DAIO

Please note this event is being recorded. At this time, I'd like to turn the conference over to Mr. Jordan Darrow, Investor Relations. Please go ahead, sir.

Thank you, Asha, and welcome to everyone to the Data I/O Corporation Second Quarter 2026 Financial Results Conference Call. With me today are the company's President and CEO, Bill Wentworth, and Chief Financial Officer, Charlie DiBona. Before we begin, I'd like to remind you that statements made in this conference call concerning future events, results from operations, financial position, acquisitions, financings and capital markets initiatives, economic conditions, supply chain expectations, estimated impact of tax and other regulatory reform, foreign exchange fluctuations, product releases, new industry participants, and any other statements that may be construed as a prediction of future performance or events are forward-looking statements which involve known and unknown risks, uncertainties, and other factors which may cause actual results to differ materially from those expressed or implied in such statements.

These factors also include uncertainties as to the impact of global and geopolitical events, international tariff and trade regulations, order levels for the company, and the activity level of the automotive and semiconductor industry overall, ability to record revenues based on the timing of product deliveries and installations, market acceptance of new products, changes in economic conditions and market demand, part shortages, pricing, and other activities by competitors and other risks, including those described from time to time in the company's filings on Form 10-K and 10-Q with the Securities and Exchange Commission, in our press releases and other communications.

The company may also reference GAAP and non-GAAP financial performance measures, including one-time items, which are intended to provide listeners with a means to better understand the company's performance. Please refer to reconciliations in our earnings press release issued today after the market closed. Finally, accuracy and completeness of all discussions on this call, including forward-looking statements, should not be unduly relied upon. Data I/O is under no duty to update any forward-looking statements. Now I'll turn the call over to Bill Wentworth, President and CEO of Data I/O.

Thank you, Jordan. Appreciate it. We've got a lot to talk about. There's a lot to unpack here, so I'll try to make sure I hit all the points. As you know, all of you are aware, obviously love to take questions. For those who, if I didn't explain or you need some clarity, please hang on and ask away. First, the Q2 highlights. Results midpoint of our revenue guidance, which was $5.1 million-$5.4 million, we achieved $5.2 million. Gross margins obviously had a significant improvement. This is the highest level since Q2 of 2023 and 30% lower revenue. Sales funnel continued to expand with new customers and new domains, which obviously has been a huge focus for us. Sorry about that. Doing this remote from a cell phone. Anyways, I'll continue.

Sales continue to expand, as I said, with new customers and new domains. We had six new logos so far this year, three automotive, two robotics, and one in global communications. All of these, especially the last two domains, have a significant amount of upside in the out years. Probably seeing some of these things are ratcheting up now for their demand. I would think on the robotics side, we'll see that start to really creep in to drive significant revenues probably in the second half of next year. We're getting built into the supply chain of these companies, which is the first step you have to make. You have to be built into the process.

With stronger revenue performance and our drive to take costs out of the business while operating more efficiently, we have reached our goal of reducing the overall cost of running the business to less than $22 million. That was a goal that we set early last year, and we achieved that April of this quarter. This equates to approximately $5.25 million-$5.5 million to break even, essentially. We feel comfortable at that level that we can generate organic growth and start to turn a profit and start seeing quarter-over-quarter growth. We entered Q3 with a pretty strong active pipeline. We've closed quite a few of those deals in July. This revenue and our improved revenue mix, we're certainly selling more, I would say systems with more value, more IOs, more options.

I think we've done a great job of managing our quotes and making sure that we're charging appropriately for that value. We've done a great job of communicating with our customers to show them that value through multiple different methods, and it's certainly helping out significantly. With the margin improvement strategies and our reduced operating expenses, I can say for the month of July, our second large milestone is to get to cash flow neutrality, stop burning cash. Preliminary numbers for July show close to cash flow neutrality. Yes, it's only one month. It's a significant improvement that's a result of all the hard work and execution driven by the broader team at Data I/O. Again, we're not done yet. There's still plenty of work to do.

I can see two or three areas we still need to get better operational efficiency and cost, which will also improve our customer sat and also be doing things in this industry that our competitors don't do. Through these efficiencies, we can react to customer demands faster, which are increasing almost daily. I had an email from a new client over in India, and the demand for what they need as they gear up these new products is not easy. They're looking for a few weeks turnaround on device support and new devices. These challenges we have to meet, and we are in the process of doing that during Q3. We've set a goal for, I think, four weeks of device turnaround. The industry right now is about 8-12. That's been on the great side. Transformational, give an update on the acquisitions.

Obviously, we've announced those back in May. They've been pretty much going to plan. These things never happen as fast as you want. I think the team's done a great job of looking at the business. We've had some great organizations help us through the process, just trying to find any holes or issues with the business. I think we've done the Quality of Earnings, was great because it did identify a few things that we were able to actually save some money on the purchase price. Everybody's doing the job. We've extended the date to August 31st for close, so that's where we're at with that. The security acquisition, which came out in the press release, I am calling from a Microchip conference that we would never gotten invited to if it wasn't for buying these security assets from IAR.

Having a seat at the table with suppliers because you have IP that's real, and they need it for their businesses. There's all these different compliance programs and regulatory programs coming out, such as the Cyber Resilience Act in Europe and the Radio Equipment Directive. These things, they have to be fully compliant by the end of next year. They're starting to monitor the vulnerability reporting starting next month. We're seeing a big push on the medical side because they've got to go through their FDA approval. Other industries are certainly going to have to meet this requirement, or you cannot sell your product in the EU. This is something, I think, from a timing perspective, perfect for us. We've engaged some of their customers.

We're getting out in front of them and looking at and listening to their plans and what they have scheduled and kind of their methodology of getting customers compliant at the semiconductor space, but also at the OEM and subcontractors as well. It's opening up a whole new branch of opportunities for Data I/O that honestly we wouldn't have had prior to. We had the partnership with IAR, but that's just a partnership. Now that we own the platform, and it's a platform we'll continue to invest in, it is differentiating the conversation we have with almost every customer. We will continue, by the way, it's an important point here is we're buying the assets, but we will continue a commercial relationship with IAR. Their compiler and debugging software, their workbench stack is an important platform for companies like Microchip.

