Q1 2025 Frequency Electronics Inc Earnings Call
Greetings and welcome to the frequency electronics third quarter fiscal 25 earnings release Conference call.
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 phone keypad. As a reminder, this conference is being recorded.
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.
Speaker Change: The private Securities Litigation Reform Act of 1995.
Speaker Change: Such statements inherently involve uncertainties that could cause actual results to differ materially from the forward looking statements.
Speaker Change: Factors that would cause or contribute to such differences are included in the company's press releases and I'll further detailed in the company's periodic report filings with the Securities and Exchange Commission if.
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.
Speaker Change: It is now my pleasure to introduce your host Thomas, but Thailand, President and Chief Executive Officer.
Speaker Change: Thank you and good afternoon, everyone.
Thomas Thailand: I'm pleased to report our first quarter results coming in very much in line with expectations.
Thomas Thailand: So I articulated when we reported the fiscal year of 2024 results.
Thomas Thailand: Revenue for the first quarter of fiscal year, 2025 increased by 22% and operating income improved by 15% compared to the first quarter of previous year.
Thomas Thailand: We believe revenue profits and margins should continue to increase going forward.
Thomas Thailand: Backlog of $70 million at the end of Q1 is down slightly from the high of 78 million at the end of the last fiscal year.
Thomas Thailand: But it's up substantially from previous years and represents a historically high value for the company.
Thomas Thailand: We continue to win significant production contracts in our primary end markets of space navigation secure communication.
Speaker Change: And timing.
Speaker Change: To anticipate healthy margins on these.
Speaker Change: This creates some breathing room to work on developing new technologies and also to participate in higher risk programs targeted at developing products for low cost proliferated satellite systems and.
Speaker Change: In fact, we're beginning to see some success in these endeavors.
Speaker Change: Two primary areas that have much larger addressable markets than our core legacy offerings have historically enjoyed.
Speaker Change: First we've won some initial contracts for developing low cost synchronization systems for proliferated satellite programs. We've had a number of questions on prior earnings calls about our ability to participate in the market for so called small set.
Speaker Change: Grabs which are generally lower cost and produced at higher numbers.
Speaker Change: These initial contracts are a good indication of our ability to successfully compete and win in this large and growing portion of the space market.
Second we're also attracting outside funding for quantum sensors.
Speaker Change: One example, we're working on quantum magnetometer applications, which utilize some of the physics building blocks of our core atomic clock technologies and can be utilized as sensors for navigation purposes in GPS denied environments.
Speaker Change: This is just one of several new quantum applications, which have been developed in physics laboratories around the world.
Speaker Change: Which our company is well positioned to transition from the laboratory into developed developed products, which work in challenging real world environments.
Speaker Change: Quantum is also a very large and growing end market and we're excited about our prospects for participating in it.
Speaker Change: In order to stimulate further progress in quantum sensor technology.
Speaker Change: Our company is sponsoring a quantum center sensor summit in New York City in early October.
Speaker Change: This scientific conference will bring together leaders from government University and private sector laboratories to discuss sensor technologies and how best to realize their potential.
Speaker Change: And also to ensure that our country maintains a leadership role in this arena.
Speaker Change: We're excited about the enthusiasm which is developed around this is that deep.
Speaker Change: Details related to the event are available at a frequency electronics website for anyone interested.
All in all this is an exciting time for our company.
Speaker Change: Combining the disciplined approach to our core business, which is growing with our studies approach to new technologies, which can sustain us in foster additional growth in the future.
Speaker Change: Puts us on a solid positive trajectory as a company.
Speaker Change: The excitement is tangible as I engage with our employees on a daily basis.
Speaker Change: There was an enthusiasm and drive our parents, which frankly is unique in the 40 years I've been at MTI.
Speaker Change: With the support of our boards, we've incentivized employees and fostered an environment, where everyone benefits from axis success as a company.
Speaker Change: Theres plenty of hard work ahead of us, but I'm personally energized and committed to the continued growth of our company.
Steve Bernstein: I will now now I will turn things over to our CFO, Steve Bernstein, we'll fill you in on the financial details.
Steve Bernstein: Thank you Tom and good afternoon.
