Frequency Electronics (NASDAQ: FEIM) posts weaker fiscal 2026 Q2 earnings
Frequency Electronics, Inc. reported higher quarterly revenue but sharply lower profitability for the quarter ended October 31, 2025. Revenue rose to $17.1 million from $15.8 million, driven mainly by growth in non-space U.S. Government/DoD business at the FEI-Zyfer segment, while satellite revenues declined. Gross margin fell to 38.2% from 48.2%, and net income declined to $1.8 million (basic and diluted EPS $0.18) from $2.7 million (EPS $0.28).
Over the first six months of fiscal 2026, revenue was essentially flat at $30.9 million, but operating income dropped to $2.1 million from $5.0 million and net income fell to $2.4 million from $5.1 million, as gross margin compressed to 37.5% from 46.3% and SG&A increased. The company ended October 31, 2025 with $31.3 million of working capital and $3.0 million of cash and cash equivalents, a funded backlog of about $82 million versus $70 million at April 30, 2025, and a new $20.0 million share repurchase authorization under which approximately $0.4 million had been used.
Positive
- None.
Negative
- Profitability deterioration: Six-month operating income fell to $2.1 million from $5.0 million and net income to $2.4 million from $5.1 million as gross margin dropped from 46.3% to 37.5% amid mix shift away from higher-margin satellite programs and higher SG&A.
Insights
Profits and margins fell sharply despite flat year-to-date revenue, while backlog and liquidity remain solid.
Frequency Electronics grew quarterly revenue to
Rising selling, general, and administrative expenses also pressured results. SG&A increased to
Despite weaker earnings, the balance sheet and demand indicators are comparatively strong. Working capital was about
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FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES
TABLE OF CONTENTS
| Page No. | ||
| Part I. Financial Information: | ||
| Item 1 - Financial Statements: | 3 | |
| Condensed Consolidated Balance Sheets – October 31, 2025 (unaudited) and April 30, 2025 | 3 | |
| Condensed Consolidated Statements of Operations – Three and Six Months Ended October 31, 2025 and 2024 (unaudited) | 4 | |
| Condensed Consolidated Statements of Cash Flows Six Months ended October 31, 2025 and 2024 (unaudited) | 5 | |
| Condensed Consolidated Statements of Changes in Stockholders’ Equity – Three and Six Months Ended October 31, 2025 and 2024 (unaudited) | 6-7 | |
| Notes to Condensed Consolidated Financial Statements (unaudited) | 8-15 | |
| Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations | 16-22 | |
| Item 3 - Quantitative and Qualitative Disclosures About Market Risk | 22 | |
| Item 4 - Controls and Procedures | 22 | |
| Part II. Other Information: | ||
| Item 1A – Risk Factors | 23 | |
| Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds | 23 | |
| Item 5 – Other Information | 24 | |
| Item 6 - Exhibits | 24 | |
| Signatures | 25 |
Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands, except par value)
| October 31, | April 30, | |||||||
| 2025 | 2025 | |||||||
| (UNAUDITED) | ||||||||
| ASSETS: | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net of allowances of $ | ||||||||
| Contract assets | ||||||||
| Inventories | ||||||||
| Prepaid income taxes | ||||||||
| Prepaid expenses and other | ||||||||
| Total current assets | ||||||||
| Property, plant, and equipment, net | ||||||||
| Deferred taxes | ||||||||
| Goodwill | ||||||||
| Cash surrender value of life insurance and assets held in trust | ||||||||
| Right-of-use assets – operating leases | ||||||||
| Restricted cash | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY: | ||||||||
| Current liabilities: | ||||||||
| Accounts payable – trade | $ | $ | ||||||
| Accrued liabilities | ||||||||
| Loss provision accrual | ||||||||
| Income taxes payable | ||||||||
| Operating lease liability - current portion | ||||||||
| Contract liabilities | ||||||||
| Total current liabilities | ||||||||
| Deferred compensation | ||||||||
| Operating lease liability – non-current portion | ||||||||
| Total liabilities | ||||||||
| Stockholders’ equity: | ||||||||
| Preferred stock - $ | ||||||||
| Common stock - $ | ||||||||
| Additional paid-in capital | ||||||||
| Retained earnings | ||||||||
| Common stock reacquired and held in treasury - at cost ( | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
See accompanying notes to condensed consolidated financial statements.
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FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
| Three Months Ended October 31, | Six Months Ended October 31, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Condensed Consolidated Statements of Operations | ||||||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of revenues | ||||||||||||||||
| Gross margin | ||||||||||||||||
| Selling and administrative expenses | ||||||||||||||||
| Research and development expenses | ||||||||||||||||
| Operating income | ||||||||||||||||
| Other income (expense): | ||||||||||||||||
| Income on investments | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other expense, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income before (benefit) provision for income taxes | ||||||||||||||||
| (Benefit) provision for income taxes | ( | ) | ( | ) | ||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||
| Net income per common share: | ||||||||||||||||
| Basic and diluted income per share | $ | $ | $ | $ | ||||||||||||
| Weighted average shares outstanding: | ||||||||||||||||
| Basic and diluted | ||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
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FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
| Six Months Ended October 31, | ||||||||
| 2025 | 2024 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | $ | ||||||
| Non-cash charges to earnings | ||||||||
| Net changes in operating assets and liabilities | ( | ) | ( | ) | ||||
| Net cash provided by operating activities | ||||||||
| Cash flows from investing activities: | ||||||||
| Purchase of fixed assets | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Payment of dividend | ( | ) | ||||||
| Purchase of treasury stock | ( | ) | ( | ) | ||||
| Net cash used in financing activities | ( | ) | ( | ) | ||||
| Net decrease in cash and cash equivalents and restricted cash | ( | ) | ( | ) | ||||
| Cash and cash equivalents and restricted cash at beginning of period | ||||||||
| Cash and cash equivalents and restricted cash at end of period | $ | $ | ||||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash paid during the period for: | ||||||||
| Interest | $ | $ | ||||||
| Income taxes | $ | |||||||
| Non-cash investing and financing activities: | ||||||||
| Right-of-use assets obtained in exchange for operating lease liabilities | $ | $ | ||||||
See accompanying notes to condensed consolidated financial statements.
