Taylor Devices, Inc. Stock

As well as report elaborating on the 2026 annual report to share. [indiscernible]

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Meeting [indiscernible] This meeting on all matters to come before the meeting. The polls are now open. At this time...

[indiscernible] Chief Executive Officer. Tim will address the shareholders and discuss the accomplishments of the past year and present an outline of what management anticipates for the upcoming fiscal year.

Thank you, John. Again, welcome Paul. [indiscernible] I can see it here -- and you see a picture throughout the presentation here. This is a picture of the grand opening of our Alan Klembczyk Development Lab this past January. There will be multiple mentions and references to that throughout.

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I hope you all enjoyed the meeting. Thank you for coming.

We are having technical difficulties with that PowerPoint presentation. Bear with me, please. [indiscernible] There, sorry. Thanks [indiscernible]. Okay. Just a cautionary statement. We'll be talking about some forward indicating dynamics. So it's covered under the safe harbor.

I'll kick off here with an overarching summary of the broader business followed by Stu Buckley, our VP of Business Development and Sales, who will talk about not only business development sales across the whole enterprise, but also our industrial product groups. Followed by Brian Lowicki, our IPT lead for our Aerospace and Defense Product Group.

We will then be followed by Todd Avery, IPT lead for our Structural products. And then Jim Talty for our newly created as of this past fiscal year, I'll talk more about this, and Jim will go into detail, our new product development team, which all are very, very important relative to agility, velocity and speed, the ability to do what we do and get it done very quickly to the delight of our customers, hopefully, followed by Bob Conrad, our VP of Ops, who will go over the, again, enterprise-wide operational dynamics. And then Paul Heary, our CFO, will wrap it up with the financials.

Well, just to speak a little bit about why do we have product teams and groups. And really, we created -- we started this almost 2 years ago now, mainly because even though we leverage the common technologies, capabilities and talents at Taylor Devices, we serve different market sectors and customers who have different needs. So the -- these teams now -- many businesses within the business, if you will, that are focused on their specific customers and the markets and those needs is the best way to serve those folks.

Now additionally, it creates a succession planning and a growth, a scalable structure, infrastructure, if you will. So again, John alluded to this at the end of last year's AGM, it's a lot -- it's all about leadership, right? Organizational structure is important. It provides guidance, but really at the end of the day it's about the leaders. And these folks as well as the team, the entire team at Taylor Devices is what makes it happen.

So FY '26, I'd say overall, a very good year. And absolutely, in many ways, it was an excellent year, again, year-on-year down on the revenue from $46 million down to $41.6 million. And really, that's about 2 high-level dynamics around what's going on and what happened last year in the market. On the Aerospace and Defense side, there are incredible demand. The needs and the opportunities there are off the chart and Stu and Brian as well as some Jim will talk about a lot of that.

But even on that side, by the way, the government shut down for the beginning of the year, remember last year, their fiscal year from October 1 through late November, that created a delay in all the contract flow and activity in the government, which inevitably impacted us. So you could see that if you looked at our backlog, we entered the fiscal year '26 with 200 -- around $27 million went up a little bit in Q1, bounced around, but it generally went down into the last quarter where we had a deluge of orders that put us on a record backlog. That created a delay in the execution that impacted the sales recognition in the year.

Bookings, as I just said, record tremendous year, $67.3 million versus $40.2 million the prior year, the average down around the 30s. We had a single $19 million order within that 60 -- almost $68 million -- to $67.3 million. That record high in the company's history, which is great. It's fantastic. But as we alluded to in our 10-K and 10-Qs, it's spread out over almost 4 fiscal years (sic) [ 5 fiscal years ]. So just to keep that in mind.

This put us at a very favorable backlog, again, 53 -- record, almost $53 million record high. Again, $19 million -- really $17 million of that is spread out beyond fiscal year '27. But when you normalize that, it's still a $35 million-ish in backlog, which is still a record high versus the $33.1 million, which was our prior record. Net income, $8.6 million, 20.6% of sales, again, very significantly favorable overall, down from year-on-year. Mainly due to sales volume and a little bit of the mix dynamics, and we'll talk more about that later.

I talked about it, Aerospace and Defense tailwinds, significant activity due to unfortunate world events, restocking of legacy systems and components as well as new capabilities being developed, which I'm very happy to report we have significant activity relative to both in customer funded as well as IRAD, which we'll talk more about. The Non-Aerospace and Defense side continues to face headwinds, and again, high interest rates, Todd will talk more about this -- and uncertainties create delays that are carrying on. They were there actually before as we entered into FY '26, and they're still in play right now. But there's underlying activity there that looks like light at the end of the tunnel, and Todd will talk about that.

We're still first diversified from a regional perspective. We're a global company. That, as the nature of the Aerospace/Defense to Non-Aerospace Defense shifts more towards the U.S. side of things because we -- everything we do on Aerospace or the Defense side is U.S. government based, but still good to have a broader footprint.

On-time delivery, a new record at 94%. Bob will talk about it -- talk a lot about this, really fantastic job by the team. That's never easy. You get above the 90%, we were at 92% last year. It gets really hard to move the dial higher from that point, especially when you're doing very difficult products like that, like we do and you introduce new products at the same time.

