Frequency Electronics, Inc.

Greetings and welcome to the Frequency Electronics fourth quarter and fiscal year end 2021 earnings release conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. 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, Stanton Sloan, President and CEO.

Thank you. Good afternoon, everyone. Thank you for joining us on the call today. Let me begin by saying I'm very pleased with FDI's improving financial performance in fiscal year 2021. We increased by approximately 31 percent compared to fiscal year 2020, and 53 percent compared to Q4 of fiscal year 2020. Gross margin for the fiscal year increased to 31 percent, and while we worked diligently to keep improving that, the trend is very encouraging. Comparing Q4 fiscal year 21 to Q4 fiscal year 20, revenue increased by $5.4 million. Operating income was positive, and net income was significantly improved at $1.4 million. Again, that is an encouraging trend. Net income for the full fiscal year was also substantially improved, and we generated over $12 million of cash from operations. ending the year with approximately $20 million of cash and marketable securities. We also ended the year debt-free and with approximately a $40 million backlog of funded contract work. SG&A costs increased last year due to legal and other administrative cost increases. Absent these unusual expenses, bottom line performance would have been higher. The fact that we achieved these improvements in a very difficult year attest to the growing strength of the company. The COVID-19 pandemic was a particular challenge last fiscal year due to supply chain issues and delays in customers processing of the anticipated contract awards, particularly in our Zephyr operations. Sadly, we did lose one employee to COVID. Except for that extremely unfortunate event, it was a very good year. Now let me turn the call over to Steve and have him take us through financial details. Steve?

Thank you, Stan, and good afternoon. For the fiscal year ended April 30th, 2021, consolidated revenue was $54.3 million, up 31% compared to $41.5 million 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 $27 million compared to $20.4 million for the same period of the prior fiscal year, and accounted for approximately 50% of consolidated revenues compared to 49% for the prior fiscal year. Revenue on satellite payload contracts are recognized primarily under the percentage of completion method and recorded only in the FEI New York segment. Revenue from non-space U.S. government and DoD customers, which are recorded in both the FEI New York and FEI Zephyr segments, were $27.8 million compared to $16.9 million in the same period of the prior fiscal year and accounted for approximately 46% of consolidated revenue compared to 41% for the prior fiscal year. Other commercial industrial revenues were $2.5 million compared to $4.2 million in the prior fiscal year. Intersegment revenues are eliminated in consolidation. For the fiscal year ended April 30, 2021, gross profit and gross profit percentage increased significantly as compared to the prior fiscal year. The increase in gross profit and gross profit percentage was due to completion of several programs identified in prior periods that incurred higher engineering costs in their development phase and have since been completed or are near completion. For the fiscal year ended April 30, 2021 and 2020, selling and administrative expenses were approximately 24% and 28% respectively of consolidated revenues. The increase in SG&A expense was mainly due to an increase in professional fees relating to litigation, deferred compensation, and insurance expenses. R&D expense for the fiscal year ending April 30, 2021, and 2020 decreased to $4.7 million from $5.1 million, a decrease of $0.4 million, and were 9% and 12% of consolidated revenue. The company's R&D expense decreased year over year as previous R&D efforts have ended and turned into production. However, the company plans to continue to invest in R&D to keep its products at the state of the art. For the fiscal year ended April 30, 2021, the company recorded an operating loss of $1 million compared to $10.9 million in the prior year. The decrease in operating loss in the fiscal year ended April 30, 2021 reflects improvement in revenue, gross profit, and gross profit percentage. Other income consists primarily of investments derived from the company's holdings of marketable securities. For the fiscal year ended April 30, 2021, investment income includes a $105,000 dividend from Morion compared to a $250,000 dividend from Morion in the same period in fiscal 20. Included in other income for the fiscal year ended April 30, 2021, was the collection of a $1 million note relating to the sale of Jelam in April of 2018. This yields pre-tax income of approximately 476,000 compared to a pre-tax loss of approximately 11.8 million in the prior year. For the fiscal year ending April 30, 2021, the company recorded a tax benefit of 204,000 compared to 1.7 million for the prior year. Consolidated net income for the fiscal year ending April 30, 2021 was 680,000 worth $0.07 per diluted share compared to a consolidated net loss of $10.3 million or $1.10 per share in the previous fiscal year. Our fully funded backlog at the end of April 2021 was approximately $40 million, up approximately $5 million from the previous year end to April 30, 2020. The company's balance sheet continues to reflect a strong working capital position of approximately $57 million at April 30, 2021, and a current ratio of approximately 6 to 1. Additionally, the company is debt-free. The company believes that its liquidity is accurate to meet operating and investing needs for the next 12 months and the foreseeable future. I'll turn the call back to Stan, and we look forward to your questions shortly.