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Shares of Franklin Wireless Corp. (FKWL - Free Report) have declined 12.4% since the company reported its earnings for the first quarter of fiscal 2026 compared with the S&P 500’s 1.7% decrease over the same period. Over the past month, the stock has fallen 11.3%, also underperforming the S&P 500’s 1.3% plunge. The stock’s steeper drop reflects investor caution despite modest improvements in several operating metrics.
Franklin Wireless posted quarterly revenues of $12.7 million, down 4.3% from $13.3 million a year ago. Net income attributable to the parent company rose to $640,478 from $515,187, resulting in EPS of 5 cents compared to 4 cents a year earlier. Gross profit increased 40.5% year over year to $2.9 million, and the gross margin improved to 22.8% from 15.5% in the prior-year period. Operating expenses decreased 5.1%, while other income plunged sharply due to unfavorable foreign-currency movements and the absence of a one-time gain recorded in the year-ago quarter.
Franklin Wireless Corp. Price, Consensus and EPS Surprise
The increase in gross margin stemmed primarily from a more favorable product mix and lower production costs. While top-line performance softened — particularly in North America, where revenues declined 4.4% — the company benefited from an increased proportion of higher-margin products. The cost of goods sold decreased 12.6%, significantly outpacing the drop in sales. As a result, gross profit rose to $2.9 million from $2.1 million in the comparable quarter.
Operating expenses totaled $2.3 million, down from $2.4 million a year earlier. Administrative costs declined due to lower legal expenditures and reduced stock-based compensation, which more than offset higher delivery-related expenses. Research and development spending fell 7.3%, reflecting a reduction in third-party service and materials costs. Taken together, these changes enabled Franklin Wireless to post a positive operating income of $590,380 compared to an operating loss of $372,783 in the prior-year period.
Other Income and Currency Impacts
Other income dropped to just $2,804 from $1.07 million last year. This swing was largely due to unfavorable changes in foreign-currency exchange rates affecting the company’s South Korean subsidiary, Franklin Technology Inc. The subsidiary experienced losses from currency appreciation of approximately $740,000. Additionally, the prior-year quarter benefited from the write-off of a forgiven customer commission worth about $230,000, which did not recur this year. Interest income also declined modestly.
Despite these headwinds, the company delivered net income of $550,536, though this was below last year’s $648,656 due to the sharp drop in other income. However, net income attributable to Franklin Wireless rose because non-controlling interests showed a net loss in the current quarter but a net gain in the prior one.
FKWL: Management Commentary and Market Conditions
The company noted that post-pandemic shifts in end-user behavior continue to reshape demand for its products. In particular, demand for mobile device management (MDM) services has declined as remote-learning and work-from-home trends moderate. Franklin Wireless emphasized efforts to enhance its software offerings in response to changing market conditions. It also highlighted the importance of managing customer relationships, maintaining manufacturing partner performance, and monitoring the defect rates of both hardware and software products.
Management reiterated that demand patterns from major carrier customers can fluctuate significantly from period to period, affecting quarterly revenue volatility. The company continues to rely heavily on two major customers, which together represented 90.4% of consolidated net sales during the quarter. Although such concentration poses a business risk, it also reflects longstanding relationships that management views as critical to future growth.
Factors Behind FKWL’s Quarterly Results
Inventory management and supply-chain relationships were key contributors to the quarter’s operating performance. Inventories declined meaningfully during the period, helping offset a substantial increase in accounts receivable, which pressured operating cash flow. Cash used in operations totaled $1.49 million, contrasting with the positive operating cash flow of $2.67 million in the prior-year quarter. The company attributed the shift primarily to higher receivables, which reflected the timing of shipments to major customers.
On the cost side, the company continued to benefit from controlled production expenses and steady amortization of intangible assets. However, higher shipping and delivery charges partially offset these efficiencies. Management noted that defect rates in both 4G and 5G devices remained low, reducing warranty-related financial exposure.
Other Developments at FKWL
During the quarter, Franklin Wireless continued to operate its joint venture, Sigbeat, formed in 2024, in which it holds a 60% ownership interest. The venture focuses on telecommunications modules and contributed modest net income during the period.
