Q2 2026 Frequency Electronics Inc Earnings Call Transcript
Key Points
- Frequency Electronics Inc (FEIM) reported a strong second quarter performance with revenue of $17.1 million, up 24% sequentially, marking the third highest quarter of revenue in the past decade.
- The company's backlog reached $82 million, the highest in its history, indicating strong future business prospects.
- FEIM is experiencing growth in non-space U.S. government and Department of Defense contracts, which accounted for 69% of consolidated revenue, up from 37% in the prior fiscal year.
- The company is strategically positioned in emerging markets such as quantum sensing, proliferated satellites, and alternative position, navigation, and timing (ALT-PNT) programs, which are expected to drive future growth.
- FEIM maintains a strong balance sheet with approximately $31 million in working capital and no debt, ensuring liquidity to meet operating and investing needs.
- Gross margin and gross margin rate decreased compared to the same period of the prior fiscal year due to a change in the mix of high-margin production satellite programs versus lower-margin programs.
- Operating income decreased to approximately $1.7 million from $2.6 million in the prior fiscal year, impacted by lower gross margins and increased SG&A expenses.
- The company faced delays in revenue recognition due to customer-driven delays and issues with program requirements, affecting quarterly performance.
- The government shutdown delayed the start of new programs, impacting the timing of contract awards and backlog growth.
- R&D expenses decreased, which could impact future innovation and product development if not managed carefully.
Greetings, and welcome to the Frequency Electronics second quarter fiscal 2026 earnings release conference call. (Operator Instructions) As a reminder, this conference is being recorded.I will now turn the conference over to your host, Thomas McClelland, President and Chief Executive Officer. Sir, the floor is yours.
Good afternoon, and thank you for joining Frequency Electronics second quarter fiscal year 2026 earnings call. With me today is our Chief Financial Officer, Steve Bernstein.
On our first quarter fiscal 2026 earnings call in September, I discussed 2 near-term factors that produced a quarter with lower revenue than recent trend levels suggested. The first factor was that strong execution in fiscal 2025 allowed the company to produce revenue on certain programs in fiscal 2025, that we had originally expected to produce over a more extended period of time in fiscal 2026, essentially pulling forward some revenue. The second factor was customer-driven delays on a
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