AmpliTech Group Q2 2024 Earnings Call Transcript

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Provided by Quartr
August 28, 2024

There are 4 speakers on the call.

Operator

day, ladies and gentlemen, and welcome to Amplitec Group's Quarterly Investor Update Call, where the company will discuss its Second Quarter 2024 Financial Results. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will be given at that time. As a reminder, today's conference is being recorded. I would now like to turn the call over to Amplitec's management.

Speaker 1

Thank you for joining today's call to review the progress of Ampitec's growth initiatives and to answer investor questions. On the call, today are Ampitec's Founder and CEO, Pawel Mapuc the company's CFO, Luisa Sanfatelo and Jorge Flores, the company's COO. Following initial management comments, we will open the call for investor questions. An archived replay of today's call will be posted to the Investor Relations section of AMPYTECH's corporate website. This call is taking place today, Wednesday, August 28, 2024.

Speaker 1

Remarks that follow and answers to questions include statements that the company believes to be forward looking within the meaning of the Private Securities Litigation Reform Act of 1995. These forward looking statements generally include words such as anticipate, believe, expect or words of similar importance. Likewise, statements that describe future plans, objectives or goals are also forward looking. These forward looking statements are subject to various risks that could cause actual results to be materially different than expected. Such risks include, among others, matters that the company has described in its press releases and in its filings with the Securities and Exchange Commission.

Speaker 1

Except as described in these filings, the company disclaims any obligation to update forward looking statements, which are made as of today's date. With that, let me turn the call over to our CEO and CTO, Pawel Nacour.

Speaker 2

Hello, everyone. Thanks for joining our Q2, 2024 review call today. We will reflect our performance in the Q2 of 2024 and discuss the company's growth and outlook and market opportunities. The Q2, we reported revenue of $2,500,000 with gross profits of $1,000,000 Company maintained a healthy gross profit margin of approximately 42% mix inflationary pressure. However, due to the significant decrease in global demand and recessionary market dynamics, we did not meet our projected revenue goal.

Speaker 2

This economic situation with the global and domestic markets continues to be a factor affecting most of our customers across all product lines. Hard to believe that our largest customers like ViaSat, CCI and L3 Harris Communications to name a few were suffering losses and or layoffs. Semiconductor distribution sales from our Spectrum division also decreased due to software international demand mainly from Hong Kong, which is controlled by China now. It seems there was a sustained perfect storm of negative market conditions contributing to our loss of revenue for the better part of the first half of the year. We couldn't have predicted such an event would ever occur since we have never experienced it before.

Speaker 2

Naturally, this is a significant factor in many of our losses. The good news is that this is just and yes, I will use the word transitory. Overall, the company reported a loss of $1,570,000 for Q2 2024 and as mentioned above attributed largely to a combination of unexpected lower global and domestic sales, increased corporate expenses and our continuing R and D efforts to obtain licensing and certifications required for development and pending market release of our new 5 gs products. As of June 30, 2024, we had cash, cash equivalents and accounts receivable in the amount of approximately $2,100,000 and working capital of nearly $10,000,000 Our inventory position, however, remained healthy with over $7,000,000 of raw materials and finished goods available to support immediate customer needs. Company is ready to serve its customers as normal demand for our products is expected to resume in the upcoming quarters.

Speaker 2

We have started seeing an increased stream of RFQ activities since the beginning of Q3. We're confident that the investments we've been making in new products should generate higher returns and profitability for the company. Our products are designed to be not only cutting edge, but also light touch labor and supported by the automated quoting and other capabilities of the multi function CRM system we have in place. Our goal is to lower our cost and increase our profit margins. Looking ahead, here are some key highlights to provide some revenue guidance for the upcoming quarters.

