Q4 2020 Ultralife Corp Earnings Call
Good day and the welcome to the as the Ultra that you'll July of Corporation fourth quarter of 22 trying to earnings really East conference call. At this time for opening remarks, and introductions introductions I'd like to try and the call over to me is Jody perfect and please go ahead.
Thank you for a day and good morning, everyone and thank you for joining US. This morning from Ultra lights corporations conference call for the fourth quarter of physical of 2020.
And today's call and like popular Ultralights, President and CEO and she'll Fain Ultra lights, Chief Financial Officer.
And you're earning scratch the least with you should earlier this morning, and if anyone who's not yet received the copy I invite you to visit the company's website www Dot ultra light of core Dot Com, where you find the be linked to the Investor Relations section.
Before turning the call over to management and I would like to remind everyone that some statements made during the conference call will contain and forward looking statements and based on current expectations actual results could you from materially from the projected as a result of various risks and uncertainties. These include potential reductions and revenues from keep customers and certain global and.
Economic conditions and acceptance of new products out of global basis some of that.
Cautious and dressers knocked the place undue reliance and forward looking statements, which reflect the companies analysis only as of today's date somebody undertakes and you'll obligation to publicly update forward looking statements to reflect the subsequent events or circumstances.
Further information on these and other factors that could affect ultra likes financial results you can keep it and the company's filings with those securities and Exchange Commission, including the latest annual report on form 10-K, and the latest quarterly report on form to and cute.
And addition on today's call management will be for work and certain non-GAAP neutral measures.
And considers to be usefulness matrix and differ from the gap is non-GAAP measures should be considered a supplemental the corresponding figures.
That I would now like to turn the call over to my the morning like.
Good morning, Jody and thank you everyone for joining the call today.
The they all start by making some brief overall comments about our two four and total your 2020 operating performance.
The which I'll turn the call would of Phil who will take you to the details of financial results. After.
After bill of finished I'll provide and update on the progress against her of 2020 of revenue initiatives and the focus areas for 2021 before opening it up for questions.
For the fourth quarter of 2020.
Ah battery and her age of products core business.
The third consecutive quarter of double digit organic revenue growth year over year.
Total be any fourthquarter medical sales and be any government and defense. The house, we're up strongly despite the ongoing operational impact of the pandemic and supply chain logistics and customer of availability.
The solid Corbina performance fully upset continued oil and gas market sluggishness and.
Led to a total queue for being the revenue increase year over year.
Communications systems revenue was down year over year again, primarily due to the prior year of vehicle adapter the amount of power amp by ourselves under the U S. Army is network of monitors Asian initiatives.
As a result total company was below the previous year.
Sequentially quarter over quarter revenue has increased and when combined with discipline cost control led to an increase of the operating income by over 70%.
For the child of year 2020, with the unprecedented the operational and market challenges due to COVID-19.
We were humbled to achieve modest year of your revenue growth and company wide profitability.
Also focus working capital management throughout the year improved our ear and debt and cash position.
And a few minutes I'll give you further updates and a revenue initiatives.
But first of all like to ask outright CFL fill pain to take you through additional details of.
The fourth quarter of 2020 financial performance Phil.
Thank you, Mike and good morning, everyone.
Earlier. This morning, we released our fourth quarter results for.
For the quarter and the December 31st 2020.
And you also filed their form 10-K with the S E C and.
And of updated our Investor presentation, which you can find and the Investor Relations section of our website.
I would like to thank all of those the help make this happen.
For the fourth quarter consolidated revenue totaled 29 million.
Representing of 2 million or 6.6% decrease from the 31 million reported for the fourth quarter of 2019.
The year over year of variance reflects a significant increase and battery fails to our medical and government defense customers, which was offset by lower oil and gas market and communication system sales.
Estimates that approximately 2.6 million of the year over year, very and is due to demand impacts associated with COVID-19.
With the substantial increase and sales of medical batteries.
Especially those used and ventilators respirators, and infusion pumps more than offset by weakness and the oil and gas and international industrial markets.
[noise] revenue from her battery and the energy product segment or 25.3 million.
And the increase of 0.7% from last year.
Attributable to of 94.3% increase and medical battery sales and.
And and the 18.8% increase and government defense sales.
Offset by of 67.4% decline and oil and gas market sales.
Sales for a core battery business, we're at the highest quarterly level and 10 years with medical sales for the fourth quarter, comprising 38% of total sales for the segment.
The sale of split between commercial and government defense.
Was 68 32 compared to 67 33 for the 2019 fourthquarter.
