Frequency Electronics (FEIM) 10 Dec 212022 Q2 Earnings call transcript

Greetings. And welcome to the Frequency Electronics Second Quarter Fiscal Year '22 Earnings Release Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. Litigation the forward-looking this safe statements of Private by the call harbor made XXXX. the constitute of future pursuant Securities statements company conference during regarding provisions Any Act Reform to the Such statements cause to materially differ that the statements. actual forward-looking results from involve inherently uncertainties could to Exchange cause filings in included the periodic differences report in Commission. are the that would such and detailed Factors company's the further and Securities with or contribute are press release company's the company statements statements, no obligation changes By the these forward-looking making this undertakes to update for after these or revisions conference date of call. It your host, now Stanton pleasure CEO. and is to my Sloane, introduce President

to Thanks second us. you. fiscal 'XX our for Welcome joining earnings call. Thank quarter

the QX. let comments financial a few turn offer details, Steve I Before call through over me on the to us to take

with of positive. say I'd in generation income $XX.X and with I'm quarter. now at the income pleased It's million. also marketable highest current operating approximately very Cash all, First the been, cash for and the net securities very balance the improvement [ph] it's

continue Of also. debt free we to be course,

a revenues just do bit delayed, that we for come principally in the were our bookings Zyfer and the While anticipate will they are quarter, operation, in. those lower

with company in QX we've related compete new position atomic next-generation marketplace In these we've and and some Moreover, the oscillators. announce QX, to these timing. internal and of produce we technologies developments, ramped to it's So to which hope term. revenue R&D in products. to increases related significant investments we some the in expect been And our clocks long-term low-noise opportunities had to that pursuing we technology in advanced contract near up awards

products followed near our and we term. We're focus mentioned Research, I'm the was see additional investments by the which have additional Naval I also I'm off, I'm starting forefront product And we're to the continue that for it last obviously, was that, we POPRAFS contract we've going of right research not time over quarter. optimistic The important awards optimistic clearly pay you believe continue on comments, space recall, stop into I those to made awards. investments to truly The contract back of to working precision R&D Steve? contracts you. will That If that Steve some some With are be and for last government telecom Office generation call that but I there. the to and turn receive going applications. developments. hopeful we'll in of said then to FEI and we push announced groundbreaking I'll hard technology. that with We'll trend. and very for development on

good And afternoon. Stan. you, Thank

customers, $XX.X year $X in the industrial fiscal revenues the consolidation. compared the percentage accounted only programs the fiscal $XX under compared Other segments, for were components from commercial of follows. were prior and million which in method revenue $XX.X fiscal the XXXX, for for was are $X.X commercial are consolidated million Revenue was FEI-Zyfer million the XX% and and and of months XX% on million The For $XX prior in contracts revenues the million to $XX.X of million consolidated period or million X the of in revenue Government the to prior compared or completion year. year. non-space the of segment. Government in eliminated and to the Intersegment period prior approximately year. York fiscal to from same period satellite year. million are recognized of satellite same October recorded FEI-New in payload US both revenue Revenues York compared to the prior ended Revenues XX% XX% fiscal DOD approximately recorded FEI-New XX, primarily $XX.X and same as are US are compared

gross mechanical decrease as unavailable engineering parts rate and supply margin of of need to maintain due parts were by supply For lack and quality XX, gross from and as XXXX, available as electronic gross that necessitated rate schedules. cost several to was margin gross complex chain, resulting year cases, October phase in boards decreased technical to The impacts that resulting delivery problems, the in and with 'XX. re-procurement increased ended parts compared was the costs. issues margin vendors, period on challenges, on quality contributing materials to to further months programs to contract chain margin experience programs cost in X and circuit development in the of units redesign fiscal well particularly same traditional different problems parts certain with order the availability replace increased In several in

decrease XXXX, X fees. and and XX% consolidated The decrease XXXX the For ended XX, months the in and to due is expense were in of SG&A selling October mainly revenues. administrative XX%, respectively, professional expenses approximately

We that state-of-the-art. marketplace increases related investments to at The technology in to developments company with the with low-noise to XXXX $X.X its and XXXX due for fiscal clocks is products. increase to and to R&D expect October plans to of 'XX of company compete were intended and revenue. XX% million revenue this X% as R&D expenses the and company first to second higher-than-usual in the quarters and invest increased R&D months XX, to continue $X.X the oscillators normalize. in from in trend expense ended of products to $XXX,XXX levels position and were increases produce X the internal in new next-generation are R&D associated atomic of continue an consolidated the million, making long-term keep

October October primarily months recorded redemptions gross months XXXX, the an cited to an recorded of of on of above marketable may $XXX,XXX, $X.X year. X significant period XXXX, Other compared in from securities. prior October vary company to the It operating from the loss prior sorry, ended holdings operating of the months interest The quarter. company's year. operating important the timing derived XXXX, company income [ph] operating the Other operating is to based company the discussion Earnings income investment reported applicable as ended the the payout the first the ending sales, fluctuating income in of securities. are of XX, million XX, securities income - and levels dividend compared for consisted of of in loss improvement million of rates, that purchases, $XXX,XXX a $XXX,XXX I'm or X maturities XX, the for on $X.X an an mention loss For X margin loss operating an factors well. to profit

