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DATE

Thursday, Sept. 10, 2026 at 4:30 p.m. ET

CALL PARTICIPANTS

• President and Chief Executive Officer - Thomas McClelland
• Chief Financial Officer - Steven L. Bernstein

TAKEAWAYS

• Revenue -- $23.5 million, representing a record for the company and an increase of 70% year over year.
• Revenue Growth -- 52% sequentially, reflecting the start of a return to growth in fiscal 2027 as previously guided.
• Funded Backlog -- $129 million, growing 82% year over year and 16% sequentially to a new company high.
• Operating Income -- $5.2 million, increasing significantly from $364,000 in the prior year period due to higher production volume and operational efficiencies.
• Net Income -- $4.2 million, or $0.41 per share, compared to $634,000, or $0.07 per share, in the same period last year.
• Gross Margin -- 45.8%, an improvement from the prior year driven by higher production levels and improved overhead allocation.
• Operating Margin -- 22%, demonstrating progress toward management's minimum three-year target of 30% by fiscal 2029.
• Satellite Segment Revenue -- $11.8 million, accounting for 50% of consolidated revenue and increasing from $6.5 million in the prior year.
• Nonspace Defense Revenue -- $11.1 million, representing 47% of consolidated revenue and increasing from $6.9 million year over year.
• Commercial and Industrial Revenue -- $605,000, increasing from $439,000 in the same quarter of the prior year.
• SG&A Expenses -- 18% of revenue, down from 26% last year despite a $500,000 increase in actual expenditures primarily for compensation.
• R&D Expenditures -- $1.4 million, representing investments to maintain state-of-the-art products in time and frequency technology.
• Secondary Stock Offering -- $73 million raised in July, including the exercise of the green shoe option, bringing in new long-term institutional investors.
• Cash and Equivalents -- $61.4 million at the end of the quarter, reflecting the impact of the capital raise and positive operational cash flow.
• Operating Cash Flow -- $3.0 million provided by operating activities, compared to $1.2 million used in the same period last year.
• Working Capital -- $90 million, supported by the stock offering and a debt-free balance sheet.
• Current Ratio -- 5.3 to 1, providing what management described as adequate liquidity for the next 12 months and the foreseeable future.
• Book-to-Bill Ratio -- 1.76 to 1 for the quarter, indicating that new orders are significantly outpacing current revenue recognition.
• Backlog Duration -- 60% to 65% of the $129 million funded backlog is expected to be realized within the next 12 months.
• Long-term Revenue Target -- $150 million minimum annual revenue by fiscal 2029, a target management now expresses increased confidence in meeting or exceeding.
• Green Shoe Proceeds -- $14 million, which was received after the quarter ended following the exercise of the overallotment option.
• Investment Income -- $100,000, primarily derived from interest income and unrealized gains in the company's deferred compensation trust.
• Target Gross Margin -- 50%, which the company aims to reach by fiscal 2029 through higher production rate efficiencies.
• Pretax Income -- $5.2 million, compared to $557,000 in the first quarter of fiscal 2026.
• Contract Assets -- $19.6 million, increasing from $17.3 million at the end of the previous fiscal year.

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RISKS

• McClelland stated, "In some cases, we are not signing up to some of the more ridiculously optimistic schedules that some of our customers are asking for because it is... we do not feel that it is possible," highlighting management challenges in balancing growth with production limits.
• McClelland noted that the company is "walking a tightrope" regarding the ramp-up of production to meet increased demand while ensuring on-time delivery.

SUMMARY

Frequency Electronics, Inc. (FEIM +42.40%) reported record quarterly revenue and backlog, attributing the performance to increased demand across traditional space and defense markets and expansion into sectors such as quantum sensing and alternative position navigation and timing. Management stated that the company is on track to meet its fiscal 2029 revenue target, supported by increased production capacity and a significant capital infusion from a recent secondary offering. The company reported a debt-free balance sheet and generated positive operating cash flow during the quarter while maintaining its long-term focus on vertically integrated manufacturing.

