Scott Buck

Scott Buck of H.C. Wainwright inquired about Usio's strong pipeline of future opportunities, specifically asking if there were any changes in sales cycles that could impact the timing of these opportunities. He also asked about Usio's ability to accelerate customer adoption and the potential impact of a federal government shutdown on state and local government business. Finally, Buck sought clarification on Usio's M&A criteria and the remaining balance on the share repurchase authorization.

Answer

Louis Hoch, Founder, Chairman, CEO and President, Usio, stated that the pipeline is strong, with a focus on accelerating implementations rather than sales cycles, noting that implementation pace is largely outside Usio's direct control. Greg Carter, EVP of Payment Acceptance and Chief Revenue Officer, Usio, added that the UCO One initiative helps standardize internal processes but customer integration remains variable. Regarding the government shutdown, Louis Hoch mentioned receiving calls from cities and counties for bridge payments, but many programs were put on hold due to the anticipated end of the shutdown, a point echoed by Michael White, SVP and Chief Accounting Officer, Usio. Louis Hoch outlined Usio's M&A criteria: synergy (people, industry, or technology), fair valuation, and absence of significant operational issues. Michael White confirmed over $3 million remains on the current share repurchase authorization.

Scott Buck of H.C. Wainwright inquired about changes in sales cycles and the pace of adoption for Usio's strong pipeline opportunities. He also asked about the potential impact of the federal government shutdown on state and local government business, Usio's M&A criteria, and the remaining balance on the share repurchase authorization.

Answer

Louis Hoch, Chairman and CEO, indicated that while the pipeline is strong, implementation speed is largely outside Usio's control, though Usio One aims to standardize internal processes. Greg Carter, EVP of Payment Acceptance and Chief Revenue Officer, elaborated that adoption nuances vary by business unit. Regarding the government shutdown, Mr. Hoch noted an increase in inquiries from local governments for bridge payments, but some programs are now on hold. Michael White, SVP and Chief Accounting Officer, confirmed some programs were delayed. Mr. Hoch detailed Usio's M&A criteria: synergy, fair valuation, and absence of significant operational issues. Mr. White confirmed over $3 million remains on the share repurchase authorization.

The analyst asked about the reasons for gross margin improvement, details on operating expense reductions, the factors determining the range of the revised revenue guidance, and the company's sensitivity to a potential economic slowdown.

Answer

The company attributed margin improvement to a favorable product mix (strong ACH growth) and efficiency gains. OpEx savings are from automation and not backfilling positions. The guidance range depends on the implementation speed of two large clients. The company believes it is well-insulated from economic downturns due to its non-retail, B2B, and government-related business segments.

Inquired about the potential for gross margin recovery to the mid-20s, the company's capacity for growth within its current cost structure, the criteria for potential M&A, and the reasons for positive investor sentiment and stock performance.

Answer

Executives stated the goal is 25% gross margin and that the company has significant operating leverage to grow without major cost increases. M&A criteria are strict, focusing on synergies, valuation, and self-sufficiency of the target. Positive investor sentiment is attributed to positive EPS, cash flow, a healthy balance sheet attracting quant funds, and an attractive valuation.

Scott Buck of H.C. Wainwright & Co. inquired about Usio's 2025 revenue guidance, specifically asking about visibility, the cadence of growth throughout the year, and customer concentration. He also questioned the company's capital allocation strategy, asking how it prioritizes share repurchases against business reinvestment and potential M&A. Finally, he asked if the change in the federal administration has impacted sales conversations with government entities.

Answer

CEO Louis Hoch stated that 2025 revenue growth is expected to be back-end loaded as new implementations go live and confirmed that the projected 14-16% growth is widespread, not reliant on a few large customers. Regarding capital allocation, Hoch noted the Board's $4 million repurchase authorization and affirmed the company's active but selective approach to M&A, funded by positive cash flow. Greg Carter, Chief Revenue Officer, added that from a PayFac perspective, the administration change has no real effect, but it might open doors in the funds disbursement space, though there was nothing specific to comment on at the time.

Scott Buck of H.C. Wainwright & Co. inquired about the gross margin potential in the Output Solutions segment, specifically the difference between electronic and paper delivery. He also asked about Usio's capital allocation strategy, including potential M&A, given the company's increasing cash position.

Answer

CEO Louis Hoch explained that electronic delivery offers nearly pure margin, whereas paper delivery has about a 20% gross margin, presenting a significant opportunity for expansion. Regarding capital allocation, Hoch noted that while Usio is actively looking, the M&A market has been challenging, but the company remains hopeful for better opportunities to deploy its growing cash reserves.

Scott Buck from H.C. Wainwright & Co., LLC asked about the drivers of the gross margin improvement, specifics on operating expense reductions, the factors determining the high and low ends of the revised revenue guidance, and the company's exposure to a broader economic slowdown.

Answer

CEO Louis Hoch attributed the gross margin improvement to a favorable business mix, particularly strong growth in the high-margin ACH segment, as well as efficiency gains from new machinery and process improvements. He explained that the revised revenue guidance range depends on the implementation speed of two large national accounts. Hoch also reiterated USIO's strategy of avoiding direct retail exposure, noting that their diverse business model is insulated from macroeconomic pressures and can sometimes benefit from government stimulus activities during downturns.

Scott Buck inquired about the effort and timeline involved in redesigning G5 Infrared's product line to utilize BlackDiamond glass, and whether this redesign impacts near-term sales of existing products. He also asked if the recently announced $40 million order from a leading global technology customer was factored into the initial $55 million annual revenue expectation at the time of the G5 acquisition.

Answer

CEO Sam Rubin indicated that one to two more cameras are expected to be redesigned within two to three months, with more complex systems requiring greater effort, and that the redesign does not hinder current product delivery. He noted that customers are already placing orders for the new germanium-free versions. CFO Al Miranda clarified that the initial revenue expectation from this customer during due diligence was approximately $9 million annually, which has now more than doubled, compared to the $4 million G5 previously generated from them.

Scott Buck asked about the effort and timeline involved in redesigning G5 Infrared's products to be germanium-free, and whether this redesign would impact the ability to sell existing products in the near term. He also questioned if any revenue from the recently announced $40 million order from a global technology customer was included in the initial $55 million annual revenue projection at the time of the G5 acquisition.

Answer

CEO Sam Rubin explained that redesign efforts vary, with one to two more cameras expected to be redesigned in the next two to three months, while larger, more complex systems require more effort. He confirmed that the redesign does not prevent selling current products, and customers are already placing orders for the new germanium-free versions. CFO Al Miranda clarified that the initial due diligence estimated this customer at a $9 million annual run rate, which has now more than doubled, indicating significant incremental revenue beyond the acquisition's initial projections. Prior to the acquisition, this customer generated about $4 million with G5 Infrared.

Scott Buck asked about the effort and timeline involved in redesigning G5 Infrared's product line to use BlackDiamond glass, and whether this impacts near-term sales. He also questioned if the $40 million order from a global technology customer was factored into the initial $55 million annual revenue forecast at the time of the G5 acquisition.

Answer

CEO Sam Rubin stated that redesigning one or two more cameras is expected in the next two to three months, with larger ones taking more effort, but current materials allow for deliveries. He added that customers are already placing orders for germanium-free versions, driving business. CFO Albert Miranda clarified that the initial due diligence for this customer projected around $9 million annually, significantly less than the current $40 million order, which was largely incremental.

Scott Buck asked about potential capacity constraints for the rapidly growing G5 business and inquired about the strategy for integrating the sales teams of LightPath and G5 post-acquisition.

Answer

Executive Sam Rubin detailed that G5 has sufficient assembly capacity, has secured detector supply through large pre-orders, and can leverage LightPath's optics manufacturing in Latvia or Orlando to mitigate component lead times. He also disclosed the recent resignation of the VP of Sales for personal reasons but assured that the existing camera sales team is working closely with G5, with Rubin himself actively involved in business development to open new doors.

