Innventure Inc (INV) 2024 Q4 法說會逐字稿

Good day and thank you for standing by. Welcome to the Innventure fourth-quarter and full year 2024 earnings conference call.

(Operator Instructions) Please be advised that today's conference is being recorded.

I'd like to hand the conference over to your first speaker today, Lucas Harper, Chief Investment Officer. Please go ahead.

Thank you, operator, and thank you all for joining us for our Innventure fourth-quarter and full year 2024 earnings call. My name is Lucas Harper, and Innventure Chief Investment Officer; and joining me on the call today are Bill Haskell, Chief Executive Officer; and Dave Yablunosky, Chief Financial Officer.

Earlier today, we issued a press release announcing our financial results, which is available on our Investor Relations website along with the supplemental slide presentation. As referenced on slide side, we will be discussing non-GAAP financial measures during the call. The most directly comparable GAAP financial measures and a reconciliation of the differences between the GAAP and non-GAAP financial measures are available in our earnings relief and supplemental slide presentation on our website.

In addition, certain statements being made today are forward-looking statements that are based on management's current assumptions, beliefs and expectations concerning future events impacting the company. These forward-looking statements involve a number of uncertainties and risks, including but not limited to those described in our earnings release, Form 10-K for the period ended December 31, 2024, and other filings with the SEC. The actual results of operations and financial conditions of the company could differ materially from those expressed or implied in our forward-looking statements.

And now I'd like to hand the call over to our CEO, Bill Haskell.

Thanks, Lucas, and thanks to everyone listening today. Innventure was happy to report on our fourth-quarter and full year 2024, which proved to be a seminal year in the company's history, and our evolution is a growing differentiated technology commercialization platform.

We accomplished several key milestones throughout the year, which I'd like to recap. First, Both AeroFlexx and Accelsius started delivering commercial product to the marketplace, marking a significant milestone in their commercialization journeys. Both have continued the momentum into this year, and I'll touch on 2025 strategic priorities for each, later in my commentary.

Second, in October, Innventure closed its business combination with Learn CW and started trading on the Nasdaq as a public company. As we said in the past, we believe Innventure represents a differentiated opportunity for investors to participate in the expected growth trajectory of our current and future operating companies. We remain committed to our goal of driving long-term value for our shareholders and believe we are only in the very early stages of capturing that value.

Third and finally, in December, we announced our collaboration with the Dow Chemical Company and the launch of our fourth operating company, Refinity. In addition to Procter & Gamble and Nokia, Dow is the third active multinational corporation we've collaborated with in connection with the launch of a new operating company. There are various collaborative opportunities we plan to explore with Dow within the waste to value ecosystem, and we are very much look forward to the future.

As you can see, 2024 was a watershed year at Innventure. We executed well against our 2024 strategic priorities and believe we have positioned the company well for success in 2025. Now let's dive into updates for each of our operating companies, starting with Accelsius.

As a reminder, Innventure owns a majority of the company and we consolidate Accelsius's financials. Compared to single phase water, Accelsius's new cool systems offer a differentiated cooling solution that can handle higher heat fluxes, lower overall operating expense, and have superior redundancy and servicing flexibility, all while using a dielectric fluid that our testing indicates will not damage the GPUs in the event of a leak. All of this can lead to a lower total cost of ownership for the data center operators compared to single phase cooling systems.

As I mentioned, Accelsius started delivering product to the marketplace during Q3 2024 and gained momentum during the fourth quarter. While revenues have yet to scale, the traction Accelsius's generating within the data center ecosystem is impressive.

I'd like to start by reviewing the strategic goals that Accelsius set out to accomplish. Our strategy has always been to lever the reach of global partners to both validate our model and to reach scale. To that end, we have targeted establishing relationships with one or more entities in each of the following four separate groups.

Number one, large global OEMs; number two, hyper scales; number three, co-location operators; and number four, AI as a service providers. To date, we have made meaningful progress with companies in all four groups. As communicated in our recent press release, Accelsius signed a three year master purchasing agreement to white label its product for a leading global thermal management OEM for sale to its end user customers and resale to its channel partners.

