Prepared for the Board of Directors. This report summarizes operating results, financial position, and cash flow for the three months ended June 30, 2026, with comparatives to the prior-year quarter.
Revenue for the second quarter reached $48.2M, up 14.3% from $42.2M in the prior-year period, driven by strong demand in the sensor-module line and a full quarter of the Helix product family. Operating leverage improved as fixed costs held while revenue grew, lifting operating income 21.0% to $7.9M.
Net income was $5.6M, an 11.6% net margin and up from $4.6M a year ago. The balance sheet strengthened: cash and equivalents rose $3.1M sequentially to $22.4M, total debt declined, and the current ratio improved to 2.4. Free cash flow of $4.2M comfortably funded capital expenditure and the quarterly debt amortization.
Five consecutive quarters of revenue growth with expanding margins. The quarter beat internal plan on every headline measure — revenue ahead 1.5%, operating income 7.8%, and free cash flow 16.7%. No covenant or liquidity concerns are noted, and the second-half outlook remains intact.
The condensed statement of operations below compares the second quarter of 2026 with the prior-year quarter. Percentages express each line as a share of revenue.
Gross margin expanded 80 bps to 43.1% on favorable product mix and lower component costs. Operating margin rose 90 bps as R&D and S&M grew slower than revenue; the G&A uptick reflects one-time audit and ERP-upgrade costs.
The effective tax rate was 25.9%, in line with guidance. Net interest expense declined on lower average debt following the Q1 term-loan paydown. No unusual or non-recurring items below operating income.
The Helix family was the quarter's standout, up 28.7% on its first full quarter of volume shipments, while the established Sensor Modules line grew a healthy 12.6%. The mix shift toward higher-margin Helix units drove the 80-bps gross-margin expansion.
Financial position strengthened across the quarter. Liquidity improved, leverage declined, and equity grew with retained earnings. Selected lines are presented below against the prior quarter-end.
The $1.4M term-loan amortization lowered debt-to-equity to 0.24. Inventory declined on improved turns while receivables held at a healthy 29 days. Total equity grew to $52.8M, fully funded by retained earnings with no new issuance.
Net working capital rose to $26.5M as cash built faster than payables. The cash-conversion cycle tightened by four days on lower inventory and steady receivable collection, releasing roughly $0.9M of cash during the quarter.
Operating cash flow comfortably exceeded the quarter's investing and financing outflows, producing a net $3.1M increase in cash. The waterfall below reconciles the opening and closing cash balance.
Free cash flow (operating cash less capex) was $4.2M, a 67% conversion of net income. Capex of $3.4M funded the line-three automation upgrade, on plan and on budget.
Management reaffirms full-year revenue guidance of $190–196M and operating-margin guidance of 15.5–16.5%. Second-half cash generation is expected to support continued debt reduction.
All term-loan covenants were met with comfortable headroom: net-leverage of 0.0× against a 3.0× maximum, and fixed-charge coverage of 8.1× against a 1.25× minimum. No waivers were required and none are anticipated.
Figures are unaudited and prepared consistent with the most recent audited statements. No changes in accounting policy and no subsequent events requiring disclosure as of the issue date. A reconciliation of non-GAAP measures appears in the board appendix.