Thank you, everyone, for joining us today, and welcome to Avante's second quarter investor webinar. My name is Nanaki Singh, and I'll be the moderator for today's call. Joining me on the call today are Emmanuel Mounouchos, Founder and CEO of Avante, and Raj Kapoor, the company's CFO. This call is being recorded. There will be a question-and-answer session at the end of the call. I trust that everyone has received a copy of our financial results press release that was issued yesterday. Listeners are also encouraged to download a copy of our quarterly financial statements and management discussion and analysis from sedarplus.ca. Please note, portions of today's call, other than historical performance, include statements of forward-looking information within the meaning of applicable securities laws.
These statements are made under the safe harbor provisions of those laws, forward-looking statements that are based on management's current views and assumptions, and that 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 Avante's reports filed on SEDAR+ for various factors that could cause actual results to differ materially from the projections. We use terms such as gross profit, gross margin, Adjusted EBITDA, and RMR on this conference call, which are non-IFRS and non-GAAP measures. For more information on how we define these terms, please refer to the definitions set out in our Management's Discussion and Analysis. With that, let me turn the call over to Mr. Emmanuel Mounouchos, Founder and CEO.
Thank you, Nanaki, and welcome, everyone. We truly appreciate everyone's joining us today. On today's call, our CFO, Raj Kapoor, will review Q2 results, and I will provide a general update and business overview of where the company is today and our positive outlook. Before getting to the financial results, I will provide a high-level overview of Avante. Avante is a leading provider of security operatives and technology-enabled security solutions to residential and commercial clients. Avante's mission is to deliver and elevate the level of security globally with white-glove mentality to high-net-worth families and corporations alike through advanced solutions and methods of detecting conditions that require immediate response. The company has developed a diversified security platform that leverages advanced technology solutions to provide a superior level of security services.
With an experienced team and a proven track record of solid growth, Avante is taking steps to establish a broad portfolio of security businesses and solutions for its customers through organic growth complemented by strategic acquisitions. Avante acquires, manages, and builds industry-leading businesses, which provide specialized mission-control solutions that address the security risk of its clients. Avante is headquartered in Toronto, Ontario, and we have approximately 153 employees in the company. The second quarter of fiscal 2025 marked another successful quarter of growth for Avante, with quarterly revenues increasing by 52% year- over- year. Our core business continues to thrive, reflecting a 29% growth of recurring monthly revenue. The success of the NSSG acquisition has been a key driver of this growth, enabling us to expand our international revenue and elevate our global capabilities, supported by Avante Black initiatives.
Our Adjusted EBITDA grew by 49% in Q2 fiscal 2025, and we now achieve positive Adjusted EBITDA in nine of the past 11 quarters. We've made significant progress in our AI-driven detection technologies. Our proprietary Halo technology is now deployed in over 160 locations and continues to grow, with a significant enhancement on the way. In addition to Halo, we've launched several technology-driven security solutions over the past year, including Avante Verified, Human-in-the-Loop remote services developed in partnership with Scylla. Looking ahead, we plan to continue developing new tech-enabled products and integrating advanced third-party solutions to enhance our abilities and outreach. We remain committed to drive organic growth to further strengthen our business and deliver exceptional value to our clients. Today, I can proudly announce that the company is bank debt-free and that Avante is now growing revenues and generating positive cash flows.
We have CAD 12 million available of undrawn credit facilities. We are in a very strong financial position going into our fiscal 2025. I will provide additional details on our outlook later on the call, but first, I would like to turn over to our CFO, Raj, who will review the financial results of Q2 2025. Raj?
Thanks, Nanak.
Our fiscal second quarter 2025 results are as follows. Second quarter was another exceptional quarter for Avante, as we increased revenue by 52% compared to the same quarter last year. Avante achieved quarterly revenues of CAD 8.1 million during Q2 2025, compared to revenues of CAD 5.3 million generated during Q2 2024. The increase was due to the acquisition of NSSG, Avante Black growth, and organic growth of its domestic business. Avante achieved gross profit of CAD 3.5 million in Q2 2025, compared to CAD 2.1 million during Q2 2024, representing an increase of 64%. Avante's gross margin percentage in Q2 2025 was 43%, compared to 39.7% in Q2 2024, indicating a consistent level of profitability. During Q2 2025, Avante achieved Adjusted EBITDA gain from continuing operations of CAD 338,000, in line compared to an Adjusted EBITDA gain of CAD 277,000 in Q2 2024.