And the domestic to international split was 50 446 compared to 49 51 last year.
Revenue of Smart communication systems segment, or 3.7 million a decrease of 37.6 from last year the.
The deep decrease reflects 2019 shipments of vehicle amplifier adapter systems to support the U S armies network modernization initiatives under delivery orders and announced and October 2018. These.
These orders were completed and the second quarter of 2020.
And of consolidated basis, commercial sales and government defense sales decreased 8% and 4.9% respectively from the 20th 19 period.
The commercial to government defense sales split was 50 446 versus 50 545 for the year earlier quarter.
Arkansas date of gross profit was 7.4 million compared to 9.4 million for the 20th 19 period.
As a percentage of total revenues consolidated gross margin was 25.4% versus 32% for last year's fourthquarter.
Gross profit for a battery and energy products business decreased to 6.4 million from 6.6 million.
Gross margin was 25.2% of decrease of 120 basis points from 26.4% reported last year, reflecting the product mix impact of lower oil and gas market sales and incremental costs and 2020 associated with the transition of of multi.
Dude of new products to higher volume production.
For a communication system segment gross profit was 1 million compared to 2.7 million for the year earlier period.
Gross margin of 26.3% compared to 46.1% for the last from last year, primarily due to the high volume production and sales mix impact of vehicle amplifier adapter systems for the U S Army and 2019.
Operating expenses decreased point 7 million or 10.9% from 6.9 million last year to 6.1 million.
This decrease succeeded the overall percentage reduction and revenues and attributable to strict control over all discretionary spending and headcount reductions earlier and the year and.
As a percentage of revenues operating expenses were 22, 21.2% down and 100 basis points from 22.2% for last year's fourth quarter.
Operating income for the fourth quarter of 2020 was 1.2 million compared to 2.5 million for the 2019 quarter, reflecting the net financial impact of COVID-19, and lower year over your sales for communication systems.
And operating margin was 4.2% for the 2020 period versus 8% last year driven by the lower gross margins.
During the fourth quarter. The company was awarded approximately 1.6 million net of fees.
And you US District court approval and order authorizing the distribution of funds to claimants and the lithium ion battery antitrust settlement the.
The funds have been released by the court and we expect receipt and the very and your future the.
The recognition of our settlement of war, which pertains to purchase is made and prior periods is reported with other income and expense and our statement of earnings.
Our tax provision for the fourth quarter was point 7 million compared to the point 5 million for the 2019 quarter computer that statutory rates.
While excluding the benefits of our net operating losses and tax credit carryforwards for GAAP reporting purposes of.
Accordingly, a report of tax provision for the fourth quarter is based on and effective rate of 24.4%.
While utilization of our deferred tax asset will drive the tax provision down to only point 1 million or 4.2% when we pay our taxes.
We expect that the net operating losses and tax credits included and are deferred tax assets will offset all of the U S taxes for the foreseeable future.
Using the 24.4% statutory tax rate net income was 2.1 million or 13 cents per share and the diluted basis for the 2024th quarter. This compares to net income of 1.6 million or 10 cents per share and the diluted basis for the 2019 quarter.
We utilize the adjusted EPS to reflect actual taxes paid or to be paid and.
And define adjusted EPS is EPS, excluding the provision for none cash U S taxes expect it to be fully offset by our net operating loss carryforwards another tax credits.
As noted and the supplementary table and their earnings release, adjusted EPS and a diluted basis was 17 cents per share for the 2024th quarter compared to 13 cents for the 2019 fourthquarter.
We estimate that the adverse impact of COVID-19 tour adjusted EPS for the fourth quarter with seven cents per share.
[noise] throughout these challenge and times, we continued careful management of our liquidity.
We ended 2020 with the significantly strength and balance sheet and enhanced liquidity.
With cash on hand, increasing 44% from 7.4 million and last year to 10.7 million.
And that decreasing 91% from 17.3 million last year to 1.5 million.
We ended 2020 with work and capital of 45.8 million and the current ratio of 3.4.
And as a result, we remain well positioned to fund organic growth initiatives, including new product development and strategic capital expenditures, well expediting of organic growth through accretive emanate.
Going forward with our resilient business model ample liquidity diversified and markets and growth initiatives, we remain steadfast the focused unreleased and the full average potential of our business model I will now turn it back to me.
[laughter].
Thank you so.
To date, the combination of our business model growth strategy and execution has enabled us to deliver respectable revenue growth and to sustained profitability and operational cash flow and.
And even the most difficult of times.
