Good morning and welcome to NTG Clarity's Q2 2025 earnings conference call. My name is Ali Farouk, an analyst at NTG Clarity. On the agenda for today's call, we'll start with management's prepared remarks on our financial and operating results for the three months ending June 30th, 2025. We'll then have a Q&A period answering questions from covering analysts and investors. Note that the full published report with audited financial statements, notes, and management discussion is available on CEDR and our website at www.ntgclarity.com. This presentation aims to highlight and summarize the key information already reported there. We will be posting both the slides and a recording of the presentation on our website following the call. Make sure to subscribe to our mailing list on our investor page on our website to get notified when those are available.
If you have a question that doesn't get addressed, please reach out to adam@ntgclarity.com and we will get you an answer after the call. With that said, I'll be welcoming management for remarks shortly, but first I'll start with a quick disclaimer. Certain statements in this presentation, other than statements of historical fact, are forward-looking information that involves various risks and uncertainties. Such statements relating to, among other things, the prospects for the company to enhance operating results are necessarily subject to risks and uncertainties, some of which are significant in scope and nature. These uncertainties may cause actual results to differ from information contained herein. There can be no assurance that such statements will prove to be accurate. Actual results and future events could differ materially from those anticipated in such statements.
These and all subsequent written and oral forward-looking statements are based on the estimates and opinions of the management on the dates they are made and expressly qualified in their entirety by this notice. The company assumes no obligation to update forward-looking statements should circumstances or management's estimates or opinions change. In this presentation, we also make reference to non-IFRS or non-GAAP financial measures that management believes are useful supplemental measures, but not alternatives to net income and operating cash flow. Please see the non-IFRS measures section towards the end of this presentation, our press release, and our MDNA for details and reconciliation of non-IFRS measures to IFRS measures. With that, I'd like to invite Adam Zaghloul, Vice President of Strategy and Planning, to begin his remarks.
All right, right on. Thank you, Ali, and thank you to everybody who tuned in this morning for our earnings conference call. It really is great to see all of the interest that you guys have and the support that you have taking a look at our results coming out of Q2. Of course, I am Adam Zaghloul, Vice President of Strategy and Planning for NTG Clarity Networks Inc., and I want to get started just by saying, you know, despite some headwinds that we faced from some foreign exchange taxes as well as some investments that we made in our growth of our operations, Q2 2025 really was another quarter of really strong growth. It makes 17 consecutive quarters of last 12 months revenue growth, bringing that last 12 months revenue up to a record level of about $70 million.
We're really seeing a continued tailwind from our key market of Saudi Arabia. They're still investing heavily into IT infrastructure, digital transformation as a part of their Vision 2030 initiative to diversify their economy and really technologize. With all the growth in that sector, we've been growing along with them. Q2, we grew our team again. We hired approximately 100 new employees, bringing us up to 1,300 total employees, and the whole team has been working really hard to continue the growth that we've been seeing over the last few years, really. I would say Q2 is another quarter of accomplishments. We entered 2025 really with a focus on, you know, three key strategic priorities. The first is to really embed ourselves in our customers' digital transformation strategy, become an integral part, and expand with them and grow with them as they continue to invest in digital transformation.
We also wanted to expand our footprint by winning new customers. A lot of times those come from word-of-mouth referrals from satisfied existing customers. We did pretty well on those first two initiatives. I can just call out so far this quarter, one of our three-year contracts that we signed towards the end of 2024, this quarter got expanded for a second time to the point where the first year's billing is approximately 60% higher than we originally thought. Definitely a lot of success in expanding our outsourcing business. I would say the standout for this quarter really is this third point, which is to increase the adoption of our in-house built proprietary software platform, which is NTG Apps. This year in Q2, we saw amazing year-over-year growth, about 1,600% year-over-year in the revenue from the NTG Apps line. Absolutely incredible.
I remember talking last quarter about how the team did a lot of work in 2024 getting to the point where a lot of our customers were at least piloting the NTG Apps product, about half of them. I also talked about how those pilot projects were turning into real projects, and we definitely saw the engagements continue to expand in 2025 as well with this amazing growth. Now I'll just call out, a lot of these early NTG Apps projects are sort of like more traditional bespoke software development and implementation projects. A large proportion of the revenue is services-based and implementation of the project, but there is a portion that is licensing, maintenance, support that can be considered that sort of recurring revenue style.
