TEL-Instrument Electronics Corp. Reports 24% Revenue Increase but Net Loss for Q3 2024

TEL-Instrument Electronics Corp. reported its financial results for the three and nine months ended December 31, 2024, revealing a significant increase in revenue but a notable decline in profitability. The company recorded net sales of $2,972,137 for the third quarter, a 24% increase from $2,403,099 in the same period last year. For the nine months, sales rose 11% to $7,591,655 compared to $6,835,123 in the prior year. However, gross margins fell sharply, with the current quarter's gross margin at $634,401 (21%) compared to $968,118 (40%) a year earlier, primarily due to increased costs associated with the CRAFT test set and engineering labor overruns.

The company's net loss for the three months ended December 31, 2024, was $456,483, a stark contrast to a net income of $133,809 in the same quarter of the previous year. For the nine-month period, the net loss was $1,228,829 compared to a minimal loss of $6,052 in the prior year. The increase in losses is attributed to rising costs related to the CRAFT ECP program, which has exceeded budgeted levels. Operating expenses also surged, with selling, general, and administrative expenses increasing by 45% to $601,187 for the quarter, driven by the hiring of additional sales personnel.

Operationally, TEL-Instrument reported a backlog of $8.4 million as of December 31, 2024, up from $7.2 million at the end of the previous fiscal year. This backlog includes a significant $1.55 million order for the new MADL test set for the F-35 program, expected to commence production in the final quarter of fiscal 2025. The company has also made strides in product development, with the SDR-OMNI and SDR-OMNI/MIL test sets receiving positive feedback from customers, including a recent order from Airbus for the SDR-OMNI.

The company’s liquidity position showed a decline, with working capital decreasing to $2,663,404 from $4,249,777 at the end of the previous fiscal year. Cash on hand was reported at $192,783, with accounts receivable at $1,138,791. TEL-Instrument has drawn the full $1 million on its line of credit with Bank of America, which was renewed with a maturity date of July 31, 2025. Despite the current challenges, management expressed optimism about future cash flows, anticipating significant revenue growth and improved margins as production ramps up for the MADL and CRAFT ECP test sets.

Looking ahead, TEL-Instrument expects to see a turnaround in financial performance, projecting that revenues and profits will improve significantly starting in fiscal year 2026, driven by the successful launch of new products and the fulfillment of existing orders. The company is also exploring new product avenues, including a high-frequency test set for the Lockheed Martin F-35 program, which could further enhance its market position.