Frequency Electronics, Inc. Q3 FY2026 earnings call

• Thomas McClelland discussed the company's vision for growth in large and growing end markets like quantum sensing, proliferated satellites, and alternative position navigation and timing programs, built on core space and defense capabilities. - Announced two contracts valued at approximately $45 million, one in traditional space satellite programs and one in proliferated satellite paradigm. - January quarter end backlog was a new record, and new business will enter backlog in the current fiscal fourth quarter. - Discussed the company's involvement in defense programs including missile systems and the need for alternative position navigation and timing systems due to GPS jamming. - Mentioned participation in investor conferences in the fiscal fourth quarter.

For the three months ended January 31st, 2026, consolidated revenue was $16.9 million. Revenue from commercial and U.S. government satellite programs was approximately $4.2 million, or 25% of consolidated revenue. Revenues from non-space U.S. government and Department of Defense customers were $12.5 million, accounting for approximately 74% of consolidated revenue. Other commercial and industrial revenues were approximately $180,000. Gross margin and gross margin rate decreased compared to the prior year period due to a change in the mix of programs. Selling, general, and administrative expenses increased to 21% of consolidated revenue from 18% in the prior year. R&D expense increased to approximately $1.8 million. Operating income decreased. Fully funded backlog at the end of January 2026 was approximately $83 million, a new all-time high.

• Anticipated multiple awards in the coming months, some as large or larger than historical ones. - Believed backlog could be north of $100 million in the near future, and new business announced will help progress towards that. - Expect gross margin to move up over time with more unit production and follow-on business. - Operating leverage expected as additional revenue expands faster than expenses.

Q: Jeff Vanry with Craig Hallam asked about the proliferated win, learning in the marketplace, and details on the $45 million contracts.

A: Tom said technical edge leads to success, dodged details on size proportion of the $45 million contracts, and mentioned backlog impact.

Q: Chris Bukowski asked about proliferated satellites, gross margins on new program, and start of production.

A: Tom explained proliferated satellites, anticipated short-term lower gross margins on proliferated but strong margins long-term, and couldn't say when production starts.

Q: Michael Eisner asked about Golden Dome and name change.

A: Tom couldn't give specifics on Golden Dome and said they've thought about name changes but are sticking with the current name.

Q: Jeff Vannery followed up on bookings push-outs and backlog.

A: Steve said contracts pushed from Q3 to Q4, and Tom said $100 million backlog will be breached quickly.

Q: Robert Smith congratulated Tom.

A: Tom thanked him.

Q: Chris Bukowski followed up on alternative position and navigation.

A: Tom explained magnetic navigation and other alternatives, and said they're getting revenue from development funds.

Q: Sam Nelson asked about new contracts and backlog impact.

A: Tom said 10x approximation is valid but didn't provide specific guidance.