Q3 2025 One Stop Systems Inc Earnings Call
Speaker #3: Good day and welcome to the One Stop Systems , Inc. . Third quarter 2025 Earnings Conference Call . At this time , all participants are in a listen only mode .
Speaker #3: Later , you will have the opportunity to ask questions during the question and answer session . As a reminder , this call is being recorded .
Speaker #3: As part of the discussion today . The representatives from OSS will be making certain forward looking statements regarding the company's future financial and operating results , including those relating to revenue growth as well as business plans , bookings , the company's multiyear strategy , business objectives and expectations .
Speaker #3: These statements are based on the company's current beliefs and expectations and should not be regarded as a representation by OSS that any of its plans or expectations will be achieved .
Speaker #3: Please be advised that these forward looking statements are covered under the Safe harbor provisions of the Private Securities Litigation Reform Act of 1995 , and that OSS desires to avail itself of the protections of the safe harbor for these statements .
Speaker #3: Also , please be advised that the actual results could differ materially from those stated or implied by the forward looking statements due to certain risks and uncertainties , including those described in the company's most recent annual Report on Form ten K .
Speaker #3: Subsequent quarterly reports on Form 10-q and recent press releases . Please read these reports and other future filings that OSS will make with the SEC , OSS disclaims any duty to update or revise its forward looking statements , except as required by applicable law .
Speaker #3: It is now my pleasure to turn the conference over to OSS president and CEO , Mr. Mike Knowles . Please go ahead , sir .
Speaker #4: Thank you Andrew . Good morning everyone , and thank you for joining today's call . OSS delivered a strong third quarter with significant consolidated revenue growth , higher gross margin and positive EBITDA and net income .
Speaker #4: Our third quarter and year to date performance underscore the solid foundation we have built as we capitalize on increasing demand from both defense and commercial customers for our rugged enterprise class compute solutions .
Speaker #4: Since implementing several strategic actions in 2023 and 2024 to reposition OSS for growth , we have seen continual improvements in our financial and operating results .
Speaker #4: These actions included strengthening our leadership team with proven defense industry executives , launching a multi-year strategic plan , rebuilding our go to market approach , expanding our sales pipeline , and driving higher gross margins .
Speaker #4: As a result , we have experienced positive bookings momentum over the past 12 months , translating into increased sales and positive operating leverage .
Speaker #4: I'm extremely proud of what our teams have accomplished and believe we're well positioned for continued growth and strong profitability in the remainder of 2025 and into 2026 .
Speaker #4: We continue to pursue strategic growth opportunities that leverage our high performance edge compute solutions to meet the growing demands of AI , machine learning , autonomy and sensor fusion at the edge .
Speaker #4: Our pipeline is expanding across leading defense organizations and advanced commercial enterprises that seek trusted , proven partners like OSS . On a trailing 12 month basis , our OSS segment had a book to bill ratio of 1.4 .
Speaker #4: After a historic level of bookings in the second quarter . Third quarter trends reflected expected quarter to quarter variability . Our growing pipeline and customer engagement activities remain strong across both defense and commercial markets .
Speaker #4: Our second quarter performance also reflects our continued focus on fulfilling recent awards , investing in next generation product development , and advancing new program opportunities that are expected to contribute to positive bookings growth in 2026 and 2027 .
Speaker #4: Overall , we are tracking ahead of our plan and development milestones , which gives us confidence in our long term growth trajectory . During the third quarter , we continued to support an increase our exposure on the PA Poseidon reconnaissance aircraft .
Speaker #4: To date , we have recognized lifetime contracted revenue over $50 million on the PA platform . In addition , we had previously announced a five year sole source supply agreement and a five year extension support , which involves equipping the PA aircraft and ground based stations with high capacity flash storage systems , spare flash storage canisters , and related support services .
Speaker #4: We expect continued orders from both the US Navy and our Defense Prime customer into 2026 . Another highlight is our growing relationship with the leading medical imaging OEM .
