AmpliTech Group, Inc. (AMPG) Earnings Call Transcript

Good day, and welcome to the AmpliTech Third Quarter 2026 Earnings Conference Call. [Operator Instructions] With us on the call today, we have Fawad Maqbool, Chief Executive Officer; Louisa Sanfratello, Chief Financial Officer; and Jorge Flores, Chief Operating Officer. Please note that this event is being recorded. I would now like to turn the conference over to Chief Operating Officer, Jorge Flores. Please go ahead.

Thank you, operator. Welcome to AmpliTech Group Third Quarter Fiscal 2026 Financial Results Conference Call. Today is Thursday, November 12, 2026. Earlier today, we issued our third quarter earnings release, which reports our results for the 3 and 9 months ended September 30, 2026, along with our operational progress and updated full year outlook. Following our prepared comments, the operator will open the lines for the live question-and-answer session. A replay and transcripts of today's call are expected to be made available through our corporate website when available. Before we begin, I want to remind everyone that the statements made during this call, including answers to questions, may constitute forward-looking statements within the meaning of applicable federal securities laws. These include statements regarding future revenue, anticipated shipments, production readiness, backlog conversion, customer deployments, margins, operating performance, liquidity and market opportunities. Forward-looking statements reflect current expectations and are not guarantees of future results. Actual performance may differ materially because of risks, including changes in customer schedules and demand, order deferrals or cancellations, production and supply chain constraints, customer qualification and acceptance, geopolitical developments, export control and other regulatory requirements and risks described in our filings with the Securities and Exchange Commission. All forward-looking statements speak only as of today, and we undertake no obligation to update them, except as required by law. We encourage everyone to review the full safe harbor language in today's earnings release and our SEC filings. With that, I will turn over the call to our Founder and Chief Executive Officer, Mr. Fawad Maqbool.

