Tribe Property Technologies Inc. (TRBE) Earnings Call Transcript & Summary

Thank you, everyone, for joining us. My name is Pardeep Sangha, and I will be the operator for today's call. Welcome to Tribe Property Technologies Fiscal Second Quarter 2026 Financial Results Conference Call. This call is being recorded. We will be having a question-and-answer session at the end of the call. On our call today, we have Tribe's CEO, Joseph Nakhla; and the company's CFO, Scott Ullrich. I trust that everyone has received a copy of the financial results press release that was issued earlier today. Listeners are also encouraged to download a copy of our financial statements and management discussion and analysis from sedarplus.ca. Please note, portions of today's call, other than historical performance, include statements of forward-looking information within the meaning of applicable securities laws. These statements are made under the safe harbor provisions of those laws. Forward-looking statements are based on management's current views and assumptions. Please review our press release and Tribe's reports filed on SEDAR+ for various risk factors that could cause actual results to differ materially from our projections. We use such terms as gross profit, gross margin, adjusted EBITDA and recurring revenue on this conference call, which are non-IFRS and non-GAAP measures. For more information on how we define these terms, please refer to the definition set out in our management discussion and analysis. In addition, reconciliations between any adjusted EBITDA and net income is included in the press release this morning. Please note that all financial information is provided in Canadian dollars unless otherwise noted. With that, I will turn the call over to Tribe's CEO, Joseph Nakhla. Go ahead, Joseph.

Good morning, everyone, and afternoon for those of you on the other side of the country. It's Joseph Nakhla with you. Thanks for taking interest and being with us here. A quick highlights for the quarter. We delivered revenue of about $8.3 million, approximately 3% year-over-year growth, and that was mainly driven by software and service recurring revenue that increased approximately 5% year-over-year. We also hit a milestone, a significant one of increasing the number of deficiencies and workflows from A to Z essentially in a case of a brand-new construction deficiency track through our platform. We hit 1.5 million of those through the life cycle of our platform. So if you've ever bought a brand-new condo and he did the walk-through and the developer that you worked with had -- was using our technology, the workflow from the moment it's identified right through to completion runs on our back office, and that is one of our most popular platforms, and that continues to grow. It's currently supporting 100-plus developers across Canada. And since the announcement of the quarter, we also announced the appointment of Jerome Samuels to the role of Chief Operating Officer. I do encourage you to go learn more about his background. He comes with 15 years of tremendous experience with Rogers as a Vice President there. He oversaw a lot of the M&A activities and integrations of -- in the last 15 years of Roger's Fortier into the market, both on the cable and -- essentially cable, wireless and other products that they take to the market. He's come on to oversee a lot of our activities within digitization, integration of a lot of the acquisitions that we've made and also delivering on a fantastic new platform called the One Tribe OS. We'll be more on that shortly. That being said, I'm going to hand it over to our CFO, Scott Ullrich, to drive you and walk you through the financials.

Thank you, Joseph, and thank you, everyone, for attending today. Once again, to somewhat repeat what Joseph mentioned, revenue for Q2 was $8.3 million and comparing that to Q2 of 2025, which was $8.1 million. We successfully maintained the high revenue levels, pardon me, generated in 2025 with the help of our acquisition of Ace Agencies and DMSI and of course, additional growth through just increased software and service fees. Our gross profit for Q2 was $3.5 million compared to $3.4 million last year, again, a 3% improvement. This increase was due to obviously increased revenues while still maintaining our salary costs. Our gross margin percentage was up slightly to 42% compared to 41.7% last year. And our adjusted EBITDA reflected a loss of $147,000 for Q2 compared to a loss of approximately $41,000 last year. If we normalize this for some onetime accounting and professional advisory fees, adjusted EBITDA would have actually been near breakeven. Next slide, please. I'm very happy to announce that we continue to make meaningful progress in strengthening our balance sheet and improving cash flow in Q2. Our vendor takeback obligation declined from $1.5 million to $1 million, a $500,000 improvement, 33% year-over-year, and there'll be an additional $500,000 paid down by the end of our calendar year December 31. In addition, our interest expense declined 36% year-over-year due to our change of banking relationships. And obviously, that further helps improve our cash flow and reducing our financing costs. These improvements, I feel, really strengthen our financial position and enhance our flexibility. We continue executing on our long-term growth strategy. And looking ahead, I feel we're still maintaining a disciplined capital management and continued debt reduction and working on improving shareholder value. And as a reminder, our revenue is segmented in 2 buckets. We have our recurring revenue. This is comprised of our tech elevated service fees, so our, our condo, rental and commercial management fees. For Q2 2026, recurring revenue accounted for just under 83% of our total revenue, and it was approximately $6.9 million. We also have transactional fees. These are generated revenue from licensing of our proprietary software, revenue from our banking services, data reporting, in-app purchases from Tribe's digital marketplace, project management and leasing fees. And for Q2 2026, transactional revenue was approximately $1.4 million, and this represented just over 17% of our total revenue. And the growth in this segment was primarily driven by our project management activity and expanded service offerings across our platform. That concludes my part of it. I'll turn it back to you, Joseph.

