AmpliTech Group, Inc. Q1 FY2025 Earnings Call

Good afternoon, and welcome to AmpliTech Group's First Quarter 2025 Investor Update Call. Today's call will cover the company's financial results and strategic progress for the quarter ended March 31st, 2025. All participants will be in listen-only mode during the presentation. A Q&A session will follow management's remarks. This call is being recorded and a replay will be made available on AmpliTech's Investor Relations webpage. I'll now turn the call over to Mr. Jorge Flores, Chief Operating Officer.

Thank you and welcome everyone. We appreciate you joining today's call to hear updates on AmpliTech's operational and financial progress as well as our growth initiatives. Joining me are Fawad Maqbool, our Founder and CEO and Louisa Sanfratello, our CFO. After our prepared remarks, we will open the floor for investor questions. An archived replay of today's call will be posted to the Investor Relations section of AmpliTech's corporate website. Please note that today's discussion may contain forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that could cause Orchard's results to differ materially. Please refer to our filings with the SEC for a full list of risk factors. We undertake no obligation to update these statements after today's call. With that, I would like to turn the call over to our CEO, Mr. Fawad Maqbool.

Thank you, Jorge. Thank you all for joining us today. We're pleased to report continued progress across all our divisions in Q1 2025. While we reported a net loss of $1.8 million this quarter, driven by increased operational spending in our 5G division and R&D efforts, I'd like to emphasize that these are strategic investments. They directly support the certification, scaling, and deployment of our next generation ORAN 5G platforms. And we're confident that they'll position AmpliTech for long-term success in high growth markets. With that, I'll go to the Q1 2025 highlights and strategic progress. The revenue of $3.6 million, up 57% year-over-year, our strongest quarter since Q4 fiscal year 2023. Gross profit of $1.1 million, a record backlog of $19.6 million as of April 30th, driven by strong bookings. Cash and receivables of $19.1 million, $24.6 million of working capital, and zero debt. Inventory of over $7 million to support near-term deliveries and demand rebound across both the LNA and semiconductor distribution division. Looking at the growth outlook and the fiscal year 2025 guidance. Following a challenging 2024, we're pleased to see strong demand recovery. Semiconductor and LNA orders are accelerating. AmpliTech has already booked more sales in the first four months than any recorded in all of 2024. Our 5G division leads the charge with over $12 million in firm orders already booked from a $118 million LOI pipeline. We now forecast fiscal year 2025 revenue of nearly $21 million, almost more than double that of the prior fiscal year. We expect this to be the trend going into fiscal year 2026. Our key strategic achievements in Q1 include securing CE, FCC, and REACH certifications for our ORAN 5G radios enabling global deployments. We expanded our proprietary LNB product line with the next generation satellite solutions based on AmpliTech's low noise IP foundation for which we received three patents this year already. Based on quoting activity and demand trends, LNB revenues are projected to match LNA sales within 12 months. We boosted our visibility through Mobile World Congress, IEEE, MILCOM, and LEAP 2026 trade shows, and we see emerging opportunities with AI. We're partnering with leading AI native wireless companies to develop technologies for spectrum sensing, network optimization, and digital twin applications using our ORAN platforms. Our certified ORAN 5G radios are already being deployed globally. Over $12 million of our $118 million in signed LOIs will be delivered to customers this year. So the LOIs are very meaningful for the company. We expect to continue delivering on these LOIs well into fiscal year 2026. Shipments are being made to a Tier 1 MNO in North America. So this validates our ability to service and provide high-level equipment in live environments. We're going to address the tariff resilience and adaptability since that's basically a question by many investors. Thanks to our sourcing strategy and operational foresight, we've successfully managed tariff-related risks. We are prepared to adjust pricing as industry trends shift costs and customers while maintaining value and efficiency. As mentioned earlier, we have ample inventory to avoid any immediate effects of the new tariff policies, and we have not seen a noticeable effect on our supply chain and business at this point in time. In closing, AmpliTech is in a position of strength, record backlog, zero debt, certified global products, and a growing IT portfolio. With a strong pipeline and execution in place, we expect to deliver continued revenue growth and value creation in 2025 and beyond. That's pretty much in a nutshell. Thank you for your continuous trust and support. Operator, please open the call for Q&A.

Thank you. Our first question will come from Jack Vander Aarde with Maxim Group. You may now go ahead.

It's great to see all the positive momentum. Congratulations on that, especially with the backlog, strong outlook, the two Letters of Intent, and the FCC certification. Fawad, it's been a while since we last spoke. I would like to get more details about the Letters of Intent you announced publicly. Regarding the acquisition of the ORAN assets in Canada, can you provide an update on that? Has the acquisition been completed? How do these assets relate to the Letters of Intent and the purchase orders you've received? Thank you.

