Q2 2024 Frequency Electronics Inc Earnings Call
and welcome to the frequency electronics given to fiscal 24 earnings release.
From a financial point of view, as was the case last quarter, we have encouraging numbers to report.
and I continue to be confident that we're on a sustainable path of growth and profitability.
We have a lot of exciting new business and are confident in our ability to execute properly going forward.
As everyone should be aware, we publicly announce three relatively large contracts, one right after the other during the month of November .
These contracts were a long time in the making and originally we anticipated getting under contract much sooner.
However, in the end, this occurred after the close of Q2.
Because these contracts have been anticipated for some time, we've been able to prepare ahead of time, and are thus in an excellent position to hit the ground running, so to speak.
we have every reason to be confident in our ability to execute these programs. Success.
In addition, we anticipate additional smaller contracts to be coming online over the next few weeks, the last months, and we will make public announcements as appropriate. All in all, we're experiencing significant growth and have good reason to believe that this trend will continue going forward.
Let me briefly highlight the financial results before Steve fills you in on the details.
Revenue, gross margin and operating income are all up compared to Q2 of last fiscal year and holding steady compared to Q1 of this year.
The backlog's holding steady at around $50 million at the end of Q2, and is anticipated to grow significantly based on the new orders that we got in November .
So in summary, I believe our efforts have put us on a sustainable, positive trajectory of growth in our core business. The company remains committed to achieving sustained profitability and cash generation going forward.
At this point, I'd like to turn things over to Steve Bernstein, our CFO , who will go through the numbers in a lot more detail.
For the six months ended, October 31, 2023, consolidated revenue was 25.9 million compared to 17.2 million for the same period of the prior fiscal year.
<unk> operator assistance during the conference. Please press Star zero on your telephone keypad.
As a reminder, this conference is being 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 1095.
Such statements inherently involve uncertainties that could cause actual results to differ materially from the forward looking statements factors that would cause or contribute to such differences are included in the company's press releases and 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. It is now my pleasure to turn introduce your host Thomas Mcclelland present, President and Chief Executive Officer.
Thomas Mcclelland: Thank you and good afternoon, everyone.
Thomas Mcclelland: From a financial point of view as was the case last quarter, we have encouraging numbers to report.
Thomas Mcclelland: And I continue to be confident that we're on a sustainable path of growth and profitability.
Thomas Mcclelland: We have a lot of exciting new business and are confident in our ability to execute profitably going forward.
Greetings and welcome to the frequency electronics Q2 fiscal 'twenty four earnings release conference call.
Thomas Mcclelland: As everyone should be aware, we publicly announced three relatively large contracts one right. After the other during the month of November.
Speaker Change: At this time all participants are in a listen only mode. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad as a reminder, this conference is being recorded.
Thomas Mcclelland: These contracts were a long time in the making.
Thomas Mcclelland: And originally we anticipated getting under contract much sooner.
Speaker Change: 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 Litigations Reform Act of 1995, such statements inherently involve uncertainties that could cause actual results to differ materially from the forward looking statements.
However in the end this occurred after the close of Q2.
Thomas Mcclelland: Because of these contracts have been anticipated for some time, we've been able to prepare ahead of time and are thus in an excellent position to hit the ground running so to speak we have every reason to be confident in our ability to execute these programs successfully.
Speaker Change: Factors that would cause or contribute to such differences are included in the company's press releases and are further detailed in the company's periodic report filings with the Securities and Exchange Commission.
Thomas Mcclelland: In addition, we anticipate additional smaller contracts to be coming online over the next few weeks slash months.
Speaker Change: 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. It is now my pleasure to introduce your host Thomas Mcgowan's present, President and Chief Executive Officer.
Thomas Mcclelland: And we will make public announcements as appropriate.
Thomas Mcclelland: All in all we're experiencing significant growth and have good reason to believe that this trend will continue going forward.
Speaker Change: Okay.
Speaker Change: Thank you and good afternoon, everyone.
Speaker Change: From a financial point of view as was the case last quarter, we have encouraging numbers to report.
Speaker Change: Let me briefly highlight the financial results before Steve filled you in on the details.
Steve: Revenue gross margin and operating income are all up compared to Q2 of last fiscal year and holding steady compared to Q1 of this year.
Speaker Change: And I continue to be confident that we're on a sustainable path of growth and profitability.
Speaker Change: We have a lot of exciting new business and are confident in our ability to execute profitably going forward.
Steve: The backlogs are holding steady at around $50 million at the end of Q2 and is anticipated to grow significantly based on the new orders that we got in November.
Speaker Change: As everyone should be aware, we publicly announced three relatively large contracts one right. After the other during the month of November these contracts were a long time in the making and originally we anticipated getting either contract much sooner.
So in summary, I believe our efforts have put us on a sustainable positive trajectory of growth in our core business. The company remains committed to achieving sustained profitability and cash generation going forward.
Speaker Change: However in the end this occurred after the close of Q2.
Speaker Change: Because of these contracts have been anticipated for some time, we've been able to prepare ahead of time and are thus in an excellent position to hit the ground running so to speak.
Steve: At this point I'd like to turn things over to Steve Bernstein, Our CFO, who will go through the numbers in a lot more detail.
Speaker Change: We have every reason to be confident in our ability to execute these programs successfully.
Thank you Tom and good afternoon.
Steve Bernstein: For the six months ended October 31, 2023, consolidated revenue was $25 9 million compared to $17 2 million for the same period of the prior fiscal year.
Speaker Change: In addition, we anticipate additional smaller contracts to be coming online over the next few weeks slash months.
Speaker Change: And we will make public announcements as appropriate.
Steve Bernstein: The components of revenue are as follows revenue from commercial and U S. Government satellite programs was approximately $9 $5 million was 37% compared to $7 8 million or 46% in the same period of the prior fiscal year.
Speaker Change: All in all we're experiencing significant growth and have good reason to believe that this trend will continue going forward.
Speaker Change: Let me briefly highlight our financial results before as Steve showed you a lot of the details Rev.
Steve Bernstein: Revenues on satellite payload contracts are recognized primarily under the percentage of completion method and are recorded only in the FBI New York segment.
Speaker Change: Revenue gross margin and operating income are all up compared to Q2 of last fiscal year and holding steady compared to Q1 of this year.
Steve Bernstein: Revenues from non space U S government Dod customers, which are recorded in both the FBI, New York and <unk> segments were $15 8 million compared to $8 million in the same period of the prior fiscal year and accounted for approximately 58% of consolidated revenue compared to 42.
Speaker Change: The backlogs are holding steady at around $50 million at the end of Q2 and is anticipated to grow significantly based on the new orders that we got in November.
Speaker Change: So in summary, I believe our efforts have put us on a sustainable positive trajectory of growth in our core business. The company remains committed to achieving sustained profitability and cash generation going forward.
Steve Bernstein: 7% for the prior fiscal year.
Steve Bernstein: Other commercial industrial revenue was $1 4 million for the six months ending October 31, 'twenty three and 'twenty two.
Steve Bernstein: The significant increase in revenue for the period compared to the same period in the previous fiscal year was related to contract awards resolution of technical problems from the previous fiscal year and improvements made by management.
Speaker Change: At this point I'd like to turn things over to Steve Bernstein, Our CFO, who will go through the numbers show a lot more detail.
Thank you Tom and good afternoon.
Speaker Change: For the six months ended October 31st 2023, consolidated revenue was $25 9 million compared to $17 2 million for the same period of the prior fiscal year.
For the six months ended October 31, 23, gross margin and gross margin rate increased as compared to the same period of fiscal year 'twenty three the gross margin dollars increased as a direct result of increase in revenue the gross margin rate increased significantly due.
Speaker Change: The components of revenue are as follows revenue from commercial and U S. Government satellite programs was approximately $9 5 million was 37% compared to $7 8 million or 46% in the same period of the prior fiscal year.
Steve Bernstein: Two the fact that many of the technical challenges faced in the prior fiscal year have been resolved and as a result, the related programs are now moving forward and running more efficiently.
Steve Bernstein: Previous programs that sustained lower margins due to technical issues are near completion or have completed.
Revenues on satellite payload contracts are recognized primarily under percentage of completion method and are recorded only in the New York segment.
Steve Bernstein: For the six months ending October 31, 23, and 22, SG&A expenses were approximately 19% and 23% respectively of consolidated revenue.
Speaker Change: Revenues from non space U S government in D O D customers, which are recorded in both the FBI, New York and <unk> segments were $15 8 million compared to $8 million in the same period of the prior fiscal year and accounted for approximately 58% of consolidated revenue compared to 42.
Steve Bernstein: The percentage of consolidated revenue decreased 5% due to an increase in sales for the six months ending October 31, 23 as compared to the six months ending October 31 22.
Speaker Change: 7% for the prior fiscal year.
Speaker Change: Other commercial industrial revenue was $1 4 million for the six months ending October 31, 23 and 'twenty two.
Steve Bernstein: The increase in SG&A expense for the six months ending October 31, 23 as compared to the prior year period was largely due to an increase in professional fees payroll and associated costs.
Speaker Change: The significant increase in revenue for the period compared to the same period in the previous fiscal year was related to contract awards resolution of technical problems from the previous fiscal year and improvements made by management.
Steve Bernstein: R&D expense for the six months ending October 31, 23 decreased to $1 3 million from $1 $7 million for the six months period, ending October 31, 2002, a decrease of 400000 and were approximately 5% and 10% respectively of consolidated revenue.
Speaker Change: For the six months ended October 31, 23, gross margin and gross margin rate increased as compared to the same period of fiscal year 'twenty three the gross margin dollars increased as.
Steve Bernstein: R&D decreased for the six months ending October 30, 123 was primarily due to a shift of employees between production and development, depending upon availability scheduling and necessity. The company plans to continue to invest in R&D in the future to keep its products out of state of the art.
Speaker Change: A direct result of increase in revenue the gross margin rate increased significantly due to the fact that many of the technical challenges faced in the prior fiscal year have been resolved and as a result, the related programs are now moving forward and running more efficiently.
Steve Bernstein: For the six months ending October 30, 123 <unk>.
Speaker Change: Previous programs that sustained lower margins due to technical issues are near completion or have completed.
Steve Bernstein: We recorded operating income of $3 million compared to an operating loss of $5 4 million in the prior year operating income increased due to the combination of increased in revenue gross margin and the effects of cost cutting measures instituted by management that began in fiscal year 'twenty three.
Speaker Change: For the six months ending October 31, 23, and 22, SG&A expenses were approximately 19% and 23% respectively of consolidated revenue.
Speaker Change: As a percentage of consolidated revenue decreased 5% due to an increase in sales for the six months ending October 31, 23 as compared to the six months ending October 31 22.
Steve Bernstein: Other income can be derived from reclaiming of metals refunds interest on deferred trust assets or the sale of fixed assets interest expenses related to deferred compensation payments made to retired employees.
Speaker Change: The increase in SG&A expense for the six months ending October 31, 23 as compared to the prior year period was largely due to an increase in professional fees payroll and associated costs.
Steve Bernstein: This yields pre tax income of approximately $2 9 million compared to a $5 4 million pretax loss for the prior fiscal year for.
Speaker Change: R&D expense for the six months ending October 31, 23 decreased to $1 3 million from $1 7 million for the six months period, ending October 31, 22, a decrease of 400000 and were approximately 5% and 10% respectively of consolidated revenue.
Steve Bernstein: For the six months ending October 31, 2003, the company recorded a tax provision of 13000 compared to 2000 for the same period of the prior fiscal year.
Steve Bernstein: Consolidated net income for the six months ending October 31, 2003 was $2 8 million was <unk> 30 per share compared to $5 $4 million loss or <unk> 58 per share in the previous fiscal year.
