Frequency Electronics Q4 2025 Earnings Report

Frequency Electronics EPS Results

• Actual EPS: $0.34
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Frequency Electronics Revenue Results

• Actual Revenue: $19.99 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Frequency Electronics Announcement Details

• Quarter: Q4 2025
• Date: 7/10/2025
• Time: After Market Closes
• Conference Call Date: Thursday, July 10, 2025
• Conference Call Time: 4:30PM ET

Frequency Electronics (NASDAQ:FEIM), together with its subsidiaries, engages in designing, development, and manufacturing of precision time and frequency control products and components for microwave integrated circuit applications. It operates through two segments, FEI-NY and FEI-Zyfer. The FEI-NY segment offers precision time and frequency control products for communication satellites, terrestrial cellular telephone or other ground-based telecommunication stations; and other components and systems for the U.S. military; and provides design and technical support for satellite business. FEI-Zyfer segment offers global positioning system technologies to systems and subsystems for secure communications, both government and commercial, and other locator applications; and engages in sale and support of wireline telecommunications products, including US5G. It markets its products directly and through independent sales representative organizations located in the United States, Europe, and Asia. Frequency Electronics, Inc. was founded in 1961 and is headquartered in Mitchel Field, New York.

Frequency Electronics Q4 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Record Q4 revenue – the highest in 25 years driven by accelerated program execution, although management cautions that quarterly results may remain variable.
• Positive Sentiment: Fiscal year 2025 revenue rose to $69.8 M from $55.3 M with net income of $23.7 M ($2.46/share) versus $5.6 M ($0.59/share) in FY24, and the company remains debt-free.
• Neutral Sentiment: R&D spending increased to $6.1 M (9% of revenue) from $3.4 M (6%) to fund quantum sensors and advanced timing products, with R&D expected to stay elevated.
• Positive Sentiment: Pursuing multiple growth areas including quantum sensing, unjammable magnetometer navigation (APNT), next-gen rubidium clocks (TURBO), and resilient GPS/“Golden Dome” initiatives.
• Positive Sentiment: Backlog stands at ~$70 M and a strong working capital position (~$30 M; 2.3:1 current ratio) supports management’s view of adequate liquidity for the next 12 months.

Presentation

[Operator]

Greetings, and welcome to the Frequency Electronics Fiscal Year End twenty 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 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.

[Operator]

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 McClelland, President and Chief Executive Officer.

[Thomas McClelland, CEO & President at Frequency Electronics]

Good afternoon, everyone. The fiscal fourth quarter we just reported was the highest revenue quarter for the company in the past twenty five years. And I'd like to provide some additional context on that. We've demonstrated strong growth over the past several years, and we believe the growth potential for our company is expanding even further for reasons I'll get into shortly. While we do not provide guidance given the lumpiness of contract awards, I would be remiss if I did not mention that this recently ended quarter benefited from strong execution that allowed the company to produce revenue on certain programs in fiscal year twenty five that we originally expected to produce over a more extended period of time in fiscal year 'twenty five, 'twenty six and beyond.

[Thomas McClelland, CEO & President at Frequency Electronics]

In other words, while the trend here is very much an upward one, I do not think it's prudent to expect every quarter in the near term to look exactly like this from a top line perspective. Though in the medium term, it is directionally where we're headed. It's important to keep in mind that the allocations for space and defense related programs from the recently passed legislation in Congress are very positive for the direction the company is going. But as the bill just passed last week, the additional revenue from those contract awards will flow in over the coming quarters and years as our customers now submit bids for increased available funds. Critically, as we position the company to take advantage of all the opportunities we've discussed before and others I'll discuss in a moment, we're also expanding our customer base beyond the traditional prime contractors.

