Alpine 4 Holdings is undergoing a 'metamorphosis,' CEO Kent Wilson writes in letter to shareholders

Alpine 4 Holdings Inc (OTCQB:ALPP) CEO Kent Wilson has penned a letter to shareholders, outlining the company’s significant shift in focus and consolidation in 2021.

“If 2020 was the year of correction and ways to think about business differently, 2021 has been and remains a year of robust opportunities for Alpine 4,” CEO Kent Wilson wrote. “For those of you who have read our financial statements for Q1 2021, they represent a perplexing snapshot of our company in the midst of a monumental transition. In the process of metamorphosis, the company has changed its direction to become a dominant player in several indices.”

During the first quarter, Alpine 4 raised $54 million in cash with five institutional investment groups, paid down more than $14 million in debt and boosted its aerospace holdings with the addition of Vayu (US) Inc. 

READ: Alpine 4 Holdings says holding subsidiary enters nutraceutical and CBD manufacturing industry with acquisition of Alternative Labs

The company also took substantial steps to consolidate resources. First, Alpine 4 began consolidating its A4 Construction Services Inc holdings of Deluxe Sheet Metal (DLX) and Morris Sheet Metal Corp after the “wide and extreme” impact of the coronavirus on DLX’s educational customer base.

The outcome of this consolidation will begin to bear fruit in the third quarter of 2021, the company said, and Alpine 4 expects the consolidated company to be well prepared to tackle the rebounding market of mechanical contracting in the US midwest. 

“It’s important to remember that Alpine 4′s acquisition model was based on leverage buyout at the beginning,” Wilson wrote. “[Quality Circuit Assembly] was our first acquisition and was accomplished through debt, though the company is now profitable. It takes time and growth to optimize an acquisition, dig it out of debt and make it profitable. The business model is being proved out through the success of QCA, and our recent capital raise of $54 million has accelerated the cycle towards profitability for all subsidiaries.”

On the financial front, first-quarter revenue was $8.7 million, compared to $8.8 million in the same period of 2020. Gross profit was down 57.1% year-over-year, the company said, due primarily to its A4 Construction Services Inc holdings.  

However, Alpine 4 noted that its total assets in the first quarter more than doubled from the first quarter of 2020. This was driven primarily by its capital raise, which allowed Alpine’s cash position to grow from $277,000 in the first quarter of 2020 to $35.7 million a year later. Total liabilities shrunk by 22% year-over-year from $49.5 million to $38.6 million in the quarter after Alpine paid down its long-term debt by $7.5 million.

Looking forward, Wilson expects the second quarter to bring increased margins and a reduction in costs from consolidation. With the addition of Thermal Dynamics International and Alternative Labs, the CEO noted, Alpine 4 is “racing towards net profitability.”

Contact Andrew Kessel at [email protected]

Follow him on Twitter @andrew_kessel

Story by ProactiveInvestors