Executive Summary

Q2 FY2025 revenue was $1.78M and diluted EPS to common was $(0.28), with margins pressured by parts issues and over-budget CRAFT ECP engineering costs; backlog rose to $7.9M, positioning for stronger 2H as parts availability normalized .
Management expects a marked improvement in revenue, profitability, and cash position in Q3–Q4 as parts constraints ease and production ramps; CRAFT ECP is in Navy platform/AIMS testing with LRIP requested, and MADL full-rate production slated for Q4 FY2025 .
Strategic traction continued: Airbus follow-on orders for SDR-OMNI, Boeing supplier listing approval, and initial SDR-OMNI/MIL orders from the U.S. DoD; SDR-OMNI/MIL targets replacement of thousands of obsolete test sets across U.S./NATO fleets .
Street consensus (S&P Global) was unavailable for Q2 FY2025, so a vs-estimates comparison cannot be provided; the primary stock catalysts ahead are AIMSPO certification, LRIP award timing, and MADL/SDR-OMNI production cadence .

What Went Well and What Went Wrong

What Went Well
- Backlog expanded to $7.9M in Q2, supported by Airbus follow-on orders and Boeing authorization for SDR-OMNI, strengthening multi-quarter visibility .
- Clear commercialization milestones: CRAFT ECP progressed through Navy platform/AIMS testing with LRIP request submitted; MADL slated for full-rate production in Q4 FY2025 .
- Management reiterated SDR-OMNI/MIL differentiation (only multipurpose avionic test set meeting Class 1 military environmental specifications) with early DoD orders, framing a multi-year replacement opportunity .
What Went Wrong
- Gross margin compressed to 12% (vs 23% YoY) due to parts issues across CRAFT, legacy and SDR-OMNI lines and elevated CRAFT ECP engineering costs; operating expenses rose 44% YoY from sales hires and lack of NRE offsets .
- Q2 revenue of $1.78M declined QoQ from $2.84M (Q1), driving an operating loss of $(1.00)M and net loss of $(0.82)M (to common $(0.91)M) in Q2 .
- No formal numeric guidance was issued; margin normalization and revenue ramp hinge on execution through certification/production and timely resolution of supply chain/PCB insourcing frictions .

Financial Results

Metric	Q2 FY2024 (YoY comp)	Q1 FY2025	Q2 FY2025
Revenue ($USD Millions)	$1.565	$2.842	$1.777
Gross Profit ($USD Millions)	$0.359	$0.746	$0.207
Gross Margin %	23%	26%	12%
Total Operating Expenses ($USD Millions)	$0.839	$0.674	$1.207
Operating Income ($USD Millions)	$(0.479)	$0.072	$(1.000)
Net Income ($USD Millions)	$(0.435)	$0.042	$(0.815)
Net Income Attributable to Common ($USD Millions)	$(0.518)	$(0.052)	$(0.909)
Diluted EPS to Common ($)	$(0.16)	$(0.02)	$(0.28)

Notes:

QoQ revenue fell from $2.84M (Q1) to $1.78M (Q2), reflecting parts and program cost headwinds; YoY revenue increased from $1.57M (Q2 FY2024) .
Q3 FY2025 early read (after Q2) shows sequential improvement: revenue $2.97M, GM% 21%, net loss $(0.46)M, backlog to $8.4M, indicating trajectory stabilization as production normalizes .

KPIs

KPI	Q1 FY2025	Q2 FY2025	Q3 FY2025 (post-Q2 trend)
Backlog ($USD Millions)	$7.0	$7.9	$8.4
CRAFT ECP Status	TRR completed (Apr 2024)	Navy platform/AIMS testing; LRIP request submitted	AIMSPO testing completed; certification expected in March; LRIP early next FY
MADL Status	Negotiations to supply up to 119 units	$1.55M order (Oct); full-rate in Q4 FY2025	Full-rate production to commence in Q4 FY2025
SDR-OMNI Commercial	Airbus selection; shipments starting	Airbus follow-on orders; Boeing authorization	Began shipping initial Airbus units
SDR-OMNI/MIL Military	Product launched; early traction	Initial U.S. DoD orders	Units shipping to domestic/overseas customers

Segment breakdown: The company does not report formal operating segments in these releases .

Guidance Changes

Metric/Item	Period	Previous Guidance/Commentary	Current Guidance/Commentary	Change
CRAFT ECP Revenue Potential	Post-certification (full-rate)	“Around $5M per year” once production commences	“Around $5M per year” reiterated; AIMS testing underway; LRIP requested	Maintained
CRAFT ECP Certification/Timing	FY2025–FY2026 ramp	TRR completed; production expected later FY2025	AIMS/Navy platform testing; LRIP request for Q4 FY2025; Q3 update: AIMSPO testing completed; certification expected March	Increased timing clarity
MADL Production	Q4 FY2025	Negotiations to supply units	$1.55M order received; full-rate production in Q4 FY2025	Improved visibility
Margin Outlook	2H FY2025	Q1: margins pressured by low-margin CRAFT ECP invoices	Q2: margins abnormally low; management expects marked improvement in Q3–Q4 as parts normalize and updated PCBs reduce CRAFT costs; Q3: updated PCBs should substantially lower costs	Positive trajectory commentary

No formal numeric top-line or EPS guidance was issued in the releases; commentary focuses on program milestones and margin normalization drivers .

