Taylor Devices, Inc. (TAYD) Earnings Call Transcript & Summary

[indiscernible] matters to come for the meeting. The polls are now open.

[indiscernible] Chief Executive Officer. Tim will address the shareholders and discuss the accomplishments of the past year and present an outline of what management anticipates for the upcoming fiscal year.

Thank you, John. Again, welcome all. We can see -- and you see a picture throughout the presentation here. This is a picture of the grand opening of our Allen Cluncheck development lab this past January. There will be multiple mentions and references to that throughout.

I hope you all enjoy the meeting.

We are having technical difficulties with that PowerPoint presentation. Bare with me, please. There, sorry. Thanks [indiscernible]. Okay. Just a cautionary statement. We'll be talking about some forward indicating dynamics. So it's covered under the safe harbor I'll kick off here with an overarching summary of the broader business followed by Sue Buckley, our VP of Business Development and Sales. We'll talk about not only this development sales across the whole enterprise, but also our industrial product groups. Followed by [ Brian Laiki ], our IPT Lead for our Aerospace and Defense Product Group. We will then be followed by Todd Avery, IPT lead for our structural products. And then [indiscernible] newly created as of this past fiscal year. I'll talk more about this and Jim will go into detail our new product development team, which all are very, very important relative to agile velocity and speed, the ability to do what we do and get it done very quickly to the deli of our customers, hopefully, followed by Bill Conrad, our VP of Ops, we go over the, again, enterprise-wide operational dynamics. And then Paul Heary, our CFO, will wrap it up with the financials. So just to speak a little bit about why do we have product teams and groups. And really, we created -- we started this almost 2 years ago now, mainly because even though we leverage the common technologies, capabilities, and talents at tailored devices. We serve different market sectors and customers who have different needs. So the -- these teams now -- many businesses within the business, if you will, that are focused on their specific customers and the markets and those needs is the best way to serve those folks. Now additionally, it creates a succession planning and a growth, a scalable structure, infrastructure, if you will. So again, John alluded to this at the end of last year's AGM, it's a lot -- it's all about leadership, right? Organizational structure is important. It provides guidance, but really at the end of the day is about the leaders. And these folks as well as the team, the entire team of follow devices is what makes it happen. So FY '26, I say overall, a very good year. And absolutely, in many ways, it was an excellent year, again, year-on-year down on the revenue from $46 million to $41.6 million. And really, that's about 2 high-level dynamics around what's going on and what happened last year in the market. On the aerospace and defense side, there are incredible demand, the needs and the opportunities there are off the chart and Stu and Brian as well as some Jim will talk about a lot of that. But even on that side, by the way, the government shut down for the beginning of the year, remember last year, their fiscal year from October 1 through late November, that created a delay in all the contract flow and activity in the government, which inevitably impacted us. So, you could see that if you looked at our backlog, we entered fiscal year '26 with around $27 million went up a little bit in Q1 bounced around, but it generally went down into the last quarter where we had a deluge of orders that put us on a record backlog that created a delay in the execution that impacted the sales recognition in the year. Bookings, as our data said, record tremendous year, $67.3 million versus $4.2 million the prior year, the average down around the 30s. We had a single $19 million order within that 60 -- almost $68 million to [ $7.3 million ]. That record high in the company's history, which is great. It's fantastic. But as we alluded to in our 10-K and 10-Qs, it's spread out over almost toward fiscal years. So just to keep that in mind. This put us at a very favorable backlog, again, to be record, almost $53 million record high. Again, 19 million, really $17 million of that is spread out beyond fiscal year '27. But when you normalize that, it's still a $35 million is in backlog, which is still a record high versus the 33.1%, which was our prior record. Net income, $8.6 million, $20.6 million of sales, again, very significantly favorable overall, down from year-on-year. Mainly due to sales volume and a little bit of the mix dynamics, and we'll talk more about that later. I talked about aerospace and defense tail significant activity due to personal world events, restocking of legacy systems and components as well as new capabilities being developed, which was very happy to report we have significant activity relative to both in customer funded as well as IRAD, which we'll talk more about. The nonaerospace and defense side continues to face headwinds and again, high interest rates. Todd will talk more about this and uncertainties create delays that are carrying on. They were there actually before as we entered into FY '26, and they're still in play right now, but there's underlying activity there. that looks like late at the end of the tunnel, and Todd will talk about that. We're still first diversified from a regional perspective. We're a global company. That, as the nature of the aerospace defense to non-aerospace defense shifts more towards the U.S. side of things because we -- everything we do on aerospace or the defense side is U.S. government based. But still have a broader footprint. On delivery, a new record at 94%. Bob will talk about it -- talk a lot about this really fantastic job by the team. That's never easy. You get above the 90%. We're 92% last year. It gets really hard to move the dial higher from that point, especially when you're doing very difficult products like that, like we do and introduce new products at the same time. R&D, a little bit under $1 million 0.8 million versus $0.4 million a year before. As you can see a trend here, but a couple of prior years, R&D, we're very importantly, planning seeds that are going to terminate in the future here. So we're very careful about making sure that this R&D investment is aligned with our strategic priorities where we know there's going to be future opportunity