RADA Electronic Industries Ltd.
Q3 2017 Earnings Call Transcript

Published: 28 Nov 2017

[Operator:]

Ladies and gentlemen, thank you for standing by. Welcome to the RADA Electronic Industries Third Quarter 2017 Results Conference Call. All participants are present in listen-only mode. Following management’s formal presentation, instructions will be given for the question-and-answer session. As a reminder, this conference is being recorded. You should have all received by now the Company’s press release. If you have not received it, please contact RADA’s Investor Relations team at GK Investor & Public Relations at 1-646-688-3559 or view it in the News section of the Company’s website, www.rada.com. I would now like to hand over the call to Mr. Ehud Helft of GK Investor Relations. Mr. Helft, please go ahead.

[Ehud Helft:]

Thank you, operator. I would like to welcome all of you to this conference call and thank RADA management for hosting this call. With us on the call today are Mr. Dov Sella, Chief Executive Officer; and Mr. Avi Israel, Chief Financial Officer. Dov will summarize the key highlights of the quarter followed by Avi who will provide a summary of the financials. We will then open the call for the question-and-answer session. Before we begin, I would like to point out that the Safe Harbor published in today’s press release also pertains to the contents of this conference call. And with that, I would now like to introduce RADA’s CEO, Mr. Dov Sella. Dov, go ahead please.

[Dov Sella:]

Thank you, Ehud. Good morning to our U.S. participants and good evening to the Israeli participants. Good day to everybody else. And welcome to our third quarter conference call which we came ahead with this year. Obviously, we are very pleased with the results of the third quarter which is a remarkable quarter in many years. Our revenues are over $7 million which is showing over 100% increase compared to previous year and also a 112% increase over the previous quarter. Gross margin is about 39% compared to the 12% of last year and it is mainly because of the mix of the products that we sold this quarter, mainly radars, tactical radars and our average for 2017 for the first nine months is at about 35%. We show higher operating expenses since we invested heavily in infrastructure mainly for production -- real production of our radars but not only, and we expect that in the fourth quarter we will complete this investment which enables us to produce in a very efficient way our tactical radars. We took some steps to bolster our cash position recently. We have raised $10 million in capital from top Israeli institutional investors back in August this year. Our major shareholder DBSI increased its net shareholder by converting our debt to them to equity and exercises the warrant. And this reduced our interest payments, annual interest payments by $250,000 per year. The capital that we raised is primarily to invest in our business, capitalize on opportunities and improve our infrastructure. We are going to increase our spending on IR&D in order to keep and maintain technological leadership in these markets, mainly of tactical radars, but not only. We are in the process of setting up our U.S. subsidiary and to take advantage of the many opportunities that this market is presenting to us. We are going to use the funds to increase our working capital and to build inventories that should address urgent needs of this emerging markets and we want our customers to see a strong and stable supplier which can support the products over the long-term. Despite the higher operating expenses going forward, our operating income is about $1 million which is close to 15% of operating margin which is a multi-year record for the Company. The net income of this quarter is $800,000. With regard to expectations ahead, we increased our yearly guidance to $26 million based on our current performance up to now, which shows 100% growth compared to 2016. While we see sequential growth of over 25% between Q3 and Q4, I want to stress that revenue growth is not necessarily linear and it has its ups and downs. Sales of our, in our industry can by lumpy and can vary significantly up and down between quarters and even years, especially when we are addressing this emerging market of tactical radars which is sort of unstable yet. And in whatever in the next quarter in quarter number four, we see a jump in sales mainly due to the specific U.S. military project that we have announced back in August. A large portion of it was already delivered and we expect to complete the deliveries this year. This represents a very significant program that was accomplished in a very short period of time. You like us internally showed our business through the lens of a longer period comparisons year-over-year at a minimum which removes some of the quarterly volatility as we mentioned earlier. Let’s review our business. Regarding the radar line of business, this is our growth engine. We are introducing software-defined multi-mission tactical radars to the marketplace and especially for the maneuver force. This is our edge over competition, and radars can work on the move are very adaptable and very agile compared to when you address them to the current warfare. The tactical radar solutions for the maneuver force are a new technologically advanced offering as I mentioned and they provide hemispheric detection and tracking of all the relevant tracks that can endanger the war fighter of today whether these are aerial targets, fixed fires from a fixed site of all kinds and also surface movers and direct attack weapons. The applications are mainly active protection for tactical military vehicles and the emerging mobile very short-range air defense need for the maneuver force, which is an emerging need especially in the United States, but not only. The addressable market we estimate is between $3 billion to $5 billion over the next decade. And we believe that we are a diverse of market acceptance and growth. We begin to see earlier adaptor of the technology amongst some of the most model military forces like the example of this major program that we have accomplished recently. Our legacy business Avionics is basically stable. Our pipeline is very good mainly around RADA but not only. We’re pursuing dozens of opportunities, amounting to multiple million dollars opportunities over the world with about 50% of these opportunities in the United States. This market is our most important market. We -- as I mentioned, we have accomplished a major project in a record time and the customer is very satisfied with the results. And we see additional potential in the pipeline, while future potential is further order from the same customer from other military customers. This is a specific care military force out of the few that there are in the United States, and all of them show the information among them. And we see that other advanced militaries elsewhere in the world are showing similar interest based on our current achievements that we have demonstrated. We are also continuing to corporate with our partner in the United States, which is DRS Technologies and this partnership is progressing well, and we see a lot of opportunities around this corporation as well. In summary, we are very pleased with this quarter results. The pipeline is strong. We are pursuing many opportunities in the United States and not only, and we are very excited with regards to the potential ahead. I’d like to introduce you to our new CFO Avi Israel. Avi is highly experienced executive that joined us from being a CEO of Logisticare and previously also the CEO of Brimag Communication in Israel. And before that he was the CFO and Deputy CEO of Telit Communications, which is traded in the London Stock Exchange. I would like also to thank Shiri Lazarovich, our former CFO, who is retiring from the Company today for her many years of service and efforts on behalf of the Company. Avi?

