Revenue Growth - Revenue for the three-month period ended September 30, 2024 increased by approximately $848,000, or 7.3%, compared to the same period in 2023[99] - Revenue for the nine-month period ended September 30, 2024 increased by approximately $3,858,000, or 12.3%, compared to the same period in 2023[100] - The company reported a revenue growth of 7% despite challenges in the commercial aerospace market, which is experiencing significant volatility[130] Gross Profit and Margins - Gross profit decreased approximately $231,000, or 9.2%, for the three-month period ended September 30, 2024, resulting in a gross margin of 18.2%[102] - Gross profit increased approximately $2,027,000, or 40.2%, for the nine-month period ended September 30, 2024, resulting in a gross margin of 20.1%[103] Operating Expenses - SG&A expenses for the three-month period ended September 30, 2024 decreased by $240,000, or 10.8%, compared to the same period in 2023[105] - SG&A expenses for the nine-month period ended September 30, 2024 decreased by $1,269,000, or 16.6%, compared to the same period in 2023[106] Operating Income and Loss - Operating loss for the three-month period ended September 30, 2024 was approximately $(281,000), a decline of approximately $(561,000) compared to operating income of $280,000 during the same period in 2023[109] - Operating income for the nine-month period ended September 30, 2024 improved by approximately $2,726,000 compared to the operating loss of $(2,624,000) during the same period in 2023[110] Income Taxes - Loss before income taxes for the three-month period ended September 30, 2024 was $(453,000), a decrease of approximately $(635,000), or (348.9)%, compared to income before income taxes of $182,000 during the same period in 2023[115] - For the nine-month period ended September 30, 2024, the loss before income taxes was $(251,000), an increase of approximately $2,612,000, or 91.2%, compared to a loss of $(2,863,000) in the same period in 2023[116] - The effective tax rate was 0.0% for the nine-month periods ended September 30, 2024, and 2023, reflecting a full valuation allowance against deferred tax assets[118] Cash Flow and Working Capital - Cash provided by operating activities was $11,000 for the nine-month period ended September 30, 2024, representing an increase of $4,919,000 compared to cash used of $(4,908,000) during the same period in 2023[124] - The company's working capital increased to approximately $21,845,000 as of September 30, 2024, compared to $20,795,000 as of September 30, 2023, primarily due to higher inventory levels[125] - Cash used for investing activities was approximately $(933,000) for the nine-month period ended September 30, 2024, compared to $(606,000) during the same period in 2023[126] - Cash provided by financing activities was $1,045,000 for the nine-month period ended September 30, 2024, primarily driven by advances from the line of credit[127] Discontinued Operations - Loss from continuing operations for the nine-month period ended September 30, 2024, improved by approximately $3,675,000, resulting in a loss of $(251,000) compared to $(3,926,000) in the same period in 2023[120] - Loss from discontinued operations for the nine-month period ended September 30, 2024, improved by approximately $7,254,000, resulting in a loss of $(72,000) compared to $(7,326,000) in the same period in 2023[122] Strategic Focus - The company is focused on managing costs and enhancing operating cash flow to achieve profitability and shareholder value[131]

Core Viewpoint - Servotronics, Inc. demonstrated a strong performance in Q2 2024, with significant revenue and profitability growth driven by strategic initiatives and increased market demand [1] Q2 Results - Earnings per share for Q2 2024 were 22 cents, a recovery from a loss of $1.33 per share in the same quarter last year [2] - Total revenues reached $12.3 million, marking a 15.3% increase from $10.6 million in Q2 2023, primarily due to higher volumes and improved pricing, despite an unfavorable sales mix [2] Profitability - Gross profit rose to $3.1 million from $1.6 million year-over-year, driven by increased volumes and operational efficiencies [3] - Operating income improved to $0.7 million from an operating loss of $1.7 million in Q2 2023, attributed to higher gross profit and reduced SG&A costs [3] Net Income - Net income from continuing operations was $0.6 million, compared to a net loss of $3.3 million in the prior-year quarter [4] - Overall net income for Q2 2024 was $0.6 million, a significant recovery from a net loss of $9.5 million in Q2 2023, which was impacted by losses from discontinued operations [4] Costs - SG&A expenses decreased by $0.9 million to $2.4 million from $3.3 million in Q2 2023, mainly due to lower professional and legal costs [5] - The cost of goods sold (COGS) slightly increased to $9.2 million from $9.1 million in Q2 2023, but the increase in revenue led to improved gross profit margins [6] Cash and Debt - Cash and restricted cash totaled $0.27 million at the end of Q2 2024, up from $0.25 million at the beginning of the year [7] - The company's line of credit was reduced to $1.473 million from $2.103 million at the end of 2023, indicating a focused effort on debt repayment [7] Management View - The company expressed confidence in its strategic positioning for long-term growth, anticipating strong demand in key markets for the remainder of the year [8] - Management noted satisfaction with the rebound from a slow start to the year, highlighting continuous improvement efforts that positively impacted growth, margins, and operating income [8] Cash Flow - Improvements in cash flow from operations increased by approximately $6.6 million compared to the same period in 2023, driven by higher net income and reductions in accounts receivable [9] - The decrease in SG&A expenses significantly contributed to improved operating income, alongside savings from lower non-recurring costs compared to the previous year [9]

