Rada Electronic Industries (RADA) 2 Aug 212021 Q2 Earnings call transcript

Ladies and gentlemen, thank you for standing by. Welcome to the RADA Electronic Industries Second 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.

received the all press have should by Company's now release. You

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day you, participants. Thank Good to Ehud. call our

Let's with start the results summary.

pleased the The opinion. QX board. are very performing for show across growth to according with our and are the results We numbers We strong to our continued plans. themselves speak

million in $XX quarter, of quarter. and revenues have sequential XX% We the up year-over-year XX%

of given fact over is is or around of margin is guidance the EBITDA the XX% similar growth past or the growth support quarter we These is in revenue which last above last second very quarter. a versus margins year. whole we XX% and gross of million absolute margin full very XXX This XX%, ahead with in terms which of which XX% EBITDA now basis of Adjusted the were for expectations. year that million make have enhanced pleased are revenue the points significant significant. $XXX revenues are in further, our over our of the our X.XX% progress We at already results year, Overall, our year-over-year, revenues year. and base the $X.X

with We strong the in $XX million have a balance end sheet cash over the at net quarter. of

plans cash current need inventory for Our our is enable to the continue in invest manufacturing, our and to supply secure more enough and enables support growth. level than efficient us chain, to our

against on components levels the shortage our global our for mitigate COVID-XX pandemic ongoing strategically plans. have the components increase to taken Given current supply impact of ensure of availability chain, need any production to to we inventory and ongoing the decision

our are to level this double high acquisition our edge also us using both through U.S. to on capacity competitive opportunities We allows to present manufacturing capitalize the they cash also our Furthermore, and and R&D, themselves. it when Israel in us cash maintain allows

Let's bit talk markets. about a our

leading summary mainly terms and market, our The UAS on a and positive UAS global of our continue in base the to the also the markets, interest of around markets, is trend In increased we see defense develop. basis. short

Hence, of performance, world. for orders. section which and on in continues opportunities India also adoption. shipping today's is it saw need and mass Gulf in detects price Iraq with And for new our counter-UAS make mature further the continued can North more rockets or threats, to and address feasible the underlying the Oman. sometimes by difficult the longer constraints, COVID-XX we along of However, RADA today, which relationships the new the detection recently pipeline broaden. these region, in and may drone attack materializing other drones a This, take in current to into to last geographies in Only Gulf week,

anticipate so three the far a really satisfied the in already follow-on and we few for. and years, since are to customers. new initial issued to have production we orders, to systems years from In market quite coming we started the emerge, the upside initial have orders Over the

are awarded U.S. programs We In radars program the record; of framework the each program XXX well. $X.X is expected far are Army program the systems year, part. of to U.S. reorg level some of there funded our of requires is in year a systems X will currently a covering full terms which dozens year, Marine GBAD revenues next resume bit Dynamics, emissary It's expected this in this of and radars at coverage. we program, by General continue dozens and biggest we revenues which U.S. revenues OTA. This Army X to however, as while of so slow which contract, mid-XXXX, M-SHORAD Corps the shall brigades is affects of this billion XXX that of year deliver next year. are The program down. year. assume

others defense base urgent the the and Special potential and testing, counter-UAS onwards. satisfying growth significant are in Ops incubating continued to undergoing should XXXX SOCOM, in it Additional and and and our U.S. after needs Force Air programs support

example, which close precise. $XXX billion Force over $X an are award our radars Air included a be XX in an As Parsons million Base of with Air recent or years, IDIQ, Defense the ABAD, to of to ceiling

performance continues ABAD of best-in-class fielding we and of provide requirements. missions, variety further radars addressing for anticipate the Our as intended radars key program

summary, over in are The vehicles, first of Eitan Bradley Elbit for Israeli embedded several growth. Iron potentially in In onwards. APS with XXXX, second one the of to potential 'XX and is hundreds the solution. continue results and ongoing in XXXX deliveries In radars brigade believe there production are is U.S. than production that IFV Fist experiencing show requiring terms ongoing our higher scope will APS radars, radars pipeline, into as and The of XXX we onwards. and of significant brigade. The are each serial Army's currently commence programs development our start in additional in is expected and so will testing AFV with half our XXXX. And fighting the we is

the according margins. performing top our on ahead on somewhat of expectations plans are our and to We profit improving line

given line. hold is operating We products leverage expect CFO. our mature and this to at the coming margin years the anticipate From financial for point, over there our current business Avi markets now, coming we I'd for our gross Israel, reiterate in model And and our margin. sustainable discussion the the with years. to XX% the for improvement million potential year, further of revenue perspective, hand around over like U.S. representing growth levels. year-over-year a over that in the growth for Avi? $XXX further global Please our At guidance this

we immediately. Now, are please? Avi, room into stepping the

you, Thank Dov.

press results on release today. we issued our You earlier can find the

As quarter our of Dov are and results. we summary financial I performance, the second mentioned, a will proud provide of short

