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DATE

Thursday, February 26, 2026 at 5 p.m. ET

CALL PARTICIPANTS

  • President & Chief Executive Officer — William O. Wentworth
  • Chief Financial Officer — Charles DiBona

TAKEAWAYS

  • Net Sales -- $4,000,000 for the quarter, down from $5,200,000 the prior year; full year net sales of $21,500,000 versus $21,800,000 prior.
  • Bookings -- $3,100,000 for the quarter, reflecting a 25% decrease; full year bookings were $18,600,000, down 17%.
  • Geographical Performance -- 2025 bookings and revenues were strongest in Asia, with North America steady and Europe declining.
  • Deferred Revenue -- Approximately $1,500,000 as of December 31, up from $1,400,000 at September 30.
  • Revenue Mix -- Consumables, adapters, and services comprised 58% of total revenue, capital equipment made up the remaining 42%.
  • Automotive Bookings -- Automotive electronics sector represented 52% of 2025 bookings, down from 59%.
  • Backlog -- $2,300,000 at year-end, reduced from $2,700,000 on September 30.
  • Gross Margin -- 43% for the quarter versus 52.2% prior, with a full year margin of 49.3% compared to 53.3%.
  • Operating Expenses -- $4,200,000 for the quarter including $312,000 in one-time expenses; full year expenses were $15,700,000, of which $1,400,000 were one-time items.
  • Net Loss -- Quarterly net loss of $2,500,000 ($0.27 per share), and full year net loss of $5,000,000 ($0.53 per share).
  • Adjusted EBITDA -- Negative $2,500,000 for the quarter (negative $1,900,000 excluding one-time expenses), and negative $3,900,000 for the year (negative $2,600,000 excluding one-time expenses).
  • Cash Position -- $7,900,000 at year-end versus $10,300,000 the prior year, after investments, one-time expenses, and inventory reductions; the company reported no debt.
  • Net Working Capital -- $12,300,000 at year-end, compared to $16,100,000 the previous year.
  • Strategic Partnerships -- Wentworth said, "We are a small company. You cannot just go it alone. And being able to forge a relationship and a collaborate really strong collaboration with IR really combines their security expertise with our provisioning expertise to create a very comprehensive device support model for security provisioning in the industry."
  • AI Implementation -- The company integrated AI across all departments, including a DocAI solution that reduced technical document processing costs from $120,000 to $100, and completed its first AI-driven production code release with minimal human intervention.
  • Transformation Progress -- Wentworth said, "That plan is proving to be approximately one year ahead of schedule." Deliberate board and executive suite changes were cited as key drivers.
  • M&A Pipeline -- The company is in advanced data room discussions with multiple acquisition targets and is prioritizing "day-one accretive" opportunities closely tied to its strategy.
  • New Product Integration -- Wentworth confirmed full software integration across manual and automated programming platforms is nearly complete, enabling unified future product releases and revenue migration opportunities.

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RISKS

  • Bookings and Revenue Decline -- Year-over-year bookings fell 17%, and net sales decreased both for the quarter and year, driven by "realignment of technology spending with AI-related data center investments at the forefront" and "a reassessment of EV capacity and manufacturing impacted the company's largest end market, the automotive electronics sector."
  • Gross Margin Compression -- Fourth quarter gross margin dropped to 43% from 52.2%, with DiBona stating, "The decrease in gross margin reflects some mix shift as well as lower absorption of labor and overhead costs."
  • Ongoing Net Losses -- The company reported a $2,500,000 quarterly net loss and $5,000,000 annual net loss, increased from prior comparative periods.
  • Cash Burn -- Year-end cash decreased by $2,400,000, with DiBona noting, "we did drain some cash last year. That is sort of the inevitable outcome of making the investments and the transformation that we were undergoing."

SUMMARY

Data I/O Corporation (DAIO 1.11%) management described a rapid transformation positioning the company to target expanded markets in data provisioning and Edge AI, reporting they are approximately one year ahead of their prior schedule. Strategic initiatives included a comprehensive partnership with IR to strengthen security provisioning capabilities and an ongoing shift from capital equipment to recurring services and consumables revenue. Investments in AI-driven automation resulted in significant operational efficiencies and cost reductions, specifically in software engineering, ERP implementation, and customer support processes. A disciplined M&A pipeline is progressing, with multiple acquisition candidates nearing advanced evaluation, and any completed transactions are expected to be "day-one accretive." Management expects organic growth, margin recovery, and $1,000,000 of further cost reductions to potentially yield positive operating cash flow by the back half of next year, enabled by accelerated adoption of new products and expanded customer opportunities in Edge AI and automotive markets.

  • Company leadership stated, "deferred revenue rose to approximately $1,500,000 on 12/31/2025," indicating stability in recurring business lines.
  • Wentworth indicated customer activity increasing in Edge AI and early revenue alignment not previously forecast, with pipeline opportunities for both programming services and test markets.
  • Management acknowledged lowered bookings from automotive customers; however, "Automotive will still remain a pretty strong market for us," and company strategy seeks to increase software attach and retention rates.
  • Capital structure remains free of debt, with management intending to minimize equity financing and aiming for non-equity sources should M&A proceed, per DiBona: "I do not think we are looking at a wholly equity type of acquisition."
  • Comprehensive integration of manual and automated product platforms is expected to unlock further migration and upsell opportunities, supporting revenue stabilization efforts.