As we look to scale this line, we'll also look to bring with it a larger base of that recurring SaaS style software license and revenue, which will come with it a higher margin as well. Talking about the top line in Q2, we really saw strong year-over-year revenue growth despite the FX headwind that we experienced, and I'll talk a little bit more about that in a second. Revenue year-over-year is up 51%, bringing our revenue for the quarter to $18.9 million. The gross margin expanded by about 380 basis points to about 38%, driving up our gross profit by about 68% as well. Great expansion in the gross margin. This was driven largely by the NTG Apps playing a bigger part in our revenue mix. This quarter, NTG Apps contributed about 21% of the quarter's revenue. Great performance from NTG Apps.
We also had strong performance from our offshore software development offering. Year-over-year offshore services, the revenue contribution increased by about 90%. We're definitely seeing a clear trend of our customers choosing these sort of offshore and NTG Apps services, which, from their perspective, they're still getting the same great quality software development services delivered in their language, in their time zone by our Egypt offshore center. They're also getting cost savings associated with it. On the NTG side, these offerings are really scalable as well as higher margin for us. It really is a win all around. Now I want to talk a little bit about foreign exchange quarter. It's definitely had a little bit of a headwind for us this quarter, and it makes sort of sequential comparisons between quarters a little bit tricky because of how it worked out for us.
Just as a refresher, we bill our customers primarily in the Saudi Riyal, which is pegged to the U.S. dollar, but we report in Canadian dollars. Over the course of Q2, you can see from the chart here that we saw about a 5% decline in the U.S. dollar to Canadian dollar exchange rate, and that resulted in about a $1 million headwind to NTG Clarity. I want to stress that the foreign exchange situation doesn't have really any impact on our customers' demand for our services or our backlog or our ability to really win work going into the future. What it does have an impact on is the way that our revenue translates on these financial statements. That being said, since quarter end, we have seen a stabilization in the U.S. dollar-Canadian dollar exchange rate and even seen it improve at least slightly.
We don't expect future quarters to have this much of a disturbance from foreign exchange going on into the future. With that point about foreign exchange in mind, I want to stress that we're still on track to meet our 2025 revenue target of $78 million for the year. I definitely want to reaffirm that revenue guidance. $78 million for the year 2025 would be about 39% or 40% year-over-year revenue growth. The confidence in that backlog really comes from a couple of places. It's from our backlog of $100 million of POs and contracts on hand, approximately, but also from the continued trend we saw in Q2 of our customers showing strong retention rates. Customers are continuing to work with us, but not only that, they're also choosing to expand the scope of their contracts with us as well. We start to see a lot of contract expansions.
That $22 million three-year contract example is just one of many. At the end of the day, while we're not immune to currency fluctuations, we still see from boots on the ground that the demand in our markets is strong for the types of products and services that we're offering. I'll talk a little bit about operating expenses for the quarter. Starting in the G&A line, G&A this year represented about 17% of revenue, up from about 8% in Q2 2024, but this is really because of an intentional increase in the G&A. What we expect to be over the short term to support things like hiring, onboarding, and training resources to be deployed on future engagements.
Now, the types of resources that we've been hiring, there definitely is a bend towards more senior, harder to find resources that are going to help with the larger, more complex projects that we see coming down the pipeline as well. We'd definitely rather hire and retain them before we need them, rather than be in a situation where we have to scramble for talent when we actually get those contracts coming through. The majority of the increase in G&A was intentional hiring in preparation for the next leg of growth. There also was a decent amount of expenses in investing in our geographic expansion. A good example is investments in expanding our operations in Iraq that contributed about 1% of revenues' worth of expenses this quarter.
We're doing things like hiring a sales team, consultants looking for office space as well to really keep the growth that we've been seeing in the region of Iraq going, which I'll talk about in a little bit as well. Looking ahead on the G&A side, we really expect to be rolling out some of the resources that we've hired, moving their expenses from G&A to the cost of goods sold line when they're billable, reducing that absolute G&A expense, and expanding the margins from there as well. Talk about sales and marketing as well. This quarter, Q2 2025, we saw sales and marketing represent about 7% of revenue, up from about 5% in Q2 2024. This is about where we expect to see this expense land. There could be some noise from things like extra travel expenses or commissions hitting or some extra investments in expansion.
