Q2 2026 M-Tron Industries Inc Earnings Call
Operator 3: Hello, everyone. Thank you for joining us, and welcome to the M-tron earnings call for Q2 2026. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Linda Biles, Executive Vice President of Finance. Please go ahead.
Operator: Hello, everyone. Thank you for joining us, and welcome to the M-tron earnings call for Q2 2026. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Linda Biles, Executive Vice President of Finance. Please go ahead.
Speaker #1: If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. I will now hand the conference over to Linda Biles, EVP of Finance.
Speaker #1: Please go ahead.
Speaker #3: Good morning, everyone. Thank you for joining our 2026 M-tron Q2 earnings call. Please note that this call will be recorded and we will make the recording available on our website www.mtron.com shortly after the call.
Linda M. Biles: Good morning, everyone. Thank you for joining our 2026 M-tron Q2 earnings call. Please note that this call will be recorded, and we will make the recording available on our website, www.mtron.com, shortly after the call. Yesterday afternoon, we released our earnings for the second fiscal quarter of 2026. 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 2025 10-K, which was filed on 26 March 2026 with the SEC. 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. These forward-looking statements contain known and unknown risks and uncertainties, which are detailed in our filings with the SEC.
Linda Biles: Good morning, everyone. Thank you for joining our 2026 M-tron Q2 earnings call. Please note that this call will be recorded, and we will make the recording available on our website, www.mtron.com, shortly after the call. Yesterday afternoon, we released our earnings for the second fiscal quarter of 2026. 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 2025 10-K, which was filed on 26 March 2026 with the SEC. 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. These forward-looking statements contain known and unknown risks and uncertainties, which are detailed in our filings with the SEC.
Speaker #3: Yesterday afternoon, we released our earnings for the second fiscal quarter of 2026. 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 2025 10-K, which was filed on March 26, 2026, with the SEC.
Speaker #3: 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 #3: These forward-looking statements contain known and unknown risks and uncertainties which are detailed in our filings with the SEC. Although the company believes that the forward-looking statements are based on 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.
Linda M. Biles: Although the company believes that the forward-looking statements are based on 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 the 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 CEO, Cameron Pforr.
Linda Biles: Although the company believes that the forward-looking statements are based on 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 the 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 CEO, Cameron Pforr.
Speaker #3: The company undertakes no obligations to publicly update or revise any forward-looking statement, whether it is the result of new information, future events, or otherwise.
Speaker #3: 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 CEO, Cameron Pforr.
Speaker #4: Thank you, Linda. And good morning, everyone. Thank you for attending our Q2 FY 2026 earnings call. We're pleased to discuss our strong first half results for the fiscal year 2026 and our outlook going forward.
Cameron Pforr: Thank you, Linda, and good morning, everyone. Thank you for attending our Q2 FY26 earnings call. We are pleased to discuss our strong H1 results for the fiscal year 2026 and our outlook going forward. 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 and electronic circuits. We are a global company with three manufacturing sites in the United States and India, and our primary markets include aerospace and defense, commercial avionics, space, and industrials. We are pleased to report that the company continued to perform well with continued strength in our 2026 Q2 sales, earnings, and booking results, and a growing backlog. Our revenues continue to be driven by our defense-related orders. In this quarter, we saw particular strong growth in avionics shipments.
Cameron Pforr: Thank you, Linda, and good morning, everyone. Thank you for attending our Q2 FY26 earnings call. We are pleased to discuss our strong H1 results for the fiscal year 2026 and our outlook going forward. 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 and electronic circuits. We are a global company with three manufacturing sites in the United States and India, and our primary markets include aerospace and defense, commercial avionics, space, and industrials. We are pleased to report that the company continued to perform well with continued strength in our 2026 Q2 sales, earnings, and booking results, and a growing backlog. Our revenues continue to be driven by our defense-related orders. In this quarter, we saw particular strong growth in avionics shipments.
Speaker #4: As a reminder, M-tron 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.
Speaker #4: We're a global company with three manufacturing sites in the United States, and in India. And our primary markets include aerospace and defense, commercial avionics, space, and industrials.
Speaker #4: We're pleased to report that the company continued to perform well, with continued strength in our Q2 2026 sales, earnings, and booking results, and a growing backlog.
Speaker #4: Our revenues continue to be driven by our defense-related orders and this quarter we saw a particular strong growth in avionics shipments. Our backlog continues to increase with strong growth over the past year in aerospace and defense and space orders.
Speaker #4: And we've now had three quarters in a row with very strong book-to-bill ratios. With consistent operating performance, we've been able to continue to make strategic investments in research and development, and continue to increase the market profile of the company and prime the pump for future growth.