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FKWL Stock Declines 12.4%, Q1 Profit Strengthens Amid Lower Sales
Shares of Franklin Wireless Corp. (FKWL - Free Report) have declined 12.4% since the company reported its earnings for the first quarter of fiscal 2026 compared with the S&P 500’s 1.7% decrease over the same period. Over the past month, the stock has fallen 11.3%, also underperforming the S&P 500’s 1.3% plunge. The stock’s steeper drop reflects investor caution despite modest improvements in several operating metrics.
Franklin Wireless posted quarterly revenues of $12.7 million, down 4.3% from $13.3 million a year ago. Net income attributable to the parent company rose to $640,478 from $515,187, resulting in EPS of 5 cents compared to 4 cents a year earlier. Gross profit increased 40.5% year over year to $2.9 million, and the gross margin improved to 22.8% from 15.5% in the prior-year period. Operating expenses decreased 5.1%, while other income plunged sharply due to unfavorable foreign-currency movements and the absence of a one-time gain recorded in the year-ago quarter.
Franklin Wireless Corp. Price, Consensus and EPS Surprise
Franklin Wireless Corp. price-consensus-eps-surprise-chart | Franklin Wireless Corp. Quote
FKWL’s Operating Metrics and Margin Drivers
The increase in gross margin stemmed primarily from a more favorable product mix and lower production costs. While top-line performance softened — particularly in North America, where revenues declined 4.4% — the company benefited from an increased proportion of higher-margin products. The cost of goods sold decreased 12.6%, significantly outpacing the drop in sales. As a result, gross profit rose to $2.9 million from $2.1 million in the comparable quarter.
Operating expenses totaled $2.3 million, down from $2.4 million a year earlier. Administrative costs declined due to lower legal expenditures and reduced stock-based compensation, which more than offset higher delivery-related expenses. Research and development spending fell 7.3%, reflecting a reduction in third-party service and materials costs. Taken together, these changes enabled Franklin Wireless to post a positive operating income of $590,380 compared to an operating loss of $372,783 in the prior-year period.
Other Income and Currency Impacts
Other income dropped to just $2,804 from $1.07 million last year. This swing was largely due to unfavorable changes in foreign-currency exchange rates affecting the company’s South Korean subsidiary, Franklin Technology Inc. The subsidiary experienced losses from currency appreciation of approximately $740,000. Additionally, the prior-year quarter benefited from the write-off of a forgiven customer commission worth about $230,000, which did not recur this year. Interest income also declined modestly.
Despite these headwinds, the company delivered net income of $550,536, though this was below last year’s $648,656 due to the sharp drop in other income. However, net income attributable to Franklin Wireless rose because non-controlling interests showed a net loss in the current quarter but a net gain in the prior one.
FKWL: Management Commentary and Market Conditions
The company noted that post-pandemic shifts in end-user behavior continue to reshape demand for its products. In particular, demand for mobile device management (MDM) services has declined as remote-learning and work-from-home trends moderate. Franklin Wireless emphasized efforts to enhance its software offerings in response to changing market conditions. It also highlighted the importance of managing customer relationships, maintaining manufacturing partner performance, and monitoring the defect rates of both hardware and software products.
Management reiterated that demand patterns from major carrier customers can fluctuate significantly from period to period, affecting quarterly revenue volatility. The company continues to rely heavily on two major customers, which together represented 90.4% of consolidated net sales during the quarter. Although such concentration poses a business risk, it also reflects longstanding relationships that management views as critical to future growth.
Factors Behind FKWL’s Quarterly Results
Inventory management and supply-chain relationships were key contributors to the quarter’s operating performance. Inventories declined meaningfully during the period, helping offset a substantial increase in accounts receivable, which pressured operating cash flow. Cash used in operations totaled $1.49 million, contrasting with the positive operating cash flow of $2.67 million in the prior-year quarter. The company attributed the shift primarily to higher receivables, which reflected the timing of shipments to major customers.
On the cost side, the company continued to benefit from controlled production expenses and steady amortization of intangible assets. However, higher shipping and delivery charges partially offset these efficiencies. Management noted that defect rates in both 4G and 5G devices remained low, reducing warranty-related financial exposure.
Other Developments at FKWL
During the quarter, Franklin Wireless continued to operate its joint venture, Sigbeat, formed in 2024, in which it holds a 60% ownership interest. The venture focuses on telecommunications modules and contributed modest net income during the period.