Frequency Electronics (FEIM) 10 Dec 242025 Q2 Earnings call transcript

Greetings, and welcome to the Frequency Electronics Second Quarter Fiscal '25 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. 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.

everyone. afternoon, Good metrics, performance financial quarter fiscal of By excellent. the XXXX was year all second

the reflect core For fiscal and and backlog programs. and first primary business the by businesses, $XX fiscal income current end space strong both year million quarter writing space the the continuing. $XX more $XX operating the have inquiries year. The and gross which show at in we're the first our continued And end space responding high, every government of year. grown for to million the government responsible operating is way, margin at indication proposals has half busy an source of solid at substantially. compared The half which the of business. growth quarter The million is U.S. new government results and than this the of U.S. all-time holding the for also last very for is, The growth revenue year-to-date been to revenue, the of income

the in discussed satellite space and of heritage significant technologies. relates a as new we've As potential existing, as work, core our systems to portion well past,

a years. huge. we're over two is business instead our satellites, at or small a given At next of proliferated with more anticipated of lot technology on is cost, However, of this And systems general, few lower our variance. It needs products looking given systems In a X grow smaller, we associated funded market. have last it's are satellites which of power, this order seeing proliferated replace But delivered amount program, this in high-performing sometimes this lower packaged must XX% hundreds become and in more the and is that their on will program, decade. The business happen develop time, that than to targeted to in backlog on potential be we to domain, small but very X of successful dramatically that development systems expected years and must headed. to one lower significant lifetime -- in existing this at In space direction be the those technologies, exceeded which new internally. clear has a the less over it's replenishment now performing domain. satellite is programs on clear continuing lower-performing the this

fill market, as obtained and expertise, of our FEI lot which rapidly a a is well are one is we Summit the was City, year were R&D year. compared technology. government-funded a York government regarding to -- XX% Sensor CRADAs, from in X% make because in R&D within of future. talented order is and quantum a Our bringing will Currently into externally that in revenue, for about of to in government about the government this share continued a rapidly be steady our expected of quarters. and It's XXXX things the laboratories to technical to anticipated of from with at or and fact, remain individuals expenditures But development the of Sensors Cooperative available feedback some we I'm funded later. In to that fiscal on foreseeable be additional the future, future. Much New last will conference financial sworn on me, revenue up performance, existing some U.S. well XX% revenue approximately in excited developing are one experts X have in this. specific we're and of of that who This to expectations spades. In expeditiously, should this other actively And next and the believe workforce the roughly XX world Quantum to back positive NIST return harvest with we of government budget extremely of expertise this behind that success. I'll potential to administration will attractive very be turn business area R&D Bernstein, Research based them. our passed deserve will event current wins some Agreements who new With than about the business growth participate there a fiscal October, insights to In in Quantum in has most short, with investment hosted in now CFO, avenue over really Steve? the FEI attended, happy credit excuse parallel, years we pursuing the all, funding terms details. will follow-on rather and our well for of attendees All arena it. their lead positioned on which Development thus be cautiously be you developing in year technologies. optimistic together Steve this around sooner new it an of proud programs. our and in, dedicated in pursuing we're funding January, on

Tom, you, Thank and good afternoon.

increase prior of months For from U.S. compared and or government contracts completion approximately was XX, $XX.X only of and accounted compared recorded York was million increase recorded commercial U.S. of the period the U.S. respectively. to $XX.X are government XXXX, October revenue FEI-New year. Other of to consolidated of year. and method revenue $X.X million, government primarily from in to both same was non-space $XX the the satellite and and of $X.X and fiscal prior space consolidated product. York X the for XX% customers, XX% period satellite were as same customer for recognized months prior million in segments, or in compared follows. Revenue year. significant are million million, to the and FEI-New The the million sales which fiscal percentage the XX, an the in revenue million ended million the The period are on same XX% fiscal and fiscal DOD FEI-Zyfer programs industrial Revenue approximately 'XX were ended prior revenue under $X.X segment. Revenue the to compared payload XX%, year are the the related for revenue in period in for $XX.X for commercial October $XX.X components for X 'XX, primarily

was result large are For completion. complete dollars the space same the margin as near production margin gross lower a months year 'XX, the The revenue. gross margin margin major as 'XX. to as increased in programs in at compared The a X rate ending the October rate or margin milestone fiscal increase well attributable and XX, as in its gross gross particularly direct increase a that of increased completed to program older period