Cameron Pforr: Our backlog continues to increase with strong growth over the past year in aerospace and defense and space orders, and we have now had three quarters in a row with very strong book-to-bill ratios. With consistent operating performance, we have been able to continue to make strategic investments in research and development and continue to increase the market profile of the company and prime the pump for future growth. Yesterday afternoon, we reported the following Q2 FY26 results. Total revenues for the second quarter were $15.1 million, a 13.8% increase over the $13.3 million of revenue in the same period last year. The revenue increased in the period primarily due to continued strong aerospace and defense program shipments and an increase in the quarter over the Q1 in both avionics and space shipments.
Cameron Pforr: Our backlog continues to increase with strong growth over the past year in aerospace and defense and space orders, and we have now had three quarters in a row with very strong book-to-bill ratios. With consistent operating performance, we have been able to continue to make strategic investments in research and development and continue to increase the market profile of the company and prime the pump for future growth. Yesterday afternoon, we reported the following Q2 FY26 results. Total revenues for the second quarter were $15.1 million, a 13.8% increase over the $13.3 million of revenue in the same period last year. The revenue increased in the period primarily due to continued strong aerospace and defense program shipments and an increase in the quarter over the Q1 in both avionics and space shipments.
Speaker #4: Yesterday afternoon, we reported the following Q2 FY 2026 results. Total revenues for Q2 were $15.1 million, a 13.8% increase over the $13.3 million of revenue in the same period last year.
Speaker #4: The revenue increased in the period primarily due to continued strong aerospace and defense program shipments, and an increase in the quarter over Q1 in both avionics and space shipments.
Speaker #4: Gross margins for Q2 2026 were 41.2% compared to 43.6% for Q2 2025. This number reflects approximately half a million dollars of non-cash stock-based compensation directly related to our 2025 annual bonus.
Cameron Pforr: Gross margins for Q2 2026 were 41.2% compared to 43.6% for Q2 2025. This number reflects approximately half a million dollars of non-cash stock-based compensation directly related to our 2025 annual bonus, a charge not expected to recur at comparable levels in future quarters. When you factor this into how you look at the margins, our margins were very steady quarter to quarter. Net income was $1.9 million, or $0.43 per diluted share for the three months ended 30 June 2026, compared with $1.6 million or $0.53 per diluted share for the three months ended 30 June 2025. The net income figure includes a $1.0 million non-cash stock compensation expense directly related to the accelerated vesting of stock-based 2025 annual bonus. This prior year period did not include such a charge for the 2024 annual bonus.
Cameron Pforr: Gross margins for Q2 2026 were 41.2% compared to 43.6% for Q2 2025. This number reflects approximately half a million dollars of non-cash stock-based compensation directly related to our 2025 annual bonus, a charge not expected to recur at comparable levels in future quarters. When you factor this into how you look at the margins, our margins were very steady quarter to quarter. Net income was $1.9 million, or $0.43 per diluted share for the three months ended 30 June 2026, compared with $1.6 million or $0.53 per diluted share for the three months ended 30 June 2025. The net income figure includes a $1.0 million non-cash stock compensation expense directly related to the accelerated vesting of stock-based 2025 annual bonus. This prior year period did not include such a charge for the 2024 annual bonus.
Speaker #4: A charge not expected to recur at comparable levels in future quarters. When you factor this into how you look at the margins, our margins were very steady quarter to quarter.
Speaker #4: Net income was $1.9 million or $43 cents per diluted share for the three months ended June 30, 2026, compared with $1.6 million or $53 cents per diluted share for the three months ended June 30, 2025.
Speaker #4: The net income figure includes a $1.0 million non-cash stock compensation expense directly related to the accelerated vesting of stock days 2025 annual bonus. This prior year period did not include such a charge for the 2024 annual bonus.
Speaker #4: And again, we do not expect this type of magnitude of expense to recur in the future periods. Even with net income increasing, we saw a decrease in earnings per share due to the increase in weighted shares outstanding, related to our rights offering that was completed in April of 2026.
Cameron Pforr: We do not expect this type and magnitude of expense to recur in the future periods. Even with net income increasing, we saw a decrease in earnings per share due to the increase in weighted shares outstanding related to our rights offering that was completed in April 2026. Adjusted EBITDA was $3.4 million for the three months ended 30 June 2026, compared with $2.4 million for the three months ended 30 June 2025. This 41.7% increase was primarily due to higher revenues, partially offset by an increase in engineering, selling, and administrative expense, which grew at a slower rate than revenue. Backlog increased 37.2% to $84 million as of 30 June 2026, compared with the $61.2 million of backlog as of 30 June 2025.