In general, the sort of 5% - 6% of revenue target is where we want to be for the sales and marketing expenses. Talking about profitability for the quarter, net income before taxes and foreign exchange this quarter was about $2.4 million, so very similar to the position we were in last year. As you can see from the chart here, foreign exchange and taxes definitely had an impact on our net income this year. We talked about the foreign exchange aspect of it. Taxes, just as a refresher, we are, as of 2025, we've run through our historical accumulated tax losses in Canada, so we are taxable here. This quarter, due to the compressed net income margins, we didn't provision for any Canadian taxes, but the expenses were basically payments for Saudi corporate income tax, which we also pay in Saudi Arabia as well.
After foreign exchange and taxes, we were left with about $400,000 in net income for about 2% of our revenue for the quarter. The difference between net income and adjusted EBITDA is, of course, those foreign exchange and tax items largely. Adjusted EBITDA for the quarter came in at about $2.8 million, about 15% of revenue. The reason is straightforward. As I was discussing with the G&A line, we're consciously carrying more talent on the payroll this quarter in order to prepare for deploying them as billable in future quarters as well. I want to talk about our adjusted EBITDA guidance for the year. I mentioned for this quarter, we came in at about 15% adjusted EBITDA. Our target for the year is 16% to 20%, so we came in just slightly under that because of our focus on hiring and investing.
We expect to see G&A decrease as a share of revenue towards the back half of the year and allow our adjusted EBITDA margins to expand back towards our target as we roll off some of those resources that we've hired into billable roles. This is exactly the type of operating leverage that we were able to demonstrate in the past. Definitely towards the back half of 2024 comes to mind. We feel confident in reaffirming that our full year adjusted EBITDA guidance will fall, or our full year adjusted EBITDA margin will fall in the range between 16% and 20%. Talking about cash flow for the quarter, three big impacts on cash flow in Q2 were the foreign exchange headwinds that I described earlier, the Saudi tax payments that we had to make as well, but also seasonally slower collections that we experienced in Q2.
We finished the quarter with about $900,000 in operating cash flow before change in net working capital. After the changes, we had an outflow of about $2.7 million for bottom line operating cash flow. The main changes in net working capital were from accounts receivable, and that's because Q2 collections, just like back in 2024, were impacted by a combination of holidays and summer vacation in the Middle East. Q2 had both of the two major Muslim holidays impact sales cycles, billing cycles, and of course collections cycles in Saudi Arabia, causing a rise in the accounts receivable. If you take a look at our accounts receivable breakdown, approximately 95% of the accounts receivables aged between zero and 90 days. Another 5% of the balance is aged older than 90 days, and that's actually an improvement from Q1. Our accounts receivable is still in a very healthy state.
As we look forward into Q3, just like last year, we're expecting it to be a stronger quarter of collections to make up for the slowdown that happened as a result of the holidays. Overall, last points on cash flow are probably, you know, we're continuing to strengthen our balance sheet by repaying some of our bank debt to the point where it's just about almost gone at the end of Q2, and also continuing to make some payments towards the long-term debt as well to continue to strengthen that balance sheet. At the post-quarter timeframe, we also closed an equity raise that I want to talk a little bit about. Back in July, we closed gross proceeds of about $9 million in equity. The net proceeds were about $8.2 million.
I want to talk about a few of the reasons for why we thought now was the best time to do that. The first is improvements to our balance sheet. We're at a point where we're negotiating with a lot of large clients, larger engagements, and it makes those clients more comfortable engaging with us if they know that our balance sheet is in a strong position to be able to fund the projects that they're granting us at this point. The second point is to provide us a little bit of flexibility to pursue some more growth opportunities. That could be either organically, like our investments in more sales staff and more G&A staff to be rolled out to engagements in the future.
It could also be in getting a little bit more strategic about mergers and acquisitions, looking for some potential roll-ups, which I'll talk a little bit more about in a minute here. The third reason really is we had the chance with this raise to bring on some pretty high-quality institutional investors, which is important as we continue to grow and broaden our base of shareholders. Investors definitely bring capital to the table, but they also offer pretty valuable perspective and guidance and can really act as strong advocates to raise awareness for the company as well. We're really excited to bring some strong institutional investors to the table with this equity raise as well. With the cash on the balance sheet from this equity raise, it really gives us the opportunity to continue to invest in what we see as our medium to long-term growth strategy.
