Q4 2020 Rada Electronic Industries Ltd Earnings Call
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[noise], ladies and gentlemen, thank you for standing by.
Welcome to the brought out of electronics industries fourth quarter and full year 'twenty 'twenty result conference call on.
All participants are at present in listen only mode. Following management's formal presentation instructions will be given for the question of the answer session.
As a reminder of the conference is being recorded you should have all received by now the company. The press release, if you have not received it please contact rather the investor relations team of GK Investor and public relations at 16466883559 of view it in the news section of the company.
The website.
At Www Dot Rada dotcom.
That's the hand over the call to Mr hotels of GK Investor Relations. Mr. <unk> would you like to begin. Please. Thank you operator of exactly what kind of low. He was on this conference call to discuss the weather fourth quarter and full years of government 20 years on.
I would like to thank Rada mentioned the hockey stick.
Of course.
With us on the cost of them you said the data.
She said executive officer of Israel.
Ryan Chief Financial Officer.
The over and summarize the key highlights of the quarter photos of Abbvie, who will provide the summary on the from actions. We will then open the call for the questions of non sufficient.
So let me start on that went out of the safe Harbor published seem to be the first release of the bigger.
Turning to the country's on these conference calls.
I would now like to introduce rather T O the drops in the northwest.
Thanks, Harold and welcome everybody to our full.
Full year, I think the fourth quarter of any calls.
It sounds like the results summary.
As you can imagine we are very pleased with all the record financial results.
We'll see in the quarter on for the full year.
We are really.
Happy with both of the top line.
The revenue I think the bottom line the profitability.
Well I think there's growth so maybe 2% per year over a year and for the.
The full year of 'twenty 'twenty compared to 19, 6% the quarterly when you're comparing to the fourth quarter of 19.
Our gross margin in the Q.
Q4 of which 79% of the growing to 48 per cent in Q3.
From the very stable 36 of the effect, we sustained for both 10 consecutive quarters.
Before then.
All of your production is up before we can get part of the high capacity now and better efficiency.
And as we grow sales further we expect to continue to improve our manufacturing of the fishing season.
Operating expenses are subsidizing taking into account of the significant growth in the top line.
The guilty of that day.
Growth in the Opex is of a much low rate and we're looking for 'twenty and 'twenty one we ex.
The opex to be.
The stock is stable.
And it means the very strong operating leverage and on business.
And going for the we can bring the much of the revenue growth down to the north on the line.
Our EBITDA of three.
The $9 million in this quarter of 17% of forward renewals share.
Those that we are enjoying the fruits of our investments we expect of the ability to further increase in the coming quarters.
We gave of any wider use of over $120 million for the year of player.
The one.
Guidance represent approximately 60% and more.
Year over a year of growth compared to the 'twenty 'twenty.
With our backlog growth the growth in the.
All of this come in the.
At the faster rate than the original expected.
Well, if the ability of the best the that we have.
It's been in the we are increasingly confident that that will be surprising.
We have a strong balance sheet of over 36 million of net cash at the end of the quarter.
The current cash revenue supports our current inventory levels and enables efficient restructuring of especially under the COVID-19. The environment. The Navy starts to continue to investing in our growth.
Allows us to focus on maintaining our R&D edge.
And to capitalize on some opportunities as.
As we identify them.
Let's talk about one of the opportunities that we identified the mixture of implemented the.
The recent days.
We are starting to organically build on our business.
One of such opportunities this weird or a tape.
The advantage of.
Is there any investment in the right free technologies limited and early stage Israeli startup company, introducing the very interesting annoyed if on three of our technology with when we assigned an investment too.
Well actually makes the tradeoffs for the more automated driver assistance systems or Adas.
Market.
The solutions.
All of them for both of the future of autonomous vehicles as well as the current one of total sneakers.
There are many technological similarity between the weight of Oxy works and the way we are thrilled to do.
You have to focus on the commercial current and future mobility market as opposed to us focusing on the defense.
Hence, we see strong potential synergies down the road.
We are currently investing some of the median and purchase flow for sample of the equity.
The investment carries an option to further increase the RFP.
Right.
For now involved with with the rehab board membership.
We remain focused on the exit.
<unk> of our current business under the significant the growth opportunities we are experiencing.
