AIRJ earnings call analysis

NASDAQ:AIRJ Q2 2026 Earnings Call Transcript Generated on 10/9/2026 Operator | Conference Operator: Greetings and welcome to the AirJoule Technologies second quarter 2026 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note that this conference is being recorded. It's now my pleasure to turn the call over to your host, Tom Divine, Vice President of Investor Relations and Finance. Thank you.

You may begin. Tom Divine | Vice President of Investor Relations and Finance

Thank you and good morning. With me today for our second quarter 2026 earnings call are Matt Jore, founder and chief executive officer, Pat Eilers, executive chairman, Bryan Barton, chief commercialization officer, and Steven Pang, chief financial officer. During this call, we will be referring to a presentation which is available on the webcast platform and on the investor section of our website. I would like to point out that many of the comments made during the prepared remarks and during the Q&A section are forward looking statements that involve risks and uncertainties that could affect our actual results and plans. Many of these risks are beyond our control and are discussed in more detail in the risk factors and the forward looking statement sections of our filings with the SEC. Although we believe the expectations expressed are based on reasonable assumptions, they are not guarantees of future performance, and actual results or developments may differ materially. And now, I will turn it over to Matt Jore.

Matt Jore | Founder and Chief Executive Officer

Thanks, Tom. Good morning, everyone, and thanks for joining us today for our second quarter 2026 earnings call. We've had some exciting developments over the last few months, and we're pleased to be discussing those today. On our last call in May, we talked about the growing public opposition to data center development. This was driven in large part by the power and water demands these facilities place on their communities. While it started as local opposition in mostly rural areas where data center development was occurring, public perception has shifted and that opposition has gone mainstream. Even cultural icons like Willie Nelson and Erin Brockovich are weighing in. issuing statements and launching campaigns to oppose data center development in the United States. The political winds are shifting as well. New York recently enacted a moratorium on data center permits for facilities over 50 megawatts, making it the first state to explicitly pause data center development. When signing the executive order, Governor Kathy Hochul specifically said that existing regulatory frameworks are quote, not yet prepared to address the large-scale water use and treatment from data centers, which could strain aquifers, surface waters, and public infrastructure. In Texas, which has been welcoming data centers and thus has seen massive development in recent years, Governor Greg Abbott announced a pause on grid-connected data centers until a full and complete audit of all proposed development can be completed. He urged regulators to determine how much water proposed data centers will use and what their water supply is, as well as information about their cooling technology. These policy actions are unfolding against the backdrop of growing water scarcity across the U.S. A few weeks ago, the Washington Post profiled Kearney, Arizona, a town of 2,000 people whose annual water allocation was cut by 75%. After the reservoir that supplies that town fell to 1% of capacity, the town has prohibited lawn watering, car washing, and even Little League. The article concluded that other towns across the West could face the same fate. Communities are already running short on water, and the demands of new development are colliding with a shrinking water supply. These are the problems that AirJoule helps solve. Our systems produce pure distilled water on-site from the humidity in the air powered by low-grade waste heat without drawing on municipal supply or local aquifers. For data center operators, AirJoule offers a path to water access that does not put them in competition with the communities around them. It also helps solve a permitting problem. Water use is increasingly the factor that delays approval of New data centers because communities worry about long-term water usage. By using AirJoule systems, data center operators can show local officials and residents that it has a long-term solution to securing water. And over time, excess water produced by AirJoule can flow back into the community, which eases local water stress rather than adding to it. For water-stressed regions, AirJoule provides a distributed source of clean water that does not depend on a distant reservoir. The same advantage applies well beyond data centers. In many water scarce markets, water availability is constraining residential development. To that end, we recently announced an exclusive partnership with Kubota Corporation to deploy air joule systems for residential development in water scarce regions of Texas and California. Bryan's going to talk about that in greater detail. But it's a huge milestone for us on the path to commercialization. By partnering with Kubota, who has a 136-year legacy of environmental and water engineering expertise, we'll be able to deploy air-drill systems at scale and unlock residential development across the southern U.S. Partnerships like the one we just announced with Kubota have been critical to our success so far. GE Vranova, our joint venture partner, delivered a powerful validation of our technology this summer. In July, GE Vranova held a grand opening for its new Advanced Research Center Frontier Campus in Niskayuna, New York. They specifically highlighted AirJoule as one of the innovative technologies that GE Vranova is helping to develop. And they have an AirJoule core system operating there as a showcase unit for customers and partners who visit that facility. You can see it also on their website in their recent posts on LinkedIn. This reflects the strength of our joint venture with GE Renova, and we are grateful for their continued support through engineering and R&D initiatives. We've also got some very exciting technology in the hopper at AirJ that we'll be sharing in upcoming communications. Before Bryan provides an update on our customer engagements and productization, I'll turn it over to Pat for an update on our international growth initiatives in the UAE. Pat?

Pat Eilers | Executive Chairman

Yeah, thanks, Matt. Good morning, everybody. Since the end of the quarter, we've achieved two important milestones related to our ongoing commercialization efforts in the UAE. First, we shipped an AirJoule core system to the UAE for a series of deployments to demonstrate the technology and validate performance for customers across the country. The first showcase of this core unit will take place in Dubai at one of Expo City Dubai's landmark destinations. We intend to leverage Expo City's sandbox test environment for the sustainable urban deployment, including technologies addressing challenges like water security. This deployment puts AirJoule in front of the visitors and industry leaders who visit the iconic location. Following the deployment at Expo City, the AeroJoule system will be used for on-site customer demonstrations and exhibitions across various Emirates of the UAE. Second, AeroJoule was awarded one of UAE's first Expo City green licenses. The green license is the first of its kind in the UAE, and it is the key enabler of the Green Innovation District. The country's first location dedicated to sustainable innovation. It admits only companies that can demonstrate a commitment to sustainability and we were in the first cohort. It provides us with access to business missions throughout the Ministry of Economy and Tourism and a seat in the Green Modulus Leadership Forum. In a region where government engagement is paramount, this is a meaningful milestone for us. Our progress in the UAE is taking place as the region is increasingly focused on water security. The Gulf supplies roughly 40% of the world's desalinated water, and more than 90% of that comes from about 56 plants. Several countries in the region draw 70 to 99% of their drinking water from the concentrated base. That was always an efficiency story. Events in the region over the past several months have made it a resilient story as well. AirJoule produces pure distilled water onsite across a range of climate conditions without drawing on municipal supplies, local aquifers, or a connection to centralized infrastructure. That is what we are demonstrating with this latest AirJoule core deployment. With that, I'll hand it over to Bryan for the commercial update.

Bryan Barton | Chief Commercialization Officer

Thanks, Pat. Thanks, Matt. I want to walk through three areas this morning, our commercial progress, Headlined by our recently announced partnership with Kubota, an update on our two product platforms, Prime and Core, and our productization efforts. Let's start with commercialization. In July, we signed an exclusive sales agreement with Kubota Corporation covering residential developments in Texas and California. Kubota will serve as the exclusive sales channel for AirJoule systems in that segment. As a part of the collaboration, we're also deploying two AirJoule core systems with Kubota, one near Corpus Christi, Texas, and the other in Irvine, California. These will start later this quarter. Kubota, which was founded in 1890, operates in more than 150 countries and brings wastewater treatment, water reclamation, pipe systems, and operations and maintenance capabilities to our partnership. They also have tremendous experience in supporting residential development in water constrained regions. The opportunity here is clear. In California and Texas, as well as other water constrained areas, water is now a primary gating item for residential development. Under California law, a residential development of more than 500 units cannot obtain approval without written verification that the water supply is sufficient over a 20 year horizon. that requirement is getting more and more difficult to meet. The state's own water supply strategy projects that California could lose up to 10% of its water supply by 2040 due to hotter and drier weather conditions. When a developer cannot verify sufficient water supply, the projects stall. In Texas, the population is expected to grow by 53% by 2080. However, the state's recently adopted water plan projects that water supplies will be declining by 10% in the same timeframe. Water supply is decreasing while the population is booming. This is the market we are addressing with Kubota. AirJoule unlocks residential projects by generating pure water onsite, independent of municipal allocations and groundwater rights. Importantly, water produced by AirJoule is pure and distilled, meeting not only FDA bottled water standards, but also meeting California's drinking water standards, which are the most stringent in the nation. Designing our system for the most demanding standard in the U.S. positions us well for the rest of our addressable markets. When it comes to performance, our systems produce water across a wide range of temperature and humidity conditions. This is what enables a single air-dual product to serve both the U.S. Gulf Coast and Southern California. Also on the topic of customer engagement, our work with the Net Zero Innovation Hub for data centers will soon move from preparation to deployment. After being selected from more than 70 applicants in the fall of 2025, we successfully completed the Hub's technology acceleration program back in June. And throughout this program, we worked closely with the Hub's members including Google, Microsoft, Datafore, Danfoss, Schneider Electric, and Vertiv. We work with them to align AirJoule's waste heat to water capabilities with the real-world operation of data centers. We'll soon be shipping our first Prime unit to Europe for a deployment to show how AirJoule can convert low-grade data center waste heat into pure distilled water. Now let's talk about our products. I'll start with Prime. We commissioned our first full-scale prime system at our Newark Delaware facility back in May and has been operating ever since. After the initial startup, we focused our engineering work on optimizing the run conditions for specific operating cycles. The learnings we gained from our fields deployments of the core systems have transferred directly to prime. This includes the timing of fans, the sequencing of our vacuum pumps, and the thermal management of our sorbent chambers. Our decision last year to concentrate our build and development activity on the core platform is paying off now by compressing the prime optimization timeline. We are very pleased with the initial performance of the system and we're tracking toward our expectation of 2000 liters per day for this system. In late June, we held an unveiling ceremony of the prime system and we hosted both Delaware Governor Matt Meyer Chris Coons | U.S. Senator: and U.S.

