Good morning, everyone, and welcome to the Tantalus Systems' Second Quarter 2025 Financial Results Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's remarks, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch-tone phone. To withdraw your question, please press star then two. Please note that this event is being recorded. I would now like to turn the conference over to Deborah Honig, Investor Relations. Please go ahead.
Thank you, Operator. Thank you for joining us to discuss Tantalus Systems ' financial results and operating performance for the three-month and six-month periods ended June 30th, 2025. Tantalus issued these results, including their financial statements, management's discussion and analysis, and press release yesterday after market close, which are also posted on the company's website. Joining me today on the call from Tantalus Systems , herein referred to as Tantalus or the Company, are Peter Londa, President and Chief Executive Officer, and Azim Lalani, Chief Financial Officer. During the call, we will make forward-looking statements about Tantalus' business. These statements are subject to certain risks and uncertainties, which could cause actual results to differ materially. Tantalus refers conference call participants either today or in the future to the company's forward-looking statements contained in the investor presentation on our website at www.tantalus.com.
Statements made on this call reflect management's analysis. As of today, August 7th, 2025, management does not assume any responsibility or obligation to update forward-looking statements made during this conference call unless required by law. Please note that the financial information referenced on today's call is stated in U.S. dollars and in accordance with IFRS unless otherwise stated. The company is also presenting select non-IFRS financial measures, including gross profit, gross profit margin, EBITDA, adjusted EBITDA, adjusted EBITDA margin, recurring revenue, and annual recurring revenue, referred to as ARR. Tantalus believes that these non-IFRS measures provide meaningful information to investors. However, they do not have a standardized meaning and are not likely comparable to similar measures presented by other issuers. I will now turn the call over to Peter Londa, President and CEO. Please go ahead, Pete.
Thank you, Deborah. Good morning, everyone. On behalf of our Board of Directors and employees, Azim and I are pleased to provide a business update through June 30, 2025, and we'll include some commentary regarding the results of not only the second quarter, but also a few data points as it relates to the first half of this year and the trailing 12 months through June 30th. To avoid any confusion for those of you that have joined our previous earnings calls, please note that we are no longer presenting slides during these discussions. To the extent you would like to learn more about Tantalus or view our most recent quarterly results, please reference our investor presentation, which can be found on our website along with our recent Q2 Financial Filings. I'd like to commence today's comments by thanking Team Tantalus.
The progress we made during the second quarter and the first six months of 2025 is a testament to their continued hard work and dedication to our company, our customers, our shareholders, and to each other. Based on the results we issued yesterday, we remain optimistic about the trajectory for Tantalus given the improving financial results, the rate of converting opportunities from our sales pipeline, and the favorable trends in the grid modernization sector. In the interest of time and to allocate sufficient space for Q&A today, the agenda for today's call will commence with a review of our financial results from Azim, and then we'll cover a few key topics, including the latest update on tariffs and their corresponding impact to Tantalus
and our customers, the record results delivered by our sales organization, the progress we're making, and additional insights we are gathering about the TruSense Gateway. We'll wrap up with a few comments regarding the trends and trajectories of grid modernization that we are witnessing across our sector. I'll now turn it over to Azim to walk through our Q2 financial results. Go ahead, Azim.
Thank you, Pete. I would like to remind everyone that we report our results in U.S. dollars. The company increased revenue to $13.1 million, reflecting 22% growth year- over- year. Revenue from our connected devices and infrastructure segment increased by $1.7 million, or 25%, and revenue from our utility, software applications, and services segment increased by $500,000, or 12%. The increases in revenue are a result of higher sales volumes to our existing customers and the conversion of new utility customers that are commencing new projects with Tantalus. Recurring revenue recognized in Q2 increased to $3.2 million and represented 25% of total revenue in the quarter. As an aside, our annual recurring revenue (ARR), which we report on a rolling 12-month basis, grew by over 11% year- over- year and now stands at $13.3 million.