Speaker #4: Underscoring the growing relevance of our compute and storage solutions in healthcare , we believe there are opportunities to expand our presence with this customer beyond the current five year expected program value of over $25 million .
Speaker #4: Additional booking highlights include the September announcement of an initial $500,000 contract with Safran Federal Systems , with additional orders expected totaling over $3 million .
Speaker #4: While smaller in size , this award establishes a new relationship with one of the world's leading high technology defense contractors , and we see meaningful opportunity to expand this partnership over time .
Speaker #4: In October, we announced an initial $1.5 million order from a Canadian-based integrator of passenger cabin systems for the commercial aerospace industry.
Speaker #4: We expect this platform to contribute approximately $6 million in total revenue over the next three years. This award highlights the growing demand for high-performance compute in the commercial aerospace sector, an increasingly important component of our commercial market strategy.
Speaker #4: Across our pipeline , demand remains strong , supported by growing interest for our enterprise class compute solutions . While the ongoing government shutdown may impact the timing of near-term bookings , we view this as a timing issue , not a demand issue .
Speaker #4: Since OSS remains the sole source provider on affected platforms . As a result , we expect defense related bookings to improve as conditions normalize , though timing may remain uncertain .
Speaker #4: We also continue to see signs of stabilization , stabilization in our European markets that are served by our brezner operating unit . Recent bookings and revenue within our Brezner segment have been in line with our targets , and president remains on track to achieve higher sales and profitability for 2025 as compared to last year's results .
Speaker #4: Looking ahead , we believe OSS is uniquely positioned to capitalize on multi-year growth opportunities driven by accelerating adoption of artificial intelligence , machine learning , autonomy and sensor fusion at the edge .
Speaker #4: As these requirements become increasingly central to defense and commercial innovation , customers are turning to trusted partners like OSS with proven expertise in rugged enterprise class compute solutions .
Speaker #4: In support of this . We increased R&D investments in 2025 to capitalize on emerging opportunities . We see developing within our markets . Our high wattage , high density expansion products such as Ponto are currently under evaluation , evaluation with several potential commercial customers .
Speaker #4: As we focus on delivering high density , high wattage GPU and AI accelerators , solutions that address the growing need for performance intensive compute and data rich environments .
Speaker #4: We're also encouraged by recent traction in commercial aerospace , highlighted by our recent award , which underscores how OSS technology is extending into new regulated markets where we're reliability and compute performance are critical .
Speaker #4: Looking ahead , we expect to further broaden our commercial product lineup with the planned launch of two new Gen six systems in November , designed to bring even greater processing capability and efficiency to our customers .
Speaker #4: Together , these innovative initiatives demonstrate how we are executing on our strategy to leverage our rugged enterprise class engineering heritage into fast growing commercial segments driven by AI and data centric workloads .
Speaker #4: We continue to execute against a growing pipeline in both commercial and defense markets . We recently attended the Association of the US Army , or AUSA conference in Washington , DC , and introduced a newly developed portfolio of products that leverage the advanced compute and low latency advantages of commercial data centers .
Speaker #4: In addition , we showcased our wide array of scalable AIML sensor fusion and autonomy compute solutions , delivering leading compute and latency capability and advantaged size , weight , power , and cost , or swap C .
Speaker #4: These solutions generated strong interest and multiple new engagements across Army and OEM programs . We also recently attended the Nvidia GTC conference in Washington , DC , where we highlighted Osce's expanding capabilities in high performance GPU and AI accelerator expansion system .
Speaker #4: Our participation at GTC reinforced Osce's growing presence within the AI compute ecosystem , where our technology complements leading platforms from Nvidia , Broadcom and Esteria Labs .
Speaker #4: The conference provided valuable engagement with commercial and government customers exploring next generation architectures for AI , machine learning and data analytics at the edge and further validated the role OSS can play in enabling high bandwidth , low latency compute for commercial applications .
