Q4 2024 M-tron Industries Inc Earnings Call

Speaker Change: [music].

Operator: Thank you for standing by.

Thank you for standing by my name is Kathleen and I'll be your conference operator today.

Kathleen: My name is Kathleen and I will be your conference operator today.

Kathleen: At this time, I would like to welcome everyone to the Amtron Investor Update. All lines have been placed on mute to prevent any background noise.

At this time I would like to welcome everyone to the Amtrust Investor update.

All lines have been placed on mute to prevent any background noise.

Kathleen: 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 one on your telephone keypad. If you would like to withdraw your question, press the star 1 again. Thank you.

After the speakers 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 one on your telephone keypad.

If you would like to withdraw your question press the star one again.

Kathleen: I would like to turn the call over to Mr. Cameron Pforr, Interim CEO. Please go ahead.

I would like to turn the call over to Mr. Kamran for interim CEO. Please go ahead.

Cameron Pforr: Thank you, Kathleen.

Kamran: Yeah. Thank you Kathleen and good morning, everyone. Thank you for attending our Investor update this morning.

Cameron Pforr: And good morning, everyone. Thank you for attending our investor update this morning. We're pleased to speak to you about our preliminary earnings release for Q4, and also the annual preliminary annual results for 2024. We did post those last night to the SEC and NAK and put out a press release on that. So hopefully you all have a copy of that.

Speaker Change: We're pleased to speak to you about our preliminary earnings release for Q4 also the annual or annual results for 2024, we did post that is last night.

Speaker Change: Judy said it in 8-K and put out a press release on that so hopefully you all have a copy of that.

Cameron Pforr: Just a note, we do expect to file our 10K with our audit results on or about March 26 or 27. So later next month, but we're very far down our audit process and don't expect substantial changes.

Speaker Change: Just I know you do expect to file our 10-K with our audited results on or about March 26 or 27%.

Speaker Change: So later next month.

Speaker Change: But they.

Speaker Change: We're very far down the audit process and don't expect substantial changes.

Cameron Pforr: So for those of you don't know me, my name is Cameron Pforr. I joined M Tron this past September. I was recently named interim CEO, having served over the past several months as CFO.

Camera: So for those of you don't know me my name is camera before I joined I'm drawing this past September I was recently named interim CEO, having served over the past several months as CFO and just a little bit of background and then we'll get into more of the company and I guess, what's your margin.

Cameron Pforr: And just a little bit of background, and then we'll get into more of the company, which I know is what you're more interested in. My background is 30 years of experience in technology company management and advisory roles. I spent the last 15 years running companies from startups, you know, with less than a million to software companies with over 100 And this is, of those companies, you know, we've sold two of them, one to Cisco, one to Red Hat, returns significant returns to investors. I also have a lot of combined corporate finance M&A experience as an investment banker, and also as a, as an advisor at Bain & Company.

Camera: My backgrounds 30 years of experience in Technology Company management and advisory roles.

Camera: Last 15 years mining companies from startups, you know less than a $1 million to software companies with over $100 million.

Camera: And this is.

Camera: Those companies, we sold two of them wanted to Cisco under Red Hat returns. That's getting returns investors also have a lot of combined corporate finance M&A experience.

Camera: Banker also as a as an advisor or any company. So I've raised about $12 billion in equity and job and execute on the three acquisitions and hope to bring some of that experience here to bear.

Cameron Pforr: So I've raised about $12 billion in equity and, and executed on over 30 acquisitions and hope to bring some of that experience here to bear.

Cameron Pforr: So today we're going to talk about the, give you an update on the health of the business. talk about the direction that we're taking things forward and answer any questions you have about the business in our recent announcements about rights offerings. And this morning, we did put out a press release that we're going to shift gears there and move towards a dividend warrant. The goal there is really to distribute value to our shareholders in a fair and equitable way. And we've, you know, kind of refined how we're doing that. I think this is probably a better tool to do that.

Camera: Today, we're going to talk about the give you an update on the health of the business.

Camera: Talk about the direction that we're taking things forward and answer any questions you have about the business and our recent announcements about rights offerings and this morning, we did put out a press release that we're going to shift gears, there and move towards a dividend warrant.

Camera: Our goal there is really distribute value to our shareholders in a fair and equal away and we've.

Camera: Kind of refine how we're doing that and I think this is probably a better tool do that so.

Cameron Pforr: So I'm pleased to be joined this morning by Linda Biles, who's our VP of Finance and also our Chief Accounting Officer. Linda, if you could just introduce yourself and then maybe go through the safe harbor statement. I appreciate that.

Vince Vinals: I'm pleased to be joined this morning by when the vials who's our EVP of finance and also our Chief Accounting Officer.

Vince Vinals: Wonder if you could just introduce yourself and then maybe go through the Safe Harbor statement I appreciate that.

Linda Biles: Morning, I'm Linda Biles. I'd like to go over our safe harbor with you. Information included or incorporated by reference in this presentation may contain forward-looking statements. This information may involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different than the future results, performance, or achievements expressed or implied by any forward-looking statement. Forward-looking statements, which involve assumptions and describe our future plans, strategies, and expectations, are generally identifiable by use of the words may, should, expect, anticipate, estimate, believe, intend, or project, or the negative of these words or other variations on these words or comparable terminology.

Vince Vinals: Good morning, I Wonder if I'll I'd.

Vince Vinals: I'd like to go for our Safe Harbor with you.

Vince Vinals: Information included or incorporated by reference in this presentation may contain forward looking statements.

Vince Vinals: Formation may involve known and unknown risks uncertainties and other factors that may cause our actual results performance or achievements to be materially different in the future results performance or achievements expressed or implied by any forward looking statements.

Vince Vinals: Forward looking statements, which involve assumptions and describe our future plans strategies and expectation are generally identifiable by use of the words may should expect anticipate estimate.

Vince Vinals: <unk> intends or project or the negative these worse or other variations on these words or comparable terminology. Examples of forward. Looking statements include but are not limited to statements regarding efforts to grow our revenue expectations regarding fulfillment of backlog future benefit to operating margin.

Linda Biles: Examples of forward-looking statements include, but are not limited to, statements regarding efforts to grow revenue, expectations regarding fulfillment of backlog, future benefits to operating margins, and the adequacy of cash resources. Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors.

Vince Vinals: And the adequacy of cash resources actual events or results may differ materially from those discussed in forward looking statements as a result of various factors, including without limitation the risks outlined under risk factors in the information statement contained within our Form 10-K filed with the SEC.

Unknown Executive: , Carl P.

Unknown Executive: Fisher, Matt G.

Vince Vinals: On March 25, 2024 in light of these risks and uncertainties there can be no assurance that the forward looking statements contained in this presentation. We will in fact be accurate further we do not undertake any obligation to publicly update any forward looking statements. As a result, you should not place undue reliance on these forward looking.

Vince Vinals: Statements.

Cameron Pforr: And with that, I'd like to turn it back over to Cameron. Today, we're an American-made defense contractor, specializing in robust, engineered frequency and timing control and filter applications. We have about 2.9 million shares outstanding, and we also enjoy broad employee ownership. At the end of 2023, we distributed 183,000 options to our valued employees, based on their tenure with the company, really to reward their behavior over the years, their contributions. And we're really pleased that their shovel was in the company and strong believers in what we do. We're well positioned to continue to access long-term value creation opportunities, and we'll talk about some of that today.

Cameron: With that I would like to turn it back over to Cameron.

Cameron: Yes. Thank you Linda Okay, I'm going to start the presentation with the N P. G. I O D. A slide which you can see.

Cameron: You all have from our website.

Cameron: And I really just wanted to give you a brief update on the company for those of you on the call that it's new to but we were formed in 1965 and listed on the New York American.

Cameron: American exchange in October of 2022.

Cameron: And we've been focused on the aerospace and defense markets since the acquisition of Pgi.