and need Stu is going to talk more about that in section. CapEx of $2.1 million versus $2.6 million, that's port where our run rate has been around the $2 million point. So again, we're very careful on making sure we're investing in the critical of equipment and facilities that we need. Our [ dev lab ], I talked about it there with the first picture. We commemorated that in January. The product group teams we talk about that serve those markets and customers, they have the primary mandate is deliver to our customer commitments on time with perfect quality. They also, by the way, have to develop and qualify the new products that are going to keep the growth of the company in play. And whenever that is in conflict, we have to deliver on time to our customers. So that creates a challenge, hence the creation of our new product development team with dedicated resources and dedicated to focus on they help out with the money coming in stuff when necessary, but they're empowered to be able to go after and concurrently do the new product development at a rate at a high velocity. And again, in an environment that we're creating that is more agile. Customer funded development, $1.6 million this year versus $1.4 million, [indiscernible]. This is a fantastic story as well. We always try to get customer funding assistant when we can. We have to be careful of that because the customers obviously expect us that to get in the game, which is fair. We want to be well positioned to reap the best of the follow-on production and not be overly at risk from being competed out of the position. Alan, talked about the product teams, the product integrated product teams. We have those in position. We have great leaders. We have -- we've been home basing, I use the term here, assigned home-based resources that they have jobs across, they support the whole business we all do, but they have a primary day job of supporting that specific product group team. And by the way, those folks then we develop into the next wave of leaders that have the capability to be product group team leaders and who knows where they go from there, hopefully, Scott's on. '27 priorities and outlook. Not a lot of change here. Just if you go back and look at my prior presentations, you're going to see a lot of commonality and repeat. And that's not just because I'm a minimus in some regard relative to slide decks like this, but it's working. So what we've been doing has been working. So we're just modifying it as appropriate. So these focus on where the needs are, hence the money. And we know that our capabilities in a way of managing minimally vibratory and impulsive energy components and systems are valued and prospect there and win there. To do that most effectively understand the customers' needs, their system better than specification. To do that, you have to be engaging them engineer to engineer, function to function, and that's what, by the way, the integrated product teams in power and help that help assist it. How about that? The ability to analytically solve a problem, make sure the customer appreciates it before we start cutting chips and trying to go into debt or call, really, really important. So that helped us [indiscernible] and I use this tag line, I'm going to say it again, elegantly innovative custom engineered solutions. By elegant, I mean, it has the fewest parts, an elegant design. By nature, the definition has a few parts. Hence it's look the least costly and the highest reliability. When you see an elegant design, it sits obvious it's low that, of course, but try to come up with when a blanketed paper is a different challenge and we have a complement of very capable people that do it well. Then of course, we have to be able to execute machine, assemble, test and deliver on time, and we have a great complement of people that are doing that very well. assets pending on-time delivery. When you do this for a customer, you deliver more so on time and your quality is very, very high. You have the -- if they will invite you, you have the opportunity to do more if we do a bit piece or component that goes into a assembly that goes into a larger assembly platform, they will take the risk on their part to give you more of that content. That can paradigm shift your revenue sales, your sales or profit, cash, everything, and it's an incredible growth driver for the business. And that is happening. So that's great. Our priorities, these aren't changing dramatically new product development, hence, the new product development IPT and the resources, including the [indiscernible]. You're going to hear about the machining strategy. How do we focus on our integrated capabilities to add the most value and be the most competitive. We're going to add to what is already a fantastic capability in the way of our machine shop. We're adding facilities. Digital transformation. [indiscernible] this is one primary focus on our strategy to deploy in the next [indiscernible]. Cheap among many priorities, we have a team focusing on this cross-functionally all four of these and they report out on biweekly and we progressed it. The digital transformation includes what are we going to do about AI, how do we incorporate AI in a way that helps our business effectively as well as do more with the same. So helping our ability and velocity. So that's a challenging area, but very, very important. You're going to see more about this than Bob's section, but it was actually in the news. I know a couple of shareholders mentioned it here. We are in the process of purchasing an 18,000 square foot facility located about 5 miles from our existing facility, our main factory and then not even a mile or so away from our current machine shop. And that is going to enable us to immediately address the growth opportunities we have while we focus on. And I've talked about this in prior presentations where based upon our intended growth and expected mix of products, we were going to run out of work footage, and we're going to have to either buy a facility additional facilities and/or add on and bill we're focusing back to development, building and adding on to our existing One Buffalo Bold Wave facility, where we have ample land available. We can put up to a 60, actually, we can put an 80,000 square foot facility there as far as bidding goes. So we're in the process of -- we have designs we've already put in play working with architects. We're going to progress that and hear more about that in the coming quarters. So with that, concludes my section, and I'll hand it off to Stu Buckley, our VP of Business development.

