Matthew Galinko

Matthew Galinko, Senior Equity Research Analyst at Maxim Group, inquired about Intchains' strategy for launching new mining products in the second half of 2026 and the origin of third-party ETH staked on the Goldshell Stake platform.

Answer

CFO Charles Yan confirmed that Intchains is targeting new altcoin mining machine launches in H2 2026, contingent on market conditions and R&D progress, with multiple projects currently in development. Regarding the Goldshell Stake platform, Mr. Yan clarified that the 1,400 units of third-party ETH staked are a mix, with approximately half originating prior to the acquisition and the other half from new users post-acquisition, indicating growth in staked ETH units.

Matthew Galinko asked about Intchains' expectations for launching new mining products in the second half of 2026 and the origin of third-party ETH staked on the Goldshell Stake platform.

Answer

CFO Charles Yan confirmed plans to target new altcoin mining machines in H2 2026, subject to market and R&D. He also clarified that the 1,400 units of third-party staked ETH on Goldshell Stake are a mix of pre-acquisition and post-acquisition growth.

In a follow-up question, Matthew Galinko of Maxim Group asked for guidance on modeling R&D spending for the remainder of 2025, questioning if spending would increase in the second half of the year.

Answer

CFO Charles Yan clarified that while new products are slated for release in H2 2025, the majority of the associated R&D expenses were already incurred in the first half. He projected that R&D expenses in the second half would not be larger than in the first half, citing factors like a planned tape-out on a less advanced process node.

Matthew Galinko asked for commentary on the company's high inventory levels, the market feedback that prompted the development of the Goldshell Byte miner, and the expected trend for R&D spending for the rest of the year.

Answer

CFO Chaowei Yan explained that most inventory consists of Dogecoin miners and Aleo-related chips, which the company intends to sell by adjusting prices based on market conditions rather than writing them off. He noted that the Goldshell Byte was developed in response to feedback from individual miners and serves as an entry-level product to broaden the customer base. Regarding R&D, Mr. Yan stated that spending is difficult to predict as it depends on the timing of wafer tape-outs for projects currently in development.

Matthew Galinko asked about the potential geographic bias for Connected Car monetization, the confidence and timeframe for achieving a $20 ARPU for Media Platform, and the expected impact of supply chain and memory shortages on the Consumer Electronics business in 2026.

Answer

CEO Jon Kirchner anticipates Connected Car monetization will initially be more North America-based, with a European component and potential further global expansion. For the $20 ARPU target, Mr. Kirchner expressed confidence due to robust markets for targeting solutions, premium CTV inventory, Xperi's independent position, unique IPTV audiences, and optimization of platform engagement. He noted established markets and partnerships, highlighting Europe's significant shift of ad dollars from linear to streaming as a future ARPU driver. The exact timing to $20+ ARPU will become clearer as more sellers come online in 2026. Regarding Consumer Electronics, Mr. Kirchner stated a cautious view for 2026 due to supply chain impacts on product planning, pricing, and consumer demand, noting the unit-based nature of the business and uncertainties from shifting tariff environments.

Matthew Galinko asked about any geographic bias for connected car monetization as it begins mid-year and into 2027. He also questioned the confidence in reaching a $20+ ARPU for TiVo One and the expected timeframe, and how supply chain issues factor into the 2026 Consumer Electronics business outlook, given lower minimum guarantees.

Answer

Jon Kirchner, CEO, indicated that connected car monetization would likely be more North America-based initially, with a European element and potential global expansion. Regarding ARPU, Mr. Kirchner expressed confidence based on robust markets, demand for better targeting and premium CTV inventory, Xperi's independent platform, and unique IPTV audiences. He noted that the shift of ad dollars from linear to streaming in Europe would also drive ARPU growth. The exact timing to $20+ ARPU depends on the ramp-up of sellers in 2026. For Consumer Electronics, Mr. Kirchner stated that supply chain issues are impacting product planning, manufacturing, pricing, and consumer demand, leading to a cautious outlook for the unit-based business, compounded by a shifting tariff environment.

Matthew Galinko from Maxim Group asked for an update on the pipeline for new TV OEM partners and whether the year-end target for monthly active users (MAUs) has been adjusted due to potential macroeconomic factors like tariffs.

