The LGL Group (LGL) Q4 2018 earnings summary

Executive summary

• FY18 marked the fourth consecutive year of improvement; revenues rose 11% to $24.9M, net income reached $1.405M, and backlog increased 49.5% to $17.5M.

• Strategy centered on shifting from lower-margin commodity products toward complex, higher-margin engineered products, particularly for aerospace and defense markets.

Financial highlights

• Revenue was $24.870M versus $22.402M in 2017; the increase was primarily driven by $2.580M higher filter sales.

• Gross margin rose to 38.8% from 34.6%; operating income was $1.430M versus $276K, with a $1.918M gross-margin increase partly offset by $764K higher operating expenses.

• Net income was $1.405M versus $117K; basic EPS was $0.30 versus $0.04 and diluted EPS was $0.29 versus $0.04.

• Adjusted EBITDA was $1.917M, or $0.39 per diluted share, versus $1.041M, or $0.34 per diluted share, in 2017.

• Operating cash flow was $1.656M versus $681K; cash and cash equivalents ended FY18 at $15.508M versus $13.250M.

Outlook and guidance

• Management expected the continuous-improvement program to continue in FY19.

• Expected to fill the entire $17.506M December 31, 2018 backlog during 2019, while noting fulfillment timing and amount are uncertain.

• Existing cash and expected operating cash generation were considered sufficient for working capital and capital expenditures for the 12 months following filing.