Cameron: In 2004, so there was a fairly significant shift in the business not in terms of products, but in the markets that it went after.

Cameron: Today, we're an American made defense contractor specializing in robust engineered frequency and timing control and filter applications.

Cameron: We have about $2 9 million shares outstanding.

Cameron: And we also enjoy broad employee ownership.

Cameron: At the end of 2023, we distributed 183000 options to our valued employees.

Cameron: Based on their tenure with the company really to reward their behavior over the years their contributions and we're really pleased that their shareholders in the company and strong believers in what we do.

Cameron: We are well positioned to continue to access long term value creation opportunities and we will talk about some of that today.

Cameron Pforr: If we move to the next slide, some of the key takeaways that we want to share with you today. We continue to perform well and announced our preliminary earnings for Q4 in the 2024 annual period last night. We're a unique American story, I think, you know, founded in 1965 with tremendous, tremendous engineering skills and capabilities. It's been built out over the years to serve our nation's defense sector. and other key markets such as avionics. Space and Satellites and the commercial sectors and in the commercial sectors we play strongly in the telecom area. and also in test and measure.

Cameron: If we move to the next slide some of the key takeaways that we wanted to share with you today.

Cameron: We continued to perform well and announced our preliminary earnings for Q4 and into 2024 annual period last night.

Cameron: We're again unique American story, I think found at 1965 with tremendous tremendous.

Cameron: Engineering skills and capabilities.

Cameron: It's been built out over the years to serve our nation's defense sector.

Cameron: In other key markets such as avionics.

Cameron: Space satellites, and the commercial sectors and.

Cameron: And the commercial sectors, we play strongly in the telecom area.

Cameron: And also in test and measurement.

Cameron Pforr: I think, you know, what's really unique about us is that we're vertically integrated with the capability to start with a raw crystal and complete it all the way to produce a finished oscillator or filter. We're really one of the only companies in the market that supplies both oscillators and filters. And we do this in terms of how the manufacturing process using CNC machining, surface mount assembly, we have a full suite of tests and screening capabilities to ensure robust designs and we have high quality products. And the production of these, these components and subsystems, it's, they're, they're really designed to be very high tolerance markets.

Cameron: I think what's really unique about us is that we're vertically integrated with the capability to start with Iraq, Bristol and completed all the way to produce finished oscillator filter. We're really one of the only companies in the market that supplies, both oscillators and filters.

Cameron: And we do this in terms of how that manufacturing process using CNC machining surface Mount Assembly, we have a full suite of test screening capabilities to ensure robust designs and we have high quality products.

Cameron: And the production of these these components and sub systems there.

Cameron: They are really designed to meet very high tolerance markets as much as art as a science and we're dependent upon our highly skilled and motivated workforce based on Orlando, Florida, Yankton, South Dakota, Nobody India for Assembly and <unk>.

Cameron Pforr: As much as art is a science, we depend upon our highly skilled and motivated workforce based in Orlando, Florida, Yankton, South Dakota, Novi, India for assembly, and really appreciate all the work that they do and the diligence they bring to the job. We have a global customer base, including many of the industry leaders in our key markets. And many of our customers, most, in fact, really have been with us more than 10 years.

Cameron: Appreciate all the work that they do in the diligence they bring to the job we.

Cameron: We have a global customer base, including may be industry leaders in our key markets and many of our customers.

Cameron: In fact really had been with us more than 10 years.

Cameron Pforr: Since the end of 2024, just at the end of the year, we announced two big $10 million plus contract wins. One we received just in the last days of 2024. And then the second one we received at the very beginning of 2024. And it's really it strengthens our pipeline. And we also expect to have several other large contracts like that coming in over the next quarter or two. And the momentum continues for the business. So we supply many of the key defense programs for both the United States and our allies. And this includes a broad set of applications, including precision guided munitions.

Cameron: Since the end of 2024 and just at the end of the year, we announced two big $10 million plus contract wins.

Cameron: One we received just in the last days of 2024.

Cameron: And then the second one we received at the very beginning of 2024.

Cameron: And it's really strengthens our pipeline.

Cameron: And we also expect to have several other large contracts like that coming in over the next quarter or two.

Cameron: And the momentum continues for the business.

Cameron: So we supply many of the key defense programs for both the United States and our allies.

Cameron: And this includes a broad set of applications, including precision guided munitions.

Cameron Pforr: Communications. Radar, Electronic Warfare. drones and UAVs and even space and satellite applications. All these applications require really high-tolerance products, and the integration and communication between systems is ever-increasing, and it's really increasing demand for our products. Despite the recent discussions in Washington about potential defense cuts, we've seen no slowing of our engagement with customers or our sales processes. They all remain on track. I would say there's not even a slowing down of those processes. We expect bookings and revenue in the coming years, a few years to remain strong, and that'll really be driven by the replenishment of U.S.

Cameron: Communications.

Radar electronic warfare.

Cameron: <unk> and Uavs in the event space and satellite applications.

Cameron: All of these applications require really high tolerance products.

Cameron: And the integration and the communication between systems as is ever increasing it's really increasing demand for our products.

Cameron: Despite the recent discussions in Washington about potential defense cuts, we've seen no slowing of our engagement with customers or our sales processes. They all remain on track I would say there is not even a slowing down of those processes.

Cameron: We expect bookings and revenue in the coming years QE is to remain strong.

Cameron: And that will really be driven by the replenishment at U S stockpiles.

Cameron Pforr: stockpiles and also the increase in expected European defense spending, which I think there's a lot of discussion about. If you look at the European stocks, a lot of the European defense stocks are up quite a bit, but most of the European countries spent over 60% of their defense procurement budgets acquiring from U.S. defense suppliers.

Cameron: Also the increase and expected European defense spending.

Cameron: I think theres a lot of discussion about and if you look at the European stocks a lot of the European defense stocks are up quite a bit.

Cameron: Most of the European countries spent over 60% of their defense procurement budgets.

Cameron: Acquiring from U S defense suppliers.

Cameron Pforr: In addition, another note I want to add the Pentagon has been very explicit about carving out some key programs out of any discussion of budget. James Tivy, Michael Ferrantino, Unknown Executive, Linda Biles, Cameron Pforr, M Tron Ind James Tivy, Michael Ferrantino, Unknown Executive, Linda Biles, Cameron Pforr, M Tron Ind Precision Ignitions and Missile Programs, which we're a large part of. Autonomous Vehicles, so drones and UAVs where we play, and some of the surface ships and other platforms where we're a key supplier. And they're also kind of key priority areas for our growth.

Cameron: In addition, another.

Cameron: Note I wanted to add that Pentagon, it's been very explicit about carving out some key programs out of any discussion of budget.

Cameron: Decreases in the U S and a lot of these are in areas that we play a key role and so they've discussed explicitly.

Cameron: Carving out care defense systems.

Cameron: Precision munitions and missile programs, which were a large part of it.

Cameron: Economists vehicles, so drones.

Cameron: Where we play and some of the surface ships and other platforms, where we're at.

Cameron: We're a key supplier.

Cameron: And then also kind of key priority areas for our growth.

Cameron Pforr: In addition to the defense sector with the resolution of the strike discussions at Boeing. We expect to be able to fulfill orders to supply a large backlog of Boeing airframe Airbus airframes out through 2041. I believe the common Word on the street is that there'll be 80% more airframes or 80% airframes being replaced in those years. And so we expect to have strong tailwinds there.

Cameron: In addition to the defense sector with the resolution of the strike discussions at Boeing.

Cameron: We expect to be able to fulfill orders to supply a large backlog of Boeing and airframe Airbus airframes out through 2041.

Cameron: Believe the common.

Cameron: A word on the street is that there'll be 80% more airframes or 80% of your pricing you are placed in those years and so we expect to have strong tailwind there.

