Full Year 2020 Frequency Electronics Inc Earnings Call
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Greetings welcome to frequency electronics fiscal year 2020.
Fourth quarter, and your and earnings release Conference call. At this time, all participants are no listen only mode. It brief question answer session will follow the formal presentation. If anyone's your car operator assistance during the conference. Please press Star Zero on your telephone Keypad. As reminder, this conference is being recorded.
Any statements made by the company during this conference call regarding the future constitute forward looking statement pursuant to the Safe Harbor provisions of the private Securities Litigation Reform Act of 1995, such statements inherently involve uncertainties that could cause actual results to differ materially for.
Forward looking statements.
Doctors would cause or contribute to such differences are included in the company's press releases are further detailed in the company's periodic report filings with the Securities and Exchange Commission by making these forward looking statements. The company undertakes no obligation to update these statements for revisions or changes after the date.
At this conference call. It is down my pleasure to introduce your host Stanton Sloane President and CEO.
Thank you jury.
Welcome everyone. Thank you for joining us today.
I hope everyone from Wells Fargo pandemic.
We have no reported for square 2020 results I'll, just say it was difficult your no I'm glad to put it behind us.
A combination of issues impacted us last fiscal year, some of which we have previously discussed.
Late in the year, we are they got it impacts related to cope with 19 legal expense and reserve for a note that was due to us.
Backlog for 2020 was down approximately $1 million. However, we did book is significant contract earlier. This month this month, which we announced on July 1st.
Let me comment on covert 19 issues would you back to those mostly in Q4.
Well, we have little impact where operations in New York, We did experience delays and award of new contracts, which we attribute to government and prime contractor administrative process to ways.
We also had impacts from vendors and or supply chain, either being unable to deliver critical materials on time, we're having quality issues, which resulted from some of their key personnel being out due to direct or indirect covert 19 impacts.
Unfortunately, when this happens resulted in increased cost to us for either additional processing or for rework of materials.
When there were delays it affects revenue recognition gross margin and obviously operating income which is reflected in these financials.
More importantly, however, we have lost no employees to the pandemic dozens central industry. Most of our employees have been here at work through the duration and their health and safety is of course of Paramount importance.
In Q4, we continue to work through the programs that have had our development related costs, which we have previously discussed.
Those three problem programs. One is completed now one is nearing completion with initial products delivered in working extremely well and what does in the acceptance test cycle.
In summary, we should have all three these bought up these behind us in about three months.
Let me shift gears here and talk about the future of that I'm sure. You. All saw the announcement on July 1st of a significant contract award, which I mentioned earlier.
We're now currently negotiating an additional contract, which we've been selected and which is also significant.
I'm optimistic we'll be able to successfully conclude these negotiations and announced the award sometime soon.
Well there is no guarantee but this will happen I am encouraged by progress.
It is important to point out that revenue is key to improving our financial performance.
New business activity, which is robust is the best leading indicator of revenue growth.
This fiscal year is very different from previous years and that most of the new contracts that are needed to generate revenue. This year are either awarded or are imminent.
Versus being planned later in the year and that reduces the risk associated with revenue recognition.
In order to meet these new contract demands. We're currently hiring personnel in both engineering and manufacturing.
I also wanted to mentioned that we've had significant progress on key programs, which we we were previously awarded that relate to the GPS satellite program.
Both of these contracts are key to future business growth and both are on track.
One of them successfully completed a critical design review last week got very high marks one of the customer and the initial engineering model for the other program is progressing very well through the development process.
Well the fiscal year 2020 financials are what they are I am encouraged by progressively and I'm convinced that our future is brightening considerable.
Let me know turn things over to Steve for review of financial details Steve.
Thank you Stan and good afternoon.
Fiscal 2008 consolidated revenue was 41.5 million down 16% compared to 49.5 billion for the prior fiscal year. The components of revenue are as follows revenue from commercial and U.S. government satellite programs was 20.4 million compared to 22.8 million the same.
Period of the prior fiscal year and accounted for approximately 49% of consolidated revenues compared to 46% for the same period of the prior fiscal year revenues on satellite payload contracts are recognized primarily under the percentage of completion method I know recorded only in the FBI New York segment.
