Q2 2026 NTG Clarity Networks Inc Earnings Call

August 28, 2026

Speaker #1: Tuning in for our Q2 2026 earnings conference call. I want to start off the call before I get into the financial and operating results.

Adam Zaghloul: Tuning in for our Q2 2026 earnings conference call. I want to start off the call, before I get into the financial and operating results, I want to announce that we are unfortunately withdrawing our fiscal 2020 financial guidance, and that includes both the CAD 90 million revenue floor and the 13% to 16% adjusted EBITDA margin range. We are not going to be able to issue any sort of replacement guidance at this time, but the outlook that we posted towards the beginning of this year assumed that clients would continue to renew and release their contracted project work throughout the rest of 2026 at the pace similar to what we have seen historically. While revenue was stable through March, April, and May, in June, clients definitely slowed their project releases and decision-making, and June billings were below our expectations.

Speaker #1: I want to announce that we are, unfortunately, withdrawing our fiscal 2026 financial guidance, and that includes both the $90 million revenue floor and the 13% to 16% adjusted EBITDA margin range.

Speaker #1: We're not going to be able to issue any sort of replacement guidance at this time, but the outlook that we posted toward the beginning of this year assumed that clients would continue to renew and release their contracted project work throughout the rest of 2026, at a pace similar to what we've seen historically. While revenue was stable through March, April, and May, in June clients definitely slowed their project releases and decision-making, and June billings were below our expectations.

Speaker #1: So the outlook was last reaffirmed in late May, before that operation had, before that observation, sorry, had been taken place. So the geopolitical situation in the Middle East is definitely the driving force behind this, and I'll speak a little bit more about that in a moment.

Adam Zaghloul: The outlook was last reaffirmed in late May before that observation had been taking place. The geopolitical situation in the Middle East is definitely the driving force behind this, and I will speak a little bit more about that in a moment. Without any sort of clarity on when this conflict is going to be resolved and when the Saudi economy can return to growth, it is hard for us to forecast our customer needs and our customer behavior. Some clients have continued full steam ahead on their plans or even renewed and even expanded their engagements with us. Others have taken a much more cautious and conservative approach. Our profitability is really dependent on the utilization of our resources as well as top-line revenue.

Speaker #1: But without any sort of clarity on when this conflict is going to be resolved, and when the Saudi economy can return to growth, it's really hard for us to forecast our customer needs and our customer behavior.

Speaker #1: So some clients have continued full steam ahead on their plans, or even expanded their, you know, renewed and even expanded their engagements with us.

Speaker #1: But others have taken a much more cautious and conservative approach. You know, our profitability is really dependent on the utilization of our resources as well as top-line revenue, so any change in that sort of revenue profile really has a disproportionate impact on our adjusted EBITDA margins and our profitability.

Adam Zaghloul: Any change in that sort of revenue profile really has a disproportionate impact on our adjusted EBITDA margins and our profitability. That revenue trend throughout the rest of the year will be the main driving force behind our profitability, our adjusted EBITDA. I also want to highlight that while there was a little bit of a downtrend in June, subsequent to quarter end in July, we had much stronger revenue billings and collections. The reason behind withdrawing the guidance really is due to the uncertainty and not being able to put forward guidance that we can confidently stand behind and not because we are seeing a consistent downward trend. I just wanted to make that clear off the top. I will talk about the geopolitical situation specifically. Basically, in late February, the conflict escalated and crude exports from the Gulf region were pretty severely disrupted.

Speaker #1: And that revenue trend throughout the rest of the year will be the main driving force behind our profitability, our adjusted EBITDA. I also want to highlight that, while there was a little bit of a downtrend in June, really subsequent to quarter-end in July, we had much stronger revenue, billings, and collections.

Speaker #1: So the reason behind withdrawing the guidance really is due to the uncertainty and not being able to put forward guidance that we can confidently stand behind, and not because we're seeing a consistent downward trend.

Speaker #1: So I just wanted to make that clear off the top. I'll talk about the geopolitical situation specifically. Basically, in late February, the conflict escalated, and crude exports from the Gulf region were pretty severely disrupted.

Speaker #1: You know, the initial concern was a direct operational impact to our own Saudi work, but that did not happen. Our delivery teams really operate, you know, out of Egypt primarily, but even the ones in Saudi are operating outside of the affected areas, and we've been able to continue our work without interruption.

Adam Zaghloul: The initial concern was a direct operational impact to our own Saudi work, but that did not happen. Our delivery teams really operate out of Egypt primarily, but even the ones in Saudi are operating outside of the affected areas, and we have been able to continue our work without interruption. What has happened is really the fiscal picture has changed. Saudi oil activities fell about 25% year over year in the second quarter, and Saudi real GDP fell by almost 5%. We are not technically an oil business, but there really are few businesses in Saudi Arabia that are immune to this kind of impact. Non-oil activities actually grew in Q2 about 0.6% year over year, but that is down 2.9% in the first quarter, and it really was down on a sequential basis for non-oil activity. Oil receipts fund the government and government-affiliated technology budgets that we serve.

Speaker #1: What has happened is, really, the fiscal picture has changed. Saudi oil activities fell about 25% year-over-year in the second quarter, and Saudi real GDP fell by almost 5%.

Speaker #1: Now, we're not technically an oil business, but there really are few businesses in Saudi Arabia that are immune to this kind of impact. Non-oil activities actually grew in Q2 about 0.6% year over year, but that's down from 2.9% in the first quarter, and it really was down on a sequential basis for non-oil activity.

Speaker #1: Oil receipts fund the government and government-affiliated technology budgets that we serve. So really, you know, these oil receipts set the large budgets that our customers are setting for technology.

Adam Zaghloul: So really, these oil receipts set the large budgets that our customers are setting for technology, and it is usually a tailwind for the economy that we have seen really in recent years. When those receipts fall, like we have seen this year, our customers definitely get more cautious with cash. They extend their projects and payment timelines, and we have seen both of that in both of our revenues and collections this quarter. We are still receiving renewals and new POs with our customers, and we are still receiving customer payments as well. Q3 specific POs to date are about CAD 33.4 million, and that is more than the whole of Q2 by a large margin. Both revenue and collections were materially higher in July than in June, as I mentioned on the last slide too.

Speaker #1: And it's usually a tailwind for the economy that we've seen, really, in recent years. But when those receipts fall, like we've seen this year, our customers definitely get more cautious with cash.

Speaker #1: They extend their projects and payment timelines, and we've seen that in both our revenues and collections this quarter. We're still receiving renewals and new purchase orders from our customers, and we're still receiving customer payments as well.

Speaker #1: Third quarter, specifically, purchase orders to date are about $33.4 million, and that's more than the whole of second quarter by a large margin. Both revenue and collections were materially higher in July than in June, as I mentioned on the last slide too.

Speaker #1: But what we're seeing is a much more cautious approach to forecasting, both in terms of the duration and the possible conclusions to the conflict in the Middle East.

Adam Zaghloul: What we are seeing is a much more cautious approach to forecasting at both the duration and the possible conclusions to the conflict in the Middle East. With that level of uncertainty really around, we do not think it is prudent to issue an updated guidance at this time. We will move over to the financial results here. Q2 revenue was CAD 20.1 million, up 6.4% from CAD 18.9 million in Q2 2025. In one sense, it is reassuring to point out that NTG Clarity's revenue are growing year-over-year faster than the Saudi economy as a whole. The H1 revenue was CAD 41.4 million, up 7.3% year-over-year. That is a H1 record for the company and another quarter of last 12 months revenue growth. However, revenue declined by about CAD 1.2 million sequentially from Q1 to Q2.

Speaker #1: So, with that level of uncertainty really around, we don't think it's prudent to issue updated guidance at this time. So we'll move over to the financial results here.

