KWESST Micro Systems Announces Q1 2025 Financial Results
KWESST Micro Systems reported strong Q1 2025 financial results, with revenue increasing by 588% compared to Q1 2024. The company achieved a gross profit of $0.4 million with a 45.6% margin, compared to a loss in the previous year. Growth was driven by government contracts (DSEF & Land C4ISR), a Lightning SaaS pilot with Canadian Red Cross, and ARWEN business expansion.
The company completed a public offering raising $4.9 million and secured a $250,000 receivables facility. KWESST implemented a 10:1 share consolidation to maintain Nasdaq compliance and has until May 12, 2025, to meet the minimum bid requirement. The company also announced volume production of ARWEN cartridges, including new 40mm baton rounds.
KWESST Micro Systems ha riportato risultati finanziari solidi per il primo trimestre del 2025, con un aumento del fatturato del 588% rispetto al primo trimestre del 2024. L'azienda ha raggiunto un utile lordo di $0,4 milioni con un margine del 45,6%, rispetto a una perdita nell'anno precedente. La crescita è stata guidata da contratti governativi (DSEF e Land C4ISR), un progetto pilota Lightning SaaS con la Croce Rossa canadese e l'espansione del business ARWEN.
L'azienda ha completato un'offerta pubblica raccogliendo $4,9 milioni e ha ottenuto una linea di credito per crediti di $250.000. KWESST ha implementato una consolidazione delle azioni 10:1 per mantenere la conformità con il Nasdaq e ha tempo fino al 12 maggio 2025 per soddisfare il requisito di offerta minima. L'azienda ha anche annunciato la produzione in serie di cartucce ARWEN, comprese nuove munizioni da 40 mm.
KWESST Micro Systems reportó resultados financieros sólidos para el primer trimestre de 2025, con un aumento de ingresos del 588% en comparación con el primer trimestre de 2024. La compañía logró una ganancia bruta de $0.4 millones con un margen del 45.6%, en comparación con una pérdida en el año anterior. El crecimiento fue impulsado por contratos gubernamentales (DSEF y Land C4ISR), un piloto de Lightning SaaS con la Cruz Roja Canadiense y la expansión del negocio ARWEN.
La compañía completó una oferta pública recaudando $4.9 millones y aseguró una línea de crédito por cuentas por cobrar de $250,000. KWESST implementó una consolidación de acciones 10:1 para mantener el cumplimiento con Nasdaq y tiene hasta el 12 de mayo de 2025 para cumplir con el requisito de oferta mínima. La compañía también anunció la producción en serie de cartuchos ARWEN, incluidos nuevos proyectiles de 40 mm.
KWESST 마이크로 시스템즈는 2025년 1분기 강력한 재무 결과를 보고했으며, 2024년 1분기 대비 수익이 588% 증가했습니다. 이 회사는 $0.4백만의 총 이익을 달성했으며 45.6%의 마진을 기록했으며, 이는 전년도의 손실과 비교됩니다. 성장은 정부 계약(DSEF 및 Land C4ISR), 캐나다 적십자와의 Lightning SaaS 파일럿, ARWEN 비즈니스 확장에 의해 주도되었습니다.
회사는 490만 달러를 모금하는 공개 공모를 완료했으며, 25만 달러의 수취채권 시설을 확보했습니다. KWESST는 나스닥 규정을 유지하기 위해 10:1 주식 통합을 시행했으며, 최소 입찰 요건을 충족하기 위해 2025년 5월 12일까지의 시간이 있습니다. 회사는 또한 새로운 40mm 배턴 탄환을 포함한 ARWEN 탄약의 대량 생산을 발표했습니다.
KWESST Micro Systems a rapporté de solides résultats financiers pour le premier trimestre 2025, avec une augmentation des revenus de 588% par rapport au premier trimestre 2024. L'entreprise a réalisé un bénéfice brut de 0,4 million de dollars avec une marge de 45,6%, par rapport à une perte l'année précédente. La croissance a été soutenue par des contrats gouvernementaux (DSEF et Land C4ISR), un projet pilote Lightning SaaS avec la Croix-Rouge canadienne et l'expansion des activités d'ARWEN.
