Leonardo DRS(US:DRS)2021-05-11 15:41Financial Data and Key Metrics Changes - Revenues for Q1 2021 were over $25 million, representing a 67% year-over-year growth and an 8% increase compared to the previous quarter [6][19] - Gross margin improved to 40%, aligning with the company's target model [6] - Adjusted EBITDA for the quarter was $4.8 million, or 19% of revenues, compared to $0.9 million or 6% of revenues in Q1 2020 [20] - Net income for Q1 2021 was $3.8 million, up from $170,000 in the same quarter last year [20] - The company has a strong balance sheet with $96 million in net cash and zero financial debt at the end of the quarter [21] Business Line Data and Key Metrics Changes - Significant deliveries in Q1 included the IM-SHORAD program, with expectations to complete deliveries of 28 systems by midyear [26] - The company reported new business of $60 million in 2020, with significant contributions from the fourth quarter [24] Market Data and Key Metrics Changes - Positive trends in markets related to counter-UAS and base defense are developing in the U.S. and globally, with growing traction in European and Middle Eastern markets [11] - The U.S. Army awarded General Dynamics a framework of $1.2 billion covering multiple systems, with initial production expected to start soon [12] Company Strategy and Development Direction - The company is doubling manufacturing capacity in both Israel and the U.S. to address the semiconductor supply crisis and support growth [10] - New products are set to launch, including advanced tactical radars that enhance capabilities for near-term protection solutions [15][16] - The company aims to maintain a gross margin of around 40%, with potential for slight improvements [51] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving revenue guidance of over $120 million for 2021, reflecting more than 60% growth compared to the previous year [7][17] - The company is well-positioned to handle supply chain challenges due to proactive inventory management [23][43] - Management believes that the demand for their products will continue to grow despite potential budget pressures from the new U.S. administration [46] Other Important Information - The company successfully raised $56 million in March, enhancing its shareholder portfolio with long-term institutional investors [8] - The company is part of the Elbit Iron Fist solution for active protection systems, with serial production expected to commence in 2022 [13] Q&A Session Summary Question: Are there any delays in defense orders? - Management noted prolonged delivery dates from suppliers but emphasized that their inventory strategy has mitigated production hiccups [23] Question: What drove the growth in Q1? - Growth was driven by new business secured in 2020, with significant deliveries to the IM-SHORAD program [24][26] Question: What is the outlook for the total addressable market? - The total addressable market was increased by $1 billion, driven by new radar offerings addressing emerging defense needs [29] Question: Will the company be cash flow positive this year? - Management indicated strong cash flow performance in Q1 and expects to maintain a positive cash flow trajectory [32][33] Question: What is the status of the supply chain? - The company does not foresee issues affecting gross margins due to proactive inventory management and sourcing strategies [43] Question: Are there any new APS programs won recently? - The company is part of the Elbit APS program and has seen some new initiatives but expects significant revenues from these programs only in 2023 and beyond [45] Question: How does the new U.S. administration affect demand? - Management believes that the demand for their products will remain strong despite potential budget constraints, as they address new and emerging needs [46]