R&D, a little bit under $1 million, $0.8 million versus $0.4 million a year before. You can see a trend here. I put a couple of prior years' R&D, we're very importantly, planting seeds that are going to germinate in the future here. So we're very careful about making sure that this R&D investment is aligned with our strategic priorities where we know there's going to be future opportunity and need. Stu is going to talk more about that in his section.

CapEx of $2.1 million versus $2.6 million. That's about where our run rate has been around the $2 million point. So again, we're very careful about making sure we're investing in the critical equipment and facilities that we need. Our Dev Lab, I talked about it there with the first picture. We commemorated that in January. The product group teams we talk about that serve those markets and customers, they have the primary mandate is deliver to our customer commitments on time with perfect quality. They also, by the way, have to develop and qualify the new products that are going to keep the growth of the company in play. And whenever that is in conflict, we have to deliver on time to our customers.

So that creates a challenge, hence the creation of our new product development team with dedicated resources and dedicated focus on -- they help out with the money coming in stuff when necessary, but they're empowered to be able to go after and concurrently do the new product development at a rate, at a high velocity. And again, in an environment that we're creating that is more agile.

Customer funded development, $1.6 million this year versus $1.4 million, '26 versus '25. This is a fantastic story as well. We always try to get customer funding assistance when we can. We have to be careful of that because the customers obviously expect us to have a skin in the game, which is fair. And we want to be well positioned to reap the benefit of the follow-on production and not be overly at risk from being competed out of the position.

Talent -- talked about the product teams, the product -- integrated product teams. We have those in position. We have great leaders. We have -- we've been home-based, and I use the term here, assigned home-based resources that they have jobs across -- they support the whole business, we all do, but they have a primary day job of supporting that specific group, that product group team. And by the way, those folks then we develop into the next wave of leaders that have the capability to be product group team leaders and who knows where they go from there, hopefully, to -- sky is the limit.

So '27 priorities and outlook. It's not a lot of change here. Just if you go back and look at my prior presentations, you're going to see a lot of commonality and repeat. And that's not just because I'm a minimalist in some regard relative to slide decks like this, but it's working. So what we've been doing has been working. So we're just modifying it as appropriate. So these focus on where the needs are, hence the money. And we know that our capabilities in a way of managing minimally vibratory and impulsive energy components and systems are valued and prospect there and win there.

To do that most effectively, understand the customers' needs, their system better than specification. To do that, you have to be engaging them engineer to engineer, function to function, and that's what -- by the way, the integrated product teams empower and help that, help assist it -- about that. The ability to analytically solve a problem, make sure the customer appreciates it before we start cutting chips and trying to go into dev or qual, really, really important.

So that helped us to -- and I use this tagline, I'm going to say it again, elegantly innovative custom-engineered solutions. By elegant, I mean, it has the fewest parts, an elegant design, by nature the definition has a fewest parts. Hence it's the low -- the least costly and the highest reliability. When you see an elegant design, it's obvious it's low risk, of course. But try to come up with a blank sheet of paper is a different challenge and we have a complement of very capable people that do it well.

Then of course, we have to be able to execute machine, assemble, test and deliver on time, and we have a great complement of people that are doing that very well as evidenced by the On-Time Delivery. When you do this for a customer, you deliver more so on time and your quality is very, very high. You have the -- they will invite you, you have the opportunity to do more. If we do a bit -- piece of component that goes into a sub-assembly that goes into a larger assembly platform, they will take the risk on their part to give you more of that content. That can paradigm shift your revenue sales, your sales, your profit, cash, everything. And it's an incredible growth driver for the business. And that is happening. So that's great.

Our priorities, these aren't changing dramatically new product development, hence, the new product development IPT and the resources, including the Dev Lab. You're going to hear about the machining strategy. How do we focus on our vertically integrated capabilities to add the most value and be the most competitive. We're going to add to what is already a fantastic capability in the way of our machine shop. We're adding facilities.

Digital transformation, this is a catchall. This is one -- these 4 are our primary focus on our Strategy Deployment X-Matrix where chief among many priorities, we have a team focusing on this cross-functionally all four of these and they report out on it biweekly, and we progress it. The digital transformation includes, what are we going to do about AI? How do we incorporate AI in a way that helps our business effectively as well as do more with the same? So helping our agility and velocity. So that's a challenging area, but very, very important.

You're going to see more about this from -- in Bob's section, but it was actually in the news. I know a couple of shareholders mentioned it here. We are in the process of purchasing an 18,000 square foot facility located about 0.25 mile from our existing facility, our main factory and then not even a mile or so away from our current machine shop. And that is going to enable us to immediately address the growth opportunities we have while we focus on -- and I've talked about this in prior presentations where based upon our intended growth and expected mix of products, we were going to run out of square footage.

And we're going to have to either buy a facility, additional facilities and/or add on and build. We're focusing back to development, building and adding on to our existing 1 Buffalo Bolt Way facility, where we have ample land available. We can put up to a 60,000 -- actually, we could put an 80,000 square foot facility there as far as fitting goes. So we're in the process of -- we have designs we've already put in play working with architects. We're going to progress that and hear more about that in the coming quarters.

