Full transcript - Zedcor Energy (ZDC) Q4 2025:

Joe Diaz, Conference Call Operator: Thank you for standing by. My name is Joe Diaz, and I’ll be the conference call operator. Welcome to the Zedcor fourth quarter and full year 2025 financial results conference call. As a reminder, all participants are in listen-only mode, and the conference is being recorded. We will 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 Ladha, Chief Financial Officer. Please go ahead.

Amin Ladha, Chief Financial Officer, Zedcor: Thank you, Joe. Good morning, everyone. Thank you for joining us today. Joining me on the call is our President and CEO, Todd Ziniuk. Last night, after markets closed, Zedcor issued a news release announcing our financial results for 3 and 12 months ended December 2025. This news release will be available on our website under the investor relations tab and is filed on our CDR profile. Please note that portions of today’s call, other than historical performance, include statements of forward-looking information within the meaning of applicable securities law. 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 that is appended to our news release.

Please review our press release and our reports filed on CDR Plus for various factors that could cause actual results to differ materially from those projections. 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 definition set out in our MD&A. In addition, reconciliations between any adjusted EBITDA and net income is 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 financial metric as it measures cash generated from operations, which the company can use to fund working capital requirements, fund future growth initiatives, and service future interest and principal debt repayments. 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 our analysts. Moving on to a review of our financial statements for the quarter. Some highlights for the fourth quarter include record revenues of CAD 17.9 million. This exceeded our previous high set last quarter by CAD 1.9 million, and is an increase of 73% year-over-year. Our recurring revenue for Q4 2025 remains steady. We also had record adjusted EBITDA of CAD 7.1 million for Q4. This was an increase of 78% year-over-year, and EBITDA margin remained strong at approximately 40% for the quarter. Our tower count and customer base continue to grow. More importantly, our weekly tower production, which is a key metric for us, continues to increase.

During Q4, we deployed 435 towers, which was slightly impacted by the holidays in Q4 in the U.S., Thanksgiving and Christmas, and our move to our new facility. However, production in our Houston, Texas facility is back up to that 40-50 towers per week, which is what we had previously disclosed as our goal. Moving on to the year-to-date highlights. Revenue for the 12-month period ended December 31st was CAD 58.9 million. This compares to CAD 33 million for the 12 months ended December 31st, 2024. This was an increase of 79%. Adjusted EBITDA increased to CAD 21.8 million, or 37% of revenues, compared to CAD 12 million and 36% of revenues for the fiscal year ended December 2024.

The revenues and EBITDA have increased, but we have also had other major accomplishments, including significant U.S. expansion within Texas, as well as other major U.S. cities, including Denver, Phoenix, Las Vegas, Sacramento, Jacksonville, and Tampa. A number of these were expanded, too, in Q4 of 2025. The tower fleet was just under 2,800 towers at quarter end, and it’s an increase of 1,451 units or 109% year-over-year. Diving into the income statement a bit more for the three and 12 months ended December 31st, Q4 2025 revenues increased 73% and 12% quarter-over-quarter. For the full year ended December 2025, revenues increased 79%, and U.S. revenues continues to grow, standing at 43% of revenues in Q4 and 36% of revenues for the fiscal year. We’re also seeing a growth in Canada as well, and Canadian revenues grew 32% in 2025.

On a daily run rate basis, U.S. revenues have now exceeded Canadian revenues, as we had previously projected. Gross margin increased to CAD 11.1 million, or 62% of revenues in Q4. This continues to be steady, but we may see some modest reductions in upcoming quarters as we wrap up hiring and training for expanding U.S. monitoring center in order to maintain service levels and make investments for 2026 growth. Adjusted EBITDA increased to CAD 7.1 million, which is approximately 40% of revenues. This compares to CAD 4 million or 39% of revenues in Q4 2024, and it reflects our operational efficiencies despite adding salespeople and locations in key regions in both Canada and the U.S. We have nearly doubled the size of our U.S. sales team and will continue to invest in expansion at the local level and expand our geographical footprint.

