Data I/O (DAIO) Q4 2025 earnings call transcript

Thank you, Operator, and welcome to the DATA I. O. CORP's fourth quarter 2025 financial results conference call. With me today are the company's president and CEO, Bill Wentworth, and chief financial officer, I will now turn the call over to management for the DATA I. I will now turn the call over to management, and the 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 opportunities. 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 market close. 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, June, very much. Thank you for everybody dialing into the call. And I want to start off, Obviously, this is a Q4 earnings call, but obviously there's a lot that transpired over 2025. It was certainly a little more difficult of a quarter than we planned. You know, there were a lot of things and headwinds that still continue with tariffs, but I want to assure everyone that that did not waver us from the continuation of our transformation. You have to get through these tough times, and you can't stop the transformation that this company needed. You know, DATA IO had some transformation work that was fairly heavy.

We did invest a lot of money into the business, specifically our platform, and I'm pretty proud of the team, very proud of the team, and how we ended the year and how we've teed up this year, which I'll talk a little bit about shortly. The setup. Our mission throughout 25 was to transform DATA IO for long-term growth. That plan proving to be approximately one year ahead of schedule. I have been through, personally, quite a few transformations in my own business and with other companies, so this is something I am fairly good at measuring. I am very confident that we are ahead of schedule. There are things that could even speed that up throughout 26. We executed against six strategic priorities, modernizing the go-to-market, which you will hear about a little bit later.

Investing in our core platform, that was number one. Then we started that early in 25. Strengthening customer relationships, we have really, you know, got out in front of customers. Myself personally, probably really extended more of our employees into talking customers, which is so important in order for transformation to really occur because our team needs to hear from all of our customers and suppliers in order for those transformations to really take hold and for everybody to get energized around those. Optimizing business operations, IT infrastructure, you know, we went through a fairly sizable cyber attack. We made it through that. I felt extremely well. We were up and running within 11 working days. So we found out a lot about our infrastructure too and some of those things that we needed to button up.

And that also continues as part of the transformation. We've made great strides there. Moving to the cloud, you know, that offers obviously additional security. Getting things off-prem into the cloud, moving data into more secure applications that are also in the cloud. And again, that continues. Improving operational processes and deploying AI company-wide. And you'll definitely hear more about that later in this conversation. Over the past 18 months, we have made deliberate changes to the board and executive suite to ensure that we have the right team in place. Boards, you know, we've had a board member, and the executive team obviously has been, you know, you have some tivots here and there. I think we for sure have the right team on the field to execute the plan this year and return DATA IO to revenue growth and cash flow neutral to positive throughout the year.

Again, transformations take time, and I've been through these, and they're not easy. I can tell you that the team has put in a ton of time. They've really stepped up and really have positioned DATA IO for a great 2026. Our new direction, we're expanding our adjustable market. DATA IO is shifting from our traditional programming CapEx market to servicing a broader data provisioning market, a significantly larger opportunity for the company. We are leveraging our platform to reach into two adjacent markets, programming services and programming ATESTS, with activity building for both. Yesterday, if you have seen the press release with IAR, this is one of the large – this is one of the – what we feel is going to be a significant opportunity this year and going forward.

I have been a big believer in partnerships ever since I have been in the business and been in this business in particular. It's really important. We're a small company. You can't just go it alone. And being able to forge a relationship and a really strong collaboration with IAR really combines their security expertise with our provisioning expertise to create a very comprehensive device support model for security provisioning in the industry. They have a pre, they have a significant ALGO library aligned with our ALGO library. We feel the solution is frictionless, fairly easy if, you know, and I won't get into the details of how complicated security provisioning can be, but it's very difficult. We presented at a few of their conferences, it's gone really well, and we have business opportunities that we're now talking through with them and our collective customers.

I would say, you know, the interesting opportunity I've had from shareholders and other meetings and podcasts, conversations around, well, hey, how does AI help DATA IO? Well, you know, I would say during the year and have, you've heard me make this comment many times, it doesn't really help us now. That has changed. If you remember back in the mid-'90s, the Internet boom, and obviously that went through its change, but it continued even through that pause, and it continued to grow our industry. AI with the build-out with the hypervisors, that continues and will continue. But what it's doing is these AI models are starting to really gain traction, and I'm sure we all see it in the news.

