Q3 2020 Earnings Call
[music].
Greetings and welcome to the frequency electronics third quarter fiscal year 2020 earnings release conference call. At this time all participants one in listen only mode. A brief question answer session will follow the formal presentation. If any once you require operated systems. During the conference. Please press Star then on the telephone keypad, everybody know discomfort with me.
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 could have any involve uncertainties that hold cause actual results to differ materially from the forward looking statements.
Factors that would cause or contribute to such differences are included in the Companys press releases and a 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 what changes after the date of the conference call.
It's now my pleasure to use your home button Sloane President and CEO. Please proceed sir.
Thank you.
Welcome everyone. Thank you for joining us today.
We start off with a few comments about operations.
Third quarter financial impact it principally by two issues.
Persuaded by the termination of a problem program, but it's been a source of persistent technical and financial issues.
Cleaning up this problem has been a focus for so much and I'm glad to now put it behind us.
That said I've also instituted some best practices, which I've taken from my experience in a couple of well run an aerospace companies to ensure we avoid the sort of problem in the future.
Revenue decreases the second issue for the core resulted in large part from Slippages in U.S. government funding to Brian contractors on space programs, where we are a potential supplier a frequency generation or conversion systems.
Well in several of these programs the prime contractors have been awarded the contracts, but they either we're not fully funded ward there had been extended negotiations regarding the technical baselines, resulting in delays of subcontract awards to us which of course impact timing of our revenue.
On some of these programs <unk> very strong position as the supplier of choice and it's simply a matter of timing.
I would have the total value of new business opportunities. We are pursuing continues to grow and is currently around $660 million.
That is the strongest leading indicator of future revenue and profit growth.
We have invested significant resources in R&D and infrastructure to position the company to win more than our fair share of these opportunities and deliver products and I'm confident that.
He will do both.
Overall I sets a renewed spirit after <unk> and a growing optimism about the future I can certainly assure you that's how I feel.
I should also comment on the Corona virus issue, which I know it was on everyone's mind. These days and to give you. Some comfort we have taken appropriate precautions here, including canceling business travel screener restricting visitors and arranging for employees, who may have been exposed to work from home.
We're also in discussions with our supply chain to ensure their no disruptions in the flow of parts and materials.
Remember as well that we've had not not had any involvement with operations outside the U.S. like China or Belgium for more than a year. So at the moment, we do not foresee any impact to our operations.
Now, let me turn things over to Steve Bernstein to take us through financial details for the quarter and we'll come back with questions after that.
Thank you Stan and good afternoon.
For the nine in three months ending January 31st 2020, consolidated revenue was 31.3 million and 9.6 million compared to 36.3 million and 13.2 million to the prior fiscal year. The components of revenue for the nine month period are as follows revenues.
From commercial and U.S. government satellite programs was 14.7 million.
Compared to 17.3 million for the same period of the prior fiscal year and accounted for approximately 47% of consolidated revenue compared to 48% for the same period the prior fiscal year.
Revenue on satellite payload contracts are recognized primarily on the percentage of completion method and the recorded only in the FBI New York segment.
Revenues from non space U.S. government and DSD customers, which are recorded in both the FBI, New York and FDIC for segments are 12.7 million compared to 17.1 million in the prior fiscal year and accounted for approximately 41% of consolidated revenue compared to 47% for the prior fish.
Full year.
Other commercial industrial revenues were 3.9 million compared to 2 million in the prior fiscal year intersegment revenues are eliminated in consolidation.
Third quarter revenue was impacted by the conclusion of a program that has been the source of consistent technical and cost issues. Following a mutual agreement with the end customer. This problem was terminated incurring a reduction to revenue of approximately 725000 during this quarter.
For the nine in three months periods ending January 31st 2020, gross margin was 5.9 billion and 3.1 million compared to 3.1 million and 4.1 million for the same periods of the previous fiscal year.
Gross margin rate decreased to 18.9% and 30.3% as compared to 34.1 and 31.1% for the same periods in fiscal 2019, the gross margin in gross margin rate decreased as compared to the same periods in fiscal 2019, principally due to the program describe.