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FREQUENCY ELECTRONICS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Changes in Stockholders’ Equity
Three and Six Months Ended October 31, 2025
(In thousands, except share data)
(Unaudited)
| Additional | Treasury stock | Accumulated other | ||||||||||||||||||||||||||||||
| Common stock | paid in | Retained | (at cost) | comprehensive | ||||||||||||||||||||||||||||
| Shares | Amount | capital | earnings | Shares | Amount | Income (loss) | Total | |||||||||||||||||||||||||
| Balance at April 30, 2025 | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||||
| Contribution of stock to 401(k) plan | - | - | - | - | ||||||||||||||||||||||||||||
| Stock-based compensation expense | - | - | - | - | ||||||||||||||||||||||||||||
| Shares withheld on employee taxes on vested equity awards | - | - | - | - | ( | ) | - | ( | ) | |||||||||||||||||||||||
| Net income | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Balance at July 31, 2025 | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||||
| Contribution of stock to 401(k) plan | - | - | - | - | ||||||||||||||||||||||||||||
| Stock-based compensation expense | - | - | - | - | ||||||||||||||||||||||||||||
| Shares withheld on employee taxes on vested equity awards | - | - | - | - | ( | ) | - | ( | ) | |||||||||||||||||||||||
| Net income | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Balance at October 31, 2025 | $ | $ | $ | $ | ( | ) | $ | - | $ | |||||||||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
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FREQUENCY ELECTRONICS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Changes in Stockholders’ Equity
Three and Six Months Ended October 31, 2024
(In thousands, except share data)
(Unaudited)
| Additional | Treasury stock | Accumulated other | ||||||||||||||||||||||||||||||
| Common stock | paid in | Accumulated | (at cost) | comprehensive | ||||||||||||||||||||||||||||
| Shares | Amount | capital | deficit | Shares | Amount | Income (loss) | Total | |||||||||||||||||||||||||
| Balance at April 30, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||||||
| Contribution of stock to 401(k) plan | - | - | - | - | ||||||||||||||||||||||||||||
| Stock-based compensation expense | - | - | - | - | ||||||||||||||||||||||||||||
| Shares withheld on employee taxes on vested equity awards | - | - | - | - | ( | ) | - | ( | ) | |||||||||||||||||||||||
| Exercise of stock options and stock appreciation rights - net of shares tendered for exercise price | ( | ) | - | - | - | - | - | |||||||||||||||||||||||||
| Dividends payable | - | - | ( | ) | - | - | - | - | ( | ) | ||||||||||||||||||||||
| Net income | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Balance at July 31, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||||||
| Contribution of stock to 401(k) plan | - | - | - | - | ||||||||||||||||||||||||||||
| Stock-based compensation expense | - | - | - | - | ||||||||||||||||||||||||||||
| Shares withheld on employee taxes on vested equity awards | - | - | - | - | ( | ) | - | ( | ) | |||||||||||||||||||||||
| Dividends payable | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Dividends paid | - | - | ( | ) | - | - | - | - | ( | ) | ||||||||||||||||||||||
| Net income | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Balance at October 31, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | $ | - | $ | |||||||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
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FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
NOTE A – CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In the opinion of management of Frequency Electronics, Inc. (the “Company”), the accompanying unaudited condensed consolidated interim financial statements reflect all adjustments (which include only normal recurring adjustments) necessary to present fairly, in all material respects, the condensed consolidated financial position of the Company as of October 31, 2025 and the results of its operations, changes in stockholders’ equity for the three and six months ended October 31, 2025 and 2024, and cash flows for the six months ended October 31, 2025 and 2024. The April 30, 2025 condensed consolidated balance sheet was derived from audited financial statements. These financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. These condensed consolidated interim financial statements should be read in conjunction with the annual consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended April 30, 2025, filed on July 18, 2025 with the Securities and Exchange Commission (the “Form 10-K”). The results of operations for such interim periods are not necessarily indicative of the operating results for the full fiscal year.
NOTE B – EARNINGS PER SHARE
Reconciliation of the weighted average shares outstanding for basic and diluted earnings per share (“EPS”) for the three and six months ended October 31, 2025 and 2024, respectively, were as follows:
| Periods ended October 31, | ||||||||||||||||
| Three months | Six months | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Weighted average shares outstanding: | ||||||||||||||||
| Basic EPS shares outstanding (weighted average) | ||||||||||||||||
| Effect of dilutive securities | ** | ** | ** | ** | ||||||||||||
| Diluted EPS shares outstanding | ||||||||||||||||
| ** |
On
July 22, 2024, the Company’s Board of Directors declared a special cash dividend of $
NOTE C – CONTRACT ASSETS AND LIABILITIES
Contract
assets primarily relate to the Company’s rights to consideration for work completed but not billed at the reporting date on contracts
with customers. Contract assets are transferred to accounts receivable when the rights become unconditional. Contract liabilities primarily
relate to contracts where advance payments or deposits have been received, but performance obligations have not yet been satisfied, and
therefore, revenue has not been recognized. During the three and six months ended October 31, 2025, we recognized $
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FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
NOTE D –EMPLOYEE BENEFIT PLANS
During
the three and six months ended October 31, 2025, the Company made contributions of
Deferred
compensation expense charged to selling and administrative expenses during the three and six months ended October 31, 2025, was approximately
$
The
whole-life insurance policies on the lives of certain participants covered by deferred compensation agreements have been placed in a
trust. Upon the death of any insured participant, cash received from life insurance policies in excess of the Company’s deferred
compensation obligations to the estate or beneficiaries of the deceased, are also placed in the trust. These assets belong to the Company
until a change of control event, as defined in the trust agreement, should occur. At that time, the Company is required to add sufficient
cash to the trust so as to match the deferred compensation liability described above. Such funds will be used to continue the deferred
compensation arrangements following a change of control. The life insurance policies amounted to $
NOTE E – INVENTORIES
Inventories, which are reported at the lower of cost or net realizable value, consisted of the following (in thousands):
| October 31, 2025 | April 30, 2025 | |||||||
| Raw materials and component parts | $ | $ | ||||||
| Work in progress | ||||||||
| Finished goods | ||||||||
| $ | $ | |||||||
NOTE F – RIGHT-OF-USE ASSETS AND LEASE LIABILITIES
The Company’s leases primarily represent offices, warehouses, vehicles, manufacturing and research and development (“R&D”) facilities, which expire at various times through 2030 and are operating leases. Contractual arrangements are evaluated at inception to determine if the agreement contains a lease. The leases contain renewal options, early termination, rent abatement, and escalation clauses that are factored into our determination of lease payments when appropriate. We include options to extend or terminate leases in the right-of-use (“ROU”) operating lease asset and liability when it is reasonably certain we will exercise these options. As of October 31, 2025, lease options were not included in the calculation of the ROU operating lease asset and liability. ROU assets and lease liabilities are recorded based on the present value of future lease payments which will factor in certain qualifying initial direct costs incurred as well as any lease incentives that may have been received. Lease expenses for operating lease payments are recognized on a straight-line basis over the lease term.
