Thank you, and good morning, everyone. Welcome to XtractOne's fiscal 26 fourth quarter and annual conference call.

Joining me today are the company's CEO, Peter Evans and CFO, Karen Hersh. Today's call will include a discussion of the state of the business, financial results for the quarter and the full year, and the company's priorities for 2027.

Followed by a question and answer session with covering analysts. This call is being recorded and will be available on the company's website for replay.

The presentation that accompanies today's discussion is also available on the website. Before we begin, I would like to note that all dollars are Canadian unless otherwise specified and to provide a brief disclaimer, which is shown on slide 2.

Today's call contains supplementary financial measures including total contract value of new bookings, agreements pending installation and adjusted EBITDA. These measures do not have standardized means prescribed under IFRS therefore may not be comparable to similar measures presented by other reporting issuers.

Are defined in the company's filed management's discussion and analysis a reconciliation of adjusted EBITDA and net loss is included in yesterday's press release and the appendix to this morning's presentation. Today's call may also contain forward looking statements that are subject to risks and uncertainties which could cause actual results, performances or developments to differ materially from those contained in the statements.

These statements are not guarantees of future performance and no assurance can be given that any events is anticipated by the forward looking statements will prove correct. Today's call should be reviewed together with the company's audited consolidated financial statements management's discussion and analysis and the earnings press release issued October 2026, all of which are available on the company's website.

And under its profile on SEDAR+. Now it is my pleasure to introduce Peter Evans, Executive Officer of XtractOne.

Peter? Well, good morning, and thank you very much, Chris.

And to everyone who is joined us. We welcome all of our investors, our analysts everyone else who is joining us today.

Let's start with slide number 3. Fiscal 26 was a record year for XtractOne.

Overall revenue of $28.8 million was up 108% from fiscal 25. We did that while only increasing our operating expenses by 13% overall.

Adjusted EBITDA improved by $5.1 million for the year, to negative $3.5 million for the entire year, from our and our net loss narrowed from $7 million narrowed to $7 million from $11.9 million over the course of the year. We are very pleased with these results.

And I would like to talk a little bit more about them, Karen will go into more details also. Let's get to the next slide first, though.

We consider ourselves innovation first company. And this success has been driven by our 2 key solutions, which are purpose built and tailored to address the unique needs and priorities of each market segment that we serve.

We are not a 1-size, force-fit to fit all solution, but 1 that aligns with the customer's highest priorities of needs. We innovate to deliver each segment's key priorities and have these market specific must have capabilities built into each of the platforms.

The SmartGateway is the right fit where individuals arrive with fewer personal items and where the priority is throughput and small blade detection amongst other items like firearms. We also deliver specific segment-specific features which then best serves stadiums, arenas, theaters, manufacturing organizations, hospitals.

And most importantly, the international market where edge weapons not firearms, are the priority. On the other hand, the XtractOne Gateway is purpose built for medium clutter environments where you have a medium amount of personal items.

Individuals carrying backpacks, laptops, tablets, phones, and other such items. The previous industry response was extra machines, bag searches, and long lines.

The new XtractOne Gateway is a perfect fit for environments like schools, workplaces, and convention centers where the average person is carrying that bag or backpack with that laptop and other items. Each solution also delivers these further unique software capability and features that serve each market for their priority needs.

Having a product that serves those unique problems for each different buyer is a foundational part of our growing success for this year and for the future. On the SmartGateway side, sales were led by customers in health care and entertainment space this year, Hospital across Canada and The United States chose the SmartGateway for the same key reasons.

Detecting those small blades without alerting on every smartphone, every purse, and other items while also fitting seamlessly into for example an emergency departments very small vestibules. In places like California, the health care systems are buying ahead of the mandated March 2027 weapon screening requirement under assembly bill 75.

Other states that we engage with are investigating similar sorts of legislation. In the entertainment space, existing customers returned with expansion orders and we added 1 of the world's most storied football as in the global definition of football, clubs, and 1 of the most iconic and most visited museums in the world.

With almost 7 million annual visitors selecting the-- this museum selected the SmartGateway for every entrance after a very extensive on-site and rigorous testing. For context, British Museum for those who are unfamiliar, the British Museum has twice the visitors of Madison Square Garden twice the visitors of the most visited parts of the Smithsonian Institute and houses the history of mankind.

