Earnings call transcript: NTG Clarity Q1 2025 sees revenue surge, stock rises

NTG Clarity Networks Inc. (NCI) reported significant revenue growth for the first quarter of 2025, driven by strong performance in its core markets and innovative product offerings. The company’s revenue reached $19.7 million, marking a 68% year-over-year increase, building on its impressive 35.28% growth over the last twelve months. Despite a slight dip in gross margin, the company’s expansion in Saudi Arabia and investment in digital transformation initiatives have positioned it well for continued growth. The stock responded positively, with a 7.45% increase, reflecting investor confidence in NTG’s strategic direction and market potential. According to InvestingPro analysis, the company is currently trading near its Fair Value, with a market capitalization of $8.75 million.

Key Takeaways

• NTG Clarity reported a 68% year-over-year revenue growth for Q1 2025.
• Gross margin slightly decreased to 34%, below the historical range.
• The company raised its full-year revenue guidance from $75 million to $78 million.
• Offshore software development revenue increased by 260%.
• Stock price surged by 7.45% post-earnings announcement.

Company Performance

NTG Clarity’s performance in Q1 2025 highlights its robust growth trajectory, particularly in the Saudi Arabian market, which accounts for 95% of its revenue. The company’s strategic focus on digital transformation and competitive pricing has bolstered its position in sectors like telecom and finance. With a healthy current ratio of 1.84 and moderate debt levels, NTG maintains strong operational flexibility. The 260% increase in offshore software development revenue underscores NTG’s ability to capitalize on market demand for cost-effective solutions. For deeper insights into NTG’s financial health and growth prospects, investors can access the detailed Pro Research Report available on InvestingPro, part of their coverage of over 1,400 US equities.

Financial Highlights

• Revenue: $19.7 million, a 68% increase year-over-year
• Gross Margin: 34%, slightly below the 35-40% historical range
• Net Income: $2.1 million, representing 11% of revenue
• Adjusted EBITDA: 15% of revenue
• Operating Cash Flow: $400,000
• Earnings per share: $0.05

Outlook & Guidance

NTG Clarity has raised its full-year revenue guidance from $75 million to $78 million, anticipating a 40% year-over-year growth. The company aims to maintain an adjusted EBITDA margin of 16-20% and expects operating expenses to decrease in the coming quarters. NTG’s focus on expanding its NTG Apps segment, which saw a 150% growth, is projected to contribute significantly to future revenues.

Executive Commentary

Adam Zegwul, VP of Strategy Planning, emphasized the strategic execution and market opportunities, stating, "Our entire team is really executing on our strategic priorities." He also highlighted the growth potential in the Saudi market: "There really is a huge growing opportunity in front of us."

Risks and Challenges

• Gross margin compression remains a concern, potentially impacting profitability.
• The high dependency on the Saudi market may expose the company to regional economic fluctuations.
• Increasing operating expenses could pressure margins if not managed effectively.
• Accounts receivable challenges could affect cash flow.

Q&A

During the earnings call, analysts inquired about the stability of the Saudi market and NTG’s accounts receivable issues. The management confirmed the market’s stability and elaborated on strategies to address receivables. Additionally, discussions on a potential TSX uplisting and working capital dynamics were highlighted, reflecting NTG’s focus on strengthening its financial position.

Full transcript - NTG Clarity Networks Inc. (NCI) Q1 2025:

Ali Farooq, Analyst/Moderator, NTG Clarity: Good morning, and welcome to Clarity’s q one twenty twenty five earnings conference call. My name is Ali Farooq, an analyst at NTG Clarity. And on our agenda for today, we’ll start with management’s prepared remarks on our financial and operating results for the three months ending 03/31/2025. We’ll then have a q and a period answering questions written in ahead of the call. Note that the full published report with audited financial statements, notes, and management discussion is available on CEDAR and our website at www.NTGClarity.com.

This presentation aims to highlight and summarize the key information already reported there. We will we will be posting both the slides and the recording of the presentation on our website following the call, so make sure to subscribe to our mailing list on our investor page on our website to get notified when those are available. With that said, I’ll be welcoming management to look for remarks shortly. But first, I’ll start with a quick quick disclaimer. Certain statements in this presentation, other than statements of historical fact, are forward looking information that involves various risks and uncertainties.

