The LGL Group (LGL) Q4 2015 earnings summary

Executive summary

• Shifted away from low-margin commodity products toward engineered, higher-margin solutions; replaced nearly $4.0 million of low-margin business with business generating margins above 30%.

• Revenue declined $2.3 million YoY, while gross margin, operating results and cash improved; management said further portfolio transition and execution remain key challenges.

Financial highlights

• FY2015 revenue was $20.713 million, down 10.0% YoY from $23.013 million; gross margin rose to 33.1% from 27.5%.

• Operating loss narrowed to $788,000 from $2.829 million; net loss narrowed to $711,000 from $2.825 million; diluted loss per share was $0.27 vs. $1.09.

• Cash from operations was $689,000 vs. cash used of $1.299 million in 2014; year-end cash was $5.553 million, up $361,000 YoY.

• FY2015 other income, net of $117,000 included $132,000 net insurance proceeds and $35,000 foreign currency gains, offset by impairment and legal settlement costs.

Outlook and guidance

• Expected to qualify for several new product platforms in H2 2016; initial production expected in small quantities, then to ramp, with many platforms having 20-plus-year lifecycles.

• Expected to fulfill the full $8.799 million year-end backlog during 2016, subject to cancellations, deferrals and scope changes.

• Existing cash and operating cash generation were expected to cover working capital and capex for the next 12 months; additional capital could be sought for growth and strategic objectives.