FEIM - Earnings call transcript Q4 2019 | Frequency Electronics, Inc.

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Operator

Good day, ladies and gentlemen. And welcome to you Frequency Electronics' Fourth Quarter and Year-End 2019 Earnings Release Conference Call [Operator Instructions].

And now for opening remarks and introductions, I am pleased to turn the floor to Chairman of the Board, Mr. Martin Bloch. Please go ahead, sir.

Martin Bloch

you. Thank me Officer, Officer, Steve with our Sloane, Chief Financial Chief Bernstein. the have Stan Executive and I And I'll turn to Steve. over the first phase of it Please begin, Steve.

Steve Bernstein

XX% $XX.X commercial year. The Good consolidated of revenue $XX.X Martin. Fiscal follows. components for million, Revenue as were from million for $XX.X in compared previous fiscal the U.S. programs fiscal to increased you, from up for revenues government prior XXXX. Thank the consolidated $XX.X and fiscal million approximately accounted satellite are to of XX% approximately and afternoon. million compared revenues XXXX to XX% year

reported contracts million recognized non-space both method, from the in and York payload $XX.X satellite on were the of only year. York percentage FEI-New under U.S. completion government Revenues million FEI-New are in in recorded compared segments, are to are FEI-Zyfer the primarily and Revenues the $XX.X fiscal DoD segment. prior and which customers,

to in consolidation. year. compared industrial and million to $X commercial revenues million $X.X Inter-segment revenues Other fiscal prior are declined the eliminating

fiscal profit For The and profit profit XX.X% to the gross higher fiscal increased gross XX.X% percentage in is of from higher XXXX. primarily result revenues. the percentage XXXX, gross

gross charge from inventory end resulting XX, XX% and significant reflected were and policy fiscal ended a $X.X million In year new gross the The XXXX, profit consolidated April costs revenue. of XXXX gross implemented XXXX at prior XX% year. administrative percentage profit includes reserve the selling year's of and Fiscal respectively profit of inventory and write-downs.

from XXXX one-time professional of offset subsidiary, the expense New for associated company's Jersey in company's were due York fiscal SG&A in the with manufacturing from for facility. million as a XXXX. a the wholly-owned by partially to the fees Increases revenue, New percentage consolidating comp charge FEI-Asia. fiscal certain the savings in sale into of foreign decreased of deferred cost and increase $X loss primarily SG&A consolidate approximately expense revenue included

the years a year-over-year expense The and were ended customer April expense of of XXXX XX% technologies R&D business funded of advanced for and level command that portion XX, revenue, systems percentage capabilities, require the approximately communications, forward. opportunities R&D satellite reflects consolidated going XX% and as higher a R&D As address a and in R&D respectively. efforts control effort. in large decrease total and secure XXXX $XXX,XXX These

connection associated received the expense and funded cost funds The revenue. included revenue in with in included are in customer of R&D

loss loss the sale year's For of manufacturing inventory write-down FEI-Asia operating approximately for operating The an prior overhead. loss ended charge million operating year. inventory XX, of policy. and reserve the million million to $X.X and of XXXX, company's prior on new to of recorded the approximately $X.X year fiscal $X related reflects million of million the included loss operating April compared company an $XX.X $X.X in The $X the loss unabsorbed of approximately million the

in primarily for other from from in derived $XXX,XXX consisted securities, holdings holdings income equity fiscal to million the company's income income, investment Other fiscal approximately was securities. divesting the the marketable current compared $X.X XXXX gains year including company's approximately of which

loss This $X.X loss million compared of previous pre-tax a the yields to $XX.X a pre-tax for million year. of approximately approximately

a ended recorded XXXX, For company XX, of $XX,XXX. fiscal pre-tax provision April the the year

tax For U.S. the provision the million tax against the the recorded deferred company year, a full to allowance prior valuation of due $XX.X assets.

of million company year. $X.X positive the from $X.XX the XXXX The per down per year was year $X.X $X.XX flow full from a fiscal million. million April fiscal for or Consolidated ending prior share operations generated loss or $XX.X of share, net fiscal cash for for loss XX, the XXXX

strong operations over XX, these balance is adequate company XXXX believes up meet working and $XX sheet ratio end that capital of over for year. the its The was current a the reflect future. of the X:X. end fiscal to its the liquidity million at investing backlog from $XX funded in XX and of and months foreseeable company's April XXXX fully of the prior at next the April position million The million, $XX continues Our to

you, I we will turn look the later. your call questions back to Martin, to and forward

Martin Bloch

Thank turn I'd Sloane. to proceed. like Stan, to over the you, please Steve. call Stanton

Stan Sloane

you, Thank Marin.