Hello, I'm Stuart. So I'm going to talk today about business development and sales. So this is an interesting picture. So right here, this is a world Navy, obviously U.K., containerized medical mission module manufactured by that partner force development services, expanded on [indiscernible]. So the pumpkin man's most best picture a [indiscernible] equipment inside that module staff patients, it's a medical module. I'm just going to bring everything on to the slide here and then talking to use. In FY '26, we continued to gain market share in our target markets, particularly in the landing game and the missile defense sector. So within the lending year,which is a big tattoo, expanded our position, both the collaborative combat aircraft that 60 and vertical takeoff [indiscernible] platforms [indiscernible] vertical takeoff and landing platform. So [indiscernible] industry events like exponential [indiscernible], which is a really important part of our efforts to engage the space community and strengthen our relationships and identify new landing gear opportunities. In the [indiscernible], we focused on shock and seismic isolation for ground by systems we are continuing to support the emissions and aircraft weapon injection applications. We pursue strategic partnerships with key landing near technology providers across brand factor to our systems. And that has all been termed by technology roadmap. Our trust team advanced opportunities in seismic retrofits. And in FY '26, we successfully developed a design process based on our DMF to announce loan frame technology, known as a steel doubt, special [indiscernible]. This will be incorporated into the building cost in 2028. So across all these markets, agility, which are [indiscernible] that Jen talked about, and the other folks will talk about to remain a key priority. As customers increasingly demand faster responses to continue to align our business development efforts to meet those expectations we ended at backlog of $52.8 million on our 5-year revenue pipeline in a gross trajectory. Our strategies in landing gear, the ground-based missile systems have been successful in creating future opportunities. So just to put some context around that. Currently, as of today, we have 10 development and production contracts for landing gear across a range of military and commercial aircraft platforms. In addition, we received an award to develop a critical system the ground-based missile program. We expect both these programs and areas to continue to develop future sales. To support these opportunities, to continue to evolve our business development organization, leveraging key partners, it's strategic on our strategic campaigns and selectively using sales consultants and representatives to strengthen our market reach. Overall, we are focused on reversing these strategic opportunities into future revenue and sustained growth. We've been on to industrial products. Initial product sales for '26 were 3.1 million compared to $4.3 million in FY '25, while sales declined year-over-year, the remained above our 5-year average of $3.6 million. We continue to benefit from a stable established customer base for our standard products with a steady, predictable business activity. during FY '26, we also explore potential opportunities arising from reshoring manufacturing and operations in the United States as companies considered bringing and factored back domestically. We looked at our entire devices can position itself to the board, this activity and capture new business. Our focus remains on maintaining strong customer relationships while assuming these emerging growth technology to. But thank you. I'd like to introduce [indiscernible] as our integrated product team leader by aerospace [indiscernible].