L'entreprise a complété une offre publique en levant 4,9 millions de dollars et a sécurisé une facilité de créances de 250 000 dollars. KWESST a mis en œuvre une consolidation d'actions de 10:1 pour maintenir sa conformité avec le Nasdaq et dispose jusqu'au 12 mai 2025 pour répondre à l'exigence d'enchère minimale. L'entreprise a également annoncé la production en série de cartouches ARWEN, y compris de nouveaux projectiles à bâton de 40 mm.
KWESST Micro Systems hat starke finanzielle Ergebnisse für das erste Quartal 2025 gemeldet, mit einem Umsatzanstieg von 588% im Vergleich zum ersten Quartal 2024. Das Unternehmen erzielte einen Bruttogewinn von 0,4 Millionen Dollar mit einer Marge von 45,6%, im Vergleich zu einem Verlust im Vorjahr. Das Wachstum wurde durch Regierungsverträge (DSEF & Land C4ISR), ein Lightning SaaS-Pilotprojekt mit dem kanadischen Roten Kreuz und die Expansion des ARWEN-Geschäfts vorangetrieben.
Das Unternehmen hat eine öffentliche Platzierung abgeschlossen und dabei 4,9 Millionen Dollar eingenommen sowie eine Forderungsfinanzierung in Höhe von 250.000 Dollar gesichert. KWESST hat eine 10:1-Aktienkonsolidierung durchgeführt, um die Nasdaq-Konformität aufrechtzuerhalten und hat bis zum 12. Mai 2025 Zeit, um die Mindestgebotsanforderung zu erfüllen. Das Unternehmen kündigte auch die Serienproduktion von ARWEN-Patronen an, einschließlich neuer 40-mm-Knüppelgeschosse.
- Revenue growth of 588% year-over-year
- Gross profit margin improved to 45.6% from a loss in Q1 2024
- Secured $4.9 million through public offering
- Obtained $250,000 receivables facility agreement
- Potential revenue of $48 million from Land C4ISR and $27 million from DSEF contracts
- Operating expenses increased by $0.9 million
- Risk of Nasdaq delisting if minimum bid requirement not met by May 2025
- Other expenses of $0.5 million compared to $2.1 million income in previous year
- $1.8 million in share offering costs
Insights
The Q1 2025 results reveal KWESST's successful transition from development to commercialization, marked by a substantial 588% revenue increase and an impressive 45.6% gross margin compared to a loss in the previous year. This margin improvement, particularly noteworthy for a company in transition, suggests effective cost management and pricing power.
The revenue mix deserves careful attention. The company's $48 million potential workshare in Land C4ISR and $27 million in DSEF contracts over 5-6 years provides a stable revenue foundation. The staffing ramp-up for these contracts, with 16 positions representing $3.3 million in annualized revenue, indicates a methodical approach to scaling operations.
However, several financial considerations warrant scrutiny:
- The $0.9 million increase in operating expenses, while aligned with growth initiatives, requires monitoring to ensure scalability
- The recent equity raises totaling approximately $8.3 million (
$4.9 million and$3.4 million ) provide working capital but have dilutive effects - The Nasdaq compliance issue, requiring a US$1.00 minimum bid price by May 2025, poses a significant risk to market access and capital raising capabilities
The establishment of a
The diversification of revenue streams across government contracts, SaaS solutions, and ARWEN products provides multiple growth vectors. The successful commercialization of the 40mm ARWEN cartridge expands the addressable market beyond the existing 37mm installed base, potentially accelerating the non-lethal business line's growth.
Strong Revenue Growth of
Ottawa, Ontario--(Newsfile Corp. - February 18, 2025) - KWESST Micro Systems Inc. (TSXV: KWE) (TSXV: KWE.WT.U) (NASDAQ: KWE) (NASDAQ: KWESW)("KWESST" or the "Company") is pleased to announce the highlights of its fiscal 2025 first quarter ("Q1 Fiscal 2025") results. This announcement is a summary only and should be read in conjunction with KWESST's unaudited condensed consolidated interim financial statements for the three months ended December 31, 2024 and 2023 and related management's discussion and analysis for the three months ended December 31, 2024, all of which have been filed on SEDAR+ and EDGAR.
"Q1 2025 was a pivotal quarter for KWESST as we executed on our commercialization strategy." said Sean Homuth, President and CEO of KWESST. "The momentum in revenue growth at very healthy margins underscores the great work our team has done to bring our solutions to market. In 2025, we continue to be focused on accelerating ramp-up across all product and service platforms," said Mr. Homuth.
