Josh Nichols

Josh Nichols questioned the flat quarter-over-quarter performance of the iGaming business, asking how investors should model the dynamics between sequential growth and profitability for 2026, and which direction the company is leaning. He also asked if recent legislative changes, such as sweepstakes bans, have led to any easing of pressure on marketing or customer acquisition costs in the social casino segment, and what the expectation is for 2026.

Answer

Joseph Sigrist (CFO) clarified that iGaming spending decisions are made in real-time, driven by disciplined ROI measurements for player acquisition. He stated that the company will continue to spend to acquire players, with the level of increase determined by LTV algorithms and payback periods, rather than pulling back on spend. Regarding the social casino segment, Joseph Sigrist acknowledged the significant pressure on marketing costs from the rapid rise of sweepstakes. While he noted that acquisition costs generally don't decrease, the *rate of increase* in pressure has lessened to a certain extent following legislative actions.

Josh Nichols asked if recent legislative changes, such as sweepstakes bans in states like California, have led to any easing of pressure on marketing or customer acquisition costs in the social casino sector, and what the expectation is for 2026.

Answer

CFO Joseph Sigrist acknowledged that the rapid growth of sweepstakes previously put significant pressure on marketing costs. He indicated that this pressure has lessened to a certain extent due to the legislative actions, although he noted that player acquisition costs generally do not tend to decrease over time.

Josh Nichols of B. Riley Securities requested details on the Wow! Games acquisition, including its profitability profile and potential synergies like DTC and content sharing. He also asked about the organic social casino revenue trajectory for the second half of the year and the growth sustainability and profitability timeline for the Super Nation iGaming business.

Answer

CFO Joseph Sigrist confirmed synergy opportunities with Wow Games, such as implementing DTC and leveraging Double Down's royalty-free content. He also noted the flattening of social casino revenue decline. CEO In Keuk Kim added that Super Nation's growth is sustainable and accretive, with plans for new brands and geographic expansion to drive it toward double-digit profit margins at scale.

Josh Nichols asked for details on the SuperNation business, including whether its Q1 revenue represents a new sustainable base, the outlook for marketing spend, and the timeline for EBITDA profitability. He also questioned the expected rate of decline for the social casino business and the impact of sweepstakes competitors.

Answer

CFO Joseph A. Sigrist stated that due to strong returns, the company expects to maintain or increase marketing investment in SuperNation, which should continue to drive revenue growth from the new Q1 base. He confirmed the business is still on a path to scale towards EBITDA profitability. For the social casino segment, Sigrist acknowledged the tough Q1 comp and expects comparisons to ease in the second half of the year, though growth remains a challenge. He theorized that rising user acquisition costs are likely impacted by competition from sweepstakes apps for advertising inventory.

Josh Nichols inquired about the expected trajectory of gross margins for the remainder of the year, specifically if they would continue to tick up. He also sought more granularity on the factors that could lead to the higher versus lower end of the second-half growth guidance range.

Answer

CFO Jamie Loch indicated that gross margins are expected to continue expanding, typically by 10-15 basis points sequentially, as Annual Recurring Revenue (ARR) grows as a percentage of revenue, with product mix being a potential variable. President and CEO Ron Konezny outlined several puts and takes for the guidance range, including strengths in certain verticals, market chaos (tariffs, commodity prices), and memory challenges due to AI expansion. Upsides include Jolt and Particle acquisitions, new data center customers, and strong performance from the cellular router segment, with a more detailed update expected after FQ2.

Josh Nichols inquired about the directional expectations for gross margins for the remainder of the fiscal year, given the continued upward trend. He also sought more granularity on the factors that could lead to the higher versus lower end of the top-line growth guidance range for the fiscal second half.

Answer

Jamie Loch, CFO, indicated an expectation for continued gross margin expansion, typically 10-15 basis points sequentially, as annualized recurring revenue (ARR) grows in pace with revenue, with product mix being a potential short-term variability factor. Ron Konezny, President and CEO, outlined both strengths in certain verticals and risks such as tariffs, commodity prices, and memory challenges due to AI expansion. He also cited upsides from the Jolt and Particle acquisitions, growth in data center customers, and the cellular router segment, noting that a more detailed update would follow FQ2.

Josh Nichols of B. Riley Securities asked for an update on customer ordering patterns and any end markets showing particular strength or weakness. He also followed up on ARR growth, asking about current software attach rates and how they have evolved.

Answer

President and CEO Ronald Konezny responded that ordering patterns have stabilized and modestly improved. He highlighted strength in data centers, medical devices, remote machine connectivity, and utilities. On the follow-up, Konezny stated that attach rates on key products now exceed 50% and are trending higher, with new solution packages for Opengear expected to further boost this metric.

Josh Nichols of B. Riley Securities asked about the potential for gross margin expansion beyond 60% given strong ARR growth, the outlook for the seasonally slower first quarter, and the company's preparedness for potential tariff changes.

