Thank you, Adam. Can everyone hear me okay? Excellent. I'd like to start today by talking about the number 300. What's so special about 300? One or two people in the room know. 300 is an interesting number. We just announced our earnings last week for our Q3. 300% represents the revenue growth year-over-year from Q3 last year to Q3 this year.
Interesting. It's more interesting when you look at what we've done with cash flow, where last year, the same quarter, we burned about $3 million-$3.5 million of cash. This year, we're basically cash flow breakeven.
With our gross margin growing quarter-over-quarter and year-over-year sequentially, with our backlog of existing signed customers growing also, we're sitting at about $48 million or $50 million of signed contracts waiting to be installed or recognized on SaaS subscriptions.
Good metrics if you're an investor to kind of watch on a company. 300 is also an interesting number because it represents the number of people who were killed last week from gun-related incidents.
Not mass shootings, just gun-related incidents. One died earlier this week in Delaware in a hospital where they were trying to go get just care. We have a tragedy that's occurring in North America and actually around the world with gun-related incidents. We haven't had a way to solve that problem heretofore. We all know the standard disclaimers. You'll all get this chart presentation if you'd like it later.
We're always available to talk more about it. 300 is a very interesting challenge when we think about what's going on in the world today. The weapons issues are not going away. Heretofore, the problem has been solved by more security guards or more metal detectors. Metal detectors and security guards were solving a problem 50 years ago. Think about 50 years ago.
We walked around with a leather wallet, maybe a key to our front door if you locked your front door. The world was a very different place. Metal as a proxy for a weapon was a pretty good proxy. Now I look at my teenage daughter, she's got her Beats headset on, she's got sets of earbuds, two laptops, a tablet, two smartphones. There's more metal than you'd dig out of a mine in the ground.
Metal is no longer a good proxy, particularly in an environment where you have people who have higher expectations. Peter Evans paid $2,000 to go see Taylor Swift. He doesn't want to stand in line at a metal detector for 90 minutes to get in. Society is different today. We are taking an AI-based approach to digitally disrupt the physical security marketplace.
What do I mean by that? We've all seen digital disruption occur in banking, in how we do online commerce. The physical security industry has always been characterized by guns and guards and metal detectors. It no longer is a scalable problem that can be solved. We've solved the problem differently. We'll talk more about how we've done that. In society, we all know that we've got this challenge. We've got more and more risk.
We've got more and more threat-related issues. We've got more and more weapons issues. The horse has left the barn. We're not going to change gun control. Actually, this is a global problem. It's no longer a U.S. problem. I'm on my way over to Paris after this conference. Then I'm into England. Why? Because they've had similar sorts of issues, as well as Singapore, as well as Australia.
We've got a lot of demand for our technology around the world. We've got a lot of societal unrest. The problems of homelessness, of people who are struggling with mental illness, with drugs and things like this aren't going away. Most of those people are arming themselves because they have to if they live on the streets. We've also got new ways of applying AI technology in a very pragmatic, purpose-built way. Everyone flew here.
Everyone knows exactly the experience of going through a metal detector, taking out your metal, taking out your cellphone, taking out your watch, walking through, your belt buckle alerts. The average metal detector, which has been the historical response, is very reactive. About six people get through it a minute.
I can guarantee if I ask the question, everyone in this room is going to say it's not an enjoyable experience to stand in line at the TSA, nor when you're going to go see your favorite Montreal Canadiens go win the Stanley Cup playoffs. Which they didn't do, but they were close. We've created an entirely different experience where instead of six people walking through, 75 people walk in the door just like you all walked in this door today.
If I had a set of systems sitting here, everyone here in this room would fully understand, or I would at least, who's got a gun, who's got a knife. No one would even know they've been screened. Let's talk about this a little bit more. First, let me give you the punchline. The punchline is that we've built a business around a market that has incredible tailwinds behind it.
The weapons are not going away. It's moving from an environment of a nice to have to a must have to solve this in society. We've got more inbound interest from Fortune 500 companies and Fortune 100 companies, banks, insurance companies, biotech companies, who've now realized that they have to create safer environments for all their employees.