Scott Buck inquired about the backstory of the G5 Infrared acquisition and whether G5's business exhibits any seasonality that should be considered for financial modeling.

Answer

CEO Sam Rubin explained the deal stemmed from a 30-year relationship, allowing LightPath to make a preemptive offer. CFO Albert Miranda added that G5's sellers valued LightPath's commitment to growth over a sale to a larger entity that might dismantle the company. Regarding seasonality, Albert Miranda confirmed it exists, tentatively identifying LightPath's Q3 and Q4 as lighter revenue periods for G5 and Q1 and Q2 as heavier, pending further analysis.

Asked about the production timeline for the Lockheed missile program following a potential award, the gross margin profile for the growing assemblies and engineering services business, and the company's necessary operating cash balance.

Answer

Production on the Lockheed program could begin within three months of a decision. Gross margins on assemblies and modules are expected to be higher than historical averages, north of 40%. The company projects to be operating cash flow positive and does not anticipate needing large amounts of cash for CapEx as in prior years.

Scott Buck asked about the production ramp-up timeline for the Lockheed missile program following a decision, the expected gross margin dynamics given the revenue shift to assemblies, and the company's necessary operating cash balance.

Answer

CEO Sam Rubin stated that LightPath could begin shipping for the Lockheed program within approximately three months of a decision. CFO Albert Miranda projected that gross margins on assemblies and modules should be north of 40% and confirmed the company projects to be operating cash flow positive, with a recent loan serving as a buffer for CapEx or business development initiatives.

Scott Buck of H.C. Wainwright & Co., LLC asked whether the recent introduction of tariffs has caused any changes in customer booking schedules or behavior.

Answer

CEO Zvi Schreiber acknowledged that in Q2, tariff announcements drove short-term 'whiplash shipping' as customers rushed to ship ahead of deadlines. He noted that with the situation now more settled, the uncertainty has decreased, and customers are returning to more stable, long-term planning.

Scott Buck of H.C. Wainwright & Co., LLC inquired about the drivers for gross margin expansion, volume expectations for new products, the composition of the 2025 revenue guidance, distributor inventory practices, and the long-term commercialization strategy for the AetherLux heat pump technology.

Answer

Founder & CEO Steven Rossi explained that gross margin gains will come from operational efficiencies and economies of scale, which are offsetting domestic inflation. He detailed production targets for the HD3, Solace, and Core products and confirmed distributors are stocking significant inventory volumes. Regarding AetherLux, Rossi stated that while the primary plan is to manufacture, the company is evaluating all opportunities, including potential acquisitions, to maximize shareholder value. Senior Business Consultant Faran Ali clarified that the $20 million revenue guidance is based on tonneau covers alone, with Core and Solis sales representing potential upside.

Scott Buck inquired about the drivers for gross margin improvement, sales forecasts for new products (Core, Solis), the inventory practices of distributors, and the long-term commercialization strategy for the Aetherlux heat pump technology.

Answer

Steven Rossi and Faran Ali explained that gross margin gains are driven by operational efficiencies and economies of scale, offsetting inflation. The $20M revenue guide is based on tonneau covers, with Core and Solis sales being potential upside. Distributors are actively stocking inventory, with order volumes increasing. For Aetherlux, all options are on the table, including manufacturing, licensing, or even a potential sale/acquisition of the technology, given strong interest from major corporations.

Scott Buck of H.C. Wainwright & Co. inquired about the distribution strategy for the upcoming COR and SOLIS products and the key drivers behind the expected gross margin improvement for the remainder of the year.

Answer

CEO Steven Rossi explained that the initial launch for COR and SOLIS will be direct-to-consumer to gather feedback and recoup R&D costs, with a potential rollout to the existing dealer network later in the year or early 2026. Rossi also clarified that gross margin improvement is driven by both economies of scale from increased production and a strategic shift towards higher-priced, premium products.

Scott Buck asked for clarification on the drivers differentiating the high and low ends of the 2025 revenue guidance, the potential for increased marketing expenses with new product launches, the strategy for balancing profitability with reinvestment, and current manufacturing capacity.

Answer

CEO Steven Rossi explained that the low end of the revenue guidance (~$20M) is based on tonneau cover sales alone, while the high end (~$34.5M) incorporates a strong launch of the SOLIS and COR products. He confirmed marketing spend will increase but will be ramped carefully to manage customer acquisition costs. Rossi emphasized that margin improvements will stem from engineering and economies of scale, not by making products inferior. He also noted that manufacturing capacity is more efficient than anticipated, likely requiring investment in machinery rather than a costly building expansion to meet future demand.

Scott Buck of H.C. Wainwright & Co., LLC asked about the specific sales and marketing strategies driving the significant increase in customer applications. He also inquired about the current competitive landscape, including competitor movements on the credit spectrum and pricing strategies.

Answer

President & Chief Growth Officer Derek Medlin explained that the 91% growth in applications resulted from a focused, year-long strategy emphasizing digital marketing and customer referrals to build top-of-funnel activity. On the competitive front, Medlin noted a stable environment in the prime financing space and highlighted Catapult's strategy of using dynamic, individualized pricing to optimize conversion and repeat business, which he believes is a winning play supported by merchant partners.

Inquired about the specific sales and marketing strategies driving the acceleration in applications and asked for observations on the competitive environment, particularly regarding competitors' movements on the credit ladder and their pricing strategies.

Answer

The company attributed the application growth to a deliberate digital marketing and customer referral strategy focused on sourcing customers directly. On the competitive front, the financing environment above them has been stable. Catapult's strategy is to optimize for risk, conversion, and repeat business by offering unique pricing to each consumer, which they believe is a winning play supported by their merchant partners.

Inquired about the drivers of KPay's momentum (greenfield vs. market share), whether KPay users have a higher repeat customer rate, and the outlook for Q2 and full-year gross originations growth.

Answer

The company attributes KPay's success to a large greenfield opportunity, not cannibalization. KPay and app users do have a higher LTV and repeat rate because the platform makes it easy to shop across different merchants and categories. For Q2, the company expects 25% to 30% gross originations growth and reiterated its full-year guidance of at least 20% growth.

Inquired about whether macro uncertainty could accelerate merchant acquisition, the consistency of Q1 tax season trends, planned OpEx investments for 2025, and the timing of the credit facility refinancing.

Answer

Management believes a stressed macro environment makes their growth proposition more relevant and can accelerate merchant acquisition. Q1 tax season seasonality was consistent with prior years. The only planned OpEx increases are for investments in technology and marketing to drive growth. The company had no new updates on the timing of the refinancing.

Inquired about the specific merchants or products driving KPay demand, the maturation timeline for new referral partnerships, Q4 seasonality around the holidays, and the recent patent infringement lawsuit.

Answer

KPay demand is diversified across many major retailers and is not concentrated. Referral partnerships can be activated quickly, but maturing them to ensure quality takes time and is a key focus for Q4 and 2025. A significant portion of Q4 originations comes from the holiday period. Regarding the lawsuit, the company is evaluating it and intends to defend itself vigorously, with no current financial impact.

Asked for clarification on the recent DoD contract, the broader opportunity within the DoD, marketing strategies for the new AWS/Azure marketplace presence, and the status of reseller partnerships.

Answer

The CEO clarified the DoD contract is both an extension and expansion. He highlighted a significant domestic opportunity for critical infrastructure protection, similar to their DoD work. For marketplaces, they will follow a playbook of best practices. The company is actively refining its reseller channel, focusing on MSPs and MSSPs.

Scott Buck from H.C. Wainwright & Co., LLC inquired about the nature of the $3 million Department of Defense contract, the broader opportunity within the DoD, marketing strategies for Intrusion Shield on cloud marketplaces, and the current status of reseller partnerships.

