Alpine 4 Holdings, Inc. (ALPP) is a diverse conglomerate that has undergone a remarkable transformation over the past decade. Headquartered in Phoenix, Arizona, the company has established a reputation for its ability to identify and acquire promising businesses that align with its disruptive "Drivers, Stabilizers, and Facilitators" (DSF) business model.
Founded in 2014, Alpine 4 has steadily expanded its portfolio, capitalizing on emerging trends and technologies. The company's journey has been marked by both successes and challenges, but through it all, Alpine 4 has demonstrated a resolute commitment to innovation and operational excellence.
Company Background
Alpine 4 Holdings, Inc. was incorporated under the laws of the State of Delaware in April 2014 as a publicly traded conglomerate focused on acquiring businesses that fit its DSF business model. The company's growth strategy has centered on building a diverse portfolio of subsidiaries across various industries.
In 2020, Alpine 4 made significant strides in expanding its capabilities, particularly in the aerospace and defense technology sectors. The company acquired Impossible Aerospace and Vayu US, two key additions that bolstered its presence in these high-tech industries. Following this, in 2021, Alpine 4 further diversified its portfolio by acquiring Elecjet, a battery research and development company, demonstrating its commitment to staying at the forefront of emerging technologies.
Recent Challenges
However, the company's rapid expansion and diverse operations have not been without challenges. In recent years, Alpine 4 has faced difficulties in filing its financial reports in a timely manner. This issue came to a head in 2024 when the company received notices from Nasdaq regarding its delinquent filings, which posed a threat to the listing status of its securities. As a result, Alpine 4 has had to dedicate significant resources to addressing these reporting issues and working towards regaining compliance with Nasdaq requirements.
Despite these reporting challenges, Alpine 4 has continued to operate its diverse range of subsidiaries. The company's portfolio includes businesses in contract manufacturing, construction services, defense contracting, and commercial electronics manufacturing, among others. This diversification has allowed Alpine 4 to service a wide range of industries and customers, providing some stability during periods of difficulty.
Financials
In the fiscal year ended December 31, 2022, Alpine 4 reported annual revenue of $104.56 million, a significant increase from the $51.64 million generated in the prior year. However, the company faced headwinds, recording a net loss of $12.88 million compared to a net loss of $19.48 million in 2021. The company's operating cash flow for the year was a negative $19.58 million, while its free cash flow stood at a negative $20.65 million.
The first nine months of 2023 presented a mixed picture for Alpine 4. The company's revenue for the period amounted to $77.98 million, a slight decrease from the $78.35 million generated in the same period of 2022. The net loss for the nine-month period widened to $51.28 million, up from $7.22 million in the prior-year period. Operating cash flow, however, improved to a positive $2.08 million, compared to a negative $17.71 million in the first nine months of 2022. Free cash flow also showed signs of improvement, narrowing to a negative $2.92 million from a negative $17.71 million in the year-ago period.
The most recent quarter (Q3 2023) saw revenue of $25.60 million, representing a 6.9% year-over-year decrease. This decline was primarily driven by a $3.5 million decrease at RCA and a $0.8 million decrease at MSM as they focused on improving gross margins. Net income for the quarter decreased significantly to a loss of $40.87 million, largely due to non-cash impairment charges totaling $33.3 million related to goodwill and intangible assets.
Liquidity
Alpine 4's financial position reflects both its growth and challenges. As of September 30, 2023, the company had a debt-to-equity ratio of 0.77, indicating a moderate level of leverage. The company has $35 million in total bank lines of credit, with $11.5 million drawn and $3.1 million available. The current ratio stands at 0.86, while the quick ratio is 0.43, suggesting potential short-term liquidity challenges.
Alpine 4's diversified business model has been both a strength and a challenge. The company's portfolio includes a range of subsidiaries operating in various industries, including construction services, manufacturing, defense, aerospace, and technology. This diversification has provided some stability, but it has also introduced complexity, as the performance of individual business units has been uneven.