Thank you, Stu. Good morning, here to talk Aerospace and Defense. So Aerospace and Defense Products, fiscal year '26 sales of $27.5 million, probably 2/3 of the overall total for [indiscernible] positive trend continues. The sales have increased over 170% going back to 2021. So it's a big growth area for us. But of propulsion activities at a historic high level, supporting our 5-year revenue pipeline objectives. Bookings were delivered in fiscal year '26 at $55.7 million. Our strategy of capturing additional content in the motion control market, particularly unmanned aerial vehicles, commercial aviation and weapon injection segments has provided significant growth opportunities. Ongoing production on the base business continues robustly for the vertical launch system look at helicopter programs, landing gear for various customers, submarine isolators, fiscal transportation, shock isolation components, weapon containers basically, and shipboard energy absorbers, which Stuart highlighted earlier, growing portfolio, which we'll talk about next over these areas. So tailors continuing to invest in its talent, its technology, processes and facilities, focusing on positions in the following areas. -- unmanned area vehicle landing care, on the development, production, several customer with several customers to support the growing USG and prime contractor budgets. So there's a lot of opportunities in this area with collaborative combat aircraft that we are on. for development in shock and isolation applications for ground-based and clear deterrent as part of the U.S. Nuclear China. [indiscernible] space launch system. So still going back to [indiscernible], some strong positions in space. [indiscernible] isolation for key future U.S. munitions, [indiscernible], isolation for domestic and international maybe shipboard locations domestic asset, onboard weapon care-related applications. So lots of opportunities. Looking forward to [indiscernible] we also continue to support our long-standing label launch isolation [indiscernible]. So I want to thank everybody for coming today. Next, I'd like to call upon Todd Avery, our structural IPT lead, will do us since report on our structural business.

Thanks, [indiscernible]. I'd ask Brian to say [indiscernible]. Yes. So structural. It's not a surprise. Last couple of years, and it's been a struggle for the structural team. [indiscernible] different reasons for that list here. First, the results accounted for 25% of Taylor's overall revenue at $10.3 million. That was down from 32% contribution in fiscal year '25. So we should ask ourselves what are the reasons for that. The retrofit market, which we play in heavily, most of our revenue comes from that still definitely has been sluggish. Higher interest rates is mainly due to higher interest rates, boring grades, the vacancy rates post COVID still haven't come down only in San Francisco and they come down year-over-year by 5% due to [indiscernible] is kind of the center for these days. And then international projects due to currency exchange rates, we've struggled there as well. A great example there. I mean New Zealand, we usually would accomplished or complete 2 to 3 projects per year. last couple of years at 0. So their economy is just starting to percolate. So it might be some time, but we expect to have a bounce back there. Some project accomplishments in fiscal year '26, the new CS, [indiscernible]. We completed the shipping of that dispute '26 a lot of some of the work a lot of work spend for starting this year '25, when we completed the shipment of that I'll have a picture on the next slide to show you that project. And then Stu made reference to this, we delivered our first tailored Depot brand, PDFF. We're just picture there in the [indiscernible] office building. First of many, we hope, we continue to still to prove that market [indiscernible]. That's some upcoming trends. Let's go see 26 of upcoming trends in fiscal year '27 and beyond. Also Stuart made reference to this. So because of HCA, which is the kind of regulatory body for hospitals in California, not were readily accepting the TDM math, we decided we take the decision to try to get the DSN into the ASC Sesto in our Director of structural engineering, [indiscernible] successful in doing that. so that will be a 2028 result, though. So just open up to customers more, if you will, engineering firms, the ability to use our tailored product and special moment brings. We're also supporting -- one of the reason why sales are down, there's not a lack of buildings, especially in the West Coast that require that could use a retrofit. It's just nothing is pushing in order to do it at this point. different, though, hospitals, they are being put to do it with a 2030 code, which requires hospital to be a certain level of seismic resiliency. That code had been being pushed, but now it is set at 2030. So we have a lot of hospital work coming up. We have 8 new inquiries a month. That's across all markets. That's -- we're hoping that's an encouraging sign that the market is loosening up, if you will. So that's -- yes, the last 2 years, about 95 new ingress coming in. So it is -- there is a flurry of activity in our structural team. It's just getting the projects over the role line. It's just getting to the point where an owner makes a move. That's kind of where we're struggling at this point. Due to infrastructure dollars over the last couple of years, the bulk is there. We do have a couple of bridges coming up and I'm happy to report that we achieved the value supplier for the Highton bridge in Alabama. That will be started in like devices for that new bridge. So we're excited about that opportunity. And then housing conversions. We mentioned in the previous slide, the vacancy rates in office buildings other than San Francisco has started to come down, but it's still 28%. That's a lot. L.A. places like that, they're up in the 30% range. So some owners, developers have pivoted to affordable housing. So this is a picture at the bottom right picture of a port house in L.A. that is being retrofitted to the housing unit. So owner can get better financing if it's for to housing in L.A., the organ is if you convert something [indiscernible] housing, you must have a retrofit the seismic lore retrofitted in some fashion. So that's a good sign as well. I'll leave you with this on the middle picture there, I talked previously about the hospital at Parnassus which is the middle picture, that's more of a rendering. It doesn't do it justice. There's buildings all around it. We went to the construction site last month, we were able to walk through -- walk over the rebar and saw 1/4 of our dampers installed up to about the fourth floor. Each one of those floors is candidly really goes out and back end. So all floors are different than the previous floor. And so far, so good, the foreman spoke highly of [indiscernible] as far as the ease of installation and thank us for being on the project. So that good thing to hear. [indiscernible] to call power new product development, IPT and Reed, the esteemed, Jim Talty, who will give us a report on new product development activities.