And as such it is a target for protest and terrorist activities. When organizations like the British Museum prioritize security first, they choose XtractOne.

On the XtractOne Gateway side, we completed our first successful year of commercial rollout deployments. There has been an incredible uptake in interest from the education space with the XtractOne Gateway being deployed in a number of school districts and with other schools across 5 states.

In the US over phased deployment approaches. In its first full commercial year, XtractOne Gateway accounted for over a third of our revenues and roughly half of our bookings.

The logos in this slide are some of the wins that we are approved to name publicly. There are many more customers who would prefer to remain unnamed, but are just as engaged in our business activities.

They take reference calls. They host site visits for prospects.

And they recommend us to their peers. At XTRAC 1, it is our philosophy to not believe in customers and only believe in creating advocates for our business model and our solutions that we provide.

Let's move on to the next slide. I want to take time to talk about the commercial and manufacturing market segments, both of which are becoming an increasingly exciting business opportunities for us.

These are not new markets. We have been protecting manufacturing facilities for some of the largest car manufacturers for some time.

What changed this year, though, is that the XtractOne Gateway arrived and it fits some exact security and screening needs of many of the commercial customers. Enterprise buyers have a chief security officer multiple sites and locations They have rigor around activities like cybersecurity and IT integration.

And they have employees who arrive every single morning with a laptop and a bag and other personal items. XtractOne Gateway screens them without creating a bottleneck of long waiting lines and bag searches.

Office workers just walk into the office building, transparently as if there was no screening at all. The gateway screens them without creating the bottlenecks.

So long waiting lines on those bag searches. And this year, we found ourselves entering into new markets within office spaces, such as pharmaceutical manufacturing.

With a multi site deployment that spanned across facilities in Arizona, and Ohio and plans for other locations globally. We are now protecting commercial offices for large insurance healthcare, data center, and technology companies.

Additionally, a leading US airline expanded its deployment across 3 airports for its employees and the Metro Toronto Convention Center as a good example of convention centers selected the XtractOne Gateway for its screening requirements. Commercial customers now represent about 1/4 of our bookings this year, in a segment that previously had no satisfactory screening solution but pent up demand to create safer environments for the office workers.

Let's now look towards our next slide, and start to take a look into our fiscal 27. We have 4 key operating priorities for the year.

First, continued sales expansion. With a specific focus on 4 areas.

Education, health care, commercial, and international. These are where we see the largest growth trends and opportunities for our business, And we see the strongest solutions fit competitive advantages.

Secondly, focused R&D. The XtractOne Gateway is a great example and it was built in response to a problem we heard from customers over and over and over again.

What many school superintendents described as solving the air quotes, 'backpack problem'. The XtractOne Gateway has solved that problem and that is what gave it a very strong first year deployment.

Our focus this year is the same. Continue to listen to our customers, lead with the innovation that creates differentiated value for them, and solve the problems that matter to them most.

The third priority is to continue to deliver on our highly scalable operating model, hold the growth in our costs below the growth in our revenue. As stated last year, we delivered an operating expense line with an increase of about 13% against revenue growth of 108%.

Our focus is to continue to drive this operating leverage into ongoing and sustained profitability. And fourth, but most importantly, customers as advocates.

This is a goal that I personally care the most about. Because this is how we win.

A hospital network in 1 province leads us to a health authority in the next. 1 school district in Texas strongly advocates to another school district that the solution they deployed last year is the only solution that they should be considering for their deployment.

This reference ability from district to district, health care organization to health care organization, creates the advocacy that we want within our business and that is trusted across the security industry. A very happy museum in London that tested every alternative has now become a proactive reference for all the other venues within their network of connections.

And those individuals are now calling us directly. Our goal this year is to continue to be.

To drive strong advocacy from our customers to their peers. In every market we serve.

With that, I am going to turn it over to Karen to dig into the financial results in a little more detail. Karen?

Over to you. Thanks, Peter.

I am happy to review the financial highlights for our fourth quarter and for fiscal 26, the year of strong growth and performance. Let's start by turning to slide 7.

