Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Technology Solutions revenue was constrained by hardware vendor delivery times extending from historical 30-60 day windows to over 200 days, resulting in a 65% year-over-year increase in backlog.
The AZT Protect business is transitioning toward larger enterprise accounts, which involve longer 18-24 month sales cycles due to complex procurement processes and internal stakeholder alignment. Management is pivoting its sales strategy to engage higher-level IT decision-makers earlier, as these stakeholders often control the budgets even when OT teams advocate for the technology. Strategic focus has shifted toward OEM partnerships, such as the Acronis integration, to embed AZT Protect directly into third-party products for long-term recurring revenue.
The managed cloud and service practice continues to see healthy growth driven by the increasing complexity of enterprise cloud migrations and demand for post-migration operational support. Operational efficiency in the service segment improved, with service gross margins increasing by 1.3% compared to the prior-year period. Management highlighted that AZT Protect has maintained a 100% renewal rate and zero customer breaches to date, validating the product's efficacy in OT environments.
Management expects hardware supply chain constraints to persist for at least another year as large-scale AI infrastructure build-outs continue to consume global component capacity. The Acronis partnership is targeted for a full commercial launch by October 1, 2026, following the completion of software integration and SKU availability. Several large six-figure enterprise opportunities are nearing the end of their 18-24 month sales cycles, with management optimistic about conversions in the coming months.
The company is expanding its OEM pipeline with three additional US-based partners and ongoing deployments in the South African telecommunications market. Future growth will prioritize high-margin recurring revenue streams from MSP, cloud services, and AZT Protect to offset volatility in the hardware-dependent Technology Solutions segment. The company completed the buyout and sale of its UK pension plan to an insurance company, incurring one-time actuarial and legal costs of approximately a couple hundred thousand dollars.
Operating loss increased to 1.5 million from 1.2 million, partly due to variable compensation in the Technology Solutions division and the UK pension transaction costs. Management identified 'friendly fire' incidents—disruptions caused by internal IT updates in OT environments—as a key market opportunity for AZT Protect's patch-free security model. The company utilized its balance sheet to finance over 20 customer transactions, with long-term receivables reaching 8.3 million as of June 30, 2026.
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