Frequency Electronics(FEIM) - 2026 Q2 - Quarterly Report

Financial Performance - Revenues for the three months ended October 31, 2025, increased to $17,127 thousand, up 8.2% from $15,820 thousand in the same period last year[14] - Net income for the three months ended October 31, 2025, was $1,801 thousand, down 32.2% from $2,654 thousand in the prior year[14] - Total operating income for the three months ended October 31, 2025, was $1.7 million, down from $2.6 million in the same period of 2024, a decline of 34.6%[42] - Operating income for the three months ended October 31, 2025, was $1,714,000, a decrease of 34.5% from $2,618,000 in the prior year[77] - 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 prior year[84] Assets and Liabilities - Total current assets decreased to $50,919 thousand as of October 31, 2025, from $53,106 thousand as of April 30, 2025, reflecting a decline of 4.1%[12] - Total liabilities decreased to $33,800 thousand as of October 31, 2025, down 11.8% from $38,117 thousand as of April 30, 2025[12] - Total identifiable assets as of October 31, 2025, were $92.3 million, slightly down from $93.7 million as of April 30, 2025[45] - The total lease liabilities as of October 31, 2025, amounted to $8.4 million, a decrease from $8.8 million as of April 30, 2025[34] Cash Flow - The company reported a net cash provided by operating activities of $638 thousand for the six months ended October 31, 2025, compared to $2,352 thousand in the prior year, a decline of 72.9%[17] - Net cash provided by operating activities decreased to approximately $0.6 million for the six months ended October 31, 2025, down from $2.4 million in the prior year, primarily due to timing of billings and cash collections[87] - Net cash used in investing activities increased to approximately $1.4 million for the six months ended October 31, 2025, compared to $0.8 million in the prior year, all related to capital expenditures[88] Research and Development - Research and development expenses for the six months ended October 31, 2025, were $2,332 thousand, down 24.8% from $3,101 thousand in the same period last year[14] - Research and development (R&D) expenses for the three months ended October 31, 2025, were $1,199,000, a decrease of 25.7% from $1,613,000 in the prior year[76] - The company plans to continue investing in R&D to maintain competitiveness in time and frequency technology[76] - The company plans to continue investing in R&D for products related to space applications and communication systems, anticipating additional customer funding for these activities[93] Stockholder Equity and Dividends - Total stockholders' equity increased to $58,455 thousand as of October 31, 2025, up from $55,620 thousand as of April 30, 2025, reflecting a growth of 3.3%[12] - The company did not pay any dividends during the six months ended October 31, 2025, compared to $9,567 thousand in the same period last year[17] - The company declared a special cash dividend of $1.00 per share, totaling approximately $9.6 million, paid on August 29, 2024[25] Inventory and Expenses - Inventory as of October 31, 2025, totaled $24,682,000, an increase from $23,487,000 as of April 30, 2025[31] - Selling, general, and administrative (SG&A) expenses for the three months ended October 31, 2025, were $3,623,000, an increase of 6.9% from $3,388,000 in the prior year, representing approximately 21% of consolidated revenues[75] - SG&A expenses are expected to continue increasing through the remainder of fiscal year 2026 due to payroll-related expenses and investments in growth initiatives[75] Backlog and Future Outlook - The consolidated funded backlog was approximately $82 million as of October 31, 2025, compared to $70 million at April 30, 2025, with about 69% expected to be realized in the next twelve months[94] - The company believes its liquidity is adequate to meet short-term operating and investment needs through at least December 12, 2026[95] Other Financial Information - The company recognized $3.3 million and $7.4 million of contract liabilities as revenue during the three and six months ended October 31, 2025, respectively[26] - The company incurred warranty costs of $130,000 for the three months ended October 31, 2025, with an ending balance of warranty reserves at $557,000[61] - There were no changes in the company's internal control over financial reporting that materially affected its financial reporting during the fiscal quarter ended October 31, 2025[100] - The company does not have any off-balance sheet arrangements that could materially affect its financial condition or results[96]