Espey Mfg. Reports Decline in Net Sales but Increase in Net Income for Q2 FY 2026

Espey Mfg. & Electronics Corp. reported a decline in net sales for the second quarter of fiscal year 2026, with revenues of $12.1 million for the three months ended December 31, 2025, down from $13.6 million in the same period last year. For the six months, sales totaled $21.2 million, compared to $24.1 million in the prior year. The decrease in revenue is attributed to timing issues related to shipments and milestone completions on specific programs, rather than a sustained downturn in demand. Despite the drop in sales, the company experienced an increase in gross profit, which rose to $4.2 million for the quarter, up from $3.2 million a year earlier, reflecting improved product mix and operational efficiencies.

The company's net income for the quarter was $2.8 million, or $1.02 per share, compared to $1.9 million, or $0.74 per share, in the prior year. For the six-month period, net income reached $5.0 million, or $1.82 per share, compared to $3.5 million, or $1.37 per share, in the same period last year. The increase in profitability is primarily driven by higher gross profits and increased interest income, which rose due to a larger cash balance in investment securities. Selling, general, and administrative expenses saw a slight increase, reflecting higher ESOP contributions and professional services.

Espey’s total assets increased to $85.2 million as of December 31, 2025, up from $79.1 million at the end of June 2025. This growth was supported by a rise in inventories, which totaled $22.9 million, compared to $17.8 million in the previous period. The company’s backlog as of December 31, 2025, was $134.7 million, indicating a healthy pipeline of future work, although this was a decrease from $120.1 million a year earlier. The backlog includes significant contributions from three major customers, which accounted for approximately 88% of the total.

Operationally, Espey continues to focus on enhancing its product offerings and expanding its market presence. The company received a $3.4 million grant from the U.S. Navy to support facility and equipment upgrades, with $2.0 million already reimbursed. The company is also actively pursuing new contracts and has identified approximately $167.1 million in outstanding opportunities as of February 2026. Management anticipates that revenues for fiscal year 2026 will be higher than in fiscal year 2025, driven by the existing backlog and ongoing projects.

Looking ahead, Espey remains cautiously optimistic about its financial outlook. While management expects stable performance for the remainder of the fiscal year, they acknowledge potential risks, including government budget constraints and supply chain challenges. The company plans to continue investing in its operations to maintain competitiveness and meet customer demands, while also monitoring labor market conditions and inflationary pressures that could impact future profitability.