[Thomas McClelland, CEO & President at Frequency Electronics]

We maintain excellent relationships with the traditional primes and are working on numerous projects with them, and anticipate meaningful growth with them going forward. But we've also already been actively submitting bids alongside next generation defense companies, which are increasingly getting attention in this administration. We believe this positions FEI extremely well to benefit from industry trends we see playing out over the next five to ten plus years. Some of the opportunities that will further accelerate our growth are Golden Dome, we're already involved in several key missile programs and anticipate additional opportunities both for terrestrial and space applications. APNT, which is alternate position navigation and timing, The vulnerability of GPS is well documented at this point, as stories of jamming and spoofing, especially in the Mideast and Eastern Europe corroborate.

[Thomas McClelland, CEO & President at Frequency Electronics]

FEI's quantum magnetometer development, representing an unjammable approach to navigation, is part of a particularly relevant solution. Our small but very high performance rubidium atomic clock, which we've dubbed TURBO for timing units rubidium oscillator, is a key ingredient in other proposed alternate navigation approaches. Another important item is GPS enhancements, such as resilient GPS, augmenting GPS satellites with a large number of lower cost satellites. Quantum sensing. FDI is well positioned to succeed in the growing quantum sensor market based on our expertise in atomic clocks.

[Thomas McClelland, CEO & President at Frequency Electronics]

We're currently developing solid state diamond based quantum magnetic sensor devices in collaboration with MIT Lincoln Labs. Similarly, we're collaborating with scientists at NIST to develop Rydberg sensors, allowing for extremely compact microwave antennas. Last year, FEI sponsored a Quantum Summit in New York City to bring together scientists to discuss progress in quantum sensors. I'd like to announce that FEI will host a Quantum Summit again this year in October, in particular on October. All in all, I'm happy with our performance, vigilant regarding the changes in Washington, and very enthusiastic about our future. Steve?

[Steven Bernstein, CFO at Frequency Electronics]

Thank you, Tom, and good afternoon. For the fiscal year ended 04/30/2025, consolidated revenue was $69,800,000 compared to $55,300,000 for the same period of the prior fiscal year. The components of revenue are as follows: Revenue from commercial and U. S. Government satellite programs was approximately $40,900,000 or 59% compared to $23,200,000 or 42% in the same period of the prior fiscal year.

[Steven Bernstein, CFO at Frequency Electronics]

Revenue on satellite payload contracts are recognized primarily under the percentage of completion method and are recorded only in the FEI New York segment. Revenues from non space U. S. Government and DoD customers, which are recorded in both the FEI New York and FEI Zaiffer segments, $26,500,000 compared to $29,000,000 in the same period of the prior fiscal year and accounted for approximately 38% of consolidated revenue compared to 52% for the prior fiscal year. Other commercial and industrial revenue was $2,400,000 and $3,100,000 for the fiscal year ended April 3025 and 2024, respectively.

[Steven Bernstein, CFO at Frequency Electronics]

The company is encouraged by significant revenue growth compared to the prior fiscal year. The majority of the increase in revenue for fiscal year 2025 as compared to fiscal year 2024 was the result of increase in sales in U. S. Government DoD satellite market. For the fiscal year ending 04/30/2025, the gross profit and gross profit percentage increased as a result of several factors.

[Steven Bernstein, CFO at Frequency Electronics]

The increase in gross profit dollars was directly related to the significant increase in revenue over the prior fiscal year period as well as the increase in gross margin. The majority of the increase in the gross profit percentage as compared to the prior fiscal year was in the FEI New York segment and was attributable to the company's performance on several traditional space programs at higher margin and ahead of schedule. In addition, the company has new programs that are progressing well and the company anticipates they will generate additional revenue and profits. In the fiscal year ending 04/30/2524, selling and administrative expenses were 18% of consolidated revenue in both periods, while total SG expense increased in fiscal year twenty twenty five as compared to the prior fiscal year, SG and A expense remained constant as a percentage of revenue in fiscal year twenty twenty five. The approximately 2,100,000 increase is made up of mainly payroll related items such as four zero one expense, stock option expense, bonus accrual.