What this does is now create the need for the build-out of the edge AI, which is the edge of the network. You can't have autonomous cars and robotics and IOT devices that have a high level of technical capability without expanding the edge of the network. It's just not possible. We have had conversations with new customers this year already, which was not part of our revenue plan coming into the year, I have a lot of significant build-outs around this edge AI. This is something that, look, I've been in the technology industry for almost 40 years, and this build-out is something that I think is going to dwarf what the internet build-out was back in the late 90s.

I don't see this pausing because AI is changing things so fast. There's just, to keep up with it, I can see that edge of the network continuing to grow. So we're very excited about the setup, the tailwinds, the new drive and demand for semiconductors as we see things start to pick up across the board. I expect this to be a multi-year growth cycle and new revenue opportunities for DATA I. O. New and existing customers are confirming that Edge AI build-ups are real. Early customer alignment and interest validates our strategy and the framework for the company. As we enter 2026, we are poised to deliver organic revenue growth this year with very encouraging customer activity in Q4 and into 2026.

And now I'd like to hand the rest of the conversation to Charlie DeBoma, our CFO.

Thanks, Bill. And good afternoon, everyone. I'll take this time now to walk through our fourth quarter and full year financial results covering revenue and bookings, our revenue mix, margins, operating expenses, bottom line, and then also some balance sheet items. Net sales in fourth quarter were $4 million, down from $5.2 million in fourth quarter of 2024. For the full year, net sales were $21.5 million compared with $21.8 million in the prior year. Similarly, fourth quarter bookings were 3.1 million, down 25% from 4.1 million in the prior year period, while full year bookings were 18.6 million, down 17% from 22.5 million in 2024. Regionally, 2025 bookings and revenues were strongest for customers throughout Asia, as North America demand remained consistent with the prior year, but Europe declined.

Moving forward, as a global company headquartered in the Western Hemisphere, DATA I. O. is well positioned to support customers migrating manufacturing facilities to the Americas. In terms of mix for 2025, consumables and adapters and services represented 58% of total revenue for the year, providing a stable base of recurring revenue. As a result, deferred revenue rose to approximately $1.5 million on December 31, 2025, up from $1.4 million as of September 30 of the year. Capital equipment sales represented the remaining 42% of 2025 revenues. Demand for capital equipment continued to be negatively impacted by the realignment of technology spending with AI-related data center investments at the forefront. In particular, a reassessment of EV capacity and manufacturing impacted the company's largest end market, the automotive electronics sector.

Notably, sales to the automotive electronics sector represented 52% of 2025 bookings compared to 59% in 2024, while overall backlog as of December 31st was $2.3 million, down from $2.7 million at the end of September. All that said, as Bill mentioned, we've recently seen very positive indications of demand for our products as the build-out of Edge AI is beginning to ramp up. Gross margins as a percentage of sales was 43% in fourth quarter compared to 52.2% in the fourth quarter of 2024. Full-year gross margin was 49.3% for 2025 compared to 53.3% in the prior year. The decrease in gross margin reflects some mixed shifts as well as lower absorption of labor and overhead costs. Direct material costs remained relatively steady and consistent with prior periods as the company continued to actively mitigate the impacts of tariffs and other inflationary pressures.

Operating expenses for the fourth quarter were $4.2 million, which included approximately $312,000 in one-time The full-year-old operating expenses were $15.7 million, of which $1.4 million represented one-time expenses primarily related to the company's leadership transition, investments in the core programming platform, and information systems. Again, SEC filings and the remediation of the cybersecurity incident first identified on August 16, 2025. This compared to million in 2024 wherein there were no one operating expenses recorded Net loss for the fourth quarter was million or per share compared to a net loss of million or 13 cents per share in the fourth quarter of 2024 The full year net loss was $5 million, or $0.53 per share, compared to a net loss of $3.1 million, or $0.34 per share in 2024.

Adjusted EBITDA, which excludes equity compensation, was negative $2.5 million in the fourth quarter, compared to negative $1.1 million in the fourth quarter of 2024, Excluding one-time expenses of approximately $312,000 in the fourth quarter, adjusted EBITDA would have been at negative $1.9 million. For the full year, adjusted EBITDA was negative $3.9 million compared to negative $1.4 million in 2024. Excluding the one-time expenses of $1.4 million, full-year adjusted EBITDA for 2025 would have been negative $2.6 million. The company's balance sheet and liquidity remain solid. Cash at the end of the fourth quarter was $7.9 million, compared to $10.3 million on December 31, 2024. The decreased cash balance reflects one-time expenses, technology platform investments, and IT spending through the year, partially offset by reduced inventory levels and increased accounts payable.

