Guerrilla RF, an innovative fabless semiconductor company, has announced financial results and other corporate updates for the third quarter of 2022. Revenues increased slightly to $2.22 million for the three months ended September 30, 2022, as compared to $2.17 million for the three months ended September 30, 2021. The increase in revenues was attributable to an increase in royalty income while product revenue remained flat. Within product revenues, sales to their large automotive supplier customers were being impacted by macroeconomic conditions beyond our control.
“While Guerrilla RF’s third quarter revenues were impacted by customer inventory over-hang, consistent with the semiconductor industry in general, we believe this issue has been resolved,” said Ryan Pratt, CEO, and founder of Guerrilla RF. “We expect that GUER’s sales in the fourth quarter will be in the range of $2.2 to $2.5 million, up double digits from the third quarter and also the year-ago period. This will be driven by the addition of new customers and new sales channels for our catalog of products. However, it is important to note that our priority continues to be in the areas of R&D and sales, as we continue to build our designs to meet the specific needs to suit each of our potential clients. Therefore, it is imperative that we continue to invest in areas that will drive future growth despite initial capital expenditures. We are continuing to execute on our business plan despite a relatively flat quarter, and expect to continue to grow with the added design wins and our continued aggressive business development activities.”
Corporate Highlights:
- The Company announced that average lead time between taking and fulfilling orders has declined to pre-COVID levels.
- Triad Business Journal names CEO Ryan Pratt as “2022 Power Player”.
- Eight new design wins confirmed with a strategic customer, which the Company anticipates will generate an aggregated peak volume of 30 million units per year.
- Surpassed the 150 million-unit milestone for RFIC/MMIC deployments, a 50% increase in lifetime shipments over the past 15 months.
- Introduced GRF5521, one of ten ¼ W linear power amplifiers designed for 5G/4G wireless infrastructure applications.
- Appointed Susan Barkal to Board of Directors, adding extensive quality, operational, and technical expertise.
- Shares began trading on OTCQX on July 28, 2022 .
A Deeper Dive in to Finances
Direct product costs remained relatively flat over the year-ago quarter. As a percentage of product sales, direct costs increased 0.3% to 47% over the same period.
Research and development expenses increased $1.0 million to $2.1 million for the three months ended September 30, 2022, compared to $1.1 million for the three months ended September 30, 2021. The increase was attributable to $0.4 million of staffing additions in our engineering department, $0.6 million of research lab and equipment depreciation, and engineering support and prototype expenses.
Sales and marketing expenses increased $0.5 million to $1.2 million for the three months ended September 30, 2022, compared to $0.7 million for the three months ended September 30, 2021. The increase year over year was driven by increases of $0.4 million in staffing costs and $0.1 million in various sales and marketing expenses including sales commissions, information technology support, and customer support.
General and administrative expenses of $1.3 million for the three months ended September 30, 2022, were up from $0.7 million in the year-ago period, primarily as a result of bringing the Company public and its associated costs. The Company does not anticipate further material increases to its G&A expenses in future periods.
Financial Results for the First Nine Months Until September 30, 2022
Total revenue increased 18.4% during the nine months ended September 30, 2022, as compared to the comparable period in 2021. Product revenue, which accounted for 92% of total revenue increased by 16.4% while royalty revenue, which accounted for 8% of total revenue increased by 49%. The strong growth in royalty revenue had a positive impact to our gross margins due to the overall revenue mix. The increase in revenues was driven by increased product sales to our repeat customers and our catalog products over a wider breadth of applications and customers. Sales to repeat customers grew approximately 24% from the prior year period and catalog products grew 29%. Increases in our overall number of product offerings and the number of customers we had shipped contributed to increased sales. Increased sales during this nine-month period were driven by increased sales in the first half of 2022.
Direct product costs increased $0.7 million to $3.8 million for the nine months ended September 30, 2022, compared to $3.1 million for the nine months ended September 30, 2021. The 20% increase in direct product costs was primarily driven by a product sales volume increase of 16% (excluding royalty revenue). Direct product costs relative to sales increased due to increases in Operations and Quality staffing.
Research and development expenses increased $2.7 million to $5.9 million for the nine months ended September 30, 2022, compared to $3.2 million for the nine months ended September 30, 2021. The research and development expenses increase were attributable to $1.4 million of staffing additions in our engineering department, $0.2 million of research lab and equipment depreciation, and $1.1 million of engineering tools and support, as well as prototype expenses.
Sales and marketing expenses increased $1.5 million to $3.4 million for the nine months ended September 30, 2022, compared to $1.9 million for the nine months ended September 30, 2021. The increase year over year was driven by increases of $1.4 million in staffing costs, and $0.2 million in various sales and marketing expenses including sales commissions, information technology support, and customer support.
General and administrative expenses increased $2.4 million to $3.8 million for the nine months ended September 30, 2022, compared to $1.4 million for the nine months ended September 30, 2021. The increase was primarily related to increases in wages and benefits of $1.7 million, $0.5 million in directors and officers insurance, and $0.3 million in professional fees. The increase in wages, benefits, and professional fees was driven by headcount additions within our information technology and accounting departments, and expenses incurred to support our public company structure.
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