Frequency Electronics Reports 21.5% Revenue Growth and Improved Profitability in Q2 2024

Frequency Electronics, Inc. reported its financial results for the three months ended July 31, 2024, showing a significant increase in revenue and profitability compared to the same period in the previous year. Total revenues reached $15.1 million, a 21.5% increase from $12.4 million in the prior year. This growth was driven primarily by the FEI-NY segment, which generated $11.0 million in revenue, up from $9.5 million, and the FEI-Zyfer segment, which increased to $4.3 million from $3.3 million. Notably, revenues from commercial and U.S. Government communication satellite programs accounted for approximately 55% of total revenues, up from 39% in the previous year.

The company's gross margin improved to $6.7 million, representing a gross margin rate of 44.4%, compared to 39.2% in the same period of 2023. Operating income also increased to $2.4 million, up from $2.1 million, while net income rose to $2.4 million, compared to $2.0 million in the prior year. Basic and diluted earnings per share were $0.25, compared to $0.22 in the same period last year.

Despite the positive revenue and income growth, Frequency Electronics experienced a decrease in cash and cash equivalents, which fell to $16.2 million from $18.3 million as of April 30, 2024. The company reported net cash used in operating activities of approximately $1.5 million, an improvement from $2.8 million in the same period last year. The total current liabilities increased significantly to $38.7 million from $30.8 million, impacting the current ratio, which decreased to 1.5 from 1.9.

In terms of strategic developments, the company declared a special cash dividend of $1.00 per share, totaling approximately $9.6 million, which was paid on August 29, 2024. Additionally, share repurchases amounted to approximately $4.0 million out of a $5.0 million authorization. The consolidated funded backlog as of July 31, 2024, was approximately $70 million, down from $78 million in April 2024, with about 65% expected to be realized in the next twelve months.

The company also reported a material weakness in internal control over financial reporting, specifically related to loss provision accruals in contracts with customers. However, management concluded that the financial statements fairly presented the company's financial position in accordance with GAAP, despite this weakness.