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spk_0: good day and welcome to land traumatic twenty twenty two second quarter without cop and call i'll project them will be in a listen only mode should any the system preferred know a conference specialist with by pressing the starkey followed by the euro after today presentation there will be an opportunity to question check your question you may prefer dar than one other touched on phone to withdraw your question we've truck star than two please note that the is being recorded i would now like it when the conference over to rob adam investor relations with go ahead
spk_1: they expected grew entrepreneur everyone a drink you for joining the second quarter fiscal twenty twenty two conference call jamming out on the call today are paul people president and chief executive officer germy worker chief financial officer and shock isa vice president of marketing you live at all of like charged today call will be available on the company's website in addition iphone replay will be available starting at eight pm eastern five pm pacific today through february seventeenth by dialing eight shouldn't seventy three four four seven five to nine or for international callers for one two three one seven zero zero eight eight and enter passcode three four one three four to seven during this whole management they move forward looking statements which involve risks and uncertainties that could cause or results to differ materially for management's current expectations we encourage you to review the cautionary statement can risk factors contained in the early release which was fun to the ftc today and is available on a website and then the companies as you see powering so and it's can carry and can choose china can detect no obligation to revise or update publicly any forward looking statements to reflect future events or circumstances furthermore during the call the company will discuss someone get financial measures today's earnings release which is posted in the investor relations section of the website describes the differences between i'm on gap and capita point and presents reconciliation for the non up financial measures that we use that about from the pulled over to germany worker earth chief financial officer
spk_2: take you out and welcome to everyone's running up for the afternoon call i'm going to provide the financial results as well as some some of the didn't highlights for a second quarter fiscal twenty twenty two before handed over to or commentary please refer to news release and that financial information and the best relations section of or website for additional detail that with supplement my commentary for the second quarter just got twenty twenty two we reported record retinue of thirty three point seven million an increase of one hundred and three percent when compared to sixteen point six million for the second quarter of fiscal twenty twenty one the you're on your group was driven by contribution prog rock from our recent acquisition and organic growth seven percent sequentially that revenue was up twenty two percent compared to twenty seven point seven million reported in the first quarter of fiscal twenty twenty two just gross margin was forty two point nine percent for the second quarter of fiscal two thousand and twenty two hour compared with forty five percent in the prior quarter the sequential decline a gap gross margin was primarily due to product mix telling general and administrative expenses for the second quarter got twenty twenty two were a point nine million compared with four point nine million for the second quarter of fiscal twenty twenty one and seven point nine million for the first quarter of fiscal y twenty two research and development expenses for the second quarter of the score twenty twenty two were four point three million compared with two point four million the second quarter of fiscal twenty twenty one and four million for the first quarter of fiscal twenty twenty two the increase in fg today a and argue was impacted by increase headcount and operating costs related to the recent acquisition we've made good progress that implementing are synergy planned and as a result non gap operating expenses as a percentage of revenue decline sequentially and from the year ago quarter gap matlock with two point four million or eight cents per share during the second quarter of fiscal twenty twenty two compared to a gap that lot of one point five million or five cents per share during the second quarter of fiscal two thousand twenty one the increasing gap net loss was primarily due to costs related to our recent acquisition non gaap net income was three point three million or ten cents per share during the second quarter of fiscal two thousand and twenty two compared to non gaap net income up eight hundred and sixty one thousand or three cents per share during the second quarter of fiscal two thousand twenty one now turn into the balance sheet we ended the december twenty one quarter with cash and cash equivalents of thirty six point four million an increase of twenty six million from the prior quarter during november of two thousand and twenty one we raised thirty two point six million an offering and fail four point seven million common shares at a price of seven fifty per share in january of twenty twenty two we use twelve million other proceed to pay down a high interest second term on facility that we used as partial
spk_1: consideration for our recent acquisition
spk_2: working capital improved sixty four point two million as of december thirty first twenty twenty one compared with thirty three point two million out of the prior quarter that and mentors or twenty nine point four million as of december thirty first twenty twenty one compared with twenty six point six million as of september thirtieth twenty twenty one now turning to our annual outlook which includes approximately eleven months of contribution from our recent acquisition we actually did the timber quarter was strong customer demand and backlog we continue to believe that without supply chain constraints we could deliver annual revenue and on yeah dps about the high end of our guide arranged