The Company elected the practical expedient for short-term leases which allows leases with terms of twelve months or less to be recorded on a straight-line basis over the lease term without being recognized on the consolidated balance sheet. The Company has also elected the practical expedient to account for lease and non-lease components as a single component.
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FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The table below presents ROU assets and liabilities recorded on the respective consolidated balance sheets as follows (in thousands):
| October 31, 2025 | April 30, 2025 | |||||||
| Assets | ||||||||
| Right-of-use assets - operating leases | $ | $ | ||||||
| Liabilities | ||||||||
| Operating lease liabilities, current portion | ||||||||
| Operating lease liabilities, non-current portion | ||||||||
| Total lease liabilities | $ | $ | ||||||
Total
operating lease expense was $
The maturities of lease liabilities at October 31, 2025 are as follows:
| Fiscal Year Ending April 30, | ||||
| (in thousands) | ||||
| Remainder of 2026 | $ | |||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| Thereafter | ||||
| Total lease payments | ||||
| Less imputed interest | ( | ) | ||
| Present value of future lease payments | ||||
| Less current obligations under leases | ( | ) | ||
| Long-term lease obligations | ||||
As
of October 31, 2025 and 2024, the weighted-average remaining lease term for all operating leases was
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FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
NOTE G – SEGMENT INFORMATION
The
Company operates under
| (1) | FEI-NY – operates out of New York and its operations consist principally of precision time and frequency control products used in
The FEI-NY segment also includes the operations of the Company’s wholly owned subsidiary, FEI-Elcom. FEI-Elcom, in addition to its own product line, provides design and technical support for the FEI-NY segment’s communication satellite business. |
| (2) | FEI-Zyfer – operates out of California and its products incorporate Global Positioning System (GPS) technologies into systems and subsystems for secure communications, both government and commercial, and other locator applications. This segment also provides sales and support for the Company’s wireline telecommunications family of products, including US5G, which are sold in the U.S. market. |
The Company measures segment performance based on total revenues and profits generated by each geographic location rather than on the specific types of customers or end-users. Consequently, the Company determined that the segments indicated above most appropriately reflect the way the Company’s chief operating decision maker (“CODM”) views the business.
The
accounting policies of the
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FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The tables below present segment revenues, significant segment expenses, which consist of segment cost of revenues and segment R&D expenses, and segment operating income for each reportable segment and on a consolidated basis as reported in the consolidated statements of operations for the three and six months ended October 31, 2025 and 2024 (in thousands):
| Periods ended October 31, | ||||||||||||||||
| Three months | Six months | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Revenues: | ||||||||||||||||
| FEI-NY | $ | $ | $ | $ | ||||||||||||
| FEI-Zyfer | ||||||||||||||||
| less intersegment revenues | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Consolidated revenues | $ | $ | $ | $ | ||||||||||||
| Cost of revenues: | ||||||||||||||||
| FEI-NY | $ | $ | $ | $ | ||||||||||||
| FEI-Zyfer | ||||||||||||||||
| Less intersegment cost of revenues | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Consolidated cost of revenues | $ | $ | $ | $ |
| Research and development expenses: | ||||||||||||||||
| FEI-NY | $ | $ | $ | $ | ||||||||||||
| FEI-Zyfer | ||||||||||||||||
| Consolidated research and development expenses | $ | $ | $ | $ |
| Operating income (loss): | ||||||||||||||||
| FEI-NY | $ | $ | $ | $ | ||||||||||||
| FEI-Zyfer | ||||||||||||||||
| Less intersegment operating income | ( | ) | ( | ) | ||||||||||||
| Corporate | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Consolidated operating income | $ | $ | $ | $ |
Included
in the determination of operating income is selling, general, and administrative expenses of $
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FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The tables below present the identifiable assets of each reportable segment and on a consolidated basis as reported in the consolidated balance sheets as of October 31, 2025 and April 30, 2025 and the depreciation and amortization charges related to these identifiable assets for the three and six months then ended (in thousands):
| October 31, 2025 | April 30, 2025 | |||||||
| Identifiable assets: | ||||||||
| FEI-NY | $ | $ | ||||||
| FEI-Zyfer | ||||||||
| less intersegment balances | ( | ) | ( | ) | ||||
| Corporate | ||||||||
| Consolidated identifiable assets | $ | $ | ||||||
| Periods ended October 31, | ||||||||||||||||
| Three months | Six months | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Depreciation and amortization: | ||||||||||||||||
| FEI-NY | $ | $ | $ | $ | ||||||||||||
| FEI-Zyfer | ||||||||||||||||
| Consolidated depreciation and amortization expense | $ | $ | $ | $ | ||||||||||||
Total
revenue recognized over time as Percentage of Completion (“POC”) and Passage of Title (“POT”) was approximately
$
The amounts by segment and product line were as follows (in thousands):
| Three Months Ended October 31, | ||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||
| POC Revenue | POT Revenue | Total Revenue | POC Revenue | POT Revenue | Total Revenue | |||||||||||||||||||
| FEI-NY | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| FEI-Zyfer | ||||||||||||||||||||||||
| Less: intersegment | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Revenue | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Six Months Ended October 31, | ||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||
| POC Revenue | POT Revenue | Total Revenue | POC Revenue | POT Revenue | Total Revenue | |||||||||||||||||||
| FEI-NY | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| FEI-Zyfer | ||||||||||||||||||||||||
| Less: intersegment | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Revenue | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
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FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
| Periods ended October 31, | ||||||||||||||||
| Three months | Six months | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Revenues by product line: | ||||||||||||||||
| Satellite revenue | $ | $ | $ | $ | ||||||||||||
| Government non-space revenue | ||||||||||||||||
| Other commercial & industrial revenue | ||||||||||||||||
| Consolidated revenues | $ | $ | $ | $ | ||||||||||||
NOTE H – INVESTMENT IN MORION, INC.