Networking capital was $12.3 million on December 31, 2025, compared to $16.1 million on December 31, 2024. In addition to cash, inventories were reduced by about half a million dollars as the team implemented programs to become leaner and more efficient.

Finally, the company continues to have no debt on the balance sheet. Before wrapping up, and before we turn to questions, I'd like to provide a framing or framework for thinking about 2026, which is based solely on organic growth.

First, we are targeting organic growth for 2026 over 2025, supported by early demand signals we are seeing from edge AI infrastructure and continued strength in our recurring revenue base.

Second, we have a growing pipeline for entry into the programming services and programming test markets which represent meaningful opportunities to expand our addressable market. Third, as revenue increases, we expect improved absorption of labor and overhead costs which should drive improved gross margins relative to what we've experienced in 2025.

Fourth, on the expense side, we are targeting an additional $1 million in run rate reductions Beyond the benefit of previously implemented structural and operational cost improvements starting in early 2026. Fifth, AI itself is becoming deeply ingrained across all functional departments in the organization, driving efficiency and enabling us to do more with less.

Well, you know, Dave, thanks for the question. Great to hear from you. You know, semiconductor manufacturing coming back to the U. S. , I mean, it's great. It's great. Obviously, it creates a lot of jobs, which creates growth in other domains and things like that because of factories being built. I wouldn't say the semiconductor manufacturing coming back to the U. S. directly impacts us. What is impacting, again, as we talked about AI build-out? And that's not at the hypervisor level. This is the edge of the network, right, to be able to have all this automation that's coming our way that's going to be AI-driven and AI-enabled. What we're seeing though is, sure, there's some reassuring going on.

That's the other thing that we're seeing is not the semiconductor side, but just products being built and brought back to the Americas. You know, we're seeing things like, you know, factories kind of spinning up in activity that we really didn't think that would happen until second half of this year, starting early in the first half. You know, it's been a little slow out of the gate, but the conversations are definitely picking up. We've got a lot of conversations with quite a few clients and new logos that were not in part of our revenue plan, and they're very definitive about when their production is going to start, when they need systems. And, you know, I will say the plan that we've put in place, our strategy, we've been displaying to these customers, existing and new.

The comments are things like, you're exactly the supplier we're looking for. You're hitting all the areas that we provision data and need to provision data. And in the past, we were in one box. Now in the three box, we'll get there, obviously. That's part of the plan that we'll execute this year, inorganically and organically. But it's to be able to be in position to address the different areas of data provisioning. The great thing about this strategy is that we have the platform. It's not like we have to go out and buy new technology or make some other investment, which does create risk when you do M&A. We get to use exactly what we've been investing in last year.

Going into this year, we're just putting it in other areas of the data provisioning, like security. I hope that answers your question.

Yeah, absolutely. There are a huge evangelist of this, right? So I can tell you personally, I probably watch AI way too much on TV and not shows. I'm talking podcasts, you know, educating myself. You know, when I first became a board member, it was one of the things we created as one of the first couple meetings was getting AI to just search the technical documents that come from semiconductor companies. These would normally take the engineers three to five days to read through to get all the information that's important to load the table up to create an algorithm, as an example. That would take three to five days. Now, the Doc. AI that we created 18 months ago, almost two years now, it cost me the project, the POC, and to get it to work and function probably cost $120,000.

I can tell you today, if we did that same project today, it would cost about $100. That's how far AI has advanced. So, to give you an example, we are now creating a CICD process, and I know this might be over a few people's heads, So that stands for continuous improvement, continuous development. That's what you have in every software process. It's important to have that built into your DevOps and Agile. So what you do is when you're writing code, you automate all the functions and what it takes to write code and get software tested, and then more importantly, released. So for the first time, we have AI that we built in our process that actually released production code, This week, meaning very minimal human intervention.

That's how far it's come. We've mainly been using CLAWD. We're using it across every department, but we're creating teams around bug fixing and enhancements and then other teams to just do the new software that we have that's going to be coming out this year that's going to start to retire technical debt, which will further reduce our costs. I can tell you, David, the AI advancements are just amazing, and they are making a huge difference in our company and the ability to produce new products faster and get to market faster. But on top of it, I've done a lot of M&A in my career. I can tell you, looking at synergies, when you do M&A, you have your standard, hey, that's 10%, 20%.