Cameron Pforr: We do not expect this type and magnitude of expense to recur in the future periods. Even with net income increasing, we saw a decrease in earnings per share due to the increase in weighted shares outstanding related to our rights offering that was completed in April 2026. Adjusted EBITDA was $3.4 million for the three months ended 30 June 2026, compared with $2.4 million for the three months ended 30 June 2025. This 41.7% increase was primarily due to higher revenues, partially offset by an increase in engineering, selling, and administrative expense, which grew at a slower rate than revenue. Backlog increased 37.2% to $84 million as of 30 June 2026, compared with the $61.2 million of backlog as of 30 June 2025.
Speaker #4: Adjusted EBITDA was $3.4 million for the three months ended June 30, 2026, compared with $2.4 million for the three months ended June 30, 2025.
Speaker #4: This 41.7% increase was primarily due to higher revenues, partially offset by an increase in engineering, selling, and administrative expense, which grew at a slower rate than revenue.
Speaker #4: Backlog increased 37.2% to $84 million as of June 30, 2026, compared with the $61.2 million of backlog as of June 30, 2025. The increase in backlog reflects continued broad demand for our products, including several large aerospace and defense program orders, as well as several large orders for new solutions for counter-drone and electronic warfare received during the past two quarters.
Cameron Pforr: The increase in backlog reflects continued broad demand for our products, including several large aerospace and defense program orders, several large orders for new solutions for counter-drone and electronic warfare received during the past two quarters, and an increase in space industry orders as well. We continue to execute well on our strategy of continually moving into more program business, which now makes up the vast majority of our aerospace and defense revenues. We have also had heavy order volume this spring in the counter-drone area where we are supplying oscillators for phased array radar being used for both mobile and stationary counter-drone solutions. These systems are being deployed for both military and border control applications. We have also had strong orders for electronic warfare, missile guidance systems, and repeat orders for tactical communication radios.
Cameron Pforr: The increase in backlog reflects continued broad demand for our products, including several large aerospace and defense program orders, several large orders for new solutions for counter-drone and electronic warfare received during the past two quarters, and an increase in space industry orders as well. We continue to execute well on our strategy of continually moving into more program business, which now makes up the vast majority of our aerospace and defense revenues. We have also had heavy order volume this spring in the counter-drone area where we are supplying oscillators for phased array radar being used for both mobile and stationary counter-drone solutions. These systems are being deployed for both military and border control applications. We have also had strong orders for electronic warfare, missile guidance systems, and repeat orders for tactical communication radios.
Speaker #4: And an increase in space industry orders as well. We continue to execute well on our strategy of continually moving more into program business.
Speaker #4: This now makes up the vast majority of our aerospace and defense revenues. We have also had heavy order volume this spring in the counter-drone area, where we're supplying oscillators for phased array radar being used in both mobile and stationary counter-drone solutions.
Speaker #4: These systems are being deployed for both military and border control applications. We've also had strong orders for electronic warfare missile guidance systems and repeat orders for tactical communication radios.
Speaker #4: We're also engaged with the defense primes on long-term supply agreements for many of these missile systems, for which they recently signed seven-year framework agreements.
Speaker #4: We are putting in longer-term bids for the current programs and are also now competing for some systems for which we were not the original supplier.
Cameron Pforr: We are also engaged with the defense primes on long-term supply agreements for many of these missile systems, for which they recently signed seven-year framework agreements. We are putting in longer-term bids for the current programs and are also now competing for some systems for which we were not the original supplier. We believe that our percent of content for the various systems will increase due to this process. These programs are being put out to bid part by part and program by program, so the visibility is slowly coming into focus. We now expect to see our first purchase orders from these increased volumes due to these agreements in probably Q1 2027, and that would be for 2028 production. We are beginning to get increased visibility now on the volumes required.
Cameron Pforr: We are also engaged with the defense primes on long-term supply agreements for many of these missile systems, for which they recently signed seven-year framework agreements. We are putting in longer-term bids for the current programs and are also now competing for some systems for which we were not the original supplier. We believe that our percent of content for the various systems will increase due to this process. These programs are being put out to bid part by part and program by program, so the visibility is slowly coming into focus. We now expect to see our first purchase orders from these increased volumes due to these agreements in probably Q1 2027, and that would be for 2028 production. We are beginning to get increased visibility now on the volumes required.
Speaker #4: We believe that our percent of content for the various systems will increase due to this process. Now, these programs are being put out to bid part by part and program by program.
Speaker #4: So, the visibility is slowly coming into focus. We now expect to see our first purchase orders from these increased volumes due to these agreements, probably in the first quarter of 2027.
Speaker #4: And that would be for 2028 production. And we're beginning to get increased visibility now on the volumes required. Meanwhile, we have strong growth in many of our current precision guide munition production orders.