Answer

CEO Jon Kirchner confirmed the company expects to add one to two new TV partners this year and remains on track to meet its goal of 5 million monthly active users (MAUs) by year-end. He noted that while tariffs create a fluid environment, the company's current plans and targets have not been meaningfully impacted, and they continue to monitor the situation closely.

Matthew Galinko of Maxim Group asked about the operational process for rolling out the TiVo One platform, including whether it involves new negotiations with partners or is primarily a software update. He also inquired about the current competitive landscape for the Media Platform as Xperi seeks to add new TV OEM partners.

Answer

CEO Jon Kirchner described the TiVo One rollout as a long-planned initiative that is operationally a 'fairly ordinary course' process of deploying software updates in partnership with OEMs. Regarding competition, Kirchner acknowledged the environment is intense but stated Xperi has overcome key barriers to entry. He emphasized that Xperi's value proposition as an independent, content-first platform with a favorable business model continues to resonate with potential partners.

Matthew Glinko questioned the projected 55% adjusted EBITDA margin for 2026, which appears to be a step down from prior years, and asked for the underlying assumptions. He also followed up on the long-term goal of $500 million in annual revenue, asking if a litigation expense level of $30 million to $40 million is appropriate to achieve this target.

Answer

Keith Jones, CFO, explained that while R&D and SG&A expenses are expected to grow at consistent single-digit rates, the primary driver for the EBITDA margin compression is an anticipated increase in litigation expense. He noted that historically low litigation expenses in 2022-2024 were an anomaly, and 2026 litigation is expected to increase by $5 million to $10 million above the $25 million spent in 2025 to defend IP. Paul Davis, President and CEO, reiterated a preference for deals without litigation but affirmed the company's readiness to file when necessary, citing successful outcomes with Disney and Altice. He stated that litigation spend is generally expected to be around $25 million to $35 million, as it can drive significant results.

Matthew Galinko questioned the projected 55% adjusted EBITDA margin for 2026, which appears to be a step down, and the expected litigation expense levels required to achieve the long-term goal of $500 million in annual revenue.

Answer

Keith Jones (CFO) explained that while R&D and SG&A growth are consistent, the increase in litigation expense (from $25 million in 2025 to an expected $5 million-$10 million higher in 2026) is the primary driver of the margin compression. Paul Davis (President and CEO) reiterated a preference for deals without litigation but affirmed the company's readiness to defend its IP when necessary, estimating annual litigation spend to be around $25 million-$35 million, with potential fluctuations.

Matthew Galinko from Maxim Group inquired about the expected revenue cadence for the second half of 2025, asking if it would be concentrated in the fourth quarter. He also asked if R&D spending might increase if large deals were signed earlier than expected.

Answer

CFO Keith Jones stated that the primary focus is on closing deals within the year for the right economics, rather than on specific quarterly timing, but noted that the top end of the guidance range is in play. He clarified that recent spending reductions were mainly in SG&A and that the company remains committed to R&D, which could see modest growth as Adeia will invest to accelerate its business when opportunities arise.

Matthew Galinko of Maxim Group questioned the sourcing and evaluation of recent IP portfolio acquisitions and inquired about the company's long-term debt targets.

Answer

CEO Paul Davis detailed that the five 2024 IP acquisitions, focused on OTT and broadband, were sourced from various public and private companies to fill strategic portfolio gaps. CFO Keith Jones addressed the balance sheet, noting significant debt reduction and interest savings. Jones indicated the company has a comfortable long-term debt level in mind, after which it will prioritize reinvestment and shareholder returns.

Matthew Galinko of Maxim Group LLC inquired about the background of the recent patent litigation against Disney and the current pipeline for tuck-in M&A opportunities.

Answer

CEO Paul Davis explained that while specific negotiation details with Disney are confidential, litigation became a necessary step forward after it was clear a mutual agreement was unlikely. CFO Keith Jones addressed capital allocation, noting that strong cash flow and recent debt repricing provide flexibility to begin executing on the $200 million share repurchase program and continue debt paydowns in Q4, signaling a more balanced approach to returning capital to shareholders.