The Company has an investment in Morion, Inc., a privately-held Russian company, which manufactures high precision quartz resonators and crystal oscillators. The Company has also previously licensed certain technology to Morion.
The
Company’s investment consists of
During
the three and six months ended October 31, 2025 and 2024, the Company did
Prior purchases of materials from Morion consisted primarily of quartz crystal blanks, which were used in the fabrication of quartz resonators. However, on October 30, 2024, the U.S. Department of Treasury’s Office of Foreign Assets Control designated Morion as a Specially Designated National, resulting in the blocking of all Morion property and property interests. As a result, the Company has terminated all commercial relationships with Morion, including the licensing of technology to Morion and the purchase of any products from Morion. The Company has established alternate sources of supply with respect to items previously acquired from Morion. The Company is also capable of fabricating the crystal blanks in-house.
NOTE I – RESTRICTED CASH
As
of October 31, 2025 and April 30, 2025, restricted cash consisted of approximately $
A reconciliation of cash and cash equivalents and restricted cash from the condensed consolidated balance sheets to the condensed consolidated statements of cash flows is shown below (in thousands):
| October 31, 2025 | April 30, 2025 | |||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Total cash and cash equivalents and restricted cash | $ | $ | ||||||
NOTE J – RECENT ACCOUNTING PRONOUNCEMENTS
In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). The amendments in ASU 2023-09 aim to enhance the transparency and decision usefulness of income tax disclosures. ASU 2023-09 will be effective for the Company’s Annual Report on Form 10-K for the year ending April 30, 2026, with early adoption permitted. The Company is currently evaluating the impact of this update on its consolidated financial statements.
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FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
NOTE K – DEFERRED INCOME TAXES
Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, which will result in taxable or deductible amounts in the future.
On July 4, 2025, President
Trump signed H.R.1, the One Big Beautiful Bill Act (“OBBBA”) into law. In accordance with U.S. GAAP, the Company accounted
for the tax effects of changes in tax law in the period of enactment during the first quarter of fiscal year 2026. The OBBBA made changes
to the U.S. tax code, including, but not limited to: (1) allowing taxpayers to fully deduct domestic research expenditures for tax years
beginning after December 31, 2024, (2) provides a catch-up relief provision for taxpayers to accelerate deductions for unamortized domestic
research expenditures, (3) provides a permanent provision for
As required by the authoritative guidance on accounting for income taxes, we evaluate the realization of deferred tax assets on a jurisdictional basis at each reporting date. We consider all positive and negative evidence, including the reversal of deferred tax liabilities, projected future taxable income, tax planning strategies, and results of recent operations. Accounting for income taxes requires that a valuation allowance be established when it is more likely than not that all or a portion of the deferred tax assets will not be realized. In circumstances where there is sufficient negative evidence indicating that the deferred tax assets will not be realizable, we establish a valuation allowance. In general, the favorable research and expenditure provisions and permanent bonus depreciation provision will allow the Company to accelerate deductions and reduce cash taxes. The enactment of the OBBBA did not have a material impact on our provision or effective tax rate as of October 31, 2025. We continue to evaluate the OBBBA and its requirements, as well as its application to our business and its impact on cash taxes and our effective tax rate.
As of October 31, 2025, the
Company maintains a valuation allowance of $
NOTE L – PRODUCT WARRANTIES
The Company generally provides
its customers with a one-year warranty regarding the manufactured quality and functionality of its products. The Company establishes warranty
reserves based on its product history, current information on repair costs and annual sales levels.
| October 31, 2025 | April 30, 2025 | |||||||
| Balance at beginning of year | $ | $ | ||||||
| Warranty costs incurred | ( | ) | ( | ) | ||||
| Product warranty accrual | ||||||||
| Balance at end of year | $ | $ | ||||||
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FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995:
The statements in this Quarterly Report on Form 10-Q (“Form 10-Q”) regarding future earnings and operations and other statements relating to the future constitute “forward-looking” statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements inherently involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Factors that would cause or contribute to such differences include but are not limited to, our inability to integrate operations and personnel, actions by significant customers or competitors, general domestic and international economic conditions, reliance on key customers, including the U.S government, continued acceptance of the Company’s products in the marketplace, competitive factors, new products and technological changes, product prices and raw material costs, dependence upon third-party vendors, other supply chain related issues, increasing costs for materials, operating related expenses, competitive developments, changes in manufacturing and transportation costs, the availability of capital, the outcome of any litigation and arbitration proceedings, and failure to maintain an effective system of internal controls over financial reporting. The factors listed above are not exhaustive. Other sections of this Form 10-Q and in Part I, Item 1A (Risk Factors) of the Company’s Annual Report on Form 10-K for the fiscal year ended April 30, 2025 (the “Form 10-K”) include additional factors that could materially and adversely impact the Company’s business, financial condition and results of operations. Moreover, the Company operates in a very competitive and rapidly changing environment. New factors emerge from time to time and it is not possible for management to predict the impact of all these factors on the Company’s business, financial condition or results of operations or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not rely on forward-looking statements as a prediction of actual results. Any or all of the forward-looking statements contained in this Form 10-Q and any other public statement made by the Company or its management may turn out to be incorrect. The Company expressly disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
Critical Accounting Policies and Estimates
The Company believes its most critical accounting policies to be the recognition of revenue and costs on production contracts and the valuation of inventory. Both of these areas require the Company to make use of reasonable estimates including estimating the cost to complete a contract, the realizable value of its inventory and the market value of its products. Changes in estimates can have a material impact on the Company’s financial position and results of operations. The Company’s significant accounting policies did not change during the three and six months ended October 31, 2025.
