Earnings call transcript: Baylin Technologies misses Q1 2025 revenue forecast

Baylin Technologies Inc. (BYL), a small-cap technology company with a market capitalization of $30.66 million, reported its first-quarter 2025 earnings, revealing a revenue miss against market expectations. The company reported a revenue of $18.87 million, falling short of the $20.8 million forecast. Despite a significant increase in adjusted EBITDA and improved gross margins, the company’s revenue decline and net loss from continuing operations have raised concerns among investors. According to InvestingPro analysis, the company’s overall financial health score is rated as FAIR, with particular challenges in profitability. The stock price remained unchanged at $0.28 in the extended session, indicating a neutral market reaction.

Key Takeaways

• Baylin Technologies’ Q1 2025 revenue was $18.87 million, missing the $20.8 million forecast by 9.2%.
• Adjusted EBITDA increased by 47.8% year-over-year, reflecting improved operational efficiency.
• The company reported a net loss from continuing operations of $2 million.
• The stock price remained stable post-earnings, reflecting a neutral market sentiment.
• Gross margin improved to 42.4%, up by 3.9% from the previous year.

Company Performance

Baylin Technologies faced a challenging first quarter in 2025, with revenue declining by 5.9% year-over-year. Despite this, the company managed to improve its gross margin to 42.4% and significantly increased its adjusted EBITDA by 47.8%. The performance of its Wireless Infrastructure business, which saw substantial growth in 2024, continues to be a bright spot. However, the company faces ongoing challenges from macroeconomic conditions and trade tensions.

Financial Highlights

• Revenue: $18.87 million, down 5.9% year-over-year
• Gross Profit: $8 million, up 3.6% year-over-year
• Gross Margin: 42.4%, improved by 3.9%
• Adjusted EBITDA: $700,000, up 47.8% year-over-year
• Net Loss from Continuing Operations: $2 million
• Cash Position: $6 million

Earnings vs. Forecast

Baylin Technologies missed its revenue forecast of $20.8 million, reporting $18.87 million, a 9.2% shortfall. This miss, combined with a net loss, underscores the challenges the company faces in the current economic environment.

Market Reaction

Despite the revenue miss, Baylin Technologies’ stock price remained stable at $0.28 in the extended session. The stock has experienced significant volatility, declining 37.78% over the past six months, though showing recent signs of stabilization. Based on InvestingPro’s Fair Value analysis, the stock appears to be fairly valued at current levels. The stock is trading within its 52-week range, suggesting that investors are taking a wait-and-see approach, possibly due to the company’s improved margins and EBITDA.

Outlook & Guidance

Looking ahead, Baylin Technologies anticipates ongoing growth in its Wireless Infrastructure segment, despite expecting lower revenues in its SATCOM and Embedded Antenna lines. Analyst price targets range from $0.25 to $0.29, reflecting cautious optimism about the company’s prospects. The company is focusing on long-term value creation and is in negotiations for a long-term credit facility to support its strategic initiatives. For comprehensive analysis of Baylin’s growth potential and risk factors, consider accessing the detailed Pro Research Report available exclusively on InvestingPro.

Executive Commentary

CEO Layton Carroll emphasized the company’s commitment to long-term value creation amidst short-term challenges. He noted, "We remain committed to the long term, which is creating long term value, not just dealing with short term wins." Carroll also highlighted the company’s resilience in weathering tariff impacts, stating, "Balin could have been in a position where tariffs were really destructive for the company and we’re now in a position where I can say confidently, we’ll weather the storms."

Risks and Challenges

• Volatile global trade environment and US tariff policies continue to pose significant risks.
• Macroeconomic pressures and trade tensions could impact business operations and profitability.
• The company faces challenges in maintaining revenue growth in certain segments amidst economic uncertainties.

Q&A

During the earnings call, analysts inquired about the challenges in extending the company’s credit facility and the strategies employed to mitigate tariff impacts. The company detailed its customer pricing and margin management approaches, providing insights into its efforts to navigate the current economic landscape.

