Frequency Electronics Q1 2025 Earnings Call Transcript

Quartr
Provided by Quartr
September 10, 2024

There are 5 speakers on the call.

Operator

Greetings, and welcome to the Frequency Electronics Third Quarter Fiscal 'twenty five Earnings Release Conference Call. At this time, all participants are in a listen only mode. As a reminder, this conference is being recorded. Any statements made by the company during this conference call regarding the future

Speaker 1

constitute forward looking statements pursuant to

Operator

the Safe Harbor provisions materially from the forward looking statements. Factors that would 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. It is now my pleasure to introduce your host, Thomas Pateland, President and Chief Executive

Speaker 1

Officer. Thank you. Good afternoon, everyone. I'm pleased to report our Q1 results coming in very much in line with expectations as articulated when we reported the fiscal year 2024 results. Revenue for the Q1 of fiscal year 2025 increased by 22% and operating income improved by 15% compared to the Q1 of previous year.

Speaker 1

We believe revenue, profits and margins should continue to increase going forward. The backlog of $70,000,000 at the end of Q1 is down slightly from the high of $78,000,000 at the end of the last fiscal year, but it's up substantially from previous years and represents a historically high value for the company. We continue to win significant production contracts in our primary end markets of space, navigation, secure communication and timing and anticipate healthy margins on these. This creates some breathing room to work on developing new technologies and also to participate in higher risk programs targeted at developing products for low cost proliferated satellite systems. In fact, we're beginning to see some success in these endeavors in 2 primary areas that have much larger addressable markets than our core legacy offerings have historically enjoyed.

Speaker 1

First, we've won some initial contracts for developing low cost synchronization systems for proliferated satellite programs. We've had a number of questions on prior earnings calls about our ability to participate in the market for so called smallsat programs, which are generally lower cost and produced in higher numbers. These initial contracts are a good indication of our ability to successfully compete and win in this large and growing portion of the space market. 2nd, we're also attracting outside funding for quantum sensors. As one example, we're working on quantum magnetometer applications, which utilize some of the physics building blocks of our core atomic clock technologies and can be utilized as sensors for navigation purposes in GPS denied environments.

Speaker 1

This is just one of several new quantum applications, which have been developed in physics laboratories around the world and which our company is well positioned to transition from the laboratory into developed products, which work in challenging real world environments. Quantum is also a very large and growing end market, and we're excited about our prospects for participating in it. In order to stimulate further progress in quantum sensor technology, our company is sponsoring a Quantum Sensor Summit in New York City in early October. This scientific conference will bring together leaders from government, university and private sector laboratories to discuss sensor technologies and how best to realize their potential and also to ensure that our country maintains a leadership role in this arena. We're excited about the enthusiasm, which has developed around this event.

Speaker 1

Details related to the event are available at the Frequency Electronics website for anyone interested. All in all, this is an exciting time for our company. Combining the disciplined approach to our core business, which is growing with a studied approach to new technologies, which can sustain us and foster additional growth in the future, puts us on a solid positive trajectory as a company. The excitement is tangible. As I engage with our employees on a daily basis, there's an enthusiasm and drive apparent, which frankly is unique in the 40 years I've been at FEI.

Speaker 1

With the support of our Board, we've incentivized employees and fostered an environment where everyone benefits from the success of the company. There's plenty of hard work ahead of us, but I'm personally energized and committed to the continued growth of our company. I'll now turn things over to our CFO, Steve Bernstein, who will fill you in on the financial details. Thank you, Tom, and good afternoon. For the 3 months ended July 31, 2024, consolidated revenue was $15,100,000 compared to $12,400,000 for the same period of the prior fiscal year.

Speaker 1

The components of revenue are as follows. Revenue from commercial and U. S. Government satellite programs was approximately $8,300,000 or 55% compared to $4,900,000 or 39 percent in the same period of the prior fiscal year. Revenues on satellite payload contracts are recognized primarily under the percentage of completion method and are recorded only in the FTI New York segment.