Such statements relating to, among other things, the prospect the prospects for the company to enhance operating results are necessarily subject to risks and uncertainties, some of which are significant in scope and nature. These uncertainties may cause actual results to differ from information contained herein. There can be no assurance that such statements will prove to be accurate. Actual results and future events could differ materially from those anticipated in such statements. These and all subsequent written and oral forward looking statements are based on the estimates and opinions of the management on the dates they are made and expressly qualified in their entirely by this notice.

The company assumes no obligation to update forward looking statements should circumstances or management statements, estimates, or opinions change. In this presentation, we also refer to non IFRS or non GAAP financial measures that management believes are useful supplemental measures, but not alternatives to net income and operating cash flow. Please see the non IFRS measures section towards the end of this presentation, our press release, and our MD and A for details and reconciliation of non IFRS measures to IFRS measures. With that, I’d like to invite Adam Zegwul, vice president strategy planning to begin his remarks.

Adam Zegwul, Vice President Strategy Planning, NTG Clarity: Alright. Thank you very much, Ali, and thank you to everybody who is tuning in for this q one twenty twenty five earnings conference call. Q ’1 definitely was another amazing quarter for NTG Clarity. You know, we really saw the whole NTG team fire on all cylinders to keep the momentum that we saw in 2024, continue forward into 2025. And I think, you know, we can call that a success as well.

Our key market of the Kingdom Of Saudi Arabia, where 95% of our revenue still originates, is continuing to invest heavily into digital transformation and software development as a part of their vision 2030 plan. And the Kingdom is really recognizing the importance of, software development and technology as key pillars in diversifying their economy away from the oil and gas cycle. So due in large part to the growth that we saw in the Saudi market, revenues for q one are up 68% year over year to $19,700,000,000 for the quarter. So that marks 16 consecutive quarters of last twelve months revenue growth and 10 consecutive quarters of representing revenue for NTG. So with approximately a hundred million dollars in backlog purchase orders and contracts that are on hand and unbilled, we’re expecting the strong revenue growth to continue on as we finish out 2025 and beyond into future years as well.

Really, the investments that we’ve been making into, you know, our talent pipeline, the relationships, and, really, business development in Saudi Arabia are really paying dividends in the results that we’ve been seeing recently for sure. So I would say that a key component to our success in q one is really the dedication and performance and focus of our team in executing all of our key strategic initiatives, going into 2025 and, street key initiatives and priorities. You know, the first one being really deepen our relationships and our engagements with a lot of our customers and become a bigger part of their digital transformation strategies. You know, looking into or looking back on q one, our customers are showing a consistent trend of trusting NTG with larger and larger parts of their ever growing digital transformation budgets, both from the sense of on-site and offshore professional resources. Our customers are really resonating with our ability to provide quality work while still coming in at competitive prices, flexible engagement terms, as well as, you know, operational and cultural fit with that talent force being based out of Egypt as well right across the Red Sea from Saudi Arabia.

Now this is definitely evidenced, especially in our offshore software development model where this quarter, q one, we saw 260% increase in revenue from offshore software development, making it now our largest part of our business at about 50% of our revenue. So our customers are really resonating with, you know, the same quality service that you get, but add up to 50% savings when you compare to to hiring locally on-site in Saudi Arabia for sure. So overall, our customers are continuing to, you know, realize the value that NTG provides for their business and increase the size of their engagements. And that leads to q one having an increase in average contract size of about 62%. Our second priority for the year is definitely continuing to win new customers using our land and expand, sales model.

So definitely referrals and word-of-mouth are a large part of why we get a lot of our new customers. This quarter, we signed two new clients. And even though their initial engagements are relatively minor when it comes to revenue, we definitely understand that this is the first step in building those long lasting large engagements as we begin to you know, we start with a small engagement with our clients, and then our dedicated account managers will work with them to find areas that NTG could add further value in their business either on the software product side or on the resources side as well and look to expand those engagements over time as as we continue to work together and grow with our client success. The third priority is to further increase the adoption of our proprietary software product, NTG Apps. And definitely over the course of 2024, our team did a great job, sort of recruiting our existing customers, into starting, you know, trials and proof of concepts with NTG apps to the point where at the end of the year 2024, almost half, 47% of our customers were at least running a proof of concept with NTG apps that way.

