Kontrol Technologies Cancels 2022 Guidance, Sees Revenue Fall 31% Sequentially

2022 appears to be the year that wasn’t for Kontrol Technologies (NEO: KNR). The firm this morning cancelled previously issued guidance after their third quarter results demonstrated that the prior estimates would simply be unachievable.

Revenue for the third quarter came in at $19.9 million, a 31.8% decrease over the second quarters revenues of $29.1 million, and down 7.5% on a year over year basis.

“This was a very challenging quarter, and we were impacted by a number of economic factors simultaneously, including tight labor markets, supply chain issues, lack of required materials and ongoing material shortages,” said CEO Paul Ghezzi.

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The substantial decline in revenue during the quarter, along with relatively unchanged cost of sales on a quarter over quarter basis of $20.8 million, lead to the company posting a gross loss of $0.9 million. After a further $3.8 million in operating expenses, the company posted a loss from operations of $4.7 million.

The quarter overall saw Kontrol report a net loss of $5.2 million, and Adjusted EBITDA of negative $4.0 million. The company meanwhile reported a cash position of $3.7 million.

However, the big story of the quarter is the firm address its prior issued guidance. In November 2021, the company had estimated it would see 2022 revenue come in between $95.0 million and $105.0 million, while Adjusted EBITDA would be between $10 million and $12 million. With revenue for the nine month period coming in at $75.6 million, and Adjusted EBITDA sitting at $0.5 million, the firm has elected to cancel the guidance.

Notably, this suggests that revenue in the fourth quarter will further decline from its third quarter results. The miss itself is being blamed on the acquisition of Global HVAC and Automation, which was “significantly impacted by COVID disruptions, material shortages, supply chain disruptions and wage inflation.”

The company also indicated that it is not in compliance with its financial covenants on its credit facilities, including its term facility and its revolving credit facility.

Kontrol Technologies last traded at $1.25 on the Neo.

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