Zedcor Inc. (ZDC) Earnings Call Transcript & Summary

Thank you for standing by. My name is Joe Diaz, and I will be the conference call operator. Welcome to the Zedcor Inc. Fourth Quarter of 2024 Financial Results Conference Call. [Operator Instructions] I would now like to turn the conference over to Amin Ladha, our Chief Financial Officer. Please go ahead.

Thank you, Joe. Good morning, everyone. Thank you all for joining us today. Also joining me on our call today, we have our President and CEO, Todd Ziniuk. Earlier this morning, before markets opened, Zedcor issued a news release announcing our financial results for the fourth quarter of 2024. This news release will be available on our website under the Investor Relations tab and is filed on our CR profile. Please note a portion 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. This discussion is qualified in its entirety by the cautionary note regarding forward-looking statements that is appended to our news release. Please review our press release and Zedcor's reports filed on SEDAR+ for various factors that could cause actual results to differ materially from projections. We use terms such as gross profit, gross margin and adjusted EBITDA on this 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 MD&A. In addition, reconciliations between any adjusted EBITDA and net income is included in the MD&A as well. The important non-GAAP measure that we use as adjusted EBITDA, the company believes that adjusted EBITDA is a meaningful financial metric as it measures cash generated from operations, which the company can use to fund working capital requirements, fund future growth initiatives and service future interest and principal debt repayments. Adjusted EBITDA should not be construed as an alternative to the net income determined in accordance with IFRS. Please note that all financial information is provided in Canadian dollars unless noted otherwise. Following prepared remarks by Todd and I, we will conduct a Q&A session during which questions will be taken from our analysts. Moving on to the company's financial performance for the quarter. Some highlights for the fourth quarter and the year include record revenues of $10.3 million in Q4. This exceeded our previous high set just last quarter by $1.1 million and is an increase of 78% year-over-year. Our reoccurring revenue for Q4 remained steady at over 85% of total revenue. We also had record adjusted EBITDA of $4 million for Q4, and this was a 185% increase year-over-year and the EBITDA margin remained strong at over 38% for the quarter. Our tower count and customer base continues to grow. More importantly, our weekly tower production, which is a key metric for us continues to increase. During Q4, our weekly tower production count grew by 180 -- sorry, total tower production grew by 186 towers, which was over 15 per week despite some holiday weeks for Christmas and U.S. Thanksgiving. Our goal remains unchanged, 20 to 25 towers produced per week with the ability to ramp up based on customer demand. Some highlights for the year-to-date numbers include 12-month revenues of $33 million, recurring revenue of over 80% of total revenues, adjusted EBITDA of $12 million, which is up 57% year-over-year and a 36% EBITDA margin. Our fleet size at December 31 with just over 1,330 security towers, and this represents a 62% year-over-year and utilization for the fleet continued to be over 90% for the quarter. Diving a little bit deeper. Q4 shows that the strong growth continues. Revenues increased 12% quarter-over-quarter, and this was driven by an expansion of the fleet and strong utilization. Gross margins increased to $6.8 million or 66% of revenues. This was driven by operational efficiencies and higher utilization rates. The operational efficiencies we have talked about previously that will continue to pay dividends while allowing us to maintain service levels. We anticipate gross margins to continue in this range going forward. Adjusted EBITDA increased to $4 million or 38.7% of revenues versus 37.2% of revenues in Q3 2024 and 24.1% of revenues for Q4 of 2023. Just wanted to point out that Q4 2023 is a bit of a lower quarter