Conference will begin in one moment. Thank you for your patience. Greetings and welcome to the Frequency Electronics, Inc. third quarter fiscal 2026 earnings release conference call. As a reminder, this conference is being recorded. Any statements made by the company during this conference call regarding the future constitute forward-looking statements pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements inherently involve uncertainties that could cause results to differ materially from the forward-looking statements. Factors that would cause or contribute to such differences are included in the company's press releases and are further detailed in the company's periodic report filings with the Securities and Exchange Commission. By making these forward-looking statements, the company undertakes no obligation to update these statements for revisions or changes after the date of this conference call. It is now my pleasure to introduce your host, Thomas McClelland, President and Chief Executive Officer. Good afternoon.

And thanks for joining Frequency Electronics, Inc.’s third quarter fiscal year 2026 earnings call. With me today is our CFO, Steven Bernstein. On our second quarter fiscal 2026 earnings call in December, I discussed our vision for how we see the growth in our company developing in the coming years. Specifically, I told you that the exciting growth prospects we have in large and growing end markets, which are larger than our historical addressable markets, will come in addition to continuing strength and growth in our ongoing businesses in space and defense. These new markets, such as quantum sensing, proliferated satellites, and alternative position, navigation, and timing programs, are built upon our industry-leading capabilities in our core space and defense programs. I also told you on that December call that we anticipate multiple awards in the coming months, some of which are as large or larger than the biggest ones we have historically announced. Today, we are very pleased to report significant progress on all of these fronts. In a separate press release that came out at the same time as our earnings report after the close of market today, we announced that we were awarded two contracts, valued at approximately $45 million. One of these contracts is in the domain of Frequency Electronics, Inc.’s traditional space satellite programs, and one is part of the new proliferated satellite paradigm. Customer confidentiality prevents us from discussing these with greater specifics at this time, but there are two important points to consider. First, of course, is that these contracts reflect our ability to continue to win meaningful contracts in our traditional space business while also winning significant business in our next-generation markets at the same time. In other words, while our business is never perfectly linear, we are definitely not projecting a…

Thank you, Tom, and good afternoon. For the three months ended 01/31/2026, consolidated revenue was $16.9 million compared to $18.9 million for the same period of the prior fiscal year and substantially similar to the second quarter of this fiscal year, as Tom mentioned earlier and which we have described on the past several calls. The components of revenue: revenue from commercial and U.S. government satellite programs was approximately $4.2 million, or 25%, compared to $11.2 million, or 59%, in the same period of the prior fiscal year. Revenues on satellite payload contracts are recognized primarily under the percentage-of-completion method and reported only in the FEI New York segment. Revenues from non-space U.S. government and Department of Defense customers, which are recorded in both the FEI New York and FEI Cypress segments, were $12.5 million compared to $7.4 million in the same period of the prior fiscal year and accounted for approximately 74% of consolidated revenue compared to 39% for the prior fiscal year. Other commercial and industrial revenues were $180,000 compared to approximately $367,000 in the prior fiscal year. The revenue for the three months ending 01/31/2026 was lower than the revenues in the prior period partly as a result of certain space programs in the FEI New York segment during the prior fiscal year that were being expedited during the period due to very aggressive schedules. In addition, several new space bookings anticipated for the three months ending 01/31/2026 are now anticipated in fiscal ’26 Q4. For the three months and nine months ending 01/31/2026, both gross margin and gross margin rate decreased compared to the same periods in the prior fiscal year. The decrease in gross margin and gross margin rate is attributable to a change in the mix of high-margin production satellite programs in the prior-year…

Thanks, Steven. We will now open for questions.

Thank you. At this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press 1 on your telephone keypad. The confirmation tone will indicate your line is in the question queue. You may press 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset while we poll for questions. Once again, please press 1 if you have a question or a comment. The first question comes from Jeff Van Rhee with Craig-Hallum. Please proceed.