Speaker #1: Q2 revenue was $20.1 million, up 6.4% from $18.9 million in Q2 2025. So, in one sense, it's reassuring to point out that NTG's revenues are growing year over year faster than the Saudi economy as a whole.

Speaker #1: First half revenue was $41.4 million, up 7.3% year-over-year. That is a first-half record for the company and marks another quarter of last-12-months revenue growth.

Speaker #1: However, revenue declined by about $1.2 million sequentially from Q1 to Q2, and back in Q1 we had a decline as well, which I had attributed to the slowdown around the holiday season—Ramadan and Eid al-Fitr.

Adam Zaghloul: Back in Q1, we had a decline as well, which I had attributed to basically the slowdown around the holiday season, Ramadan and Eid al-Fitr. We guided back in Q1 that revenue would recover a little bit back in Q2 and return to sequential growth. That did not materialize, really due to a slowdown in the conversion of POs issued against both our framework agreements and renewals and new work, really in the last month or so of Q2. I mentioned before a couple times now, revenue in July was materially higher than our June revenue, and we really are maintaining a strong base of work with our existing customers and even getting new work from new customers. I want to stress that our withdrawal of guidance really is due to the uncertainty around the situation and the difficulty in forecasting.

Speaker #1: And we guided back in Q1 that revenue would recover a little bit in Q2, and that we'd return to sequential growth. That didn't materialize.

Speaker #1: This was really due to a slowdown in the conversion of purchase orders issued against both our framework agreements and renewals and new work, particularly in the last month or so of Q2.

Speaker #1: Now, I mentioned before, a couple of times now, revenue in July was materially higher than our June revenue, and we really are maintaining a strong base of work with our existing customers, and even getting new work from new customers.

Speaker #1: So, I want to stress that our withdrawal of guidance really is due to the uncertainty around the situation and the difficulty in forecasting. Also, gross margin for the quarter was 33.5%.

Adam Zaghloul: Gross margin for the quarter was 33.5%. That is up from 33% in Q1, but it is down year-over-year as we have seen customers push for better pricing terms with the conflict backdrop, really. We will move on to profitability. Q2 adjusted EBITDA was about CAD 5,000, effectively 0% margin. That compares to about CAD 800,000 in Q1 of 2026, and that compares to about CAD 3.8 million in Q4 of 2025. Really operating leverage is the main driver behind our adjusted EBITDA. Across these three quarters, our total cost base, so that is the COGS plus the G&A plus the S&M, really were effectively flat. You can see CAD 20.1 million, CAD 20.6 million, CAD 20.2 million. Really over the course of those three quarters, we saw a little bit of a revenue decline from CAD 23.9 million in Q4 down to CAD 20.1 million in Q2.

Speaker #1: That's up from 33% in Q1, but it is down year over year, as we've seen customers push for better pricing terms with the conflict backdrop, really.

Speaker #1: We'll move on to profitability. Q2 adjusted EBITDA was about $5,000, effectively a 0% margin. That compares to about $800,000 in Q1 of 2026, and that compares to about $3.8 million in Q4 of 2025.

Speaker #1: So really operating leverage is the main driver behind our adjusted EBITDA. Across these three quarters, our total cost base, so that is the cost of sales plus the G&A plus the sales and marketing, really were effectively flat.

Speaker #1: You can see $20.1 million, $20.6 million, $20.2 million. But really, over the course of those three quarters, we saw a little bit of a revenue decline from $23.9 million in Q4 down to $20.1 million in Q2.

Speaker #1: So that $3.8 million revenue decline against a flat cost base is really the entire movement in our adjusted EBITDA. So, at the end of the day, over about $1 million per month of salary costs are currently sitting in G&A because those staff are not assigned to billable work with our customers.

Adam Zaghloul: That 3.8 roughly million dollar revenue decline against a flat cost base is really the entire movement in our adjusted EBITDA. At the end of the day, over about CAD 1 million per month of salary costs are currently sitting in G&A because those staff are not assigned to billable work with our customers. When those resources are assigned, they are reclassified to cost of sales, and there is no incremental expense for us to begin billing revenue. It is cost that we are already carrying. That really is consistent with what we have seen over the last two or three quarters, where de-leveraging of our revenue really impacts the adjusted EBITDA line basically on a one-to-one basis. Also talk about net income.

Speaker #1: When those resources are assigned, they're reclassified to cost of sales, and there's no incremental expense for us to begin billing revenue. It's cost that we are already carrying.

Speaker #1: You know, that really is consistent with what we've seen over the last two or three quarters, where deleveraging of our revenue really impacts the adjusted EBITDA line basically on a one-to-one basis.

Speaker #1: I'll also talk about net income. Net income for the quarter was about $2.3 million, and that figure includes approximately $1.8 million of tax recovery from the conversion of our Saudi branch into an LLC.

Adam Zaghloul: Net income for the quarter was about CAD 2.3 million, and that figure includes approximately CAD 1.8 million of tax recovery from the conversion of our Saudi branch into an LLC, and that is basically to avoid having to pay double tax in Saudi Arabia and in Canada. That is really non-recurring, so it shouldn't be taken as any sort of operating performance. We also benefited from foreign exchange a little bit in Q2, and that is also backed out of our adjusted EBITDA as well. Our Q2 profitability really begs the question, why are we carrying so much non-billable delivery capacity? For that, we have to explore our order load. I mentioned Q3 saw a great deal more POs than Q2. Q2 purchase order announcements was about CAD 12.3 million. Third quarter announcements today were about CAD 33.4 million.

Speaker #1: And, you know, that's basically to avoid having to pay double tax in Saudi Arabia and in Canada. That is really non-recurring, so it shouldn't be taken as any sort of operating performance.

Speaker #1: We also benefited from foreign exchange a little bit in Q2, and that is also backed out of our adjusted EBITDA as well. Now, our Q2 profitability really begs the question: why are we carrying so much non-billable delivery capacity?

Speaker #1: And for that, we have to explore our order flow. I mentioned—you know, Q3 saw a great deal more POs than Q2. Q2 purchase order announcements were about $12.3 million.

Speaker #1: Third quarter announcements today were about $33.4 million. That includes some of the first purchase orders against that new framework agreement that we signed in March with a large real estate developer in Saudi Arabia.

Adam Zaghloul: That includes some of the first purchase orders against that new framework agreement that we signed in March with a large real estate developer in Saudi Arabia, following basically their full proposal and evaluation process. Engagements like that really start with a relatively small placement and grow over the course of their lifetime. Our thinking is guidance effectively needs us to be able to forecast when work is going to be billed. Holding our capacity really only requires a view on cash flow and whether or not the work exists in the first place, right? We have signed these multi-year agreements with purchase orders still to come.

Speaker #1: Following basically their full proposal and evaluation process, engagements like that really start with a relatively small placement and grow over the course of their lifetime.

Speaker #1: And, you know, our thinking is that guidance, effectively, requires us to be able to forecast when work is going to be built. But holding our capacity really only requires a view on cash flow and whether or not the work exists in the first place, right?

Speaker #1: We've signed these multi-year agreements, with purchase orders still to come. We've got $33.4 million in purchase orders announced over the course of the quarter, and it's important to note that our backlog of purchase orders and contracts on hand has actually grown from $73 million in Q1 to about $80 million, where it sits today.

Adam Zaghloul: We have got this CAD 33.4 million in purchase orders announced over the course of the quarter, and it is important to note that our backlog of purchase orders and contracts on hand has actually grown from CAD 73 million in Q1 to about CAD 80 million where it sits today. That is definitely a positive leading indicator on our future work. That is really what gives us the confidence to maintain our current delivery capacity. We are winning engagements with some of the largest companies in Saudi Arabia. These are ones that we have experience growing from a small amount to even tens of millions of dollars annually. They still have long-term, robust digital transformation roadmaps ahead of them, and we are eager to work with them on that.