INDUSTRY GLOSSARY

  • DocAI: An internally developed AI tool for rapid, automated extraction of technical information from semiconductor documentation, reducing manual engineering effort and cost.
  • Edge AI: Deployment of artificial intelligence at the edge of the network, such as in automotive, IoT, or robotics applications, requiring specialized provisioning and programming support.
  • CICD: Continuous Integration, Continuous Deployment—an automated software engineering process to streamline code development, testing, and deployment, referenced by management in discussions of AI-driven productivity gains.
  • Attach Rate: The percentage of equipment sales accompanied by the sale of contractual software or service agreements, cited by management as a key gross margin lever.

Full Conference Call Transcript

William O. Wentworth, and Chief Financial Officer, Charles DiBona. Before we begin, I would like to remind you that statements made in this conference call concerning future events, results from operations, financial position, markets, economic conditions, supply chain expectations, estimated impact of tax and other regulatory reform, product releases, new industry participants, and any other statements that may be construed as a prediction of future performance events are forward-looking statements, which involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially from those expressed or implied in such statements.

These factors also include uncertainties as to the impact of global and geopolitical events, international tariff and trade regulations, order levels for the company, and the activity level of the automotive and semiconductor industry overall; the ability to record revenues based on the timing of product deliveries and installations; market acceptance of new products; changes in economic conditions and market demand; part shortages; pricing and other activities by competitors; and other risks, including those described from time to time in the company's filings on Forms 10-K and 10-Q with the Securities and Exchange Commission, in our press releases, and other communications.

The company may also reference GAAP and non-GAAP financial performance measures including one-time items, which are intended to provide listeners with a means to better understand the company's performance. Please refer to reconciliations in our earnings press release issued today after market close. Finally, the accuracy and completeness of all discussions on this call, including forward-looking statements, should not be unduly relied upon. Data I/O Corporation is under no duty to update any forward-looking statements. I will now turn the call over to William O. Wentworth, President and CEO of Data I/O Corporation.

William O. Wentworth: Thank you, Jordan, very much. Thank you to everybody dialing in to the call. And I want to start off, obviously, this is an earnings call, but obviously, there is a lot that transpired over 2025. It was certainly a little more difficult of a quarter than we planned. There were a lot of things and headwinds that still continue with tariffs. But I want to assure everyone that did not waver us from the continuation of our transformation. You have to get through these tough times and you cannot stop the transformation, and this company needed Data I/O Corporation had some transformation work that was fairly heavy.

We did invest a lot of money into the business larger, specifically our platform. And I am pretty proud of the team, very proud of the team, and how we ended the year and how we have teed up this year, which I will talk a little bit about shortly. The setup, our mission throughout 2025 was to transform Data I/O Corporation for long-term growth. That plan is proving to be approximately one year ahead of schedule. I have been through personally quite a few transformations in my own business and with other companies, so this is something I am fairly good at measuring. I am very confident that we are ahead of schedule.

There are things that could speed that up throughout 2026. We executed against six strategic priorities, modernizing the go-to-market, which you will hear about a little bit later; investing in our core platform, that was number one, and we started that early in 2025; strengthening customer relationships, we have really got out in front of customers, myself personally; it probably really extended more of our employees into talking to customers, which is so important in order for transformation to really occur. Because our team needs to hear from all of our customers and suppliers in order for those transformations to really take hold and for everybody to get energized around those.

Optimizing business operations, IT infrastructure, we went through a fairly sizable cyberattack. We made it through that, I felt, extremely well. We were up and running within eleven working days. So we found out a lot about our infrastructure too and some of those things that we needed to button up and that also continues. As part of the transformation, we have made great strides there. Moving to the cloud, you know, that offers obviously additional security getting things off prem into the cloud, moving data into more secure applications that are also in the cloud. And again, that continues. Improving operational processes and deploying AI company wide, and you will definitely hear more about that later in this conversation.

Over the last past eighteen months, we have made deliberate changes to the Board and Executive Suite to ensure that we have the right team in place. Boards, you know, we have had a Board member, and the executive team, has been, you know, have some pivots here and there. I think we for sure have the right team on the field to execute the plan this year and return Data I/O Corporation to revenue growth and cash flow neutral to positive throughout the year. Again, transformations take time. And I have been through these and they are not easy. I can tell you that the team has put in a ton of time.

They have really stepped up and really have positioned Data I/O Corporation for a great 2026. Our new direction, we are expanding our addressable market. Data I/O Corporation is shifting from our programming CapEx market to servicing a broader data provisioning market, a significantly larger opportunity for the company. We are leveraging our platform to reach into two adjacent markets, programming services and programming test, with activity building for both. Yesterday, if you have seen the press release with IR, this is one of the largest—this is one of what we feel is going to be a significant opportunity this year and going forward.

I have been a big believer in partnerships ever since I have been in the business and been in this business in particular. It is really important. We are a small company. You cannot just go it alone. And being able to forge a relationship and a collaborate really strong collaboration with IR really combines their security expertise with our provisioning expertise to create a very comprehensive device support model for security provisioning in the industry. They have a significant algo library aligned with our algo library. We feel the solution is frictionless, fairly easy, and I will not get into the details of how complicated security provisioning could be, but it is very difficult.

We presented at a few of their conferences. It has gone really well. And we have business opportunities that we are now talking through with them and our collective customers. I would say the interesting opportunity I have had from shareholders and other meetings and podcasts, conversations around well, hey, how does AI help Data I/O Corporation? Well, I would say during the year and as you have heard me make this comment many times, it does not really help us now. That has changed. If you remember back in the mid-1990s, the Internet boom, and obviously that went through its change, but they continued even through that pause and it continued to grow our industry.