Speaker #4: The visibility and relationships we're developing through these engagements are creating meaningful opportunities to expand our role on next generation platforms . For example , our delivery of a rugged compute solution for combat vehicles for the US Army remains under test and evaluation , which is expected to continue for the remainder of the year .
Speaker #4: We are encouraged by the growing number of multiyear platforms we now support, adding to our portfolio. That includes the likes of the P-8 for the U.S. Navy, the medical imaging platform, and the Autonomous Maritime Program for leading defense prime in Asia.
Speaker #4: Pursuing these types of recurring programmatic opportunities remain central to our long term strategy to accelerate our growth initiatives , we strengthened our balance sheet after quarter end through a registered direct offering , raising approximately $12.5 million in gross proceeds .
Speaker #4: This enhanced financial position, combined with improving fundamentals, provides the flexibility to fund operations, pursue strategic opportunities, and capitalize on expanding global demand.
Speaker #4: Looking ahead , our solid execution and year to date performance give us the confidence to raise our full year 2025 consolidated revenue guidance range from $59 million to $61 million , to $63 million to $65 million .
Speaker #4: While reaffirming our expectation to achieve positive annual EBITDA . I'm pleased with how 2025 is shaping up . Our turnaround strategies are progressing faster than expected , reflecting strong demand and operational execution .
Speaker #4: As we look ahead , we remain focused on accelerating growth , expanding profitability and creating long term value for our shareholders . Finally , I want to thank our entire team for their dedication , innovation and relentless focus on delivering results for our customers and shareholders .
Speaker #4: So with this overview , I'd like to now turn the call over to Dan . Dan .
Speaker #5: Thank you . Mike , and good morning to everyone on today's call . Our Q3 results reflect a number of important financial milestones .
Speaker #5: One , we achieved robust top line growth , increasing revenue year over year by 36.9% at a consolidated level and by 43.4% for the OSS segment .
Speaker #5: This growth reflects strong demand for our products as well as our ability to execute on that demand to meet our customers needs . Two we achieved positive quarterly EBITDA in both of our operating segments and positive GAAP net income at a consolidated level .
Speaker #5: These results were supported by strong gross margins , reflecting the value that customers place on our differentiated technology . After the quarter closed , we also strengthened our balance sheet by securing $12.5 million of gross proceeds through a registered direct offering of common stock .
Speaker #5: This offering strengthens our balance sheet , provides flexibility around working capital to support our growth and positions us to pursue a disciplined M&A strategy in 2026 and beyond .
Speaker #5: We believe the company is in a strong position and with a solid backlog of orders . We are on track to achieve our increased full year guidance and to execute on our robust growth and profitability objectives .
Speaker #5: Now for a quick overview of Q3 2020 . Five financial performance . For the third quarter , we reported consolidated revenue of $18.8 million compared to 13.7 million last year and 14.1 million for the 2025 second quarter .
Speaker #5: The 36.9% year over year increase in consolidated revenue was a result of approximately 2.8 million of higher office segment revenue and 2.3 million of higher business segment revenue .
Speaker #5: Third quarter sales were above our expectations , and we expect continued strength in both revenue and profitability . In the fourth quarter of 2025 .
Speaker #5: Consolidated gross margin in the third quarter was 35.7% . As a reminder , gross margin in the prior year quarter included a 6.1 million inventory charge in our OSS segment , excluding the inventory charge , gross margin for the 2024 third quarter was 32% on a segment basis , gross margin for the company's OSS segment improved to 45.6% compared to gross margin .
Speaker #5: Adjusted for the inventory charge of 43.2% for the same period a year ago . The 2.4 percentage point increase was primarily due to a more profitable mix of products shipped to the tier .
Speaker #5: Year to date , OSS segment gross margin has benefited from both operational efficiency and a favorable product mix . We continue to expect some level of variability in gross margins quarter to quarter , based on absorption , product mix and program lifecycle .
Speaker #5: On a sustained basis . We continue to target OSS segment margins in the mid 30s to low to mid 40s . In the fourth quarter of 2025 .
