Good morning, everyone, and welcome to the Baylin Technologies' Kaelus Acquisition Conference Call. Today is Thursday, December the 4th, and joining us today is CEO Leighton Carroll. He will present an overview of the acquisition and its rationale, after which he will respond to questions. Analysts can ask questions live by pressing the raise hand button, and other webinar participants are encouraged to submit their questions via the Q&A box. Before we begin, I would like to remind everyone that certain statements made today may contain forward-looking statements that are subject to known and unknown risks, uncertainties, and other factors. For a complete description of the risks and uncertainties facing the company, please refer to the MD&A and other continuous disclosure filings available on the SEDAR website. And with that, I now pass it on to CEO Leighton Carroll.
All right, awesome. Thanks, everybody. It has been quite the journey getting here, but we're obviously very excited we finally were able to do the announcement. We can now talk publicly about this. Get this thing moving. There we go. We tend to talk about Baylin in chapters, and Baylin 1.0, a lot of people are familiar with it, but basically pre-Q3 of 2021, we had four business units, and for just the first six months of 2021, we were negative CAD 15 million in adjusted EBITDA, CAD 40 million in debt, 15% gross margins. Baylin 2.0 today, I couldn't be prouder of the team and what we've accomplished. We've divested, obviously, the non-core mobile business. We have sustained profitable growth. We really have our growth engine now in the business, and it's doing well. The debt's been cut roughly in half, and we're running around 43% gross margins.
When you just step back and look at that, and then you talk about doing an acquisition, I don't think we would have had the credibility to be able to talk to investors and have them say, "This is a really interesting business now that's going to get even better," if we hadn't achieved kind of Baylin 2.0. To maybe put a finer point on it, and I know a lot of you are familiar, but 2024, we finished the year at 83.6 with three businesses, 5.4 positive adjusted EBITDA, and great growth. And really, when you kind of lay out the three businesses, the satellite business going particularly into 2025, there was certainly a slowdown. There's a lot of work we do with the U.S. government. You have an administration change, then you have DOGE, then you have tariffs, government shutdown.
Not a surprise that the order flow relative to the U.S. government was lower. What's interesting about that is maybe two things. One, that gave us an opportunity to really work on restructuring the business, driving out costs, improving our product line. I've always had a philosophy if you're doing a turnaround or you're restructuring something, you don't just cost-cut your way to success. You have to be smarter cutting your costs, for sure. But on top of that, you have to innovate your way to success. And we've launched over really the past two years multiple new products, common component architecture, meaning the insides of the boxes are very, very similar across multiple families of products. And the reason that matters simplifies your supply chain.
You can produce more with less people, improves your book-to-bill, which means you're not holding as much inventory, and all of this drives margin improvement. So 2025 has been a journey for SATCOM about improving that business for the long term, understanding maybe the second point that defense spending is really starting to go, right? The U.S. is back in a material way, and Europe has woken up like they never have before. In fact, we've reset our European sales strategy, and we're already bearing fruit out of that. So even though 2025 has certainly been a challenging year in order flow for SATCOM, it's not about where you are. It's about what you're setting up for the future. And I like the direction we're taking that business. The embedded antenna line, very programmatic wins. We win something. We're typically producing it for three years, if not longer.
We're not rebidding that, and so you have this nice, stable, growing business. Grows about 10% a year, good margins, good cash flow, but it's never a business that's going to hockey stick up or down in a material way. It's a business that, to me, is a stability business. It's kind of your foundation layer. The growth engine, and to me, the thing we got really right and really overhauled the most over the course of four and a half years is our infrastructure business. When I started, out of the four businesses, it was by far the smallest, and it was running around 20%-25% gross margins as a contiguous business unit. 2026, when I look at the three divisions that we currently have, even without doing an acquisition, just, we've stayed as we were. We were going to be one-third, one-third, one-third on revenue attainment.
The interesting thing is 2024 was the lowest capital spend year for wireless infrastructure in North America in the last six. I would tell you dollar adjusted in the last 10, our wireless infrastructure business grew 40% last year. We set the budget higher for 2025. It is ahead of plan, and it's now, even after tariffs, running around at about a 60% gross margin level. We're delivering a lot of value to customers. We have gotten a very lean, smart cost structure that'll, and by the way, that continues to allow us to grow without having to just continue to add staff to do it or continue to make significant capital investment to do so.
So I feel like kind of the foundation of Baylin 2.0 is in a very solid place, and it's allowing us to consider doing other things, things that I've personally wanted to do since I've gotten here, but we just haven't been in a position where we could. So what is Baylin 3.0? So by the way, satellites, we don't put things in space. We don't make dishes, high-powered gear that makes that work, lots of NATO government work. Great example is the picture on the top right here. That's a $3 million purchase order. That's great. We've built four of those. It's for a classified U.S. DOD application. There are a minimum of 14 more coming, right? In fact, it's effectively a precursor to Golden Dome, and this type of technology will likely also be used in Golden Dome.
If I know there are 14 more coming, do I have the POs? We don't. It's tied to the U.S. government federal spending cycles. We know they're coming, and we don't have to rebid that. We are the standard of this program. This is an example when you get into some of these larger defense-related programs, they just keep going, and you know you've got a durable business with some real upside. This business I've talked about, it's our stability business. We engineer custom antenna solutions, 14 antennas in a Charter Communications box. That's a police officer body armor camera. We get chosen when the RF matters or it's difficult to achieve performance or it's critical communication. That's kind of our bread and butter. Easy example, if you're a Google Fiber subscriber in the U.S., you're likely using our gear in your house, in your enterprise.
