Frequency Electronics, Inc. Q2 FY2026 earnings call

• Second quarter revenue was $17.1 million, up 24% sequentially, the third highest in a decade. • Quarter-end backlog was $82 million, highest in company history, up 17% since fiscal year-end in April. • Anticipates multiple large awards in coming months, building on strong core business with potential for multiyear growth. • Active in space and defense markets, with long runway of growth in space, and growing defense business due to increasing defense spending. • Hired senior scientists from NIST in Boulder, Colorado, focusing on quantum technology and low phase noise oscillator technology.

For the three months ended October 31, 2025, consolidated revenue was $17.1 million. Revenue from commercial and US government satellite programs was approximately $4.6 million (27% of consolidated revenue) compared to $9.4 million (59%) in the prior year. Revenue from non-space US government and Department of Defense customers was $11.9 million (69% of consolidated revenue) compared to $5.8 million (37%) in the prior year. Other commercial and industrial revenue was approximately $560,000 compared to approximately $591,000 in the prior fiscal year.

• Anticipates multiple awards in coming months, some as large or larger than historical ones. • Backlog could go north of $100 million in the not too distant future. • Expect normalization of margins as requirements are resolved and business progresses.

• Export controls for international business, requiring time and effort for export licenses. • Potential political impacts on defense spending, though defense spending is expected to remain strong. • Variability in gross margins due to mix of high-margin production satellite programs vs lower-margin programs with nonrecurring engineering efforts.

Q: George Marema asked about the frequency component and system opportunity in the Golden Dome program and activities in Colorado operations.

A: Thomas McClelland said Golden Dome is in development with anticipation of significant involvement, and Colorado operations focus on quantum technology, low phase noise oscillators, and magnetometer development with hires from NIST.

Q: Chris Pokosky inquired about margins and shutdown impact.

A: Thomas McClelland stated lower margins were due to program delays, not funding interruptions, and shutdown affected contracting activities but requirements issues were resolved.

Q: Jeff Van Rhee asked about initial vs follow-on contract ratios and margin drivers.

A: Thomas McClelland explained initial contracts are typically 10% of total, with options for follow-ons, and margins depend on program mix.

Q: Michael Eisner asked about backlog sources and Colorado profitability.

A: Thomas McClelland said backlog is from a mix of new contracts and funding releases, and Colorado operations will be profitable with positive contribution.

Q: Brett Rice asked about growth opportunities and international business.

A: Thomas McClelland discussed defense spending being independent of politics and international business facing export controls and regional supplier emphasis.

Q: George Marema asked about Turbo in commercial drones and space data centers.

A: Thomas McClelland said Turbo could be in commercial and military drones (more in military initially) and space data centers, with radiation-hardened devices.

Q: William Bremer asked about international business.

A: Thomas McClelland mentioned international business exists but faces export controls and regional supplier trends.