Full transcript - Baylin Technologies (BYL) Q1 2025:

Conference Operator: Morning, ladies and gentlemen, and welcome to the Bailian Technologies First Quarter twenty twenty five Financial Results Conference Call. At this time, all lines are in listen only mode. Following the presentation, we will conduct a question and answer session. This call is being recorded on Thursday, February. I’ll now turn the call over to Kelly Miles, Director of Marketing and Investor Relations of Billion Technologies.

Kelly, miss, please go ahead.

Kelly Miles, Director of Marketing and Investor Relations, Bailian Technologies: Thank you. Hello, and welcome, everyone. Thank you for joining the call this morning to review our first quarter twenty twenty five financial results. On the call today from Balin are Layton Carroll, Chief Executive Officer and Cliff Garry, Chief Financial Officer. We will be available for questions at the end of the presentation.

Before we begin, let me make it clear that our comments today may include forward looking statements and information, as well as answers to questions that could imply future expectations about the prospects and financial performance of the business for 2025 and beyond and could include the use of non IFRS measures. These statements are subject to risks, uncertainties and assumptions. Accordingly, actual performance could differ materially from statements made or information provided today, so you should not place undue reliance on them. We also do not intend to update forward looking statements or information except as required by law. I ask that you read our legal disclaimers and explanation of the use of non IFRS measures and refer you to the risks and assumptions outlined in our public disclosures, in particular the sections entitled Forward Looking Statements and Risk Factors in our annual information form for the year ended 12/31/2024, and our other filings, which are available on SEDAR plus Our Q1 twenty twenty five results were released after market close yesterday.

The press release, financial statements, MD and A and annual information form are available on SEDAR plus as well as our website at balentech.com and otcmarkets.com. I would now like to turn the call over to Layton.

Layton Carroll, Chief Executive Officer, Bailian Technologies: Thank you, Kelly. As we report on our Q1 twenty five results, I wanna be pretty open about the environment work we’ve been operating in. The end of the first quarter and the beginning of the second, have been the most volatile we’ve experienced in recent years with the unexpected large escalation in global tensions and certainly tariffs. The decision by The United States implement the tariffs, reciprocal tariffs, subsequently delaying some changes in rates and exemptions, changing in policies, which is in some cases changed daily, if not almost feeling like hourly. It’s created a lot of uncertainty across various markets.

And then we’ve obviously seen retaliatory measures from certain nations back to The US, which is only added complexity. This whole situation has tested our agility, our resilience, and really in some cases, our relationships with suppliers and customers. And while our financial performance didn’t meet what I wanted, I’m proud of how our team responded. And I’m gonna talk about that as we get into this because there’s some I think there’s some interesting things that we’ve done that have really helped us navigate this environment and mitigate a lot of those impacts. I honestly and I think, and maybe this is humorous, but I think we’ve done a bit better than a lot of other companies in this environment.

So few positives I want to highlight. Despite having lower revenue year over year, our gross profit increased. That’s a cool thing and that’s a product mix and that indicates that a lot of the things that we’ve been doing, retiring legacy product, rolling out new products, on operational efficiency. Even when you have this wildly unclear macroeconomic environment, we’re generating higher gross profit relative to the revenue to a lower revenue number. I’m actually pretty proud of what we’re doing there.

Adjusted a bit that at 700,000.0 was our fifth consecutive positive result and 47.8% higher in Q1 of twenty four. That’s that’s actually good stuff in a very challenging environment. Demand remains strong. Backlog at 29,400,000 as at April 30. And but but the mix has certainly changed and we’ll we’ll talk about that some more.

And importantly, you know, you you can get yourself wrapped around the spokes of dealing with tariffs and everything becomes short term and oh my God, what are we gonna do? I think this was an important point I wanted to make while we have been doing a lot of work on tariffs and I feel good about the progress we’ve made in managing and mitigating them. We haven’t taken our eye off the long term strategy, how we get to sustained longer term growth and higher levels of profitability that remains front and center for business. So I’m gonna talk about each of the businesses just briefly before I turn it over to Cliff. So our SATCOM business certainly had slower sales.