Thanks, Scott. Good job. So the key metric that we pay attention to as an organization is the revenue generated per door. This quarter, we average approximately -- on the software and service, we -- Scott just spoke about 2 segmentation of our revenue. The first segmentation is the software and service. That's up an additional 10%, approximately 48 -- almost $49 per month per door and the transaction fees are approximately about another $10, $9.58 that is driven by new services and new contracts with new customers despite of all the activities and the challenges in the market, we still continue to be very active there. And then we do still trade up lower revenue versus higher revenue buildings to create more capacity within our environment. And I'm going to now speak about the Tribe operating system because that is relevant to this conversation. The first time we've put out our essentially One Tribe operating system charter to The Street. We're very proud of it. It's one slide that speaks to the methodology of our approach to -- this concept has never been done before. It's not a single company that you can point to in property management around the globe that has actually attempted to take all residential living and commercial living and actually put it on one operating system as we are -- we've embarked on. Essentially, we're building a unified scalable operating platform that delivers consistent services right across all of our types of buildings, homes that we manage as well as the different regions that we operate in despite the changes and the different complexities associated with the geography, meaning the rules and regulations at condos is very different in Ontario than it is for example, to BC, yet, we are still embarking on this one operating system to deliver really superior service despite the fact that the regulation may vary per building or per city and/or per province. Three stages, the operating path is -- Stage 1 is the predictable outcome, i.e., great service delivered. All buildings expect a same level of service when they are within the Tribe -- under the Tribe banner. Automation, a significant amount of automation. Our birth into the space came from automation, and we continue to do that. It's no surprise to everybody that's a main stay for what we set out to do in the market, both on the rental side and on the condo side. And then Stage 3 is AI enhancement. We've never lived in a world whereby a new technology could actually be as significantly impactful in terms of workflows, the type of work that we do as AI, and we're active in it. We're very, very -- we're making big investments into that space. It's reflected in our OpEx, and we'll continue to do that. We've even made some major changes to the way we deliver our traditional software services, and that's a big kudos to our team in the fact that we are able to push out features and make changes to the workflows at a much higher speed than we've ever experienced before. On the ground, the kind of execution priorities for us are very clear, streamline the resident requests, anybody that lives in our building really should be interfacing with a lot of our automation. We manage 55,000 inbounds in 100 days, at least that's the last 100 days to envision how AI and a lot of those agents can actually make a big difference. Condo boards or big boards that manage big portfolios, they need stronger and better digital governance and decision-making tools, and that's an area that I think our data stack delivers and will continue to deliver significantly, expand our self-service capabilities to reduce repetitive work for our staff so they can do more as we bring in more buildings. And again, standardization of the delivery of quality of service that we we do there. And I have to say, I do want to give a lot of kudos to Jerome Samuels, who came on board. He's been with us earlier in the year as Executive Vice President of Operations, went on a very deep listening tour and learning more about our processes. And now that he's ready to make his big impact as it pertains to bringing in a lot of these integrations under one umbrella, he's driving our operating system, the