Q1 2021 Rada Electronic Industries Ltd Earnings Call
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Ladies and gentlemen, thank you for standing by welcome for the Rada Electronic industries first quarter 2021 results conference call.
All participants are at present in listen only mode. Following management's formal presentation instructions will be given for the question and answer session.
As a reminder, this conference is being recorded.
You have all received by now the company's press release.
You have not received it please contact <unk> Investor relations team of G K Investor and public relations at one six for 66883559, our view of it in the news section of the company's website Www dot right up the dotcom I would now like to hand over the call to Mr. Eglin health of GK Investor.
Mr. Helft would you like to begin please yeah. Thank you operator.
We welcome all of you for this conference call to discuss.
First quarter 2021 results with net.
And the other management for hosting this call.
We would ask for their on the program you said don't fill up the Chief Executive Officer.
The obvious right she's financials for sure.
The only and summarize the key highlights of Dakota, It's one of the.
He will provide the summary of the financials.
We went then open the call for the question and answer session.
Before we start the Mexico out of the Safe Harbor published in today's press release.
For two days for the contents of this conference call.
And with debt that would not actually if you use them on a C. O you said after the.
Go ahead for us.
Thank you.
Thank you all of our core plus fixed income.
Hmm.
We do need to stay on our financial results speak for themselves and operating really are detailed in the later in the use of it.
Bart.
The highlights on the following our revenue where all of a 25 million for.
For for the 60 70 ramp of some of the year over year and they are based.
Based on strength.
Compared to last quarter.
We expect all of the sequential quarterly revenue growth along the year.
The gross margin improved to 40%, which is the in line with the target for the Bill.
Adjusted EBITDA in the school Barry for a full force.
Medium or 19 at the Central Florida renewals.
And we should cross the go with the current credit 11 of Squirrel true operating now Jason the needs vary for some room for improvement of the next quarters.
We gave revenue guidance of of hiring.
The median borne off for the full year of 'twenty or 'twenty, one which is more than 60% from towards the last year.
We've got the.
This guidance is varied and we continued to spend by day for guidance.
We have of certain balance sheet.
The 96 million of any net cash at the end of third the Toyota.
And these photos of very very successful capital raise of $56 million and which would be the March.
The share also added a group of for long term, they're focused on the leading institutional investors from the U S for newsletters to our shareholders of three of portfolio.
It's also tightened the the connection between the other than some of them for the Wall Street, the leading investment banks.
Each of our focus on technology on defense companies and there are no cover of the body.
For the other leagues.
The current cash level the.
For both our current <unk> been fairly clear.
On a need to secure the supply chain, it's amazing for us.
Okay.
And manufacturing in the neighborhoods have to continuously invest for growth.
While the aim.
All of your production and he's got briefing with group. The appreciate it seems in the 35 of our U S market needs.
Meanwhile, our manufacturing capacity both from enjoying in the U S and increasing our inventory to accommodate to the semiconductor of real house prices retreat.
We treat all here of balance.
Especially for the borrowers also allows us to focus on maintaining the R. N D edge is I wouldnt describe the peak later in the call.
Capitalized on some opportunities as we identify them.
As discussed on.
Walker.
And in general a lot of the positive strengthening of our market mainly of our onshore on the counter UAS and basically defense continues to develop both in the new ex any more recently on global basis, we are simply see drilling the attraction from the European and middle Eastern markets.
Sure I know the emerging for us and our pipeline for beauty of the board.
Beyond the ones, we have already delivered to customers, we anticipate significant upside from follow on orders to the initial of older. We have the effect of sites will fall in the all in production.
Specifically for you worked on other programs New York for the tree E. G. The programming the pulls on the FERC Corp.
For the any one of the ease of use of dozens of afforded us the.
On the U S Army I'm sure of program is the funded opiate.
The U S Army award of the General Dynamics Index.
The training for $12 2 billion.
With the foreign corrupt covering for the eggs in 144 systems, but you need 2023. The initial production for sure is 28 strike of vehicles, each of which hit the brakes for one of those who follow us the function would be the huge growth by midyear.
And we expect the vision of a production order for 50 93 book to Bill of Sidoti.
The spring and the Detroit.
Yeah.
Additionally, the basically said if the counter UAS for pension programs in the North Sea all of you could break things into Otas or program for for.
