Q3 2026 Frequency Electronics Inc Earnings Call

March 11, 2026

Speaker #1: Please continue to hold . Your conference will begin momentarily . Please continue to hold . Your conference will begin in one moment . Thank you for your patience Greetings and welcome to the Frequency Electronics Inc third Quarter Fiscal 2026 Earnings Release .

Speaker #1: Conference Call . 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 .

Speaker #1: 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 to the safe harbor provisions of the private Securities Litigation Reform Act of 1995 , such statements inherently involve uncertainties that could cause actual results to differ materially 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 .

Operator: Any statements made by the company during this conference call regarding the future constitute forward-looking statements pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. Such statements 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 introduce your host, Thomas McClelland, President and Chief Executive Officer.

Speaker #1: 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 .

Speaker #1: It is now my pleasure to introduce your host, Thomas McClelland, President and Chief Executive Officer.

Speaker #2: Good afternoon and thanks for joining Frequency Electronics Inc third quarter Fiscal year 2026 Earnings Call With me today is our CFO , Steve Bernstein On our second quarter fiscal 2026 earnings call on December , I discussed our vision for how we see the growth in our company developing in the coming years Specifically , I told you that the exciting growth prospects we have in large and growing end markets , which are larger than our historical addressable markets , will come in addition to continuing strength and growth in our ongoing businesses , in space and defense These new markets , such as quantum sensing , proliferated satellites and alternative position navigation and timing programs are built upon our industry leading capabilities in our core space and defense programs I also told you on that December call that we anticipate multiple awards in the coming months , some of which are as large or larger than the biggest ones .

Thomas McClelland: Good afternoon, and thanks for joining Frequency Electronics Q3 Fiscal Year 2026 Earnings Call. With me today is our CFO, Steven Bernstein. On our Q2 fiscal 2026 earnings call in December, I discussed our vision for how we see the growth in our company developing in the coming years. Specifically, I told you that the exciting growth prospects we have in large and growing end markets, which are larger than our historical addressable markets, will come in addition to continuing strength and growth in our ongoing businesses in space and defense. These new markets, such as quantum sensing, proliferated satellites, and alternative position, navigation, and timing programs, are built upon our industry-leading capabilities in our core space and defense programs.

Thomas McClelland: I also told you on that December call that we anticipate multiple awards in the coming months, some of which are as large or larger than the biggest ones we have historically announced. Today, we're very pleased to report significant progress on all of these fronts. In a separate press release that came out at the same time as our earnings report after the close of market today, we announced that we awarded two contracts valued at approximately $45 million. One of these contracts is in the domain of FEI's traditional space satellite programs, and one is part of the new proliferated satellite paradigm. Customer confidentiality prevents us from discussing these with greater specifics at this time, but there are two important points to consider.

Speaker #2: We have historically announced today . We're very pleased to report significant progress on all of these fronts . In a separate press release that came out at the same time as our earnings report after the close of market today , we announced that we awarded two contracts valued at approximately $45 million , one of these contracts is in the domain of phase traditional space satellite programs , and one is part of the new proliferated satellite paradigm .

Speaker #2: Customer confidentiality prevents us from discussing these with greater specifics . At this time , but there are two important points to consider First , of course , is that these contracts reflect our ability to continue to win meaningful contracts in our traditional space business , while also winning significant business in our next generation markets .

Thomas McClelland: First, of course, is that these contracts reflect our ability to continue to win meaningful contracts in our traditional space business while also winning significant business in our next-generation markets at the same time. In other words, while our business is never perfectly linear, we are definitely not projecting a dislocation in which the traditional business wanes while the new business replaces it. Rather, they'll both grow and pave the way for us to become a substantially larger company. Second, we're already actively working on additional contracts of similar magnitude in both our traditional and new business lines and anticipate additional awards in this calendar year.

Speaker #2: At the same time , in other words , while our business is never perfectly linear , we are definitely not projecting a dislocation in which the traditional business wanes .

Speaker #2: While the new business replaces it . Rather , they'll both grow and pave the way for us to become a substantially larger company Second , we're already actively working on additional contracts of similar magnitude in both our traditional and new business lines , and anticipate additional wards in this calendar year .

Speaker #2: On the December call , I also told you that while backlog in any given quarter can fluctuate , given newly funded awards and what is converted into revenue in a given quarter based on what we're seeing coming down the road , we believe it is reasonable that we could see backlog north of $100 million in the not too distant future .

Thomas McClelland: On the December call, I also told you that while backlog in any given quarter can fluctuate given newly funded awards and what is converted into revenue in a given quarter, based on what we're seeing coming down the road, we believe it is reasonable that we could see backlog north of $100 million in the not-too-distant future. Our January quarter end backlog was at a new record for FEI, and of course, this backlog amount was prior to the award of the contracts announced today. This new business announced today will start to enter backlog in this current fiscal Q4, which should help us make further progress towards the $100 million mark in the near future. Now, that $100 million level, by the way, is not meant to indicate, but a level we're currently building towards.

Speaker #2: Our January quarter-end backlog was at a new record for FY. And of course, this backlog amount was prior to the award of the contracts announced today.

Speaker #2: This new business, announced today, will start to enter backlog in this current fiscal fourth quarter, which should help us make further progress towards the $100 million mark in the near future. Now, that $100 million level—

Speaker #2: By the way, it's not meant to indicate counseling, but a level we're currently building towards, adding more awards like the ones we announced today.

Thomas McClelland: Adding more awards like the ones we announced today could push us well past that over time. Steve will provide more financial details a little bit later, but I would make a few financial comments here. For the third fiscal quarter, we reported revenue of $16.9 million, essentially the same as the second fiscal quarter. This revenue number is down year over year because of the particularly strong execution we exhibited in fiscal 2025, which allowed the company to produce revenue on certain programs in fiscal 2025 that we had originally expected to produce over a much more extended period of time, well into fiscal 2026. Essentially pulling forward some revenue as we've discussed in the previous calls. Nonetheless, this was still the fourth highest quarter of revenue in the past 10 years, with the only three higher quarters having occurred within the past four quarters.

Speaker #2: Could push us well past that over time . Steve will provide more financial details a little bit later , but I would make a few financial comments here For the third fiscal quarter , we reported revenue of 16.9 million , essentially the same as the second fiscal quarter This revenue number is down year over year because of the particularly strong execution .

Speaker #2: We exhibited in fiscal 2025, which allowed the company to produce revenue on certain programs in fiscal 2025 that we had originally expected to produce over a much more extended period of time.

Speaker #2: Well into fiscal 2026 . Essentially pulling forward some revenue As we've discussed in the previous calls . Nonetheless , this was still the fourth highest quarter of revenue in the past ten years , with the only three higher quarters having occurred within the past four quarters .

Speaker #2: As we said on the December call , though , our business does not proceed in a perfectly fashion , we have established a new , higher base and we anticipate building upon that base .

Thomas McClelland: As we said on the December call, though our business does not proceed in a perfect fashion, we have established a new higher base, and we anticipate building upon that base now and in the years to come. Before I turn things over to Steve, I would like to make a few comments on the current state of the world and how it relates to FEI's business. Obviously, most immediately, our country is now at war. As we've discussed on previous calls, we're involved in numerous defense programs, including Golden Dome, Patriot Missile System, B-2 Spirit, and Terminal High Altitude Area Defense missile system, the THAAD system, as well as other multi-domain defense systems. Missile systems and interceptors have been in the news quite a bit over the past two weeks, and I would like to remind you of remarks we've made previously on our calls.

