Frequency Electronics, Inc. (FEIM) Q4 2026: Revenue Decline Amid Record Backlog — Cautiously Optimistic

Frequency Electronics, Inc. (NASDAQ-FEIM) reported its financial results for the fourth quarter and fiscal year 2026, revealing a challenging quarter with significant year-over-year declines in revenue. Specifically, revenue for Q4 2026 was approximately $15.4 million, down $4.6 million or -23% from $20.0 million in Q4 2025. For the full fiscal year, revenue totaled $63.2 million, a decrease of $6.6 million or -9% compared to $69.8 million in fiscal year 2025.

Despite the revenue decline, the company achieved a record $111 million in funded backlog, which represents a 34% sequential increase and a 59% increase year-over-year. This backlog growth is a positive indicator of future revenue potential and reflects strong demand in the space and defense markets.

Analyst View

This quarter can be viewed as disappointing for shareholders primarily due to the significant drop in revenue and the operating losses reported. The operating loss for Q4 2026 was $6.3 million, compared to an operating income of $3.3 million in the same quarter last year. Additionally, the net loss from operations was $4.9 million, or ($0.50) per diluted share, compared to a net income of $3.2 million, or $0.33 per diluted share in Q4 2025.

However, the substantial increase in backlog provides a glimmer of hope for future growth. The company has reaffirmed its three-year revenue target of at least $150 million, which translates to a 34% compound annual growth rate (CAGR) from its Fiscal 2026 revenue. This ambitious target, coupled with the establishment of minimum gross and operating margin targets of 50% and 30%, respectively, by Fiscal 2029, indicates a strategic focus on improving profitability.

Key Metrics

• Q4 2026 Revenue: $15.4 million (down $4.6 million or -23% YoY)
• Fiscal Year 2026 Revenue: $63.2 million (down $6.6 million or -9% YoY)
• Operating Loss (Q4 2026): $6.3 million (compared to $3.3 million operating income in Q4 2025)
• Net Loss (Q4 2026): $4.9 million or ($0.50) per diluted share (compared to $3.2 million or $0.33 per diluted share in Q4 2025)
• Funded Backlog: $111 million (up 34% sequentially and 59% YoY)

Strategic Initiatives

The company has made significant investments in engineering talent and manufacturing efficiency projects during Fiscal 2026, which have temporarily impacted gross margins. The gross margin for Q4 2026 was approximately 1%, while adjusted gross margins would have been around 36% without the non-recurring charges and investments. The company anticipates that these investments will yield higher margins and operational efficiencies in the coming years.

Additionally, Frequency Electronics has restructured its FEI-Elcom manufacturing business, resulting in a $3.8 million inventory write-down. While this decision has affected near-term revenue, management believes it aligns resources with higher-growth opportunities in core markets.

Future Outlook

Investors should closely monitor the company's progress in achieving its revenue and margin targets in the upcoming quarters. The anticipated growth in backlog and the strategic shift towards higher-rate production models are expected to drive revenue growth starting in Fiscal 2027. Furthermore, the company's focus on core space and defense markets, along with the expected return to normal cash generation, will be critical for restoring shareholder confidence.

In summary, while the current quarter presents challenges, the strategic initiatives and backlog growth suggest a potential turnaround on the horizon. Investors should remain vigilant for updates on revenue growth and margin improvements as Frequency Electronics embarks on its path to recovery.

Note: All amounts in the following tables are in thousands.

Frequency Electronics, Inc. and Subsidiaries	Condensed Consolidated Statements of Operations	(in thousands except per share data)
Three Months Ended	April 30, 2026	April 30, 2025
Twelve Months Ended	April 30, 2026	April 30, 2025
Revenue	15,317	20,000
Cost of revenue	15,173	12,940
Gross margin	144	7,060
Selling and admin.	4,603	2,614
Research and dev.	1,898	1,250
Operating (loss) income	(6,309)	3,196
Interest and other net	(326)	(72)
Income before income tax	(6,635)	3,124
Net (loss) income	(4,903)	3,205
per share (unadjusted)	(0.50)	0.33
Weighted-average shares out	Basic	9,854
Diluted	9,854	9,617

Frequency Electronics, Inc. and Subsidiaries	Condensed Consolidated Balance Sheets	(in thousands)
ASSETS	April 30, 2026	April 30, 2025
Cash and cash equivalents	$ 1,603	$ 4,720
Accounts receivable, net	4,740	5,914
Contract assets	17,277	17,914
Inventories, net	22,618	23,487
Other current assets	1,738	1,071
Property, plant & equipment, net	7,105	6,188
Other assets	12,801	12,374
Deferred taxes	14,084	12,045
Right-of-use assets – operating leases	7,409	8,659
Restricted cash	1,331	1,365
Total Assets	$ 90,706	$ 93,737
LIABILITIES AND STOCKHOLDERS’ EQUITY
Lease liability - current	$ 2,002	$ 2,027
Contract liabilities	9,418	13,607
Other current liabilities	9,564	7,821
Other long-term obligations	7,671	7,933
Operating lease liability – non-current	5,648	6,729
Stockholders’ equity	56,403	55,620
Total Liabilities and Equity	$ 90,706	$ 93,737

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