FEIM's Q1 Earnings Plunge 74% Amid Revenue Declines

TL;DR

**FEIM's Q1 is a disaster, with net income down 74% and revenues shrinking; time to bail on this one.**

AI Summary

FREQUENCY ELECTRONICS INC (FEIM) reported a significant decline in financial performance for the three months ended July 31, 2025, with revenues decreasing by 8.4% to $13.812 million from $15.077 million in the prior year. Net income plummeted by 73.9% to $0.634 million, down from $2.430 million in the same period last year. This led to a basic and diluted income per share of $0.07, a sharp drop from $0.25. The FEI-NY segment saw revenues fall from $10.975 million to $10.354 million, and its operating income decreased substantially from $1.377 million to $0.166 million. Similarly, the FEI-Zyfer segment's revenues declined from $4.272 million to $3.718 million, with operating income dropping from $1.140 million to $0.300 million. Selling and administrative expenses increased by 26% to $3.585 million, while research and development expenses decreased by 23.9% to $1.133 million. Cash and cash equivalents decreased from $4.720 million to $4.512 million, and the company used $0.583 million for treasury stock purchases.

Why It Matters

FEIM's substantial drop in net income and revenue signals potential operational challenges and reduced demand for its precision time and frequency control products, impacting investor confidence. The significant decline in operating income across both FEI-NY and FEI-Zyfer segments suggests a broad-based slowdown, which could affect employee morale and future investment in R&D. For customers, this could imply less innovation or potential supply chain issues if the company's financial health continues to deteriorate. In a competitive landscape, this underperformance could allow rivals to gain market share, especially in critical sectors like communication satellites and secure government communications, making FEIM a less attractive investment.

Risk Assessment

Risk Level: high — The company's net income decreased by 73.9% from $2.430 million to $0.634 million, and operating income fell by 84.6% from $2.365 million to $0.364 million. Both key segments, FEI-NY and FEI-Zyfer, experienced significant declines in operating income, indicating systemic issues rather than isolated incidents. This sharp decline in profitability, coupled with a decrease in cash and cash equivalents, points to elevated financial risk.

Analyst Insight

Investors should consider reducing their exposure to FEIM given the severe decline in net income and operating performance across both segments. Monitor upcoming filings closely for any signs of stabilization or further deterioration, and evaluate if management can articulate a clear strategy to reverse these negative trends. A wait-and-see approach is prudent, but current indicators suggest caution.

Financial Highlights

revenue

$13.812M

net Income

$0.634M

eps

$0.07

cash Position

$4.512M

revenue Growth

-8.4%

Revenue Breakdown

Key Numbers

• $13.812M — Revenues (Decreased by 8.4% from $15.077M year-over-year)
• $0.634M — Net Income (Decreased by 73.9% from $2.430M year-over-year)
• $0.07 — Basic and Diluted EPS (Decreased from $0.25 year-over-year)
• $3.585M — Selling and Administrative Expenses (Increased by 26% from $2.845M year-over-year)
• $1.133M — Research and Development Expenses (Decreased by 23.9% from $1.488M year-over-year)
• $0.364M — Operating Income (Decreased by 84.6% from $2.365M year-over-year)
• $4.512M — Cash and Cash Equivalents (Decreased from $4.720M at April 30, 2025)
• $0.583M — Purchase of Treasury Stock (Cash used in financing activities)
• 9,749,271 — Shares Outstanding (As of September 10, 2025)
• $4.1M — Contract Liabilities Recognized as Revenue (For the three months ended July 31, 2025)

Key Players & Entities

• FREQUENCY ELECTRONICS INC (company) — Registrant
• FEI-NY (company) — Operating segment
• FEI-Zyfer (company) — Operating segment
• NASDAQ Global Market (regulator) — Exchange where common stock is registered
• Securities and Exchange Commission (regulator) — Regulatory body for filings
• CEO (person) — Chief Operating Decision Maker
• Bloomberg (company) — Financial news organization
• Delaware (regulator) — State of incorporation

