Theodore O'Neill

Theodore O'Neill followed up on the ruggedized cellular router business, asking if the competitive advantage from existing microwave business connections and incumbent dissatisfaction was still helping. He also inquired if the number of chosen customers in that area had changed from the previously mentioned 10. Additionally, he asked for color on the strength observed in Europe.

Answer

Pete Smith (President and CEO) confirmed that the competitive advantage from existing 911 network connections and a good reputation with purchasing agents is definitively helping customer traction for the cellular router. He stated they are engaged with about 15 customers, have received their first small PO, and are excited about the potential, expecting it to become material in fiscal year 2027. He noted no customers have rejected the solution. Regarding Europe, Pete attributed the strength to a new EMEA leader driving discipline and focus on private networks over the past five quarters.

Theodore O'Neill followed up on Aviat Networks' ruggedized cellular router business, asking if the competitive advantage from existing microwave customer relationships and incumbent dissatisfaction was still driving business, and if the number of engaged customers had changed from the previously mentioned 10. He also inquired about the source of strength in the European market.

Answer

Pete Smith, President and CEO, confirmed that Aviat's strong relationships with U.S. 911 networks provide a competitive advantage for the cellular router, with the company now engaged with approximately 15 customers and having received its first small PO. He anticipates the cellular router business becoming material in fiscal year 2027. Regarding Europe, Pete Smith attributed the strength to a new EMEA leader appointed five quarters ago, who has driven discipline and focus on private networks.

Theodore O'Neill asked about the drivers behind the increasing emphasis on fixed wireless access (FWA) for business and multi-dwelling units (MDUs), inquiring if it's due to DSL discontinuation, BEAD funding, or lack of fiber access. He also questioned if there are any government-induced delays in the BEAD program's funding flow.

Answer

President and CEO Pete Smith explained that the preference for multi-dwelling units and their achievable price points are driving residential FWA. He noted that while fiber is suitable for dense urban areas, wireless applications become more prevalent outside these centers. Regarding the BEAD program, Mr. Smith stated it's not moving as expected but expressed encouragement over states adopting technological neutrality, shifting from fiber to wireless. He reiterated that revenue impact from BEAD is anticipated in calendar year 2026 and is not yet included in financial guidance, despite seeing the most positive signs for funding flow to date.

Theodore O'Neill of Litchfield Fields Research questioned the drivers behind holding OpEx flat, particularly in R&D, and asked if strategic discussions with U.S. customers could lead to incremental sales beyond tariff-driven effects.

Answer

CFO Michael Connaway attributed the strong OpEx performance to the roll-off of transitional service agreements with NEC and disciplined cost management, confirming this low-cost mindset will continue. CEO Pete Smith noted that while not yet in the model, a persistent tariff environment could create a positive catalyst for new business from U.S. customers seeking domestic suppliers, potentially materializing in about 12 months.

Theodore O'Neill from HBO Hills Research questioned the specific drivers behind the quarter's gross margin improvement, asking if it was due to mix, utilization, or Pasolink. He also asked if the company had any customers accounting for 10% or more of revenue.

Answer

CFO Michael Connaway attributed the strong gross margin rebound to an improved revenue mix, specifically a better geographic dispersion with North America's recovery and a favorable product mix with higher software sales. He also noted the newly acquired 4RF business contributed positively with its above-average margins. CEO Pete Smith confirmed the company has high customer diversification, stating that in the last two quarters, the largest customer did not exceed 6% of revenue.

Theodore O'Neill of Litchfield Hills Research requested commentary on the market opportunity in fixed wireless access (FWA), including relevant products and market segments. He also asked a financial question about whether the $4.4 million in M&A expenses from Q1 were expected to recur.

Answer

CEO Pete Smith explained that FWA is a significant growth driver for backhaul, as FWA users consume substantially more data than mobile users. He noted this trend is favorable for Aviat's business, as it increases overall backhaul needs. CFO Michael Connaway confirmed that the Q1 M&A expenses were not expected to repeat at that level, stating they would be "significantly less" in Q2 and would normalize in the second half of the year, absent any new M&A activity.

Theodore O'Neill inquired about business trends and market share in private networks and mobile 5G, and also asked how the recent restatement and its stock price impact affected the company's view on its share buyback program.

