Q4 2024 M-tron Industries Inc Earnings Call
Operator: Thank you for standing by.
Thank you for standing by my name is John and I will be your conference operator today at this time I would like to welcome everyone to the Amtrust industries incorporated.
John: My name is John and I will be your conference operator today.
Operator: At this time, I would like to welcome everyone to the M Tron Industries Incorporated 4th Quarter Earnings Call. All lines have been placed on mute to prevent any background noise.
Fourth quarter earnings call.
Speaker Change: Lives have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this Super Brite Star followed by the number one on your telephone keypad. If you would like to withdraw your question Press Star. One again. Thank you I would now like to turn the call over its within the bylaws EVP of finance you may begin your conference.
Operator: After the speaker 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. If you would like to withdraw your question, press star 1 again. Thank you.
Linda Biles: I would now like to turn the call over to Linda Biles, EVP of Finance. You may begin your conference.
Linda Biles: Good morning, everyone. Thank you for joining our 2024 MTRON PTI Q4 and fiscal year 24 earnings call. Please note that this call will be recorded and we will make the recording available on our website www.mtronpti.com shortly after the call.
Speaker Change: Good morning, everyone. Thank you for joining our 'twenty 'twenty, four and turnkey Ti Q4 and fiscal year 'twenty four earnings call. Please note that this call will be recorded and we will make the recording available on our website www dot and tried to T. T I got caught short.
Linda Biles: Yesterday afternoon, we released our earnings release for the fourth quarter of 2024 and annual fiscal year 2024. Before getting underway, we are required to advise you that the following discussion should be taken in conjunction with our most recent financial statements and notes as contained within our 2024 10-K, which was filed yesterday on March 27, 2025 with the FCC.
Speaker Change: After the call yesterday afternoon, we released our earnings release for the fourth quarter of 'twenty, 'twenty, four and annual fiscal year, 2020 four.
Speaker Change: Before getting underway, we are required to advise you that the following discussion should be taken in conjunction with our most recent financial statements and notes is contained within our 'twenty 'twenty four 10-K, which was filed yesterday on March 27th 2025 with the S. C C.
Linda Biles: The discussion may contain forward-looking statements with the meaning of 27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934. These forward-looking statements contain known and unknown risks and uncertainties, which are detailed in our filings with the FCC. Although the company believes that the 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 result expressed or implied by the company's forward-looking statements. The company undertakes no obligations to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.
Speaker Change: A discussion may contain forward looking statements with the meaning of 27 eight and the Securities Act of 1933 and section 21 E of the Securities Exchange Act of 1934. These forward looking statements contained known and unknown risks and uncertainties, which are detailed in our filings with the SEC.
Speaker Change: Although the company believes that the 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 result expressed or implied by the companys forward looking statements. The company undertakes no.
Speaker Change: <unk> to publicly update or revise any forward looking statement, whether as a result of new information future events or otherwise.
Linda Biles: Readers are cautioned that any forward-looking statements are not guarantees of future performance.
Speaker Change: You are cautioned that any forward looking statements are not guarantees of future performance with that I will now turn the call over to our interim CEO Cameron four.
Cameron Foer: With that, I will now turn the call over to our Interim CEO, Cameron Foer. Good morning, everyone. And thank you, Linda. Thank you to our shareholders and interested parties for attending our fourth quarter and annual fiscal year 2020 for earnings call and your interest in the company. We're pleased to discuss our strong finish to the year and our outlook going forward.
Speaker Change: Okay.
Cameron four: Hey, good morning, everyone and thank you Linda.
Cameron four: Thank you to our shareholders and interested parties for attending our fourth quarter and annual fiscal year 2024 earnings call and your interest in the company.
Cameron four: We're pleased to discuss our strong finish to the year and our outlook going forward.
Cameron Foer: As a reminder to those who are new to the company or haven't tuned in recently, we M Tron PTI designs and manufacturers highly engineered RF solutions. including electronic components and subassemblies used to control the frequency and timing of signals and electronic. We're a global company with three manufacturing sites in the United States and India. And the company's primary markets include aerospace and defense. Commercial Avionics. industrials and state. So we're pleased to report that the company continue to perform well with continuing strength and MPI sales and good financial performance for Q4 fiscal year 24. Our revenues continue to be driven by defense-related orders.
Cameron four: As a reminder, today's from either the company or Havent tuned in recently.
Cameron four: <unk> designs and manufactures highly engineered RF solution.
Cameron four: Including electronic components and sub assemblies used to control the frequency and timing of signals and electronic circuits.
Cameron four: We're a global company with three manufacturing sites in the United States and India.
Cameron four: The company's primary markets include aerospace and defense.
Cameron four: Commercial avionics.
Cameron four: Industrials and space.
Cameron four: So we're pleased to report that the company continued to perform well with continued strength in NPI sale.
Cameron four: Sale and good financial performance for Q4 fiscal year 2004.
Cameron four: Our revenues continued to be driven by defense related orders.