Speaker 2

In our public 5 gs business segment, our massive MIMO ORAN 5 gs64T64R, a lot of numbers. Cellular radio which is designed for towers and base stations is in its 3rd month of testing at the OPC Center at Northeastern University. The university by the way is powered by AT and T and Verizon. It's the most advanced radio of its kind to replace current 4 gs LTE and other obsolete equipment and is moving flawlessly towards completion before the end of the year. It's planned for full deployment in public 5 gs networks by public MNOs, those are mobile network operators like AT and T, Verizon and T Mobile to fulfill the mandate to provide open, flexible architecture developed mainly by U.

Speaker 2

S. Companies. As such, it should be noted that Amplitec Group via its Amplitec Group 2 gs fee services division is the only U. S. Based massive MIMO ORAN 5 gs radio and network equipment provider.

Speaker 2

Just think of what this means in terms of competitive edge and potential market capture for AMPG. This positions the company to replace existing equipment from foreign vendors due to security and other economic concerns. Furthermore, in our private 5 gs business segment, the company has now developed a full end to end private 5 gs licensed product solution. This offering integrates advanced O RAN radios, central and distribution units, antennas, core servers and reversible range of FWA or fixed wireless access devices tailored for diverse deployment scenarios including buildings and residential homes. Yes, I did say residential homes.

Speaker 2

FWA replaces cable and fiber to the home or business and makes high speed connectivity virtually cable free. This means oscillating cable or fiber solutions. This is a major monetization opportunity with large volumes and enormous total addressable market and revenue potential. AG PGS's private 5 gs end to end solution is designed to meet burgeoning demand for expert planning and optimization services which the AGSTGSS group offers, this ensures a seamless deployment and operation of private 5 gs networks delivering 2 gs speed services exceeding 1 gigabit per second data speeds. These private 5 gs networks will be in airports, airlines, mines and etcetera.

Speaker 2

There is a big demand for corporations to have their own private 5 gs networks. Company expects to announce within the next couple of months key relationships and initial P5 gs deployment contracts domestically and abroad, so please stay tuned. At this time, our customers at home and abroad tend to take long summer vacations and some of our investors like to take their tax losses. So don't let the drop in our market cap start early. It should only be again transitory.

Speaker 2

The rest of the year should provide proved to be very exciting. Now I'd like to set some light on our APO TECH, Inc. Business segments. High Performance Satellite Ground Station LNB. The LNB is a key component that is located at the center of satellite dishes that enables all satellite communications and therefore represents a large growth opportunity due to the levels of expected revenue.

Speaker 2

You've all seen these large dishes. You've seen the TV trucks outside transmitting. They have the dishes on top and the little white box in the center. That's what we're talking about. The company has also made strides in driving demand for its new LMD product lines.

Speaker 2

Taking advantage of its low noise proprietary technology, these LMBs provide satellite companies with unparalleled performance. For example, the Ku band LMB market size was valued at $103,200,000,000 in 2023 and is expected to reach $156,100,000,000 by the end of 2,030. With the company's newly released low noise advanced Mimics from our Mimics design center, the performance of these LMDs are unparalleled in this industry giving us a marked advantage over our competitors. Company has been actively quoting these L and D solutions and expect sales for our X band, Ka band and Ku band L and D product lines match or exceed all regular L and A product purchase sales within a year from now. Again, it should also be noted that our company is the only U.

Speaker 2

S.-based designer and manufacturer of these high performance LNVs. These are used by many satellite enabled companies in GPS, content streaming for cinema and TV, news distribution, high speed internet and even airline Wi Fi. These are just a few. There are many other military and commercial industries representing another large monetization opportunity. Like the 5 gs solutions, we have a similar unique technical advantage over other industry players.

Speaker 2

So we're never a me too product. Cryogenic Power Supplies. The company also recently announced the release of its line of cryogenic power supplies for the quantum computing industry. These new units complement this line of cryogenic amplifiers and are being quoted as a set to interested customers. Our Appletech Inc.

Speaker 2

Division also take orders for its cryogenic amplifier during this quarter marking a milestone for the company. The first order was awarded from a major leading quantum computing company within the U. S. Currently there are only 2 manufacturers capable of supplying the required low noise performance at subzero temperatures. 1 is located overseas and the other is Amplitec.

