Q4 2019 Earnings Call
Ladies and gentlemen, thank you for standing by the conference will begin shortly.
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Ladies and gentlemen, thank you for standing by welcome to the Radha electronic industries fourth quarter and full year 2019 results conference call. All participants are present in listen only mode. Following managements formal presentation instructions.
Given for the question and answer session. As a reminder, this conference is being recorded.
All received by now the company's Pressroom <unk>.
Not received it please contact Rod does Investorrelations, Gms, GK investor and public relations.
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559 or view it in the news section of the company's website www Dot dot dot com.
I'd now like to handover the call Mr. hotels.
Okay Investorrelations, Mr helped would you like to begin please.
Thank you operator, I would like to wake up one of your <unk> conference call and think about as management for hosting this call.
Hey, do today, whether its results for the fourth quarter 40 is done in 19.
Now we should have all received a copy of depressed.
And then it goes on rather website at Www Dot right now.
What else on that I introduce Mr. <unk>, Chief Executive Officer, Mr., Obviously, <unk> Chief Financial Officer.
The only summarizes the key highlights of the corner FOTA biofuel would provide a somebody on the financials.
And then open the call for the question answer session.
The next to point out the Safe Harbor published in today's press release also pertains to the contents of this conference call.
And with that I would now like to introduce rather Fiomi said Docila. Let me go ahead.
Thank you [laughter] day to our core focus and some day I welcome to our fourth quarter work for you.
And then my thoughts conference.
Oh, that's always always on homologous guy and guidance.
Oh, yes, the real quickly resolved.
Q4, we've gone.
Finally with strong growth in revenue.
So probably say 14 medium.
Instead of going or other historian.
Almost 71% when compared to the fourth quarter.
Okay.
For the year all revenue.
Over 44 million 44 point.
[laughter] over last year, the highest ever we normally story.
And the Haendel 40 Youre in August we share started at 40 and then.
And updated to 43, maybe.
Furthermore, even wide we significantly increased our opex in their 2019.
Hi investments in all yours presence and the development.
Generation radar.
And the very strong revenue growth and stable gross margin.
All the Youre unable to our EBITDA will become positive in the second half of the or.
In early January we issued already guidance for 2020.
We expect all revenue say it took six to exceed 65 million.
Presenting over 47% growth 2020.
Furthermore, we expect this rather we continue to grow.
On a sequential basis school quarterly sequential basis, while 2020 on the top line.
Which implies we surpassed the breakeven point and growth profitability during the year.
This type of growth.
[laughter], we collected the in the past few years.
We aggressively invested in a new orientals technology.
Also shows that our market both in the U.S. some globally have now and welcome.
Well the offering.
Actually counter drawn and point defense.
Let's use protection exceeding the waking up stage.
Bottom line. We are currently we are on track.
And what.
We have been looking forward.
For many years.
Finally arrived.
It's still could be to both general architecture.
Dangerous to need there for the solutions in which already gone far keep Paul global.
Considering the of course.
Addressable market size. We believe this is the just the beginning for sustained growth period.
The second half of.
Well Cnineteen has indeed been the spot the transition from the initial stage to the growth stage.
Market behavior going to yours, but not only in New York Other places, including is that an air slowing the world.
It's beginning to see and these new capabilities, which are already dollars are enabling squeaky color for defense me.
We though for the programs moving from the fulfillment urgent need.
Two multiyear acquisition program, which will enable us to start building.
Bedrock, along the Atlantic 20.
And develop our salesforce as many of you know.
In the United States. We are currently targeting a number of program that's start talking about that.
The brightly actually say of protection program.
We are.
Before I am I it will be time, I, obviously surface protection system, which is in process of being installed on the U.S. songs Bradley Infantry fighting vehicle.
I would like to touch briefly on this program, which has been in the news lately.
There are three phases with this program. The first one characterization was completed in 2018.
The second phase qualification is ongoing Glenn to be completed within a year.
First phase its production for the first three gate. The original plan was to start creeping first brigade by the end of 2020 in product to qualification.
Project has been pushed back by two years and is now planned to be performed infrequent.
We do hope that successful qualification has the potential to bring the scheduled for but currently we cannot.
Yeah.
We don't see formally something around that.
I want to highlight this even while this project has been delayed what's going to frosting impact all your revenues in 2021 at this stage, we see some other programs that are being brought forward.
Are you on us and elsewhere.
Compensate for any exceeds the delayed revenue.