$XX.X Second XX% year-over-year. quarter million, were revenues up

our second the potential improve in would to the now margins. of million with income further so lower pace the the to million, versus a to operation second in sheet second compared in out $X.X operating in last much was revenues at contains current year. year. was year. of with net highlights to the deferred profitability. of $XXX,XXX revenue. gross XX% in asset quarter of last current of business I midterm, some and versus expected asset, quarter of I XX% our point quarter the $X.X expected than million income QX recorded of second in Hence, well. QX operating million of the margin quarter, Our Operating our remind million was in last were tax or which $X.X the year. the to from in for OpEx of deferred a expenses QX In in Adding XX% view is is level of we our you quarter million tax operating of $XXX,XXX our compared EBITDA recent was $XX.X summarize and balance $X.X EBITDA short year. support additional versus $X our last XX% as grow revenue million Operating last expenses like leverage that $X.X QX

XXXX, million, $XX XX% our net debt. balance June and financial XX, shareholders' XXXX, sheet. of cash our million had financing As At June of equity $XXX.X at we XX, in zero stood

components global need pandemic and any supply took the we levels impact chain, a of the production of our to ensure ongoing availability COVID-XX to on decision for shortage components inventory increase mitigate against ongoing our Given current strategically to plan.

the as progress. call quarters. to Operator, That demonstrate, with We and should please. summary, financial for very We quarter, now $XX.X my summary. end As ends as questions. the million inventory mentioned we open of the level it coming of at for of to the the plan has the end in increase the $XX.X second XXXX. million our pleased to continue In increased as further be results from Dov

Jefferies. begin [Operator Thank question from you. go we Instructions] The this Ladies Kahyaoglu at session. time and will of ahead. question-and-answer Please first gentlemen, is the Sheila

Maybe about of of what can as defense well particular are was? seen drivers Any strength, broad-based any areas growth, it talk you weakness the sort as it, from seeing drove areas given you we've of the of of that some how suppliers?

you here. Sheila, repeat, could were please, sorry, clear I'm you exactly not

Sorry you me better about now? hear that. Can

Yes.

you was great pockets potential at areas all? weakness, given really strength the of know the growth of quarter? where good. your about saw growth any talk And I you maybe Can if in

suppliers? some given some of heard Just the we've weak from commentary

Yes.

the first market, Okay. that as The and beginning. our assume strength is coming market from we from the U.S. was foremost

a there X, the already the prospects solution are there high-energy the prospect SHORAD, add Corp lasers quite ABAD. X some around And solutions. we counter-UAS integrators in is there And program SOCOM our have APS also, Marine GBAD, additional prime soon. emerging, to which are We the we and incubating now for few the like biggest, providers and programs established have with very potential of and other

in are we the the it up question very army, channels modernization now real there the market slow. are forces. also current, addressing and so declining in is U.S. the opening surviving in and any strength. is of and market European threats the on priorities around of showing gradual WE that of are focus marks is because It all the and budgets but military is see they So priority

it behind need here, expectations. for The So us our because clear. the up opened is very Middle-East is

However, year. the year and end We things believe into do for market that. show towards trend U.S. next COVID will year last the the of down dramatically slowed up probably compensated that and

grow. the believe is to end will we vehicles. year deliveries that to continuing the start is and us, So up the working with the APS market of fighting on year towards do Eitan it next The market

our should of add to million revenues. APS 'XX in So onwards and a dollars few tens

the that's of the view general market. So

what's market the your million working $XX from of to cash you last you're at Maybe you're the exercising the much how just can capital of you your I year need right thinking has thinking about think, million and use end deployment? up, talk the of about given how buffer how today, of $XX capital, stepped kind about

forward and or next three mean we do we have And organic we strategize we ago, as it until years what market, beyond enough the inventory and now, now. our launching dictated way of already we we three If because close assume more we we are are by to but what's happening growth onwards. two, new levels coming I our have year. in are two XXXX decisions increasing radars the the momentum, this mainly not experience to that is years semiconductor three ensure the than took

M&A is So as to sustain it we even which as enhance and we But have will of And activity do annual our are well. towards revenues. believe cash adequate too to level both and early discuss. this we TAM the bit our preparing is well. a And that strategies start they

from Alliance Kinstlinger is of question go Brian ahead. Global Partners. next The Please

goal infrastructure if the And need the deeper U.S. moving you're expected any and time Europe share line? so, you talk local to add discussed progress line. you you're and calls, recent to will that can the time about quicker making penetrate you than On Can you there?

see question, relatively activity incubations. As I is on We And counter-UAS as slower mentioned We fast in integrations. to short emerging, not do a earlier see is as Europe the and Sheila's do scale. Europe thought. but we

a part have questions probably XXXX. significantly, areas, words wake you think will few because of in them up the market are but We quite I answer I I Did all said? understand didn't in your the

in No, guess but than mean, other had I you was, infrastructure, little not previously would slower a anticipated. that's need taking to local question the it. I bit add is you