Cameron Foer: with Improved Operating Performance. We have been able to continue to make strategic investments in research and development, and have also initiated a number of efforts to increase the market profile. We also continue to make investments in our production facilities and have begun a program to explore greater automation on the floor to improve yield. Despite the daily news cycle and potential federal budget actions, we have seen no disruption to our business and expect to continue the company's revenue expansion throughout the year. The continuing resolution passed and signed on March 15, 2025, extended government funding through the end of the fiscal year and largely preserved defense spending as it was increasing the defense budget by $6 billion.
Cameron four: With improved operating performance.
Cameron four: We have been able to continue to make strategic investments in research and development.
Cameron four: <unk> also initiated a number of efforts to increase the market profile of the company.
Cameron four: We also continue to make investments in our production facilities and have begun a program to explore greater automation on the floor to improve yields.
Cameron four: Despite the daily news cycle and potential federal budget action, we have seen no disruption to our business.
Cameron four: To continue the company's revenue expansion throughout the year.
Cameron four: The continuing resolution passed and signed on March 15, 2025 extended government funding through the end of the fiscal year and largely preserved defense spending as it was.
Cameron four: The defense budget by $6 billion, so not a great deal of change.
Cameron Foer: So not, not a great deal of change. Slightly costing or decreasing some defense programs and increasing spending in others. Overall, we believe that we are well positioned to continue to perform well with the anticipated changes in military procurement.
Cameron four: Slightly costing are decreasing some defense programs and increasing spending in others.
Cameron four: Overall, we believe that we are well positioned to continue to perform well with the anticipated changes in military procurement focus.
Cameron Foer: Yesterday, we reported the following Q4 FY24 results. The total revenues for the fourth quarter will $12.8 million, an 18.9% increase over the same period in the prior year. The revenue increased in the period primarily due to strong defense programs. product and solution ship.
Cameron four: Yesterday, we reported the following our Q4 FY 'twenty for results.
Cameron four: The total revenues for the fourth quarter was $12 8 million.
Cameron four: And 18, 9% increase over the same period in the prior year.
Cameron four: The revenue increase in the period, primarily due to strong defense program.
Cameron four: And solution shipments.
Cameron Foer: Gross margins for the fourth quarter of 24 were 47.2. So at 360 basis point improvement over the 43.6% gross margins of Q4 2023. Gross margin improvement was driven by higher revenue. results of prior investments in our manufacturing processes. resulting in greater efficiencies and an improved product mix to higher margin product.
Cameron four: Gross margins for the fourth quarter at 24 were 47 point to say what <unk>.
Cameron four: 360 basis point improvement over.
Cameron four: Over the 43, 6% gross margins of Q4 2003.
Cameron four: Gross margin improvement was driven by higher revenues.
Cameron four: The result of prior investments in our manufacturing processes.
Cameron four: Resulting in greater efficiencies and an improved product mix to higher margin products.
Cameron Foer: Net income per diluted share was $0.73 per share in the quarter. uh, almost a 20x increase over the prior years, three cents per share, which was depleted, frankly, by a non-cash stock compensation expense related to a distribution of options to our employees to line their interests without a share.
Cameron four: Net income per diluted share was <unk> 73 per share in the quarter.
Cameron four: Almost a 20 <unk> increase over the prior years <unk> per share.
Cameron four: Which was the blade at frankly by a noncash stock compensation expense related to a distribution of options to our employees to align their interests with our shareholders.
Cameron Foer: Adjusted EBITDA in the period was $3.1 million. an increase of 29.2% over the prior year's fourth quarter EBITDA of $2.4 million. The increase was driven by gross margin. and continued containment of operating expenses other than the investment I discussed earlier in R&D. Which resulted in a higher income for taxes and a higher depreciation. as the company has accumulated more cash on the balance sheet.
Cameron four: Adjusted EBITDA in the period was $3 1 million.
Cameron four: An increase of 29, 2% over the prior year's fourth quarter EBITDA of $2 4 million.
Cameron four: The increase was driven by gross margin improvement and continued containment of operating expenses.
Cameron four: And the investment I discussed earlier any R&D.
Cameron four: Which resulted in a higher income before taxes.
Cameron four: The higher depreciation was offset by higher interest income as the company has.
Cameron four: Emulated more cash on the balance sheet.
Cameron Foer: backlog at the end of the quarter was 47.2 million as compared to 47.8 for the year prior. slight decrease in the backlog from the prior year's period reflects the continued strategy and focus on securing long, large, long duration program centric business. which can materially impact backlog based on the timing and size these orders.
Backlog at the end of the quarter was $47 2 million as compared to 47 eight for the year prior.
Cameron four: The slight decrease in the backlog from the prior year's period reflects the continued strategy and focus on securing long large long duration program centric business, which can materially impact backlog based on the timing and size of these orders.
Cameron Foer: In January 2025, for example, we publicly announced one large order over $10 million that was expected actually in FY 2024. for the fiscal year 2024.
Cameron four: In January 2025 for example, we publicly announced one large order over $10 million that was expected actually in FY 2024.
Cameron four: For the fiscal year 2024.
Cameron Foer: We reported the following results. Total revenues for the period were $49.0 million, a 19.1% increase over fiscal year 2023. The revenue increased primarily due to strong defense program product and solution ship.
