Good day. My name is Jordan, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Q2 2023 Luna Innovations Incorporated Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you'd like to withdraw your question, again, press the star key followed by the number one. Thank you. Allison Woody, Senior Director of Administration, you may begin your conference. Good afternoon, thank you for joining us today. This afternoon, after market close, we issued our Q2 2023 earnings press release. As always, you can find the release and supplemental presentations posted to the investor relations section of our website. If you do not have a copy of the release or the supplemental materials, please check our website at lunainc.com. We will also post a replay of this call to our website. Some of our comments and discussions today are based on non-GAAP measures. These adjusted numbers exclude the effect of certain non-cash expenses and other items. The adjusted results are a supplement to the GAAP financial statements. Luna believes the presentation and exclusion of these items is useful to focus on what we deem to be a more reliable indicator of ongoing operating performance. Before we proceed with our presentation today, let us remind you that statements made on this conference call, as well as in our public filings, releases, and websites, which are not historical facts, may be forward-looking statements that involve risk and uncertainties and are subject to changes at any time, including, but not limited to, statements about our expectations regarding future operating results or the ongoing prospects of the company. Actual results may differ materially as a result of a variety of factors. More complete information regarding forward-looking statements, risks, and uncertainties is available in the company's SEC filings, which can be found on the SEC website and our website. We disclaim any obligation to update any such factors or to announce publicly the results of any revisions to any of the forward-looking statements to reflect future events or developments, except as required by law. After our prepared remarks, Scott Graeff, our President and Chief Executive Officer, Gene Nestro, our Chief Financial Officer, and Brian Soller, our Chief Technology Officer, will be available to take your questions. At this time, I'd like to turn the call over to Scott. Good afternoon, everyone. Thank you for joining us today. It's great to be back together after seeing so many of you at our May Investor Day in New York. I look forward to sharing with you some of the progress we've made since then and some of the dynamics we're seeing in the market. Importantly, my team and I continue to see an abundance of opportunities for our technology. As the largest player in fiber optic sensing, we believe we're well positioned to capture those prospects. As you know, if you attended our Investor Day, we entered this year as a pure play fiber optics company after five years of execution against our strategy to focus on our core capabilities. As we began the Q2 of 2023, we lapped the sale of Luna Labs and the acquisition of LIOS. Therefore, any growth we talk about going forward is organic growth. We made good progress this quarter on many fronts, and if I had to highlight one in particular, it would be that we got much closer to and made major progress in several of our top strategic accounts. We had some incredibly productive discussions with customers, both existing and new, and some of those discussions led to agreements that have been quarters, if not years, in the making. Our sensing business, of which a large component is those project-based solutions, grew incredibly well. I will highlight some of our achievements in this business in just a moment. In comms test, we saw pressure consistent with what we are seeing in some macro trends. As a reminder, this business is more product-based and more subject to slowdowns in discretionary spend. Inflation has slowed purchasing, and some of the projects that we expected to move into procurement phase this quarter are moving more slowly than we anticipated. We are hearing consistently that many of our peers, as well as technology companies more broadly, are experiencing similar dynamics. Despite some of the current market forces, we continue to have confidence, which is supported by a strong sales pipeline and order intake as we entered the Q3. You may have seen in last week's press release that we continue to secure large multi-unit follow-on orders. We are laser focused on the service and expansion of our strategic accounts across geographies, and we continue to leverage our lead position in our primary markets. As many of you know, our last two acquisitions, both of which are significant businesses, are located in Europe. As we've continued to refine our integration of these assets to ensure efficiency and to expand our growth opportunities, we recently named a managing director for our Europe, Middle East, and Africa region. With an expanded European footprint, significant international presence, and more than a third of our employees outside the US, it was clear that we needed to put in place a leader who could help us fully integrate our European locations and drive efficiencies leading to profitable growth in our European business. Thomas Oldemeyer is an industry veteran, coming to us with more than 30 years of experience. Prior to our acquisition of LIOS, he spent nearly 12 years as their CEO, engaged in the