spk_1: based upon forecasted improvements and the supply chain and our current outlook
spk_2: we'd expect to see a much stronger fourth quarter and as a result we are increasing our annual revenue guidance for fiscal year twenty twenty two we are raising our annual revenue target to arrange a hundred and twelve point five million two hundred and seventy seven point five million representing growth and the range of fifty seven to seventy eight percent
spk_1: in addition we are adjusting our annual earnings target to take into account or recent capital raise and expect naga u p s and a range of thirty two to forty cents per share representing growth and a range of sixty eight to one hundred and eleven percent
spk_2: oh now from a call and all they girl i am specially pleased to report record results are shareholders here today during the second quarter we made progress on several fronts number one we reported record revenues of thirty three point seven million at twenty two percent square julie and one hundred and three percent year over year
spk_1: excluding are most recent acquisition organic revenue grew and impressive forty seven percent year over year and twenty one percent sequentially number three we continue to move high potential age compute project through the pipeline
spk_2: and we currently expected volume production on multiple projects or driver growth well into next fiscal year number for the team did a fantastic job navigating supply chain constraints and we were able to meet some of the upside demand a backlog that we experience in the september quarter and finally we successfully completed that secondary equity offering raising almost thirty three million dollars to fund or growth a down high interest rate that and potentially challenge or next deposition with the headlines out of the way let's get into some detail on second quarter results in or out as pointed out revenues of thirty three point seven million were a new record que to benefited from the full quarter of contribution from our most recent acquisitions an incremental one one more month than and que one removing these newly acquired revenues from the equation organic growth was twenty two percent on quench your bases in an exciting forty seven percent europe year
spk_1: we saw broad strengthen our business and second quarter notable contributors included a remote environment management products why pie cellular tracking and debate server solutions the largest that's why i came from are intelligent edge products were product revenues more than doubled from que one levels bidding benefiting from a recent execution of bolster by are strong relationship o'clock on demand for intelligent edge compute solutions continues to grow and the opportunity to funnel is very healthy we are in the process of expanding our capacity to meet the influx and we are selectively focusing on those programs that offer the strongest
spk_2: revenue potential to capture this growth potential however we must also continued to navigate ongoing supply chain constrained to we're pleased to report we made some progress on this front and due to after exiting you want with over six million dollars in customer requested product that we could not deliver on we managed to draw down that surplus a few hundred thousand dollars to quench really to about five point seven million while the decreases relatively small this the first time and more than a year that we have been able to bring that number down
spk_1: in that environment securing components for upside in a given quarter does not necessarily translate to an ability to do it repeatedly each product and it's related supply chain has it's own set of circumstances and we feel it is prudent to temper the upside potential in our outlook but we will continue to navigate situation deliver up the whenever pie
spk_2: our current belief is that the shortages will continue to linger especially for semiconductor products built an older high reliability properties
spk_1: what we are cautiously optimistic that the supply chain constraints are beginning to ease
spk_2: finally it jeremy detailed earlier we were able to successfully complete inequity offering and que to which increased the company's cash balance by thirty two point six million dollars since that time we have used twelve million to pay down and expensive second lien loan that's illuminating a double digit coupon that was poised to rise with interest rates
spk_3: the remainder of these funds will serve as a source of working capital to enable our growth allowing us to procure longer time components for crucial shipment and potentially leaving as dry powder track positions and summary i'm pleased with our results in the second cooler we navigated of supply environment that continue to be difficult were able to deliver another quarter
spk_4: or of record revenues we grew at an impressive great organically we improved our balance sheet and put in place the capital to fund the next leg a burglar that completes are prepared remarks for today's i will now turn it over to that the to conduct or two and a question
spk_0: thank you who are now begin the question and answer session
spk_5: check the costing you may die and one i had come on if you're using a speakerphone
spk_0: get your hands that team as any time your question has been addressed and you would like to withdraw your question dar and to
spk_6: at the time i pod momentarily to assemble our roster the first question comes from scott thoroughly with rock capital could go ahead good afternoon thanks for taking my questions on nice job on the quarter guys
