M-tron Industries (MPTI) Q2 2026 earnings call transcript

Good morning, everyone. Thank you for joining our 2026 MTRON 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 2nd 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 is contained within our 2025 10K, which was filed on March 26, 2026 with the FCC.

This discussion may contain forward-looking statements within 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 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 statement.

The company undertakes no applications to publicly update or revise any forward-looking statement, whether it's the result of new information, future events, or otherwise.

We used our caution that any forward-looking statements are not guaranteed a future performance. With that, I will now turn the call over to our CEO, Cameron, for.

Thank you, Linda, and good morning, everyone. Thank you for attending our second quarter of July, 2026 earnings call. We're pleased to discuss our strong first-half results for the fiscal year 2026 and our outlook went forward. As a reminder, MTRON designs and manufacturers highly engineer RF solutions, including electronic components and sub-assemblies, used to control the frequency and timing of signals and electronic circuits.

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.

We're 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 a particular strong growth in avionics shipments.

Our backlog continues to increase the strong growth over the past year in aerospace and defense and space orders. And we've 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 FY2026 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 increase 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 spaceships.

Gross margins for the second quarter of 2026 were 41.2% compared to 43.6% for the second quarter in 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 deluded share, for the three months ended June 30th, 2026, compared with $1.6 million, or $0.53 per deluded share, for the three months ended June 30th, 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. 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 increase in weighted shares outstanding related to our rights offering that was completed in April of 2026.

Adjusted either was 3.4 million for the three months ended June 30th, 26th, compared with 2.4 million for the three months ended June 30th, 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 increase, 37.2% to $84 million as of June 30th, 26, compared with the $61.2 million of backlog as of June 30th, 2025.

The increase in backlog reflects continued broad demand for our products, including several large aerospace and defensive program orders, several large orders for new solutions for counter drone and electronic warfare. We see during this, the past two quarters, and an increase in space industry orders as well.

We continue to execute well on our strategy of continuing moving into the, to more program business, which now makes up the vast majority of our airspace and defense revenues.

We have also had heavy order volume this spring in the counter drone area, where we're supplying oscillators from 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've also had strong orders for electronic warfare, missile guidance systems, and repeat orders for tactical communication radios.

We're also engaged with the defense primes on long term supply agreements for many of these missile systems towards 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. Now, these programs are being put out to bid part by part and program by program. So the visibility is kind of slowly coming into focus. We now expect to see our first purchase orders from these increased volumes due to these agreements. And probably the first quarter of 2027, 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 diamond edition production orders. Many of these program design slots were 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 also about the continued impact of tariffs. Key two fiscal year 2025 was the first year that we were. It was the first full quarter of impact to the tariffs. We were remain impacted by tariffs across the majority of our products. However, it's been reduced slightly this year. This spring, spring port ruling. We saw a 1.1% impact on gross margins as past quarter compared to 1.25% a year ago in Q two 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. We believe that we will continue to grow in 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 FY 27 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 27 and 28 production orders and beyond.

Entron plays a critical role defense of our nation by providing US source and highly engineered components for the US knowledge and military programs. 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. 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 of in 2025. We've also strengthened our balance sheet to signal to our customers that are marked, we have a market staying powered. 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 in 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 Corporation. Skyline's making significant advancements critical to the synchronization of RF sensor data and 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 Conference in early September in New York City, and also participating at the Sedoti Small Cap Virtual Conference later in September.

Information for both of these events will be posted at our investor website. I also encourage you to follow us on LinkedIn as well as to get the updates on our press releases on the website.

We operate. Thank you for your assistance day. Can you open the lines and allow the first question?

Yeah, we are. We have been talking to a number of companies since we completed the rights offering. We've had kind of an increase in deal flow.

So we now have more banks actively engaged in giving us ideas, which we appreciate. And we've been following up to some of those opportunities. 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 trying to make that a more formal process and better resource in the company. So we do anticipate accelerating that.

Yeah, no, great question, John. So we're we're actually we've had very strong bookings growth throughout this year and the past three quarters have been very strong. 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. And we've made a number of investments and kind of accelerator investments earlier this year just to meet the needs of our customers. So we're going to continue looking at that as well.

Yeah, I would say. So the backlog's been very strong. 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 ratios been, you know, well above one. Right now we have, you know, considerable backlog, not only for the next two quarters. We have more backlog than we actually currently participate 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, you know, more than half of next year's production already in the backlog. And that's, you know, we're only halfway through the year, really.

Yeah, what we're, what we're faced 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 while making good progress. But as we, you know, continue to bring up several new programs with very, with expectations of, you know, very rapid growth.

There will be some growing pains there. 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 were going to see gross margins in the back half of the year. Or somewhere in the, you know, maybe 41 and a half to 43 and a half range, maybe 44, but, but certainly not any higher than that. I think, you know, realistically, we're probably in the middle of that range.

And then as you, as you ramped that ramp of programs into 2027 and had the stock based compensation. As you see, you know, as we, as we get more comfortable with the production of certain products, you know, the margin will go up a little bit 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 quarter, you know, two, one to two quarters, 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, 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 that will have, you know, probably a point impact on our gross margins.

Sure. Yeah, several of them. First of all, they are a consumer of oscillators. So we hope to over time, you know, be a supplier there, potentially. But also we have good dialogue with the management team there and really looking at their expertise to help us learn about how our products can play a role in areas where GPS is, you know, the fragile or denied. So trying to understand how we adapt our our block lines going to meet, you know, future needs.

Okay. Well, I'd like to thank everybody for just paying today's call and you're interested in John. Have a great day and please contact us at IRMTRON. com. Should you have any additional questions? And we look forward to seeing you at some of the events in the next couple of months.