Tel-Instrument Electronics Corp. Reports Financial Results For Third Quarter FY 2023

Rhea-AI Summary

Tel-Instrument Electronics Corp. (OTCQB: TIKK) reported a net income of $393K ($0.10 per share) for the third quarter of fiscal 2023, despite a revenue decline of 27% to $2.3 million from $3.2 million year-over-year. The gross margin fell to 38% from 44%, reflecting volume-related issues. Operating expenses decreased by 14%, but the company faced an operating loss of $66K compared to a profit of $293K in the previous year. Backlog increased to $5.6 million. The company anticipates a return to normal production levels by Q1 FY2024 and strong growth from new contracts, particularly the SDR/OMNI and CRAFT programs, as well as positive responses from customers.

Positive

• Net income of $393K, up from $195K year-over-year.
• Backlog increased by $2.3 million to $5.6 million.
• Commencement of low-rate production of SDR/OMNI in December 2022.
• Projections for solid profitability in the next fiscal year.
• Funded $2.9 million CRAFT engineering program expected to generate substantial future revenues.

Negative

• Revenue declined by 27% compared to the previous year.
• Gross margin decreased from 44% to 38%.
• Operating loss of $66K compared to a profit of $293K in the previous year.
• Parts shortages have negatively impacted operations for four consecutive quarters.

EAST RUTHERFORD, N.J.--(BUSINESS WIRE)-- Tel-Instrument Electronics Corp. (“Tel-Instrument,” “TIC,” or the “Company”) (OTCQB: TIKK), a leading designer and manufacturer of avionics test and measurement solutions, today reported a net income of $393K ($0.10 per basic and $0.08 per diluted share) on revenues of $2.3 million for the third quarter of 2023 fiscal year, ended December 31, 2022.

Notes On Third Quarter:

• Revenues for the third quarter were $2.3 million, a 27% decline from $3.2 million in the year ago quarter.
• Gross margin percentage declined to 38% versus 44% in the year ago quarter. This decline was mainly volume related.
• Operating expenses decreased by $156K, a 14% decline versus the year ago quarter.
• Operating loss was $66K as compared to an operating profit of $293K in the year ago quarter.
• Other income (expense) was $563K income as compared to $51K expense in the prior year ago quarter. The third quarter results included a $628K Employee Retention Tax Credit (“ERTC”).
• Net income was $393K or $0.10 per share, compared to net income of $195K or $0.04 per share in the year-ago quarter.
• Backlog increased to $5.6 million at the end of the third quarter, a $2.3 million increase from the prior quarter-end.
• Low-rate initial production of the SDR/OMNI commenced in December 2022.
• Aeroflex appeal hearing is set for March 30, 2023.

Mr. Jeffrey O’Hara, Tel-Instrument’s President and CEO commented, “This has been the fourth consecutive quarter that has been negatively impacted by parts shortages. Due to the chip shortage situation, vendor lead times have tripled to as long as nine months in some cases. This prevented us from shipping certain high dollar orders in the last quarter. We have been ordering additional components from our vendors to mitigate the impact of extended lead times. This has resulted in an inventory increase of almost $500K since the start of the year. We expect to have sufficient parts on hand to reach normal production levels starting in the first quarter of Fiscal Year 2024 which starts in April. We also have several major contracts pending. including a large AN/USM-708 order for the F-35 program and a follow-on T-4530i order from Germany. With the commencement of SDR/OMNI shipments, we are projecting a return to solid profitability next fiscal year and strong revenue and profitability growth once we start shipping Navy CRAFT ECP Upgrade KITS.

We are extremely excited by the prospects of the SDR/OMNI which commenced initial low-rate production in December. We continue to conduct product demonstrations with the major Primes (“major customers”) and airlines. The reaction from all customers has been extremely positive. We expect to ship $300K of these test sets in the fourth quarter. The SDR/OMNI is the only multi-purpose avionic test set in the market that meets Class 1 military environmental specification. We believe that this will be a strong competitor in both commercial and military avionic and communication test set markets.

