INV

Welcome to Innventure's first quarter 2026 earnings call. All participants will be in listen-only mode until the question and answer session begins. If you'd like to ask a question, you may raise your hand at any time by clicking on the Raise Hand button, which can be found on the black bar at the bottom of your screen. As a reminder, this conference call is being recorded. I would now like to turn the call over to Kyle Nagarkar, Investor Relations.

Thanks, operator, Thank you all for joining us for Innventure's first quarter 2026 earnings call. My name is Kyle Nagarkar with Investor Relations, and joining me from the company are Bill Haskell, Chief Executive Officer, Roland Austrup, Chief Growth Officer, and Dave Yablunosky, Chief Financial Officer. Earlier today, we issued a press release announcing our financial results, which is available on our investor relations website, along with a supplemental slide presentation. As referenced on slide six, we will be discussing non-GAAP financial measures during this call. The most directly comparable GAAP financial measures and a reconciliation of the differences between the GAAP and non-GAAP financial measures are available in our earnings release and supplemental slide presentation on our website. In addition, certain statements being made today are forward-looking statements that are based on management's current assumptions, beliefs, and expectations concerning future events impacting the company.

These forward-looking statements involve a number of uncertainties and risks, including, but not limited to, those described in our earnings release, Form 10-Q for the period ending March 31st, 2026, and other filings with the SEC. The actual results of operations and financial condition of the company could differ materially from those expressed or implied in our forward-looking statements. Now I'd like to turn the call over to Bill. Bill?

Thanks, Kyle, and good afternoon, everyone. Before I start, I want to acknowledge the operating company CEO call that we hosted a couple of weeks ago. That call was designed as a way for investors to hear directly from the CEOs of Accelsius, AeroFlexx, and Refinity. The call provided unique insight into what's happening inside each business from the executives that are living it every day: the execution, the product cadence, and what the next milestones look like. We'd encourage anyone who wasn't able to join us to listen to the replay available on our investor website. Because we were limited in time for Q&A on the CEO call, we were also posting a supplemental Q&A to our investor site to address additional questions that we did not get to respond to on that call.

While we can't always address every question in real time, we are committed to providing meaningful transparency where it strengthens investor understanding without compromising the competitive position and technical advantages that high-growth disruptive businesses must preserve during their most formative stages. Given the recency of that CEO update, I'd like to use today's call to double-click on recent developments outside of our core operations before passing it to Roland and Dave. Let me start with corporate governance, which we view as especially important for a multi-entity operating model like Innventure. Over the past several weeks, we've taken concrete steps to continue to strengthen our board. We announced the appointment of John Hewitt and the nomination of Catriona Fallon as part of our continued refresh and upgrade of Innventure's governance structure.

These are seasoned operators, people who have built, scaled, and managed complex businesses, exactly the kind of directors that can provide valuable contributions to a business model like Innventure's. We have always viewed the deep expertise of our people as a key competitive advantage, and this philosophy extends to how we approach our governance structure. These recent additions underscore that importance. The other notable update is on our shareholder engagement. It is important to know that our actions around corporate governance did not happen in a vacuum. We've had extended dialogue with a diverse set of shareholders, and that engagement helped inform how we think about board composition and the capabilities we want at the table. As a case in point, earlier this month, Ascend Capital Partners, one of our largest and most engaged shareholders, publicly expressed support for Innventure's leadership and direction in an SEC filing.

We view the firm's letter as a constructive signal that shareholder engagement is working as intended. Shareholders leaning in, the company responding thoughtfully, and governance evolving in a way that strengthens the enterprise. We look forward to continued engagement with our shareholders as we work to unlock the long-term value of Innventure's model. With that, I'll turn the call over to Roland, who will share his perspective on where Innventure is in its evolution and what we are seeing across the operating companies.

Thanks, Bill. Across our operating companies, we're seeing the same pattern that has defined every major shift in high-performance compute, AI infrastructure, and next-generation compute. Customers validate, integrate, and align procurement and operational workflows before scaling. We believe that progression, not early revenue patterns, is the real indicator of where the market is heading and is the precursor to rapid adoption. Once the industry reaches consensus, adoption moves in step functions. You can see this in the early histories of Arista, Pure Storage, Nutanix, and Supermicro. Periods of modest revenue followed by 5x, 10x, even 20x expansion once the market tipped. Nvidia and AMD followed the same path as GPU-accelerated compute moved from evaluation to necessity. Transformative technologies scale suddenly, not linearly. That's the context of our Q1.

Revenue grew from $0.2 million last year to $1.4 million this quarter, but the more important signal is the progression underneath it. Customers continuing to buy, test, and integrate the technology. Combined with more than $50 million in Q1 bookings, the pattern is clear. Customers are updating protocols and preparing for scale. Market signals reinforce this. CoolIT was acquired for nearly $5 billion, underscoring the value being placed on liquid cooling today. If 1-phase solutions are valued at that level, the value of two-phase, the end state for high-density compute, will, in our opinion, be even greater. Accelsius is in an important pre-inflection phase today. The pipeline is large, the technology is validated, customers are updating protocols, and the industry is converging on the same set of thermal and power constraints.

This is the kind of setup that historically precedes exponential adoption, and this is what I want to walk you through next, continuing with Accelsius. The industry backdrop for Accelsius continues to strengthen. In Q1, AI and high-performance compute workloads drove another step change in rack-level power and thermal density, with NVIDIA's Blackwell generation accelerators pushing beyond the limits of air cooling and prompting OEMs and integrators to introduce new liquid-ready and two-phase compatible platforms across their AI server portfolios. That shift is showing up directly in the earnings of the largest data center infrastructure providers. Johnson Controls reported nearly 40% order growth led by data center demand. Legrand reported roughly 30% year-over-year growth in its data center segment. Vertiv has publicly highlighted continued strong demand for high-density thermal systems driven by AI deployments.

Together, these disclosures reinforce what we are seeing across hyperscalers, co-location providers, and server manufacturers. Next-generation architectures are being engineered for environments where advanced liquid and two-phase cooling are no longer optional but foundational. Against this backdrop, Accelsius continues to advance as one of the few companies delivering true two-phase direct-to-chip capability at rack scale. Q1 marked a pivotal stretch of commercial and product momentum for Accelsius. In February, Legrand announced a strategic partnership with Accelsius following its participation in the company's Series B funding round, framing the relationship as a pillar of its unified data center strategy. The two companies indicated they would collaborate on joint development initiatives, including the integration of two-phase direct-to-chip liquid cooling into rack infrastructure. That announcement set the stage for Accelsius' NVIDIA GTC debut in March, where the company unveiled the NeuCool IR150, billed as the industry's first integrated rack-level two-phase liquid cooling solution.

The IR150 combines a two-phase CDU, 42 U of IT rack space, and built-in liquid and vapor manifolds in a single 800mm enclosure, delivering up to 150kW of capacity. With a plug-and-play form factor purpose-built for enterprise, high-frequency trading, and other high-density deployments where simplified installation, single rack failure domains, and zero water in the rack are differentiating. Taken together with the Legrand partnership, the quarter reflects continued momentum behind the two-phase conversation. Moving on to AeroFlexx, the packaging industry doesn't usually move in straight lines. You get long stretches of incremental change, and then something solves a real structural problem and adoption shifts fast. We believe AeroFlexx is at that point. It combines the best of flexible and rigid into something better than either. Better for the consumer, less plastic, simpler supply chains, lower shipping costs.

Once validation clears, adoption moves in step functions from here. That's what we're seeing. Anchor customers across prestige beauty, household, personal care, industrial, and food and beverage are all advancing. Reorders, launch prep, late-stage negotiations. The commercial pipeline has expanded to $32 million, up 21% since January, with $13.2 million now in final negotiation, up 40%. That growth reflects meaningful stage progression across multiple anchors. When you see both pipeline expansion and late-stage advancement happening simultaneously, that's a format taking hold. Aveda has also become a major market catalyst. Since the announcement of the global commercial launch, AeroFlexx has seen approximately $3.6 million of new and reactivated opportunities, a direct reflection of strengthened brand credibility in one of the most demanding categories in consumer products.