This is yet another record for our business and an affirmation that our business model to drive recurring revenue is scaling. The company generated 53% in gross profit margins, which sits above our target range of over 50%. The margin change over the prior year was the result of the initial impact of tariffs and change in the product mix shipped within the connected devices segment. Our software and services segment, which is not impacted by tariffs, continued to post strong margins of 75%. The company generated a net loss for the period of $903,000, reflecting an improvement on a comparative basis from the prior year period loss of $1 million. The net loss translated into a diluted loss per share of $0.02, which was unchanged from last year. We delivered positive adjusted EBITDA of $510,000 in Q2, reflecting an improvement compared to negative $174,000 in the prior year period.
We used $759,000 of cash flow from operations compared to generating $475,000 in the prior year. The year-over-year decline is the result of seasonal changes in working capital balances offset by higher operating income. As of June 30th, 2025, Tantalus had available liquidity of approximately $19.7 million, consisting of $11.2 million in cash and borrowing availability of $8.5 million under our revolving line of credit facility. During the quarter, we were active in managing our debt facilities. On April 17, 2025, we completed an amendment of our $8.5 million line of credit facility. We extended the maturity date to June 30th, 2027, lowered the interest cost, modified or eliminated certain covenants, and reduced the reporting requirements. On April 22nd, we paid off the outstanding balance of $3.7 million of our line of credit.
In response to the onset of tariffs, we modified our term loan by obtaining a six-month deferral of principal and interest. As a result of these changes, we have no debt maturities until June 30th, 2027. Diving a little deeper, the company's operating expenses increased during Q2 2025 as a result of additional investments in sales and marketing and G&A to drive commercialization of the TruSense Gateway. In addition, there was a reallocation of personnel-related costs in customer operations, which is now included in the sales and marketing category. They were previously classified in the research and development category in the prior year. Based on the favorable results for Q2, we hit several new milestones on a trailing 12-month basis, including revenue approaching $50 million, which is an all-time high for a 12-month period.
Recurring revenue generated over the 12-month period was $12.7 million, or 26% of total revenues, another record for the company. Gross profit margins remained strong at 54%, and we delivered positive trailing 12-month adjusted EBITDA of $2.8 million. Beyond the reported numbers, I thought it would be helpful to reference that approximately 88% of revenue generated in the quarter came from existing customers. This reflects our strong visibility with our existing customer base while improving our ability to convert and drive growth from new customers. I will now turn it back over to Pete to address a few remaining topics. Pete.
Thanks, Azim. In terms of a few summary comments, let us first address the latest update on tariffs announced by the Trump administration over the past several weeks. It's important to remember that tariffs are only applicable to our connected devices and do not impact our software and services revenue stream. While there appears to be some additional clarity with respect to tariffs on goods coming from the Philippines into the United States, we are mindful that each day seems to bring a new element to our assessment and risk analysis as our team works expeditiously to mitigate impacts to our customers and shareholders. Specifically, as a result of the recent trade agreement between the Philippines and the United States on July 22nd, 2023, the tariff on connected devices imported into the United States was increased from 10%- 19%.
That tariff is collected once our connected devices hit ports in the United States. We are witnessing some delays in getting goods through customs as logistics providers struggle to update their systems accordingly. I'd like to commend members of our team for working extremely hard to ensure our customers do not witness disruptions on shipments, particularly as these logistics unfold. In terms of our approach to tariffs, we continue to extend an offer to our customers to absorb 5% of the 19% tariff, meaning our customers will bear 14% and Tantalus will bear 5%, totaling the 19% tariff. We view the current approach as a demonstration to our customers of our willingness to share in the incremental expense and also as a further investment in the long-term relationships we seek to maintain with utilities.
Collectively, we believe this remains the correct approach, and we are gathering favorable feedback and appreciation from our customers. While we monitor the situation daily, we have not witnessed a slowdown in sales activity within our target market, or for that matter, the urgency with which utilities are seeking to advance grid modernization initiatives. If we take a step back from the current situation, higher costs for new devices resulting from the tariffs being implemented by the Trump administration is motivation for utilities to protect and extend the life of existing assets, particularly with respect to monitoring and assessing the performance of distribution transformers and functioning meter reading equipment, almost all of which is imported into the United States.
