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Palladyne AI Corp. (STRC)·Q2 2024 Earnings Summary

Executive Summary

  • Q2 2024 delivered material cost discipline and improved losses: revenue rose to $2.71M (+112% YoY), operating expenses fell 73%, and net loss improved 81% YoY to -$5.32M; EPS was -$0.20 .
  • Commercial milestones hit: MVP of Palladyne IQ released, first on-site customer trial completed, with commercial launch targeted for H2 2024 and initial product revenues planned for H1 2025; cash and equivalents ended the quarter at $25.8M .
  • Backlog dynamics tightened: backlog declined from $4.2M in Q1 to $1.5M in Q2 (funded $0.4M), while total estimated contract value decreased from $14.1M to $11.4M, reflecting project timing and completion of milestones .
  • Near-term stock catalysts: additional customer trials in H2 2024, the Palladyne IQ commercial launch, and validation of on-edge autonomy use cases in complex, dynamic environments .

What Went Well and What Went Wrong

What Went Well

  • Revenue growth and cost cuts: revenue increased 112% YoY; total operating expenses fell 73% YoY; net loss improved 81% YoY, evidencing the impact of 2023 restructuring and the pivot to software .
  • Product progress: “Minimal viable product (MVP) version of Palladyne IQ released for customer evaluation and trials—expect commercial launch of Palladyne IQ during the second half of 2024,” said CEO Ben Wolff; first on-site trial completed in June 2024 .
  • Cash conservation: cash, cash equivalents and marketable securities were $25.8M at quarter-end; management believes liquidity is sufficient for at least the next 12 months .

What Went Wrong

  • Backlog compression: backlog fell from $4.2M in Q1 2024 to $1.5M in Q2 2024 (funded backlog declined from $2.8M to $0.4M), indicating variability in near-term development revenue timing .
  • Interest income down: other income declined due to lower invested funds; net interest income fell to $0.35M in Q2 from $0.87M in last year’s Q2 .
  • Commercial revenue still ahead: company reiterated initial commercial product revenues from Palladyne IQ are planned for H1 2025; no numeric revenue/EPS guidance provided for 2024 .

Financial Results

Quarterly progression (QoQ)

MetricQ1 2024Q2 2024
Revenue ($USD Millions)$3.441 $2.713
Cost of Revenue ($USD Millions)$1.886 $0.569
Gross Profit ($USD Millions)$1.555 (calc from $3.441 and $1.886) $2.144 (calc from $2.713 and $0.569)
Gross Margin %45.2% (calc from $3.441/$1.886) 79.0% (calc from $2.713/$0.569)
Total Operating Expenses ($USD Millions)$10.794 $8.500
Loss from Operations ($USD Millions)$(7.353) $(5.787)
Net Loss ($USD Millions)$(7.229) $(5.323)
Diluted EPS ($USD)$(0.28) $(0.20)
Cash and Equivalents ($USD Millions)$31.798 $25.831

Year-over-year (YoY) comparison

MetricQ2 2023Q2 2024
Revenue ($USD Millions)$1.277 $2.713
Cost of Revenue ($USD Millions)$0.943 $0.569
Gross Margin %26.1% (calc from $1.277/$0.943) 79.0% (calc from $2.713/$0.569)
Total Operating Expenses ($USD Millions)$31.236 $8.500
Net Loss ($USD Millions)$(28.660) $(5.323)
Diluted EPS ($USD)$(1.12) $(0.20)

Segment breakdown

Reportable SegmentsNotes
Single segmentCEO as CODM evaluates on a consolidated basis; no segment reporting below company level .

