Good morning, everyone. We will be starting in one minute. Thank you, everyone, for joining us today, and welcome to Avante 's First Quarter Investor Webinar. My name is Rajan Sohol, and I will 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 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 SEDARr+ 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 discussion and analysis. With that, let me turn the call over to Mr. Emmanuel Mounouchos, Founder and CEO.
Thank you, Rajan, and welcome, everyone. We truly appreciate everyone joining us today. On today's call, our CFO, Raj Kapoor, will review our Q1 results, and I will provide a general update and business overview of where the company is today and our positive outlook. Before we get into 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, commercial, and institutional clients. Avante's mission is to deliver an elevated level of service 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. Avante is headquartered in Toronto, Ontario, and we have approximately 215 employees in the company.
Today, the security landscape for high-net-worth individuals has become more complex than ever, with rising geopolitical tension, increasing incidents of targeted crime, and growing concerns over personal safety. The need for sophisticated security solutions has never been greater. High-profile individuals are no longer just seeking traditional protection; they require comprehensive, proactive measures that integrate advanced technology with expert oversight. At Avante, we understand these evolving risks and are committed to providing elite security services that offer not only protection but also peace of mind. On today's call, I want to highlight the following topics. First is our Q1 financial results, which Raj will discuss in more detail shortly. We are pleased with our results for the first quarter of fiscal 2026, in which we delivered solid growth, with revenues increasing 11% year- over- year and recurring monthly revenue up 25%.
This performance was driven by strengths across all divisions, most notably NSSG, which delivered an exceptional 126% increase in revenue as our enhanced sales process and operational alignment continued to bear fruit. Our results reflect the continued momentum we have built since streamlining operations, integrating recent acquisitions, and focusing on our highest margin tech-enabled offerings. Our balance sheet remains strong as we remain bank debt-free, holding $4.7 million in cash and $12 million in available credit facilities, giving us the flexibility to execute on our growth priorities. At the same time, we continue to create efficiencies to reduce operating costs through our new ERP system and by streamlining the company's operations, resulting in a decrease in operating expenses over the quarter. Second is the innovation at Avante that is driving our growth. Demand for our premium security solutions remains strong for Halo and the services it enables.
We are energized by the growth potential of our next-generation technology platforms. WALL-E and Avante Verified continue to gain momentum with strong engagement from institutions seeking advanced safety and security solutions. Both offerings have a healthy pipeline of opportunity, and we are focused on converting these into meaningful deployments in the coming quarters. Lastly, our positive outlook for the remainder of the fiscal year. I would like to turn it over to Raj Kapoor right now, our CFO, who will discuss the first theme for today, our financial results for Q1 2026. Raj?
Thank you, Manny, and welcome, everyone. Our fiscal first quarter 2026 results are as follows. The first quarter was another exceptional quarter for Avante as we increased revenue by 11% compared to the same quarter last year. Avante achieved quarterly revenues of $8.8 million during Q1 2026 compared to revenue of $7.9 million generated during Q1 2025. This increase in revenue was driven by a strong performance from NSSG, which delivered year-over-year growth of 126%. Avante achieved gross profit of $3.3 million in Q1 2026 compared to $3 million during Q3 2024, representing an increase of 10%. Avante's gross margin in Q1 2026 was 37.9%, in line with 38% in Q1 2025, indicating a consistent level of profitability. During Q1 2026, Avante achieved positive adjusted EBITDA from continuing operations of $360,000, in line compared to positive adjusted EBITDA of $363,000 in Q1 2025.
I'm proud to report that Avante achieved positive net income in the quarter. Avante recorded net income from continuing operations of $11,000 in Q1 2026 compared to a net loss of $128,000 in Q1 2025, representing an improvement of 109%. I'd like to take a moment to highlight Avante's current growth trajectory. On this slide, you'll see a graphical view of our six-year annual revenue. After a period of flat growth from fiscal 2020 through 2022, we have returned to a strong growth path over the last three years. Revenues increased by 35% in fiscal 2025 compared to fiscal 2024. The growth has been driven by the onboarding of new customers through focused sales efforts, enhanced customer support, and the launch of new services and strategic acquisitions such as NSSG. Looking forward, we do not anticipate any further reorganization expenses. 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 46% of our revenue in fiscal Q1 coming from contracted recurring revenue. Our diversified security platform, leveraging advanced technology solutions, remains solid, with recurring monthly revenues increasing by 25% in Q1. Avante delivered record recurring monthly revenues, or RMR, of $4.1 million during the first quarter of fiscal 2026, up from $3.3 million during the company's first quarter in the prior year. The increase in recurring revenue was driven by net growth in monitoring customers, the introduction of new recurring services to the existing client base, and increased recurring revenue from NSSG. Our client contracts are typically one year in length, and we continue to maintain a 98% client retention and renewal, demonstrating the value proposition and trust in our solutions.
