Earnings call transcript: Frequency Electronics Q4 2025 revenue soars

Frequency Electronics Inc. reported strong financial results for the fourth quarter of 2025, with revenue reaching $69.8 million, a significant increase from the previous year. The company’s performance was driven by the growth in its satellite programs and innovative product developments. According to InvestingPro data, the stock has delivered an impressive 108.66% return over the past year, despite recent volatility. The stock remained stable in aftermarket trading, closing at $26.95. InvestingPro analysis indicates the stock is currently trading above its Fair Value, with 11 additional exclusive insights available to subscribers.

Key Takeaways

• Frequency Electronics’ revenue increased to $69.8 million in FY 2025, up from $55.3 million in FY 2024.
• Satellite programs contributed 59% to the total revenue, reflecting strong growth in this sector.
• The company maintains a debt-free status with $30 million in working capital.
• A fully funded backlog of $70 million supports future growth prospects.

Company Performance

Frequency Electronics demonstrated robust performance in fiscal year 2025, with a notable increase in revenue from $55.3 million in 2024 to $69.8 million. The growth was primarily driven by the satellite programs, which now account for 59% of the company’s revenue, up from 42% the previous year. This shift highlights the company’s successful focus on space-related projects.

Financial Highlights

• Revenue: $69.8 million, up from $55.3 million in FY 2024
• Net Income: $23.7 million, or $2.46 per share, up from $5.6 million, or $0.59 per share
• Gross Profit Margin: Increased due to enhanced performance in space programs
• R&D Expenses: $6.1 million, up from $3.4 million

Outlook & Guidance

Frequency Electronics anticipates continued growth in the medium term (2-5 years), driven by advancements in quantum sensing and navigation technologies. The company targets gross margins of 40% or higher and plans to launch its TURBO product in the upcoming fiscal year. The addressable market for TURBO is estimated at 1-2 million units, suggesting significant revenue potential.

Executive Commentary

CEO Thomas McClelland emphasized the company’s record-breaking performance, stating, "The fiscal fourth quarter we just reported was the highest revenue quarter for the company in the past twenty-five years." He also highlighted the promising potential of the quantum sensor area, noting, "The moment I think the Quantum Sensor area looks quite promising."

Risks and Challenges

• Contract Timing Variability: Short-term fluctuations could impact financial results.
• Market Competition: Increased competition in space and defense sectors may pressure margins.
• Technological Advancements: The pace of innovation in quantum technologies poses both opportunities and risks.
• Economic Conditions: Broader macroeconomic factors could influence customer spending and project funding.

Frequency Electronics is poised for future growth with its strong financial position and strategic focus on emerging technologies. Trading at a P/E ratio of 10.85x and maintaining a moderate debt level with a debt-to-equity ratio of 0.16, the company demonstrates financial discipline. The company’s emphasis on vertical integration and collaboration with key partners like MIT Lincoln Labs positions it well in the competitive landscape. Discover more detailed metrics and analysis with InvestingPro, including exclusive financial health scores and Fair Value estimates.

Full transcript - Frequency Electronics Inc (FEIM) Q4 2025:

Conference Operator: Greetings, and welcome to the Frequency Electronics Fiscal Year End twenty twenty five Earnings Release Conference Call. At this time, all participants are in a listen only mode. As a reminder, this conference is being recorded. Any statements made by the company during this conference call regarding the future constitute forward looking statements pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 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.

Thomas McClelland, President and Chief Executive Officer, Frequency Electronics: Good afternoon, everyone. The fiscal fourth quarter we just reported was the highest revenue quarter for the company in the past twenty five years. And I’d like to provide some additional context on that. We’ve demonstrated strong growth over the past several years, and we believe the growth potential for our company is expanding even further for reasons I’ll get into shortly. While we do not provide guidance given the lumpiness of contract awards, I would be remiss if I did not mention that this recently ended quarter benefited from strong execution that allowed the company to produce revenue on certain programs in fiscal year twenty five that we originally expected to produce over a more extended period of time in fiscal year ’twenty five, ’twenty six and beyond.

