NowVertical Group Inc.

Vertical's third quarter 2025 earnings call. On the call today are Sandeep Mendiratta, Chief Executive Officer, Christine Nelson, Chief Financial Officer, Glenn Axelrod from our investor relations firm, Bristol Capital, and myself, Andre Garber, our Chief Development Officer. This morning, we issued our Q3 2025 results, press release, MD&A, and financial statements, which are now posted on our website and on CDAR+. This call is being webcast live at 11 a.m. Eastern on the 12th of November and a replay will be available on our website after the call. We will open up the webinar for Q&A after the presentation. During today's call, we will make statements related to our business that may be considered forward-looking. These statements reflect our views only as of today and should not be regarded as representative of our views and at any subsequent date. These statements are subject to various risks and uncertainties that could cause actual results to differ materially. I'll just remind everybody as per usual and always all figures discussed on our calls and today's call are in US dollars and will be on an IFRS basis unless otherwise noted. We will refer to specific non-IFRS items such as adjusted EBITDA and please refer to our cautionary note in the presentation and non-IFRS and other financial measures sections in our MD&A for more detail. And with all that, lovely to turn it over to Sandeep Mandirata. Sandeep. Thanks very much, Andre.

And welcome everyone to this quarterly earnings call. And I would just like to take you through just a refresher of what we do, who we are, and just paint some picture about how our strategic program is working that we started off in January 2024. I will then hand it over to Christine. She will take us through the quarterly performance results and share some really nice insights about how our strategic program is developing. And then I will also talk about the strategic accounts update and how we are evolving that program and what it means to us. With that, just as a refresher, what we do is we help our clients transform their customer and finance data into tangible business value, and we do this by leveraging data and AI technologies. Who we are? We are a global data and AI solutions and services business, and we are making enterprise AI possible for these large enterprise clients that we have on our portfolio. We leverage some specific hyperscaler technologies like Google Cloud, Microsoft Azure, AWS, Snowflake, Anaplan, which are some niche data platforms, and Qlik as well. These are some of the specific technologies that we leverage. We have got a portfolio of these FTSE 500-type blue-chip clients on our portfolio and a very nice diversification of the industry as well as presence in different geographies. We have got 100 plus enterprise clients on our portfolio, which is a massive asset for us. And we support these 100 plus clients, enterprise clients with 600 plus strong data and AI technologies that are spread out across the globe. We are a global business structured within two markets, which is North America and Latin America. What I would like to just unfold for everyone and talk about is some of the key pillars within our strategy of Now Vertical that we brought to limelight in January 2024. The very first pillar that we have been talking about is the strategic accounts. Now, what's a strategic account, first of all, for us? The strategic accounts are these blue chip clients, FTSE 500, multinational, global companies, household names that we have heard many times. But it's not just the size of the business or the logo. It's about the type of the business they bring to us. we focus a lot more on the accounts or the clients that are going through the transformational journey using data and AI technologies, rather than just focusing on the transactional engagement that may only last for a few months. What we expect out of our strategic accounts is they deliver upwards of $1 million revenue a year. Of course, it takes a little while to develop it to that $1 million revenue, but that's the expectation we have. Many of these strategic accounts also have been with us for over five years, which is a really nice tenure to have in our industry. Many of these accounts have delivered upwards of $5 million as lifetime value for us. What it means is once we have won these strategic accounts and we are able to keep them for a long time, they are very meaningful. They have a meaningful impact on our revenue and profitability, which is what we like. As you know, we are focusing at the moment on top 30 strategic accounts. So that's one of the key pillars and what it means to us. At this point, we are delivering about 70% of our revenue with these strategic accounts. And Christine is going to cover some of those numbers for you. The second pillar is our partnerships. And I'm specifically talking about our technology partnerships. And today, I would like to drill further into our partnership with Google Cloud. So what does this Google Cloud partnership means to us? We leverage their technology in data and AI space to build high value and innovative solutions that we bring to our strategic accounts. So that's why we work with Google to leverage their technology and data and AI space, first of all. What Google also does is they refer to us many of these enterprise clients because they believe in the value we deliver for our clients and they have seen and witnessed how we are enhancing and expanding in these enterprise clients. When these opportunities