Executive Summary

Fiscal Q2 2022 (quarter ended September 25, 2021) showed a return to profitability and strong top-line growth: revenue rose 32.5% year-over-year to $3.57M and 74% sequentially vs Q1 FY22, driven by Microsource filter strength; EPS was $0.02 vs $(0.18) a year ago .
Mix skewed to Microsource (services) while RADAR/EW test (goods) was softer due to delayed military orders and product mix; gross margin was ~37% (down slightly YoY) per management .
Management expects order activity to rebound as procurement vehicles (IDIQ) come online; no formal guidance was issued, but commentary highlighted a stronger 2H setup for EW Testing .
Key near-term stock catalysts: continued Microsource execution, visibility on IDIQ/DoD ordering for TEmS/COMPASS, and progress on the combination with Gresham to bolster scale and sales reach .

What Went Well and What Went Wrong

What Went Well
- Microsource delivered strong growth: services revenue increased 75% YoY to $3.27M on large filter orders; management called the filter business a “steady cash generation capability” .
- Sequential improvement and profitability: total revenue grew 74% QoQ and EPS improved to $0.02; Adjusted EBITDA turned positive to $0.24M from $(0.31)M YoY .
- Strategic traction in EW testing: third COMPASS order at a national lab with potential upgrades to full systems; Air Force/Navy/Army interest cited, with procurement vehicle expected to accelerate orders .
What Went Wrong
- EW test revenue softness: goods revenue fell to $0.30M (vs $0.82M YoY) as anticipated military orders slipped; mix weighed on margins .
- Slight margin compression: gross margin of ~37% vs ~38.6% YoY driven by product mix, with Microsource lower-margin vs EW test; management acknowledged mix effects .
- Procurement and supply chain delays: DoD contract vehicle timing and COVID-related staffing/supply issues slowed EW systems shipments and bookings; backlog volatility persisted .

Financial Results

Overall results (USD):

Metric	Q2 FY2021	Q1 FY2022	Q2 FY2022
Revenue ($M)	$2.69	$2.05	$3.57
Gross Profit ($M)	$1.04	$0.80	$1.32
Gross Margin (%)	38.6% (1.04/2.69)	39.0% (0.80/2.05)	37.0% (also stated by mgmt)
EPS (Basic, $)	$(0.18)	$(0.32)	$0.02
Adjusted EBITDA ($M)	$(0.31)	n/a	$0.24

Segment/Line of Business mix (USD):

Segment (as reported)	Q2 FY2021	Q2 FY2022
Giga-tronics Division (Goods) Revenue ($M)	$0.82	$0.30
Microsource (Services) Revenue ($M)	$1.87	$3.27

Additional KPIs (USD):

KPI	Q2 FY2021	Q2 FY2022
Adjusted EBITDA ($M)	$(0.31)	$0.24

Notes: Management cited Q2 FY22 gross margin of ~37% due to mix shift toward Microsource; EW test carries higher margins but was lighter this quarter .

Vs Estimates

Wall Street consensus (S&P Global) was unavailable for this ticker/period due to missing CIQ mapping; estimate comparisons cannot be provided. Values would typically be pulled from S&P Global consensus; not available for this company/quarter.

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	FY2022/2H commentary	None issued	No formal guidance; management “anticipate[s] a rebound in order activity” in 2H as procurement vehicles enable faster awards	n/a
EW Test Orders	Near-term	None issued	Expect faster ordering under IDIQ/procurement vehicle; multiple service branches engaged	n/a
Margins	Near-term	None issued	Margin sensitive to mix; Microsource strength supportive; higher EW test mix would expand margins	n/a

