Nanalysis Scientific Corp. (NSCI) Earnings Call Transcript

I, Sean Krakiwsky, second the motion.

All in favor, signify in the usual manner by raising your right hand. [Voting]

Contrary, if any? [Voting]

Carried. The next item of business is to approve and adopt the resolution in relation to the reapproval of the stock option plan of the corporation.

I, Robert Borkowsky, move that the resolution as more particularly set forth in the management information circular prepared for the purpose of the meeting relating to the reapproval of the stock option plan of the corporation be approved and adopted.

I, Sean Krakiwsky, second the motion.

All in favor, signify in the usual manner by raising your right hand. [Voting]

Contrary, if any? [Voting]

Carried. If there is no further business to be brought before the meeting, I would ask for a motion to terminate the meeting.

I, Sean Krakiwsky, move that the meeting be terminated.

I, Robert Borkowsky, second the motion.

All in favor of the resolution, signify in the usual manner by raising their right hand. [Voting]

Contrary, if any? [Voting]

Carried. I now declare that the meeting is terminated. Thanks, everyone.

Thank you very much, Jonathan. As is customary at our AGMs, I provide a short year-end review presentation. So most of the people that are on this call have seen the investor presentations of the past, but some of you have not. And therefore, there's a couple of slides that sprinkle in what long-time investors might see as redundant information, but new investors, which we're always hoping to attract, might see for the first time. So thank you very much for joining our 2026 AGM. We're both building a fully vertically integrated image and detection products and services company. Of course, on a product side our main product family is the portable MRI machines or as our customers call them, NMR spectrometers that you can drive around in a truck and put it in the fume hood, and we sell them all over the world. On the services side, of course, we have a marquee customer named CATSA and we signed a large contract with them, and we're expanding that side of our business. We do seek safe harbor for forward-looking statements. So we're the first company in the world that created this category of portable MRI machines for industrial applications. We're very proud of that. And we're also doing some pioneering work on the services side with Marc Tomlinson, who's doing a great job of expanding that business. In 2025, we generated approximately $40 million in revenue and we have been EBITDA positive and we're looking to expand those profitability margins and so on. And I'll maybe just clarify, mostly, I'm referring to adjusted EBITDA, which we highlight very clearly in all of our financial press releases and so on. And the vision is to grow products and services together as we're improving the quality and safety of our customers' products when it comes to imaging and detection equipment and services. When people hear me say portable MRI and MRI in particular, a lot of people jump to the conclusion that, that means we're a health care company or a life sciences company. And it's important to point out that although we do sell to pharma companies and biotech companies and so on, we're not a health care company per se. We're a scientific instrumentation company. And if you want some large cap comparables of what those types of companies are, I've listed some of them on the right. They tend to trade at pretty high multiples, and that's because of the really strong economic moats they have with their intellectual property, which is what we're endeavoring to do. But in addition to that, it's the relationships that they have between their technology and their services. And so that's how you should think of us as a company like Agilent or Thermo Fisher and so on, not a company like Pfizer or Eli Lilly. We have a huge and growing global market for scientific instrumentation. And as we continue to carve out segments where we can really penetrate our TAM continues to grow. Most of you are familiar with our evolving product and services portfolio. And so yes, so the reason why we started our company is because we were convinced that Benchtop NMR would be the thin edge of the wedge to help us penetrate certain aspects of the market. But we've combined that with sort of a tapestry of conviction in other areas. And today, we're a full-blown operating company that has to not only have a grand vision, but we also have to strive for operational excellence and produce value for all of our stakeholders, especially our shareholders. And we feel like we're well positioned to do that. Our stock price hasn't been doing that great, as I know most of you lament when you meet with me occasionally, but we feel like we've got some fundamentals and some foundational aspects of the business, including a fabulous management team to allow us to change that. Very proud of the amazing people that have chosen to join our Board over the last year since our last AGM. And of course, Jonathan Ladd comes to us with extensive experience as a technology CEO of publicly listed companies as well as small private companies. Werner Maas is very well known in the magnetic resonance community from his roles at Bruker, where he led that company over 25 years from sort of nominal in revenue to well over $1 billion. So really quite an accomplishment for our company that the former President of Bruker BioSpin is now on our team and helping us grow our business. And then, of course, there's Steven Feick, who's an experienced financial professional manages some pretty important assets for a pretty important group in Calgary that's been around here for over 100 years and been really successful in that regard. And also is an engineer as well. So I love it when engineers are joining our Board. And again, I think it speaks volumes to the quality of the company that we've built. And of course, really lots of thanks to Werner and Michal, who