Leonardo DRS(US:DRS)2021-08-02 17:20Financial Data and Key Metrics Changes - The company reported revenues of $28 million for Q2 2021, representing a 61% year-over-year increase and a 12% sequential quarter increase [4] - Gross margins improved to 40%, up 4.35% or 435 basis points from the same quarter last year [4] - Adjusted EBITDA was $6.3 million, accounting for 22% of revenues, compared to an EBITDA margin of 10% in the same quarter last year [5][18] - The company has a strong balance sheet with over $96 million in net cash and zero financial debt [6][19] Business Line Data and Key Metrics Changes - The U.S. market remains the primary driver of growth, with established programs like SHORAD and Marine Corps GBAD contributing significantly [22] - The company is experiencing strong demand for its counter-UAS solutions, with a broadening pipeline of opportunities [9][10] - The inventory level increased to $31.6 million from $28.8 million at the end of 2020, with plans for further increases [20] Market Data and Key Metrics Changes - The U.S. market is showing real strength, with military modernization priorities driving demand despite budget concerns [23] - The European market is opening up gradually, with expectations for significant growth in 2023 [24] - The Middle East market has shown clear demand, although COVID-19 has slowed some opportunities [24] Company Strategy and Development Direction - The company plans to double its manufacturing capacity in both Israel and the U.S. to support growth [7] - There is a focus on maintaining high R&D investment and exploring acquisition opportunities [7] - The company anticipates further growth in the U.S. and global markets for its products in the coming years [14][15] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving over $120 million in revenues for the full year, representing around 60% year-over-year growth [5][15] - The company is strategically increasing inventory levels to mitigate supply chain risks due to global component shortages [6][19] - Management believes that the demand for their products will continue to grow, driven by military modernization efforts [23][25] Other Important Information - The company recorded a deferred tax asset of $6 million due to recent profitability, leading to a net income of $10.4 million for the quarter [18] - The company is launching three new radar systems this year, which are expected to enhance total addressable market and annual revenues [27] Q&A Session Summary Question: What drove the growth in the quarter? - The growth was primarily driven by the U.S. market, with established programs like SHORAD and Marine Corps GBAD contributing significantly [22] Question: How is the company thinking about capital deployment given the increase in cash? - The company is increasing inventory levels due to semiconductor market conditions and is preparing for growth beyond 2024 [26][27] Question: What is the status of the European market penetration? - The European market is emerging but slower than anticipated, with significant growth expected in 2023 [29] Question: Are the new Multi-Mission Hemispheric Radars on track for shipment? - The company is on track to ship the new radars by the end of the year, with no cannibalization of existing products expected [31] Question: Will the company maintain its gross margin? - The company expects to maintain a gross margin of around 40% going forward, which is not seen as temporary [41]