Let me this pleased with year. start by progress saying I'm

year over the growth revenue think I particular a of is XX% previous fiscal highlight.

We've also added portfolio to only bids, currently of also but development new opportunities, resources outstanding of to million very business have $XXX not prosecute additional additional and We robust those continue about opportunities. business identify pursue bids.

new much including more help which efforts to our effectively. plan the continued to operational also will projects improve us system, We ERP across efficiency, monitor

which continued revenues finalized investment advancing downstream development, we our level expect earnings. as significant as Asia's several was internal of healthy technologies, key produce to and and Steve subsidiary Disposition in We mentioned. of research well,

was Cash year-end XX% of at flow continued to Backlog be the the year. up positive. compared prior fiscal to end

Martin? I'm future. FEI's encouraged I what performance, very continue see we improve As by our to in

Martin Bloch

programs is up Thank outstanding time history that we all hard in This you, that thank and and the us. the very the of question the will near of would $XXX like materialize for for have of in. just working over the add to future. comments first million proposals putting company in Stan, open answer. on following He's for effort we I of you're all you and before

the demonstrates, precision which our system, to commodity. clear just important a a is becoming typical service. of emphasis went the times a very it's as think Galileo GPS system, very, each competitor I as example, out And of day

the only precision planes, able to like own involves if would people their their go order in for major be would communication. to Now, procurement have to in ground home SS off The or mobile environment that time of it anything service, is continue GPS be a safety catastrophe.

in that in the be on more spending the becoming that sure and Stan's I the significant best the that has time as of enter to total resources come defense and this on companies few more do has do So it. has it's and timing the investments. environment is the is lead our with make commodity responsibility and FEI to important of are and one the of world demand, we to given we very dependent my And more GPS running fulfill supplemented to uncertain luxury will timing to more have product to position the company development, the products mission. mission I'll me capability

over So of each this a again, is more over we're of a timing day I more are society. and products again, emphasize looking attention. critical bright future our getting forward to with and and our lot becoming in advanced And

questions you would Bloch. to Sloane I over either to At and would address answers. Bernstein, Stan Martin to Steve turn the this questions I or time, appreciate like if

Operator

open. [Operator will question SER Please today our at instructions] line take Asset Management. your We first Rebotsky from ahead, is go now Sam

Sam Rebotsky

Steve. Martin Stan, Congratulations and

to could seem you were gotten all and be You forward, that things issues these Hopefully, have that no profitable. dragging. there everything behind going is

what making $XXX Is that -- $XXX when of they that million? million, the on at and look Stan. do Let's decisions number make bids years we're the

Stan Sloane

no. months. Well, disposition next of take particular will terms decisions XX to the probably that those bids XX place in of The in the

some of period couple contract and is. with have for Couple of of from what associated to depending months, anywhere would go in some of on of time. to or years could project It those longer course Now, things them, production varies long bids cases. XX even on with be the opportunities the XX nature execution those associated

current will But near-term. bids decided a So, the it's bag. outstanding in mixed be relatively the

Sam Rebotsky

Now the the quarter? of January do at that the number? end what million firm, you $XX was the number have Steve,

Steve Bernstein

The backlog?

Sam Rebotsky

end Yes, XXst? the the funded January of backlog at

Steve Bernstein

$XX million. was It

Sam Rebotsky

you than per we enough going did quarter okay. And we assuming say quarter? down more we'll that you went this in that Is break breakeven if fair million without and sales about items. and $XXX million, million, $X forward the these do each So in it be million quarter even profitable in or $XX is to this $XX to subtract

Martin Bloch

I years changed do policy. you give in know prediction. you make view. And long-term you FEI's Sam, not We haven't just know you. all We any our the

our So appreciate question but spend I on legacy. the we

Sam Rebotsky

to fair $XX say not This you Is to question. a it need is million breakeven?