R&D XX% X for approximately X expense. R&D primarily million customer a XX% was XXX(k) employees ending $X.X 'XX, expense The due lower are mainly production 'XX, the the $X.X and For costs $X.X quarter. the was October the related Frequency R&D X X October XX, orders consolidated to in realignment approximately million, 'XX, such keep for October as 'XX its products and revenues. Electronics cost as on be majority transactions, approximately on 'XX. for respectively consolidated per from Summit the than related to continue months payroll-related was XX%, expenses, XX, R&D are 'XX and increase, from the million, to in compensation invest driving the and months for future payroll-related of to year overhead be the the expected ending planned. 'XX, to which the October to were of October and X million company of of in respectively, 'XX $X increased First fiscal primarily the rate in ending The revenue. where It plans Quantum to October focused resulting in increase noncash XX, of the and expense XX%, increases stock opposed months ending and advances from expense SG&A, an expenses, approximately XX, focus initially and should is was to SG&A company increase months noted the that SG&A annual XX, products at expense increase state-of-the-art. months ending for run SG&A to The approximately an modernization of to X%, X during the much in

spend However, to expected quarterly actual vary. is

months income of the ending operating 'XX, compared the million to discussed the For ending large $X completed months in 'XX, X October as the production XX, recorded X company during year. to its million $X Operating operating that October space prior a of partially milestone in due earlier. income major XX, program increased income

metal, improved the year also our first income building more tangible reclaiming deferred increase payments the these is of deferred income fixed result $X.X company to half costly products. are efficiently programs $X.X of a the expenses complete a efforts. Other and this of bidding, However, related made of for to fiscal successful testing efforts for results trust year. assets and of the company outcome of refunds, compared and The Interest approximately of to fiscal the believes work complex million in the from the or retired the to operating can to assets. million sale yields compensation pretax interest income be employees. This derived on prior

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

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

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

Steve. Thanks,

I can take think we questions. now

investor. [Operator Instructions] The comes from private first Chris [ Witkowsky ], question

lifetimes And ask you I smaller tell us on satellites. these kind what talk wanted that these difficult competitive little you will And advantage developing bit you much be the to will precision. as to a Congratulations about results require as for there? great don't shorter as about products not of new have products products first. they and be these satellites usual have your Presumably,

advantage? competitive your is what -- there is So

Good question. Okay.

products to that about small same but the business, optimize the I to we're the modify those satellite them we're think going fundamentally, sell today satellite that applications. we to talking for products

portion the of this on a cheap one is bit whole rapidly. used and the kind necessarily absolute side to of fairly this that satellites other believe from world up start little the to the address on smallest things understand It's that the evolving in long-lasting that one terms and absolute of right we're able unclear of moving is and going thing in small to high performance Now spectrum of the somewhere that very, long-lasting the and ends is we're from but exquisite not to with of end that the dealing in past. the spectrum. inexpensive where this very We be direction and cheapest,

that going we of we kind that performance to get as is to that to we monitor performance. larger the than do so high believe place people we much right what have that can be forward. forward. But something good this this develop performance. right sweet there we we're necessarily It the pay and doesn't do have positioned is the this when in good things still lower And today deliver And pretty we going spot very out go that no But and that the the but we cost, have doesn't think for to pay a that perform the kind deliver much satellites that applications money don't out address. there. as other are that tiny, we've able have low-cost a been as of than is have that lower but performance that think and So that's hand, to smaller the looking but are power best we object, on still are that there's absolute we on it for Not to needed well products, there. products better

to a bit feel it. do how it's but and of challenge, about pretty we go a to good idea we of So that have we where a need be

for from it So you're make cheaper designing than that to a them somebody bit to is and your of little and you be just products, your your advantages delayed easier up history else come for products high-quality will saying below?