Revenues from non space U.S. government and do you go de customers, which are recorded in both the FBI, New York and FDIC for segments are 16.9 million compared to 22.8 million in the prior fiscal year and accounted for approximately 41% of consolidated revenue compared to 46% for the pro.
Fiscal year other commercial and industrial revenue was 4.2 million compared to 3.9 million in the prior fiscal year intersegment revenues are eliminated in consolidation.
For fiscal 20 gross margin was 5.8 million compared to 15.8 million, but the prior fiscal year gross margin rate decreased to 13.9% as compared to 31.9% for the same period in fiscal 2019.
The lower gross profit and gross profit percentage was the result of lower revenues and was impacted by increases in engineering cost incurred on several programs, which are in the development phase and wishing counted unanticipated technical challenges related to customer driven system packaging and environmental requirements for state of the arc performance demand.
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In fiscal <unk> years, 20, and 19, selling and administrative expenses were 28% and 24% respectively of consolidated revenue.
The actual dollar value of the expense decreased compared to the same period of the prior fiscal year.
That's DNA increased as a percentage of consolidated revenues due to the jury decrease in revenue.
<unk> expense in fiscal 19 included a one time charge of approximately $1 million for the loss associated with the sale of that the Asia depreciation and professional fees were up. This year. However, we expect that are do you know coverage will cover a percentage of the legal fees.
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 fiscal 2008 was 12% of sales compared to 13% of sales for the previous fiscal year the upper.
Oximetry 1.4 million dollar decrease in R&D expense year over year reflects a higher level of customer funded R&D as a portion of the total R&D effort.
These R&D efforts address large business opportunities and secure communications commanding control and satellite systems that require advanced technologies and capabilities going forward.
For fiscal 2008, the company recorded an operating loss of 10.9 million compared to 2.8 million for the prior fiscal year. The increase in the operating loss in the current fiscal year as a result of decreased revenue as well as increased costs related to technical challenges uncertain programs and the development phase.
Other income consists primarily of an investment derived income from the company's holdings of marketable securities earnings on Securities May vary based on fluctuating interest rates dividend payout levels and the timing of purchases sales redemptions or maturity of securities included in other expenses for fiscal.
A year ended April Thirtyth 2020 is it provision related to a 1 million dollar note receivable from the sale of July which is due in fiscal 21.
This yields a pre tax loss for fiscal 20 of approximately 11.7 million compared to a pre tax loss of approximately 2.5 million for the prior year.
For the fiscal year ended April 32020, the company recorded a tax benefit of 1.7 million compared to a tax provision of 56000 for fiscal 19.
For fiscal year ended April 32020, consolidated net loss was 10 million or $1.10 per diluted share compared to a net loss of 2.5 million or 28 cents per diluted share.
Our fully funded backlog at the end of April 2020 was approximately 36 million down approximately a million dollars from the previous year. However, subsequent to year end.
We announced a significant contract win and expect to announce additional wins in the near term.
The company's balance sheet continues to reflect the strong working capital position of approximately 38 million at April Thirtyth 2020, and a current ratio of approximately four to one.
The company believes that its liquidity is adequate to meet its operating in investing needs for the next 12 months and if at the same fias foreseeable future I return the call back to stand and we look forward to your question soon.
Thank you Steve with that we'll be happy to take some questions. We would ask you to please limit yourself to one question and with that I'll turn it back to the operator will explain how to get your question to Sherry.
Thank you if he would like to ask a question. Please press star one on your telephone keypad and confirmation Tele indicate your line is in the question Kim.
You May press Star too if you would like to remove your question for like you and for participants using speaker equipment and made the necessary to pick up your handset before pressing the star. He is our first question is from.
Brett Reece with Janney Montgomery Scott. Please proceed.
Yeah, Hi, Dan Hi, Steve Hi, Hi, Hi.
Yeah in the past calls you stated.
The amount of proposals outstanding I think on the last call it with 660 million.
I guess you subtract the 28.6 million. So do we have 631 million in proposals out outstanding or yeah. Presently no. It's actually closer to 690 million, but but you got to be really careful with that number Brett the changes daily stuff goes into and out of.
The of the Q, if you will so oh the current the current number is around 688, if I remember.
Exactly.
But that's likely to change.
Hi, good just to follow up on that and I'll drop back in queue could you know I respect your Ah, yes, you're a protocol.
Base case scenario, what percentage of that 688 become from business.
Sure.