We have also been engaging in discussions with multiple hyperscalers. To get a sense for the potential for these large global companies, the top hyperscalers collectively have estimated spending over $250 billion for data center development for 2025, and each typically orders equipment at a rate of about 1,000 racks per week.

Accelsius has also announced deals with large co-location players, Telehouse, and iM data centers, both of which have established innovation centers that will display Accelsius's new cool solution. We have announced a collaboration with A, as a service provider, Nordik as well. Importantly, we believe each of these agreements has the potential for expansion as we expect additional orders will follow as the customers valid the technology.

We believe that the economics of the Accelsius solution are compelling, the expected benefits for data centers are clear, and market adoption of the technology is starting to gain momentum. We are also excited about Accelsius's recent announced product line expansion which can help serve the needs of large players in the data center market. This includes the launch of a 250 kilowatt multi-rack cooling system, helping Accelsius serve the ever increasing need for higher rack power densities across a broadening set of end market use cases.

We believe the design of this product can scale even higher, and we are excited about the company's sophisticated product roadmap. We expect these innovations will help the company maintain a leading position in the two-phase direct to chip liquid cooling market.

We look forward to sharing more as we progress through 2025, but needless to say, we are proud of what Accelsius has accomplished today and expect many additional achievements from Accelsius, in the quarters and years ahead.

Now shifting to AeroFlexx, which as a reminder is carried on our balance sheet as an equity method company. Similar to Accelsius, AeroFlexx started delivering product to the marketplace during 2024 and is gaining momentum that we believe sets the company up for a pivotal 2025.

Earlier this month, AeroFlexx announced a partnership with Spectrum Brands for their FURminator deShedding Ultra Premium pet shampoo product. The AeroFlexx design should help improve the overall customer experience with a sustainable solution that uses up to 66% less plastic than rigid bottle alternatives. This is a significant development for AeroFlexx and one that is indicative of the broader conversations Andy and his team are having with potential customers.

Packaging companies are not solely focused on volume and price. Sustainability, performance, and total cost of ownership all play a large role in the decision-making process, and potential customers need to audit the packaging facilities to ensure the products meet all of their criteria. This makes two other recent announcements critically important.

First, as we mentioned on our last call, AeroFlexx received the highest standard and rating under the brand reputation through Compliance Global Standard or BRCGS and is certified as AA grade. This represents the fourth consecutive year the Westchester manufacturing site has achieved the highest rating, which is an important credential MNC has looked for in a packaging supplier.

Second, AeroFlexx recently achieved two important international organizations for standardization, or ISO certifications. These ISO certifications hold significant value for organizations and brand owners with clear policies surrounding product quality and performance. These credentials provide verification that AeroFlexx's production process meet ISO standards and coupled with the BRCGS certification, exemplify AeroFlexx's exceptional quality and consistent approach to manufacturing.

These certifications open up the aperture of potential customers that AeroFlexx can target to further establish itself within the $400 billion packaging market. In addition, AeroFlexx launched its partnership with Chemipak in Europe, which was originally announced back in June of 2024.

AeroFlexx deployed its proprietary filling machine directly at Chemipak production site to facilitate adoption of the technology across Europe. This strategic partnership positions AeroFlexx to help address growing demand for sustainable liquid packaging solutions in the broader European region.

Our product deliveries have yet to start, this milestone establishes a global footprint, localizing the ability for European customers to do business with us. We are proud of this momentum and look forward to seeing what Andy and his team do next.

Now let's move to our latest operating company Refinity, which is focusing on opportunities in the waste of value space. In mid-December, we launched Refinity and announced its collaboration with Dow. In January, we hosted a call where Bill Grieco, Refinity's CEO, did a deep dive into the Dow collaboration and the technology that Refinity intends to commercialize. We encourage everyone to give that a listen as it provides valuable detail around the plastic waste to value market opportunity, and come to technologies and Refinity differentiators.