We reported the following results.
Cameron four: Total revenues for the period were 49.0 million.
Cameron four: 19, 1% increase over fiscal year 'twenty three.
Cameron four: The revenue increase primarily due to strong defense program product and solutions.
Cameron four: Yeah.
Cameron Foer: gross margins for 2024 for the entire year with 46.2%. 550 basis point improvement over the 40.7% gross margin we produced in 2023. And this margin improvement was driven by higher revenue. results of the prior investments in manufacturing processes that we discussed, and an approved product mix into higher margin products. That income per Duluth share was $2.65 per share for the year. 107% increase over the prior years, $1.28 per share. The increase was driven by increased revenue offsets by higher manufacturing costs. driven by the revenue increases. higher engineering expense related to the investment in R&D and higher sales commission related to the increase of revenue.
Cameron four: Gross margins for 2024.
Cameron four: For the entire year were 46, 2%.
Cameron four: 550 basis point improvement.
Cameron four: Over the 48, 7% gross margin.
Cameron four: We produced in 2023.
Cameron four: This margin improvement was driven by higher revenue.
Cameron four: As a result of the prior investments and manufacturing processes that we just got.
Cameron four: And then a group product mix into higher margin products.
Cameron four: Net income per diluted share was $2 $65 per share for the year.
Cameron four: 107% increase over the prior years.
Cameron four: <unk> 28 per share.
Cameron four: The increase was driven by increased revenue offset by higher manufacturing costs.
Cameron four: Driven by the revenue increases.
Cameron four: Higher engineering expense related to the investment in R&D and higher sales commissions related to the increase of revenue.
Cameron Foer: and an increase, an overall increase at least in administrative and corporate expenses to support the growth.
Cameron four: And an increase in overall increase in administrative corporate expenses to support the growth.
Cameron Foer: Adjusted EBITDA for the period was $11.1 million for the year, an increase of 44% over the prior year's $7.7 million adjusted EBITDA. And the increase was driven by this improved gross profit. Continued containment of operating expenses other than the investment in R&D.
Cameron four: Adjusted EBITDA for the period was 11 1 million for the year.
Cameron four: An increase of 44% over the prior years seven $7 million adjusted EBITDA number.
Cameron four: And the increase was driven by this improved gross profit.
Cameron four: The containment of operating expenses other than the investment in R&D.
Cameron Foer: We continue to execute on our strategy of continually moving into more program business. and which now makes up the vast majority of our airspace and defense. Defense and aerospace has been an amazing market for the past several years and remains one with plenty of room for us to grow. We seek to maintain close relationships. with our customers and be the first line resource for them as they plan upgrades to current systems or design new systems to meet government program needs and changing requirements. The same can be said for our avionics industrials.
Cameron four: Yeah.
Cameron four: We continue to execute on our strategy of continually moving into more program business.
Which now makes up the vast majority of our aerospace and defense revenue.
Cameron four: Defense and aerospace it's been an amazing market for the past several years and remains one with plenty of room for us to grow.
Cameron four: We seek to maintain close relationships.
Cameron four: With our customers and be the first line resource for them as they planned upgrades to current systems or design, new systems to meet government program needs and changing requirements.
Cameron four: The same can be said for our avionics industrial businesses.
Cameron Foer: We are also pushing into new high growth markets and are accumulating design wins in space and satellite industry and seek to do more business in the drone and UAV markets, radar and electronic warfare, all areas that are expanding within the defense. These growing markets depend on the type of technologies that M Tron. been a leader for years. We have a we have won a number of design wins in all these market areas, with both well established, as well as up and coming vendors, and expect our revenues to grow in these markets.
We are also pushing into new high growth markets and are accumulating design win based on satellite industry and seek to do more business.
Cameron four: And the drilling and UAV markets radar and electronic warfare, all areas that are expanding within the defense budget.
Cameron four: These growing markets, depending on the type of technologies that have drawn.
Cameron four: For years, we have.
Cameron four: We have won a number of design wins in all these market areas.
Cameron four: Both well established as well as up and coming vendors and expect our revenues to grow in these markets over time.
Cameron Foer: While our management team is focused on executing on our organic growth strategy, we are placing greater emphasis on complementing these efforts with inorganic growth from both partnerships and acquisition. We continue to look for complimentary acquisition opportunities in the RF components and subsystem space, as well as other subsystem or solution companies focused on the same end.
Cameron four: While our management team.
Cameron four: Team is focused on executing on our organic growth strategy, we are placing greater emphasis on complementing these efforts with inorganic growth from both partnerships and acquisitions.
Cameron four: We continue to look for complementary acquisition opportunities in the RF components and subsets in space.
Cameron four: Well as other subsystem or solution companies focused on the same end markets.
Cameron Foer: For companies that are too early in their development cycle to be an acquisition partner, we'll look at forming strategic partnerships as a means of expanding our product portfolio and insisting assisting both companies in their growth.
Cameron four: For companies that are too early in their development cycle to be an acquisition partner.
Cameron four: You'll look at forming strategic partnerships at the <unk>.
Cameron four: Means of expanding our product portfolio.
