Data I/O (DAIO) Q1 2026 earnings call transcript

Thank you, Operator, and welcome to the DATA I. O. CORP 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 DeBona. 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, financing and capital markets initiatives, economic conditions, supply chain expectations, estimated impact of tax and other regulatory reform, product releases, new industry participants, The statement of statements 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.

And 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 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 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 We had some really good plans going into the year. They were well thought out. As you know, we have a very large installed base globally, and a lot of that equipment has certainly gotten some of its aging out.

So 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. So 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 going to talk about, an acquisition, But it's really important that the shareholders and the people on the phone understand that the core business is healthy. It's a slow start, but 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.

So we are seeing some good pick-up. We also will land most likely, 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 of closing. So to land three, and these are not three site changes, not like another J-Bill location or flex, these are net new logos that we've never invoiced. So, 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. And I know in the past those numbers were 58 to 63 percent. You know, when I dug in during the year, especially in the second half, it was pretty clear to me a lot of the subcons that we had as kind of industrial were really automotive.

So, you know, coming off a really tough time in the automotive industry, this has been a big transition overall for us. But, 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. But, you know, we feel really good about Q2 and where we're going with the CORP business. So that's, you know, Charlie, we get into some of the details and the financials. We had some one-time write-offs, and as we optimized the business, That has been a big part of the last two quarters. I will tell you that 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. And I will tell you, AI has been a big part of that ability to get more productivity but also save money. And it's not just about saving money because, you know, look, 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. And 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 working in, and 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, but we're really looking for a transformational acquisition. I mean, that's, you know, look, there's some small acquisitions we could do, and that would kind of, but we really needed something that was going to 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. So, 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.

And I'm happy to announce that we were able to bring in $9 million of proceeds in common stock, warrants, convertible, and temperature in support of our current M&A activity as well as future M&A. Fundamental institutional investors following our progress for and met with us at least three times, maybe four over the last year. I think we've built a really good relationship with the investor and other investors that are looking. So I really like where we're going as far as bringing in new money. You know, and it's time. This is a new day and age for DATA I. O. You know, so 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. But 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 of quarters, and it was definitely a target market for us.

And so those are two of the new logos. So we're very excited about where we're going and where DATA 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, but 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 can see programming as a service, and we are in four or five very deep conversations right now with significant large subcontractors that want to move from doing it themselves, in sourcing, 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 kind of takes out that lumpiness of the CapEx business. I'm sure that I know Charlie's going to enjoy those new cash flows as we start to expand that business and the services. And so, you know, we're focused on developing new software to also run our products in a multi-tenant environment. And all that leads to better revenue, better recurring revenue, and a more predictable business for the future. I'll move on a little bit to the acquisition. I do want to save, you know, a good amount for the Q&A. I hope you guys are ready because 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 going to help us accelerate our growth. It's going to 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. So stay tuned. And I think at this point I'd like to hand this over to Charlie. And let's see where we go.

Yeah, I think at this point, Charlie, if you're ready, take it away.

Thanks, Bill. Thank you, Charles. Good afternoon, everyone. I'm going to cover four areas today. First, I'll walk through our first quarter financial results Then I move on to our updated business framework and second quarter revenue guidance because I suspect that top of mind for everyone Third I discuss the million direct investment and what it means for our balance sheet and capitalization And finally I walk you through the transformational acquisition that Bill was just discussing So 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 in 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 the 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, 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 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 want to emphasize that point. Ongoing operating costs are being managed down even as we invest for the future. Bottom line, 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 per 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 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, and today we announced a private placement resulting in an 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, because 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 strengthen our recurring revenue base and new sales models we're implementing. Acceleration of recurring and services revenues, including the launch of our onsite programming as a platform service as we move forward. Entry into the programming services market, which represents a meaningful opportunity to expand our addressable market and in which Bill has particular expertise.

Operational optimizations 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. And 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. And finally, as Bill mentioned, AI is deeply ingrained across all functions in driving productivity gains in engineering, operations, customer support, and administration and finance.

Now for the second quarter, we are providing revenue guidance of $5 million to $5.4 million. That implies a minimum of approximately 20% sequential growth from the first quarter. I want to be very clear that we are providing this guidance and the context around it. As 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 REVREC. The Q2 guidance includes these delayed first quarter sales as well as solid new activity early in the quarter. The demand did not disappear. It shifted. The combination of the late Q1 momentum carrying over and customer engagement building in Q2 gives us visibility to provide this range.

I also want to 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 going to talk about today or other ones that might come through the course of the year.