Speaker 1

Revenues from non space U. S. Government and DoD customers, which are recorded in both the FEINew York and FEI ZEICR segments were $6,300,000 compared to $6,900,000 in the same period of the prior fiscal year and accounted for approximately 42% of consolidated revenue compared to 55% for the prior fiscal year. Other commercial and industrial revenues were approximately 50 $544,000 compared to approximately $672,000 in the prior fiscal year. The significant increase in revenue for this quarter compared to the same quarter in the previous fiscal year was reflected in both segments and primarily related to increases in government space of approximately $3,400,000 in sales from space U.

Speaker 1

S. Government customers offset by a decrease of approximately $500,000 in sales from non space U. S. Government customers. For the 3 months ending July 31, 2024, gross margin and gross margin rate increased compared to the same period in the prior fiscal year.

Speaker 1

The gross margin dollars increased mainly due to the increase in revenue and the gross margin rate increased due to the fact that many of the technical challenges faced in prior fiscal year have been resolved and as a result, the related programs are now moving forward and running more efficiently. Additionally, there were many smaller jobs that were completed at higher margins. This is the highest gross margin the company has recorded in a consolidated business in the last 24 years and while there will likely still be quarter to quarter variability, we believe this is indicative of a direction we can continue to move in when we are producing efficiently and solving engineering challenges in a timely manner. For the 3 months ending July 31, 20 4, 20 23, SG and A expenses were approximately 19% of consolidated revenues. The increase in SG and A expenses is related to an increase in payroll related expense.

Speaker 1

R and D expense for the 3 months ending July 31, 'twenty four increased to approximately 1,500,000 dollars from $506,000 for the 3 months ending July 31, 'twenty three, an increase of approximately $982,000 and were approximately 10% and 4%, respectively, of consolidated revenue. R and D increases for the 3 months ending July 31, 'twenty four was primarily due to a focus on advances in modernization of products. The company plans to continue to invest in R and D in the future to keep its products at the state of the art. However, we expect the actual quarterly spend to vary. For the 3 months ending July 31, 24, the company reported operating income of approximately $2,400,000 compared to an operating income of approximately $2,100,000 in the prior fiscal year.

Speaker 1

Operating income increased due to higher revenue and gross margin percent offset by higher R and D spend. Other income expense net is derived from various sources. The income can come from reclaiming of net or refunds of sale of fixed assets, interest expenses related to deferred comp payments made to retired employees. The majority of the approximately $200,000 of investment income for the 3 months ending July 31, 24, was from assets in high yield treasury funds. This yields a pre tax income of approximately $2,500,000 for the 3 months ending July 31, 2024, compared to approximately $2,100,000 pretax income for the 3 months ending July 31, 2023.

Speaker 1

For the 3 months ending July 31, 24, the company recorded a tax provision of 133,000 compared to $7,000 for the same period of the prior fiscal year. Consolidated income for the 3 months ending July 31, 24, was approximately $2,400,000 or $0.25 per share compared to approximately $2,000,000 or $0.22 per share for the same period of the previous fiscal year. Our fully funded backlog at the end of July 24 was approximately $70,000,000 compared to approximately $78,000,000 for the previous fiscal year ended April 30, 24. The company's balance sheet continues to reflect a strong working capital position of approximately $21,000,000 at July 31, 24 and a current ratio of approximately 1.5:one. Additionally, the company is debt free.

Speaker 1

The company believes that its liquidity is adequate to meet its operating and investing needs for the next 12 months and the foreseeable future. I will turn the call back to Tom and we look forward to your questions shortly. Thanks, Steve. We can now start the question session.

Operator

Thank you very much. We will now open the floor for questions. Our first question is coming from George Moreba of Pareto Ventures. George, your line is live.

Speaker 1

Yes. Hi. Thank you. Tom, the I want to ask a little bit more about this technology. Well, first, are you guys working on any MEMS technology instead of crystal oscillation technology?

Speaker 1

We are not internally developing MEMS technology, but we do utilize MEMS technology in some of our products. Of course, the MEMS devices, MEMS resonators don't perform quite as well as the quartz the best quartz resonators. And of course, it's the high performing applications that are our specialty. But there is definitely a place for the MEMS resonators in particular. They're very good in terms of high vibration environments.