Answer

President and CEO Ronald Konezny affirmed that the 60%+ gross margin level is sustainable, driven by the increasing mix of high-margin ARR. Regarding Q1, he noted market recovery is unclear and the company is taking a pragmatic approach. On tariffs, Konezny detailed a robust diversification strategy, having reduced China exposure to single digits and established manufacturing options in Southeast Asia, Mexico, and the U.S. to adapt to various scenarios.

Josh Nichols inquired about the specific financial impact of the Fuze platform decommissioning, particularly the service revenue headwind expected in fiscal Q4 and subsequent quarters, and also asked about the company's strategy to achieve sustained double-digit operating margins given the trend of lower gross margins from usage-based offerings.

Answer

Kevin Kraus, Chief Financial Officer, confirmed the estimated $4.5 million service revenue headwind for fiscal Q4 from Fuze and provided a breakdown of expected headwinds for fiscal 2027. Samuel Wilson, Chief Executive Officer, explained that while usage-based businesses typically have structurally lower gross margins, their operating margins are healthy and expected to improve with scale, reiterating that sustained double-digit operating margins are a target without providing a specific timeline.

Josh Nichols inquired about the fiscal Q4 Fuze service revenue headwind and the implied ex-Fuze service revenue growth, seeking confirmation on its alignment with prior quarters. He also asked about the gross margin trend, the standout operating margin performance, and the company's target for achieving sustained double-digit operating margins, particularly for fiscal 2027.

Answer

Kevin Kraus, Chief Financial Officer, confirmed the assessment of the Fuze headwind and provided guidance for its impact in fiscal 2027. Samuel Wilson, Chief Executive Officer, explained that usage-based business gross margins are structurally lower but operating margins are 'perfectly fine' at scale, noting a slight downward trend in gross margins as usage grows. He affirmed that sustained double-digit operating margins are a target, though he couldn't specify an exact timeline.

Josh Nichols of B. Riley Securities inquired about the remaining revenue headwind from the Fuze platform migration, the expected churn from the final customer cohort, and the evolving mix of usage-based revenue and its impact on the margin profile.

Answer

CFO Kevin Kraus stated the Fuze headwind was approximately 3% in Q1, with about 4% of service revenue remaining on the platform, half of which is expected to be retained. CEO Samuel Wilson added that this will translate to a 1.5% growth headwind next year. Wilson also noted that usage-based revenue, now 17% of the total, is expected to continue growing by 1-2% per quarter, driven by AI products and CPaaS adoption.

Josh Nichols of B. Riley Securities asked for clarification on service revenue growth excluding foreign exchange impacts, the contribution of new AI products, and the progress and financial impact of the Fuze platform shutdown.

Answer

CFO Kevin Kraus confirmed that FX headwinds impacted the Q4 guidance but that the constant currency outlook was effectively a raise. CEO Samuel Wilson stated that while new AI product revenue is growing over 60% year-over-year, it's still from a small base. He reaffirmed the goal to shut down the Fuze platform by the end of the calendar year, expecting mid-single-digit millions in hard savings and additional intangible benefits, which will aid the return to growth.

Josh Nichols asked about the specific expectations built into Gentex's 2027 revenue guidance, particularly concerning the ramp-up of Driver Monitoring Systems (DMS), potential recovery in the China market, and the revenue contribution from dimmable glass products. He also inquired about the commercialization timelines for larger dimmable glass opportunities like sunroofs and side windows, beyond the recently announced visors. Finally, Nichols sought an update on the Vox integration, specifically how much of the targeted $40 million+ in synergies has been realized, its current profitability, and the expected timeline for full realization.

Answer

Steve Downing, President and CEO, clarified that 2026 revenue guidance includes virtually no dimmable glass contribution (other than existing aerospace), anticipates continued decline in China exports, and only immaterial DMS revenue initially, with real impact expected in 2027 and beyond. Neil Boehm, COO and CTO, confirmed strong interest in dimmable visors, with the first customer launching for late 2027 production. For large area devices, customer engagement remains strong, and equipment for in-house film coating is being installed, expected to be operational by late Q1/early Q2 to demonstrate production capability. Kevin Nash, VP of Finance and CFO, stated that Vox is about halfway to the $40M+ synergy target in 2026, with new product launches mid-year and cost trimming efforts. Downing added that Q4 2025 annualized profitability for Vox already puts them halfway there, aiming for further progress in 2026 and full run rate in 2027.

Josh Nichols inquired about the specific expectations built into Gentex's 2027 revenue guidance, particularly regarding the ramp-up of Driver Monitoring Systems (DMS), potential China market recovery, and the revenue contribution from dimmable glass. He also asked for an update on commercialization timelines for larger dimmable glass opportunities like sunroofs and side windows, and the progress of Vox integration towards the $40 million synergy target.

Answer

Steve Downing, President and CEO, clarified that 2026 revenue guidance includes no dimmable glass contribution, anticipates continued decline in China exports, and only immaterial DMS revenue, with significant DMS impact expected in 2027 and beyond. Neil Boehm, COO and CTO, confirmed strong customer interest in dimmable visors with a first customer launch targeted for late 2027. For large area devices, he noted that in-house coating equipment is being installed, expected to be operational by late Q1/early Q2, to produce films for customer demonstrations. Kevin Nash, VP of Finance and CFO, and Steve Downing stated that Vox is about halfway to its $40 million synergy target, with Q4 2025 profitability indicating good progress towards 2026 goals and full run rate by 2027.

