It's taken a multi-year investment program from us, and we've done it. And that new business that we announced effectively will double the business itself, and it's upward from there. Our pipeline is now about $75 million in this area also, and we have a dedicated team who's found its stride. And we're now evaluating the market in China. The second largest market for robotic assisted surgery. And we have all the approvals we need to go in with the exact same customers. So this business is gaining momentum for us, and we have a strong team in place, and we have high aspirations for our medical business. So with that and the next page, Chris gave you an overview of the really – Thank you. Thank you. Thank you. also due to our actual results. And we were asked about how we think about our guidance. And really, we're letting the results flow before we're changing our outlooks. And we're doing it again here. So we do expect our sales to be 460 to 480 this year. Our EBITDA, 55 to 65. And our new business wins 80 to 100. In our earnings release that we put out this morning, you'll see that through July, our new business wins are already 80 million. So we increased the high end of the range there and the expectations. And those are all records for us. And they're bringing along the need for talented people and also capital equipment to put in place to be able to produce at a higher level as we add to the capacity. So that's our new guidance. We're very happy about it. As events unfold, we'll look at our guidance further as we go along through the second half of the year. With that, we'd like to turn it over and open up the webcast to question and answer period.

We will now begin the question and answer session. Please limit yourself to one question and one follow up. If you would like to ask further questions, kindly rejoin the queue. Reminder, if you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Our first question comes from the line of Rob Brown with Lake Street Capital Market. Rob, your line is now open.

Hi, congratulations on all the progress and great to see the steps that you've taken. Just wanted to follow up on the kind of start with the data center market. You've had some nice wins in the quarter. Could you kind of characterize the pipeline in that market? What, you know, what's sort of the building pipeline? What areas are you most interested in? And just maybe the scale of the pipeline. Thank you.

Yep. That's Christine. That's page 10 in the deck. Our products right now, Rob, we're making transformer parts, bus bar parts, test probes, liquid connector parts. We branched into the cold plate itself, plating of the gold plate, of the cold plate. It actually is plated with a nickel kind of plating. and we are looking at couplings that go into the heat pumps. The heat pump system itself, there's a lot of well-known people in that area, Dan Foss, Parker, Stobley, kind of well-known fluid management people and all the couplings are also metal. So we are looking at the stampings that are also inside that go into the racks. both up and down, and as well as the WIPs and cabling that controls the electricity inside of the center. So we have a multi-product look at the data center ecosystem, but basically we're focused in on our core markets. We're getting pulled into a few new areas of welding and brazing and that's fine because we know how to do that. And then you have to be able to automate it. So it's not a one product story. It's a bring everything the company has to the game plan story. And we have a large expanding pipeline on this chart here at the bottom. I mentioned that we're now approaching $100 million. on prospecting. And just to delineate that, we talk about pipeline figures if we've rendered an RFQ and the customer has an RFQ from us. But prospecting begins before that. So we have discussions underway that are large. And in our last call, someone asked, how big are you trying to get in these connectors? And we think we could do 100 million in that alone over time. The real thing for us is who to partner with, what type of assets do we want to put in place, where do we want to put them? So it's an evolving market for us, Rob. And it's quite fulsome. It's quite fulsome. It's a big story for us.

Thank you for the comment on that. Just on the gross margin improvement, nice to see there. How do you sort of see it? Is it sustainable at this level, or can you continue to move that up as you change your product mix?

Yeah, Chris, you want to take that?

Sure, sure. Thanks, Rob. Yeah, so we've benefited in a lot of areas with our margins. We took a lot, as you know, Rob, we took a lot of costs out over the last Thank you. Thank you. and many more. Your next question comes from the line of Greg Palm with Craig Hallam. Greg, your line is now open.

Yeah, good morning. Congrats on all the positive news and frankly, just really impressive progress. So pretty impressive stuff.

Thank you.

