Frequency Electronics Inc Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: George Marema - Pareto Ventures - Analyst : Yeah. Hi. Thank you. Tom, the -- I want to ask a little bit more about this technology. Well, first, are you guys working on any MEMS technology instead of crystal oscillation technology?

Question: George Marema - Pareto Ventures - Analyst : If you can say whether or not, do you have any involvement in the DARPA chip-scale atomic clock work? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 10, 2024 / 8:30PM, FEIM.OQ - Q1 2025 Frequency Electronics Inc Earnings Call

Question: George Marema - Pareto Ventures - Analyst : Steve. But on the R&D expenses this quarter, can you illuminate some of that? It kind of went up, looks like about $1 million year over year. Is there any onetime aspects to that? Or is that a run-rate we should expect? Or can you give some commentary about the R&D line?

Question: George Marema - Pareto Ventures - Analyst : So it looks like this quarter was let's just call it, $1.5 million to round off. What would be sort of a -- well, how much of the $1.5 million would you say is more sort of nonsteady state of that? Just -- I guess the spirit of the question is to try to get some like for the full year anchoring of expectations there, roughly.

Question: George Marema - Pareto Ventures - Analyst : Okay. That's helpful. This gives some idea. And then the same for selling and administrative, didn't go up that much, but it's up like $500,000 year over year. Is there anything unusual about the quarter? Or is that sort of a steady state now?

Question: George Marema - Pareto Ventures - Analyst : Yeah. Okay. And the gross margins were really nice this quarter. I know you mentioned in the commentary, I think Steve mentioned that there were some smaller projects with some higher margin. And then in the press release, you talked about -- I forget the exact wording, but sort of higher margins and profits as the year went on. I'm assuming you're not talking about gross margins increasing from here. Are you? This seems like a pretty high number.

Question: George Marema - Pareto Ventures - Analyst : Okay. And my last one before I go. The TAM on these new projects, the addressable markets are very large. If you doing, say, $60 million, $70 million run-rate of revenue these days, what sort of capacity do you guys have currently to grow into these addressable markets? A plant and equipment kind of standpoint?

Question: George Marema - Pareto Ventures - Analyst : Okay. Thank you, Tom. I'm very excited about your direction. Thank you.

Question: Jon Gruber - Gruber & Mcbaine Capital Management - Analyst : Good afternoon. Is there any large contracts you're expecting to win or being (technical difficulty) when are you going to be able to replenish that? And -- REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 10, 2024 / 8:30PM, FEIM.OQ - Q1 2025 Frequency Electronics Inc Earnings Call

Question: Jon Gruber - Gruber & Mcbaine Capital Management - Analyst : Yeah, that's good news. Could you take us through what some of the projects you're hoping to win here over the next quarter, which will -- which are decent size, which will help the orders?

Question: Jon Gruber - Gruber & Mcbaine Capital Management - Analyst : Okay. Thank you.

Question: George Marema - Pareto Ventures - Analyst : Yeah. Thanks. Steve, I just have a little ticky-tacky question. For fiscal '25, what kind of tax rate are you thinking about?

Question: George Marema - Pareto Ventures - Analyst : Low single-digit percent?

Question: George Marema - Pareto Ventures - Analyst : Okay. Thanks, Steve.

Question: Tim Hasara - Sinnet Capital LLC - Analyst : Yes. Congratulations again on the gross margin. When I went over the last year's transcript, you called out a onetime contractual adjustment that benefited gross margins a year ago by 8%, which would have made that 31.1% or 31.2%, let's say. And even the operating income was about $1 million, about $0.10 or $0.11. Any particular reason why you didn't call that out today and mentioned that?

Question: Tim Hasara - Sinnet Capital LLC - Analyst : That's Q4 -- no, that was Q1, I believe. A year ago.

Question: Tim Hasara - Sinnet Capital LLC - Analyst : Yeah. Okay. And then the -- just with respect to the backlog, the three contracts you announced last November, I would assume that there'd be -- you're still sort of in the beginning stages of that, but that backlog should probably be funded over the next few quarters as well? I know that's what would be an unfunded backlog, but that's I would assume from the last call or so that, that would be coming through here shortly. Would that be accurate?

Question: Tim Hasara - Sinnet Capital LLC - Analyst : Sounds good. And then I guess with respect to -- you made a comment in the beginning of the press release about some of the newer programs being funded. Are you -- can you give a little bit more color on that? Are you referring to a government funding of a particular contract versus your own R&D? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 10, 2024 / 8:30PM, FEIM.OQ - Q1 2025 Frequency Electronics Inc Earnings Call

Question: Tim Hasara - Sinnet Capital LLC - Analyst : Okay. Understood. And I guess following up on my first comment about the gross margins. I'm reading from your first quarter '24 comments, you're saying there, the onetime month -- three months ended July 31, '23, there are onetime contractual and other adjustments that also benefited gross margin rate by approximately 8%. My only point is versus a year ago, you really did a -- on the year ago call but didn't spell it out here. So just to comment there.

Question: George Marema - Pareto Ventures - Analyst : Yeah. Hi. Tom, I was wondering if you could talk a little bit more about this quantum sensor area. In terms of -- like do you currently have product? Or what's the product roadmap? And what sort of addressable market do you think there is on that and just sort of timing of that? Just a little more illumination on this area?

Question: George Marema - Pareto Ventures - Analyst : Okay. That's great. Thank you.