Thank you for standing by. My name is Joe Diaz, and I will be the conference call operator. Welcome to Zedcor Inc Third Quarter of 2025 Financial Results Conference Call. As a reminder, all participants are in listen-only mode, and the conference is being recorded. We will be having a question-and-answer session at the end of the call, and questions will be limited to analysts only. I would now like to turn the conference over to Amin Ladha, Chief Financial Officer. Please go ahead.
Thank you, Joe. Good morning, everyone. Thank you all for joining us today. Joining me on our call today, we have Zedcor President and CEO, Todd Ziniuk. Last night, after markets closed, Zedcor issued a news release announcing our financial results for the 3 and 9 months ended September 2025. This news release will be available on our website under the Investor Relations tab and is filed under SEDAR+ Profile. Please note, a portion of today's call, other than historical performance statements, includes statements of forward-looking information within the meaning of applicable securities law. 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. This discussion is qualified in its entirety by the cautionary note regarding forward-looking statements, as it appears appended on our news release.
Please review our press release and Zedcor's reports filed on SEDAR+ for various factors that could cause actual results to differ materially from these projections. We use terms such as gross profit, gross margins, and adjusted EBITDA 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 definition set out in the MD&A. In addition, reconciliations between any adjusted EBITDA and net income are included in the MD&A. An important non-GAAP measure that we use is adjusted EBITDA. The company believes that adjusted EBITDA is a meaningful financial metric as it measures cash generated from operations, which the company could use to fund working capital requirements, fund future growth initiatives, and surface future interest and principal debt repayments. Adjusted EBITDA should not be construed as an alternative to net income and determined in accordance with IFRS.
Please note that all financial information is provided in Canadian dollars unless otherwise noted. Following the prepared remarks by Todd and I, we will conduct a Q&A session during which questions will be taken from our analysts. Now, moving on to a review of the company's financial performance for Q3. Some highlights for the third quarter include record revenues of CAD 16 million. This exceeded our previous high just set last quarter by CAD 2.5 million and is an increase of 75% year-over-year. Our recurring revenues for Q3 2025 remain steady. We also had record adjusted EBITDA of CAD 5.7 million for Q3 2025. This was a 68% increase year-over-year, and the EBITDA margins remained strong at 36% for the quarter. Our tower count and customer base continues to grow. More importantly, our weekly tower production, which is a key metric for us, continues to increase.
During Q3 2025, our tower production count grew by 469 towers, which was over 36 per week on average. We have met our previous goal of 30-35 towers produced per week and have the optionality to manufacture more than 40 units per week, currently with the ability to ramp up based on customer demand. For year-to-date highlights, revenue for the 9-month period ended September 30th, 2025, was CAD 41 million. This compares to CAD 22.7 million for the 9 months ended September 30th, 2024. This was an increase of 81%. Adjusted EBITDA increased to CAD 14.8 million, or 36% of revenues versus CAD 8 million and 35% of revenues for Q3 2024. The revenues and EBITDA have increased, but we have also had other major accomplishments, including significant U.S. expansion both within Texas and the Southern U.S.
Tower fleet was more than 2,350 at the quarter end, which is an increase of 1,200 year-over-year. Diving into the income statement a bit more for the three and nine months ended September 30, revenues increased 75% year-over-year and 18% quarter-over-quarter. The U.S. revenues continue to grow, but we are also seeing growth in Canada as well. Gross margins increased to CAD 10.2 million, or 64% of revenues. This continues to be steady, but there might be reductions in some upcoming quarters as we ramp up hiring and training for expanding the U.S. Monitoring Center in order to maintain customer service levels. Adjusted EBITDA increased to CAD 5.7 million, which was 36% of revenues. This was also steady in Q3, but could see some decrease as we continue to expand in the U.S. and add salespeople in key regions.
