Executive Summary

Q1 2024 marked a clear profitability inflection: revenue rose 56% YoY to $5.79M, operating income reached $0.57M, and diluted EPS was $0.05, driven by an uptick in product-oriented fixed-price contracts .
Gross profit grew to $2.03M, but gross margin contracted to 35% (vs 44% a year ago) on higher materials costs tied to fixed-price mix; SG&A was cut to 25% of revenue from 47% YoY, supporting operating leverage .
Adjusted EBITDA improved materially to $0.734M from $0.090M YoY, reflecting stronger revenues and gross profit; working capital strengthened to $3.3M and equity to $6.2M .
Management highlighted a major April subsea safety control systems contract, first delivery of the new 20,000 psi multi-quick-connect plate, and ongoing international expansion, framing Q1 as “a great start” to 2024 .
No formal guidance or earnings call was held for Q1; stock catalysts likely center on execution of fixed-price backlog, new international wins, and margin normalization as product design improvements scale .

What Went Well and What Went Wrong

What Went Well

“Significant revenue and gross profit growth” with “exceptional results reflecting strong execution and accelerating results from growth initiatives,” including “first delivery of our new 20,000 psi multi-quick-connect plate” and an April “major contract” win .
Operating leverage: SG&A fell to $1.46M (25% of revenue) vs $1.74M (47%) YoY, enabling a swing to $0.57M operating income and $0.05 diluted EPS .
Liquidity stable: working capital of $3.3M, cash $2.0M, receivables $3.9M; equity rose to $6.2M, aided by improved profitability .

What Went Wrong

Gross margin compressed to 35% from 44%, reflecting higher materials costs associated with increased fixed-price mix, tempering flow-through despite revenue gains .
Q4 2023 context shows margin pressure and losses into year-end (gross margin 17%, net loss $0.88M), underscoring the need for sustained normalization through 2024 .
Cash from operations was negative ($0.307M) in Q1 due to working capital movements even as earnings improved; the company also used short-term borrowings and had one factored invoice outstanding ($332k) .

Financial Results

Revenue and EPS vs Prior Periods and Estimates

Metric	Q3 2023	Q4 2023	Q1 2024
Revenue ($USD Millions)	$4.11	$4.00	$5.79
Gross Profit ($USD Millions)	$1.37	$0.70	$2.03
Gross Margin %	33%	17%	35%
Operating Income (Loss) ($USD Millions)	$(0.21)	$(0.89)	$0.57
Net Income (Loss) ($USD Millions)	$(0.14)	$(0.88)	$0.58
Diluted EPS ($USD)	$(0.01)	$(0.07)	$0.05
Adj./Mod. EBITDA ($USD Millions)	$0.02 (“modified”)	$(0.73) (“modified”)	$0.73 (“adjusted”)
Note: EBITDA definitions differ by period (Q3/Q4 “modified” vs Q1 “adjusted”) as described in the releases/10-Q .

Estimates: Wall Street consensus estimates via S&P Global were unavailable for Q1 2024 at time of query; no estimate comparison shown (SPGI daily limit error).

Contract Mix (Disaggregation)

Revenue Mix ($USD Millions)	Q1 2023	Q1 2024
Fixed Price Contracts	$1.41	$4.51
Service Contracts	$2.31	$1.28
Total Revenue	$3.72	$5.79

Operating Expense and Cash Flow Highlights

Metric ($USD Millions)	Q3 2023	Q4 2023	Q1 2024
SG&A	$1.58	$1.57	$1.46
Cash from Operations	$(0.97)	$0.94	$(0.31)
Investing Cash Flow	$(0.15)	$0.00	$(0.01)
Financing Cash Flow	$(0.10)	$(0.04)	$0.27
Change in Cash	$(1.22)	$0.90	$(0.05)

Balance Sheet and Liquidity

Metric ($USD Millions)	Q4 2023	Q1 2024
Cash	$2.03	$1.98
Net Receivables	$4.23	$3.88
Working Capital	$2.57	$3.30
Shareholders’ Equity	$5.62	$6.21
Accounts Receivable Sold (Factored)	$0.00	$0.33

