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

Good afternoon, everyone, and thanks for being with us on the 2026 M-tron Q3 earnings call. I'd like to point out that this call is being recorded, and the recording will be posted on our investor relations site, ir.mtron.com, soon after we finish. Earlier today, we issued our results for the third fiscal quarter of 2026. Before we begin, we are obligated to tell you that the discussion that follows should be read alongside our latest financial statements and accompanying notes as included in our 2025 10-K, which we filed with the SEC on March 26, 2026. This discussion could 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 carry known and unknown risks and uncertainties, and those are described in detail in our SEC filings. While the company believes these forward-looking statements rest on reasonable assumptions about its business and future market conditions, we cannot assure you that actual results will not differ materially from any result expressed or implied by those statements. The company assumes no obligation to publicly update or revise any forward-looking statement, whether because of new information, future events, or otherwise. Readers should be cautioned that forward-looking statements are not guarantees of future performance. With that, I'll hand the call over to our CEO, Cameron Pforr.

Alright, thank you Linda, and good afternoon to all of you. I appreciate you joining us for the third quarter earnings call and for your interest in M-tron. Our earnings release and call schedule were a bit out of the ordinary today because of the Veterans Day holiday, so we appreciate everyone being flexible. We're very happy to talk about the strong results we delivered in the first nine months of the 2026 fiscal year. As a reminder, M-tron designs and manufactures highly engineered RF solutions, which include electronic components and sub-assemblies that control the frequency and timing of signals in electronic circuits. Our operations span the globe, with manufacturing conducted at three locations — two located in the United States and one in India. A&D markets, commercial avionics, industrials, and space make up the company's main markets. We're happy to share that performance remains solid, as our 2026 Q3 sales and backlog continued to show strength. Revenue continues to be led by defense-related orders. Even so, additional areas also grew during this quarter. Thanks to steady operating performance, we've continued making strategic investments in research and development as well as in our manufacturing capabilities and capacity, while also enhancing the company's market profile and priming the pump for future growth. The following Q3 FY 2026 results were reported by us this morning. Third-quarter revenue came in at $15.7 million, which is up 11.1% from the $14.2 million we reported for Q3 of 2025. That gain was driven mainly by robust shipment growth across aerospace and defense, avionics, and space. For the third quarter of 2026, gross margin reached 44.5%, versus 44.3% during the three months ended September 30, 2025. Product mix largely accounted for that modest improvement. Gross profit for the period rose to $7 million, marking an 11.5% gain over the $6.28 million posted in last year's Q3. For the quarter that closed on September 30, 2026, we posted net income of $3 million, which works out to $0.70 per diluted share. In the same quarter a year earlier, ending September 30, 2025, that figure stood at $1.8 million, or $0.60 per diluted share. The gain came mainly from the revenue growth and related gross profit we covered earlier, along with more interest income generated by investments and money market mutual funds as a result of larger invested cash balances. Adjusted EBITDA for the quarter ended September 30, 2026 reached $3.6 million, up from $3.2 million in the quarter ended September 30, 2025. That modest improvement was driven largely by increased revenues and gross profit, though it was partly offset by greater general and administrative expenses. Our approach keeps shifting more toward program-based work, and that category now accounts for the bulk of what we bring in from aerospace and defense. Radar plus electronic warfare systems have been the standout growth drivers for us in that sector this year, and each of those areas is expanding at a rate comfortably above 100%. Beyond that, we hold a significant supplier position across numerous precision-guided munitions efforts, including a substantial portion of the programs falling under the seven-year framework deals that the Department of War reached with Raytheon and Lockheed Martin during early spring of 2026. Even though the FY 2027 federal defense budget has not been signed, contract awards totaling over $127 billion have come through with Raytheon and Lockheed across multi-year contracts for a number of missile systems, such as PAC-3, Tomahawk, SM-3 IB interceptors, Standard Missile-6, and AMRAAM. Most of those contracts are five-year production agreements featuring substantial production volume increases. Given this emphasis on missile replenishment, we anticipate meaningful growth in order quantities for 2028 and later across the programs we support; innovation continues on our side, as shown by the high share of revenue coming from newly designed products. Oven-controlled oscillators are expanding at a strong pace, with demand coming from new radar systems at established vendors and newer entrants alike. We are likewise seeing considerable interest in these products from customers in electronic warfare systems. Numerous counter-UAS projects are in progress right now, and we are also competing for positions in several large radar programs. Many of you saw Boeing's recent announcement of a 5% reduction in force, aimed at aligning workforce size with the present pace of airframe deliveries; this does not concern us, since certain near-term deliveries are sliding further out and that division's near-term CapEx exceeds expected free cash flows. Our view is that this will not affect our 2026 results or our 2027 growth, because Boeing and Airbus both order via their subcontractors, and orders were already expected to slow in 2027. They are presently working through an earlier three-year order. Backlog stayed solid during the quarter, with a book-to-bill ratio a bit above one. As noted before, our bookings are highly uneven, and timing depends on many factors, among them the present political climate in Washington. Several large aerospace and defense orders that were originally expected in Q3 or Q4 of 2026 are now anticipated to land early in the new year, meaning backlog will probably dip somewhat in Q4 and then improve considerably in Q1 2027. We keep reviewing acquisition and strategic investment opportunities and continue executing our three-pronged inorganic growth strategy, which involves M-tron as a holding company, M-tron as a vehicle for larger corporate carve-outs or reverse mergers, and M-tron as an investment platform. A transaction now underway fits the first category, and we have brought in corporate development hires to help broaden our efforts. I want to thank our loyal employees for supporting the company's mission of serving the nation, and our dedicated customers for their ongoing business and partnership. M-tron is essential to protecting our country, supplying components that are U.S.-sourced and highly engineered for a great many American and allied military programs. Having advanced manufacturing capability here in the United States still counts for a lot, and our plan is to expand that capacity in a way that serves the national interest. Ahead of taking your questions, I want to flag a few upcoming events: next week in California, we'll be holding one-on-one meetings at the Raymond James Investor Symposium, and later in December, we'll present at the Sidoti Year-End Virtual Investor Conference. Looking to early 2027, our current schedule has us presenting at the Oppenheimer Emerging Growth Virtual Conference in February, as well as at the TD Cowen Aerospace & Defense Conference, which likewise falls in February 2027. You can find the specifics on our investor site, and if your schedule permits, I'd welcome you to join and take part; with that, operator, please open the lines so we can take the first question.

