Company Overview - Frequency Electronics, Inc. (NASDAQ: FEIM) is a vertically integrated technology company specializing in high-precision timing, synchronization, and navigation systems [1] - The company's products are particularly suited for clients in aerospace, defense, and critical infrastructure sectors, indicating a niche market focus [1] Educational Background of Key Personnel - Myriam Hernandez Alvarez holds multiple degrees, including a degree in Electronics and Telecommunication Engineering, a M.Sc. in computer science, a graduate degree in Business Management, and a Ph.D. in computer applications [1]

Core Viewpoint - Frequency Electronics, Inc. has been awarded a subcontract from Leidos to develop a next-generation Nitrogen Vacancy (NV) Diamond Magnetometer, which is aimed at enhancing magnetic navigation in GPS-denied environments [1][2][4]. Group 1: Company Overview - Frequency Electronics, Inc. is a leading provider of precision timing and frequency technology, specializing in high precision timing, frequency generation, and RF control products for both space and terrestrial applications [5]. - The company has received over 100 awards for excellence in providing high-performance electronic assemblies for more than 150 space and Department of Defense (DOD) programs [5]. - Frequency Electronics invests significantly in research and development to expand its capabilities and markets [5]. Group 2: Project Details - The NV Diamond magnetometer will utilize nitrogen vacancy centers in diamond to create a compact and highly sensitive quantum magnetometer, suitable for deployment in challenging operational environments [2][3]. - Frequency Electronics will lead the design, prototyping, and testing phases of the NV Diamond magnetometer over a multi-year effort, aligning with national investments in quantum technologies [4]. Group 3: Industry Context - The demand for highly sensitive, reliable, and compact magnetic field sensors is growing across defense, intelligence, and scientific applications, reflecting the frontier of modern physics and defense technology [3]. - The initiative supports broader national goals of enhancing situational awareness, navigation, and detection capabilities in various operational contexts [4].

Core Insights - FEI-Zyfer, Inc. received a $12 million contract increase for the development and manufacture of a customized high-precision airborne time, synchronization, and frequency distribution system, with deliveries scheduled through 2027 [1] - The airborne-rated systems are designed to operate in high-dynamic environments and support advanced avionics technologies, including assured and Alternate-Position, Navigation and Timing (Alt-PNT) [1] - The contract reflects the growing demand for advanced airborne time and frequency distribution systems critical to national defense [2] Company Overview - Frequency Electronics, Inc. is a leader in high precision timing, frequency generation, and RF control products for both space and terrestrial applications [3] - The company's products are utilized in various sectors, including satellite payloads, military systems, and electronic warfare [3] - FEI has received over 100 awards for excellence in providing high-performance electronic assemblies for more than 150 space and Department of Defense programs [3] Strategic Focus - The company emphasizes transforming research discoveries into practical products, maintaining a legacy of delivering unique precision time and frequency generation products [3] - Significant resources are allocated to research and development to expand capabilities and market reach [3]

Core Viewpoint - Frequency Electronics, Inc. has been recognized as one of the top supplier partners by Northrop Grumman during the Supplier Excellence Awards, highlighting its significant role in supporting national security technologies [1][2][3] Company Overview - Frequency Electronics, Inc. is a leader in the design, development, and manufacture of high precision timing, frequency generation, and RF control products for both space and terrestrial applications [4] - The company's products are utilized in various sectors including satellite payloads, military systems, and secure communications, with a strong emphasis on research and development to expand capabilities and markets [4] Recognition and Impact - Northrop Grumman acknowledged Frequency Electronics for its strategic excellence, emphasizing the company's contribution to delivering innovative and cost-effective military and security solutions [2] - The recognition reflects Frequency Electronics' commitment to high-quality performance and operational excellence, which are crucial for national security missions [2][3] Leadership Commentary - The President and CEO of Frequency Electronics expressed pride in receiving the award, reinforcing the company's dedication to meeting performance, reliability, and schedule requirements for critical missions [3]