Adjusted EBITDA per share increased to CAD 0.07, driven by higher sales and effective cost controls, and offset by higher share count year-over-year. The improvement in our operating results is mainly driven by increasing fleet of security towers, which grew nearly 110% and nearly 20% in Q4 alone, supported by strong customer demand. While utilization dropped slightly in Q4 as a result of manufacturing more towers in order to build inventory, this was planned, and the previous utilization rates above 95% were inefficient for the operations. Moving on to a discussion of the balance sheet. We exited Q4 with a cash balance of CAD 2.7 million. Also in Q4, we expanded our current banking facility to a CAD 50 million revolver and a CAD 25 million accordion.

Approximately CAD 40 million of that was drawn at the end of the fiscal 2025, and subsequent to the quarter, we increased that facility in February 2026 to CAD 75 million, with a CAD 25 million accordion. This provides additional liquidity for continued growth at reduced interest rates. Due to the new refinancing, our new facility does not have principal debt repayments. We have interest-only payments. This frees up about CAD 1 million quarterly and CAD 4 million annually in free cash to invest back into the business. We had net debt of just under CAD 38.4 million. Our net debt, LTM EBITDA, is 1.76 times. This has increased over time as we deploy capital, but it’s been offset by growing LTM EBITDA, as we saw this quarter. Net PP&E increased to CAD 96.5 million due to continued investments in growing the company’s fleet of security towers.

A portion of that increase is sitting in assets under construction as we purchased a number of longer lead components in order to ramp up growth and meet our production targets. We try to keep that around 6-8 weeks production, and we are actively managing AUC so that unnecessary capital isn’t tied up. Subsequent to the quarter, we also completed a CAD 30.5 million upsize bought deal public offering at CAD 6 per share, and no warrants were included in that. Together with the expanded and extended banking facility, the strong demand for our equity empowers us to appropriately fund our growth using debt and equity to minimize dilution for our shareholders. A review of our cash flow statement for Q4, adjusted operating cash flow before working capital increased to CAD 5.9 million, demonstrating the growing cash flow generation capacity of the business.

Capital expenditures in Q4 increased quarter-over-quarter as our manufacturing capability is streamlined. We staffed up our team and established our processes. An important thing we’d like to point out here is that maintenance CapEx continues to represent a small portion of the total, and the bulk of the amount being spent on capital expenditures is for growing our security tower fleet and expanding our geographical footprint. I’ll now hand over the call to Todd, who will provide you with an operations update and some insights into our go-forward strategy.

Todd Ziniuk, President and Chief Executive Officer, Zedcor: Thank you, Amin. As you saw from the numbers, we had a strong quarter with strong margins, and we’re excited about where the business is headed, opportunities we are seeing both in Canada and the U.S. To touch on the manufacturing side, in Q4, we averaged 40 towers per week, and we are averaging about 35 towers being deployed. The biggest goal I had from the beginning when we got down there was to get the manufacturing set up to where we have the ability to obviously build towers quicker if we need to. We’ve moved into a new facility. We’re seeing big efficiencies there with the larger shop floor space, and just everybody being housed under one roof. We’re finding strong efficiencies there. We have the ability, obviously, to build a lot more towers now moving forward per week.

We’re experiencing quite a bit of interest from the enterprise customers. As we’ve said before, it’s a long runway. We’ve got some that we’re growing out. They’re moving slowly, but we’re deploying towers with them. Something that excites me quite a bit about that, it’s been roughly about 2 years from this month where we actually deployed our first towers in the United States of the new style tower, our prototype. I think we’re getting strong interest for only being there for 2 years. We’re continuing to build out our platform, which has been the plan all along. Getting the platform built out, what I mean by that is all of our branches set up across the U.S. We’re on target to do 6-8 minimum this year. It’s exciting. We’re getting into different regions.

We’re moving into different regions on the fact that we know the works there. Also, customers are taking us into the different regions as well. As far as the manufacturing also goes, we’ve done a great job. The team in Houston has done an excellent job, and we have no bottlenecks. We’ve done a great job working with our steel providers. They’re ahead on packages as well, so that if we have to step on it harder, we can. We also, at all times at the facility, have about 100-150 unbuilt towers. If you need to step on it gives everybody else a little bit of a chance to catch up and the ability to build towers quicker. We’ve always wanted to get the business 85% utilization, run it there. Obviously, if you can be higher, that’s great.