Speaker #4: On many of these program design slots, we're a sole source provider. And we stand to reap many benefits of dispense defense spending in this area that we support continues to grow.
Cameron Pforr: Meanwhile, we have strong growth in many of our current precision-guided munition production orders. On many of these program design slots, we are a sole source provider, and we stand to reap many benefits of defense spending in this area that we support continues to grow. Some of you have asked also about the continued impact of tariffs. Q2 fiscal year 2025 was the first full quarter of impact to the tariffs. We remain impacted by tariffs across the majority of our products. However, it has been reduced slightly this year after the Supreme Court ruling. We saw a 1.1% impact on gross margins this past quarter compared to 1.25% a year ago in Q2 2025. Overall, we see demand for aerospace and defense products only increasing over the next several years, and 2026 being a very strong year for avionics and space orders and shipments.
Cameron Pforr: Meanwhile, we have strong growth in many of our current precision-guided munition production orders. On many of these program design slots, we are a sole source provider, and we stand to reap many benefits of defense spending in this area that we support continues to grow. Some of you have asked also about the continued impact of tariffs. Q2 fiscal year 2025 was the first full quarter of impact to the tariffs. We remain impacted by tariffs across the majority of our products. However, it has been reduced slightly this year after the Supreme Court ruling. We saw a 1.1% impact on gross margins this past quarter compared to 1.25% a year ago in Q2 2025. Overall, we see demand for aerospace and defense products only increasing over the next several years, and 2026 being a very strong year for avionics and space orders and shipments.
Speaker #4: Some of you have asked also about the continued impact of tariffs. Q2 fiscal year 2025 was the first year that we were you know, it was the first full quarter of impact to the tariffs.
Speaker #4: We remain impacted by tariffs across the majority of our products. However, it's been reduced slightly this year after the spring port ruling. We saw a 1.1% impact on gross margins this past quarter compared to 1.25% a year ago in Q2 2025.
Speaker #4: Overall, we see demand for aerospace and defense products only increasing over the next several years, with 2026 being a very strong year for avionics and space orders.
Speaker #4: And shipments. We believe that we will continue to grow at a slightly accelerated rate through '26 and '27, and we'll begin to see more significant impact to our 2028 revenues from the strategic reshuffling and prioritizing of certain military systems we're now seeing in the FY27 defense budget and also reconciliation requests.
Cameron Pforr: We believe that we will continue to grow at a slightly accelerated rate through 2026 and 2027, and we will begin to see more significant impact to our 2028 revenues from the strategic reshuffling and prioritizing of certain military systems we are now seeing in the FY27 defense budget and also reconciliation requests. As we more rapidly scale, we expect gross margins to initially decrease slightly as programs ramp and move to a full rate of production. But overall, earnings continue to increase as revenue should increase at a higher rate than operating expenses. We will continue to update the market as we learn more from our customers about the production volumes expectations on these 2027 and 2028 production orders and beyond. M-tron plays a critical role in defense of our nation by providing US-sourced and highly engineered components for the US knowledge and military programs.
Cameron Pforr: We believe that we will continue to grow at a slightly accelerated rate through 2026 and 2027, and we will begin to see more significant impact to our 2028 revenues from the strategic reshuffling and prioritizing of certain military systems we are now seeing in the FY27 defense budget and also reconciliation requests. As we more rapidly scale, we expect gross margins to initially decrease slightly as programs ramp and move to a full rate of production. But overall, earnings continue to increase as revenue should increase at a higher rate than operating expenses. We will continue to update the market as we learn more from our customers about the production volumes expectations on these 2027 and 2028 production orders and beyond. M-tron plays a critical role in defense of our nation by providing US-sourced and highly engineered components for the US knowledge and military programs.
Speaker #4: As we more rapidly scale, we expect gross margins to initially decrease slightly as programs ramp and move to a full rate of production. But overall, earnings continue to increase as revenues should increase at a higher rate than operating expenses.
Speaker #4: We will continue to update the market as we learn more from our customers about the production volumes expectations on these '27 and '28 production orders and beyond.
Speaker #4: M-Tron plays a critical role in the defense of our nation by providing US-sourced and highly engineered components for US and allied military programs.
Speaker #4: We continue to make significant investments in our ability to scale production, with much new equipment and automation coming online, and the development of innovative new solutions.
Cameron Pforr: We continue to make significant investments in our ability to scale production with much new equipment and automation coming online, and the development of innovative new solutions. These past two quarters, for example, we have received $12 million of new orders for 2026 and 2027 production for products that we just introduced to market a year ago and sold approximately $200,000 of in 2025. We have also strengthened our balance sheet to signal to our customers that we have market staying power. We have the ability to invest in our growth and a desire to be a strategic partner as they scale their businesses to meet unprecedented demand. We will also use this funding to add to our product portfolio and engineering talent pool through both acquisition and investments. During the quarter, for example, the company made an investment in an innovative dual-use synchronization and timing systems company, Skyline Instruments, LLC.
