FEIM - Earnings call transcript Q1 2025 | Frequency Electronics, Inc.

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Operator

Greetings, and welcome to the Frequency Electronics Third Quarter Fiscal '25 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 would 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.

pleasure Executive your Officer. my President Thomas now Chief and is to host, introduce McClelland, It

Thomas McClelland

much expectations, Thank to the quarter very report Good fiscal our line you. afternoon, first results, everyone. year XXXX coming we articulated when as I'm results. pleased in reported with in

continue fiscal for the QX and first but $XX end year. increase million the by of the historically from first of to the of end XXXX million and previous XX% margins value XX% and backlog the up it's Revenue for at year is by to company. the operating of believe down at compared profits revenue, years year, slightly We from a previous should high quarter of The the substantially fiscal forward. increased income improved last going quarter represents $XX of high

primary Communication participate margins products We in on proliferated contracts risk continue Space, low-cost our to to room technologies This anticipate developing targeted at healthy programs of higher for win satellite and work new Secure and significant to on systems. some breathing Timing, also end-markets in Navigation, creates these. developing production and

in beginning than much these we're some that offerings core in to fact, have areas see legacy larger two primary In our endeavors markets success have addressable historically enjoyed.

calls higher lower on earnings systems are satellite programs. market which and proliferated prior for We've cost the so-called our won we've synchronization participate Small-Sat number for initial programs, produced some of a low-cost First, in for ability generally in questions developing contracts had numbers. to about

a the in large successfully space are and good growing of indication These to win of our this compete market. portion and initial ability contracts

funding for also attracting we're Second, sensors. quantum outside

developed into sensors building the working we're been real-world as core of the which our new our work well can from navigation physics environments. challenging which This clock blocks of in one which products, which several is purposes As applications, just the is be in GPS-denied company on laboratory world technologies quantum around utilized and developed for physics in transition some one atomic have quantum environments. in applications laboratories of utilize to positioned magnetometer example,

a for very sensor about that This is realize discuss Sensor sponsoring in also order and to how it. website Quantum end-market company further Quantum will we're York bring excited Electronics quantum and their maintains our arena. enthusiasm early to interested. university is to the together We're related excited event and role October. in our large sensor leaders a growing Frequency Summit in available conference City in and the to from participating also to and stimulate New at progress Details in prospects laboratories technology, a technologies scientific In the best developed are around this anyone sector this about event. has potential ensure private for our which country government, leadership

at an the a XX as frankly, tangible technologies, is our daily approach in business, I've is which FEI. with company. employees the studied approach growth on as in can our positive which puts core the engage There basis. unique in an on exciting growing Combining which The new with for us trajectory this is time additional all, solid I to a disciplined to is company. All foster sustain us and a is and a future, excitement our years enthusiasm been drive-apparent,

committed our benefits personally environment growth incentivized energized ahead success where the With the the company. of and company. plenty from everyone employees continued I'm us of an our to support There's of fostered work Board, of and the of we've hard but

the to turn over financial you on will who in Steve Bernstein, now fill CFO, our things details. I'll

Steven Bernstein

Thank you, Tom, and good afternoon.

in and the same prior to revenues quarter XXXX, for by sales, same offset follows: XX, fiscal customers, segments consolidated from are $X.X year compared both of accounted from July primarily compared for prior approximately as year. government commercial X of compared the in fiscal or The XX%, revenue commercial in was the significant for the year. to of $X.X the $XX.X U.S. in on period the of in fiscal the prior this which in are revenue both prior DOD $X.X fiscal non-space increase the of $XX.X of ended U.S. previous completion or sales the prior year period revenue million to the and $X.X Revenue satellite the of million compared million compared same million revenue to the and components $X.X segments, primarily space customers. satellite the XX% under government the was York $X.X million from a government recognized government For contracts million customers, were and period XX% approximately million and to segment. to $XXX,XXX same months method government fiscal Revenues approximately year. Other approximately programs U.S. payroll Revenues FEI-New in reflected approximately was million approximately from recorded fiscal space in are year. of consolidated compared U.S. quarter and only in $XXX,XXX FEI-Zyfer in decrease to in recorded were percentage for The and XX% related increases York are industrial FEI-New non-space

