FEIM · Frequency Electronics, Inc.

Frequency Electronics reported Q4 FY2026 revenue of $15.4 million, down 23% YoY from $20.0 million, and full-year revenue of $63.2 million, down 9% from $69.8 million. The decline was attributed to digestion of pulled-forward revenue and restructuring of the FEI-Elcom business. Reported gross margin was just 1% in Q4 due to a $3.8 million inventory write-down and other non-recurring charges. However, on an adjusted basis (non-GAAP), gross margin was 36% for Q4 and 41% for the full year, reflecting the underlying profitability of the core business. Operating loss of $6.3 million (reported) swung to adjusted operating income of $0.2 million (1.3% margin). The company emphasized that these charges are non-recurring and represent investments for future growth. The standout metric is backlog: $111 million, up 34% sequentially and 59% YoY, providing strong visibility into revenue growth. Management reaffirmed a three-year minimum revenue target of $150 million (34% CAGR) and established new margin targets: gross margin at least 50% and operating margin at least 30% by FY2029. These targets are supported by the shift to high-rate production and operating leverage. Cash from operations improved to $1.3 million in FY2026 from negative $1.4 million in FY2025, indicating improving cash generation despite the investments. Balance sheet remains solid with $1.6 million cash and $90.7 million total assets. The press release provides a clear narrative: near-term pain from restructuring and investment is setting the stage for significant revenue and margin expansion in the coming years, underpinned by a record backlog. Investors should monitor quarterly revenue growth and margin progression toward the 2029 targets.