M-tron Industries, Inc. (MPTI) Earnings Call Transcript & Summary

Hello, everyone, and good morning. We appreciate you being on the call for M-tron Industries' Q3 earnings discussion for 2025. I'd like to remind you that this session is being recorded, and a copy will be posted on our investor relations site, ir.mtron.com, soon after we finish. Our results for the third fiscal quarter of 2025 were issued yesterday afternoon. Prior to beginning, we must inform you that today's discussion ought to be reviewed alongside our latest financial statements and accompanying notes, which appear in our 2024 10-K filed with the SEC on March 27th, 2025. Statements made here might include forward-looking statements as defined under 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934; such forward-looking statements involve both known and unknown risks and uncertainties, all of which are described in our SEC filings. While the company holds the view that these forward-looking statements rest on reasonable assumptions about its business and future market conditions, nothing guarantees that actual results won't vary materially from any outcome stated or suggested by the company's forward-looking statements. The company assumes no duty to publicly update or revise any forward-looking statement, whether due to new information, future events, or any other reason. Listeners should be aware that forward-looking statements cannot be relied upon as guarantees of future performance; with that said, I'll hand things over now to Cameron Pforr, our CEO.

Thanks, Linda. Morning, everybody. I appreciate you joining us for the earnings call covering the third quarter of FY 2025. We're happy to walk through the solid numbers we posted across the first nine months of this fiscal year, along with what we see ahead. Just to remind everyone, M-tron is in the business of designing and building highly engineered RF solutions — that covers electronic components as well as subassemblies that govern signal frequency and timing within electronic circuits. We operate globally, with three manufacturing locations across the United States and India. Aerospace and defense, commercial avionics, space, and industrials make up the company's main markets. We're glad to say the business keeps delivering, with ongoing momentum showing up in M-tron's Q3 sales and backlog. Defense-related orders remain the engine behind our revenues. That said, this quarter we also saw some expansion in other areas. Thanks to steady operating execution, we've kept funding strategic R&D investments, kept lifting the company's market profile, and kept priming the pump for growth down the road. Yesterday, we posted these Q3 2025 results. Third quarter total revenues came to $14.2 million, up 7.2% from the $13.2 million recorded in Q3 of 2024. That gain largely came from strong shipment growth in avionics, space, and industrial products. Gross margins in Q3 landed at 44.3%, versus the elevated 47.8% we saw in Q3 2024. The drop stemmed mainly from product mix, plus higher costs tied to tariffs, something we've talked about before. Net income for the quarter reached $1.8 million, or $0.63 per diluted share, against $2.3 million, or $0.81 per diluted share, for the three months that ended September 30th, 2024. That decline was mostly driven by a sizable reversal of a deferred tax asset triggered by tax law changes in the Big Beautiful Bill. That represented close to $1 million of expense — actually a bit above $1 million of expense — plus the P&L impact, the softer gross margins versus a year earlier, and somewhat higher OpEx spending in line with our growth. Adjusted EBITDA came in at $3.2 million for the three months that ended September 30th, 2025, versus $3.3 million in last year's September quarter. The modest decline was mostly attributable to lower gross margins and a fairly small investment in SG&E. Backlog as of September 30th, 2025, stood at $58.8 million — a rise of 48% over the $39.8 million recorded on September 30th, 2024, and a 24.5% gain over the December 31st, 2024 year-end figure of $47.2 million. The growth in backlog since December speaks to robust demand across aerospace and defense programs, new program launches, and a recent surge in avionics and space orders. On October 23rd, 2025, the company announced that the dividend of warrants granted in April 2025 hit its early trigger condition and can be exercised through 5:00 P.M. on December 11th, 2025. Five warrants may be exercised to buy one common share of stock. Each warrant carries a strike price of $4,750 per share, and there's an oversubscription provision built into them. That provision means a holder who has exercised every one of their warrants could potentially ask for and obtain extra warrants should the offering come up short of demand. We urge those holding warrants to look over the warrant agreement along with the FAQ page found on our investor relations site, ir.mtron.com. Our strategy keeps pushing us further into program business, and that business now accounts for the overwhelming share of revenue from aerospace and defense. More than 40 programs of record involve us, and a large number of them are sole-source arrangements, so should defense spending keep rising in the areas we serve, we're positioned to gain a great deal. To offer a bit of a sense of this, we've landed several major wins this year in EW and radar systems, and in that space we anticipate doubling our revenue next year, simply because of those wins along with certain programs shifting into higher production rates; beyond that, we've received requests to submit plans for sharply boosting our output of precision-guided munitions for certain programs, plus a new UAV program that has us quite enthusiastic. Innovation remains ongoing for us, as shown by the large share of revenue coming from products we've recently designed. As one illustration of that innovation, we along with other vendors in this field build compensated oscillators, which go into airframes subject to heavy vibration, typically a helicopter or fighter aircraft. The purpose of that compensation is to cut down on timer drift. In the past, compensation happened externally, and such a unit or module would typically measure 16 inches by 16 inches. What we've come up with is an internally compensated oscillator measuring slightly over two inches by two inches that does the very same job, and demand for this product line has been dramatic; innovation of this kind is precisely what keeps M-tron at the industry's forefront. I want to express thanks to our dedicated customers for their ongoing business and partnership, and to our loyal employees for backing the company and its mission of serving the nation and its capability to defend freedoms. By supplying U.S.-sourced, highly engineered components for numerous U.S; and allied military programs, M-tron plays a vital role in defending our nation. Possessing a U.S.-based advanced manufacturing capability to support our joint forces matters more now than it ever has. Before opening the floor to questions, I wanted to note that next week in Dallas, Texas, we'll be presenting at the IDEAS Conference, then at the Sidoti Year-End Virtual Investor Conference later in December, and at the Oppenheimer Conference in February of 2026. Details about these events will go up on our investor website, and I hope plenty of you can join us for some of those presentations and meetings. Operator, would you mind unmuting the phone lines at this point so that our initial caller can ask a question?