In other words, while the trend here is very much an upward one, I do not think it’s prudent to expect every quarter in the near term to look exactly like this from a top line perspective. Though in the medium term, it is directionally where we’re headed. It’s important to keep in mind that the allocations for space and defense related programs from the recently passed legislation in Congress are very positive for the direction the company is going. But as the bill just passed last week, the additional revenue from those contract awards will flow in over the coming quarters and years as our customers now submit bids for increased available funds. Critically, as we position the company to take advantage of all the opportunities we’ve discussed before and others I’ll discuss in a moment, we’re also expanding our customer base beyond the traditional prime contractors.

We maintain excellent relationships with the traditional primes and are working on numerous projects with them, and anticipate meaningful growth with them going forward. But we’ve also already been actively submitting bids alongside next generation defense companies, which are increasingly getting attention in this administration. We believe this positions FEI extremely well to benefit from industry trends we see playing out over the next five to ten plus years. Some of the opportunities that will further accelerate our growth are Golden Dome, we’re already involved in several key missile programs and anticipate additional opportunities both for terrestrial and space applications. APNT, which is alternate position navigation and timing, The vulnerability of GPS is well documented at this point, as stories of jamming and spoofing, especially in the Mideast and Eastern Europe corroborate.

FEI’s quantum magnetometer development, representing an unjammable approach to navigation, is part of a particularly relevant solution. Our small but very high performance rubidium atomic clock, which we’ve dubbed TURBO for timing units rubidium oscillator, is a key ingredient in other proposed alternate navigation approaches. Another important item is GPS enhancements, such as resilient GPS, augmenting GPS satellites with a large number of lower cost satellites. Quantum sensing. FDI is well positioned to succeed in the growing quantum sensor market based on our expertise in atomic clocks.

We’re currently developing solid state diamond based quantum magnetic sensor devices in collaboration with MIT Lincoln Labs. Similarly, we’re collaborating with scientists at NIST to develop Rydberg sensors, allowing for extremely compact microwave antennas. Last year, FEI sponsored a Quantum Summit in New York City to bring together scientists to discuss progress in quantum sensors. I’d like to announce that FEI will host a Quantum Summit again this year in October, in particular on October. All in all, I’m happy with our performance, vigilant regarding the changes in Washington, and very enthusiastic about our future.

Steve?

Steve, Chief Financial Officer, Frequency Electronics: Thank you, Tom, and good afternoon. For the fiscal year ended 04/30/2025, consolidated revenue was $69,800,000 compared to $55,300,000 for the same period of the prior fiscal year. The components of revenue are as follows: Revenue from commercial and U. S. Government satellite programs was approximately $40,900,000 or 59% compared to $23,200,000 or 42% in the same period of the prior fiscal year.

Revenue on satellite payload contracts are recognized primarily under the percentage of completion method and are recorded only in the FEI New York segment. Revenues from non space U. S. Government and DoD customers, which are recorded in both the FEI New York and FEI Zaiffer segments, $26,500,000 compared to $29,000,000 in the same period of the prior fiscal year and accounted for approximately 38% of consolidated revenue compared to 52% for the prior fiscal year. Other commercial and industrial revenue was $2,400,000 and $3,100,000 for the fiscal year ended April 3025 and 2024, respectively.

The company is encouraged by significant revenue growth compared to the prior fiscal year. The majority of the increase in revenue for fiscal year 2025 as compared to fiscal year 2024 was the result of increase in sales in U. S. Government DoD satellite market. For the fiscal year ending 04/30/2025, the gross profit and gross profit percentage increased as a result of several factors.

