Paragon Technologies Reports First Quarter 2025 Results

Rhea-AI Summary

Paragon Technologies (OTC:PGNT) reported Q1 2025 financial results with revenues increasing 10% to $34.6 million, driven by growth at SI Systems and SEDC. However, the company posted a net loss of $790,000, down from a $53,000 loss in Q1 2024, primarily due to $1.1 million in legal expenses from litigation with former CEO Hesham Gad. The company expects additional litigation impact exceeding $2 million in Q2 2025. Notable developments include: operational improvements at SI Systems with new sales and software professionals, sale of one Ohana unit resulting in a $450,000 gain, and ongoing challenges with their investment portfolio showing a $165,000 decline. SEDC continues to show sales growth despite tight margins and currency fluctuation impacts. Management expects improved performance in H2 2025 following the resolution of litigation issues.

Positive

• Revenue increased 10% YoY to $34.6 million
• Sale of Ohana unit generated $450,000 one-time gain
• SEDC continues to show sales growth
• Operational improvements at SI Systems with new sales and software professionals
• Contract signed for sale of another unit expected to close in Q2

Negative

• Net loss of $790,000 in Q1 2025, compared to $53,000 loss in Q1 2024
• $1.1 million in legal expenses from litigation, with additional $2+ million expected in Q2
• Investment portfolio declined by $165,000
• SI Systems backlog continues to decline
• SEDC margins remain tight with currency fluctuation impacts
• Potential charges coming from misclassification of former CEO as independent contractor

Addresses Litigation Impact and Strategic Plan Progress

EASTON, PA / ACCESS Newswire / May 13, 2025 / Paragon Technologies, Inc. (OTC PINK:PGNT), a diversified holding company, today announced its financial results for the first quarter ended March 31, 2025.

For the first quarter of the year, Paragon's revenues increased by roughly 10% to $34.6 million with increased revenue at both SI and SEDC. Net income declined by approximately $0.7 million from the prior year's first quarter primarily due to legal expenditures of approximately $1.1 million related to the litigation initiated by former Chairman and CEO Hesham Gad last November. While the case was settled by the current board to limit these unnecessary expenditures, the company estimates the second quarter impact of this litigation will be in excess of $2 million. The Company also expects to incur a charge due to self-reporting the misclassification of Mr. Gad as an independent contractor during most of his tenure as CEO.

The board has initiated proceedings against the company's former legal counsel to recover the costs associated with the Gad litigation as it contends that the litigation was attributable to faulty legal advice provided by the company's former legal counsel.

Sam Weiser, Interim CEO at Paragon commented, "At SI Systems several operational improvements are underway that are designed to benefit shareholders in coming quarters. First, SI added two dedicated professionals in the first quarter who have restarted outbound sales calls to both our installed base and to targeted prospects. This effort is especially critical as our backlog continues to decline. In addition, SI has added two additional software professionals dedicated to a project designed to rewrite the company's operating software for its dispensing equipment; a project expected to be completed in the first half of 2026. This project is necessary as previous management terminated or drove away experienced SI professionals with the institutional knowledge related to the software's operation. As such, the current project is designed first to document the current code prior to the second phase where the operating system will be rewritten. Upon completion, the company's operating software for dispensing equipment will be properly documented to prevent this situation from recurring in the future. The costs associated with this project are being capitalized and will be expensed over the useful life of the updated software."

Mr. Weiser further noted, "SEDC sales continue to grow although margins remain tight, and currency fluctuations continue to impact the SEDC profit contribution. Additionally, the company closed on the sale of one Ohana unit which resulted in a one-time gain of $450,000. The company also entered into a contract for the sale of another unit in the first quarter expected to close prior to the end of the second quarter. The company continues to focus on liquidating the remaining two condominium units due to their poor returns. Finally, the value of the company's investment portfolio declined by $165,000 reflecting the ongoing poor performance of the portfolio constructed by Mr. Gad and is in the process of being liquidated."