Speaker #5: We anticipate OSS segment margins in the upper end of that range . The company's Brezner segment had gross margin , percentage of 26% in the third quarter .
Speaker #5: The 400 basis point increase from the same period last year was primarily due to a more profitable mix of products shipped in the quarter .
Speaker #5: Total third quarter operating expenses increased 22% to 6.1 million . This increase was predominantly attributable to higher R&D expenditures , reflecting targeted investment in new product development .
Speaker #5: For the third quarter , the company reported GAAP net income of 0.3 million , or $0.01 per diluted share , compared to a net loss of 6.8 million , or $0.32 per share , in the prior quarter .
Speaker #5: Prior year quarter , the company reported non-GAAP net income of 0.7 million , or $0.03 per share , compared to a non-GAAP net loss of $6.4 million , or $0.30 per share , in the prior year quarter .
Speaker #5: Adjusted EBITDA , a non-GAAP metric , was 1.2 million compared to an adjusted EBITDA loss of 6 million in the prior year . Third quarter .
Speaker #5: Turning to the balance sheet . As of September 30th , 2025 , OSS had total cash and short term investments of 6.5 million .
Speaker #5: 1 million of borrowings outstanding on our $2 million revolving line of credit and a consolidated balance outstanding on our term loans of 1.2 million .
Speaker #5: After the third quarter ended on October 1st , 2025 , OSS completed a registered direct offering with participation from certain new and existing institutional investors , resulting in gross proceeds of approximately $12.5 million before deducting placement agent commissions and other offering expenses for the nine months ended September 30th , 2025 .
Speaker #5: OSS used $4.9 million in cash from operating activities , compared to operating cash flow of 2.1 million for the nine months ended September 30th , 2020 .
Speaker #5: For the change from prior year period was primarily due to the timing of working capital , particularly receivables associated with our revenue ramp .
Speaker #5: Partially offset by higher net income . As Mike mentioned , the company has increased its 2025 full year financial guidance due to stronger than expected bookings over the trailing 12 months .
Speaker #5: We now anticipate consolidated revenue of 63 million to 65 million for the full year 2025 , compared to prior guidance of 59 to 61 million .
Speaker #5: We expect OSS segment revenue in the range of 30 million to 32 million , representing a 22% to 30% increase in annual OSS segment revenue .
Speaker #5: And we expect the company to achieve positive EBITDA at a consolidated level as we move through the final quarter of the year . We remain focused on disciplined execution , including managing our supply chain and achieving our planned production ramp .
Speaker #5: We also remain focused on continuing to drive growth by investing in our technology and securing new platform opportunities that can provide sustained multiyear revenue streams .
Speaker #5: I look forward to updating you on our success. This completes our prepared remarks. Operator, please open the call to questions.
Speaker #3: Thank you . Ladies and gentlemen , we will now begin the question and answer session . Should you have a question , please press the star followed by the number one on your touch tone phone .
Speaker #3: You will hear a prompt that your hand has been raised should you wish to decline from the polling process , please press . The star followed by the number two .
Speaker #3: If you are using a speaker phone , please lift the handset before pressing any keys . One moment please . For your first question .
Speaker #3: Your first question is from Brian Kisslinger from Alliance Global Partners . Please go ahead .
Speaker #6: Great . Thanks so much and solid results . As we think about the uptick of revenue in the second half of the year .
Speaker #6: How should investors think about the seasonality going forward for core OS in light of the strong bookings execution , but also as we think about the government shutdown ?
Speaker #5: Yeah , I'll start with the with the seasonality . And then Mike can talk a little bit more about the government shutdown . So in general , we've seen this consistent pattern where we tend to see higher revenues in the second half of the year just based on timing of bookings .
Speaker #5: You know , as , as , as the government goes into into the holiday period , you tend to see a bit of a slowdown in , in bookings .
Speaker #5: And so just the timing of that tends to drive second quarter revenue or second half revenue higher than first half . We'd expect that to continue as we go into 2026 .