So 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 releases, as follows. The investment includes the issuance of approximately 870,000 shares of common stocks, 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 is convertible into Series B preferred stock, which is non-voting and convertible into common stock at an initial conversion price of $250 per share.

The debenture will automatically convert upon receipt of stockholder approval pursuant to NASDAQ roles. 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 venture 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 to invest in the organic business.

Fourth, the terms are reasonable and aligned. The coupon on the venture is modest. The conversion and exercise prices reflect the conversion, excuse me, the warrant exercise prices reflect the premium to where the stock has been trading. And the investors' willingness to take a large position at this stage speaks to their confidence in the combined organic and unorganic 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 revenue 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 Q&A later. Okay? One notable part of the structure, though, I do want to 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.

So 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 to $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. It signals the transformation of DATA I in action We incredibly excited about what lies ahead We look forward to updating you as we move through the closing process and begin integration We will now begin the question and answer session To ask a question you may press star then 1 on your telephone keypad If you are using a speakerphone please pick up your handset before pressing the keys To withdraw you may be able to use the Q CORP To withdraw your question, please press star then 2.

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.

Yes. Which we should see a slight improvement on that. We'll see more improvement with the acquisition, but yeah, that's a bright state. That's correct.

Yeah, I think it would be a little early to model that just because there is a lot, there are some significant, there are some solid synergies. I'm not going to say significant. We still have some investigation to do there, Dave, during the due diligence stage of this, which we just kicked off yesterday. So I'd probably hold that back. And it's not all services. It's probably like a, you know, call it 60-40, right? So it's not all services. There is CapEx in there. But 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 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. So, you know, again, it'll double the size of the company. It's certainly accretive. There's a lot of work to do between now and when we try to, you know, get this thing closed. But there is certainly upside across the board in improving growth margins for both companies, honestly. I mean, when I talk, when I think through AI and what we've done here and the significant productivity improvements we've seen and, you know, We've taken projects that have taken years, and we're actually starting some of them all over to reduce our technical debt. And 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 at the time by 70%, 80%. Walking through their factory and looking at what they do, there's clear signs of where we can reduce design times by, you know, four or five weeks. You know, certainly bring AI in to get them more productive. So there's just a lot of upside across the board. But from a revenue perspective, yeah, you should definitely think kind of 40 plus.

It's a great question, Dave, and thanks for asking it. Taking a tour of the facility, I was like, yes, we now have expansion capabilities to scale. If you think about where we're going, our core capital CapEx business, we have a fairly tight production floor downstairs. And, you know, as we get into programming as a service, I'm going to be building even more equipment for our own long-term contracts around programming on-site as a service. So that will increase the need to build more. We would not be able to do that here, I can tell you that. So this allows us to accelerate programming as a service because they have plenty of manufacturing space for us to go into, as well as their core business as well.

No worries. We have multiple questions today, Dave. There's a lot going on.

Yes, sure. Let's call it this AI build out and exactly where that intersects with programming and what this opportunity is over the next 12 to 24 months. Absolutely, Dave. Another great question. And 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. But it's really products that surround or utilize AI, such as robotics and automation in cars.

We've got a new client that we should be announcing soon that has a very large business in both of those sectors. So, you know, when I look at 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 the ability to accept that automation in those AI signals. So, 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? And they're a great barometer because they're really kind of what I would call supermarkets of the world as far as semiconductors. So, if you ever want to 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 the world that have just gone, you know, in a stratosphere with their numbers. I mean, I never thought Micron from four years ago would go from $56 to almost $700 or more. But, 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. So, you know, granted those aren't programmable, but there's a lot of automated solutions needed for these things. So, you know, I think overall the AI push is here, and it's starting to drag other industries and semiconductors with it.

So that's what we're seeing, that's what we're hearing, and that's what customers are telling us. And I will tell you the OpEx model, customers love it. You know, and the great thing about programming as a service is the signatory stage for an OpEx contract It isn't at the VP of finance level. You're at director, manufacturing manager. These decisions can be made at lower levels, which means we can execute multiyear contracts with services, including a managed service fee that we'll have on top of a multiyear contract with guaranteed volumes and minimum monthly revenues that they have to meet. So that's what really, 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, and maybe they thought their business was going to go one way and it stayed flat. But those customers probably still have a good amount of programming business that we can take back from them regionally. And the advantage we have, Dave, is that we can give them a little bit of value of that equipment, even though it may have aged out or also there's no depreciation left on it, because there's still the programming ads and the adapters. So we're in a great place to give customers real value, even on old equipment, to move to a new model. So I hope that answers your question.