A great example of the priority for utilities to extend the useful life of assets is demonstrated through our announcement of Tantalus' largest ERT overlay migration with the city of Riverside, California. By leveraging our ERT overlay TruConnect AMI capabilities, the utility was able to pinpoint and prioritize other investments while extending the life of their legacy meter reading system. As the utility was able to generate incremental savings across their organization and improve their resiliency, they were in a position to allocate the necessary investment to extend their grid modernization journey by upgrading the balance of their electric footprint, which will drive revenue for Tantalus across our connected devices and our software and services segments.
While we may see a potential slowdown at the rate at which utilities deploy new infrastructure and devices, given that utilities operate on annual budgets, that may not have taken the incremental cost of tariffs into consideration. Tantalus is uniquely positioned to navigate potential disruptions given our commitment to a data-driven approach to grid modernization. Our ability to access the right data from the right device at the right time and deliver that data to the right system enables utilities to pinpoint and resolve challenges across the distribution grid. This approach is absolutely resonating with both existing and new customers, leading to record results from our sales pipeline. To that end, we were extremely pleased to convert $24.6 million of orders from our sales pipeline during the second quarter of this year.
It should be noted that the $24.6 million of orders is a new high-water mark for our company in terms of orders converted by our sales team in a single quarter. It's a tremendous result for our team. Similarly, through the first six months of 2025, we have converted $44.1 million in orders. This reflects a 34% growth year- over- year when comparing our sales conversions to the first half of 2024. Our business model continues to be validated in terms of getting connected devices deployed in the field and driving software services and analytics. That led to another high-water mark that Azim already shared in terms of our ARR, which now sits at $13.3 million as we look forward for the next 12 months.
As an example of the importance of data and driving recurring revenue for our business, we were pleased to share the news of the activation of our triggered analytics within the Indiana Municipal Power Agency, IMPA. IMPA supports approximately 60 utilities across Indiana and Ohio. Within those 60 member utilities, Tantalus currently has 19 of those members utilizing our TruConnect AMI solution. The intent of this project is to make our AI-driven analytics available in a digestible manner to the 19 existing utilities deploying Tantalus solutions. We believe from the success with those 19 utilities, we'll be in a very good position to extend our reach within IMPA to the broader footprint of their membership. With respect to the TruSense Gateway, we were pleased to announce EPB's commitment to deploy the Ethernet version of our gateway.
Beyond the milestone agreement with EPB, the recent announcement is a testament to the strong working relationship and partnership that Tantalus has with its customers as a trusted vendor. It's uncommon to see a customer partner alongside a technology vendor to help develop the next generation of solutions for an entire industry. That's what's unfolded between EPB and Tantalus as EPB served as an important member of the advisory committee for our TruSense Gateway. The importance of EPB is not only the contractual commitment of deploying significant volumes of our Ethernet gateway, but it serves as a landmark validation of the technology and its capabilities. As you may have seen from our announcements, beyond EPB, we've now received orders from 45 utilities for the TruSense Gateway. This is up from 33 utilities announced in conjunction with our Q1 filings in May of this year.
At 45 utilities placing orders for the TruSense Gateway so far in 2025, we have already surpassed our internal target that we set. Of these 45 utilities, a few data points for your consideration. Roughly 70% of the initial utilities that have placed orders for the gateway are existing customers. We believe existing customers present a more predictable path to deliver revenue contributions from the TruSense Gateway in the near term as we continue to activate the commercialization of this game-changing technology. With the exception of EPB, the vast majority of our existing customers are looking to use the TruSense Gateway as an enhancement to their existing communications network to enhance IP capabilities, leverage the advanced power quality measurement of the TruSense Gateway, and reach beyond the meter to improve load management capabilities.
Approximately 70% of the TruSense Gateways on order are for the cellular version of the solution, which is in alignment with our own internal expectations as the cellular gateway is applicable for all utilities, whereas the fiber and Ethernet gateway are truly applicable for the approximate 220 utilities deploying fiber all the way to the home. Of our primary use cases for the TruSense Gateway, we continue to see the advanced power quality measurement capabilities emerging as a killer app to specifically help utilities pinpoint vulnerabilities across the distribution grid, particularly with respect to their transformers. Early detection is crucial for the management and preventative maintenance of these distribution transformers and other critical assets. The aggregate opportunity tied to the TruSense Gateway remains robust, and we continue to build visibility through the initial 45 utilities placing orders into the $500 million adjustable market opportunity that we have previously conveyed.