Revenue Recognition
Revenues are reported in operating results predominantly over time using the cost-to-cost method. Under this method, revenue is recorded based upon the ratio that incurred costs bear to total estimated contract costs with related cost of revenues recorded as the costs are incurred. Each month management reviews estimated contract costs through a process of aggregating actual costs incurred and estimating additional costs to completion based upon the current available information regarding labor, outside services, materials, overhead costs, and status of the contract. The effect of any change in the estimated gross margin rate (“GM Rate”) for a contract is reflected in revenues in the period in which the change is known. Provisions for the full amount of anticipated losses on contracts are made in the period in which they become determinable.
Significant judgment is used in evaluating the financial information for certain contracts to determine an appropriate budget and estimated cost. The Company evaluates this information continuously and bases its judgments on historical experience, design specifications, and expected costs for material and labor.
Inventories
In accordance with industry practice, inventoried costs contain amounts relating to contracts and programs with long production cycles, a portion of which will not be realized within one year. Inventory write downs are established for slow-moving materials based on percentage of usage over a ten-year period, obsolete items on a gradual basis over five years with no usage and costs incurred on programs for which production-level orders cannot be determined as probable. Such write-downs are based upon management’s experience and estimates for future business. Any changes arising from revised estimates are reflected in cost of revenues in the period the revision is made.
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FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES
(Continued)
Income Taxes
We are subject to income taxes in the U.S. and significant judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets that are not more likely than not to be realized. We monitor the realizability of our deferred tax assets taking into account all relevant factors at each reporting period. In completing our assessment of realizability of our deferred tax assets, we consider our history of income (loss) measured at pre-tax income (loss) adjusted for permanent book-tax differences on a jurisdictional basis, volatility in actual earnings, excess tax benefits related to stock-based compensation in recent prior years and impacts of the timing of reversal of existing temporary differences. We also rely on our assessment of the Company’s projected future results of business operations, including uncertainty in future operating results relative to historical results, volatility in the market price of our common stock and its performance over time, variable macroeconomic conditions impacting our ability to forecast future taxable income, and changes in business that may affect the existence and magnitude of future taxable income. Our valuation allowance assessment is based on our best estimate of future results considering all available information.
Our provision for or benefit from income taxes for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter, we update our estimate of the annual effective tax rate, and if our estimated tax rate changes, we make a cumulative adjustment.
RESULTS OF OPERATIONS
The table below sets forth for the three and six months ended October 31, 2025 and 2024, respectively, the percentage of consolidated revenues represented by certain items in the Company’s condensed consolidated statements of operations or notes to the condensed consolidated financial statements:
| Three months | Six months | |||||||||||||||
| Periods ended October 31, | ||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Revenues | ||||||||||||||||
| FEI-NY | 63.0 | % | 72.8 | % | 68.3 | % | 72.8 | % | ||||||||
| FEI-Zyfer | 41.3 | 28.8 | 34.9 | 28.6 | ||||||||||||
| Less intersegment revenues | (4.3 | ) | (1.6 | ) | (3.2 | ) | (1.4 | ) | ||||||||
| 100.0 | 100.0 | 100.0 | 100.0 | |||||||||||||
| Cost of revenues | 61.8 | 51.8 | 62.5 | 53.7 | ||||||||||||
| Gross margin | 38.2 | 48.2 | 37.5 | 46.3 | ||||||||||||
| Selling and administrative expenses | 21.2 | 21.4 | 23.3 | 20.2 | ||||||||||||
| Research and development expenses | 7.0 | 10.2 | 7.5 | 10.0 | ||||||||||||
| Operating income | 10.0 | 16.6 | 6.7 | 16.1 | ||||||||||||
| Other income, net | 0.3 | 1.1 | 0.8 | 1.2 | ||||||||||||
| (Benefit) provision for income taxes | (0.2 | ) | 0.9 | (0.4 | ) | 0.9 | ||||||||||
| Net income | 10.5 | % | 16.8 | % | 7.9 | % | 16.4 | % | ||||||||
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(Continued)
Revenues
| Three months | Six months | |||||||||||||||||||||||||||||||
| Periods ended October 31, | ||||||||||||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||||||||
| Segment | 2025 | 2024 | Change | 2025 | 2024 | Change | ||||||||||||||||||||||||||
| FEI-NY | $ | 10,794 | $ | 11,518 | $ | (724 | ) | (6.3 | )% | $ | 21,148 | $ | 22,494 | $ | (1,346 | ) | (6.0 | )% | ||||||||||||||
| FEI-Zyfer | 7,065 | 4,559 | 2,506 | 55.0 | 10,783 | 8,831 | 1,952 | 22.1 | ||||||||||||||||||||||||
| Intersegment revenues | (732 | ) | (257 | ) | (475 | ) | 184.8 | (992 | ) | (427 | ) | (565 | ) | 132.3 | ||||||||||||||||||
| $ | 17,127 | $ | 15,820 | $ | 1,307 | 8.3 | % | $ | 30,939 | $ | 30,898 | $ | 41 | 0.1 | % | |||||||||||||||||
For the three months ended October 31, 2025, revenues from commercial and U.S. Government communication satellite programs accounted for approximately 27% of consolidated revenues compared to approximately 59% of consolidated revenues during this same period in the prior fiscal year. Revenues are recognized primarily over time under the percentage-of-completion (“POC”) method. Revenues from the satellite market are recorded in the FEI-NY segment. Revenues from non-space U.S. Government/Department of Defense (“DOD”) customers, which are recorded in both the FEI-NY and FEI-Zyfer segments, accounted for approximately 70% of consolidated revenues for the three months ended October, 31, 2025 compared to approximately 37% of consolidated revenue during the same period in the prior fiscal year. Other commercial and industrial revenues for the three months ended October 31, 2025 accounted for approximately 3% of consolidated revenue compared to 4% in the same period of the prior fiscal year.
The revenue for the three months ended October, 31, 2025 was higher than revenues in the prior period due to an increase in non-space DOD products, in the FEI-Zyfer segment. This increase was in both shipment-based products as well as products accounted for under the POC method.
For the six months ended October 31, 2025, revenues from commercial and U.S. Government communication satellite programs accounted for approximately 36% of consolidated revenues compared to approximately 57% of consolidated revenues during this same period in the prior fiscal year. Revenues from non-space U.S. Government/DOD customers accounted for approximately 61% of consolidated revenues for the six months ended October, 31, 2025 compared to approximately 39% of consolidated revenue during the same period in the prior fiscal year. Other commercial and industrial revenues for the six months ended October 31, 2025 accounted for approximately 3% of consolidated revenue compared to 4% in the same period of the prior fiscal year. The slight increase in revenue for this six month period, compared to the same period in the previous fiscal year, was attributable to the FEI-Zyfer segment and the increased demand for non-space DOD products.