Josh Nichols of B. Riley asked for an update on the VOXX acquisition's synergy integration and realization, specifically if the company remains on target to achieve previously discussed synergy levels within 18 months post-close. He also inquired about the dimmable sunroofs and visors, seeking details on what remains to be done for commercial viability and OEM certification, given the operational target of early 2026.

Answer

President and CEO Steve Downing stated that the VOXX organization is already positive on net income and accretive on EPS, ahead of schedule. He reiterated the goal of achieving approximately $40 million in annual free cash flow from VOXX within 18 months post-acquisition. VP of Finance and CFO Kevin Nash added that over $10 million in annualized savings have been achieved so far from areas like audit costs, insurance, and executive overlap. COO and CTO Neil Boehm explained that key challenges for dimmable sunroofs/visors include meeting automotive environmental and temperature requirements, and ensuring process quality for large glass pieces, with in-house capability targeted for Q1-Q2 2026 to improve control.

Josh Nichols asked for an update on the synergy integration and realization of the VOXX acquisition, specifically whether the company remains on target to achieve previously discussed synergy levels 18 months post-close. He also inquired about the progress and remaining steps for achieving commercial viability and mass-scale production for dimmable sunroofs and visors, particularly regarding technical and manufacturing challenges.

Answer

President and CEO Steve Downing confirmed that VOXX International Corporation was positive on net income and accretive on EPS ahead of schedule, and the company remains on track to achieve the original target of approximately $40 million in free cash flow from the business within 18 months post-acquisition. Director of Investor Relations Josh O'Berski added that over $10 million in annualized savings have already been achieved from reduced audit and insurance costs, and executive team overlap. COO and CTO Neil Boehm explained that the main challenges for dimmable sunroofs and visors involve meeting automotive environmental and process requirements for large glass pieces, with in-house manufacturing capability targeted for late Q1 to early Q2 2026 to improve quality control.

Josh Nichols from B.Riley Securities questioned the drivers behind the positive shift in product mix toward advanced features, the potential for gross margin expansion at VOXX over the next two years, and requested an update on the driver monitoring systems business.

Answer

President & CEO Steve Downing explained that while higher-end mix is improving as OEMs focus on profitability, it's being partially offset by de-contenting of outside mirrors. He stated that 200-300 basis points of gross margin improvement for VOXX is 'absolutely achievable' within two years. COO & CTO Neil Boehm detailed the launch timeline for driver monitoring, with new customers coming online through late 2025 and early 2026, and more substantial revenue expected in 2027-2028.

Josh Nichols asked for confirmation of his consolidated revenue and gross margin estimates including the VOXX acquisition. He also questioned if the China forecast represents a conservative 'bear case' scenario and inquired about the long-term revenue expectations for the newly launched driver monitoring system (DMS).

Answer

President and CEO Steve Downing agreed with the revenue estimate but suggested the gross margin headwind from VOXX would be closer to 100-150 basis points. He confirmed the China guidance is a conservative 'rip the Band-Aid off' forecast based on current tariff rates, implying potential upside if conditions improve. COO and CTO Neil Boehm reiterated that the DMS business is still expected to become a significant revenue contributor as the four announced programs launch and ramp up through 2026-2028.

Josh Nichols questioned how much revenue from new technologies like dimmable glass and driver monitoring is included in the 2026 guidance. He also asked if there is a path back to high single-digit revenue outperformance and which technologies would enable it.

Answer

CEO Steve Downing responded that the 2026 guidance is driven by FDM, DMS, and the existing portfolio, with minimal revenue from large area devices. He confirmed a path back to higher outgrowth exists but is several years away, contingent on the full-scale launch of DMS, in-cabin monitoring, and large area devices.

Josh Nichols asked for an update on the timeline and potential revenue contribution from new R&D initiatives like driver monitoring (DMS). He also questioned if the sustained outperformance of the Full Display Mirror (FDM) is due to its adoption on higher-volume vehicles.

Answer

President and CEO Steve Downing projected that DMS/CMS revenue would be in the tens of millions in 2025, becoming more material in late 2026 and 2027. He affirmed that FDM's success is driven by its faster-than-usual adoption beyond luxury vehicles into higher-volume platforms like pickup trucks, which is a key part of its growth story.

Josh Nichols asked about the drivers behind Ooma achieving a record EBITDA margin in Q3 and the expected significant increase in profitability for fiscal Q4, particularly concerning the FluentStream acquisition's impact on EPS and EBITDA. He also inquired about quantifying potential synergy benefits from the FluentStream and Phone.com acquisitions and the expected timeline for realizing these benefits.

Answer

CFO Shig Hamamatsu attributed the improved profitability to increased operating leverage, actions taken on R&D spend in late Q3, continued optimization of sales and marketing spend, and a lower-than-expected impact from tariffs. CEO Eric Stang noted that cost synergies for FluentStream are expected to be modest, with more significant synergies anticipated from Phone.com, particularly in vendor relationships and rationalizing R&D and operations over a larger base, with early wins expected soon after closing.