Mr. Weiser concluded, "We anticipate ongoing improvements at SI to have a positive impact on our results going forward. SEDC continues to increase sales which should contribute to an increase in profitability assuming a stable currency relationship between the Colombian peso and US dollar. Now that the Gad litigation is behind us, the true earnings power of the company will be evident in the second half of the year."

First Quarter 2025 Results

Revenue for the first quarter of 2025 increased to $34.6 million, up from $31.5 million in the first quarter of 2024. Net loss for the first quarter of 2025 was $790,000, down from net loss of $53,000 in the first quarter 2024. Paragon's income loss before income taxes and non-controlling interest was $649,000 in the first quarter 2025, down from net income of $247,000 in the first quarter 2024. Profits for the first quarter of 2025 include unrealized loss of $165,000 related to the investment portfolio compared with unrealized losses of $78,000, in the first quarter of 2024.

Paragon Technologies, Inc.'s Consolidated Statement of Operations for the three months ended March 31, 2025, are summarized below. For further detail on our results, shareholders should carefully review our quarterly report, which can be found at www.pgntgroup.com.

Consolidated Statements of Income and Comprehensive Income (Loss)

For the Quarter Ended March 31, 2025, 2024

About Paragon Technologies

Paragon Technologies, Inc. is a holding company owning subsidiaries that engage in diverse business activities, including material handling, distribution, real estate, and investments. For additional information please visit: www.pgntgroup.com.

Investor Relations Contact:

Alliance Advisors IR
ParagonIR@allianceadvisors.com

Cautionary Note Regarding Forward-Looking Statements

This press release contains forward-looking statements within the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements concern the Company's operations, financial condition and performance and are based largely on the Company's beliefs and expectations. These statements involve known and unknown risks, uncertainties and other factors that may cause the Company's actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors and risks include, among others, those related to: general economic conditions, including those in the markets in which the Company operates; the Company's ability to expand its revenue streams; technological changes in the Company's industry; the continued acceptance of the Company's distribution channel by vendors and customers; decreased demand for the Company's products and services and the Company's ability to retain or replace its significant customers; factors affecting the capital markets and share prices generally; economic and political risks of selling products in foreign countries, including risks of non-compliance with U.S. and foreign laws and regulations; cybersecurity risks and risks of damage and interruptions of information technology systems; and the Company's ability to complete acquisitions, strategic investments, divestitures, mergers or other transactions on acceptable terms or at all. New risk factors emerge from time to time, and it is not possible for management to predict all such risk factors, nor can management assess the impact of all such factors on the Company's business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. All statements in this press release other than statements that are purely historical are forward-looking statements. The Company does not intend and assumes no obligation, to update any forward-looking statements made in this press release. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this press release. For further information, contact the company at info@pgntgroup.com

SOURCE: Paragon Technologies, Inc.

View the original press release on ACCESS Newswire

FAQ

What were Paragon Technologies (PGNT) Q1 2025 earnings results?

Paragon reported Q1 2025 revenues of $34.6 million (up 10% YoY) and a net loss of $790,000, compared to a net loss of $53,000 in Q1 2024.

How much did the litigation impact PGNT's Q1 2025 earnings?

The litigation with former CEO Hesham Gad resulted in legal expenses of $1.1 million in Q1 2025, with additional impact exceeding $2 million expected in Q2 2025.

What operational improvements is PGNT implementing at SI Systems?

SI Systems added two dedicated sales professionals for outbound calls and two software professionals to rewrite operating software for dispensing equipment, with completion expected in H1 2026.

How is SEDC performing for Paragon Technologies?

SEDC shows continued sales growth but faces challenges with tight margins and currency fluctuations impacting profit contribution.

What was the performance of PGNT's investment portfolio in Q1 2025?

The investment portfolio declined by $165,000 in Q1 2025, reflecting poor performance, and is currently being liquidated.