So with that concludes my section. And I'll hand it off to Stu Buckley, our VP of Business Development.

Hello, I'm Stuart. So I'm going to talk today about Business Development and Sales. So this is an interesting picture. So right here, this is the Royal Navy, obviously U.K., containerized medical mission module manufactured by that partner, Force Development Services. It's mounted on Pumpkin Mounts. So the Pumpkin Mounts one of the best [indiscernible], but they are sitting right there. And that protects equipment inside that module staff patients. It's a medical module.

I'm just going to bring everything on to the slide here and then talk you through. So in FY '26, we continued to gain market share in our target markets, particularly in the landing gear and the missile defense sectors. So within the landing gear, which is a big strategy of ours, we expanded our position both in Collaborative Combat Aircraft, that's CCA, and Vertical Takeoff Landing platform, that's VTOL, Vertical Takeoff and Landing platform. So attending key industry events like XPONENTIAL in Detroit earlier this year and Farnborough Airshow was a really important part of our effort to engage the aerospace community and strengthen our relationships and identify new landing gear opportunities.

In the missile defense sector, we focused on shock and seismic isolation for ground-based systems while continuing to support munitions and aircraft weapon injection applications. We pursued strategic partnerships with key landing gear technology providers across [indiscernible] actuated control systems, and that has all been driven by our technology road map.

Our structural team advanced opportunities in seismic retrofits. And in FY '26, we successfully developed a design process based on our TDMF, Taylor Damped Moment Frame technology known as the steel damped special moment frame. This will be incorporated into the building codes in 2028. So across all these markets, agility, which you'll hear a lot, Jim talked about it and the other folks will talk about it too, remained a key priority as customers increasingly demand faster responses. We continue to align our business development efforts to meet those expectations.

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2026, we ended a healthy backlog $52.8 million and our 5-year revenue pipeline in a growth trajectory.

Our strategies in landing gear and ground-based missile systems have been successful in creating future opportunities. So just to put some context around that. Currently, as of today, we have 10 development and production contracts for landing gear across a range of military and commercial aircraft platforms. In addition, we received an award to develop a critical system for ground-based missile program. We expect both these programs and areas to continue to develop future sales. To support these opportunities, we continue to evolve our business development organization, leveraging key partners in strategic -- on our strategic campaigns and selectively using sales consultants and representatives to strengthen our market reach. Overall, we are focused on converting these strategic opportunities into future revenue and sustained growth.

Moving on to industrial products. [indiscernible] industrial products sales for FY '26 were $3.9 million compared to $4.3 million in FY '25, while sales declined year-over-year that remained above our 5-year average of $3.6 million. We continue to benefit from a stable, established customer base for our standard products with a steady, predictable business activity. During FY '26, we also explored potential opportunities arising from reshoring manufacturing and operations in the United States as companies considered bringing manufacturing back domestically. We looked at how Taylor Devices could position itself to support this activity and capture new business. Our focus remained on maintaining strong customer relationships while pursuing these emerging growth technologies.

But thank you. I'd like to introduce Brian Lowicki. Brian is our integrated product team leader for our Aerospace and Defense team.

Thank you, Stu. Okay. Good morning. Here to talk aerospace and defense. So Aerospace and Defense Products fiscal year '26 sales of $27.5 million, roughly 2/3 of the overall total for all Taylor, up slightly from $27.1. Positive trend continues as sales have increased over 117% going back to 2021. So it's a big growth area for us. Bigger proposal activity is at a historic high level, supporting our 5-year revenue pipeline objectives. Record bookings were delivered in fiscal year '26 at $55.7 million. Our strategy of capturing additional content in the motion control market, particularly unmanned aerial vehicles, commercial aviation and weapon injection segments has provided significant growth opportunities.

Ongoing production on the base business continues robustly for the vertical launch system, helicopter programs, landing gear for various customers, submarine isolators, physical transportation, shock isolation components, weapon containers basically and shipboard energy absorbers, which Stuart highlighted earlier.

Growing portfolio, which we'll talk about next, covers these areas. So Taylor is continuing to invest in its talent, its technology, processes and facilities, focusing on positions in the following areas: unmanned aerial vehicle landing gear, funded development, production, several customers with several customers to support the growing USG and prime contractor budgets. So there's a lot of opportunities in this area with collaborative combat aircraft that we are on.

Funded development and shock and isolation applications for ground-based nuclear deterrent as part of the U.S. Nuclear Triad. Launch support equipment of NASA space launch system. So it's still going back to Taylor's heritage, some strong positions in the space. [indiscernible] container isolation for key future U.S. munitions. Shock and vibration isolation for domestic and international Navy shipboard applications. Domestic mass jet onboard weapon carriage released applications. So lots of opportunities looking forward to continue to grow. We also continue to support our long-standing naval launch and isolation position.

So I want to thank everybody for coming today. Next, I'd like to call upon Todd Avery, our structural IPT lead, who will give us his report on our structural business.

Thanks, Brian. I'd ask Brian to say the esteemed [indiscernible]. Yes. So structural, it's not a surprise the last couple of years, it's been a struggle for the structural team. A couple of different reasons for that list here. First, the results, we accounted for 25% of Taylor's overall revenue at $10.3 million. That was down from 32%, our contribution in fiscal year '25. So we should ask ourselves what are the reasons for that?