as we had 2 of our large pipeline construction project end, which resulted in lower utilization and lower EBITDA margins. It's not the best comparative, but still impressive growth. Once these projects ended, we are able to diversify our revenues, and they remain diversified throughout the year. Adjusted EBITDA worked out to $0.04 per share, again, driven by higher revenues and margins, offset by a higher share count. The fleet was 1,337 at the quarter end, an increase of 186% quarter-over-quarter or sorry -- 186 total towers and 512 towers year-over-year. Utilization continued to exceed 90% in the quarter. In terms of the future outlook, we completed an equity raise in Q1 2025 and have started to expedite our growth. We are aggressively expanding across the Southern U.S. and ramped up our sales team. While this will result in slightly lower margins as we expedite U.S. growth, the U.S. -- the revenues continue to grow, and we are already starting to see the spending pay dividends as we gain traction in areas like Austin, Texas, Denver, Colorado and Phoenix and Nevada. We continue to expand our revenues in the retail segment and residential construction segments. These are 2 verticals where we are seeing large potential, and we will continue to allocate resources in those areas in order to grow. However, we're seeing opportunities in all verticals in the U.S., which is great. And while we have areas of focus, this is a truly customer agnostic industry, and we won't be picky. We continue to grow our revenues with key customers as we expand our footprint. Current customers are requesting service at more and more locations, and we're trying to service that to the best of our abilities. During the year, we successfully onboarded over 190 new clients to the platform throughout Canada and the U.S. customers are requesting services -- Canadian customers are requesting services in the U.S. and vice versa. The financing that we completed allows us to exploit some of these opportunities. As you can see from the chart, our customer base is fully diversified by industry verticals. And despite recent tariff and potential economic threats, we aren't seeing a slowdown in demand opportunity. In fact, some of our customers, such as in the homebuilder segment are even taking more security to protect fully built homes. Moving on to a discussion on the balance sheet. It's really been set up to support our growth trajectory. We exited Q4 with a cash balance of $5.8 million. We have $10 million of available borrowing room on our current banking facilities. Our net debt at the end of Q4 was $14.4 million, and our net debt-to-EBITDA increased slightly to 1.19x. This will increase over time as we deploy capital, but it will be offset by growing EBITDA. $1.2 million of the debt is expected to come due in the next quarter, which will be retired from free cash flow. Property and equipment increased almost $6 million to [ 42.7 ] sorry, and we continued investments in growing the company's fleet of security towers. A portion of that increase is sitting under assets under construction as we purchased a number of long lead components in order to ramp up production growth and meet our targets. We try to keep this around 1 month's production and actively manage assets under construction so that unnecessary capital isn't tied up. A review of our cash flow statements for Q4. Adjusted operating cash flow increased 585% year-over-year to $3.3 million, demonstrating the growing cash flow generation capacity in the business. Capital expenditures ramped up in Q4 as our manufacturing capability goes streamlined, and we have staffed up our team and established our processes. Maintenance CapEx continues to represent a small percentage of the total in 2024, it was less than $0.5 million, which is all for older cameras or older technology equipment that broke and be replaced. Free cash flow for Q4 2024 was just over $3.3 million, reflecting continued investments in fleet expansion and working capital supported by our expanded capital facilities. I'll hand over the call to Todd, who will provide us with an operations update and some insights into our go forward strategy.