Gross Margin
| Three months | Six months | |||||||||||||||||||||||||||||||
| Periods ended October 31, | ||||||||||||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||||||||
| 2025 | 2024 | Change | 2025 | 2024 | Change | |||||||||||||||||||||||||||
| $ | 6,536 | $ | 7,619 | $ | (1,083 | ) | (14.2 | )% | $ | 11,618 | $ | 14,318 | $ | (2,700 | ) | (18.9 | )% | |||||||||||||||
| Gross margin rate | 38.2 | % | 48.2 | % | 37.5 | % | 46.3 | % | ||||||||||||||||||||||||
For the three months and six months ended October 31, 2025, both gross margin (“GM”) and GM Rate decreased compared to the same periods in the prior fiscal year. The decrease in GM and GM Rate were attributable to a change in the mix of high margin production satellite programs in the prior year periods versus lower margin programs with significant non-recurring engineering (“NRE”) effort during the three and six months ended October 31, 2025.
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FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES
(Continued)
Selling, General, and Administrative Expenses
| Three months | Six months | |||||||||||||||||||||||||||||
| Periods ended October 31, | ||||||||||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||||||
| 2025 | 2024 | Change | 2025 | 2024 | Change | |||||||||||||||||||||||||
| $ | 3,623 | $ | 3,388 | $ | 235 | 6.9 | % | $ | 7,207 | $ | 6,234 | $ | 973 | 15.6 | % | |||||||||||||||
For the three months ended October 31, 2025 and 2024, selling, general, and administrative (“SG&A”) expenses were approximately 21% of consolidated revenues in both periods. For the six months ended October 31, 2025 and 2024, SG&A expenses were approximately 23% and 20%, respectively, of consolidated revenues. The increase in SG&A expenses during the three months ended October 31, 2025 was due to fluctuations in the various expense accounts that make up SG&A. For the six months ended October 31, 2025 an increase in payroll related expenses, including stock-based compensation, and investments in the future growth of the Company, including expansion into Colorado and Quantum sensing, resulted in increased SG&A expenses. These increased SG&A expenses are expected to continue through the remainder of fiscal year 2026.
Research and Development Expenses
| Three months | Six months | |||||||||||||||||||||||||||||
| Periods ended October 31, | ||||||||||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||||||
| 2025 | 2024 | Change | 2025 | 2024 | Change | |||||||||||||||||||||||||
| $ | 1,199 | $ | 1,613 | $ | (414 | ) | (25.7 | )% | $ | 2,332 | $ | 3,101 | $ | (769 | ) | (24.8 | )% | |||||||||||||
Research and Development (“R&D”) expenditures represent investments intended to keep the Company’s products at the leading edge of time and frequency technology and enhance future competitiveness. Fluctuations in R&D expenditures will occur in some periods due to current operational needs supporting ongoing programs. The Company plans to continue to invest in R&D in the future to keep its products at the state of the art.
Operating Income
| Three months | Six months | |||||||||||||||||||||||||||||
| Periods ended October 31, | ||||||||||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||||||
| 2025 | 2024 | Change | 2025 | 2024 | Change | |||||||||||||||||||||||||
| $ | 1,714 | $ | 2,618 | $ | (904 | ) | (34.5 | )% | $ | 2,079 | $ | 4,983 | $ | (2,904 | ) | (58.3 | )% | |||||||||||||
For the three and six months ended October 31, 2025, operating income decreased due to lower gross margin and increased SG&A as described above.
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FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES
(Continued)
Other Income (Expense), net
| Three months | Six months | |||||||||||||||||||||||||||||||
| Periods ended October 31, | ||||||||||||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||||||||
| 2025 | 2024 | Change | 2025 | 2024 | Change | |||||||||||||||||||||||||||
| Investment income, net | $ | 153 | $ | 203 | $ | (50 | ) | (24.6 | )% | $ | 371 | $ | 427 | $ | (56 | ) | (13.1 | )% | ||||||||||||||
| Interest expense | (22 | ) | (27 | ) | 5 | (18.5 | ) | (46 | ) | (53 | ) | 7 | (13.2 | ) | ||||||||||||||||||
| Other expense, net | (75 | ) | (1 | ) | (74 | ) | NM | (77 | ) | (1 | ) | (76 | ) | NM | ||||||||||||||||||
| $ | 56 | $ | 175 | $ | (119 | ) | (68.0 | )% | $ | 248 | $ | 373 | $ | (125 | ) | (33.5 | )% | |||||||||||||||
Other income (expense), net is derived from various sources. The other income (expense), net can come from reclaiming of metal, refunds, interest on deferred trust assets, or the sale of a fixed asset. Interest expense is related to the deferred compensation payments made to retired employees. The majority of the approximately $0.2 million and $0.4 million of investment income for the three and six months ended October 31, 2025, respectively, was from interest income and unrealized gains on assets held in the Frequency Electronics, Inc. Deferred Compensation Trust.
(Benefit) Provision for Income Tax
| Three months | Six months | |||||||||||||||||||||||||||||
| Periods ended October 31, | ||||||||||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||||||
| 2025 | 2024 | Change | 2025 | 2024 | Change | |||||||||||||||||||||||||
| $ | (31 | ) | $ | 139 | $ | (170 | ) | (122.3 | )% | $ | (108 | ) | $ | 272 | $ | (380 | ) | (139.7 | )% | |||||||||||
| Three months | Six months | |||||||||||||||
| Periods ended October 31, | ||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Effective tax rate on pre-tax book income: | (1.7 | )% | 5.0 | % | (4.6 | )% | 5.1 | % | ||||||||
On July 4, 2025, President Trump signed the OBBBA into law. In accordance with U.S. GAAP, the Company accounted for the tax effects of changes in tax law in the period of enactment during the first quarter of fiscal year 2026. The OBBBA made changes to the U.S. tax code, including, but not limited to: (1) allowing taxpayers to fully deduct domestic research expenditures for tax years beginning after December 31, 2024, (2) provides a catch-up relief provision for taxpayers to accelerate deductions for unamortized domestic research expenditures, (3) a permanent provision for 100% bonus depreciation deductions for most tangible personal property with a recovery period of 20 years or less, acquired and placed in service after January 19, 2025, and (4) for tax years beginning after December 31, 2024, restores Adjusted Taxable Income by adding back amortization and depreciation to calculate the limitation on interest deductions (effectively returning to EBITDA).