Speaker #1: So, that's definitely a positive leading indicator on our future work. So, that's really what gives us the confidence to maintain our current delivery capacity.

Speaker #1: We're winning engagements with some of the largest companies in Saudi Arabia. You know, these are ones that we've— we have experience growing from a small amount to even tens of millions of dollars annually.

Speaker #1: They still have long-term, robust digital transformation roadmaps ahead of them, and we're eager to work with them on that. Now, the macro environment is really, undoubtedly negative right now, and that's driven primarily due to lower oil revenue and the sort of follow-on impacts onto the economy because of that.

Adam Zaghloul: Now, the macro environment is undoubtedly negative right now, and that's driven primarily due to lower oil revenue and the sort of follow-on impacts onto the economy because of that. But the region's ambitions to modernize, digitize, diversify its economy have not gone anywhere, and we believe that our onsite and offshore delivery models can help deliver on some of these roadmaps, even if the timelines have been shifted slightly. I'll turn to the cash flow now. Q2 operating cash was an outflow of about CAD 4.6 million. Again, we're seeing our customers push billing to the extent that they're allowed to under the terms of their contracts. That includes delaying the release of invoices, which we see reflected in a little bit of growth in our contract assets line, so unbilled revenue line recently.

Speaker #1: But the region's ambitions to modernize, digitize, and diversify its economy really have not gone anywhere. And we really believe that our on-site and offshore delivery models can help deliver on some of these roadmaps, even if the timelines have shifted slightly.

Speaker #1: So I'll turn to the cash flow now. Q2 operating cash was an outflow of about $4.6 million. And again, we're seeing our customers push billing really to the extent that they're allowed to under the terms of their contract.

Speaker #1: That includes delaying the release of invoices, which we see reflected in a little bit of growth in our contract assets line—so, our unbilled revenue line—recently.

Speaker #1: But as of now, management has begun working with clients directly in a focused effort to speed up those collections. As a result, subsequent to quarter-end in July, we collected about $8 million Canadian.

Adam Zaghloul: As of now, management has begun working with clients directly in a focused effort to speed up those collections. As a result, subsequent to quarter end in July, we collected about CAD 8 million, and that's approximately half of Q2's total collections. That includes also the majority of accounts receivable aged over 60 days as of the report of Q2. Our focus is definitely on repeating that result every month until the end of the year to sort of moderate that impact on our working capital there. That brings me to where our attention is for the rest of the year. First, just doubling down on the point from the last slide, we want to convert the receivables, focus on converting those receivables. Collections move to escalation at the client level, direct executive negotiations, including new contracts.

Speaker #1: And that's approximately half of Q2's total collections. So that also includes the majority of accounts receivable aged over 60 days as of the report for Q2.

Speaker #1: So, our focus is definitely on repeating that result every month until the end of the year, to sort of moderate that impact on our working capital there.

Speaker #1: So that brings me to where our attention is for the rest of the year. You know, first, just doubling down on the point from the last slide—we want to convert the receivables, focus on converting those receivables.

Speaker #1: Collections have really moved to escalation at the client level: direct executive negotiations, including— you know, new contracts. We want to offer a little bit of early payment incentive on future work.

Adam Zaghloul: We want to offer a little bit of early payment incentive on future work. The key metrics that we're going to be keeping our eyes on are how that accounts receivable will move, days sales outstanding, how much of receivables from last quarter we're going to collect in this quarter, for example. Our second focus is going to be on converting the order book and returning to our growth trajectory. We're going to be watching POs received. We definitely got good signals so far in Q3, and really watching to see that total contracted backlog grow, which so far it's a positive signal that it's grown from Q1 to Q2 as well. Our operating model is proven in the past. Our fixed costs are there. Accelerating revenue to really get that sort of one-to-one profitability leverage is our top of mind.

Speaker #1: The key metrics that we're going to be keeping our eyes on are really—you know, how that accounts receivable moves, days sales outstanding, how much of receivables from last quarter we're going to collect in this quarter, for example.

Speaker #1: Our second focus is going to be on converting the order book and returning to our growth trajectory. You know, we're going to be watching purchase orders received; we've definitely got good signals so far in Q3.

Speaker #1: And really watching to see that total contracted backlog grow, which so far is a positive signal, as it's grown from Q1 to Q2 as well.

Speaker #1: So our operating model has been proven in the past; our fixed costs are there. So, accelerating revenue to really get that sort of one-to-one profitability leverage is really top of mind for us.

Speaker #1: And our last focus—or our last top priority—is to hold our expenses against our cash, right? So we're keeping our delivery capacity in place, as I mentioned, and we're reviewing it against cash every month.

Adam Zaghloul: Our last focus, or our last top priority, is hold our expenses against our cash. We're keeping our delivery capacity in place, as I mentioned, and we're reviewing it against cash every month. If collections don't support that sort of cost base, or if any of our client negotiations stall, we're going to have to explore cutting costs for sure. We're going to watch the cost base against revenue, and cash collections every month. Well, that brings me to the end of prepared remarks. I want to thank you for taking the time to listen to it. We're now going to open things up to a Q&A session. We're going to start with questions from our covering analysts and then move on to a few questions written in from investors ahead of the call.

Speaker #1: If collections don't support that sort of cost base, or if any of our client negotiations sort of stall, we're going to have to explore cutting costs, for sure.

Speaker #1: So, we're going to watch the cost base against revenue and cash collections, really, every month. That brings me to the end of my prepared remarks.

Speaker #1: I want to thank you for taking the time to listen to it. We're now going to open things up to a Q&A session. We're going to start with questions from our covering analysts, and then move on to a few questions written in from investors ahead of the call.

Speaker #1: So, if—again, like Ali mentioned at the beginning of the call—if you don't get your question answered, feel free to reach out to me.

Adam Zaghloul: If, again, like Ali mentioned at the beginning of the call, if you don't get your question answered, feel free to reach out to me. My email is on the screen, adam@ntgclarity.com, and I'll be happy to respond to you via email. But I think we'll get things started with covering analysts. I see Amar Ezzat from Canaccord Genuity is on the line. Amar, are you ready for any questions?

Speaker #1: My email is on the screen: adam@ntgclarity.com. I'll be happy to respond to you via email. But I think we'll get things started with covering analysts.

Speaker #1: I see Amar Ezzat from Canaccord Genuity is on the line. Amar, are you ready for any questions?

Speaker #2: All right, good morning. Can you hear me?

Amar Ezzat: Hi. Good morning. Can you hear me?

Amr Ezzat: Hi. Good morning. Can you hear me?

Speaker #1: Yes, we hear you. Good morning, Amar. How are you?

Adam Zaghloul: Yes, we hear you. Good morning, Amar. How are you?

Speaker #2: I'm very well. How are you, Adam? Adam, I—I want to start with the guidance. Last call, you guys went from characterizing, I guess, the $90 million revenue guidance as a floor that was largely supported by POs already in hand.

Amar Ezzat: Very well. How are you, Adam?

Amr Ezzat: Very well. How are you, Adam?

Adam Zaghloul: Been well, thank you.

Amar Ezzat: Adam, I want to start with the guidance. Last call, you guys went from characterizing, I guess, the CAD 90 million revenue guidance as a floor that was largely supported by POs already in hand. I do fully understand the geopolitical situation and the elongation of cycles. But I am wondering what specifically changed in June relative to May. Conversely, can you speak to why, in your opinion, July improved materially?