I would also like to quickly highlight the current growth trajectory of Avante. On this slide, you can see a graphical display of our five-year annual revenue. After a period of stagnant growth in fiscal 2020 to 2022, you can see that over the past two years, we have gotten back on the path of growing the company. This was achieved through the onboarding of new customers with our focused sales efforts, improved customer support, introduction of new services, and accretive acquisitions. We have a very predictable business model as a significant portion of our revenue is recurring in nature. We continue to have strong visibility and predictability for future performance, with over 45% of our revenue in fiscal Q2 coming from contracted recurring revenue. Recurring revenue growth has been entirely from the core business.
Our core business, as a diversified security platform leveraging advanced technology solutions, remains solid, with recurring monthly revenue increasing by 29%. The Avante Security segment delivered recurring monthly revenues, or RMR, of CAD 3.3 million during the second quarter of fiscal 2025, up from CAD 2.8 million during the company's second quarter in the prior year. The increase in recurring revenue was driven by net growth and monitoring customers. As you can see from the graph, in the past four quarters, there has been an increase in overall non-recurring revenue, which was primarily due to the acquisition of NSSG and the growth in Avante Black. Our client contracts are one year in length, and we continue to maintain a minimum of 98% client retention and renewal, demonstrating the value proposition and the trust in our solutions. We continue to have a clean and healthy balance sheet.
I'm pleased to report that we continue to have a strong balance sheet and are able to fund the company's organic growth initiatives. We continue to have a positive outlook for the next fiscal year. As of September 30th, 2024, Avante is bank debt-free and has CAD 3.9 million in cash and short-term investments. The company has access to a senior secured revolver of CAD 2 million and to a CAD 10 million unsecured term loan facility for a total of CAD 12 million, all of which remains completely undrawn as of today. We feel confident to continue funding growth with cash flow from operations. Overall, the company is in a very strong position going forward. I will now turn the call back over to Manny. Manny?
Manny, you're muted right now.
Thanks. Future vision and strategy. We've identified four key areas of focus that will drive our growth moving forward. Our first priority is to replicate our proven services in high-net-worth residential neighborhoods throughout North America. This is a market where we've already demonstrated success, and we plan to differentiate ourselves with our white-glove service, advanced solutions that I will discuss in more detail shortly, and our proven model of infrastructure. Our second focus area is leveraging NSSG to expand both entities into each other's client base with blended solutions. This allows us to deliver comprehensive offerings to the Fortune 500 companies that are part of both our client portfolios. Use cases of our solutions include traveler and mobile asset tracking via Avante Argus and advanced video analytics to detect human trespassers in high-security projects worldwide, which we recently assisted with a dam and construction project in Senegal.
Our third area of focus builds on strong success of Avante Black, where we aim to grow its customer base revenues and services. I'll discuss Avante Black in more detail shortly. Lastly, innovation remains at the heart of our technology and our strategy. We are committed to scaling our proprietary technologies for mass use and emphasizing subscription-based models to enhance recurring revenue. These four pillars define our strategy as we look ahead, positioning us for substantial growth and creating long-term value for our shareholders. Innovation drives Avante. Our company was founded on the principle of combining cutting-edge technology with best-in-class security operatives. This unique combination enables us to revolutionize the security industry in several ways. We were the first true six-minute responder responding from the moment the alarm was triggered, not after being contacted by the monitoring station to show up at a client's home.
We developed one of the first apps for BlackBerry devices before the term app even existed. We became the first security company to use cameras via dial-up internet to monitor the status of large construction projects, including Walmart stores and other major retail developments, back in 2002. We integrated real-time analytics to detect trespassers, further enhancing the effectiveness of our security solutions. This culture of innovation and vision has been the cornerstone of Avante's growth and success. By delivering exceptional trust and services to our clients, we've built strong, enduring relationships that have propelled us forward. However, Avante also faced significant challenges during the 12 years it was controlled by others, a period during which the company struggled greatly. Since our rebirth in April 2022, innovation has once again returned to the forefront of our strategy, revitalizing the company and positioning us for future success.
