Q4 2024 nLIGHT Inc Earnings Call
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This call is being recorded on Thursday February 27 2025.
Good afternoon, ladies and gentlemen, and welcome to the Enlink, Inc. Fourth quarter and year end 'twenty 'twenty four earnings call Conference call.
Speaker Change: I would now like to turn the conference over to John Mccurdy. Please go ahead.
At this time all lines are in listen only mode. Following the presentation, we will conduct a question and answer session.
John Mccurdy: Thank you and good afternoon, everyone.
John Mccurdy: John Marchetti, <unk> VP of corporate development and head of Investor Relations with me on the call today are Scott Keeney, Enlighten, chairman and CEO and Joe Corso <unk> CFO.
If at any time during this call you require immediate assistance. Please press star zero for the operator.
This call is being recorded on Thursday February 27, and 20 to 25.
John Mccurdy: Today's discussion will contain forward looking statements, including financial projections and plans for our business some of which are beyond our control, including the risks and uncertainties described from time to time in our SEC filings.
Speaker Change: I would now like to turn the conference over to John Mccurdy. Please go ahead.
John Marchetti: Thank you and good afternoon, everyone I'm, John Marchetti, <unk> VP of corporate development and the head of Investor Relations with me on the call today are Scott Keeney, Enlighten, chairman and CEO and Joe Corso and law.
John Mccurdy: Our results may differ materially from these projected on today's call and we undertake no obligation to update publicly any forward looking statement, except as required by law.
John Mccurdy: During the call, we will be discussing certain non-GAAP financial measures.
Speaker Change: CFO.
Speaker Change: Today's discussion will contain forward looking statements, including financial projections and plans for our business some of which are beyond our control, including the risks and uncertainties described from time to time in our SEC filings.
John Mccurdy: We have provided reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures in our earnings release, which can be found on the Investor Relations section of our website.
Scott King: I will now turn the call over to <unk>, Chairman and CEO Scott King.
Speaker Change: Our results may differ materially from these projected on today's call and we undertake no obligation to update publicly any forward looking statement, except as required by law.
John Mccurdy: Scott.
Scott King: Thank you John 2024 was a transformative year for enlighten revs.
Speaker Change: During the call, we will be discussing certain non-GAAP financial measures.
Scott King: Revenue from aerospace and defense grew to more than 60% of our total sales by the end of the year and has become the primary growth driver for us going forward.
Speaker Change: We have provided reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures in our earnings release, which can be found on the Investor Relations section of our website.
Scott King: Our aerospace and defense markets grew 20% year over year to a record $110 million and we saw significant growth in both our advanced development revenue as well as our defense product sales in.
Speaker Change: I will now turn the call over to <unk>, Chairman and CEO, Scott King Scott.
Scott King: In addition, our backlog increased by more than 50% year over year in 2024 to a record of $167 million as we continue to qualify new opportunities in both directed energy and laser sensing.
Speaker Change: Scott.
Speaker Change: Thank you John.
Speaker Change: 124 was a transformative year for enlighten.
Speaker Change: Revenue from aerospace and defense grew to more than 60% of our total sales by the end of the year and has become the primary growth driver for us going forward.
Scott King: And in light our work in defense remains aligned with the department of Defense, most critical priorities such as directed energy at laser sensing.
Speaker Change: Our aerospace and defense markets grew 20% year over year to a record $110 million and we saw significant growth in both our advanced development revenue as well as our defense product sales in.
Scott King: In directed energy interest in our high energy laser systems and components continues to grow as ongoing military operations in the middle East and Ukraine highlight the increasing need for advanced cost effective defensive weapons technology for.
Speaker Change: In addition, our backlog increased by more than 50% year over year in 2024 to a record $167 million as we continue to qualify new opportunities in both directed energy and laser sensing.
Scott King: For layered defense strategies, directed energy lasers complement traditional kinetic defenses by offering a deep magazine low cost per engagement and speed up light delivery.
Speaker Change: And in light our work in defense remains aligned with the department of Defense, most critical priorities such as directed energy laser sensing.
Addressing a wide range of targets, including drones rockets artillery mortars, and missiles with directed energy laser reduces the reliance on costly low inventory traditional weapons against low cost threats, thereby rebalancing the economics of protecting key assets.
Speaker Change: In directed energy interest in our high energy laser systems and components continues to grow as ongoing military operations in the middle East and Ukraine highlight the increasing need for advanced cost effective defensive weapons technology for.
Scott King: Enlighten has led the world in the development of high powered lasers for directed energy for over two decades, and recently demonstrated a 300 kilowatt of high brightness laser.
Speaker Change: For layered defense strategies, directed energy lasers complement traditional kinetic defenses by offering a deep magazine low cost per engagement and speed up late delivery.
Scott King: In late lasers are built in the U S incorporating patented and proprietary technologies across the company's entire technology stack from semiconductor lasers to high power fiber amplifiers being combined lasers and beam directors.
Speaker Change: Addressing a wide range of targets, including drones rockets artillery mortars, and missiles with directed energy laser reduces the reliance on costly low inventory traditional weapons against low cost threats, thereby rebalancing the economics of protecting key assets.
Scott King: We have generated revenue at nearly every level of vertical integration in the directed energy market and we have established ourselves as the most comprehensive supplier to the U S government other prime contractors and foreign allies.
Speaker Change: In light has led the world in the development of high powered lasers for directed energy for over two decades, and recently demonstrated a 300 kilowatt of high brightness laser.
We are making significant progress on our healthy two program, which as a reminder is a multi year Dod funded $171 million program to develop a one megawatt high energy laser with a completion date expected in 2026.
Speaker Change: In late lasers are built in the U S incorporating patented and proprietary technologies across the company's entire technology stack from semiconductor lasers to high power fiber and players being combined lasers and beam directors.
Scott King: We began shipping components towards this program in the second half of 2024, and we expect to accelerate those shipments throughout 2025.
Speaker Change: We have generated revenue at nearly every level of vertical integration in the directed energy market and we have established ourselves as the most comprehensive supplier to the U S government other prime contractors and foreign allies.
Scott King: Another critical directed energy program for enlighten is the Army's DM short effort, which is to develop a 50 kilowatt high energy laser for short range Air Defense.
Speaker Change: We are making significant progress on our healthy two program, which as a reminder is a multi year Dod funded $171 million program to develop a one megawatt high energy laser with a completion date expected in 2026.
Scott King: On this program enlighten is delivering a 50 kilowatt high energy laser to a prime contractor and during the second half of 2024, we finalize the design and delivered the majority of the most critical hardware components of the steam combined laser.
Speaker Change: We began shipping components towards this program in the second half of 2024, and we expect to accelerate those shipments throughout 2025.
Scott King: The success, we have achieved to date in both of these key programs reinforces the importance of our vertical integration strategy and the directed energy market, where we leverage our entire technology stack to deliver the highest demonstrated performance and most cost effective high energy lasers.
Speaker Change: Another critical directed energy program for enlighten is the Army's Tem short effort, which is to develop a 50 kilowatt high energy laser for short range Air Defense.