We estimate the market tradeoffs for MTS systems, It's about 3 billion dollar in the coming decade.
Piece evenly between us and the rest of the world and we feel area earlier.
Finally, our position right now despite the breadth and delay.
We stand the western bias clearly, even more confident with regard to our clinics might be expectation.
Then we.
We are few months ago.
And other program is the short branch.
Our solutions short branch out different solutions for the Marine Corps into your arms.
We estimate.
The short range over the fence market.
We'll be at 2 million $2 billion market over the coming decades also split evenly between the yours and the rest of the world.
We are currently serving the US Army I am short program.
Providing protection for fall Battalion.
Defensible value.
We are also providing systems to the Marine Corps ground based LG first program.
In addition to the ABS and shore and to the maneuver force base.
Boeing defense has been becoming recently a clear made maybe seems to have side effects in the near east.
And a light.
Beyond what has been delivered to date, we see significant upside from following orders to the initial orders that we have delivered in the last two years.
Pipeline continues to broaden we significant prospects.
Sure orders, especially strong in the us while other international market.
Our increasingly growing.
Let's say.
Before concluding let's talk a bit about the corner of wireless and its effect on our business.
Team.
As of now.
No impact on our sales and deliver a deliveries since we do dr. use Chinese spots or material on one hand, and maintain the inventory levels to support immediate needs on the other.
However, if current travel restrictions continue for an extended period. This will likely have an impact on our business development. Therefore.
That may have.
Thanks.
Maybe later this year and the into 2000 2021.
We also assumed that the situation in China may affect availability and price of global supply chain.
Demand for non Chinese spots and materials may rights and cost allocation of supplier.
We cook.
All in all we do wish well to all those impacted by euros and the whole.
All of us off that the global situation, we stabilize.
In summary, these are exciting targets for us and finally, reaching the stage we have there been planting for for quite a while.
We have material solutions was a strong performance over price advantage versus competition.
In view of the opportunities ahead products positions for significant growth.
We are investing in our production infrastructure both in USA in Israel.
Leading radar technology, which keeps evolving.
Versus the demanding needs.
Growing market.
For the coming years and overall, we're very pleased with our performance in 2019 and look forward to continued growth in 2020 in the years to come.
I'd like to.
Now to hand over the discussion to obviously Darcy having feasibly. Thank you Julie.
Good morning to our Usfive cents less inventory Israeli once.
You can find our results on the press release, we issued earlier today and I will provide a short summary of the fourth quarter and the full year results.
Fourth quarter revenues were $14.4 million up 71% year over year.
For the year revenues were 44.3 million ups, 58% year over year.
Our gross margin in the quarter and to full year was at a stable 36% of revenues.
Same as reported in Q4 last year as well as in 2018.
This is delivered we currently expect in a hefty with.
As you know we can to continue to make significant investment in 2019, especially in R&D and marketing.
As well as our infrastructure into us so operating expenses grew.
We expect operating expenses to stabilize the drought current.
Around current fourth quarter levels throughout 2020.
Operating loss was 209000 compared to 102000, India.
Q4 last year.
Operating loss narrowed form $494000 in the prior quarter.
For the year, we reported an operating loss of 2.1 million versus an operating income of 62000 in 2018.
Net loss attributable to shareholders for the quarter was $295000. This is compared with a net loss of 86000 in Q4 last year.
686000 last quarter.
For the full year net loss attributable to rather shareholders was $2 billion versus 163000 last year.
We reported a positive EBITDA for the quarter 587000 versus 401000 in Q4 last year and 105000 last quarter full year EBITDA was 407000 versus $1.8 billion last year.
I would also like to summarize and point out some highlights on our balance sheet as of December 31st 2019, we had $30.8 million in cash and no financial debt at all.
On January 2020, we strategically.
Placement tell balance sheets by raising approximately $23.5 million from investors in the US. This is after expenses in the secondary offering.
United States.
At year end ourselves as equity stood at 44 41.4 million financing, 64% of our balance sheet.
In summary, as Bill mentioned.
And as the financial results demonstrates we are very pleased with our progress and on track.
As my summary, we should now open the call for questions.
Operator please.
Thank you ladies and gentlemen at this time, we will begin the question and answer session is you have a question. Please press star one.
If you wish to cancel your request please press star too.
You are using speak or equipment kindly lift the handset for pressing the numbers questions will be pulled in the order they are seat.
Please standby, while we pull for your questions.
Yes.