Total revenue was $8.2 million for the fourth quarter versus $3.3 million in the prior year period. Representing an increase of 144%.

For the full year, revenue was $28.8 million versus $13.9 million in fiscal 25 an increase of 108%. The increase in revenue this year is primarily from the successful commercial rollout of our XTRACT 1 gateway, which as Peter mentioned earlier, makes up over a third of total revenue along with the continued growth year over year for the Smart Gateway product.

Fourth quarter installations were similar to the previous quarter However, revenue for the quarter was lower than the third quarter primarily due to the installation contract mix. With a greater portion of the fourth quarter's installations represented by subscription contracts.

As previously discussed on other calls, the total contract value for subscription contracts does not immediately show up as revenue when the installation takes place. Rather, it goes into contractual backlog and becomes revenue over the life of the contract.

Let's move to slide 8. Our contractual backlog was $25.6 million at year end.

up 66% from $15.5 million just a year ago. Marking a significant growth in our installed base as we continue to build predictable recurring revenue.

During the quarter, we successfully completed the installation of the previously announced US$2.6 million Smart Gateway expansion for a major international entertainment venue which will provide recurring revenue quarterly revenue over the next 3 years. Of the total contractual backlog, $10.5 million is scheduled to be recognized in the next 12 months.

This amount represents revenue already under contract for fiscal 27. Before any new bookings, installations or renewals and is ultimately the best indicator for assessing the growth in our installed base and the resulting recurring revenue.

Turning now to slide 9. We will talk about bookings.

Total contract value of new bookings was $32.2 million for fiscal 26. Compared with $38.5 million in fiscal 25.

The fiscal 25 figure included a single record quarter of $16.1 million in the fourth quarter which carried the first wave of XtractOne gateway orders and several large education awards landing at once. Bookings in this year's fourth quarter were $6 million and while down from last quarter, it is important to note that historically our quarterly bookings are often lumpy due to customer buying cycles.

We have also experienced an increase in the average size of our customer contracts with some of them extending over multiple phases. Meaning that contract timing be it positive or negative can have a material impact on any given quarterly bookings.

In fiscal 26, our bookings were well diversified across verticals with commercial and manufacturing accounting for notably 37% of our total bookings for the year, while healthcare and education represented 20%, 15% respectively. We also saw a well balanced split between the XtractOne Gateway and the SmartGateway.

Slide 10 shows both halves of our backlog over the past 5 quarters. The black representing the contractual backlog or installed systems under contract, the Orange has signed agreements pending installation.

Or contracts that we have won but have not yet installed. Agreements pending installation ended the year at $18.4 million down from the $34 million a year earlier.

As the manufacturing improvements we made in the first half let us accelerate deployments through the second half of the year. This resulted in a higher revenue and contractual backlog balance than a year ago.

And for the first time, the value of what we have installed and under contract is larger than what is waiting to be installed. Moving to slide 11.

Gross margin was 57% in the quarter, compared to 71% in the prior year quarter. For the first for the full year, gross margin was 58% versus 66% in fiscal 25.

We are now a 2-product company and the 2 products are at different stages in their commercial journey. Smart Gateway is a product with a longer history of deployment and a mature margin.

Whereas the XtractOne Gateway is in its first year of production. And with that comes more variability and higher production and installation costs.

That every new hardware product carries. Market Gateway had a similar path with margins initially in the low 50s which improved as we refined the bill of materials, and the installation and service experience.

The XtractOne Gateway is expected to follow a similar path. Because of the split between products, we will continue to have some margin variability driven by product mix from quarter to quarter.

We expect over time the margin gap between the 2 products will narrow reducing volatility, and trending upwards. Moving on to slide 12.

Which shows operating expenses by quarter. For fiscal 26, operating expenses were $24 million up only 13% against revenue of 108%.

Selling and marketing was $8.2 million, up 31%. A deliberate investment in business development initiatives.

General and administrative expenses were $8.6 million, up 13% research and development was $7 million flat year-over-year. Overall, while operating expenses were slightly higher compared to prior year, the increase relative to revenue shows a consistent effort to manage our operating expenses while still strategically investing in key areas like selling and marketing to support our continued revenue growth and leverage business model.