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Company Guidance (Revenue, Margins, OpEx, Tax, etc.)	Q1 2024	None provided in prior communications	No formal guidance issued; no Q1 call	N/A

Note: No explicit numeric guidance was provided in the Q1 2024 press release or 10-Q; the company did not host a Q1 earnings call .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q-2: Q3 2023)	Previous Mentions (Q-1: Q4 2023)	Current Period (Q1 2024)	Trend
Market cycle/offshore activity	Industry recovery, higher FIDs; bidding momentum; cautious optimism	Continued investment by operators; 2023 revenue +18% YoY; margin pressure acknowledged	Strong order intake; April major subsea safety control systems contract	Improving
Product innovation (20k psi)	R&D largely complete; passes qualification; expands deepwater addressable market	Emphasis on product-oriented fixed-price contracts	First delivery of new 20k psi multi-quick-connect plate	Execution/Commercialization
Pricing/margins	Expect better margins on improved pricing; internal cost evaluation	Gross margins pressured by legacy pricing/materials costs	Gross margin 35% (down YoY on materials costs); SG&A efficiencies	Mixed (mix headwinds; opex tailwinds)
Liquidity/working capital	Cash dip then collections; factoring as backstop	Working capital $2.6M; no AR sold at year-end	Working capital $3.3M; one factored invoice $0.332M	Stable/Improving
International expansion	Asia interest; faster time-to-market advantage	Global offshore role emphasized	Intent to expand presence in faster-growing international markets	Expanding

Management Commentary

“We are off to a great start in 2024, with exceptional results reflecting strong execution and accelerating results from growth initiatives... we also won a major contract in April for delivery and installation of subsea safety control systems to an international energy company.” — Erik Wiik, CEO .
“We are a focused subsea controls technology provider... mission-critical technology with high barriers to entry.” — Erik Wiik, CEO .
On 2023 context: “Revenues increased by 18 percent... However, we continued to experience the effects of price pressures... strategically priced at lower than ideal margins.” — Charles Njuguna, prior CEO .

Q&A Highlights

Note: No Q1 2024 earnings call was hosted; highlights reference the most recent call (Q3 2023).

Carousel monetization potential: Customer projects restarting post-industry consolidation; rental vs sale being evaluated for long-term storage use cases .
Order momentum and pricing: Larger-quantity flying leads orders and improved pricing/margins expected as volumes scale; cost structure evaluation ongoing .
20k psi product readiness: Qualification completed; competitive differentiation on testing; time-to-market advantage, including Asia interest .
Liquidity/backstop: Minimal use of factoring facility; primarily a backstop; focus on managing cash and working capital .

Estimates Context

Wall Street consensus estimates (EPS and revenue) via S&P Global were unavailable for Q1 2024 due to a data request limit error at time of retrieval; therefore, no estimate comparison is included for this quarter. Future comparisons will anchor to S&P Global consensus when accessible.

Key Takeaways for Investors

Profitability inflection: The swing to positive operating income and EPS, alongside Adjusted EBITDA expansion, signals improved execution as fixed-price product volumes ramp .
Mix-driven margin dynamics: Expect near-term gross margin variability as fixed-price materials costs flow through; SG&A discipline provides offset and operating leverage .
Backlog and contract wins: The April subsea safety control systems award and first 20k psi plate delivery support revenue visibility; watch for additional international wins and scaling of new products .
Liquidity is adequate but sensitive to working capital cycles: Negative operating cash flow in Q1 tied to contract assets/liabilities; factoring remains limited backstop, not a primary funding tool .
Near-term trading lens: With no formal guidance or Q1 call, stock narrative hinges on subsequent contract disclosures and margin normalization; catalysts include large fixed-price deliveries and international expansion updates .
Medium-term thesis: Standardization and product innovation (20k psi) aim to accelerate execution and profitability; industry offshore cycle and faster time-to-market positioning could underpin sustained growth .
Watch definitions: EBITDA presentation differences (“modified” vs “adjusted”) across periods mean investors should focus on consistent GAAP metrics (operating income, EPS) for trend comparability .

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