Tribe operating system, which is the one I just spent quite a bit of time with you on here. Next slide is very specific to a little bit of a macro view on the market. Build Canada Homes or BCH as you may have heard of it, is a massive federal initiative that is intended to go out there and make a big dent into our affordability. I don't want to call crisis, but challenges in the country. And really, it's focused on building affordable homes, financing affordable homes and catalyzing the construction around the housing industry to deliver affordable homes. I've spoken quite a bit about that before. I also mentioned that we've been nominated to join and we have been active this year in the commission, the Chamber of Commerce Commission that's set out to make strong recommendations on housing affordability. We are the only property management company that actually sits on the board at a federal level or provincial level, and we are helping kind of guide these decisions. Usually, affordability is within the lens of can we build homes that cost less. We've been a very, very strong voice in can you build homes that cost less, but can you also build homes that cost less to live in, i.e., either lower rent and/or if you live in an operating expenses of the building itself are lower. And we've got a significant amount of tools. We've got a lot of data to point the fact that buildings that we manage actually spend less in multitudes of verticals and multitudes of products and the fact that you're spending less as a building on your operating expenses that really does yield affordability, especially in a condo environment. Some progress to report on. The government has set out -- it's essentially set up to almost add 4 million homes. It's an incredibly aggressive goal and made a bit of a dent in it. They completed about 340 homes under construction and now it was about 200,000 homes, and they vary in the different categorization, by the way. They've also loosened the purse essentially to allow for $82 billion of capital to be available in different formats associated with helping new construction. A lot of not-for-profit organizations that actually are seeking access to these types of grants actually be very active. A lot of people don't know this about our organization, but Tribe is very active in the non-for-profit through the acquisition we've made in DMS, and we'll continue to grow there. We're also going to see things hopefully, in this year and definitely next year, whereby we are very active in terms of putting together structures that help those developers not-for-profits and different designation of groups that are coming in to actually take land that's vacant and actually put communities on them. And that's a little bit on the asset management, some of it around the governance and a big chunk of that around the property management side of it. That's an area of our business that we will continue to grow and make more active. Next slide, please. So just to kind of summarize our priorities for the second half of 2026. Continue very strong drive on our profitable operations. We're very, very close. As you can see, we're teetering around that. The investment we're making in our One Tribe OS essentially is the delta between this level of profitability, but we are willing to make that investment because we can see the ROI coming on the other end of it, and you'll be able to track that. And we're still focused -- while we're focused, obviously, very strongly on organic growth, we've made some changes to the way we're approaching content management in the market and actually lead generation, you'll see more on that. A big drive of that is actually bringing all of our businesses, every single company we purchased, including DMS now under the One Tribe brand. So those of you that live in Ontario, you will be seeing in the end of next quarter, a massive presence of Tribe, both on the condo side and on the rental side that will be pretty evident right across Ontario as well. I think that concludes it from my point of view. There's probably some questions coming in from some of the analysts. I'm happy to take them or myself or Scott.