Moving to slide 13. Adjusted EBITDA was negative $700 thousand for the fourth quarter compared with negative $2.7 million in the prior year quarter.

For the full year, adjusted EBITDA was negative $3.5 million an improvement of $5.1 million from the negative $8.6 million in fiscal 25. This is operating leverage and it is worth putting numbers on it.

Revenue grew by $14.9 million this year while operating expenses only grew by $2.8 million driving a $5.1 million improvement in adjusted EBITDA. This means that about 1/3 of every incremental revenue dollar reached adjusted EBITDA.

And finally, moving on to slide 14. We ended the year with cash and cash equivalents of $17.3 million compared with $8.2 million a year earlier.

Cash used in operating activities was $3.5 million for the year compared with $6.5 million in fiscal 25. In the fourth quarter, the company generated approximately $1.9 million of operating cash flow, including working capital, and our cash balance rose by $1.7 million from the previous quarter with no financing activity.

Excluding working capital, the fourth quarter was within $500 thousand of operating cash breakeven, following a strong third quarter in which we generated cash on that basis of $700 thousand In closing, fiscal 26 delivered what the plan called for. A record year of revenue pending installations converted into installed systems and contractual backlog and controlled operating expense growth of only 13% while revenue more than doubled.

We are highly focused on continuing this work into fiscal 27. And with that, as always, Peter and I welcome any questions that investors may have.

Good morning. Thanks for taking my questions.

My first 1 is on replenishing the top of the funnel Bookings were $6 million and I understand these can be rock and roll Q-to-Q Then when I look at the signed agreements pending installation, they declined to $18 million as deployments progressed, which is great. But can you update us on your qualified pipeline and how it is evolving?

Our bookings, and the opportunities you see in front of you running at a level that could sustain your growth ambitions?

Yeah. Amr, I will jump in on that 1, always good to hear your voice.

Thank you for joining the call. The first thought is our booking sorry, our qualified opportunity pipeline continues to grow.

I would have to double check the numbers, but right now, the last time I looked at it a few days ago, we were in the range of about a US$122 million of qualified opportunities in our pipeline. For clarity, these are not leads.

They are not just names. These are organizations that we are engaged with and they have, you know, buying intent.

Timing is always something to work our way through. Different organizations move faster and others move slower.

Depending on their requirements to go approve a solution for example, cybersecurity analysis. But I am very comfortable that we have a continuously growing pipeline of opportunities, and what is most encouraging to me is that it is very diversified across all of our market segments.

As well as we are starting to see significant growth outside of North America. Fantastic.

You guys are not seeing any changes in win rates or sales cycle length or anything like that? it is just the usual lumpiness?

Yeah. it is really just lumpiness, a little bit of, you know, sometimes we see a little bit of slowdown during the summer months due to the schools being out.

it is really just a little bit of the lumpiness quarter to quarter.

Fantastic. Then maybe 1 for Karen back on the margins.

My understanding last quarter was that the gateway margins started to improve significantly, especially as volume sort of scaled. So I am wondering for this quarter specifically, the decline in margin is just based on lower sales.

And, you know, like, you are still comfortable with the underlying gateway margin. there is no, like, real step back outside of scale.

No, Thanks, Amr. that is a great question.

From our standpoint, it is really a question of mix. And that is going to vary from quarter to quarter depending on the mix between the SmartGateway and the XtractOne Gateway.

But we have not seen any systemic issues in terms of our margin for the XtractOne Gateway. it is moving along nicely.

It just takes some time to be able to make the material changes it is a complex supply chain out there. And we are making progress.

So that will happen we believe over time, but it is going to take some time to be able to make those changes, but there has not been any fundamental change in what we see in terms of margins by product line.

Fantastic. That might be a harder 1 or you might not have the number, but would you know what percentage of your 2026 bookings, came from existing customers?

We do not have those exact numbers. it is certainly a big part of what we do and we see it especially now having 2 products where often we will have a customer that is been using the SmartGateway and now is very excited to bring on the XtractOne Gateway as well.

And so we are often seeing customers that are actually doing both products now, but we do not have the exact number of the breakdown, but it is key to us in terms of we continue to build new logos, particularly with the XtractOne Gateway being a new product. But we also have again that recurring revenue that is starting to grow as well.

