Nasdaq:FEIM
FREQUENCY ELECTRONICS INC
A niche aerospace and defense manufacturer delivering high-frequency electronic solutions with a recent turnaround to strong profitability.
Key Metrics
Investment Thesis
Bull Case
Investors may buy FREIM due to its clear earnings momentum, with net income surging 323% year-over-year from 2024 to 2025 and a revenue CAGR exceeding 20%. The company's strong gross profit margin of roughly 43% demonstrates pricing power in a specialized niche that competitors cannot easily replicate. With total assets growing to $93.7M and a clean balance sheet, FREIM appears well-positioned for continued expansion in the defense electronics sector.
Bear Case
Potential buyers should be cautious about the persistent negative operating cash flow of -$1.4M which indicates ongoing liquidity pressure despite accounting profits. The company's reliance on a cyclical aerospace and defense budget means earnings could be volatile if government spending contracts or delays occur. High capital expenditures of $1.8M combined with other investing outflows of $3.6M suggest the company is burning cash to sustain growth, which may not be sustainable without additional equity financing.
About FREQUENCY ELECTRONICS INC
Frequency Electronics Inc. designs and manufactures high-frequency electronic components, primarily serving the aerospace and defense sectors with advanced connectors, cables, and electromechanical devices. The company operates in a niche market requiring rigorous quality standards and specialized engineering for mission-critical applications. Recent financial data indicates a robust recovery with revenue reaching $69.8M and net income turning to $23.7M.
Analysis
Management Discussion
The company has executed a successful operational turnaround, evidenced by net income climbing from a $5.5M loss in 2023 to $23.7M in 2025 while revenue grew by 71% over the same period. Operating cash flow remains negative at -$1.4M, suggesting continued heavy investment in working capital changes totaling $2.4M and R&D of $6.1M to fuel future growth. Despite a significant cash outflow from financing activities of $9.9M, the company maintains sufficient liquidity with current assets of $53.1M against liabilities of $38.1M.
Industry Overview
The aerospace and defense electronics industry demands specialized components for high-frequency radar, satellite communications, and avionics systems where reliability is paramount. Competition is low but fragmented, with barriers to entry centered on proprietary technology, long-term contract adherence, and rigorous certification processes. Industry trends point toward increasing demand for lightweight, high-performance electronic solutions as military platforms modernize their communication infrastructure.
Financial Statements
Income Statement
Balance Sheet
Cash Flow
| Metric | 2023 | 2024 | 2025 |
|---|---|---|---|
| Revenue | $40.8M | $55.3M | $69.8M |
| Cost of Revenue | $32.9M | $36.7M | $39.7M |
| Gross Profit | $7.8M | $18.6M | $30.1M |
| Operating Expenses | $12.5M | $13.6M | $18.4M |
| Operating Income | $-4.7M | $5.0M | $11.7M |
| R&D | $3.1M | $3.4M | $6.1M |
| G&A | $9.4M | $10.2M | $12.3M |
| Stock-Based Comp | $197.0K | $822.0K | $1.2M |
| D&A | $2.4M | $2.1M | $2.1M |
| Depreciation | $2.4M | $2.1M | $2.1M |
| Other OpEx | $0 | $0 | $0 |
| Non-Operating Income | $-755.0K | $445.0K | $412.0K |
| Interest Expense | $156.0K | $109.0K | $104.0K |
| Pre-Tax Income | $-5.4M | $5.5M | $12.1M |
| Income Tax | $74.0K | $-130.0K | $-11.5M |
| Continuing Ops | $-5.5M | $5.6M | $23.7M |
| Discontinued Ops | $0 | $0 | $0 |
| Net Income | $-5.5M | $5.6M | $23.7M |
| Minority Interest | $0 | $0 | $0 |
| Net to Common | $-5.5M | $5.6M | $23.7M |
| Metric | 2023 | 2024 | 2025 |
|---|---|---|---|
| Current Assets | $48.3M | $58.1M | $53.1M |
| Cash & Equivalents | $12.0M | $18.3M | $4.7M |
| Marketable Securities | $0 | — | — |
| Accounts Receivable | $4.6M | $4.6M | $5.9M |
| Inventory | $20.5M | $23.4M | $23.5M |
| Prepaid Expenses | $1.1M | $1.2M | $1.1M |
| Other Current Assets | $10.0M | $10.6M | $17.9M |
| Long-Term Assets | $26.2M | $25.1M | $40.6M |
| PP&E (Net) | $7.1M | $6.4M | $6.2M |
| Goodwill | — | $617.0K | $617.0K |
| Operating Leases | $7.4M | $6.0M | $8.7M |
| Other LT Assets | $11.7M | $12.0M | $25.2M |
| Total Assets | $74.5M | $83.3M | $93.7M |
| Current Liabilities | $27.3M | $30.8M | $23.5M |
| Current Leases | $1.8M | $1.6M | $2.0M |
| Deferred Revenue | $18.6M | $21.6M | $13.6M |
| Taxes Payable | — | — | $103.0K |
| Other Current Liab | $3.0M | $2.8M | $1.8M |
| Long-Term Liabilities | $14.3M | $12.6M | $14.7M |
| LT Operating Leases | $5.9M | $4.5M | $6.7M |
| Other LT Liab | $8.4M | $8.1M | $7.9M |
| Total Liabilities | $41.6M | $43.4M | $38.1M |
| Shareholders' Equity | $32.9M | $39.8M | $55.6M |
| Paid-In Capital | $49.1M | $50.3M | $42.5M |
| Retained Earnings | $-25.6M | $-20.0M | $3.7M |
| AOCI | $0 | $0 | — |
| Treasury Stock | $3.0K | $3.0K | $231.0K |
| Total L&E | $74.5M | $83.3M | $93.7M |
| Metric | 2023 | 2024 | 2025 |
|---|---|---|---|
| Net Income (CFO) | $-5.5M | $5.6M | $23.7M |
| Non-Cash Adjustments | $-11.0M | $-5.4M | $-27.6M |
| Working Capital Changes | $17.7M | $8.5M | $2.4M |
| Cash from Operations | $1.2M | $8.7M | $-1.4M |
| Capital Expenditures | $918.0K | $1.5M | $1.8M |
| Cash from Investing | $8.7M | $-1.5M | $-1.8M |
| Share Buybacks | — | — | $377.0K |
| Dividends Paid | $9.4M | $0 | $9.6M |
| Cash from Financing | $-9.4M | $0 | $-9.9M |
| FX Effect | $0 | $0 | $0 |
| Net Change in Cash | $488.0K | $7.2M | $-13.2M |
| Beginning Cash | $11.6M | $12.0M | $19.3M |
| Ending Cash | $12.0M | $19.3M | $6.1M |
Frequently Asked Questions
How does FREQUENCY ELECTRONICS INC make money?
High-Frequency Connectors and Cables serving aerospace and military platforms; Electromechanical components for specialized industrial and defense applications; Engineering and design services supporting complex system integration projects.
What are the main risks for FEIM?
Concentration risk dependent on a limited number of large aerospace and defense contracts; Volatility in raw material costs impacting the gross profit margin of $30.1M relative to $69.8M revenue; Potential supply chain disruptions affecting delivery schedules for mission-critical components.
What is FEIM's competitive advantage?
Specialized expertise in high-frequency electronics required for advanced radar and communication systems; Strong customer relationships within the capital-constrained aerospace and defense supply chain; Consistent revenue growth from $40.8M in 2023 to $69.8M in 2025 reflecting market expansion.
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Not financial advice. All content is for informational purposes only. Data may contain errors. Consult a qualified financial advisor before making investment decisions.