Tantalus Systems Holding Inc.

Good day and welcome to the Tantilla Systems second quarter 2026 financial results conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. And to withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Mrs. Deborah Honig, Head of Investor Relations. Please go ahead, ma'am.

Thank you, Operator. Thank you for joining us to discuss Tantalus Systems' financial results and operating performance for the second quarter ended June 30, 2026. Tantalus issued these results, including their financial statements. Managements Discussion and Analysis, and press release yesterday after market close, which are also posted on the company's website, along with an updated version of the company's corporate presentation. As a reminder, we will not be utilizing an earnings deck for this call. Joining me today on the call from Tantalus Systems, here referred to as Tantalus or the company, are Peter Londa, President and Chief Executive Officer, and Azim Lalani, Chief Financial Officer. During the call, we will make forward-looking statements about Tantalus' business. These statements are subject to certain risks and uncertainties, which could cause actual results to differ materially. Tantalus refers conference call participants either today or in the future to the company's forward-looking statements contained in the investor presentation on our website at www.tantalus.com. Statements made on this call reflect management's analysis of today. As of today, August 6, 2026, Management does not assume any responsibility or obligation to update forward-looking statements made during this conference call unless required by law. Please note that the financial information referenced on today's call is stated in U.S. dollars and in accordance with IFRS unless otherwise stated. The company is also presenting selected non-IFRS financial measures, non-IFRS ratios, and other supplementary measures including EBITDA, Adjusitive EBITDA Margin, Recurring Revenue, Annual Recurring Revenue, referred to as ARR, and Liquidity. Channelus believes these non-IFRS measures provide meaningful information to investors. However, they do not have a standardized meaning and are not likely comparable to similar measures presented by other issuers. We'll now turn the call over to Peter Londa, President and CEO. Please go ahead, Pete.

