Frequency Electronics(FEIM -20.70%) reported first-quarter fiscal 2026 earnings on Sept. 11, 2025, with revenue dropping sharply to $800,000 from $15.1 million in the prior year period due to customer-driven program delays. Despite this, the company maintained a record $71 million funded backlog at quarter-end, launched new quantum sensing initiatives, and authorized a $20 million share repurchase, underscoring resilience, growth investments, and a focus on shareholder returns.
Program delays reduce FEIM revenue but backlog remains strong
The company’s revenue for the three months ending July 31, 2025, fell to $800,000 from $15.1 million year over year, primarily due to externally imposed program delays. Congressional defense appropriations and late customer action contributed to the timing mismatch, but management confirmed that delayed revenue will be recognized later in the fiscal year, and the $71 million backlog at quarter-end reflects sustained customer demand.
"The revenue for the three months ending July 31, 2025, is lower than expected due largely to several externally imposed program delays which halted work on the affected programs. Importantly, these delays are not expected to result in overall program revenue reductions, and the revenue shortfall from 2026 is expected to be made up in the upcoming quarters, predominantly in this fiscal year."
— Steven Bernstein, Chief Financial Officer
This temporary revenue dip does not indicate demand erosion or contract loss, but it does increase near-term earnings risk and highlights the importance of timely program execution for margin recovery.
FEIM invests in quantum sensing and expands engineering talent
The company opened a new engineering facility in Boulder, Colorado, and recruited senior physicists from the National Institute of Standards and Technology (NIST) to support ongoing programs and new technology initiatives. FEIM is also pursuing externally funded research and development in quantum sensing, an emerging market, and expects the Boulder facility to contribute positively to earnings by the third quarter of this fiscal year.
"To support these markets, as well as our new initiatives in quantum sensing, the company recently opened an engineering facility in Boulder, Colorado, and hired senior scientists formerly with the National Institute of Standards and Technology, Time and Frequency Division. These physicists and others who are expected to join Frequency Electronics, Inc. at the Boulder facility in the near future will support ongoing company programs and new technology efforts. We expect that the Boulder facility will contribute positively to the bottom line by the third quarter of this fiscal year."
— Thomas McClelland, President and Chief Executive Officer
This interdisciplinary capability and geographic expansion position the company to pursue future government research and development contracts and strengthen its technology leadership in quantum sensing.
FEIM advances atomic and quantum timing products toward commercialization
Management confirmed ongoing off-the-shelf atomic clock production, readiness for low-rate production of the mercury ion atomic clock within a year, and delivery of prototype nitrogen-vacancy (NV) diamond magnetometers by mid-calendar year 2026. External government support underpins the development of alternative navigation systems, targeting both GPS-dependent and independent applications for high-security and military use.
"Keep in mind that we have atomic clocks that are available off the shelf at this time, and, in fact, we are actively producing. In particular, we have a satellite-grade state-of-the-art GPS atomic clock for GNSS satellite systems that we are actively producing. But to address some of the more advanced things that we are working on, in particular, as you stated, we are working on mercury ion atomic clock, and we are actually beginning to produce prototypes at this point in time in collaboration with the Jet Propulsion Laboratory, and we anticipate that this will be ready for low-rate production in another year or so. We are also, as you stated, working on various magnetometer technologies. This is primarily to support a very important field at this point in time, which is alternate navigation sources that are completely independent of GPS and related satellite navigation systems. We have externally supported programs to develop this technology, in particular, NV Diamond magnetometer technology. And we anticipate by the middle of next calendar year to have prototypes available to support testing done by some of our potential customers. And roughly a year after that, we are anticipating that we will have next-generation higher performance devices available."
— Thomas McClelland, President and Chief Executive Officer
Clear production timelines for new technologies signal the maturation of the company’s product pipeline for next-generation timing and navigation solutions, with government partnerships accelerating commercialization.
Looking Ahead
The company expects revenue recognition to rebound in subsequent quarters as delayed contracts commence, with the Boulder facility anticipated to become earnings accretive by the third quarter. No formal revenue or EPS guidance was issued, but management emphasized a historically high backlog, an active major contract bid pipeline with larger contracts than the historical norm, and an increased $20 million share repurchase authorization announced on Sept. 11, 2025. No additional explicit financial guidance was provided in the transcript.