Speaker 1

And so we are utilizing these devices in several of our newer products. If you can say whether or not do you have any involvement in the DARPA chip scale atomic clock work? Currently, we do not we're not directly involved in any chip scale activities at DARPA. We have been in the past. We have participated on several of the efforts in the chip scale atomic clock just going back 5 to 10 years.

Speaker 1

But currently, we do not have any chip scale atomic clock involvement with DARPA. Okay. And my next question is either for you or Steve. But on the R and D expenses this quarter, can you eliminate some of that? It kind of went up, looks like about $1,000,000 year over year.

Speaker 1

Is there any one time aspects to that? Or is that a run rate we should expect? Or can you give some commentary about the R and D line? Yes. I'd like to comment on that.

Speaker 1

I think that you should not extrapolate that out into the future. I think, yes, you do have to realize that something that's going to fluctuate from quarter to quarter. And I know it is a little bit higher this quarter, but yes, we do not anticipate significant increase in overall R and D expenditures going forward. So it looks like this quarter was let's call it $1,500,000 to round off. What would be sort of well, how much of the $1,500,000 would you say is more sort of non steady state of that?

Speaker 1

I guess the spirit of the question is to try to get some like for the full year anchoring of expectations there roughly. Yes. I think a third to a half of that is probably unique. We have some development efforts, which have been partially funded by some of our customers and partially funded by us. And this happens to be a quarter where the activity, the funding from our customers is more limited, and so we're taking on a bigger part of the development effort.

Speaker 1

But I think that we anticipate overall R and D expenditures for the year. What have we planned, Steve? I think approximately 3,000,000 Okay. That's helpful. That's helpful.

Speaker 1

Just give some idea. And then same for selling and administrative, it didn't go up that much, but it's up like $500,000 year over year. Is there anything unusual about the quarter? Or is that sort of a steady state now? Steve, that's a question.

Speaker 1

No, I believe it's a steady state. Also remember, it's a comparison last year. So the end result is things went up 3% to 5%, whatever, some a little higher, some a little lower. But I think it's going to stay constant. It's not going to continually grow.

Speaker 1

Yes. Okay. And the gross margins were really nice quarter. I know you mentioned in the commentary, I think Steve mentioned that there were some smaller projects with some higher margin. And then in the press release, you talked about, to get the exact wording, but sort of higher margins and profits as the year went on.

Speaker 1

I'm assuming you're not talking about gross margins increasing from here, are you? It seems like a pretty high number. No. I don't think it's fair to expect that the gross margins will be going up significantly. But we I think the basic strategy is we're really trying to keep the gross margins up on our core heritage business.

Speaker 1

And I think we've been very effective at doing that, and we anticipate we'll continue to do that going forward. But some of the newer programs, we it's unrealistic to expect that we can get those high margins on all of those. Okay. And my last one before I go, the TAM on these new projects, the addressable markets are very large. If you're doing, say, $60,000,000 $70,000,000 run rate of revenue these days, what sort of capacity do you guys have currently to grow into these addressable markets So I'll answer a plant and equipment kind of standpoint.

Speaker 1

Yes. We from a plant and equipment point of view, I think we're in pretty good shape. We I think the bigger challenge is a people challenge. But plant and equipment, I think we've got plenty of capacity and room to expand. And of course, financially, we're in a good position to support that.

Speaker 1

But people, I think, were watching very carefully. We've talked about this previously. We need to make sure that we have enough people to get the work done, but not we don't want to get ahead of ourselves and end up with too many people. And it's a challenge because the way a lot of our work has gone from that work and the government is fairly unpredictable when things are going to start. So this is always a challenge for us.

Speaker 1

But we I think we don't see any major problems in this regard at this point in time. Okay. Thank you, Tom. I'm very excited about your direction. Thank you.

Operator

Thank you very much. Your next question is coming from John Gruber of Gruber MacBain. John, your line is live.

Speaker 2

Good afternoon. Is there any large contracts you're expecting to win or being competitive over the next few months? And the genesis of my question is, your orders were fairly very low this quarter with the book to bill of 0.4 and orders, what, the backlog down 8, so that means orders were 7.1. When are you going to be able to replenish that?

