Strategic Pivot and Operational Performance

• Performance in Q1 was driven by a 55% revenue increase following the strategic sale of Bressner, which management believes unlocks shareholder value and sharpens focus on high-margin edge AI opportunities.

• Growth was attributed to increased shipments for the P-8 aircraft and prototype deliveries for U.S. Army enhanced vision systems, alongside rising demand from medical imaging OEMs for liquid-cooled server platforms.

• Management reported a record book-to-bill ratio of 1.8, with $15 million in new bookings nearly equaling the total bookings generated for the entirety of 2023.

• The average order size has increased nearly 3x since 2023, reflecting a shift toward larger, more programmatic, and multiyear deployments across both defense and commercial sectors.

• The opportunity pipeline has expanded significantly from a previous estimate of $1 billion, driven by a deliberate effort to align with applications that scale across both markets.

• Customer-funded development increased 145% year-over-year, which management views as a critical strategy to embed OSS early in the life cycle of next-generation defense and commercial platforms.

2026 Outlook and Strategic Assumptions

• Management reaffirmed 2026 revenue growth guidance of 20% to 25%, assuming a planned ramp in the second half of the year as development programs transition into production.

• Gross margins are expected to normalize to approximately 40% for the full year, reflecting a mix of product shipments and an increasing contribution from customer-funded development.

• Guidance assumes potential timing impacts from supply chain constraints, specifically longer lead times for memory components and CPUs which remain the critical path for deliveries.

• The company expects to generate positive EBITDA and adjusted EBITDA while continuing to invest in sales expansion and customer support resources.

• Management indicated that the strengthened balance sheet, with $34.4 million in cash and no debt, provides flexibility for selective strategic acquisitions to enhance technology capabilities.

Structural Changes and Risk Factors

• The sale of the Bressner subsidiary in December 2025 for $22.4 million resulted in its historical results being reclassified as discontinued operations.

• Supply chain volatility has moderated but plateaued at higher pricing levels; management intends to pass these increased costs to customers rather than absorbing them.

• While defense budgets for 2026 are passed, management noted a potential risk of slight delays in award timing due to the redirection of logistics and material for Middle East operations.

• The company introduced a next-generation PCIe Gen 6 product portfolio to address increasing bandwidth requirements for AI and machine learning workloads at the edge.