FAQ

Risk Factors

• Declining Revenue and Profitability [high — financial]: The company experienced an 8.4% decrease in revenue to $13.812M and a 73.9% drop in net income to $0.634M for the three months ended July 31, 2025. This significant decline in performance, particularly the 84.6% decrease in operating income, indicates potential challenges in sales execution or market demand.
• Increased Operating Expenses [medium — financial]: Selling and administrative expenses rose by 26% to $3.585M, while research and development expenses decreased by 23.9% to $1.133M. The substantial increase in SG&A without a corresponding revenue increase negatively impacts profitability.
• Reduced Cash Position [medium — financial]: Cash and cash equivalents decreased from $4.720M to $4.512M. The company also utilized $0.583M for treasury stock purchases, further reducing liquidity.
• Segment Performance Issues [high — operational]: Both the FEI-NY and FEI-Zyfer segments reported revenue declines. FEI-NY's operating income fell from $1.377M to $0.166M, and FEI-Zyfer's operating income dropped from $1.140M to $0.300M, highlighting broad-based operational challenges.
• Dependence on Specific Markets [medium — market]: While not explicitly detailed in the summary, the company's reliance on specific industries or government contracts could expose it to market shifts or budget changes within those sectors.

Industry Context

Frequency Electronics Inc. operates in the specialized field of high-precision frequency control and timing components. This sector is characterized by demanding technical specifications, often serving defense, aerospace, telecommunications, and scientific research markets. Competition can be intense, with success often depending on technological innovation, reliability, and long-term customer relationships.

Regulatory Implications

As a supplier to defense and aerospace sectors, Frequency Electronics Inc. may be subject to stringent government regulations, including export controls (e.g., ITAR) and cybersecurity requirements. Compliance with these regulations is critical for maintaining contracts and avoiding penalties.

What Investors Should Do

1. Monitor Segment Performance
2. Analyze SG&A Expense Increase
3. Evaluate R&D Investment Strategy
4. Assess Cash Flow and Liquidity

Key Dates

• 2025-07-31: End of Second Quarter — Reporting period for the 10-Q, showing significant revenue and profit declines compared to the prior year.
• 2025-04-30: End of First Quarter — Prior period balance sheet date, used for comparison of cash and cash equivalents.
• 2025-09-10: Date of Shares Outstanding Disclosure — Indicates the current number of shares outstanding, relevant for EPS calculations and market capitalization.

Glossary

FEI-NY Segment

One of the operating segments of Frequency Electronics Inc., likely focused on New York-based operations or product lines. (Contributed to the overall revenue and operating income decline, with its own operating income falling significantly.)

FEI-Zyfer Segment

Another operating segment of Frequency Electronics Inc., potentially focused on specific technologies or markets. (Also experienced a revenue decrease and a substantial drop in operating income, indicating company-wide performance issues.)

Treasury Stock Purchases

The company's repurchase of its own shares from the open market. (Used $0.583M in cash during the period, reducing available liquidity and potentially signaling management's view on share value or capital allocation strategy.)

Contract Liabilities Recognized as Revenue

Represents revenue recognized during the period that was previously recorded as a liability (unearned revenue) on the balance sheet. (The $0.364M figure indicates the amount of previously deferred revenue that was converted to recognized revenue in the current quarter.)

Year-Over-Year Comparison

Compared to the prior year's comparable period, Frequency Electronics Inc. reported a significant downturn in financial performance. Revenue decreased by 8.4% to $13.812 million, while net income plummeted by 73.9% to $0.634 million, resulting in a sharp drop in EPS from $0.25 to $0.07. Operating income saw an even more drastic decline of 84.6%. This performance deterioration is accompanied by an increase in selling and administrative expenses by 26%, contrasting with a decrease in research and development spending.

