Gatekeeper Systems Inc.

Good morning, ladies and gentlemen, and welcome to the Gatekeeper Systems Inc. shareholder call. At this time, note that all lines are in the listen-only mode. And if at any time during this call you require immediate assistance, please press star zero for the operator. Note that this call is being recorded on July 22nd, 2026. I would now like to turn the conference over to Doug Diamond. Please go ahead.

Thank you, operator. Good morning, everybody. I would like to remind everyone that our remarks today include forward-looking statements that are subject to risks and uncertainties. These statements are based on current management expectations and actual results could differ materially from those projected. These financial statements were prepared in accordance with IFRS accounting standards as issued by International Accounting Standards Board. We may also use non-IFRS metrics like adjusted EBITDA, Please refer to our MD&A filed on CDAR for full reconciliations. As I said, good morning, everybody. We've got an exciting jam-packed meeting here this morning and looking forward to diving into all the details. We're going to start first by, as I hand over the meeting to Kelsey Chin, our CFO, to review the financial statements. Kelsey?

Thank you, Doug, and good morning, everyone. We filed our third quarter financial statements yesterday, which are available on CDAR and Gatekeeper's website. I'll provide a brief review of our third quarter results, and then Doug will provide some comments and an update. Company revenue for the three and nine months ended May 31, 2026 was $12.5 million and $28.8 million, respectively. Revenue in the prior year comparable periods was $7.5 million and $20.7 million. representing an increase of 68% and 39%, respectively. Cost of sales for the three and nine months ended 2026 was 5.9 million and 15 million, respectively, compared to 3.8 million and 11.6 million for the same prior year comparable periods, representing an increase in direct costs of 55% and 30%, respectively. Gross profit for the three and nine months ended 2026 was 6.7 million and 13.8 million, respectively, compared to 3.7 million and 10.5 million for the same prior year comparable periods, representing an increase in gross margin of 82% and 51%, respectively. Gross margin as a percentage of revenue for the three and nine months ended 2026 was 53% and 48%, respectively, compared to 49% and 44% for the same prior year comparable periods. Operating expenses for the three and nine months ended 2026 were 4.6 million and 13 million respectively, as compared to 3.7 million and 10.5 million for the same prior year comparable periods, representing an increase in operating expenses of 23% and 24% respectively. Operating expense increase is attributable to higher sales costs, research and development costs, special project costs, and bid preparation costs relating to large transit projects the company is actively pursuing. Operating income for the three and nine months ended 2026 was $2.1 million and $720,000 respectively, as compared to an operating loss of $60,000 and $1.4 million for the same prior year comparable periods. Total comprehensive income for the three and nine months ended 2026 was 1.48 million and 1.49 million, respectively, compared to total comprehensive loss of 442,000 and 800,000 for the same prior year comparable periods. Adjusted EBITDA for the three and nine months ended 2026 was 2.4 million and 1.5 million, respectively. At the end of our third quarter, we had $7.2 million in cash compared to $14.8 million at year end. We had $3 million in payables and accrued liabilities at the end of the second quarter compared to $10.8 million at year end, and total liabilities of $4 million at the end of the third quarter compared to $12.4 million at year end. I'll now turn it over to Doug to provide some comments.

