Executive Summary

ELST’s FY14 sales declined 15% to $1,867,420 and the company swung to a net loss of $101,790 (−$0.02 per share) from a $116,197 profit in FY13 (+$0.02), reflecting weaker demand and mix headwinds .
Q4 sales improved sequentially to an implied ~$454,927 (FY14 sales less 9M14 sales) vs. $380,408 in Q3, while the implied Q4 net loss narrowed to ~$14,948 (FY14 net loss less 9M14 net loss) from a $93,804 loss in Q3, suggesting stabilization into year-end .
No Wall Street consensus estimates or formal company guidance were available; therefore, no beat/miss assessment can be made. ELST did not issue forward guidance and did not declare dividends in 2014 .
Liquidity remains solid for a micro-cap with $637,086 cash at 12/31/14 and no long-term debt; however, management disclosed a continuing material weakness in internal controls (segregation of duties) earlier in 2014 .

What Went Well and What Went Wrong

What Went Well
- Sequential revenue improvement in Q4: implied sales rose to ~$454,927 vs. $380,408 in Q3; implied Q4 net loss narrowed to ~$14,948 from $(93,804) in Q3 .
- Q2 showed operating resilience: net income of $12,912 on $532,262 gross revenues; gross margin improved with cost of sales at 39% in Q2 vs. 42% in the prior year’s Q2, aided by favorable product mix .
- Management highlighted drivers of strength: “Management believes the increase in quarterly and increase year to date sales revenues is due to increased engineering services and core products,” underscoring product and service contributions .
What Went Wrong
- Full-year contraction: sales fell 15% YoY to $1,867,420 and ELST posted a FY14 net loss of $(101,790), reversing FY13 profitability .
- Q3 weakness: sales dropped to $380,408 from $574,507 in Q3’13, with a net loss of $(93,804) versus a profit of $51,956 in the comparable period, indicating demand softness and deleverage .
- Internal controls: management reported a material weakness in internal control over financial reporting (segregation of duties) as of Q2’14, with mitigating controls deemed impractical given company size .

Financial Results

Metric	Q2 2014	Q3 2014	Q4 2014 (Implied)	FY 2014
Sales ($)	$482,976	$380,408	$454,927 (FY14 $1,867,420 − 9M14 $1,412,493)	$1,867,420
Other Revenues ($)	$49,286	NA	NA	NA
Gross Revenues ($)	$532,262	NA	NA	NA
Net Income (Loss) ($)	$12,912	$(93,804)	$(14,948) (FY14 $(101,790) − 9M14 $(86,842))	$(101,790)
Basic/Diluted EPS ($)	$0.00 (Nil)	$(0.02)	NA (not disclosed)	$(0.02)
Gross Margin %	56.8% (Gross Profit $302,276 / Gross Revenues $532,262)	NA	NA	NA
Net Margin %	2.4% ($12,912 / $532,262)	−24.6% ($(93,804) / $380,408)	−3.3% ($(14,948) / $454,927)	−5.5% ($(101,790) / $1,867,420)

Notes: Q4 figures are derived from FY14 minus 9M14 totals disclosed in Q3 PR; quarterly EPS for Q4 was not disclosed. Q2 “gross revenues” includes sales and site support; Q3/Q4 “sales” excludes “other revenues,” so margin comparability is limited across quarters .

Segment breakdown (where available)

Segment Sales ($)	Q2 2014	Q3 2014	Q4 2014
Domestic	$434,192	NA	NA
Foreign	$98,070	NA	NA
Total	$532,262	NA	NA

KPIs and Balance Sheet Highlights

KPI	Q2 2014	Q3 2014	FY 2014
Cash & Cash Equivalents ($)	$880,715	$952,484	$637,086
Backlog ($)	$14,895 (as of 6/30/14)	NA	NA
Long-term Debt	None	None	None
Shares Outstanding (Wtd Avg)	5,158,667	5,158,667	5,158,667

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
All metrics	FY15 and beyond	None	None	Maintained “no guidance” posture
Dividend	FY14	None	None	Maintained “no dividend” posture

Earnings Call Themes & Trends

No earnings call transcript was found for Q4 2014; the company did not file an earnings call transcript in our document set for the period [ListDocuments returned none between 2014-10-01 and 2015-03-31].

Topic	Previous Mentions (Q2 2014, Q3 2014)	Current Period (Q4 2014)	Trend
Demand variability and timing	“Revenues have historically fluctuated… due to timing factors such as customer order placement and product shipments…”	No additional commentary in FY release beyond reported totals	Persistent timing-driven lumpiness
Mix and margins	Q2 cost of sales 39% vs. 42% prior year Q2, reflecting favorable mix	Not disclosed for Q4	Mixed: improvement seen mid-year; Q4 unknown
Domestic vs. foreign	Q2 domestic 82%, foreign 18%; foreign down on prior-year end-of-life purchase in 2013	Not disclosed for Q4	Domestic-led mid-year; foreign variability
Product/engineering drivers	“Increase… due to increased engineering services and core products.”	Not discussed in FY PR	Execution tailwind mid-year
Internal controls	Material weakness (segregation of duties) disclosed in Q2	Not updated in FY PR	Ongoing constraint given company size

Management Commentary

“Management believes the increase in quarterly and increase year to date sales revenues is due to increased engineering services and core products.”
“The Company's revenues have historically fluctuated from quarter to quarter due to timing factors such as customer order placement and product shipments to customers, as well as customer buying trends, and changes in the general economic environment.”
“Management believes the decrease in foreign sales revenues was due to one-time end of life purchase last year.”

Q&A Highlights

No Q4 2014 earnings call transcript was filed or found; therefore, no Q&A disclosures are available for this period [ListDocuments returned none for transcripts in Q4 window].

Estimates Context

Wall Street consensus (S&P Global) was not available for ELST; no CIQ mapping/coverage found for the ticker, so no consensus revenue or EPS estimates could be retrieved for Q4 or FY14. As a result, no beat/miss assessment vs. Street can be made.
Given the absence of coverage, we expect limited near-term estimate revisions by the sell-side.

Key Takeaways for Investors

Sequential stabilization into Q4: implied Q4 sales improved and losses narrowed vs. Q3, suggesting some demand normalization after a weak third quarter .
Full-year deterioration: 15% sales decline and swing to loss underscore a challenged demand backdrop and/or unfavorable mix through 2014 .
Mid-year margin signal was positive: Q2 gross margin benefited from favorable mix, indicating product/engineering contribution can lift profitability when volumes and mix align .
Balance sheet conservatism: year-end cash of $637k and no debt provide runway, but lower cash vs. Q3 reflects operational cash burn into year-end .
Structural constraints: internal control material weakness persists given small scale; not an immediate P&L driver but a governance overhang for institutional investors .
No guidance/no coverage: absence of formal guidance and Street coverage increases uncertainty; trading is likely to be headline- and print-driven (quarterly 8-Ks), with liquidity considerations typical of micro-caps .
Watch for demand catalysts: product cycles (ESTeem 210/195 inventory build noted mid-year), domestic infrastructure projects, and foreign order timing remain key swing factors for 2015 trajectories .

Additional Source Documents Read

Q4 2014 8-K 2.02 and FY14 press release (Feb 6, 2015)
Q3 2014 8-K 2.02 and press release (Oct 31, 2014)
Q2 2014 10-Q (filed Aug 1, 2014), including financial statements and MD&A
Q1 2014 8-K 2.02 and press release (May 8, 2014)

ELECTRONIC SYSTEMS TECHNOLOGY INC (ELST)·Q4 2014 Earnings Summary