Executive Summary

Q3 2018 delivered double-digit growth and materially higher profitability: revenue rose 12.7% to $12.77M, net income more than doubled to $1.46M, and diluted EPS was $0.61, driven by stronger commercial shipments and favorable mix in the Advanced Technology Group (ATG) .
Gross margin expanded 360 bps YoY to 30.9% as ATG volume/mix improved and the company controlled costs; SG&A fell slightly YoY despite higher CPG marketing spend .
Momentum built through the year: Q1→Q2→Q3 revenue stepped up to $10.56M → $11.95M → $12.77M, with gross margin expanding from 21.3% (Q1) to 24.5% (Q2) to 30.9% (Q3) .
No formal quantitative guidance or earnings call transcript was available in filings; management highlighted strong demand and continued cost discipline as key drivers and risks tied to government budgets and macro conditions in forward-looking statements .

What Went Well and What Went Wrong

What Went Well
- Gross margin improved to 30.9% (from 27.3% YoY), benefiting from higher units and price/mix at ATG and cost control, driving operating leverage .
- Profitability inflected: net income rose to $1.46M from $0.67M YoY and EPS to $0.61 diluted from $0.29, reflecting stronger ATG shipments and disciplined SG&A .
- CEO tone constructive on demand and cost control: “Our quarterly and nine-month results continue to reflect strong demand… gross margin… increased… reflecting our efforts to control costs while also investing for the future.” .
What Went Wrong
- Consumer Products Group (CPG) remained a headwind; Q3 cited lower commercial shipments at CPG offsetting ATG gains .
- CPG SG&A increased ~+$155K in Q3 due to sales/marketing and admin, diluting some consolidated SG&A progress .
- Mix and capacity adds have cost implications: earlier in the year the company increased production headcount and D&A with ATG ramp (Q2), reflecting investment needs and potential margin sensitivity if volumes soften .

Financial Results

Quarterly trend (oldest → newest):

Metric	Q1 2018	Q2 2018	Q3 2018
Revenue ($USD Millions)	$10.559	$11.946	$12.768
Net Income ($USD Millions)	$0.331	$0.707	$1.457
Diluted EPS ($)	$0.14	$0.30	$0.61
Gross Profit ($USD Millions)	$2.247	N/A	$3.940
Gross Margin (%)	21.3%	24.5%	30.9%

YoY comparison (Q3 2018 vs Q3 2017):

Metric	Q3 2017	Q3 2018
Revenue ($USD Millions)	$11.325	$12.768
Net Income ($USD Millions)	$0.671	$1.457
Diluted EPS ($)	$0.29	$0.61
Gross Margin (%)	27.3%	30.9%

Segment commentary and mix:

Segment	Q3 2018 YoY Direction	Q2 2018 YoY Change ($)	Notes
Advanced Technology Group (ATG)	Increased commercial shipments; key driver of consolidated growth and margin expansion	+$2.775M in commercial shipments vs Q2’17	Mix and unit gains at ATG cited as primary reason for gross margin uplift
Consumer Products Group (CPG)	Decrease in commercial shipments; partial offset to ATG strength	Decrease of approx. $0.314M (commercial + government) vs Q2’17	Higher SG&A at CPG (+~$155K) for marketing/admin in Q3

Additional operating detail:

Q3 cost of goods sold increased ~7.2% YoY (≈+$0.594M), reflecting higher ATG volumes partly offset by lower CPG volumes .
Q3 SG&A decreased slightly YoY to $2.074M (from $2.085M), with ATG SG&A down ~-$166K and CPG SG&A up ~+$155K due to sales/marketing and admin .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
All metrics	FY 2018/Forward	None disclosed in filings reviewed	None disclosed in filings reviewed	Maintained (no formal guidance)

No quantitative guidance ranges were provided in the Q3 2018 press release; forward-looking statements emphasize demand drivers and risks (government budgets, macro, industry health) rather than numeric targets .

Earnings Call Themes & Trends

No earnings call transcript was located in the company documents for Q3 2018; themes below aggregate management commentary from Q1–Q3 press releases.

Topic	Previous Mentions (Q-2 and Q-1)	Current Period (Q3 2018)	Trend
ATG demand and mix	Q1: ATG drove revenue growth; Q2: strong commercial shipments at ATG (+$2.775M YoY)	Continued increases in commercial shipments at ATG, driving revenue and gross margin expansion	Improving
CPG performance	Q1: CPG sales decreased; Q2: CPG down ~$0.314M YoY	CPG commercial shipments decreased, offsetting some ATG gains; CPG SG&A up for marketing/admin	Mixed/Weak
Cost control and margins	Q1: SG&A decreased YoY; Q2: gross margin improved to 24.5%	Gross margin 30.9%; management cites cost control and favorable mix; SG&A modestly down YoY	Improving
Capacity/operational investment	Q2: higher production headcount and D&A to support ATG growth	Continued investment while controlling costs per CEO commentary	Ongoing
Macro/government exposure	Company depends materially on U.S. Government/prime contractor contracts; macro and defense appropriations are key risks	Reiterated in forward-looking statements (defense appropriations, aviation demand, macro competition)	Unchanged

Management Commentary

“Our quarterly and nine-month results continue to reflect strong demand for our products… our gross margin… increased… reflecting our efforts to control costs while also investing for the future.” — Kenneth D. Trbovich, CEO & Chairman (Q3 press release) .
“This growth, largely attributed to organic growth of our existing product lines, is a testament to the hard work and dedication of the entire Servotronics team…” — Kenneth D. Trbovich (Q2 press release) .
“We’re off to a strong start to 2018… progress is gradual and challenges are real… reflective of the successful execution of our strategy…” — Kenneth D. Trbovich (Q1 press release) .

Q&A Highlights

No earnings call transcript was available in the filings reviewed for Q3 2018; therefore, there were no Q&A highlights to summarize from company-provided sources.

Estimates Context

Wall Street consensus (S&P Global) for Q3 2018 revenue and EPS could not be retrieved for SVT; treat estimates as unavailable.

Given the absence of consensus figures, no beat/miss versus estimates is presented.

Key Takeaways for Investors

Strong top-line and bottom-line momentum: revenue grew sequentially Q1→Q2→Q3 to $12.77M, with net income scaling to $1.46M and diluted EPS to $0.61 on improved mix and cost control .
Material margin expansion (gross margin to 30.9%) underscores operating leverage at ATG as volumes and average pricing/mix improved; watch sustainability as mix normalizes .
CPG remains the primary drag (lower shipments, higher marketing/admin), tempering consolidated growth; strategic actions to stabilize CPG could be a medium-term lever .
Investment and capacity adds (headcount, equipment) support ATG growth, but raise operating sensitivity if demand slows; monitor utilization and incremental margins into 2019 .
Macro/government exposure is non-trivial; program timing, defense appropriations, and commercial aviation cycles are key external swing factors (per forward-looking statements) .
With no formal guidance and no visible consensus benchmarks, stock reaction likely hinges on continued delivery of margin gains and order flow updates at ATG, and signs of stabilization at CPG .

Supporting detail and sources:

Q3 2018 press release (Form 8-K, Ex. 99.1, Nov 13, 2018) .
Q2 2018 press release (Form 8-K, Ex. 99.1, Aug 13, 2018) .
Q1 2018 press release (Form 8-K, Ex. 99.1, May 14, 2018) .

SERVOTRONICS INC /DE/ (SVT)·Q3 2018 Earnings Summary