It's a requirement, just in the same way that smoke detectors and sprinkler systems have become a requirement because people have done the risk/reward kind of cost analysis. We're seeing the same thing happens with weapons detection. We built a technology that has very, very high barriers to entry.
I'll explain a little bit more about that in just a moment when we talk about the technology. It's very difficult to do what we've done. We've got these purpose-built sensors that, together with the AI software, can essentially tell you that's a gun, that's a knife, that's a smartphone, that's a laptop, as someone walks in the door. Only alert on the things it's supposed to alert on.
There'll always be some false positives, but the key idea is instead of 100 of us waiting in line for an hour to get through a metal detector 95% of the people, 85% of people are just walking in. Children going to school and enjoying their day will no longer having to have all their bags inspected.
The technology has been thoroughly tested and proven. We've taken it to the TSA, we've taken it to the FAA, we've taken it to the NPSA, we've taken it to the Department of Justice, the U.S. Federal Marshals, and had them verify and validate the technology. Unfortunately, the physical security industry is characterized by, let's call it exaggerated marketing.
We went the other way and said, "Let's have the experts test us and validate to give our customers confidence that we can solve their problems and create safer environments." From a business point of view, we're playing into $135 billion marketplace, again, with great tailwinds.
As we've proven over the last year, we built a very scalable operational model where, while our operational costs might be growing single digits, our top line's been doubling and tripling almost every year.
That's why you see the gross margins going the way they are. I'm going to talk a bit about what happens in the security world here, just a little background. There's this head butting that occurs between guest experience and between security. We've all experienced it.
I don't know if everyone's noticed here, when you go online and do your banking, you used to just have to enter your name and your password. Now you've got to use your thumbprint, your eye print, your butt print, whatever print they want. Captchas, where the bus is on these mosaics.
We're getting to six, seven, eight factor authentication, and the more that occurs, it's a poor guest experience. The more a place like Madison Square Garden needs to protect their environment while sitting on top of Penn Station in downtown New York, the less of a great experience it is for that Knicks fan to go celebrate the games, the win by the team. These two things have always been in juxtaposition with each other.
You see, for example, in an arena like Madison Square Garden, where the guest experience people are saying, "Let them in. We need the revenues. We don't want them standing outside in January." The security people are saying, "We're a target for risk. We're a target for threat."
Digital innovation, just like the way it's changed the way we do banking, the way we do commerce, the way our kids all got educated during COVID, can also change this physical security environment, and that's what we've delivered to our customers, like Madison Square Garden and the Sphere here in Vegas and auto manufacturers and schools and hospitals and many others.
We're playing in a marketplace that's about $139 billion-$140 billion globally. As a business, when I first came on board, we said, "Let's just do one thing really well.
Let's focus on the weapons in the arenas and replace all those metal detectors, 45 of them with 85 security guards with half a dozen of our systems, one-fifth the number of security guards and people getting in 5x faster. Instead of the average line of people just waiting and waiting to get in, everyone's just walking in and going and buying popcorn and having fun. It's a very different guest experience.
The market wasn't willing to wait for us. Hospitals started calling. Auto manufacturers started calling. One of the largest electric vehicle companies in the world called us. They had a gun incident right in the plant, three of them, and they called us and we were there on a Tuesday. Now every single employee of that company walks through our gear into a safer environment going to the factories.
Same thing with many others and many other hospitals. Internationally, investors are always saying, "What's the fulcrum point for your company? Is there some sort of impact that's going to happen here that's going to cause breakaway growth?" We're already on breakaway growth, there's two things have happened to us, those fulcrum points.
One is the international markets are where the U.S. was two or three years ago, and our business is being pulled internationally now, the same way that we were getting pulled into hospitals, into manufacturing, and into the schools, where nobody wants kids to have to worry about guns.
We've delivered two or three different pieces of the equation here as a solution. Each product is purpose-built to solve a specific problem for a specific vertical market, and that's where our differentiation comes in.
