Electro-Sensors, Inc. Announces Second Quarter 2024 Financial Results

Rhea-AI Summary

Electro-Sensors, Inc. (NASDAQ: ELSE) reported its Q2 2024 financial results, showing a 3.7% increase in quarterly revenue to $2,217,000. The company's gross margin was 47.2%, down from 50.0% in Q2 2023. Despite the revenue growth, Electro-Sensors recorded an operating loss of $107,000 compared to an operating income of $44,000 in the prior-year quarter. The company maintained a strong cash position with $9.9 million in cash and investments. Sales growth was primarily attributed to increased demand for HazardPRO wireless hazard monitoring systems. For the first six months of 2024, net sales increased by 6.7% to $4,461,000, while gross margin decreased to 47.7% due to higher material and labor costs.

Positive

• Quarterly revenue increased by 3.7% to $2,217,000
• Six-month net sales grew by 6.7% to $4,461,000
• Strong cash position with $9.9 million in cash and investments
• Increased sales of HazardPRO wireless hazard monitoring systems

Negative

• Operating loss of $107,000 compared to operating income of $44,000 in Q2 2023
• Gross margin decreased to 47.2% from 50.0% in Q2 2023
• Six-month gross margin declined to 47.7% from 50.0% due to increased material and labor costs
• Diluted earnings per share decreased from $0.03 to $0.00 year-over-year

Insights

Financial Analyst

Electro-Sensors' Q2 2024 results present a mixed financial picture. While revenue grew 3.7% year-over-year to $2,217,000, the company swung to an operating loss of $107,000 from a profit of $44,000 in Q2 2023. This shift is concerning, primarily driven by increased operating expenses and a 280 basis point decline in gross margin to 47.2%.

The HazardPRO wireless systems are a bright spot, driving sales growth. However, rising material and labor costs are pressuring margins across all product lines. With earnings per share dropping from $0.03 to $0.00, the company needs to address cost challenges to return to profitability.

The balance sheet remains solid with $9.9 million in cash and investments, providing a cushion for potential investments or weathering further challenges. Investors should monitor the company's ability to control costs and leverage its HazardPRO success in coming quarters.

Market Research Analyst

Electro-Sensors' performance reflects broader industry trends in industrial automation. The 3.7% revenue growth, while modest, outpaces some competitors in the machine monitoring sector. The success of HazardPRO systems indicates a growing demand for wireless, easy-to-install solutions in hazard monitoring applications.

However, the margin pressure Electro-Sensors is experiencing is a common theme across the industry, as supply chain disruptions and inflation impact material and labor costs. The company's ability to maintain sales growth despite these headwinds is noteworthy, suggesting strong product positioning.

Looking ahead, Electro-Sensors' focus on systems with favorable total cost of ownership could be a key differentiator in a price-sensitive market. Investors should watch for signs of margin stabilization and the company's ability to pass on costs to customers without impacting demand.

MINNETONKA, Minn., Aug. 9, 2024 /PRNewswire/ -- Electro-Sensors, Inc. (NASDAQ: ELSE), a leading global provider of machine monitoring sensors and hazard monitoring systems, today announced financial results for the second quarter ended June 30, 2024.

• Quarterly revenue of $2,217,000, up 3.7% from the prior-year period
• Gross margin of 47.2%
• Cash and investments of approximately $9.9 million

Selected Financial Information (unaudited; in thousands, except per share data)

	Q2 2023				Q2 2022			Change
Net Sales		$	2,217		$	2,137		3.7	%
Gross Margin			47.2	%		50.0	%	-280	bps
Operating Income (Loss)		$	(107)		$	44		(343.2)	%
Operating Income Margin			(4.8)	%		2.1	%	-690	bps
Income (Loss) Before Income Taxes		$	2		$	138		(98.6)	%
Earnings Per Share (diluted)		$	0.00		$	0.03		(100.0)	%

Net sales in the second quarter increased 3.7% to $2,217,000 from $2,137,000 in the prior-year quarter.  For the first six months of 2024, net sales increased 6.7% to $4,461,000 from $4,182,000 in the comparable prior-year period.  Furthermore, gross margin for the 2024 six-month period was 47.7%, down from 50.0% in the corresponding six months in 2023, primarily due to increased material and labor costs across all product lines.

"During the 2024 second quarter, our sales increased 3.7% from the comparable prior-year period, primarily due to increased sales of our HazardPRO^TM wireless hazard monitoring systems," said David L. Klenk, Electro-Sensors' president.  "Customers continue to value the ease of installation, flexibility, and favorable overall cost of ownership of our HazardPRO systems."