So that was one of the questions in today's meeting is this just decoupling completely? No, we said we're absolutely going to stay connected to service customers like Microchip, do launches in the channel with them, as well as technical support. We're working out the commercial relationship between IAR and Data I/O. But no, we'll stay tightly coupled, and they will be a strategic channel partner for this platform. It brings in four new revenue streams for the software platform itself, annual support contracts, licensing fees, and then you've got the tokens that have to be placed in the part, and there's a charge for every token. Also, as we get into Programming as a Service, providing security provisioning as a service provider. It's exciting, and it's great having more multiple revenue lines.

I think the best thing about this is that we didn't have to invent anything new. We're using Data I/O's core LumenX platform. We're just pivoting it to address a market need. The beauty of that is we don't have to go and invest a bunch of money to be able to address the market. We can address it with our existing platform. Another key point to security is it's domain neutral. Everybody's going to need it. This will also help accelerate our domain dependence on automotive and move into other domains. Certainly help accelerate it. As far as PaaS, we talked about this last earnings call. We're now in the data collection stage for proposals on the pipeline that we built. That is ongoing now.

We expect to have proposals ready to go by the end of Q3, and the goal of booking one to three contracts in Q4. Overall growth drivers, improving opportunities, customers domain expansion in Q2, robotics, new automotive logos such as Valeo, automotive showing some early signs of recovery, industrial, med tech, and then global communications. We are working hard to diversify our customer base. I would say, it's safe to say that we are finally evolving. It's been a long 18 months. But our goal of becoming a highly valued supplier in the semiconductor supply chain is starting to come true, especially with the security. There's other things that we can add to our stack internally, licensing debugging software from like an IAR, so that we can be a higher value within the engineering communities. Paralleling the return for growth for programming industry alongside, along with the security mandates.

Data I/O is well positioned with team and tech platform balance sheet and market growth drivers. At this point, I would like to hand this over to Charlie and provide more insight to our Q2 financial performance. Charlie, please take it away.

Thanks, Bill.

Thanks, Bill.

Good afternoon, everyone. I'm going to cover four areas today. First, a quick review of our second quarter financial results. Second, I'll dive briefly into the accounting treatment for the convertible debenture we closed in June because it has a meaningful impact on the reported operating, sorry, net income and EPS. Third, I'll give an update on our 2026 business. Finally, I'll give another quick overview of where we stand with some of the strategic transactions that Bill discussed in his remarks. Let me start with the quarter. Net sales in the second were $5.2 million, up 59% sequentially from $3.3 million in Q1, and compared to $5.9 million in Q2 of last year. The sequential improvement reflects conversion of delayed Q1 orders and what we believe is an inflection in demand for capital equipment after a prolonged downturn.

Second quarter bookings were $4.9 million, up from $4.2 million in Q1. We signed six new customer logos in the first half, three from automotive and three from diversified technology markets that Bill mentioned. Consumable adapters and software and services represented 55% of total revenues, with platform sales at 45% of Q2 revenues. A shift from the 81/19 split in Q1, reflecting the rebound in capital equipment orders. Deferred revenues fell slightly to $1.1 million from $1.5 million. Meanwhile, backlog as of June 30 was $2.1 million, down from $2.6 million on March 31, reflecting operating improvements enabling quicker response to orders and improved order to ship performance within the quarter. Again, as Bill mentioned, we're getting our product out to our customers faster. Gross margin was 57%, compared to 49.5% in Q1 and 49.8% in Q2 of last year.

The improvement reflects the cumulative effect of positive mix shift, improved value-based pricing, increasing operational efficiencies, and greater overhead absorption on the higher revenue base. Direct material costs remained steady as we continued to mitigate the impact of tariffs and other inflationary pressures. Operating expenses were $3.7 million, including approximately $527,000 in one-time expenses, primarily related to the restructuring, but also consulting IT and placement expenses. Excluding one-time items, operating expenses were approximately $3.1 million, a decline both sequentially and from the prior year. By April, we achieved our target, as Bill mentioned, of total COGS and operating expenses below a $22 million annual run rate. Operating loss was $724,000 on $5.2 million of revenue, an improvement from $844,000 loss on $5.9 million of revenue in Q2 of 2025. Better performance on lower revenue.

Net loss was $1.6 million or $0.17 per share, compared to $742,000 or $0.08 per share in Q2 of 2025. This increase was driven almost entirely by $873,000 of interest expense from the convertible debenture accounting, the accounting for which I will walk through in a minute because it is unique to the situation that we faced. Adjusted EBITDA, excluding equity compensation and one-time items, was essentially break even at +$39,000, compared to a -$1.75 million in Q1. On the balance sheet, cash at quarter end was $10.8 million, up from $5.7 million as of March 31st, reflecting net proceeds of $8.3 million from the June private placement. Net working capital was $10.8 million. On the balance sheet as of June 30, you will see $6.2 million of convertible debentures classified as short-term debt, which was netted from working capital.

I want to flag that this was a quarter end snapshot only. The debentures converted into Series B preferred shares on July 8th, and the company currently has no debt outstanding. Removing those convertible debentures from short-term liabilities and the working capital calculation would have yielded a working capital of $17 million at quarter end. Now let me turn to the second part here, the walk through the accounting on the convertible debenture, because I know the $873,000 interest expense will draw questions. When we closed the $9 million private placement in June 17th, the proceeds were allocated across common shares, equity-classified warrants, and the convertible notes using the relative fair value method based on standalone fair values determined by KPMG, our independent consultant. Approximately $5.9 million was allocated to the notes, which have a face value of $6.8 million.

This difference, combined with the allocated issuance cost, created a total discount on the notes of approximately $1.5 million. Under the effective interest method, that discount is amortized over the expected life of the notes. Because the notes automatically converted to Series B preferred stocks upon shareholder approval, which both management and the investor expected promptly. The amortization period was not the five-year stated maturity of the notes, but the period from issuance to the anticipated shareholder vote. Approval was obtained on July 8th, giving us an amortization window of approximately three weeks. Amortizing $1.5 million of discount over three weeks produces a concentrated charge. Of the $873,000 in interest expense recognized in Q2, approximately $863,000 is non-cash and non-recurring accretion of debt discount, and approximately $10,000 is the coupon interest at 4%.

Again, the notes converted to preferred equity on July 8th, and there is no debt currently on the balance sheet. Let me just quickly turn to the update of the business framework we laid out in our first quarter call. Following the strong second quarter and significant progress on two planned acquisitions, we are reaffirming the 2026 business framework we laid out earlier this year. The pillars are unchanged. Organic revenue growth over 2025, acceleration of recurring and services revenue, including Programming as a Service, continued expansion within the programming services market, and operational and process optimizations driving improved margins, including in the internal application of AI. The first half trajectory supports these targets, and the framework now incorporates consolidation of transformational acquisitions in the second half. We are not providing specific revenue guidance for the third quarter.