[Operator Instructions] We have a couple of questions here from Gianluca Tucci of Haywood Securities. The first question is, can you give us an update on your acquisition pipeline? Can you also give us some color on what your targets look like in terms of margin or EBITDA profile? And what does it immediately accretive mean to you?

Perhaps I can take that one. We're definitely actively involved on the M&A front. Since going public, we've actually looked at over 50 M&A opportunities either through a share purchase or an asset purchase, and we actually completed on about a dozen of them since going public. We continue, obviously, to look at other opportunities. We look at -- when we look at these companies, obviously, we look at their revenue profile, their geographic location, what market segments are they in and how that would help us. And of course, we look at what economies of scale we can bring by acquiring them. And so it's -- yes, we look at the margin they have. And then obviously, we look at what the margin we think we can bring to it with our technology in that. for this year, I'm thinking we may not be closing on any of the opportunities, but there are some [indiscernible].

Second question from Gianluca Tucci of Haywood Securities. Last quarter, you described 44% as a floor on gross margin with 50% as a destination. Gross margin was slightly lower than that this quarter. Does the floor for 44% still stand? Or is it the right way to think about it is that margin improves around within a band as you onboard and integrate?

Yes. Well, both statements can be true, meaning we do -- when we say floor, I mean, my words are what I didn't want us to think is look at us 44%. We've achieved what we set out to achieve. The point I'm trying to make is to explain that the cost of goods, and we are unique that way as a company because actually we load up our cost of goods very directly, including our technology costs, digitization, accounting services, compliance. So actually, when you look at our cost of goods, you see that we're not a traditional technology company that runs at 75%, 80% gross margin and very, very little goes into cost of goods. Ours is actually -- the metric we use externally at The Street is the exact same metric that we use internally as we measure our business. So all that being said, one of the challenges we have with our gross margin when you're dealing with onboarding businesses or waiting for new businesses to come in is that you load up your cost of goods, you hire people in anticipation of revenue, but you may not see that revenue for 3 months out or 6 months out. So that's the fluctuation there. So when we say we're in that 42% to 44% as a floor, what we're saying specifically is as we normalize, we anticipate that number to continue to go up. I still do see the fully integrated, especially with some of the process modernization that we're doing, including AI. I still see us going to the 50%. We will see that soon.

So a related question to that, how does One Tribe OS play a role in achieving the additional gross margin improvements?

Plays a big role because a lot of cost of goods really are administrative work, some of the accounting service delivery, and a lot of it is around the workflows of the property managers, the daily work that they do. If we are successful and early signs are very promising, but if we're very successful in automating a lot of these workflows, what this will allow us to do is 2 things. One is the most obvious thing is to be able to manage a bigger portfolio with the same number of people with a very high level of service delivery and consistent layer in terms of customer satisfaction. But what it will also allow us to do is actually bring in a lot of our know-how to actually identify additional products and services that these buildings need to maybe lower our operating expenses while we're hopefully able to monetize further. So I think it's going to play a major role in that, quite frankly.

Last question from Gianluca Tucci. Transaction revenue was down slightly in the quarter. Q2 is normally a stronger leasing period. So I wanted to ask whether the economics of that banking relationship have reset to new baseline? And how are you thinking of rebuilding that line? Relatedly, you mentioned completed payments and rewards pilot lease product you were happy with. Where do you stand on those?

Yes. I mean I would challenge the fact that Q2 is always a great leasing quarter. It really depends. And our transactional revenue isn't just driven by leasing. Our transaction revenue is -- it's a big bucket of probably 50-plus line items. So leasing doesn't just play a role up and down into that. A lot of stuff happens, brand-new activities around units being sold where people in app will purchase packages for the buyer and for the seller. That's a big active area. Leasing and lease-ups are a big part of that as well, but there's a long list of products and service insurance and so on and so forth, including interest revenue associated with service deliveries for these buildings and their actual operating expenses that they spend every month. So it's a long list. It's not just driven by leasing. All that being said, it is a little bit lower. It is a band, and it is not -- unlike our recurring revenue that's very steady, it's contractual. Transactional revenue, you kind of sort of every month start from 0 and you kind of regain momentum in that. And it does depend on a whole bunch of stuff. So if we do have brand-new buildings coming on the platform in that month, then you'll see transaction revenue really spike up. But if you're just sustaining the number of buildings, nothing new comes on board, and you might even have a brand-new building that was supposed to be delivered this month for rental, but it's not delivered until next month, you'll see the lease-ups revenue come down. So that band kind of varies a little bit. I think the second part of the question, what was it about, sorry? I forgot.

The economics of the banking relationship to -- and to impact the transactional revenues basically?

While they're 2 separate things, the economics of the new banking relationships strengthen our -- well, essentially strengthen our ability to access capital and how much -- and cost of capital. So we're spending less than cost of capital, as Scott had mentioned earlier, and that number is significantly lower year-over-year. We're quite pleased with that. And it doesn't really directly impact our transaction revenue whereby, obviously, we do have some interest revenue that we generate from some of the condo communities that we manage, but it's not necessarily directly a linear line. I'm happy to get in touch with the analysts and unpack that further.

We have several questions coming in from -- on the line. A listener on the line asks, how is capital being prioritized between debt reduction and growth?