At its core, it really is to continue what we have been doing already. We've defined this core growth model where we'll start with relatively small engagements with new customers, a lot of the times based from word-of-mouth referrals from existing customers. We will impress them with the quality of our work, the competitiveness of our pricing, and really the cultural alignment of our team based with that Egypt offshore center. We'll work with our embedded account reps with the customer to basically identify areas where we can continue to work even more, grow those engagements, expand them naturally over time, and really get to the point where the customers are happy to introduce us to their friends and provide us with referrals, and the cycle repeats itself from there.
That really is the story behind all the growth that we've been seeing over the last few years organically in Saudi Arabia. It also has started to result in some organic growth and expansion in neighboring geographies as well. Iraq and Oman are really good examples where we have an early-stage operation there contributing about a few % of our revenue. In the Iraq and Oman markets combined, we saw in Q2 2025 about a 76% year-over-year increase in revenue. That beat the company as a whole as well in terms of revenue growth. We are really excited to continue the geographic expansion, and that really is just the beginning. There are other neighboring geographies, Kuwait, Qatar, the U.A.E, for example, that have similar vision style digital transformation and economic diversification strategies and are looking to invest and digitize.
Over the long term, I think our Egypt-based operations can serve those markets just as well as in Saudi Arabia and in Iraq and in Oman as well. The recent capital raise also gives us flexibility to start looking at the potential for some M&A roll-ups. If we can identify companies either in Saudi Arabia or in some of the neighboring Gulf geographies that are similar to where NTG Clarity was about five years ago, they have a decade and a half track record of quality work in the region. You've built the relationships that are fundamental to doing business in the region. We could look to basically exercise a roll-up and bring them on board, bring in our Egypt offshore center and talent pipeline, and really grow the engagements with the customers that they have as well.
Now, like I mentioned, some extra capital gives us the flexibility to move more quickly. I just want to be upfront and honest with investors that we're still in the very early stages of this M&A piece. I don't want to set any specific expectations around timeline or anything related to that piece. Overall, we're really excited to continue this core growth model and see where the expansion can get us in Saudi Arabia and in the neighboring geographies as well. To summarize, I would just say Q2 2025 was another great quarter of year-over-year growth. It makes 17 consecutive quarters of the last 12 months revenue growth. Even though we had some headwinds from foreign exchange and taxes and our EBITDA was tracking slightly below our target, it really was because we're making deliberate investments to position us for longer-term success.
We're already seeing the early results of that success with the strong performance of our higher margin offerings like NTG Apps and the offshore software development services, as well as in geographic expansion with the success in revenue growth in neighboring Gulf geographies like Iraq and Oman. Our model is scalable and profitable, and we really have a proven product-market fit for the Gulf region. As the region continues to prioritize its digital transformation as a part of its economic development and diversification plan, we have confidence that we can maintain the growth trajectory that we have been on so far. With that, I want to say thank you for listening to the prepared remarks, and I want to change things over to the Q&A period where we'll welcome some questions, first by our covering analysts and then from some investors as well.
I'll invite Aravinda Galappatthige from Canaccord onto the screen to start us off with some questions.
Thanks, Adam, and congrats on the quarter and the continued success. I'll start with obviously NTG Apps. I mean, that was a kind of a headline, as you noted. To get a little bit maybe more granular, what proportion of that sort of $4 million number should we think of as sort of implementation and sort of installment or setting up cost? Just so that we have a sense of what the recurring component is, and what exactly is the model of the recurring component? Is it maintenance or is it sort of an ongoing, almost a licensing fee type of structure?
That's a really good question. Thanks, Aravinda. The NTG Apps, we are really excited about the growth we've seen this quarter for sure.
When I think about the breakdown between licensing and services implementation, it really is the majority of the revenue is coming from those implementation services. I would probably say in excess of 80% is going to be from those bespoke services implementation. The benefit behind that is we get to make a really tailor-made solution that works for our individual customers. We can expect it to be very sticky and stay around for a long time with those customers and let us bill the remaining percentage of that ongoing license maintenance support. Ideally, over time, we start to see the customer base grow. Number one, we'll have to do less bespoke work because we'll have a mature product line. Number two, with scale and more customers, we'll be able to increase the amount of just general ongoing license support and maintenance fees as well.
On the nature of those license support and maintenance fees, they typically are like a package bundle. What comes with it is, yes, license to use the product, but also access to support resources in order to fix any errors or train users, that kind of thing. It is like a package deal between license and user support as well.