Now in 2025, we’re starting to see early feedback that those trial engagements are converting into full on contracts. So far in q one, we’ve booked a a 150% increase in NTG apps revenue. And when it comes to, so I guess that’s also noteworthy that that a 50% growth is the first time that NTG apps growth has outpaced the company as a whole. And we’ve also billed about 2 and a half million dollars of NTG apps revenue this quarter, making it already about 60% of the whole year 2024 NTG apps billings as well. So overall, we’re continuing to be really excited about NTG apps providing not only some revenue growth in the future, but also some margin expansion from the software side of the business as well.

So I’ll move to the financials now. So I’ll talk about revenue and gross margin. In q one twenty twenty five, we saw a 68% year over year growth in revenue, like I mentioned, to $19,700,000 of of q one revenue. Now our gross margin came in at just about 34 per percent. Now that is a little bit below our historical typical gross margin of between 3540%, but there are two main temporary reasons of that why that’s the case.

The first one is some ramp up costs associated with new contracts. So it could be traveling and relocation for some on-site contracts, but also a lot of work to put together, you know, renovated office space for our new and expanded engagements from the offshore software development side. Now those expenses would fall into cost of goods sold as they, support our offshore revenue generation as well. The other contributing factor was definitely some year end bonuses that we gave to our technologists, that was booked in q one for the year 2024. And together, these factors combined add about, 200 basis points of drag to our gross margin.

Now like I mentioned, these are, pretty temporary pressures, and we’re expecting to recover back to a more typical 35 to 40% gross margin range as we continue out through the rest of the year. Moving on to operating expenses. Now, as you can probably tell comparing, this quarter’s results to our, full year adjusted EBIT guidance, for example, this quarter has what we see as probably the high point in our operating expenses. I’ll start off with the g and a line. Comparing this year, q one twenty twenty five, g and a represented about 13% of revenue.

Now that’s down from a proportion of 16% last year, but there still is a large absolute value client when it comes to g and a expenses. And the reason behind that is really our focus on being able to scale our workforce to meet the demand of the clients that we see right now. So over the course of q one, our g and a roster increased by headcount by about 15, and our focus right now is really on scaling with quality employees. So we wanna be doing that recruiting, that hiring, that onboarding, that training of skilled employees to have them on our roster to deploy for customers in the future and get them to be booked as billable and cost of goods sold later on down the line. So we definitely laid the groundwork with a lot of, you know, g and a hiring of skilled talent at Square.

Moving on to the sales and marketing line. So sales was about 7% of revenue in q o twenty twenty five compared to 6% of revenue last year. But that came with it again another absolute value client. And similar reasons for that as the g and a are that we are, you know, actively expanding the footprint of our sales team. Their sales team increased by headcount by about 10% this quarter as well, and a large part of the the increase is providing some of our larger accounts with dedicated account managers and account coordinators who are basically working with them full time to understand the demand and the capacity that, these customers need, being able to, you know, forecast and plan what resources will need to be placed with what clients in the future, and also learn where maybe NTG apps can be a fit in, their digital transformation strategy as well.

So we’re definitely laying the groundwork to continue our growth throughout the rest of the year and into next year as well with these sales and marketing investments. The last piece that played into sales and marketing was, again, you know, as a, you know, a thank you and a thanks for a job well done to our sales team. We booked some year end bonuses for the performance in 2024 because the team really rise to the occasion and drove the amazing growth that we saw with the year in 2024. But that being said, you know, those bonuses did put some temporary pressure onetime pressure on the operating expenses as well. So that plays into the quarter’s profitability.

For q one twenty twenty five, net income before taxes was $3,200,000. That’s up from about $2,000,000 in 2024, which is about 56 percent increase. But that being said, in, q one twenty twenty five is, of course, the first time where we will have officially run through our accumulated historical tax losses. So we’ve, for the first time, needed to provision taxes for Canadian corporate tax in addition to the Saudi corporate tax that we were all all ready put paying. So the combined tax provision was, $1,200,000, and that’s about a 600 basis point impact to our net income margin.

