January 2019 – I would like to thank you for the supportive comments on our 2018 performance. Year over year, our revenue was up 12.4%, our gross margin % was up 3.3%, our adjusted EBITDA was up 152%, and our backlog grew by 49%. Not only was 2018 an excellent year for us, but the increased backlog has positioned us very well for 2019!
The current administration’s commitment to rebuild our military and increase our readiness has manifested in the increase in orders from both the Department of Defense and from the prime defense contractors that we directly support. General Dynamics is increasing their production levels of the Abrams Main Battle Tank, BAE Systems is successfully bringing the AMPV into full production, and we continue to receive orders in support of the Bradley Fighting Vehicle, the Stryker and other Light Armor Vehicles (LAV).
For new investors, I thought it would be helpful to show our progress over the last five years.
We made a strategic acquisition of the AOC Division of L3 Communications in late 2014 as a “bargain purchase” due to their historical losses on a reduced “sequestered” defense budget and the resulting lower AOC defense revenue base. After working through their pricing and gross margin issues, as well as implementing their commercial optical assembly product line, we’ve successfully executed on expanding their revenue market and driving the consolidated gross margin percentages in an upward trajectory. From this chart, you can see why you find “Increased Revenues”, “Increased Gross Margins”, and “Increased Earnings” in many of my investor communications.
Investors will also notice that all of the previous preferred Series A, B and C shares have been converted to common stock. This was one of the final steps in cleaning up the equity ownership allowing investors clearer visibility of the investor holdings of common stock plus the 4 million warrants (issued in 2016 and exercisable at $1.50). While some investors might see these warrants as a potential dilution, we’ve already seen some of these warrants executed in 2018, which in turn brings additional cash into the company that can be used to further grow the business. You can monitor this warrant execution rate through our Q’s and K’s going forward.
To wrap it up, we’re pleased with our 2018 performance and we look well positioned to build upon this in 2019. Thanks again for your continuing support.