Liquidmetal Technologies Review of Product Line Financial Results and Guidance April 20, 2017
Liquidmetal Technologies Inc (OTCQB: LQMT), is a leading developer of bulk amorphous alloys. Amorphous alloys are unique materials that are distinguished by their ability to be injection molded and die cast into high performance applications for a broad range of markets.
The company recently announced that it has received two hot crucible amorphous metal molding machines from the Company’s licensing partner Eontec Ltd. LQMT’s hot-crucible machines provide the benefits of amorphous alloy technology to price-sensitive applications that were previously beyond its reach. Management is bullish about the synergistic benefits accruing due to merger of Eontec’s technology and expertise within Liquidmetal.
As per management, the company’s business risk profile is on a rapid growth trajectory and it’s making excellent progress on its plans to significantly expand market reach and the scale of operations.
Previously, the company announced that it has passed additional pre-screening biocompatibility tests for use in medical implants and is now pursuing collaborations with medical implant companies.
The results of these tests strategically position the Company to engage medical device customers in a broad range of implantable device applications including, cardiac rhythm, cochlear, spinal, and orthopedic implants among others. Liquidmetal will now focus on collaborating with medical implant manufacturers to identify specific applications to further explore the use of Liquidmetal.
In 2016, the company generated $480 thousand ($125 thousand in 2015) in revenue as it continued to focus on development and manufacturing of prototype and commercial parts for its customers, and collaborating with licensees on the development of the Company’s technology and production processes. Notwithstanding its revenue growth, Liquidmetal continues to struggle with subdued profitability, and high debt amongst other challenges.
The new addition of these systems along with the above-mentioned strategic developments could potentially benefit the company’s earnings and revenues, and consequently, this could drive LQMT shares. The company’s stock has witnessed significant strength in the recent past. Liquidmetal reported an increase in share price backed by its above-expected performance and robust guidance laying foundation for revenue visibility and business growth.
Description & about the Company: California-based Liquidmetal Technologies, Inc. is the leading developer of bulk alloys and composites that utilize the performance advantages offered by amorphous alloy technology. Amorphous alloys are unique materials that are distinguished by their ability to retain a random structure when they solidify, in contrast to the crystalline atomic structure that forms in ordinary metals and alloys. Liquidmetal Technologies is the first company to produce amorphous alloys in commercially viable bulk form, enabling significant improvements in products across a wide array of industries.
About Eontec: EONTEC (“EON”) provides one-stop solutions in aluminum & magnesium die-casting. It is also an innovator in amorphous metals with substantive IP in alloys, molds, machines and manufacturing processes.
Advanced Amorphous Metal Molding Systems: Liquidmetal received two hot crucible amorphous metal molding machines from the Company’s licensing partner Eontec Ltd.
These Machines allow the production of amorphous alloy parts that are up to three times larger and one-third the cost of established technologies. This technology complements Liquidmetal’s well established cold-crucible systems, which are capable of producing parts that meet requirements for the most demanding medical and automotive applications. The Machines are in the Company’s new 41,000 square-foot manufacturing facility in Lake Forest, CA., where operations are planned to commence in the second half of this year.
Liquidmetal’s hot-crucible machines provide the benefits of amorphous alloy technology to price-sensitive applications that were previously beyond company’s reach.
Implant Study: Liquidmetal has passed additional pre-screening biocompatibility tests for use in medical implants and is now pursuing collaborations with medical implant companies.
In February 2017, LQMT received long-term implantation results from parts 3, 10, 6 and 11 of the ISO 10993 (Biological Evaluation of Medical Devices) suite of tests, which include evaluation of genotoxicity, sub-chronic systemic toxicity, and pyrogenicity. LQMT alloy LM105 passed all of these tests well within the allowable limits. These results, combined with previously completed tests from ISO 10993 parts 10, 11, 4, and 5 which cover sensitization, irritation, acute systemic toxicity, hemocompatibility and cytotoxicity, indicate that the Liquidmetal process is compatible with a wide range of medical device requirements including long term implants.
The results of these tests are very exciting and it positions LQMT well to engage medical device customers in a broad range of implantable device applications including, cardiac rhythm, cochlear, spinal, and orthopedic implants among others.
With the above-mentioned developments, along with purchase of a new, larger manufacturing facility, as well as sourcing alternatives, manufacturing platforms and materials from China-based Eontec, Liquidmetal is actively moving towards increasing manufacturing capabilities, expanding the range of products it will be able to manufacture, and providing lower cost solutions to customers. Management believes that these investments, when combined with an improved capital structure and future strategies, will allow LQMT to accomplish goal of expanding the Liquidmetal brand and future profitability.
Key Stock Influences & Risk Factors: Limited Track record & Competitive landscape: Liquidmetal competes against companies that have relatively more established products, longer operating histories and greater resources, which may prevent it from achieving rapid market penetration or increased operating results. Also, LQMT has a limited history of developing and selling products. Therefore, if the company cannot ramp up its business, as envisioned, it may not achieve the anticipated market penetration, revenue targets or profitability.
Liquidity & Financial Flexibility: Liquidmetal’s business is not currently profitable, and it may not be able to achieve profitability even if it continues to record significant growth in revenue. The operating loss for the fiscal years ended December 31, 2016, 2015, and 2014 were $9.9 million, $9.3 million, and $8.9 million, respectively. It had an accumulated deficit of approximately $236.7 million at December 31, 2016.
Therefore, its ability to maintain liquidity and financial flexibility to fund its incremental capital requirements will remain key financial sensitivity factor for the company.
Earnings Review: Total revenue increased by $355 thousand to $480 thousand for the year ended December 31, 2016 from $125 thousand for the year ended December 31, 2015. The increase for the period was attributable to a higher mix of small-scale pre-production orders during 2016 as a result of continued growth of on-site manufacturing capabilities.
Profitability: Gross profit (loss) increased by $151 thousand from $(224) thousand as of December 31, 2015 to $(73) thousand as of December 31, 2016.
Operating loss increased by $606 thousand from $9.3 million for the year ended December 31, 2015 to $9.9 million for the year ended December 31, 2016. Fluctuations in operating loss are primarily attributable to variations in operating expenses.
Also, annual net losses of $18.8 million as of December 31, 2016 and $7.3 million as of December 31, 2015 are reflective of operating expenses associated with on-going business as well as non-operational expenses.
Cash Flow & Balance Sheet: Cash and restricted cash totaled $58.9 million at December 31, 2016, as compared to $4.8 million at December 31, 2015.
The company anticipates that its current capital resources, when considering expected losses from operations, will be sufficient to fund the Company’s operations for the foreseeable future.
Stock Performance On Wednesday, April 19th, 2017, LQMT shares surged by 3.36% to $0.268 on an average volume of 1.65 million shares exchanging hands. Market capitalization is $237.03M. The current 14 days RSI is 68.54
In the past 52 weeks, shares of LQMT have traded as low as $0.12 and as high as $0.29
At $0.268, shares of LQMT are trading above their 50-day moving average (MA) at $0.216 and above their 200-day MA at $0.187
The present support and resistance levels for the stock are at $0.2539 & $0.2669 respectively.
The Only Difference Between a Short-Term and Long-Term Investment is Stock Performance. ~Unknown.