AI with the build out with the hypervisors that continues and will continue. But what it is doing is these AI models are starting to really gain traction. And I am sure we all see it in the news. What this does is now create the need for the build out of the AI, which is the edge of the network. You cannot have autonomous cars and robotics and IoT devices that are fairly—have a high level of technical capability without expanding the edge of the network. It is just not possible.

We have had conversations with new customers this year already which was not part of our revenue plan coming into the year, of significant build outs around this edge AI. This is something that, look, I have been in the technology industry for almost forty years. And this build out is something that I think is going to dwarf what the Internet build out was back in the late '90s. And I do not see this pausing. Because AI is changing things so fast. There is just, to keep up with it, I can see that edge of the network continuing to grow.

So we are very excited about the setup, the tailwinds, the new drive and demand for semiconductors as we see things start to pick up across the board. I expect this to be a multiyear growth cycle. New revenue opportunities for Data I/O Corporation. New and existing customers are confirming that Edge AI build outs are real, early customer alignment and interest validates our strategy and the framework for the company. As we enter 2026, we are poised to deliver organic revenue growth this year with very encouraging customer activity in Q4 and into 2026. And now I would like to hand the rest of the conversation to Charles DiBona, our CFO.

Charles DiBona: Thanks, Bill, and good afternoon, everyone. I will take this time now to walk through our fourth quarter and full year financial results covering revenue and bookings, our revenue mix, margins, operating expenses, bottom line, and then also some balance sheet items. Net sales in the fourth quarter were $4,000,000, down from $5,200,000 in 2024. For the full year, net sales were $21,500,000 compared with $21,800,000 in the prior year. Similarly, fourth quarter bookings were $3,100,000, down 25% from $4,100,000 in the prior year period, while full year bookings were $18,600,000, down 17% from $22,500,000 in 2024. Regionally, 2025 bookings and revenues were strongest for customers throughout Asia. North America demand remained consistent with the prior year, but Europe declined.

Moving forward, as a global company headquartered in the Western Hemisphere, Data I/O Corporation is well positioned to support customers migrating manufacturing facilities to the Americas. In terms of mix for 2025, consumables and adapters and services represented 58% of total revenue for the year, providing a stable base of recurring revenue. As a result, deferred revenue rose to approximately $1,500,000 on 12/31/2025, up from $1,400,000 as of September 30 of the year. Capital equipment sales represented the remaining 42% of 2025 revenues. Demand for capital equipment continued to be negatively impacted by the realignment of technology spending with AI-related data center investments at the forefront.

In particular, a reassessment of EV capacity and manufacturing impacted the company's largest end market, the automotive electronics sector. Notably, sales to the automotive electronics sector represented 52% of 2025 bookings compared to 59% in 2024, while overall backlog as of December 31 was $2,300,000, down from $2,700,000 at the September. All that said, as Bill mentioned, we have recently seen very positive indications of demand for our products as the build out of Edge AI is beginning to ramp up. Gross margin as a percentage of sales was 43% in the fourth quarter compared to 52.2% in 2024. Full year gross margin was 49.3% for 2025 compared to 53.3% in the prior year.

The decrease in gross margin reflects some mix shift as well as lower absorption of labor and overhead costs. Direct material costs remained relatively steady and consistent with prior periods as the company continued to actively mitigate the impacts of tariffs and other inflationary pressures. Operating expenses for the fourth quarter were $4,200,000, which included approximately $312,000 in one-time expenses related to SEC filings, restructuring work, and the initial phases of our transition to a new ERP system. This compared to $4,000,000 in 2024.

Full year 2025 operating expenses were $15,700,000, of which $1,400,000 represented one-time expenses primarily related to the company's leadership transition, investments in the core programming platform and information systems, again SEC filings, and the remediation of the cybersecurity incident first identified on 08/16/2025. This compared to $14,600,000 in 2024, wherein there were no one-time operating expenses recorded. Net loss for the fourth quarter was $2,500,000 or $0.27 per share, compared to a net loss of $1,200,000 or $0.13 per share in 2024. For the full year, net loss was $5,000,000 or $0.53 per share compared to a net loss of $3,100,000 or $0.34 per share in 2024.

Adjusted EBITDA, which excludes equity compensation, was negative $2,500,000 in the fourth quarter compared to negative $1,100,000 in 2024. Excluding one-time expenses of approximately $312,000 in the fourth quarter, adjusted EBITDA would have been negative $1,900,000. For the full year, adjusted EBITDA was negative $3,900,000 compared to negative $1,400,000 in 2024. Excluding the one-time expenses of $1,400,000, full year adjusted EBITDA for 2025 would have been negative $2,600,000. The company's balance sheet and liquidity remain solid. Cash at the end of the fourth quarter was $7,900,000 compared to $10,300,000 on 12/31/2024. The decreased cash balance reflects one-time expenses, technology platform investments, and IT spending through the year, partially offset by reduced inventory levels and increased accounts payable.

Net working capital was $12,300,000 on 12/31/2025 compared to $16,100,000 on 12/31/2024. In addition to cash, inventories were reduced by about $5,000,000 as the team implemented programs to become leaner and more efficient. Finally, the company continues to have no debt on the balance sheet. Before wrapping up, and before we turn to questions, I would like to provide a framing or framework for thinking about 2026, which is based solely on organic growth. First, we are targeting organic growth in 2026 over 2025, supported by early demand signals we are seeing from Edge AI infrastructure and continued strength in our recurring revenue base.