The retrofit market, which we play in heavily, most of our revenue comes from that still, definitely has been sluggish. Higher interest rates, that's mainly due to higher interest rates, borrowing rates. The vacancy rates post COVID still haven't come down, only in San Francisco have they come down year-over-year by 5% due to the AI boom. it's kind of the center of AI these days.

And then international projects due to currency exchange rates, we've struggled there as well. A great example there, New Zealand. I mean, New Zealand, we usually would accomplish or complete 2 to 3 projects per year. Last couple of years, 0. So their economy is just starting to percolate. So it might be some time, but we expect to have a bounce back there.

Some project accomplishments in fiscal year '26, the UCSF Helen Diller Hospital at Parnassus, 189 dampers. We completed the shipping of that in fiscal year '26. A lot of -- some of the work -- a lot of work was done in fiscal year '25, but we completed shipment of that. I'll have a picture on the next slide to show you that project.

And then Stu made reference to this. We delivered our first Taylor Damped [indiscernible], TDMF, which is pictured there, the Southern medical office building. First of many, we hope. We continue to still grow that market within TDMF.

Next some upcoming trends. So that was fiscal year '26, some upcoming trends in fiscal year '27 and beyond. Also Stu made reference to this. So because of HCAI, which is the kind of regulatory body for hospitals in California, not readily accepting the TDMF, we decided -- we took the decision to try to get the TDMF out into the ASCE [indiscernible]. Our Director of Structural Engineering, Dr. Nathan Canney was successful in doing that. So that will be up in 2028 results, though. So just open up to customers more, if you will, engineering firms, the ability to use our tailored product in special moment frames.

We're also supporting -- one reason why the sales are down, there's not a lack of buildings, especially in the West Coast that require -- that could use a retrofit. It's just nothing is pushing in order to do it at this point. Different, though, hospitals, they are being pushed into it with the 2030 code, which requires hospital to be at a certain level of seismic resiliency. That code had been -- being pushed, but now it is set at 2030. So we have a lot of hospital work coming up.

We have 8 new inquiries a month. That's across all markets. That's -- we're hoping that's an encouraging sign that the market is loosening up, if you will. So that's -- yes, the last years, about 90, 95 new inquiries coming in. So it is -- there is a flurry of activity in our structural team. It's just getting the projects over the goal line. It's just getting to the point where an owner makes a move. That's kind of where we're struggling at this point.

Due to infrastructure dollars over the last couple of years, the focus there, we do have a couple of bridges coming up, and I'm happy to report that we've achieved the value supplier for the I-10 bridge in Alabama. That will be 17 lockup devices for that new bridge. So we're excited about that opportunity. And then up to housing conversions. I mentioned in the previous slide, the vacancy rates in office buildings, other than San Francisco is starting to come down, but it's still 28%. That's a lot. L.A., places like that, they're up in the 30% range. So some owners, developers have pivoted to affordable housing.

So this is a picture on the bottom right, a picture of a courthouse in L.A. that is being retrofitted to the housing unit. The owner can get better financing if it's converted to housing. And in L.A., the ordinance is if you convert something office to housing, you must have it retrofitted, be seismically retrofitted in some fashion. So that's a good sign as well.

I'll leave you with this on the middle picture there, I talked previously about the hospital at Parnassus, which is the middle picture, that's more of a rendering. It doesn't do it justice. There's buildings all around it. We went to the construction site last month. We were able to walk through -- walk over the rebar and saw about 1/4 of our dampers installed up to about the fourth floor. Each one of those floors is cantilevered that goes out and then back in. So all floors are different than the previous floor. And so far, so good. The foreman spoke highly of Taylor dampers as far as the ease of installation and thanked us for being on the project. So that was a good thing to hear.

Next, I will like to call upon our new product development IPT lead, the esteemed Jim Talty, who will give us a report on new product development activities.

Thank you, Todd. Good morning, everyone. I appreciate the opportunity to talk to you for a 2 minutes. I'm Jim Talty. I'm the IPT lead for the new product development in IPT at Taylor Devices. Before I get into IPT specific, I thought it would be good to talk a little bit about how the market has changed over the last 12 to 18 months for our customers and our customers' customers because that drives down to us eventually. So just looking at a bunch of headlines will come flying in here.

Basically, the message from both the U.S. government and other governments is you need to move quicker, you need to produce at higher rates. You need to build in new technology, you need to lower cost. So those types of headlines are coming out daily. In my 30 years in the market, I've never seen the -- this is the push for agility is unlike anything I've ever seen before. So that has caused a fundamental change in how businesses pursue, capture, execute and deliver business, driven largely by the 4 items you see up there.

So the first one, probably the biggest in my opinion, is the military conflict in the Ukraine and the Middle East has caused a paradigm shift, and you hear it on the news of how conflicts are both executed offensively and countered defensively, totally changed the demand for aircraft weapons dramatically over the last 2 years. In addition, new players have entered the market. So it's no longer just Lockheed, Boeing, Raytheon, Northrop. Now you have companies like Anduril and Castelion who have come in with promises of agility, rapid time to market, lower cost, higher production rates, new technology, and they've caused a seismic shift to the military market, especially -- and now it's forcing the folks, like I mentioned before, the Lockheed and the other primes have to react to that. So they're starting to behave differently as well.

