Full Year 2023 M-tron Industries Inc Earnings Call
Dennis: Good morning, my name is Dennis and I will be your conference operator today. At this time, I would like to welcome everyone to the M Tron Industries Inc. Investor Call for Fiscal 2023 Results.
Dennis: All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session.
Dennis: If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. To withdraw your question, press star one again. I would now like to turn the conference over to James Tivy, Chief Financial Officer. Please go ahead.
James W. Tivy: Thank You Dennis good morning everyone and thanks for joining our 2023 q4 and annual earnings call please note that this call will be recorded and we anticipate making the recording available on our website shortly after the call
James W. Tivy: We have issued our 10K yesterday evening reporting our fourth fiscal quarter of 2023 along with the annual results.
James W. Tivy: Before getting underway, we're required to advise you and all participants should note that the following discussion should be taken in conjunction with the most recent financial statements and notes thereto contained within our 2023 10-K which has been filed with the SEC on March 25th, 2024.
James W. Tivy: This discussion may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934.
James W. Tivy: These forward-looking statements involve known and unknown risks and uncertainties, which are detailed in our filings with the SEC.
James W. Tivy: Although the company believes that its forward-looking statements are based upon reasonable assumptions regarding its business and future market conditions, there can be no assurances that the company's actual results will not differ materially from any results expressed or implied by the company's forward-looking statements.
James W. Tivy: The company undertakes no obligation to publicly update or revise any forward-looking statements whether as a result of new information future events or otherwise
James W. Tivy: Readers are cautioned that any forward-looking statements are not guarantees of future performance.
James W. Tivy: With that, I'll now turn the call over to Mike Ferrantino, our CEO .
Michael J. Ferrantino: Thank you, James.
Michael J. Ferrantino: Good morning and thank you to our shareholders for your interest in us and attending our annual earnings call. The completion of the fourth quarter also marks the completion of our first full calendar year as a public company.
Michael J. Ferrantino: as a brief reminder M Tron PTI has been providing RF solutions to the marketplace since 1965
Michael J. Ferrantino: We are a global company with three manufacturing locations in the US and India.
Michael J. Ferrantino: With consistent investment in research and development, we have a robust product pipeline, averaging 260 new product introductions a year. Our customer base is growing with over 300 active customers today.
Michael J. Ferrantino: We continue to focus on our core markets of defense and aerospace, avionics, and space, each of which continues to demonstrate significant tailwinds,
Michael J. Ferrantino: Design wins in these markets tend to be very sticky and program life cycles are long.
Speaker Change: Let me now summarize for you where M Tron PTI stands for the 2023 year.
Speaker Change: Total revenues for the year ended December 31st, 2023, or $41.2 million, a 29.3% increase from the prior year, reflecting strong aerospace and defense product shipments.
Speaker Change: Gross margins improved to 40.7% compared to 35.6% reflecting our increase in business volume and effects of product mix changes.
Speaker Change: Our order backlog was 47.8 million, an increase of 3.6
Speaker Change: percent compared to the prior year.
Speaker Change: In 2023, our book-to-bill ratio was 1.04.
Speaker Change: Our sales funnel continues to be strong as we continue with new product offerings while focusing on providing excellent technical solutions and customer service.
Speaker Change: During the fourth quarter, all M Tron PTI full-time employees below the executive level were issued a one-time stock option grant based on their respective
Speaker Change: years of service. The purpose of the grant was to reward employees for their past contribution to the company and serves to align employee interests with those of the stockholders.
Speaker Change: The company recorded a $2 million
Speaker Change: The company recorded $2 million of stock-based compensation expense related to this one-time grant during the fourth quarter, which will have no impact on our 2024 financial outlook or results.
Speaker Change: The company reported an operating income of $4.3 million for 2023 compared to operating income of $2.9 million for the prior year. This increase reflects higher revenues and margins effects from product mix changes, offset by increased engineering, selling, and administrative expenses.
Speaker Change: excluding the 2 million one-time expense for stock options engineering selling and administrative expenses would have been 25.4 percent of revenue versus 26.6 recorded for the prior year
Speaker Change: Our quarterly income before income taxes grew incremental each quarter during 2023 from 700,000 in Q1
Speaker Change: to $2 million in Q3. Without the impact of the $2 million one-time expense related to stock options grants, we would have recorded 2.1 million income before taxes for the fourth quarter of 2023.
Speaker Change: Net income was $3.5 million for the year ended December 31st compared to $1.8 million for the prior year.
Speaker Change: Diluted income per share was $1.28 versus 67 cents per share for the prior year.
Speaker Change: Adjusted EBITDA, a non-GAAP measure, was $7.7 million for the 2023 year versus $4 million for the prior year, a portion of which was reported on a standalone basis.
Speaker Change: Note that adjusted EBITDA does not include any adjustments for the potential impact from the additional cost of being a publicly traded company.
Speaker Change: Management calculated the incremental direct cost of being a public company, which do not have any comparable amounts in the prior year when results were presented partially on a standalone basis.
Speaker Change: at 107,000 and 842,000
Speaker Change: for the quarter and year ended December 31st, 2023, respectively.
Speaker Change: In conclusion, with a strong backlog and a robust pipeline, we believe we are well positioned for continued organic growth. We are working diligently to drive efficiencies throughout the organization by leveraging our India operation while making key investments in talent and equipment to improve yields and reduce cycle times.
