FEIM - Earnings call transcript Q3 2024 | Frequency Electronics, Inc.

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Operator

Greetings, and welcome to the Frequency Electronics Q3 Fiscal '24 Earnings Release Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.Any statements made by the company during this conference call regarding the future constitute forward-looking statements pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements inherently involve uncertainties that could cause actual results to differ materially from the forward-looking statements. Factors that could cause or contribute to such differences are included in the company's press releases and are further detailed in the company's periodic report filings with the Securities and Exchange Commission. By making these forward-looking statements, the company undertakes no obligation to update these statements for revisions or changes after the date of this conference call.It is now my pleasure to introduce your host, Thomas McClelland, President and Chief Executive Officer.

Thomas McClelland

everyone. afternoon, Good

mixed a tell quarter. this We story have to

experiencing growth, growing an On for the record revenue we're hand, continued one all-time continued backlog products. our demand and

aggressively conservatively an improved quarter reporting On the on hand, and and single lessons are the programs part to technology case, the year.Furthermore, new inevitable to performance managing us will its new challenges for the a long such largely operating from of order incorporating a $XXX,XXX development program.In requiring new are technologies. temporary learned competitive loss primarily a the we question, challenging program equation. on and attributable we're that setbacks fiscal helped the assessing and profit confident take for generate knowledge overall, In position the remain us other we development run, in technical to on still necessary the are are base the behind of setbacks such business, that in it's progress new overruns material for this

sometimes space importance of products, this anticipate markets higher continued to achieve strategy.We highlights currently, the communication We're to higher which is this in to with business that primary is business, secure opportunities end for and previous pass margins in earnings of discussed us and continue quarter long-term on our not possible. gross approach calls. We'll fortunate navigation, our timing. new margins there demand growth considerable as which This allows we've our on on gross successfully

continued to coupled evidenced these conservatively to and and expertise as us and disciplined growth identified aggressively heritage the approach addressed with management which a in business new bookings, in problems backlog early, continue Our proven new Steve by win strongly allows over cash going Bernstein, profitability I CFO, are technical some trajectory turn to believe forward.I'll now things sustained albeit financial on a flow, on details. you fill is legals the in and of our for. the company who with will accounted growth, inevitable disciplines

Steven Bernstein

and good comment X-month you, the X I ending the Thank I a the results add months wanted XXXX. for afternoon.Before January into regarding get XX, results, Tom, financial to

of temporary Tom on the third 'XX, one quarter of during setback the had a year our company fiscal As programs. mentioned,