Steve Bernstein

No.

Sam Rebotsky

breakeven Steve, is you out? those this presumably a the would you if take you have broken take $XXX Because even, if million. numbers

Stan Sloane

I the bottom-line to in that This below telling to costs manage you sensitive is margins revenue Stan. very of harder the gross that is just is level. the because infrastructure that business was the

Sam Rebotsky

XXth. out anything taking number we out? Okay, as employees the number XX, have sold you have of the was of January April may What of then that to the compared employees

Stan Sloane

last the year which So, and employment account is difference year… That the been XXX range. across in the into does this enterprise a we -- have take not Asia,

Sam Rebotsky

fourth the end of the quarter, we more quarter? in did add So employees had that third the at we

Martin Bloch

It's about the same.

Stan Sloane

No.

Operator

take our with Marema line the we'll next George question Pareto Ventures. from of And

Your line is open.

George Marema

you're a be What of has had noise are Stan math. Let's at you What striving for a gross of easy question would level? would and to model target for numbers. Last Sloane. A margins in $XXX a doing model million of for? say that you margins years hope achieve guys the operating lot business couple revenue

Stan Sloane

to the of probably more the $XXX that think that that related you mix the margin the near-term in that company much, it. see probably that's but I would outstanding I grow. bids take portion business, level have gross I by the we opportunities. mentioned that about will I vary think dominated be The space million related number anticipate the I wouldn't gross would I At space are XXs. take that would the margins, number grows, be as way not in would of very Overtime, would

George Marema

that think achieve that scale? like of that what would margins from OpEx And at you something kind on

Martin Bloch

this question I'm think I that sorry -- Martin… say again, is

George Marema

kind Yes, level, net at revenue, hope expense what or would you gross of operating margin, achieve? to that of OpEx, level margin net income

Stan Sloane

level, digit. bottom I double the would line approaching be Well that at think double-digit, would

George Marema

million? that like net XX%-ish income, like So $XX of

Stan Sloane

sake, argument's For yes. sure,

George Marema

Yes, stuff, rough ballpark just okay…

Martin Bloch

As is Martin. this you understand --

a we're any in as to revenue. of stated, We of independent increase business fixed certain expense Stan and the very level has have sensitive,

market, I'll So, opportunity is revenue improve our emphasis not tell performance. you, But to to any the our the increase gives dollar. capture short-term in on an

Operator

Investor. question next will come [Einser], Our Michael Private from

Unidentified Analyst

Asia be completely A the written-off, quarter? nothing on there'll first year-over-year growth question. Is

SteveBernstein

them XXst. We sold May on

However, the it was three an for immaterial weeks. amount

the it there Asia pruned is result effect QX. in end have we will no So of be all and

Unidentified Analyst

And Stan. this is for

You back Did you got you some commented slip in pushed mean schedule. contract?

Stan Sloane

You're new referring opportunities? the to business

Unidentified Analyst

Yes, in put schedule. potential so awards program

Stan Sloane

didn't They right. anticipated. just to timeline the awarded that on we get things moved So the

Unidentified Analyst

they're lost? Also not

Stan Sloane

No.

proposals Our win steady. pretty both rates our of number and holding are

it, lost we've not slipped to right. that the it but it's So

Unidentified Analyst

it you was think you see followed should time and over get So that? you'll

Stan Sloane

-- or is and still out be them But win Well, they're whether for evaluated just evaluation, not not lose competition, been we awarded. determined. they programs still them haven't didn't does if we to in

Unidentified Analyst

Is the $XXX in that number? million

Stan Sloane

Yes.

Martin Bloch

history that XXXX we Mark, in want again have in I this the the proposals this of was time Frequency is first established firm it emphasize to is Martin. outstanding. since

for approximately outstanding this million. We of But is we time lots have $XXX proposals opportunities. first have the firm

Unidentified Analyst

had your you On last call, $XXX million…

Martin Bloch

correct. That's

Unidentified Analyst

And ago that was months guess roughly… four I

Martin Bloch

had Well, more opportunities. we

Unidentified Analyst

And is in advanced you on received market the is production. the How and what that February coming of that? XXXX, and contracts development electronic warfare size along

Stan Sloane

to the I think clock? Air Force you're optically program, referring pumped the rubidium

Unidentified Analyst

was It it was electronic development… the a advanced warfare, product

Stan Sloane

about electronic Yes, I warfare… offshore talking think you're off-board airborne

Unidentified Analyst

that's Yes, it.

