- Reaffirm full year revenue guidance of $55 million in revenue with 14% net income margin
- Backlog of work on hand of approximately $83.5 million as of September 30, 2024
"We are seeing exceptional new contract momentum as customers increasingly recognize the value of our 20+ years of experience in Saudi Arabia, paired with a highly skilled workforce that sets us apart in the industry. We are effectively navigating the 109% year-over-year revenue growth and sustaining our high service standards and profitability, with a 22% Adjusted EBITDA margin1.
While the Middle East has seen instability, Saudi Arabia has been a beacon for stability and growth. The recent LEAP 2024 conference highlighted nearly $13 billion in new technology investments in Saudi Arabia[2] as the Country rapidly digitizes. International companies are taking notice, with over 180 companies moving their regional headquarters to Saudi Arabia in the first half of 2024[3], including Unilever, Siemens, Google, and PepsiCo.
We are uniquely positioned to drive this digital transformation, backed by a proven track record, an established and hard-to-replicate workforce, and a strong balance sheet that enables us to seize the opportunities ahead," said Adam Zaghloul, Vice President of Strategy & Planning at NTG Clarity.
On Wednesday, November 13, 2024, at 11:00 AM ET, management will host a conference call webcast to discuss the Company's financial and operating results.
Management will be hosting a Q&A at the end of the call; however, to streamline the earnings conference call, we ask any questions to be emailed along with the asker's name and company, if applicable, by the end of the day Tuesday, November 12, 2024, to:
Adam Zaghloul, Vice President, Strategy & Planning
Email: adam@ntgclarity.com
Income Statement Highlights for the three and nine months ended September 30, 2024 and 2023
| | 3 Months Ended | 9 Months Ended |
| | Sept 30, 2024 | Sept 30, 2023 | Sept 30, 2024 | Sept 30, 2023 |
| REVENUE | $ | 14,671,878 | $ | 7,003,553 | $ | 38,915,713 | $ | 19,503,993 |
| COST OF SALES | | 9,044,243 | | 3,920,316 | | 24,309,941 | | 11,738,575 |
| GROSS PROFIT | $ | 5,627,635 | $ | 3,083,237 | $ | 14,605,772 | $ | 7,765,418 |
| Operating Expenses | | 2,647,635 | | 2,196,887 | | 6,632,328 | | 4,492,343 |
| Foreign exchange loss (gain) | | 200,143 | | 437,913 | | 10,882 | | 237,182 |
| INCOME FROM OPERATIONS | $ | 2,980,000 | $ | 886,350 | $ | 7,973,444 | $ | 3,273,076 |
| Total Other Expenses | | 957,508 | | 275,052 | | 1,452,193 | | 698,759 |
| INCOME FROM CONTINUING OPERATIONS | $ | 2,022,490 | $ | 611,298 | $ | 6,521,250 | $ | 2,574,317 |
| Other - Exchange (loss) gain on translation | | 31,465 | | (101,418) | | 353,947 | | (728,430) |
| TOTAL COMPREHENSIVE INCOME FOR THE PERIOD | $ | 2,053,955 | $ | 509,880 | $ | 6,875,197 | $ | 1,845,887 |
| | | | | | | | | |
| Per Share | $ | 0.05 | $ | 0.00 | $ | 0.16 | $ | 0.01 |
Balance Sheet Highlights for the nine months ended September 30, 2024 and December 31, 2023
| | September 30, 2024 | | December 31, 2023 |
| Cash | $ | 5,354,322 | | $ | 358,088 |
| Current Assets | $ | 21,727,762 | | $ | 6,857,069 |
| TOTAL ASSETS | $ | 27,376,727 | | $ | 12,392,158 |
| Current Liabilities | $ | 11,967,245 | | $ | 8,949,732 |
| TOTAL LIABILITIES | $ | 18,145,364 | | $ | 15,629,301 |
| SHAREHOLDERS' EQUITY | $ | 9,231,362 | | $ | (3,237,143) |
Outlook
We are excited to continue our track record of sustained growth in rapidly expanding markets with yet another quarter breaking revenue records, and with Q3 having NTG's highest-ever single-quarter revenue. Q3 was the eighth consecutive record-breaking quarter for revenue. Consolidated revenue for Q3 2024 was $14,671,878, up 109% from $7,003,553 for the same period in 2023. The trend in growth carries forward to our net income as well, with Q3 2024 having a net income of $2,053,955, up 303% from $509,880 for the same period in 2023.
Q3 2024 also saw NTG signing its largest-ever, $53M, three-year contract to provide offshore digital transformation services to an existing customer in the Middle East, showcasing our customers' eagerness to expand our engagements due to NTG's quality and competitive pricing.