'XX. yields XX, X from for the $XXX,XXX a from the Morion loss October investment prior of same included million compared in XXXX, This dividend to ended $X.X For $XXX,XXX income period the pretax dividend months Morion fiscal approximately pretax to year. compared $XX,XXX income in of

recorded net income ending ending previous XXXX, the company loss $X,XXX million share tax $X.XX X or to was year. for $XX,XXX to October in per of months the the compared X of the October per or XX, XX, the compared year. XXXX, share net months For for fiscal $X.X a $XX,XXX fiscal provision Consolidated prior $X.XX

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

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

Thanks, Steve. the call over I'll Operator? explain who questions. ask to the will you operator your how turn now

from [ph] Instructions] [Operator Certainly. Michael we a And have Eisner question

last and percent October, contracts in is backlog? September in you Good announced what of two job. that the The

two over Well, it's a between I you contracts. million, million little a won't percent. $X give $X around the Collectively,

That's meant. what I

as of the So about million. chains any custom, supply how and How $X delays? are now, -

Well, I us. times think And materials. get that's we're don't and seeing think just longer universal. to that's I parts

the are Our telling us issues. customers have they same

I'm ahead of and that to that. But best will basic things are So doing our we're settle longer, electrical to taking parts hopeful keep down. start

seen have We delay. some

I am sorry.

of We parts. have some delays in delivery seen

- companies on finish I IIIF, remember. I to - how delays. if All deduction, to you stock having want extreme GPS the are you working I were know for qualifications think just did

correct. That's

What you did - you with qualifications, finish that? or where are

have pretty two. it's It's to The shortly. we which aging program but long-term a essentially be within getting complete finished, test, finished the at And next, close. we or but be through, quite program the will go qual point, month not should say, a have that qual I'd

complete long production? So you start how after that's can

can production today. We start

be do to options at the you process, along is we do to I'm it need Theoretically, I end it us. that could question are they'll think that the customers of far sooner. issue hopeful know, prepared aging to be the before how

it's our order think performance that track and I low such record risk the is to right on now. clock

hard we're come get So tell but that order yet. working them it, will I out to how can't you to

So it will couple be months? a of

That's probably likely.

you did XXX employees more think people? hire And had I quarter? like right. All last you

I last we're employment. Yeah, much quarter. don't think pretty since changed in stable we've

about employees We total last is to number the quarter planning same. have some the of job openings, from fill. we're But which

So hire a you may few more?

Yeah.

actively some recruiting. have we're openings We and

still find hard to it Is people?

people. Always though. in encouraged by hard efforts, pretty We've good I'm pretty find our recruiting been successful to that.

problem. a think So I we'll have don't

overall. All right. qualified job Well, people, I say. should Good

on money million revenue. made $XX.X You a

Thank you. Yes.

question a from Brett your have from Please Thank line you. Instructions] Reiss Montgomery Brett, coming live. Scott. ahead. [Operator go We Janney is

Stan. Hi, Steve. Hi,

Hi.

what me just oscillator a used tutorial, give is you brief for? low-noise Could a

for to you good. very other frequency important communications of critically be the and where systems and purity They're the radars want

noise. it. you frequency that's of contributes of want off So don't to the that a lot noise It's

very So Electronic performance oscillator. and low-noise. instead could high basically, guess important Warfare. I radar of it it's for performance communications, call things But high we they're a like

be part the is on addressable And a market that there who total metric major competitors that? in business? Okay. would like your And of

that level is of Well, give competitors probably a depending a kind size to of variety dollars. for performance a on so you couple specifying, you're what answer. we the of here of produce difficult market The oscillators million an little hundred there's

Hello?

Yeah.

know I'm end sorry, my it's whether You cut or end. out. your I don't

dollars A kind hundred for Yes. oscillator. market is million the few that of

who are competitors? our major And Okay.

people, on at the you It's low specifications competitors you But have of a again, depending variety Asian on have. the that - end. particular

in talking the produce European whether oscillator have depending then You oscillators. competitors product. the US, finished on of And or part you're the variety competitors similar basic about there's fairly resonator types a that of

an from customers a opposed US as that product buy Would type to inclination manufacturer? foreign manufacturer to a there of US be by

military, and government For yes.

are divided Okay. the the the guess, Is moving which excited opportunity company? I low-noise the equally clock between see oscillator? most for keeps it is area most atomic the of kind about up, R&D, you initiatives which and and

technology company one bit of R&D or that position terms I atomic the So in in optically term. type on clocks. current in to that about my program the understand comments, more that we of atomic clock new company let quarter that the total up And the think significant upside opportunity clocks. we're other clock to to that spend win rubidium biased for competing little market type we like of to We're because over those for last time some we clocks - revenue. a new more pumped important a result These atomic more I'm can the significant the have, really what open more towards the the the significantly going long performance optimistic and lately of is going a it's And that me said think of oscillators technologies. has improved things. us. we're having doing And is And announced for these I will that

