Worksport (WKSP) Q1 2026 Earnings Transcript

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Date

Wednesday, May 13, 2026 at 4:30 p.m. ET

Call participants

• Chief Executive Officer — Steven F. Rossi
• Chief Financial Officer — Jennifer [last name not provided]
• President — Michael D. Johnston

Takeaways

• Revenue -- $3.3 million, representing 47.9% year-over-year growth, and reflecting both product launches and channel expansion.
• Gross profit -- $854 thousand, up approximately 116% from the prior year, with gross margin improving to 26% from 18% year over year.
• Operating expenses -- $6.6 million, a 41% increase, driven by $980 thousand higher general and administrative, and $1.3 million increased sales and marketing spend.
• Channel sales mix -- Direct-to-consumer sales contributed $1.8 million on 1,700 covers, B2B channel delivered $1.5 million on 2,300 covers, highlighting a near-even Q1 revenue split.
• Product launches -- SOLIS and CORE began shipping, Nexus was unveiled at the Keystone Big Show and launched commercially in April, Tri-State Enterprises secured as major distributor with initial and follow-on purchase orders.
• Inventory -- $11.6 million as of March 31, 2026, an increase reflecting raw materials and product readiness for new launches, with $5.4 million allocated to raw goods for upcoming production.
• Asset base -- Net property and equipment totaled $13.3 million, including $8.3 million in building and land, and $6.6 million in manufacturing equipment.
• Cash position -- Cash and cash equivalents declined to $566 thousand, primarily due to $8.2 million in Q1 operating cash outflow tied to launch-related working capital and prior period obligation settlements.
• Dealers and distribution -- Dealer locations surpassed 500, with a target to reach 1,500 by year-end; Tri-State Enterprises partnership expands reach across key U.S. Midwest and Southern states.
• Guidance policy shift -- Management announced a move to annual guidance updates, reaffirming prior annual revenue guidance, and cash flow positivity as a core goal for 2026.

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Risks

• Management disclosed a going concern explanatory disclosure in recent SEC filings, highlighting reliance on future cash flows and continued access to debt and equity capital markets.
• Cash from operations saw an $8.2 million outflow in Q1, with working capital use and operating loss not expected to recur at the same magnitude, but representing current pressure.
• Reliance on equity capital remains, as $2.2 million was raised in 2026 via an ATM offering, resulting in 1.46 million new shares, and acknowledged shareholder dilution.
• "Our ability to continue as a going concern remains dependent on generating future cash flows from operations while maintaining access to debt and equity capital markets."

Summary

Worksport (NASDAQ:WKSP) delivered approximately 48% revenue growth in Q1 2026 year over year, driven by new product launches and B2B expansion, while reporting a significant increase in gross profit and margin compared to Q1 of the prior year. Management spotlighted the successful certifications and commercial distribution of SOLIS, CORE, and Nexus, with the Tri-State Enterprises distribution agreement marking an important step in geographic expansion. The call confirmed major investments in inventory, facilities, and working capital to support upcoming sales conversions, with management focused on improving cash flow and reducing further dilution. The company moved to an annual reporting cadence for financial guidance, prioritizing operational cash flow positivity and long-term scalability over quarterly updates.

• Worksport reported direct-to-consumer and B2B channel sales contributed evenly to Q1 revenue, reflecting an intentional move toward B2B as a growth vector.
• Certification processes for AetherLux, through subsidiary TerraVis Energy, advanced, with government-related evaluation ongoing, but management stated that "no procurement decision has been made," and revenue from this segment is not expected this year.
• Initial dealer network milestones include a six-fold expansion from the prior year, pointing to execution focus and growth in both reach and order potential.
• The executive team emphasized execution over expansion, noting a strategic channel activation focus in the coming quarters for revenue conversion and margin enhancement.

Industry glossary

• Tonneau cover: A protective cover for a pickup truck bed, offered in folding hard (e.g., aluminum with specialized coatings) or soft configurations, designed to secure, protect, and sometimes integrate power functionality for cargo areas.
• UL/CSA certification: Product safety and compliance certifications (Underwriters Laboratories and Canadian Standards Association) required for retail and commercial distribution in North America, particularly for electrical and energy storage devices.
• ATM offering: At-the-market equity offering allowing a company to raise capital by selling shares incrementally into the open market, typically without predetermined pricing or timing.
• HVACR: Heating, Ventilation, Air Conditioning, and Refrigeration—the sector addressed by the AetherLux heat pump development.