We continue to have a 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 remainder of the fiscal year. As of June 30, 2025, Avante' s bank debt-free and at $4.7 million in cash and short-term investments. The company has access to a senior secured revolver of $2 million and a $10 million unsecured term loan facility for a total of $12 million, all of which remains completely undrawn as of today. We feel confident to continue funding growth with cash flow from our operations. Overall, the company is in a very strong position going forward. We continue to have a positive outlook for the remainder of the fiscal year. I will now turn the call back over to Manny.
Thank you, Raj. I will now discuss our second theme for today, how our innovation is driving growth at Avante. Our company was founded on the principle of combining cutting-edge technology with the best-in-class security operatives. This still is the foundation of our business growth. Innovation remains at the heart of our strategy. We are committed to scaling our proprietary technologies for mass use and emphasizing subscription-based models to enhance recurring revenue. Our legacy of leadership and commitment to innovation continues to drive us as we build upon the strong foundation and the shape of the next chapter for Avante. Our pipeline of technology-enabled security solutions continues to expand, and I'd like to take a moment to walk through three key offerings: Avante Black, Avante Verified, and WALL-E in greater detail. Launched in January 2023, Avante Black now represents over 13% of our total revenue.
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 forces from various countries around the world, who combine their expertise in covert operations with 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 a physical response team capable of acting within minutes when a threat arises. We also go beyond conventional security by offering safe houses for clients and their families who require heightened protection. We currently have a safe house in operation, protecting the family who was kidnapped. 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 client communication and operations remain secure, custom campaigns designed to protect clients and their corporations from targeted risk, and ethical hacking to test and strengthen network security. Halo is an Avante AI-driven video tracking and two-way voice communication service. With the use of Halo video analytics, we can either warn the intruder using two-way live voice or dispatch before an intruder can break into the home. It is based on self-learning technology that uses pattern-based algorithms to recognize movement and characteristics. Halo sets itself apart with proprietary AI-driven analytics that not only detect full-body silhouettes but even individual limbs, offering unmatched accuracy. Features such 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 was approved by the Department of Defense for use in U.S. nuclear facilities, providing high-level security with AI video. Since launching in the summer of 2024, Halo has achieved significant market penetration, now viewing over 2,100 cameras across the Greater Toronto Area. 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. Last November, we announced the launch of Avante Verified and our Human-in-the-Loop remote video monitoring services, developed in partnership with Scylla Technologies Inc. This service integrates Scylla and Halo's AI capabilities in physical threat detection, with Avante 's expert human oversight to redefine the standards for security solutions. Avante Verified brings the strength of AI and human judgment.
Advanced AI algorithms continuously monitor video feeds and identify potential risks in real time, while our human operators 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. The use of this product has begun with K-12 schools, currently monitoring four schools, three in New Mexico in the Estero School Board for gun detection and one here in Toronto. However, we are actively expanding the product into commercial security and defense. By offering clients this balanced, adaptive solution, we're ensuring that security decisions are precise, timely, and effective, ultimately empowering our clients with peace of mind and superior protection. Turning to our latest innovation, WALL-E.
This solution represents a major leap forward in autonomous security technology and is a prime example of how Avante and our Halo technology continue to push the boundaries of innovation in the industry. WALL-E is an unmanned, solar-powered security unit that integrates our proprietary Halo technology to provide real-time surveillance and threat detection. Equipped with Halo AI-driven video analytics, it can identify unauthorized individuals, detect weapons, and provide immediate alerts to security teams. This ensures rapid response and heightened situational awareness in any environment. Designed for versatility, WALL-E is ideal for a wide range of applications, from securing large gatherings, corporate campuses, and construction sites to protecting schools, hospitals, and other public spaces. Its mobility and ability to operate in remote locations make it a game changer for clients seeking effective, scalable solutions without the need for fixed infrastructure.
With the increasing demand for advanced security solutions, we expect WALL-E to be a significant contributor to our growth. We are ramping up production to deploy additional units in the coming months and are seeing strong interest from both public and private sectors. Currently, the deployment of the units is starting, with production actively ramping up. By combining sustainable design with cutting-edge technology, WALL-E reinforces Avante's leadership in security innovation and positions us to continue success in this evolving market. I will now conclude with our final theme for today, our positive outlook for the remainder of fiscal 2026. Our outlook continues to look promising with increased sales, positive EBITDA, positive net income, a clean balance sheet, and potential for future acquisitions. The company's long-term financial objective serves as a guide in developing our strategy and should not be considered as guidance.