Our legacy of leadership and commitment to innovation continues to drive us as we build upon the strong foundation and shape the next chapter for Avante. I will now go through some of our new services. Avante Black represents the pinnacle of exclusive risk mitigation, offering an unprecedented level of client experience that redefines how risk mitigation and crisis management are handled. This elite offering has been built by assembling a team of experts, including veterans from the elite Israeli forces, who combine their expertise in covert operations and tailored security solutions. Our investigation services are unparalleled, providing clients with the most comprehensive and accurate intelligence in the industry. This extends to 24/7 personal security protection, supported by physical response teams capable of acting within minutes when a threat arises.
We also go beyond the conventional security by offering safe houses for our clients and their families who require heightened protection. In addition, we proactively monitor reputational risk on social media, addressing and rectifying issues before they escalate. Avante Black's capabilities include in-depth background investigations to uncover potential threats and provide clients with a clear understanding of risks. Technical surveillance countermeasures, ensuring clients' communication and operations remain secure. Custom campaigns designed to protect clients and their corporations from targeted risk. Ethical hacking to test and strengthen network security. Avante Argus. Argus is a groundbreaking safety companion app developed by Avante Security, designed to provide unmatched protection and peace of mind for our clients with Argus. With Argus, we ensure clients feel safe and secure no matter where they are in the world.
The app allows users to instantly request assistance from Avante's team of skilled security professionals with just a tap. Whether you're in the perilous situation or simply feeling uneasy, Argus ensures help is always within reach. The NSSG branded version will soon be available. Halo is an Avante AI-driven tracking and two-way voice communication service. With the use of Halo video analytics, we can dispatch before an intruder can break into the home. It is based on self-learning technology that uses pattern-based algorithms to recognize movements and characteristics. Basically, deep learning AI engines, not simple rule-based analytics like our competitors. Halo sets apart with proprietary AI-driven analytics that detects full-body silhouettes and even individual limbs, offering unmatched accuracy. Features as instant detection, two-way voice capabilities, and seamless integration with existing camera systems make Halo a market leader in next-generation security solutions.
In fact, Halo is approved by the Department of Defense for use in the U.S. nuclear facilities, providing high-level security with AI video analytics. Since launching in the summer of 2024, Halo has achieved significant market penetration with over 160 units installed in neighborhoods across the Greater Toronto Area. We are continuing to enhance Halo capabilities. Looking ahead to 2025, we'll incorporate Halo-Track, a game-changing feature allowing us to activate up to 200 nearby Halo devices when an intruder is detected to track them across neighborhoods or cities, providing real-time location and updates and facilitating communication with authorities. Halo represents a transformative step forward in neighborhood security, offering peace of mind to our clients while solidifying Avante's leadership in AI-driven security technology. We believe this innovation will drive growth, strengthen our market position, and deliver long-term value to our stakeholders.
On November 11, we announced the launch of Avante Verified, our Human-in-the-Loop remote video services. The remote video services developed in partnership with Scylla Technologies. This service integrates Scylla's AI capabilities in physical threat detection with Avante's expert human oversight to redefine the standards for security solutions. Avante Verified brings together the strengths of AI and human judgment. Advanced AI algorithms continuously monitor feeds and identify potential risks in real time, while our human operations step in to validate and interpret incidents, ensuring rapid and accurate response. As the only visual AI company with multiple industry benchmarks and proprietary technology, Scylla brings unparalleled expertise to our systems. The use of this product will begin with K- 12 schools, but we plan to expand into commercial security and defense.
By offering clients this balanced, adaptive solution, we ensure that security decisions are precise, timely, and effective, ultimately empowering our clients with peace of mind and superior protection. One of the most exciting advancements in our portfolio is WALL-E, an unmanned solar-powered security solution that integrates our Halo technology. WALL-E is specifically designed for autonomous security and surveillance in remote and challenging environments, offering a next-level approach to safety and monitoring. WALL-E detects unauthorized individuals and provides real-time alerts, ensuring immediate awareness and rapid response to potential threats. Its versatility makes it ideal for a wide range of applications, including securing large gatherings, schools, hospitals, corporate campuses, construction sites, and public spaces. Some of our other innovations since I took over again include Avante Homeworxx.
