Innventure, Inc.

Good day and thank you for standing by. Welcome to the InVenture fourth quarter and full year 2024 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I'd like to hand the conference over to your first speaker today, Lucas Harper, Chief Investment Officer.

Please go ahead.

Thank you, operator, and thank you all for joining us for InVenture's fourth quarter and full year 2024 earnings call. My name is Lucas Harper, InVenture's Chief Investment Officer, and joining me on the call today are Bill Haskell, Chief Executive Officer, and Dave Yablunovsky, Chief Financial Officer. Earlier today, we issued a press release announcing our financial results, which is available on our investor relations website along with a supplemental slide presentation. As referenced on slide side, we will be discussing non-GAAP financial measures during the call. The most directly comparable GAAP financial measures and a reconciliation of the differences between the GAAP and non-GAAP financial measures are available in our earnings release and supplemental slide presentation on our website. In addition, certain statements being made today are forward-looking statements that are based on management's current assumptions, beliefs, and expectations concerning future events impacting the company. These forward-looking statements involve a number of uncertainties and risks, including but not limited to those described in our earnings release, Form 10-K for the period ended December 31, 2024, and other filings with the SEC. The actual results of operations and financial conditions of the company could differ materially from those expressed or implied in our forward-looking statements. And now, I'd like to hand the call over to our CEO, Bill Haskell.

