Twin Vee PowerCats, Co. (VEEE)·Q2 2024 Earnings Summary

Executive Summary

• Demand slowed materially; revenue fell 47% year over year to $4.33M, units sold declined 68%, and gross margin compressed to ~4.7%, driving net loss to $4.52M; Forza booked a $1.674M impairment, further widening losses .
• Management continued cost actions: consolidated SG&A and wage costs down year over year; Forza burn rate cut to < $150K/month in Q2, with a glide path toward ~$100K/month exiting Q3, preserving liquidity and optionality .
• Strategic positioning advanced: launched GFX2 digital boats and continued 30,000 sq. ft. expansion in Fort Pierce; added a 46-foot 5‑axis CNC router to in-house tooling; announced an all-stock merger with Forza to streamline overhead and bolster the balance sheet (no funded debt anticipated) .
• No formal financial guidance; management emphasized right-sizing, efficiency, and product innovation; S&P Global consensus estimates were unavailable at time of writing (SPGI daily request limit exceeded).

What Went Well and What Went Wrong

What Went Well

• GFX2 product launch and tech upgrades: “Our GFX2 model line features… an all-digital switching backbone… via a touchscreen on a 24-inch multifunction display” and redesigned ergonomics; dealer feedback was “incredible” on flagship 40' GFX2 and new 28' DC/26' GFX2 .
• Manufacturing and tooling investment: “We are also in-housing a fully integrated tooling department with our new 46-foot 5-axis router… design tools faster with less expense” and 30,000 sq. ft. expansion toward ~100,000 sq. ft. linear manufacturing .
• Liquidity discipline and cash burn reduction: Forza cash fell by ~$1.75M largely due to building additions (non-capital burn ~ $445K, < $150K/month in Q2, targeting ~$100K/month exiting Q3); Twin Vee’s non-capital cash reduction only ~$132K in Q2 .

What Went Wrong

• Macro/interest rate headwinds: “declining customer demand… stubbornly high-interest rate environment” continued to pressure recreational marine demand; consolidated revenue down 47% y/y .
• Volume and mix pressure: Units sold down 68% y/y; revenue fell less than units due to two 40’ boats (~$630K each), but fixed-cost deleveraging hit margins; gross margin ~4.7% vs 12% y/y, ~5.3% in Q1 .
• Forza impairment and widening losses: Recorded $1.674M impairment on partially constructed building; consolidated net loss increased to $4.52M; electric segment remained non-revenue, weighing on results .

Financial Results

Consolidated P&L vs prior periods and sequential

Segment breakdown

KPIs and balance sheet snapshots

Non-GAAP (as presented)

Note: Q2 2024 non-GAAP excludes stock-based compensation and Forza impairment; prior-year non-GAAP included ERC income, which reduced adjusted loss last year .

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• CEO strategic focus: “We are also in-housing a fully integrated tooling department with our new 46-foot 5-axis router… design tool, new models faster with less expense” and will “strengthen our balance sheet as a result from the Twin Vee-Forza merger” .
• Product strategy: “GFX2… all-digital switching backbone… control their boats via a touchscreen… complete redesign with improved upholstery… engineers… outdid themselves” with strong dealer feedback .
• Capacity expansion: “construction continues on our 30,000 square foot expansion… linear manufacturing… up to 1,000 boats annually” .
• CFO on cost controls: Excluding impairment, “consolidated operating expenses are down $793,000 or 20% y/y… G&A down 17%, salaries and wages down 43%” with Forza inventory reserve and R&D reductions .
• CFO on burn rate: “noncapital investment reduction in cash [Forza] ~ $445,000 for the quarter or a burn rate of less than $150,000 a month… expect… closer to $100,000 a month or better” exiting Q3 .
• Forza impairment rationale: Carrying value above market by $1.674M per appraisal; strategic alternatives under review to maximize value .

Q&A Highlights

• The transcript primarily captured prepared remarks; management’s clarifications centered on cost reductions, burn-rate targets, impairment appraisal methodology, and operational right-sizing (see CFO remarks above) .
• Guidance clarifications: No formal quantitative guidance; directional targets provided for Forza burn rate and capacity post-expansion .
• Tone vs prior quarter: Continued caution on demand and rates, but confident about product innovation, operational efficiency, and merger benefits .

Estimates Context

• Wall Street consensus (S&P Global) for Q2 2024 EPS and revenue was unavailable at time of writing due to SPGI daily request limits; therefore, estimate comparisons cannot be presented.
• We recommend revisiting after SPGI access resets to assess potential estimate revisions.

Key Takeaways for Investors

• The quarter underscores severe industry demand weakness: units down 68% y/y and net sales down 47%; margins held near ~5% through efficiencies, but fixed-cost deleveraging persists .
• Liquidity remains sufficient to execute; consolidated cash/marketable securities at ~$15.1M end-Q2, with working capital ~$15.0M; burn-rate reductions and capex discipline mitigate risk .
• Product-led differentiation continues via GFX2 digital upgrades and larger-format boats (two 40’ units sold), potentially improving mix/ASP when demand normalizes .
• Forza wind-down and merger should streamline overhead and simplify the story; impairment taken, and governance steps underway toward combination; monitor S-4/proxy timing and closing risks .
• Listing risk emerged (Nasdaq bid price deficiency); potential corporate actions (e.g., reverse split) could become catalysts; monitor compliance windows through Nov 2024 .
• Near-term trading: stock likely sensitive to macro rates, merger milestones, and any liquidity/asset-sale updates on Forza; volume trends at dealers and boat show order flow are key near-term reads .
• Medium-term thesis: execution on capacity/efficiency and product roadmap positions Twin Vee to benefit disproportionately on a cyclical upswing; consolidation should reduce complexity and overhead .