Speaker Change: R&D decreased for the six months ending October 31, 23 was primarily due to a shift of employees between production and development, depending upon availability scheduling and necessity. The company plans to continue to invest in R&D in the future to keep its products out of state of the art.
Steve Bernstein: Our fully funded backlog at the end of October 23 was approximately $50 million compared to <unk> 56 for the previous fiscal year ending April 32003 <unk>.
Steve Bernstein: The company's balance sheet continues to reflect our strong working capital position of approximately 25 million at October 31, 23, and a current ratio of approximately two to one. Additionally, the company is debt free.
Speaker Change: For the six months ending October 30, 123, the comfort me recorded operating income of $3 million compared to an operating loss of $5 4 million in the prior year operating income increased due to <unk>.
Speaker Change: The company believes that its liquidity is adequate to meet its operating and investing needs for the next 12 months in the foreseeable future I will turn the call back to Tom and we look for your question soon.
Speaker Change: Combination of increase in revenue gross margin and the effects of cost cutting measures instituted by management that began in fiscal year 'twenty three.
Tom: Thanks, Steve.
Speaker Change: Other income can be derived from reclaiming of metals refunds interest on deferred trust assets or the sale of fixed assets interest expenses related to deferred compensation payments made to retired employees.
Tom: We will now turn things over.
Tom: For any questions.
Speaker Change: Certainly at this time.
Speaker Change: A question and answer session if.
Speaker Change: If you'd like to ask a question. Please press star one on your telephone keypad.
Speaker Change: This yields pre tax income of approximately $2 9 million compared to a $5 4 million pre tax loss for the prior fiscal year.
Speaker Change: Confirmation tone will indicate your line is in the question queue you.
Speaker Change: You May press Star two if you would like to remove your question from the queue.
Speaker Change: For the six months ending October 31, 23, the company recorded a tax provision of 13000 compared to 2000 for the same period of the prior fiscal year.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, please press star one on your phone at this time, if you wish to ask a question.
Speaker Change: Consolidated net income for the six months ending October 31, 23 was $2 8 million was <unk> 30 per share compared to a $5 $4 million loss or <unk> 58 per share in the previous fiscal year.
Speaker Change: Please hold while we poll for questions.
Speaker Change: Thanks.
Our first question today is coming from Brett Reiss from Janney.
Brett Reiss: Line of lives.
Brett Reiss: Yeah.
Hi, gentlemen, thanks for.
Speaker Change: Fully funded backlog at the end of October 20th rate was approximately $15 million compared to 56 for the previous fiscal year ending April 32003 <unk>.
Brett Reiss: The opportunity of asking a question or two.
Brett Reiss: Tom.
Brett Reiss: <unk>.
Brett Reiss: Starlink a satellite.
Speaker Change: The company's balance sheet continues to reflect our strong working capital position of approximately 25 million at October 31, 23, and a current ratio of approximately two to one. Additionally, the company is debt free.
Brett Reiss: Program that Spacex has that so many of the military's or are using in the conflicts that are going on.
Brett Reiss: Is this satellite sides of those satellites.
The company believes that its liquidity is adequate to meet its operating and investing needs for the next 12 months in the foreseeable future I will turn the call back to Tom and we look for your questions soon.
Brett Reiss: The size where.
Brett Reiss: Our atomic clocks and our frequency generators.
Brett Reiss: Yeah.
Speaker Change: Thanks, Steve.
Brett Reiss: Are these you know.
Speaker Change: We will now turn things over.
Potential.
Brett Reiss: And sales opportunities.
Speaker Change: For any questions.
Brett Reiss: Well.
Brett Reiss: I can tell you that.
Speaker Change: Certainly at this time, we'll be conducting a question and answer session.
Star link in particular.
Speaker Change: If you'd like to ask a question. Please press star one on your telephone keypad.
Brett Reiss: None of our products are on the Starlink satellites at this point in time, nor do we have any.
Speaker Change: Confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue.
Brett Reiss: As anticipated.
Brett Reiss: Our presence on the Starlink satellites going forward. However, there are.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, please press star one on your phone at this time, if you wish to ask a question.
Brett Reiss: Several other <unk>.
Brett Reiss: Similar kind of satellite systems that are in various stages of development and launch and.
Speaker Change: Please hold while we poll for questions.
Speaker Change: Yes.
Speaker Change: On the first question today is coming from Brett Reiss from Janney.
We have been talking to several of these.
Speaker Change: <unk> lives.
Speaker Change: Hi, gentlemen, thanks for the opportunity to asking a question or two.
Brett Reiss: These programs and we do anticipate at some point in the future that we will definitely be involved.
Speaker Change: Tom.
Speaker Change: The starlink.
Brett Reiss: And these programs. So one of the important things Star link is very much a communication system.
Speaker Change: Satellite.
Speaker Change:
Speaker Change: Program that Spacex has that you know so many of the military's or are using in the conflicts that are going on.
Where we think that we have a better opportunity is in similar systems that are developing a navigation.
Speaker Change: Is this satellite sites of those satellites you know the size where.
Speaker Change: You know, our atomic clocks, and our frequency generators E E.
Brett Reiss: Segment.
Brett Reiss: And those systems and they're the precision timing becomes.
Speaker Change: Are these you know you know potential.
Brett Reiss: Much more important and that provides a big opportunity for us and this is a pretty big thing at this point in time people are very concerned about the vulnerability of GPS and the ability to.
Speaker Change: Sales opportunities.
Speaker Change: Well.
Speaker Change: I can tell you that our starlink in particular, we are none of our products are on the Starlink satellites at this point in time, nor do we have any.
So one thing is to actually take out GPS satellites. The other is to jam no signals from those satellites or it's a spoof them.
Speaker Change: The anticipated.
Speaker Change: Our presence on the Starlink satellites going forward. However, there are.
Brett Reiss: It's much more difficult to jam the signals that come from low Earth orbit satellites.
Speaker Change: Several other similar kind of satellite systems that are in various stages of development and a launch and.
Brett Reiss: Does the signals are a much higher level.
Brett Reiss: So so a lot of people a lot of programs are looking at adding a navigation.
We have been talking to several of these.
Brett Reiss: Payload.
And capability to those systems.
Speaker Change: These programs and we do anticipate at some point in the future that we will definitely be involved in.
Brett Reiss: We have a big potential opportunity in those and we're looking at those very very carefully.
Brett Reiss: Yeah.
These.
And these are programs. So one of the important things Starlink is very much a communication system.
Brett Reiss:
Brett Reiss: Organizations that are looking to develop these similar systems do know who they are and you already have your foot in the door or is it you know.
Speaker Change: Hum.
Speaker Change: There, we think that we have a better opportunity is in similar systems that are are developing a navigation ER segment.
Brett Reiss: Someone that your sales.
Brett Reiss: People have to.
Brett Reiss: First you know get to know.
Brett Reiss: No.
Speaker Change: Those are systems and they're the precision timing becomes a much more important and that provides a big opportunity for us and this is a pretty big thing at this point in time people are very concerned about the vulnerability of GPS.
Brett Reiss: We know who they are and we do already have our foot in the door and a significant number of days.
Great.
I'm going to drop back in queue. Thanks, again for another good quarter and a good holiday to you.
Speaker Change: Okay. Thank you.
Speaker Change: S and the ability to.
Speaker Change: <unk>.
Thank you. The next question is coming from Chris Kotowski Christmas a private investor Chris Your line is less.
Speaker Change: So one thing is to actually take out a GPS satellites and the other is to jam the signals from those satellites or to smooth them.
Chris Kotowski: Hello, Congratulations on good results.
Speaker Change: It's much more difficult to jam the signals that come from low Earth orbit satellites.
Chris Kotowski: Thank you.
Chris Kotowski: I want to ask for.
Speaker Change: Cause the signals are a much higher level.
Did margins go down like you sequentially.
Speaker Change: And so so a lot of people a lot of programs are looking at adding a navigation.
Chris Kotowski: Because you did discuss the logical six month basis.
Chris Kotowski: The basis it seems like you.
Payload.
Chris Kotowski: The question that you had slightly larger revenues last quarter, you said, you know barring onetime items.
Speaker Change: And capability to those systems, and we have a big potential opportunity in those and we're looking at those very very carefully.
Chris Kotowski: Sure.
Chris Kotowski: Operating income was a little bit over 1 million and no. It was a little bit of the $1 billion.
Yeah.
Speaker Change: These.
Speaker Change: Yes, yes, yes.
Speaker Change: Organizations that are looking to develop these symbolists systems do know who they are and you already have your foot in the door or is it you know someone that your sales people.
Speaker Change: That's certainly correct.
Speaker Change: But I think the.
Speaker Change: The point in Taiwan emphasize we always anticipate that quarter to quarter, we're going to see some fluctuations in things as we reported last quarter. There were some one time events that had a positive impact on those numbers.
Speaker Change: We'll have to you know first you know get to know.
Speaker Change: No. We are we know who they are and we do already have our foot in the door and a significant number of days.
And those those are onetime events aren't oh, there this quarter, so I think the way.
Yeah.
Speaker Change: Great.
Speaker Change: I'm going to drop back in queue. Thanks, again for another good quarter and a good holiday to you.
Speaker Change: <unk> speaking the margin went down a little bit, but I think I would.
Speaker Change: Okay. Thanks, Brett Thank you.
I think realistically I would characterize it as pretty much are holding steady.
<unk>.
Speaker Change: Thank you. The next question is coming from Chris Kotowski, Chris is a private investor Chris Your line is less.
Speaker Change: Okay.
Speaking does your business along four.
Chris Kotowski: Hello, Congratulations on good results.
Speaker Change: It's kind of continuing amazing vouchers as the revenues increase or was that with the government.
Chris Kotowski: Thank you.
Chris Kotowski: I want to ask first.
Speaker Change: With the government to call them, it's kind of like look at that.
Speaker Change: Did margins go down like you sequentially.
Speaker Change: Take that into account towards the price to contract.
Speaker Change: Because you did discuss module a six months basis.
Speaker Change: Yes.
For our government customer of course.
Speaker Change: Totally basis, it seems like you.
It's a question that he gets luxury lounger revenues last quarter, you said, you know barring onetime items.
Speaker Change: They scrutinize things pretty carefully and we're subject to audit of all our numbers.
Speaker Change: Uh huh.
Speaker Change: Operating income was a little bit over 1 million and no. It was a little bit under $1 million.
Speaker Change: Any programs that the ultimate customer is the government.
Speaker Change: But I think that.
Speaker Change: Yeah, Yeah, Yeah, you Oh this that's certainly correct.
Speaker Change: We are we.
We feel pretty strongly that.
Speaker Change: R R.
Speaker Change: But I think the.
Speaker Change: Gross margin is going to continue an upward trend of course, that's not going to.
Speaker Change: 0.2, I would emphasize we always anticipate that quarter to quarter, we're going to see some fluctuations in things as we reported last quarter. There were some one time events that had a positive impact on those numbers.
Go on indefinitely.
Speaker Change: We are targeting.
Speaker Change: Gross margin of.
Speaker Change: Around 50%.
Speaker Change: And we think that we can get there within the next six.
Speaker Change: And those those are onetime events aren't there this quarter. So I think the way I. It strictly speaking the margin went down a little bit, but I think I would.
Speaker Change: Six months to a year.
Speaker Change: Yes.
But it's great to hear.
Speaker Change: And.
You.
Speaker Change: Backlogs.
Speaker Change: I think realistically I would characterize it as a pretty much are holding steady.
You know kind of dull.
Speaker Change: Don.