• McClelland reported that the company's digital rubidium atomic frequency standard is operational on the final GPS 3 satellite and is selected for the upcoming GPS 3F follow-on launches.
• The company is bidding on new missile programs to potentially displace incumbents, focusing on components that go directly onto missiles in addition to established work for Patriot and THAAD batteries.
• Management is exploring naval applications for mercury ion atomic clocks, specifically for strategic submarines that require highly accurate timing while submerged and unable to receive GPS updates.
• McClelland stated, "In this case, we are working on a production contract for over 1 thousand systems," referring to a military secured communication program where the customer requested a 50% increase in monthly production.
• The company recently delivered a quantum sensor and associated electronics to the Army Research Laboratory for testing in magnetic navigation for GPS-denied environments.
• Management indicated that the $73 million raised in the secondary offering will facilitate customer-driven expansion and may lead to reaching the $150 million revenue target sooner than fiscal 2029.
• The company is evaluating automation for its quartz crystal manufacturing facility to increase throughput as it transitions from boutique production to higher volume requirements.

INDUSTRY GLOSSARY

• DRAFS: Digital Rubidium Atomic Frequency Standard, a high-precision atomic clock developed for satellite navigation systems.
• PNT: Position, Navigation, and Timing, a critical utility for military and commercial applications often provided by GPS.
• Alt-PNT: Alternative Position, Navigation, and Timing, technologies designed to provide navigation data when GPS signals are unavailable or denied.
• PLEO: Proliferated Low Earth Orbit, a satellite architecture involving large numbers of small satellites to increase system resilience.
• THAAD: Terminal High Altitude Area Defense, a U.S. Army anti-ballistic missile defense system.
• C4ISR: Command, Control, Communication, Computer, Intelligence, Surveillance and Reconnaissance systems.
• SIGINT/COMINT: Signals Intelligence and Communications Intelligence, involving the interception and analysis of electronic signals and communications.
• Thermal Vacuum: A testing environment that simulates the extreme temperature and vacuum conditions of outer space.

Full Conference Call Transcript

Operator: And welcome to the Frequency Electronics First Quarter Fiscal 27 Earnings Release Conference Call. At this time, 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 2000. 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 different 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: Thank you, Paul. Good afternoon, and thank you for joining Frequency Electronics First quarter fiscal year 27 earnings call. With me today is our Chief Financial Officer, Steven L. Bernstein. I am very pleased to report first quarter revenue of $23.5 million an all time record for FEI, up 70% year over year and up 52% sequentially. As we told you on our fourth quarter 2026 earnings call in July, we expected to return to growth starting in the current fiscal 2027. And this first quarter is a strong proof point of that.

Further, this performance gives us increasing confidence in our ability to meet or exceed the $150 million or more in annual revenue that we guided to by fiscal 29 which ends 04/30/2029. I will have more to say about that target shortly. Steven will provide additional financial comments later in the call but I would like to highlight a few items. On our July call, we established 3-year minimum margin targets of 50% for gross margin and 30% for operating margin again, by fiscal 29. In the fiscal first quarter we are reporting today, we generated gross margin of 45.8% and operating margin of 22%. Substantial improvements and solid progress on our path towards our minimum targets.

As I have mentioned numerous times over the past few years, we did not expect our progress to be perfectly linear on a quarterly basis, whether in revenue or profitability. But the trends we see in revenue backlog and pipeline as well as the internal improvements we have made that we discussed last quarter and the operating leverage we should generate with increasing revenue. Position us well to meet or exceed those minimum targets. As for backlog, it grew to a new record of $129 million up approximately 82% year over year and 16% sequentially. This continued increase in backlog gives further support to our ability to add meaningful growth to FEI in the years to come.

As we have discussed before, we expect continued growth in our core space and defense markets. While also seeing additional growth coming from new markets such as space, defense, proliferated satellites, quantum sensing, space exploration, and alternative position navigation and timing. Today, I would like to provide some additional color on several of these markets. All of which build upon our core timing and frequency generation capabilities. So I am sure you are all familiar with GPS satellites. Part of the traditional space business we have sold into. On April 20 first of this year, the final GPS 3 satellite was launched, which included FEI's newly developed digital rubidium atomic frequency standard or DRAFS atomic clock.

This enhanced DRAFS clock is currently operational on the GPS satellite, is on order for use on other global navigation satellite systems and is targeted at future GPS satellites including the upcoming GPS 3F or follow-on launches. This advanced atomic clock is an example of the company's important capabilities not just to provide the precision time and frequency devices, that we have been delivering for the last 65 years, but also our capability to deliver state of the art products with capabilities fueling future technological innovations. You have no doubt seen the news flow over the past several months about the critical need for missile replenishment. With government plans to significantly expand production by 30%.