Cameron four: And then just a.
Cameron four: Listing both companies in their growth.
Cameron Foer: I'd like to thank our loyal employees for supporting the company and its mission and serving the nation and its capability to defend freedom. M Tron plays a critical, plays a critical role in the defense of our nation. providing US sourced and highly engineered components for many US and allied military programs. Strengthening the U.S. defense industrial base is more important than ever before, and we thank our employees for their dedication to their jobs, their fellow employees in our mission.
Cameron four: I'd like to thank our loyal employees for supporting the company and its mission of serving the nation and its capability to then freedom.
Cameron four: And try and places a critical plays a critical role in the sense of our nation.
Cameron four: Biding U S sourced and highly engineered components for many U S and allied military programs.
Cameron four: Strengthening of the U S defense industrial base is more important than ever before.
Cameron four: We thank our employees for their dedication to their jobs their fellow employees and our mission.
Cameron Foer: And I also want to thank our dedicated customers for their continued business and partnership.
Cameron four: I also want to thank our dedicated customers for their continued business and partnership.
Cameron Foer: Before I open the floor to questions, I wanted to introduce Bill Drafts and Linda Biles, who are joining me on today's call. Bill is our President and COO, having joined the company five years ago from FLIR, and previously serving in senior management roles at SawTech and ICX. And Linda Biles, our EVP of Finance and our Chief Accounting Officer, has served the company for over 17 years.
Cameron four: Before I open the floor to questions I wanted to introduce Bill drafts and London vials, who are joining me on today's call.
Cameron four: Bill <unk>, our president and CFO, having joined the company five years ago from clear.
Cameron four: And previously serving in senior management roles at <unk> and Ics.
Linda: And Linda <unk>, our EVP of finance and our Chief Accounting Officer, who served the company for over 17 years.
Cameron Foer: I also want to thank Anja Soderstrom from Sidoti, who's a research analyst covering this space. She just published a research report on the company two days ago, which updated her numbers for the company. So I wanted to point you to that.
Cameron four: I also want to thank.
Cameron four: Anja Soderstrom, Sidoti whose or a research analyst covering this space. She just published a research report on the company two days ago, which updated her numbers for the company. So I want to point you to that.
Cameron Foer: And make a last comment that there's plenty of information on the company, including numerous presentations we made over the past month. all available on our IR website on our at www.mtronpti.com.
Cameron four: And last nickel last comment that there's plenty of information on the company, including numerous presentations, we've made over the past month.
Speaker Change: All available on our IR website on our WWE.
Cameron four: Www Dot com John PCI dotcom.
Operator: And with that, Operator, can you open the lines and allow some questions? Absolutely. Thank you.
Speaker Change: And with that operator can you open the lines and allow.
Speaker Change: Questions.
Speaker Change: Absolutely. Thank you and we will now begin the question and answer session again as a reminder to everyone. If you have dialed David would like to ask a question. Please press star followed by the number one on your telephone keypad and if you would like to withdraw your question because your breasts Starwood and again, if you are called the pharmacy you asked a question in or listening via loud speaker on your device.
Operator: And we will now begin the question and answer session. If again, as a reminder to everyone, if you have dialed in and would like to ask a question, please press star followed by the number one on your telephone keypad. And if you would like to withdraw your questions, please press star one again.
Operator: If you are called upon to ask a question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question.
Speaker Change: Please speak up your handset and ensure that your phone is not on mute when asking your question.
Anja Söderström: The first question comes from the line of Anja Soderstrom with Sidoti, please go ahead. Hi, and thank you for taking my question and congrats on the nice progress here. And thank you for the shout out on behalf of me and the firm of the CIDODI.
Speaker Change: Our first question comes from the line of and you saw this Trump with Sidoti. Please go ahead.
Speaker Change: Hi, and thank you for taking my question and congrats on nice progress here and thank you for the shoutout them perhaps.
Speaker Change: <unk> Sidoti.
Cameron Foer: And if we just start talking about the tariffs, maybe if you're affected from them and if so, how and if you're able to pass on the expense of that. Yeah, good question, Anja. And it's, it's one that's on our mind. There's a lot of, I guess, noise in the news cycle. And I think, you know, we're gonna have to see how it turns out we are continually kind of evaluating our supply chain, not only for tariffs, but there's also a growing concern within the federal government about where You know, components are sourced for a number of the systems from all their vendors.
Speaker Change: And if we just start talking about the tariffs maybe.
Speaker Change: That's it.
Speaker Change: From them somehow.
Speaker Change: Give us a pass on that extends from that.
Speaker Change: Yeah. Good question.
Speaker Change: It's one that's on our mind Theres a lot of.
Speaker Change: I guess noise in the news cycle I think we're going to have to see how it turns out we are.
Speaker Change: <unk> kind of evaluating our supply chain.
Speaker Change: Not only for tariffs, but there's also a growing concern within the federal government about where.
Speaker Change: That's our source for a number of the systems from other vendors.
Cameron Foer: We do receive some components or raw materials from Japan and Korea and Asia. And we're watching that carefully and making sure that we are prepared to react. But there hasn't been any impact on our business to date. And we do we do plan ahead and make sure we have components on board for near term revenue. Okay, thank you.