due revenue gross and of compared the efficiently. programs prior running fact increase And result, and a in in margin have For to year many the the July prior as the same due fiscal the are the margin in that ending the rate the to been faced mainly XX, rate challenges forward moving fiscal period year. margin related resolved. gross to and gross gross technical The now year XXXX, -- increased increased fiscal X months dollars increased margin more

and in company we margin a and recorded there gross in challenges quarter-to-quarter business be indicative Additionally, is many completed we is smaller while a at variability, years, are on were there in timely a the were still has jobs believe consolidated manner. continue This the XX engineering last that margins. highest this can higher move direction to solving of producing likely when we will efficiently the

focus X X of SG&A XX, increase modernization July company XX, of X approximately the For July future XX, consolidated revenues. is to R&D SG&A July the for The plans ending related in ending continue $XXX,XXX 'XX, to months to million R&D and 'XX expenses the the from to in of were months increase 'XX, an increased payroll-related advances XX% and ending products. expense and for X%, July $X.X $XXX,XXX invest X the at state-of-the-art. R&D for approximately expenses 'XX on approximately months XX% the expense. to increases in increase XX, keep its months 'XX, The an products of ending primarily due approximately a revenue. were consolidated to respectively, in was in

spend the expect vary. we quarterly actual However, to

refunds 'XX, from higher made ending to and For operating of July operating the investment the metal, various of $X.X X net by months July high-yield Operating from ending expenses deferred sources. reclaiming income income offset prior expense recorded of the related gross million income X retired spend. Other fiscal $X.X 'XX months to for approximately of the year. in million margin XX, company derived payments fixed assets the $X.X funds. employees. income The R&D compared income the to to higher come is million sale XX, revenue majority income assets, percent, or due of comp approximately from can was of in The interest approximately treasury increased

pretax million for $X.X approximately of months income compared pretax for 'XX. income XXXX, ending XX, July the XX, $X.X a million yields approximately July This months X ending the X to

million share For period months ending XX, of Consolidated $X,XXX compared approximately a previous million recorded months income the same the the the or or same to ending provision the July year. of per prior company the the $X.XX fiscal X for approximately $XXX,XXX, $X.XX period was for for share X 'XX, of $X.X XX, July compared to fiscal tax per $X 'XX year.

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

liquidity XX months next is Additionally, believes to The company debt-free. the investing the future. company its adequate meet is foreseeable its that the and for operating needs and

turn will call the and your look forward to I back we to questions Tom, shortly.

Thomas McClelland

Thanks, session. start Steve. the can We question now

Operator

Ventures. [Operator George of is coming Marema Pareto first Instructions] Our question from

George Marema

little -- I ask want this technology. the a bit more to Tom, about

instead guys are on First, any crystal technology? of working MEMS you technology oscillation

Thomas McClelland

We in some are developing do technology MEMS we utilize not of our products. but technology, internally MEMS

is of And they're the as quite Quartz are MEMS particular, But applications Quartz our resonators a very the in devices, high resonators. in high-performing course, resonators best MEMS perform Of of -- place course, definitely it's for the specialty. there vibration good well environments. that the terms as the don't MEMS

And newer so our several these of are utilizing products. devices in we

George Marema

DARPA If you work? any not, atomic do the say chip-scale can you in whether involvement clock have or

Thomas McClelland

the directly But in of involvement DARPA. past, efforts any currently, have any -- on with back atomic -- chip-scale the not to clock, we're we at been we XX several involved participated X in DARPA, chip-scale have chip-scale years. not We we we the do not activities going do this currently, atomic have in clock

George Marema

we you can Steve. you But commentary for is to on million Okay. some Is of a illuminate kind And that? Or went that? Or give my quarter, about R&D that the line? some next the R&D year-over-year. of run-rate like onetime can either up, question this or any It expenses there about expect? $X is looks aspects should you

Thomas McClelland

that. Yes. to on I'd like comment

future. I you out think the not that extrapolate should that into

And to forward. this is fluctuate R&D I expenditures it increase I not But bit think higher you yes, in quarter. we do from quarter-to-quarter. yes, overall going that's going something do that to know realize anticipate a little significant have