Prestige beauty is one of the hardest categories to win. Aveda choosing AeroFlexx is a strong signal to the rest of the industry. Aveda is starting with refill packaging with select best-selling products debuting in 2027, but the long-term opportunity is dozens of SKUs across a global lineup. Initial purchase orders are already in to build inventory for launch. We've also expanded the manufacturing footprint. Through our partnership with Packaging Imolese in Italy, we picked up regional manufacturing, formulation, and commercialization capability in household and personal care, two of the biggest categories in our total addressable market. An AeroFlexx filling machine is installed at the Packaging Imolese facility now, and that site brings real R&D formulation and testing capability with it. That's the kind of expansion that supports scaling. Operational readiness keeps strengthening.

BRCGS, GMP Ohio, and ISCC+ certifications all reinforce our ability to run compliant, scalable programs across categories and geographies. On capital, our objective hasn't changed. Operating company capital from strategic investors who can also become commercial partners. Looking ahead, the milestones are straightforward. Active programs converting to launches and reorders, and anchor customers expanding across more products, more categories, and more regions. That's how AeroFlexx builds durable commercial cadence and shows the format is taking hold across the broader packaging landscape. Just as AeroFlexx is reshaping packaging, Refinity is doing the same in advanced materials and circular feedstocks. The chemical industry is experiencing the same adoption dynamic just discussed for AeroFlexx. Decades of incremental change and then regulatory pressure, decarbonization commitments, and cost volatility all hit at once, and the pace of evaluation picks up fast. Qualification and integration take time, but once the industry aligns, adoption moves quickly.

Refinity is at an early stage of that journey, building the technical and commercial foundation that precedes industry adoption. Detailed design on the 10kt commercial demonstration plant is underway. We expect that engineering design should wrap up by the end of Q3, and more on offtake partners will come in the coming months. Refinity is working with a U.S. partner with existing fluidized bed assets for additional testing. By mid-year, we expect the Refinity process will be running on those assets on the same mixed plastic waste feedstocks the 10-kiloton plant will use, which should give extended runtime and meaningfully accelerate the validation process. Recent multi-day pilot trials at VTT using market-sourced plastic waste produced light olefins, ethylene and prop-propylene at yields meeting or exceeding targets. That reinforces the core thesis. Refinity can convert mixed plastic waste into cracker-ready light olefins with high yields and minimal char.

The work with Dow continues on gas purity and integration, how a co-located Refinity plant ties into existing steam cracker infrastructure. That's the kind of integration work that has to happen before commercial adoption. The macro backdrop reinforces why this matters. The Iran situation and the constraints in the Strait of Hormuz are a reminder of why diversifying raw material pathways and commoditizing plastic waste are valuable, not as a headwind or a tailwind, but as another reason feedstock optionality is the right place to be. Refinity is in active discussions with key customers on offtake agreements for the 10kt plant and is working with the government agencies on non-dilutive funding to support CapEx. Long-term offtake and non-dilutive funding together would position Refinity to project finance a substantial portion of the plant, a meaningful shift in how a first commercial facility gets funded.

The signals to watch are straightforward, technical validation, integration work with Dow, and commercial commitments from offtake partners. These are the milestones we expect will move Refinity from a promising technology to a bankable platform. six to 12 months ago, Refinity was proving the chemistry. Today, it is progressing toward commercial scale and the building blocks of a financeable product. Stepping back, we believe that what we are seeing across our operating companies fits a much larger historical pattern. Every major technology wave, from the Industrial Revolution to electrification to the semiconductor era to software to the internet and cloud, has created a small group of companies whose technologies become the infrastructure of the shift itself. In each case, the long-term winners were the companies without which the new economy could not scale.

Intel, Texas Instruments, Taiwan Semiconductor in semiconductor space, Microsoft and Oracle in software, Cisco, Google, and Amazon, AWS in the internet and cloud era. These companies didn't grow because of quarterly revenue. They grew because they were the backbone of a secular transformation, compounding 5x, 10x, even 20x over sustained multi-year periods. We believe the convergence of AI, high-performance compute, and next-generation compute is the next of these waves, the early stages of a fourth industrial revolution that will reshape productivity, discovery, and global GDP potential. In that context, we believe Accelsius is not simply transforming an industry, it is positioned at the point where this AI boom cannot scale without the technology it provides.

While AeroFlexx and Refinity are aligned with major structural shifts in their own markets, we believe Accelsius sits at the center of a secular change that will touch virtually every sector. That is why we focus on progression, validation, and positioning, because when these markets tip, they don't move gradually. They move all at once, and the companies enabling the transition capture the long-term tailwind. With that, I'll turn it over to Dave to cover the financials.

Thanks, Roland, good afternoon, everyone. The financial results for the first quarter of 2026 were in line with expectations and consistent with the business progression we've been outlining. As Bill mentioned, our recent CEO call provided a deep dive into the commercial momentum at Accelsius, AeroFlexx, and Refinity. We continue to believe this momentum will translate into strong revenue and adjusted EBITDA growth in the second half of this year and into 2027. For the first quarter, Innventure reported consolidated revenue of $1.4 million, up from $0.2 million in the first quarter of 2025 and up from $0.8 million in the fourth quarter of last year. Revenue has grown sequentially every quarter since the beginning of 2025.

Accelsius revenue in the first quarter was $1.3 million, the highest quarterly revenue since we began reporting in 2024. As we discussed last quarter, we continue to expect Accelsius to exit December 2026 with positive operating cash flow, implying a revenue run rate of approximately $100 million. We are now seeing third-party validation at our operating companies, resulting in commercial bookings, operational scale, and clear milestone achievement across the entire enterprise. Total G&A expenses for the quarter were $12.7 million, $7 million lower than the first quarter of 2025.

Professional service fees in the first quarter were $3 million, down 51% from the $6.1 million in the first quarter of last year as we transitioned from outsourced professional services to in-house personnel at materially lower cost. The increase from Q4 to Q1 reflects the annual reset of payroll tax and benefits. Net loss attributable to Innventure stockholders was $20.8 million for the quarter, the lowest since we became a public company. adjusted EBITDA for the quarter was a loss of $18.4 million. Turning to the balance sheet, we ended the quarter with $60.4 million of cash and restricted cash, down $5.1 million from the end of last year.

On the cash flow statement, you will see Innventure receive $37.2 million net proceeds from the purchase and sale of common stock in a registered direct offering, paid down $7.4 million of debt, invested $0.8 million in PP&E out of Accelsius, had a $16.4 million working capital use of cash, and a $17.6 million of other cash OpEx, including G&A, sales and marketing, and R&D costs. As we previously noted, we believe Accelsius will exit December 2026 with positive operating cash flow. At the Innventure parent company, subsequent to the end of the quarter, we have selectively accessed our standby equity facility and raised approximately $11.9 million.

Hey Dave, let me add some context on capital market strategy because this is an area I personally oversee. We used the SEPA opportunistically during a period of share price strength. Executing above $6 per share limited dilution to roughly 2%. At those price levels, our projected annualized dilution rate remains under 10%, which is consistent with the disciplined capital formation philosophy we've been communicating the past several months. The purpose of this raise was simple: extend our runway in a way that avoids raising capital during periods of seasonal trading softness or geopolitical uncertainty. With the $60.4 million cash on hand that Dave mentioned, combined with the extension provided by this opportunistic raise, we do not anticipate the need to raise significant capital for the foreseeable future.

While the SEPA continues to be available to Innventure, when we return to the market, our intent is to utilize more conventional tools available to an S-3 eligible issuer with a top-tier bank syndicate, including facilities that would allow us to opportunistically extend our position over time, as well as the ability to execute larger transactions when market conditions and valuation are supportive. Our objective is to further reduce dilution relative to the rate implied by this last opportunistic raise, and to ensure that any future capital formation aligns with the disciplined approach we've communicated.

Thanks, Roland, for the additional context. We continue to carefully manage our capital structure to support the growth of Innventure's operating companies, maintain adequate liquidity at all levels of the company, with the goal of minimizing future dilution to our shareholders. It's important to say the Innventure team remains focused on what we believe are very attractive growth opportunities ahead of us. Innventure, along with our operating companies, are focused on the future, on where we are going, with the goal of creating substantial value for our shareholders. With that, we'll open up the call for questions.

Thank you. As a reminder, if you would like to ask a question, please click on the Raise Hand button, which can be found on the black bar at the bottom of your screen. When it is your turn, you will receive a message on your screen from the host allowing you to talk, and then you will hear your name called. Please accept, unmute your audio, and ask your question. We will wait one moment to allow the queue to form. Our first question comes from Chip Moore with Roth Capital Partners. Your line is open. Please unmute and ask your question.

