GIGA - Earnings call transcript Q1 2019

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Operator

Hello and welcome to the Giga-tronics First Quarter Fiscal 2019 Earnings Teleconference. My name is Michelle and I will be your operator for today's call. At this time all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions]. conference recorded. this that note is being Please I turn the to Ms. call over will now Mitchell. Traci begin. may you Ma'am

Traci Mitchell

Hi, everyone, today for Financial our Traci our and Vice thanks Lutz Officer Mitchell, call. earnings CEO; Sales and and I'm and conference President Executive I'm Tim our of joined Henckels, by VP; Regazzi, joining John Chief our Ursprung, quarterly Marketing. and

to Actual statements long-term I that the stocks, be due as pending and in this on market, our contains litigation of uncertainty and ability timing the shipments. forward-looking going of OTC company's orders, our traded of orders, common results everyone growth significantly need or orders, conference for potential orders deferrals receipt future need ability remind concerning existing cancellation the may to to continue begin, performance, company's to we market price uncertainties, volatility concern, Before and delays conditions. operational differ of such for results the as and with to future the ASG, call general risks a market new threatened for as manufacturing financing, or additional

now of Part Risk With fiscal the see For XX-K under the annual the XX, Operations. in Discussion most and to year pass Management I'll heading Factors call Conditions heading I, XXXX, Results ended those Financial report our for the and and Part March under John. Form recent further discussions, II, place, of Analysis reminders

John Regazzi

a our but I numbers Dr. a moments, Thank you to joining over Henckels highlight you, for call. quarterly will our Good go few in recent Traci. conference the thank about afternoon few quarters. things wanted and

first year in and overhead beginning XXXX, improved fourth in have our quarter costs. focus the of margins efficiency and last of the production reflects which our fiscal on significantly continuing quarter First,

XXXX. running offices have first We for of in full in the began occupying new have than things year now new we our smoothly April more one been and facility when

expenses sizing long With have continues operating year. terms fiscal prior new received higher our to contracts on to our right and our investment. term and run to to been anticipate during RADAR business regard we focus sales, in several due company headcount year, Second, shipments this the we our due the well reduced of filter fiscal

Sales in and order elements pieces, the Marketing the we will this Mr. advanced the of in remains the year. signal the add the opportunities Tim change of platform, company in available order than our ahead. in with to Overall, over place Ursprung, our numbers. the to Although have which this generator the turn sales like will situation that I'd believe revamped call the perspective selling regarding With call quarters to same to his market we Lutz improve rather business the the picture over the are full fiscal for line Giga-tronics. remarks enabling go to our Dr. strategy return later VP just to outlining profitability in solutions we on believe Lutz? team for Henckels

Lutz Henckels

call. this you on Thank Hi. being for

sole-source We lot highly to products divested to we being with The new product microwave, poor transitioned RADAR, differentiated transition the highly summarize company has little warfare electronic the a the some so differentiation those a that a with we and people are has on there need over call, we want six to lines, major briefly from think outlined expect company I what good businesses delivers products Microsource filters which the division. aircraft. last company million F-XX supplier fighter F-XX, made focused I product on rock, call of the and This sell and that used EW, two years. F-XX call conference circuits, contractors to in business foundation, of the margins. gross is which transition to microwave RADAR is those which which by $XX XXXX. in the integrated for that our jets. our achieved and the very on in gross $X I a strengths fighter building is of for margins. YIG between revenue our company our jet solid means We building prime This million We division

our We we margins. for focusing business years rock. a plus really strengths microwave our are and ourselves core competency on name year's call it the microwave has analyzer. and our in by gross sole-source circuit to five developed that company and advance past. I really the generator The which signal million company it's a EW is the platform products, product say the a have over we testing over supplier. worth spent on for next endower ASGA, Hydra or integrated also by refer $XX overextended and as has short R&D we XX% backlog, of the this I in and And in that should designing producing By alone test RADAR often name

good inflection the at and for However, that news finally we believe an point have we're company. the completed transition that firmly we this is that

so now made we in fiscal'XX, talk ended have June. we'll QX And of which that about in the progress

before X, with ASU using which the to Now standards that so required way XXX, called for XXXX-XX. This XXX, need fact standard ASC company commonly also to ASC company they is The in referred accounting XXXX, the also release. that's the to the called April adopt will contracts. I the must revenue as changed the revenue going up that customers, also was word be recognize to from that certain contracts there accounting a express and is change press I into you expressed in

ended 'XX, revenue membership which we invoice So customer. the end fiscal March recognize that of on XX, until the XXXX,

today one contract on simple the The presented XXXX must that's results months Under that financial that. been on June three for like to based new we do method. adjusted costs. have XXX, I of we're it reflect not think but that recognize incurs accounting the as ended completion XX, the revenue allowed ASC

to a the more this is have XXX to 'XX the today always identify difficult, that try FY made year ASC However, impact however QX item. presentation not did this accounting ago every you the discussion in new on I will method. in because comparison