And then this is our growth engine. This is one where competitive differentiation matters. We all know New York City. That is a small cell. We're all familiar with the giant cans. That is a small cell in front of the Empire State Building you see in front of Yankee Stadium. Places like New York, Boston, they didn't want the traditional cans. Well, we have a great product in a very different form factor that has been super well received by the wireless carriers that has allowed us to, as an example, win from Crown Castle, Manhattan, and all five boroughs exclusively for small cells. LinkNYC, the kiosks that are all over the city. That's a different company. That's Boldyn. That's us that does the wireless enablement there.
These types of relationships and the quality of our products, and by the way, there's a big portfolio of stuff we have behind it, has allowed us to grow nationally with Crown Castle so that we're one of two, two and a half vendors for them for small cells. In respect to Boldyn, it's allowed us not only to do a ton of work with them in the U.S., it's allowed us to expand into Europe as well. Really cool product. This guy over here is called a HyperFlat, patented. It's an in-building wireless antenna that's hotel room card key thin. Why does that matter? They're installed in MGM casinos, Hilton hotels. They're currently being installed in Disney properties. When the end customer cares about the aesthetics, having something that works while paintable, stainable, but you really don't see matters. We sold thousands of those.
Then finally, the last piece here is our multibeams, and this has just been a home run for us. When I got here, this business never really sold into Europe, and we weren't even selling to Rogers, right? We're Canadian, for Lord's sake. The old record for the most amount of data carried by a multibeam is 30 TB. It was set by Rogers in Rogers Centre. So if you're in Rogers Centre and you look up and you see the roof closed, you'll see kind of a gray rectangle right in the middle of the roof. That's one of our multibeams. They carried 30 TB of data at the Taylor Swift concerts. That's the old record. The new record was set by Deutsche Telekom. They did a trial in the Hockenheimring in Germany for a music festival. They carried 40 TB of data.
They liked it so much, they reached out and said, "We would like to do a press release as Deutsche Telekom and mention your company and the product by name." Of course, we said yes. This brand operates underneath a sub-brand called Galtronics. The Deutsche Telekom press release literally says 40 TB of data using one antenna from Galtronics, a Canadian company, their multibeam product. Obviously, I was super, super happy because that's a big deal in Europe. They took it a step further, and let's see if I can bounce over this real quick. This is actually on our website in our news section if you guys are able to see it. They produced a YouTube video, a high-quality YouTube video showcasing our product. I've been doing this a long time. I've never seen that. I love watching it. I've seen it several times, obviously.
If you watch it, make sure you have closed captions on with auto translate, but it tells you how powerful what we're doing is and how well it is received. For someone like Deutsche Telekom to showcase us like this, it speaks volumes. Where does this go? Well, guess what? Vodafone saw it, actually contacted us and said, "That was really impressive. We saw the video." We've since quoted them. Orange Group, which is a multinational carrier group that's headquartered in France, they got in touch with us. We've quoted them. This is something that has been a game changer for us, and it's driving a lot of growth and a lot of future growth. So when you talk about Baylin and what we are, at the end of the day, it starts really with our customers and our employees.
And our employees are all the interface points, but you don't do what we do for who we do unless we're doing it really well. And I'm really happy with our customer list. And the fun part is it's actually continuing to expand over in other cases, certainly continuing to deepen. So Baylin 2.0 is really kind of a neat company. I'm super proud of the team. The question is, how do we become Baylin 3.0 and really change the game? So this is the proposed acquisition of Kaelus. On Monday, we announced we signed the purchase agreement to acquire them. They are headquartered in Sweden with operations in the U.S., Finland, Australia. They have a sales guy in India, and they certainly have a manufacturing facility in China, ironically, in the city adjacent to where we have one. Acquisition basics, it's CAD 42 million for the transaction.
63.5, 36. The 63.5 is a little misleading, so I'm going to come back to that. Significant cross-selling and upselling. There's some obvious opportunities on synergies and margin expansion. That's been part of Baylin's bread and butters, in particular margin expansion. We see great opportunities there. As good as Baylin 2.0 has been, our leverage ratios have still been running around four times, right? We're going to be low twos in 2026 with this transaction. How do we know we got this right? Well, maybe a couple of things. So one, personally, this will be my 18th transaction over the course of my career that I've been involved in. I am personally very picky, and we are very programmatic in how we approach these.
What I mean by that is not just how we figure out who we want to buy, how we want to go after something in the market where we see creating value, but once we've gotten to that point, for example, we had them under LOI. We hadn't gotten to the SPA. We didn't just do due diligence, the QofE, all the normal stuff. We did heavy, heavy integration planning because when we close, I want us to have a plan. I want both teams to have signed off on it. I want us to know how we're going to market and how we're driving incremental value for doing this acquisition. You don't start planning day of close.
