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TI

TEL INSTRUMENT ELECTRONICS CORP (TIKK)·Q3 2024 Earnings Summary

Executive Summary

  • Q3 2024 (calendar; reported as Q2 FY 2025 ended Sep 30, 2024) showed weak execution: revenue $1.78M (+13.5% YoY), gross margin 12% (down ~11 pts YoY), and EPS of $(0.28), driven by parts delays and negative manufacturing margins on low shipments .
  • Management guided to a near-term inflection: backlog $7.9M at quarter-end and “current sales backlog” over $9M; full‑rate MADL production slated for Q4 FY25 and LRIP on CRAFT ECP targeted for Q4, positioning for stronger revenue, profitability, and cash in H2 FY25 .
  • Commercial traction strengthened: substantial SDR‑OMNI follow‑on orders from Airbus and Boeing authorization for SDR‑OMNI supplier listing; initial SDR‑OMNI/MIL DoD orders received .
  • No earnings call transcript was available; Wall Street consensus (S&P Global) was unavailable, limiting beat/miss assessment [List 0 documents for transcripts; 2024-01–12 window] [GetEstimates error: daily limit exceeded].

What Went Well and What Went Wrong

What Went Well

  • Airbus placed substantial SDR‑OMNI follow‑on orders; Boeing authorized SDR‑OMNI for its approved supplier listing, expanding commercial channel validation .
  • Backlog strengthened to $7.9M at quarter‑end and “current sales backlog” exceeded $9M, supporting visibility into Q3/Q4 ramps .
  • Strategic programs advancing: $1.55M MADL order received in October with full‑rate production planned for Q4 FY25; CRAFT ECP in Navy platform/AIMS testing with LRIP sought in Q4 FY25 .

Quote (CEO): “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.”

What Went Wrong

  • Parts delays across major product lines led to abnormally low margins (12% vs 23% YoY) and negative manufacturing margins on low shipments; CRAFT ECP engineering expenses ran over budget .
  • Operating expenses rose by $368K (+44% YoY) due to sales headcount additions and lack of current NRE projects, pressuring operating loss to $(1.00)M vs $(0.48)M YoY .
  • Interest expense tied to judgment weighed on results (quarterly $(128K)); combined other net expense totaled $(31.5K), compounding the operating loss .

Financial Results

MetricQ2 FY 2024 (Sep 30, 2023)Q1 FY 2025 (Jun 30, 2024)Q2 FY 2025 (Sep 30, 2024)Consensus (S&P Global)
Revenue ($USD Millions)$1.57 $2.84 $1.78 Unavailable (S&P Global daily limit)
Gross Margin %23% 26% 12% Unavailable
Operating Income ($USD Millions)$(0.48) $0.07 $(1.00) Unavailable
Net Income ($USD Millions)$(0.44) $0.04 $(0.81) Unavailable
Diluted EPS ($)$(0.16) $0.02 $(0.28) Unavailable

KPIs and Balance Sheet Highlights

KPIQ4 FY 2024 (Mar 31, 2024)Q1 FY 2025 (Jun 30, 2024)Q2 FY 2025 (Sep 30, 2024)
Backlog ($USD Millions)$7.2 (FY end) $7.0 (Q1 end) $7.9 (Q2 end); “current sales backlog” >$9.0
Cash ($USD)$132,013 $149,550 $242,366
Line of Credit ($USD)$690,000 $1,000,000 $965,000
Inventories, net ($USD)$5,411,644 $5,208,229 $4,989,908

Notes:

  • YoY revenue grew 13.5% ($1.78M vs $1.57M), but margins compressed sharply due to parts constraints and low shipment volumes .
  • Sequentially, revenue fell 37% ($2.84M → $1.78M) and EPS declined from $0.02 to $(0.28) as gross margin dropped from 26% to 12% .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue/Profitability trajectoryH2 FY 2025“Expect strong growth” in FY25 driven by SDR‑OMNI, MADL, and CRAFT ECP “Third and fourth quarters should show a marked improvement in revenues, profitability, and cash position” Maintained, with stronger near‑term emphasis
MADL (F‑35)Q4 FY 2025Negotiations to supply up to 119 test sets this year $1.55M order received in October; full‑rate production to commence in Q4 FY25 Firmed/advanced to production
CRAFT ECPQ4 FY 2025 and beyondProduction projected to commence in Q4 FY25; ~+$5M annual revenue run‑rate In Navy platform/AIMS testing; requesting LRIP in Q4 FY25; ~+$5M annual revenue once full‑rate Maintained; clarified milestones
SDR‑OMNI (Commercial/MIL)FY 2025Airbus selected SDR‑OMNI; gaining traction commercially Substantial Airbus follow‑on orders; Boeing authorization; initial SDR‑OMNI/MIL DoD orders; shipments to Airbus and domestic/overseas customers Strengthened channel validation

Earnings Call Themes & Trends

No Q3 2024 earnings call transcript was available in the document set; themes are derived from press releases.