Steven Bernstein

get -- So quarter it, round off. $X.X it say sort I of What nonsteady the anchoring well, $X.X would of try just full there, of more the Just looks is to like be question would year a that? call like much million million guess roughly. you state was for the of of the of sort expectations to is let's how spirit -- to this some

Thomas McClelland

Yes.

unique. I that of probably is X/X think X/X to

quarter been to the from We the development our have and a and where our limited. have of activity, funded by funding partially which partially more happens customers be by this funded us, efforts, customers some is some

effort. that taking we Steve, approximately part for planned, expenditures so $X of think a And I have we What year. I R&D we're the overall the bigger on million? development anticipate But think

Steven Bernstein

[ million. million $X ] to $X

George Marema

This but the about unusual selling And quarter? and steady idea. like a then administrative, helpful. much, sort some go up there is didn't gives Or That's same state it's of now? anything up Is $XXX,XXX Okay. the that for year-over-year. that

Thomas McClelland

the That's Steve. question...

Steven Bernstein

Also, state. year. a it's steady a remember, No, comparison it's I believe last

end the stay not X%, up higher, going things to So going to continually It's some grow. little are result are But I whatever little think lower. a some X% to is went a it's constant.

George Marema

Yes.

margins forget gross profits I the mentioned higher some margins as -- were commentary, you're I gross And high went the sort year press from exact in increasing margin. smaller some really not and quarter. higher talked the then about pretty the wording, Are seems nice assuming that like margins but you? of Okay. with you I This this release, a there talking I'm here. And were about in number. on. you the think projects Steve mentioned know

Thomas McClelland

I I is be to programs, going think gross do gross those. newer our Core business. up that margins But strategy we think continue we -- margins effective No, get really the we'll some on that will on but forward. fair the of unrealistic very all those I keep it's to we basic expect at anticipate the and that, been think that going can trying we expect we've Heritage to to And --'s doing the of margins high we're up significantly, don't

George Marema

Okay. the go. one before on last new large. are And very TAM addressable my projects, markets The I these

equipment guys of what into If to kind markets? you and of do say, A addressable have you grow doing, sort $XX these days, revenue run-rate standpoint? capacity million, these currently of million $XX plant

Thomas McClelland

sure of plant I But support pretty plenty we're expand. to to make work we've shape. enough -- good to course, And and need a way a is going of And think We previously. because government capacity the people, of carefully. to done. end government the up this the about people we're a our room I it's work. think in talked in not with But I a from I work position start. are challenge too a have We've equipment, many And people get when challenge. we're -- ourselves financially, equipment things we and get lot think we of and is watching challenge of plant We unpredictable Yes. view, point But people. -- to fairly that. the good We and don't that got ahead very think to bigger want

always a But in problems we I point major is any this at challenge So us. this see -- in time. think for this don't we regard

George Marema

Thank I am your very you, about direction. you. Tom. excited Thank

Operator

is question Gruber McBaine. from Gruber next of Your coming Jon

Jon deRoy Gruber

what with million, be large When next the so orders the backlog over the are book-to-bill quarter, genesis that? being the $X low you any to there Is were -- months? orders that going your competitive contracts win were expecting very to And question of $X.X X.X and down orders replenish And... able means or to of million. few this my is fairly you're

Thomas McClelland

to we're that anticipate do replenish that. We going

what the are talking also I of -- contracts. but additional some terms after anticipating going definitely just observing in forward in starting and I the business current was unpredictability think is government the you're that. significant new we of quarter, about, We what

-- in we yes, So I think good shape... we're

Jon deRoy Gruber

that's what will some win hoping help news. which quarter, the the -- which the Yes, us are to over size, next through Could projects orders? decent of here good which take you will you're

Thomas McClelland

programs Well, this And programs that are several -- that anticipate at there point. there satellite satellites also are are non-satellite significant very some we we also, anticipating.