Answer

President, CEO & Director Tony Scott clarified that the DoD contract is both a renewal and an expansion with an increased dollar value and scope. He expressed excitement about domestic critical infrastructure opportunities, noting the company will follow a playbook of best practices to market its products on cloud marketplaces. Scott also mentioned that Intrusion is refining its reseller channel, focusing on MSPs and MSSPs, and dropping underperforming partners.

Scott Buck of H.C. Wainwright & Co. inquired about the anniversary date of a large Shield client's departure, the size and nature of new Shield logos, and the potential impact of recent election results on government business.

Answer

CEO Anthony Scott and CFO Kimberly Pinson clarified that the revenue from the lost client ended in Q1, which should improve year-over-year growth comparisons. Scott explained that new logos are varied, with a growing reputation in the Asia Pacific region leading to larger deals. He also noted that while cybersecurity demand is apolitical, a government continuing resolution could pose a risk.

Scott Buck from H.C. Wainwright & Co., LLC inquired about Yatra's appetite for further M&A in the MICE segment, the specific regulatory hurdles remaining in the share restructuring, and the associated operating expenses for the quarter.

Answer

Co-Founder & CEO Dhruv Shringi responded that while the company is open to M&A in the attractive MICE sector, the focus has been on integrating the Globe acquisition. Regarding the share restructuring, he described it as a complex, multi-jurisdictional regulatory process without providing specific details but confirmed it's a top priority. He also noted that related expenses were not material in Q1 FY26, unlike the previous quarter.

Scott Buck from H.C. Wainwright & Co., LLC inquired about Yatra's appetite for further M&A in the MICE segment and sought details on the remaining hurdles and costs associated with the U.S. to India share restructuring.

Answer

Co-Founder & CEO Dhruv Shringi stated that while the company is open to M&A in the attractive MICE sector, the immediate focus has been on integrating the Globe acquisition. Regarding the share restructuring, he described it as a complex, multi-jurisdictional regulatory process and noted that related operating expenses were not material in Q1 but were significant in the prior quarter.

Scott Buck of H.C. Wainwright & Co., LLC inquired about the potential business impact of geopolitical tensions, progress on the corporate restructuring for share fungibility, opportunities for MICE acquisitions, and the company's operating leverage for future growth.

Answer

CEO Dhruv Shringi stated that Northern India, representing about 30-35% of business, could be affected by border tensions. He confirmed a viable corporate structure for share fungibility is now defined, with procedural implementation underway. Shringi also noted that Yatra is open to more MICE acquisitions post-integration of Globe Travel and believes the company can grow revenue 30-40% without significant changes to its cost structure.

Scott Buck of H.C. Wainwright & Co. inquired about the total addressable market for MICE in India, the typical ramp-up time for new corporate clients, the revenue contribution from the Globe India acquisition, and the timeline for the board's review of the company's legal structure.

Answer

CEO and Co-Founder Dhruv Shringi explained that the MICE market in India is a highly fragmented $8-10 billion opportunity, offering significant long-term growth. He detailed that corporate client ramp-up takes 3-6 months for smaller accounts and 6-9 months for larger ones. While not providing a specific quarterly contribution for Globe, he offered a baseline of its prior year's revenue less service costs ($5.3-5.4 million). Regarding the corporate structure, Shringi noted that meaningful progress has been made and he is hopeful for a concrete update in the near future.

Scott Buck of H.C. Wainwright & Co. inquired about the integration process and cross-selling timeline for the Globe Travels acquisition, the primary growth opportunities in the MICE segment over the next two years, and the drivers behind the persistent price competition in the B2C business.

Answer

CEO and Co-Founder Dhruv Shringi explained that the Globe Travels integration is a two-step process, with supply-side benefits accruing now and technology-driven cross-selling and cost optimization expected to begin in early January (Q4). He projected the MICE business could grow 20-25% annually for the next 2-3 years, driven by cross-selling to Yatra's large existing corporate client base. Regarding the B2C segment, Shringi noted that price competition initiated by a major domestic airline is likely to continue, shifting Yatra's strategy to focus on value-added services and using flights for customer acquisition rather than profitability.

Scott Buck asked about the Q3 revenue guidance, seeking to understand how much is already secured versus what needs to be earned. He also inquired about customer concentration within the VDR pipeline and whether the sales process for VDR is becoming more efficient.

Answer

Co-Founder, CEO, President & Director Ryan Steelberg reiterated that the company has the 'smallest delta of go get' revenue needed to hit its guide in a very long time, indicating high confidence from contracted opportunities. On VDR, he explained that while the market spend is concentrated among about 50 large tech companies, Veritone is engaged with nearly all of them. He confirmed the sales process is improving, evidenced by repeat business and a growing pipeline, which is building customer confidence and trust.

Scott Buck of H.C. Wainwright & Co. inquired about the visibility and confidence in the significant second-half revenue ramp implied by the annual guidance, asking for more detail on the key drivers and the nature of the recent doubling of the Veritone Data Refinery (VDR) pipeline.

Answer

Executive Ryan Steelberg explained that the second-half growth is expected to be dominated by the Public Sector and Veritone Data Refinery (VDR) segments. He noted high visibility on the size of Public Sector deals, with timing being the main variable. For VDR, he expressed confidence in its growth velocity and potential upside. Steelberg clarified that the VDR pipeline's recent growth from $5 million to over $10 million is due to multiple new contracts with new partners and prospective clients.

Scott Buck inquired about opportunities to improve the selling process or optimize pricing amid accelerating AI demand, and also asked about the potential wallet share remaining within the existing customer base.

Answer

CEO Keyvan Mohajer noted that SoundHound uses its own AI to improve internal development efficiency and is exploring AI for sales, while being mindful of regulations. CFO Nitesh Sharan added that wallet share penetration is still very low with a "ton of runway" for growth, as customer AI budgets expand and new revenue streams like voice commerce are introduced.

Scott Buck asked if the reaffirmed revenue guidance of $157 million to $177 million is based on organic growth or if it includes potential M&A. He also questioned whether a challenging macroeconomic environment could serve as a revenue catalyst for the company.

Answer

CFO Nitesh Sharan confirmed the guidance is entirely organic and does not depend on future M&A, citing a tremendous organic growth opportunity. While open to strategic acquisitions that are operationally sound and correctly priced, none are required to meet the outlook. Sharan also affirmed that the business is resilient to macro shifts, as AI solutions address both innovation for growth and efficiency for cost savings. He emphasized that the move to conversational AI is a generational shift and that AI's share of IT budgets continues to grow, insulating the company from short-term economic volatility.

Scott Buck asked how SoundHound is prioritizing its expansion into secondary verticals like healthcare and retail and whether it has the capacity to pursue them all simultaneously. He also inquired about the expected timeline for realizing cross-selling and upselling momentum.

Answer

CFO Nitesh Sharan explained that as a platform company, they prioritize verticals with the biggest use cases and are investing in a high-ROI go-to-market strategy using both direct sales and channel partners. On cross-selling, he noted that while some opportunities are near-term, particularly with contract renewals, the momentum will build over the next 6-9 months and beyond as product stacks are integrated.

Scott Buck of H.C. Wainwright & Co. asked about the company's capacity and resource allocation across key verticals like restaurants, retail, and auto for 2025. He also sought clarity on whether the increased financial outlook was driven by the legacy business, recent acquisitions, or a combination of both.

Answer

CFO Nitesh Sharan responded that while all segments are growing, the most significant growth is expected from the AI agent business. He emphasized the large expansion opportunity within existing QSR customers and new verticals like healthcare and finance. Sharan confirmed the improved outlook is driven by a combination of strong organic growth in the legacy auto and restaurant segments, plus significant cross-sell and upsell synergies from the recent acquisitions.