Senator Chris Coons. Bryan Barton | Chief Commercialization Officer

This will allow us to continue optimizing the system at Newark as well as provide showcase systems for customer demonstrations. Turning to the core system, as a reminder, we've been using the core system to demonstrate the technology for customers, but there is significant market demand for the core product as a dehumidifier that also generates pure water, and we refer to this product as Core DH. Our head-to-head testing of Core DH against the incumbent desiccant wheel standard continues to demonstrate significant energy savings across our target humidity range. with this product we're targeting the estimated 1.2 million unit install base of conventional desiccant wheel systems and more specifically applications where facilities operate between 30 and 50 percent relative humidity. We've already begun to deploy these systems, these dehumidifier systems with strategic customers for demonstrations and technology validation. The third area I want to cover is productization. In 2025 and 2026, we deployed several Airduel systems for pilot projects and customer demonstrations, and these units have been critical in improving the technology in the field. We're continuing that work with a limited number of strategic customers this year. And in parallel, we're advancing the engineering that turns Airduel into a commercial product, designed for manufacturing, cost reduction, reliability testing, and product certification. Running these efforts together rather than in sequence is deliberate. It lets commercial deployment and product development proceed at the same time and accelerates market adoption. Reliability has been a huge factor for us this year, huge focus for us this year. It's one of the most important factors that customers look for when evaluating a new product. We built a component reliability program that evaluates every major component in the AirJoule system, and we operate dedicated test rigs through accelerated duty cycles, allowing us to identify problems and mitigate them early. In parallel with reliability and component testing, we're completing design for manufacturing work to prepare both platforms for scaled production. We're continuing to reduce and simplify the bill of materials and we're working through a clear sequence to get us ready for contract manufacturing. Putting it all together, we're executing the commercialization plan that we've laid out for several quarters and I look forward to providing more updates on our next call. Now I'll pass it over to Steven for the financial updates. Thank you, Bryan.

Steven Pang | Chief Financial Officer

I'll walk through our financial results for the second quarter of 2026 and then provide an update on our 2026 outlook and liquidity position. For the second quarter, AirJoule Technologies reported net operating expenses of $4.1 million. This is inclusive of $0.8 million in administrative and engineer expenses reimbursed to us by the joint venture under a statement of work. Our net loss for the quarter was $8.5 million. The primary components below the operating line was $5.1 million of non-cash losses due to the increase in the fair value of our earn-out shares liability and subject-festing shares liability. Now turning to the joint venture. Total JV operating expenses for the second quarter were approximately $5 million. The joint venture received $2.5 million in additional capital contributions from Air Joule Technologies during the quarter to support ongoing productization, manufacturing, and commercial deployment activities. Air Joule Technologies ended the second quarter with $41.4 million of cash on a balance sheet. This includes $14.2 million of net proceeds from a registered direct offering we completed in early June. combined cash across Airdrieu Technologies and the JV was $43 million with no debt. Our guidance for the full year 2026 cash spent at Airdrieu Technologies and the JV is now slightly higher at approximately $27 to $28 million. This reflects increased commercialization activities as we pursue multiple projects and deployments across different market applications. Our liquidity is sufficient to fund our operations, the JV, and our planned commercial deployments into 2028. Looking ahead, we still expect modest pay deployment revenue at the JV during 2026, but more meaningful commercial revenue beginning in 2027 as our core and prime deployments come online. We continue to maintain strong flexibility in managing our capital position and balance sheet, and we'll remain opportunistic and disciplined in evaluating any financing and strategic opportunities that enhance our balance sheet and support long-term value creation. With that, I'll pass it back for the Q&A portion of the call.

Operator | Conference Operator

Thank you. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our first question comes from the line of Jeffrey Campbell with Seaport Research Partners. Please proceed with your question.

Jeffrey Campbell | Analyst, Seaport Research Partners

Good morning. Congratulations on all the progress that you're making. You said that AirGel is deploying the core DH to strategic customers beginning in the third quarter, which provides areas that you're targeting specific types of businesses.

Bryan Barton | Chief Commercialization Officer

I'm sorry, Jeff, you were breaking up a little bit. We got that this is about the core DH deployments. Can you repeat?

Jeffrey Campbell | Analyst, Seaport Research Partners

As the core DH, I was wondering if you could give us a little color on maybe where these initial strategic applications are being located geographically and maybe specific types of businesses that you're targeting if that's relevant.

Bryan Barton | Chief Commercialization Officer

Yeah, thank you for the question. And as we said, we are deploying core DH systems to strategic customers for industrial dehumidification and really this segment where spaces need to be kept dry. And I would maybe just elaborate that as strategic deployments, these are seeking to validate the performance and the efficacy of the core operating system and we're focusing on both deployments that can enhance our commercial product adoption with strategic customers in that sense, as well as some industrial focused customers that see the value of both the dehumidification and the water that's generated.

Jeffrey Campbell | Analyst, Seaport Research Partners

Okay, and Bryan, you discussed Preparations for Contract Manufacturing, specifically highlighting cost reduction and simplifying materials. I wondered if you could add any color with regard to, A, are both models in optimization? Is the effort on time? And when do you expect to be ready to present enhanced designs to manufacturing partners?

Bryan Barton | Chief Commercialization Officer

Yeah, thanks. I think both DFM activities and kind of cost simplification activities are on track for Prime and Core. The Prime, you know, engineering is effectively going through, right, those cost component changes and some simplifications for manufacturing. And it's on time for, you know, those 2027 contract manufacturing conversations and we're preparing on schedule for that. For the core product, it's a little bit, even though we've had core for a while, getting that product to be really ready for prime time. I'm very excited about the dehumidification market opportunity in front of us with this product. We're on time, but we're also pushing to accelerate that effort. In the past, we've clearly communicated a 2027 product there for core DH, and we're on track for that.

Matt Jore | Founder and Chief Executive Officer

Hey, Matt. Sorry, Jeff. Matt here. Just wanted to add on the first topic. Keep in mind, Brian mentioned the $1.2 million installed base for that dehumidification market. Pretty excited about that. That gives you a little bit of color on where we're heading with it. On contract manufacturing, it's important to recognize that the vast majority of the components that go into a core or prime system are built around the heart of the system, the coded contactor, the metal organic framework coded contactor. So there are many manufacturers who already have ERP systems, supply chain all set up for all the rest of the relatively commodity components. So it's not a heavy lift is my point.

Thank you. Right. Jeffrey Campbell | Analyst, Seaport Research Partners

Yeah, understood. If I can ask one last one with regard to Kubota and the development work that's going on there. You just gave us a little color on what the thought is. I'm wondering are the installations going to be more centralized maybe for a planned development or will each home have an air jill and with one core, enough water supply for each home? Just anything you can tell us here so we can start to visualize it a little bit.

Thanks. Bryan Barton | Chief Commercialization Officer

Jeff, thanks. I think we have a rendering that was, I believe, released. But the idea is a planned residential community. This is a multi-home community where there are several houses and there would be a centralized water generation system and recycling system. So Airdwell brings the pure distilled potable water for the drinking water for the community. And then there's water recycling system as well for the community. So it's kind of that centralized community picture.

Jeffrey Campbell | Analyst, Seaport Research Partners

Great.

Thank you. Bryan Barton | Chief Commercialization Officer

Thanks.

Operator | Conference Operator

Thank you. Our next question comes from the line of Alex Furman with Lucid Capital Markets. Please proceed with your question.

Chris Coons | U.S. Senator

Thank you for joining us.

Matt Jore | Founder and Chief Executive Officer

you recognize long term these communities are looking and regulators are looking at permitting where companies, data centers or residential developers can show 20 or 100 years in the case of Arizona water supply so that's really what we're pointing to long term 2,000 liters a day is just the start long term we want to do 10,000 and 20,000 liters and that's what we're focusing on but for now I'll let Brian answer the Bryan Barton | Chief Commercialization Officer: Thank you for the question, Alex. We commissioned this system in May. It's been operating outdoors ever since, and we've been really impressed with the speed upon which it's come online and operated. It's running 24-7 with high uptime, and there's a lot of water and data that's being generated through a lot of different environmental conditions. And I guess as a reminder, to everyone, the system operates depending on the humidity levels in the air. So when we talk about 2,000 liters per day, up to 2,000 liters per day, that's on the higher side of the humidity levels. And what makes AirJoule unique is the ability to Thank you for joining us today. You know, really, I'm very pleased with its performance coming online. And, yes, we are on track to hitting the 2,000 liters per day, and we have specific, you know, measures now identified to close the gap and to have the system really operating at spec.

Alex Furman | Analyst, Lucid Capital Markets

Okay, that's really helpful. Thank you. And then if I could ask one on capital, it sounds like a very high class problem that you're going to be burning a little bit more cash than expected at the JV given the accelerated commercialization. How much capital do you envision committing to the JV this year and next?

Steven Pang | Chief Financial Officer

Yeah, Alex, this is Steven here. We haven't provided 2027 guidance, but as we think about the slightly higher 27, 28 million guidance that we provided for this year, The incremental capital above the $25 million is geared towards the JV. The additional capital has really helped steer some incremental units that we have earmarked for additional customer interest that we're seeing. So from a G&A standpoint, certainly nothing higher as a corporate entity, but all of this is earmarked toward enhanced deployments. I would think about next year as similar to kind of what we're Thinking about right now, I think from a CapEx standpoint, certainly we're evaluating the contract manufacturing partners to help eliminate some of the incremental CapEx we'll likely need if we were to scale up production on our own. But from a R&D and current G&A spend perspective, we expect next year right now to trend similarly from what we're seeing.

Alex Furman | Analyst, Lucid Capital Markets

Okay, that's really helpful.

Thank you very much. Operator | Conference Operator

Thank you.

Alex Furman | Analyst, Lucid Capital Markets

Thanks, Alex.

Operator | Conference Operator

Our next question comes from Ryan Sinks with B Reilly Security. Please proceed with your question.

Ryan Sinks | Analyst, B. Riley Securities

Hey, guys. Thanks for taking my questions. Maybe starting with the collaboration with Kubota, I think residential is the main opportunity, but are you exploring broader commercialization efforts with those guys and other verticals?

Bryan Barton | Chief Commercialization Officer

Yeah, thanks, Ryan, for the question. Today, our partnership and conversations with Kubota are focused on the residential multi-home communities.

Ryan Sinks | Analyst, B. Riley Securities

Appreciate that. And then maybe turning to Europe, with the prime expected to shift near term for the net zero renovation hub for data centers, I'm curious what you envision resulting from that program, whether it be technology partnerships, commercial deployment opportunities, or anything else that you're looking for.

Bryan Barton | Chief Commercialization Officer

Yeah, thanks. I think this is a really great opportunity for us to highlight our product and how it's integrated for data center waste heat operation. And as shared on the call, the hub includes major key members in the sector, so Microsoft, Google, DataForce, Danfoss. and then Schneider and Vertiv to round it out. But highlighting the system and integration into data centers is really a key showcase for these guys. And I think the expected success is really the carry on from there into how AirDuel can specifically enable data center operations for those players.

Ryan Sinks | Analyst, B. Riley Securities

Great. I appreciate the time, guys.