Thanks, Lucas, and thanks to everyone listening today. InVenture is happy to report on our fourth quarter and full year 2024, which proved to be a seminal year in the company's history. and our evolution as a growing, differentiated technology commercialization platform. We accomplished several key milestones throughout the year, which I'd like to recap. First, both Aeroflex and Excelsius started delivering commercial product to the marketplace, marking a significant milestone in their commercialization journeys. Both have continued the momentum into this year, and I'll touch on 2025 strategic priorities for each later in my commentary. Second, in October, InVenture closed its business combination with LearnCW and started trading on the NASDAQ as a public company. As we've said in the past, we believe InVenture represents a differentiated opportunity for investors to participate in the expected growth trajectory of our current and future operating companies. We remain committed to our goal of driving long-term value for our shareholders and believe we are only in the very early stages of capturing that value. Third and finally, in December, We announced our collaboration with the Dow Chemical Company and the launch of our fourth operating company, Raffinity. In addition to Procter & Gamble and Nokia, Dow is the third active multinational corporation we've collaborated with in connection with the launch of a new operating company. There are various collaborative opportunities we plan to explore with Dow within the waste-to-value ecosystem, and we very much look forward to the future. As you can see, 2024 was a watershed year at InVenture. We executed well against our 2024 strategic priorities and believe we have positioned the company well for success in 2025. Now let's dive into updates for each of our operating companies, starting with Excelsius. As a reminder, InVenture owns a majority of the company and we consolidate Excelsius's financials. Compared to single-phase water, Excelsius's new cool systems offer a differentiated cooling solution that can handle higher heat fluxes, lower overall operating expense, and have superior redundancy and servicing flexibility, all while using a dielectric fluid that our testing indicates will not damage GPUs in the event of a leak. All of this can lead to a lower total cost of ownership for the data center operators compared to single-phase cooling systems. As I mentioned, Excelsior started delivering product to the marketplace during Q3 2024 and gained momentum during the fourth quarter. While revenues have yet to scale, the traction Excelsior is generating within the data center ecosystem is impressive. I'd like to start by reviewing the strategic goals that Excelsior set out to accomplish. Our strategy has always been to leverage the reach of global partners to both validate our model and to reach scale. To that end, we have targeted establishing relationships with one or more entities in each of the following four separate groups. Number one, large global OEMs, number two, hyperscalers, number three, co-location operators, and number four, AI as a service providers. To date, we have made meaningful progress with companies in all four groups. As communicated in our recent press release, Excelsior signed a three-year master purchasing agreement to white label its product for a leading global thermal management OEM for sale to its end-user customers and resale to its channel partners. We have also been engaging in discussions with multiple hyperscalers. To get a sense for the potential for these large global companies, the top hyperscalers collectively have estimated spending over $250 billion for data center development for 2025, and each typically orders equipment at a rate of about 1,000 racks per week. Excelsis has also announced deals with large co-location players, tele-house, and IM data centers. both of which have established innovation centers that will display Excelsis' new cool solution. We have announced a collaboration with AI as a service provider Nordic as well. Importantly, we believe each of these agreements has the potential for expansion as we expect additional orders will follow as the customers validate the technology. We believe that the economics of the Excelsis solution are compelling, the expected benefits for data centers are clear, and market adoption of the technology is starting to gain momentum. We are also excited about Excelsis' recent announced product line expansion, which can help serve the needs of large players in the data center market. This includes the launch of a 250 kilowatt multi-rack cooling system, helping Excelsis serve the ever-increasing need for higher rack power densities across a broadening set of end market use cases. We believe the design of this product can scale even higher and we are excited about the company's sophisticated product roadmap. We expect these innovations will help the company maintain a leading position in the two-phase direct-to-chip liquid cooling market. We look forward to sharing more as we progress through 2025, but needless to say, we are proud of what Excelsius has accomplished to date and expect many additional achievements from Excelsius in the quarters and years ahead. Now, shifting to Aeroflex, which, as a reminder, is carried on our balance sheet as an equity method company. Similar to Excelsis, Aeroflex started delivering product to the marketplace during 2024 and is gaining momentum that we believe sets the company up for a pivotal 2025. Earlier this month, Aeroflex announced a partnership with Spectrum Brands for their Furminator Deshedding Ultra Premium Pet Shampoo product. The Aeroflex design should help improve the overall customer experience with a sustainable solution that uses up to 66% less plastic than rigid bottle alternatives. This is a significant development for Aeroflex and one that is indicative of the broader conversations Andy and his team are having with potential customers. Packaging companies are not solely focused on volume and price. Sustainability, performance, and total cost of ownership all play a large role in the decision-making process, and potential customers need to audit the packaging facilities to ensure the products meet all of their criteria. This makes two other recent announcements critically important. First, as we mentioned on our last call, Aeroflex received the highest standard and