I we least don't too to specific until But under definitely we are get contract. these things, think at yes. like about

Operator

a Wisneski next private from Your question ], coming Instructions] [ [Operator investor. is who's Frank

Unknown Shareholder

And a The the seemed pretty to have of is of one well, to the past, business was in. word, couple direction you're have a the mix revenue for Tom, non-satellite Satellite company decline I'm in good. compared taking the between the satellites The questions. other a I and with business pleased quarter. really better going which Non-Satellite but in is sharp

a And margin Non-Satellite remainder little expect a million? business that the expansion? some year? Or in gross over $X expect reason is, that the the that part run-rate for do of secondly, to First in is for you Zyfer the continue the of part we can of improvement of

Thomas McClelland

I think there. to of A into numbers. to be you about too careful got read couple much the really questions trying that

Space say would that the because up I Non-Space little think not margin is and gross I went a up down bit. is

And of that's things the think I just the anticipate our an anticipate, really increase. will And think I I interpretation. do I a that lumpiness incorrect of Zyfer that's general think we of do measure business. piece think we

And in in York here the New fact, area.

some We also anticipate non-space activity.

fluctuations. wouldn't I yes, So read too much into those

Unknown Shareholder

Okay.

answered to I would opposed that Did or mean think... R&D came XX% rate question this the that You previously. R&D to the for in X%? year, as quarter be rate sales that first to you the it of imply there up so closer

Thomas McClelland

Yes, trend, think I numbers? think Probably those I are not, general the but the yes. that's exact

Unknown Shareholder

Interesting.

Okay. give That's the you feel a what good. And can for backlog us is? unfunded

Thomas McClelland

Steve, go ahead.

Steven Bernstein

publish don't unfunded that -- number. we the No,

Unknown Shareholder

funded backlog? Would as a million, that $XX have it larger be the fair to than it's assume you significantly

Steven Bernstein

the I never funded, it's things give offerings Yes. a gets other said, you if end if that. -- But I it or can it's result number but or is, like like

don't we to feel a valuable So provide. it's number

Thomas McClelland

It's a dangerous number.

Unknown Shareholder

of to area. stay Okay. it me. That's I dangerous for out want the

Operator

Michael Your is next a coming question investor. who's Eisner, private from

Michael Eisner

like gross margin you report, comment you business, had just I regularly $XX never new wondering meant? your question. Great said was there. what I one annual that. In it million,

Steven Bernstein

of front me, in I I it don't have know. don't

what you're it want me to you line look front me. you. call I don't I tomorrow, in can of it can I at and to explain have If saying,

Michael Eisner

Alright, that's fine. Thank you.

Operator

Pareto Ventures. George from is question coming Marema next Your of

George Marema

ticky-tacky Steve, question. little have I just a

are For about? rate kind thinking you what fiscal 'XX, of tax

Steven Bernstein

I have tax the interesting a NOLs, and a rules different and issue, tax low not will you NOLs California. Well, but tell rate. think a in I'm it do has be do business it's on very I'll that only We very is of bunch but expert, question, a California we very

$XXX,XXX why NOLs. of covered We that's the will see So by most provision. be you income tax -- our

are not that be because tax will California there of However, some covered rules.

-- a anywhere normal XX%, not do going expect don't I be. whatever, it to year, I to it's So be near this not XX%,

George Marema

percent? single-digit Low

Steven Bernstein

Yes.

Operator

Sinnet Tim from of next Capital. is Your coming Hasara question

Tim Hasara

the And X%, onetime gross called When went that on again transcript, contractual adjustment margins last year margin. ago Congratulations would have which benefited over reason was year's made operating about say. you a by the out let's particular that $X $X.XX. why mentioned the or gross you a $X.XX I income XX.X% out that? million, call even XX.X%, Any that about or didn't today and

Thomas McClelland

-- to that, you Do that I'm want Steve? address was...

Steven Bernstein

in that QX, happened correct? was, think, I

Tim Hasara

that was I believe. A year no, ago. QX That's -- QX,

Thomas McClelland

No.