[Steven Bernstein, CFO at Frequency Electronics]

In addition to these expenses, trade show and related costs also increased during the fiscal year 2025. R and D expense for the fiscal year ending 04/30/2025 increased to $6,100,000 from $3,400,000 an increase of $2,700,000 and were approximately 96% respectively of consolidated revenue. The company funded R and D amounts was higher in fiscal year twenty twenty five as compared to previous fiscal year, partially because of the previous fiscal year R and D expenditures were lower than planned and some of the expense were subsequently captured in fiscal year twenty twenty five. The increase in R and D expense also reflects the company's commitment to maintain its technical excellence. The company expects future R and D investment to be in line with or even potentially above historical spending.

[Steven Bernstein, CFO at Frequency Electronics]

For the fiscal year ending 04/30/2025, the company recorded operating income of $11,700,000 compared to an operating income of $5,000,000 in the prior fiscal year. The increase is mainly attributable to the company's significant increase in revenue and gross margin during fiscal year twenty twenty five as noted above from traditional space programs that have been executed ahead of schedule, well within budget, and technologically performed well. The positive effect of cost cutting measures instituted by management have also contributed to the increase. The change in other income expense from prior fiscal year was relatively minimal. All three categories presented were slightly lower in fiscal year twenty twenty five compared to prior fiscal year.

[Steven Bernstein, CFO at Frequency Electronics]

This yields pretax income of approximately $12,100,000 compared to $5,500,000 for the prior fiscal year. For the fiscal year ending 04/30/2025, the valuation allowance decreased approximately $13,900,000 from the prior fiscal year, primarily due releasing the majority of the valuation allowance recorded against deferred tax asset. This change in estimate occurred in the third quarter of fiscal twenty twenty five. Consolidated net income for the year ending 04/30/2025 was $23,700,000 or $2.46 per share compared to $5,600,000 or $0.59 per share in the previous fiscal year. Our fully funded backlog at the April '25 was approximately $70,000,000 compared to $78,000,000 for the previous fiscal year April 3024.

[Steven Bernstein, CFO at Frequency Electronics]

The company's balance sheet continues to reflect strong working capital position of approximately $30,000,000 at 04/30/2025 and the current ratio of approximately 2.3:one. Additionally, the company is debt free. Cash went down by approximately $13,600,000 since prior fiscal year end. Of this decrease, the dividend paid in Q2 of fiscal twenty twenty five accounted for approximately $9,600,000 of it. The additional $4,000,000 decrease was related to timing of billing and revenue.

[Steven Bernstein, CFO at Frequency Electronics]

Contract liabilities went down $8,200,000 since year end. Contract liabilities are generated as part of six zero six accounting when the billings are in excess of revenue taken on specific programs. We expect that cash will fluctuate quarter to quarter. However, we expect its trend to be higher over time. The company believes that its liquidity is adequate to meet its operating and investing needs for the next twelve months and the foreseeable future.

[Steven Bernstein, CFO at Frequency Electronics]

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

[Thomas McClelland, CEO & President at Frequency Electronics]

Thanks, Steve. We're now ready for questions.

[Operator]

Certainly. At this time, we'll be conducting a question and answer session. And the first question today is coming from Brett Rice from Janney Montgomery Scott. Brett, your line is live.

[Brett Reiss, Financial Advisor & SVP at Janney Montgomery Scott]

Hi, Tom. Hi, Steve. Can you guys hear me?

[Thomas McClelland, CEO & President at Frequency Electronics]

Yes.

[Steven Bernstein, CFO at Frequency Electronics]

Yes.

[Brett Reiss, Financial Advisor & SVP at Janney Montgomery Scott]

Great. Great. You know, nice quarter. You know, great end of the year. Tom, you rattled off, a number of growth potential areas the Golden Dome, the APMT, resilient GPS.

[Brett Reiss, Financial Advisor & SVP at Janney Montgomery Scott]

Can you walk me through the processes to how you will allocate corporate time and resources to these various growth opportunities?