Speaker #5: Probably , you know , a somewhat moderated ramp compared to what we saw in 2025 , but still somewhat of a ramp as we go through the year .
Speaker #4: Yeah . Brian . And you know , we're with the kind of the strong bookings we've had this year . And as we close out the year , we'll expect to be starting next year with a little bit more backlog .
Speaker #4: So we think while we had a fairly decent size ramp this year , as Brian mentioned , or as Dan mentioned , we hopefully that that backlog and the way we'll prosecute , will will soften that .
Speaker #4: A bunch of that will be dependent on the government shutdown here. As we may have noted prior, we have everything in backlog.
Speaker #4: We need to achieve our guidance for for 2025 and the bookings that we are making now are , are , will further support that and or build into into backlog for next year .
Speaker #4: And the main bookings that are affected for us by the government shutdown are anticipated sole source awards. So we won't be losing opportunity.
Speaker #4: We'll just we'll be affected , we'll be affected by time .
Speaker #6: Got it . And then maybe you can update us on the data center market opportunity and the investments you're making . I mean , that market has seen unprecedented demand in the last few months .
Speaker #6: And then maybe also at a high level touch on the situational awareness technology procurement evaluation by the Army . I don't know if that's been able to progress given the government shutdown , but that was something obviously of importance to the company .
Speaker #4: Yeah , great . Brian , thanks . Yeah . On the on the data center side , as we had noted prior and in the remarks here , you know , we launched Ponto , which is a bigger version of our standard of for you .
Speaker #4: GPU expansion solution. That product is under evaluation by a couple of customers, specifically in these kinds of data center markets where they're looking for this opportunity for big GPU and compute expansion.
Speaker #4: So we're we've got product in that market . We've got outreach , we've got interest . We have people testing . So we'll look through the end of this year and into the first half of next year to likely and hopefully see that transition into into awards .
Speaker #4: And in backlog . And then , as we noted in this call , we'll be augmenting that with bringing forward some of the new PCIe Gen six and some of the other new technologies that will be launching into those data center architectures .
Speaker #4: So we'll be we'll be well positioned with multiple products across that to to leverage into that market . On the on the Army situation awareness side , that that testing continues on , as you noted .
Speaker #4: Yes . Anything that had been going on now has stalled as a result of the government shutdown . So we'll be losing time on on their evaluation as they went through .
Speaker #4: Things have been progressing and tracking well . The Army is also seeing how they could use our distributed compute system for that solution in multiple other ways .
Speaker #4: So it's created other opportunities that we will we will look to prosecute coming into 2026 and beyond to leverage our position in the technology across those .
Speaker #4: So we'll we'll look for hopefully more news on that in the in the coming year and where that could progress to .
Speaker #6: Great . I got some more questions , but I'll get back into the queue and and ask some more .
Speaker #7: After .
Speaker #4: All right . Thank you Brian .
Speaker #5: Thanks , Brian .
Speaker #3: Your next question is from Eric Martinuzzi from Lake Street . Please go ahead .
Speaker #7: Yeah . It was good to see the OSS segment come back . So strong there . There was a terrific recovery . Obviously that was something that you guys have been investors have been patiently waiting for .
Speaker #7: But actually I wanted to ask about Brezner . I that was outperformance versus at least versus what I was estimating for the , the third quarter .
Speaker #7: Can you tell us what was behind that ? And then if if were there any , you know , pull forwards out of Q4 or maybe point us in a direction for where we expect the final quarter of the year for Brezner ?
Speaker #5: Yeah , Brezner has been performing strong . We've seen some nice recovery in their in their industrial end markets . And , you know , expect continued strength as we go through the year .
Speaker #5: FX has been a tailwind to Brezner segment revenue in the third quarter . You know they grew by about 2.3 million . About 600 K of that was due to FX .
Speaker #5: The other 1.7 million was growth on constant currency basis . Just really based on strength in their end markets . And some of the larger product or projects that they've been executing on .
Speaker #5: And so we continue to see Brezner performing well . And see strength as we close out the year and go into 26 .
