Frequency Electronics Inc. (NASDAQ:FEIM) Q3 2019 Earnings Conference Call - Final Transcript

Mar 14, 2019 • 04:30 pm ET

Previous

Frequency Electronics Inc. (NASDAQ:FEIM) Q3 2019 Earnings Conference Call - Final Transcript

Share
Close

Loading Event

Loading Transcript

Presentation
Operator
Operator

Good day, ladies and gentlemen, and welcome to the Frequency Electronics Third Quarter Fiscal Year 2019 Earnings Release Conference Call. All lines have been placed in a listen-only mode and the floor will be open for your questions and comments following the presentation. (Operator Instructions)

At this time, it is my pleasure to turn the floor over to Martin Bloch. Sir, the floor is yours.

Executive
Martin Bloch

Thank you, Christie. Good afternoon, everybody. First of all, I would like to say that the NASDAQ wire service is having some IT problems, and they have not been successful in releasing our press release, but it's available on our website on this point. It just shows that the need for more precise (technical difficulty) necessity.

With no further ado, I would like to turn over this call to Steve Bernstein, who will go through the details and then turn it back to me. Steve?

Executive
Steven Bernstein

Thank you, Martin, and good afternoon. For the nine months ended January 31st, 2019, consolidated revenue was $36.3 million, up from $31.9 million for the first nine months of the last fiscal year. The components of revenue are as follows: for the nine months ended January 31st, 2019, revenues from commercial and U.S. Government satellite programs increased to $17.2 million compared to $11.4 million for the same period of fiscal 2018 and accounted for approximately 48% of consolidated revenues compared to approximately 36% in fiscal 2018; revenues on these contracts are recognized primarily under the percentage of completion method; revenue from the satellite payload market are recorded only in the FEI-New York segment; revenues from non-space U.S. government DOD customers, which are recorded in both the FEI-New York and FEI-Zyfer segments were $17.1 million compared to $13.9 million in the same period of fiscal 2018 and accounted for approximately 47% of consolidated revenues compared to approximately 44% in fiscal 2018.

Other commercial and industrial revenues declined to $2 million compared to $6.7 million in the prior fiscal year and accounted for approximately 5% of consolidated revenues compared to 20% in the previous year. Intersegment revenues are eliminated in consolidation.

For the nine month period ended January 31st, 2019, the gross margin rate increased to 34.1% from 12.1% for the same period in fiscal 2018. The increase in gross margin and gross margin rate over the same period of fiscal 2018, primarily resulted from higher revenues, decreased repair cost and reduced manufacturing overhead cost. The prior year's gross margin and gross margin rate reflected significant inventory write-downs.

For the nine months ending January 31st, 2019 and 2018, selling and administrative expenses were approximately 22% and 24% respectively of consolidated revenues. For the three month period ended January 31st, 2019 and 2018, SG&A expenses were approximately 20% and 26% respectively of consolidated revenues. The dollar revenue of SG&A expenses were comparable for both the nine and three months ended January 31st, 2019 and '18, however, the percentage decreased due to the increase in revenue during the fiscal 2019 year.

Research and development expenditures