You can carve out of the back office when you consolidate roles and jobs and things that overlap. AI brings a whole new component to that because you can look at the company and go, if they have not deployed AI, for example, the many places that they could that would advance the optimization of their business. So not only for what we're doing today, but also when we look at inorganic growth as well. I think it's going to accelerate that. It's going to greatly help us get our new ERP online far faster. I mean, the things we're doing now with AI, before we start the actual process of the transformation at ERP, is setting it up to make it.

I don't want to say easy for Charlie because he's heading the project, but I can tell you it's had a huge, it's filled some huge gaps that you would normally be concerned with in ERP implementations. Do you want to comment on that, Charlie?

Yeah, I mean, I could go on and on about AI. I won't take open objections as well as easy. But it's certainly, you know, the speed at which we're doing, you know, what are fairly time consuming tasks like mapping your old, you know, chart of accounts to the new chart of accounts, creating new chart of accounts, putting in new policies. The speed at which you can do that with assistance from AI, obviously overseen by people, making sure everything works, it's just accelerating and de-risking the process. I think it's probably the biggest impact on ERP is going to be the reduction in implementation costs as we go forward. It's just amazing how quickly we're getting the ball in play.

We have a current example. We just launched Salesforce Service Cloud two weeks ago. Right, actually soft launch was two weeks ago. Formal launch was last week, a week ahead of schedule, which is rare when you're implementing new software. This is Service Cloud is now what we use for taking ticket information from customers when they have a challenge with any of our equipment or software, and that's where they enter the tickets. That project originally was scoped at, and this is only eight months ago, was scoped at almost $250,000 with AI and with some other things that we did to maximize the process and make it easy. We did this for $100,000, and we were on time with the project.

And I can tell you after five days, typically, you'll hear a lot of issues with changes substantial as that. I just talked to the head of service at the parking lot before I went and ran an errand. I said, how's it going, Sam? He's like, five days in, we're good. Like, no noise, you know, no challenges. There haven't been any problems with the customers being able to answer tickets. I mean, and AI was a big part of that.

Yeah, I'm comfortable with it. Obviously, you know, we did drain some cash last year. That's sort of the inevitable outcome of making the investments and the transformation that we were undergoing. But we do see that there's a turning point through the course of the year here. We are very focused internally on controlling costs. We're making moves that we expect to be at least a million dollars of run rate savings, and that will happen through the early part of the year. So we'll realize a lot of that through the course of the year as well. So, you know, this is, I think, a very solid, you know, we're a debt-free company right now with decent cash on hand and in a good position to sort of execute on the strategy we have, both organic and inorganic.

And you know I really don have any it doesn certainly the balance sheet does not keep me up at night ERP transformations keep me up at night But I would say in that to add to that David is that going back to AI and I sorry to go back to this but the transformations do cost money right And the thing is that coming into the business over a year and a half ago, this company was very thinly threaded, whereas you were going to need additional resources to do transformations. I can tell you that AI has an impact in lowering the cost of the transformation, especially where we are today and moving forward. Then I don't have to hire a bunch of resources to continue the transformation because AI is picking up a lot of the slack and creating huge productivity increases, especially in engineering and software development.

You know, so it helps in all areas and will create new sources of revenue for us.

Yeah, absolutely, Mike, as we've talked about, that was certainly a big part of my charter and strategy. And this goes back to, you know, October of 2024 when we laid out the original strategy of the board to get into these other, you know, capabilities. We have – we are in – the DATA room was just opened up on one of our opportunities just two nights ago. We have another one being opened up most likely tomorrow. I got a call from a CEO in one of our strategic initiatives to meet at APEX to discuss a serious discussion around acquiring their business, and we have two other irons in the fire. So it is a quite active pipeline.

More in there, you know, probably a little more than I'd like, but at least it gives us choices, and that's great. Fully expect something to happen this year. Obviously, I wouldn't be having these conversations, but everything, again, It's directly tied to the strategy that we discussed. So very active, Mike, and there's more behind that once we get through a few of these that fit exactly where we want to fill and the holes we want to fill in our strategy. And then we will refill that pipeline and we will take another path to the next year.

Michael, let me just follow up on that. I do want to emphasize that both Bill and I are very disciplined acquirers. We have already walked from a couple of transactions that did not make sense once we got into looking at the financials. We are not going to be good stewards of the capital of the company. We have very exciting targets that we are looking at. We are enthusiastic about them, but we are also not in deal heat. And they're day one accretive. That's the important thing. I mean, really accretive in a couple cases.