We hired a number of key people in these key sales regions toward the end of Q3 and into early Q4. We have nearly doubled the size of our U.S. sales team and will continue to invest in expansion at the local level in order to maintain our industry-leading service levels. We also achieved production capacity of 40 towers a week in Q3, which is proving to be absorbed directly by market demand. We also continue to see demand for our wall-mounted ZBox unit. This is not contributing significantly to revenues yet, but we are seeing demand for this unit as well without much sales or marketing focus. We have had significant customer wins in both the U.S. and Canada, and this has been across a few different verticals. Moving on to a discussion of the balance sheet, we exited Q3 with a cash balance of CAD 1.5 million.
Subsequent to the end of the quarter, we expanded and extended our current banking facility to a CAD 50 million revolver with a CAD 25 million accordion. This provides additional liquidity for continued growth and reduced interest rates. We had a net debt of just under CAD 22.7 million, and our net debt- to- last twelve months EBITDA is 1.21. This will increase over time as we deploy capital, but will be offset by growing LTM EBITDA as we saw this quarter. Due to the new financing, our new facility does not have any principal repayment requirements. We have only interest payments monthly. This frees up about CAD 1 million quarterly and CAD 4 million annually in free cash to invest back into the business. PP&E increased to CAD 78.2 million due to continued investment in the company's growing fleet of security towers.
A portion of that increase is sitting in assets under construction as we purchased a number of longer lead components in order to ramp up growth and meet our production targets. We try to keep this around 4-6 weeks of production, but are managing AUC actively so that unnecessary capital isn't tied up. A review of our cash flow statement for Q3, adjusted operating cash flow increased 71% year-over-year to CAD 5.1 million, demonstrating the growing cash flow generation capacity of the business. Capital expenditures in Q3 2025 increased quarter-over-quarter as our manufacturing capabilities are streamlined. We've staffed up our team and established our processes, and this is reflected in the weekly production counts. Sorry. Maintenance CapEx continues to represent a small portion of the total CapEx. During the quarter, we repaid CAD 1.9 million of debt and finance leases.
I will now hand over the call to Todd Ziniuk, who will provide us with an operations update and some insights into our goal for our strategy.
Thank you, Amin. As everybody saw, obviously, we had a great quarter. We're very excited about where the business is headed. We see strong opportunities both Canada and the U.S. Despite the cost of the growth in the U.S. expansion, we still maintained, like Amin said, over a 35% EBITDA margin. You know, I think our management team does a great job of running the cost, keeping costs in line as fast as we're growing. We're being very successful and fairly methodical on how we're growing and opening up our different locations. You know, the biggest thing I talk about all the time is our platform. Our platform is creating one thing for Zedcor, the ability to give service to our clients and the ability to move fast, you know, get the towers out to our clients pretty much within 24 hours.
You know, it's a big value- add for a client. A lot of these people, different clients, you know, are in a situation they need coverage right away. They can't afford to wait weeks. That's the one big thing that cuts us apart. You know, and then it's a cost-saving thing for our clients. A lot of places we're placing guards or they have nothing, and we're actually, you know, holding back what the shrinkage is on a normal job site where they had, you know, just a fence, lock, and key. You know, clients are starting to see more and more value, obviously, in the tower service, mobile security. Obviously, Zedcor's product is bar none. It's right at the top. You know, we run the top cameras in the world, and we're seeing big benefit from, you know, obviously, the strength of our product as well.
You know, I can't say enough about the platform, but the platform for us ties into a couple of different things. Our branch model, our monitoring is all in-house. Like Amin said, you know, we're going to be in Q1 opening Houston. We're quite excited about it. We're going to be starting to train people here late December, early January, probably be fully live by, you know, mid-February to March 1st. Another thing that we're quite proud of is we've brought the cost of our tower down, you know, a fairly significant percent, close to 8%-10%. You know, we're right on target with 2025. We said we'd build 1,200-1,400 towers. It's going to be on the high side. It'll be the 1,400-ish by the year end. 2026, the goal is 1,800-2,000 towers. You know, the demand is not stopping.