Full Conference Call Transcript

Steven F. Rossi: 26 as our VP of finance and has recently been promoted to CFO. Jennifer first began providing advisory services for WorkSports in August 2023, Her short term focus has been to help strengthen our financial discipline, reporting processes, and our internal control environments as we scale towards profitable operations. We will be reviewing the financial results for the quarterly period ending 03/31/2026. These results were just filed today at 4PM eastern time in our form 10 q and can be downloaded from the link provided in the chat. At the end of today's call, our prepared remarks and presentation deck will be available for download at www.investors.worksport.com forward slash hashtag reports.

Again, w dot investors dot worksport dot com forward slash hashtag reports. Our remarks will follow on a slide presentation After our prepared remarks, we will open the line for questions. On that, let's begin. First, safe harbor statements. During this call, we will make forward looking statements, including statements regarding our financial outlook for the full-year 2026, our expectations regarding financial and business trends, impacts from the macroeconomic environment, and our market position opportunities, go to market initiatives, growth strategy, and business as aspirations and product initiatives, and the expected benefits of such initiatives. These statements are only predictions that are based on our current beliefs, expectations, and assumptions.

Because forward looking statements relate to the future, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict and many of which are outside of our control. Actual results or events may differ materially. Therefore, you should not rely on any of these forward looking statements. These forward looking statements are subject to risks and other factors that could affect our performance and financial results which we discuss in detail in our filings with the SEC, including our annual report on Form 10 k and quarterly reports on Form 10 Qs and other SEC filings.

The forward looking statements made in this earnings call are only made as of today's date, Worksport assumes no obligation to update any forward looking statements we may make on today's webinar. So with that, we have our agenda. On today's call, we will be covering the following. First, key highlights from our Q1 26 that we just filed. Number 2, liquidity position and capital strategy. Number 3, financial review. Number 4, update on worksport operations. Number 5, an update on TerraVis Energy and Aetherlux. The exciting product. And Number 6, the 2026 outlook in general. With that, let's jump to key highlights. Let's dive into it.

Q1 26 was the investment and launch readiness quarter, and we executed it with that objective in mind. In January, the Solace and Core started commercial shipping. In March, we unveiled Nexus to industry buyers at the Keystone Big Show. And initiated preorder activity on this product offering. In April 2026, Nexus launched commercially. Core received the applicable UL and CSA certification package needed to support broader North American retail and commercial distribution, and we secured distribution with Tri State Enterprises, including their placement of initial purchase order. Revenue grew approximately 48% year-over-year $3.3 million and gross profit more than doubled, increasing approximately 116%, $854 thousand.

Gross margin was approximately 26% in Q1 compared with approximately 18% in Q1 of last year. These are meaningful year-over-year improvements. Since Q1 26 was a launch readiness quarter, our current product portfolio is yet to meaningfully contribute to our results, including gross margin contribution. We are at the eve of our broad broadest product revenue opportunity to date, for our Tonneau cover business. During 2026, we funded conducted multiple product launches, refined our marketing strategy, and allocated resources to bolster our distribution network. We could now focus on converting our working capital investments for the balance of the year.

We entered Q2 with a stronger product portfolio, continued growth in with our distribution relationships, and deeper sales channel opportunity than any prior period in work sports history. Our cash position reflects the cost of operational strategic growth efforts and we will address that directly. But the key investor highlight for 2026 is this, We built product availability, funded launch activity, and expanded our commercial platform. Q2 26 in the second half are about conversion. Shipment, sales channels, activation. Margin efficiency improvement, and lower operational cash burn.

We are projecting strong growth in both B2B and B2C sales channels, as well as a focus on meaningful efforts towards profitability, from the operations in 2026 and beyond, but more on that soon. First, and before we move deeper into the financial review, let's step back for a second and review what works port actually is. At its core, Worksport as a business consists of 2 key elements. First, we are an innovation focused US manufacturer. Second, we are building a clean energy solution. Or multiple solutions. These 2 areas are not separate. They move together. Our manufacturing platform gives us the ability to design, build, and scale physical products.