Second, a growing pipeline for entry into the programming services and programming test markets which represent meaningful opportunities to expand our addressable market. Third, as revenue increases, we expect improved absorption of labor and overhead costs, which should drive improved gross margins relative to what we experienced in 2025. Fourth, on the expense side, we are targeting an additional $1,000,000 in run-rate reductions beyond the benefit of previously implemented structural and operational cost improvements starting in early 2026. Fifth, AI is becoming deeply ingrained across all functional departments in the organization, driving efficiency and enabling us to do more with less.

And finally, the combination of revenue growth and cost discipline gives us line of sight to positive operating cash flow by 2026. Again, this preview only addresses organic operations and does not include the inorganic initiatives which we are actively pursuing to accelerate our growth and build out. With that, I will turn back to the Operator for the Q&A portion of the call.

Operator: We will now begin the question and answer session. To assemble our roster, our first question comes from David Williams with Benchmark.

David Williams: Hey, good afternoon, everyone, and thanks for letting me ask the question here. So Bill, good to hear from you and thanks for all the updates. I guess maybe first, can you maybe talk a little bit about the semiconductor manufacturing and maybe what the reshoring does as we come back to the American regions. What do you think that means for your revenue opportunity? And is that an area of growth and opportunity for you in the near term?

William O. Wentworth: Well, Dave, thanks for the question and great to hear from you. Semiconductor manufacturing coming back to the U.S., I mean, it is great. Obviously, it creates a lot of jobs, which creates growth in other domains and things like that because of factories being built. I would not say the semiconductor manufacturing coming back to U.S. directly impacts us. What is impact, again, as we talked about AI build out, and that is not at the hypervisor level, it is the edge of the network. Right? To be able to have all this automation that is coming our way that is going to be AI driven and AI enabled.

What we are seeing though is, sure, there is some reshoring going on. That is the other thing that we are seeing is not the semiconductor side, but just product being built and brought back to the Americas. We are seeing things like factories kind of spinning up and activity that we really did not think that would happen until second half of this year starting early in the first half. It has been a little slow out of the gate, but the conversations are definitely picking up.

We have got a lot of conversations with quite a few clients and new logos that were not part of our revenue plan and they are very definitive of how and when their production is going to start, when they need systems. And I will say the plan that we put in place, our strategy we have been displaying to these customers existing and new, the comments are things like you are exactly the supplier we are looking for. You are hitting all the areas that we provision data, need to provision data. And in the past, we were in one box. Now in the three box, we will get there obviously.

That is part of the plan that we will execute this year, inorganically and organically, but it is to be able to be in position to address the different areas of data provisioning. The great thing about this strategy is, David, is that we have the platform. It is not like we have to go out and buy new technology or make some other investment, which does create risk when you do M&A. We get to use exactly what we have been investing in last year, going into this year. We are just putting it in other areas of the data provisioning, like security. I hope that answers your question.

David Williams: Yes, great color. Thanks for that. And then maybe just if you could speak to the AI-assisted software development and maybe what that means.

William O. Wentworth: So I could tell you personally, I probably watch AI way too much on TV and not shows. I am talking podcasts, educating myself. When I first became a Board member, it was one of the things we created at one of the first couple of meetings was getting AI to just search technical documents that come from semiconductor companies. These would normally take the engineers three to five days to read through to get all the information that is important to load the table up to create an algorithm as an example. That would take three to five days.

Now the DocAI that we created eighteen months ago, almost two years now, it cost us in the project, the POC, and to get it to work and function, probably $120,000. I can tell you today, if we did that same project today, it would cost about $100. That is how far AI has advanced. So to give you an example, we are now creating a CICD process, and I know this might be over a few people's heads, but that stands for continuous improvement, continuous development. That is what you have in every software process. It is important to have that built into your DevOps and Agile.

So what you do is when you are writing code, you automate all the functions and what it takes to write code, get software tested, and then more importantly, released. So for the first time, we have AI that we built in our process that actually released production code this week. So meaning, like, very minimal human intervention. That is how far it has come. And so we are adopting—we have mainly been using Claude. We are using it across every department.

But we are creating teams around bug fixing and enhancements and then other teams to just do the new software that we have to cut that is going to be coming out this year, that is going to start to retire technical debt which will further reduce our costs. I can tell you, David, that the AI advancements are just amazing and they are making a huge difference in our company and the ability to produce new products faster and get to market faster. But on top of it, I have done a lot of M&A in my career.

I can tell you looking at synergies, when you do M&A, you have your standard, hey, that is 10%, 20% you can carve out of the back office when you consolidate roles and jobs and things that overlap. AI brings a whole new component to that. Because you can look at the company and go, if they have not deployed AI, for example, there are many places that they could that would advance the optimization of their business. So not only for what we are doing today, but also when we look at inorganic growth as well. I think it is going to accelerate that. It is going to greatly help us get our new ERP online far faster.

I mean, the things we are doing now with AI before we start the actual process of the transformation of ERP is setting enough to make it—I do not want to say easy for Charlie because he is heading the project. But I could tell you it has had a huge—it has filled some huge gaps that you would normally be concerned with in ERP implementations. Yes. If you want to comment on that, Charlie?

Charles DiBona: Yes. I mean, I could go on and on about AI. I will not take open objections. But it is certainly, you know, the speed at which we are doing what are fairly time-consuming tasks like mapping your old data, you know, chart of accounts to the new chart of accounts; creating new chart of accounts; putting in new policies. The speed at which you can do that with assistance from AI, obviously overseen by people making sure everything works, is just accelerating and de-risking the process. I think probably the biggest impact on ERP is going to be the reduction in implementation costs as we go forward.