Matthew Galinko of Maxim Group inquired about the potential cash position following the tender offer, the sustainability of Q3 2025 SG&A expenses as a run rate, and the company's acquisition strategy, particularly regarding bolstering the Nexus subsidiary versus pursuing volatile AI/HPC opportunities.

Answer

Chairman and CEO Chuck Piluso estimated the post-tender cash could range from $5 million to $15 million, ideally $10 million-$15 million, noting a $10.8 million ATM. CFO Chris Panagiotakos confirmed Q3 2025 SG&A had no non-recurring charges and is a good run rate. Mr. Piluso also stated that expanding Nexus through VoIP and data access company acquisitions is a viable and "easy" focus, aiming for significant revenue growth, contrasting it with the more volatile AI/GPU market.

Matthew Galinko questioned Data Storage Corporation's acquisition strategy, specifically whether bolstering the Nexus subsidiary with tuck-in acquisitions in data and voice services might be a more stable use of capital compared to volatile AI/GPU-based computing opportunities.

Answer

Chairman and CEO Chuck Piluso affirmed the focus on Nexus, highlighting its platform's capacity for growth through acquisitions of VoIP and data access companies. He contrasted this with the volatility of the AI/GPU market, emphasizing Nexus's potential to offset public company expenses.

Inquired about the company's post-transaction cash position, the cloud business pipeline for the remainder of the year, and the progress of the European expansion.

Answer

The company anticipates having approximately $35 million in cash after the transaction. The cloud pipeline remains robust with $10-11 million in opportunities, driven by existing customer expansions. The European operations are fully installed in three data centers with trained partners, and the sales funnel is actively being built.

Matthew Galinko of Maxim Group inquired about Data Storage Corp's pro forma cash position following the Cloud First sale, visibility into the cloud business pipeline for the remainder of the year, and the operational status of the European expansion.

Answer

Chairman and CEO Charles Piluso clarified that the post-transaction cash would be approximately $35 million, combining the $24 million in net proceeds with the existing $11 million. He also stated the sales pipeline consistently holds $10-11 million in total contract value and detailed that the UK infrastructure is fully installed across three data centers with partnerships and trained sales forces now building the funnel.

Matthew Galinko asked about the business development progress of Data Storage Corporation's European expansion and the maturity of the European market's shift toward cloud consumption models.

Answer

CEO Charles Piluso detailed the European expansion, noting key hires, the establishment of approximately 10 distributor partnerships, and the installation of equipment in three U.K. data centers. He anticipates revenue to begin in Q4 2025 with a breakeven target for January 2026. CFO Chris Panagiotakos added that the company invested around $450,000 in the U.K. during the quarter. Regarding market maturity, Piluso stated that while speculative, a significant cloud migration is underway, and the company is well-positioned to overcome security concerns and capture this demand, with potential expansion into mainland Europe being explored.

Matthew Galinko asked for clarification on the company's line of sight to 2025 services revenue, the components of the projected $20 million+ baseline, and whether that figure accounts for churn. He also inquired about the growth trajectory of cloud subscription renewals, specifically if renewed contracts are typically larger than the originals.

Answer

CEO Charles Piluso, with input from CFO Chris Panagiotakos, clarified that the over $20 million baseline for 2025 includes $5-6 million in lumpy software/hardware renewals and approximately $2.4 million in managed services. Piluso stated the figure accounts for high renewal rates (approx. 94% by client count), emphasizing the stickiness of their services. He added that while moving a client from on-premise to cloud hosting can shift revenue types, it significantly improves margins from 15% to over 50%. He also confirmed that renewal contracts tend to grow, citing a 3:1 ratio of clients adding services and a contractual right to increase prices by up to 10% upon renewal.

Matthew Galinko inquired about LM Funding America's strategic outlook for Bitcoin mining infrastructure and equipment in 2026, considering the significant operational changes in 2025. He also asked about the company's approach to future site acquisitions and capital allocation between mining operations and direct Bitcoin purchases, aiming to maximize Bitcoin per share.

Answer

Chairman and CEO Bruce Rodgers highlighted the successful integration and growth potential of the Mississippi acquisition, including unexpected expansion opportunities, and the nearing completion of the Oklahoma site. CFO Richard Russell added that there is an additional 4 MW expansion capacity available in Mississippi. Bruce Rodgers further clarified that site acquisitions are continuously explored based on energy tariffs and property. Regarding capital allocation, he explained it's a long-term decision balancing Bitcoin and infrastructure prices, aiming for future payoff and considering the interplay between equity and Bitcoin markets, with mining supporting the overall treasury strategy.