Cameron Pforr: In terms of margins, I want to talk about margins a little bit. Our margins remain strong with gross margins around the 40% mark for the quarter, and over 46% for the year. So this is a really 1000 basis point increase over the past three years, we're getting a lot more leverage out of the model and dropping more cash to the bottom line. And this is the result of our product mix. Also improving just our manufacturing efficiencies and reducing our inventory usages and being more efficient with our raw products.

Cameron: In terms of margins when I'm talking to merchants of all of that.

Cameron: Our margins remained strong with gross margins around the 40% mark for the quarter.

Cameron: Over 46% for the year.

Cameron: So this is a.

Cameron: Really it's a 1000 basis point increase over the past three years, we're getting a lot more leverage out of the model and dropping more cash to the bottom line and this is the result of our product mix.

Cameron: Also improving our manufacturing efficiencies.

Cameron: And reducing our <unk>.

Cameron: Our inventory usages.

Cameron: And being more efficient with our <unk> product.

Cameron Pforr: We ended 2024 with a strong balance sheet, and we expect cash to accumulate significantly throughout this fiscal year. There are some remaining options to be exercised by our employee base, and they would account for an additional up to about $3.6 million of cash. Potentially get their exercises here.

Cameron: We ended 2024 with a strong balance sheet and we expect cash to accumulate significantly throughout this fiscal year.

Cameron: There are some remaining options to be exercised by our employee base and they would account for an additional up to about $3 $6 million of cash.

Cameron: Potentially get their exercise this year.

Cameron: Okay.

Cameron Pforr: I wanted to talk a little bit about where we're taking the business and the business itself, the core business remains very strong. I do think we're going to spend a little bit more time in the future exploring the use of partnerships and acquisitions to to provide inorganic growth to the company. And also we talked briefly in our press release last week about. Also, an investment in a group called connectivity partnership, which will be making investments in RF communications companies in a number of sectors, many of which, you know, we don't participate in. And so this gives us a window into new market opportunities.

Cameron: I wanted to talk a little bit about.

Cameron: We're taking the business and the business itself the core business remains very strong how.

Cameron: Do you think we're going to spend a little bit more time in the future exploring the use of partnerships and acquisitions two to provide inorganic growth to the company.

Cameron: And also we talked briefly in our press release last week about.

Cameron: Also in.

Cameron: An investment in that group, all connectivity partnership, which will be making investments in RF communications companies and a number of sectors. Many of which we don't participate in and so this gives us a window into new market opportunities and I'll go through that in a little bit more detail.

Cameron Pforr: And I'll go through that a little bit more. I expect you'll see over the next couple of quarters, you know, announcements detailing our progress along this line. And we're really seeking to expand our product portfolio, gain new customers and increase our traction and growing markets. And most importantly, consistently grow our EBITDA and EPS for our share. So when we look at acquisitions, we're looking at creative transactions where NPI TI can play up and provide value to the combined entity. Whether that's through our strong sales network or manufacturing capabilities or engineering talent. And the goal was to acquire companies and bring them to our margin profile as quickly as possible.

Cameron: I expect you'll see over the next couple of quarters.

Cameron: Announcements detailing our progress along those lines.

Cameron: We're really seeking to expand our product portfolio gain.

Cameron: Again, new customers and increase our traction in growing markets.

Cameron: Importantly, consistently grow our EBITDA and EPS for our shareholders.

Cameron: So when we look at acquisitions were looking at accretive transactions, where MPI Ti can play out and provide value to the combined entity.

Cameron: Whether that's through our strong sales network, our manufacturing capabilities, our engineering talent.

Cameron: And the goal is to acquire companies and bring them to our margin profile as quickly as possible.

Cameron Pforr: And given the large fixed transaction costs and legal and advisory fees, and just, you know, the time it requires from our team for the integration work and diligence, we're trying to concentrate on potential transactions that can add meaningfully to that, even without to our bottom line. And when a company has meaningful technology, it's a little bit too early for development cycle. And it's development cycle will provide that earnings profile we're looking for. We can either partner with it for development of product. for manufacturing our products and for sales and assisting their sales. Or we can participate through a potential investment by connectivity partners and then either exercise a right in the future to acquire or partner with that business to drive revenue from it.

Cameron: Given the large fixed transaction costs, and legal and advisory fees and just.

Cameron: The.

Cameron: Time, it requires from our team for the integration work and diligence.

Cameron: Trying to concentrate on potential transactions that can add meaningfully to the.

Cameron: EBITDA to our bottom line.

And when the company has meaningful technology, it's a little bit too early for development cycle and its development cycle will provide that earnings profile were looking forward we.

Cameron: We can either partner with it toward development of products.

Cameron: We're manufacturing our products and for sales and assisting their sales or.

Cameron: Or we can participate through a partition potential investment by connectivity partners and then either.

Cameron: Exercise or right in the future to acquire or partner with that business to drive revenue from both firms.

Cameron Pforr: So then I want to turn next to the next slide and really speak to our Q4 results. So you saw in the press release that our preliminary revenues were up significantly in the quarter over the prior year. It's a year-on-year increase of between 17.9 and 20.7 percent, so it remains the third year in a row that we've had near 20 percent growth on the revenue line. In addition, our quarterly gross margin was also strong. And we expect it to be in the range of about just just shy of 46 to 48.5% or 7% for the fourth quarter.

Cameron: So then I will.

Cameron: Want to turn next to the next slide and really speak to our Q4 results.

Cameron: So you saw in the press release that our preliminary revenues were up significantly in the quarter over.

Cameron: Over the prior year.

Cameron: It's a year on year increase of between $17 nine and 27%. So it remains the third year in a row that we've had near 20% growth on the revenue line.

Cameron: In addition, our quarterly gross margin was also strong and we expect it to be in the range of about just just shy of 46 to 48, 5% or 7% for the fourth quarter.

Cameron Pforr: And that's comparing to it's up 200 basis points from the fourth order of 2023. So 2024 has continued to be a very, very good year for the company in terms of its execution. If you look at the fiscal year results, Revenues are expected to be between $48.9 and $49.2 million in 2024 compared to $41.168 million in 2023. This represents an annual growth rate of between 18.8 and 19.5%. And as I said, that's the third year of an annual growth rate close to approaching the 20% mark. And I think these results really reflect the strength of our strategy, the dedication of our team, and really the trust our customers have placed in us.

Cameron: And that's comparing two thats up two.

Cameron: 200 basis points from the fourth quarter of 2023.

Cameron: 2024 has continued to be a very very good year for the company in terms of its execution.

Cameron: If you look at the fiscal year results.

Cameron: Revenues are expected to be between 48, nine and $49 2 million and 24.

Cameron: Compared to 41.1 dollars $6 million to $8 million in 2023.

Cameron: This represents an annual growth rate of between $18, 895%.

Cameron: As I said.

Cameron: Third year.

Cameron: The annual growth rate close to approaching 20% Mark.

Cameron: And I think these results really reflect the strength of our strategy and the dedication of our team.

Cameron: And really the trust our customers place Dennis.

Cameron Pforr: And we continue to execute on their behalf well. We haven't finished our tax provisions yet, otherwise we would provide operating income and net income. But they're expected to remain close to the same percentages that we saw in Q3. And the long range goals that we've outlined in prior investor presentations. So no radical changes on that front for Q4 or for the annual results.

Cameron: And we continue to execute on their behalf well.

Cameron: We haven't changed our tax provisions, yes, otherwise, we will provide operating income and net income.

Cameron: But they are expected to remain close to the same percentages that we saw in Q3.

Cameron: And our long range goals that we've outlined in prior investor presentation. So.

Cameron: No radical changes on that front for Q4 before the annual results.

Cameron: Okay.

Cameron: Okay. We'll go next to move to.

Cameron Pforr: We're next going to move to some of the investment highlights. And this is really just, I think, a repeat of what you've heard in the past if you followed us, but I think it's tracking well. We are seeing strong revenue growth and expect that to continue. And we're now in the phase of the company where we're generating a lot of cash and we expect to drive earnings up throughout the period. We have long term contracts and loyal customers, and they're very attractive and large end markets. At this point in time, this is something we've talked about a little bit, we've become a critical part of the U.S.