The increase in gross profit dollars was directly related to the significant increase in revenue over the prior fiscal year period as well as the increase in gross margin. The majority of the increase in the gross profit percentage as compared to the prior fiscal year was in the FEI New York segment and was attributable to the company’s performance on several traditional space programs at higher margin and ahead of schedule. In addition, the company has new programs that are progressing well and the company anticipates they will generate additional revenue and profits. In the fiscal year ending 04/30/2524, selling and administrative expenses were 18% of consolidated revenue in both periods, while total SG expense increased in fiscal year twenty twenty five as compared to the prior fiscal year, SG and A expense remained constant as a percentage of revenue in fiscal year twenty twenty five. The approximately 2,100,000 increase is made up of mainly payroll related items such as four zero one expense, stock option expense, bonus accrual.

In addition to these expenses, trade show and related costs also increased during the fiscal year 2025. R and D expense for the fiscal year ending 04/30/2025 increased to $6,100,000 from $3,400,000 an increase of $2,700,000 and were approximately 96% respectively of consolidated revenue. The company funded R and D amounts was higher in fiscal year twenty twenty five as compared to previous fiscal year, partially because of the previous fiscal year R and D expenditures were lower than planned and some of the expense were subsequently captured in fiscal year twenty twenty five. The increase in R and D expense also reflects the company’s commitment to maintain its technical excellence. The company expects future R and D investment to be in line with or even potentially above historical spending.

For the fiscal year ending 04/30/2025, the company recorded operating income of $11,700,000 compared to an operating income of $5,000,000 in the prior fiscal year. The increase is mainly attributable to the company’s significant increase in revenue and gross margin during fiscal year twenty twenty five as noted above from traditional space programs that have been executed ahead of schedule, well within budget, and technologically performed well. The positive effect of cost cutting measures instituted by management have also contributed to the increase. The change in other income expense from prior fiscal year was relatively minimal. All three categories presented were slightly lower in fiscal year twenty twenty five compared to prior fiscal year.

This yields pretax income of approximately $12,100,000 compared to $5,500,000 for the prior fiscal year. For the fiscal year ending 04/30/2025, the valuation allowance decreased approximately $13,900,000 from the prior fiscal year, primarily due releasing the majority of the valuation allowance recorded against deferred tax asset. This change in estimate occurred in the third quarter of fiscal twenty twenty five. Consolidated net income for the year ending 04/30/2025 was $23,700,000 or $2.46 per share compared to $5,600,000 or $0.59 per share in the previous fiscal year. Our fully funded backlog at the April ’25 was approximately $70,000,000 compared to $78,000,000 for the previous fiscal year April 3024.

The company’s balance sheet continues to reflect strong working capital position of approximately $30,000,000 at 04/30/2025 and the current ratio of approximately 2.3:one. Additionally, the company is debt free. Cash went down by approximately $13,600,000 since prior fiscal year end. Of this decrease, the dividend paid in Q2 of fiscal twenty twenty five accounted for approximately $9,600,000 of it. The additional $4,000,000 decrease was related to timing of billing and revenue.

Contract liabilities went down $8,200,000 since year end. Contract liabilities are generated as part of six zero six accounting when the billings are in excess of revenue taken on specific programs. We expect that cash will fluctuate quarter to quarter. However, we expect its trend to be higher over time. The company believes that its liquidity is adequate to meet its operating and investing needs for the next twelve months and the foreseeable future.

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

Thomas McClelland, President and Chief Executive Officer, Frequency Electronics: Thanks, Steve. We’re now ready for questions.

Conference Operator: Certainly. At this time, we’ll be conducting a question and answer session. And the first question today is coming from Brett Rice from Janney Montgomery Scott. Brett, your line is live.

Brett Rice, Analyst, Janney Montgomery Scott: Hi, Tom. Hi, Steve. Can you guys hear me?

Thomas McClelland, President and Chief Executive Officer, Frequency Electronics: Yes. Yes.

Brett Rice, Analyst, Janney Montgomery Scott: Great. Great. You know, nice quarter. You know, great end of the year. Tom, you rattled off, a number of growth potential areas the Golden Dome, the APMT, resilient GPS.

Can you walk me through the processes to how you will allocate corporate time and resources to these various growth opportunities?

Thomas McClelland, President and Chief Executive Officer, Frequency Electronics: Well, I’m not quite sure how to answer that question. We’re actively pursuing proposals at this time are in all of those areas. And I think we have ongoing discussions with all our Prime customers about these topics as we go and what our capabilities are in this arena.

