Q325 Letter to Investors, Clients, and Friends

Dear friends,

Our third-quarter results reflect a deliberate and foundational investment in the future of our company. This was a period where we consciously traded short-term profitability for a significant and durable increase in our long-term capacity to serve our clients. We executed our strategic plan, absorbed the upfront costs of expansion, and have emerged a stronger, larger, and more capable company well-positioned for the years to come.

A thoughtful analysis of the quarter reveals a clear story of building momentum. The early part of the quarter demonstrated our ability to operate with discipline and efficiency, proving the underlying health of our business model. This strength allowed us to reach an inflection point mid-quarter, where we surpassed a key monthly revenue milestone, driven by a significant month-over-month increase in sales. This period also saw us secure a pivotal relationship with a major new corporate client, further validating our service offering and market position.

The final stretch of the quarter was defined by investment. Sacrificing short-term profitability was the direct and anticipated result of launching multiple new, high-potential micro markets. These are not expenses in the traditional sense; they are capital expenditures that have been converted into long-term, revenue-generating assets. The most critical data points were not on the income statement, but in our core operating metrics. We saw a notable increase in our average transaction value, proving the strength of our product mix and pricing strategy. Furthermore, as our new locations came online toward the end of the quarter, our profit margins returned to strong, healthy levels. This is the clearest possible signal of the inherent profitability of our model and provides a preview of what we expect to see as we move forward.

Fortifying Our Company for the Long Term

Growth requires taking calculated risks, and a core part of our philosophy is to identify and manage those risks with extreme prudence.

The investments made this quarter were funded with a combination of operational cash flow and calculated leverage. We are watching our balance sheet with vigilance. The debt we have taken on is not speculative; it is directly tied to the acquisition of assets that are already producing recurring revenue. At the same time, our growth has resulted in a leaner cash position, which highlights the need for continued discipline.

Our plan to fortify our financial position is clear and already in motion:

1. We will designate a short period of time in the fourth quarter that will allow us to direct all free cash flow toward strengthening our balance sheet and paying down debt.

2. We are building a dedicated cash reserve, funded by a portion of incoming sales, to increase our liquidity and resilience against unforeseen events.

We must also be accountable for our execution. We had a minor operational error this quarter related to an accidentally late regulatory filing. While the impact was negligible, the lesson was valuable. It is acceptable to make mistakes; it is unacceptable not to learn from them. We have already implemented new internal processes to ensure it does not happen again. This is how a durable, well-managed company is built.

The Path Forward: A Relentless Focus on Execution

The investments of the third quarter are behind us. Our focus for the fourth quarter is clear: realize the returns. The foundation has been laid, and our priorities are centered on execution and financial discipline. We will be moving into a dedicated commercial facility to support our larger operational footprint and will continue to build our cash reserves.

The market environment remains favorable. Our brand—evidenced by our 100% client retention rate and 100 5-star Google ratings—continues to attract a premium client base, with a promising pipeline of opportunities in both the corporate and luxury residential sectors.

Achieving our near-term revenue goals is the key that unlocks the next phase of our company’s growth: funding our first team members and acquiring the key infrastructure that will allow us to scale effectively. The decisions we made in Q3 directly paved the road to achieving these goals in 2026.

We have the right strategy, a proven model, and a clear-eyed view of the risks and opportunities before us. We will continue to manage our company with the discipline and long-term perspective you expect. Your friend and trusted leader of Skala Industries,

Nate Skala

Founder and CEO

Skala Industries