development, production, and global sales of fiber optic distributed temperature sensors. Having someone with deep history and broad experience in technical environments joining the team will be an incredible asset to our EMEA operations and the company as a whole. Thomas's appointment in EMEA is an example of the types of investments that Luna will continue to make in order to support our growth. We've spoken frequently about our need to invest in scalable platforms, processes, and people in order to capture the opportunities we see. For those of you who have followed Luna for some time, you will remember that we've periodically had pressure on margins and earnings due to investments in areas like engineering and sales. Our highest priority is to continue to build value for the long term, and we know that we will need to tolerate some lumpiness as we make the necessary investments. We have a very clear long-term vision and are focused on investments that will drive long-term growth and profitability. As you look at our balance sheet, you probably see some of that lumpiness reflected in our inventory numbers for the quarter. The higher inventory levels resulted from our making strategic purchases to ensure that we are able to service new accounts as soon as they come through the door, while also provisioning for next gen platforms for several of our product lines. In addition, in some areas, we continue to deal with the supply chain lag that began with the onset of COVID. Let's turn now to some of the specifics of Q2 2023, including financial performance and a few business highlights. After that, I'll turn the call over to Gene. For the Q2 of 2023, we recorded total revenues of $29.2 million, an increase of 11% compared to the prior year period. Our gross margin was 58%. Adjusted EBITDA was $2.7 million for the quarter versus $1.2 million in the prior year quarter. Our adjusted earnings per share was $0.04 for the three months ended June 30th. Now, let me share some specifics about each of our businesses. Our sensing vertical had a very strong quarter, realizing 21% year-over-year growth. The growth was driven primarily by strong performance in our distributed sensing products, which we often refer to as our project-based business. Product lines in those project-based businesses grew in the strong double digits, realizing 43% year-over-year growth, which was driven by significant commercial progress in a number of different areas, including multiple large wins in our staple markets of pipeline and perimeter monitoring, and significant wins in emerging applications such as power cables, industrial battery storage, and mining. For example, with power cables, we secured a nearly $2 million project for a monitoring system combining our DAS and DTS products and industry-leading software for the largest power utility in Italy. In the mining market, we won initial contracts in Q2 for the fire detection and conveyor belt monitoring with a partner in South Africa. This is an emerging market that we are investing in to grow. Shifting focus to our Terahertz business, I'm pleased to note that in Q2, we experienced triple-digit revenue growth and record bookings. Not surprisingly, the automotive EV market continues to be the largest driver for this business. We were fortunate to secure a large follow-on multi-unit order in the EV battery market from our largest customer for this product line. Q2 was our first full quarter of production on the redesigned Terahertz systems after successful transfer of production to our Atlanta facility. Revenue in our communications test vertical was down 4% year-over-year. As a reminder, revenue in this segment includes test instruments for telecommunications, control modules for a variety of photonic applications, and laser sources. Some of these areas were stronger than others, and we believe that any slowness was due to macroeconomic factors. On the positive side, revenue for our RIO offerings grew at a healthy 22%, with satellite communications and LiDAR applications continuing to drive growth. Module revenues were down in Q2 compared to the prior year, after growing at a healthy rate in recent quarters. Timing factors, including near-term pressure on discretionary spending and inflated inventories at several large customers, impacted revenue realization for the quarter. We are encouraged by the fact that order intake has been strong. We had multiple key wins in this area, including a seven-figure blanket order for polarization modules from a major data center hyperscaler, and significant OEM wins for new customers in multiple key growth segments, including defense systems, quantum computing, and medical applications. We did experience some spending delays for our higher-end test equipment, especially from several of our larger government and defense customers, resulting in the flattish performance in Q2. We believe this is related to postponements in program spending rather than reductions. We continue to have very positive conversations with customers, I will share that many of those conversations span a longer period of time. Because we are now selling more comprehensive solutions and driving larger, multiple unit orders, we have seen longer sales cycles, as we've previously discussed. Once we get the order in the books, there is certainly real stickiness to it. I'm encouraged that sales pipelines are strengthening, and the longer-term outlook remains strong as we manage through some of the uncertainties we face that