In the schools, let the kids in and not alert on the laptops. All the solutions are out there. If you have too much metal, it's going to alert on a laptop. If I walked in with this bag with a laptop, a tablet, a charger, a metal water bottle, headsets, and all those things, imagine yourself going through a metal detector with one of these.
How long is it going to take you to unpack that thing and make the TSA happy? In our case, 66 kids walk into school every single day with one of these things as if there was nothing there. If they have a gun or a knife, it identifies there's a gun in the backpack and a knife in that pocket, we're starting to work on the ability to identify different electronics. You want to keep vapes out of school?
We can do that. You want to keep cell phones out of the classroom? We can do that. You want to stop theft of electronics from a fulfillment center, a big distribution center? We can alert on weapons on the way in and electronics on the way out, which is a CAD 8 billion problem to one of the largest retailers in the world. We're sitting in a very interesting position with the technology, each one purpose-built to solve a problem.
Hospitals, the number one issue, catch the knives because of the proximity of the caregiver to the person who's having a drug-related issue. This is not a scenario of one product fitting all markets and jury-rigged. We've actually developed this solution whereby for each market with each unique need, we can solve that unique need. Don't want to alert on the steel-toe boots in manufacturing? We don't.
Everything else does. We have a competitive advantage here in what we've done with the portfolio. This is where a video normally shows, but this was uploaded as a PDF, so I'm going to imitate a video, if you all will bear with me. What this video would show is a gentleman taking a backpack, loading it with a Chromebook, loading it with a three-ring binder, loading it with a metal water bottle, and so on and so on and so on, and walk you through not alerting.
Then he takes a Glock 19 and he slides it between the laptop and the three-ring binder. Walks through, and it correctly identifies there is a gun in the backpack. Then we show a video of kids going into school, just streaming in, streaming in, streaming in.
If you'd like to see those videos, you're welcome to give us a call, or we'll take you to a customer and show you it live. On to the next chart here. What does this all meant? Lots of customers. Everyone's got their NASCAR chart. This looks like a NASCAR car, with all the logos of all the sponsor things. We're very proud of the people we call our customers because they are the people who take security seriously.
Places like Madison Square Garden, which is a terrorist target, the Sphere when it first opened had a lot of threats against it. VA hospitals, the Department of the Office of the Inspector General of the United States, the British Museum, which is a terrorist target continuously around the world all the time. People who take security seriously take us seriously. The British Museum is a fantastic example.
They did aggressive security screening of everyone who went in, and there was always a line of 2,000- 3,000 people waiting to go in. On the first day, in the first weeks of when they implemented us, that line of 2,000 people was cleared within 40 minutes. I was talking to a security guard and he said, "I've worked here 19 years. I've never seen that courtyard empty."
They also got 3x more weapons and had people in 3x faster than before. There's this compelling ROI around creating a great guest experience and a safer environment. What does this all mean in terms of our results? I mentioned earlier when I started, this has been about a five-year journey for me. I joined the company about five years ago and it was a turnaround situation.
We had an interesting product that at its core was very good, but it really wasn't deployable. We didn't have a lot of customers, partners. The technology still was a little lumpy. In the first year, 2001, 2002, we had about a $200,000 worth of business. This last fiscal quarter that we just closed, we did about $10 million of revenue. We were cash flow breakeven. We're running about $20-ish million of OpEx a year.
We started the quarter with $15 million in the bank. We finished with $15 million in the bank. Our gross margin went up from this prior year's Q3 from about 57%-61%. That's the number I'm most proud of because we introduced a brand-new product about three quarters ago. This is hardware and software as a business.
With hardware and software, typically when you introduce new hardware, it takes a while to get the critical mass in your manufacturing processes, in your installation processes. You start with a very low gross margin, and we've quickly accelerated that with a very scalable manufacturing model. We're now starting to bang around 61% for a blended average of all our products.
The next thing on the journey here after we talk about this is I believe we've hit a new norm, where we're kind of moving along around 3 million, 4 million and taking our time to convert backlog into revenue. We've now got the model right where we're now delivering and converting that backlog to revenue very quickly. We're sitting on about mid-40s million CAD of backlog, roughly broken into two scenarios.