Speaker #4: Yeah , Eric , I just add right , the , the the economy hasn't fully recovered across across the EU and Germany to the growth expectations they had at the start of the year .
Speaker #4: But but Brezner has been able to to find some , some , some strength in its markets to keep them on , on our targets and on our plans for the year .
Speaker #4: And they've seen some pockets of , of people generating some bigger orders , which has which has helped keep them on , on plan through the year .
Speaker #7: Okay . Well , let me just sequentially then , is it is your expectation that we're in line to to better with the final quarter of the year or .
Speaker #7: Yeah , I .
Speaker #5: Would model . So there's a few there's a few shipments in Brezner that are going to be right on the cusp between this year and next year .
Speaker #5: So where those fall will will kind of impact Q4 . But as I would model Q4 as being basically flat to Q3 for Brezner .
Speaker #5: .
Speaker #7: Gotcha . Okay . And then you talked about the registered direct offering that closed on October 1st , and the $12.5 million of gross cash raised .
Speaker #7: Just curious to know , how are we at least here in the near term , how are we deploying the cash ? Are you sitting on it ?
Speaker #7: Are you investing it in inventory , sales channel investments ? What can you tell us ?
Speaker #5: Yeah , absolutely . So the the cash rate did a couple of things for us . One , it supported our working capital ramp as we're going through this growth phase .
Speaker #5: So you can see that in our results this quarter , particularly in AR . So we have I think good visibility towards towards collecting that AR this year .
Speaker #5: I expect that as we go into Q4, we'll see positive cash flow. We'll have a number of shipments that will be going out between the end of November and the beginning of December.
Speaker #5: So where those shipments fall within that range will will somewhat impact where we where cash flow is for Q4 . But I do expect that it'll be positive .
Speaker #5: our
Speaker #5: And then in terms of the cash rate. So, as we support the working capital ramp, we're using it for that.
Speaker #5: But then , you know , companies generating positive EBITDA will be generating positive cash flow . So then we look to redeploy that that cash raise towards towards a disciplined M&A strategy as we go into 2026 .
Speaker #7: Thanks for taking my questions .
Speaker #4: Thanks , Eric .
Speaker #3: The next question is from Scott Searle from Roth Capital . Please go ahead .
Speaker #8: Hey . Good morning . Thanks for taking my questions . Congrats on the quarter , guys . Hey , Mike , maybe just to get some clarifications on the government shutdown .
Speaker #8: One , understand a little bit better about what's what's still operating and what isn't . It sounds like
Speaker #8: some larger sole source opportunities might just be delayed from a timing standpoint , but just kind of wondering , you know , what you're able to do in concert with with government entities at the current time .
Speaker #8: And I think given the backlog , you've talked about in the past , you felt pretty good for the next six months or so .
Speaker #8: I'm wondering if that's still holds and when the shutdown becomes a little bit more concerning from you as you start to look into 26 .
Speaker #4: Yeah . Thanks , guys , for your question . So what we're seeing today generally is , you know , major organizations are shut down and really not not responding .
Speaker #4: So any any contract awards or deliveries we need to make , if the government is using a third party services independent company , we're still able to operate with them .
Speaker #4: And so we still have some of that ongoing . We still can make deliveries to the customers and the government is set up to to pay for delivery on stuff that's under contract .
Speaker #4: So deliveries we have planned for this quarter through defense primes and or directly to the end services . We will be able to ship and deliver those .
Speaker #4: And we should be able to get payment for those under under standard payment timings . As we . So the biggest effect for us really at the end of this year is just planned awards .
Speaker #4: We were intended to get . So we we'll have some some backlog to start in the first half of next year . So if the with that number will be fairly high , fairly higher .
Speaker #4: If we can get the government bookings in when the government reopens and but as long as realistically as long as those bookings get in here before the end of Q2 next year , we still have plenty of time and runway to convert that , convert that to revenue .
Speaker #4: So we've got some runway to watch and plan where that goes .