But above as well as charges detailed in the previous quarters. Despite the current quarter charge. The gross margin rate for the three month period, ending January 30, Onest 2020 remains relatively comparable to the gross margin rate for the three months period ending January 31st 2019.
For the nine and three months period, ending January 31st 2020.
Selling general and administrative expenses increased compared to the same period in fiscal 2019 for the nine months ending January 31 to 2020, and 2019 SGN a expenses were approximately 26% and 22% respectively of consolidated revenues.
For the three months ended January 31st 2020 in 2019, SGN expenses were approximately 35% and 20% respectively of consolidated revenues.
The large increase bulk percentage in dollar amount during the three month period, ending January 30, Onest 2020 was due to increases in depreciation insurance expenses professional fees and payroll related expenses.
Research and development expenditures represent investments intended to keep the company's products at the leading edge of time and frequency technology and enhance future competitiveness. The R&D rate for the nine months ended January 30, Onest 2020 was 15% of sales compared to 14% of sales for the same period.
Over the previous fiscal year, the R&D rate for the three months ended January 31, 2020 was 10% of sales as compared to 14% of sales for the same period of the previous fiscal year.
For the nine at three months ended January 31, 2020, the company recorded operating losses of 7.3 million and 1.6 million compared to 540000 and 394000 for the prior fiscal year.
Other income consists primarily investment income derived from the company's holdings of marketable securities to the nine month period, ending January 31, 2020. Other income include a dividend of 250000 from Marianna compared to 105000 in the prior fiscal year other income expense in fiscal 2000.
19 also included certain miscellaneous income and the proceeds of an insurance policy.
This yields a pre tax loss for the nine months in three months period, ending January 31, 2020 of approximately $7 million and 1.6 million compared to a pre tax loss of approximately 168000 and 261000 for the prior year.
For the nine months ending January 31, 2020, the company recorded a tax provision to 48000 compared to 38000 for the same period of fiscal 2019.
For the nine months ended January 31, 2020, consolidated net loss was 7.1 million or 78 cents per diluted share compared to 168000 or two cents per diluted share for the same period of the previous fiscal year.
For the three months ended January 31, 2020, consolidated net loss was 1.6 million or 17 cents per diluted share compared to 321000 or four cents per diluted share for the same period of the previous fiscal year.
Our fully funded backlog at the ended January 2020 was approximately 36 million down approximately 4 million from the previous quarter. However, subsequent to quarter end. The company received over 3.5 million additional funding onto existing programs.
The company's balance sheet continues to reflect a strong working capital position of approximately $40 million at January 31, 2020 debt free and a current ratio of over 6.1 to one.
The company believes that its liquidity is adequate to meet operation investing needs for the next 12 months and the foreseeable future I will turn the call back to stand and we look forward to your questions later.
Thank you Steve.
We're going to call for questions. We would ask that you will please limit your questions to one.
And.
First of all trying to get to everybody and then if you have another question back into queue with that let me turn it back to the operator for today.
Thank you at this time, we will conduct a question answer session. If you would like to ask a question. Please press star 1 million telephone keypad.
Information total indicate your line is another question Q.
You May press Star too if you would like to remove your question from the Q.
For participations and speaking equipment, and maybe not decided to pick up your handset before president stocky, one moment, while we pull first question.
Our first question comes from Sam Rebotsky with FBR asset management. Please proceed with your question.
Hi, good afternoon span and Steve.
The revenue the revenue this 725000.
And.
The additional professional fees could you quantify the additional professional fees and the 725000, which is bad in addition to the 44 million that we charged in the previous quarter and presumably were finished with any special.
Charges in this current asset in the future quarters.
All right I'll answer the easier one for US a professional fees was a couple of hundred thousand dollars. The $725000 is part of accounting for based on six so six for the termination a a contract.
So it's too basically to reverse.
What was on the books remaining at the point of termination.
[noise], but is that related to the 4 million from the previous quarter now the Rins should've been 4 million seven and we had 4 million no not out the programs that we took losses on this this piece of the of the contract wasn't in that $4 million.
Okay Alright.
Yeah, I'll get back in the Q.