Josh Nichols inquired about AirDial's contribution to Annual Recurring Revenue (ARR), when the company might provide more detailed financial breakouts for the product, and the progress of new partner ramps.

Answer

CFO Shig Hamamatsu confirmed that AirDial is meaningfully contributing to ARR and business user growth. CEO Eric Stang added that Ooma now has nearly 35 AirDial reseller partners, with two recent additions switching from a competitor. He noted that partners like Comcast are beginning to place orders, T-Mobile remains a strong channel, and another key partner is ramping up significantly.

Josh Nichols from B.Riley Securities asked for details on the growth ramp in the hospitality vertical and questioned when Ooma might begin to provide separate financial reporting for its AirDial and 2600Hz businesses.

Answer

CEO Eric Stang reported that Ooma targets winning 50-100 hotels per quarter and hopes the recent Marriott certification will accelerate this. Regarding segment reporting, both Stang and CFO Shig Hamamatsu indicated that while these businesses are growing, they are still too small to break out. Hamamatsu suggested they might consider separate reporting once the products contribute 10-15% of total revenue.

Josh Nichols of B.Riley Securities asked for more detail on the traction in the hospitality vertical, which now includes over 500 hotels, and its potential as a future growth driver. He also inquired about future plans to provide more granular reporting for AirDial and 2600Hz.

Answer

CEO Eric Stang stated that the hospitality segment is significant, with a target of winning 50 to 100 hotels per quarter, a pace they hope to exceed with the new Marriott certification. CFO Shig Hamamatsu added that more granular disclosure for AirDial and 2600Hz would be considered once these businesses reach a more material scale, such as 10-15% of revenue.

Asked for more detail on the SMB market performance excluding AirDial, and about long-term expectations for revenue growth acceleration and continued profitability improvements beyond the current fiscal year.

Answer

Ooma is balancing its focus across SMB, POTS replacement (AirDial), and wholesale, which moderates growth in any single segment but supports overall company goals. They are committed to improving profitability. Long-term, management sees many years of growth potential in all key segments and expects to continue growing revenue and improving profitability by leveraging past product investments.

Josh Nichols inquired about the growing optimism for the 2600Hz platform, particularly regarding market dynamics and the potential impact of Microsoft sunsetting its Metaswitch platform. He also asked about the company's path to achieving double-digit EBITDA margins, given the improving operating leverage.

Answer

CEO Eric Stang explained that the 2600Hz opportunity is massive, with 50-80 million users on legacy BroadSoft and Metaswitch platforms needing to migrate. He highlighted the ServiceTitan win and the platform's modern API design as key differentiators. CFO Shigeyuki Hamamatsu confirmed the company is on a path toward double-digit EBITDA margins for the next fiscal year, noting the Q4 guidance implies a 9.2% margin. Eric Stang added that with strong recurring margins, the company can now leverage past investments to drive bottom-line growth.

Josh Nichols inquired about the primary drivers behind the increased revenue guidance for the second half of the year, the potential for subscription gross margin expansion, and whether the recent wins suggest an acceleration in revenue growth for the next fiscal year.

Answer

CEO Eric Stang attributed the growth to the entire Ooma Business portfolio, including Ooma Office, AirDial, and 2600hz, noting AirDial is growing fastest from a small base. CFO Shigeyuki Hamamatsu stated that while there's room for margin improvement, he projects the subscription gross margin to remain around 72% for the rest of the year due to offsetting investments, with a potential step-up next year. Stang confirmed they are driving towards growth acceleration next year, fueled by recent large customer wins.

Josh Nichols asked about the timing and ramp-up of EV partnerships, specifically Autel's target of 100,000 devices, and requested an update on Smart Cooler market offerings, demand, and growth, as well as car washes and amusement.

Answer

Aaron Greenberg, Chief Strategy Officer, and Yair Nechmad, Co-Founder and CEO, discussed the acceleration of EV charging, the launch of VPOS Media for PIN-enabled transactions in Europe/UK, UNO-Mini OEM integrations, and initial hardware revenues from EV customers. They also highlighted Smart Cooler partnerships in the U.S. and Europe, and the significant growth of Tigapo's arcade gaming solution.

Josh Nichols inquired about the timing of shipments for Nayax's fast-growing EV partnerships, specifically asking if Autel's target of 100,000 devices by the end of next year is still on track and the overall expectation for the EV ramp. He also asked for an update on Nayax's offerings in the smart cooler market, demand, and potential growth activity for the next year, as well as updates on car washes and amusement.

Answer

Aaron Greenberg (Chief Strategy Officer) confirmed EV charging acceleration, noting momentum in North America and the upcoming VPOS Media launch in Europe/U.K. for high-value transactions. He mentioned hardware revenues from EV charging in Q3, expecting significant acceleration in Q4, and confirmed Autel and other OEM partnerships are progressing as expected, with Uno Minis delivered in Q2. Regarding smart coolers, Aaron Greenberg highlighted new partnerships in the US and Europe, seeing it as a future growth driver, along with car washes and arcade gaming (Tigapo). Yair Nechmad (Co-Founder and CEO) added that Nayax is partnering with cooler manufacturers to embed VPOS Media, expanding market share.