All right, thanks, Kelsey. Well, good morning, everybody. This is really happy to be with everybody here this morning, and I'm going to provide a brief summary here of a few points that I've got, some talking points that really shine light on really the why in behind this strong quarterly performance. So all of you know that We did two bought deal financings raising $25 million, and we really put that money to work. And again, some of the results are showing up in this quarter. I want to talk a little bit about three buckets that Gatekeeper has. And this is really focused on this current backlog that we have and how the backlog has really evolved. The first bucket is contracts that have been announced since September 1st and how much of those contracts have really been shipped and a little bit of color on the background of those contracts and where they came from. So we've got over $70 million in bucket number one, which are contracts announced, and we've only shipped about 14 million of those contracts. When you look at the breakout of what makes those contracts up, Six of those contracts were really in the transit area, representing about $57 million. And 16 of those projects came out of the K-12 market, representing about $15 million. So that's a little bit of color on bucket number one. And bucket number two is what we consider gatekeeper being specced but not announced. And we got close to about $47 million US in that particular bucket. An example of a project that sat in that bucket last week and then moved into bucket number one was Monday's announcement of that $19 million contract with SEPTA. And then bucket number three, bucket number three are really bids in progress contracts. that we want to be moving into bucket number two and then moving back into bucket number one. And bids in progress at the moment, we've got about $110 million in that bucket. Now, obviously, in all of those buckets, we're seeing fluctuations as we continue to work on more deals. If you add up all of the buckets, bucket one, two, and three, you'll see that there's roughly around $300 million in potentials, not only deals that we've landed since September, but also stacked and not announced, and then, of course, bids in progress. So we've really put this, you know, a lot of the money that we raise, we really put it to work, and that's an example of, you know, the activity that's going on in the sales funnel. Number two, I want to talk a little bit about some activity that, frankly, that started late last week at TTC Toronto Transit, and that's the ACES project. We've been working with Toronto Transit now for several months after getting an award of a contract for four trains for this automated streetcar enforcement project. We've gotten the technology to a point where they're happy with it, and they're starting their nine-month pilot program as of today. For some of you that are not unfamiliar with that particular project, these trains in Toronto that go up and down the streets and picking passengers up, dropping them off, when they come to a stop, it's illegal for a car to pass that train. It puts passengers at risk. So they've been testing this technology now for several months, and they're going to start a pilot program where they want to monitor how big a problem they've actually got. So Gatekeeper, part of our process that we're going through is working with them to track and collect all of the evidence. We're not going to be issuing any citations during the pilot program, but we'll be reporting how serious a problem it is. So the hope here is that there's a full deployment on all their trains, and they've got a little over 200 trains. So it's a significant project, potential project, that if they do move forward with full deployment, it could be quite beneficial for Gatekeeper. The other thing I want to talk about is this five-year $19 million contract that we just announced on Monday. It just goes to show that the goodwill that we've really built at SEPTA is really the result of another five-year deal that we've got. Video is very important to SEPTA and their operations. They save over $20 million a year in false liability claims alone. And many of you probably are not aware of the types of vehicles. We're not just on transit buses and trains, but we're also dealing with police car video and all other general fleet vehicles. So Gatekeeper's technology is on a host of different types of vehicles at SEPTA. The next thing I want to talk about, number three, I want to talk a little bit about the balance sheet before we get into questions. So our inventory at the moment is, at the end of Q3, was a little over $17 million. Receivables had grown to $14.5 million. Payables, about $3 million. And cash, about $17.2 million, which was down from $14.7 million August 21st. Working capital has grown to about $37.5 million. So the balance sheet is in strong shape. And... The build-up of inventory is really in preparation for all of the projects that are coming at us. So a lot of this inventory is already paid for and ready to turn to revenue. So we are in a strong situation with our balance sheet and all of our lines of credit are not drawn on. So we've got some bandwidth there. So any investors that think that Gatekeeper may have to go out to the market to raise more money, that couldn't be farther from the truth. We have no plans to go in the market with our stock sitting at the level that it's at, to be quite frank. We feel like we are undervalued here, and it's a