การแถลงผลประกอบการ ROC ไตรมาส 2 ปี 2026: รายได้เพิ่มขึ้นเกือบเท่าตัวเมื่อเทียบกับไตรมาสก่อนหน้า, อัตรากำไรขั้นต้นแตะ 90%

ประเด็นสำคัญ

• รายได้ไตรมาส 2 ปี 2026 เพิ่มขึ้น 2% เมื่อเทียบรายปี สู่ระดับ 5.1 ล้านดอลลาร์ และเกือบเติบโตเป็นสองเท่าเมื่อเทียบรายไตรมาส โดยได้รับปัจจัยหนุนจากกิจกรรมการจัดซื้อจัดจ้างของภาครัฐที่ปรับตัวดีขึ้น
• รายได้จากสัญญา R&D เพิ่มขึ้น 41% สู่ระดับ 3.0 ล้านดอลลาร์ หลังจากที่มีการใช้สิทธิขยายสัญญาของรัฐบาลที่มีอยู่เดิมอย่างมีนัยสำคัญ
• กำไรขั้นต้นเพิ่มขึ้นสู่ระดับ 4.6 ล้านดอลลาร์ ขณะที่อัตรากำไรขั้นต้นขยายตัวสู่ระดับ 90% จาก 80% เนื่องจากสัดส่วนรายได้ที่มีอัตรากำไรสูงกว่าและต้นทุนการขายที่ลดลง
• รายได้จากผลิตภัณฑ์ลดลง 26% สู่ระดับ 2.1 ล้านดอลลาร์ เนื่องจากรายได้จาก ROC Watch ร่วงลง 87% หลังจากเสร็จสิ้นการส่งมอบโครงการใหญ่ในปีก่อนหน้า
• รายได้จาก ROC SDK เติบโต 84% สู่ระดับประมาณ 1.6 ล้านดอลลาร์ ส่วน ROC ABIS พุ่งขึ้น 723% สู่ระดับประมาณ 0.2 ล้านดอลลาร์ ด้าน ROC Enroll เพิ่มขึ้น 125% สู่ระดับประมาณ 0.1 ล้านดอลลาร์ และ ROC Evidence เริ่มสร้างรายได้เชิงพาณิชย์เป็นครั้งแรก
• ROC รายงานผลขาดทุนสุทธิ 0.8 ล้านดอลลาร์ หรือ 0.04 ดอลลาร์ต่อหุ้น โดยสิ้นสุดไตรมาสด้วยเงินสด 11.9 ล้านดอลลาร์ เงินทุนหมุนเวียน 14.8 ล้านดอลลาร์ และไม่มีหนี้สินค้างชำระ

ข้อมูลทางการเงินที่สำคัญ

ผลการดำเนินงานทางธุรกิจและการปฏิบัติการ

งานที่ได้รับทุนสนับสนุนจากภาครัฐเป็นปัจจัยขับเคลื่อนหลักของการเติบโตในไตรมาสนี้ ฝ่ายบริหารกล่าวว่ากิจกรรมการจัดทำสัญญากำลังเคลื่อนตัวไปสู่สภาวะปกติมากขึ้น หลังจากที่ชะลอตัวในช่วงปลายปี 2025 และต้นปี 2026 แม้ว่ากิจกรรมต่างๆ ยังไม่กลับคืนสู่ระดับปกติโดยสมบูรณ์ก็ตาม นอกจากนี้ ROC ยังรายงานว่าปฏิสัมพันธ์กับลูกค้า คำขอราคา และการเชิญชวนเสนอราคาปรับตัวเพิ่มขึ้นด้วย

ROC SDK ยังคงเป็นผลิตภัณฑ์ที่สร้างรายได้เปิดเผยรายใหญ่ที่สุด โดยสร้างรายได้ประมาณ 1.6 ล้านดอลลาร์ การเติบโตของ ROC ABIS สะท้อนให้เห็นถึงการปรับใช้ของลูกค้ารายใหม่หลายราย ในขณะที่ ROC Enroll ได้รับประโยชน์จากการขยายการลงทะเบียนและการยืนยันตัวตนของ MTN ในแอฟริกาใต้