Speaker Change: We do receive some components or raw materials from Japan, and Korea and Asia.
Speaker Change: We're watching that carefully and making sure that we are prepared to react.
Speaker Change: But theres there hasnt been any impact on our business to date.
We do we do plan ahead make sure we have components onboard for near term revenue.
Speaker Change: Okay.
Speaker Change: Okay. Thank you and also in terms of that.
Cameron Foer: And also, in terms of the avionics market has been a little bit challenged for you, following the pandemic, how is that trending now? And what are you seeing there? Yeah, actually, that's, I think, going to be an area of strength going forward. So we were concerned at the end of the year about the Boeing strike. And we're, we're happy that was resolved as quickly as it was. We serve really the suppliers, the main suppliers to both Airbus and Boeing. And we have components on every airframe that they produce. And we're also involved with some of the business jet companies.
Speaker Change: Our next Mark <unk> has been a challenge for you Colin.
Speaker Change: And then make how is that trending now and what are you seeing there.
Speaker Change: Yeah.
Speaker Change: Actually that's I think going to be an area of strength going forward. So we were concerned at the end of the year about the Boeing strike and we're happy that was resolved as quickly as it was.
Speaker Change: We serve really the suppliers of the main suppliers to both Airbus and Boeing.
Speaker Change: And we have components on every airframe that they produce and we're also involved with some of the business jet companies.
Cameron Foer: So we're, we're, we're convinced that market's going to have an upturn by the end of the year. And we're starting to see more activity as those, as those production lines come back online, and they kind of work through whatever inventories they might have had.
Speaker Change: So where we're at we're convinced of that market is going to have it up turn by the end of the year and we're starting to see more activity as those as those production lines come back online and they kind of work through whatever inventory they might have had.
Cameron Foer: Okay, thank you.
Speaker Change: Okay. Thank you and then let's touch on the backlog it was a little bit softer than you mentioned, but you mentioned that $10 million contract coming in.
Cameron Foer: And then let's touch on the on the backlog, it was a little bit faster than you had mentioned, but you mentioned that 10 million contracts coming in in January, and it was anticipated in the previous year. And since then, you actually received two contracts of the magnitude of 10 million.
Speaker Change: Our analysts anticipated.
Speaker Change: In the previous year.
Speaker Change: Actually received two contracts of the magnitude of $10 million, but.
Cameron Foer: But what does the pipeline look like for you in terms of other large contracts to the same sort of size? Yeah, yep. Good question. We were we were hoping that one $10 million order would come in by the end of 24. It didn't, but it came in a few weeks later. And we frankly don't have a lot of control over some of the procurement processes are taking place. As our orders get larger, you know, they come under more compliance scrutiny, which it hasn't impacted any orders. And we've done very, very well in the compliance cycle, but it does often delay things a couple of weeks.
Speaker Change: What does the pipeline look like for you in terms of other large contracts to the same sort of place.
Speaker Change: Yes. Good question, we were hoping that $110 million order would come in by the end of 'twenty four it didn't but it came in a few weeks later and we frankly don't have a lot of control over some of the procurement processes are taking place.
Speaker Change: As our orders get larger they come under more compliance scrutiny.
Speaker Change: It hasn't impacted any orders and we have done very very well in the compliant cycle, but it does talking to delay things a couple of weeks. So we have a number of orders coming in throughout Q1, and also expected in Q2, which are sizable.
Cameron Foer: So we have a number of orders coming in throughout Q1 and also expected in Q2, which are sizable. And so I think our pipeline looks good for the year.
Cameron Foer: And we will be publishing or making press releases on some of the larger ones as they come in over the next quarter or so. Okay, thank you.
Speaker Change: And so I think our pipeline looks good for the year and we will be publishing our press release and some of the larger ones as they come in over the next quarter or so.
Speaker Change: Okay. Thank you and you also issued a warrant dividend recently can you just talk about that and motivation for that sure yes.
Anja Söderström: And you also issued that warrant dividend recently.
Cameron Foer: Can you just talk about the motivation for that? Sure, yeah. So we've had, you know, tremendous performance in the company stocks since our spin out in 2022. And we did want to, you know, we have a policy of really not making cash dividends, but we did want to reward our shareholders, most people who are investing in the company and believe in our story. So we wanted to issue a dividend to them.
Speaker Change: So we've had tremendous performance in the company's stock since our spin out in 2022.
Speaker Change: And we did want to.
Speaker Change: Have a policy of really not making cash dividends, but we did want to reward our shareholders and those people who are investing in the company and believe in our story. So we wanted to issue.
Speaker Change: Dividends to them.
Cameron Foer: The, you know, we actually apologize for the switch from a rights offering to a dividend warrant, but we think the dividend warrant is a better instrument for providing value to our shareholders. It has not been issued yet, but the record date has been set. And it will provide a means of shareholders either participating in the growth of the company by exercising the warrant at some point and investing and receiving additional shares in the company. Or they could, we anticipate it'll be tradable. We've applied to trade it on the New York Stock Exchange. And if that happens, that'll allow them also to, if they don't want to exercise, they could trade that warrant and receive some remuneration for the sale of the warrant.