rating under the brand reputation through compliance global standard, or VRCGS, and is certified as AA grade. This represents the fourth consecutive year the Westchester manufacturing site has achieved the highest rating, which is an important credential MNCs look for in a packaging supplier. Aeroflex recently achieved two important international organizations for standardization or ISO certifications. These ISO certifications hold significant value for organizations and brand owners with clear policies surrounding product quality and performance. These credentials provide verification that Aeroflex's production process meet ISO standards and coupled with the BRCGS certification exemplify Aeroflex's exceptional quality and consistent approach to manufacturing. These certifications open up the aperture of potential customers that Aeroflex can target to further establish itself within the $400 billion packaging market. In addition, Aeroflex launched its partnership with Chemipak in Europe, which was originally announced back in June of 2024. Aeroflex deployed its proprietary filling machine directly at Chemipak's production site to facilitate adoption of the technology across Europe. This strategic partnership positions Aeroflux to help address growing demand for sustainable liquid packaging solutions in the broader European region. While product deliveries have yet to start, this milestone establishes a global footprint, localizing the ability for European customers to do business with us. We are proud of this momentum and look forward to seeing what Andy and his team do next. Now let's move to our latest operating company, Raffinity, which is focusing on opportunities in the waste-to-value space. In mid-December, we launched Refinity and announced its collaboration with Dow. In January, we hosted a call where Bill Grieco, Refinity's CEO, did a deep dive into the Dow collaboration and the technology that Refinity intends to commercialize. We'd encourage everyone to give that a listen, as it provides valuable detail around the plastic waste-to-value market opportunity, incumbent technologies, and Refinity differentiators. To quickly frame why we're so excited about the opportunity, less than 9% of global plastic waste generated each year is recycled. Raffinity is focused on the 240 million tons of plastic waste that are typically landfilled or incinerated annually. The scope of this unmet market need is a key reason that we're focused on commercializing what we believe will be an economically viable recycling solution. Our solution to that problem uses a proprietary advanced recycling process licensed from VTT, Technical Research Center of Finland, to convert minimally sorted, low-cost, mixed plastic waste to drop-in chemicals. Raffinity plans to take waste from food trays, plastic wrap, storage bins, detergent containers, and other household plastics and convert them to sustainable chemicals that today come from barrels of oil. in turn reducing the overall net need for oil production. The process targets conversion of abundant, low-cost plastic waste to valuable chemicals at an expected high yield. The company is only a few months old, but Raffinity has hit the ground running. First, they are building an impressive team. In addition to Bill Grieco and Adam Javin, Raffinity hired Dr. Ignacy Paulo-Rivera as Chief Technology Officer who brings over 25 years of experience in the chemicals and fuels industries. Second, the team established plans with VTT for bench and pilot scale experiments for optimization of olefin gas production from plastic waste. These experiments are currently being conducted using plastic waste that are potential feedstocks for the initial production plants that Raffinity plans to build. VTT also started experiments on Raffinity's behalf for liquid production that have been promising. Additionally, the Raffinity and Dow teams are beginning to develop project plans for defining product quality, site selection, and integrating the conversion process with steam cracker operations. Looking ahead, while we don't expect the company to generate revenue for a few years, we thought it would be helpful to discuss three key strategic priorities for Raffinity over the next several quarters. Number one, engage an engineering procurement and construction partner for the first plant design and delivery. Two, demonstrate viability of fluid bed conversion of mixed plastic waste to liquid product at VTT pilot scale. And three, finalize initial site selection and feedstock sourcing for the first plant. Executing on these priorities will set the company up for future success, and we are excited to watch the company develop. Now I'll provide an update on the pipeline of multinational corporation relationships in our funnel. We started 2024 with two ongoing MNC partners, Procter & Gamble and Nokia. We ended the year with three, adding Dow in collaboration with our launch of Affinity. Beyond that, there is a diverse and evolving set of MNCs that continually share opportunities with InVenture for us to evaluate. Given this, we don't plan to disclose MNC numbers on a quarterly basis moving forward. Instead, we will communicate relevant developments to the market as they happen. Rather than focusing on quantity, the quality of the opportunities has always been paramount and we continue to see quality increase as our relationships evolve. Based on relationships with just three MNCs, InVenture has launched four companies since inception. PureCycle Technologies was the first InVenture operating company and it is now a public company with an enterprise value of approximately $1.5 billion. As previously communicated, InVenture took the company public in 2021 and we no longer have an economic interest in PureCycle. As we evaluate opportunities, we look to create companies that we believe have the potential to reach similar target enterprise values above $1 billion. To close, 2024 was a milestone year for InVenture and it marked the beginning of our journey as a public company. I am incredibly proud of all the hard work exhibited by the entire InVenture team and the teams across our family of operating companies. The momentum that we've seen early in 2025 is invigorating, and we expect this year to be an inflection point for revenue growth. With that, I'd like to turn the call over to our Chief Financial Officer, Dave Yadlonowski, to review our financials. Dave?