Speaker Change: On this program and light is delivering a 50 kilowatt high energy laser to a prime contractor and during the second half of 2024, we finalized the design and delivered the majority of the most critical hardware components of the steam combined laser.
Last month, the President signed an executive order to build the iron Dome for America.
Scott King: The executive order directs implementation of our next generation missile defense shield for the United States and splits to hypersonic advanced cruise missiles and other next generation aerial attacks.
Speaker Change: The success, we have achieved to date in both of these key programs reinforces the importance of our vertical integration strategy in the directed energy market, where we leverage our entire technology stack to deliver highest demonstrated performance and most cost effective high energy lasers.
Scott King: Within the executive order non kinetic missile defense capabilities, where specifically highlighted as an area for development with.
Scott King: With a mandate to build these systems in the United States. We believe we are uniquely positioned to benefit from this effort over the coming years.
Speaker Change: Last month, the President signed an executive order to build the iron Dome for America.
Scott King: And it's not just the U S military which sees the potential benefits of directed energy systems in October of last year, Israel Ministry of Defense announced that it would spend over $500 million towards iron beam and Israeli ground based laser system for defense against <unk> threats, including rockets mortars drones missiles with delivery of the initial unit of the weapons systems scheduled in this.
Speaker Change: Executive order direct implementation of our next generation missile defense shield for the United States. It splits take hypersonic advanced cruise missiles and other next generation aerial attacks.
Speaker Change: Within the executive order non kinetic missile defense capabilities, where specifically highlighted as an area for development.
Scott King: Calendar year.
Speaker Change: With a mandate to build these systems in the United States. We believe we are uniquely positioned to benefit from this effort over the coming years.
Scott King: Israel's announcement is another example of how direct energy is increasingly being viewed as a critical part of a layered defense strategy.
Speaker Change: And it's not just the U S military which sees the potential benefits of directed energy systems in October of last year, Israel Ministry of Defense announced that it would spend over $500 million towards higher beam and Israeli ground based laser system for defense against <unk> threats, including rockets mortars drones missiles with delivery of the initial unit of the weapons systems scheduled this.
Scott King: We also continue to gain momentum in our laser sensing markets in 2024.
Scott King: Our laser sensing products include missile guidance proximity detection range, finding and counter measures and have been incorporated into several significant and long running defense programs all of which remain key defense parties under the current administration.
Speaker Change: Calendar year.
Speaker Change: Israel's announcement is another example of how direct energy is increasingly being viewed as a critical part of a layered defense strategy.
Scott King: During 2024, we announced a new $25 million contract for an existing long running missile program and we began shipping against this award in the third quarter of last year we.
Speaker Change: We also continued to gain momentum in our laser sensing markets in 2020 for.
Scott King: We've also continued to make excellent progress in a handful of classified programs.
Speaker Change: Our laser sensing products include missile guidance proximity detection range, finding and counter measures and have been incorporated into several significant and long running defense programs all of which remain key defense parties under the current administration.
Scott King: And one of these we shipped our first AMD or engineering and manufacturing development unit.
Scott King: <unk> is focused on building testing and qualifying the solution to ensure it meets all operational requirements are.
Speaker Change: During 2024, we announced a new $25 million contract for an existing long running missile program and we began shipping against this award in the third quarter of last year.
Scott King: Our customers forecast suggests that the low rate initial production should start for this program in the latter half of 2025.
Scott King: Our growing pipeline of both directed energy programs and laser sensing opportunities gives us confidence that we can grow our revenue in aerospace and defense at least 25% in 2025.
Speaker Change: We've also continued to make excellent progress in a handful of classified programs.
Speaker Change: In one of these we shipped our first AMD or engineering and manufacturing development unit.
Scott King: Turning to our commercial markets too.
Speaker Change: <unk> phase is focused on building testing and qualifying the solution to ensure it meets all operational requirements are.
Scott King: 2024, it was another challenging year for our commercial markets with revenue down 25% year over year as a growing number of our customers face increasing competition from China and global manufacturing demand remained muted.
Speaker Change: Our customers forecast suggests that the low rate initial production should start for this program in the latter half of 2025.
Scott King: And with these headwinds expected to continue in 2025 I wanted to spend a few minutes on the strategic importance of these legacy markets for the future success of that light.
Speaker Change: Our growing pipeline of both directed energy programs and laser sensing opportunities gives us confidence that we can grow our revenue in aerospace and defense by at least 25% in 2025.
Scott King: First let me start with our semiconductor fab as many of you know, we design and manufacture our own gallium arsenide chips here in Vancouver, Washington.
Speaker Change: Turning to our commercial markets.
124, it was another challenging year for our commercial markets with revenue down 25% year over year as a growing number of our customers face increasing competition from China and global manufacturing demand remained muted.
Scott King: These chips or laser diodes are the foundational building blocks from nearly all of the work we do in lasers with over 25 years of chip level innovation decisions made at this level enable us to lead the world in demonstrated power for high energy lasers for directed energy and other defense applications.
Speaker Change: And with these headwinds expected to continue in 2025 I wanted to spend a few minutes on the strategic importance of these legacy markets for the future success of that light.
Scott King: Second if the commercial application of these lasers that have enabled us to bring key learnings into our defense work, ensuring that our lasers are not only the highest performing but also the most cost effective.
Speaker Change: First let me start with our semiconductor fab as many of you know, we design and manufacture our own gallium arsenide chips here in Vancouver, Washington.
These chips or laser diodes are the foundational building blocks for nearly all the work we do in lasers with over 25 years of chip level innovation decisions made at this level enable us to lead the world in demonstrated power for high energy lasers for direct energy and other defense applications.
Scott King: Many of the competitors, we see today in our defense markets are defense contractors not laser manufacturers.
Scott King: We believe that it is the application of our technology at scale with thousands of high power laser systems shipped to customers that truly differentiates our high energy lasers for defense.
Scott King: We have a demonstrated track record of designing and manufacturing these systems of delivering cost effective field maintenance programs to keep these lasers operational at optimal levels.
Speaker Change: Second if the commercial application of these lasers that have enabled us to bring key learnings into our defense work, ensuring that our lasers are not only the highest performing but also the most cost effective.
Scott King: And a history of commercial innovation, both in terms of performance and cost that we believe we will be increasingly important to the success of these systems in the future.
Speaker Change: Many of the competitors, we see today in our defense markets are defense contractors laser manufacturers.
Speaker Change: We believe that it is the application of our technology at scale with thousands of high power laser system shipped to customers that truly differentiates our high energy lasers for defense.
Scott King: Lastly, we see opportunities for growth, particularly longer term and metal additive manufacturing.
Scott King: Increasingly we are seeing growing interest from the aerospace and defense markets as they look to metal additive manufacturing to accelerate prototyping timelines and build resiliency into their supply chains with domestic capabilities for existing and future programs in.
Speaker Change: We have a demonstrated track record of designing and manufacturing these systems of delivering cost effective field maintenance programs to keep these lasers operational at optimal levels.