Speaker #2: Now and in the years to come, before I turn things over to Steve, I would like to make a few comments on the current state of the world and how it relates to FEI's business.

Speaker #2: Obviously , most immediately , our country is now at war . As we've discussed on previous calls , we're involved in numerous defense programs , including Golden Dome , Patriot Missile System , B-2 bomber and Terminal High Altitude Area Defense Missile System .

Speaker #2: The Thadd system , as well as other multi-domain defense systems , missile systems and interceptors , have been in the news quite a bit over the past two weeks , and I would like to remind you of remarks we've made previously on our calls .

Speaker #2: Our exposure on major missile programs is principally in the missile batteries, which are ground-based units used to detect, track, and intercept incoming threats, generally by firing missiles at those threats.

Thomas McClelland: Our exposure on major missile programs is principally in the missile batteries, which are ground-based units used to detect, track, and intercept incoming threats, generally by firing missiles at those threats. As the government increases the deployment of these batteries, our business will expand along with that, and we've already seen evidence of that in the current quarter. Further, the early days of this war, as well as the action earlier this year in Venezuela, have shown an increased reliance on traditional jet fighters and naval fleets, as opposed to next-generation defense technologies. Similar to our discussion earlier on our space positioning in the traditional and emerging markets, we believe this military deployment is a good example of how there remains strong opportunities in our traditional defense business, even as we are engineering products for next-generation modalities.

Speaker #2: As the government increases , the deployment of these batteries , our business will expand along with that . And we've already seen that in the current quarter Further , the early days of this war , as well as the action earlier this year on Venezuela , have shown an increased reliance on traditional jet fighters and naval fleets , as opposed to next generation defense technologies similar to our discussion earlier on , our space positioning in the in the traditional and emerging markets .

Speaker #2: We believe this military deployment is a good example of how their remains strong opportunities in our traditional defense business . Even as we are engineering products for next generation modalities We expect defense to continue to be a meaningful and growing business for Fe , for many years Meanwhile , in the Ukraine , Russia war and in the Strait of Hormuz , GPS jamming has become ubiquitous , creating dead zones that threaten civilian aircraft , telecom and financial systems .

Thomas McClelland: We expect defense to continue to be a meaningful and growing business for FEI for many years. Meanwhile, in the Ukraine-Russia war and in the Strait of Hormuz, GPS jamming has become ubiquitous, creating dead zones that threaten civilian aircraft, telecom, and financial systems, shipping firms, and NATO allies. The need for alternative position, navigation, and timing systems, ALT-PNT, including the use of quantum sensing and magnetometers, is paramount, and we expect to be a part of that solution set in the years to come. In fact, in this current fiscal year, we've already won some new business in both magnetometers and other quantum sensing, including business won out of our new Colorado facility. We expect a lot more ALT-PNT business in the years to follow. Our technology is used in systems and programs that play critical roles in keeping our country and our military safe.

Speaker #2: Shipping firms and NATO allies The need for alternative position , navigation and timing systems alt PA , including the use of quantum sensing and magnetometers , is paramount , and we expect to be a part of that solution set in the years to come In fact , in this current fiscal year , we have already won some new business in both magnetometers and other quantum sensing , including business .

Speaker #2: One out of our new Colorado facility. We expect a lot more Alt PA business in the years to follow. Our technology is used in systems and programs that play a critical role in keeping our country and our military safe. We're very proud of this work, and it creates an additional sense of mission for our team. I would like to thank our employees, our customers, and our shareholders.

Thomas McClelland: We're very proud of this work, and it creates an additional sense of mission for our team. I would like to thank our employees, our customers, and our shareholders, all of whom we serve by carrying out this important work. Lastly, we will be participating in two investor conferences in the fiscal Q4, and we look forward to meeting with a number of you at the Craig-Hallum NewSpace Conference on 25 March and the Morgan Stanley Golden-Dome and National Security Innovation Summit on 15 June. Now I'll turn the call over to Steve to provide some more financial details, and I look forward to taking your questions during the Q&A following Steve's remarks. Steve?

Speaker #2: All of whom we serve by carrying out this important work. Lastly, we will be participating in two investor conferences in the fiscal fourth quarter, and we look forward to meeting with a number of you at the Craig-Hallum New Space Conference on March 25th and the Morgan Stanley Golden Dome and National Security Innovation Summit on June 15th.

Speaker #2: And now I'll turn the call over to Steve to provide some more financial details . And I look forward to taking your questions during the Q and A Steve remarks Steve .

Speaker #3: Thank you . Tom , and good afternoon For the three months ended January 31st , 2026 , consolidated revenue was $16.9 million compared to $18.9 million for the same period of the prior fiscal year .

Steven Bernstein: Thank you, Tom, and good afternoon. For the three months ended 31 January 2026, consolidated revenue was $16.9 million compared to $18.9 million for the same period of the prior fiscal year and substantially similar to Q2 of this fiscal year, as Tom mentioned earlier, and which we have described on the past several calls. The components of revenue are as follows. Revenue from commercial and US government satellite programs was approximately $4.2 million or 25% compared to $11.2 million or 59% in the same period of the prior fiscal year. Revenues on satellite payload contracts are recognized primarily under the percentage of completion method and reported only in the FEI-NY segment. Revenues from non-space US.

Speaker #3: And substantially similar to the second quarter of this fiscal year . As Tom mentioned earlier , and which we have described on the past several calls , the components of revenue , revenue from commercial and US government satellite programs was approximately $4.2 million , or 25% , compared to 11.2 million , or 59% in the same period of the prior fiscal year Revenues on satellite payload contracts are recognized primarily under the percentage of completion method , and recorded only in the FBI .

Speaker #3: New York segment. Revenues from non-space U.S. government and Department of Defense customers, which are recorded in both the FBI, New York, and FBI.

Steven Bernstein: Government and Department of Defense customers, which are reported in both the FEI New York and FEI-Zyfer segments, were $12.5 million compared to $7.4 million in the same period of the prior fiscal year and accounted for approximately 74% of consolidated revenue, compared to 39% for the prior fiscal year. Other commercial and industrial revenues were approximately $180,000 compared to approximately $367,000 in the prior fiscal year. The revenue for the three months ending 31 January 2026 were lower than the revenues in the prior period, partly as a result of certain space programs in the FEI New York segment during the prior fiscal year that were being expedited during the period due to very aggressive schedules.

Speaker #3: Zephyr segment revenues were $12.5 million, compared to $7.4 million in the same period of the prior fiscal year, and accounted for approximately 74% of consolidated revenue, compared to 39% for the prior fiscal year. Other commercial and industrial revenues were approximately $180,000, compared to approximately $367,000 in the prior fiscal year.

Speaker #3: The revenue for the three months ending January 31st, '26, were lower than the revenues in the prior period, partly as a result of certain space programs in the FBI New York segment during the prior fiscal year that were being expedited during the period due to very aggressive schedules.

Speaker #3: In addition, several new space bookings anticipated for the three months ending January 31st, '26, are now anticipated in the fourth quarter of fiscal '26.