Now that things - these developmental. are

affected about for But financial significantly next being It's at produce to significant. So company. do the revenue. look long-term of you got the these although quarter's think by effects can't they performance these, you've things

dollars hundreds from of up market products. of opportunity opening about new these talking You're of millions

imply in we're So what focused and I that, are convey to really want on sure get last about very not quarter's these I performance, current to for I wrapped to we're that want because things to make tend you've developments don't improving company are. But technical with And got financial we the that up the the quarter advancements. doing term. long and continually we think significant or

to now. little You've it about little a differently got think about company a really think differently the and

Are a isn't goes that competition about in by States I United you would China read that's a satellite tailwind opportunities, all the increasing that, it day, right. the the Right, a and arena. between space - don't headwind. that for market potential There Stanton, not take

Well, yeah.

technology me is the for staying it's - players these US of critically that important. I so think developments, - just excited we're - you from new know about easy but referred from you to, to I the national ahead perspective, what get - a

a investing that's it's funding that to indicator new And I these technologies. government to that's why So you a sees development tailwind. And tell is they're there. me, government The of very in market the can be there's best going it. significant that the it, and tremendous

So we're very well I think positioned.

Great. for a holiday you my good Steve taking I have good Thank if or Year. you don't And holidays, and the to speak New questions. before a

Thank too. You you.

You too.

you. Thank

Your next question Richard line is go Please ahead. is you from [ph] Richard, Johns coming live.

bring past there for and hoping conversation long I $XX orders that bids Good in and what half rate years, million, to million, $XX we'd and million, term that But revenues. going or is along encouraged technical of understand that is still an you X maybe revenues term. want afternoon. the the of I'm just million X X talked out $XXX were I'm just might the those. to old for I moving worth made the you've advances long in at they to over And million having. recently, And me. company quarterly guy, we great or a get sure $XXX $XXX about I'm we've try the continue possible not were of bring

years? that there in those seems aren't term relatively out start the me revenues so recent that due in put well, least relatively of And yes, near or all to to the at it getting - we term, bids from we near

we so. certainly hope Well,

bid, then to to it you revenue. have win bid before converts the have to You

to pick seeing up. as soon adjudicated start hard are And that So those as get the on working pipeline we're keep then going. yeah, things and you'll revenue contract,

long your And that is significant that surge been the term bring new is this a the the that in can in near term, related start revenues intermediate revenues you've message the in I've achieved business that but so really in see exciting going that to about? to technical to to company talking developments

up. hard Well, base working always we're to revenue the get

bid I a the term, everything That's over we don't linear My long was of we point term think longer a bid. the you company's So term being see about process. that growth thing. can the if sort a near about it

these and working marketplace. Between there, think it's on and function. so. the going step end how bidding, I be products in I large will keep the and to see that's That's improving up and market, we a way keep operational profitability the that think I stuff, we here efficiency sort of

revenues, need the for $XXX the company are million Or step big get than So in we term? that? to going we sooner going to there that to are get in to long

pretty you that's I wish But there Monday. about could challenging. get talk we the revenue, doubling

So it to time takes that. some do

say, that we maybe well, $XXX years recollection my $XXX And the talking question answer not doubling million timid recollection there, don't next I - of it and those Stan, about turn that I'm more the that into would of X of because orders, of to ball. long was, million, know how turn crystal take and have within a I've was Well, bids into But million, - you bids ago. the than revenues? for when the years I'm was X answer to that bids my out revenue got talking about about $XXX would not the a were

a little feeling I'm So frustrated.

revenue Well, get we're the working hard up. to

got nose So all I tell everybody's grindstone. you their can is the to

Okay, right. you. all Thank

question Instructions] Michael Eisner a do [Operator go [ph] have you. please ahead. Michael, Thank We follow-up from

the you Thank Pulsed in and same make were US the Optically anyone does quality? That talking Rubidium, product contract you. One final Pumped about, the question.

I'm of. that not No, aware

it? Is anyone - of heard All even haven't you anyone right. doing

That's a market. on actually similar technology. product having this a few aware of started I'm ago. researching we for years got how But are them not Europeans a ready

As a far it's there. still know, I as research over

if even well, the in US? had wants - everything the government where probably made right So they the something, now

For that's government a programs, and true statement. military

allowed military to that's it's are government. - Well, or talking whether - about, probably clock we're you it's this say

does Government? So say US a it's it

the Research. It Naval Office was from of

Yeah.

the only point? this we're at that do So one can this

not anyone let may - aware but Pulsed US. working it. to of want Optically not Clock the I on no, here be, else There I'm of me Rubidium Pumped misstate. We... in aware don't Well, a we're

There basically. any They out putting I could not news be. be understand. could

Right.

you. All right, thank

bet. You

And in the at there for turn to are like time. now queue floor would no to further this questions Stanton Sloane remarks. I back closing

to Thank you, a to and Thank From all you, XXXX. wish at everybody. thanks, safe, forward healthy happy, We everybody everyone. on of look here a next the holiday and us FEI, you we talking great call.

conclude conference and ladies today's This you, Thank call. does gentlemen.

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