Sure, Jack. Yes, I'd be glad to answer that question. These LOIs that we announced were based on the relationships that we're having in discussions with large MNOs currently. And the idea was to acquire assets. By the way, it's a closed deal. We acquired the assets that we needed to and we're basically positioning the company so that we can become a viable supplier to a very large MNO that is looking for a complete push into ORAN technology. So this is a trend that's going around globally now that ORAN is becoming the acceptable way of growth for all of these MNOs, and it gives them flexibility to go from a RAN-based environment, which has locked them into other suppliers like Nokia and Ericsson and Fujitsu. Those basically offer a one-shot solution to them. They have no flexibility. They are stuck with them forever and they have to always go to them for any changes in technology. We're offering basically a plug-and-play type of solution with ORAN. The whole idea is that we can replace their existing infrastructure, whether it be for replacing antiquated architecture or whether it's because of Chinese architecture. Any reason there is, we're able to come in and offer a flexible solution so that now the MNO has a choice to go and change their software partners or their actual hardware partners, even though we provide everything from top to bottom for these companies. So, it really is meaningful. It's a trend that's going up. You'll find that the ORAN growth is over 30% or 40% combined annual growth, and the RAN growth, which is existing technology, is flat and actually decreasing. So we believe we're in the right position. We're a couple of years, a few years ahead of all the competitors. They don't have the kinds of products that we have. And making this deal and completing it and acquiring the assets that we need, it actually adds to the IP that we have right now. So it basically goes right to our bottom-line assets and also continued IP development that we're doing for all the other MNOs in private 5Gs.

I have a couple more questions, Fawad. Can you provide insight into the remaining amount, over $100 million, in those two LOIs? I believe both agreements are for about three years. You've already received over $12 million from them. Can you clarify when you expect the $100 million to come in and how it might be distributed? I'm interested in knowing how much visibility you have regarding this.

We haven't received $12 million yet. We have received the orders. We will deliver $12 million this year. Is that my right, Jorge?

Yes.

We received purchase orders for $12 million that's already in the backlog, right? For 2026 and 2027, we do expect that it's going to be scaling up with our best year being 2026 with the higher number of radios that we need to deliver. But 2026 is definitely going to be a great year for us, when it comes to hundreds of deliveries for these radios. The bulk of them will be in 2026.

That was what I was going to follow-up with. So it sounds like you're expecting, you've already received $12 million of orders. You still have to ship those orders, but you received $12 million. And then it sounds like you're expecting that to significantly ramp in 2026. And then, I guess then there'll be even more coming in 2027 from these two LOIs alone. Is that a fair way to think about it?

Yes. And the programs we believe they have legs. For example, in one of them with the EUR 78 million that we negotiated already with the end user. Right now, the first negotiation that we had was for a three-year program, but we are following very closely on their program with their end user as well. And we have seen information that the program is extending through 2030. So, it's expanding as we speak.

Okay. That's fantastic to hear. I look forward to learning more about that. And then, Fawad, maybe there's so much to chew on here, but I guess I'm trying to structure some of the more top of mind thoughts here. So you obviously have one formal MNO relationship in Canada that you have announced publicly. Can you maybe speak to other potential discussions you're having or looking to have with other MNOs globally in North America, wherever? Are you gaining traction in any other discussions with other MNOs? Are they knocking on your doors? Did they catch word of this pretty large LOI contract you recently signed? Is this bringing more MNOs knocking on AmpliTech's door? Thanks.

Yes. Actually, even before this was done, even before we did this MNO deal, we were talking to several MNOs in Europe and in Southeast Asia and Far East. So we are constantly talking with them, but this achievement obviously will make our chances much better to close deals with all these other MNOs. It gives us a working relationship and it allows them to understand that we can receive these large orders and deliver them. I mean, we can say that, we've already delivered, I guess, three quarters to a half of what we were supposed to deliver this year to the first MNO already. So, we're really well into this cycle and it shows that we can deliver it and that was the whole question. A company like us, the new company, will we be able to service these MNOs in the proper way and that's what we're showing now. So, yes, we do expect all these other MNOs to catch wind of this and they already have actually and they've approached us, and we're going to continue to build on that. So we believe we will have more bookings.

Excellent. Okay. And then, it looks like the balance sheet is very healthy, very strong. So, I'm not going to ask questions about that. No debt, you have lots of cash. That's not an issue, I guess in terms of satisfying any of these orders. My final kind of question, I guess, would be just if you could touch on the FCC certification, maybe help us understand the importance of achieving that milestone? What does that enable you to do that you haven't been able to do in the past? And that's it. Thanks.

