Espey(ESP) - 2025 Q1 - Quarterly Report

PART I FINANCIAL INFORMATION Item 1 Financial Statements Presents unaudited financial statements for Q1 FY2025, including Balance Sheets, Income, Equity, and Cash Flows Balance Sheets Balance Sheets show financial position as of September 30, 2024, with increased assets and equity, and decreased liabilities | Metric | September 30, 2024 | June 30, 2024 | | :---------------------- | :----------------- | :------------ | | Total Assets | $57,635,091 | $56,542,931 | | Total Liabilities | $15,142,035 | $15,268,959 | | Total Stockholders' Equity | $42,493,056 | $41,273,972 | Statements of Comprehensive Income Q1 FY2025 saw significant growth in net sales and net income, driven by increased gross profit and other income | Metric | September 30, 2024 | September 30, 2023 | Change (YoY) | | :---------------------- | :----------------- | :----------------- | :----------- | | Net Sales | $10,443,218 | $8,568,214 | +21.9% | | Gross Profit | $2,800,882 | $2,245,377 | +24.7% | | Operating Income | $1,719,213 | $1,221,696 | +40.7% | | Net Income | $1,598,317 | $1,094,544 | +46.0% | | Basic EPS | $0.63 | $0.44 | +43.2% | | Diluted EPS | $0.61 | $0.44 | +38.6% | | Dividends per share | $0.25 | $0.15 | +66.7% | Statements of Changes in Stockholders' Equity Stockholders' equity increased in Q1 FY2025 due to net income and stock-based compensation, offset by dividends | Metric (Three Months Ended Sep 30) | 2024 | 2023 | | :--------------------------------- | :------------ | :------------ | | Balance as of June 30 | $41,273,972 | $35,879,758 | | Net Income | $1,598,317 | $1,094,544 | | Stock options exercised | $144,826 | $59,480 | | Stock-based compensation | $101,492 | $55,653 | | Dividends paid on common stock | $(633,243) | $(370,948) | | Balance as of September 30 | $42,493,056 | $36,720,282 | Statements of Cash Flows Operating cash flow decreased in Q1 FY2025; investing used less cash, and financing shifted to cash usage | Cash Flow Activity (Three Months Ended Sep 30) | 2024 | 2023 | | :--------------------------------------------- | :------------ | :------------ | | Net cash provided by operating activities | $1,389,114 | $2,614,783 | | Net cash used in investing activities | $(438,769) | $(2,358,348) | | Net cash (used in) provided by financing activities | $(488,417) | $59,480 | | Increase in cash and cash equivalents | $461,928 | $315,915 | | Cash and cash equivalents, end of period | $4,813,898 | $3,064,670 | Notes to Financial Statements Notes provide essential context for financial statements, covering policies, investments, EPS, stock compensation, and revenue Note 1. Basis of Presentation Unaudited financial statements rely on management estimates; interim results may not predict full fiscal year outcomes - Management's opinion is that the unaudited financial statements contain all necessary adjustments for fair presentation, though interim results may not predict full fiscal year outcomes. Key estimates include revenue recognition, inventories, income taxes, and stock-based compensation[11] Note 2. Investment Securities Investment securities, primarily Level 1 assets, include CDs, municipal bonds, and U.S. treasury bills | Investment Security Type | September 30, 2024 Fair Value | June 30, 2024 Fair Value | | :----------------------- | :---------------------------- | :----------------------- | | Certificates of deposit | $17,422,000 | $17,651,000 | | Municipal bonds | $857,045 | $711,570 | | U.S. Treasury bills | $381,697 | $516,061 | | Total Investment Securities | $18,660,742 | $18,878,631 | | Contractual Maturities (Available-for-sale debt securities) | September 30, 2024 | June 30, 2024 | | :-------------------------------------------------------- | :----------------- | :------------ | | Less than One Year | $17,436,398 | $17,889,582 | | One to Five Years | $1,224,344 | $989,049 | | Total | $18,660,742 | $18,878,631 | Note 3. Net Income per Share Basic and diluted EPS increased in Q1 FY2025 year-over-year, alongside an increase in weighted average shares | EPS Metric (Three Months Ended Sep 30) | 2024 | 2023 | | :------------------------------------- | :---------- | :---------- | | Net Income | $1,598,317 | $1,094,544 | | Basic EPS | $0.63 | $0.44 | | Diluted EPS | $0.61 | $0.44 | | Basic Weighted Average Shares | 2,525,937 | 2,470,092 | | Diluted Weighted Average Shares | 2,600,237 | 2,485,789 | - Options to purchase 62,691 shares for 2024 and 229,731 shares for 2023 were excluded from diluted EPS calculation as their inclusion would be anti-dilutive[17] Note 4. Stock Based Compensation Stock-based compensation expense increased in Q1 FY2025, with $516,598 unrecognized cost over two years | Stock-Based Compensation (Three Months Ended Sep 30) | 2024 | 2023 | | :--------------------------------------------------- | :---------- | :---------- | | Total Stock-Based Compensation Expense | $101,492 | $55,653 | | NQSOs related expense | $7,059 | $8,255 | | Deferred tax benefit related to NQSOs | $1,482 | $1,734 | - As of September 30, 2024, unrecognized compensation cost related to stock option awards is approximately $516,598, with an expected deferred tax benefit of $9,570, to be recognized over the next 2 years[21] | Stock Option Activity (Three Months Ended Sep 30, 2024) | Number of Shares | Weighted Average Exercise Price | | :------------------------------------------------------ | :--------------- | :------------------------------ | | Balance at July 1, 2024 | 322,056 | $18.41 | | Granted | 76,500 | $21.58 | | Exercised | (10,500) | $13.79 | | Outstanding at September 30, 2024 | 388,056 | $19.16 | | Exercisable at September 30, 2024 | 232,656 | $19.14 | Note 5. Commitments and Contingencies No material litigation; $7.4 million Navy funding award in progress, $561,852 pension liability expected in FY2025 - The Company was awarded $7.4 million in funding for facility and capital equipment upgrades for the U.S. Navy, with $4,228,722 in milestone reimbursements received as of September 30, 2024. $1,561,215 of spending was not yet reimbursed[28] | Pension Withdrawal Liability | September 30, 2024 | June 30, 2024 | | :--------------------------- | :----------------- | :------------ | | Recorded Obligation | $561,852 | $772,157 |