Regarding our growth strategy, continuing and 2021, and we were focused on increasing our revenue growth opportunities through diversification.
Expansion of marketing and sales reach.
New product development and strategic Capex and.
And potential act was just physicians.
Or the better and your products business.
Diversification and marketing and sales reach expansion into the global commercial markets and international government of fence markets has lessened our historic of concentration and the U S government the best Marcus.
And two four of 2020 hour of UK operations continue to drive this global diversification strategy with the sales increasing it of strong double digit rate and at record levels.
We continued to expand our participation and major medical device OEM company companies with new and existing products.
And our UK checked and the resources have also been instrumental in the global development of new.
The design forthcoming medical cart batteries systems.
For 2021, and the UK team has the salad order book with its current customer base and they will also serve as of key European launch point, but I knew three bought range of products from already engaged potential customers.
Looking deeper into our commercial revenue and.
Global of medical revenues, the pandemic continues to boost demand from global medical customers.
And and Q4 2020 medical revenue was up 94% year over year.
Our of medical sales and two four of 2020 represented 38% of total battery and your product revenues further validating our diversification strategy.
We saw strong demand from existing customers with applications for ventilators respirators, infusions pumps digital X ray and surgical robots.
We also received delivery orders for existing medical costs, and blanket and or a multiyear agreements, which totaled four point and one $8 million.
Looking at nine medical commercial revenue and Q4 of 2020 or Sweet team provided approximately 9% of total battery and your product sales.
Shipments, where the customers and the core oil and gas space as well as for subsidy electrification battery projects.
Despite the very challenging COVID-19 and economic circumstances, and the core oil and gas market.
Sweet was EPS accretive for the year.
Capitalizing on medical and so you say of opportunities and.
Near term.
We're cautious about the when and.
And the how much the return of oil and against the estimate is.
As of Covid, 19, shutdowns loosen up and consumer travel starts doing trees and.
In the meantime, we continue to make investments and the manufacturing capability and certifications persuaded do more of our medical business.
And we're also pursuing new business opportunities with our C save subsea battery modules.
As large autonomous underwater vehicles, subsea oil and gas infrastructure and Oceanography industries.
Begin to see the ease of use safety and depth advantage of our pressure tolerant rechargeable battery modules.
Looking back and we did this bolt on the acquisition of 2019.
We were excited and not only about the diversification potential with this core business, but also about obtaining of highly valuable technical team of battery pack and charter system engineers of the technicians that we could add to a new product development based revenue growth initiatives and our commercial and markets.
We are delighted that we have this additional engineering and technical of bandwidth and have recently applied it's and not only new medical projects, but also do some exciting new government defense products.
We also look forward to their involvement as we roll out our new E. R. A sign of core itself.
Particularly for smart metering as of tracking and other industrial applications.
For being a U S government defense business revenue was up 39% year over year and represented approximately 34% of total be any product sales.
Included where radio battery shipments to OA and price.
As well as final shipments under a $4.8 million and 50 390 DLA spot by of war.
We also continue to make progress against testing requirements.
<unk> excuse me for over $85 million and untapped D. O D. D. L. A idea of accuse award and 2017, including the 21 million dollar of next generation 50, 390, and the $49 million and 50 790 primary batteries.
Whereas the amount and timing of deliveries under the idea of two contracts are at the discretion of the L. A.
And we are hopeful testing will be completed and some initial revenue and start later and 2021.
And the meantime, we continue to strengthen our relationships with the OEM price and have new radio of battery of products, incorporating leading edge technology that will help support our customers needs a multiple platforms for several years to come.
Regarding battery and your products, new product development and two four of 2020, 12% of revenues from products introduced less than or equal to three years ago.
During the fourth quarter of 2020 continued progress is made on several projects and couldn't but not limited to.
Oh, and public safety radio batteries and.
And the next generation medical cart battery.
And you of military can form of battery.
And next Gen Ruggedize modular large format energy storage batteries.
Looking forward, we will further expand of new product of them and work and the medical automated guy that vehicle and robotics markets with the variety of new products, the weird talking to bring the market this year.
We use investment and new product development, and multi generational product planning to not only pursue new revenue streams and identified and and markets.
But to us to collaborate remained close with and provide value to Archie customers.
In addition to the investment and new product development and multi generational product planning we.
We are also continuing to deploy strategic capex investment and our facilities to strengthen our competitive of differentiation.
Our goal is to produce the highest value proposition best cloudy and the safest products and close collaboration with the and market and OEM customers.