Brett Rice, Analyst, Janney Montgomery Scott: Tom, I apologize. I didn’t ask the question in the right way. Of the five or six areas you mentioned, which one do you think has the greatest potential that might lead to a greater allocation of corporate resources and attention?

Thomas McClelland, President and Chief Executive Officer, Frequency Electronics: Okay, I see. Well, I, you know, that’s a little hard to say also. I think the, you know, the moment I think the Quantum Sensor area looks quite promising. You know, we know GPS is vulnerable and the magnetometer activity that we’re working on certainly looks very promising and there’s a huge addressable market there in terms of providing alternates to GPS navigation, especially I think in commercial aircraft. So, that’s certainly a big one, but I think Golden Dome looks like a big thing also, but it’s a little bit ambiguous as to how the funding is gonna happen on that one.

So we’ll just have to see.

Brett Rice, Analyst, Janney Montgomery Scott: All right. Last one from me. Because of these tremendous growth opportunities, R and D spend is going to move up. We’ve got a strong balance sheet but do we have enough cash to fund this greater amount of R and T that’s needed to take advantage of these opportunities?

Thomas McClelland, President and Chief Executive Officer, Frequency Electronics: At this point in time, we are confident that we have adequate cash in order to fund that. We As I stated in the press release, it’s really targeted to use of internal funds. We, you know, I think we’re being somewhat cautious and careful about just what we spend our resources on. And I think we’re in a pretty good position to do that and to continue doing that going forward. But we’ll keep an eye on that and have to evaluate that in the future.

There are a lot of external funding things that we see and we’re working on obtaining. And I think that supplements our use of internal funds significantly.

Brett Rice, Analyst, Janney Montgomery Scott: Great. Thank you for taking my questions and enjoy the rest of the summer.

Thomas McClelland, President and Chief Executive Officer, Frequency Electronics: Okay, thank you. You.

Conference Operator: The next question is coming from Chris Wojciechowski, who is a Private Investor. Chris, your line is live.

Chris Wojciechowski, Private Investor: Hello. Congratulations on great results. Mentioned the mentioned in your press release that there might be some short term uncertainty. Can you elaborate on that?

Thomas McClelland, President and Chief Executive Officer, Frequency Electronics: Well, it I’m not sure uncertainty is the right way to refer to it. I think that there will be some variability in, you know, the timing of contracts, I think is really what we’re talking about. And we’ve already seen this, you know, the new administration is intent on making their mark on things. So, the timing of a lot of programs that are already in the works are changing and you know, we just, we have to deal with that obviously. So, you know, I think it’s very clear that overall the administration is intent on spending even more money on the things that are in our area of expertise.

But they’re going to not necessarily spend them in the same way that was imagined prior to this administration. So this is the thing, we just have to roll with the punches in terms of how the timing of these things plays out.

Chris Wojciechowski, Private Investor: Okay. And you’re absolutely right. You did not use the term uncertainty, you used the term variability, which is what I should have said. Okay. So does that include the variability and timing, does that include stuff that’s already in your $70,000,000 backlog?

Thomas McClelland, President and Chief Executive Officer, Frequency Electronics: I’m not quite sure I understand question.

Chris Wojciechowski, Private Investor: So the variability issues you mentioned, would those include projects that are already in your $70,000,000 backlog? Or is it

Thomas McClelland, President and Chief Executive Officer, Frequency Electronics: No, no, not really. The $70,000,000 don’t anticipate any variability in the backlog. The only thing I would say is that the contracts can be terminated. We don’t anticipate that with anything in our backlog at this point in time, but that certainly has happened. So I guess in that sense, there’s the potential for variability.

But the backlog is pretty solid. I think it’s with future work that we have to look at the variability and the timing of when things occur.

Chris Wojciechowski, Private Investor: All right. So you think there’ll be with future contracts, there’ll be some variability in the short term, but in the medium term, you’ll see certainty kind of relative certainty for higher growth. Now what could you just tell me roughly what do you mean by short term, mid term?

