GIGA - Earnings call transcript Q2 2022

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Operator

Welcome to the Giga-tronics Fiscal 2022 Second Quarter Earnings Conference Call. My name is Cheryl 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 Regazzi. turn the to John call over will now may you Sir, begin.

John Regazzi

Regazzi, And and Operating our Chai Henckels, quarter John our fiscal afternoon [ph], XX company's Good thank and CFO second earnings you our Corporate Executive call. Dr. by VP, joined Officer. today I'm for Controller, joining the Maya CEO. Lutz I'm Chief and

of need call statements significantly I uncertainties, begin, results to and results may about manufacturing with forward-looking we that Actual conference as orders remind such orders, Before this due future capital receipt for common including include our cancellations statements, future of of threatened deferrals shipments. and volatility growth operations margins, everybody delays needs, common conditions. and or to and risks stock differ orders, general and company's of the results future litigation our the timing of our and market price market the trading of products; or or pending in stock; the existing orders; may

For Lutz? Part and see Henckels. fiscal and XX heading X Discussion XX-K the March Form Financial year over of With heading ended annual I for Dr. XXXX recent further to under report now Results place, our turn under Factors and of will the the Management's Risk Part reminders discussion, Condition Operations. those Analysis X on most in the call

Lutz Henckels

to Welcome John. our second quarter you, conference Thank XXXX fiscal call.

and a future. system three expected a to end, upgraded the order third a digital by with microwave large was received filters XX% The and full application XXXX second in or encouraging, synthetic its for was net to a be contractor. a growth prime RADAR division, lab. These for Microsource, RADAR quarter initial the received fiscal division of research The from military driven in The income. X% radar order growth filter for front for the systems COMPASS which are primarily revenue large a systems testing EW from

vary division receive So we have At multiple and large not did anticipated same orders are to and believe part approval military long EW second military cycles greatly which approval we time, processing a We contract XXXX, this receive period. these for certain very the encouraged application. reduces associated test period cycle significantly that, fiscal the cycles the of be of orders, the half with that will uncertainties from and military procurements. to long during

Let look us the now detailed results. financial at

million XXXX. second ending First, the let's was two look of $X.X the at in XX, the prior QX fiscal the for year XXXX $X.X fiscal XXXX. period September Net sales. quarter fiscal for million components XXXX for revenue same to revenue for compared of show as We

year This component first the which The quarter XXXX COMPASS Basically, a the fiscal of compares in which goods to XXXX. in digital RADAR/EW of shipped for XXXX. our the $XXX,XXX period prior which $XXX,XXX, is second shipped was fiscal for our we system, second during TEmS we system is fiscal the of of business. revenue than same $XXX,XXX quarter lower

line, product the of $X.X to component million which F-XX, which for used the XXXX. is $X.X RADAR are for same jets. million the $X.X fighter and period the in second fiscal compares Microsource F-XX our for namely The million, services F-XX is the year of The for filters the prior

quarterly receives As orders, cause revenue. Microsource large which typically business I've can earlier, in mentioned the swings

lower quarter by the As of were roughly million year that in the quarter good not fiscal overall, EW/RADAR the quarter XXXX test of were XXXX, you the margin of very But namely The fiscal for of the business. year. in margins gross XX.X%. The margin XXXX impacted test than the Gross very much margin business first fiscal The gross fiscal steady regular has so good XX%. better second business revenue. fiscal but see in margins. over Microsource negatively were $X here, is XXXX. XXXX a was for product a RADAR/EW can The gross business QX mix, gross second

that so, a little XX%. given changes XX.X% mix, gross from the bit to margin And

by consulting the by QX at were operating primarily cost engineering non-recurring Looking FY for R&D XXXX. of increased portion contract QX of a to personnel software compared allocated services which due now. expenses to reduced costs, engineering revenue. of to They when expenses $XXX,XXX expenses, decreased in FY decreased greater and XXXX $XXX,XXX, expenses capitalization reduced expenses,

engineering and conference I sold. in had cost for we As engineering a are goods this received charging hours contract mentioned last to $XXX,XXX we contractor, call, my of from prime a contract

the Looking by now increased primarily stock-based This and is to at the headcount they in compensation in increase SG&A $XXX,XXX. expense sales. due higher as

conference As range take that we the of have TEmS in opportunity believe it. pandemic last behind in to our with advantage I mentioned with to and the we sales so us, issues personnel unique added and applications our call, a success largely product, we