Matt Jore | Founder and Chief Executive Officer

Yeah, hey, Bryan, I would add to Bryan's comment. This whole theme of permitting, you know, that unlocking the opportunity, if these data centers look at the air for their next source of water and demonstrate that, that's all it takes. They need to demonstrate a long-term solution to not deplete aquifers. And so that's what I view the Net Zero Innovation Hub is all about that. demonstrate the efficacy of a water-from-air system. The alternative is aquifers that are going to deplete. And so that's what it offers data centers. That's what I get excited about because it's a long-term initiative that they can point to now just entering into a contract with us. So thank you for your question. Thanks, Matt.

Operator | Conference Operator

Thank you. As a reminder, if you'd like to join the question queue, please press star 1 on your telephone keypad. Our next question comes from the line of Amit Dayal with AC Wainwright. Please proceed with your question.

Amit Dayal | Analyst, AC Wainwright

Thank you. Good morning, everyone. Just trying to confirm if Carrier did invest in AirJoule and where that relationship stands in terms of commercialization efforts.

Steven Pang | Chief Financial Officer

Are you asking as it relates to the most recently completed offering or just more broadly speaking?

Amit Dayal | Analyst, AC Wainwright

No, just in relation to this deal with Kubota.

Bryan Barton | Chief Commercialization Officer

Yeah, Matt, thanks. I think Carrier is very interested in a couple of things. One, obviously the HVAC market sectors, HVAC being an over $300 billion market and Carrier being a key leader in that sector. And also, they're a great strategic partner as it comes to data centers, Carrier providing some heat recovery system to keep data centers cold while also providing warm water for, for example, for AirJoule to be used on location. So those are two really important strategic initiatives under Carrier. and they're, you know, engaged in both of those efforts. So, you know, thinking about the dehumidification and where that technology is going at large in terms of our longer-term product roadmap, you know, in the HVAC sector as well as, yeah, the data center engagement.

Amit Dayal | Analyst, AC Wainwright

Okay, understood. Thank you. Are there any regulatory incentives that could be brewing at a state or federal level that could support the commercialized efforts for these types of offerings?

Matt Jore | Founder and Chief Executive Officer

That's a great question and we're definitely exploring those. In my remarks, I talked about the attention that's being paid on water. We aim to do our best to inform Congress and all government regulatory bodies that water's a real issue. And, you know, Bryan hosted Senator Chris Coons as he made in his remarks, as he referenced. And that part of that is to make sure that everyone at the policymaking level understands how serious this issue is and what a fantastic solution AirJoule is. So... You know, we're active in terms of communication there.

Amit Dayal | Analyst, AC Wainwright

Thank you. And then the two, just last one for me today, the two units that are deployed, I guess, you know, in relation to this Kubota development, is this just to continue sort of, you know, benchmarking performance, et cetera, or to, you know, start showcasing these offerings to developers? Any clarity on that would be helpful.

Thank you. Bryan Barton | Chief Commercialization Officer

Yeah, it's really the latter, showcasing the technology opportunity to the developers and how we can actually unlock residential communities. So two of the areas that are of key focus, right, are the Irvine, California, and Corpus Christi, Texas, both locations that are facing difficulty expanding, you know, development in general, but specifically on residential communities. So Kubota selected these two locations really as a focus for them to highlight the technology to the developers. Thank you, guys.

That's all I have. Tom Divine | Vice President of Investor Relations and Finance

Thanks, Amit.

Operator | Conference Operator

Thank you. Ladies and gentlemen, that concludes our question and answer session. I'll turn the floor back to Mr. Joule for any final comments.

Matt Jore | Founder and Chief Executive Officer

Thanks, Melissa. Thanks, everyone, for joining us this morning. The second quarter moved AirJoule from validating the technology to building defined commercial channels. Our exclusive sales agreement with Kubota gives us a channel into residential development in two states where water decides whether projects get built. Our first prime system is operating at Newark and ships to Europe this quarter. We have a core system operating at GE Vranova's Frontier Campus and another in the UAE supporting customer demonstrations. Every deployment we execute over the balance of this year builds towards scaled commercial activity in 2027.

Thank you very much. Operator | Conference Operator

Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation. jsPDF 3.0.3 D:20261009125756-00'00'

NASDAQ:AIRJ Q1 2026 Earnings Call Transcript Generated on 6/8/2026 Operator | Conference Call Operator: Greetings and welcome to the Airtel Technologies first quarter 2026 earnings call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note that this conference is being recorded. It's now my pleasure to turn the call over to your host, Tom Devine, Vice President of Investor Relations and Finance. Thank you.

You may begin. Tom Devine | Vice President of Investor Relations and Finance

Thank you, and good morning. With me today for our first quarter of 2026 earnings call are Matt Jor, Chief Executive Officer, Pat Eilers, Executive Chairman, Brian Barton, Chief Commercialization Officer, and Stephen Pang, Chief Financial Officer. During this call, we will be referring to a presentation, which is available on the webcast platform and on the investor section of our website. I would like to point out that many of the comments made during the prepared remarks and during the Q&A section are forward-looking statements that involve risks and uncertainties that could affect our actual results and plans. Many of these risks are beyond our control and are discussed in more detail in the risk factors and the forward-looking statement sections of our filings with the SEC. Although we believe the expectations expressed are based on reasonable assumptions, they are not guarantees of future performance, and actual results or developments may differ materially. And now I will turn it over to Matt Jor.

Matt Jor | Chief Executive Officer

Thanks, Tom. Good morning, everyone, and thank you for joining us for our first quarter 2026 earnings call. On our last earnings call in March, we framed 2025 as the year we built the foundation for commercialization through our initial deployments, at our joint venture with GE Vernova, and 2026 as the year we move from those one-off deployments to productized commercial sales. We are executing against that plan. So far in 2026, we've made disciplined progress on the AirJewel core platform, completed the build of our first AirJewel Prime full-scale system at our Newark, Delaware facility, and continued advancing customer engagements toward commercial pipeline building in 2027 and beyond. Before I describe that progress in more detail, I want to spend a little time on the macro. The water resilience tailwinds we discussed on prior calls have not slowed. They've actually accelerated. Water scarcity is becoming more central to industrial planning every quarter. In recent weeks, multiple hyperscalers have abandoned multibillion-dollar data center projects in the face of community opposition tied to water access. Institutional investors representing more than a trillion dollars in assets have pressed those same companies for site-by-site disclosure of their water use. When the largest cloud operators in the world walk away from projects of that scale over water access, the signal to the rest of the market is unmistakable. At least a dozen US states have introduced data center moratorium bills this year, and Bloomberg has documented that roughly two-thirds of the data centers built in the US since 2022 sit in areas already under measurable water stress. Drought, regulatory pressure, and the accelerating water demands of compute and infrastructure are all intensifying, not abating. This is exactly the problem AirJewel was built to help solve. Now let's discuss how AirJewel fits into this picture, particularly with respect to data centers. We applaud the work the industry has done to drive water consumption down. Closed-loop systems, direct-to-chip cooling, and continuous improvements in Water Use Effectiveness, or WUE, are real progress. The most efficient WUE levels we see today are on the order of 0.1 liters per kilowatt hour at the most advanced hyperscaler facilities. However, These facilities are hundreds of megawatts or even gigawatts in scale. So the absolute volume of water consumed is still substantial and requires significant water permits. Beyond the initial draw to fill the system, there are continuing requirements for closed-loop water replenishment, humidification, and domestic uses. For the millions of gallons of water that even the most efficient data centers still consume, AirJewel can reduce dependence on multiple supply and aquifer access through on-site water generation. Turning back to our progress so far in 2026, on productization, our AirJewel core platform improved performance and durability through systematic optimization of airflow, thermal management, and contactor coding process. The core design is essentially locked. On certification, we've advanced our UL and water quality work to ensure our systems are compliant with the most stringent regulatory standards. Brian will share more on that in just a moment. On our flagship prime platform, our first full scale air dual prime system has been built at our Newark Delaware facility and is now operational. This is a meaningful milestone. The prime is a system we engineered for scale from day one, and we'll spend more time discussing it shortly. On commercialization, we're seeing strong customer demand across an important range of markets. And Brian will walk through where we are deepening the most active engagements. On the balance sheet, our combined cash position supports our operations through 2027 with no debt. And Stephen will provide more detail in a minute. The bottom line is this. We're on course. We've developed our technology and are now a product company. Our internal organization reflects that with strong product engineering leadership and every work stream aligned to a product roadmap. What we're doing this year lays the foundation for scaled commercial pipeline building in 2027 and beyond. With that, I'd like to turn it over to Mr. Pat Eilers, our executive chair.

Pat Eilers | Executive Chairman

Yeah, thanks, Matt, and good morning, everyone. Before Brian walks through our product and commercial update, I would like to share an update on governance and our progress in the Middle East. As disclosed in our proxy statement filed on April 15th, effective May 28th, 2026, Max Baucus will be stepping down from the AirJewel Technologies Board of Directors. On behalf of the entire board, I want to thank Max for his service to the company. Mack served six terms in the US Senate representing Montana and served as US ambassador to China. He has been a tremendous director since our formation. He brought a depth of experience in public policy, international affairs, and industrial strategy that has been invaluable as we have built AirJewel into the company it is today. We are grateful for his contributions and wishing well in everything that comes next. I'm also pleased to announce that Stu Porter has assumed the role of lead independent director of the board and will also serve as chair of our nominating in governance committee. Stu has been active and engaged director since the company's formation and his leadership in these new roles will strengthen our governance and support our path to commercialization. Turning to the Middle East, concern about water security in the region continues to grow given the region's dependence on desalination. AirJewel remains actively engaged with UAE government and regulatory leaders to build awareness of how our technology can bolster water infrastructure resiliency through distributed AirJewel placements. UAE leadership has signaled a clear intent to lead on water security through innovative technology. And we believe the Air Jewel value proposition is a strong fit. Our commercialization path in the Middle East region begins with the initial proof of con value installations at potential UAE clients. From there, we will plan to scale across the UAE, the broader GCC, and Global South markets that can benefit from those reference deployments. Through the balance of 2026, we expect to build AirJules' profile in influential industry and thought leadership gatherings, often in coordination with the Global Climate Finance Council, MASDAR, in the UAE Ministry of Foreign Affairs. These efforts will lead up to our participation in the UN Water Conference, which will be co-hosted by the UAE in Senegal in Abu Dhabi in December, 2026. With that, I'll turn it over to Brian to discuss our product and customer progress.

