- Q4 Net Sales Growth: Increased 23% year-over-year to $22.7 million, surpassing expectations.
- Gross Margin Expansion: Achieved 37% in Q4, exceeding the 30% target, driven by higher-margin product lines.
- Full-Year Adjusted EBITDA: $6.1 million with a 33% gross margin, reflecting 24% net sales growth to $80.6 million.
- Liquidity Strength: Maintained $5.1 million in cash and a current ratio of 1.7, supporting debt reduction and strategic initiatives.
- Strategic Focus on Profitability: Prioritizing debt reduction while targeting sustained EBITDA margins above 10% through product mix and market diversification.
Operational Highlights
The company's growth is attributed to its strategic transformation into a technology solutions provider, diversification of end markets, and new product launches. CEO Robert Dawson stated that the company is well-positioned for another year of sales growth and profitability in fiscal 2026. Dawson highlighted that once the company absorbs its fixed overhead and labor, it starts to generate a lot of cash, and he anticipates a similar approach to 2026, with a focus on keeping profitability high. As Dawson noted, "Having a better product mix with higher-value, more technology-centric product areas really helps. Once we cross $18-19, $20 million in sales, we start to see the impact on gross margins."
Financial Position and Capital Allocation
CFO Peter Yin discussed the company's financial position, noting that working capital and overall liquidity remain strong, with a total of $5.1 million in cash and cash equivalents and a current ratio of approximately 1.7 to one. The company's backlog stood at $15.5 million as of October 31 and currently stands at $12.4 million. Regarding capital allocation, Dawson stated that the priority is to pay down debt, with a goal to get the net debt as low as possible. The company's net debt to EBITDA ratio is currently 6.34, indicating a significant amount of debt relative to its earnings.
Valuation and Outlook
Analysts estimate next year's revenue growth at 4.9%. With a P/E Ratio of 1014.35 and an EV/EBITDA of 29.01, the company's valuation appears to be stretched. However, the company's strong growth prospects and improving profitability may justify the premium. The company's focus on debt reduction and its strong liquidity position are positives. As Dawson expects the public safety market to be an opportunity for the company going forward, despite being fragmented, the company's diversified product offerings and technology-centric approach may drive future growth.