Financial Data and Key Metrics Changes - The cash burn from operating and investing activities for Q2 2025 was $2.5 million, an increase from $2.2 million in Q2 2024 and $2.1 million in Q1 2024 [28] - Total cash, cash equivalents as of June 30, 2025, was $11.1 million, with no debt and a clean capital structure [30] - The net loss for Q2 2025 was $3 million compared to $2.7 million in Q2 2024 [32] Business Line Data and Key Metrics Changes - The company shipped updated solid state circuit breaker prototypes to its first design win customer, which is expected to generate several hundred thousand dollars in revenue in its first year and potentially millions in the second year [11][26] - Collaborations with five automakers, including four of the top 10 global automakers, have been established, indicating a growing interest in B TRAN technology for EV applications [7][9] Market Data and Key Metrics Changes - The company is seeing increased interest in B TRAN technology for circuit protection applications, particularly in Asia, which is the world's largest market for power electronics [7][12] - The automotive market is expected to contribute significantly to revenue growth, with a focus on solid state circuit breakers and EV contactors [27][79] Company Strategy and Development Direction - The company aims to broaden its collaboration with Stellantis and other automotive suppliers, focusing on commonality across their EV platforms [16][41] - Plans to increase the power rating of products later this year, which will enhance competitiveness in the market [21][22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving milestones for 2025, including the start of revenue ramp and completion of third-party automotive qualification [27] - The company is well-positioned to mitigate impacts from tariffs and trade policies due to its asset-light business model and dual sourcing strategy [20] Other Important Information - The company has 96 issued V TRAN patents, with 74 pending, indicating a strong focus on innovation and intellectual property protection [25] - The company is actively engaged in educating the engineering community about its technology to facilitate adoption [58] Q&A Session Summary Question: How do we think about the opportunity with Stellantis? - The company expects to be involved with multiple brands under Stellantis' EV platform, aiming for commonality across their brands [36][38] Question: What is the estimated power semiconductor content in EVs? - The estimated total power semiconductor content in an EV is about $1,100, with the EV contactor contributing approximately $300 [43] Question: How many design win opportunities are there? - The company sees a growing funnel of design win opportunities, particularly in the industrial sector, with many companies interested in solid state circuit breakers [45][48] Question: What are the challenges to closing sales? - The primary challenge is the education process for engineers regarding the new technology, as opposed to technical challenges [58] Question: What is Ideal Power doing to drive sales ramp? - The company is utilizing internal sales teams, distributor relationships, and increasing awareness through trade shows and publications [60][62] Question: When will Ideal Power reach cash flow breakeven? - A few key design wins could lead to cash flow breakeven, with significant revenue potential from solid state circuit breakers and EV applications [67] Question: What is the cost comparison between B TRAN and IGBT? - B TRAN is expected to be about 10-20% more expensive than a single IGBT, but offers significant cost savings in bidirectional applications due to fewer components needed [84]

Financial Data and Key Metrics Changes - Total revenue for the second quarter grew nearly 5% year-over-year, reaching $39.4 million, while adjusted EBITDA increased by 4% to $9.3 million [6][14] - Adjusted free cash flow was positive for the first time since the company went public, amounting to $1.8 million [7][17] - The company reported a net debt of $55.8 million and cash and cash equivalents of approximately $1.1 million at the end of the second quarter [14] Business Line Data and Key Metrics Changes - Tool rental revenue was approximately $32.8 million, while product sales revenue was $6.7 million, reflecting a drop in deep casing sales due to market conditions [14][15] - The Eastern Hemisphere operations saw a revenue increase of 21%, contributing about 14% of total revenue in the first half of the year [9][16] - The deep casing product line experienced significant softness due to rig declines in the Middle East and Mexico [7][15] Market Data and Key Metrics Changes - The global rig count declined by 7% year-over-year, impacting overall market activity levels [13] - Despite the decline in rig counts, the company managed to maintain operational discipline and benefited from recent acquisitions [13][19] Company Strategy and Development Direction - The company is focused on integrating recent acquisitions and enhancing operational efficiency through a program called "One DTI" [22][23] - A cost reduction program was implemented to cut expenses by $6 million annually, aligning spending with customer activity levels [11][19] - The company