Steve Bernstein: For the three months ended July 31, 2024, consolidated revenue was $15 1 million compared to $12 4 million for the same period of the prior fiscal year.
Speaker Change: The components of revenue are as follows.
Steve Bernstein: Revenue from commercial and U S government satellite programs was approximately $8 3 million or 55% compared to $4 9 million or 39% in the same period of the prior fiscal year.
Steve Bernstein: Revenues on satellite payload contracts are recognized primarily under the percentage of completion method.
Speaker Change: Recorded only in the <unk> in New York segment.
Speaker Change: Revenues from non space U S government and Dod customers, which are recorded in both the FBI, New York and <unk> segments were $6 3 million compared to $6 9 million in the same period of the prior fiscal year and accounted for approximately 42% of consolidated revenue compared to 55%.
Speaker Change: The prior fiscal year.
Speaker Change: Other commercial and industrial revenues were approximately 50 544000 compared to approximately 672000 in the prior fiscal year. The significant increase in revenue for this quarter compared to the same quarter in the previous fiscal year was reflected in both segments and primarily related to increases in <unk>.
Speaker Change: Government space of approximately $3 4 million in sales from space U S government customers offset by a decrease of approximately half a million in sales from non space U S government customers.
Speaker Change: For the three months ending July 31, 2020 for gross margin and gross margin rate increased compared to the same period in the fiscal year prior fiscal year. The gross margin dollars increased mainly due to the increase in revenue and the gross margin rate increased due to the fact that many of the technical challenges.
Speaker Change: Based in prior fiscal year have been resolved and as a result, the related programs are now moving forward and running more efficiently. Additionally, there were many smaller jobs that were completed at higher margins.
Speaker Change: This is the highest gross margin. The company has recorded on a consolidated business in the last 24 years and while there will likely still be quarter to quarter variability. We believe this is indicative of a direction. We can continue to move in when we are producing efficiently and solving engineering challenges in a timely manner.
Speaker Change: Yeah.
Speaker Change: For the three months ending July 31, 24, and 23 SG&A expenses were approximately 19% of consolidated revenues. The increase in SG&A expenses is related to an increase in payroll related expense.
Speaker Change: R&D expense for the three months ending July 31, 24 increased to approximately $1 5 million from 506000 for the three months ending July 31, 23, an increase of approximately 982000 and were approximately 10% and 4% respectively.
Speaker Change: <unk> of consolidated revenue.
Speaker Change: R&D increases for the three months ending July 31, 24 was primarily due to our focus on advances and modernization of products. The company plans to continue to invest in R&D in the future to keep its products that the state of the art. However, we expect the actual quarterly spend to vary.
Speaker Change: For the three months ending July 31, 24, the company recorded operating income of approximately $2 4 million compared to operating income of approximately $2 1 million in the prior fiscal year operating income increased due to higher revenue and gross margin percent was offset by higher R&D spend.
Speaker Change: Other income expense net is derived from various sources. The income can come from reclaiming of metal refunds or sale of fixed assets interest expenses related to deferred comp payments made to retired employees. The majority of the approximately $2 million of investment income for the three months ending July 30.
Speaker Change: <unk> 24, western assets and high yields Treasury funds.
Speaker Change: This yields a pretax income of approximately $2 5 million for the three months ending July 31, 2024, compared to approximately $2 1 million pre tax income for the three months ending July 31 23.
Speaker Change: For the three months ending July 31, two for the company recorded a tax provision of 133000 compared to 7000 for the same period of the prior fiscal year.
Speaker Change: Consolidated income for the three months ending July 31, 24 was approximately $2 4 million or <unk> 25 per share compared to approximately $2 million or 22 per share for the same periods of the previous fiscal year.
Our fully funded backlog at the end of July 24 was approximately $70 million compared to approximately $78 million for the previous fiscal year ended April 32004.
Speaker Change: The company's balance sheet continues to reflect a strong working capital position of approximately $21 million at July 31, 24, and a current ratio of approximately one five to one. Additionally, the company is debt free the company believes that its liquidity is adequate.
Speaker Change: Got it.