The Kingdom of Saudi Arabia (KSA) continues to be the primary contributor to our revenue growth with $36,962,662 YTD; an increase of 150% over the same period last year. With its ambitious Vision 2030 economic development plan, KSA is prioritizing a shift to a more balanced, service-based economy and from its traditional oil & gas focus. As a result, large investments are being made into digital transformation, AI, infrastructure, tourism, entertainment, and creating a hub for financial activities in the region.
With so much demand for digital transformation services, many companies in KSA are turning to offshoring to fill the requirements for talent and get a competitive price. These Saudi companies find Egypt a desirable destination to outsource due to attractive labor costs, shared language, culture, and time-zone, preferring it over more traditional destinations like India.
In 2021, management began transforming the NTG Egypt subsidiary into a supplier of offshore services for international customers through our Egypt Offshore Centre, scaling back sales activities in Egypt except for supporting NTG Egypt's legacy customers. This strategy allows us to pay expenses in the devaluing Egyptian Pound, while collecting revenue in stronger currencies such as the Saudi Riyal, which is pegged to the US Dollar.
Since embracing our offshore model, we have been able to connect more clients with talented candidates faster, accelerating their digital transformation journeys, all the while at a lower cost and consistent margins for NTG. This is NTG's strategy to hedge the devaluation of the Egyptian Pound while continuing to take advantage of growth in the region.
With decades of experience in the Middle East, a large offshoring operation based out of Egypt, and a professional network including many top decision makers in Saudi companies, we expect the strong demand for our services and products to continue as KSA continues to rapidly build out technical infrastructure and software, choosing NTG as their preferred partner.
We also have a team of sales personnel dedicated to our flagship software product, NTGapps, targeting new customers in this currently booming KSA economy. We are targeting small and medium enterprises (SME) as well as our traditional enterprise clients across multiple verticals that now include the medical sectors and the food & beverage industry in addition to the telecom and financial sectors. For more information, visit www.ntgapps.com.
NTG's current work on hand is approximately $83.5M. This includes unbilled POs and new POs/contracts received and previously announced as of September 30, 2024. This, along with our $38.9M in booked revenue in 2024 YTD puts NTG in a strong position to meet our recently increased 2024 revenue target of $55M.
As we work towards the end of 2024, we look forward to continued growth with a focus on our four-part commitment to:
1. Customers by providing flexible, quality services at a competitive price.
- We accelerate and simplify the digital transformation journey for our clients by providing the right solution delivered by passionate professionals both on their sites and offshore.
2. People by helping our staff grow and develop personally and professionally.
- We empower our staff to build and deliver challenging projects while providing opportunities for training and career advancement both internally and outside NTG.
3. Shareholders by continuing our growth trajectory and profitability.
- With purchase orders on-hand and contracts we expect to close, we project our 2024 revenue to be approximately $55 Million.
- With three years of consistent profitability under our belt, we're actively identifying opportunities to make sure as much of this new revenue as possible flows to the bottom line, with a targeted 2024 net income of 14%.
- The increase in share price in 2024 has gone from $0.20 in January to $1.35 at the end of September, a 575% increase in 9 months.
4. Community by passing our experience down to the next generation.
- We provide youth education and employment opportunities tailored to the modern job market through the NTG Academies, School, and on-the-job training.
Transaction - Brokered LIFE Offering Financing
On September 27, 2024, the Company closed its brokered LIFE Offering. NTG issued an aggregate of 3,720,000 units at a price of $1.40 per Unit, for aggregate gross proceeds of $5,208,000. Each Unit consists of one Common Share and one-half (1/2) of one Common Share purchase warrant of the Company. Each Warrant is exercisable to acquire one Common Share of the Company at a price of $2.00 per Common Share for a period of 24 months after closing.
The Units were issued pursuant to the listed issuer financing exemption under Part 5A of National Instrument 45-106 Prospectus Exemptions. The securities offered under the listed issuer financing exemption are not subject to a hold period, in accordance with applicable Canadian securities laws.
The Company intends to use the net proceeds of the Offering to support the expansion and delivery of digital transformation solutions through the Company's Egypt Offshore Centre and Saudi sales office and for working capital and general corporate purposes.
Non-GAAP Financial Measures
NTG references Adjusted EBITDA, which is a non-IFRS (non-GAAP) measure and Adjusted EBITDA margin, which is a non-GAAP ratio. Adjusted EBITDA means adjusted earnings before interest, taxes, depreciation and amortization. EBITDA is equal to net income (loss) before income taxes plus finance costs plus depreciation. Adjusted EBITDA is equal to EBITDA before other discretionary expenses and expenses outside of the control of NTG. In NTG's case these are other income, share-based payments, and expenses related to foreign exchange. Adjusted EBITDA margin is Adjusted EBITDA as a percentage of total revenue.