This is driven by market conditions, uncertainty in the tariff environment. And even to the extent if you think about when the US inauguration was and then you had the phenomenon of doge and layoffs. We actually saw delayed orders. Think I talked on our last call, very obvious one, which was the it was a great order from the National Oceanographic and Atmospheric Administration. We expected that order a while before when we actually received it, but of course, they had significant layoffs and that caused turmoil within that department and as you can imagine, it caused us to see some delays.

So understanding that you run a business and you have to take necessary steps Given the lower sales environment that we saw in, in q four of twenty four and then, we had a less than optimal February in terms of new bookings, we decided it was necessary to implement temporary layoffs of about 30 employees to better align our cost structure and our capacity with our expected revenue streams and going forward. Temporary was important because a, it’s a, it’s the right way to do it. And if we get a rebound, we’re gonna be able to repair and grow quickly. And that takes nothing away from the work that we’re doing in that business on improving efficiencies and retiring some of the legacy product that is is more challenging to produce. Our embedded line also experienced some revenue softness.

We ship most of our products that we manufacture, which by the way, manufacture predominantly in China. We do manufacture in Vietnam, Malaysia, but we ship those products to Asian partners and thus our business is not directly impacted by tariffs. In other words, Balin’s not paying the tariff. However, if we’re delivering a product to to one of our partners to an ODM, say, or a Centimeters in Malaysia, in Indonesia, in Taiwan, in China, well, and they’re then shipped to The US, their tariffs. Now, obviously there’s been start stop.

There’s been a rush of customer conversations about how we handle certain things only to pause that with the ninety day pause. But when you have a ninety day pause on reciprocal tariffs in a 10% baseline, there’s not certainty and that’s causing certain buying behavior challenges. And it just causes we have this nice level of backlog in that business, but the order flow through from that backlog was lower than we would have liked in q one. And understanding that the pause was due to expire on July 8 without having some level of clarity, we could see that behavior continue. Now wireless infrastructure has been an interesting story and it was when I got here, I felt like it was the it was the business with the most potential to growth.

But from a go to market strategy point of view was not necessarily focused on the right things. You know, we had a bang out 2024. That business grew 40% over ’23. It’s continuing to grow. Right?

And and this is a cool thing. The the multi beams are gaining even further traction. We’ve had some very, very exciting developments with Verizon in that space, which I’m excited about. And then the other thing which is, you know, historically been one of our strengths and it’s one of the things I think the the Galtronics infrastructure group always got right and was a strength is small cells. Well, cells were muted in ’23 and ’24.

We’re seeing good small cell flow through for the first time in several years and that actually leans into one of our strengths and knowing that we’re so well positioned with with Crown Castle, with T Mobile, with AT and T and now with Verizon as well as obviously with the Canadian carriers. It’s been a nice revenue stream for us. So we produce the majority of those in China. Well, I would tell you that Cliff, this guy named Layton, a bunch of other people who work in this business when we were going, okay, it’s 30%. Okay, no, no, it’s it’s higher.

Tariffs are going higher. Oh, no, no, it’s 125%. No, no, it’s it’s 145%. Sleepless nights and a lot of stress were the result of that. What’s interesting, and this has been a lot of work getting here, our effective rate is not a 45% for the infrastructure products coming to The US.

Our effective tariff rate is approximately 30%, and we’ve taken further steps to lower this through multiple strategies. And I can explain how all this works and how we got to 30%, but it’s above board. We’ve had containers come through customs and border patrol. It’s a it’s, you know, I never thought I’d say I was happy with 30%, but given the alternative, I’m happy with 30%. Looking ahead, we expect the external environment to remain unpredictable just as the Trump administration seems to be unpredictable.

However, we continue to adjust our operations to build greater resilience and we are always looking at how we can be more effective. I do wanna thank the employees, my leadership team, everybody at this business who had been busting it during this really choppy time. We’re doing okay. Not perfect, but we’re doing okay. And we’ve done really well at managing what was a very challenging situation.