Speaker Change: It's operating investing needs for the next 12 months and the foreseeable future I will turn the call back to Tom and we look forward to your questions. Shortly.
Tom: Thanks, Steve we can now.
Tom: Start the question session.
Speaker Change: Thank you very much we will now open the floor for questions. If you would like to ask a question. Please press star one on your phone keypad now.
Time will indicate that Youll line isn't the key he May press star two if you would like to remove your question from the key so anyone using speaker equipment. It may be necessary to pick up your handset before you buy stickies wait a moment, while suite poll for questions.
Speaker Change: Yes.
Speaker Change: Okay. I'll first question is coming from George Maremma of Perito Ventures, George Your line is live.
George Maremma: Yeah, Hi, thank you.
George Maremma: Tom.
George Maremma:
George Maremma: I wanted to ask a little bit more about this technology well. Firstly are you guys working on any M. E. M. S. A technology instead of Crystal isolation technology.
Speaker Change: Oh, we are not internally developing mems.
Speaker Change: Technology, but we do utilize Mems technology.
Speaker Change: Some of our products.
Speaker Change: Of course.
It.
Speaker Change: Mems devices Mems resonators.
Speaker Change: Uh huh perform quite as well as the courts, the best quartz resonators and of course, it's the high performing applications and tariffs are our specialty.
Speaker Change: But there was definitely a place for the man's resonators and particular, there they're very good in terms of high vibration environments.
Speaker Change: So we are utilizing these devices and while several of our newer products.
Speaker Change: If you can say whether or not do you have any involvement in the DARPA chip scale atomic clock work.
Speaker Change: And currently we do not we're not directly involved in the any chip scale activities had DARPA, we have been in the past we have participated.
Speaker Change: On several of the efforts in the chip scale atomic clock, that's going back five to 10 years, but currently we do not have any chip scale atomic clock involvement with DARPA.
Speaker Change: Okay and my next question is either for you or Steve but on the R&D expenses. This quarter can you illuminate some of that it kind of went up it looks like about $1 million of year over year is there any one time aspects to that or is that a is that a run rate, we should expect or if you could give some commentary about the R&D line.
Speaker Change: Yeah.
Steve Bernstein: I'd like to comment on that I think that.
Steve Bernstein: You should not extrapolate that out into the future I think you do have to realize that.
Speaker Change: That's something that's going to fluctuate from quarter to quarter.
Speaker Change: And.
Speaker Change: There's a little bit higher this quarter, but yeah, we do not anticipate.
Speaker Change:
Speaker Change: Sure.
Speaker Change: Significant increase in the overall R&D expenditures going forward.
Speaker Change: So it looks like this quarter was.
Speaker Change: Let's just call it a million five to round off what would be sort of.
Speaker Change: Well well how much of the million five would you say is more sort of a non steady state.
Speaker Change: That just I guess the spirit of the question is to try to get some.
Speaker Change: So I'm like for the full year anchoring of expectations there roughly.
Speaker Change: Yeah.
Speaker Change: I think.
Speaker Change: A third to a half of that is probably a unique we have heard some development efforts.
Speaker Change: Which have been partially funded.
Speaker Change: Some of our customers and partially funded by us and this happens to be a quarter, where the activity. The funding from our customers is more limited and so we're taking a bigger part of the.
Development effort, but I think that.
Speaker Change: We anticipate our overall R&D expenditures for the year.
Speaker Change: What have we planned Steve alright, thank you.
Steve Bernstein: Approximately a 3 million three.
Speaker Change: Okay. That's helpful. That's helpful. Just give some some idea.
Speaker Change: And then the same for selling and administrative Didnt go up that much but its up like 500000 year over year is there anything unusual about the quarter or is that sort of a steady state now.
Steve Bernstein: Steve's us I.
Steve Bernstein: Believe it's a steady state of Wassa remember, it's a comparison last year.
Speaker Change: So the end result is if things went up.
Steve Bernstein: 3% to 5% whatever some a little higher some are lower.
Speaker Change: I think it's going to stay constant it's not going to continually grow.