Steven Bernstein: In addition, several new space bookings anticipated for the three months ending 31 January 2026 are now anticipated in Q4 of fiscal 2026. For the three months and nine months ending 31 January 2026, both gross margin and gross margin rate decreased compared to the same period in the prior fiscal year. The decrease in gross margin and gross margin rate were attributable to a change in the mix of high margin production satellite programs in the prior year periods versus lower margin programs with significant non-recurring engineering efforts during the three months ending 31 January 2026. Going forward, the mix of programs will vary in any given quarter, but in general, we expect our gross margin to move up over time, particularly as we add more business with higher rate of unit production and follow-on business from successful programs.

Steven Bernstein: In addition, several new space bookings anticipated for the three months ending 31st January 2026 are now anticipated in Q4 of fiscal 2026. For the three months and nine months ending 31 January 2026, both gross margin and gross margin rate decreased compared to the same period in the prior fiscal year. The decrease in gross margin and gross margin rate were attributable to a change in the mix of high margin production satellite programs in the prior year periods versus lower margin programs with significant non-recurring engineering efforts during the three months ending 31 January 2026. Going forward, the mix of programs will vary in any given quarter, but in general, we expect our gross margin to move up over time, particularly as we add more business with higher rate of unit production and follow-on business from successful programs.

Speaker #3: For the three months ended, and the nine months ending January 31, 2026, both gross margin and gross margin rate decreased compared to the same period in the prior fiscal year.

Speaker #3: The decrease in gross margin and gross margin rate were attributable to a change in the mix of high margin production , satellite programs in the prior year periods versus lower margin programs with significant non-recurring engineering efforts during the three months ending January 31st , 26 .

Speaker #3: Going forward , the mix of programs will vary in any given quarter , but in general , we expect our gross margin to move up over time , particularly as we add more business with higher rate of unit production and follow on business from successful programs For the three months ending January 31st , 26 and 25 , selling , general and administrative expenses increased by approximately 213,000 and were approximately 21% of consolidated revenue , up from 18% in the prior year The increase in G&A expenses during the three months ending January 31st , 2026 , was due to fluctuations in various expense accounts that make up .

Steven Bernstein: For the three months ending January 31, 2026 and 2025, selling general and administrative expenses increased by approximately $213,000 and were approximately 21% of consolidated revenue, up from 18% in the prior year. The increase in SG&A expenses during the three months ending January 31, 2026 was due to fluctuations in various expense accounts that make up SG&A. R&D expense for the three months ending January 31, 2026 increased to approximately $1.8 million from $1.4 million for the three months ending January 31, 2025, an increase of approximately $327,000 and were approximately 10% and 8% respectively of consolidated revenue. Fluctuation in R&D expenditures will occur in some periods due to current operational needs supporting ongoing programs.

Speaker #3: G&A R&D expense for the three months ending January 31st , 26 increased to approximately 1.8 million from 1.4 million for the three months ending January 31st , 25 , an increase of approximately 327,000 and were approximately 10% and 8% , respectively , of consolidated revenue .

Speaker #3: Fluctuation in R&D expenditures will occur in some periods due to current operational needs , supporting ongoing programs . The company plans to continue to invest in R&D in the future to keep its products at the state of the art in total , operating expenses increased approximately 540,000 , but has includes approximately 500,000 of non-recurring expenses .

Steven Bernstein: The company plans to continue to invest in R&D in the future to keep its products at the state-of-the-art. In total, operating expenses increased approximately $540,000, but this includes approximately $500,000 of non-recurring expenses. We anticipate showing more operating leverage going forward as additional revenue should expand at a much faster rate than expenses. For the three months ended 31 January 2026, the company reported operating income of approximately $1.3 million compared to an operating income of approximately $3.5 million in the prior fiscal year. Operating income decreased due to lower revenue, lower gross margin, and increased SG&A described earlier. Other income expense net is derived from various sources.

Speaker #3: So, we anticipate showing more operating leverage going forward, as additional revenue should expand at a much faster rate than expenses. For the three months ended January 31st, '26, the company reported operating income of approximately $1.3 million, compared to operating income of $3.5 million in the prior fiscal year.

Speaker #3: Operating income decreased due to lower revenue , lower gross margin , and increased G&A described earlier . Other income expense , net is derived from various sources .

Speaker #3: The majority of the approximately $0.2 million of investment income for the three months ending January 31st, '26, was from interest income and unrealized gain on assets held in the Frequency deferred compensation trust.

Steven Bernstein: The majority of the approximately $0.2 million of investment income for the three months ending 31 January 2026 was from interest income and unrealized gain on assets held in the Frequency Electronics Deferred Compensation Trust. This yields a pre-tax income of approximately $1.4 million for the three months ending 31 January 2026, compared to approximately $3.6 million pre-tax income for the three months ending 31 January 2025. For the three months ending 31 January 2026, the company recorded an income tax benefit of approximately $127,000, which includes a discrete tax benefit of approximately $568,000. The discrete income tax benefit is primarily due to stock compensation windfall deductions.

Speaker #3: This yields a pre-tax income of approximately $1.4 million for the three months ending January 31st, '26, compared to an approximately $3.6 million pre-tax income for the three months ended January 31st, '25.

Speaker #3: For the three months ending January 31, 2026, the company recorded an income tax benefit of approximately $127,000, which includes a discrete tax benefit of approximately $568,000.

Speaker #3: The discrete income tax benefit is primarily due to stock compensation , windfall deductions for the three months ended January 31st , 25 , the company recorded an income tax benefit of 11.8 million , which included a discrete income tax benefit of 11.9 million .

Steven Bernstein: For the three months ending 31 January 2025, the company recorded an income tax benefit of $11.8 million, which included a discrete income tax benefit of $11.9 million. The discrete income tax benefit in the comparable period is primarily due to the release of the valuation allowance. Consolidated net income for the three months ended 31 January 2025 was approximately $1.6 million or $0.16 per share, compared to approximately $15.4 million or $1.60 per share for the same period of the previous fiscal year. Our fully funded backlog at the end of January 2026 was approximately $83 million, a new all-time high for FEI, as compared to approximately $70 million for the previous fiscal year ended 30 April 2025.

Speaker #3: The discrete income tax benefit in the comparable period is primarily due to the release of the valuation allowance. Consolidated net income for the three months ended October 30th.

Speaker #3: Sorry . January 31st , 25 was approximately 1.6 million , or $0.16 per share , compared to approximately 15.4 million , or $1.60 per share , for the same period of the previous fiscal year .

Speaker #3: Our fully funded backlog at the end of January 26th was approximately $83 million, a new all-time high for FE as compared to approximately $70 million for the previous fiscal year ended April 30th, '25.

Speaker #3: The company's balance sheet continues to reflect a strong working capital position of approximately $32 million at January 31st, 2026, and a current ratio of approximately 2.6 to 1.

Steven Bernstein: The company's balance sheet continues to reflect a strong working capital position of approximately $32 million at January 31, 2026, and a current ratio of approximately 2.6 to 1. The amount of cash reported as of the quarter end January 31 should represent a low point going forward, which is a combination of investments made by the company, purchases of stock, and collections coming in early in the fiscal Q4 that were in just the Q3. Specifically, we have already collected over $11 million of cash since February 1, 2026, and we expect that to continue building through the quarter. Additionally, the company is debt free, and the company believes that its liquidity is adequate to meet its operating investing needs for the next 12 months and the foreseeable future.

