Editor Faris Sleem talks growth, outlook and new products
LRAD Corporation (LRAD) shares are up about 20% since our recommendation just under a year and a half ago, and the stock is trading at a new two-year high. It has announced significant improvements in its bookings, its top and bottom lines and its pipeline. Since the company is hitting major milestones, I reached out to interview CEO Richard Danforth and Director of Investor Relations Brian Harvey. Below is our conversation:
Sleem: What is the biggest change or milestone reached in the past year that has resulted in LRAD’s market value increase?
Danforth: Our results throughout the first three quarters showed a significant increase of almost 50% in bookings. In fact, mass notification bookings were up over 200%. In the final weeks of September, we announced about $9 million more in bookings, which included a significant order from the U.S. Army. The steep uptick in stock price is relative to the U.S. Army coming back, coupled with the significant bookings and revenue for our mass notification product line.
Harvey: I’d just like to add that the important thing that Wall Street has recognized is that the U.S. has really made a comeback. It used to represent about 80% of our business 6 or 7 years ago, and it has fallen to less than 10% of our business. With the recent announcements, investors are realizing the increase in U.S. spending.
S: In the conference call for the second quarter of fiscal 2017, you mentioned tremendous growth in Europe. Are sales there still growing at a similar rate?
D: As Brian mentioned, the U.S. Department of Defense has historically dominated LRAD’s sales. Despite the decrease in U.S. sales over the past 6 or 7 years, the top line has remained relatively flat due to our international bookings growth in all geographical regions, bookings in all geographical regions are up
S: What are the major contributing factors to this growth?
D: The uptick in mass notification systems demand, hiring of resellers in and outside of the U.S. and our new product introductions have all helped.
H: In Europe, there has been a move towards security and border protection, which is where LRAD is in a great position to capture market share.
S: I saw that LRAD added a few new members to its team. Are there any noteworthy additions or moves towards expansion?
D: We’ve added 4 or 5 salesmen within the fiscal year, one of which was in the U.S.
H: We’ve also revamped our reseller network in and out of the U.S. and cut loose some of the under performers while adding a few new names to the list.
S: That’s great to hear as many companies don’t see the need to trim the fat while expanding. These smaller decisions made by management not only improve the top line, but also improve the bottom line, making LRAD both a value and growth stock.
H: I’d also like to add that our new products, both acoustic and mass notification, have helped us penetrate international and domestic markets. When we entered the mass notification market with just a speaker, we were providing a product that was only 5% of an entire mass notification system. In the 15 months that Richard has been here, we have rolled out products that allow us to go for a bigger piece of the pie. Aside from speakers, we are able to now capture the full functionality of a mass notification system with our software and hardware improvements. We believe we’re going to start seeing the fruits of that within the coming year.
S: With these new products and the existing high quality mass notification products, will you be focused on improving current products or rolling out even more?
D: In FY17 we really focused on completing our objectives for our mass notification products. In FY18, we will continue to have a similar focus on new product development.
S: Moving forward, what are some long-term goals that you have for LRAD?
D: In the upcoming earnings call, you’ll hear us talk about the mass notification market and frankly, the slope of the market demand curve is impressive. We’re seeing high competition in that marketplace, but we are distinguishing ourselves domestically and internationally.
H: I’d like to add that there are some upcoming additional opportunities for FY18. There’s an expected request for proposal (RFP) for up to 3,500 units coming from the government that we will definitely be bidding on, and we could be working with Homeland Security if the border wall ever gets built.
S: Are you seeing an increase in competition for these bids?
D: We aren’t seeing any new competitors in the acoustic handling marketplace, where LRAD is the leading provider. As for mass notification, there are the same competitors as always within that marketplace.
S: Is there a specific product that you are excited about moving forward?
D: We’re obviously focusing on mass notification products moving forward just because of the demand. Our goal isn’t to just roll out new products, but to keep our great engineering team working on meeting the strong demand in the marketplace. The half-dozen products we have rolled out in the past year are new in every sense of the word and were made to meet demand expectations, not necessarily just to expand our pipeline.
S: Do you have any closing remarks for our subscribers?
D: If you keep an eye on LRAD, I’m sure you’ll see our backlog, revenues and bookings increase over time. Our pipeline has improved, and we are continuing to invest internally, in both people and systems, and they’re paying off as we speak.
Richard and Brian provided some great color on LRAD’s impressive quarters of late. Although not a huge gainer yet, the stock has steadily appreciated in price over the past year and is starting to heat up following its product rollouts.