Q3 2025 M-Tron Industries Inc Earnings Call
Speaker #1: Thank you for standing by. My name is Jael, and I will be your conference operator today. At this time, I would like to welcome everyone to the m-tron earnings call for the third quarter of 2025.
Speaker #1: All lines 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 time, simply press star, followed by the number one on your telephone keypad.
Speaker #1: If you would like to withdraw your question, press star one again. I would now like to turn the conference over to Linda Biles, EVP of Finance.
Speaker #1: You may
Speaker #1: begin. Good morning,
Speaker #2: everyone. Thank you for joining our 2025 m-tron Q3 earnings call. Please note that this call will be recorded and we will make the recording available on our Investor Relations website IR dot m-tron dot com shortly after the call.
Speaker #2: Yesterday afternoon, we released our earnings for the third 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 as contained within our 2024 10-K, which was filed on March 27th, 2025, with the SEC.
Speaker #2: This discussion may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
Speaker #2: These forward-looking statements contain known and unknown risks and uncertainties which are detailed in our filings within the SEC. 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 actually results will not differ materially from any result expressed or implied by the company's forward-looking statements.
Speaker #2: The company undertakes no obligations to publicly update or revise any forward-looking statement, whether as the results of new information, future events, or otherwise. Readers are cautioned that any forward-looking statements are not guarantees of future performance.
Speaker #2: With that, I will now turn the call over to our CEO, Cameron
Speaker #2: Pforr.
Speaker #3: Hey, thank
Speaker #3: you, Linda. Good morning, everyone. Thank you for attending our third quarter FY 2025 earnings call. We are pleased to discuss our strong results for the first nine months of the fiscal year, and our outlook going forward.
Speaker #3: As a reminder, m-tron designs and manufactures highly engineered RF solutions. Including electronic components and subassemblies, used to control the frequency and timing of signals on electronic circuits.
Speaker #3: We're a global company with three manufacturing sites in the United States and in India. The company's primary markets include aerospace and defense, commercial avionics, space and industrials.
Speaker #3: We're pleased to report that the company continued to perform well, with continued strength in Q3 sales and backlog. Our revenues continue to be driven by defense-related orders.
Speaker #3: However, well. With consistent operating performance, we have been able to continue to make strategic investments in research and development, and continue to improve the market profile of the company and prime the pump for future growth.
Speaker #3: Yesterday, we reported the following Q3 2025 results. The total revenues for the third quarter was $14.2 million, which was a 7.2% increase over the 13.2 million for the third quarter in 2024.
Speaker #3: This increase was primarily due to strong growth in avionics, space, and industrial product shipments. Gross margins for the third quarter were 44.3%, compared with the elevated 47.8% gross margins in Q3 2024.
Speaker #3: The decrease was primarily due to product mix, and also higher tariff-related costs, which we've discussed in the past. Net income for the quarter was $1.8 million, or 63 cents per diluted share, compared with 2.3 million or 81 cents per diluted share, for the three months ended September 30th, , 2024.
Speaker #3: This decrease was primarily due to a large reversal of a deferred tax asset, called for by the tax law changes in the Big Beautiful Bill.
Speaker #3: That was almost $1 million of expense, or a little bit more than $1 million expense flushed through the P&L. The lower gross margins from the year prior, and also slightly higher OpEx expenses consistent with our growth.
Speaker #3: Adjusted EBITDA was $3.2 million for the three months ended September 30, 2025, compared with $3.3 million for the prior year’s September quarter. The slight decrease was primarily due to lower gross margins and a relatively small investment in SG&E.
Speaker #3: Backlog ended as of September 30th, 2025, was $58.8 million. It was an increase of 48% from the $39.8 million for September 30th, 2024, and was a 24.5% increase from the end of year December 31st, 2024, figure of $47.2 million.
Speaker #3: The increase in backlog from December reflects robust demand across aerospace and defense programs, new program launches, and a recent surge in avionics and space orders.
Speaker #3: On October 23rd, 2025, the company announced that the dividend of warrants that grant in April 2025 achieved its early trigger condition, and is exercisable through 5:00 PM on December 11th, 2025.
Speaker #3: Five warrants are share of stock. The strike price is $47.50 per share, and the warrants have an oversubscription feature which allows warrant holders who have exercised all of their warrants to potentially seek and acquire additional warrants if the offering is undersubscribed.
Speaker #3: Warrant holders are encouraged to review the warrant agreement and the FAQ page on our investor relations website, which is ir.mtron.com. We continued 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.