To quickly frame why we're so excited about the opportunity, less than 9% of global plastic waste generated each year is recycled. Refinity is focused on the 240 million tons of plastic waste that are typically landfilled or incinerated annually. The scope of this unmet market need is a key reason that we're focused on commercializing what we believe will be an economically viable recycling solution.

Our solution to that problem uses a proprietary advanced recycling process licensed from VTT Technical Research Center of Finland to convert minimally sorted, low-cost mixed plastic waste to dropping chemicals. Refinity plans to take waste from food trays, plastic wrap, storage bins, detergent containers, and other household plastics and convert them to sustainable chemicals that today come from barrels of oil, in turn reducing the overall net need for oil production.

The process targets conversion of abundant low cost plastic waste to valuable chemicals at an expected high yield. The company is only a few months old, but Refinity has hit the ground running. First, they are building an impressive team. In addition to Bill Grieco and Adam Javan, Refinity hired Dr. Ignasi Palou-Rivera as Chief Technology Officer, who brings over 25 years of experience in the chemicals and fuels industries.

Second, the team established plans with VTT for bench and pilot scale experiments for optimization of olefin gas production from plastic waste. These experiments are currently being conducted using plastic waste that are potential feedstocks for the initial production plants that Refinity plants to build.

VTT also started experiments on Refinity's behalf for liquid production that have been promising. Additionally, the Refinity and Dow teams are beginning to develop project plans for defining product quality, site selection, and integrating the conversion process with steam cracker operations.

Looking ahead, while we don't expect the company to generate revenue for a few years, we thought it would be helpful to discuss three key strategic priorities for Refinity over the next several quarters.

Number one, engage an engineering procurement and construction partner for the first plant design and delivery. Two, demonstrate viability of fluid bed conversion of mixed plastic waste to liquid product at VTT pilot scale. And three, finalize initial site selection and feedstock sourcing for the first plant. Executing on these priorities will set the company up for future success, and we are excited to watch the company develop.

Now I'll provide an update on the pipeline of multinational corporation relationships in our funnel. We started 2024 with two ongoing MNC partners, Procter & Gamble and Nokia. We ended the year with three, adding Dow in collaboration with our launch of affinity. Beyond that, there is a diverse and evolving set of MNCs that continually share opportunities with Innventure for us to evaluate.

Given this, we don't plan to disclose MNC numbers on a quarterly basis moving forward. Instead, we will communicate relevant developments to the market as they happen. Rather than focusing on quantity, the quality of the opportunities has always been paramount, and we continue to see quality increase as our relationships evolve.

Based on relationships with just three MNCs, Innventure has launched four companies since inception. PureCycle Technologies was the first Innventure operating company, and it is now a public company with an enterprise value of approximately $1.5 billion. As previously communicated, Innventure took the company public in 2021, and we no longer have an economic interest in PureCycle. As we evaluate opportunities, we look to create companies that we believe have the potential to reach similar target enterprise values above $1 billion.

To close, 2024 was a milestone year for Innventure and it marked the beginning of our journey as a public company. I am incredibly proud of all the hard work exhibited by the entire Innventure team and the teams across our family of operating companies. The momentum we've seen early in 2025 is invigorating, and we expect this year to be an inflection point for revenue growth.

With that, I'd like to turn the call over to our Chief Financial Officer, Dave Yablunosky, to review our financials. Dave?

Thanks, Bill, and thanks to all joining today. Innventure ended 2024 with total revenue of $1.2 million primarily representing the first commercial sales at Accelsius. As Bill mentioned, both Accelsius and AeroFlexx began generating revenue in 2024, and we expect revenues to continue to grow in 2025, with most of the growth occurring in the second half of the year.

Adjusted EBITDA was a loss of $27.9 million in 2024, driven by cost of sales and R&D expense at Accelsius, marketing expense as Accelsius grows, non-recurring professional services, legal fees, and consulting fees related to the business combination, and higher G&A at both Accelsius and Innventure, resulting from our transition from a private company to a public company. A reconciliation of adjusted EBITDA and net loss is shown in the appendix of the earnings presentation.