Amr Ezzat: Adam, I want to start with the guidance. Last call, you guys went from characterizing, I guess, the CAD 90 million revenue guidance as a floor that was largely supported by POs already in hand. I do fully understand the geopolitical situation and the elongation of cycles. But I am wondering what specifically changed in June relative to May. Conversely, can you speak to why, in your opinion, July improved materially?

Speaker #2: And I do fully understand the geopolitical situation and the elongation of cycles, but I'm wondering what specifically changed in June relative to May? Then, conversely, can you speak to why, in your opinion, July improved materially?

Speaker #1: Yeah, that's definitely a really good question, and it's worth exploring a little bit more. So really, what we saw happen in June was—we were running a relatively consistent revenue rate, let's say March, April, May—coming off of the holidays, as we had expected.

Adam Zaghloul: Well, that is definitely a really good question, and it is worth exploring a little bit more. Really what we saw happen in June was we were running a relatively consistent revenue rate, let us say March, April, May, coming off of the holidays, as we had expected. When we think about our revenue guidance, let us say, it is based off of the POs and contracts that we have on hand, but also renewals that we have a very high confidence in converting. Definitely in June was when a decent amount of, let us say, renewals came up for conversion.

Speaker #1: And when we think about our revenue—or our revenue guidance, let's say—it's based off of the POs and contracts that we have on hand, but also renewals that we have a very high confidence in converting.

Speaker #1: And definitely in June was when a decent amount of, let's say, renewals came up for conversion. And like I was mentioning maybe a little bit briefly on the call, definitely what we saw happen in June as that sort of Q2—let's say, you know, reduction in oil activity, reduction in revenue in Saudi happened—was our customers were, you know, more hesitant to renew their engagements at the same level that it was before.

Adam Zaghloul: Like I was mentioning maybe a little bit briefly on the call, definitely what we saw happen in June as that sort of Q2, let us say reduction in oil activity, reduction in revenue in Saudi happened, was our customers were more hesitant to renew their engagements at the same level that it was before. I think it is important to stress that this is not a huge trend that is across all of our customers. Some customers are continuing ahead with their roadmaps. They are continuing their engagements. They are expanding the sizes of them. Other ones either renew at a rate less than we had seen histor To get those resources billable again and see the revenue rebound that way. I just want to stress that the withdrawal of the revenue guidance especially really is in the face of uncertainty and not necessarily because we see a sustained downtrend going forward.

Speaker #1: So I think it's important to stress that this isn't a huge trend across all of our customers. Some customers are continuing ahead with their roadmaps; they're continuing their engagements, and they're expanding the sizes of them.

Speaker #1: Other ones either renewed at a rate less than we had seen historically, so we need to get those resources billable again and see the revenue rebound that way.

Speaker #1: So I just— I just want to stress that the withdrawal of the revenue guidance, especially, really is in the face of uncertainty and not necessarily because we see a sustained downtrend going forward.

Speaker #1: That's a really good question. Thank you.

Adam Zaghloul: That is a really good question. Thank you.

Speaker #2: Okay, maybe to follow up on that last point you made. You guys announced the $33 million of POs in Q3, which sounds very strong relative to Q2, but help us understand how much of that is truly incremental work versus renewals or replacements of expiring POs.

Amar Ezzat: Okay. Maybe to follow up on that last point you made, you guys announced CAD 33 million of POs in Q3, which sounds very strong relative to Q2. Help us understand how much of that is truly incremental work, versus renewals or replacements of expiring POs. How much would you expect to actually recognize as revenue during Q3 and Q4? Is that harder for you guys to estimate at this point?

Amr Ezzat: Okay. Maybe to follow up on that last point you made, you guys announced CAD 33 million of POs in Q3, which sounds very strong relative to Q2. Help us understand how much of that is truly incremental work, versus renewals or replacements of expiring POs. How much would you expect to actually recognize as revenue during Q3 and Q4? Is that harder for you guys to estimate at this point?

Speaker #2: Then how much would you expect to actually recognize as revenue during Q3 and Q4, or is that harder for you guys to estimate at this point?

Speaker #1: Yeah, it's definitely not something that I'd give a precise number on, but I understand from modeling—like, it's a really important point to get some clarity around.

Adam Zaghloul: Yeah, it is definitely not something that I would give a precise number on, but I understand for modeling, it is a really important point to get some clarity around. How we think about it internally is these PO announcements that we put out typically are on the duration of about one year. Any POs that are going to come around the midpoint of the year, you can very roughly assume that about half is going to be billed. There is basically going to be a flat billing profile to it. About half is going to be billed in the remaining year and half the subsequent year. What we also try to do with those releases is break out how much of it is new work versus customers renewing and expanding their engagements. That can sort of be built into the model as well.

Speaker #1: How we think about it internally is, you know, these PO announcements that we put out are typically for a duration of about one year.

Speaker #1: So, you know, any POs that are going to come around the midpoint of the year, you can very roughly assume that about half is going to be billed. You know, there's basically going to be a flat billing profile to it.

Speaker #1: So about half is going to be billed in the remaining year, and half the subsequent year. And what we also try to do with those releases is break out how much of it is new work versus customers renewing and expanding their engagements.

Speaker #1: So that can sort of be built into the model as well. Just to take an example, of the POs that were issued with this release—the same as the quarter—it was about $1 million of truly new work, and the remainder being renewals and expansions of some of our existing customer contracts.

Adam Zaghloul: Just to take an example of the POs that were issued with this release, the same as the quarter, it was about CAD 1 million of truly new work, and the remainder being renewals and expansions of some of our existing customer contracts. I think that is the best way to think about it.

Speaker #1: So I think that's— I think that's the best way to think about it.

Speaker #2: Okay. Then I just—like, on your last point, on the last slides, you know, I fully understand that you guys have a strong backlog. And this might be a conceptual question, but what is the trigger for you guys deciding that you've waited long enough and need to rightsize the cost base?

Amar Ezzat: Okay. On your last point on the last slide, I fully understand that you guys have a strong backlog, and this might be a conceptual question, but what is the trigger for you guys deciding that you've waited long enough and need to right-size the cost base? Is it a specific cash balance utilization level or a time frame?

Amr Ezzat: Okay. On your last point on the last slide, I fully understand that you guys have a strong backlog, and this might be a conceptual question, but what is the trigger for you guys deciding that you've waited long enough and need to right-size the cost base? Is it a specific cash balance utilization level or a time frame?

Speaker #2: Is it a specific cash balance utilization level, or a timeframe? Help us think about that, please.

Amar Ezzat: Help us think of that, please.

Amr Ezzat: Help us think of that, please.

Speaker #1: Yeah, I think definitely it's important to, you know, balance the sort of view of new work coming down the pipeline with just the realities of the cash flow as it stands right now.

Adam Zaghloul: Yeah, I think definitely it's important to balance the sort of view of new work coming down the pipeline with just the realities of the cash flow as it stands right now. So the balance that we're always trying to strike is, we put a lot of time and effort into recruiting the talent pool that we have right now. Certain resources have been instrumental in NTG's growth and have proven themselves with many client engagements. A lot of our customers especially are looking for this type of senior experienced resources to work on their engagements really for the long term. So what we're constantly looking at is the cash balance that we have at the end of each month versus the bench staff that we have.

Speaker #1: So the balance that we're always trying to strike is, you know, we— we put a lot of time and effort into recruiting the talent pool that we have right now. You know, certain— certain resources have been instrumental in NTG's growth and have proven themselves with many client engagements.

Speaker #1: And a lot of our customers, especially, are looking for this type of senior, experienced resources to work on their engagements, really for the long term.

Speaker #1: So, what we're constantly looking at is, you know, the cash balance that we have at the end of each month versus the bench staff that we have.

Speaker #1: Definitely, right now at a million dollars per month, I don't think we'd want to go much higher than that. So we've done a pretty good job keeping our cost base relatively consistent.