Thank you, Todd. Good morning, everyone. I appreciate the opportunity to talk to for 2 minutes. I'm Jim Talty, I'm the IPT lead for the new product development, IPT, Tailored devices. Before I get into IPT specific, I thought it would be good to talk a little bit about how the market has changed over the last 12 to 18 months for our customers and our customers' customers, because that drives down to us eventually. So just looking at a bunch of headlines will come line in here. basically, the message from both the U.S. government and other governments as they need to move quicker, need to produce at higher rates, you need to build in new technology, you need to lower cost. So those types of headlines are coming out daily. In my 30 years in the market, I've never seen the -- and this is the for utility is not unlike anything I've ever seen before. So that has caused a fundamental change in how businesses pursue, capture, execute and deliver business driven largely by the 4 items you see out there. So the first one, probably the biggest in my opinion, is the military conflict in the Ukraine and the Middle East are just cause a paradigm shift, and you hear it on the news of how compliments are both executed offensively and countered defensively, totally changed the demand for aircraft weapons, dramatically over the last 2 years. In addition, new players have entered the market. So it's no longer just Lockheed, Boeing, Raytheon, Northrop, I know you have companies like [indiscernible] and Castilian who have come in with promises of agility, rapid time to market, lower costs, higher production rates, new technology, and they've caused a seismic shift to the military market, especially and now it's forcing the folks like I mentioned before, the Lockheeds and the other primes have to react to that. So they're starting to behave differently as well. So the next one off as we mentioned several times, artificial intelligence. We hear about it every day. I think we're also figuring out how it applies in our world, but it's not a question of if it's going to impact business, it's a question of how and how much it will impact how business is operations. And the last one is being a lot of change here, how is that being funded? I think you can look at the U.S. Department of War budget is just under $1 trillion in 2026. The request for 2027 is $1.5 trillion. So a 50% increase is what's being requested. So that's driving massive demand for both existing and new weapon aircraft platform. So, with that background of what's going on in the market? I think the next label question is what's Taylor doing about it. So we -- from a basis perspective, in March, Tim created a new product development IPT, recognized in those market changes and knowing that we needed to do things differently than we've done historically to operate in this new world. So, the IoT is focused on early customer engagement, getting in early with customers trying to influence requirements as that once the required in car at least program tentatively. We need to expedite design, build, test, delivery of prototype hardware. Gone are the days have taken 12, 18, 24 launch that come up with a piece of hardware that they can put into their -- the customer systems. Literally every color around now they're looking for, can we have in a few weeks or a few months. So it's consistent. Now still we need to adapt to that and do things differently. So within the IPT, we're looking at agile development processes. We have a very robust S91 in holidays. We're looking to put at we've had a rapid development process where we every step of the business capture process from a proposal, engineering through procurement, manufacturing, test and delivery. We're looking at every aspect and see how can we lean that out and document that, and then while still maintaining quality and safety at the same time, we can't compromise [indiscernible]. So that's the main mantra of our IT team. So as mentioned earlier, we -- in February of this year, we opened the element [indiscernible] cleansed development lab. With a dedicated floor space, the equipment and resources targeted specifically for [indiscernible] so it's a beautiful facility, beautiful equipment. And it's always a challenge trying to balance production and development. This gives the development IPT a chance to develop the products exclusively for those engagements to win additional business. So that's up and running in. There's been a benefit even in the first 6 months of operation. AI come up again. So we're looking where can we leverage AI in our portion of the business. So computer-aided manufacturing TAM program, so all the CNC machines in [indiscernible] have to program them to create a lot kinds to generate the [indiscernible]. That can be a very tedious and time-consuming process for our mandatory engineers. So there's companies coming into the market now that are doing AI-assisted cans with promises of being able to reduce programming time by 80%, which is dramatic. So again, the reason we're pursuing that there's the cost savings there, but also is the manufacturing engineer is not spending time on the programming side, and they're sending spending time cutting chips out on the floor, pushing towards that goal of getting hardware to our customers. Then the last item is, again, we have very capable equipment in the dev lab. In my mind, it will do maybe 20%, 30% of the bill material will focus on the harder to do parts that are tougher to outsource. But somebody said to be working on the other 78%. So we're working with our supply chain team to onboard development-specific suppliers. We have a very robust production supply chain, but we made a different skill set on the development side who can handle high mix, bearing complexity and quick turn part. So we want the [indiscernible] working parts, our supply chain would be working parts be together quickly and then get into assembly test to our customer. So a lot going on, the market has changed. Taylor is changing as well, all with the goal of winning additional business and growing over the coming years. So I think that I appreciate your time. I'll head to up to Bob Conrad our VP of Operation.

