Xtract One Technologies: this is just the “tip of the iceberg,” analyst says

Ventum Capital Markets analyst Amr Ezzat reaffirmed his “Buy” rating and $1.15 target price on Xtract One Technologies (Xtract One Technologies Stock Quote, Chart, News, Analysts, Financials TSX:XTRA) in an Oct. 24 report, saying that record bookings, accelerating deployments, and solid margins position the Toronto-based threat-detection company for a stronger second half of fiscal 2026.

“Following our First Look last night, we emphasized that the near-term noise in revenue mattered far less than the visibility embedded in record bookings and backlog—and the call reinforced that view,” Ezzat said. “Management struck a confident tone, noting that deployment friction is easing and installation momentum is improving into FQ2, setting up a stronger second half as volumes ramp. Margins remain structurally solid, with near-term compression viewed as transitional.”

Xtract One, formerly Patriot One Technologies, develops AI-powered weapon and threat detection systems for stadiums, schools, casinos, offices, and healthcare facilities across North America and abroad. Founded in 2016, the company’s SmartGateway and One Gateway products use sensor and analytics technology to detect concealed weapons and threats without intrusive screening.

Ezzat said the company’s growth engine continues to “evolve as intended—bookings converting into deployments, deployments into revenue, and revenue into earnings leverage.” The new One Gateway product has exceeded internal expectations, prompting management to double manufacturing capacity to meet demand, while the qualified sales pipeline now exceeds US$100-million across both gateway platforms.

Ezzat said backlog conversion appears to be accelerating, with management expecting “the real ramp” in H2/F26. While some deployments were delayed by customer-side factors such as reorganizations and construction, “none of the signed deals were lost,” he noted.

Gross margin in the fiscal fourth quarter was 71.2%, well above Ventum’s 60% forecast and up from 57% last quarter, aided by pricing strength and production efficiencies in SmartGateway manufacturing. Management guided to a temporary dip in early F2026 as new One Gateway installation costs flow through, before margins normalize with scale.

Education accounted for 60% of Q4 bookings (US$16.1-million, up 250% quarter over quarter), with 24% from entertainment and 12% from healthcare, a mix that contributed to a higher proportion of upfront contracts as school boards typically pay through grants and annual budgets.

“This is the tip of the iceberg,” Ezzat said, adding that weekly demos and repeat orders from early education customers indicate strong adoption.

Revenue for the quarter came in at $3.3-million (Ventum: $2.9-million), down 3.4% sequentially and 40.6% year over year, reflecting the timing of deployments. Bookings reached a record $16.1-million, while combined backlog and signed contracts pending installation hit $49.7-million, up 85% year over year.

Adjusted EBITDA was –$2.7-million (in line with expectations) versus –$2.3-million in Q3 and –$1.4-million last year. Free cash flow was –$1.0-million, an improvement from –$3.5-million in the prior quarter, and the company ended the period with $8.2-million in cash and no debt, up sharply from $1.9-million.

Ezzat introduced quarterly forecasts for fiscal 2026, expecting revenue and margin contributions to be weighted toward the second half as One Gateway deployments scale and gross margins normalize. His full-year forecasts remain unchanged.

He projects Adjusted EBITDA of $1.7-million on revenue of $29.8-million in fiscal 2026, improving to $7.8-million on $43.5-million in fiscal 2027.

“The story continues to play out as expected,” Ezzat concluded. “With deployments ramping, margins expanding, and a rapidly growing sales pipeline, execution, not demand, is now the gating factor.”

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