spk_7: thank you very maybe just at the store quickly on the financial front
spk_2: i was wonder if you qualify a little bit the supply chain impact on gross margins you know in terms of expedite incremental component cause you know i know there's a mix issue in the quarter if he could kind of watch that on let out a little bit in terms of component cause maybe vs max and i've got a couple of hours because it is jeremy so yeah most of the sequential decline was driven by by next we had a record quarter with are intelligent edge solution products they more than doubled from the previous quarter and even private more than that from from the year ago quarter and this this product that group is on the lower end of the scale of as you look at our various products for a margin standpoint so that that you know we are still you know feeling the pressure from company shortages and ppv than other costs but
spk_6: it was more a matter of makes this quarter than it wasn't necessarily a change and
spk_2: costs because those those cost of been relatively consistent over the last several quarters dogen and if i could to follow up on the op x run it was up a sequential he he had a full quarter of of impact from a transition networks so i think curses two months in the prior border
spk_8: you know is is that the only impact in there is there anything else is just the base level that we should be thinking about extrapolating going forward and to the you know second half of fiscal twenty two
spk_2: yeah because of the higher than expected revenue this quarter the at a higher
spk_1: variable path
spk_6: so that was so that as revenue at templars and we could see
spk_9: the variable boycott them down you know accordingly law yeah but at it just the cost of the percentage of revenue maybe we prove that a little bit but all i wouldn't say that on a dollar basis that this is a base level we are going to growth moved we definitely had some good programs that were
spk_2: looking for source and find so i would expect you know on a dollar basis spending to go up over time as revenue growth but as a percentage of of read and i think we continue to drag some additional efficiency dodger and paul maybe jumping on the supply chain to tell the you guys have been doing a pretty good job on that front but could you provide a little bit more color in terms of what areas are are stretched still problematic from a lead time standpoint and then maybe just from and and market standpoint i think last quarter you talked about some larger opportunities as related to intelligent meters we can't flush out where some the bigger opportunities or for you have an actual quarters and levers to move things up
spk_1: oh thanks okay so yeah on the if i reflect back on some of the comments i made last quarter i believe i said last quarter the qualcomm would not be long poem the tenth so you know at this point as i reflected doing additional outside we managed to secure a lot of the other ca
spk_2: opponents around the block on processors and we were able to get some additional shipments in the quarter but that does not necessarily mean it will translate to digital shipment in the march quarter timeframe so we got some good visibility anthem upside potential possibly in queue for and quo i'll come in particular on processors are scrambling to drain get those deliveries to us but at this point
spk_1: and it's mostly spot market buys i have to say i did dive into the rolodex last quarter to to try and source of additional upside demand when we go out and look for were able to find it but the you know the the tough components or the exotic substrates as mentioned before pot memory and particular even though the chips are real relatively good supply and then flash so processors flash memory
spk_2: and then some why project that and then i will say eternal switches is starting to creep up as a shortage here that were able to navigate by is definitely getting a little bit more difficult i think that's more related to certain suppliers so if we go outside of those suppliers were able to get those one other additional point i will say that we did qualified some additional vendors on platforms this past quarter which gave it's more optionality that will be definitely had planned shift in strategy as we gonna look forward to production in future quarters and in terms of and market on opportunities
spk_6: we've secured a couple of compute projects that are more in the
spk_2: i'll say a our space but still not consumer electronics as more industrial safety type applications but h a r if it's still kind of the same core competency into the camera processing visual processing but automotive of course remain strong smart utility
spk_0: some additional projects were picking up and smart cities related to security cameras and then a ours is a new one a new contract that we just picked up of late
spk_10: i thank you nice quarter
spk_11: thank you sir
spk_3: the next question comes and christian swab with craig how capital good go ahead
spk_1: a great quarterback so you have a a day
spk_2: record backlog another record backlog that a backlog number or did you did i miss that yeah we you know it fell and gave backlog out last quarter because it with such a big jump we had dead you know tripling of border rates and then several poland request by customers and it went from centrally a twenty seven million dollars the thirty to thirty nine excluding the three million have acquired backlog so that's why we gave it let's go to we really thought it was relevant it's not a fairly something we want to fixate on having said that i would hate north of fifty as of today so did grow
spk_10: despite being able to see some significant outside and and
spk_12: in revenue in the quarter so it does continue to grow but it's also not something that