You start planning as soon as possible, get a good plan together with all the moving pieces, sign off on both sides, clear reporting structures, game plan for customers, and you have it baked so when you do close, you can create value. The other reason I know this is a good acquisition. Kaelus has been around certainly for a long time. Their chairman is a super good guy, but he's 79 years old. Between him and a venture capital fund in Sweden, they were the majority owners. Well, the VC fund has wrapped. This is their last asset. They are tired of doing regulatory filings, accounting, taxes. They need to wrap. They needed to sell. We got this at a very reasonable value on 2024 adjusted EBITDA. And since we've had them under LOI, their order book has really expanded. They have CAD 28 million in backlog.
That is a huge record for them at the end of Q3. This is a good place for us because in combination, our two businesses, we are way north of CAD 50 million in backlog going into the new year. That's a cool place to be. So kind of the punchline and the vision for where we're going is we're going to be approximately CAD 140 million in revenue in combination and CAD 16 million in adjusted EBITDA. Now, I'm going to expand on that slightly. As I go through this, what do they do? So if I look at my infrastructure business, and this is really about doing an acquisition that ties into where our growth engine is and what we're doing, in my opinion, really well. Our infrastructure business is great at several things, right? We have in-building wireless antennas, outdoor small cells, stadium antennas, and then multibeams.
I didn't say cell tower antennas. Cell tower antennas have been around for a while. There's lots of people in that space. But what's interesting is we chose not to go after that unless we saw a way to drive real competitive differentiation and values. Part of why we just focused so hard on multibeams. They actually went after that market and created their own competitive differentiation. So, for example, if you're AT&T and you just bought the EchoStar Spectrum, a typical playbook is to install a new antenna and radio on a tower. Well, this is a good picture of it. This kind of horizontal area vertically on a tower is called a rad center. Every single antenna and radio you put up there is an additional rent, okay? Because it's the individual space on that.
If that rad center is full, you have to get into an adjacent rad center up or down. That's even more rents. They've created a technology where you can effectively have antennas stacked front to back in the same footprint on a tower structure. Why does that matter? It saves carriers costs in rents in a very material way. There are only three companies that have this "transparent antenna technology." And when you think of it, it's Amphenol through their acquisition of CommScope, it's Huawei, and it's these guys. Well, one thing I know about wireless carriers, let's talk about North America, Canadian, U.S., etc. Europe is another great example. They like supplier diversity for key technology, right? It's important to them. Well, I'm pretty sure Huawei is not selling in the U.S. This is a really interesting place. This business, by the way, relatively new for them.
How do I know it's real? I met with them probably two plus months ago at one of our integration planning meetings, and their CEO and their head of sales came in, sat down, and they handed me a piece of paper. It was a purchase order from T-Mobile in the U.S. for $4.8 million. Obviously, they've got real credibility. To get a purchase order of that magnitude from a tier one in the U.S., you actually have to have something that really works. Now, here's maybe where it gets interesting. Significant cross-selling and upselling. Currently, for this type of product and many of these, sell to T-Mobile. That's it. We sell to AT&T, Verizon, T-Mobile, Rogers, Bell, Telus, [T-Mexico], Telcel. By the way, it keeps going when you start to talk about Crown Castle, American Tower, SBA, Boldyn, Boingo. You get the idea.
So we see an obvious cross-sell opportunity that we already have great status and a great reputation with all of these carriers. We can bring this product into the portfolio and now have something that is additionally, like much of Galtronics, competitively differentiated and adding value for carriers. Another kind of interesting point is margin expansion. This is one that there's going to be the obvious stuff that you work on, operational synergies. Are they using systems correctly? What can we do with supply chain? The layup for margin expansion to me is tariffs, right? Well, if we believe the U.S. market is going to be a good market for them, one of the things I am keenly aware of is what the tariff impact has been in our business and how hard we work on tariff mitigation and planning around that.
My infrastructure division, as we manufacture in China, we ship a ton to the U.S. Our margin impact for 2025 has been 6%. That's huge. That's through multiple things that we did. I actually will coach CEOs on some of the things that we did, particularly around transfer pricing. We worked with RSMs, our auditors, to make sure it was durable, auditable, clean, and it's worked. When we're running around 35, I mean, Lord, we were up at 145 at one point. Only to have a 6% tariff impact to your growth engine business, that's, first of all, I'm proud of the team, but secondly, I know they don't do some of the things we have done, and that's an obvious margin expansion opportunity. All right, I'm going to move to the right. Cell tower synchronization. Everything's data packets, right? People drive between cell towers all the time.
Data packets, even on this call here, they're being reassembled. There are timing stamps involved. Having a GPS or GNSS antenna on these towers is very normal. You can see the picture where it's once pointed out. They are one of two vendors for Nokia and one of three for Ericsson. Effectively, it means when those two companies are selling, these guys are selling in a proportionate way. Well, there's even another place here that I think is interesting. Unfortunately, because of the situation in Ukraine, Russia has been trying to interfere with just about every network in Europe they can get their hands on, and that includes GPS and GNSS. These guys created a derivative anti-jamming technology for GNSS antennas that has been super well received. In fact, both Nokia and Ericsson have tested it. Passed tests, great performance. Take it a step further.