Speaker Change: We're also working hard on potential acquisitions with a focus on companies or carve-outs that provide synergistic products, increased technical capabilities
Speaker Change: and or access to new and growing markets.
Speaker Change: As we conclude, I would like to thank our dedicated customers for their continued orders in support of our products, along with our team of worldwide employees and representatives who continue to execute diligently on our plans for growth.
Speaker Change: each of whom are ultimately responsible for providing our shareholders with excellent financial results.
Speaker Change: I'll now open the floor to questions. Operator, please open the call to any questions.
Speaker Change: At this time I would like to remind everyone in order to ask a question simply press star then the number one on your telephone keypad. We'll pause for a moment to compile the Q&A roster.
Speaker Change: Subtitles by the Amara.org community Subtitles by the Amara.org community
Speaker Change: And your first question is from the line of Anya Soderstrom with Sidoti. Please go ahead.
Anja Marie Theresa Soderstrom: Hi and thank you for taking my questions and congratulations on the phenomenal year. I'm curious for the fourth quarter for the revenue and backlog we saw some sort of a sequential decline there. Is there any seasonality there, any lumpiness or anything that we should be aware of and how should we think about it going forward?
Speaker Change: Yeah, Andrew, thank you for the question. The fourth quarter revenue numbers had a little bit of seasonality built into them, but in general it really just reflected timing of customer requests.
Andrew: I think looking forward we continue to strive for quarter-over-quarter growth especially on an annualized basis and we'll continue to do that.
Speaker Change: Okay, thank you. And in terms of that gross margin, you've been helped there by the higher revenue, but also by product mix.
Speaker Change: Is that product mix, is the content room for improvement there or is this the sort of new normal gross margin here within that content to expand? Should we see that content expand or is this sort of the level we can expect it to be at or is there going to be lumpiness there as well?
Speaker Change: Sure, thank you, Ange. In general, I think we expect to see continued gross margin improvement, not only from the expansion of new product revenue, which is driving quite a bit of it, as well as we continue to focus on efficiencies within the organization.
Speaker Change: Okay, thank you. And then in terms of CAPEXPAN, that was a bit elevated.
Speaker Change: How should we think about that going forward and what are you spending it at?
Speaker Change: So in general our CapEx budget is really being spent on two primary things, increasing capacity as well as increasing our capabilities as we bring new products to market. We are requiring additional capabilities both on the testing side of things as well as on the manufacturing side of things.
Speaker Change: In general, our target is in that 2.5% of revenue range.
Speaker Change: Okay, and in terms of the capacity, how much more capacity do you have to support the expected growth?
Speaker Change: So certainly in the foreseeable future we have adequate capacity both in terms of our footprints as well as in terms of the equipment we have. We are not running multiple shifts so we have room to expand in that aspect as well.
Speaker Change: Okay, thank you. That was all for me for now. I'll get back into it.
Speaker Change: Thank you, Anja.
Speaker Change: Once again, if you would like to ask a question, simply press star then the number one on your telephone keypad.
Speaker Change: Your next question is from the line of Jordan Kimmel with Magnet Investing Insights. Please go ahead.
Jordan Kimmel: Yeah, hi, good morning, and this is Jordan, and I just had a quick question. The thing I'm trying to get a handle on is the product mix.
Jordan Kimmel: and it seems based on revenue you have so many products you talk about even new products and I'm just trying to get an idea
Jordan Kimmel: If there is a pie chart or so, what is the real product mix? What's the biggest products? It just seems like an enormous amount of things on your website that you sell based on the revenue.
Speaker Change: Yeah, sure Jordan, thank you for the question. You know, in general we can break our products into three primary categories. Spectrum control, frequency control, and then resonators and integrated products.
Jordan Kimmel: So spectrum control would represent about 50% of our revenue.
Speaker Change: Frequency control is about 30% and resonators and integrated products is about 20% of revenue.
Speaker Change: Does that answer your question?
Speaker Change: I mean, those are three big categories. You know, when you go on the site and you try to get a handle on it, it seems like,
Speaker Change: You know, I think of Home Depot almost in the amount of skids you have. And, you know, impressive revenue growth is, you know, I'm really intrigued by the company, but it just seems like.
Speaker Change: I can't even imagine how much of each one you sell or what this actually looks like in terms of
Speaker Change: How could you have that many products? Right, so to try to give a little more color to that. So a large portion of what we sell are what I would call slight variations on core products. So as an example, if you take a look at an OCXO, you know, one given OCXO which would have a set of capabilities
Speaker Change: could have maybe 50 different SKUs where the slight variation in frequency for a specific end use by a specific end customer, but all being built on the same court package.
Speaker Change: Okay, and continued success. I think you're in the right industry. I was a drop surprised that the revenue growth wasn't even higher, but congratulations on the corner and continued success.
Speaker Change: Well, thank you very much, Jordan.
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Speaker Change: And once again, if you would like to ask a question, simply press star then the number one on your telephone keypad
Speaker Change: Subtitles by the Amara.org community Subtitles by the Amara.org community
Speaker Change: And at this time there appear to be no further questions. I will turn the call back over to Mike for any closing remarks.
Michael J. Ferrantino: All right, thank you. I guess I would just like to thank everybody for their interest in M Tron PTI We look forward to really executing again in 2024 on your behalf and everybody. Please have a great day
Speaker Change: This concludes today's conference call. Thank you all for participating. You may now disconnect.