Cameron: Some of the investment highlights and this is really just I think a repeat of what you've heard in the past.

Cameron: But I think it's tracking well.

Cameron: We are seeing strong revenue growth and expect that to continue.

Cameron: We're now in the phase of the company, where we're generating a lot of cash we expect to drive earnings up throughout the period.

Cameron: We have long term contracts and loyal customers.

Cameron: They are very attractive and large end markets.

Cameron: At this point in time. This is something we've talked about a little bit we have become a critical part of the U S supply chain mission critical supply chain and for our aerospace and defense business, which is.

Cameron Pforr: supply chain, the mission-critical supply chain. And for our aerospace and defense business, which is close to 70% of our business this past year, it's in the mid-60s to 70%, depending upon the quarter. We are 85% of that is program driven at this point in time, which means we're part of long-term contracts for programs of record in the Defense Department. And that's critical because that helps you weather budget storms, like when things are going through, you know, late budget approvals. We're still able to benefit from that because we're on a program of record, and any continuing resolution can fund further purchases of our products.

Close to 70% of our businesses.

Cameron: This past year.

Cameron: Mid <unk> to 70% depending on the quarter.

Cameron: Where are.

Cameron: 85% of that is program driven at this point in time, which means we're part of long term contracts for programs of record and the defense Department.

Cameron: And that's critical because that helps you whether budget storms segment things are going through.

Cameron: Wait budget approvals.

Cameron: Still able to benefit from that because we're on a program of record and any containment resolution confront further purchases of our products.

Cameron Pforr: And those programs of record typically last, you know, 5 to 25 years in the defense sector. Just an example of that is in this past year, the Patriot missile system, which is a stalwart that's used around the globe and is in the news quite often. was up for a redesign and they've decided that there really are no competitors and it's quite effective still. And so that program has been extended again without a reason. So that's going to be a program that's well over 25 years old. We also feel we have compelling financials with the organic growth that we've shown over the past year and the improvements we made in the business.

Cameron: And those those programs of record typically last.

Cameron: 5% to 25 years and defense sector.

Cameron: Just an example of that is in this past year, the Patriot missile system, which is a stalwart that's used around the globe as in the news quite often.

Cameron: Was up for a redesign and they've decided that there really are no competitors and it's quite effective sale and so that program has been extended again without a redesign.

Cameron: So that's going to be a program that is well over 25 year Mark.

Cameron: We also feel we have compelling financials.

Cameron: With the organic growth that we've shown over the past year and the improvements we made the business and now we're looking more at an inorganic growth strategy to complement that.

Cameron Pforr: And now we're looking more at an inorganic growth strategy to complement that. And then lastly, we have a very strong management team. Linda is a part of that, Bill Drafts, who I think will be on the next call when we do our 10K earnings release in March will also join us.

Cameron: And then lastly, we have a very strong management team.

Cameron: Linda is a part of that Bill drafts, who I think will be on the next call. When we do our 10-K earnings release and March will also join us.

Cameron Pforr: He's our president and COO. Both of them have a long tenure at the company and a clear understanding of our business. And we work well together to support our employees and also our shareholders.

Cameron: He's our president and COO.

Cameron: Both of them have a long tenure at the company and a clear understanding of our business and we work well together to to support our employees and also our shareholders.

Cameron Pforr: Okay, I'm going to turn towards the opportunities for growth slide and talk a little bit more about our M&A strategy and our partnership strategy. We're really focused on improving our market position through acquisitions and for more products and entering new markets or else gaining key customers. Our organic growth has been contributing to this. And if you look out in the past year, you know, we've had over 30% of our revenues are generated by new products or products developed within the last several years. And we're continuing to hire engineers, additional engineers help us make good progress penetrating markets and penetrating programs. But we're looking for integrate in a gas method as well to accelerate.

Cameron: Okay, I'm going to turn towards the opportunities for growth slide and talk a little bit more about R. R.

Cameron: M&A strategy our partnership strategy.

Cameron: We're really focused on improving our market position through acquisitions and for more products and entering.

New markets or else gaining key customers.

Cameron: Our organic growth has been contributing to this.

Cameron: If you look out in the past year, we've had over 30% of our revenues are generated by new products or products developed within the last several years.

Cameron: And we're continuing to hire engineers.

Cameron: Additional engineers help us make good progress penetrating markets and penetrating programs, but were looking forward integrate into gas methods as well to accelerate that.

Cameron Pforr: So in terms of the type of profile of companies we're looking for, we're looking to companies that have moderate to strong revenue growth and also have positive cash flow. that they fill key product or technology gaps. can bring new customers or in markets or help us accelerate into new markets. And they also support our desire to move more to solution sales. And so we we've been doing that on our own. We're we're selling subsystems now, modules as well. But but acquisition or partnership is another key way to do that. And we also want to find companies where hopefully we can also leverage what MPTI has already built and honed over the years to help accelerate their traction.

Cameron: So in terms of the type of profile of companies we're looking for.

Cameron: We're looking to companies at moderate to strong revenue growth and also have positive cash flow.

Cameron: <unk> key product or technology gaps.

Cameron: They can bring new customers or end markets or help us accelerate into new markets.

Cameron: And they also support our desire to move more into solution sales and so we've been doing that on our own where we're selling sub systems now modules as well but.

Cameron: But acquisition or partnership is a key way to do that.

Cameron: And we also want to find companies, where hopefully we can also leverage <unk>.

Cameron: Pgi is already built and honed over the years to help accelerate their traction.

Cameron Pforr: And lastly, there is a slide here which shows some of the technologies we're looking at just to get a feel for it. We're open to ideas of companies you're aware of that you think might be a good fit. Really, the key here is to add additional products and technologies to our portfolio. This gives our sales reps additional products in their line cards and helps, you know, Solidify our engagement with customers and helps us move more into the subsystem space. And so some of the areas we're looking at are amplifiers, mixers, power dividers and couplers. Phase shifters, diplexers and waveguides, and we're also looking at subsystem providers and also people who provide sensors or keep components of avionics and other areas like that for growth.

Cameron: And lastly, there was a slide here, which shows some of the technologies. We're looking at just to get a feel for it.

Cameron: We're open to ideas company as you are aware of that you think might be a good fit.

Cameron: Really the key here is to add additional products and technologies to our portfolio.

Cameron: Gives our sales reps additional products and are aligned cards helps.

Cameron: Solidify our engagement with customers and helps us move more into the subsystem space and so some of the areas. We're looking at our RF amplifiers mixers power divider and couplers.

Cameron: Phase Shifters, Diplex series and wave guides and we're also looking at subsystem providers and also people who provide sensors are key components of avionics and other areas like that for growth.

Cameron Pforr: And the last thing I'll leave you there is we're looking at companies that do have revenues that are growing their revenues, but they might need some improvement there. And that already have an EBITDA. They're already offering EBITDA and probably around the $2 to $5 million EBITDA. And this is something that we think we can acquire and integrate well, and it'll also be a meaningful driver of our argument on numbers and our DPS. And then lastly, I think it's important to consider we are a publicly listed company. So we have a lot of flexibility in how we can finance acquisitions.

Cameron: And the last thing I'll leave you. There was we're looking at companies that do have revenues that are growing the revenues that they might need some improvement there.

And that already have an EBITDA.

Cameron: Already offering EBITDA and probably around the 2% to $5 million EBITDA range.

Cameron: And this is something that we think we can acquire and integrate well.

Cameron: And it'll also.

Cameron: It will be a meaningful driver of our EBITDA numbers in our EPS.

Cameron: And then lastly, I think it is important to consider.

Cameron: We are a publicly listed company so.