Thank you, Amin. As you saw, the numbers, we had a strong and great quarter. The business and the opportunities heading forward are endless. Year-end, we're operating in the U.S. cities that we're all operating in was Houston, Dallas, San Anton, Austin, Midland, Texas, Denver, Colorado, Las Vegas, Nevada; Phoenix, Arizona and Atlanta, Georgia. In Canada, we are operating in Vancouver, Calgary, Edmonton, Winnipeg, Ottawa and Toronto. We're seeing great growth in all branches. Opportunities are endless. All of our -- especially in Canada as well. As we mature our relationships and partnerships with our clients, a lot of internal growth in our customer list, which is quite exciting as a company. We're not seeing turnover with our clients, which tells me as the CEO of the company that we've got great service for our clients and things are moving forward. We see some projects in, but kinds we have that in that project end up taking towers to new projects. So it's been exciting. We're seeing lots of opportunity in Vegas and Phoenix right now. I'll move into some update -- operational updates across the company and sales updates as well. While everybody is excited about the U.S. We're seeing huge growth as well in Canada. Obviously, the margins in Canada, we've got our platform built. So our contribution rate is quite a bit higher because we're not adding a whole bunch of SG&A and G&A in Canada. And we're starting to see that in our platform as well in Texas. We've got our branches built out, buildings in place, people salespeople, managers in place, all of our field techs, it's probably going to be the next part of the puzzle that shows good margins due to the fact that it's maturing and the customers unless just keeps growing. We're seeing a lot, like Amin said lower R&M on our equipment. We've got a lot of things streamlined. The AI portion that's in our cameras is helping our growth -- I'm sorry, to keep cost down in the monitoring center. As the platform grows, we're going to keep continuing to get stronger at the AI side of the business as well. And -- the maturing side of the customers is a big part of it. Our customer list now is probably north of 500 customers. And a lot of these clients, they come on in an early stage, maybe that represents 5 to 10 towers, but we have the ability to grow some of these clients upwards of 50 to 100 towers as some of them are across Canada, some of them are across borders, Canada, U.S. and multiple states as well. We're moving into different regions to just do the fact that clients are taking us there. We're seeing great opportunities for growth outweigh strategically hiring once we have the opportunities to get in there. We go in behind that. We get our facility set up. for example, right now, we've just hired people in Las Vegas. We've got 38 towers deployed. And we have no people on the ground there. We've been servicing that from Phoenix. So the opportunity is large. I was just in Phoenix and Las Vegas last week, doing the interviews, bringing people on board and myself and James Leganchuk, our President of Operations United States. And we spent 2 days in each city and traveled around and looked at the opportunities, and they're just endless. Something Zedcor is doing is -- we're all about our clients, and that's how we operate our company. We're not designing apps or different things to give to clients and put it on them. We remove all that from the client. We put it on us as a company to maintain service levels for clients. Clients that are running these projects or building homes, they've all got multiple things on their mind. They don't have to worry about is the security being looked after and referring to an app and turning -- monitoring off and on. We do that. And we see big value. And we're seeing that in every city that we got in that. The clients are very happy with the service levels. The great thing that Zedcor has is we run high levels of service, but we also got a great product. And when you run those 2 together, all of a sudden, your client base, the Okta salespeople for you, and we're seeing that referrals. And it makes it quite easy to grow and you have a guy in a construction he's telling his friends in the same line of business at a different company that these guys they do what they say they're going to do. And that's our culture at Zedcor. So we've seen big value from that. The demand is not stopping. Like I said, we're moving forward here for the growth in the next quarter here, we're moving into Tennessee. We've just hired a fellow there. It will give us the ability to reach out to Knoxville, Tennessee, Nashville, Atlanta, cover down into Florida, Jacksonville. We have clients that want us to go into Jacksonville will be Q3, Q4 moving into Florida and California. We have some towers deployed right now in the northern region of California. So the growth isn't stopping. We're seeing a big demand on that side. As Amin was talking about the manufacturing to dive a little deeper into that. We're producing right now 25 towers a week. We've got 35 packages as of the beginning of this week coming into our facility. So what I want to see happen there is we'll build up about 30 to 40 packages and then we'll start doing 35 towers a week that way. We never stop production. You're pulling them all into the floor instead of waiting for more packages to show up. We've done a great job of securing all of our procurement stuff, cameras, we're not heavily affected actually at all with the tariffs, our steel component of our tower, for example, to give you an idea of it's about $0.95 a pound prior to tariffs. Our towers weigh the steel components were about 2,300 pounds. So 10% on that is $230, right? And the rest of the steel components come in are made up of the labor portion as well. We're -- like Amin said, we exited at 1,330 towers today. We're actually sitting right at about 1,600 in the fleet. Like I said, we're going to 25 to 35 as we're moving towards 35. The highs -- the upside here is about 1,400 towers to build this year, 1,100 to 1,400. We're right on track for that. The demand, we've done a great job of balancing how fast we're building our towers and how fast we're bringing on salespeople moving into new regions. By the end of this month, we're going to have 8 operational branches across the United States. Obviously, we got our 6 in Canada. We're looking at probably before the end of the year, expanding into Quebec as well. So it's not -- it's -- you start feeding these branches, 10 towers every couple of weeks or every week. There's a lot of demand it's going to keep going, and we'll just keep growing with our growth. The 1,100 to 1,400 towers, that's not -- that's what we're doing regardless. Now if we need -- large enterprise customer, let's say, another 200 to 300 towers on the outside, somebody in the retail space. That will be built on the outside. We'll schedule out how we're going to get them deployed to all the different locations. And nobody expects us to drop off 300 towers in 30 days. It would be over a 6-month period, maybe 8 months, and we'll work with the client. We've seen it with working with Home Depot across Canada. They have a bunch of logistics items to do on their end as well before we can start dropping the towers off. So I already covered the fact that we're going to be focusing on California and Florida. We think it's a big opportunity to be there as well. To speak a little more about the culture, I'll say it again, we're all about our clients. And when you have your clients on your side, it puts everything else in place, right? It looks to have their investors. If you have happy clients, you look after everything, and we're doing a great job of that. I'm a big component and a believer that they're #1. Just behind safety and -- it's exciting times. I think we can open the floor up. I mean to any questions from the analysts. Thank you very much.