Also, just to get the FX impact out of the way, Adam, the $1 million negative headwind, is that at the top line? I mean, that's at the bottom line level, right? I mean, top line, high-level math, if you look at Q2 last year versus Q2 this year, the USD Canada rate hasn't really, exchange rate hasn't changed too dramatically. Was your top line affected by the exchange rate as well, year- over- year comparison?
That's a really good question for sure.
When we're looking at, basically, we get FX impacts on both the top line and the bottom line, right? We bill in that Saudi Riyal pegged to the U.S. dollars. A lot of our expenses are also in Saudi Riyals, but also some Egyptian pounds and Canadian dollars as well. We get the FX showing up at every line. Just as a point of comparison, you know, if the foreign exchange situation in Q2 was the same as it was in Q1, for example, then we probably would have seen over $1 million more in the top line. It probably would have been closer to a $20 million quarter. We would have had improved bottom line margins as well. The net income probably would have been closer to $1.3 or $1.4 million. The FX shows itself up in both lines for sure. Okay.
Just to kind of talk about margins in the second half, obviously, the guidance suggests a fairly significant uptake in the second half. If I kind of break that down, I mean, we have a sense of what the revenues would be because of your very clear revenue guide. G&A was up about 240% year over year, and it's really that salaries and wages piece. Should we kind of anticipate the absolute number for G&A stepping down from the Q2 level? Because that looks, even considering the headcount increase, that salary and wages component looks like a bit of a step up. I just wanted to get a sense of the sequential trend.
Yeah, I would say definitely that's a good question.
The intention behind hiring these additional resources, again, they are the more senior resources that are a little bit more expensive and a little bit harder to find, is we want to get ourselves prepared for the next leg of projects that we're going to see coming down the pipeline. We think we are in a pretty good spot of being staffed up right now, and what we're expecting to see is sort of like this plateau of G&A expenses here. As towards the back half of the year and into potentially 2026, we begin rolling more and more of these resources out with some of our clients, we'll start to see some stepping down of the G&A expenses on an absolute sense and bring it more in line with what we'd expect to see from that sort of 16% to 20% adjusted EBITDA guide that way.
Definitely expecting a plateau followed by stepping down of the G&A expenses.
Okay, thanks. I'll pause the line. Thank you.
Okay, thanks very much, Ervin. I appreciate having you on the line. Next up, I'd like to invite Doug Cooper from Beacon Securities up to the screen to ask a couple of questions. Doug, if you're ready.
Yeah, can you hear me, Adam?
Yeah, all good. Welcome.
Okay, just getting back to the prior question on margins, the gross margin in particular. You obviously have NTG Apps implementation stage, but as that sort of matures in the higher software margin, what do you expect the impact of that to be on gross margin? You came in this quarter, you know, not in, or I guess including the FX, was just at 38%, 39%. What do you anticipate that to be over the next 18, 24 months as NTG Apps becomes a bigger proportion of revenue?
Good question. Thanks, Doug. Definitely really excited about having NTG Apps a larger proportion of the revenue, especially because that sort of licensing support and maintenance piece lends itself to inherently higher margins. I would say in the short term, you know, NTG Apps, like I mentioned when we were talking with Aravinda, the nature of the revenue from NTG Apps is largely service-based. It is very similar to the sort of on-site offshore resources that we've been billing for as well. That is just because, you know, early on we're making very bespoke software implementation projects for our customers. It still is a little bit better because they are project-based and it has that component of licensing and support and maintenance as well. As of right now, that little bit better has expanded our margins modestly.
Over the longer term, you know, what we're expecting to see happen is that sort of bespoke software services line to shrink and the just ongoing base of licensing support and maintenance that we have. We're expecting that to grow and bring with it more traditional SaaS style margins. It could be upwards of 50%, 60%, you know, some software platforms even achieve 70% gross margins. That is what we're expecting over the longer term for the NTG Apps line. Over the shorter term, it will probably end up closer to that high end of that 35% - 40% gross margin that we see as typical, so probably closer to the 40% like we have been seeing.
Okay, just moving on to, I thought it was interesting, your geographic expansion plans. Can you give us an idea? Saudi's got the Vision 2030, obviously. Kuwait, I think some of these other countries you mentioned have similar types of projects. Can you give us an idea? You mentioned revenue is up to 76% year- over- year, but can you put an absolute dollar number on that and what you think that can be, sort of non-Saudi Middle East revenue can be as a component of revenue over the next couple of years?