A full analysis of results for the period ended June 30, 2024 is available in the Company's Form 10-Q, which is available on the Company's website at www.electro-sensors.com or through the Securities and Exchange Commission's Edgar database at www.sec.gov.

 

Electro-Sensors, Inc. Statements of Income For the Three and Six Months Ended June 30, 2024 and 2023 (unaudited) (in thousands except share and per share amounts)
	Three Months Ended June 30,
	2024			2023
Sales	$	2,217		$	2,137
Cost of goods sold		1,170			1,069
Gross profit		1,047			1,068
Operating expenses		1,154			1,024
Operating income (loss)		(107)			44
Non-operating income, net		109			94
Income before income taxes		2			138
Provision for income taxes		6			22
Net income (loss)	$	(4)		$	116
Earnings (loss) per share – diluted	$	0.00		$	0.03
Average shares outstanding - diluted		3,428,021			3,443,394
	Six Months Ended June 30,
	2024			2023
Sales	$	4,461		$	4,182
Cost of goods sold		2,334			2,092
Gross profit		2,127			2,090
Operating expenses		2,334			2,184
Operating income (loss)		(207)			(94)
Non-operating income, net		225			187
Income before income taxes		18			93
Provision for income taxes		11			21
Net income	$	7		$	72
Earnings per share – diluted	$	0.00		$	0.02
Average shares outstanding - diluted		3,428,021			3,443,930

 

Electro-Sensors, Inc. Balance Sheets June 30, 2024 and December 31, 2023 (in thousands)
	June 30,			December 31,
	2024			2023
Assets	(unaudited)
Current Assets
Cash and investments	$	9,944		$	9,926
Trade receivables, net		1,180			1,283
Inventories		1,865			1,751
Other current assets		218			179
Total current assets		13,207			13,139
Deferred income tax asset, long-term		330			355
Property and equipment, net		930			951
Total assets	$	14,467		$	14,445
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable and accrued expenses	$	638		$	690
Total current liabilities		638			690
Stockholders' equity
Common stock		342			342
Additional paid-in capital		2,297			2,230
Retained earnings		11,190			11,183
Total stockholders' equity		13,829			13,755
Total liabilities and stockholders' equity	$	14,467		$	14,445

About Electro-Sensors

Electro-Sensors, Inc. is an industry leading designer and manufacturer of rugged and reliable machine monitoring sensors and wireless/wired hazard monitoring systems applied across multiple industries and applications. These products improve processes by protecting people, safeguarding systems, reducing downtime, and preventing waste. Electro-Sensors is proud to be an ISO9001:2015 quality certified company and is committed to providing excellent customer service and technical support. Founded in 1968 and located in Minnetonka, Minnesota, Electro-Sensors provides its loyal customers with reliable products that improve safety and help plants operate with greater efficiency, productivity and control.

Cautionary Statement Regarding Forward Looking Statements

This press release may include statements about possible or anticipated future financial performance, business activities, plans, or opportunities.  These forward-looking statements may include the words "will," "should," "believes," "expects," "anticipates," "intends" or similar expressions.  For these forward-looking statements, the Company claims the protection of the safe harbor for forward−looking statements contained in federal securities laws.  Forward-looking statements reflect the company's current views with respect to future events and financial performance and include any statement that does not directly relate to a current or historical fact.  These forward-looking statements are subject to a number of factors, risks and uncertainties, including those disclosed in our periodic filings with the SEC that could cause actual performance, activities, plans, or opportunities after the date the statements are made to differ significantly from those indicated in the forward-looking statements.

For more information please visit our website at: www.electro-sensors.com. Also look us up on:
LinkedIn: linkedin.com/company/electro-sensors-inc-
X: x.com/ESIsensors
Facebook: facebook.com/ElectroSensors

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SOURCE Electro-Sensors, Inc.

FAQ

What was Electro-Sensors' (ELSE) revenue growth in Q2 2024?

Electro-Sensors (ELSE) reported a 3.7% increase in quarterly revenue to $2,217,000 in Q2 2024 compared to the same period last year.

How did Electro-Sensors' (ELSE) gross margin change in Q2 2024?

Electro-Sensors' (ELSE) gross margin decreased to 47.2% in Q2 2024 from 50.0% in Q2 2023, primarily due to increased material and labor costs.

What was Electro-Sensors' (ELSE) operating income in Q2 2024?

Electro-Sensors (ELSE) reported an operating loss of $107,000 in Q2 2024, compared to an operating income of $44,000 in Q2 2023.

How much cash and investments did Electro-Sensors (ELSE) have as of Q2 2024?

Electro-Sensors (ELSE) reported approximately $9.9 million in cash and investments as of the end of Q2 2024.