Q1 2025 M-tron Industries Inc Earnings Call
Yeah.
Eric: Thank you for standing by my name is Eric and I will be a conference operator today.
Speaker Change: At this time I would like to welcome everyone to the M. Sean earnings call for Q1 2025.
Speaker Change: All lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there'll 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.
Speaker Change: If you'd like to withdraw your question Press Star one again.
Linda bias: I would now like to turn the call over to Linda bias.
Linda Bias: John's EVP of finance. Please go ahead.
Speaker Change: Good morning, everyone and thank you for joining our 2025 and trying to Q1 earnings call.
Speaker Change: Note that this call will be recorded and will make the recording available on our website www dot M Dot com shortly after the call guest.
Speaker Change: Yesterday afternoon, we released our earnings for the first fiscal quarter of 2025 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 on March 27th 2025.
Speaker Change: With the SEC This discussion may contain forward looking statements with the meaning of 27 a of the Securities Act of 1933 and section 21 E of the Securities and Exchange Act of 1934. These forward looking statements contained known and unknown risks and uncertainties, which are detailed.
Speaker Change: Our SEC filings.
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 obligation to publicly update.
<unk> or revise any forward looking statement, whether as a result of new information future events or otherwise readers are cautioned that any forward looking statements are not guarantees of future performance with that I will now turn the call over to our interim CEO Cameron four.
Cameron: Yes, good morning, everyone and thank you Linda.
Cameron four: First of all I want to thank all of our shareholders and interested parties for attending our first quarter FY 'twenty five earnings call and your interest in the company.
We're pleased to discuss our strong start to fiscal 'twenty.
Cameron four: 2025 fiscal year, and our outlook going forward.
Cameron four: As a reminder, our intron designs and manufactures highly engineered RF solutions, including electronic components and sub assemblies used to control the frequency and timing of signals and electronic circuits, whereas.
Cameron four: What company are three manufacturing sites.
Cameron four: United States and India. The company's primary markets include defense and aerospace.
Cameron four: Commercial avionics.
Cameron four: Industrials and space.
We are pleased to report that the company continued to perform well with continued strength in <unk> sales and good financial performance for Q1 fiscal year 2025.
Cameron four: Our revenues continued to be driven by defense related orders and we also saw some growth in the commercial avionics market.
Cameron four: Something we believe bodes well for the future recovery of that market.
Cameron four: We are pleased to see Boeing resolve its labor dispute early in the year.
Cameron four: And expect orders from the major airframe manufacturers to pick up throughout the year.
Cameron four: With consistent operating performance, we have been able to continue to make strategic investments in research and development.
Cameron four: And continue to increase the market profile of the company.
Cameron four: Part of that effort with the recent rebranding of the company as <unk>.
Cameron four: Updates to our logo our website sales materials.
Cameron four: As well as the initiation of the advertising and some of the leading publications for our sector.
Cameron four: And also enhanced.
Cameron four: Enhanced lead generation activity.
Cameron four: We also continue to make investments in our production facilities and we've seen good initial results in a program that I mentioned I think on the last call to deploy greater automation on the factory floor to improve yields.
Cameron four: It looks like we have gotten through some of the choppiness in the defense market caused by some of the conflicting messages from the administration on the defense budget.
Cameron four: We have at <unk> have seen no disruption to our business and.
Cameron four: And expect to continue the company's revenue growth throughout the year.
Cameron four: The continuing resolution passed and signed in mid March 2025.
Cameron four: Extended government funding through the end of the federal fiscal year and largely preserved the defense spending as it was actually increasing the defense budget by.
Cameron four: I guess it relatively small about $6 billion.
Cameron four: The administration is now proposing increasing defense budget for this fiscal year by 150 billion through a reconciliation process.
Cameron four: And also substantially increase in procurement spending and the federal FY 2026 budget.
Cameron four: Many of the areas targeted for investment.
Cameron four: Such as next Gen aircraft.
Cameron four: Shipbuilding.
Cameron four: Yeah.
Cameron four: Loitering and precision guided munitions.
Cameron four: Border security.