Our clean energy focus gives our products a larger strategic purpose. These are the 2 core capabilities we believe that can drive the company towards profitability within the near term. We are a US based manufacturer. With approximately $11.6 million in inventory, $13.3 million in net property and equipment, including approximately $8.3 million of building and land, net value, and $6.6 million of manufacturing equipment net value. We have more than 500 dealer locations and target more than 1.5 thousand dealer locations by the end of this year.

Our global intellectual property portfolio alone includes approximately 26 issued and 56, 57 patent pending utility patents, 51 issued, and 25 pending design patents and registrations, and 44 registered and 15 pending trademarks. We are also in the process of preparing and filing several other key utility and design patent applications across various countries and jurisdictions. We started production of our tonneau covers just in late 23, and based on internal sales data, have sold approximately 26 thousand tonneau covers through worksport.com and related direct online channels from 2024 through 2026. Including approximately 8 thousand covers in 2024, 16 thousand covers in 2025, and 2,000 covers alone just in 2026.

In 2025 alone, across both B2B and B2C channels, WorkSports sold approximately 25 thousand tonneau covers and generated $16.1 million in net sales. We are quite proud of these statistics. Work sports started on the foundation of roughly 61 million pickup trucks in The USA on US roads alone, and pickup trucks remain among the top selling vehicles in The US every single year. People buy pickup trucks regardless of broader economic conditions. We started by making high quality tonneau covers at prices that compete and in many cases, can be competitors that primarily source raw material and components from foreign markets.

We believe we can continue to capture market share in the estimated $4 billion-plus tonneau cover market in 2026, and build the tonneau cover core business into a 9-figure profitable middle market company over time. Said plainly, we believe Worksport has the potential to become a $100 million-plus middle market revenue company profitably from tonneau cover sales alone and that is just our foundation. that is our core of this business. Our vision does not stop at tonneau. We imagine a future where pickup trucks evolve to power. From power consuming utility vehicles into mobile power and nanogrids that support owners at the campsite, worksite, emergency site, and on fleet levels.

That is where our newly launched SOLIS and core product offerings enter the picture. The tonneau cover is the physical platform, SOLIS adds solar generation, and CORE adds portable energy storage and usable power wherever you go. Together, Solis and CORE allow WorkSports to move from an aftermarket automotive accessory business into an anticipated 13 billion plus dollar portable power market. Importantly, Core is not limited to truck owners. CORE is a modular portable power system that can function as a standalone product for job site, off grid, emergency, recreational, and general portable power use cases for anybody, anywhere, globally.

We are actively targeting OEM, fleet, dealer direct, distributor, and other direct-to-consumer relationships while continuing to build brand and consumer awareness around this new line of product offerings. Our next steps could be to look at integrating core battery backup technology for residential and commercial power. A possible first of its kind modular battery system for emergency power or key energy savings and off peak cost savings for businesses, with strong apparent opportunities in industrial applications. Now our subsidiary, Teravise Energy, is at the forefront of developing energy savings HVAC energy saving HVAC technology. The AetherLux zero plus frost heat pump has all the elements to become significant breakthrough in energy saving as a product solution alone.

It is expected to be the only heat pump platform of capable of operating without traditional defrost cycles and it has been tested to operate smoothly in extreme rarely seen by conventional systems. In fact, I will say not seen by conventional systems. AetherLux can provide heating and cooling highly efficiently and we have a keen focus on home heating. We are also currently evaluating efficiencies within data center cooling technologies. The breakthrough AetherLux heat pump is expected to advance towards certification 2026 and address a $150 billion-plus HVACR market.

And we have received a strong level of interest through initial inbound inquiries achieved support through the US Department of Energy, inclusive including their national renewable energy laboratory and are engaged in active government related strategic conversations. AetherLux sits on top of the core WorkSports product platform, as an important additional opportunity. In short, WorkSport has 3 related but distinct layers. First, the core tonneau cover business, what I call our foundational business. Second, the Solace and core power ecosystem. And third, the longer term highly efficient AetherLux HVAC opportunity through TerraVis Energy. And we will provide more information and more details on TerraVise later in this call. Let's talk about liquidity. I will now address our liquidity position directly.