And the important thing too, Mike, is I've done a fair share of M&A activity, and I can tell you what's really important. Look, there's things like roll-ups and things like that, you know, that the private equity firms have been doing from day one with their LBO funds. There's not a roll-up, you know. This M&A strategy is a place where you have a company that has vertical capabilities and a business that has horizontal. When you put those types of companies together, it accelerates growth because you're filling each other's gaps. And that's where M&A really makes sense, logical sense, but good financial sense as well.

Yeah, sure. I wouldn't say Q4. There were some conversations, a lot of it was tailing off like, we'll talk to you in Q1 and Q2. So those were good conversations, trying to get an idea. You're always trying to set up your next year, right? So you do a big push, trying to find out when budgets expire, what's left, what's the budget going to look like next year, what are your projects you're working on. You know, a good amount of our pipe this year that are opportunities that are in our pipeline revenue plan, 75% of them are new from last year. I mean, so we've had conversations throughout the year, and they're not all new logos, but just new activity, right?

Some new logos, which is a big push. It's a reason why we developed the manual product line. We've got reps ready to set up orders in Q1 for our manual systems, which we should start to see next month. And to get those manual systems both here in North America and China. I just came fresh off a trip from there. Met with one of our largest customers that's a big supplier to BYD. We have new products coming out. As a matter of fact, they brought up and asked for a solution. Just so happens we're already working on it. And so they offered to be our beta client. And so that's in our pipeline for the second half.

So a lot of exciting things across the board. But yeah, those conversations are starting now to turn into purchase orders as we get into the end of Q1 and definitely in the Q2. I mean, there's a lot of... and I think the tariff thing recently, pulling that back, there's some pent-up demand back there. I can't tell you how much. I think that will have an impact and give us a little bit of a tailwind, but we'll see. But outside of that, the build out of Edge AI, our existing customers, the solutions we're bringing them, the new plan that we have to be in all areas of data provisioning, the customers love the story.

Yeah, absolutely. It's a great question. It's a hard thing to measure, obviously. But in year one, there's always a significant amount of investment because you're going to have to maybe kill the old contracts or you're going to have to swizzle the management team. You're going to have a bunch of one-time costs. We're paying for things that weren't fixed in the past three, four, five years ago. We are still investing in 26, but the investment right now is directly in new products. It's directly in areas that are going to drive revenue. So there's no more. I would say the cleanup is pretty much completed. I would have thought it would have taken longer, but as I said, the tools we're using and the technology we're using to get there faster has paid huge dividends, and that's only going to accelerate.

So yes, I think we're probably, you know, typically transformations of this nature are two, two and a half years. We're a good six months ahead of schedule. Could be more, but easily six. So that's why we feel really comfortable with the revenue plan this year and get to where we've articulated.

Yeah, the great thing is we don't have to change anything. These are existing customers and some new logos that are large contract manufacturers that we call on globally. They're now, you know, obviously been tasked with new projects to build out, you know, the edge of the network, the products that fit that. There's one campus we went to, it's 80 acres, and next to them is Google, Verizon, a bunch of other companies that have created products that they're going to build for this build-up. This is a massive campus, massive. And, you know, that's, so it's really, we're not changing, you know, channels. I mean, we are handling more of this direct, George, I will tell you, that's one of the things that, you know, look, the reps we've had in the past, The good reps, and as reps said, quite frankly, are old and tired.

And so we've been revamping that slowly. We changed all their contracts this year. We're very specific in what they need to do, and if they don't, they know that we will go into these accounts direct. I want to make sure we control our revenue this year. And in the future, it's important. And there's no reason to, you know, look, nobody's going to sell your products with passion than the people that work for the company. It's just not. And so our team is very passionate about what they're doing. They're very knowledgeable. Most of them have been in this industry for quite some time, and that's the new blood we brought in. So people like Monty and Dean and others, you know, and again, we're looking to add more sales resources through this year.

So that's where the investment is going to be in revenue and growth. I hope I answered your question.

Well, you know, it's tough to say. I mean, obviously, you know, we're reducing and optimizing the business monthly, honestly, and there's some significant optimization that's coming. Some we've already done in Q1, which we'll talk about after Q1. Charlie, I don't know if you want to comment on that.