Now a brief discussion on tariffs. Like most companies across many different industries, we're still evaluating the impact tariffs may have on our business. At this point, we don't expect tariffs to have a material impact on our ability to grow revenue and scale our operating companies. While Accelsius is a buyer of materials like aluminum and copper and other electrical components, the company's Tier 1 supply chain is largely North American based, so Accelsius is relatively protected from any direct impact tariffs may have.

For AeroFlexx, the company continues to pursue US based raw material suppliers, and all production is currently done in the US. The impact of tariffs on the Chemipak partnership is also not expected to be material, as Chemipak distribution will be focused within the broader European region. And for Refinity, we also don't expect tariffs to have a significant impact on the business.

The company's plan is to build plants in the US, source plastic waste feedstock domestically and sell both the liquid and gas products to domestic off-takers. It's important to say, we remain committed to our goal of creating long-term shareholder value and are confident in how the company is positioned as we move through 2025.

Moving now to our recently announced transactions all of which strengthen our capital position. First, on March 24, 2025, Innventure completed a private placement of Series C preferred stock in the aggregate amount of approximately $28.9 million. The Series C offering was designed to accommodate certain persons interested in investing in the company on terms similar to those of the Series B preferred round that closed on October 2024. As well as strengthen the Innventure balance sheet by converting founder and other related party debt into Series C preferred shares.

Specifically, we issued 275,000 preferred shares for cash proceeds of $2.75 million and issued 300,000 Series C preferred shares pursuant to an agreement with one of our advisors. In addition, Executive Chairman, Mike Otworth; Chief Strategy Officer, John Scott, and other related parties terminated approximately $18 million worth of Innventure and AeroFlexx debt in exchange for approximately 2.3 million Series C preferred shares, resulting in an annual interest expense savings of approximately $3 million. We believe this demonstrates a strong commitment from our founders and reiterates their belief in the Innventure's goal to drive long-term value creation for our shareholders.

Second, on March 25, 2025, Innventure entered into a securities purchase agreement with Yorkville for convertible to debenture issuances in an aggregate principal amount of up to $30 million. We expect to issue $20 million of debentures in a closing scheduled to occur within the next few days. And to issue an additional $10 million of debentures later in the second quarter, subject to satisfaction of certain closing conditions.

I'd like to close by reiterating our previously stated capital allocation priorities. We've set up before, discipline and risk mitigation is part of our DNA and we'll take that approach as we look to scale our operating companies. We will aim to pace capital investments with revenue visibility and be highly focused on cost management to minimize early stage operating expense. Again, this is a key benefit of our closed loop model as our collaborations with multinational corporations are designed to help reduce operating risk.

We will also focus on supporting our operating companies with the ultimate goal of funding growth off of our own balance sheet. We believe that our operating companies have strong growth potential, and by maintaining long-term control, we'll have the opportunity to unlock significant shareholder value over the long term.

Finally, as we continue to scale and launch new companies, we plan to consolidate their cash flows at the Innventure level. Because of this, we may ultimately look to return a portion of the excess capital to our shareholders.

That concludes our prepared remarks. We believe there are many exciting things on the horizon for Innventure, and we look forward to executing our strategy and delivering value to our shareholders. Now we'll open up the call for Q&A.

(Operator Instructions)

Chip Moore, Roth Capital Partners.

Morning. Hey, everybody. Thanks for taking the question. I wanted to maybe ask on Accelsius, if you could expand a bit on those four groups you mentioned and I guess particularly the global OEMs and hyper scalers just maybe give us a sense of, how those discussions have been evolving here, in recent months.

Hey Chip, this is Bill and thanks for the question. So first I would say that on the OEM agreement, that is a contract that we have and it does have, some conditions in it that include, effectively, hard contracts particular pay and then some benchmarks to obtain certain extensivity provisions in the agreement. So that's a deal that we are in the contract for, so it's for a white label product as we described in our information.

So we're quite excited about it. It's -- the scale of this, the scale of both the OEM who has asked us not to name them at this stage, but the scale of the OEM and their demands, in the marketplace are quite substantial. The agreement that we've drafted, I mean, I can't imagine that they would have entered into something that they didn't believe was going to, result in at least, sort of thousands of racks of equipment or larger, which is very significant to us from a kind of a revenue standpoint.

