Good morning, everyone, and welcome to the LGL Group Q1 2014 Earnings Report. [Operator Instructions] This call also has a visual PowerPoint component in addition to the conference call. To view the PowerPoint, please click on the Join the Meeting link you received in your invitation and included in the press release announcing today's call. [Operator Instructions] It is now my pleasure to turn the conference over to the company's Chief Financial Officer, Mr. LaDuane Clifton.

Good morning, everyone, and thank you for joining the call today. With me as well is our President and CEO, Mr. Greg Anderson; and LGL's Vice Chairman, Michael Ferrantino. We prepared a slide presentation for your reference that may be viewed as part of today's Web conference. Those materials are available on our website at lglgroup.com. This call will be recorded and will be available for playback later today on our website. Other financial information and recent press releases are posted there as well. Please note that our comments are covered today by a Safe Harbor statement. [Operator Instructions] At this time, I'd like to introduce Mr. Greg Anderson.

Thank you, LaDuane, and good morning. I'll start by giving a quick corporate snapshot overview of LGL just to refresh folks. We're obviously publicly traded, formed in 1917. Today, we have one operating subsidiary that goes under the brand of MtronPTI. Trailing 12 is $25 million, cash and cash equivalents is approximately $7.5 million, our revenue is approximately 50% outside the United States, our current stock price as of Monday was $4.75, we got a market cap of $12.3 million and we're a small player in a very large market. When we look ahead to our investment highlights, LGL subsidiary, MtronPTI, we really are a large -- serve a large B2B type of client. And really -- we're really in primarily 2 market sectors: Internet Communications Technology, and more largely in Aerospace and Defense. Today, approximately 2/3 of our business is Aerospace and Defense and about 1/3 Internet Communications. Our technology is core, is based upon crystal technology in the timing arena. We tend to work and perform on the real low noise or, what we call, the performance aspects of the value chain in these kinds of products. The company's platform itself is enabling. We have a global footprint, we've got a number of U.S. sites, international sales and international supply. And we do have a low-cost manufacturing facility in India, and we have the opportunity to even produce these high-performance products from that particular facility. Our margins -- we gain margin performance, really, because of the high-value and high reliability of the kinds of applications that our products go into. We strive to have long product life cycles with these repeat revenue streams, and we certainly have an experienced supplier management team to help drive cost. Our growth opportunity, we have several long-standing relationships with industry leaders. Some…

[Operator Instructions] Our first question comes from Hendi Susanto.

So Greg, Q1 revenue declined by 7.8% on a year-over-year basis, and then on the other hand, you reported that LGL continued to expand share gain in Aerospace and Defense, and I would assume that your overall end markets declined at a lower rate than 7.8%. So how should we view that revenue decline relative to your overall end market trend?

Well, it's a thoughtful one. Honestly, I'm not sure that, that is completely out of line with end markets, especially in the networking side. So a fair amount of price compression, I mentioned that, Hendi. And in that particular market space, double digits is, year-on-year, is really not that hard. And in fact, it's probably required in some of those networking products to maintain share. And I think the rest of it has really just been a compression, really, of a continuation of sequestering and softness. I don't really feel that we've lost share, at many of our key accounts we certainly have felt some price compression. And I think through the -- you want to call it the budget cycle, there are some signs in the electronic industry, a number of companies are reporting positive book-to-bill, so we're not the only one out there doing that. So maybe some of the budget, I'll call it, program funding is now beginning to come through. So yes, it was an aggressive step-down, but the markets that we serve at this time, they were under a fair amount of pricing pressure over this past year.

How do you characterize the pricing pressure in Q1 compared to historical numbers? I'm wondering whether you can share some insight whether it's like over, below or on par with like recent historical trends.

I'm not sure I heard that so clearly, Hendi. So the pricing pressure historically -- can you restate that for me?

How do you characterize the pricing pressure in Q1, whether it's steeper, on par or below recent historical trends?

Oh, I think it would be steeper this year. So typically, our contract -- another aspect of it, our contract cycles typically follow the calendar as well, Hendi. So the stuff that we have in our revenue stream in the first quarter of this year versus the first quarter of last year would certainly be under a new contract cycle, which really means new pricing. And so I think the last 2 years, for certain, in the networking space, pricing pressure has been steep and more aggressive than the previous, certainly. In fact, I was on a call with one of our OEMs yesterday, and essentially, they had affirmed that. Will that stabilize? I think the pricing pressure is certainly going to be tough through this year as well.

Got it. And LaDuane, would you be able to share what Trilithic's assets contribution in Q1 look like and what the revenue run rate? And then, perhaps, whether you can share also Trilithic assets, customer profiles and the number of customers?