Great. Thanks for taking the questions. A couple for you here, guys. So, Tom, the proliferated win—talk to me about what you are learning out in the marketplace and your ability to win in these proliferated constellation deals. I know it is something you have sort of felt your way through. Looks like you have got some success and you are sort of guiding to continued success. Where do you have the right to win? Where do you win? Where do you not have a right to play? Just what have you learned there?

Well, I think when we can provide some technical edge, we are very successful. We are seeing that, and that is what the win that we announced today reflects. When there are systems that have minimal technical requirements and all of the emphasis is just on the lowest possible cost, then it is a much bigger challenge for us.

Mhmm. Realizing your hands are somewhat tied, talk to me to the degree you can on the $45 million. I think you said there is a couple wins in there. Are these roughly equal in size? I know you said one was proliferated, one was not, but just rough proportion of what is in there?

Well, I am going to dodge that one a little bit, Jeff. But let me just say they are both significant.

And in terms of the coming into funded backlog, I think that phrasing was they will start to come into backlog. I mean, can you give us some swag at how quickly that is going to play into the backlog?

Just a reminder that we talk about funded backlog. So it is a question of the funding profile on each of these programs. But the reality is that it will be pretty significant in the quarter that we are in currently. I do not think I can say a whole lot more than that at this point.

Okay. And, Steven, on the cost structure, I was unclear. I think you referenced there were some unusuals in there. Obviously, R&D has bumped up considerably over the last few quarters. I am trying to understand what the steady-state OpEx levels are going forward. So just what was in there this quarter that was one-time and not?

Well, we have in the general operating expenses— we still have investments that we are making into Colorado. It is the largest piece of that. And once that is done, it should normalize pretty much. That was one of the larger pieces of it.

And so when you say normalize, are we going to go up from this level as we go forward into future quarters, or was there unusual in here and we should step down from here?

Well, again, operating expenses in general—unfortunately, there is always some bump, whether at 3%, 4%, 5%, based on just the normal growth of normal expenses. So I do not see any—unless something changes, I do not see a large increase, but I do not see a large decrease.

Okay. Maybe last for me. Tom, with respect to Turbo, I know you had given some color commentary in a few prior quarters that you felt it had the potential to go from a couple million to maybe $20 million in the out year if things go right. Just your updated thinking on Turbo based on market reception, pipeline, etcetera? Thanks.

I think if anything, we are more optimistic about Turbo. We are beginning to see significant revenue at this time, and every indication is that this is going to grow dramatically over the next—even over the next couple of quarters and definitely over the next couple of years.

Got it. Thanks so much.

Our next question comes from Chris Pokosky, private investor. Please proceed.

Hello. Thank you for taking my questions. And congratulations on the new wins. Could you clarify what exactly is the proliferated satellite? Is it the Starlink-type satellite? I am not asking if it is Starlink or not, just if it is that type of satellite.

It is actually a pretty good question. I am not sure I really like that term “proliferated satellites,” but it is one that is being used out there. I think the distinction we are trying to make is between what we call traditional satellite systems, where there may be three to five satellites in a constellation, oftentimes in geosynchronous orbits, versus these newer satellite systems that are being envisioned at this point in time, often, but not always, in low Earth orbit, but consisting of many, many more satellites, typically from 300 to, in some cases, many thousands, and SpaceX is now talking about a constellation of a million satellites. But I think that the real distinguishing feature is the thought process that goes behind these systems. What has become very clear recently is that satellites are vulnerable from our enemies, and this has been demonstrated recently that both the Chinese and the Russians in particular have the capability to destroy other satellites. When we have a satellite system that has only a couple of satellites in it, if one of those satellites gets destroyed, it is a huge loss for us. It can represent billions of dollars, in fact. So the idea is, instead of having a couple of satellites worth a billion dollars each, to have a system where there are many more satellites, but the individual satellites are much less costly. The simple way I like to look at it is that the system itself may overall cost the same amount of money, but instead of those costs being distributed over a few satellites—three, four, five satellites—it is distributed over 300 or a thousand satellites. In order to make that approach work, obviously the individual satellites have to cost a lot less. So that is what we…

That was very appreciated. Please feel free to be as long-winded as you want. So it seems like there will be some headwinds or some tailwinds for gross margins. I am sure having continuous production would really help gross margins. But then having a new satellite program which requires limited cost, that might hurt gross margins. So do you think you will be able to keep your gross margins on this new proliferated satellite program? And is there going to be, like, a learning period where gross margins will be lower?