Cameron: So we have a lot of flexibility in how we can finance acquisitions. So we can we can we're accumulating cash.

Cameron Pforr: So we can, we can, we're accumulating cash. We have the ability to, uh, to borrow. We already have a line in place with a third bank, and we're looking to expand that. We can raise capital from our investors, our current investors. or issue shares to target shareholders, you know, we've already used those first methods just to enhance the return to the current investors in the company.

Cameron: The ability to borrow we already have a line in place with fifth third bank.

Cameron: We're looking to expand that.

Cameron: Can raise capital from our investors our current investors.

Cameron: Or issue shares to target shareholders Verde is first methods.

Cameron: Enhance the returns at the current investors in the company.

Cameron Pforr: And then lastly, I want to mention another thing is that, you know, we went through a strategic committee process or review this past year. We looked at acquisition targets and identified quite a few. We also tried to identify if there are other companies in the marketplace that are maybe of similar size or even larger than us. They're interested in going public and using our listing as a means of providing liquidity and also serving as an acquisition platform. And so that's something we're not against. And this is something that we would consider if it's going to provide meaningful returns to our shareholders.

Cameron: And then lastly, I wanted to mentioned and the other thing is that we went through a strategic committee process of review this past year.

Cameron: We looked at acquisition targets identified quite a few we also tried to identify if there are other companies in the marketplace that are maybe a similar size or even larger announced their interest in going public and using art our listing as a means of providing liquidity and also serving as an acquisition platform and so that's something we're not against and this is something that.

Cameron: We would consider.

Cameron: If it's going to provide meaningful returns to our shareholders.

Cameron Pforr: And really our goal as a company is to become two to three times our current size in the next few years to continue to gain market share and market presence. and to increase the number of types of products our reps have on their line cards and grower.

Cameron: And it really our goal as a company is to be down two to three times. Our current size in the next few years to continue to gain market share and market presence.

Cameron: The increase in number of types of products.

Cameron: Perhaps have on your line cards and grow earnings.

Cameron Pforr: So that's the update on the business.

Cameron: So that's the update on the business.

Cameron Pforr: I did want to talk briefly about the offering, the rights offering, and now this morning's announcement about a warrant dividend, just to clarify that for some of you, and then we're going to turn it to questions from the group. So many of you are aware that we announced a rights offering last week. The goal of that was really to distribute value to shareholders. We are at the point now where we're, we're generating cash for, um, that helped drive our business and fuel growth of the business. Uh, we appreciate your interest in investment in the company and want to reward you for it.

Cameron: Did want to talk briefly about the offering the rights offering and now this morning's announcement about a warrant dividend just to clarify that for some of you and then turn it to questions from the groups.

Cameron: So many of you are aware that we announced a rights offering last week.

Cameron: The goal of that was related to distribute value to shareholders. We are at the point now where we're generating cash for.

Cameron: That helped drive our business and fuel growth of the business.

Cameron: We appreciate your interest and investment in the company and wanted to reward you for it.

Cameron Pforr: Uh, but given the volatility, uh, of the stock, and also some of the feedback we received and just an engagement that we've done with shareholders and stakeholders, we thought we should look for an alternative way to approach that. So we did this morning announced that we were canceling the rights offering. And we were going to use another vehicle similar to that called a Warren dividend, which is essentially a right, but it's a longer term. to provide that value distribution to shareholders, that was our goal. So with a warrant dividend, it's it's essentially a right to buy a share.

Cameron: But given the volatility of the stock.

Cameron: So some of the feedback we received and just the engagement that we have done with shareholders and stakeholders. We thought we should look for an alternative way to approach that.

Cameron: So we did this morning announced that we were canceling the rights offering.

Cameron: And we were going to use another vehicle similar to that call. It a warrant dividend, which is essentially a right, but its a longer term rate too.

Cameron: To provide that value distributions shareholders that was our goal.

Cameron: So.

Cameron: A warrant dividend.

Cameron: It's essentially a right to buy a share so for every shareholder of record will receive a warrant dividend for warranty.

Cameron Pforr: So for every shareholder record, they'll receive a warrant dividend, a warrant. The warrant for five warrants, you're allowed to purchase one common share of stock. The warrant dividend itself will remain open for three years. Once it's declared, we have a record date and we open that, we distribute the warrant. and it'll also have an early trigger. And we spoke this morning in our press release about the strike price of the warrant being $47.50. And, uh, and that would be something you would act on at the end of the three year period, unless during the course of the next three years, our stock trades up to the fifties and it, and the V average VWAP of the company for 30 days is, is $52 a share or greater.

Cameron: The warrant.

Cameron: Five warrants youre allowed to purchase one common share of stock.

Cameron: The warrant dividend itself will remain open for three years.

Cameron: Just declared we have a record date when we open that we distribute the warrants.

Cameron: And it will also have an early trigger.

Cameron: And we spoke this morning in a press release about the strike price of the warrants being $47 50.

Cameron: And.

Cameron: And that would be something you would act on at the end of the three year period.

Cameron: And less during the course of the next three years, our stock trades up to the <unk> and at an average <unk> of the company for 30 days is $52 a share or greater.

Cameron Pforr: The warrants are going to be tradable on the New York Stock Exchange and transferable. And I think that's really key to understand.

Cameron: The warrants are going to be.

Cameron: Tradable on the New York Stock Exchange and transferable and I think that's really key to understand and this is really key to the concept of distributing value to the shareholder. So what it does is it gives you the ability to either take your warrant and sell it to another individual or to keep the warrant exercise it over time.

Cameron Pforr: And this is really key to the concept of distributing value to the shareholder. So what it does is it gives you the ability to either take your warrant and sell it to another individual, or to keep the warrant and exercise it over time and participate in the growth of the company and your investment. We will, in the short term, in your term, be announcing just the record date. and making further announcements about this, but I did want to just update everybody here on the call.

Cameron: And participate in the growth of the company and your investment in our company.

Cameron: We will in the short term and near term be announcing just a record date.

Cameron: And making further announcements about this but I did want to just update everybody here on the call.

Cameron: Okay.

Cameron Pforr: I think that that's what we wanted to cover on today's call.

Cameron: I think that's what we wanted to cover on today's call. We are happy to open it up to questions from the audience.

Cameron Pforr: We are happy to open it up to questions from the audience. and welcome your feedback.

Cameron: And and welcome your feedback.

Kathleen: Okay, we will now begin the question and answer session.

Cameron: Okay. We will now begin the question and answer session.

Kathleen: If you have dialed in and would like to ask a question, simply press star then the number 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press the star 1 again.

Speaker Change: <unk> dialed in we would like to ask a question simply press Star then the number one on your telephone keypad to raise your hand and join the queue.

Speaker Change: And if you would like to withdraw your question simply press Star one again.

Speaker Change: Yes.

Anja Söderström: And your first question comes from the line of Anja Soderstrom of Sidorean Company.

Speaker Change: And your first question comes from the line of.

Speaker Change: And just a very strong of Sidoti and company your.

Cameron Pforr: Unknown Speaker Your line is now. Hi, and thank you for taking my questions and congrats on the nice progress here. So just in terms of this capital rates you were doing and you're cancelling now and doing this warrants thing again, is this Is there something imminent for you in terms of M&A or is this support that or is it what are you seeing in the M&A market? Yeah, thank you, Anja. Appreciate you joining us today.

Speaker Change: Your line is now open.

Speaker Change: Hi, and thank you for taking my question and congrats on the nice progress here.

Speaker Change: So just in terms of this.

Speaker Change: Capital ratio, we're doing AMD Kathleen.

Laurent <unk>.

Speaker Change: This.

Is there something imminently in terms of M&A, it's discipline.

Speaker Change: Or is it.

Speaker Change: What are you seeing in the M&A market.

Roger: Yes. Thank you Roger I appreciate you joining us today.