Speaker Change: Yeah, Okay, and the gross margins were really nice this quarter with a I know you mentioned in the commentary I think Steve mentioned that there were some smaller projects with some higher margin and then in the press release, you talked about I forget the exact wording, but sort of higher margins and profits as the year went on.
Speaker Change: I'm, assuming you're not talking about gross margins increasing from here are you it seems like a pretty high number.
Speaker Change: Oh, Hi, I I don't think it's.
Speaker Change: Fair to expect that our gross margins will be going up significantly, but we are you know I think the basic strategy as well.
Speaker Change: Where we're really.
Speaker Change: Trying to keep the gross margins on our core.
Speaker Change: Our heritage business and I think we've been very effective at doing that and we anticipate we will continue to do that going forward, but some of the newer programs.
We we are at.
Speaker Change: Unrealistic to expect that we can get there.
Speaker Change: Those are high margins on all of those.
Okay and my last one before I go the the Tam on these new projects the addressable markets are very large.
Speaker Change: If you're doing say $60 million to $70 million run rate of revenue. These days, what sort of capacity do you guys have currently two to grow into these addressable markets.
Speaker Change: Hello, all and plant and equipment kind of standpoint.
Speaker Change: Yeah, we we are from a plant and equipment point of view I think we're in pretty good shape.
Speaker Change: We are we I think the bigger challenge is are people challenge mhm, but plant and equipment and I think we've got plenty of capacity and.
Speaker Change: Room to expand and of course financially we're in a good position to support that.
Speaker Change: But.
Speaker Change: People I think were watching very carefully and we've talked about this previously we are we are we need.
Speaker Change: Need to make sure that we have enough people to get the work done but not a we don't want to get ahead of ourselves and end up with a.
Speaker Change: Too many people.
Speaker Change: And it's it's a challenge because of.
Speaker Change: The way you know well a lot of work has gone from not work and.
Speaker Change: The government is fairly unpredictable when things are going to start.
Speaker Change: So this is always a challenge for us, but oh, we.
We.
Speaker Change: I think we don't see any major problems in this regard at this point in time.
Speaker Change: Thank you Tom I'm very excited by your direction. Thank you.
Speaker Change: Thank you very much. Your next question is coming from Jon Gruber of great in that vein John Your line is live.
Speaker Change: Yeah.
Jon Gruber: Good afternoon.
Jon Gruber: Is there any large contracts here.
Jon Gruber: You're expecting to win or are being competitive over the next few months and the Genesis of my question is you know your orders were very low this quarter.
Speaker Change: They like the book to build a point for us.
Speaker Change: And you know the orders what.
Speaker Change: The backlog down eight so that means orders were 7.1.
Speaker Change: When he is going to be able to replenish that.
Speaker Change: And we.
We do anticipate that we're going to replenish that.
Speaker Change: I think.
Speaker Change: What youre observing is what I was just talking about the the predictability.
Speaker Change: The government in terms of starting contracts.
But are we we are we are definitely anticipating some additional significant.
Speaker Change: New business Oh.
Speaker Change: In the current quarter and and also going forward. After that so we are yes, I think that's where that's yeah. That's it yeah. That's good news could you take us through what you.
Speaker Change: You know some of the some of the projects you're hoping to win here or the next.
Speaker Change: Quarter, which hill, you know, which are decent size, which will help the orders.
Speaker Change: Well there are several satellite dish very significant satellite programs that are that we are anticipating.
And and also there are some non satellite programs that debt that we anticipate are also at this point.
Speaker Change: I think we we are we don't like to get too specific about these things are at least until we definitely are under contract.
Speaker Change: Yeah.
Okay. Thank you.
Speaker Change: Thank you very much.
Speaker Change: Just to remind you that if you have any remaining questions. You can press star one on your phone keep has now joined the key.
Speaker Change: Your next question is coming from Frank Wisniewski, Who's a private investor Frank Your line is live.
Speaker Change:
Frank Wisniewski: Yeah, I'm really pleased with the direction, you're taking the company and I have a couple a couple of questions.
Speaker Change: The revenue mix between satellites in the full brunt of a better word non sat right, which we've pretty.
Speaker Change: Shop and compare it to in the past, which is good it sounds like business is growing well, but the other northern satellite business I.
