The LGL Group, Inc. (NYSE American: LGL) (the “Company” or
“LGL”) announced its financial results for the three and six months
ended June 30, 2022.
- Revenue of $7.4 million for the three months ended June 30,
2022 increased 8.0% compared to $6.9 million for the comparable
prior year period. For the six months ended June 30, 2022, revenue
was $15.5 million, a 15.8% increase from the $13.4 million reported
for the comparable prior year period.
- Realized and unrealized losses aggregating $2.3 million during
the first half of 2022, largely related to unrealized losses
recorded for the Company’s ongoing investment in IronNet, Inc.
- Diluted net loss of $0.34 per share compared to zero for the
prior year quarter, and a loss of $0.30 for the six months versus
zero for the comparable prior year period.
- Backlog of $43.4 million at June 30, 2022, up 45.6% versus
$29.8 million as of Q4 2021 and up 103.2% compared to $21.3 million
at June 30, 2021.
- Balance sheet cash and marketable securities of $41.5
million.
- Net working capital of $49.5 million including $6.4 million of
inventory.
- Adjusted EBITDA for Q2 2022 was $603,000 or $0.11 per diluted
share compared to $767,000, or $0.15 per diluted share for Q2 2021.
For the six months ended June 30, 2022, adjusted EBITDA was
$1,318,000 or $0.25 per share versus $964,000 or $0.18 per share
for the comparable prior year period.
- A special meeting of stockholders approved the Company’s
strategic Spin-Off initiative of MtronPTI on June 21, 2022, and the
Company’s Board voted to approve the Spin-Off on August 3,
2022.
Mike Ferrantino, LGL’s Chief Executive Officer, stated, “We are
pleased with the results of the MtronPTI subsidiary and for
recording increased backlog for a third straight quarter and look
forward to the renewed ability to grow value for our shareholders,
both LGL and for MtronPTI, as the companies chart their separate
paths as public companies.”
James Tivy, LGL’s Chief Financial Officer added, “MtronPTI will
benefit greatly from its upcoming public company status and will
prudently seek opportunities to grow both organically and through
acquisition.”
RESULTS FROM OPERATIONS
Revenues for the six months ended June 30, 2022 increased $2.1
million, or 15.8%, to $15.5 million from $13.4 million for the six
months ended June 30, 2021. The revenue increase reflects the
continued recovery of the avionics market and strong defense
product shipments. Gross margins were 37.6% compared to 36.3% for
the prior year benefiting from an increase in business volume.
Backlog was $43.4 million versus $29.8 million at the beginning
of the year and $21.3 million at the end of the second quarter
2021. Backlog included $43.2 million and $21.1 million for our
electronic components (MtronPTI) segment and $0.2 and $0.3 for our
electronic instruments segment (PTF) as of June 30, 2022, and June
30, 2021, respectively. Quarterly bookings were $13.8 million for
the second quarter of 2022, $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 three quarters reflects improved
orders from the continued recovery of the avionics market along
with strong defense orders, as we continue to pull in orders from
our customers for 2023 and beyond, much of which is expected to
ship subsequent to 2022. Supply chain constraints within our
industry have pushed our customers to order well in advance to
secure product deliveries for their production requirements.
GAAP operating income was $124,000 compared to $616,000 in the
second quarter of 2021, inclusive of $51,000 of increased stock
compensation expense and $232,000 of Spin-Off costs incurred during
the second quarter of 2022. For the six months, GAAP operating
income was $345,000 compared to $556,000 in the comparable period
of 2021, inclusive of $206,000 of increased stock compensation
expense and $343,000 of Spin-Off costs.
Investment loss was $2.3 million for the six months ended June
30, 2022 compared to income of $202,000 for the six months ended
June 30, 2021, primarily related to IRNT related investment losses
of $1.8 million and from investment losses of $487,000 from the
remainder of the portfolio.
Net loss was $1.6 million for the six months ended June 30,
2022, compared to income of $9,000 for the comparable prior year
period. The decrease was primarily from the previously discussed
investment loss which was offset by increased business volume
partly offset by one-time Spin-Off costs. Diluted loss per share
was $0.30 and $0.00 for the for the six months ended June 30, 2022
and 2021, respectively.