I think, you know, for competitive reasons, I'm not going to get too deep into our pipeline, but our pipeline is strengthening every day. And it's also the quality of our clients are strengthening. A lot of these newer clients coming on, these towers are there for a long term of different plays that, you know, that they're it's not for construction. It's the retail space. We're very excited about that side of the business. We know that there's a bunch of good wins coming, going to be coming from that. And it's going to help with us having the platform to service these clients. And we're really, really excited about that side of the business. You know, I don't want to dive into too much more. I think, you know, everything we've talked about on every call is we're right on track.
I think, Amin, you'd agree that things are right where we thought they would be, and they continue to be. The growth is there. You know, we haven't scratched the surface, nor has any competitor in this space scratched the surface. It's a very large white space. We know that. I think the whole industry knows that. It's the world's evolving technology, and we're quite excited to be part of it. I think we're going to open it up, Amin, for questions.
Yeah, for sure. I'll hand the call back to Joe for questions from the analysts.
Thank you, Amin. We will now take questions from analysts only. We have Doug Taylor from Canaccord. Please go ahead, Doug.
Good morning, Doug.
Yeah, good morning. Congratulations on another strong quarter against, you know, what are pretty lofty expectations set for your company. I'd like to start with a question on what you just finished with, which is these large potential retail customer opportunities. You've had some of these in the pipeline, and you've been talking to them for some time. You know, it's taken time to close these. Is there, you know, from your perspective, is there anything that you need to do with respect to your platform and development that is, you know, a gating factor in the timetable for announcing some of these? You know, is this a, you know, continue to be a near-term potential, you know, catalyst for even more accelerated tower growth?
Near-term is relative. We found in the retail space, they kind of move at their own pace. They have multiple layers to go through, different RFPs. Now we're running into Black Friday, Christmas time, and they seem to not make any decisions at that point. I think we've had to be patient as well and kind of work through their process. Obviously, given the size of the customers we're at the table with, we can't really, we don't want to push too hard and kind of offend them or lose that opportunity. We're working more off their timetable. What we've learned that's kind of interesting is they're using a competitor, but I think they're either looking for expanding or replacing. I think it's more on the expanding line, which is interesting. That's about as much insight as we have at this time.
I think once we get some deals in place, we'll definitely let everybody know.
Yeah, thank you for that. I think you referenced earlier in this slide deck still above 90% utilization rate for your existing fleet, which is, you know, very robust. Also, I think understood from your language that, you know, you now see your ability to supply and your ability to place these towers into market as being, you know, stabilized or, you know, reaching some sort of equilibrium. Is that a fair assessment? How would you describe the current state of your, you know, tower inventory, you know, at the branch level?
Yeah, we're finally getting—it's a good question, Doug. We're finally getting to the point where the branches have towers. They've got inventory. Obviously, as you build this platform out, it's going to give you more inventory. You know, you go to work for some of these retail chains or even, you know, these mid-enterprise customers that are in multiple states or big construction companies in multiple states. It gives us the ability to move fast. I think we're obviously moving forward here, building towers quicker every week, more every week. We're starting to get it to a point. We kind of want to get it, honestly, around that 85%-90% utilization to give us the, you know, the ability to move faster. Plus, we can—I think you'd agree with this, Amin—build towers quicker if required.
We're in a good position that way on the manufacturing side.
Having that ability to move quick and kind of have some units sitting in inventory, that's helped to keep the customer service levels and led to win work. Like if a big customer wants to move quick, we want to be able to show them that we can move quick.
We also have our steel providers, Doug, that have inventory as well. They are building up their inventory for when I phone and say, "Hey, I need more." It is not a wait. They have it. We are kind of all working together on that. When the time comes, we can step on it harder, right?
Okay. So generally in a healthier place.
That way it's a healthier place to answer the question, yes.
Okay. Last question for me. I mean, it doesn't take, you know, much extrapolation to see that, you know, even continuing at your current pace or the pace you had in Q3 would put you through the top end of, you know, the guidance numbers which we're looking at in front of us right now with respect to tower fleet size by year end. Is there something seasonal we should think about now, given the changes to your geography, but also your end customers and the way, you know, they want to take towers on into the holidays, for example, with retail or anything else we should consider there?