So the next one up as we mentioned several times, artificial intelligence. We hear about it every day. I think we're also figuring out how it applies in our world. But it's not a question of if it's going to impact business. It's a question of how and how much it will impact our businesses and operations. And the last one is the -- a lot of change here, how is that being funded? I think if you can look at the U.S. Department of War budget, it's just under $1 trillion in 2026. The request for 2027 is $1.5 trillion. So a 50% increase is what's being requested. So that's driving massive demand for both existing and new weapon aircraft platform.

So with that background of what's going on in the market, I think the next logical question is what's Taylor doing about it. So from a Taylor Devices perspective, in March, Tim created a new product development IPT, recognizing those market changes and knowing that we needed to do things differently than we've done historically to operate in this new world. So the IPT is focused on early customer engagement, getting in early with customers, trying to influence requirements. And then once those requirements are at least firmed up tentatively, we need to expedite design, build, test, delivery of prototype hardware.

Gone are the days of taking 12, 18, 24 months to come up with a piece of hardware that they can put into their -- the customer systems. Literally every call around now they're looking for, can we have it in a few weeks or a few months. It's consistent now. So we need to adapt to that and do things differently. So within the IPT, we're looking at agile development processes. We have a very robust AS9100 [ complaint ] Quality System. We're looking to put [indiscernible] development process where we [indiscernible] every step of the business capture process from [indiscernible] proposal, engineering through procurement, manufacturing, testing and delivery. We're looking at every aspect and see how can we lean that out and document that. And then while still maintaining quality and safety at the same time, we can't compromise on those. So that's the main mantra of our IPT.

So as mentioned earlier, we -- in February of this year, we opened the Alan Klembczyk Development Lab, with a dedicated floor space, equipment and resources targeted specifically for development. So it's a beautiful facility, beautiful equipment. And it's always a challenge trying to balance production and development. This gives the development IPT a chance to develop products exclusively for those early engagements to win additional business. So that's up and running and there's been a huge benefit even in the first 6 months of operation.

AI coming up again. So we're looking at where can we leverage AI in our portion of the business. So computer-aided manufacturing, CAM programming. So all the CNC machines in our Dev Lab, you have to program them to create digital path to generate the part you want. That can be a very tedious and time-consuming process for our manufacturing engineers. So there's companies coming into the market now that are doing AI-assisted CAM, with promises of being able to reduce programming time by 80%, which is dramatic. So again, the reason we're pursuing that, there's a cost savings there, but also if the manufacturing engineer is not spending time on the programming side and they're spending out -- spending time cutting chips out on the floor, we're pushing towards that goal of getting hardware to our customers.

And then the last item is, again, we have very capable equipment in the Dev Lab. In my mind, it will do maybe 20%, 30% of the build of material. We'll focus on the harder to do parts that are tougher to outsource but somebody has got to be working on the other 70%, 80%. So we're working with our supply chain team to onboard development-specific suppliers. We have a very robust production supply chain, but we need a different skill set on the development side who can handle high mix, varying complexity and quick turn parts. So we want the Dev Lab to be working parts, our supply chain to be working parts, be together quickly and then get into assembly and test with our customers. So a lot going on. The market has changed. Taylor is changing as well, all with the goal of winning additional business and growing over the coming years.

So I think that's -- I appreciate your time. I'll hand it off to Bob Conrad, our VP of Operations.

Thanks, Jim. Good morning. I will be giving a summary of supply chain and operations for fiscal year 2026. You can see this is our small assembly cell with a couple of our happy assemblers in there. You can see Shelly smiling widely. So it's a glimpse of our small assembly cell. So the slide behind me is consistent with last year's slide, and it's consistent with the year before that slide. And because we believe this is the foundation of our operating principles, we align our investment of capital, training and projects closely within these systems to continue to improvement cycle -- the improvement cycle we've been on for several years. This is similar to last year as well, which shows how different functions align in our business.

This year, we have added another component to our planning structure, the tier meeting structure. This meeting is designed to empower our shop floor employees without formal approval. There are 3 tiers. If there is capital requirement or a systemic issue, they can escalate to a second or third tier, but it's meant to empower employees on the floor. All right. As I stated last year and Tim mentioned, as we reach the 90% On-Time Delivery range, the gains become harder. Solid root cause and corrective action is needed to get some extra percentage point gains. I'm happy to report last year, we increased by 2% and 23% in the last 5 years.

Successful On-Time Deliveries like conducting an orchestra where there are many inputs from all functions that can impact an order being on time. We are constantly looking at our end-to-end processes to improve year-over-year. Internal and external [ key ] contributors to perform at high levels. We will continue to look for ways to improve our internal processes and leading KPIs to address On-Time Delivery in 2027.

Moving to our supplier performance, supplier on-time delivery first on your left. As you can see, there's been a positive trend over the last several years. However, we recognize that this metric has been flat. The supply chain team is focused on engagement with supplier partners on performance and quarterly scorecards and the need to deliver to their commitments. However, we realize that alone is not enough. As we grow our Aerospace and Defense business and the expectations of the supply base is growing.