In 2023, Alpine 4 faced significant headwinds, including the ongoing impact of the COVID-19 pandemic, supply chain disruptions, and macroeconomic uncertainty. The company was also impacted by non-cash impairment charges totaling $33.31 million, which included $14.90 million in goodwill impairment and $18.41 million in intangible asset impairment.
Business Segments
Alpine 4 operates through several key product segments:
Construction Services: This segment, which includes the subsidiary Morris Sheet Metal Corporation (MSM), provides commercial construction services primarily as a sheet metal contractor. It generated $11.23 million in revenue for the first nine months of 2023, down from $13.74 million in the prior year period. Gross profit for this segment was $979,930 in the first nine months of 2023, up from $487,600 in the same period of 2022.
Manufacturing: This segment includes the contract manufacturing subsidiaries Quality Circuit Assembly (QCA-W) and Alternative Laboratories (Alt Labs). For the first nine months of 2023, it generated $20.65 million in revenue, up from $22.06 million in the prior year period. Gross profit for the Manufacturing segment was $6.00 million, an increase from $4.15 million in the same period of 2022.
Defense: Represented by Thermal Dynamics International (TDI), this segment does contracting work for the U.S. Government. TDI recorded $7.46 million in revenue in the first nine months of 2023, down from $8.26 million in the year-ago period. Gross profit was $1.78 million, down from $3.04 million in the same period of 2022.
Technologies: This segment includes RCA Commercial Electronics (RCA) and Elecjet subsidiaries. For the first nine months of 2023, it generated $24.29 million in revenue, down from $30.64 million in the prior year period. Gross profit was $7.89 million, down slightly from $8.40 million in the same period of 2022.
Aerospace: Represented by Vayu Aerospace Corporation, this segment manufactures drone aircraft. Vayu recorded $25,000 in revenue in the first nine months of 2023, compared to $6,060 in the year-ago period. Gross profit was $1,710 in the first nine months of 2023, up from $6,060 in the same period of 2022.
Legal Proceedings
Alpine 4 has been involved in several legal proceedings. In August 2020, the company filed a lawsuit against Alan Martin regarding his promissory note. This was settled in July 2023, with Mr. Martin receiving a mix of cash and stock payments. The company is also involved in other legal proceedings, including a lawsuit from Robert Porter regarding shares allegedly owed to him, and a lawsuit from former VWES employees over employment contracts.
Resilience and Adaptation
Despite these challenges, Alpine 4 has demonstrated resilience and a commitment to adapting to the changing market conditions. The company has implemented cost-saving measures, streamlined operations, and continued to invest in research and development to drive innovation and differentiation.
The company has shown some improvement in its gross profit margin, which increased from 20.5% in the first nine months of 2022 to 21.0% in the same period of 2023. This suggests that Alpine 4's efforts to enhance operational efficiency may be yielding results, despite the overall revenue decline.
Future Outlook
Looking ahead, Alpine 4 has provided limited guidance for the remainder of 2023 and beyond. The company has emphasized its focus on improving operational efficiency, strengthening its balance sheet, and positioning its subsidiaries for long-term success. However, the uncertain economic environment and the potential for additional challenges could continue to impact the company's financial performance in the near term.
Alpine 4 operates in what it considers a target-rich environment of small to mid-market companies, which it believes presents greater opportunities for operational and strategic improvements to enhance profitability. This perspective aligns with the company's acquisition-driven growth strategy and may inform its future moves in the market.
Alpine 4's journey has been marked by both successes and setbacks, but the company's commitment to its DSF business model and its focus on innovation suggest that it may be well-positioned to navigate the turbulent waters ahead. The company's ability to manage its diverse portfolio of subsidiaries, address its financial reporting challenges, and capitalize on its perceived market opportunities will be crucial in determining its future trajectory. Investors will be closely watching the company's ability to execute on its strategy and deliver sustainable growth in the years to come.