RADA Electronic Industries Ltd.

Ladies and gentlemen, thank you for standing by. Welcome to the RADA Electronic Industries fourth quarter 2021 results conference call. All participants are 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 Radha's Investor Relations Team at GK Investor and Public Relations at 1-212-378-8040 or view it in the news section of the company's website www.radha.com. I would now like to hand over the call to Mr. Ehud Helft of GK Investor Relations. Mr. Helft, would you like to begin?

Yeah, thank you, Operator. I would like to welcome all of you to this conference call to discuss Radha's fourth quarter and full year 2021 results. I would like to thank RADA management for hosting this call. With us on the call today are Mr. Dov Stella, 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 questions 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 contents of this conference call. And with that, I would now like to introduce Radha's CEO, Mr. Dov Sela. Dovi, go ahead, please.

Thank you, Eud. Good day to all our participants. We had a call with our investor just a few weeks ago where we talked about our unique go-to-market strategy We cover the status of our markets and discussed our 2022 guidance. In today's call, we will provide a summary of our fourth quarter and full year of 2021. The results of that remind you of our forecasts ahead and reiterate our guidance for 2022. So let's start with the financial highlights. We demonstrate year-over-year revenue growth in excess of 50% in recent years. In some years, well over 100 even. Such growth rates are typically expected for successful early-stage technology companies, and it is unusual, to say the least, for established and profitable public companies like us, and even more so in the defense industry. We reported the revenue of $117 million, up 54% year over year. And we remind you that only two years ago, in 2019, our revenue was 44 million, a bit more than a third of what we have reported today. We are exceptionally proud of these results, and even more so given the ongoing corona pandemic and associated work and travel restrictions, the supply chain constraints and part shortages, and specifically in the US, the delay in the US budget for this year and the continuous resolution condition which is still in effect. Our EBITDA for the year was 27.3 million versus 9.7 million last year. It is almost three times year-over-year growth. While revenue grew 54%, EBITDA growth of 182% demonstrates the operating leverage in our business model. Because of the investments made in the past few years in our business, especially in the US, our business operating expense footprint is right-sized for today's revenue level, and our operating expenses now grow at a much slower rate than revenue. Furthermore, we have the manufacturing capacity for revenues at significantly higher levels than what we are currently delivering, which gives us ample room to grow. And beyond that, we have also built an ability to add new capacity quickly and at reasonable costs as needed in the future. In terms of our balance sheet, we ended the quarter with $79 million net cash and with absolutely no debt. Throughout the year, we have leveraged our strong cash level to increase our working capital mostly our inventory for semiconductors to avoid any supply chain issues. We are also planning to use our cash for potential M&A. We are looking to expand our addressable markets beyond the current estimation of the organic term of $6 billion over the next decade and hope to be able to bring you some news on this front in the future. Let's discuss our 2022 guidance. In our analyst score a few weeks ago, we issued our guidance for 2022 of $140 million, representing growth of around 20% year-over-year. This is comprised of a number of factors. $9 million are associated to Avionics revenues, which is a similar level to the revenues we achieved from this business over the past few years. In the non-US shore rod slash point defense market, we forecast over $40 million freighter revenues during 2022. It includes also counter UAS, naturally. In the United States, the stabilization of the shore rod and point defense market for us enables us to forecast our revenues based on the relevant line items in the U.S. defense budgets. About 90% of our guidance are incorporated in the defense budget line items. This gives us good visibility, and we feel comfortable with our U.S. forecast of $90 million for 2022. To that, I want to add that we often receive very short timelines and urgent need book and ship delivery requirements, with the whole process taking sometimes very few weeks. This means we are also operating without the luxury of planned backlog for these types of orders and is one of the reasons we maintain a high level of inventory so we can meet this demand. These type of customers of this new and growing market appreciate the top level and short-term supply that they receive from us that they cannot typically find somewhere else. and is a key factor in us winning new businesses with new customers. We note that these short-term turnaround revenues that are not part of our forecast represent further upside to our U.S. revenue expectations for this year. Let's take a look at our markets and the forecast for the coming years. Longer term, it is our goal to achieve $250 million in annual revenue within three to four years, which implies an acceleration of our revenue growth in 2023 and beyond. A significant driver will be the APS market, which is half of our potential market and very much in the incubation stage as of now. We have currently a backlog to deliver radars to the Iron Fist ATS at the level of about 30 million, and we expect to double or even triple it by the end of this year, which means increased revenues in 2023 and beyond. In the U.S., the qualification testing of the Iron Fist on the Bradley AFP will take place during 2022. It's already ongoing. In terms of future potential, we also believe that the solution we are part of, namely the Iron Fist, is a real candidate for striker vehicles as well. And other programs such as OMFV and APS or VPS advanced configurations such as MAPS are also posing for growth potential in future years. Regarding the shore rod slash point defense market in the USA, Our rapid growth since 2017 is mainly due to the U.S. COAS and short market segment. And to date, we have delivered around $160 million of tactical radars to this market segment in the U.S., over half of that in 2022. This reflects a new and emerging market through urgent acquisition processes, typically June joint urgent operational need statements, with relatively limited multi-year visibility. We now see our market shifting into a phase of stable growth, with multi-year planning and visibility reflected in line items in the U.S. defense budgets, as I mentioned earlier. But urgency is still very much around, as we see via our recent drone and cruise missile attacks in the Near East and other geographies. SHORAD and point defense programs such as the USMC GBAD, US Army M-SHORAD, US Air Force ABAD, SOCOM-SIP and others have become line items in the budget and reflect multi-year acquisition plans. Such transitions from G1s to programs of record or OTAs typically take a year or more. The fact that we are engaged in multiple programs has ensured a sustained growth you have seen from us in recent years, which we expect to continue in the future. While CR, continuous resolution, is still around, G1s compensated for some of the purchasing delays in the U.S. The recent award of the SOCOM SIP multi-year program to Android a company which is our customer, worth over $1 billion to them, is an encouraging signal that such delays will soon be over. Regarding the short slash point defense markets in the rest of the world, this market is currently around 25% of our total revenues, and we believe that it will rise to the U.S. levels within a very few years. The Near East often suffers from terrorist drones and cruise missile attacks, has been an active market for our radar since 2019, and continues to hold significant growth potential for RADA. The European-slash-NATO countries are typically following the doctrine and solution of the U.S. military, and the need for shore RAD and point defense is becoming recognized there. Currently, the market is in its incubation phase. We are engaged with quite a few prominent European weapon system providers, and our radars are integrated and continuously being tested as part of those solutions. We estimate that the market will uptick in the near future. The Indian market is also waking up around the need to mitigate the small UAS threats, mainly. and also short-range air defense in view of the recent drone attacks. We expect significant initial sales of counter-drone solutions in this market in this year, 2022, and strong growth from the region beyond that. In view of the size of this market and the regulatory environment, we announced a few months ago our plans to set up an Indian JV with a local partner and establish local production capabilities. Let's summarize. As our 2021 results show, RADA continues to experience very strong growth, also on the top line and significantly amplified on the bottom line due to our operating leverage, which we are enjoying now. As the discussion of our guidance and the coming projects indicate, we expect this growth trend to continue for the foreseeable future. And finally, I want to thank all of Radha's employees for their tremendous efforts and success in bringing these exceptional results in 2021. I'd like now to hand over the discussion to Avi Israel, our CFO. Avi, please.