And we have spoken with you before about our content that goes into missile batteries for programs such as Patriot and THAAD. We expect to generate revenue from those programs in 2027 and for years beyond that coming from existing orders. More orders to come and additional orders to meet the needs of allied countries. In addition to this missile battery related work, we are also now bidding on additional missile programs. With components that go directly onto the missiles themselves. In some cases, we are being asked to bid on these on missile programs in order to potentially displace incumbents.

There is a secured communication program for the military that we are producing that is a good example of both the higher rate production programs we have spoken about and the push by our customers to deliver more sooner. In this case, we are working on a production contract for over 1 thousand systems. In addition, the customer on this program is now asking us to increase monthly production by more than 50% while also promising additional follow on orders. In other words, we are expanding the total size of an already high rate production program.

For another example of our ability to use internally developed technology, for expanded use cases, we are currently exploring potential uses of our mercury ion atomic clock for naval applications. For example, strategic submarines are a potential use case for advanced atomic clocks because they need to be underwater for months at a time and their timing cannot be updated from GPS satellites. while they are underwater. So they will need a different technology for certain use cases that require very highly accurate timing. And our advanced mercury ion clocks may be the solution.

We believe this is also a good example of our ability to participate in long term programs for higher price systems and to do so with external funding. In quantum sensing, we are making rapid progress in the development of advanced sensors for magnetic navigation in GPS denied environments. We just recently delivered a sensor and associated electronics to the army research laboratory for additional testing. Development is ongoing at FEI, to make smaller, more capable magnetic sensing systems for alt-PNT applications. Finally, I would like to discuss the capital raise that we completed right at the end of the first quarter and how that may impact our long term guidance.

We have told you previously that we have sufficient capital in place to meet the minimum of a $150 million revenue target by fiscal 29. Numerous customers, however, are asking us to do more for them and to do it more quickly. To meet this customer driven business expansion, we decided to pursue a secondary offering of our common stock in July, which raised approximately $73 million and also brought several excellent long term oriented new institutional investors into our shareholder base Approximately $14 million of the total came in after the quarter ended as the green shoe was exercised.

We remain debt free with a very strong cash position, and we anticipate being a free cash flow generative on an annual basis going forward. We would like to thank Morgan Stanley, our lead bankers on the offering, and Craig-Hallum, who served as book running managers. For their hard work on this successful transaction. The capital we raised will allow us to pursue expansion to help meet these additional customer requests, which may have the effect of our both reaching the $150 million minimum target sooner and making that target a substantially larger number, by fiscal 29. We also expect that some of our customers will pay for capacity expansion in certain cases.

We expect this additional revenue growth that derives from capacity expansion to be organic and it is likely that if we were to make any acquisitions, they would be small tuck ins to add to our vertical manufacturing capabilities. In other words, we do not intend to buy revenue. Frankly, because we do not need to given the strength of our backlog pipeline, order book, and prospects. there is an exceptional amount of growth and value creation to be gained by focusing on what is in front of us. Without getting distracted by a larger acquisition.

We should be able to super serve our customers with this extra capital resulting in additional profitable growth that should benefit our shareholders as well. With that, I will turn it over to Steven for some financial commentary, and I look forward to taking your questions in the Q and A portion. Of the call. Steven?

Steven L. Bernstein: Thank you, Tom. And good afternoon. As Tom highlighted, it is a great start to our fiscal 27 and a strong start to achieving our 3-year targets. For the 3 months ended July 31, 2026, revenue from commercial and US government communication satellite programs was $11.8 million and accounted for approximately 50% of consolidated revenue compared to $6.5 million and approximately 47% of consolidated revenue during the same period in the prior fiscal year. Revenue is recognized primarily over time under the percentage of completion method. Revenue from the satellite market, are recorded in the FEI-New York segment.

Revenue from non space US government Department of Defense customers, which are recorded in both the FBI New York and FEI-Zyfer segments, were $11.1 million and accounted for approximately 47% of consolidated revenue for the 3 months ended 07/31/2026, compared to $6.9 million and approximately 50% of consolidated revenue during the same period in the prior fiscal year. Other commercial industrial revenue for the 3 months ended 07/31/2026 and 2025, accounted for approximately 3% of consolidated revenue and were $605 thousand and $439 thousand respectively. The revenue for the 3 months ending 07/31/2026 was significantly higher in both segments and in consolidation by approximately 70% or $9.6 million over the same quarter of the prior fiscal year.