Thanks, Bill, and thanks to all joining today. InVenture ended 2024 with total revenue of $1.2 million. primarily representing the first commercial sales at Ascelsius. As Bill mentioned, both Ascelsius and Aeroflex began generating revenue in 2024, and we expect revenues to continue to grow in 2025, with most of the growth occurring in the second half of the year. Adjusted EBITDA was a loss of $27.9 million in 2024, driven by cost of sales and R&D expense at Ascelsius, marketing expense as Ascelsius grows, non-recurring professional services, legal fees, and consulting fees related to the business combination, and higher G&A at both Ascelsius and InVenture resulting from our transition from a private company to a public company. A reconciliation of adjusted EBITDA to net loss is shown in the appendix of the earnings presentation. Now, a brief discussion on tariffs. Like most companies across many different industries, we're still evaluating the impact tariffs may have on our business. At this point, we don't expect tariffs to have a material impact on our ability to grow revenue and scale our operating companies. While Ascelsius is a buyer of materials like aluminum and copper and other electrical components, The company's Tier 1 supply chain is largely North American-based, so Ascelsius is relatively protected from any direct impact tariffs may have. For Aeroflex, the company continues to pursue U.S.-based raw material suppliers, and all production is currently done in the U.S. The impact of tariffs on the Chemipak partnership is also not expected to be material, as Chemipak distribution will be focused within the broader European regions. And for Raffinity, we also don't expect tariffs to have a significant impact on the business. The company's plan is to build plants in the U.S., source plastic waste feedstock domestically, and sell both the liquid and gas products to domestic off-takers. It's important to say we remain committed to our goal of creating long-term shareholder value and are competent in how the company is positioned as we move through 2025. Moving now to our recently announced transactions, all of which strengthen our capital position. First, on March 24, 2025, InVenture completed a private placement of Series C preferred stock in the aggregate amount of approximately $28.9 million. The Series C offering was designed to accommodate certain persons interested in investing in the company on terms similar to those of the Series B preferred round that closed on October 2024, as well as strengthen the InVenture balance sheet by converting founder and other related party debt into Series C preferred shares. Specifically, we issued 275,000 preferred shares for cash proceeds of $2.75 million and issued 300,000 Series C preferred shares pursuant to an agreement with one of our advisors. In addition, Executive Chairman Mike Otworth, Chief Strategy Officer John Scott, and other related parties terminated approximately $18 million worth of InVenture and Aeroflex debt in exchange for approximately 2.3 million Series C preferred shares. resulting in an annual interest expense savings of approximately $3 million. We believe this demonstrates a strong commitment from our founders and reiterates their belief in InVenture's goal to drive long-term value creation for our shareholders. Second, on March 25th, 2025, InVenture entered into a securities purchase agreement with Yorkville for convertible debenture issuances in an aggregate principal amount of up to $30 million. We expect to issue $20 million of debentures in a closing scheduled to occur within the next few days, and to issue an additional $10 million of debentures later in the second quarter, subject to satisfaction of certain closing conditions. I'd like to close by reiterating our previously stated capital allocation priorities. We've said it before, Discipline and risk mitigation is part of our DNA, and we'll take that approach as we look to scale our operating companies. We will aim to pace capital investments with revenue visibility and be highly focused on cost management to minimize early-stage operating expense. Again, this is a key benefit of our closed-loop model as our collaborations with multinational corporations are designed to help reduce operating risk. We will also focus on supporting our operating companies with the ultimate goal of funding growth off of our own balance sheet. We believe that our operating companies have strong growth potential, and by maintaining long-term control, we'll have the opportunity to unlock significant shareholder value over the long term. Finally, as we continue to scale and launch new companies, We plan to consolidate their cash flows at the InVenture level. Because of this, we may ultimately look to return a portion of the excess capital to our shareholders. That concludes our prepared remarks. We believe there are many exciting things on the horizon for InVenture, and we look forward to executing our strategy and delivering value to our shareholders.