Speaker Change: <unk> had a history of commercial innovation, both in terms of performance and cost that we believe we will be increasingly important to the success of these systems in the future.
Scott King: In the emerging market for hypersonic another key focus area for the department of Defense, we see an expanding list of new companies and new programs leveraging metal additive manufacturing to design prototype and manufacture next generation munitions and unmanned aerial vehicles.
Speaker Change: Lastly, we see opportunities for growth, particularly longer term and metal additive manufacturing.
Speaker Change: Increasingly we are seeing growing interest from the aerospace and defense markets as they look to metal additive manufacturing to accelerate prototyping timelines and build resiliency into their supply chains with domestic capabilities for existing and future programs.
Scott King: We believe that one of the most critical challenges facing the additive manufacturing industry is to reduce the overall build time and overall cost per parts.
Scott King: To address this industry wide pinpoint and light continues to introduce new products and increase the printing speed and flexibility of additive manufacturing tools.
Speaker Change: In the emerging market for hypersonic.
Speaker Change: Another key focus area for the Department of Defense, we see an expanding list of new companies and new programs leveraging metal additive manufacturing to design prototype and manufacture next generation munitions and unmanned aerial vehicles.
Scott King: Corona FX dynamic beam shaping technology allows for high resolution printing for find detailed features while also offering faster build rates utilizing stable remote power.
Speaker Change: We believe that one of the most critical challenges facing the additive manufacturing industry is to reduce the overall bill time and overall cost per part.
Scott King: Making it the most versatile and efficient laser available for the additive manufacturing market.
Scott King: As these and other additive manufacturing opportunities mature over the next several years, we expect that our commercial lasers associated with this market will return to growth.
Speaker Change: To address this industry wide pinpoint and light continues to introduce new products that increase the protein speed and flexibility of additive manufacturing tools.
Scott King: In summary, 2024 was an important year for <unk> as revenue from aerospace and defense grew to more than 60% of our total sales by the end of the year and established itself as the primary growth driver for our business going forward.
Speaker Change: Our Corona FX dynamic beam shaping technology allows for high resolution printing for find detailed features while also offering faster build rates utilizing stable remote power.
Speaker Change: Making it the most versatile and efficient laser available for the additive manufacturing market.
Scott King: We completed the last leg of our manufacturing transition out of China, and now are operationally set to support the growth expected in our defense business.
Speaker Change: As these and other additive manufacturing opportunities mature over the next several years, we expect that our commercial lasers associated with this market will return to growth.
Scott King: As we look forward to 2025, I expect it to be a year of growth frontline.
Speaker Change: In summary, 2024 was an important year for in light as revenue from aerospace and defense grew to more than 60% of our total sales by the end of the year and established itself as the primary growth driver for our business going forward.
Scott King: While many of the headwinds in our commercial markets are expected to persist throughout the year I am optimistic that growth in aerospace and defense that it's well aligned with the key priorities for the department of defense.
Scott King: With good visibility on large and growing backlog and a solid balance sheet I expected. The significant progress that we made last year to accelerate with revenue growth of 25% or more expected in aerospace and defense markets as many of the programs previously announced continued to ramp.
Speaker Change: We completed the last leg of our manufacturing transition out of China, and now are operationally set to support the growth expected in our defense business.
Speaker Change: As we look forward to 2025, I expect it to be at your growth frontline.
Speaker Change: While many of the headwinds in our commercial markets are expected to persist throughout the year I am optimistic that growth in aerospace and defense that it's well aligned with the key priorities for the department of defense.
Scott King: I'd like to thank all of the enlighten employees for their hard work and execution over the past year. They continued to deliver great results for our customers and are the critical driver of building a successful and enduring high energy laser technology company.
Speaker Change: With good visibility.
Speaker Change: Large and growing backlog and a solid balance sheet I expected the significant progress that we made last year to accelerate with revenue growth of 25% or more expected in the aerospace and defense markets as many of the programs previously announced continued to ramp.
Scott King: With that I'll turn the call over to Joe to discuss our fourth quarter and full year financial results.
Joe Corso: Thank you Scott turning to the fourth quarter and full year financial results total revenue in the fourth quarter was $47 4 million a decrease of 9% compared to $51 9 million in the fourth quarter of 2023.
Speaker Change: I'd like to thank all of the in light employees for their hard work and execution over the past year. They continued to deliver great results for our customers and are the critical driver of building a successful and enduring high energy laser technology company.
Joe Corso: Product revenue for the fourth quarter was $31 7 million compared to $37 9 million in the fourth quarter of 2023.
Speaker Change: With that I will turn the call over to Joe to discuss our fourth quarter and full year financial results.
Joe Corso: The decrease in product revenue was partially offset by a 12% year over year increase in development revenue to $15 7 million.
Joe: Thank you Scott turning to the fourth quarter and full year financial results total revenue in the fourth quarter was $47 4 million a.
Joe Corso: As noted in our January pre announcement, the shortfall in fourth quarter revenue relative to the midpoint of guidance was primarily due to a continued weakness in our industrial market execution challenges and micro fabrication and the timing of delivery of a limited number of defense products for the year total revenue was 198 five.
Joe: A decrease of 9% compared to $51 9 million in.
Joe: In the fourth quarter of 2023.
Joe: Product revenue for the fourth quarter was $31 $7 million.
Joe: Compared to $37 9 million in the fourth quarter of 2023.
Joe: The decrease in product revenue was partially offset by a 12% year over year increase in development revenue to $15 7 million.
Joe Corso: A decrease of 5% compared to $209 9 million in 2023 due to declines in our micro fabrication and industrial markets.
Joe: As noted in our January pre announcements the shortfall in fourth quarter revenue relative to the midpoint of guidance was primarily due to a continued weakness in our industrial markets execution challenges and micro fabrication and the timing of delivery of a limited number of defense products for the year total revenue was 198 five.
Joe Corso: These declines were partially offset by strong growth in our aerospace and defense markets.
Joe Corso: Revenue from the aerospace and defense market increased 20% year over year to a record $109 5 million A&D products revenue increased by 25% year over year to $47 $7 million and A&D development revenue increased by 16% year over year to $61 9 million.
Joe: A decrease of 5% compared to $209 9 million in 2023 due to declines in our micro fabrication and industrial markets.
Joe Corso: Total gross margin in the fourth quarter was 2% compared to 19% in the fourth quarter of 2023.
Joe: These declines were partially offset by strong growth in our aerospace and defense markets revenue from the aerospace and defense market increased 20% year over year to a record $109 5 million A&D products revenue increased by 25% year over year to $47 $7 million in A&D development revenue increased by 16.
Joe Corso: Fourth quarter total gross margin was negatively impacted by non routine charges of approximately $6 million related primarily to inventory reserves on products for the industrial market.
Joe Corso: Adjusting for these non routine charges total gross margin for the fourth quarter would have been approximately 15%, which is still slightly below the bottom end of guidance due to lower than expected product sales and production volumes.
Joe: Percent year over year to $61 9 million.
Joe: Total gross margin in the fourth quarter was 2% compared to 19% in the fourth quarter of 2023.