Our next question comes from Michael Eisner, a private Investor. Please proceed with your question.
Congratulations to Russell as chairman of the Board and my question is GPS to be yes, any update on that.
No we are progressing through the qual programs going pretty well in fact, a review that today.
And.
No other than just Tony is going well, there's not much else to report.
All right. Thank you.
You bet.
Once again to ask a question that star one on your telephone keypad.
Next question is a follow up from Sam Rebotsky with FBR. Please proceed with your question.
Your 660 million was about 160 million more.
Yeah and relative to the 7.2 million.
Is the 7.8 point 2 million funded and is there any chance of any sizable portion of the 660 million coming into play soon and then next three months six month what is the.
Timing of this.
Well I can.
Tell you that he timing is very difficult to predict with precision for the reasons that I cited.
In fact in the press release, so we don't control the government's a negotiated cycles and things like that so it's a bit of a difficulty too.
You know predict that with precision, but I'll tell you that on.
On two of those programs.
They are there.
We are believed in a single source position. So when they are awarded to the prime contractor or when they are definitive was when the government negotiates them than we would expect to get those contracts you know the best I can tell you is that will play out over the next few months.
That was I think part of your question was 7.2 those are funded poser.
The two contracts that we had in the press releases, what I think you referred to yeah. So if we had 36 million in another 7 million is the backlog 43 million.
Well, yes, but then you got to take away from it sales, but yes. You are that 7.2 was not included in that 36 million that I gave you.
Okay.
Can I ask any more questions I wish I get back into queue.
Okay. So the key would do 660 million do we see the government freeing up some thing and do we see.
Or the launch.
You know companies, whether its lockheed or its Northrop Grumman or is there why do we need to know what they're doing for them to is it that they have to allocated or is the government had the funded or.
And as far as the next couple of months do we expect something say before the end of the year, which would be April you know.
That we would see something going on.
That we know that we could be profitable going forward.
Most of our most of our work is as a second tier supplier to one of the big aerospace companies, but that's not 100%, but the bulk of it that way so for us to get a revenue couple of things up to happen. One is the government has the award the prime contracts to those large.
Aerospace companies [laughter] big the large aerospace companies.
I have to negotiate and definitized their contracts with the government. So from the time the government announces the selection to all the time the prime contractors are actually on contract can be extended periods of time could be it could be as short as a few weeks to be months.
Then those are the prime contractors have to negotiate with us that typically entails finalizing technical requirements as well as cost that can take also anywhere from a few weeks to a few months. So we don't control.
We control part of the second part of that part of that were responsible for but not the first part.
Alright, well good luck hopefully that some of these com contracts come into play. So you can be profitable life close. It appear it appears you need close to 12 million to breakeven and Oh would be nice if you could breakeven pretty soon and make some profits good luck.
Yes, absolutely agree with you yes. Thank you.
Our next question comes from put to John a private Investor. Please proceed.
Thank you first I'd like to congratulate management on getting to the 0.0 660 million of bids. It's it's really a it's a promising number.
And.
I'd like to expand a little aligned on stands question.
A few years back.
When management talked about the pot at the end of the Rainbow.
The the vision was maybe 100 million in sales in a year, 50% gross margin.
20% for selling and administrative 10% for her and de leaving 20% for pre tax.
And it would seem to me that you're you maybe on the doorstep of numbers like that.
What's your response to that and then and then.
I know you don't give guidance, but.
When do you think what what corridor in the.
Coming.
Future.
Would you think you to report a significant profit.
Oh, so a first of all of it because you covered a couple of things almost 660 million Oh, you know that.
What's important about that number I think.
Rather than whatever the immediate numbers is the trend.
And I think if youve followed us for last few quarters, you've heard that number consistently increase.
That's that's the result of a couple of things what was the.
Increases in defense spending, but more so from a focused effort here to expand the types and numbers of new business opportunities, we're pursuing and that's not an easy thing to do and it takes a lot of work, but we're starting to see the benefit of that you see that.
Number going up so I'm very encouraged by the SEC 60, I want to turn that 660 into you know billion EUR $2 billion, if I can do so.