For us, we see the efficiency at 85%. What I mean by that is we fill all of our platforms, all of our branches with adequate tower levels now, where before, when you’re first getting into this, you’re sending loads of 2 to 3 to 4 towers if required per city. Now we have the ability, the way we’ve designed our tower, we can haul 20 per load, and it’s way more efficient. The guys at all the platforms have inventory now. So if we do keep growing with some of these enterprise customers with the platform, we can deploy our towers quite quickly. I think that’s something that gives us a bit of a competitive edge, being able to do that, move quickly, and keep supplying our clients with the white glove service. We exited 2025. Our goal was to build 1,200-1,500 towers. We built 1,451.

The goal for 2026 is a minimum of 1,800 and getting up closer to the 2,000. I’d like to see us get really close to exiting the year with a total fleet of about 5,000. We’re seeing growth as well in the ZBOX. Just so everybody understands what that is, it’s a box. I think most of the people on the call didn’t explain what that is, but they go where towers can’t be utilized. It could be due to space, wall mount units. We’re happy to see the growth there as well. It’s just another service line that we give our clients. The biggest thing right now is too, building out our sales team. We continue to do that as we build out the platform. We hire managers in the area, field salespeople that are out hitting job sites.

We continue to build out our national sales team. We’re actually now just making a move to get some inside sales as well. People to line up meetings. We’re quite excited about that. We’re starting to see in a lot of different regions, we’re in incoming calls. Obviously, when these towers get out in the field, they become a bit of a billboard themselves, and we see it in different regions that it’s helped the growth. Once you get someone established there, you start to see the incoming calls to the branch managers in that region. There’s pretty much high level, for the operations side, I think, Amin, I can pass it back over to you, and we’ll open it up for questions from the analyst.

Amin Ladha, Chief Financial Officer, Zedcor: For sure.

Todd Ziniuk, President and Chief Executive Officer, Zedcor: Sorry, Joe.

Joe Diaz, Conference Call Operator: Thank you, Todd. We will now take questions from analysts only. The first question comes from Richard Tse at National Bank.

Richard Tse, Analyst, National Bank: Hey. Thanks, guys. Congrats on the great results here. With respect to your targets for 2026, what do you think is the biggest constraint to kind of hitting those numbers? I think you talked, Todd, about sales. Is that sort of the key thing that we should sort of focus on in terms of helping meet those targets?

Todd Ziniuk, President and Chief Executive Officer, Zedcor: Yeah, I think honestly, Richard, it’s not a matter if the work’s there. It’s about getting set up in the different regions, building out the client base. We have a strong client base. I think there’s a lot of internal growth just with those clients as well, and it is about the sales, getting a strong sales team. I think as a company, we’ve got a lot better. Amin, I think you’d agree with the training that we do now. Different things we have in place to make sure that these people fit in with the organization. It’s a lot of B2B sales, and that’s an important part of this business and being able to get out there. It’s also educating the client on our specific product. Hardware is one thing, but it’s what we do under our whole umbrella that makes Zedcor who we are.

I think, Amin, I don’t know if you’d like to add to that.

Amin Ladha, Chief Financial Officer, Zedcor: Yeah, I’ll just quickly add. I think we learned getting in front of the customer and really expanding on how we’re different than the competitors in the market, how we bundle the sales and the service with the monitoring, how we can truly prevent the crime. That’s key for landing the work and making it sticky. We found that once we get the work, most people don’t leave, and they will add to that towers. We have a number of growing medium-sized enterprise customers or even large-sized enterprise customers that have grown from two towers on a proof of concept or a trial to four to eight and close to 50 so far. That’s both in the home building space and in the logistics space.

Getting in front of these customers, having the right salespeople, the relationships, really being able to extrapolate and kind of explain the differences, that’s key for us.

Richard Tse, Analyst, National Bank: Okay. Just on the sales side, I think last year you kind of really started the ramp, particularly on the U.S. sales side. Maybe you can kind of give us a sense of how those hires have kind of come to sort of full capacity. Are they kind of where they need to be, or they’ve got a little bit more to go to sort of be fully productive?

Amin Ladha, Chief Financial Officer, Zedcor: We started the salespeople. We had a bunch in kind of late October, early November. Obviously, that’s not the best time in the U.S. to be hiring people with Thanksgiving and Christmas coming up. We’re going to keep adding to people. I think that’s one thing we learned is don’t let our foot off the gas on hiring the salespeople. That kind of big batch of people we hired in Q4 last year, they’re getting up to speed. Like Todd said, we’ve added and expanded our training and our monitoring and kind of our accountability, and improved that as well. Being on top of them is key. I don’t necessarily have a percentage of success, but it’s getting better.

