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ADM TRONICS UNLIMITED, INC. (ADMT)·Q1 2016 Earnings Summary

Executive Summary

  • Q1 FY2016 delivered a sharp YoY inflection driven by Engineering Services: revenue rose 69% to $1.06M, gross margin expanded to 71.5%, and net income reached $0.43M ($0.01/share), vs $0.04M in Q1 FY2015 .
  • Mix shift was the core driver: Engineering revenue increased by $430K YoY and underpinned margin expansion, while Electronics declined YoY; Chemical grew modestly .
  • Liquidity improved: positive operating cash flow of $0.16M and quarter-end cash of $0.37M; management reiterated 12‑month liquidity sufficiency .
  • Risk skew: customer concentration (one customer = 46% of revenue), higher SG&A, and “not effective” disclosure controls; near-term stock catalysts include sustained engineering project flow vs. concentration risk .

What Went Well and What Went Wrong

What Went Well

  • Engineering-led acceleration and utilization: “The increase in engineering services is primarily the result of several projects for one customer,” driving the bulk of YoY growth and better labor utilization .
  • Material margin expansion: Gross margin improved to 71.5% from 45.8% YoY, aided by mix and engineering utilization .
  • Positive cash generation and liquidity runway: Operating cash flow of $0.16M with cash of $0.37M; “We expect to have enough cash to fund operations for the next twelve months” .

What Went Wrong

  • Customer concentration heightened: one customer represented 46% of Q1 revenue (vs. 18% prior year), increasing key‑account dependency risk .
  • Electronics segment softness YoY: Electronics revenue declined $67K YoY in Q1, offset by engineering growth; underscores volatility in non‑engineering lines .
  • Controls not effective and rising SG&A: Disclosure controls deemed “not effective” due to staffing/segregation constraints; SG&A rose 25% YoY (royalties/commissions and consulting fees) .

Financial Results

Income Statement Snapshot (oldest → newest)

MetricQ1 FY2015 (3M ended Jun 30, 2014)Q3 FY2015 (3M ended Dec 31, 2014)Q1 FY2016 (3M ended Jun 30, 2015)
Revenue ($)$623,674 $677,683 $1,055,928
Gross Profit ($)$285,458 $393,558 $755,055
Gross Margin (%)45.8% 58.1% 71.5%
Operating Income ($)$35,734 $114,160 $434,548
Net Income ($)$35,828 $114,653 $434,228
Diluted EPS ($)$0.00 $0.00 $0.01

Notes: A prior sequential quarter (Q4 FY2015) 10‑Q is not available; Q3 FY2015 is shown for directional context from the latest available quarter .

Segment Breakdown

SegmentQ1 FY2015 Revenue ($)Q1 FY2015 Gross Margin (%)Q1 FY2015 Operating Inc (Loss) ($)Q1 FY2016 Revenue ($)Q1 FY2016 Gross Margin (%)Q1 FY2016 Operating Income ($)
Chemical$297,159 69% $87,479 $365,944 85% $200,922
Electronics$242,210 36% ($8,836) $175,229 39% $15,676
Engineering$84,305 -11% ($42,909) $514,755 73% $217,950
Total$623,674 45.8% $35,734 $1,055,928 71.5% $434,548

KPIs and Operating Metrics

KPIQ1 FY2015Q1 FY2016
Top customer concentration (% of revenue)18% 46%
Foreign revenue (% of total)6.4% 9.6%
Cash & Equivalents (end of period, $)$69,894 $370,526
Cash from Operations (3M, $)($9,262) $161,392
SG&A Expense (3M, $)$236,037 $295,221

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY2016N/ANo formal guidance provided in filings—
MarginsFY2016N/ANo formal guidance provided in filings—
OpEx/Tax/OtherFY2016N/ANo formal guidance provided in filings—

No explicit quantitative guidance was issued in Q1 FY2016 filings –.

Earnings Call Themes & Trends

No Q1 FY2016 earnings call transcript was located; themes reflect Management’s MD&A/filings and a related FY2015 press release.

TopicPrior Mentions (FY2015 10‑K; Q3 FY2015)Current Period (Q1 FY2016)Trend
Engineering-led growthFY2015: growth “primarily the result of several projects for one customer” ; Q3 FY2015: electronics/engineering drove YoY growth Engineering revenue +$430K YoY; better labor utilization Positive; sustained engineering demand
Customer concentrationFY2015: two customers 38% of revenue One customer 46% of Q1 revenue Rising concentration risk
Gross margin trajectoryQ3 FY2015 GM 58.1% Q1 FY2016 GM 71.5% Expanding on mix
Internal controlsFY2015 ICFR “not effective” Disclosure controls “not effective” (staffing/segregation) Weakness persists
Liquidity outlookFY2015: sufficient for 12 months Sufficient for 12 months Stable outlook

Management Commentary

  • “The increase in engineering services is primarily the result of several projects for one customer.” (MD&A, Results of Operations) .
  • “We expect to have enough cash to fund operations for the next twelve months.” (Liquidity & Capital Resources) .
  • FY2015 release context: “We are pleased with the improved financial performance… reporting our return to profitability and positive cash flow from operations… We expect to see continued growth in our medical device engineering activities.” (Andre’ DiMino, President) .

Q&A Highlights

No Q1 FY2016 earnings call transcript or Q&A was found in company documents during the period searched; therefore, no Q&A highlights are available [ListDocuments returned none for earnings-call-transcript: 2015-10-01 to 2016-06-30].

Estimates Context

  • We attempted to retrieve Wall Street consensus (S&P Global) for Q1 FY2016 but no estimates were available for ADMT; the company is thinly covered and comparisons to consensus are not applicable at this time. S&P Global request was unsuccessful due to API limit; no alternative published consensus located.
  • Implication: Post‑print estimate revisions are unlikely to be a meaningful stock driver for ADMT this quarter.

Key Takeaways for Investors

  • Execution inflected with engineering-led growth and margin expansion; monitor durability of the underlying projects and pipeline conversion to sustain revenue and margins .
  • Concentration risk is elevated (46% revenue from one customer); contract visibility, project milestones, and credit quality of the key customer are critical watch‑items .
  • Operating leverage is visible, but SG&A growth (commissions/consulting) can dilute flow‑through; track cost discipline as mix stabilizes .
  • Liquidity strengthened (positive CFO, higher cash) and 12‑month funding runway is affirmed; supports continued investment in engineering capacity .
  • Controls weakness persists; as scale grows, remediation of staffing/segregation should reduce operational/reporting risk premia .
  • Near‑term stock catalysts: new engineering wins/extensions, signs of customer diversification, and continued margin strength; risks include project timing, electronics segment softness, and any deterioration at the top customer .

Additional supporting documents referenced: Q1 FY2016 10‑Q (filed Aug 14, 2015) –; Q2 FY2016 10‑Q (filed Nov 23, 2015) for trend corroboration ; FY2015 10‑K (filed Jul 14, 2015) –; FY2015 press release (8‑K, Jul 17, 2015) –.