Key Financial Figures

• $1.00 — ich registered Common Stock (par value $1.00 per share) FEIM NASDAQ Global Market

Filing Documents

• feim10q073125.htm (10-Q) — 579KB
• feimex31-1.htm (EX-31.1) — 13KB
• feimex31-2.htm (EX-31.2) — 13KB
• feimex32.htm (EX-32) — 10KB
• 0001185185-25-001203.txt ( ) — 3583KB
• feim-20250731.xsd (EX-101.SCH) — 35KB
• feim-20250731_cal.xml (EX-101.CAL) — 31KB
• feim-20250731_def.xml (EX-101.DEF) — 141KB
• feim-20250731_lab.xml (EX-101.LAB) — 236KB
• feim-20250731_pre.xml (EX-101.PRE) — 158KB
• feim10q073125_htm.xml (XML) — 394KB

Financial

Part I. Financial Information: 3 Item 1 - Financial Statements: Condensed Consolidated Balance Sheets – July 31, 2025 (unaudited) and April 30, 2025 3 Condensed Consolidated Statements of Operations – Three Months Ended July 31, 2025 and 2024 (unaudited) 4 Condensed Consolidated Statements of Cash Flows Three Months ended July 31, 2025 and 2024 (unaudited) 5 Condensed Consolidated Statements of Changes in Stockholders' Equity – Three Months Ended July 31, 2025 and 2024 (unaudited) 6 Notes to Condensed Consolidated Financial Statements (unaudited) 7-14 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 15 Item 3 - Quantitative and Qualitative Disclosures About Market Risk 20 Item 4 - Controls and Procedures 20 Part II. Other Information: Item 1A – Risk Factors 21 Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds 21 Item 5 – Other Information 21 Item 6 - Exhibits 21

Signatures

Signatures 22 Table of Contents PART I. FINANCIAL INFORMATION Item 1. Financial Statements FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES Condensed Consolidated Balance Sheets (In thousands, except par value) July 31, April 30, 2025 2025 (UNAUDITED) ASSETS: Current assets: Cash and cash equivalents $ 4,512 $ 4,720 Accounts receivable, net of allowances of $ 102 at July 31, 2025 and $ 110 April 30, 2025 7,440 5,914 Contract assets 14,213 17,914 Inventories 24,772 23,487 Prepaid expenses and other 1,406 1,071 Total current assets 52,343 53,106 Property, plant, and equipment, net 6,494 6,188 Deferred taxes 12,122 12,045 Goodwill 617 617 Cash surrender value of life insurance and assets held in trust 11,128 10,882 Right-of-use assets – operating leases 8,249 8,659 Restricted cash 1,375 1,365 Other assets 875 875 Total assets $ 93,203 $ 93,737 LIABILITIES AND STOCKHOLDERS' EQUITY: Current liabilities: Accounts payable – trade $ 1,095 $ 1,359 Accrued liabilities 6,213 5,899 Loss provision accrual 133 460 Income taxes payable 103 103 Operating lease liability – current portion 2,067 2,027 Contract liabilities 13,105 13,607 Total current liabilities 22,716 23,455 Deferred compensation 7,876 7,933 Operating lease liability – non-current portion 6,292 6,729 Total liabilities 36,884 38,117 Stockholders' equity: Preferred stock - $ 1.00 par value; authorized 600 shares, no shares issued - - Common stock - $ 1.00 par value; authorized 20,000 shares, 9,784 shares issued and 9,749 shares outstanding at July 31, 2025; 9,717 shares issued and 9,704 shares outstanding at April 30, 2025 9,784 9,717 Additional paid-in capital 43,056 42,475 Retained earnings 4,293 3,659 Common stock reacquired and held in treasury -at cost ( 35 shares at July 31, 2025 and 13 shares at April 30, 2025) ( 814 ) ( 231 ) Total stockholders' equity 56,319 55,620

View Full Filing

View this 10-Q filing on SEC EDGAR