Speaker Change: Sequentially again, but do you still anticipate to be clear I would still anticipate backlog shooting up again as you win more deals is that correct.
Speaker Change: Okay gentlemen.
Speaker Change: Speaking does your business at all for you know leverage kind of continuing amazing vouchers as your revenues increase or was that with the government with the government to call them, it's kind of like look at that and take.
That's definitely correct.
Speaker Change: Same same I would characterize that as the same way it's true.
Speaker Change: And literally speaking the numbers have gone down.
Take that into account towards the pricing contracts.
Speaker Change: A little bit.
Speaker Change: Over the last quarter, but they are really pretty much holding steady and given the new business that we booked in the month of November and Additionally, what we anticipate over the next couple of months.
Speaker Change: Yeah, you know we.
Speaker Change: For our government customer of course, they scrutinize things pretty carefully and we're subject to audit of all our numbers.
Our backlog is definitely.
Speaker Change: Any programs that the ultimate customer is the government, but I think that we we are we feel pretty strongly that a R.
Speaker Change: Going to trend upwards because of that.
Speaker Change: Yeah.
Speaker Change: Okay, that's good to hear.
Speaker Change: And.
Speaker Change: Of the deals you know one of them.
Speaker Change: Our gross margin is going to continue an upward trend of course, that's not kind of a go on indefinitely, but we're targeting a gross margin of around.
Speaker Change: Government customer is that still a military deal or is that the civilian deal.
Speaker Change:
Speaker Change: It's not the military.
Let me put it that way.
Speaker Change: Around 50%.
Speaker Change: Yeah.
Speaker Change: Do you would you expect to commensurate the civilian markets in any way.
Speaker Change: And we think that we can get there within the next six months to a year.
I'm, sorry can you say that again.
Speaker Change: Do you expect to go into civilian markets significantly.
Speaker Change: Yes.
Speaker Change: But it's good to hear.
Speaker Change: And are you backlogs were.
Speaker Change: Definitely.
It of course.
Speaker Change: So kind of a share of the.
Speaker Change: So that's the question we are good but you still anticipate to be clear you still anticipate backlog shooting up again as you win more deals is that correct.
Speaker Change: The satellite business the U S government as a.
Speaker Change: Historically been the biggest player.
Speaker Change: But.
There has always been there.
Speaker Change: That's that's definitely correct same same I would characterize that as the same way. It's true literally speaking the numbers have gone down a little bit over the last quarter, but they're really pretty much holding steady and given the.
There is a lot of activity and more and more.
Speaker Change: Coming from other arenas and.
Speaker Change: The nine.
Speaker Change: <unk> nine 9 million dollar contract that we talked about in.
Speaker Change: November press release.
Speaker Change: New business that we booked in the month of November and then Additionally, what we anticipate over the next couple of months.
Speaker Change: It is an example of that and we anticipate that there will be more of that going forward.
Speaker Change: Yes.
Speaker Change: Our backlog is definitely.
Okay. That's it for me.
Speaker Change: Transportation was again.
Going to trend upwards because of that.
Speaker Change: Okay. Thanks, Thank you.
Speaker Change: Thank you. The next question is coming from.
Speaker Change: Okay, that's good to hear and Oh.
Speaker Change: Tim Hazara from Senate capital.
Speaker Change: You know one of them.
Tim Hazara: Line is live.
Speaker Change: The us government customer is that still a military deal or is that the severe rehab deal.
Thank you Tom.
I'm just I just wanted to did you I just wanted to confirm you said, 50% gross margins in the next six months to a year okay.
Speaker Change: Is it.
It's not the military Oh, let me put it that way.
Yes.
Tim Hazara: Okay, that's our goal.
Speaker Change: Okay.
Right.
Speaker Change: Do you would you expect you can enter the civilian markets in any way.
Tim Hazara: I would assume that the three new contracts that you announced in November would be.
Speaker Change: I'm, sorry can you say that again.
Tim Hazara: Much higher gross margin.
Do you expect to go into civilian markets significantly.
Tim Hazara: The next day or would that be correct.
Speaker Change: In general that's correct yes.
Speaker Change: Oh definitely you know it.
Speaker Change: And with respect to those three contracts I would assume that you will book those as the percent of completion through the term I guess all three of them are approximately 10 years.
Of course in our satellite business are the U S. Government is historically been the biggest player but you know.
Speaker Change: Can you.
Speaker Change:
Speaker Change: There's always been a there there is a lot of activity and more and more.
Speaker Change: Yes.
Speaker Change: One of them is actually closer to three years, but.
Speaker Change: Coming from other arenas.
Speaker Change: One of them, so 18 months.
Speaker Change: And.
But they will all be percentage completion.
Speaker Change: They are nine 9 million dollar contract that we talked about in the November press release is an example of that and we anticipate that there will be more of that going forward.
Speaker Change: And with respect to <unk>.
Speaker Change: Booking those on a quarterly basis will can you give us any kind of.
Speaker Change: Estimate or guidance.
Speaker Change: Somewhat linear for the amount of the contract are more front loaded back loaded or.
Speaker Change: Yes.
Speaker Change: Okay. That's it for me.
Speaker Change: Any color would help kind of model that.
Speaker Change: That's really I suppose again.
Speaker Change: Okay. Thanks, Thank you.
Speaker Change: Yeah, I think the you know.
Thank you. The next question is coming from.
Speaker Change: Got it.
Speaker Change: Tim Hazara from Senate capital Jamie.
Speaker Change: It's pretty hard to model, but I would say that there's a the best approximation that would be a linear approximation.
Speaker Change: Your line is live.
Speaker Change: Yes, Thank you Tom.
Speaker Change: I'm just I just wanted to did you I just wanted to confirm you said, 50% gross margins in the next six months to a year that's.
Probably a little bit more upfront.
Speaker Change: Correct.
Speaker Change: Yes.
Speaker Change: But approximately linear over the course of the program.
Okay, that's our goal.
Speaker Change: Right.
Speaker Change: I I would assume that the three new contracts that you announced in November would be.
Speaker Change: Okay great.
Speaker Change: I don't have any other questions. Thank you.
Okay. Thank you.
Speaker Change: A much higher gross margin.
Speaker Change: Thank you the.
Speaker Change: To help the next day or would that be correct.
Speaker Change: The next question is coming from Frank <unk> Frank.
Speaker Change: In general that's correct yes.
Speaker Change: Frank is a private investor Frank Your line is live.
Speaker Change: Yeah.
Speaker Change: Hi.
Speaker Change: With respect to those three contracts I would assume that you will book those as the percent of completion through the term I guess all three of them are.
Speaker Change: And.
Your backlog given the new orders in November.
Speaker Change: Current backlog must be closing in on about 100 million.
Speaker Change: Approximately yes years.
Speaker Change: Can you.
Speaker Change: Bob.
Speaker Change:
Speaker Change: And in that right.
Speaker Change: Yes, they do.
Yeah.
Speaker Change: The one of them is actually closer to three years, but.
Speaker Change: Inventory.
Speaker Change: Hi.
Speaker Change: Is that positive.
Speaker Change: And one of them so 18 months.
Speaker Change: I'm I'm I'm I'm.
Speaker Change: About the.
Speaker Change: But they will all be a percentage completion.
Speaker Change: The personnel do you have enough engineers and do you have enough people to put out these contracts efficiently.
Speaker Change: And with respect to booking those on a quarterly basis will can you give us any kind of.
Speaker Change: Okay. So so a couple of things to highlight there.
Speaker Change: Estimate or guidance will be somewhat linear for the amount of the contract are more front loaded back loaded or.
Speaker Change: First of all.
Speaker Change: The current backlog is a is not a $100 million.
Speaker Change: Any color would help kind of model that.
Speaker Change: You have to keep in mind that.
Speaker Change: Yeah, I think the you know, it's a it's pretty hard to model, but I would say that there's a the best approximation that would be a linear approximation.
Speaker Change: When we get under contract on these programs we we.
Speaker Change: We don't get authorized to spend the full amount of the car.
Speaker Change: Contract so the.
Speaker Change: The backlog is going to go up and it's going to go up significantly.
Speaker Change: Probably a little bit more upfront.
Speaker Change: But approximately linear over the course of the program.
Speaker Change: Over over the coming months, but it doesn't all happen at once.
Speaker Change: Okay great.
So just a.
Speaker Change: I don't have any other questions. Thank you.
Speaker Change: Okay. Thank you.
Speaker Change: That's kind of an important thing to understand.
Speaker Change: Thank you.
Speaker Change: The next question is coming from Frank <unk>, Frank is a private investor Frank Your line is live.
Speaker Change: Think that.
Speaker Change: I'd like to address the inventory a little bit I think you.
Speaker Change: Hi.
Speaker Change: And.
Speaker Change: Youre actually right on the money with that one I think.
Speaker Change: Yeah your backlog given the new orders in November.
We really coming out of.
Speaker Change: Your current backlog must be closing in on about 100 million.
Speaker Change: The pandemic and this periods, where we all experienced supply chain problems and as part of that it's pretty important too.
Speaker Change: And in that right.
Speaker Change: Your are your inventories, which are which are high.
Speaker Change: Is it positive I assume.
I'm curious about the.
Speaker Change: Inventory provided a good buffer to the all of the supply chain kind of problems.
Speaker Change: The personnel, though do you have enough engineers and do you have enough people to put out these contracts are efficiently.
Speaker Change: And we're really kind of coming out of that and we're at a point, where we really want to be much more aggressive in.
Okay. So so a couple of things to highlight there.
Speaker Change: First of all the.
Speaker Change: Keeping the inventory down and approaching it.
Speaker Change: The current backlog is a is not that a $100 million.
Speaker Change: And managing that inventory very carefully, but youre right. We do have a very significant inventory and as we start these programs, especially where we're on really quite historically quite tight schedules to deliver things. That's a that's a benefit now.
Speaker Change: You have to keep in mind that when we get under contract on these programs. We we are we don't get authorized to spend the full amount of the contract. So.
Speaker Change: The backlog is going to go up and it's going to go up significantly.
Speaker Change: They're part of the question regarding engineers.
Speaker Change: Think of this what I tried to point out in my opening statements is it.
Speaker Change: Over over the coming months, but it doesn't all happen at once.
Speaker Change: So just.
Speaker Change: We've actually been working on this.
Speaker Change: These three programs for quite some time and that in fact has been fairly frustrating that we didn't get turned on get under contract on these jobs sooner than we did but the the the benefit of that the positive thing about that is that we have.
Speaker Change: That's kind of an important thing to understand.
Speaker Change: I think that Oh, I'd like to address our inventory a little bit I think you actually are right on the money without one.
Speaker Change: Thank.
Speaker Change: You know, we've we really coming out of the.
Speaker Change: The pandemic and there's periods, where we all are experienced the supply chain problems and as part of that it's pretty important to us.
Speaker Change: Really been preparing for these programs over the last six to nine months and we we have cautiously been increasing our workforce and hiring engineers. So we're really in.
Speaker Change: Inventory provided a good buffer to the all of the supply chain kind of problems and we're really kind of coming out of that and we're at a point, where we we really want to be much more aggressive in.
Speaker Change: I think a very very good position.
Speaker Change: In that regard and.
Speaker Change: I'm very very optimistic about our ability to.
Speaker Change: Execute these are effectively.
Speaker Change: Keeping the inventory down and and approaching it.
Speaker Change: Right from the start.
Good.
I'm, a little curious on how you're thinking about backlog.
Speaker Change: And managing that inventory very carefully, but you're right. We do have a very significant inventory and as we start these programs, especially where we're on really quite historically quite tight schedules to deliver things. That's a that's a benefit now your other part of the question.