It is a good question, and something we have talked about on previous calls. I think we do anticipate, in the short run, somewhat lower gross margins on the proliferated satellite business as it gets refined in the initial years. But at the same time—and it is really one of the things we are trying to emphasize today—is that the traditional satellite business is still alive and well, and that is a business where our gross margins are very strong. So whereas we have to invest to some extent in the proliferated satellites, we have really good gross margins with the traditional satellites. I also want to emphasize that, in the long run, we anticipate very strong margins for the proliferated satellite business as well.

Okay. And you mentioned that in this current quarter things are going—this $45 million—some of it is going to the funded backlog. Are you allowed to tell us when actual production would start?

That is something I think we are not prepared to get into. It is a very early stage of these programs, and the schedules are being worked out now with our customers.

Alright. Thanks. Good luck.

Thank you. Next question is from Michael Eisner, private investor.

Michael, please proceed.

Congratulations on the two contracts and future contracts. Most of my questions are answered. Can you comment on Golden Dome?

I do not think there is a whole lot I can say. From our point of view, Golden Dome is just sort of being defined at this point in time. We have spoken specifically in the past and earlier today about some of the programs—Patriot missile and THAAD—which I think are, in some ways of thinking, considered part of the Golden Dome concept. We are also involved in several other missile programs, which we cannot talk about in specific. But we are very, very involved in a number of things that are part of the Golden Dome concept. And, of course, satellites are also a very, very important part of the Golden Dome concept, and we are very involved in that also. Other than that, Michael, I do not think I can really get into any specifics.

Comment. Frequency Electronics, Inc. has been around 60, 70 years, and Frequency is a nice name, good name, respected name. Did you ever think of adding to Frequency—maybe Frequency Quantum Sensing, for example, or Timing—the more what the company actually does?

We have thought about it, and there have been all sorts of suggestions along the lines that you are suggesting right now and quite a number of other ones also. I do not think I want to say a whole lot more than that. But, at the moment, we are sticking with the 65-year-old name that we have.

Yeah. I just thought because it does so much more now, and we keep on—it sounds like from this call—getting involved with more stuff in technology. I did not say technology company.

One thing I will say: we have given some thought to this kind of thing, and I am not going to say one way or the other what the future will bring, but I think there is—we have just been talking about it—there is a tremendous amount of business that we are looking at at this point of time, and we are anticipating very, very significant growth. I think the important thing to do is concentrate on executing that business effectively, and that is what we are focusing on, and we feel that is way more important than the name we provide to the company.

Okay. That is fine. Thank you. See you.

Once again, if you have a question or a comment, please press 1. We have a follow-up coming from Jeff Van Rhee with Craig-Hallum. Please proceed, Jeff.

Great. Thanks. Yes, just a few from you guys. In terms of the script, Steven, I might have missed it. I thought you had said you had some bookings push-outs, and I did not quite catch it. I think you said Q1 went to Q4. Just that for me. And then, Tom, you have been talking about $100 million backlog you thought in relatively near future—sounded like slightly different verbiage here, so maybe it is not quite as near as you thought it had been. Just connect those two dots for me and help me understand what is going on there.

I think that, again, we cannot really get into quantitative specifics. But I do think that the $100 million mark is going to be breached relatively quickly. Just what we talked about today—the numbers—our backlog is up from what it was last quarter slightly, and we just announced today $45 million of new contracts, and that is going to begin hitting the backlog this quarter. There is more in the input pipeline, so we are very quickly approaching the $100 million mark.