I'll hand it over to Joe.

[Operator Instructions] The first question comes from Kyle McPhee from Cormark Securities.

First one for me. So as you mentioned, you started disclosing your detailed financials by country, Canada and the U.S. operating margin is much higher in Canada, 2024 was 58% versus 21% in the U.S. So is that just -- is that different to just highlighting the benefit of regional density and cost absorption that you have in the relatively mature Canadian region and U.S. should be able to catch all the way up to that? Or -- is there something structurally different about the margins in the U.S. that may keep it lower long term? And maybe as part of that, I'm curious where you're accounting for the tower assembly operations, all the costs related to that that are in the U.S. but benefit both Canada and the U.S.? Or is that in the corporate segment?

So Kyle, I'll answer the second question first, it's easier. All those costs related to manufacturing to the people, like if they're directly involved in the manufacturing of the equipment, those get capitalized to the piece of equipment themselves. So the cost -- like the pricing we kind of hope to you guys includes the cost of labor, our cost of assembly. We don't put a ton of overhead into it, but it's more direct cost for that. So those all get capitalized and they get included in the depreciation over time. With respect to the operating costs, it's not necessarily a scale thing. The scale more impacts the SG&A side and the EBITDA margin. The operating costs last year, we had a bunch of the towers come back from those 2 pipeline jobs. So R&M was high as we were cleaning the lots and getting ready to put them back into work. And -- the other thing is partly as the fleet diversified before it was more kind of solar hybrid base, where it was engine based, and we have to have mechanics on staff. We had to have engines parts. It was a complicated piece of equipment. And as the fleet has grown towards the more simplified solar electric and the electric power. The cost of maintaining in those solar hybrids becomes less and less kind of as a fleet on a whole. And we've also done a bunch of upgrades to those solar hybrids, we've upgraded generators, upgraded engines and that's starting to pay dividends in terms of the lower R&M and the lower wages related to maintaining that. So that's kind of what's driving the operational efficiencies as well as the AI in the cameras.

Got it. Okay. And just going back to the first part of your answer on labor for the assembly functions capitalized. But what about all the OpEx for the assembly facilities, that type of stuff? Is that going into corporate? Or is that going into U.S.?

Those are leases so that would just go into like the right-of-use depreciation. We don't capitalize that. It's just in and out of 1 line of appreciation to another.