Scott Buck of H.C. Wainwright & Co., LLC asked about Mogo's strategy for balancing Bitcoin accumulation with reinvestment in the business, its appetite for M&A, the regulatory timeline for its crypto trading initiative, and the outlook for its lending business.

Answer

President, CFO & Director Gregory Feller explained that Mogo plans to do both, using Bitcoin as a hurdle rate for all capital allocation decisions. He noted that M&A would be considered if strategic and met this hurdle rate. Feller estimated a minimum six-month regulatory process for crypto trading, leveraging existing infrastructure to manage costs. He also characterized the lending business as a stable, profitable segment that will support, but not lead, the company's primary growth drivers of Wealth and Payments.

Scott Buck inquired about the company's capital allocation strategy, specifically balancing Bitcoin accumulation with reinvestment in the business, their appetite for M&A, the timeline and costs for the new crypto trading initiative, and the outlook for the lending business.

Answer

Gregory Feller stated that the company plans to do both invest in Bitcoin and the business, using Bitcoin's potential return as a hurdle rate. They have ample liquidity to do so. M&A is a possibility but must be strategic and meet that same high return hurdle. The regulatory process for crypto trading is expected to take at least six months with manageable investment, and the lending business is expected to continue its disciplined growth, supporting the primary growth areas of wealth and payments.

Inquired about the state of consumer credit, the long-term strategy for the lending business, the financial structure of the partnership with Tom Lee and Fundstrat, and the potential dollar impact of declining interest rates on the company's credit facility.

Answer

The company is maintaining a relatively flat loan book, prioritizing wealth and payments, but views the lending business as a valuable long-term asset with improving charge-off rates. The partnership with Tom Lee is a cash-based marketing agreement with no equity involved. Regarding interest rates, every 1% reduction would result in approximately $500,000 in annual cash savings for the company.

Scott Buck from H.C. Wainwright & Co. asked about the current state of consumer credit, the long-term strategy for the lending business, the financial terms of the new Fundstrat partnership, and the potential annual savings from declining interest rates.

Answer

President and CFO Gregory Feller stated that while the loan book is currently flat as they prioritize wealth and payments, the lending business remains a valuable, under-monetized asset with improving net charge-off rates. He clarified the Tom Lee partnership is a fee-based marketing agreement with no equity involved. Feller also quantified that every 1% decrease in interest rates would result in approximately $0.5 million in annual cash savings for the company.

Scott Buck of H.C. Wainwright & Co., LLC asked about the extent of customer overlap between the newly acquired ESCO and the legacy Transcat business to gauge cross-selling opportunities. He also inquired about Transcat's current market share and whether its market position provides opportunities for increased pricing.

Answer

President & CEO Lee Rudow explained that while there is capability overlap, ESCO's revenue in the New England region is about five times larger than Transcat's existing operations there, presenting a significant opportunity. He plans to integrate the facilities to leverage combined strengths, noting that Transcat's access to capital will uniquely fuel ESCO's growth potential. Regarding market share, Rudow stated it's difficult to quantify precisely but outlined three major growth avenues: outsourcing in-house calibration labs (CBLs), where Transcat has a strong value proposition; competing against single-product OEMs by offering a comprehensive service for all plant instruments; and continuing to consolidate the fragmented third-party provider market through acquisitions.

Scott Buck from H.C. Wainwright & Co., LLC inquired about the extent of customer overlap between the newly acquired ESCO and legacy Transcat operations to gauge cross-selling potential. He also asked for an assessment of Transcat's current market share and whether its market position creates opportunities for price increases.

Answer

President and CEO Lee Rudow explained that while there is capability overlap, ESCO's operation in the New England region is about five times larger than Transcat's legacy facility, presenting a significant opportunity to combine forces and leverage Transcat's capital for growth. Regarding market share, Rudow noted it's difficult to calculate precisely but identified major growth opportunities in outsourcing in-house calibration labs (CBLs) and consolidating the fragmented third-party market.

Scott Buck of H.C. Wainwright & Co., LLC asked about the extent of customer overlap between the newly acquired ESCO and the legacy Transcat business to gauge cross-selling opportunities. He also inquired about Transcat's current market share and whether its market position allows for increased pricing power.

Answer

President & CEO Lee Rudow explained that while there is capability overlap, ESCO's revenue in the New England region is about five times larger than Transcat's existing operations there. He emphasized that the key opportunity lies in combining ESCO's expertise with Transcat's access to capital to drive growth. Regarding market share, Rudow noted it's difficult to calculate precisely but detailed significant growth runways, including outsourcing in-house labs (CBLs), competing against OEMs with a single-source value proposition, and consolidating the fragmented third-party market.

Scott Buck asked about the extent of customer overlap between the newly acquired ESCO and the legacy Transcat business to gauge cross-selling opportunities. He also inquired about Transcat's current market share within the industry and whether its market position allows for opportunities to increase pricing.

Answer

CEO Lee Rudow explained that while there is capability overlap, ESCO's business in the New England region is about five times larger than Transcat's legacy operations there. He plans to integrate the facilities to leverage combined strengths, noting that Transcat's ability to provide capital will be a key driver of future growth for the ESCO operations. Regarding market share, Rudow stated it's difficult to quantify precisely but highlighted significant runway for growth. Key opportunities include outsourcing in-house labs (CBLs), where Transcat has a strong value proposition, competing against single-product OEMs, and continuing to consolidate the fragmented third-party market.

Scott Buck from H.C. Wainwright & Co., LLC asked about the degree of customer overlap between the newly acquired ESCO and the legacy Transcat business to understand cross-selling opportunities. He also inquired about Transcat's current market share and whether there are opportunities to increase pricing.

Answer

President and CEO Lee Rudow explained that while there is capability overlap, ESCO's business in the New England region is about five times larger than Transcat's legacy operations there. He sees a significant opportunity by combining forces and providing ESCO with capital to expand. Regarding market share, Rudow noted it's difficult to calculate precisely but detailed the large addressable market, including opportunities to outsource in-house labs, compete against single-service OEMs, and consolidate the fragmented third-party market.

Scott Buck from H.C. Wainwright & Co., LLC asked about the degree of customer overlap between Transcat's legacy business and the newly acquired ESCO, looking to understand cross-selling opportunities. He also inquired about the company's ability to increase pricing given its growing market share and position.

Answer

CEO Lee Rudow explained that while capabilities overlap, ESCO's operation in the New England region is about five times larger than Transcat's, creating a dominant combined presence rather than simple overlap. He emphasized that Transcat's key contribution is providing capital to leverage ESCO's expertise for further growth. Regarding market share and pricing, Rudow noted the market remains highly fragmented. He highlighted Transcat's unique strength in outsourcing in-house labs (CBLs) and providing single-source solutions for large plants as key competitive advantages that drive its value proposition.

Scott Buck of H.C. Wainwright & Co., LLC asked about the customer overlap with the newly acquired ESCO and the potential for cross-selling opportunities. He also inquired about Transcat's current market share and whether its market position provides increased pricing power.

Answer

President & CEO Lee Rudow explained that while there is capability overlap, ESCO's revenue in its region is about five times larger than Transcat's legacy operations, creating a significant opportunity to combine forces and leverage Transcat's capital. Regarding market share, Rudow noted it is difficult to quantify but highlighted major growth opportunities in outsourcing in-house labs, competing against single-service OEMs, and consolidating the fragmented third-party market.

Scott Buck inquired about the remaining potential for margin expansion from automation initiatives, the typical customer behavior in the Distribution segment during challenging macro environments (rentals vs. sales), and whether the company's M&A criteria have evolved with its increased scale.

Answer

President and CEO Lee Rudow responded that the company is only in the 'fourth inning' of its automation journey, implying significant runway for future margin improvement. He noted that while customers typically shift to rentals in uncertain times, this trend is currently being offset by customers potentially buying equipment ahead of tariffs. Regarding M&A, Rudow confirmed that while the landscape has more private equity involvement, Transcat's core strategy for synergistic acquisitions remains unchanged and the opportunity pipeline is still strong.