In terms of trying to predict when the you know when we're going to get there I don't want to I don't want to do that because of.
Oh predictions always end up being wrong, but.
But I think again, what I would say three as you're going to watch the trend the trends much more important my objective is to is to focus on organic.
Growth and that that's both topline and Bottomline growth.
If if we could grow the business you know on the 10% order than your 100 million dollar numbers not far off so I'm working hard to do that I don't want to tell you that you know I'm going to do about a moral but but that's my objective and the whole team here is pulling to to take US there are so oh.
Standby.
Okay. Okay. Good luck my my other question is what's what's Martin blocks role at the company now.
Important is a a director.
Okay.
All right.
Okay. Thank you.
You bet.
Our next question comes from Michael Eisner, a private Investor. Please proceed with your question.
Hi, you are you guys able to comment on the value of the two sole source contracts.
That's two contracts you're talking about.
You mentioned two sole you waiting on Twoq sole source contracts it would be a.
Oh law Judge Defense company, Yeah, no because they're they're not [laughter], they're not defended ties were negotiated yet so I don't want to do that prematurely, but as soon as that is done we obviously will make press releases on those.
Well take a couple months anything I think he said.
You know.
If I could be more precise I would put that's probably about what we're talking about.
And.
Any update on an outcome.
Oh, the outcome is is doing well, but they have some new eat w. products and a one of their their big programs is a has to do with electronic warfare system for the U.S. Navy.
And Ah, that's that's going pretty well we've delivered the.
The initial products and they're going through evaluation. So we're at the moment, we're waiting for what's called a low rate initial production.
And what's that comes in the fall one would be full rate production.
That's a process that's going to play out over the next year too.
I'll take a year or two says that.
Yeah, It gets rolled that yes.
Alright, thank you.
Yep.
Thank you at this time I would like to turn the call back the management for closing comments.
Great. Thank you again, thanks, everybody for joining us a we look forward a with the increasing optimism in the future in 'em, we hope to assure that we'll look forward to talking to you next quarter. Thank you.
Thank you. This does conclude today's teleconference. You may disconnect. Your lines at this time and have a great day.
[music].
[music].
Greetings and welcome to the frequency electronics third quarter fiscal year 2020, <unk> earnings release conference call. At this time opposite suppose one in listen only mode. <unk> question answer session will follow the formal presentation. If anyone should require operated sister stores.
That's please press Star then one on the telephone keypad as everybody under this contract we 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 could have really involve uncertainties that hold cause actual results could differ materially from the forward looking statements.
Factors that will cause or contribute to such differences are included in the Companys press releases and a 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 well revisit what changes after the date of the conference call.
It's now my pleasure to do show, it's gotten Sloane President and CEO. Please proceed sir.
Thank you.
Welcome everyone. Thank you for joining us today.
We start off with a few comments about operations.
Third quarter financial impact it principally by two issues for sleep by the termination of a problem program that has been the source of persistent technical and financial issues.
Turning up this problem has been a focus for some months, but I'm glad to now put it behind us.
That said.
So instituted some best practices, which I've taken from my experience in a couple of well run aerospace companies to ensure we avoid the sort of problem in the future.
Revenue decreases the second issue for the core.
Resulted in large pork from Slippages in U.S. government funding to Brian contractors on space programs, where we already potential supplier a frequency generation or conversion systems.
Several of these programs to prime contractors have been awarded the contracts, but they either we're not fully funded or there have been extended negotiations regarding technical baselines.
Resulting in delays of subcontract awards to us, which of course impact timing of our revenue.
Well some of these.
Programs FBI isn't very strong position as the supplier of choice and it's simply a matter of timing.
I would have to total value of new business opportunities. We're pursuing continues to grow and is currently around $660 million.
That is the strongest leading indicator of future revenue and profit growth.
We have invested significant resources in R&D and infrastructure to position the company to win more than our fair share of these opportunities and deliver products and I'm confident that we will do both.
Overall, I sets, a renewed spirit and after <unk> and a growing optimism about the future I can certainly assure you that's how I feel.