Morning. I will be giving the summary of supply in an operations for fiscal year 2026. You can see this is our small assembly cell with a couple of our happy assemblers in there you can see Shelley smiling. So it's a glimpse of our small [indiscernible]. So the slide behind me is consistent with last year's slide and it's consistent with the year before that slide because we believe this is the foundation of our operating principles. We align our investment of capital, training and projects closely within these systems to continue improvement cycle -- the improvement cycle we've been on for several years. This is similar to last year as well which shows how different functions align in our business. This year, we've added another component to our planning structure, the tier meeting structure. This meeting is designed to empower our shop for employees without formal approval. There are 3 tiers if there is capital requirement or a systemic issue, they can escalate to second or third tier, but it's meant to empower employees on floor. All right. As I stated last year, and Tim mentioned, as we reach the 90% on-time delivery range, the gains become harder. Solid cash corrective action is needed to get some extra percentage point gains. I'm happy to report last year, we increased by 2% and 23% in the last 5 years. Successful on-time deliveries like conducting an [indiscernible], where there are many inputs from all functions that can impact an order being on time. We are constantly looking at our end-to-end processes to improve year-over-year. internal FX key contributors to perform at high levels. We will continue to look for ways to improve our internal processes and leading KPIs to address on-time delivery in 2022. Moving to our supplier performance, supplier on-time delivery first on your left. As you can see, there's been a positive trend over the last several years. However, we recognize that this metric has been flat. The supply chain team is focused on engagement with supplier partners on performance and quarterly scorecards and the need to deliver to their commitments. However, we realized that alone is not enough. As we grow our aeroplanes business and the expectations of the supply base is growing. Over the past year, 4 new aero suppliers have been onboarded and there's a continuing search for the right suppliers and the right partners going forward in a very competitive and busy aerospace market. These efforts will continue over the next several years to ensure that we have the right to the flyers, can partner and deliver at a high quality and delivery levels. As you can see, the quality graph on the right, there was a significant improvement in Escapes, 40% reduction in suppliers case escapes are anything that reaches Taylor that has a quality issue. The quality of [indiscernible] teams worked well together on so audits and the Get Wall program execution and follow up with suppliers on root causing corrective actions to get this. We need to continue this effort into the next several years. All right, on to our people system. Strategic workforce development, to development, succession planning, process development, one of our strategic deployment projects involve development of a succession plan, which is not unique to any company. What was unique was Taylor this approach. Every dental candidate was given a series of tests in problem-solving, critical thinking, numerical reasoning, occupational personality, which includes work attitudes and what motoring. Results from these tests became the foundation of development plans for each person all the plan for every person. This will continue to be developed within our organization in the coming years. On the continuous improvement, we had 22 employees go through continuous improvement training this year, which was held as the next step from last year's leadership development training. This will continue as with another wave in fiscal year '27. And the goal is that our leaders are problem solving with a common approach on a daily basis. We're not speaking different languages, same as leadership. Safety, our team-based approach continued in FY '26 and it is embedded into our daily meetings where state topics are covered and safety walks have. A new root cause corrective measures process on significant safety incidents also ensures a cross-functional and floor personnel approach, which ensures facts are well in their food and actions dress the true root cause of the concerns. Our safety and operations team also did a great job exceeding our environmental KPIs in FY '26 through to the same root cause activity I just mentioned. One example is pain waste reduction of 29% this year. Okay. You probably remember these slides from the past few years, right? It's always going to look back at the CI projects and what you did and how you impact the operation. So these bursts represent some of the major time and capital investments we made in FY '26. Our development lab is completed on time, as you heard in January of 2026. Shortly after that, there were two rapid development projects involving landing gear that were completed in approximately 4 months. These projects were the initial testing ground of what is now the development new quality software called one factory is in implementation in the implementation stage, which will aim in first article inspections auto bolting of drives, data exports, DMM. It will also help in execution of advanced product quality planning which is becoming more and more of a requirement in aero markets. Another 1 is we've developed an internal assembly and test capacity planning tool which gives us visibility into both equipment and personnel and employee modelings far in advance of the actual need. This come as a key part in [indiscernible] capacity in FY '26, enabled our testing given much. Significant efforts by the IT department to ensure CMMC compliance have been going on, and we've recently successfully passed the [indiscernible], one of the major milestones to achieve Level 2. In summary, there are many CI projects ongoing all the time. Far too many to put on this slide, but it remains part of our DNA at Taylor. Okay. We're embarking on a solar project. So we felt it was important to bring the team up to speed here. So we're embarking on a large solar project and we are seeing rising energy costs and rising demand for energy. We are taking the opportunity to become more energy independent and good stewards of the environment. The chart behind me shows some statistics for our sites -- for one of our sites. In summary, both sites, Taylor will have a reduction of 754,000 (sic) [ 754 ] annual metric tons of CO2 or the equivalent of 162 passenger cars off the road. There's an estimated 50% annual electric bill offset in this project aligned with incentives offered in the solar market, which Taylor took part of. We are in the process of permitting and this project will continue into FY '27. Upcoming expansion. We've also have a project expansion underway, which involves machining. I'm going to show you the map here. That's our main facility. That's our Buffalo Bolt facility, and this facility is literally right in the path of both. So it don't fit well with our campus footprint. This project was initiated as a Phase 1 step towards more complex machining needed for Aerospace and Defense growth plans. Execution of this phase will allow Taylor Devices to support follow-on development programs as well as existing platforms that require more complex and flight tolerance capable machines. There's a team assembled to execute facility upgrades, machine purchase and implementation, personnel and training as well as recruitment of additional talent to support the project. We believe this is an important next step in our support of the Aerospace and Defense markets. Some of our goals for next year remain very consistent every year. On-time delivery, we are always in pursuit of grabbing that next percent, challenge ourselves to get to 95% or greater next year. Supplier on-time delivery, we've upped that to 94%. We're only as good as that number will be. Execute strategy deployment projects. Tim touched on the 4 focus areas for FY '26. We have the same going for FY '27 and engage workforce through lean strategy deployment, performance management and strategic workforce planning. Thank you. I'd like to introduce Chief Financial Officer, an esteemed Paul Heary, to give the financial report.