We’ve had a few people start. The goal is two towers per week minimum, and I think that’s a pretty achievable goal for most people. Our best salespeople do a lot more than that, and our goal is to get everybody to that level.

Richard Tse, Analyst, National Bank: Okay.

Todd Ziniuk, President and Chief Executive Officer, Zedcor: I think I’ll just add to that, Richard. I think there’s a lot of learnings we’ve taken as you grow into different regions and even the two different countries. I think we’ve done a great job of paying attention to what the KPIs need to be. It’s a bit of a newer industry, especially with the monitoring portion added onto the towers, and it takes quite a bit to get through exactly what it means, that educational stuff for the clients and the proper way to messaging out to the clients. I think we’ve come up with a pretty good strategy with that. We see it working out. Like you said, Amin, some of our salespeople that come on, it’s unbelievable the job the team’s doing and how quick they are getting it out. Unfortunately, some people don’t make it, right?

That’s where I think we’ve got a lot better with our accountability with our people. I’ve made that a strong word moving into 2026, accountability and holding people accountable from branch manager levels right down to the salespeople and to everybody in our manufacturing facility. I think it’s key to how we run our business.

Richard Tse, Analyst, National Bank: Okay, great. I just have one other one and I’ll hand the line over after that is, if you sort of look at the progression of wins, obviously, you had some really great growth recently. What’s the mix of wins between, let’s say, greenfield versus competitive displacements? How has that compared to the past? What do you think it’ll look like here going forward here over the next year?

Amin Ladha, Chief Financial Officer, Zedcor: To be totally honest, we don’t really track that. We’ll take the work any way we could get it. I want to say a lot of it is, especially in the U.S., it’s a mix of offsetting or especially in the larger customers, it’s offsetting security guards, or it’s offsetting a competitor. Some of the logistics wins we’ve had, those guys, they’ve ramped up pretty quick. They’re up to close to 100 units, and that’s ones where we’ve offset people, or offset competitors, sorry. In the home building space, we’re usually offsetting.

Todd Ziniuk, President and Chief Executive Officer, Zedcor: Guards

... security guards, in the construction space.

Richard Tse, Analyst, National Bank: Okay. Great. Thanks guys. Congrats on the results.

Amin Ladha, Chief Financial Officer, Zedcor: You bet. Thanks, Richard.

Joe Diaz, Conference Call Operator: The second question comes from Gary Hou from Desjardins. Go ahead. I think you’re muted, Gary.

Todd Ziniuk, President and Chief Executive Officer, Zedcor: Are you there, Gary? I think you’re muted.

Gary Hou, Analyst, Desjardins: Yeah. I’m here. Can you guys hear me okay?

Todd Ziniuk, President and Chief Executive Officer, Zedcor: Yeah, we can hear you now. Thanks, Gary.

Gary Hou, Analyst, Desjardins: Sorry about that. Yeah, maybe just to start off, I think in the U.S., you mentioned utilization was above the 83%. I think on the last call you mentioned targeting that 85%-90%. You can move quicker and build inventory in anticipation of mid-enterprise clients. Are you at a comfortable utilization rate right now? Is that how we should think about, that at least for the balance of 2026? Maybe just housekeeping, what were utilizations for Canada and overall on a consolidated level?

Amin Ladha, Chief Financial Officer, Zedcor: I think overall, we’re pretty happy with the utilization levels. Even going into Q1 2026, we’ve ramped up the utilization back to where it should be. Overall, I think we’re pretty happy. Obviously, the fleet’s grown as well. Yeah, it was a minor difference in the utilization as a whole. The U.S. is back on track, and as I mentioned, the run rate revenue in the U.S. is greater than Canada, which happened in a pretty short period of time.

Todd Ziniuk, President and Chief Executive Officer, Zedcor: What about overall utilization, percentage-wise?

Amin Ladha, Chief Financial Officer, Zedcor: I don’t know if we want to disclose the overall percentage just for competitive reasons right now.

Gary Hou, Analyst, Desjardins: Yeah. Okay. No, thanks for that. Just on the enterprise account side, maybe just give us an update there. How are discussions going with larger enterprise accounts from our last call and any new ones of note in the past few months? As you intensify your efforts in the enterprise channel, do you feel you need extra sales expertise to tap that channel, different skill set or relationship, or can you just do that with your existing sales team?