[Thomas McClelland, CEO & President at Frequency Electronics]

Well, I'm not quite sure how to answer that question. We're actively pursuing proposals at this time are in all of those areas. And I think we have ongoing discussions with all our Prime customers about these topics as we go and what our capabilities are in this arena.

[Brett Reiss, Financial Advisor & SVP at Janney Montgomery Scott]

Tom, I apologize. I didn't ask the question in the right way. Of the five or six areas you mentioned, which one do you think has the greatest potential that might lead to a greater allocation of corporate resources and attention?

[Thomas McClelland, CEO & President at Frequency Electronics]

Okay, I see. Well, I, you know, that's a little hard to say also. I think the, you know, the moment I think the Quantum Sensor area looks quite promising. You know, we know GPS is vulnerable and the magnetometer activity that we're working on certainly looks very promising and there's a huge addressable market there in terms of providing alternates to GPS navigation, especially I think in commercial aircraft. So, that's certainly a big one, but I think Golden Dome looks like a big thing also, but it's a little bit ambiguous as to how the funding is gonna happen on that one. So we'll just have to see.

[Brett Reiss, Financial Advisor & SVP at Janney Montgomery Scott]

All right. Last one from me. Because of these tremendous growth opportunities, R and D spend is going to move up. We've got a strong balance sheet but do we have enough cash to fund this greater amount of R and T that's needed to take advantage of these opportunities?

[Thomas McClelland, CEO & President at Frequency Electronics]

At this point in time, we are confident that we have adequate cash in order to fund that. We As I stated in the press release, it's really targeted to use of internal funds. We, you know, I think we're being somewhat cautious and careful about just what we spend our resources on. And I think we're in a pretty good position to do that and to continue doing that going forward. But we'll keep an eye on that and have to evaluate that in the future.

[Thomas McClelland, CEO & President at Frequency Electronics]

There are a lot of external funding things that we see and we're working on obtaining. And I think that supplements our use of internal funds significantly.

[Brett Reiss, Financial Advisor & SVP at Janney Montgomery Scott]

Great. Thank you for taking my questions and enjoy the rest of the summer.

[Thomas McClelland, CEO & President at Frequency Electronics]

Okay, thank you.

[Operator]

You.

[Operator]

The next question is coming from Chris Wojciechowski, who is a Private Investor. Chris, your line is live.

[Analyst]

Hello. Congratulations on great results. Mentioned the mentioned in your press release that there might be some short term uncertainty. Can you elaborate on that?

[Thomas McClelland, CEO & President at Frequency Electronics]

Well, it I'm not sure uncertainty is the right way to refer to it. I think that there will be some variability in, you know, the timing of contracts, I think is really what we're talking about. And we've already seen this, you know, the new administration is intent on making their mark on things. So, the timing of a lot of programs that are already in the works are changing and you know, we just, we have to deal with that obviously. So, you know, I think it's very clear that overall the administration is intent on spending even more money on the things that are in our area of expertise.

[Thomas McClelland, CEO & President at Frequency Electronics]

But they're going to not necessarily spend them in the same way that was imagined prior to this administration. So this is the thing, we just have to roll with the punches in terms of how the timing of these things plays out.

[Analyst]

Okay. And you're absolutely right. You did not use the term uncertainty, you used the term variability, which is what I should have said. Okay. So does that include the variability and timing, does that include stuff that's already in your $70,000,000 backlog?

[Thomas McClelland, CEO & President at Frequency Electronics]

I'm not quite sure I understand question.

[Analyst]

So the variability issues you mentioned, would those include projects that are already in your $70,000,000 backlog? Or is it

[Thomas McClelland, CEO & President at Frequency Electronics]

No, no, not really. The $70,000,000 don't anticipate any variability in the backlog. The only thing I would say is that the contracts can be terminated. We don't anticipate that with anything in our backlog at this point in time, but that certainly has happened. So I guess in that sense, there's the potential for variability.

[Thomas McClelland, CEO & President at Frequency Electronics]

But the backlog is pretty solid. I think it's with future work that we have to look at the variability and the timing of when things occur.