On hyperscalers, we've had literally dozens of meetings with various hyperscalers, so we're quite optimistic that going forward we will end up with some firm commitments from those groups. As you may know, Chip, the competition in the space is principally, I would say the old way of doing things. There are, of course, most people are using air today. We've got some that are using single-phase water and there are dozens and dozens of contractors in that space, but there are only two, to our knowledge, ourselves and one another in the two-phase directed chip.

And most of the large players have already indicated that it's inevitable that we'll get there and have a requirement for that some now, some later. So I think we're well positioned with both the hyperscalers, the OEMs, and then the AIs, the service providers, as I mentioned, we've had a contract that we announced and we're in discussions with others that has fairly substantial, kind of chip sets that they need cooling for.

So overall, quite bullish. I feel like this business is really at an inflection point and I'm more optimistic than I've been ever with respect to that work Accelsius is.

Great, thanks, Bill for that and I guess --

Was that answered everything you asked?

Sorry go ahead. Yeah, I was going to say to your point --

(multiple speaker) Yeah. I was going to ask about that inflection point and then particularly as it relates to, sort of back half of this year you gave some commentary there maybe just Dow tail that with some of some of those conversations you're having.

Well, in the case of, the OEM, we expect that ramp to begin in the second half when the white label product would be available in the marketplace. They obviously can't sell it until it's finalized, and that's really more on their side than ours. I think we're --we have a -- I mean, excuse me, a product that we've already developed, for them, we need to go through [UL] and a few other certifications, but by and large, we have a product that, we could put in the marketplace, pretty readily.

So sometime in the second half of the year, that'll be available for sale and that would begin the ramp there, which again, I would expect to be relatively steep. Timing is always challenging to predict, particularly right now, if the market is very volatile and there's a lot of uncertainty and nervousness kind of across the board, but overall, quite bullish on what the second half of the year looks like, not only for Accelsius but also for AeroFlexx.

Got it. That's helpful and yeah, I haven't noticed any volatility. I guess as a follow up here, I did notice on Accelsius on their website, there is, I think a major contract manufacturer and a pretty large global thermal management OEM listed on there, just wondering if that is new or something I just hadn't noticed in the past.

Yeah. Well, the OEM is what we discussed, that is the global OEM, I'm not aware that they've named the contract manufacturer. Was there a name of one on the website or?

I thought I saw maybe Celestica on there.

Okay, that's certainly a possibility. I'll defer to them to answer the question, but --

Okay. we can take it offline, yeah.

We're certainly -- yeah, we certainly are engaged with various content manufacturers to be able to accommodate the scale, particularly of the hyperscalers that they sell through to, the kind of orders that we would anticipate there are very substantial, and so we need a content manufacturer by a side to be able to accommodate the kind of volumes that we would expect.

Understood. If I could sneak one more in maybe on AeroFlexx, you announced that pet shampoo product, just have a think about that is that sort of an early stage, testing on the shelf limited markets, or what's the -- and then what's the potential opportunity with that customer.

Yeah. What I think it's smaller so far to your point, that you can go buy them on Amazon today if you want to, and it's out there and available, so it has both a kind of an online element to it as well as, kind of a meaningful commercial skill contract for us, which is not the first, but it's the largest to date and we would expect larger ones, not just from them follow on orders, but we got quite a queue of folks that are interested in it and all of these various certifications that we've been announcing and continue to announce are really critical, particularly to the large CPG companies, they are all require not only ISO certifications but various certifications along the way, in order for them to be able to place an order.

It's just kind of one of the hurdles you have to go through. So there's one yet to be achieved. I think it's fairly close in time, a month or two away, and we expect that to kind of unlock some various orders that are pending that certification.

Got you. Perfect, thanks Bill. Maybe just one last housekeeping question, it looked like AeroFlexx stake went up to 38%. Did that increase? Would you be looking to take that majority at some point and then, is Accelsius is that's still the same ownership position. Thanks.

