Solitron Devices Reports 39% Revenue Growth, Net Sales Reach $3.6M in Q2 2024

Solitron Devices, Inc. reported significant financial developments in its 10-Q filing for the three and six months ended August 31, 2024. The company achieved net sales of $3,581,000 for the three-month period, marking a 39% increase from $2,579,000 in the same period of 2023. For the six months, net sales rose 63% to $7,548,000 compared to $4,617,000 in the prior year, largely attributed to the acquisition of Micro Engineering Inc. (MEI) in September 2023.

Despite the increase in sales, the company faced challenges with profitability. Gross profit for the three months ended August 31, 2024, was $738,000, down from $897,000 in 2023, resulting in a gross margin decrease to 21% from 35%. The cost of sales surged to $2,843,000, representing 79% of net sales, compared to 65% in the previous year. Consequently, operating income fell to $50,000 from $283,000 in 2023, and net income for the three months decreased to $17,000 from $200,000, primarily due to increased costs.

For the six-month period, net income increased to $606,000 from $29,000 in 2023, driven by higher operating income. The company reported a net loss of $171,000 for the six months ended August 31, 2024, reflecting the impact of increased costs and operational challenges.

Solitron's backlog as of August 31, 2024, was $7,572,000, down 14% from $8,785,000 a year earlier. Net bookings for the three months decreased by 21% to $1,752,000, and for the six months, bookings fell 34% to $3,780,000.

The company’s selling, general, and administrative expenses increased to $688,000 for the three months ended August 31, 2024, from $614,000 in 2023, but as a percentage of net sales, these expenses decreased to 19% from 24%. Interest expenses rose to $(77,000) from $(26,000) in the prior year, while interest income and dividend income also saw declines.

Solitron's cash and cash equivalents increased to approximately $3,303,000 as of August 31, 2024, up from $2,217,000 at the end of February 2024. The company also reported a working capital increase to $8,475,000, primarily due to the termination of finance lease liability.

The company has acknowledged a material weakness in its disclosure controls and procedures, which was previously noted in its Annual Report for the year ended February 29, 2024. Despite this, management believes that the financial statements fairly present the company's financial condition and results of operations for the reporting period.