Answer

CEO Pete Smith reported that fiscal 2024 private network revenue was the highest in three years and that market share is trending favorably. He contrasted muted CapEx from historical Aviat Tier 1s in the U.S. and Africa with a favorable spending environment from Pasolink's Tier 1 customers. Regarding buybacks, Smith confirmed they would lean into them given the share price but noted that execution is difficult due to persistent quiet periods from the delayed filings.

Theodore O'Neill inquired about the effectiveness of DarioHealth's adjusted product-market fit and new performance-based pricing model compared to 12 months prior, and whether federal and state interest in DarioHealth presents unique challenges compared to the commercial sector.

Answer

Steven Nelson, President and Chief Commercial Officer, highlighted that improved effectiveness stems from a focused approach on multi-condition offerings, claims-based analytics, and strategic partnerships (e.g., GreenKey for sleep, OneStep for falls prevention) that expand product capabilities without significant R&D investment. He also mentioned a more targeted client acquisition strategy. Regarding federal and state interest, Mr. Nelson stated that it does not necessarily present unique challenges, as DarioHealth's value-based light offering (milestone-based payments tied to clinical metrics) aligns well with government-sponsored plans like Medicaid and Medicare. He noted that the primary hurdle is government budget appropriation rather than product fit, with promising initiatives in maternal and rural health.

Theodore O'Neill of Litchfield Hills Research asked for details on the new claims-based billing infrastructure, questioning what problem it solves and the key benefits for DarioHealth and its customers.

Answer

CCO Steven Nelson explained that the new claims-based billing infrastructure is a strategic shift to tap into a larger profit pool. It allows DarioHealth to move from billing against administrative budgets to billing through medical claims by adding clinical oversight. This aligns with the broader industry and key competitors, opening a significant new revenue path.

Theodore O'Neill from Litchfield Hills Research asked for clarification on the distribution of the 40,000 PetPhone unit order and details regarding secured orders for in-car infotainment systems, including future business potential.

Answer

CEO Chaohui Chen specified that 30,000 PetPhone units were ordered by a Middle East channel, with the remaining 10,000 for the U.S. market, expressing confidence in the U.S. as the largest pet market and the need for marketing to educate users on PetPhone's unique 'mutual communication' concept. For in-car infotainment, CEO Chen stated that uCloudlink's solutions are integrated with almost all major Chinese providers, serving North American, Latin American, Middle East, and European markets, anticipating significant future growth and revenue.

Theodore O'Neill from Litchfield Hills Research asked for clarification on the destination of the 40,000-unit PetPhone order, specifically if it was primarily for the US market, and requested more details on the secured orders for the NCAR infotainment system and the future prospects of this business segment.

Answer

CEO Chaohui Chen clarified that 30,000 units of the PetPhone order are for a tier-one channel in the Middle East, with the remaining 10,000 units allocated to the US market. He expressed strong confidence in the US as the largest pet market and the unique 'mutual communication' concept of PetPhone, emphasizing the need for significant marketing investment globally, particularly in the US, given the positive initial order data. Regarding the NCAR infotainment system, Mr. Chen stated that uCloudlink has integrated its solutions with almost all major Chinese providers, whose products are distributed across North America, Latin America, the Middle East, and Europe. He anticipates substantial future growth and revenue from this segment.

Theodore O'Neill of Litchfield Hills Research inquired about the sustainability of the GlocalMe ecosystem's strong growth and the reasons for product sales falling below expectations.

Answer

CFO Yimeng Shi highlighted massive year-over-year growth in Monthly Active Terminals (MAT) for the new IoT, SIM, and Life businesses, expecting them to scale the user base to millions. CEO Chaohui Chen added that this follows years of R&D investment, with IoT nearing profitability and new products like eSIM Trio gaining traction. Regarding the sales miss, Mr. Shi attributed it primarily to a delayed multi-million dollar order from Japan, now expected in Q3, and secondarily to macroeconomic headwinds impacting U.S. sales.

Theodore O'Neill inquired about which of the new products unveiled at MWC, such as the Pet phone and eSIM Trio, would likely have the biggest impact in 2025. He also asked about the assumptions for international travel recovery embedded in the company's full-year 2025 revenue forecast.