As we said last quarter, the Q2 guidance was a one-time disclosure driven by the near-term visibility from Q1 slippage. Nonetheless, we remain confident in the trajectory, and the framework is tracking to plan. Finally, let me briefly give you a further update on the three strategic transactions shaping Data I/O. The $9 million direct investment closed on June 17th with net cash proceeds of $8.3 million, and the convertible notes converted to Series B preferred stock as of the shareholder meeting on July 8th. The warrants remain outstanding and exercisable at $3 per share over five years. Our lead investor is now our single largest shareholder. Transformational acquisition is on track. We have extended exclusivity through the end of August, as Bill mentioned, as we progress due diligence and definitive documentation.

Upon closing, as we discussed before, the acquisition is expected to nearly double our annual revenue run rate and boost earnings and cash flows. Finally, in July, we announced our intent to acquire IAR's embedded software security and IT-related assets. Combined with our programming platform, this creates a true end-to-end security provisioning solution that Bill mentioned, even as regulations like EU Cyber Resilience Act mandate device-level security. We will provide additional details as we progress toward a definitive agreement and an expected close.

In summary, Q2 was an operational watershed. 59% sequential revenue growth, 57% gross margins, and break-even adjusted EBITDA as the strategic plans and operational efficiencies implemented over the prior 18 months began to bear fruit. The large reported net loss reflects a non-recurring, non-cash accounting charge that will not repeat. We have $10.8 million of cash, no debt, two acquisitions advancing that collectively continue the transformation of Data I/O into a company with greater scale and diversification, broader provisioning and security capabilities and reach, and new revenues and business models to exploit. With that, I will turn the call back over to the operator for questions and answers.

Thank you. We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the key. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble a roster. Once again, if you have a question, please press star then one. The first question comes from Jon Hickman with Ladenburg. Please go ahead.

Hi. I got on late, so maybe you already talked about this, but did you state something about the progress of the closing of your acquisition that you mentioned a couple months ago?

Yeah, we just mentioned we extended the exclusivity to the end of August. That is all we commented on, other than due diligence along and tracking to plan and that.

Okay. So you are still pretty confident that that will happen?

Remain confident, yes.

Okay. Could you elaborate a little more on. I know you've spent some time and energy and money on building out your team. You've added some new executives recently.

No, we haven't added any new executives. Pretty much no.

Who you added? I thought you added somebody just a couple weeks ago that used to work with you at your other company.

No, I have a strategic consultant to come in to review some of our customer-facing activities and also look at the Programming as a Service side. Whether or not that person becomes a full-time employee will probably bear fruit as we go through the quarter. I fully expect that, but no, we haven't formally added anybody new to the payroll.

Okay. This might prove my naivete as far as the industry in general is concerned, but we're hearing a lot about shortages in the memory world due to AI. Is that affecting your customers and their demand for programming chips?

Well, they're using that same high-speed memory that NVIDIA needs or AI requires. I'm sure those customers are being adversely affected. There's always going to be a ripple effect through a technology when you have the newer technology being in such high demand. If the technology they have in the fabs can produce the, let's say, different flash technologies that aren't as cutting-edge, and they could use that technology to build those flash memories, it's absolutely going to have an impact. We can't avoid it. But for the most part, what we've seen is, at least on the UFS side, we haven't seen lead times go out too far. There's a client on the acquisition that had some allocation challenges with a few memory parts, but it's not as widespread as the high-speed memory needed for cell phones, and it's more specifically AI.

Okay. Thank you. Appreciate it.

Yeah, no problem.

Okay.

Once again, if you have a question, please press star then one. Since there are no further questions, this concludes the question and answer session. I would like to turn the conference back over to Bill Wentworth, Chief Executive Officer, for any closing remarks. Please go ahead.

Yeah. Thank you. Thank you, operator. Appreciate that. Obviously, there's a lot of changes going on, and the industry itself is going through some significant changes, like the last question, things like allocation and pricing increases and things like that. It's great when things are slow. You don't worry about those things when an industry such as tech has picked up like it has. And it's starting to broaden its reach outside of AI as far as the demand for semiconductors. As things like edge computing start to build out autonomous anything, AI-driven robotics and industrial automation, those things will continue to expand, and you're starting to see that demand affect the overall semiconductor market. So yeah, lead times have pushed out. But I think the industry has learned a lot since 2001, and they do a much better job of managing through that.

Obviously, this is a very unique time, as the amount of infrastructure that's being built out right now is beyond, I think anybody that's been in this industry as long as I have. We haven't seen anything like this. So you just don't know how that's going to affect. But I would say in conclusion, that we're in a great position, especially because a lot of the technologies we're dealing with are not related to that specific industry. But that industry is driving other companies and technologies and bringing new products to life, which helps us, and driving significant volumes at that too.

I would say as we become a more highly valued vendor, it is one of the main reasons why buying the SentriX asset was so important to us, because it gives us a pretty significant differentiator against our competitors, but also we fill a huge customer need that is coming up soon. I see that obviously helping a lot. One of the things I did mention early on in my comments is between the two assets, we are picking up almost, I would say, 60 to 70 active accounts that would use our technology that we have not been in. That is a lot of new logo and new domain growth.

Being able to realize those revenue synergies that will be right in front of us soon, and that is not really accounted for yet on my side of the fence, other than doing some FP&A on those numbers and trying to gauge an eye on how that will help cash flow generation and things like that. But even that, I would say that analysis was fairly conservative. I would say below the midpoint. Anyway, I think we are definitely in a great position now for Data I/O to return to continued growth, both inorganically for sure, but organically as well.

We are off to a very good start in Q3. I feel very confident about the target that we set for ourselves internally of reaching that target, which makes me look forward to Q3's earnings call. But stay tuned because there is going to be more announcements coming out over the next 30 to 60 days that are significant. I would like to close with those remarks and hand it off to the operator.

Ladies and gentlemen, with that, we will conclude today's conference call and presentation. We do thank you for joining. You may now disconnect your lines.

Please note this event is being recorded. At this time, I'd like to turn the conference over to Mr. Jordan Darrow, Investor Relations. Please go ahead, sir.