After satisfying the significant urgent needs for the.
U S Air force and so going through various integration along the 'twenty 'twenty, an umbrella of growing convenience for testing.
A cheap for both our growth in 'twenty 'twenty, two and onwards.
In terms of the Andas for Paul.
For Ya fighting vehicle vehicles, I think the protection of fixed income for parking vehicles.
It's the you probably may know, we are part of the Elba Island free solution currently.
And the the Israel Israeli economy. It free of development is ongoing fear of production of implementing for any planning tool of the scope of this for learnings over the 2000 right of over a few of you.
The other side is worthy of IV <unk>.
The <unk>, we've deployed over 2021 'twenty 'twenty two.
Three of our production expected from there into an expanded suite of total for the.
And the scope of the first regarding the for over 600 very dark.
We believe the standard potentially for other than one day gains.
There are several of our additional EPS for 17 of our pipeline of requiring the pinch older provincially thousands of free dog.
Deliveries to start in 2023 of the onwards.
We are on the verge launching of the.
The if you're on the new products. This year in addition to the.
I see the chart for the economy of free.
And we should start field testing.
Joining me worried on towards the end of this year.
The first is the end of any charter next day may chocolate for an extra day there.
If we lose share of the average our February.
The advanced stuff, the kind of radar with high accuracy of its wide frequency bands.
Speaking of our processing.
All the time, you shouldn't capabilities and all the goodies that make all of their all radar and the year of further more.
The uniquely adapted the than the other.
The 0.2 of them.
Moving to the aim.
The Colorado sorted maneuver force all of these unique features with Nike.
For our combined for near term protection solutions, such as the direct energy went from systems and the others.
The other radar is the extended the in HR or accelerate share.
And half of the range of two of our image of our family for.
Right out to the.
The address new for infrastructure with the reported results the infection and fire controls and capabilities such exploring defense on GAAP feeding.
All of these radar should maintain all of our global leadership in the market the succor, Colorado for the menu for foods.
The increasing the R. A T.
Part of the addressable market and ensuring growth in the coming year.
In summary.
We are pro forming of the according to our plans and expectations and the experienced significant and sustainable growth.
Based on all of our visibility.
The 21 of we reiterate our revenue guidance, it's over 170 million of door on for this year with continued sequential quarterly growth.
And all of the appropriate margins on all of delivery, we aim debt and feel comfortable about.
We expect our growth to come.
Premium for the foreseeable future and finally on the wider reporting of our first for ever quarterly results with.
It's clear that the upcoming quarter, we'll continue to do better.
I would like at this point of 100 or the discretion over to Avi Israel of our CFO.
Thank you Julie welcome to all of our free participant you can find our results on the press release, we issued earlier today and I will provide the short summary of the fifth quarter in the.
First quarter results political revenues were at credit $22 million up 67% year over year.
Our gross margin in the first quarter was 40% the 36% in the.
The interest.
First quarter of last year.
Operating expenses of $6 4 million from $35 3 million in this quarter of last year for operating income was $3 6 million in the quarter versus $46000 in the first quarter of last year.
Q1.
Net income was $3 8 million.
Versus 170000.
In the first quarter of last year.
We reported the adjusted EBITDA for the first quarter of for $8 million.
Which is 19% of our revenue versus the adjusted EBITDA of $49 million for 6% of our revenue in the first quarter of last year.
Also I'd like to summarize the and point out some highlights from our balance sheet as at the end of the first quarter. We had 96 from $2 million of net cash and zero financial debt.
At the same time on shareholders' equity stood at $132 2 million.
The financing of 67% of our balance sheet.
In summary, as Bill mentioned and as the financial results demonstrate we continue to be very pleased with our progress.
And for my summary, we shall now open the call for questions operator. Please.
Thank you ladies and gentlemen at this time, we will begin the question and answer session.
Have a question please press star one.
If you wish to cancel your request please press star two.
You are using speaker equipment kind of on the list of handset before pressing the numbers.
Questions will be called in the order. They are received please standby while we poll for your questions.
The first question is from the Sheila higher growth of Jefferies. Please go ahead.
Good morning to the anatomy and thank you for the time.
Yeah, there's been some commentary from the appears on push out of the back orders, obviously gets double the manufacturing capacity of the stocking up of inventory with the you're not seeing that perhaps can you just talk about.