Joe Corso: Product gross margin in the fourth quarter was 1% compared to 22% in the fourth quarter of 2023.
Joe: Fourth quarter total gross margin was negatively impacted by non routine charges of approximately $6 billion.
Joe Corso: Adjusting for non routine charges products' gross margins would have been approximately 20%.
Joe: Related primarily to inventory reserves on products for the industrial market.
Joe Corso: Development gross margin was 6% in the fourth quarter compared to 9% in the fourth quarter of 2023.
Joe: Adjusting for these non routine charges total gross margin for the fourth quarter would have been approximately 15%, which is still slightly below the bottom end of guidance due to lower than expected product sales and production volumes.
Joe Corso: For the year total gross margin was 17% compared with 22% in 2023.
Joe Corso: Product gross margin was 21% in 2024 compared to 27% in 2023.
Joe: Gross margin in the fourth quarter was 1% compared to 22% in the fourth quarter of 2023.
Joe Corso: The decrease in product gross margins in 2024 compared to 2023 and was driven by the impact of lower sales and production volumes on fixed manufacturing cost due to the decrease in overall customer demand and inventory charges in the fourth quarter of 2024 previously discussed.
Joe: Adjusting for non routine charges products' gross margins would have been approximately 20%.
Joe: Development gross margin was 6% in the fourth quarter compared to 9% in the fourth quarter of 2023.
Joe: For the year total gross margin was 17% compared with 22% in 2023.
Joe Corso: Partially by positive changes in sales mix.
Joe: Product gross margin was 21% in 2024 compared to 27% in 2023.
Joe Corso: <unk> gross margin was 7% in both years.
Joe Corso: non-GAAP operating expenses were $17 7 million for the fourth quarter compared to $17 4 million in the fourth quarter of 2023.
Joe: The decrease in product gross margins in 2024 compared to 2023 was driven by the impact of lower sales and production volumes on fixed manufacturing cost due to the decrease in overall customer demand and inventory charges in the fourth quarter of 2024 previously discussed offset partially by positive changes in sales mix.
Joe Corso: GAAP operating expenses in the fourth quarter were $27 6 million and included restructuring charges of $4 3 million.
Joe Corso: Primarily related to severance cost from our decision to shut down manufacturing operations in China.
Joe: Development gross margin was 7% in both years.
Joe Corso: Full year 2024, non-GAAP operating expenses were $71 2 million compared.
Joe: non-GAAP operating expenses were $17 7 million for the fourth quarter compared to $17 4 million in the fourth quarter of 2023.
Joe Corso: Compared to $67 $2 million in 2023.
Joe Corso: The year over year increase in non-GAAP operating expenses were driven by increases in employee compensation costs.
Joe: GAAP operating expenses in the fourth quarter were $27 6 million and included restructuring charges of $4 3 million <unk>.
Joe Corso: Spending on research and development projects and approximately $2 $3 billion of bad debt charges for customers in the industrial market.
Joe: Primarily related to severance costs from our decision to shut down manufacturing operations in China.
Joe Corso: We continually review the appropriate level of operating expenses for our business and we believe our current level of Opex is sufficient to support our long term growth objectives.
Joe: Full year 2024, non-GAAP operating expenses were $71 2 million.
Joe: Compared to $67 $2 million in 2023.
Joe Corso: Adjusted EBITDA for the fourth quarter was a loss of $11 $3 million, including the non routine charges discussed previously compared to $3 3 million in the fourth quarter of 2023.
Joe: The year over year increase in non-GAAP operating expenses were driven by increases in employee compensation costs spending on research and development projects and approximately $2 $3 billion of bad debt charges for customers in the industrial market.
Joe Corso: GAAP net loss for the fourth quarter was $25 million or <unk> 51 per share compared to a net loss of $13 2 million or <unk> 28 per share for the fourth quarter of 2023.
Joe: We continually review the appropriate level of operating expenses for our business and we believe our current level of Opex is sufficient to support our long term growth objectives.
Joe Corso: Turning now to the balance sheet. We ended 2024 with total cash cash equivalents restricted cash and investments of $109 million and no debt compared to $113 1 million at the end of 2023.
Joe: Adjusted EBITDA for the fourth quarter was a loss of $11 $3 million, including the non routine charges discussed previously compared to $3 $3 million in the fourth quarter of 2023.
Joe: GAAP net loss for the fourth quarter was $25 million or <unk> 51 per share compared to a net loss of $13 2 million or <unk> 28 per share for the fourth quarter of 2023.
Joe Corso: Inventory decreased to $48 million at the end of 2024 compared to $52 1 million.
Joe Corso: At the end of 2023.
Joe Corso: Turning now to guidance.
Joe: Turning now to the balance sheet. We ended 2024 with total cash cash equivalents restricted cash and investments of $109 million and no debt compared to $113 1 million at the end of 2023.
Joe Corso: Before discussing Q1 guidance I would like to reiterate that analyte is planning for meaningful growth in our A&D markets in 2025.
Joe Corso: Supporting our growth expectation is approximately $399 million.
Joe Corso: Funded and unfunded backlog as of December 31, 2024.
Joe: Inventory decreased to $40 8 million at the end of 2024 compared to $52 1 million at the end of 2023.
Joe Corso: Funded backlog of $167 million is 55% higher than it was at December 31 2023.
Joe: Turning now to guidance.
Joe Corso: And we are working under contracts with over $230 million of incremental aggregate down.
Joe: Before discussing Q1 guidance I'd like to reiterate that enlightens planning for meaningful growth in our A&D markets in 2025.
Joe Corso: Although execution challenges remaining given the highly technical nature of our defense work and while we can't control the specific timing of government programs. We are exceptionally well aligned with many of the dod's highest priority programs that we expect to support growth in 2025 and beyond.
Joe: Supporting our growth expectation is approximately $399 million.
Our funded and unfunded backlog as of December 31, 2024.
Joe: <unk> backlog of $167 million is 55% higher than it was at December 31, 2023, and we are working under contracts with over $230 million of incremental aggregate value.
Joe Corso: With respect to the first quarter of 2025 based on the information available today, we expect revenue to be in the range of $45 million to $51 million. The midpoint of $48 million includes approximately $33 million of product revenue and $15 million of development revenue.
Joe: Although execution challenges remain given the highly technical nature of our defense work and while we can't control the specific timing of government programs. We are exceptionally well aligned with many of the dod's highest priority programs that we expect to support growth in 2025 and beyond.
Joe Corso: Turning to gross margin.
Joe Corso: First quarter 2025 products gross margin is expected to be in the range of 16% to 20% and development gross margin to be approximately 8%, resulting in a total gross margin range of 13% to 17%.
Joe: With respect to the first quarter of 2025 based on the information available today, we expect revenue to be in the range of $45 million to $51 million.
Joe Corso: As we've mentioned previously is a vertically integrated manufacturing business gross margin is largely dependent on production volumes and the absorption of fixed manufacturing costs.
Joe: The midpoint of $48 million includes approximately $33 million of product revenue and $15 million of development revenue.