Speaker Change: It seemed to have a decline in the quarter.
First is is.
Speaker Change: Is that part of the reason for the gross margin expansion and secondly, do.
Speaker Change: Do you expect a safer in that part of the non satellite business to to.
Speaker Change: Can you a run rate of a little over $6 million or can we expect some improvement in that for the remainder of the year.
I think that.
Speaker Change: You've got to be really careful about trying to read too much into the numbers a couple of questions. There I think.
I I would not say that the gross margin went up because space is up and down space is down a little bit.
Speaker Change: I think that's an incorrect interpretation and I think we are we do anticipate.
Think that's really just.
Speaker Change: A measure of the the general Lumpiness of our business and I think our we do anticipate that the XI for piece of things will increase and in fact are here and are in the New York area, We Oh.
Speaker Change: So anticipate some non space activity, so yeah, I wouldn't read too much into into those fluctuations.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: The R&D question that came up previously.
Speaker Change: Did you mean to imply that opposed to as opposed to the 10% or so R&D at a rate of say a sales rate in this.
Speaker Change: First quarter for the year, it would be closer to 5%.
Speaker Change: I think I think.
Speaker Change: Yeah I think.
Speaker Change: Are those the exact numbers, probably not but I think that's the general trend yeah.
Okay. That's good and B can you give us a feel for what the unfunded backlog is.
Speaker Change: Yes.
Speaker Change: Steve.
Steve Bernstein: The unfunded.
Speaker Change: Publish that number.
Speaker Change: Would it be fair assume then it's significantly larger than the 70 million you are heavily funded backlog.
Speaker Change: Yes, but the end result is like I said, you know I can give you a number but if it's you know it never gets funded or if the top lines or other things like that so we don't feel that it's a one.
Speaker Change: <unk> number two provide it's a dangerous number.
Speaker Change: Okay.
Speaker Change: Stay out of the dangerous area.
Speaker Change: That's it for me thank you very much.
Speaker Change: Okay Bye.
Speaker Change: Thank you. Your next question is coming from Michael Eisner, a private investor Michael Your line is live.
Hi, a great the gross margin.
Michael Eisner: I just had one question in your annual report.
Michael Eisner: It said new business 70 million regularly you never comment like that I was wondering what you meant.
Speaker Change: Uh huh.
Speaker Change: I don't have enough suddenly I don't know.
Speaker Change: If you want to call me Tomorrow I can look at what line Youre, saying and I can explain it to you.
Having in front of me.
Speaker Change: All right that's fine.
Oh, thank you.
George <unk>: Thank you very much. Your next question is coming from George <unk> of benches, George Your line is live.
George: Yeah. Thanks, Steve I, just have a little ticky-tacky question for fiscal 'twenty, five what kind of tax rate are you thinking about.
Well, it's a very interesting question, but I think it'll be a very low tax rate. We do have nols, the only issue and I'm not a tax expert, but I'll tell you is that.
Speaker Change: California has very different rules on Nols, and we do a bunch of business in California. So that's why you see the $133000 tax provision. We most of our income will be covered by Nols. However, there will be some that are not covered.
George: The California tax rules.
George: So I don't see this year I do and I do not expect it to be anywhere near a normal 21%, 22% whatever it is not going to be.
George: Low single digit.
George: Yes, yes.
George: Yes, okay. Okay. Thanks, Steve.
Steve Bernstein: No problem.
Speaker Change: Thank you very much. Your next question is coming from Ken <unk> of Senate capital Tim Your line is live.
Steve Bernstein: Yes.
Ken: Congratulations again on the gross margin you know when I went over the last year's transcript you called out one time contractual adjustment that benefited gross margins a year ago by 8%, which would've made that 31.1 or two let's say an even even the operating income was about $1 million about 10 or 11 centers.
Speaker Change: Any particular reason why you didn't call that out today.
Speaker Change: You had mentioned that.
Speaker Change: Uh huh.
Steve Bernstein: 101 dress that Steve.
Speaker Change: That was a that was I think happened in Q4 correct.
Speaker Change: Q4, no that was.