Frequency.
A very difficult to answer that question, obviously, we're trying to convert all that but.
You're not going 100% of all the opportunities sold also sometimes programs get cancelled or.
Or restructured or whatever so.
Part for me to give you a number.
Okay, I'm going to drop back a guy I'm sure you've got some other.
Ah Ah Cross examiner.
Okay.
Our next question itself from Sam Rebotsky, what I see our asset management. Please proceed.
Yeah. Good afternoon, a stand then Steve.
Huh.
It is far is the 36 million funded and 29 million funded what ever you have a.
Utilized in the quarter ending July.
65 million funded that would disappear.
That you would be ready to make a profit.
In one of the next quarters and with the other contracts coming up.
Being pretty serious it would be appear that you're going to being profitable in the.
Your 20 2021.
So Sam you know group. So we do not give guidance, but let me just say couple of things I tried to point this out in my and my commentary.
The the business is very revenue sensitive and given these recent wins and my expectation is that the revenue will trend upwards.
Obviously that helps the bottom line performance. We're we're working hard obviously to up to make to place profitable and that's my objective.
So you know I'm encouraged by what I see in the way of new business activity.
And do my best to make sure that that produces improving result.
Just a little follow up but relative to the funded do we expect this 65 million to be complete in the year 2021, or what is the timeframe. We expect this 65 million to be completed it didnt.
And so I'm not sure we're going to 65 million from Sam, but let me, let me back up and so I think you might be referring to the contract Oh announcement from July 1st which was $28.6 million. That's not all funded that's that though if you read that release that wouldn't.
Clued auctions, which are not exercised so that again doesn't I don't know how you get to 65, but you mentioned so that's how much of the 29 is funded.
I think it's about three and a half three initial funding with about three and a half million dollars.
Okay. Okay quick site I took the 36 I assume the 29 was funded and ER and but you're saying only three when do we find out the funding of the 29 million Asami, Let me look up the if I can help you hear so ah so funding or sometime.
Did you get a contract, but let me give you. An example, not this specific contract. Hypothetical example, you get a contract to $10 million.
That has an option for another $10 million. So the total contract value would be $20 million.
The the based contract for the $10 million or may not be fully funded.
At the onset so in other words, you get a contract for $10 million, they only put $2 million a funding against it but you do have contract for $10 million. They just funded incrementally that's very typical of our contracts. So Oh, you know in the backlog Rowley really telling you what is actually funded but that doesn't mean.
That we don't have additional contract value and that debt and then on top of that we have other options.
Okay, So maybe that make things a little bit clear for you.
Okay, I I'll come back to the Q.
Okay.
Our next question is from Michael is there a private investor. Please proceed.
The how you guys doing.
Doing great Michael. Thank you how are you hi that to me problem contracts now.
How much she thing is that kind of affect our earnings in this and this first quarter.
So oh, just give you my confidence level one of them I said is complete and that that is complete that's behind us.
The one was a complete.
There's three contracts that we talked about right because number one was island was that completed and yearend well what in the first quarter two months ago.
Oh that once complete the we have one that that is not complete but we have delivered the initial units. So the the risk associated with the with engineering development is largely complete the that program will finish up in Oh.
In August September timeframe.
Oh, then we have one program, which is in its a final test acceptance.
And and that finishes up in the late October timeframe barring some additional problems so all of them or no one's done and the others are nearing being done.
All right I I was just wondering if we can you get hit more expenses.
The the the likely scenarios that there won't be a significant additional costs now you know I can't guarantee that until we get through the test programs. We're not we're not done so we have to finish up that one but but the signs on the just the middle one if you will or are very good because.
The product works and it works very well so it's been delivered an accepted by the customer. So the only remaining risk. There is really if you have to.
You know if you have to fix something with the customer fines.
Sort of warranty related things, though the third one is so we're through partially true the test process and I don't think there's significant risk remaining but until we finish testing I can't guarantee that.
The second one can you can't walk ins from that.
Yes, there are significant orders downstream associated with that that's a that as a DW a electronic warfare system, which will deliver again it goes into a a navy program and.
No. It's one we have been making announcements through the year about that program.
I'm sure you've read so that when we're looking forward to additional revenues.
And that will be profitable programs come down the road Oh, that's the L. calm advanced warfare contract.
Yes.