By implementing our grid modernization platform, which includes TruConnect AMI, the TruSense Gateway, our TruGrid analytics, our TruFlex load management for behind-the-meter control, and our TruSync grid data management, we believe Tantalus ' resilient business model will continue to demonstrate an ability to drive profitable and sustainable growth for our shareholders. From our perspective, grid modernization is all about the data, and we believe Tantalus finds itself at the critical crossroads of where data and resiliency meet. As such, we believe Tantalus remains extremely well-positioned to continue to drive growth of our core offering while also working towards an inflection point as we convert the number of utilities placing orders for advanced capabilities. With that, we appreciate everyone's time and attention, and we'll open it up for questions.
We will now begin the question and answer session. To ask a question, you may press star then one on your touch-tone phone. If you're using a speaker phone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. Our first question today will come from Daniel Magder with Raymond James. Please go ahead.
Morning, everyone. Congrats on a fantastic quarter and all the recent customer announcements this summer. It seems from these wins and the increase to 45 initial orders for TruSense and the macro backdrop that utilities are moving quicker in their decision-making process. Just wanted to get your perspective on this.
I don't know if the word quick and utility go hand- in- hand, Daniel, historically, but what I would say is , there are a few ways to look at it. I think it's just urgency. You can't seem to go a week this summer without some headline about outages, extreme weather events impacting the grid, or the rise of data centers and the corresponding impact that has on the power available. I think it's the broader trends that are forcing certainly public power and electric cooperative utilities to really think and act with more urgency. To that end, I think as they all, as utilities get smarter about an approach towards grid modernization, we're just seeing the concept of a data-centric approach really gain momentum. Obviously, in order to access data, we need to get an intelligent connected device deployed in the field.
It's not as if we don't have devices or don't anticipate utilities deploying devices, but when we can take the approach of rolling out a certain number of devices and from those connected devices accessing granular data and then feeding that data into the right systems, I think it de-risks the sort of grid modernization journey and the rate at which utilities can deploy. I think urgency leads to, for us, I mean, the fast adoption to 45 utilities. It's incumbent on our team now to drive all 45 of those utilities, 70% of which are existing customers, to whatever their full deployment looks like. That's where we are pretty excited, Daniel. I think that's where we're continuing to see growth opportunity for the company and for our shareholders.
Yeah, that makes.
I hope that answers your question.
Yeah, absolutely. I guess on the tariff front, especially with the move from 10%- 19%, how have those conversations gone, the initial ones, about grid covering the 5% of those tariffs?
Our team is in regular contact with our customer base through a combination of members of our customer operations team, sales team, and members of the executive team. The conversations I've been directly involved in, Daniel, have been appreciative. I think there is still an element of a bit of shock and surprise on the way this continues to unfold. I think if these agreements now start to settle, and the activation of some of these rates really go into effect for an extended period of time, that's where we may start to see some decision-making as utilities get into, for those that are 12/31 reporting organizations, they get into their 2026 budgeting process. Notionally, being willing to absorb a portion of those tariffs and not just directly increasing prices like some of our competitors have chosen to do, it resonates with the utilities.
It reiterates the importance of a long-term relationship and a trusted relationship. The feedback I'm receiving is that the utilities that are commenting on it are extremely appreciative of it.
Okay.
That's why we think it's the right approach. It has near-term margin impact for us, but we're focused on long-term, multi-decade relationships here to really drive this business. A little short-term pain, I think, will pay dividends long term.
That makes sense. I guess last from me here, in regards to the R&D expense, given the shift to cost of sales and marketing and the decline in spend for TruSense Gateway, should we be expecting a similar level of R&D spend moving forward, or is there some variability there?
Azim, do you want to handle that, or do you want me to cover it?
Why don't you take it, Pete?
