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Safe Pro Group Inc. (SPAI)·Q2 2024 Earnings Summary

Executive Summary

  • Q2 2024 delivered record net revenue of $0.643M, up 524.2% year-over-year, with sequential growth of 114% versus Q1 2024, driven by ballistic protective products and drone services .
  • Gross margin compressed to 28.7% from 32.8% in Q2 2023, reflecting a mix shift to lower-margin fragmentation and blast-resistant PPE; operating expenses rose on IPO-related professional fees and stock-based comp .
  • Reported net loss was $1.215M and diluted EPS was -$0.14; interest expense increased given convertible notes .
  • Organizational milestones included USPTO Notice of Allowance for AI explosives detection, an UNDP drone survey in Ukraine, and the August IPO raising $5.1M gross to fund AI/drone initiatives and ballistic solutions—material catalysts for narrative and funding runway .

What Went Well and What Went Wrong

What Went Well

  • Record top-line growth: net revenue up 524.2% YoY to $0.643M; sequential revenue growth of 114% vs Q1 2024, led by Safe‑Pro USA and Airborne Response .
  • Segment momentum: Airborne Response revenue rose to $0.213M vs $0.009M YoY; Safe‑Pro USA to $0.430M vs $0.094M YoY .
  • Strategic progress and credibility: “With new capital, we are investing across the business to further build our AI image processing technology… and American-made ballistic protection products” and spotlighted real-world adoption of SpotlightAI in Ukraine with UNDP and humanitarian partners .

What Went Wrong

  • Margin pressure: Q2 gross margin fell to 28.7% from 32.8% YoY due to sales of lower-margin fragmentation/blast PPE; gross profit was $0.185M vs $0.034M YoY .
  • Elevated operating costs: total OpEx increased to $1.307M (professional fees $0.617M; stock-based comp $0.450M), expanding operating loss to $1.123M vs $0.730M YoY .
  • Financing costs: interest expense rose to $0.092M vs $0.001M YoY amid convertible notes, contributing to net loss of $1.215M vs $0.731M YoY .

Financial Results

MetricQ2 2023Q1 2024Q2 2024Consensus Q2 2024
Revenue ($USD)$103,008 $300,000 $642,989 N/A
Gross Profit ($USD)$33,784 N/A$184,615 N/A
Gross Margin %32.8% N/A28.7% N/A
Total Operating Expenses ($USD)$764,121 N/A$1,307,421 N/A
Operating Income ($USD)$(730,337) N/A$(1,122,806) N/A
Net Loss ($USD)$(731,488) N/A$(1,214,923) N/A
Diluted EPS ($USD)$(0.09) N/A$(0.14) N/A

Segment revenue breakdown:

SegmentQ2 2023Q2 2024
Safe‑Pro USA Revenue ($USD)$94,169 $430,039
Airborne Response Revenue ($USD)$8,839 $212,950
Safe Pro AI Revenue ($USD)$0 $0
Total Revenue ($USD)$103,008 $642,989

KPIs and concentration:

KPIQ2 2023Q2 2024
Geography: US (% of sales)100.0% 45.3%
Geography: Bangladesh (% of sales)64.6% (6M) 0% (Q2)
Geography: Eastern Europe (% of sales)0% (Q2) 54.7%
Customer concentration (Top contributors)One customer ~90.8% (Q2) Two customers ~79.0% (Q2)
Weighted Avg Shares (Basic & Diluted)7,882,501 8,900,762

Note on discrepancies: The press release stated “Gross margin for the second quarter of 2024 was 32.8%… Gross profit… $311,830… net loss… $2,358,783,” which correspond to six-month figures; the 10‑Q shows Q2 gross margin 28.7%, gross profit $184,615, and net loss $1,214,923 for the quarter .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
None issued————

No quantitative guidance ranges were provided in the Q2 2024 press release or 10‑Q .

Earnings Call Themes & Trends

No Q2 2024 earnings call transcript was available in company filings; themes below derive from the press release and 10‑Q.

TopicPrevious Mentions (Q-2, Q-1)Current Period (Q2 2024)Trend
AI/technology initiatives—Patent Notice of Allowance (21 claims) for AI explosives detection; launch prep and capitalized internal-use software for SpotlightAI; AWS case study recognition Accelerating productization and IP positioning
Supply chain/product mix—Lower-margin fragmentation/blast PPE drove margin compression Mix-sensitive margin profile
Macro/Ukraine operations—UNDP drone survey in Ukraine; humanitarian mine-clearing adoption Expanding international use cases
R&D execution—$172,596 capitalized AI software costs; amortization to start July 1 Transition from R&D expense to productization
Regulatory/legal—Patent claims allowed; no material legal proceedings Positive IP development; stable legal backdrop

Management Commentary

  • “The completion of our second quarter, the first following our IPO on Nasdaq, marks a milestone… we are investing across the business to further build our AI image processing technology, aerial managed drone services and American-made ballistic protection products.” — Dan Erdberg, Chairman & CEO .
  • “Ukraine’s unprecedented landmine crisis demands a rapid, modernized… approach… SpotlightAI’s unique capabilities will drive its continued adoption by humanitarian organizations…” .
  • Organizational highlights included USPTO Notice of Allowance for AI claims and an UNDP purchase order for drone survey operations in Ukraine .

Q&A Highlights

No Q2 2024 earnings call transcript or Q&A session was posted in the available filings; therefore, no management Q&A clarifications can be cited from primary sources.

Estimates Context

Consensus Wall Street estimates for Q2 2024 (EPS, revenue) were unavailable at the time of this analysis due to S&P Global request limits. As a result, estimate comparisons cannot be provided.

Key Takeaways for Investors

  • Top-line acceleration is real: Q2 revenue up 524% YoY and +114% sequential; growth breadth across ballistic products and drone services supports multi-segment thesis .
  • Margin sensitivity remains the near-term swing factor: PPE mix drove gross margin to 28.7%; watch product mix normalization and SpotlightAI monetization for margin uplift .
  • Cost structure inflects post-IPO: professional fees and stock-based comp elevated; expect OpEx normalization after listing-related expenses, but ongoing SG&A investment to drive growth .
  • Financing headwinds easing: convertible note-related interest increased Q2 loss; subsequent IPO proceeds and note conversions improve liquidity trajectory .
  • Strategic catalysts: patent allowance and UNDP work validate SpotlightAI; AWS case study expands credibility—watch for recurring SaaS revenues as SpotlightAI commercialization scales .
  • Customer/geography concentration is high: Eastern Europe and key US customers dominate sales; diversification and contract visibility are important de-risking levers .
  • Actionable setup: Near-term, stock narrative hinges on execution in Ukraine/commercial AI deployments, mix-improved margins, and OpEx control; medium-term thesis depends on converting AI/drones into recurring SaaS and services revenue with higher gross margins .

Sources: Q2 2024 8‑K Earnings Release and filing , Q2 2024 10‑Q including financial statements and MD&A .