Cameron Pforr: We continue to make significant investments in our ability to scale production with much new equipment and automation coming online, and the development of innovative new solutions. These past two quarters, for example, we have received $12 million of new orders for 2026 and 2027 production for products that we just introduced to market a year ago and sold approximately $200,000 of in 2025. We have also strengthened our balance sheet to signal to our customers that we have market staying power.
Speaker #4: This past two quarters, for example, we've received $12 million in new orders for '26 and '27 production for products that we just introduced to the market a year ago and sold approximately 200,000 dollars of in 2025.
Speaker #4: We have also strengthened our balance sheet to signal to our customers that we have market staying power, we have the ability to invest in our growth, and a desire to be a strategic partner.
Speaker #4: As they scale their businesses to meet unprecedented demand, we will also use this funding to add to our product portfolio and engineering talent pool through both acquisition and investments.
Cameron Pforr: We have the ability to invest in our growth and a desire to be a strategic partner as they scale their businesses to meet unprecedented demand. We will also use this funding to add to our product portfolio and engineering talent pool through both acquisition and investments. During the quarter, for example, the company made an investment in an innovative dual-use synchronization and timing systems company, Skyline Instruments, LLC.
Speaker #4: During the quarter, for example, the company made an investment in an innovative dual-use synchronization and timing systems company, Skyline Instruments Corporation. Skyline is making significant advancements critical for the synchronization of RF sensor data and operations in GPS-denied or fragile environments.
Speaker #4: This is part of the company's effort to continue to innovate and to learn about future market opportunities in areas critical to our national defense.
Cameron Pforr: Skyline is making significant advancements critical for the synchronization of RF sensor data in operations in GPS-denied or fragile environments. This is part of the company's effort to continue to innovate and to learn about future market opportunities in areas critical to our national defense. Before I open the floor to questions, I wanted to mention that we will be presenting at the Moody Capital Solutions 2026 Disruptive Growth & Life Sciences Conference in early September in New York City and also participating at the Sidoti Small-Cap Virtual Conference later in September. Information for both of these events will be posted on our investor website. I also encourage you to follow us on LinkedIn as well as communicate the updates on our press releases on the website. Operator, thank you for your assistance today. Can you open the lines and allow the first questions?
Cameron Pforr: Skyline is making significant advancements critical for the synchronization of RF sensor data in operations in GPS-denied or fragile environments. This is part of the company's effort to continue to innovate and to learn about future market opportunities in areas critical to our national defense. Before I open the floor to questions, I wanted to mention that we will be presenting at the Moody Capital Solutions 2026 Disruptive Growth & Life Sciences Conference in early September in New York City and also participating at the Sidoti Small-Cap Virtual Conference later in September. Information for both of these events will be posted on our investor website. I also encourage you to follow us on LinkedIn as well as communicate the updates on our press releases on the website. Operator, thank you for your assistance today. Can you open the lines and allow the first questions?
Speaker #4: Before I open the floor to questions, I wanted to mention that we will be presenting at the Moody Capital Conference in early September in New York City.
Speaker #4: And also participating at the Sidoti Small Cap Virtual Conference later in September. Information for both of these events will be posted on our investor website.
Speaker #4: And I also encourage you to follow us on LinkedIn, as well as communicate the updates on our press releases on the website. And we operate—thank you for your assistance today.
Speaker #4: Can you open the lines and allow for the first questions?
Speaker #2: We will now begin the question-and-answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand.
Operator 3: We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of John Baehr with Ascend Wealth Advisors. Please go ahead, your line is now open.
Operator: We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of John Baehr with Ascend Wealth Advisors. Please go ahead, your line is now open.
Speaker #2: To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality.
Speaker #2: If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of John Baer.
Speaker #2: With Ascend Wealth Advisors, please go ahead. Your line is now open.
Speaker #3: Thank you. Good morning, Cameron. Question on your outlook on M&A. I know the rights offering, you know, bolstered your cash balance and so forth.
John Baehr: Thank you. Good morning, Cameron. Question on your outlook on M&A. I know the rights offering bolstered your cash balance and so forth. Just wondering if you can comment on that, what you see there potential.
John Baer: Thank you. Good morning, Cameron. Question on your outlook on M&A. I know the rights offering bolstered your cash balance and so forth. Just wondering if you can comment on that, what you see there potential.
Speaker #3: So just wondering if you can comment on that. What you see there potential. You know, working on some things and just wondering how that's coming along.
Speaker #4: Yes, we are. We have been talking to a number of companies. Since we've completed the rights offering, we've seen an increase in deal flow.