[Avi Israel:]

Thank you. Hi, everybody. And first of all you can find our results on the press release we issued earlier today and I will provide a short summary of our third quarter results now. The highlights were as follows. Third quarter revenues grew 112% to $7.1 million compared to $3.3 million in the third quarter of 2016. Gross margin was 39% versus 12.4% in the third quarter of last year. Our operating profit for the quarter was $1 million versus loss of $900,000 in the third quarter of 2016. Net income for the quarter was $800,000 or representing $0.05 per share versus loss of $1 million last year, representing $0.06 per share in the third quarter of 2016. Net cash and equivalence at the end of quarter was $9.3 million compared to $1.2 million at year end of 2016. And most important thing, no long-term liabilities on the balance sheet as of today. The growth in cash was due to a $10 million offering that the Company undertook in August as well as conversion of debt to equity and exercise of warrants by DBSI which growth another $3 million into the Company. Cash was used mainly for capital expenditure, extending on our manufacturing capacity for our RADA production line as well as for working capital giving the expenses for growth in our orders in the coming quarters. We expect positive operating cash flow in the fourth quarter as well. Another point to mentioned, shareholders equity increased to $27.5 million at the end of the quarter versus $11 million at the end of 2016. That ends my summary. We should now open for the call for questions. Operator, please?

[Operator:]

Ladies and gentlemen, at this time we will begin the question-and-answer session. [Operator Instructions] The first question is from Isaac Vidomlanski [ph], a private. Please go ahead.

[Unidentified Analyst:]

Yes. Good morning to USA and Israel. My first question is, RADA is an established company for many years. It was founded in 1970. But still I didn’t see any coverage by analysts on the Company. What are you planning to do in order to rectify the situation? Also, are you planning any meeting with institution and private investors in the U.S. in order to tell the story of RADA?

[Avi Israel:]

Hi, basically make sure that RADA is a long-term company, but really initiated the IR program after the Company sort of emerged from difficult period in the last two years. In the last year, RADA has done quite a few management meetings and we are definitely talking to U.S. analysts and investors and participating in different investor conferences. And our intention is definitely to increase the profit of the Company in the coming years as far as IR is concerned.

[Dov Sella:]

Regarding meetings in United States of the investor community, we are doing it in a frequency of basically every quarter, are going to be in the United States in early December and we can schedule meetings through our IR agency.