Highlights for the Period:
KWESST's commitment to execution of our strategy, our strong focus on cash management and capital allocation, and the beginning of KWESST's pivot from development stage to revenue ramp-up is evidenced by the following key metrics for the period:
Revenue for Q1 Fiscal 2025 increased by
588% over Q1 Fiscal 2024, driven by the DSEF ("Directorate Land Command Systems Program Management Software Engineering Facility") & Land C4ISR ("Land Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance") government contracts, pilot of our Lightning SaaS product with the Canadian Red Cross, and growth in our ARWEN business; andIn Q1 Fiscal 2025, the gross profit was
$0.4 million or45.6% as compared to a gross loss of$0.1 million in Q1 Fiscal 2024. The increase in gross profit is due primarily to the ramp-up of digitization revenue from government programs, the Canadian Red Cross contract that concluded in the period as well as the ramp-up of higher margin ARWEN product sales. In Q1 Fiscal 2024, there were higher than anticipated costs on a fixed price digitization contract as well as initial ramp-up costs on one of the government programs.
Results of Operations
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Revenue
Total revenue increased by
We expect revenue to increase with the commercial launch of KWESST LightningTM which we expect to be in Fiscal 2025, as well as from the expected demand/future orders for the new ARWEN 40mm ammunition and PARA OPS products. Management continues to work with our industry partners to determine the outlook for ramp-up on the DSEF and Land C4ISR programs. The Company continues to expect no material impact to the overall potential revenue over the life of the contract.
Operating Expenses ("OPEX")
Total OPEX increased by
- Sales and marketing expenses increased by
$0.2 million , primarily due to an increase in personnel costs due to a shift in allocation of senior management as they focus their current strategies on sales and marketing as well as increased head count, offset by a decrease in consulting costs as the Company increased head count to reduce the reliance on consultants;
- General and administrative expenses increased by
$0.6 million , primarily due to an increase in professional fees due to work relating to the Nasdaq minimum bid requirement and the internal control consulting work, the impairment of a right-of-use asset, an increase in overall general expenses, along with an increase in personnel costs due to an increased head count along with a short-term incentive plan expense, offset by a decrease in consulting fees; and
- Research and development expenses increased by
$0.1 million , primarily due to an increase in personnel costs advancing the KWESST LightningTM and BLDS projects in Q1 Fiscal 2025, offset by a decrease in engineering costs related to the PARA OPS products.
Other income (expenses), net
In Q1 Fiscal 2025, the Company reported total other expenses of
$0.8 million in unfavorable changes in the fair value of warrant liabilities as a result of the remeasurement of the warrant liabilities at December 31, 2024. Under IFRS, we are required to remeasure the warrant liabilities at each reporting date until they are exercised or expired; and
$1.8 million in share offering costs related to the November 2024 public offering. There were no equity financings in the comparable prior year period.
Unaudited Condensed Consolidated Interim Statements of Financial Position
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Major Highlights - Q1 Fiscal 2025
The following is a summary of major highlights that occurred during the quarter ended December 31, 2024:
On October 1, 2024, the Company updated investors on the ramp-up of activity on its sub-contract to Thales Canada in support of the Canadian DND Land C4ISR series of contracts to modernize the Canadian Army's capabilities through advanced Land C4ISR systems program. KWESST was in various stages of completing its staffing with conditional offers accepted for all 16 positions on the program, representing an annualized revenue of approximately
$3.3 million . The Company expects to continue to increase staffing, and related revenue, as future taskings are received. The Company's maximum potential workshare under the Land C4ISR and DSEF remains approximately$48 million and$27 million for the initial contract periods of six and five years respectively.On October 10, 2024, the Company announced its plan to proceed with a consolidation of its outstanding Common Shares on the basis of ten (10) pre-consolidation shares for each one (1) post-consolidation share (the "Consolidation"). The Company believed that the Consolidation was in the best interests of shareholders as it allowed the Company to ensure continued compliance with the Nasdaq minimum bid price requirements.
On October 21, 2024, the Company announced that, further to the Company's press release on October 10, 2024, it had received approval of the TSX Venture Exchange ("TSXV") for the consolidation of the Company's issued and outstanding Common Shares on the basis of ten (10) pre-consolidation shares for each one (1) post-consolidation share.