TopicPrevious Mentions (Q1 FY25, FY2024)Current Period (Q2 FY25)Trend
Supply chain/parts availabilityFY24: parts shortages impacted production; easing into FY25 Late deliveries drove low shipments and abnormally low margins; parts now received for major product lines Improving availability; near‑term margin recovery expected
SDR‑OMNI commercial tractionAirbus selection; gaining commercial traction Airbus follow‑on orders; Boeing authorization; shipments imminent Strengthening adoption
SDR‑OMNI/MIL DoD pathwayDesign to replace obsolete military test sets; extended procurement cycles Initial DoD orders received; only Class 1‑rated avionic test set Early adoption; multi‑year potential
MADL programDevelopment completed; negotiating up to 119 units $1.55M order received; full‑rate production slated Q4 FY25 Transitioning from development to production
CRAFT ECPTRR completed (Apr 2024); Q4 FY25 production targeted In Navy/AIMS testing; LRIP request for Q4; ~$5M annual revenue at full‑rate Advancing milestones
Operating expense/NREFY24 OpEx down due to funded engineering OpEx up +44% YoY; no current NRE projects Near‑term OpEx pressure; expected leverage with revenue ramp

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 $1.55 million MADL contract will commence full‑rate production in the fourth quarter of this fiscal year… Once full rate production commences, this is expected to increase revenues by around $5 million per year.”
  • “We will be shipping the initial Airbus units this month as well as SDR‑OMNI/MIL units to both domestic and overseas customers.”

Q&A Highlights

  • No Q3 2024 earnings call transcript was available in the document set; therefore, no Q&A themes or clarifications can be provided [List 0 documents for transcripts in 2024].

Estimates Context

  • Wall Street consensus (S&P Global) for revenue and EPS was unavailable due to request limits; as a result, we cannot quantify beats/misses for Q3 2024 (calendar) [GetEstimates error: daily limit exceeded].
  • Given management’s commentary and backlog/order intake (MADL order, Airbus/Boeing SDR‑OMNI developments), near‑term estimates may need upward revision for Q4 FY25 revenue and gross margin recovery, contingent on execution and production ramp .

Key Takeaways for Investors

  • Near‑term inflection setup: parts availability restored and backlog/order intake strong; management explicitly guides to Q3/Q4 improvements in revenue, profitability, and cash—watch execution on MADL full‑rate and CRAFT LRIP in Q4 FY25 as catalysts .
  • Commercial validation building: Airbus follow‑on orders and Boeing authorization materially de‑risk SDR‑OMNI adoption; initial DoD orders for SDR‑OMNI/MIL widen TAM and support multi‑year revenue ramps .
  • Margin rebound potential: Q2’s 12% GM reflects temporary parts/shipment constraints; shipment normalization plus program mix (MADL, CRAFT ECP) should lift margins—track sequential gross margin and operating leverage in Q4 FY25 .
  • OpEx discipline vs growth: Sales investments and lack of NRE elevated OpEx by +44% YoY; leverage requires revenue ramp—monitor OpEx trajectory relative to backlog conversion .
  • Balance sheet/liquidity: Cash improved sequentially; LOC usage modestly lower vs Q1, inventories reduced—positive working capital dynamics if Q4 ramps as planned .
  • Risk monitors: program milestones (AIMS/platform testing for CRAFT ECP), production start timing, judgment‑related interest expense, and DoD procurement cycles remain key variables for FY25 trajectory .
  • Trading implications: Stock may respond to confirmation of Q4 production starts and shipment updates (MADL/CRAFT/SDR‑OMNI) and any margin recovery in upcoming results; absence of consensus limits immediate beat/miss framing—focus on backlog conversion and program milestones as near‑term catalysts .