is actively pursuing strategic acquisitions to enhance its competitive position and expand its geographic footprint [27][55] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the future, noting that while pricing pressures are expected, the company is well-positioned to adapt to market changes [25][26] - The company anticipates continued uncertainty in the market, but remains confident in its ability to deliver shareholder value [25][27] - Management highlighted the importance of maintaining strong communication with clients to navigate pricing pressures effectively [44] Other Important Information - The company repurchased $600,000 of its common stock during the second quarter at an average price of $3 per share [20] - Maintenance capital expenditures for the second quarter were approximately 10% of total revenue, primarily funded by tool recovery revenue [18] Q&A Session Summary Question: How did the company maintain margins despite rig count declines? - Management indicated that they anticipated activity declines and pricing pressures, which were somewhat muted in the first half of the year, allowing margins to hold up [30][31] Question: Will the cost cuts fully impact Q2, or will benefits be seen in Q3 and Q4? - Management stated that more benefits from cost cuts are expected in Q3 and Q4, as the cuts were just being implemented in Q2 [33] Question: What factors will determine the company's position within the guidance range for the year? - The activity level and pricing pressure will significantly impact whether the company reaches the low or high end of its guidance range [36] Question: What drove the sequential international revenue growth this quarter? - Management attributed growth to positive momentum from recent acquisitions and successful re-establishment in the Eastern Hemisphere market [37][39] Question: What is the company's exposure to Western Canada and gas markets in the US? - The company has a solid presence in the Haynesville and Northeast markets, with a strong business in Canada [48][49] Question: Have margins eroded in Q3, and what is the outlook for Q4? - Management acknowledged that while Q1 and Q2 were on plan, they expect pricing pressure to continue impacting margins in Q3 and Q4 [52] Question: What is the current M&A environment like? - Management noted ongoing discussions with potential acquisition targets and emphasized the importance of finding good value in the current cycle [54][55]

Financial Data and Key Metrics Changes - Total revenues for Q2 2025 were $9 million, up from $7.8 million in Q2 2024, driven by a 5% increase in unit sale price and a 9.5% increase in sales volume of Ameluz [15][16] - Total operating expenses increased to $14.1 million in Q2 2025 from $12.9 million in Q2 2024, with a net loss of $5.3 million compared to a net loss of $0.3 million in the prior year quarter [18][19] - Adjusted EBITDA for Q2 2025 was negative $5.1 million, compared to negative $4.7 million in Q2 2024, reflecting higher selling, general, and administrative costs [18][19] Business Line Data and Key Metrics Changes - The company sold more than 50,000 tubes of Ameluz in the first half of 2025, with 40 ROGOLET XL lamps placed in physician offices during the year [5][6] - Cost of revenues decreased by $1.7 million or about 42% compared to Q2 2024, primarily due to a reduced transfer price for Ameluz [17][20] - Sales volume of Ameluz increased due to improvements in direct sales team efficiency [15][19] Market Data and Key Metrics Changes - The company is in the process of transferring all U.S. IP, FDA approvals, and contracts with third-party manufacturers, which is expected to enhance operational control [7][8] - CMS has officially listed Ameluz for reimbursement for up to three tubes per treatment, which is expected to significantly impact treatment options for actinic keratosis [10] Company Strategy and Development Direction - The company has restructured its relationship with Biofrontera AG, becoming completely independent, which includes a shift to a royalty model that will reduce costs and improve financial flexibility [6][9] - Future plans include expanding the label for Ameluz to treat actinic keratosis on larger body areas and superficial basal cell carcinoma, with ongoing clinical trials [11][12] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the strong results and the potential for Ameluz to treat acne vulgaris, with ongoing clinical trials showing promise [13][14] - The company is focused on improving operational efficiency and reducing costs through better control of manufacturing processes [22][23] Other Important Information - The company raised $11 million to support the restructuring and expansion of its operations, which is reflected in its balance sheet [23] - As of June 30, 2025, cash and cash equivalents were $7.2 million, an increase from $6 million at the end of 2024, indicating improved financial health [22] Q&A Session Summary Question: How many of each lamp were placed in Q2 2025? - 40 XL lamps were placed in 2025 [28] Question: When do you think you'll receive the $2,500,000? - Expected in Q3 2025 [31] Question: Is the data timing still as previously reported for acne and peripheral AK? - Yes, both are expected in Q4 2025 [32] Question: How do you see gross margins unfolding over the next couple of quarters? - Gross margins are expected to improve due to the new agreement with Biofrontera AG [41][43] Question: What is the timing for the FDA submission for superficial basal cell carcinoma? - The submission is being prepared and is expected in the second half of the year [49]