Revenue from commercial and U. S. Government communications satellite programs increased $5.2 million over 80% revenue from nonspace US government Department of Defense customers increased $4.2 million and over 61% over the same period in the prior fiscal year. For the 3 months ended 07/31/2026, both gross margin and gross margin rate increased compared to the same period in the prior fiscal year. The increase in gross margin is attributable to the $9.6 million increase in revenue compared to the same period in the prior fiscal year. The 9-point improvement in gross margin rate is attributable to higher production levels driving efficiencies in labor, overhead allocation, product mix, and also partially due efficiencies recognized as programs mature.

For the 3 months ended July 31, 2026 and 2025, selling, general, and administrative expenses were approximately 18%, 26%, respectively, of consolidated revenues a decrease of approximately 8% However, the actual expenditures increased by $500 thousand The increase in SG&A expenses during the 3 months ended July 31, 2026 related mostly to compensation expenses. SG&A as a percentage of revenue decreased 8% over the same period in the prior fiscal year, demonstrating positive operating leverage given the higher revenue base and because the prior year included strategic headcount additions and process optimizations that were implemented to support growth in fiscal 27 and beyond, which caused SG&A as a percentage of revenue to be higher in fiscal 26.

Research and development expenditures represent investments intended to keep the company's products at the leading edge of time and frequency technology enhanced future competitiveness. Fluctuations in R&D expenditures will occur in some periods due to current operational needs supporting ongoing programs. Company plans to continue to invest in R&D in the future to keep its products at the state of the art. For the 3 months ended July 31, 2026, operating income was $5.2 million or 22% of revenue and increased significantly compared to the prior fiscal year period's $364 thousand operating income due to the higher revenue, gross margin and operational efficiencies as described above.

The majority of the approximate $100 thousand of investment income for the 3 months ended 07/31/2026 was from interest income and unrealized gains on assets held in the Frequency Electronics deferred compensation trust. This yields a pretax income of approximately $5.2 million for the 3 months ending 07/31/2026 compared to approximately $557 thousand pretax income for the 3 months ended July 31, 2025. Consolidated net income for the 3 months ended July 31, 2026, is approximately $4.2 million or $0.41 per share compared to $634 thousand or $0.07 per share for the same period in the prior fiscal year.

Our fully funded backlog at the end of July was approximately $129 million, a new company high compared to approximately $111 million for the previous fiscal year ending April 30, 2026 and compared to $71 million in the year ago period. The company's balance sheet continues to reflect a strong working capital position of approximately $90 million and a current ratio of approximately 5.3-to-1, helped by the company's stock offering and which increased further following the exercise of the green shoe after the quarter ended. Additionally, the company is debt free. The company believes that its liquidity is adequate to meet its operating needs for the next 12 months and the foreseeable future.

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

Thomas McClelland: Thanks, Steven. We are now ready to take questions.

Operator: Thank you. At this time, we will be conducting a question and answer session. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. Participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. 1 moment please while we poll for questions. The first question today will be from Jeff Van Rhee from Craig-Hallum. Jeff, your line is live.

Jeff Van Rhee: Great. Thanks. Thanks for taking the questions, guys, and congrats across the board. Just looks like a fantastic quarter here. Maybe a few for me. Tom, maybe touch on Turbo. I know, obviously, you know, interesting form factor, a lot of useful applications. Could you just give us a little update in terms of what you are seeing there, in particular from the new bookings side, strength of bookings? Any quantify of where revenue is going, maybe insights into the use cases just how it is being deployed. Just sort of a broader update on Turbo would be great.

Thomas McClelland: Yes. Yes. Sure, Jeff. We are just starting to. Beginning to deliver production rate turbo units at this point in time. Relatively, small quantities still. But we anticipate things will be picking up in the near future. We Currently, the applications are all aircraft applications. Manned aircraft applications. Although, we have discussions with some companies, regarding drone applications, which is 1 of the areas that we are most excited about. We are also starting some initial efforts in terms of updating the development of the turbo units for use in space, primarily that involves radiation hardening of those devices.

Jeff Van Rhee: Got it. that is helpful. And then maybe just a couple quick on the numbers front, Steven. The percent of the backlog that is 12 months and then if you could just any color around funded. I know you only report in total backlog, the portion that is funded. I am wondering how the ratio of funded to total has changed maybe compared to, say, a year-ago quarter?