Speaker Change: You got contract awards.
I'd say the first one for $25 million.
Speaker Change: So you don't take all of that 25 million, even though we've been awarded yeah, you don't take it into backlog.
Speaker Change: No we only take fully funded backlog. So in that example, let just to say it's $25 million contract. They give you a $5 million upfront and then they progressively funded accordingly, we would only put $5 million in backlog.
Speaker Change: Regarding engineers.
Thank God this.
Speaker Change: This what I tried to point out in my opening statements is it.
Speaker Change: We've actually been working on these three programs for quite some time and then in fact has been fairly frustrating that we didn't get turned on and get under our contract on these jobs sooner than we did but the the the benefit of that deposit.
Speaker Change: I understand but I mean, it's not like the rest of that $25 million is contingent on anything other than you delivered in the first $5 million I suppose right.
Speaker Change: Its not contingent on anything, but it's just funding and we only report funded backlog.
Speaker Change: So.
Speaker Change: And just to follow up on that.
Speaker Change: The thing about that is that we've really been preparing for these programs over the last six to nine months and we we have cautiously been increasing our workforce and our hiring engineers. So we're really.
In that particular example, less $25 million program, which has that completion in 18 months. So I think one of the important ways to look at that is it.
That backlog has the surface within the next 18 months.
Speaker Change: And I think a very very good position in that regard and I'm very very optimistic about our ability to to execute these are effectively.
Speaker Change: Obviously, most of it a lot sooner than that.
Okay. So our initial turn on those just for a few million dollars, but that has to.
Speaker Change: In order for the customer to get that product.
Right from the start.
Good.
Speaker Change: In 18 months, they're going to have to turn us on for a lot more money.
Speaker Change: I'm I'm, a little curious on how you figure the backlog.
Speaker Change: You got contract awards.
Speaker Change: Relatively quickly.
Speaker Change: I'd say the first one for $25 million.
Speaker Change: Great I understand.
Speaker Change: Shane.
Speaker Change: Vein.
Speaker Change: So you don't take all of that 25 million, even though it had been awarded yeah, you don't take it into backlog.
Speaker Change: The atomic clock.
Speaker Change: Well water.
Speaker Change: No we only take fully funded backlog. So in that example, let just to say, it's 25 million dollar contract. They give you $5 million upfront and then they progressively funded accordingly, we would only put $5 million in backlog.
Speaker Change: Which I guess has the potential contract options of $70 million, depending upon the effectiveness of the navigation system performance on a demonstration satellite.
Speaker Change: Is that the demonstration satellite going up and when do you win.
Speaker Change: I understand but I mean, it's not like the rest of that $25 million is contingent on anything other than you delivered in the first 5 million I suppose right.
Speaker Change: Do you expect to receive confirmation that the product has been effective.
Speaker Change: So so I think that is currently scheduled for a 2027.
Speaker Change: Its not contingent on anything, but it's just funding and we only report funded backlog.
Speaker Change: So and just to follow up on that.
So we would anticipate that.
Speaker Change: In that particular example, that's a $25 million program, which has that completion in 18 months. So I think one of the important ways to look at that is that that that backlog has the surface within the next 18 months.
Speaker Change: Potentially even well before that but certainly at that point in time.
Speaker Change: We'd anticipate.
Speaker Change: That that.
That would get determined let's just put it that way.
Speaker Change: Okay.
Speaker Change: This is a new customer.
Speaker Change: And.
Speaker Change: Obviously, most of it a lot sooner than that.
And I think Oh.
Speaker Change: One of the important things is for that customer to gain confidence in working with Spi.
Okay. So our initial turn on those just for a few million dollars, but that has to in order for the customer to get that product.
And so.
So we're doing everything we can to.
Speaker Change: In 18 months, they're going to have to turn us off for a lot more money.
Speaker Change: Position ourselves.
The relatively quickly.
Speaker Change: So that.
Speaker Change: Right I understand and that same vein.
Speaker Change: Those options get realized.
Speaker Change: Yes.
Speaker Change: It's probably yes.
Speaker Change: The atomic clock.
Speaker Change: Correct any engineering difficulties like you've had in basketball grabs.
Speaker Change: Well, what our which I guess has the potential contract options of seven 8 million depending upon the effectiveness of the navigation system performance on a demonstration satellite.
Speaker Change: But I hope.
Speaker Change: No we do not in fact.
Speaker Change: That's one of the things. This this is a.
Speaker Change: There is.
Speaker Change: When is that the demonstration satellite going up and when do you does win.
Speaker Change: Very little New development on this is basically a building hardware it's a.
Speaker Change: Do you expect to receive confirmation that the product has been effective.
Speaker Change: Production job and.
Speaker Change: So so I think that is currently scheduled for toil 2027.
Speaker Change: There's there's every reason.
Speaker Change: To believe that we should be very very successful on this one.
Speaker Change: So we would anticipate that are potentially even well before that but certainly at that point in time, we would anticipate the.
Speaker Change: Okay. One final one for me.
Speaker Change: Investors look at at FBI.
Speaker Change: Pretty much in a as a satellite.
Speaker Change: Program Company.
But the <unk> and.
Speaker Change: That oh.
Speaker Change: The non satellite.
Speaker Change: That would get determined let's just put it that way.
Speaker Change: Business seems to be going quite well.
Speaker Change: Ah Okay.
Alright.
Speaker Change: This is a new customer.
Other big orders associated with.
And I think one of the important things is for that customer to gain confidence in working with at the eye.
Speaker Change: That business or is it more continuing to autos or is it smaller orders, but the numbers are quite impressive.
Speaker Change: And so we're doing everything we can.
Speaker Change: That's growing.
Speaker Change: Yeah they they.
Speaker Change: To.
Speaker Change: Actually.
Speaker Change: Positioning ourselves to.
Speaker Change: <unk> been very successful over the past couple of quarters in the end.
Speaker Change: So that those options get are realized.
Speaker Change: Getting new work completely new stuff and of course, there are also continuing our orders on their existing products. So are they.
It's probably yeah, you don't expect any engineering difficulties like you've added in basketball grabs.
Speaker Change: But I hope.
Speaker Change: No we do not in fact.
Speaker Change: They went through a rough patch about a year ago.
Speaker Change: That's one of the things. This this is a there's theirs.
Speaker Change: Remember, perhaps things were moved around the country, but they've surprised us all actually in their ability to to turn things around.
Speaker Change: Very little New development on this is basically a building hardware it's production job and.
Speaker Change: Uh huh.
Speaker Change: At there's there's every reason to believe that we should be very very successful on this one.
Speaker Change: Things are are really.
Speaker Change: Just looking really good.
At site for at this point in time.
Speaker Change: And is there other margins at diaper.
Speaker Change: One final one for me.
Speaker Change: You know investors look at at N V I, a pretty much of a as a as a satellite.
Similar to the satellite or is there any difference in the margin structure of.
Those two operations.
Speaker Change: Our program our company.
Speaker Change: Yeah I think.
Speaker Change: But the zephyr and the nor on our satellite.
Speaker Change: There are.
Speaker Change: The numbers aren't that different when you look at them, but I think the details of how you get there are definitely not quite the same.
Speaker Change: Business seems to be going quite well alright.
Speaker Change: Other big orders associated with with that business or is it more continue we know where those are or is it.
Speaker Change: Great well, thank you very much.
Speaker Change: Best of luck in coming quarters.
Speaker Change: Okay. Thank you.
Speaker Change: Part of it is but the numbers are quite impressive how about slowing.
Speaker Change: Thank you. The next question is coming from George Marina from Porretto Ventures, George Your line of sight.
Speaker Change: Yeah. They they are actually had been very successful over the past couple of quarters, and and getting new work completely new stuff and of course. There are also continuing our orders on their existing products.
George Marina: Hi, Thanks for taking my call.
George Marina:
George Marina: I had a question about your SG&A and R&D expenses.
It has.
George Marina: As our revenues.
George Marina: Revenues increase and if you get near your gross margin, let me ask it differently. If you get towards your gross margin goals, what would net margins approximately it looked like.
Speaker Change: So they they went through a rough patch about a year ago.
Speaker Change: Remember the.
Speaker Change: Things were moved around the country, but they've surprised us all actually in their ability to to turn things around and Oh things are are are really just looking really good.
George Marina: Steve I'll, let you take that one.
Steve Bernstein: So SG&A on a dollar value number is going to run fairly consistent I mean again, if we if we grow substantially yes, there'll be some more cost in there but percent wise as you see.
Speaker Change: At site for at this point in time.
And is that the margins at Jive for.
Steve Bernstein: It went down.
Steve Bernstein: Getting a percentage the dollars even as a formula of income is down. So we expect it to stay at that current level, where it is now unless things substantially grow.
Speaker Change: Similar to the satellite or is there any difference in the margin structure of.
Speaker Change: Those two operations.
Speaker Change: Yeah, I think there there are.
Speaker Change: You know the numbers aren't that different when you look at them, but I think the the details of how you get there are definitely are not quite the same.
Steve Bernstein: Yeah.
Steve Bernstein: Okay.
Steve Bernstein: Okay.
Steve Bernstein: You don't expect margins expanded as a percentage of sales.
Steve Bernstein: Gross margin or SG&A.
Speaker Change: Great well, thank you very much and wish you a best of luck in coming quarters.
Steve Bernstein: No net margin.
Steve Bernstein: Yeah.
Speaker Change: Thank you. Thank you.
Steve Bernstein: Please go ahead.
Let's say in gross margin.
Speaker Change: Thank you. The next question is coming from George <unk> from Porretto Ventures, George Your line is open.
Steve Bernstein: But.
Steve Bernstein: What would you anticipate a net margin.
Steve Bernstein: Operating margin right.
George: Hi, Thanks for taking my call.
I would have to look at it but it will go up and again I think like I said, the actual cost structure will be relatively the same.
Speaker Change:
I had a question about your SG&A and R&D expenses.
Yeah.
As our revenues increase and if you get near your gross margin. Let me ask you differently, even if you get towards your gross margin goals, what would net margins approximately looked like.
Steve Bernstein: All in all yes.
Steve Bernstein: Yeah.
Steve Bernstein: So the SG&A right now is about $2 five a quarter.
Steve Bernstein:
Steve Bernstein: You don't expect that to increase too much.
Speaker Change: No I do not.
Speaker Change: Steve I'll, let you take that one.
Speaker Change: Okay.
Speaker Change: Alright and also.
Speaker Change: So SG&A.
Speaker Change: The dollar value number is going to run fairly consistent I mean again, if we if we grow substantially yes, there'll be some more cost in there but percent wise as you see.
Speaker Change: After you have won a couple of these big jobs here recently.
Speaker Change: What does the opportunity outlook over the next thing a couple of years look like.
<unk>.
Speaker Change: Pipeline.
It went down.
Speaker Change: Yes.
Speaker Change: Forgetting the percentage the dollars even as a formula of income is down so we expect it to stay at that current level, where it is now unless things substantially grow.
Speaker Change: Thanks.
Speaker Change: The.
Speaker Change: Okay.
Speaker Change: The opportunities look really great.
Speaker Change: You might.
Speaker Change: <unk> that we got the FID and then working on these are these are three jobs for some time and we finally got them in and that's it but the reality is that.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: So you don't expect margins expanded as a percentage of sales.
Speaker Change: Gross margin or SG&A.
Speaker Change: No net margin.
We are just.
Speaker Change: Yes.
Speaker Change: Actually overwhelmed with the opportunities at this point in time space is is booming.
Speaker Change: Thank you.
Speaker Change: Okay.
Speaker Change: Gross margin does.
Speaker Change: Right.
Speaker Change: What would you anticipate a net margin.
