Blaze transitions to execution phase with $176 million in contracts and robust $725 million pipeline, predicting strong revenue growth through 2026.

OPERATOR - (00:00:56)

Thank you for standing by and welcome to Blaze's second quarter 2025 earnings conference call. At this time all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. To remove yourself from the queue. You may press star 11 again. I would now like to hand the call over to Veronica Pazinski, Investor Relations. Please go ahead.

Veronica Pazinski - (00:01:28)

Before we begin the prepared remarks, we would like to remind you that earlier today Blaize issued a press Release announcing its second quarter 2025 results. A corporate overview presentation was published and is available on the Investor Relations section of Blaze's website. Today's earnings call and press release reflect management's views as of today only and will include statements related to our competitive position, anticipated industry trends, our business and strategic priorities, our financial outlook and our revenue guidance for the third quarter of 2025 and full fiscal year 2025, all of which constitute forward looking statements under the Federal securities laws. Actual results may differ materially from those contained in or implied by these forward looking statements due to risks and uncertainties associated with our business. For a discussion of the material risks and other important factors that could impact our actual results, please refer to the Company's SEC filings and today's press release, both of which can be found on our investor relations website. Any forward looking statements that we make on this call are based on assumptions as of today and other than as may be required by law, we undertake no obligation to update these statements as a result of new information or future events. Information discussed on this call concerning Blaze's industry competitive position and the markets in which it operates is based on information from independent industry and research organizations, other third party sources and management's estimates. These estimates are derived from publicly available information released by independent industry analysts and other third party sources as well as data from Blaize's internal research. These estimates are based on reasonable assumptions and computations made upon reviewing such data and Blaize's experience in and knowledge of such industry and markets. By definition, assumptions are subject to uncertainty and risk which could cause results to differ materially from those expressed in the estimates. During the call we will discuss certain non GAAP financial measures. These non GAAP financial measures should be considered as a supplement to and not a substitute for measures prepared in accordance with gaap. For reconciliation of non GAAP financial measures discussed during this call to the most directly comparable GAAP measures, please refer to today's press release.

Dhinikar - (00:03:59)

Good afternoon everyone and thank you for joining us today. Blaize's second quarter of 2025 marks a clear inflection point from building technology to putting it to work. Our hybrid AI strategy has now moved from pilot validation to early stage deployment, with contracted programs underway across industries and regions. For the last 12 months we've been focused on validation. Now we're shifting to execution at scale. Blaze is now deploying its technologies to advance sovereign AI strategies and power public safety networks. We're not only delivering chips, we're also enabling hybrid AI infrastructure that complements GPU systems powered by our programmable, power efficient Blaze AI platform. In the last few months, We've locked in two major contracts together worth up to $176 million to be fulfilled through 2026. These contracts send a strong signal that our product market fit and our platform approach complement the global demand for hybrid AI. The first is a $120 million contract with Starshine building hybrid AI systems across Asia. The second is a $56 million purchase order rolling out Sovereign Ready Smart infrastructure in South Asia, serving as many as 250,000 cameras for smart traffic and public safety. Both rollouts complement existing GPU systems, with Starshine deployments starting in the third quarter and South Asia systems continuing to ship through the third and the fourth quarters of this year. These two significant wins are just the start. In addition to these contracts, we have a robust pipeline of over $725 million in active opportunities through 2027. Today's AI deployments are fundamentally heterogeneous, powered by a mix of hardware types across edge and cloud. That complexity often creates bottlenecks, especially as organizations run multimodal workloads at the edge. Blazor's hybrid AI approach answers that need. Our purpose built platform is built to complement GPU systems and to unlock better performance per watt and more responsive inference. While GPUs handle training jobs and complex AI in the cloud, Blaze handles fast, efficient tasks like processing live video, small-large language models or sensor data right where it happens, delivering a compelling total cost of ownership benefit to customers. Customers aren't replacing infrastructure, they're augmenting it, and Blaze helps them do exactly that. To meet the growing demand for hybrid AI, we're introducing the Blaze AI Platform, a plug and play software and hardware stack that makes deployment faster and easier. At its heart is our programmable graph streaming processor, the Blaze GSP, designed for low power inference where data is created. We combine that with full stack verticalized software, a low code software development kit and a growing partner network to make AI Applications deployable Out of the box According to Gartner's 2024 AI services forecast, the combined market across defense, smart cities, retail, industrial and Energy is over $112 billion today. And in its 2024 AI server forecast, Gartner notes that inference systems will outnumber training systems by as much as 6 to 1. That is why the Blaze AI platform is positioned to deliver better performance, lower total cost of ownership and more deployable solutions at scale. That is how we take customer demand and turn it into deployments quickly and at scale. It is what gives us confidence in the quarters ahead. From day one, my co founders and I set out to create a programmable architecture to power the physical world not just through the cloud, but with localized intelligent systems. Our vision is to be the trusted AI platform that helps people and machines act on real time intelligence in every critical industry. Our mission is to deliver energy efficient, scalable AI infrastructure at the edge and in the cloud. That vision and mission are now coming to life. Our platform is already in the field, validated through the Starshine project and the South Asia rollout, where hybrid AI is moving from signed contract to real deployment. Whether it's smart infrastructure, autonomous zones or next generation defense, the common thread is clear. Blaze is enabling real time intelligence wherever it's needed. Momentum is growing as projects move forward and new opportunities open in Asia, the Gulf and the Americas. The hybrid AI platform today runs on our current generation chip and we're already developing our next generation chip to keep our strong edge AI position while deepening our reach into cloud, native enterprise and data center environments. We believe Blaze is becoming a core part of the AI infrastructure stack, complementing GPU systems, enabling multimodal workloads and optimizing for power latency and cost from edge to Cloud. This second quarter was a milestone for us. We secured $176 million in contracts, launched the Blaze AI platform and proved our go to market strategy across smart cities, defense and sovereign AI. Hybrid AI is no longer just a roadmap item, it's in the field helping to advance national infrastructure and delivering real outcomes. The product is ready, our partners are aligned and customer momentum is real. With that, I'll turn it over to Harminder to walk through the financial highlights and updated guidance.