Customers who've signed contracts, we've installed, but they're on a subscription model, so it's going to be recognized revenue over time, and that our annual recurring revenue keeps growing. We also have customers who we've contracted with, but we're yet to install. A good example would be a school district with 12 high schools. They don't deploy all 12 at once. They want to take care of the kids.
They want to make sure they're safe. Generally, they'll do one school, then the next, then the next, then the next over a 12-1 8-week period. As we load up more and more of these contracts, we keep seeing that contractual backlog increase, and we keep converting that to revenue very quickly. I mentioned also a testing and validation. You don't have to believe me. You can believe the TSA. You can believe the FAA.
You can believe the Department of Justice and U.S. Federal Marshals who are worried about perimeter security at very important sites and locations. We took the approach to make sure those folks are validating what we do, and that we are, in fact, indeed, more secure than some of the current methodologies like walk-through metal detectors. I talked a little bit about our go-to-market model.
I'll highlight it here, too. We have a number of customers who purchase as an upfront CapEx-type model and those who purchase on a subscription basis. Frankly, I like both. The split is around 60% upfront and 40% on a subscription basis. I come from a cybersecurity SaaS world where we loved recurring revenue just stacking on top of each other more and more and more because it gave you a lot of predictability in your revenues going forward.
Eventually, it covers your OpEx, which is the path that we're onto in a very short period of time, where just the recurring revenue covers the OpEx. Very pleased with that. However, many of our customers, like the school systems who want to protect the entire district, they often apply for grant money and they get that grant money, they have to spend it all within the year.
We've got a nice blend because that upfront cash is also keeping us cash flow breakeven and looking very positive. The headline there is, "We don't mind how customers pay us, just pay us. All money's green." The future is what is kind of most exciting to me.
While we've got these core products that are continuing to deliver value in terms of keeping weapons out of places like casinos, we've started to deliver value-added features on top of the stack that we've delivered. More and more customers are saying to us, "Well, can you integrate authentication in this?"
When Peter walks into Madison Square Garden to see the Knicks play, he doesn't stand in line for a ticket. He doesn't stand in line to have his bag checked. He doesn't stand in line to go through the walk through metal detector. Peter just walks from the sidewalk to his seat, and the system goes, "This is Peter. He hasn't been kicked out before. He has a valid ticket. He doesn't have a weapon. But Peter's been here 5x .
Let's send him a text and invite him up to the VIP suite." We start to think about the end-to-end journey. Very large retail organizations are starting to talk to us about authentication. Should this person be here?
Is it their shift? Are they on a performance improvement plan? Are they a new employee? How can I add more to the whole guest journey married with security in an automated manner and remove things like people looking at your badge and your ID like when you checked in here at the desk?
Where the company's future starts to lie is we're delivering more software value stacked on the infrastructure, obviously much more recurring revenue at a much higher margin. The platform is in place for us to create that extensibility. I briefly mentioned our ability to do object detection.
Large retailers are losing millions and billions of dollars to employee theft every year. Apple Watches, smartphones, these sorts of things. In one case of one retailer, it's an $8 billion problem they told us. If I can alert on those weapons on the way in, which is the predominant application, then deliver incremental software value to stop that $8 billion problem,
We did the math and the ROI is about 17 hours for what it would take for them to deploy our solution and actually stop that theft. We see a great feature for adding more and more value onto the software stack and continuing that gross margin acceleration in the business. These charts, they're as of June 5th. We announced our earnings last week on June 10th, I'm not sure if these are as current.
I think we had to get this in before we actually announced our earnings. We do have about $250 million of shares outstanding. Our market cap here is a little light because the stock took a bit of a pop after we announced our earnings. We're on a nice trajectory as a business. We're currently publicly traded on the OTC in the U.S. and on the Toronto Stock Exchange.