Speaker 2

Again, this makes Amplitec the only U. S.-based domestic manufacturer for these types of cryogenic products. Once again, this is going to be a significant factor for the company to obtain a leadership position in the quantum computing industry and gives AMPG a significant competitive advantage to be a leading enabler for next gen AI and computing quantum computing application. Mimics and chips. Our AGM DC division has released over 100 new MMIC and chip products since its inception.

Speaker 2

All these configurations are available now for sale at our newly completed online store, where customers can readily purchase the superior performance products online 20 fourseven, thereby leading to a continued stream of revenue for the company. Our global distribution partner CDI, which distributes locally and abroad provides local customer service and application support across the Americas is actively marketing our products which includes obsolete replacement parts from large semiconductor companies no longer manufacturing these products. This opens up even more opportunities for our Mimics division. In addition, our AGMDC center has the capability of designing custom parts. Most recently, our AGMDC MDC division received and performed a custom design for a well funded space company startup, which the company believes will win their program.

Speaker 2

This project will require 100 of 1000 of Mimic parts to be supplied over the next 2 to 4 years. In addition to this, our Mimic division is designing the most advanced chipsets to build into our own 5 gs products to further differentiate us from our competition in terms of speed, throughput, performance and reliability of the 5 gs equipment. That was a summary of some of the products we have been investing in to align the company with exploding industry demand for innovative and disruptive technology. These products have high margins, high volumes, high performance differentiation and that could readily lead to near term profitability due to the very large TAMs for these markets. Furthermore, on 5 gs initiatives, the company plans key global trade show participation to promote its 5 gs suite of products and new disruptive technology.

Speaker 2

We have just began that 5 gs marketing. It's in its infancy, but we plan on growing that aggressively. I've said a lot and I truly hope all of you understand our dedication to success. In closing, we're proud that our investment in our research and product development efforts have yielded leading edge technology that will drive our revenue growth for the next few years and beyond. Our products enhance our clients' entire communication system and our commitment remains unwavering to aid our clients in shaping the future of communication and thus improving the quality of life for everyone.

Speaker 2

The team has been working relentlessly to develop the lowest noise, lowest power dissipating amplifiers on the market and these are included in our new 5 gs and wireless infrastructure product and mimic design for the satellite, wireless and 5 gs markets, including the advanced military and commercial markets. We've also expanded into the design of full service through open radio access network, O RAN public and private 5 gs network deployments, actual deployment. These offerings are cutting edge end to end solutions. We have painstakingly developed strategic partnerships with giants of the industry. We now have a fully licensed end to end private 5 gs solution we are offering for the 5 gs market.

Speaker 2

We just recently released news on our first MoU to deploy domestic private 5 gs network on the West Coast. Moreover, we're excited to be bringing these products to market at a time that the 5 gs infrastructure market is projected to reach 99,000,000,000 by 2,030 according to industry research. This tremendous growth outlook reaffirms our belief in the significant potential of our product line to serve this market. Despite the weakening economic trends experienced during this initial 6 month period, we remain optimistic about our sales prospects. We anticipate that global demand will bounce back as market conditions improve.

Speaker 2

Our 2024 fiscal year marks the 3rd year of our 5 year growth plan after we became public. Please remember that we still have 2 years left in our plan to realize and generate tremendous value for the company and our shareholders. From what I mentioned, it's evident that we have made great strides during these initial 3 years after becoming public. Considering all of the negative dynamics around our public presence, which incidentally has never been fairly evaluated by the market even when we were profitable. We expect this change once we gain the traction we anticipate in the coming months.

Speaker 2

We thank you as always for your continued patience and trust. Thank you. We'll now open the call for questions.

Operator

Okay, we'll now move on to Q and A. The first question comes from Jack Van Derag at Maxim Group.

