FREQUENCY ELECTRONICS INC
For the period ended Jul 31, 2025. Filed Sep 15, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jul 31, 2025 · Filed Sep 15, 2025
FEIM$60.22+11.0%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-01-31; filed 2025-03-17.
0001185185-25-000189
Item 2. - Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-07-31; filed 2025-09-15.
0001185185-25-001203
Item 2. - Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 46 previous paragraphs and 43 current paragraphs.
23 unchanged; 12 reworded; 8 added; 9 removed; 2 previous and 0 current paragraphs rearranged.
Tables are not compared: 9 previous and 9 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (8)
Current report
The revenue for the three months ended July, 31, 2025 is lower than revenues in the prior period due to several customer imposed program delays. These delays are not expected to result in revenue reductions as the revenue shortfalls are anticipated to be realized in the upcoming quarters, predominately in this fiscal year.
Current report
For the three months ended July 31, 2025, both gross margin (“GM”) and GM rate decreased compared to the same period in the prior fiscal year. The decrease in GM was primarily due to a decrease in revenue; and the decrease in GM rate was attributable to quarterly fluctuations in the mix of business activity between higher margin programs and lower margin programs, including cumulative catch-up adjustments for some ongoing programs. As we have stated in the past, gross margins on the manufacturing of existing products are generally high; whereas, gross margins on development efforts and new products are typically lower.
Current report
Operating Income
Current report
For the three months ended July 31, 2025, operating income decreased due to lower revenue and gross margin and increased SG&A as described above.
Current report
On July 4, 2025, President Trump signed the OBBBA into law. In accordance with U.S. GAAP, the Company will account for the tax effects of changes in tax law in the period of enactment which is the quarter ended July 31, 2025. The OBBBA made changes to the U.S. tax code, including, but not limited to: (1) allowing taxpayers to fully deduct domestic research expenditures for tax years beginning after December 31, 2024, (2) provides a catch-up relief provision for taxpayers to accelerate deductions for unamortized domestic research expenditures, (3) a permanent provision for 100% bonus depreciation deductions for most tangible personal property with a recovery period of 20 years or less, acquired and placed in service after January 19, 2025, and (4) for tax years beginning after December 31, 2024, restores Adjusted Taxable Income by adding back amortization and depreciation to calculate the limitation on interest deductions (effectively returning to EBITDA).
Current report
The estimated annual effective tax rate for the fiscal year ending April 30, 2026 is 20.96%. This calculation reflects an estimated income tax expense based on our current fiscal year annual pretax income forecast which includes non-deductible expenses, estimated research and development credits, and state income taxes. The estimate of the annual effective tax rate is based on evaluations of possible future events and may be subject to revision in subsequent reporting periods.
Current report
Net cash used in investing activities for the three months ended July 31, 2025 and 2024 was approximately $0.8 million and $0.3 million, respectively, all relating to purchases of capital expenditures.
Current report
Net cash used in financing activities for the three months ended July 31, 2025 and 2024 was $0.6 million and $0.1 million, respectively, all related to purchase of treasury stock.
Removed paragraphs (9)
Previous report
For the three months ended January 31, 2025, both gross margin (“GM”) and GM rate increased compared to the same period in the prior fiscal year. The increase in GM was mainly due to an increase in revenue and the GM rate increase was mainly attributable to a large space program that completed a major milestone in its production. The completed milestone, and related mitigation of risk, resulted in a higher GM on this program for the quarter. For the nine months ended January 31, 2025, both GM and GM Rate increased compared to the same period in the prior fiscal year. This is partially due to the large space program mentioned above that completed major milestones during the nine months ended January 31, 2025.
Previous report
Operating Income (Loss)
Previous report
For the three and nine months ended January 31, 2025, operating income increased due to higher revenue and GM percentage, partially offset by higher R&D expenses. The increase is partially due to a large space program that completed major milestones in its production during the nine months ended January 31, 2025, as discussed above, however, the increase is also the result of the successful efforts of the Company to complete complex programs and to work more efficiently in bidding, building and testing our products. The Company believes the improved operating income results for the first nine months of this fiscal year are a tangible outcome of these efforts. The Company seeks to continue to implement changes to further improve its performance.