As of May be known to all of his line has the vibrant and innovative technology ecosystem also nicknamed the startup of nation with quite a few interesting relative I'm, sorry, the technologies companies addressing attractive and growing markets.
Our vision of all of that is the quality of synergetic radar technology hub broadening the commercial and lucrative market.
And later on why didn't it.
Although the geographies, where we have advantage of it.
Well, let's see if the first step towards the scope.
Again, our business focus right now is to cater for a message in that.
The emerging defense end markets.
We made only in any share of investments to have access to technologies, but the importantly, we do not want to take out of either of the ball and we continue to work towards our current growth.
Let's summarize.
We are outperforming the already high expectations of 20%.
The revenue grew 70% year over year.
Two of record of over 76 million in revenue.
In the year.
The business environment.
The difficult for everybody.
Gross margins are increasing.
Opex is stabilizing and we are increasingly benefiting from the leverage in the business.
We have to become solidly profitable with EBITDA of 17% in the last quarter and potential to improve this even further.
Based on all of its ability for 'twenty 'twenty, one we reiterate our.
And are optimistic about our revenue guidance of over $120 million this year.
And our current living and mature the technology addresses the demand the need for fast growing markets for the near term and we expect our growth the continuum.
For the foreseeable future.
We have taken the first step in broadening our vision to become the neither in the wider already the auto arena with our initial investment the north sea of very promising early stage oncology company.
And finally on bolting on with Evercore quarterly results, we believe.
With our upcoming quarters would be even better.
At this point I'd like to hand over on the discussion of the full of these right.
Thank you do the Quaker of everybody you can find out the results on the press release, we issued earlier today and I will provide the short summary of the fourth quarter and the full year results.
Fourth quarter revenues were $23 $3 million up 62% year over year for the year revenues were $76 2 million up 72% year over year.
Our gross margin in the fourth quarter was 39% 300 basis points of the loss over that of last year and the full year was 37% versus 36% of last year.
We're happy with this improvement in gross margin and you can expect the further improvement in the future of quantities will grow and production efficiency will improve Q.
Q4, operating expenses were $6 2 million compared to $5 3 million in Q4 of last year.
The full year operating expenses were $22 9 million compared to the $18 million in 2019.
I would like to point out that the Opex was 30% of our revenues in 2021, it was 41% of revenue in 2019.
So as we already mentioned the Opex is pretty stabilized.
Operating income was $2 $8 million in Q4 versus the loss of 207 thousands of dollars in Q4 of last year from.
For 2020, you hit on operating income of $5 5 million versus the operating loss of $2 $1 million of last year.
Q4, net income attributable to run on shareholders with $2 $6 million versus $295000 of low in Q4 of last year.
And for the year, we had $5 $6 million of net income versus the $2 billion of low.
<unk>.
Yeah.
We reported the record EBITDA for the fourth quarter of $3 9 million.
The retreat, which is 17% of revenue versus the EBITDA of 587004 per cent of revenue in Q4 of last year with.
For the full year EBITDA was going to recoup of $9 7 million authentic 13% of revenue versus 407000, or one percentage of revenue last year.
I would like to summarize and point out some highlights from our balance sheet as of December 31, 2020, we had $35 $8 million, the net cash and no material financial debt.
At the end of the year on shareholders' equity stood at $72 million financing, 67% of on balance sheet.
In summary is the.
Bill mentioned and as the financial results demonstrate we are very pleased with the focus and what has been the.
Complicated year for everyone.
And to my summary, we should now open the call for questions operator. Please.
Thank you.
Ladies and gentlemen at the time, we will begin the question answer session to profit.
The question Please press star one.
Canceling the request please press star two if you're on.
Correct.
Perhaps at the for quite some time on price.
The question will be called in the order of the Harrison. Please stand by while we poll for your questions.
First question is from Bryan Bryan Keane Deutsche Bank.
The law.
<unk> Global partners. Please go ahead.
Great. Thanks, so much for taking my question.
You mentioned I am sure, Matt obviously received the follow on driving growth of use of a share with us how many programs. They're large like this the makeup maybe a majority of the demand for example, the five or six large programs account for 50 or 60 per cent of the orders where it needs.
The man broad based over say hundreds of customers.
Oh, well, we don't have hundreds of customer share.
The I think.
Yes.