Financial Performance - Servotronics reported strong financial results for Q1 2024, with revenues increasing by 15.3% year over year to $10.4 million, driven by higher volumes and a favorable product mix [7] - Gross profit surged by 75.6% to $1.7 million, reflecting the company's focus on cost management and operational efficiencies [7] - Operating cash flow for Q1 2024 was $2.8 million, providing financial flexibility for growth initiatives [1] Strategic Initiatives - The company divested its unprofitable Consumer Products Group segment in 2023 to focus on its core servo control component business, enhancing profitability and targeting high-growth markets [3] - Servotronics is leveraging the recovery in the commercial aerospace sector and plans to expand into repair and overhaul markets, as well as explore opportunities in energy and industrial sectors [4] - The company is committed to maintaining zero-defect quality standards, crucial for competitiveness in aerospace and defense markets, and continues to innovate by adding products based on market demand [8] Market Positioning - Servotronics has a high customer concentration, with four major customers accounting for 90% of revenues in 2023, emphasizing the need for strong client relationships [9] - The stock is currently undervalued compared to industry benchmarks, presenting an attractive opportunity for investors [10] - The company replaced its previous line of credit with a new three-year financing agreement, ensuring continued support for operations and expansion plans [1]

Revenue and Profitability - Revenue for the three-month period ended March 31, 2024 increased by approximately $1,386,000, or 15.3%, compared to the same period in 2023, driven by increased volume, favorable product mix, and price increases [101]. - Gross profit increased approximately $747,000, or 75.6%, for the three-month period ended March 31, 2024, resulting in a gross margin of 16.6% compared to 10.9% for the same period in 2023 [103]. - Foreign sales increased to $2,615,000 for the three-month period ended March 31, 2024, a growth of approximately $592,000, or 29.3%, compared to the same period in 2023 [102]. Operating Performance - Operating loss improved by approximately $914,000, or 76.4%, to ($283,000) for the three-month period ended March 31, 2024, compared to ($1,197,000) in the same period in 2023 [105]. - Cash provided by operating activities was $413,000 for the three-month period ended March 31, 2024, representing an increase of $2,830,000 compared to cash used of ($2,417,000) during the same period in 2023 [112]. - Selling, general and administrative expenses decreased by $167,000, or 7.6%, to approximately $2,018,000 for the three-month period ended March 31, 2024, compared to $2,185,000 in the same period in 2023 [104]. - Loss from continuing operations decreased by approximately $614,000, or 62.7%, to ($366,000) for the three-month period ended March 31, 2024, compared to ($980,000) in the same period in 2023 [109]. Tax and Working Capital - The effective tax rate for continuing operations was 0% for the three-month period ended March 31, 2024, compared to (21.2%) for the same period in 2023 [108]. - Working capital decreased to approximately $21,481,000 at March 31, 2024, from $25,449,000 at March 31, 2023, primarily due to cash used to fund losses and impairment charges [113]. Business Strategy - The company is focusing on expanding its business in primary markets such as commercial aviation while exploring new opportunities in energy and industrial sectors [95].

Company Overview - Servotronics designs and manufactures high-performance servo valves for commercial aerospace, government, medical, and industrial markets[10]. - The Consumer Products Group (CPG) segment was divested in 2023, now reflected as a discontinued operation[12]. - As of December 31, 2023, the company employed 262 individuals, with 88% actively contributing to production and engineering tasks[22]. Strategic Focus - Servotronics is focusing on a rebranding initiative to enhance communication of its product capabilities and expand into energy and industrial markets[14]. - Significant investments in research and development are being made to drive sustainable long-term growth and strengthen market position[20]. - The company emphasizes the importance of intellectual property as a competitive advantage and aims to leverage it for innovation and value creation[19]. Employee Engagement - Employee engagement and retention are prioritized, with a focus on personal and professional growth through feedback and leadership programs[24]. - Servotronics is dedicated to attracting diverse talent through partnerships with educational institutions and professional associations[23]. Risk Management - The company is navigating risks related to global economic uncertainties, supply chain disruptions, and customer concentration[27]. - Forward-looking statements indicate potential risks including uncertainties in the global economy and political risks[27]. - The company faces challenges related to supply chain constraints and labor market disruptions[27]. - Revenue concentration among a small number of customers poses a risk to the company's financial stability[27]. - The company is focused on the aerospace and defense industries, which are subject to market fluctuations[27]. - The introduction of new technologies and competitive products will impact the company's future operations[27]. - The ability to attract and retain key executives and employees is critical for the company's growth[27]. Compliance and Ethics - The company emphasizes ethics and integrity in its operations, ensuring compliance with all laws and regulations[25]. - The company files annual, quarterly, and current reports with the U.S. Securities and Exchange Commission[25]. - The company maintains an anonymous ethics hotline for employees to report concerns about business behavior[25]. - The company does not assume any obligation to update forward-looking statements after the date of the report[27].