I should also comment on the Corona virus issue, which I know is on everyone's mind. These days and to give you. Some comfort we have taken appropriate precautions here, including canceling business travel screener restricting visitors and arranging for employees, who may have been exposed to work from home.
We're also in discussions with our supply chain to ensure their no disruptions in the flow of parts and materials.
Remember as well that we've had not not had any involvement with operations outside the U.S. like China or Belgium for more than a year. So at the moment, we do not foresee any impact to our operations.
Now, let me turn things over to Steve Bernstein to take us through financial details for the quarter and we'll come back with questions after that.
Thank you Stan and good afternoon.
For the nine at three months ending January 31st 2020, consolidated revenue was 31.3 million and 9.6 million compared to 36.3 million and 13.2 million to the prior fiscal year. The components of revenue for the nine month period are as follows revenue.
Use from commercial and U.S. government satellite programs was 14.7 million compared to 17.3 million for the same period of the prior fiscal year and accounted for approximately 47% of consolidated revenue compared to 48% for the same period of the prior fiscal year.
Revenue on satellite payload contracts are recognized primarily on the percentage of completion method and recorded only in the FBI New York segment.
Revenues from non space U.S. government and DRG customers, which are recorded in both the FDI, New York and FDIC for segments are 12.7 million compared to 17.1 million in the prior fiscal year and accounted for approximately 41% of consolidated revenue compared to 47% for the prior.
Full year other commercial industrial revenues were 3.9 million compared to 2 million in the prior fiscal year intersegment revenues are eliminated in consolidation.
Third quarter revenue was impacted by the conclusion of a program that has been the source of consistent technical and cost issues. Following a mutual agreement with the end customer. This problem was terminated incurring the reduction to revenue of approximately 725000 during this quarter.
For the nine in three months periods ending January 30, Onest 2020, gross margin was 5.9 billion at 3.1 million compared to 3.1 million and 4.1 million for the same periods over the previous fiscal year.
Gross margin rate decreased to 18.9% and 30.3% as compared to 34.1 and 31.1% for the same periods in fiscal 2019 gross margin in gross margin rate decreased as compared to the same periods in fiscal 2019, principally due to the program describe.
But above as well as charges detailed in the previous quarters. Despite the current quarter charge. The gross margin rate for the three month period, ending January 30, Onest 2020 remains relatively comparable to the gross margin rate for the three months period, ending January 31 2019.
For the nine and three months period, ending January 30, Onest 2020.
Selling and general administrative expenses increased compared to the same period in fiscal 2019.
For the nine months ending January 31, 2020, and 2019, SGN expenses were approximately 26% and 22% respectively of consolidated revenues.
For the three months ended January 31, 2020 in 2019, SGN expenses were approximately 35% and 20% respectively of consolidated revenues.
Large increase bulk percentage in dollar amount during the three month period, ending January 31, 2020 was due to increases in depreciation insurance expense and professional fees and payroll related expenses.
Research and development expenditures represent investments intended to keep the company's products at the leading edge of time and frequency technology and enhance future competitiveness. The R&D rate for the nine months ended January 30, Onest 2020 was 15% of sales compared to 14% of sales for the same period.
Of the previous fiscal year, the R&D rate for the three months ended January 31, 2020 was 10% of sales as compared to 14% of sales for the same period of the previous fiscal year.
For the nine at three months ended January 31, 2020, the company recorded operating losses of 7.3 million and 1.6 million compared to 540000 and 394000 for the prior fiscal year.
Other income consist primarily investment income derived from the company's holdings of marketable securities.
The nine month period, ending January 31, 2020. Other income include a dividend of 250000 from Morgan compared to 105000 in the prior fiscal year. Other income expense in fiscal 2019 also included certain miscellaneous income and the proceeds of an insurance policy.
This yields a pre tax loss for the nine months in three months period, ending January 31, 2020 of approximately $7 million and 1.6 million compared to a pre tax loss of approximately 168000 and 261000 for the prior year.
For the nine months ending January 30, Onest 2020, the company recorded a tax provision to 48000 compared to 38000 for the same period of fiscal 2019.
For the nine months ended January 31, 2020, consolidated net loss was 7.1 million or 78 cents per diluted share compared to 168000 or two cents per diluted share for the same period of the previous fiscal year.