The first question is from Ken Herbert from Canaccord.
Please go ahead.
Hello Dove Annabi.
Hi.
Hi.
Just wanted to ask you first.
For the 2020 outlook, you've indicated that you expect quarter to quarter, some sequential improvement both in in revenues and profitability as we think about the revenue line can you maybe provide a little more granularity on maybe sort of specific first quarter or first half or or.
Maybe a little more parameters around how exactly that acceleration will take place over the year.
As you can see fourth quarter can days.
Yeah.
We reported $14.4 million Investor News.
And based on the current pipeline and maturity and backlog and so on.
We can point out where the revenues will come from especially in the first half.
Nevertheless, we are working in this kind of environmental the last two to three years. So we developed our internal mechanism.
To identify the right potential and mature less of the pipeline. So yes, we gain considering the fact that we are.
Mid March already we know what the revenues.
Numbers will be in Q1, and we have enough pipeline in backlog for to support.
Continuous growth in Q2, and we asked about the necessary tite liner to support continuous growth in Q3 and four so we believe that to 65 that was reported.
It is.
Third quarter by quarter will show growth and we'll achieve the 65 that we reported.
Okay. That's helpful. Avi I guess, maybe one other way to think about it as last year in 19 first half revenues were roughly 40% to 43% to the full year.
Is that sort of make sure that accelerate the cadence there may be the right way to think about it.
I believe so I believe that Youre correct you are not.
Hi, good mistaken.
Okay, great and if I could you.
Obviously little bit of sounds like question the right on on rattling, an actor protection.
Can you just maybe go through a little more detail doobie on on sort of the next milestones on that program and where you maybe see risk over the next year to choose you moving from the qualification phase ideally to production in the future, but but what are the next key milestones on on the Bradley HTS system, we should be thinking about.
No the qualification is.
Process the thoughts.
Very strong I mean, we are working on that together with I am I continuously but there are no gateways in front of the customer.
Yes, and demonstrations it costs a hearing is strong in a few weeks then it goes to the United States. This is why this process takes a.
Thanks, Let's say a year and there.
Not at the end the or even internally.
Conclusions I don't think we will see any specific milestones on milestone.
Until it is declared as a success hopefully and Thats, what we are here for.
And you know that.
Biggest milestones to get the enough funding by the US army to upgrade the broadly to version for that will enable the inspiration elsewhere.
Okay.
Based on the breadth, so probably within a year or you will see you know.
Fave wasn't certifications coming from I am I mean.
Okay. Okay. That's helpful and just just finally.
As we look at.
Similarly, hearing in Maryland, and United States, just ramping up.
Can you just provide any more detail on how thats going it sounds like obviously, you're missing is going well and you're just sort of produced and tested the first articles there, but certainly you've got.
Part of investment you put in and ramp up there what kind of cadence should we expect another facility. This year and just any more more commentary on how that's ramping up.
Currently we plan to deliver over 200 radars.
To the us market from.
Our general and Tom facility, and if we're lucky even more.
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The ceremony of the first or either.
No launching was done.
Two weeks ago, and with the presence of the Maryland.
Oil and Congressman Mr. Tong.
Everything is on track I mean, we thought at the beginning that we will be able to complete everything by end of last year, but we took into account that may be may slip to the first quarter on we are here.
In the very soon.
Hopefully this free.
Hopefully, but the plan is that.
And by the end of this month, we will start delivering radars to customers from our chairman Tom facility.
Excellent. Thank you very much for the color.
In Q.
Next question.
Brian Kinstlinger from Alliance global.
The next.
The next question is from Brian Kinstlinger from Alliance Global Partners. Please go ahead.
Hi, great. Thanks can you hear me.
Yes.
Great.
I think the problem with the Brady that Bradley from when I read was not enough power to support the iron fast do you have other programs, where you see this is a potential issue I guess, you've had a couple on wins and I'm wondering if that power of those vehicles has been evaluated given the lessons learned.
To our best knowledge Gs mainly since these are new vehicles that or upgraded the before the decision to select day active protection and they too.
Requirements affair.
Protection and modern requirements into accounts, you have to remember that the bradley's.
Veteran vehicles that.
Sooner than later, the US Army, one store, replacing them they call. It oil industry. So I think the situation of the Bradley's unit.
Okay, and you mentioned.
Funding for the Bradley edge.
The one risk.
And I Havent really right up on that is.
Their content chain on whether that would be funded for this fiscal year or not or is in all likelihood expected to happen.