Speaker 1

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

Speaker 2

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

Speaker 1

Well, there are several satellite, very significant satellite programs that we are anticipating. And also there are some non satellite programs that we anticipate also at this point. I think we don't like to get too specific about these things at least until we definitely are under contract. But yes.

Speaker 3

Okay. Thank you.

Operator

Thank you very much. Your next question is coming from Frank Wisniewski, who is a private investor. Frank, your line is live.

Speaker 4

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

Speaker 4

First, is that part of the reason for the gross margin expansion? And secondly, do you expect ZEIFER in that part of the non satellite business to continue run rate of

Speaker 2

a little over $6,000,000 or can we expect some improvement in that for the remainder of the year?

Speaker 1

I think that you got to be really careful about trying to read too much into the numbers. A couple of questions there. I think I would not say that the gross margin went up because space is up and non space is down a little bit. I think that's an incorrect interpretation. And I think we do anticipate I think that's really just a measure of the general lumpiness of our business.

Speaker 1

And I think we do anticipate that the Zephyr piece of things will increase. And in fact, here in the New York area, we also anticipate some non space activity. So yes, I wouldn't read too much into those fluctuations. Okay.

Speaker 4

You answered the R and D question that came up previously. Did you mean to imply that opposed to the as opposed to the 10 percent or so R and D rate of sales rate in this Q1 that for the year it would be closer to 5%? I think

Speaker 1

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

Speaker 4

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

Speaker 1

Steve, go ahead. No. The unfunded, we don't publish that number.

Speaker 2

Would it be fair to assume that it's significantly larger than

Speaker 4

the $70,000,000 you have as a funded backlog?

Speaker 1

Yes. But the end result is, like I said, I can give you a number, but if it's it never gets funded or if it's off planes or other things like that. So we don't feel it's a valuable number to provide. It's a dangerous number.

Speaker 4

Okay. I want to stay out of the dangerous area. That's it from me. Thank you very much.

Speaker 1

Okay. Bye.

Operator

Thank you. Your next question is coming from Michael Eisner, who's a private investor. Michael, your line is live.

Speaker 3

Hi. Great gross margin there. I just had one question. In your annual report, it said new business $70,000,000 and regularly you never comment like that. I was wondering what you meant.

Speaker 1

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

Speaker 3

All right. That's fine. Thank

Operator

you. Thank you very much. Your next question is coming from George Marama of Pareto Ventures. George, your line is live.

Speaker 1

Yes, thanks. Steve, I just have a little ticky tacky question. For fiscal 2025, what kind of tax rate are you thinking about? Well, it's a very interesting question, but I think it will be a very low tax rate. We do have NOLs.

Speaker 1

The only issue, and I'm not a tax expert, but I'll tell you is that California has very different rules on NOLs, and we do a bunch of business in California. So that's why you see the $133,000 tax provision. Most of our income will be covered by NOLs. However, there will be some that are not covered because of California tax rules. So I don't this year, I do not expect it to be anywhere near a normal 21%, 22%, whatever it's not going to be.

Speaker 1

So single digit percent? Yes. Okay. Okay. Thanks, Steve.

Speaker 1

No problem.

Operator

Thank you very much. Your next question is coming from Tim Hoofara of Synit Capital. Tim, your line is live.

Speaker 2

Yes. Congratulations again on the gross margin. When I went over the last year's transcript, you called out one time contractual adjustment that benefited gross margins a year ago by 8%, which would have made that 31 point $1,000,000 or $2,000,000 let's say and even the operating income was about $1,000,000 about $0.10 or $0.11 Any particular reason why you didn't call that out today? Did they mention that?

Speaker 1

Do you want to address that, Steve? That was a That was, I think, happening in Q4, correct?

Speaker 2

That's Q4. No, that was Q1, I believe. I

Speaker 1

think that was Q3 and Q4. And those were kind of one off issues. It's not really relevant at this point. Yes. Okay.

Speaker 2

And then the just with respect to the backlogs, the 3 contracts you announced last November, I would assume that there would be you're still sort of in the beginning stages of that, that backlog should probably be funded over the next few quarters as well? I know that's what would be an unfunded backlog, but that's I would assume from the last call or so that, that would be coming through here shortly. Would that be accurate?