Without the people at this company’s support, we would not have come this far. I also wanna thank our shareholders and lenders for their continued support and trust. We remain committed to the long term, which is creating long term value, not just dealing with short term wins. And and, you know, obviously, we’ve had short term volatility we’ve had to deal with, but we we continue to focus on the long term as well. With that, I’ll now hand it over to Cliff to walk through the financials in more detail.

Cliff Garry, Chief Financial Officer, Bailian Technologies: Thank you, Layton, and good morning, everyone. Prior to discussing the first quarter of twenty twenty five results and financial position, I’d like to address some important disclosure in our statements. Consistent with our thirty one December twenty twenty four reporting, we have noted a material uncertainty related to going concern, rising from the outstanding court order for the return to the escrow agent of $1,800,000 plus interest and the negotiation of our current lender of a new credit facility to replace the current one, which has most recently been extended to 05/30/2025. We’re actively addressing both issues. We had expected to reach a longer term agreement with our current lender prior to the March 2025, but the process was delayed further due to the changing tariff environment and its impact on our financial forecasting.

Nathan will discuss that in more detail later in the call. Needless to say, we continue in discussion with our lender and expect a longer term facility to be agreed in the near future. Let me now walk through the financial results for the first quarter of twenty twenty five. We began the year in a challenging demand environment, which contributed to a decline in revenue. Q one revenue came in at 18,900,000.0, down 5.9% year over year and 9.2% sequentially from q four of last year.

The decline was primarily driven by softness in Satcom and embedded business lines as outlined by Leighton. That said, despite the top line pressure, we delivered strong improvements in profitability, a testament to the operational discipline now embedded across the organization. Gross profit for the quarter increased to $8,000,000 up 3.6% from the same period last year. The gross margin improved by 3.9% to 42.4%, reflecting the more favorable product mix. On the operating side, we maintain tight control of the discretionary spending with operating costs of $9,100,000 for the quarter being consistent with the prior year quarter.

As a result, adjusted EBITDA grew to $700,000 up 47.8% year over year. This represents our fifth consecutive quarter of positive adjusted EBITDA and we are especially pleased to see that progress against the backdrop of softer revenue. Net loss from continuing operations was $2,000,000 for Q1 of twenty twenty five, which was consistent with the prior year. On our balance sheet, we ended the quarter with $6,000,000 in cash and a lower credit from banks at $17,600,000 compared to $18,700,000 at the prior quarter end. Our net debt declined from $14,300,000 at thirty one December twenty four to December at the end of Q1 twenty twenty five.

Working capital declined $3,100,000 mainly in accounts receivable through a combination of the lower revenues and taking advantage of early payment pro of customer early payment programs. Working capital was the largest contributor to a positive to positive cash from operating activities of $2,600,000, which was used to pay down the debt. To wrap up, it has been a challenge, but we have seen an appropriate response on our balance sheet to the change in operations for the first quarter of twenty twenty five, and we remain focused on cash management. With that, I’ll now turn the call back to Layton.

Layton Carroll, Chief Executive Officer, Bailian Technologies: Alright. Cliff, can you hear me? Yes. Alright. Sorry about that.

My my I had a Bluetooth on, and it decided to give me a challenge. So, I assume I’m I’m back back up the day. I was waiting for the transition. So look, the company’s business has certainly been affected by the uncertainty on timing, level, duration, extent of U. Tariffs.

Canadian goods other than those are compliant with CUSMA are subject to a twenty five percent tariff. And by the way, even whether you call it CUSMA or USMCA, even those goalposts have changed, right? When that first came out, it was 60% was the guideline, then it went to 75% and then that has now changed to significantly transformed, which define what that means. And you have to work on that to understand that, there’s paperwork, qualifications. So even with something as simple as that, which if you think about our satellite products, which are manufactured in the majority in Kirkland, Quebec, well the goalposts keep changing and how do you set your team up to be successful so we can help our customers import those goods to The US understanding that 40 to 50% of what we manufacture goes to The US.