Harminder - (00:10:56)

Thank you Dhinikar and good afternoon everyone. I'll take you through our second quarter financial performance, what we've been getting done and where we're headed next. As you heard from Dhinikar, in the last six weeks alone we signed $176 million in customer commitments. That's two deals, a $56 million purchase order for server and software deliveries to a South Asia company and $120 million minimum revenue contract for servers to StarShine covering markets across Asia Pacific. We booked $1.6 million of the South Asia order in the second quarter net of partner commission and there is about $4 million in backlog for the remainder of this year. StarShine shipments are planned to begin in the third quarter, with up to 25% of the total order anticipated to be fulfilled this year. Cash collections should come in steadily and most of our deliveries in the third and fourth quarters of 2025 are expected to be paid within the year. We believe these bookings alone largely de risk our revenue outlook for fiscal years 2025 and 2026. Our pipeline growth is robust now over $725 million with $300 million of that in advanced discussions. We expect conversion to accelerate as we move into 2026 and plan to share news as contracts and purchase orders close. Now let's look at the second quarter by the numbers. I'm pleased to report that revenue came in at $2 million net of around $200,000 in related party sales commissions. That's almost double the revenue reported last quarter and above the high end of our guidance range. The South Asia purchase order includes around 15% of perpetual software licenses shipped with each server and we also recognized $300,000 in AI studio license revenue from another customer. Excluding inventory cost adjustments made in prior periods, our underlying blended gross margin for the second quarter was 64%. Gross margins are expected to dip for the next two or three quarters as we ramp up the StarShine contract because of third party hardware research and development expense of $9.6 million in the second quarter included a non cash stock based charge of $3.2 million. The underlying cost of $6.4 million was $700,000 lower than the prior quarter underlying cost of $7.1 million. This reduction was largely due to the uneven nature of third party costs related to the development of our next generation chip. We continue to actively manage our labor costs by optimizing resources in lower cost geograph selling, general and administrative expenses excluding depreciation and amortization and stock based compensation grew slightly to $8.6 million in the second quarter up from $8.3 million in the prior quarter. The primary drivers were higher legal and financial advisory fees and external marketing costs offset by savings in labor costs. We plan to selectively invest in our go-to-market capability in the regions where we're experiencing highest demand for the hybrid AI platform. Net loss for the second quarter of $29.6 million was over $118 million, lower than the prior quarter, which included significant one time and non cash accounting adjustments related to the merger. Cash ended the quarter at $29.1 million, including funds in escrow. In July, we entered into a common stock purchase agreement with B. Riley. This agreement gives us the flexibility to raise equity when we want to. We will continue to explore capital formation strategies to fund capital needs for future growth opportunities, coupled with anticipated receipts from customers. We believe that our Cash Runway supports the commercialization of the two announced contracts and engagement of third party design partners to begin developing our next generation silicon since our last earnings call. Here's what I'd highlight. First, we secured $176 million in contracts and purchase orders. South Asia deliveries are underway and we anticipate the first shipments for StarShine to start in the third quarter of 2025. Second, we launched our hybrid AI platform which is resonating strongly with customers serving multiple use cases. This is no longer a roadmap item. It's being deployed in national and enterprise infrastructures and shaping real world outcomes. Next, our qualified pipeline now exceeds $725 million with $300 million in higher confidence deals expected to contribute towards more predictable revenue growth in 2026 and beyond. And finally, we continue to maintain cost discipline, investing where demand is strongest and have capital formation strategies in in place to fund growth. Thank you. And with that, we'll now open the line for questions.

