RADA Electronic Industries Ltd.

Ladies and gentlemen, thank you for standing by. Welcome to the RADA Electronic Industries second quarter 2021 results conference call. All participants are at present in listen-only mode. Following management's formal presentation, instructions will be given for the question and answer session. As a reminder, this conference is being recorded. You should have all received by now the company's press release. If you have not received it, please contact RADA's investor relations team at GK Investor and Public Relations at 1-646-688-3559 or view it in the news section of the company's website, www.rada.com. I would like to now hand over the call to Mr. Ehud Helf of GK Investor Relations. Mr. Helf, would you like to begin, please?

Thank you, operator. I would like to welcome all of you to this conference call to discuss RADA's second quarter 2021 results. I would like to thank RADA management for hosting this call. With us on the call today are Mr. Dov Sela, Chief Executive Officer, and Mr. Avi Israel, Chief Financial Officer. Dov will summarize the key highlights of the quarter, followed by Avi, who will provide a summary of the financials. We will then open the call for the question and answer session. Before we start, I'd like to point out that the safe harbor published in today's press release also pertains to the content of this conference call. And with that, I would now like to introduce RADA CEO, Mr. Dov Sela. Dov, go ahead, please.

Thank you, Ehud. Good day to our call participants. Let's start with the results summary. We are very pleased with the results and are performing according to our plans. We show continued strong growth across the board. The Q2 numbers speak for themselves to our opinion. We have revenues of $28 million in the quarter, up 61% year-over-year, and 12% sequential quarter. We have growth margins which are at 40%, 4.35% or 435 basis points above the second quarter of last year. Adjusted EBITDA is 6.3 million or 22% of our revenues versus EBITDA margin of 10% last year in the similar quarter. Overall, we are very pleased with the progress we make. and the margins growth over the past year, which were ahead of our expectations. These results support our guidance of over 120 million in revenues for the whole full year. This is a revenue growth of around 60% year-over-year, which is very significant in absolute terms, and hence further, given the fact that our revenue base is now already significant. We have a strong balance sheet with over $96 million in net cash at the end of the quarter. Our current cash level is more than enough to support our inventory plans and our need for secure the supply chain, enable efficient manufacturing, and enables us to continue to invest in our growth. Given the current global shortage of components and the ongoing need to mitigate against any COVID-19 pandemic impact, on our supply chain, we have taken the decision to strategically increase inventory levels to ensure availability of components for our ongoing production plants. We are also using our cash to double our manufacturing capacity both in Israel and the U.S. Furthermore, this cash level allows us to maintain our competitive edge through IR&D, and it also allows us to capitalize on acquisition opportunities when they present themselves. Let's talk a bit about our markets. In terms of a summary of our markets, the positive trend in our markets, mainly around SHORAD, CUIS, and Base Defense, continue to develop. The U.S. is the leading market, and we also see increased interest on a global basis. However, new opportunities in other geographies may take longer to materialize in the current COVID-19 constraints, which sometimes make it more difficult to mature new relationships into orders. Only last week we saw a drone attack on shipping in the Gulf of Oman. This, along with continued attacks by drones and rockets in Iraq and the Gulf region, and recently also in North India, are further underlying the need for counter-UAS protection in today's world. And today, RADA can address the detection of these threats at the price and performance which is feasible for mass adoption. Hence, our pipeline continues to broaden. Over the three years since the market really started to emerge, we have already issued the initial systems to quite a few new customers. In the coming years, we anticipate upside from following orders to these initial orders. We are satisfied so far and are in production form. In terms of programs in which we are currently a part of, a Marine Corps, U.S. Marine Corps, GBAT program is the program of record. However, there are some reorg in the program that affects revenues this year. It's a bit slowed down. We assume revenues will resume next year at the level of dozens of radars a year. U.S. Army M-SHORAD program is funded OTA. The U.S. Army awarded General Dynamics the framework of $1.2 billion contract covering four brigades and 144 systems by mid-2023, each of which requires four radars of ours. For 360 emissary coverage this year, we shall deliver dozens of systems to this program, which is our biggest this year, while revenues are expected to continue next year as well. Additional base defense and counter UAS potential programs in the U.S. are incubating after satisfying significant urgent needs to the Air Force and SOCOM, Special Ops, and others, and undergoing continual testing. It should support our growth in 2022 and onwards. As an example, our radars are included in the recent Parsons Award of Air Force Base Air Defense, or ABAD, an IDIQ with a ceiling of close to $1 billion over 10 years, $953 million to be precise. Our radars provide best-in-class performance for key ABAD missions, and we anticipate further fielding of radars as the program continues, addressing a variety of intended requirements. In terms of APS for fighting vehicles, our radars are embedded in Elbit's Iron Fist solution. The Israeli Aitan AFV development is ongoing, and serial production will commence in the second half of 2022. The U.S. Army's Bradley IFV testing is ongoing and will continue into 2022, with serial production expected in 2023 and onwards. The scope of the first brigade is over 600 radars, and we believe that the potential is higher than one brigade. And there are several additional APS programs in our pipeline, each requiring potentially hundreds of radars with deliveries to start in 2023 and onwards. In summary, our results show as we are currently experiencing significant growth. We are performing according to our plans on the top line and somewhat ahead of expectations on improving our profit margins. We expect that the U.S. and global markets for our products mature over the coming years and anticipate further growth in the coming years. From a financial perspective, we reiterate our revenue guidance for over $120 million for this year, representing around 60% year-over-year growth. with gross margins sustainable at current levels, and given the leverage in our business model now, there is potential for further improvement of our operating margins. At this point, I'd like to hand over the discussion to Avi Israel, our CFO.