Answer

Co-Founder, Director and CEO Chaohui Chen identified the Pet phone as a unique device creating a new market, noting immediate interest from major pet channels. He also detailed the significant potential of the eSIM Trio and SIM Kit to solve connectivity issues for users and Tier 2/3 carriers. CFO Yimeng Shi confirmed the 2025 guidance of $95 million to $130 million factors in a 10-20% growth from continued international travel recovery, alongside contributions from new business lines.

Theodore O'Neill inquired about the expected outcomes following Ceragon's E-band validation, the specific regions or customers seeking network resilience solutions, and the potential impact of a U.S. government shutdown on Ceragon's business.

Answer

CEO Doron Arazi stated that following E-band validation, Ceragon is finalizing commercial terms and expects orders in the current or next quarter, leading to increased revenue in 2026. He identified network resilience as a global phenomenon, with operators worldwide (including North America and Asia-Pac) seeking wireless redundancy solutions for fiber cuts due to their cost-effectiveness and reliability. Arazi noted that the U.S. government shutdown's impact has been minimal for Ceragon, primarily affecting private networks, and does not foresee a significant long-term concern.

Theodore O'Neill asked about the expected outcomes following the E-band validation process, the specific regions or customers driving demand for network resilience solutions using microwave to mitigate fiber cuts, and whether Ceragon anticipates a similar impact to its business as a competitor (5%) if the U.S. government shutdown continues.

Answer

CEO Doron Arazi expects to finalize commercial terms and demand for E-band PoCs, anticipating orders this quarter or next and increased revenues from these new products in 2026. He identified network resilience as a global phenomenon, with wireless redundancy being a viable, cost-effective, and reliable solution for fiber cuts across North America, Asia-Pac, and other regions. Regarding the U.S. government shutdown, Mr. Arazi stated that the impact on Ceragon has not been significant so far, primarily affecting private networks, and he does not foresee a very significant impact if it continues, though the company is monitoring the situation closely.

Asked about the drivers of success in India, how the company manages the cyclicality of Tier 1 business, and the current state of the supply chain.

Answer

Success in India is driven by superior technology, reliable products with good price-performance, and strong, long-term customer relationships. The company manages Tier 1 cyclicality through its three-pillar strategy (diversifying into private networks and managed services) and by managing its cost structure. There are no significant supply chain issues currently.

Theodore O'Neill inquired about Lesaka Technologies' Consumer division, seeking a ranking of near-term growth opportunities across its core products and overall market share, and then asked the same question for the Enterprise division.

Answer

Lincoln Mali, CEO - Southern Africa & Director, highlighted account growth from Postbank migration, the new lending product, and expanding insurance offerings beyond the EPE base, with future opportunities from the BankZero transaction. Naeem Kola, Group COO & Director, addressed the Enterprise division's transition year, emphasizing platform investment, distribution network growth, Recharger integration, and an expected run rate of ZAR 30 million in group-adjusted EBITDA for Q4, aiming for over 10% contribution to total segment adjusted EBITDA for FY2026.

Theodore O'Neill of Litchfield Hills Research questioned the consumer segment's future growth strategy beyond its core grant recipient market and inquired about the company's capital expenditure plans for fiscal year 2025.

Answer

Executive Lincoln Mali detailed the consumer growth strategy, highlighting significant room to grow market share from its current 11%, increase cross-sell penetration, and enter the non-grant market via the Adumo payout business. Executive Naeem Kola added that FY25 CapEx would be similar to FY24, with a continued focus on growth investments like Kazang devices and cash vaults in the merchant division.

Theodore O'Neill of Litchfield Hills Research inquired about the rollout of the new Mustang program, asking for details on the pipeline and deliveries for the next year. He also questioned whether the $500 million Bitcoin financing facility was primarily a marketing or a financing tool.

Answer

Scott Wallace, Co-Founder, Chairman & CEO, detailed that the Mustang program has been a successful learning experience, overcoming initial supply chain challenges by moving panel fabrication in-house. He highlighted the program's early success with a first-place award and a growing backlog. CFO Victoria Hay explained that the Bitcoin equity facility serves a dual purpose: it acts as a marketing tool to engage crypto-native customers and as a strategic financing vehicle to fund business expansion, including new retail units and production lines.