Scott Buck asked if the Q2 softness was isolated to the NEXA business or indicative of a broader macroeconomic issue, inquired about the M&A environment and deal pricing, and questioned the operating expense outlook for the second half of the year.

Answer

President and CEO Lee Rudow confirmed the issue was isolated to NEXA, highlighting that the core calibration business grew 9% organically and the pipeline remains strong. He described the M&A pipeline as 'robust' and noted the company is well-positioned to execute deals. Executive Thomas Barbato added that operating expenses are expected to increase sequentially in Q3 and Q4 to support growth initiatives.

Scott Buck of H.C. Wainwright asked for color on the information sharing and integration roadmap for the newly acquired Edge Autonomy business.

Answer

CEO Peter Cannito detailed the integration plan, which prioritizes financial reporting integration first, followed by aligning strategic roadmaps and pursuing multi-domain business opportunities. He noted the company is following its established playbook from ten previous acquisitions and expects full integration within twelve months. CFO Jonathan Baliff added that detailed financial information on Edge Autonomy, a higher-margin business, will be available in upcoming SEC filings.

Scott Buck inquired if the entry into the UAV space is complete with the Edge Autonomy acquisition or if further expansion is planned, and whether future M&A would favor space or unmanned systems.

Answer

Peter Cannito, Chairman and CEO, confirmed that Redwire will likely continue its 'land and expand' strategy for the autonomous systems market. He clarified that future M&A will be primarily opportunistic rather than favoring one sector, driven by a strict formula that requires deals to be accretive and meet valuation criteria. He sees opportunities in both space and defense segments.

Scott Buck asked for additional details on potential revenue synergies from the Edge Autonomy acquisition that are not included in the 2025 guidance and also inquired about the nature of Edge's stand-alone sales pipeline.

Answer

CEO Peter Cannito confirmed the guidance was conservative and excludes revenue synergies, but highlighted opportunities to cross-sell space and UAS platforms to defense customers in Europe. CFO Jonathan Baliff described Edge Autonomy's pipeline as different from Redwire's, with a shorter sales cycle focused on fleet replacement and upgrades, creating a more predictable revenue stream. He noted Edge's program of record was about $100 million in 2023 and is expected to grow.

Scott Buck inquired about the timeline for the $30 million transportation OEM opportunity, asked for more details on the four new business wins, and questioned the drivers behind the increase in sales and marketing expenses.

Answer

CEO Matt Fisch stated that for the $30 million opportunity, the company is on the customer's timeline with integration and deployment currently in progress. CFO Conor Tierney added that the four new wins are primarily in smart infrastructure, security, and defense, with a line of sight to thousands of units. Tierney explained that the increase in sales and marketing expense was largely a reallocation of resources from G&A and R&D to support business development and deployments, consistent with the company's capital-light model.

Scott Buck from H.C. Wainwright & Co. asked for an update on the $30 million transportation OEM contract timeline, requested more details on the four new business wins, and inquired about the increase in sales and marketing expenses.

Answer

CEO and Chairman Matt Fisch stated that the $30 million contract is progressing on the customer's timeline, with AEye teams currently on the ground for integration and deployment. CFO Conor Tierney added that the new wins are primarily in the smart infrastructure, security, and defense sectors, with a line of sight to thousands of units and an expected ramp-up over the next 6-12 months. Tierney clarified that the increase in sales and marketing expense was largely a reallocation of resources from G&A and R&D to support business development and deployments, consistent with their capital-light model.

Asked about the drivers for the guidance range, the timeline for realizing benefits from new partnerships, and for more details on commercial opportunities and the resources allocated to them.

Answer

The executive explained that the guidance range is primarily driven by the timing of closing deals in the sales pipeline. Regarding partnerships, many are already established with large integrators, and the timing of large opportunities, particularly in Device-as-a-Service, will impact financial performance. They confirmed that a majority of the opportunities in the current sales pipeline are on the commercial side, including Device-as-a-Service and initiatives in the satellite sector, and they are making capital investments to support them.

Scott Buck of H.C. Wainwright & Co., LLC asked for clarity on the drivers behind the 2025 guidance range, the timeline for new strategic partnerships to impact results, and the scale of opportunities on the commercial side of the business.

Answer

Executive Jin Kang explained that the guidance range is primarily dependent on the timing of closing large deals in the pipeline. He noted that key partnerships with systems integrators are already established, and converting opportunities, especially in Device-as-a-Service (DaaS), is the current focus. Kang emphasized that a majority of the current sales pipeline consists of commercial opportunities, particularly in DaaS, mobility, and satellite sectors.

Scott Buck of H.C. Wainwright & Co. inquired about the progress of MobileAnchor pilots with federal agencies, the potential business impact from the presidential administration turnover, and the company's 2025 outlook for capital expenditures and cash deployment.

Answer

Executive Jin Kang confirmed a MobileAnchor pilot with a transportation-related agency is progressing well and another is planned with a K-12 related agency. He stated that so far, there have been no negative impacts from the administration change due to long-term contracts and the essential nature of their services, even seeing potential for increased work with DHS. Regarding capital allocation, Jin Kang and Executive Robert George noted that cash flow was impacted by a temporary unbilled issue being resolved and that 2025 CapEx is expected to be minimal, around $200,000, primarily for a new facility build-out.

Scott Buck requested details on the shipping and logistics vertical, the maturity of the reseller go-to-market strategy, and the reason for the recent increase in the accounts receivable balance.

Answer

Executive Bryan Lewis described the shipping and logistics opportunity as larger than initially thought, focused on preventing high-value cargo theft by verifying trucker identities. He noted the reseller channel has significant room for improvement and that a new hire is dedicated to activating this channel. Lewis clarified that the rise in accounts receivable is a direct result of changing payment terms to prepaid annual or quarterly commitments instead of billing in arrears.

Scott Buck inquired about the visibility for stronger growth in the second half of the year, the impact of the macroeconomic environment on sales conversations, and the potential operating expense savings from migrating to AWS.

Answer

CEO Bryan Lewis explained that the back-half growth visibility is based on client rollout schedules and proof-of-concept timelines, including a delayed but strategic integration with a super-regional bank. He stated that sales conversations remain strong as fraud is a persistent issue, though overall retail transaction volume is a concern. Regarding AWS, Lewis anticipates significant savings, which will be balanced against increased computing costs for new AI and machine learning initiatives.

Scott Buck from H.C. Wainwright & Co. inquired about when Intellicheck would anniversary its more difficult retail comparisons and asked about the company's comfort level with its cash position for potentially increasing sales and marketing spend to drive growth.

Answer

Bryan Lewis, an executive, responded that the retail weakness began around mid-last year with rising inflation and consumer credit issues. He expressed confidence that the company does not need to raise cash and is focused on re-evaluating marketing spend for better ROI, emphasizing Intellicheck's unique technology as a key differentiator.

Scott Buck from H.C. Wainwright & Co. asked if the gross margin headwind from the new platform client campaign would improve, whether typical seasonality should be expected in 2025, and for feedback on the enhanced IntentKey Self-Serve platform.

Answer

CFO Wally Ruiz confirmed the new platform campaign's margin is expected to scale and improve, noting it drives significant gross profit dollars with low marketing expense. CEO Richard K. Howe added that Q1 results suggest a break from normal seasonality, with a strong outlook for the year. He described feedback on the Self-Serve platform as 'very positive,' highlighting its unique ability for users to generate and execute on AI-driven audiences with unprecedented ease.

Scott Buck asked for clarification on a new platform client campaign that was impacting gross margins, inquiring if profitability would improve as it scales. He also questioned if typical seasonality would hold for 2025 and requested color on the initial feedback and market opportunity for the enhanced IntentKey Self-Serve Platform.