And whichever one or more of our global locations best serve their supply chain.
And Ah Newark, New York facility.
Implementation of automated manufacturing is and the final stages for a new premium what's the I'm Mad and use the acts like three Bob cell.
Survey and the I O T wireless devices market as well as the next generation three balls smoke alarms.
And that's the tracking metering medical and portable lighting devices.
While we're ramping up production to fulfill initial customer orders.
The other potential large customers are continuing evaluation testing.
This new product provides customers with world class product performance safety and of competitive price value proposition as.
As well as the supply chain proximity of being made and the United States.
[noise] during the come and year. We're also looking to introduce I see it backs blended battery chemistry and of similar form factor to the three of old cell, which will offer significantly longer runtime and enhance system reliability to address growing applications and the I O T and remote sensor markets.
And China, we can change the advanced and invest and they're the final court ear. So upgrade project involving extensive process improvements, which will help us expand our total of available market with newly identified commercial and industrial applications.
Samples of the newly formulated and and design ear of high rate products continue the ship throughout you for the pro rate he ourselves ready and available for sampling and Q1 2021.
This next generation of lithium final quite cells is targeted at some of the most of the meaning applications.
For a decade plus year, so life and high energy density is key on the.
The a limited number of global players currently make these products, which can lead to longer lead times.
Trading and opportunity as customers look for alternative and backup suppliers.
We also plan to use our China operations for various battery pack of assemblies at the request of some of our global customers.
Lastly, there continues to be broad customer interest and our China produced and saw battery and multiple of medical and tracking applications that required the street thin power for body worn electronics and sensors with one, particularly attractive segment being patient vital signs of monitoring.
And communication systems, and Q4 of 2020, new product development of revenue for products less than or equal. The three years ago represented approximately 22% of communications systems revenues.
The challenge of impact of COVID-19, and continue to be thought with global military sales, including delays due to the U S Army vehicle production line limitations.
Overall sales were lower but engagement of primary oh and customers, where it sustained at a high rate.
Using virtual towards the support engagement and collaboration.
Allow them and continue and new product development and planning for future program Awards.
One bright spot and Q4 was the purchase of reward from of channel partner for an international Ministry of the fence four of 21 amplifiers and handheld vehicle adapters valued at $3.1 million instead of the ship throughout the first half of 2021.
Looking forward.
If additional vehicles of outfitted as expected and.
Our orders are possible.
Regarding the U S armies handheld manpack small forfeit and lead of radio programs.
The operational tests and evaluations are now underway.
With the U S Army HMS program office.
And is expected that the U S Army will release program funds to move forward with higher rates production orders apply and completion of of these O T. He's with the follow on contract opportunities anticipated and 2021.
Communication systems remains well positioned for future business within the domestic military radio market with.
The proven products simple.
It's importing both single and two channel.
<unk> and Mantech radios.
<unk>.
[noise] and the integrated solutions.
As an update to the system integration of cutting edge serve of technology mentioned previously.
Fielding assessment and operational testing.
Of the initial survey cases has been completed.
And expectations for initial system orders and support of Protium upgrades are expected and the first half of 2021.
The initial scope of of the multi chase configurations, providing integration of of the server.
M P S and the answer of items to support operations.
The same case configuration for another program will begin test trials, starting and February with prepare procurement anticipated later and 2021.
Momentum continues of other commercial applications, which leverage our experience and past performance of a government defense system integration into new global markets.
We remained very optimistic about this emerging dropped the area and further expansion of the key O M relationship as the man's materialize and 2021.
And closing for the.
The fourth quarter of 2020, we.
We were pleased that are strong performance and a battery and your products Corp businesses.
Unable to achieve the sought after total company.
Out of your revenue growth Harbor slight.
Disciplined execution on the part of all of our business units focused on serving our customers and a very difficult COVID-19 and economic environment.
Once again and sustained profitability positive cash flow and of solid balance sheet weed.
We'd like to think of each of our dedicated employees for the individual contributions to the outcome.
As we embark on 2021, while Covid and energy market uncertainties remain.
We nevertheless are focused on starting to deliver initial revenue from the transformation of projects we've been working on for the past few years.
And we speak of transformation of projects, we're referring to the new meaningful sustainable annual revenue streams and attractive growth markets from new competitively differentiated products.
And communications systems. These include but are not limited to Patel.
Potential leader radio follow and awards and.
<unk>, Oh, Yeah, Manpack radio answers.
Integrated computing solutions.
And the next generation 20th of amplifiers.