Hello, and thanks for taking my questions, and congratulations on the good progress here. It looks like you're expecting quite a bit of backlog growth in 2027, and that helped 2028 revenue. Should we expect revenue growth to speed up in 2028 compared with 2027, or?

Yes. Good question, Anja; right now we have a lot of demand for our products. In fact, if you look at our backlog, it's larger than what we can produce in the quarter, and we expect that to remain the case next year. We're moving quickly to expand, and we have a very active hiring program, for instance, underway, along with a lot of CapEx activity happening to support the growth. If you look at our progress this year, this quarter, we grew 11% year on year, but year to date, I think we're at 13% over the prior year-to-date period. I expect us to finish the year somewhere around that growth rate, and that should speed up somewhat in 2027. I think that based on the inputs we currently have, that 2028 will be at a number above that, probably in the high teens.

All right, thanks. Product mix pushed the gross margin up considerably. What's the right way to view that over the next few quarters?

Sure. Back earlier in the year, we ran into some headwinds involving certain products we were making that were fairly new and that we were attempting to scale. Efficiency improvements there have come along nicely, and that's really helped us out. A good deal of this swings with mix from one quarter to the next. During the quarter just ended, we had plenty of business at fairly high margin. Looking ahead to next year, I'd say gross margin lands somewhere in the 43%-46% range. I expect next year to be a building year in the sense that, should a lot of orders arrive early in the year, we'll need to scale our production capabilities to meet that demand, and that takes some investment in hiring. My expectation is that gross margin comes down slightly, though that really represents investment in future growth for which we'll already hold contracts. I'm quite confident about gross margin ahead, and about holding this rate or nudging it up a little.

All right, thanks. I'll rejoin the queue.

Hello. Could you expand a bit more on those defense programs you mentioned might arrive in 2027, and what we should expect regarding the defense budget?

Yes. Anja, let me confirm I've got your question right. Did you mean the programs running now, or the ones we expect to finalize early in the year?

Those you're putting bids in for.

Right. Fine. So clearly, defense spending is very much in flux at the moment, and the administration has split things into three parts, each using separate mechanisms to get the different pieces approved. Still, we've seen some of these framework agreements—meant to give industry seven years of visibility into future orders—now being contracted. Particularly in September, I believe over $100 billion in missile contracts got awarded, and most of those were five-year contracts. So those contracts carry quite specific growth rates and requirements. We've been talking with quite a few folks in the industry, both the established leaders and some of the newer vendors, who offer somewhat cheaper programs than the exquisite missiles I mentioned earlier. We've been bidding on those and giving the feedback they asked for, and we do expect to win our fair share of those engagements, and we think we'll see them and receive those POs early next year, so once the new Congress is seated. After that, I do expect those to be multi-year contracts. I mean, things are still in flux, so we'll learn at the start of the year exactly how they'll look, but I do expect our backlog will rise significantly at that point, and that we'll finally have far more visibility into the growth rate this will drive for the company. But I do think we're at an inflection point, and it's fairly well recognized that this replenishment cycle has to move forward, regardless of who's running Congress or sitting in the White House.

Would you say that's largely coming from the U.S., or are you also seeing demand out of Europe or NATO?