Answer

CFO Wally Ruiz clarified the campaign is with an existing client and, while having a lower margin percentage, drives significant gross profit dollars and is expected to scale. CEO Richard Howe stated that strong Q1 results suggest a break from typical seasonality. He described feedback on the Self-Serve platform as 'very positive,' highlighting its unique AI-driven audience generation, and projected it could be a 'many, many tens of millions of dollars' opportunity.

Scott Buck of H.C. Wainwright inquired about the gross margin impact from a new platform client campaign, the outlook for business seasonality in 2025, and the initial market feedback for the enhanced IntentKey Self-Serve Platform.

Answer

CFO Wally Ruiz clarified the campaign is with an existing client, and while it has a lower margin percentage, it drives significant gross profit dollars with minimal marketing expense. CEO Richard Howe noted that Q1's strength suggests a break from typical seasonality and that the outlook is strong. Howe also described feedback on the self-serve platform as 'very positive,' with a goal of tens of millions in revenue over the next few years, driven by its unique AI-powered audience generation capabilities.

Scott Buck asked if the gross margin headwind from a new platform campaign would improve as it scales, whether typical seasonality should be expected in 2025, and for initial feedback and the market opportunity for the enhanced IntentKey Self-Serve Platform.

Answer

CFO Wally Ruiz confirmed the new campaign drives significant gross profit dollars despite a lower margin and is expected to scale. CEO Richard Howe noted that Q1 results suggest a break from normal seasonality, with the year starting strong. He added that feedback on the self-serve platform is very positive, with a potential market opportunity of tens of millions of dollars.

Scott Buck inquired if commissioning the first Gen-3 satellite alters the timeline for the subsequent satellites and asked about the expected trend of CapEx for the year.

Answer

CEO Brian O'Toole confirmed that since the first Gen-3 satellite is performing better than expected, they are proceeding with the original launch schedule. CFO Henry Dubois added that CapEx is expected to increase throughout the year, in line with the Gen-3 production and launch cadence.

Scott Buck inquired about BlackSky's pricing strategy, asking if the company can raise prices for customers who are slower to secure long-term capacity. He also asked about any potential risk to CapEx from tariffs, given the sourcing of satellite components.

Answer

CEO Brian O'Toole responded that the focus is on delivering higher value with Gen-3's improved resolution and capabilities, which naturally allows the company to grow its accounts with customers interested in long-term engagements. He also stated that the company does not foresee any impact from potential tariffs, as they have a clear understanding of their bill of materials and have secured long-lead components.

Scott Buck asked about the cadence of the ~$27 million in expected milestone payments, potential changes to operating expenses with the 2025 Gen-3 launches, and any shifts in the sales cycle due to the geopolitical environment.

Answer

CEO Brian O'Toole and CFO Henry Dubois confirmed the milestone payments would be lumpy and tied to specific contract deliverables. Dubois stated that no significant OpEx changes are expected for Gen-3 as it will leverage existing infrastructure. O'Toole added that while demand is growing, government sales cycles remain typical.

Scott Buck asked for color on the Q1 adjusted net income beat relative to guidance issued in March, inquired about potential macro hesitation in the Bitty small business segment, questioned the strategy of special dividends versus regular dividends, and sought details on criteria for inorganic growth opportunities.

Answer

CEO Todd Schwartz explained that the Q1 outperformance was driven by stronger-than-expected results across the board in March, including robust repayments, operational efficiencies, and continued growth. He noted that while OppFi is monitoring tariff impacts on the Bitty SMB portfolio, its short-duration product allows for quick adjustments. Regarding capital allocation, Schwartz stated the company prefers maintaining flexibility with special dividends to pursue high-ROI initiatives and inorganic growth in areas like SMB and consumer point-of-sale, which offer significant synergies.

Scott Buck of H.C. Wainwright & Co. inquired about the installation schedule for the $20 million in pending installations, asking if it was customer-driven or due to capacity constraints. He also asked about potential future capacity issues, the reasons for the pullback in sales and marketing spend, and the company's strategy regarding potential tariffs.

Answer

CEO Peter Evans clarified that installation schedules are determined by customers' phased deployment plans, not Xtract One's capacity, and affirmed the company has ample capacity for future growth. CFO Karen Hersh and CEO Peter Evans attributed the lower sales and marketing spend to seasonal timing of high-value events. Regarding tariffs, Peter Evans stated the situation is fluid but expressed confidence in navigating challenges due to strong global demand, value-based selling, and the fact that competitors face similar supply chain issues.

Scott Buck of H.C. Wainwright & Co. inquired about Xtract One's operations, asking whether the installation schedule for its $20 million in pending installations is set by customers or limited by company capacity. He also questioned the recent pullback in sales and marketing spend and sought clarification on the company's strategy regarding potential tariffs.

Answer

CEO Peter Evans clarified that installation timing is entirely determined by customer deployment schedules, not by any capacity constraints at Xtract One, and affirmed the company has ample capacity for future growth. CFO Karen Hersh and CEO Peter Evans explained that the lower sales and marketing spend was a matter of seasonal timing and focusing on high-value events. Regarding tariffs, Evans stated the situation is fluid, but the company is preparing alternatives and is confident that strong global demand and a value-based sales approach will mitigate potential impacts.

Scott Buck of H.C. Wainwright & Co. inquired about the $20 million in pending installations, potential future capacity constraints, the recent pullback in sales and marketing expenses, and the company's strategy regarding potential tariffs.

Answer

CEO Peter Evans clarified that installation schedules are dictated by customers, not company capacity, and affirmed that Xtract One has sufficient capacity for future growth. CFO Karen Hersh and CEO Peter Evans attributed the lower sales and marketing spend to seasonality and strategic timing of event participation. Regarding tariffs, Evans described the situation as fluid but stated the company is preparing alternatives and believes strong global demand and a value-based sales approach will mitigate potential impacts.

Scott Buck from H.C. Wainwright & Co. inquired about the scheduling of the $20 million in pending installations, potential future capacity constraints, the recent decrease in sales and marketing expenses, and the potential impact of tariffs on the business.

Answer

CEO Peter Evans clarified that installation schedules are customer-driven, not due to capacity issues, and affirmed that Xtract One has ample capacity for future growth. CFO Karen Hersh and CEO Peter Evans explained that the dip in sales and marketing spend was due to seasonality and strategic timing of marketing efforts. Regarding tariffs, Evans stated the situation is too fluid to predict, but the company is preparing alternatives and believes strong global demand and its value-based selling model will help navigate any challenges.

Scott Buck of H.C. Wainwright & Co. inquired about the drivers of the $20 million installation backlog, future deployment capacity, the reasons for lower Q2 sales and marketing expenses, and the potential impact of tariffs.

Answer

CEO Peter Evans clarified that the installation schedule is customer-driven, not a capacity constraint, and affirmed the company has ample capacity for future growth. CFO Karen Hersh and CEO Peter Evans attributed the dip in S&M spending to seasonality and strategic timing of marketing efforts. Regarding tariffs, Evans stated the situation is too fluid to predict, but the company is preparing alternatives and believes strong global demand and its value-based selling will mitigate potential impacts.

Inquired about the potential impact of tariffs, the structure of contracts in newer verticals like education compared to sports, and the pricing dynamics for upcoming contract renewals.

Answer

The company is monitoring potential tariffs but can mitigate them by moving assembly operations to the U.S. Contract differences across verticals are more about payment structure (upfront vs. subscription) than price. Renewals are strong, with customers often upgrading to new equipment under new, higher-value contracts.

Scott Buck from H.C. Wainwright & Co. asked about the potential impact of tariffs on the business, the typical contract structure in newer verticals like education and manufacturing versus sports and entertainment, and the pricing dynamics observed during recent contract renewals.

