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GRESHAM WORLDWIDE, INC. (GIGA)·Q2 2021 Earnings Summary

Executive Summary

  • Q2 FY2021 revenue was $2.69M, down 11.3% year-over-year, as delayed Microsource filter orders reduced overhead absorption; EPS swung to a loss of ($0.18) vs $0.03 in the prior year .
  • Sequentially vs Q1 FY2021, revenue fell from $3.55M to $2.69M and gross margin compressed from ~42.7% to 39% as segment mix shifted and overhead absorption declined .
  • Management emphasized that large, timing-driven orders make quarterly results volatile and reiterated confidence in the long-term opportunity, particularly in the higher-margin RADAR/EW test business .
  • No formal quantitative guidance was issued; management expects stronger second-half revenues in both Microsource filters and RADAR/EW test as access to military bases normalizes and orders flow improves .

What Went Well and What Went Wrong

What Went Well

  • RADAR/EW test revenue grew sharply year-over-year to $0.82M, evidencing traction despite access constraints; “we expect orders in the near future” as base access improves .
  • Strategic expansion of use cases beyond the lab to ranges and across services (Navy, Air Force, Army), with an addressable Navy range opportunity of ~10 systems at ~$1.5M per complete trailer, supporting medium-term growth .
  • Microsource remained a “rock” with sole-source positioning; Boeing’s $4.96M order highlighted enduring demand for F‑15/16/18 programs and supports backlog stability .

What Went Wrong

  • Microsource filter sales declined to $1.87M from $2.66M YOY due to delayed order timing, pressuring gross margin to 39% (vs 41% prior year) and driving an operating loss of ($0.44M) .
  • COVID-19 travel restrictions impaired in-person access to cleared facilities, slowing EW test demonstrations and procurement cycles, which “drove the company into an operating loss for the quarter” .
  • SG&A increased to $0.93M (+23% YOY) on legal and personnel costs, while engineering spend rose to $0.55M (+59% YOY) to support EW development, magnifying loss in a lower-revenue quarter .

Financial Results

Consolidated Performance vs Prior Year and Prior Quarter

MetricQ2 FY2020 (Older)Q1 FY2021 (Prior Quarter)Q2 FY2021 (Current)
Revenue ($USD Millions)$3.035 $3.548 $2.692
Goods Revenue ($USD Millions)$0.373 $1.109 $0.822
Services Revenue ($USD Millions)$2.662 $2.439 $1.870
Cost of Goods and Services ($USD Millions)$1.787 $2.034 $1.652
Gross Profit ($USD Millions)$1.248 $1.514 $1.040
Gross Margin %41% 42.7% (1.514/3.548) 39%
Operating Income (Loss) ($USD Millions)$0.148 $0.108 ($0.440)
Net Income (Loss) to Common ($USD Millions)$0.044 $0.072 ($0.477)
EPS – Basic ($USD)$0.06/$0.03 (see table) $0.03 ($0.18)
EPS – Diluted ($USD)$0.03 $0.03 ($0.18)
EBITDA ($USD Millions)$0.295 N/A($0.309)

Note: Q1 FY2021 values derived from Q1 FY2021 column in Q1 FY2022 press release tables .

Segment Mix

Segment RevenueQ2 FY2020 (Older)Q1 FY2021 (Prior Quarter)Q2 FY2021 (Current)
RADAR/EW Test – Goods ($USD Millions)$0.373 $1.109 $0.822
Microsource Filters – Services ($USD Millions)$2.662 $2.439 $1.870

Selected KPIs and Balance Sheet Highlights

KPI / MetricQ2 FY2020Q1 FY2021Q2 FY2021
PPP Loan Balance ($USD Millions)$0.786 (applied for forgiveness in Oct-2020) $0.786 (still outstanding) N/A in quarter; forgiveness completed by Q3 FY2021
Loans Payable (Net, $USD Millions)$1.49 ~$0.70 expected post-forgiveness $0.273 by Q3 FY2021
Inventory ($USD Millions)$3.166 $3.2 (strategic position) N/A