It is just amazing how quickly we are getting the ball in place. We have a current example. We just launched Salesforce Service Cloud two weeks ago.

William O. Wentworth: Right? Actually, launch was two weeks ago. Formal launch was last week, a week ahead of schedule, which is rare when you are implementing new software. This is Service Cloud, it is now what we use for taking ticket information from customers when they have a challenge with any of our equipment or software, and that is where they enter the tickets. That project originally was scoped at, and this is only eight months ago, was scoped at almost $250,000. With AI and with some other things that we did to the process and make it easy, we did this for $100,000 and we were on time with the project.

And I could tell you after five days, typically, you will hear a lot of issues with changes as substantial as that. I just talked to the head of service in the parking lot before I went and ran an errand. I said, how is it going, Sam? He is like, five days in, we are good. Like, no noise, you know, no challenges. There have not been any problems with the customers being able to enter tickets. I mean, and AI was a big part of that.

David Williams: Great. Really fantastic color there. I appreciate it. And maybe, Charlie, just one for you. Just kind of thinking about the balance sheet and where you are, what is your level of comfort, I guess, with the balance sheet given the strategy and kind of what you see out in front of you?

Charles DiBona: Yes. I am comfortable with it. Obviously, you know, we did drain some cash last year. That is sort of the inevitable outcome of making the investments and the transformation that we were undergoing. But we do see that there is a turning point through the course of the year here, as we are very focused internally on controlling costs. We are making moves that we, like I said, we expect to be at least $1,000,000 of run-rate savings and that will happen through the early part of the year. So we will realize a lot of that through the course of the year as well. This is, I think, very solid.

We are a debt-free company right now with decent cash on hand and in a good position to sort of execute on the strategy we have both organic and inorganic. And inorganic, excuse me. And I really do not have any—it does not—certainly the balance sheet does not keep me up at night. ERP transformations keep me up at night.

William O. Wentworth: But I would say in that, to add to that, David, is that going back to AI, and I am sorry to go back to this, but the transformations do cost money, right? And the thing is, is that coming into the business over a year and a half ago, this company was very thinly threaded. Whereas you were going to need additional resources to do transformation. They do not happen on their own.

I can tell you that AI has an impact in lowering the cost of the transformation, especially where we are today and moving forward, that I do not have to hire a bunch of resources to try to continue the transformation because AI is picking up a lot of the slack in creating product, huge productivity increases, especially in engineering and software development. So it helps in all areas and can create new sources of revenue for us.

Operator: Our next question comes from Michael Legg with Ladenburg Thalmann.

William O. Wentworth: Thanks, guys. Hi, Michael. How are you?

Michael Legg: Wanted to dig a little deeper into M&A pipeline and where you are there. You just give us a little update on how that is going?

William O. Wentworth: Yes, Mike, as we have talked about, that was certainly a big part of my charter and strategy. And this goes back to October 2024 when we laid out the original strategy at the Board to get into these other capabilities. We are in a data room that was just opened up on one of our opportunities just two nights ago. We have another one being opened up most likely tomorrow. I got a call from a CEO in one of our strategic initiatives to meet at Apex to discuss a serious discussion around acquiring their business, and we have two other irons in the fire. So it is a quite active pipeline.

More in there, probably a little more than I would like, but at least it gives us choices. That is great. I fully expect something to happen this year, obviously, I would not be having these conversations, but everything again is directly tied to the strategy that we discussed. So very active play, Mike. And there is more behind that once we can get through a few of these that fit exactly where we want to fill and the holes we want to fill in our strategy. And then we will refill that pipeline and we will take another pass at it next year.

Charles DiBona: Michael, let me just follow up on that. You know, I do want to emphasize that both Bill and I are very disciplined acquirers. We have already walked from a couple transactions that did not make sense once we got into looking at the financials. We are not going to be—we are good stewards of the capital of the company. We have very exciting targets that we are looking at. We are enthusiastic about them, but we are also not in deal heat. And they are day-one accretive.

William O. Wentworth: That is the important thing. I mean, really accretive in a couple of cases. And the important thing too, Mike, is I have done a fair share of M&A activity. And I can tell you what is really important. Look, there are things like roll ups and things like that, you know, private equity firms have been doing from day one with their LBO funds. This is not a roll up. This M&A strategy is a place where if a company has vertical capabilities and a business that has horizontal, you put those types of companies together, I think it accelerates growth. Because you are filling each other's gaps.

And that is where M&A really makes sense—logical sense, but good financial sense as well.

Michael Legg: Okay, great. And then obviously, we have some headwinds in the industry right now. You mentioned in the fourth quarter, you saw a lot of good customer activity. Just expand on that customer activity and what you are seeing?

William O. Wentworth: Yes, sure. I would not say Q4 had a lot of customer—there were some conversations, a lot of it was tailing off like we will talk to you in Q1 and Q2. So those were good conversations trying to get an idea. You are always trying to set up your next year, right? So you do a big push trying to find out when budgets expire, what is left, what is the budget going to look like next year, what are your projects you are working on. A good amount of our pipe this year that are opportunities in our pipeline revenue plan, 75% of them are new from last year.

I mean, so we have had conversations throughout the year. And they are not all new logos, but just new activity, right? Some new logos, I would say it is a big push. The reason why we developed the manual product line, we have got reps ready to set up orders in Q1 for our manual systems, we should start to see next month, and to get those manual systems both here in North America and China. I just came fresh off a trip from there. Met with one of our largest customers that is a big supplier to BYD. We have new products coming out.