Adam Zaghloul: Definitely right now at CAD 1 million per month, I don't think we'd want to be able to go much higher than that. So we've done a pretty good job keeping our cost base staying relatively consistent. That is about CAD 1 million per month of incremental resources waiting to be rolled out. It is always going to be a combination of looking at what customer conversations we have coming down the pipeline, as well as new POs that we know are going to be rolling out in the relatively near future before we can make that decision. Because the goal is not to, let's say, go into debt to pay for these resources or dilute shareholders to pay for these operating overheads.

Speaker #1: That is about a million dollars per month of incremental resources waiting to be rolled out. But it is always going to be a combination of looking at what customer conversations we have coming down the pipeline, as well as new POs that we know are going to be rolling out in the relatively near future before we— we can— we can make that decision.

Speaker #1: Because the goal is not to, you know, let's say, go into debt to pay for these resources or dilute shareholders to pay for this operating overhead.

Speaker #1: It really is a balancing act of taking a look at operating cash flow, and can we support the sort of gap between now and when we expect these—these contracts to go.

Adam Zaghloul: It really is a balancing act of taking a look at operating cash flow and can we support the sort of gap between now and when we expect these contracts to go. Because at the end of the day, I think it is important to point out our delivery staff, our technical staff, they are probably NTG's core assets, right? And we do not want to put ourselves in a position where when activity resumes, which we are already getting the leading indicators that there is the possibility for that to happen now. When activity resumes, we are not in a position to take advantage of the growth just because we wanted to save the cash flow profitability of any one individual quarter, right?

Speaker #1: Because, at the end of the day, I think it's important to point out that our delivery staff and our technical staff are probably NTG's core assets, right?

Speaker #1: And we're— we don't want to, you know, put ourselves in a position where when activity resumes, which we're getting— already getting the leading indicators that there's the possibility for that to happen now, when activity resumes, we're not in a position to take advantage of the growth just because we wanted to save the cash flow or profit— profitability of any one individual quarter, right?

Speaker #2: Fantastic. Maybe one last one. Appreciate the color you guys gave on collections. I think you guys were saying $8 billion of collections in July, and receivables declined by more than $2 million.

Amar Ezzat: Fantastic. Maybe one last one. Appreciate the color you guys gave on collections. I think you guys were saying CAD 8 million of collections in July and receivables declined by more than CAD 2 million as at 31 July. Wondering if, given that we are now end of August, can you give us an update on where August collections and where the receivables stand in cash?

Amr Ezzat: Fantastic. Maybe one last one. Appreciate the color you guys gave on collections. I think you guys were saying CAD 8 million of collections in July and receivables declined by more than CAD 2 million as at 31 July. Wondering if, given that we are now end of August, can you give us an update on where August collections and where the receivables stand in cash?

Speaker #2: Is that July 31st? I'm wondering if, you know, given that we're now at the end of August, can you give us an update on where August collections and receivables stand in terms of cash?

Speaker #1: Yeah, I think that's— that's definitely a good question. The reason behind, you know, why July is a— a good example is, you know, just— just as typically, right, at the end of the month is really when we see a lot of the invoices go out and the cash collections come in.

Adam Zaghloul: Yeah, I think that is definitely a good question. The reason behind why July is a good example is just as typically, right at the end of the month is really when we see a lot of the invoices go out and the cash collections come in. So it really is less of a useful marker to, say, take a look at 15 August or 21 August cash balance and receivables balance just because I think it is pretty similar in any line of business. The end of the month really is when things are in a much more stable position. So I take your point, and I think it would probably be useful going forward over the next few quarters to give more regular updates about cash balances. But I think they would have to, going forward, be as of the end of the month.

Speaker #1: So it really is less of a useful marker to, say, take a look at the August 15 or August 21 cash balance and receivables balance, just because, you know, I think it's pretty similar in any line of business.

Speaker #1: The end of the month really is when things are in a much more stable position. So I take your point, and I think it would probably be useful, going forward over the next few quarters, to give more regular updates about cash balances. But I think they would have to, going forward, be, you know, as of the end of the month.

Speaker #2: Thanks. I'll—I'll pass the line. Appreciate your answers.

Amar Ezzat: Thanks. I will pass the line. Appreciate your answers.

Amr Ezzat: Thanks. I will pass the line. Appreciate your answers.

Speaker #1: Thank you, Amir. I appreciate you helping on the call. Okay, we'll move forward. And I see that we have Nick Cortellucci on the line from Atrium Research.

Adam Zaghloul: Thank you, Amar. Appreciate you hopping on the call. We'll move forward. I see that we have Nick Cortellucci on the line from Atrium Research. Nick, if you're ready, I'll hand it off to you.

Speaker #1: So Nick, if you're ready, I'll hand it off to you.

Speaker #3: Hey, Adam. Can you hear me?

Nick Cortellucci: Hey, Adam. Can you hear me?

Speaker #1: Hey, all good. How's it going?

Adam Zaghloul: Hey, all good. How's it going?

Speaker #3: Good. Yourself?

Nick Cortellucci: Good. Yourself?

Speaker #1: Very well. Very well. Thanks.

Adam Zaghloul: Very well. Thanks.

Speaker #3: Thanks for answering my questions. The first thing I wanted to ask about was, you know, what do you see as baseline margins? You know, looking back to 2025, or even going back to 2024, what do you see as kind of normal for you guys?

Nick Cortellucci: Thanks for answering my questions. The first thing I wanted to ask about was, what do you see as baseline margins? Looking back to 2025 or even going back to 2024, what do you see as kind of normal for you guys?

Speaker #1: That's a— definitely a good question, Nick. Thanks. I think, you know, historically, what we had put forward as our goal around we can— we can start at the gross margin line and then move maybe to the adjusted EBITDA is sort of that mid to high 30% gross margin range.

Adam Zaghloul: That is definitely a good question, Nick. Thanks. I think historically what we had put forward as our goal around, we can start at the gross margin line and then move maybe to the adjusted EBITDA, is sort of that mid to high 30% gross margin range. Then ideally the bottom line being in, say, the mid-teens, even getting up to 20% in an ideal world. That is what we saw really as we exited 2024 into 2025. This is definitely key to the reason why we are withdrawing our guidance and not giving an updated range at this time is especially the profitability is hugely dependent on that sort of incremental revenue profile.

Speaker #1: And then, ideally, the bottom line being in, say, the mid-teens, even getting up to 20% in an ideal world. And that's what we saw really as we exited 2024 into 2025.

Speaker #1: But, you know, this is definitely key to the reason why we're, you know, withdrawing our guidance and not giving an updated range at this time—especially since profitability is hugely dependent on that sort of incremental revenue profile.

Speaker #1: Like we saw really over the last two or three quarters, a decrease of $3.8 million in revenue roughly had the exact same amount of impact on our—on our adjusted EBITDA line, just because the cost base stayed the same.

Adam Zaghloul: We saw really over the last two or three quarters, a decrease in CAD 3.8 million in revenue roughly had the exact same amount of impact on our adjusted EBITDA line just because the cost base is staying the same. I think maybe longer term, those are goals that we would want to get back to, but in the short term, we definitely cannot give any sort of guidance for the next few quarters. That is because, A, we are carrying that cost base to prepare ourselves for more stability and when contracts hit the ground again.

Speaker #1: I think, you know, maybe longer term, those are goals that we'd want to get back to. But in the short term, we definitely can't give any sort of guidance for the next few quarters.

Speaker #1: And that is because, you know, A, we're carrying that cost base to prepare ourselves for more stability and when contracts hit the ground again.