due ending expenses of were both and months primarily accounted space prior consolidated U.S. significant X million compared was and million the satellite the 'XX a were months XX% completion for in compared X% customer revenue year. gross as DOD for decreased increase million months XX, and and expenses increase the commercial was resolved. largely for and to related commercial of margin U.S. and the due XX, to only period on year are XX% funded 'XX, increase primarily or margin prior revenue, are management which increase period ending in decreased months and sale the As completed.For the yields ending ending approximately ending of are be and respectively. Revenues with favorable the today, payload related 'XX. company sales, associated costs.R&D of the respectively X has under X% was revenues of income for X on $XX.X of FEI-Zyfer combination resolved million were of certain program sales to programs revenue. recorded margins customers, fiscal to and cost-cutting increase consolidated of January 'XX SG&A X gross consolidated year. $XX.X prior ending same the ending with XX% the prior have increased decreased third sales of expenses of 'XX as months XX% reclaiming effects of majority 'XX XX% X in gross the 'XX, employees. a $XX.X January margin revenue setback, accounted as the and fiscal sales X now the continues. forward X% the compared XX, professional increased for of associated to deferred the programs for to payroll 'XX, assets. the fiscal fully we for XX, year there was $X.X income during compared lower to XX, Interest are to Operating the due million of future proposal increase the income January period fully the government company million or months year. prior satellite costs the derived result, to ending begun increased that Consolidated costs contracts percentage in the payments issue been backlog plans to in a as compared due fiscal technical the The compared instituted margin continue for results to operating same $X.XX months $X and XX, staff. was million hidden ending Similarly, for share months or the going ending an X revenue. approximately 'XX year. to respectively the due to the to or XX, negative fact forward.For components segments shift the months compared primarily absolute and measures Revenue 'XX X prior to having are compared million, $X decrease as sustained months period fiscal in the non-space The X January revenue. balance XX, the pre-tax remained loss the revenue York January government consolidated art.For are in FEI-New fiscal and the of quarter approximately recorded year loss million million the $X,XXX of margin as the in January to months of million were relating XX, percentage metals, as forward method net X efficiently. invest months the January 'XX, industrial sheet per continue direct ending of from fiscal segment.Revenues related of operating cash fixed significantly quarter, year ending and in SG&A of Other prior both and at 'XX. fiscal XX, an period recorded 'XX. York in approximately to R&D $X.X recorded year.For $XX $X.X dollars tax compared technical same XX, net increase, increased keep million revenue expect 'XX year the same year. loss fiscal almost of for The the compared $XX 'XX, been next that a million and a completion This the to pre-tax $X increased the result the of moving positive fiscal the year. and commercial in revenue issues in consolidated X challenges for by near programs to January look reporting U.S. Other $XX.X for was $X.X ended the period a January the Previous The government approximately of the from interest Despite compared XX, 'XX. the And million per temporary same gross the the and gross for for X $X.X for many our faced in products its fees The rate more been million the expense due trust and to news $XX,XXX January The rate compensation $XXX,XXX to months from or January to the made of retired $X.X the or of more to company provision XX% share in positive in increased the flow the was prior recorded income XX, $XX.X follows. assets 'XX million X $X.XX period strong million to quarter from refunds, deferred in January of to We $X.X approximately January state prior fiscal have in previous orders.For can to running of R&D the been from a FEI-New income 'XX, of have R&D

$XX million approximately April million January company's the continues strong and the X.X:X. current was year at backlog ratio to approximately million 'XX fiscal $XX capital compared sheet $XX approximately of fully 'XX XX, Our January approximately to of a XX, position funded of working end, previous 'XX.The balance reflect at end for

look company is future.I back The foreseeable your to adequate Additionally, to turn we operating and soon. will the forward debt -- company months meet questions investing needs believes next and back for that the is the and to its free. its the liquidity Tom, XX call call

Thomas McClelland

Thanks, Steve.

I think time. have this things for nothing over say. we turn more We can at to questions

Operator

[Operator Instructions] a for ], [ Private Richard Investor. is from Brett question today Your first

Unknown Analyst

much actually. business? couple you I backlog the other of problems apologize questions the increase the there. was I how Can have a Can quarter guys a couple related you versus about contracts of November guys to talk -- for of

Thomas McClelland

was the get We've as of to Well, new significant certainly, it, part speak. a additional to lot of completely had November we're due but new contracts. business business continuing and we a not it

Unknown Analyst

or of you per would kind strengthened steady color QX business as or of contracts on any outside I held that? So guess those say se

Thomas McClelland

strengthened. it's think I

Unknown Analyst

Good Okay. to hear.

was second the cost So overruns. question about the

those was, So were Also, November? quantify... overruns of that you of part were announced part can that contracts cost the in first

Thomas McClelland

No.

Unknown Analyst

helpful. the And That's you impact quantify can Okay. of dollar those?

Thomas McClelland

that? know, you want do Steve, don't to address I

Steven Bernstein

program. It or $X.X million particular take, was effect give about on that approximately,

Unknown Analyst

Okay. that's pretty All on right, margins. substantial a effect

that? mid-XXs, that, absent you were like in So somewhere the probably something

Steven Bernstein

Yes.

