How much of the $111 million funded backlog is expected to convert to revenue in the current fiscal year, and what is the average gross margin in that backlog?

The backlog is expected to be worked off over 1 to 3 years, with the funded portion on the shorter end of that range. Gross margins are anticipated to increase significantly over the current fiscal year, but specific numbers were not provided. “I have to be a little bit careful about providing specific numbers on that. So let me just say that I think what we typically see is that we are -- the programs that we work on typically take place over a period of 1 to 3 years. So we expect that backlog to be worked off over the next 3 years, completely.”

What are the biggest needle movers for backlog growth currently and over the next 6-12 months?

Space-related activities, including lunar missions, proliferated satellites, and space defense, are expected to be the primary drivers in the coming year. The company has a 90% win rate in the space arena. Non-space defense also remains significant. “But that being said, I think actually over this last fiscal year, nonspace played a big role in the revenue that we did generate. But I think, in the coming year, space is going to be forefront. We're really excited about the activity related to the lunar activity, the movement toward the repopulating the [indiscernible], so to speak.”

Clarification on whether 'several new record revenue quarters in the coming quarters' refers specifically to the next fiscal year (FY27).

The CFO confirmed that the company expects to see several new record revenue quarters specifically within fiscal year 2027. “Yes, I believe, in fiscal '27, we should have.”

FEIM

Frequency Electronics (FEIM) Q4 FY26 earnings call: guidance and Q&A

Earnings call· Apr 2026 (Q4 FY26)· Information Technology· Jul 15, 2026

Source: earnings call transcript

Executive summary

Frequency Electronics Q4 FY26 — Record Backlog and Multi-Year Growth Targets

Frequency Electronics is poised for a multi-year growth phase, driven by a record $111 million funded backlog and significant contract wins in high-growth markets like proliferated satellites and space defense. The company has set ambitious 3-year revenue and margin targets, supported by strategic investments in engineering talent and business process improvements, despite a challenging Q4 FY26 marked by revenue digestion and non-recurring charges related to the Elcom restructuring. Management is confident in its ability to execute on these opportunities without significant additional capital investment.

Highlights

Reported a record funded backlog of $111 million as of the end of fiscal year 2026.
Achieved a book-to-bill ratio of nearly 3x in the fourth quarter of fiscal 2026.
Fiscal 2026 was the single biggest year of bookings in company history.
Established a 3-year revenue target of at least $150 million, representing 34% compound annual growth from FY26.
Set minimum gross margin target of 50% and minimum operating margin target of 30% by fiscal 2029.

Concerns

Consolidated revenue for Q4 FY26 decreased to $15.4 million compared to $19.9 million in the prior year.
Elcom manufacturing business restructuring included a $3.8 million noncash inventory write-down in Q4 FY26.
Nonrecurring charges, including an accrual for employee sick/paid time-off policies, impacted Q4 FY26 gross and operating margins.
Fiscal 2026 revenue decreased by approximately $6.6 million or 9% compared to the prior fiscal year due to revenue digestion.

Guidance & targets

Category	Target	Timeline	Confidence
3-year revenue target	at least $150 million high materiality	FY29	High
Minimum gross margin target	50% high materiality	FY29	High
Minimum operating margin target	30% high materiality	FY29	High
Revenue growth	returning to growth medium materiality	Q1 · FY27	High
Quarterly revenue records	multiple new quarterly revenue records established medium materiality	FY27	High
Elcom manufacturing business wind-down	completely shut down those activities low materiality	FY27	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Commercial & U.S. government satellite programs Revenue decreased from $12 million in the prior fiscal year's fourth quarter. 50% of consolidated revenue (Q4 FY26)60% of consolidated revenue (Q4 FY25)	$7.7 million	—	—	—
Non-space U.S. government & Department of Defense Revenue compared to $7 million in the prior fiscal year's fourth quarter. 44% of consolidated revenue (Q4 FY26)35% of consolidated revenue (Q4 FY25)	$6.8 million	—	—	—
Other commercial & industrial Revenue compared to approximately $890,000 in the prior fiscal year's fourth quarter.	$908,000	—	—	—
Satellite program revenues (government end use) For fiscal year ended April 30, 2026. 31% of total revenues (FY26)53% of total revenues (FY25)	—	—	—	—
Satellite program revenues (commercial end use) For fiscal year ended April 30, 2026. 6% of total revenues (FY26)6% of total revenues (FY25)	—	—	—	—
Non-space U.S. government & Department of Defense (FY) Increased by approximately $11.5 million in fiscal '26 compared to fiscal year '25. 60% of consolidated revenues (FY26)38% of consolidated revenues (FY25)	—	43.2%	—	—
Other commercial & industrial (FY) Sales were $2.1 million for FY26 compared to $2.4 million for FY25. 3% of consolidated revenue (FY26)3% of consolidated revenue (FY25)	$2.1 million	—	—	—

Orderbook & backlog

Funded backlog $111 million end of fiscal year (April 30, 2026)

record

Expected to be worked off over the next 1 to 3 years; funded backlog on the shorter end of that range.