Stan Sloane

We what's York. to that's delivered delivered fact to in Yes, XX of other the the the project. few probably are New be to that's product it well. we're couple that of going those developed days. in pretty next, And first, Elcom, And deliver a reference pieces the -- that's master in oscillator, Over XX days. at doing progressing called being here next

program advanced stuff. well. really technology that pretty is Extremely progressing state-of-the-art So

encouraging… So, it's pretty

Martin Bloch

in be investment done to a order game. And big we the that have in

Unidentified Analyst

wise? mean You R&D

Martin Bloch

That's correct.

Unidentified Analyst

on market the of size what that? And

Stan Sloane

the That range the of -- also EW eventually. applicable the that that had But $XX several being this is, the shipboard could as That's whole the Navy of important project other suite with what's probably be EW particular And in developed contract. a part not well, million this we've become on probably AOEW has. inquiries. product lot for standard of the be could will systems. the But is is that's already for

bids fact, In but not a for of we other that product have that for for out programs. couple program same particular

pretty exciting. that's So,

Unidentified Analyst

companies other working else on anyone this? Is

Martin Bloch

I'm sure…

Stan Sloane

single And people EW program on produce complicated the other AOEW we're the stuff. are part obviously the of we're particular word, other not for modules Navy. a that believe we doing EW companies the parts what doing part sure I'm of for other larger is more we're other In it. we're source developing. Well, But because

Unidentified Analyst

already part? a the principle most R&D of or is done, in good And

Stan Sloane

finish good A to that's of some up have still it true. but with, part We is.

Unidentified Analyst

coming clock more the GPS in space. along One atomic is How's rubidium question. huge contract? digital

Martin Bloch

Excellent…

Stan Sloane

It's in doing it's is it's that initial production, It's progressing well manufactured being been product, very part well. now. is

Unidentified Analyst

And you get that? think you can

Stan Sloane

optimistic tested, results question Well, that. we're from that qualified. But we to on evaluated and it was we're be has contract. significant highly production got going That that. The get is to

Unidentified Analyst

correct? iridium, the That's

Martin Bloch

GPS… No. delivered The is space. This the iridium been in done, has all

Unidentified Analyst

sorry I'm IIIF. you. Thank the Yes, GPS

Operator

with line Brett next to Janney. Reiss the We'll of go

Your line is open.

Brett Reiss

Stan. letting I and a in a the me programs. several executed language for you pleased explain development couch talking that you ask this question technical that on two. or explanation, you for Thank guess are release The is non-engineer? your that Could just little a you're press bit to further you very

Stan Sloane

bit be difficult. that's So to a going

realm our very the the been quartz very low low-G clocks, one and being a high-end that would last to do a advanced fair pumped development So, miscellaneous optically oscillator rubidium I phase chunk think But R&D include sensitive developments some of related technologies. performance oscillators, in the example, quartz from year. R&D noise, the what describe that’s activities here we as of oscillators,

Martin Bloch

Bloch. Martin is this And

on more and important platforms. the important For can becoming very explain. more the layman becoming is time mobile Precision I

mobile the accuracy. of atomic have that the field, in the we in a standards. GE on both of we our you big quartz-controlled sensitivity patent motion platforms, the have that's development, and affect in have a vibration and part best quartz the And key So, and also performance and

Stan Sloane

you help important. to understand And why that's

systems, -- radar So systems the you and and oscillators other noise affects example, that comes from electronic sources warfare if radar for performance.

a performance very you're performing means radar. having better to going oscillator have So that a high

Brett Reiss

were sales me, you your successful you've development to in impediment So in you successful execution since an not just programs? be been it what tactical cataloged in these should since to

Stan Sloane

think. I it's you what sure an sale, not by to advantaged impediment sales, I'm mean

Martin Bloch

Let me it. take

$XXX this of provided type that about technology proposals of to have programs, outstanding. a the and is dozen part million have we We

the have heavy done we So, lifting.