Second one for me. So you mentioned in your filings that you're considering moving into the manufacturing part of your supply chain. I assume that's for the deal towers, correct me if that's wrong. Is the supply chain change versus your current outsourcing of that manufacturing function. Is that something that would require a big lead time and CapEx investment to get up and running? And does this change more about reducing supply chain risk? Or do you also think there's a big benefit when it comes to internalizing merger in your supply chain?

It's -- like you said, it's kind of taking the metal components in-house right now that's outsourced where we outsource the welding, the cutting, the painting of the metal. We're looking at taking it in-house. We're not saying we're going to. And it's kind of a mix of, like you said, being more in control of our supply chain, where we're not in kind of reliance on vendors where they could increase prices and shift demand to other customers. And obviously, we're one of their many customers. But -- it's part of that. And partly, there's cost savings as well, which would reduce the cost of the tower. So again, it's a mix of both. I don't want to attach a percentage, but we're definitely looking at it. And those are kind of the driving factors, like you said.

Yes. And in the short term, right now, Kyle, to stop gap that we've got multiple builders in place. We can step it up with the ones we have. But to explain it, even the control box at the bottom, we had that outsourced. We brought that in-house. For example, we used cost is about USD 1,700 to USD 1,800 our cost to do it now in-house is about right around that USD 950. So it just saves costs. I think right from day 1, when I got down there, we knew we were going to do this in stages. That was one of the last box that last box is one of the last components to bring in-house on the tower and yes, the last piece would be the metal side of it. Down to your question even a little deeper, it'd probably be about a $4 million spend. If we were to go down that route, and then getting key people to run it. We'd obviously ease into it, start building it. And if we were to go down that road, you start out by let's produce 10 a week, get to 25 a week and get it to where we could be fully in-house. That would be obviously the end goal on this. And you probably -- I think where the business is going to be quite honest, we might always need another builder. We might just become one of the builders and you'd end up -- let's just say, for example, we're paying $7,200 for metal components now coming in that are painted. And if we could do for about $4,500 to 5 million you're going to end up with a blended price depending on how much we're doing compared to our builders of around maybe that $5,500 and it's all just about. I'll be quite honest,. I don't see the grow stopping at all. As we're building this platform, it's going to ramp up. We know that. We're seeing it. We're getting very, very good salespeople coming on board. One thing about our culture, too, just to dive into that is it's all referrals. We haven't rounded out in our shop yet for the manufacturing side. Now we're starting to see that in our sales side, manager side. These guys worked at other machines. For example, our fellow in Phoenix. He's brought a whole bunch of referrals in that we hired for Vegas and Phoenix. And he explained the people that we interviewed that this is what we always thought it was where we worked before. And these guys are -- they do what they say, and it's great to hear that it's great to have a culture that these people that work for us are reaching out to friends and telling them, "Hey, you know what, you want to get over. This is an up-and-coming company." And -- so we know the growth there. Obviously, I think a lot of the people know on the call, I mean and I are all about holding margins and keeping guardrail on the growth, and we'll stick to that plan. But us being able to do that raise post year-end, it gave us the ability to step on the growth pattern, and we are -- the platform we're probably, I'd say, a meanwhile ahead 6 months on the program compared to where we thought we'd be at least a good quarter, 1.5 quarter.

Especially with the kind of the locations we're operating in.

100%. Yes.

We're not going to be picky like I said earlier, but some of these kind of opportunities pop up and that money gave us the flexibility to take advantage of it.

The second question comes from Sean Jack from Raymond James.

Just quickly wanted to touch on enterprise customers and see if you guys had any more details, any updates to share on how that's progressing?

