Leonardo DRS(US:DRS)2020-08-11 19:03Financial Data and Key Metrics Changes - The company reported a revenue of $17.5 million for Q2 2020, representing a 75% year-over-year growth and a 60% quarter-over-quarter growth [29][33] - Gross margins remained stable at approximately 36% [5][34] - Operating income was $634,000, compared to an operating loss of $843,000 in Q2 2019 [35] - Adjusted EBITDA was $1.7 million, which is 10% of revenues, compared to a negative EBITDA of $268,000 in Q2 2019 [36] - Net income attributable to shareholders was $707,000, or $0.02 per share, compared to a net loss of $564,000 or $0.01 per share in Q2 2019 [36] Business Line Data and Key Metrics Changes - The company has increased its revenue guidance for 2020 from $65 million to over $70 million, indicating a growth of over 58% year-over-year [9] - The company has significantly increased its inventory to $26.5 million from $17.2 million at the end of 2019 to support future growth [37] Market Data and Key Metrics Changes - The addressable market for the company is estimated at about $5 billion over the next decade, with a strong interest in their solutions globally [12][13] - The company noted that defense spending is generally less exposed to macroeconomic downturns, and they have not seen cancellations of existing orders [17][30] Company Strategy and Development Direction - The company is focused on maintaining its leadership in the radar technology market and is investing in R&D for next-generation tactical radars [31][54] - The company is optimistic about its growth trajectory, expecting to benefit from long-term acquisition programs and a strong backlog [14][19] Management's Comments on Operating Environment and Future Outlook - Management indicated that the pandemic has not had a material financial impact on the company, and they expect continued growth into 2021 [6][10] - The company believes that defense spending will remain resilient, particularly in the niches they focus on [19][30] - Management expressed confidence in their ability to navigate potential challenges posed by the pandemic and changing economic conditions [11][22] Other Important Information - The company is involved in several major programs, including the APF for fighting vehicles and the U.S. Army Bradley program, with production expected to commence in 2022 [23][24] - The company has a strong balance sheet with $30 million in net cash, which supports their growth and working capital needs [10] Q&A Session Summary Question: Has the revenue mix changed with more than 50% coming from the U.S.? - Management expects the U.S. to account for over 50% of revenue in the near term, especially next year [39][40] Question: Will inventory levels continue to increase? - The company plans to maintain inventory levels to address emergent needs while transitioning to serial production [41][42] Question: Any changes in the competitive landscape? - Management has not observed significant changes in competition, maintaining a lead over competitors [44] Question: What are the assumptions for SHORAD orders? - The company expects to receive orders for the first battalion this year, with additional battalions ordered next year [46][47] Question: How is R&D spending expected to change? - R&D spending is expected to stabilize, with ongoing development of three radars [50] Question: What is the status of the C-RAM opportunity? - The C-RAM program is under initial testing, with more details not yet available [69] Question: Is the new revenue guidance too conservative? - Management believes the guidance is realistic, considering uncertainties in the market [72]