I've discussed. All in all, I want to express my optimism for Luna's future. We are seeing greater-than-ever potential for uses of our technologies. We are aligned with macro trends in industries with vast market potential, and I firmly believe that the opportunities ahead of us are abundant. As we shared at our Investor Day, we've set the stage for meaningful expansion. We remain confident in our strategic direction, and we remain focused on scalability and capturing market share. For Q3, we anticipate revenues in the range of $29 million-$32 million, and for the full year, our guidance remains total revenue of $125 million-$130 million and Adjusted EBITDA of $14 million-$18 million. As you can see, we're reaffirming our annual guidance. However, the back half of the year, and particularly the Q4, are dependent on the timing of revenue recognition from some of those larger project-based sales. That, in combination with some of the overall market uncertainty, makes me more comfortable at the low end of our annual guidance range. While I'm not happy about the impact that recent market uncertainty has had on Luna, I want to express that on the whole, I'm proud of what we achieved this quarter. We've proven to be a nimble enterprise as we've continued to build and refine the structure we need to drive the efficiency that will allow us to scale. We have identified unique opportunities to collaborate with our customers on grander scales and to strengthen those partnerships. We're generating great momentum on targeted development projects that we believe will lead to long-lasting, high-value relationships. We have a positive outlook for long-term growth, and we're moving purposefully to capture the opportunities that lie ahead of us. With that overview, let me turn the call over to Gene for his commentary on the quarter's financials. Thank you, Scott, good afternoon, everyone. As you just heard from Scott, we continued to drive the Luna business, even as we experienced some pressure in the sales cycles of some of our products. This was the reason for some of the buildup in inventory that you see on our balance sheet. More on the subject of inventory in a moment. Let me start by providing some detail on our Q2 results. As a reminder, now that we have lapped the sale of Luna Labs and the acquisition of LIOS, all of our results are now on an organic basis. Revenue this quarter was $29.2 million, an increase of 11% year-over-year. The increase was driven largely by performance in the sensing business, specifically organic growth from OptaSense and LIOS. As Scott mentioned, we did see an impact from slowdowns in discretionary spend in our comms test business. Gross profit for the quarter increased 6% to $16.9 million. Our gross margin was 58% for the 3 months ended June 30, 2023, compared to 61% for the 3 months ended June 30, 2022. Our gross profit increased in total due to the increased revenue from our sensing business. Our gross margin decreased because the sensing business, which is primarily project-based, has lower gross margins than our products, so the net impact was an overall decrease in gross margin percentage. Operating expenses were $17.1 million, a decrease of 7%. That's largely attributable to our continuous work to consolidate operations, operate on standardized processes and platforms, and drive efficiencies. As we focus on our One Luna philosophy, we are able to better leverage our support functions. Operating loss was $214,000 for the three months ended June 30, compared to an operating loss of $2.5 million for the prior year period. We had a net loss of $1.6 million, compared to a loss of $2.4 million in the prior year period. Adjusted EBITDA for the quarter was $2.7 million, an increase of 131% over the prior year period. We ended the quarter with $3.3 million of cash and cash equivalents, compared to $6 million at the end of 2022. Our working capital was $63.8 million at the end of the quarter, compared to $54.2 million at the end of 2022. As I mentioned earlier, we are carrying a disproportionately large amount of inventory due to the lag on COVID-related supply issues, new product introductions, and the expected increase in Q3 and Q4 sales. The operations team is continuing to focus on inventory levels, lead times, and improved forecasting to drive overall inventory levels lower. Our total debt outstanding is $30.7 million, as compared to the December 31st, 2022, amount of $23.2 million. The increase is primarily due to tax payments related to the gain on the sale of Luna Labs and the increase in inventory to support second-half sales. Overall, we had a solid performance in the first half of the year. I'm particularly proud of the work the teams have done on operating expenses, and we will continue to look for ways to be more efficient as we drive strong growth on the top line. With that, I will turn the call back over to Scott. Thank you, Gene. Now, Brian, Gene, and I will be happy to take any questions that you may have. Jordan, please open the call for Q&A. Thank you. At this time, I'd like to remind everyone, in order to ask a question, press Star, then the 1 on your telephone keypad. We'll pause for just 1 brief moment to compile the Q&A roster. Your first question comes from the line of Alex Henderson from Needham. Your line is live. Thanks. I just popped over from the Viavi call, and was listening to them talking about a gradual improvement in the comms test market. They obviously went into the weakness in the