Speaker #1: But also B, as I mentioned in the presentation, even on the gross margin line, we're sort of seeing a shift from that mid to high 30% range really towards the low to mid 30% range because of the pricing that customers are negotiating for in lieu of the sort of cautious approach to cash that they're taking in the region right now.

Adam Zaghloul: But also, as I mentioned in the presentation, even on the gross margin line, we are sort of seeing a shift from that mid to high 30% range really towards the low to mid 30% range because of the pricing that customers are negotiating for in lieu of the sort of cautious approach to cash that they are taking in the region right now. So I would say we have got long-term our work cut out for us, but of course we cannot issue any sort of near-term guidance or guidance for this year.

Speaker #1: So, I would say we've got, long-term, our work cut out for us, but of course we can't issue any sort of near-term guidance or guidance for this year.

Speaker #3: Yeah, got it. Okay. And then, just on the G&A, because it increased quarter over quarter, maybe just—what's been driving that? I know I see the COGS and the S&M declined, but just maybe a bit about the G&A.

Nick Cortellucci: Yeah, got it. Okay. Just on the G&A, because it increased quarter-over-quarter, maybe just what has been driving that? I know I see the COGS and the S&M declined, but just maybe a bit about the G&A.

Speaker #1: Yeah, definitely. You know, when you take a look at our cost mix, there really is a lot of carryover between, you know, say, our cost of sales and our G&A.

Adam Zaghloul: Yeah, definitely. When you take a look at our cost mix, there really is a lot of carryover between, say, our cost of sales and our G&A. What typically comes along with a reduction in revenue is a movement of resources from the cost of sales line into the G&A line. So to the extent that maybe G&A has been up, cost of sales has been down. It largely is attributed to that sort of dynamic of non-billable resources being in the G&A. That is part of the reason why, over the last few quarters when we have been talking about our results, we have been breaking it out to show what that total cost base is. Basically, what is our, for all intents and purposes, our staffing costs which has remained relatively consistent over the last few quarters.

Speaker #1: What typically comes along with a reduction in revenue is a movement of resources from the cost of sales line into the G&A line. So, to the extent that maybe G&A has been up and cost of sales has been down, it largely is attributed to that sort of dynamic of non-billable resources being in the G&A.

Speaker #1: And that's part of the reason why, over the last few quarters when we've been talking about our results, we've been breaking it out to show what that total cost base is.

Speaker #1: Basically, what are our— for all intents and purposes—our staffing costs, which have remained relatively consistent over the last few quarters?

Speaker #3: Got it. Yeah, that makes sense. Okay. And then maybe just more conceptually, outside of the Middle East conflict, have you seen any clients, you know, building their own solutions, you know, with AI or— or, you know, cheaper competitors come into the scene?

Nick Cortellucci: Got it. Yeah, that makes sense. Okay. Then maybe just more conceptually, outside of the Middle East conflict, have you seen any clients building their own solutions with AI or cheaper competitors come into the scene? Has that played a role at all with withdrawing the guidance, or is this solely based on the Middle East?

Speaker #3: Has that played a role at all—at all with, you know, withdrawing the guidance? Or—or is this, you know, solely based on the Middle East?

Speaker #1: That's— that's a really good question, for sure. Right now, it really is not so much a competition situation as much as it is, you know, geopolitical, expense-related considerations from our— from our customers, right?

Adam Zaghloul: That's a really good question. For sure, right now it really is not so much a competition situation as much as it is geopolitical expense-related considerations from our customers, right? None of our customers have come to us and said, "We can do this with AI better," or, "A competitor can do this better, so we're going to not scale our contracts, or we're going to not renew our contracts." Really, the cash impact from the impact to the oil market has caused our customers to look for cost savings on really every line item. That, of course, includes software development and the digital transformation roadmaps. So I would say, as of right now, really is more of a geopolitical impact. Our experience hasn't been that competitors are coming to the scene or AI is coming to the scene.

Speaker #1: None of our customers have come to us and said, you know, we can do this with AI better, or a competitor can do this better, so we're going to not scale our contracts, or we're going to not renew our contracts.

Speaker #1: Really, the cash impact from the oil market has caused our customers to look for cost savings on really every line item.

Speaker #1: And that, of course, includes software development and the digital transformation roadmaps. So I would say, as of right now, it really is more of a geopolitical impact, and our experience hasn't been that competitors are coming to the scene or that AI is coming to the scene.

Speaker #1: And I just, you know, maybe echo that by saying yes, revenue is down this quarter, but we have not had any customers cancel an engagement, pause an engagement, anything like that.

Adam Zaghloul: I just maybe echo that by saying, yes, revenue is down this quarter, but we have not had any customers cancel an engagement, pause an engagement, anything like that. We still have our existing customer base, albeit maybe the amount of work has slowed down or been extended over a longer period of time.

Speaker #1: We still have our existing customer base, albeit maybe the amount of work has slowed down or been extended over a longer period of time.

Speaker #3: Understood. Okay. Yeah, those are the only questions from me. Thank you.

Nick Cortellucci: Understood. Okay. Yep. Those are the only questions from me. Thank you.

Speaker #1: We're done. Thanks, Nick. Appreciate it. All right, so that concludes questions from covering analysts. I'd like to invite Ali back to the stage to start us off with some questions written in from investors ahead of the call.

Adam Zaghloul: Right on. Thanks, Nick. Appreciate it. All right, so that concludes the questions from covering analysts. I'd like to invite Ali back to the stage to start us off with some questions written in from investors ahead of the call. So whenever you're ready, Ali.

Speaker #1: So whenever you're ready, Ali.

Speaker #4: All right. To get these questions started, we have a question from David, a private investor. To achieve success, leaders often make significant personal sacrifices.

[Company Representative] (NTG Clarity): All right. To get these questions started, we have a question written in from David, a private investor. To achieve success, leaders often make significant personal sacrifices. While not expecting extreme measures, what more are the two major owners of NTG Clarity, Ashraf Zaghloul and Christine Lewis, willing to commit or sacrifice now and in the near future to drive success for the company, themselves, and their shareholders?

Ali Farouk: All right. To get these questions started, we have a question written in from David, a private investor. To achieve success, leaders often make significant personal sacrifices. While not expecting extreme measures, what more are the two major owners of NTG Clarity, Ashraf Zaghloul and Christine Lewis, willing to commit or sacrifice now and in the near future to drive success for the company, themselves, and their shareholders?

Speaker #4: While not expecting extreme measures, what more are the two major owners of NTG Clarity and Christine Lewis willing to commit or sacrifice now and in the near future to drive success for the company, themselves, and their shareholders?

Speaker #1: That's a— that's a really good question. Thanks, David. So, definitely, just taking a look at the turnaround that we've experienced over the last six or seven years or so, starting in about 2019, I think the management team has pretty well proven that they're willing to put skin in the game.

Adam Zaghloul: That's a really good question. Thanks, David. So definitely just taking a look at the turnaround that we've experienced over the last seven years or so, starting in about 2019, I think the management team has pretty well proven that they're willing to put skin in the game. They still own about 36% of the shares outstanding. They've participated in equity infusions multiple points in time over the last, say, seven years or so, and also infused debt into the company at extremely favorable rates. Really just passing through the expenses that they incur themselves to hold that debt. That still sits at about CAD 5 million on the balance sheet. So, management really believes, I would say, in the company, in the market in Saudi Arabia, and in our ability to serve the digital transformation sector with both our on-site and offshore resources.

Speaker #1: You know, they still own about 36% of the shares outstanding. They've participated in equity infusions at multiple points in time over the last, say, seven years or so.

Speaker #1: And also, infuse debt into the company at extremely favorable rates. So, you know, really just passing through the expenses that they incur themselves to hold that debt.