Speaker Change: Booming.
Speaker Change: I.
Speaker Change: I don't see that turning.
Operating margin right.
Speaker Change: Turning around anytime soon.
I would have to look at it but it will go up and again I think like I said, the actual cost structure will be relatively the same.
Speaker Change: Okay a lot more.
Speaker Change: You mentioned that you may have some small wins here in the coming week Flash model.
All in all.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: So the SG&A right now is about $2 five a quarter.
Are there any big ones in the pipeline or that.
Speaker Change: You want them already.
Speaker Change:
Speaker Change: You don't expect that to increase too much.
No Sir there are definitely.
Speaker Change: I do not.
Speaker Change: Some other big things in the pipeline, but.
Speaker Change: Okay.
Speaker Change: Alright.
Speaker Change: The big things.
Speaker Change: And also.
Speaker Change:
Speaker Change: After you have won a couple of these big jobs here recently.
Speaker Change: Happen overnight.
Some of the.
Speaker Change: So it's kind of a constant.
Speaker Change: What does the opportunity outlook over the next thing a couple of years look like the opportunity set.
Speaker Change: Barrage of smaller things coming in the big ones.
Speaker Change: Pipeline.
Speaker Change: I think.
Speaker Change: Yeah.
Speaker Change: We look for some things to materialize.
Speaker Change: Uh huh.
Speaker Change: Ben.
Speaker Change: The Oh.
Speaker Change: In the six to nine months perhaps.
Speaker Change: The opportunities look really great. You know, we you you might have imagined that a we got a fit and then working on these are these are three jobs for some time and we finally got them and and that's it but the reality is.
Speaker Change: Okay.
Speaker Change: And if I may ask one last one since you were there.
Speaker Change: For many years here and I know your new as the CEO, but you have some history with the company.
Speaker Change: Can you kind of maybe compare and contrast or describe maybe qualitatively.
Speaker Change: That.
Speaker Change: We are we're just.
Speaker Change: The difference between today and back around 2018, there was a similar I'd say setup in terms of you know.
Speaker Change: Actually overwhelmed with the opportunities at this point in time space is is booming.
Speaker Change: Huge opportunities a lot of wins, but it just didn't really materialize.
And.
Speaker Change: I don't see that turning around anytime soon.
Speaker Change: What kind of happened men and what's to prevent it from everything to kind of falling apart again now.
Speaker Change: Okay a lot more.
Speaker Change: You mentioned that you may have some small wins here in the coming week Flash model.
Yeah.
Speaker Change: A very good question and.
Speaker Change: Yeah.
Speaker Change: Of course, there is there are no guarantees in life, but I think.
Speaker Change: Are there any big ones in the pipeline or that Theyre, all you want them already.
Speaker Change: We are doing some things differently.
Speaker Change: Oh no. There there are definitely are some other big things in the pipeline but are.
Speaker Change: Think that.
Speaker Change: If we look historically we've.
Speaker Change: The big things.
Had a lot of difficulty with what what we referred to as the NRA programs for nonrecurring engineering or a lot of new development activity.
Speaker Change: They don't happen overnight.
Speaker Change: All of the.
Speaker Change: There's kind of a constant.
Speaker Change: Barrage of smaller things coming in the Big ones. You know I think we look for some things to materialize are.
Historically, when when those turn into.
Speaker Change: Later on into production, we've been able to do those are a very.
Speaker Change: In the six to nine months perhaps.
Very profitably, but we have been challenged with the development.
Speaker Change: Okay.
Speaker Change: And if I may ask one last one since you were there.
Speaker Change: And I think one thing that I've I've made a real effort to do differently is.
Speaker Change: For many years here and I know your new as the CEO, but you have some history with the company.
Speaker Change: We're bidding these things differently and I think to some extent.
Speaker Change: Can you kind of maybe compare and contrast or describe maybe qualitatively.
Speaker Change: My experience here over many years.
Speaker Change: The difference between today and back around 2018, there was a similar I'd say setup in terms of.
Speaker Change: I have been involved in an awful lot of.
This development programs and I know the pitfalls and the difficulties and I think we are.
Speaker Change: Huge opportunities a lot of wins, but it just didn't really materialize.
Speaker Change: What kind of happened then and what's to prevent that from everything that kind of falling apart again now.
Speaker Change: We're pushing back really hard and.
Speaker Change: We're making sure that we did this in a way that we are we feel confident that we can be profitable.
Speaker Change: Yeah, a very good question and.
Speaker Change: Of course, there is there are no guarantees in life, but I think.
And so I think Oh.
Speaker Change: We are doing some things differently.
Speaker Change: Uh huh.
Speaker Change: Uh huh.
That's that's.
Speaker Change: Think that.
Speaker Change: One of the elements I think then the rest is just kind of the Devil's in the details I think if we look at the specific programs.
Speaker Change: If we look historically, we've had a lot of difficulty with what what we referred to as a N. R. E programs for nonrecurring engineering or a lot of new development activity.
Speaker Change: That have just come online in November.
Speaker Change: Think of these have a smaller nonrecurring engineering component to them there are much more production and those are <unk>.
Speaker Change: Historically, when when those turn into later on into production, we've been able to do those very profitably, but we have been challenged with the development.
Speaker Change: Historically, we have been very effective on so we're confident.
In that regard.
Speaker Change: I think one thing that I've I've made a real effort.
Speaker Change: And I think the rest of it is just.
Speaker Change: I think one of the problems are starting in 2018 is it.
Do differently is we were bidding these things differently and I think so to some extent.
Speaker Change: Top management really didn't understand the programs very well and so so we really didnt.
Speaker Change: My experience here over many years I have been involved in an awful lot of a of a there's a development programs and I know the pitfalls and the difficulties and I think we are.
Speaker Change: We just kind of ended up behind the eight ball from the start in some cases and.
Speaker Change: Think I'm actively involved in these programs and I'm committed to making sure.
Speaker Change: We're pushing back really hard and of where we're making sure that we bid. These in a way that we are we feel confident that we can be profitable.
Speaker Change: That they.
Speaker Change: Execute effectively going forward.
Speaker Change: And.
Speaker Change: I think so so that's my take on things so really good question.
Speaker Change: And so I think.
Speaker Change: But.
Speaker Change: We'll just have to see how things go going forward.
Speaker Change: Yeah.
Speaker Change: That's that's one of the elements I think then the rest is just kind of the Devil's in the details.
Speaker Change: I appreciate your candor.
Think if we look at the specific programs that.
Speaker Change: If I may slip in one real one last quick one here on <unk>.
That have just come online in November I think these have a smaller nonrecurring engineering component to them. There are much more production and those are historically, we have been very effective on so where we are.
Speaker Change: I know you guys don't give guidance.
Speaker Change: Do you guys as a company have good visibility quarter to quarter on what revenues and costs look like or you don't have much visibility.
Speaker Change: Well, we have we have pretty good visibility.
Speaker Change: Have you considered giving quarterly guidance a quarter ahead.
Speaker Change: Confident in that regard.
Steve.
Speaker Change: And I think the rest of it is just.
Speaker Change: As of now we don't guide going forward, maybe we will continue in the future, but not for now.
Speaker Change: Think one of the problems are starting in 2018 is at.
Speaker Change: Okay. Thank you for your time.
Speaker Change: Okay.
Speaker Change: The top management are really didn't understand the programs very well.
Speaker Change: Yeah.
Speaker Change: Thank you. The next question is coming from Michael Eisner, a private investor Michael Your line is live.
Speaker Change: And Oh, so are we really didn't.
Speaker Change: Hi.
Michael Eisner: How many employees do you have at this time.
Speaker Change: We just kind of ended up behind the eight ball from the start in some cases and I think I'm actively involved in these programs and I'm committed to making sure that they are.
Speaker Change: We have fared.
Speaker Change: Just about 200 employees.
Speaker Change: Including all three sites at this point.
That's full time.
Speaker Change: Oh, yes.
Speaker Change: Execute effectively going forward.
Speaker Change: And some you have some part time also right.
And.
Speaker Change: Some part time, where you work with some consultants.
Speaker Change: Thank a so so that's my take on things. So really good question, but you know, we'll just have to see how things go going forward.
Speaker Change: And we have some contracts with some outside engineering.
Speaker Change: Contractors.
Speaker Change: Alright, let's see hired more people.
Speaker Change: I appreciate your candor.
Speaker Change: Three contracts.
Speaker Change: Two.
Speaker Change:
Speaker Change: It may slip in one real one last quick one here on <unk> and I know you guys don't give guidance.
Speaker Change: Yeah.
Speaker Change: The technology is already proven in the first $2 million to $25 million and $19 million.
Speaker Change: Do you guys as a company have good visibility quarter to quarter on what revenues and costs looked like or you don't have much visibility.
Speaker Change: Yes, that's great.
Speaker Change: Now.
Speaker Change: Well, we have a we have a pretty good visibility.
Speaker Change: Can they can these companies whether you're dealing with can they give you more business on these two contracts.
Speaker Change: Have you considered giving quarterly guidance a quarter ahead.
Speaker Change: Oh, yes.
Speaker Change: Alright, yes risk.
Steve.
Speaker Change: Just the first part if like for example, the 25 million that will be done in roughly two years or so that could go through them.
Speaker Change: As of now we don't guide going forward, maybe we will continue in the future, but not for now.
Okay. Thank you for your time.
Okay.
Speaker Change: Another 20 million say.
Speaker Change: Thank you. The next question is coming from Michael Eisner, Michael is a private investor Michael Your line is live.
Speaker Change: Well it.
Speaker Change: I want to make sure I don't mislead.
Michael Eisner: Hi, Oh, how many employees do you have at this time.
Speaker Change: In that particular case, its not like there are contract options.
Michael Eisner: We have fared.
Speaker Change: Going forward, but that is a major.
Michael Eisner: <unk> just about 200 employees that are including all three sites at this point.
Speaker Change: Satellite a supplier.
Michael Eisner: That's full time.
Speaker Change: And we have many many contracts with that particular company over the years and we will have many more going forward. In fact, we do currently have other contracts with the with that company.
Michael Eisner: Ah yes.
And some you have some part time also right.
You have some part time, where you work with some consultants.
Michael Eisner: And we have some contracts with some outside engineering.
Speaker Change: Uh huh.
Michael Eisner: The contractors.
Speaker Change: I have every reason to believe that if we are successful on that particular program.
Michael Eisner: Alright C hired more people.
The three contracts differ.
Michael Eisner: First to.
Speaker Change: That will lead to other other satellite.
Michael Eisner:
Michael Eisner: Hugh.
Michael Eisner: The technology is already proven in the first two.
Programs for us going forward.
Michael Eisner: The 25 million and.
Speaker Change: Well it should work because you're using technology at work before.
19 million.
Michael Eisner: Yes, that's great.
Michael Eisner: <unk> now.
Speaker Change: Yes, absolutely.
Michael Eisner: Can they can these are companies who are are you dealing with can they give you more business in these two contracts.
Speaker Change: One of the this one of the things we pointed out in the press release is that this is a $25 million program, but from beginning to end. This 18 month time period and the.
Michael Eisner: Oh, yes.
Yes, it did.
Michael Eisner: Just the first part if like for example, the 25 million that will be done in roughly two years of Sal.
Michael Eisner: I could go through another.
Speaker Change: In a way this is the ultimate customer is a U S government.
Michael Eisner: Another 20 million say.
Michael Eisner: Well it I I want to make sure I don't mislead it's.
And this is a sort of a test to see if we and of course, our our customer can deliver in the this a shortened period of time typically a program like this would take.
Michael Eisner: Is it in that particular.
Michael Eisner: Particular case its not like there are contract options are going forward.