Yeah, definitely. It is an exciting time to be in some of the neighboring geographies, especially when it comes to Iraq. It is just such an amazing use case or such an amazing case study just because it's in a very similar spot to maybe where Saudi Arabia was a decade or so ago, right? They have a lot of revenue from oil and gas, or a lot of funds from oil and gas, but they're basically starting from scratch when it comes to anything digital transformation or computational or anything like that. There is a huge opportunity to grow and expand in the Iraqi market itself. That being said, as of this quarter, the Iraqi market contributed only about 2% of our revenue, even though there is strong year-over-year growth when it comes to that line offering. Over the medium term, there really is a lot of investment appetite.
That's why we're focused so hard on basically establishing a local presence there, looking for offices, hiring sales staff, that kind of thing. Our CEO always says it could be as significant as Saudi over the five to 10 year timeframe. All that being said, as of right now and probably for the foreseeable future, as Saudi Arabia continues to show strong demand, it's still going to be a relatively minor part of NTG Clarity's revenue, I would say.
Okay. Of the 1,300 employees, how many would be not like focused on non-Saudi?
Of the 1,300 employees, I would say right now it's probably in the neighborhood of 50 or 75.
Just the final one for me, the regional conflict, obviously, with Israel, Gaza, any impact on what's happening on the ground in Saudi or, for that matter, any of the neighboring geographies? I'll leave it there.
Thank you. Yeah, good point. It's always good to keep a touch on the geopolitics of the region for sure. I would say there hasn't really been any change in the situation from our perspective, as has been the case in previous quarters. The Gulf states especially have remained focused on economic development and economic diversification, and every effort has been made to basically maintain peace and try and stay out of as much as possible the regional troubles. We've been seeing overall a philosophy of stability and economic growth in the Gulf still, and we expect that to remain the case. Thanks very much, Doug. Appreciate the questions. Thanks for coming on. Next up, we've also got Chris Northwood from Activ8 Capital on the line. I'd like to welcome Chris to the screen for some questions. Thanks, Chris.
Yeah, thanks, Adam. I'm going to go back to the FX rate. Looking at the charts today, the rate was down 5% in the second quarter. That's obviously the million bucks on $20 million, pretty simple math. It's also started to recover. Does that mean that we'll see a recovery in the third quarter? Some of those losses potentially, does it turn around that quickly or how long does it take to really impact?
Yeah, that's definitely a really good question. It's really good to point out for sure, just as we saw in Q2, how quickly the losses on FX can accumulate to the point of being about $1 million. We can expect the turnaround to be relatively rapid as well. That's what we've seen historically, right? Up until Q2, foreign exchange has actually been a tailwind for us, and we've actually made a significant amount of gains on FX, especially when the proportion of our revenue coming from the U.S. dollar is extremely high as it has been, and the U.S. dollar has been performing well. I think if trends continue and the U.S. dollar continues to show recovery, as we've sort of seen the beginnings of in Q3, we can expect some of those gains or some of those losses to be offset by gains as we post the future quarters.
That is a really good point.
Thanks. On cash flow, obviously receivables sort of blew out a little bit. Can you give us any idea how things are going so far in the third quarter? Are we sort of catching up? Does that mean that we're going to return to that positive operating cash flow in the third quarter also?
Definitely we saw some constriction in the cash flow due in large part to that increase in the accounts receivable in Q2. So far, Q3, just as we saw last year, has been a quarter of pretty strong collections. People are coming back to work after being off on summer vacation and Eid vacation in Saudi Arabia, and the billing and collection cycles are returning to where they're going to be. As of right now, we're on track in Q3 to make up the deficit of collections, and hopefully we'll have a dampened, if not net zero, change in those account receivables looking into Q3. We're making good progress.
Okay, great. That's all for me. Thanks.
All right, thanks very much, Chris. Appreciate the questions. Looking at the time, it looks like we've got time for a couple more write-in questions from some of our investors. I'd like to invite Ali back onto the stage to read us a couple of those questions, please.
Thanks, Adam. Okay, our first question comes in from Murray, a private investor. Would you comment on your growth prospects for specific NTG product offerings in the context of both Saudi Arabia and nearby countries? Which particular segments of these countries do you visualize or target for sales penetration? Are there many clients within petrochemical pipeline refining areas of the economies? Are you more focused upon communications, banking, and other monetary institutions?