[Unidentified Analyst:]

Yes, but sometimes you quote them, they don’t answer. That’s a problem. And usually companies, they announce to the public and everybody is invited, not just one-on-one.

[Dov Sella:]

What is the question here?

[Unidentified Analyst:]

No I said that a lot of companies, they make a public announcement that they will have a conference at this and this place and everybody is invited.

[Dov Sella:]

Yes, whenever we do public presentations then everybody is invited. Sometimes there are one-on-one meetings with institutional investors. Whenever we are doing more open or public, like this conference call, everybody is invited to attend obviously.

[Unidentified Analyst:]

Okay. My second question is on September 30th, Leonardo announced and I quote. Leonardo led team to demo active armor to protect British Army vehicles and they're cool against current and future weapons. The project will help to ensure that British Army vehicles can affordable use their latest active protective system, APS technology, to counter the evolving threat by hostile weapon system. Are you involved in this project since you are involved with APS?

[Dov Sella:]

Yes.

[Unidentified Analyst:]

In what capacity?

[Dov Sella:]

Obviously, we are offering our radar to them. This is not a project yet. This is an initiative that is in its early stage and we are involved to the level that we need at this stage by introducing our radars to this initiative.

[Operator:]

The next question is from Michael Brcic of National Securities. Please go ahead. Q - Michael Brcic Just to follow on. You mentioned that the business is very lumpy and it is not fair to look at on a quarter-to-quarter basis good or bad. I guess are you sort of hinting at this point that Q1 will be -- you don’t have much visibility into Q1 and could it be lower than Q1 the year before? Thanks.

[Dov Sella:]

We have reasonable visibility but we would like to defer any you know guidance that when we release the results of the full year and then we will release the expectations for the year of 2018.

[Operator:]

The next question is from Jeff Bernstein from Cowen. Please go ahead.

[Jeff Bernstein:]

Just one want to get a little more color on the DRS negotiation I guess you’ve changed a little bit what you’re looking for there with the decision to open a headquarters in the U.S.?

[Dov Sella:]

Yes, it’s a combination of you know DRS is elevating themselves as an integrator and they are addressing the markets that are emerging like the mobile short and the APS. And we are trying to cooperate with them mainly on the mobile short but there are some other significant market segments that we would like to address directly. And this is why we are also setting up our online joint venture in the United States.

[Jeff Bernstein:]

When you do expect your deal with DRS to be completed?

[Dov Sella:]

It’s practically the agreement is there, practically, and we are working for quite a few years now under the assumptions of this agreements and its ongoing.

[Jeff Bernstein:]

Great. And then just on the Avionics business, you mentioned that the pipeline had some opportunities for Avionics as well. I think you guys are looking at some Avionics capability on the Lockheed Martin trainer. Just wondering when a decision might happen here and any other color on anything going on with Avionics?

[Dov Sella:]

Yes, when we talk to the Avionics, we mainly refer to our digital video recorders. This is a stable market for us. The trainer of Lockheed Martin in the United States for the U.S. Air Force is one of the opportunities. Its public knowledge, the decision of the U.S. Air Force was delayed to mid year. So, we are patient and hopefully Lockheed Martin will you know get this order and we as a result.

[Jeff Bernstein:]

Got you. So that’s mid 2018?

[Dov Sella:]

You know they said spring of -- sorry, yes, spring of 18. So, I am saying mid-18 to be kind of closest.

[Operator:]

The next question is from David Kress [ph], private. Please go ahead.

[Unidentified Analyst:]

How are you doing? I like the answer of your questions. I’m a little confused about concerning your additional contracts. And do you expect to complete these contracts let’s say by the fourth quarter of this year?

[Dov Sella:]

Could you be specific to what exact contract you are referring to?

[Unidentified Analyst:]

Well, you've mentioned I think that you’ve got a contract for $8 million I believe. Then you’ve got additional I suppose contract of 10 million, but they gave you like a down payment like a 1 million they gave you and the rest will follow they said. But I want to know like, are they going to be completed let’s say by the end of this year, which is like in the fourth quarter? That’s what I’m referring to.

