Zedcor Inc.

Thank you for standing by. My name is Joe Diaz, and I'll be the conference call operator. Welcome to the Secretary First Quarter 2026 Financial Results Conference Call. As a reminder, all participants are in listen-only mode, and the conference is being recorded. We'll 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 Lara, Chief Financial Officer. Please go ahead.

Thank you, Joe. Good morning, everyone, and thank you for joining us today. Joining me on the call today is our President and CEO, Todd Ziniak. Last night, after markets closed, ZCorp issued a news release announcing our financial results for the three months ended March 31, 2026. This news release will be available on our website under the Investor Relations tab and is filed on our CR Plus profile. Please note that portions of today's call, other than historical performance, include 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 are based on management's current views and assumptions. This discussion is qualified in its entirety by the cautionary note regarding forward-looking statements appended to our news release. Please review our press release and ZCOR's reports filed on CDAR Plus for various factors that could be qualified by these statements. In these statements, we use terms such as gross profit, gross margin, 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 definitions set out in the MD&A. In addition, reconciliations between adjusted EBITDA and net income are included in the MD&A as well. One important non-GAAP measure we use is adjusted EBITDA. The company believes that adjusted EBITDA is a meaningful metric because it measures tax generated from operations that can be used to fund working capital requirements, support future growth initiatives, and service future interest and principal debt repayment. Adjusted EBITDA should not be construed as an alternative to net income 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 myself, we will conduct a Q&A session during which questions will be taken from analysts. Moving on to a review of the company's financial performance for Q1. Some highlights for the first quarter include We achieved record quarterly revenues of $19.4 million, up 69% year-over-year from $11.5 million in Q1 2025, driven by higher tower count, strong customer demand, and continued expansion in the U.S. We also diversified our customer base and reduced the contribution from any one customer to revenues. In the U.S., we added several enterprise customers this quarter across home building, specialty retail, commercial construction, and logistics. Accounts that are either already at a 1 million annual run rate or with that we expect to get there. We can't always name them publicly, but a few wins worth flagging. We started working for one of the largest home builders in the U.S., a top 10 logistics company, and a regional furniture retailer with more than 150 locations across the South and the Southeast U.S., In Canada, our largest retail account has grown to become our biggest customer overall in that century. Our recurring revenue remains steady as customers continue to add new towers and maintain utilization of existing units on a long-term basis. We also achieved record adjusted EBITDA of $7.6 million in Q1, up 86% year-over-year due to higher revenue and expanding margins. Adjusted EBITDA margin expanded to 39% for the quarter, up from 36% in Q1 2025 due to operating cost controls and economies of scale, despite higher administrative and sales investments to support continued expansion in the U.S. We deployed 475 solar mobilized security towers in Q1 2026, up from 435 in Q4 2025 and 229 in Q1 2025, averaging 43 towers per week, after accounting for the impacts of moving to our new manufacturing facilities in Houston. With production capacity of 45 to 50 towers per week, we are well positioned to meet customer demand and our fleet growth targets with the ability to scale further at relatively low cap access needed. Our total fleet size is 3,261 units at the end of the quarter, an increase of 108% year over year. Notably, 1,878 units, or 58% of these units, were located in the U.S., helping U.S. revenue exceed Canadian revenues for the first time in our history. Our U.S. fleet growth year-over-year of 233% highlighted the exceptional growth we are experiencing south of the border. Diving a bit deeper into the income statement for the three months ended March 31, 2026, Revenue is up, as previously mentioned, to $19.4 million, with U.S. revenues of $9.7 million, representing just over 50% of total revenue. This marks the first time that U.S. revenues have exceeded Canadian revenues, and we expect this to become the norm going forward. Canadian revenues are up 19% year-over-year in Q1, quarter-over-quarter. Revenue came in slightly below Q4 2025, and this is consistent with the Q4 to Q1 trend that we saw last year as well. And we see this in Canada at our larger locations where construction starts slow down and municipal permitting drags. Q1 is typically not a growth quarter when looking at it sequentially. The good news is we returned to growth in the first