Financial Data and Key Metrics Changes - Total EBITDA reached BRL2.7 billion, showing significant growth compared to last year, partially driven by the recognition of extraordinary tax credits [16] - Recurring EBITDA for the quarter totaled BRL1.648 billion, representing a 15% increase compared to the second quarter last year [17] - Net income was BRL1.151 billion in the quarter, an increase of 134% compared to the same period of the previous year [17] - Operating cash generation was BRL1.848 billion, a growth of 73% compared to the same period last year [18] - Net debt at the end of the second quarter was BRL12.635 billion, equivalent to 1.9x net debt to EBITDA, an increase from 1.7 times in the last quarter [18] Business Line Data and Key Metrics Changes - Ipiranga's volume sold in the second quarter was 2% lower compared to the same quarter last year, with a 3% reduction in diesel sales [19] - Ultragaz's recurring adjusted EBITDA was BRL442 million, 11% higher than the same period in 2024, reflecting better sales mix and efficiency [22] - Ultracargo's EBITDA totaled BRL141 million, which is 15% lower than the same period last year, mainly due to lower cubic meters sold [23] - Hydrovias' total volume in the quarter was 10% higher compared to the same quarter last year, with a recurring adjusted EBITDA increase of 39% [25] Market Data and Key Metrics Changes - The fuel sector continues to experience illegalities, including increased regular imports of naphtha for selling as gasoline with reduced tax burden [7] - The implementation of single-phase taxation of hydrated ethanol for PIS and COFINS began in May, marking progress in the regulatory environment [7] - The volume of LPG sold by Ultragaz was 1% lower than in 2024, with a 2% decrease in the bottle segment [21] Company Strategy and Development Direction - The company remains committed to long-term value creation and disciplined capital management, focusing on operational cash flow generation [6] - The completion of the buyback program of 25 million Ultrapar shares at an average cost of BRL16.64 reflects the company's capital allocation strategy [8] - The company is preparing for potential regulatory changes in the LPG market, emphasizing the importance of maintaining safety and investment in the sector [10] Management's Comments on Operating Environment and Future Outlook - Management highlighted the positive effects of recent regulatory changes, although they acknowledged that the single-phase taxation initially deteriorates margins [33] - The company expects seasonally stronger volumes in the third quarter, with a trend towards normalization of inventories in the industry [20] - Management expressed optimism about the future performance of Hydrovias, expecting continued strong results and significant increases in recurring EBITDA [25] Other Important Information - The company raised BRL1 billion at Epidanga at an average cost equivalent to 106% of the CDI, below the current average cost of debt [8] - The company will pay BRL326 million in interim dividends, equivalent to $0.30 per share in August [8] Q&A Session Summary Question: Impact of informal practices on margins - Management acknowledged improvements in the industry but noted that it is too early to assess the full impact on margins [30][34] Question: Competition from Petrobras in the LPG market - Management indicated that Petrobras could support regulatory consolidation but emphasized the need for careful monitoring of market dynamics [38] Question: Working capital and draft discount related to IOF - Management confirmed that the discussion around IOF was a trigger for managing working capital effectively [40] Question: Consolidation of Hydrovias and cost reduction initiatives - Management expects improvements in management and operations to positively impact EBITDA in the second half of the year [54] Question: Long-term perspective for Ultracargo and expansion projects - Management confirmed ongoing investments in expansion projects, with expectations of reaching EBITDA per cubic meter similar to other terminals by 2026 [61] Question: Capital allocation and leverage targets - Management indicated that once leverage reaches a comfortable level, they will consider both investments and increasing dividend payouts [62]