I want to say it was three weeks ago. Ericsson outfitted an SUV, packed it with Ericsson gear, and put one of these anti-jamming GNSS antennas from Kaelus on the top, and they demoed it to multiple NATO military organizations. We see that as a very interesting place, but I think there's almost a bit of myopia here. Kaelus, for as good as they are, they're hardcore telecom guys, right? And they tend to have tended to focus strategically on very specific carriers as opposed to broader carriers, and they have focused on the OEMs. And by the way, it's been a good strategy for them. The ecosystem is much broader in telecom, and by the way, the technology I just talked about, we see applicability in other verticals. That's something I'm excited about exploring for our future to drive further growth. Now, I mentioned myopia for a second.
I think that's interesting about the next business. So RF conditioning, it's filters, converters, combiners, amplifiers, things that are used on all types of cellular installations. As I was explaining to my chairman when I was first looking at this business line, this is a boring business that makes money. It's just stable cash flows, great margin profile. Boring makes money. I love boring makes money. This is another foundation business, right? And the more of those businesses that are the "boring makes money," you just know you've got your basis underneath you, your foundation, and then you just keep going at the places where you can drive growth and value in some of your other areas. Well, what's interesting is when I talk about this, they sell to wireless carriers, and they sell to the OEMs, right? And they don't sell to all wireless carriers, certainly.
Just let me take North America as an example. The wireless ecosystem is much broader, right? As I mentioned, we sell to Crown Castle, American Tower, SBA, Boldyn, Boingo, etc., right? Shared Access, Cellnex in Europe. None of those are wireless carriers, and yet they buy antennas from us. The interesting thing is everybody who buys antennas are the same people in the same organizations who buy those types of products. It is a super easy cross-sell play for us where we see in a business with a really nice margin profile, we can drive value to shareholders and drive value to the company. Final business, test and measurement, been around for a long time. Anytime you manufacture wireless gear, anytime you are deploying wireless gear, test and measurements involved, right?
In fact, if you go to our facility in China, we use Kaelus gear in the manufacture of our products. When we send a new antenna to Verizon for certification in their test lab in Texas, they're a 100% Kaelus shop. So Kaelus has really good products, a great brand. This, again, is not going to be a hockey stick up or down business. Maybe the only interesting thing that we're seeing is, unfortunately, there's been this bifurcation of Western and Eastern economies. A lot of Western wireless operators, wireless companies don't want to use Chinese company-owned gear, right? Well, if you're talking about Western companies that do this type of test and measurement, it really leaves Rohde & Schwarz and Anritsu. So nice business. I don't think it's going to explode in any way, but again, a nice business and a nice piece of the pie, so to speak.
So when I look at this, I get really excited about the stuff to the left and where it's going. I see a lot of cross-sell and upselling opportunities, and then we see opportunities to improve margins, really on the left-hand side of the board in a pretty material way. Customers. So as proud as I am of my customer role, you'll note they have different customers in large measure than we do. This is a good thing. It creates a nice overlap. So where does this go and how do we get to these numbers? Well, Baylin, we're trending at about 5.1. I've guided that way all year, looking to try to beat that, but SAC calmed down, infrastructure growing and filling the gaps. If you just take their expected 2025 performance and our 2025 performance and overlay them, you're at about 14.2 and adjusted EBITDA, okay?
When we did this, and it was important for me to do it this way, this is a one plus one equals two exercise. Now, most times when you're doing M&A, you're going to go one plus one equals three or one plus one equals 2.5 or 2.8 or whatever the number is, right? Just when we do budget and planning and talking to both teams, I'm like, "I want planning like this transaction is never happening. Let's go out and I want to set a basis." And by the way, the expectation is both growing and you got to hump it to get there. So CAD 141, 15.9 on the bottom line. This is kind of the baseline view. This is, by the way, as we've talked to our prospective new lender, they're like, "Are you sure that's bananas? That's triple your current adjusted EBITDA." We're like, "We're sure.
This is a good number," right? And the point of this is I want us to do better than this in a material way. I want us to be on the back half of 2026 and be materially higher than 15.9. Why would we do that? So one, Baylin has not had the best history with acquisitions. This is our first as Baylin 2.0 under the new leadership, and I want this to work. I want us to prove ourselves. And by the way, I want this to exceed expectations because I think the stock can have a material rerate later. And by the way, I'm personally invested and personally incented as our employees. I want everybody to do well, certainly our investors. I do believe these numbers are completely attainable.
Like I said, to be honest, I want to crush these numbers if I'm able to, if we are able to, excuse me. Let me talk about the deal framework, and this is where we revisit the 63.5 number. 2024 was kind of a low watermark year for them, but they needed to sell. We're getting it at 4.7 times 2024 adjusted EBITDA. That is a great multiple for a business like this, particularly given what I've shared about backlog and the product pipeline that these guys are developing. 63.5. When we were first negotiating this, it was supposed to be a 50% cash, 50% stock deal. In kind of the 10th hour, the VC fund came and said, "We can't do stock. It's not going to work for us.
I don't want to deal with brokers," and I don't have an appreciation for capital gains tax rules in Sweden. So it was like, "Okay. Let's figure out a solution to this." And the answer was, at close, it's 50% in cash, 36.5% in stock. The VC fund owns approximately 27%. The remaining 13.5% that they were supposed to get in stock, it is going to be funded over 26, most likely from cash from operations. This allows us to actually lower the dilution in the stock for executing the transaction while being very cash efficient and close. So kind of a neat thing on this is how the final numbers are playing. So on the equity raise side, our goal is CAD 10 million to fund the transaction. We've been partnered with Paradigm Capital to make that happen. We are well on our way to doing this.