Michael Eisner: But that is a major satellite a supplier.
Speaker Change: Roughly three years to do the same thing we're trying to do it in an half that time.
Michael Eisner: And Oh, we have many many contracts with that particular company over the years and we will have many more going forward. In fact, we do currently have other contracts.
And so where we are we see this as a is a big challenge.
Speaker Change: But it's one that we are pretty confident that we can do and the and I think if we're successful I think.
Michael Eisner: With with that company and.
Michael Eisner: I have every reason to believe that if we are successful on that particular program that are that will lead to other other satellite programs for us going forward well.
I was going to be a lot more business behind it.
Speaker Change: Alright, well that's good to hear but at this point. These are these three contracts.
Speaker Change: I assume you already started working on them.
Well, yeah, it should work because you're using technology that work before.
Speaker Change: That's correct, yes, so the clock is ticking.
Speaker Change: He didn't start just today.
Michael Eisner: Yep absolutely.
Speaker Change: The contract was a right that came in.
Michael Eisner: You know one of the this one of the things we pointed out in the press release is that this is a $25 million program, but from beginning to end. This 18 month time period and.
Speaker Change: Yes.
Speaker Change: We are we are.
Speaker Change: Moving forward very aggressively on all of these.
Speaker Change: And the 9 million one is that is there.
That new technology, where you had did that worked before.
Michael Eisner: In a way this is the ultimate customer is a U S government and this is a sort of a test to see if we and of course, our our customer can deliver in the this.
Speaker Change: No that's not that's not new technology for us that's a.
Speaker Change: Base based atomic frequency standards.
Speaker Change: But that is an existing MTI product that has already gone through qualification testing and so forth and so on and so so.
Michael Eisner: The shortened period of time typically a program like this would take.
Michael Eisner: Roughly three years to do the same thing, we're trying to do it and and half that time.
Speaker Change: That is one that we really do not anticipate a.
Speaker Change: Any may.
Speaker Change: Major difficulties in the it's just a straight manufacturing.
Michael Eisner: And so where we are we see this as a is a big challenge.
Speaker Change: Alright, and who owns that technology for that you or the customer.
But it's one that we are pretty confident that we can do and and I think if we're successful I think theres going to be a lot more business behind it.
We own the technology.
Speaker Change: Is that going to three X.
Ah yes.
Speaker Change: Alright, well that's good to hear but at this point. These are these three contracts I assume you already started working on them.
Speaker Change: So once you make it for them they can't take the work to someone else.
Speaker Change: No no definitely not.
Speaker Change: Alright, So you get you get the R&D.
Speaker Change: That's correct, yes. So the clock is already ticking did you you didn't start just today or the data contract. It was the right thing came in.
Speaker Change: Which is key.
Speaker Change: And that when you mentioned it could be $70 million over six years.
Is that more because they don't want to give you the whole thing at once they want.
Speaker Change: Have you thought.
We are we are moving forward very aggressively on all of these.
Speaker Change: Well so.
Speaker Change: So.
Speaker Change: Have to be careful what I say, because we are as part of this contract. There was a lot of specific information that we're not able to divulge but.
And the 9 million one is that is that new technology, where you had did that worked before.
Speaker Change: That's not a that's not new technology for us that's a.
Speaker Change: This is a navigation satellite system.
Speaker Change: Base based atomic our frequency standards.
Speaker Change: And so the idea is we were.
But that is an existing FTE I product that has already gone through qualification testing and so forth and so on and so so.
Speaker Change: The products that we're going to deliver on this contract are going to go on a demonstration satellite.
Speaker Change: And if that demonstration satellite is successful.
Speaker Change: That is the one that we really do not anticipate.
Speaker Change: Any.
Then there is a very high probability that those options will be exercised now.
Speaker Change: Major difficulties in the it's just a straight manufacturing.
Speaker Change: The other thing to keep in mind is if you read about a lot of these satellite systems those are all kind of.
Speaker Change: Alright, and who owns that technology for that you or the customer.
Speaker Change: We own the technology.
Speaker Change: Independent of the FTE is participation in these programs there is.
Speaker Change: Is that going to all three X.
Speaker Change: Ah yes.
Speaker Change: So they once you make it for them they can't take they'll work to someone else.
Speaker Change: It's a very expensive to two.
Speaker Change: To launch a satellite system Theyre, all kind of considerations.
Speaker Change: No no definitely not.
Alright, So you get you get the R&D.
Speaker Change: And so there are many things other than just.
Speaker Change: Which is key.
Speaker Change: And that when you mentioned it could be $70 million over six years.
Speaker Change: The product that we deliver for the satellite that can.
Speaker Change: Is that work because they don't want to give you the whole thing at once they want.
Speaker Change: Cause problems for the ultimate success of that satellite system. All those things are completely out of our control and so so there are a number of other reasons that the our customer could decide down the road.
Speaker Change: Well, so so I have to be careful what I say because of we are as part of this contract are theres a lot of specific information that we're not able to divulge but.
Speaker Change: Not to go forward with this system things that have nothing to do with F. P. I.
Speaker Change: The they are this is a navigation satellite system.
Speaker Change:
Speaker Change: And so the idea is we were.
Speaker Change: I think we have a reason to which I can't go into to believes that that is unlikely.
Speaker Change: The products that we're going to deliver on this contract are going to go on a demonstration satellite.
Speaker Change: But nonetheless.
Speaker Change: Nonetheless, we have to recognize that those are possibilities.
And if that demonstration satellite is successful.
I think of course.
Speaker Change: The other side of it is that.
Speaker Change: And then there's a very high probability that those options will be exercised now.
If if.
Speaker Change: We're not successful in delivering on time or our products don't work. The way anticipated then obviously our customer would have the opportunity to try to procure those products from somebody else, we think that's highly unlikely.
Speaker Change: The other thing to keep in mind, if if you read about a lot of these satellite systems those are all kind of.
Speaker Change: Independent of the FTE is participation in these programs. There's a you know it's a very expensive to two.
Speaker Change: It's hard to imagine that that would be cost effective for our customer so setting aside.
Speaker Change: To launch a satellite system, they're all kind of considerations and so so there are many things other than just.
Speaker Change: Part of this that is completely out of our control that the system doesn't go forward because of the financial things or are there other things that have nothing to do with our products, where you set that aside and look at the part that we can control I think we feel that we're in.
Speaker Change: The the product that we deliver for the satellite that can 10.
Speaker Change: Cause of problems for the ultimate success of that satellite system. All those things are completely out of our control and so so there are a number of other reasons that the our customer could decide down the road.
Speaker Change: A really good position and.
Speaker Change: I think it is a is very likely that one way or another those options will get exercised.
Speaker Change: Just for example, someone they make the part that attaches you apart and if they can't make it that would be an example, something could go wrong.
Speaker Change: Not to go forward with this system things that have nothing to do with F. P. I.
Speaker Change: We.
Speaker Change: Yeah.
Speaker Change: Yeah, that's the kind of thing that could go wrong.
Speaker Change: I think we have a reason to which I can't go into to believes that that is unlikely.
Speaker Change: We've.
Yeah.
Speaker Change: But nonetheless, we have to recognize that those are possibilities.
Speaker Change: I am not going to speak specifically about this program, but we've seen where other space programs.
I think of course the.
Speaker Change: The other side of it is that if if.
Speaker Change: Yes.
Speaker Change: The whole program was put together and the plans were to launch satellites are in Russia, and then over the last couple of years are.
Speaker Change: The we're not successful in delivering on time or our products don't work. The way anticipated then obviously our customer would have the opportunity to try to procure those products from somebody else. We think that's highly unlikely and it's hard to imagine that that would be.
Speaker Change: All of the things that have gone on the geopolitical realm.
Russia.
The arrangements with the U S are suddenly not very good and so those launch opportunities disappear and so so now.
Speaker Change: <unk> cost effective for our customer so setting aside the part of this that is completely out of our control that the system doesn't go forward because of the financial things or are there other things that have nothing to do with our products, where you set that aside and look at the park.
Speaker Change: The customer making that system is scrambling to find the other kind of launch sources someplace else in the world that the latest programs and then when things are delayed D&O. If people are investing money and it goes out in time and things things become a lot more challenging so so.
Speaker Change: We can control I think we're where we feel that we're in a really good position and.
Speaker Change: It is is very likely that one way or another those options will get exercised.
Just by way of example of other things that can throw a monkey wrench into these kind of programs. So.
Just for example, someone they make the pot and attach is C. U a part and if they can't make it that would be an example, something could go wrong hybrid.
Speaker Change: I.
It's probably shouldnt be.
Speaker Change: Sitting here being negative about this kind of thing, but I think.
Speaker Change: Yeah, that's the kind of thing that could go wrong.
Speaker Change: Those are the kind of things that I could imagine that would wood.
Speaker Change: You know we've.
Speaker Change: It potentially be a problem.
Speaker Change: No.
Speaker Change: If you pay attention to the commercial satellite.
Speaker Change: I am not going to speak specifically about this program, but we've seen where other space programs.
Speaker Change: Programs that people talk about somebody mentioned star link earlier.
We had.
Speaker Change: And there are many other of the system. So there is a good number of them that are never really end up getting launched so.
The whole program was put together.
Speaker Change: The plans were to launch satellites are in Russia, and then over the last couple of years are the all of the things that have gone on a geopolitical realm are raw.
Oh, yes, that's all.
Speaker Change: Can always happened like Youre comfortable with these three contracts.
Yes.
The third one is that the three year, one you said three years before.
Speaker Change: <unk> Oh arrangements with the U S are suddenly.
Speaker Change: That's correct.
Speaker Change: Not a very good and so those launch opportunities disappear.
Speaker Change: Yes three.
Speaker Change: Yeah.
Speaker Change: Alright, so all of these contracts could go any.
And so so now.
Speaker Change: You could do more work on but right now you'd expect a couple of just smaller contracts over the next couple of months.
Speaker Change: The customer making that system is scrambling to find the other kind of launch sources someplace else in the world that delays programs and then when things are delayed do you know if people are investing money and it goes out in time and things things become a lot more challenging so so.
Speaker Change: Correct.
Speaker Change: Alright, and I think Spacex I think he is launching that have the rockets at this point right.
Speaker Change: I don't know the exact number but they're pretty busy yes.
Speaker Change: Is that just by way of example of other things that can throw a monkey wrench into these kind of programs. So I.
Speaker Change: Yeah, it's not you're really you're concerned you just make the product.
Speaker Change: That's all I had to ask it sounds like the backlog is going to grow and your revenue went up this quarter. So that's always been it's been going up like.
Speaker Change: I.
Speaker Change: It's probably shouldn't be sitting here being negative about this kind of thing, but I think those are the kind of things that I could imagine that would.
Speaker Change: A year and a half so good job there and.
Speaker Change: The backlog did go up for a while thank you for your time, okay. Thanks.
Speaker Change: Would that.
Speaker Change: Potentially be a problem you know if you're if you pay attention to the commercial satellite.
Speaker Change: Thanks, Mike.
Thank you. The next question is coming from Frank Gasca, Frank is a private investor.
Speaker Change: Programs that people talk about somebody mentioned Starlink earlier and there are many other of the system. So there is a good number of them that are never really end up getting launched so.
On the slides.
Frank Gasca: Yes, thanks for taking my call.
Frank Gasca: Keith you can say something about the present technology, but the future technology.
Speaker Change: Oh, Yeah, that's all.
In particular.
Speaker Change: I can always happened like you are comfortable with these three contracts.
Frank Gasca: Several.
Quarter was years ago.
Speaker Change: Yes, and then the third one is that the three year one.