Thomas McClelland, President and Chief Executive Officer, Frequency Electronics: I think short term, we’re really talking about the next year or so, and medium term I think we’re looking at two to five years, long term beyond the five year point.

Chris Wojciechowski, Private Investor: Alright. And I had a question about Quantum. Right now it seems that we’re not yet at the point where commercial quantum systems are coming out, but a lot of money is going to research. Would you say that at this research stage because you know, you probably your your timers are probably needed for the research stage as well. Would you say this research stage is enough to make, you know, kind of a, like, a notable revenue?

Thomas McClelland, President and Chief Executive Officer, Frequency Electronics: Yes.

Chris Wojciechowski, Private Investor: Yes.

Thomas McClelland, President and Chief Executive Officer, Frequency Electronics: We, there’s I think significant revenue from the research stage. It might better be characterized as development as opposed to research, because I think the science is well understood in these areas. It’s really developing products based on that science that we’re working on. And to the extent that this development is externally funded, it certainly generates revenue and indeed profit. So, yeah.

I hope that answers your Yeah.

Chris Wojciechowski, Private Investor: Oh, yeah. Definitely does. And would you expect to would you do have I mean, you expect to get externally funded revenue or would your clients be kind of asking you to do some development on your own income statement as well?

Thomas McClelland, President and Chief Executive Officer, Frequency Electronics: Well, that’s a really good question. I think in some cases,

Michael Eisner, Private Investor: the

Thomas McClelland, President and Chief Executive Officer, Frequency Electronics: funding agencies aren’t, don’t have enough money to support all of the work that needs to be done, and so we supplement that with internal funding. But I think that’s usually a pretty small amount of the total funding that is to be had. So, it’s relatively small thing and that I think we account for in our budget for internal R and D funding on an annual basis. That is going up a little bit, but just a little bit in order to support these new technologies and things.

Chris Wojciechowski, Private Investor: Okay. It’s good to hear it’s a small amount. Well, this is all for me. Good luck again and congratulations again.

Thomas McClelland, President and Chief Executive Officer, Frequency Electronics: Okay. Thank you.

Conference Operator: Thank you. The next question is coming from Michael Eisner. Michael is a private investor.

Thomas McClelland, President and Chief Executive Officer, Frequency Electronics: Hi, how are you? Hi, Michael.

Michael Eisner, Private Investor: You start working on wireless and linking labs yet?

Thomas McClelland, President and Chief Executive Officer, Frequency Electronics: Yes. Yes.

Michael Eisner, Private Investor: I see. Yes. Who’s paying for that r and d for that?

Thomas McClelland, President and Chief Executive Officer, Frequency Electronics: That’s a so we’re funded by Leidos at this point in time.

Michael Eisner, Private Investor: That means they’re paying for it?

Thomas McClelland, President and Chief Executive Officer, Frequency Electronics: I’m not I’m not sure I understand the the question. You have to do R and with Go ahead.

Michael Eisner, Private Investor: I was gonna say you have you have to do r and d on that, or it’s already proven.

Thomas McClelland, President and Chief Executive Officer, Frequency Electronics: Well, that the development, you know, this is development activity, and that is primarily funded by Leidos. Just like the last question, there’s a small amount of internal funding that supplements that. But that’s primarily

Michael Eisner, Private Investor: We get to keep the technology also. Right? Yes. And I is g GPS three f back in play? I thought it was over with a while ago.

I heard something about that.

Thomas McClelland, President and Chief Executive Officer, Frequency Electronics: No. No. That’s that’s not true. GPS three f is indeed very active. And in fact, we’re currently delivering products for the GPS three f program.

Michael Eisner, Private Investor: Which would launch it only up to now?

Thomas McClelland, President and Chief Executive Officer, Frequency Electronics: Well, I don’t think there are there are there’s GPS three and there’s GPS three f. The f, I think, is for follow on. So, current launches, the last launch that occurred was a GPS three launch. And I believe it was the eighth GPS three satellite, if I’m not mistaken.