Financial Data and Key Metrics Changes - The company reported a GAAP net income of $5,300,000 for the first half of 2025, marking an approximate 80% increase from the prior year period, setting a new first half record [6] - Gross margin expanded year over year to 59.1%, while operating income nearly tripled to $1,100,000 [6][28] - Revenue for Q2 2025 was $7,140,000, slightly lower than $7,500,000 in Q2 2024, but gross profit increased by 12.7% to $4,200,000 [27] Business Line Data and Key Metrics Changes - The company has shifted towards higher margin contracts, resulting in a significant improvement in operating margin, which rose to 15.1% from 5.3% in the previous year [28] - EBITDA increased by 56% to $2,500,000 in Q2 2025, marking the twelfth consecutive quarter of positive EBITDA [28] Market Data and Key Metrics Changes - The electronic monitoring market is projected to reach $2,300,000,000 by 2028, with the US and Europe accounting for 95% of this market [10] - The US market is expected to grow to six times the size of the European market in the coming years, presenting substantial long-term opportunities [19] Company Strategy and Development Direction - The company focuses on three strategic pillars: innovative technology, expanding global presence, and delivering outstanding service [8] - Recent investments include over $45,000,000 in technology platforms, enhancing capabilities in GPS tracking and domestic violence prevention solutions [9] Management's Comments on Operating Environment and Future Outlook - Management emphasized the importance of long-term contracts with governments, which may not reflect immediate quarterly results but shape the business trajectory [7] - The company is well-positioned to lead in public safety solutions as governments seek cost-effective alternatives to incarceration [30] Other Important Information - The company has secured over 70 multiyear government projects since February 2018, with accelerated expansion in North America [11] - The balance sheet shows strong cash and cash equivalents totaling $15,000,000, up from $5,700,000 at the end of Q2 2024 [29] Q&A Session Summary Question: Opportunities for expansion with the contract in Israel - Management noted that the contract encompasses all electronic monitoring programs in Israel, with growth potential in existing programs and new deployments [35][36] Question: Growth opportunities in Europe versus the US - Management highlighted that while Europe has ongoing projects, the US market presents higher margin potential and faster growth opportunities due to its fragmented nature [38][41] Question: Margin expansion opportunities - Management indicated that margin expansion is influenced by project mix and geographic deployment, with expectations for continued improvements as more high-margin projects are deployed [51][56] Question: Visibility on margin expansion versus revenue growth - Management stated that visibility on margin expansion is better than revenue growth due to the nature of ongoing projects and their varying stages [58][60]

Financial Data and Key Metrics Changes - The company achieved record sales, EBITDA, and EPS in fiscal 2025, with full-year EPS growth of 4% exceeding initial guidance [6][7] - Gross margins expanded nearly 50 basis points, surpassing 30% for the first time in history [6][7] - Free cash flow reached over $465 million, up 34% year-over-year, marking a new record [17][18] Business Line Data and Key Metrics Changes - Engineered Solutions segment sales grew organically year-over-year for the first time in seven quarters, with a 2% organic daily sales increase [9][11] - Service Center segment trends improved, returning to positive organic growth in June, with average daily sales increasing 1.5% sequentially [11][37] - The Engineered Solutions segment saw a 20.7% increase in sales year-over-year, with acquisitions contributing 19.7 points to this increase [39] Market Data and Key Metrics Changes - Year-over-year trends across the top 30 end markets remained mixed, with 15 markets generating positive sales growth [11] - Declines were noted in machinery, primary metals, utility and energy, aggregates, and chemicals, while technology verticals showed solid demand [12][13] - Orders in the Engineered Solutions segment increased by a high single-digit percentage year-over-year, indicating a positive inflection [13] Company Strategy and Development Direction - The company is focused on accelerating growth while being mindful of ongoing trade and interest rate policy uncertainties [21][24] - There is an emphasis on increasing growth with local customers through greater sales of ancillary products and comprehensive service solutions [25][28] - The company plans to remain active in M&A, with a developing pipeline for fiscal 2026 [28] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to execute amid evolving tariff backdrops and inflationary pressures [19][20] - The outlook for fiscal 2026 includes expectations for organic sales growth of 1% to 4% and EBITDA margins of 12.2% to 12.5% [44][45] - Management noted that recent U.S. trade agreements and tax reforms could positively impact business sentiment and capital investment [22][24] Other Important Information - The company closed four acquisitions in fiscal 2025, including Hydrodyne, which contributed over 400 basis points of inorganic growth [18][39] - The company repurchased 656,000 shares for $153 million and increased its quarterly dividend by 24% [18] Q&A Session Summary Question: Hydrodyne's sequential sales growth and EBITDA performance - Management indicated that the improvement in Hydrodyne's performance was due to stronger margin performance and quicker realization of synergy benefits [52][53] Question: Break fix MRO market trends - Management noted positive trends in local accounts and national accounts, indicating potential firming in the market [54][55] Question: Pricing contributions to guidance - Management expects pricing contributions to remain similar in the first quarter, with potential increases as the year progresses [61][62] Question: Market softness in international operations - Management identified Canada as experiencing more softness due to tariff impacts, but noted improvements as the quarter progressed [97] Question: Hydrodyne's contribution to EBITDA - Hydrodyne contributed just over $7 million to EBITDA in Q4, aligning with initial expectations for the first twelve months [87][88]