Hello, and thanks for fielding my questions — also, Cameron, congratulations on the appointment.

Yes, thank you, Anja.

You brought up that research and development spending has gone up. Is there a particular segment where that increase is happening? Could you share a bit about your efforts in that space?

Yeah. No, the main thing is hiring design engineers. A great deal of our spending has gone toward — we're a company built around filters and oscillators, yet each kind of filter oscillator we make demands somewhat different skill sets across various specialties. That's one place we're looking to add people. This genuinely is something that assists us in growing revenue, since we're a business with a strong engineering emphasis, and our sales groups truly involve our engineers quite early with customers and prospects to create what amounts to a jointly developed solution; honestly, it's an exhausting job.

All right, thanks. You said industrials have begun improving for you. Which programs would you say are the primary ones on the industrials side?

Yes. In the near term, the largest piece, I'd say — that's a space where we've deployed across a number of markets. Test and measurement stands out among the larger ones. Oil and gas, such as downhole drilling. Telecom belongs in that space as well. What has powered it lately were certain test and measurement revenues.

All right. You brought up as well the latest spike in avionics. What's your read on that spending for Q4?

Sure. I believe I noted on a few prior calls that we deliver through a number of other primes, essentially every Airbus and Boeing aircraft program. Those firms have genuinely begun to re-engage. Their backlogs keep growing quite sharply, and they're shifting toward faster build rates; we saw orders from Boeing, for instance, in the earlier part of the year, and possibly sooner than we'd anticipated, honestly, simply because of what happened there and the stock we assumed they were holding. We landed a sizable order and a major contract for commercial aircraft in the earlier part of the year, and orders are now beginning to come in under that contract.

All right, thank you. For our final topic, we touched on tariffs earlier, but what steps can you take to counter them?

Yes, excellent question — and as plenty of folks listening have likely realized by now, this is a target that keeps shifting. Our expectation is that these tariffs will likely stay in effect for another 3 years, unless the Supreme Court steps in and does something. It may simply be a situation we have to accept at this stage. The hit to us equals roughly 1%-1.5% of revenue when measured by the effect on gross margins. A few measures are underway. First, we're reviewing the materials we purchase to determine which ones must come into the country, and whether certain parts we buy could instead go straight to customers. We're adjusting things along those lines. We're also working closely with our customers to invoke a FAR provision that gives us tariff relief on defense items intended specifically for U.S. forces. Shipments to other NATO nations don't qualify for that. Beyond that, we've handed down a portion of the tariff costs, which we consider reasonable and is essentially built into our contract terms. Right now, we're aiming to build tariff costs into a large share of our pricing on new orders. That's simply the situation we face.

All right. So when does that kick in? What's the timeline before it takes hold?