Yeah, I remember I. Thank you you bet.
Our next question is from Kurt is Cara Mendis with Carl M. Henning.
<unk>.
Hi, Thank you as you can see your revenue is probably picking up do you ever gross margin target in the next six to 12 months.
[laughter] higher.
[laughter].
Yeah, We're you know I'd like to see it no 40.
Range, I guess would be my reaction to that.
Okay. Thank you.
Our next question is from David Stasse, He private Investor. Please proceed.
Hey, guys. Some type of kind of a two parter just a are you guys I'm involved with that Spacex CEP program, where as you know, they're putting up 60 satellites every few weeks now.
No.
Is that something that you're.
They're getting product from other people.
I don't know too much about about that one so hard for me to tell you I think there I think it's largely commercial.
Type stuff, but I'm not too sure.
Okay and are you looking at doing more contracts on a cost plus basis. So you seems like you have more and more of the sub contract problems over the last year a couple of years now.
So we don't really get to a pick the contract type of cost plus contracts or are you is pretty rare really for the types of things we do.
So I wouldn't anticipate a significant increase in the percentage of the business, that's a from cost plus contracts.
Okay.
So most of your satellite art are not commercial they're all promising military oriented right now.
Well, I'm, sorry, which ones are you referring to.
Well, you know that they're putting up the big range on Spacex every.
10, or 12 days another another rocket goes up.
That's all commercial you're saying.
So I'm really not familiar with.
What you're talking about if the we we don't bid to Spacex, we bid to the satellite prime contractors.
Okay.
Well there that they end user I guess is now you're talking about.
Yeah.
Okay.
Thank you.
As reminder to star one on your telephone keypad, if he would like to ask a question. Our next question is a follow up from Brett we used to Teddy memories. Scott. Please proceed.
Okay. Thank you for letting me ask or additional question.
You mentioned stand in your prepared remark.
That youre looking to hire additional personnel and engineering talent <unk> can you describe.
What type of people, you're looking to hire how many engineering and yes is there any issue with.
Finding the the people with the skill sets that cure you're looking for you know over the next era. So.
Oh, so its a variety of disciplines or mechanical engineering or or systems Engineers manufacturing engineering, and then I'm on the manufacturing side, It's a assembly and test people. We're also hiring some engineering at Antelope.
Yes, we do a lot of what we do has to do with delivery of analytical reports, which require engineering work. So it's sort of across the board and ER. We've already hired I don't know probably think about four or five folks in the last couple of weeks and we're interviewing I don't want another three or four this week. So so far.
We've had no problem Oh, finding the people that we need.
Great. Thank you.
Our next question is from Larry colder <unk> private Investor. Please proceed.
Yeah, Hi, guys my questions also twofold.
I would like to know let's side the mom.
It's a there or any other employees doing the company's age discrimination.
And at Mountain.
No more upbeat as the company have enough money to survive.
So, yes, we're not or we're not concerned about that I don't think it'd be appropriate for me to comment further on the legal stuff at this point.
So was there any other employee that filed suit against the company.
<unk> <unk>. So I think we have one no I don't know, which ones you referred to I think we have one or whenever age discrimination I think we have one.
Beside mountain.
No.
Okay, I'm, just curious to know it or if he wins that it oh, we can I have enough money to them.
Well move on.
Well I don't think it'd be appropriate for me to comment further on the legal cases right now.
Okay. Thank you.
And our final question is a follow up from my guys, you're a private investor. Please proceed.
Oh, Hi did 2.7 million contract in June.
Is that what part is funded.
[noise] Oh is it seemed to stop sympathize <unk>, Yeah, I think it was a million and a half thinking about approximately million and a half Michael.
Hi, and or are you, okay with didn't materials now that were held up for Corona.
Yeah were mostly okay, a lot of that had to do with the the program I talked about for that E.W. system and that caused us some delays there, but we've resolved most of that were delivered as I said, we delivered their products. So we got that stuff taking care of.
Hi, it's good to hear and that the Big did 20 million dollar contract that was the what G. P. S. Three yes.
No we're not disclosing the specific.
ER classified program.
All right and How's G.P.S.T.F. coming along.
We got that was what was in my comments about the the a the two contracts related to that went to different contracts for equipment that goes on to GPS three yeah, both of which are doing very well.
All right you have been contract that was a classify country right.