helped us assemble this great new version of our Board of Directors that I think is going to really help us and I rely on extensively to do my job. So thank you to the great new Board of Directors and our existing ones. So just to go through some of the things that we've accomplished over the last year, and there's one area that sort of I kind of want to highlight, but just to sort of go through them is if you remember a year ago, mid-2025, let's say, we had some challenges. We had some litigation issues with some old founders of companies that we acquired. We ended up winning those situations and being able to move forward successfully. We were in the process of shedding certain businesses, most notably the Agilent reseller business. So we basically had to move out of that business and several of those people went to Agilent as part of that transition. Similarly, with a European preclinical MRI company called Mediso, we had to shift away from that business. And part of that was we totally rebuilt our commercial team to sell our own proprietary products. And that's going very well, by the way, and we're really starting to show the fruit of that activity. On the Benchtop NMR technology side, we've improved our product performance by leaps and bounds. Very proud of the fact that we've done a soft launch of our FDA compliance software, which you have to have in order to get your products for pharma quality control and polymer quality control. So you're going to hear more about that in the near future. And then also really formalize our quality program, again, striving for operational excellence. We're not a start-up anymore, and quality programs are an important part of any instrumentation company's manufacturing and so on. I've already talked about a great Board of Directors that has changed significantly. I want to talk a little bit about our services group and Marc Tomlinson, who's done a great job. And of course, he was part of that change when I talked about how we had some challenges that digesting certain aspects of previous acquisitions. And Marc came in over a year ago and really cleaned things up and he's taken gross margins in the right direction, and we can expect to see more of that kind of improvement on the gross margin side going forward. We got some exciting new customer wins that we'll be announcing soon that are part of that evolution. And of course, the relationship with our existing customer, the marquee customer that I referred to before, is extremely strong and getting better, including with regards to new contract opportunities with that same existing customer, which you all know is called CATSA. I think everybody knows that while our Benchtop NMR spectrometers, these portable MRI machines that I referred to our main product family, we also leveraged those technologies and capabilities in the actual clinical and preclinical MRI space as well as the larger NMR spectrometer space, which goes after a different segment of the market. For example, biological samples like human blood and urine and so on is where the bigger machines tend to get more traction, whereas our smaller machines are more in the chemistry part of the market. So we really built -- continue to build on those relationships with existing customers, signed some exciting new deals that are going to position us for licensing opportunities in the future as well as cash inflows every quarter and several more deals in the works there as well. On the finance side, if you took a close look at some of our notes in the -- in our Q2 financials that we published, we're on side with our covenants with our bank, working hard to stay there, of course. I'm very proud to say that a government granting agency called PrairiesCan, who has supported us over the years with unsecured interest-free debt, has provided us with nonrepayable $1 million recently. Our CFO and our extended team did a great job on securing that money. And I think that's important for 2 reasons. One, it's $1 million that's nondilutive that we don't have to repay, but also because it's emblematic of the relationship we have with that organization. So when you're reading through our balance sheet or the associated notes and you see PrairiesCan, please keep that in mind because you'll need to understand that relationship to have a correct understanding of that part of our balance sheet. Extremely supportive shareholders that contributed to us raising $3.4 million in the last year via private placement, which probably everybody on this call participated in. And then our CFO and our financial team has done a great job at sort of recalibrating our cost structure so that as we resume revenue growth and experience higher gross margins, we're positioned very well to expand other profitability metrics because of that reduced cost structure that is sustainable. So one of the areas that I want to highlight because I mentioned we rebuilt our commercial team. And so this is what it looks like today. If I would have showed this to you middle of 2025, basically, except for Matt Zamora, who's been with us for over a decade and done a great job and 1 or 2 other people on here, this slide would essentially be empty, and it's because we were relying on K'(Prime) to be our commercial team. And as I've said publicly many times, K'(Prime) is a services entity now. It has nothing to do with scientific equipment sales. So really proud of the group that we put together here. Matt's done a great job of onboarding them with help from Dr. Susie Riegel on the marketing side, who's really got people going in the right direction. So very proud of this group. And you're going to really start to see the fruit of this commercial team in the very near future. We've seen unprecedented sales activities for months like July and August and September as an example, where in previous years throughout our company's history, months like August have been where we told our 1 or 2 salespeople to take their vacations because nothing