Thank you. So some of these numbers obviously have already been presented, but we'll go ahead and recap. So from a revenue standpoint, total revenue finished at $41.7 million (sic) [ $41.6 million ], down 10% from $46.3 million in FY '25. It was a challenging year on the revenue front as we had some large projects in the prior year in both Aerospace and Structural and which were difficult to replace from a magnitude standpoint. And it was also a light start to the year from a bookings -- on the bookings front, which has been touched on earlier as well. Breaking out sales by customer type, Structural was down roughly 30% to $10.3 million from $14.8 million last year. Aerospace and Defense, up slightly, $27.5 million versus $27.1 million; Industrial down roughly 10%, $4.3 million down to $3.9 million. Looking at just the Aerospace and Defense sales, again, just up slightly at 1%, but we were able to replace a very large project that turned over. So that was actually a nice performance given the magnitude of that project. The concentration of Aerospace/Defense sales to total company sales is now about 2/3 at 66%, up from the 66% to 60% range we've seen in the last couple of years. For non-aerospace sales, Structural and Industrial sales were down about 26%. In the Structural area, we were not able to replace a large project from FY '25, a project that again turned out. Sales concentration decreased to 34% of total sales from the 40% range the last couple of years. Breaking down sales by geographic region, domestic sales were flat. Domestic sales concentration increased to 87% of total sales from 79%. Non-domestic concentration decreased to 13% from 21%, mainly driven by reduced structural activity in Asia. Sales to Asia decreased from $7 million to $3.2 million. Moving beyond sales, gross margin performance dropped to 44% from 46% due to the cost impacts from low revenue in addition to a less favorable project. R&D expense increased to $800,000, close to 2% of sales, driven by increased Aerospace/Defense activity. Funded development continued its trend upward at about $1.6 million. Defense-related funded R&D was up 30%. G&A expense. So G&A expense was $10.2 million, down $1.2 million from FY '25 due to profit-related incentive compensation and reversal of a credit loss reserve that we talked about a year ago. So we were successful in collecting that overdue structural receivable in Peru. So we had reserved for that last year, but we were able to relieve that this year with the collection. G&A as a percentage of sales remained at about 25%. Operating income went down to $7.3 million or 18% of sales from $9.6 million or 21% of sales in FY '25. The decline is attributed to lower revenue and the shift in the project mix. Net income was down by a much smaller amount, only down about $850,000 because of the favorable tax dynamics associated with stock option exercises. So net income finished at $8.6 million as compared to $9.4 million in FY '25. Earnings per share was $2.70 versus $3.01 a year ago. Year-end backlog jumped to $52.8 million with a heavy Aerospace and Defense concentration at 92% of the backlog. We took a substantial -- we talked about a multiyear order towards the end of the year, $19 million as scheduled deliveries over 4 fiscal years, $1.7 million is scheduled for delivery in FY '27. Total bookings for the year, as previously mentioned, were $67.3 million. Looking at some select financial data. Returns on asset and equity were both down with profitability. Return on assets down to 11.5% from 14%. Return on equity down to 12.7% from 16.6% in the prior year. CapEx at $2.1 million for the year, focused on rapid development capabilities, operating cash flow at $7 million and then EBITDA finished at $9.3 million or 22.3% of sales, down from 24.5% last year, again, because of the reduced profitability, which was driven by lower revenue. And then just some selected share-related information as of the last day of the year, May 31. Total market cap at that time was $164 million. The share price was $51 on that day. It closed last night at about $54 a share. We had another year with substantial volatility in the share price, low at $34, high $90 a share. That volatility is what triggered some of that stock option activity that was alluded to with the net income slide. We have about 3.2 million shares outstanding and the average daily volume slightly up, but not much, 26,000 shares a day. So that's the end of mine. Thank you very much.