[Analyst]

All right. So you think there'll be with future contracts, there'll be some variability in the short term, but in the medium term, you'll see certainty kind of relative certainty for higher growth. Now what could you just tell me roughly what do you mean by short term, mid term?

[Thomas McClelland, CEO & President at Frequency Electronics]

I think short term, we're really talking about the next year or so, and medium term I think we're looking at two to five years, long term beyond the five year point.

[Analyst]

Alright. And I had a question about Quantum. Right now it seems that we're not yet at the point where commercial quantum systems are coming out, but a lot of money is going to research. Would you say that at this research stage because you know, you probably your your timers are probably needed for the research stage as well. Would you say this research stage is enough to make, you know, kind of a, like, a notable revenue?

[Thomas McClelland, CEO & President at Frequency Electronics]

Yes. Yes.

[Thomas McClelland, CEO & President at Frequency Electronics]

We, there's I think significant revenue from the research stage. It might better be characterized as development as opposed to research, because I think the science is well understood in these areas. It's really developing products based on that science that we're working on. And to the extent that this development is externally funded, it certainly generates revenue and indeed profit. So, yeah. I hope that answers your Yeah.

[Analyst]

Oh, yeah. Definitely does. And would you expect to would you do have I mean, you expect to get externally funded revenue or would your clients be kind of asking you to do some development on your own income statement as well?

[Thomas McClelland, CEO & President at Frequency Electronics]

Well, that's a really good question. I think in some cases, the funding agencies aren't, don't have enough money to support all of the work that needs to be done, and so we supplement that with internal funding. But I think that's usually a pretty small amount of the total funding that is to be had. So, it's relatively small thing and that I think we account for in our budget for internal R and D funding on an annual basis. That is going up a little bit, but just a little bit in order to support these new technologies and things.

[Analyst]

Okay. It's good to hear it's a small amount. Well, this is all for me. Good luck again and congratulations again.

[Thomas McClelland, CEO & President at Frequency Electronics]

Okay. Thank you.

[Operator]

Thank you. The next question is coming from Michael Eisner. Michael is a private investor.

[Analyst]

Hi, how are you?

[Thomas McClelland, CEO & President at Frequency Electronics]

Hi, Michael.

[Analyst]

You start working on wireless and linking labs yet?

[Steven Bernstein, CFO at Frequency Electronics]

Yes.

[Thomas McClelland, CEO & President at Frequency Electronics]

Yes.

[Analyst]

I see. Yes. Who's paying for that r and d for that?

[Thomas McClelland, CEO & President at Frequency Electronics]

That's a so we're funded by Leidos at this point in time.

[Analyst]

That means they're paying for it?

[Thomas McClelland, CEO & President at Frequency Electronics]

I'm not I'm not sure I understand the the question. You have to do R and with Go ahead.

[Analyst]

I was gonna say you have you have to do r and d on that, or it's already proven.

[Thomas McClelland, CEO & President at Frequency Electronics]

Well, that the development, you know, this is development activity, and that is primarily funded by Leidos. Just like the last question, there's a small amount of internal funding that supplements that. But that's primarily

[Analyst]

We get to keep the technology also. Right?

[Thomas McClelland, CEO & President at Frequency Electronics]

Yes.

[Analyst]

And I is g GPS three f back in play? I thought it was over with a while ago. I heard something about that.

[Thomas McClelland, CEO & President at Frequency Electronics]

No. No. That's that's not true. GPS three f is indeed very active. And in fact, we're currently delivering products for the GPS three f program.

[Analyst]

Which would launch it only up to now?

[Thomas McClelland, CEO & President at Frequency Electronics]

Well, I don't think there are there are there's GPS three and there's GPS three f. The f, I think, is for follow on. So, current launches, the last launch that occurred was a GPS three launch. And I believe it was the eighth GPS three satellite, if I'm not mistaken.

[Analyst]

The last one. See, I remember that.