Speaker Change: Was Q1 I believe.
Speaker Change: Sure.
Speaker Change: I think that the year ago, Q3 and Q4.
Speaker Change: And Oh, okay.
Speaker Change: Those those were.
Speaker Change: One off issues.
Speaker Change: Uh Huh, there's not really relevant at this point.
Speaker Change: Yeah.
Yeah.
Speaker Change: Okay.
Speaker Change: Yeah Yeah.
Speaker Change: Okay and then.
Speaker Change: Just with respect to the backlogs for the three contracts you had announced last November I would assume that there would be.
Speaker Change: Youre still sort of in the beginning stages of that but that backlog should probably be funded.
Over the next few quarters as well I know, that's what would be an unfunded backlog, but that's it.
Speaker Change: I would assume from the last call or so that that would be coming through here shortly would that be accurate here.
Speaker Change: It is absolutely correct.
Speaker Change: Those so those programs are those street program. So you've mentioned have a different durations, but we're actively working on those and.
Speaker Change: Yeah, we have still some unfunded.
Speaker Change #100: Backlog associated with those but a very significant amount of that is funded at this point in time.
Speaker Change: Okay.
Speaker Change #102: Sounds good.
Speaker Change #101: And then.
Speaker Change #101: Yeah.
I guess with respect to you made a comment at the beginning of the press release about some of the newer programs being funded.
Are you can you give a little bit more color on that are you referring to.
Speaker Change #101: A.
The government funding of a particular contract versus your own R&D.
Speaker Change #103: Yeah, we are for the satellite the proliferated a satellite systems.
We have a significant government funding at this point in time.
Speaker Change #103: But.
Speaker Change #103:
Speaker Change #103: A number of these programs that we're seeing.
Speaker Change #103: They are you know what's happening is a.
Speaker Change #104: Nobody knows the best way to go about these satellite systems. So the government is really looking for a novel kind of approaches from a number of different suppliers.
And in particular, they they don't want to just get the same old thing from the the prime contractors that they deal with all of the time, so they're looking for.
Speaker Change #104: The newer satellite companies with different ideas.
Speaker Change #104: And so instead of a jet are creating just a single contract for a single company that goes through the development phase and then production they're looking at initially funding multiple companies.
Speaker Change #104: And then funneling those down as time goes on so in the first phase they may find five companies find prime contractors.
Speaker Change #105: And then they go into a second phase where maybe they they found only two of those and then the idea is that eventually they end up with perhaps one or two suppliers in the yen. So so we of course are a supplier to the prime Contra.
Speaker Change #105: <unk> and <unk>.
Speaker Change #105: Really what happens is that we have to accept.
Speaker Change #105: Some risk in the beginning because in order to meet the kind of schedules that.
Speaker Change #105: Are being demanded.
Speaker Change #105: We have to Oh work on things, we have to invest in inventory et cetera.
Speaker Change #105: In the initial phases, when we have no guarantee.
Speaker Change #105: Is that our customer will make it through to the following phases.
Speaker Change #105: Hmm.
Speaker Change #106: We of course, we are approaching this is cautiously as we can so we don't get involved the where we think that.
Speaker Change #105: The prime contractor.
Speaker Change #105: Is unlikely to proceed to the next phase, but we do not have any guarantees and that's where the risks common Shan.
Speaker Change #105: But initially we are we are not funding any additional R&D, what we what we just have to account for is the risk that the program itself continue.
Speaker Change #105: To later phases, and we're left with the.
Some.
Uh huh.
<unk> tours, which are end up not being reimbursed ultimately.
Speaker Change #107: Okay understood and I guess following up on my first comment about the gross margins, yes, I'm reading from your first.
Speaker Change #105: First quarter 'twenty four.
Speaker Change #105: Comments.
Speaker Change #105: They're they're one one time.
Speaker Change #108: Months three months ended July 31, 23, there were onetime contractual and other adjustments that also benefited gross margin rate by approximately 8%. My only point is versus a year ago. You really you really did a 31% gross margin versus the 44 plus here this disciplined and it just it would be helpful. If you spell that out as well you spell that out.