Over the past year, 4 new aero suppliers have been onboarded, and there is a continuing search for the right suppliers and the right partners going forward in a very competitive and busy aerospace market. These efforts will continue over the next several years to ensure that we have the right suppliers, can partner and deliver at a high quality and delivery level. As you can see the quality graph on the right, there was a significant improvement in escapes, 40% reduction in supplier escapes.

The escapes are anything that reaches Taylor that has a quality issue. The quality and supply chain teams worked well together through on-site audits and the get well program execution and follow-up with suppliers on root cause and corrective action to get this. We need to continue this effort into the next several years.

All right. On to our people system, strategic workforce development. So development, succession planning, process development, one of our strategic deployment projects involved development of a succession plan, which is not unique to any company. What was unique was Taylor's approach. Every potential candidate was given a series of tests in problem solving, critical thinking, numerical reasoning, occupational personality, which includes work attitudes and what motivates them. Results from these tests became the foundation of development plans for each person, call the plan for every person [indiscernible]. This will continue to be developed within our organization in the coming years.

On the continuous improvement, we have 22 employees go through continuous improvement training this year, which was held as the next step from last year's leadership development training. This will continue with another wave in fiscal year '27. And the goal is that our leaders are problem solving with a common approach on a daily basis. We're not speaking different languages, same as leadership.

Safety. Our team-based approach continued in FY '26, and it is embedded into our daily meetings where safety topics are covered and safety walks happen. The new root cause corrective measures process on significant safety incidents also ensures a cross-functional and floor personnel approach, which ensures facts are well understood and actions address the true root cause of the concerns. Our safety and operations team also did a great job exceeding our environmental KPIs in FY '26 through the same root cause activity I just mentioned. One example is paint waste reduction of 29% this year.

Okay. You probably remember these slides from the past few years, right? It's always good to look back at the CI projects and what you did and how you impact the operation. So these bursts represent some of the major time and capital investments we made in FY '26. Our development lab was completed on time, as you heard, in January of 2026. Shortly after that, there were 2 rapid development projects involving landing gear that were completed in approximately 4 months. These projects were the initial testing ground of what is now the development IPT.

A new quality software called 1factory is in implementation -- in the implementation stage, which will aid in first article inspections, auto ballooning of drawings, data exports, CMM and will also help in execution of advanced product quality planning, which is becoming more and more of a requirement in aero markets. Another one is we've developed an internal assembly and test capacity planning tool, which gives us visibility into both equipment and personnel and employee bottlenecks far in advance of the actual need. This tool was a key part in adding test capacity in FY '26, which enabled our test [indiscernible] significant efforts by the IT department to ensure CMMC compliance have been going on, and we recently successfully passed the pen test, one of the major milestones to achieve Level 2. In summary, there are many CI projects ongoing all the time. Far too many to put on this slide, but it remains part of our DNA at Taylor.

Okay. We're embarking on a solar project. So we felt it was important to bring the team up to speed here. So we're embarking on a large solar project and we are seeing rising energy costs and rising demand for energy. We are taking the opportunity to become more energy independent and good stewards of the environment. The chart behind me shows some statistics for our sites -- for one of our sites. In summary, both sites, Taylor will have a reduction of 754,000 (sic) [ 754 ] annual metric tons of CO2 or the equivalent of 162 passenger cars off the road. There's an estimated 50% annual electric bill offset in this project aligned with incentives offered in the solar market, which Taylor took part of. We are in the process of permitting and this project will continue into FY '27.

Upcoming expansion. We also have a project expansion underway, which involves machining. I'm going to show you the map here. That's our main facility. That's our Buffalo Bolt facility, and this facility is literally right in the path of both. So it don't fit well with our campus footprint. This project was initiated as a Phase 1 step towards more complex machining needed for Aerospace and Defense growth plans. Execution of this phase will allow Taylor Devices to support follow-on development programs as well as existing platforms that require more complex and tight tolerance capable machines. There's a team assembled to execute facility upgrades, machine purchase and implementation, personnel and training as well as recruitment of additional talent to support the project. We believe this is an important next step in our support of the Aerospace and Defense markets.

Some of our goals for next year remain very consistent every year. On-time delivery, we are always in pursuit of grabbing that next percent, challenge ourselves to get to 95% or greater next year. Supplier on-time delivery, we've upped that to 94%. We're only as good as that number will be. Execute strategy deployment projects. Tim touched on the 4 focus areas for FY '26. We have the same going for FY '27 and engage workforce through lean strategy deployment, performance management and strategic workforce planning. Thank you.

I'd like to introduce Chief Financial Officer, our esteemed Paul Heary, to give the financial report.

Thank you. So some of these numbers obviously have already been presented, but we'll go ahead and recap. So from a revenue standpoint, total revenue finished at $41.7 million (sic) [ $41.6 million ], down 10% from $46.3 million in FY '25. It was a challenging year on the revenue front as we had some large projects in the prior year in both Aerospace and Structural and which were difficult to replace from a magnitude standpoint. And it was also a light start to the year from a bookings -- on the bookings front, which has been touched on earlier as well. Breaking out sales by customer type, Structural was down roughly 30% to $10.3 million from $14.8 million last year. Aerospace and Defense, up slightly, $27.5 million versus $27.1 million; Industrial down roughly 10%, $4.3 million down to $3.9 million.