Matthew Galenko with Maxim Group inquired about LM Funding America's strategic outlook for Bitcoin mining infrastructure and equipment in 2026, considering the significant operational changes in 2025. He also asked about the company's approach to future site acquisitions and its capital allocation strategy between mining operations and direct Bitcoin purchases, aiming to maximize Bitcoin per share.

Answer

Chairman and CEO Bruce Rodgers detailed the successful integration and expansion potential of the Mississippi site, the upcoming deployment of immersion machines at the Oklahoma facility, and the continuous exploration of new site acquisitions based on favorable energy tariffs. CFO Richard Russell highlighted an additional 4 megawatts of expansion capacity available in Mississippi. Mr. Rodgers further explained that capital allocation decisions are based on a long-term, five-year perspective, balancing mining profitability with direct Bitcoin accumulation to enhance overall treasury strategy and Bitcoin per share.

Matthew Galinko of Maxim Group sought details on LM Funding's acquisition pipeline for power assets, including target capacity, and questioned the company's strategy regarding potential diversification into AI data centers.

Answer

Executive Bruce Rodgers stated that LM Funding is targeting power assets between 5 and 20 megawatts, prioritizing locations with favorable contracts that allow for selling curtailed power back to the grid. Rodgers confirmed the company remains exclusively focused on Bitcoin mining, citing the high capital requirements, lack of customer access, and operational experience as prohibitive for entering the AI data center market. He emphasized their strategy is to profit from either mining Bitcoin or selling power back to the grid.

Matthew Galinko of Maxim Group asked for details on the Oklahoma mining site, including the current power rate and its sustainability, the potential for on-site expansion, and the company's deployment strategy if a planned Texas expansion does not proceed.

Answer

Executive Richard Russell stated the Oklahoma power cost is approximately $0.04/kWh and is expected to remain stable. An Unknown Executive confirmed the site can be expanded by 60 megawatts, though it would require a 9-month infrastructure build-out. If the Texas site is unavailable, Russell clarified they would pursue a dual strategy of finding quick-to-deploy sites while also starting the longer-term Oklahoma expansion.

Matthew Galinko asked about the role Hut 8's Bitcoin reserve plays in accessing project financing and funding for site builds.

Answer

CEO Asher Genoot explained that the Bitcoin reserve enables covered calls for yield and low-cost Bitcoin-backed revolvers for flexible capital. CFO Sean Glennan added that the reserve enhances creditworthiness with large counterparties, streamlining financing discussions and making it a 'check-the-box' exercise for larger AI data center deals.

Matthew Galinko asked about the role Hut 8's Bitcoin reserve plays in accessing project financing and financing for site builds.

Answer

CEO Asher Genoot explained that the Bitcoin reserve allows for covered call strategies to generate yield and provides access to low-cost Bitcoin-backed loans and revolvers without penalties. CFO Sean Glennan added that the Bitcoin holdings enhance the company's creditworthiness, making it easier to work with large counterparties and serving as a 'check-the-box' exercise for financing larger AI data center projects. Genoot also mentioned the ongoing strategic consideration of whether Bitcoin exposure should primarily reside at Hut 8 or American Bitcoin as the data center platform matures.

Matthew Galinko with Maxim Group inquired about the financial contributions from the Quantix deal, specifically asking about the $25 million revenue recognition over three years, expected margins on project revenue, and the potential for additional product revenue. He also asked about the composition of the $170 million business pipeline, particularly the representation of Trusted Platform Model (TPM) chips, and the commercialization path for WISe.ART 3.0 in conjunction with SealCoin for 2026.