Thank you, Greg. Can we maybe just start a little bit tying to the last kind of answer around new business wins? And I'm wondering at this point, how much of that is currently flowing through the P&L. It sounds like there's actually a pretty big chunk that's still yet to come, at least on the stuff that you've announced, you know, the liquid cooling connectors, the firearms accessions. I think you talked about that ramping up in Q3. I only ask in light of really positive first-half results, I'm guessing you're just Maybe build in some extra conservatism in the second half guide, but maybe you can just address that as some of these newer business opportunities start to ramp up.

Yeah, good point. So, Greg, all things being equal, if we weren't winning a new business and things were just steady state, the second quarter usually is our strongest quarter. That's when we have our highest production volumes on existing contracts. and then the next quarter is Q3 and then Q1 and then Q4. So Q4 is usually our lightest quarter just because our customers are big and they try to pretty up their balance sheet and inventory positions before they report their year-end results. This year is going to be a little different because we have a lot of new wins that we're ramping up in the second half, and your posit is true. The announcements we made, all three of them, medical, data center, and defense, they are not impacting the first half at all. They ramp up in the second half. For instance, the 50 machines to make data center parts will start to hit its stride in November. We'll have all the machines installed then, and the sales outlook in November is going to go over a million dollars a month and keep building into Q1. We don't have any benefit from that right now, and the same with medical and the same with defense. through the end of July, we won $80 million worth of business. And the majority of it is immediate ramp up. So we will benefit from that in the second half. And so the way we're playing it right now, Greg, is we know that Q4 is usually light, but we have offsetting winds. So That's what's led us to think through our guidance and how much to increase it or not. You're right that it's slightly conservative, but we don't really control our demand, so we have to get pull signals. So our visibility is really in this quarter. We don't have pulls going into the fourth quarter yet, with the exception of data center, where basically they're saying we want everything you can make the same as you can make it. But we're comfortable right now with the guidance that we've given Greg, and it will have those variables playing out.

Yep, okay, makes sense. And I know you're not addressing the longer-term EBITDA margin guidance here today, but you just realized a 14% EBITDA margin on the quarter on revenue that's significantly lower than what your long-term... Thank you for joining us.

The goal is more like 14% to 16% longer term if you're talking about the adjusted EVDA margin. And that's really going to be pulled through by a better mix. So the mix of the products is going to drive that. And we're still maintaining about five points higher on gross margins on our new wins versus the existing. And You know, that's a good point. I think in our next update, Greg, we'll give an update on the longer-term goals. But I would say right now, you're right, our longer-term guidance should be more like 14% to 16% just to give it to you.

Yeah, it makes sense. All right, I'll leave it there. Thanks for the color. Thank you, Greg.

Your next question comes from the line of Joe Gomez with Noble Capital. Joe, your line is now open.

Hi, this is George Post. I'm filling in for Joe this morning. Congratulations on the quarter. I'm curious about the manufacturing expansion you guys mentioned earlier in China and what that looks like in terms of production and a timeline to hopefully bring that online.

Yeah, so right now we have two facilities in China that are wholly owned. What's called locally is Wolfies, wholly owned foreign entities. And then we have one JV plant. And the machining plant is in Wuxi, China, which is a suburb of Shanghai. And that's the plant where we've been doing all of the sampling work. for all of the data center customers that we're prospecting with. And it's where we have our approvals. So we kind of chose that location to get our certifications, approvals, and equipment organized. We believe we can get in about 80 machines into that facility. We've already ordered 50. We're getting ready to order the next batch. As we think it through, We think that we need space for at least another 200 machines from our estimates. And the timing is hard to understand right now because everyone is kind of in a feeding frenzy to get equipment lined up, parts lined up, parts applied. And so the size of the facility that we're looking for would be a facility that can accommodate another 200 machines after we have filled up our current envelope. And the timing, you mentioned the timing. We need to get this done by within 12 months.

Okay, perfect. Thank you. Thank you for a little background on that. A follow-up is, so what materials are the most volatile for you guys? Right now, is that altering any of your sourcing decisions?