Michael Eisner, Private Investor: The last one. See, I remember that.

Thomas McClelland, President and Chief Executive Officer, Frequency Electronics: Yeah. So, there there are still additional GPS III satellites to launch. I think nine and ten in particular, and GPS IIIF starts with number 11.

Chris Wojciechowski, Private Investor: Mhmm.

Thomas McClelland, President and Chief Executive Officer, Frequency Electronics: So no no GPS three f satellites have launched yet.

Michael Eisner, Private Investor: But they will eventually. That $12,000,000 contract that you just announced, was that a continuation from the previous contract?

Thomas McClelland, President and Chief Executive Officer, Frequency Electronics: Yes. That was

Michael Eisner, Private Investor: The one from, like, February?

Thomas McClelland, President and Chief Executive Officer, Frequency Electronics: Don’t remember exactly. Yeah. No. Oh oh, I no. It was not a continuation of of those contracts.

It was separate.

Michael Eisner, Private Investor: Alright. And let me see. You mentioned that. How how far are we into the magnetic navigation So we don’t get spoofed and everything jammed up.

Thomas McClelland, President and Chief Executive Officer, Frequency Electronics: Well, we’re actively pursuing it. I think our development activity is basically a two year program and we should have prototype demonstrations at the end of that period.

Michael Eisner, Private Investor: After two years. Alright. Are we the only one that can do vertically integrate only company that’s vertically integrated to produce all this stuff from beginning to end?

Thomas McClelland, President and Chief Executive Officer, Frequency Electronics: Well, I don’t know that I can say we’re the only company that’s vertically integrated, but I think it is indeed true that we are vertically integrated. And as I’ve said before, I think we feel strongly that that’s key to our continued success because it allows us to control all, you know, we’re working in technology areas that are fairly esoteric and if we rely on other suppliers to provide key ingredients, and we lose control of those key ingredients, and it’s hard to get the kind of performance that’s required in these areas. So, we do feel it’s key. I think it is a differentiator. There are not so many companies out there that are vertically integrated in the way that we are, but I’d hesitate to say that we have a monopoly on that.

Michael Eisner, Private Investor: Is microchip, can they do it? Really not sure. Microchip.

Thomas McClelland, President and Chief Executive Officer, Frequency Electronics: Oh, Microchip. I don’t think so. No.

Michael Eisner, Private Investor: Probably not. That’s good for us. Alright. Good job. That’s it for me.

Thomas McClelland, President and Chief Executive Officer, Frequency Electronics: Okay. Thanks, Michael.

Michael Eisner, Private Investor: Thank you.

Conference Operator: You. The next question is coming from George Marima from Parekh Ventures. George, your line is live.

George Marima, Analyst, Parekh Ventures: Hey, Tom. Thanks for taking my questions. The first one was on gross margin this quarter was a little bit down. Can you sort of outline the reasons why?

Thomas McClelland, President and Chief Executive Officer, Frequency Electronics: I don’t think there’s anything super significant. I think, you know, there’s just a general lumpiness from quarter to quarter on how things play out. I think we’re pretty comfortable with where the gross margin is overall.

George Marima, Analyst, Parekh Ventures: As you look out into next into this current coming fiscal year, for 2025, you’re on a 43% gross margin for the year and 37% in this last quarter. Would you be sort of targeting the high 30s or more low 40s for this coming year?

Thomas McClelland, President and Chief Executive Officer, Frequency Electronics: I think we’re targeting 40 or more and where we end up, we’ll see. I think that’s where we’re trying to maintain a very disciplined approach in terms of our margins. And so, that’s where we’re aiming and, but, you know, we do have to see the timing of things, etcetera, always comes into play.

George Marima, Analyst, Parekh Ventures: Okay. And then on quantum sensing, could you sort of maybe characterize or size up a little bit for for this coming fiscal year? What kind of development, like, revenue opportunity is there? Is it material, like 10% of your business or less or more than that? And then secondly, when would you hope to have product revenue out of this area?

