AmpliTech Group, Inc. (AMPG)·Q2 2024 Earnings Summary

Executive Summary

• Q2 2024 revenue was $2.53M with gross profit of $1.06M and gross margin 41.82%; EPS improved sequentially to $(0.16) from $(0.48) in Q1 as margins recovered and the large Q1 digital-asset loss did not recur .
• Management attributed weak demand to global recessionary dynamics and softness in Spectrum’s semiconductor distribution business, especially Hong Kong/China; RFQ activity increased entering Q3, positioning for sequential improvement .
• Strategic focus: public 5G Massive MIMO ORAN radio in month 3 of OTIC testing (AT&T/Verizon) with completion targeted in 2–3 months and private 5G end-to-end solution launched; initial P5G deployment contracts expected during Q3 .
• Revenue trajectory/guidance: prior FY24 revenue guide of $35–$40M is now framed for FY25, with management “easily” targeting ~$40M and expecting 5G to comprise 75–80% of 2025 revenue; pipeline ~$130M with a historical ~25% conversion rate (ex-5G) .
• Near-term stock catalysts: OTIC certification progress and potential private 5G MoUs/deployment announcements; next investor call planned mid-November (Q3 results) .

What Went Well and What Went Wrong

What Went Well

• Gross margin held at ~42% despite inflation; Q2 gross profit $1.06M and margin 41.82% vs 38.49% in Q1, indicating product mix/margin recovery .
• Strategic 5G progress: Massive MIMO ORAN 64T/64R radio advancing through OTIC testing; full deployment targeted upon completion, positioning AMPG as a U.S.-based alternative to foreign vendors .
• Product expansion and early wins: launch of private 5G end-to-end solution; cryogenic power supplies complement amplifiers with first cryogenic amplifier order from a major U.S. quantum computing company; over 100 MMIC SKUs released and custom design wins in space verticals .

Management quote: “We have…expanded into the design of full-service, true 5G O-RAN public and private 5G network deployments. These offerings are cutting-edge, end-to-end solutions.”

What Went Wrong

• Demand softness drove revenue down 38% YoY (Q2 revenue $2.53M vs $4.07M), with Spectrum distribution pressured by weaker international demand (Hong Kong/China), and delays across customers .
• Elevated OpEx and R&D (licenses/certifications) contributed to an operating loss of $1.57M; SG&A increased due to legal/consulting/accounting tied to the digital asset fraud incident .
• Internal control weaknesses disclosed (segregation of duties, documentation, IT general controls), stemming in part from the Q1 digital asset loss ($3.25M), with remediation actions ongoing .

Financial Results

Segment breakdown (revenue, COGS, net income/loss):

Selected KPIs:

Vs estimates:

Note: Wall Street consensus via S&P Global was unavailable at time of analysis. The company did not provide formal numeric Q3/Q4 guidance ranges .

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “We have…expanded into the design of full-service, true 5G Open Radio Access Network (O-RAN) public and private 5G network deployments. These offerings are cutting-edge, end-to-end solutions.” — CEO Fawad Maqbool
• “Our massive MIMO ORAN 5G…radio…is in its third month of testing at the OTIC Center…moving flawlessly towards completion…planned for full deployment in public 5G networks…”
• “We’re excited…5G infrastructure market…projected to reach $99 billion by 2030…Despite the weakening economic trends…we remain optimistic…We anticipate that global demand will bounce back…”
• “We expect this business, 5G business will account for at least 75% to 80% of our revenues in 2025.”

Q&A Highlights

• Pipeline and conversion: Opportunity funnel ~$130M; historical conversion ~25% (non-5G); 5G is early cycle with potential upside .
• Revenue trajectory: Prior $35–$40M guide now framed for FY25; management “easily” targeting ~$40M; bookings expected to start H2 2024 .
• 5G tower upgrades: ~1M U.S. towers; deployment of true 5G expected to be larger than prior Gs; near-term focus on private 5G proof-of-concepts, with 2025 ramp and system integrator partnerships to accelerate market access .
• Private 5G monetization: Customers can add subscribers, tier services (e.g., 600 Mbps or 1 Gbps), and generate recurring revenue; AMPG can provide maintenance .
• Initial private 5G projects: Phase-based deployments to prove functionality; early projects could exceed $1M value; municipal timing uncertainty acknowledged .

Estimates Context

• S&P Global consensus for Q2 2024 (Revenue and EPS) was unavailable due to access limitations at time of analysis; the company did not issue formal numeric quarterly guidance ranges .
• In absence of consensus, focus shifts to sequential/YoY performance and order activity: QoQ revenue +10% ($2.29M → $2.53M) and margin recovery (38.49% → 41.82%), with RFQ activity rising entering Q3 .

Key Takeaways for Investors

• Sequential stabilization: Q2 revenue +10% QoQ and margin improvement to 41.82%; EPS narrowed to $(0.16), suggesting core operations improving absent one-time Q1 losses .
• Demand backdrop: Semiconductor distribution weakness (Hong Kong/China) persists, but RFQ momentum entering Q3 may support sequential recovery into 2H .
• 5G catalysts: OTIC certification completion (public 5G radio) and initial private 5G deployments are key near-term stock catalysts; management expects announcements during Q3 .
• 2025 pivot: Prior FY24 $35–$40M revenue ambition deferred to FY25, with 5G targeted to be 75–80% of mix; monitor booking conversion and system integrator partnerships .
• Product breadth: Cryogenic power supplies and amplifiers, high-performance LNBs, and >100 MMIC SKUs expand TAM and margin profile; early quantum order validates capabilities .
• Balance sheet/financing: Cash $1.01M and working capital ~$10.0M at Q2; $1.3M Altbanq loan secured to fund licensing/certification—watch cash burn vs ramp .
• Governance/process: Material weaknesses in controls remain under remediation; progress here is relevant for investor confidence and execution reliability .