However, believe independent we change, better than inflection our year and clear an know this that's vastly points, we this a at independent you are account ago accounting of are that change. results be completely of

So go through me let now the details.

look first sales. Let's at

prior compared increase the $X.XX first first $X.XXX primarily. year This XXXX New quarter first the components serious million, a quarter increase million. three ago The fiscal the for was which due to sales net to XX, quarter was 'XX, on in a June ended FY which is as XXXX. XX% the was period of versus

fighter was change The filters. in indeed in XXX. increase $XXX,XXX due higher due ASC increase was first $XXX,XXX revenue shipments component of to to accounting. jet that was

We with three we by increased F-XX, this the of are accounting independent ship, the sales F-XX now full production and so and planes to planes F-XX $XXX,XXX by methods. more in having

by We sales fifty also for increase thousand two slightly $XX,XXX legacy service.

because first Hydra of However, in were quarter year. fiscal we the had no reduced then this sales XXX,XXX shipments by

also ago over fiscal out gross to And margin on to no above XXXX. now, first gross should Going a More as from gross gross with XX%. was in John quarter fully row fiscal of This now here a quarter margins really I margins. gross XX% 'XX the the gross expressed, margins. quarter, forward year first impact XX%. a margin of the XXX have fiscal point so XX% compares is this second And margins would has we quarter expected that the ASC on going every for

net is improvement was of losses, to This $XX,XXX. from the just the So XXXX because which There $X.XXX $X.XXX the performance that an comes reduction first to components to quite XXXX absolute to quarter it of the fiscal when That's are percentage XXX. of for $XX,XXX. does huge, four of the net quarter down loss operating a ASC million compares nearly not million. And the even first loss then fiscal of change okay. to loss

that. So sales. $XXX,XXX operating was due in gave increase due performance. $XXX,XXX lower expenses, $XXX,XXX improvements interest line improvement was $XXX,XXX to to then $XXX,XXX expenses $XX,XXX fiscal the sales. $XXX,XXX that low below margins. were And reduced better Them an operating $XXX,XXX us $XXX,XXX to improvement to We XXXX. the QX expenses. going of And to in improvement impacted other compares in QX fiscal That $XXX,XXX to for operating the higher operating XXXX. the was This gross and they this margin gross expenses. and due line,

year difference XXXX. $XXX,XXX income this So other fiscal the was settlement to due due to of in expenses was interest following. the for tax dispute and an $XX,XXX

here grows, due point owe for more then remainder our to bank %XX,XXX for expenses with so was $XX,XXX taxes E [ph]. expenses regards from the payments PFG, for per growth. X% and due And to interest our XXXX. to the that partners terms we cash to the money typically want $XX,XXX in okay. year the interest bridge of loan interest in Series. was I other where that's make our should the cash is quarter, to was So

loss you this operating for loss And payment fiscal So net we first compares million combine first when of the the $XXX,XXX of net a XXXX. a $XX,XXX quarter $XXX,XXX loss of interest have of and the then of quarter. the in to $X.XXX

of independent improvement So XXX. major ASC a client

Now let's to the go balance sheet.

period before it an This $X.XXX Looking at the with which three know still March XXX. $XXX,XXX weak. Well, compares million. equity and $XXX,XXX. you is know we our is equity all lot. made now, all cash to Shareholder that ASC months so equity, so improved balance losses, $X.XXX of XXXX stands That at XX, at sheet of to that's million ASC we XXX equity ending the cash a due improve remember because and a to due cannot you

So there in retained current expenses standard. a changes deferred in other this accounting huge all and prepaid to is due like in revenue inventory, in change change you a changes see earnings, and assets entries large

