RADA - RADA Electronic Industries slumps after Q2 results disappoint market

• RADA Electronic Industries ( NASDAQ: RADA ) stock slides 6.5% on Wednesday after the company reported second quarter's earnings well below the consensus mark.
• However, revenue, which declined 18.5% Y/Y to $23.06M, beat estimates by $0.42M.
• "As we announced a few weeks ago, similar to what is being experienced by many U.S. defense companies, it is taking longer than we originally expected to recover from the pause in revenue in the U.S. as the resumption of normal spending takes time," said RADA's CEO Dov Sella.
• Gross margin was 35% vs. 40% a year-ago.
• Adjusted EBITDA was $1.8M in the quarter compared to adjusted EBITDA of $6.3M in Q2 2021.
• GAAP EPS of -$0.09 missed consensus by $0.11.
• The defense technology company ended the quarter with cash balance of $55.7M.
• Commenting on RADA's ongoing merger deal with Leonardo DRS, Sella said "I am happy to report that the pending merger with U.S.-based DRS is proceeding as planned and we are actively working to identify top-line synergies within our businesses to actualize post-merger close. The merger creates a leading technology defense company in which RADA will continue to play an important role, with capabilities serving a broad range of high growth U.S. and global budget priorities."
• Once completed, Leonardo SpA and RADA shareholders will own ~80.5% and 19.5%, respectively, of the combined company.
• As reported earlier, the combined company, which will be listed as "DRS", is targeting a low teen Adjusted EBITDA CAGR through 2023 from a 2021 base of $305M and the merger is expected to close in the fourth quarter of 2022 .

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