Theodore O'Neill of Litchfield Hills Research inquired about the rollout and delivery pipeline for the new Mustang program over the next twelve months. He also questioned the strategic purpose of the $500 million equity facility, asking if it was primarily for financing, marketing, or a combination, particularly in relation to the company's Bitcoin strategy.

Answer

Co-Founder, Chairman & CEO Scott Wallace detailed the Mustang rollout, noting initial supply chain challenges with part quality led to a pivot towards in-house panel fabrication. He highlighted the program's success, evidenced by a recent award and a growing backlog, and projected a streamlined production process after the first few builds. CFO Victoria Hay clarified that the equity facility serves a dual purpose as both a financing and marketing tool. She explained it will fund the Bitcoin treasury strategy, cater to crypto-native clients, and support broader growth initiatives like retail expansion and new production lines.

Theodore O'Neill asked about the company's path to achieving operating income in 2025, the evolving sales mix between web-based and retail channels, and the strategies in place to mitigate potential tariff impacts.

Answer

Executive Benjamin Piggott explained that the company reaches cash flow positivity at 10 units per month, a milestone they expect to hit in the coming months, supported by 12 vehicle sales deferred from Q4 2024. Executive Scott Wallace added that the new retail stores now generate about 20% of leads, allowing for reduced marketing spend. Regarding tariffs, Wallace clarified that the company's base vehicles are exempt as classic cars, and while some parts are affected, they are adjusting upgrade pricing rather than base vehicle prices to protect margins and customers.

Theodore O'Neill from Litchfield Hills Research asked for guidance on profit margins and operating expenses for the first clean quarter post-divestiture and inquired about the potential impact of tariffs and layoffs in India on the Semicap business.

Answer

CEO Gary Atkinson and CFO Alex Andre explained that Semicap's gross margins are expected to be lower, around 5-10%, but revenue growth will be significantly higher. They noted operating expenses will drop substantially with the sale of Singing Machine before intentionally increasing to fund Semicap's growth. Gary Atkinson added that Semicap has no direct exposure to tariffs and that strong demand from its large multinational clients in India should mitigate any indirect impacts from broader economic conditions.

Theodore O'Neill of Litchfield Hills Research asked for guidance on profit margins and operating expenses for the first clean quarter post-divestiture and questioned the potential impact of tariffs and Indian economic conditions on the Semicap business.

Answer

CEO Gary Atkinson and CFO Alex Andre explained that while Semicap's gross margins will be lower (5-10%) than Singing Machine's, overall operating expenses will decrease significantly. Atkinson added that Semicap has no direct exposure to tariffs and is insulated from broader economic shifts due to strong demand from its large multinational clients and its platform's ability to increase truck utilization to ~85%, creating significant value.

Theodore O'Neill of Litchfield Hills Research sought to confirm if the reported $4.9 million in 'other income' included the $5.5 million realized gain from Servitronics. He also asked about the underlying dynamics making prefab construction increasingly popular compared to traditional stick-built methods.

Answer

Executive Chairman Jeffrey Eberwein confirmed the realized gain was included in 'other income'. CEO Richard Coleman detailed the advantages of prefab construction, citing higher quality from a controlled factory environment, reduced weather-related damage, lower crew turnover, less material waste, and the ability to build year-round. Jeffrey Eberwein added a practical example, noting that leftover wood scraps are used to heat their factory.

Theodore O'Neill of Litchfield Hills Research asked about the specific reasons for project pushouts at the EdgeBuilder business, questioning why delays were concentrated there and not across other divisions despite potential tariff impacts. He also inquired about any early signs of other projects being paused due to pricing uncertainty.

Answer

Executive Chairman Jeff Eberwein explained the EdgeBuilder delays were due to a two-month pause on a large, company-specific project and weather-related issues, emphasizing these were timing shifts to Q2, not cancellations. Executive Richard Coleman and Jeff Eberwein both confirmed they are not seeing broader project holds, citing strong underlying construction demand and a record backlog as evidence that projects previously delayed by interest rate hikes are now proceeding.