Hi. Thanks for taking the question. How's everybody doing? Can you hear me okay?

We can, Chip.

Hey, Bill.

Great.

Yeah, I feel like we just caught up, but, you know, not that long ago, and some great detail on that call with the CEOs. Maybe for me, you know, Accelsius, this $100 million run rate, exiting the year, you know, not too far away, just comfort with that or any risks to that. You know, we hear about obviously data centers getting delayed on power equipment and all sorts of things, maybe just start there.

Yeah, sure. There are two things, Chip. I mean, one, there are a few things outside of our control, of course, which we've talked about on prior calls, and that pertains to supply chain challenges for some of the folks out there. You know, in terms of having the business available to deliver, we're in a good position to do that. We have the ability to execute and produce the volume of material to support that run rate internally, with a lot of cushion. The other factor is something that actually augers in our favor. As you may know, there are about $150 billion worth of data centers that are in, I would say, on suspension.

They're on suspension because of environmental protests at regional levels, particularly around the utilization of power and water. Because Accelsius's solution uses materially less power than the alternatives and can also run without water in your racks, that really is a big factor in helping move those things along. Some of those things can get unlocked as a result of Accelsius. You know, on balance, you know, I think we still feel very optimistic that we'll hit that run rate before year-end. Again, we have, you know, a book of business to execute on. More to come. Optimistic at this point. No reason to believe that we're not gonna hit that target.

Great. Yeah. That's a great point. You know, I guess on the booking side, you know, the $50 million of bookings this quarter, great to see. Should we expect to hear about bookings, you know, on a regular basis? You know, would we expect them to be more lumpy until adoption really starts.

Yeah, I mean-

to scale up? Yeah.

Look, we would anticipate certainly more bookings, Chip, and so I think by the time we announce the next quarter, which, you know, will be first half of August, you know, in all likelihood, you know, we can give an update on bookings if there are material changes. To Roland's point, you know, these businesses are lumpy in the early stages, but then they hit an inflection point that can be substantial. You might know that, you know, that Vertiv, who had a great deal of bookings, you know, in the last year, stopped reporting bookings, I think, as a result of that. Even very large companies that are at scale with high market caps, you know, have that same lumpy effect as a result of some of the sort of the disruption in the data center space.

For sure. For sure. Did see that. My last sort of follow-up just around capital, which you outlined in good detail, just, you know, maybe the corollary around future targets and down select, you know, just maybe an update on what you're seeing there. Thanks.

We have some interesting things in the pipeline that could be the next if that's what you're asking about. We've been refining our process, improving our process, honestly, to get a higher quality and a higher volume of opportunities through the funnel. We have some really, really interesting things in the funnel today. Again, we never announce anything until we already hit the go button because things can fall out. We're very objective and uncompromising in how we make that selection process. It has to be ready, and it has to be a real opportunity. We've had really good success with the ones we've chosen to date, you know, the four. In fact, if you've watched PureCycle, it's starting to hit its stride now.

It's over a couple of billion in market cap and seems to be breaking out. Virtually all of the companies that we've started, we feel really, you know, quite confident are going to be companies of scale. While there are some good things in there and we're optimistic we'll get something done this year, we won't announce anything until we have something that we've already formed a company around.

Understood. Thanks very much.

Our next question comes from Nehal Chokshi with Northland Capital Markets. You may now unmute your audio and ask your question.

Thanks. Great to hear everything about the progress in the CEO call from a month ago or less than a month ago, actually. You did announce the, I think $50 million of bookings right around GTC or so it's almost been two months. Has there been a actual increase, you know, material increase in bookings since then, or are we sort of like in a wait-and-see period because of these delays that you're talking about?

There have been bookings, Nehal. I can't quantify that for you, but I think when we announce the second quarter in August, I would, I would project that we will update some of the bookings forecast. Again, the CEO call was just two weeks ago or just a little bit over. We gave our first quarter Excuse me, our year-end result was kind of late in the quarter as well. We've done updates here in the last few weeks, which is what Chip just mentioned. I would anticipate we'll see an improvement in bookings by the time we report our second quarter.

Okay. You know, in order to hit this $100 million annualized revenue run rate, I guess, is it true that basically you only need another $50 million of bookings between now and, like, the next 6 months?

Yeah. Just to be 100% clear on what that means, Nehal, right? $100 million run rate just means that by year-end, we'll be running at, you know, $8 million or $9 million of revenue a month, right? That's what we're implying here. We've not forecast that we're gonna do $100 million of revenue this year. We've never said that. We just said that we would be at an annualized rate of $100 million by year-end, which again, are two different things. You know, we do expect meaningful additional bookings in Accelsius and AeroFlexx for that matter, you know, over the coming couple of quarters.

Got it. Understood. Can you help us understand how that should translate to annualized bookings?

We don't have we haven't projected a bookings target. We have certainly internal ideas of what we think the backlog would look like at year-end. Again, we haven't forecast that. You can appreciate in this type of business, first of all, predictability is a little tricky because it's early stage. Our, you know, revenue targets for next year are relatively aggressive in terms of growth from this year to next. We would anticipate some meaningful bookings going into 2027 to be able to hit the kind of targets that we anticipate internally. Again, we haven't forecast that, and we don't plan to at this stage.

You know, in a couple of years' time when things are really smoothed out and it's much more predictable, you know, we may get to that point, but now we're not projecting any kind of revenue targets. We do expect to roll into 2027 with, you know, pretty significant backlog.

Okay. Do you guys have visibility into how your cash conversion cycle is gonna look, i.e., what's gonna be a typical inventory, days inventory holding time? What's gonna be a typical day sales outstanding? What's gonna be a typical days payables given that you now have $50 million of bookings here?

Yeah, Nehal

Go ahead. Go ahead. Go ahead, Dave.

Yeah. Yeah, thanks for the question. I would sort of go back to some of Bill's comments and even Roland's comments that it's a little bit too early to tell exactly what our, you know, cash conversion cycle will be and DSO, DPO, DIO, those kind of metrics. You know, we can certainly talk about that as the year progresses. I think at this point, it is just a little bit too early to project that.

Every customer's gonna be different. You know, some customers we anticipate will get some deposits, others we won't. Turns out the larger companies are the ones that we probably won't, and they'll negotiate, you know, probably longer, you know, time on payables. We have a, you know, pretty conservative estimates in place internally, and we're pretty confident we have adequate cash to scale to those deliveries without needing to go back to the market. I think a lot of those that inventory will be financiable with more traditional lenders as opposed to equity to be able to finance the growth in inventory, particularly given the types of counterparties that we're dealing with.

Yep, absolutely. I'll just say that the data points that I've been picking up is that there is strong demand out there for Innventure's two-phase direct liquid cooling. Look forward to seeing that actually come to fruition. Thank you.

Thank you.

As a reminder, if you would like to ask a question, please click on the Raise Hand button at the bottom of your screen. Our next question comes from Aashi Shah at Sidoti & Co.. You may now unmute and ask your question.

Hi. Just wanted to ask you about the role of the channel partners and strategic integrators and how they play in scaling deployments, and how important will partnerships become as these businesses grow?

Did you say Chinese partners, Aashi, just to make sure I understood your question?

No. No, I said channel partners, like Johnson or Vertiv.

Oh, I'm sorry. Channel partners. I'm sorry.

Yeah.

I just misunderstood. We have, you know, very good relationships with, you know, we have a couple of large players that we've announced as partners, including Johnson Controls, Legrand, Vertiv. You can go out to the website actually and see the various partnerships that we have with a lot of players in the industry. What we're really focused on are channels that have a big multiplier effect. You know, virtually all of the partnerships that we have can lead to, you know, not tens of racks, but hundreds of racks or thousands of racks ultimately, because they're delivering, you know, more broadly to the marketplace. We have the different sectors from hyperscalers to OEMs, to AI as a service, et cetera. We have different types of partnerships for different things.

In general, our partners are seeing demand as well, and they'll be able to drive demand for us because they have their own sales marketing forces that are out there interacting with a broader range of customers.

Right. Also relating to Accelsius here. As the deployment scale, could software monitoring or system optimization become part of the revenue mix? Like, I'm trying to understand if there is room for recurring revenue to be possible later once the initial deliveries are made, or is it just once a customer has been delivered the product, there's no more, like, unless they order more, there is no way to get revenue out of them.

