M-tron Industries, Inc.

Good day, ladies and gentlemen, and welcome to the Emtron PTI third quarter earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's 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. If you would like to withdraw your question, press star one again. Thank you. On today's call, we will have Mike Ferentino, CEO, And James Tybee, CFO. I would now like to turn the call over to James. Please go ahead.

Thank you. Good morning, everyone, and thanks for joining our Q3 2023 earnings call. Please note that this call will be recorded, and we anticipate making the recording available on our website at www.mtronpti.com shortly after the call. We issued our 10Q last week, Thursday, reporting the results for our third fiscal quarter of 2023. Before getting underway, we're required to advise you and all participants should note that the following discussion should be taken in conjunction with the most recent financial statements and notes thereto contained within our 2022 10K, which has been filed 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 and Exchange Act of 1934. These forward-looking statements involve known and unknown risks and uncertainties, which are detailed in our filings with the SEC. Although the company believes that its forward-looking statements are based upon reasonable assumptions regarding its business and future market conditions, there can be no assurances that the company's actual results will not differ materially from any results expressed or implied by the company's forward-looking statements. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Readers are cautioned that any forward-looking statements have not guaranteed a future performance. With that, I'll now turn the call to Mike Tarantino, our CEO.

Thank you, James. Good morning, and thank you to our shareholders for your interest in the Emtron PTI and attending our Q3 2023 earnings call. The completion of the third quarter also marks the completion of our first year as a public company. As a brief reminder, Emtron PTI has been providing RF solutions to the marketplace since 1965. We are a global company with three manufacturing locations in the U.S. and India. With consistent investment in research and development, we have a robust product pipeline averaging over 260 new product introductions a year. Our customer base is growing with over 300 active customers today. We continue to focus on our core markets of defense and aerospace, avionics, and space. each of which continue to demonstrate significant tailwinds. Design wins in these markets tend to be very sticky and program life cycles are long. Let me now summarize for you where Emtron PGI stands for the third quarter 2023. Compared to prior year, revenue for the three months ended September 30th increased 29.4% to $10.9 million. and revenue for the nine months increased 31.2% to $30.4 million. The revenue increase for the quarter and year-to-date periods over the prior year numbers reflects strong defense product shipments. Gross margins were 42.8% for the three months compared to 32.4% for the prior year, and 39.7% for the nine months compared to 35.6% for the prior year. benefiting from the favorable product mix along with increased product volumes. Backlog was $50.3 million at September 30th compared to $46.2 million at the beginning of the year and $44.1 million at the end of the third quarter of 2022. Backlog increased during 2023 primarily due to an increase in defense product orders. The company reported operating income of $4.4 million for the nine months ended September 30th compared to operating income of $2 million for the prior year period. The increase reflects both higher revenue and higher margins impacted by favorable product mix as described earlier. For the nine months ended September 30th, engineering, selling, and administrative costs increased $1.5 million over the prior year, primarily as a result of $1.2 million of administrative cost increases, including public company costs of $735,000, which represent The incremental direct cost of being public company was no comparable amount being recorded within the prior year when results were presented on a standalone basis. Our investment in research and development increased 125,000 to 1.6 million for the nine months ended September 30th as compared to the prior year. Net income was 3.4 million for the nine months ended September 30th, 2023. Diluted net income per share for the nine months ended September 30th was $1.25 compared to 60 cents for the prior year period. Our adjusted EBITDA was 5.3 million for the nine months ended September 30th versus 2.9 million for the prior year period. Note that adjusted EBITDA was calculated on a standalone basis for the nine months ended September 30th, 2022. and does not include any adjustments for the potential impact from additional costs of being a publicly traded company. Finally, as we conclude, I would like to thank all of the 300 plus members of our team who have diligently worked to execute our plans, contributing greatly to these results. With a strong backlog and a robust pipeline, we believe we are well positioned for the continued organic growth. We are working hard to drive efficiencies throughout the organization by leveraging our India operation, making key investments in talent and equipment to improve yields and reduce cycle times. We are also working hard to extend our legacy of acquisitions with a focus on companies or cargoes that provide synergistic products, increased technical capabilities, and access to new and growing markets. I will now open the floor to questions. Operator, please open the call to any questions.