Answer

CEO Peter Evans and CFO Karen Hersh addressed the questions. Regarding tariffs, Evans noted the situation is uncertain, while Hersh added that the company has the flexibility to move its assembly operations to the U.S. to mitigate potential impacts. On contract structure, Evans explained the primary difference between verticals is the purchasing model (upfront for schools, subscription for arenas) rather than price. For renewals, Hersh stated that customers often opt for new, updated equipment under a new multi-year subscription, and Evans added that product improvements allow for higher average deal sizes upon renewal.

Inquired about the sales process and implementation timeline for the new global automaker contract, the potential for expansion with that client, the company's implementation capacity, and the current number of channel partners.

Answer

The automaker contract followed an extensive 30-90 day pilot and bake-off. The initial contract is for 5 of over a dozen North American facilities, representing a significant expansion opportunity. Implementation capacity is not a concern and they are meeting all timelines. The company is working with over two dozen carefully selected channel partners.

Questioned the return on investment for the recent increase in selling and marketing expenses and inquired about the company's capital allocation priorities, specifically whether they would increase spending at the expense of EBITDA margins if ROI remains strong.

Answer

The increased selling and marketing spend is a direct result of seeing strong ROI through record leads and high close rates. The company will continue to invest as long as returns are positive but will balance this reinvestment with maintaining strong adjusted EBITDA margins. Any further investment is expected to drive more revenue and ultimately higher EBITDA over time.

Scott Buck inquired about the nature of the new self-insurance reserve, its impact on adjusted EBITDA, potential margin improvements at the newly acquired Detroit club, residual liabilities from closed Bombshells locations, and the overall operating environment for the nightclub segment.

Answer

Executive Eric Langan explained the self-insurance reserve was a one-time, non-cash GAAP accounting adjustment not added back to adjusted EBITDA. He noted it's too early to project margin improvements for the Detroit club due to recent severe weather but believes it's possible. Langan also stated there are no significant residual cash outlays for closed Bombshells, aside from one lawsuit where he is confident in their legal position. He described the current club environment as one where they are using pricing power on beverages and food to offset a slight decline in high-end service revenue, aiming for steady same-store sales growth.

Scott Buck inquired about the primary drivers behind the improvement in payment performance, the typical ramp-up time for new B2B retail locations, and whether a revenue mix shift towards retail should be expected in the fourth quarter due to seasonality.

Answer

John Davis (JD), an executive, attributed the improved payment performance primarily to enhanced underwriting and fraud evaluation, followed by higher customer quality and improved servicing capabilities. Harold Heiser, an executive, explained that new B2B locations typically take 6-9 months to reach a plateau, and while a Pareto principle applies, the large number of new stores will drive significant gains. Heiser also noted that while Q4 sees high origination volume, the full revenue impact is typically recognized in the following year's first quarter.

Scott Buck inquired about the introduction of the 'total lease funding approvals' metric, the progress of the company's micro-site rollouts, and the typical maturation timeline for new retail locations.

Answer

CEO Harold Heiser explained that the 'total lease funding approvals' metric better reflects the demand pipeline, as customers may use approvals over time. COO John Davis reported that the first micro-site for electronics is live, with two more planned by year-end to enhance marketing efficiency. Davis also noted that new retail locations can be activated in days, with success dependent on partner engagement. Heiser added that a recent cohort of 580 stores achieved an 80% lease activity rate within 60 days and that the next 500 stores are expected to launch before mid-October.

Scott Buck of H.C. Wainwright & Co. inquired about origination seasonality patterns for Q2, the specific timing of when new retail revenue collection began in Q1, and the company's marketing expense strategy for the remainder of 2024.

Answer

CEO Harold Heiser confirmed that traditional seasonality persists, with a strong Q4 followed by a slower Q1, but noted that new funding options and SKU diversification aim to mitigate this over time. Heiser specified that the new retail revenue stream from additional payment options was launched in late February. Regarding marketing, he explained that spending is expected to grow symbiotically with the addition of new funders, potentially around 20% per quarter, with the goal of having gross margin from all transactions cover the online marketing costs.

The analyst asked for clarification on the value and revenue potential of the MyCanvass and Campaign Nucleus partnerships, and also requested guidance on the company's future revenue development from its current low base.

Answer

Stephen Chen described the MyCanvass partnership as a ready-to-go, revenue-generating tool for the hyper-local political canvassing market, with a strong pipeline. Regarding future revenue, he acknowledged the current low base is an opportunity to build from the ground up, focusing on securing large ($1M-$10M) enterprise and federal government contracts for generative AI, which have longer sales cycles but are the primary focus for growth.

Scott Buck of H.C. Wainwright & Co. asked for clarification on the MyCanvass and Campaign Nucleus partnerships, specifically whether they represent revenue, technology, or talent acquisitions. He also requested guidance on the company's revenue outlook for the next 12-24 months.

Answer

Executive Stephen Chen described the MyCanvass partnership as a way to transform hyper-local civic engagement into a data-rich, real-time platform with a robust pipeline of paying customers. On revenue visibility, Chen acknowledged the challenge of forecasting from a low base but framed it as an opportunity. He outlined a strategy focused on securing large enterprise and federal contracts, leveraging channel partners, and using the company's long financial runway to build sustainable value.

Scott Buck of H.C. Wainwright inquired about recent hires and investments in the hospitality vertical and asked for a timeline for investors to see tangible progress from these efforts.

Answer

Executive Mike Snavely detailed two strategic hires, Paul Ruffino and Dannie Nunez, to deepen expertise in luxury properties and hospitality events. Snavely asserted that tangible progress is already evident in Q1's strong bookings, which represented 60% of 2023's total, and are expected to materially contribute to Q2 revenue due to a 30-day implementation cycle.

Inquired about changes to the sales strategy, whether this marks a 'fresh restart' for the company, and if the current cost structure can support significant revenue growth.

Answer

The company confirmed a new sales approach focused on distribution leverage rather than a large direct sales force. They affirmed it is a 'new day' for the business after restructuring and regaining Nasdaq compliance. They also stated that modest investments will be needed to support growth as it ramps up, to be done in a 'conservatively aggressive' manner.

Scott Buck inquired about the primary reasons for the delay in the Western Son acquisition, the potential cost savings from relocating production, and the use of proceeds from the recent capital raise. He also sought clarification on the 2025 financial guidance, details of the asset-based lending (ABL) facility, and the company's plans regarding brand divestitures.

Answer

CEO Robert Nistico confirmed the Western Son delay was entirely due to finalizing the right financing structure, which is now resolved. He and CFO Julius Ivancsits detailed that relocating logistics to Texas could yield material freight savings of around 30%, which is not yet in the guidance. Ivancsits explained the new capital would be used to methodically pay down vendors over 8-10 weeks and secure inventory purchasing leverage. He also confirmed the ABL facility has a term sheet for $3-5 million. Nistico provided significant transparency on strategy, announcing the decision to discontinue the TapouT brand license to focus capital on accelerating proven brands rather than incubating new ones.

Scott Buck inquired about the economic structure of the Meta-Stadiums partnership, the capacity of the current cost infrastructure to support future revenue growth, and the origination of new customers in the sales pipeline.

Answer

CEO Ann Hand explained that the Meta-Stadiums partnership involves joint pitches and a generous revenue share on consumer monetization from dedicated, off-platform events. She stated that the company's 'productization' approach allows for significant revenue growth without proportional increases in headcount, though some costs will rise with scale. Hand also noted a shift in the sales pipeline, with an increasing percentage of new business coming from direct-to-brand relationships, supplementing the traditional 80% from agencies.

Inquired about the company's path to profitability, specifically if a quarterly profit is possible by Q4, whether delayed revenue will be fully recovered, and if any programs are at risk due to the upcoming election.