Core Insights - Frequency Electronics, Inc. (FEIM) reported a strong financial performance for the third quarter of fiscal 2025, with net income of $1.60 per share, a significant increase from $0.01 in the prior-year quarter [2][3] - Revenues reached $18.9 million, representing a 38% increase from $13.7 million in the prior-year period [2][3] - The company's gross margin improved to 44% from 23% in the prior-year quarter, driven by revenue growth in core business areas and high-margin contracts [4] Financial Performance - Operating income for the fiscal third quarter was $3.5 million, a significant improvement from an operating loss of $0.5 million in the prior year [3] - Net income increased to $15.4 million in the fiscal third quarter compared to $0.1 million in the year-ago period [3] - Revenues from satellite payloads surged to $11.2 million, accounting for 59% of total revenue, up from $6.8 million (50%) in the year-ago period [5] Business Metrics - The company's backlog stood at $73 million as of January 31, 2025, down from $78 million at the end of fiscal 2024, indicating continued demand for its products [6] - R&D spending increased to $1.4 million for the third quarter, up from $1 million in the prior year, representing 8% of revenues compared to 7% in the prior-year quarter [9] Strategic Outlook - CEO Thomas McClelland expressed optimism about the company's growth trajectory, highlighting strong performance in core businesses and demand for FEIM's technology [7] - The company is focused on expanding its presence in proliferated satellite programs and quantum sensing, anticipating additional contract wins despite potential delays in government funding [8] Competitive Positioning - FEIM is developing quantum sensors for applications such as GPS-denied navigation and submarine detection, with expectations of generating meaningful revenues over time [10] - The company is actively bidding for contracts with the Space Development Agency and adapting technology for radiation-heavy environments, believing its expertise provides a competitive edge in the proliferated satellite market [14] Financial Position - FEIM maintained a strong financial position, remaining debt-free with working capital of approximately $27 million as of January 31, 2025 [11] - The cash balance declined to $5.5 million from $18.3 million at fiscal year-end, primarily due to a $9.6 million special dividend payment [12]

Financial Performance - Revenues for the three months ended January 31, 2025, increased to $18,927,000, a 38.5% increase from $13,714,000 in the same period of 2024[13] - Net income for the nine months ended January 31, 2025, was $20,489,000, a substantial increase from $2,969,000 in the same period of 2024, indicating strong financial performance[16] - Operating income for the three months ended January 31, 2025, was $3,469,000, compared to a loss of $473,000 in the same period of 2024, demonstrating a turnaround in operational efficiency[13] - Consolidated operating income for the three months ended January 31, 2025, was $3.5 million, compared to an operating loss of $0.5 million in the same period of 2024[40] - For the three months ended January 31, 2025, total revenue was approximately $18.9 million, compared to $13.7 million for the same period in 2024, representing a year-over-year increase of 37.5%[41] - For the nine months ended January 31, 2025, total revenues increased by 25.5% to $49.8 million compared to $39.7 million in the same period of the prior year[63] Profitability Metrics - Gross margin for the three months ended January 31, 2025, improved to $8,285,000, compared to $3,104,000 in the prior year, reflecting a significant increase in profitability[13] - The gross margin for the three months ended January 31, 2025, improved to 43.8% from 22.6% in the same period of the prior year, reflecting a significant increase in revenue and completion of major milestones in a large space program[66] - The company recorded a net income of 81.4% for the three months ended January 31, 2025, compared to 0.9% in the same period of the prior year[62] Cash and Assets - Total current assets decreased to $50,148,000 as of January 31, 2025, down from $58,121,000 as of April 30, 2024, primarily due to a reduction in cash and cash equivalents[11] - Cash and cash equivalents at the end of the period were $6,871,000, down from $12,604,000 at the end of January 31, 2024, reflecting cash outflows from financing activities[16] - Restricted cash as of January 31, 2025, was approximately $1.4 million, an increase from $945,000 as of April 30, 2024[47] - Cash and cash equivalents totaled $5.5 million as of January 31, 2025, down from $18.3 million as of April 30, 2024[48] - The total identifiable assets increased to $86.4 million as of January 31, 2025, compared to $83.3 million as of April 30, 2024[40] Liabilities and Financial Stability - Total liabilities decreased to $34,592,000 as of January 31, 2025, compared to $43,437,000 as of April 30, 2024, indicating improved financial stability[11] - The company's consolidated working capital position was approximately $27.3 million as of January 31, 2025, with a current ratio of 2.2 to 1[79] Research and Development - Research and development expenses for the three months ended January 31, 2025, increased to $1,436,000, up from $958,000 in the same period of 2024, highlighting ongoing investment in innovation[13] - Research and development expenses for the three months ended January 31, 2025, increased by 49.9% to $1.4 million compared to $958,000 in the same period of the prior year, driven by modernization efforts[68] - The company plans to continue investing in research and development to enhance product competitiveness and modernization efforts[68] - The company plans to continue investing in R&D for space applications and may pursue acquisitions to expand its product range[84] Shareholder Returns - The company paid dividends totaling $9,567,000 during the nine months ended January 31, 2025, reflecting a commitment to returning value to shareholders[16] - The company declared a special cash dividend of $1.00 per share, totaling approximately $9.6 million, paid on August 29, 2024[25] - The company has authorized a share repurchase of up to $5.0 million, having repurchased approximately $3.9 million worth of shares as of January 31, 2025[83] - The company repurchased a total of 11,802 shares during the quarter ended January 31, 2025, with an average price of $18.42 per share, totaling approximately $1,138,718[103] - As of January 31, 2025, the company has approximately $1,350,172 worth of shares that may yet be purchased under the repurchase program[103] Taxation - The company recognized a discrete tax benefit of $11.8 million during the three months ended January 31, 2025, resulting in an income tax benefit of 330.6% for that period[52] - The nine months ended January 31, 2025, saw an income tax benefit of $11.6 million, with an effective tax rate of 129.3% on pretax income of $8.9 million[78] - The estimated annual effective tax rate for the fiscal year ending April 30, 2025, is 3.54%[74] - As of January 31, 2025, the company maintained a valuation allowance of $1.3 million against certain deferred tax assets due to the need for sufficient taxable income to utilize these attributes[53] Operational Changes - The company has terminated all commercial relationships with Morion, Inc. due to sanctions related to the Russia-Ukraine conflict, resulting in a complete write-off of the investment in Morion[43][46] - The company has established alternate sources of supply for items previously acquired from Morion and is capable of fabricating crystal blanks in-house[46] - The company incurred approximately $4.2 million of non-cash operating expenses for the nine months ended January 31, 2025, compared to $3.1 million for the same period in 2024[80] - There were no updates or changes to the company's risk factors since the filing of the Form 10-K[102] Backlog and Future Expectations - The company had a consolidated funded backlog of approximately $73 million as of January 31, 2025, with about 65% expected to be realized in the next twelve months[85] - The company expects to maintain consistent SG&A expenses throughout the remainder of fiscal year 2025[67]