Yes.

cannibalize Hemispheric these complementary? or Multi-Mission of or they last quarter, And replace Were you being track way and the any then Yes. Radar, new in other about them now end about just year? prototype. they your radars in talked totally quarter Are being three still you products last and on sales the shipped the talked are by to of

track. any are cannibalization we and on see don't We

Okay.

to Lastly, I months curious, have mistaken, inventory of calculated but if versus count how that's continuing you Should about the accelerate? to see was XX%, XX% how that maybe we so? year? growing couple the not about cost quarters see next are a remainder the we over addressed I'm two mistaken, of I'm you how I should grow -- of I times. Are thinking if more six you inventories, you're or inventory five you goods it? than Or

towards it's management months. Brian, right is strategy. the circumstances decreased view market, end the more this the is decision important adopted it's end It's increase five, right further of our level that. we XXXX. of the semiconductor and again bit rather taken in have the our inventory our inventory. And the ago day, and growth, started, of more now that it's strategy the that by than of a At to proved We six year COVID little level a because be to was believe of to we the And than the itself the same when one. support

Arment question Please ahead. of next go from is The Peter Baird.

forward? and and given supply out kind Dov your stress give is maybe about Dov, building just the just chain could you're strategic you're about regarding year still positive given thinking us this thoughts updated being when Avi. you goal afternoon, being Good inventory, in flow a cash going your of that

that and quarter, that is cash will year flow positive. believe this activities We that operations assuming to no why the for reason first path. EBITDA, positive. already this in Yes, operating first profitability cash the there's revenues flow not we from assuming increased half stronger be second the the operating be of of the in than reason level level right there's we will but of half, presented to inventory, And flow no the in a positive not be believe cash

this on Okay. of And could had kind MHR just us where in and I place put CapEx, to And update Maybe think to I coming the year. in know U.S. additional they you then your just related status Israel. was online in planned one the you chambers stand?

the towards stick We Israel plans in our the in it will U.S. the is one significant end and come original up of plan. reflected Yes, running the no one already balance from in fixed our active and assets is and the sheet. our The year. change in to

expectations Okay. the half benefit just, from the a at be What quickly just model Avi, And should just looking just of year? because thoughts of -- quarter tax that the second you about perspective? in the any in we had

significant four of to obviously. not came with the it's It's significant a in of part point sequential quarters question a we year. No, second terms, question of our we are presenting the operating which in profit, the

benefits Israel. around of can about XX% update As was the presented rate NOLs have Israel December and million so statements XXXX, a forth, the so we executed in $XX $X in It's deferred of of of on the quarters. in I the not over a June, tax tax be of we've an few all billion. Calculating and of recorded end that next the question asset to few financial next as average of because years.

question The Please from Canaccord. go is ahead. Austin of next Moeller

Avi. and Dubi Hi,

defend Afghanistan troop and all the the for at Iraq radars my of see it we and affecting in question the any Just the in an their your they're demand is here. equipment is counter bases on drone Iraq of and throughout more, Or attack pulls to as of various first mission in of to Afghanistan, need another drone Middle U.S. the impact Oman even these drawdown out to continue you applications? Do combat East? probably just oil going air for the Gulf saw tanker

forces equip into structure We their GBAD, that we It deployment believe the not plans. it to SHORAD that the step on have our based -- to military the four related and to plans like vehicles when basically. relates their programs is

changes. we see So here, any don't

stage, We is delivered what see are don't the because drop with till at solutions believe very, demand much that where the we this of deployed. details any are of stationary But up have not higher familiar now. than we very exactly our do momentum we

So, our picture that's the on end.

batch before that on that Okay. when SHORAD be next XX just Army couple the the of expected the the timing And receive months? expect end ordered contract provide next strikers in on Is that to maybe to stay the can of sort that? just you guys then Or U.S. year. tuned are you by of and of there any

track on is all received. expected orders and program SHORAD The are

the gross on margin. just then And Okay.

that correctly Or to forward? results to of you your maintain gross XX% or if around just understood your of I that going So temporary expect XX% able in margin a sort going be to at you mix? comments, you're is XX%

it about Actually, XX% for well. not have and as we in future talked the it -- little our margin expectation future XX% achieved bit was We is the expectations is a of No, our temporary. gross before for it before our coming goal.

[Operator Instructions] like statement? at this would time. Mr. further make you There your Sella, concluding are no to questions

Yes. of our continued Thank you, would operator. management, like for you On but thank in behalf all interest to business. the I

Otherwise, Jefferies to and tomorrow forward a look the some of next day the healthy, to and speak to well time will have these speaking also that stay with we you Conference week, our results present next with We we and in you we you look Canaccord venues all. in again. report forward good at Conference and

your Call. concludes you This Thank second for the XXXX Conference Results Thank quarter you. RADA Electronic participation. Industries

may disconnect. ahead and You go