Okay. Daniel, I think when we think about, in my mind, the trailing 12 months through June 30th is a pretty good barometer. The trailing 12 months through September 30th of this year, so forthcoming, will even be a better barometer on R&D spend. We've obviously ramped down the external expenditures in R&D where we had to bring in very specific experts for certain elements of the design of the TruSense Gateway, as well as certification processes and some prototyping. Those expenses are filtering out. I think on a trailing 12-month basis, certainly as we get into the end of this quarter, you'll see effectively four quarters without that external spend or a significant portion of that external spend. With that said, we're not eliminating our team.
We're redirecting them to focus on not only enhancements to the TruSense Gateway as we get it into the field, but also stepping on the accelerators as it relates to analytics and the advanced capabilities that we're bringing into the market. I think you'll see a normalization of R&D. From that normalization, Daniel, as you think about modeling, in 2026, the IMPA win is the first of its kind for a joint action agency in the United States. It in and of itself, as we can demonstrate traction among the 19 utilities that already have our TruConnect capabilities and potentially some portion of the balance of utilities, 41, that could leverage our analytics even if they don't have our TruConnect capabilities. I think that'll be a landmark win for us and give us that much more confidence to lean forward in enhancing our expertise in both AI and data analytics.
I think that's where we'll start to pivot some dollar spend, but it'll be in conjunction with the opportunities that present themselves and certainly validating what we already have in the market.
Got it.
Understood. Congrats again on a fantastic quarter, and I'll jump back into queue.
Yeah, thanks, Daniel. Appreciate it.
Our next question will come from Gianluca Tucci with Haywood Securities. Please go ahead.
Hi. Good morning, guys. Congrats on a nice quarter.
Thanks.
If I could just start on the connected segment, I saw pretty good growth again in the second quarter. Pete, can you perhaps unpack that a bit for us? Are customers going through a refresh and upgrade cycle, or is it more than that?
With respect to TruConnect AMI, Gianluca?
Yes, correct.
Okay. Sorry. There's some interesting data that we track from Northeast Group, which is a research organization that really solely focuses on the utility industry and investment in what historically has been referred to as smart grid and now for us, grid modernization. There are sort of two paths for us to scale, a couple of paths for us to scale TruConnect AMI, Gianluca, to your question. One is there's still a decent number of utilities in the United States and Canada that really have no automation of their meter reading capabilities or very basic meter reading capabilities. In the concept of like Riverside that still had a drive-by system as a very large community and town in California, we still see a lot of opportunity there of just helping utilities that have not yet made that first step in grid modernization.
That's one path of growth, and I'd say that that still is robust to drive our business. The second is to your comment, a refresh. I'll bifurcate that. We have a number of long-term relationships at Tantalus where those utilities deployed systems leveraging 220 megahertz as a communications network over a decade ago, when cellular or IP capability was just fundamentally not available across their footprint. Fast forward a decade plus, our computing capabilities have expanded, our networking capabilities have expanded as 5G and certainly LTE become more prolific, and as utilities make investments in fiber. We're seeing a very compelling opportunity within our existing customers to start migrating some of those legacy systems that relied on 220 megahertz with the TruSense Gateway. I think that's why we're seeing quick expansion of the number of utilities placing orders to start making that migration.
From the networking migration, I think we'll see an upgrade of the computing capabilities under the glass of a meter, Gianluca. The second leg of that refresh, if you will, if I understand your statement, there are a number of utilities that deployed what some companies in our sector refer to as AMI 1.0 that were not capable of supporting edge computing. We're seeing a number of those utilities come back into the market and start to look for the next generation of their technology. In conjunction with that, we've had some pretty good success in 2025 adding new customers to our user community that are migrating away from some of our competitors' previous generations of technology. I think it's sort of a three-legged stool that'll drive growth for TruConnect.
One is the utilities that just have not yet gone down that path yet, that I think with urgency are starting to make that investment. The second is our own set of customers where we're leaning forward with the TruSense Gateway to lock in that refresh. The third is utilities that are coming back to market looking for a new trusted technology partner.