Revenue Growth - Revenue for the three-month period ended September 30, 2023, increased by approximately $2,759,000, or 31%, compared to the same period in 2022, driven by a 29% increase in units shipped [108]. - Revenue for the nine-month period ended September 30, 2023, increased by $4,552,000, or 17%, compared to the same period in 2022, with units shipped increasing by 16% [108]. - The company expects continued sequential revenue growth in the last quarter of 2023 and stronger growth and profitability for 2024, driven by production improvements and increased output [136]. Profitability - Gross Profit for the three-month period ended September 30, 2023, increased by approximately $1,272,000, or 104%, with a Gross Margin of 21.6%, up 7.7 percentage points from 13.9% in the same period in 2022 [110]. - Operating Income for the three-month period ended September 30, 2023, was $280,000, an increase of approximately $971,000 compared to a loss of ($691,000) in the same period in 2022 [116]. - Income before income taxes for the three-month period ended September 30, 2023, was $182,000, an increase of approximately $923,000 compared to a loss of ($741,000) in the same period in 2022, driven by higher gross profit from increased volume [119]. - Loss from continuing operations for the nine-month period ended September 30, 2023, was ($3,926,000), an increase of approximately ($2,998,000) compared to a loss of ($928,000) in the same period in 2022, primarily due to significantly higher non-recurring SG&A expenses [125]. Expenses - Selling, General and Administrative (SG&A) expenses for the three-month period ended September 30, 2023, increased by approximately $301,000, or 16%, compared to the same period in 2022 [113]. - SG&A expenses for the nine-month period ended September 30, 2023, increased by approximately $1,744,000, or 29%, compared to the same period in 2022, driven by significant non-recurring expenses [114]. - The company incurred significant non-recurring SG&A expenses of approximately $1,211,000 for the nine months ended September 30, 2023, related to bank refinancing and corporate restructuring [138]. Cash Flow and Working Capital - The company used approximately $4,908,000 in cash for operating activities during the nine-month period ended September 30, 2023, compared to $147,000 in the same period in 2022, primarily due to losses from continuing operations and an increase in accounts receivable [128]. - Working capital decreased to approximately $20,795,000 as of September 30, 2023, from $29,082,000 in the same period in 2022, primarily due to cash used to fund losses and impairment charges [129]. - The new Credit Facility of $7,000,000 provides adequate working capital for operations and reinvestment, with a borrowing base increase of $3,100,000 compared to the previous line of credit [130]. Strategic Decisions - The company plans to exit the CPG business segment and focus on driving revenue growth and profitability for the servo controls business [104]. - The decision to discontinue the OKC operations, which incurred a loss of $1,894,000 for the nine months ended September 30, 2023, will allow the company to focus on its core business and enhance shareholder value [141]. Challenges and Risks - Supply chain challenges and cost inflation are expected to continue impacting operations through the remainder of 2023 [102]. - Interest expense increased by approximately $48,000, or 98%, for the three-month period ended September 30, 2023, compared to the same period in 2022, primarily due to higher interest rates and advances on the line of credit [118]. Internal Controls and Compliance - The Company identified material weaknesses in internal controls over financial reporting for the years ended December 31, 2021, and 2022 [148]. - Remediation efforts began in 2021 and are expected to be completed by December 31, 2023 [148]. - A comprehensive technology assessment by a third party is part of the remediation plan [148]. - The Company believes that the condensed consolidated financial statements fairly present its financial position in accordance with U.S. GAAP [149]. Tax Assets - The company recorded a full valuation allowance against net deferred tax assets of approximately $3,394,000 as of September 30, 2023, resulting in no deferred tax assets on the balance sheet [122].

or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No. 1-07109 Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 Form 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 1110 Maple Street Elma, New York 14059 (Address of principal executive of ices) (zip code) (716) 655-5990 (Registrant's telephone number, inclu ...

Table of Contents ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No. 1-07109 SERVOTRONICS, INC. (Exact name of registrant as specified in its charter) Delaware 16-0837866 (State or other jurisdiction of incorporation or organization) (I. R. S. Employer Identification No.) 1110 Maple Street Elma, New York 14059 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 Form 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 1 ...

or Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 Form 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 Commission File No. 1-07109 SERVOTRONICS, INC. (Exact name of registrant as specified in its charter) (State or other jurisdiction of (I. R. S. Employer incorporation or organization) Id ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 Form 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No. 1-07109 SERVOTRONICS, INC. (Exact name of registrant as specified in its charter) Delaware 16-0837866 (State or other jurisdiction of incorporation or ...