Financial Data and Key Metrics Changes - For the nine months ended January 31, 2025, consolidated revenue increased to $49.8 million from $39.7 million in the same period of the prior fiscal year, reflecting a significant growth [12] - Consolidated net income for the nine months ending January 31, 2025, was $20.5 million or $2.18 per share, compared to $3 million or $0.32 per share in the previous fiscal year [22] - The company recorded an operating income of $8.5 million compared to $2.5 million in the prior year, indicating improved profitability [17][18] Business Line Data and Key Metrics Changes - Revenue from commercial and U.S. government satellite programs was approximately $28.8 million, or 58%, compared to $16.3 million, or 41%, in the same period of the prior fiscal year [13] - Revenues from non-space U.S. government and DoD customers decreased to $19.5 million from $21.1 million, accounting for approximately 39% of consolidated revenue compared to 53% in the prior fiscal year [13] - Other commercial and industrial revenues were $1.5 million for the nine months ending January 31, 2025, down from $2.3 million in the previous year [14] Market Data and Key Metrics Changes - The company’s backlog at the end of January 2025 was approximately $73 million, down from approximately $78 million at the previous fiscal year end [22] - The company continues to maintain a strong working capital position of approximately $27 million and a current ratio of approximately 2.2 to 1 [23] Company Strategy and Development Direction - The company aims to continue investing in R&D to modernize products and maintain a competitive edge in the market [17] - The focus is on adapting products for proliferated satellites and quantum sensing, which are expected to drive future growth [6][79] - The company is cautiously optimistic about new business opportunities in both legacy systems and quantum sensors [40] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company’s upward trajectory despite potential near-term uncertainties in the market [6] - The company believes that the increasing strategic importance in the industry and exposure to larger addressable markets will lead to higher revenue and profitability [6] - Management noted that while there may be delays in some government programs, they do not anticipate any eliminations of programs of interest [62] Other Important Information - The company is debt-free and believes its liquidity is adequate to meet operating and investing needs for the next 12 months [25] - SG&A expenses remained approximately 19% of consolidated revenues, with increases primarily due to payroll-related expenses [15] Q&A Session Summary Question: Inquiry about quantum sensing products and revenue expectations - Management indicated that there are no products available yet, but several development contracts are anticipated over the next year or two, with potential revenue generation [32] Question: Clarification on backlog and specific contracts - Management confirmed that part of the backlog includes revenue from a previously secured contract [46][48] Question: Discussion on R&D spending trends - R&D expenses decreased slightly percentage-wise, but not in dollar terms [50][52] Question: Update on government program participation - Management stated that they are currently working with two of the three remaining prime contractors on a GPS-related project [56][58] Question: Future opportunities in proliferated satellites - Management highlighted ongoing involvement in classified satellite programs and the need for investment to adapt products for space environments [78][79] Question: Financial resources for future investments - Management confirmed that they have adequate resources to invest cautiously in necessary areas [104][105] Question: Bidding environment and competition - Management noted a mix of new entrants and familiar faces in the bidding environment, particularly for proliferated satellite programs [111]