Thank you, operator, and welcome to the Data I/O Corporation First Quarter 2026 Financial Results Conference Call. In addition to the earnings, we are also addressing the recently announced transformational acquisition and strategic direct investment of $9 million. With me today are the company's President and CEO, Bill Wentworth, and Chief Financial Officer, Charlie DiBona. Before we begin, I'd like to remind you that statements made in this conference call concerning future events, results from operations, financial position, acquisitions, financings and capital markets initiatives, economic conditions, supply chain expectations, estimated impact of tax and other regulatory reform, product releases, new industry participants, and any other statements that may be construed as a prediction of future performance or events are forward-looking statements which involve known and unknown risks, uncertainties, and other factors, which may cause actual results to differ materially from those expressed or implied in such statements.

These factors also include uncertainties as to the impact of global and geopolitical events, international tariff and trade regulations, order levels for the company and the activity level of the automotive and semiconductor industry overall, ability to record revenues based on the timing of product deliveries and installations, market acceptance of new products, changes in economic conditions and market demand, part shortages, pricing, and other activities by competitors and other risks, including those described from time to time in the company's filings on Form 10-K and 10-Q with the Securities and Exchange Commission, in our press releases and other communications. The company may also reference GAAP and non-GAAP financial performance measures, including one-time items, which are intended to provide listeners with a means to better understand the company's performance. Please refer to reconciliations in our earnings press release issued today after the market closed.

Finally, the accuracy and completeness of all discussions on this call, including forward-looking statements, should not be unduly relied upon. Data I/O is under no duty to update any forward-looking statements. Now I'll turn the call over to Bill Wentworth, President and CEO of Data I/O.

Thank you very much, Jordan. As you heard from Jordan, we've, you know, obviously have a lot of great news to talk about today, but I will start with kind of the low end of this conversation, which is, you know, talking a little bit about Q1 and talk a little bit about kind of what happened and what we did to pivot within Q1 to get the momentum that we now have in Q2 as a, you know, the core business. You know, we had some really good plans going into the year. They were well thought out. You know, as you know, we have a very large installed base globally, and a lot of that equipment has certainly gotten in age and some of it's aging out.

Our plans were really around generating revenue through our existing clients first. Obviously, that's the easiest place to go. Things got off to a little slower start than we thought, so we made some pivots and really started to change a little bit of that messaging, and you can kind of see through Q1, especially into March, where bookings really started to pick up. Now we didn't get those bookings in time to ship, but they certainly came into Q2 strong, and that continued to accelerate. I am, you know, this company, you know, in the past has typically not given any guidance, so this is something that's somewhat new. I'm highly confident that we've moved north of $5 million both in bookings and revenue for the quarter. I won't go anything beyond that.

This is really to give the shareholders an understanding of really directionally where the business is going on its own. Obviously, we have an investment we're gonna talk about, an acquisition, it's really important that the shareholders and the people on the phone understand that the core business is healthy. It's been a slow start, We've got new products rolling out the second half, We've got some really good momentum. A lot of it is actually in North America and Mexico. Asia is still a little bit slow. We did book three purchase orders for systems in Europe, which is the most we've booked more than the last two years combined in Q1. We are seeing some good pickup. We've landed about three net new logos since the beginning of the year.

We've got three right now in the active pipe for this quarter that we have a good chance at closing. To land three, and these are not three site changes. It's not like another Jabil location or Flex. These are net new logos that we've never invoiced. You know, that is obviously a big part of our plan was to diverse our customer base because we really were so heavily reliant on automotive. I know in the past those numbers were 58%-63%. You know, when I dug in during the year, and especially in the second half, it was pretty clear to me a lot of the subcons that we had as kinda industrial were really automotive. You know, coming off a really tough time in the automotive industry, this has been a big transition overall for us.

You know, we're seeing some of our automotive customers come back. You know, we happen to be riding a few of the right horses there, which is always good. You know, we feel really good about Q2 and where we're going with the core business. That's, you know, Charlie will get into some of the details and the financials. We have some one-time write-offs, and as we optimize the business, that has been a big part of the last two quarters. I will tell you that, you know, going into this quarter, our break even for the overall business starting April as a clean month going forward is less than $22 million a year overall. When I started, it was close to $27 million.

I will tell you, AI has been a big part of that ability to get more productivity but also save money. It's not just about saving money because we, you know, AI is impacting our lives everywhere. We all see it. You know, we see it across companies and across every domain. CEOs are asked about how they're deploying AI all the time. It has a real positive impact to the company and to companies and to productivity. We've seen a lot of that in different projects that we're working on, and I'll talk more about that in the Q&A. I'd like to move on to the direct investment.

This is something we've been In looking at the M&A pipeline that we started to build when we brought Benchmark on as an advisor, you know, that pipeline has stayed pretty healthy, and it still is. We're really looking for a transformational acquisition. I mean, that's You know, look, there's some small acquisitions we could do. We really needed something that was gonna take us to the next step, the next level, and give us some scale and scope and, you know, increase manufacturing capacity, things like that. You know, we've been talking to a company over the last, you know, three, four, five months, and during that time, talking to some investors.

You know, I'm happy to announce that we were able to bring in $9 million of proceeds in common stock warrants convertible debenture in support of our current M&A activity as well as future M&A. Fundamental institutional investor following our progress for and met with us over at least 3x, maybe 4x over the last year. I think we've built a really good relationship with the investor and other investors that are looking. I really like where we're going as far as bringing in new money. You know, it's time. This is a new day and age for Data I/O. We're excited about the future. The team's excited. The companies we're talking to are excited. There's a very large growing market for us.

If you look at the overall semiconductor market, it has gone through the roof over the last several quarters. A lot of that has been in specialty parts such as GPUs and high-speed memory. Now you're starting to see the tide rise for everybody, and this is where we're seeing the activity. As AI starts to get more pervasive across our infrastructure, there are other things that need to be built to support that or take advantage of AI automation, and we're seeing that in places like robotics, edge of the network. You know, two of our new logos are robotics companies. You know, you've heard me talk about this in the past couple quarters, and it was definitely a target market for us. Those are two of the new logos.

We're very excited about where we're going and where Data I/O sits in that supply chain, but as well as getting into services. You know, I'll talk a little bit more about the acquisition a little bit later. If, if you followed us in our launching of our new website on April 10th, it was a dynamic change in this company's history. You could see Programming as a Service, and we are in four or five very deep conversations right now with significant large subcontractors that wanna move from doing it themselves, insourcing to Programming as a Service on-site or regional. My expertise is services, so this falls right into a comfort zone of mine, and I'm really looking forward to getting back into the services business. It's a great industry. It's recurring.