are referred to us, we then work with these clients and develop them into strategic accounts for ourselves. What this translates into for us is a very reliable revenue stream, which is mutually beneficial for both Now Vertical as well as Google. So this is what this Google partnership within the technology partnerships mean to us. At this point in time, we have got year to date about 14% of our revenues coming from Google Cloud, which is quite significant as compared to where we were last few years. And the third pillar we have is integration. Integration was our focal point of the one business, one brand strategy that we brought in for Now Vertical in January 2024. And this was primarily to bring all the synergies from the 12 acquisitions that we had done as a business. What we have been able to do very effectively is cross sell and upsell the solutions and services from one part of the business to another part of the business. And this has been quite a phenomenal journey for us. And we are very pleased to see that this is working quite effectively. What we have also been able to do is build our delivery powerhouse and bring in the delivery efficiencies to our strategic accounts and the other clients. What that means is we have been able to even win some of the projects, which otherwise we would not have been able to if we were operating as independent single business units that were acquired. This translates for us into improved gross margins and net margins. And that's what the integration has brought to us. One of the key elements that I would want to mention, which we said earlier in the year, beginning of the year, we will complete all of our integration by bringing in all the Latin brands and converging them into now vertical as one brand. I'm very pleased to announce that this initiative is going really well and we are on track to onboard and converge all of our three brands within LATAM onto NowVertical. And we will then be truly one business and one brand, one machine to operate. This integration revenue is our target was to have 10% revenue and we are right now standing at 12% already year to date, which is quite phenomenal. Let me just give you a real-world example of how these three pillars are helping us expand within our strategic accounts. So I'll take an example of one of the media giants as our client, which is, of course, within our top 30 strategic accounts. We have the lifetime value of upwards of $7 million from this account already. We recently sold a Google Cloud-enabled data modernization project which we would not have done otherwise if we were not an integrated business and we did not bring in this focus on our partnership with Google. Not only that, we are now working on this project as a globally distributed team by leveraging all the best capabilities that are available across our business. And that's just one of the examples that I'm giving you. There are many accounts where we are leveraging two or more of these key pillars already as an integrated business. So these three key pillars are maturing really nicely and are already steering us forward towards a high margin recurring revenue base. And I'm really delighted about how they are coming together. I'll come back shortly and I will discuss how these pillars are working in concert to accelerate our growth. But first, I'm pleased to hand the call over to Christine to walk us through our quarterly performance. Christine, over to you.

Thanks, Sandeep, and hi, everyone. I would just like to remind everyone that this is still a transition year as we continue to execute on the one brand, one business integration strategy. and increase our focus on growing our strategic accounts. And while we dealt with some unexpected macros this year, we are still delivering 27.7 million of revenue year to date. We have grown our EBITDA by 17% to 5.4 million, and we have grown our operating income by 55% to 2.5 million. We have also delivered our key strategic KPIs relating to strategic revenue, gross margin, and EBITDA margin targets. Sandeep will go into more detail on how we are reaching those targets later on, but I just want to highlight that we have grown our top strategic accounts by 23% to $19 million year over year. Our gross margin for Q3 was 51%, exceeding our 50% target, and we have reached best-in-class 20% EBITDA margin. Now, digging into the quarter, in Q3, we had revenue of $9.1 million, which was a return to sequential growth over Q2 2025. While we're seeing growth over the prior quarter, there was a significant devaluation of the Argentine peso this quarter, which resulted in a 1 million deflation of our revenue, as we have to restate the Argentine year-to-date results for the current FX rate. If the FX rate had remained the same as last quarter, revenue would have been 10.1 million in Q3. I really want to highlight the fact that the underlying performance in the Argentine market is incredibly strong. We actually had quarter over quarter revenue growth in local currency of 18% in that market, which we also highlight in our MD&A. Also last quarter, we had discussed the increase in multi-year reseller contracts in 2024, which resulted in higher reseller revenue in the prior year, as we have to recognize 100% of the contract on the date of delivery. So even if it's like a three-year contract, we have to recognize all three years net of costs at the date of delivery. And while this is actually fantastic for the business as it's committed future cash inflows, it does impact the comparables. We're continuing