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue (Companywide)FY2021 Second HalfNo formal quantitative guidanceManagement expects stronger second-half revenues in both Microsource and RADAR/EW as order timing normalizes and base access improves Maintained narrative; no numeric ranges
Gross MarginFY2021 Second HalfNo formal quantitative guidanceMargin mix to improve as EW test grows as a % of revenue (EW >50% margin vs high-30s for Microsource) Maintained qualitative view
OpEx (Engineering, SG&A)FY2021Continued investment in EW; SG&A elevated by legal/personnelSG&A expected to flatten as one-time legal costs fade; continue R&D investment in EW Clarified components, no numeric ranges

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 FY2021 call)Previous Mentions (Q3 FY2021 call)Current Period ViewTrend
Access to cleared facilitiesCOVID restrictions blocked access; quarantine required to enter labs Easing restrictions; expanding to Eglin AFB and ranges Access improvements expected to accelerate demos and orders Improving
EW Test business rampOne system booked (~$0.82M) with range application Goods revenue $1.56M; expanding lab-to-range and across services Multi-system opportunity (10 trailers ~ $1.5M each) at Navy ranges; Air Force and Army next Accelerating
Microsource filtersTiming-driven quarterly swings; still “rock” of revenue Backlog normalizing across all aircraft Sole-source positioning; $4.96M Boeing order supports visibility Stabilizing
Margin mixGM pressured by lower Microsource revenue EW >50% margin vs high-30s Microsource; mix should lift GM over time Mix shift is a lever as EW scales Positive medium-term
OpEx disciplineHigher R&D and SG&A (legal/personnel) SG&A % of revenue down; PPP forgiveness improved liquidity SG&A to flatten post one-time legal; maintain R&D investment Normalizing

Management Commentary

  • CEO on operational constraints and outlook: “Travel restrictions due to COVID-19… delayed the ability to demonstrate our EW test capability… revenues fell below our forecast… Nevertheless, we believe that the second half of this fiscal year will pick up… We remain confident… with growth expected in both our Microsource filter and RADAR EW test businesses” .
  • CFO on timing volatility and order momentum: “Because of the timing of large orders, we incurred a loss. However, we received a large order in late September, and we expect to make up for this timing delay” .
  • On strategic expansion: “We are expanding… from one lab to multiple labs, from lab application to range application, and… into the Air Force… and the Army” .
  • On segment economics: “Microsource… gross margin… high 30s… EW test… definitely over 50% gross margin… as EW test increases… gross margin should definitely improve” .

Q&A Highlights

  • Access to secret labs: Restrictions eased from mandatory quarantine to appointment-based access, enabling demos and accelerating EW opportunities (e.g., Eglin AFB installations) .
  • EW ramp cadence: Near-term orders expected; opportunity at Navy ranges of 10 multi-component trailers ($1.5M each) with detection/capture upgrades, plus expansion to Air Force/Army .
  • SG&A drivers: Elevated due to rights agreement/legal costs and added sales personnel; expected to “come down a little bit” as one-time legal costs fade .
  • Filter business stability: Sole-source programs across F‑15/16/18 with large Boeing order; quarterly swings are timing rather than competitive losses .

Estimates Context

  • S&P Global/Capital IQ Wall Street consensus estimates were unavailable for GIGA in this period (no CIQ mapping; tool returned error). As a result, no beat/miss vs consensus can be determined for revenue or EPS. Estimates unavailable via S&P Global.

Key Takeaways for Investors

  • Quarterly volatility is driven by large, timing-sensitive defense orders; the underlying demand profile remains intact, particularly for sole-source Microsource filters .
  • The higher-margin EW test business is scaling from lab to range and across services; mix shift should structurally lift gross margins over time as EW becomes a larger share .
  • Near-term catalysts include improved base access and range installations (e.g., Eglin AFB), which management expects to translate into orders and shipments in coming quarters .
  • Operating leverage is visible: as EW revenue grows, gross margin should expand and SG&A as a % of sales can normalize post one-time legal costs .
  • Liquidity improved materially by PPP loan forgiveness in Q3 FY2021; debt reduction supports balance sheet resilience heading into the second half .
  • With no formal guidance and limited analyst coverage, investors should focus on order flow updates (filters and EW systems), base access milestones, and segment mix to gauge trajectory .
  • Risk monitor: renewed access constraints or procurement delays could pressure near-term results; the long-cycle defense backdrop and sole-source positioning mitigate medium-term risk .