Metatek-Group (TSX:MTEK) released fourth-quarter financial results and hosted an earnings call on Tuesday. Read the complete transcript below.

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Full Transcript

Mark

The momentum we've seen is reflected in the growth of our Adjusted Backlog. Since early March, Adjusted Backlog has increased by approximately 23 million USD to around 69 million. Importantly, that increase was driven primarily by repeat business with an existing nation state customer in Africa. That's a pattern we see consistently. Clients typically begin with a regional survey, then return to high grade priority areas and over time the work evolves into broader multi year programs. To date, every customer we've worked with has signed up for repeat work and our Adjusted Backlog continues to provide visibility into what we expect to convert over the next 12 to 18 months. Our results are driven primarily by how we deploy and sequence capacity rather than by underlying demand. Therefore, growth in the business is not linear. Through the year, activity builds as systems are deployed and projects progress, which means results tend to be weighted towards the middle and back half of the year in early 2026. That dynamic reflects deployment timing and external factors. Our second system, the DFTG system, was deployed during the second half of Q1 to its first customer, contracted in the UAE and operated as planned, completing approximately 12% of the scheduled data acquisition before the project was paused due to regional events. We have now agreed with a client to return once conditions are low, and in the meantime, the DFTG system is being redeployed to another region with its next project expected to begin in the second quarter. Importantly, this kind of flexibility is fundamental to how we operate the business as we routinely move capacity across regions and as conditions evolve. The ability to redeploy systems, manage risk and keep assets productive across regions is exactly how we nearly doubled our revenue in 2025. To summarize, fiscal 2025 was the year Metatek-Group showed that its operating model works at scale, and this model is ready to be expanded today. Demand is not the constraint. Capacity is. With two instruments now in the field and a growing backlog driven by repeat soaring customers, the opportunity ahead is about execution and scaling that capacity against sustained demand. Through our recent IPO, we successfully raised the capital we set out to raise, giving us exactly what we need to execute our plans. That capital strengthens our balance sheet and allows us to accelerate deployment, add capacity, and convert backlog in a disciplined way as the business scales. With that, I'll turn it over to Nick., who will walk through the financial results in more detail, discuss capital allocation, and provide additional color on geographic performance, margins and costs. Nick.

Nick

thanks Mark. I'll spend a few minutes walking through the financials, but rather than running line by line through the income statement, I wanted to focus on what actually mattered during 2025, what drove the results, what changed structurally in that business, and how that sets us up for future Full-year revenue for 2025 was 23.7 million, up 99% year over year. From a geographic standpoint, the mix shifted materially through the year. Approximately 59% of revenue was generated in Southeast Asia compared with 2024 when Africa represented 58% of revenue. That shift reflects the greater diversification of our client base and the expanding number of regions where we're executing sovereign level programs. What 2025 clearly demonstrated is the revenue generating capacity of a single system when it's deployed consistently against sufficient backlog. Almost 90% of the 23.7 million revenue was generated by the ESTG alone, operating across multiple regions over the course of the year at steady utilization. One system is capable of generating in the order of 20 to 25 million of annual revenue depending on project mix and operating conditions. And that's not theoretical, that's what we delivered in practice in 2025. Looking specifically at the fourth quarter, revenue was 7.5 million, up 69% year over year, driven primarily by work in Southeast Asia. That included project activity across Malaysia and Singapore and illustrates our ability to work across multiple nation state customers within a region and keep a system productively deployed as projects move through different phases. Achieving this level of income with one system is important because it shows how the business grows from here. As we move into 26 and 2027, growth is driven less by changing the model, but more by adding capacity. The DFTG as Mark described is now in service, having deployed recently in the second half of Q1 and our older ISTG instrument, which is currently being refurbished by Lockheed Martin and is capable of adding further revenue capacity of a similar order of magnitude is targeted for deployment at the beginning of 2027. Moving down the income statement, gross profit for the year was 14.2 million, or 60% of revenue, compared to 51% for the prior year and for the fourth quarter represented 62% of revenue. The margin expansion is primarily a function of scale and utilization, and we are pleased to have gross profit margins already at our long term operating target. It's also worth noting that gross profit reflects the direct operating cost of running the aircraft and instruments, including crews, logistics, insurance and maintenance required to keep those assets productive in the field. In addition, certain projects executed through local partners, including work in Nigeria, carry a different cost structure where some in country costs are borne by the partner. In those instances, cost reported revenues are lower, but our gross margins are higher. Adjusted EBITDA for the year was 9.2 million, representing an adjusted EBITDA margin of 39% compared with 18% in 2024. For the fourth quarter, adjusted EBITDA margin was 44%. As we add more instruments, we expect operating leverage to drive margins up towards the 50% range over time. It's also important to note that adjusted EBITDA reflects the operating cost of running the aircraft and instruments in the field, including costs that in some asset heavy businesses are often catalyzed rather than expensed. For example, adjusted EBITDA includes maintenance costs on the aircraft and the instruments. As a result, a higher proportion of adjusted EBITDA converts to positive operating and free cash flow which is a key feature of the model as capacity scales. In fiscal 2025 we generated $7.3 million in cash from operating activities, which compares well to the $9.2 million of adjusted EBITDA. This cash flow was used to support $1.2 million in CapEx to build out of the new DFTG and paid down $2.8 million of debt below EBITDA. It's worth understanding the material costs associated with the revaluation of the debentures and their associated warrants. These debentures were issued in 2024 to support the purchase of instruments. With the increasing value of the company since then, the greater the value accrued to the debentures and this is shown as a finance cost through the profit and loss and a current liability on the balance sheet. These debentures and warrants were converted as part of the recent IPO. Now turning to the balance sheet at 12-31-25, we ended the year with 1.4 million pounds of cash and borrowings of 6.5 million with the gross proceeds from the IPO in March raising 35 million Canadian dollars. We used a portion to pay down the outstanding borrowings. The remaining capital is being directed towards the next phase of capacity expansion. This includes the initial milestone payments on two new EFTG instruments, our highest resolution system with cash flow funding, the remaining build costs over the next two to three years and the final use of the IPO proceeds is the refurbishment and redeployment of the IFTG into the marine environment. With this investment funding, the next stage of growth and debt paid off, the balance sheet is well positioned to support disciplined growth as additional systems come online. To Sum It Up, 2025 demonstrated the operating and financial model at scale strong revenue growth driven by utilization, expanding margins, high cash conversion and a growing backlog to support additional capacity. Our focus now is on disciplined execution, converting backlog into profitable growth as additional capacity comes online. We're now ready to open the call for questions. Operator.