Brian Barton | Chief Commercialization Officer

Thanks, Pat. I want to walk through four areas this morning. Our core platform, which will have two product variants, our first prime build and our commercial engagements. And then I will close with a brief look at the rest of 2026. Starting with the AirDuel core platform. In 2025, we made a deliberate decision to focus our build activity on the core platform because core and prime share a common sorbent chamber architecture, which means every core deployment also de-risked the path to prime. This year, we have improved the performance and durability of the core system through systematic optimization across three areas, airflow distribution, thermal management, and contactor coating. The first-generation core design is now locked. We may make minor dimensional adjustments as we finalize manufacturing, but we're at a form factor that we can scale. We now have updated product spec sheets available on our website at airdualtech.com, And I would encourage anyone interested in the technical specifications to take a look. We're planning to launch the core platform in two product variants targeting two distinct markets. The first is the Airdule Core AWG variant with the target commercialization launch of late 2026. The primary customer focus for Core AWG is the US military and small residential deployments. With the U.S. military, we are collaborating through our existing Cooperative Research and Development Agreement, or CRADA, with the U.S. Army Engineer Research and Development Center. The CRADA brings together Air Jewel's Waste Heats to Water platform and ERDC's tactical water recovery research to deliver resilient water supply solutions for forward deployed personnel. The second variant is the Air Jewel Core DH. with a target commercial launch in 2027. Core DH is materially the same product as Core AWG, the same hardware, optimized through process configuration and controls for dehumidification application. This variant targets the global installed base of conventional desiccant wheel dehumidification systems for humidity control between 30 and 50% relative humidity. I want to spend a moment on the dehumidification opportunity because this is the first time we are presenting concrete performance data publicly. AirJules metal organic framework sorbent regenerates at 60 to 70 degrees Celsius compared with 120 to 150 degrees required for conventional desiccant wheels. That difference is fundamental. It enables heat pump driven regeneration in place of electric reheat or natural gas. Our initial performance data shows up to approximately 40% energy savings versus incumbent and defecant wheel technology in our target operating ranges. And we expect further improvements over the next few quarters leading up to the product launch. Our initial target markets for core DH are dry storage and cold storage facilities operating between 30% and 50% relative humidity. Last year, we announced an MOU with a defense contractor to collaborate on this dehumidification application. This engagement has informed our core DH development, and we expect other markets and applications to follow. Now let me turn it over to AirDuel Prime. As Matt mentioned, we have hit a meaningful milestone with the completion of our first full-scale AirDuel Prime system, which is now operational outdoors at our Newark facility. we will provide a meaningful update on its performance on our next earnings call. The AirDuel Prime has been engineered for scaled manufacturing from day one. The Prime contains 16 vacuum chambers sourced from established suppliers at low cost. With the balance of the bill of materials made up of off-the-shelf components such as valves and pumps. The only custom component is the sorbent coated contactor, which we are manufacturing in-house. The overall design of Prime is set. Further refinement will be limited to sorbent level improvements and individual component tuning. All of the work we did across 2025 to optimize core, particularly the thermal management and the airflow, directly informed the Prime design and it's expected to translate it into Prime performance. The prime is designed to deliver up to 2,000 liters per day, or less than 200 watt hours per liter when paired with low-grade waste heat, with a maximum power draw of just 12.5 kilowatts and configurability across waste heat sources from 60 degrees Celsius and above. Over the next several months, we will continue to optimize this system in Newark. This first prime unit is planned for deployment in Europe as part of our Net Zero Innovation Hub collaboration. We are also building another prime system to serve as our internal showcase unit at our network, at our new ARC facility, supporting customer demonstrations and proof of value engagements throughout the year. Regarding product certification, we will pursue UL certification of the air dual systems for electrical components, while water quality certification will be addressed on a case by case basis, depending on the customer requirements and their location. And importantly, our products already meet FDA bottled water standards and will be compliant with California water quality standards, which are the most stringent regulatory standards in the United States. We believe that designing for compliance with the most demanding applications positions us well across the rest of our addressable market. Let me turn now to customer engagements that lead to a commercial pipeline in 2027 and beyond. First, hyperscale data centers. As we've talked about previously, AirJewel's value proposition for data centers is that we can utilize low-grade waste heat to produce pure distilled water onsite. Onsite water generation delivers operational resilience and supports water stewardship and community license that hyperscale operators increasingly require. We're currently working with a leading hyperscale operator on a detailed evaluation of AirDuel Prime's economic and technical performance at discrete data center locations. This work has deepened our understanding of the value that AirDuel can deliver when tethered to waste heat. Building from this understanding, we recently published a white paper articulating AirDuel's economic benefit across both water-cooled and air-cooled data center configurations. AirDuel can help address the water permit constraints for new data center construction by generating distilled water onsite from atmospheric humidity. And given that a 100-megawatt data center can generate $3 to $5 million per day of revenue, AirDuel CapEx can be recovered in just days of avoided permit delay. We're also building momentum through the Net Zero Innovation Hub for data centers. Waste heat reuse from data centers has emerged as an important regulatory priority in Europe under the EU Energy Efficiency Directive. And we are in close conversations with the consortium's members to address that need. As referenced earlier, our first prime unit is planned for deployment in Europe in conjunction with the Net Zero Innovation Hub to demonstrate air jewels integration into a data center and its ability to convert waste heat into pure water. Residential development. We're deepening a co-development framework with a global partner targeting water scarce US residential markets in the US Southwest. The Southwest is increasingly an environment in which residential development projects are restricted due to a lack of water security. Our AirDuel platform addresses that constraint directly. And during the first quarter, we completed deployment of an AirDuel core system at the Red Dot Ranch Foundation site in Pescadero, California. The pilot validated off-grid water generation that supports Red Dot Ranch's climate-positive housing development. Third, water delivery and distilled, trucks distilled water. The global water distribution market is approximately $50 billion. And in many U.S. markets, distilled water sells for above a dollar per gallon. driven not by raw supply, but by the logistics of trucking water from distant wells to the customer. In collaboration with a waste heat partner, AirJewel's waste heat to water economics can result in operating costs below 10 cents per gallon, positioning us favorably in this supply chain. We have early stage conversations underway with waste heat providers, distributors, and end users about future collaborations. And finally, the Middle East. In January, we announced an exclusive distribution agreement with 10X Investment across six Gulf countries, the UAE, Oman, Qatar, Saudi Arabia, Bahrain, and Kuwait. We are pacing deployment activity to align with regional conditions and the availability of production-ready hardware later in 2026. Putting it all together, we're excited about the opportunities ahead of us. We're seeing growing traction for our data center application, Opportunities in the residential development space continue to deepen with our co-development partner, and the launch of our dehumidification product is attracting interest from customers. Through the rest of 2026, we will complete the commissioning of our first prime system at Newark and prepare for its deployment in Europe via the Net Zero Innovation Hub. We will deliver our first commercial core systems, We will publish additional dehumidification performance data and build out customer engagements for the core DH variant. And we will continue to build the deployed base and contracted customer relationships that support scaled commercial activity in 2027. With that, I'll turn it over to Steven for the financial update.

Stephen Pang | Chief Financial Officer

Thank you, Brian. I will walk through our financial results for the first quarter of 2026 and then provide some color on our outlook and liquidity position. Before turning to operational highlights, I do want to address one item in our results. We recorded a non-cash impairment charge of approximately $55 million flowing through our Airdrieu JV equity method investment line. This follows last quarter's adjustment and like that charge is accounting related. Our fair value assessment of the JV investments ordinarily performed annually, but given the decline in our share price last quarter, performed an interim assessment. Because the test was measured as of quarter end and our share price was a trough on that date, the assessment resulted in a write-down for the quarter. I would note that our share price has recovered meaningfully since the close of the period. I also want to underscore what's unchanged. This charge has no impact on cash, no impact on the operational performance at the JV, and no impact on our broader commercial trajectory. The JV's technology development, customer pipeline, and execution against milestones continues to track in line with our expectations, as you've heard on this call. Turning to our financial results. For the first quarter, Airdrieu Technologies reported net operating expenses of 3.6 million. This is inclusive of 0.8 million in administrative and engineering expenses reimbursed to us by the JV under a statement of work. Our net loss for the quarter is 49.8 million. The primary component below the operating line was the loss from investment in Airdrieu JV of 63.1 million, driven primarily by the impairment I mentioned. This is partially offset by a 14.7 million tax benefit. Turning back to the joint venture, the total JV operating expenses for the first quarter was approximately 5.5 million, and the JV received $10 million in capital contributions from Aerogeo Technologies during the quarter to support ongoing productization, manufacturing, and commercial deployment activities. Aerogeo Technologies ended the first quarter with 31.1 million of cash on the balance sheet. Combined cash across the systems, with the JV was $35 million with no debt. Our guidance for the full year 2026 cash spent at the Airdrill Technologies and JV is unchanged from our prior guidance. And our liquidity is sufficient to fund our operations, the JV, and our planned commercial deployments through 2027. Looking ahead, we expect modest pay deployment revenue at the JV during 2026 with more meaningful commercial revenue beginning in 2027 as our core product completes our certifications and our first prime deployments also come online. We maintain strong flexibility in managing our capital position and balance sheet. We'll also remain opportunistic and disciplined in evaluating any financing and strategic opportunities that enhance our balance sheet and also support long-term value creation. With that, I'll pass it back for the Q&A portion of the call.

Operator | Conference Call Operator

Thank you. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from the line of Amit Dayal with HC Wainwright. Please proceed with your question.

Amit Dayal | Analyst, HC Wainwright & Co.

Thank you. Good morning, everyone. Thank you for taking my questions. So, you know, congrats on, you know, getting the first fully assembled unit ready. My question, I guess, is just, you know, pretty basic, I guess. What will it take now for the customers to potentially pull the trigger on placing orders for these units? Do they need some type of pilot deployment before they place larger orders? I mean, if you could walk us through the sales process from here to potentially getting these deployed in the field.

Thank you. Brian Barton | Chief Commercialization Officer

Thanks, Amit, for the question. We actually see a couple of different ways that customers can convert. Some of them do want to see pilots. Some of them are happy seeing the system operational with real-world performance data. And of course, there are also customers that are hungry for water, so to speak, that are eager to move forward as well. So we're having a range of conversations with various different customers, taking them through that process. every customer is unique in terms of what they need to see in order to pull the trigger.

Amit Dayal | Analyst, HC Wainwright & Co.

Understood. Thank you. And then as you sort of, you know, make some tweaks and improvements to the assembled unit, like how much more improvement in performance, et cetera, could you, do you think there is that you could extract from these levels?

