Applied Energetics, Inc. AERG continues to expand its revenue base and operational capabilities, particularly in securing larger defense contracts. However, the ongoing challenges of rising costs and operating losses indicate the need for careful cost management as the company scales. The improvement in cash reserves is a positive sign. The company’s ability to sustain growth while managing expenses will be critical in the coming quarters.
Applied Energetics Inc. Price, Consensus and EPS Surprise
Applied Energetics Inc. price-consensus-eps-surprise-chart | Applied Energetics Inc. Quote
Q2 Results
Applied Energetics reported a second-quarter 2024 net loss per share of 1 cent, unchanged from the previous-year quarter.
Total quarterly revenues of $0.78 million represented a 39.4% increase from $0.56 million in the year-ago quarter.
The company's unchanged quarterly earnings were supported by ongoing investments, and new and modified contracts. Performance was particularly bolstered by the defense sector, wherein the company secured larger and more complex projects.
Profitability Metrics
The company’s gross profit in the second quarter of 2024 was $0.4 million, marginally up from $0.38 million in second-quarter 2023. Despite revenue growth, the gross margin decreased to 50.8% from 68.4% in the previous year primarily due to a significant rise in the cost of revenues, which more than doubled year over year.
The operating loss expanded to $2.06 million in second-quarter 2024 from $1.83 million in second-quarter 2023, reflecting the ongoing challenges of managing costs while scaling operations.
The net loss for second-quarter 2024 was $2.06 million compared with $1.82 million in second-quarter 2023, marking an increase of around 13%.
Costs
The cost of revenues in second-quarter 2024 was $0.38 million, an increase of 116.8% from $0.18 million in second-quarter 2023. This surge was attributed to higher material costs and increased labor expenses required to fulfill the larger and more complex contracts.
Operating expenses also rose 11% to $2.46 million from $2.21 million in the prior-year quarter, driven by higher general and administrative expenses, which reached $2.34 million, up 13.4% year over year. This increase was due to an expanded workforce and higher stock-based compensation as the company invested in talent to support its growth initiatives.
Cash & Debt
Applied Energetics significantly improved its cash position in second-quarter 2024, ending the quarter with $2.79 million in cash and cash equivalents, up from $1.32 million at the end of December 2023. This increase was primarily due to a successful equity financing round that raised $4.17 million. Despite these inflows, the company continued to experience a negative cash flow from operations, which totaled $2.67 million for the first half of 2024.
On the debt front, the company reported a note payable of $0.14 million, stemming from an insurance premium financing agreement. This was led by a new obligation compared with the previous year when the company had no notes payable. The company’s working capital surplus stood at $2.60 million as of Jun 30, 2024, compared with $1.11 million at the end of December 2023, reflecting an improved liquidity position.
Management View
Management’s ongoing efforts to secure larger government contracts, coupled with continued investments in infrastructure and talent, suggest that the company is focused on positioning itself for long-term growth. The emphasis remains on executing current contracts efficiently and exploring additional funding options to support its development pipeline.
Other Developments
Applied Energetics expanded its operational footprint by leasing an additional 5,000 square feet at the University of Arizona Tech Park, bringing its total occupied space to approximately 26,000 square feet. This expansion is intended to support the company's growing infrastructure needs, including the establishment of a Battle Lab for laser system testing, which is expected to enhance the company’s capabilities in meeting military program requirements.
In conclusion, while Applied Energetics is making strides in revenue growth and strategic expansion, the increased costs and ongoing operating losses remain significant concerns.
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Applied Energetics Inc. (AERG): Free Stock Analysis Report
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