Financial Data and Key Metrics Changes - For Q2 2025, the company generated distributable earnings of $0.15 per basic weighted average share of common stock and declared a second quarter dividend of $0.15 per share [5][6][18] - The company reported a GAAP net loss of $13.2 million, or a loss of $0.60 per basic weighted average common share [18] - As of June 30, 2025, total assets were $290.6 million, total shareholder equity was $184.7 million, and book value per share was $8.18 [19] Business Line Data and Key Metrics Changes - The company exited an equipment loan to a Nevada cultivator, impacting earnings but not book value as the loan was fully reserved [6][7] - The weighted average portfolio yield to maturity was approximately 17% as of August 1, 2025 [19] - The CECL reserve was $44 million, approximately 14.6% of loans at carrying value, with total unrealized losses of $21.5 million for loans held at fair value [19] Market Data and Key Metrics Changes - The cannabis industry remains challenging with limited capital entering the market, impacting the company's ability to invest in size [12] - The company noted that about two-thirds of cannabis opportunities do not have real estate coverage, limiting the current investment pipeline [28] Company Strategy and Development Direction - The company announced its intention to convert from a REIT to a BDC, which would allow it to invest in a broader array of opportunities, including non-real estate covered assets [13][14] - The conversion is seen as a positive step to capitalize on the cannabis sector's growth potential, especially if federal rescheduling occurs [14][16] Management's Comments on Operating Environment and Future Outlook - Management highlighted the ongoing uncertainty and volatility in the cannabis industry, which has tightened underwriting standards and reduced the investment pipeline [29] - The potential rescheduling of cannabis is expected to attract more capital into the industry, improving asset valuations and supporting the company's troubled loans [31][32] Other Important Information - The company expanded its senior secured revolving credit facility from $30 million to $50 million [19] - The proposed conversion to a BDC is subject to shareholder approval and is anticipated to occur in 2026 [16][17] Q&A Session Summary Question: Why convert to BDC versus mortgage REIT? - Management explained that many thriving cannabis operators do not own real estate, limiting investment opportunities as a REIT. The conversion to a BDC is seen as the best path for long-term value [22][24] Question: How much will the BDC conversion broaden the pipeline? - Management indicated that approximately two-thirds of cannabis opportunities do not have real estate coverage, suggesting significant potential for pipeline expansion post-conversion [28] Question: Update on problem loans with Private Company A and K? - Management provided updates on asset sales under receivership for Private Company A and clarified the accounting treatment for loans held at fair value versus carrying value [37][39] Question: What is the target debt leverage ratio? - The company targets a leverage ratio between 1.0 and 1.2 times and does not foresee issuing equity given current stock trading levels [41][42] Question: Market sentiment on mortgage REIT sector? - Management noted that mortgage REITs have traded better recently, with interest rates impacting trading and investment opportunities [45] Question: Impact of rescheduling on borrower interest? - Management stated that the rescheduling conversation is still new, and many are in a holding pattern awaiting concrete developments [49][50] Question: CECL reserves increase due to portfolio fundamentals or macro aspects? - Management indicated that while macro factors play a role, the increase in CECL reserves is primarily driven by individual loan evaluations [51][52] Question: Will BDC conversion open new credit facilities? - Management noted that while the current credit line is similar to BDC financing, it is uncertain if the structure will attract more banks to participate in cannabis lending [54][55]