So this is definitely an area that we’re striving to improve on, and we’re working pretty closely with our tax advisers to figure out the best way to, you know, mitigate the combined impact of both Saudi and Canadian corporate taxes as well. But after taxes, net income came out came in at about $2,100,000 or about 11% of revenue, and earnings per share was about 5¢. Now the difference between net income and adjusted EBITDA for NTG primarily is, number one, taxes, which I just mentioned, but also foreign exchange on the difference between our primary operating currency of the Saudi rial, which is pegged to the US dollar, and some of our other operating currencies like the Egyptian pound and the Canadian dollar. For q one, foreign exchange was a bit of a tailwind. We picked up some, dollar value on the foreign exchange, which has typical in the past few quarters for sure.

But at the end of the day, that was not included in the adjusted EBITDA, which came in at about 15% of revenue. Now understanding that that 15% of revenue is slightly below our target range for the year of 16 to 20%, it really is a case of us making some investments into, like I mentioned, our g and a, our our roster of employees to be deployed with customers in the future, but also our sales team, in order to be able to sustain our growth going forward and even drive it, even further. So we’re expecting, that as we continue out through the year, we’ll see our operating model return, to the, I guess, can say the prime example that we set in q four with adjusted EBITDA margins being closer to 20. Moving to the cash flow. In q one, we booked about $2,500,000 in operating cash flow before the change in net working capital.

And when it comes to the main driver in that change of working capital, I’m gonna sound repetitive definitely from q four and previous quarters, but it is, you know, the growth in our accounts receivable, which is, of course, a natural byproduct of the rapid revenue growth that we’ve been seeing recently. To dive a little bit deeper into the accounts receivable, we can take a look at our days sales outstanding. So the average amount of time between when, we book revenue and when we actually collect the cash, still sitting at a relatively consistent seventy five days. So it’s clear to say that within a quarter, we’re generally collecting. And when we take a look at our aging of our accounts receivable, we can see that 91% of receivables were in fact billed in q one, and another 5% were billed in q four.

Now both of those bins are market improvements over q four as well. Now there are about 4% of receivables that were billed prior to q four, but I can say that so far, what we’ve seen is that collections have been pretty strong in q two, and we’re looking forward to, you know, our more moderate revenue growth, reducing our drag in accounts receivables and letting some more cash flow come through. All that being said, our total operating cash flow for the quarter is sitting at about $400,000. And below the operating cash flow line, I also wanna point out that we’re continuing to earmark in the range of about a hundred and 50 to $200,000 per quarter of continued long term debt repayment to really have that slow and steady drip of improvements to our balance sheet going on into the future. To talk about revenue guidance, coming into the call and coming into this earnings release, we had guided for $75,000,000 of top line revenue.

Q one definitely has been an amazing quarter for for NTG. Our customers are continuing to show strong demand, not just for our professional services, but also more and more for our software products as well. So that combined with our already strong and consistent backlog of purchase orders and contracts on hand of about hundred million dollars, it makes us confident to modestly increase our revenue guidance for the year from $75,000,000 to about $78,000,000. And that brings our targeted revenue growth, for the year to be approximately 40% year over year growth. On the cost side, q one is definitely characterized by investments both into, as I mentioned, the, resources and the talent that we’re going to be placing with our clients in the future, but also into our sales team who’s going to be able to get out there and, you know, not only get new clients, but also expand the engagements with our existing clients as well.

But that being said, again, like I mentioned, we’re expecting operating expenses to be tapering off towards the end of the year similar to what we did in 2024. So we’re confident enough to reaffirm our guidance of adjusted EBITDA in the range of about 16% to 20% as well. But overall, I really just wanna echo, how proud I am with the whole NTG team and how amazing of a quarter q one was. You know, we’re continuing to take advantage of our customers’ demands for quality professional services when it comes to software involvement and our software products as well. Our entire team is really executing on our strategic priorities.

We’re deepening our relationships with all of our existing customers to a large extent as well as, you know, really having that word-of-mouth work for us in the sense of, you know, new customers signing with on with us, and then those dedicated account representatives working with them to identify areas where we can do some more work for them. We can add some more value for them both on the resource side and on the software side. And, of course, that software side is becoming more and more relevant with NTG apps, now reaching up to nine percent of our revenue, and looking like it can be a source of continued revenue growth and margin expansion into the future as well. All that said, you know, there really is a huge growing opportunity in front of us. There really is a worldwide trend of continued digitization and increase in automation, and that’s especially the case in Middle East, in The Middle East and especially Saudi Arabia where there are large government investments into digital transformation, software development, and diversification of the economy.