Our fiscal 25 form 10 k included a going concern explanatory disclosure. That disclosure is important, and we are addressing it through a clear operating plan. Convert inventory into revenue. Grow gross margins in each of our sales channels, and reduce operating cash consumption as our product launch spending normalizes. And maintain a disciplined approach to working capital and capital market funding resources as needed. Our ability to continue as a going concern remains dependent on generating future cash flows from operations while maintaining access to debt and equity capital markets. The largest use of cash in Q1 was the capital intensive launch related investments.

The primary use of cash was working capital to support production of our existing product offerings, and the expected growth of additional product offerings launched in 2026. Including Solis, Core, and the new Nexus. We received approximately $5.1 million of inventory to support the expanded product lineup, with approximately $1 million of these raw material purchases remaining in accounts payables of 03/31/2026. We also used cash to settle prior period working capital obligations. The objective from here is clear. Turn that inventory into revenue, continue to improve our gross margin for each sales channel, and reduce operating cash used quarter over quarter. Our West Seneca facility also remains a substantial, meaningful asset on the balance sheet.

Reflected in $13.3 million of net property and equipment. We are a manufacturing company with real assets, real inventory, and an expanding order and distribution base. The question is execution velocity. And Q2 26 begins answering that question. Our priority is to reduce our reliance on capital on equity capital and potential additive dilution. Or additional dilution to existing shareholders as revenue scales and working capital normalizes. Capital strategy. We remain transparent with our use of capital tools. During 2026, we raised approximately $2.2 million including net proceeds through our amended at the market offering with H. C. Wainwright. As a result, we issued 1.46 million shares of common stock.

We recognize the impact of dilution, and we are mindful of our shareholder responsibilities. Our strategy remains to use the ATM as a tactical tool, subject to applicable form s 3 public float limitations and market conditions. Not our primary and not as our primary capital vehicle. Where capital tools are used, we will continue to evaluate them through 1 lens, whether the operational return justifies the dilution and improves the long term shareholder value equation. With that, I will hand the call over to Michael to walk through our financial results.

Michael D. Johnston: Thank you, Steven. Good afternoon, everyone. it is a pleasure to be speaking with you, and I look forward to continuing these conversations as we progress through fiscal 26. Net sales for Q1 26 were $3.3 million an increase of approximately $1.1 million or 47.9% compared to $2.2 million in Q1 25. Geographically, The US continues to represent an overwhelming majority of our net sales at 99%, up 40.5% year over year Within our segments, hard tonneau covers generated approximately $3.3 million in net sales, accounting for approximately 99% of total Q1 net sales. Our soft tonneau cover segment contributed approximately $400 thousand.

The concentration in net sales in the hard tonneau covers segment reflects our ongoing strategic focus on higher margin American made product offerings. From a channel perspective, Q1 also reflects a deliberate transition in how we are building the business. In Q1 26, B2C or the direct to consumer online channel contributed approximately $1.8 million in net sales on approximately 1.7 thousand covers, while B2B generated approximately $1.5 million in on approximately 2.3 thousand covers. Direct to consumer activity remains an important sales channel to develop but our growth strategy includes an enhanced concentration in the B2B sales channel, including dealers, distributors, fleets, and potential OEM partnerships. Moving on to gross margin.

Gross margin for Q1 26 was approximately $900 thousand more than doubling from approximately $400 thousand in Q1 25. A 115.5% year over year improvement. Our Q1 26 gross margin was approximately 26%. Compared to approximately 18% in Q1 25 and 30 percent in Q4 25. The sequential movement from q 25 Q4 25 to Q1 26 was primarily driven by our sales channel mix. In Q4 25, our sales mix was weighted more heavily towards the direct to consumer sales channel, while in Q1 26, our mix shifted closer to an even split between B2C and B2B.

Importantly, our B2C margin improves sequentially from approximately 30% to approximately 34% but the higher relative concentration from the B2B sales channel which has a lower margin, impacted that blended gross margin. Onto operating expenses. Total operating expenses for Q1 26 was approximately $6.6 million compared to $4.7 million in Q1 25. An increase of approximately $1.9 million or 41%. Let me walk you through some of the key line items. Research and development expenses decreased by approximately $200 thousand or 44% between Q1 25 and Q1 26. This decrease reflects the natural progression of our product development projects. The AL 4, and h d 3 moved out of active development and into full production during 2025.