Obviously, our chairman is supporting the transaction. The subscription receipts for this, we're closing and funding the escrow on December 18th. So we're legitimately in the final throes, and I am honestly highly confident that we have this. In fact, we put out the press release to that end. Let's put it this way. I know this will get funded at this point. In fact, if anything, I would like to have more people participate, A, because I think it would be good for them, B, because as amazing as our chairman has been in supporting this, the lower the number that he participates, the better it is. He's diluted. He owns a much lower percentage of the company. We all see that as beneficial, and I think the people who will be participating now will do very well.
Conversely, if people don't participate and we're just getting the message out and then they decided to come and take a look later, that's a good thing because I really like where we're going. Debt financing. So we've had a long, very productive relationship with RBC. We have been whittling that down over time. I think we're a tick above CAD 10 million now in outstanding debt with RBC. We have executed a non-binding term sheet, CAD 30.9 million with the Canadian lender, and the proceeds are going to be used to fund the transaction plus deal costs. Based on our forecasts, our net debt of CAD 30 million, we're going to be at a sub-2.3 leverage ratio, and if we outperform, it gets even better with a chance to go below 2, which is pretty cool. The other thing on this for all the work on transactions, we do this raise.
We have CAD 4.2 million, right? This is completely separate. We get this deal done. There is CAD 4.2 million in cash for working capital in Sweden. In other words, we're not going to have to write a check to go fund that. It means that business can run and has the runway to keep growing because the cash is there. Secondly, there's CAD 4.1 million in fresh working capital in Baylin, which means I can service the debt. I can invest in specific growth opportunities, and maybe the one final point to make there is when you have run a business like we've had to run Baylin for the past four plus years, you have to be cash and capital efficient. That isn't changing. We're not suddenly going to have a bunch of money here. Okay, what do we go buy? It's no.
We're going to drive this business forward and continue to be lean and focused because that leanness, the lessons learned of going through something so hard as this turnaround are going to pay dividends in the future years, and we anticipate continuing to run a very lean operation as we move forward. The investment summary, look, the obvious, this is positioning us for long-term growth, not just 2026, right? I want to beat 2026, and 2027 needs to be bigger, and 2028's bigger. Obviously, this is a really good acquisition in terms of the purchase price. It strengthens our balance sheet, as I've talked about, leverage goes significantly down. There's clear synergies and margin expansion. And look, at the end of the day, when you're running a public company, if you're doing a transaction, you better dang well know that you're creating long-term shareholder value.
I fully believe that's going to happen. This is, for me personally, I get value out of this as a shareholder and with my incentives. I think our investors will as well. And then maybe a final point is, well, what comes next? What's Baylin 4.0? Well, if we do what I expect we'll do, our balance sheet continues to improve. We're sub-2 leverage ratio. Stock price materially increases, which I absolutely expect it will. This may not be the end of the story here. We'll have a great business, right? But this is 18 for me personally. Do we do 19? Do we do 20? Do we keep? This is we operate, particularly on the infrastructure side, in a pretty fragmented market. Are there opportunities to go buy additional assets, continue to add revenue diversity, customer diversity, and geographic diversity? Absolutely.
But this will allow us to do that in the coming years and build a much bigger company that is going to be really interesting, not just for investors, but certainly for our customers. The other thing is when you're building a company and you have a 40% growth rate in such a terrible capital market picture, a lot of people circling, what are they doing? We should try to go buy those guys. And we've had those feelers, right? That has happened affirmatively. In fact, twice between LOI and SBI, I've had people come and say, "Man, you guys have got something special. We want to do something." That's great. But the correct answer is not no, but not yet. And that doesn't mean we're going to do it. But it's interesting. Why?
If you're selling a business with a 5 handle and your adjusted EBITDA running around CAD 20 million in debt versus running a business that's 16, 17, 18, and growing in adjusted EBITDA with, call it, CAD 28 million in debt or hopefully a lower number by then, it doesn't take the biggest genius to figure out that there's going to be more value on the table at the later date. So I think that is also an interesting angle for investors to consider. I'm not saying there's a path. I'm not saying any of this is predetermined by any means, but I like the setup and I like where we're going. Martin, I think that concludes the presentation. Happy to take questions.
All right. Thank you. Now we will open it up for some questions. All analysts have been given speaker permission, so please raise your virtual hand to open the mic and ask your question. And other audience members, please type your questions into the Zoom Q&A box, and we will address those questions. Firstly, from the Q&A, do your 2026 projections include synergies?
No. No. That's the idea of the one plus one equals two. One of my smart board members said, "Have you done the full financial analysis on what synergies will be and what your projections are?" And the truthful answer was, "No, we have not." We are a very thin team at Baylin, and that's on purpose because we've been doing a turnaround. We've been running to get this transaction done and determine how to create value. Clearly, when I was doing M&A at AT&T, synergy and planning was a big deal. You had that in your plans. You had that in your budget, but we also had armies. We had people who could just focus on that and get that baked. In this case, to me, just the one plus one equals two, no synergies, is a really good number.
As we execute both long cross-selling and then margin expansion and taking cost out, it gives us an opportunity to outperform that 15.9 number.
All right. What is the immediate low-hanging fruit to increase sales and expand margins?