It's got a higher quality of revenue, improved cash flows. It kinda takes out that lumpiness of the CapEx business. I'm sure that we're I know Charlie's gonna enjoy those new cash flows as we start to expand that business and the services. You know, we're focused on developing new software to also run our products in a multi-tenant environment. All that leads to better revenue, better recurring revenue, a more predictable business for the future. I'll move on a little bit to the acquisition. I do wanna save, you know, a good amount for the Q&A or Look, I hope you guys are ready, 'cause we're certainly ready for your questions. You know, as I said, we've been working on this acquisition for quite some time.

I will tell you that, you know, the team is very excited and, you know, what this acquisition does for the company, you know, it's gonna help us accelerate our growth. It's gonna expand our scale and scope and manufacturing capability. It is truly a transformational acquisition. It will double the size of this company from a run rate perspective post first quarter that we close or when that close happens. I do expect that to happen by the end of Q3. Stay tuned. I think at this point I'd like to hand this over to Charlie. Let's see, where'd it go? Yeah, I think at this point, Charlie, if you're ready.

Yep.

Take it away.

Thanks, Bill.

Thank you, Charlie.

Good, good afternoon, everyone. I'm gonna cover four areas today. First, I'll walk through our first quarter financial results. I'll move on to our updated business framework and second quarter revenue guidance because I suspect that's top of mind for everyone. Third, I'll discuss the $9 million direct investment and what it means for our balance sheet and capitalization. Finally, I'll walk you through the transformational acquisition that Bill was just discussing. Let me start with the quarter. Net sales in the first quarter were $3.3 million, down from $6.2 million in the first quarter of 2025. The reduced revenues in part reflect lower bookings and backlog coming out of Q4, which was a function of the broader industry dynamics we discussed on prior calls.

In addition, as Bill noted, we saw a slower than expected ramp of our new sales initiatives. That said, we experienced positive acceleration of traction and momentum through the quarter. First quarter bookings were $4.2 million, which was a meaningful improvement from the $3.1 million in the fourth quarter of last year. Though it was still below the $4.6 million we booked in Q1 of 2025. We're encouraged by the sequential improvement both quarter-over-quarter and through the course of Q1, and importantly, by the composition and quality of the interest in bookings we're seeing. Regionally, first quarter bookings were strongest, most notably improved in Europe, as Bill mentioned. We saw especially late quarter growth in Europe, which is very encouraging.

Revenue mix was 47% adapters and 34% software and services, representing 81% of total first quarter revenue, providing a very stable and recurring revenue base, with capital equipment making up the remaining 19%. We do expect that capital equipment sales, though, with a strong strength in bookings, will rebound in Q2. Backlog as of March 31 was $2.6 million, up from $2.3 million at the year-end, and deferred revenue was held consistent at $1.5 million as of both quarter ends. Gross margin was 49.5% in the first quarter, compared to 51.6% in Q1 of last year. The decrease reflects lower absorption of labor and overhead costs on the reduced revenue base.

Direct material costs, however, remained relatively steady, and the teams have continued to actively mitigate the impact of tariffs and other inflationary pressures. Operating expenses were $4.75 million for the quarter, which was of which approximately $1.2 million was one-time expenses. The one-time items were primarily related to the optimization of our German operations, ongoing investments in core programming platform information systems, and our ERP, ongoing ERP transition. Excluding the one-time items, operating expenses were approximately $3.55 million, which is in line with prior year despite the additional operating complexity of the transition we're executing. I wanna emphasize that point. Ongoing operating costs are being managed down even as we invest for the future.

Bottom line, net loss, the net loss for Q1 was $3.2 million, or $0.34 per share, compared with a net loss of $382,000, or $0.04 a share in Q1 of 2025. The increased loss reflects both lower revenue and the one-time expenses. Adjusted EBITDA, excluding equity compensation and one-time items, was a negative $1.75 million for the quarter, compared to a negative $98,000 a year ago. Both periods include elevated overhead for annual public company expenses that are generally paid in the first quarter. On the balance sheet, cash at the quarter end was $5.7 million, compared with $7.9 million at year-end.

The decline reflects cash expenses paid annually in the first quarter, including public company compliance costs and insurance renewals, along with one-time items, platform investments, and a temporary increase in inventory as we built ahead to satisfy the demand we saw as it through the end of the quarter. Net working capital was $9.3 million, down from $12.3 million at year-end. Importantly, we continue to have no debt on the balance sheet as of March 31st. Today, we announced a private placement resulting in aggregate proceeds of $9 million, which I'll discuss in detail shortly. Before I get to that and the strategic transaction, let me address the forward outlook, 'cause I know near-term trajectory is top of mind for many of you.

Our framework for 2026, which we discussed in the last quarterly call, is built on the following pillars: organic revenue growth for 2026 over 2025, and we continue to see good demand signals for that, as well as strength in our recurring revenue base and new sales models we're implementing. Acceleration of recurring and services revenues, including the launch of our on-site Programming as a Service as we move forward. Entry into the programming services market, which represents a meaningful opportunity to expand our addressable market, and with our addressable market and in which Bill has particular expertise. Operational optimization is driving improved gross and operating margins. As revenue increases, we expect not only better absorption of labor and overhead, but mix will also continue to play a role as we introduce higher margin software and services.

Expense reductions totaling approximately $1.8 million in annual run rate from operational optimizations implemented since the beginning of 2026. That's over the last five months. Including the German restructuring and broader structural cost improvements. These are already in place, and we expect to reap the benefits of these as we go forward. Finally, as Bill mentioned, AI is deeply ingrained across all functions in driving productivity gains in engineering, operations, customer support, and administration and finance. For the second quarter, we are providing revenue guidance of $5 million-$5.4 million. That implies a minimum of approximately 20% sequential growth from the first quarter. I wanna be very clear, we are providing this guidance and the context around it.

We saw the sequential acceleration of sales activity within the quarter, we also saw some revenue recognition slippage of bookings that were processed but pushed into Q2 based on the timing of revenue. Q2 guidance includes these delayed first quarter sales, as well as solid new activity early in the quarter. Demand did not disappear, it shifted. Combination of the late Q1 momentum carrying over and customer engagement building in Q2 gives us visibility to provide this range. I also wanna be equally clear, we do not expect to be providing revenue guidance or other specific forward-looking guidance on a regular basis going forward. This quarter is an unusual circumstance as we saw such rapid acceleration from a weak start of the year.