OPERATOR - (00:16:57)

As a reminder to ask a question, you will need to press Star 11 on your telephone to remove yourself from the queue. You may press star 11 again. Please limit yourself to one question and one follow up. Please stand by while we compile the Q and A roster.

UNKNOWN - (00:17:17)

Good afternoon everybody.

OPERATOR - (00:17:22)

Sorry speaker, we just needed to pass it back to Dhinikar for some closing remarks.

UNKNOWN - (00:17:30)

Okay, thanks for sharing.

Dhinikar - (00:17:33)

Good afternoon everybody. As we get started, I wanted to share something we're excited about. Our client StarShine recently published a case study featuring Blaize along with a great video from the CEO Matt, CEO of StarShine. It's always energizing to see our work and vision showcased. Matt, CEO of StarShine shared the video link with us and we posted it on the Blaize website and our blog for anyone who would like to check it out. With that, I'd like to hand it over back to you for Q and A.

OPERATOR - (00:18:06)

Thank you, sir. Our first question comes from the line of Gil Lauria of DA Davidson. Please go ahead, Gil.

Gil Lauria - Equity Analyst - (00:18:16)

Thank you. Good afternoon. First question is Just to check some math here, if we have $176 million that will be delivered by the end of 2026 based on this year's guidance, that would imply that there's $140 million that should still that go into 2026 before any additional wins from any other contracts that could be secured between now and the end of next year. Is that right?

Dhinikar - (00:18:45)

That would be correct, Gil.

Gil Lauria - Equity Analyst - (00:18:48)

Okay. And then the second part is more about the architecture and the market opportunity. It sounds like the architecture for Starshine is, I think you refer to it as a hybrid architecture where you're putting your product side by side in a server with Nvidia GPUs because your inference is so much more efficient. But then that goes into the data center. Unlike other projects that you were going to deliver on the edge, this architecture puts you in the data center. Does that mean that you now have a bigger incremental opportunity within data centers as opposed to the opportunity at the edge?

Dhinikar - (00:19:34)

Absolutely, Gil. It is a combination of, for example, the South Asia contract that we announced is also with sovereign AI provider and they are doing traffic management use cases where they have a box right behind the camera and also a server in an on prem cloud that can do analytics for traffic. So what we're seeing bigger picture is customers primarily care about ROI for a project and this is where they're looking at hybrid as the right strategy where they do GPU based systems for part of the problem and then they need part of the AI stack. Blaze runs more efficiently for a total cost of ownership (TCO) advantage, for a cost advantage, power advantage and this is where they complement GPUs with Blaze and that's the momentum that we're seeing and that's what we're referring to as hybrid AI. So you are right. Also extending our reach into the data center.

Gil Lauria - Equity Analyst - (00:20:42)

That's great.

Dhinikar - (00:20:43)

Thank you.

OPERATOR - (00:20:46)

Thank you. Our next question comes from the line of Richard Shannon of Craig Hollam Capital Group LLC. Please go ahead Richard.

Richard Shannon - Equity Analyst - (00:21:00)

Thank you. Thanks Dhinikar and Harminder for taking a couple of my questions here. Maybe let's just ask more a tactical one here. Following up the guide as well as a couple of the past questions here. I guess the first part of this. You were talking about a dip in gross margins here in I think the next couple of quarters, maybe you could nail this down a little bit better, help us out what kind of levels you're thinking of and then how much of the sales here come from these two large contracts from StarShine and from the South Asia customer.

Harminder - (00:21:32)

So in your Second question for clarification, Richard. Do you mean in 2025, how much of those contracts are?

Richard Shannon - Equity Analyst - (00:21:40)

I mentioned the third quarter, but if you'd like to go for the whole second half, that'd be great too.

