LGL Group Inc: Form 10-Q for the period ended Mar 31, 2026

The following discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with the accompanying unaudited Condensed Consolidated Financial Statements, the notes thereto and the other unaudited financial data included in this Quarterly Report on Form 10-Q. The following discussion should also be read in conjunction with the audited consolidated financial statements and the notes thereto, and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in the Company's Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the SEC on March 30, 2026. The terms "LGL," "LGL Group," "we," "our," "us," or the "Company" refer to The LGL Group, Inc. and its consolidated subsidiaries and unless otherwise defined herein, capitalized terms used herein shall have the same meanings as set forth in our condensed consolidated financial statements and the notes thereto.

Unless otherwise stated, all dollar amounts are in thousands.

In addition to historical data, this discussion contains forward-looking statements about our business, operations and financial performance based on current expectations that involve risks, uncertainties and assumptions. Actual results may differ materially from those discussed in the forward-looking statements as a result of various factors. See the Cautionary Statement Concerning Forward-Looking Statements included in this Quarterly Report on Form 10-Q.

Overview

The Company is a holding company engaged in services, merchant investment, and manufacturing business activities. The Company, through its manufacturing business subsidiary, is engaged in the designing, manufacturing, and marketing of high-performance Frequency and Time Reference Standards that form the basis for timing and synchronization in various applications. The Company's primary markets are communications, networking, aerospace, defense, instrumentation, and industrial markets.

The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of The LGL Group, Inc., its majority-owned subsidiaries, and variable interest entities ("VIE") of which we are the primary beneficiary.

We provide our products and services through our Electronic Instruments and Merchant Investment businesses. Activities not related to our business segments, such as our corporate operations and corporate-level assets and financial obligations, are included in Corporate.

Electronic Instruments Business

We operate our manufacturing business currently through our subsidiary, Precise Time and Frequency, LLC ("PTF"), a globally positioned producer of industrial Electronic Instruments and commercial products and services. Founded in 2002, PTF operates from our design and manufacturing facility in Wakefield, Massachusetts.

Merchant Investment Business

The LGL investment business is comprised of various investment vehicles in which LGL is either shareholder, partner, or has general partner interests, and through which LGL invests its capital. The Company seeks to invest available cash and cash equivalents in liquid investments with a view to enhancing returns as we continue to assess further acquisitions of, or investments in, operating businesses broadly. LGL core strengths include identifying and acquiring undervalued assets and businesses, often through the purchase of securities, increasing value through management, financial or other operational changes, and managing complex legal, regulatory or financial issues, which may include technical, engineering, environmental, zoning, permitting and licensing issues among others.

As of March 31, 2026, LGL Group had investments (classified within Cash and cash equivalents and Marketable securities) with a fair value of approximately $25.9 million. The Company accounts for its Marketable securities under Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 321, Investments - Equity Securities ("ASC 321") and as such, its Marketable securities are reported at fair value on its consolidated balance sheets.

Trends and Uncertainties

We are not aware of any material trends or uncertainties, other than global macroeconomic conditions affecting our industry generally that may reasonably be expected to have a material impact, favorable or unfavorable, on our revenues or income other than those listed below and those listed in Item 1A, Risk Factors, of our Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the SEC on March 30, 2026.

Changing Interest Rates

The U.S. Federal Reserve decreased the federal funds rate a total of three times throughout 2025, resulting in a range from 3.50% to 3.75% as of December 31, 2025. Through the date of filing of this Quarterly Report on Form 10-Q, the Federal Reserve has maintained the federal funds rate in the same range as of December 31, 2025. If interest rates continue to decline, the returns generated by our investments in U.S. Treasuries could be adversely impacted.

Tariffs

The current U.S. federal administration has imposed tariffs on certain products and materials entering the United States imported from other countries. Additionally, foreign governments have imposed retaliatory tariffs on products and materials exported from the United States. Following the U.S. Supreme Court’s February 2026 decision striking down certain tariffs, the Trump Administration announced its intention to invoke other laws to collect tariffs and announced new tariffs on imports from all countries. There remains substantial uncertainty regarding the duration of existing and newly announced tariffs, potential changes or pauses to such tariffs, tariff levels, and whether further additional tariffs or other retaliatory actions may be imposed, modified, or suspended, and the impacts of such actions on our business.