ROC Evidence บันทึกรายได้เชิงพาณิชย์เป็นครั้งแรกเร็วกว่ากำหนดการภายในของบริษัท ROC คาดว่าแผนการเข้าซื้อกิจการ ZTC ซึ่งเป็นพันธมิตรทางยุทธศาสตร์ที่มีความเชี่ยวชาญด้านนิติวิทยาศาสตร์ดิจิทัลและมีความสัมพันธ์อันดีกับภาครัฐ จะช่วยขยายขีดความสามารถของผลิตภัณฑ์ ฝ่ายบริหารคาดว่าจะปิดธุรกรรมได้ภายในสิ้นไตรมาส 3 ปี 2026

ROC Watch เผชิญกับการเปรียบเทียบรายปีที่ท้าทาย หลังจากโครงการจัดส่งมอบขนาดใหญ่สำหรับภารกิจเฉพาะของรัฐบาลเสร็จสิ้นลง ฝ่ายบริหารอธิบายว่าไตรมาสของปีก่อนหน้าเป็นช่วงที่รายได้พุ่งสูงขึ้นเป็นพิเศษ และกล่าวว่ากรอบเวลาของการปรับใช้ในอนาคตจะขึ้นอยู่กับการประเมินของรัฐบาล งบประมาณ และการลงนามในสัญญา

นอกจากนี้ บริษัทยังเน้นย้ำถึงผลการทดสอบมาตรฐาน NIST ซึ่งรวมถึงความเร็วในการค้นหารอยพิมพ์ลายนิ้วมือแฝงที่เร็วที่สุดในการประเมินดังกล่าว และความแม่นยำในการระบุตัวตนระดับชั้นนำในหมวดหมู่อิมเมจลายนิ้วมือที่ท้าทายหลายหมวดหมู่ ฝ่ายบริหารกล่าวว่าการรับรองประสิทธิภาพจากหน่วยงานอิสระสามารถช่วยสนับสนุนการตัดสินใจจัดซื้อจัดจ้างของภาครัฐได้

แนวทางจากฝ่ายบริหาร

ROC ไม่ได้ให้แนวทางทางการเงินอย่างเป็นทางการ ฝ่ายบริหารกล่าวว่ามีมุมมองเชิงบวกต่อครึ่งหลังของปี 2026 เนื่องจากหน่วยงานภาครัฐเร่งผูกพันงบประมาณปี 2026 ภายในวันที่ 30 กันยายน โดยสัญญาบางฉบับอาจผ่านผู้รวมระบบ และส่งต่อไปยังผู้ให้บริการเทคโนโลยีในไตรมาส 4

บริษัทกำลังมุ่งเป้าไปที่โครงการขนาดใหญ่ขึ้นและมีระยะเวลานานขึ้นในพอร์ตโฟลิโอ Vision AI ฝ่ายบริหารได้ให้นิยามชัยชนะแบบ "ฐานที่มั่น" (beachhead) ว่าเป็นสัญญาระยะยาวหลายปีที่มีมูลค่าหลายล้านดอลลาร์ต่อปี และกล่าวว่าการจัดตั้งลูกค้ารายสำคัญดังกล่าวยังคงเป็นเป้าหมายหลักสำหรับปี 2026

ฝ่ายบริหารเตือนว่าอัตรากำไรขั้นต้น 90% ในไตรมาส 2 ไม่ควรถูกมองเป็นอัตราดำเนินงานปกติรายไตรมาส (run rate) อัตรากำไรจะผันผวนตามสัดส่วนของไลเซนส์ซอฟต์แวร์ บริการ ฮาร์ดแวร์ และรายได้จากสัญญา R&D

ความเสี่ยงและปัจจัยที่ต้องติดตาม

• การอนุมัติสัญญาและกำหนดการส่งมอบของภาครัฐยังคงไม่แน่นอน ส่งผลให้เกิดความผันผวนของรายได้รายไตรมาส
• กิจกรรมการจัดซื้อจัดจ้างของภาครัฐปรับตัวดีขึ้น แต่จากข้อมูลของฝ่ายบริหาร พบว่ายังไม่กลับสู่ระดับปกติอย่างเต็มที่
• รายได้จากผลิตภัณฑ์ยังคงมีความเสี่ยงจากกรอบเวลาตามเป้าหมาย (milestone) และฐานเปรียบเทียบที่สูงจากโครงการเฉพาะขนาดใหญ่ เช่น ROC Watch
• ค่าใช้จ่ายในการดำเนินงานเพิ่มขึ้นจากการที่ ROC ลงทุนด้านบุคลากร วิศวกรรม การพัฒนาผลิตภัณฑ์ และโครงสร้างพื้นฐาน ซึ่งส่งผลให้เกิดผลขาดทุนสุทธิในไตรมาสนี้
• การเปลี่ยนโครงการนำร่องให้เป็นสัญญารายได้ประจำขนาดใหญ่ขึ้นอาจต้องใช้เวลา ฝ่ายบริหารเห็นพ้องว่าช่วงเวลาประมาณ 12 ถึง 18 เดือนถือเป็นจังหวะเวลาที่สมเหตุสมผลสำหรับโครงการ ROC ABIS พร้อมระบุว่ามีโอกาสหลายรายการที่กำลังดำเนินการอยู่แล้ว
• อัตรากำไรขั้นต้นอาจผันผวนอย่างมีนัยสำคัญขึ้นอยู่กับสัดส่วนของสัญญาและผลิตภัณฑ์

