Executive Summary
Frequency Electronics (FEIM) delivered a solid QQ2 2025 (six months ended Oct 31, 2024) with notable top-line momentum, margin expansion, and a historically high backlog of $81 million. The quarter’s revenue of $15.82 million rose 4.9% QoQ and 16.5% YoY, aided by a stronger mix of U.S. government space programs. Gross margin improved to 48.2%, contributing to a 16.55% operating margin and a net income of $2.65 million ($0.28 per share). Management attributes the year-to-date strength to the U.S. government space segment, which accounts for more than half of revenue and operating income in the first half of FY2025, and signals ongoing momentum through quantum sensing initiatives and Proliferated Small Satellite (PSS) opportunities. FEIM reiterated a healthy R&D cadence (~10% of revenue) to position for future wins in the growing small-satellite and quantum-tech domains, while maintaining a robust cash position and a debt-free balance sheet. Near-term visibility rests on continued government funding and backlog conversion, as the company scales investment in internal R&D and explores CRADAs with national laboratories. Investors should monitor (1) backlog evolution and revenue realization, (2) progress in Quantum Sensors initiatives and related government funding, (3) the trajectory of non-space government revenue, and (4) the competitive dynamics of the proliferated small satellite market.
Key Performance Indicators
QoQ: 10.70% | YoY:179.10%
QoQ: 12.00% | YoY:230.19%
Key Insights
Revenue (Q2 2025): 15.82m; YoY +16.5%, QoQ +4.93% | Gross Profit: 7.62m; Gross Margin: 48.16% | Operating Income: 2.62m; Operating Margin: 16.55% | EBITDA: 2.82m; EBITDA Margin: 17.83% | Net Income: 2.65m; Net Margin: 16.78% | EPS: 0.28; Diluted EPS: 0.28 | Backlog: 81.0m (all-time high) | Six-month Revenue (to Oct 31, 2024): 30.9m; Six-month Net Income: 5.1m; Six-month Backlog: 81m | Cash from Operations: 3.87m; Free Cash Flow: 4.20m | Cash at End of Period: 10.44m; Cash at Beginning: 17.42m | ...
Financial Highlights
Revenue (Q2 2025): 15.82m; YoY +16.5%, QoQ +4.93% | Gross Profit: 7.62m; Gross Margin: 48.16% | Operating Income: 2.62m; Operating Margin: 16.55% | EBITDA: 2.82m; EBITDA Margin: 17.83% | Net Income: 2.65m; Net Margin: 16.78% | EPS: 0.28; Diluted EPS: 0.28 | Backlog: 81.0m (all-time high) | Six-month Revenue (to Oct 31, 2024): 30.9m; Six-month Net Income: 5.1m; Six-month Backlog: 81m | Cash from Operations: 3.87m; Free Cash Flow: 4.20m | Cash at End of Period: 10.44m; Cash at Beginning: 17.42m | Total Assets: 77.78m; Total Liabilities: 41.58m; Total Stockholders’ Equity: 36.19m | Current Ratio: 1.79; Quick Ratio: 0.93; Debt/Equity: 0.15; Net Cash Position: ~$-3.35m net debt (net cash balance after debt)
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
15.82M |
16.54% |
4.93% |
| Gross Profit |
7.62M |
75.96% |
13.75% |
| Operating Income |
2.62M |
179.10% |
10.70% |
| Net Income |
2.65M |
233.00% |
9.22% |
| EPS |
0.28 |
230.19% |
12.00% |
Key Financial Ratios
operatingProfitMargin
16.5%
operatingCashFlowPerShare
$0.4
freeCashFlowPerShare
$0.44
Management Commentary
Key management takeaways from the earnings call include a continued emphasis on government space programs as the growth engine, a strategic push into proliferated small satellites, and a sustained R&D investment to capture future wins. Highlights: backlog at $81 million, a new all-time high, signals robust demand; U.S. government space business now accounts for more than half of revenue and operating income in the first half of FY2025; R&D spend rising to ~10% of revenue, up from ~6% prior year, with expectation to remain near 10% going forward; Quantum Sensors Summit and CRADAs with NIST indicate a pipeline of external funding and collaboration that could drive multi-year growth; management expects government funding to accelerate within the next two quarters, aided by a more predictable budget environment post-transition.
“Backlog is also holding strong at $81 million, which is, by the way, an all-time high compared to $70 million at the end of the first quarter and $78 million at the end of the last fiscal year.”
— Thomas McClelland (President & CEO)
“Our R&D expenditures are up this year because of this, currently about 10% of revenue compared to about 6% of revenue last fiscal year. It’s anticipated that R&D will remain steady at approximately 10% of revenue for the foreseeable future, but we believe that the return on this investment has the potential to be extremely attractive in terms of new business wins.”
— Thomas McClelland (President & CEO)
Forward Guidance
Management commentary points to ongoing expansion in government space programs and proliferated small satellites as the key long-term growth vectors. Near-term indicators include: (1) continued policy and funding support for space initiatives under a potentially more stable US budget, (2) readiness to capitalize on externally funded quantum technology programs via CRADAs with NIST and other labs, (3) R&D investment remaining around 10% of revenue to sustain product modernization and competitive differentiation. However, FEIM notes that a portion of the growth may be lumpy as government programs move through procurement cycles. Investment implications: monitor backlog-to-revenue conversion momentum, the pace of CRADA-funded projects, and the development of affordable, radiation-tolerant small-satellite products that maintain FEIM’s high-precision timing advantage. Potential catalysts include successful qualification of radiation-hardened components, broader adoption of resilient GPS and timing solutions, and new awards in the GEO/LEO/MEO segments.