Josh Nichols of B. Riley Securities inquired about the long-term revenue potential of the EV charging market and the expected timing of the revenue acceleration from enterprise customers in the second half of the year.

Answer

CEO Yair Nechmad and CSO Aaron Greenberg explained that the strategy with OEMs like Autel is to embed Nayax's UNO Mini device, lowering customer acquisition costs and increasing stickiness. CFO Sagit Manor added that the expected second-half acceleration will be driven by enterprise sales across multiple verticals, including smart coolers and retrofits, not just EV, and noted that strong transaction growth in July and August supports this outlook.

Josh Nichols of B.Riley Securities inquired about the scaling potential of the EV charging market for Nayax and whether the anticipated second-half revenue acceleration is primarily driven by these new EV partnerships.

Answer

CEO Yair Nechmad explained that EV partnerships with OEMs like Autel are a low-cost customer acquisition strategy that embeds Nayax's solution for the long term. CSO Aaron Greenberg added that their UNO Mini device provides a competitive advantage and stickiness. Regarding the H2 ramp, CEO Yair Nechmad and CFO Sagit Manor confirmed it would be driven by a combination of enterprise sales across EV, smart coolers, and retrofits, as well as strong recurring revenue growth already observed in the new quarter.

Josh Nichols of B.Riley Securities asked about the long-term revenue opportunity in the EV charging market following recent wins and inquired about the drivers behind the expected revenue acceleration from enterprise customers in the second half of the year.

Answer

CEO Yair Nechmad explained that EV partnerships with OEMs like Autel are a low-cost customer acquisition strategy, embedding Nayax's solution to capture long-term, high-margin SaaS revenue. CSO Aaron Greenberg added that integrating the UNO Mini device during manufacturing creates significant stickiness. CFO Sagit Manor confirmed the second-half ramp will be driven by enterprise sales in smart coolers and EV, strong transaction growth, and retrofit projects.

Josh Nichols asked about the gross margin profile for Q4, considering the Q3 expenses and Q4 revenue normalization. He also inquired if the media business, given its current traction and raised expectations, is expected to grow above the company's overall 20%+ pace for the foreseeable future.

Answer

Mark Locke (CEO) (responded by Bryan Castellani) referred to the full-year guidance of $136 million adjusted EBITDA on $655 million revenue, representing a 20% margin and 400 basis points of expansion, noting that increased rights costs impact cost of sales. For media growth, Bryan Castellani stated that more details would be provided at the upcoming Investor Day, acknowledging its U.S.-centric nature and the significant contribution of the NFL in the latter half of the year.

Josh Nichols asked about the gross margin profile for Q4, expecting it to be up year-over-year due to normalization of revenue recognition and cost basis, and if the media business is expected to grow above a 20%+ pace for the foreseeable future.

Answer

Mark Locke (CEO) referred to the full-year guidance of 20% margin, up 400 basis points year-over-year, and mentioned increased rights costs impacting cost of sales. Bryan Castellani (CFO) noted strong media growth this year, its U.S.-centric nature, and the NFL's significant component, deferring a multi-year view to Investor Day.

Josh Nichols of B. Riley Securities asked about the extent of Genius's market share increase in European soccer with the new partnerships, the timeline for deploying Genius IQ, and the highest-value incremental revenue opportunities from the platform beyond betting data.

Answer

Nicholas Taylor (CFO) and Mark Locke (Co-Founder, CEO & Director) responded that while precise market share is difficult to calculate, their position in European soccer is now very strong. The rollout of Genius IQ into over 400 stadiums will begin in late 2025 at a pace the company controls. They explained the platform's value lies in its multiple use cases—such as broadcast augmentation, coaching tools, and officiating—all powered by the same core technology, allowing for tailored and cost-effective solutions for leagues.

Josh Nichols asked if the recent expansion of BetVision into high-volume soccer is factored into the current financial guidance and inquired about the product's long-term opportunity given its success with the NFL.

Answer

CFO Nicholas Taylor confirmed that a baseline contribution from the BetVision soccer launch is included in the guide, with potential for upside if commercial adoption accelerates. CEO Mark Locke described the long-term vision is to make BetVision a ubiquitous viewing experience across its vast portfolio of sports rights, including soccer and upcoming basketball, to drive engagement.

Josh Nichols with B. Riley Securities inquired about the drivers behind RF Industries' impressive 34% gross margin, specifically asking about the impact of DAC thermal cooling systems, small cells, and overall product mix. He also sought clarity on the gross margin outlook for Q4 and fiscal 2026, considering similar revenue expectations and potential mix shifts. Furthermore, Nichols asked for a characterization of the company's strong bookings, differentiating between traditional wireless business and newer end markets like aerospace, transportation, and data centers. He also questioned the timing of meaningful bookings from the 100+ venue pipeline, including Olympics and World Cup projects, and sought insight into the pathway to achieving the 10% adjusted EBITDA margin target, focusing on the roles of higher sales and operational improvements.

