Q2 2024 M-tron Industries Inc Earnings Call
Speaker Change: Thank you very much for watching this video.
Desiree: Ladies and gentlemen, thank you for standing by. My name is Desiree and I will be your conference operator today. At this time, I would like to welcome everyone to the Amtron Industries Inc. second quarter 2024 earnings call. All lines have been placed on mute to prevent any background noise.
Desiree: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad.
Desiree: If you would like to redraw your question, again, press the star 1. I would now like to turn the conference over to Linda Biles, Executive Vice President of Finance. You may begin.
Linda Biles: Good morning everyone and thank you for joining our 2024 Q2 earnings call. Please note that this call will be recorded and we anticipate making the recording available on our website at www.mtrungpti.com shortly after the call.
Linda Biles: We have issued our 10-Q yesterday morning, reporting our second fiscal quarter of 2024.
Linda Biles: Before getting underway, we are required to advise you and all participants should note that the following discussion should be taken in conjunction with the most recent financial statement and notes thereto contained within our 2023 10-K, which has been filed with the SEC on March 25, 2024.
Linda Biles: 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.
Linda Biles: These forward-looking statements involve known and unknown risks and uncertainties which are detailed in our filings with the SEC.
Linda Biles: Although the company believes that its forward-looking statements are based upon reasonable assumptions regarding its business and future market conditions, there are 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.
Linda Biles: The company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise. Readers are cautioned that any forward-looking statements are not guarantees of future performance.
Linda Biles: With that, I'll now turn the call over to Mike Ferrantino, our CEO.
Mike Ferrantino: Thank you, Linda. Good morning and thank you to our shareholders for your interest in us in attending our second quarter earnings call. We are pleased to discuss the strong year-to-date results along with our improved 2024 outlook.
Speaker Change: As a brief reminder, Emtron PTI designs and manufactures highly engineered RF solutions including components and sub-assemblies in both spectrum and frequency control.
Speaker Change: We are a global company with three manufacturing locations in the U.S. and India.
Speaker Change: Since our debut as a stand-alone public company in October of 2022, we have been successfully executing our strategy of focusing on the core markets of aerospace and defense, commercial avionics, and space, leading to consistent, positive growth in revenues and earnings.
Speaker Change: Let me now summarize for you where Emtron PTI stands after the conclusion of Q2 2024.
Speaker Change: Total revenues for the quarter were $11.8 million, an increase of 16.4% from the $10.14 million of Q2 2023.
Speaker Change: and an increase of 67.2% from the 7.06 million of Q2 2022. This increase continues to be driven by strong defense program shipments. This also marks the eighth consecutive quarter of sequential growth.
Speaker Change: Gross margins were 46.6% for the quarter, compared to 41.6% of the prior year, and 37.5% for the period ending Q2 2022.
Speaker Change: This increase was primarily due to the previously mentioned higher revenues combined with improved production efficiencies associated with our ongoing investments in people and equipment.
Speaker Change: Net income was $1.75 million or $0.63 per diluted share, a 36.6% increase from the
Speaker Change: $1.27 million of Q2 2023 and a 258% increase from the $486,000 of Q2 2022.
Speaker Change: This increase was primarily due to the continued strong defense program shipments partially offset by higher engineering selling and administrative expenses
Speaker Change: From increased investment in research and development, higher sales commissions related to the increase in revenue and an increase in administrative and corporate expenses consistent with the overall growth of the business.
Speaker Change: adjusted EBITDA
Speaker Change: increased 30.7% to $2.52 million compared to $1.93 million from Q2 2023, and an increase of 200% as compared to the $841,000 from Q2 2022.
Speaker Change: Backlog was $45.3 million as of June 30th, 2024.
Speaker Change: compared to $47.8 million at the end of 2023 and $51.5 million at the end of Q2 2023.
Speaker Change: This decrease in backlog is not unexpected and reflects the increase in revenues along with the variability of our order intake due to the size and timing of large program related orders.
Speaker Change: With continued momentum in the defense-related sales and accelerated in production,
Speaker Change: shipments during the first half of 2024. We are pleased to raise the outlook for fiscal year 2024, increasing revenues to a range of 46 to 48 million from our previous range of 43 to 45 million.
Speaker Change: We are also holding our expected end-of-the-year backlog at $49 to $50 million, despite the increase in revenue.
Speaker Change: We have good visibility for the remaining two quarters and expect EBITDA margins to continue in the 19% to 21% range.
Speaker Change: We are well positioned to continue to execute our strategy for organic growth of particular focus
Speaker Change: For us are the areas of space and satellite with our growing print position across multiple satellite platforms
Speaker Change: rate our applications with products such as our E-Vibe series OCXOs, which are designed to maintain exceptional stability in phase noise
Speaker Change: under the dynamic conditions of mobile platforms.
