Espey Mfg. & Electronics Corp.

What they do

Espey designs, manufactures and tests power conversion and advanced magnetics products, including power supplies, power converters, filters, power transformers, magnetic components, power distribution equipment, UPS systems and antennas. Applications include AC and DC locomotives, shipboard power and radar, airborne power, and ground-based and ground-mobile power. It is ISO 9001:2015 and AS9100:2016 certified, vertically integrated, and operates from a 174,000+ square foot facility at 233 Ballston Ave., Saratoga Springs, New York. It markets directly and through outside sales representatives to industrial manufacturers, defense contractors, and U.S. and foreign governments.

Revenue drivers

• Defense prime contractor programs — A small number of defense customers drive most sales; in fiscal 2025 six customers accounted for 16%, 13%, 12%, 12%, 11% and 10% of total sales.
• Power supplies and power conversion products — Primary product lines are power supplies, power converters, filters, power transformers, magnetic components, power distribution equipment, UPS systems and antennas for military and severe-environment use.
• Rail and industrial power programs — The Company cites concentration in the rail industry alongside military and industrial applications as a core exposure.
• Engineering design and development contracts — Funded and unfunded engineering programs in backlog aggregated approximately $13 million, and the Company targets these for follow-on production awards.

Recent performance

Fiscal 2025 revenue was $43,950,872, up from $38,736,319 in fiscal 2024, with net income of $8.1 million and diluted EPS of $3.02. Recent quarterly revenue was $9.6 million for the quarter ended 2025-06-30, $9.1 million for 2025-09-30, $12.1 million for 2025-12-31 and $11.4 million for 2026-03-31. Operating cash flow reached $21.0 million in fiscal 2025. At 2026-03-31, total assets were $96.0 million, total liabilities $39.6 million, shareholder equity $56.4 million and cash and equivalents $21.2 million. Total backlog at March 31, 2026 was approximately $137.1 million, including approximately $92.7 million from three significant customers.

Strategy

Management expects fiscal 2026 revenues to be higher than fiscal 2025, but net income per share to fall below fiscal 2025 results because backlog orders to be shipped in fiscal 2026 carry higher anticipated aggregate costs than the fiscal 2025 product mix. The Company focuses on long-standing relationships with defense prime contractors and targets programs expected to generate longer-term production tails. It continues to pursue new and current customers to lower sales concentration and reduce reliance on any single major program or customer. Capital expenditures, primarily machinery, equipment and facility upgrades, are not expected to exceed $850,000 in fiscal 2026. The Company also evaluates employment levels, facility costs and pricing to balance retention of repeat programs against competitiveness on new bids.

Risks

• Customer concentration — In fiscal 2025 six customers represented 16%, 13%, 12%, 12%, 11% and 10% of total sales, and the loss of one of these customers or programs could significantly impact financial performance.
• Backlog margin pressure — Management states net income per share is anticipated to fall below fiscal 2025 results because orders in backlog to be shipped in fiscal 2026 have higher anticipated aggregate costs than the fiscal 2025 product mix.
• Supply chain lead times and part obsolescence — Certain components are available from single or limited sources, waiting times for some components approach a year or more, and part obsolescence may require identifying alternate parts.
• Tariffs and input costs — Tariffs on steel and aluminum imports remain in effect and the Company cannot assure that existing tariffs, potential additional tariffs, or related foreign trade policy volatility will not negatively impact future earnings.

Outlook

Management expects fiscal 2026 revenues to be higher than fiscal 2025 revenues, while net income per share is anticipated to fall below fiscal 2025 results due to the higher-cost mix in backlog. The Company expects new orders in fiscal 2026 to be lower than fiscal 2025, when it received $86.4 million in new orders including two multi-year contract awards totaling $49.4 million. As of August 31, 2025, outstanding opportunities totaled approximately $163 million for repeat and new programs, though there is no assurance any will be awarded. Inflationary costs are expected to continue but are not expected to have a significant impact on operating income in fiscal year 2026.