I think point. relevant kind really issues. not and one-off this that was those QX. were at It's QX of And

Tim Hasara

Yes.

the as respect beginning just there'd X November, next Okay. last quarters that stages from -- well? of funded be or contracts the would sort And be assume should Would be I through unfunded backlog, that, that the what that's few an over be with probably I would here announced that you're would be know in to the that's so assume but but of shortly. that, backlog, coming the that accurate? still last -- call backlog I then you the would

Thomas McClelland

those those, absolutely funded correct. have we're durations some unfunded programs And associated a mentioned those. programs, backlog it's still X but Yes, point that at very in actively you have working yes, of Those time. is amount this significant different on with but we

Tim Hasara

-- of to referring bit the of press -- good. that? contract then beginning you more can funded. your R&D? release versus give on you color little Sounds with being the And government newer own funding programs I you you particular comment some made to a about a in the a guess respect a of Are Are

Thomas McClelland

government funding that -- we're significant -- in nobody Yes. But to number the of at best way they We the systems, -- go is these proliferated happening seeing, a up knows for satellite about programs the what's systems. satellite this the time. have these we point satellite,

So government kind a really from of novel number is different looking the approaches for of suppliers.

want get from thing old to And in of the same the time. prime the they with all contractors particular, don't just they deal that

they're So satellite looking ideas. different with newer companies for

goes the at then goes a creating as contract instead development production, so a and time that for through And funding this funneling down and companies single of looking single company multiple initially just on. phase then they're

then eventually and end. first the X in suppliers may second into the X prime companies, So with they a X contractors, perhaps ideas they fund maybe those. that phase go the fine only phase, in up fund X And they then or where they end of

So of supplier to really, are that a some in beginning because kind fine we being are order meet we, happens the is risk have course, to the accept on to and contractors of have that what the demanded, we work to schedules in things.

in cetera, initial the no it to have et in We we the that make through invest when inventory, to phases. customer our guarantee have following will phases

We, this cautiously approaching of -- course can. as are we we as

additional where the involved but get is that which initially, don't for are risk phase, we up any we to don't programs the reimbursed we're comes to in. think we guarantees, do some expenditures, And contractor next left that's end risk being any have later to the But not that and is account with the where proceed What not funding R&D. we just the So ultimately. continue phases. into we prime have unlikely not

Tim Hasara

gross 'XX, there, first Okay. And month -- this approximately versus my a -- you also you gross And and margin if gross saying there here onetime would following point a ] you're year XX-plus in other helpful contractual X%. quarter about adjustments versus out just comments, reading months XX, I only well. up margins. be by it spell ended [ as from the onetime July that margin it first your are I'm is really Understood. a XX% X comment one. ago, did guess benefited that rate on My 'XX the

the You year on spelled it spell didn't call that but out ago here. out

So just there. to comment

Operator

is Private question coming Your Johns, he's next a Investor. from Richard

Unknown Shareholder

the set annual meeting? wondering I'm yet you date for if a

Thomas McClelland

I X. October we it's have a date. believe do Yes,

Operator

a Your next ], he's from investor. Frank private question is [ Wisneski coming

Unknown Shareholder

LEOs Just to -- is you're little on talking one about? that more follow-up satellite the are a color those get proliferated speech,

Thomas McClelland

what? The

Unknown Shareholder

earth lower proliferate satellite The are orbits? clusters, those are

Thomas McClelland

Many are exclusively not of it's lower orbits, but lower them orbit. at earth

going the medium smaller only earth I satellites, that's the concept orbit think true for orbits, orbits, lifetimes. quantities, business the general And et for orbits, earth is low the in higher not also cetera. forward Satellite geosynchronous satellites, shorter but larger

Unknown Shareholder

area Okay. smaller I You contracts, now? And couple get of said a you're beginning had you assume? to into ones, that

Thomas McClelland

Yes. Yes. initial have We some Yes. we do Indeed, this are arena. contracts beginning. in

Unknown Shareholder

Would commercial? they be or government

Thomas McClelland

this At point government. in time, they're

Unknown Shareholder

before imagine But speculation. significant before totally you several area, it's least from you be significant it'd And at get that -- Great. quarters revenues right? any get Okay I

Thomas McClelland

fair that's think I assumption. a Yes,

Operator

And of question Marema is from your next Ventures. Pareto George coming

George Marema

Tom, area. talk a I was this wondering more about if sensor you quantum bit could little

do Or terms of -- you think addressable have do In little sort that? And product of is and a just this on currently sort of there timing product? more you like that what Just area? illumination what's roadmap? the market on of