Our R&D spend is increasingly directed towards next generation innovation rather than ongoing refinement of production ready products. General and administrative expenses increased by approximately $980 thousand or 24% from $3.4 million in Q1 25 to $4.3 million in Q1 26. This increase is primarily attributable to the timing of costs incurred to support capital market positioning and promotion of our enterprise value amidst a perceived valuation gap in our market value. We continue to manage this expense caption with strategic discipline. Sales and marketing expenses increased by approximately $1.3 million or 148% from $900 thousand in Q1 25 to $2.1 million in 2020.

The increase resulted from the combination of intentional brand awareness and product launch campaigns directly linked to the launch of multiple product offerings in early 26. We launched 3 products, and initiated large scale digital marketing campaigns to drive awareness for both the CORE and SOLIS, as well as to support the overall brand validation. We are closely monitoring the ROI on each marketing channel and plan to optimize accordingly. On to cash flows and the balance sheet. Cash and cash equivalents were $566 thousand down from $5.9 million approximately at December 2025. As Steven noted, this decline reflects working capital deployed to fund multiple product launches and reduce prior period obligations.

Net cash used in operating activities in Q1 26 approximately 8.2 million. Let's further discuss the cash used from operations. Our net loss of $5.8 million included approximately $1.1 million of non-cash items. Primarily stock based compensation, depreciation, and amortization. That implies a cash based operating loss of approximately $4.7 million. Working capital used an additional approximately $3.5 million driven primarily by inventory build, and the settlement of prior period payable obligations. I would like to reinforce that we do not expect the level of working capital use in Q1 26 to repeat at the same magnitude as inventory begins converting into revenue and prior period obligations normalize.

That normalization combined with a growing revenue base across multiple sales channels is how we close the gap and achieve cash flow positivity. Inventory increased by $2.1 million to $11.6 million as of 03/31/2020 Of that total, raw goods grew from $3.4 million to $5.3 million a direct reflection of our investments in Core and Solis as well as the NEXUS product readiness. Raw materials, of $5.4 million reflects our near term production pipeline. We are not anticipating a significant use of cash for further material purchases until Q3 26. Working capital as of 03/31/2026 was approximately $6.6 million compared to $10.1 million at 12/31/2025.

This reflects our strategic decision to proactively convert working capital into operational assets to support the launch of multiple product lines in early 26. Our asset base anchored by approximately $13.3 million of net property and equipment represents our investment in our West Seneca manufacturing facility and continues to provide a strong foundation to support our future production growth. I will now turn the mic back to Steven to review our milestones. Steven?

Steven F. Rossi: Thanks, Michael. On 01/13/2026, we announced the commercial launch of our flagship energy product tool, the SOLIS Solar Tonneau Cover in the CORE portable energy system. This was a defining moment for WorkSports. Years of R&D engineering, certification work, and manufacturing preparation culminating in real products shipping to real customers from our facilities. SOLIS is the world's commercially available solar integrated hard folding tonneau cover. CORE is a more modular portable energy system that integrates with SOLIS or functions as a standalone unit for the job site, off grid, or emergency power needs. Together, they represent work sports entry into the multibillion dollar clean energy and portable power market. So excited about it.

With the initial product launches behind us, our 2026 focus is scaling, solar, and core revenue. In April 2026, CORE received the safety and regulatory certifications needed for North American retail and commercial distribution. Including all applicable UL and CSA approvals. This certification package is important because it expands the universe of retailers distributors, fleets, and commercial customers that we can evaluate to carry the product. We also strengthened our commercial sales channels around this product. In February 2026, we announced a strategic partnership with ProtoMAC International Partners to help position the SOLIS and CORE ecosystem for federal, fleet, and commercial adoption channels.

We do not consider these channels as immediate revenue sources, but it is an important awareness channel for products that can serve worksite emergency mobile power and off grid applications. Solis also carries credibility through our active conversations with OEMs. The point is not that OEM revenue is assumed in our 2026 sales pipeline. The point is that the product platform has strategic relevance beyond direct to consumer sales, and we are building the channel architecture to pursue that opportunity responsibly.