comms test market a lot earlier. They are now saying that, the, you know, with the, the current quarter and their pipeline, that they're actually seeing some improvement in the willingness of service providers to spend on operational, OpEx-related, comm test. How long do you think the weakness in that comm test that you're looking at, that started so much later, is, is likely to last? You know, do you think it's a short-term kind of thing, or do you think it takes a 2 or 3, 4 quarters to, to play out? Can you characterize the curve of that? Yeah, sure. Well, I believe it's going to be shorter, but I'm going to let Brian answer because he was most recently out with a couple of these customers and getting a feel with that. Brian. Yeah. Hey, Alex, Brian. Just I think it's a shorter-term situation. Remember, for our comms test business, we segment that out and, you know, the, the bigger customers in there are actually military defense customers. That's where we saw more softness than than in the general communications kind of market. Yeah, that's, that's a good point to clarify, that within our comms test, the, the end market that was a little softer was actually government spending and defense in particular. We actually see that likely to pick up here as the new government year starts later this year. Right. The Viavi comments on military and Arrow was that it was pretty strong, with the good visibility, just pass that along. In, in terms of the back half of the year, can you characterize how you expect your spending to, to go? Do you anticipate, given the strength of the back half, that you'll invest along with that growth, or do you expect to provide more leverage, you know, meaningfully more leverage on the OpEx lines? Yeah, we, we certainly believe the second half will be able to leverage more. You know, we have spent some of this up front. You saw it in the, in the form of, of inventory and some other things. We really believe, and we've been, we've been increasing that OpEx, but we believe that the OpEx has, has somewhat leveled off, and we believe we should be able to get some leverage out of that in the second half of the year. Is that Gene? Yeah. I think the primary increase will probably be, you know, additional, you know, commissions on the higher sales of variable stuff with there. Yeah, Scott said nothing, no material change to it. Great. Thanks. Thanks, Alex. Your next question comes from the line of Dave Kang from B. Riley. Thank you. Good afternoon. My first question is regarding your outlook. If I back out the first three quarters, you are implying Q4 revenue will be above $40 million. It's pretty big sequential uptick from Q3. What will drive that? Is that going to be mainly sensing, or do you, as Brian alluded, earlier, that maybe comm test will contribute some sequential growth in Q4 from Q3? Yeah. No, it's a good point, Dave. You know, if we look historically at, at Luna, you know, anywhere between 42 and 44, somewhere in that range, 42 to 45, is, is what we see in, in revenue that comes in H1 versus H2. I, I, I don't... You know, looking not necessarily at the number that needs to happen in, in Q4, although, you know, with the scalability that we've done, we know that we can do larger numbers. We kind of look at it that way. We spent a lot of time going through the second half funnel with the sales guys and, and things like that. I, I will let Brian talk a little bit to that. You know, a lot of big deals out there, a lot of, of sensing and multiple unit orders, things like that, that we see teeing up in the second half of the year. I felt it was, it was worth being a little bit more conservative here in Q3 to make sure that, you know, we get back and, and really look at the second half with giving a little bit of top line there in Q3. Brian? Yeah, sure. Hey, hey, Dave. The math there, you know, works out. You know, I think you got it right, that Q4, in order to achieve that, you know, if you look at last year, Q4, versus what we're forecasting here for the rest of the year, you know, frankly, both segments, will get back into that growth mode. We'll see the growth, both communications test and from sensing. Our visibility level is pretty high because, you know, as we've evolved over the last year and a half or so, a lot of these orders tend to be on the larger side. You know, we just announced a large order with an EV manufacturer that was in the mid seven figures. That's scheduled for the back half of the year. You know, we tend to have a, a lot higher tick up in the defense business for our test equipment in the, in the second half of the year, in particular in Q4, as the new government year starts, as I, as I mentioned previously. yeah, really. I think that, yeah, I think that's a fair point. You know, there also is a lot of investment that goes in when, you know, when you're able to convince and then bid and win a, you know, a mid seven-figure deal that we just announced, it, it, it does take a lot of upfront investment to get that you know, to see the harvesting of that in the second half. We certainly anticipate that. Got it. Just a couple of questions on Terahertz. I was looking at my note, and I think you were supposed to expand Terahertz capacity by 4x during the quarter. Did you accomplish that? Second question on Terahertz is that I think last quarter, you were booked, fully booked for the rest of this year. With additional Q2 bookings, are you booked beyond this year? Yeah, our goal was to get to