No, there is a smaller, as a fraction of the orders, recurring revenue component to what we provide. Yes, there is a piece that would be recurring revenue for each of those deployments going forward.

Got it. Thank you.

Thank you, Aashi.

This concludes the question and answer session. This concludes today's call. You may now dis-.

Good day and thank you for standing by. Welcome to the Innventure fourth quarter 2025 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there'll be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I'll now hand the conference over to your first speaker today, Lucas Harper, Chief Investment Officer. Please go ahead.

Thanks, operator, and thank you all for joining us for Innventure's fourth quarter of 2025 earnings call. My name is Lucas Harper, Innventure's Chief Investment Officer, and joining me from the company are Roland Austrup, Chief Growth Officer, Bill Haskell, Chief Executive Officer, and Dave Yablunosky, Chief Financial Officer. Earlier today, we issued a press release announcing our financial results, which are available on our investor relations website, along with a supplemental slide presentation. As referenced on slide six, we will be discussing non-GAAP financial measures during this call. The most directly comparable GAAP financial measures and a reconciliation of the differences between the GAAP and non-GAAP financial measures are available in our earnings release and supplemental slide presentation on our website. In addition, certain statements being made today are forward-looking statements that are based on management's current assumptions, beliefs, and expectations concerning future events impacting the company.

These forward-looking statements involve a number of uncertainties and risks, including, but not limited to those described in our earnings release, Form 10-K for the period ending December 31, 2025, and other filings with the SEC. The actual results of operations and financial condition of the company could differ materially from those expressed or implied in our forward-looking statements. Now I'd like to turn the call over to Roland Austrup.

Thank you, Lucas, and thank you to everyone joining us today. I'm Roland Austrup, Chief Growth Officer. Before I begin, I want to note that this April, we will host an Innventure CEO call featuring deep dive commentary from Accelsius CEO, Josh Claman, AeroFlexx CEO, Andrew Meyer, and Refinity CEO, Bill Grieco. There will be more details to follow, and I strongly encourage our shareholders to tune in. Now, let me start by saying something plainly. This is the earnings call we have been building toward, not because of a single milestone, not because of a single announcement, but because for the first time in Innventure's history, every part of this platform is firing at the same time, and the results are undeniable. There is a difference between a company that tells you it is going to do something and a company that has done it.

There's a difference between a thesis and a proof, and what we are presenting to you today is proof. This is not one milestone. It is not one announcement we are dressing up for you. Let me give you the headline, and then I'll give you the proof. The headline is this: Innventure has crossed the threshold from potential to performance, and the proof is in third-party validation, commercial bookings at scale, operational expansion, execution milestones delivered across our family of operating companies simultaneously. What you are seeing in the fourth quarter of 2025 and the opening months of 2026 is not incremental progress. It is a decisive, across-the-board inflection in the trajectory of this company. This is what an industrial growth platform looks like when it starts to run, and it is what differentiates Innventure from single asset or venture-style stories.

Since inception, we have deployed approximately $160 million of balance sheet capital into our operating companies. That capital has generated roughly $860 million in net asset value, including approximately $460 million distributed directly to shareholders through PureCycle. That track record matters, but what matters more is what is happening now. The platform is beginning its transition from being capital-funded to being commercially self-funding, and the evidence is clear. In the first quarter of 2026 alone, our operating companies generated more than $50 million in new bookings in a single quarter. That is a commercial inflection point by any measure and a powerful leading indicator of forward revenue and enterprise value creation. Across our operating companies, the momentum is unmistakable.

Accelsius is scaling with the speed and urgency the AI infrastructure build-out demands, backed by institutional validation from Johnson Controls and Legrand and a growing pipeline of commercial deployments. AeroFlexx has entered prestige beauty, one of the most demanding markets in the world, and expanded global manufacturing capacity to meet accelerating demand. Refinity moved from formation to pilot scale validation in just over a year, demonstrating the speed, repeatability and discipline of the Innventure model. Three companies, three proof points all at once. This is not a coincidence. This is architecture. The architecture of a platform business delivering on its promise. This momentum underpins our expectation of reaching consolidated cash flow positivity in 2028, driven by Accelsius expecting to achieve cash flow positivity this year.

Each operating company is now directly raising capital, reducing the need for Innventure's balance sheet and fundamentally changing the financial character of this business exactly on schedule. Our model has always been well-defined. I know there are investors on this call who have been patient. I know there are investors who have been waiting for us to stop talking about what we are going to do and start showing what we have done. We appreciate your patience. I want you to hear me clearly now. The waiting is over. The results are here. They are accelerating, and the best chapters of the Innventure story are the ones we are writing right now. With that, let me pass the call to Bill Haskell to walk through each operating company and provide the specifics behind this acceleration.

Thanks, Roland. I want to start with Accelsius, and I want to start with something I think people in this market are still underappreciating. The world has decided it wants artificial intelligence, not eventually, now. Every major technology company, every sovereign wealth fund, every hyperscaler on the planet is in a race to build compute infrastructure at a scale that has no historical precedent. Here is the part that most people have not yet fully internalized. You cannot run that infrastructure without solving the thermal problem. You cannot. The chips that power AI generate heat at densities that make traditional air cooling physically insufficient. This is not an engineering preference. It is simply thermodynamics. That is the market Accelsius is scaling into. Accelsius is not scaling into it theoretically.

It is scaling into it with over $50 million in contracted backlog secured in the first quarter of 2026 alone, all tied to greenfield next-generation data center developments anchored by an initial order for the first deployment by DarkNX, a vertically integrated and funded AI data center developer with a healthy tenant pipeline and the ability to deliver liquid-cooling-ready capacity on an accelerated timeline. Now, I want to be honest with you about something, because I think honesty on earnings calls is more valuable than cheerleading. Data center construction is experiencing real global supply chain constraints, power distribution equipment, switchgear, memory, and modular mechanical systems. These constraints can affect the timing of delivery and revenue recognition even when customer demand and purchase orders are firmly in hand.

While we expect to recognize the majority of the contracted backlog as revenue this year, the exact cadence is difficult to forecast with precision. Our expectation today is that revenue will be heavily back-end weighted in 2026. I want to be very clear about what that means and what it does not mean. It does not mean demand is uncertain. It does not mean our technology is unproven. It means the physical world has supply chains, and supply chains have constraints. The important signal is not the quarter-to-quarter timing. It is the bookings. It is the customer commitments. It is the scale of demand we are now seeing. Those are the leading indicators of long-term value creation, and those indicators are unambiguous. Based on our current trajectory, Accelsius is on a path to exit 2026 cash flow breakeven defined by cash from operations.

This implies a December 2026 annual revenue run rate of approximately $100 million. Importantly, we believe Accelsius's cash on hand is sufficient for the company to reach this cash flow positive threshold. Think about what that means. A company that, just a short time ago was still in the early field deployments, is now approaching self-funded commercial scale. Let me contextualize this further because the market is telling you something important that you should be paying attention to. The recent acquisitions of CoolIT and Boyd at roughly eight to nine times revenue and nearly 30 times forward EBITDA make it unmistakable that the industry is moving decisively toward direct-to-chip liquid cooling. Here is the critical distinction. Both CoolIT and Boyd remain single phase today. Accelsius is already commercially deployed in the two-phase architecture that the market is converging toward.

Two-phase cooling is not an incremental improvement over single phase. It is a fundamental architectural advantage. Because of the phase change that occurs, it removes far more heat with far less energy, enabling rack densities and thermal performance that single-phase water systems simply cannot reach. Industry analyses consistently show that direct-to-chip cooling is one of the fastest growing segments of the data center thermal market, with forecasts ranging from low double digits to mid-30% compound annual growth rates over the next decade. The earliest adopters are exactly where we are seeing our strongest traction today. Greenfield high-performance computing and AI-focused data centers where air cooling cannot keep up with the heat flux of modern GPUs and accelerators. Here is what I want investors to understand about the size of the opportunity. The first wave is already here. New builds, HPC, AI infrastructure.

The second wave, and this is potentially even larger, is legacy data centers. Even in facilities where air cooling is technically adequate today, operators are recognizing that two-phase cooling unlocks higher rack densities, greater compute per square foot, and significant energy savings. It allows them to densify instead of expand, to deploy more compute power without new construction, to reduce the energy overhead of air-based cooling. We believe that the necessity of two-phase cooling for HPC and AI workloads, combined with the compelling economics for non-HPC environments, will cause direct-to-chip two-phase cooling to become the dominant architecture for both new and retrofit data centers over the next three to five years. Accelsius is now widely recognized as a leader in direct-to-chip two-phase cooling, a position reinforced by our strategic investors, Johnson Controls and Legrand. Their involvement is not passive.

