Xtract One Technologies TSE: XTRA reported record fiscal third-quarter revenue and reached positive adjusted EBITDA for the first time, as management said stronger production capacity helped the company convert more of its order backlog into installations.
On the company’s fiscal 2026 third-quarter earnings call, CEO and Director Peter Evans described the quarter as “outstanding,” saying Xtract One generated CAD 10.3 million in revenue, nearly triple the CAD 3.5 million reported in the same period of fiscal 2025. CFO Karen Hersh said a significant portion of the quarter’s revenue came from a high volume of installations of the Xtract One Gateway product as the company continued to address its backlog.
“This quarter has shown everything coming together that we’ve invested in the business and delivering upon that,” Evans said.
Revenue Growth Driven by Installations
Hersh said Xtract One delivered Xtract One Gateway systems to 16 different customers during the quarter and is now “pleased with the turnaround time” for deliveries of that product. She added that SmartGateway also had a strong quarter, with most of its revenue coming from the healthcare and entertainment markets.
Deployments in the quarter were roughly evenly split between SmartGateway and Xtract One Gateway, a point management said supports the company’s view that the two product lines address complementary market segments. Evans said SmartGateway continues to gain traction in healthcare and entertainment, while Xtract One Gateway orders are accelerating in schools, office buildings and other sectors.
Hersh said many of the quarter’s installations were upfront purchases, which helped boost near-term revenue and reduce cash burn, while still adding monthly recurring revenue through extended support terms. She said revenue was spread across numerous customers and industries, particularly education, healthcare and entertainment.
Margins Improve as Production Scales
Gross profit margin improved to 61% from 57% in the prior-year quarter. Hersh attributed the improvement to higher production volumes and economies of scale, particularly for Xtract One Gateway as the company worked through costs associated with launching the product.
Evans said the company had previously faced a hurdle in accelerating deployments because demand for Xtract One Gateway exceeded its initial first-year projections. He said Xtract One worked with suppliers to increase manufacturing capacity and improve the pace of installations.
“We have in place the operations model to address future projected demand at a much higher level than we originally forecasted,” Evans said.
During the question-and-answer session, H.C. Wainwright analyst Scott Buck asked how much of the gross margin improvement was driven by mix versus efficiencies. Hersh said a “big part” of the change related to Xtract One Gateway and ongoing work on the bill of materials and supply chain. Evans added that new hardware products typically begin with lower gross margins and improve over time as supply chain and manufacturing efficiencies increase.
Bookings, Backlog and Pipeline
New bookings totaled CAD 9.1 million in the quarter, up from CAD 4.6 million in the prior-year period. Hersh said nearly 80% of bookings in the quarter were subscription contracts, contrasting with recent trends and providing a foundation for higher future recurring revenue after deployment. Year-to-date bookings were split approximately 60/40 between upfront contracts and subscription contracts, and Hersh said that split was a reasonable proxy for how the year may end based on fourth-quarter activity to date.
The company reported contractual backlog and signed agreements pending installation of CAD 45.1 million, compared with CAD 36.5 million last year. Hersh said that amount included CAD 17.9 million of contractual backlog and CAD 27.2 million of signed agreements pending installation. The pending backlog represented just over 200 units across a wide customer base and was slightly weighted toward upfront deals.
Hersh said the majority of agreements pending installation are expected to be deployed within the next 12 months, though timing depends on customer scheduling and readiness. In response to a question from Haywood Securities analyst Gianluca Tucci, she declined to quantify how much of the pending installation backlog would be recognized in the fourth quarter versus fiscal 2027.
Evans said Xtract One now has more than US$110 million in its qualified sales pipeline across both product lines, with opportunities approximately evenly split between SmartGateway and Xtract One Gateway.
Positive Adjusted EBITDA and Cash Metrics
Xtract One reported positive adjusted EBITDA of CAD 0.6 million for the quarter, which Hersh called a “significant financial milestone” for the company. Operating cash usage was approximately CAD 30,000, compared with CAD 3.4 million in the prior-year quarter. Excluding working capital changes, the company generated approximately CAD 0.7 million of operating cash, compared with usage of CAD 2.2 million a year earlier.
The company ended the quarter with CAD 15.6 million in cash, which Hersh said was virtually unchanged from the previous sequential quarter.
Operating expenses increased year over year as the company scaled. Sales and marketing expenses rose to CAD 2.1 million from CAD 1.6 million, research and development expenses increased to CAD 2 million from CAD 1.6 million, and general and administrative expenses rose to CAD 2.4 million from CAD 1.9 million.
Asked about the operating expense run rate, Hersh said the company believes current levels are a “pretty good run rate” going forward for the next year and that there is nothing currently expected to cause a large jump in operating expenses as the company scales.
Management Sees Growth Continuing
Evans said the company is “sitting at a fulcrum point of profitability” and expects backlog expansion and revenue growth to continue. Asked by Buck whether maintaining positive adjusted EBITDA is a priority, Evans said the company’s scalable operating model should allow it to drive top-line growth while staying near cash flow breakeven or becoming cash flow positive.
Management also discussed expanding market opportunities. Hersh said commercial office buildings represented approximately 11% of year-to-date bookings. She also cited growing international interest, including the impact of Martyn’s Law in the U.K. and the company’s recently announced British Museum reference customer. She said SmartGateway is well suited for Europe and Asia because of its small-knife detection capabilities.
In response to a question from Northland Capital Markets analyst Mike Latimore, Evans said seasonality in bookings is smoothing as the company gains more diversity across segments such as manufacturing, distribution, hospitals and office buildings.
Evans told investors the quarter reflects work done over the past year to improve manufacturing capacity, brand awareness, sales channels and customer support. Asked whether the quarter was a one-time result or the start of a new trend, he said he viewed it as “the new norm, not a one-time blip.”
About Xtract One Technologies TSE: XTRA
Xtract One Technologies is a leading technology-driven threat detection and security solution leveraging AI to provide seamless and secure patron access control experiences. The Company makes unobtrusive threat detection systems that enable venue building operators to prioritize and deliver improved patron experiences while providing unprecedented safety. Xtract One's innovative multi-sensor Gateway product enables companies to covertly screen for weapons at points of entry without disrupting the flow of traffic.
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