Speaker #1: That still sits at about $5 million on the balance sheet. So, you know, management really believes, I would say, in the company, in the market in Saudi Arabia, and in our ability to serve the digital transformation sector with both our on-site and offshore resources.

Speaker #1: And I think, you know, going forward, we'd see them continue to keep their skin in the game that way. Yeah.

Adam Zaghloul: I think, going forward, we see them continue to keep their skin in the game that way. Yeah.

Speaker #4: All right, great. Our next question is also written in from David. Could you please discuss the recent LinkedIn videos regarding NTG Clarity being back and provide some context?

[Company Representative] (NTG Clarity): All right. Great. Our next question is also written in from David. Could you please discuss the recent LinkedIn videos regarding NTG Clarity being back and provide some context?

Ali Farouk: All right. Great. Our next question is also written in from David. Could you please discuss the recent LinkedIn videos regarding NTG Clarity being back and provide some context?

Speaker #1: Yeah, right on. So, I know we like to focus on our key markets in the Gulf region and the Kingdom of Saudi Arabia, but we also have a more moderate presence in other regions like North America.

Adam Zaghloul: Yeah. Right on. I know we like to focus on our key markets in the Gulf region and the Kingdom of Saudi Arabia, but we also have a more moderate presence in other regions like North America that we find we are equally able to serve with our existing delivery infrastructure and our software products that way. Recent videos, a few of which I have starred in actually at this point, have basically served to keep engagement with that market as well as do a little bit of marketing and outreach. There is no material announcement to be made in terms of new progress in those markets at this time, though.

Speaker #1: That we find that we're equally able to— to serve with our existing delivery infrastructure and our software products that way. So you know, recent videos, one of which— a few of which I've starred in actually at this point, have basically served to keep engagement with that market, as well as do a little bit of marketing and— and outreach.

Speaker #1: There is no, you know, material announcement to be made in terms of new progress in those markets at this time—no.

Speaker #4: Okay. And then we have the next couple of questions written in from Peter, a private investor. Please elaborate on the gross margin decline. Are customers expecting any AI-related efficiency savings to be passed on to them?

[Company Representative] (NTG Clarity): Okay. We have the next couple questions written in from Peter, a private investor. Can you please elaborate on the gross margin decline? Are customers expecting any AI-related efficiency savings to be passed on to them? How should investors think about the durability of margins long term?

Ali Farouk: Okay. We have the next couple questions written in from Peter, a private investor. Can you please elaborate on the gross margin decline? Are customers expecting any AI-related efficiency savings to be passed on to them? How should investors think about the durability of margins long term?

Speaker #4: How should investors think about the durability of margins long term?

Speaker #1: Definitely, that's a good question, Peter. Thank you. I would say, you know, similar to what we were talking about with Nick, what we haven't seen so far is customers coming to us and saying, "We can do what you do with AI."

Adam Zaghloul: Definitely. That is a good question, Peter. Thank you. I would say, similar to what we were talking about with Nick, what we have not seen so far is customers coming to us and saying, "We can do what you do with AI. We should get a better price." Or, "You should give us a discount because you are using AI," anything like that. Really, the decrease in gross margin is seen as a knock-on effect of the geopolitical situation impacting cash flow in Saudi Arabia, just due to lower oil exports, and that trickling down to really our customers' budgets and digital transformation roadmaps. So they are looking for savings on every line item of their expense sheet, and that includes our kinds of services.

Adam Zaghloul: Definitely. That is a good question, Peter. Thank you. I would say, similar to what we were talking about with Nick, what we have not seen so far is customers coming to us and saying, we can do what you do with AI. We should get a better price or, you should give us a discount because you are using AI, anything like that. Really, the decrease in gross margin is seen as a knock-on effect of the geopolitical situation impacting cash flow in Saudi Arabia, just due to lower oil exports, and that trickling down to really our customers' budgets and digital transformation roadmaps. So they are looking for savings on every line item of their expense sheet, and that includes our kinds of services.

Speaker #1: We should get a better price, or, you know, we should get a discount because you're using AI—anything like that. Really, the decrease in gross margin is seen as a knock-on effect of the geopolitical situation impacting cash flow in Saudi Arabia, just due to lower oil exports.

Speaker #1: And that's trickling down to, really, our customers' budgets and digital transformation roadmaps. So they're looking for savings on every line item of their expense sheet.

Speaker #1: And that includes, you know, our kinds of services. So right now, I would say the gross margin situation is completely attributable to the geopolitical climate and less so to any sort of AI or competition or anything like that.

Adam Zaghloul: Right now, I would say the gross margin situation is completely attributable to the geopolitical climate and less so any sort of AI or competition or anything like that.

Adam Zaghloul: Right now, I would say the gross margin situation is completely attributable to the geopolitical climate and less so any AI or competition or anything like that.

Speaker #4: All right. And his next question: Do you have a sense for whether the war is causing permanent damage to demand for digital transformation in the Middle East?

[Company Representative] (NTG Clarity): All right. His next question. Do you have a sense for whether the war is causing permanent damage to demand for digital transformation in the Middle East?

Ali Farouk: All right. His next question. Do you have a sense for whether the war is causing permanent damage to demand for digital transformation in the Middle East?

Speaker #1: That's a good question to keep in mind, for sure. So, I would say no—no permanent impact to demand for digital transformation in the Middle East right now.

Adam Zaghloul: That is a good question to keep in mind, for sure. I would say no. No permanent impact to demand for digital transformation in the Middle East right now. I think what we are seeing is a sort of point-in-time disruption just from the recent conflict. All of our customers still have their digital transformation roadmaps out in front of them. Maybe they will be over a longer period of time, and they will need less resources in the short term, but still, we have complete confidence in the sector as a whole. Just to talk a little bit more, the Saudi market had a little bit of a decline in Q2. Non-oil based companies actually grew, although a relatively small amount.

Speaker #1: I think what we're seeing is a sort of point-in-time disruption, just from the— the recent conflict. All of our customers still have their digital transformation roadmaps out in front of them.

Speaker #1: Maybe they'll be over a longer period of time, and they'll need fewer resources in the short term. But still, we have complete confidence in the— the sector as a whole.

Speaker #1: Just to talk a little bit more, you know, the Saudi market had a bit of a decline in Q2. Non-oil-based companies actually grew, although it was a relatively small amount.

Speaker #1: And we have every indication from our customers that, you know, once a more stable situation is achieved, we're going to continue our level of work, and maybe even see the growth that we've seen in the past resume.

Adam Zaghloul: We had every indication from our customers that once a more stable situation is achieved, we are going to continue our level of work and maybe even see the growth that we have seen in the past resume. I think that is echoed by, so far in Q3, we have very good leading indicators in terms of revenue collections rebounding, also that CAD 33.4 million of POs that we have received in Q3 so far to date. We have still maintained a pretty solid reputation with our customers, and we are really looking forward to continuing to put forward this compelling model of offshore and onsite software development services for them.

Speaker #1: And I think that's sort of echoed by, so far in Q3. You know, we have very good leading indicators in terms of revenue collections rebounding, and also that $33.4 million of POs that we've received in Q3.

Speaker #1: So far to date, you know, we've still maintained a pretty solid reputation with our customers. And we're really looking forward to continuing to put forward this compelling model of offshore and on-site software development services for them.

Speaker #4: All right. Moving on to his next question: To what extent is the top-line softness driven by company-specific execution issues or competition?

[Company Representative] (NTG Clarity): All right. Moving on to his next question. To what extent is the top line softness driven by company specific execution issues/competition?

Ali Farouk: All right. Moving on to his next question. To what extent is the top line softness driven by company specific execution issues/competition?

Speaker #1: Yeah, that's a great question, for sure. So I would say, you know, the— the top-line sort of deceleration that we saw over the last couple of quarters, I would say, is, again, attributable to the geopolitical situation in the Middle East right now.