[Dov Sella:]

I see. I think there is a bit of a mixture here. We got an order of $8 million and then one additional million dollar as a completion and all of that will be completed this year.

[Unidentified Analyst:]

I know it will be completed in the fourth quarter.

[Dov Sella:]

Yes.

[Unidentified Analyst:]

Now you said that $8 million was more or less like for step and one like a separate contract. And you got the 10 was like for another contract. And you got I believe like 1 million from that second contract. Is that so or I’ve mistaken?

[Dov Sella:]

Yes, I think you’re always taking risk.

[Unidentified Analyst:]

So not the way to adjust one contract for $8 million, is that what you’re saying?

[Dov Sella:]

8 plus 1 completion of that same contract.

[Unidentified Analyst:]

Oh, I see. It sounds like you’re the only got 1 million from that contract and you expect the rest to be over two by the end of the year in other words.

[Dov Sella:]

Again, we got a $9 million contract in two phases, 8 plus 1.

[Unidentified Analyst:]

Oh, I think one contract but like in two phases.

[Dov Sella:]

Yes.

[Unidentified Analyst:]

In other ways, it’s more or less like one contract in other words.

[Dov Sella:]

Exactly.

[Unidentified Analyst:]

Yes, I thought it was two separate contracts where you like -- it was like a little confused about it. I see. Now this company as one question and the second one is you happened to have with your partnership with this company called DRS in United States.

[Dov Sella:]

Yes.

[Unidentified Analyst:]

And expect to expand your business more into the United States as well?

[Dov Sella:]

Absolutely.

[Unidentified Analyst:]

Now, you’re trying to get contracts with Martin, and its Lockheed Martin, Mariana and Boeing as well?

[Dov Sella:]

That’s in our Avionics business side, we’re trying to get contracts is all the players like Lockheed and Boeing, yes, and not only them.

[Unidentified Analyst:]

In other words, if you can’t get it, this could be don't let say by the middle of next year in other words?

[Dov Sella:]

So, the recorder of business that we have referred to in just a few minutes ago is around U.S. potential new trainer and the award by the U.S. Air Force is going to be by mid-next year.

[Unidentified Analyst:]

Might be in next year, not with the U.S. trainer?

[Dov Sella:]

Yes.

[Unidentified Analyst:]

With U.S. Air force, I see. Okay. That’s sounds good. Now, one more thing you mentioned like you did revenue in all that, but you didn’t. In other words, what did you do actually in earnings per share? I wasn't sure I heard that correctly was it $0.03?

[Dov Sella:]

Earnings per share for the quarter was $0.03, this is the loss of $0.06 in the third quarter of 2016.

[Unidentified Analyst:]

And it was $0.06 of the 2016 adverse which are in $0.03 there. All right, so in other words, you're going forward, are you optimistic about the business once for next year going forward let say for 2018?

[Dov Sella:]

Any going forward statement will be made as I mentioned earlier when we release the full year results.

[Unidentified Analyst:]

I see. Okay. Now, one more thing. Do you have what you quote like any long-term debt or no stuff like that?

[Dov Sella:]

No, as I mentioned in my short review. The good news -- one of the good news about September 30th financial is that no long-term -- no significant long-term liabilities is reflected over there. We had some long-term loans, but they’ve all been converted into equity.

[Unidentified Analyst:]

I see. No long-term in liabilities and that to all be converted into equities. That’s we’re saying.

[Dov Sella:]

Was already converted.

[Unidentified Analyst:]

Oh was already converted into the equities. Okay, now since you’ve converted into equities. What is the total amount in shares outstanding as the Company have now since global converted?

[Dov Sella:]

At the end of the quarter on fully diluted basis we’re talking about 25,146,000 shares round about.

[Unidentified Analyst:]

All right, 25,100,000. Okay, that’s not too many shares. The reason why I mentioned that because you know -- come out of corner or rather the earnings comes out corners like divided like whatever the shares the Company is and then more shares you have, the more it's you come out with unless since it’s a -- since divided amongst this outstanding shares of the Company. Any other questions -- in other ways, your main business is radar Avionics and what you do adopt Doppler as well which is that software that you employee as well?

[Dov Sella:]

Sorry, you were not clear. Could you repeat?