ประเด็นสำคัญจากการถาม-ตอบกับนักวิเคราะห์

ฝ่ายบริหารระบุว่าหน่วยงานระดับรัฐบาลกลางกำลังเร่งผูกพันงบประมาณปี 2026 ที่เหลืออยู่ภายในวันที่ 30 กันยายน แม้ว่าจะมีความเป็นไปได้ที่กิจกรรมในครึ่งปีหลังจะแข็งแกร่งขึ้น แต่การอนุมัติสัญญาอาจต้องใช้เวลา และเงินทุนบางส่วนอาจส่งมาถึง ROC ผ่านผู้รวมระบบในช่วงไตรมาส 4

เกี่ยวกับ ROC ABIS ฝ่ายบริหารกล่าวว่าการปรับใช้ในระยะเริ่มต้น 2 โครงการช่วยสร้างคุณสมบัติอ้างอิงสำหรับการแสวงหาโอกาสขนาดใหญ่ขึ้นในระดับรัฐบาลกลาง แต่ยังไม่นับเป็นชัยชนะแบบฐานที่มั่นตามเป้าหมายของบริษัท ROC กำลังมองหาสัญญาระยะยาวหลายปีที่มีมูลค่าหลายล้านดอลลาร์ต่อปี

สำหรับ ROC Watch ฝ่ายบริหารอธิบายว่าการลดลงของรายได้เป็นเรื่องของจังหวะเวลาหลังจากที่มีการส่งมอบโครงการใหญ่เป็นพิเศษในไตรมาส 2 ปี 2025 บริษัทคงดำเนินโครงการนำร่อง การเสนอราคา และโอกาสอื่น ๆ ต่อไป แต่ไม่ได้ให้แนวโน้มรายได้อย่างเป็นทางการ

เกี่ยวกับสภาพคล่อง ฝ่ายบริหารกล่าวว่าการลงทุนระยะแรกส่วนใหญ่ตามแผนในด้านบุคลากรและโครงสร้างพื้นฐานฮาร์ดแวร์ได้ดำเนินการไปแล้ว ด้วยเงินสด 11.9 ล้านดอลลาร์ เงินทุนหมุนเวียน 14.8 ล้านดอลลาร์ และไม่มีหนี้สิน บริษัทระบุว่าพอใจกับระดับสภาพคล่องที่มีอยู่

บันทึกการประชุมผลประกอบการฉบับเต็ม

บทถอดเสียงฉบับเต็มของการประชุมทางโทรศัพท์ผลประกอบการ

คำชี้แจงจากฝ่ายบริหาร

Operator

Thank you. and welcome to the ROC Second Quarter 2026 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, please press star, then 1. withdraw your question, please press star then 2. As a reminder, this conference is being recorded. I would now like to turn the conference over to Jules Abraham with Core IR.

Please go ahead.

Unknown Speaker

Thank you, Betsy, and good afternoon, everyone. We thank you for joining ROC's second quarter 2026 financial results call. Presenting on today's call are Scott Swan, ROC's CEO, and Cody Barnes, ROC's CFO. Brendan Clare, ROC's co-founder and chairman of the board of directors, and David Ray, ROC's head of capital markets and general finance. will also be available during the question and answer portion of the call. Before we begin, I remind everyone that this call may contain certain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These include remarks about management's future expectations, beliefs, estimates, plans, and prospects. statements are subject to a variety of risks, uncertainties, and other factors that could cause actual results to differ materially from those indicated or implied by such statements. Such risks and other factors are set forth in the company's quarterly report on Form 10-Q, followed with the Securities and Exchange Commission, and it does not undertake any duty to update such forward-looking statements.

