Revenue Performance - The Advanced Technology Group (ATG) reported revenue of $10,649,000 for Q2 2023, a 21.7% increase from $8,749,000 in Q2 2022, primarily due to higher customer prices and increased sales volumes [107][109]. - For the six-month period ended June 30, 2023, revenue was $19,709,000, reflecting a 10% increase from $17,916,000 in the same period of 2022 [108][109]. - Revenue for Q2 2023 reached $10,649,000, an increase from $9,060,000 in Q1 2023 and $8,446,000 in Q4 2022, reflecting a growth trend [141]. Gross Margin and Profit - Gross margin for Q2 2023 improved to 14.6%, up 2.9 percentage points from 11.7% in Q2 2022, with gross profit increasing by $531,000 or 52% [107][111]. - However, gross profit for the six-month period decreased by $1,157,000 or 31%, with a gross margin of 12.9%, down 7.7 percentage points from 20.6% in the same period of 2022 [108][112]. - Gross profit for Q2 2023 was $1,557,000, with a gross margin of 14.6%, up from 10.9% in Q1 2023 and 2.8% in Q4 2022 [141]. Operating Expenses - Selling, general and administrative expenses (SG&A) for Q2 2023 rose to $3,269,000, a 71% increase from $1,908,000 in Q2 2022, largely due to non-recurring expenses [107][115]. - SG&A for the six-month period increased to $5,444,000, a 36% rise from $4,001,000 in the same period of 2022, driven by significant non-recurring expenses [108][116]. - SG&A expenses increased by $1,361,000 (approximately 20%) for the three months ended June 30, 2023, compared to the same period in 2022, primarily due to non-recurring costs related to bank refinancing and a proxy contest [117]. - Adjusted SG&A expenses for Q2 2023 were $2,296,000, representing 21.6% of revenue, slightly down from 21.8% in Q1 2023 [141]. Losses and Tax Expenses - Operating loss for the three-month period ended June 30, 2023, was ($1,712,000), an increase of approximately ($830,000) from the loss of ($882,000) in the same period in 2022 [118]. - Loss before income taxes for the three-month period ended June 30, 2023, was ($1,801,000), an increase of approximately ($845,000) compared to the loss of ($956,000) in the same period in 2022 [121]. - Income tax expense for the three-month period ended June 30, 2023, was approximately $1,479,000, an increase of $1,646,000 compared to the income tax benefit of ($167,000) in the same period in 2022 [123]. - Significant tax expense of approximately $1,063,000 for the six months ended June 30, 2023, was related to the establishment of a full valuation reserve against deferred tax assets, resulting in no recognition of these assets on the balance sheet [138]. Discontinued Operations and Cash Flow - The company incurred a loss from discontinued operations of ($6,220,000) for the three-month period ended June 30, 2023, compared to a loss of ($21,000) in the same period in 2022 [126]. - Net cash flows from operating activities for the six-month period ended June 30, 2023, were ($5,141,000), a significant increase from ($74,000) in the same period in 2022 [128]. - Working capital decreased to approximately $20,766,000 as of June 30, 2023, from $29,548,000 as of June 30, 2022, primarily due to cash used to fund operating losses [129]. Strategic Initiatives and Future Outlook - The company plans to exit the Consumer Packaged Goods (CPG) business segment, having executed an Asset Purchase Agreement on July 10, 2023, to focus on the ATG business [106]. - The ATG backlog remains strong, but actual scheduled shipments may be delayed due to changes in the global economy and customer delivery determinations [102]. - Continuous improvement initiatives are being implemented to enhance production efficiency and reduce lead times, which is expected to support revenue growth [114]. - The company continues to face supply chain challenges and cost inflation, which are anticipated to persist throughout 2023 [104]. - The company secured a new credit facility of $7,000,000 as of June 27, 2023, providing adequate capital to run operations and reinvest in the business [130]. - The company expects revenue for the second half of 2023 to be higher than the $19,709,000 reported for the six months ended June 30, 2023, driven by growing customer demand and production improvements [134]. Adjusted Operating Performance - Adjusted operating loss for Q2 2023 improved to $(739,000) compared to $(991,000) in Q1 2023 and $(1,468,000) in Q4 2022 [141]. - The company reported a significant reduction in nonrecurring expenses, which were $(973,000) in Q2 2023 compared to $(201,000) in Q1 2023 [141].
Servotronics(SVT) - 2023 Q2 - Quarterly Report