Steven L. Bernstein: Well, I will answer the first question. The reported backlog is fully funded. We do not report the nonfunded part. Of the options or things Tom has explained numerous times we get a contract, just for, like, $10 million, maybe 10 or 20% of it is funded, so only a $1 million or $2 million would go into backlog. We do not report that other $8 million or $9 million until it becomes funded.

Jeff Van Rhee: Yeah. No. Understood. What I am asking is, know, you have got visibility to what the rest of that unfunded backlog is. I am asking the ratio of what is visible to total and how it is changed. And then the second part of the question is what portion is for the next 12 months?

Steven L. Bernstein: Well, I think it is multiple times of it. it is-- the unfunded portion of it And as for the 12 months, it is about 60 some odd percent, 65% approximately.

Jeff Van Rhee: Okay. Tom, the, you referenced again on this call, you talked about it last call as well. I mean, obviously, the order book is full, and you have got to figure out how to allocate and which orders to take. But 1 of the responses has been to ramp production. Just talk a little bit about where you are in that volume production ramp, that build out. Are you hitting your throughput goals? it is a challenge to keep up with this level of growth. Curious how you are doing on that volume production shift.

Thomas McClelland: Yeah. it is a really good question, Jeff. I think that is certainly 1 of our biggest, challenges at this point. We are ramping successfully, ramping up our production on a number of fronts at this point. But we. You know, there are some challenges and limits to what we are able to achieve in that regard. And I think 1 of the management challenges is being able to thread the needle appropriately so that we, know, of course, we never like to, turn down additional, business. On the other hand, it is very important for us to deliver what we say we are gonna deliver and to do it on time.

So in some cases, we are not signing up to some of the more ridiculously optimistic schedules that some of our customers are asking for. Because it is. We do not feel that it is possible. And I think you know, it is important for us to stand firm on that kind of a thing. But that is a we are we are walking a tightrope in this regard at this point. Let's just put it that way. Yep. Understood.

Jeff Van Rhee: And then maybe 2 other quick I could. On the proliferated LEO, opportunity, I mean, I think you commented last quarter 90% win rates in the space. And in particular, we have seen some real interesting, call it, green shoots in terms of proliferated LEO and the ability to win. Just curious, any updates there last 90 days, things that have influenced your conviction, what you are seeing in the pipeline there, observations on PLEO would be great.

Thomas McClelland: Yeah. Yeah. I think the, opportunity opportunities are really good. I think that, you know, big arena for us is, the classified satellites which the architecture is very aggressively moving to the proliferated satellite model. It is still in the early stages of that transition. But we are. We are kind of at the point where we are moving from demonstrating capabilities to initial production on those programs. We are getting involved in more programs every day at this point. So that is really, pretty exciting. But I think there is a tremendous amount more to come in the future We hear a lot of talk about data centers in space but that has not materialized quite yet.

I know there is talk about that happening in 2027. But, we. I think that is probably a little bit, overly, optimistic. But it. But the proliferated satellite is that concept is definitely happening and we are in the thick of it and, very excited about that. Sort of a variant of that We are, of course, actively involved in some of the lunar missions. That you get a lot of press at this point in time. And in some ways, it is similar to the proliferated satellites In some ways, it is different.

We are not really talking about hundreds or thousands of devices heading toward the moon, But I think, a lot of the approach is similar to the proliferated satellites where we are looking for a lot smaller, cheaper, faster production of things. And so I think that is important involvement for us because it helps to get our feet wet in this smaller, cheaper, faster arena. Mhmm. Very helpful.

Jeff Van Rhee: Last 1 maybe on gross margin. Tom, I know you I know you pay a lot of attention to which contracts you take and which you do not, and there are a lot of variables that can affect your gross margins, whether they are follow on orders, versus new and a variety of other things. Just as you look at the order book and what is to come over the next few quarters, any notable callouts in terms of, you put up a great gross margin print here this quarter, quite a bit ahead of us. Things that would drive it higher or lower.

I know you are not going to call a specific quarter, but as you look out over the next 2 or 3, anything to call out about what is in that pipe and gonna turn into revenue and whether those are in particular, upward or downward pressure on gross margin?

Thomas McClelland: Yes. I do not see any particular either upward or downward pressure on things at this point in time. I guess what I would say is it is really part of our strategy at this point. We have talked about it before. You know, there is so much growth in our basic markets that, it puts us in a really strong position. We can be a little bit picky.