It’s been a challenging environment. Obviously, we had the reciprocal tariffs and then there was the pause on reciprocal tariffs and then there’s a situation on China. It’s been a really funky ride. Now, the company’s been very proactive and really it’s been an opportunity for us to look at diversifying our supply chain, really looking at our operations, how we handle what we do, where we’re importing from and are there opportunities to move production to deal with the tariffs while we mitigate their impact. For the embedded antenna business, we’ve obviously, there remains this risk because most of the people who manufacture the end products for our customers like Google, like Amazon, like AT and T, like Verizon Charter Communications, they’re manufacturing in another Asian country and while there was a 10% baseline tariff left in place, all the reciprocal tariffs were paused.

But you don’t have clarity on what that’s gonna mean. And by the way, some of these partners who we work with, it’s an ODM. Well, if you live in the ODM contract manufacturing world, you’re not running around at balin level gross profits, right? You’re likely gonna have a much lower gross profit and a 10% tariff if your customer is saying, that’s not my problem, that’s yours to these ODMs. Well, that has significant impacts on their business.

You can see the uncertainty that that would cause and we have certainly seen a slowdown in embedded, we believe in no large measure due to the tariff uncertainty and even just a 10% tariff rate. So, we are continuing to work through this with each of these guys and trying to get this completely worked through. Wireless infrastructure, we’re doing pretty well. So what happened is with that business, we all had the sticker shock at 01:45. What we learned and have since tested, proven with our own product and then validated with a friendlier competitor.

If your product is underneath The US harmonized tariff schedule or ATS, excuse me, HTS code, specifically for aluminum and steel, you have an aluminum steel tariff of 25% for that component of the product that you manufacture. What that means is you are not subject to the full reciprocal tariffs but a set of baseline tariffs. That combination based on what we have been importing to The US for infrastructure effectively comes out to approximately 30%. That’s a good place to be, I’d rather it not be 30% but 30% is livable for the business and understanding the gross margin profile for our infrastructure business is the strongest of the three and that it is growing and has a very tight cost structure, we are able to handle 30%, keep growing and keep generating cash flow, particularly within this business. In the case of SATCOM, most of the products we have are produced in Canada.

And obviously a good measure go to The United States. Being CUSMA or USMCA compliant allows us to not be subject to that tariff. There’s a lot of paperwork involved and it is an effort. Now, understanding we do have US based competitors, they don’t have to do this paperwork and understanding many of our customers are picking up FBO, our customers don’t have to do that paperwork if they take from our competitors. So obviously this is even with the fact that we’re compliant because of the extra bureaucracy, it does have an impact on the business and it has caused delays in fulfilling orders and we have had a bit of order slowness.

Now, I will say order volume in January was good. Order volume in February was not strong. Order volume in March was pretty good. But if I average those three out, it’s not where it needs to be given where the size of the business was. Obviously, we looked at it, looked at revenue and profitability and we took steps to reduce cost structure through the temporary layoffs.

I think we all know that everyone is navigating this tariff landscape and the amount of uncertainty that we have. I will say we have done a, I feel confident saying, we have done a good job of controlling what we can control, preparing even in anticipation of the unknown with contingencies and have implemented ways to take costs out of different business units and reduce the tariff burden in each. By the way, one of the things I didn’t mention and we have done this but to a limited extent in the infrastructure space is we have increased pricing to select customers. We’ve had AT and T, Verizon, T Mobile basically all came out and said, hey, tariffs are your problem, not ours, right? They don’t care that we produce in China.

And by the way, not all of our competitors do, right? We have for small cells, we have two competitors who are both pretty decent and strong companies. One produces in Mexico, One produces in Korea, they don’t care where we produce, that’s your problem. So it’s up to us to manage it but for other customers and it depends on the product set and product line, we have been able to do price increases and what I have found interesting is when you explain to those customers, we’re not going to increase prices to 145% to reflect 145% tariff, we’re going to increase prices to reflect the fact that we have managed this down to 30%. The sigh of relief they have and they’re willing to pay the higher price at this point because they know that for this particular set of products and in this case is particularly DAS and stadium products, really just about everybody produces those in China.