Book-to-bill ratio nearly 3x Q4 FY26

Strong indication of demand.

Bookings single biggest year FY26

In company history.

Product announcements

Product	Type	Timeline	Details
Compact, highly precise atomic clocks	launch	to support position navigation and timing for a lunar space mission
Space defense solution	launch	—

Deals & partnerships

U.S. government customer customer contract approximately $7 million

Contract for compact, highly precise atomic clocks to support position navigation and timing for a lunar space mission.

U.S. government customer customer contract

Contract in the burgeoning area of space defense, leveraging company's expertise in terrestrial secured communications in a new domain space. Included hardware and internally developed software.

Capital programs

Investments in engineering talent and business process improvement completed

Funding: cash on hand generated from operations

Start: FY26

Benefit:better prepare the company for strong growth ahead; improve turnaround time; open opportunities in quantum sensing and very low noise micro resources

The majority of this investment was focused on hiring engineering talent in advance of the large ramp-up in production and revenue. The second meaningful investment was a business process improvement investment. These investments were made entirely with cash on hand generated from operations. With these investments now made, we do not need to make additional meaningful investments to achieve our 3-year revenue target.

Risks & headwinds

Revenue digestion FY26

Fiscal 2026 was a year of revenue digestion

Mitigation:returning to growth in the current fiscal first quarter and for fiscal '27 in general.

Elcom restructuring charges Q4 FY26

$3.8 million inventory write-down (noncash), additional severance costs

Mitigation:believe it's the right long-term decision to better align our capital and talent towards their highest and best use and potential returns.

Nonrecurring charges impacting margins Q4 FY26

accrual related to a onetime change in employee sick/paidtime-off policies

Mitigation:decided to take the pain now so that we can focus on our highest return opportunities going forward... thought it was cleanest to clear the decks now as we head into fiscal 2027.

Q&A highlights

How are the wars in Ukraine and the Middle East impacting demand for Frequency's precision timing clocks?

GPS jamming and spoofing in conflict zones expand the market for precise atomic clocks and alternative navigation solutions like magnetic navigation. There's also increased demand for missile battery components due to missile replacement activities.

“So those things going on have made it very clear to everybody that for defense applications, in particular, but even for a lot of commercial applications, GPS cannot be relied on for position navigation and timing applications. So that's just expanded tremendously our accessible market.”

asked by Brian Kinstlinger · answered by Thomas McClelland

2 min read 5 chapters

Detailed narrative

Strategic Shift to High-Rate Production

Frequency Electronics is transitioning from a bespoke manufacturer of specialized products to a high-rate production company, focusing on producing more units of similar products on a consistent basis. This strategic shift is expected to significantly improve gross margins by enabling better overhead absorption and reducing the percentage of nonrecurring engineering costs.

Management anticipates this change will drive gross margins to at least 50% by fiscal 2029.

Investments for Future Growth and Efficiency

In fiscal 2026, the company made substantial investments, primarily in hiring engineering talent and implementing business process improvements, to prepare for the anticipated ramp-up in production and revenue. These investments, funded entirely by cash on hand from operations, temporarily impacted gross margins in the short term.

However, they are expected to yield significant returns by opening new market opportunities, such as in quantum sensing, and improving operational turnaround times, positioning the company for strong growth without requiring further major capital outlays.

Elcom Restructuring and Core Market Focus

Frequency Electronics restructured its Elcom manufacturing business in New Jersey during Q4 FY26, resulting in a $3.8 million noncash inventory write-down and additional severance costs. This decision was made to reallocate capital and talent towards higher-growth, higher-margin core space and defense markets, and new larger addressable markets.

While sacrificing some near-term revenue, the restructuring is viewed as a long-term strategic move to align resources with the company's highest return opportunities and is expected to generate over $9 million in future tax benefits.

Expanding Total Addressable Markets and Contract Wins

The company is actively pursuing and winning business in significantly larger total addressable markets (TAMs), including proliferated satellites, quantum sensing, space defense, space exploration, and alternative Position, Navigation, and Timing (P&T) solutions. These markets are projected to be multi-billion dollar opportunities with high growth rates.

Recent wins include a ~$7 million contract for atomic clocks for a lunar space mission and a space defense contract involving hardware and internally developed software, leveraging existing competitive strengths.

Impact of Geopolitical Conflicts on Demand

Ongoing geopolitical conflicts, such as those in the Middle East and Ukraine, are driving increased demand for Frequency's precision timing products. The jamming and spoofing of GPS signals in these environments highlight the critical need for reliable, precise atomic clocks and alternative navigation solutions like magnetic navigation.

Additionally, the need for missile replenishment, particularly for systems like Patriot and THAAD, is creating an uptick in demand for the company's components in missile batteries.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.