No quantitative guidance or ranges were provided in the press release or call; commentary focused on an expected bookings recovery via new procurement vehicles and continued Microsource execution .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 FY2022 press release; Q3 FY2022 call)	Current Period (Q2 FY2022 call)	Trend
Procurement/IDIQ	Q1 FY22: “US Government has streamlined its procurement process… anticipate more predictable and increasing order flow”	IDIQ to reduce approval cycles; “should be vastly simpler” once in place	Improving visibility/velocity pending IDIQ activation
EW Test pipeline	Q3 FY22: pipeline increased; awareness growing across Air Force/Navy/Army; demos at ranges	Third COMPASS at national lab; Air Force range training opportunities; expected upgrade orders	Positive; growing interest and reference sites
Mix/Margins	Q3 FY22: EW softness vs prior year; mix impacted margins	~37% gross margin; mix driven by Microsource strength vs EW lighter shipments	Margins levered to EW mix
Supply chain/COVID	Q3 FY22: supply chain and staffing issues affected shipments; some bases closed to demos previously	Less about base access now; bottleneck mainly in procurement processing bandwidth	Operational friction shifting from demos to contracting
Strategic/Scale	Q3 FY22: Gresham combination to add scale, balance sheet, and cross-sell, esp. Israel/Europe	Reiterated need for scale to fully leverage $23M+ invested in EW	Combination viewed as an enabler

Management Commentary

“The second quarter of fiscal 2022 was encouraging, with a 33% growth in revenue and [positive] net income.”
“Microsource… received a large order for RADAR filters… [while] the EW testing division did not receive certain large anticipated military orders… [which] vary significantly from period to period.”
“Net income in the second quarter was $64,000… adjusted EBITDA income was $238,000… versus a loss of $380,000 in the prior year.”
“We believe that… we will be part of a military contract that greatly reduces the long approval cycles… associated with military procurements.”
CEO on reference wins: “A national lab… purchased… COMPASS… we expect a second order… Another program within the same lab… and we expect another… this quarter.”
On IDIQ: “It should be vastly simpler… IDIQs are the ideal way of purchasing.”

Q&A Highlights

Procurement Vehicle/IDIQ: Management expects IDIQ to streamline and accelerate orders; delays have been procedural rather than competitive losses .
National Lab/COMPASS traction: Multiple programs at one national lab, with prospects for additional systems and RF hardware upgrades later in program cycles .
Range Training Opportunities: Anticipation of multiple systems across at least five or six ranges/bases; near-term orders expected as procurement clears .
EW Tech Roadmap: Increase instantaneous bandwidth and add remote antenna/tracking solutions to support range survivability and flexibility .
Filter business outlook: Expected steady performance; quarter-to-quarter swings tied to order timing are normal under the revenue recognition method .

Estimates Context

S&P Global/Capital IQ consensus estimates were unavailable for this micro-cap and quarter due to missing SPGI CIQ mapping for GIGA; therefore, no revenue or EPS estimate comparisons can be provided. The absence of coverage implies estimates may need to be initiated post-combination to reflect the integrated business model and scale.

Key Takeaways for Investors

Microsource execution is the earnings ballast; continued large filter orders support revenue and cash generation near term .
Turning point potential in EW testing hinges on IDIQ activation and contracting throughput; watch for sequential order inflections and backlog rebuild as the primary catalyst .
Mix is the margin lever: incremental EW shipments should expand gross margin from ~37%, amplifying EPS sensitivity to bookings conversion .
Positive operating turn: Adjusted EBITDA inflected to +$0.24M in Q2; sustained profitability depends on EW follow-through and supply/contracting normalization .
Strategic scale matters: the Gresham combination is aimed at sales reach, balance sheet strength, and cross-sell synergies (notably Israel/Europe) to accelerate EW penetration .
Risk monitor: contracting delays, supply chain components for Microsource, and lumpy DoD procurement cadence remain key variables .
Setup: Near-term trading likely driven by order announcements (EW systems, national lab upgrades, range deployments) and transaction milestones related to the Gresham tie-up .

Sources:

Q2 FY2022 press release (8-K Item 2.02): “Giga-tronics Reports Fiscal 2022 Second Quarter Results” .
Q2 FY2022 earnings call transcript: prepared remarks and Q&A .
Q1 FY2022 press release (8-K Item 2.02) for trend context .
Q3 FY2022 earnings call and 10-Q for subsequent-quarter themes and metrics .

GRESHAM WORLDWIDE, INC. (GIGA)·Q2 2022 Earnings Summary