Speaker #3: The amount of cash reported as of the quarter end January 31st should be represent a low point going forward , which is a combination of investments made by the company , purchases of stock and collections coming in early in the fiscal fourth quarter that were anticipated third quarter specifically , we have already collected over 11 million of cash since February 1st , 2026 , and we expect that to continue building through the quarter Additionally , the company is debt free and the company believes that its liquidity is adequate to meet its operating investing needs for the next 12 months and the foreseeable future .

Speaker #3: I will turn the call back to Tom , and we look forward to your questions shortly

Steven Bernstein: I will turn the call back to Tom, and we look forward to your questions shortly.

Speaker #2: Thanks, Steve. We're now ready for questions.

Thomas McClelland: Thanks, Steve. We're now ready for questions.

Speaker #1: Thank you . At this time , we will be conducting a question and answer session . If you would like to ask a question , please press star one on your telephone keypad .

Operator: Thank you. At this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A 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. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Once again, please press star one if you have a question or a comment. First question comes from Jeff Van Rhee with Craig-Hallum. Please proceed.

Speaker #1: A 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.

Speaker #1: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please, while we poll for questions.

Speaker #1: Once again, please press star one if you have a question or comment. The first question comes from Jeff Van Rhee with Craig-Hallum.

Speaker #1: Please proceed

Speaker #4: Great . Thanks for taking the questions . A couple for you here , guys . So Tom , the proliferated within . Talk to me about what you're learning out in the marketplace and your ability to win in these proliferated constellation deals .

Jeff Van Rhee: Great. Thanks for taking the questions. A couple for you here, guys. Tom, the proliferated win, talk to me about what you're learning out in the marketplace and your ability to win in these proliferated constellation deals. I know this is something you've sort of felt your way through. Looks like you've got some success, and you're sort of guiding to continued success. You know, where do you have the right to win? Where do you win? Where do you not have a right to play? Just what have you learned there?

Speaker #4: I know this is something you've sort of felt your way through . Looks like you've got some success and you're sort of guiding to continued success .

Speaker #4: You know , where do you have the right to win ? Where do you win ? Where do you not have a right to play ?

Speaker #4: Just what have you learned there

Speaker #2: Well , I think when we can provide some technical edge , we're very successful . We're seeing that . And and that's what the the win that we announced today reflects when there are systems that have minimal technical requirements and all of the emphasis is just on the lowest possible cost , then it's a much bigger challenge for us

Thomas McClelland: Well, I think when we can provide some technical edge, we're very successful. We're seeing that, and that's what the win that we announced today reflects. When there are systems that have minimal technical requirements and all of the emphasis is just on the lowest possible cost, then it's a much bigger challenge for us.

Jeff Van Rhee: Realizing your hands are somewhat tied, talk to me to the degree you can on the $45 million. I think you said there's a couple wins in there. Are these roughly equal in size? I know you said one was proliferated, one wasn't, but just rough proportion of what's in there.

Speaker #4: Realizing your hands are somewhat tied , talk to me to a degree you can on the 45 million , I think you said there's a couple wins in there .

Speaker #4: Are these roughly equal in size? I know you said one was proliferated, one wasn’t, but just a rough proportion of what’s in there.

Speaker #2: Well , I yeah , I'm gonna dodge that one a little bit . Jeff , but let me just say they're they're both significant

Thomas McClelland: Well, yeah, I'm gonna dodge that one a little bit, Jeff, but let me just say they're both significant.

Speaker #4: Okay . And , and in terms of the coming into funded backlog , I think that the phrasing was they will start to come into backlog .

Jeff Van Rhee: Okay. In terms of the coming into funded backlog, I think that the phrasing was they will start to come into backlog. I mean, can you give us some swag at how quickly that's gonna play into the backlog?

Speaker #4: I mean , can you give us some swag at at how quickly that's going to play into the into the backlog ?

Speaker #2: Yeah . Just a reminder that we talk about funded backlog . So it's a , it's a question of the funding profile on each of these programs .

Thomas McClelland: Yeah. Just a reminder that we talk about funded backlog. It's a question of the funding profile on each of these programs. The reality is that will be pretty significant in the quarter that we're in currently. Yeah, I don't think I can say a whole lot more than that at this point.

Speaker #2: But I, the reality is that it will be pretty significant in the quarter that we're in currently. But yeah, I don't think I can say a whole lot more than that at this point.

Speaker #4: Okay . And Steven , on the cost structure , I was unclear . I think you referenced there were some unusuals in there .

Jeff Van Rhee: Okay, Steven, on the cost structure, I was unclear. I think you referenced there were some unusuals in there. Obviously, R&D has bumped up considerably over the last few quarters. I'm trying to understand what the steady-state OpEx levels are going forward. Just what was in there this quarter that was one time and not?

Speaker #4: Obviously , R&D has bumped up considerably over the last few quarters . I'm trying to understand what the steady state opex levels are going forward .

Speaker #4: So just what was in there this quarter that was one time and not

Speaker #3: Well, we have it in the general operating expenses. We still have investments that we're making into Colorado—it's the largest piece of that.

Steven Bernstein: Well, we have in the general operating expenses, we still have investments that we're making into Colorado is the largest piece of that. Once that's, you know, done, it should normalize pretty much. That was the larger piece of it.

Speaker #3: And once that's done, it should normalize pretty much. That was one of the larger pieces of it.

Speaker #4: And so when you say normalize, are we going to go up from this level as we go forward into future quarters? Or was there something unusual in here?

Jeff Van Rhee: When you say normalize, are we gonna go up from this level as we go forward into future quarters, or was there unusual in here and we should step down from here?

Speaker #4: And we should step down from here?

Speaker #3: Well , again , operating expenses in general , unfortunately , there's always some bump , you know , whether 3% , 4% , 5% , you know , based on just the , you know , normal growth of of normal expenses .

Steven Bernstein: Well, again, operating expenses in general, unfortunately, there's always some bump, you know, whether 3%, 4%, 5%, you know, based on just the, you know, normal growth of normal expenses. I don't see any, you know, unless something changes, I don't see a large increase, but I don't see a large decrease.

Speaker #3: So I don't see any , you know , unless something changes , I don't see a large increase , but I don't see a large decrease

Speaker #4: Okay . Maybe last for me , Tom . The on on with respect to turbo , I know you had given some color commentary in a few prior quarters that , you know , you felt it had the potential to to go from a couple million to maybe 20 million in the out year .

Jeff Van Rhee: Okay, maybe last for me, Tom. On with respect to Turbo, I know you had given some color commentary in a few prior quarters that it, you know, you felt it had the potential to go from $2 million to maybe $20 million in the out year if things go right. Just your updated thinking on Turbo based on market reception, pipeline, et cetera. Thanks.

Speaker #4: If , if things go right , just your updated thinking on turbo based on market reception , pipeline , etc. . Thanks .

Speaker #2: I think if anything , we we are more optimistic about turbo . We're beginning to see significant revenue at this time and every indication is that this is going to grow dramatically over the next even over the next couple of quarters .

Thomas McClelland: I think if anything, we are more optimistic about TURbO. We're beginning to see significant revenue at this time, and every indication is that this is gonna grow dramatically over the next even over the next couple of quarters and definitely over the next couple of years.

Speaker #2: And definitely over the next couple of years

Speaker #4: Got it . Thanks so much

Jeff Van Rhee: Got it. Thanks so much.

Speaker #1: Our next question comes from Chris Bukowski, private investor. Please proceed.

