Frequency Electronics (FEIM) 13 Jul 232023 Q4 Earnings call transcript

Greetings, and welcome to the Frequency Electronics Fiscal Yearend '23 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. statements, for undertakes the revisions this call. forward-looking update obligation date these conference statements these or making the no company to of By changes after

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

challenge. been positive everyone. CEO a during And couple look certainly Thank continuation growth. of a be feel reflecting exactly I of There one the on President on path next is I it more find solid the years. myself and a of It's Frequency the Overall, what it's confident to experience. year you, very Today, company a almost success transpired I forward last that challenges, since year. been but that to experience and of the will inherited over I has welcome continued and role has Electronics. And

the important ultimately to final financial like think I I'd are of with which start for the observations, non-financial company. very some health

past are run. and positive year these year, in the These Island us moved was morale Over back short to was Long terms benefits. And stronger the to understandably have in both costly end cents. of last September layoff were moves team. and at In early showing and the major and to run. But of alongside location traumatic, manufacturing costly year, had and relocated calendar restructuring in before engineering company their we've move of of designed which the stronger facility. layoff The number made the original of costly their been Zyfer also now in dollars moves California our had workforce the long XXXX, a make made we Island a we Zyfer the changes capability, Long in

we way our it all in in such to future. a to this made into well and bolster fact conscientious remain on, in was competitive engineering, can science we've the going Simultaneously, that harness a strength while of and effort

our lower major old have position, cost to last year, and begun the to develop Over the arena. to we've improve which customers with timing of potential performance to in the new several and navigation approaches work collaboratively problems,

quantum R&D reinvigorated move lower we've our to internal satellite which target the program systems. and cost to address products, technology smaller Similarly,

Our a million, suffered about an comeback. Zyfer whereas in a of made over anticipated. operating division operating originally of the has dramatic of $XXX,XXX. XX, profit fiscal million. XXXX, In manufacturing. associated the April small deserve more XXXX, made credit in this loss year operating which fiscal over overall of half team Zyfer of importantly, was year, still much making year [indiscernible], for But second a faster ended the lot had $X $X his in Zyfer Zyfer loss an than the happen President This, move costs just Zyfer's of with John and spite cross-country much of

future. Meanwhile, contracts and XXXX is Furthermore, layoffs, York, after back to in coming fiscal contracts the line several regrouped, in several contribute awarded has it's significantly New year new are which near smaller will XXXX during fiscal Zyfer's been bottom and year major but the strong. beyond, expected FEI during the

coming completion successfully. engineering finally to efforts Some development costly are

program contracts proceeding are large next Some new contracts over and profitably in several the months. and satellite anticipated six are

workforce a the parts, to and to company feel changes spirit sum I and dramatic what's do York, force. but in necessary the of the the enduring morale year, a is greater things success than I high. the entire happen. the powerful make at all FEI New pretty believe that's whole working in only the over is our of some after Importantly, last There together, is I we're believe not air,

comparison results the the of confidence to to the period growth in large XXXX. of six have increased of the anticipated several fiscal October the XXXX, a during in the year which margin year. to six for our months FEI's of the for operating gross substantiating reporting management fiscal And has and XX, six April portrait, an taken substantially and okay quarter high next is the XXXX as historically last year-end over fourth second the place Revenue period we is efforts the well same compared the are as at programs financial satellite ended primary in in decade half the fiscal cost-cutting months, for year. the our profit So, see months markets. XXXX, and XX, reorganization, at ended continued company backlog period

businesses satellite sustained to signs government growth and commercial forward. show double-digit of Both continue going

and required very strong Thank confident Officer. company is is balance opportunities. committed to challenging growth towards going economic to nonetheless I'd fund in to debt-free, positive to are vigilance remain Bernstein, direction but we improvement that geopolitical look The progressing sustained cash Financial we the to profitability navigate over you. moving in forward Chief and we're sheet a our the forward. generation and like environment, turn with results. things continued future now a Further, we And Steve Continued to

fiscal Thank QX 'XX you, be Tom, to good and it results. the QX is important versus will mention Difficulty] fiscal comparing to afternoon. that 'XX results, financial [Technical I of

mention half the key the metrics. of the the full first of like would year 'XX. of in compared fiscal to improvement half Our 'XX second fiscal press to and the also results has some fiscal the release I results for