Hi, Thank you.
Welcome.
Yeah Reed said never question answer session I would like to turn the conference back over for closing remarks.
So thank you everybody Oh, we appreciate your joining us today and look forward to talking to you in the next time.
Thank you. This does conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.
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Greetings welcome to frequency electronics fiscal year 2020.
Fourth quarter in Europe and earnings release Conference call. At this time, all participants are no listen only mode. It brief question answer session will follow the formal presentation.
If any what's your car operator assistance during the conference. Please press star zero and their telephone Keypad. As reminder, this conference is being recorded.
Statements made by the company during this conference call regarding the future constitute forward looking statement pursuant to the Safe Harbor provisions of the private Securities Litigation Reform Act of 1995, such statements inherently involve uncertainties, that's a cause actual results to differ materially from.
Forward looking statements factors would cause or contribute to such differences are included in the company's press releases are further detailed in the company's periodic report filings with the Securities and Exchange Commission by making these forward looking statements. The company undertakes no obligation to update these statements for.
Revisions or changes after the date of this conference call is down my pleasure to introduce your host Stanton Sloane President and CEO.
Thank you Shirley.
Welcome everyone. Thank you for joining us today.
I hope everyone spring Wilberger pandemic.
We have now reported for square 2020 results I'll, just say it was difficult your no I'm glad to put it behind us.
Combination of issues impacted us last fiscal year, some of which we have previously discussed.
Late in the year, we have got it impacts related to cope with 19.
Legal expense and reserve for note that was due to us.
Backlog for 2020 was down approximately $1 million. However, we did book is significant contract earlier this month, the smoke, which we announced on July 1st.
Let me comment on corporate 19 issues, what you're back to those mostly in Q4.
Well, we have little went back to our operations in New York, We did experience delays and awarded new contracts, which we attribute to government and prime contractor administrative process to ways.
We also at impacts from vendors and or supply chain, either being unable to deliver critical materials on time.
Having quality issues, which resulted from some of their key personnel being out due to direct or indirect cope with 19 index.
Unfortunately, when this happens result increased cost to us for either additional processing or for rework of materials.
There were delays it affects revenue recognition gross margin and obviously operating income which is reflected in these financials.
More importantly, however, we have lost nor poised to the pandemic doesn't central industry. Most of our employees have been here at work through the direction and their health and safety is of course of Paramount importance.
Q4, we continued to work through the programs that have helped our development related costs, which we have previously discussed.
Three problem programs. One it was completed now one is nearing completion with initial products delivered and working extremely well.
And what isn't the acceptance test cycle.
In summary, we ship all three these bump up these behind us at about three months.
Let me shift gears here or talk about the future, but I'm sure you all saw the announcement on July 1st of a significant contract award, which I mentioned earlier.
We are now currently negotiating an additional contract, which we've been selected and which is also significant.
I'm optimistic we'll be able to successfully conclude these negotiations and announced the award sometime soon.
While there is no guarantee that this will happen I am encouraged by progress.
It is important to point out that revenue is key to approving our financial performance.
New business activity, which is robust is the best leading indicator of revenue rose.
This fiscal year is very different from previous years and that most of the new contracts that are needed to generate revenue. This year are either awarded or imminent.
It is being planned later in the year and that reduces the risk associated with revenue recognition.
In order to meet these new contract demands. We're currently hiring personal both engineering and manufacturing.
I also wanted to mention that we've had significant progress on key programs, which we we were previously awarded the relate to the GPS satellite program.
Both of these contracts are key to future business growth and both are on track.
One of them successfully completed a critical design review last week got very high marks from the customer.
Additional engineering model for the other program is progressing very well through the development process.
Well the fiscal year 2020 financials are what they are I am encouraged by progressively and I'm convinced that our futures brightening considerable.
Let me now I'll turn things over to Steve forwards your financial details.
Thank you Stan and good afternoon.
Fiscal 2008 consolidated revenue was 41.5 million down 16% compared to 49.5 billion for the prior fiscal year. The components of revenue are as follows revenue from commercial and U.S. government satellite programs was 20.4 million compared to 22.8 million the same.
Period of the prior fiscal year and accounted for approximately 49% of consolidated revenues.
That's a 46% for the same period of the prior fiscal year revenues on satellite payload contracts are recognized primarily under percentage of completion method on a recorded only in the FBI New York segment.