That's helpful color, Peter. Thank you. A good segue to my second question. On the 45 activations for TruSense, Pete, are you able to share how many, in your view, are perhaps getting closer to placing EPB-type orders in terms of bigger commercial-type orders, Pete?
I appreciate the question, Gianluca. I think we have a number of utilities out of those 45 that are equivalent size and substance to EPB, some even larger that we're working on with our channel partner, Erby, that is very focused on utilities deploying fiber and helping those utilities manage and maximize the investment in that fiber that's in the ground. I think we're going to not make comment at this point in terms of timing and size. Gianluca, I'd say we've really started to, I think, codify a path to in excess of $100 million of opportunity across those 45 utilities just for the TruSense Gateway alone, not including potential refresh of connected endpoints with some of our existing customers. I think we're well down the path of really driving visibility.
In terms of revenue, we should see an uptick in revenue from the TruSense Gateway in the second half of this year as production really ramps. I would think the trajectory that we're on and that we've shared for 2026 and beyond are very much within reason at this point.
That's great color. Congrats again, guys. I'll pass the line.
Thanks so much.
Our next question will come from Nick Boychuk with Cormark Securities. Please go ahead.
Thanks. Morning, guys.
Morning.
On the 12 utilities, out of the 12 utilities that you added this quarter, Pete, that's a big step increase from the six last quarter. Is there something that's changing within their mindset of them wanting to now demo it? Was it related to EPB, or is there something in the market that's happening that they're saying, "No, we need to get this in the field ASAP"?
In the context of your passion for golf, it's like finding access to that lab putter to win the U.S. Open. I think it's a combination of some of our advisory committee members like EPB making for Tantalus a massive commitment to move forward. It's a great validation, and I have no doubt that it's influenced several of those new utilities within the Tennessee Valley Authority, Nick. I think EPB carries a ton of weight there. The second piece of it is, you know, it's a great dynamic of our customer base, and I think underappreciated in the broader investor community. Utilities don't compete with each other, particularly public power and co-ops. They share information. That's great when things go well. That can be problematic when things don't. I think we're seeing an increasing number of utilities share their learnings from putting TruSense Gateways in the field with surrounding utilities.
That's led to an uptick in the number of utilities that have placed those initial orders. I'd also say, Nick, the dollar spend and investment that we're making in sales and marketing, you know, it's sometimes always hard to quantify a return on investment in branding and marketing dollars spent. I think we're seeing an increasing number of utilities that have never approached us whatsoever, making direct outreaches to us asking about the TruSense Gateway. I think word of mouth and the investment that's being made by the team internally, as well as Rob Roy, who helps us on branding, is certainly resonating in the market.
Okay. That's a good color. For the utilities that you are getting the sense there, positive word of mouth, anything you can share in terms of feedback? There are some in the 45 user base who have obviously had the product in the field for quite a while now.
Yeah. I'm going to knock on the proverbial wood. We've been, I'd say lucky is the wrong word. Our team, I think, has done an exceptional job of thinking through the design of a really complicated device. You know, when you look at it on a PowerPoint slide, it's okay, it looks like, you know, an iPhone or something wrapped in plastic. The level of complexity in that device is substantial. I'd say between our hardware engineering team, our QA team, our manufacturing team, and our customer ops team, we've been extremely fortunate that the devices in the field have met or exceeded expectation. There are a few enhancements that we'll continue to make as we have devices in the field in some circumstances now for over a year, which is great. That is common.
When you introduce a new product, I'd say we're far enough along at this point where I think we are that the knock on wood is we're beyond something that we don't yet know. In terms of performance, Nick, and the actual, you know, beyond the design, the granularity of data that we are capturing is, it's a game changer. I don't know how else to describe it. What's fascinating and humbling is as utilities have the device in the field, they are bringing use cases to us and either giving us examples and directing our team to prioritize our roadmap or helping us think through how we leverage the data to solve a very specific problem and deliver yet another outcome. I think we're just starting to scratch the surface of how we leverage that data.