Avante Homeworxx is a home management service providing trusted, vetted, and security background check trained persons for luxury homes to perform various repairs and maintenance services. It also provides services such as boarding up windows and repairs after a break-in occurs. The Reserve, formerly The Toyboxx, is an exclusive top-tier auto storage service tailored for automotive enthusiasts, collectors, and owners of high-value vehicles. We've had a ton of interest in The Reserve given the high volume of car thefts in the Greater Toronto Area. Our outlook continues promising with increased sales, positive EBITDA, clean balance sheet, and potential for future acquisitions. Regarding our price increase on April 1st, I want to highlight that despite this increase, our churn has remained minimal, demonstrating our client satisfaction with our services.
We believe there is no comparable competitor offering our level of services at our price point, particularly for our target market of high-net-worth families and corporate clients. As a result, Avante holds significant pricing power as we continue to rebuild and turn around the business from its previous management group. The company's long-term financial objectives serve as a guide in developing our strategy and should not be considered as guidance. The company's long-term financial objectives are building recurring revenues, achieving consolidated Adjusted EBITDA margins consistent with its industry, achieving growth in adjusted net income per share, reinvesting cash flow in future business, and, of course, reducing overhead using new software that will be launched shortly. I believe we laid an excellent foundation for the company in fiscal 2024 and have a positive outlook for fiscal 2025.
We expect continued improvement in revenues, cash flow, and EBITDA driven by organic growth, introduction of new products and services, and increases in NSSG and Avante Black revenues. We expect international revenue to increase over the next year as NSSG now allows us to attract new clients globally and service them in the boutique manner that Avante offers. We are very excited about the potential growth opportunities with our newly launched services such as Argus, Homeworxx, the Reserve, Avante Verified, and Halo. We are expecting overall revenues to benefit over the next year from all these new services. Meanwhile, we continue to actively seek new opportunities to expand and enhance our services throughout acquisitions. We maintain a positive outlook for fiscal 2025 with renewed optimism based on continued sales growth, improving cash flow, and potential M&A activity.
Finally, I want to thank the entire team at Avante, including the employees whose hard work continues to elevate the company to higher levels. We want to thank our customers around the globe who trust and rely on us to use innovative technologies to manage risk and provide elevated security solutions and services. Also, I'd like to thank you all for joining us on this call today. We look forward to providing more updates next quarter. I will now hand it back to Nanaki for questions.
Thanks, Manny. With that, we will now open the call to questions. To submit your questions, please use the Q&A button on the bottom of your screen. Please note that priority will be given to questions from analysts. The first question we have here comes from Gabriel Leung from Beacon Securities. He asks, "Can you provide some color around the pipeline for Halo?
Specifically, are you speaking with municipal governments to deploy Halo as a citywide threat detection solution?"
We have mentioned and have had discussions about Halo-Track. It's a very unique service, and it's very hard to talk about it, but it will benefit cities as we can track vehicles and individuals across our Halo-Track network. Hope that answers the question kind of.
Thanks. We have another one from Gabriel. He asks, "When do you expect the first deployments for Human-in-the-Loop? How quickly is the pipeline building in the K-12 vertical, and what are the next verticals you'll be exploring beyond K-12? Can you also talk about the economic model here and for Halo?"
Okay. So we have been providing Human-in-the-Loop for our executive clients to receive trespassers stepping on their property for over 20 years.
This new initiative called Avante Verified is specifically designed for K-12 schools, and we are presently testing Artesia Public Schools in New Mexico. We should be going live in the next couple of weeks for K-12. We are hoping to be monitoring about 10,000 cameras by December 2025. Halo has various models ranging the price point. There are various models ranging from CAD 5,200 per year for executive homes to $3,500 for a WALL-E rental and $20 per camera for K-12 schools. What was the last question? What are the next verticals you'll be exploring beyond K-12? Well, there's various markets that are talking to us. There's a bunch of community centers and event spaces and retail. As we partner up with some security guard companies who have these clients, they want to partner up and deploy Halo or WALL-E in various environments that they work in.
Right.
Thank you. Building on that, do you expect to grow operating expenses in any meaningful way to accommodate the potential growth of Halo or Human-in-the-Loop?