Financial Data and Key Metrics Changes - Net sales and revenues decreased by 9% to DKK 12.018 billion, with equipment operations net sales also down by 9% to DKK 10.357 billion [9] - Net income attributable to Deere & Company was €1.289 billion, or $4.75 per diluted share [9] - Operating margin for equipment operations was reported at 12.6% [5] Business Segment Data and Key Metrics Changes - **Production and Precision Ag**: Net sales decreased by 16% year over year to €4.273 billion, primarily due to lower shipment volumes and unfavorable price realization [10] - **Small Ag and Turf**: Net sales were down 1% year over year to €3.025 billion, with a slight decline in shipment volumes offset by positive currency translation [11] - **Construction and Forestry**: Net sales decreased by 5% year over year to DKK 3.059 billion, mainly due to unfavorable price realization [17] Market Data and Key Metrics Changes - In the U.S. and Canada, large ag equipment industry sales are expected to decline by approximately 30% in fiscal year 2025 due to high interest rates and elevated used inventory levels [12] - Small ag and turf industry demand in the U.S. and Canada is projected to be down 10% [13] - European market sentiment is improving, with expectations for industry sales to be flat to down 5% in fiscal year 2025 [14] Company Strategy and Development Direction - The company is focused on disciplined execution amidst challenging market dynamics, managing production costs, and inventory levels effectively [5][6] - There is an emphasis on responding proactively to market downturns and maintaining robust investment levels for future growth [65] - The company aims to build production in line with retail demand as market conditions improve [26][65] Management's Comments on Operating Environment and Future Outlook - Management noted that global uncertainty and high interest rates continue to weigh on customer sentiment, but there are signs of improved demand in certain segments [5][6] - The company remains optimistic about its order books and is well-positioned to respond to demand growth when it returns [7][65] - Management highlighted the importance of managing costs and production efficiency to navigate the current economic environment [30][32] Other Important Information - Tariff costs in the quarter were approximately $200 million, with a forecasted pretax impact of nearly $600 million for fiscal year 2025 [32][33] - The company has seen significant reductions in inventory levels across various segments, positioning itself well for future demand [26][27] Q&A Session Summary Question: Production to retail demand expectations - Management indicated that production levels could align closely with retail sales increases, particularly in large ag, while small ag and turf may see some lift due to underproduction this year [70][73] Question: Early order programs insights - Management noted that planter programs are seeing cautious ordering, while early responses for combines are positive but still early in the cycle [76][79] Question: Pricing and market competition - Management acknowledged competitive pricing pressures but noted positive market responses to recent pricing actions, with expectations for some price moderation in the fourth quarter [97][99] Question: Cash flow guidance variability - Management explained that the cash flow guidance range reflects uncertainties in the market, but they feel confident about inventory levels and retail sales trends [91][94] Question: Tariff impacts and mitigation strategies - Management provided details on the tariff costs and their allocation among business units, emphasizing ongoing efforts to mitigate these impacts [114]

Financial Data and Key Metrics Changes - The company reported a revenue growth of 105% compared to Q3 2024, reaching net revenues of $24.1 million, driven by new military programs, particularly the F-sixteen program [5][14] - Adjusted EBITDA increased by 43% year-over-year, although gross margins were impacted by costs associated with building safety stock for the F-sixteen product line [6][18] - Gross profit was $8.6 million, up 37% from $6.3 million in the same period last year, but gross margin decreased to 35.6% from 53.4% due to lower margins on the F-sixteen product line [15][16] Business Line Data and Key Metrics Changes - Product sales reached $16.6 million, significantly up from $5.1 million last year, primarily due to the recently acquired military product line [15] - Service revenue was $7.5 million, largely from customer service sales related to the Honeywell acquisitions, including $1 million from the F-sixteen program [15] Market Data and Key Metrics Changes - The backlog as of June 30, 2025, was approximately $72 million, which includes purchase orders in hand but excludes additional orders from long-term programs [18] - New orders in Q3 2025 totaled $17 million, indicating strong demand and future sales potential [18] Company Strategy and Development Direction - The company is focused on a long-term growth strategy called IS and S NEXT, which emphasizes targeted commercial growth, improved operating leverage, and disciplined capital allocation [7] - The expansion of the Exton facility is expected to increase manufacturing capacity by more than threefold, supporting the goal of exceeding $250 million in revenues over the next few years [9] - The company is actively pursuing acquisitions, particularly smaller avionics manufacturers, to enhance its product lines and achieve synergies [11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving revenue and EBITDA growth of over 30% compared to fiscal year 2024, despite near-term margin volatility [13] - The company anticipates improved margins in the