I think the only real seasonal stuff we see, honestly, throughout the company is out of Calgary. We work, you know, for ENMAX and Volker up there. They, you know, they have a couple of months shut down, but it's all dependent on weather. They don't fully shut down. They pull back a few towers. Nothing that really affects the bottom line. Then it's right back, if not more towers go out. It's, you know, I don't think we're seeing a whole bunch of seasonal, Amin.
No, in the retail space, it seems like they stop making decisions around the holidays, but they do not stop working necessarily. Once we are in, those towers would obviously keep working.
All right. I appreciate the color, guys. I'll pass the line.
Thanks, Doug.
Thank you, Doug. Next question comes from Kyle McPhee from Cormark Securities. Go ahead, Kyle.
Hi, everyone. First on me, just on this topic of the enterprise clients, the national clients, can you shed some light on just how intense the process is to get on the vendor list of some of these major clients you're going after here? I mean, what goes into the audit process? And are you getting the sense that Zedcor stands out as a rare player in this service niche that actually has the scale and sophistication and internal monitoring function to win this type of big business? Is your early scale proving to be a competitive advantage here?
Each kind of retailer is a bit different. Like we've worked for national accounts before, and they haven't necessarily been as stringent as some of the retailers. Some of the retailers we're at the table with, like Home Depot Canada, didn't have a ton of onboarding requirements. Some of the American retailers have some more. It is really unique. I think it's not necessarily an onboarding thing. It's more just kind of moving, they make decisions at their own pace, if that helps, Kyle. We have the sophistication, and I think we're probably one of the only few players in the space that can offer that service-level platform, which is important for them, being kind of spread across the country, being able to respond to issues, service the equipment. That's important to them. That's kind of the feedback we've gotten is what they're looking for.
The in-house monitoring helps as well, having it not overseas. I do not think it is necessarily our issues. It might be just the way they do business.
Got it. Okay. Thanks for that, Color. It looks like Zedcor experienced pretty good cost leverage in Q3. Your gross margin percentage was up. Your G&A percentage of revenue was down. All great to see as you grow. Do you expect this trend to hold near term, or should we expect a pause here for margin expansion or even a kind of minor reversal in the typical range we've seen in the past as you get into another round of growth spend, you know, for headcount expansion, regional expansion? Just give us a preview of how the growth spend cadence is playing out through Q4 and near term.
It's going to be a bit choppy, to be totally honest. We were quite excited, and we've kind of talked about it before. As we see those economies of scale, the per-unit operating costs of these units, SG&A operating expenses, everything is going to go lower as we build scale and as we build the branches. You can kind of see that in Canada, which is our "mature market." The U.S., as we get good people, as we expand to new regions, we're not going to slow the growth down necessarily. It is definitely trending downward. I don't know if it's going to happen in the next quarter or if it's going to take a bit longer than that.
Okay. Thanks. I'll pass the line.
Thank you, Kyle.
Thanks, Kyle. Third question comes from Richard Tse from National Bank. Go ahead, Richard.
Yes. Thank you. Can you maybe talk about the competitive landscape a little bit? I guess specifically, I'm kind of wondering, of your new wins, can you maybe talk about the mix between greenfield opportunities and those from competitive displacements?
The new ones, some of them, like the one of the kind of larger stores that we've gotten, had nothing. They were using your traditional kind of security guards, the roving, guarding a car that would drive by three, four times a night. They were getting vandalism, graffiti on their building, just people doing drugs in their parking lot. That was not working for them. I think they did a bit of a competitive process, and we came out ahead on that. That was one example. One of the kind of other vertical wins that we've had, they did displace a competitor. It is a mix of either competitors or a mix of traditional security guards.
Twenty-five percent competitor.
Yeah. It's more so traditional security guards. One-third, I would say.
More than they had nothing.
Yeah. One-third offsetting kind of a competitor and 2/3 offsetting security guards or nothing.
Okay. So 1/3, like a direct competitor, 2/3 old-school security.
Approximately, yeah.
Another third, you know, people shifting and realizing the value of technology and cameras now that they can be monitored, Richard.
Right. Okay. And then your sales force, what's the mix in terms of numbers between Canada and U.S.?