Thank you, Jorge. Thank you all of our shareholders, analysts and other participants for joining us. Our third quarter tells us 2 very important stories. First, we continue to advance the business through year-over-year revenue growth, meaningful expansion in our O-RAN 5G and Spectrum divisions and an improvement in gross margin from the second quarter. Second, the timing of large 5G deployments and manufacturing execution has not matched the shipment schedules that originally supported our full year revenue expectations. We want to address both of these realities clearly today. We also continue to see significant commercial activity. As previously announced, during the third quarter, we received more than $17 million in customer purchase orders, including follow-on orders under existing O-RAN radio programs. In October, bookings were nearly $25 million, a record month for our company. Following the announced orders in October, our previously reported backlog exceeded $52 million, also a new company record. One of the most important developments was the $21.7 million follow-on purchase order announced on October 20 for 5G O-RAN radio supporting an Asian mobile network operator program. There was confusion earlier on this, but we have received almost half of that original $78 million LOI, which shows dedication to that program by our customer. Cumulative orders under that program reached approximately $34 million. So separately, we announced a $1.03 million follow-on order for low noise amplifiers from a Fortune 1000 satellite communications customer. So orders, repeat orders in segments is happening on a regular basis, and it's increasing as we go forward. Earlier in October, we reported that more than 3,000 AmpliTech radio units have been deployed in support of a North American mobile network operator program. These deployments are tangible indicators of commercial activity, while the timing of future deliveries remains tied to each customer's rollout plan. After quarter end, we also completed a dedicated production line and reached production-ready status with initial shipments expected during the fourth quarter. On October 27, we announced that our 5G Medium Power Radio unit, MPRU, demonstrated interoperability with OCUDU, O-C-U-D-U which is an open source software platform for 5G wireless networks supported by the Linux Foundation. This happens to be a very important part of defense and military applications. It provides software that helps control how 5G radios communicate with mobile devices and the broader telecommunications network. This creates another software environment in which prospective customers can evaluate our radio technology. In addition, we successfully completed the qualification and onboarding requirements of a major telecommunications infrastructure provider and became an approved vendor of their very selective approved vendor list. This is an important commercial milestone for our 5G O-RAN platform as it enables us to pursue large opportunities with this provider. It's only the beginning. Our work spans O-RAN radio systems, RF microwave components, semiconductor distribution, MMIC design and low-noise amplifier technologies used across telecommunications, satellite, defense, space and quantum-related applications. That's a lot. We are continuing to invest in product readiness, engineering and manufacturing infrastructure to support the larger opportunities we are pursuing. With such a comprehensive and diversified portfolio of innovative products strategically aligned with some of the fastest and most transformative technologies in the world, one might reasonably ask why AmpliTech is not yet more widely recognized across the industry. That is precisely one of the reasons we have increased our investment in marketing, brand awareness and strategic customer engagement. Our products alone are helping us push us to the top, but we need to have more market awareness. We believe these initiatives will significantly expand AmpliTech's visibility among major industry players, strengthen our competitive positioning and create additional opportunities to convert customer interest into meaningful bookings and revenue in the coming quarters. This has slowly been happening, but it will become more evident as we proceed the rest of the year and into next year. Our approach to innovation has been deliberate, targeted and highly strategic. Rather than pursuing technology development for its own sake, we have focused our resources on advanced wireless and connectivity solutions that address critical market needs today and are positioned to remain in strong demand for years to come. Building an organization with a robust technology portfolio, differentiated intellectual property, scalable operational capabilities and a sustainable pipeline of growth opportunities requires considerable time, investment and disciplined execution. This is exactly what we have been working towards over the past several years. It may not seem evident, but this is what we have been announcing over the last several press releases. Our strategy has never been centered on achieving immediate profitability. We have never said that, at the expense of long-term growth. Instead, we have consistently invested in building the technological foundation, industry relationships, certifications, strategic partnerships and operational infrastructure necessary to support the sustainable revenue growth and ultimately drive consistent profitability. Year after year, we have announced meaningful milestones that demonstrate measurable progress towards these objectives and continue to strengthen AmpliTech's presence and credibility with the global wireless communications industry. I'm proud of what our team has accomplished and believe we are now entering one of the most important phases of our strategic journey. The transition from years of technology development, infrastructure investment and market positioning for commercial execution, revenue expansion and improved financial performance. That's the key, improved financial performance. While the timing of customer deployments and revenue recognition remains subject to various factors, which we'll explain as we go on, we believe the foundation we have established positions AmpliTech to demonstrate increasingly tangible results in the coming quarters. We are no longer simply building the foundation for growth. We are increasingly focused on converting that foundation into measurable financial results and sustainable shareholder value. I'd like to thank all our faithful shareholders for their continued patience throughout this journey. I also want to speak directly about our revenue outlook. We previously projected $50 million in revenue for 2026 and withdrew that target in August. As today's press market makes clear -- press release makes clear, we will not achieve that original target. Based on the customer deployment, schedules, production plans and anticipated shipments available to us today, we now expect full year 2026 revenue of at least $28 million. The gap between our original outlook and our current expectations primarily reflects supply chain constraints, delays in technology transfers, extended customer evaluations, global geopolitical developments and customer-directed deployment changes, including among international mobile network operators. At the time we established our earlier outlook, we relied in part on customer provided shipment forecast that subsequently moved. In addition, important backlog awards came later in the year than we had expected. Applying the lessons learned throughout 2026, the company made the decision that beginning with fiscal year 2027, AmpliTech will no longer provide formal full year revenue guidance. Our decision reflects the nature of the industry in which we operate, where revenue recognition can be significantly influenced by factors beyond our control. These include customer-directed deployment, postponements, global supply chain constraints and the availability of critical electronic components, some of which are experiencing increased demand due to the rapid expansion of AI-driven data centers and related infrastructure. This is not only in our industry, but in every industry, the AI-related chips and components are getting more and more expensive and the deliveries are being pushed down. So it did affect us. As we have experienced this year, even when customer demand is strong and purchase orders are secured, the timing of shipments and revenue recognition can shift considerably due to circumstances outside our direct control. Rather than provide annual revenue projections that may not accurately reflect the timing of customer deployments, we believe shareholders will be better served by our continued transparency regarding confirmed purchase orders, backlog, production milestones, shipments and actual financial performance. This decision does not change our confidence in AmpliTech's long-term growth opportunities or our commitment to delivering sustainable shareholder value. The customer orders, production capabilities and relationships we have announced provide a foundation for our work in 2027. Our priority is to convert orders into shipments, complete customer acceptance where required, improve operating efficiency and build sustainable performance. We are not treating backlog as a substitute for delivering results. With that, I will ask Louisa to review our third quarter financial performance and financial position in more detail.