Speaker 3

Okay, great. Thanks, Fahd. I appreciate the update and you covered plenty of ground. There's a lot to chew on here. Maybe it'd be helpful if we could just kind of compare some of the staffs and just general stuff that you provided a few quarters ago and just get an update on that in a simplified way.

Speaker 3

In terms of the overall pipeline size maybe, I think it was over $120,000,000 about 2 quarters ago. I'm not sure if you guys are still tracking it the same way, but can you just maybe help us provide an easily like an easier way to understand what's the pipeline at and kind of what you expect from a revenue perspective for the rest of this year?

Speaker 2

Well, first, Jack, you know that we've been facing heavy headwinds from all sides domestically and abroad. In the election year we have seen too often the customers pushing out orders again and again. So that's what we experienced. That pushes out our own projections that we've had before. And this situation is not just here in our company, it's everywhere and it's not just related to the company.

Speaker 2

We've had our contract manufacturers do the same thing to us and they've said that every customer is doing that to them. So it's not something that we're just experiencing, but it does push our orders and our predictions out. On the good side, we're seeing increased RFQ activity combination of new RFQs and then just refreshing older quotations that we've been talking about and counting on before that has been pushed aside when we just had to basically refresh the date for them to order. With that said, our 5 gs in the opportunity funnel, we see about $130,000,000 in our pipeline of opportunities. And historically, we've seen about a 25% conversion rate and our opportunities to purchase orders.

Speaker 2

So however, we just started our sales cycle for 5 gs. We haven't been able to start because of all these other conditions and getting licenses and certifications, it takes time. So, I mean, we just feel that we're starting out on our 5 gs division, which means there's no real history of the conversion for that particular product line. But we can share that this we're very excited about that and our engagements with the large 5 gs players, we expect this business, 5 gs business to account for at least 75% to 80% of our revenues in 2025.

Speaker 3

Okay. I'm sorry, that business that's going to account for that percentage, is that the 5 gs overall, 5 gs tower upgrades or just private networks?

Speaker 2

Yes. 5 gs overall. Right now we've just started to make a dent in the private 5 gs enterprise with our new suite of 5 gs products, but these are predecessor to our commercial 5 gs, which is the original radios that are planned for urban deployment by these MNOs, by the companies like AT and T, Verizon. And in all probability, we'll probably start doing that internationally as soon as our radio for commercial applications, the large radio, the advanced radio that gets where we complete our certification and our testing at the OTIC center that's in Northeastern University. We've already gotten demand for that same radio by international players that are looking to use them for urban communities.

Speaker 2

So it's a global play, but it's hard to push that in U. S. Domestic markets, although we've been contacted by all these large guys. But we definitely expect to see results after we complete our testing. We're in our 3rd month.

Speaker 2

After our 5th month, which will be end of the year and early next year, we'll have the certifications and start receiving orders for the massive MIMO radios. But we can already start receiving orders for the private 5 gs.

Speaker 3

Okay, great. Great. And you said about $130,000,000 pipeline give or take. Is that for overall AmpleTech or is that for 5 gs?

Speaker 2

Yes, it's for overall Ampletech. And as we said, I mean, we're converting Ampletech's revenue stream and product line and market target focus into 5 gs and quantum computing and satellites rather than just amplifiers. We're converting our connectorized amplifiers and larger labor related assemblies into mimics and chips. This is what the goal was, so that we can lower the costs and lower the prices and be more competitive for our advanced technology and then put it into our products like the quantum amplifiers and like the 5 gs radios and the satellite in space as well as ground.

Speaker 3

Okay. And then I think it was 2 quarters ago, I know you just kind of referenced it as well in your prepared remarks, but in terms of the revenue guidance you had provided entering the year, it was like $35,000,000 to 40,000,000 Obviously, there's been some delays with just across all your verticals or there's just delay like across the industry as well. It's not something specific to you guys. But just so we have an idea, that $35,000,000 to $40,000,000 prior guide, is that a good proxy to think about maybe for your expectations for 2025? Just in if you don't want to provide guidance, that's fine as well.