[Thomas McClelland, CEO & President at Frequency Electronics]

Yeah. So, there there are still additional GPS III satellites to launch. I think nine and ten in particular, and GPS IIIF starts with number 11.

[Analyst]

Mhmm.

[Thomas McClelland, CEO & President at Frequency Electronics]

So no no GPS three f satellites have launched yet.

[Analyst]

But they will eventually. That $12,000,000 contract that you just announced, was that a continuation from the previous contract?

[Thomas McClelland, CEO & President at Frequency Electronics]

Yes. That was

[Analyst]

The one from, like, February?

[Thomas McClelland, CEO & President at Frequency Electronics]

Don't remember exactly. Yeah. No. Oh oh, I no. It was not a continuation of of those contracts. It was separate.

[Analyst]

Alright. And let me see. You mentioned that. How how far are we into the magnetic navigation So we don't get spoofed and everything jammed up.

[Thomas McClelland, CEO & President at Frequency Electronics]

Well, we're actively pursuing it. I think our development activity is basically a two year program and we should have prototype demonstrations at the end of that period.

[Analyst]

After two years. Alright. Are we the only one that can do vertically integrate only company that's vertically integrated to produce all this stuff from beginning to end?

[Thomas McClelland, CEO & President at Frequency Electronics]

Well, I don't know that I can say we're the only company that's vertically integrated, but I think it is indeed true that we are vertically integrated. And as I've said before, I think we feel strongly that that's key to our continued success because it allows us to control all, you know, we're working in technology areas that are fairly esoteric and if we rely on other suppliers to provide key ingredients, and we lose control of those key ingredients, and it's hard to get the kind of performance that's required in these areas. So, we do feel it's key. I think it is a differentiator. There are not so many companies out there that are vertically integrated in the way that we are, but I'd hesitate to say that we have a monopoly on that.

[Analyst]

Is microchip, can they do it? Really not sure. Microchip.

[Thomas McClelland, CEO & President at Frequency Electronics]

Oh, Microchip. I don't think so. No.

[Analyst]

Probably not. That's good for us. Alright. Good job. That's it for me.

[Thomas McClelland, CEO & President at Frequency Electronics]

Okay. Thanks, Michael.

[Analyst]

Thank you.

[Operator]

You. The next question is coming from George Marima from Parekh Ventures. George, your line is live.

[George Marema, Founding Owner & Managing General Partner at Pareto Ventures]

Hey, Tom. Thanks for taking my questions. The first one was on gross margin this quarter was a little bit down. Can you sort of outline the reasons why?

[Thomas McClelland, CEO & President at Frequency Electronics]

I don't think there's anything super significant. I think, you know, there's just a general lumpiness from quarter to quarter on how things play out. I think we're pretty comfortable with where the gross margin is overall.

[George Marema, Founding Owner & Managing General Partner at Pareto Ventures]

As you look out into next into this current coming fiscal year, for 2025, you're on a 43% gross margin for the year and 37% in this last quarter. Would you be sort of targeting the high 30s or more low 40s for this coming year?

[Thomas McClelland, CEO & President at Frequency Electronics]

I think we're targeting 40 or more and where we end up, we'll see. I think that's where we're trying to maintain a very disciplined approach in terms of our margins. And so, that's where we're aiming and, but, you know, we do have to see the timing of things, etcetera, always comes into play.

[George Marema, Founding Owner & Managing General Partner at Pareto Ventures]

Okay. And then on quantum sensing, could you sort of maybe characterize or size up a little bit for for this coming fiscal year? What kind of development, like, revenue opportunity is there? Is it material, like 10% of your business or less or more than that? And then secondly, when would you hope to have product revenue out of this area? How far off?

[Thomas McClelland, CEO & President at Frequency Electronics]

So I think it's, over the next fiscal year, I would anticipate that it's less than 1% of our overall revenue, number one. And number two, I anticipate products sort of five years out from now. I think that's a reasonable expectation.

[George Marema, Founding Owner & Managing General Partner at Pareto Ventures]

Okay. And then are any of the other newer products coming out before then? These other things you mentioned?

