KWESST Updates Investors On Business Ramp-Up In Fiscal Q2, Outlook For Q3
- The reorganization of ARWEN business has led to a six-fold increase in customer shipments in Q2.
- Anticipated Q2 revenue of CAD $226K represents a run rate of approximately CAD $1 million annually.
- The company foresees continued growth driven by the introduction of new products and improvements in the supply chain.
- The DSEF program is expected to yield approximately CAD $2.2 million annually in revenue.
- KWESST expects to be under contract with a global defense contractor by mid-April, with a maximum workshare of approximately CAD $48 million for the initial 6-year term.
- None.
Insights
KWESST Micro Systems' announcement regarding the growth in their ARWEN orders and backlog, particularly after a reorganization, signifies a strategic pivot that appears to be yielding tangible results. The six-fold increase in customer shipments in Q2 is a robust indicator of enhanced operational efficiency and market demand. This uptick, especially in the context of doubling annual revenue projections for ARWEN, suggests a successful turnaround in this product line.
From a defense industry perspective, the focus on less-lethal products like the 40mm baton cartridge is noteworthy. Law enforcement agencies' inventory build-up in anticipation of public unrest is a trend that could see an uptick in demand for such products. Given the current social climate and the potential for civil disturbances, KWESST's positioning in this market segment could be advantageous. The long-standing ARWEN brand's reputation and the recent supply chain improvements could be significant drivers for the company's growth trajectory.
The strategic emphasis on military digitization services by KWESST, as demonstrated by their involvement in the DSEF program and the anticipated subcontract with a global defense contractor, represents a forward-looking approach to capturing a larger share of the defense technology market. While there have been logistical delays, the potential annualized revenue of CAD $2.2 million from the DSEF program, with prospects for growth, underscores the company's capability to secure and execute sizable contracts.
The anticipated CAD $48 million workshare for the G7 military digitization program over six years is particularly significant. This reflects not only the scale of the opportunity but also the company's competitive positioning to secure such high-value contracts. The ability to attract top talent is important in this high-tech sector and KWESST's success in building a competent team bodes well for their execution capabilities on future projects.
Analyzing the financial implications of KWESST's recent business developments, the projected increase in revenues from both the ARWEN business and military digitization programs is poised to impact the company's financial health positively. The six-fold increase in Q2 shipments and the doubling of ARWEN's annual revenue projection suggest a strong growth trajectory, which could be reflected in the company's stock performance.
Investors should note, however, that revenue from government contracts, such as those mentioned, can be subject to fluctuations based on governmental budget cycles and policy changes. The mention of logistical delays and the dependency on task orders for revenue realization also introduces elements of uncertainty that must be considered. Nevertheless, the long-term contracts and the potential for increased workshare provide a level of revenue predictability, which is often favored by the market.
- ARWEN orders, backlog continue to grow following reorganization
- Outlook on military digitization revenue strengthens
Ottawa, Ontario--(Newsfile Corp. - March 21, 2024) - KWESST Micro Systems Inc. (NASDAQ: KWE) (TSXV: KWE) (TSXV: KWE.WT.U) (FSE: 62UA) ("KWESST" or the "Company") today updated investors on the ramp-up of business in Fiscal Q2 2024 ending March 31st, 2024 ("Q2") and the outlook heading into Fiscal Q3 ending June 30, 2024 ("Q3").
"Reorganization of our ARWEN business in Q2 and ramp-up of our military digitization business have provided stronger revenue visibility, which we are pleased to share with investors," said Sean Homuth, KWESST President and CEO.
ARWEN Business Grows Following Re-organization
KWESST stated that its ARWEN business, which it reorganized in late 2023, has been able to increase customer shipments in Q2 six-fold over Q1 (including shipments anticipated through end-March). Anticipated Q2 revenue (CAD
"I'm pleased with our team's progress in simplifying, outsourcing and improving the responsiveness of the ARWEN supply chain," said Homuth. "The ARWEN brand has been relied upon by law enforcement for over 40 years as a critical alternative to lethal force in high-risk policing operations. The introduction of 40mm products addressing the largest part of the install base in the market as well as supply chain improvements, position us well to drive meaningful growth in the business."
Key Military Digitization Programs
The DSEF (Directorate Land Command Systems Program Management Software Engineering Facility) program has ramped up and KWESST has filled approximately half (5) of the positions required to staff the initial works tasks that are expected to yield approximately CAD
In our press release of February 15, 2024 the Company announced that it expected to be under subcontract with a global defense contractor by mid-May to provide digitization services for a G7 miliary program with work scope of similar scale to the DSEF program. The Company is pleased to guide that, while not yet complete, it now expects to be under contract within a month with work and revenue commencing mid-April on the program. The Company now expects the maximum workshare under this task-based program to be approximately CAD
"The substantial progress made on the development of our digitization business demonstrates success in executing on our strategy of winning and delivering on long-term strategic military programs with multi-year revenue stability. We've demonstrated our ability to attract top talent to the DSEF program, and have also built a solid initial team that stands ready to deploy on the new program," said Homuth.
About KWESST
KWESST (NASDAQ: KWE) (NASDAQ: KWESW) (TSXV: KWE) (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 operations in Guelph, Ontario Canada, and Youngsville, North Carolina, USA as well as representative offices in London, UK and Abu Dhabi, UAE.
For more information, please visit https://kwesst.com/.
Contact:
David Luxton, Executive Chairman: luxton@kwesst.com
Sean Homuth, President and CEO: homuth@kwesst.com
Jason Frame, Investor Relations: frame@kwesst.com 587.225.2599
Forward-Looking Information and 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 words such as "plans", "is expected", "expects", "scheduled", "intends", "contemplates", "anticipates", "believes", "proposes" or variations (including negative and grammatical variations) of such words and phrases, or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. Such 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 statements are reasonable, they may prove to be incorrect. The forward-looking events and circumstances 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 fulfill staffing requirements, statements of work and orders for its products in 2024 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, ramp-up of the DSEF Program, consummation of the G7 military digitization contract, overall interest in KWESST's products being lower than anticipated or expected; general economic and stock market conditions; adverse industry events; loss of markets; future legislative and regulatory developments in Canada, the United States and elsewhere; the inability of KWESST to implement 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. No forward-looking statement can be guaranteed. 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.
To view the source version of this press release, please visit https://www.newsfilecorp.com/release/202561
FAQ
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