So it really the ball really is in NTG’s court. All we have to do is keep doing what we’re doing, providing value to our customers, and keeping our costs under control. But with all of that said, thanks again for tuning in. I’ll now open up the floor to questions that were written in from the audience just ahead of the call. So I’d like to invite Ali back to the stage to start us off with the first question whenever you’re ready out.

Ali Farooq, Analyst/Moderator, NTG Clarity: Alright. Our first question is written in from Mac, a private investor. With oil prices at $60 a barrel, are you seeing declining budgets from your Saudi clients?

Adam Zegwul, Vice President Strategy Planning, NTG Clarity: That is a really good question. Thank you, Mac. So, yeah, we’ll talk about, you know, Saudi funding right now. I think one of the core strong suits of our offering and our business right now is that, you know, a lot of our customers are not in the oil and gas businesses themselves. You know, they are telecom operators.

They’re banks and financial institutions. That’s the primary customer. Also, system integrators. They have revenue that’s not at least directly derived from the oil and gas cycle. But that being said, of course, there are large government investments that are largely funded, by oil and gas.

But another strong suit of our operating model and our business model is that definitely the Saudi government recognizes that investment into technology and software development is, you know, one of those core pillars that’s gonna get their economy diversified away from that oil and gas and really get them away from being, you know, beholden to that cyclicality in oil and gas cycle. So what we’re seeing is, you know, there are no impacts from what we can tell on our clients’ budgets for digital transformation. Where the government maybe is scaling back funding is on those more, you know, higher prestige projects, those infrastructure projects that can be scaled back a little bit more. But, again, you know, what we work on really is, the core to the digital transformation of of the Saudi economy, which, again, is core to their vision 2030.

Ali Farooq, Analyst/Moderator, NTG Clarity: Alright. Awesome. Our next question comes in from Aravinda, an analyst from Canaccord. Do you expect working capital to balance out for the rest of the year? It was still an issue in q one resulting in less cash flow, but with more moderate growth this year, are you expecting improvements?

Adam Zegwul, Vice President Strategy Planning, NTG Clarity: That’s a good question. Thank you, Aravinda. So to cover, yeah, the working capital aspect of things, I think, definitely, you’re right to point out the more moderate revenue growth that we’ve been seeing so far. Typically, know, just due to the nature of our billing cycle, working capital drag from accounts receivable is about equal in magnitude to the to the revenue growth. So as we’re seeing a more moderate revenue growth, we’re expecting that working capital drag from accounts receivable to moderate as well.

So as we continue on down the year, we are expecting to see a little bit more cash flow come through. The one caveat I would put on that is that we’re coming up, next week to the aid holiday at the end of next week, which we saw last year definitely slowed down the payment cycles for q two. And that’s to be expected. You know, people are off on vacation. It basically is their equivalent of Christmas in The Middle East.

So people are taking time off. They’re spending time with their families, that kind of thing. But what it can slow down is our, you know, signing of new deals temporarily and, you know, collections on invoices. But we expect it to be the case that, you know, picking up shortly after the holiday in q three, we’ll see a pickup in receivables like we saw last year and also a pickup in in contract side. So all that is to say, definitely, we expect to see some cash flow come through towards the midpoint second half of this year.

Ali Farooq, Analyst/Moderator, NTG Clarity: K. Awesome. We also have a second question from Aravinda. Gross margin was slightly compressed at 34. I understand that amortization is now included, but still seems down a little.

How should we think about it throughout the year?

Adam Zegwul, Vice President Strategy Planning, NTG Clarity: That’s a good question. Thanks. And, so I’ll add a little bit more color to the prepared remarks that, that we went through for sure. You’re right to point out that amortization is now, accounted for. The amortization of our intangible asset, NTT apps It’s now accounted for in the cost of goods sold just due to the amount of revenue that we’re deriving from NTG apps, right now.