Looking at just the Aerospace and Defense sales, again, just up slightly at 1%, but we were able to replace a very large project that burned off. So that was actually a nice performance given the magnitude of that project. The concentration of Aerospace/Defense sales to total company sales is now about 2/3 at 66%, up from the [ 56% ] to 60% range we've seen in the last couple of years. For non-aerospace sales, Structural and Industrial sales were down about 26%. In the Structural area, we were not able to replace a large project from FY '25, a project that again burned off. Sales concentration decreased to 34% of total sales from the 40% range the last couple of years. Breaking down sales by geographic region, domestic sales were flat. Domestic sales concentration increased to 87% of total sales from 79%. Non-domestic concentration decreased to 13% from 21%, mainly driven by reduced structural activity in Asia. Sales to Asia decreased from $7 million to $3.2 million.

Moving beyond sales, gross margin performance dropped to 44% from 46% due to the cost impacts from low revenue in addition to a less favorable project mix. R&D expense increased to $800,000, close to 2% of sales, driven by increased Aerospace/Defense activity. Funded development continued its trend upward at about $1.6 million. Defense-related funded R&D was up 30%. G&A expense. So G&A expense was $10.2 million, down $1.2 million from FY '25 due to profit-related incentive compensation and reversal of a credit loss reserve that we talked about a year ago. So we were successful in collecting that overdue structural receivable in Peru. So we had reserved for that last year, but we were able to relieve that this year with the collection. G&A as a percentage of sales remained at about 25%.

Operating income went down to $7.3 million or 18% of sales from $9.6 million or 21% of sales in FY '25. The decline is attributed to lower revenue and the shift in the project mix. Net income was down by a much smaller amount, only down about $850,000 because of the favorable tax dynamics associated with stock option exercises. So net income finished at $8.6 million as compared to $9.4 million in FY '25. Earnings per share was $2.70 versus $3.01 a year ago. Year-end backlog jumped to $52.8 million with a heavy Aerospace and Defense concentration at 92% of the backlog. We took a substantial -- we talked about a multiyear order towards the end of the year, $19 million has scheduled deliveries over 4 fiscal years, $1.7 million is scheduled for delivery in FY '27. Total bookings for the year, as previously mentioned, were $67.3 million.

Looking at some select financial data. Returns on assets and equity were both down with profitability. Return on assets down to 11.5% from 14%. Return on equity down to 12.7% from 16.6% in the prior year. CapEx at $2.1 million for the year, focused on rapid development capabilities, operating cash flow at $7 million and then EBITDA finished at $9.3 million or 22.3% of sales, down from 24.5% last year, again, because of the reduced profitability, which was driven by lower revenue.

And then just some selected share-related information as of the last day of the year, May 31. Total market cap at that time was $164 million. The share price was $51 on that day. It closed last night at about $54 a share. We had another year with substantial volatility in the share price, low at $34, high $90 a share. That volatility is what triggered some of that stock option activity that was alluded to with the net income slide. We have about 3.2 million shares outstanding and the average daily volume slightly up, but not much, 26,000 shares a day. So that's the end of mine. Thank you very much.

Thank you management for the presentation. That's the show part of the meeting. We will now proceed to the business of this meeting. For purpose of voting at this meeting on all matters to come before this meeting, the polls are closed. The Board of Directors has appointed Courtney Smiley to serve as the inspector of election. She is present and will function in that capacity.

We will now turn to the items presented for vote of the shareholders. The first matter for consideration by shareholders is proposal 1, the election of Timothy J. Sopko as a Director of the Corporation to be elected to Class 2 for a 3-year term, which would expire in the year 2029. I would like to ask the inspector of election, do we have enough votes to pass proposal 1?

Yes, Mr. Chairman, we have enough votes to pass proposal 1. 1,671,112 shares were voted for proposal 1 and 151,303 withheld authority for proposal.

I declare that proposal 1, the election of Timothy J. Sopko as a Director of the Corporation for a 3-year term, is hereby passed.

The second matter for consideration by shareholders is proposal 2, ratifying the appointment of Lumsden & McCormick, LLP as the independent registered public accounting firm for the corporation for the fiscal year ended May 31, 2027. I would like to ask the inspector of election, do we have enough votes for proposal #2?

Yes, Mr. Chairman, we have enough votes to pass proposal 2. 2,313,069 shares were voted for proposal 2. 70,728 shares were voted against proposal 2 and 8,395 shares were voted abstain on proposal 2.

I declare that proposal 2 ratifying the appointment of Lumsden & McCormick, LLP as the independent registered public accounting firm of the corporation for the fiscal year ended May 31, 2027, is hereby passed.

The third matter for consideration by the shareholders is proposal 3, to approve on a nonbinding advisory basis, the compensation of the company's named executive officers. I would like to ask the inspector of election, do we have enough votes to pass proposal #3?