Now it's production sure a follow. that on we matter making to the cash-in is that bound

Brett Reiss

program? go educate the and areas, to have you development to base successful because these that tactical on you these them executed customer you've products have So in

Martin Bloch

the models in Well, to have delivered we many engineering customers. cases, the

of customer know majority our our to is our and critical So the mission capability the production. get

Brett Reiss

at kicked decision? the make to get can a and leaders it opinion once key you customer product. a the purchase that got quick will goods, level that Or and the you've the fairly lag? Is time Now, your looked the decision long tires they see

Martin Bloch

The yes to both. is answer

for timing for mature provide environment. will provide quickly, system with military and has to Some some, going the total they the programs this fairly are development. of be significant to a incorporated to product to because require are Because than larger answer mobile the much secure the

Operator

[Operator to Michael go Investor. Instructions] [Cooper], next We'll Private

Unidentified Analyst

question then QX which XX% think your two up -- XXXX. I pretty results, a Stan's no, good over and on QX million on a Congratulations are comment It's number. here just revenue. math on One maybe main $XXX

So and this in question have more? I But you through that a now? up with and/or capacity before what produce to you've infrastructure you could your is facilities is been plant staff good you've staffing what equipment investment and going invest in got first rejuvenation. think,

Stan Sloane

$XX as a you the give high I'll of been in So as has here the One, couple million. revenue business answers. base

running would I And picks could I facility problem. and of handle current including be phases. don't capacity would we a capacity. you would million can -- as tell a that the the tell you up, defense we here, assuming revenue that so make outsourcing mixes think would couple that and obviously, things. other I of some ways, I $XXX we we're that capable given product hope revenue of

be a would that think don't I So problem.

Martin Bloch

I saying. want to Stan's

the great quartz key atomic resonator of building has finished we blocks. build from advantages One to that products. material clocks is and the the FEI raw that Like

it to react And no to has performance. as wraparound and to at reason the get part, great on Stan that shape in electronics, very this, the be there's indicated So we're able quickly necessary conservative easily keep think is quite And get facility. I to to in we saying why outsource very a $XXX done million represent problem. our by not and these Stan should couldn't facilities

Unidentified Analyst

that I math million your number million million number when million you get Now, much a $XXX get a didn't Stan, ran to $XXX revenue. $XX market when company. to like $XX that for on cap income a you all after number you

I before $XX like would at million So million. doesn't seems it closer in you I Looked profit million that those threw XX% if realm, $XX numbers investor. And $XXX sound keep some on stable so $XXX the at a removing here. more up which Does to as it seem your expenses, if me SG&A, be number that me net I tax an million $XX gross quick to mean, on I really, running margin, mean, very million it that just just to to Does out overtime. your you And revenue. move, then I sketched it stable. more you're number more -- R&D you're revenue. sounds know mean, pretty sound enticing

Stan Sloane

should sort better? Your be little to it'd arithmetic at better able million of How not too we or but better. more is So, think far revenues, the do that out, a or much conservative. that $XX I be

Unidentified Analyst

And a or a that of larger opportunities give you're about just then can last, program launched referring, you And just little on… more talk the you ago bit the that about new so? NASA little a week some that bit us these announced some you color more

Stan Sloane

referring press think deep the I space the block you're NASA, release… to atomic

Unidentified Analyst

Yes.

Stan Sloane

ultra in for stable the the So quartz produce for mercury-ion high is is on. program, oscillator, oscillator, the which clock that relies DSAC a precision which we JPL, the

And so that role. was our

then $XXX programs that include there -- good large plus of there that are related a very is are classified to GPS. that couple in satellite constellations There's And commercial opportunities other The is few large million things some possibilities. size.

to opportunities make $XXX part the is, couple not it is broad opportunities. extremely So, or a mix. it's highly up good one on of dependent numerous million. pretty of it's a There And large the

is comfortable feel makes likely more I that. It to So that more happen. outlook like the me

Martin Bloch

on again, Bloch, to Martin is supplement This this. it

commercial. very precision between sensitivity, low-G and also the both what's many quartz classified of programs space, the applications. we is in clock, advantage and And the military opportunities becoming an it. opportunities, exciting so great of for necessity take lot have for But time to is have I We terrestrial that good atomic have

Operator

a Sam up take follow from will We Rebotsky.