The CRAFT ECP contract will be critical for the Company as this is expected to generate millions of dollars of annual production revenues, starting when the engineering work is completed. The CRAFT engineering effort is a funded $2.9 million program and is expected to take two years to complete. The next major milestone is the Critical Design Review (“CDR”) which is scheduled to take place in April 2023. This will generate almost $700K of non-recurring engineering revenues. The Lockheed Martin F-35 MADL Test Set development program has been completed. This is expected to generate ongoing production revenues in the $600K-$700K range. Finally, we have been in negotiations with the U.S. Army on a software upgrade for the TS-4530A product to include new functionality such as Mode 5 Level 2B and compatibility with European CCI (“COMSEC Controlled Item”) devices. This software upgrade effort is expected to result in a funded engineering program.

The Aeroflex appeal hearing has been set for March 30, 2023 with a final decision expected this summer. We believe that we have excellent arguments to reduce or reverse the judgment. Regardless of the outcome, we look forward to resolving this case and stopping the accrual of judgment interest.”

About Tel-Instrument Electronics Corp.

Tel-Instrument is a leading designer and manufacturer of avionics test and measurement solutions for the global commercial air transport, general aviation, and government/military aerospace and defense markets. Tel-Instrument provides instruments to test, measure, calibrate, and repair a wide range of airborne navigation and communication equipment. For further information please visit our website at www.telinstrument.com.

This press release includes statements that are not historical in nature and may be characterized as “forward-looking statements,” including those related to future financial and operating results, benefits, and synergies of the combined companies, statements concerning the Company’s outlook, pricing trends, and forces within the industry, the completion dates of capital projects, expected sales growth, cost reduction strategies, and their results, long-term goals of the Company and other statements of expectations, beliefs, future plans and strategies, anticipated events or trends, and similar expressions concerning matters that are not historical facts. All predictions as to future results contain a measure of uncertainty and, accordingly, actual results could differ materially. Among the factors which could cause a difference are: changes in the general economy; changes in demand for the Company’s products or in the cost and availability of its raw materials; the actions of its competitors; the success of our customers; technological change; changes in employee relations; government regulations; litigation, including its inherent uncertainty; difficulties in plant operations and materials; transportation, environmental matters; and other unforeseen circumstances. A number of these factors are discussed in the Company’s previous filings with the U.S. Securities and Exchange Commission. The Company disclaims any intention or obligation to update any forward-looking statements as a result of developments occurring after the date of this press release. The safe harbor for forward-looking statements contained in the Securities Litigation Reform Act of 1995 (the “Act”) protects companies from liability for their forward-looking statements if they comply with the requirements of the Act.

TEL-INSTRUMENT ELECTRONICS CORP. CONDENSED CONSOLIDATED BALANCE SHEETS
		December 31, 2022				March 31, 2022
		(unaudited)
ASSETS
Current assets:
Cash		$	3,292,547			$	4,949,690
Accounts receivable, net			1,270,353				1,049,040
Inventories, net			3,311,159				2,820,497
Restricted cash to support appeal bond			2,011,050				2,011,050
Prepaid expenses and other current assets			967,612				244,040
Total current assets			10,852,721				11,074,317
Equipment and leasehold improvements, net			81,921				115,338
Operating lease right-of-use assets			1,575,377				1,720,921
Deferred tax asset, net			2,584,036				2,499,587
Other long-term assets			35,109				35,109
Total assets		$	15,129,164			$	15,445,272
LIABILITIES & STOCKHOLDERS’ EQUITY
Current liabilities:
Operating lease liabilities – current portion		$	200,148			$	194,370
Accounts payable			563,414				406,489
Deferred revenues - current portion			167,672				119,835
Accrued expenses ‐vacation pay, payroll and payroll withholdings			217,461				410,538
Accrued legal damages			6,291,226				6,097,273
Accrued expenses - other			270,107				174,145
Total current liabilities			7,710,028				7,402,650
Operating lease liabilities – long-term			1,375,229				1,526,551
Deferred revenues – long-term			195,814				289,071
Total liabilities			9,281,071				9,218,272
Commitments and contingencies
Stockholders’ equity:
Preferred stock, 1,000,000 shares authorized, par value $0.10 per share
Preferred stock, 500,000 shares 8% Cumulative Series A Convertible Preferred authorized, issued and outstanding, par value $0.10 per share			3,815,998				3,695,998
Preferred stock, 166,667 shares 8% Cumulative Series B Convertible Preferred authorized, issued and outstanding, par value $0.10 per share			1,187,367				1,147,367
Common stock, 7,000,000 shares authorized, par value $0.10 per share, 3,255,887 and 3,255,887 shares issued and outstanding, respectively			325,586				325,586
Additional paid-in capital			6,797,056				7,018,353
Accumulated deficit			(6,277,914	)			(5,960,304	)
Total stockholders’ equity			5,848,093				6,227,000
Total liabilities and stockholders’ equity		$	15,129,164			$	15,445,272