Answer

John O'Hara, CFO of WISeKey, clarified the Quantix deal is for $25 million over three years, noting varying margins depending on whether it's equipment installation (lower margin) or professional services/IP (higher margin). He also mentioned expectations for product revenues even during the center's construction. Carlos Moreira, Founder and CEO, elaborated on the strategic importance of personalization centers for national semiconductor control, WISeKey's investment recovery, immediate semiconductor sales, and the broader ecosystem synergies with WISeSat.Space, SealCoin, and WISe.ART. Regarding the $170 million pipeline, Mr. Moreira explained it comprises Quantum Shield QS7001 upgrades, TPM chips, and personalization centers, driven by regulatory pushes for quantum resilience. For WISe.ART and SealCoin, he detailed the shift from art-focused NFTs to industrial digital twin generation, SealCoin's role in machine-to-machine payments, and plans for SealCoin to be listed on a top exchange, alongside the integration of WeCan for KYC-compliant blockchain solutions.

Matthew Galinko inquired about the financial contribution from the Quantix deal, specifically asking for details on the $25 million revenue recognition over three years, expected margins for project revenue, and the potential for additional product revenue.

Answer

John O'Hara, CFO & Board Member, clarified the Quantix deal is for $25 million over three years, noting that margins would vary, with equipment installation having lower margins and professional services/IP having higher margins. Carlos Creus Moreira, Founder, CEO & Chairman, emphasized the strategic importance of this first personalization center, highlighting the Spanish government's co-investment and the immediate opportunity for semiconductor sales even before the center is fully operational, creating synergies across WISeKey's ecosystem.

Matthew Galinko asked for details on the path to commercializing WISe.ART with its 3.0 release, potentially in conjunction with SealCoin, and expectations for this segment in 2026.

Answer

Carlos Moreira (CEO) explained that WISe.ART's original concept involved creating digital twins of physical objects secured by microchips for industrial applications, initially using art as an entry point. He acknowledged the impact of the NFT market collapse but emphasized re-educating the market towards WISe.ART's role as an industrial generator of digital twin components. SealCoin is positioned as the payment method for machine-to-machine transactions within this ecosystem, with plans for it to be listed on a major exchange soon. Moreira also mentioned WISeKey's investment in WeCan for KYC-compliant blockchain solutions, highlighting the convergence of these technologies into Web 3.0 cybersecurity and connectivity.

Matthew Galinko (Maxim Group) questioned DDC Enterprise's April joint venture's contribution to H1 2025 results and its H2 outlook, alongside prospects for future M&A/JVs to boost operating business and cash flow. He also probed DDC's Bitcoin yield enhancement strategies and its approach to structured Bitcoin purchases, considering MNAV and accretive capital deployment.

Answer

Norma Chu (Founder, CEO & Chairwoman, DDC Enterprise) clarified that the April JV will contribute from Q4 2025, with another potential JV by year-end. Kyu Ho (Chief of Staff, DDC Enterprise) outlined Bitcoin yield enhancement strategies focusing on principal protection, including passive yield funds and structured products. He emphasized that capital deployment for Bitcoin accumulation prioritizes increasing Bitcoin per share through accretive dilution, evaluating equity and convertible debt based on cost of capital.

Matthew Galinko of Maxim Group inquired about the expansion opportunities within the new Israel contract, the expected balance of growth between the U.S. and European markets over the next 12-18 months, and the company's M&A strategy for accelerating U.S. growth.

Answer

Ordan Trabelsi, President & CEO, explained that the Israel contract can grow by increasing unit deployments and adding new monitoring solutions like GPS tracking. He highlighted that while Europe offers large national projects, the U.S. market is a key focus due to its larger size, higher margins, and faster, recurring revenue potential from county-level contracts. Trabelsi confirmed that with a stronger balance sheet, Supercom is actively evaluating acquisitions of U.S. service providers to accelerate market penetration, similar to its successful LCA acquisition.

Matthew Galinko inquired about SuperCom's R&D focus for maintaining its technological edge, the strategy for U.S. market expansion, and the potential political risks to its major project in Romania.

Answer

Executive Ordan Trabelsi explained that R&D efforts are focused on integrating AI, improving GPS reliability in urban environments, and extending battery life. Regarding the U.S., he described the strategy as 'planting seeds' in a fragmented market, where small initial contracts expand through performance and word-of-mouth. For Romania, Trabelsi assured that the domestic violence monitoring program is supported by major parties and mandated by the EU, minimizing risk from local elections.

Matthew Galinko asked about the sustainability of gross margins above 40%, the next steps for the U.S. market expansion, and the potential for M&A to consolidate partners in the U.S.