Brian Barton | Chief Commercialization Officer

Yeah, looking forward to being able to answer that question more fully. With the system just now becoming operational today, we're looking forward to starting the optimization process and what's called the shakedown of that process so we can really see the initial performance and then how much further we can drive it with various improvements. Improvements can range from individual component optimization, say, for example, fans and pumps, optimizing their efficiencies, as well as sorbent level changes, which are things such as like the thickness or the quantity of sorbent that's in each contactor. So we can expect to see, you know, tweaks and improvements to performance over the coming months and we'll provide a more meaningful update, you know, on our next quarterly.

Amit Dayal | Analyst, HC Wainwright & Co.

Understood. And then just last one, maybe, you know, this fully assembled unit, are you potentially going to place it in a customer site, you know, or are you... Yeah, good question.

Brian Barton | Chief Commercialization Officer

We'll discuss the details of this unit's deployment in a future call. We haven't disclosed or communicated the specifics around that, but it will be deployed.

Amit Dayal | Analyst, HC Wainwright & Co.

Thank you, guys.

That's all I have. Operator | Conference Call Operator

Thank you. Our next question comes from the line of Jeffrey Campbell with Seaport Research Partners. Please proceed with your question.

Jeffrey Campbell | Analyst, Seaport Research Partners

Good morning, and congratulations on all the work and the developments. I guess my first question is, now that the core and the prime designs are stable, can you provide some color on your roadmap to reduce unit costs?

Brian Barton | Chief Commercialization Officer

Yeah, thanks, Jeff. You know, the primary activities on reduction of unit costs are early occurring throughout the remainder of 2026, and these are, you know, kind of similar to my previous comment, things like finding the most cost-effective and quality and efficient pumps and fans, as well as some other kind of components that are throughout the system. So that work has begun for core and is beginning for prime. And we anticipate to be able to move substantially through this process over the coming quarters. you know, leading up to the launch of the core AWG system at the end of the year and then, you know, fully completing that process, obviously, before the launch of the prime and the DH unit. So we'll provide a more meaningful update as we move through that. It will take time to validate, you know, quality and performance of the different components we have inbound, but that's substantially the bulk of the activity.

Jeffrey Campbell | Analyst, Seaport Research Partners

And as long as we're at it, I thought I'd ask, is the Is this sorbent that you want to use now stable as well, or do you still look at other MOFs perhaps maybe from research that's happening at GIF?

Brian Barton | Chief Commercialization Officer

Yeah, we're exploring alternative MOFs within the standard research kind of pipeline so that we're aware fully with all sorbents as MOFs and non-MOFs. that can have an impact on our core performance. And I'd like to say we're loss agnostic and we want the best technology in our product as possible. But today, the sorbent that we've scaled and is available in large quantities at a cost-effective price, it's performing very well. And it's setting the benchmark for us in terms of any other material would have to deliver substantial performance to validate its position in a variant of the product.

Jeffrey Campbell | Analyst, Seaport Research Partners

Maybe it's a little bit early, but probably not the way you guys look ahead. I'm just wondering if you could tell us what kind of planning or working you're doing towards the contract manufacturing shift in 2028, and are you still targeting that year, and when in the year do you expect that to begin to really ramp up?

Brian Barton | Chief Commercialization Officer

Yeah, we've had the initial conversations with contract manufacturing assembly houses, so to speak, and as we've shared on previous calls and materials, our system is largely off the shelf components. And so there are assembly houses or contract manufacturing partners that are perfectly positioned to take our assembly instructions and scale to provide the volumes of the primes and cores that we need. So we've begun those conversations. We're, of course, not ready to disclose any details around the maturity, but we are still planning for when that will happen so that we can be prepared. 2028 sounds right in terms of the volume scale that we're anticipating and into future years. But we're really leading with a customer pull in terms of volume and then capability to meet that volume will match.

Jeffrey Campbell | Analyst, Seaport Research Partners

Okay. Yeah, that's enough. I'll take the rest of them offline and give it back to the queue. Thanks. Thanks, John.

Operator | Conference Call Operator

Thank you. Our next question comes from the line of Alex Furman with Lucid Capital Markets. Please proceed with your question.

Alex Furman | Analyst, Lucid Capital Markets

Hey, guys, thanks very much for taking my question, and congratulations on all the progress that you're making towards commercialization. You know, now that you've got the core design essentially locked here, can you tell us what still needs to be done here to finalize the design for Prime? It sounds like the underlying technology behind the two systems is essentially the same. Are you hoping to have a better sense of how core performs in the field and then use some of those insights to tweak the final design for PRIME?

Brian Barton | Chief Commercialization Officer

Yeah, thanks, Alex, for the question. You know, substantially all the engineering was completed through the core because effectively it's the same sorbent chamber architecture that we just put 16 sorbent chambers into. And, you know, moving forward with the PRIME, then we'll be optimizing that core engineering design. So we don't see any substantial engineering changes modifications um and there could be things here as as we start to shake down the system but um moving forward core will not really inform prime we have prime now in our hands and so we'll start the shakedown and optimization and then um you know treat it independently as it moves forward okay that's that's really helpful thanks uh and then you mentioned a number of different Alex Furman | Analyst, Lucid Capital Markets: use cases and end markets on the call. Obviously, military is a big one that could be, you know, commercialized pretty soon here. Data centers are, of course, a big one here as well. You mentioned residential deployment. Where are you kind of seeing the most demand now, and how do you prioritize going after these different and market? You know, is it fair to assume the AI data center opportunity is for the most part tied to the larger prime system?

Brian Barton | Chief Commercialization Officer

Yeah, that's a fair assumption, Alex, and we've talked a lot about data centers and water scarcity and our ability to impact that market segment, and we're having, you know, substantial conversations with that, and I think that there's significant, you know, pull into that direction. You know, one other comment on this is that different markets take different time. Like, there's different regulatory frameworks and different proof points and validations before different markets, you know, will embrace and adopt in a meaningful volume way. You know, for example, data centers are going to move at a different pace than U.S. residential, than U.S. military, you know, than desiccant dehumidification, you know, core DH products, for example. So we're trying to manage all of those different – go-to-market timing dynamics here as well.

Alex Furman | Analyst, Lucid Capital Markets

Okay, that's really helpful.

Thank you. Operator | Conference Call Operator

Thank you. Our next question comes from Ryan Fingst with Be Ryan Securities. Please proceed with your question.

Ryan Fingst | Analyst, B. Riley Securities

Hey, good morning, guys. Thanks for taking the questions. Maybe a follow-up to the last one. For the core deployments expected in the fourth quarter, Which customer do you think is most likely first to place an order? Or is a better way to think about it, multiple customers are ready and just waiting for the required certifications to be completed?

Brian Barton | Chief Commercialization Officer

Yeah, thanks, Ryan. In a lot of ways, the initial core deployments are still positioning customers that are principally interested in Prime, although there are core customers as well. For example, Core DH, that product is going to go to market through pilot programs and that kind of thing and convert customers on Core. We also talked about U.S. military engagement and really providing them with Core AWG products. So Hopefully that provides some color here. We'll disclose more in terms of who's actually engaged in due time with the disclosures we can provide.

Ryan Fingst | Analyst, B. Riley Securities

Appreciate that. And then could you give us an update on customer interest in the water purchase agreement model and if that's something where we can see an agreement come together in late 26 or is that more of a 2027 event?

Brian Barton | Chief Commercialization Officer

Go ahead.

Matt Jor | Chief Executive Officer

Thanks, Brian. Brian has been answering the questions that have come in so far. He's leading our joint venture, and he's also our chief commercial officer. So he's answering a lot of these questions. He's also a PhD in chemistry. So one of the things that these questions denote are you guys are asking about the differentiation between core and prime. And what's really critical to this last question, the water purchase agreements, is the utilization of waste heat. you get a much, much better opportunity when you're actually recovering that waste heat that's available everywhere and your energetics go down to such a large degree that the levelized cost of water is impacted less than it is when you're out there dehumidifying because we have a standalone heat pump system for the dehumidification project. So I think that's a really important – Delineator between core and prime. Um, so I think you're, you're with respect to the last question, Ryan, on water purchase agreements, I remain most excited about that. And when you use waste heat to drive that cost down and you also, as Brian talked about in his prepared remarks, you tie that into district distribution within a hundred mile radius. Uh, there's numbers of sites, uh, whether they're data center or other sites where waste heat will drive our regeneration costs down. and therefore water costs down. So I see the water purchase agreements this year coming, you know, at least planning for the, you know, and planning to get the commitments as opposed to including in parallel, I should say, with equipment sales for the prime. I appreciate that. Yeah. Brian, if you were going to add to that, please. No, thank you, Matt.

Brian Barton | Chief Commercialization Officer

Ryan, anything else? Okay. Thank you, Ryan.

Operator | Conference Call Operator

Thank you. Our final question this morning comes from the line of Sean Milligan with Needham & Company. Please proceed with your question.

Sean Milligan | Analyst, Needham & Company

Hey, guys. Thanks for taking the questions and all the updates today. Just wanted to touch base on the slides. You have a slide that has the CapEx for AirDuel relative to the CapEx for the data centers for 100 megawatt sighting. I thought that was pretty interesting. Can you kind of talk about you know, is that sort of the siting density that you're thinking about when you talk about having these discrete conversations with data centers? Or, like, would initial sitings be lower and just kind of, like, trying to get a sense for is that going to be a standard siting for data centers?

Brian Barton | Chief Commercialization Officer

Sean, I think you're asking about the capital size of the deployment of these sites?

Sean Milligan | Analyst, Needham & Company

Yeah, so, like, the slide that says, you know, 1% to 3% of total facility build costs you know, would represent AirDual CapEx. I guess that's pretty sizable relative to like what I was thinking. So I'm just trying to get a sense for, is that based on like citing, like you mentioned talking to a data center customer with discrete citing opportunities. I'm curious, like what's informing that sizing that you're giving in that slide?

Brian Barton | Chief Commercialization Officer

I see. Thank you for that question. And this is an important topic to be clarified. So On the slide here, we're mentioning the 3 to 5 billion total capex for 100 megawatt data center. What we've done is we've looked at the amount of water that that data center needs in totality. And if you replaced all of the water with air dual capex, it would be a 1 to 3% of that total build. This is kind of like a worst case or maybe a best case scenario in terms of the volume of water that would fit the bill at these types of deployment sizes. So as you anticipate, this would be a very sizable project to replace 100% of a data center's water demand. And I don't anticipate that out of the gates at any initial projects.