So, let's say potentially so yeah. It is spread for us it's a it's the widespread D&O.
And I am sure of is a significant volume for us is getting a it can be for driving the something like $20 million of revenues, maybe a bit more of this year, we thought we were already.
The backlog of faith in the.
We expect the and other order of the.
The.
Significant order of the.
About the.
74, additional the 72 additional vehicles with some of them will be delivered towards the second half of the year. So I am sure. The significant program. The G box. This day model in some of the program on the phone calls.
Lessing size of the competitors I'm sure, but it is significant the on quite a few of additional customers both in the U S and the.
And the rest of the oil go from cannot disclose at this stage, but the.
On a bit less of Williams, but significant so you know we it is for the.
Well, let's say in the.
Primary customers in the.
Additionally, during the less the listing sites.
What's the right helpful and then.
On the EPS side I'm.
You're still expecting from over 1000 radars for the eighth on and 60 per the Bradley in 'twenty 'twenty, one or the anything change in terms of delays or a.
Push forward, okay, and or are the other Aps the level you expect this year on the.
Average stages.
Oh, we've said already that the Ats will affect the top line only in the second half of 'twenty 'twenty, two and on the work mainly in 2023.
The three which was at the eight time on Brown, we gotta be the only true that we'll have small delivery. This year is that right.
Yeah.
We are going towards very minimal deliveries of prototype cities insignificant.
Sure on delivery channel.
We thought the net.
Next year.
On the law of lower scale Bradley's expected 2020 free CV 19, neither of these expected 2023 also.
The Ats will start affecting walk the only in 2023.
Got it.
Okay, and then you mentioned gross margins and line in the U S where the high capacity expense efficiencies.
I guess I'm curious with the long term target 40 per cent or double or triple in size in terms of revenue and build scale. What is a reasonable long term gross margin target for the company.
On things that give you.
Companies like golf product companies.
Especially in the defense you know if we do really well when we close the 40, but but the you'll know it is not the way.
Keep saying we are not the software company.
The there is a limit to the top line to the to the.
Gross margin. So if we do offer of 40, we'd be very happy with it.
Yeah.
And then lastly, if.
If you can comment on back of the racking technology will give us more details.
All of these radars being used in autonomous driving on the B B.
Nickel market in general the baby of supplier to some big solutions.
What kind of functionality they bring to that the automotive market.
It's too early it's too early to describe the you know we are taking a minority share of the falling but the whole idea is to address the share I E.
Price sensitive market with the <unk>.
The high end solutions the.
The game here.
Yes.
Excellent performance over price.
This ratio, that's what we need and doing the defense.
On today's technology of availability of components and small design of Santana and first of all the only can scan compensate the loss for.
What was that not so long ago by how well the team.
In case, the prices of Megan on the affordable.
There is the demand and pressure in the automotive market, even today to be better of things, but they don't let go about price. It so I'd seasoning unique situation of the.
You know April performance over the price the mix.
Meets the expectations of the market.
And also give something which pro forma of the skin and can meet the high demand that the potential autonomous cars.
Requiring until now the consensus was the the lidar and cash.
N D of the flight hours are expensive.
They come in with the ingenuity solution the King Air.
If the real high performance right on it.
The really affordable price has to this market, but again.
The early stage the on the verge of start testing within a few of monthly fee of one <unk>.
The one or two and also the Oems in this market and we will help them as much as we can and follow the close to me.
We will update every quarter when we have something here.
But this is the 14th of April.
Hey, Thanks for taking my questions. Thank you.
Hey, Brian.
The next question from Ken Herbert of Canaccord. Please go ahead.
Yes, hi, good evening.
Yes.
Hi, Ken.
Oh.
Maybe on the first of all.
Operating expenses were looks like about 26 to 27 per cent of sales in the quarter.
It's just that sort of as a percentage of sales it sounds like from your comments on the stability there the percentage of sales we should assume for 'twenty one.
I believe that the as you know revenue from 'twenty, one will flow from <unk>.
76, two once the line is that our guidance.
And definitely our Opex will grow at the.
The way smaller percentage so as time goes by the sense of revenue of the Opex will go down.
Okay.
Go down you know.
Can you provide any more specifics on on how much it goes to all of our maybe another way to ask the question is is it fair to assume the EBITDA margins for next year will hold in the sort of 15% to 16% range look we already achieved the 70%. So we can go and all of them.