Yes.

and pretty think have we advantage to work. a is that corollary that technologies fundamental the we have is those And I I kind necessary we think else and nobody capabilities of the have that I applications good what understanding think has. to is performance a that of applications make

table. that's we bring so the to what And yes,

That's bit devil's satellites -- right. advocate. a of which of danger of of and expensive the this seems is any business? to Is hear. away another your And kind XX% question, there cheaper business those still your good satellites, little All more to of playing taking is be

the Well, on I we sure, And have But not orbit that. think there speak. up is the a small we understand, participated potential there have for to are satellites we that are in as thing table those at reason that somebody those nothing from because else technology brought to programs. procured a And haven't cost. lower there in much we participated is couldn't the programs be our

that will precision, this and we the very in. There other demand we these just more to performance, of and definitely the to and those from closely. need much are technologies to as the we high-precision believe can something be the that there's frequency higher-end monitor. and in we're timing participate satellite have to precision, that an But time there be the requires systems be time people business There portion that ready we that we're so a hardware that is of I do is for trade-offs, something address never synchronization, needs. particular impact and to address, the And future, And will various be think brought going needed frequency bear have that's part but will how applications. on are able for business monitoring

right. All

serve you're the kind a will with they'll from functions precise, your decide still you. of think satellites, I probably smaller some and they'll same if still simplify, clients need is to to that even that So Is timing need saying product correct?

our will That's Yes. Yes. correct. require applications that are There products.

comes Derrickson Brent question ], from next The private investor. [

in of the hard everybody. I speak the Congratulations a quarter, I long say appreciate hours going big are I I'm to forward? guys thank the wondering, fantastic Everybody just in and seeing putting here you. My you EPS and want Frequency, really when I breakout in for question And revenue work think is, we've start we seen the do of kind kind backlog. breakout of a and just in.

the yes, sure reflected don't revenue beyond And I I I do, change in think I what fair is at mean, guess not I'm has I else -- I been to of but definition the that. know Well, understand think say growing. breakout, Yes. be track. in at to assume I the that they can't in change -- But going necessarily not least look to it's revenue. backlog percentage qualitatively instantaneously the percentage think we

from comes with Marema question next George The Pareto Ventures.

cheaper today describe satellite and line what need in have you to competitive? the get the smaller, cheaper lift engineering? you Or -- do you smaller, it technical getting Along how breakthroughs in of the would Is direction, you how the characterize of difficulty to version to be would a physics there?

Okay. It's really a good question.

fundamental from smaller is we power make digital the and products for electronic cheaper lot that that of interesting everything that own products smaller cheaper. all that course, smaller electronics. problem is think and the The all you sell have and time. we applications I point else that lower cell way know actually terrestrial that are with we that experience you and that phones our And a of electronics digital use gets the of is

it's called this There electronics and digital event the there's space, well radiation are when high you fundamental employ radiation single those So with very that sensitive you known and fact digital other to have of that is various nuclear in electronics. The in protons utilize and upset. more we things problem smaller what's and of space. cheaper way is contend we those more things in are that the types nuclear the electrons to make and space, want to density,

bits can modifications cause we space. up take So particles and can particles on if use cause in space severe upsets. we And They those in problems can -- radiation in cause any without flip. try them devices things that earth the to these here utilize to small

properly So those to we the looking ground able environment. this that taking products sell we to adapting is the and thing. currently are is function What primary in really space be survive on at and the

hardened actually a radiation those digital verify survive digital will of are to that are is this then that radiation so fairly are And with parts. designed have parts that's bigger have we difficult lot for features. don't the the of kind devices space hardened big to In it's cases, the the space. in some because that in things replace doing challenge. same adequate order on some other ground cases, And But a in testing question of of they a parts that

at the small the applications course, as low are these a of where earth And as lower-cost are these orbits, of of have for in but severe Now lot we devices shorter. devices, higher still, space the isn't radiation. in radiation lifetime orbits,

with can effective So to some so enough. of how environment. just to orbit radiation going in it's earth away need for do -- to X the -- really get problems. something good survive biggest we But is to of low that's years X one be kind We this and figure out this challenges

that's So whole but the story these a not I story, and challenge in huge think biggest of the that's part things. developing the

the radiation QuickLogic at at final done SkyWater Tom, there's it's have for hardened today, not being is that? looked a phase. and looked project technology with you which space. Honeywell commercialized but It's for an FPGA Have -- the in you

them. any number there are worked of radiation Yes. number this of any And FPGAs. We've with different various at looked levels and hardened

what's the part the is out challenge of figuring thing. So most effective

devices don't expensive. need products, amount capabilities. small FPGAs we of tremendous a have smaller our for those of And extremely require that huge Some We things. are

there cost, away get items FPGAs And intolerance. that again, levels aren't needs. And of the radiation different really appropriate getting the we can without challenge are larger with also, the smallest using or is just problems. having lowest sometimes And so tolerance our for

