Palladyne AI Corp. (STRC)·Q1 2023 Earnings Summary

Executive Summary

• Q1 2023 revenue was $2.30M, up ~209% year over year from $0.74M as Product Development Contract revenue drove the quarter; GAAP net loss was $21.5M and GAAP EPS was ($0.14) . Management maintained FY2023 revenue guidance of $23–$25M and guided Q2 revenue to ~$2.1M, including ~$0.4M from product sales .
• Operating cash burn guidance improved sequentially: ~$6M/month in Q1 (prior guidance) to ~$5M/month expected in Q2; unrestricted cash, cash equivalents, and marketable securities ended Q1 at $94.7M, supporting no equity raise plans in 2023 .
• Strategic execution advanced: a manufacturing services agreement with Jabil to expand production capacity and an agreement with VideoRay to offer integrated underwater systems, plus multiple product demos at ConExpo, Aviation & Robotics Summit, and OTC, signaling commercialization momentum in 2H 2023 .
• Estimates context: S&P Global consensus figures for STRC were unavailable via the tool at the time of this analysis; we therefore present results vs prior periods and company guidance and note estimates explicitly as unavailable [GetEstimates error].

What Went Well and What Went Wrong

What Went Well

• Revenue inflected: $2.30M in Q1 2023 vs $0.74M in Q1 2022 (+209% YoY), driven by Product Development Contract revenue . “Momentum building as company nears commercialization,” highlighted management .
• Manufacturing scale-up: signed a manufacturing services agreement with Jabil to expand production capacity as scaling continues, supporting commercial ramp in 2H 2023 .
• Underwater systems strategy: agreement with VideoRay to sell integrated underwater robotic systems combining VideoRay ROVs with Sarcos’ Guardian Sea Class, broadening addressable market and solution completeness .

What Went Wrong

• Profitability remains distant: GAAP net loss of $21.5M and non-GAAP net loss of $19.4M; total operating expenses of $25.5M with higher R&D and cost of revenue reflecting program activity and RE2 integration .
• Product revenue still nascent in Q1: $0 product revenue; mix is heavily contract-driven, with product sales guided to begin ramping in 2H 2023 .
• Prior quarter headwinds emphasize trajectory risk: Q4 2022 net loss was $92.3M, driven by a $70.2M goodwill impairment amid share price and market cap decline, underscoring sensitivity to market conditions and execution timelines .

Financial Results

Income Statement Comparison vs Prior Periods

Note: Net income margin calculated from cited revenue and net loss figures.

Segment/Revenue Mix (where disclosed)

KPIs and Operating Metrics

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “We continue to refine our focus and gain momentum as we push toward commercialization of our robotic systems and solutions… Our participation in these events reinforce our commitment to the opportunities we continue to pursue in the Aerospace, Construction, and Underwater industries, which we estimate represent a collective global TAM opportunity of approximately $185 billion in 2025.” — Kiva Allgood, President & CEO .
• “We are guiding for full year 2023 revenue to increase by 64% at the midpoint of our guidance, and will continue to optimize operating expenses, all leading to our goal of exiting 2024 on pace to be cash flow positive in 2025.” — Kiva Allgood .
• “It’s a combination of raw materials and finished products. So we do have both in place now.” — CFO Andrew Hamer on inventory composition (Q&A) .

Q&A Highlights

• Cash burn trajectory: Analysts probed whether the ~$5M/month Q2 cash use would persist for the year; management indicated the rate reflected current planning while focusing on commercialization progress and expense optimization .
• Early product sales visibility: Questions targeted expected initial deliveries and customer details; management refrained from naming customers but reiterated confidence in 2H 2023 ramp and deal announcements as orders scale .
• Inventory build: CFO clarified Q1 inventory step-up reflects both components and finished goods as the company positions for product launches .

Estimates Context

• S&P Global consensus estimates for Q1 2023 EPS and revenue were unavailable via the tool due to a mapping issue; we therefore benchmark results against prior periods and company-issued guidance and explicitly note estimates as unavailable [GetEstimates error].
• Based on company guidance, Q1 actual revenue of $2.30M aligned with prior guide (~$2.3M, all Product Development Contract) and Q2 revenue guide is ~$2.1M with ~$0.4M product revenue, implying initial commercialization contribution in Q2 .

Key Takeaways for Investors

• Execution momentum is tangible: demos, Jabil manufacturing partnership, and VideoRay integration support the 2H 2023 product ramp narrative — focus on order conversion and delivery milestones as near-term catalysts .
• Liquidity adequate for 2023: ~$94.7M in cash/securities and no equity raise planned; watch cash burn trend improving from ~$6M/month in Q1 to ~$5M/month guided in Q2 .
• Revenue mix remains contract-heavy near term: product revenue zero in Q1, with ~$0.4M guided for Q2 — track product revenue growth as a key indicator of commercialization progress .
• Prior impairment highlights sensitivity: the Q4 goodwill impairment underscores the importance of meeting 2H 2023 commercialization timelines to sustain investor confidence .
• FY2023 guide reaffirmed: $23–$25M maintained; delivery execution and supply chain via Jabil likely critical to achieving mix and revenue targets .
• Operational readiness building: inventory composed of both raw materials and finished products signals preparation for shipments; monitor backlog, lead times, and customer names as disclosures allow .
• Near-term trading lens: stock likely responsive to concrete commercialization proof points (first product revenues, named customer wins) and sustained improvement in cash burn; absence of equity issuance in 2023 reduces dilution risk if guidance is delivered .