Shares of Applied Energetics, Inc. (AERG Quick QuoteAERG - Free Report) have gained 1.1% since the company reported its earnings for the third quarter of 2024, comparing favorably with the S&P 500 index’s decline of 1.1%. Over the past month, the AERG stock has gained 6.4%, outperforming the S&P 500’s rise of 1.6%.

Key Financial Metrics

For the third quarter of 2024, Applied Energetics reported revenues of $0.75 million, reflecting a 4.9% increase from $0.71 million in the prior-year period.

Despite revenue growth, the company’s net loss widened 31.1% to $2.37 million in the reported quarter from a net loss of $1.81 million in the third quarter of 2023.

The loss per share was unchanged at 1 cent in the third quarter of 2024, reflecting a greater number of outstanding shares offsetting the widened loss.

Applied Energetics Inc. Price, Consensus and EPS Surprise

 

Applied Energetics Inc. price-consensus-eps-surprise-chart | Applied Energetics Inc. Quote

Other Key Business Metrics

Cost of revenues jumped 192.7% year over year to $508,709 for the reported quarter, driven by higher material and labor costs associated with contract modifications. Gross profit declined sharply to $239,011 in the third quarter of 2024 from $538,398 a year ago, compressing the gross margin. Selling and marketing expenses decreased 8.2% year over year, aligning with efforts to streamline business development activities.

Operating expenses, particularly general and administrative costs, increased 10.7% year over year to $2.46 million. Research and development (R&D) costs rose 29.6% year over year.

The operating loss for the quarter was $2.37 million, wider than $1.83 million in the third quarter of 2023. The operating margin deteriorated to -317.3% in the third quarter of 2024 from -256.6% in the prior year, as higher general and administrative expenses, and increased R&D spending weighed on the results.

Management Commentary

Management emphasized its focus on developing ultrashort pulse laser technologies for defense and national security applications. CEO Gregory J. Quarles highlighted recent contracts and collaborations, including a $1.99-million Office of Naval Research project and a Phase II Small Business Technology Transfer award from the U.S. Army. These efforts reflect the company's drive to capitalize on growth opportunities in the directed energy sector.

Management remains optimistic about the company’s pipeline of government and defense contracts. The newly transitioned Department of Defense grant to a contract with a ceiling value of $1.46 million underscores the company’s potential to secure stable revenue streams.

Factors Influencing Results

Revenue growth was partially offset by increased operating expenses, including higher non-cash stock-based compensation, and elevated costs for leases and utilities. The company's expanded presence at the University of Arizona Tech Park, encompassing a new Battle Lab, has contributed to higher overheads. Applied Energetics has been facing challenges from rising input costs and geopolitical uncertainties, which could impact supply chains and profitability.

Other Developments

Applied Energetics expanded its operational footprint in the quarter by leasing an additional 5,000 square feet at the University of Arizona Tech Park. This facility will support the development and testing of laser systems in a controlled environment, aligning with the company’s growth objectives. Additionally, AERG signed a Memorandum of Understanding with a U.S.-based systems integrator to incorporate its laser technology into high-energy directed energy platforms.

In conclusion, while Applied Energetics demonstrated a strong stock performance and continued progress in its growth initiatives, the company’s growing losses and cost pressures are concerning. The successful execution of its government contracts and ongoing efforts to commercialize its technologies will be critical in determining its future financial performance.