$XX,XXX declined expenses, this basically due we Looking loan, the March in at from $XX,XXX. they XXXX. to interest to off And which PFG is paid

recorded I $XXX,XXX. to net a loss last of about in when we minute was quarter, talk XXXX pre-funded quarter gain warrant the address will the the in a second second quarter we $XX,XXX. income. fiscal also This of sheet. income of of in a the During Net balance non-cash that compares $XX,XXX, Net which

reasons So, I due to a just that that's And the significant all earlier. improvement. stated

important and of as Looking compensation prior quarter the noting taxes, interest, which in fiscal inventories. on in balance delayed, and test fiscal for EBITDA the increase income in the $XXX,XXX balance was $XXX,XXX to an XXXX earlier. at sheet primarily brings March two the second since XX, This division share-based of income in fiscal by which our of driven now RADAR/EW adjusted me This The expenses, were items excludes and income orders second expenses, worth amortization. compensation, the sheet. There's anticipated a are quarter of is the year. EBITDA, versus explained the the increase inventory which XXXX had an increase in loss year, stock-based other last in XXXX. is $XXX,XXX system We this Adjusted TEmS EBITDA or I depreciation following. industry, measure beginning of roughly an really is

other million total to from the shareholder XX. September on sheet the end second XXXX increased the at $X.X the equity, of fiscal which March million $X.X The XXXX end point is balance of at of quarter the

shareholder made So, the the million due during XXXX. investor March over the pre-funded those $X.X first for since equity one company. investment now million increase also, owns This the by is in above $X time six $X.X XX% increased way, of by from the $X.X is months, the of to warrants is to who This million. equity million that

We the While we sheet, businesses is orders test up be to needed our free EW cash strengthen totaling that it for need mostly cash. the tied inventory balance up inventory generate needs the understood the to $X.X million. and in that

summary, quarter run the the the demonstrated modest the level. over first second of at profitably and revenue fiscal quarter saw we second we in during business have and quarter XXXX improvements of over can a how So, fiscal XXXX,

in Now, goal the is progress second made that on we the to quarter. build have

market has Our large a opportunity. EW division

company, do gaining need a share. as said, to job that better a However, we market

solution million on five for We are we share a time. market that We points. this have in To over have over product. key can that $XX focused disruptive confident we the gain are end, invested market and w we

exponential and have in for products. revenue test inroads product to our survivability this application that the First, should We growth we RADAR/EW work the next the for range out streams started our made in result training secure with testing, aircrew is long-term years. expected expanding and X to and lab now multiple XX over

Navy from other forces. expanding been Second, we armed to have the the

additional have our We Air Marines. armed of sales broadened the parts the forces, initiative Army, the the and Force to namely

of of wins the Department developing at various Third, more of excellence we centers are strategic Defense.

so system development done our with we NAVAIR Fourth, We system TEmS at at done our laboratory. RADAR national have and we for product. have continue a COMPASS improve the so our system to with now advanced

the marketing make And continue next to We the in capability. weapon improving new to we to meet point, finally, enhance and strategy. a our critical void in applications develop currently to test R&D requirements investments that test product then the systems are sales for have generation major fifth and

Air electronic broaden military our an and tradeshow large and improve team our is to customer in late sales our have DC base in added where continue We and exhibiting. manager invest the there end market. XXth called a I an point Annual we we be ability officer, should having the to in will November strategy out Washington will convention an AOC enhanced by marketing sales program Force to warfare

So, as on focused scaling so revenue profitable, business. incremental and you can you. we are the are Thank very see,

are ready questions. to We take now

Operator

[ph]. question from comes Walter And [ph], Instructions]. first Hometown [Operator our Capital Belgers

Unidentified Participant

development product additional any guys wondering, in I you color front? the on on was provide are what just focused can you

John Regazzi

that Walter. This system takes we is hardware, of that's working our have advantage requires on that advantage digital and a system upconverter and John, emulation it to advantage lot solution downconverter take taking of we're our of hardware a of our hardware. has now a The threat capability

working one Those systems kind of next we're thing So in the on two that connected. on is that's being parallel. And going product. are

you way Defense what and you the stimulate them stimulate they listen So then adjust the respond, these test Department you with. to you that uses, what you complex them, machines

prerecorded machine difficult scenario. all trying a through deployed you're to that's they're that when very in the they a That's them playing through with So, back go only to paces static a would put battlespace. do

Our and to essentially the very simulate. they active, under test. a complex device are scenarios that's thing with dance And a do

that's we're working on. So, what

Lutz Henckels

out like because built a also that enhance was test that system. me it's time. that started But a is real that John RADAR, And Let system the a our little much is, pretty but architected original like bit work with.

the a architecture itself for jammer with able unique our it signal difficult then be John's is capability. it to that adjust architecture, out is because problem. we to being to jam jammer, And drive unique to for jammed to signal the and have RADAR an RADAR the was extremely – So,

for enhancing closed So provide that we are system capability. to loop our

a performance XXX. In addition to also factor enhancing speed the that, system our of by to improve we're

stuff there's So going major on. some

Operator

Ameriprise. question Franz next comes from Our from

Frank Barresi

had I'm Lutz, I sorry, Was said, received you talked got I it about the a guys. or…? national But heard, off call. I important cut of missed order. a I a and lot somehow. lab, very problems you from

Lutz Henckels

that application. answer because will unique John a But it's Yes.

John Regazzi

purchased their a going talking system digital COMPASS system is was playback national and on. the working work. we've an radar They're They're lab advanced RF a that that about eventually has he that. that's this system stuff and invented to developing add called characterizing Well, to they're mapping hardware that recording recording

from order we a one expect separate program our going one second is time, within expecting on received heard any equipment. the using they have third we two at have So because order lab stuff. and programs nice the that same other But lab. we're about thing an program a orders about And the additional actually multiple for programs from the

quite that So, building good we've site got a a reference at location.