Operator: Our next question comes from Chris Bukowski, Private Investor. Please proceed.

Speaker #5: Hello . Thank you for taking my questions . And congratulations on the new wins . Thank you . Could you could you clarify what exactly is the proliferated satellite ?

Chris Bukowski: Hello. Thank you for taking my questions. Congratulations on the new wins.

Thomas McClelland: Thank you.

Chris Bukowski: Could you clarify what exactly is a proliferated satellite? Is that the Starlink type satellite? I'm not asking you if it's Starlink or not, just if it's that type of satellite.

Speaker #5: Is that the Starlink type satellite ? I'm not asking you if it's Starlink or not . Just if it's that type of satellite .

Speaker #2: Yeah , yeah , yeah , it's actually it's actually a pretty good question . I'm not sure I really like that term proliferated satellites , but it is one that is being used out there .

Thomas McClelland: Yeah, yeah. It's actually a pretty good question. I'm not sure I really like that term proliferated satellites, but it is one that is being used out there. I think the distinction we're trying to make is between what we call traditional satellite systems, where there are maybe 3 to 5 satellites in a constellation, oftentimes in geosynchronous orbits, versus these newer satellite systems that are being envisioned at this point in time, often but not always in low Earth orbit, but consisting of many, many more satellites, typically from 300 to, in some cases, many thousands. SpaceX is now talking about a constellation of 1 million satellites.

Speaker #2: I think the distinction we're trying to make is between what we we call traditional satellite systems , where there may be 3 to 5 satellites in a constellation , oftentimes in geosynchronous orbits versus these newer satellite systems that are being envisioned at this point in time , often , but not always in low earth orbit .

Speaker #2: But consisting of many, many more satellites, typically from 300 to, in some cases, many thousands, and space is now talking about a constellation of a million satellites.

Speaker #2: And that . But I think the the real distinguishing feature is that the , the , the thought process that goes behind these systems , what's become very clear .

Thomas McClelland: I think the real distinguishing feature is that the thought process that goes behind these systems. What's become very clear recently is that satellites are vulnerable from our enemies. This has been demonstrated recently that both the Chinese and the Russians, in particular, have the capability to destroy other satellites. You know, when we have a satellite system that has only a couple of satellites in it, if one of those satellites gets destroyed, it's a huge loss for us. It can represent billions of dollars, in fact. The idea is instead of having a couple of satellites worth $1 billion each, to have a system where there are many more satellites, but the individual satellites are much less costly.

Speaker #2: Recently is that satellites are vulnerable From our enemies . And this has been demonstrated recently that both the Chinese and the Russians in particular , have capability to destroy other satellites and , you know , when when we have a satellite system that has only a couple of satellites in it , if one of those satellites gets destroyed , it's a huge loss for us .

Speaker #2: It can represent billions of dollars . In fact . So the idea is instead of having a couple of satellites worth $1 billion each to have a system where there are many more satellites , but the individual satellites are much , much less costly .

Speaker #2: So the simple way I like to look at it is that the system itself may overall cost the same amount of money.

Thomas McClelland: The simple way I like to look at it is that the system itself may overall cost the same amount of money, but instead of those costs being distributed over a few satellites, 3, 4, 5 satellites, it's distributed over 300 or 1,000 satellites. In order to make that approach work, obviously the individual satellites have to cost a lot less. That's what we end up looking at. We look at individual satellites. The contribution that we make in a product to an individual satellite has to cost a lot less than what we would deliver for one of the traditional satellites.

Speaker #2: But instead of those costs being distributed over a few satellites , three , 4 or 5 satellites is distributed over . 300 or 1000 satellites .

Speaker #2: So the . In order to make that approach work , obviously , the individual satellites have to cost a lot less . So .

Speaker #2: So that's what we end up looking at. We look at individual satellites, so the contribution that we make in our product to an individual satellite has to cost a lot less than what we would deliver for one of the traditional satellites.

Speaker #2: And then , of course , another important feature is that , you know , if you're going to launch 300 satellites instead of three , you know , you need to do it at a much more rapid pace than than is necessary for the three satellites .

Thomas McClelland: Of course, another important feature is that, you know, if you're gonna launch 300 satellites instead of 3, you know, you need to do it at a much more rapid pace than is necessary for the 3 satellites. The production rate has to increase dramatically. This lower cost and more rapid production makes for a significantly different manufacturing approach than with traditional satellites. One of the things we're actually investing in order to really get involved in a very significant way in this new kind of satellite business. One of the attractive features is that on an ongoing basis, many of these systems are envisioned to have just a continuous ongoing production of satellites.

Speaker #2: So , so the production rate has to increase dramatically . So , so this lower cost and more rapid production makes for a significantly different manufacturing approach than with traditional satellites .

Speaker #2: But one of the things—so, so we're actually investing in order to really get involved in a very significant way in this new kind of satellite business.

Speaker #2: One of the attractive features is that, on an ongoing basis, many of these systems are envisioned to have just a continuous, ongoing production of satellites.

Speaker #2: The idea is that the individual satellites are intended to have a shorter lifetime . Instead of 15 years . For traditional satellites maybe 3 to 5 years for the newer satellites .

Thomas McClelland: The idea is that the individual satellites are intended to have a shorter lifetime. Instead of 15 years for traditional satellites, maybe 3 to 5 years for the newer satellites. We get into a production mode where we are delivering on a scheduled basis, say, the first 300 satellites in a 300 satellite system. As soon as we're done delivering the 300 satellites, we have to start all over again because the first satellites that were launched are nearing the end of life and have to be replaced with new ones. It makes for potentially a much more continuous kind of production, and that's something that we think makes for a much more predictable business.

Speaker #2: And so we get into a production mode where we are delivering on a scheduled basis , say the first 300 satellites in a 300 satellite system .

Speaker #2: But as soon as we're done delivering the 300 satellites, we have to start all over again. Because the first satellites that were launched are nearing the end of life and have to be replaced with new ones.

Speaker #2: So, it makes for potentially a much more continuous kind of production. And that's something that we think makes for a much more predictable business.

Thomas McClelland: It also in many ways a more attractive business than the traditional satellites, where we would have a large scale production activity over a couple of years. When we're finished with 3 or 4 satellites, we're done perhaps for the next decade until people are talking about potentially replacing those satellites. Anyway, it's probably a more long-winded answer than you wanted, but let me leave it at that.

Speaker #2: And it's also in many ways a more attractive business than the traditional satellites, where we would have a large-scale production activity over a couple of years.

Speaker #2: And then when we're finished with 3 or 4 satellites were done , perhaps for the next decade until people are talking about potentially replacing those satellites .

Speaker #2: So anyway, it's probably a more long-winded answer than you wanted, but let me leave it at that.

Speaker #5: That was very much appreciated. Please feel free to be as long-winded as you want. So, it seems like there will be some headwinds and tailwinds for gross margins.

Chris Bukowski: That was very appreciated. Please feel free to be as long-winded as you want. It seems like there will be some headwinds and some tailwinds for gross margins. I'm sure having continuous production would really help gross margins. But then having a new satellite program with which requires limited costs, that might hurt gross margins. Do you think you'll be able to keep your gross margins on this new proliferated satellite program? And is there gonna be like a learning period where gross margins will be lower?

Speaker #5: I'm sure having continuous production would really help gross margins , but then having a new new satellite program with which which requires limited costs , that might hurt gross margins .