Revenues from non space U.S. government at deal de customers, which are recorded in both the FBI, New York and FDIC Cypress segments are 16.9 million compared to 22.8 million in the prior fiscal year and accounted for approximately 41% of consolidated revenue compared to 46% for the prior.
Fiscal year other commercial and industrial revenue was 4.2 million compared to 3.9 billion in the prior fiscal year intersegment revenues are eliminated in consolidation.
For fiscal 2008 gross margin was 5.8 million compared to 15.8 million for the prior fiscal year gross margin rate decreased to 13.9% as compared to 31.9% for the same period in fiscal 2019.
The lower gross profit and gross profit percentage was the result of lower revenues and was impacted by increases in engineering cost incurred on several programs, which were in the development phase and wish uncounted unanticipated technical challenges related to customer driven system packaging and environmental requirements for state of the aren't performance demand.
Yeah.
In a fiscals years, 20, and 19, selling and administrative expenses were 28% and 24% respectively of consolidated revenue.
The actual dollar value of the expense decreased compared to the same period of the prior fiscal year.
In a increased as a percentage of consolidated revenues due to the doing decrease in revenue.
SGN expense in fiscal 19 included a onetime charge of approximately $1 million for the loss associated with the sale of that the Asia depreciation or professional fees were up. This year. However, we expect that are do you know coverage will cover a percentage of the legal fees.
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 fiscal 2008 was 12% of sales compared to 13% of sales for the previous fiscal year.
Approximately $1.4 million decrease in R&D expense year over year reflects a higher level of customer funded R&D as a portion of the total R&D effort.
These R&D efforts address large business opportunities and secure communications command the control and satellite systems that require advanced technologies and capabilities going forward.
For fiscal 2000 at the company recorded an operating loss of 10.9 million compared to 2.8 million for the prior fiscal year. The increase in the operating loss in the current fiscal year as a result of decreased revenue as well as increased costs related to technical challenges on certain programs in the development phase.
Other income consists primarily of an investment derived income from the company's holdings of marketable securities earnings on Securities May vary based on fluctuating interest rates dividend payout levels and the timing of purchases sales redemptions or maturity of securities included in other expenses for fiscal year end.
That April Thirtyth 2020, as a provision related to a $1 million note receivable from the sale of July which is due in fiscal 21.
This yields a pre tax loss for fiscal 20 of approximately 11.7 million compared to a pre tax loss of approximately 2.5 million for the prior year.
For the fiscal year ended April Thirtyth 2020, the company recorded a tax benefit of 1.7 million compared to a tax provision of 56000 for fiscal 19.
For fiscal year ended April 32020, consolidated net loss was 10 million or $1.10 per diluted share compared to a net loss of 2.5 million or 28 cents per diluted share.
Our fully funded backlog at the end of April 2020 was approximately 36 million down approximately <unk> million dollars from the previous year. However, subsequent to year end.
We announced a significant contract win and expect to announce additional wins in the near term.
The company's balance sheet continues to reflect the strong working capital position of approximately $38 million at April Thirtyth 2020, and a current ratio of approximately four to one.
The company believes that its liquidity is adequate to meet its operating and divesting needs for the next 12 months and if at the same fias foreseeable future I return the call back to span and we look forward to your question soon.
Thank you, Steve with that we'll be happy to take some questions.
I would ask you to please limit yourself to one question.
With that I'll turn it back to the operator will explain how to get your questions Im sure.
Thank you if he would like to ask a question. Please press star one and your telephone keypad confirmation tele indicate your line is in the question can you.
You May press Star too if you would like to remove your question from the Gill and for participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys. Our first question is from.
Brett Reece with Janney Montgomery Scott. Please proceed.
Yeah, Hi, Dan Hi, Steve.
All right.
Yeah in the past call you.
Stated the amount of proposals outstanding I think on the last call it with 660 million.
I guess you subtract the 28.6 million so do we have $631 million proposals out outstanding.
Presently.
Actually closer to 690 million, but but you got to be really careful with that number Brett the changes daily stuff goes into and out of the.
Q, if you will so.
The current the current number is around 688, if I remember.
Exactly.
But if thats likely to change.
Just a follow up on that and I'll drop back in Q.
We expect tiara.
Sure protocol.
Base case scenario what percentage of that.