Yeah, so there's tonnage and then there's dollar value. You're probably wondering about the dollar value. The biggest dollar value of materials is precious metals, gold and silver. The biggest tonnage is steel and then copper. So We have year-over-year inflation in all metals, and we track it, and we also have tariffs on steel, and we track that. I do not believe there are any tariffs on gold or silver, and so we have our procurement team, and we have a chief procurement officer, and he's very are knowledgeable on all the tariffs and surcharges that are underway right now, and it's a moving target. But we have the right to pass through basis cost changes, and we do, and we monitor our behavior there. And so we seek full recovery, so we don't make money on it, but we try not to lose money on it. It impacts working capital when you have inflation. When I answered Greg's question, I was thinking through the outlook for metals over time, and they are to calm down, which will also help our percentages. So those are the main, the metals are our main raw materials of company. Yeah. All right. Perfect. Thank you. You're welcome.

Your next question comes from the line of Barry Hames with Sage Asset Management. Barry, your line is now open.

Thanks so much, and again, congrats on all the progress. I had a couple questions on the financing. One is, could you tell us how the share count will change? And then secondly, you alluded to the phase two, if you will, you know, in terms of are renegotiating the term loan. Could you talk a little bit about the progress and possible timing on that? Thank you.

Yeah. Go ahead, Chris. Yeah, thanks for the question. So yeah, the share counts in the details in the docs, but we swapped about, well, we swapped 5.5 million shares for that roughly $19 million of reduction in the PREF. So that'll increase the overall share count. The refinance of the term loan, I mean, you know, obviously we're thinking about that. Again, lots going on in the background. We're very pleased with our relationship with Marathon right now, and we're hopeful that we're able to work out some better terms based on how the business is doing. Nothing to announce at this point, but I think with where the business is performing, the lower debt that we've been able to achieve over this transaction as well as expectations in the future, I think that will bode well for reducing rate and so forth and getting us more flexibility and being able to take control of the growth that we're seeing. That's really one thing that's very critical for us. With all this new business, we want to have a capital stack that allows for growth, gives us the flexibility to either buy or lease equipment, and get much better and more competitive rates, not only on the senior note, but on the leasing or buying of equipment. Harold and I and the team will be working on that diligently in the coming weeks and quarter. More to come on that.

Great, thank you. Barry, I'll also give you a couple numbers. So right now, through this swap, we have 82.6 million shares outstanding, 82.6 out of an authorized of 90. And the gap there is reserved for comp plans and previously issued warrants. So right now, we've used all the available common stock that the company had access to.

Great. Thank you.

You're welcome.

Your next question comes from the line of Robert Sussman with Bentley Capital. Robert, your line is now open. Thank you.

I'm absolutely staggered listening to this call and the number of wins and the pipeline that you have for a company your size. It's It's just staggering. I'd like to ask you, what is it about the company that is enabling all these wins in such diverse markets? Is there a unique skill set that you have?

It's a good question. Most of the wins have been multi-year in nature, Robert. And you know it from being a professional investor, one of the differentiators of a small company is their ability to organically grow sales. And for us, you know, if you spend back three years, the company was really focused on satisfying automotive customers and then other customers if they called us, you know. And so we kind of flipped that around. and said, geez, what's the best use of these assets and this know-how that we have? And there are several glaring markets that you just do a simple chat GBT on where's the best use of these assets. And so we had to go hire executives that we didn't have from the industry. And then we had to start prospecting and then understand what our gaps were to being able to become an approved supplier and then start quoting Find your way. You don't start off low. You start off high and then kind of find where the market is. And then you start running a program. We're using Salesforce.com as our organizing software tool. And then you track why do you win and why do you lose. And then you try to work around those findings and you drive to outcomes. What's happened this year is... We've had some multi-year kind of marquee things that we're working on with some big people that we thought would help our credentials and establish us as a real competitor. And that helped us. So we have references now. And it's fun. And another question you could say is, what's big enough? What's too big? What's too small? We're definitely winning Thank you for joining us. that compares favorably. If you research and benchmark that number, that's above industry average for a manufacturing company. But the reason we're losing over 70% and the reason why we lose is we're being disciplined about the financials. So I mentioned in the dialogue that our prospecting is expanding and it's really due to the fact that we're getting credentials now in these targeted areas and we're getting more looks now. We're not going to go into different areas, really. There's one other area that we're evaluating, Robert, and it's the automotive aftermarket. But right now we kind of have our hands full with the markets that are performing for us.

