Strategic Transition and Operational Context

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• Management is shifting the business model away from large, unpredictable one-off projects toward standardized, repeatable platforms to improve revenue visibility.

• The year-over-year revenue decline was primarily attributed to a significant water-for-energy delivery in 2025 that did not repeat in the current period.

• Gross margin expansion of 280 basis points was driven by a more favorable product mix, improved manufacturing utilization, and disciplined procurement.

• The commercial pool segment is emerging as a primary growth engine, with revenue increasing from $300 thousand to $800 thousand year-over-year.

• The company successfully entered the US market with its first pool system order, validating the technology’s fit for aging infrastructure and high water quality standards.

• Strategic investments in a Chinese joint venture and local service infrastructure are stabilizing order flow and execution in the marine dual-fuel engine market.

• A disciplined approach to the oil and gas sector remains, with management focusing on pilot programs to validate performance without relying on single large project wins.

2026 Outlook and Strategic Priorities

• Reiterated full-year 2026 revenue guidance of $23 million to $27 million, representing projected growth of 39% to 64% over 2025.

• Management expects a record quarter for the commercial swimming pool vertical in Q2 2026 based on current order book strength.

• The financial trajectory assumes gradual quarter-over-quarter improvements as 2025 operational changes and new order conversions take full effect.

• Future profitability is contingent on scaling standardized systems to fully absorb fixed production costs and achieve a target 40% steady-state margin.

• Operating leverage is expected to improve as the company converts its pipeline in pool, marine, and component segments while maintaining strict overhead control.

Risk Factors and Structural Dynamics

• Operating expenses increased by $400 thousand, with approximately 60% of that rise driven by unfavorable foreign exchange developments.

• The company continues to operate below the revenue level required for full fixed-cost absorption in its manufacturing platform.

• Cash management remains a critical focus, with $2.7 million on hand as the company balances growth investments with the path to positive adjusted EBITDA.

• The timing of large-scale water-for-energy projects remains a known headwind to short-term forecasting accuracy.