Now we'll open up the call for Q&A.

Thank you. At this time, we'll conduct the question and answer session. As a reminder to ask a question, you'll need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster.

And our first question comes from the line of Chip Moore of Roth Capital Partners.

Your line is now open.

Morning. Hey, everybody.

Thanks for taking the question. I wanted to maybe ask on Exceltius if you could expand a bit on those four groups you mentioned, and I guess particularly the global OEMs and hyperscalers. Just maybe give us a sense of how those discussions have been evolving here, you know, in recent months.

Hey, Chet. This is Bill, and thanks for the question. So first I would say that on the OEM agreement, that is a contract that we have and it does have, you know, some conditions in it that include, you know, effectively hard contracts for particular pay and then some benchmarks to obtain certain exclusivity provisions in the agreement. So that's a deal that we were under contract for, for a white label product as we described in our, you know, information. So we're quite excited about it. It's, you know, the scale of this to the scale of both the OEM, who has asked us not to name them at this stage, but the scale of the OEM and their demands in the marketplace are quite substantial. You know, the agreement that we've drafted, I mean, I can imagine that they would have entered into something that they didn't believe was going to result in at least, you know, sort of thousands of racks of equipment or larger. which is very significant to us from a revenue standpoint. On the hyperscalers, we've had literally dozens of meetings with various hyperscalers, so we're quite optimistic that going forward we will end up with some firm commitments from those groups. As you may know, Chip, the competition in this space is principally, I would say, the old way of doing things. There are Of course, most people are using air today. We've got some that are using single-phase water, and there are dozens and dozens of contractors in that space. But there are only two, to our knowledge, ourselves and one other, in the two-phase directed chip. And most of the large players have already indicated that it's inevitable that we'll get there and have a requirement for that, some now, some later. So I think we're well-positioned with both the hyperscalers, the OEMs, and then the AIs, the service providers. As I mentioned, we've had a contract that we announced, and we're in discussions with others that have fairly substantial kind of chipsets that they need cooling for. So overall, quite bullish. I feel like this business is really at an inflection point, and I'm more optimistic than I've been ever with respect to where Excelsius is.

Great. Thanks, Bill, for that.

Sorry, go ahead. Yeah, I was going to say to your point.

Yeah, I was going to ask about that inflection point and then particularly as it relates to, you know, sort of back half of this year, you gave some commentary there. Maybe just, you know, dovetail that with some of those conversations you're having.

Well, in the case of you know, the OEM, we expect that ramp to begin in the second half when the white label product would be available in the marketplace. They obviously can't sell it until it's, you know, it's finalized. And that's really more on their side than ours. I think we have a product that we've already developed for them. You know, we need to go through UL and a few other certifications. But by and large, we have a product that we can put in the marketplace, you know, pretty readily. So sometime in the second half of the year, that will be available for sale, and that would begin the ramp there, which, again, I would expect to be relatively steep. Timing is always challenging to predict, particularly right now as the market is very volatile and there's a lot of uncertainty and nervousness kind of across the board. But overall, quite bullish on what the second half of the year looks like, not only for Excelsior, but also for Aeroflux.

Got it. That's helpful. And, yeah, I haven't noticed any volatility. I guess as a follow-up here, I did notice on Excelsius, on their website, you know, there is, I think, a major contract manufacturer and a pretty large global thermal management OEM listed on there. Just wondering if that is new or something I just hadn't noticed in the past.

Yeah, well, the OEM is what we discussed, and that is the billable OEM. I'm not aware that they've named the contract manufacturer. Was there a name of one on the website?

I thought I saw maybe Celestica on there.

Okay. That's certainly a possibility. I'll defer to them to answer the question, but we certainly are engaged with with, you know, various content manufacturers to be able to accommodate the scale, particularly in the hyperscalers that they sell through to. You know, the kind of orders that we would anticipate there are very substantial, and so we need a content manufacturer by our side to be able to accommodate the number of volumes that we would expect.

Understood. If I could sneak one more in, maybe on Aeroflex. you know, you announced that pet shampoo product, just, just how to think about that. Is that sort of an early stage, you know, testing on the shelf, you know, limited markets or what's the, and then what's the potential opportunity with that customer?

Yeah, look, I think it's smaller so far to your point, you know, that you can go buy them on Amazon today if you want to, it's out there and available. So it has both a, you know, kind of an online element to it, as well as, you know, kind of, a meaningful commercial scale contract for us, which is not the first, but it's the largest to date, and we would expect larger ones, not just from them, follow-on orders, but we've got quite a queue of folks that are interested in it, and all of these various certifications that we've been announcing and continue to announce are really critical, particularly to the large CPG companies. They are all require not only ISO certifications but various certifications along the way in order for them to be able to place an order. It's just kind of one of the hurdles you have to go through, but there's one yet to be achieved. I think it's fairly close in time, you know, a month or two away, and we expect that to kind of unlock some various orders that are pending that certification.

Gotcha. Perfect. Thanks, Bill. And maybe just one last housekeeping question. It looked like Aeroflex, you know, stake went up to 38%. Did that increase? Would you be looking to take that majority at some point? And then is Excelsis, is that still the same ownership position? Thanks.