Cameron four: And the Golden down.
Cameron four: Anti aircraft anti missile defense.
Cameron four: All require a significant amount of RF subsystems and components highlighting to continue growing need for insurance products.
Cameron four: The importance of filters and oscillators has only increased as the electromagnetic spectrum has become a more congested part of the battle space.
Cameron four: Communications systems and commanders.
Cameron four: Battens range subject to electronic countermeasures, such as jamming interference.
Cameron four: We believe that we are well positioned to continue to perform well with the anticipated changes in military procurement focus.
Cameron four: Now would you mind.
Cameron four: Giving our audience.
Cameron four: Highlights of our fiscal year Q.
Cameron four: Q1 performance.
Cameron four: Total revenues for first quarter were $12 7 million or 13, 8% increase over the $11 2 million of revenue in the same period last year. The revenue increase in the period, primarily due to strong defense program product and solution shipments gross margins for <unk>.
Cameron four: The first quarter of 2025, or 42, 5%, a 20 basis point decrease over the 42, 7% gross margins in Q1 of 'twenty for the decrease was primarily due to additional manufacturing costs with the initial production runs of several new products. In addition, we saw the initial impact this.
Cameron four: <unk> of newly initiated federal tariffs on imports of foreign source materials and partially finished goods.
Cameron four: Net income was one 6 million or <unk> 56 cents per diluted share in the first quarter 2025, compared with $1 5 million or <unk> 53 per diluted share in the first quarter of 2024. The increase in revenues discussed above is partially offset by higher manufacturing cost of sales consistent.
Cameron four: With the growth in revenues and the introduction of new products as well as higher engineering, selling and administrative expenses related to continued research and development investments higher sales commissions from an increase in revenues and an increase in administrative expenses consistent with the overall growth of the business.
Cameron four: Adjusted EBITDA was $2 5 million in the first quarter 2025, compared with $2 3 million in the first quarter of 2024. The increase was primarily due to higher revenues, resulting in higher income.
Cameron four: Backlog was $55 5 million as of March 31, 2025, compared to $47 2 million as of December 31, 2024, and $46 1 billion as of March 31 2024.
Cameron four: The increase in backlog reflects several large defense and avionics orders received during the quarter and the continued broad demand for our products in early 2020 in early February 25. For example, we publicly announced one large order supporting shipboard systems for over $10 million that was expected.
Cameron four: <unk> had been received in fiscal year 2024.
Cameron four: And now I'd like to turn the call back over to Cameron.
Thank you Linda.
Cameron four: So in March 2025, <unk> saw the initial impact of the recently announced federal chair.
Cameron four: On the import of goods materials from outside the United States.
Cameron four: And while <unk> is United States based manufacturer.
Cameron four: With a great degree of vertical integration something we pride ourselves on.
Cameron four: We do import some materials from Japan, China, South Korea, and a very small amount from Europe and we are.
Cameron four: Also perform some finishing work at our facility in India, India.
Cameron four: It's difficult to predict the long term impact of this trade policy on our financial performance as it changes regularly.
Cameron four: We are working with many of our defense customers on acting parts of the federal acquisition regulations.
Cameron four: Which potentially exempt materials receive for defense production from entry tariffs.
In addition, we continue as always to analyze our supply chain in order to make sure that we have redundancy of suppliers where possible.
Cameron four: And can source from reliable suppliers at the best prices possible.
Cameron four: To date, we have seen no impact from tariffs on demand for our products.
Cameron four: Also I wanted to highlight the recent distribution of warrants.
Cameron four: On April 25, 2025, the company distributed the dividend of warrants to stockholders of record as of March 10 2025.
Cameron four: The warrants are listed on the New York Stock Exchange Amir.
Cameron four: The American exchange.
Cameron four: Under the ticker <unk>.
Cameron four: MP Ti Ws.
Cameron four: The warrants may be listed on certain financial websites under the ticker.
Cameron four: <unk> W T or similar nomenclature.
Cameron four: Pursuant to the warrant agreement the warrants contain the following terms, which I'll summarize in it we're happy to answer questions about this later, but five warrants are exercisable to purchase one share of common stock.