Frank Barresi

Did add you the were missed part I they saying to ordered or component you say system? radar the they Because maybe of only it? were that going

John Regazzi

Frank, on themselves. in they work sequence things a

So, RF hardware they the right need the RF program. will they their later digital point to when piece. And hardware adding that don't in They the only get be now. bought they

Frank Barresi

I thought systems. something said Lutz about three

different You're the referring three to, programs? I guess,

John Regazzi

No.

of program one we second the purchased programs the think the I has two one and purchased then and expect third from system. another one, systems

quarter, actually. This

Frank Barresi

has like nothing don't I mapping, ground with to software? – the you this mapping know And do what mean

John Regazzi

for things, of ground that's mapping. Well, radar one them a synthetic aperture used but a variety of is it's

Frank Barresi

been on a the of systems You're training too? the I delayed expecting, guess, still those trainings lot range. Have – for

John Regazzi

those contract Air now – source the this. these waiting let in of the And was of let's The that to its we're wind delayed, answer funding for I with But place. bureaucracy. negotiating the and I government's systems. that contracts was got believe for Department way maybe through should that Defense I the PO are believe the Force

Frank Barresi

to the Are be that training systems? term, many of these there expect you near systems ordered

Lutz Henckels

we different The multiple that of or a five But, It's that yes, many term. yes. or near there is word addressing. bases are opportunities ranges to in six answer the question least are and at

so, different five programs. And

each need multiple products. So, our of yes, program will

So the answer yes. is

Frank Barresi

why get problems I I phone. sorry, with my And I'm missed. That's

So, I of heard parts these.

to which orders got a to point. complete will was that that at to going you've there's training you're the systems, method, some one lead point referred have? it, And on, procurement mapping systems, early I new you the So, at think

John Regazzi

to not costs paying indefinite the Q… the is the engage that them we over through XX%, XX% gets third But administration, GSA, then time long and called party, reduces a initially overall the concept That called the cycle. switched, XX% but a general service that's to so buy XX% but to domain, the procurement us procurement IDIQ, cycle got takes method equipment, time. they or of which whereby third procurement what's the was quantity, that So, the went military, reducing which

Lutz Henckels

And indefinite delivery.

John Regazzi

under delivery, material then or Indefinite the Once and indefinite is place, which a without we're in government can is that's XX% paying so program, at. that what funded quantity. XX%, that order quickly looking

Okay, IDIQ.

Frank Barresi

contract – order with in happened? that's so the I to in is the systems IDIQ don't Force place, know, the ranges? This new that's And start has can for Air they effect,

John Regazzi

answer yes. is we seen not a that. to But that have physically order yet of as The result the

Frank Barresi

That'll hopefully standing a it'll order So be be, a guess, going forward? lot simpler. I

John Regazzi

vastly the talk purchasing. way of you IDIQs if to In simpler. are space, It the military should be somebody, ideal

Frank Barresi

Is new something TEmS, you you mentioned a that to also You TEmS hired also? these somebody systems. said sell just

John Regazzi

run has This this is who comes programs very in a gentleman space. the military who from

the the knows knows people. he's He familiar. So, all process. He procurement very

experienced hired in Florida. we person so, that And

So, the West the Sales East President and a on business East of our the because there's military on Coast of Coast. Coast lot basically, Vice on

So him. that's where we hired

So all of But year. that this about a fiscal takes the excited since time that's we're very beginning only of that. because little

Frank Barresi

the for guess to the balance of I continue business, filter year? you the expect steadily

John Regazzi

That is correct.

Frank Barresi

And listen questions. have Well, other maybe some the I'll to Okay. replay. later

that. I what to tried about just about caught. ask questions Sorry I

John Regazzi

Frank. you, Thank company. supporting Okay, thank you the for

Operator

Thank you. have in further queue. no And questions we

John Regazzi

like conclusion. a So, to make I'd of sort

been focused has our really to important While stay big performance picture. on it's inconsistent, the

Frank it generation microwave which of with call, mentioned, business, just steady by filter First, us strength as the cash way, the our capability. a the rock, provides I

and pipeline we better for fiscal testing, this year. improved half a to radar with expect warfare of an positioned electronic be Second, second

is revenue, in with million market is the to business, look tight truly for quarter. Thank share. structure – the in RADAR/EW grow we are especially there support and market Third, and what are technology go-to-market next product speaking EW you. your as gain attractive a with term, a the we incremental over in strategy $XX our we growing And the Longer value have you Thank With testing of attractive. and opportunity you business. disruptive unique, testing considerable list high to invested economics patterns, we EW the capital very unrealized a improving very this profitability on the capability. for forward

Operator

and you, Thank call. concludes for today's Thank gentlemen. ladies This conference you your participation.

disconnect. You may now

Gresham Worldwide (GIGAQ) 15 Nov 212022 Q2 Earnings call transcript