Speaker #3: We are involved in over 40 programs of record, and many of these programs are sole source programs, where we stand to reap many benefits if defense spending in the areas we support continue to grow.
Speaker #3: Just to give you a little bit of a flavor for that, this year we've had some big wins in EW and radar systems. And that's an area where we expect to double our revenue next year.
Speaker #3: Just reflecting those wins and some of the programs moving to our higher rates of production. In addition, we've been asked to provide plans to dramatically increase our precision-guided munitions production for certain programs, as well as a new UAV program, which we're very excited about.
Speaker #3: We continue to innovate as evidenced by the high rate of revenue from newly designed products. To give you an example of some of this innovation, we and other vendors in this space produce compensated oscillators, which are used in airframes with a great amount of vibration.
Speaker #3: So usually a helicopter or fighter aircraft. This compensation is done to reduce the drift, the timer, traditionally they were externally compensated and a typical size for a unit like this or module like this was 16 inches by 16 inches.
Speaker #3: We've developed an internally compensated oscillator, which is a little bit more than two inches by two inches, and performs the same function, and we're seeing dramatic demand for this line of products.
Speaker #3: This type of innovation was really what keeps m-tron at the fore of the industry. I'd like to thank our dedicated customers for their continued business and partnership, and our loyal employees for supporting the company and its mission of serving the nation and its capability to defend freedom.
Speaker #3: m-tron plays a critical role in the defense of our nation by providing U.S. sourced highly engineered components for many U.S. and allied military programs.
Speaker #3: And having a U.S.-based advanced manufacturing capability support our joint forces is more important than ever. Before I open the floor to questions, I wanted to mention that we will be presenting at the Ideas Conference next week in Dallas, Texas, at the Sedoti Urin Virtual Investor Conference later in December.
Speaker #3: And at the Oppenheimer Conference in February of 2026. Information for these events will be posted on our investor website and I
Speaker #1: can you please Operator , open up the lines now and allow our first question . ?
Speaker #2: course Of . Thank you . The floor is now open for questions . If you have dialed in and would like to ask a question , please press Star One on your telephone keypad to raise your hand and join the queue .
Speaker #2: would like to If you withdraw your question , simply press star one again . 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 on mute .
Speaker #2: When asking question . Your first question comes from line of Anja Soderstrom of line is Sidoti . Your open .
Speaker #3: Thank you for Hi . taking my questions and congrats the on appointment . Cameron
Speaker #1: Thank you . .
Speaker #1: Anya
Speaker #3: noted .
Speaker #3: noted . the Yeah . research and increased development . Is there a specific you are area increasing ? It within ? And can you talk a little bit about what you're doing there ?
Speaker #1: No , it's Yeah . really bringing on board design engineers . We've been spending a lot of , you know , we're a filter and oscillator company , but every type of filter oscillator we build takes some different expertise levels , areas .
Speaker #1: So that's one area we're trying to hire . And this is this is really something that helps us drive the revenue because we're a very engineering focused company .
Speaker #1: And our sales teams really get our engineers engaged very early with our customers and prospects to work kind of on a co-developed solution.
Speaker #1: So it's really a hiring .
Speaker #3: Okay, thank you. And then also, you mentioned that industrials have started to pick up for you. What are your sort of main programs there within industrials?
Speaker #1: Yeah , I think the biggest in the area short term , you know , that's an area that we put in several markets .
Speaker #1: So, test and measurement is one of the bigger ones. Oil and gas, like downhole drilling. Telecom also fits into that area.
Speaker #1: But what's been driving of recent with some test and measurement revenues .
Speaker #3: And then you, okay. Also mentioned the recent surge in avionics. How are you seeing that spending in the fourth quarter?
Speaker #1: Right. So I kind of mentioned some earlier calls that we supply through several primes. Other really all the Airbus and Boeing.
Speaker #1: Aircraft builds and those are those companies have really started reengaging their backlogs . Are increasing really dramatically . And they're moving towards higher production rates .
Speaker #1: We did see orders for from Boeing , example , earlier in the year and maybe earlier than we expected . Frankly , just kind of given the events there and the inventory , we thought they had .
Speaker #1: And we did have a big order and a large contract for commercial aircraft earlier in the year . And starting to see we're orders against that .
Speaker #1: That contract .
Speaker #3: Okay . Thank you . And then lastly , we've been talking about tariffs what But can you do there to sort of combat that .
Speaker #1: Yeah that's a great question . And it's it's kind of an ever moving target as most of the people in the line probably figure .