Cameron four: The exercise price.
Cameron four: Is $47 50 per share.
Cameron four: The warrants are exercisable at the earlier of 30 days prior to the maturity date of April 25 2028.
Cameron four: And we're on the date when the average volume weighted average price or the view app of <unk> common stock.
Cameron four: As greater than or equal to $52 per share for the prior 30 consecutive trading days.
Cameron four: Call. This the accelerated trigger early trigger.
Cameron four: Okay.
Cameron four: Warrants expire at the earlier April 25, 2028, but they run to full maturity.
Cameron four: Or 30 calendar days, following and John's public announcement of the date of the accelerated trigger being triggered.
Cameron four: And warrant holders exercising their full allotment of warrants can you apply to subscribe for any and all shares of common stock issuable pursuant to any outstanding but on the exercise warrants.
Cameron four: This is called the Oversubscription feat.
Cameron four: Feature.
Cameron four: And it is included on your warrant agreement.
Cameron four: Further information on the warrants is available in our Faq found on our <unk> Investor website, which is IR dot amtrust.
Cameron four: <unk> Dot com.
Cameron four: Yeah.
Cameron four: Just to highlight some of the strategic activity, we do continue to execute on our strategy that could tell you moving into more program business, which now makes up the vast majority of our aerospace and defense revenues.
Cameron four: We are involved for example in over 40 programs of record the very significant amount defense and aerospace has been an amazing market in past several years and it does remain one with plenty of room for us to grow.
Cameron four: We seek to maintain close relationships with our customers and be their first line resource for them as they plant upgrades to current systems or compete for the design of new systems to meet government program needs.
Cameron four: And the same can be said in our other sectors like avionics and industrials.
Cameron four: We have also ramped up our pursuit of complementary acquisitions and strategic partnership opportunities in both the RF component and subsystem space as well as some tangential subsystem installation companies that focus on the same markets.
Cameron four: We are focused on finding deals that would be accretive for shareholders and help both companies strengthen their financial performance and customer base.
Cameron four: Strengthening the U S defense industrial base is one of the goals of administration straight policy and current budget focus they've actually dedicated.
Cameron four: Budget dollars to the strengthening of the defense industrial base.
Cameron four: The.
Cameron four: The anticipated increase in this year's defense budget.
Cameron four: Having a U S based advanced manufacturing capabilities support our joint forces is more important than ever before and we thank our employees for their dedication to their jobs and the mission.
Cameron four: We also thank our dedicated customers for their continued business and the trust they place an undrawn and our people.
Cameron four: One plays a critical role in defense of our nation, providing U S sourced highly engineered components for many U S and allied military programs.
Cameron four: Before I open the floor to questions.
Cameron four: Wanted to mention that we will be holding our annual meeting on June 10th 2025.
Cameron four: At 10 am in the morning at the Harvard Club in New York City.
Cameron four: The meeting will be open to all shareholders of the company's common stock.
Cameron four: In addition, we will hold an investor presentation and question and answer session before the annual meeting.
Cameron four: And information for both of these events will be posted on our investor website.
Cameron four: For those interested in attending in person you will need to get a QR code from our IR site to pass through.
Cameron four: At the Harvard Club security.
Operator can you. Please open the lines and allow the first question.
Speaker Change: At this time I would like to remind everyone in order to ask a question. Please press star followed by the number one on your telephone keypad.
Speaker Change: Your first question comes from the line of Ana <unk> with Sidoti.
Please go ahead.
Speaker Change: Hi, Thank you for taking my questions.
Speaker Change: In terms of the gross margins as well.
Speaker Change: With music due to the ramping of new programs.
Speaker Change: Yes.
Speaker Change: Hi.
Speaker Change: How is that sort of develop and what does near large contract wins.
Speaker Change: See that being a ramp for a longer period of time or will it picked up pretty quickly.
Speaker Change: Yes.
Speaker Change: Good question on yes. Thank you for joining so the gross margins were impacted by it.
Speaker Change: Really three factors one one was just product mix.