And the fact that we’re able to have done the work that we have, know that we can get it to The United States at a reasonable level, those increases are being accepted. So, really funky environment and you’ve got to play it, it’s a little bit of hand to hand combat dealing with individual customers and in some cases helping them understand how to be compliant, what do they gotta do on the paperwork? In other cases, hey, you’re not gonna be impacted by tariffs or in other cases, we’re gonna change some pricing but it’s not gonna be this crazy sticker shock and still gonna be able to procure a product and keep moving forward. So let me talk about each business briefly and I think I beat the tariff force to death. Overall look, the embedded antenna line had an amazing year last year, it grew 23% on ’24 over ’23.

Given what’s going on with the uncertainty, the embedded team will have a good year but we expect that revenue will be in line or slightly lower than in ’24 and we’ve certainly seen that in Q1. The point of this though is the backlog remains actually really high, it’s just the flow through has got to start happening and I think the uncertainty has caused that, you know, a level of slowness and to be clear, it’s not a crawl. We’re still sending orders, we’re still very active and by the way, we have a really good book of active bids and projects going on in that business. So, feel great about the long term future, It’s a little annoying that we have the uncertainty but I think from an overall 25 of view, it’s probably going to be slightly lower, still going be nicely profitable and we’re going to do whatever we can to try to get it back on plan. Wireless infrastructure, despite tariffs, it’s just kind of a cool thing, it’s thumping.

The strategy is working well. Multi beams and the small cells are doing well. We’ve obviously had some nice stadium deployments going into Stadio Azteca in Mexico City is kind of a cool thing in front of the World Cup. Lots of good stuff and we’re having some really productive conversations with new European customers and we need to turn that into revenue. But the strategy, it feels like it’s really working because we’re seeing the order flow through and look at, it’s up to us to manage the margin profile but given how much we improve the margin profile in this business, we’ve been able to hand what we did to mitigate the tariffs, we’re able to handle it, stay nicely profitable and keep growing.

So, I actually feel ’25 is gonna be a better year than ’24 and ’24 was a bang out year for us. And we’ll have to see. Obviously, the margin profile within this business may not meet the same levels on a percentage basis as last year. We got to keep working on how we mitigate tariffs, improve our operational efficiency and try to keep it in line. The satellite business, we do expect it to generate lower revenue in ’25 compared to ’24.

The level of uncertainty that we’ve seen particularly in Q4 sales which we don’t produce overnight and seeing a little bit of softness in Q1, it should be lower than ’24. Now, we continue to see good opportunities in broadcast and it’s interesting, military spending has the level of opportunities has increased. What I think is unique about that is if you look where it’s increased, well with all of the changes the US administration has done, we’re seeing more opportunity with European government agencies than I think we’ve seen since I’ve been here. Now, you can’t just win it overnight and turn it around overnight. These are longer sales times and it takes a little bit to produce but we have had some nice wins, we had a really nice win, excuse me, in March with a European group which is why I explained that March was a pretty solid sales month for us.

It’s interesting, so we’re seeing more in different places and it comes back to the fact that we do high power satellite. We’re not trying to compete with the Starlinks of the world, to me that’s a fool’s errand. Specializing in high power for unique applications, military, government, commercial and communications broadcast, that’s paying off. So, it was on us understanding we’re seeing lower revenue, okay, let’s take some cost out, let’s make some challenging decisions and let’s keep grinding and get this business to drive even better profitability than it has historically. Honestly, would tell you I think being Canadian is helping us in this space, not just with NATO countries but even with other in Asia for opportunities and the focus on the high power is kind of our baseline and that’s an important piece that isn’t gonna go away.