Additionally, during today's call, certain non-GAAP measures will be discussed. The presentation of this additional information should not be considered in isolation, or as a substitute for results prepared in accordance with U.S. DAP. Now, my pleasure to turn the call over to ROCK's CEO, Scott Swan. Scott.

B. Swann

Thank you, Jules. Good afternoon, and thank you for joining ROC's second quarter 2026 earnings call. The second quarter marked ROC's first full quarter operating as a public company, and it was reflected measurable progress in two areas we outlined on our first quarter call. We've seen improving government contracting activity and broad commercial adoption across the ROC product portfolio. pleased to report sequential growth nearly doubling our revenue compared to the first quarter. We've also successfully monetized the entire RockVision AI platform ahead of our plan. Second, quarter revenue was $5.1 million. as I mentioned, nearly double first quarter revenue, primarily driven by a 41% increase in R&D contract revenue, which more than offset the decline in product revenue attributed to the completion of a ROC watch deployment recognized in prior year period. In May, we said government procurement activity was appeared to be improving with awards and revenue to follow incrementally through the remainder of 2026. The second quarter provided initial evidence that funding and program activity are actually beginning to return to normal and develop.

Additionally, we advanced our newer ROC products across the Vision AI platform. ROC SDK, ROC ABUS, and ROC Enroll each generated strong year-over-year revenue growth, and ROC Evidence produced its first commercial revenue. These developments indicate early progress on the path to growth we've outlined. However, that does not mean growth for the business will follow strictly a linear trajectory. Government awards and deployment schedules are unpredictable and they create quarterly variability. However, we believe the second quarter performance demonstrates that the underlying government procurement activity level has increased. The contract awards that we target are beginning to be executed and a go-to-market strategy is advancing.

Taking a closer review of ROC's government-driven activity, R&D contract revenue increased to approximately $3 million from $2.1 million in the prior year quarter. This initial contract revenue growth is encouraging, but activity has still not returned to a normalized rate. program timing remains variable and business activity is informed by appropriations, procurement schedules, and the timing of individual awards. That being said, we believe ROC is well positioned to capture growth opportunities through the second half of this year. Importantly, the value of these programs extends beyond the initial contract revenue. Government funded work allows Rock to demonstrate its technology in expanding operating environments that deepen our customer relationships and position us to pursue expanded programs with our vision AI solutions. Our overall strategic growth objective for our R&D contract business is straightforward, converting research and successful mission deployments or proof of concepts that lead to larger, longer-duration recurring revenue, and ultimately establishing ROC's American-built technology at the identity infrastructure of the R&D contract. of my customers. Turning to our product segment, overall product revenue declined year over year due to the completion of a significant RockWatch deployment, which was recognized in prior year quarterly revenue.

To be clear, this was a profoundly successful project for ROC. Under the construct, the ROC WAP solution was selected for an initial short-term contract period with a strict timeline and tailored to a really highly sensitive mission for a government agency. But based on rigorous intelligence results, it validated that mission and that critical utility, and RockWatch outperformed customer expectations, and that deployment was subsequently expanded and ultimately completed successfully with high customer satisfaction. This RockWatch mission is an important example of contract economics because certain rock product programs are revenue may be concentrated in particular periods depending on program and deployment milestones. Excluding the RockWatch year-over-year comparison, the broader product portfolio showed strong progress. Rock SDK revenue increased 84% to approximately $1.6 million, supported by growth and new customers. Rock Avis revenue increased 723% off of marginal base in the prior year quarter.

The current ABUS revenue contribution was a result of our early go-to-market process to advance these initial customer programs to commercial deployment, and we are continuing discussions with our consequential potential BCHED customers. Our newest product brought to market rock evidence, JRA's first commercial revenue, following an early deployment completed ahead of the original commercialization timeline. Rock and roll revenue increased 125%, also from a small base, reflecting continued adoption by our key enterprise customer, MTN, in South Africa, as it activates an expanded rollout plan for identity enrollment and verification. Our commercial growth model remains consistent across our Vision AI platform. We introduce rock products with a defined use case. our performance and successfully expand across additional users' workflows, locations, and products. The ultimate objective is to secure beachhead customers that require capacity to deliver multi-year identity intelligence programs with ROX technology. and support for a recurring repeatable revenue stream. Before shifting away from a product performance, I'd like to touch on our digital evidence growth strategy.