Matter of fact, they brought up and asked for a solution, just so happens we are already working on it. And so they offered to be our beta client. And so that is in our pipeline for the second half. So a lot of exciting things across the board. But yes, those conversations are starting now that will turn into purchase orders as we get into the end of Q1 and definitely into Q2. I mean, there is a lot of—and I think the tariff thing recently pulling that back, there is some pent-up demand back there. I cannot tell you how much. I think that will have an impact and give us a little bit of a tailwind.

But we will see. But outside of that, the build out of edge.ai, our existing customers, the solutions we are bringing them, the new plan that we have to be in all areas of data provisioning. The customers love the story.

Michael Legg: Great. And then you mentioned you are a year ahead of plan since you took over, Bill. Can you just kind of give us some of the thoughts you have on, you know, two years ago, what you thought versus what you are seeing today, some of that, why you are ahead of plan, what is positive upside you may have seen that you might not have thought of a couple of years ago?

William O. Wentworth: Yes, absolutely. It is a great question. And it is a hard thing to measure, but in year one, there is always a significant amount of investment because you are going to have to maybe kill those contracts or you are going to have to swizzle the management team, you are going to have a bunch of one-time costs. We are paying for things that were not fixed in the past, three, four, five years ago, right? So a lot of that was really all in 2025. We are still investing in 2026, but the investment right now is directly in new products. It is directly in areas that are going to drive revenue.

So there is no more—I would say, cleanup is pretty much completed. I would have thought it would have taken longer, but as I said, tools we are using and the technology we are using to get there faster has paid huge dividends, and that is only going to accelerate. So yes, I think we are probably—typically transformations of this nature are two, two and a half years. We are a good six months ahead of schedule, could be more. But easily six. So that is why we feel really comfortable with the revenue plan this year and getting to where we have articulated.

Operator: Our next question comes from George Marema with Pareto Ventures.

William O. Wentworth: Hey, George.

George Marema: Hey, Bill. Hey, Charlie. Hi. So, Bill, as you guys are moving into physical AI and kind of in-line program, what are you replacing out there? What are you competing against? And just internally as a company moving into these new areas, what kind of changes in distributions and sales and marketing motions need to happen to fully realize this?

William O. Wentworth: Yes. The great thing is we do not have to change anything. We just—these are existing customers and some new logos that are large contract manufacturers that we call on globally. They are now, you know, being tasked with new projects to build out the edge of the network, the products that fit that. There is one campus we went to, it is 80 acres. And next to them is Google, Verizon, a bunch of other companies that have created products that they are going to build for this build out. This is a massive campus. Massive. And that is—so it is really we are not changing channels. I mean, we are handling more of this direct, George.

I will tell you that is one of the things that, look, the reps we have had in the past, there are good reps and there are reps that, quite frankly, are old and tired. And so we have been revamping that slowly. We changed all their contracts this year. Very specific in what they need to do. And if they do not, they know that we will go into these accounts direct. I want to make sure we control our revenue this year. And in the future, it is important. And there is no reason to—look, nobody is going to sell your products with passion like the people that work for the company. It is not.

And so our team is very passionate about what they are doing. They are very knowledgeable. Most of them have been in this industry for quite some time. And that is the new blood we brought in. So like Monty and Dean and others, and again, we are looking to add more sales resources through this year. So that is where the investment is going to be, in revenue and growth. I hope I answered your question.

George Marema: Yes. And then on the cash flow flipping positive, what kind of revenue do you need to achieve that?

William O. Wentworth: Well, you know, it is tough to say. I mean, you know, we are reducing in the business monthly, honestly, and there is some significant optimization that is coming, some we have already done in Q1, which we will talk about after Q1. Charlie, I do not know if you want to comment on that.

Charles DiBona: Yes. Obviously, we are not giving specific guidance on revenue, but we believe between the upside on revenue and the cost containment and the cost reductions we can implement, that we are pretty comfortably—and you can see what we did last year, can sort of project from that and say if the two lines are moving in opposite directions, both in a positive way, there is a point at which they cross pretty close to where we were.

George Marema: Okay. So perhaps back half 2026, you can flip it.

Charles DiBona: I think that is probably a reasonable type of—I think that is fair.

Operator: Our next question comes from David P. Marsh with Singular Research.

William O. Wentworth: Hey, David.

David P. Marsh: Hey, guys. Thanks for taking the question. So your predecessor was pretty heavily focused on the electric vehicle market. You know, talked a lot about that and we are starting to see some new products come out and, you know, start to take, you know, a little bit of market share and, you know, starting to see that evolve a little bit. I just wanted to get a sense, I mean, is it—clearly you guys are focused on, you know, new and different markets—can you talk a little bit about activity in that market specifically? If that is something that is still, you know, a revenue driver for you guys?

William O. Wentworth: Oh, yes. Absolutely. Automotive will still remain a pretty strong market for us. Obviously, actually some of the customers we talked to, I will give an example, a large German automotive company, Tier Two, actually had told us at Productronica—this was in November—and, you know, they had said, not going to buy any CapEx for all of 2026. Well, we just presented to their larger build down in Mexico. And after we presented where we were going, they want us to actually present to their global tech council next month. Because they were so impressed with the places we are taking our technology.

And it solves a lot of problems that they have had on their board to figure out how to manage data provisioning. Data provisioning, because there is so much content in cars and other products, it is a larger conversation nowadays. You know, it was still 52% of our bookings last year. So it still remains a strong market. The customer I was talking about for betaing one of our new solutions is an automotive client. And the provider—one of the largest providers to BYD, which is an EV company. So none of that changes or stops.