good buying opportunity for investors that want to come in, especially with all the activity that's going on in the business, which is one of the reasons I wanted to touch on our sales funnel and how the buckets work here at Gatekeeper. All right, so that's a little bit of information on a summary on the business. I would like to also add that while a lot of investors have their eyes set on all of the large projects that are going on in the transit market, the K-12 business is really quite robust. And it delivered the majority of the revenue in Q3, to be quite frank. And gross margins are very healthy in the K-12 market. And really, that's a culmination of things. We've widened our product line significantly. We're delivering more revenue per bus than really we ever have in the K-12 market. And frankly, There's a lot of bandwidth for delivery of revenue in the transit side of things. And like I said, there was probably only around a million dollars in revenue delivered in the Q3 from transit. The rest of the revenue came from K-12. And there's a lot more room and growth in that K-12 market. So I encourage investors just to pay attention to the K-12 market Safety in and around school buses is an important thing. And like I've said before, we're going through a paradigm shift to wireless, and that's driving connectivity to our systems or the ability to connect to our system, which allows us to offer up hosted services. And a little bit of information on the recurring revenue side of things. We update our investors, at least in the MD&A and our online presentation every year. But at the moment, and you can see if you go to the presentation, we've got about 4,000 MDCs that are delivering recurring revenue at the end of 2025 fiscal. But the reality is that in the queue at the moment, we're up to over 7,000. And Now, what I mean by in the queue is that we've got approximately 5,000 in delivering recurring revenue, but there's over 7,000 that are in various areas of to get to recurring revenue. And that's usually, you know, we get a contract signed, we've got to get the equipment installed, that takes some time, and then we've got to configure the system before we actually, you know, turn the lights on and start recurring revenue. So that portion of our business is really growing. And just another reminder, Gatekeeper invested in the data center, and we invested in that hardware. So we can actually load up over 60,000 MDCs on the data center. And right now, like I say, we're pushing towards 7,000 here shortly. Once we get to 10,000, our margin scales from where it's at today, which is in and around 75%. percent gross margin to 90%. So you can see as we start loading up more and more MDCs, we don't have to invest in any hardware until we get beyond the 60,000 MDCs. So margin really starts to scale. It's a nice business model and we're excited about our hosted service offering. So with that being said, I'm going to open it up to questions. And the first question I've got here is, can you talk a little bit about what drove gross margin performance in the quarter? How do you see that evolving in coming quarters? So I talked a little bit about the gross margin, but quite frankly, what's driven the gross margin has been the K-12 market, frankly. And some of the projects in K-12, We try to keep our margins quite healthy and how we do that is we widen the product line to offer up more and more video centric systems and we were able to keep gross margins pretty healthy. One of the things we do is we offer that free software application and then we get our customers using our hosted service. As far as coming quarters, in some situations, if we have large projects, the gross margins may slide a little bit. But when you look at how many customers we have in the K-12 market, a lot of the deals are a little bit smaller, $50,000, $100,000, and margins are quite healthy for those smaller projects. And we have a lot of them. So when you look at the averaging, the margins can be pretty healthy, which is where they need to be because we have to have margins up in the area in order to show the profitability, be able to invest that money back into the business and continue staying on top of our technology. So next question, has there been any changes around the timing of LIRR and Alstom timelines? LIRR at the moment has been pushed out a little bit. We're expecting to be able to get back on invoicing potentially sometime in October, so beginning of Q1 2026-27. As far as Alstom timelines, we may see some revenue delivered in the 2026-27 fiscal, but we plan to be updating investors as we work with Alstom on the timing of those new train builds. Can you update us on your pipeline opportunities? I think I've done that. And then again, next question is very healthy working capital position. Are you comfortable with the cash and available liquidity with some of the larger projects and set to ramp? So yes, we are. We've got other strategies that you know, if we needed to finance some of these larger projects that don't require us to go back to the market. So, like I said earlier, you know, given where our stock price is, given the, you know, the current balance sheet that we have, we have no plans to go back to the market, you know, anytime soon. Now, if there's something that happens that... you know, that causes some sort of material change, you know, that could be something that, you know, that sends us back. But at the moment, we're quite comfortable with where we're at.