During the quarter, we pursued a strategic initiative designed to enhance a ROC evidence product. As announced in June, we entered into an agreement to acquire ZTC, a legacy strategic partner of ROC. Consolidating ZTC into Rock's business and operations was a natural next step in our collaboration with this uniquely skilled engineering team. We see this as a strategic acquisition intended to build a robust version of RockEvidence with VTC's additional digital forensic capabilities, their domain expertise, and government-customer relationships. We have already made a lot of progress on aligning our companies in advance of closing the transactions. integration across our engineering products business development is well underway and showing promising results with the business operation integration to be completed quickly upon closing. We will provide further details once the transaction is complete with greater visibility into the financial profile and full scale of the integrated company. We anticipate closing the transaction by the end of the third quarter.

I'd like to spend a moment to revisit Rock's differentiator. It's not simply that we are American-built. It's that we combine this US ownership and development with technical performance, build it by top-tier performance and independent industry benchmarks. We believe that combination is increasingly relevant to national security, public safety, and critical identity infrastructure. Our commercialization efforts are also supported by this independent validation as a key consideration in both government and commercial procurement processes. During the quarter, ROC achieved NIST results, including the fastest latent fingerprint search speed in the evaluation of latent fingerprint technologies benchmark, and leading identification accuracy results across multiple friction-rich image and features for fingerprint technology evaluation. Now, these results matter because our customers require this objective evidence of accuracy, speed, and scalability, and they frequently support their acquisition decisions.

We also continue to strengthen the platform and organization as we deepen our public market heritage. We appointed Dr. Kathleen Kiernan, former assistant director for the ATF Office of Strategic Intelligence and Information to our board of directors. We also added Stephen McQueen, former director of the FBI's Threat Screening Center as a senior advisor establishing our Homeland Security and Intelligence Market Strategy. Additionally, a ROCWARX suite of solutions received its development, testing, and evaluation designation under the Department of Homeland Security Safety Act and were named Facial Recognition System of the Year in the 2026 AI Breakthrough Awards. As a newly public company, our mandate is to deliver on the objectives within our control to our shareholders. And we acknowledge that our credibility we built as we demonstrate execution against our express strategic priorities. In the first quarter, we said government activity was beginning to improve.

In the second quarter, R&D contract revenue increased materially. We indicated that we were advancing RockAvis and RockEvidence toward commercial use. In the second quarter, RockAvis revenue expanded. We covered multiple new customers and RockEvidence generated revenue. generated its first commercial revenue ahead of our internal plan. We invested in talent across product development, business development, and deployment capacity, as well as investing in our AI ML algorithm development engine. Our technology hardware and processing infrastructure drive durable growth and scale. Our responsibility now is to convert those investments into larger customer programs for a more durable revenue profile and scale.

With that, I'll turn the call over to Cody Barnes, our key financial officer.

Cody Barnes

Thank you, Scott, and good afternoon, everyone. I will now provide a brief overview of our financial results for the second quarter into June 30, 2026. Total revenue for the second quarter of 2026 was $5.1 million, compared to $5 million in the second quarter of 2025, an increase of approximately $0.1 million, or 2%. Product revenue was $2.1 million compared to $2.8 million in the prior year quarter, a The decrease of $0.7 million was 26%. As Scott said, the decrease in product revenue was due to the completion of a significant RockWatch deployment recognized in the prior year quarter. Rock watch revenue in the second quarter decreased 87% year-over-year. This was partially offset by higher revenues for Rock SDK, Rock ABIS, Rock Enroll, and Rock Evidence.

Rock SDK revenue was approximately $1.6 million, up 84% year-over-year, reflecting continued customer adoption of our foundational software platform. Rock ABIS revenue increased 723% year-over-year to approximately 0.2 million, driven by multiple new customer deployments. Rock enrolled revenue grew 125% to approximately 0.1 million, reflecting the planned expansion of our MTN deployment. And Rock Evidence generated its first commercial revenue during the quarter. ROC R&D contract revenue was $3 million compared to $2.1 million in the second quarter of 2025, an increase of $0.9 million, or 41%. The increase reflected revenue recognized from an exercise of an option to significantly expand an existing government R&D contract. Importantly, this award reflects improving government contracting activity following the slower award environment experienced in late 2025 and early 2026.