Yeah. Excelsis is where it was before. We did increase our ownership stake in Aeroflex. We converted some debt into equity. to increase our stake. And we do have a mechanism, potentially, to be able to get to a majority ownership in Aeroflux down the road, so that remains to be seen. But there is a pathway, I would say, to achieving that at some point in the future if we decide to do it.

Very good. Okay. Thanks very much. Thank you. Thank you. One moment for our next question. Our next question comes from a line of Naha Jokshi of North Air Capital Markets.

Your line is now open.

Yeah, thank you.

I've got a few questions myself. First of all, I don't believe I see a 10-K filed yet. When do you guys actually expect that to be filed? Or if I missed it, just let me know I missed it.

Yeah, yeah. Go ahead, Bill. Or you want me to take it? Sure. You know, we expect the 10-K to be filed in the next few days. It's routine. No significant issue there. Okay, great.

And then product revenue for the quarter, I don't see an actual explicit disclosure on the product revenue, but I think he did have it on the September quarter. Can you give us a sense as far as what was actually product revenue for the December quarter?

That's you again, Dave. Well, I mean, if you'd repeat the question, please, to make sure I got it.

Yeah, I'm looking for product revenue for the December quarter, and I'm thinking that's something you can disclose, because I believe it was disclosed for the September quarter.

Right. I think we'll disclose that in our 10-K filing with the details. But, you know, primarily, we have a Celsius consolidated, and the revenue represents a Celsius. A little bit of management fees for managing the ESG fund. But in general, primarily the revenue number you'll see in our financial statements at this point in time will represent a Celsius.

Okay. Got it. And, you know, COGS was up about 3.8 X QRQ. So would it be fair to believe that that's a pretty good profit for how much product revenue was up QRQ as well?

We're building the inventory somehow. Yeah, I mean, I would just say we're building some inventory in anticipation of sales. So we have the ability internally to manufacture a decent number of racks of equipment per month, but we wanted to build some inventory so we can be responsive to customer contracts as they represent themselves. So I wouldn't draw too much correlation between the cost of materials at this stage and the revenue. But they'll obviously reconcile each other at some point.

That's right. And just to add to Bill's comments, I mean, there's some period costs in there that get, you know, amortized over certain numbers of units. And also the amortization of the intangible asset that we had to book as a result of the business combination agreement. That's through purchase price allocation. Some of that hits cost of goods sold as well.

Okay, that's super helpful. So in the September quarter, you basically had one sort of like a proof of concept delivery. Could you help quantify how many proof of concepts did you deliver during the December quarter?

Yeah, we're not wanting to provide that information to how principally for competitive reasons. What we don't want people to do is be able to sort of, you know, kind of back into the you know, the cost per system and margins and those sorts of things. Again, principally for competitive reasons. And we have certain customers that don't want us to disclose many contract details. But I think what you'll want to look at overall will be the trend, you know, over the next few quarters and just look at the trajectory of the revenue growth. But, you know, again, trying to not obscure, but, you know, try not to show too much information that would impact us in a negative way competitively.

Okay, great. Rather understood. That makes sense. And then in your slide deck, you talk about on the Celsius, some of the Celsius accomplishments, doubling the heat capacity removal with this most recent test. Now, what enabled that doubling of that heat capacity? Was it some implementation of a new technology, or was it just simply getting access to higher wattage thermal simulators?

It's a combination of things, but principally it's, I would just say, engineering improvements, design improvements that allow us to get a higher heat flux. Because it's not just the total heat per socket, it's the heat flux, you know, the watts per square centimeter that you can remove, because you've got chips with a bunch of different formats. And so, you know, if you're really trying to measure the effectiveness of the technology, then heat flux is a good measure that kind of makes everything apples to apples. But, yeah, we are getting access to, you know, kind of the latest round of chips to test, but we can also simulate higher heats. We have a capability to simulate much, much higher heat than what is available in the marketplace. And so we continue to test the limits of where we think the technology can go. So we're, I think, well ahead of the next couple of generations of chips that we even anticipate coming out into the marketplace based upon looking at the product roadmaps of the various chip suppliers. We feel very confident that we can manage whatever heat loads they can produce chips for and that's really important because you know single phase water that kind of drops out in the not too distant future in terms of its ability to remove that kind of heat so there's a i mean if you look at some of the the information that's been put out by some of the larger players they've all indicated that two-phase directed chip is going to be required at some point for certain chipsets, you know, water will just reach its limitation because it's kind of linear with the amount of water you can pump through the cold plate.