Speaker 1

It's absolutely correct. Those programs those 3 programs you mentioned have different durations, but we're actively working on those. And yes, we have still some unfunded backlog associated with those, but very significant amount of that is funded at this point in time.

Speaker 2

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

Speaker 1

Yes. We for the satellite, the proliferated satellite systems, we have significant government funding at this point in time. But a number of these programs that we're seeing, they what's happening is nobody knows the best way to go up about these satellite systems. So the government is really looking for novel kind of approaches from a number of different suppliers. And in particular, they don't want to just get the same old thing from the prime contractors that they deal with all of the time.

Speaker 1

So they're looking for newer satellite companies with different ideas. And so instead of creating just a single contract for a single company that goes through the development phase and then production, they're looking at initially funding multiple companies and then funneling this down as time goes on. So in the first phase, they may fund 5 companies, 5 prime contractors and then they go into a second phase where maybe they fund only 2 of those. And then the idea is that eventually they end up with perhaps 1 or 2 suppliers in the end. So we, of course, are a supplier to the prime contractors.

Speaker 1

And really what happens is that we have to accept some risk in the beginning because in order to meet the kind of schedules that are being demanded, we have to work on things. We have to invest in inventory, etcetera, in the initial phases when we have no guarantee that our customer will make it through to the following phases. We, of course, we are approaching this as cautiously as we can. So we don't get involved where we think that the prime contractor is unlikely to proceed to the next phase, but we do not have any guarantees and that's where the risk comes in. But initially, we are not funding any additional R and D.

Speaker 1

What we just have to account for is the risk that the programs don't continue into later phases. And we're left with some expenditures, which end up not being reimbursed ultimately.

Speaker 2

Okay. Understood. And I guess following up on my first comment about the gross margins. Yes, I'm reading from your Q1 'twenty four comments, you're saying there, one time month 3 months ended July 31, 'twenty three, there were one time contractual and other adjustments that also benefited gross margin rate by approximately 8%. My only point is that versus a year ago, you really did a 31% gross margin versus a 34% plus here in this one.

Speaker 1

And it just it would be helpful

Speaker 2

if you spell that out as well. You spelled that out on the year ago call, but didn't spell it out here.

Speaker 1

So just a comment there. Okay.

Speaker 2

Thank you. Thank you.

Operator

Thank you very much. Your next question is coming from Richard Johns, Hughes Private Investor. Richard, your line is live.

Speaker 1

Hi. I'm wondering if you set a date yet for the annual meeting. Yes. We do have a date. I believe it's October 8.

Speaker 1

Okay. All right. Thank you.

Operator

Thank you very much. Your next question is coming from Frank Wisniewski, who's a private investor. Frank, your line is live.

Speaker 4

Thank you. Just one follow-up to get a little more color on the proliferated satellites. Are those Nios you're talking about? The what? The proliferated satellite clusters, are those at low earth orbit?

Speaker 1

Many of them are low earth orbit, but it's not exclusively low earth orbit. I think the general concept going forward in the satellite business is smaller satellites, larger quantities, shorter lifetimes. And that's true not only for the low earth orbit satellites, but also for the higher orbits, medium earth orbit, geosynchronous orbits, etcetera.

Speaker 4

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

Speaker 1

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

Speaker 4

Would they be government or commercial?

Speaker 1

At this point in time, they're government.

Speaker 4

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

Speaker 1

Yes. I think that's a fair assumption.

Speaker 4

Okay. Thanks a lot. Bye.

Operator

Thank you very much. And your next question is coming from George Marama of Pareto Ventures. George, your line is live.

Speaker 1

Yes. Hi, Tom. I was wondering if you could talk a little bit more about this quantum sensor area in terms of like do you currently have product or what's the product roadmap? And what sort of addressable market you think there is on that? And just sort of timing of that, just a little more illumination on this area?

Speaker 1

Sure. I think a couple of questions. Let me try to address each of them. First of all, currently, we do not have any products. They're not shipping for any military missions or anything of that sort at this point in time.