Previous report
In assessing the realizability of deferred tax assets, the Company evaluates whether it is more likely than not (more than 50%) that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in those periods in which temporary differences become deductible and/or net operating losses can be utilized. The Company assesses all positive and negative evidence when determining the amount of the net deferred tax assets that are more likely than not to be realized. This evidence includes, but is not limited to, prior earnings history, scheduled reversal of taxable temporary differences, tax planning strategies and projected future taxable income. Significant weight is given to positive and negative evidence that is objectively verifiable. Concluding that a valuation allowance is not needed is difficult when there is significant negative evidence such as cumulative losses in recent years.
Previous report
The change in estimate occurred in Q3 2025 because Frequency no longer has cumulative losses in recent years due to significant earnings in Q3 2025. The positive evidence that led to the Q3 2025 release of the valuation allowance includes (i) objectively verifiable cumulative earnings as of January 31, 2025, (ii) utilization of net operating loss carryforwards and a reduction of the net deferred tax asset, (iii) a backlog of $73 million, and (iv) sufficient projections of future taxable income that support the more-likely-than-not realization of the existing deferred tax asset and the remaining net operating loss carryforward. The projections of future taxable income are considered objectively verifiable positive evidence because the Company has demonstrated a sustained return to profitability as of Q3 2025. The Company maintains a valuation allowance of $1.3 million against certain deferred tax assets including state tax credits and capital loss carryforwards because the realization of these tax attributes requires sufficient taxable income be sourced to the respective state jurisdiction and capital gain income is required to utilize capital losses. The Company will continue to evaluate the realizability of its net deferred tax assets quarterly. Any further increases or decreases in the valuation allowance could have an unfavorable or favorable impact on the Company’s income tax provision and net income in the period in which such determination is made. As of January 31, 2025, the deferred tax asset is recorded at its more-likely-than-not realizable amount.
Previous report
Under the accounting for income taxes guidance, the change in the valuation allowance may be reflected in the annual estimated effective tax rate or recognized discretely in the interim period, or both. The Company recognized the reduction in the valuation allowance in both the annual estimated effective tax rate and discretely in Q3 2025. The estimated annual effective tax rate for the fiscal year ending April 30, 2025 is 3.54%. This calculation reflects estimated income tax expense based on our current year annual pretax income forecast which is offset by the estimated change in the current year valuation allowance. During the three months ended January 31, 2025, the Company reduced its valuation allowance and recognized a discrete income tax benefit of $11.8 million resulting in an income tax benefit of 330.6% and 132.8% for the three and nine months ended January 31, 2025.
Previous report
For the nine months ended January 31, 2025, the Company recorded an income tax benefit of $11.6 million which includes a discrete tax benefit of $11.9 million. The calculation of the overall income tax provision consists of a discrete tax benefit for the release of the valuation allowance offset by current U.S. federal and state income taxes. For the nine months ended January 31, 2024, the Company recorded an income tax provision of $19,000.
Previous report
Net cash used in investing activities for the nine months ended January 31, 2025 and 2024 was approximately $1.2 million and $0.7 million, respectively. The Company acquired property, plant, and equipment in the amount of approximately $1.2 million and $0.7 million for the nine month periods ended January 31, 2025 and 2024, respectively.
Previous report
Net cash used in financing activities for the nine months ended January 31, 2025 was $9.9 million, of which $9.6 million was related to a special cash dividend payment of $1.00 per share of common stock paid on August 29, 2024. There were no financing activities for the nine months ended January 31, 2024.
Reworded paragraphs (12)
Previous wording
The Company believes its most critical accounting policies to be the recognition of revenue and costs on production contracts and the valuation of inventory. Both of these areas require the Company to make use of reasonable estimates including estimating the cost to complete a contract, the realizable value of its inventory and the market value of its products. Changes in estimates can have a material impact on the Company’s financial position and results of operations. The Company’s significant accounting policies did not change during the three and nine months ended January 31, 2025.
Current wording
The Company believes its most critical accounting policies to be the recognition of revenue and costs on production contracts and the valuation of inventory. Both of these areas require the Company to make use of reasonable estimates including estimating the cost to complete a contract, the realizable value of its inventory and the market value of its products. Changes in estimates can have a material impact on the Company’s financial position and results of operations. The Company’s significant accounting policies did not change during the three months ended July 31, 2025.