And B N E. A transformation of project lists includes but is not limited to.
The new the three of all product line and.
The new ER product line.
The smart you one battery product line the the.
Two 790 of <unk> ex blend primary battery.
And several other new public safety pin some medical and subsidy electrification battery packs.
The industries, we serve.
Military defense energy and medical.
Provide us durability and resiliency too.
Right out of the current economic headwinds.
We expect of the actions underway.
Will improve our revenue growth rate and revenue and EPS consistency.
As a total of company.
Sure and beyond sheet.
Solid cash flow from operations and disciplined execution of our business amount of our management team of.
Four does the opportunity.
The simultaneous of pursue organic revenue growth.
Through our transformational projects.
Invest and new product development and strategic Capex for competitive advantage.
And seek out impactful acquisitions.
Our goal and 2021.
It's the deliver our next year of profitable growth of.
And this concludes my prepared remarks, and we'd be happy to open up the top of questions.
Yeah.
Thank you, ladies and gentlemen of if you wish to ask a question at this time. Please people of approaching star one and your telephone keypad. Please make sure of the Misfunction on the phone is switched up too and all of your signal to reach of at the the equipment. If you wish to cancel your request. Please the global person and start to again it is star one.
You're asking the question.
The the first question comes from Gary.
Suffers from Elliott Roosevelt management. Please go ahead and.
Good morning, guys and congratulations on the 70 per cent improvement and operating income on the sequential basis.
And could you.
Uhm My first question is.
And we're still struggling with the gross margin Mike you know I know the bill is to get it back. The 30% is is the entire five per cent differential.
Due to the the fact that it's it's it's the deleveraging from communication systems no versus the period of the time of year. When you have those contract the shipments and the decline and oil and gas from Sweden.
Yeah. It is three pieces as I mentioned and the prepared remarks, I mean, you're correct. The deleveraging of the kind of system of volume a little bit of that the same thing and the oil and gas space and then really the transition of some products from the new product development of realm and to the high speed production dressed and some excess scrap of.
And some some challenge of along the way, they're nothing insurmountable and we're making some great improvements to to get past that but I would say, it's those three things collectively to add it to that a slight drop and gross margin.
Okay and.
You do any room on the expense side to address the address of all of the function of volume and and maybe one of the volume comes back and the second half of the this year and then we'll take care of itself.
Yeah, we're trying to be extremely of frugal and operating expenses at the same time, we're trying to get these somebody's transformational projects and to realize and revenue. So little tradeoff, we don't want to cut back too much on things, it's gonna drive us.
Towards the future revenue growth.
But but we are aware of the fact that gross margins are a little bit lower so we have been tighter on operating expenses as indicated and filled remarks.
Okay, and I might've missed this but.
The opportunity and communications with the commercial customer that you alluded to last quarter and.
I I.
And I might've missed the did you make any comments on that.
It just continues to the testing I mean, and we have a number of these new integrated solutions that we have and market interest and our core cover and defense space.
And some of the same other industries were working and like oil and gas and and factoring and automation and.
We're just really trying to pursue those opportunities as well as the maybe some opportunities and the five G space and.
We don't want to get too much into it because it's still emerging but the potential of quite large if it should it come to fruition. So we're trying to be transparent and talking about what we're working on but not overstock until we actually have something tangible we can talk about.
Understood is is it is it a brand new product or is it just you.
You know tweaking the amplifiers and we already sell to the military.
Yeah, I think I think it's really interesting if you look at com systems over the last decade.
And when we started out the least within my tenure there had a really strong position and 21 and body of one amplifiers. They had some vehicle amplifiers.
And and and and we really migrated they're offering to be and integrated solution and so it ended up having you know.
[noise] fires plus power supplies for deployment and vehicles and and other type of opportunities and so we're really leveraging this experience and integrating somebody is pretty sophisticated devices, particularly for the harsh environments of the military and oil and gas and all of the kinds of places and.
And and this really plays off of that with some other key electronics of electronics being servers, and uninterruptible power supplies and the white. So it's a natural migration of the integrated solutions thrust of calm systems. It's been of great job of doing over the last couple of years and into a commercial space. So so we're really excited about that.
Okay. Thank you from that color in terms of sweet So I know, it's gonna be a little bit of of lagging indicator, but you know.
The price of your boy and was gone from like 45 Bucks a pack of 54 and.
And there's speculation that the you know with vaccines and.
That could be you know economic recovery and the back half travel could pick up or to get back to six day.