Yeah, obviously we can't give, we're not giving specific guidance on revenue, but we believe between the upside on revenue and the cost containment and the cost reductions we can implement, that we are pretty comfortably, and you can see what we did last year, you can sort of project from that and say, if the two lines are moving in opposite directions, Both in a positive way, there's a point at which they cross pretty close to where we were.

I think that's probably a reasonable type of question. I think that's fair.

Oh, yeah, absolutely. Automotive will still remain a pretty strong market for us, obviously. Actually, some of the customers we talked to, I'll give an example, a large German automotive company, Tier 2, actually had told us of Productronica, this was in November. And, you know, they had said, we're not going to buy any CapEx for all of 2026. Well, we just presented to their larger team down in Mexico. And after we presented where we were going, they want us to actually present to their global tech council next month, because they were so impressed with the places we're taking our technology It solves a lot of problems that they've had on their board to figure out how to manage data provisioning.

Data provisioning, because there's so much content in cars and other products, it's a larger conversation nowadays. You know, it was still 52% of our bookings last year. So, you know, it still remains a strong market. The customer I was talking about for beta-ering our, one of our new solutions is an automotive client. And they're the provider, one of the largest providers to BYD, which is an E. V. company. So, no, none of that changes or stops. If anything, we're trying to bring new solutions to them, which we are, that will gain more market share for us, but also provide them solutions that they don't currently have today. So, kind of that expands the market. It's kind of a market expansion, you know, as we drive these new solutions.

So, no, and in the other case, you know, we're looking forward to that meeting, but the person who actually said that they weren't going to be buying any CapEx is actually on that council. So we're looking forward to that conversation.

Absolutely. I'm a big fan of partnerships, like real partnerships where both people win. And IAR, that took a year. These things do take time. The great thing about IAR is this was a company that was falling out of favor with DATA IO, And it actually started at an embedded conference in Nuremberg, Germany. And I'm with my team, and they're like, I'm walking towards their booth. I'm like, where are you going? I'm like, I'm walking over there. They're in security. A large company, we should partner with them. Like, you do know that is, you know, a company about secure things, and we've fallen out of favor with them. So I walk in, hey, I'm Bill Wentworth.

They're like, well, you know, they don't really like us. I said, they don't like you. They don't know me. So walk into the booth, right, completely oblivious, and start up a conversation. The first guy I run into actually worked at Arrow before he joined the company, and we knew all the same people. So it broke the ice right away. We had a conversation. That conversation led to this agreement. And look, people like Monty Reagan, our VP of sales, drove this relationship for the last year and ended in this result. They have a huge ALGO library. We have one. You combine those two with a frictionless solution, we will be the choice in security. I mean, I know that might be a bold statement, but their software development kit is one of the best in the industry, if not the.

But your point, too, can this lead to other relationships? Yes, because guess what? Their relationships are with semiconductor companies. So as our relationship grows, I'm sure we'll get opportunities with their relationships because as we've created this collaboration, the one thing I say in partnerships, look, we won't both always win, and it's okay, but I'd rather have a ton of at-bats than none at all. And so that's the type of real true collaboration partnership you want. And yes, David, we're going to look for more and more of those, absolutely. It's how this company will grow organically and take share.

I'll let Charlie take that when he's studying hard. Yeah.

I think it will sort of be through the course of the year, though not necessarily purely linear. Okay. I think it will come back a little bit faster than, again, it is tied to volumes, a big part of it at least. And there's a mix shift issue. So there's some of the new products that we're going to be selling, particularly in the back half of the year, higher margin, that will help, certainly. You know, again, we're not giving firm guidance, but I think that if you sort of look at historical levels, that's probably a reasonable starting point. And then mix will play a big part.

As we build more value in our software, one of the things that we've done and we'll be releasing, We will see probably a release next month of a piece of software that really brings a tremendous amount of value. We have been demoing it already with customers. This is the other thing that has gone really well with these customer visits. And they see the value, but what it is going to allow us to do is increase our attach rate on our software or on our equipment. And as you know, that is highly profitable revenue. I would say our attach rate is probably at 20%, 30%. We should be able to double that throughout the year. And that's a significant boost.