Joe Corso: Finally, we expect adjusted EBITDA for the first quarter of 2025 to be in the range of approximately negative six to negative $3 million and we continue to expect breakeven adjusted EBITDA with quarterly revenue in the $55 million to $60 million range with that I will turn the call over to the operator for questions.
Joe: Turning to gross margin.
Joe: First quarter 2025 product gross margin is expected to be in the range of 16% to 20% and development gross margin to be approximately 8%, resulting in a total gross margin range of 13% to 17%.
As we've mentioned previously is a vertically integrated manufacturing business gross margin is largely dependent on production volumes and the absorption of fixed manufacturing costs.
Joe Corso: Thank you ladies and gentlemen, we will now begin question and answer session should you have a question. Please press star followed by one on your Touchtone phone, you'll hear pump that Johan has been reached.
Joe: Finally, we expect adjusted EBITDA for the first quarter of 2025 to be in the range of approximately negative 6% to negative $3 million and we continue to expect breakeven adjusted EBITDA with quarterly revenue in the $55 million to $60 million range with that I will turn the call over to the operator for questions.
Joe Corso: Could you we should decline from the polling process. Please press star followed by the cheap.
Joe Corso: Yours.
Speaker Change: Using a speaker phone please lift the handset before pressing any keys.
Joe: Thank you ladies and gentlemen, we will now begin question and answer session should you have a question. Please press star followed by one on your Touchtone phone, you'll hear pump that Johan has been raised.
Speaker Change: We have your first question comes from Jim <unk> with Needham <unk> Company. Please go ahead.
Speaker Change: Alright. Thanks.
Speaker Change: Couple of questions.
Joe: Should you we should decline from the polling process. Please press star followed by the two.
First just given the backlog Yahoo, you obviously.
Joe: If you are.
Joe: Using a speaker phone please lift the handset before pressing on it Keith.
Speaker Change: <unk>.
Speaker Change: Fairly strong line of sight on the A&D business.
Speaker Change: How should we think about the.
Speaker Change: Revenues.
Speaker Change: We have your first question comes from Jim <unk> with Needham <unk> Company. Please go ahead.
Speaker Change: Over the course of the year, particularly in light of some of the challenges you experienced in Q4, which I'm assuming is.
Joe: Alright. Thanks.
Speaker Change: Behind you with respect to.
Speaker Change: Couple of questions.
Yeah, fulfilling some of the shipments.
Speaker Change: First just given the backlog yob with you obviously.
Speaker Change: Key customers.
Speaker Change: Yes, hi, Ken Thanks for the question. So I think in Scott's script, we talked about having confidence that our A&D markets should be up at least 25% over 2023, I think as we've talked about in the past that the.
Speaker Change: Uh huh.
Speaker Change: Fairly strong line of sight on the A&D business.
Speaker Change: Should we think about the <unk>.
Speaker Change: Revenues.
Speaker Change: Over the course of the year, particularly in light of.
Speaker Change: Some of the challenges you experienced in Q4, which I'm assuming.
Speaker Change: Quarterly trajectory of that sometimes is a little bit more difficult to predict but I think it's a reasonable approach to think as we move through the year revenue from the A&D markets will increase as we talked about on our pre announcement there are timing challenges right.
Speaker Change: Is behind you with respect to fulfilling.
Speaker Change: Full filling some of the shipments with key customers.
Ken: Yes, Hi, Ken.
Speaker Change: Thanks for the question. So I think in Scott's script, we talked about having confidence that our A&D markets should be up at least 25% over 2023, I think as we've talked about in the past that the.
Speaker Change: Round, delivering some of those products, but as.
Speaker Change: As we highlighted with the backlog we don't have very much in terms of go get for 2025, So we feel really good about.
Quarterly trajectory of that sometimes is a little bit more difficult to predict but I think it's a reasonable approach to think as we move through the year revenue from the A&D markets will increase as we talked about on our pre announcement there are timing challenges right.
Speaker Change: The way that the year is starting to look.
Speaker Change: Got it.
Speaker Change: And I apologize I joined the call a little bit and you may have provided some update.
Speaker Change: Yes.
Speaker Change: Around delivering some of those products, but.
Speaker Change: Where do you stand with the handoff to the contract manufacturing partners in Thailand.
Speaker Change: As we highlighted with the backlog we don't have very much in terms of go get for 2025, So we feel really good about.
Speaker Change: I guess, what I'm asking is.
Speaker Change: If the demand.
Speaker Change: Doesn't change in this area of the business does having that behind you what is it what does that do for gross margins in that part of our business I guess is what I'm asking.
The way that the year is starting to look.
Speaker Change: Got it.
Speaker Change: And I apologize I joined the call a little bit late and you may have provided some update but.
Speaker Change: Yes, I think Jim frankly, there will be some improvement in gross margins, obviously as we are working through the execution and the improvement in the transition back to a more full capacity that that that's got a little bit of an impact on our gross margin. So.
Speaker Change: Yes.
Speaker Change: Where do you stand with the handoff to the contract manufacturing partner in Thailand, I guess, what I'm asking is.
Speaker Change: If the demand.
Speaker Change: It doesn't change in this area of the business does having that.
Speaker Change: There will be some lift in gross margins due to that but I think what will be the bigger driver for gross margins is really just ramping volumes right that has been our story for quite some time with product revenues at these current levels.
Hi, and you what does it what does that.
Speaker Change: Thank you for gross margins in that part of the business I guess is what I'm asking.
Speaker Change: Yes, I think Jim frankly, there will be some improvement in gross margins, obviously as we are working through the execution and the improvement in the transition back to a more full capacity, that's got a little bit of an impact on our <unk>.
Speaker Change: It's difficult to have meaningful margin margin expansion, but as we work through those issues. It will be my margins will improve for sure.
Speaker Change: Gross margin so there will be some lift in gross margins due to that but I think what will be the bigger driver for gross margin is really just ramping volumes right that has been our story for quite some time with product revenues at these current levels. It's just it's difficult to have meaningful margin.
Speaker Change: Got it I'll jump back in the queue. Thank you.
Speaker Change: Thank you.
Speaker Change: Yeah.
Speaker Change: Your next question comes from Greg Palm with Craig Hallum Capital Group. Please go ahead.
Greg Palm: Yes, Thanks, Matt can we start with just a little bit more in terms of the assumptions that's baked into the Q1 guide. So for instance does it assume that.
Speaker Change: Expansion, but as we work through those issues it will be my margins will improve for sure.
Speaker Change: Got it I'll jump back in the queue. Thank you.
Speaker Change: Thank you.
Greg Palm: $4 million shortfall from Q4 is is fully recognized in Q1.
Greg Palm: Your next question comes from Greg Palm with Craig Hallum Capital Group. Please go ahead.
Greg Palm: Any other.
Greg Palm: Inventory reserves.
Speaker Change: That need to be taken in Q1, just a little bit more color on kind of how you're thinking about that specifically.
Greg Palm: Yeah. Thanks, Tim.
Tim: Start with just a little bit more.