Fantastic. Then maybe 1 last 1 that is related to the quarter.

I have been doing a lot of reading of board minutes of schools and so on. And, you know, like, 1 of the challenges that always comes up is maintaining a low secondary screening rates with fully loaded backpacks since, you know, like some of the competing solutions address that with a separate back screening system which obviously you guys do not do.

I am just wondering if you have any stats for us, whether it is clear rates or alert rates, you are seeing with the gateway in real world deployments relative to the competing products. Yes.

So I can give some thoughts anecdotally here, Amr. and it is somewhat dependent on the environment.

An office building is a little bit different than a convention center, which is a little bit different than a school. And then there is even variability between some of the schools.

If you think about high school students, with everything such as the Nintendo Switch to elementary school students, So you have got some variability in demographics. We see alert rates vary from as low as 4% to mid teens.

What is most compelling though is when you start to look at the total cost of ownership. And you start to think about the cost of having a secondary system like an x-ray machine.

Or additional staff. We replaced a competitive product at 1 school, and they had to have 8 staff doing secondary searches on backpacks through the high alert rates from people or students walking through with laptops.

You start to think of the total cost of ownership model and the cost of those 8 security staff at every single entrance, it changes the dynamic significantly. So we are pleased that we are providing very low false alert rates.

We are pleased that we are providing fast ingress for all of the students. And we are pleased that side by side the total cost of ownership numbers are significantly better for XtractOne.

Fantastic. that is very helpful.

I will pass the line.

Hi. Good morning, Peter and Karen.

Perhaps just question on the pipeline. How's the Fortune 100 pipeline, activity these days?

And my secondary question is as you guys shift into schools, hospitals, and industrial sites, what is that? Or I guess, does that impact average deal sizes going forward?

it is a great question. And from a pipeline point of view, we do see that there is very, very strong fit for particular markets where we have differentiated value.

We just talked about the schools, for example. And, you know, the alternative is 1 gateway.

Or deploying people screening systems, x-ray systems, and all the staff that goes along with that. Those deal sizes do tend to be larger because they are buying for a school district.

Or a hospital system. And so, you know, there is from my point of view and from the strategy, you know, larger deal sizes where we have significant competitive advantage becomes a good place to go double down on and spend more time.

In terms of the pipeline itself and your question around more kind of enterprise and Fortune 500-type companies, I think we are seeing a lot more of that. I was recently at 1 of the large security trade shows and what was fascinating to me was the number of large enterprise customers who are intentionally seeking us out.

And these are interesting in that they have. Typically have many locations they focus on security first as a priority, not cost or sponsorships or these sorts of things, but security first.

And they take their time to do their due diligence correctly not only thinking about the individual technology we bring, but how it integrates and streamlines and further improves the overall flow of their business and their business operations. So we are seeing more of those enterprise customers actively seeking us out.

And we are pleased that they are the type of folks like the British Museum who will focus on security as a priority and therefore find XtractOne.

Okay. that is helpful.

I appreciate the context there. So, is it fair to say then that in your Fortune 100 cohort in the pipeline, like are the sales cycles a bit longer than what you are used to?

Or how would you categorize that?

it is an intro-- there is a yes and no answer there. The sales cycles may be a little bit longer because they will go through other steps around looking at things like IT integration and cyber, making sure they have their policies and their training programs correct.

But once they make a decision, they make a decision fast and then things accelerate very quickly. And we start to see things then move in a phased rollout manner from 1 location to the next to the next.

I referenced in earlier a biotech manufacturing company You know, it was an average sales cycle They have multiple locations. But they then start rolling out 1, then the next, and the next and the next in a very phased manner.

So, you know, I like the model of these companies. I like that they find us because they see the value of our solution to improving their overall business operations and a little bit of extra time on the front end is creating a nice almost recurring revenue with repeat deployments into different locations.

Excellent. Very good.

Thank you, Peter. Perhaps a question for Karen.

The OpEx growth is quite impressive given the revenue scale that you guys are experiencing. How should we think about OpEx growth this fiscal?

Are there any planned investments we should be thinking about in fiscal 27?

