The LGL Group, Inc. (NYSE American: LGL) (the “Company” or
“LGL”) announced its financial results for the three months ended
March 31, 2022.
- Revenue of $8.1 million increased 24.1% compared to $6.5
million for Q1 2021.
- Diluted net income of $0.03 per share compared to $0.01 per
share for the prior year quarter.
- Backlog of $37.0 million at March 31, 2022, up 24% compared to
$29.8 million as of Q4 2021.
- Balance sheet cash and marketable securities of $44.5
million.
- Net working capital of $51.6 million including $5.9 million of
inventory.
- Adjusted EBITDA for Q1 2022 was $715,000 or $0.13 per diluted
share compared to $197,000, or $0.04 per diluted share for Q1
2021.
- A special meeting of stockholders to vote on the Company’s
strategic Spin-Off initiative will be held on June 21, 2022.
Mike Ferrantino, LGL’s Chief Executive Officer, stated, “We are
well positioned to implement our MtronPTI Spin-Off initiative with
a strong balance sheet and a significant increase in MtronPTI
operational backlog. We are encouraged by the recovering avionics
market and strong defense business performance but are cautiously
optimistic given current economic headwinds. I am proud of our
MtronPTI team’s success and dedication while facing the challenges
of inflation, supply chain disruption and workforce
availability.”
James Tivy, LGL’s Chief Financial Officer added, “We continue to
hold 1,288,620 IronNet common shares, of which 250,000 shares were
hedged and in the money at the end of the period.”
RESULTS FROM OPERATIONS
Revenues were $8.1 million compared to $6.5 million for the
first quarter of 2021, up 24.1% versus the prior year quarter. The
revenue increase reflects the recovering avionics market and strong
defense product shipments. Gross margins were 37.6% compared to
32.7% for the prior year quarter benefiting from an increase in
business volume.
Backlog was $37.0 million versus $29.8 million at the beginning
of the year and $20.4 million at the end of the first quarter 2021.
Quarterly bookings were $15.3 million for the first quarter of 2022
and $15.2 million for the fourth quarter of 2021. This record
booking trend during the last two quarters reflects improved orders
from the recovering avionics market along with strong defense
orders, including $9.8 million from two major missile defense
programs, much of which is expected to ship subsequent to 2022.
GAAP operating income was $221,000 compared to a loss of $60,000
in the first quarter of 2021, inclusive of $111,000 of spin-off
costs and 233,000 of non-cash stock compensation incurred during
the first quarter of 2022.
Investment income was $45,000 compared to $127,000 for the first
quarter of 2021.
First quarter 2022 net income was $169,000 compared to $27,000
in the prior year quarter. Diluted earnings per share were $0.03
and $0.01 for the three months ended March 31, 2022 and 2021,
respectively.
Adjusted EBITDA, a non-GAAP measure, was $715,000 in the first
quarter of 2022 versus $197,000 in the first quarter of 2021. (See
non-GAAP reconciliation in the Appendix.)
BALANCE SHEET
The Company’s strong balance sheet reflects cash and marketable
securities of $44.5 million, $6.0 million of which relate to our
IronNet, Inc. (IRNT) positions, and total net working capital of
$51.6 million at March 31, 2022. Total inventory was $5.9 million,
including $2.6 million of raw materials, $2.4 million of WIP, and
$0.9 million of finished goods.
We held 1,288,620 IRNT shares at March 31, 2022, of which
250,000 shares were hedged at the end of the period. As a
subsequent event, this hedge was closed leaving the IRNT position
intact and resulting in pretax hedge proceeds of $1,263,000.
SPIN-OFF UPDATE
The Company has set Tuesday, June 21, 2022, at 9:00 a.m. local
time, as the date and time of a special meeting of stockholders to
vote on the Spin-Off. As previously announced, LGL Group’s Board of
Directors approved the spin-off of M-Tron Industries, Inc. and its
wholly-owned subsidiaries (collectively, “MtronPTI”). The spin-off
is expected to be structured as a tax-free, pro-rata distribution
to all LGL shareholders. If completed, upon effectiveness of the
transaction, LGL shareholders would own shares of both companies.
Completion of any spin-off would be subject to various conditions,
including approval of shareholders and relevant regulatory bodies.
It is also expected that MtronPTI will be treated as discontinued
operations from a GAAP reporting perspective, effective upon
shareholder approval. There can be no assurance that the potential
spin-off transaction will be completed in the manner described
above, or at all.
LGL believes that, if completed, the potential spin-off of
MtronPTI would enable shareholders to more clearly evaluate the
performance and future potential of each entity on a standalone
basis, while allowing each to pursue its own distinct business
strategy and capital allocation policy. Separating MtronPTI as an
independent, publicly owned company positions the business to
increase value to both MtronPTI and LGL Group. The spin-off permits
each company to tailor its strategic plans and growth
opportunities, more efficiently raise and allocate resources,
including capital raised through debt or equity offerings, flexibly
use its own stock as currency for teammate incentive compensation
and potential acquisitions and provide investors a more targeted
investment opportunity.