Speaker Change: Sure Greg So note that the guide in Q1 to the midpoint doesn't assume that we've had a lot of that Q4 revenue rolls over into Q1, it's more natural in terms of the revenue demand and growth that we'll see in the first quarter I think trajectory wise.
Speaker Change: Of the assumptions that's baked into the Q1 guide. So for instance, does it assume that kind of $4 million shortfall from Q4 is is fully recognized in Q1.
Speaker Change: Are there any other inventory reserves.
Speaker Change: We as we said earlier in the call, we expected defense business to grow and the commercial business to decline in the first quarter sequentially.
That that need to be taken in Q1, just a little bit more color on kind of how you're thinking about that specifically.
Greg Palm: Sure Greg So no none.
Greg Palm: The guide in Q1 to the midpoint doesn't assume that we've had a lot of that Q4 revenue rolls over into Q1, it's more <unk>.
Speaker Change: In terms of gross margin, we don't we're not anticipating any.
Speaker Change: Unusual or nonrecurring type cost of goods issues that we saw in the in the fourth quarter. So it is getting back to a more normalized operating environment from a gross margin perspective.
Greg Palm: Natural in terms of the revenue demand and growth that we'll see in the first quarter I think trajectory wise as we as we said earlier in the call. We expect the defense business to grow and the commercial business too.
Speaker Change: Okay. So I think what I'd just heard was versus the 17 million in commercial revenue for Q4, you're expecting that to actually declined sequentially. In Q1, Yeah. I don't think were going to have I mean, we're not guiding specifically by market, but directionally, yes, we don't really see.
Greg Palm: Decline in the first quarter sequentially.
Greg Palm: In terms of gross margin, we don't we're not anticipating any.
Greg Palm: Unusual or nonrecurring type cost of goods issues that we saw in the in the fourth quarter. So it is getting back to a more normalized operating environment from a gross margin perspective.
Speaker Change: <unk> growth in the in the commercial side of the business and so as we think about that sequential movement of revenue, we do see a little bit of softening of the commercial revenue in the first quarter.
Greg Palm: Okay. So.
Speaker Change: I think what I just heard was versus the 17 million in commercial revenue for Q4, you're expecting that to actually declined sequentially in Q1.
Speaker Change: Okay.
Speaker Change: That applies.
Speaker Change: A pretty soft.
Speaker Change: Run rate I mean.
Speaker Change: Yeah, I don't think we're going to have I mean, we're not guiding specifically by market, but directionally, yes, we don't really see much growth in.
Speaker Change: How should we think about I mean, knowing that you didn't guide for that for the year, but how should we think about the sort of the remainder of the year.
Speaker Change: In the commercial side of the business and so as we think about that sequential movement of revenue, we do see a little bit of softening of the commercial revenue in the first quarter.
Speaker Change: Yeah, I think if in the commercial business as we've talked about we don't have the same level of visibility that we do in the defense business. So some of it is just trying to read the tea leaves and do our best to understand our customers' forecast and the broader macro demand environment as we think about the overall year.
Speaker Change: Okay.
Speaker Change: That implies.
Speaker Change: A pretty soft.
Speaker Change: Run rate I mean.
Speaker Change: How should we think about I mean, knowing that you didn't guide for that for the year, but how should we think about the sort of the remainder of the year.
Speaker Change: What we are planning for with some range of error bars is somewhere in the <unk>.
Speaker Change: 15% to 20% down on a.
Yeah, I think if in the commercial.
Speaker Change: <unk> business as we've talked about we don't have the same level of visibility that we do in the defense business. So some of it is just trying to read the tea leaves and do our best to understand our <unk>.
Speaker Change: Calendar 'twenty four versus a calendar 2023 now.
Speaker Change: Would it be better than that but yeah, absolutely could it be a little worse than that it could but I think what you should take away from this comment is we don't expect the commercial business in 2024 to drive any level of outsized growth right. I mean, we're managing it as best as we can but plus the growth in 2024 is really going to come from.
Speaker Change: Customers forecast and the broader macro demand environment as we think about the overall year. What we are planning for with some range of error bars at somewhere in the <unk>.
15% to 20% down on a.
Speaker Change: The A&D business.
Speaker Change: Calendar 'twenty four versus calendar 2023, now could it be better than that but yes, absolutely could it be a little worse than that it could but I think what.
Speaker Change: Yeah, Okay that makes sense.
Speaker Change: And then.
Speaker Change: Just last one on maybe industrial specifically.
Speaker Change: I'm curious.
Speaker Change: You should take away from this comment is we don't expect the commercial business in 2024 to drive any level of outsized growth right. I mean, we're managing it as best as we can but but the growth in 2024 is really going to come from the A&D business.
Speaker Change: If tariff implementation.
Speaker Change: Occurs that may be a broader scale I mean is that enough to stem some of the negative Chinese.
Speaker Change: <unk> impacts that have maybe evolved here over the last few quarters and just.
Speaker Change: Curious to get your thoughts around kind of overall pricing.
Speaker Change: Okay that makes sense and then.
Speaker Change: For that and maybe overall competition relative to where we were at this point last year.
Speaker Change: Just last one on maybe industrial specifically.
Speaker Change: I'm curious.
Greg Palm: Yes, Greg I mean, it's hard to predict where things are going to land with respect to tariffs.
Speaker Change: If tariff implementation.
Speaker Change: Occurs that may be a broader scale I mean is that enough to stem some of the negative Chinese competitive impacts that.
Speaker Change: But certainly directionally.
Speaker Change: Everything else being equal that could be beneficial it's not something that we are expecting and relying on but yes, certainly directionally that could be beneficial just depends on the particulars of how they are implemented.
Speaker Change: Maybe evolved here over the last few quarters I'm just.
Speaker Change: Curious to get your thoughts around kind of overall pricing.
Speaker Change: For that and maybe overall competition relative to where we were at this point last year.
Speaker Change: Okay Alright.
Speaker Change: Alright, I will leave it there thanks.
Greg Palm: Yes, Greg I mean, it's hard to predict where things are going to land with respect to tariffs.
Thank you.
Yes.
Speaker Change: Yeah.
Speaker Change: But certainly directionally.
Speaker Change: Next question.
Greg Palm: Everything else being equal.
Speaker Change: Brian.
Speaker Change: John Please go ahead.
Greg Palm: That could be beneficial it's not something that we are.
Speaker Change: Hey, gentlemen, thanks for taking my questions maybe a couple for you Joe just first of all the funded backlog could you confirm it was $167 million.
Greg Palm: Expecting and relying on but certainly directionally that could be beneficial just depends on the particulars of how they are implemented.
Greg Palm: Okay.
Right up 55% year over year, but.
Greg Palm: Alright, I will leave it there thanks.
Speaker Change: Yes.
Speaker Change: Yes, that's right.
Greg Palm: Thank you.
Speaker Change: All shippable.
Speaker Change: And then is it all shippable in 2025.
Greg Palm: Okay.
Greg Palm: Next question comes from with.
Speaker Change: It's all shippable in 2025 and 2026, so thats funded backlog over the next two years.