half of Q2 with daily revenues running ahead of our internal class. Gross margin increased to $11.5 million, up 58% from Q1 2025. Operating expenses, excluding depreciation, remain steady at 22% of revenues, despite increased hiring and training to support the expansion of the U.S. monitoring center and maintain customer service levels, which we expect will drive higher margin revenue growth in the future. Adjusted EBITDA grew 86% year-over-year to $7.6 million, with adjusted EBITDA margin expanding by approximately 300 basis points, demonstrating our platform's operating leverage. As adjusted EBITDA per share came in at $0.07 compared to $0.04 from the prior year period, this was driven by higher revenue and tight cost controls, partially offset by a higher share count due to the completed equity finances. These strong results demonstrate the significant investments we've made in our business and the competitive modes that are compounding returns for shareholders. As we position for sustainable growth in the years ahead, we expect further economies to scale improved monitoring services, new product innovations, and conversion of a growing pipeline of enterprise customer prospects to continue driving shareholder value. Turning to our balance sheet, we'd like to note that Zedcore's access to liquidity remains robust, with $1.7 million of cash and an additional $43.2 million of undrawn credit facility capacity at the end of Q1. In February 2026, We expanded our credit facility with National Bank from $50 to $75 million, plus a $25 million accordion, and also completed a $30.5 million upsized bought deal equity financing at $6 per share. This strong liquidity position provides the funding we need to continue growing our immobilized fleet, grow our U.S. service platform, and develop innovative products and services for our current and prospective customers and markets. Net debt to last 12 months adjusted EBITDA was 1.25 times at the end of Q1, which we view as conservative leverage ratio that allows for expansion as non-dilutive debt financing is used to support growth initiatives. This will increase as we deploy growth capital from the financing. Property plant and equipment ended the quarter at $112.6 million, an increase year-over-year from $52 million, primarily due to the manufacturing of new security towers, the consolidation of manufacturing facilities in Houston, and the pre-purchase components designed to de-risk growth targets and lock-in pricing. Now for an overview of our cash flow and capital expenditures for the quarter. Adjusted free cash flow before non-cash working capital impacts was $6.4 million in Q1 2026, an increase of 80% compared to $3.6 million in Q1 2025. demonstrating the accelerating cash flow generation capacity of the business and in line with EBITDA growth. After non-cash working capital impact, adjusted free cash flow was 2.75 million, also up 80% year-over-year. Capital expenditures continue to grow with our increasing fleet of security towers. In Q1 2026, CapEx was 19.3 million, up year-over-year from 11.3 million in Q1 2025. Maintenance CapEx related mostly to camera replacements continues to represent a small portion of total CapEx. Okay. And a quick geographical update. As stated in the press release, it's evident that the significant investments in the business and our competitive moats are compounding returns for shareholders, continue to deliver healthy growth with another quarter of record revenue and record adjusted EBITDA. The company also deployed more mobilized towers in any prior quarter, and for the first time in our history, our U.S. business contributed more revenue than Canada. Each of these milestones reflects the strength of our integrated platform and the discipline of the team executing behind it. As noted, bulk of the revenue is coming from the U.S., or more than 50% of the revenue is coming from the U.S., and we expect that to continue going forward. U.S. revenue is up 189% year-over-year. It's $9.7 million, supported by the 233% year-over-year increase in the U.S. tower count, which stood at 1,878 units at quarter end, or 58% of the total fleet. We expect the U.S. to continue growing as a percentage of revenue, given its larger market size relative to Canada. With Texas serving as the base of our southern U.S. operations, We now have the infrastructure in place to support manufacturing of 40 to 50 towers per week. In addition to our uncompromised levels of monitoring and security services with the expanded monitoring center in Houston. We will continue to invest in our U.S. growth and expect steady state margins to reflect attractive returns on capital over time. Canada remains a critical component of our business in terms of profitability and growth. with revenue up year-over-year to $9.7 million and fleet growth of 38%, increasing to 1,386 towers for 42% of the total fleet. Canada continues to demonstrate the profitability potential of our platform at scale while maintaining very attractive growth rates. I'll now pass the call over to Todd, who will provide an operations and strategy and outlook update. Thank you, Amin.