The enterprise customers take time, like we started -- we started putting an NDA in place with Walmart. They're doing a trial. Those guys are so big, they get distracted. They have multiple priorities on the go. Kroger's doing an RFP that we know about. So we're going to be on the list for that. Again, they just take time. Some of the other big retailers that we're working for, we're just completing a security audit with them. So we're continuing to invest in that section and chase that down. It just takes time into longer lead space. It's not like the construction world or some of the field guys take care of that and the paperwork solved and afterward, the kind of the enterprise world is the other way around or the paperwork, and they need to check their boxes before they could bring us on board. And where we want to be flexibility to work with like Home Depot Canada that started off being a few stores and a group kind of year-over-year. We're happy to do it that way. But we're happy to do it the other way, too, where somebody wants to place a big order we'll figure it out and make it happen, like Todd said, on the manufacturing side.

And also too, Sean, to touch on that. It's -- the other part of our business we're drawing out is our national sales team, right? And that's -- the national sales team is focused on a few different things, building out the customer list. We might be working for a client in Texas, but they're actually in 22 different states. I look at them as a fairly large enterprise customer. They might have 20 towers in Texas, but we have the ability to grow that account 200 to 300 towers. And then it goes from there into different verticals, the REITs, retail. It just goes on and on and on the list. And sometimes it's not in a bad way, but it gets to be a little overwhelming because everybody is a client. It's 100% customer agnostic schools. We're seeing different areas of that, it's all kinds of things. So that's where we're very confident the $1,200 this year is $1,100 on the minimal growth side, that's just day-to-day sales, right? And then without any big enterprise changes. So that's where we -- you can see on the chart here or the bar chart $1,400 could lead to $1,600. We're preparing the back end of the business for that to the ability to step on it. I can talk to my manufacturers of the steel components all the time. They're aware of it. They need about a 30-day lead time to start adding to it, too. And over the span of a month to 3 months, they could be ramped up quite heavy as well. And yes, so it's exciting that side of it.

That's great. Also, just one more from me. Thinking about the growth that's expect coming up here and also these new territories that you guys are going to be expanding into. I wanted to see how we should think about margins moving through 2025. They were quite strong in this past period, but -- are we going to see any sort of movements with increase or decrease in spending?

I'll speak a little bit to the margins. And I think in this business, we've seen a bit of a trend at hockey sticks and -- the hockey stick doesn't stop so much. But for example, in Q1, we've hired a lot of people. It's going to be a strong quarter. But you kind of plateau there for a minute while you get everybody in place. And then the platforms are much bigger, you start getting that many more towers out and the revenue keeps growing. I think we're going to be able to maintain margins. I think, Amin, I'll let pass it over to you, you'd agree with that.

Yes, operating margins, we definitely maintain. The EBITDA margins will probably drop a bit in Q1 just because of all the hiring we've done, but it's not going to drop substantially. We always think we can hire more people than actually happens. So it's like Todd said, it's kind of growth, plateau, growth again.

The third question comes from Doug Taylor from Canaccord.

I'm curious to dig in on something you said earlier regarding the demand profile. I think you've said seeing no signs of waning demand and -- but also some pockets of strength in response to the current little geopolitical environment. I think you said homebuilders specifically. So the question is, I mean, -- would you say that response is to perceive to increase security risk? Or is there a function of the labor shortages given some of the recent changes in this administration is put through? Or is there some other factor we should be thinking about there?

Specifically on the homebuilders side, it's a mix of -- they keep building and the sales and sometimes slowdown in certain regions. So they have like unsold inventory that we're watching that they probably haven't anticipated us to be watching. But -- that's probably the most important stuff for them where the house is done. They need to be able to move it quick, and they don't want appliances getting stolen or somebody coming and vandalizing or stripping copper from the wall. So kind of, unfortunately, for the customer, the double-edged swords where things slow down, you need more security. We kind of saw that in COVID [indiscernible] into the space, but we saw the mountain when stock shut down, it's not like they can assume that security will people weren't going to steal stuff just because they were forced to stay in place. So it's kind of like I said a double-edged sword. Some verticals might slow down and some verticals might need more, and we're kind of balanced in that sense. So we're excited on -- in that way to see what happens, but -- we don't see the growth slowing down because of tariffs. So it might even ramp up.