Earnings Call Themes & Trends

Note: No Q2 FY2025 earnings call transcript was found; themes are synthesized from management press releases for Q1–Q3 FY2025 and Q3 FY2024 .

Topic	Previous Mentions (Q3 FY2024 and Q1 FY2025)	Current Period (Q2 FY2025)	Trend
Supply chain/parts	Supply chain issues delaying shipments; new Supply Chain Manager hired (Q3 FY2024)	Parts delays drove low shipments and margins; now in receipt of required parts, expecting Q3–Q4 improvement	Improving availability; execution risk moderating
CRAFT ECP	TRR completed; production expected later FY2025 (Q1 FY2025)	Navy platform/AIMS testing; LRIP requested	Advancing toward production; certification window clearer
MADL	Negotiations to supply up to 119 units (Q1 FY2025)	$1.55M order; full-rate production Q4 FY2025	Transitioning from development to production
SDR-OMNI (Commercial)	Airbus selection; shipments beginning (Q1 FY2025)	Airbus follow-on orders; Boeing supplier approval	Strengthening commercial adoption
SDR-OMNI/MIL (Defense)	Introduced; potential multi-year revenue; early traction (Q1 FY2025)	Initial U.S. DoD orders	Early customer wins; broader pipeline
Margins	Pressured by low-margin CRAFT ECP invoices (Q1 FY2025)	Abnormally low due to parts and engineering overages; improvement expected with updated PCBs and volume	Near-term trough, recovery targeted in 2H

Management Commentary

“The abnormally low margins in the second quarter were a combination of low shipments causing large negative manufacturing margins plus CRAFT ECP engineering expenses running over budgeted levels.”
“We are now in receipt of all required parts for our major product lines and the third and fourth quarters should show a marked improvement in both revenues, profitability, and cash position.”
“The CRAFT ECP is currently in Navy platform and AIMS testing and we are requesting a limited rate initial production (“LRIP”) contract starting in the fourth quarter of this fiscal year.”
“The SDR-OMNI/MIL is the only multi-purpose avionic test set in the market that meets Class 1 military environmental specifications.”
Q3 update: “With the updated PCB’s, production cost for the CRAFT test sets should drop substantially which will help improve margins… The $1.55 million MADL contract will commence full-rate production in the fourth quarter of this fiscal year.”

Q&A Highlights

No Q2 FY2025 earnings call transcript was available; therefore, no Q&A themes or clarifications could be reviewed [ListDocuments: 0 transcripts].

Estimates Context

Wall Street consensus (S&P Global) for Q2 FY2025 was unavailable at the time of analysis due to an SPGI request limit, so no vs-consensus revenue or EPS comparisons are presented [GetEstimates error].
Given the magnitude of margin headwinds in Q2 and management’s explicit 2H improvement commentary, estimate revisions (if any coverage exists) would likely focus on 2H margin recovery, the timing of CRAFT ECP LRIP/full-rate, and conversion of MADL/SDR-OMNI backlogs to revenue .

Key Takeaways for Investors

Near-term trough dynamics in Q2 driven by parts shortages and CRAFT ECP engineering overages; management signaled sequential improvement into Q3–Q4 as supply normalizes and updated PCBs reduce CRAFT unit costs .
Backlog rose to $7.9M in Q2 (then $8.4M in Q3), underpinned by Airbus follow-ons, Boeing supplier approval, and initial SDR-OMNI/MIL and MADL orders, providing revenue visibility into coming quarters .
Program catalysts are close: CRAFT ECP LRIP request submitted (AIMS/Navy testing underway); MADL full-rate production slated for Q4 FY2025, both positioned to inflect revenue and gross margins as volume ramps .
SDR-OMNI/MIL offers differentiated military spec compliance; as procurement cycles progress, multi-year fleet replacement could become a durable, higher-margin growth driver .
Watchlist for the next print: evidence of margin recovery (mix, PCB cost downs), backlog conversion pace (Airbus, DoD), and tangible milestones (AIMSPO certification/LRIP award timing) as key stock-moving catalysts .
Absence of formal numeric guidance and lack of published Street estimates limit near-term consensus benchmarking; focus turns to execution on production ramps and certification outcomes [GetEstimates error].

References:

Q2 FY2025 8-K/Press Release and financial statements .
Q1 FY2025 8-K/Press Release and financials .
Q3 FY2025 8-K/Press Release and financials (post-Q2 trend) .
Q3 FY2024 8-K/Press Release .

TEL INSTRUMENT ELECTRONICS CORP (TIKK)·Q2 2025 Earnings Summary