Are you know the thing any program of delays you know all of them yet.
Top programs like the more.
The possible.
Yeah, we see EBITDA when we contact the our supplier component for clients, we see for a long delivery day and Luckily enough. We are protected because of the our strategy.
The handling the inventory of the long ago, when the COVID-19 farther than EBITDA before that was true.
The vivo to stock and a hold of any of these assets. So our inventories are.
For exempting any any hiccups in production Luckily enough and we are continuing to do that even further.
So let's talk about the go over the top for them for the quarter what drove the growth on how do you expect that since from throughout the year.
Well.
You know we reported the.
New business for for the 60 million daus.
In <unk> 'twenty 'twenty.
We significantly on new business from the fourth fourth quarter on and we actually delivered one of ours.
The need for recycling.
Less than the six months typically sometimes with even a few weeks depends on the urgency in the program.
So you know the first quarter or presents all of the debt.
The new business typically growth in the fourth quarter of 2020.
And the and you know what it's basically according to our plan.
Stocking of the yield is the.
For the.
As opposed to defend the other than trying to integrate those we are of a product. The company. We're starting the year with not the 100% naturally them free of backlog, so we ever quite the.
About 50% of the book and ship.
And we have the depth in this quarter as well.
In the first quarter of significant deliveries of our also per day I'm sure. We have not completed it we will completed by mid year for the 28 systems without the described in my discussion earlier and the other deliveries.
While the other integrated hosting the U S mainly of the U S, but not the only also as we mentioned in the media.
Yes.
In the in Europe and for Europe in Israeli companies.
For the <unk> as well.
So altogether.
It makes of the of the U S programs.
Mainly the insured and the basic.
The defense and the the other products.
Okay. Thank you I'll jump back in the standard.
Thank you.
Yes.
The next question is from Peter Arment of Baird. Please go ahead.
Yeah, good afternoon billions of having.
The baby in the presentation.
It looks like you increased the total addressable market I'm out of.
$30 from the from the last time I can see kind of presentation out there and it seems like that was tied to the air defense and short range surveillance radar market. So.
The jamul for protecting period, but what do you see the kind of increased both the bulk.
Both of them I guess on the USA on the rest of world.
Yeah, I think the state of the introduction of the <unk>.
The new radars, especially the extent of Charles Thats why are you done for our offering the piece actually doubling.
Definitely in the range of the the more thoughtful right out of the fleet currently and which is they are in the channel and we have deployed the idea of hundreds of them, but we see the need for one day.
The defense the island fear of.
For full fiction.
The demanding more than just like.
Protecting the against the causing the size and low flying Uavs.
We have seen the.
In the travel the attack in the in May of 2019 and in the other places in the U S basis, the in Iraq, and so on and that's the only we believe the V C.
Yeah.
In addressing these needs.
Not only in the U S Australia and other places is the evidence is the increasing the eye.
Addressable market. So we have the top teed up by $1 billion based on the offerings that we are going through.
To have very soon.
Okay. That's helpful. And then just are you still on track for the adding of additional and child the tankers that you've talked about previously for free.
Yes, absolutely.
So that'd be alive, and kicking and getting in the U S. The.
The ratio of the line is the board and in the all of those already out there for the adequate agenda. There will be within a few months are afraid of a livable.
Okay very good and just last on your thoughts on why now the.
On the cash flow positive this year.
All the growth of your Shanghai.
That's the it looks like it's tracking obviously you had great operating leverage as of this quarter yet.
Yet as you could've seen comp.
There too.
Compared to the cash balance at the end of the quarter with the one at the end of the year of the 2020 take out the <unk>.
Money that was raised in March we definitely see a very powerful cash.
Cash flow positive quarter for <unk>.
For the will continue to reduce the drip moving.
The main debt.
The we said that's where the.
Glenn considering the current situation of the components market, we plan to further increase on inventory to avoid any hiccups in the in the delivery for the.
Yes, we definitely expect the.
Positive cash flow per year.
I appreciate all the detail so I'll jump back in queue. Thanks.
The next question.
Question is from Ken Herbert of Canaccord. Please go ahead.
Uh huh.
Hey, good afternoon, and all of them.
Very nice quarter.
Thank you.
Okay.