Yeah. Accelsius is what it was before. We did increase our ownership stake in AeroFlexx. We converted some debt into equity, to increase our stake, and we do have a mechanism potentially to be able to get to a majority ownership in AeroFlexx down the road, so that remains to be seen, but there is a pathway I would say to achieving that at some point in the future, if we decide to do it.

Very good. Okay, thanks very much.

Thank you.

Nehal Chokshi, Northland Capital Markets.

Yeah, thank you. Got a few questions myself. First of all, I don't believe I see a 10-K filed yet. When do you guys actually expect that to be filed? Or if I miss it, just let me know I missed it.

Yeah, yeah no --

Yeah, hi, this is a -- yeah, go ahead Bill. Or you want me to take it? Sure. We expect 10-K to be filed in the next few days. It's routine, no significant issue there.

Okay, great, and then product revenue for the quarter, I don't see an actual explicit disclosure on the product revenue, but I think it did have it on the September quarter. Can you give us a sense as far as what was actually product revenue for the December quarter?

That's you again, Dave.

Well, I mean, if you repeat the question please, make sure I got it.

Yeah. I'm looking for product revenue for the December quarter, and I'm thinking that's something you can disclose because I believe it was disclosed for the September quarter.

Right, I think we'll disclose that in our 10-K filing with the details, but primarily we have a Accelsius consolidated and the revenue represents. Accelsius, little bit of management fees for managing the ESG fund, but in general, primarily the revenue number you'll see in our financial statements at this point in time will represent Accelsius.

Okay, got it. And, COGS was up about 3.8x QoQ. So would it be fair to believe that that's a pretty good proxy for how much product revenue was up QoQ as well?

Well, I think when you look at the --

We're willing to inventory somehow -- yeah, I mean, I would just say I know we're building some inventory, in anticipation of sales, so we want to have -- we have the ability internally to manufacture, a decent number of racks of equipment per month. But we wanted to build some inventory so we could be responsive to customer contracts as they represent themselves. So I wouldn't draw too much correlation between the cost of materials at this stage and the revenue, but they'll obviously reconcile each other at some point.

That's right. And just to add to Bill's comments, I mean, there's some period costs in there that get, advertised over certain numbers of units and also the amortization of the intangible asset that we had in the book as a result of the business combination agreement that's through purchase price allocation, some of that hits cost of goods sold as well.

Got it. Okay, that's super helpful. Yeah, so, in the September quarter, you basically had one sort of like, proof of concept delivery. Could you help qualify how many proof of concepts that you deliver during the December quarter?

Yeah. We're not wanting to provide any information on how principally for competitive reasons. What we don't want people to do is be able to sort of kind of back into, the cost per system and margins and those sorts of things again, principally for competitive reasons, and we have certain customers that don't want us to disclose many contract details. But I think what you want to look at overall will be in the trend, over the next few quarters and just look at the kind of trajectory of the revenue growth, but again, trying to not obscure, but try not to show too much information that would impact us in a negative way competitively.

Okay. Great. Rather understood that makes sense. And then, in your slide deck you talked about on the Accelsius -- some of the Accelsius accomplishments doubling the heat capacity removable, with this most recent test. Now, what enabled that doubling of that heat capacity? Was it some implementation of a new technology or was it just simply getting access to higher wattage thermal simulators?

It's a combination of things, but principally, it's I would just say engineering improvements, design improvements that allow us to get a higher heat flux cause it's not just the total heat for socket, it's the heat flux, the watts per square centimeter that you can remove, because you've got chips with a bunch of different formats. And so if you're really trying to measure the effectiveness of the technology, then heat flux is a good measure that kind of makes everything apples to apples.

But yeah, we are getting access to kind of the latest round of chips to test, but we can also stimulate higher heats. We have a capability to simulate much, much higher heat than what is available on the marketplace. And so we continue to test the limits of where we think the technology can go.