Yeah, I I'm wondering if you guys think <unk> you know the bottom done sweet and that doesn't mean, it's gonna increase yet you know until we're into more of an economic recovery and if it'd be the web does get back to 60 and I'll go do you think we've seen the worst in terms of bookings there.
And I I I tend to look at it this way I I tend to look at you know how did our team there perform under and excruciating sort of <unk>.
Circumstances, I mean, I can't think of a more robust stress tests and that business went through last year and interact and matter as they were still EPS accretive for the year and so they they performed well and and the corner of while and gas business that they did have.
And they did some things and and medical R. C safe business is continuing to emerge and so you know.
It's hard to make projections of what's gonna happen and the oil industry and there's a lot of rhetoric and you know swirling around that.
But we're just trying to make sure that the highly valuable technical and and great team.
And we fought and when he bought the company are deployed as efficiently as possible and if the oil and gas to the should come back and a strong we don't know when that would be or not.
But you know and we certainly expect something will happen, but in the meantime, you know, we're trying to to really control and definitely by getting them involved and all the kinds of things. So I I'm very pleased and how they performed last year and.
And and and Heck I'm not expecting that'd be another difficult year of like there was the last year of this coming here.
Okay. Thank you and thank you for that color and again I'm not trying to be a Monday morning quarterback and you said it was accretive and your and your expanding and the dealt with the areas and then if there's any rebound around and gas that'll that'll be wonderful, but you know it is and acquisition that within the cyclical business type of commodity is it safe to say your neck.
The acquisition will be more on the lines of that the tronic with you know of medical or some industry that secular of got secular growth as opposed to cyclical where the window of back instead of of potentially and her face.
It's hard to say I mean at any given time, we're farming through multiple different opportunities for them and having.
And many times you start.
A relationship and one set of economic circumstances, and then you end up having the opportunity to maybe do and acquisition and the difference instead of that kind of economic circumstances, you know, we tried to and and make it a real concerted effort to understand what it is we think that the acquisition brings to the from the strategic level of from the financial perspective.
And and sometimes you know you you you have to do the acquisition when it may not be and the most advantageous economic cycle and make the wrong way of saying really we're just trying to evaluate individual acquisitions on the on the individual merits and.
And I wouldn't make any blanket statements and at this point about whether or not and be a cyclical and non cyclical type of business.
Okay, Alright, it just seems a lot easier to buy something with you know where the where it.
It is and secular glut of of you know like medical people getting older and that's not gonna change one of the.
The second week of areas Uhm could we plane and is there anything with the you know take advantage of the work from home and environment and you can take and since you know with I D and thank you mentioned it since I D and the commentary.
Uhm and.
Fulfillment you know the all the peoples chipping stuck the home do the Covid and that all the Amazon accelerated.
And the digital thing what are the the there is can we play and besides medical and that or something.
I think you're right, you're and I mean, we are looking at all of those spaces that you talked about one of the areas that and.
Maybe the rock reference of a little bit of our prepared remarks of some of the.
Automated kind of vehicles and warehousing and distribution of.
You know of course anything medical and it was very attracted to US I mean, I think we're trying to looked at.
Acquisitions that would.
Contribute to.
Ah Ah Ah reputation of being some of the performers really strongly and I'm mission critical type applications. So I think of everything that you mentioned is on the table.
I think with with more and more things.
Things happening with the E V.
And and charging stations and all the different opportunities that are evolving there.
We're looking at what would make sense for us.
To participate there so and I think everything and on the table at this point and it's not really at all I'll say about it.
Yeah of something and he would certainly be upset and.
Like you talked about three vote against that plays into the into those things you know we made a lot of investment and the last couple of years and and <unk> do you think that'll start contributing and.
Or lose the third quarter or was that of fourthquarter contribution.
I would hope the sooner than the fourth quarter for sure.
And the Super Okay, and the same with the I D. I T is and you said, the 85 million Rene and and you called two of the bigger once and talked about testing completing and the possibility of borders is that also of possibilities. The Q3 or is that too for.
Probably later I mean, and it really has to do with the you know the.
The testing and and the evaluation of by the customer and then the next step action items and that cycle of back and forth cycle has slowed down and and the result of Covid.
People working out of their homes and those kinds of things.
Alright, and does that does that also the move the leaders and and and I just from hopefully Harris just the two weeks ago and get another I think it was $57 million and 59 million L Rep and within the news release day reiterated it was a 3.9 billion dollar of war.
And for 100000 radios and so I think that's the the third or fourth of low rate initial production order. So I'm just curious I don't you know notice field, how many low rate orders do get before you go into the high rate order and then the ZIP three is at five is at seven and.
