KULR Technology (NYSE: KULR) stock ripped about 17% higher after investors digested numbers and guidance from its Q3 report. The company posted a 133% increase in comparative quarterly revenues, held $16.2 million in cash at the end of Q3, and noted in its commentary that the quarter was an inflection point, reaching record-setting revenues as it transitions to its next chapter of company growth.
A deeper dive into the results show a company positioned to grow bigger faster, with increases in labor due to producing finished goods, costs to procure customized finished products, and securing materials for a new product line setting up KULR for increasing Q4 and 2023 sales. While those expenses squeezed margins, commentary about them indicates that the costs are expected to generate returns starting this quarter.
Thus, often the case for growth stocks, investors turned bullish on the forward-looking proposition, paying particular attention to the foundation now in place to accelerate already record-setting performance.
Strategic Investments Expected To Yield Substantial Returns
Strategic investments intend to make that happen. In fact, the report's highlight exposed what KULR has done to facilitate near-term growth, including investments made in the previous quarters into its employees, R&D, and sales & marketing initiatives, which have laid the groundwork to accelerate revenue growth and expedite its expansion efforts. Notably, while pressuring bottom-line performance in Q3, the guidance indicates a reversal of fortune could be in the queue.
KULR guided for moderation in near-term investment activities and instead expects to generate a significant ROI on the ones made. These investments were made with top line growth in mind, and those following KULR know they rarely over-promise and under-deliver.
That precedent will likely continue. And while KULR anticipates short-term fluctuations in gross margins as a result of several new client-focused initiatives, the longer-term outlook is that the company’s strong cash position, robust sales pipeline, and continued product validation from global business giants will create the path of least resistance for the growth of KULR and its shares. There are reasons to be bullish.
During the quarter, KULR commenced Phase 2 development of passive propagation resistant ("PPR") battery systems for the Lockheed Martin Corporation, following a successful Phase 1 trial. They also secured a deployment order for over $500,000 from a leading Department of Defense ("DoD") contractor, noting that future considerations in play from that agreement could be worth several million in 2023. That's not all.
Multiple Revenue-Generating Deals And Acquisitions
KULR announced it secured two orders from a leading Fortune 20 e-commerce and cloud computing company for its next-generation Li-ion battery-powered commercial drone delivery fleet, as well as an order from a top Fortune 500 commercial aviation company for its suite of battery design and safety solutions. This deal targets opportunities related to developing that client's new electric vertical takeoff and landing aircraft ("eVTOL"), also keeping potentially significant add-on deals in the queue.
In addition to those deals, KULR announced inking a production prototype order from a top-tier power tool manufacturer for its KULR SafeCase, a reusable and safe transportation and storage solution for high-energy batteries. The SafeCase technology was also instrumental in KULR receiving approval from the Department of Transportation ("DoT") to increase the energy levels in three special permits from 2.1 kWh to 2.5 kWh, expanding usage applications for the SafeCase product and technology. Acquisition activity adds to the value proposition, too.
KULR announced its acquisition of VibeTech and the subsequent launch of KULR VIBE, an AI-driven vibration reduction solution utilizing proprietary sensor processes with advanced learning algorithms to achieve precision balancing solutions and successfully predict component failure based on its comprehensive database of vibration signatures. That cutting-edge technology leverages enhanced AI learning algorithms that pinpoint areas where excess vibrations cause energy loss, which can lead to system malfunctions, weakened performance, and maintenance issues.
Capping off the busy quarter, KULR presented at the Federal Aviation Administration's Tenth Triennial International Fire and Cabin Safety Research Conference on the necessity of a holistic battery safety strategy for electrical aviation. As a platinum member, they also joined the battery industry's most recognized trade association for developers, manufacturers, suppliers, and users of battery technology in North America.
The quarter provided additional highlights and accomplishments accretive to near and long-term growth.
Increasing Its Exposure Through Major Brand Collaboration
KULR stock jumped after announcing continuing development work with the Andretti Racing team and the inclusion of the No. 98 KULR Technology Honda for the 2023 Indianapolis 500®. Several follow-on contracts from global business giants added to the bullish sentiment, with those deals expected to push revenues higher and validate the specialized products within its growing arsenal. Perhaps the biggest takeaway from its earnings call is that KULR looks better positioned than ever to accelerate positive top and bottom-line growth.