Yep, no doubt about that, that water cold, one-phase direct liquid cold has its limitations. Bill, you did mention something about watts per square meter.

I wasn't sure if you were saying that you had actually – Square centimeter.

Yeah, I'm sorry. Watts per square centimeter, yeah. But was that a statement saying that you had increased the heat flux withdrawal in terms of watts per square centimeter, or was it more a statement that you were able to expand the amount of square centimeters that you can cool, and that's what got your watt removal up?

Yeah, it's a bit of both. I mean, we can build these various plates that sit on top of the chips. It's kind of whatever configuration is required. And as you know now, there are, you know, four-way and eight-way GPUs. So you have to build, you know, kind of, you know, some fancy plates to sit on top of all of those combined. But it really is the, I would say, the engineering improvements that we have out there just that we're pursuing to continue to crank up the actual heat flux, which is, again, watts per square centimeter.

Great. Okay. And then moving on to Aeroflex, you announced Feminator as a customer, as part of Spectrum Group. And I think in the early days, you also had a dog shampoo, Mighty Mutt, and I believe that's a different brand brand. owned by a different private equity group. Do you see basically like the pet care vertical being basically your first vertical that will reach critical mass?

Not necessarily. I mean, it's certainly, you know, one of the marketplaces that we're pursuing. I think oil is likely to be, you know, a pretty significant player, you know, going to gear oil and motor oil for, you know, recreational vehicles and so forth. That seems to be, you know, a pretty aggressive area right now for us that we're pursuing. And then there are others, you know, just baby shampoos, home care, that kind of line. You know, there's a lot of interest in that as well. But really, you know, we're covering a lot of different verticals in terms of, you know, having client interactions with customers in a lot of different verticals. across the board. But I think if I had to bet on one, I would say in terms of 2025 kind of penetration, oil would be a good guess.

Great. That's a helpful color. And then finally, could you just tell us what was the actual OPEX rate, the non-GAAP OPEX rate for the December quarter, and where do you expect that to head for the March quarter here?

Hey, this is Dave again. You know, if you look at the OPEX in the press release, as I said in my remarks, I mean, that contains a lot of costs from the business combination agreement and other elements going forward. But I don't think we want to really get into too many details of specific cost lines in OPEX, but rest assured, it'll be lower.

Our run rate will be lower going forward.

I guess what I'm trying to get at is that, is it, obviously it's going to go up as we progress and scale, right? But yeah, I have it at 13 million in the September quarter. I'm sorry. Rather, I have a baseline rate of around 6 million a quarter. And I'm not sure if that's really a good baseline rate. If you could give any sort of, you know, guidance there that would be appreciated.

Well, again, I think when we put our 10K out, there'll be more detail in there for sure about operating expense, and there'll be more breakouts on the business combination expense, et cetera. And I just think at this point in time, I'm not ready to get into that kind of detail. But, you know, you can look at last year as a proxy. You know, we – We expect to keep OpEx as low as we possibly can. Now, excluding cost of goods sold, right? I'm talking G&A, sales and marketing, and R&D, right? That's what we're talking about. It's baseline fixed cost. We intend to manage it. Frankly, we would even like to find ways to optimize that cost and perhaps even reduce. But I think we ought to wait for the 10K to come out.

Okay. I'll yield the floor. Thank you for taking my questions.

Thanks, Nahal. Thank you. This concludes the question and answer session. I'll now turn it back to Bill Haskell, Chief Executive Officer, for closing remarks.

Great. Well, thank you all. We really appreciate you listening in and the questions, and we look forward to the next update going forward here, which will be sometime in the middle of May, I believe. So thanks again.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.