is happening. Very proud to say that it was totally the opposite this August, and you're going to see that play out in our published financials for Q3 and Q4, which is always strong. So the vision is still products and services working together. I admit that right now, they appear as separate businesses, and that's fine. On a day-to-day basis, we do try to optimize them according to their own characteristics. But my vision is still like to harken back to one of the previous slides where we list those large-cap instrumentation companies is to have products and services working synergistically together. There's a long way to go before that aspect of the vision manifests itself. But just to give a case study here, that's a real thing in terms of an opportunity that we're pursuing on both sides of the North American border here is our Benchtop NMR instruments are suitable for illicit drug detection. You can't hide from magnetic resonance if you're a clever chemist and you change some molecules, but you're still producing a deadly synthetic opioid. Magnetic resonance is by far the best way to see that. We have sold to law enforcement for that application. And my vision is that for border services protection both in the United States and Canada, we wouldn't just be offering our proprietary product, but we would also offer a service as well because there's some training requirements and so on and so forth if you're going to operate hundreds of these instruments along the U.S.-Canadian border. So -- and certainly, from a revenue perspective, from a core perspective that products and services feed off each other. So this is a real-life case study, and we have recent wins that are going in this direction for our company. And both Marc and Susie are doing a great job on both sides of these parts of our business. Just wanted to talk a little bit about adjusted EBITDA here. So -- and maybe I'll sort of kind of provide a little bit of an outlook here. Certainly not going to provide guidance or anything like that, but I do want shareholders to feel optimistic because I certainly do. If you look at our adjusted EBITDA over the last 5 reporting periods and maybe kind of point out Q2 2026, which we just reported compared to Q2 2025. So between those 2 periods, revenue wasn't that different, but cost structure was completely different and also some other things that we've been able to do with our finance department that's done a great job of optimizing. So if you compare those 2 numbers and then you sort of start to think about, okay, while we're resuming revenue growth, but this time, we're resuming on a profitable basis. I think you can kind of see how -- once we start to increase revenue, how you're going to start to see much better performance on the adjusted EBITDA side, which we're kind of using as a proxy for cash flow going forward. So if you look deep into the numbers, there's a reason to be optimistic about this. And of course, Q3 and Q4 are very -- tend to be very strong for us and will be this year. So I'm feeling good about all aspects of our business. Of course, our work isn't done yet. I mean, in some sense, I still feel like we're just getting started, but that's more a reflection of what our tremendous opportunities are rather than the fact that we've also been doing this for quite a while now and digesting a lot of things like acquisitions over the years. If you haven't had a chance, please go to Leede Financial and touch base with an experienced analyst named Doug Loe, by the way, he is a PhD in biochemistry and knows magnetic resonance very well. And he produces a really quality rigorous report on us, and we're expecting to have more coverage going forward. But right now, Doug Loe produces a very high-quality report on us, has a buy rating, of course, and it's very knowledgeable on our technology. And he says to me things like Sean, one day, these small MR spectrometers are going to be in every lab and every mobile lab around the world. And he certainly knows what he's talking about. So please check out Doug's great work. So just coming to the end of the presentation now and really excited about all the areas of our business, which we have working synergistically and done a great job of moving us towards operational excellence. Please feel free to reach out to Jake Bouma, which is our IR Manager, doing a great job for us out in Vancouver, really experienced person and also part of a great ecosystem that has worked with a lot of quality companies over the years, and I know he's very optimistic about the trajectory of our company as well. So please feel free to reach out to Jake if you have some time. So that's the end of my presentation, and happy to take any comments or questions. Jake will be moderating that. So if you want to ask a question, please fire away.

[Operator Instructions]

So I'll just talk a little bit, Jake, but if there's people still want to ask questions, we have a couple more seconds. But most of the people on this call are people that reach out to me regularly. So if you prefer to talk to me privately, please give me a call at any time, always available. And so it sounds to me like there are no further questions. So if that's the case, then thank you very much for joining our 2026 AGM. I look forward to talking to you more during the year. And of course, our 2027 AGM, which I anticipate will be excellent. Jake, anybody looking like they're about to ask a question?

Yes, it doesn't look like it. So maybe we can just wrap up. Thanks, Sean, and thanks to the team for putting this on this morning.

Thank you very much. Jonathan, do you want to say just the closing remarks and end the event?

Certainly, Sean, a nice presentation, as always, keep it going, keep it going up and to the right. And you're taking -- I believe you're taking the right steps in order to do that. Execution is everything, and I think you're well on your way. And thanks, everyone, for attending today's AGM.

Have a nice day, everybody.