Cameron Pforr: I would be happy to.
Cameron Pforr: I would be happy to.
John Baehr: I know you people are working on some things, and just wondering how that is coming along.
John Baer: I know you people are working on some things, and just wondering how that is coming along.
Speaker #4: So, we now have more banks actively engaged in giving us ideas, which we appreciate. And we've been following up with some of those opportunities.
Cameron Pforr: Yeah, we are. We have been talking to a number of companies. Since we completed the rights offering, we have had an increase in deal flow. We now have more banks actively engaged in giving us ideas, which we appreciate. We have been following up with some of those opportunities, and we still hope to get a deal done this year. We are also starting to hire for our corporate development team, trying to make that a more formal process and a better resource in the company. We do anticipate accelerating that.
Cameron Pforr: Yeah, we are. We have been talking to a number of companies. Since we completed the rights offering, we have had an increase in deal flow. We now have more banks actively engaged in giving us ideas, which we appreciate. We have been following up with some of those opportunities, and we still hope to get a deal done this year. We are also starting to hire for our corporate development team, trying to make that a more formal process and a better resource in the company. We do anticipate accelerating that.
Speaker #4: And we hope—we still hope—to get a deal done this year. We're also starting to hire for our corporate development team, so we're trying to make that a more formal process and better resource in the company.
Speaker #4: So, we do anticipate accelerating that.
Speaker #3: And how much increase in bid order and order activity and so forth. So I'm assuming that your roof line and capability of keeping up with that is adequate at this point.
John Baehr: How much increase in bid order and order activity and so forth? I am assuming that your roof line and capability of keeping up with that is adequate at this point and maybe some of that rights offering money utilized for increased production.
John Baer: How much increase in bid order and order activity and so forth? I am assuming that your roof line and capability of keeping up with that is adequate at this point and maybe some of that rights offering money utilized for increased production.
Speaker #3: And maybe some of that rights offering money will be utilized for, you know, increased production?
Speaker #4: Mm-hmm. Yeah. I know. Great question, John. So we're actually we've had very strong bookings growth throughout this year. You know, the past three quarters have been very strong.
Speaker #4: And I would say that and it looks like it will continue to be strong. So right now, we're very focused on increasing our manufacturing capacity and kind of scalability.
Cameron Pforr: Mm-hmm. Yeah, great question, John. We have had very strong bookings growth throughout this year. The past three quarters have been very strong, and it looks like it will continue to be strong. Right now, we are very focused on increasing our manufacturing capacity and scalability, and we have made a number of investments and accelerated our investments earlier this year just to meet the needs of our customers. We are going to continue looking at that as well.
Cameron Pforr: Mm-hmm. Yeah, great question, John. We have had very strong bookings growth throughout this year. The past three quarters have been very strong, and it looks like it will continue to be strong. Right now, we are very focused on increasing our manufacturing capacity and scalability, and we have made a number of investments and accelerated our investments earlier this year just to meet the needs of our customers. We are going to continue looking at that as well.
Speaker #4: And we've made a number of investments to accelerate our growth earlier this year, just to meet the needs of our customers. So we're going to continue looking at that as well.
Speaker #3: Very good. Thanks. Thank you very much for taking my question.
Speaker #4: Mm-hmm. Thank you.
Speaker #2: Your next question comes from the line of Anya Sonderstorm with Sadote. Please go ahead. Your line is now open.
John Baehr: Very good. Thanks very much for taking my question.
John Baer: Very good. Thanks very much for taking my question.
Cameron Pforr: Mm-hmm. Thank you.
Cameron Pforr: Mm-hmm. Thank you.
Speaker #5: Hi, thank you for taking my question. Congratulations on the quarter. How much of the backlog do you expect to convert over the next 12 months?
Operator 3: Your next question comes from the line of Anja Soderstrom with Sidoti. Please go ahead. Your line is now open.
Operator: Your next question comes from the line of Anja Soderstrom with Sidoti. Please go ahead. Your line is now open.
Speaker #5: And has the timing of that conversion changed?
Anja Soderstrom: Hi, thank you for taking my questions and congrats on the quarter. How much of the backlog do you expect to convert over the next 12 months, and has the timing of that conversion changed?
Anja Soderstrom: Hi, thank you for taking my questions and congrats on the quarter. How much of the backlog do you expect to convert over the next 12 months, and has the timing of that conversion changed?
Speaker #4: Yeah. I would say so the backlogs are getting very strong, Anya. And you know, appreciate your question on this. We've had you know, three quarters in a row of a very good you know, bookings and the book-to-bill ratio has been you know, well above one.
