Actuals vs. estimates

Highlights & what matters

• Net sales of $131.1 million beat the $118.1 million estimate by 11.0%, and adjusted EPS of $0.07 came in against $0.02 expected.
• Guidance went up for the third time this year: full-year sales to $480-500 million from $460-480 million, adjusted EBITDA to $64-68 million from $55-65 million, and new business wins to $110-130 million from $80-100 million.
• Profit grew faster than sales. Adjusted EBITDA rose 50% to $18.5 million with its margin up 220 basis points to 14.1%, on sales up 26%.
• The capital structure changed completely. Net debt and preferred fell to $139 million pro forma from $261 million at year-end 2025, with the last $35 million of preferred redeemed at a $5 million discount and all preferred obligations dating to 2021 now gone.
• The one thing that matters: clearing the last of the 2021 preferred stock takes $122 million off net debt and preferred and removes the overhang on this story; what replaces it as the growth engine is data center and defense work that management has not yet put into a 2027 plan.

Guidance & KPIs

Management commentary

• Bevis said the company is launching more than 150 programs this year worth $100 million in annual sales, and that every end market grew in the first nine months.
• On whether the raised wins number is a ceiling, Bevis said: 'It's probably going to be a bigger number, Greg. We'll be moving that number up.'
• New business is held to a 25% gross-margin floor and a 25% return-on-invested-capital floor, with hit rates running above 25% and a target of 35% gross margin, against current gross margins of about 20%.
• The quoted pipeline is $750 million with a further prospecting list above $1 billion not yet quoted.
• Longer-term aspirations were framed as 25% gross margin and 15% adjusted EBITDA margin, against 19.3% and 14.1% this quarter.

Quality of earnings

• The EBITDA step-up outruns the gross-margin gain. Adjusted EBITDA rose 50% to $18.5 million and its margin 220 basis points to 14.1%, while adjusted gross margin added only 50 basis points to 19.3% - the difference sits below gross profit, including higher income from the China joint venture.
• Part of the 26% sales gain is price rather than volume. Power Solutions sales rose 41% to $63.2 million largely on pass-through of precious-metal costs, and management flagged a lag before metal inflation is recovered in customer pricing.
• The deleveraging is finished, not promised. Net debt and preferred of $139 million pro forma against $261 million at year-end 2025, with the final $35 million of preferred taken out at a $5 million discount.

Gotchas & watch items

• New to the story and not press-released: a first munitions contract for the Department of Defense, NATO and the Marine Corps, with the initial ramp underway and brass and multi-part machining capabilities built for it.
• Data center is small but inflecting: a $35 million run rate from near zero at the start of last year, with 19 liquid-cooling machines averaged in the quarter against 55 targeted for Q1 and a 180-machine objective.
• The wins guide understates how far ahead of plan the year is: $106 million of awards secured in nine months against an original full-year ambition of $70-80 million.
• There is no 2027 plan. Management said the 2027 business plan awaits a board decision on how aggressively to exit legacy low-margin automotive, so the implied path of about $50 million of annual sales growth and $7 million of EBITDA growth is the only guide.

Last quarter's watch items: what happened

• No watch items on file from a prior quarter - this is the first tracked quarter for this company.

Next quarter: the 2-3 things that matter

• Data center revenue run rate against the $100 million goal Baseline: $35 million run rate in Q3 2026, from near zero at the start of 2025; 19 liquid-cooling machines averaged in the quarter Confirms: Run rate above $50 million with installed and commissioned machines at or above 55 Breaks: Run rate still near $35 million or machine installs below 40 Check in: Q4 2026. Source: Bevis remarks on data center only, slide 12
• Whether the margin gain holds as precious-metal pass-through lags unwind Baseline: Q3 adjusted EBITDA margin 14.1%, adjusted gross margin 19.3% Confirms: Q4 adjusted EBITDA margin at or above 14% with adjusted gross margin above 19.3% Breaks: Adjusted EBITDA margin below 13% or gross margin back under 19% Check in: Q4 2026. Source: Bohnert remarks on third quarter margins, slide 5
• A 2027 plan once the board settles the legacy automotive exit Baseline: No 2027 guidance; 2029 targets of $625 million revenue and $87 million adjusted EBITDA against a $490 million and $66 million 2026 midpoint Confirms: 2027 guidance issued consistent with about $50 million of sales growth and $7 million of EBITDA growth Breaks: 2027 guidance below that path or deferred again Check in: Q4 2026. Source: Bevis and Bohnert remarks on the 2027 business plan and long-term targets