Financial Data and Key Metrics Changes - For Q2 FY 2026, total revenue was $96.3 million, down from $113.9 million in the same period of FY 2025, primarily due to reduced demand from a longstanding customer and the transition of an End-of-Life program [3][4] - The net loss for Q2 FY 2026 was $8.6 million or $0.79 per share, compared to a net loss of $4.9 million or $0.46 per share in Q2 FY 2025 [7] - Adjusted gross margin for Q2 FY 2026 was 7.9%, while gross margin was 0.6%, down from 6.8% in the same period of FY 2025 [5][6] Business Line Data and Key Metrics Changes - The company initiated a wind down of manufacturing operations at its China facility, which is expected to save approximately $1.2 million per quarter once completed [5] - The company is also reducing its workforce in Mexico, anticipating savings of approximately $1.5 million per quarter [5] Market Data and Key Metrics Changes - Inventory decreased by $12.3 million or 12% year-over-year, while accounts receivable days sales outstanding (DSOs) improved to 77 days from 99 days a year ago, indicating stronger collection on receivables [8] Company Strategy and Development Direction - The company is focusing on nearshoring and tariff mitigation strategies to reduce costs while maintaining operational flexibility [4] - Investments in U.S. and Vietnam facilities are aimed at enhancing production capabilities and meeting evolving customer demands [11][15] - The company expects approximately half of its manufacturing to occur in the U.S. and Vietnam by the end of FY 2026 [15] Management's Comments on Operating Environment and Future Outlook - Management noted ongoing global economic uncertainties and volatile trade policies but expressed optimism about new program ramps and cost efficiency improvements [9][10] - The company is not providing forward-looking guidance for Q3 FY 2026 due to uncertainties in new product launches [10] Other Important Information - The company reported a total cash flow from operations of approximately $6.3 million for Q2 FY 2026, compared to $1.3 million in the same period of FY 2025 [8] - Capital expenditures for FY 2026 are expected to be around $8-$10 million, focusing on new production equipment and automation [9] Q&A Session Summary Question: Can you provide more details on the increased demand from existing customers? - Management indicated that the increased demand is primarily from two longstanding customers, with a significant revenue impact from product maturation and an End-of-Life program [22][23] Question: What is the size and timing of the new programs won? - The automotive program is expected to generate up to $5 million, while pest control and industrial equipment programs could generate $2-$5 million each, with manufacturing taking place in Mexico and the U.S. [24] Question: Can you elaborate on tariff mitigation strategies? - The company is focusing on offering production options in Vietnam and Mexico to mitigate tariffs, leveraging the USMCA agreement for cost advantages [25][26] Question: What are the expectations for gross margin and revenue growth? - Management anticipates achieving breakeven by the end of the fiscal year, with expectations for revenue growth and margin expansion driven by the consignment program [39][40] Question: What is the impact of the wind down of China operations on costs? - The $1.2 million savings from the wind down will impact both cost of goods sold and operating expenses, contributing to overall cost reductions [44][45]