Answer

Executive Ordan Trabelsi explained that while gross margins benefit from scale and adding more units in a region, volatility is still possible based on project mix. For the U.S., he outlined a strategy of continued expansion with an active sales team, starting with smaller contracts and progressively targeting larger ones, similar to their European growth model. Regarding M&A, Trabelsi confirmed it's an opportunity, noting that the company's stronger balance sheet and reduced debt make such deals more likely, pending the right price and strategic fit.

Matthew Galinko of Maxim Group asked about SuperCom's European project pipeline for 2025, the nature of new bids, and the strategy for accelerating U.S. market expansion. He also requested details on the new Israeli national project, including its structure, expansion potential, margin profile, and implementation timeline.

Answer

Executive Ordan Trabelsi explained that SuperCom is leveraging its track record to pursue large national projects in new European countries, often displacing incumbents with superior technology. Regarding U.S. expansion, he noted the company is balancing growth with profitability, strategically adding resources without the heavy cash burn of a venture-backed firm. For the Israeli deal, Trabelsi described it as a 5-year extendable lease model with partner Electra, starting with ~1,500 offenders and holding rights to all future national EM programs. He highlighted that margins on incremental units are significantly higher and the project will ramp up over a six-month handover period.

Matthew Galinko of Maxim Group inquired about the competitive environment for winning business from digital asset treasury companies and Galaxy's success in engaging these new players.

Answer

Founder, CEO & Director Michael Novogratz noted that while Galaxy is seeing a tremendous amount of opportunity and has engaged with over 20 companies, the peak of new company issuance may have passed. He highlighted that the focus will shift to which existing companies become dominant players and that these vehicles have been highly effective at bringing new investors into the crypto space.

Matthew Galinko asked for clarification on the R&D run-rate after a Q1 tape-out expense, the expected timing for North American revenue, and gross margin expectations during the initial production ramp.

Answer

CFO Karine Pinto-Flomenboim projected the annual OpEx burn to be between $32 million and $34 million, with the R&D component being about $25 million for the year. CEO Jacob Marenko confirmed that North America is about a year behind Europe, making a 2028 revenue start for 2029 model years a realistic timeline, noting GM's recent selection of NVIDIA as a positive sign. Regarding margins, Pinto-Flomenboim explained that while the long-term target is 50-60%, the initial 'SAFE launch' phase for the first 100,000-200,000 units will have margins of 30-35% due to extra testing costs.

Asked for more detail on the market traction of the new MultiSensor product, which verticals are adopting it, and how to model operating expenses for 2025 given the conflicting trends in Q4 versus the full year.

Answer

The MultiSensor product is seeing positive traction, particularly in high-security verticals like corrections and utilities, and is central to the company's growth strategy. Regarding operating expenses, management expects a modest increase from the Q4 level in 2025 as the company continues to invest in headcount to support sales growth, while still managing costs diligently.

Matthew Galinko asked about the run-rate business prospects for LHD in Europe after clearing its backlog, the company's M&A strategy for the current year, and the performance of the LineDrive sales partnership.

Answer

CFO Roger Shannon projected LHD's revenue to be around EUR 8 million for the year as it builds a new pipeline, with potential upside from new tenders. Executive James Jenkins outlined a dual growth strategy: organic growth from a new sales team and cross-selling, and an M&A focus on smaller acquisitions in the decontamination services space. Jenkins also confirmed the LineDrive partnership is performing well and his optimism is increasing.

The analyst asked for more details on the multiyear backlog from the acquired LHD business, including the timeline for clearing it. He also inquired about the opportunity and timeline for expanding the company's services business across its geographic footprint.

Answer

Executives stated they expect to ship 80-90% of the LHD multiyear backlog in Q4, which gives them confidence in their revenue forecast. They have ramped up production and made a key strategic hire to lead the German operations. Regarding services, expansion is a priority for the next fiscal year, with business cases being developed for regions like Latin America, but it is too early to quantify the financial impact.

Inquired about the convertibility of the LHD backlog, strategies to capture untapped opportunities in the European industrial market, plans to expand LHD's service and maintenance business globally, and the current market penetration of such services.