The beauty of it is the more utilities that have even one device in the field, the more information we're gathering and the more ideas that are being brought to us to really drive growth in software and analytics for our company. As I referenced it, every utility zeros in immediately on the power quality measurement. I think that is going to be the prolific use case that justifies the investment of the TruSense Gateway on its own. Depending on where utilities are located, some tied to broadband initiatives, and we're just starting to scratch the surface and validating the behind-the-meter control. That's the project with UI in Connecticut and a few other places where the demand profile and rates for electricity are just getting out of control.
I think that's where I think we're going to see over the next 12 months, Nick, a quick inflection as well on the behind-the-meter control through our TruFlex load management capabilities. We have not only the data, but then the control from the TruSense Gateway itself. That's a lot to answer your question, but hopefully, I addressed it.
Absolutely. Last on tariffs, you mentioned, obviously, you're thinking about how that's going to play through in the next couple of years. If TruSense ramps as you're expecting, the single line you have in the Philippines is going to be taken up pretty quickly. Are you guys thinking about for line two, potentially having that in another jurisdiction? Are there advantages to that, disadvantages?
Yeah, it's a great question. I'd say we have, I think I'll be candid, I'm a bit surprised, as is, I think, IMI on the agreement that was structured between the United States and the Philippines. No doubt, the Philippines has been a great location for us as we tried to mitigate the dependency on China facilities. If these tariffs stick, Nick, I'd say we are actively evaluating alternative paths for broader manufacturing, not just for the TruSense Gateway, but for everything, both in terms of geographic location and contract manufacturer. We're kind of getting to the scale where we have enough volume to support potentially a second contract manufacturer, and that opens up the door for us to really start to think about geographic diversification to mitigate risk of tariff, including potentially some assembly in the United States at some point.
Okay. That's great. If I can sneak in one last one for Azim.
Yeah.
Gross margins this quarter were another good beat, and there was mention of mix again. Can you comment on if something is specifically happening in there or if these are just transient, we should be thinking about that longer-term consolidated 50% gross margin type profile?
Thanks for the question. Certainly, our target is in excess of 50%. I think some of this is just a reaction to the tariffs and some of the utilities trying to front-end load the orders. Some of it is just tied to seasonality where we have certain products moving more than others.
Got it. Thanks, Azim. Thank you, Pete.
Yeah, thank you, Nick.
If you would like to ask a question, please press star then one. Our next question will come from Daniel Rosenberg with Paradigm. Please go ahead.
Hi. Good morning, Pete and Azim. My first question comes around the sales function. I know you had mentioned some increased investment in sales and marketing. I was just wondering if you could speak to some of the tactical aspects to that in terms of go-to-market. Where are these resources being allocated in terms of targeting specific regions or verticals, and then across product sets? Any info would be appreciated.
Yeah. Daniel, thanks for the question. We've created a new role inside the company. It is a business development role and have hired, we've been fortunate to hire two individuals, one that is focused on our TruSync grid data management that came out of the software industry for the utility sector with experience in a combination of DERMS or distributed energy resource management, TIPCO's most recently. That individual is right at the tip of the arrow trying to articulate the value proposition of TruSync grid data management where we see applicability not only on the larger side, the utilities on the larger side of our existing customer base, but with utilities like PG&E and on the IOU side. This individual has experience selling to investor-owned utilities, public power, and electric cooperatives. That's one very direct area of investment.
The second resource that we've brought in for business development purposes and to really try to qualify the pipeline and then help the sales team convert is focused on the TruSense Gateway in particular. That individual has decades of experience selling to the utility industry, a combination of AMI, of distributed energy resource capabilities, and the integration of things like EV, solar storage, as well as selling some advanced power quality measurement capabilities. At one point worked inside a utility that developed something that they were selling externally. A really robust background there for those two individuals. That's a new area of investment for Tantalus. From our perspective, the sales team can identify, our channel can identify, we need subject matter experts to go then and explain and to push process or to help the sales team push process. That's an area of investment.