Speaker Change #109: A year ago call, but didn't start out here so.
Speaker Change #110: Okay, and just to comment there.
Speaker Change #110: Okay.
Speaker Change #111: Thank you.
Thank you.
Speaker Change #111: Thank you very much. Your next question is coming from Richard Jones, who is a private investor.
Speaker Change #111: Richard Your line is life.
Richard Jones: Hi, I'm wondering if you set a date yet for the annual meeting.
Richard Jones: Yes.
Speaker Change #113: We do have a date I believe it's October 8th.
Richard Jones: Okay all right. Thank you.
Richard Jones: Thank you very much.
Richard Jones: Next question is coming from Frank with Muskie is a private investor. Thank you. Your line is live and you are just a one follow up to get a little more color on the.
Speaker Change #114: The proof proliferated satellites.
Speaker Change #115: Oh, so you're talking about.
Frank Wisniewski: The what.
Speaker Change #116: The preliminary it sounds like there's a.
Speaker Change #117: And those are lower I thought but.
Speaker Change #118: Uh huh.
Speaker Change #119: Many of them are lower with Harvard's, but it's not a exclusively a low earth orbit I think are they the general concept going forward and the satellite business is smaller satellites larger quantities.
Speaker Change #119: Shorter lifetimes, and that's true not only for the low Earth orbit satellites, but also for the higher orbits medium Earth orbit.
Speaker Change #119: G O synchronous orbitz, etc.
Speaker Change #120: Okay and end the year.
Speaker Change #121: You're beginning to get into that area. Now you said you had a couple of our contracts smaller ones I assume.
Speaker Change #122: Yes, yes. Indeed, we are beginning we do have some initial contract.
Speaker Change #122: And in this arena.
Speaker Change #122: Yes.
Speaker Change #122: It'd be a government or a commercial.
Speaker Change #122: At this point in time, they're government.
Speaker Change #122: Okay, Great and then yeah, right, it's totally speculation, but before you get any significant rebound.
Speaker Change #122: It would be several quarters at least before you got significant revenues from that area right.
Speaker Change #122: Okay.
Speaker Change #123: Yeah, I think that's a fair assumption.
Speaker Change #122: Okay. Thanks, a lot Mike.
Speaker Change #122: Yep.
Speaker Change #124: Thank you very much and your next.
Joel <unk>: Question is coming from Joel <unk> of three inches.
Speaker Change #126: George Your line is life.
Yeah, Hi, Tom I was wondering if you could talk a little bit more about these quantum sensor area in terms of like do you currently have product or whats the product road map and.
Speaker Change #127: What sort of addressable market do you think there is on that and just sort of timing of that and it's a little more illumination on this area.
Sure.
Speaker Change #128: I think.
Speaker Change #129: A couple of questions, let me try to address each of them.
Speaker Change #130: First of all currently we do not have any product you know, where we're not shipping for for any military missions or anything of that sort at this point in time, but we do anticipate there.
Speaker Change #130: That's the whole goal of this effort from our point of view is to develop products. I think are so so what are we talking about I mentioned to the magnetometers.
This is just one example, but there there are a slew of.
Speaker Change #130: Of sensor technologies that are that really utilized the same basic physics that we utilize in our atomic clocks and so we because we we are are really expert in those technologies and we have a lot of.
Experience, making practical products that work in the real world.
Speaker Change #130: We're in a really good position to take some of these are more esoteric technologies.
Speaker Change #130: Sensors like magnetometers from the laboratory and make them into real world products, one of the difficulties with a lot of these technologies is there have been these exquisite demonstrations and laboratory environments.
Speaker Change #130: Of of the sensitivity of some of these sensors and measuring things that people are really interested in.
Speaker Change #130: Getting them out of the laboratory and getting them to operate with that kind of a sensitivity in the real world is always a challenge and that's where we come in and we are we're really excited.
Speaker Change #130: We have some activities, which are just getting started with some of the major national laboratories, where they've developed some of these technologies.
Speaker Change #130: We have.
Speaker Change #130: <unk> developed a really good working relationship with some of these labs because they recognize that they do not have the capabilities frankly, they don't have the interest either in developing practical products and we understand the basic physics.