Cameron Pforr: No, it's not, there's not a deal at Emmett that we're going to announce in the next week or so, but we are seeing a lot of opportunity. And so the desire was to one is distribute value to shareholders. And, you know, an added benefit is that it would, to the extent that people exercise the warrant or exercise the right, when we were envisioning that, is it would put more capital on the balance sheet. And it would make it just a little bit easier to do acquisitions of size. So that's some of the, and really execute on that strategy.

Speaker Change: No. It is not there's not a deal with <unk> that we're going to announce in the next week or so, but we are seeing a lot of opportunity.

Speaker Change: And so the desire was to one is distributing value to our shareholders in an added benefit is that it would to the extent that people exercise. The warrants are exercised the right. When we were a revision that is it would put more capital on the balance sheet and it would make a just a little bit easier to do acquisitions of size. So that's some of the.

Speaker Change: Really execute on that strategy, so it could be JV partnerships it could be acquisitions.

Cameron Pforr: So it could be JV partnerships, it could be acquisitions. We're going to continue to make investments in the business, regardless of how much capital we raise. And I think we will see some opportunities in the acquisition market as well. But having some more capital on the balance sheet, as we continue to accumulate capital as well, will just help make sure that we can do acquisitions with a higher cash content than shares. And so that that that provides a better return to our investors.

Speaker Change: We're going to continue to make investments in the business, regardless of how much capital, we raise and I think we will see some opportunities in the acquisition market as well, but having some more capital in the balance sheet.

Speaker Change: As we continue to accumulate capital as well we will just help make sure that we can do acquisitions with a higher cash content in shares.

Speaker Change: And so that that.

Speaker Change: <unk> provides a better return to our investors over time.

Cameron Pforr: Okay, thank you. And in terms of those large contract wins you've been announcing, are those with the same customer or with different customers? You're also alluding to other sizable contracts in the pipeline and also if they are with the same customers or different customers. Yeah, there's we're with two different customers with two of our larger customers. We do have a number of other contracts that we expect to sign in the next few months and it's you know It's really it's a variety of people in the avionics and also in the airspace and defense. Okay, thank you.

Speaker Change: Okay. Thank you and in terms of those large contract wins you have been announcing.

Speaker Change: Are those with the same customer with different customers you also alluded to other sites.

Speaker Change: Flexible contracts in the pipeline and also if they are with the same customer.

Speaker Change: Yes.

Speaker Change: Yes, theres, where with two different customers with two of our larger customers.

Speaker Change: We do have a number of other contracts that we expect to sign in the next few months.

Speaker Change: It's really it's a variety of people.

Speaker Change: In the avionics and also in the aerospace and defense space.

Speaker Change: Okay. Thank you and then the connectivity partnership.

Cameron Pforr: And then the connectivity partnership. And how are you going to be working with that? And is that could that be also helping you source deals to absorb into MTROM? Yeah, eventually. Yeah.

Speaker Change: How are you going to be working with Apple is that could that be also helping you source deals.

Speaker Change: Soybean to Amtrust.

Speaker Change: Yes, that's essentially right.

Cameron Pforr: So the connectivity partnership is something that's been discussed at this affiliate for several months. I think there's a large market opportunity for investment in the area. And they are establishing a team of seasoned investors and operators, you know, the space as well. And, you know, I anticipate they're gonna have pretty strong investment return. Part of the interest on our part is that, you know, we focus on several markets. We're really trying to drive our revenue. But we don't have a broad view of all the markets where RF plays a role, right, or where connectivity plays a role, communications in general.

Speaker Change: Yes, so the connectivity partnership is something Thats been discussed at this affiliate for several months.

Speaker Change: There is a large market opportunity for investment in the area.

Speaker Change: And they are establishing a team of seasoned investors and operators in the space as well.

Speaker Change: Anticipate they're going to have a pretty strong investment returns.

Speaker Change: Part of the interest on our part is that we focus on several markets were really trying to drive our revenue.

Speaker Change: But we don't have a broad view of all of the markets where are a place where all right.

Speaker Change: Or where connectivity plays where all the communications in general So connectivity partnership is going to look at a broader set of vertical applications than we do here at Amtrust.

Cameron Pforr: So Connectivity Partnership is going to look at a broader set of vertical applications than we do here at M Tron. And so I think it'll give us a good window into some of those market opportunities. and allow us to invest through the partnership in some companies that we might not have come across. We'll also gain knowledge of new market opportunities and areas that we should consider in the future for growth.

Speaker Change: And so I think it will give us a good window and just some of those market opportunities in.

Speaker Change: It allow us to invest through the partnership and some companies that we might not have come across.

Speaker Change: Gain knowledge of new market opportunities in areas that we should consider in the future for growth.

Cameron Pforr: And I think it's in terms of how does it benefit our shareholders. We're looking at it two ways. One is I think it'll generate significant investment returns to us over time. And also, I think they'll give us the opportunity to partner with or acquire companies that we may not have come across on our own.

Speaker Change: And I think it's in terms of how does it benefit our shareholders.

Speaker Change: We're looking at it two ways.

Speaker Change: One is I think it will generate significant.

Speaker Change: <unk> returns to us over time.

Speaker Change: And also I think it will give us the opportunity to partner with or acquire companies that we may not have come across on our own.

Speaker Change: So.

Cameron Pforr: So we're going to have a strategic role in the fund, but we're not going to be running the fund. And I anticipate that we'll have a right or first refusal on potential acquisitions of companies that come across. And also there may be a lot of companies that frankly are too small for us to buy at this point in time. And if connectivity partnership can support them, wonderful. And we'll partner with them to drive revenue for both firms, or, you know, maybe we'll look at acquiring them down the road. So I think it's too bold, really, it'll be it'll generate good returns on our capital, as well as give us opportunities to acquire or partner with companies that we might not have seen.

Speaker Change: We're going to have a strategic role in the fund, but we're not going to be running the fund.

Speaker Change: And I anticipate that we will have a writer first refusal on potential acquisitions of companies that come across.

Speaker Change: Also there may be a lot of companies are frankly are too small for us to buy at this point in time.

Speaker Change: And its connectivity partnership can support them wonderful and we'll partner with them to drive revenue for both firms or maybe we will look at acquiring them down the road.

Speaker Change: So I think it's twofold really it'll be it'll generate good returns on our capital as well as give us opportunities to acquire or partner with companies that we might not have seen yet.

Cameron Pforr: Okay, thank you. And you mentioned you expect a strong revenue growth to come in with a strong backlog in these contracts. Do you expect it to be the same magnitude as the near 20%? Or were you anticipating the revenue growth to be in the next coming year? No, we've been we've been guiding people to in terms of what we feel we can guarantee is lower numbers. So in the 10% growth range, we do have a desire to grow higher than that. And if you look the last three years, I think we went into every single one of those years, expecting probably, you know, seven to 10% growth.

Speaker Change: Okay. Thank you.

Speaker Change: And you expect a strong revenue growth to contain them with a strong backlog and as contracts with.

Speaker Change: Do you expect it to be the same magnitude.

Speaker Change: 20% are where are you anticipating the revenue growth to be in the next coming on.

Speaker Change: Yeah, we've been we've been guiding people to.

Speaker Change: In terms of what we feel we can guarantee is a lower number so in the 10% 10% growth range. We do have a desire to grow higher than that and if you look at the last three years I think we went into every single one of those years expecting probably.

Speaker Change: 7% to 10% growth.

Cameron Pforr: And we were pleasantly surprised with how we came out. This year is shaping up strongly. So we're, you know, we're doing well in Q1. And I think we do have a good chance at exceeding that I don't want to predict 20%. There's a lot of, you know, there's a lot of headwinds in the market in terms of The dialogue that's going on in Washington and other places, I don't think it's going to impact us. But, but, you know, there are a lot of changes in front. And so I think it's kind of prudent to stick with those numbers for now.

Speaker Change: And we were pleasantly surprised with how we came out.

Speaker Change: This year is shaping up strong way, so we're doing well in Q1.