Speaker Change: Yes, absolutely.
Speaker Change: We apologize for the switch from a rights offering to a dividend warrant, but we think the dividend warrant as a better instrument for providing value to our shareholders.
Speaker Change: It has not been issued yet but the record date has been set.
Speaker Change: And it will provide a means of shareholders either participating in the growth of the company by exercising the warrant at some point.
Speaker Change: Investing in reshaping the additional shares in the company.
Speaker Change: Or is that we anticipate it'll be tradable applied to traded on the New York stock exchange.
Speaker Change: And if that happens that will allow them also to if they don't want to exercise that could trade that warranted and receive some remuneration for the sale of the warrant.
Anja Söderström: Okay, thank you.
Speaker Change: Okay. Thank you and then you've had a pretty strong growth over the last couple of yesterday in terms of revenue.
Cameron Foer: And you've had a pretty strong growth over the last couple of years in terms of revenue. And what can we expect for 2025? And will you provide any sort of guidance for 2025?
Speaker Change: Yeah.
Speaker Change: What can we expect for 2025 and will you provide any sort of guide us what preclinical simplified yep.
Cameron Foer: Yeah, no, I appreciate that question, Anja. It's obviously early in the year. I think that your research report that you published a few days ago is really a very good look at the company and its potential. And, you know, I think those are very reasonable estimates. You know, going into the year, we will provide some guidance later on as we get further down the track. But I think at this point in time, it's probably prudent to withhold that that we think, you know, long term, we're a company that can grow very, very consistently at 10% revenue.
Speaker Change: Yes, no I appreciate that question.
Speaker Change: Obviously early in the year.
Speaker Change: I think that your research report that you published a few days ago is is really a.
Speaker Change: A very good look at the company and its potential.
Speaker Change: And I think those are very reasonable estimates.
Speaker Change: Going into the year, we will provide some guidance later on as we get further down the track, but I think at this point in time, it's probably prudent to withhold that but we think long term.
Speaker Change: We're a company that can grow very very consistently at 10% revenue.
Cameron Foer: In the past several years, we've kind of gone into each quarter or each fiscal year thinking that, and we've been able to exceed it. I think it's just too early this year to tell if we'll be in the same position this year or not. But we do expect continued strong performance from the company and I think your estimates are very reasonable. And but that sort of double digit growth that that's on an organic basis, right? And then you're looking at the opportunities on top of that, too. Yeah, I think for the double digit growth. And I also do think that there's the potential for additional orders.
Speaker Change: In the past several years, we've come and gone into each quarter or each fiscal year thinking that and we've been able to exceed it I think.
Speaker Change: It's just too early this year to tell it will be in the same position as you or not but we do expect continued strong performance of the company.
Speaker Change: Yeah, I think your restaurants are very reasonable.
And but that's sort of double digit growth.
Speaker Change: On an organic basis, rather than looking at M&A opportunities on top of that too.
Speaker Change: Yes, I think we're there.
Speaker Change: The double digit growth and I also do think that there's the potential for additional orders we just.
Cameron Foer: We just but right now we feel more comfortable with, you know, going to bring people towards nine, 10% growth for the year. Yeah.
Speaker Change: But right now we feel more comfortable with.
Speaker Change: When people towards 19% growth for the year.
Speaker Change: Yeah.
Anja Söderström: OK, thank you. That was all for me. Thank you.
Speaker Change: Thank you that was tough for me.
Speaker Change: Thank you.
Speaker Change: Yeah.
Speaker Change: Okay.
Chief Krui: Once again, if you would like to ask a question that is suppressed or And the next question comes from the line of Chief Krui with Rui Asset Management. Please go ahead. Morning, guys. Good quarter, I wanted to touch on the gross margin strength. You know, as you noted, very strong in a quarter, and strong for the year. But what do you how much of that you listed out three things, I guess, revenue, manufacturing efficiencies and mix. How much of that 47.2 or the increase do you think is kind of sustainable as we roll into 2025?
Speaker Change: Once again, if you would like to ask a question that is suppressed Darwin.
Speaker Change: And the next question comes from the line of cheap Crue Ruby asset management. Please go ahead.
Speaker Change: Good morning, guys.
Speaker Change: Good quarter I wanted to touch on the gross margin strength.
Speaker Change: As you noted very strong in the quarter.
Speaker Change: And strong for the year, but.
Speaker Change: What do you how much of that you listed out three things I guess revenue manufacturing efficiencies and mix.
Speaker Change: How much of the 47 to or the increase do you think is kind of sustainable as we roll into 2025.
Cameron Foer: And how much is mixed dependent or, you know, other variables around the gross margin? Yeah, I don't think we've done a you know, an analysis necessarily of it. But I think we've made a number of improvements over the past couple years on just fixing bottlenecks and improving processes on the manufacturing floor. So I think that that part is very, very sustainable. We have had, you know, as we recompeted for contracts, price improvements or increases that have been maintained with our customers. And they've done a lot of analysis on our cost structure just to justify it.