Cameron Pforr: Yeah. The backlog's looking very strong, Anja, and appreciate your question on this. We've had three quarters in a row of very good bookings, and the book-to-bill ratio has been well above one. Right now, we have considerable backlog, not only for the next two quarters. We have more backlog than we actually currently anticipate producing in those two quarters, and we're trying to figure out how we can handle that. But also, the backlog goes out through 2028, and we have more than half of next year's production already in the backlog, and we're only halfway through the year, really.
Cameron Pforr: Yeah. The backlog's looking very strong, Anja, and appreciate your question on this. We've had three quarters in a row of very good bookings, and the book-to-bill ratio has been well above one. Right now, we have considerable backlog, not only for the next two quarters. We have more backlog than we actually currently anticipate producing in those two quarters, and we're trying to figure out how we can handle that. But also, the backlog goes out through 2028, and we have more than half of next year's production already in the backlog, and we're only halfway through the year, really.
Speaker #4: Right now, we have, you know, a considerable backlog not only for the next two quarters. We have, you know, more backlog than we actually currently anticipate producing in those two quarters.
Speaker #4: And we're trying to figure out how we can handle that. But also the backlog goes out through 2028. And we have you know, more than half of next year's production already in the backlog.
Speaker #4: And that's you know, we're only halfway through the year really.
Speaker #5: Okay, thank you. And you mentioned for the gross margin, you expect that to contract in the second half due to the ramping of new programs.
Speaker #5: But you also had an impact from the stock-based compensation for the second quarter. So, how should we think about the contraction there for the second half?
Anja Soderstrom: Okay. Thank you. You mentioned for the gross margin, you expect that to sort of contract in the H2 due to ramping on new programs. You also had an impact from the stock-based compensation for the Q2. How should we think about the contraction there for the H2?
Anja Soderstrom: Okay. Thank you. You mentioned for the gross margin, you expect that to sort of contract in the H2 due to ramping on new programs. You also had an impact from the stock-based compensation for the Q2. How should we think about the contraction there for the H2?
Speaker #4: Yeah. What we're faced with is really, really rapid expansion for several products that are relatively new to us. And so we are making investments to try to automate that production and to improve the margins there.
Cameron Pforr: Yeah. What we are faced is really, really rapid expansion for several products that are relatively new to us, so we are making investments to try to automate that production and to improve the margins there. We are making good progress, but as we continue to bring up several new programs with expectations of very rapid growth, there will be some growing pains there. So it is difficult to tell quarter by quarter what the margins will be, but I think with the tariffs continuing, we probably are going to see gross margins in the back half of the year somewhere in the maybe 41.5% to 43.5% range, maybe 44%, but certainly not any higher than that. I think realistically, we are probably in the middle of that range.
Cameron Pforr: Yeah. What we are faced is really, really rapid expansion for several products that are relatively new to us, so we are making investments to try to automate that production and to improve the margins there. We are making good progress, but as we continue to bring up several new programs with expectations of very rapid growth, there will be some growing pains there. So it is difficult to tell quarter by quarter what the margins will be, but I think with the tariffs continuing, we probably are going to see gross margins in the back half of the year somewhere in the maybe 41.5% to 43.5% range, maybe 44%, but certainly not any higher than that. I think realistically, we are probably in the middle of that range.
Speaker #4: We're making good progress, but as we, you know, continue to bring up several new programs, with expectations of, you know, very rapid growth, there will be some growing pains there.
Speaker #4: So I you know, it's difficult to tell quarter by quarter what the margins will be. But I think with the tariffs continuing we probably are going to see gross margins in the back half of the year somewhere in the you know, maybe 41 and a half to 43 and a half range.
Speaker #4: Maybe 44, but certainly not any higher than that. And I think, you know, realistically, we're probably in the middle of that range.
Speaker #5: And then as you ramp those programs into 2027, and have the stock-based compensation comparison this year and the tariffs, that should have a positive impact then on the margins for next year? Or how should we think about it?
Anja Soderstrom: Then as you ramp those programs into 2027 and have the stock-based compensation comparison this year and the tariffs, that should have a positive impact then on the margins for next year, or how should we think about-
Anja Soderstrom: Then as you ramp those programs into 2027 and have the stock-based compensation comparison this year and the tariffs, that should have a positive impact then on the margins for next year, or how should we think about-
Speaker #4: Yeah, I do see, as we get more comfortable with the production of certain products, the margins will go up a little bit.
Speaker #4: Just because of being more efficient. And so I do think that if you look at the larger programs, you know, the margins tend to go up over the first two or three quarters, you know, one to two quarters.