I'd also say we've updated some of our regional sales managers and been fortunate to find some individuals that can cross-sell a little bit more across different segments of the utility sector between public power, co-op, and IOU. That's where some investment's been made. The third area, Daniel, is really in marketing collateral and branding. It is important for us to get awareness in the market. We're doing that through a combination of thought leadership articles, press releases, blogs, conference attendance, and some forthcoming articles that'll be circulated across trade journals. That's sort of three areas. Business development is a new role, enhancing our regional sales managers and their capabilities, and then investing heavily on building awareness through marketing and branding. Azim, I don't know if there's a is that a fair summary or other areas you would want to highlight in terms of investment in sales and marketing?
No, you got it, Pete.
Great. Thanks for that info. My second question was around the RFP process. I was curious in what you're seeing as you go through these RFPs, if you could kind of deconstruct the decision-making of a customer, just how much you are seeing differentiation play a role, if you're seeing competitors trying to compete on price. If you could just speak to those two elements as you're working through RFPs, that'd be much appreciated.
We have not seen a change in pricing strategies from our competition, Daniel. I think maybe the alternative is several of our competitors, particularly out of the metering and meter manufacturing space, are increasing the prices of meters to offset a portion of or potentially all of tariffs, particularly for meters coming in from Mexico. We don't see downward pricing pressure at this point. In terms of differentiation, we are including the TruSense Gateway as part of our communications networking deployment in every single bid. By incorporating the TruSense Gateway as an actual communications network device, it is allowing us to not only differentiate on the communications network itself because now it's a communications network with a purpose that goes beyond just supporting metering infrastructure. It's a network that supports power quality measurement at key locations across the distribution grid.
It then seeds, from our point of view, the basis of taking that TruSense Gateway from a networking device down to the meter socket and doing advanced power quality measurement and behind-the-meter control. I think we are pleasantly surprised by the way in which the TruSense Gateway and our analytics package as a result are really core paths for us to differentiate relative to competition. I'd say we have not yet seen any counter or the emergence of anything new from our competition. I think that speaks to the first mover advantage that we have so far.
Great to hear. Lastly, for me, I was wondering if you could just speak to the funding environment. Obviously, a lot of change in government initiatives. I'm just wondering what you're seeing on the front lines in terms of available funding for your customer base.
The IMPA TruGrid deployment was tied to some funding that the Joint Action Agency received through state mandates that tied to federal mandate and federal funds. I'd say for the wave of the stimulus funding that was allocated down to the state level, that is still very much available to utilities, Daniel. I'd say the number of utilities looking to pursue the federal funds at this point, as I don't want to say it's dissipated, but it's certainly the volume is lower. I think based on the view that those funds may not be available. With that said, there's an inverse component to what's unfolded with the Trump administration and the investment in infrastructure and broader clean energy. There are a number of utilities that were hoping to receive stimulus funding and as a result, applying and then, if not receiving, pushing out another year and applying again.
I think we're starting to see a number of those utilities really rethink and reorient that strategy and determining how to move forward based on what they can afford today. That's where our approach on the grid modernization journey and meeting utilities where they are and supporting what they can support today to lay the groundwork for long-term growth through that relationship resonates very well. Even though there may be some perspective that stimulus funding dries up, dollar spend dries up, utilities don't invest, we actually may see the inverse. Utilities that were sitting around or waiting to see if they could get stimulus funding over a five-year window are starting to now realize that that may not materialize and they need to move without stimulus funding.
I think we could see some conversions out of our pipeline that are favorable, even though stimulus funding may no longer be available to them.
Okay, thanks for taking my questions. I'll pass the line.
This will conclude our question and answer session. I'd like to turn the conference back over to Peter Londa for any closing remarks.
Cole, thanks for facilitating. Deb and Azim, thanks for your comments. Appreciate the questions that we received, and also appreciate everybody's allocation of time to get updated on our quarterly results and to continue to track the business. We're in an exciting time in Tantalus's history. I'll close by, again, thanking Team Tantalus for all the hard work. The results that Azim and I get to convey are directly correlated to the time and effort and capabilities of our team. We really appreciate the continued hard work there across the company. We'll look forward to providing an update on Q3 in a few months. I appreciate everyone's time and attention. Hope everyone enjoys the balance of the summer. Thank you.
The conference is now concluded. Thank you for attending today's presentation, and you may now disconnect your lines at this time.