Franklin Wireless Corp. (FKWL) FY2026 Earnings: Revenue $37M (-20.8%)
FKWL — FY2026 Financial Report Analysis
Full Year · Fiscal year 2026 · Published by Pham Hop
Franklin Wireless's FY2026 sales fell 20.8% to $36.5M after a major carrier discontinued a key hotspot product, and a $4.6M Korean lawsuit charge widened the loss to $0.40 a share.
Revenue
$37M
-20.8% YoY
Net income
-$4.7M
Diluted EPS
$-0.40
Operating margin
-7.3%
This period vs a year ago
Same period last year
This period
Revenue▼-20.8%
≈$46M
$37M
Year-ago figures (≈) are worked out from the growth rate the company reported. Each row has its own scale.
Franklin Wireless, a San Diego company that sells 5G and 4G mobile hotspots and routers mostly through US wireless carriers, had a sharply worse fiscal 2026 (the year ended June 30, 2026). Sales fell 20.8% to $36.5 million because a major carrier customer discontinued a hotspot product Franklin had expected to be a large source of revenue. The bottom line was hit harder than the top line: a $4.6 million charge for a lost lawsuit in South Korea and a $1.1 million currency loss pushed the net loss attributable to Franklin shareholders to $4.7 million, or $0.40 a share, from $0.2 million ($0.02) a year earlier.
At a glance
Sales down 20.8% to $36.5M. Almost all revenue comes from North American carriers, and one of the two big customers has stopped buying the product that was supposed to drive growth. The company says it does not expect material future sales of that product to that customer.
$4.6M lawsuit charge. A Seoul court ruled partly against Franklin's 66.3%-owned Korean design subsidiary (FTI) in a dispute with parts maker Partron. The charge accounts for about two-thirds of the year's $7.1M pre-tax loss. FTI has appealed.
Operating cash outflow of $6.3M. The business used cash rather than produced it, as inventory more than doubled while sales fell. Cash plus short-term investments dropped from $40.6M to $32.0M. That is still a large cushion for a company this size, but it shrank by about a fifth in one year.
Results
Metric
FY2026
FY2025
YoY Change
Net sales
$36.5M
$46.1M
-20.8%
Gross margin
17.1%
17.2%
-0.1 pts
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Operating loss
-$2.7M
-$2.9M
loss narrowed $0.2M
Operating margin
-7.3%
-6.2%
-1.1 pts
Net loss attributable to Franklin
-$4.7M
-$0.2M
n/m (loss widened $4.5M)
Diluted EPS
-$0.40
-$0.02
n/m
Operating cash flow
-$6.3M
+$1.8M
swing of -$8.1M
Cash + short-term investments (June 30)
$32.0M
$40.6M
-21.3%
Largest customer / top two, share of sales
61% / 89%
61% / 94%
—
n/m = not meaningful. A percentage change between two losses doesn't tell you much.
Gross margin is the share of each sales dollar left after paying for the products themselves. It held almost flat at about 17%, which means Franklin did not cut prices to hold on to volume. The problem is volume: $9.6 million less revenue at a 17% margin cost the company $1.66 million of gross profit.
Operating margin (what is left after also paying for staff, R&D and overheads, before interest and tax) went from -6.2% to -7.3%. Operating expenses fell 17.1% to $8.9 million, but sales fell faster.
What drove the sales drop
All of the decline came from North America, which is 99.9% of sales. Management gives two reasons. First, "the discontinuation of a key product by a major carrier customer, which was expected to contribute a significant portion of revenue following its recent launch." Second, the timing of large deliveries in earlier periods, which left customers "work[ing] through existing inventory." The Asia line grew from $6K to $36K, which is too small to matter.
Customer concentration is extreme. The two largest customers were 61% and 28% of sales. Franklin's written agreements with them "do not obligate them to purchase any quantity of products," so each customer's product decisions pass straight into Franklin's revenue. The company now says it is shifting away from mobile hotspots toward fixed wireless routers and telecom modules sold through Sigbeat, its 60%-owned subsidiary. It also says those lines "are in earlier stages of commercialization, and there can be no assurance regarding the timing or level of future revenues."