And of lot cetera, trial et order a in it's to and some things. testing, error, of optimize

I the happy over see math, quarter. backlog increase just by about it million last in $XX like thing one And rough last quarter to the government was budgets. looks

time. kind during election is of is up few for stuff, going a amped gummed administration, was on-orbit be doing a DOD There's the race new in a to that would all several information I this the necessarily? years. budgetary has NASA about talk the It an of is period? really available see to now next and a space difficult right not the it 'XX, next in lot Given but comments services, from happy the you space that lot transition getting hopefully, plans. How describe of made you And some months? environment things lot of up Are appears or

Well, not necessarily. yes,

and out the one I political election think not be. we funding. the as with the thing of we It's this level I turned would are Congress. as it the -- way about results government the And with frustration divided year. of always thing there's one's fast we're good independent a will it And of is leanings, a like pretty things course, certain to like concerned think we have never looks

think ability of there helpful. we that at the the be is will forward. an resolution inauguration. And move I of least after thing to a sometime so programs number limits And actual The some continuing soon budget these hope that get just

I And growing foreseeable things kind think, for correct. so what about mean, usually, these future, comment the the your of is space

that, hopefully, moving start that, good think of months. in the in of good like months. the business look a just some next to I we'll time. on anybody's on few And the have few not get question out what it's question And moving It's next we After in a think over a right, pretty further really so I to things it's the handle shape. disappearing. guess, we're And clarity it

from comes private next The Eisner, investor. question Michael

company Great job really all Everyone at did good around. a job.

to Your XX%, up gross impressive. very is I margins thought went which

point you funding? you You going see continue went Or get government until up on that's Do at the down? cost, rather. to coming this R&D that

Well, see. let's

comments. several -- think I

really able be mix a this the the to always numbers we've a little this of couple And First, the on that that. time. be. With ideally do did next to on talk we gross years we've think respect the of won't point -- just that's few It want couple think think been kind talking at margin. bit work. gross R&D, targeting about the just to depends we're I I last I minutes margin, where over We I of But of delivering ago. of kind about been in

probably I to think underspent R&D need it's be R&D need year. guess really we where in the terms we're spending thing of in I last of I up to significantly And about we terms year. last think be we to from say is right now. where

and and somewhere like future. at a revenue, I'd as of we percentage of So to year, anticipate that couple for of point the revenue, anticipate foreseeable near years. now, it next the we're I at this that over about look Right XX% being

margins, of All say companies right. do. but get one gross lot And up, thing their then they on never a the going margins gross to they're

what a any is it I the XX% of that? was And impressive did, continues. -- You very number. hope is

I to hope achieve We're working so, it. actually too. hard

yes. So

of you quantum any quarter, this is from had that any revenue sensing? Is the

any I significant quantum get a hesitate suffice this amount from it to to there's this in regard. quarter not revenue say, sensors. But of specifics into

we're this. to thought you high I really was margins the getting expect thinking. even to of year because weren't at going, anything everything is going sometime. beginning like gross didn't why until the I be I next have That's

Is reach future the you like even. to I LEO X company? get the months I think could them thought there X you of before months

low LEO as earth in orbit?

Yes.

low-cost earth satellite Yes. are LEO think orbit. It's lot. I people but we're low not of looking follow stuff, the that the it's whole applications satellite lots not it, part at of times But that orbits that talked for story. about are a small And

exclusive so. going next LEO. crowded the here the or LEO pretty in decade not over it's And fact, is environment get to So to

in that's be not LEO mean exactly not XXX% what going town. game to stuff of for there's this to only lot that's is a going clear. but But stuff, some the -- So of we

work And we medium Do GEO orbit? MEO, also? earth the with

course, our there that satellite satellite of in most GPS, heritage some absolutely. are GEO. geosynchronous systems is satellite medium also orbits lot work or of well-known And and navigation orbits. is global Yes, are MEO, the earth system earth medium A orbit other

yes, all of that are we So involved stuff. in

answer with don't if you Final question. R-GPS I by that. Astranis. backup We're That's know working GPS Force. on Space can

familiar and Resilient pursuing one things GPS, The limited of that. programs for administration, we'll working That's funding how prime actually the the with we're very that we're the contractor moment. at actively four we very these see -- different But that go. with are Yes, Yes. is new government has funded teams.