The question we are focused on answering is how quickly these products scale, through which channels, core and SOLIS did not represent a meaningful amount of sales in Q1, as emerging products we are developing marketing assets, product awareness, and sales pipelines to target strong sales towards the rest of the year. We are just getting started. With a focus on certification, channel onboarding, repeatable fulfillment, and measure customer acquisition economics, the path for market adoption is becoming accessible. We note it took approximately 1 year for our initial Made in the USA tonneau cover lines to build traction. I will repeat that.

We note it took approximately 1 year for our initial Made in the USA tonneau covers, the AL 3, to build traction. And we believe that it can achieve we can achieve a similar speed or better with the SOLIS and the CORE. The third major commercial milestone of the quarter was the unveiling of our Nexus tonneau cover. Boy, is it exciting. On 03/19/2026, we presented NexSys to industry buyers at the Keystone Big Show. Keystone is 1 of the biggest aftermarket distributors in North America, 1 of the premier aftermarket distributors in North America, and this is 1 of the most premier events in North America.

At the Keystone Big Show, our NexSys product generated immediate buyer interest in preorder activity. Following production and commercial launch in April 2026, early distributor interest is and remains significant. This supports management's expectation that NexSys can contribute meaningfully in net sales for this year. Nexus is a premium tonneau cover featuring a newly engineered operating system designed to improve the ease of use. Safety, speed for truck owners. Unlike conventional folding tonneau covers that often require users to walk around both sides of the truck to secure latches or prop rods, NexSys is designed to allow full operation from a single side of the truck while maintaining full bed access.

This is a practical innovation that is focused on a clear customer pain point, and early distributor demand supports our view that the product can accelerate adoption across both existing and new sales channels. I encourage everyone to check the product out at www.worksport.com. It’s astonishing. In late 26, we announced that we secured Tri-State Enterprises as a new cross regional distribution partner and our biggest at the time. For a full tonneau cover lineup inclusive of NexSys. TriState expands our distribution reach across Arkansas, Missouri, Oklahoma, and Texas. Tri State operates approximately 1 million square feet of warehouse space, and has already placed initial purchase orders and reorders.

Management believes TriState can become a 7-figure near term account with recurring multimillion dollar potential. Our distribution strategy remains a central pillar of our 2026 growth plan. We entered in the year with a dealer network that exceeded 500 locations, a nearly 6-fold increase from the start of last year. Our target is to reach 1.5 thousand plus locations by the end of this year through a combination of direct dealer onboarding and new distributor partnerships. Remember, there are 17 thousand dealers in America. So we are just getting started. The Tri-State Enterprise partnership announced in April is our first major distributor relationship and gives us the broader penetration to new geographic markets.

Importantly, this is not just a logo announcement. Tri State has already placed initial purchase orders, and truck bed covers are among its top selling categories. That alignment matters because it increases the likelihood distribution reach can translate into real sell through. We are also in closing discussions with nationwide dealer network capable of bringing our products to all US continental states. We will update investors as these discussions move from pipeline to signed commercial relationships. Each of these relationships represent a potential step change in distribution reach. But our standard for reporting progress will remain execution. Orders, channel activation, repeat purchase behavior. We are strictly focused on execution this year.

Our US manufacturing and quality credentials also matter to the strategy. The West Seneca facility that we built is an ISO 9 thousand:2015 certified facility, which supports our ability to pursue larger dealer, distributor, fleet, and potential OEM relationships. Quality certification does not create revenue by itself, but it removes the friction in conversations with larger counterparties that require this for quality systems. Our B2B go to market strategy continues to complement our direct to consumer ecommerce sales channel. We believe that the combination of strong online presence and expanding dealer network and new distributor partnerships is the right model to capture demand across the $4 billion-plus tonneau cover market. The investors takeaway is straightforward.