Answer

RF Industries CEO Rob Dawson explained that the improved gross margin was driven by an increasing mix of higher-value items, including DAC thermal cooling systems, small cells, and aerospace projects, alongside significant operating leverage from higher sales volumes. For Q4 and fiscal 2026, Dawson indicated that while mix fluctuates, gross margins are expected to consistently remain "30% and above," potentially in the "low to mid 30% levels." Regarding bookings, he highlighted broad diversification across traditional and new markets, with contributions from multiple high-value product lines and diverse customers. Dawson clarified that the venue pipeline, including Olympics and World Cup projects, represents long-term, multi-year deployments with lengthy sales cycles, contributing into fiscal 2026. Finally, he stated that the 10% adjusted EBITDA target would be achieved through a combination of higher sales, continuous operational improvements, and a better product mix leading to more predictable supply chain management.

Josh Nichols (via Matthew) inquired about the drivers of the 34% gross margin, specifically the impact of DAC systems and small cells versus overall product mix. He also asked about the gross margin outlook for Q4 and fiscal 2026, considering revenue stability and mix shifts. Further questions covered the competitive landscape across traditional wireless and new markets like aerospace, transportation, and data centers, and the timeline for bookings from the 100+ venue pipeline. Lastly, he sought clarification on the strategy to achieve the 10% EBITDA margin target, focusing on sales growth versus operational improvements.

Answer

CEO Rob Dawson explained that the improved gross margin was driven by an increasing mix of higher-value items, including DAC systems and small cells, combined with significant operating leverage from higher sales volumes. He stated that while the mix fluctuates, the company expects gross margins to consistently be north of 30%, potentially staying in the low to mid-30% range. Regarding bookings, Mr. Dawson highlighted diversification across various product lines and new end markets, with contributions from aerospace, transportation, and data centers, alongside a solid core business. He noted that the venue pipeline, including projects for the Olympics and World Cup, represents long-term, multi-year deployments with contributions expected into fiscal 2026 and beyond. For the 10% EBITDA target, Mr. Dawson indicated it would be achieved through a combination of higher sales, ongoing operational efficiencies (also mentioned by President and COO Ray Bibisi), and a better product mix from predictable, project-based customer relationships.

Josh Nichols inquired about the sustainability of gross margins near 30%, the mix of high-margin products in the backlog, and the future outlook for backlog levels. He also asked about potential seasonal patterns affecting the Q4 sales forecast.

Answer

CEO Robert Dawson stated that the company is comfortable with current gross margin levels and sees potential for expansion driven by a favorable product mix and higher sales volume. He noted the backlog is being refreshed with higher-margin products. Dawson explained that while a $20 million backlog is strong, the primary goal is a healthy flow of orders, and he wouldn't be concerned if it dipped slightly. For Q4, he anticipates sequential sales growth, with the exact magnitude dependent on customer shipment timing and material availability, noting that traditional seasonality has been unusual but may normalize in 2025.

Josh Nichols asked about OSI Systems' fiscal 2026 revenue guidance, specifically questioning if the top line would grow at a double-digit rate when excluding the declining Mexico contracts. He also inquired if the high-margin services business would continue to outgrow the product segment, thereby boosting overall gross margins.

Answer

EVP and CFO Alan Edrick confirmed that excluding the headwind from the Mexico contracts, OSI Systems' overall revenue growth guidance for fiscal 2026 would indeed imply a double-digit rate. Edrick also affirmed that the strong growth in high-quality, recurring service revenue is expected to continue and could outpace product revenue growth, which would be accretive to margins. CEO A. J. Mera added that aviation services will be a significant contributor to this trend.

Josh Nichols of B. Riley Securities asked for context on how much of the current record backlog is expected to be recognized in fiscal 2026. He also questioned whether the new, higher level of service revenue is a sustainable baseline for future growth.

Answer

Executive President & CFO Alan Edrick stated that while the company does not disclose future backlog conversion rates at this time, the record backlog and strong pipeline are encouraging for fiscal 2026. He affirmed that the current service revenue level, which surpassed $100 million, is believed to be a new baseline, with the company's goal being to grow it further as a percentage of overall revenue in the coming years.

Josh Nichols asked about the potential impact of the new U.S. administration's focus on border security and the growth opportunities for the recently acquired RF Solutions business.

Answer

President and CEO Ajay Mehra stated that the bipartisan support for border security is a positive for OSI Systems, highlighting the company's dominant position with CBP and its advanced software. For the RF Solutions acquisition, he explained that OSI's global reach and financial strength will help expand the business, particularly by applying its over-the-horizon radar technology to border security for tracking drones and ships, in addition to its traditional defense applications.

Josh Nichols inquired about the drivers of the strong Security backlog growth despite seasonal slowness, the strategy for gaining market share in aviation security, and the synergies expected from the new RF technology acquisition.