Theodore O'Neill of Litchfield Hills Research inquired about the business outlook following two major project wins in March, the reasons for margin improvement in the Building Solutions segment, the composition of the $1.7 million 'other expense', and whether the Enservco situation would affect the new Alliance Drilling business.

Answer

EVP Richard Coleman attributed the margin improvement to spreading fixed costs over higher revenues and noted a substantially growing sales pipeline. CFO Dave Noble explained the 'other expense' was a non-cash write-down of the company's equity investment in Catalyst (formerly Digirad), which was reclassified from SG&A. Executive Chairman Jeffrey Eberwein confirmed the Enservco situation has no impact on Alliance Drilling.

Theodore O'Neill of Litchfield Hills Research inquired about the drivers of the improved business outlook, the potential for further impairment charges related to the TTG investment, and the company's exposure to potential tariffs on imported lumber.

Answer

Executive Richard Coleman stated the improved outlook is from both new business and the revival of previously delayed projects. CFO David Noble and Executive Chairman Jeffrey Eberwein addressed the impairment, noting that while further equity write-downs are possible up to a maximum of $1.9 million, they do not foresee writing down the debt portion and see potential for future gains. Eberwein also explained that while the company doesn't buy much imported lumber, Canadian tariffs would be an industry-wide issue, and Star Equity manages price risk by pushing it to clients through various contract structures and hedging.

Theodore O'Neill of Litchfield Hills Research asked for clarity on the split between organic and inorganic growth within the digital services segment and inquired about the potential for a future pipeline of acquisitions.

Answer

Group CEO Kaan Terzioğlu clarified that the 57% year-on-year growth in digital revenue was almost entirely organic, with the Uklon acquisition being the only inorganic component ($21.7 million). While declining to speculate on specific targets, he confirmed that VEON will continue to pursue both organic and inorganic growth opportunities in its markets.

Theodore O'Neill of Litchfield Hills Research asked for a breakdown of the digital business growth between organic and inorganic sources and inquired about the company's pipeline for potential digital acquisitions.

Answer

Group CEO Kaan Terzioğlu stated that the 57% year-on-year growth in digital revenue was almost entirely organic, with the only inorganic contribution being $21 million from the recent Ookla acquisition. While declining to speculate on specific targets, he confirmed that VEON's strategy includes both organic and inorganic efforts to expand its digital services in its markets.

Theodore O'Neill of Litchfield Hills Research asked for a breakdown of organic versus inorganic growth within the digital business and inquired about the company's pipeline for potential digital acquisitions.

Answer

CEO Kaan Terzioğlu clarified that the digital business's 57% year-on-year growth was predominantly organic. The only inorganic contribution was the $21.7 million in revenue from the newly acquired Ookla. While not speculating on specific targets, he affirmed that VEON's digital strategy includes both organic and inorganic initiatives tailored to each market's needs.

Theodore O'Neill of Litchfield Hills Research inquired about the future dynamics of profitability, asking whether improvements would stem from lower member acquisition costs or higher revenue. He also sought clarification on the frequency of new 'club offers,' wondering if they were released on a monthly or quarterly basis.

Answer

Global CEO Holger Bartel explained that future profitability will be driven by recognizing revenue from members acquired in previous quarters, for whom acquisition costs have already been expensed. He clarified that this recurring revenue, combined with new member growth, will improve profits over time. Bartel also stated that Travelzoo releases several dozen new club offers each week, not just when press releases are issued.

Theodore O'Neill of Litchfield Hills Research asked for clarification on the future profitability dynamics, questioning if improvements would stem from lower member acquisition costs or higher revenue. He also inquired about the frequency of new 'club offers'.

Answer

Global CEO Holger Bartel explained that future profitability will be driven by the cumulative, ratably recognized revenue from members acquired in previous quarters, for whom acquisition costs have already been expensed. Bartel also clarified that dozens of new club offers are released weekly, with press releases only highlighting select examples.

Theodore O'Neill of Litchfield Hills Research inquired about the future dynamics of profitability, asking if improvement would stem from lower member acquisition costs or higher revenue. He also asked about the frequency and pace of new 'club offers'.