Sean Milligan | Analyst, Needham & Company

Okay. And then the customer that you're talking to, is it like, are the conversations being driven more by water issues where they're citing their data centers or just kind of the ability to get more efficient at the data center? And I guess it goes back to just I'm curious, you know, how much of this is like where future sites could be opened up versus just getting more efficient at current sites?

Brian Barton | Chief Commercialization Officer

Yeah, most of our conversations are around new data center builds where they have, you know, permitting and pushback in water-scarce regions, right, where they're having, you know, some trouble securing the permits that are necessary. And, you know, Airdrill comes as a solution to get the project back on track. And so that's kind of where those conversations live. I mean, you know, you could – anticipate if you're building a data center and you have all the water you need, then you're not our customer. But if there's water scarcity or quality or regional pushback, then those are where we can come in.

Sean Milligan | Analyst, Needham & Company

Great.

Thank you. Operator | Conference Call Operator

Thank you.

Pat Eilers | Executive Chairman

Ladies and gentlemen. If you don't mind, I'll just add one more comment to Brian's. This is Pat Eilers. So these data centers as well, there's a whole sustainability aspect to it, as well as an insurance opportunity with distributed water. It does provide resiliency, and sustainability, which is not lost on many of the hyperscalers as well, even if it were not the primary source. So that's just additional color on the data center opportunity.

Operator | Conference Call Operator

Thank you. That concludes today's question and answer session. I'll turn the floor back to Mr. Torr for any final comments.

Matt Jor | Chief Executive Officer

Thanks, Melissa. Thanks, everyone, for joining us this morning. The first quarter of 2026 was a quarter of disciplined execution against our 2026 objectives that we outlined in March. Our core platform is maturing. Our first prime is built and operational, and we're seeing strong customer demand across a range of markets. I'm super excited that we are scaling our commercial pipeline for 2027 and beyond. The productization of core, the prime development in Europe via the net zero innovation hub, the launch of our dehumidification platform, and the customer engagements Brian walked through this morning all support this exciting path.

We really thank you. Operator | Conference Call Operator

Thank you. Ladies and gentlemen, this concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation. jsPDF 3.0.3 D:20260608224422-00'00'

NASDAQ:AIRJ Q4 2025 Earnings Call Transcript Generated on 6/8/2026 Operator | Conference Operator: Greetings. Welcome to the AirJewel Technologies fourth quarter and full year 2025 earnings call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. It is now my pleasure to turn the conference over to your host, Tom Devine, Vice President of Investor Relations and Finance. Thank you.

You may now begin. Tom Devine | Vice President of Investor Relations and Finance

Thank you and good morning. With me today for our full year earnings call are Matt Jor, Chief Executive Officer, Pat Eilers, Executive Chairman, Brian Barton, Chief Commercialization Officer, and Steven Peng, Chief Financial Officer. During this call, we'll be referring to a presentation which is available on the webcast platform and on the investor section of our website. I would like to point out that many of the comments made during the prepared remarks and during the Q&A section are forward-looking statements that involve risks and uncertainties that could affect our actual results and plans. Many of these risks are beyond our control and are discussed in more detail in the risk factors in the forward-looking statement sections of our filings with the SEC. Although we believe the expectations expressed are based on reasonable assumptions, they are not guaranteed that future performance and actual results or developments may differ materially. And now, I'll turn it over to Matt Jor.

Matt Jor | Chief Executive Officer

Thanks, Tom. Good morning, everyone, and thank you for joining us for our full year 2025 earnings call. This is an important call for AirJewel. 2025 was the year we built the foundation for commercialization And 2026 is the year we intend to convert that foundation into a commercial pipeline to revenue. Before I review our accomplishments and outline our plan for the year ahead, I want to take a moment to talk about something that has become impossible to ignore, the growing urgency of water resilience. In Corpus Christi, Texas, home to one of the nation's largest petroleum ports, the main water reservoir has dropped below 10% capacity, its lowest level on record. The city's own projections indicate it could reach a water emergency within months, meaning supply will be unable to meet demand. The governor of Texas has publicly warned that the state may need to intervene. Industrial operations that produce jet fuel for Texas airports and support billions of dollars in economic activity face the prospect of curtailment due to lack of water. The city's proposed long-term solution is a desalination plant that will cost over a billion dollars and is years away from producing any water. Meanwhile, in the Middle East, the unfortunate ongoing conflict has caused immense human suffering. Our thoughts are with the people in the communities affected there. It has also exposed a critical vulnerability for the more than 100 million people who depend on desalination for their water supply. Desalination plants in Bahrain have been damaged by military strikes. Facilities in the UAE and Kuwait have been hit by missile debris. As Bloomberg columnist Xavier Blas recently observed, water is now more strategically important than oil. These desal plants are centralized facilities that represent single points of failure for entire populations. These risks are real, and they are often underappreciated until they become urgent. They stem from the same structural problem. The world's water infrastructure is concentrated, brittle, and increasingly vulnerable to disruption. Whether the stress comes from drought, industrial and population growth, or geopolitical conflict, the result is the same. Communities and industries are exposed to water supply risks with very limited alternatives. AirJewel offers a fundamentally different approach. Distributed water generation from the atmosphere that operates independently of pipelines, reservoirs, and centralized desalination. AirJewel systems generate water on site, behind the meter, and at the point of need. They require no municipal water connection. These systems produce pure distilled and potable water from ambient air using waste heat. We've proven this in the field. Over the past year, AirJewel systems have operated in Texas, Arizona, California, and Dubai. The macro tailwinds that we've discussed on prior calls remain in full force and have been exacerbated and exposed by the current war. Data center expansion and the onshoring of advanced manufacturing is exponentially driving an increase in industrial water and power demand. But the events of recent weeks have elevated the conversation from efficiency and sustainability to resilience and security and even survival. That shift is accelerating interest in exactly what AirDuel can deliver. In our year-end call in March of last year, we laid out a clear set of objectives for 2025. Validate our technology in the field, develop products for commercial launch, strengthen our partnerships towards building a commercial pipeline, and ensure sufficient capitalization to support commercialization. we delivered on these commitments. On technology validation, we said we would move from laboratory demonstrations to real-world field deployments. In Dubai, we operated an air jewel system at a government advanced technology facility, showcasing our technology to public and private sector customers across the Middle East. In Hubbard, Texas, we deployed the first US field demonstration of air jewel, showing our ability to produce pure water from air and generating months of operational data across diverse environmental conditions. At Arizona State University, an independent academic evaluation is ongoing in one of the most demanding air environments in the United States. On product development, we said we would advance our products toward commercial readiness. Last year, we made a deliberate engineering decision to focus our initial builds on our so-called A250 platform, which we'll now be referring to as our AirJewel platform. core product. This is our core two-chamber system optimized for industrial dehumidification and water generation. This allowed us to build, deploy, and learn from multiple systems in the field. And those learnings have directly informed the design of our A1000, which we'll now be referring to as AirJewel Prime. This is our larger water generator for industrial scale applications that we're currently building. Both products share a common sorbit chamber architecture and produce distilled and potable water that meets FDA bottled water standards. On partnerships, we said we would leverage our strategic relationships to accelerate commercialization. GE Renova invested additional capital and commenced a strategic waste heat integration project with us. We'll also be deploying an air dual system at GE Renova's New York facility to support our waste heat strategic project with them. and to be used as a demonstration system for GE Vernova's customers. Additionally, we were selected for the Net Zero Innovation Hub to showcase our AirJuul system for Google, Microsoft, DataFor, and other leading data center infrastructure companies. We established defense sector credibility through a CRADA with the U.S. Army and an agreement with a defense contractor for anti-corrosion applications. And we announced an exclusive Middle East distribution agreement with 10X Investment an Emirati-owned company with well-established relationships across government, commercial, and industrial sectors throughout the Gulf. On commercial pipeline, we said we would develop strong customer engagements with a path to commercial sales. We are now actively engaged with customers across several industry verticals. We introduced the water purchase agreement business model, and we developed a defined, repeatable customer engagement process that is advancing prospects toward commercial deployment. Brian will take you through that process in detail shortly. On the balance sheet, we said we would ensure sufficient capitalization to support commercialization. We completed a $15 million private placement anchored by GE Vrnova, filed an S3 shelf registration, and completed a $23 million equity offering in January 2026, ensuring that we have the runway to execute on our plan with zero debt. Let me highlight the key milestones from the fourth quarter and the first several weeks of 2026. Some of these were discussed on our third quarter call in November, but I want to place them in the context of the full year and the momentum we're carrying into 2026. During the fourth quarter, we continue to advance our defense sector relationships. Our CRADA with the U.S. Army, which we announced in October, is focused on integrating Air Jewel with tactical waste heat recovery systems to deliver resilient water supply for forward deployed troops. In December, we announced a collaboration with Red Dot Ranch to bring off-grid water solutions to rural residential communities in Pescadero, California, demonstrating Air Jewel's value proposition for distributed residential water generation. We deployed an AirDuel core system in January and completed the first stage pilot in February. In December, we also commissioned an AirDuel core system at Arizona State University for independent academic evaluation by Dr. Paul Westerhoff and his team of globally recognized experts in atmospheric water harvesting. In January, we announced an exclusive distribution agreement with 10X, providing AirDuel with market access across six Gulf countries. and we commenced our partnership in the Net Zero Innovation Hub program in Denmark that I mentioned earlier. Looking ahead, 2026 is the year when AirDuel transitions to commercial pipeline building. We expect to secure multiple long-term customer commitments across data center, industrial, defense, and international markets. Importantly, the customer relationships we build in 2026 are laying the foundation for scaled commercial business in 2027 and beyond. As I mentioned earlier, one of our recent announcements was our exclusive distribution agreement with 10X across the Middle East, a region where water demand has far exceeded natural supply and where recent conflict has further exposed its fragility. I'd like to turn it over to Pat Eilers to discuss the significance of this part of the world in terms of energy, water, and the opportunity it represents for an air-jewel solution in that region. Pat?