Thank you, Deborah, and good morning, everyone. On behalf of our board of directors and our employees, thank you for joining us to review our results for the second quarter of 2026. TANOS delivered a strong second quarter, and more importantly than any single number, demonstrated the durability and operating leverage of our business model. Four results define it. Record revenue of $15.4 million, up 18% year-over-year. Gross profit margin of approximately 55%, well above our long-term target of 50%. Positive adjusted EBITDA of 690,000, up 35% while continuing to fund growth. And the strongest balance sheet in our history with approximately 41.3 million of liquidity. We also set new high water marks for first half revenue at 30 million. and trailing 12-month revenue at approximately $60 million. While Azim will take you through the details, I'd like to spend my time on what sits behind these results. Utilities across North America are managing rising load, aging distribution infrastructure, heightened reliability expectations and real affordability pressure on the customers they serve all at the same time. The scale of the response is substantial. and it is concentrated in exactly the part of the grid where we operate. According to Lawrence Berkeley National Laboratory, distribution has become the fastest growing category of utility investments, rising by roughly 50% between 2019 and 2023, a period over which generation capex spending actually declined. While research that tracks utility spending certainly highlights the opportunity, We continue to validate that opportunity by expanding the number of utilities in our user community with another five new additions in Q2, and witnessing an increasing number of utilities embrace and adopt our technology, including another seven utilities adding the TruSense gateway into their mix. We see expanding investments in the distribution grid that go beyond metering, and our hearing utilities ask about sequencing their investments and deployments. How do they do more with and extend the life of the infrastructure they already own since many utilities cannot upgrade everything all at once. Utilities also already hold a considerable amount of data. We recently witnessed the first IOU utilizing the TrueSense Gateway report to their regulators that they have lacked visibility into what is actually happening across the grid, which from our perspective reflects just the tip of the iceberg since the need to leverage and supplement existing systems to provide that visibility to utilities is precisely what Tanalyst was built to deliver. The opportunity to upgrade the distribution grid is massive and not just limited to the United States. As reflected in our filings yesterday, we are actively investing to expand in Canada by hiring our first regional sales manager during the first half of the year, and building awareness of Tantalus with provincial ministers, utilities and other stakeholders through various channels. Ontario's integrated energy plan contemplates 103 to 120 billion Canadian dollars to upgrade the province's distribution system. And we believe our previous announcement relating to the factory integration with the clarimeters that supports Measurement Canada and our heritage as a Canadian-based company positions us well. The clearest financial evidence of the opportunity in front of us and validation that our business model is working ties to the continued growth of our annual recurring revenue, or ARR. We hit a new milestone of $15 million in ARR as of June 30th, and our compound annual growth rate of recurring revenue dating back to 2016 is approximately 19%. Nine consecutive years of compounding at that rate indicates that our solutions are gaining traction, that we are making good progress towards a paradigm shift in the industry to embrace data-centric solutions, and that our business is scalable. Every connected device we deploy expands the installed base against which we can deliver analytics and software to solve problems for utilities, and every new application we introduce increases the value of that base. That is the engine that converts traditional hardware deployments into predictable, high margin, recurring revenue, and we are pleased with the continued upward trajectory that continues to hit and deliver new quarterly milestones. To drive operating leverage out of our business model and deliver earnings power, we start by evaluating our gross profit margin, which hit nearly 55% in Q2. On a relative basis to other grid modernization companies in our sector, we are delivering among the highest thresholds of gross profit margin, which is a direct reflection of deliberate management by our team and consistency within our business model. Margins remained strong within connected devices and infrastructure, and we continue to benefit from higher margins generated by our software and services segment. While the large majority of our supply chain remains stable, we are actively managing pockets of cost pressure for specific components, including memory. To protect margin continuity through the second half of 2026, our team put our balance sheet to work, building inventory of key components and finished goods ahead of anticipated deployments. That strategic planning insulates our bill of materials from the risk of component price increases and positions us to meet customer demand without interruption. It reflects both the financial strength we have built and the disciplined, forward-looking approach our team takes in managing the business. Turning to commercial results, as of today's call, 77 utilities have placed orders for the TruSense Gateway. up from 70 as reported during our first quarter earnings call. More significant than the count is the progression. Utilities moving beyond pilots into scaling deployments grew from 28 to 37 over the past three months. We have now shipped roughly 6,200 TrueSense gateways and deployment volumes are expanding, which also helps us build and validate use cases over time. That progression from evaluation to deployment is the clearest validation we can point to. Utilities are confirming, with their capital, two things that make the TrueSense Gateway unique. First, it delivers circuit-level visibility into power quality from the edge of the grid, a capability that has not previously been available in our industry from metering. Second, it offers a practical alternative to traditional rip-and-replace models from Metering Infrastructure. That value proposition was tested in a public hearing a few weeks ago. In July, our innovative energy solutions pilot with United Illuminating was reviewed before the Connecticut Public Utilities Regulatory Authority. Both the utility and the program administrator confirmed the pilot worked as intended, and both highlighted the circuit-level visibility that the utility had not previously had. We are awaiting the regulator's determination, but the pilot proved something significant and that is applicable to all utilities. A single device can deliver granular power quality measurement in front of a meter while simultaneously integrating distributed energy resources and creating dispatchable load behind the meter in a secure, equitable, and reliable manner. We believe this unique capability of the TrueSense Gateway will become increasingly important as the rise of data centers and large industrial loads continue to pressure local and rural distribution grids. We also expanded our software platform during the quarter with two new offerings, both designed to help utilities generate greater value from the data they are already collecting. TrueGrid Verify is an AI-enabled analytics application that identifies and eliminates hidden errors in data from GIS and AMI systems, whether those are TANalys systems or our competitors. TrueGrid Advantage is a managed service that pairs our analytics suite with TANalys data experts to help utilities convert that data into actionable insights. Both capabilities advance the same strategy. We have utilities already deploying and leveraging these new offerings, and we are well capitalized to keep investing behind initiatives like these. That brings me to orders, where I want to give you the full picture rather than focus on a single ratio. Through the first six months of 2026, we converted approximately $30 million of orders. Producing a book-to-bill ratio of approximately 0.97 times. A few points of context are important here. First, we believe a rolling book-to-bill ratio is more relevant given the size of Tantalus because that is the lens that best reflects how our orders actually materialize. As previously referenced, our average sales cycle approximates 18 months. and can vary utility by utility. Order timing in our market is driven by utility budget cycles, board and commission approvals and project scheduling, most of which is outside of our control and none of which aligns neatly to a 90-day window. A single quarter's implied ratio will move above and below 1.0. And if we look back at the past 14 quarters where Channelys has reported quarterly orders figures You'll notice that eight of those quarters, or over 50%, are below 1.0. The range on a quarterly basis varied from .46 times to 2.3 times, and on an annual basis dating back to 2021, that range has varied between .84 times and 1.76 times. From our perspective, the book-to-bill ratio is never a straight upward line, and on its own, A sub 1.0 quarter or period of time is not the best or only signal about demand of our ability to scale, as it fails to take into consideration the attributes of our overall model, including the depth of our user community, the percentage of revenue that's derived from existing customer base each year, outstanding backlog tied to multi-year deployments, and our ability to drive ARR. More importantly, every forward indicator we track is moving in the right direction. There are four I draw to your attention. First, the adoption of our solutions is broadening. As referenced yesterday, we've added seven utilities, placing orders for the TrueSense Gateway over the past three months, with 77 in total now moving forward. Our order base is becoming broader for all solutions, which will support our ability to scale over the coming years. customers are scaling. As an example, 37 utilities are now moving in deployments of the TrueSense Gateway, up from 28 just three months ago, and our user community is quickly approaching 350 utilities. Those conversions from pilot to deployment and the expanded user community are the clearest leading indicators we have of future order flow. Third, Neaterm Conversion is in motion. We currently have eight utilities in active contracting compared with four utilities at the end of the second quarter of 2025, and we expect all late opportunities to convert before year end. Lastly, I'd say our qualified order pipeline is at a record level. It's the strongest in our company's history. That strength reflects two forces, the necessity for utilities to modernize the distribution grid and our data-centric approach, which lets them sequence that modernization through prioritized investments rather than a single large capital event. Those are the operating highlights for the quarter and I want to thank our team for the execution behind them. With that, I'll turn it over to Azim to review our financial results in more detail and then provide some broader observations before we take your questions. Go ahead, Azim.