Yes. So the FCC certificate is very important because it allows AmpliTech the entity and its own identity to be able to radiate in the spaces that the government allows in the U.S. So, it's really purely a U.S. certification, but it's very important for us because we're a U.S. manufacturer and we are trying to gain the U.S. business not just globally, but U.S. and the world. So, it's important to get that certification. At the same time, I'll add that we are also working on getting certifications for other countries, other regions, so that we can provide this technology to all of the other countries as well. So, we are actively working that way. But the FCC is important for the U.S. really and reaching that means that we have credibility and our equipment is actually tested. It's tested to a certain standard and when it passes, that's when we get the FCC certification. Now we can radiate and provide our solutions anywhere in the country.

Excellent. Congrats again on the momentum. It's great to see you guys really executing. I look forward to tracking the story. Thanks.

Our next question will come from Vishal Mishra with Bard Associates. You may now go ahead.

Hi, everyone. Impressive results this quarter. Congratulations. It seems like the company is transitioning into a third line of business focused on 5G ORAN radio, with $12 million of the $21 million coming from these radios. Do you have any guidance or forecast regarding the margins for this new business and its impact on the bottom line? If previous margins are maintained, it appears you might achieve breakeven GAAP earnings by year-end. Could you share some insights on that?

That's a reasonable assumption. We have indicated that we are transforming the company to align with the 5G trend, which is crucial for us. I believe this will be the largest growth opportunity for the company, and that's why we are positioning other groups to support and develop products that will drive the 5G division. It's a chain reaction where the 5G radios we sell will utilize our own Mimic chips, making them superior to our competitors. Our low noise amplifier technology, along with our own chips and front-end solutions, will enhance these radios. This technology will give them better coverage, throughput, and signal fidelity. The strategy is for other groups to feed into the 5G division, so as it expands, all the other groups will grow because we will need hundreds of thousands of chips for these radios. Our packaging division in Silicon Valley will supply the necessary packaging for all the chips developed by our Texas division. Consequently, revenue will increase across the board as we produce our own chips for these radios. As I've mentioned before, there's a symbiotic relationship between all our divisions.

That is great. You've been speaking about 5G, and you're putting all the pieces together now. This is fantastic. Are these MNOs who seem to be the biggest customers, do they also sign LOIs with whoever else is the 5G ORAN radio provider in addition to you? How is the relationship amongst these MNOs with the suppliers of 5G ORAN radios? How does it look like or are you the only suppliers?

No. They do sign LOIs in general with companies. And I'm sure they have LOIs for other products with other companies. But this is basically just catered to the AmpliTech 5G division and we were able to procure these because of the uniqueness of the radio solutions that we provided. So in the past, we have not really done any LOIs. We have not announced LOIs. But this year, we feel that it's very important because it's a main ingredient and validator for our business and we have to have that in place. But we also went one step further and actually delivering on the LOIs and not just mentioning them that we have an LOI. So these LOIs, if they were not serious, we would not be mentioning them at all.

Is what I'm understanding correct that your radio technology is preferred by MNO customers over competitors, or is your US-based location playing a role in your differentiation from international competitors?

It's a combination of things. Because we are a U.S. company making these radios, there are no other U.S. companies making these kinds of radios. So, it's important because, as I mentioned before, it's ORAN technology. We are pretty much a leader now in ORAN technology being actually deployed. There is no other company that has this large deployment or these large orders for ORAN business. So, since the whole world is going to be moving towards this, it's a good position for us to be in, as being a qualified supplier where there are not that many players in it.

So going forward and then you have such a large pipeline, that seems like your existing businesses will be smaller, your ORAN business will be larger going forward.

Not necessarily. I mean, as I mentioned before, if we have a demand that's being created by the radios, we are going to fulfill that demand by providing our own products that go into these radios, and it's going to grow the mimic chip business as well and it's going to grow the Silicon Valley business to provide the packages. So they're all growing. We're all scaling it up. Why would we pay in our own designs and our own radios? Why would we pay Qorvo and Macom or other companies for these chips when we can make them ourselves.

That concludes the Q&A. I'll now hand the call back to Mr. Fawad Maqbool for closing remarks.

Thank you. That concludes the Q&A. So thank you very much operator and thank you to all who joined us today to hear about the progress we've made and the plan we have to further our company's mission of providing the communication systems of tomorrow, today. We look forward to speaking with you again during our Q2 2025 update in August. Please reach out to Investor Relations for follow-up or one-on-one meetings. Stay safe and thank you for being part of the AmpliTech journey.

That concludes today's conference call. Thank you and have a great day.