Yes, Mr. Chairman, we have enough votes to pass proposal 3. 1,720,222 shares were voted for proposal 3. 82,386 shares were voted against proposal 3 and 19,807 shares voted abstain on proposal 3.

I declare that proposal 3, the nonbinding advisory vote on the compensation of the company's named executive officers, is hereby passed.

That concludes our business meeting. There being no further business, the meeting is hereby adjourned. Thank you for attending our 2026 Annual Meeting of Shareholders of Taylor Devices.

And now we will be happy, in fact, glad to entertain questions. Mr. [indiscernible].

Last year, you mentioned that you intended to open a sales office in California to [indiscernible]?

So sales office. So we have multiple that are actually located on the West Coast. So they're resident there, they were either out of their homes or out of leased office local areas. So that -- I'm not sure where you're -- I don't think we referenced that we're going to actually build or a physical location there. Is that what you said?

You just mentioned that you were expanding the sales efforts in California...

Okay. Well, relative to people. So one of the -- Stuart alluded to the fact that we are looking at strategic engagement with reps and sales basis. However, our strategy that's been in play for the last 5 years plus has been to add internal employees that are capable of engaging directly with the -- in particular, the Structural market stakeholders. So Structural engineers, the owners, the general contractors and architects. So yes, we had added one person, one person left. So we're net neutral on the 4-person team that's out there.

The short answer is no. We are not opening an office, notwithstanding all the office space that seems to be available.

[indiscernible] shareholder and also an investment adviser, 5 years [indiscernible]. So I've got a couple of questions I'd like to ask. But first off, thank management for a very nice presentation. I would encourage you to do more to get that story out because a very exciting story. So however that might play out, [indiscernible].

First question, I guess, is a structural one, I guess for Todd would be -- you did touch on the office conversion to apartments or residential facilities. Is that something that can be applied in other areas other than just California with the [indiscernible]? And secondly, any potential for applying to new laws in Florida or condo structural revisions or evaluation?

Yes. So the last question first [indiscernible] no seismic if you will [indiscernible] in California, fortunately, [indiscernible] go city by city. L.A. does not have the same [indiscernible] we're trying to with regards to structural integrity support. I mean, get a hurricane going through [indiscernible] for different type of dynamic than obviously [indiscernible].

Other methods of strength I don't think [indiscernible].

The wind point is, think about the bridge Todd referenced in Alabama. So there are the wind dynamics that drive the need and the value for our capability on bridges. A lot of that is vibratory from the traffic over the bridge as well, the impulses. To Todd's point, it's really my 7 years, I don't remember much -- the wind application for very tall skyscrapers in large cities tends to sometimes be a value proposition where it's appreciated for our products. But if it's a lower, fewer story height building, it's typically not.

Another question would be [indiscernible] do you use 3D printing at all [indiscernible]?

Development stage.

Prototypes or final product...

Well, let me -- so we have 2 rapid prototype machines. We actually added one recently as part of the development lab implementation. We -- the team -- Bob's team uses them a lot for assembly and test fixturing. So versus the machine or make something if we can make a thermoplastic part that immediately gets integrated into production and supports ongoing production. We do that all the time. Relative to Tim and team on coming up with a functional prototype relative to a customer need, that's in play as well. Using it otherwise for a part that we ship directly to a customer that's a flight-worthy part, that's not typical, no.

This question for Tim is, you mentioned trying to develop early customer engagement. How do you break in -- what is the process that you break in either to get a new customer? Obviously, if you've got an existing customer that probably easier, but to develop new technology [indiscernible]?

[indiscernible] once you have the technology you go to places like the [indiscernible] show, where you show the technology and hundreds of thousands of people come and 2 or 3 of them [indiscernible] connect between our technology and what they're doing.

Okay. Sounds good. [indiscernible].

I've got a real fast answer to you. We are currently interviewing long [indiscernible] companies to be able to explain to the world what we're doing. But no, I mean, this is a different kind of business. You don't take a dog and pony show on the road and [indiscernible] you've got to target your customers, but first, you need [indiscernible] and the sum that you have [indiscernible] to the technology you develop.

Yes. Just to John's point, we -- if you can -- if you understand enough about what the customer's need is to -- and Tim alluded to it, rapidly build something, get functional data on and correlate that data to math models you do and literally put it on the customer's desk unsolicited. That has been very effective. That's -- sometimes just getting so you put it on their desk can be tricky, but that's been successful.

That doesn't give too much secret sauce away.

That's the risk of running the business. Anybody else has any questions?

I just add to that story because I think it's important to understand that this entire executive team came from the aerospace world. So relationships have already been built. So that's leveraged by these guys. And I think one of the greatest stories that kind of superficial in the moment is they're doing landing gear in the world of aerospace because we all came from that also, getting someone to trust you to do something that you've never done before is a bar -- at least when I was working, it was the bar too far. The fact that they were able, from a credibility standpoint, not just because of who they are past life, but how they could articulate the technical solutions and counter every reason why you shouldn't trust us to do something we've never done before is really the story to the talent level and the capability level of the individuals that actually operate the organization.

Any other questions? If you want to discuss with some of the other guys at this one-on-one, please feel free to do so. Happy to give you all the information you [indiscernible]. Anybody else have any questions? Thank you very much for coming. Very much appreciated.