The question we always get is, are you interested in moving to a U.S. exchange? The answer is absolutely yes, at the right time. We'll have two, three, four quarters of continued growth, continued profitability, continued top-line expansion to show that there's a lot of stability and predictability in what we're going to do. It's a when, not if, answer. In summary, where are we as a company? Huge tailwinds.
I don't think anyone would deny the weapons issue is a problem, and it's becoming a global problem. Internationally, the problem is knives, not guns. We can uniquely say that's a knife in someone's pocket while not alerting on all the other nonsense they have on them. Significant market, large TAM, differentiated value in what we can do for each customer, for each market segment.
Huge moat around the technology we've created. It's very, very difficult when people are walking into a building to be able to say, "That's what this person has on them," all their electronic componentry.
We think we've got a great compelling advantage here with a very difficult technology to replicate, and we're executing. Look at our numbers. The operational business has been built to scale very, very cost effectively. I have a few minutes left here. Any questions? Does this make sense? Please, sir.
It's a great question. The question that was asked, in case people didn't hear it, was talk a bit about our manufacturing and our capacity. It's a great question. We introduced a second product. We have our main product line, which is doing very, very well in arenas, stadiums, healthcare, manufacturing. We introduced a new product to serve places like office buildings and schools,
Where people are carrying the large backpack as opposed to going to the Knicks game with nothing on. I had a forecast for what I thought the market uptake would be, and it was about 3x that. We had a little bit of a challenge to go deal with that and get our manufacturing right. We currently don't have any supply chain problems because a lot of the technology that we use is off
A few purpose-built sensors. We have our own supply for delivering those. It took us about a Q2 to kind of step up to meet that market demand. We're now at a place that I had a demand for 3x the capacity we could deliver it essentially overnight. More importantly, we're using some contract manufacturers who are global in nature.
If all of a sudden we wish to do manufacturing in Taiwan or Singapore or Mexico, whatever, it's a lift and shift of all those processes that have been put in place and that they've got in their ERP systems and everywhere else to just move to another location. It's a great question. Thank you. Other questions? Please, sir. In three years?
Probably standing here at this conference talking to you and saying, "I'm glad you bought." The question was, where do we see ourselves in three years? I'm a big believer in building a great company that has high predictability, high growth, high profitability. I'm not a big believer in building a company to be sold and flipped. If you do the thing right and you build the right company with those kinds of financial metrics, you attract a lot of interest.
Would that attract us to potentially move to Nasdaq? Possibly. Do I see growth in partnerships? Do I see growth internationally? Absolutely. Where do I see us in terms of revenue point of view? Wow, I've modeled that three or four different times. There's a clear trajectory for us to continue doubling revenue almost every year.
It's going to come down to execution at the end of the day. We have the manufacturing capacity, as this gentleman asked. We have the differentiated value. The market is clear. We're barely 1%, 2% penetrated in the marketplace right now.
It's just execution. More headcount? Definitely, because you always need salespeople to absorb the demand and address it, marketing people to create more interest in other countries. More importantly, we invest a lot of time in the after-sale support.
We don't talk about it as customer success or customer support, we talk about it as a customer concierge. Security is an industry where it's based on trust and relationship, and it will never fail me how many times customers have called us and said, "I'm calling you because so-and-so recommended you." Security is a very tight industry of people who all know each other.
We're going to run out of time, gentleman, sir, you had a question. Didn't you? Did you have your hand up? Somebody did over here. Tell you what, over there. I'd have to kill you. I'll give you sort of the layman's answer. We built some purpose-built sensors that essentially determine that object that walked through has a little gold, little platinum, little aluminum, little lithium.
That's the make, the amounts, and the combinations that are characteristic of a smartphone. The next object has a little gold, little copper, little silver, more aluminum, more lithium. That's the characteristics of a laptop. The next object has four ounces of steel, two ounces of brass, one ounce of lead. It's a gun. That's the layman's way of kind of putting it. You're looking at a lot of characteristics around these items.
I think I'm running out of time here, right, Adam? We're going to have to wrap here. I'm here all this afternoon, this evening, tomorrow. We would love for you to come on by to our booth or look us up, Xtract One Technologies. Thank you.