Sam Rebotsky

we decision number? make July attribute do that have somebody that? Is a could million The the that we NASA. or Xst, Do a $XX to to need program, backlog that on we

Stan Sloane

space to talked the the deep launch clock? about, just referring NASA You're I atomic

Sam Rebotsky

Yes…

Stan Sloane

revenue was years over sold ago... three Since two that years -- in ago,

Martin Bloch

Yes, that's old…

Sam Rebotsky

fact it, more the this produce to launched any this So have just that don't they we in of backlog, we business have don't have backlog -- of any that item? more we

Martin Bloch

for have precision clock was employing items, we Similar It's building key and developed the technology. in same the backlog programs. secure That program. And other have many quartz contracts for we a DoD block.

Sam Rebotsky

some do have the of to tell than us we it to in for or quality and launch, kind wait we of of worked XXX% it's do And approval somebody succeeded our product statement of this that? need better

Martin Bloch

going it next be the to point our of Well, on year just give to we'll June. before launched was get call an and it's data. you I'm update. sure on conference monitored And we'll XXnd that a the next make

Sam Rebotsky

securities area growing? an cyber been And relative going that you're Is that product others for our differentiate the security, this cyber pressure? has and revenue from to forward? the GPS spoofing, exerting Does some

Martin Bloch

answer The is yes. short

Sam Rebotsky

some you're have to to are presentation? And to such a going you story where good tell, make now when the that you make presentations and ready

Martin Bloch

We advise on Sam. you, plate. It's will the

Stan Sloane

We now. I'm scheduled anxious but don't have them

story, have know… we'll let do the you I we think so

Sam Rebotsky

there as see, as can bite you. and far think I to any be shouldn't I negatives

forward. positive kind of going be So everything should

luck guys. good So

working hard the make let's and stock go You're up.

Martin Bloch

and From mouth to your God's ears…

Sam Rebotsky

God's maybe listening. right, All

Martin. thanks Okay,

Stan Sloane

right sitting next to He's here me.

Sam Rebotsky

there go. you Okay,

you. thank Okay,

Operator

Michael to up a move we'll And from now [Einser]. follow

Unidentified Analyst

One on…

Martin Bloch

one… short Only a

Unidentified Analyst

Who contract? for the right. Galileo is main All builder

Martin Bloch

what's again? Sorry,

Unidentified Analyst

issue. had just that Galileo The the

Martin Bloch

Yes.

want of not U.S. product decided All any European has they do involved. the that

effort. So was this European total a

Unidentified Analyst

are you any to of competition those though here? And people

Martin Bloch

same has of U.S. U.S. the don't missions. any foreign because on critical clocks want We the policy. No, type

Unidentified Analyst

the to at So this news is I hate say, because quality companies work actually, of good that they're GPS? looking on

Martin Bloch

of so precision timing, news Well, of system a important sync any from more spoofed, can out Mike, is important having go your commodity. the good the jammed satellite becoming type to me that time because or or be is own

Unidentified Analyst

known Which you're is for… what

Martin Bloch

our specialty. That's

Unidentified Analyst

million the thing, how's final contract And on that Force Air $XX going?

Martin Bloch

Slow.

Unidentified Analyst

is Why that?

Martin Bloch

Say that again?

Unidentified Analyst

slow? going it is Why

Martin Bloch

for reason trickling slow very new breakthrough in technology that and a is going of Air Force It's little funding. out the

Unidentified Analyst

going to it's though? think You be complete

Martin Bloch

One it. way will or another, complete we

Unidentified Analyst

news. good Thank you. Okay,

Operator

we phones. additional questions it have further And the I'll at to this the or team back from no any closing leadership time, for remarks. turn

Martin Bloch

for to participants possible. I my come again. Okay. through. all Again, all want the We're to as you to the make to opportunities who thank usual September. the participating. FEI personal you. Thank you hard be thank future we express working talking family and employees in you And of our will Thank make

Operator

and participation. your today's this and thank you meeting gentlemen, we all Ladies conclude does for

You may you that your your disconnect lines of rest we day. the and hope enjoy

Frequency Electronics (FEIM) 18 Jul 192019 Q4 Earnings call transcript