Gross profit increased to $4.6 million in the second quarter of 2026 and $4 million in the second quarter of 2025. The gross margin expanded to 90% from 80% in the prior year quarter. improvement reflected the quarter shift to higher margin revenue mix with lower cost of sales. We believe this reflects the strength of our software-driven revenue model and the efficiency of our Vision AI platform. Notably, margin will fluctuate depending on the revenue mix of software licenses, services, hardware, and R&D contract revenue. Operating expenses are $5.3 million in the second quarter of 2026, compared to $3.2 million in the second quarter of 2025. Selling, general, and administrative expenses increased to $3.3 million, primarily driven by our continued investment in growth, reflected in higher personnel-related costs across engineering and product development. development and operations. Research and development expenses increased to approximately $2 million.

The increase from the prior year reflects continued investment in engineering, product development and platform enhancement. Net loss for the second quarter of 2026 was 0.8 million, compared to net income of 0.6 million in the second quarter of 2025. basic and diluted loss per share was $0.04, compared to basic and diluted earnings per share of $0.04 in the prior year period. As of June 30th, 2026, we had $11.9 million in cash, approximately $14.8 million in working capital, and no outstanding debt. We believe the post-IPO balance sheet provides the flexibility to continue executing our current strategic growth plan against product development, deployment capacity, customer acquisition, and the infrastructure required to support larger, longer-duration programs. With that, I'll turn the call back to Scott.

B. Swann

Thank you, Cody. In closing, our second quarter results showed progress, but they also clearly indicate there is work to do in executing against our stated plan. goal remains establishing beachhead contracts for all of our products and expanding those relationships both within the product line and across the Vision AI platform. Our priorities are to convert government funded activity into larger production programs, advance RockAbus and RockEvidence customers into expanded deployments and grow existing customer relationships across additional rock products. Completing the ZC transaction will further accelerate product development capabilities and our ability to serve new and existing customers. The core opportunity for ROC is market recognition as the leading American-built identity technology infrastructure for national security and law enforcement customers, which generates long-duration customer relationships and high-margin revenue. We're encouraged by the progress made during this quarter. We also understand that credibility will be established as we demonstrate sustained execution with contracts secured, deployments completed, customers expanded, and financial performance delivered. That is the long-term value proposition of ROC.

We appreciate the continued support of our dedicated shareholders, customers, our partners, and our employees, and we look forward to providing updates on our developments. I would like to now hand the call to the operator to begin the questions and answers session. We will now begin the question and answer session.

Operator

To ask a question, please press star then 1 to join the question queue. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. Once again, to ask a question, please press star, then 1. At this time, we will pause momentarily to assemble our roster. The first question today comes from Yi-Fu Lee with Benchmark. Please go ahead.

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Yi Fu Lee

Hello, Scott and the RANCHO. Thank you for taking my question. Congrats on a strong QO, nearly doubling revenue quarter over quarter while boosting golf margin to 90%. So Scott, I just want to start with the macro environment, especially as it relates to the government recovery. Obviously, R&D revenue grew 41% year-on-year. I think you clocked in at $4.9 million, which is pretty much nearly the entire balance of 2025, right, in R&D revenue. Can you describe what you are seeing, Scott, in terms of the government side, the recovery? I know you mentioned that it's not that linear, the recovery. But as we all know, September is the fiscal government year end.

I just wanna get your thoughts on how you characterize the funding environment. I know in your prepared remarks, you say it's a little bit slower in terms of approval. Just wanna get your thoughts on that just to start off the conversation, Scott.

B. Swann

Thank you, Lee. As we're coming off a fiscal year in 2025 that was operating the entire year in a continuing resolution and a record government shutdown, it did set the stage for a slow half of the year. large part because the money for government agencies hadn't made it to where they needed to get to this particular point. that would execute against that money. The revenue is a good indicator. The award of the R&D contract is a good indicator that the government is back in more of a normal operation. But there are several other indicators that we really pay a lot of attention to. Those are increases in the number of employees in interaction, additional quotes and pricing and solicitations. And we're seeing all those signals from the government right now that they are moving toward their milestones of having to obligate their FY26 monies by.

Yi Fu Lee

September 30th of this year. Got it, Scott. Thanks for that. So but would you would you characterize any possibility of a budget flush like a budget flush that we're accustomed to? I know I know like three years ago, like in the SAS software space, you know, the government needs to spend that money before fiscal year. Would you anticipate any sort of that coming just because there's still a lot of money left?.

