Frequency Electronics (FEIM) Q2 2026 earnings summary

Executive summary

• Q2 FY2026 revenue was $17.1 million, up 24% sequentially and 8.3% year-over-year, among the top three quarters in the past decade.

• Net income for Q2 was $1.8 million ($0.18/share), down from $2.7 million ($0.28/share) year-over-year; six-month net income was $2.4 million ($0.25/share), down from $5.1 million ($0.53/share).

• Operating income for Q2 was $1.7 million, down from $2.6 million year-over-year, with six-month operating income at $2.1 million, down from $5.0 million.

• Backlog reached a record $82 million at October 31, 2025, up from $70 million at April 30, 2025, with expectations to surpass $100 million in the near future.

• Growth is driven by core business and emerging opportunities in quantum sensing, proliferated satellites, and ALT-PNT programs.

Financial highlights

• Gross margin for Q2 was 38.2% ($6.5 million), down from 48.2% ($7.6 million) year-over-year; six-month gross margin was $11.6 million, down from $14.3 million.

• SG&A expenses increased 6.9% for the quarter, driven by payroll, stock-based compensation, and investments in growth.

• R&D expense decreased to $1.2 million (7% of revenue) from $1.6 million (10% of revenue) year-over-year, with a 25.7% quarterly and 24.8% six-month decline.

• Cash and cash equivalents at quarter-end were $3.0 million, with working capital of $31.3 million and a current ratio of 2.6.

• Net cash provided by operating activities was $0.6 million for six months, down from $2.4 million prior year.

Outlook and guidance

• Management expects continued multi-year growth, with new contract awards anticipated in the coming months and 69% of backlog to be realized in the next twelve months.

• Margins are expected to normalize as program requirements are resolved and new contracts begin.

• TURbO product line is projected to generate a few million dollars in the near term and up to $20 million in future years.

• Anticipates significant backlog growth in both non-space defense and space sectors.

• Expects Q3 and Q4 to benefit from reversal of government shutdown delays.