Results of Operations - Consolidated

The following table presents our Condensed Statements of Operations for the periods indicated:

(in thousands)

Three months ended March 31, 2026 compared to three months ended March 31, 2025

Total Revenues

Total revenues increased $167, or 18.2%, from $918 for the three months ended March 31, 2025 to $1,085 for the three months ended March 31, 2026. The increase was primarily due to a $184, or 36.9%, increase in Net sales from $498 for the three months ended March 31, 2025 to $682 for the three months ended March 31, 2026 driven by higher backlog as of December 31, 2025.

The increase is partially offset by a $28, or 6.7%, decrease in Net investment income from $417 for the three months ended March 31, 2025 to $389 for the three months ended March 31, 2026 primarily due to lower yields on investments in U.S. Treasury money market funds.

Total Expenses

Total expenses increased $993, or 113.2%, from $877 for the three months ended March 31, 2025 to $1,870 for the three months ended March 31, 2026. The following items contributed to the increase:

• a $97, or 40.9%, increase in Manufacturing costs of sales from $237 for the three months ended March 31, 2025 to $334 for the three months ended March 31, 2026 driven by higher revenues as well as general increases in the cost of materials and components; and
• a $896, or 140.0%, increase in Engineering, selling and administrative from $640 for the three months ended March 31, 2025 to $1,536 for the three months ended March 31, 2026 driven by higher stock-based compensation associated with non-cash equity awards granted to officers in January 2026.

Gross Margin

Gross margin (Net sales less Manufacturing cost of sales as a percentage of Net sales) decreased 140 basis points from 52.4% for the three months ended March 31, 2025 to 51.0% for the three months ended March 31, 2026 reflecting a lower margin product mix as well as general increases in the cost of materials and components.

Income Tax Expense

Income tax expense decreased $208, or 742.9%, from $28 for the three months ended March 31, 2025 to ($180) for the three months ended March 31, 2026 primarily due to the decrease in Income before income taxes.

Net Income Attributable to Non-Controlling Interests

Net income attributable to non-controlling interests decreased $2 from $19 for the three months ended March 31, 2025 to $17 for the three months ended March 31, 2026 primarily due to lower yields on U.S. Treasury money market funds.

Backlog

As of March 31, 2026, our order backlog was $1,525, an increase of $900, or 144.0%, from $625 as of December 31, 2025 and an increase of $1,230, or 416.9%, from $295 as of March 31, 2025. The backlog of unfilled orders includes amounts based on signed contracts likely to be fulfilled largely in the next 12 months but usually will ship within the next 90 days. Order backlog is adjusted quarterly to reflect project cancellations, deferrals, and revised project scope and cost, if any.

Results of Operations - Operating Segments

Electronic Instruments

The following table presents income from continuing operations of our Electronic Instruments segment for the periods indicated:

(in thousands)

Three months ended March 31, 2026 compared to three months ended March 31, 2025

Income Before Income Taxes

Income before income taxes decreased $2, or 10.5%, from $19 for the three months ended March 31, 2025 to $17 for the three months ended March 31, 2026. The decrease was primarily due to the $186, or 38.8%, increase in Total expenses driven by higher Manufacturing cost of sales reflecting higher revenues and general increases in the cost of materials and components as well as engineering and sales and marketing costs consistent with the growth in Net sales partially offset by the $184, or 36.9%, increase in Net sales reflecting higher backlog as of December 31, 2025.

Merchant Investment

The following table presents income from continuing operations of our Merchant Investment segment for the periods indicated:

(in thousands)

Three months ended March 31, 2026 compared to three months ended March 31, 2025

Income Before Income Taxes

Income before income taxes decreased $55 from $153 for the three months ended March 31, 2025 to $98 for the three months ended March 31, 2026 due to lower yields on investments in U.S. Treasury money market funds as well as higher corporate allocations.

Corporate

The following table presents income from continuing operations of our Corporate segment for the periods indicated:

(in thousands)

Three months ended March 31, 2026 compared to three months ended March 31, 2025

Loss Before Income Taxes

Loss before income taxes increased $769, or 587.0%, from ($131) for the three months ended March 31, 2025 to ($900) for the three months ended March 31, 2026. The increase was primarily due to higher stock-based compensation discussed above.