Okay, thanks for the question, Murray. Appreciate it. Yeah, talking more about NTG Apps and the target market for NTG Apps, just on a sector basis right now, our historic focus has been on sectors like telecom, financial institutions, and other IT companies. We have found a strategy that seems to be working, which is working with our existing customers who fall into those sectors and use NTG Apps as the sort of cross-sell, upsell opportunity with them. Some of these customers might think that they want outsourced software development services, but it turns out that we have an NTG Apps implementation that could meet all of their needs. We can upsell it, cross-sell it like that. What we expect to see happen is from a sector standpoint, we will remain focused on the financial institutions, telecom operators, and IT companies.
As of right now, we don't have a very strong presence in the oil and gas sector. I can just throw in that one of the things that we're going to be looking for when we start thinking about expansion and M&A, rolling up some of these other companies, is going to be companies who have exposure to the oil and gas sector. Even though the region is trying to diversify away from oil and gas, it will still remain a large part of the economy as well. I just wanted to throw that in there. Probably one other aspect is that not just in Saudi Arabia, but also in all of the neighboring geographies that we're targeting as well, there is a focus on expanding the small and medium-sized business ecosystem. One of the core pillars of Saudi Arabia's Vision 2030 is basically a bustling SMB ecosystem that way.
We're also finding some success working with these small and medium-sized businesses, offering them things like enterprise resource planning systems based on NTG Apps and really looking forward to growing with this growing segment. Overall, I would say the primary focus is serving our traditional sectors that we have been serving in Saudi Arabia and in the rest of the Gulf, followed by taking advantage of the growth in the SMB marketplace as well.
Okay, great. Our next question is written in. This is the day. How does AI impact your business?
Thanks for the question. Appreciate it. AI is definitely a hot topic when it comes to the world of software development right now. There definitely is a lot of news. I would say overall, NTG Clarity's position on AI really is one of seeing it as an opportunity as opposed to a threat to our business. What we don't see happening anytime soon is the complete replacement of some of our software developers by these AI tools. At the same time, we recognize that tools like Copilot or Cursor are going to be able to improve developer productivity. At the end of the day, what our customers get from us in terms of value and what we're providing to them is the results and the systems that we're building and the infrastructure that we're building out.
These AI tools we really see as an opportunity to increase our developer productivity and really provide more value to our customers. If anything, we see all of the changes in AI as an opportunity to provide more value for our customers over the long term. That's sort of on the services side. On the software product side, we're also working with a lot of the AI models to implement and integrate them into our software offering to NTG Apps. There are a couple of early-stage projects using AI to train sales teams with a chatbot or crunch numbers on investment feasibility for some of our financial institutions customers. Overall, we're just really excited about the possibility for AI to improve developer productivity and also augment and improve the value that's offered from our proprietary software platforms as well.
Okay, amazing. Our last question is written in from Megan, another private investor. With NTG Apps making up so much of the growth this quarter, does that mean some of the other segments are down?
That's a good question. Thanks, Megan. It's pretty perceptive too, because, you know, NTG Apps being up 1,600% and the offshore services being up 90%, we actually did see a year-over-year decline in revenue from on-site services. It actually went down about 16%. From our perspective, what we're seeing happen is our customers are recognizing the value in offshore work and NTG Apps. They're still getting the same quality developers that they would have gotten on-site, but they're at a fraction of the cost. They're still, and very importantly, speak their language, work in their time zone, being based out of Egypt, just across the Red Sea there. What we're seeing happen is our customers move some of their on-site work offshore, but also move towards NTG Apps implementations instead of building the software and technical infrastructure from scratch themselves too.
NTG, as a company, is perfectly okay with this because the offshore services and the NTG Apps offerings are higher margin and more scalable than the on-site services as well. Very happy to move the proportions of the revenue over to those lines. All right. That being the last question, thanks very much, Ali, for reading off the questions. I just want to say thanks again to everybody who is tuning in and everybody who asked us a question. Again, I really think that Q2, despite a few headwinds and some investment, was a very strong quarter of continued year-over-year revenue growth. We're looking forward to keep this going into Q3 because the opportunity is there. Our customers have the demand for our services, and we really think that there is a long way to grow yet in the IT services market in Saudi Arabia.
Till Q3, thank you again, and I'll talk to you soon.