It is a strong validation of both our technology and our commercial readiness by two of the most respected names in global building systems and data center infrastructure. In December 2025, Accelsius closed the second tranche of a $65 million Series B investment led by Johnson Controls and Legrand, valuing the company at approximately $665 million post-money. I want to emphasize this. That valuation was set by two global industrial companies deploying their own capital, not by Innventure, not by internal Accelsius financial models, but by external institutional investors with deep domain expertise writing real checks. That is the kind of validation that is very difficult to dismiss. Let me turn to AeroFlexx, which operates in a completely different market but demonstrates the Innventure model just as clearly. There is a problem in packaging that almost everyone acknowledges, but almost no one has solved.

The world produces an enormous amount of single-use rigid plastic packaging. Everyone agrees it is wasteful. Everyone agrees the supply chains are inefficient. Yet, the alternatives have historically forced a trade-off. You could have sustainability or you could have performance and consumer appeal, but you cannot have both. AeroFlexx changes that equation. Founded in 2018 around liquid packaging technology sourced from Procter & Gamble, AeroFlexx is an integrated packaging and filling platform that improves the consumer experience, simplifies supply chains, reduces virgin plastic usage, and enhances e-commerce economics. Its differentiation comes from delivering all of this value simultaneously.

A curbside recyclable package that uses up to 85% less virgin plastic than rigid bottles, a flat pack format that enables up to 10 times greater shipping efficiency, lower total cost of ownership by consolidating the supply chain, and consumer testing that consistently shows a clear preference versus traditional packaging. This is not a trade-off. This is a better product. As of the fourth quarter, AeroFlexx has delivered six consecutive quarters of revenue across pet care, baby care, personal care, household products, and industrial applications. What is notable today is that AeroFlexx is transitioning from early market validation to large-scale adoption and volume production gains. During the first quarter of 2026, AeroFlexx announced a global partnership with Aveda, part of the Estée Lauder Companies.

Aveda is the first global prestige brand to adopt AeroFlexx's refill packaging format with select products expected to debut in early 2027. Let me tell you why that matters beyond the headline. Prestige beauty is one of the most demanding markets in the world. The brand standards, the performance requirements, the aesthetic expectations, these are extraordinarily high. When Aveda, backed by Estée Lauder, chooses our platform, that is a statement about the maturity and credibility of our technology. Aveda is one of four anchor customer relationships that now underpin AeroFlexx's commercial momentum across distinct end markets.

The other anchors include a multinational consumer packaged goods company with a signed multi-brand, multi-million-unit agreement, a major producer of industrial fluids and packaging services, where commercialization is advancing through both equipment and pack sales, with the first purchase order already received and production beginning next month, a large beverage and food service partnership that would make AeroFlexx's entry into food and beverage the largest portion of its addressable market.

Taken together, these four anchor customers validate the platform across premium beauty, household and personal care, industrial applications, and food and beverage, and each has the potential to support line extensions, geographic expansion, and follow-on programs as AeroFlexx becomes more deeply integrated into long-term packaging strategies. AeroFlexx's near-term commercial pipeline stands at just under $30 million, including an approximately 1/3 in final negotiations. We are not providing guidance on the timing of revenue conversion, but the realization of these opportunities is incorporated into our assumptions for AeroFlexx to reach cash flow positivity in 2028. The company's opportunity set is broader and more diversified than at any point in its history.

AeroFlexx is also in the process of launching a direct capital raise at the operating company level, targeting strategic investors that also serve as commercial partners. As our operating companies mature, they are increasingly able to raise capital independently, reducing the need for parent-level funding. That is the model working exactly as designed. Let me turn to Refinity, and I'll tell you candidly, this may be the most compelling industrial opportunity we have ever launched. Here is the problem. The world produces hundreds of millions of tons of plastic waste every year. A meaningful portion of that waste has no viable recycling pathway today.

It goes to landfills, it goes to incinerators, it goes into the environment. At the same time, petrochemical companies are spending enormous sums buying fossil feedstocks, ethane and naphtha, to produce ethylene and propylene, two hydrocarbons that represent a $350 billion global market and are essential to producing polyethylene, polypropylene, and a wide range of specialty materials. Refinity connects those two problems. It takes the portion of plastic waste stream that today have no viable recycling pathway and converts it into high-value chemical building blocks, ethylene and propylene, that petrochemical companies are already buying. The substitution alone creates a compelling economic incentive and ability to hedge against fossil price swings while meeting circularity commitments. Across the value chain, circular materials command a 30%-50% price premium, with the highest premiums closest to the consumer.

This is not a sustainability story that requires you to ignore economics. This is a sustainability story where the economics are the reason it works. Refinity's primary commercialization strategy is built around integration, co-locating plants directly at petrochemical sites such as a Dow steam cracker. This eliminates transportation costs, feeds directly into existing infrastructure, reduces CapEx for both Refinity and its customers, and accelerates adoption by fitting seamlessly into the way these companies already run their assets. Beyond its core ethylene and propylene focus, Refinity sees significant opportunities in producing customized circular hydrocarbon products, including specialty high-value lubricants and sustainable aviation fuel or SAF.

One of our independent directors is a C-suite executive in the aviation industry, and we have come to appreciate that SAF has become one of the most critical pathways for aviation to meet its net zero commitments, with demand growing far faster than supply and U.S. production expected to scale dramatically over the next decade. Refinity recently licensed technology from a U.S. national lab for catalytic conversion of its mixed ethylene and propylene product to SAF and SAF precursor liquids, and intends to demonstrate this conversion process later this year. The SAF market alone is growing at 30%-50% annually and is anticipated to reach $40 billion by 2034. The ability to disrupt a $350 billion commodity market while also accessing high-growth specialty sectors like lubricants and SAF underscores just how significant the total addressable market is for Refinity.

Now, here is the part that should get your attention. Refinity was formed in December 2024. Less than one year later, the team produced its first metric ton of circular product from real-world mixed plastic waste yields typically above 60%-70% with minimal char. That compares to about 25% conversion for competing technologies. For a technology of this complexity, that speed is exceptional. Since then, Refinity has filed multiple patents on its DuoZone reactor design, expanded its IP portfolio with licenses from a U.S. university and a national lab, and advanced engineering toward a 10 kt/yr demonstration plant targeted for completion in 2028. A commercial-scale plant of around 150 kt/yr is planned for early next decade, aligned with the chemical industry's expected return to growth. Refinity is hitting KPIs ahead of schedule.

It is solving a real cost problem for petrochemical customers, and it is positioning itself to scale just as the industry reenters the growth phase. This is the Innventure model. Rapid formation, accelerated validation, and a disciplined progression toward commercialization in a massive market with structural economic drivers. Before Dave gets into the financials, I want to leave investors with three clear takeaways. First, the Innventure model works. PureCycle proved it, and Accelsius is validating it again at a faster pace. This is not theoretical. It has been demonstrated twice. Second, we are not dependent on a single operating company. We now have three businesses executing simultaneously, each with independent third-party validation. That is diversification with conviction, not diversification as a hedge. Third, I think this is the one the market has been slow to absorb. A platform is transitioning structurally from capital consuming to increasingly self-funded.

Operating companies are raising their own capital. They are converting commercial traction into revenue. The architecture of this business is changing, and it is changing exactly the way we expected it would. I want to say something about valuation because I think it needs to be said plainly. We believe our current share price does not fully reflect the value of Innventure shares. The $665 million third-party valuation of Accelsius was set by institutional investors deploying their own capital, adding two strategic investors to the cap table, and securing more than $50 million in contracted backlog. We believe the value of Accelsius alone has materially increased, and that does not include the value of AeroFlexx or Refinity. We're not gonna complain about the market, but we are going to state facts.

The facts suggest there is a significant gap between where our shares trade and what this platform is worth. Our focus remains on execution. We believe that if we continue to execute, value will ultimately be recognized, and we intend to continue executing. When we look across our family of operating companies today, our confidence in Innventure's path to consolidated cash flow positivity in 2028 is grounded in execution, not aspiration. Accelsius is scaling into production deployments in a market where liquid cooling is becoming mandatory with third-party institutional validation and a clear line of sight towards self-funded growth. AeroFlexx has moved beyond pilot programs into repeat revenue, anchor customers, and global manufacturing scale while transitioning to direct capital formation at the operating company level.