Speaker #5: So do you have , do you think you'll be able to keep your gross margins on these new proliferated satellite program ? And is there going to be like a learning period where gross margins will be lower ?

Speaker #2: Yeah . So , so that that's it's a good question . It's something we've talked about on previous calls . I , I think we do anticipate in the short run , somewhat lower , gross margins on the , the proliferated satellite business as it , it gets a refined in the initial years , but at the same time , and it's really one of the things we're trying to emphasize today is that the traditional satellite business is still alive and well .

Thomas McClelland: That's a good question. It's something we've talked about on previous calls. I think we do anticipate in the short run somewhat lower gross margins on the proliferated satellite business as it gets refined in the initial years. But at the same time, it's really one of the things we're trying to emphasize today, that the traditional satellite business is still alive and well. That is a business that our gross margins are very strong. Whereas we have to invest to some extent in the proliferated satellites, we have really good gross margins with the traditional satellites.

Speaker #2: And that is a business where our gross margins are very strong. So whereas we, we have to invest to some extent in the proliferated satellites.

Speaker #2: We have really good gross margins with a traditional satellite. And I also want to emphasize that in the long run, we anticipate very strong margins for the proliferated satellite business as well.

Thomas McClelland: I also wanna emphasize that in the long run, we anticipate very strong margins for the proliferated satellite business, as well.

Chris Bukowski: Okay. You mentioned that in this current quarter, things are going. This $45 million, some of it is going to the funded backlog. Are you allowed to tell us when actual production would start?

Speaker #5: Okay . And and you mentioned that that in this current quarter , things are going . This 45 million . Some of it is going to the funded backlog .

Speaker #5: Are you allowed to tell us when actual production would start?

Thomas McClelland: That's something I think I'm not prepared to get into. It's very early stages of these programs, and the schedules are being worked out now with our customers.

Speaker #2: I , I , that's something I think I'm not prepared to get into . It's a very early stages of these programs and the schedules are being worked out now with our customers

Thomas McClelland: That's something I think I'm not prepared to get into. It's very early stages of these programs, and the schedules are being worked out now with our customers.

Speaker #5: All right . Thanks . luck .

Chris Bukowski: All right, thanks. Good luck.

Speaker #2: Thank you .

Thomas McClelland: Thank you.

Speaker #1: Next question is from Michael Eisner , private investor . Michael , please proceed .

Operator: Next question is from Michael Eisner, Private Investor. Michael, please proceed.

Michael Eisner: Congratulations on the two contracts and future contracts. Most of my questions-

Speaker #6: Congratulations on the two contracts . Future contracts . Most of my questions are answered . I can you comment on Golden Dome

Michael Eisner: Congratulations on the two contracts and future contracts. Most of my questions-

Thomas McClelland: Thank you.

Michael Eisner: are answered. Can you comment on Golden Dome?

Thomas McClelland: I don't think there's a whole lot I can say. From our point of view, Golden Dome is just sort of being defined at this point in time. We have spoken specifically in the past and earlier today about some of the programs, Patriot and THAAD, which I think are in some ways of thinking considered part of the Golden Dome concept. We are also involved in several other missile programs, which we can't talk about in specific. You know, we're very involved in a number of things that are part of the Golden Dome concept.

Speaker #2: I , I don't think there's a whole lot I can say From our point of view , Golden Dome is is just sort of being defined at this point in time .

Speaker #2: The . We we have spoken specifically in the past and earlier today about some of the programs Patriot Missile and Thad , which I think are is in some ways of thinking , considered part of the Golden Dome concept .

Speaker #2: We are also involved in several other missile programs which we can't talk about in specific . But , you know , we're very , very involved in the a number of things that are part of the Golden Dome concept .

Speaker #2: And of course , the , you know , satellites and are also a very , very important part of the Golden Dome concept .

Thomas McClelland: Of course, you know, satellites, and are also a very, very important part of the Golden Dome concept, and we're very involved in that also. You know, other than that, Michael, I don't think I can really get into any specifics.

Speaker #2: And we're very involved in that also . But I , you know , other than that , Michael , I don't think I can really get into any specifics

Speaker #6: Comment frequency electronics has been around for 60 , 70 years and frequencies are nice name , good name , respected name . But did you ever think of adding to frequency ?

Michael Eisner: Comment. Frequency Electronics has been around 60, 70 years, and Frequency is a nice name, good name, respected name. Did you ever think of adding to Frequency, maybe frequency quantum sensing, for example, or timing? More close to what the company actually does.

Speaker #6: Maybe frequency quantum sensing, for example, or timing? The more to what the company actually does.

Speaker #2: Oh yeah . Sure . We we we have thought about it , you know , and there have been all sorts of suggestions along the lines that you're suggesting right now .

Thomas McClelland: Yeah. Sure. We have thought about it, you know, and there have been all sorts of suggestions along the lines that you're suggesting right now and quite a number of other ones, also. Yeah, I don't think I wanna say a whole lot more than that. At the moment, we're sticking with the 65-year-old name that we have.

Speaker #2: And quite a number of other ones also , we . Yeah , I , I don't think I want to say a whole lot more than that , but at the moment we're sticking with the 65 year old name that we have .

Speaker #6: Yeah , I just thought because it does so much frequency from years ago , it does so much more now . And we keep on .

Michael Eisner: Yeah. I just thought 'cause it does so much. Frequency from years ago, it does so much more now. We keep on, it sounds like from this call, we're getting involved with more stuff and technology.

Speaker #6: It sounds like from this call we're getting involved with more stuff in technology .

Speaker #2: Yeah , I'd .

Thomas McClelland: Yeah. I get-

Speaker #6: Say technology company .

Michael Eisner: It's a technology company.

Speaker #2: Yeah , I , the one thing I'll say , you know , we've given some thought to this kind of thing and I'm not going to say one way or the other .

Thomas McClelland: Yeah. The one thing I'll say, you know, we've given some thought to this kinda thing, and I'm not gonna say one way or the other what the future will bring, but I think, you know, we've just been talking about it. There's a tremendous amount of business that we're looking at at this point in time, and we're anticipating very significant growth. I think the important thing to do is concentrate on executing that business effectively. That's what we're focusing on, and we feel that's way more important than, you know, the name we provide to the company.

Speaker #2: What the future will bring . But I think , you know , there's , we've , we've just been talking about it . There's a tremendous amount of business that we're looking at at this point at a time .

Speaker #2: And we're anticipating very , very significant growth . And I think the important to do is concentrate on executing that business effectively . And so , so that's what we're focusing on .

Speaker #2: And we feel that's way more important than , you know , the , the name we provide to the company .

Speaker #6: Okay , that's fine . Thank you .

Michael Eisner: Okay, that's fine. Thank you.

Speaker #2: Yeah .

Thomas McClelland: See you.

Speaker #1: Once again , if you have a question or comment , please press star one . We have a follow up coming from Jeff Van Rhee with Craig-hallum .

Operator: Once again, if you have a question or a comment, please press star one. We have a follow-up coming from Jeff Van Rhee with Craig-Hallum. Please proceed, Jeff.

Speaker #1: Please proceed . Jeff .

Speaker #4: Great , thanks . Yeah , just a few for me , guys . The in terms of the , the script , Steven , I might have missed it .