the, the ability to get to 4, and we have achieved that. Last year, we were running, excuse me, last quarter, just to get caught up 3, 3.5. We'll probably continue to run in that range with the ability to go to 4 when needed. We have pulled deliveries in now, so we're booking into the latter part of this year into Q4, with delivery dates. Some of those larger orders, multiple unit orders, have taken some of that backlog out as well. Got it. Thank you. Yeah. Thanks, Dave. Your next question comes from the line of Chris Sakai from Singular Research. Oh, yes. Hi, Scott, Gene, and Brian. Hey. I'm in, in for Jim. Oh, great. Can you guys talk more about your significant wins in for monitoring systems? Are these long-term contracts, and what sort of impact on revenue will they have? Brian, you wanna talk about... You know, we have, we have quite a few that we're landing. Yeah. If you look at the wins in quarter, you know, as we, as we mentioned, Chris, we kind, kind of look at it, the core business, which is pipelines and perimeters. We had multiple strong wins there. You know, in the security side, an airport, several airports in Europe, residential property in South Florida. We landed several refineries- Utility in Italy. Italy. Really, really excited about the, the, the step into the mining, the conveyor belt. Yeah. Our first significant win- Yeah ... in mining, which is an area that we view as a growth area. We did talk about the largest utility in Italy, which is a power cable monitoring. For the most part, these are, you know, multimillion-dollar wins that, they have a positive impact on revenue, to answer your question. They're, for the most part, in year, scheduled in year, and they are a combination of hardware delivery, sensor cables and software. Okay. Okay, sounds good. I know you guys recently have had some news for the EV battery production monitoring. Are you seeing a pickup there in demand as far as concurrently with demand for electric vehicles? Yeah, absolutely. Yeah, the demand there is really the main driver of demand behind our Terahertz solution. You know, we talked about our win that we had in Q2. That was a very significant win, similar to the types of larger wins the, you know, the, the, the strategy we put in place to go from selling 1 or 2 to selling 10, 20, 50+. A lot of development actually went into that. That product had to be completely revamped to get into that, that application in line monitoring for the production of these batteries. So this is really our first major step here in Q2, along with getting the production up in Atlanta, and that is all driven by the global demand for, for EVs. you know, we've got, you know, other customers, you know, that we're developing, behind that, that, that one major customer we, we've talked about. I think the outlook is, is pretty positive. Okay. Great. Sounds good. Thanks for your answers. Yeah. Thanks, Chris. Thanks, Chris. Your next question comes from the line of Ruben Roy from Stifel. Your line is live. Thank you. Scott, Brian, hi. Hey, guys. Gene, and I, I joined a little late, so I apologize if you talked through this, but I, I wanted to touch on the EV win. Congrats on on the order and, you know, getting Atlanta up and running. Just thinking through the guidance for the year, reiteration of the guidance and, you know, the new order and it sounds like you're expecting delivery through the remainder of this year. I, I would imagine that'd be incremental, you know, to how you were thinking about full year guidance. Is that correct? If so, are there some other moving parts elsewhere? Are you being conservative on the guide for the full year? If you could just walk me through how you're thinking about that, please. Yeah, I don't see that as incremental. The way we step back and look at it, everything that, that, you know, is going to happen, for us, in many cases, it's a timing thing. You know, just given, I'm, I'm interested to see the, the write-up and, and listening to what Viavi was saying on the, on the Comstet side. That's interesting. Given, given what we've seen. You know, we step back and look at a lot of these bigger deals, and, you know, we've always looked at annual guidance. That's what we used to, you know, just only give the annual guidance. We look at it and say, you know, you gotta be, you know, pretty damn certain on the bottom, and then you have up, you know, opportunities to be, you know, the higher end of the range. We, and we, you know, we take it very seriously. There's. Go through it in detail. It's a bottoms-up look at these things. It just comes down to timing, and that's a matter of, of, you know, the way we look at it. There's some. The things that are in-house, that we have orders in already, we're working on, and we factored into reaffirming that guidance. There are some things that, you know, that, that would take, that would move you around within that, within that range, but that's kinda how we step back. I've always looked at guidance as what do I see in front of me now, to just try to be absolutely straightforward and transparent with what we see today, to give you what, what, what's out there, and that's how we guide. That's helpful. I, I appreciate the detail, Scott. Maybe for Brian, you know, obviously gaining traction in EV. It's an exciting space. Previously had a win for temperature sensing, temperature monitoring, I guess. What are the synergies like, you know, for that type of product, along with the Terahertz, you know, thickness