So the all equity ASC that as the XXX. improved fact

seems say during went bills primarily net in and What that $XXX,XXX the It trend, we out of deferred for and high. should only more way can What period cash, And easily while purchase products. that $X.XXX not goes that's the we paid cash that get the is of That a inventory the that $X.XXX we it net million we of had inventory like be accounts we because this know time. I reduction go will is and in understood talk a losses. due as and Deferred And going is at million and already will goes down for least as okay. let's then this fiscal invoice means revenue about, payable system actual The then get a that's it inventory course am Test and XXX. that if sheet we stands of will order it we decrease by $X actually too you it up down bit of RADAR that deferred year, quarter it's, lot all reduction little be $XXX,XXX. out because a to revenue That balance cash. goods ASC to customer in of during this the a of be shipped net that revenue a soon I finished million. more believe it $XXX,XXX, So we about and fluctuates, down talk by decrease by is that in for needs of is that in okay. inventory

will get inventory. of cash some out we So good

that However, cash is concern the addressing are concern we ways. and still multiple clearly and

pure of $X that's a cash. in which bill I have should First, goods. XX% as And of order it have large expect finished we mentioned immediately, we million

the million We to have from then oversubscribed raising it E losses. expect funds we so through and eliminate And the Series been $X.XX. $X.X limit increase also we was

net Test $XXX,XXX, near really achieved This And because performance are we In improved so business. to the are without want gross concern. I I addressing and But our RADAR breakeven by the lower improved ASC change, even so our about this okay. of expenses. operating was yes much clear the think that, XXX be cash summary, we margin earnings

profits financials, 'XX a in moving fiscal fiscal going and we to on 'XX. 'XX. business deliver be least to XX% in to Now expect fiscal fully the at focusing are the we net And forward, achieve on growing

these the you achieve where and sales Tim And we of introduce that also strategy goals, to Time Now a as President change outlook, explain these our Ursprung, now lot we our Sales a And answer and get joined on orders. in I our team. two like July to changes the require XXXX. Vice to of change that who X, sales will are Giga-tronics question we Marketing to

Tim Ursprung

Yeah, you much And this for time. your forward with is me very let Tim Ursprung. the go Thank discussion.

a of overview years. know people background, power you and President Marketing the Test a same worked for worked systems. number me the on where Vice From there, standard radar First company for Aeroflex which other as in and I to electronic mostly radar focused was built for joined were amplifiers like a markets for electronic Solutions and little solution warfare Vice you Aeroflex, ask Sales about communications, I my At space. ten ten companies years. market that Then Microwave with communication, for called give there. there Devices, and so about I I'd we Power the President of warfare custom test really

eight stream Here we transmit, and at owner I in major aerospace Aeroflex. manufacturers, resulting After two on a sold test major about the for base. firm first Aeroflex, for the also years was module for customer revenue receive Nav/Comm system of radar concentrating military an in Southeast manufacturer Mid-Atlantic

why ask join did would Giga-tronics. people that after So you me

marketplace has major I'm excited the and generation about supplying that of the the go product Hydra our that complex become next extremely reviewed for for force features briefly. will EW RADAR and I right EW solutions benefits I know the development next thought RADAR wanted become a we opportunity So and has solution this generation customers. customers and over Test offering platform. to product disrupted the just and

on discussing and what doing we're where going. Giga-tronics, to Now we're

our earlier, and rock very Group As growing. discussed the is Microsource strong

So have of in as into I experience will but discussing these going I that feel market area, focus to am product with do growth types potential different and that have products these well. not areas products and going

for development strategy the test discuss solution. next to EW generation Now the

that the the and set to and team. discuss really I want through focus with orders, doing saying could we're will sales of what start I with I but the While go changes, marketing the

we're meet The system needs. to minor focus. specific focus first requiring each So specific changing overall a this to product to for solution is customer changes a reason the from needs approach their has our

team of a with to a requirements assembling to Giga-tronics these understanding properly technical the we're solution. Second, position detail enable right

areas a military on with focused the systems. locating channel prime in bases team developing Third, radar sales and contractors warfare we're and close to electronic

can their person full a systems. Now just customers Sergeant located customers Dan Kirby, a close retired of regard offer his to that to requirements in southern electronic tech we success we've change in sure know especially for hired has the worked California in career who warfare Dan Master at Dan to I and it the he previous to point, area employers of work has Giga-tronics. we as the We product our extremely our solutions understanding targeted Air is needs. for to Force configure he's and to colleague, better products. the meet and I an make strategy business to that developed. this win In and pursuing roadmap the is the right conclusion, capability hears rate we features opportunities benefits approach, the want the right

for waiting Now new been status the our what has everyone of order. for major

told customer years it's we but with mentioned, book not slightly by We've to in well a this the book, to was timeframe which forward has close but and at it's outlined. contact every fully close we support. could funded included of current moving is expect we into And every of which to has submitted be roughly So still and expected this $X.X first has and really will order the product also when the as now of confidence we're this government. staying test step order slip million high we've The of been this order systems the step. by been we quarter. U.S. Previously, been order $X purchasing order The we have end all The value discussed be increased fiscal and in happen matter estimated order. the that QX. to timing are million, keeping

has will the try receive testing And contractors a that and center do at this of air our the system. features So customer to foothold order differentiating this our in for prime of this excellence been their solidify use customer will It also as have. warfare solution has competitors systems. our to data [ph] that not solution stated electronic