Adjusted EBITDA, a non-GAAP measure, was $1.3 million for the
six months ended June 30, 2022 versus $964,000 for the six months
ended June 30, 2021. Adjusted EBITDA excludes one-time and
non-operating items to present solely the core operating results
(See non-GAAP reconciliation in the Appendix.)
The Company has two reportable business segments; electronic
components consisting of MtronPTI, and electronic instruments
consisting of Precise Time and Frequency (“PTF”). The electronic
components segment is focused on the design, manufacture and
marketing of highly-engineered, high reliability frequency and
spectrum control products. These electronic components ensure
reliability and security in aerospace and defense communications,
low noise and base accuracy for laboratory instruments, and
synchronous data transfers throughout the wireless and Internet
infrastructure. The electronic instruments segment, or PTF, is
focused on the design and manufacture of high performance Frequency
and Time Reference Standards that form the basis for timing and
synchronization in various applications.
Business segment information follows (in thousands):
Three Months Ended June
30,
Six Months Ended June
30,
2022
2021
2022
2021
Revenues
Electronic components
$
7,064
$
6,407
$
14,755
$
12,661
Electronic instruments
370
475
787
757
Total consolidated revenues
$
7,434
$
6,882
$
15,542
$
13,418
Operating Income (Loss)
Electronic components
$
711
$
834
$
1,765
$
1,183
Electronic instruments
(22
)
102
(14
)
118
Unallocated corporate expense
(565
)
(320
)
(1,406
)
(745
)
Total operating income
124
616
345
556
Interest income (expense), net
7
(3
)
—
(6
)
Loss on equity investment in
unconsolidated subsidiary
—
(676
)
—
(752
)
Investment (loss) income
(2,373
)
75
(2,328
)
202
Other (expense) income, net
(8
)
(5
)
(24
)
40
Total other expense, net
(2,374
)
(609
)
(2,352
)
(516
)
(Loss) Income Before Income Taxes
$
(2,250
)
$
7
$
(2,007
)
$
40
Operating income is equal to revenues less cost of sales and
operating expenses (engineering, selling and administrative
expenses).
BALANCE SHEET
The Company’s strong balance sheet reflects cash and marketable
securities of $41.5 million, $2.8 million of which relate to our
1,288,620 shares of IronNet, Inc. (IRNT), and total net working
capital of $49.5 million at June 30, 2022. This compares to
marketable securities of $45.2 million, and total net working
capital of $51.4 million at December 31, 2021. Total inventory was
$6.4 million, including $2.8 million of raw materials, $2.7 million
of WIP, and $871,000 of finished goods, up $880,000 from inventory
of $5.5 million as of December 31, 2021.
As of June 30, 2022, the Company has disposed of 1,555,315 of
its 2,843,935 shares of IRNT common stock and received related
proceeds of approximately $20.2 million.
SPIN-OFF
The Spin-Off was approved by the Company’s Board on August 3,
2022 and is expected to be effected through a pro rata issuance of
shares of MtronPTI’s common stock to the Company’s stockholders
structured as a tax-free distribution. Stockholders of the Company
will receive one share of MtronPTI’s common stock for each share of
the Company’s common stock held of record as of the close of
business on the record date for the distribution. As a result, the
Company’s stockholders as of the record date for the Spin-Off will
also become the stockholders of MtronPTI after the Spin-Off. The
Company will cease to have any ownership interest in MtronPTI
following the Spin-Off, but the Company’s stockholders will, unless
they sell their shares, be the stockholders of both the Company and
MtronPTI.