Just wanted to follow up.
And Youre correct that you're still expecting.
The next sure of contracts in the second quarter or how does the timing work.
For from a subsequent share.
On units you talked about.
Yeah, we expect them on the virtue of the second line third quarter on we do believe that we will deliver the beef here.
Okay.
Great and.
Could you provide any more detail on on the growth of your screening.
In Europe for in other parts of the paint shop me I know, you've clearly got some work coming up you know on another.
Because of our areas of spectrum to provide any more details on any of the contracts for how many of these opportunities getting getting hold sort of left like you've seen in the United States.
Uh huh.
We anticipated that the let's say in April let's talk about Europe is the target the end user market and through Europe.
The two other places and that's it for like the offensive. So for Europe, we anticipate that that Europe itself NATO countries will adopt the UX concept. The <unk> sure on the counter UAS fewer of them and so on in the faith and we start to see debt.
You know we.
The experience in the U S. At the beginning of the fourth the steps they have and the and the local the solutions. We do believe that we have an energy profit.
At the end of cost performance.
When you are talking about the big quantities.
For the mobile the more of that focuses mainly on <unk>.
Making the difference. So this is the process of if we experience in the U S. Until we started to free all of those coming in the coming in and we were demonstrating in the U S. Since the 2014 and only in 17 that we got the the first significant order for the Marine Corps for the <unk> in it.
We started the year ago, we do believe it will be an accelerated for sale. So probably we felt the scene.
Let's say initial orders, we have already but more significantly older a lot of 'twenty 'twenty, two and mainly in 'twenty 'twenty free.
A true European companies and some other Israeli companies and elsewhere, we did fail to we don't sell directly you know our go to market is the why the insight and we sell to the integrators. So we don't sell directly we are part of the work consistent solutions.
And we sell through the medium of middle East on the end.
The needs through integrators.
Most of them European for both not only in D. C is happening the the coffee slowly down a bit.
But the seasonal regaining momentum.
As you have seen the bout 60, maybe a bit more of it.
60% of our revenue last year this year, we see Malawi the tire.
Where in the U S and the rest is Europe, and the and the middle East and in for.
Still we don't have yet any significant influence on the top line coming from equity protection, including me the length. It will reflect our I think it was the only in 2020 free and onward.
These are on the program will be already showing the whereas on.
It was in 2022.
That's the kind of European or Asian markets for.
Maybe its largest United States market.
Oh yeah.
We believe that the U S market is the it's about 50% of the of the addressable market.
And the rest of of the royalty is another 50%. We do believe that the India is the is a big potential maybe on all 15% out of that the 50%.
And the NDA is waking up very slowly we all know what's happening the robins coffee, but we are doing some the.
<unk> in India as well, we see it has the potential market what is the slow start to the market. Yes. We have we do believe that the rest of the world markets like the U S market.
Great well, thank you very much I'll pass the factor.
Thank you.
The next question is from Brian <unk> of Alliance Global Partners. Please go ahead.
Great. Thanks for taking my questions.
I think the scripts you made the active members.
Staying on that.
The issues of the supply chain that you could see impacts from the gross margin of our lead times and can you remind us where you source most of your supply.
Well, we are you on.
The supply chain is made of mainly towards.
Towards the offense and provide the components that's all for the semiconductor for let's say that all of you know.
<unk>.
Commercial off the shelf components and the the.
Sophisticated the parks are coming from the U S. I must say local look always the output from the U S and I think the USPS.
Is the you'll know in conquering the challenge of for establishing the supply chain internally, but the you'll know we will.
I was saying that there were any type of let's.
But you'll know it come from the Europe from the the far East we don't have any any components coming from China.
So that's about where we buy components from.
Well regarding the <unk> the <unk>.
Gross margin no we are avoiding debt at this point, we don't see any.
Any effect on the price we avoided by the by the inventories the inventory levels that we already have.
And the fact that we are now all during the war on material and we take into account the the longer lead times, we can pull of our debt.
In both north of 15 got a.
Our bill of material and not affecting all of the people who have good. This is why this is our way of doing this move.
Now and we did it in the past and not the.
Not later so touchwood.
We don't anticipate as of now any problems for all index.
Right.
From Thomas on the ATM programs.
Pipeline of the.
For the one and the additional ATM programs of the last six months or so on that.