Speaker Change: and Electronic Warfare, where the demand for higher frequencies has led to the introduction of our planar filter product line.
Speaker Change: We are also expanding our acquisition bandwidth to include companies that are inside and outside our time and space.
Speaker Change: We will look outside of our subsector for undervalued companies much like ours where we can drive both top and bottom line growth with the ultimate mission of increasing shareholder value.
Speaker Change: As we conclude, I would like to thank our dedicated customers for their continued orders and 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: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue.
Speaker Change: If you would like to redraw your question, simply press star 1 again.
Speaker Change: If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset to ensure that your phone is not on mute when asking your question. Again, press star 1 to join the queue.
Speaker Change: Your first question comes from the line of Anja Söderström-Pizzirotti. Your line is open.
Anja Söderström-Pizzirotti: Thank you for taking my questions and congrats on the great quarter. Seems like the margins are, gross margins are holding up at these levels. Is there room for further improvement there or?
Speaker Change: Yes. Thank you, Andrew, for that question. So, you know, gross margins, as we've talked about, are dependent highly on our product mix from quarter to quarter.
Speaker Change: But, you know, there is room for continued improvement as we introduce new products. We are targeting, you know, it marches in the 50% range. So as those gain traction in the marketplace, we do have room for growth.
Speaker Change: Okay, thank you. And you mentioned in terms of M&A activity, you're going to look outside of your core business. How is the M&A environment now? Has it changed at all?
Speaker Change: I think it's still been a little bit challenging for us to find good value companies, but we are out there looking. I think when we talk about expanding a little bit,
Speaker Change: We're still really focused in the RF chain in companies that would bring synergistic product lines and offerings to us, particularly as we contemplate our solutions side of the business. So there are opportunities for us as we look forward.
Speaker Change: Thank you. And just in terms of the demand, are you seeing any of your sort of end markets?
Speaker Change: being stronger than others?
Speaker Change: In terms of clearly the aerospace and defense is a very, very strong market. We believe it continues to do so. All of our core markets, we believe, do have
Speaker Change: solid tailwinds behind them. Commercial avionics seems to be seems to be doing very very well. In the space business, we've got a lot of traction in terms of design winds. Those just need to move into production moving forward.
Speaker Change: Okay thank you and the last one in terms of component availability, anything to call out there?
Speaker Change: I'm sorry, you've clicked out for one second. Would you repeat the question, please? Component availability. Has that loosened up for you or is it still a bit challenging? Yeah, the supply chain side of things has really settled out. That has not been a key challenge for us, really, for this year.
Speaker Change: Okay, great. Thank you. That was all for me.
Anja Söderström-Pizzirotti: Thank you, Anja.
Speaker Change: Your next question comes from the line of Garrett King with Truffle Hound Capital. Your line is open.
Garrett King: Hi, can you just explain to me how you kind of view the difference between avionics and aerospace and defense? Because I would kind of think avionics and aerospace
Speaker Change: would typically be a component of aerospace.
Speaker Change: Sure. Good question. So when we look at those two things, really what we're doing is we break out commercial avionics from the defense side of things. So aerospace and defense for us would be all of our defense-related business, and then avionics is commercial avionics.
Speaker Change: Got it. And then as you look at M&A
Speaker Change: Incorporating
Speaker Change: The companies or assets that you buy into your current production sites
Speaker Change: where, you know, there might be cost synergies or, you know, are the products that you're looking at just different enough that they'd be produced at different sites?
Speaker Change: No, I think certainly we have capacity in a few of our facilities that if the product line was conducive to it, that would certainly be on the table.
Speaker Change: You know, we have a facility in India which certainly we would look to continue to take advantage of any of the labor-intensive manufacturing and drive efficiencies through that as well.
Speaker Change: Got it. Thank you.
Speaker Change: Thank you.
Speaker Change: There are no further questions at this time.
Speaker Change: Okay, I would like to...
Speaker Change: We have another added question, again from Gareth King with Truffle Hound Capital.
Speaker Change: I wanted to jump back in the queue, but I guess there's no one else in the queue.
Speaker Change: Can you just talk about, are you typically sole source or dual source with your products to, you know, defense and commercial aviation customers?
Speaker Change: Yeah, it really is a pretty even mix of both single and dual source across the product lines.
Speaker Change: So maybe, you know, if you just in those two segments, if you combine them...
Speaker Change: Maybe half of revenues is sole source, half is dual source.
Speaker Change: Yeah, in that range, that would be a correct statement.
Speaker Change: Got it. All right. Awesome. Thank you very much, and have a great day.
Garrett King: Thank you, Garrett.
Garrett King: And now there are no further questions at this time. Mr. Ferrantino, I turn the call back over to you.
Mr. Ferrantino: All right. Well, I would once again like to thank everybody for their interest in us and joining us today. And please enjoy the remaining weeks of summer and we'll talk to you soon.