Servotronics(SVT) - 2025 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) The unaudited financial statements show a significant turnaround, with a return to profitability driven by revenue growth Condensed Consolidated Balance Sheets Total assets and liabilities increased, driven by higher accounts receivable and greater use of the line of credit Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | $29,629 | $27,779 | | Accounts receivable, net | $11,362 | $9,288 | | Inventories, net | $15,488 | $15,826 | | Total Assets | $36,708 | $34,832 | | Total Current Liabilities | $8,551 | $6,855 | | Line of credit | $3,725 | $2,127 | | Total Liabilities | $13,013 | $11,328 | | Total Shareholders' Equity | $23,695 | $23,504 | Condensed Consolidated Statements of Operations The company achieved a significant operational turnaround with a 12% revenue increase and a return to net income Q1 2025 vs. Q1 2024 Statement of Operations (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Revenue | $11,703 | $10,446 | | Gross Profit | $2,360 | $1,735 | | Operating Income (Loss) | $242 | ($283) | | Net Income (Loss) | $128 | ($383) | | Basic and Diluted EPS | $0.05 | ($0.16) | Condensed Consolidated Statements of Comprehensive Income (Loss) Total comprehensive income improved significantly, driven by the shift from a net loss to a net income Q1 Comprehensive Income (Loss) (in thousands) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Income (Loss) | $128 | ($383) | | Other Comprehensive Income | $17 | $19 | | Total Comprehensive Income (Loss) | $145 | ($364) | Condensed Consolidated Statements of Cash Flows Cash flow from operations turned negative due to a substantial increase in accounts receivable Q1 Cash Flow Summary (in thousands) | Cash Flow Category | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Cash (Used) Provided by Operating Activities | ($1,589) | $413 | | Net Cash Used by Investing Activities | ($52) | ($152) | | Net Cash Provided (Used) by Financing Activities | $1,598 | ($94) | | Net (Decrease) Increase in Cash | ($74) | $41 | Notes to Condensed Consolidated Financial Statements The notes highlight the OKC discontinued operation, significant customer concentration, a pending lawsuit, and credit facility details - The sale of assets from The Ontario Knife Company (OKC) closed on August 1, 2023, and its results are now reported as a discontinued operation[19][55] - The company has significant customer concentration, with four customers collectively accounting for approximately 84% of revenues in Q1 2025[89] - The company is defending against a lawsuit from an employee seeking damages of at least $5 million, though management does not consider the risk of loss to be probable[87] - The company has a $7 million asset-based line of credit and was in compliance with its covenants as of March 31, 2025[64][66] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the drivers of improved performance, including revenue growth and margin expansion, and its liquidity position Results of Operations Revenue grew 12% due to price and volume increases, leading to a 36% rise in gross profit and a return to operating income Q1 2025 vs Q1 2024 Performance Comparison (in thousands) | Metric | Q1 2025 | Q1 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenues | $11,703 | $10,446 | $1,257 | 12.0% | | Gross Profit | $2,360 | $1,735 | $625 | 36.0% | | Gross Margin | 20.2% | 16.6% | - | - | | Operating Income (Loss) | $242 | ($283) | $525 | 185.5% | - Revenue growth was driven by price increases of approximately $451,000 and volume increases of approximately $763,000[104] - The increase in SG&A was primarily due to higher professional and legal fees related to the review of strategic alternatives[108] Liquidity and Capital Resources The company's liquidity is supported by its credit facility, which was used to fund a working capital deficit from higher receivables Key Liquidity Data (in thousands) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Cash from Operating Activities | ($1,589) | $413 | | Net Cash from Financing Activities | $1,598 | ($94) | | Working Capital | $21,078 | $21,481 | - The use of cash from operations in Q1 2025 was primarily due to an increase in accounts receivable[116] - Primary sources of liquidity are cash from operations and the $7 million credit facility, which had approximately $3 million of additional funding capability[120] Quantitative and Qualitative Disclosures About Market Risk The company is exempt from this disclosure requirement as a smaller reporting company - As a smaller reporting company, Servotronics is not required to provide quantitative and qualitative disclosures about market risk[131] Controls and Procedures Management concluded that disclosure controls and procedures were effective with no material changes to internal controls - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 31, 2025[132] - No material changes were made to the company's internal controls over financial reporting during the first quarter of 2025[133] PART II. OTHER INFORMATION Legal Proceedings The company reports no material pending legal proceedings beyond those disclosed in the financial statement notes - The company refers to Note 9 for details on legal proceedings and states there are no other material proceedings pending[135] Risk Factors As a smaller reporting company, Servotronics is not required to provide this information - The company is a smaller reporting company and is not required to provide risk factor disclosures in its Form 10-Q[136] Other Information No directors or Section 16 officers adopted or terminated Rule 10b5-1 trading arrangements during the quarter - No directors or Section 16 officers adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter[139] Exhibits This section lists the required CEO/CFO certifications and XBRL data files filed as exhibits - The report includes required certifications from the CEO and CFO, as well as XBRL interactive data files as exhibits[140]