88.
Come from business for.
Frequency.
Okay.
Very difficult to answer that question, obviously, we're trying to convert all that but.
You're not going to win 100% of all the opportunities. So also sometimes programs get cancelled or.
Or restructured or whatever so.
Our hard for me to give you numbers.
Okay.
Got it dropped back because I I'm sure you've got some other.
Cross examiner.
Okay.
Our next question itself from Sam Rebotsky with SCR asset management. Please proceed.
Yes, good afternoon, Stan and Steve.
As far as the 36 million funded and 29 million funded what ever you have a.
Utilized in the quarter ending July this 65 million funded that would appear.
That you would be ready to make a profit.
In one of the next quarter's end with the all the contracts coming up.
Being pretty serious it would appear that youre going to being profitable in the.
The year 20 2021.
So Sam.
So we do not give guidance, but let me just.
Say couple of things I tried to point this out in my.
Commentary.
The business is very revenue sensitive.
Given these recent wins.
My expectation is that the revenue will trend upwards, obviously that helps the bottom line performance.
We're working hard obviously to have to make place profitable and Thats My objective.
So I'm encouraged by what I see in the way of new business activity and.
Do my best to make sure that that produces improving results.
Just a little follow up relative to the funded do we expect is 65 million to be complete in the year 2021, or what is the timeframe. We expect this 65 million to be completed.
So our im not sure we get the 65 million from Sam but.
Let me, let me back up so I think you might be referring to the contract.
I will Smith from July 1st which was $28.6 million, that's not all funded debts.
If you read that release that would include auctions, which are not exercised so that again doesn't I don't know how you get to 65, but you mentioned so thats how much of the 29 is funded.
Okay.
About three and a half.
Initial funding with about $3.5 million.
Okay. Okay quick site I took the 36 I assume the 29 was funded and.
And but you're saying only three when do we find out the funding of the 29 million assignment. Let me look up by can help you here so.
So funding, sometimes you get a contract, but let me give you. An example, not this specific contract hypothetical example, your contract $10 million.
That has an option for another $10 million. So the total contract value would be $20 million.
The based contract for the $10 million.
May not be fully funded.
At the onset so in other words, you get a contract for $10 million, they only put $2 million a funding against that but you do have contracts $10 million. They just funded incrementally that's very typical of our contract. So.
In the backlog Rowley, we're only telling you what is actually funded but that doesn't mean that we don't have additional contract value.
At that and then on top of that we have other options.
Okay, So maybe that make things a little bit clear for you.
Okay I'll come back to the Q.
Okay.
Our next question is from Michael Eisner private Investor. Please proceed.
How are you guys doing.
Great Michael Thank you how are you hi.
The problem contracts.
How much you think is that kind of effect.
Earnings in this first quarter.
So.
I'll just give you my confidence level one of them I said is complete.
That is complete that's behind us.
One was a complete.
Theres three contracts that we talked about right number one was I like it was that completed and yearend lighten the first quarter two months ago.
So that once complete.
We have one that.
That is not complete but we have delivered.
Initial units so the the risk associated with.
Engineering development.
Is largely complete.
That program will finish up in.
August September timeframe.
Then we have one program, which is in its a final test acceptance.
And that finishes up in late October timeframe, Lori some additional problems. So all of them more one's done and the others are nearing being done.
Hi, I'm not I was just wondering filling it get hit more expenses.
The the likely scenarios that there won't be significant additional costs now.
I can't guarantee that until we get through the test programs. We're not we're not done so we have to finish up that one, but but the signs on the.
The middle one if you will.
Our are very good because the product works and works very well. So it's been delivered and accepted by the customer. So lonely remaining risk. There is really if you have to.
Jeff to fix something with the customer fines.
Sort of warranty related things the third one is.
Through partially through the test process.
I don't think there's significant risk remaining but.
We finished testing I can't guarantee that.
The second one can you get one is from that.
Yes, there are significant orders downstream associated with that so that is the DW a electronic warfare system, which were delivering it goes into a.
A navy program and.
That's what we have been making announcements through the year about that program, which I'm sure you've read so that when we're looking forward to additional revenues.
And that will be profitable programs come down.
Oh that steel calm advanced warfare contract.
Yes.
Yeah I remember.
Hi, Thank you.
Yep.