Pat Eilers | Executive Chairman

Yeah, thanks, Matt. Even good morning. I have spent a considerable time in the middle east region over the past two years with air jewel and the last decade since my black rock days. And I want to share some perspective on why it is an important region for air jewel. The middle east is one of the most water stress regions on earth. Gulf nations depend on desalination for 70 to 90% of their drinking water. At the same time, the region is experiencing massive growth in data center development, advanced manufacturing, and infrastructure investment. Each of these sectors requires substantial quantities of water. Governments and enterprises across the Gulf are actively seeking technologies that can strengthen water security while reducing energy intensity. Matt described the recent attacks on desalination infrastructure in Bahrain, and elsewhere in the Gulf. Those events have exposed a vulnerability that has concerned regional leaders for years. The concentration of critical mineral supply in small number of centralized coastal facilities. Communities have already lost access to drinking water when individual plants have gone offline. The fragility of this infrastructure is now visible to the entire world. This is exactly why distributed water generation matters. Air jewel systems operate independently of desalination infrastructure and can be located where water is needed rather than relying on pipelines or trucks. They can be deployed onsite at industrial facilities, military installations, and community water systems to produce pure distilled water from the atmosphere. This capability has significant value in a region where water resilience is now a national security priority. We recognize that the current conflict in the region creates uncertainty around the near term timeline for deployments. We are monitoring the situation closely and working with 10X, our partner, to ensure we are positioned to move forward when conditions are favorable. At the same time, these events are reinforcing the strategic urgency of water resilience across the Gulf, and the conversations we are having with prospective customers reflect that urgency. We are confident that the long-term opportunity in the Middle East is substantial, and we intend to support the increased need for water resiliency. Now I will turn it over to Brian Barton, our Chief Commercialization Officer, to discuss our product roadmap, and commercialization plans for 2026. Over to you, Brian.

Brian Barton | Chief Commercialization Officer

Thanks, Pat. Let's start with the AirJewel A250, which we're now referring to as AirJewel Core. As Matt mentioned, we made a deliberate decision in 2025 to focus our initial system builds on the Core platform. The Core is a two-chamber system that shares the same sorbent chamber architecture as our larger AirJewel Prime water generator. By building, deploying, and iterating on the core systems throughout the year, we accomplished two things simultaneously. First, we gained important engineering learnings that helped us improve the overall design of the system. Second, and equally important, we used the core system as a proof of value surrogate for the prime system. Every core deployment demonstrates to customers the performance, water quality, and economics of the AirDuel platform. directly de-risking the pathway to prime commercial deployment. We are finalizing the core product design and preparing for UL and NSF certification, which are required steps before commercial launch. We expect the core product to be commercially available in late Q4, 2026. For industrial dehumidification applications, there will be an additional core product, will be optimized for maintaining low humidity environments in a range of approximately 30 to 40 percent relative humidity with significant energy savings compared to incumbent desiccant wheel technology for this product we are targeting commercialization in 2027. on cost reduction we have made substantial progress we have sourced lower cost components across multiple subsystems and are evaluating their reliability in our current builds We are also simplifying the overall system design, which reduces both manufacturing complexity and cost. The sorbent chamber remains the only custom manufactured component. The balance of the bill of materials consists of commercially available parts. Turning to the prime, this is our larger water generator designed for industrial scale water production using waste heat. Prime is the product that the majority of our data center and industrial water customers are ultimately looking for. The learnings from our core systems have directly informed the prime design, and we are building our first prime system now in Newark, Delaware. Once operational, it will serve as a critical outdoor showcase unit, enabling customers to see the full-scale system operating in real-world conditions. We will provide updates on prime deployment timing as the build progresses and we gain operational experience with the full-scale system. Water productivity per chamber continues to improve through ongoing optimization of our sorbent performance and cycle tuning across a range of temperature and humidity conditions. These improvements directly translate to better economics for our customers, and we expect to continue to make gains as we move into commercial production. We're also initiating a dedicated optimization of the core platform for the standalone dehumidifier market. focused on system performance optimization for dry storage and anti-corrosion applications. This targets a large installed base of approximately 1.3 million industrial dehumidification systems globally. And our longer-term HVAC integration work with Carrier continues to benefit from the engineering and productization work underway on both the core and prime systems. On manufacturing, our coating line is operational in Newark, producing the sorbent coated contactors central to AirJules operation. We are advancing process developments to establish a scalable, repeatable manufacturing process. Our Newark facility has sufficient production capacity to address expected sales volume through 2027. As demand increases beyond that, we expect to transition to contract manufacturing for both contactor production and full system assembly. We're initiating those conversations now and preparing for assembly documentation required to support that transition. On slide nine, I want to walk us through our process for converting strong customer interest that Matt and Pat described into commercial deployments. We have developed a defined repeatable customer engagement process with four stages. Stage one is discovery and evaluation. where we assess product market fit for a specific customer, benchmark AirJules performance against the customer's alternatives, and complete a techno-economic analysis. This stage typically takes one to three months, and we are actively engaged with customers across several industry verticals. Stage two is proof of value. In some cases, the techno-economic analysis from stage one or prior deployments are sufficient for customers to move to commercial structuring. In other cases, we deploy a demonstration unit onsite and validate performance in the customer's operating environment. The customer validates water quality, observes waste heat integration, economics, and confirms real-world performance and reliability. Our deployments in Hubbard, at ASU, in Dubai, and in Pescadero have all served as proof of value demonstrations. Today, the core system is our primary proof of value platform because it operates on the same architecture as the prime and demonstrates the same sorbent performance, water quality, and energy economics. As prime becomes operational, it will serve as an additional proof of value asset at full scale. This stage typically takes six to 12 months. Stage three is commercial structuring. Once performance is validated, we define the commercial model, which could be a water purchase agreement, direct unit sale, or a lease. We also align on product configuration, site engineering, deployment scope, and pricing. The stage typically takes three to six months. Stage four is deployment and scale. Multi-unit commercial deployment, expansion within the customer's portfolio and across geographies, and recurring revenue through service maintenance and WPA contracts. This is the long-term value creation engine. I should note that these stages are not strictly sequential. For customers with strong strategic urgency or established familiarity with our technology, commercial structuring discussions often begin while proof of value work is still underway. This parallel progression can compress the overall timeline from initial engagement to commercial deployment. Putting it all together, here's what to expect from us in 2026. The core system for both industrial dehumidification and smaller scale water production applications will be our first commercial products to launch late Q4 this year, following completion of certifications. Our first prime system is being built now, and once operational, it will serve as our showcase for industrial scale water generation customers. Through our partnerships with the net zero innovation hub for data centers, we expect to deploy an air dual system later this year. This deployment will directly demonstrate AirJules performance for Google, Microsoft, DataForce, Danfoss, and other leading data center companies. Through 10X, initial commercial deployments in the Middle East are planned for late 2026, subject to regional conditions. And across our defense partnerships, we anticipate deployments in 2026 in both water resiliency and anti-corrosion applications. And in the residential market, we're planning for additional partnerships and deployments that can unlock new developments in water scarce regions. Through these various deployments and partnerships, our focus in 2026 is on building the deployed reference base and contracted customer relationships that support scaled commercial activity in 2027 and beyond. Every deployment we execute this year validates AirJewel for an entire category of customers and advances our pipeline toward commercial conversion. The customer engagement cycle we are outlining is the engine that converts interest into commercial deployments. We're advancing customers through this process with discipline and the pipeline is growing across multiple verticals and geographies. Now I will turn it over to Steven for the financial update.

Steven Peng | Chief Financial Officer

Thank you, Brian. I will now walk through our financial results for the fourth quarter and full year 2025 and also provide some color on our 2026 outlook and liquidity position for the year. We can turn to the financial results slide in the presentation. As a reminder, Aerojoule Technologies accounts for its 50% ownership in the JV or GE Vernova using the equity method. The numbers I will discuss are for Aerojoule Technologies, and the results from the joint venture are reflected in the loss from investment in Aerojoule JV lines. For the fourth quarter, Aerogeo Technologies reported net operating expenses of $3.2 million. This is inclusive of approximately $0.7 million in administrative and engineer expenses reimbursed to us by the joint venture under our statement of work. For the full year, net operating expenses at Aerogeo Technologies were $13.6 million, which compares to $11.2 million in 2024. The year-over-year increase is driven primarily by a $4.2 million increase in non-cash stock-based compensation expenses. is offset by lower professional fees and a shift in the R&D line from ARJ to the joint venture. Our net loss for the full year is $9 million. The primary components below the operating line were our loss from investment in ARJJV of $39.3 million, offset by a non-cash gain of approximately $25 million from changes in the fair value of earn-out liabilities and subject investing shares. The $39.3 million JV loss compares to $5.3 million for the full year of 2024. The primary driver of the variance is the non-cash impairment of in-process R&D that reduced net income at the joint venture. This is a non-cash accounting adjustment related to a change of valuation of intellectual property contributed to the JV at formation. It has no impact on our joint venture's operations cash position or ability to execute on the commercialization plan. Now let's turn to our joint venture. The total JV cash outflows for the year was approximately $18 million, which is consistent with the guidance provided on our third quarter call. The JV received capital contributions totaling $17.8 million from AeroJewel Technologies during the year. $5 million of that came from GE Vernova through their April 2025 equity investment in AeroJewel Technologies. The joint venture remains in the development and proposition stage. And there was nominal revenue of approximately $110,000 during the fourth quarter from the sale of AeroJewel Core Systems to Arizona State University. AeroJewel Technologies ended 2025 with approximately $22 million of cash on the balance sheet. Subsequent to year-end, we completed an equity offering in January 2026 that raised approximately $22 million in net proceeds. Following that offering, our combined pro forma cash position across Airdrieu Technologies and the JV was approximately $44 million of no debt. With respect to liquidity, we have sufficient cash to fund our operations, the JV, and our planned commercial deployments through 2027. We expect our combined cash spend across the corporate entity and the JV in 2026 to be approximately 25 million. The January offering combined with our existing cash and liquidity provides a clear runway to execute on the commercialization plan that Matt and Brian have both outlined. Looking ahead to 2026, at the joint venture level, we are budgeting approximately 17 to 19 million in operating expenses to support the productization, manufacturing, and commercial deployment activities that Brian described. This is in line with our 2025 spend level. At Airtrue Technologies, our corporate operating expenses are expected to be approximately $15 million for the full year, of which approximately $8 million is non-cash stock-based composition. With the successful execution of our registered offer in January, along with our effective S3 registration status, we continue to maintain strong flexibility in managing our capital position and balance sheet. Going forward, we will remain opportunistic in evaluating any financing and strategic opportunities that enhance our balance sheet and support long-term value creation. With that, I will pass it back to Tom for the Q&A portion of the call.

Operator | Conference Operator

Thank you. We'll now be conducting a question and answer session. If you'd like to ask a question at this time, you may press star 1 from your telephone keypad. and a confirmation tone to indicate your line is in the question queue. You may press star two if you'd like to withdraw your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Thank you. Thank you, and the first question we have comes from the line of Michael Legg with Leidenberg-Salmon. Please proceed with your questions.