So definitely a good problem to have. But you’re right to point out that, you know, 34% is a little bit below what we typically see from our gross margins, in the range of 35 to 40%. Really was some temporary factors that I mentioned. You know, we were running and gunning to set up a lot of new offshore offices, a lot of whose expenses will fall into the cost of goods sold. So those are onetime expenses.

Also, really bonuses for the tremendous performance of our technologists last year also hit a onetime expense in q one. So we’d really expect once we get past those into q two, three, four, we’d expect those gross margins to recover by the about the 200 basis points and even potentially more, as we look to get these projects into, into a more steady state.

Ali Farooq, Analyst/Moderator, NTG Clarity: Alright. Great. Our next question comes in from Doug, an analyst at Beacon. NTG apps was 9% of the revenue versus 6% last year with q one product revenue more than 55% of the entire 2024 product revenue. You had mentioned in prior calls that a number of your clients were trialing NTG apps.

Was the growth in product revenue in q one due to more revenue from existing clients, or have some new clients started to issue purchase orders? What is the goal for NTG apps as a percent of revenue by q four twenty twenty five and for 2026? What would be what would be the impact on gross margins if NTG apps can get to 15 to 20% of total revenue?

Adam Zegwul, Vice President Strategy Planning, NTG Clarity: Hey. Right on. Thanks thanks for the questions, Doug. So, yeah, NTG apps is something that we’re really excited about this quarter. That 50% year over year revenue growth really is showing that a lot of those proof of concept type projects are transitioning into full on contracts.

So to answer that first part of your question, you know, absolutely, our sales strategy has been, you know, nurturing existing customers to then grow their engagements with us, a large part of which being that NTG apps software offering. So, definitely, the contract’s coming through from from existing customers on that as we would expect. Now when it comes to, you know, projecting of the growth of NTG apps, that’s something that’s definitely hard to do. It’s very beholden to this sort of testing out proof of concept pilot project life cycle. But I would say if I were to be, you know, optimistic and aggressively forecasting NTG apps, keep the growth going the way that it has been going, we could finish out the year with, say, 12% of NTG apps, just to throw a number out there.

And then in, you know, 2026, if that grows up to 15 to 20%, that would be great. And, you know, what you’re right to point out asking about the, gross margin profile in those cases that, you know, this is a software business. It has close to, at this time, about 50% gross margins with room for upside after we get some efficiencies of scale going on in that sense. Just as a comparison, you know, our typical services, you know, if it’s on-site, maybe it’s in the neighborhood of 34 to six 36%. Offshore can be, you know, 36 to 37%, even 40% as well.

So if we were to say have a 20% revenue mix of NTG apps, that could bring our gross margin up to about 40%, which, of course, is a 600 basis point improvement on this quarter. So, yeah, I’ll just echo the point that we’re really excited about, the opportunity in front of us about NTG apps bringing some margin expansion for us as well.

Ali Farooq, Analyst/Moderator, NTG Clarity: Alright. He also has a second question. Q one margins were clearly impacted by an increase in headcount. How long will it take new employees to ramp up their productivity?

Adam Zegwul, Vice President Strategy Planning, NTG Clarity: That’s, yeah, that’s definitely an excellent point about, increase in in in headcount. So I think, how we can typically think about our our billing cycle rate is that about, a one quarter lag between rolling out to employees? I mean, we definitely did a lot of investing, that 15% extra headcount in the g and a line item, a lot of whom are going to be, you know, basically technologists on the roster to be rolled out with future projects. I would say, you know, if I were to put a target, it would be most of the way there to rolling out these employees by about q two and, you know, almost all of the way there by time we report q three as well. So I I would expect us to mimic the sort of profile that we saw towards the end of, 2024 as well.

Ali Farooq, Analyst/Moderator, NTG Clarity: Alright. Awesome. Our next question comes in from Chris, an analyst from Activate Capital. Do you think Saudi is being seen as a more stable place to invest and do business in, particularly with the recent publicized improved government relationship between The USA and Saudi?

Adam Zegwul, Vice President Strategy Planning, NTG Clarity: Thanks, Chris, for the question. And I would say, you know, long story short, definitely yes. Just in my conversations with investors over the last few months, I’m definitely seeing a lot, of investors become more interested or more interested, more intrigued by the opportunity of investing in Saudi Arabia. The sort of recent diplomatic mission to Saudi Arabia and The Middle East over the last few weeks, you know, it was it was all over social media. A lot of people were talking about it.