Our next question is from Curtis.
Mendis with Carl M. Henning.
Okay.
Hi, Thank you.
As you guys see your revenue is probably picking up do you have a gross margin target in the next six to 12 months.
Higher.
[laughter].
Yeah we're.
Now I'd like to see it a 40.
Range, I guess would be my reaction to that.
Okay. Thank you.
Our next question is from David Starsky private Investor. Please proceed.
Hey, guys have a kind of a two parter just a are you guys.
Involved with the Spacex program, where they are putting up 60 satellites every few weeks now.
No.
Is that something that you're.
They are getting product from other people.
I don't know too much about.
About that one so arch mi to tell you I think there I think it's largely commercial.
Type stuff, but I'm not to share.
Okay and are you looking at doing more contracts on a cost plus basis. So you seems like you have more and more of the sub contract problems over the last year a couple of years now.
So we don't really get to pick for contract type cost plus contracts are used pretty rare really for the types of things we do.
So I wouldn't anticipate a significant increase in the percentage of the business that's.
From cost plus contracts.
Okay.
Most of your satellite art are not commercial they're all mostly military oriented right now.
Well, I'm, sorry, which ones you referred to.
Well, they're putting up the big range on Spacex Debbie.
10, or 12 days another another rock goes up and that's all commercial you're saying.
So I'm really not familiar with.
What you're talking about if.
We don't bid to Spacex, we bid to the satellite prime contractors.
Okay.
Well there that the end user I guess is now you're talking about.
Yes.
Okay.
Thank you.
As a reminder to star one and your telephone keypad, if he would like to ask a question. Our next question is a follow up from Brad We submitted in my memory. Scott. Please proceed.
Okay. Thank you for letting me at additional question.
You mentioned than in your prepared remark.
That youre looking to hire additional personnel and engineering.
Alan.
Can you describe.
What type of people, you're looking to hire how many engineers and yes is there any issue with.
Finding the the people with the skill sets that cure you're looking for over the next era. So.
So its a variety of disciplines mechanical engineering.
Or a systems engineers.
Factoring engineering and then.
The manufacturing side, it's a assembly and test people.
We're also hiring some engineering at analyst, we do a lot of what we do has to do with.
Delivery of analytical reports, which require engineering work, so it's sort of across the board and.
We've already higher no probably.
But four or five folks in the last couple of weeks and we're interviewing until another three or four this week. So so far we've had no problem finding people that we need.
Great. Thank you.
Our next question is from Larry colder private Investor. Please proceed.
Yes, hi, guys.
My questions also twofold.
I would like to know that side the month.
Is there any of the employee doing the company's age discrimination.
Martin.
The lawsuit as the company have enough money to survive.
So, yes, we're not or we're not concerned about that hurdle there could be appropriate for me to comment further on legal stuff at this point.
So was there any other employees.
That filed suit against the company.
Okay.
So.
I have one no I don't know, which ones you referred to I think we have one.
Age discrimination I think we have one.
The side month.
Hello.
Okay, I'm, just curious to know it or if he wins that.
Are we going to have enough money to them.
And move on.
Well I don't think would be appropriate premium comment further.
Cases right now.
Okay. Thank you.
And our final question is a follow up from my guys. There a private investor. Please proceed.
Hi did 2.7 million contract in June.
Is that what part of its funded.
Oh this is centered sensitized.
Yeah, I think was a million helps figures by approximately million and a half Michael.
And.
Okay with the materials now what held up for Corona.
Yeah were mostly okay, a lot of that had to do with.
The the program I talked about for the E.W. system.
That caused us some delays there, but we've resolved most of that were delivered as I said, we delivered that products. So we got that stuff taking care of.
Hi, it's good to hear and that the Big did 28 million dollar contract that was on what GPS yes.
No we're not disclosing the specific.
Classified program.
All right and How's GPS do you have coming along.
Got that was what was in my comments about the the the two contracts related to that with two different contracts for equipment that goes on to GPS trio, both of which are doing very well.
All right so that big contract I would classify control right.
Hi, Thank you.
[noise] Weve reached the end of our question and answer session I would like to turn the conference back over for closing remarks.
So thank you everybody.
We appreciate your joining us today and look forward to talking to you in the next time.
Thank you. This does conclude today's conference you may disconnect. Your lines at this time is they can't be if I can station.