sensing? You know, moving forward, do you expect, you know, kind of synergistic sales and, you know, kind of additional opportunities because of, you know, having a broader portfolio, of testing products for that market? Yeah, yeah, for sure. Good question. You know, a little bit probably hard to quantify at this point, we're seeing the activity levels increase organically. You know, through partnerships between, you know, the, the sales teams that sell, you know, cross-sell these different products, certainly we've, we've seen new opportunities arise because of, you know, for the temperature sensing, because of the EV work we've done, 'cause it's, you know, it, it's exciting and, you know, and it's pretty high profile within the company. That said, there's also internal synergies because the platform strategy that we've developed, is deriving commonality between all these platforms. We're not there yet on these two particular products, but, you know, they'll, they'll be using a lot of the same components, a lot of the same internals, the optics, the mechanicals, but, you know, the kind of guts, if you will, of the products, are all highly leverageable across these platforms. We get, we get some internal synergies as well. Excellent. Thank you. Thanks, Ruben. Thanks, Ruben. Your next question comes from the line of Tim Savageaux from Northland Capital Markets. Your line is live. Hi, good afternoon. Also coming in a bit late, but, hopefully not repetitive here. You've been talking a lot about some pretty significant wins in the quarter, mostly on the sensing side of the business. I wonder if you have any commentary, kind of at a higher level, around, you know, bookings, or backlog, book-to-bill, either. Sounds like some of these are hitting in Q3 as well, either for, for the June quarter or heading in December. What sort of trends we're, we're seeing there? Thanks. Yeah, I think, I'd have to. I, I looked at it, about north of 1, about 1, 2, maybe on the product side of the business. If you look at, you know, some of the, some of the businesses, you know, we are booking more than we're, we're able to get out the door on some of those larger orders. It just carries in, you know, leads into, you know, can we get it out? Some of these are very large orders that, you know, does it spill into Q3, Q4, even into next year in some of these larger orders? Okay, great. I, I think you covered what I was gonna ask. If that 1.1 to 1.2, I, I assume, was Q2, but you expect that to sustain in Q3? Sounds like... Yeah, I mean- Yes. Some of that roll-up, you know, is. It could be, it could be that or even higher in Q3 in some of these things that we're looking at. They just don't move as easily as, you know, when you can ship a box out the door on the Comstet side. You know, some of the when they come in and say that they want to place an order for larger numbers and things like that, many times, you know, it requires these upfront investments because they don't come in and say: "I love the OBR that you make today. I want to place, you know, 10, 10 a month for the next 10 years." They come in and go: "Can that OBR do something? You have to work on it and invest and invest more R&D to get to what we're doing. I see the book-to-bill continuing to run pretty hot for us because of those larger orders. I mean, Brian, you tell me if that's- Yeah. No, that's fair. Yeah, then we've got, you know, several larger blankets we're looking at for next year deliveries on things that we've talked about in the past, lasers in particular, that would drive that book-to-bill even higher. Again, it, it's the kind of thing that hits this year and delivers next. It, it drives visibility into 2024, so that's good. Right. I guess that from a laser perspective, you're looking at LiDAR as the end application. I want-- I did have a question on the commercial side, if you will, the comms test business or the silicon photonics side? Mm-hmm. Are you seeing any activity, as a result of what the cloud guys or their suppliers are doing on the AI front? Yeah, that's a good question. You know, we've been digging a lot into that. That's a very rapidly evolving area. We... You know, one of the large orders we talked about in our narrative was with a, a, a cloud player. We're digging into the nature of that, we do believe is driven by AI build-out. As you know, it can be a little bit hard to determine what and where these things eventually are ending up in terms of, you know, their endpoint. The level of activity on the commercial comms test side and the test stands that we're building into, the one in particular we talked about, was a really nice seven-figure win. It was one of the product lines that was, was down year-on-year for us, revenue-wise. Mm-hmm was really strong bookings-wise, just because deliveries are in the latter part of the year. We do believe that AI is, is playing a, a part in that. Great. Thanks very much. All right. Thanks, Tim. Your next question comes from the line of Paul Essey from William K. Woodruff. Your line is live. Thank you for taking my questions. A lot of my questions have been answered. I do have one. I know you mentioned the, in the sensing area, some of the wins. I think, you've had these companies together now for, for a year. Can you give us a sense for what you're seeing in the funnel that's building, that you've been able to put together? You know, what areas do you see strength and any sense of when you expect these things to kind of break