Sure, And thanks for the question. Our goal is definitely to keep cost growth below revenue growth like we did in fiscal 26, having just 13% versus the 108% But there are exceptions for areas where we really do want to focus Sales and marketing, as I mentioned during the earnings call, My comments were definitely an area where we wanted to focus on.

To make sure that we are addressing the healthcare and commercial and other key markets that we are focused on. So, this is an area of focused on.

We will continue to invest in research and development. But I think what you are asking really is there is nothing that is anything planned that requires a step change into a significantly higher OpEx cost And we see that leverage is going to continue going forward.

Into fiscal 27. We have that difference in that leverage model will certainly continue into 2027.

that is our goal.

Okay. Thank you.

I will pass the line.

Hey, guys. Good morning.

Thanks for taking my questions. So, yes, just wanted to follow-up on that selling and marketing comments.

Obviously, a massive step up in the quarter, but I was just curious if you can maybe quantify some of the initiatives you guys are doing to capitalize on those active social and legislative demand tailwinds. And, like, when you would expect to see some of the benefit of those moves and if this quarter's level for selling and marketing specifically is the new norm, or can we even see a further step up from here as you guys look to capitalize on the market?

Yes, it is a great question. Thank you for that, Steve.

As March approaches in California, yes, it is always a bit of a humorous thing where for the past year, we have been engaging the hospital systems in California as you would expect. Through direct selling activities, demo days, marketing activities, attending all the right trade shows, all the normal things you would expect us to do.

And no matter how often you tell customers, look, March is coming fast, They always seem to wait a little bit to the last minute. Because they have to, you know, deal with internal activities such as policies and unions and things like this.

But we have seen quite a nice step up in activity. We started to see some now inbound from all those outbound activities that we execute over the past year.

And I do expect that we will see a lot more activity in California, for example, in healthcare. We are definitely seeing it in The UK, with the pending Martyn's Law, and that is where, as I referenced, organizations like the British Museum who are very, very well connected and become very strong advocates.

Are helping us take advantage of that accelerating interest as those pending legislations start to get towards their Thank you.

And then the next question would be kind of in regards to mix. I mean, the XtractOne Gateway really took off and I was just wondering in the fourth quarter specifically, if you would quantify the mix of new bookings and what was installed, can you just kind of understand on a go forward basis, what the gross margin path will look like.

So I understand what you are trying to do, but I think it really does vary from quarter to quarter when you are looking at revenue. Because you have got the SmartGateway that is been installed for quite some time.

There is obviously a bigger portion that is coming from that number, but again, as we mentioned in the call that third of the revenue came from Extract 1 Gateway. And so that mix is going to vary from quarter to quarter depending on which product gets installed in a quarter.

And so we really cannot I think the historical is not the best indicator of what is become. And in fact, maybe bookings might be a better way of certainly what we look to understand that mix better.

And in fiscal 26, they were pretty much 50-50. And while that is only 1 metric to consider, I think you have to really accept that we are going to have that variability between the products from quarter to quarter depending on what is installed.

But that margin mix is going to start to reduce as we continue to make those improvements in the XtractOne Gateway. Hopefully, that helps.

And Yes, that is helpful. And just 1 quick last question.

I think 1 of the strong parts of your story is how churn is essentially nonexistent and the land and expand kind of motion that you guys have with your clients. Can you just mention a little bit something on that of I know you said that you do not quantify how many of your customers are return customers, but are the churn rates consistent with what my understanding is?

Yeah. The industry standard for our kind of technology tends to be in sort of the 8% level of churn.

We are running significantly lower than that. We are very pleased.

Where there has been churn has tended to be either customers who did not get further grant money and they were unable to continue Or in some cases, for other business reasons, they had to move to more traditional screening mechanisms. But our churn is very low and from my perspective, I am actually interested and we will get those numbers for you, Steve, around how many customers are repeat customers and expanding customers and what that looks like.

Great. Thank you so much, guys.

Yes, Corey, Karen, you were going to say something. No, I think you covered it all.

Thank you, Peter. Thank you, Karen.

Hi, good morning, Peter and Karen. Thanks for taking my question.

Regarding the recent Willis ISD contract, could you confirm whether that would be primarily an upfront purchase or subscription arrangement? And also following the main and Willis wins, are you seeing increased inbound interest from other Texas school districts, particularly in light of HB3 funding?