Financial Data and Key Metrics Changes - For the nine months ended January 31, 2025, consolidated revenue increased to $49.8 million from $39.7 million in the same period of the prior fiscal year, reflecting a significant growth [12] - Consolidated net income for the nine months ending January 31, 2025, was $20.5 million or $2.18 per share, compared to $3 million or $0.32 per share in the previous fiscal year [22] - The company recorded an operating income of $8.5 million for the nine months ending January 31, 2025, compared to $2.5 million in the prior year, indicating improved operational efficiency [17][18] Business Line Data and Key Metrics Changes - Revenue from commercial and U.S. government satellite programs was approximately $28.8 million, or 58% of total revenue, compared to $16.3 million, or 41%, in the same period of the prior fiscal year [13] - Revenues from non-space U.S. government and DoD customers decreased to $19.5 million from $21.1 million, accounting for approximately 39% of consolidated revenue compared to 53% in the prior fiscal year [13] Market Data and Key Metrics Changes - The company’s backlog at the end of January 2025 was approximately $73 million, down from approximately $78 million at the previous fiscal year-end [22] - The balance sheet reflects a strong working capital position of approximately $27 million at January 31, 2025, with a current ratio of approximately 2.2 to 1 [23] Company Strategy and Development Direction - The company aims to continue investing in R&D to modernize products and maintain a competitive edge in the market, particularly in quantum sensing and proliferated satellites [16][17] - Management emphasized the importance of adapting products for space environments, particularly for proliferated satellite systems, which require smaller, cheaper, and faster delivery solutions [77][79] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding future revenue growth, despite potential delays in government programs due to uncertainties in Washington [40][62] - The company believes it is well-positioned for growth in the medium to long term, particularly in the space and quantum sensor markets [65][66] Other Important Information - The company is debt-free and believes its liquidity is adequate to meet operating and investing needs for the next 12 months [25] - SG&A expenses remained approximately 19% of consolidated revenues, with increases attributed to payroll-related expenses and costs associated with the first Quantum Summit [15] Q&A Session Summary Question: Inquiry about quantum sensing products and revenue expectations - Management indicated that no products are currently available, but several development contracts are anticipated over the next year or two, with potential revenue generation [32][40] Question: Clarification on backlog and specific contracts - Management confirmed that part of the backlog includes revenue from a previously secured $11 million contract [46][48] Question: Discussion on R&D spending trends - R&D expenses decreased slightly as a percentage of revenue, but not in dollar terms [50][52] Question: Update on government program participation - Management stated that they are currently working with two of the three remaining prime contractors on resilient GPS programs [56][58] Question: Future opportunities in proliferated satellites - Management highlighted ongoing involvement in classified satellite programs and the need for investment to adapt products for space applications [77][79] Question: Financial resources for investment in product development - Management confirmed adequate financial resources for cautious investment in product development, while being mindful of changing government requirements [102][104] Question: Collaboration opportunities with government labs - Management is actively pursuing teaming agreements with government labs and other companies to enhance product offerings [108][109] Question: Bidding environment and competition - Management noted a mix of new entrants and familiar players in the bidding environment, particularly for proliferated satellite programs [110][112]

