Company Overview - Frequency Electronics, Inc. (FEI) 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 satellite payloads and various commercial, government, and military systems, including C4ISR, electronic warfare, missiles, UAVs, aircraft, GPS, secure communications, and energy exploration [4] - FEI has received over 100 awards for excellence in providing high-performance electronic assemblies for more than 150 space and Department of Defense (DOD) programs [4] Upcoming Events - Frequency Electronics will hold a conference call to discuss its fiscal year 2025 results on July 10, 2025, at 4:30 PM Eastern Time [1] - The call will be accessible via webcast on the company's Investor Relations website and through a dedicated phone line for both domestic and international callers [2] Financial Information - A telephone replay of the archived call will be available for one week following the call, with specific domestic and international numbers provided for access [3] - The call can also be accessed via a link on the company's website until September 10, 2025 [3] Mission Statement - The company's mission is to transform research discoveries into practical products, emphasizing excellence and creating value for customers, employees, and stockholders [4]

Core Viewpoint - Frequency Electronics, Inc. has been added to the Russell 3000 and Russell 2000 indexes, marking a significant milestone for the company and enhancing its visibility among institutional investors [1][2]. Company Overview - Frequency Electronics, Inc. is a leader in precision timing and frequency control products, serving both space and terrestrial applications [4]. - The company’s products are utilized in various sectors, including satellite payloads, military systems, and secure communications [4]. - Frequency Electronics has received over 100 awards for excellence in high-performance electronic assemblies for more than 150 space and Department of Defense programs [4]. Market Impact - The inclusion in the Russell indexes is expected to provide expanded access to capital markets and increased liquidity for shareholders [2]. - Approximately $10.6 trillion in assets are benchmarked against Russell's US indexes, indicating the significance of this inclusion for the company [3]. Index Membership Details - Membership in the Russell 3000 Index is determined by market capitalization rankings and style attributes, and it remains in place for one year [2]. - Automatic inclusion in either the large-cap Russell 1000 or small-cap Russell 2000 indexes is a direct result of being part of the Russell 3000 [2].

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 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 capabilities in GPS-denied environments [1][2][3]. Group 1: Company Overview - Frequency Electronics, Inc. is a leading provider of precision timing and frequency technology, focusing on high precision timing, frequency generation, and RF control products for various applications including space and terrestrial uses [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]. 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][4]. - 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 importance of quantum sensing in 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]