Formerly it will not happen this year.
I see that's why two years now now one yes.
Got it okay and in your original guidance I'm curious.
Although it's unchanged was there some benefit in the second half of the year. For addition can you quantify that.
No no.
Yes.
And the other hand, we have we do have a few whether hps contracts that you announced for best So I'm wondering whether it'd be a contribution that you can quantify it all that you expected in your 2020 guidance from EPS programs.
And then should we expect a significant ramp in 2021.
I don't expect it to two to be significantly in 2020.
Still in the low quantity so you know.
Five years 10, therefore prototypes mainly in testing.
And since we are.
We have been selected and potentially going to be Furthermore, selected too.
A production of new vehicles or upgrade.
These programs are.
For longer than the spread over a few years.
So significant revenues, we start only in 2022 really.
Got it okay.
And then I'm wondering.
Or maybe the fourth quarter.
We've talked about different geographies can you break down roughly an exact percentages of where revenues by geography compared to maybe a year ago.
It's very similar in geography compared to the year ago, you know us is about.
Around 50%, maybe it will increase this European.
Israel is a big chunk mainly.
To export full integrators, but steel.
And the rest of the royalties.
Gradually increasing its about two now 30%.
30% not so small.
Yes.
And then.
Okay. The first question that was asked and my final question.
Based on what you know as the quarters almost done.
First quarter expected to be stronger than the fourth quarter in terms revenue is it more even or is there seasonality it makes to first quarter.
Step back from the fourth quarter.
What we can say is that the fourth quarter of 19, which we just announced is the baseline to the sequential growth that we expect quarterly Elong 2020.
Okay. Thank you.
Yes.
The next question is from Scott Huntingtons of both down over cash.
Anderson and cow. Please go ahead.
Good morning, I have a couple of questions here for you this morning.
First off congrats on Germantown.
And I, just wondering regarding Germantown as you ramp up.
Our your breakevens going to be similar to volume in Israel and when do you anticipate.
Humans.
Being sufficient to allow you to be breakeven.
Breakeven company wise or no no no the U.S. installation.
Oh.
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You know they elect distillation shield.
She has become a profitable this year.
Durable.
Thank you and in in gas releases.
And then probably guilty for and that.
Trend.
Frame the window, a little better, but you had mentioned.
For new products that anticipated being released.
The first of the year after the first year and of course.
Hey, sitting in my Cherry likes and think it's January 1st.
But that was never stated by you folks I'm just wondering how the.
New products are moving along and when we can anticipate.
A release of such.
One was already released.
Was there radar for Lps and along 2019.
Our.
Three more will be released.
And the 2020.
And not later by mid 22 anyway.
Already thank you folks.
Thank you.
The next question is from Michael Bursik of National Securities. Please go ahead.
Hi, guys two real quick questions or one is.
With what's been going on China et cetera.
I assume it doesn't affect your supply chain at all.
And your assumption is correct.
Okay. Good to have it on paper.
Secondly.
Now the germantown facilities going to be up and running.
Is that kind of too.
Take away from capacity in trial, right now and how.
Will that affect overall margins.
First of all.
The growth season, not only in the United States, It's about 60%. So we don't believe that day.
The low in Israel will not be or youre because of the youre swing, but.
And it will stabilize it even quantities.
A.
What was the second question.
That was it just the overall margins so you.
Our corporate level and we do.
We do not expect.
To change.
Great. Thank you very much for the answers.
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Thank you if there any additional questions. Please press star one.
If you wish to cancer request. Please press star to please standby, while we pull for more questions.
There are no further questions at this time, Mr. Sell out would you like to make your concluding statement.
Thank you for heater excuse me there is there isn't additional question would you like to take another question yes.
Okay. There is a further question by Scott Huntington of bowed out over cash Anderson and CFO. Please go ahead.
Yes, I'm sorry for jumping back on I, just got thinking a little bit about the through releases are scheduled for later in 2020.
Wonder if that has been schedule all along or.
There's been a snafu or delay or is everything rolling along according to game plan.
Everything is as planned.
Beautiful thank you for that thank you.
Mr sell out would you like to make your concluding statement.
Yes.
For the management I would like to thank you for your interest in our business. We look forward to speaking to you.
And updating your next quarter and have a good day.
Okay.
Thank you. This concludes the Radha electronic industries fourth quarter and full year 2019 results conference call.
Thank you for your participation you May go ahead and disconnect.
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Okay.