to a contractors. that prime it Major it government that the down it that's from key drives Now aspect using is the

also electronic efforts carry Going will radar across our this the their and platforms. warfare solution focus to

order, that platform with has demonstrate Hydra within partners the to past and to we to are capability a and to this that XX another And had that been addition feature working have our Dan strategic in obsoleted. company to should product be I In additional XX able area add next worked the in days. with this product

upgrade to to a solution platform. and fiscal and base next this in still needs product able bring we're We be Our feel customer that the will year. that additional that developing fulfill solution that orders this

this, So Thank confident next time. as I'm will that EW RADAR our Giga-tronics. success for I source revenue become with grow of much and result a for solution your extremely believe very this generation you development and major a Hydra Testing

Lutz Henckels

Okay.

Just I'll question. a couple open of then remarks and it for

we do it and next for to being see I cautious. you turn report we express the want do still at medal the time like very pass We words, over weak us to and to we it we yet. are I a the the and that at is inflection still we same no balance of to reach With of sheet have so this expect are same we making woods time sales, the and medal are the At in we want are on I not I So ought conference we optimistic that be call point. confusion the clear Hydra there question. that that think have very, be to no the to losses,

Operator

Thank you, sir.

Advisory. queue from the begin have will William question Instructions] Velmer session. question-and-answer now [Operator the do S.A. from in one We We

William Velmer

actual all mean throwing currently kinds Yeah, so actual the is there blah, work blah, what backlog backlog total blah, question, going fiscal have. Thank Real of how you're that you quick to you're on 'XX? off guys? contracts, you the the doing that is are you. what I

Lutz Henckels

we have Number the zero okay. Hydra for backlog product, Okay. one,

assume I product. So the you're Microsource referring to

William Velmer

looking I any total for backlog am of just all?

Lutz Henckels

have the no I be we one number in will second. want the X.XXX Microsource clear, million. that you backlog for rock to for The and Hydra. backlog only for there's is we products get

William Velmer

roughly? XXX,

Lutz Henckels

No, X.XXX.

William Velmer

saying what $X million, that roughly? are that you is Is

Lutz Henckels

Correct, correct.

William Velmer

Okay.

just you So last will over not look XX% by doesn't opportunities little continual going - I there so, revenue your business grow just was business, that you where backlog, because year, that this or if that don't include finding that arise month it's every a to is did correct? mention at am

Lutz Henckels

me to let So just that. add

did already $X we So business million on Microsource. of that's

backlog for that $X there, million roughly is is $X are to is million. so projecting to this We which said what that So million fiscal year. gets $XX million that $X you we

have growth grew - the will plane, from because million backlog much at Microsource to okay. $X Hydra. $X from We million The million in no because it $X very of come added

comes from really However, what we the business. Hydra call RADAR our growth or Test

fiscal that for And million so $X expecting notice know million million. is we're $X to that and expect in between the you we $X year order sales this

order, year. So basically this that for by fiscal are getting we there

William Velmer

is will the us make million, Can what $X about and because you that actual give green, state got little where to companies dollar know a many money, - you're to you got so to going got in what talked on Okay, million. $X the color hit you is we're million, profitability? amount you $X.X you you breakeven place hit the point

Lutz Henckels

green, $XX $XX.X $XX.X we to maybe million are around basically the in are million green. year in million, in we per the Yeah, sales

William Velmer

year? the this you much means are be to million, going when that $X for you're pretty fiscal breakeven So for saying year,

Lutz Henckels

in or expect The for Hydra million no, that in Microsource million $X additional I'm not get backlog million and in $X us we and QX $XX million business, profitable. be like $XX in million. no, million have we $X from $X to saying I'm $X saying to business $X sales million, No, to million that. is order the

with Microsource should we Tim order in that So business, and that with from as and order $X so million be purchasing is profitable. mentioned

William Velmer

Great, $XX so it's million.

very much. it. company. A small Thank thorough a call I Okay, you conference very for great. appreciate

Lutz Henckels

Okay. Thank you.

Operator

sir. you, Thank

Regazzi time, so no We call for further I the questions this turn final over at Mr. will remarks. John have

John Regazzi

no participation for good just and Okay, questions, I'd if afternoon. further to everybody call thank there Giga-tronics. for are Have like on a the support their their continued

Lutz Henckels

very you thank much. Okay,

Operator

gentlemen. for Thank and you, teleconference. This ladies Thank participating. today's you concludes

You may disconnect. now

Gresham Worldwide (GIGAQ) 14 Aug 182019 Q1 Earnings call transcript