B. Swann

There's certainly a lot of money left within the government. I think those that are doing business with government agencies will see stronger performance in the second half of the year. It takes time for them to move that money to a contract and get that awarded to particular vendors. The key for government agencies is that they have to obligate that money by September 30th, and that sometimes can go to thermal like integrators that can subsequently award that money to technology providers like us. So I think that will trickle into Q4 in some respects for some government contractors. All that said, the government is setting on some very large budgets that they need to execute before September 30th. or to obligate before September 30th. And I think that there is a lot of energy toward that within the government agencies right now, and we're seeing all those signals with our customers.

Yi Fu Lee

Got it, got it, Scott. The next topic is really the pipeline conversion. I'm sure a lot of investors are wanting an update and you provide a great update. Let us start off with the ABIS contract first, right? You did two pilot programs in the past. a quarter. You know, can you help us understand from these pilot programs to long-term deployment? You know, we just want to understand the journey to get to from initial pilot to full commercialization deployment. You know, how long does it take to, for these projects to scale up? Cause I remember during the IPO process, research process, mentioned, and you have two pilots going on, can you give us a sense of the ramp up on those? Sure.

B. Swann

Yes, you know, early in the deployment of your new product capabilities, a few things happen. First of all, you know, the first adopters get the best deals. We work very closely with them to make sure the products are truly ready for market, and that helps us to really ensure that we have that scalability movement. moving forward, we successfully worked with two of our customers this year to provide them with deployments. As we move forward into our next set of deployments, we would be looking at larger opportunities, depending on the agencies. some of the agencies are smaller in size and could be smaller opportunities. But as we start approaching larger federal agencies and having AVIS opportunities in that particular space, we'll have those credentials under our wind column of already have proven out the technology. And that's what I believe where we'll see our longer term durable revenue with repeating.

Yi Fu Lee

year after year revenue to rock but any timeline like yes i know two of them and pilot program are we are we should we think the cadence is like 12 18 months uh to fully ramp uh you know these eight a-biz projects up.

B. Swann

That is about the cadence, but do note that we're not starting from zero. We've been working several of these, so we have already been working specifically for capture in many, many different APHIS and APHIS market spaces now. And as I set out at the beginning of our IPO, our key focus is on the market. for this year is to establish our beachhead wins in each one of our product lines. Those two early ABUS wins this year, they don't constitute what we consider beachhead wins. Beachhead wins to us are multimillion dollar contract, multimillion dollars per year contracts. tracks that have multi-years associated with them. And we're looking to establish that, not just in the APHIS-ABIS market, but across a few of our product lines this year.

Yi Fu Lee

Got it, got it. And then like just to balance things out for investor, I know you mentioned that watch, you know, there's a completion of the launch deployment. So we've seen some headwinds this quarter. Just want to get your, you know, help investor understand, you know, about the cadence of watch deployment going forward, whether the expanding custom base will create opportunities for more recurring revenue. Seems like there's some lumpiness on the watch side. Can you give us a little bit more color on how to think about watch?.

B. Swann

Yes, I think this is just timing. I think as you look at the particular project that gave us a spike last year, that was a very mission-related project that we were very successful in delivering that particular project. You know, as I mentioned, in the government budget cycles, it's a very, very, very, very takes time for the valuations, the money to get to the agencies and the actual obligation and execution of those funds to a contractor. So we've been very active in various pilots and opportunities and quotes and activities within the Rockwatch portfolio. So our focus this year is scaling. RockWatch, as well as establishing a major beach customer in RockWatch as well.

Yi Fu Lee

But would you anticipate, let's just say, like the second half, how would the watch, you know, will there be any headwinds on the over the comparisons, I guess?.

B. Swann

because of this roll off with the contract? You know, I won't provide any formal guidance moving forward. I will say that we're fostering, you know, several opportunities And I believe that we're really focused on the growth of our various product lines, and I anticipate that the Q2 of 2025 was a bit of a spike in Rockwash performance in comparison to what we'll see as we move forward.

Yi Fu Lee

within 2026. Got it. Got it. Thanks for that. And then, and then, Scott, on the rock evidence, right, I love these two questions together. GTC, you talked about how, you know, the strategic, you know, impetus to buy ZTC, ZTC to accelerate data for the evidence product and we see some wins at the US Drug Enforcement Administration. You know it started last quarter but I think you guys make good headway into that. How would you characterize ZTC will help you you know accelerate let's just say the evidence style of your portfolio?.