Speaker Change: And how much is mix dependent or other variables around the gross margin.
Speaker Change: Yes, I don't think we've done an analysis necessarily of it but I think we've made a number of improvements over the past several years on.
Speaker Change: Just fixing bottleneck and improving processes on the manufacturing floor.
Speaker Change: So I think that part is very very sustainable.
Speaker Change: Have had.
Speaker Change: As we re competed for contracts price improvements or increases.
Speaker Change: That had been maintained with our customers and they've done a lot of analysis on our cost structure just to justify it.
Cameron Foer: We feel comfortable with that. And then thirdly, we've made a shift in markets, you know, to more, more program business, where there's a lot of engineering that goes into every product. So we're selling less products, frankly, that are maybe considered commodity. So these are very specialized products. And so that that points towards a higher margin. And I don't know if you have any more commentary on that. But we have pointed people to, you know, thinking that we should remain in that, the high 40s. So you know, 45 to 48 49% of that range, and it will change by quarter.
Speaker Change: And we feel comfortable with that.
Speaker Change: And then thirdly, we have made a shift in markets to more more program business, where there's a lot of engineering that goes into every product. So we're selling less products frankly that art.
Speaker Change: Maybe you can tell your commodity.
Speaker Change: So these are very specialized products and so that that points towards a higher.
Speaker Change: Margin.
Speaker Change: And I know, Doug you had any more commentary on that but we have plenty of people too.
Speaker Change: Thinking that we should remain in the high 40%, so $45 to 48, 49% in that range and it will change by quarter.
Cameron Foer: You covered the high points, Cameron. I can't stress enough how much our process engineering team engages with the operators to make sure that they have all the fixturing, all the ergonomics, all the automation they need to be efficient. And, and we're just constantly measuring how many units per hour. And then every time we do an improvement, we celebrate that. And so just really focus on efficiency.
Speaker Change: You covered the high points Kamran.
Speaker Change: I can't stress enough how much.
Speaker Change: Our process engineering team engages with the operators to make sure that they have all the fixed during all the ergonomics all the automation they need to be efficient.
Speaker Change: And we're just constantly measuring how many units per hour and then every time, we do an improvement we celebrate that and so just really focus on efficiencies.
Chief Krui: And if I could follow up. First quarter 22 and first quarter 23, both saw, you know, kind of a dip in gross margin, is that some seasonality or business, we should accept, expect the same thing. And I guess what I'm looking at, you know, the third quarter and the fourth quarter had very strong gross margins. And you noted the Sudoti report is reasonable, and they're looking kind of for a dip in those margins, even into the second half of 25. And that just doesn't seem. like giving the cadence to the business and the winds and the cost reduction for the things you're talking about.
Speaker Change: And if I could follow up.
Speaker Change: First quarter 'twenty two in first quarter 'twenty three.
Speaker Change: <unk> saw kind of a dip in gross margin is that some seasonality your business we should expect.
Speaker Change: We expect the same thing and I guess, what I'm looking at the.
Speaker Change: The third quarter and the fourth quarter had very strong gross margins and you noted the Sidoti report.
Speaker Change: It is reasonable and theyre looking kind of for it dips in those margins even into the second half.
Speaker Change: 25, and that just doesn't seem.
Speaker Change: But given the cadence of the business and the wins and the cost reduction some of the things you were talking about.
Cameron Foer: What am I missing? Why would that happen? Why would that be reason? Yeah, actually, if you look at the prior couple of years, usually, Q1 is slightly, it's either flat from Q4, or, you know, in the earlier period, like 21-22 is slightly down. I actually don't think we'll necessarily see that activity. I think we don't have a lot of seasonality in our business.
Speaker Change: What am I missing why would that happen and why would that be reasonable.
Speaker Change: Yeah actually if you look at the prior couple of years.
Speaker Change: You can easily.
Speaker Change: Q1.
Speaker Change: Slightly.
Speaker Change: We're flat from Q4 or.
Speaker Change: Earlier periods like 'twenty, one 'twenty two is slightly down.
Speaker Change: I actually don't think we'll necessarily see that activity I think we do.
Speaker Change: Have a lot of seasonality in our business.
Cameron Foer: It's really more a matter of product mix and timing. And what about the second half of the year? Like next year, that reasonable comment? Would there be anything one off that would depress margins? Or are you just kind of being conservative. No, I mean, I am looking at a report and I see the margin staying, you know, relatively flat, like slightly increasing throughout the year. And I think that's kind of a reasonable trend, I think. I think that, you know, the civilian report talks about 46 and a half going to 47 for the year. And I think that's in a range of definitely reasonable.
Speaker Change: Really more a matter of product mix and timing.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: And what about the second half of the year like next year that reasonable comment would there be anything one off that would depress margins or are you just kind of.
Speaker Change: Being conservative.
Speaker Change: No.
Speaker Change: I am looking at a report and I see the margins staying relatively flat like slightly increasing throughout the year.
Speaker Change: And I think thats kind of a reasonable trend I think that I think that.
Speaker Change: How you report talks about 46 five 147.