Operator

Thank you. We'll now begin the analyst question and answer session. To join the question queue, you May press star then 1. On your telephone keypad, you'll hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press Star then two. Our first question is from Aravinda Galafatige with Canaccord Genuity. Please go ahead.

Aravinda Galafatige

Thanks for taking my questions and congrats on the IPO. I'll start with the backlog. You know, nice addition there. Up to March. Can you perhaps sort of revisit the pipeline? Talk about sort of, you know, to the extent that you can, conversations that are being had and the prospect of sustaining that backlog even as you convert components of it back into revenue? Perhaps start there?

Mark

Okay, maybe I'll start on that and Nick will follow after it. Well, yeah, as you said, we added 22.5 million dollars to that adjusted backlog. And you know, it's safe to say that the sales process is often, you know, 12 months, 18 months. So we knew that was in our pipeline and it was just a case of bringing that forward and executing the final bit of the contract or the final contract for that. We have an exceptionally strong kind of pipeline in the hundreds of millions of dollars. And what we're going to do is over the next kind of 12 months, similar sized projects will be converted to our adjusted backlog. Nick, do you want to add anything to that?

Nick

I think the only thing to say is that current backlog will be delivered over the next 12 to 18 months. So as Mark says, the size of the project dropping in during that time should allow us to keep growing the backlog as we continue and then deliver instruments against it. Great, thank you. And then just to get a sense of the cadence through the year, given some of the realignments on account of the geopolitical tensions, can you talk about what your expectations are in terms of how kind of top line would

Mark

The various, the seasonality, I guess, would play out and then connect it to that, how the gross margins would move around as well. Just a sense of the cadence there, please. So I'll start on the geographical side of it. It is something that we put mitigation measures in place and operating procedures, not just with kind of geopolitical activity that's going on at the moment, but also from awareness standpoint. So operationally we do shift the instrumentation and systems around according to geographical locations and should we have to pivot due to any events, with the strong backlog that we have, we can pivot to effectively the next taxi off the rank. Nick, do you want to talk about cadence and how that converts?

Nick

Yeah, sure. I think you're absolutely right and we've mentioned it before that it is a lumpy project based business. So within the sort of tight confines of quarters you're going to get big variances. And if you look at last year, the second half of the year was much stronger than the first half of the year. That's also partly driven by the budget cycles of our clients. So we always anticipate sort of Q1 to be the lowest quarter and then it builds throughout the year and the margins we look at on an annual basis. So yes, of course there's going to be some variance alongside top line variance on a quarter by quarter basis. Thank you.

Aravinda Galafatige

And then perhaps just a quick follow up for Nick with respect to the CapEx, you know, the installments that you had to make on the upcoming instruments, can you just remind us what those pieces are and potentially what the annual number could be?

Nick

Sure, yes. So we obviously raised capital in the IPO and the use of those proceeds was initially the first one was to pay down the debt as we mentioned here, and that's actually been done. The next item was to put the first milestone payments on the new EFTG instruments. So these ones we're in discussion with Lockheed now and we expect to get that first payment that's going to be sort of in the region of around $5 million in the next month or so. And then it's all about the refurbishment redeployment of the IFTG, which will be $13 million plus and that's expected to occur over this year. So we can deploy that instrument by first thing 2027. So in total, the CAPEX for this year across those, those main items is going to be in sort of $25 million plus region.