Okay, next question. Just give me a moment here. Is the TTC project included in one of the three buckets or is it incremental?

The TTC project is included in bucket number two. All right, next question. Regarding the growth of the K-12 revenue in this quarter, was the change weighted toward existing customers or new customers? That's a good question. I would say that without having the information in front of us but knowing our business, you're probably looking at a 50-50 split. Important to note that we're starting to see more of our existing customers doing refresh of their existing technology that's now aging out, right? With 3,500 customers out there and over 60,000 MDCs, some of our MDCs are getting to the point where our customers are looking at increasing the number of video cameras. So they've got to do a refresh on the MDC to make it a larger MDC. and provide them with more eyes on target, whether or not they want to add more cameras internally or start looking at 360 systems to protect against blind spots in and around the buses. Next question, thinking about the 19 million SEPTA video maintenance contract, is there opportunity to do similar style size of contracts with other transportation companies? Yeah, this is another good question. It's something that as we grow, we may be taking that boilerplate structure that we have at SEPTA, which has been enormously successful, and bundling it up and pushing that out to potential other customers.

So just give me a moment here.

So I've got a question here about some of the larger contracts that I've talked about in the past, and the answer is that yes, are those contracts still in play? Yes, those contracts are still in play, and you have to keep in mind that this sales funnel is really growing, and there are some larger projects, especially when you get into, when you're participating in the training business.

Just give me a moment here as I find the next question.

I have a question here about the potential dollar amount of TTC Toronto contract for the 200 trains. That's a little bit of a tough question to answer, frankly. I know I'm sure a lot of you are wondering what that could be. But it really depends on how TTC structures the system. You know, it definitely has the potential to be, you know, north of 30 million. You know, so again, it's a tough one, but we'll work our way through the, you know, the proof of concept here and the nine-month trial and hopefully have more information as we, you know, as we move forward. Here's a question on how are you managing the increase in memory cost? The timing of our financing was quite good. Memory cost for this shortage of DRAM and NAND flash is affecting SSD costs. We have committed to a significant amount of SSDs. It's one of the reasons you see the increase in inventory. So we've probably committed to more SSDs than we ever have in the company's history. And you've got to keep in mind that every one of our MDCs needs memory, needs an SSD, whether it's a one terabyte SSD for most of our school bus customers or in some cases up to 16 terabytes for some of these train projects. So what we've done is we've secured enough inventory and SSDs just become part of our COGS and we then margin up our COGS to land on the gross margin that we need to operate our business. I would encourage investors to not necessarily be concerned that the gatekeeper is because the cost of storage is going up that our margins are going down. That is not the case at all.

Our margins are staying healthy and so is our gross profit.