We believe it's important and appropriate to share that with investors in this instance, but this should not be taken as a precedent for ongoing quarterly guidance. On an organic basis, the combination of revenue growth and cost discipline gives us line of sight to positive operating cash flow on an organic basis by the end of 2026, and that organic basis does not yet include the strategic acquisitions that we're gonna talk about today or other ones that might come through the course of the year. Let me turn to the $9 million direct investment, which we announced today, and which we expect to close before the end of May. We entered into a securities purchases agreement with a single institutional investor for an aggregate gross proceeds of $9 million.

The structure is, you can see in the press release, is as follows: investment includes the issuance of approximately 870,000 shares of common stock, a convertible debenture in the principal amount of approximately $6.8 million, and warrants to purchase up to 1.08 million shares of common stock. The warrants carry an exercise price of $3 per share and are exercisable for five years from issuance. The convertible debenture is unsecured and bears and is convertible into Series B preferred stock, which is non-voting and convertible into common stock at an initial conversion price of $2.50 per share. The debenture will automatically convert upon receipt of stockholder approval pursuant to Nasdaq rules. Let me explain why this is the right transaction for the company. First, it validates our strategy.

This is a sophisticated institutional investor making a significant commitment to Data I/O at this stage of our transformation. They will become our single largest shareholder. That kind of conviction from an institutional source, particularly at this inflection point, is a strong signal. Second, it strengthens the balance sheet. $9 million in gross proceeds provides us with additional working capital and financial flexibility without encumbering the company with traditional secured debt. The debenture is unsecured, and we anticipate its conversion to preferred stock. This gives us room to operate and invest. Third, it enables our M&A strategy. Combined with our existing cash and the deal structure we've negotiated for the acquisition, this capital positions us well for the transaction and to continue invest in the organic business. Fourth, the terms are reasonable and aligned. The coupon on the debenture is modest.

The conversion and exercise prices reflect the conversion. Excuse me. The warrant exercise prices reflect the premium for where the stock has been trading, and the investor's willingness to take a large position at this stage speaks to their confidence in the combined organic and inorganic plan. The investment strengthens our foundation. Now let me tell you what we're building on. We executed a letter of intent to acquire a leading manufacturer in our space. The total consideration is approximately $23 million, and upon closing, as Bill mentioned, this acquisition is expected to nearly double our annual revenues as well as be immediately accretive to both earnings and cash flow. Let me start with the strategic rationale. Well, actually, let me leave that for the.

Yes, please.

Q&A later. Okay. One notable part of the structure, though, I do wanna mention, is that of the purchase price, about $3 million is going to be in the form of equity. The fact that the current private equity owners have agreed to take, you know, roughly 15% of the consideration in our stock is meaningful. These are people who know the business best, and they are expressing confidence in the value of the combined enterprise. Let me leave you with this. The first quarter financials reflect where we've been, a business in transition with costs coming down and customer activity building. The Q2 guidance of $5 million-$5.4 million revenue reflects where we're going on an organic basis.

The $9 million investment gives us the balance sheet to execute, and the acquisition that nearly doubles our revenue is accretive to earnings and cash flow. Signals the transformation of Data I/O in action. We're incredibly excited about what lies ahead, and we look forward to updating you as we move through the closing process and begin integration planning. With that, I'll turn it back to the operator for Q&A portion of the call.

We will now begin the question-and-answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question today comes from David Cannon with Cannon Wealth Management. Please go ahead.

Hi, good afternoon and congratulations on the transaction. Very exciting.

Yeah, thank you.

You're welcome. The first question is for Charlie. Bill called out a breakeven of $22 million.

Yes.

-with the restructuring. In other words, Charlie, just to clarify, you're saying at five and a half million dollars of, per quarter, you'll essentially be EBITDA neutral. Is that correct?

Yeah.

What is this?

Assuming gross margins stay roughly in line with where they've been. Yes.

Yeah. Which we should see a slight improvement on that.

Yeah.

-based some of the changes. We'll see more improvement with the acquisition. Yeah, that's a bright phase.

That's correct.

Okay. Bill, you alluded to this will roughly double the size of the company.

Yep.

let's say, for example, that number is $20 million in services. Is this a double digit? Is this like a 15% EBITDA margin business? How should we look at that in terms of modeling going forward?

I think it'd be a little early to model that just because there is a lot. There are some solid synergies. I'm not gonna say significant. We still have some investigation to do there, Dave, during the due diligence stage of this, which we just kicked off yesterday. I'd probably hold that back. It's not all services. It's probably like a, you know, call it 60/40, right? It's not all services. There is CapEx in there. The services that come along with this company are much more, I would say, recurring nature than even our recurring on the adapters and things. There's, you know, more supply chain business and things like that that are pretty consistent.

Whether the tide goes up and down, there's always some consistent level of revenue, and fairly predictable regardless of what's going on market-wise. You know, again, it'll double the size of the company, certainly accretive. There's a lot of work to do between now and when we try to, you know, get this thing closed. There is certainly upside across the board and improving growth margin for both companies, honestly. I mean, when I think through AI and what we've done here and significant productivity improvements we've seen and, you know, taking projects that have taken years, and we're actually starting some of them over to reduce our technical debt. Dave, you know, you've been with the business for a while.

We've got a lot of antiquated equipment and software and hardware out there, and we're finding ways to literally cut this, the time by 70%-80%. Walking through their factory and looking at what they do, there's clear signs on where we can reduce, you know, design times by, you know, a couple, you know, four or five weeks and, you know, certainly, bring AI in to get them more productive. There's just a lot of upside across the board. From a revenue perspective, yeah, you should definitely think kind of 40+.

Okay. In terms of the capacity to grow organically with the existing footprint, or facilities that they have, what is the opportunity of that $20 million or so in revenue? Where do you think you can grow that organically with the current facilities that they have?

Yeah. It's a great question, David Cannon, thanks for asking it because, taking a tour of their facility, I was like, "Yes, we now have expansion capabilities and scale." You know, because if you think about where we're going, our core capital CapEx business, you know, we have a fairly tight production floor downstairs. You know, as we get into Programming as a Service, I'm gonna be building even more equipment for our own long-term contracts around Programming on-site as a Service. That will increase the need to build more. We would not be able to do that here, I can tell you that. This allows us to accelerate Programming as a Service because they have plenty of manufacturing space for us to grow into, as well as their core business as well.

Okay. Final question before I go back into queue. My apologies for monopolizing.

No, no worries. No.

with the acquisition.