It will both increase the attach rate and the retention rate. So we're looking at boosting, not only helping the gross margin, but helping the overall margin profile of the company. And then having sort of a contractually repeated revenue source. Yeah, because a lot of times they would buy these, you know, interesting, and this is, you know, look, the programming industry, I know, has been in it for a very long time. And look, we take advantage of the rules that they didn't have in place. Like, we would get a software agreement and then we would use it on other machines, because they just weren't that sophisticated. And it's happening. There's a way to close that off, and it's one of the things that, look, we should not have a customer running our equipment without a software contract.

I want to get it to the point where none of them can, and they shouldn't be, honestly, because it's not good for their business. It induces risk, especially because one of the things we're going to build in our software stack is the ability to do things like have security built in, We recognize the legal handshakes between our equipment and their network. We don't know where that security breach could have came from. And these are things that are very important to IT departments, CIOs, chief security officers across the board. It's been something that's been ramping up over the last 12 to 18 months anyways. So as we build more value in our software stack, it will force them to have to have the machines under contract, Which, you know, it's one of our initiatives this year.

Yeah, it's a great question. It's a little bit of both, honestly. Geography, that to me is definitely strategic. We do have, obviously, a significant operation in China. It would be good to de-risk that a little bit in Asia, because Asia will continue to be a strong market. And it's a market, quite honestly, we're weaker against our competition. So my goal is to strengthen that, right, especially with our new products, but also with a footprint. So that's important. In the U. S. , certainly easy to do transactions in the U. S. So those are not only geography friendly, but also strategically friendly as well. So services is a very fragmented industry. I know I was in it for a long time.

It's as fragmented as ever. So there's opportunity there. And so we're going to take advantage of that.

Both Bill and I have experience doing international transactions as well as domestic. Obviously, there's complications that come with international, but there's also opportunities that come with international, because we are comfortable treading where other people might not want to walk.

Yes, yes it has. And so that software, we now can run both our manual engineering units and our automation units on the same software. There's still some cleanup to do, especially in the handler side of things, but we're probably three months away from cleaning that up, three to four. But as far as that integration, yeah, that unified platform is what we talk about a lot with customers, Because that platform, again, also will be used in services and at tests when we get there. So fully integrated, fully compliant, forward compatible with algorithms. You know, obviously we still got a, we do have a legacy product that we're going to start to migrate from. That also is a revenue opportunity in the next two to three years.

And starting this year, as we start to get customers to migrate to our Luminix platform. So that's the thing, you know, we're out talking to customers that have been with us for quite some time, talking about kind of where Flashcore is today, how long it's going to be along, and that we need to start migrating to WUMINEX. So that will also be a revenue boost for us over the next two years.

I know you wanted to take a look. Yeah, I mean, you know, there are alternative sources that we're exploring, and we're building some relations. I have some relationships, as is Bill, to look for non-equity sources of cash. You know, would there be, I'm not going to say that there wouldn't be any component of equity in the transaction, but I wouldn't expect it to, you know, I don't think we're looking at a wholly equity type of acquisition. And some of it depends on the scale. We're looking at a couple different things, different sizes. The size obviously plays some role in how much would be cashed. And how the deal is structured, too. We have a lot of different options on deal structure.

There are some that are very favorable to cash.

There's a couple different permutations, but I don't think you're going to look at us just issuing stock for a company. I don't think that's what you're going to be seeing.

Well, it is to have that flexibility. I mean, there's not many public companies that don't have some kind of shelf registration because it affords you flexibility if an opportunity that's sort of uniquely strong comes along. And as I said, I don't think that we're looking at not, you know, we may blend some equity component into some of these acquisitions, so we would need some flexibility to issue stock. But I don't, again, I don't think we're going to be 100% stock.

I'm saying there's no near-term, there's no present need or desire to tap into that shelf. No, no, no. We're not going to just get you to share it right now. That's not our plan.

Thank you, Aubrey. I really appreciate everybody jumping on the, people that jumped on the call, and really appreciate the questions. I can't tell you that's far better than reading a script, I get to talk from the heart and where we're going with the company. I'm very proud of this team. I'm really looking forward to this year. It was a tough, tough 2025. Those things are never easy. I can tell you that the lack of anxiety that's happening right now, granted, we still have a lot of work to do. That pace will not stop. If anything, I would expect the pace to up. The team is ready for it. We've had a lot of meetings over the last week or two, getting people prepared and the team prepared for what we're going to embark upon this year and into 27.

So thank you again, all of you, for your time. I'm always available for a conversation. Jordan knows that, so if you want any additional conversations, please read out to Jordan. Happy to talk about the business anytime.

Thank you, everyone, and have a great day.