Speaker Change #130: But we also know.
Speaker Change #130: Know how to how to make these into a real world products. So the magnetometers as one example, we talked about that that's measuring the magnetic field of the euro.
Speaker Change #130: And there are multiple applications for that sort of thing.
Speaker Change #130: One of them is this alternate navigation when the G. P. S is not available so the it turns out that there exist.
Speaker Change #130: Really pretty good maps of the magnetic field.
Speaker Change #130: Around the.
Speaker Change #130: Surface of the Earth.
Speaker Change #130: They're called magnetic anomaly maps, because the whole point.
Speaker Change #130: Is that the magnetic field.
Speaker Change #130: Two of them first approximation looks uniform, but when you look more closely at varies at every point in time. The Earth then it turns out that by measuring the magnetic field and on long location and then correlating the exact details of the measurement.
Speaker Change #130: At that location.
Speaker Change #130: These are maps Oh, the magnetic anomalies you can do a pretty good job of locating yourself not necessarily within a couple of centimetres.
Speaker Change #130: Like as possible with G. P S isn't the and a lot of applications.
Speaker Change #130: Certainly within our hundreds of.
Speaker Change #130: Our feet.
Speaker Change #130: And for a lot of applications, that's a it's certainly better than not knowing anything about your location.
Speaker Change #131: There are other.
Speaker Change #131: Applications that we're looking at one of the.
Speaker Change #131: The interesting areas is so called Rydberg sensors.
Speaker Change #131: And are these actually are sensors, and which we look at rydberg transitions in Adams, which are very high energy levels.
Speaker Change #131: The levels of atoms, whereas the add ons are almost but not quite ionized.
And if people have developed our sensors.
Speaker Change #131: In such a way that is possible to utilize a cell containing rubidium.
Speaker Change #131: As a receiving antenna and for microwave frequencies and this cells containing rubidium are exactly the same kind of cells that we use.
Speaker Change #131: In our atomic clocks, and a lot of the techniques of measuring the microwave fields and utilizing this device has an antenna are exactly the same techniques that we use on our atomic clocks the interesting thing about the rydberg.
Speaker Change #131: Or is that the most antenna applications are really.
Speaker Change #131: Tied to the wavelength of the frequency.
Speaker Change #131: All of the signals that are being measured so typically for for our RF and microwave.
Speaker Change #131: Signals these have wavelengths measured in meters and so antennas need to be.
Speaker Change #131: Sized in several meters in diameter.
Speaker Change #131: There's rydberg sensors are.
Speaker Change #131: Even though the wavelengths are longer they have a sensitivity.
<unk> sells its one centimeter in diameter can measure with the the same sensitivity is as a a more conventional antenna that has dimensions of meters. So theres the potential to make a very very small antennas.
So these are just a couple of there kind of things.
Speaker Change #131: That we're in.
Speaker Change #131: Vault in.
Speaker Change #131: And and working as I say with some of the laboratories and we are we are very much seeking external funding.
Speaker Change #131: And we're beginning to have some success in in getting that are external funding.
Speaker Change #132: Okay. That's great. Thank you.
Speaker Change #132: Thank you very much. Your next question is coming from Frank.
Frank Wisniewski: He is a private investor.
Speaker Change #133: Your line is life.
Frank Wisniewski: Last question I promise, the Oh, and its governance more than anything yeah.
Frank Wisniewski: The companies that I've ever been involved with the Chief Executive Officer is on the board of Directors is there any particular reason that you can give us. So you are not on the board of directors.
Speaker Change #134: Yeah I don't.
Speaker Change #135: Think I'm in a good position to answer that question I haven't been invited them to the board.
Speaker Change #135: At this point in time.
Speaker Change #135: Yeah.
Speaker Change #136: Okay. Thank you.
Speaker Change #137: Thank you very much well we appear to reach the end of the question answer session and also the end of the conference.
Speaker Change #138: And gentlemen, this does conclude today's conference call. You may disconnect. Your phone lines at this time and have a wonderful rest of the day. Thank you for your participation.
Speaker Change #138: Ooh.
Speaker Change #138: Okay.