If anything, we are trying to bring new solutions to them, which we are, that will gain more market share for us, but also provide them solutions that they do not currently have today. So, kind of, that expands the market. Kind of a market expansion as we drive these new solutions. So now—and then the other case, we are looking forward to that meeting, but the person who actually said that they were not going to be buying any CapEx is actually on that council. So we are looking forward to that conversation. So, but no, it is—I will tell you, the strategy we have is spot on, and it is crystallized.

And the customers are 100% nodding up and down.

David P. Marsh: Got it. And the agreement with IR, I mean, it is really—you know, it seems like a really, really tremendously positive step for you guys. I mean, are there other agreements that you could potentially, yeah, look to ink with some other folks that, you know, might be able to provide you those same types of opportunities? I mean, I know you have, you know, a pretty long history with some of the major electronic component suppliers out there. I mean, have you had similar conversations with any of those that you might be able to allude to?

William O. Wentworth: Absolutely. And that is—I am a big fan of partnerships, like real partnerships where both people win. And IR, that took a year. Right? These things do take time. The great thing about IR is this was a company that was falling out of favor with Data I/O Corporation. And it actually started at an embedded conference in Nuremberg, Germany. And I am with my team and they are like—I am walking towards their booth. They are like, where are you going? I am like, I am walking over there. They are in security. Large company. We partner with them.

You do know that is, you know, the company bought Secure Thingz, and we have fallen out of favor with them. So I walk in, hey, I am Bill Wentworth, and they are like, well, you know, they do not really like us. I said, they do not like you. They do not know me. So walk into the booth. Right? Completely oblivious, and start up a conversation. The first guy I run into actually worked at Arrow before he joined the company, and we knew all the same people. So it broke the ice right away. We had a conversation. That conversation led to this agreement.

And look, people like Monty Reagan, our VP of Sales, drove this relationship for the last year and ended in this result. They have a huge algo library. We have one. You combine those two with a frictionless solution, we will be the choice in security. I mean, I know that might be a bold statement, but their software development kit is one of the best in the industry, if not the best. But to your point, too, can this lead to other relationships? Yes, because guess what? Their relationships are with semiconductor companies.

So as our relationship grows, I am sure we will get opportunities with their relationships because as we have created this collaboration, the one thing I would say in partnerships, look, we will not both always win. And it is okay. But I would rather have a ton of bad bets than none at all. And so, that is the type of real true collaboration partnership you want. And, yes, David, we are going to look for more and more of those. Absolutely. It is how this company will grow organically and take share.

Operator: Our next question comes from Casey Ryan with Westpark.

Casey Ryan: Hi, Bill. Hey, Charlie. Yes, great update. We have kind of picked over the bones here in this call. You got to get first in line. I did not realize it was going to be such a bum rush tonight. I love it. Yeah. No. It is fantastic. Well, so one question just about the gross margin I think. Obviously, tied to revenue, you know, we all understand that. But what do you think is the rebuild? Is it sort of overall four quarters through the year or can it bounce back a little faster than that? And is, like, 51, 52 kind of the right normalized rate in some normal quarter down the road?

William O. Wentworth: I will let Charlie take that one. He is studying our—

Charles DiBona: Yeah. I think it will sort of be through the course of the year, though not necessarily purely linear. I think it will come back a little bit faster than—yeah, again, it is tied to volumes, a big part of it at least. And there is a mix shift issue. So there are some of the new products that we are going to be selling, particularly in the back half of the year, higher margin, that will help certainly. Again, we are not giving firm guidance, but I think that if you sort of look at historical levels, that is probably a reasonable starting point. Yeah. And then mix will play a big part.

William O. Wentworth: Great question. Margin is always on everybody's mind. As we build more value in our software, one of the things that we have done and we will be releasing—you will see probably a release next month of a piece of software that really brings a tremendous amount of value. We have been demoing it already with customers. This is the other thing that has gone really well with these customer visits. And they see the value, but what it is going to allow us to do is increase our attach rate on our software on our equipment. And as you know, that is highly profitable revenue. We have—I would say our attach rate is probably at 20%, 30%.

We should be able to double that throughout the year. And that is a significant boost.

Charles DiBona: It will both increase the attach rate and the retention rate. So we are looking at boosting, not only helping the gross margin, but helping the overall margin profile of the company and then having sort of a repeated, contractually repeated revenue source.

William O. Wentworth: Yes, because a lot of times they would buy these—interesting, and this is, look, the programming industry, I know, has been in it for a very long time. And look, we used to take advantage of the rules that they did not have in place. Like, we would get a software agreement, and then we would use it on other machines. Because they just were not that sophisticated. And there is a way to close that off. And it is one of the things that I said, look, we should not have a customer running our equipment without a software contract. I want to get to the point where none of them can, and they should not be, honestly.

Because it is not good for their business and induces risk, especially because one of the things we are going to build in our software stack is the ability to do things like have security built in, like recognize illegal handshakes between our equipment and their network. Because we do not know where that security breach could have come from. And these are things that are very important to IT departments, CIOs, Chief Security Officers across the board. It has been something that has been ramping up over the last twelve to eighteen months anyways.

So as we build more value in our software stack, it will force them to have to have their machines under contract, which it is one of our initiatives this year.