Answer

The company is confident in converting the LHD backlog, noting competitors face similar delays. To grow in Europe, they will increase end-user engagement and revamp logistics. They see the LHD service model as a significant, scalable opportunity for both organic and inorganic expansion into new markets like Latin America, driven by the need for gear decontamination. They believe the market penetration for these services is still very low, representing a large growth runway.

Matthew Galinko of Maxim Group asked about the risk of attrition in LHD's significant order backlog, the strategy to improve performance in European markets, and the plan to expand LHD's gear maintenance and service business into other regions.

Answer

CEO James Jenkins stated that delivery challenges are common in the German market, and they are not seeing significant customer attrition from LHD's backlog. He explained that European industrial sales will be improved by shifting to an end-user engagement model. Regarding the LHD service business, Jenkins described it as a scalable and significant opportunity, confirming they are exploring both organic and inorganic expansion, with Latin America as a near-term focus. Executive Roger Shannon added that LHD's proprietary software for tracking services is a key differentiator they plan to leverage globally.

Asked about the source of confidence in the Q4 outlook, the business model for the telemetry software, and the long-term potential for software to become a material part of the company's revenue mix.

Answer

Confidence in the Q4 forecast is based on a strong backlog, sales forecasts, and the beginning of a product replacement cycle for units in the field. Executives confirmed there is a recurring revenue model for the telemetry software, and the company's aspiration is to make it a material part of the business long-term.

Asked if the company had previously lost deals due to product gaps that it can now fill, and questioned how quickly new sales hires are expected to contribute to revenue in the current macro environment.

Answer

The company has missed deals in the past because it lacked certain product variations needed by customers seeking a one-stop supplier, and filling these gaps is expected to help win more business. New sales hires are expected to contribute to revenue within 3-6 months because the company is recruiting experienced professionals with existing industry networks, who are not starting from scratch.

Asked for more details on the $100 million sales pipeline, including any recent changes to its composition or the company's confidence in converting it.

Answer

The $100 million pipeline represents high-confidence, though not guaranteed, orders that stretch out over several years. It reflects the growing build-out of fleets for existing customers and the addition of new ones. The timing is subject to the customers' forklift replacement schedules, which can move around, but the pipeline itself is solid.

Inquired about the development of the first responder market in the U.S. for the Optimus platform, the potential impact of U.S. tariffs on costs and delivery, the competitive landscape for drone-in-a-box solutions, and whether rail network redundancy goals could open the door for competitors.

Answer

The company sees significant and growing interest in the U.S. first responder market, highlighting a successful pilot program. They do not expect a major impact from tariffs due to limited sourcing from China. For drone-in-a-box, Optimus is differentiated by its battery swapping and industrial-grade dock, with Skydio and DJI being the main competitors. The company does not see any new competition for its 802.16 standard on private rail networks.

Matthew Galinko asked about the potential impact of the U.S. election on the DFR market, the recent acceleration of marketing the Optimus system to military customers, and the company's ability to scale production for Optimus.

Answer

CEO Eric Brock stated that support for drone technology is bipartisan, viewing the political landscape as a net positive for the domestic drone industry. He confirmed the military opportunity for the Optimus system has emerged 'a bit quicker' than anticipated, driven by global defense trends. Regarding production, he expressed confidence in current capabilities for the high-end system but noted the company is actively working to broaden its supply chain and establish local production in the U.S.

The analyst requested an update on the smart tolling project's status and potential for expansion, and also asked for guidance on operating expense trends for the upcoming year.

Answer

The company confirmed that significant shipments for the smart tolling application continued in Q4 and that they are supporting operators in US expansion and international bids. Regarding spending, OpEx is not expected to increase and will likely be lower than in 2023, with a formal update to be provided with Q1 results.

Asked if the delay from the primary OEM affects decisions on new platforms with them, inquired about other significant programs expected to be decided in 2024, and requested an outlook for the smart infrastructure business for 2024.

Answer

The company stated the current delay is for a few months and there's no discussion on changes to future platforms with the primary OEM. They highlighted another major opportunity with a European trucking OEM expected to be decided by year-end. For smart infrastructure, they expect to fulfill multiple multimillion-dollar contracts in 2024, an increase from the single major contract in 2023.