Frank Gasca: There was mentioned on atomic clock.
Said three years before.
Frank Gasca: Which could impact be.
Speaker Change: That's correct, yes, three yeah.
Changer.
I haven't heard much about that.
Speaker Change: Alright, so all of these contracts could go any.
Frank Gasca: Could you elaborate on that in a way.
Speaker Change: You could do more work on but right now you expect a couple of just smaller contracts over the next couple of months.
Frank Gasca: Right.
Speaker Change: Yeah. So so.
Speaker Change: We are.
Speaker Change: Currently working on.
Speaker Change: That's correct.
Speaker Change: And advanced our atomic clock.
Speaker Change: Alright, and I think Spacex I think he is launching that have the rockets at this point right.
Speaker Change: In fact.
Speaker Change: We're going to do a demonstration tomorrow for our government customer.
Speaker Change: I don't know the exact number but they're pretty busy yes, yeah.
Speaker Change: Yeah, it's not really a concern you.
Speaker Change: On that one that's a pulse optically pump rubidium standard.
Just make the product and I think that's all I had to ask it sounds like the backlog is going to grow and your revenue went up this quarter. So that's always been it's been going up like.
That technology.
Speaker Change: Anticipate should make an order of magnitude improvement and the capability of these kind of clocks now the demonstration that we're doing tomorrow actually is.
A year and a half so good job there.
Speaker Change: And the backlog, okay, a big buildup for a while thank you.
Speaker Change: Okay. Thanks.
Speaker Change: Thanks, Mike.
Speaker Change: Thank you. The next question is coming from Frank Gastar, Frank is a private investor.
Speaker Change: Not for a space based.
Speaker Change: While my clock is for a for terrestrial applications, but we do believe that this technology.
Speaker Change: Your line is live.
Speaker Change: Yes, thanks for taking my call.
Speaker Change: Yes.
Speaker Change: Is is definitely something that.
Speaker Change: Uh huh.
See if you can say something about.
Speaker Change: The present technology, but the future technology.
Speaker Change: It can work very effectively in the space environment also.
Speaker Change: In particular.
Speaker Change: So that's just one thing I think that the the.
Speaker Change: Several.
Quarter was years ago.
Speaker Change: There was mention of an atomic clock.
Speaker Change: There are some other technologies.
Speaker Change: Which could impact be.
Speaker Change: In terms of even more advanced clocks that we are seeking funding.
Speaker Change: I'm changer.
Speaker Change: I haven't heard much about that sense could you elaborate on that in any way.
Rather than for us to develop those technologies on the internal MTI money is probably not feasible. So we are seeking sources of external funding at this point in time and we'll see over the next year or two whether we can be successful at.
Speaker Change: Yeah. So so are we we are currently are working on a and advanced our atomic clock in fact, Oh, we're going to do a demonstration tomorrow for all.
Speaker Change: Our government customer on that one that's a pulse optically pumped a rubidium standard Oh that technology, we anticipate should make an order of magnitude improvement and the capability of these.
Speaker Change: In addition, I think one of the things. We think is very important and we are pursuing with internal funding is.
Speaker Change: Smaller lower cost.
Speaker Change: <unk> atomic clocks, and also court space clocks for space applications, but with an emphasis on.
Kind of clogs.
Speaker Change: Now the demonstration that we're doing tomorrow actually is.
Speaker Change: Very high performance. So I know I've talked about this previously on these calls, but I think we feel strongly that the trick is to find the sweet spot.
Not for a space based atomic clock is for a for terrestrial applications, but we do believe that this technology.
Speaker Change: For a lot of these.
Satellite programs, the lower with horrible satellite programs.
Speaker Change: Is is definitely something that.
And the sweet spot is a is that.
Speaker Change: It can work very effectively in the space environment also.
Speaker Change: Finding the right compromise between low cost small sized low power low cost and high performance.
Speaker Change: So that's just one thing I think that the the.
Speaker Change: Are we there are some other technologies.
Speaker Change: I think we've seen many of the satellites and Starlink is actually an example, where the emphasis is on low cost, but the performance capabilities.
Speaker Change: In terms of even more advanced clocks that we are seeking a funding.
Speaker Change: Rather the for us to develop those technologies on the internal Fai money is probably not feasible. So we are seeking a sources of external funding at this point in time.
In terms of our precision frequency and time are very very limited.
So so.
Once you add the navigation component of those satellites are much better performance starts to become necessary and we think that's where where we can make.
Speaker Change: And we'll see over the next year or two whether we can be successful at that in addition, I think one of the things. We think is very important and we are pursuing with internal funding.
Speaker Change: Yeah.
Speaker Change: A big contribution and for working on that.
Speaker Change: Is a smaller lower cost.
Speaker Change: Yes. Thank you.
Speaker Change: Thank you very much for getting detail that I just have one more.
Speaker Change: <unk> atomic clocks, and also of course face clocks for space applications, but with an emphasis on.
Speaker Change: Short aspect of that the test you said tomorrow.
Speaker Change: Is that in fact that I'm going to show a significant increase in AR.
Speaker Change: A very high performance. So I know I've talked about this previously on these calls, but I think we feel strongly that the trick is to find the sweet spot.
Speaker Change: Clocks capability.
Speaker Change: Yes, yes, it is it.
Speaker Change: We believe that that technology is capable of even more.
Speaker Change: For a lot of these.
Speaker Change: You know, where we're going to buy one measure we're gonna demonstrate roughly in order of magnitude of improvement over over what we typically do with our current products, but we think that technology is capable of even another order of magnitude improvement.
The satellite programs, the lower with orbit satellite programs.
And the sweet spot is a is the finding the right compromise between low cost small sized low power low cost and high performance Ah I think we've seen the many of the satellites since Starlink is actually an example.
Speaker Change: If things are optimized appropriately you have to keep in mind.
Whereas the emphasis is on low cost, but the performance capabilities.
Speaker Change: This particular development.
<unk>.
There are there is it.
Speaker Change: In terms of our precision frequency and time are very very limited.
Speaker Change: It's not just do whatever you need to do to get the best performance possible.
Speaker Change: Uh huh.
Speaker Change: And so.
Speaker Change: Get the best performance possible, but you have to keep power dissipation below a certain amount of size below a certain amount of weight below a certain amount.
Speaker Change: So.
Speaker Change: Once you add the navigation component of those satellites are much better performance starts to become necessary and we think that's where where we can make a.
Speaker Change: And so forth and so on has to work over a wide temperature range and so so that's where we end up.
Speaker Change: Big contribution and for working out of that.
Speaker Change: Where we are.
Speaker Change: It's the performance that can be achieved given the constraints that we have to operate in.
Speaker Change: Yes. Thank you. Thank you very much for getting a detail that I just have one more short aspect of that the test you said tomorrow.
Speaker Change: And so yes, depending on the application the particular application.
Is that in fact that I'm going to show a significant increase in our clocks capability.
Speaker Change: This is one particular example, and we do see a very significant performance improvement, but if if we remove some of the constraints that we have on this particular application we can do.
Speaker Change: Yes, yes. It is it are we we believe that that technology is capable of even more.
Speaker Change: You know, where we're going to vote by one measure we're gonna demonstrate roughly in order of magnitude of improvement over over what we typically do with our current products, but we think that technology is capable of even another order of magnitude improvement.
Speaker Change: <unk> much.
Speaker Change: Much better.
Speaker Change: Okay. Thank you very much.
Responses.
Speaker Change: The improvement.
Speaker Change: Have a good day, okay. Thank you.
Speaker Change: Thank you. The next question is coming from Richard Johns and Richard is a private investor Richard Your line is live.
If things are optimized appropriately you have to keep in mind.
Richard Johns: Thank you Tom you you were talking earlier about changes in in your bidding processes I Wonder if you could expand on that a little further would you characterize the contracts the large and small contracts here winning is.
Speaker Change: This particular development Ah you know the there are.
Speaker Change: It's it's not just do whatever you need to do to get the best performance possible.
Speaker Change: Uh huh.
Speaker Change: You know get the best performance possible, but you have to keep power dissipation below a certain amount of size below a certain amount of weight below a certain amount.
Richard Johns: <unk> is fixed price contracts.
Most of the contracts for bidding on our fixed price contracts.
And so forth and so on has to work over a wide temperature range and so so that's where we ended up.
We do from time to time have a.
Speaker Change: Where we are it's the performance that can be achieved given the constraints that we have to operate in.
Richard Johns: Cost plus contracts, but in general it's fixed price contracts.
Richard Johns: Think.
Richard Johns: You know.
So yes, depending on the application the particular application.
Uh huh.
Richard Johns: Hi.
Richard Johns: Alright.
Richard Johns: <unk>.
Richard Johns: In terms of expanding on things beyond that Oh, let me just say I think that.
Speaker Change: This is one particular example, and we do see a very significant performance improvement, but if if we remove some of the constraints that we have on this particular application we can do.
Richard Johns: Yeah I have been here for almost 40 years. So I do have a lot of experience on these programs and.
Richard Johns: I think that.
Speaker Change: Do a much better.
Richard Johns: I have a pretty good sense of.
Speaker Change:
What we can achieve.
Speaker Change: Okay. Thank you very much Oh.
Richard Johns: And and I.
Richard Johns: I think I have a pretty good understanding of our of our business and our customers and what the needs are and so forth and so on so I think.
Speaker Change: Responses and the.
Speaker Change: The improvement.
Speaker Change: Have a good day, okay. Thank you.
Speaker Change: You.
Speaker Change: Thank you. The next question is coming from Richard Johns and Richard is a private investor Richard Your line is live.
Richard Johns: Part of the trick in this regard is is knowing just how to go about things and I think in some cases.
Richard Johns: Thank you Tom you you were talking earlier about changes in in your bidding processes I wonder if you'd expand on that a little further would you characterize the contracts the large and small contracts here winning as.
Richard Johns: You know we we.
Richard Johns: We are if not sole source, where virtually a sole source because nobody else can provide nobody else has the technology or the demonstrated capability to.
Richard Johns: As fixed price contracts.
Richard Johns: To deliver the product that's needed and in those cases.
Richard Johns: Uh Huh most of the contracts for bidding on our fixed price contracts.
We we shouldnt be giving anything away.
Richard Johns: We do from time to time have cost plus contracts, but in general it's fixed price contracts.
Richard Johns: And I think we've been working very hard to to told that line.
Richard Johns: In other cases, you know.
Richard Johns: So we have to look at the potential.
Think.
Richard Johns: You know.
Richard Johns: Potential going forward.
Richard Johns: Uh huh.
Richard Johns: Alright.
Uh huh.
Richard Johns: <unk>.
Richard Johns: Debt.
Richard Johns: In terms of expanding on things beyond that Oh, let me just say I think that.
That maybe there is a new development and.
And it's a it's something that we want to invest in.
Richard Johns: Yeah I've been here for almost 40 years. So I do have a lot of experience on these programs and.
Richard Johns: With the idea that we will.
Richard Johns: The significant business going forward.
Richard Johns: And.
Richard Johns: Think that I have a pretty good sense of you know what we can achieve.
Richard Johns: We can we are we.
Richard Johns: Want to make sure we have the opportunity to participate in that and.
Richard Johns: And I.
Richard Johns: And.
Richard Johns: I think I have a pretty good understanding of our of our business and our customers and what the needs are and so forth and so on so I think a part of the trick in this regard is is knowing just how to go about things and I think in some cases.
Richard Johns: So I think the trick is is having a good enough understanding of where things are on.
Richard Johns: On the other hand to invest in a new program.
Richard Johns: Where.
Richard Johns: We we end up taking on a lot of risk and theres not much potential.
You know we.