And.
And also following up on that if they get of <unk>. If they go to the since there's two manufacturers and for the next Gen Radio Alright, and Oh, three Harris got that 57 million does that mean tell US also got the 57 million order the day that apples and apples or does it.
Different times for the different companies.
What's the answer your first question you know what we do know for the overall leader program and sit there going through the operational and testing evaluations right now and.
And you know I don't have specific.
Statistical.
Variances too how many hours until you get into of hiring production type of war and but what I do know is that the.
Oh Chinese that are taking place right now or a key milestone to get into that high rate of production.
Area so.
You know work cautiously optimistic to get through the OTT.
Phase and Ah depending of people need.
Amplifiers or V E as or of people named radio batteries.
We're ready willing and able for any highway towards the should happen to come our way.
Okay. So there was a possibility of that.
Whether it's low rate or highway that there could be some that's half of the your business 23244 that I would think since you completed shipment of pilots and Q2 of last year.
And you're very amplifiers I bet. The the you know maybe the get close to work and down and inventory.
I mean, that's the that's a good you know.
Oh wait.
Point of view and that I don't have any way to confirm the ninth at this point.
Okay.
So I just want to.
<unk> you know from like the mile uplifting down. So you just did a seven or eight cents quarter and.
During the worst of the times for oil and gas and without you know leader and the idea of accuse really helping in terms of future business.
So it it seems to me it's it's.
Sorry, the back half of this year comparisons get easier year over year on the EPS front and.
And and for them and get it doesn't get worker got the did actually that's getting better and and if the.
The leader.
Kicks in uhm, the and tactics in the idea of accused kicked in and you know maybe get your first revenue is out of the sick and vacation so commercial communications effort.
You know the back half could look pretty interesting and and after four years of have and earnings roughly between I guess 37 and 41 sense.
Maybe we could start to to break out sofa at seven or eight cents now with all of that when did and the face and no contribution for all of the C. G planted.
It it could get pretty interesting and then when I looked at it if you can get back to 10 12 cents quarters. You know that implies you know growth again kind of EPS basis, and obviously the revenue of grow on top of that you know once the street, you know with the stocks been and the penalty box because they're running.
ZIP and flat.
And we're trading out of terrible discount the book, but once the street and you anticipate positive earnings comparisons and earnings started to grow again and it seems to me once you get back to that 40 50 cent level on an annual basis the star.
<unk> could easily go back to 10, and then we don't have the math works. If you can get the you know 50 cents plus made of the stocks 12, and 15 60 cents plus of annual earnings 15 cent quarters the.
The you know could make a run to the 20th so and the nowhere sort of on your own and wear off the radar, even though the volume of the stock has been robust there's nowhere analyst coverage. So I guess I'm, what I'm, saying is and usually the stock market's that's the anticipate.
And six months in advance so we shouldn't be too far.
Everything else being equal and assuming the third quarter. You know is gonna be good and then we can approach. The fact that we're gonna have and up here and earnings on the annual basis and started having nice you know your of of your of comparisons and two three that the stock shouldn't be too far from may be moving to the upside and anticipate.
And of all of this and the fact that restart and here. It's six Bucks set of you know 20, 25% discount the book I think with this latest quarter book is over set and and a quarter now with the clean balance sheet. So in light of all of that and like I guess, what I'm, saying is does it make sense come this spring.
And summer ahead of the Q3 print that maybe we start to put something in place for you know a little bit of the different I R and.
To really you know get the street interested and us and drink the seeds for instead of waiting until the number of shit and then doing it you know after the fact, you know the sort of of getting out there and maybe this summer early for the for the three quarter print the AD people ready to maybe take a look.
And I saw one of our stock in anticipation of better things.
I think you bring about very good points, Gary and and have to be honest with you I can't wait to get out.
Have you ever seeing the.
Over 45 customers of year, you know face to face.
I mean, and there's no greater oxygen and the face to face from the customer where we spend a ton of time and and then we applied that well a lot of face to face with the investors So and as soon as we get the all clear and and things get back to the or whatever and new normal is I'll probably be gone for about a month, just going out and and sitting and and customer offices and investor offices and.
And trying to pick their brain to what we can do to serve both constituents better the bite also pass it over to fill Philip you have any comments you'd like that sure Gary you know I certainly I certainly.
Agree with everything that you had mentioned and all they have a few more of a reference points that are are in our 10-K that was issued this morning, you know.