So we're -- I think well ahead of the next couple of generations of chips that we've been anticipate coming out of the marketplace based upon looking at the product road maps of the various chip suppliers, we feel very confident that we can manage whatever heat loads they can produce chips for. And that's really important because single-phase water, that kind of drops out in the not too distant future in terms of its capability to remove that kind of heat.

So there's a -- I mean, if you look at some of the information that's been put out by some of the larger players, they've all indicated that two-phase directorship is going to be required at some point for certain chip sets, water will just reach its limitation because it's kind of linear with the amount of water you can pump through the cold plate.

Yeah, no doubt about that, that water cold one phase, direct local cold has its limitations. Bill, you did mention something about watts per square meter. I wasn't sure if you were saying that you actually.

Square centimeter.

Yeah. I'm sorry, watts per square centimeter, yeah. But had -- was that a signal saying that you had increased the heat flux withdrawal in terms of watts per square centimeter, or was it more of a statement that you were able to expand the amount of square centimeters that you can cool and that's what got your watt removal up?

Yeah, it's a bit of both. I mean, we can build these various plates that sit on top of the chips. It's kind of whatever configuration is required and as you know now there are, four-way and eight-way GPUs, safe to build kind of some fancy plates to sit on top of all of those combined, but it really is the, I would say the engineering improvements that we have others that we're pursuing to a crank up the actual heat flux, which is again, watts per square centimeter.

Great. Okay. And then moving on to AeroFlexx, you announced FURminator as a customer as part of Spectrum Group, and I think in the early days you also had a dog shampoo, Mighty Mutt and I believe that's a different brand owned by a different private equity group. Do you see basically like the pet care vertical being basically your first vertical that will reach critical mass?

Not necessarily. I mean, it's certainly one of the marketplaces that we're pursuing. I think oil is likely to be a pretty significant player, kind of gear oil and motor oil for recreational vehicles and so forth. That seems to be a pretty aggressive area right now for us that we're pursuing.

And then there are others, just, baby shampoos, kind of home care, that kind of line, there's a lot of interest in that as well. But really, we're covering a lot of different verticals in terms of having client interactions with customers in a lot of different verticals across the board, but I think if I had to bet on one, I would say in terms of 2025 -- '25 kind of penetration oil would be a good guess.

Great. That's a helpful color. And then finally, could you just tell us what was the actual OpEx rate, the non-GAAP OpEx rate for the December quarter, and where do you expect that to head for the March quarter.

That's a great question.

Hey, this is Dave again, yeah. Hey, if you look at the OpEx and the press releases as I said in my remarks, I mean that contains a lot of cost from the business combination agreement and other elements going forward, but I don't think we want to really get into too many details of specific cost lines in OpEx, but rest assured it'll be lower. Our run rate will be lower going forward.

I guess what I'm trying to get at is that, is it -- obviously it's going to go up as we progress and scale right? But -- yeah, I have it at $13 million in the September quarter -- I'm sorry, rather, I have a baseline rate of around $6 million a quarter, and I'm not sure if that's really a good baseline rate. If you could give any sort of guidance there that, that would be appreciated.

Well, again, I think when we put our 10-K out there'll be more detail in there for sure about operating expense and they'll be more breakouts on the business combination expense, et cetera. And I just think at this point in time I'm not ready to get into that kind of detail, but you could look at last year as a proxy.

We expected to keep OpEx as low as we possibly can, now excluding cost of goods sold, right? I'm talking G&A, sales and marketing and R&D, right? That's what we're talking about. It's baseline, fixed cost, we intend to manage it, frankly we would even like to find ways to optimize that cost and then perhaps even reduce, but I think we ought to wait for the 10-K to come out.

Okay. I'll leave the floor. Thank you for taking my questions.

Thanks, Nehal.

Thank you. This concludes the question answer session. I'll now like to turn back to Bill Haskell, Chief Executive Officer for closure remarks.

Great. Well, thank you all. We really appreciate you listening in and the questions and we look forward to, kind of the next update going forward here, which will be sometime in the middle of May, I believe. So, thanks again.

Thank you for your participation in today's conference. This does conclude the program, you may now disconnect.