Liquidity and Capital Resources

Overview

Liquidity refers to our ability to access sufficient sources of cash to meet the requirements of our operating, investing and financing activities.

Capital refers to our long-term financial resources available to support business operations and future growth.

Our ability to generate and maintain sufficient liquidity and capital depends on the profitability of the businesses, timing of cash flows, general economic conditions and access to the capital markets and the other sources of liquidity and capital described herein.

As of March 31, 2026 and December 31, 2025, Cash and cash equivalents were $46,646 and $41,514, respectively.

Cash Flow Activity

The following table presents the cash flow activity for the periods indicated:

(in thousands)

Operating Activities

Cash provided by operating activities was $501 for the three months ended March 31, 2026 compared to $340 for the three months ended March 31, 2025, an increase of $161, primarily due to the following:

• Lower net income
• Higher non-cash adjustments, including:
• Stock-based compensation increased $679 from $9 for the three months ended March 31, 2025 to $688 for the three months ended March 31, 2026;
• Working capital movements, including:
• Accounts receivable, which decreased $288 for the three months ended March 31, 2026 compared to a decrease of $187 for the three months ended March 31, 2025, due to timing of collection of receivables;
• Accounts payable, accrued compensation and commissions, other accrued expenses and liabilities, and other liabilities, which increased $299 for the three months ended March 31, 2026 compared to an increase of $128 for the three months ended March 31, 2025, due to higher expenses incurred and the timing of payments.

Our working capital metrics and ratios were as follows:

(in thousands)

Management continues to focus on efficiently managing working capital requirements to match operating activity levels and will seek to deploy the Company’s working capital where it will generate the greatest returns.

Financing Activities

Cash provided by financing activities was $4,631 for the three months ended March 31, 2026 compared to $0 for the three months ended March 31, 2025, an increase of $4,631, primarily due to the settlement of warrants in January 2026.

Capital Resources

We believe that existing cash and cash equivalents, marketable securities and cash generated from operations will provide sufficient liquidity to meet our ongoing working capital and capital expenditure requirements for the next 12 months from the date of this filing and for the foreseeable future.

Our Board has adhered to a practice of not paying cash dividends. This policy takes into account our long-term growth objectives, including our anticipated investments for organic growth, potential acquisitions and stockholders' desire for capital appreciation of their holdings. No cash dividends have been paid to the Company's stockholders since January 30, 1989, and none are expected to be paid for the foreseeable future.

Contractual Obligations

As of March 31, 2026, there have been no material changes in our contractual obligations from December 31, 2025, a description of which may be found in Part II, Item 7. Management Discussion and Analysis - Liquidity and Capital Resources - Contractual Obligations in the 2025 Annual Report.

Critical Accounting Estimates

Our accompanying Condensed Consolidated Financial Statements are prepared in conformity with U.S. GAAP, which requires management to make estimates and assumptions that affect the amounts reported in our financial statements and accompanying footnotes. These estimates are made and evaluated on an on-going basis using information that is currently available as well as various other assumptions believed to be reasonable under the circumstances. Actual results could differ from those estimates, perhaps in material adverse ways, and those estimates could be different under different assumptions or conditions. For a discussion of the Company’s critical accounting estimates, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2025.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended (the "Exchange Act") is recorded, processed, summarized and reported within the time periods specified in the rules and forms, and that such information is accumulated and communicated to us, including our Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As required by Rules 13a-15(b) and 15d-15(b) of the Exchange Act, an evaluation as of March 31, 2026 was conducted under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures, as of March 31, 2026, were effective.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting during the quarter ended March 31, 2026 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II

OTHER INFORMATION

For a discussion of the Company's potential risks and uncertainties, refer to Part I, Item 1A. Risk Factors in the 2025 Annual Report and Trends and Uncertainties in Management's Discussion and Analysis of Financial Condition and Results of Operations in Part I, Item 2. of this Quarterly Report on Form 10-Q.

We are not aware of any material trends or uncertainties, other than national economic conditions affecting our industry generally, that may reasonably be expected to have a material impact, favorable or unfavorable, on our revenues or income other than those listed in Item 1A, Risk Factors, of our Annual Report on Form 10-K for the year ended December 31, 2025.