The LGL Group continues to strive for profitable growth
internally and by acquisition. The LGL Group, on a pro-forma
standalone basis after the spin-off, will continue to own and
develop its frequency reference and time standard synchronization
solutions business through its Precise Time and Frequency LLC
(“PTF”) subsidiary platform, and is expected to retain
substantially all the company’s cash and marketable securities.
The LGL Group has successfully spun off several businesses over
its history, including Lynch Interactive, The Morgan Group, Tremont
Advisors, and others. MtronPTI itself sought to become an
independently listed company via an IPO, filing a form S-1
registration statement with Needham & Company as the
underwriter in 2000. This IPO was pulled as a result of market
conditions. MtronPTI has an established and formidable presence in
its key markets today and if the spin-off is completed, the
standalone MtronPTI would continue providing market-leading
engineered solutions to its defense and aerospace customers. The
potential spin-off is thus a continuation of the company’s strategy
of developing businesses and positioning them as independent
entities to enhance shareholder value and alignment.
About The LGL Group, Inc.
LGL’s business strategy is primarily focused on growth through
expanding new and existing operations across all industries,
including the Company’s wholly owned Precise Time and Frequency
Corporation (PTF) based in Wakefield Massachusetts. The LGL Group
Inc.'s engineering and design origins date back to the early part
of the last century. In 1917, Lynch Glass Machinery Company, the
predecessor of LGL, was formed, and emerged in the late twenties as
a successful manufacturer of glass-forming machinery. The company
was then renamed Lynch Corporation, and was incorporated in 1928,
under the laws of the State of Indiana. In 1946, Lynch was listed
on the “New York Curb Exchange,” the predecessor to the NYSE
American. The company has had a long history of owning and
operating various businesses in the precision engineering,
manufacturing and services sectors.
Precise Time and Frequency (PTF) was founded in 2002 and offers
customers frequency reference and time standard synchronization
solutions tailored to meeting performance requirements. PTF is
housed in a well-equipped, modern, facility and staffed by a highly
dedicated and experienced team of time and frequency professionals.
Although the company offers a wide range of standard instruments
and options, new requirements are enthusiastically embraced,
resulting in an ever expanding capability. Products include NTP
Servers, broadband amplifiers, RF distribution, 1PPS distribution,
and fiber optic distribution. The company has developed a
comprehensive portfolio of time and frequency instrumentation
including frequency standards, time standards, and time code
generators, complemented by a wide range of ancillary products such
as RF distribution amplifiers, Digital distribution amplifiers,
Time Code distribution amplifiers, and redundancy switches.
Thousands of instruments have been delivered to a broad range of
applications worldwide, from simple network time servers to
synchronize local computers and instruments, to fully redundant and
highly sophisticated Satellite Communications and Broadcast
systems. Military applications include synchronization of mobile
Satcom terminals, high performance sources for calibration, a
unique SAASM solution, and test equipment providing the ultimate in
frequency stability and phase noise performance.
M-tron Industries, Inc. (“Mtron”) was originally founded in 1965
as Mechtronics, Industries, Inc. Shortly thereafter, the name was
formally changed to M-tron Industries, Inc. The primary business of
Mtron during the early years was building crystals for the CB radio
market. When technology changed in the late 1970s, so did Mtron. A
change in marketing approach and continued development of products
provided new life for the company. Mtron became known as a supplier
of high quality, high reliability crystal, oscillator, and to some
degree, VCXO (Voltage Controlled Crystal Oscillator) and TCXO
(Temperature Compensated Crystal Oscillator) products which would
be used in applications such as telecommunication infrastructure
used to make phone systems and later on, the internet function. In
1976, M-tron Industries, Inc. was acquired. In 2002, Mtron acquired
the assets of Champion Technologies, Inc. of Franklin Park,
Illinois. Champion was a spin-off of Motorola during the mid-1980s.
This acquisition helped Mtron recover more quickly from the telecom
market collapse of 2001 and 2002 by expanding product offering, as
well as customer base.
In 1965, at nearly the same time that Mtron was established,
another company was organized, known as Piezo Technology, Inc.
(“PTI”). PTI was organized for the purpose of designing and
building crystal filters used in all types of equipment where
certain types of noise need to be filtered out of a circuit. PTI
grew over the years in both business and products to include LC
(Lumped Element) filters, TCXO and OCXO (Oven Controlled Crystal
Oscillator) products. Primary markets for PTI were Military,
Avionics and Instrumentation. In 1995 PTI opened a manufacturing
location in India and in 2004 M-tron Industries, Inc. acquired
Piezo Technology, Inc.
The combined operations of Mtron and PTI are referred to as
“MtronPTI”, and are headquartered in Orlando, Florida. MtronPTI
currently has a global footprint and serves most major markets that
require precision timing and filter products. The Company’s target
market segments include high-end telecommunications, and military,
instrumentation, space and avionics (referred to as “MISA”).
MtronPTI has operations in Orlando, Florida, Yankton, South Dakota
and Noida, India. In addition, MtronPTI has sales offices in Hong
Kong and Shanghai, China. MtronPTI, is currently in the process of
being spun off from LGL Group, subject to shareholder approval.