Harminder - (00:21:44)

Yeah. So it's going to be a combination. If I take your second question first, between the 56 million and the 120 million, there'll be more of Starshine this year in proportion. And of course it'll be proportionate. As we go into 2026, the gross margin dip. It will depend on the mix of not just the deliveries of these two contracts. Both have third party hardware components in them, but the margins on the Starshine third party components are slightly lower. So it will, I can't quantify just yet. It will all depend on the mix. But all we do know what we can say is that it will be a little bit lower than what we are seeing today. Of course, what will also and can also offset that is the more software licenses and so on that we deploy in 2020. That should counter some of that reduction from the Starshine contract specifically.

Richard Shannon - Equity Analyst - (00:22:51)

Okay, perfect. That's a very helpful detail here. My second question is regarding the MOU with the UAE entity that you announced last year. And I asked this partly dinnaker because a couple times in your prepared remarks you talked about defense applications being proven out here and it smells something like what's going on there. So maybe if you can give us an update of where that sits if it's still in the pipeline when you expect that to. To come across the finish line.

Dhinikar - (00:23:17)

Sure. Our defense pipeline is actually growing. But let me specifically address your question with regards to the MOU status. The delivery and revenue recognition of that particular MOU project will follow the customer's deployment schedule, which currently targets 2026. Given the size and immediacy of the StarShine and the South Asia orders. We're actually prioritizing these programs to deliver recognized revenue in Q2, Q3 and Q4 and that's where we are. On top of that, we are engaged with defense industry in various. This is part of our pipeline, larger pipeline including use cases like drones as well as video security, perimeter security. And as these further materialize, we'll be sure to announce them.

Richard Shannon - Equity Analyst - (00:24:17)

Okay, great. One last question. I will jump out of line here. The pipeline, $725 million I think the last quarter you talked about, I can remember what it was 400 or something like that. So a nice increase. And I would assume if we take out the 176 that the contracts you've announced since then here, maybe you can tell us about where the new elements of the pipeline sit. And then also with these, I think $300 million in late year. How many different contracts are we talking about and would it be reasonably expected to see those closed sometime this year?

Harminder - (00:24:49)

So, yes, you're right. The 176 is outside of the 725. And so we've always maintained a very deliberate nature of how we qualify our opportunities. And really, it's playing to the advantages of the the Blaize, the programmable device, the low latency, high performance and low power consumption. There are probably around 20 to 40 different applications or customer engagements in the 725. So they vary in size. As we would have discussed in earlier conversations, we approach what we call a beachhealth customer. We take a beachhead customer approach with our ISVs when we deal with one particular customer, one ISV in one specific industry. And as that gets deployed, we expect that that ISV's pipeline, you know, becomes available to us. The 300, specifically that one. We've gone through POCs, we've done some pilots, we've identified the ISV. We're working with those customers, and really it's about when they wish to start deploying solutions. We expect most of those to begin at scale in 2026. Okay, great.

Richard Shannon - Equity Analyst - (00:26:23)

Thanks. That's all from you guys.

OPERATOR - (00:26:27)

Thank you. Once again, to ask a question, please press Star 11 on your telephone. Again, that's Star 11 to ask a question. Our next question comes from the line of Kevin Cassidy of Rosenblatt Securities. Please go ahead, Kevin.

Kevin Cassidy - Equity Analyst - (00:26:49)

Yeah, thank you for taking my question and congratulations on the great results and good outlook. One question I had was your guidance for the year for 2025, it tightens it on the low end and also on the top end. I was just wondering on the high end, is it more of your supply chain or what brought that number down?

Harminder - (00:27:12)

No, it's not a supply chain issue, Kevin. It's really. We're now working very closely with those customers on what their deployment needs are. We know that they had requirements for 2025, which we're fulfilling, and we've got schedules for 2026 that we're working through.

Kevin Cassidy - Equity Analyst - (00:27:32)

Okay, great. And your outlook for 2026 remains the same? The revenue guidance you had given before?

Harminder - (00:27:40)

Okay, great. Yes. A while ago we had updated the lower end from 105 million to 130 million, but the upper end still remains the same.

Kevin Cassidy - Equity Analyst - (00:27:52)

Okay, and can you talk about the supply chain? Is there any problems getting wafer starts or Any other, I guess what is the long pole in the tent for manufacturing your products?

Harminder - (00:28:07)

No, we're fortunate in the sense that our first generation of chip is at 14 nanometer. Doesn't cause us any capacity sort of challenges with the Samsung foundry. We maintain extremely close relationships with them and our contract manufacturer. So as these contracts were being discussed and we knew what the rollouts were going to be, we'd already placed orders for not just chips, but also the end the cards and so on. Dhinikar, did you want to add also that. No.

Dhinikar - (00:28:46)

Right. Our foundry is here is also beneficial.