Unknown Analyst

Okay.

that one more question So too. on

halfway these this. you sign there about Can When the Were the a in aware problems? gap last beginning had them quarter. aware wasn't issues? we When or did little talk So here there through we realizing that call, of the the a you from of were bit? become was any management conference of

Thomas McClelland

little Yes, we that about a can talk bit.

road. middle about think the December that of like think that really of I in the And problem. can do for sort that with lot little bit of of what do up -- of the these one is dealing effect. worst And we came pay issues point to we fix. a kind to end a when is make quick a technical snowball thing primarily. provide try the of we in And And this is are the a there of things find experience we this spades usually at was it I'd I down that I have

a we problem unfortunately, approach this a spent this with we And way. in to short We it's that, problems more bit won't that lot down think more things the in doing that contain costly of able confidence the do way. significantly to have additional I by But run, So little that the things didn't resources we're have dealing problem. and we road.

Unknown Analyst

last of -- you Okay. this that? X ultimately XX% to any Does so change about call, And months targeting within margins a does year. talked this

Thomas McClelland

will about I a I that tried to no, do like to of that. bit. gross And a point there there obviously, be And better. can't But market. those gross growing right our and XX% the talking And course, to is little challenges. -- understand continuing sometimes as But you in of a would becomes little that. about, always situation even cases, competition, and and to we're conditions, are And have to many in certainly it technical when always we in need few we this any little obtain we're We bit that. time very Well, target change at we we there that do potentially of -- margin margin more do it I is do a competition.Under where been difficult we doesn't then words, we used that. discuss technology can have a needed. minutes sound talk there's think that XX% But ago.

to of those have be will certainly in wiggles gross things. with we there margin as deal so some that the we kind And expect

Operator

today Marcel for from Herbst Herbst question next Capital. with Your is

Marcel Herbst

constellations growth GPS I GPS Space that what current a put complement, was GPS understand involved, on Earth understand, Command older I Orbit and I major improving are wondering the future About GPS this you focus driver the far has a or would IIIF etc.? the you satellites, such programs. an opportunity and Systems and if GPS Medium constellation consider III from how

Thomas McClelland

opportunity. lot have regard. in fact, ongoing We we future in a And Yes. this activity of a certainly consider

about of effort of are little in is being responsible differently the current would lifetime would XX the space bit X.X last satellites not that I only GPS approach even years time X of you're this years.So in the working space. point satellites is at launched is satellites of pushed point for were to Earlier time a which of at have are that years. but field those Command, new designed And satellites to set X orbits, years, designed a is than this what of still in the are GPS for in lifetime being talking even Space think years. with designed an Systems acceptance will after about an similar idea be -- which but a a designed there's the The have GPS all lifetime GPS orbit satellites some current the that a to satellites in XX satellites. are of new satellites

along much been more lot And which to than with satellites course, there's a rapidly to course satellites with desire launched the desire launch those along expensive. there's to of date. for this, a to that be those less Of satellites be able have these

we're actively participating. So

with of go related people satellites, at early clocks Command conversations pursuing had obviously, the have and We actively And Space that we're attempts to them. from atomic Systems prototype the on this. the some

we potentially very as a see and interested our of yes, it and we're future. important part actively involved we're So

Marcel Herbst

opportunity sounds the really us in for That Can you some quantify great. way?

Thomas McClelland

to point at is at the hard in because It's this put advertised that us phases. we way time being do to pretty in point are this forward -- things being

get think years, pretty in much I about quantities X better And we'll terms a the next But is phases of going. to where small all initial so the things. of are this feeling over start of

Operator

[ Michael Frequency for ]. question next from today Your is Eisner with

Unknown Analyst

right. All

I was correct? think of this the that X said projects. you none Is November

Thomas McClelland

Yes. to nothing That's the awarded the November. do correct. in quarter have The with losses that were for contracts

Unknown Analyst

are still those So schedule? on

Thomas McClelland

on still schedule, yes. are Those

Unknown Analyst

projects is for of revenue you the of quarter? did part And the any that those

Thomas McClelland

programs, into initial continue be phase programs, significant to case procuring these relatively Yes, is will And yes, translate and We're that of into one parts, not on we sort start is of a something but in second doesn't The minimal. doing those the the mostly going and particular, until revenue far behind. one forward. we're parts. gear with revenue shifting high that of those

we see to as revenue those forward. significant start we'll a So due to programs go

Unknown Analyst

In the fourth quarter?