Speaker #8: Great . That good , great clarification really helps to see that we got visibility . Then through the first half . Looking to the fourth quarter and the guidance , it really implies though that the core OS is either flat to up 2 million .
Speaker #8: So you're starting to get to to new highs in terms of the business , which I guess brings sustained EBITDA profitability with it .
Speaker #8: So I guess as we're looking into 2026 now , is that sustainable ? And are you thinking about the core OS business now being EBITDA positive for the year , which is , you know , I think well ahead of prior expectations , just want some clarification on the early thoughts there .
Speaker #4: Yeah , I'll let Dan follow up on on it too . But yeah , in general as as we've kind of highlighted , we , we believe based on our pipeline and everything , we've been looking at that the core OS segment has this opportunity to grow at 20 to 30% a year .
Speaker #4: And so the the bookings this year , the pipeline for next year , how we've been performing still gives us confidence that we should see growth into 2026 for the OSS segment in that range .
Speaker #4: Clearly , that opportunity would give us opportunity to get OSS into into the positive EBITDA range next year . That actually would be accelerating our plans a little bit .
Speaker #4: But given where we are , how we're performing , the opportunity , I think it would be it would be our intent that if if bookings can play through and the timing can work out correctly would be to try to accelerate that plan and , and work into that , because we are now kind of at that , we're kind of at that nexus point where the revenue inside of OSS segment would , would support that kind of outcome .
Speaker #4: Dan , anything .
Speaker #5: Yeah . No , the only thing I'd add , you know , just kind of reiterating that high level parameters for 2026 . Revenue growth , that 20 to 30% that we've that we've been targeting gross margins for the OSS segment , we continue to to see it in that mid 30s to low to mid 40s range for the segment affects we would see as being roughly flattish .
Speaker #5: But we did make some one time investments to accelerate our R&D in 25 . So I think you'll see some moderation or normalization of R&D expenditures as we go into 2026 .
Speaker #5: And then Brezner segment , you know , we model growth in the range of 5% a year . And stable gross margins .
Speaker #8: Gotcha . And lastly , if I could , Mike , just kind of looking at the opportunity pipeline certainly been a lot of government military opportunities , but commercial as well .
Speaker #8: Now kind of given the slowdown with the current government infrastructure , are some more of those commercial opportunities kind of accelerating to the forefront ?
Speaker #8: I think you referenced some in-flight entertainment opportunities and commercial aviation , but are there some bigger things that we should be thinking about in the 2026 timeframe ?
Speaker #8: On the commercial side? Thanks.
Speaker #4: Yeah , I think consistent with what we what we said in the in the earnings call here was we're seeing we're seeing that movement .
Speaker #4: We've got some product placement . Right . That was all about trying to continue to advance the commercial side of side of the strategy .
Speaker #4: You know , we're probably a little bit slow to where we thought some commercial opportunity would have , would have showed up . And so we're thinking that hopefully that start to see that coming to fruition in 2026 , where we thought we might have seen it closer to the back end of 2025 .
Speaker #4: But we're positioned well . I think now with the products we've got contacts , engagements across a number of fronts . As we mentioned , not only in and around data centers , but around medical imaging and some of the work we were doing with commercial aerospace .
Speaker #4: So we're starting to see some of that , some of that expansion . And as long as the economy and the investments in those markets continue to grow , I think we'll start we'll continue to see us be able to operate in those markets .
Speaker #8: Great . Thanks so much .
Speaker #4: All right . Thank you Scott .
Speaker #5: Thank you .
Speaker #3: Ladies and gentlemen , as a reminder , should you have any questions , please press the star key followed by the number one .
Speaker #3: We will pause a moment for further questions . There are no further questions at this time . Please proceed with closing remarks .
Speaker #4: Andrew , that completes our remarks for today . We appreciate everybody's support of the company and the questions . You can end the conference call .
Speaker #3: Ladies and gentlemen , this concludes our conference call for today . We thank you for participating and ask that you please disconnect your lines .