KPIs and operating metrics

KPIQ1 2024Q2 2024
Backlog ($USD Millions)$4.2 $1.5
Funded Backlog ($USD Millions)$2.8 $0.4
Unfunded Backlog ($USD Millions)$1.4 $1.1
Total Estimated Contract Value ($USD Millions)$14.1 $11.4
Working Capital ($USD Millions)$30.3 $25.8

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Palladyne IQ commercial launch timingH2 2024Initial customer testing by June 2024; trials throughout H2 2024 MVP released; first on-site trial completed; commercial launch expected H2 2024 Maintained timing with increased specificity
Palladyne IQ initial commercial revenuesH1 2025Begin generating commercial revenue in 2025 Goal to begin product sales revenue in H1 2025 Maintained, narrowed window
Palladyne Pilot MVP and launchH2 2024 (MVP), Q1 2025 (launch)MVP “ready for initial testing in H2 2024” MVP for trials in H2 2024; commercial release targeted for Q1 2025; recent customer trial completed Clarified timing; maintained trajectory

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 2024 and late-2023 context)Current Period (Q2 2024)Trend
AI/technology initiatives (on-edge autonomy)Emphasis on full-stack, closed-loop autonomy; on-robot compute to reduce cloud dependency Continued emphasis; MVP of Palladyne IQ; first customer trial; hardware-agnostic design Execution progressing from development to customer trials
Supply chain/hardware relianceMinimal hardware components; single/sole source supplier risks highlighted Continued recognition of supplier risks; focus remains software-first Stable risk profile; mitigated by software orientation
Macro/tariffs/inflationMacro pressures (inflation, rates, geopolitical conflicts) impacting costs and hiring Similar macro caution reiterated Persistent headwinds
Product performance and commercial timingInitial customer testing planned; commercial revenues targeted for 2025 MVP released; commercial launch H2 2024; revenues targeted H1 2025 Timelines narrowed; milestones achieved
Regulatory/legalNo material proceedings; general AI regulatory uncertainty No material proceedings; continued disclosure of AI-related risks Stable
R&D execution and cost structureSignificant RIFs reduced OpEx; pivot from hardware to software Further OpEx reduction evident; continued product development Cost discipline maintained
Backlog trajectoryBacklog $4.2M (funded $2.8M) Backlog $1.5M (funded $0.4M) Down sequentially due to milestone timing

Management Commentary

  • “Palladyne AI makes robots smarter to do jobs that have historically been too complex to automate… we are seeing strong interest… expect to release the commercial version of Palladyne IQ in the second half of this year… goal of generating revenues from Palladyne IQ product sales beginning in the first half of 2025.” — Ben Wolff, President & CEO .
  • “We have so far met our key product development milestones on time in 2024.” — Ben Wolff .
  • “The key for us is enabling autonomy in an unstructured environment that can dynamically change. We focus on generalized autonomy, providing closed-loop functionality to adapt to tasks continuously.” — Dr. Denis Garagić, CTO .

Q&A Highlights

  • No Q2 2024 earnings call transcript was available in the document set; the company furnished an investor presentation and press release on August 7, 2024 in lieu of detailed call Q&A .

Estimates Context

  • Wall Street consensus (S&P Global) for Q2 2024 EPS and revenue was unavailable due to missing CIQ mapping for STRC/PDYN; coverage appears limited for this name. As a result, beats/misses versus consensus cannot be determined at this time [GetEstimates error].

Key Takeaways for Investors

  • The pivot to software is translating into improved financials: revenue up 112% YoY, OpEx down 73% YoY, and net loss down 81% YoY as restructuring benefits flow through .
  • Commercial momentum is building: MVP released, on-site trials underway, and commercial launch of Palladyne IQ targeted for H2 2024, with initial product revenues in H1 2025 .
  • Backlog and TCV declined sequentially, highlighting timing variability in development contracts; watch for replenishment via new awards aligned to IQ/Pilot roadmaps .
  • Liquidity provides runway: $25.8M in cash/equivalents and marketable securities at quarter-end; management indicates at least 12 months of operating liquidity .
  • Gross margin improved sharply QoQ and YoY on contract mix and lower cost of revenue, signaling better unit economics as the company transitions to software .
  • Near-term catalysts: additional customer trials, detailed launch plans in H2 2024, and customer validation of edge autonomy in complex industrial environments .
  • Risk monitor: limited sell-side coverage/consensus, backlog variability, and execution risk on commercialization timelines remain the key overhangs to watch .