[Unidentified Analyst:]

Yes. I’m saying your main business is radar and avionics and you also do this software call Dapla -- Doppler or something like that?

[Dov Sella:]

No.

[Unidentified Analyst:]

You don’t do that. I thought I heard something. Okay then it's just like mainly radar and avionics is that for the program to those two parts of the business?

[Dov Sella:]

Yes, we describe our radar as software-defined radars, so maybe that’s the confusion.

[Unidentified Analyst:]

Oh, I see. In other words software and I was a little confused. I thought it was more differently. I thought it was separate issues. Radar, I mean the software and different from the radar and the avionics, but it’s all employed into the same thing you’re trying to say that?

[Dov Sella:]

Yes, our business is tactical radars and avionics.

[Unidentified Analyst:]

Multi-avionics as I know. Okay. Now, do you plan to expand in Europe as well, let say in Western Europe beside the United States?

[Dov Sella:]

Absolutely, we have already customers there and we anticipate this market segment of ours to grow.

[Unidentified Analyst:]

Okay. In other way, you can grow very good too, if you get into the Chinese market.

[Dov Sella:]

Yes, but then we are in the defense business, and if you are familiar with the political jurisdiction.

[Unidentified Analyst:]

Yes, you're right. Thank you. Now you have to be right. Yes. Congratulations on the quarter and just keep up the good work, okay?

[Dov Sella:]

Thank you very much.

[Operator:]

The next question is from Kevin Dede of Rodman & Renshaw. Please go ahead.

[Kevin Dede:]

Hi, Dov. Listen, last time we chatted, I didn’t get a good chance to ask you about how you view the size of your addressable market. And I was wondering if you could take a step back and just sort of characterize, how you would -- you recommend that we think about how large addressable market is both U.S. and Western Europe please?

[Dov Sella:]

Okay. One segment of the addressable market is active protection. We believe that it is comprised of between 20,000 to 30,000 relevant vehicles in the western world, both in the United States and Europe. Some may say that this is a conservative assumption but let’s stick to that. And if we convert it into revenues, potential revenues based on our prices, it is reflecting an addressable market of $2 billion to $3 billion. The other segment is mobile short range air defense and air surveillance. We estimate this market by additional $2 billion. This is why we estimate the total addressable market as $5 billion.

[Kevin Dede:]

Okay. Fair enough. So the mobile short range is primarily the armored I guess the armored vehicle defense versus sort of the tactical…

[Dov Sella:]

No, let me correct you Kevin. Yes the active protection systems market is what you are referring to. This is armored vehicles and tactical vehicles. The short range is a solution for maneuver force but it is basically a unique vehicle or tool that provide air defense to a larger group of vehicles or force. So it’s not like you install potentially on each and every vehicle, you will address bigger forces. But the solution is more expensive and far varying range.

[Kevin Dede:]

Okay. Can you also Dov give us may be a little perspective on contract negotiations or terms that you might be able to offer solution for -- given that these exist. I am wondering if there is anything else coming up on the part on the plan, part on the radar screen that RADA might have a solution set or could position its existing technology to meet?

[Dov Sella:]

Yes, I mean these are the major market segments in the military market that we are addressing at this stage, but you can imagine that if we detect drones and UAVs, it can be adapted to critical infrastructure protection and the like border protection and so on. But currently, we are focusing on the military market which is showing interest and movement while the other markets are still kind of preparing themselves.

[Operator:]

The next question is from Jeff Bernstein of Cowen. Please go ahead.

[Jeff Bernstein:]

Just a quick follow-up. On the radar systems for energy weapons, I know you’ve been doing some work there. What sizable market is that? Do you get a premium in that application? Or how should we think about that market?

[Dov Sella:]

This market is a subset of what I am addressing to as MV short. It’s one of the vehicles that -- one of the weapons that should be employed within the solutions of interception under this slogan of MV short. So, I’ve included energy laser weapons as part of the estimation of the market in the previous response.

[Jeff Bernstein:]

Terrific. Thank you. And do we expect anything to get fielded in the next year or so?

[Dov Sella:]

From the high energy laser market?

[Unidentified Analyst:]

Yes.