Answer

Global CEO Holger Bartel explained that future profitability will be driven by recognizing revenue from members acquired in previous quarters, where the acquisition costs have already been expensed. He clarified that new club offers are released several times per week, not just when press releases are issued.

Theodore O'Neill asked for clarification on the future profitability dynamics, questioning whether improvements would stem from lower member acquisition costs, higher revenue, or both. He also inquired about the frequency of new 'club offers' being released.

Answer

Global CEO Holger Bartel explained that future profitability will be driven by recognizing revenue from members acquired in previous quarters, for whom acquisition costs have already been expensed. He clarified that dozens of new club offers are released weekly, and press releases only highlight a small sample of them.

Theodore O'Neill of Litchfield Hills Research inquired about the future profitability dynamics, specifically whether improvements would come from lower acquisition costs or higher revenue, and asked about the frequency of new club offers.

Answer

Global CEO Holger Bartel explained that future profitability will be driven by the recurring revenue from members acquired in previous quarters, for whom acquisition costs have already been expensed. He clarified that dozens of new club offers are released weekly, and press releases only highlight a small sample of them.

Theodore O'Neill of Litchfield Hills Research inquired about the future dynamics of profitability, asking whether improvements would stem from lower member acquisition costs or higher revenue. He also sought clarification on the frequency of new 'club offers' beyond what is announced in press releases.

Answer

Global CEO Holger Bartel explained that future profitability will be driven by recognizing revenue from members acquired in previous quarters, as those cohorts will generate revenue without new acquisition costs. He clarified that dozens of new club offers are released weekly, with press releases only highlighting a small sample of them.

Theodore O'Neill of Litchfield Hills Research inquired about the impact of declining foreign travel to the U.S. on Travelzoo's member behavior and travel plans originating from Europe and Canada.

Answer

Holger Bartel, an executive at Travelzoo, explained that while the trend of reduced foreign travel to the U.S. is acknowledged, it does not negatively impact their business. He emphasized that Travelzoo members are highly flexible, with 91% open to new destinations, and they simply shift their travel to other locations where great deals are available.

Theodore O'Neill of Litchfield Hills Research inquired about current travel market trends, asking if travelers remain cost-conscious, and sought an explanation for the strong operating margin performance in Europe relative to North America.

Answer

Executive Holger Bartel confirmed that the trend of consumer cost-consciousness is accelerating, leading to more deals from hotels and airlines. He noted that Europe's strong profit margin was due to highly efficient operations during the quarter, a trend the company expects to continue.

Theodore O'Neill of Litchfield Hills Research asked if the current tariff environment changes the company's focus on new products, design wins, and new customers. He also inquired about the current level of activity in the M&A market for potential acquisitions.

Answer

CFO Farouq Tuweiq responded that while the tariff environment creates operational challenges, it also presents opportunities to support customers and gain share. He emphasized that Bel's focus remains on its long-term, long-design-cycle business. Regarding M&A, Tuweiq noted that the market, which had been showing signs of health in early Q1, has paused as potential sellers adopt a 'wait-and-see' approach due to tariff uncertainty. He expects the M&A market to remain quiet in Q2.

Theodore O'Neill of Litchfield Hills Research asked if the company's AI applications are mainly for data centers, whether Enercon's performance could alter the earnout timing for the remaining 20% stake, and if increased European defense spending would significantly benefit Enercon.

Answer

Executive Daniel Bernstein confirmed the AI application is primarily in data centers. Executive Farouq Tuweiq clarified that the 2027 timeline for the remaining Enercon stake is fixed by contract and has no accelerators. He added that while increased European defense spending would be positive, the benefit to Enercon depends on whether Europe buys locally or imports from the U.S. and Israel.

Theodore O'Neill asked for more detail on the Enercon Technologies acquisition, specifically regarding new products and cross-selling opportunities. He also inquired about the regional dynamics of the rail business and which regions are showing strength.

Answer

Executive Farouq Tuweiq explained that Enercon expands the Power segment into the Aerospace and Defense markets, creating cross-selling opportunities with the Connectivity segment. CEO Daniel Bernstein added that Bel's European manufacturing base can help Enercon expand and that offering a combined product basket strengthens relationships with military customers. Regarding rail, Tuweiq and Bernstein clarified that while customers are global, manufacturing is centered in Slovakia, making European seasonality a key factor, with many sales going to European-based customers.

