Core Insights - Nukkleus Inc. is focused on strategic acquisitions and partnerships in the aerospace and defense industry, aiming to build a robust portfolio that is expected to generate revenues of $20-22 million in 2026 [1][3]. Company Strategy - The company has executed a successful M&A strategy in 2025, completing multiple acquisitions and forming key partnerships to strengthen its foundation for future growth [1][3]. - Nukkleus is targeting businesses with proven revenue and operational synergies, positioning its portfolio to benefit from sustained demand in the defense sector [3][5]. Market Environment - The U.S. military and national security spending is projected to reach $1.5 trillion, reflecting a bipartisan commitment to defense readiness and modernization [2]. - Increased investments from NATO members and Indo-Pacific allies are driving demand for advanced aerospace and defense technologies globally [2]. Acquisitions and Partnerships - Nukkleus has completed several strategic acquisitions, including: - Star 26 Capital, Inc., which owns B. Rimon Agencies Ltd., Water.IO Ltd., Zorronet Ltd., and a convertible loan to ITS Industrial Techno-logic Solutions [6]. - Nimbus Drones Technologies and Tiltan Software Engineering Ltd., enhancing its capabilities in unmanned aircraft and defense technology [6]. - The company has also signed a three-year distribution agreement with BladeRanger Ltd. and a joint venture with Mandragola Ltd. to focus on aircraft modernization projects in the EU [12]. Future Outlook - Nukkleus aims to scale its recently acquired businesses, drive organic growth, and maintain operational reliability as part of its strategic outlook for 2026 [9]. - The company is committed to a disciplined acquisition approach, focusing on five core layers of the value chain, including manufacturing and tactical technologies [10][14]. - Nukkleus has identified over 400 potential acquisition targets across the U.S., Israel, and Europe, focusing on Tier-2 and Tier-3 manufacturers with strong customer relationships [13].

Financial Data and Key Metrics Changes - The company achieved sales growth of 22% year-over-year, with net sales for the quarter at $132.5 million [9][19] - Adjusted EBITDA for the quarter was $11.3 million, with adjusted earnings per share of $0.20 [19][21] - Cash flow generated in the third quarter was $4.7 million, increasing the trailing twelve months cash flow to approximately $35 million [21] - The balance sheet remains strong with net debt of $51 million, resulting in a net debt to trailing twelve months adjusted EBITDA ratio of 1 times [21] Business Line Data and Key Metrics Changes - Display Solutions segment saw a 70% increase in sales compared to the prior year, with 15% organic growth [10][22] - Lighting sales lagged year-over-year, but operating margins improved by 110 basis points [11][26] - The Lighting segment's order levels increased, resulting in a book-to-bill ratio of 1.1 times [27] Market Data and Key Metrics Changes - The Refueling/C-store vertical experienced a 60% increase in sales, while Grocery vertical sales grew by 20% [22] - The company exited the quarter with a backlog 15% above the previous year [22] Company Strategy and Development Direction - The company is focused on onshoring and reshoring manufacturing, currently at 70% domestic sourcing [13] - Management believes that the ongoing trade and tariff activities may provide a competitive advantage over competitors reliant on foreign sourcing [14][16] - The company is committed to integrating acquisitions effectively and pursuing growth opportunities while balancing customer and shareholder needs [17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in regaining margins as customer demand stabilizes [8][16] - The company anticipates continued favorable order rates, although performance may be choppy due to the lengthened quote to order conversion cycle [28] - Management remains optimistic about the upcoming quarter and the overall market outlook despite external challenges [85] Other Important Information - The company completed the acquisition of Canada's Best Store Fixtures for $24 million, with a potential $7 million earn-out [21] - The company continues to release over 30 new products annually, indicating strong product development velocity [80] Q&A Session Summary Question: Can you provide more details on fluctuating demand levels and customer schedules? - Management indicated that fluctuating demand is primarily around the Grocery vertical, with improvements in scheduling stability noted since early April [33][34] Question: What is the margin impact from production inefficiencies? - Management estimated a margin impact of 200 to 250 basis points due to scheduling disruptions and the EMI mix, with expectations for recovery as operations stabilize [38][40] Question: How is the company managing the tariff environment? - The company has been working on alternative sourcing and pricing strategies to mitigate tariff impacts, ensuring that costs are captured appropriately [44][46] Question: Are there opportunities for cross-selling between Display and Lighting segments? - Management confirmed that there are significant cross-selling opportunities between the two segments, particularly in vertical markets like Petroleum [52][54] Question: What is the company's acquisition strategy moving forward? - The company remains active in M&A, focusing on both incremental and transformational acquisitions to enhance growth and market presence [72][76]