For the three months ended January 30, Onest 2020, consolidated net loss was $1.6 million or 17 cents per diluted share compared to 321000 or four cents per diluted share for the same period of the previous fiscal year.
Our fully funded backlog at the end of January 2020 was approximately 36 million down approximately 4 million from the previous quarter. However, subsequent to quarter end. The company received over 3.5 million additional funding onto existing programs.
The company's balance sheet continues to reflect the strong working capital position of approximately $40 million at January 30, Onest 2020 debt free and a current ratio of over 6.1 to one.
The company believes that its liquidity is adequate to meet operation investing needs for the next 12 months in the foreseeable future I will turn the call back to span and we look forward to your questions later.
Thank you Steve.
We're going to call for questions. We would ask that you. Please limit your questions to one.
And in the interest of trying to get to everybody and then if you have another question back into queue with that let me turn it back to the operator for today.
Thank you at this time, we will conduct a question answer session. If you would like to ask a question. Please press star one telephone keypad.
Information to imitate your line is on a question Q.
You may prestart tools, we would like to remove your question from the Q.
For participations and speaking equipment, and maybe not to start to pick up your handset before present. This bulky one moment, while we pull first question.
Our first question comes from Sam Rebotsky with FBR asset management. Please proceed with your question.
Good afternoon span and Steve.
The revenue the revenue this 725000.
And.
The additional professional fees could you quantify the additional professional fees and the 725000 wins that in addition to the 44 million that we charge than the previous quarter and presumably were finished with any special.
Well again in this current.
In the Q2 quarters.
[music].
All right I'll answer the easier when president professional fees was a couple of hundred thousand dollars.
The $725000 is part of accounting for based on six so six for the termination of the contract. So it's too basically to reverse.
What was on the books remaining at the point of termination.
But is that related to the 4 million from the previous quarter now the rent should have been 4 million seven and we had 4 million no not at out the programs that we took losses on this this piece of the of the contract Wasnt in that $4 million.
Okay Alright.
I'll get back in the Q.
Okay.
Our next question comes from Michael Eisner, a private Investor. Please proceed with your question.
Congratulations to Russell as chairman of the board.
My question is GPS VF any update on that.
No we are progressing through the qual programs going pretty well in fact, a review to today.
And.
Other than just Tony is going well, there's not much hills to report.
All right. Thank you.
You bet.
Once again to ask a question does star one on your telephone keypad.
His questions a follow up from Sam Rebotsky with FBR. Please proceed with your question.
Your 660 million was about 160 million more.
And relative to the 7.2 million.
Is the 7.8 point 2 million funded and is there any chance of any sizable portion of the 660 million coming into play soon and then next three months six months what is the.
Timing of this.
Ill.
I can.
Tell you that the timing is very difficult to predict with precision for the reasons that I cited.
In fact in the press release, so we don't control the government's negotiated cycles and things like that so it's a bit of difficulty too.
Predicts that with precision, but I'll tell you that on.
On two of those programs.
There there.
We are believed in a single source position.
So when they are awarded to the prime contractor.
Or when they are definitive was when the government negotiates them.
Than we would expect to get those contracts.
The best I can tell you is that will play out over the next few months.
That was I think part of your question. The 7.2 those are funded poser.
The two contracts that we had in the press releases, what I think you referred to yes. So if we had 36 million in another 7 million is the backlog 43 million.
Well, yes, but then you've got to take away from its sales, but yes, you're that 7.2 is not included in that 36 million that I gave you.
Okay.
Can I ask any more questions or should I get back into queue.
Go ahead.
Okay. So the key would the 660 million do we see the government.
Freeing up some thing and do we see.
The launch.
Companies, whether its lockheed or its Northrop Grumman or is there why do we need to know what they're doing for them to is it that they have to allocated or is the government has funded or.
And as far as the next couple of months.
We expect something say before the end the year, which would be April.
[music].
That we would see something going on.
That we know that we could be profitable going forward.
Most of our most of our work is as a second tier supplier to one of the big Aerospace companies, that's not a 100%, but the bulk of it does that way so for us to get.