Refinity has rapidly validated its core technology, established a clear commercialization roadmap, and has begun the process of funding its next phase independently. Taken together, these developments reflect a platform that is structurally maturing, with operating companies increasingly funding their own growth, corporate capital requirements declining, and commercial activity translating into revenue. This is exactly how the Innventure model is designed to work, and it underpins our confidence in the enterprise's long-term financial trajectory. With that, I'll turn the call over to Dave to walk through the financials.

Thanks, Bill, and good afternoon, everyone. I'll walk through our fourth quarter and full year results, but let me begin with the most important thing I could tell you. The financial profile of this company is changing, not gradually, structurally, and the numbers I'm about to give you are evidence of that change. 2025 was an important proof point year for Accelsius. Revenue increased from $0.3 million in 2024 to $1.6 million in 2025, driven by successful proof of concept deployments with early customers. At the consolidated level, Innventure's 2025 revenue was $2.1 million, up from $1.2 million in 2024. Fees from our management of the Innventure ESG fund, along with intercompany eliminations, were $0.5 million compared to $0.9 million in 2024.

The real step change happened in the first quarter of 2026. Accelsius generated more than $50 million in contracted backlog. These are production volume orders, not pilots, not trials. This provides strong visibility into meaningful revenue scaling in 2026. As Bill mentioned, we expect Accelsius to exit December 2026 with positive operating cash flow, implying an annual revenue run rate of approximately $100 million. We also expect revenue to be heavily weighted to the back end of this year. General and administrative expense. Before I get into specifics, I want to explain something about how our cost structure has evolved because it gives important context. We have included a slide in our earnings presentation that illustrates this in granular detail.

Historically, prior to the operating companies reaching commercialization, Innventure funded essentially all G&A costs from the TopCo level. Personnel expense, professional services, operating expenses, all centralized, all flowing through Innventure's consolidated P&L. That's now changing. While costs at Accelsius and Refinity will continue to flow through the consolidated financials, a growing portion of the total operating expenses will be funded directly within those businesses rather than by Innventure. At the TopCo level, our focus is increasingly on a lean corporate cost structure, funding only what's required to operate Innventure Topco. Now let me give you the numbers because they're significant. G&A has decreased sequentially every quarter since Innventure went public. Consolidated G&A declined from $29.7 million in the fourth quarter 2024 to $11.5 million in the fourth quarter 2025, a 61% reduction.

That reflects disciplined cost management across Innventure, Accelsius, and Refinity, as well as the tapering of non-cash expenses associated with our public listing. Professional service fees shows the same trajectory, $3.5 million in the fourth quarter 2025, down 42% from their peak of $6.1 million in the first quarter 2025 as we brought key functions in-house at lower cost. At the parent company level, Innventure's fourth quarter 2025 cash G&A expenses were $5.7 million, down over 55% from $12.9 million in the fourth quarter of last year. That's not noise. That's a structural change in how this business operates. Looking ahead to 2026, we expect Innventure Topco G&A to follow a trend similar to the last three quarters of 2025. A few income statement highlights.

Excluding the $347 million non-cash goodwill adjustment and other minor non-cash items, adjusted EBITDA for 2025 was a loss of $78.8 million. As we look forward, the combination of a significant contracted backlog, our expectation that Accelsius will reach a revenue run rate of approximately $100 million, and exit 2026 cash flow positive gives us confidence that there will be a substantial improvement in the reported adjusted EBITDA in 2026. Moving to cash and liquidity. On a consolidated basis, we ended 2025 with $65.4 million of cash, restricted cash, and cash equivalents, up from $11.1 million at the end of 2024. Additionally, in January 2026, we strengthened our balance sheet with a $40 million registered direct offering as Innventure became shelf-eligible.

Shelf eligibility is an important milestone. It gives us efficient access to public market capital on substantially better terms than what was available previously. Just as importantly, we repaid the entire remaining $5.6 million balance on our convertible debentures, which simplifies our capital structure. Let me walk through why we believe our cost of capital will improve significantly going forward. One, we believe Accelsius is now effectively fully funded and entering rapid commercial scaling with the over $50 million in contracted backlog. Two, fourth quarter 2025 G&A is down 61% from fourth quarter 2024, with further efficiencies expected as we take advantage of productivity improvements. Three, shelf eligibility, which reduces reliance on higher cost financing alternatives. As our operating companies, particularly Accelsius, begin generating cash, we expect this to further extend our cash runway and move Innventure towards a self-funding evergreen model.

While it is too early to discuss the details of the ongoing capital needs for Refinity and AeroFlexx, the disciplined cost actions I discussed earlier gives us visibility into Innventure's needs. At the Innventure level, we estimate 2026 capital needs to be materially less as our operating companies become self-funded. This reflects a leaner parent company structure as expenses continue to shift to the operating companies. On the balance sheet, by way of explanation, our $28.7 million in investments represents our $19.5 million equity method investment in AeroFlexx and $9.2 million in AeroFlexx debt securities. Following the goodwill write-downs earlier this year, $323 million of goodwill still remains on our balance sheet. On the cash flow statement, you can see many of the non-cash items that appear in our income statement.

The cash used in investing activities primarily reflects funding to AeroFlexx and capital expenditures at Accelsius. Let me close with this. There are companies that talk about inflection points, and then there are companies that cross them. Innventure is crossing one right now. Rapid commercialization, a dramatically improved cost structure, efficient access to capital, operating companies that are beginning to fund their own growth. These are not just aspirations we are sharing with you. They are facts supported by every number I just walked you through. We believe this combination positions us to scale with far greater capital efficiency and to create meaningful long-term value for our shareholders. I want every investor on this call to understand, we are not slowing down. We are accelerating. With that, we'll open the call for questions.

Thank you. At this time, we'll conduct a question-and-answer session. As a reminder, to ask a question, you'll need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Chip Moore of ROTH Capital Partners. Your line is now open.

Hey, good evening, everybody. Congrats on pivoting to this new phase here.

Appreciate that, Chip. Yeah, appreciate that, Chip.

Yeah. Hey, maybe if I could start on Accelsius. You know, the $50 million+ in contracted orders here in Q1, it sounds like DarkNX is a significant chunk of that. Maybe you can talk about the types of customers in there, other customers, and what you're seeing there, and then pipeline as well.

Yeah, sure. I would say this, Chip, we have literally hundreds of people in the pipeline or customers in the pipeline that are all kind of moving forward through. I mean, the beginning of that is starting to drip through, as you can see. It's fairly chunky right now, but I think what you'll see going forward is we'll have, you know, a larger framework of customers. I mean, we have delivered to dozens of customers to date.

You know, I think what you're going to see is many more, you know, groups of purchase orders fall with increasing numbers as they go forward. It's a tricky marketplace, as I think we all know, just because of, again, some of the supply chain issues that have been talked about on this call and people are seeing in the marketplace. That affects some of the timing of various both purchase orders and the prospective deliveries of those. While I'm not predicting that we'll have any, you know, material delays in delivery, it's not something within our control. I mean, ultimately, these are things that will be determined by the pace of the build-out of the various data centers and our customers' sort of supply chain constraints.

That's kind of where we stand at the moment. We'll have a broader and broader, more diversified pipeline of contracts as we go forward is my belief.

Yeah. That's helpful, Bill, and makes a lot of sense. Obviously, a lot of things out of your control, like many. I guess for the deliveries, you know, to dozens of potential customers, would you describe that more as sort of piloting phase, and how long do you think people want to have a look at the technology before they get fully comfortable?

Yeah. Well, last year, virtually all of our deliveries were kind of one-off pilots, where people were just evaluating the technology. I think we've moved past that for most all of the customers that are in the pipeline at this stage. You know, the way I would frame it is this: if we were sitting here a year ago, you know, our average proposal outstanding was probably worth a couple hundred thousand dollars. Now, not everyone, but most of the purchase orders are either, you know, seven-, eight-, or even nine-figures in terms of scale. I would say, you know, most are probably in the eight-figure range. That just shows you a significant transition from evaluation units to real commercial production orders.