latter quarters of fiscal 2026 as integration efforts and cost efficiencies are realized [6][12] Other Important Information - The company closed a new five-year $100 million credit facility, providing expanded access to credit and flexibility for strategic acquisitions [21] - As of June 30, 2025, net debt was $22.7 million, down $3.5 million from the previous quarter, reflecting strong operating results [20] Q&A Session Summary Question: What is the normalized gross margin outlook given the F-sixteen impact? - Management expects gross margins in the mid-40s, depending on product mix, with military sales typically carrying lower margins [24] Question: What is the targeted net leverage ratio? - The company is comfortable with a net leverage ratio around three, depending on the size of acquisitions [25] Question: Can you elaborate on the acquisition strategy and pipeline? - The company has a pipeline that includes potential acquisitions from Honeywell and smaller avionics companies, with ongoing discussions [27] Question: What is the expected impact of the F-sixteen safety stock on future revenues? - Management anticipates nominal F-sixteen revenue for Q4 and Q1 due to the transition process, with a temporary dip expected [33] Question: How does the company view the trajectory of gross margins in the coming quarters? - Management is guiding conservatively due to the lumpiness of product mix, targeting a gross margin of around 45% [36] Question: Are there any changes in defense budgets that might impact backlog execution? - There is increased interest from government and military sectors, which is encouraging for future sales [37] Question: Is the company prioritizing acquisitions to leverage the new credit facility? - Both organic growth and acquisitions are significant parts of the growth strategy, with a focus on utilizing expanded capacity for organic growth [39]

Financial Data and Key Metrics Changes - For Q3 2025, the company reported revenue of $15.4 million, an 18% increase compared to $13.1 million in Q3 2024, and an 18% sequential increase from the previous quarter [5][19] - Product revenue grew by 29% year-over-year, while service revenue was slightly higher at $5.3 million [19] - Gross profit for the quarter was $4.5 million, representing 29% of sales, down from 35% in the same quarter last year due to a change in sales mix and higher component costs [19] Business Line Data and Key Metrics Changes - The Technology Solutions (TS) segment is driving revenue growth, particularly through the Managed Cloud business, which has gained traction in niche markets like container shipping [6][8] - The High Performance Products (HPP) segment is seeing momentum with the ADT Protect cybersecurity offering, particularly in operational technology markets [8][10] Market Data and Key Metrics Changes - The company has established a strong presence in the operational technology marketplace, with successful deployments in industries such as steel, concrete, and lumber [8][10] - The company is expanding its cloud portfolio, which reflects a strategic focus on delivering secure and scalable cloud solutions [6][7] Company Strategy and Development Direction - The company is focused on a "land and expand" sales approach, aiming to build long-term relationships with customers by initially deploying solutions at individual sites and then expanding within the organization [9][10] - CSPi aims to maximize returns from the AZT Protect product line through prudent investments in marketing and participation in industry events [17][65] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to grow both top and bottom lines for the full fiscal year if current trends continue [5] - The company is optimistic about the momentum heading into the end of the fiscal year, driven by recent contract wins and increased reseller activity [65] Other Important Information - CSPi ended the quarter with over $26 million in cash and cash equivalents, allowing for continued investment in growth and a quarterly cash dividend of $0.03 per share [17][21] - The company was added to the Russell 3000 Index, enhancing visibility among institutional investors [18] Q&A Session Summary Question: Can you expand on the consulting expenses mentioned? - Management indicated that the consulting expenses were for additional engineers conducting high-level testing of product enhancements, and this is expected to be a recurring expense for another quarter [26][27] Question: Can you disclose the location of the lumber mill? - The management confirmed that the lumber mill is located in the Pacific Northwest [30] Question: What features have been added to the AZT Protect software since its release? - The software has evolved significantly, now supporting Windows and Linux with 14 countermeasures against various cyber threats, compared to just one in the initial release [40][41] Question: Are there any updates on the water facilities project with UFT? - Management stated that progress is being made with UFT, but specific details are limited due to NDA restrictions [60] Question: What are the projections for ACT revenues in the coming years? - Management declined to share specific projections but confirmed that internal forecasts exist [62]