Frequency Electronics, Inc. Q3 FY2025 earnings call

• The third quarter was an excellent financial quarter with substantial growth in revenue, gross margin, and operating income. Backlog was historically high. • Progress on a specific program contributed to revenue increase, with anticipation of similar successor programs. • Workforce engagement and dedication are crucial for continued success, enabling meeting customer expectations and attracting talent. • R&D expense increased to $4.5 million for the nine months ended January 31, 2025, due to focus on product advances and modernization. • Operating income improved due to successful program completions and efficient bidding, building, and testing.

For the nine months ended January 31, 2025, consolidated revenue was $49.8 million. Revenue from commercial and U.S. government satellite programs was approximately $28.8 million, or 58% of consolidated revenue. Revenues from non-space U.S. government and DoD customers were $19.5 million, accounting for approximately 39% of consolidated revenue. Other commercial and industrial revenues were $1.5 million for the nine months ending January 31, 2025.

• Anticipated future wins suggest a continued upward revenue and profitability trajectory. • Confidence in financial growth despite near-term industry uncertainties, with potential for faster growth in the medium term based on future program wins.

• Uncertainty in Washington could impact near-term program timelines. • Market variability in quarterly results.

Q: George Marema asked about quantum sensing, if it's part of new business opportunities mentioned.

A: Thomas McClelland said it's potentially a little of both legacy business and quantum sensing, with cautious optimism for new business in both areas.

Q: Michael Eisner asked if part of the $73 million backlog is from the $11 million contract.

A: Thomas McClelland confirmed yes.

Q: Asked about R&D percentage-wise.

A: Steven Bernstein said percentage-wise it went down.

Q: Asked about working with prime contractors on resilient GPS.

A: Thomas McClelland said they understand only three prime contractors are involved currently.

Q: Frank Wisniewski asked about engineering strength and attracting talent.

A: Thomas McClelland said there's potential for opportunities with government labs.

Q: Asked about non-space DOD and government business sales continuing.

A: Thomas McClelland said it's anticipated to continue.

Q: Asked about proliferated satellites.

A: Thomas McClelland discussed involvement in classified satellite programs and SDA, emphasizing smaller, cheaper, fast delivery.

Q: Robert Smith asked about financial resources for investment in hardening.

A: Thomas McClelland said they have adequate resources but will invest cautiously.

Q: Asked about collaboration opportunities.

A: Thomas McClelland said they are pursuing teaming agreements with labs and companies.

Q: Asked about bidding environment.

A: Thomas McClelland said it's a mix of new entrants and familiar faces depending on the program.

Q: George Marema asked about adjusted earnings per share and deferred tax rate.

A: Steven Bernstein said he didn't have the quarter's adjusted EPS in front of him and deferred tax rate modeling is affected by NOLs and adjustments.