We've got about, we got 24 salespeople in the U.S. right now. We've got 7 going to 8 in Canada. And then we've got a corporate sales team made up of about 4 people, 5 , actually 5 right away. And they're working U.S. and Canada, Richard.
Okay. What's the target for the U.S. sales force here in the next 12 months?
I think we'll probably realistically, as we build the platform out, it could probably get, you know, to that 36-40 people across the country. I think it's a realistic number for the, you know, the sales force that's out on the ground every day door knocking. And then, you know, they will probably expand that corporate team a little bit, the national accounts team, maybe a couple more people. I think that's a fair statement, Amin.
Yep.
Okay. With respect to like the margin mix, like the U.S. and Canada, like I think the U.S. margin profile is a little bit lower. Like is there a plan to sort of walk that up to the Canadian margin profile, or is the market just structurally below what the Canadian margins would be?
No, it's just a matter of getting the economy to scale. Obviously, all the Canadian branches are largely built out. We have all the people hired. Allocating incremental units doesn't necessarily allocate incremental costs to the same side. The U.S. market's going to take some time to get there, just given the size of it. The big goal is definitely to get to that point. It's going to take, I want to say, kind of 24-36 months.
Okay. Great. Just one last one for me. Like obviously, there's tremendous growth here. Do you think you need to sort of do anything with respect to the org structure to kind of maintain that pace, or you think you're kind of well organized today, like just from a staffing perspective or maybe other sort of processes to continue that path?
I think we're pretty well structured right now. You know, we've brought in some key people. We've brought in an internal counsel, for example, to work with contracts and everything. We keep adding positions like that, Richard. You know, I think the org chart's well structured from an executive team. We have great management in place at these branches and on their platform. We do not believe in a whole bunch of layers. You know, obviously, as we grow, the org chart keeps growing and the structure changes. We make some moves. Obviously, that's a big thing that I always look at is getting the people in the right roles. You might have them in a role as the company grows that they have to move into a different role.
I think we do a great job of that. No, I think we're in a really good place with that. You know, obviously, we put the training that we've designed now has got a lot stronger when we bring new managers on, new salespeople. The business is evolving as we get bigger. We're quite, quite pleased with where things are at.
Okay. Great. Thanks. I'll pass the line.
Thank you.
Thanks.
Next question comes from Gary Ho from Desjardins. Go ahead, Gary.
Gary, I think you're muted.
Yeah. Can you guys hear me okay?
Yeah. We hear you now, Gary.
Okay. Apologies. Yeah. Maybe just your first question. I think historically, your client base are more kind of construction-related. You mentioned adding new clients. Just wondering if you're seeing new clients in other industry verticals attracted to your products and/or other use cases that might have come your way.
Yeah. There's different use cases. We haven't started necessarily kind of marketing that, but.
Or we don't want to share.
Yeah. We do not necessarily want to get into that for competitive reasons at this point. We are definitely looking at expanding the use cases, whether those ideas are coming internally or some ideas are coming from customers as well. Obviously, as the technology evolves, there are always new features built in. We are seeing if we can exploit those and market those for sure. The focus is security right now. If somebody wants to do something at scale, we can assess that for sure.
Okay. My next question, just on winning new clients. Can you talk about perhaps, you know, getting a bigger share of your existing clients' wallet? My understanding is that you might be servicing, operating some of a conglomerate. Is there an opportunity to leverage existing relationships you already have, thinking, you know, the Home Depots of the world, D.R. Hortons, etc.?
Yeah. 100%, Gary. You know, I've always kind of talked about that, that I could probably say we're taking no more clients on, and we could probably build our customer list out to anywhere from 2,500-4,000 towers. Our clients are coming on so quick that, you know, we've got to sit back and do the learnings on our clients to see how many states they're in, how many job sites they have going, how many stores. You know, once you prove out how good the product is and how efficient our team is and how good our monitoring is, they start to grow. That's the other thing that we know just off the organic growth side. This client list we have is we don't see churn.