The company's long-term financial objectives are: reach new record levels for revenue, recurring monthly revenue, and adjusted EBITDA. Leverage NSSG's footprint to increase international revenue and introduce technology to their clients. Achieve growth and adjusted net income per share. Reinvest cash flow into future business growth. I believe we have laid an excellent foundation for the company and have a positive outlook for the remainder of fiscal 2026. We expect continued improvement in revenue, cash flow, and EBITDA, driven by organic growth, introduction of new products and services, and increasing NSSG revenues. We expect international revenue to continue to increase this calendar year as NSSG 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 latest services, WALL-E and Avante Verified.
We are expecting overall revenue to benefit over the next year from these new services. Meanwhile, we continue to actively seek new opportunities and expand and enhance our services through acquisitions. 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 for all joining us on this call today. We look forward to providing more updates next quarter, and I'll now hand it over back to Rajan for questions.
Thank you, 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. We have Gabriel Leung from Beacon Securities on the call. Gabriel, if you could unmute your mic, go ahead, please.
Good morning. Thanks for taking my questions and congrats on all the progress. I just got a couple of things. Manny, can you talk a little bit about the NSSG pipeline? You obviously had a very strong quarter with that group, and I'm curious to see whether the pipeline is there to support the current quarterly run rate of $1.8 million, $1.9 million a quarter.
Yes, we're helping NSSG with some strategic meetings and allow introducing technology to their clients, and that's enabled them to just gain more and more leads coming in. I do believe that they are on the path for more growth. They do introduce Halo and Avante technologies to their clients almost on every meeting or every lead that they get, which is allowing them to become more of a full-service provider as opposed to just the manpower side. I do believe that NSSG will have a very good quarter coming forward.
Gotcha. No, I appreciate that. Just on WALL-E, anything you can provide us in terms of the types of customers that you're seeing and that are engaged with you and maybe the quantum of towers you might expect to deploy over a 12 to 24-month timeframe?
The customers that are calling us and interested in what we're doing with WALL-E are a lot of construction companies, but it's interesting how we're getting more of a global reach and there's huge construction companies calling us to monitor certain areas. We have some government discussions as well with various projects. We can't really say what number of WALL-Es are going to be deployed, but I do believe that once we get the ramp-up of the manufacturing sorted out, which we had some delays with tariffs, and we've got that all under control now, I think it's going to be probably the biggest growth in Avante.
With the current manufacturing platform you have in place right now, do you have any sort of sense of what your monthly production rate might look like?
The production rate isn't the problem. It's getting them shipped, you know, into Canada that has delayed us. The ramp-up, we can easily produce 100 a month. These are big corporations that are manufacturing the WALL-Es for us, and they're around the world. We have three suppliers: one in the U.S., one in Canada, and one in China.
Gotcha. No, it's helpful. With Verified, you know, what's the selling cycle looking like for Verified in the U.S. right now? Are you running into any sort of headwinds, just given what's happening from a macro perspective with some of your public sector customers that you're talking to?
Yes, it hasn't grown as quickly as we wanted to. We expected it to grow. Funding for the states has been taken away, so it's always been reduced. The school projects were really grants from the government of the state. Since that's been reduced, it's been a little bit of a struggle. Interesting enough, we've been getting leads from corporations that want us to detect gun detection around their building, around their offices. Maybe the schools have slowed down, but we definitely have more leads coming in and more discussions with corporations to enable their existing cameras to detect guns.
Gotcha. It's helpful. Any sort of early feedback from the initial schools that you're deployed in terms of how the solution has worked out?
Like everything we do, we go above and beyond expectations. All the feedback has been positive. We've had situations where there was a kid with a drill, a battery-operated drill, walking it, pointing it to another student, and we caught it instantly, informed the school, did the whole procedure, and they were just so happy with the organization and how quick everything just happened. Fortunately, it wasn't the gun, so that's great.
Gotcha. Awesome. Appreciate the feedback and congrats on the progress.
Thank you, Gabriel.
Thank you, Gabriel. We also have a question from Rob Goff of Ventum Financial. First question here. The NSSG acquisition has been very successful for the company, but it's been some time since the company last made an acquisition. What is your current strategy when it comes to M&A, and what does the pipeline look like?
You know, we're actively entertaining security and tech acquisitions. We just don't want to jump into and make that a priority just because we want to have the headlines. We want to make sure that we're organized, we're ready. We also want to make sure that we're negotiating a fair evaluation where some of these founders may think that their value is much higher than what it really is. We are actively entertaining and we're looking. It just has to be the right deal at the right time.
Great. A follow-up here from Rob Goff. Can you provide some more color on what drove the revenue growth at NSSG?
We implemented a sales, you know, sales assistance and strategies. We meet with them, we collaborate with them every Thursday, and we have, and we assist in how to make a presentation. Before, they were presenting by themselves. Now we have one of the Avante managers and sales managers present on the presentation that they do to their clients. It's teaching them how to just be more effective and what to talk about and how to read the room. It's more of a collaboration, and we're implementing the Avante side of marketing to them, and it's working really well.