Speaker Change: For the year and I think that's in a range of definitely reasonable.
Chief Krui: Okay, thank you.
Speaker Change: Okay. Thank you and then on the drone and electronic warfare, you said you had some wins already.
Chief Krui: And then on the drone and electronic warfare, you said you had some wins already.
Cameron Foer: Can you detail that? Is it sizable? And will we see a revenue impact on that over the next 12 months? Yeah, we've had a number we've actually been involved in the drone business since 2014. We tend to play in areas in the larger drones, not not in FPV drones, for example. So if you look at Global Hawk, and some of the larger platforms, you know, those are the kinds of areas we've played historically. And we're also working with a number of the newer vendors who are, you know, participating like replicator two and other programs in the defense department.
Speaker Change: Can you detail that is sizable and will we see a revenue impact on that over the next 12 months.
Speaker Change: Yes.
Speaker Change: We've had we've actually been involved in the drone business since 2014.
Speaker Change: We tend to play in areas and the larger John's not not an FTE trends for example, so.
Speaker Change: You look at global Hawk, and some of the larger platforms. Those are the kinds of areas. We've played historically in.
Speaker Change: We're also working with a number of newer vendors who are.
Speaker Change: Participating like replicate or two other programs in the defense Department and we expect a fair amount of growth out of those areas. So I think it is an area that's going to increase.
Cameron Foer: And we expect a fair amount of growth. So I think it is an area that's going to increase.
Cameron Foer: And same with space. So in space, and satellites, we we participate there in ground stations. well as spacecraft and higher orbit satellites. You know, we're not in the Leo market. And that's usually because of cost and the more stringent requirements. Okay.
Speaker Change: And same with space selling space.
Speaker Change: Lights.
Speaker Change: We participate there in ground stations.
Speaker Change: As well as space craft in higher orbit satellites, you know we're not in the OBL market for example.
Speaker Change: And that's usually because of cost and the strips more stringent requirements.
Speaker Change: Yeah.
Chief Krui: And last one, if I could, just capital allocation. I mean, the net cash is nice to see, but at this point, almost four bucks a share, plus or minus. How quickly do you think that can be deployed into acquisitions or potential repurchase?
Speaker Change: Okay and last one if I could just capital allocation I mean the.
Speaker Change: Net cash is nice to see but.
Speaker Change: At this point almost four bucks, a share plus or minus how quickly.
Speaker Change: Do you think that can be deployed into acquisitions or.
Cameron Foer: And is that year-end number a good variability that you would say, hey, just be careful the way the balance sheet ended at the end of the year, a real number is more likely this? Yeah, I think it's very dependent on whether we do an acquisition or not or repurchase. But I think we'll probably be able to get to a slightly higher cash number by the end of the year. But we'll see about that. Like, yeah, unless unless we do make an acquisition. If we do make an acquisition, we would like to use a sizable amount of cash and might also finance it through a little bit of debt.
Speaker Change: Potential repurchase in and is that year end number.
Speaker Change: A good number to use or is there any kind of payable variability that you would say hey, just be careful the way the balance sheet and ended at the end of the year real number is more likely this year.
Speaker Change: Yes.
Speaker Change: I think it's very dependent on whether we do an acquisition in honor of repurchase but.
Speaker Change: I think we'll probably be able to get to a slightly higher cash number by the end of the year.
Speaker Change: We'll see about that.
Speaker Change: Unless unless we do make an acquisition and we do make an acquisition we would like to use.
Speaker Change: Sizable amount of cash and might also financed through a little bit of that.
Cameron Foer: just to help reduce any, any issuance of shares.
Speaker Change: Just to help reduce any issuance of shares.
Cameron Foer: Are you repurchasing shares now? Or is there any outlook for that? We're not doing that right now.
Speaker Change: Are you repurchasing shares now or is there any outlook for that.
Speaker Change: We're not doing that right now, but it is something we've discussed.
Chief Krui: But it is Okay, thank you guys. Yeah, appreciate no further questions.
Speaker Change: Okay. Thank you guys yes.
Speaker Change: I appreciate it.
Speaker Change: Okay.
Speaker Change: With no further questions that concludes the Q&A session and I would like to turn the call back over to Cameron for her closing remarks.
Cameron Foer: That concludes the Q&A session and I would like to turn the call back over to Cameron for for closing remarks. Okay, well, thank you, John. I'd like to thank everybody for participating in today's call, your interest in the company have have a great day. Please feel free to contact us. If you have further questions at IR at mtronpti.com. And, and we do have a lot of materials on the website that should hopefully answer many questions you have, but happy to interact. So thank you again for your time.
Cameron: Okay, well, thank you John I'd like to thank everybody for participating in today's call and your interest in the company have a great day, please feel free to contact us if you.
Cameron: You have further questions at IR at <unk> Dot com.
Cameron: And we do have a lot of materials on the website that should hopefully answer any questions you have but they're happy to interact so thank you again for your time.
Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.
Cameron: This concludes today's conference call. Thank you for your participation you may now disconnect.
Cameron: Yeah.
Cameron: Okay.
Cameron: Yeah.
Cameron: Yeah.
Cameron: [music].