Target is to bring it up the the 20 per cent.
And we definitely see as the.
Quantities the grow awareness of the top line would grow we definitely want to see all sales in this in this area of the 20 plus percent.
Okay.
And you're confident that's sustainable that from 'twenty, one 'twenty channel.
Yeah, Yeah that's.
That's the idea we increase the OPEC dramatically over the last couple of years, we've been very transparent with the market informing them, but this is what we're doing with built up of our U S presence and U S subsidiary Avaya for some growth out of Opex.
We'd be pretty dramatically on R&D efforts.
We're stabilizing.
Okay.
The excellent and <unk>.
Just wanted to sort of.
Follow up on the on the EPS.
Yes. The question it sounds like we shouldn't contract with the Netherlands.
L bits of it involves your radar that would then likely ship in 'twenty two and beyond.
Yes.
Okay, Okay, perfect and just one final question as well on rats.
Should we expect more investments the.
On the automotive sector.
Becomes maybe.
On an area, where you see synergies and opportunities for growth or strategically how should we view this initial investment.
The longer term goals.
Uh huh.
Look we are looking at.
Oh, all of them fall synergetic opportunities of all of the technology first.
Most of the market because there are not too many companies that are involved in the defense market like us.
And the I typically do go on a full we're looking for growth or on the technology and females female G. In the technology technological approach and the innovation and so on so the automotive and automotive market is the first one.
And the.
There are some adjustments day market as well, maybe you know the security markets.
Although you can find radar technologies today, which are available and Andrew what was the man.
You know and done in the past because of price or if you can you can see them in other places as well.
So we are we on.
Walking around the core of the technology.
Okay. So is it fair to say there are some the OSM natural synergies between your radar technology.
And Oh, she offers the but over time you see you see.
Greater opportunity there.
Yes, we can free even the way they they they do the write off of is very similar to how we did it.
Okay, and then might go on it although it on from here to there.
Naturally with the adaptation of the the frequency ranges are totally different but still there on the us on the.
Core although items with all of us.
Or on the signal processing, we can migrate their technology to autonomous immediately cause of the water market wise.
We are in this market and the very close to the customers when we install the oil guys on vehicles. It can be you know also.
Talking to the engineers the develop.
The unmanned vehicles in the low.
Inventory market, that's that's how we see we see strength and naturally.
And with quality of idea of it really falls in the next couple of years.
Alright, well, thank you very much I'll pass it back there.
Thank you Ken.
The next question is from Alex Silverman of all the best.
Please go ahead.
Most of my questions have been asked and answered can you.
To help us with how efficient the review process.
Have they gotten back the any semblance of normalcy.
Yeah.
Uh huh.
I'm sorry.
Because we did not get your question.
So so far for the past year.
Hi.
The.
The military review people have been working from home, we haven't seen very efficient has any.
And you've got returns of any level of normalcy. There are they back at any level of reviewing the on.
On a sort of the normal basis.
I see.
I think we can say that there is the of coffee fatigue roll over and things feel Don can we can through the origin of pace.
But we took it into account and the a lot of what we believe will happen.
We have to any of the U S vs. Here. So we do see where it's coming from we are beyond beyond the point of free.
If you know holding up close the fifth and so on because we are testing.
The programs are continuing installation of production all of those and such.
And we also took it into account when we are feeling of what can happen in the rest of the world, but generally speaking things are not yet normal sometimes we have to do you know the demonstrations of the wirelessly and we are overcoming the challenge and we are in the real time.
Exhibiting the outperformance of the potential customers all over the world full of death.
The creativity is happening, but on the outright thinks of slower Unfortunately.
That's helpful. Thank you very much of the rest of my questions were asked me on surface.
Sure.
Lincoln.
The next question is from Jeff Bernstein of Cowen. Please go ahead.
Hi, guys too that those born of that sort of a deal a couple.
Couple of questions for you on the balance sheet.
On the inventory days are up from stable despite.
The big growth you guys have had.
Just wondering how you're feeling about the inventory of some of its about the routes.
There's been a lot of sort of just reported.
Et cetera, and the weather.
That's the kind of sustainable going forward and then.