Previous wording
The table below sets forth for the three and nine months ended January 31, 2025 and 2024, respectively, the percentage of consolidated revenues represented by certain items in the Company’s condensed consolidated statements of operations or notes to the condensed consolidated financial statements:
Current wording
The table below sets forth for the three months ended July 31, 2025 and 2024, respectively, the percentage of consolidated revenues represented by certain items in the Company’s condensed consolidated statements of operations or notes to the condensed consolidated financial statements:
Previous wording
For the three months ended January 31, 2025, revenues from commercial and U.S. Government communication satellite programs accounted for approximately 59% of consolidated revenues compared to approximately 50% of consolidated revenues during this same period in the prior fiscal year. Revenues are recognized primarily over time under the percentage-of-completion (“POC”) method. Revenues from the satellite market are recorded in the FEI-NY segment. Revenues from non-space U.S. Government/Department of Defense (“DOD”) customers, which are recorded in both the FEI-NY and FEI-Zyfer segments, accounted for approximately 39% of consolidated revenues for the three months ended January, 31, 2025 compared to approximately 44% of consolidated revenue during the same period in the prior fiscal year. Other commercial and industrial revenues for the three months ended January 31, 2025 accounted for approximately 2% of consolidated revenue compared to 7% in the same period of the prior fiscal year. The significant increase in revenue for the quarter ended January 31, 2025, compared to the same quarter in the previous fiscal year, was reflected in both the FEI-NY and FEI-Zyfer segments and was related to an increase of approximately $4.4 million in sales to U.S. Government space customers and an increase of approximately $1.4 million in sales to Government non-space customers, partially offset by a decrease of approximately $0.6 million in other commercial and industrial revenues.
Current wording
For the three months ended July 31, 2025, revenues from commercial and U.S. Government communication satellite programs accounted for approximately 47% of consolidated revenues compared to approximately 55% of consolidated revenues during this same period in the prior fiscal year. Revenues are recognized primarily over time under the percentage-of-completion (“POC”) method. Revenues from the satellite market are recorded in the FEI-NY segment. Revenues from non-space U.S. Government/Department of Defense (“DOD”) customers, which are recorded in both the FEI-NY and FEI-Zyfer segments, accounted for approximately 50% of consolidated revenues for the three months ended July, 31, 2025 compared to approximately 42% of consolidated revenue during the same period in the prior fiscal year. Other commercial and industrial revenues for the three months ended July 31, 2025 and 2024 accounted for approximately 3% of consolidated revenue.
Previous wording
For the three months ended January 31, 2025 and 2024, selling, general, and administrative (“SG&A”) expenses were approximately 18% and 19%, respectively, of consolidated revenues. For the nine months ended January 31, 2025 and 2024, SG&A expenses were approximately 19%, of consolidated revenues in both periods. The increase in SG&A expense during the three and nine months ended January 31, 2025, was mainly related to an increase in payroll related expenses including stock compensation and incentive accruals based upon Company performance, costs from the re-alignment of employees from overhead to SG&A, and costs related to Frequency Electronics’ first Quantum Summit in October 2024. The Company believes the costs related to SG&A will remain fairly consistent throughout the remainder of fiscal year 2025.
Current wording
For the three months ended July 31, 2025 and 2024, selling, general, and administrative (“SG&A”) expenses were approximately 26% and 19%, respectively, of consolidated revenues. The increase in SG&A expenses during the three months ended July 31, 2025 was an increase in payroll related expenses, including stock compensation, and investments in the future growth of the Company, including expansion into Colorado and Quantum sensing, which are expected to continue through the fiscal year.
Previous wording
Research and Development (“R&D”) expenditures represent investments intended to keep the Company’s products at the leading edge of time and frequency technology and enhance future competitiveness. The change in R&D expenditures for the three and nine months ended January 31, 2025, as compared to the prior year periods, was primarily due to a focus on advances and modernization of products. The Company plans to continue to invest in R&D in the future to keep its products at the state of the art, however, we expect the actual quarterly spend to vary.
