Executive Summary

Revenue of $3.567M, up 32.5% year over year and up 74.0% sequentially; basic EPS of $0.02 vs ($0.18) YoY and ($0.32) in Q1 FY22, with operating income turning positive ($0.037M) on lower engineering expense and stronger Microsource filter shipments .
Gross margin was 37.0%, modestly below 38.6% YoY due to mix (lower-margin Microsource outweighed higher-margin RADAR/EW) .
Adjusted EBITDA improved to $0.238M from ($0.308M) YoY and ($0.493M) in Q1, aided by stock-based comp add-back and a $46k non-cash gain on pre-funded warrants; management highlighted expected rebound in EW orders in H2 FY22 .
Management cited streamlined procurement via IDIQ and multiple range opportunities (5–6 programs) as near-term catalysts to unlock inventory and drive incremental high-margin EW revenue .

What Went Well and What Went Wrong

What Went Well

Significant sequential recovery: Revenue rose 74% vs Q1 on Microsource filters ($3.3M) after a large order; gross profit increased to $1.320M, with net income turning positive .
Cost discipline: Engineering expenses fell by $320k YoY in Q2, reflecting capitalization of software engineering and lower personnel/consulting costs .
Balance sheet strengthening: Shareholders’ equity increased from $4.247M at FY21 year-end to $5.343M at Q2 FY22, aided by reclassification of pre-funded warrants to equity; CFO: “we are encouraged by our improved performance” .

What Went Wrong

EW order delays persisted: RADAR/EW test revenue fell to $0.297M vs $0.822M YoY, as certain anticipated military orders did not arrive; management noted long approval cycles and product mix impact .
Margin mix headwind: Gross margin dipped to 37.0% from 38.6% YoY due to a higher proportion of Microsource revenue relative to EW testing .
First-half profitability still negative: Six-month net loss ($0.798M) and adjusted EBITDA loss ($0.255M) reflect earlier weakness in Q1 and order timing .

Financial Results

Metric	Q2 FY2021 (3 months ended Sep 26, 2020)	Q1 FY2022 (3 months ended Jun 26, 2021)	Q2 FY2022 (3 months ended Sep 25, 2021)
Revenue ($USD Millions)	$2.692	$2.050	$3.567
Basic EPS ($USD)	($0.18)	($0.32)	$0.02
Gross Profit ($USD Millions)	$1.040	$0.800	$1.320
Gross Margin %	38.6%	—	37.0%
Operating Income (Loss) ($USD Millions)	($0.440)	($0.700)	$0.037
Adjusted EBITDA ($USD Millions)	($0.308)	($0.493)	$0.238

Segment/Line-Item Breakdown

Segment/Line	Q2 FY2021	Q1 FY2022	Q2 FY2022
Microsource (Services) Revenue ($USD Millions)	$1.870	$1.999	$3.270
RADAR/EW Test (Goods) Revenue ($USD Millions)	$1.109	$0.051	$0.297
Total Revenue ($USD Millions)	$2.692	$2.050	$3.567

KPIs and Balance Sheet Highlights

KPI	Q2 FY2021	Q1 FY2022	Q2 FY2022
Cash ($USD Millions)	—	$1.030	$0.648
Inventories ($USD Millions)	—	$4.404	$4.446
Accounts Receivable, Net ($USD Millions)	—	$0.394	$1.299
Shareholders’ Equity ($USD Millions)	—	$3.527	$5.343
Diluted Shares (Millions)	2.636	2.725	3.361

Notes:

Gross margin % for Q1 FY22 was not disclosed; management cited mix drag due to low EW in Q1 .
Services line corresponds to Microsource filters/oscillators; Goods line to RADAR/EW test products per company framing .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
EW order cadence	H2 FY2022	Delays; procurement streamlining underway	Expect rebound in order activity; IDIQ in place and awaiting POs	Raised (directionally)
Microsource revenue trajectory	FY2022	Delays in new contracts noted in Q1	“Dependable cash flow”; Q2 strength on large order	Improved
Procurement process	Near term	Shift away from GSA toward faster methods	IDIQ established to simplify and accelerate orders	Improved
Formal quantitative guidance	FY2022	None provided	None provided	Maintained