Speaker 1

But we do anticipate the whole goal of this effort from our point of view is to develop products. I think so what are we talking about? I mentioned the magnetometers. This is just one example. But there are a slew of sensor technologies that really utilize the same basic physics that we utilize in our atomic clocks.

Speaker 1

And so we because we are really expert in those technologies and we have a lot of experience making practical products that work in the real world, we're in a really good position to take some of these more esoteric technologies, sensors like magnetometers from the laboratory and make them into real world products. One of the difficulties with a lot of these technologies is there have been these exquisite demonstrations in laboratory environments of the sensitivity of some of these sensors in measuring things that people are really interested in. But getting them out of the laboratory and getting them to operate with that kind of sensitivity in the real world is always a challenge. And that's where we come in. And we're really excited.

Speaker 1

We have some activities, which are just getting started with some of the major national laboratories where they develop some of these technologies. And we have developed a really good working relationship with some of these labs because they recognize that they do not have the capabilities. Frankly, they don't have the interest either in developing practical products. And we understand the basic physics, but we also know how to make these into real world products. So the magnetometers is one example we talked about that.

Speaker 1

That's measuring the magnetic field of the earth. And there are multiple applications for that sort of thing. One of them is this alternate navigation when GPS is not available. So it turns out that there exist really pretty good maps of the magnetic field around the surface of the earth. They're called magnetic anomaly maps because the whole point is that the magnetic field to a first approximation looks uniform, but when you look more closely, it varies at every point on the earth.

Speaker 1

Then it turns out that by measuring the magnetic field at an unknown location and then correlating the exact details of the measurement at that location to these maps of the magnetic anomalies, you can do a pretty good job of locating yourself, not necessarily within a couple of centimeters like is possible with GPS in a lot of applications, but certainly within 100 of feet. And for a lot of applications, that's it's certainly better than not knowing anything about your location. There are other applications that we're looking at. One of the interesting areas is so called Rydberg Sensors. And these actually are sensors in which we look at Rydberg transitions in atoms, which are very high energy levels of atoms where the atoms are almost but not quite ionized.

Speaker 1

And people have developed sensors in such a way that it's possible to utilize a cell containing rubidium as a receiving antenna in the for microwave frequencies. And these cells containing rubidium are exactly the same kind of cells that we use in our atomic clocks. And a lot of the techniques of measuring the microwave fields and utilizing this device as an antenna are exactly the same techniques that we use in our atomic clocks. The interesting thing about the Rydberg sensors is that most antenna applications are really tied to the wavelength of the frequency of the signals that are being measured. So typically for RF and microwave signals.

Speaker 1

These have wavelengths measured in meters. And so antennas need to be sized in several meters in diameter. But these Rydberg sensors, even though the wavelengths are longer, they have sensitivity. Our cells that's 1 centimeter in diameter can measure with the same sensitivity as more conventional antenna that has dimensions of meters. So there's the potential to make very, very small antennas.

Speaker 1

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

Operator

Thank you very much. Your next question is coming from Frank Wisniewski, who is a private investor. Frank, your line is live.

Speaker 4

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

Speaker 1

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

Speaker 2

Okay. Thank you.

Operator

Thank you very much. Well, we appear to have reached the end of the question and answer session and also the end of the conference. Ladies and gentlemen, this does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful rest of the day. Thank you for your participation.

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Key Takeaways

  • Frequency Electronics reported Q1 FY 2025 results with 22% revenue growth to $15.1 million and a 15% increase in operating income year-over-year, alongside a historically high funded backlog of $70 million.
  • The company has won initial contracts for low-cost synchronization systems in proliferated (smallsat) satellite programs, demonstrating its ability to compete in this rapidly growing space market.
  • FEI is securing outside funding and sponsoring a Quantum Sensor Summit to advance quantum applications, including quantum magnetometers for navigation in GPS-denied environments.
  • Q1 gross margin reached its highest consolidated level in 24 years, driven by the resolution of prior technical challenges and completion of smaller high-margin jobs.
  • The balance sheet remains debt-free with $21 million in working capital and a 1.5:1 current ratio, providing ample liquidity for the next 12 months.
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Earnings Conference Call
Frequency Electronics Q1 2025
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