On October 23, 2024, the Company announced that its wholly-owned subsidiary, KWESST Inc., had entered into a receivables facility agreement with a US-based global financing company. The facility provides up to
$250,000 advanced at a rate of2.5% for the first 30 days and1% for each 10 days thereafter until receipt of funds from the receivable payee and limited to a total of20% of the value of the receivable funded. Funds are advanced at80% up front of the face value of the receivable with a20% fee deposit retained by the financing company until the amount funded is fully repaid, following which any balance remaining of the20% fee deposit is returned to KWESST Inc. The agreement grants security against KWESST Inc.'s receivables and other assets for funds advanced by the financing company. The initial term is for 12 months and may be terminated within such a term by KWESST Inc., subject to the payment of an early termination fee of3% of the total limit of the facility.On October 23, 2024, the Company announced it had completed its plan to ramp-up volume production of ARWEN cartridges, including the new 40mm baton round following successful characterization testing by a recognized ballistics laboratory. The ARWEN system is long-established in the law enforcement community and was designed as an alternative to lethal force for maintaining public order in the event of riots and civil unrest during protests and demonstrations. Historically, the Company has offered a 37mm cartridge that fires from its ARWEN launchers. In a move to expand the market for ARWEN branded products and to leverage the large installed base of third-party 40mm firing platforms, KWESST announced and showcased a new 40mm baton cartridge at the annual SHOT Show in January 2024. Live fire demonstrations at the SHOT Show Range Day and other events since then have demonstrated the notable performance of the new 40mm baton cartridge.
On November 1, 2024, the Company announced the closing of a public offering of 3,889,000 pre-funded warrants at a public offering price of
$1.25 (US$0.90) per Common Share. The gross proceeds from the offering were approximately$4.9 million (US$3.5 million ), before deducting placement agent fees of US$0.06 75 (CAD$0.09 4) per Common Share (being an aggregate of$365,726 (US$262,508) or7.5% of the public offering price of the securities) and estimated offering expenses were$417,960 (US$300,000) . In addition, the Company issued to the placement agent as compensation for its services 194,450 Common Share purchase warrants with an exercise price of$1.56 7 (US$1.12 5) per share.On November 11, 2024, the Company announced that it intends to issue a total of 119,047 Common Shares at a deemed price per Common Share of
$0.84 per share, representing a20% discount on the closing price of the shares on the TSXV, for settlement of business expenses incurred while representing the Company, in an aggregate amount of$100,000 owed to a company controlled by Mr. David Luxton, Chairman of the Company.On November 12, 2024, the Company announced the closing of a brokered private placement offering to an institutional accredited investor for aggregate gross proceeds of approximately
$3.4 million (the "November 2024 Offering"). As a part of the November 2024 Offering, the Company issued 4,145,200 pre-funded warrants to acquire one Common Share at a price of$0.82 4 per pre-funded warrant, inclusive of the exercise price of$0.00 1 per Common Share. Each pre-funded warrant was bundled with one Common Share purchase warrant of the Company. The Company also announced that it amended the terms of the outstanding pre-funded warrants issued on November 1, 2024, as part of the Company's best efforts public offering in the United States. The amendments revised the exercise price of the pre-funded warrant from USD$0.00 1 to CAD$0.00 14, revised currency references from USD to CAD, and removed the ability for the holder to exercise the pre-funded warrant on a cashless basis. The foregoing amendments were agreed to by the holder of such pre-funded warrants pursuant to a pre-funded warrant amendment agreement.On November 13, 2024, the Company announced that it received a letter from Nasdaq, notifying the Company that it is eligible for an additional 180 calendar day period, or until May 12, 2025 (the "Compliance Date"), to regain compliance with the Minimum Bid Requirement. The Company was first notified by Nasdaq of its failure to maintain the Minimum Bid Requirement on May 16, 2024, and was given until November 12, 2024, to regain compliance. The Company did not regain compliance with the Minimum Bid Requirement during the first 180 calendar day period. On November 13, 2024, in accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company was provided with an additional and final 180 calendar day period, or until May 12, 2025, to regain compliance with the Minimum Bid Requirement. To regain compliance, the closing bid price of its Common Shares must meet or exceed US
$1.00 per share for a minimum of ten consecutive business days at any time prior to the Compliance Date, unless the Nasdaq staff exercises its discretion to extend this ten-day period pursuant to Nasdaq Listing Rule 5810(c)(3)(H). Should the Company fail to cure the deficiency in the second 180-day extension period which ends May 12, 2025, no further extensions will be granted and the Nasdaq will initiate delisting procedures.In December 2024, the LEC royalty payment (see section "Capital Resources - Contractual Obligations and Commitments" of the Company's management's discussion and analysis for the three months ended December 31, 2024 for more details) due April 2025, in the amount of
$200,000 was paid early to DEFSEC, a private company owned by KWESST's Chairman , in exchange for a$25,000 reduction, resulting in a net payment of$175,000.