[Thomas McClelland, CEO & President at Frequency Electronics]

Definitely. We we we We have products which are going to be available within the next fiscal year. The compact rubidium standard is gonna be available. And yeah.

[George Marema, Founding Owner & Managing General Partner at Pareto Ventures]

Is that the turbo you're talking about?

[Thomas McClelland, CEO & President at Frequency Electronics]

Yes.

[George Marema, Founding Owner & Managing General Partner at Pareto Ventures]

That'll be out in this fiscal year, you hope, this product?

[Thomas McClelland, CEO & President at Frequency Electronics]

It will. Yes.

[George Marema, Founding Owner & Managing General Partner at Pareto Ventures]

What kind of addressable market is that? If you can kind of size that up or characterize it.

[Thomas McClelland, CEO & President at Frequency Electronics]

Well, it's a growing addressable market. Think probably one to 2,000,000 within the next year or so and growing after that.

[George Marema, Founding Owner & Managing General Partner at Pareto Ventures]

Okay, thank you Tom.

[Operator]

Thank you. And the next question is coming from Brent Garrickson. Brent is a private investor. Brent, your line is live.

[Analyst]

Hi, Tom. Thank you for your leadership, and thanks to all the employees for their hard work. Much appreciated. My question is, what do you target for SG and A and R and D for 2026 going forward as a percentage of revenue?

[Thomas McClelland, CEO & President at Frequency Electronics]

I'll let Steve respond to that question.

[Steven Bernstein, CFO at Frequency Electronics]

I believe they'll be very similar to where they are this year. Approximately SG and A, we ran 18% the last two years and R and D somewhere in the 6% to 8% or 9% range.

[Analyst]

And do you target taxes? I mean, know you didn't have any more carry forwards, but you had a few more NOLs left. Do you still see taxes in the 1.5 to 2% range?

[Steven Bernstein, CFO at Frequency Electronics]

Again, depending I think for next year, we'll use more NOLs. We still have a bunch left. But with the new tax law change and stuff and California is where right now we pay our taxes because they suspended the use of NOLs, I still believe if we have a good year, it's still the majority of it will be covered. Some may not based on where it comes and so forth. But it will not be a normal 21% tax year next year either.

[Analyst]

You still feel it's in the single digits?

[Thomas McClelland, CEO & President at Frequency Electronics]

Yes.

[Analyst]

Last quarter, spoke about SDA bids. Were any of those successful? And what kind of investment expense do you see coming from SDA?

[Thomas McClelland, CEO & President at Frequency Electronics]

So, so at this point in time, that's a little bit up in the air. Actually, the the new administration is rethinking the SDA process. We are still looking at tracking layer activity from SDA, but the transport or data layer is currently being reimagined and how that's going to play out is not clear at this point in time.

[Analyst]

There's no indication of even maybe a time frame? I know you earlier you mentioned short, medium term to be, you know, one to five years or one to two years. Do you personally think that it's somewhere in the, within the next, you know, nine to twelve months?

[Thomas McClelland, CEO & President at Frequency Electronics]

Definitely. I I think yes. Yes. I think something is going to pop within that time frame. Yeah.

[Analyst]

Okay. Alright. I'll I'll back out. Thank you for your time.

[George Marema, Founding Owner & Managing General Partner at Pareto Ventures]

Okay. Thanks.

[Operator]

Thank you. And there were no other questions from the lines at this time. I will now hand the call back to Thomas McLellan for closing remarks.

[Thomas McClelland, CEO & President at Frequency Electronics]

Okay. I think I'd like to thank everybody for participating in this call and have a nice summer. Thank you.

[Operator]

Thank you. This does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.

Participants

Executives

• Thomas McClelland, CEO & President
• Steven Bernstein, CFO

Analysts

• Brett Reiss, Financial Advisor & SVP at Janney Montgomery Scott
• Analyst
• George Marema, Founding Owner & Managing General Partner at Pareto Ventures