spk_10: thank you did something that we want to fixate on a on a go for bases with adult continued to grow
spk_2: great
spk_1: and then you know the have any update on
spk_2: the new
spk_1: and you know smart grid energy custom or when that was also kind of maybe for kicking in the second happen
spk_13: and and drive you know more material revenue growth in those fiscal twenty three time frame is everything on track had a track any update their
spk_1: i'd i'd say it on track on track to our expect expectations cuts are driving from aggressive schedules they're still driving the schedules and there's some can sign boards the come into the platform in can find component to come into the platform i should say
spk_10: you know our customers had some difficulty procuring those components so we've kind of that in and been able to secure them to ensure that program continues to move forward happy to say we just finished the three day workshop talking about with the next generation looks like
spk_2: and then just
spk_3: for additional color comparing the commentary from last one we talked about a ten to twenty million dollar contribution ended december quarter what kinda tuning in terms of fiscal year starting to impact the december quarter and i'd say we're probably a bit more confident in the upper end of that range and in you so for things going pretty nicely
spk_2: one cat great books led that good as an adult i guess my last question and in the the organic growth is that your scene
spk_1: is is quite material on an arm back why we talked about be in northern fifty million a tube you know go back to new programs here when their own were a while now all i mean that will what what you can feel like a true organic growth rate of this business leader might have said the acquisition that could be layered dog overtime
spk_14: i'm that is where i'd probably take out a little bit of bad as more conservative position but in terms of i think that we can continue to drive twenty plus percent
spk_0: now and i'll carry that caviar that i don't think that on the entirety of the business you know we have not really worked the do road map that required with the businesses closed on august second
spk_15: so we we need to turn that around but i think if we look at what we've done so far twenty plus percent probably conservative i'm i'm i'm factoring in that were in just an extraordinary demand growth phase that could very well continue through next year if you look at that smart meter program that is
spk_16: not or should take more utility program it's currently not in the backlog
spk_2: that would obviously add some considerable growth potential of twenty plus percent so i think that's a good number even in a more normalized environment i think we can manage to drive that level two planets great bad haircut no other questions thank you the next question comes from branca with need him with go ahead
spk_17: the question ah
spk_2: contrast earlier called organic business and they acquire transition workspaces as relate to the different mark articles are seen strength across the town and how's your progress come along on your cross stretches thanks the cross selling drugs up can talk but that one for as i will say that that the were were pleasantly surprised
spk_3: you know we kept them good portion of the sales team the game with that with transition networks at that they're doing a phenomenal job be gathered are picking up the product lines from land products proper
spk_1: will say but and you know there's natural alter opportunities we thought that potential was there but i don't know that we put a lot of emphasis on at the beginning and acquisition but i have to say that team is performing quite well so pretty happy about that i would still say a little bit more muted from an organic growth rate
spk_3: yea though
spk_2: terms of the rest the business right now
spk_16: the computer business is really growing adjust the staggering rate with a couple of key customer programs and we expected to continue so newly acquired business if i if a contract that i would say you know ten plus percent is probably reasonable expectation
spk_2: maybe we'll get to a point where we can confidently drive a steady fifteen but right now to contra thing that with twenty plus percent
spk_3: even protein twenty five on the on the new
spk_1: the more computer oriented solutions that we have
spk_2: okay touch base on the departments across two businesses other to for are similar
spk_1: he has when the newly at and and i won't say that there's two different words we have two different sale games that really can sell the entirety of the portfolios and with not separated the business at i think it makes sense to combine the product portfolio we just have to distinct distinct selling motions and there's a portion of account responsibility that went to
spk_2: ooh the acquired to the of well so just i don't want to send a message that they're two different organizations but if we look at the go through the burgled there's two different sales motion certainly that come about smart cities is one that a little bit more and does shoulders of fed business on that particular sales motion as well
spk_18: that and does move at a bit of a slower pace it does happen cyclicality to it was having a stronger september and december quarter and a little bit pull back in the march and june time frame
spk_0: it and then marched towards the fiscal year and for government spending so that one we could look at it from a deal tuesday and point good for within smart cities
spk_3: that one is definitely slower moving fail cycles are a little bit longer but then again it's a bit dick years so
spk_0: if if we move into where we expect some of the extreme growth to come from and the next several quarters certainly smart utility would be one of those
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