Current wording
Research and Development (“R&D”) expenditures represent investments intended to keep the Company’s products at the leading edge of time and frequency technology and enhance future competitiveness. Fluctuations in R&D expenditures will occur in some periods due to current operational needs supporting ongoing programs. The Company plans to continue to invest in R&D in the future to keep its products at the state of the art.
Previous wording
Other income (expense), net is derived from various sources. The income can come from reclaiming of metal, refunds, interest on deferred trust assets, or the sale of a fixed asset. Interest expense is related to the deferred compensation payments made to retired employees. The majority of the approximately $0.1 million and $0.6 million of investment income for the three and nine months ended January 31, 2025, respectively, was from interest income and unrealized gains on assets held in the Frequency Electronics, Inc. Deferred Compensation Trust.
Current wording
Other income (expense), net is derived from various sources. The income can come from reclaiming of metal, refunds, interest on deferred trust assets, or the sale of a fixed asset. Interest expense is related to the deferred compensation payments made to retired employees. The majority of the approximately $0.2 million of investment income for the three months ended July 31, 2025, was from interest income and unrealized gains on assets held in the Frequency Electronics, Inc. Deferred Compensation Trust.
Previous wording
For the three months ended January 31, 2025, the Company recorded an income tax benefit of $11.8 million which includes a discrete tax income benefit of $11.9 million. The discrete tax benefit is primarily due to the reduction in the valuation allowance. The calculation of the overall income tax benefit consists of a discrete tax benefit for the release of the valuation allowance offset by current U.S. federal and state income taxes. For the three months ended January 31, 2024, the Company recorded an income tax provision of $6,000.
Current wording
For the three months ending July 31, 2025, the Company recorded an income tax benefit of $77,270 which includes a discrete income tax benefit of $193,919. The discrete income tax benefit is primarily due to stock compensation windfall tax benefits. For the three months ending July 31, 2024, the Company recorded an income tax provision of $132,930 which included a discrete income tax expense of $6,894.
Previous wording
The effective tax rate for the three months ended January 31, 2025 was an income tax benefit of 330.2% on pretax income of $3.6 million compared to an income tax provision of 4.4% on pretax income of $0.1 million in the comparable prior fiscal year period. The effective tax rate for the three months ended January 31, 2025 differs from the U.S. federal statutory rate of 21% primarily due to the release of the valuation allowance.
Current wording
The effective tax rate for the three months ended July 31, 2025 was an income tax benefit of 13.89% on pretax income of $0.6 million compared to an income tax provision of 5.19% on pretax income of $2.6 million in the comparable prior fiscal year period. The effective tax rate for the three months ended July 31, 2025 differs from the U.S. federal statutory rate of 21% primarily due to non-deductible expenses, state income taxes, R&D credits and discrete items.
Previous wording
The Company’s consolidated balance sheets continue to reflect a strong working capital position of approximately $27.3 million at January 31, 2025 and at April 30, 2024. Included in working capital at January 31, 2025 and April 30, 2024 was $5.5 million and $18.3 million, respectively, of cash and cash equivalents. The Company’s current ratio was 2.2 to 1 at January 31, 2025 compared to 1.9 to 1 as of April 30, 2024.
Current wording
The Company’s consolidated balance sheets continue to reflect a strong working capital position of approximately $29.6 million at July 31, 2025 and approximately $29.7 million at April 30, 2025. Included in working capital at July 31, 2025 and April 30, 2025 was $4.5 million and $4.7 million, respectively, of cash and cash equivalents. The Company’s current ratio was 2.3 to 1 at both July 31, 2025 and at April 30, 2025.
Previous wording
Net cash used in operating activities for the nine months ended January 31, 2025 was approximately $1.3 million and net cash provided by operating activities for the nine months ended January 31, 2024 was approximately $1.2 million. The increase in net cash used in operating activities in the first nine months of fiscal 2025 as compared to the prior fiscal year period was primarily due to an increase in operating income offset by increases in deferred tax assets, accounts receivable, and inventories levels. For the nine months ended January 31, 2025 and 2024, the Company incurred approximately $4.2 million and $3.1 million, respectively, of non-cash operating expenses including amortization of ROU assets, depreciation and amortization, inventory net realizable value adjustments, deferred compensation, and accruals for employee benefit programs.