Cameron Pforr: Yeah, I do see as we get more comfortable with the production of certain products, the margins will go up a little bit just because of being more efficient. So I do think that if you look at the larger programs, the margins tend to go up over the first one to two quarters, and then they flatten out. After that, the benefits you can get really are from increased automation on a line. So I do think that the margins will be slightly better next year. But I think this year we have had such strong bookings in the H1 of the year with products with a very rapid ramp that will have probably a point impact on our gross margins.
Cameron Pforr: Yeah, I do see as we get more comfortable with the production of certain products, the margins will go up a little bit just because of being more efficient. So I do think that if you look at the larger programs, the margins tend to go up over the first one to two quarters, and then they flatten out. After that, the benefits you can get really are from increased automation on a line. So I do think that the margins will be slightly better next year. But I think this year we have had such strong bookings in the H1 of the year with products with a very rapid ramp that will have probably a point impact on our gross margins.
Speaker #4: And then they flatten out. After that, the benefits you can get really are from, you know, increased automation on a line. And so, I do think that the margins will be slightly better next year.
Speaker #4: But I think this year we've had such strong bookings in the first half of the year with products with a very rapid ramp that will have you know, probably a point impact on our gross margins.
Speaker #5: Okay, thank you. And then I'm just curious, with the Skyline influence investment, what benefits do you expect that to bring for the company in the near term?
Speaker #5: And how should we think about that kind of strategic investment?
Anja Soderstrom: Okay, thank you. I am just curious with the Skyline Instruments investment, what benefits do you expect that to bring for the company near term, and how should we think about that kind of strategic investment?
Anja Soderstrom: Okay, thank you. I am just curious with the Skyline Instruments investment, what benefits do you expect that to bring for the company near term, and how should we think about that kind of strategic investment?
Speaker #4: Sure. Yeah, several of them. First of all, they are a consumer of oscillators, so we hope to, over time, be a supplier there.
Speaker #4: Potentially. But also, we have good dialogue with the management team there, and we're really looking at their expertise to help us learn about how our products can play a role in areas where GPS is either fragile or denied.
Cameron Pforr: Sure. Yeah, several of them. First of all, they are a consumer of oscillators, so we hope to, over time, be a supplier there, potentially. Also, we have good dialogue with the management team there and are really looking at their expertise to help us learn about how our products can play a role in areas where GPS is either fragile or denied. So trying to understand how we adapt our product line to meet future needs.
Cameron Pforr: Sure. Yeah, several of them. First of all, they are a consumer of oscillators, so we hope to, over time, be a supplier there, potentially. Also, we have good dialogue with the management team there and are really looking at their expertise to help us learn about how our products can play a role in areas where GPS is either fragile or denied. So trying to understand how we adapt our product line to meet future needs.
Speaker #4: So, trying to understand how we adapt our product line to kind of meet, you know, future needs.
Speaker #5: Okay, thank you. That was all for me.
Speaker #4: Mm-hmm. Thank you. Appreciate it.
Speaker #2: There are no further questions at this time. We have reached the end of the Q&A session. I will now turn the call back to Cameron Pforr, CEO, for the closing remarks.
Anja Soderstrom: Okay, thank you. That was all for me.
Anja Soderstrom: Okay, thank you. That was all for me.
Cameron Pforr: Mm-hmm. Thank you. Appreciate it.
Cameron Pforr: Mm-hmm. Thank you. Appreciate it.
Operator 3: There are no further questions at this time. We have reached the end of the Q&A session. I will now turn the call back to Cameron Pforr, CEO, for the closing remarks. Please go ahead.
Operator: There are no further questions at this time. We have reached the end of the Q&A session. I will now turn the call back to Cameron Pforr, CEO, for the closing remarks. Please go ahead.
Speaker #2: Please go ahead.
Speaker #4: Okay, well, I'd like to thank everybody for participating in today's call and for your interest in us. If you have any additional questions, please contact us at ir@mtron.com.
Cameron Pforr: Well, I'd like to thank everybody for participating in today's call and your interest in M-tron. Have a great day, and please contact us at ir@mtron.com should you have any additional questions. We look forward to seeing you at some of the events in the next couple of months.
Cameron Pforr: Well, I'd like to thank everybody for participating in today's call and your interest in M-tron. Have a great day, and please contact us at ir@mtron.com should you have any additional questions. We look forward to seeing you at some of the events in the next couple of months.
Speaker #4: And we'll look forward to seeing you at some of the events in the next couple of months.
Speaker #2: This concludes today's call. Thank you for attending. You may now disconnect.
Operator 3: This concludes today's call. Thank you for attending. You may now disconnect. This event has now concluded. Thank you for joining M-tron Earnings Call for Q2 2026. The line will disconnect automatically.
Operator: This concludes today's call. Thank you for attending. You may now disconnect. This event has now concluded. Thank you for joining M-tron Earnings Call for Q2 2026. The line will disconnect automatically.