The estimated annual effective tax rate for the fiscal year ending April 30, 2026 is 21.69%. This calculation reflects an estimated income tax expense based on our current fiscal year annual pretax income forecast which includes non-deductible expenses, estimated research and development credits, and state income taxes. The estimate of the annual effective tax rate is based on evaluations of possible future events and may be subject to revision in future reporting periods.
For the three months ending October 31, 2025, the Company recorded an income tax benefit of $30,644 which includes a discrete income tax benefit of $418,766. The discrete income tax benefit is primarily due to stock compensation windfall deductions and a remeasurement of the net deferred tax asset due to a new state filing. The calculation of the overall income tax provision consists of current U.S. federal and state income taxes. For the three months ending October 31, 2024, the Company recorded an income tax provision of $138,592 which included a discrete tax income benefit of $9,577.
For the six months ended October 31, 2025, the Company recorded an income tax benefit of $107,915 which includes a discrete tax benefit of $612,685. The discrete income tax benefit is primarily due to stock compensation windfall deductions and a remeasurement of the net deferred tax asset due to a new state filing. The calculation of the overall income tax provision consists of current U.S. federal and state income taxes. For the six months ended October 31, 2024, the Company recorded an income tax provision of $271,522 which includes a discrete tax benefit of $4,222.
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FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES
(Continued)
The effective tax rate for the three months ended October 31, 2025 was an income tax benefit of 1.73% on pretax income of $1.8 million compared to an income tax provision of 4.96% on pretax income of $2.8 million in the comparable prior fiscal year period. The effective tax rate for the three months ended October 31, 2025 differs from the U.S. federal statutory rate of 21% primarily due to non-deductible expenses, state income taxes, R&D credits and discrete items.
The effective tax rate for the six months ended October 31, 2025 was an income tax benefit of 4.64% on pretax income of $2.3 million compared to an income tax provision of 5.07% on pretax income of $5.4 million in the comparable prior fiscal year period. The effective tax rate for the six months ended October 31, 2025 differs from the U.S. federal statutory rate of 21% primarily due to non-deductible expenses, state income taxes, R&D credits and discrete items.
LIQUIDITY AND CAPITAL RESOURCES
The Company’s consolidated balance sheets continue to reflect a strong working capital position of approximately $31.3 million at October 31, 2025 and approximately $29.7 million at April 30, 2025. Included in working capital at October 31, 2025 and April 30, 2025 was $3.0 million and $4.7 million, respectively, of cash and cash equivalents. The Company’s current ratio was 2.6 to 1 at October 31, 2025 compared to 2.3 to 1 as of April 30, 2025.
Net cash provided by operating activities for the six months ended October 31, 2025 and 2024 was approximately $0.6 million and $2.4 million, respectively. The decrease in net cash provided by operating activities in the first six months of fiscal 2026 as compared to the prior fiscal year period was primarily due to timing of billings and cash collections and a decrease in net income. For the six months ended October 31, 2025 and 2024, the Company incurred approximately $2.7 million and $2.5 million, respectively, of non-cash operating expenses including amortization of ROU assets, depreciation and amortization, inventory net realizable value adjustments, deferred compensation, and accruals for employee benefit programs.
Net cash used in investing activities for the six months ended October 31, 2025 and 2024 was approximately $1.4 million and $0.8 million, respectively, all relating to purchases of capital expenditures.
Net cash used in financing activities for the six months ended October 31, 2025 was $1.0 million, all related to purchase of treasury stock. Net cash used in financing activities for the six months ended October 31, 2024 was $9.7 million, of which $9.6 million was related to the payout of a special cash dividend of $1.00 per share of common stock paid on August 29, 2024.
In March 2005, the Company’s Board of Directors authorized the repurchase of up to $5.0 million worth of shares of the Company’s common stock. On September 9, 2025, the Company’s Board of Directors approved a new share repurchase authorization in the amount of $20.0 million. Under this new share repurchase authorization, the Company’s shares of common stock may be purchased on a discretionary basis from time to time, subject to general business and market conditions and other investment opportunities, through open market purchases, privately negotiated transactions or other means. This repurchase program may be suspended or discontinued at any time without notice. The new share repurchase authorization replaced the Company’s existing share repurchase authorization under which approximately $0.6 million remained. This new share repurchase authorization does not have an expiration date.
During the three months ended October 31, 2025, the Company acquired 10,219 shares at a weighted average share price of $36.72 per share. The Company acquired these shares to satisfy tax withholding requirements upon the vesting of previously granted RSU awards. As of October 31, 2025, the Company had repurchased approximately $0.4 million of its common stock out of the $20.0 million authorized under the new share repurchase authorization. During the three months ended October 31, 2024, the Company repurchased 7,893 shares of outstanding common stock at $12.62 per share, respectively.
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FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES
(Continued)
The Company will continue to expend resources for R&D to develop, improve and acquire products for space applications, guidance and targeting systems, and communication systems that management believes will result in future growth and profitability. The Company anticipates securing additional customer funding for a portion of its R&D activities and will allocate internal funds depending on market conditions and identification of new opportunities. The Company expects internally generated cash will be adequate to fund these R&D efforts. The Company may also pursue acquisitions to expand its range of products and may use internally generated cash and external funding in connection with such acquisitions.
As of October 31, 2025, the Company’s consolidated funded backlog was approximately $82 million compared to approximately $70 million at April 30, 2025. Approximately 69% of the backlog, as of October 31, 2025, is expected to be realized in the next twelve months. The Company excludes from backlog any contracts or awards for which it has not received authorization to proceed. On fixed price contracts, the Company excludes any unfunded portion. Over time, as partially funded contracts become fully funded, the Company will add the additional funding to its backlog. The backlog is subject to change for various reasons, including possible cancellation of orders, change orders, terms of the contracts and other factors beyond the Company’s control. Accordingly, the backlog is not necessarily indicative of future revenues or profits (losses) which may be realized when the results of such contracts are reported.