Speaker 3

But just so we have an idea of how do you connect the dots back to that original guidance?

Speaker 2

Yes, I would easily say 2025, yes. I just can't say definitely what's happening in 2024 because of all that's happened. But we definitely see activity and we definitely are close to just thinking the orders. We've been as I said before, we've been painstakingly making these relationships. But for people to get the sign on the dotted line, it takes forever, especially in an environment like this or private 5 gs is a very, very technical product.

Speaker 2

And we have players that we're competing with, but because of our technology, we are going to get adoption very fast. There are not that many players that have that technology that we have. So definitely this year we will see the increase compared to the first half of the year. We will definitely start to see bookings in the second half of the year, but definitely for 2025, easily $40,000,000 or so that we projected.

Speaker 3

Okay. Understood. And then do you also expect your whole new Mimic line of business that's going to essentially maybe double the existing run rates of the business. Are you going to be experiencing do you expect revenue start trickling in from that during 2024 or is that also a 2025 event?

Speaker 2

Yes. George has been working on the Mimic division and also some key customers. George, can you say

Speaker 1

a couple of words about that? Yes. We already have some small revenues on the Mimics. But right now, definitely, we are going to be expecting to book the sizable order in Enelica hopefully in Q1, which is going to really drive the Mimica sales for 20252026. So we definitely expect a very good news early next year.

Speaker 2

Yes, not towards the end of this year. It can happen, but you can't say anything right now because of what's happening. Who knows what happens? Do we have the election coming up? There are so many uncertainties here that it's unusual circumstances.

Speaker 3

Absolutely. Okay. I appreciate that color. That's helpful. And if I could, maybe just circle back as it relates to the 4 gs, 5 gs tower upgrade opportunity.

Speaker 3

There's thousands of these cell towers across the U. S. And I know you've previously talked about these are higher this would be a you've an out of box solution to upgrade these towers and it's a higher ASP, it's a big ticket item as well. Can you just remind us, is this a 2025 opportunity that you expect to ramp? How quick are you actively targeting certain towers already and working with industry participants or other third parties?

Speaker 3

How do you actually approach and target that opportunity? And how quickly can we expect those towers to be upgraded and be recognized into revenue for Amplitec?

Speaker 2

So one, there's about 1,000,000 towers in the U. S. Alone, right, all over the country. And then we're talking about

Speaker 1

not just U. S, so there's also global.

Speaker 2

There should be a lot. Now when you remember, everyone converted from 3 gs to 4 gs, and then 4 gs to what they call 5 gs, it was a massive deployment. Every company involved, including the tower companies like American Tower Crown Castle, they were all experiencing significant growth. And I mentioned before that the new deployment for 5 gs is not even beginning yet. And it's going to be bigger than all the other Gs combined.

Speaker 2

So therefore, we expect, 1st, to start off in the smaller areas for the private 5 gs. That's why we did this and we licensed private 5 gs. We went through a lot of trouble to do that so that we can start revenue streams as soon as possible. And now we have actually a full complement of products. So we will definitely be able to start satisfying the customers.

Speaker 2

But all it takes is the first proof of concept and show that it's working. Everybody asks the same question. And we'll be doing that later this year and inking couple of smaller orders this year. And it could be big ones too. But most of that, obviously, the growth will come in 2025.

Speaker 2

And we have partnered with strategic players. These are called system integrators. We're partnered with them and also strategic suppliers that make key products like the software for all these radios and the spec hardware. We're providing end to end means that we're providing from the tower to the home, CPE equipment, customer premise, which is a wireless routers that are very advanced. They have higher than 1 gigabit speeds and they can be put in home connecting to a private network or public network outdoors without any cables.

Speaker 2

So that's including Wi Fi 7 as well. Wi Fi 7 you've heard of, that's the new technology. Everyone wants it because it has higher bandwidth and higher speeds. We have that already. We have Wi Fi 7, we have CPEs, we have power radios, we have connection to the home wirelessly, everything you can think of.