And we'd go back and look at what of a realistic estimate of and I'm.
2020 of the fight net financial impact of Covid I would say sales were adversely impacted by 7 million for the year operating profit 2.6 million of the impact on GAAP. EPS was was 12 cents the impact out of adjusted EPS was 15 cents. So.
You know hopefully God will and we'll have that and are back and the not too distant future. Another point that I did I do a lot of reference that's that's also deep and and the 10-Q and had K and I'll save you. Some digging is when you look at our our the the backlog exiting two four of 2020, which was just shy of $40 million.
And you compare that to the backlog of exiting of the prior year of which was.
Which was approximately $42 million and.
And you look at 40 million versus $42 million and then you just take a step deeper we talked about the delivery of $4.8 million of of of the of the DLA fifty-three 90 of batteries, we talked about concluding the the lead of radio shipments, all which were and the backlog X.
Sitting last year. So you know I I think there are resilient business model of the ample liquidity the diverse and markets and the growth opportunities that we have especially though with the transformational projects. The covered by Mike Once those hit you know I think we're in of of.
The the position that the.
We want to be in to recognize the leverage and scalability of our of our business model.
And that's very helpful. Fill so let me just drill down and that a little more so.
So if you take out from the 42 million and you mentioned the the the 4.8 and then the.
[noise] communications the the the Tallis order, so apples and apples was last year's backlog actually like the originally and the 32 million.
And I would say you know and.
Always try to do it on and the apples to apples basis, and and it's it's more cherry picking than anything that those are the the two biggest obvious ones that the fallout because they're always looking apples and apples and you're not quite able to get there. So instead of looking backwards at the comparison, which we do our our goal is just to look forward and.
And to to increase that and shirt ensure that we're in a position to ship at all and and 2021, but I think overall, what you mentioned is correct.
Okay. So so.
Yes, and you're not gonna of any shipments and the first half of this year from that large contact the completed and Q2 last year and and the other idea of queue on top of it so.
Yeah, that's pretty significant that so maybe of 25, 30% increase and backlog apples and apples of with the possibility.
Of getting orders to ship and the bad canceled this year and any new awards out of town was sort of out from the Harris.
And as they work down there and inventories and and started shipping these new L lips and.
And one last question and.
I would have you refer to the 10-K, where all of this is explained and and detail. It's all publicly stated.
Okay Super and I don't know if this is a question are more of the the suggestion or and observation, but you know it's it's all of this comes to fruition and we get you know post COVID-19. So we don't have the headwinds and sweet and the you know get new businesses, you know, Mike and I just went through.
And the queue and airy for the back half of the year and.
You know, it's the earnings come through and the stocks back to you know eight 910 Bucks 12 Bucks whenever it goes two one and proving earnings and the expectation positive comparisons and the expectation that and.
You know we could grow this for two or three years and a row after being flat and I E. P. S bases for three or four years.
What would you consider possibly hiring and investment banker and let's say the stocks 10, and you haven't made and acquisition yet and then if you make it nice secular acquisition something with the little sex appeal, maybe medical or E D or whatever that's more secular than cyclical <unk>.
And you know at the same time of the acquisition you know maybe you do of secondary and you.
<unk>, you know a million and and a half 2 billion chairs with the stock of 10. So the balance sheet, you know gets less of the hate from the acquisition.
And my bring and on board and investment Bank or you know that could lead to sponsorship of analysts cover it because and and you guys did buy and two two and a half million chairs around four bucks for and and a half parts of the buyback program. So if you had an opportunity the issue that with a real sweet acquisitions and move the needle.
And it was accretive by doing it. It you know eight 910 and 11 whatever the stock is.
It could be of Whitman is is that something that you'd consider at that time.
Gary I'll, just say that we are surrounded herself with some outstanding resources and we'll keep it at that.
Okay, Alright, guys take again, congratulations on the 70 per cent of sequential improvement and operating income.
And fingers crossed for the new year.
Okay. Thank you Sir.
Cause the reminder to ask a question please signal depressing star one.
Is there a note for the questions in the queue and that will conclude today's the Q&A session and I would like to have the over the back over to Mike for any additional Covid remarks poetry and Mike.
Great well. Thank you once again for joining us for our fourth quarter of 2020 earnings call. We look forward to sharing with you our quarterly progress and each quarters conference call and the future is Philip mentioned and we put a number of documents out today and there's a new investor presentation of our website. So.
Please take a look everybody have a great and the same day.
And you can just today's called the principle. Thank you for your participation you may now disconnect.
And.