Answer

EVP and CFO Alan Edrick attributed the backlog strength to broad-based demand across geographies and product lines in the Security division. President and CEO Deepak Chopra discussed the strong international aviation pipeline, focus on air cargo, and innovative solutions like employee screening. He also explained the RF acquisition adds complementary technology and leverages OSI's global sales and service infrastructure to reach a broader customer base.

Josh Nichols of B.Riley Securities inquired about Red Violet's traction with large enterprise accounts, the potential impact of recent federal legislation on government sector opportunities, and the timeline for expanding the ForWarn platform into new verticals beyond real estate.

Answer

Chairman & CEO Derek Dubner confirmed significant progress in testing with and winning larger enterprise customers, noting that these clients often start with smaller volumes before ramping up. He also affirmed that recent government budget changes present opportune timing for their public sector push, with large, seven-figure opportunities in the pipeline. CFO Dan MacLachlan added that the company is actively testing ForWarn in new markets and expects to invest heavily in a few promising areas in 2026 to drive meaningful revenue.

Josh Nichols of B. Riley Securities inquired about the drivers behind the strong growth in IDI customers, trends among larger enterprise clients amid economic uncertainty, and key long-term technology investments aimed at enhancing the core identity graph.

Answer

Chief Financial Officer Dan MacLachlan attributed the strong IDI customer growth to consistent, broad-based demand across all verticals, noting that the number of clients spending over $100,000 annually grew from approximately 96 to nearly 110. Chairman and CEO Derek Dubner detailed long-term technology priorities, including enhancing the core identity graph with AI, expanding into Know Your Business (KYB) and account monitoring solutions, and increasing internal automation to drive future efficiencies.

Josh Nichols inquired about Red Violet's strategy to maintain its elevated top-line growth in 2025, the balance between acquiring new customers versus expanding within the existing base, the ROI on recent sales and marketing investments, and the pipeline for new products.

Answer

Chairman and CEO Derek Dubner and CFO Daniel MacLachlan explained that growth momentum is expected to continue, driven by prior strategic investments, strong brand awareness, and a robust sales pipeline. They highlighted a significant opportunity to expand within their growing base of higher-tier customers. MacLachlan confirmed that 2025 investments will be consistent with 2024, with positive ROI already emerging from recent hires. Dubner detailed a product roadmap focused on AI-driven solutions, account monitoring, KYB (know your business), and expanding FOREWARN's capabilities.

Josh Nichols of B. Riley Securities inquired about the impact of increased sales and marketing spend on customer acquisition, the balance between new customer growth and the 'land and expand' strategy, and the remaining market penetration for the FOREWARN platform.

Answer

Chairman and CEO Derek Dubner confirmed that strategic investments in sales and marketing are successfully driving record customer onboarding, which provides strong visibility and confidence for 2025. CFO Daniel MacLachlan added that growth is a healthy mix of new and existing customers, with significant opportunity in larger enterprises. Regarding FOREWARN, MacLachlan noted they have penetrated just under half of the available U.S. REALTOR associations and are actively planning to expand the brand into new industries.

Josh Nichols of B.Riley Securities inquired about the progress toward the $30 million business development goal, specifically the contribution from humanoid robotics customers. He also asked how order sizes and margin profiles for robotics might evolve as customers move from development to production, and questioned the overall scalability of the business and its impact on operating margins as revenue recovers.

Answer

Ziv Shoshani, CEO, President & Director, confirmed VPG received $1.5 million in follow-on humanoid robotics orders from April to July and is prepared to support production ramp-ups in 2026, though timing depends on the customer. Shoshani noted that pricing models would likely change with higher volumes and it was premature to discuss specific profit margins. He affirmed the company's financial model, stating that recent cost-saving initiatives should allow for accelerated profitability, with an expected $0.30 to $0.40 of every incremental revenue dollar dropping to the pre-tax level.

Josh Nichols questioned whether higher current HFC prices compared to last year would lead to year-over-year revenue and margin growth in the second half, and requested an update on the competitive landscape for the DLA contract renewal.

Answer

CFO Brian Bertaux affirmed expectations for a strong Q3 but cautioned that Q4 is seasonally soft, maintaining the full-year gross margin target of mid-20s with potential upside. President and CEO Brian Coleman explained the DLA contract is no longer a small business set-aside, estimating 5-10 bidders, and noted that while Hudson has a strong track record, the outcome is uncertain.

Josh Nichols from B. Riley inquired about how the transition to new OEM equipment might affect inventory destocking in 2025, whether Hudson would distribute new, higher-priced replacement refrigerants, and if there have been any significant shifts in demand or pricing for older refrigerants like R-22.

Answer

Executive Brian Coleman explained that while there is some market disruption from the transition to lower GWP systems, legacy 410A units will still be sold and installed in 2025. He confirmed Hudson can technically reclaim new refrigerants but noted that material volumes are years away and patent rights are a consideration. For R-22, Coleman described the market as stable with slowly declining volumes, unaffected by the HFC stockpile issues.