Thomas McClelland

Yes.

Unknown Analyst

guess, the right. the project, something was is upset? had client problems you new All with -- Is I there that get

Thomas McClelland

it, under Well, our is with customer we I joy I don't but down and I up anybody because things of working have we're for jumping control. think think think

Unknown Analyst

$XX with -- was of million? last part, part All a million the $XX that Is with the right. that big backlog the new

Thomas McClelland

that working has on for No. the program time. that. the in is it we've backlog No, -- involved any some wasn't wasn't increase -- This in been

Unknown Analyst

big where came can from? And not comment sure if increase the I'm you

Thomas McClelland

to I go don't any appropriate think details. into it's

that have understand details us to talk to our of about their like don't You programs. customers

Unknown Analyst

And mostly you All resolved and cost problem for? the the said mostly is accounted right.

Thomas McClelland

Yes, the and the are That's definitely costs problems resolved. accounted are for correct.

Unknown Analyst

be schedule, you'd on should this be but quarter, So the back fourth, not okay? in you schedule,

Thomas McClelland

Yes.

Operator

from is Capital. Your with Hasara next Sinnet question Tim

Tim Hasara

Yes.

to going here been go value has I the the there to are the in X? exactly? full assume amount of X into respect new how the they with given contracts, Just backlog put

Steven Bernstein

Correct.

backlog funded. our So fully is

and obviously subtracted as program added backlog. get that will on taken then programs to the be revenue from amount the funded, backlog So additional the

Thomas McClelland

were that into that as fraction for goes funded total the what for we contract typically fraction is funded And a get So we're amount. of them, backlog. these programs,

Operator

is next Your Private from Wisniewski ], [ for question a Frank today Investor.

Unknown Analyst

business, I but well. a seems all where calls growth extremely satellite But get which mainly a couple concentrate conference that's of along lot is of be to these things, the coming on justifiable, the is. Zyfer

to turns of guess. backlog your half you going up-to-date there? bring us it's months, How for of fact, X as much business? a the on that opposed what's In a over business on business is Could I

Thomas McClelland

each. it's So of some

I the think my the any top are There of head. business. over they than specific more turn have do couple lot of a which we rapidly off-the-shelf are satellite off tremendous but I don't answers a things programs I'm term, essentially which do in but... at products Zyfer on longer amount numbers a as they that is needed basis. of sure business, an question, your not

Unknown Analyst

business? I kind of predictable talk that how XX% the predictable the last mean, how guess, margins? is, Zyfer or of talking it's I growing in it? what Yes. are margins, satellite you you been is And just think couple question very, basically nicely And years. about is the business? corporate-wide very I when over

Thomas McClelland

corporate-wide, Well, we're #X. talking

Unknown Analyst

So the then? must margins of pretty a good gross too basis on Zyfer be

Thomas McClelland

yes. are, They

Unknown Analyst

And that that pretty can predictable business, so well you is more Is of right. All or how -- variable? is turns and that? something much that because a it's model it's out

Thomas McClelland

Well, more variable. it's potentially

years. the been couple more obviously and it's conditions forth. But it yes, so pretty economic is variable think predictable for changing of I last potentially in

Unknown Analyst

most is government related? or business that of And DOD

Thomas McClelland

Yes.

Operator

We remarks. have call And now of Thomas question the answer closing will end over turn the reached and the I to for session.

Thomas McClelland

everybody All Thank participating in and much. right. you we'll another very just this for quarter. talk like thank call, again in I'd to

Operator

Thank may conference concludes This today's disconnect your your time. and you participation. at you lines for this

Frequency Electronics (FEIM) 14 Mar 242024 Q3 Earnings call transcript