For more information on the Company and its products and
services, contact James Tivy at The LGL Group, Inc., 2525 Shader
Rd., Orlando, Florida 32804, (407) 298-2000, or visit
www.lglgroup.com and www.mtronpti.com.
Caution Concerning Forward Looking Statements
This press release may contain forward-looking statements made
in reliance upon the safe harbor provisions of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Forward-looking
statements include all statements that do not relate solely to
historical or current facts, and can be identified by the use of
words such as “may,” “will,” “expect,” “project,” “estimate,”
“anticipate,” “plan,” “believe,” “potential,” “should,” “continue”
or the negative versions of those words or other comparable words.
These forward-looking statements are not guarantees of future
actions or performance. These forward-looking statements are based
on information currently available to us and our current plans or
expectations and are subject to a number of uncertainties and risks
that could significantly affect current plans, anticipated actions
and our future financial condition and results. Certain of these
risks and uncertainties are described in greater detail in our
filings with the Securities and Exchange Commission. We are under
no obligation to (and expressly disclaim any such obligation to)
update or alter our forward-looking statements, whether as a result
of new information, future events or otherwise.
THE LGL GROUP, INC.
Condensed Consolidated
Statements of Operations
(Unaudited)
(Dollars in Thousands, Except
Share and Per Share Amounts)
For the Three Months Ended
March 31,
2022
2021
REVENUES
$
8,108
$
6,536
Costs and expenses:
Manufacturing cost of sales
5,061
4,401
Engineering, selling and
administrative
2,826
2,195
OPERATING INCOME (LOSS)
221
(60
)
Loss on equity investment in
unconsolidated subsidiary
-
(76
)
Investment income
45
127
Other (expense) income, net
(23
)
42
INCOME BEFORE INCOME TAXES
243
33
Income tax provision
74
6
NET INCOME
$
169
$
27
Weighted average number of shares used in
basic EPS calculation
5,323,973
5,272,204
BASIC NET INCOME PER COMMON SHARE
$
0.03
$
0.01
Weighted average number of shares used in
diluted EPS calculation
5,345,202
5,350,571
DILUTED NET INCOME PER COMMON SHARE
$
0.03
$
0.01
THE LGL GROUP, INC.
Condensed Consolidated Balance
Sheets
(Unaudited)
(Dollars in Thousands)
March 31, 2022
December 31, 2021
ASSETS
Cash and cash equivalents
$
21,652
$
29,016
Marketable securities
22,815
16,167
Accounts receivable, net
5,255
4,667
Inventories, net
5,919
5,492
Prepaid expenses and other current
assets
467
494
Total Current Assets
56,108
55,836
Property, plant and equipment, net
3,442
3,383
Right-of-use lease assets
369
396
Intangible assets, net
234
252
Deferred income tax asset
199
34
Other assets
1
5
Total Assets
$
60,353
$
59,906
LIABILITIES AND STOCKHOLDERS'
EQUITY
Total Current Liabilities
$
4,497
$
4,426
Total Long-Term Liabilities
711
737
Total Liabilities
5,208
5,163
Total Stockholders' Equity
55,145
54,743
Total Liabilities and Stockholders'
Equity
$
60,353
$
59,906
Reconciliations of GAAP to Non-GAAP Measures
To supplement our consolidated financial statements presented on
a GAAP (generally accepted accounting principles) basis, the
Company uses certain non-GAAP measures, including Adjusted EBITDA,
which we define as net income adjusted to exclude depreciation and
amortization expense, interest income and expense, income taxes
expense (benefit), stock-based compensation expense, investment
income and loss, and other items we believe are discrete events
which have a significant impact on comparable GAAP measures and
could distort an evaluation of our normal operating performance.
These adjustments to our GAAP results are made with the intent of
providing both management and investors a more complete
understanding of the underlying operational results and trends and
our marketplace performance. The presentation of this additional
information is not meant to be considered in isolation or as a
substitute for net earnings or diluted earnings per share prepared
in accordance with GAAP.
Reconciliation of GAAP Income Before
Income Taxes to Non-GAAP Adjusted EBITDA:
For the Three Months Ended
March 31,
2022
2021
(000's, except share and per share
amounts)
Income before income taxes
$
243
$
33
Interest expense, net
7
3
Depreciation and amortization
166
134
Non-cash stock compensation
233
78
Loss on equity investment in
unconsolidated subsidiary
—
76
Investment income
(45
)
(127
)
Spin-Off costs
111
—
Adjusted EBITDA
$
715
$
197
Basic per share information:
Weighted average shares outstanding
5,323,973
5,272,204
Adjusted EBITDA per share
$
0.13
$
0.04
Diluted per share information:
Weighted average shares outstanding
5,345,202
5,350,571
Adjusted EBITDA per share
$
0.13
$
0.04
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version on businesswire.com: https://www.businesswire.com/news/home/20220511006003/en/
James Tivy The LGL Group, Inc. jtivy@lglgroup.com (407)
298-2000
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