The Korean lawsuit
Partron, a Korean electronic-parts maker, sued FTI in January 2025. It alleged that FTI used Partron's Qualcomm account credentials to design products with another manufacturer, and that FTI then failed to buy semiconductor components Partron had ordered at its request. Partron's claim, including interest, was $8.9 million. In July 2026 the Seoul Central District Court ordered FTI to pay about $3.67 million plus 5% annual interest back to November 2022. Interest rises to 12% a year from the judgment date until the award is paid. FTI has booked a $4.35 million liability ($3.67M award plus $0.67M interest to June 30). The income-statement charge came to $4.62 million, because it was translated at the year's average exchange rate. FTI filed an appeal on August 6, 2026.
Franklin owns 66.3% of FTI, so about one-third of FTI's losses are assigned to the minority owners. That is why the consolidated net loss was $6.9 million while the loss attributable to Franklin shareholders was $4.7 million. The liability has not been paid, and the 12% post-judgment interest keeps adding to it while the appeal runs.
What the headline numbers hide
The underlying operating loss got worse, not better. The reported operating loss narrowed slightly, from $2.86M to $2.68M. But fiscal 2025's SG&A included a one-off $1.25M incentive bonus to President OC Kim, which the filing names as the main reason SG&A fell. Without it, last year's operating loss would have been about $1.61M. On that basis the core business lost about $1.07M more this year, which is what you would expect with 21% less revenue.
One-offs cut both ways. Fiscal 2026 had the $4.62M litigation charge and a $1.11M currency loss (a $0.20M gain the year before). There was also a $0.41M gain from writing off a marketing-support liability after the related product line was discontinued. Fiscal 2025 had $1.0M of litigation settlement income. Without the litigation items in both years, the pre-tax loss would still have roughly doubled, from about $1.19M to about $2.44M.
Inventory and receivables grew while sales fell. Inventory rose from $2.36M to $5.30M (+125%) and receivables from $1.33M to $2.30M (+73%), against a 20.8% sales decline. Bad-debt expense also rose to $0.56M from $0.16M. Those balance-sheet moves are the main reason operating cash flow was -$6.3M. The filing points to industry-wide shortages and price increases for memory chips and circuit-board materials, which may explain buying ahead. Even so, more than twice as much stock on hand, going into a year when a key product has been discontinued, is the balance-sheet item to watch.
Cash conversion was poor even after the non-cash charge. Operating cash flow of -$6.3M was close to the consolidated net loss of -$6.9M. That loss includes a $4.6M lawsuit accrual that has not yet been paid in cash. In other words, the business consumed real cash on top of the paper loss, mostly through working capital.
Almost no tax benefit. Franklin recorded a $0.14M tax benefit on a $7.1M pre-tax loss. During the year management concluded that its Korean subsidiary's accumulated losses meant its deferred tax assets were no longer likely to be used, so it set a 100% valuation allowance against them. Franklin still carries $3.4M of US deferred tax assets on the balance sheet with no allowance. That judgment depends on the US business returning to profit.
Obligations sit on top of the cash. Current liabilities rose to $15.2M from $12.4M. They include the $4.35M lawsuit liability and $3.13M of bonuses owed to the President that have been accrued but not paid. The company also paid a $0.04 per share dividend ($0.47M) during a loss-making year.
No change from share count. Weighted shares were unchanged at 11,784,280, so buybacks played no part in the per-share figures.
Takeaway: Franklin's gross margin held at about 17%, so the problem is volume. One carrier's product decision took out a fifth of sales, and nothing in the filing yet replaces it. The company still has $32M of cash and investments. But that pile fell $8.7M in a year, and a $4.35M lawsuit liability plus $3.1M of unpaid officer bonuses are claims on it.
Outlook
Management gives no revenue or earnings guidance. What the filing does say:
It is shifting from mobile hotspots to fixed wireless routers and telecom modules. Management gives no timeline or revenue target and says there is no assurance about timing or scale.
It expects to need more than $2 million over the next 12 months for capital spending, software licences and certifying new products. It believes cash on hand plus cash from operations will cover that.
Rising memory and circuit-board costs and supply limits could affect product costs and delivery times. Tier-1 carriers are sensitive to both.
New US restrictions on some foreign-made telecom equipment may affect approval of future products. Management believes its already-approved hotspots are not materially affected.
Our read: Fiscal 2027 starts without the product that was supposed to carry revenue, and with a customer list where two names were 89% of sales. Watch for three things. First, whether the new router and module lines show up as named revenue in the quarterly filings. Second, whether the $5.3M of inventory turns into sales or into write-downs. Third, how the Korean appeal goes, since a loss locks in a cash payment that is still growing at 12% a year. Franklin can absorb all of these with $32M of liquidity, but it cannot keep losing $6M of operating cash a year for long without that cushion running down.