Frequency Electronics, Inc. Q1 FY2026 earnings call

• Customer-driven delays on key programs pushed revenue recognition out of Q1 2026, but revenue will be earned in coming quarters. - Funded backlog remains historically high. - Opened engineering facility in Boulder, CO, hiring scientists from NIST. - Hosting second annual quantum sensing summit in Oct 2025. - Positioned in defense, space, and quantum technologies, with programs like Golden Dome, Patriot missile system, etc. - Confident in continued strength despite temporary revenue/earnings decline.

For the three months ending July 31, 2025, consolidated revenue was $800,000 compared to $15.1 million in the prior fiscal year. Revenue from commercial and US government satellite programs was approximately $6.5 million or 47% of consolidated revenue, down from $8.3 million or 55% in the prior year. Revenues from non-space US government and DOD customers were $6.9 million, accounting for approximately 50% of consolidated revenues (compared to 42% prior year). Other commercial and industrial revenues were approximately $439,000 vs $544,000 prior year. Gross margin and gross margin rate decreased due to lower revenue and mix of business. SG&A expenses increased due to one-time investments and payroll, while R&D expense decreased but plans to continue investing.

• No formal guidance given due to lumpy contract awards. - Revenue shortfall from 2026 expected to be made up in upcoming quarters. - Boulder facility expected to contribute positively to bottom line by Q3 2026. - $20 million authorization for share repurchase.

• Customer-driven delays on a few key programs pushed revenue recognition, but not cancellations or contract reductions.

Q: George Marema asked about progress on clock technologies (rubidium vapor, mercury ion clocks, NV diamond magnetometer) and quantum sensing applications outside space.

A: Thomas McClelland responded that mercury ion atomic clock prototypes are being produced with low-rate production expected in ~1 year, NV Diamond magnetometer prototypes expected by mid-next calendar year with higher performance devices a year after that. On quantum sensing outside space, noted quantum computing isn't excluded from space, not directly investing in quantum computing but aware of potential applications and building workforce for future contributions via Colorado facility.