and everybody starts to jump in? Yeah. Hey, Paul. Yeah, so the funnel is, is robust, right? You know, we think we talked at our Analyst Day about, you know, numbers north of $200 million in terms of opportunities that we're chasing. Those would be for, you know, this and next year timeframe. Energy, in particular, power cable monitoring, where we're combining the solutions from, you know, from the 2 recent acquisitions, is a, is a big one. We've got visibility in that area into some pretty significant wins. You know, there's some work to do. You know, there's work to do on the products, there's work to do on the customer development side, but that's one area that's, that's really growing, you know, rapidly, both domestically and in Europe. We talked about the power cable opportunity in Italy that we've recently won. Those are coming, you know, at, at, at a higher rate than they have even in the previous several quarters, and they're coming at a higher dollar value. You know, but, but we're seeing, you know, good activity. That, that segment was up north of 40% this quarter, and, and is driven by not only that, but infrastructure has been strong, pipelines have been strong. You know, we mentioned some new applications like mining. We're working on product developments for the main products in that category. You know, the 3 main products that we use to service that category, or really 4. That will, you know, result in new products between the end of this year and the beginning of next year, that will allow us to really begin to, to harvest some, some of that at a, at a faster rate. As I said, there's work to be done, you know, we're aimed in the right direction. I believe we've got the right resource behind it. How about the, the infrastructure build? Some, some of these... Have you-- I know you said you're starting to see a little bit of the, the funds starting to flow last quarter. Is, is any pickup there? Seeing any design work coming across? Yeah. The, the work there, I would categorize that as, as still pretty early days. Okay. There have been something like 2,800 projects, let from that bill, over $100 billion in spending. What we're learning is that most of that is for, you know, filling the cracks, so to speak. It's, it's really making sure. Mm-hmm ... the damaged infrastructure is just fixed and working properly. We do have some work going on with, a number of institutions across the country. Still relatively low from a, a revenue standpoint, but we do expect to see a pickup. You know, timing-wise, we've always said, hard to predict. You know, right now, probably looking at mid-late next year to see anything significant, but, but lots of activity. Okay. Once they start, you know, they're, they're five-year programs, so that, you know, once they do get going, they should have a, a nice five-year tail to them that will generate business for us, you know, kind of over that timeframe. Okay. Thank you. Another question: Do you expect another follow-on order for the, the handheld for the F-35 this year? Yeah. That, that's, certainly, we expect continued follow-on orders for that. We have a frame agreement in place for, you know, annual quantities. You know, the outlook for this year is, is a little cloudy on that. It's one of the things that drives the uncertainty we talked about. You know, right now we're, we're looking at getting that into the aperture for this year, but some of that government spending has, has been a little less predictable than it has in previous years. I think just driven by delays, programmatic delays, delays in getting equipment in the field. Whether, you know, whether or not we, we get that in, into this, this calendar year or not is still something we're working on. you know, it's a question of, of, you know, when, more than if. Okay. My last question is, your manufacturing footprint, I think it's your, your, and your, your investors say, Jacki Klein had talked about optimizing the East Coast, and the Atlanta, the Atlanta facility in particular. First question: do you, have you seen any impact on gross margin because of that, and can, can you quantify it? Then secondly, I know that the next step is to do the West Coast and, and Europe. You know, where do you stand there? In both cases, what, what type of impact do you expect to have on, on gross margin when, when all this is done? Well, some of that build-out, you know, can be a drag on the margin, right? We've seen a little bit of that. The majority of what you saw in the gross margin this quarter, I believe, was, was more product mix. It would really be in the, in the coming quarters where you'd start to see the, the tailwind on that, going into next year. Yeah, I think, you know, I think it's probably worth, you know, Gene commenting on that as well in the margins, Paul. You know, Jackie, you remember at, at the Investor Day, talked about these core competencies, and I think you have to be careful to make sure the core competencies grow at, at a rate that, that revenue is growing, to make sure that, that we don't get out ahead of ourselves on some of those things. That sometimes in moving something, and you're creating redundancies until you get to the point where, you know, you can kind of streamline that, can, can, can have short-term effects on margin. I would think it would clean out. Gene, you know, you give a little comment on gross margin going forward, right? Yeah, yeah, right. We're, you know, we said full year, we thought we'd be around 60%. We