Well, maybe I'll double back then on the labor shortage part of the profile because it's been a demand driver for you for years now. Has that -- have you noticed any change in behavior as a result of that where security guards just harder to find or things like that?

I think, Doug, the biggest thing in that component is people are starting to realize these towers, I'm not saying nothing bad about security guards, but they're way more effective. And we're kind of on that right on that bubble right now where it's people are moving into it. They're like these guards cost more money. They're not doing their job. They're looking at their phones in their car, they're sleeping. They're maybe not even at site. They're at the coffee shop. And the beautiful thing is the name of the company's Zedcor security solutions, but these clients get a lot more out of the tower than just security. They all have portals, they can watch their job sites. They can't do that with it. You can have, let's say, 4 towers for 10,000, but you have a guard at night or a couple of guards, it's 20,000. You can go on to portal and watch your job sites. They're saving a lot of money. Secondly, something happens on your job site or cameras are according 24/7. And then the clients are seeing big value and that safety stuff happens on the site. For example, in the home building, a common thing is a poor driveway a vehicle pulls into it backs out. Now they can see who did it. Let's take a company like D.R. Horton they're not stuck paying for that. They can build it back to the contractor they drove into the driveway. The uses of the cameras are unbelievable time laps, videos. It goes on and on. So there's a lot more value add and Doug, to even answer that a little deeper. And that's a big thing with our sales team that they're really well versed and is educating the client, this is what this tower can do. It's not just your typical tower that you're used to. In some of these regions have Camera towers or cameras before, but all they were doing was recording. And then you get the guy that come along and now he's going to start monitoring in-house, it's done overseas. Or like I said earlier in the call, it's an app that the client watches. And I've said this multiple times. And when it comes down to client success, you can't have the heartbeat of your business being around overseas. You got to keep it in-house. They need to be employees of your company. It's the heartbeat of our business is that monitoring center. If that marketing centers miss some stuff every night, you have no control over, but you don't have a business. And you're actually not giving your clients the success that they want. These people need to go on from their job sites at night, know that you're protecting their facilities. And we do a great job of that. And partly, it is, you know what, -- we have challenges in our room, but we're on them every day, and we're evolving even the layout of our rooms, how we're changing it, the different things we're doing. We don't go, we're just monitoring this which works great. We look at bringing AI in. AI works great with the cameras, the AI portion that you can overlay on your servers. They're not dependable yet. We actually just had our auditors in yesterday, and they run AI, but they still double check everything. So it kind of shows you where AI can be -- it's evolving. But we really -- we want to make sure that when we put the proper AI in, we know the stuff that we have in our access cameras works, and we know the abilities of it. And before we overlay any other AI into our service into our system, we're going to double check that, that works properly. And I think it's going to get to the point that your frontline alarms, AI is going to help with that. We're investigating a whole bunch of that right now. And that helps cut costs, right, and it helps bring margins up. And it helps the room stay, the size as the growth carries on. And those are all efficiencies. But when you have that set overseas, it doesn't work. And I don't mean to go off on a different direction Doug, I just wanted to explain that in detail. And -- that's -- it's a big part of it, but the clients out there are really starting to move towards camera towers and cameras in general. It's interrupting the security world. You're never going to get away from a security guard required at the front desk of a skyscraper or the guys rolling the malls or the airport security guards. There are always -- there's going to be a place for them. They're not fully replaced. But a lot of this remote stuff, deterrent wise, it works a lot better. You see the blue lights on a tower. If that helps, Doug, I could go on for a long time on that.

No, I mean it's great color, but maybe I'll press on some other questions here. been a release, and I want to say it might not have been today but in an earlier release, you alluded to the potential. It seems like you've got your cost of your towers as it relates to tariffs or any other inflation seemingly very much under control. But you did allude to the potential to use pricing to protect your return on investment. And so I guess my question here is -- have you -- has the discussion progressed anywhere on using that step at this point? And maybe you can talk to the market willingness to take price here in this environment?