Adam Zaghloul: Yeah, that's a great question, for sure. I would say the top line deceleration that we saw over the last couple of quarters, I would say is, again, attributable to the geopolitical situation in the Middle East right now. To the extent there's company specific performance considerations, it really is the decision to keep that delivery capacity intact as we ride out the instability that we've been seeing. That itself has nothing to do with the top line softness. Again, what we're seeing is customers come to us with maybe longer term plans than they had initially thought about. Maybe a slower decision-making cycle, slower to renew their engagements, maybe a little bit more hesitant to engage them.

Speaker #1: To the extent there are company-specific performance considerations, it really is the decision to keep that delivery capacity intact as we sort of ride out the instability that we've been seeing.

Speaker #1: But that, in itself, has nothing to do with the top-line softness. Again, what we're seeing is customers coming to us with maybe longer-term plans than they initially thought about.

Speaker #1: You know, maybe a slower decision-making cycle, slower to renew their engagements, maybe a little bit more hesitant to engage them. And that really is, you know, the driving force behind the sort of softer revenue that we've seen the last couple of quarters.

Adam Zaghloul: That really is the driving force behind the softer revenue that we've seen in the last couple of quarters, as opposed to any sort of internal considerations, performance, or competition that way.

Speaker #1: As opposed to any sort of, you know, internal considerations, performance, or— or competition that way.

Speaker #4: All right. Moving on to the next question. Please provide an update on how AI is affecting NTG, both from a cost and revenue perspective.

[Company Representative] (NTG Clarity): All right. Moving on to the next question. Please provide an update on how AI is affecting NTG, both from a cost and revenue perspective.

Ali Farouk: All right. Moving on to the next question. Please provide an update on how AI is affecting NTG, both from a cost and revenue perspective.

Speaker #1: Yeah, right on. Thank you. So you know, think about AI on the cost side. It's— I always like to point to the efficiency gains that we're getting from, you know, rolling out those early-stage projects of, you know, developer productivity tools.

Adam Zaghloul: Yeah. Right on. Thank you. When you think about AI on the cost side, I always like to point to the efficiency gains that we're getting from rolling out those early stage projects of developer productivity tools, say Cloud Code and Cursor, and it definitely makes life a lot easier as a developer, just leveraging those tools. We get a few benefits on the cost side. On the revenue side, I think is probably what NTG's most excited for. We've had a couple of updates over the course of Q2 on our AI software platforms. First of which, Peak Defy is, you can think about it as an AI-powered ERP implementation companion tool. We've signed early stage partnerships with about four Gulf region system integrators to start using the Peak Defy product.

Speaker #1: Say Claude, Code, and Cursor definitely make life a lot easier as a developer, just leveraging those tools. So, we get a few benefits on the cost side.

Speaker #1: On the revenue side, I think it's probably NTG I'm most excited for. We've had a couple of updates over the course of Q2 on our AI software platforms.

Speaker #1: You know, first of which, Peak Defy is—you can think about it as, you know, an AI-powered ERP implementation companion tool. We've signed early-stage partnerships with about four Gulf region system integrators to start using the Peak Defy product.

Speaker #1: So we definitely have a line of sight on, you know, bringing that product to market and seeing some revenue come through in the future.

Adam Zaghloul: So we definitely have a line of sight on bringing that product to market and seeing some revenue come through in the future. Also, our TestFlare product, our AI powered software testing software product, is in enterprise pilot project mode right now with some customers. So we also look forward to those turning over into full engagements in the near future as well. So we are very excited about what the prospects for our AI powered products are as well.

Speaker #1: Also, our Testflare product, our AI-powered software testing software product, is in enterprise pilot project mode right now with some customers. So we also look forward to those turning over into— into full engagements in the near future as well.

Speaker #1: So we're very excited about what the prospects for our AI-powered products are as well.

Speaker #4: All right. And moving on to the final question. We kind of touched on it in the presentation, but just to reiterate, given that the war in the Middle East has been going on since February, why has there only recently been a drop-off in demand?

[Company Representative] (NTG Clarity): All right. Moving on to the final question. We kind of touched on it in the presentation, but just to reiterate. Given that the war in the Middle East has been going on since February, why all of a sudden has there been a drop off in demand only recently?

Ali Farouk: All right. Moving on to the final question. We kind of touched on it in the presentation, but just to reiterate. Given that the war in the Middle East has been going on since February, why all of a sudden has there been a drop off in demand only recently?

Speaker #1: Yeah, and that's a good question. I think it definitely is worth just touching on it one more time. You know, I think when the conflict started off in February, a lot of people were expecting—pricing in—a quick resolution.

Adam Zaghloul: Yeah, that's a good question. I think it definitely is worth just touching on one more time. I think when the conflict started off in February, a lot of people were expecting pricing in a quick resolution, relatively painless. But really, I think people are coming to the recognition, especially in Q2 with oil activity down to the extent that they were in a little bit of a overall Saudi GDP contraction, that this might be something that they have to plan for in the medium term. So I think that's really the reason why we saw that sort of midyear hesitation in renewal and the expansion of some of our contracts that way. But again, I just want to reiterate that we do not necessarily foresee a complete downward trend right now. Again, July performance was much better than June. Collections were higher, revenue was higher.

Speaker #1: Relatively painless. But really, I think people are coming to the recognition, especially in Q2, with oil activity down to the extent that it was and a little bit of an overall Saudi GDP contraction.

Speaker #1: That this might be something that they have to plan for in the— in the medium term. So I think that's really the reason why we saw that sort of mid-year hesitation in renewal and the expansion of some of our contracts that way.

Speaker #1: But again, I just want to reiterate that we don't necessarily foresee a complete downward trend right now. Again, July performance was much better than June.

Speaker #1: Collections were higher. Revenue was higher. It really is the uncertainty in the region that's causing us to withdraw our guidance, and not because we see anything too detrimental coming down the pipeline.

Adam Zaghloul: It really is the uncertainty in the region that's causing us to withdraw our guidance and not because we see anything too detrimental coming down the pipeline. So in the medium to long term, I would overall see this sort of conflict as a net tailwind for the digital transformation sector that we are serving. I think it's really becoming apparent the extent to which the Saudi economy relies on oil and gas exports. If anything, the current situation only strengthens the need for a diversification of the economy in that way.

Speaker #1: So, in the medium to long term, I would overall see this sort of conflict as a net tailwind for the digital transformation sector that we're serving.

Speaker #1: I think it's really becoming apparent the extent to which the Saudi economy relies on oil and gas exports. If anything, the current situation only strengthens the need for diversification of the economy in that way.

Speaker #4: And that's all the questions I have.

[Company Representative] (NTG Clarity): And that's all the questions I have of our management.

Ali Farouk: And that's all the questions I have of our management.

Speaker #1: Hey, thank you, Ali. And thank you to our analysts and to all the investors who wrote in questions ahead of the call. Again, if you have any questions that didn’t get answered over the course of this call, feel free to reach out to me.

Adam Zaghloul: Thank you, Ali, and thank you to our analysts and to all the investors who wrote in questions ahead of the call. Again, if you have any questions that didn't get answered over the course of this call, feel free to reach out to me. My email is adam@ntgclarity.com. I'd be happy to respond via email. And really want to thank you for tuning in to the earnings conference call, and I'll look forward to discussing some more results with you as we look forward and continue through Q3. So thank you very much and take care.

Speaker #1: My email is adam@ntgclarity.com. I'd be happy to respond via email, and I really want to thank you for tuning in to the earnings conference call.

Speaker #1: And I'll look forward to discussing some more results with you as we look forward and continue through Q3. So thank you very much, and take care.