Current wording
Net cash provided by operating activities for the three months ended July 31, 2025 was approximately $1.2 million and net cash used in operating activities for the three months ended July 31, 2024 was approximately $1.5 million. The increase in net cash provided by operating activities in the first three months of fiscal 2026 as compared to the prior fiscal year period was primarily due to timing of billings and cash collections. For the three months ended July 31, 2025 and 2024, the Company incurred approximately $1.3 million, in both periods, of non-cash operating expenses including amortization of ROU assets, depreciation and amortization, inventory net realizable value adjustments, deferred compensation, and accruals for employee benefit programs.
Previous wording
The Company has been authorized by its Board of Directors to repurchase up to $5.0 million worth of shares of its common stock when appropriate opportunities arise. During the nine months ended January 31, 2025, the Company acquired 24,264 shares, at a weighted average share price of $15.55 per share, from withholdings pursuant to RSU tax repayments. As of January 31, 2025, the Company has repurchased approximately $3.9 million of its common stock out of the $5.0 million authorization. For the nine months ended January 31, 2024, there were no repurchases of shares.
Current wording
The Company has been authorized by its Board of Directors to repurchase up to $5.0 million worth of shares of its common stock when appropriate opportunities arise. During the three months ended July 31, 2025, the Company acquired 21,910 shares, at a weighted average share price of $26.60 per share, for withholdings pursuant to RSU tax repayments. As of July 31, 2025, the Company has repurchased approximately $4.4 million of its common stock out of the $5.0 million authorization. During the three months ended, July 31, 2024, the Company repurchased 4,569 shares of outstanding common stock at a weighted average share price of $13.60 per share.
Previous wording
As of January 31, 2025, the Company’s consolidated funded backlog was approximately $73 million compared to approximately $78 million at April 30, 2024. Approximately 65% of the backlog, as of January 31, 2025, is expected to be realized in the next twelve months. The Company excludes from backlog any contracts or awards for which it has not received authorization to proceed. On fixed price contracts, the Company excludes any unfunded portion. Over time, as partially funded contracts become fully funded, the Company will add the additional funding to its backlog. The backlog is subject to change for various reasons, including possible cancellation of orders, change orders, terms of the contracts and other factors beyond the Company’s control. Accordingly, the backlog is not necessarily indicative of future revenues or profits (losses) which may be realized when the results of such contracts are reported.
Current wording
As of July 31, 2025, the Company’s consolidated funded backlog was approximately $71 million compared to approximately $70 million at April 30, 2025. Approximately 64% of the backlog, as of July 31, 2025, is expected to be realized in the next twelve months. The Company excludes from backlog any contracts or awards for which it has not received authorization to proceed. On fixed price contracts, the Company excludes any unfunded portion. Over time, as partially funded contracts become fully funded, the Company will add the additional funding to its backlog. The backlog is subject to change for various reasons, including possible cancellation of orders, change orders, terms of the contracts and other factors beyond the Company’s control. Accordingly, the backlog is not necessarily indicative of future revenues or profits (losses) which may be realized when the results of such contracts are reported.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
For the nine months ended January 31, 2025, revenues from commercial and U.S. Government communication satellite programs accounted for approximately 58% of consolidated revenues compared to approximately 41% of consolidated revenues during this same period in the prior fiscal year. Revenues from non-space U.S. Government/DOD customers accounted for approximately 39% of consolidated revenues for the nine months ended January, 31, 2025 compared to approximately 53% of consolidated revenue during the same period in the prior fiscal year. Other commercial and industrial revenues for the nine months ended January 31, 2025 accounted for approximately 3% of consolidated revenue compared to 6% in the same period of the prior fiscal year. The significant increase in revenue for the nine month period ended January 31, 2025, compared to the same period in the previous fiscal year, and was reflected predominately in U.S. Government satellite programs.
Previous report — wording carried elsewhere
The effective tax rate for the nine months ended January 31, 2025 was an income tax benefit of 129.3% on pretax income of $8.9 million compared to an income tax provision of 0.6% on pretax income of $3.0 million in the comparable prior fiscal year period. The effective tax rate for the nine months ended January 31, 2025 differs from the U.S. federal statutory rate of 21% primarily due to the release of the valuation allowance.