Q2:14 HIGHLIGHTS

• Revenue increased 52.1% year-over-year to $12.5 million in Q2:14 and was above our forecast of $10.9 million, largely attributable to higher-than-expected Engineering sales.
• EPS of $0.05 was below our $0.06 estimate primarily due to a combination of the larger than expected contribution from low-margin Engineering sales and modestly higher SG&A expense.
• Backlog as of March 31, 2014 stood at $80.9 million versus $87 million at December 31, 2013 with net orders of $6.7 million for the quarter.
• Initial production deliveries related to the Delta Airlines contract are expected to begin later this fiscal year and are expected to result in increasing Production revenue.
• Geoffrey Hendricks, Founder, Chairman and CEO, announced he will be retiring at the end of calendar year 2014. Shahram Askarpour, President, will become the company’s new CEO.
• We are trimming our FY14 estimate to $0.22 from $0.25 to account for (1) the Q2:14 EPS shortfall versus our estimate and (2) the higher than previously expected contribution from Engineering sales for the year which will result in lower relative margins. We maintain our FY:15 EPS estimate of $0.43 at this time but will revisit our forecasts after release of the company’s 10-Q. We maintain our Buy rating and $10 price target for the shares.