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LGL GROUP INC (LGL)·Q3 2024 Earnings Summary

Executive Summary

  • Q3 2024 total revenues were $1.179M, up 20.6% YoY, while diluted EPS was $0.01, down from $0.02 YoY as lower-margin product mix and higher costs pressured profitability .
  • Gross margin fell sharply to 43.4% (from 55.5% YoY), driven by sales of lower-margin, higher-cost products; this offset stronger net sales and investment income .
  • Backlog rose to $505K as of September 30, 2024 (vs. $313K at September 30, 2023), supporting near-term shipment conversion, but most will ship in the next 90 days .
  • Management cited resilient investment portfolio performance despite a modest decline in U.S. Treasury yields and highlighted a senior hire (Cameron Pforr) to drive strategy; catalysts include backlog conversion and segment mix improvements .

What Went Well and What Went Wrong

What Went Well

  • Net sales increased to $650K (from $438K YoY) on higher product shipments; Electronic Instruments revenue grew 48.4% YoY, reflecting sales momentum .
  • Backlog expanded to $505K (+$192K YoY), indicating improved order flow that is expected to ship primarily within 90 days .
  • “Although our yields in U.S. Treasuries have seen a modest decline, the portfolio's overall performance has been resilient despite the Federal Reserve's September rate cut… we are… actively pursuing investment opportunities,” said Co-CEO Tim Foufas .

What Went Wrong

  • Gross margin compressed to 43.4% (from 55.5% YoY) due to lower-margin product mix and higher manufacturing costs, weighing on EPS .
  • Engineering, selling and administrative expenses increased on higher headcount, wages, and benefits, pressuring operating profits .
  • Corporate segment revenues declined 16.6% YoY in Q3; combined with higher corporate expenses, this muted consolidated income before tax (down to $138K vs. $199K YoY) .

Financial Results

MetricQ3 2023Q1 2024Q2 2024Q3 2024
Total Revenues ($USD Millions)$0.978 $0.888 $1.068 $1.179
Diluted EPS ($USD)$0.02 $0.00 $0.02 $0.01
Gross Margin (%)55.5% 48.0% 59.7% 43.4%

Segment revenue and expense detail (Q3 YoY):

SegmentQ3 2023 Revenue ($USD Millions)Q3 2024 Revenue ($USD Millions)YoY %Q3 2023 Expenses ($USD Millions)Q3 2024 Expenses ($USD Millions)
Electronic Instruments$0.438 $0.650 48.4% $0.368 $0.606
Merchant Investment$0.287 $0.318 10.8% $0.064 $0.090
Corporate$0.253 $0.211 -16.6% $0.347 $0.345
Total$0.978 $1.179 20.6% $0.779 $1.041

KPIs and liquidity:

KPIMar 31, 2024Jun 30, 2024Sep 30, 2024
Backlog ($USD Thousands)$341 $737 $505
Working Capital ($USD Thousands)$41,171 $41,382 $41,535
Cash & Marketable Securities ($USD Millions)$40.890 $41.092 $41.618
Investments (fair value, total) ($USD Millions)$40.9 $41.1 $41.2
Merchant Investment share ($USD Millions)$23.8 $23.8 $24.3

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY/Q4 2024Not provided Not provided Maintained: No guidance
MarginsFY/Q4 2024Not provided Not provided Maintained: No guidance
OpExFY/Q4 2024Not provided Not provided Maintained: No guidance
OI&E / TaxFY/Q4 2024Not provided Not provided Maintained: No guidance
DividendsFY/Q4 2024Not provided Not provided Maintained: No guidance

Note: The Q3 2024 press release and 8-K do not include forward quantitative guidance; no Q3 2024 earnings call transcript was available in our document set .

Earnings Call Themes & Trends

No Q3 2024 earnings call transcript was found; themes below reflect management statements from press releases across Q1–Q3.

TopicPrevious Mentions (Q1 & Q2 2024)Current Period (Q3 2024)Trend
Electronic Instruments executionQ1: Revenue decline YoY; improving backlog and sales initiatives . Q2: Sales/marketing initiatives “starting to bear fruit” with higher-margin products; gross margin up to 59.7% .Net sales up and segment revenue +48.4% YoY; margin compression due to lower-margin products .Improving volumes; mix-driven margin volatility .
Merchant Investment returnsPortfolio repositioned to U.S. Treasury money market funds in 2023; higher net investment income cited in Q1/Q2 .Portfolio “resilient” despite modest decline in Treasury yields after Fed September rate cut .Stable income; rate-sensitive .
Backlog/near-term shipmentsBacklog improved to $341K at Q1 end ; rose to $737K by Q2 end .Backlog $505K at Q3 end; most expected to ship within 90 days .Elevated but normalizing; supports near-term sales .
Cost structure & OpExQ1: Higher engineering, selling & administrative costs (wages) .Continued higher ES&A and manufacturing cost of sales .Cost inflation/headcount pressure persists .
Leadership/strategyNo senior hire commentary in Q1–Q2 press releases.Hiring Cameron Pforr to help drive strategy; pursuing investment opportunities .Added leadership; active capital deployment .

Management Commentary

  • “Although our yields in U.S. Treasuries have seen a modest decline, the portfolio's overall performance has been resilient despite the Federal Reserve's September rate cut… we are also thrilled to welcome Cameron Pforr… as we continue to actively pursue investment opportunities” — Tim Foufas, Co-CEO .
  • “With our sales and marketing initiatives starting to bear fruit, we are pleased with the improved performance within our Electronic Instruments segment. Additionally, we are actively pursuing investment opportunities to enhance shareholder value within our Merchant Investment segment” — Tim Foufas (Q2) .
  • “We are pleased with the improvement in our order backlog and recent sales initiatives… mindful of current U.S. Treasury yields as we continue to seek value add opportunities to grow shareholder value” — Tim Foufas (Q1) .

Q&A Highlights

  • No Q3 2024 earnings call transcript was available; therefore, no Q&A details could be reviewed .

Estimates Context

  • Wall Street consensus estimates from S&P Global were unavailable at the time of analysis due to data access limits; as a result, we cannot provide beat/miss comparisons for EPS or revenue for Q3 2024 [GetEstimates error].
  • Given micro-cap coverage dynamics, investors should monitor subsequent estimate revisions as sell-side models incorporate margin compression and backlog conversion .

Key Takeaways for Investors

  • Revenues rose 20.6% YoY to $1.179M, but EPS fell to $0.01 as gross margin dropped to 43.4% on lower-margin mix and higher costs — watch mix normalization and cost controls for EPS leverage .
  • Electronic Instruments showed strong YoY top-line growth (+48.4%), underscoring demand and shipment execution; margin volatility remains the key swing factor .
  • Backlog at $505K and expected shipment within 90 days supports Q4 near-term conversion; monitor order intake cadence and mix quality .
  • Investment portfolio resilience despite modest Treasury yield declines provides a stabilizing earnings component; rate path remains a driver .
  • Operating expenses and manufacturing costs increased; any efficiency gains or pricing actions could materially improve margins given small scale .
  • No formal guidance was provided; near-term narrative hinges on backlog conversion, segment mix, and investment income trajectory .
  • Actionable: Focus on margin mix improvements and OpEx containment; track backlog adds and conversion speed, and the impact of leadership additions on capital allocation and growth initiatives .