X% percentage half of million Gross of $XX.X income the 'XX to fiscal operating second million went half to fiscal an first from to 'XX. of increased income 'XX, fiscal of of from Revenue $XX.X operating of an second 'XX XX.X% the in went from loss first half fiscal $X.X and half the first the during 'XX. 'XX million of in in of during second the profit loss in the fiscal half $XXX,XXX fiscal half operating

company difficulty] the row quarter this operating that income. in [technical Additionally, is second the

that second improvement fiscal comparing the the to improvement. are of It have results half right 'XX previously announced fiscal changes to the half the is vast evident been heading is company by that in the of this direction the 'XX first from our contributing and in

For $XX.X the $XX to million consolidated 'XX, the period year. same in April XX, ended fiscal for the revenue was three million months prior compared

prior primarily and fiscal only follows. or Revenue period the in commercial are components revenue government and recognized satellite in payload revenue are the method the contracts year. The Revenue satellite are same consolidated U.S. compared of approximately of XX% York of as under percentage consolidated from or completion million of of programs segment. million FEI-New revenue the on to was $X.X $X.X XX% recorded

U.S. fiscal customers, which in to segments $X.X in FEI-Zyfer recorded and $X.X period DOD are York FEI-New both million were approximately the non-space of $XXX,XXX fiscal compared same Revenues XX% prior government from approximately the and XX% in compared compared million year, fiscal prior to for to and and the of revenue the prior $XXX,XXX for year. approximately Other consolidated year. accounted revenue was industrial commercial the

was to revenue The FEI-Zyfer. increase increase in revenue at for in XX, the mainly three April due months the XX ending

anticipates 'XX year the for continue company the that fiscal by will months fiscal gross margin rate XX, and The gross company that 'XX. margin in down of of encouraged April fact the both For 'XX. year this compared ended 'XX, increased to went fourth three the period as is same percentage third XX%, were over trend fiscal the profit quarter the and gross and

XX, effective approximately over fiscal April and decreased increase the Full expenses SG&A million. ended months three consolidated $X to prior respectively, continues revenues. reversals 'XX XX%, ending XX% year going expense ways three and company in XX, 'XX of the SG&A to expenses 'XX, for expenses additional as in compared months cost year were SG&A The For 'XX. due to forward. monitor was for largely The looking April

months respectively, from to million XX, ending 'XX for R&D. to decrease not in two ending April decreased the show for the to programs, three and April consolidated in keep of R&D R&D three was 'XX dedicated to funded R&D developmental revenue. 'XX, of plans to its expense which approximately $XXX,XXX approximately R&D three in $X.X externally working the the approximately up for company ending XX, invest at who and The future would months X% the $XXX,XXX resources a on products April XX, decreased are months due state-of-the-art. XX%, continue

has ending months April to an income the instituted. due loss $X.X a to approximately operating of million of compared over income of in increased approximately XX, and operating company combination recorded changes $XXX,XXX 'XX, in gross three increase of months an XX, the For ending sales the management increased three prior margin, April effects year. Operating the 'XX,

primarily For this sold were since QX consisted and all marketable 'XX, income miscellaneous other of interest income fiscal securities year. expense

an approximately XX, yields the impairment of three a a million the charge April loss months 'XX. income pretax took company XX, pretax ending Morion. investment compared April related 'XX, the three $XXX,XXX to approximately in months During This $XXX,XXX to the company's for $X.X ending