There's a bunch of the won't start for a while I'm just curious.
Business development.
Yeah well.
We are part of the that'll be true our own face the we don't.
We are winning the programs on the one and this is the most of mature system that we are part of we have some incubation programs in other places of the world, but it is for early to talk about it will take quite a while until they mature maybe in the more than three years until they mature to products.
On delivery. So we are now part of a L. A P S.
And the.
We have the a tiny in Israel I think needle on floors. The program that was announced in the last six the six month as you mentioned the CV 19, and these are the tool and all the programs in the the pipeline is quite wide you know.
The Australia in Europe quite a few initiatives.
And once the LP pronounces debt, we will piggyback on debt and announce households.
A question on NAV.
The demand for your rate.
It's been robust do you see of course.
On the challenges with the new U S administration, given several of its something that it will be a loss of favorable overall bunch of environment.
Yes. This question also for us.
The full.
Or any current and we are asking ourselves the same but the answer of that we do based on what we read in the etsy them.
Is that we are addressing the new and emerging needs that are in demand and of children with growing demand.
The defense counter UAS, we also what happened in the in the war and number one on the prior about the more emphasize that's mobile and force protection and so on and so forth for we believe that the.
Even if there are the U.
No pressure of bunch of pressure they will be on.
Directed towards more of a legacy programs, mainly in the U S. I mean compared to the for the new needs that we are addressing.
Thank you.
The board.
The next question is from Austin Moeller of Canaccord. Please go ahead.
Hi, good evening from Boston.
I just had a quick question on <unk> could you speak yet as of the quantities that will be manufactured yet of the world.
The ones harsh nine program for 90 day programs for Iron.
I would assume that's probably not well revenue expected to be material more of a 2022 of 2023.
The city of $19 99.
The 90 vehicles as the.
I L because the northeast in the it will be in 2020 free and onwards.
Thank you for vehicles and 90 vehicles times for which is the new.
360 radars with some fuel some steroids can be close to 400.
Okay great.
And can you comment on any of the opportunities surrounding the C. Ram with any of your customers yet or is that still too early to discuss.
Yeah, I've mentioned debt I think oh, the therefore and the <unk>.
The needs are.
The combination of the Euro based protection.
There is excuse me there is a program the incubation named the APAC airbase Aero defense.
And also around focus on the there is the need to combine the.
Sure I'm aware of the.
As the Air Force Valence and counter of drugs and we are offering.
Danish and right of that can do all of these initiatives simultaneously. So we do believe there is the good potentially on the all in these airports as well.
Okay awesome.
And then you guys hit 40% gross margin in the quarter, she expects guidance sort of be the run rate going forward here for the next several quarters or do.
Do you expect a show of <unk>.
Actually it's the expand further beyond 40%, what what kind of dull.
So should we assume on that.
40% was actually of our.
Our target.
From long ago and the.
So for the steep now may be a bit earlier than what we thought the event.
I'd like to we'd like to stay at this level of immune there on maybe one the one two points.
More of that.
Must be on debt.
No no we want some margin for competition in the us.
And maybe for you if we have the IND.
The efficiency issues, which we don't anticipate but you know I believe this is a from a margin and we should look at our performance at this level.
Okay.
Okay got it well thank you for all of the color I appreciate it.
Okay.
If there are any of additional questions. Please press star one.
Wish to cancel your request please press star Kim Please standby, while we poll for more questions.
The next question is from I couldn't get on line ski. Please go ahead.
In the last conference call announcing the investment of 3 million balance.
That's true and retain an option for them.
So my question is based on yield of experience with vaccines so far.
Would you plan to invest more money in the upstream.
And kind of gave us more crowded about the legacy it's too early to discuss the.
Both again.
I'm, saying that it is too early to discuss debt.
Okay. Thank you.
Thank you.
Okay.
There are no further questions at this time, Mr. Sella would you like to make your concluding statement.
Yes.
On behalf of the rather at the management I would like to thank him.
And all of our investors and participants to this call.
And for the interest in our business and we look forward to speaking with you.
Against the <unk>.
They went on LC and day to day tool. Thank you.
Thank you. This concludes the Rada electronic industries first quarter 2021 results conference call. Thank you for your participation you May go ahead and disconnect.
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Moving on.
Thank you for.