Adjusted EBITDA and Adjusted EBITDA margin are not recognized measures under IFRS. Management believes that in addition to net income (loss), Adjusted EBITDA and Adjusted EBITDA margin are useful supplemental measures as they provide an indication of the results generated by the Company's primary business activities prior to consideration of how those activities are financed, amortized, or how the results are taxed and consolidated in various jurisdictions and currencies as well as the cash generated by the Company's primary business activities without consideration of the timing of the monetization of non-cash working capital items.
Readers should be cautioned, however, that Adjusted EBITDA and Adjusted EBITDA margin should not be construed as an alternative to net income determined in accordance with IFRS as an indicator of the Company's performance. The Company's method of calculating Adjusted EBITDA and Adjusted EBITDA margin may differ from other organizations and, accordingly, Adjusted EBITDA and Adjusted EBITDA margin may not be comparable to measures used by other organizations.
The non-IFRS measures referenced in this release reconcile to the IFRS measures reported in the Consolidated Financial Statements as follows, unless reconciled elsewhere:
| | For the three months ended | For the nine months ended |
| Adjusted EBITDA | September 30, 2024 | September 30, 2023 | September 30, 2024 | September 30, 2023 |
| Net Income (Margin) | $ 2,053,955 (14%) | $ 509,880 (7%) | $ 6,875,195 (18%) | $ 1,845,886 (9%) |
| Add back: | | | | |
| (Gain) loss on foreign exchange | 200,143 | 437,913 | 10,882 | 237,182 |
| Depreciation | 66,224 | 26,838 | 155,616 | 81,888 |
| Amortization | 132,184 | 108,473 | 396,550 | 299,185 |
| Interest, net | 90,662 | 94,825 | 244,027 | 250,749 |
| Foreign taxes | 240,804 | 16 | 296,936 | (11,563) |
| Other income | (52,848) | - | (213,921) | - |
| Share-based payment | 480,482 | 44,900 | 572,985 | 78,500 |
| Exchange (gain) loss arising on translation of foreign operations | (31,465) | 101,418 | (353,947) | 728,430 |
| Adjusted EBITDA (Margin) | $ 3,180,141 (22%) | $ 1,324,263 (19%) | $ 7,984,323 (21%) | $ 3,510,257 (18%) |
About NTG Clarity Networks Inc.
NTG Clarity Networks' vision is to be a global leader in digital transformation solutions. As a Canadian company established in 1992, NTG Clarity has delivered software, networking, and IT solutions to large enterprises including financial institutions and network service providers. More than 900 IT and network professionals provide design, engineering, implementation, software development and security expertise to the industry's leading enterprises.
Forward Looking Information
Certain statements in this release, other than statements of historical fact, are forward looking information that involve various risks and uncertainties. Forward looking information includes, but is not limited to, statements with respect to: anticipated activity levels and operating results; projections relating to revenue, net income margin and work on hand; corporate strategies; customer demand and competitive conditions in the markets in which the Company operates.
Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable, are subject to known and unknown risks, uncertainties, and other factors which may cause the actual results and future events to differ materially from those expressed or implied by such forward-looking statements. Such factors include, but are not limited to: future demand for the Company's products and services; the results of research and development activities; access to capital; intellectual property protection; general business, economic, competitive, political and social uncertainties; delays in obtaining governmental approvals; failure to obtain regulatory approvals; reliance on key personnel; stock market volatility; fluctuations in interest rates and exchange rates; and the impact of new laws and regulatory requirements. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
This news release contains future-oriented financial information and financial outlook information (collectively, "FOFI") about estimated annual revenue and net income, all of which are subject to the same assumptions, risk factors, limitations, and qualifications as set out in the above paragraph. The actual financial results of the Company may vary from the amounts set out herein and such variation may be material. NTG and its management believe that the FOFI has been prepared on a reasonable basis, reflecting management's best estimates and judgments. However, because this information is subjective and subject to numerous risks, it should not be relied on as necessarily indicative of future results. Except as required by applicable securities laws, the Company undertakes no obligation to update such FOFI. FOFI contained in this news release was made as of the date hereof and was provided for the purpose of providing further information about the Company's anticipated future business operations on an annual basis. Readers are cautioned that the FOFI contained in this news release should not be used for purposes other than for which it is disclosed herein.
For Further Information:
Adam Zaghloul, Vice President, Strategy & Planning
NTG Clarity Networks Inc.
Ph: 905-305-1325
Fax: 905-752-0469
Email: adam@ntgclarity.com
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