$XX,XXX the of per the to $XXX,XXX for compared an $X,XXX or For approximately April 'XX $X.XX loss share of three prior XX, the XX, 'XX, for months compared share $X.X net provision months the ending year. three Consolidated period income to ending fiscal period was fiscal tax reported for of same a per same April tax the or year. company benefit approximately a $X.XX million the the previous

of fully previous end 'XX ended million April $XX fiscal backlog was for $XX compared million year to the Our the 'XX. April at funded approximately XX,

seen than third the levels backlog $XX In greater company the consecutive years. not is which over in XX addition, this in quarter has million, is

While significant revenue turn we backlog the into quarters. to some additional this and backlog thus added this in out contract of year, awards expect of to will come be coming

$XX April X.X:X. XX, to reflect approximately a The sheet strong of position company's continues ratio at working 'XX million of capital balance at a approximately current

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

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

to And this we the from Steve. accept time, Thanks, in over questions turn at will audience. point

[Operator with Montgomery. question comes from you. Instructions] our Thank Janney first Reiss Brett And

Hi, Tom. Stephen. Hi,

First, on congratulations progress. and applaud the

that. see nice to So

you. Thank

Could us Now mind? crossed able opportunities. to that you some give mentioned you in on self-fund what we're have being to color more growth profitability, over you

over Well, couple our of we R&D plan years. increase to funding next significantly the

vigorously there's expertise XXXX. we're fact, those to out funding that in fiscal And year there we're get seeing pursuing that's stuff of development external budgeted of for relevant that of also technology. efforts. But course, aggressively efforts. lot a In areas pretty to we've we're in our And working actually development for

headwind This economy coming we that? revenues growth Right, that macro become go a does? you recession, of anticipate can the that what come that a quarters, does in those into great. irrespective anything the is in there -- derail in or If revenues

Yes.

Of I very, that can But at are always there course, positive think time. out stuff. things very in look this derail things there point

getting of that them future. in the based contracts and that profitably. we already that we work working we programs are a carefully are Our very are on things have, in have we such that also think execute revenue very confident can near we I very to those estimates And way very, already pursue

And that, so that significant and think all revenue really of we're quite because we'll also I see of profitability. growth confident

Right. Is there Steve? number, book-to-bill a

with don't [ph] number starting when will I I you, get a to X.X:X, in to you. me. believe, we get higher, it was It bit I neighborhood, can e-mail off I'll have get of the exact but I it it maybe somewhere the little to call. printed. the

consistent Right. last what it's is, quarter? with If that's was what it it

Pretty close, yes.

queue. And once drop for you again the to going progress. back in thank I'm

you. Thank

with is question for proceed. next The Robert Performance Center Investing. Smith Please The from

you much afternoon. questions of Hi, taking 'XX? how is Tom, for deliverable feel for and in the do my Thanks good the fiscal backlog thanks progress.

I a It's XX% reasonable give to estimate. tough to but exact think an number, estimate -- is

Okay. as give small effort the of tap me area. mount said distinct making? Could satellite kind you color you to going a to And calls, the prior you're progress to in some were you

Okay, sure.

contractors, size time contractors satellites of in -- working future. things there There this the hone universities out to are things launched are think the moves have the we is trying exactly and been at been pan think most the soccer systems. major have some I important experimental are the And to really that. satellites ball of people in going on like especially satellite in and closely launched on part with that by I prime the things how to the have -- point

this where sweet than bit a things a costly we A to But than that are we we feel end that's bigger between more perceive that. to really is going pretty very home up. We a spot cost and that's strongly really on not there's high are little that. performance. trying little what sweet low spot bit And feel in that as

to the making So we're achieve R&D package be doing some targeting and efforts achieve we collaboration to can a today also at able at of smaller really with our lower it that cost. performance but improved internal prime what and we're contractors in over

sense numbers a is specific of up be in ends to headed. kilograms and the in that remains general in but dollars where we're sense, Exactly that seen, specific where