Theodore O'Neill requested more granular detail on the Power segment's performance in high-growth areas, specifically asking about trends in AI, e-mobility, data centers, and blockchain power conversion.

Answer

Executive Farouq Tuweiq explained that Bel benefits from general data center growth but strategically avoids the hyperscaler market, focusing on the other half of the industry. Executive Daniel Bernstein elaborated on this niche strategy, stating Bel targets profitable applications like school buses and heavy equipment for EV, and testing equipment for data center ICs, rather than pursuing low-margin, high-volume business as it had in the past with customers like Facebook.

Theodore O'Neill asked for clarification on the drivers of Q1 sequential revenue growth despite recent divestitures and inquired about the specific factors causing the accelerated recovery in the U.S. and Canada remodeling business.

Answer

Executive Michael Matacunas explained that strong core business growth in the U.S. (up 17%) and Canada (up 79%) more than offset the impact of divestitures. He attributed the robust remodeling recovery to pent-up client demand, new customer wins, and existing clients expanding their projects, noting he sees no indication of a slowdown for the remainder of the year.

Theodore O'Neill of Litchfield Hills Research inquired about the drivers behind the sequential revenue growth in Q1 2024, despite recent divestitures, and sought details on the accelerated recovery of the U.S. and Canada remodel business.

Answer

Executive Michael Matacunas explained that strong core business growth in the U.S. (+17%) and Canada (+79%) more than offset the impact of divested international operations. He attributed the accelerated remodel business recovery to significant pent-up demand from clients who had previously paused store transformation projects, noting that both existing and newly won clients are expanding their initiatives.

Theodore O'Neill of Litchfield Research inquired about the recent Arauco pre-order, seeking confirmation on his calculation that it represents 20% of monthly cash burn. He also asked about the deployment plan for the 100 autonomous forklifts.

Answer

CFO Don Alvarez confirmed the calculation was 'roughly on the right page' and explained that while specific ramp-up guidance isn't public, the goal is to deploy the vehicles quickly. Alvarez emphasized this order is a small fraction of the total opportunity with Arauco, with potential to significantly exceed the current burn rate in the future.

Theodore O'Neill from Litchfield Hills Research inquired about the sensor costs for factory-based autonomous vehicles versus on-road EVs. He also asked for clarification on the financial impact of the Arauco preorder, questioning if it represents 20% of the monthly cash burn and seeking details on the deployment timeline for the 100 units.

Answer

Executive Ben Landen explained that operating in controlled, lower-speed factory environments reduces the problem space, requiring fewer sensors and less computing power than on-road EVs, which still results in substantial savings for customers. He confirmed that the Arauco deal's financial impact is roughly 20% of the current cash burn and noted that while a specific ramp-up schedule isn't public, there is a mutual interest in rapid deployment. He also highlighted that this initial order is a small fraction of the total opportunity with Arauco.

Theodore O’Neill of Litchfield Research inquired about the impact of recent AI advancements on product development and the deployment mix between retrofitting existing stock chasers versus installing DriveMod on new vehicles.

Answer

Chairman and CEO Lior Tal explained that Cyngn views AI advancements as a positive driver for both enhancing product intelligence and improving internal development efficiency. Regarding deployments, he described a transition phase where retrofitting existing fleets presents a large opportunity, with the long-term goal of having new vehicles come with DriveMod integrated off the assembly line.

Theodore O'Neill of Litchfield Hills Research inquired about the most promising commercialization path for Cyngn's DriveMod stack among stockchasers, forklifts, and mining equipment for 2023-2024, and whether retrofits or OEM products were more favorable. He also asked about any pricing insights gained from exploring these paths.

Answer

Chairman & CEO Lior Tal explained that while they are all implementations of the core Enterprise Autonomy Suite (EAS) software, the stockchaser is the most advanced and ready for commercialization, making it the current focus for sales. The forklift and mining applications are in paid development phases and are expected to reach commercial readiness next year. VP of Business Development Ben Landen added that the initial commercial contract with U.S. Continental has served as a strong validator for their pricing model, which is based on the cost of human labor.