Mhmm. Yeah. Understood. And just back to the original question, Steven, did you reference contracts pushing out from Q1 to Q4? And if so, can you expand on that?

To Q4, and that is why some of the revenue was down and dropped because—

I said they pushed from Q3. The very specifically—the contracts that we just announced. One of the frustrating things in the satellite business is our wonderful government—they like to get their satellite hardware as quickly as possible, but they are not so fast in executing contracts.

To say the least. Okay. Thanks so much.

Alright.

Next question comes from Robert Smith with Center for Performance Investing.

Good afternoon, Tom. Steve. Hi. I just wanted to congratulate you, Tom, on your transforming this company and positioning it for future growth, and I am hopeful that you can continue to execute, and I think you are doing a wonderful job. And kudos to you. Grateful to be aboard. Thanks so much.

I appreciate it, and we will do our best.

Our next question, we have a follow-up actually from Chris Pokosky, private investor. Please proceed.

Hello. Thanks for taking my follow-up. I wanted to ask if you can expound a little bit on the alternative position and navigation. Now, obviously, there is GPS jamming all over the place. How do you help address that, and would that lead to your devices being actually deployed in kind of the terrestrial—in the boats and cars and so on?

For alternative navigation, there are dozens or more things that people are considering. I think it is maybe worth just a little bit of discussion about this. We all have come to depend on GPS, Global Positioning System, over the last couple of decades, but the one thing that distinguishes GPS is the “G” part of it—the global. It is available literally any place on the surface of the Earth. When people talk about alternatives to GPS, sometimes they talk about other satellite navigation systems which are potentially also global in reach, but in general, people like to talk about things that are not satellite systems. The whole idea is that the satellite Global Positioning System is vulnerable—the satellites can be destroyed or damaged by our enemies in particular—and also the signals can be jammed. If you just replace one satellite system with another satellite system, you have essentially the same problems that you had with the original system. So people talk primarily about non-satellite alternatives, and in general, the non-satellite alternatives are not global in reach. That means that, usually, when you talk about alternatives, you are talking about employing multiple approaches to navigation. One alternative may work in a particular environment—say, an urban environment—and another approach will work over the ocean or in the middle of the desert someplace. With all of that preliminary being said, there are a couple of things that we are involved in and think are going to become important over the next couple of years and probably over the next decade. One of them that we are working on very actively right now is so-called magnetic navigation. The idea here is that the magnetic field around the surface of the Earth is not exactly constant. It varies by small amounts, and the exact…

Well, thanks for the thorough answer. And are you getting any revenue right now? I guess production revenue will be a couple of years out.

We are, because the U.S. government is very interested in developing these technologies and they are funding development activities. So we are getting revenue from those development funds. But we anticipate over the next decade turning that development revenue into product-based revenue.

Alright. Thanks again.

The next question is from Sam Nelson, private investor. Sam, please proceed.

Hi, Tom. Thanks for taking my question. I was just trying to get a better idea of, with the new contracts, how that award might ultimately flow through the backlog. I think on previous calls, you had described how ultimately the impact might be, like, 10x the initial value that is realized on the backlog, and just to clarify, I was wondering if we could look at these new contract awards in a similar way where the initial realized amount of the contract that is falling in backlog—could we 10x that, or what might the impact ultimately be?

I think, without making specific kinds of statements, that the 10x approximation is reasonably valid here. The contribution to backlog depends on the initial funding on these contracts. Something along those lines—again, not providing specific guidance.

Okay. Thank you.

Okay. We have no further questions in the queue. I would like to turn the floor back to management for any closing remarks.

Thank you for taking the time to listen and participate in today’s earnings call, and we look forward to providing further updates in the coming months. Thank you.

This concludes today’s conference, and you may disconnect your lines at this time. Thank you for your participation.