The Company believes that its liquidity is adequate to meet its short-term operating and investment needs through at least December 12, 2026 and its long-term operation and investment needs for the foreseeable future thereafter.
The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to investors.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not applicable to smaller reporting companies.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on their evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that as of October 31, 2025, the Company’s disclosure controls and procedures were effective at a reasonable assurance level.
There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.
Changes in Internal Control Over Financial Reporting
There have been no changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended October 31, 2025 that has materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
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PART II. OTHER INFORMATION
Item 1A. Risk Factors
As disclosed in “Item 1A. Risk Factors” in the Form 10-K, there are a number of risks and uncertainties that could have a material adverse effect on the Company’s business, financial position, results of operations and/or cash flows. There are no material updates or changes to the Company’s risk factors since the filing of the Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Share Repurchases
The following table presents the share repurchase activity for the quarter ended October 31, 2025:
| Period | Total number of shares purchased (1) (2) | Average price paid per share | Total number of shares purchased as part of the publicly announced plan or program | Approximate dollar value of shares that may yet be purchased under the plan or program | ||||||||||||
| August 1 - 31, 2025 | - | - | - | $ | 555,912 | |||||||||||
| September 1 - 30, 2025 | - | - | - | $ | 20,000,000 | |||||||||||
| October 1 - 31, 2025 | 10,219 | $ | 36.72 | 10,219 | $ | 19,624,758 | ||||||||||
| Total | 10,219 | 10,219 | $ | 19,624,758 | ||||||||||||
| (1) | In March 2005, the Company’s Board of Directors authorized the repurchase of up to $5.0 million worth of shares of the Company’s common stock. On September 9, 2025, the Company’s Board of Directors approved a new share repurchase authorization in the amount of $20.0 million. Under this new share repurchase authorization, the Company’s shares of common stock may be purchased on a discretionary basis from time to time, subject to general business and market conditions and other investment opportunities, through open market purchases, privately negotiated transactions or other means. This repurchase program may be suspended or discontinued at any time without notice. The new share repurchase authorization replaced the Company’s existing share repurchase authorization under which approximately $0.6 million remained. This new share repurchase authorization does not have an expiration date. |
| (2) | Represents shares withheld with respect to stock-based awards to satisfy required tax withholding obligations for the month of October 2025. There were no shares withheld or otherwise repurchased during the months of August 2025 and September 2025. |
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Item 5. Other Information
During the
three months ended October 31, 2025, no director or officer of the Company
Item 6. Exhibits
| 31.1 - | Certification by the Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 31.2 - | Certification by the Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 32 - | Certifications by the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 101- | The following materials from the Frequency Electronics, Inc. Quarterly Report on Form 10-Q for the quarter ended October 31, 2025 formatted in eXtensible Business Reporting Language (XBRL): (i) Cover Page, (ii) Condensed Consolidated Balance Sheets, (iii) Condensed Consolidated Statements of Operations and Comprehensive Income (Loss), (iv) Condensed Consolidated Statements of Cash Flows, (v) Condensed Consolidated Statements of Changes in Stockholders’ Equity and (vi) Notes to Condensed Consolidated Financial Statements. The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within Inline XBRL document. | |
| 104- | Cover Page Interaction Data File (formatted as inline XBRL and contained in Exhibit 101). |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| FREQUENCY ELECTRONICS, INC. | ||
| Dated: December 15, 2025 | ||
| By: | /s/ Thomas McClelland | |
| Thomas McClelland | ||
| President and Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| By: | /s/ Steven L. Bernstein | |
| Steven L. Bernstein | ||
| Chief Financial Officer, Secretary and Treasurer | ||
| (Principal Financial and Accounting Officer) | ||
25
FAQ
How did Frequency Electronics (FEIM) perform in the quarter ended October 31, 2025?
Frequency Electronics generated quarterly revenue of $17.1 million, up from $15.8 million a year earlier. Net income declined to $1.8 million (basic and diluted EPS $0.18) from $2.7 million (EPS $0.28), as gross margin narrowed to 38.2% from 48.2%.
What drove the change in Frequency Electronics (FEIM) revenue mix and margins?
For the three months ended October 31, 2025, satellite programs made up about 27% of consolidated revenue versus about 59% a year earlier, while non-space U.S. Government/DoD revenue rose to about 70% from about 37%. This shift toward lower-margin work and programs with significant non-recurring engineering contributed to gross margin declining year over year.
How did Frequency Electronics (FEIM) results for the first six months of fiscal 2026 compare to the prior year?
For the six months ended October 31, 2025, revenue was $30.9 million, essentially flat with $30.9 million in the prior-year period. Operating income fell to $2.1 million from $5.0 million, and net income declined to $2.4 million from $5.1 million, reflecting a gross margin decrease to 37.5% from 46.3% and higher SG&A expenses.
What is Frequency Electronics (FEIM) current backlog and revenue visibility?
As of October 31, 2025, the company reported a consolidated funded backlog of approximately $82 million, up from about $70 million at April 30, 2025. Management stated that roughly 69% of this backlog is expected to be realized as revenue within the next twelve months.
What is the liquidity position of Frequency Electronics (FEIM)?
At October 31, 2025, the company had total assets of $92.3 million and total liabilities of $33.8 million. Working capital was about $31.3 million, including $3.0 million of cash and cash equivalents and $1.4 million of restricted cash. Management stated it believes liquidity is adequate for operating and investment needs.
Did Frequency Electronics (FEIM) pay dividends or repurchase shares during this period?
For the six months ended October 31, 2025, the company did not pay dividends, compared with a special $1.00 per share cash dividend (about $9.6 million) in the prior-year period. It used about $1.0 million for treasury stock purchases, including 10,219 shares acquired at an average price of $36.72 during October 2025.
What share repurchase authorization does Frequency Electronics (FEIM) have in place?
On September 9, 2025, the board approved a new $20.0 million share repurchase authorization, replacing a prior program with about $0.6 million remaining. Under the new authorization, approximately $0.4 million of common stock had been repurchased as of October 31, 2025, with about $19.6 million still available.
