AmpliTech Group, Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023; filed November 14, 2023. AmpliTech designs and manufactures microwave and communications components and systems, and distributes semiconductor packaging products through Spectrum.
Financial performance and position
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $3.39 million | $5.44 million | $11.57 million | $15.12 million |
| Gross profit | $1.48 million | $2.66 million | $5.27 million | $7.02 million |
| Gross margin | 43.78% | 48.95% | 45.51% | 46.45% |
| Operating income (loss) | ($0.93 million) | $0.59 million | ($2.05 million) | $0.24 million |
| Net income (loss) | ($0.89 million) | $0.58 million | ($1.94 million) | $0.21 million |
| Net loss per share, basic and diluted | ($0.09) | $0.06 | ($0.20) | $0.02 |
- For the nine months, operating cash flow was negative $1.77 million, investing cash flow negative $3.74 million, and financing cash flow negative $2.33 million. Cash declined $7.83 million to $5.46 million.
- At September 30, cash and cash equivalents were $5.46 million; marketable securities were $3.10 million; working capital was $15.90 million. Total assets were $32.62 million and stockholders’ equity $27.09 million.
- Total liabilities were $5.53 million, including $3.84 million of operating lease obligations and $0.05 million of financing lease obligations. Notes payable were $117,473, all classified as current. The company paid a $2.18 million revenue earnout during the nine-month period.
Changes and business drivers
- Q3 revenue fell 37.69% year over year. AmpliTech Inc. revenue declined 21.12%, partly because a major customer order shipped in Q3 2022; Spectrum revenue fell 47.36% as demand for IC packaging eased with supply-chain conditions.
- Nine-month revenue fell 23.46%. AmpliTech Inc. revenue was approximately flat, up 1.27%, while Spectrum revenue declined 33.96%, primarily due to lower international sales.
- Nine-month gross margin declined to 45.51% from 46.45%. Research and development expense more than doubled to $1.64 million as the company added AGMDC personnel and advanced MMIC designs and other products. Management cited work on more than 75 new SKUs, cryogenic amplifiers, and 5G ORAN radios.
- Investment gains contributed $112,029 to nine-month other income, including $49,994 realized and $41,700 unrealized gains. These gains did not offset operating losses.
Outlook, risks, and notable disclosures
- No specific revenue or earnings guidance was provided. Management stated that cash on hand and cash provided from operations should fund operations for the next 12 months; the filing also says the company may use borrowing or debt or equity offerings to finance growth.
- Management’s growth strategy includes expanding into 5G/6G, satellite, quantum computing, and cybersecurity markets through product development and strategic partnerships, joint ventures, and potential acquisitions. These are forward-looking plans, not assured outcomes.
- Disclosure controls and procedures were deemed ineffective as of September 30, 2023. Management reported no period changes in internal control over financial reporting that materially affected, or were reasonably likely to materially affect, those controls.
- The company reported no pending legal proceedings to its knowledge and no off-balance-sheet transactions. It disclosed that $4.46 million of cash exceeded FDIC insurance limits at September 30, 2023.
- Management reported no impairment indicators for goodwill, intangible assets, long-lived assets, or its cost-method investment during the period. Inventory included a $1.13 million obsolescence reserve.
Important facts for investors to verify
- Whether Spectrum demand and international sales stabilize, and whether AmpliTech’s newer products and development programs generate sufficient commercial revenue.
- Whether operating cash use improves as revenue and margins change, and how cash, marketable securities, capital spending, and any financing needs evolve.
- The remediation status and implications of management’s conclusion that disclosure controls were ineffective.
- The assumptions behind management’s 12-month liquidity assessment, including the impact of lease commitments and future operating performance.