Not in the short term. We have staff and software which will manage all the alerts, and our last question from Gabriel. Have you scoped any new geographies, either in Canada or the U.S., you would like to expand into with your traditional high-end security services? Well, we've been invited to quote a few billionaire homes, specifically in Fort Lauderdale, Greenwich, Connecticut, Princeton, New Jersey, for Halo and bodyguarding, so that's slowly being discussed.
Thank you. Our next question comes from Gianluca Tucci from Haywood Securities. Can you talk about your organic growth in the quarter?
The organic growth is basically our marketing and our networking and building relationships. We e-blast our services, and then our phones just ring.
But we're training our salespeople to build relationships and not be a salesperson, give a quote, and then walk away. So that's worked very well. We've also brought a VP of sales and marketing to help us globally, locally with our sales team, and internationally with NSSG. So that's a plan that we're still initiating, but that was part of our growth. Just to add to that, in the last six months, organic growth has represented 34% of the growth to date.
Thank you, guys. Another question from Gianluca. He says, "You mentioned reinvesting cash flows in the business. Could you elaborate on this? And what sort of investments are you planning?"
Well, we're reinvesting in the business because we have a lot to do. And the infrastructure and the backend is very important for us as we grow. We don't want to overpromise and underdeliver.
So we really want to make sure that all our technologies in our control center, which will be the fastest-growing service, I believe, in the future, that monitors various, I guess, Human-in-the-loop interactions, has to grow.
Thank you. Our next question comes from a participant on the call. How is the progress on Avante Black, and could you provide an example of its service?
Avante Black is just such an interesting business. It's the problems that some of these people have or some of the situations that occur are just so unique. And we solve these problems, and it's great. For example, we had a CEO who thought that something was going on with one of his employees in Taiwan, and we discovered that actually, no, it wasn't. But a headhunter was trying to take him away from his business. So he felt very relieved that that occurred.
And to do that is not very easy, and it cost him $210,000. Another situation was one of our clients called and said that he gets a funny feeling and a strange feeling of his new boyfriend that his daughter is in love with. And we discovered that he was a sex trafficker and went to jail and a big problem about 15 years ago. And it's a bad situation that we're dealing and trying to resolve. There was another one where one of our clients needed some information, and they discovered that there were some people that he was associated with that got charged with sex escorts, underage sex escorts in Dubai. So there's a lot of interesting stuff that we do that we discover that is really, really difficult to find.
Thanks for the examples. We have a couple of questions coming from a caller.
What factors have contributed most significantly to the decline in the company's cash balance over the past quarter? Can you comment on the settlement with a former executive which negatively impacted cash in the quarter?
In terms of our company's cash balance, we've had some one-time costs and some large prepayments which provided significant discounts. In terms of the settlement, the company was presented with an opportunity to eliminate a residual overhang on the business. The company took advantage of this opportunity and anticipated recoveries. This eliminated the distraction to the business and allows management to focus on its core business and grow its top-level revenues. The cost and the anticipated recoveries have been disclosed in the financial statements and the MD&A.
Right. Another question from a caller. How do you plan to continue innovating and expanding product offerings like Argus app, Homeworxx, Toyboxx, and Halo?
What feedback have you received from early adopters?
Like I mentioned earlier, we hired a VP of global marketing and sales who is building up all the sales initiatives. We've had discussions with one of the world's largest security guard companies for the use of Argus and a special Halo application. We've had people reach out that want the Argus app for all their employees as they're leaving the office. They had a situation happen where there was, I guess, an attack. And they'd want to be able to push the button, connect with our control center, and have a verbal escort to their vehicles. And if something happens, we know their location, we know where they are, and we can dispatch vehicles.
Thanks. Another participant is asking, "How has the integration of NSSG into Avante's operations progressed since the acquisition?
Have there been any significant challenges?"
The largest significant challenge is time. With our new backend being implemented in January, this process should be quickly completed. With the help of our new VP of sales, we should be able to significantly integrate both NSSG into Avante's operations.
Thanks for your responses. That's all the time we have for questions today. I'll now pass the call back to Manny for closing remarks.
In closing, I want to thank everyone once again for joining our call today. Thank you to the analysts for their questions. We look forward to providing more regular updates in the future. Thank you very much.