Okay. Thank you. Yep.

Well, it wasn't a company that was in a process, right? And so, you know, when I think of M&A, and I've done a lot of M&A over my career, and, 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 I will now turn the call over to management for your market. You have to ask that you have to sell. I mean, the business has been a bit over the last year and a half. We are going into this year strong, and we like where their numbers are going as well as ours.

I think it was more of a, you never know when you're going to get a dance partner in life. Sometimes timing is everything. I think the match between me and the other CEO, we felt strongly that this was a good idea. Quite frankly, if they were going to go to market at some point, we were definitely one of the companies that would have received the book. But, 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 from both firms and the strengths and weaknesses, and so, you know, that's why we, you know, have come to an agreement.

So...

Oh I can really get into those details We just kicked off an early due diligence We will be able to get more on that once we close and talk through really what the not only the strategic rationale but how we going to lay each other strategies up and how well they fit together in the future The team members and things like that that a little way too much Okay, then I missed one thing.

A million eighty, one million eighty thousand.

Yeah, great question, Howard. No, it does not include any of that. I can tell you that we are deep in the conversation of the A clients. These are existing customers that already have our equipment, but we're 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. So, 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. Now, so none of that revenue is really built in our current model. There's a little bit in Q4, but I will tell you the conversations are accelerating far faster than even I thought.

So, no, none of that revenue is in there. And in terms of scope of that is... The size of revenue of contracts vary. So kind of the rule of thumb that I've used over the years in doing, because even at Source, we had four on-site programming centers for clients. We typically minimal, the minimum part of annual volumes, usually around a million to one five. From there, that's a machine or two. You typically look at a big contract would be five, 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.

So those deals can get big quickly. And, you know, if you look at 10 million plus parts and an average programming price of, you know, anywhere between, you know, 9 and 14, 15 cents, and that does not include security provisioning, that's pretty good revenue. And obviously there is a managed service fee in there for things like sockets and maintenance and software, so you add that into the total equation. And then multiyear contracts. These will be three-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, Security provisioning, and I know DATA went through this with Centrix for many, many years.

The CRA Act, which is the Cyber Resilience Act, which is coming out from the EU, becomes mandatory September of 2027. So we're starting to see security provisioning start to become more of an important thing to get taken care of going into 2027. So we are in discussions to have some definitive strategic relationships in that area with both semi-houses and contract manufacturers. I just want to, because that was a question Dave kind of talked about a little bit, I wanted to get back and get that answered. But it's important for everybody because 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.

So we've got some opportunities to really dislodge some competitors as well.

I'll turn that over to Charlie.

So we are 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. But I think we are very confident about the ability to raise this, to secure the rest of the financing.

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

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

Thank you. Thank you.

Yeah, sure. I mean, they're in a couple of different markets that are complementary to ours. I wouldn't say they're a direct competitor, Bob. I've talked about buying other programs. And there are 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. I would say not competitive directly, but the other attributes of this business is that, as you know, we have been so bolted on to automotive. One of the other attributes of this business is their various different domains that they have. Less than 10% of their business is in automotive, so they do service a lot of semiconductor companies, which we can latch on to those relationships and expand our technology into those companies.

Military, Defense, and Arrow, kind of a hot spot, would like to get there as well. So when you think about the domain barriers that are broken down right away because the customer relationships are there to leverage are pretty significant. And so, you know, we both benefit from some of that. I would say on our side, you know, there's obviously when you think through and 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 going to help you execute all this, right? So, you know, I've been planning that for probably at least the last three, four, 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. So, there's only so much, Bob, I can share right now, but stay tuned. I think you'll get a much clearer picture post-close.

Yes. No problem. Thanks, Bob.

All right. Well, I want to thank everybody for the time today. It was, you know, this is an exciting time in Data Rose history. You know, I can tell you the team, you know, there have been people here, and thank you, Operator. The team, you know, we've got members here that have been for 20, 25, 35 years, and 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, a year ago. I don't see them going anywhere. They are really excited about where we're going. And these are key, key contributors that have been with this company for a very long time.

And they're like, this is something that we've been looking forward to for over a decade. So the energy here and just utilizing the new tools and, you know, we've done, We've really started to really work on graduating from within. If you want to 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. This is where the real work begins, although it feels like the last few 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. I 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. And it's really how you handle the people during that. And when I look at acquisitions and M&A, culture is a huge part of that, if not number one. But on top of that is being able to bring stakes and weaknesses together that complement each other, Which, at least in my experience, accelerates growth. So, 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.