I think it's a nail on the head, Doug. We try to push pricing whenever we can, but it's more market driven and more market willingness. I think the easier way to go about pricing is to get in with the customer, show them the value, show them the results and then kind of up the pricing rather than push it on the back end and blame it on tariffs or some governed policies. And honestly, living in the U.S. like nobody really mentions the tariffs get on a day-to-day basis, especially in B2B sales like most people are -- unless you're like direct consumer of say, for example, metal, you won't see a tariff impact, like consumers might see in a few months, but it's a rapidly evolving situation, but I think it's a little early to start pushing pricing on customers because of tariffs, especially every day, they see to change the policy. So we're definitely going to try to cushion any which angle we can. But I think the better approach is the -- so when I talked about it is more get in and show you where to show the value and then go to the customer to talk about pricing.

The next question comes from Gabriel Leung from Beacon Securities.

I want to touch on the enterprise side of things again. You guys talked about doing some initial work with Walmart and Kroger. And I'm curious whether these are competitive displacement opportunities and if they are, why the client might be looking to an alternative provider? Is it around pricing? And is it around service level agreements, et cetera?

I think a lot of its service level having the platform Gabriel, it's a big part of it. The other thing is locked into contracts. I know contracts are great in the markets. People love contracts. I have a different view on contracts. Obviously, we'll get contracts wherever we can. I think a lot of people get the contracts signed and then they forget about the client. And I can't go on enough of both the client. We want to make business easy for our client. I think if we go to work for a client. We're not doing our job. I ask them to get rid of us if we can't fix the problems. And I think that -- in the retail space, right now, everybody wants to lock these guys down. And I've met with quite a few of them, and that's something they're tired of. They're really tired of being locked into contracts. And -- in some of it's competitive space. Some of it's new. Some of it goes back to what I just talked about, Gabriel, they've had guards. They've had nothing. They know the world is getting worse. They needed to turn in their parking lot or counters on their buildings. Some of it is a shift that they're moving towards that type of security. And some of it, they want to do a blend of it. Liability with the guard that's on site. They need something to back them up, and that's a camera the eye in the sky are, right? So Obviously, I think a lot of everybody on this call knows Walmart, they've had a client. They are a competitor for quite some time. That's how they started their business. And -- the Walmart is growing a lot, obviously, and they're going to add to it. I don't know if they're running off a competitor. I think they just went out to different parts of their business, distribution, more stores. And we're seeing that, it might be a blend of us and a competitor. A lot of them now are going towards renting them. Some want to buy them. It's all different, Gabriel. It's independent. We're at one right now that we're doing a large cyber audit. We're going to be complete with that at the end of April. That's going to hold the doors for that one. And we don't know to what size, but the cyber audit that we've moved forward on is great for Zedcor, it's great for everybody. It show the next level of where Zedcor is at that we're obviously, cybersecurity is a big thing. And even to talk a little more on that. We make it easy on our clients -- a lot of Clients don't want you on their Internet. For example, they go Home Depot Canada. They don't want us on their Internet because, obviously, in their cyber world, they have a lot of people's personal information. That's the other thing that Zedcor does is we just supply our own SIM card and we go direct and we don't need to be on their systems. And they like that -- and a lot of the competitors run on the Internet or that's how they operate their business. And we've made it stand-alone, which kind of cuts us apart. Amin, do you have anything to add to that?

No, I think you covered it. Some of the things we didn't talk about of why G&A is going up. We're also investing in the back end in terms of upgrading our cybersecurity upgrading some of our processes, et cetera?

Absolutely, yes.

I think you've done. That's all the questions. I think.

Well, thank you, everyone, for your time, and we look forward to speaking with everybody in getting more results out there.

Thank you, everyone. Have a great day.