Summary KULR Technology reported fourth quarter and full-year 2024 results ahead of consensus expectations. However, outperformance was solely the result of a last minute licensing transaction, which helped masking persistent product order delays. In recent months, the company has raised $123 million in gross proceeds from selling new shares into the open market with the majority having been utilized to accumulate Bitcoins. KULR Technology is currently trading at approximately 3.3x its combined cash and Bitcoin holdings as compared to market leader Strategy's 2.0x multiple, which isn't exactly cheap either. Given the company's apparent overvaluation, I am reiterating my "Sell" rating on the shares. Note: I have covered KULR Technology Group, Inc. (KULR) or “KULR Technology” previously, so investors should view this as an update to my earlier articles on the company. Last week, KULR Technology reported fourth quarter and full-year 2024 results ahead of consensus expectations: Regulatory Filings Revenues of $3.37 million were up by more than 40% on a year-over-year basis, and the gross margin more than doubled to 63.6%. In the press release, management attributed the increase to " the scaling up of design and test services from larger customers ". However, a closer look at the company's annual report on form 10-K reveals a $1.66 million one-time benefit from a licensing agreement with an undisclosed Japanese company: (...) The Agreement provides an exclusive license to use the KULR CF Intellectual Property to manufacture and sell CF Cathodes in Japan, and a non-exclusive license to manufacture and sell CF Cathodes in several other countries, including Taiwan, China, India and Korea. The license fee is $1.8 million to be paid over 5 years as follows: The license fee is $1.8 million to be paid over 5 years as follows: 02/15/25 - $300,000 06/15/25 - $150,000 12/15/25 - $150,000 Then $150,000 on each of 6/15 and 12/15 in 2026 through 2029 (the last $150,000 payment is due 12/15/2029). The CF Cathode Agreement contains a significant financing component. Therefore, the Company immediately recognized revenue in an amount equal to the present value ($1,658,451) of the $1,800,000 license fee, using the prevailing interest rate in the relevant market (prime rate) of 7.5%. In layman's terms: At the very end of the fourth quarter, KULR signed a ten-year licensing agreement which does not provide for any upfront payments but with terms sufficient to recognize more than 90% of the total license fee just in time to avoid reporting an almost 30% year-over-year revenue decrease. Particularly, the company's product business has been underperforming expectations in recent quarters as also outlined in the 10-K: Revenue from product sales during the year ended December 31, 2024 decreased by $3,259,748 or 47% compared to the year ended December 31, 2023. We had 53 product sales customers in 2024, compared with 39 in 2023. The decline in product revenue can be attributed to several expected 2024 orders, which management now expects to receive in a later period. We can provide no assurance as to when we will receive the expected orders. Product sales during these periods include sales of our component product, carbon fiber velvet (“CFV”) thermal management solution, internal short circuit (“ISC”) battery cells and devices, patented TRS technology, and thermal fiber thermal interface (“FTI”) materials. Despite the company's less-than-stellar operating performance, management's persistent efforts to position KULR Technology as a one-stop shop investment into several of the biggest hype themes in today's market (Space, AI, Defense, Energy Storage, Nuclear, Bitcoin) have attracted a myriad of speculative investors and momentum traders in recent months: Barchart.com The company used the hype to raise a substantial amount of funds from selling newly issued shares into the open market: During the year ended December 31, 2024, the Company issued a total of 74,781,217 shares of common stock pursuant to the ATM for aggregate gross proceeds of $61,912,798. During the period from January 2, 2025, through March 27, 2025, the Company has sold 19,387,610 shares of common stock pursuant to this offering, with gross proceeds of $ 51,122,190. Until last week, the company had raised approximately $123 million in gross proceeds from open market sales, with the majority having been utilized for Bitcoin purchases: As of December 31, 2024, we purchased a total of 217.18 bitcoins at an aggregate purchase price of approximately $21 million for an average purchase price of approximately $96,694 per bitcoin, inclusive of fees and expenses. (...) During the period January 1, 2025 and March 27, 2025, we purchased a total of approximately 449.45 bitcoins at an aggregate purchase price of approximately $44 million for an average purchase price of approximately $99,008 per bitcoin. (...) As of March 27, 2025, we held approximately 666.63 bitcoins that were acquired at an aggregate purchase price of $65 million and an average purchase price of approximately $98,255 per bitcoin, inclusive of fees and expenses. Additionally, 2.48 bitcoins acquired by us were through mining operations that we have leased. The per bitcoin price for each such coin mined was approximately $84,225. At prevailing prices, the company's Bitcoin investment represents an unrealized loss of approximately $10.2 million, or 15.7%. On the conference call , management projected a " transformational year " for KULR with revenues expected to " at least double ". However, given persistent product order delays, the company will likely require more upfront revenue recognition from additional licensing agreements to come even close to the $20+ million revenue number implied by management. On the flip side, KULR's recent decision to effectively replicate Strategy's ( MSTR ) business model of financing large-scale Bitcoin purchases by raising additional equity is likely to result in investors becoming increasingly focused on the company's Bitcoin exposure rather than its operations. Valuation-wise, the core business is currently valued at close to 15x projected 2025 revenues: Regulatory Filings, Author's Estimate Leaving the company's operations aside, KULR is currently trading at approximately 3.3x its combined cash and Bitcoin holdings as compared to Strategy's 2.0x multiple, which isn't exactly cheap either. However, the world's largest corporate Bitcoin holder still appears to be a real bargain when compared to tiny KULR Technology. At least in my opinion, investors looking for Bitcoin exposure should discard investments in overvalued companies like Strategy or KULR and rather consider purchasing ETFs like IBIT , FBTC , ARKB or HODL which trade close to their net asset value. With KULR Technology still changing hands at a large premium to Bitcoin behemoth Strategy, I am reiterating my " Sell " rating on the company. Risk Factors: The most apparent risk to the bear thesis would be another jump in the Bitcoin trading price. In addition, substantial improvements in the company's operating performance would likely attract a new round of speculative investors and traders to the stock. Bottom Line KULR Technology reported better-than-expected fourth quarter and full-year 2024 results, but outperformance was solely the result of a last minute licensing transaction which helped masking persistent product order delays. However, with the company having adopted Strategy's business model of selling expensive common shares into the open market in order to accumulate Bitcoins, market participants are increasingly likely to view KULR as a Bitcoin proxy while paying less attention to the company's tiny core business. But even after the recent selloff, KULR Technology is still changing hands at a substantial premium to Strategy, which apparently does not make sense. Investors looking for exposure to the world's leading cryptocurrency should rather consider investing in Bitcoin ETFs which tend to trade around net asset value rather than buying overvalued shares of companies like MicroStrategy and particularly KULR Technology. Consequently, I am reiterating my " Sell " rating on the shares.