In terms of the growth outlook, we're very excited about the future of our business in Canada and the United States. To touch on the enterprise customers, you know, our pipeline is getting quite strong. I know, you know, we have a lot of enterprise clients already that are, you know, started out with pilots, and now they're moving quite quickly into taking substantial amount of towers. That's in the home building. That's across a lot of different verticals, such as distribution, logistics, and retailers as well. To touch on the manufacturing, our new facility, as I've said before, we're very happy with that, where that's at right now, producing 45 to 50 towers a week. We see the importance of the ability to move forward if we need to step on it and build more, but the reality is the reason we ended up moving down in 23 to, I moved down there myself, to get the prototype built, which, you know, the prototype only hit the ground 24 months ago. And to see where the business is today in the U.S. is quite staggering. We're very happy and proud of what we've done as a team. But the reason for going down there was the bottleneck and not having the towers when required. And we hear that a lot in this industry that our competitors can't supply in a timely fashion. And we know the importance of if you want to give white glove service, you've got to have the inventory right. So, you know, we're happy to have gotten to manufacturing the assembly to where it is today at the 40 to 50 towers. To touch on the infrastructure, you've heard me speak a lot about our platform. You know what, it's been going very well from coast to coast. We're across central U.S., touching into the northeast corners and obviously the northwest corners as well. We've got a great platform being built. I'd like to refer to it with our team as the power of the platform. Right now, customer base-wise, we've got between both countries, we're serving 1,000 clients, which means volumes. And, you know, to go back to the enterprise clients, something else we're doing with our customer list is we're right in the middle now of building our enterprise sales team. And what we're seeing is we're probably going to be getting around a lot of pilots and going right directly to, you know, working for the clients. And, you know, a lot of them, they're putting a lot of trust into it, and it's – Obviously, it's a fairly large spend, especially with the bigger companies. They want to test you and know that they can trust you as well, that you're going to do the right things for their company. And, you know, to even touch more on our platform, I'm quite happy with where we're at right now. We're at 20 branches across North America. We're going to be probably four to five more before the end of the year. We're strategically putting in locations to where our customers of 1,000 different clients are actually starting to take us. And one thing I'd like to touch on, when we first started in the U.S., we moved into a new region and we started from zero towers because obviously we're a smaller company at the time. Now we're moving into new regions and that branch that's being added to the platform right away has got 30, 40 towers that they're actually responsible for looking after. And then the growth of our client base is actually growing that quite quickly. So we're seeing our branches grow a little quicker as we open them up. You know, and to touch a little more on the supply chain side of things and where we are with growth, we know that we need to run this business between 80% and 90% utilization. And when you have 20, 24 branches, we don't want these guys sitting with two, three towers of branches. We need them to be sitting with 10 to 20 towers at all times. You know, there's a lot of different clients in this industry who want to start with 10 towers. Our answer to them, we don't want it to be, well, we can get to that in two weeks. Some of them want them rapidly deployed, and we have the people and the facilities and the platform to be able to do that. And so, as you can imagine, 20 branches, if you have them sitting with, you know, 10, 15, 20 towers, that's 400 towers right there that you have to have in inventory. And then we also, something we've done a great job on, you know, and it was a learning curve at the beginning was, being able to back up our assembly facility with redundancies of on-bill packages on the ground. And then at all times, any given week, we're 50 to 60 towers at the plant as well, ready to be deployed to different branches that are, you know, getting low on inventory. So, you know, I think that's a key thing that we need to stay on top of is having that inventory, having the inventory at the manufacturing plant, having it at the branches, And that's the only way we're going to be able to continue to do the Z-Core weight, which is white glove service, and to be able to move very quickly. You know, as far as supply chains went, with the manufacturing, we've done a great job. We're getting the cost of the tower down just on volume and being ahead of supply chain. And obviously, as we've got to be a bigger company, we've been able to, you know, put more pressure on our vendors on ordering larger volumes instead of when we first started out ordering everything at 50 at a time. You know, now we're getting into where we're ordering stuff at $500 to $1,000 at a time. So we've seen a really good impact on that with the cost of the tower. You know, on the innovation side, we're going down the road, obviously, you know, in innovation with AI and all the different components that are tied into it today. The camera manufacturers are getting stronger at that. We're doing quite a bit of internal stuff with AI right now to see efficiency is Across a lot of things, our monitoring. We're using different platforms. We're designing some of our own. We're quite excited about. And then, you know, some of the other stuff we've evolved is obviously this e-box. We're seeing more traction with that as well. That's some really good long-term stuff we're doing with that. Smaller sites, you can't take towers. And then, you know, the other thing we realized as we started growing this business and continue to grow the business is, We need to have a clean balance sheet. And, you know, I'm very happy with where the quarter was. We're at 39% adjusted EBITDA. I think the rapid growth rate that this company is growing at, if we can maintain between that 35% and 40% EBITDA, you know, I think it speaks volumes to cost control in the company. We run, you know, keeping the guardrails on growth. I think it's an important thing. As you know, we did our last raise, and that's to keep the balance sheet clean. When you start dealing with these large, large retailers, and even other clients that are, you know, maybe not in the retail space, but distribution, logistics, home building, they need to know that you can supply them with product and the ability to move fast. And we've done a great job with that. You know, we're happy to, I think, with where the pricing's at. I mean, you know, I think we've held that. I think there's a little bit of, as the company's got bigger here, our new product is a certain price. And, you know, two, three years ago, our first product we ever started out with, which was the original unit, the pricing on that was a little higher. But on our new prototype product, the pricing's holding very well. We're very satisfied with where that's at. I think at this point in time, I'll turn it back to Amin, and we'll turn it over to the analysts for some questions. Yeah, thanks for the update, Todd.