I would say two things. One, things coming into the U.S., I would say that around tariff and tariff mitigation, that to me is a super low-hanging fruit. What we did with transfer pricing, and meaning anything that was not tied directly to the manufacturer of a product, and every business has overheads. If you go back to 2023 as an example, our cost of goods sold included a lot of overheads, engineering support, HR, tax file, everything was in the cost of the product on a unit basis. That's how we tracked it. Well, when tariffs happen, tariff is really about the raw costs to build something. We took everything that wasn't in the direct product or the manufacturer of said direct product.
Effectively, we're able to move it to a services contract separate, which isn't tariffs, and it has a material lowering on the impact of the overall tariffs. We still deal with tariffs, and there's certainly a lot of other things we did. These guys, they hadn't known to do that. There's a really, I mean, there's an obvious opportunity to change their margin structure, particularly in the antenna products. The cross-selling, the obvious one is this RF conditioning. It is just, to me, it's just a layup, and it's such an easy bolt-on because the people who are buying our antennas, AT&T, Verizon, T-Mobile, Rogers, they'll tell us all the 3POs, the systems, the integrators, they also buy that stuff. We already have great relationships with them. That is so obvious and so easy. It's not even funny.
And by the way, there's more cross-selling opportunities we've identified, but from the, "Let's get after it right now and add this conversation," these are the ones that just flat stick out and are obvious.
All right. Are Kaelus's margins similar to Baylin's, and should we expect margin expansion from your current margins?
So the short answer is no, but it depends on the product stack. So if I look at the margin profile, the RF conditioning side has the best margin profile in Kaelus. It's a very mature business. They've been smart about their cost structures. If I look at their cell tower antennas - now, cell tower antennas, you typically aren't going to make the level of - we're with what we do really well. I talked about some of the great margins in our infrastructure unit. That is because of certain key products and how it plays on the playing field, how we manufacture, how we've gone about things, and ultimately the use cases that they're sold into. Cell tower antennas, you tend to have a much larger addressable market, more competition. You tend to have a lower margin profile.
Now, their cell tower antenna business is, let's just say, mid-30s% in terms of margin profile, nowhere near close to what we're doing on our infrastructure business. Now, do I expect that margin profile will go up as we work on improving their products, manufacturability, the stuff on tariffs, etc.? Yes, absolutely do. I see margin expansion there. Do I see us running around 43% today, going higher on margins? As Baylin 2.0, yes. In combination with Kaelus, I would actually say no, but it doesn't take a math genius to say, "Okay, if I'm X on about CAD 80 million or Y and it's not that materially lower on CAD 140 million plus, the bottom line number is bigger materially." And then over time, we can obviously, as part of our bread and butter, we'll continue to work on margin expansion. So I actually think the raw numbers will go down.
Post-acquisition in particular for 2026, and it's just you don't expand margins overnight. We didn't get to 43% from 15% in a day. It took a lot of work by a lot of smart people, and it was a long journey getting there. We expect we'll be able to do some of those things here, hopefully faster than the Baylin journey, but I don't see it being overnight. So meaning margin expansion will start in 2026, roll into 2027, and guess what? It'll continue to be a theme for us thereafter.
Are any Swedish institutional investors participating in the equity issue?
Short answer is no. However, the Kaelus leadership, and particularly their chairman, are actually very excited about the combination. The chairman told me that for his shares. And by the way, anybody on the Kaelus side who is getting shares in Baylin has lockups. I probably should have mentioned that previously. But as a Canadian-owned business, working with Paradigm, we've really done the capital raise. Home field in Canada, being Canadian with Canadian investors, and we've had great reception. People love the transaction. People love where this is going, and they love the concept of being able to uncork this level of growth in a company that was almost dead at one point and has rebounded in a pretty neat way, going to, "Hey, this is now getting to be a real business with further upside." People love the story.
So for us, it was really around home field, and we've had a lot of people who really like where this combination is going to lead us.
Will this transaction change the makeup of the Baylin board, and will any Kaelus management be joining the board?
So the short answer is no, but let me caveat that. So Harold Wolkin was obviously on our board, was a friend, super smart guy, really a nice human being, and unfortunately, ultimately lost a battle with a health issue. So we currently do have an open board seat. Kaelus, their chairman, he will likely be joining our board as an—oops, sorry—as an observer. That allows us to have the opportunity to, in effect, vet him. If you think about when the Chief Technology and Strategy Officer of Mavenir joined our board, that wasn't a quick process. I talked to a lot of executives, very experienced executives, before we landed on someone who we thought was really going to be interesting for Baylin's board and brought the guy onto the board itself.
We're being thoughtful in our approach in that so that when we look at their chairman, is it a good fit? Is he going to be a long-term shareholder? Are we adding value? Conversely, we do have an open board seat. What's the right person to fill that and add additional expertise? So I wouldn't say we're shuffling the board, and that would be so far from the story, but given what has transpired, we are looking to add additional expertise to the board, and we are looking at and having conversations with the chairman and say, "Let's start this relationship the right way. Have you come on as an observer? Have conversations, and then we'll make decisions in the future.
All right. Will you be retiring the RBC debt with the new lending package?
Yes. 100%.
Are there any duplicated or overlapping technologies or products that need to be rationalized?