So a couple of questions. Yes, it is or responses.

It is an upfront arrangement with Willis. And there will be, however, future recurring revenues for ongoing annual maintenance that we will be conducting with the customer.

In terms of increased interest in Texas schools, absolutely. And not only in Texas, but across multiple other states right now.

There is a, you know, continued unfortunate incidents across The US. There was just 1 in California.

Of course, Eden Prairie, and other schools, Bend, Oregon. And there is a tragedy that is occurring across The US, and we are seeing as a result of that significant interest in what we do with XtractOne Gateway.

Great. Thank you.

Hi, good morning guys. Thanks for the time.

Peter, I am curious, can you provide us a bit of an update on the channel partner strategy and, what you are seeing there?

Yes. Scott, it is a good question.

We are seeing results kind of fall into sort of 3 different camps. We have a quality set of partners who were actively out marketing promoting, selling our solutions into their installed base of customers.

And keeping their ears and eyes open. We like that.

They are leading into the opportunity to what they see as a market opportunity that they too wish to take advantage of and position themselves strongly and so we spend. We double down on our time with those partners.

They are bringing us not only opportunities domestically, but also internationally. Have a second tier who are a little more opportunistic, and we continue to nurture those.

They tend to do, you know, smaller deals spread throughout the year. And we are very pleased to serve those.

And then there is a group, which is more where we have got them in a kind of a marketing mode, keeping them aware of all of our updates. They tend to be even more opportunistic.

We are finding that we fit a nice sort of steady state with the partners. They are contributing to our business and our business growth.

But they tend to be more aligned to the segments of customers who do not have a chief security officer and do not have all the infrastructure and they rely heavily on their partners to provide that expertise and objective recommendations about the right solutions to meet their business needs. So different segments, tend to want to always work directly.

We are happy to serve them. Different other segments tend to rely very heavily on the partners and what we have done is made sure that we are aligning with those partners who understand the uniqueness and complexity of our solution as well as the fact that it requires people and processes to be engaged correctly.

And those partners are serving us very well right now as well as the customers.

Great. that is helpful.

And then I want to ask about international expansion. I am curious, are you seeing similar trends internationally as to what you have seen as the company has developed here in North America?

I mean, is it the same track, I guess, very much so, Scott. I think here in North America, we saw the first early adopters tended to be in the sports stadiums, arenas, and live entertainment environment.

And then the next markets to kind of pull on us were the health care organizations, the manufacturing organizations, followed by the schools. We are starting to see the same thing internationally.

Whether it is Asia or Europe or The UK. It seems that the primary interest and those with buying intent are in the sports stadiums and arena environments.

But we are now starting to see that shifting a little bit towards more office locations, manufacturing locations, particularly, and to a lesser degree, some healthcare. So we are seeing that same sort of wave of segment by segment in terms of their maturing from interest to buying intent.

Working its way through the segments in the same pattern as we saw in North America.

Okay. Perfect, Peter.

And then last 1, just on school safety. What are you seeing in terms of federal or state grant programs directionally more of them, fewer of them?

And how do they impact deal timing, either positively or negatively?

I think it is. We do see, for example, Texas passed funding program of about $430 million following the unfortunate Uvalde event.

For school safety. Now it is not it is not calling out our technology specifically.

That could be cameras. It could be locked doors.

It could be bulletproof glass. It could be any 1 of a number of different items associated with school safety.

Pennsylvania recently had a couple of hundred million dollar application Georgia, of course, is working its way through actually legislating that, you know, all schools will be protected. And recently, a law passed in Virginia that made it illegal to carry a weapon into a health care organization.

So various types of funding activities or legislative activities are all starting to move towards making this a mandatory thing versus you know, an afterthought. And so that legislative tailwind is really pushing on a lot of opportunity for us.

What we find is with. When the grant monies are applied, more often than not, that puts the school in the position of selecting the right technology then getting the right quote from that vendor.

And then using that quote to apply for the grant money. And so it becomes less of a price sensitive scenario versus a school has to self fund.

So we applaud those states who are putting grants in place to protect the schools. But also allows us to put our best foot forward with our right solution for the customers.

Great. that is very helpful.

I appreciate the added color, guys. Thank you very much.

