Frequency Electronics Inc

Frequency Electronics reported record revenue of $23.5 million for the first quarter of fiscal 2027, up 70% year-over-year and 52% sequentially, sending the stock more than 24% higher in after-hours trading. The company said the results raised its confidence in meeting or beating its previously stated target of at least $150 million in annual revenue by fiscal 2029, which ends April 30, 2029. Frequency Electronics also ended the quarter with a record funded backlog of $129 million, up 82% year-over-year and 16% sequentially. Gross margin expanded to approximately 46% and operating margin surpassed 22%, and the company said it expects to remain cash-generative on an annual basis. Management said internal research and development expenses are expected to remain below 10% of revenue, though production ramp-up remains a challenge and the company has seen limited traction with new defense technology companies, with most of its success coming from the space market.

Frequency Electronics has been awarded a follow-on production contract valued at approximately $8 million to supply compact, high-precision atomic clocks for lunar space missions. The contract covers production of atomic clocks designed to support position, navigation and timing capabilities for lunar exploration.

Frequency Electronics reported a record funded backlog of $111 million at the end of fiscal 2026, representing 59% annual growth and 34% sequential growth, and reaffirmed a minimum revenue target of $150 million by fiscal 2029. The company posted fourth-quarter revenue of $15.4 million, down from $20.0 million a year earlier, and full-year revenue of $63.2 million, a 9% decline from $69.8 million, citing pulled-forward revenue from fiscal 2025. A near 3-to-1 book-to-bill ratio in the fourth quarter and the highest annual bookings in company history signal strong demand, with management expecting multiple new quarterly revenue records in fiscal 2027. Frequency Electronics also announced three-year margin targets of at least 50% gross margin and 30% operating margin by fiscal 2029, driven by a shift to high-rate production and improved overhead absorption. The quarter included a $3.8 million non-cash inventory write-down from restructuring the FEI-Elcom segment, contributing to a net loss of $4.9 million, or $0.50 per diluted share, compared to net income of $3.2 million in the prior-year period.

Frequency Electronics has been awarded multiple contracts with a combined value of approximately $18 million. The awards include an $11 million contract from a major aerospace prime contractor to supply an on-board precision frequency-generation system for a proliferated satellite program, marking the company's first contract with this customer. An additional $7 million in follow-on production contracts covers space oscillators and non-space U.S. Government programs. CEO Tom McClelland noted that the $11 million award is the company's second significant contract for proliferated satellites in 2026 and expects more wins in this area, while the follow-on awards tend to carry higher-than-average corporate gross margins.

Frequency Electronics shares have surged 213.3% over the past year, far outpacing the industry's 4.4% growth. The company is benefiting from record backlog exceeding $100 million for the first time, rising defense spending, strong satellite contract wins including approximately $45 million in new awards in March 2026, and expanding opportunities in quantum sensing and alternative position, navigation and timing technologies. Management has set a target of at least $150 million in annual revenues by fiscal 2029, implying a compound annual growth rate above 30%. However, near-term pressures include a less favorable program mix, higher operating expenses, and lower initial margins on newly awarded satellite programs, while the stock trades at a premium valuation of 10.57 times trailing 12-month enterprise value to sales compared with the industry average of 3.09 times.