Casey Ryan: Right. Right. Okay. And then just one quick question about maybe some acquisitions, maybe, you know, to add services. Beyond being accretive, are you sensitive to the size, like, is there sort of a minimum size that, like, you are thinking about? Or is geography relevant? Like, does it need to be a U.S.-based service or—

William O. Wentworth: Yeah, it is a great question. You know, it is a little bit of both, honestly. You know, geography, that to me is definitely strategic, right? I mean, we do have obviously a significant operation in China. It would be good to de-risk that a little bit in Asia. Right? And because Asia will continue to be a strong market. And it is a market, quite honestly, we are weaker against our competition. So my goal is to strengthen that. Right? Especially with our new products, but also with the footprint. So that is important. In the U.S., certainly, easy to do transactions in the U.S. So those are not only geography friendly, but also strategically friendly as well.

So services is a very fragmented industry. I know—I was in it for a long time. It is as fragmented as ever. So there is opportunity there. And so we are going to take advantage of that.

Charles DiBona: Yes. Okay. Bill and I have experience doing international transactions as well as domestic. Obviously, there are complications that come with international, but there are also opportunities that come with it because we are comfortable treading where other people might not want to walk.

Operator: We have time for one more question before concluding the call. We will now take Howard Root, Retail Investor.

Howard Root: Thanks. Good afternoon. I will keep it real short not to delay it. But two quick things. One, Bill, when you stepped in, you really had two challenges. One was the market, the other was the product, kind of the platform, in that it was not integrated. You did not talk anything about the product status. Has that work all been done to integrate automatic and manual programmers?

William O. Wentworth: Yes. Yes, it has. And so that software, we now can run both our manual engineering units and our automation units on the same software. There is still some cleanup to do, especially on the handler side of things. But we are probably three months away from cleaning that up, three to four. But as far as that integration, yeah, that unified platform is what we talk about a lot with customers. Because that platform, again, also will be used in services and at test when we get there. So fully integrated, fully compliant, forward compatible with algorithms. You know, obviously, we still got a—we do have a legacy product that we are going to start to migrate from.

That also is a revenue opportunity in the next two to three years, and starting this year, as we start to get customers to migrate to our Luminex platform. So that is the thing. We are out talking to customers that have been with us for quite some time, talking about kind of where FlashCore is today, how long it is going to be along, and that we need to start migrating to Luminex. So that will also be a revenue boost for us over the next two years.

Howard Root: Okay. Great. And then in terms of cash flow, just a follow-up. I mean, you ended the year a little under $8,000,000 in cash. You are near term positive cash flow, you are saying, but that looks like second half of the year, not first half. And then you are talking about the acquisitions, and then you have got the shelf that you have filed out there. Obviously, the stock being depressed, to use that as a currency is dilutive. Can you do the acquisitions and run your business without issuing any more shares in order to accomplish that?

Or is that going to be a—you are going to need a financing here in order to accomplish what you want to do?

William O. Wentworth: I know. If you want to take—

Charles DiBona: Yeah. I mean, I—you know, there are alternative sources that we are exploring. We are building some relations. We have some—Bill and I have some relations to look for non-equity sources of cash. Would there be—no, I am not going to say that there would not be any component of equity in that transaction, but I would not expect it to—I do not think we are looking at a wholly equity type of acquisition. And then some of it depends on scale. We are looking at a couple of different things, different sizes. The size obviously plays some role in how much will be—

William O. Wentworth: How the deal is structured too, right? So there are a lot of different options on deal structure. There are some that are very favorable to cash.

Charles DiBona: Yep.

William O. Wentworth: Like you do not need much of it.

Charles DiBona: Yes. There are a couple of different permutations, but I do not think you are going to look at us just issuing stock for our company. I do not think that is what you are going to be seeing.

Howard Root: So, okay. And the reason for doing the shelf registration?

William O. Wentworth: I am sorry?

Howard Root: Reason for doing the shelf registration.

Charles DiBona: The reason for the shelf, it is, you know, it is to have that flexibility. I mean, there are not many public companies that do not have some kind of shelf registration because it affords you flexibility if an opportunity sort of uniquely strong comes along. And as I said, I do not think that we are looking at—not—we may blend some equity component into some of these acquisitions, so we would need some flexibility to issue stock. But I do not—again, I do not think we are going to be 100% stock.

William O. Wentworth: No. Definitely not.

Howard Root: I am saying there is no near term—there is no present need or desire to tap into that now.

Charles DiBona: That is what—no. That is not our plan.

Howard Root: Okay. Great.

Charles DiBona: Operator, is that our last question or—

William O. Wentworth: Did they all hang up?

Charles DiBona: Hello?

Operator: Yes. Bill, would you please repeat—

Operator: Ladies and gentlemen, at this time, we have reached the end of our question and answer session. I would like to turn the floor back over to management for any closing remarks. William O. Wentworth, Chief Executive Officer.

William O. Wentworth: Thank you, Everett. I really appreciate everybody jumping on the call and really appreciate the questions. I cannot tell you, that is far better than reading a script and I get to talk from the heart and where we are going with the company. I am very proud of this team and I am really looking forward to this year. It was a tough, tough 2025, but those things are never easy. But I can tell you, the lack of anxiety that is happening right now—granted we still have a lot of work to do. And that pace will not stop. If anything, I would expect the pace to uptick.

The team is ready for it, and we have had a lot of meetings over the last week or two, getting people prepared and the team prepared for what we are going to embark upon this year and into '27. So thank you again, all of you, for your time. I am always available for a conversation. Jordan knows that. So if you want any additional conversations, please reach out to Jordan. Happy to talk about the business anytime. Thank you, everyone, and have a great day.

Operator: Ladies and gentlemen, with that, we will conclude today's conference call and presentation. We do thank you for joining. You may now disconnect your lines.