The receivable days of come way way down, but just interested in how the collections of rounds on the status.
Okay.
Yeah inventory wise, we took the decision.
The year ago.
The basically one full year of office.
Supply of components.
The components.
All of our houses and that's what we keep we are attentive to the hiccups in the market. That's come focused sales team the automotive market all of the but he does not affect US. We are closely monitoring the are putting all of the well ahead of time line.
The long term non skirmish approach. So we are not the not affected on if you take a look at our inventory level you can realize that.
And the bulk of collections Avi the adult collections of the good news is that you could have seen in the fourth quarter.
The cash from collection was the.
The the very very high.
Hi.
If you look at the accounts receivable.
Accounts receivable at the end of 'twenty 'twenty compared to the accounts receivable at the end of 2019. We total is the same figure despite the growth. So it means the collection is the is doing very very well.
Some of the price conventionally it again.
We experienced different pace of collection in the U S compared to the Israel and the rest of the world.
On the U S is the.
The money is becoming is coming to us.
Weaker content growth and as the U S revenue of ours.
The growing we experience the short cycle the collection, which is very good news flow.
Gotcha. Thank you.
The next question is from Iraq with the mines.
Please go ahead.
Well that's the unknown.
Do you think that being that the Seattle you bring to be at the it's even better for the time being all of U S. C bench on the wrong with this ties to the automobile industry is going to be involved in the deal.
Okay.
No, we're going to be a passage of minority and vessel of 12%.
The branch of alone is not involved because of the investment of rather.
I mean, he is involved the the chairman of product, but the the.
I mean.
The threat of it is investing in ROTC.
Okay.
My second question is I noticed that our E T F. The thread.
By the same with the captive.
The award is involved in the lab that are using parts of the management of arc and the other big games left out of into a kind of a company like lending from the Sun.
So.
What's the question please.
How do you think that's a sign of letting them know what's going on in the company decided that menu.
The list with new of argument that should be you know the people involved the eye in the.
The T S and running on time.
We're in touch with all of the relevant interest of why though whenever they need it is on the general basis I don't understand why this is unique.
Okay.
Thank you.
Thank you.
Thank you.
And you have additional questions. Please press star one if you spoke.
Cancel your request. Please press star two piece of bylaw of the call for more questions.
The number of each of them.
The next question is from Ken Herbert of Canaccord. Please go ahead.
Got it.
Recently started trading of shares in Tel Aviv on the stock exchange. There can you just provided investors from provide us an update on on the logic for that and then I mean, I think it makes a lot of sense and then how that's gone so far and how that helps to achieve the goals.
Oh, Okay first we opened up the.
The trading today in the opening ceremony so.
The milestone, let's say this morning, we thought of being traded the on Vela.
Excuse me.
So you know it's too early but I think the actually on all of these very yeah.
Very out of the stores, we have of quite a significant the.
The rest of day see healing is the.
Lots of execution of our primarily institutional the vessels in the hedge funds.
And you know here in the.
Okay, and the request of making the the trading for them regarding the.
Oh man hours and the and location. So we are of guarantees.
And then and we do hope that the it will be for the benefit of the company and then as well.
You know we in Israel. We are immediately included in the Tel Aviv.
90, which is the second the.
The second highest the index.
And the there is going to be on the ease of demand for the free.
Sure.
Our share of because we are going to be included not only means that the index, but also on technology and some others, probably 567 different index. It really of increased trading between the includes rather than in the in the lot of the portfolio of sort of institutional investors. So all of them all.
All in all.
So another on another vehicle that showed the should support the company and also the interest of.
Great. Thank you very much very nice quarter.
Thanks Ian.
There are no further questions at this time, Mr. <unk> would you like to make your concluding statement.
Yes. Thank you for the and we have fulfilled from management I would like to thank you all for continuing the interferon business.
Tomorrow, we'll be presenting the.
At the Cowen Conference and also if there's someone on one day of meetings.
I'm not sure of it.
You can see the joined but the price you'd like.
Otherwise, we look forward to speaking with you again soon probably in the next quarter of events.
Stay well and healthy and day to day tool. Thank you.
Thank you. This concludes the Rada electronic in the industries fourth quarter and full year 'twenty 'twenty result conference call.
You for your participation you May go ahead of the disconnect.
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Yeah.
Okay.
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