Answer

The company aims to be EBITDA positive by Q4, driven by increased automation and yield, though it depends on new program timing. The delayed revenue from EAC adjustments is a timing issue and will be fully recognized later. Core DoD programs are considered safe regardless of the election outcome.

Asked about the level of demand from commercial partners, whether macroeconomic uncertainty is impacting it, if the company is actively bidding on commercial programs, and the specific revenue contribution from Rivada in the third quarter.

Answer

Management described commercial demand as 'astronomical' and far exceeding government demand, with no slowdown observed. The company is very actively bidding on commercial programs globally. Rivada's revenue contribution was approximately $5 million for the third quarter and $6.7 million year-to-date.

Scott Buck inquired about the current pipeline for new lending opportunities, the typical size of these deals, and the competitive environment for lending to cannabis-related businesses.

Answer

Executive Sundie Seefried stated that the lending pipeline is very strong, attracting larger multi-state operators (MSOs) and includes opportunities to acquire loan portfolios from banks exiting the cannabis sector. She emphasized that Safe Harbor faces limited competition due to the high compliance barriers to entry, which few other institutions can meet.

Scott Buck from H.C. Wainwright & Co., LLC inquired about the expected timing for NexTech's integration with Amazon's Seller Central, the company's current and year-end 3D model production capacity, the potential for gross margin improvement in Q4, and the status of its NASDAQ uplisting application.

Answer

CEO Evan Gappelberg projected the Amazon Seller Central integration would occur in Q3 2023. He noted that while production capacity is currently stretched, technology improvements are expected to boost Q4 profitability and volume. Both Gappelberg and CFO Andrew Chan confirmed they anticipate higher gross margins in Q4 due to increased AI efficiency. Regarding the NASDAQ application, Gappelberg stated it is on track and moving forward.

Scott Buck from H.C. Wainwright asked about Nextech's key competitive differentiators with e-commerce partners, the sustainability of current operating expense levels as revenue scales, the financial impact of the Toggle3D spin-out on OpEx, and the potential timing for an up-listing to a major stock exchange.

Answer

CEO Evan Gappelberg attributed their strong partnerships to providing 'white glove service' and acting as an extension of their clients' businesses, which they value highly. Gappelberg also stated that OpEx is expected to decrease as the company drives for more efficiencies and profitability. CFO Andrew Chan specified that the Toggle3D spin-out would reduce monthly OpEx by approximately $100,000 to $125,000. Finally, Gappelberg confirmed that an up-listing is a priority for 2023 to attract institutional investors, though he did not commit to a specific timeline.

Scott Buck from H.C. Wainwright inquired about the potential revenue growth from the existing customer base, particularly Amazon, the company's production capacity relative to current demand, and the strategy for future working capital, including raising capital versus selling ARway shares.

Answer

CEO Evan Gappelberg explained that Amazon alone represents a massive growth opportunity, especially with the upcoming ability to engage directly with Amazon's merchants. He stated that while current production capacity meets demand, the company's continuously improving AI will allow them to scale to meet the expected ramp-up. Gappelberg also noted that the company is driving hard to achieve cash flow positivity, which could eliminate the need for future capital raises.

Scott Buck inquired about the revenue ramp timeline for new channel partners, the company's cash runway, the potential valuation of the satellite business being sold, and the associated cost savings from its divestiture.

Answer

David Williams, Founder, Chairman & CEO, confirmed that channel partners are already generating revenue with growing momentum, noting that first revenues came just three months after signing. CFO & Exec. Director Nick Pointon detailed the cash runway, stating the current $41.5M balance and reduced monthly burn of $3.2M provide runway well into 2024, which could be extended by revenue and the satellite sale. Williams added that while a precise valuation for the satellite business is unknown, Arqit has invested approximately $53M in it, and its sale would materially reduce operating costs by eliminating the 40-person engineering team.

Scott Buck of H.C. Wainwright asked about the revenue conversion model for new channel partnerships, the extent of product education provided to partners, the existence of any exclusivity clauses, the revenue timeline for the trade finance business, and potential customer hesitancy due to macroeconomic uncertainty.

Answer

Founder, Chairman and CEO David Williams explained that revenue from partners like Fortinet and AWS will be based on a price-times-volume model, with Arqit's software offered as a simple upgrade to a large existing customer base. He confirmed that partner sales teams are already being educated and there are no exclusivity arrangements. Williams expects the trade finance project to generate initial revenue in the current half-year. He also stated that macro uncertainty is not a significant factor, as the need to upgrade encryption is a new and rapidly growing market driven by recent government mandates.

Scott Buck of H.C. Wainwright inquired about the monetization timeline for a major enterprise vendor partnership, the accounting treatment for grant revenue versus QuantumCloud and ESA revenue, future operating expense growth, and how demonstration projects translate into revenue.

Answer

Founder, Chairman and CEO David Williams explained that vendor partnerships are a key sales channel tactic and expects monetization from recent integrations within months. He also detailed how demonstrations prove interoperability and build accreditation, accelerating new business. CFO Nick Pointon clarified that grant revenue is a balance sheet item amortized against costs, not reported as revenue. He distinguished QuantumCloud revenue (primary business) from ESA revenue (other operating income) and noted that while infrastructure is in place for growth, costs as a percentage of revenue should moderate over time.

Scott Buck of H.C. Wainwright & Co., LLC inquired about the revised financial guidance, questioning the factors beyond the Netherlands regulatory changes that contributed to the adjustment. He also asked about internal modeling for sportsbook hold, the status of delayed event revenue, initial feedback on the VIE.gg launch in New Jersey, and the expansion timeline for both VIE.gg and the Helix Esports Centers.

Answer

Chairman and CEO Grant Johnson attributed the guidance revision to a combination of factors: the seven-figure impact from exiting the Netherlands, historically low sportsbook hold, and COVID-related delays affecting live events and center openings. CFO Dan Marks added that sportsbook margins recovered in January and are expected to normalize, so internal models are not being permanently adjusted. Johnson clarified that event revenue is considered delayed, not lost, and that the VIE.gg New Jersey launch is awaiting exit from its 'soft play' phase before a full marketing push. He also noted that the LANDuel product has a faster path to market in the U.S. and that the UCLA Helix center opening is imminent, with other locations like the Hall of Fame Village in progress.

Scott Buck from H.C. Wainwright & Co. asked if any franchise-partnered tournaments were held during the quarter and inquired about the best way to model the incremental value of each new pro team partnership. He also questioned how much revenue from New Jersey was factored into the $100 million guidance for fiscal 2022.

Answer

CEO Grant Johnson clarified that no major franchise tournaments occurred in Q1 but are set to begin weekly, and that profitability requires converting only a small fraction of a team's fan base. CFO Dan Marks revealed that the company has only included a very prudent $1 million in revenue from New Jersey in its fiscal 2022 forecast, suggesting significant potential upside.

Scott Buck of H.C. Wainwright inquired about the long-term gross margin opportunity and the company's M&A strategy for fiscal year 2022.

Answer

CFO Dan Marks responded that he expects gross margins, which rose to 59% in Q4, to improve by a couple more basis points due to cost efficiencies from increased scale. CEO & Chairman Grant Johnson added that the company is taking a "breather" from M&A to focus on integrating its recent acquisitions and realizing synergies, though it remains open to unique strategic opportunities.

Scott Buck of H.C. Wainwright & Co. asked about the operational integration and cross-selling progress between Lucky Dino and SportNation, the specific revenue contribution from Lucky Dino in March, and the economic model for the new crypto mining product.

Answer

CEO Grant Johnson stated that while COVID has slowed full integration, cross-marketing initiatives are set to begin in June, with a single wallet feature planned for the fall. An unidentified company representative clarified that Lucky Dino's revenue for March was $3.3 million. Regarding the crypto mining product, Mr. Johnson expressed strong optimism, noting that while specific numbers are not yet available, he expects it to have a 'substantially positive impact' on revenues.