And when revenue? some we you actual product think do and see

little a bit That's estimate. hard to

kind think XXXX. are things that there XXXX currently calendar of some perhaps the timeframe, I scheduled year in XXXX, are

think looking I at. probably that's what we're

I And at a with shared addressable give my you of that I all kind you you considerable me arms Yeah. think there Could that around? there. was us and some can work with felt get market figure that average

satellite That's And of involve little the towards is business a a satellites. growing. very earth The trend large the number tough systems bit to definitely do. orbit low is that

seen how to remains So market I think exactly that big be becomes. it

going understand the go I mean redirecting, you're But potential it? for certainly you're and not of to kind you is if what

I'm didn't -- sorry, quite catch repeat Can you I that?

what Yes. go you it. and you're for to I that potential assume understand going the is fully

Oh, yes, yes.

yeah, All thanks and… Okay. sorry. right

Well, potential satellite pursue disappear. think it other to what but there is very we satellite going. direction are the to if business that. the One starts And the two that is, is that's the aspects business thing the don't is I important

So…

is Yeah, I wish well. powerful. Well the so much. I Thanks you recognition understand.

Thank you.

from [Operator Instructions] Michael Michael, Private question comes The next please proceed. Investor. Eisner,

can revenue feel Great growth? continue increase previous Do you in from you Hi. job. XX% quarter. that

talk I very we Well, to have specific confident want but don't growth. we continued feel will that about numbers,

delays How causing Okay. part inflation -- any any is or problems?

a things problems. easing think But than or the up. ago part we were seeing with dealing are business. I We're regard, continually we're six that difficulty really in months three less months Well, That's ago. of

to. but received more, and a actually we more two in parts certainly given parts or longer more think that used delivery we times initially months. But we of even than see or year times more lead I months encounter much six historically on we're and three lead then what of we're

have so times with that's associated But very with And to lead encouraging. deal have challenges that. we to the long still and

Okay, on it's now. years the couple has going delays, part of so less. getting been This a for

Yeah.

So I York in keeps Zyfer all as you now? on long as slightly it Did New right, less. is hear going

sorry, and here facility Zyfer California to to No, the made we've York. California. year the done split the a facility. for was No. Zyfer, the was where it And ago at New confusion. in their was manufacturing decision manufacturing The move that in the County, out -- originally engineering being Orange back was

New and the -- last And last a the So we that do problematic. year. was feel the the the that mistake, separate over the took was to place fiscal to move York, manufacturing engineering it manufacturing have here was in from

ended we back process. decision ways, And started, costs the so back. both the things but in to to incurred move obviously made lot a And we up this move of where

think the So point but I it themselves. was results costly, for this at speak

lot faster happy pretty things, happened I originally a expected. think we're that we than it and did we

right. All

So that's back completely? California in

Yes.

All right.

I saw of in be payers? of started that about R&D, external next [ph]. that be up years. Frequency will paid talking to is said probably your -- going the down to and you that You R&D couple paying or go some going the Is it's went

the aggressively internally next Well, company. can is any pursuing to that as That's also that the going years. so development most But funded increase that sense over thing get efforts we're externally. funded anticipate small of makes for the a us R&D we we couple

percentage With revenue, will so -- equal would be the it out?

Yeah, I think…

exact sorry? As kind but will or in up of opposite? R&D they revenue Maybe sync. I'm up, And goes -- the go not timing,

Yes.

assumption. reasonable think I that's a

have And you point? at many employees Okay. this how do Roughly.

roughly XXX overall. I have think employees, we

overall. Yes,

Yes.

And final question.

III I the one, you think testing was along? coming were units two one I National talked test the that and there and IIIF, -- is think about You with Laboratories. they they were Research GPS live last quarter, How that

that's Research was until be calendar at of funding So year. the told, the what going least end support Naval supposed take but to testing going to available, That's the testing the this government to we're take place at place Laboratory. that to still roughly isn't

simulating testing we've vacuum agreed do now space keep in going have end year. of -- agreed the and environment we that at here So to some FEI the to until unit we're the the from

year? calendar The

to be to additional unit. just on data that get the able Yes, of performance

well, sorry, you about, are we once talked All in like right. thing. satellite all the see I'm to -- programs All those backlog the do? pieces one or And the at usually that going just we

impossible arrive that that programs to near it's it's future. in frustrations, tend we those simultaneously, bit. business be the there they Well, we very out like. that also they of things, where predict a one very conceivable major exactly, anticipate in but realities could more would that out to could this are these almost the the several It's stretched than conceivable that but of It's time stretch

comes control in, basically. it It's out Yes. of when it comes basically your in,