Thank you management for the presentation. That's the show part of the meeting. We will now proceed to the business of this meeting. For purpose of voting at this meeting on all matters to come before this meeting, the polls are closed. The Board of Directors has appointed Courtney Smiley to serve as the inspector of election. She is present and will function in that capacity. We will now turn to the items presented for vote of the shareholders. The first matter for consideration by shareholders is proposal 1, the election of Timothy J. Sopko as a Director of the Corporation to be elected to Class 2 for a 3-year term, which would expire in the year 2029. I would like to ask the inspector of election, do we have enough votes to pass proposal 1?

Yes. Mr. Chairman, we have enough votes to pass proposal 1. 1,671,112 shares were voted for proposal 1 and 151,303 withheld authority for proposal.

I declare that proposal 1, the election of Timothy J. Sopko as a director of the corporation for a 3-year term is hereby passed. The second matter for consideration by shareholders is proposal 2 ratifying the appointment of Lumsden & McCormick, LLP as the independent registered public accounting firm for the corporation for the fiscal year ended May 31, 2027. I would like to ask the inspector of election, do we have enough votes for proposal #2?

Yes. Mr. Chairman, we have enough votes to pass proposal 2. 2,313,069 shares were voted for proposal 2. 70,728 shares were voted against proposal 2 and 8,395 shares were voted abstain on proposal 2.

I declare that proposal 2 ratifying the appointment of Lumsden & McCormick, LLP as the independent registered public accounting firm of the corporation for the fiscal year ended May 31, 2027, is hereby passed. The third matter for consideration by the shareholders is proposal 3, to approve on a nonbinding advisory basis, the compensation of the company's named executive officers. I would like to ask the inspector of election, do we have enough votes to pass proposal #3?

Yes. Mr. Chairman, we have enough votes to pass proposal 3. 1,720,222 shares were voted for proposal 3. 82,386 shares were voted against proposal 3 and 19,807 shares voted abstain on proposal 3.

I declare that proposal 3, the nonbinding advisory vote on the compensation of the company's named executive officers is hereby passed. That concludes our business meeting. There being no further business, the meeting is hereby adjourned. Thank you for attending our 2026 Annual Meeting of Shareholders of Taylor Devices. And now we will be happy, in fact, glad to entertain questions. Mr. [indiscernible].

Last year, you mentioned that you intended to open a sales office in California to [indiscernible]?

So sales office. So we have multiple that are actually located on the West Coast. So they're resident there, they were either out of their homes or out of leased office local areas. So that -- I'm not sure where you're -- I don't think we referenced that we're going to actually build or a physical location there. Is that what you said?