How far off?

Thomas McClelland, President and Chief Executive Officer, Frequency Electronics: So I think it’s, over the next fiscal year, I would anticipate that it’s less than 1% of our overall revenue, number one. And number two, I anticipate products sort of five years out from now. I think that’s a reasonable expectation.

George Marima, Analyst, Parekh Ventures: Okay. And then are any of the other newer products coming out before then? These other things you mentioned?

Thomas McClelland, President and Chief Executive Officer, Frequency Electronics: Definitely. We we we We have products which are going to be available within the next fiscal year. The compact rubidium standard is gonna be available. And yeah.

George Marima, Analyst, Parekh Ventures: Is that the turbo you’re talking about? Yes. That’ll be out in this fiscal year, you hope, this product?

Thomas McClelland, President and Chief Executive Officer, Frequency Electronics: It will. Yes.

George Marima, Analyst, Parekh Ventures: What kind of addressable market is that? If you can kind of size that up or characterize it.

Thomas McClelland, President and Chief Executive Officer, Frequency Electronics: Well, it’s a growing addressable market. Think probably one to 2,000,000 within the next year or so and growing after that.

George Marima, Analyst, Parekh Ventures: Okay, thank you Tom.

Conference Operator: Thank you. And the next question is coming from Brent Garrickson. Brent is a private investor. Brent, your line is live.

Michael Eisner, Private Investor: Hi, Tom. Thank you for your leadership, and thanks to all the employees for their hard work. Much appreciated. My question is, what do you target for SG and A and R and D for 2026 going forward as a percentage of revenue?

Thomas McClelland, President and Chief Executive Officer, Frequency Electronics: I’ll let Steve respond to that question.

Steve, Chief Financial Officer, Frequency Electronics: I believe they’ll be very similar to where they are this year. Approximately SG and A, we ran 18% the last two years and R and D somewhere in the 6% to 8% or 9% range.

Michael Eisner, Private Investor: And do you target taxes? I mean, know you didn’t have any more carry forwards, but you had a few more NOLs left. Do you still see taxes in the 1.5 to 2% range?

Steve, Chief Financial Officer, Frequency Electronics: Again, depending I think for next year, we’ll use more NOLs. We still have a bunch left. But with the new tax law change and stuff and California is where right now we pay our taxes because they suspended the use of NOLs, I still believe if we have a good year, it’s still the majority of it will be covered. Some may not based on where it comes and so forth. But it will not be a normal 21% tax year next year either.

Michael Eisner, Private Investor: You still feel it’s in the single digits? Yes. Last quarter, spoke about SDA bids. Were any of those successful? And what kind of investment expense do you see coming from SDA?

Thomas McClelland, President and Chief Executive Officer, Frequency Electronics: So, so at this point in time, that’s a little bit up in the air. Actually, the the new administration is rethinking the SDA process. We are still looking at tracking layer activity from SDA, but the transport or data layer is currently being reimagined and how that’s going to play out is not clear at this point in time.

Michael Eisner, Private Investor: There’s no indication of even maybe a time frame? I know you earlier you mentioned short, medium term to be, you know, one to five years or one to two years. Do you personally think that it’s somewhere in the, within the next, you know, nine to twelve months?

Thomas McClelland, President and Chief Executive Officer, Frequency Electronics: Definitely. I I think yes. Yes. I think something is going to pop within that time frame. Yeah.

Michael Eisner, Private Investor: Okay. Alright. I’ll I’ll back out. Thank you for your time.

George Marima, Analyst, Parekh Ventures: Okay. Thanks.

Conference Operator: Thank you. And there were no other questions from the lines at this time. I will now hand the call back to Thomas McLellan for closing remarks.

Thomas McClelland, President and Chief Executive Officer, Frequency Electronics: Okay. I think I’d like to thank everybody for participating in this call and have a nice summer. Thank you.

Conference Operator: Thank you. This does conclude today’s conference. You may disconnect your lines at this time. Thank you for your participation.

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