So I think For us, the strategy is to be disciplined, to make sure that we bid things you know, such that, we can be very profitable and maintain our high margins And, of course, part of that strategy is being willing to lose some things if the you know, the competition is extreme and the margins that we would necessarily need to accept, in order to get those programs are a little bit lower. So we are in a really good position, and, we are staying disciplined. And I think we have talked about it previously.

The, proliferated satellites, especially in the early stages, are ones where we are willing to accept, somewhat lower margins in order to get involved in those programs. But, at this point, you know, we you know, there is not a major move in that direction in the sense of having to accept lower margins. We are seeing activity in the proliferated satellites, but we have not really seen a lot of pressure on our margins. So I think it is pretty optimistic on the margin front But, yeah, I will say that you know, we should not interpret that as a straight line upward necessarily. As we go.

Jeff Van Rhee: Yep. Yep. Got it. Congrats and understood. And, obviously, your years of decision making, good decision making getting you guys to this point. So congrats to the whole team.

Thomas McClelland: Thanks, Jeff.

Operator: Thank you. The next question will be from John Sigmund from Stifel. John, your line is live.

John Sigmund: Hey, good afternoon. Thank you very much for taking my question and congratulations on the momentum in the business.

Thomas McClelland: Yeah, thanks.

John Sigmund: So the company's got a long history of relationships with the larger traditional companies. You have made reference in earlier calls about bidding with some of these new companies. Clearly, success sounds like it is percolating on the space side. Can you talk a little bit about any penetration and success you have had with the new defense tech companies? Thank you.

Thomas McClelland: Very good question. Yes. I think it is true that at this point in time, most of our success in this arena is in the space environment. We have I have to be very careful about talking about specific programs, but, we have had conversations with a number of the newer space companies, on a variety of different programs intuitive machines, Stennis, and a number of others. In the defense arena, we do not have a whole lot of success in this area yet, although we are certainly pursuing things with a number of different companies. Of course, Anduril in particular is 1 that we have had, communications with. Yeah. Let me just leave it at that.

John Sigmund: that is great. And then maybe just on traditional side, the Patriot and THAAD, production increases. Understand you are more on the battery side versus the interceptor side. But is there any way to frame how much increases that could be for your business if we are tripling production rates for those programs? Thank you again.

Thomas McClelland: Yeah. it is very, you know, it is very significant, obvious that you do not, build new batteries every time you shoot off a couple of missiles. But, I think we. We are the bottom line is we are seeing a tremendous amount of business for both THAAD and, Patriot. And I think, to put that into context, I think you know, there is a lot of activity in Ukraine talking about additional missile batteries and things And I think that the more missiles are shot off, it tends to mean that batteries are needed in additional locations, and this translates into more business for us. and needs in these applications.

So, yeah, for whatever reason, I think the bottom line is it is a thriving business for us at this point. Thank you.

Operator: Thank you. The next question will be from Steven Levinson from Big Rock Research. Steven, your line is live.

Steve Levinson: Thank you very much. Good afternoon. Yeah. Hi, Steven. I have enjoyed watching your progress over the last few years, and I am curious about a few things.

Thomas McClelland: You talked about using some of your new capital to expand manufacturing. And I imagine a lot of your work is sort of manual bench work. And I am wondering if there is an opportunity to enhance margins by using some automation, or is that impractical?

Steve Levinson: For the sort of assemblies you make?

Thomas McClelland: Well, it is a very good question. it is it is certainly not out of the question. In fact, we are looking at that very carefully, especially in, you know, quartz crystal manufacturing is an important part of, what we do. And, the, quantities, the are required And I guess I should emphasize that, all the you know, this is part of our vertical integration. We do all of manufacturing of quartz resonators starting from, raw quartz crystal material. And, so the production, there is certainly 1 of the challenges that we face at this point in time, and we are looking at putting in place additional equipment that has higher throughput capabilities.

We tend to think of our production facility as sort of a boutique facility, because in general, we. The quantities that we work with are relatively small for space applications and so forth and so on. And you know, relative to quartz crystal manufacturing for, consumer watches and things of that sort our production will remain relatively small going forward. But it is nonetheless increasing. And so we are looking at putting in place equipment that can increase the throughput. In addition to that, though, the. You know, there is a lot of equipment that is needed just in general, you know, most of the, products that go into space need to be tested in a space like environment.