who is prime And we of four are them. Astranis, with working this three actually the time. point and at talking mentioned, one you of to in contractors

the You're four? That's working I very impressive. one. of hoping, just was with three it's out

Yes.

want yes, a good with with several to So not we're if program working we're moves And be three point involved contract in I think But emphasize contractors. this position four. some of forward the under of to at pretty and in additional that with anybody time. -- I if funding, prime the we're get

all like types seems every I mentioned, to to GEO, like use and... these MEO it use companies because Yes, SpaceLink different -- Astranis with work

GPS, MEO is point Resilient targeting at specifically program time. the in R-GPS this So orbit

-- I I think don't that. mentioned medium you never say before. orbit you earth the heard said

Yes. That's...

right, impressed. I'm you All overall fantastic Thank time. a for well, job. very your

Okay. Thanks Mike.

investor. Frank [Operator Wisneski from Instructions] [ ], The comes private question next

funding And DOD and weak. Coast continue be glad for They difficulties, to in was see the business. on business, some were the the continuing to My the it the in X expect well talking were area appointed Could West you this from mainly any a revenues months? the Zyfer Board, referred I operations. and whether and assume you the deserved. operations U.S. recovery I about resolutions of next such, very those us your you government of question little First, the give when feel you to to non-space is

Yes.

government -- are think non-space true that get there. we certainly programs challenges out and I it's definitely pushed stuff, the there

that do I -- quarter-to-quarter. we've that fair think variability what is amount anticipate there's seen of a I some

downward that sense on think with don't trend we're business. any a in I So

I think is very some it's predict do point very, growth. to And at some profitable. see anticipate it's -- solid, we timing this time. we The significant just in challenging

space would be backlog primarily your And business?

business. have is Well, it's of it certainly big I don't exact space breakdown at this a chunk point. the

with The question Capital. from Tim next comes Sinnet Hasara

to for Just that X to while and more for X months upgrades have over been out curious, there some the with what's of contracts the just prospects existing GEO here? your programs a next

work anticipate X do in area, months. definitely to within the a X amount significant We that of next

of We feel have proposals business to of to a do be think there. And for I stuff. several satellite and administration small positioned think multiple on when things continued programs to we Again, we hard to are we programs that's should do important able to a out need how what little to we things primes some programs. margins bid properly programs, say. to is definitely anticipate exactly those bit new get out But try right, the those bit I do quite and the where because different leeway that, play for little we we've properly, have good I on those get give a us us

Eisner, a have coming private from follow-up investor. We Michael

the meant to Board. Tom, you joining on congratulate I

Thanks.

from is Ventures. with question Next Pareto Marema George

didn't leave man the Zyfer to I odd How out. Zyfer want Yes. unit as is performing? the

that. actually. I good, this Yes, performance pretty specifics think think their at doing see you'll They're But happy pretty some point... on we're with I

or new new any on any R&D R&D are sorry, there things Zyfer priorities I'm areas there? Are or for there -- going any

We We going Zyfer. do. some have at Yes, R&D on yes. activity definitely

the we see the business, variant main -- so the we smaller, cheaper. satellite in of -- area think there I theme

they -- the which to I thing So a GPS think some timing have they've perform functions. Utilizing take the clocks other incorporate precision they receiver. locked development is and traditionally, and products, been GPS but things the some smaller receiver synchronization to we their to packages. And that the of a and GPS of receiver same do, then doing in some take for years,

of that the one forward add some GPS. to of things think navigation is to for I going capability the absence in

So navigation. inertial means alternate and potentially navigation of

that looking we've quantum of some and yes, sensors kind leads gets that been at. to the So of

that of into the some future. And so Zyfer potentially incorporate we're technology looking products in to

Any -- cybersecurity of any this connections them? with with

It's with to cybersecurity a not means huge everything in end really do. Well but end. thing an that we very important. It's it's is itself, a an

As I'd turn questions queue, like the over no closing further to to have any in we management remarks. floor for back

for happy in to you everyone like and I'd I'd to and Okay. wish call, Thank participating a thank much. healthy very holiday this season. everybody like

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