Greg Palm: With regard Fitzgerald. Please go ahead.
Speaker Change: Hey, gentlemen, thanks for taking my questions maybe a couple for you Joe just first of all the funded backlog could you confirm it was $167 million.
Speaker Change: Perfect.
Speaker Change: Alright, and then I just wanted to do it again you said there is these opportunities youre working on and the pipeline is $230 million.
Greg Palm: He set up the correct year over year, but.
Speaker Change: Of.
Speaker Change: Total defense type opportunities that the interplay.
Speaker Change: Yes, that's right.
Speaker Change: And then the pipeline could you go yes. Please yes.
Speaker Change: And then is it all shippable in 2025.
Speaker Change: That's correct. So what we've got is we are working on.
Speaker Change: It's all shippable in 2025 and 2026, so thats funded backlog over the next two years.
Speaker Change: On tracks that in aggregate have about $399 million of total value right. Now 167 of that $3 99 is firmed funded backlog that we expect to execute during calendar 'twenty five in calendar 'twenty six the balance of.
Okay perfect.
Speaker Change: Alright, and then I just wanted to do it again you said there is these opportunities you are working on in the pipeline is $230 million of <unk>.
Speaker Change: Total defense type of opportunities that are already in the pipeline that could go over that one more time.
Speaker Change: Of that $2 30 unit at $232 million that is really some on some funded backlog that will roll into 2027 as well as a big portion of the bigger portion though is.
Speaker Change: No that's.
Speaker Change: That's correct. So what we've got is we are working on.
Speaker Change: On track so that in aggregate have about $399 million of total value right. Now 167 of that $3 99 is firmed funded backlog that we expect to execute during calendar 'twenty five in calendar 'twenty six the balance of.
Speaker Change: The portion of those contracts that are not yet funded we expect a big piece of that to be funded but we want to be very clear around what is funded and what is not funded but in either case, we feel very good about what we're working against and Troy just to build on that.
Speaker Change: That $2 30 to get to that $232 million that is really some on some funded backlog that will roll into 2027 as well as a big portion of the bigger portion though is.
You mentioned pipeline, what Joe was describing is funded and unfunded contracts pipeline goes beyond that there are opportunities that go well beyond what we're talking about here.
Speaker Change: The portions of those contracts that are not yet funded we expect a big piece of that to be funded but we want to be very clear around what is funded and what is not funded but.
Speaker Change: Right I would imagine then the Trump initiative that you highlighted that would be new in the pipeline to exactly right. That's one example of many.
Speaker Change: Okay Perfect and then my last question just one more for Joe.
Speaker Change: In either case, we feel very good about what we're working against and Troy just to build on that.
Speaker Change: Big restructuring charges quarter can you just talk Opex apps.
Speaker Change: You mentioned pipeline, what Joe was describing is funded and unfunded contracts pipeline goes beyond that there are opportunities that go well beyond what we're talking about here.
Speaker Change: Absolutely do you think is going to start to decline sequentially for a couple of quarters, given the restructuring you've been doing or do we assume it's march quarter Opex is greater than December quarter, yes.
Speaker Change: Alright, I would imagine in the Trump initiative that you highlighted that would be new in the pipeline to nine exactly right. That's one example of many.
Speaker Change: Yes.
Yeah, and I think that the current opex levels are about where we expect to be Troy and I think it's important to recognize we don't believe that we need to meaningfully increase our operating expenses even over the next couple of years right now there will be quarterly <unk>.
Speaker Change: Okay Perfect and then my last question just one more for Joe just a bit.
Speaker Change: Restructuring charges quarter can you just talk opex.
Speaker Change: Absolutely do you think is going to start to decline sequentially for a couple of quarters, given the restructuring you've been doing or do we assume it's march quarter Opex is greater than December quarter.
Speaker Change: <unk> as you know some quarters have more materials than other quarters, but.
Speaker Change: On an absolute yes, I think that.
Speaker Change: When you think about the number of Ftes that are.
Speaker Change: Yeah, and I think that the current opex levels are about where we expect to be Troy.
Speaker Change: In our plan in the.
Speaker Change: First quarter it no no real difference then.
Speaker Change: It's important to recognize we don't believe that we need to meaningfully increase our operating expenses even over the next couple of years right now there will be.
Speaker Change: Where we are post restructuring right. So I don't I don't see the Opex moving all that much right that Q1 25.
Speaker Change: Quarterly fluctuations as some quarters have more.
Speaker Change: Implied number is reasonable okay.
Speaker Change: Alright, guys well, thank you and good luck this year.
Speaker Change: Cheerios than other quarters, but when you think about the number of Ftes that are in.
Speaker Change: Thank you.
Speaker Change: Next question comes from Rodney Hull with Northcoast Research. Please go ahead.
Speaker Change: In our plan in the.
Speaker Change: First quarter it no no real difference then.
Rodney Hull: Hey, guys. Thanks for taking my question I'm on today for Keith Awesome.
Speaker Change: Where we are post restructuring right. So I don't I don't see the Opex moving all that much right that Q1 25.
Speaker Change: So I'm just curious how.
Rodney Hull: How much longer do you guys think it will take for you guys to get.
Speaker Change: Implied number is reasonable.
Rodney Hull: Some of the Kinks worked out as far as manufacturing Ams for the T&D business and just curious if youre seeing any further uptake in those products from your customers. Thanks.
Speaker Change: Alright, guys well, thank you and good luck this year.
Speaker Change: Thank you.
Speaker Change: Next question comes from Rod mean fall with Northcoast Research. Please go ahead.
Rodney Hull: Good.
Rodney Hull: Very good question. The the amps business is very important part of the business, we have leading performance in the fiber amplifiers that go into the directed energy systems, both in the U S and with our allies.
Speaker Change: Hey, guys. Thanks for taking my question I'm on today for Keith how some so I'm just curious how.
Speaker Change: How much longer do you guys think it will take for you guys to get.
Speaker Change: Some of the Kinks worked out as far as manufacturing Ams for the A&D business and just curious if youre seeing any further uptake in those products from your customers. Thanks.
Rodney Hull: There are current products that are released to manufacturing.
Speaker Change: Those Kinks, you referred to theirs.
Speaker Change: We're well into manufacturing with a more mature product there the product that we are using for the megawatts program is a next generation product that is being transferred to manufacturing right now and we're making progress. There. We were just below what we had expected in the quarter there but.
Speaker Change: Good.
Speaker Change: Very good question. The Dms business is very important part of the business, we have leading performance in the fiber amplifiers that go into the directed energy systems, both in the U S and with our allies.
Speaker Change: There are current products that are released to manufacturing debt.
Speaker Change: That is proceeding well and we do see.
Speaker Change: Opportunities to expand that business significantly.
Speaker Change: Those Kinks, you referred to there as well.
Speaker Change: We're well into manufacturing with a more mature product the product that we are using for the Mega Watch program is a next generation.
Got it got it thanks for that.