Financial Performance - For the three and nine months ended January 31, 2025, revenues were approximately $18.9 million and $49.8 million, representing increases of 38.6% and 25.5% compared to $13.7 million and $39.7 million for the same periods in fiscal year 2024[2] - Operating income for the three and nine months ended was $3.5 million and $8.5 million, compared to an operating loss of $0.5 million and operating income of $2.5 million for the same periods in fiscal year 2024[2] - Net income from operations for the three and nine months ended was $15.4 million or $1.60 per diluted share and $20.5 million or $2.14 per diluted share, compared to $0.1 million or $0.01 per diluted share and $3.0 million or $0.32 per diluted share for the same periods in fiscal year 2024[2] Margins and Expenditures - Gross margins were 44% for the quarter and 45% for the first nine months of FY2025, reflecting the company's efforts to deliver high-quality work[3] - R&D expenditures increased to 9% of revenue for the first nine months of FY2025, as the company expands its competitive capabilities in the proliferated satellite market and quantum sensors[4] Revenue Sources - Revenues from satellite payloads accounted for approximately $11.2 million or 59% and $28.8 million or 58% of consolidated revenues for the three and nine months ended January 31, 2025, compared to $6.8 million or 50% and $16.3 million or 41% for the same periods in the prior fiscal year[5] Backlog and Debt - The backlog at January 31, 2025 was approximately $73 million, down from $78 million at April 30, 2024[5] - The company remains debt-free and is confident in its ability to invest for profitable growth while maintaining flexibility for shareholder-oriented initiatives[4] Future Outlook - The company anticipates continued profitability and higher, more consistent margins going forward despite potential delays in contract awards due to changes in government funding[3] - The company is focused on diversifying its customer base and end-market exposure, particularly in smaller satellite programs and quantum sensing[3]

Core Insights - Frequency Electronics, Inc. reported significant revenue growth for the three and nine months ended January 31, 2025, with revenues of approximately $18.9 million and $49.8 million, respectively, compared to $13.7 million and $39.7 million for the same periods in fiscal year 2024 [1] - The company achieved operating income of $3.5 million and $8.5 million for the three and nine months ended, respectively, a notable improvement from an operating loss of $0.5 million and operating income of $2.5 million in the prior year [1] - Net income from operations for the three and nine months ended January 31, 2025, was $15.4 million ($1.60 per diluted share) and $20.5 million ($2.14 per diluted share), respectively, compared to $0.1 million ($0.01 per diluted share) and $3.0 million ($0.32 per diluted share) in the same periods of the previous fiscal year [1] Financial Performance - The gross margin for the third quarter was reported at 44%, and 45% for the first nine months of FY2025, reflecting the company's focus on high-quality work [2] - R&D expenditures increased significantly, accounting for 9% of revenue for the first nine months of FY2025, as the company expands its competitive capabilities in the proliferated satellite market and quantum sensing [3] - The backlog at January 31, 2025, was approximately $73 million, slightly down from $78 million at April 30, 2024, indicating a stable demand for the company's services [5] Revenue Breakdown - Revenues from satellite payloads constituted approximately 59% ($11.2 million) and 58% ($28.8 million) of consolidated revenues for the three and nine months ended January 31, 2025, respectively, up from 50% ($6.8 million) and 41% ($16.3 million) in the prior year [4] - Revenues from non-space U.S. Government/DOD customers were approximately 39% ($7.4 million) and 39% ($19.5 million) of consolidated revenues for the same periods, compared to 44% ($6.0 million) and 53% ($21.0 million) in the previous fiscal year [4] - Other commercial and industrial sales accounted for approximately 2% ($0.4 million) and 3% ($1.5 million) of consolidated revenues for the three and nine months ended January 31, 2025, down from 7% ($0.9 million) and 6% ($2.3 million) in the prior year [4] Strategic Outlook - The company anticipates continued profitability and is optimistic about winning several key programs in the upcoming quarters, despite potential delays due to changes in government funding and federal workforce reductions [2] - The focus on expanding into larger end-markets through increased R&D investment is expected to yield meaningful returns over time [3] - The company remains debt-free and is positioned to invest in profitable growth while rewarding employees and maintaining flexibility for shareholder initiatives [3]