The channel base has become larger, more diverse increasingly capable of absorbing a broader product lineup. Let's talk AtherLux. TerraVis Energy, our clean energy subsidiary, continued to make progress in the first quarter of this year. In February 2026, we confirmed that a large government entity is actively monitoring upcoming laboratory performance results of for the AetherLux heat pump as a part of an internal evaluation process. We also announced that the certification work is progressing. With AHRI, ENERGY STAR, and other North America milestones targeted within 2026. To be clear, no procurement decision has been made we are not currently projecting initial AetherLux revenue within this year. However, we anticipate commercial opportunities within 12 months.

What we are saying is that a credible government related evaluation process is underway and that the technology is advancing towards third party validation, certification, and potential early commercialization in the 150 billion plus dollar HVACR market. We believe that AetherLux is the only heat pump technology in the world tested to operate at temperatures as low as negative 57 degrees Fahrenheit. Without the need for energy intensive defrost cycles. Our proprietary zero frost technology eliminates defrosting cycles entirely opening the doors to markets and applications that have historically been difficult for conventional heat pump technologies to serve. AetherLux can also be viewed as an upside driver beyond the revenue drivers embedded in our 2026 pipeline.

The core 2026 revenue is expected to be driven by the tonneau cover business and early SOLIS/CORE contribution. AetherLux is a separate platform advancing through testing, certification, commercialization. We intend to update investors as lab results and certification milestones are achieved. 26 outlooks. So let's talk about this for a second. This is the strongest commercial work position WorkSports has occupied to start any of the fiscal years in our history. We have provided revenue 2026 guidance of $3.542 billion in our 2025 Form 10-K. We believe our revenue will increase substantially from 2025, and we will actively target operational cash flow positivity this fiscal year. As part of our recent key leadership transition, we reevaluated our strategic priorities.

We believe it is in the best interest of all shareholders to conduct a high growth and construct a high growth and durable business that can compound shareholder value over the long term. Although it is not going to be a straight line, we are going to get there. And we are relatively young, and we are a dynamic business with consistent growth in design, production, distribution of quality and innovative products. Which offers us a promising future and opportunities. We believe our approach to support this achievement of our strategic priorities includes a more holistic evaluation of our guidance Accordingly, we plan to provide annual financial guidance every calendar year.

The primary driver for moving away from quarterly guidance updates is to increase our emphasis on allocation of resources on long term strategy, including a focus on shareholder value. Believe a change in the frequency of providing guidance updates from a quarterly basis to an annual basis allows us to prioritize long term vision over short term metrics, which will allow us to focus and align our near-term efforts to meaningfully contribute to the successful execution of our strategic objectives. With countless potential operational variables alongside emerging sales and product channel mixures.

We will hold off on specific guidance updates, but reaffirm our previous broader guidance Fiscal 2026 is about achieving cash flow positivity from operations and continued upward revenue trajectory. As I said earlier, we are executing, and we are going to continue to grow, and we are going to get to cash flow positivity, but it is never a straight line. So in closing, to our investors and our analysts, I want to close with this. 3 years ago, Worksport was generating under $2 million in annual revenue. Last year, we crossed $16 million. This year, we are on the path for achieving operational cash flow positivity just with our foundational product and significant revenue uptake.

This is the company we have all built together. We have done this by manufacturing in America, building products that dealers and consumers want, and expanding our distribution with discipline. I also want to know that I recently purchased shares on the open market reflecting my personal conviction in the company's long term direction. Our responsibility now is to turn that conviction into measurable execution. And I will purchase shares again if I have to. In 2026, it is not a perfect quarter from a cash flow perspective.

It was a quarter where we did what we said we were going to do, launch Solace, launch Core, unveiled Nexus, added major distribution, and completed Core certifications, expanded gross margin year over year, and improved loss per share, All while it was the slowest quarter of the year. Q1 tends to be the slowest quarter seasonally of the year for tonneau cover sales. Q1 was the investment in launch readiness quarter. 2026 and the second half are about proving conversion: turning inventory into revenue, dealer growth into orders, NexSys demand into shipments, and margin expansion into lower cash burn. We are also building strategic vectors around federal channels, OE targeting for SOLIS and CORE and AetherLux certification process progress.

None of which are required for making the overall business operationally cash flow positive. We expect the tonneau cover business, our foundation, to be capable of that on its own, and everything else is accretive to that. We are not managing this business for a single quarter.

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