So, we’re continuing to work and hopefully get better efficiencies over the course of the year. As we close out today’s call, look, I want to acknowledge the reality that this has been, I mean, I’ve had to lead businesses through COVID, I’ve had to lead businesses through the recession of 02/2008, ’2 ’9, etc. From real estate And here we are, another unique interesting time particularly for an international wireless and satellite OEM. It has been funky. The team has been really I can’t thank the team enough for rolling up their sleeves, being creative, working hard, losing sleep and helping us mitigate the impact of tariffs.

I’m happy with where we are, I’m annoyed by tariffs, but I like our long term prospects and I like the strategy that we’ve got. I feel we’re continuing to head in a good direction. That concludes our formal remarks. Operator, happy to take questions.

Conference Operator: Thank you so much for that. Ladies and gentlemen, we will now begin the question and answer session. You will hear a prompt that your hand has been raised. Should you wish to cancel your request, please press the star button followed by the number two. And if you are using a speakerphone, please give the handset before tapping in.

Our first question comes from Daniel Rosenberg from Paradigm Capital.

Daniel Rosenberg, Analyst, Paradigm Capital: Hi. Good morning, Layton. I was just Hi, Danny. My first question thanks. My good my first question was just around the balance sheet.

I saw on your release the credit facility. You’re able to extend the contract, but not as long term as you would have hoped. So I was wondering if you could provide an update on that and how you’re thinking about the balance sheet, please.

Layton Carroll, Chief Executive Officer, Bailian Technologies: Yeah. So it was part of this is timing. So we had a timing originally we’re going to April 30 and we’re having really productive conversations with RBC. Then the April happens, reciprocal tariffs, reciprocal tariffs, abbreviated 10 tariffs, 145% tariffs and we’re going, Oh dear Lord. And we’re going through this period.

Keep in mind, RBC needs time. They’re dealing with a material extension. You go through credit committee. You have to have forecasts. Well, we’re sitting in effectively the second week of April and every forecast we had given RBC needed to change.

Hard stop period. And RBC is, can we have a new forecast? And I’m like, guys, I don’t want to give you bad numbers. We got to figure this out and it’s going to take some time. And this is kind of been the cycle with when people who run businesses hate uncertainty particularly in regulatory environments.

I know I just stated the obvious but this is why Because we had things to do with RDC and we had to be and the way we run our shop is we’re really open and transparent. It’s just, guys, we are gonna have to reforecast. And that means based on where we think we’re gonna get tariffs and fortunately, we were able to go from 145 down towards 30. 30 still has material impacts in terms of mix, particularly in the infrastructure line. And the infrastructure line is the growth workhorse that was really starting to fit.

So I mean, you could see it, right? We were before all this, we were running around a 7.5% tariff and the volumes were picking up, the traction was picking up, the quality of conversations and the breadth that we’re having with people in our industry. It was really starting to go. And it was kind of a neat time. And then you had this, oh my god, $1.45.

What does that do to the business? Because we didn’t get clarity that we were gonna be at 30 for a while. It took us working on it, understanding the changes, looking at the HTS codes, talking to brokers, talking to tariff specialists. I’ve talked to a number of other CEOs of large manufacturers and importers who manufacture import from China to The United States. What have they done?

How do we share ideas? And through that process and people like Cliff and our ops teams working very hard, we realized we could fit into this structure, did so. Two containers came over, confirmed we’re at 30. Okay. Now we need to reforecast.

What do we think this will do? What where can we change prices? Where can we not? What do we think that will do to the demand curve? What will this do to our margin profiles in reforecast through the end of the year now into ’26?

So we can have a productive conversation with RBC, So the obvious thing here, I know I’m being a bit long winded is RBC and us and Valen, we have a good relationship and we were working on a very material long term extension. And then the tariff uncertainty really caused uncertainty for RBC and for us. And so it’s taken us a while to get to that level of certainty. We are working on a material extension. It just had to get to extend it to May and we’ve got a little more work to do, but I I think Cliff and I are both remain confident we’re gonna get something done here that will be, you know, longer than the month to month merry-go-round that we’ve been on recently.