So called thermal vacuum, vacuum environment where we can modify the temperature to be similar to what units experience in space. And, so, obviously, that is an environment which is normally not encountered on Earth, and there is a lot of test equipment in order to be able to test them in those kind of environments. So we you know, that is an. Another thing that we are looking at as a additional capacity for And, of course, there is a lot of lot of other things that we are looking at this point in time. Those are just kind of a couple of straightforward examples.

Steve Levinson: Great. that is helpful. Thank you. My other question would be, in terms of proliferated satellite constellations, is there an application for the quantum sensor to gather data for the world magnetic model. Is that something that can be done using that device from space, or is that more a terrestrial item?

Thomas McClelland: Well, it definitely is something that meaningful measurements can be made from space. And I know there is definitely some talk and some ideas for doing just that. I think that, in terms of overall quantities, I think that would remain relatively small, but it is definitely something that we are interested in pursuing.

Steve Levinson: Great. Thank you very much. I will be watching your progress along the way.

Thomas McClelland: Thanks. Okay. Great.

Operator: Thank you. Thank you. The next question will be coming from Michael Eisner, and Michael is a private investor. Michael, your line is live.

Michael Eisner: Hey. Great job. 1 quick question or 2. In space, is there a specific area you see the most revenue coming from? Or opportunity?

Thomas McClelland: Well, I think no, the simple answer is I think we are seeing increasing revenue from just a variety of different directions, and that is really what is so exciting and unique about this time.

Michael Eisner: Relative certainly to a decade or 2 decades ago. it is just-- I think we have commented on it recently Whereas, you know, a decade ago, there were something like 100 launches in a year.

Thomas McClelland: I think in the in the last year, The United States had something like. Launched something like 3.7 thousand objects into space. So a 100 objects launched into space, objects being satellites and things like that. And now 3.7 thousand. So tremendous growth any way you look at it. The traditional satellite activity is booming We have a lot of work going on right now. But the new proliferated satellite stuff is also very active, and, we have a lot of, programs that we are getting involved in. And, as we demonstrate success on those programs, we see more and more coming in the front door. So it is pretty exciting.

Michael Eisner: that is a good. I like the answer. what is the book-to-bill this at this time?

Steven L. Bernstein: Steven, have you got those kind of numbers? The book to bill is about 1.76-to-1 for the quarter.

Michael Eisner: 1.76-to-1. Alright. Excellent. Thank you for your time.

Thomas McClelland: No problem. Thanks, Mike.

Operator: Thank you. And the next question will be from Robert Smith from the Center of Performance Investing. Robert, your line is live.

Robert Smith: Thank you for taking my questions. Congratulations on the ramp. it is superb to see.

Thomas McClelland: Thank you. My question is could you give me the current R and D figure?

Robert Smith: And how do you see R&D as a percent of revenue going forward, considering the large targets that you have for growth?

Thomas McClelland: So a good question. I think a couple of qualitative statements first. I think. And we have talked about this in the past, but 1 of the overall strategies for the company is to try to get as much external funding for R&D, as possible. I think this is really important in, the kind of, products that, we specialize in. Because, you know, our. The primary customer for our products is really the US government And, you know, when the US government funds research, it is it is always because they are they are funding applications that they are interested in.

And, of course, that is what we wanna focus our research and development on what our customers are interested in as opposed to stuff that might be intellectually interesting, but not necessarily. Does not necessarily lead to profitable products down the road. So that is the first thing is to try to get external funding for as much research and development as possible but talking about the internal R&D, I think that like, a lot of things that you have to understand that there will be fluctuations and so I do not wanna make statements that will be held to on a quarter to by quarter basis.

But I think that we anticipate the end R&D funding to stay under, 10%, revenue at this point in time. It we. I think that we will see in an absolute sense some additional R&D expenditure over the next couple of years as our revenue grows. I hope that gives at least a bit of an answer to your question.

Robert Smith: It does. And my second question is would you at all consider the initiation of a small cash dividend to attract the. Any number of institutions that will not will not buy the security without a cash payment.

Thomas McClelland: Well, we have had done so in the recent past and I think we certainly will consider that going forward. I am not making any promises at this point. But, yes. Definitely something that is on the table.

Robert Smith: Thanks very much. Good luck.

Thomas McClelland: Thank you.

Operator: Thank you. Thank you. And there were no other questions at this time. I would now like to hand the call back to Thomas McClelland for closing remarks.

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

Operator: Thank you. This does conclude today's conference. You may disconnect your lines at this time, and have a wonderful day. Thank you for your participation.