Richard Johns: So it's a one shot program or whatever it doesn't really make sense to <unk>.
Richard Johns: We are if not sole source, where virtually a sole source because nobody else can provide nobody else has the technology or the demonstrated capability to live to deliver the product that's needed and in those cases.
Richard Johns: And that and I can tell you over the last year I can think of specific cases.
Where are we we lost the program, but we kind of did that knowingly we know there was competition.
Richard Johns: No, we we shouldnt be giving anything away.
Richard Johns: And are there just wasn't much potential beyond those particular program.
Richard Johns: And I think we've been working very hard to to told that line.
Richard Johns: And we we could have taken those for coda gotten those programs. We know what would have taken but we would have lost money and it just doesn't make any sense to do that.
Richard Johns: In other cases, you know there is a we have to look at the potential going forward.
Richard Johns: So I I don't know if thats a helpful answer.
Richard Johns:
Richard Johns: That maybe there was a new development and.
Richard Johns: Yeah.
Speaker Change: Yeah, that's that's a it sounds as if you're going about the process.
Richard Johns: And it's a it's something that we want to invest in.
With the idea that we will there will be a significant business going forward.
We're in a very reasonable fashion.
Speaker Change: I have another question about your income taxes.
Richard Johns: And Oh, we can we are we want to make sure we have the opportunity to participate in that.
Speaker Change: They were tiny in the recent quarters.
Speaker Change: As compared with the.
Richard Johns: And.
Speaker Change: Historic tax rate.
Richard Johns: So I think the trick is is having a good enough understanding of where things are you know.
Speaker Change: Do you is that because of our loss carry forwards.
Speaker Change: And when do you expect to get back to.
Richard Johns: On the other hand, two in invest in a new program.
Speaker Change: What I believe was more like a rate in the mid twenty's or around there. When do you think you go back to that kind of tax rate.
Richard Johns: Where.
Richard Johns: We we end up taking on a lot of risk and Ah theres not much potential.
So it's a one shot program or whatever it doesn't really make sense to.
Speaker Change: We do it is because of Nols attacks are paying now was mandatory state taxes and things of that nature.
Richard Johns: Invest in that and I can tell you over the last year I can think of specific cases, where we we lost the program, but we kind of did that knowingly we know there was competition.
Speaker Change: Hi.
Speaker Change: Can't predict exactly when the Nols run out, but I can tell you as you see the performance in the last couple of years.
Speaker Change: We have a bunch of Nols going forward that we will be using for a while.
Richard Johns: And there just wasn't much potential beyond those particular program and we we could have taken those precursor gotten those programs. We know what would have taken but we would have lost money and it just doesn't make any sense to do that.
Speaker Change: Okay. Okay.
Speaker Change: Alright, that's it for me thanks, very much for the good work you're doing.
Speaker Change: Okay. Thanks.
Speaker Change: Thank you.
A question coming from Jeffrey Cohen from Mulholland Capital Management Jeffrey Your line is live.
Richard Johns: So I I don't know if that's a helpful answer.
Jeffrey Cohen: Yes, good afternoon.
Richard Johns: Yeah.
Jeffrey Cohen: I appreciate all the color is other callers have reflected just real quick you talked about a target gross margin of about 50% what sort of quarterly revenue run rate would contemplate.
Richard Johns: Yeah, that's that's a it sounds as if you're going about the process.
Richard Johns: We're in a very reasonable fashion I am I have another question about your income taxes.
Richard Johns: They were tiny AR in the recent quarters as compared with.
Jeffrey Cohen: Yeah.
Jeffrey Cohen: Yeah.
Jeffrey Cohen: Yeah.
Jeffrey Cohen: Steve do you want to.
Richard Johns: The historic tax rate.
Jeffrey Cohen: Okay.
Richard Johns: Do you is that because of our loss carry forwards.
Well, we don't we're not.
Jeffrey Cohen: Fully.
Richard Johns: And when do you expect to get back to work.
Jeffrey Cohen: Ready to guide how revenue will grow long term.
Richard Johns: What I believe was more like a rate and in our mid twenties or around there. When do you think you go back to that kind of tax rate.
Jeffrey Cohen: We believe it will grow.
Jeffrey Cohen: And from there we will see the efficiency, we get from the growth in the margin.
Richard Johns: We do it is because of Nols attacks are paying now is mandatory state taxes and things of that nature.
Speaker Change: Yes, no I appreciate that but I mean, if if if 50% gross margin as your target you must have some sort of underlying assumption in terms of what sort of revenue you'd need to get there. So that's that's my that's my question.
Richard Johns: I can't predict exactly when the Nols will run out but I can tell you as you see the performance in the last couple of years.
Speaker Change: Okay.
Or maybe Sean can check.
Richard Johns: We have a bunch of Nols going forward that we will be using for awhile.
Speaker Change: Well I.
Speaker Change: I put things differently, because I don't think its.
Richard Johns: Okay. Okay.
Alright, that's it for me thanks, very much for the good work you're doing.
Speaker Change: At that target is not really based on the particular revenue goal I think that target is based.
Richard Johns: Okay. Thanks.
Richard Johns: Thank you.
Richard Johns: Did have a question coming from Jeffrey Cohen from Mulholland Capital Management Jeffrey Your line is live.
Speaker Change: It's really a question of how we're bidding new business.
Richard Johns: Yeah good afternoon.
Speaker Change: And and that's the target for new business as a gross margin of 50%.
Richard Johns: I appreciate all the color.
Richard Johns: Callers are reflected.
Richard Johns: Just real quick you talked about a target gross margin above 50%, what sort of quarterly revenue run rate would that contemplate.
Speaker Change: And you know what.
Speaker Change: I just talked about a particular contract that.
Speaker Change: We lost.
Yeah.
Speaker Change: And that's because.
Richard Johns: Yeah.
When we did it at a 50% we are we didn't get it and that made sense in that particular case now there there are going to be some cases, where.
Richard Johns: Yeah.
Richard Johns: Steve you want to.
Well, we don't we're not.
Speaker Change: We're going to bid.
Really.
Richard Johns: Ready to guide how revenue will grow long term.
Speaker Change: Lower gross margin.
Speaker Change: Because there is good reason to do that but in general.
Richard Johns: We believe it will grow.
Speaker Change: You know, we're really targeting 50% and that's kind of a baseline approach to things.
Richard Johns: And from there we will see the efficiency, we get from the growth in the margin.
Speaker Change: And it's really a freely.
Speaker Change: Yes, no I appreciate that but I mean, if if if 50% gross margin as your target you must have some sort of underlying assumption in terms of what sort of revenues you'd need to get there. So that that's that's my that's my question.
Speaker Change: Really not.
Speaker Change: You know it's it's.
Speaker Change: Debt.
Speaker Change: That is not based on the particular revenue assumptions.
Speaker Change: Okay, but just so I'm clear you're not you're not talking about your your.
Speaker Change: Well I or maybe Sean can check.
Speaker Change: Your six to 12 month goal being you're necessarily getting 50% gross margin on your contracts, you're talking about being able to show that in our quarterly.
Speaker Change: I I put things differently, because I don't think it's that that target is not really based on a on a particular revenue goal I think that target is based.
Speaker Change: Pork correct.
Speaker Change: Okay.
I'm not quite sure I understand the distinction there.
Speaker Change: It's really a question of how we're bidding new business.
Speaker Change: Well I think there's a distinction between.
Speaker Change: And and that's the target for new business as a gross margin of 50%.
Speaker Change: Bidding a project at a 50% gross margin and actually bringing that down to your financial result.
Speaker Change: And you know what I just talked about a particular contract that Oh, we lost him.
Speaker Change: Okay.
Speaker Change: That's certainly true.
Speaker Change: And that's because you know when we did it at a 50% we are we didn't get it and that made sense in that particular case now there there are going to be some cases, where where we're going to bid at a lower gross margin.
Speaker Change: And so when you put out that target you're talking about the louder correct I mean.
Speaker Change: Yes, yes, okay.
Can you quantify your bidding activity at all.
Speaker Change: The amount of outstanding bids or the sales funnel or in some way to quantify.
Speaker Change: No.
Speaker Change: Because there's good reason to do that but in general.
Speaker Change:
Speaker Change: I don't think I'm prepared to do that in a very meaningful fashion.
Speaker Change: Yeah, No, we're really targeting 50% and that's kind of a baseline our approach to things.
Speaker Change: Qualitatively very qualitatively I think.
Speaker Change: And that's really that's really not the.
Speaker Change: The pipeline is pretty full at this point in time.
It's.
Speaker Change: That that does is not based on the particular revenue assumptions.
Speaker Change: We are we have.
Speaker Change: A tremendous amount of bidding activity going on.
Okay, but just so I'm clear you're not you're not talking about your your.
Speaker Change:
Speaker Change:
Speaker Change: Uh huh.
Speaker Change: Your six to 12 months ago, being you're necessarily getting 50% gross margin on your contracts, you're talking about being able to show that in our quarterly report correct.
Speaker Change: Yeah, I'm not really in a position to put the total dollar amount on things at this time.
Speaker Change: Okay.
Speaker Change: Steve I was just curious you said you have a lot of Nols can you what what would they be on a cumulative basis roughly.
Okay.
Speaker Change: I'm not quite sure I understand the distinction there.
I don't have the exact number but I will say, it's approximately $20 million give or take.
Speaker Change: Well I think there's a distinction between.
Speaker Change: Bidding a project at a 50% gross margin and actually bringing that down to your financial result.
Speaker Change: Okay.
Speaker Change: Alright, that's all I had thanks so much.
Speaker Change: Okay Alright.
Speaker Change: Alright. Thank you. Thank you.
Speaker Change: Okay.
Speaker Change: All of the questions that we had I would now like to hand, the call back to Tom or Kevin for his closing remarks.
Speaker Change: That's that's certainly true.
Speaker Change: And so when you put out that target you're talking about the louder correct I mean.
Tom: Okay. Thank you.
Tom: I think.
Tom: We've been on the call for quite a while at this point in time I appreciate everybody's participation and I'd like to wish everybody.
Yes, yeah, Okay can you quantify your bidding activity at all.
Speaker Change: The amount of outstanding bids or the sales funnel or in some way to quantify.
Tom: Happy and healthy holidays and.
That.
Speaker Change: I I don't think I'm prepared to do that in a very meaningful fashion qualitatively very qualitatively I think are the <unk>.
Speaker Change: That's it thank you very much.
Speaker Change: Yeah.
Speaker Change: Thank you. This does conclude today's conference you may disconnect. Your lines at this time and have a wonderful day. Thank you for your participation.
<unk> is pretty full at this point in time are we are we have.
Speaker Change: A tremendous amount of bidding activity going on.
Speaker Change:
Speaker Change: But.
Speaker Change: I.
Speaker Change: Yeah, I'm not really in a position to but the total dollar amount of time on things at this time.
Speaker Change: Okay.
Speaker Change: Steve I was just curious you said you have a lot of Nols can you what what would they be on a cumulative basis roughly.
Speaker Change: I don't have the exact number but I will say, it's approximately $20 million give or take okay.
Speaker Change: Alright, that's all I had thanks so much.
Speaker Change: Okay Alright.
Speaker Change: Alright. Thank you. Thank you.
Speaker Change: All of the questions that we had I would now like to hand, the call back to Tom Mclennan for closing remarks.
Speaker Change: Okay. Thank you.
Speaker Change: I think we are we've been on the call for quite a while at this point in time I appreciate everybody's participation and I'd like to wish everybody a.
Happy and healthy holidays, and that's it thank you very much.
Thank you. This does conclude today's conference you may disconnect. Your lines at this time and have a wonderful day. Thank you for your participation.