Last question here from Rob Goff. How do you differentiate yourself compared to other security vendors or providers in the market?
We're really a unique company. We can't say we have or know of any competitors. We're a full suite of service providers under one roof. Big corporations are attracted to our services because they make one phone number or they push the button on our app and they could connect with our control center and we could provide whatever they need. We develop technology that is unique and implement it to the use of our everyday business. The other vendors are very unique. They put in an alarm system or they do personal protection or they drive people around, but they don't combine everything. Clients that are very busy, that are running big corporations don't want to remember who to call for a problem.
They don't want to remember that they have to call their automation person who put in the cameras and then the security company who's monitoring the cameras. They just want one person to deal with or one corporation to deal with. That's what we offer.
Thank you, Manny. We also have a question from Daniel Rosenberg of Paradigm Capital. First question here. How has the feedback been with WALL-E, the security tower? What's in the pipeline, and when do you expect it to become more meaningful to the overall revenue mix?
I'm sorry, can you repeat the question?
Sure. Yeah. How has the feedback been with WALL-E? What's in the pipeline, and when do you expect it to become more meaningful to your overall revenue mix?
The feedback on WALL-E has been very positive. We had our first big project that we had. They were using another provider, and they couldn't believe what we were able to offer. We were monitoring carbon dioxide in their tents. We were monitoring hidden areas where you can come behind some of the trailers where traditional camera towers can't see through trailers. Our WALL-Es are very innovative. Not only do we use Halo to detect limbs and feet and areas where somebody can hide, but we have added technology that detects trespassers in areas where the cameras can't see. It's been very, very positive. They're a very happy customer. They intend to use us more and more as their projects develop. The other projects that we're using, we're catching people trespassing. Some people are camping on properties. It's been very, very positive.
We're also learning how to adjust to the trespassers. Because we're a licensed security company with the ministry, we're allowed to remove trespassers. Once we detect somebody on a property or they camp out there or they're trying to build a camp, our people go and remove them. The client doesn't have to worry about how they're going to get rid of these people because you can call the police, the police will take them away and then just come back. With us, we assist, remove them, and then we hang at the site to make sure that they don't come back.
Thank you, Manny. A follow-up here from Daniel Rosenberg. What is your target gross margin profile for the company?
Our gross margin was slightly less this last quarter due to overtime. We expect our gross margins to be around 42%- 44% moving forward.
Thank you, Raj. Last question here from Daniel Rosenberg. What is the biggest driver of organic growth this year?
The biggest driver is primarily our new products, WALL-E and Avante Verified. Our traditional business continues to have strong growth as well, but the big drivers are going to be our new products.
Thank you, Raj. We also have Gianluca Tucci from Haywood Securities on the call. First question here. It seems as though NSSG is driving the bulk of your growth. Could you speak to the dynamics behind that and if there were any notable one-time revenue items in the quarter?
With NSSG, their cyber and sentiment analysis and monitoring has generated their recurring revenue, and it seems to be catching on more and more as they detect a threat or a risk to some of their clients ahead of it happening. Just like Halo detects somebody trespassing on a property before they break into the home, NSSG's cyber and sentiment analysis and monitoring is detecting people that are talking negatively about their clients. The growth of the recurring side of NSSG is a big piece.
Great. A follow-up on that from Gianluca Tucci. Recurring revenue saw a nice step up in the quarter. How does this growth split between existing customer spending and new customer spend?
I'm sorry, say that again.
Recurring revenue saw a nice step up in the quarter. How does this growth split between existing customers spending more and new customers spend?
It's a combination of both. We had quite a large recurring revenue component from NSSG this quarter, but like I had previously mentioned, we are increasing sales in our core business as well as new products.
Thank you, Raj. A last question here from Mr. Tucci. Is there anything particular on M&A that you're exploring? Any specific technologies or new markets?
We'd rather not talk about that. There are a few in the works, and it's just something that, you know, when we actually get closer, we could probably share some information.
Thank you, Manny. A question here from a listener. One of your goals going forward is to achieve new record levels for adjusted EBITDA. Can you provide some more details, such as what is your expected EBITDA margin in the coming quarters and what you think you can achieve in the long term?
This year, we're targeting approximately 14%- 15% adjusted EBITDA. Based off our plans, the first quarter came in in line with what we expected, and we're expecting that to increase over the fiscal year.
Thank you, Raj. There are no further questions. I will now pass the call back to Manny for closing remarks.
Thank you, Rajan. In closing, I want to thank everyone once again for joining our call today. Thank you too to the analysts for their questions. We look forward to our next update for Q2. Thank you, everybody.