TEL-INSTRUMENT ELECTRONICS CORP. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
		Three Months Ended								Nine Months Ended
		December 31, 2022				December 31, 2021				December 31, 2022				December 31, 2021
Net sales		$	2,328,254			$	3,171,532			$	6,594,768			$	10,914,787
Cost of sales			1,434,547				1,763,739				4,312,405				5,824,341
Gross margin			893,707				1,407,793				2,282,363				5,090,446
Operating expenses:
Selling, general and administrative			578,077				523,966				1,613,021				1,674,618
Litigation expenses			10,860				17,145				12,102				21,545
Engineering, research, and development			370,795				574,118				1,502,534				1,950,545
Total operating expenses			959,732				1,115,229				3,127,657				3,646,708
(Loss) income from operations			(66,025	)			292,564				(845,294	)			1,443,738
Other income (expense):
Interest income			5,664				996				8,787				2,977
Other income			628,400				-				628,400				35,854
Gain on forgiveness of PPP loan			-				-				-				722,577
Interest expense – judgment			(71,016	)			(52,490	)			(193,952	)			(156,901	)
Total other net income (expense)			563,048				(51,494	)			443,235				604,507
Income (loss) before income taxes			497,023				241,070				(402,059	)			2,048,245
Income tax expense (benefit)			104,396				46,448				(84,449	)			278,446
Net income (loss)			392,627				194,622				(317,610	)			1,769,799
Preferred dividends			(80,000	)			(80,000	)			(240,000	)			(240,000	)
Net income (loss) attributable to common shareholders		$	312,627			$	114,622			$	(557,610	)		$	1,529,799
Basic net income (loss) per common share		$	0.10			$	0.04			$	(0.17	)		$	0.47
Diluted net income (loss) per common share		$	0.08			$	0.04			$	(0.17	)		$	0.35
Weighted average shares outstanding:
Basic			3,255,887				3,255,887				3,255,887				3,255,887
Diluted			5,155,665				5,095,665				3,255,887				5,095,665

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20230213005088/en/

Pauline Romeo

Tel-Instrument Electronics Corp.

(201) 933-1600 (Ext 309)

Source: Tel-Instrument Electronics Corp.

FAQ

What were Tel-Instrument's earnings results for Q3 2023?

Tel-Instrument reported a net income of $393K ($0.10 per share) on revenues of $2.3 million for Q3 2023.

How did the backlog change in Q3 2023 for TIKK?

The backlog increased to $5.6 million, up $2.3 million from the prior quarter.

What impact did parts shortages have on TIKK's performance?

Parts shortages have negatively impacted Tel-Instrument's operations for four consecutive quarters.

What is the outlook for Tel-Instrument's production in FY2024?

The company expects to reach normal production levels starting in the first quarter of FY2024.

What are the projections for SDR/OMNI shipments in Q4 2023?

Tel-Instrument expects to ship $300K worth of SDR/OMNI test sets in the fourth quarter.