The LGL (US:LGL)2022-03-29 15:38Financial Data and Key Metrics Changes - Fourth quarter revenues were $7.2 million, a decrease of $0.2 million or 2.6% compared to $7.4 million in Q4 2020 [6] - Full year revenues were $28.1 million, down $3.1 million or 9.7% from $31.2 million in 2020 [8] - Operating loss for Q4 was $596,000 compared to a loss of $138,000 in Q4 2020 [6] - Net income for the year was $14.6 million, significantly up from $1 million in the previous year, primarily due to SPAC-related investments [10] - Diluted earnings per share increased to $2.74 from $0.19 in 2020 [10] - Year-end net cash position, including marketable securities, was $45.8 million, equating to more than $8.5 per share [10] Business Line Data and Key Metrics Changes - The backlog at the end of the quarter was $29.8 million, up from $19.8 million at the beginning of the year and $21.8 million at the end of Q3 2021 [7] - Gross margins improved to 35.8% compared to 35.1% in the previous year [8] - The company reported an operating loss of $0.8 million for the full year, but excluding a non-cash charitable donation, operating income was $0.5 million compared to $1.4 million in 2020 [9] Market Data and Key Metrics Changes - The avionics market is recovering, contributing to backlog growth, with a significant order of $6.3 million related to a missile defense program expected to ship after 2022 [7][12] - The company noted that approximately 10% of the backlog growth is related to new products introduced in the past 12 to 18 months [17] Company Strategy and Development Direction - The MTronPTI spin-off plan is progressing, with shareholder approval targeted for Q2 2022, allowing each entity to pursue distinct strategic plans [14] - Post spin-off, the company will focus on profitable growth through acquisitions [33] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges from inflation, supply chain disruptions, and workforce issues but expressed confidence in maintaining workforce levels [12][22] - The company is in the early stages of recovery in the avionics market, indicating potential for further growth in the coming quarters [21] Other Important Information - The company has released several new products in 2021, enhancing its presence in the military and aerospace markets [13] - Management has identified a team for the MTronPTI business and expects the spin-off to be completed in Q3 2022 [25] Q&A Session Summary Question: Can you quantify how much backlog growth is related to new business versus supply chain challenges? - Approximately 10% of the backlog growth is related to new products introduced in the past 12 to 18 months, with a small portion related to advanced orders due to supply chain issues [17] Question: Are there any new customers contributing to the backlog? - There is some new customer penetration, but a large part of the backlog is with existing customers [19] Question: What is the lag time for passing on cost increases to customers? - The lag generally varies from eight to 12 weeks or slightly beyond that [20] Question: How is the company addressing inflationary pressures and labor shortages? - The company is actively working with suppliers and identifying additional sources to combat inflationary pressures, while maintaining workforce levels [22] Question: What is the expected timeline for the MTronPTI spin-off? - The shareholder vote is targeted for Q2 2022, with the spin-off expected to be completed in Q3 2022 [23][25] Question: How might the war in Ukraine affect the defense business? - Increased defense spending could benefit the company, and there may be opportunities arising from sanctions on Russia [41]