Speaker #1: Now at this point in time , we really anticipate probably tariffs remaining in place for the next three years , unless the Supreme Court takes some action .
Speaker #1: There . So maybe something we have to live with at this point . It's costing us about 1 to 1.5% of revenue in terms of the impact on gross margins , there are a couple of things we're doing .
Speaker #1: So one is we're examining , you know , what the materials that we order , what has to be shipped into the country and what can be for certain parts we order , can they be shipped directly to customers ?
Speaker #1: So we are making some changes in that regard . We are actively working with our customers to enact a clause of the FA , which allows us to get tariff relief for defense products that are specifically for US forces .
Speaker #1: That doesn't apply to shipments to other NATO countries . And we've also passed along some tariff charges . And , you know , we think that's fair .
Speaker #1: And that's kind of part of our contract . But we are at this point in time looking , you know , to incorporate tariff charges in much of our pricing for new orders .
Speaker #1: So that's just a reality.
Speaker #3: Okay . And what like when would that become effective then ? How much . How much longer are you going to this .
Speaker #1: Yes . No I we're on the the far exemptions . That's just starting to come Just because of the way the program is set up .
Speaker #1: You need to do it on the front end when materials you're ordering for a future shipment . And so for all inventory that we had in stock , we couldn't we couldn't use that exemption .
Speaker #1: But for new orders , we are putting that into effect on pricing . That's something that we're we're having to factor into our pricing currently .
Speaker #3: Okay , great . I'll get back in queue .
Speaker #1: Thank you . Anya .
Speaker #2: Thank you . Anya . With no further , o we our next question comes from the line of Otto . Hang of Farnam Street .
Speaker #2: is
Speaker #4: Cameron, congrats on the appointment. Quick question on the Indiana microelectronics partnership that you announced. Can you...
Speaker #5: Yeah .
Speaker #4: How high the tunable . You know , products , if you will . And integrating their technology into or with with empty do you see that What products are we talking about .
Speaker #4: Can you what can you tell us about that partnership ?
Speaker #1: Yeah, actually, we’re very excited about it. It’s a company we’ve known for a long time, and we’ve been keen to work with them in the past.
Speaker #1: We're glad we've come to agreement about how to do it , how to support each other . They're a really great design team .
Speaker #1: They've won some very interesting contracts , primarily with the military , but other , other areas as well . And one of the issues , I think , for them was really how do they scale their business ?
Speaker #1: So we've really formed a partnership where we'll work with them on the sales and marketing of their designs , and then also working with them .
Speaker #1: Once we procure an order based on the manufacturer's ability to produce the product, we go to market and provide a quote for someone.
Speaker #1: Our engineers , we work with their engineers to make sure that what we're going to be delivering can be manufactured effectively . And they make a number of tunable filters .
Speaker #1: They're really kind of software tunable and the the processes are not too difficult . So we've spent time with their team really understanding think that's can stand up pretty quickly without a lot of CapEx on , on either party side .
Speaker #1: And we've already actually had some some sales wins . So we're we're excited about where that can go .
Speaker #4: Do you think this is something where these could turn into rather large orders ? You know , over time , you know , programs or is this going to be kind of smaller , smaller programs or smaller products , if you will , or runs ?
Speaker #4: Can you elaborate on that a little bit?
Speaker #1: we're very obviously early in the relationship , but we we actually think it can grow into some fairly large contracts . They have already made great headway with several customers of their own that would like to , to scale production .
Speaker #1: And think that just with the size manufacturer rep , Salesforce , we'll find a lot of other opportunities to work together .
Speaker #4: Excellent . 111 additional , if I can . Can you give us an update on connectivity partners have it doesn't appear we've made any investment there or what's happening in the in them terms of raising capital .
Speaker #4: Any update on what's happening with connectivity?
Speaker #1: There's no investment on Intron's part to date. I do know that they've been meeting with companies and identifying key targets.
Speaker #1: And so they're trying to really build up a backlog of opportunities to to prepare . There fundraising , marketing and and just in terms of standing up , the firm , but no , no current news in terms of how it impacts us .
Speaker #4: Okay . Thank you .
Speaker #2: Thank you . Otto , with no further questions . That concludes our Q&A session . I'll turn conference back over the to Mr. .
Speaker #2: for closing remarks For .
Speaker #1: Well Okay . , well thank you all for joining and I appreciate the questions . Anna and Otto , wishing the call everyone on a great day and I appreciate your interest in the firm .