Kevin Cassidy - Equity Analyst - (00:28:57)

Okay, thank you.

OPERATOR - (00:28:59)

Thank you. Our next question comes from the line of Scott Searle of Roth Capital. Please go ahead. Scott.

Scott Searle - Equity Analyst - (00:29:10)

Hey, good afternoon. Thanks for taking my questions. Hey Dinnaker. I was hoping to dive in a little bit on the hybridization commentary. You know, there's certainly been the evolution within the data center, which was a huge upside opportunity as we look at over the next several years. But it sounds like there's a little bit of hybridization going on in the edge as well. I'm wondering a couple things. Coexistence at the edge with GPUs as opposed to complete displacement. How do you see the evolution over the next year or so? And then I'm wondering within the data center itself, it sounds like some of those early opportunities are starting to crop up and present themselves. I'm wondering about the timeline of when we start to see that materialize in a little bit more of a meaningful way. And as we look at that $725 million pipeline, how is that spread across traditional data center versus edge applications? Thanks.

Dhinikar - (00:30:02)

Sure. Sure, Scott, thank you. So first of all, I guess the technology part behind it customers clearly, especially in these real world projects, care about ROI. How much is the spend and they have their budgets established and within that they have to show results and a return. And whether it's a government or city or what have you. And that is what is driving. If they did the entire project on gpu, only the cost would be prohibited. At the same time, there are parts of the AI stack that Blaze is more efficient and more power efficient, more cost efficient. At the same time, one of the uniquenesses of Blaze's architecture is full programmability so that it can adopt these workloads and then the software tool chain to make it seamless and easy to adopt so that it also helps with the customer's time to market and IT spend. So these are all coming to play. And complementing a GPU based design, a system with a Blaize server alongside is what they're witnessing, significant TCO advantage. So that's what is driving the momentum. The second part, I'll let Harminder jump in as well.

Harminder - (00:31:25)

Yeah, so you asked about a mixture of the split of the pipeline and actually it is a blend. So I'll give you one extreme, which is where in certain defense applications, drones, for example, it's deployment of one of our cards on the drone itself and that, that is the solution that's being provided. At the other end you've got the kind of things that you've heard from the South Asia deal and the StarShine deal where we are delivering server systems powered by Blaze and they coexist with GPU based systems. And in the middle you've got again another defense type of application where you've got a mixture of. On the one hand you will have sensors, perimeter security, for example, you have sensors on the perimeter which is fusing visual spectrum, near infrared, infrared, radar, et cetera. And there are certain alerts being delivered from the algorithms that are being run there and then, but they are then backed up by a command center which has a server sort of system based server system based server system. Excuse me. So when we look at that pipeline. It'S got combinations of all of those and we just focus on where customers want to deploy the fastest and that's how we react.

Scott Searle - Equity Analyst - (00:33:01)

Hey, if I could just quickly follow up, I think you indicated in your opening remarks about inference driving about, you know, 6x the opportunity versus traditional training. And I'm just wondering if you're seeing those types of numbers in any of these early deployments. Right, in terms of the wallet share or market opportunity for you guys or is that the evolution that you're going to expect over the next several years? Thanks.

Dhinikar - (00:33:28)

This is actually quite clear, right? The initial phase of AI was all about AI training and creating models in the cloud. Now AI does need to come outside the data center into real use cases. It could be smart city, it could be smart agriculture, industrial automation, all of these use cases and this is where majority of the workload is inference. So as the world starts adopting, AI increasingly influences the main use case. And we're actually finding this, even as we discuss with our customers about the hybridization strategy, pretty common to see them have more inference demands than anything else. So, yeah, short answer is yes.

Scott Searle - Equity Analyst - (00:34:19)

Great, thank you. Thank you.

OPERATOR - (00:34:23)

I would now like to turn the conference back to Dinakar Monagala for closing remarks, sir. Sure.

Dinakar Monagala - (00:34:31)

Thank you. So as we wrap up, we started the year as a young public company and we had a pipeline and our focus was to convert the pipeline. I want to emphasize that Blaze is now entering this next chapter of hybrid AI. With focus, momentum and the right partnerships in place, we have a clear path to execute on our commitments at scale with our Blaze AI platform and capture the opportunities ahead with our pipeline. Our technology is proven, our go to market is working, our team is fully aligned. I'm excited about what's ahead for Blaze and I want to thank our employees, our partners, customers and shareholders for their continued trust and support. Thank you.

OPERATOR - (00:35:24)

This concludes today's conference call. Thank you for participating. You may now disconnect.