And I think it really did wonders for, you know, opening the minds of a lot of people at the opportunity that lies in The Middle East, specifically in in Saudi Arabia. Definitely, again, my conversations with investors recently has been, you know, had themes of investors being confident in the stability and long term suitability for investment that The Middle East has to offer. So, yes, very excited about, you know, increased and, better relations between, you know, Western countries and Saudi Arabia, sort of sweetening the deal when it comes to an investment opportunity for sure.

Ali Farooq, Analyst/Moderator, NTG Clarity: Alright. Our next question comes in from Aditya, a private investor. Are most of the planned twenty twenty five investments now behind you, or should we expect a similar run rate of growth related spend in the coming quarters?

Adam Zegwul, Vice President Strategy Planning, NTG Clarity: That’s a good question, Ditia. Thanks. So I’ll start off by saying, you know, so far from what we can tell, we we spent a lot on investments in, like I mentioned, building our roster for professional services and increasing the footprint of our sales team this quarter. We do expect, you know, when it comes to operating expenses, q one to have, you know, the highest operating expenses this year. That’s the expectation.

So we do expect as we hit q two, q ’3, q ’4, we see some reduction into a more sustainable run rate when it comes to operating expenses and be able to post, you know, a full year adjusted EBITDA, result of in the range of 16 to 20% like we projected. That being said, you know, as we finish off the holiday season in The Middle East, we’re we’d open ourselves back up to, you know, negotiating new contracts and renewals and expansions with some of our customers. Depending on the pipeline of contracts, we might need to make a few more investments. That’s why we gave ourselves that readability in that adjusted EBITDA guidance between 1620% to be able to make a few more investments if we needed to to scale. But, yeah, just to summarize, we did make what we see as the bulk of the investments in q one and expect some improvement, in the bottom line going forward.

Ali Farooq, Analyst/Moderator, NTG Clarity: Alright. Great. Our next question comes in from Sergei Oddi, private investor. I’m wondering about forward guidance, which indicates the next three quarters will be flat sequentially. $19,700,000 reported in q one times four quarters is $78,800,000 with guidance estimated to be $78,000,000.

Adam Zegwul, Vice President Strategy Planning, NTG Clarity: Yeah. That’s a good point, Sergio. So one note on the guidance I would put out is that, you know, our guidance is typically built on, you know, number one, primarily the backlog of purchase orders and contracts that we have on hand. It also includes, you know, renewals and, yeah, renewals from existing customers that we expect to come through, in the near future as well. What it is not as good at reflecting is any new work or any expansions of existing contracts from existing customers.

So while this may make our guidance seem a little bit conservative, what I can say qualitatively is that, you know, the appetite for growth is still there from our customers. We do definitely see growth in the economy in Saudi Arabia continuing on throughout the year and into the future as well as growth in our engagements as well. That’s that’s definitely what we’re seeing on the ground.

Ali Farooq, Analyst/Moderator, NTG Clarity: Alright. Great. Our next question comes in from James, a private investor. How many clients do you expect to be able to land land a quarter?

Adam Zegwul, Vice President Strategy Planning, NTG Clarity: So new clients. That’s a good question, James. Thank you. When it comes to new clients, historically, it has been a little bit bumpy. We did get those two new clients, in q one, but there have been times in our history where we haven’t signed a new customer in a quarter.

There have been quarters where we had multiple customers. But at the end of the day, you know, signing those new customers is that important first step in, you know, then nurturing them into the large engagements that we see once we prove ourselves, to be valuable to those customers. But all that being said, I would say the main driver behind all the revenue growth that we’ve been seeing is not as much new customer acquisition, but it is very much the nurturing and expansion of existing customer contracts. That seems to be the secret sauce in in the growth that we’ve been seeing recently.

Ali Farooq, Analyst/Moderator, NTG Clarity: Alright. Our next question comes in from Tyler, another private investor. Are you going to uplist to the to the TSX this year?