Yeah, definitely. That's helpful. Maybe just one more on Accelsius for me, to your, you know, to your point on cadence being tougher to predict near term and some of these things out of your control, but it sounds like you have reasonable visibility into, you know, maybe $25 million-ish of revenue in Q4 if you know, something out of your control doesn't get held up. Is that the right way to think about it based on.

Yeah.

The backlog?

I mean, that's the kind of runway we indicated that would make the company cash generative. You know, I think Josh came out a couple months ago and said that was our expectation, that we would reach cash flow positivity by year-end, and that is still our belief.

Yeah. Okay. Just one more before I hop back in queue. AeroFlexx, a lot of momentum. Aveda, obviously announcement recently, but now you're talking about a $30 million pipeline and some of that getting close. Just a little more detail there, and I think I heard you say that you might be looking to do a raise with some strategics there. Just any more color you can provide? Thanks.

Yeah. I would say this, now that we've gotten to the point where we've proven out the technology and proven out the recyclability of the AeroFlexx package, and it's gone through its own evaluation unit phase, just as we did in Accelsius, now we're starting to see, again, same thing, commercial-sized proposals that have been asked for. Aveda’s really a framework deal that we think can be quite significant. I don't have a number scale yet of what that can grow to, but they're a very large luxury brand within Estée Lauder, as you may know. You know, what we believe, based on conversations we've had with lots and lots of customers, is that they'll start with a product, you know, one SKU I'll call it, that they'll go out and run.

Assuming that's successful, they will, you know, kind of broaden the reach of that packaging solution to other brands within the same platform. Again, Aveda is one, but they're a big one. As we mentioned, it's a very challenging customer in the sense that, again, the bar is very high across the board because aesthetics is very important. They want unique shapes and, you know, different kinds of packaging, labeling that is more difficult than, say, industrial, where you're, you know, doing putting in lubricants and, you know, bar and chain oil, which is an opportunity for us and other things of that kind.

Yeah. No, that's great. One last one from me before I hop back in queue. You know, I can, probably it's more for Dave, but you know, the transparency around G&A and some of the expenses, I really appreciate that and the slide in there. You know, I guess the question would be, is there much more low-hanging fruit there? Do you think G&A continues to come down? You know, how much more optimization do you think you could see there? Thanks.

Well, hi, Chip. Hey, thanks for the question. Certainly, we're always focused on G&A. We're always looking at ways to be more efficient, more effective, get more done with less. While I don't wanna give forward guidance on where I think that number's gonna be, I can assure you it's on our radar, and we're always looking at ways to operate more efficiency. We're pretty proud of the five consecutive quarters since we went public. That's how I'd answer that.

Yeah, I would just amplify that a little bit, Chip, in the following way. I mean, we talked about when we went public that we needed to be, say, public company ready kind of out of the chute, and we relied very heavily upon, you know, outside vendors to help. Now we've brought a lot of that functionality in-house. But so we've weaned ourselves off, you know, some of those outside services, which were quite expensive, but that wasn't all realized by the end of December. There was, you know, still some carryover. That continues to reduce, you know, which is why I think you'll see some improvements in our cost structure moving forward.

Thank you. Our next question comes from the line of Nehal Chokshi of Northland Capital Markets.

Thank you. I think that was a well-said narrative on the transition of Innventure and proof points that the VC model is working, so well done there. There are some questions, though, that I think need to be asked. I got a bunch, and let me just go through them real quickly. The COGS to revenue ratio continues to inch up. I understand that we're still in basically pilot phase, but at what point in time, why is it continuing to inch up? At what point in time do you expect that to, you know, start to get normalized?

Yeah. I would say we're building some things to inventory based on, you know, projected orders, Nehal, which is the cost of goods is ahead of delivery, right? I think that's the primary issue, right? Where we have customers that we know what they're going to want in terms of product mix. You know, we've developed some inventory, which of course all that cost of goods is in, but the revenue is yet to be realized in certain areas.

Yeah, I'll jump in. That's accurate, right? There is a fixed cost element to COGS as well, so you got to keep that into account. It's not all variable.

Certainly later this year, that should even out, you know, as we start delivering at scale, you'll see all of that really flesh out.

Okay. I mean, when I look at the COGS relative to revenue, I mean, it's roughly scaling, but it's increasing a little bit, right? It's not like a massive increase. It almost looks like the variable cost structure is close to 100%. If I were just to look at it with a pure analytical lens of COGS to revenue ratio. Can you help me understand, like, what percent of these COGS is actually fixed versus variable then?

Do you have an answer to that one, Dave? I don't know.

I mean, I do. It gets into the margins and the cost structure of Accelsius. We probably don't want to go into too many details on there. We're amortizing intangible assets, right? For the R&D development took place and the other things that are attributable to cost of goods sold, that amortization is going through, it's fixed. It doesn't vary with each unit produced. The second thing is there's been a shift at Accelsius, right, to the higher capacity cooling units, to the different MR250s and demands by the customer. That generated a little bit more cost than just doing straight math on units and per unit cost. Those would be the two things I'd point you to.

It's a very nice margin business. I'm, you know, not gonna give you the projected margins at this stage. You know later as revenues get to scale, I think you know we'll be able to share more in terms of that. But the margins are attractive margins in this business, in my view, on a comparative basis to, you know, kind of other vendors out there.

Okay. You know, so the fixed cost element within these COGS that has been going up each quarter then, is that correct?

Well.

Dave?

Well, again, I mean, I think the fixed portion is fixed. I just think there's a lot of different things happening as we're scaling, as we're getting customer orders and costs are getting booked to COGS. I, again, I think as we scale, then you'll start to see it more normalized where you can say, "Hey, for every unit produced, this is, you know, the cost per unit," and it'll start to make more sense. When your numbers at this level, I think you have to be careful drawing those kind of conclusions.

We also reopened a brand new manufacturing facility too. I don't know if you're aware of that, Nehal, but we've opened another, I think it's 25,000 sq ft facility, you know, there in Austin, in addition to where we had before. We just materially increased our manufacturing footprint. There are obviously some costs associated with that.

Okay. Going on this line here, inventory was down about $5 million QoQ on less than $2 million of revenue recognition in the quarter. Can you help me understand that there?

Yeah, I can answer that. Again, as we transition to different products, you know, there was some inventory write-downs, and that's flowing through COGS as well. There was a little bit of obsolescence.

A little bit of manufacturing costs, some more heads allocated to cost of goods sold. It's all kind of related, but that's why you saw a drop in inventory.

Yeah. I can give you some more color on that, Nehal. You know, this market has evolved very rapidly. You know, our initial belief was that a, you know, sort of 70-kW rack was, you know, sort of 10 times the average rack size, and that was going to be kind of where the market was headed. It really leapfrogged over that and, you know, we have about a 150-kW and a 250-kW product as well. That's really more of the sweet spot of what the market seems to want. That's where the obsolescence really came in, is just writing off a lot of that 70-kW inventory.

Got it. That makes a lot of sense. That's very helpful. Okay. Couple other questions, and I'll cede the floor here. You said that DarkNX is funded. Can you give us, it's hard to find information on this company, can you give us a sense as to where these funding sources are coming from for DarkNX?

Hey, Roland, do you wanna field that one?

Sure I can, Nehal. I mean, look, all I can tell you is, I mean, coincidentally, of course, I'm in Toronto, which is where they are, so I've met with them a handful of times already and gotten to know them. I didn't go through the formal qualification. That was done by, you know, Accelsius themselves, and I believe JCI did that as well because they're part of the chillers for that facility. All I can tell you is, they are funded, and they've represented to me directly that they're funded, but it was formally done when they were qualified by both Accelsius and Johnson Controls. A key part of that was determining that they did have funding. I don't know the source, though, to tell you the truth.

Okay. All right. My last question, and I'll get back in the queue for the rest of my questions here. Companies are raising company capital independently, which then means that Innventure will get diluted relative to these operating companies. Doesn't that also represent a change in philosophy on whether to fund the operating companies or not, rather than just evidence of operating company maturation? I do agree that there's evidence of operating company maturation, but I'm also saying, "Hey, doesn't it also represent a change in funding philosophy as well?"

Yeah. Let me field that one for you, Nehal. In the early days of Innventure, most of the companies were funded off, not off the balance sheet of Innventure, but there was subsequent funding. We had a fund that co-invested with Innventure. We had some outside investors that funded a lot of those. We ended up with relatively small stakes in each of PureCycle and AeroFlexx. When we evolved with a conglomerate model, our goal was to own more. The balancing act, the trade-off there is, until we, Innventure, are cash generative at the TopCo level, which we projected to 2028, you know, you'd have to take permanent dilution at the Innventure level, which would affect not only the companies that we currently have, but future companies going forward.