B. Swann

Yes, they're a key partner in this. We would have been working with them even had we not moved forward toward an acquisition. They have decades of experience in working in the digital evidence space. And our ability to help them focus more toward a product mindset and working toward a product in the digital evidence space is already paying dividends. As I mentioned, we have already made great strides in this. the integration of ZTC into ROC on the engineering and product space. And, you know, those strides have already, you know, been presenting to customers and, you know, giving us good signals of the demand signals that we're seeing from on those that need forensic digital evidence capabilities. So really combining their decades of engineering experience building these products with our product-minded mindset of building out applications is already well underway and something that I think that we'll see. a lot of benefits from in the near term.

Yi Fu Lee

Got it. Makes sense. Makes sense. And then for the technology enhancements, I know you've won some awards in fingerprinting search, whether it be search for accuracy. How should investors think about these, you know, award accolades? You know, it seems like, you know, the rock platform is earning more and more. Like, does this open the door to certain avenues that wasn't able to go into in terms of those awards?.

B. Swann

Yes, it's very important. You know, we oftentimes talk about being one of the only American companies in this space. We're really the only American company that's providing identity technologies across all the various biometric modalities. but we don't win on just being American alone. We really have to prove out our performance and that we are best in industry when it comes to our algorithms. So the recognition that we get from winning these benchmarks and awards is important from the business development perspective, but even more so, some of the government procurement activities are structured to help support acquisition decisions based on how well we perform in these evaluations. So we take them very seriously. We're performing extremely well across the board in all those biometric modalities thanks to our research team. Thank you.

Yi Fu Lee

Got it, got it. And then I'll finish off with the financials, Scott. And I'll ask both of them at the same time is go to market. In terms of the go to market investments, can you give us a status on that? Like how should we think about the team? Are you wrapping up? Is there sufficient resource? And lastly on the financial is, I think you have $11 million, a little bit more than that on your balance sheet. Your timing on fundings, like how much runway you have, and also give us some like color. I know you gave us some qualitative guidance, We've seen some good outperformance, right, in terms of revenue growth this quarter, almost 100%, as well as gross margin, 90%. How should we think of it as we head into the second quarter of this year? And that's it for me. Thank you, Scott and team.

B. Swann

That's right. I'll answer the first part of this question, and I'll hand it over to Cody to take it to the second part. But I would say we deployed capital early. We were prepared to launch that capital to support our growth. We kind of intelligently deployed to make sure that we got people in place quickly and also invested in the hardware resources that we need to accelerate the abilities of our research. team, the majority of that allocation has been already put in place and deployed. To this point now, we'll really be focused in converting those investments into capital. Given the software nature of our business, as we look forward and we are optimistic about the second half of the year, with the margins that we create, we essentially are able to start converting our business into cash also as we move forward. Cody, I would.

Cody Barnes

you have a little more color on the balance sheet. Yes, thanks, Scott. So, yes, I mean, I think on the liquidity side, you know, we ended the quarter with $11.9 million in cash. Yes. 14.8 million working capital and no borrowings outstanding on our facility. The use of cash reflects the investments that we've discussed and been discussing, mainly personnel related, into product development, into our infrastructure and deployment capacity. So just overall, we're very comfortable with our current liquidity profile and balance sheet and will continue to be disciplined with how we allocate. operating capital. I think in terms of just kind of forward looking, we won't provide provide formal guidance. But I'll just kind of emphasize again that, you know, we've been very deliberate with the investments we've made in the first half of the year.

We're obviously encouraged by Q2 results. We're seeing good engagement in the opportunity funnel. And again, the balance sheet's very, very healthy. So I think collectively that sets us up really, really well for the second half. And then just to touch on the gross margin, I wouldn't think about it as a quarterly run rate. You know, gross margin is going to move around based on contract mix. This quarter in particular, we benefited from a higher mix of software license revenue relatively a relatively lower cost of sales associated with R&D contract revenue.

And by comparison, the prior year quarter included a large Rockwatch deployment, which carried some marginal delivery costs that were very unique to that project. So I think we should generally expect some quarter-to-quarter variability in gross margin. And we should definitely look at this, you know, over a longer trailing period.

Yi Fu Lee

Thank you. Got it. Thank you, Cody and Scott, for patiently taking all my questions. Congrats again on a strong 2Q. Talk soon.

Operator

Thank you. As a reminder, if you would like to ask a question, please press star then one to join the question queue. This concludes our question and answer session. I would like to turn the conference back over for any closing remarks. The call has now concluded. Thank you for attending today's presentation. You may now disconnect.

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