Speaking on behalf of Josh Nichols, Matthew from B. Riley Securities asked for more detail on the macro uncertainty's impact, the specific segments driving the large spike in purchase orders, and which products or segments are key to achieving full-year positive adjusted EBITDA.

Answer

Executive Eyal Peso clarified that tariff uncertainty in March caused temporary shipment delays but had no lasting impact on the business, with demand remaining strong. He detailed the backlog composition, with Aero at $15.5 million, Safety-Tech at approximately $17-18 million, Automotive at $6 million, and Architecture at $2.2 million. He explained that achieving positive EBITDA will be driven by top-line growth leverage, particularly in the high-margin Aero segment, continued margin improvement in Safety-Tech, and disciplined operating expense control.

Josh Nichols asked for clarity on the 2025 revenue guidance, questioning how much is covered by the newly disclosed long-term backlog. He also inquired about the company's typical quarterly seasonality and which business segments are expected to be the primary drivers of growth in 2025.

Answer

Eyal Peso, an executive, explained that less than 50% of the 2025 guidance is from the $409 million committed backlog, with the remainder coming from recurring, non-contracted customer orders. Executive Meir Peleg confirmed the company's seasonality, with Q4 being the strongest and H2 driving full-year profitability. Eyal Peso added that while all segments are growing, the Safety-Tech division is expected to be the largest contributor to top-line growth.

Josh Nichols from B. Riley Securities sought clarification on the Aeronautics division's Q4 revenue outlook, the expected gross margin profile of the ramping automotive business, and the progress toward the $100 million aggregate revenue target for its CMS offering.

Answer

CEO Eyal Peso confirmed that Aeronautics revenue is expected to be 'significantly higher' in Q4 as it fulfills delayed shipments, surpassing previous quarterly run rates. He projected that the automotive business will have 'very healthy' gross margins that contribute positively to the company's overall average, thanks to scale and single-source supply positions. Regarding the $100 million CMS revenue goal, he reiterated confidence, explaining that long-term contracts like the 10-year deal with Ford Trucks, combined with massive market demand for ADAS in commercial vehicles, support this target.

Josh Nichols of B. Riley Securities asked for an outlook on future free cash flow generation, considering the shift to a CapEx-light model and growing digital revenue. He also asked which second-half growth initiative, such as Hybrid Dealer, management is most excited about.

Answer

Executive A. Weil explained that free cash flow conversion should steadily increase, potentially to the 30% of EBITDA range, driven by rising EBITDA, a higher mix of digital revenue, and a significant reduction in annual CapEx to around $25 million. Executive Brooks Pierce identified Hybrid Dealer as the most exciting growth opportunity, citing its sustained player engagement and strong, broad-based operator demand, which is currently a supply-side constraint.

Josh Nichols of B. Riley Securities inquired about the quantifiable impact of weather on transaction revenue, the early demand signals for Smart Store products, and any specific progress updates for the Latin American market.

Answer

Scott Stewart, an executive, quantified the adverse weather impact at approximately $2 million in transaction revenue. Executive Ravi Venkatesan highlighted a strong Q4 rebound for equipment, describing the Smart Store as the company's "hottest selling product" with significant interest at the NAMA industry conference. Regarding Latin America, Venkatesan noted that while exciting developments are underway with both large and SMB customers, it was premature to share specific details.

Josh Nichols asked for more color on the wide range in the full-year revenue guidance and inquired about the outlook for EBITDA, given the company's strong profitability trends and recent outperformance.

Answer

Executive Scott Stewart explained that the wide revenue guidance range is primarily driven by the variability in timing and volume of large equipment sales in the second half of the year, particularly the new, high-value Smart Stores. Regarding profitability, Stewart stated that while margin improvements could provide a benefit, the company is currently tracking toward the midpoint of its reaffirmed adjusted EBITDA guidance for the fiscal year.

Josh Nichols from B. Riley Securities inquired about the sustainability of the high gross margin in the subscription and transaction business, progress on international deployments in Latin America, and the factors contributing to the wide full-year EBITDA and net income guidance range.

Answer

CFO Scott Stewart stated that the gross margin trend for transaction processing is expected to continue improving throughout the year, driven by rising average ticket sizes. He also noted that the guidance range is influenced by revenue growth, margins, tax expenses, and steady OpEx. CEO Ravi Venkatesan added that the company remains bullish on its Latin America expansion, taking a measured, metric-driven approach to scaling deployments to ensure a solid foundation.

Josh Nichols from B. Riley Financial asked about the expected revenue cadence for fiscal 2025 after a lighter Q4, the financial materiality of the SB Software acquisition, and the primary drivers for the company's projected growth acceleration.

Answer

Executive Ravi Venkatesan addressed revenue cadence, noting that weaker consumer spending observed in June did not persist, with July and August trends returning to normal. Both Ravi Venkatesan and Scott Stewart confirmed the SB Software acquisition is not financially material, contributing less than 1% to revenue and EBITDA, but is a strategic move to gain technology and cross-sell opportunities. Scott Stewart identified international expansion, particularly the Cantaloupe ONE platform in Latin America, and the fast-growing micromarket segment (25-30% growth) as key drivers for FY25.