still think that. To the point that, that Brian made, you know, as, as you're transitioning, there's a little bit of headwind there, but then you get the tailwinds later on. For the most part, they're through the move from Ann Arbor to Atlanta. That's up and running. They're fully staffed. They're ready to go. we would see that coming up to the 60%. I think you would see most of the positive impact, though, later, maybe in Q4 and then into early part of next year. Yeah, I think, you know, it was encouraging for us. All units that went off the dock in Q2, Terahertz related, I'm talking about, all came out of Atlanta. You know, that, that, that has been 100% in Atlanta. Don't underestimate what that takes. It seems, it seems trivial, but, but boy, it is not. You know, moving, you know, production line from Michigan to Georgia. It was the right thing to do. You know, it takes twice as long as you think it was and, and, and, and a little bit more cost than we thought, but, but we're really, you know, feel really good about where we are. Last question, Gene, on the, on the subject. Gene, what type of drag do you expect? You know, and can you quantify the drag this year and, and maybe into next year with all these changes, including what might take place in Europe? Drag on, on the gross margin? Yes, yes. From the, like what Scott had said, there'd be some disruptions, you know? Yeah, we had some. We had some of them in Q2. We had some, yeah, migration costs that you can see in our Adjusted EBITDA schedule. We, we have that in there. you know, probably the bigger, the bigger drag we'll see is, we didn't talk about it, but we're increasing our production capacity in our laser facility in California. That's coming online here, you know, at the end of Q3 and into Q4. there's been a slight little drag there, but I think, you know, when you look at our sales level, 1% is typically $200,000. I would say in that range, probably. Okay. Very good. That's all I had. Thank you. All right. Thanks, Paul. Mm-hmm. Your next question comes from the line of Alex Henderson from Needham. Thanks. It seems to me that you guys ought to be viable for the CHIPS Act, particularly given, you have U.S. manufacturing. Can you talk about whether you have any intention of getting any funding from that? We are looking into that. That is something that, you know, I don't want to get out ahead of that, but, yes, I think that is something that we agree with you. The second thing is, I wanted to understand a little bit more about the quote, "seven-figure blanket order polarization." First off, what is a blanket order? I'm not sure I know what that term implies. yeah. Then second, you know, it's a little bit of a contrast to, to, to what we're hearing out of that segment. A lot of people are seeing a lot of consolidation and slowdown in that business. Is that a function of, you know, tying into the AI, that, that that's something that you're getting now going into an environment where conditions are tightening? Yeah, I'll let Brian talk. Blanket order, we use the term blanket order, just if someone comes in and says: Hey, I need 100 of these things over the next 18 months, or something like that. That's a blanket. We obviously can't get 100 of them out in the current quarter, current month, maybe current half of the year. We look at it as a blanket order. They place the order, they're all the same. We will pick off that, usually work with them on a delivery schedule. That's what we're talking about when we say a 7-figure blanket order. They've come in... We've used it before, like with Intuitive Surgical, when they've come in and said: I want to place a $14 million blanket order to get... lasers over a 18-month period or something like that, so- I see. Yeah, and that, that, that order in particular was for, for data center, for testing, with one of, you know, one of the larger players in that space. Yeah, we do believe that it's driven by some AI build-out. What exactly is the polarization module doing? Is it testing the contrast of data or light going down a fiber? Is that, is this fiber testing that we're looking at? Yeah. It, it's built into a test system that, that stress tests very high channel count, stress testing of receivers, data center receivers- Okay. -for polarization sensitivity, which can bring, you know, can bring a whole line down, which is, is near, it's not catastrophic, but it's very expensive. Right. CD- CWDM, I assume? Yes. Good. Great. Thanks. Thanks, Alex. Again, if you'd like to ask a question, press star, then 1 on your telephone keypad. Your next question comes from Chris Sakai, from Singular Research. Your line is live. Yes, just to follow up on that blanket order. Wanted to get a sense of the timing on that. Over what time frame could we expect that order? Oh, this is next quarter. Yeah. This is Q3, right? Yeah. Yeah. It just came in Q2, we couldn't get it out the door. Q3. Q3, Q4, maybe? Into Q4. Okay. All right, great. Sounds good. That was all I was had to ask. Yeah. Yeah. No problem. Thanks, Chris. There are no further questions at this time. Mr. Scott Graeff, I turn the call back over to you. All right. Thanks, Jacob. I appreciate it. Thank you, everyone, for joining us today. As always, we appreciate your time, and if you have any follow-up questions, I mean, feel free to, to reach out to any one of us, we'd be happy to, to address them. With that, we'll end today's call. Appreciate it. This conference is now ended. You may disconnect.