The spin-off of MtronPTI will 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
June 30,
2022
2021
REVENUES
$
7,434
$
6,882
Costs and expenses:
Manufacturing cost of sales
4,639
4,151
Engineering, selling and
administrative
2,671
2,115
OPERATING INCOME
124
616
Loss on equity investment in
unconsolidated subsidiary
-
(676
)
Investment (loss) income
(2,373
)
75
Other expense, net
(1
)
(8
)
(LOSS) INCOME BEFORE INCOME TAXES
(2,250
)
7
Income tax (benefit) expense
(452
)
25
NET LOSS
$
(1,798
)
$
(18
)
Weighted average number of shares used in
basic EPS calculation
5,334,187
5,272,204
BASIC NET LOSS PER COMMON SHARE
$
(0.34
)
$
(0.00
)
Weighted average number of shares used in
diluted EPS calculation
5,345,648
5,272,204
DILUTED NET LOSS PER COMMON SHARE
$
(0.34
)
$
(0.00
)
For the Six Months Ended June
30,
2022
2021
REVENUES
$
15,542
$
13,418
Costs and expenses:
Manufacturing cost of sales
9,700
8,552
Engineering, selling and
administrative
5,497
4,310
OPERATING INCOME
345
556
Loss on equity investment in
unconsolidated subsidiary
-
(752
)
Investment (loss) income
(2,328
)
202
Other (expense) income, net
(24
)
34
(LOSS) INCOME BEFORE INCOME TAXES
(2,007
)
40
Income tax (benefit) expense
(378
)
31
NET (LOSS) INCOME
$
(1,629
)
$
9
Weighted average number of shares used in
basic EPS calculation
5,329,080
5,272,204
BASIC NET (LOSS) INCOME PER COMMON
SHARE
$
(0.31
)
$
0.00
Weighted average number of shares used in
diluted EPS calculation
5,347,583
5,337,986
DILUTED NET (LOSS) INCOME PER COMMON
SHARE
$
(0.30
)
$
0.00
THE LGL GROUP, INC.
Condensed Consolidated Balance
Sheets
(Unaudited)
(Dollars in Thousands)
June 30, 2022
December 31, 2021
ASSETS
Cash and cash equivalents
$
22,325
$
29,016
Marketable securities
19,177
16,167
Accounts receivable, net
4,711
4,667
Inventories, net
6,372
5,492
Prepaid expenses and other current
assets
331
494
Total Current Assets
52,916
55,836
Property, plant and equipment, net
3,465
3,383
Right-of-use lease assets
332
396
Intangible assets, net
214
252
Deferred income tax assets
499
34
Other assets
20
5
Total Assets
$
57,446
$
59,906
LIABILITIES AND STOCKHOLDERS'
EQUITY
Total Current Liabilities
$
3,447
$
4,426
Total Long-Term Liabilities
632
737
Total Liabilities
4,079
5,163
Total Stockholders' Equity
53,367
54,743
Total Liabilities and Stockholders'
Equity
$
57,446
$
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
June 30,
2022
2021
(000's, except share and per share
amounts)
(Loss) income before income taxes
$
(2,250
)
$
7
Interest (income) expense, net
(7
)
3
Depreciation and amortization
185
137
Non-cash stock compensation
70
19
Loss on equity investment in
unconsolidated subsidiary
—
676
Investment loss (income)
2,373
(75
)
Spin-Off costs
232
—
Adjusted EBITDA
$
603
$
767
Basic per share information:
Weighted average shares outstanding
5,334,187
5,272,204
Adjusted EBITDA per share
$
0.11
$
0.15
Diluted per share information:
Weighted average shares outstanding
5,345,648
5,272,204
Adjusted EBITDA per share
$
0.11
$
0.15
For the Six Months Ended June
30,
2022
2021
(000's, except share and per share
amounts)
(Loss) income before income taxes
$
(2,007
)
$
40
Interest expense, net
—
6
Depreciation and amortization
351
271
Non-cash stock compensation
303
97
Loss on equity investment in
unconsolidated subsidiary
—
752
Investment loss (income )
2,328
(202
)
Spin-Off costs
343
—
Adjusted EBITDA
$
1,318
$
964
Basic per share information:
Weighted average shares outstanding
5,329,080
5,272,204
Adjusted EBITDA per share
$
0.25
$
0.18
Diluted per share information:
Weighted average shares outstanding
5,347,583
5,337,986
Adjusted EBITDA per share
$
0.25
$
0.18
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version on businesswire.com: https://www.businesswire.com/news/home/20220809006045/en/
James Tivy The LGL Group, Inc. jtivy@lglgroup.com (407)
298-2000
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