OTTAWA - KWESST Micro Systems Inc. (TSXV: KWE) (NASDAQ: KWE), a developer of tactical systems, has been awarded a subcontract by Thales Canada to provide specialized software services. This contract is part of the Canadian Department of National Defence's initiative to modernize the Canadian Army's C4ISR capabilities, which include command, control, communications, computers, intelligence, surveillance, and reconnaissance systems.
The subcontract, signed on Monday, June 7, 2024, is a task-based agreement with a maximum workshare value of approximately CAD $48 million over an initial six-year term. The revenue for KWESST will depend on the timing and scope of task orders issued by the customer.
Sean Homuth, CEO of KWESST, mentioned that this award underscores the company's strategy to focus on programmatic digitization, which is fundamental to the technology behind all their products in the Defence and Public Safety markets. Homuth expressed excitement about enhancing their partnership with Thales Canada to deliver essential capabilities to the Canadian Armed Forces.
Ian Krepps, VP Growth at Thales Canada, praised KWESST's innovative and agile capabilities, which are expected to contribute to delivering world-class C4ISR solutions and support the digitization of the Canadian Army.
KWESST's portfolio includes systems for the digitization of tactical forces, allowing for real-time situational awareness and targeting information from various sources to be streamed to users' devices and weapons. The company also offers countermeasures against electronic detection, lasers, and drones, which can be integrated with OEM products and battlefield management systems.
In other recent news, KWESST Micro Systems Inc. has been active in a series of significant developments. The company successfully completed a public offering, raising approximately $1 million. The offering involved the sale of 735,000 common shares and 803,500 pre-funded warrants. ThinkEquity acted as the sole book-running manager for the offering. The net proceeds will be used primarily for working capital, general corporate purposes, and to advance the company’s business objectives.
In addition to the public offering, KWESST has announced a change in its auditing services. The company has appointed MNP LLP as its new auditor, replacing KPMG LLP. The transition is not due to any disagreements with the company's management, board, or practices.
Lastly, in light of the auditor transition, KWESST has rescheduled its annual general meeting to July 30, 2024. At this meeting, shareholders will vote on the appointment of the successor auditor, among other agenda items.
InvestingPro Insights
As KWESST Micro Systems Inc. (KWE) secures a significant subcontract with Thales Canada, the company's financial health and market performance come under scrutiny. According to real-time data from InvestingPro, KWESST has a market capitalization of $3.15 million USD, indicating that it is a smaller player in the defense sector. Despite a substantial revenue growth of 34.83% over the last twelve months as of Q2 2024, the company's gross profit margin is in the negative at -15.58%, reflecting the challenges in converting sales into profit.
The stock's price has experienced considerable volatility, with a 1-week price total return showing a decline of -7.83%. This is part of a broader trend, with the 1-year price total return plummeting by -87.65%, which could be attributed to the company's challenges, such as quickly burning through cash and weak gross profit margins as highlighted by InvestingPro Tips. Additionally, the company is trading at a high Price / Book multiple of 6.08, which may raise concerns about valuation among potential investors.
InvestingPro also notes that KWESST does not pay a dividend to shareholders, which could be a decisive factor for income-focused investors. With these considerations in mind, those interested in a deeper analysis can explore further InvestingPro Tips for KWESST, which include insights on the company's cash flow, debt levels, and stock performance over various time frames. There are 18 additional tips available at https://www.investing.com/pro/KWE, which could provide valuable perspectives for evaluating the company's prospects.
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