Speaker Change: And I think we do have a good chance that exceeding that I don't want to predict 20%. There's a lot of there's a lot of headwinds in the market in terms of.

Speaker Change: The dialogue, that's going on in Washington, and other places.

Speaker Change: I don't think its going to impact us but.

Speaker Change: But there are a lot of changes in front and so I think it's prudent to stick with those numbers for now.

Cameron Pforr: Okay, and then just in terms of the gross money, I'll be talking about 45% before, but you've been beating that every quarter now. How should we think about that going forward and the product mix there? Yeah, I think we're going to stay in the high 40s, to be honest. It'll bounce around a little bit from quarter to quarter. But I think something in the, you know, when we gave up the long term model, we were talking about, I think, you know, 45 to 48%. I think that's reasonable on a quarter by quarter basis. And I expect emergence to kind of remain where they are.

Okay, and then just in terms of the gross money also been talking about 45% before but you have been beating that.

Speaker Change: Every quarter now.

Speaker Change: How should we think about that going forward and the product mix there.

Speaker Change: Yes.

Speaker Change: I think we're going to stay in the high 40 percents to be honest.

It'll bounce around a little bit from quarter to quarter.

Speaker Change: But I think something in the <unk>.

Speaker Change: What we gave up the long term model, we were talking about I think 45% to 48%.

Speaker Change: Think thats reasonable on a quarter by quarter basis.

Speaker Change: I expect our margins to kind of remain where they are.

Speaker Change: Okay.

Cameron Pforr: Okay, great.

Speaker Change: Okay, Great that was helpful. Thank you.

Cameron Pforr: That was all for me. Thank you.

Speaker Change: Yes.

Speaker Change: Yeah.

Speaker Change: Okay.

Chip Ruby: Okay, your next question comes from the line of Cheap Ruby of Ruby Asset Management.

Speaker Change: Okay. Your next question comes from the line of cheap really I freely asset management. Your line is now open.

Chip Ruby: Your line is now open.

Chip Ruby: Good morning. Thanks for taking my call.

Speaker Change: Good morning, Thanks for taking my call.

Cameron Pforr: first question. Again, and I'm just not that familiar what's going on. So could you put into context What the connectivity partnership is. so much. of you, what sort of funding is the company committed to for right now? And then how big will that fund be? And, you know, just to clarify, that is the fund where your former CEO is taking a senior advisory role.

The first question.

Speaker Change: Again, and I'm, just not that familiar what's going on so could you put into context what.

Speaker Change: The connectivity partnership is how much.

Speaker Change: What sort of funding as the company.

Speaker Change: <unk> committed to for right now and then how big will that fund B.

Speaker Change: And just to clarify that is the fund where your former CEO is taking a senior advisory role.

Cameron Pforr: I have some follow-up questions. Sure, I think. Thank you, Chip. So the fund itself is just being established there in there right now in the market building their team, talking to potential investors, and also identifying and building out their deal flow. It's so it's not set in stone yet in terms of like the size of the raise, but I think they anticipate raising about 200 to $250 million. So, you know, substantial amount. We look at being a part of the GP. So, so we would have some benefit from the carry on that on those investments.

Speaker Change: I have some follow up questions.

Speaker Change: Sure. Thank you Jeff So the fund itself is just being established there.

Speaker Change: We're right now in the market building their team.

Speaker Change: Looking to potential investors and also identifying and building out their deal flow.

Speaker Change: So it's not set in stone yet in terms of the size of the raise but I think they anticipate raising about $200 million to $250 million, so substantial amount of money.

Speaker Change: We look at being a part of the GP.

Speaker Change: So.

Speaker Change: So we would have some benefit from the carry.

Speaker Change: On that on those investments.

Speaker Change: And we haven't determined yet the size of our investment I don't expect it to be a meaningful amount of cash on our balance sheet.

Cameron Pforr: And we haven't determined yet, you know, the size of our investment, I don't expect it to be a meaningful amount of cash on our balance sheet. But I do think given our position in the market, and getting it early with the fund will have a meaningful return.

Speaker Change: Do think given our position in the market and getting it early with the fund will have a meaningful return there.

Cameron Pforr: But we'll let people know that as it becomes more solidified. Okay, and you mentioned, I think that you'll have a right of first refusal. I mean, I see this fund a little bit as a competitor of your own M&A activities potentially. Yeah. And that's a good point, Chip. So that's one of the reasons why, as we work with them, we are looking to establish a right of first refusal. So it's not a point of competition for us. We're really trying to delineate the types of things that they would look at and the types of things that we would look at.

Speaker Change: Well, we'll let people know that as it becomes more solidified.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: And you mentioned.

Speaker Change: I think that Youll have a right of first refusal I mean I see this fund a little bit there is a competitor of your own M&A activities potentially.

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: That's a good point chips and that's one of the reasons why as we work with them. We are looking to establish a writer first refusal so its not plenty of competition for us.

Speaker Change: We're really trying to delineate the types of things that they would look at the types of things that we would look at.

Cameron Pforr: And for anything that's really in our, our wheelhouse, you know, we would have the ability to, to transact ahead of them.

Speaker Change: And for anything Thats really in our wheelhouse, we would have the ability to transact ahead of them.

Cameron Pforr: But if we choked when we looked at it, which shows not to then what I wouldn't see any reason why we would like connectivity partnership potentially getting Okay, and Changing gears to the second topic, I appreciate your comments on the continued cadence of activity with the DoD and foreign military replenishment. I think That makes sense. My question is, you know, there's a strong organic growth path at the company. So can you talk about the hurdle for acquisitions as far as if you do, and you've said you look at bigger, and you use the word accretive, accretive over what time, like immediately, year one, and on what metrics, EPS, cash flow, adjusted EBITDA, that would be helpful.

Speaker Change: But if we chose when we looked at it which is so it's not too then.

Speaker Change: I wouldn't see any reason why we would like connectivity partnership potentially get involved.

Speaker Change: Okay.

Speaker Change: Changing gears for a second topic I appreciate your comments on the continued cadence of activity.

Speaker Change: And for military replenishment I think.

Speaker Change: That makes sense.

Speaker Change: My question is there's strong organic growth path at the company. So can you talk about the hurdle for acquisitions as far as if you do you've said you'll look at bigger than you.

Speaker Change: Use the word accretive.

Speaker Change: Accretive over what time immediately year, one and on what metrics EPS cash flow adjusted EBITDA.

That would be helpful and then secondly.

Cameron Pforr: And then secondly, Discuss your incentives, if you would, since you're new to the company, now you have a new role, so changing quick. Are your incentives in cash? Are your incentives in stock? And how are the other members of the C-suite? incentivized and how are you going to get paid? Are you doubling the company with kind of equity at stake? And how much, you know, kind of skin in the game for a successful accretive growth path for us as equity holders?

Speaker Change: Discuss your incentives.

Speaker Change: If you would since.

Speaker Change: You're new to the company now you have a new role so changing quick.

Speaker Change: Are your incentives and cash are your incentives.

And how are the other members of the C suite.

Speaker Change: Incentives and how you're going to get paid or you're doubling the company.

With the kind of equity stake and how much kind of skin in the game for successful accretive growth path for us as equity holders.

Cameron Pforr: Okay, and do you mind just repeating your first question? Right? I've got the second one down. The first question was the creative nature of deals on what metrics, basically. Yeah, that's fine. Yeah, thank you for that. So yeah, we've been looking at doing a creative deals. We look at it on an EBITDA basis. And. We've been really limited to looking at things that are creative almost immediately. So we're not looking to make big bets on new technologies moving into production levels of manufacturing. For things that are more on the come, we would look probably more towards partnerships or forming of JVs as a way of sharing in the benefit of helping them grow their business or grow our business.

Okay and do you mind just repeating your first question Ive got the second one down.

Speaker Change: The first question was.

Speaker Change: The.