Speaker Change: And then I'm just kind of curious I know you mentioned the the executive order signed by President Trump recently to bring Iron dome to U S. I know, it's very early in that process, but I'm just kind of curious if you have any ideas of like.
Speaker Change: Product that is being transferred to manufacturing right now and we're making progress. There. We were just below what we had expected in the quarter there.
Speaker Change: But that is proceeding well and we do see.
Speaker Change: The scale of that project and maybe what it can mean for headlines just any any sort of color there would be would be helpful and maybe like a timeline. Thanks.
Speaker Change: Opportunities to expand that business significantly.
Speaker Change: Got it got it thanks for that.
Speaker Change: And then I'm just curious I know you mentioned the executive order signed by President Trump recently to.
Speaker Change: Yes, it's a fairly broad based set of initiatives for defense, both kinetic and non kinetic applications.
Speaker Change: To bring iron dome to U S. I know, it's very early in that process, but I'm just kind of curious if you have any ideas of like.
Speaker Change: Funding numbers, we've seen are very very big.
Speaker Change: And there is a broad range of difference.
Speaker Change: The scale of that project and maybe what it can mean for Ed just any any sort of color there would be would be helpful and maybe like a timeline. Thanks.
Speaker Change: Approaches that are being considered we are actively engaged with.
Speaker Change: A number of them right now.
Speaker Change: The time frame, while theres some of the programs that go out further there is an emphasis on the near term.
Speaker Change: Yes, it's a fairly broad based.
Set of initiatives for defense, both kinetic and non kinetic applications.
Speaker Change: And so there'll be more information in the coming months on that but it is large.
Speaker Change: The funding numbers, we've seen are very very big.
Speaker Change: It is separate from <unk>.
Speaker Change: And there's a broad range of different approaches.
Speaker Change: Some of the cuts that are being discussed.
Speaker Change: Approaches that are being considered we are actively engaged with.
Speaker Change: It is a clear priority and <unk>.
Speaker Change: Key players and Doj right now we're working through how.
Speaker Change: A number of them right now.
Speaker Change: How to prioritize that and <unk>.
Speaker Change: The time frame while there is there is some of the programs that go out further there is an emphasis on the near term.
Speaker Change: <unk> engaged there.
Okay.
Speaker Change: Got it got it thanks, I will hand, it back to the queue. Thanks, so much.
Speaker Change: And so there'll be more information in the coming months on that but it is large.
Speaker Change: Yeah.
Speaker Change: Again, if you would like to ask a question. Please press star one on your own Samsung phone.
Speaker Change: It is separate from <unk>.
Speaker Change: Some of the cuts that are being discussed.
Speaker Change: Your next question comes from Mark Miller with benchmark. Please go ahead.
Speaker Change: It is a clear priority and <unk>.
Speaker Change: Key players and Doj right now we're working through.
Speaker Change: So what we've heard today it sounds like the current administration Theres really been no change in your existing programs and you have this opportunity with the iron dome is that a good summary.
Speaker Change: How to prioritize that.
Speaker Change: <unk> engaged there.
Speaker Change: Got it got it thanks, I will I will hand, it back to the queue. Thanks, so much.
Speaker Change: Okay.
Speaker Change: Well put.
Speaker Change: Again, if you would like to ask a question. Please press star one on your touch on phone.
Speaker Change: Certainly there is a lot of uncertainty around a whole host of factors and certainly we need to be thoughtful about that but I think directionally in our business.
Speaker Change: Your next question comes from Mark Miller with benchmark. Please go ahead.
Speaker Change: Our exposure is in areas, where there is significant.
Mark Miller: So what we've heard today it sounds like the current administration that Theres really been no change in your existing programs and you have this opportunity with the iron dome is that a good summary.
Speaker Change: Continuation and new efforts underway.
Speaker Change: Okay.
Speaker Change: So your existing backlog I assume there is a high percentage of that is defense can you can you give us an estimate what percent of.
Speaker Change: Well put.
Mark Miller: Thank you.
Mark Miller: Certainly theres a lot of uncertainty around a whole host of factors and certainly we need to be thoughtful about that but I think directionally in our business.
Speaker Change: Aerospace and defense related.
Speaker Change: Also if you can comment on the margin profile.
Speaker Change: Backlog.
Speaker Change: Yes, the vast majority of it is A&D related Mark and I would tell you that generally the.
Mark Miller: Our exposure is in areas, where there is significant.
Mark Miller: <unk>.
Mark Miller: Continuation and new efforts underway.
Speaker Change: Backlog on the product side.
Speaker Change: Sure in terms of your existing backlog I assume there is a high percentage of that is defense can you can you give us an estimate what percent of that.
Speaker Change: Carries very nice products gross margin.
Speaker Change: Some of that backlog, obviously is in the development side of the business and that is.
Mark Miller: Aerospace and defense related.
Mark Miller: Also we can comment on the margin profile in your backlog.
Speaker Change: Typical for us in that kind of mid to high single digits margin that we've experienced over the last couple of years.
Mark Miller: Yes, the vast majority of it is A&P related Mark and I would tell you that generally the <unk>.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Equipment orders for the Stryker program. When do you think that could come could that'd be second half of next year.
Mark Miller: Backlog on the product side.
Mark Miller: Carry very nice products gross margin.
Speaker Change: Okay.
Speaker Change: Yes, I do think that the opportunities will be contingent upon the performance of.
Mark Miller: Some of that backlog, obviously is in the development side of the business and that is.
Mark Miller: Typical for us in that kind of mid to high single digits margin that we've experienced over the last couple of years.
Speaker Change: Our initial deliveries, but yes, I think there are opportunities in the next next two years for sure.
Speaker Change: Yeah.
Mark Miller: Okay.
Speaker Change: Thank you.
Mark Miller: Ed.
Speaker Change: Thank you.
Speaker Change: Equipment orders for the Stryker program. When do you think that could come could that'd be second half of next year.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: There are no further questions. Please continue.
Mark Miller: Okay.
Mark Miller: Yes, I do think that the opportunities will be contingent upon the performance of.
Speaker Change: So thanks, everybody for joining us this afternoon and I did want to highlight that we will be participating in a couple of investor conferences over the next two weeks.
Speaker Change: We'll be at the 46th annual Raymond James Institutional Investor Conference on Tuesday March 4th and we will be participating at the Cantor Fitzgerald Global Technology Conference on Wednesday March 12, So we look forward to catching up with a lot of you over the next couple of weeks. Thank you very much.
Our initial deliveries, but yes, I think there are opportunities in the next two years for sure.
Mark Miller: Thank you.
Mark Miller: Thank you.
Mark Miller: Okay.
Mark Miller: Okay.
Mark Miller: There are no further questions. Please continue.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
Speaker Change: So thanks, everybody for joining us this afternoon and I did want to highlight that we will be participating in a couple of investor conferences over the next two weeks.
Speaker Change: At the 46th annual Raymond James Institutional Investor Conference on Tuesday March 4th and we will be participating at the Cantor Fitzgerald Global Technology Conference on Wednesday March 12, So we look forward to catching up with a lot of you over the next couple of weeks. Thank you very much.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
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