Adam Zegwul, Vice President Strategy Planning, NTG Clarity: That’s a good question, Tyler. Thanks. So I get a lot of questions, from investors about uplisting to the TSX, and there’s definitely, you know, pros and cons to, to the uplist for sure. You know, just to run through a few of them, the pros is definitely, you know, the extra exposure that you get to investors, know, more ability for different types of investors to buy in, maybe a little bit more peace of mind to those investors as well. When it comes to the cons, it’s mostly is, you know, cost related both in terms of strict monetary cost, but also the time and effort required to do all the extra reporting requirements, that kind of thing.

When we’re crunching the numbers, it seems like the extra cost will be something in the neighborhood of 300,000 to a million dollars per year. So definitely significant increase in expenses related to an uplift. But that being said, you know, the last year or so has definitely proved that even being a venture listed company, we don’t have any problems getting out in front of investors and getting some investors interested in in investing in the company. So it’s something that we’ve got on our radar and that we’re thinking about, but that we’re sort of waiting until, you know, the the incremental expenses, make sense for the value that we get when it comes to those pros there as well.

Ali Farooq, Analyst/Moderator, NTG Clarity: Alright. Our next question comes in from Roger, a private investor. Accounts receivable is continuing to be a drag on operating cash flow. How should we think about this and your ability to collect?

Adam Zegwul, Vice President Strategy Planning, NTG Clarity: That’s a good question. Thanks, Roger. So, definitely, I fully understand, a lot of the questions about the accounts receivable. I can definitely see that that, you know, the company’s cash flow is being constrained by that. But I just wanna double down on how, you know, natural of a byproduct the, working capital drag is from our revenue growth.

There’s a couple of ways that I think are useful to think about it. Number one is probably, you know, the proportion of revenue growth to change in receivables. You know, just the way our billing is set up and the way our billing system works, we generally expect, you know, all else being equal, the incremental revenue to be about equal to the change in working capital. When you take a look at q one, we had about $2,500,000 increase in revenue, but it was actually, less increment less incremental, you know, that change in in accounts receivable. It’s about $2,100,000.

So that definitely indicates that, you know, our revenue growth is moderating a little bit, and we’re starting to see less of an impact on, cash flow from that, change in accounts receivable there. Another way to think about it is probably, you know, the aging of the accounts receivable that I went over in the prepared remarks. You know, we talked about this. I think it’s in note 10 of all of our financial statements. But, basically, as of this quarter, you know, 91% of our accounts receivable was billed in q one, another 5% billed in q four.

So, you know, those are number one, just improvements over the numbers that we posted in q four, but also shows very strong collections within the time frame of about of about a quarter, which is what we what we would expect for sure. So I think, you know, those two ways of looking at the proportion between incremental revenue and the change in accounts receivable and the aging of the receivables can really get across the the idea that, you know, our collections are actually very strong, and we’re having no problems with collections. And the cash flow, let’s say, drag really is a natural byproduct of really the incredible revenue growth that we’ve been seeing recently.

Ali Farooq, Analyst/Moderator, NTG Clarity: Alright. And our last question also comes in from Roger. Are you starting to see warrants exercised now that the stock is above $2?

Adam Zegwul, Vice President Strategy Planning, NTG Clarity: That’s a good question too. Thanks, Roger. So, yeah, the warrants that were a part of the brokered life offering that we closed back in September, we are seeing some initial warrants start to trickle in as, you know, the share price has been pretty consistently above $2 now. So, yeah, that is a a really exciting time. We could see the cash coming through onto our balance sheet, to further strengthen the balance sheet over the near future.

We expect that to be the case going forward as well. Okay. So I think you mentioned that was the last question. Thank you very much, Ali, for reading out the questions, and thank you to everybody who wrote in a question ahead of time. It was great to be able to answer them live on the call here.

I think I just, you know, close out by saying, you know, I really am proud of the progress that we made in q one. Q ’1 was an amazing quarter again, posted that sixteenth consecutive quarter of last twelve month revenue growth. It really looks like growth is continued on the, the radar on the menu going forward as we finish out the rest of 2025 and on beyond. And like I mentioned, it really is, the ball at NTG’s court to, keep driving that growth, keep providing value for our customers, and continue to manage the costs in a way that will bring that margin through. But that’s it for today.

Thanks again for tuning in, and I’ll look forward to checking back with you in a couple months for q two. But until then, take care, and thank you.

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