Speaker Change: The accretive nature of our deals on what metrics basically yes.

Speaker Change: That's fine okay.

Speaker Change: Thank you for that.

Speaker Change: So yes, we've been looking at doing accretive deals we look at it on an EV to EBITDA basis.

Speaker Change: And.

Speaker Change: And.

Speaker Change: We've been really limited to looking at things that are accretive almost immediately so we're not looking to make big bets.

Speaker Change: On new technologies moving into production levels.

Speaker Change: Of manufacturing.

Speaker Change: For things that are more on the come we would look probably more towards partnerships are forming a JV.

Speaker Change: They are sharing in the benefit of helping them grow their business grow our business.

Cameron Pforr: So those are that some of the metrics in terms of the size, you know, we're really trying to buy things that have a couple million at least of EBITDA, if not more, we do find though, that when we look at the marketplace, you know, I say currently our margins are Unknown Speaker 0.5 to 10 higher than many of the companies that we look at. And so we are trying to find situations that aren't going to drag down our margins over time. and where we can have an impact on that and hopefully improve their margins and bring them closer to our own, you know, and keep our business model the way it is.

Speaker Change: So those are some of the metrics in terms of the size, we're really trying to buy things that have.

Speaker Change: A couple of million at least of EBITDA, if not more.

Speaker Change: We do find though that when you look at the marketplace.

Speaker Change: I would say currently our margins are.

5% to 10.

Speaker Change: Higher than many of the companies we look at.

Speaker Change: And so we are trying to find situations that aren't going to drag down our margins overtime.

Speaker Change: And where we can have an impact on that and hopefully improve their margins have been closer to reality.

Speaker Change: Our business model the way. It is we think we have a great successful model at this point in time, we're really trying to export that.

Cameron Pforr: We think we have a pretty successful model at this point in time.

Cameron Pforr: We're really trying to. In terms of incentives, you had asked about that right now, the senior team is through, you know, salaries and performance bonuses that are cash based based on the company's performance against plan. It's not really based on our stock performance to be honest. And we are also we do, but we do participate as equity holders. So senior management team either has, they most of them have restricted stock, and which best for a three year period. So they benefit from that. And there are periodic, you know, grants of stock or restricted stock to management team members.

Speaker Change: In terms of incentives you had asked about that.

Speaker Change: Right now the senior team as this entity through salaries.

Speaker Change: In performance bonuses that are cash based.

Speaker Change: Based on the company's performance against plan.

Speaker Change: It's not really based on our stock performance to be honest.

Speaker Change: We are also we do that we do participate as equity holders. So.

Speaker Change: Senior management team either has.

Speaker Change: They most of them have restricted stock and <unk>.

Speaker Change: Which that's a three year period, so they benefit from that and there are periodic.

Speaker Change: Granted stock restricted stock to management team members.

Speaker Change: Yes.

Cameron Pforr: Okay, that's helpful.

Speaker Change: Okay. That's helpful.

Cameron Pforr: And I would just I can let you go but I think the one thing I'd like to see as a holder since you are kind of targeting Good and aggressive and that's positive growth targets. I think the Bonus. should be more equity based to align you with holders better. It, I think that will be received well, if you, if you can look at that next go round or next cycle. and change that probably. And if you're successful, probably it's better for everybody on the team.

Speaker Change: I would just add.

Speaker Change: I'm going to let you go but I think the one.

Speaker Change: I'd like to see is a holder since you are kind of targeting.

Speaker Change: Good and aggressive and Thats positive growth targets I think.

Speaker Change: Bonus.

Speaker Change: Should be more equity base to align with holders better.

Speaker Change: I think that will be received well if you. If you can look at the next go round or next cycle.

Speaker Change: Changed probably and if youre successful.

Speaker Change: It's better for everybody on the team any way if you do that over the longer term if you're successful. So I would look forward to that change.

Cameron Pforr: Anyway, if you do that over the longer term, if you're successful, so I would look forward to that. Okay, appreciate that, Jim.

Speaker Change: Okay I appreciate that Jim.

Cameron Pforr: Thank you.

Speaker Change: Thank you.

James Tivy: Your next question comes from the line of James Tivy, your line is now open. James, your line is now open. Yes, sorry. Good morning. Thanks for taking the call. Hi, Linda. Welcome, Cameron.

Speaker Change: Your next question comes from the line James timing. Your line is now open.

Speaker Change: Yes.

James: Yes, good morning, James now open.

James: Yes, sorry, good morning, thanks for taking the call.

James: Hi, Linda.

Cameron Pforr: I have a very granular question related to gross margins. Okay. In your Q3 earnings release, you mentioned that margin improvements were due in part to improved production efficiencies from previous investments. And I know today on this call, you talked about efficiency of raw materials, which relates to crystals. Can you provide some clarity on the statement? It wasn't something we previously seen.

Linda: Welcome Cameron and I have a very granular question.

James: Related to gross margins.

James: Okay.

James: In your Q3 earnings release, you mentioned that margin improvements were due in part to improved production efficiencies from previous investments.

James: And I know today on this call you talked about efficiency of raw materials, which relates to crystals can you provide some clarity on the statement. It wasn't something we previously had seen and are these.

Cameron Pforr: And are these investments, capital or human in nature? And how does the crystal yield actually fit into this efficiency? Yeah, we haven't talked about like what our crystal efficiency levels are, but we are dedicating resources to making improvements there, just because it's such a large portion of our cog. So we have both consultants and engineering talent we've brought on board to help us do that, as well as we are making investments in machinery to aid that. Um, so I I don't know if we can say more than that, but it is a core area of focus for us.

James: Investments capital or human nature, and how does the crystal yield actually sit indeed this efficiency.

James: Improved deficiency in your production.

James: Yes, we haven't talked about like what our crystal efficiency levels are but we are dedicating resources to making improvements there just because it's such a large portion of our Cogs. So we have both consultants and engineering talent, we brought on board to help us do that.

James: And as well as we are making investments in machinery to aid that.

James: So.

James: I don't know if we can say more than that but thats. It is a core area of focus for US. We're also trying to be just more efficient and our purchase of inventories and.

Cameron Pforr: We're also trying to be just more efficient in our purchase of inventories. as well, since that can be a large number.

James: Yeah.

James: As well since that's that can be a large number as well.

Cameron Pforr: Okay, thank you. That's all I had. Yeah. Thank you, James.

James: Okay. Thank you that's all I had.

James: Thank you James.

James: Okay.

Kathleen: That concludes our Q&A session.

James: And that concludes our Q&A session I will turn the conference Matt to Mr. Kamran Foreign critical closing remarks.

Cameron Pforr: I will turn the conference back to Mr. Cameron Pforr for the closing remarks. So thank you very, very much for joining the call today and your interest in the company. I'm hoping that clarified a lot of things that were may have arisen in your mind as you've been reading some of the press releases recently. We are really committed to providing shareholder value and doing that in a number of different ways. One way to do it is the warrant dividend now, which is what we're trying to pursue. We do realize we kind of stubbed our toe on the rights offering and hoping to make that good for you over time and appreciate your support of the company and kind of be in our mission.

James: Yes.

Speaker Change: Thank you very very much for joining the call today and your interest in the company.

James: Hoping that clarified a lot of things.

James: That may have arisen in your minds as you've been reading some press releases recently.

James: We are really committed to providing shareholder value and doing that in a number of different ways.

James: One way to do it is the <unk>.

James: Warrant dividend now, which is where we're trying to pursue.

James: We do realize the kind of stubbed, our toe on that on the rights offering.

James: Hoping to make that good for you over time.

James: And I appreciate your support of the company and kind of the and our mission. So.

Cameron Pforr: So and also a big thank you to our employees who are on the call and their dedication to what we're doing. Thank you for your time.

And also a big thank you to our employees who are on the call and their dedication to what we're doing here.

James: And thank you for your time.

Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

James: Ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect.

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