to close more of these multi-year contracts so that revenue gap from Q2 is narrowing, but we wanted to highlight that it is still a factor. Another reason for the 2024 year-over-year variance is the restructured Chile and Mexico businesses. Now, while the overall impact of the multi-year deals and the restructuring is narrowing, it still had about a $700,000 impact year-over-year for revenue. Next, I'll dig into some of our key revenue KPI performance updates, showing that our underlying core business is strong, driven by the growth in our top strategic enterprise accounts. How are we growing these accounts? Well, we're winning more. How are we winning? Three ways, cross-selling and upselling, capitalizing on our technology partnerships, and third, our efficient delivery model. These three things have allowed us to grow our top strategic accounts 23% year over year to 19 million, reaching 69% of our total revenue. So growing these strategic enterprise accounts is one of our key focus areas going forward. Another focus area is our technology partnerships, which are incredibly important to the growth of the business. Specifically here, we want to highlight our Google partnership and the revenue generated from this relationship. We have grown our GCP partnership revenue by 42% year over year. So in 2024, our Google partnership was primarily concentrated within Argentina. Now it has grown across LATAM into North American EMEA, giving us new leads, new clients, and the ability to upsell and bring innovative solutions to our clients. We also now have three specializations with Google, data analytics, machine learning, and gen AI. We're incredibly proud at how fast we've achieved these, and that we're only one of 15 partners that have these credentials worldwide. And on top of that, we are a Google Premier Partner. And of course, we won 2025 Partner of the Year in LATAM. The integration of our global business and the one brand, one business integration strategy has been another key driver for growth, specifically within our strategic accounts. We have seen an 82% increase in integration revenue year over year and are incredibly proud this is now 12% of our revenue. But how are we measuring our integration? Through cross-selling and upselling, our net new Google partnership revenue, and of course, the utilization of our efficient delivery cost centers globally. Now that we are like a globally integrated business, we're able to offer our clients more solution services from one part of the business to another, enabling us to organically grow our existing clients through cross-selling and upselling. And the other key foundation is being able to service our global clients with our efficient delivery powerhouses in Argentina and India. These delivery centers are increasingly servicing our North American MBA market. Not only does that allow us to maintain high gross margins of around 50% quarter after quarter, they've also allowed us to win certain accounts and projects that otherwise just would not be possible. Next, I'll walk through EBITDA and income from ops. So EBITDA for Q3 was 1.8 million. While this was slightly lower than Q3 of 2024, our EBITDA margin was at was higher at best-in-class 20%. Year-to-date EBITDA was 5.4 million, a 17% increase over 2024. Our EBITDA margin has also increased from 16% to that best-in-class 20%. This goes to show that there's so much resilience and consistency in the business that despite the lower EBITDA results in Q2, we're still seeing growth in both EBITDA and our EBITDA margin this year. Income from ops was about 0.4 million this quarter. It was a decrease over last year, but mainly due to about a $600,000 increase in non-cash share-based compensation related to performance sharing units granted in the quarter. Now these PSUs granted is a really positive reflection of our business as our employees have chosen to invest in the long-term prospects of the company by committing part of their compensation into stock. And despite that increase in share-based comp this quarter, We are still looking and showing a 55% increase to 2.5 million year over year for income from operations. One big focus for management for the past two years has been cleaning up our balance sheet. We have made incredible progress this year reducing our cash obligations. As of Q3, we have reduced our short-term liabilities by 4.7 million since December, 2024. A big part of that was clearing 2.7 million of old-aged AP. Furthermore, in October, we completely paid off our convertible debentures, removing a potential dilutive issuance of shares if that convertible notes had converted. Both the reduction in short-term liabilities and the repayment of the convertible notes were made possible from our cash flow from operations and also funding from HSBC, who's been an incredible partner for the business. Overall in 2025, and this includes up until the end of December, We will have cleared up over 8.9 million of acquisitions and long-term debt obligations this year. And when you look into 2026, we only have 2.8 million of acquisition and debt obligations. Not to mention that they are predictable from a timing perspective. This is a 69% decrease. What is this doing for the business and why do we want to highlight this? Well, clearing these liabilities is setting us up for cash flow success in 2026. and setting the foundation to have our cash inflows from operations fund our future growth by investing in our sales teams and looking at potential accretive acquisitions. Thanks, everyone. Back to Sandeep.