Always a pleasure, Scott.

Hi, Peter and Karen. Thanks for taking my questions here.

I was curious on what the product versus subscription mix was in the quarter and then also the year. And then on the subscription side, what is the typical payback period to XtractOne on those Karen, I will let you take that 1.

Hi, Alex. Nice to hear you.

Thanks for joining the call. So the mix had changed quite a bit throughout the year.

We tend to look at bookings as the best indicator rather than from a revenue standpoint because it is sort of diluted by the contractual backlog moving over. But from a booking standpoint, we had quite a bit of variation throughout the year.

How we ended up the year was around 70% upfront and 30% subscription. And the main reason that we think that driving that is the industries that we have been dealing with throughout the year.

Peter mentioned the scenario of school from the government grants. Those deals tend to be upfront deals because of the grant funding that is available.

Same with a lot of commercial opportunities, they tend to pay for them upfront, whereas sports and entertainment tends to be subscription. And so I think that, we were not particularly surprised by that split for the year, although there was quite a bit of variation throughout the year.

Going forward, I think we are going to see similar trends and we are going to continue to deal with that variation. But I think it is important for us to meet the customer where they are at.

And offering 2 solutions or 2 business models is really the way to go, and it has a big impact on the success of the deal. And so we will continue to do that going forward.

Awesome. And then another question on the California mandate.

It might be hard to quantify, but what percent of hospitals would you say have implemented weapon detection screening to date, And then I imagine we should witness maybe an acceleration of purchase purchases through March. Instead of earlier?

Well, I think, you know, if the world was perfect, we might see that acceleration, but sometimes some of these organizations have to work through many different policy activities or budgeting activities. They may be mandated to do something, but they may not have the budgets in place.

And so there are--there might be some cases where there is exceptions. In terms of the percentage who have already deployed, I do not have an exact number, but based anecdotally on all the engagements that we have, I have been out to California several times myself.

We have got a team that is very focused there. I would estimate that we are probably under 10%-15% penetrated or deployed across all the health care organizations but it is really hard to know because not everyone wants to announce publicly what moves they have made.

That makes sense. 1 final question.

So as you scan more people, you are going to amass more data. Is there a simple way to think about how that data improves your models and systems.

And it might be granular, but I am curious if you could paint it with broad strokes. You know, for example, 1 million people scanned is maybe a 1% increase in capability.

It does not quite translate that way. There is not a direct correlation.

You have to be intentionally gathering the data for the purpose of improving the models. And just saying it bluntly, Alex.

that, you know, any organization that says the systems are self learning is lying. Let's just get that on the table.

An individual walks through a system with a tuba and somebody walks through with a machete, the system, unless it is got cameras that actually can see those items out in the open and it is doing recognition, will not understand that it was a machete in the backpack or a tuba in the backpack. So there is a degree of human involvement required to categorize the items and create that data collection model.

Then, of course, you wanna integrate that into your overall AI algorithms so you do not have each individual customer with their own orphan software load based on who walked through their system and who did not. You know, that keeps your operating model very simple.

Your support model is very simple, and everyone's on a common load and benefiting from the same AI software. So there is an ability to gather data, is an ability to gather data on a continuous basis, but you have to understand what that data is.

Is the data related to benign objects or is it related to weapons? And then categorize it, and that requires some human activity in the process.

Understood. Thank you, guys.

Thank you.

Well, thank you, everyone, for joining us. As always, it is a pleasure to be doing these calls with the team and provide an update on everything we are doing in XtractOne.

Our fiscal 26 was a great year for the company and we have proved that we could scale with a record $28.8 million of revenue. And, of course, the second half most importantly to me was essentially adjusted EBITDA breakeven.

We have a great backlog of pending installations, We have got a great set of converted installs for customers that will take advantage of that pending installation to predict to drive into future revenues. And we saw doubling of our revenues over the past year while controlling our ongoing operating expenses, which is a leverage model that we are very proud of.

Most importantly, we are very, very proud of the customers that we serve who have become strong advocates for what we do. And are becoming our greatest source for growth for the company.

I would like to thank everyone for joining us today, our investors, our team at XtractOne, and particularly our customers for the ongoing support of what we have done. Thank you so much.