Electronic Control Security Inc (OTC:EKCS)

Wednesday, June 5, 2019

Research

Electronic Control  (OOTC:EKCS) ($0.08; $1.9M market cap)  designs, develops, manufactures, and markets technology-based integrated security solutions. Yesterday, we highlighted the Company’s fiscal 2019 6 month results. We were able to obtain first quarter 2019 financials and wanted to provide further clarity on the strength of the company’s Q2 2019 quarter.  

  • Q1 2019 sales were $336,915 vs $166,557 with net income of $11,994 vs a loss of $92,404
  • Q2 2019 sales $513,726 vs $162,380 with net income of $126,253 vs a loss of $201,955 and EPS of $0.01 vs loss of $0.01

It is still unclear if the Q2 2019 revenues will become the company's new run rate, since the company’s revenues and gross margins have historically been lumpy. While gross margins have also been lumpy, it is encouraging to see that they have been improving on a year over year basis.

Margin improvement was an area we highlighted in our initial report.  

  • Q2 2019 gross margins were 71% vs 58% in the prior year
  • Q1 2019 gross margins were 42% vs 24% in the prior year

The key will be to determine if these Q2 2019 results are an outlier or the possible new run rate. When we first interviewed management, they discussed a new software offering which obviously would have bigger gross margins. We will try to determine if the software was the cause for the boost in Q2 gross margins.