The following is a summary of major highlights that occurred subsequent to Q1 Fiscal 2025:
- On January 6, 2025, the Company announced the appointment of Mrs. Jennifer Welsh as Chief Financial Officer and Chief Compliance Officer of the Company effective February 3, 2025, replacing Mr. Kris Denis, who will transition to a new role within the KWESST finance team reporting to Jennifer. In connection with her new role, Jennifer resigned from the Board of directors and as Chair of the Audit Committee of the Company effective January 6, 2025. The Company also announced the appointment of Mr. James Yersh as a director of the Company and Chair of the Audit Committee effective January 6, 2025.
For further information, please contact:
Jennifer Welsh, Chief Financial Officer and Chief Compliance Officer
welsh@kwesst.com
Sean Homuth, President and Chief Executive Officer
homuth@kwesst.com
Jason Frame, Investor Relations
+1 (587) 225-2599
frame@kwesst.com
About KWESST
KWESST (TSXV: KWE) (TSXV: KWE.WT.U) (NASDAQ: KWE) (NASDAQ: KWESW) (FSE: 62UA) develops and commercializes breakthrough next-generation tactical systems for military and security forces. The company's current portfolio of offerings includes digitization of tactical forces for real-time shared situational awareness and targeting information from any source (including drones) streamed directly to users' smart devices and weapons. Other KWESST products include countermeasures against threats such as electronic detection, lasers and drones. These systems can operate stand-alone or integrate seamlessly with OEM products and battlefield management systems, and all come integrated with TAK. The company also has a new proprietary non-lethal product line branded PARA OPSTM with application across all segments of the non-lethal market, including law enforcement. The Company is headquartered in Ottawa, Canada, with representative offices in London, UK and Abu Dhabi, UAE.
Forward-Looking Statements
This press release contains "forward-looking statements" and "forward-looking information" within the meaning of Canadian and United States securities laws (collectively, "forward-looking statements"), which may be identified by the use of terms and phrases such as "may", "would", "should", "could", "expect", "intend", "estimate", "anticipate", "plan", "foresee", "believe", or "continue", the negative of these terms and similar terminology, including references to assumptions, although not all forward-looking statements contain these terms and phrases. Forward-looking statements are provided for the purposes of assisting the reader in understanding us, our business, operations, prospects and risks at a point in time in the context of historical and possible future developments and therefore the reader is cautioned that such information may not be appropriate for other purposes. Such forward-looking statements are based on the current expectations of KWESST's management and are based on assumptions and subject to risks and uncertainties.
Although KWESST's management believes that the assumptions underlying such forward-looking statements are reasonable, they may prove to be incorrect. The forward-looking statements discussed in this press release may not occur by certain specified dates or at all and could differ materially as a result of known and unknown risk factors and uncertainties affecting KWESST, including KWESST's inability to secure contracts and subcontracts (on the timelines, size and scale expected or at all), statements of work and orders for its products in 2024-2025 and onwards for reasons beyond its control, the renewal or extension of agreements beyond their original term, the granting of patents applied for by KWESST, inability to finance the scale up to full commercial production levels for its physical products, inability to secure key partnership agreements to facilitate the outsourcing and logistics for its ARWEN and PARA OPS products, overall interest in KWESST's products being lower than anticipated or expected; general economic and stock market conditions; adverse industry events; future legislative and regulatory developments in Canada, the United States and elsewhere; the inability of KWESST to implement and execute its business strategies; risks and uncertainties detailed from time to time in KWESST's filings with the Canadian Security Administrators and the United States Securities and Exchange Commission, and many other factors beyond the control of KWESST. Although KWESST has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results to differ from those anticipated, estimated or intended. Except as required by applicable securities laws, forward-looking statements speak only as of the date on which they are made and KWESST undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Neither the TSX Venture Exchange nor its respective Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
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