Yes.

time. you appreciate. job. I Thank for your Great

you. Okay, thank

Next question Please comes from proceed. Greg Funds. Roeder with Adirondack

Hi, the thank to story. I'm new you for taking my Frequency call. Electronics

the growth back would the And Thank that good there So I'm as was backlog big the just could a function impressive. -- function order you. or their have curious is a from I'm offer one you? you color of be getting Any curious was into to, about on primes prime of is helpful. a graces? Or very what backlog

Yes.

the I getting really not primes. the it a is of think would of distinctly back I that's question good combination things. say into graces a of

the into the think will that I and to growth a the is market, and trend of have to future. space is that's believe reason this fundamentally, And but we something that continue -- market. be every is extent the it large a in think, there course, what in I to that's well is downs this going ups about growth

And there very, backlog several it backlog seen non-space lot there a Zyfer. I programs those are think is part that are increase substantial And very things. a follow-ons I think we've of part and -- anticipate we of encouraging, significant at programs. of to is that

of have development afterwards. there, programs We some for there's a lot follow-on and potential

we're at pretty this positive in think I really point So time.

Of course, into like ball, but crystal one-off this does this we a have anticipate to point. persist blip at way in the looks a don't perfect it no future. We

was you That Thank luck. very helpful. and good

Please Smith Smith question Performance for from Center a next comes Robert from the The Investing. follow-up Okay, with Robert -- proceed.

Hi, Tom.

has how the the your a wondering I it future? helmed this in at for was time the increased? about how you've still Or what company taken And is year, frame? looking principal you've present, learnings and So are you optimism

been very one a Frequency new And a I a Well, okay. we're I my experience about this frankly. have Electronics. say, pretty most say it's year. Yes. time, close here me, it's to in not all it. think really pretty I'm I'm enjoying been the -- for to basis, for sometimes a future CEO. about I of at It's here year I it's challenging, career, but But think at frustrating. But have I've XX day-to-day as will for point newcomer to optimistic point. I'm that I this years on

leader? you well X if I the any a forward. as vantage to I of have was great I'm you've company, since wondering a on the And that year that knowledge particular I the there mean home. counting from gained and is that us take point been insights understand being at you've

lot think little don't Well, But I major insights. there think I a think thing things. that of I there's I finger of can a one at. my point there are are lot

at attention point. this primarily, attention a to it's the hard the work important It's details. that I lot I and is detail paying of thing to think think

just -- sure the other it I we to look that But in as at the and business, on to it that, think than details. pursue when think to new we take I new it's yes, is we're opposed want can devil seeking business. make profitably working we -- hard

people you feel have adequate you? place support for you that in to Do provide the

that's Well, a question. really good

looking growing our do. significant at we in point this to are cautious last in potentially some over potentially But that. -- think But at had year, cutbacks. I we're significant some looking be very doing going looking at and growth this workforce. we time, at we're the We're very we

new of think Frequency future. old and that's looking expertise, expertise and science new people we're new engineering I into with technology we time, have talent technologies. many keeping a important for the is of to an and to generation viable Electronics have a some that And same what really most in years important, the a approaches people as get company I the think train in to At well of number also

that So come would with hires? new

that we it's partly it's hires, the partly already with people Well, have on yes, and new with workforce. training

good Wish you. you Thank you. Thank luck.

have We in questions queue. further no

end first you. participating look I With in like call. for all thank I to quarter. to Okay. I'd this the the call can forward that, we think our Thank call. next you after And

your you. concludes and participation. may conference, Thank Thank this you for This disconnect today's you lines time. at your