Speaker Change: Had less products being shipped for two of our long term missile programs, which have very high relatively high margins.
Speaker Change: And that that is expected to return very shortly are those.
Speaker Change: Is that part of the mix was going to increase in Q2 throughout the rest of the year.
Speaker Change: Due to some of the orders we received in Q1.
Speaker Change: Okay.
Speaker Change: I mentioned earlier was that we did ship some new products and whenever youre working on new products. The first couple of runs are a little bit less efficient than.
Speaker Change: Then when all the Kinks have been worked out in our processing.
And you are running at a higher yield.
Speaker Change: We shipped some new space products, which require a rigorous testing and they've been successful but.
Speaker Change: The first couple of runs of those.
Speaker Change: Take more labor than you would hope to use later.
Speaker Change: And also we shipped a new type of loss later in the quarter. That's used in EW and radar, which I think is great for the long term prospects of the company and I think that those yields will improve over time, so I do expect the yields to improve and the.
Speaker Change: And the margins to improve throughout the year.
Speaker Change: We also did see some impact of the tariffs we had less than a 100 K of tariff charges in March and it's kind of difficult to predict.
Speaker Change: How much we should anticipate receiving there for the rest of the year.
Speaker Change: And we hope that a lot of the progress that's been made over the past couple of weeks, reducing the tariffs will have a positive impact there.
Speaker Change: Do you anticipate it to go up.
Speaker Change: And the rest of the year.
Speaker Change: Okay.
Speaker Change: This new App program.
Speaker Change: The shift in this space and the escalators are they higher than average.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: Dolby is yes, there'll be a very strong margin products, but they are just early in their development.
Speaker Change: Okay, and then in terms of the tariff.
Speaker Change: Able to pass that on an hour.
Speaker Change: Right, Yes, we do have the capability on our contracts to pass that on the reality is that in the market there is.
Speaker Change: There are a lot of mistakes being made in terms of how the tariffs are applied.
Speaker Change: And then also the whole thought of passing on tariffs to vendors is relatively new and I do anticipate a fair amount of pushback, although I think ultimately many customers will pay for their agreements.
So we're really hoping that we can work through the tariff situation in the short term, but we do have in our contracts the ability to pass on taxes and tariffs.
Speaker Change: So I think over time, it doesn't work out, but there'll be some disruption in the industry in terms of cost for the short term.
Speaker Change: Okay. Thank you and then also.
This large contracts <unk> been winning and congrats on us.
Speaker Change: Are they also higher margin programs then.
Speaker Change: They are and they were actually some of the programs that I mentioned, we didn't ship a lot of it Q1, which did impact our margins.
Speaker Change: Return to that Sir.
Speaker Change: And then what does the pipeline look like for Idaho, and large deals like that.
Speaker Change: We actually had a pretty strong pipeline for the year. So we don't really talk about bookings per se and give numbers on that but we've had two very strong quarters of bookings and and we do have a lot of large programs that we think will be announcing over the next quarter or two.
Speaker Change: So.
Speaker Change: The missile programs as well as some in the avionics space.
Speaker Change: And and then back half of the year, we're working on some really significant drone bookings and programs, which I think will be excited with the company.
Speaker Change: Yes.
Speaker Change: Okay. Thank you I'll get back in queue.
Speaker Change: Uh-huh.
Speaker Change: Okay.
Speaker Change: At this time there are no further questions I would now like to turn the call back over to Cameron for for closing remarks. Please go ahead.
Speaker Change: Okay.
Speaker Change: Well. Thank you operator, I appreciate you, helping us manage the call and I'm going to.
Speaker Change: I'd like to thank everybody for participating today and if there are no further questions.
Speaker Change: Please have a great day.
Speaker Change: You want to follow up after the call after you've kind of read the transcripts or you've had a chance to kind of go through the earnings release more detail feel free to contact us at IR at <unk> Dot com.
Speaker Change: And we will.
Speaker Change: Bonds and content. So thank you again.
Speaker Change: Okay.
Speaker Change: Ladies and gentlemen, this concludes today's call. Thank you all for joining and you may now disconnect.
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