You know, one thing we have seen, a couple of things happen, Gary, is a cheaper solution to mom and pop or whoever comes along. We have had a couple of clients actually just actually here in the last 45 days switch out because it was a cheaper solution. In both scenarios, within seven days, we were back out there. They said, "We realize you get what you pay for." You know, that is the thing. We are not playing big pricing games. I truly believe that we do not need to. The market is too big to do that. Guys that want to work for free or cheap, go ahead. We are not going to play that game. I think these people doing it are leaving a lot of money on the table. Like I said, you know, the white space is so big. Why do it?
We have a great group of clients, you know, and I think our team does a great job of servicing our clients. They are loyal to us, and the loyalty grows, right? You have to prove it out. You know, maybe they start with 10-20 towers, but it can lead to 200-300. We are very excited about that side of it. You are exactly 100% bang on. There is a lot of growth there.
Okay. Great. Maybe we can sweep one more in here. Just on the production side, you mentioned 35-40 per week in the quarter. How should we think about Q4 in terms of weekly production? On a related question to that, when you look over the next year, should we see additional scale and procurement benefits in terms of cost per tower bringing that a little bit lower too?
In terms of the production numbers, the official word is we're able to do about 40-50 a week. We're just in the process of moving to our new expanded facility. We could push on it more. We just need to kind of, we like to keep the risk off and just kind of assess customer demand before we want to announce a big upswing. We definitely have the capability to do more if we felt, as we're expanding the locations or one of these large kind of customers comes and makes a commitment. That's definitely there. In terms of the cost, we've run the cost down significantly. There's probably another about 5%-7% we can shave off. Beyond that, there won't be much left to squeeze off of that capital cost of the tower itself.
Okay. Great. Those are my questions. Thank you.
Thanks, Gary.
Thanks, Gary.
Next question comes from Ian Gillies from Stifel Financial. Go ahead, Ian.
Morning, everyone.
Morning.
I think you might have just answered the question, but what is the gating factor on increasing production next year? It sounds like you want to manage risk, but that you could, if you wanted to, based on customer demand, or do you need to add salespeople or locations or branches? I'm just trying to tie kind of all these items out together.
It's pretty much a mix of all of the above. If we had unlimited money and unlimited capital and we could just hire salespeople, then yes, we could build as much as we wanted. Right now, it's a balancing act between the salespeople, the production, and the gating factor, I think, is kind of that balancing act and that risk management. I don't know if that answers your question.
No, no, it does. It came through a variety of different angles throughout the call. The other question I had is in around the production side is much of your operations right now are focused in the U.S. Southwest or South, however you'd like to frame it. As you start to think about going to California or the U.S. Northeast, do you anticipate having to add new assembly facilities in those locations to keep transport costs down, or is that irrelevant?
It's pretty irrelevant. For example, even as moving them to Canada, you fit 20 per truckload. It's quite efficient. You know, 20 per load, it's probably CAD 200-CAD 300 a machine. It's pretty irrelevant.
Okay. And then.
I think we want to keep it centralized even after that. Further, Ian, just to keep, you know, quality control on the product. We have a very good team that puts them together here. You know, it carries on from there. I do not know if you want to add to that.
Just to keep the capital cost of the facility, I think the trade-off would be minimal.
Okay. One of the common questions I'm getting right now, and I'll reframe it to you all, is how are you thinking about your offering and the potential for debundling services, i.e., just selling the towers outright rather than renting them and providing the monitoring on the back end? Or do you want to keep it all together as is?
We've been asked. I think we do it in limited circumstances for like a large retailer who has some different needs. Some of those guys don't necessarily want the marketing or are allowed to, or sorry, the monitoring or don't want their data kind of going off-site. Like they think we're going to count their customers or something. I think we do it in limited cases, but the preferred treatment and where we found we've had the best success in the security use case anyway has been that kind of all-in where we control everything from start to finish.
Understood. Thanks very much. I'll turn it back over.
Awesome. Thanks. Thanks, Ian. I do not think there are any more questions. So we will wrap it up here. Thank you for your time, everyone.
Thank you, everyone.
Have a good day.