Thomas McClelland

Sure.

a I of each questions, couple think let to me of address try them.

point of First any for this we in sort not products. We're effort do of of have products. point But is to missions do whole we view or of the at anything currently, time. any shipping goal this our develop from anticipate all, military that not

I -- I about, so example. talking one are think is the magnetometers, this mentioned just what we

that really of we utilize the atomic clocks. same basic in technologies there slew sensor But physics are that our utilize a

these because experience esoteric practical sensors lot into technologies, that products we we're and -- make more work the real-world laboratory we of position really technologies, are in to so and take products. we real And those like some have from expert in a the magnetometers of in really world, good making a them

measuring things exquisite there the lot these these these technologies interested sensors demonstrations laboratory where challenge. really people in been we're world the them sensitivity is And in. have that's the to of that kind And getting sensitivity are is some operate difficulties the them in, environments of in laboratory come getting One a that with of a excited. always out real with really of and and of we but of of

started they getting working laboratories which that some recognize the good of have And technologies. developed developing just national interest not either really are some of the major they these We they relationship with some have capabilities. develop labs Frankly, where we do have these products. don't the with practical have some in because activities of they

to the understand we also know basic but products. make into physics, these we real-world And how

We field the So earth. talked of that. And that thing. magnetic about for measuring example. the there That's multiple the magnetometers is are of applications one sort

navigation One is alternate the is available. them of not GPS this when

exists So uniform. the is earth. it the magnetic good turns surface that a magnetic the called out the point approximation the They're pretty there looks around field of really of field maps to because magnetic first anomaly whole maps that

But of applications. do yourself, location anomalies varies that's But a at by and within that not lot out possible the more of you as certainly of not at when the the anything of measuring at earth, pretty for location. applications, correlating the every with can of magnetic a hundreds then measurement magnetic -- you job in look unknown locating it it's a to closely, good these about exact field better of location your GPS necessarily turns couple centimeters then than like point knowing a maps lot details on it and within feet of certainly an the that

ionized. look in is a -- as other possible that quite are are that rubidium at we're applications sensors And Rydberg frequencies. the sensors utilize transitions which Rydberg a not that atoms in energy have at in microwave areas one for people atoms of levels high containing very cell so-called are developed actually There which we sensors. receiving interesting of these to where it's almost a And antenna but atoms such in are way the looking

the that our that measured. interesting techniques the atomic most lot kind being containing we our wavelength the are applications signals the the used are of cells thing is we to frequency in same the tied about rubidium clocks. are device in use fields clocks. of And measuring techniques as this antenna Rydberg And sensors The of antenna atomic microwave and a exactly the are utilizing these that that same cells of of the really an exactly

sensors, need dimensions longer, and have So and for are in centimeter measured in typically, signals, these so measure more in same can they wavelengths meters, these to have sized Rydberg RF cell microwave antennas the that's that sensitivity conventional wavelengths antenna but meters diameter, meters. several with the a though be X of diameter sensitivity, has a in a as even

very small antennas. make the there's So potential to very,

things these of say, have as just funding, kind external and involved we of seeking getting are funding. and a much to laboratories. we're with that are in beginning I of in some external the So couple very success some the we're that working, And

Operator

[ next Wisneski Private Frank ]. question a from coming is Investor. Your He's

Unknown Shareholder

us? Board the I and more reason companies are question, the Chief Last been is promise. can of Officer So -- not Directors. of the ever on involved the The you In most I've Directors? Is it's Board give there of that governance than on Executive anything. with any particular that you

Thomas McClelland

that I'm think in at to them haven't this don't a Board by to point been question. position I in time. Yes, invited good answer I the

Operator

end of Well, of call. the the session and reached the conference. we does today's Ladies gentlemen, this question-and-answer have end to appear and conference also conclude the

lines your Thank phone have time, disconnect at wonderful rest of for a you participation. You the day. and may this your

Frequency Electronics (FEIM) 10 Sep 242025 Q1 Earnings call transcript