Speaker 2

So, we think it's a question of marketing and marketing and brand awareness and the partnerships that we're making are with the larger players that have actually 2nd tier providers that provide the systems. We're connecting with them to be their hardware provider and service provider so that we're going to obtain this business by climbing up the ladder. And therefore, it's an immediate access to the markets. And it's not just us doing all the heavy lifting, it's our partners helping us to get there.

Speaker 1

I would like to add something, Jack. This is George. For the private 5 gs networks, right, in addition to the enhanced security and the data speeds that we can offer our customers, there is also the monetization aspect of them being able to add subscribers and become a revenue based service for them. So it's not just an expense, it is also ROI related because they will be able to add subscribers at a fee, at the monthly fee, just like I currently have with your cable services or getting a Wi Fi signal into your homes. So our private 5 gs networks enable our customer who is going to own this network to add subscribers on a monthly basis.

Speaker 1

They're going to be able to provide credentials, user names, passwords. They're going to be able to provide levels services, do they want 600 megabits per second, do they want 1 gigabit per second, right? And then they're going to be able to charge their customers for this service and we'll do the maintenance for them as well. So that's why we feel so excited that we have this end to end, which is fully licensed now and we are definitely speaking to a lot of customers and trying to educate the customers also that this is just not enhancing your security system, but also it provides them with monetization experience and capabilities on these networks.

Speaker 3

Great. No, I appreciate that. And maybe just one more question for me. You put a press release out a few I guess it was last week actually, where you announced your MOU with for a private 5 gs network. And kind of towards the end of that press release, you mentioned you expect maybe you expect revenue to commence within this, I think the current fiscal year.

Speaker 3

It could be in value in excess of $1,000,000 within and finalized within 3 months after receipt. Can you just maybe touch on that, this particular press release in this private 5 gs network, that $1,000,000 potential contract? How does that kind of is that just for the first phase of this? How does this how do you expect this to ramp up? That would be helpful.

Speaker 1

Yes. For example, this will be one of those projects that we call like a proof of concept. We use this terminology seeing is believing a lot, right? So that's why our public massive MIMO radius are undergoing interoperability testing so we can get those values, those certificates, so then we can have proof, right, that what we said our radius do is going to be certified. So in this particular case with the private 5 gs, we have these very smaller initial projects that we worked with the customers, right?

Speaker 1

So they are going to be able to start doing deployment in phases, right? So basically like Phase 1 is going to cover X area on this city and then like once they see the functionality, the data speeds, the performance of the networks, again, we are going to be able to open it up into more cities and then the strategy of course is going to be rinse and repeat through all their cities or municipalities across the United States.

Speaker 2

And Jack, back on that point where I mean this is dealing with actually cities and municipalities where they move very slow. So we have to make sure we don't know timing wise if things get delayed in Jifpersand, but we definitely are there. We definitely are there and things will happen and we'll be announcing that.

Speaker 3

Okay. Well, great. Look, that's it for me. It sounds There's a lot of irons in the fire here. It's interesting to track it all, but I look forward to watching you guys execute.

Speaker 3

And also it sounds like you'll be announcing some official partnerships and potential contracts in the near future. So best of luck and that's it for me. Thank you.

Speaker 2

Thank you, Jack. Appreciate it.

Operator

This concludes Q and A session. I will now turn the call back over to Fawad Mahbou for closing remarks.

Speaker 2

Thank you, operator. Thanks to everyone who joined today's call to hear about the progress we've made and the plan we have adopted to further our company's mission of providing the communication systems of tomorrow today. We look forward to updating you further on our Q3 financial results call in mid November. Until then, please contact us directly should you have any questions or wish to schedule a call with management. Our Investor Relations team can be reached at the contact information listed at the bottom of our press release.

Speaker 2

Thank you and be well.

Operator

Today's conference call is now concluded. Thank you. You may now disconnect your lines.

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AmpliTech Group Q2 2024
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