Jeff Van Rhee: Great. Thanks. Yeah, just a few from you guys. In terms of the script, Steven, I might have missed it. I thought you had said you had some bookings push outs, and I didn't quite catch it. I think you said Q1 went to Q4. Just recap that for me. Tom, I know you've been talking about a $100 million backlog. You thought in the relatively near future. Sounded like slightly different verbiage here, so maybe it's not quite as near as you thought it had been. Just connect those two dots for me and help me understand what's going on there.

Speaker #4: I thought you had said you had some bookings . Push outs and I didn't quite catch it . I think you said Q1 went to Q4 .

Speaker #4: Just recap that for me . And then Tom , you I knew you'd been talking about 100 million backlog . You thought in the the relatively near future sounded like slightly different verbiage here .

Speaker #4: So maybe it's not quite as near as you thought it had been . Just connect those two dots for me and help me understand what's going on there .

Speaker #2: Well , I , I , I think that , you know , again , we can't really get into quantitative specifics , but I do think that the 100 million mark is going to be breached relatively quickly .

Thomas McClelland: Well, I think that, you know, again, we can't really get into quantitative specifics, but I do think that the $100 million mark is gonna be breached, relatively quickly. I think, you know, what we talked about today, our backlog is up from what it was last quarter, slightly. You know, we just announced today $45 million of new contracts, and that's gonna be hitting the backlog, beginning to hit the backlog this quarter. There's more, you know, in the pipeline. We're very quickly approaching the $100 million mark.

Speaker #2: I think , you know , just the so what we we talked about today , the numbers we are , are backlog is up from what it was last quarter slightly .

Speaker #2: And , you know , we , we just announced today $45 million of , of new contracts . And that's going to be hitting the backlog beginning to hit the backlog this quarter .

Speaker #2: And there's more , you know , in the input pipeline . So we're , we're very quickly approaching the hundred million mark

Jeff Van Rhee: Mm-hmm. Yeah, understood. Just back to the original question, Steve, did you reference-

Speaker #4: Yeah . Understood . And just back to the original question , Steve , did you reference contracts pushing out from Q1 to Q4 ?

Steven Bernstein: Uh-huh.

Jeff Van Rhee: Contracts pushing out from Q1 to Q4? If so, can you expand on that?

Speaker #4: And if so, can you expand on that?

Speaker #3: No , I , I said they pushed from Q3 to Q4 , and that's why , you know , some of the revenue was down a drop because of that .

Steven Bernstein: No, I said they pushed from Q3 to Q4, and that's why, you know, some of the revenue is down or dropped because of that. That's all.

Speaker #3: That's all .

Speaker #2: Yeah, I think the, the, and very specifically, the contracts that we just announced.

Thomas McClelland: Yeah, I think-

Jeff Van Rhee: Okay.

Thomas McClelland: Very specifically, the contracts that we just announced.

Speaker #3: Yeah .

Steven Bernstein: Yeah.

Speaker #2: So one of the frustrating things in the satellite business is our , our wonderful government , they like to get their satellite hardware as quickly as possible .

Thomas McClelland: One of the frustrating things in the satellite business.

Jeff Van Rhee: Yeah.

Thomas McClelland: Our wonderful government, they like to get their satellite hardware as quickly as possible, but they're not so fast in executing contracts.

Speaker #2: But they're not so fast in executing contracts.

Speaker #4: To say the least . Okay . Thanks so much .

Jeff Van Rhee: To say the least. Okay, thanks so much.

Speaker #3: All right .

Steven Bernstein: All right.

Speaker #1: Next question comes from Robert Smith with Center for Performance Investing.

Operator: Next question comes from Robert Smith with Center for Performance Investing.

Speaker #7: Hi . Good afternoon . Tom . Hi . I just wanted to congratulate you , Tom , on your transforming this company . And positioning it for future growth .

Robert Smith: Hi, good afternoon, Tom.

Thomas McClelland: Hi.

Robert Smith: I just wanted to congratulate you, Tom, on your transforming this company and positioning it for future growth. I'm hopeful that you can continue to execute, and I think you're doing a wonderful job. Kudos to you. Grateful to be aboard. Thanks so much.

Speaker #7: And I I'm hopeful that you can continue to execute . And I think you're doing a wonderful job . And kudos to you .

Speaker #7: Grateful to be aboard . Thanks so much .

Speaker #2: Hey. Appreciate it. And we'll do our best.

Thomas McClelland: I appreciate it, and we'll do our best.

Operator: Okay, our next question. We have a follow-up, actually, from Chris Bukowski, Private Investor. Please proceed.

Speaker #1: Okay . Our next question . We have a follow up actually from Chris Bukowski , private investor . Please proceed

Speaker #5: Hello . Thanks for taking my follow follow up . I , I wanted to ask you if you can have a expound a little bit on the alternative position and navigation .

Chris Bukowski: Hello. Thanks for taking my follow-up. I wanted to ask you if you can expound a little bit on the alternative position and navigation. Now, obviously, there's GPS jamming all over the place. How do you help address that? Would that lead to your devices being actually deployed in kind of the terrestrial, in the boats and cars and so on?

Operator: Hello. Thanks for taking my follow-up. I wanted to ask you if you can expound a little bit on the alternative position and navigation. Now, obviously, there's GPS jamming all over the place. How do you help address that? Would that lead to your devices being actually deployed in kind of the terrestrial, in the boats and cars and so on?

Speaker #5: Now , obviously , there's GPS jumping all over the place . And how do you help address that ? And would that lead to your devices being actually deployed in the in the terrestrial , in the , in the bolts and , and cars and so on

Thomas McClelland: You know, for alternative navigation, there are dozens or more things that people are considering. I think it's maybe worth just a little bit of discussion about this. You know, we all have come to depend on GPS, Global Positioning System, over the last couple of. The one thing that distinguishes GPS is the G part of it, the global. It's available, you know, literally any place on the surface of the earth. When people talk about alternatives to GPS, sometimes they talk about other satellite navigation systems which are potentially also global in reach. In general, people like to talk about things that are not satellite systems. The whole idea is that the satellite Global Positioning System is vulnerable.

Speaker #2: So , so , okay . The , the , you know , for alternative navigation , they're , they're dozens or more things that people are considering .

Speaker #2: I think it's maybe worth just a little bit of discussion about this , you know , the , the , we all have come to depend on the GPS , global Positioning system over the last couple of .

Speaker #2: But the , the one thing that distinguishes GPS is the G part of it . The global . It's available , you know , literally any place on the surface of the earth .

Speaker #2: And when people talk about alternatives to GPS, sometimes they talk about other satellite navigation systems, which are potentially also global in reach.

Speaker #2: But in general, people like to talk about things that are not satellite systems. The whole idea is that the satellite Global Positioning System is vulnerable.

Speaker #2: The satellites can be destroyed or damaged by our enemies , in particular , and also the signals can be jammed . And if you just replace one satellite system with another satellite system , you , you , you have essentially the same problems with that .

Thomas McClelland: The satellites can be destroyed or damaged by our enemies in particular, and also the signals can be jammed. If you just replace one satellite system with another satellite system, you have essentially the same problems that you had with the original system. People talk primarily about non-satellite alternatives. In general, the non-satellite alternatives are not global in reach. That means that if you're not talking about systems, usually when you talk about alternatives, you're talking about employing multiple approaches to navigation. You know, one alternate may work in a particular environment, say an urban environment, and another approach will work over the ocean or in the middle of the desert someplace.