Revenue couple of things up to happen one is the government has the.
Award the prime contracts to those large aerospace companies.
The large aerospace companies.
Have to negotiate and definitive as their contracts with the government. So from the time the government announces the selection to all the time the prime contractors are actually on contract can be extended periods of time could be it could be as short as a few weeks can be months.
Then those the prime contractors have to negotiate with us.
Typically entails finalizing technical requirements as well as cost that can take also anywhere from a few weeks to a few months.
So we don't control.
We control part of the second part of that part that worse.
Possible for but not the first part.
Alright, well good luck hopefully that some of these com contracts come into play. So you could be profitable like of course. It appear appears you need close to 12 million to breakeven and it would be nice if you can breakeven pretty soon and make some profits good luck.
Yes, absolutely agree with you.
Q.
Our next question comes from Richard John a private Investor. Please proceed your question.
Thank you.
First I'd like to congratulate management on getting to the point of 660 million of bids. It's it's really.
It's a promising number.
And.
I'd like to expand a little aligned on stands question.
[music].
A few years back when management talked about the part at the end of the Rainbow.
The division was maybe a 100 million in sales in a year, 50% gross margin.
20% for selling and administrative 10% for R&D, leaving 20% for pre tax.
And.
It would seem to me that you're maybe on the doorstep of numbers like that.
What's your response to that and then.
I know you don't give guidance, but.
When do you think what what quarter in them.
Coming.
Future.
Would you think you to report a significant profit.
Okay.
So.
First of all because you covered a couple of things on the 660 million.
That.
What's important about that number I think.
Rather than whatever the immediate numbers is the trend.
And I think if youve followed us for last few quarters, you've heard that number consistently increase.
That's the result of a couple of things one as the.
The increases in defense spending.
But more so from a focused effort here to expand.
Types and numbers of new business opportunities we're pursuing.
That's not an easy thing to do and.
Takes a lot of work, but we're starting to see the benefit of that you see that number going up so.
I'm very encouraged by the 660 I want to turn that 660 into.
Billion EUR $2 billion, if I can do so.
In terms of trying to predict when the when we're going to get there I don't want to I don't want to do that because.
Oh productions always end up being wrong, but.
I think again, what I would say to is going to watch the trend the trends much more important my objective is to his focus on organic growth.
Growth and that that's both topline and bottom line growth.
If if we could grow the business you know well in the 10% order than your 100 million dollar numbers not far off so.
I'm working hard to do that I don't want to tell you that I'm going to do about a moral but.
But thats my objective.
The whole premier is pulling the to take us there so.
Bye bye.
Okay. Okay. Good luck my my other question is what's what's Martin Bloch throw at the company now.
Martin as a director.
Okay.
Okay. Thank you.
You bet.
Our next question comes from Michael Eisner, a private Investor. Please proceed with your question.
Hi, you you guys able to comment on the value of the two sole source contracts.
Just two contracts we talking about.
You mentioned two sole you waiting on Twoq sole source contracts it would be.
Oh Lodge at Defense Company.
No because theyre they're not.
They are not definitized are negotiated yet so I don't want to do that prematurely, but as soon as that is done we obviously will make press releases on those.
We'll take a couple of months say state I think he said.
Hello.
If I could be more precise I would put that's probably about what we're talking about.
And.
Any update on outcome.
Oh the outcome is.
Doing well, but they have some new efw products and.
One of their their big programs.
His oh.
Chronic warfare system for the Us Navy.
And that's that's going pretty well we delivered the.
Initial products and.
There are going through evaluations or at the moment, we're waiting for what's called the low rate initial production.
And what's that comes in the following would be full rate production.
Thats a process thats going to play out over the next year too.
I'll take a year or two says that.
Yes, it gets rolled that yes.
Alright, thank you.
Thank you at this time I would like to turn the call back to management for closing comments.
Great. Thank you.
Again, thanks, everybody for joining us.
We look forward.
With increasing optimism to the future and.
Sure that we'll look forward to talking to you next quarter. Thank you.
Thank you. This does conclude today's teleconference. You may disconnect. Your lines at this time and have a great day.