[Dov Sella:]

I think next year is pretty much still and it’s not because of the radars, it’s because of the basic technology that is still being under development and testing. Maybe some initial installations will be there, but not the significant in a wakeup call. It will happen maybe in two or three years away.

[Operator:]

The next question is from Michael Brcic of National Securities. Please go ahead.

[Michael Brcic:]

Yes hi, I’ve got a follow-up as well. You mentioned right now on the radar side, we're in the early adoptive stage, which obviously is much smaller than if it becomes a thing. Can you sort of take us through a not necessarily a timeline but how we can envision going from early adoptive to general adoption? Is that something of that is going to take whole bunch of two, three, four, five years or is it that if it becomes more mainstream within the U.S. military then everyone jumps on board. How do you see going from early adopter to mass adoption?

[Dov Sella:]

I think that from early adoption to general adoption is a process that takes as you mentioned two to three years, but it is you know it's not linear, and it is not on the other hand a step function. So my assumption is that we will see gradual adoption based on the early adoption, sometimes, it takes time to do a full operational evaluation after as military force gets some initial quality to get some initial quantity to do evaluation, and it will take two to three years until a stable forecast can be made.

[Michael Brcic:]

Just on that. Can you sort of point to what would be a sign that we could sort of look for? Is it more branches of the particular military picking it up? Is it other militaries signing on? How can we get a sense of, yes, this is going the right way?

[Dov Sella:]

Yes, hopefully, we will see through a forecast that we can issue and note you know notices of contracts. And both answers are correct. You will see more from the same military force. You will see other forces joining in and so on.

[Operator:]

Your next question is from Rosie Griffin [ph], private. Please go ahead.

[Unidentified Analyst:]

Hi, on the previous quarter you projected the $25 million revenue for the whole year and now you've upgraded it to 2016. I wonder if it includes orders that are going afterwards the new orders from the U.S. Military? That’s the first question. And how they are projected in this revenue? And the second is not really to you, but to your controlling shareholders DBSI, which it seems that you’ve shown so much trust in Company since directly from selling big chunks of equity in the markets? Thank you.

[Dov Sella:]

Okay, the forecast of 2017 includes the order from the military force that we mentioned, and as we mentioned earlier, it will be completed this year, that’s for your first question. For the other question, I’m not in the position to talk instead of DBSI, but the facts are that on one hand, they fell, on the other hand they convert and actually increase their share in the Company, and they show significant trust in the Company and also help us a lot by converting the loan into share. So, I don’t understand why you believe that there are in not showing trust in the Company.

[Unidentified Analyst:]

Okay. That's probably for another time, but another last question is. The tomorrow you have special meeting at the Company and I attended all the recent shareholder meetings and I asked you in the past will be the present any board members or except for the legal leader of the Company?

[Dov Sella:]

Only management will be in this shareholder meeting.

[Unidentified Analyst:]

All the managements will attend?

[Dov Sella:]

Not, all the management, only management will attend. Not board members.

[Unidentified Analyst:]

Can you elaborate on that on, who could we expect to come?

[Dov Sella:]

Why it is so important?

[Unidentified Analyst:]

No, just to know it's to take the verbal and goal later and because I’m sure I’m not changing the votes the one subject it is to vote. But we can meet others because from modern year, first meeting when I came that will put for them in the and since then we only get the legal consultant, don't remember that -- we couldn’t get much like to follow on?

[Dov Sella:]

Well, on one hand you know exactly what is this special meeting is all about. Our CFO and our legal advisors will attend this meeting.

[Operator:]

Thank you. [Operator Instructions] The next question is from Noah Steinberg of G2 Investment Partners. Please go ahead.

[Josh Goldberg:]

Hi. Good morning, this is Josh Goldberg for Noah. How are you doing?

[Dov Sella:]

Good morning, Josh.

[Josh Goldberg:]

So, I know, there has been a lot of question about visits and ammos reports all these things. We just wanted to focus on one thing. In the last three months, how comfortable or more confident you that some of your products might be more, let say, more entrenched in some of the stuff at the U.S. Military. It would seem to me like that’s really the key question for the Company. And do you think that this initial order and fulfilling new order as well as some of the other recent trade shows make you feel more confident that you are in a strong business condition moving forward?

