M-tron Industries, Inc.

Good morning, everyone. Thank you for joining our 2025 Emtron Q3 earnings call. Please note that this call will be recorded and we will make the recording available on our investor relations website, ir.emtron.com, shortly after the call. 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 27, 2025, with the SEC. This discussion may contain forward-looking statements within the meaning of 27-A as of Securities Act of 1933, and Section 21 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 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 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 Fore.

Hey, thank 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. As a reminder, Emtron 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. 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. We're pleased to report that the company continued to perform well with continued strength in Intron Q3 sales and backlog. Our revenues continue to be driven by defense-related orders. However, we did see some growth this quarter in other areas as 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. 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. 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. 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 $0.63 per diluted share, compared with $2.3 million, or $0.81 per diluted share, with the three months ended September 30, 2024. 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. That was almost $1 million of expense, or a little bit more than $1 million of expense plus the P&L. the lower gross margins from the year prior, and also slightly higher OPEX expenses consistent with our growth. Adjusted EBITDA was $3.2 million for the three months ended September 30th, 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. Backlog ended October as of September 30, 2025, was $58.8 million, which was an increase of 48% from the $39.8 million for September 30, 2024, and was a 24.5% increase from the end of year, December 31, 2024, figure of $47.2 million. 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. On October 23rd, 2025, the company announced that the dividend of warrants that granted April 2025 achieved its early trigger condition and is exercisable through 5 p.m. on December 11th, 2025. Five warrants are exercisable to purchase one common share of stock. The strike price is $47.50 per share, and the warrants have an over-subscription feature, which allows warrant holders who have exercised all of their warrants to potentially seek and acquire additional warrants if the offering is under-subscribed. Warrant holders are encouraged to review the warrant agreement and the FAQ page on our investor relations website, which is ir.gov. We continue to execute on our strategy of continuing moving into more program business, which now makes up the vast majority of our aerospace and defense revenue. 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 and spend spending in the areas we support continue to grow. 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, just reflecting those wins and some of the programs moving toward 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. 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, so usually a helicopter or fighter aircraft. This compensation is done to reduce the drift of the timer. Traditionally, they were externally compensated, and a typical size or unit like this or module like this was 16 inches by 16 inches. We've developed an internally compensated oscillator, which is a little bit more than 2 inches by 2 inches, and performs the same function, and we're seeing dramatic demand for this line of products. This type of innovation was really what keeps Emtron 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 freedoms. Emtron 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. And having a U.S.-based advanced manufacturing capability to 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 Year-End Virtual Investor Conference later in December, and at the Oppenheimer Conference in February of 2026. Information for these events will be posted on our investor website, and I hope that many of you can join us for some of those presentations and meetings. Operator, can you please open up the line now and allow our first question?

Of course. Thank you. The floor is now open for questions. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you're called upon to ask a question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Your first question comes from mine of Anja Soderstorm of Sidoti. Your line is open.