Michael Legg | Analyst at Leidenberg-Salmon

Thanks. Good morning, and congrats on the quarter. Nice progress here. I wanted to ask a little bit about, you know, you talked about the customer engagement. Can you talk about, you know, how you're going about engaging the customer from a feed-on-the-street perspective, from a distributor perspective, and how is the outreach going? And talk about that a little bit, please.

Brian Barton | Chief Commercialization Officer

Thanks, Mike. This is Brian. I think if I understand your question correctly, it's really around our process of engaging customers. Is that accurate?

Yes. Tom Devine | Vice President of Investor Relations and Finance

Yes.

Brian Barton | Chief Commercialization Officer

Yeah, so it's worth noting that there's really, I think, three ways in which these conversations are initiated. One is through direct engagement from the customer themselves. That's when they reach out to us. And then, of course, there's warm introductions that happen across our network and to the tops of these organizations. And then there's really kind of meeting folks through direct conferences or trade shows or or suppliers and that kind of thing. And so there's really a lot of activity in all three kind of categories of how we reach our customers. You know, there's a lot of them that come to us, frankly, because this is an urgent topic for a lot of data center builds in particular in that market. You know, one thing to note on the data center market is there's a lot of builds that are happening and a lot of builds that end up getting canceled, canceled projects due to permitting on the water side where everything seems to be moving ahead, but then you can't secure the water permit. And so that's one thing that's really driven a lot of engagement for us in the data center market. And there's other verticals as well where that outreach has been predominantly customer driven. in the industrial sector as well as in the residential sector, which we believe is a significant value for AirJewel to unlock different kind of frozen residential developments. Does that address the question, Mike?

Michael Legg | Analyst at Leidenberg-Salmon

Yeah, thank you. Great. And then on the supply chain, you mentioned almost everything except one is commercially available. As we scale over the coming years, Is there anything that's a scarce supply chain or that you don't have redundancy on that we should be thinking about?

Brian Barton | Chief Commercialization Officer

I don't think so, Mike. Most of these components that are in the box, so to speak, are kind of already at scale, you know, pumps and motors and valves. The custom, you know, part of our sorbent chamber is an aluminum vacuum chamber that is produced at scale through, you know, cast aluminum manufacturing, and this is Um, a very commodity industrial process. Uh, it's just our form factor is a bit unique. Um, but it's, it's, it's, uh, you know, totally available at scale. Um, the thing inside the vacuum chamber is our sorbent coated contactor. Um, the contactor is, you know, already at scale commodity, many vendors, uh, millions of parts globally already produced. So that's a standard offering that we then coat with the metal organic framework sorbent material. We do that in-house really to define the process of coating, but coating parts is also a commoditized process. There are many vendors that can do this at scale. AirJewel has taken, like this is kind of the, core aspect of our intellectual property, and we need to define and own kind of the optimization of that process and lock it down before we engage with a select, you know, partner to take that to scale.

Michael Legg | Analyst at Leidenberg-Salmon

Okay, great. And just one last question. You mentioned a $10 million cap call on the Air Jewel joint venture at year end. Can you explain that and then also talk if there are any other major CapEx needs for 26?

Thanks. Brian Barton | Chief Commercialization Officer

Yeah, Steven, you want to take that?

Steven Peng | Chief Financial Officer

Yeah, Mike, you're asking about the 2026 capital call, correct?

Tom Devine | Vice President of Investor Relations and Finance

Yeah.

Steven Peng | Chief Financial Officer

Yeah, so that capital call, those two capital calls are kind of the normal course funding plan for this year. As we laid out in our prepared remarks, what our anticipated total spend for the joint venture will be. And these two capital calls are part of the funding contribution to fund the JV for those perspective expenses. And I'm sorry, the second part of your question?

Michael Legg | Analyst at Leidenberg-Salmon

Any other major CapEx for 26?

Steven Peng | Chief Financial Officer

No, nothing other than, again, the forecast that we provided in our prepared remarks around our cash needs. CapEx at the joint venture has largely been funded through last year to help support the build-out that Brian described.

Michael Legg | Analyst at Leidenberg-Salmon

Okay, great. Thanks. Congrats on the progress. Thanks, Mike.

Operator | Conference Operator

Thank you. Our next question is from the line of Alex Furman with Lucid Capital.

Please receive three questions. Alex Furman | Analyst at Lucid Capital

Hey, guys. Thanks very much for taking my question, and congratulations on all the milestones you achieved in 2025. I wanted to ask about gross margins. You know, what kind of gross margins are you expecting initially for your first couple units of sales? And then as you think about longer-term contracting, transitioning to contract manufacturing, what kind of gross margins do you think you'll be able to achieve at scale?

Steven Peng | Chief Financial Officer

Yeah, maybe I can take that. I think for this year, we're really just focused on deployments. And so I think the gross margin is less of an emphasis for us in terms of what our long-term objectives are, which are around 30, 35% at scale as we move into contract manufacturing. So this year, as we're focused on really the customer pipeline build-out and the validation of our technologies, the focus is more on offline and customer-engaged execution. And as we move into 2027, as alluded to, as contract manufacturing, that margin is targeting. And so our conversations around both our design and our building materials will ultimately help unlock the gross margin profile that we're pursuing long-term.

Alex Furman | Analyst at Lucid Capital

Okay, that's really helpful. Thank you for that. And then nice to see the first You know, obviously small revenue here for the JV in Q4. Should we expect to see similar small revenue, you know, throughout 2026 as we get closer to the full-scale commercial launch at the end of the year?

Steven Peng | Chief Financial Officer

Yeah, we do. We envision these deployments, some of them will be piloted in nature, will be paid deployments. So we expect some modest revenue that will continue to grow here in 2020 at the joint venture level. and given some of the accounting treatment of the JV that will flow through the equity income or loss from the JV line.

Alex Furman | Analyst at Lucid Capital

That's really helpful. Thanks. And then you guys mentioned the water crisis in Corpus Christi and kind of the trade-off between AirJewel and desalination. Just curious how close your economics are getting to competing with large-scale desalination progress project and how much of a selling point is, you know, the lack of a, you know, massive upfront capex for these types of projects as you start engaging with communities like that?

Brian Barton | Chief Commercialization Officer

Yeah, thanks, Alex. You know, I think it's important to think about how desalination actually gets built. It's a multi-year permitting and planning process and typically desal plants are, you know, billions of dollars of infrastructure that goes into the ground. You know, then they clean up the saltwater, of course, and then they have to dispose brine, and brine disposal back into the source is a point of concern often. Economically, the comparison, desal is, you know, probably is definitely cheaper than air-dwell technologies for water creation. It's about, you know, five to ten times cheaper in terms of operating costs. The difference is, like, really the value of when you would deploy AirJewel is when the time to those permits and capital are constraining economic development. We're in a period of time right now where there's immense build-out, and we talk about Corpus Christi, who is right on the gulf, as you point out. But the timeline to unlocking those development projects is really a constraint, and Another thing I'd like to point out in terms of the water that's produced from AirJewel is distilled, very plain, zero TDS. This is actually difficult for RO water or desal water infrastructure where there's residual TDS or things that come along. Water quality is a main value driver. you know, if we were kind of like bucket at large, like where is the value for air drill technologies? It's in terms of speed to market, distributed water, resiliency water, where that water is yours, right? And it's your asset that you own. And then it's around water quality.

Matt Jor | Chief Executive Officer

And Alex, this is Matt. Alex, this is Matt. I'll add to two things here that Stephen and Brian said. Regarding your gross margin question, you might recall we've established a water purchase agreement business model, and that has been well received by customers. And to Brian's point about distributed water, if you envision these air dual water plants at the site, you know, wherever there's waste heat and every data center there is waste heat, every industrial operation there's waste heat. you can envision an air to a water plant. And so the gross margin question when you take that model is easier to maintain as long as you're focused on where that water has value. And that distilled water that Brian brought up has tremendous value. So we're pretty confident because you get to, we place these air to a water plants and sell the water for a 15, 20 year period. So that gross margin question on sale of equipment also applies to water being sold. So just wanted to add that to your question.

Alex Furman | Analyst at Lucid Capital

Okay. Thanks, Matt. That's really helpful. Really appreciate the thorough response from all of you.

Matt Jor | Chief Executive Officer

Yep. Thanks, Alex.

Operator | Conference Operator

Thanks. Our next question is from the line of Julian Mitchell with Barclays. Please receive your question. on for Julian Mitchell\ Hi. Good morning. This is Drew on for Julian Mitchell. You know, thanks for taking our question. So we just wanted to get a sense of, you know, what commercial opportunities, you know, you're expecting to turn into firm orders and, you know, I guess more broadly, like on a global scale and then more specifically in the middle East. I know you guys touched on that a bit during the call, but if there's any additional color you could provide there, that'd be great.

Brian Barton | Chief Commercialization Officer

Sorry, Drew. I'm not exactly. Yeah. So the question is around, uh, commercial deployments that lead to, sorry, deployments that lead to commercial activity. on for Julian Mitchell\ deployments, like leading into orders throughout the year, if there's any color on that.

Brian Barton | Chief Commercialization Officer

Yeah, sure. So thanks for the question, Drew. You know, as kind of discussed on the call, there's a number of different market verticals that we're, you know, engaging into, be it on the residential side of unlocking, you know, whole residential built communities that are currently frozen and, you know, the development pipeline due to water permitting. as well as a number of data center engagements, as well as the US military in terms of water resiliency, as well as on dehumidification. So there's a number of verticals and customer conversations that are ongoing that are really kind of poised for these deployments and that proof of value conversation with each one of those customers. We will announce these as they happen. throughout the year and kind of give updates as to the success of those deployments and proof of values with those customers in different verticals. And then, you know, those will cascade into commercial commitments from those customers is our expectation on the overall process. Does that address the question, Drew? on for Julian Mitchell\ Yeah, absolutely.

Thank you very much. Operator | Conference Operator

Thank you. At this time, there are no more questions in the queue, so I'll turn it back to Matt Schor for some closing comments.

Matt Jor | Chief Executive Officer

Thanks, everyone, for joining us this morning. 2025 was a year of building for us, building systems, building partnerships, and building towards a commercial pipeline. In 2026, we expect to see the early results of that work through our first product launches, and additional customer deployments. Every deployment we execute this year and every customer relationship we advance is building the foundation for scaled commercial activity in 2027 and beyond.

Thank you. Operator | Conference Operator

Thank you. This will conclude today's conference. Let me disconnect your lines at this time. Thank you for your participation and have a wonderful day. jsPDF 3.0.3 D:20260608224644-00'00'