Thank you, Fawad, and good afternoon, everyone. For the 3 months ended September 30, 2026, AmpliTech recorded total revenues of $6.58 million compared with $6.09 million in the third quarter of 2025, representing year-over-year growth of 8%. Spectrum Semiconductor Materials distribution revenue increased 36.4% year-over-year to $2.89 million. Gross margin improved sequentially to 34.2% compared with 27.9% in the second quarter, an improvement of approximately 6.3 percentage points, with gross profit for the quarter to be $2.25 million. Looking at the first 9 months of the year, gross profit increased 41.1% to $7.07 million, and gross margin reached 35.3% compared with 24.2% for the first 9 months of last year. We believe these results illustrate the value of our evolving product and customer mix, even as quarterly margins can vary based on what ships in any particular period. Manufacturing and Engineering segment revenue was $3.70 million compared to $3.98 million in the same quarter last year. Selling, general and administrative expense was $3.38 million compared with $2.48 million in the prior year quarter. The increase primarily reflects higher corporate costs, including legal fees and stock-based compensation as well as increased marketing, business development, cybersecurity and information technology security initiatives. Research and development expense was $860,000 compared to $700,000 in the third quarter of 2025. This included approximately $440,000 of 5G-related activity and approximately $420,000 of MMIC design activity. The third quarter net loss was $1.89 million or $0.07 per basic and diluted share. That compares with a net loss of approximately $3.09 million in the second quarter of 2026, reflecting a sequential narrowing of the quarterly loss. For the first 9 months of 2026, total revenue was $20 million. Gross profit increased to 41.1% year-over-year to $7.07 million from $5.01 million, while gross margin increased to 35.3% from 24.2% in the comparable period of 2025. The 9-month net loss is $6.50 million. This reflects the higher operating expenses and continued investment in technology development and commercialization as we prepare our product and production infrastructure for anticipated larger scale opportunities. As of September 30, 2026, we held $19.48 million in cash and cash equivalents and $10.79 million in marketable securities for a combined total of approximately $30.27 million. Total current assets were $49.25 million, working capital was approximately $42.14 million, and our current ratio was approximately 6.93. Total assets were $76.13 million, total stockholders' equity was $65.72 million compared with $51.48 million of total assets and $32.86 million of stockholders' equity at December 31, 2025. The improved liquidity position primarily reflects equity financing completed during 2026, including approximately $20.11 million in net proceeds from the July closing of the Series A Rights. Net cash used in operating activities was $8.48 million for the first 9 months of 2026. Based on our existing cash, marketable securities, working capital and current forecast, management believes we can meet normal operating obligations and planned capital requirements for at least the next 12 months. We continue to monitor spending, working capital and capital allocation as we execute our customer program. That concludes my financial review. I will now turn the call back to Fawad.

Thank you, Louisa. So I'll discuss strategic perspective now. The priorities for AmpliTech remain clear: fulfill our funded customer programs and advance 5G O-RAN production and deployment readiness, along with expanding our 5G O-RAN business development efforts and increasing our Spectrum division distribution activity, making good progress in RF and MMIC innovation and exercise discipline over operating expenses and capital deployment. We need to stay ahead of our competition in all of these areas, and AmpliTech has never been a me-too company. So therefore, we need to invest the money that we -- the funds that we have gotten into making sure that we have a clear advantage over our competitors for the next 3 to 4 years. We currently do have that advantage in all the technology we possess right now. That's why we have made a focused development effort. We've made investments in engineering, manufacturing readiness and supply chain capability ahead of the revenue that we expect those programs to generate. You might think we're both bullish on the company, but yes, we are bullish on the company, and that's our job. This is why we are doing this, and we're very confident that the results will be evident. Those investments carry near-term costs. Our focus now is translating that readiness and our customer commitments into a more efficient flow of deliveries and revenue during 2027 and 2028, recognizing that customer schedules and production execution remain important variables. We're encouraged by the size of the customer opportunities and the order activity announced since quarter end, but we know that the business must be measured by operational delivery and financial performance, as you expect. The strengthened balance sheet gives us this additional capacity to execute while we continue to manage those risks. Before opening the phone lines, I would like to ask Jorge to address several questions we anticipate investors may have following today's release and the questions that we have received already from investors.