One follow-up. I assume that there's some lag in passing precious metal prices through. Can you tell us what that lag is? And I assume there has to be some drag on profitability from that lag?

We're allowed to true up to actual. So the show me part of this, you know, Chris is from Missouri, so I should have probably had him answer. It's a show me deal. So if we can show that we incurred inflation to deliver their order, it's a true up. So the onus is upon us to match up and be transparent with what our input costs are in the performance of producing for those POs. So it's not much, Robert. It's smaller than you think because the company is pretty good at not letting that happen.

Okay. Thank you very much. Keep up the great work. Thank you. Appreciate it.

Your next question comes from the line of Barry Hames with Sage Asset Management. Barry, your line is now open.

Thanks. One other follow-up. Harold, on your comment you just made on the new business obviously creating demand for machines and capital, when you're going through that exercise, what sort of ROIC target or target range Do you have, you know, in terms of saying, you know, okay, this capital is worth spending on such and such a program. Thank you.

Yep. So the bottom, the floors, the floor on gross margin is 25% and the floor on IRR, if spending is needed, is 25%. Those are the floors. We've been averaging quite a bit above those floors. The financials are there, though, to be honest, Barry. The real decision-making is around how solid of a commitment are they willing to make to us on a multi-year basis for volume. And you can see when the customer has plenty of suppliers bidding because they don't really want to make a commitment or if you're kind of have a me too value proposition. And so you see a lack of commitment to each other. They want to date. They don't want to get married. And so it's different when you can tell that you have a differentiated value that you're bringing to the table because they want to lock you out. And so we have a giant opportunity we're looking at right now with a big a data center customer, and they've requested us to kind of be exclusive with them. And if we do that, they'll give us this huge amount of business, but they don't want us working with others. And so what that means to us is, hey, wait a minute, we're pretty special in this space here. We're not doing that. We're more being balanced, if you will, across companies. A set of customers versus just getting married to one customer. But that's where the real play is, is how much you want to do versus the commitment that they're offering. The numbers are all there predominantly. And we're lucky that we're able to be selective and kind of cherry pick the better return programs. And this year, we've won about 100. And I think yesterday, Through yesterday, it was 132 programs. We're into August now. And we're launching programs we've previously won, and we're winning programs that are immediate ramp up. I'm going to say we have well over 150 programs in ramp up mode now, right now, on this call. And I'm also going to say that we probably have every single plant and some sort of a new business ramp up. The biggest and the most exciting ones are obviously three areas we talked about, data center, grid, defense, electronics and medical because it's good business, it's high growth and it's acceptable to the stock market. So we're definitely focused on those three areas with a differentiated push.

Great, thanks so much. You're welcome.

This concludes the question and answer session. I will now turn the call back to Harold Bevis for closing remark.

Yeah, let's tag, Chris, let's tag team. You want to give a summary on the balance sheet and the financials and then I'll do the business wrap up?

Sure, sure. Thanks, Harold. Yeah, so, you know, as I mentioned, we're very pleased with the strategic refinancing of the balance sheet and more to come with the senior note and so forth. So, Like I mentioned before, I think we've got another step to go to get the balance sheet fine-tuned for the growth that we're experiencing, and we'll be working hard on that.

Thank you, Chris. And I'm sure that you've detected from our comments here and from the Q&A that our momentum has not peaked. Our momentum is building, and things have traction here at the company, and we're proud of the quarters. But we have bigger aspirations and we look forward to reporting Q3 with you guys in 90 days. Thank you very much for calling in today. And with that, we'll end the call. Christine.

This concludes today's call. Thank you for attending. You may now disconnect.