Todd Ziniuk, President and Chief Executive Officer, Zedcor: I think, Gary, obviously we’re always looking for enterprise sales people. We’re actually interviewing one right now. In that industry, it’s a lot of relationships, and it’s a lot of trust. For example, I think that whole retail space, if you’re talking just retail as an enterprise client, which there’s a lot of other different enterprise clients, it comes across that, "Why are you using these guys?" "Well, they’re doing a great job." We’re getting very close. I can’t say, obviously, but we’ve got towers deployed with some very big names that I think over time are going to keep growing in the retail space. I think it’s a matter of proving ourselves, what we’re doing different. I think the biggest thing that everybody probably needs to understand is the retail space is not used to having monitoring.

Amin Ladha, Chief Financial Officer, Zedcor: Mm-hmm.

Todd Ziniuk, President and Chief Executive Officer, Zedcor: The towers they’ve had did not come with that. There again, you got to educate these clients, give them the opportunity to see the advantages. "When your store is closed, we can do this. We can watch stores. We can do a variety of different things." It takes a bit. I think even when we first got into Texas, Gary, it was pretty saturated with some mom and pops, not heavily saturated, but the attitude when we first got out there, even in the home building construction, "Oh, you’re just another tower company." Once they get educated on the fact that no, we’re not just another tower company, a couple things that make us different, we build our own towers, we monitor them, and once they see that, it speaks volumes. To speak of enterprise, we’ve got another home builder that’s a large home builder come on board.

They’re growing very quickly with us. It’s probably going to lead us into another national account. It’s great. They love it. We moved into one area with them, Gary, and literally took their theft from through the roof to pretty much nil. It’s zero. They see why it’s worth paying, obviously, the rate we charge because it’s effective. That’s the biggest thing that we really explain to the clients is, yeah, maybe our rates are a little bit higher or pretty much competitive, but what we’re doing is you’re saving money. You got to look at the big picture. It’s not just your monthly price on this tower, it’s what are we actually saving you in the long run on a project.

If your shrinkage can go from X down to saving them hundreds of thousands of CAD over a year, you get the right guys that do the math that way. We’ve actually had some of our bigger enterprise clients that have taken it to upper management above them and said, "Look, these guys have taken us from where we are with this to literally no theft." That’s all part of this educational cycle with clients, and it takes time. It’s frustrating. Then you get some of these other enterprise groups that just move at a slower pace.

To even talk a little further on that, I think some of these bigger enterprise clients are locked into contracts that are all coming due over the next few months or maybe over the next year, and they’re starting to look around at what other opportunities are out there when the contracts come due. I think the timing for us is great. I think I’ll say it again, Gary, like where the manufacturing is, we’re set up to take on anything. After doing that last capital raise, we’re in a financial position that’s excellent with the ability to do that. I’m quite happy with the fact that we did the raise when we did.

With the uncertainty obviously going on in the world right now, I think it’s put us in a great place to, you know what, just bury our heads in the sand and build the business.

Gary Hou, Analyst, Desjardins: Yeah. That’s great, Tyler. Thanks for that. Maybe just last one for me. I know historically in your adjusted free cash flow number, there’s no maintenance CapEx deducted. Just remind me, maybe a question for Amin, are those expense going through kind of OpEx currently? Maybe as you see your fleet age, how should we think about the replacement cycle cost for refreshing the current fleet, et cetera? I just want to dig through a little bit on the maintenance CapEx side and maybe just overall free cash flow outlook.

Amin Ladha, Chief Financial Officer, Zedcor: Yeah. The maintenance CapEx, we don’t disclose it separately just because it’s not a significant number. Any repairs and maintenance, any standard minor items that would run through the P&L. Any kind of major replacement, which we don’t have to really do very often for the structural components, we don’t have a plan to just swap out structures just because they’re a 10-year life. That’s what we’re depreciating them at. There’s no plan on the structure side. The cameras largely have a five-year warranty. They’re good. The economic life is in that kind of five to seven years, we think. Again, no plans to swap out any cameras unless they break and they’re out of warranty. That’s why there hasn’t been any significant maintenance CapEx to disclose on the struct-

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