No. It's kind of a neat story here. So if you go to the Kaelus website, you will see they say they have a small cell platform. They have not invested in their small cell product line, if not in two years more, right? I think it's actually probably they haven't invested in it in four. We're huge in small cells. We're actually AT&T's number one small cell provider. Verizon, I mean, this week, $250,000 orders just keep coming, boom, boom. It's all small cells setting up for 2026. We're super strong in small cells. They actually haven't invested there. Our portfolio is likely to be sold over there, right? They will get rebranded Kaelus, a Galtronics company. In fact, we purposely chose not to say Baylin because Galtronics is the infrastructure brand. Because we have this really interesting portfolio, guess what? They're in Europe.
They have customer relationships in Europe. We don't have. We can take our portfolio: small cells, in-building, wireless, multibeam, etc. Kaelus guys, you are now selling a combined portfolio, including all of this and these other great products that we've engineered in Canada, across your customer base with the expectation you're going to grow your customer base and penetrate your existing customer bases even further, given the diversity of products you now have. So the only thing that would appear redundant from the outside would be small cells, and it's actually not.
Where are we in the wireless telco infrastructure spending cycle right now? Where in that CapEx cycle are we?
It's a great question. So I'm going to put a little historical context on this. So keep in mind I'm walking in the door mid-year 2021. My last business that we ultimately sold to MasTec, we had great growth years in 2019 and 2020, and that's all 2020 is really the start of COVID. 2021 was a big year in wireless. 2022 was a big year in wireless. Well, we're doing a turnaround. We didn't have the products. There were a lot of things, in my opinion, strategically that were not thought through well, and the go-to-market wasn't where it needed to be. Customer relationships weren't where they needed to be. We weren't in the position in 2021, 2022 to really go after a lot. So what drove that, right? So 2021, huge COVID spending, right? Network usage changed where people were using it.
Number two, to get you to 2022, C-band, right? And particularly in North America, the wireless carriers had acquired C-band from the satellite guys, and then that spectrum needed to be cleared, and it was being cleared by the satellite guys. And as it was cleared, Verizon and AT&T started to deploy. That ran through 2023, and then it ended, right? There's still C-band deployments, but the big tranche going through was that. Then you throw on top of that T-Mobile by Sprint. So what are they doing? Huge capital investment, all these assets, integrating and decommissioning certain cell towers, adding spectrum to existing infrastructure. So you've got kind of this perfect storm 2022 to 2023 of a lot of capital spending. Why was 2024 such a low spend year? Well, T-Mobile just got done. They just did the Sprint acquisition.
AT&T and Verizon just spent a lot of money on C-band, and by the way, they're not stupid. Particularly AT&T and Verizon have big fiber networks. If you know anything about telecom, 2025 and 2026, particularly as we're going out, it's since changed a little bit given the administration, but BEAD funding, it's the Broadband Equity, Access, and Deployment program, was coming in billions of dollars for fiber in rural America. Canada has similar programs with similar stuff in Europe. That's all coming with a lot of money behind it. If you know it's coming 2025 to 2026, what is it going to do? Your costs are going to go up. You're going to be fighting for resources. Supply chains are going to get constrained. Verizon and AT&T said, "You know what? We've already spent all this money on our wireless networks.
We need to go and invest in fiber now before all this BEAD stuff starts to happen." And they did. They swung very hard into the fiber side of the networks, really starting in late 2023 and certainly in 2024. So why 2024 was the lowest capital spend cycle? Well, there's this little kind of universal truth about wireless technology. Wireless data usage just continues to grow. More devices, more applications. Ericsson does a great, great paper, kind of a summary thing every year, and they show the amount of data that just continues to grow. By geography, in North America, you're very, very similar. Well, guess what? What does that mean? Oh, no. We got to go back and start investing. We expected that, and there are third-party reports that definitely show this. 2025 was going to be better than 2024. That is true. That has happened.
2026 will be better than 2025. I believe that completely. 2027 will continue. Then, by the way, when you get to 2030, what are we going to be doing? Every 10 years is a G, right? So 5G, when did it come out? It's really around 2020, give or take. When did 4G come out? 2010. When was 3G? 2000. You get the idea. 6G is coming. That will have new spectrum associated with it, new use cases, and there's almost always a big spending cycle kind of right around that turn of the decade timeframe. So it's one of the reasons I'm so excited about Baylin 2.0 and infrastructure. In 2024 was such a terrible year. We grew that much. Guess what? We're finally going to have a rising tide, and we're already taking market share and getting a lot right with our customers.
We're going to continue to grow and have a tailwind finally, as opposed to what we've been dealing with, which is a turnaround in a rising interest rate environment with softening markets. It's been a journey. I like where this is going in capital spending cycles, particularly for around wireless infrastructure, where these guys play, is expected to grow incrementally over the next several years.
How long do you think it would take until you could contemplate additional acquisitions, and is there a segment or market you are most interested in?
Another good question. So the first play that we're going to do, it needs to rhyme with something that we're already growing with, that's obvious, and it needs to add revenue, product diversity, customer diversity, and geographic diversity. To me, Kaelus really hits the sweet spot there. How fast would we consider doing another one? Look, I think my CFO thinks I'm crazy sometimes to go and do some of the evaluations we do and look at different things. But I think the reality of this is, while I've had certainly a lot of experience, a lot of the people in my company have not, or they've had limited experience with acquiring a company, integrating it correctly, being on one team, and driving real value. I want us to get those lessons learned, right? That's important because that's part of your basis to be able to do it again.