We allow for multiple questions today, Dave. There's a lot going on.

Okay. Bill, you alluded to potentially the market coming to you. I forgot the exact phraseology, but there's, quote, "An increasing urgency around, edge AI infrastructure build-out security provisioning." Can you talk a little bit about that?

Yeah, sure.

You know, let's call it this AI build-out.

Yeah.

Exactly where that intersects with programming and what this opportunity is, you know, over the next 12 to 24 months.

Absolutely, Dave. Another great question. As you know, we talked about this in previous quarters, and we've just been kind of waiting for the wave to come. You know, we saw signs of this in Q4. It's why we really thought Q1 would really get out to a faster start than it did. Those conversations obviously accelerated towards the end of the quarter, and now we're deep in discussions in getting POs and booking new logos from those businesses. It's really products that surround or utilize AI, such as robotics and automation and cars. We've got a new client that we should be announcing soon, that has a very large business in both of those sectors.

When I look at, you know, what AI is doing in our overall economy and across every domain, that automation is going to drive other products that need to be automated or it's the ability to accept that automation and those AI signals. As you say, like, if you look at Avnet and Arrow's quarters, the last three quarters, I mean, their numbers have gone through the roof, right? They're a great barometer 'cause they're really kind of what I would call supermarkets of the world as far as semiconductors. If you ever wanna look at really what are the trends, they're a great barometer for that. And I segregate that from like the Microns of the world and NVIDIAs of world that have just gone, you know, in the stratosphere with their numbers.

I mean, I never thought Micron from four years ago would go from $56 to almost $700 or more. You know, the overall semiconductor industry is rising with it because there's needs for, like, more photonics inside the cabinets and just the little discrete power management chips and all these things. You know, granted, those aren't programmable, there's a lot of automated solutions needed for these things. You know, I think overall, the AI push is here, and it's starting to drag other industries and semiconductors with it. That's what we're seeing, that's what we're hearing, and that's what customers are telling us. I will tell you, the OpEx model, customers love it, you know. The great thing about Programming as a Service is the signatory stage for an OpEx contract isn't at the VP of Finance level.

You know, you're at director, manufacturing manager. You know, these decisions could be made at lower levels, which means we can execute multi-year contracts and services, including a managed service fee that we'll have on top of a multi-year contract with guaranteed volumes and minimum monthly revenues that they have to meet. I'm really looking forward to that and also opening up regional programming centers for Look, like I said, we've got a huge installed base out there. We've got a lot of customers that bought one system, and they never really bought again. Maybe they thought their business was going to go one way, and it, you know, it stayed flat. Those customers probably still have a good amount of programming business that we could take back from them regionally.

The advantage we have, Dave, is that we can give them a little bit of value of that equipment, even though it may have, you know, aged out or also, you know, there's no depreciation left on it because there's still the programming heads and the adapters. We're in a great place to give customers real value, even on old equipment, to move to a new model. I hope that answers your question.

Okay. Thank you.

Yep.

The next question comes from Jon Hickman with Ladenburg. Please go ahead.

Hey, Jon.

Hi. Hi. I'm new to this story, and I'm sorry if this is naive of me or so, but could you elaborate a little bit more on the, it says that these guys do semiconductor handling and packaging.

With what's all going on, why is the seller wanting to sell?

Well, it wasn't a company that was in a process, right? You know, when I think of M&A, I've done a lot of M&A over my career, you know, when you're looking at transforming a company such as Data I/O, you're looking around for strengths and weaknesses, right? Where are we strong? Where is a company that might be a great target because they're an adjacent market, or they have some of the businesses in a core part of your market, and you put those two companies together and can help accelerate growth, scale, and scope, and revenue. You know, it wasn't a question that they had to sell or, you know. Like, obviously, I understand your question because you're thinking, "Why would anybody sell in this market right now?" Because it's so robust. Not everybody's benefit.

You know, their business is definitely strengthened over the last year and a half, and they're going into this year strong. You know, we like where their numbers are going as well as ours. You know, I think it was more of a, you know, you never know when you're gonna get a dance partner in life, right? Sometimes timing is everything. You know, I think the match, you know, between me and the other CEO, we felt strongly that this was a good idea. Quite frankly, if they were gonna go to market at some point, we were definitely one of the companies that would have received the book. You know, look, we both decided that we felt that this would be a good time for us to merge the companies.

We both saw the great opportunities for both firms and the strengths and weaknesses, and so, you know, that's why we, you know, have come to an agreement, so.

Who from the other company is staying with you?

Oh, I can't really get into those details.

Okay.

Kicked off an early due diligence status. We'll be able to.

Okay.

get more on that once we close and talk through really not only the strategic rationale, but how we're gonna lay each other's strategy out and how well they fit together in the future, the team members and things like that. That's a little way premature.

Okay. I missed one thing. How many warrants are going with this deal?

Uh, a million eighty-- uh, one million eighty thousand.

The next question.

I'm sorry.

The next question comes from Howard Root with Fairhope Capital. Please go ahead.

Hey, Howard.

Good afternoon. Thanks for taking my question, and congrats on the next step in this transformation. It's good to see.

Yes. Thank you, Howard.

A couple questions. First, a little one. On the $5 million in Q2 that you're kind of guiding toward, is any of that your Programming as a Service? Has that started to kick in yet? When do you see that kicking in, and what's kind of the scope of the size and ballpark, and you see that hitting your revenue line?

Yeah. Yeah, great question, Howard. No, it does not include any of that. I can tell you that we are deep in the conversations with 8 clients. These are existing customers that already have our equipment, but were looking to buy more. Their businesses are expanding. Some of them are just, you know, looking to maybe move to an OpEx model because of all the benefits that you get from an OpEx model, and there are many of them. No. No, I would expect that I'd be shocked if we didn't have at least one to three contracts signed by the end of Q3. None of that revenue is really built in our current model. There's a little bit in Q4. I will tell you, the conversations are accelerating far faster than even I thought.

No, none of that revenue is in there.

In terms of scope of that.

Like size of revenue or contract-

Yeah. Right

vary. Kind of the rule of thumb that I've used over the years in doing, 'cause even at Source, we had four on-site programming centers with clients. We typically minimal, the minimum part of annual volumes are usually around 1 million to 1.5 million. From there, that's a machine or two. You typically look at a big contract would be 5 million-10 million parts a year. Obviously, you can find one 20 million plus, and they're out there. I mean, we have one subcontractor that is talking to us about giving us space in one site and servicing six others from that site. Those deals can get big quickly.

