Avante Corp. (XX:CA) Q2 2026 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings report shows strong financial performance with significant revenue growth, improved profitability, and no bank debt. Despite geopolitical risks and technological dependencies, the company is expanding its MAST platform and maintaining high client retention. The Q&A reveals positive sentiment about market opportunities and strategic growth plans, though some uncertainty remains about MAST deployment. Overall, the financial health and strategic direction suggest a positive outlook, likely leading to a stock price increase in the short term.

Key Financial Performance

Revenue $8.9 million in Q2 2026, a 10% increase from $8.1 million in Q2 2025, driven by strong performances in NSSG and Avante Black with year-over-year growth of 47% and 48%, respectively.

Recurring Monthly Revenue (RMR) $4.2 million in Q2 2026, a 27% increase from $3.3 million in Q2 2025, driven by continued expansion in the monitoring customer base and new subscription services.

Gross Profit $3.7 million in Q2 2026, a 7% increase from $3.5 million in Q2 2024.

Adjusted EBITDA $584,000 in Q2 2026, a 73% increase from $338,000 in Q2 2025.

Net Income $83,000 in Q2 2026, compared to a net loss of $909,000 in Q2 2025, representing an improvement of 109%.

Balance Sheet $4.2 million in cash and $12 million in available credit facilities, with no bank debt as of September 30, 2025.

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Operating Highlights

MAST (Mobile Automated Surveillance Tower): Rebranded from WALL-E, MAST is a solar-powered, wireless communication security tower equipped with proprietary Halo technology. It offers real-time surveillance, advanced AI-driven analytics, and autonomous threat detection. Over 20 pilot units are deployed, and additional towers are in production to meet growing demand across industries like construction, telecommunications, retail, and oil and gas.

Avante Black: Launched in 2023, this division now represents over 10% of total revenue and achieved 48% year-over-year growth. It provides high-value security and intelligence services, including executive-level security, safe houses, and advanced risk mitigation solutions. The division benefits from limited competition in the ultra high-end market.

NSSG (North Star Support Group): Acquired a 55% stake in September 2023. NSSG achieved 48% year-over-year revenue growth and operates in over 100 countries. It provides services like threat monitoring, executive protection, and crisis management, leveraging Avante's technology platforms for larger, complex engagements.

International Expansion: NSSG's global presence in Europe, the Middle East, North America, and Africa enables Avante to support multinational clients and expand its international reach.

Recurring Monthly Revenue (RMR): Achieved $4.2 million in RMR during Q2 2026, a 27% increase year-over-year, driven by monitoring customer base expansion and new subscription services.

ERP System Implementation: Streamlined operations and reduced operating costs, contributing to positive net income for the second consecutive quarter.

Focus on Innovation: Emphasis on scaling proprietary technology like MAST and subscription-based models to enhance recurring revenue.

Acquisition Strategy: Plans to pursue acquisitions to expand and enhance services, leveraging NSSG's footprint for international growth.

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Risk or Challenges

Geopolitical tensions and targeted crime: The increasing geopolitical tensions and targeted crime have made the security landscape more complex, posing challenges to Avante's ability to provide effective security solutions.

Dependence on advanced technology: Avante's reliance on advanced technology for its security solutions, such as the MAST platform, could be a risk if there are technological failures, supply chain disruptions, or cybersecurity threats.

Scaling MAST platform: The company faces challenges in scaling its MAST platform from pilot programs to full commercial deployment, including production, customer support, and meeting growing demand.

Limited competition in high-end market: While Avante Black benefits from limited competition, this also means the company must maintain its high standards and reputation to retain its competitive edge.

Global risk environment: The rising geopolitical risks and demand for comprehensive security services could strain Avante's resources and operational capabilities, especially in high-risk jurisdictions.

Integration of NSSG: The integration of NSSG into Avante's operations, while beneficial, could pose challenges in terms of aligning processes, technology, and culture.

Economic uncertainties: Economic uncertainties could impact client budgets for security services, potentially affecting Avante's revenue growth.

Client retention and contract renewals: Although Avante has a high client retention rate, any decline in this metric could significantly impact recurring revenue.

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Guidance & Outlook

Revenue Growth: The company expects to achieve over 15% organic growth for fiscal 2026, driven by increasing sales, introduction of new products and services, and rising NSSG revenues.

Recurring Monthly Revenue (RMR): The company anticipates continued growth in recurring monthly revenue, which increased by 27% in Q2 2026 compared to the prior year. This growth is driven by net growth in monitoring customers and new subscription services.

MAST Platform Expansion: The company plans to scale the MAST platform from successful pilot programs into a meaningful growth engine in calendar 2026. Additional towers are in production to support growing demand, with a focus on expanding sales and customer support capabilities.

International Revenue Growth: The company expects international revenues to increase, leveraging NSSG's global footprint to attract and service new clients.

Positive Financial Performance: The company projects continued improvement in revenue, cash flow, and EBITDA for the remainder of fiscal 2026, supported by organic growth, new product introductions, and NSSG's contributions.

Acquisition Strategy: The company plans to seek new opportunities to expand and enhance services through acquisitions.

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Shareholder Return Plan

The selected topic was not discussed during the call.

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Key Q&A

Q:Can you talk about the verticals involved in the MAST pilots and the KPIs customers are looking for?

A:The verticals include communication, retail, and oil and gas sectors. Customers are testing MAST's ability to cover larger areas and detect trespassers in challenging scenarios. The U.S. market is seen as a significant opportunity. KPIs include successful detection and communication capabilities.

Q:If the current pilots move forward, how many MAST units would be required for full deployment?

A:It is difficult to estimate, but a target of 10 units per partner would be significant.

Q:What is the manpower status for NSSG and Avante Black, and their revenue capacity with the current employee base?

A:NSSG is operating smoothly, expanding with technology-enabled solutions like MAST. Avante Black is growing quickly, and there may be a need to hire a business development person to balance business growth and costs.

Q:What are the expectations for EBITDA margins for the fiscal year?

A:The target is just under 15% adjusted EBITDA for the fiscal year, and the company has been meeting internal budget targets so far.

Q:What are the CapEx requirements in the near term with MAST's acceleration?

A:Approximately $0.5 million over the next 6 to 9 months.

Q:Which service verticals are strategic priorities for Avante over the next 12 to 18 months?

A:The focus is on organic growth in areas like Oakville, which has high crime rates, and on serving large international corporations as their sole security provider.

Q:What is the view on demand stability for Avante Black's elite protection services through 2026?

A:Demand depends on the global environment. During geopolitical tensions, demand increases for services like investigations, cyber monitoring, and travel protection. Growth is driven by word of mouth and customized solutions for clients.

Q:What are the main priorities for capital deployment entering 2026?

A:The primary focus is on the production of MAST units to ensure superior product and service quality.

Q:Review of Unclear Management Responses

A:Management avoided providing a precise estimate for the number of MAST units required for full deployment, citing difficulty in guessing. Additionally, the response about Avante Black's demand stability was somewhat vague, emphasizing variability based on global conditions without specific data or projections.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

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The earnings call highlighted record revenue growth, strong data center and networking performance, and positive market reception to AI advancements. Despite geopolitical and tax challenges, management's confident outlook on meeting demand, strategic investments, and shareholder returns support a positive sentiment. The Q&A confirmed robust planning and partnerships to sustain growth, with no critical concerns raised by analysts. Overall, the strong financial metrics, optimistic guidance, and strategic initiatives suggest a positive stock price movement over the next two weeks.

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