Daniel Rosenberg, Analyst, Paradigm Capital: Okay. I can appreciate that and certainly adds a degree of complexity to trying to do anything in this environment. I guess as an extension, you mentioned trying to forecast demand curve. So, you know, as you think about a 30% impact, if that does hold, you know, what what do you you know, what’s your best guess on how customers react to, you know, bearing that price increase? What are the kind of conversations you’re having around the product sets and how it impacts your demand?

Layton Carroll, Chief Executive Officer, Bailian Technologies: Yeah. So it’s interesting. So we’ve actually, our auditors are RSM. We have actually had great support from RSM. We’ve worked with third parties.

We’ve looked at how we do transfer pricing or landed costs. And the effect is even at 30% are in turn remember 30% is landed cost, right? So there were ways we could actually take cost out. It still has to be paid for and it has to be auditable, legal, above board but actually reduce our landed cost a bit, have 30% on that and then have for particularly for say our DAS products which largely go through distribution, having a price increase. And when you explain that and your partners are expecting originally 145 and now they’re 30, We’re actually able to price a little bit underneath that and still have a pretty strong margin profile.

I’ve had nothing so far but positive response. Now I’ve only talked to a few of the distributors, have a big conference next week in Chicago. We’ll be there with the team and it’s packed with meetings and you can get, excuse me, guess what the front and center will be. But based on what we expect, we actually expect a little lower in dense in DASH sales because the prices are increasing. Conversely, small cells in multi beams because of the work that we had done on margins, we’re able to absorb that fairly well.

And because we’ve been able to reduce our landed cost a bit, effectively, we’re not gonna have massive margin degradation. And know this is and I’m not revealing everything because I don’t want to, But we feel pretty good with respect to the top two, what I call the top two tier product sets that have been driving the greatest margin value for us in being able to mitigate the impact of what 30% means, reduce that so we still have a very strong margin profile. And yeah, it’s annoying because it adds costs. But the volumes we’re seeing in those programs is growing. We have opportunities and have had conversations with carriers.

This is a unique place to be where they want volume discount rebates. Well, that could reduce your margins. But if you sell X number of product in a certain category and maybe you get $500,000 to $1,000,000 at one margin profile, I don’t have to be the smartest at math to know that slightly lower margin on that same set of products at a $10,000,000 level is more bottom line for Balen. And we’re having those conversations because they see the value in some of our products. That’s a cool place to be.

So I actually feel like Balin would be rolling without this tariff nonsense. But I do feel like we’re gonna be in a solid place. It’s up to us to keep managing and Lord knows it could change tomorrow. But the team has done I’m not trying to pat ourselves on the back, but I’m really proud of work the team did to help us manage through this, reduce our landed costs, reduce the impact of the tariffs, manage customer expectations. And when you look at our our forecast, we feel good as a business.

Yep. Excuse me. Going into ’26 and growing beyond based on what is working now and, to be honest, what we have coming in additional product development.

Daniel Rosenberg, Analyst, Paradigm Capital: Okay. Thanks for all that context, Layton. I’ll pass the line.

Conference Operator: Thank you so much for that question, Daniel. And since there are no further question at this time, please continue, mister Layton, for the our closing remarks.

Layton Carroll, Chief Executive Officer, Bailian Technologies: Yeah. Well, I I think I’ve said it. You know, this is probably been my most unscripted. I I have people who work with me try to help me get a script to stay on and I’m sure they’re pulling their hair because they haven’t stayed on it. Balin could have been in a position where tariffs were really destructive for the company and we’re now in a position where I can say confidently, we’ll weather the storms.

We’re going to be fine. It’s going to be challenging particularly as we’re going through still dealing with a lot of customer turmoil this particular quarter. But I like where we’re going and I like the growth we’re continuing to have. With that, I appreciate everyone’s time and attention. And, guys, have a great rest of your day.

Conference Operator: This concludes today’s call. Thank you for participating. You may now disconnect. Thank you.

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