Speaker #2: You had with the original system. So people talk primarily about non-satellite alternatives. And in general, the non-satellite alternatives are not global in reach.

Speaker #2: And that means that if you're if you're not talking about systems , usually when you talk about alternatives , you're talking about employing multiple approaches to navigation .

Speaker #2: So , you know , one alternate may work in a particular environment , say an urban environment and another approach will work over the ocean or in the middle of the desert someplace .

Speaker #2: So what with all of that preliminary being said , you know , there there are a couple of things that that we're involved in .

Thomas McClelland: What with all of that preliminary being said, you know, there are a couple of things that we're involved in and think are gonna become important over the next couple of years and probably over the next decade. One of them that we're working on very actively right now is so-called magnetic navigation. The idea here is that the magnetic field around the surface of the Earth is not exactly constant. It varies by small amounts, and the exact magnetic field and direction is location sensitive. If you have a very accurate map of the magnetic field in a region on the surface of the Earth, then you can...

Speaker #2: And think are going to become important over the next couple of years . And probably over the next decade . So one of them did .

Speaker #2: We're working very actively right now on a so-called magnetic navigation. And the idea here is that the magnetic field around the surface of the Earth is not exactly constant.

Speaker #2: It varies by small amounts , and it and the exact magnetic field and direction is location sensitive . So if you have a very accurate map of the magnetic field In a region on the surface of the earth , then you can and you have a means of measuring the magnetic field , then you can compare your measurements to the magnetic map and locate yourself with really quite precision .

Thomas McClelland: You have a means of measuring the magnetic field, then you can compare your measurements to the magnetic map and locate yourself with really quite precision. Probably not at this point in time with the same precision that we get from GPS, but under the right conditions, it can be pretty close to that. That's something that we're pursuing. We're pursuing the magnetometer end of this, the sensor for measuring the magnetic field. Of course, that by itself isn't going to allow you to navigate. You also have to have the magnetic maps, which by the way, is something that we're looking at helping to improve the existing magnetic maps of the surface of the Earth.

Speaker #2: Probably not at this point in time with the same precision that we get from GPS, but under the right conditions, it can be pretty close to that.

Speaker #2: So that's something that that we're pursuing . We're pursuing the magnetometer end of this . The sensor for measuring the magnetic field . And of course , that by itself isn't isn't going to allow you to navigate .

Speaker #2: You also have to have the magnetic maps , which , by the way , is something that we're looking at helping to improve the magnetic , the existing magnetic maps of the surface of the earth .

Thomas McClelland: Another alternative to GPS that is considered is really a similar kind of concept, but you can imagine using a combination of fixed terminals on the surface of the Earth or and drones. Those fixed terminals and drones effectively act as a mini GPS system. The drones are equivalent to the GPS satellites. In a localized area, that kind of configuration provides a means of very precise localized navigation. You know, these are just a couple of things that Frequency Electronics is actually involved in in terms of alternative navigation. There are, of course, many other things that people talk about, various detecting radio frequency signals from radio stations and using that to locate.

Speaker #2: Another thing that another alternative to GPS , that is considered is , is really a similar kind of concept , but you can imagine using a combination of fixed terminals on the surface of the earth or , and drones and those fixed terminals and drones effectively act as a mini GPS system .

Speaker #2: So the drones are equivalent to the GPS satellites . And in a , a localized area that kind of configuration provides a means of very , very precise , localized navigation .

Speaker #2: So , you know , these are just a couple of things that that frequency electronics is actually involved in in terms of alternative navigation .

Speaker #2: There are, of course, many other things that people talk about—various detecting radio frequency signals from radio stations and using that too. There's inertial navigation and various other things.

Thomas McClelland: There's inertial navigation and various other things. I'll just leave it at that for now.

Speaker #2: So, I'll just leave it at that for now.

Speaker #5: Well , thanks for the thorough answer , and I would . Are you are you getting any revenue right now or I guess production revenue will be a couple of years out ?

Chris Bukowski: Well, thanks for the thorough answer. Are you getting any revenue right now? I guess production revenue will be a couple of years out.

Thomas McClelland: Well, thanks for the thorough answer. Are you getting any revenue right now? I guess production revenue will be a couple of years out.

Speaker #2: Well , I , yeah , we , we are because the , the , the US government is very interested in developing these technologies and their funding development activities .

Thomas McClelland: Well, yeah, we are because the US government is very interested in developing these technologies and they're funding development activities. We're getting revenue from those development funds. We anticipate over the next decade, you know, instead of development revenue, turning that into product-based revenue, excuse me.

Speaker #2: And so , so we're , we're getting revenue from those development funds , but we , we anticipate over the next decade , you know , you know , instead of development revenue turning that into product based development , product based revenue , excuse me .

Speaker #5: All right . Thanks again

Chris Bukowski: All right. Thanks again.

Michael Eisner: All right. Thanks again.

Speaker #1: The next question is from Sam Nelson, private investor. Sam, please proceed.

Operator: The next question is from Sam Nelson, Private Investor. Sam, please proceed.

Speaker #8: Hi , Tom . Thanks for taking my question . I was just trying to get a better idea of what the new contracts , how that award might ultimately flow through the backlog .

Sam Nelson: Hi, Tom. Thanks for taking my question. I was just trying to get a better idea of, with the new contracts, how that award might ultimately flow through the backlog. I think on previous calls, you had described how ultimately the impact might be like 10x the initial value that's realized on the backlog. Just to clarify, I was wondering if we could look at these new contract awards in a similar way where the initial realized amount of the contract that's falling in backlog could we 10x that or what might the impact ultimately be?

Operator: Hi, Tom. Thanks for taking my question. I was just trying to get a better idea of, with the new contracts, how that award might ultimately flow through the backlog. I think on previous calls, you had described how ultimately the impact might be like 10x the initial value that's realized on the backlog. Just to clarify, I was wondering if we could look at these new contract awards in a similar way where the initial realized amount of the contract that's falling in backlog could we 10x that or what might the impact ultimately be?

Speaker #8: I think on previous calls you had described how ultimately the impact might be like ten x , the initial value that's realized on the backlog and just to clarify , I was wondering if we could look at these new contract awards in a similar way where the initial realized amount of the contract that's falling in backlog , could we ten x that or what might the impact ultimately be ?

Speaker #2: Yeah , I , I , I think without making specific kind of statements that ten X approximation , I think is reasonably valid here .

Thomas McClelland: Yeah. I think without making specific kinda statements that the 10x approximation is reasonably valid here. You know, the contribution to backlog depends on the initial funding on these contracts. Yeah. The something along those lines. Again, not providing specific guidance.

Speaker #2: You know , it's in the , the contribution to backlog depends on the initial funding on these contracts . And yeah , so the something along those lines , again , not providing a specific guidance

Speaker #8: Okay . Thank you

Sam Nelson: Okay. Thank you.

Thomas McClelland: Okay. Thank you.

Speaker #1: Okay. We have no further questions in the queue. I'd like to turn the floor back to management for any closing remarks.

Operator: Okay. We have no further questions in the queue. I'd like to turn the floor back to management for any closing remarks.

Speaker #2: Okay. Thank you for taking the time to listen and participate in today's earnings call. We look forward to providing further updates in the coming months.

Thomas McClelland: Okay. Thank you for taking the time to listen and participate in today's earnings call. We look forward to providing further updates in the coming months. Thank you.

Speaker #2: Thank you .

Operator: This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.

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