Frequency Electronics Q1 Earnings Call Highlights

Frequency Electronics NASDAQ: FEIM reported record fiscal first-quarter 2027 revenue of $23.5 million, up 70% from a year earlier and 52% sequentially, as growth in satellite and U.S. government and defense programs lifted profitability and backlog to new highs.

President and Chief Executive Officer Thomas McClelland said the quarter provided a “strong proof point” for the company’s expectation of returning to growth in fiscal 2027.

The company said the results increased its confidence in meeting or exceeding its previously stated goal of at least $150 million in annual revenue by fiscal 2029, which ends April 30, 2029.

Frequency Electronics recorded gross margin of 45.8% and operating margin of 22% in the quarter, advancing toward its three-year minimum targets of 50% gross margin and 30% operating margin.

McClelland cautioned that progress in revenue and profitability may not follow a linear quarterly path, but said trends in backlog, pipeline, operational improvements and expected operating leverage support those longer-term objectives.

Funded backlog rose to a record $129 million at the end of July, up approximately 82% from the year-ago period and 16% from the prior quarter.

Chief Financial Officer Steven Bernstein said the reported backlog is fully funded, while the company does not include unfunded contract options in its reported backlog figures.

About 65% of the backlog is expected to convert within the next 12 months, he said.

The company reported a quarterly book-to-bill ratio of approximately 1.76-to-1.

Revenue from commercial and U.S. government communications satellite programs totaled $11.8 million, or about 50% of consolidated revenue, compared with $6.5 million in the prior-year period.

Revenue from non-space U.S. government and Department of Defense customers reached $11.1 million, or about 47% of revenue, compared with $6.9 million a year earlier.

Other commercial and industrial revenue was $605,000, representing about 3% of total revenue.

Bernstein said the 9 percentage-point improvement in gross-margin rate reflected higher production levels, labor and overhead efficiencies, product mix and efficiencies as programs mature.

Selling, general and administrative expense rose by about $500,000, primarily due to compensation, but fell to 18% of revenue from 26% a year earlier as revenue growth generated operating leverage.

Operating income increased to $5.2 million, or 22% of revenue, from $364,000 in the prior-year quarter.

Net income was approximately $4.2 million, or $0.41 per share, compared with $634,000, or $0.07 per share, a year earlier.

McClelland highlighted demand across the company’s traditional space and defense businesses as well as newer markets including proliferated satellites, quantum sensing, space exploration and alternative positioning, navigation and timing applications.