Applied Energetics Announced Q3 Earnings: Growth Amid Rising Losses and Costs
Shares of Applied Energetics, Inc. (AERG) saw a modest increase of 1.1% after the company disclosed its earnings for the third quarter of 2024. This rise stands in contrast to the S&P 500 index, which experienced a decline of 1.1%. In the past month, AERG’s stock has surged 6.4%, outperforming the S&P 500’s 1.6% growth.
Highlights from the Financial Report
In the third quarter of 2024, Applied Energetics announced revenues of $0.75 million, marking a 4.9% increase from $0.71 million during the same quarter last year.
However, despite this revenue growth, the company’s net loss expanded by 31.1%, reaching $2.37 million compared to a net loss of $1.81 million in the third quarter of 2023.
Interestingly, the loss per share remained stable at 1 cent in the third quarter of 2024, which can be attributed to a larger number of outstanding shares offsetting the greater loss.
Applied Energetics Stock Performance
Applied Energetics Inc. price-consensus-eps-surprise-chart | Applied Energetics Inc. Quote
Other Important Business Metrics
The cost of revenues soared by 192.7% year over year, reaching $508,709. This sharp increase reflects higher material and labor expenses linked to contract modifications. Gross profit also fell dramatically to $239,011 in Q3 2024 from $538,398 in the previous year, leading to a compressed gross margin. Meanwhile, selling and marketing expenses were reduced by 8.2% year over year, as the company worked to streamline its business development.
Operating expenses, particularly general and administrative costs, escalated by 10.7% to $2.46 million. Research and development (R&D) expenses rose significantly, increasing by 29.6% year over year.
As a result, the operating loss for the quarter ballooned to $2.37 million, up from $1.83 million in the same quarter of 2023. The operating margin worsened to -317.3% from -256.6% in the prior year, affected by heightened general and administrative expenses alongside increased R&D spending.
Insights from Management
Management expressed a commitment to advancing ultrashort pulse laser technologies aimed at defense and national security. CEO Gregory J. Quarles pointed to several recent contracts and partnerships, including a $1.99 million project with the Office of Naval Research, as well as a Phase II Small Business Technology Transfer award from the U.S. Army. These initiatives illustrate the company’s intent to tap into growth opportunities in the directed energy sector.
An optimistic outlook persists regarding the ongoing government and defense contracts. A newly transitioned Department of Defense grant, valued at $1.46 million, highlights the company’s potential for securing stable revenue in the near future.
Challenges and Opportunities
While revenues grew, rising operating expenses—including increased stock-based compensation and significant costs for leases and utilities—present challenges. Additionally, the company’s larger footprint at the University of Arizona Tech Park, featuring a new Battle Lab, has led to higher overhead. Ongoing input cost inflation and geopolitical uncertainties remain potential hurdles that could impact supply chains and profitability.
Recent Developments
In a notable expansion, Applied Energetics has leased an additional 5,000 square feet at the University of Arizona Tech Park during the quarter. This facility aims to enhance the development and testing of laser systems in a controlled setting, which aligns with the company’s long-term growth strategy. Furthermore, AERG has signed a Memorandum of Understanding with a systems integrator based in the U.S. to integrate its laser technology into high-energy directed energy platforms.
In summary, while Applied Energetics exhibited notable stock performance and continues to make strides in growth initiatives, rising losses and cost pressures could pose risks. The company’s ability to manage government contracts and commercialize its technologies will be vital for future financial success.
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Applied Energetics Inc. (AERG): Free Stock Analysis
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