Next question, is there any collection of risk on the $14.5 million in receivables? Has any of this received after quarter end? We're expecting that. So the answer to that is no, we don't see really any risk there. The receivables have gone up. We've probably got more receivables over 90 days than we ever have. At the end of the quarter, we're about 2.2 million. But that's really because of one large project. I can't mention the end user customer, but it's one of the largest transportation companies in North America that is a little bit slow to pay on some of their projects. But they do pay, right? So they're actually our, have turned into be, depending on timing of revenue, they're either our largest customer or they're their second largest customer. So those receivables that we have, we're expecting a significant portion of that to come tumbling in here in Q4. Next question, what about acquisitions? To be honest with you, Gatekeeper is completely focused on our organic growth model, and you can see the results in the three buckets. That's where our focus is at the moment. If there is any potential acquisitions, then we will assess those. But at the moment, we're laser focused on our organic growth model just because there's just so much opportunity there. Can you talk a little bit about integration with other systems companies as mentioned in your slide deck? Yeah, absolutely. We're being directed by MTA, and if some of you have looked at some of the bids that have been made public, there's language in there that states that whoever wins these bids, and Gatekeeper, I'm talking about Long Island Rail, I'm talking about TTC, some projects there. It states that whoever wins those projects, you know, has to integrate with Genetech. Now, I want to throw some numbers at you so you can put this in context. If you look at the number of OEM dealers that Gatekeeper does business with in school bus, there's about 113 dealers in North America that provide all of the buses and services from Bluebird, International Corporation, and Thomas. If you compare that number to the number of systems integrators that somebody like Genetech has, it's not even comparable. Genetech has an enormous amount of systems integrators around the world. So the TAM, Total Addressable Market for Gatekeeper, once we get integrated with a Genetech and we feel that we're going to probably be integrated with them for our Long Island Rail project, likely in and around Q2 or Q3 of 2026-27 fiscal, We'll have a unique product offering there. And then our plan will be to leverage that and start building relationships with all of their systems integrators around the world. That's an example of how we can increase our total addressable market. And you think about this. Genentech is one of the largest, if not the largest, when it comes to command centers and city surveillance and access control. And Johnson Controls is one of their systems integrators. They're the company that is the system integrator at MTA. So we see opportunity there with that large systems integrator. So integration for Gatekeeper has an enormous opportunity for us. So we're laser focused on that. I couldn't be more excited about the opportunity, to be frank with you. So here's a question on board composition. I believe the charter allows for more members. It seems the current directors outside Hamish have been with the company for some time. Do you anticipate any future additions here or areas of strength that can be added to the board? General thoughts. So, yeah, there's the potential for that. We've got a tight board of directors that have industry expertise in transit, K-12, Hamus brings some nice experience from the general security industry. His experience with Motorola is very good for us. But if we're going to be adding board members, we'll be looking for specific subject matter experts to help us. We're focused on attracting outstanding people to this company. We are in a growth mode and there's definitely some you know, some seats to fill to strengthen the bench and really help us to, you know, drive revenue. Any update on Hitachi and any partnership as for Alstom? Many of you are aware that there was a train deal won by Hitachi at SEPTA. Gatekeeper is specced on there. Hitachi, at the moment, hasn't named their subcontractor for the communications system. I believe they're down to two companies. Both these companies are in communication with Gatekeeper, and we think it's only a matter of time here before We're under contract with whoever Hitachi names as their subcomponent manufacturer for the communication system. So we're quite excited about that. And that particular project sits in bucket number two at the moment. So I'm getting some questions on the L&T technology services equipment. Contact Rail. That project has gone a little bit quiet, to be honest with you, largely due to a couple of reasons. Number one, the unrest that's been going on. Obviously, in the Middle East and whatnot. And then secondly, they're still working on their system configuration. These types of projects can take quite some time. I'll use Lane Transit as an example. We issued a press release over a year ago with Lane. They went through so many engineering change orders that it really delayed the project. So And that would be an example of one of the reasons that Transit missed their number in Q3. But having said that, we expect that all of Lane is going to be invoiced in Q4. So it's just kind of a timing. So some of these Transit projects, unlike most of our business in K-12, they just take time. It's just kind of the nature of the business. So I'm getting some questions on FRA mandate deadline. We're seeing some of the transit agencies put a request for extension. We're also seeing some of the agencies accelerate their plan. There is a SEPTA has awarded a contract for FRA requirement, which, by the way, for all of you that are doing research on gatekeeper spec and where we're spec'd, I think some of you do a really good job. Sometimes you'll miss things. For instance, the SEPTA FRA contract that was awarded to a company not gatekeeper, that's our spec, and the spec reads, it's gatekeeper, no substitutes, right? Well, that's different than, you know, gatekeeper or equal, all right? So, you know, we are pretty darn confident that that'll be our contract because it's our spec, even though one of our suppliers has, or one of our, I suppose Partners, who's a DBA, went in pretty skinny on pricing and SEPTA has awarded to them. I believe it's going to board meeting for approval in July here. So I wouldn't be too concerned, at least at the moment, that Gatekeeper hasn't won that project. And we continue to push our We continue to push our FRA mandate to all of our transit agencies. And by the way, I'm going to talk a little bit about the activity going on in the sales and marketing department. We're going to do 75 conferences this year, and a lot of those are transit. So we've got a lot of school bus, but a lot of transit. So we have really invested in all of our go-to-market activities And we want to get our brand exposed out there as best we can. So there's a lot of activity going on in behind the scenes to drive the numbers inside of those three buckets that I talked about at the front end of the meeting. Okay, we're getting to the point. We've got about three more minutes. I'll try to answer as many more questions as I can. I've got a question here. Would you consider uplisting to NASDAQ? That's something that we're getting a lot of interest in from the US. But frankly, at the moment, the cost of going to NASDAQ is substantial. My concern with trying to reach the NASDAQ too early is the cost can be enormous for companies like Gatekeeper. And frankly, there's a graveyard of companies that have reached too early They just had their market cap killed because of increased costs and not just reaching too early and not being ready. At some point in time, we may consider a U.S. listing, but at the moment, we're keeping our costs down. We're still in a venture exchange. Frankly, we have a lot of investors in the US that have taken a position in us, which is really nice to see.

Okay, everybody.

It'll be interesting to see how the market reacts to this quarter and all the potential. Really appreciate everybody's support, and I'm going to adjourn the meeting here and turn it over to the operator. So thank you so much for all your support and participating in our Q3 earnings call.

Ladies and gentlemen, this concludes Gatekeeper Systems Inc.'s annual general meeting. We thank you for participating and ask that you please disconnect your line.