Okay, yes. So margins in Q1, we came up with gross margins of about 26%. It is going -- the Trilithic is going to help us in the margin area, but it's relatively a small component of it. However, we think that Q1, that rate will prevail. It could improve some, as volumes improve. If we look across the year, the run rate currently, $6 million over the last couple of quarters, that was largely expected, as Greg mentioned, based on where our backlog was at end of year. We've seen backlog improve as we've reported, and that will come out later in the year. So the run rate for revenue, we have some backlog to support that. It could improve, but it's hard for us to predict or forecast that for you today. The last part of your question, Hendi, I didn't understand.

Oh, would you [ph] share Trilithic assets, customer profile and the number of customers?

Okay, well, let me take that one, Hendi, and I'll just comment just a little bit more on the margins. So in the first quarter, Trilithic probably didn't have a positive impact because of our onetime transition cost. So I would say, it probably didn't hurt our margin profile in the first quarter. I do believe it will help our margin profile in the quarters ahead, okay? And we're taking a different structure than Trilithic did, with those particular models we're able to, again, leverage some costs out of those products by largely producing those from our India facility. So that, I think, that will help frame the margins. Overall, I believe, Trilithic will be richer than our typical historical gross margin profile in the company -- for us, anyway. From a customer profile perspective, they had a couple of exceptional customers, companies like divisions of Boeing, and so there are some very key designs there in UAV platforms. And so, what's coined in Aerospace and Defense, EW platforms. And so rather than probably giving you detailed profile, there's probably, in total, dozens of clients. A few make up probably half of the revenue and they're the kind of companies and applications that I just mentioned. So that's certainly target areas for us. They're strategic areas for us. It blends nicely with the kind of technology that we're developing and where we're trying to broaden our product portfolio. So there were several very good things, clients, margin, products. There was a few things there that we got from Trilithic that we think will pay strong dividends for our shareholders in the future.

Greg, do you have updates on software-defined radio, and whether or not we should expect to see initial sales happening in 2014?

So the answer is yes. We have -- the prototype activity and the interest in the market is strong. So nearly every sales call that we're on, we find success in uncovering a, I'll call it, a complex filtering opportunity for software-defined types of applications. From a revenue perspective, we're seeing small hits at present and nothing that I would commit to that would, I'll call, being notable in our financials. On the other hand, I'll be a broken record, it takes a long time in this business to turn it into revenue streams. It's not uncommon for it to take 3 years. And on the other hand, once you are, the barriers and the switching costs are quite high. So we're active, we're active in the engineering aspects, we've taken some small orders. It's still an area of investment. It's providing a lot of, I'll call it, enthusiasm in the market for our sales and engineering folks and marketing folks. When we're out selling, there is a lot of interest. And it's quite obvious a lot of our OEMs do that kind of work inside on their own bench. It's not just competing with other folks that have these types of complex components. A lot of times, that kind of engineering is done inside of our OEMs. So we're trying to bring a nice, I'll call it, compelling market reason for them to be able to move that engineering over to us. So yes, still excited about it. I wish I could report 10% company growth on it, but I can't yet, Hendi, but we're still investing there.

Okay. And then last question for me. Greg, do you have updates on new product pipeline? In the last earnings call, you mentioned about the g-sense and vibration-sensitive oscillators and then EMI power filters?

The answer is yes. We are making inroads in bringing some g-sense products to market. We did take an order. And I'm probably not going to mention that as being material, but we have taken an order for one of those very sensitive g-sense kind of applications. So I will -- we will be shipping revenue inside of 2014 on those kinds of products. And -- so we're pleased with that, and that's actually just happened recently, in the month of April actually. So yes, we are developing there. We're actually going to have revenue this year. And as I've mentioned, that's probably where we started a couple of years ago. So that's probably our largest areas for investment, it's really this software-defined kinds of filtering applications, and really vibe, shock, g-sense kinds of timing applications is where we're spending most of our R&D dollars.

[Operator Instructions] And it appears we have no further questions.

Thank you, investors, for joining our call this morning. A couple of positive trends, still a tough financial quarter for us, but certainly, our -- an improved backlog, improved margins, better cost structure, those are all somewhat positive. We are obviously pressing hard for better performance in the second half of this year. Thank you for attending and -- okay, operator?

This ends the LGL Group's Q1 2014 Earnings Report Call. If you have any further questions, please send an email to Greg Anderson at ganderson@lglgroup.com, or to LaDuane Clifton at lclifton@lglgroup.com. Thank you, and have a wonderful day.