Aravinda Galafatige

That's helpful. And is there anything we should think about from a working capital perspective that that's material? I mean it hasn't been in the

Nick

past, but just no, yeah, obviously we keep an eye on things. We're pretty good with our clients. They are government clients and I know that, you know, typically people start to ask questions on working capital constraints with government type entities, but we keep milestone payments throughout our contracts. We have deliver and it allows Us to keep a fairly tight rein. So we're not anticipating anything too bad over the year.

Aravinda Galafatige

Okay, great. Thank you. I'll pass the line. All the best. Thanks.

Operator

The next question is from Russell Stanley with Beacon Securities. Please go ahead.

Russell Stanley

Good afternoon. Thanks for taking the question. Just with respect to the DFTG system and the disruption the UAE, I'm wondering your outlook for 26, how many distinct projects do you have currently scheduled? Understanding where the backlog is. I'm just wondering how many different project transitions you might need to make.

Mark

Well, the first thing is to say that in North Africa, Middle east, we only had one project, which was the one that was in uae. The other projects are Sub Saharan Africa, South Africa and Southeast Asia. The size of those projects, you know, does vary. And Nick, do you want to say something on the size and the quantum.

Nick

Yeah. Looking across, broadly speaking, we always say about our projects, we're aiming to be in country and operating for sort of no more than two months. Put mobilization on that, I would always think, and plan for sort of a project. A quarter is a good rule of thumb. Sometimes there are longer projects, but I think with the two instruments working fully from Q2, you can sort of do the maths on how that would work out. Two instruments and three quarters from that point forward. Historically, project value can vary quite a bit. So last year I think our smallest project in value terms was about 2.4 million, 2.5 million and our largest project was about 10 million. So again, that speaks to the lumpiness that we can get at the top line.

Mark

And I would just add one thing to that as well, is that we try and enforce the duration of the project. We have these multi phase, multi year programs and some of our clients would like us to get through that in one go. But what we try and do is constrain them to anywhere between four and six weeks maximum so that we can move on to our next client. But again, going back to the geographical kind of positioning, we would lump projects geographically so that we would minimize that mobilization time.

Russell Stanley

That's great. Color maybe my next question, just around the orders for additional EFTG systems, the milestone payments coming up, I guess. When would the rest of that associated CAPEX be due to?

Nick

Yeah, Nick, that's one for you. Yeah, sure. So typically we work with Lockheed and that's what we're negotiating at the moment to work out the milestone payments and the cadence of that investment. But from our experience previously, it's pretty steady throughout the build time. So if you're looking at two to two and a half years for an instrument, you're going to spread that, you know, 13 to 15 million dollars relatively evenly across that period.

Russell Stanley

Maybe one more for me and I'll hand it off. Just on the, on the over year revenue growth doubled on a really modest increase in opex. And you talk about where your long term EBITDA margin should come out. Just wondering what kind of OPEX increase you're expecting in 26 with you know, cost of being a public company on top of whatever, whatever real growth you envision. Thanks. Yeah, go ahead.

Nick

Yeah, sure. So as we said, our gross profit margin. So just look at the top of the P and L. The gross profit margin was 6% last year and we hope to do a bit better than that. But our target is always 60%. So let's see how the year turns out on that with the increase in growth. You're absolutely right. I think if the direction of your question was. Yet we built in more costs being a public company. So that's going to sit between the gross profit margin. That EBITDA line we achieved 39% last year on our EBITDA margin. We have stated we want to get to 50% and we believe that's possible this year. So that does take into account those increased costs that we're going to see as a public company.

Russell Stanley

Okay, that's all for me. Thanks and congrats again. Thank you.

Operator

As there are no further questions, this concludes the question and answer session. I'd like to turn the conference back over to Dr. Mark Davies for closing remarks.

Mark Davies

Yes. Well, thank you everyone for joining our first reported event and I look forward to doing the same in mid May for our first quarter report. Thank you everyone.

Operator

This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.

Summary

Metatek-Group reported a significant increase in adjusted backlog by $23 million, reaching $69 million, primarily driven by repeat business with a customer in Africa.

Revenue for fiscal 2025 was $23.7 million, up 99% year-over-year, with 59% of revenue from Southeast Asia, demonstrating strong geographic diversification.

The company successfully raised capital through an IPO, strengthening the balance sheet and enabling capacity expansion with plans to deploy additional instruments and refurbish existing ones.

Gross profit margin improved to 60%, driven by scale and utilization, while adjusted EBITDA margin increased to 39%. Future guidance suggests a target EBITDA margin of 50%.

Management emphasized the non-linear nature of growth due to project timing, and highlighted the ability to redeploy systems across regions as a key operational strength.

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