The thought was, if these companies are in a position, they're mature enough to be able to raise capital independently, let's raise some capital for each of AeroFlexx and Refinity directly in the marketplace. Yes, we'll take some dilution there, but we save the permanent dilution at the Innventure level for our shareholders in doing that. But when we're cash generative at the TopCo level, at Innventure proper level, you know, then we'd love to be able to fund as much as possible off our own balance sheet to retain full ownership. It's kind of a trade-off between, you know, taking care of investor positions today, and taking a little bit of dilution at the OpCo level, you know, versus, you know, kind of having to suffer permanent dilution for all future companies.

As we mentioned, certainly Accelsius already has the requisite capital it needs to get to a, you know, cash generative position. We're not funding anything more from there, and they're not raising any further capital. It's really at the AeroFlexx and Refinity level. AeroFlexx, as you know, is not a consolidated asset. We own a minority stake in it, so, you know, we're a little less sensitive to dilution at the AeroFlexx level. We believe now that it has done this deal with Aveda and is seeing some traction that raising the smallish amount of capital they need going forward is imminently doable.

Thank you. One moment for our next question. Our next question comes on the line of Aashi Shah of Sidoti & Co. Your line is now open.

Good evening. Thank you for taking my question. My question is related to Accelsius and the $50 million bookings in the first quarter. They're all tied to the greenfield data centers. When do you expect meaningful traction from brownfield deployments? That could accelerate adoption much quicker than greenfield, in my assumption, because the growth over there is slower and riskier as to when the data centers will be ready. Any thoughts on when, like, you start seeing traction from brownfield deployments?

Yeah. It's a tricky question to answer. I'll do my best, Aashi, and thanks for the question. You know, we do have customers obviously that have existing data centers and some of those, you know, that would like to retrofit, you know, at least part of their data centers with a different technology. But at the moment, as you know, you know, liquid cooled data centers are relatively small number. You know, I don't know, 5% or something like that of data centers have liquid cooling today, but growing very rapidly and evidenced by, you know, a lot of the M&A activity in the sector. But we are talking to customers that have many data centers, some new builds and some existing.

The nice thing about this technology is that it drops in very nicely into an existing data center because each rack is self-contained in the sense that you have a cooling solution and a CPU all contained together with one or multiple racks. You can replace a rack, a row, a whole facility or any combination thereof in a relatively straightforward way. It's just hard to know what the definitive answer to your question is, but I would expect some blend of that, you know, even later this year as things move forward. The ones that have the most acute need are those that are gearing up specifically for HPC and AI workloads, where they're, you know, acquiring the latest and greatest other systems possible.

As we migrate to, you know, agentic computing, you know, you're gonna see, I think, a big change. 2026 is really supposed to be the inflection point where we go from kinda 80% of the computing being for training these large language models to 80% being, you know, sort of consumer directed for generative AI. Just this is what's happening. People are starting to use these various AI agents. It's very steep curve of adoption. I mean, it's most, everybody I know uses it every day now and you're gonna see that continuing to grow. If they switch over from, again, these LLMs and the compute horsepower goes the other way, then it's more of a CPU game versus a GPU game.

Then you're gonna have clusters of large computes for CPUs, you know, I say big clusters. That will also require liquid cooling just because of the density that they want to be able to put forth in one data center. It's a I mean, just in the last two years, watching this market evolve, it's gone well ahead of the pace that it had anticipated. I think we're gonna see continue to see a shift, and I think that will drive more to the brownfield sites, you know, trying to get back around to answering your question here. A lot of those [crosstalk].

Well, I can probably add to that a little bit.

Yeah. It'd be perfect. Yeah, go ahead, Roland.

Yeah, 'cause I mean, you know, I've had pretty long conversations about that with Accelsius and kind of the view I get. You know, when you have the CEO call, I think it's a good time to ask that question exactly, by the way, to Josh. Right now, there's a need for greenfields to adopt the technology. Need drives adoption there. In the real legacy center, really what they wanna see is they wanna see a mature industry develop, that there's plenty of supply. I think where you're gonna see the adoption inflection point is when you see that there's a robust industry supplying, you know, more of the greenfield developments, then the brownfields will become comfortable, I think, making switchovers.

Makes sense. Understood. Another question I had was on the Aveda partnership. Can you just give us a ballpark on what the expected annual volume is going to be for that at launch in 2027, and if this is going to be like a pilot program or is it a full commercial rollout?

Yeah. We've been dealing with Aveda for quite a long time. I don't have the direct answer to your question. I'm not ducking that, I just don't know the answer to the question. You know, Aveda has big brands, you know, luxury brands. You know, the reason it's taken till 2027 before they roll out at scale is to figure out which particular product lines they're going to use in this packaging, making sure we tailor the packaging to what they wanna see in the labeling and you know, all the various things that they require. I just don't know the answer, Aashi, but we'll be learning more over the next six months in terms of the details of what we would expect to see.

Yeah, I mean, you can look at the potential too, Aashi. I mean, there's not a lot of published data available on Aveda, but if you do any search out there, you'll find that, you know, Aveda's in the tens of millions of packages a year is what the brand is estimated to have in the marketplace. You know, it could be significant, but as with any brand rollout, you don't expect to get the whole thing. It's definitely not a pilot launch. It's a global commercial launch that's targeted for 2027.

Got it. Thank you.

Thank you. One moment for our next question. Our final question comes from the line of Nehal Chokshi of Northland Capital Markets. Your line is now open.

Thank you for the follow-up questions. Another part of this narrative here is improving corporate governance. You guys did announce that you'll be, I think, nominating some independent Board of Directors and some existing, I guess, so-called insiders are gonna be stepping down. Can you just say what percent is independent now and what percent do you expect to be independent once these changes are made?

Yeah. Sure. Today we have five independent directors and four executive directors. What we're targeting is to go to seven independents and two executive directors. You know, we have our AGM in June. I would anticipate, you know, in that window of time we will have migrated to seven independents. That's the target.

Great. Also, can you give an update on the Accelsius pipeline? I believe a quarter ago you said it was, you know, a little bit over $1 billion.

Yeah, I mean, I don't have any updated information directly. I will tell you that, you know, the pipeline has a lot of different levels to it. You know, there's, I'll call it high conviction things in the pipeline. There's, you know, things that we think are probable, and there are things that we think are possible, and then there are, you know, new things coming in all the time. I don't have a comprehensive number. We can figure that out and certainly when we do the CEO call, that's a fair question to ask of Josh. I just don't have the number in front of me. I just haven't seen it yet.

Got it. Understood. How much of the greater than $50 million of Accelsius bookings in 1Q 2026 correspond to in terms of megawatts of total cooling?

Say that again.

The greater than $50 million of Accelsius bookings in 1Q 2026, what does that correspond to in terms of megawatts of total cooling?

I will just say this because I think we're trying to be a little bit careful about ascribing, you know, dollars per megawatt, which I think is probably where you're headed. I will say that, you know, part of that, a fraction of that is a small portion of the DarkNX prospective build-out. You know, what had been announced before was 300 MW, and then there was another announcement saying that they had the first funding for the first two phases of 65 MW each. That is not what our bookings represent today. It's a smaller fraction of that.

Again, I think when we do the CEO call, maybe we'll be able to provide a little bit more granularity on just how many, you know, megawatts we've been contracted to roll out. It's gonna grow. You know, it's gonna grow pretty materially between now and, you know, the next couple of quarters. We've got, again, a lot of things in the pipeline that we think will close, you know, over the next couple of quarters. But we haven't announced that. We'll see if we can get clearer information for that for the call that we do with the companies.

Yeah, Nehal, that was the whole point of doing a separate CEO call, was that we want to have the CEOs be able to go into greater granularity. You know, here on the earnings call, we're really just trying to sort of paint the macro overview of where it's going and that we're having an acceleration across all companies and a dramatic decrease in G&A. Where you can get into the technicals, I think, is gonna be on the CEO call.

Okay. All right. I'll save my additional questions for then. Thank you.

Thanks for the question.

Thank you.

Appreciate it. Yeah. Yeah.

Thank you. This concludes the question and answer session. Thank you for participation in today's conference. To disconnect the program, you may now disconnect.