You know, if you look at 10 million-plus parts and an average programming price of, you know, anywhere between, you know, $0.09 and $0.14, $0.15, and that does not include Security Provisioning, it's pretty good revenue. Obviously there's a managed service fee in there for things like sockets and maintenance and software, so you add that into the total equation. Multi-year contracts, these will be 3-year minimum contracts, so very dependable, reliable revenue. The other note that I didn't get to kind of touch on, which I think is important to everybody, is that Security Provisioning, and I know Data I/O went through this for, with SentriX for many, many years. There's a, there's a, the CRA Act, which is the Cyber Resilience Act, which is coming out from the EU, becomes mandatory September of 2027.

We're starting to see Security Provisioning start to become more of an important thing to get taken care of going into 2027. We are in discussions to have some definitive strategic relationships in that area with both semi houses and contract manufacturers. I just want to 'Cause that was a question Dave kinda talked about a little bit. I wanted to get back and get that answered. It's important for everybody 'cause Security Provisioning can be kind of 2x the programming charge. We've got three opportunities in Indy right now and, you know, one of them there is an on-site programming center, and they're just not happy with their services. We've got some opportunities to really dislodge some competitors as well.

Great. Great. Thanks for that.

Yeah

in terms of the acquisition, it's, you know, if I do the numbers, $23 million, basically $20 million of that in cash. You're raising $9 million gross. You've got $5 million on your balance sheet. That still leaves $6 million-$7 million kind of unaccounted for. How are you gonna finance the rest of the acquisition?

I'll turn that over to Charlie.

Well, we're looking at sort of a combination, potential combination of other sources of cash, also potential debt or assumption of debt. They do have some debt on their balance sheet as it is right now. We may just bring that over. That might be the most expeditious way. We're very confident about the ability to raise this, to secure the rest of the financing.

You need to raise more money in order to close the transaction? Is that one of the conditions of closing?

No, no, not raising. We don't need to raise more equity. We think we can do it most likely with debt or absorption or assumption of their debt.

Okay. Okay, finally, in terms of the big, big picture, is this acquisition kind of a next step in the process, or do you see this as kind of the step, and now you've got to kinda, you've got your three legs of the stool, if you will, from what you had, this Programming as a Service and then this, and then you've got to integrate and go forward. Are you still looking at doing other acquisitions within the next six months to a year?

Oh, yeah. Oh, yeah. It gives me the second leg. We still need to go after the third. You know, the second leg obviously is in, you know, it's my background. That's why we launched services in the early, in early this year. Well, obviously in March or actually April 10th is when we launched the new website. Services is always gonna be on our schedule, whether organic or acquisition. Obviously, doing both accelerates everything. There are a lot of other, you know, service-only providers out there that, you know, will be worth taking a look at. This is the first step in that, it really gives us a great foothold along with what we're already doing organically.

Okay, great. I appreciate all the color. Thanks.

Yeah.

Congrats, guys.

Thank you. Thank you.

As a reminder, if you would like to ask a question, please press star then one to join the question queue. The next question comes from Robert Anderson with Penbrook. Please go ahead.

Yeah. Hi, Bill.

Hey, Robert.

I'm having a little trouble understanding what this acquisition actually does. On the one hand, you suggest it's a manufacturing company somewhat similar to what you do, so I get the sense.

Yeah

They're right now a competitor, they also provide programming as a service. Help me to understand, broadly speaking, what this company does.

Yeah, sure. I mean, they're in, you know, they're in a couple different markets that are, you know, complementary to ours. I wouldn't say they're a direct competitor, Bob. You know, I've talked about buying other programming companies that would be interesting to look at. I'm not saying that's off the table, but we're looking more in the adjacent plays and services. Complementary to us, I wouldn't say not competitive directly. You know, the other attributes of this business is that, as you know, we've been so, you know, bolted on to automotive. You know, one of the other attributes of this business is there are various different domains that they have. You know, less than 10% of their business is in automotive.

They do service a lot of semiconductor companies, which we can latch onto those relationships and expand our technology into those companies. Military defense and aero, kind of a hot spot. Would like to get there as well. You know, when you think about the domain barriers that are broken down right away because the customer relationships are there to leverage, are pretty significant. You know, we both benefit from some of that. I would say on our side, you know, there's obviously when you think through when you're mapping out what your strategy is, once you get through a transformational deal like this, you start looking at who are the people that are gonna help you execute all this, right?

You know, I've been planning that for probably at least the last three, four or five months of the people that can come in and help, and I've come across some wonderful people that have been in this industry that can help both companies grow. There's only so much, Robert, I can share right now, but, you know, stay tuned. I think you'll get a much clearer picture post-close.

Okay. Thank you.

Yes, no problem. Thanks, Robert.

This concludes our question and answer session. I'd like to turn the floor back over to Bill Wentworth, Chief Executive Officer, for closing remarks.

All right. Well, I wanna thank everybody for the time today. It was, you know, this is an exciting time in Data I/O's history. You know, I can tell you, and thank you, operator. The team, you know, we've got members here that have been for 20, 25, 35 years. I can tell you from the energy inside this building right now, they are all extremely excited for this next chapter. There's a couple people here that were supposed to retire six months ago, one year ago. I don't see them going anywhere. They are really excited about where we're going. These are key contributors that have been with this company for a very long time.

They're like, "This is something that we've been looking forward to for over a decade." The energy here and just utilizing the new tools and, you know, we've really started to really work on, you know, graduating from within. If you wanna build a great culture, lean on the people that have been here for a while, but give the younger generations and the talent here that didn't maybe get the opportunity they should have had in the past, and giving that to them now. We are really grooming some really great leaders for the future. Very excited about the future. We still have a lot of work to do. You know, this is where the real work begins. Although it feels like the last three months feels like 10 years.

Look, I've done enough M&A and integration in my time across my own business and larger companies. Charlie's also done the same. We've also brought in some talent that's on the executive team now that also has a significant amount of M&A experience, but as well as, more importantly, integration. It's really how you handle the people during that. You know, when I look at acquisitions and M&A, you know, culture is a huge part of that, if not number one. On top of that is being able to bring strengths and weaknesses together that complement each other, which in my at least in my experience, accelerates growth.

Looking forward to all of this, and, I'd like to close out and thank everybody for their time today, and we're really looking forward to the next several updates over the next months and quarters coming. Thank you.

Ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We do thank you for joining. You may now disconnect your line.