[Dov Sella:]

Yes, in the last conference of the -- in the last trade show in the USA that took place in Washington D.C in October. It was very clear that the two market segments that we aimed at from the beginning which are the active protection and the mobile short are the things that are now one of the fixed focus areas of the U.S. Military and especially the U.S. Army. And we are well inside addressing these two market segments, which as I mentioned earlier are new and awakening. We are very optimistic that the initial signs that we have seen this year will show the results. We don’t know exactly it will happen next quarter or in which exact quarter next year or even in the year to follow, but the market is big, the market is waking up and we are very optimistic with this opportunity that our unique radars are addressing.

[Josh Goldberg:]

Just curious if fulfilling this order in a timely manner has helped you to think understand more or what U.S. Army and Military are thinking?

[Dov Sella:]

It helped us a lot of gaining the recognitions that we can deliver fast. On the other hand you have to appreciate the fact that most of the lessons that are learned by the user are confidential, and we are not entirely exposed to them, but all the signs are so far so good.

[Josh Goldberg:]

Okay. You talked a little bit last call on Western Europe. We didn’t hear much of that at this time. Any progress on that as well?

[Dov Sella:]

Yes, we have a few primary customers there that are adopting our technology. We have initial sales and we are in discussions of how to expand the operations there together with these customers, both on active protection and on short range air defense.

[Operator:]

The next question is from Steve Martin [ph], a private. Please go ahead.

[Unidentified Analyst:]

May be I missed it. Just could you clear up the $8 million order? Did those hit your numbers in this quarter? And if so, I would like to know then when do you think the balance will be recognized?

[Dov Sella:]

This order along with another $1 million order that followed it up is going to be delivered by the end of this year. So part of it was affecting the third quarter result as well.

[Unidentified Analyst:]

Okay. So you picked up some of the -- you recognized some of the revenue in third quarter and then -- can you clarify I mean is most of it going to be in the fourth quarter or you can’t say?

[Dov Sella:]

I don’t think it’s so important to take this order and to divide it by the quarters. This quarter is going to be 7 million and increasing the year forecast, the annual forecast of 2017 to 26 million, you have the balance of additional over $9 million to be delivered in the fourth quarter.

[Unidentified Analyst:]

Well it’s important for the investor to understand how much of that you’ve recognized because when I am saying if you’ve recognized a bulk of it then the investor can say, okay, they are projecting x means there is so much more other than the 8 million. You know what I am saying?

[Dov Sella:]

Let’s not forget that almost 8 million out of 26 million, so it’s not all of it. And this project was…

[Unidentified Analyst:]

Yes, it’s 31%.

[Dov Sella:]

Still I agree, but it was recognized part of it in Q3 and the rest of it will be recognized in Q4.

[Operator:]

The next question is from Ted Sharrow [ph], private. Please go ahead.

[Unidentified Analyst:]

My question is not necessarily on the direction that you are going. I kind of understand all that. My question is back in late 2014, there was a surge in your stock price and then just as fast was a decline as well. I was wondering what transpired and what took place in the events within the Company or what were events that happened during that time to make such a swing in the stock price?

[Dov Sella:]

I really don’t know and I cannot refer to stock prices especially back to 2014.

[Unidentified Analyst:]

Okay. [Why don’t just give it off] to anybody there who was around during that time or some -- what transpired in there -- I’ve seen going down the same path there is -- if you’ve learned from mistakes or if we're just -- I don’t know that’s I am just trying to figure out is, what transpired during that time for such a stock price swing to where you were down below $2 and then you are climbing back up? That’s all. I was just trying to get some history of the Company.

[Dov Sella:]

I don’t recall anything that affected the share price to this direction or that direction. I cannot refer to that. I don’t know.

[Operator:]

There are no further questions at this time. Mr. Sella would you like to make your concluding statement?

[Dov Sella:]

Yes. Thank you very much and we hope to see you together all of us in the final year report of 2017 in three months. And have a good evening.

[Operator:]

Thank you. This concludes the RADA Electronic Industries third quarter 2017 results conference call. Thank you for your participation. You may go ahead and disconnect.