No formal numerical guidance on revenue, margins, OpEx, OI&E, or tax rate was issued; management’s directional commentary suggests improving EW momentum and continued Microsource stability .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 FY22)	Current Period (Q2 FY22)	Trend
EW orders/approval cycles	Procurement delays impacted Q1 revenue	IDIQ now in place; expecting multiple range orders (5–6 programs); near-term PO visibility improving	Improving
Product mix and margins	EW weakness drove lower gross margin in Q1	Gross margin 37.0% vs 38.6% YoY; mix skewed to Microsource in Q2	Mixed (margin modestly lower YoY)
Microsource filter demand	$3.7–$4.3M orders since FY22 start noted; timing swings	$3.3M in Q2; steady cash generation; used in F-15/16/18	Stable to Strong
Sales organization build-out	Added sales personnel post-pandemic opportunity	Hired experienced EW officer/program manager on East Coast	Strengthening
Strategic wins (COMPASS/TEmS)	Targeting range applications; pipeline building	Multiple COMPASS orders at a national lab; digital front-end with expected RF upgrades	Expanding
Balance sheet/capital	Prefunded warrants liability present	Reclassified warrants to equity; shareholder equity ~$5.3M; inventory ~$4.4M	Improved equity; inventory awaits orders

Management Commentary

CEO: “It is gratifying to see our second quarter fiscal 2022 revenue increase from a weak first fiscal quarter… we are disappointed in the booking activity in our RADAR/EW business unit and anticipate a rebound in order activity… We remain confident in our microwave filter business’s ability to generate dependable cash flow and are optimistic about our prospects to capture share in the attractive EW Testing market.”
CFO: “We are encouraged by our improved performance… driven by a 33% increase in revenue and an 13% reduction in operating expenses… [prefunded warrants] reclassified to equity… increasing our shareholders’ equity from $4.2 million… to $5.3 million at the end of the second quarter.”
CEO (closing): “The strength of the microwave filter business… provides us with a steady cash generation capability… our EW division has a large market opportunity… we need to do a better job gaining market share… we have a disruptive solution…”
CFO (EW pipeline): “We will be part of a military contract that greatly reduces the long approval cycles… during the second half of fiscal 2022.”

Q&A Highlights

National lab COMPASS orders: Multiple programs within the lab have ordered systems; digital front-end today with expected RF hardware additions later, implying follow-on orders .
Range training systems: IDIQ contract in place to accelerate procurement; management expects multiple opportunities across at least five or six ranges/bases, each requiring multiple systems .
Sales talent: Hired an experienced military program manager (East Coast) to drive TEmS adoption; expects this to improve pipeline and execution .
Microsource visibility: Management expects steady filter demand through the balance of the year .

Estimates Context

Wall Street consensus (S&P Global) for GIGA was unavailable for the relevant periods; as a result, estimates comparisons are omitted. Management did not disclose external consensus in filings or the call .

Key Takeaways for Investors

Sequential inflection: Return to profitability (basic EPS $0.02) on strong Microsource shipments; incremental EW revenue is highly accretive, suggesting high operating leverage when orders land .
Mix-sensitive margins: Gross margin modestly below YoY due to revenue skew; improved EW order flow (higher-margin) is the key lever to lift margins and cash generation .
Procurement catalyst: IDIQ framework and multiple range programs should shorten cycles and unlock ~$4.4M of inventory, aiding working capital and cash .
Strategic validation: Multiple COMPASS wins at a national lab with expected upgrades add credibility to the EW portfolio and potential for repeat orders .
Balance sheet stronger: Equity up to ~$5.343M; reclassification of warrants reduces liability complexity, supporting potential customer/partner confidence .
Near-term focus: Watch for PO conversions under IDIQ and additional range/lab orders; each incremental EW system should materially improve profitability .
Medium-term thesis: If management executes on gaining market share in EW testing while sustaining Microsource’s “rock” cash flows, the business can scale with attractive unit economics and operating leverage .

Cross-References and Non-GAAP Notes

Adjusted EBITDA excludes interest, taxes, other income/expense, share-based comp, and D&A; Q2 included a $46k non-cash gain on prefunded warrants remeasurement .
Q2 cost reductions largely reflected capitalization of software engineering and reallocations of non-recurring engineering to cost of revenue .
Mix explanation for margin: EW test carries higher gross margin than Microsource; Q2 mix weighed on margin despite revenue/GP growth .

Additional context: The company filed as Giga-tronics Incorporated (OTCQB: GIGA) for the quarter ended September 25, 2021; this aligns with the requested period (calendar Q3 2021) .

GRESHAM WORLDWIDE, INC. (GIGA)·Q3 2021 Earnings Summary