Signs of that happening sooner than later are evident. A substantial contributor is its SafeCase technology solution, which is attracting multi-level interest from its unique ability to allow KULR and its partners to leverage special permits from the U.S. Department of Transportation for the safe shipping of lithium-ion batteries up to 2.5 kilowatt-hours. Incidentally, SafeCase is the only known product providing standard and customized case sizes while incorporating a reusable, sustainable, and cost-effective design, a distinction likely to keep the competitive landscape thin. There’s still more to like.
More than compelling design and functionality, KULR is the only known company in the world with a product approved by the DoT for storage and transport of lithium-ion batteries managing up to a capacity of 2.5 kWh for recycled, prototype, and damaged, defective, and recalled batteries. That's more than a distinction; it's an advantage. And neither should be under-appreciated nor undervalued because it puts multiple revenue-generating opportunities across different sectors in KULR's crosshairs.
Validation Through Add-On Contracts
Those advantages add to an already growing list. As noted, ongoing work with the Andretti team is opening revenue-generating opportunities in the EV sector, with its SafeCase and energy management platform a seamless fit to provide battery safety applications on the consumer side of those markets. Those needing battery-safety solutions include the prominent sector giants like Tesla (NYSE: TSLA), smaller players like Rivian (NASDAQ: RIVN), and every other company needing lithium-ion technology to power their products. Here's the exciting part of that opportunity: these industries may have no choice but to integrate robust battery-safety technologies.
As tens of millions, if not billions globally, of batteries are used annually to power the EV sector and many others, the focus has intensified on how to mitigate potentially catastrophic battery-related events. In fact, speculation is growing that mandates could be enacted to protect users in both consumer and industrial markets. In the case of battery safety, especially with the massive power encapsulated in smaller packaging, those protections are warranted. And with lithium-ion batteries being the critical ingredient to power phones, automobiles, tools, and even trips to space, there's plenty supporting safety advocates' case for having safety measures embedded as part of product development.
If that's the end result, it's potentially transformative for KULR, noting they are probably the best-positioned company to capitalize upon and meet the intended need. In the process, KULR could benefit from a battery safety and global energy storage solutions market expected to reach $554 billion by 2035. But don't expect that dollar opportunity to stop there. Worldwide interest in green-energy solutions could make an already hot market opportunity scorching, quickly putting a trillion-dollar market opportunity in play faster than many think.
Fueled To Accelerate Revenue-Generating Mission
Still, while there's plenty of blue-sky potential, don't ignore the fact that KULR is growing its base and increasing revenues now. Its suite of innovative technology provides essential thermal management and safety system technologies to just about any sector in business using lithium-ion power. These partnerships include government agencies like NASA and the U.S. Department of Defense as well as other industry giants like Lockheed Martin (NYSE: LMT) for its Phase Change Materials heat sink technology. Add in KULR’s partnership with Leidos (NASDAQ: LDOS), combined with speculation about Meta (NASDAQ: META) being one of its Metaverse interests, and revenues appear prepared for takeoff.
Trading ahead of such news may be the wisest consideration. Even as KULR stock breaches multi-month highs, the valuation disconnect is still too wide to ignore. And while the quarterly commentary touched on many near-term opportunities, it's essential for investors to appraise the value inherent to the drone, maritime safety, enterprise energy storage, and crypto-mining applications to better gauge near-term potential. Remember, these sectors all need energy storage and thermal management solutions, and moreover, any one of them presents an enormous revenue-generating opportunity. However, the more appropriate way to evaluate the proposition is that KULR can potentially benefit from every one of them in their totality.
Thus, viewed from an ongoing operational perspective without even valuing past record-setting performance, KULR is checking the right boxes to attract investors looking for undervalued opportunities in companies with solid fundamentals. Its impressive balance sheet, ability to capitalize on sales opportunities in multiple high-dollar markets, and sell to a global market needing best-in-industry battery safety solutions substantiate and justify the consideration.
But most of all, KULR makes its own case by being perfectly positioned to capture a significant share of a global battery safety solutions market that may be big now but is on its way to becoming enormous. The ability to exploit that position is more than enviable; it exposes investment opportunity, and KULR checks that box as well.
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