I think that before we would evaluate or start considering doing another one, it would be at least a year out post-close. I mean, if there's a great opportunity and something we're getting at a multiple like this, okay, I may change my mind. But I would want us to be very thoughtful about the right time to go do it and then what we go do, there are plenty of companies who rhyme with Kaelus or with the Galtronics infrastructure business. Do I want to buy another one of those? Only if there's real value and I'm going to get some unique capabilities or something that I know I can grow, that we can grow in our business. Conversely, it's kind of ironic running an RF electromechanics OEM. I have a computer science background, right?
I was a kid writing software at the age of 12 because I thought it was cool. It wasn't cool. Are there opportunities to add software components into Baylin? Are there opportunities to drive recurring revenue elements into Baylin over the long term? I'm going to be interested in looking at those, but finding the right ones, that's easier said than done. But in the long term, I think that will be something that we'll be exploring.
There are plenty of opportunities for growth in the antenna business. Do you have plans to grow the RFC and the T&M sectors?
So test and measurement is the one that I'm not sure is going to have a ton of growth to it. The RFCS, the obvious play is the breadth of customer penetration, right? When I come back up to you. Oops, I went the wrong way. Good job, Leighton. Here, right? They're selling RF conditioning. They're selling to T-Mobile. They do sell a little to AT&T, barely anything at Verizon. They certainly sell to Telesu, sorry, Telstra. They sell to Telstra, not Telus. They don't sell to Crown, American, SBA, C Spire, Extenet, Boldyn, Boingo, MasTec, Black & Veatch, Shared Access, Cellnex. There's a lot of other companies that I haven't mentioned that are much smaller, but there's tons of them that we do business with. I think the growth on the RF conditioning side is really through just traditional cross-selling and upselling a combined product line.
I was at an investor conference yesterday talking to a bunch of investors. And a way to think about this is in wireless infrastructure, particularly as a broad category, underneath the Ericsson, Nokias, and Samsungs of the world, who are kind of the big box guys, there's a lot of fragmentation. There's a lot of companies who do one or two things, right? It's really when you get to an Amphenol, that Amphenol can go into a wireless carrier and say, "We have antennas. We have small cells in-building wireless. We have stadium. We have macro antennas. Oh, we have filters, right? We have synchronization solutions." This combination, when you add this type of product line onto our infrastructure business, we start to look like an Amphenol. Granted, at a smaller scale, their wireless division. Why is that interesting?
Wireless carriers like fewer suppliers who do well for them because they don't want to have 1,700 different contracts. We now become more of a one-stop shop to carriers, not just in North America, but in Europe, and someone who can stand up and perform just as well as Amphenol. And by the way, we're actually leaner and meaner. No disrespect to Amphenol. It's a great company, well-run, but they have a lot of growth. And one of Baylin's calling cards, Galtronics' calling cards, is we're nimble, we're fast, and we're responsive. Continuing that and then having a breadth of products, it gets interesting for a lot of our customers. "Hey, I can just work with these guys. I don't have to go to five, six people.
One final question here. How much of a challenge are the Direct to Cell infrastructures deployed by AST SpaceMobile and Starlink?
They're actually not that big an issue. So look, Starlink is an amazing technology. I'm a geek at heart, so I can talk about it all day. What they've engineered and done is fantastic, particularly if you're in rural places, right? The way that we see it in the D2D space, which is what it's broadly called, Direct-to-Device, the satellite Direct-to-Device space, it is a great technology for underserved areas, right? It is a great technology for emergency situations. The Apple Globalstar deal is a great example of that. The AST SpaceMobile thing, they certainly have a lot of pretty solid customers. It's what's called a bent- pipe technology. It's not huge throughput. It's not huge bandwidth capable. Starlink, as great as they are, their spectrum is not getting in all these buildings or facilities. It's just not. We see it as complementary.
If you talk to people in the industry who are in this space, they know they need to do it. And a lot of times, it's a regulatory play to have coverage in all these places. For wireless carriers, finding a business model where the funds that they're putting into supporting this type of technology, that is incredibly difficult. Most of the wireless carrier guys I talked to are like, "Yeah, no, we know we need to do it, but we don't know how we're going to make any money on it." We see it as a complementary technology. Sometimes complementary technologies can become threats in the future, so you have to continue to monitor them. But based on what we're seeing, and in particular, the behavior of our customers, they're continuing to spend on their wireless networks. And that behavior is not changing.
And in fact, if anything, we're outgrowing our competition based in large measure because the wireless carriers are continuing to spend on the traditional network infrastructure because they need to. It's robust, and those other adjacent technologies are not going to solve for those same issues.
Thank you. There are no further questions at this time. Leighton, would you like to make any final comments before concluding this conference call?
Yeah. Look, I'm excited. I'm proud of the team for what we've accomplished, Baylin 1.0 to 2.0. My guess is we'll close in January this transaction. I'm looking forward to working with the team from Kaelus and building Baylin 3.0 and having a really good 2026 and hopefully proving ourselves that not only did we do a good acquisition with a great fit, but we grew it in a material way and delivered real shareholder value, and I appreciate everyone's support on this journey.
Thank you. And this concludes today's conference call.