Frequency Electronics(FEIM) - 2026 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported revenue of $17.1 million for the second quarter, representing a 24% sequential increase and the third highest quarterly revenue in the past decade [3][12] - Consolidated net income for the quarter was approximately $1.8 million, or $0.18 per share, compared to approximately $2.7 million, or $0.28 per share for the same period of the previous fiscal year [17] - The fully funded backlog at the end of the quarter was approximately $82 million, up from approximately $70 million at the previous fiscal year end [18] Business Line Data and Key Metrics Changes - Revenue from commercial and U.S. government satellite programs was approximately $4.6 million, down from $9.4 million in the same period of the prior fiscal year [12] - Revenue from non-space U.S. government and Department of Defense customers was $11.9 million, up from $5.8 million in the same period of the prior fiscal year, accounting for approximately 69% of consolidated revenue [13] - Other commercial industrial revenues were approximately $560,000, slightly down from approximately $591,000 in the prior fiscal year [14] Market Data and Key Metrics Changes - The company anticipates significant growth in sectors such as quantum sensing, proliferated satellites, and alternative position navigation and timing (ALT-PNT) programs [5][6] - The defense business is expected to grow sharply, driven by increasing defense spending, particularly in missiles and modernization initiatives [9] Company Strategy and Development Direction - The company aims to layer new growth opportunities on top of a strong and growing core business, focusing on next-generation defense technologies and strategic partnerships with major prime contractors [7][8] - The company is actively pursuing opportunities in international markets, although export controls present challenges [71][72] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the growth prospects in both defense and space sectors, independent of political changes [59] - The company is in a cautious hiring mode, preparing for anticipated business growth while managing costs effectively [47] Other Important Information - The company is debt-free and maintains a strong working capital position of approximately $31 million, with a current ratio of approximately 2.6 to 1 [18] - The company plans to continue investing in R&D to keep its products at the state of the art, despite a decrease in R&D expenses for the quarter [16] Q&A Session Summary Question: Can you provide details on the Golden Dome Awards? - Management indicated that specifics are still being defined, but they anticipate participation in various aspects of the program, particularly in ground-based and space-based missile defense [22][24] Question: What activities are ongoing in Colorado operations? - The focus in Colorado is on quantum technology and low-phase noise oscillator technology, with several senior scientists hired from NIST [25][26] Question: Will margins normalize in the near term? - Management expects margins to normalize as program requirements have been cleared up and new contracts are anticipated [36] Question: How do you view the growth opportunities irrespective of political control? - Management believes growth in space and defense sectors is largely independent of political changes, driven by technological advancements and global security needs [58][59] Question: Is there potential for Turbo in commercial drones? - Management sees potential in both military and commercial applications, but anticipates more immediate opportunities in military [63][64] Question: What is the status of international business? - The company has active programs with allies but faces challenges due to export controls and a preference for domestic suppliers in defense contracts [71][72]