M-tron Industries, Inc. (MPTI) August 2026 Conference Transcript

Hi, everyone. Thanks for being here. Next up is Emtron Industries. We have Cameron Forre, CEO, and Chris Nassikoff is also here, Vice President of Financial Reporting.

Thank you, Gene, and thank you all for coming after lunch. Really appreciate it. I think we're the only defense company here to this conference, so hopefully I'll give you a little bit of a window into what's happening in the defense sector. um we're also in some other major areas like commercial aviation and things like that which are doing very well so i'm happy to tell you about the company and answering any questions you have afterwards so we're we're first of all we're a um here's our safe harbor statement just i'm going to refer you to our 10k that was published or filed in march 26 of this year with the sec just for risk factors um we just did our q2 uh earnings announcement about two weeks ago so there's a updated presentation online from that or earnings call and uh in numbers there And we'll talk about a lot of that, obviously, in our slides today. But briefly, Emtron is – and it's an interesting story. It's a company that's been around a long time, but it's really been transformed quite significantly over the past four or five years. So we're a New York Stock Exchange listed company. The ticker is MPTI. We went public in 2022 through a spin-out transaction from LGL Group, which is a holding company that's been trading on the exchange, I think, since like the 1920s. So they've probably done 35 acquisitions over the years. We've performed very well. I think we came out at $11 a share. I haven't looked today, but usually I look many times a day. We're kind of hovering around the $80 mark right now per share. We went to as high as $102 about a month ago per share. And a lot of that's based on kind of what's happening in the defense sector and some of our wins there. And we're fairly tightly held. We have 4.3 million shares outstanding. And then lastly, very strong balance sheet. We have about $95 million of cash on the balance sheet, and we've raised about $70 million, I think, over the past six or seven months through a warrant offering and then later a rights offering. And then we also have very broad employee ownership. Pretty much every employee in the company owns stock and, you know, very aligned with where we're going as a company. So that's a little bit about us. I'd say, you know, why are we interesting? I think we're a very unique play in the U.S. defense market. So relatively, you know, small cap name, 70% of our revenues currently are from the defense sector. The next 20% are from commercial aviation. So we really focus on mission-critical applications of RF technologies. And we're a unique kind of American manufacturing capability in that area. So there aren't that many players that can service those markets from U.S. manufacturing and design standpoint, and we're one of the few there. We also have a very high percentage of our revenues now coming from missile content. So it's about 33% of our revenues, and there's obviously a lot in the news about missile replenishment and things like that, and this is one of the better ways to play that potentially. And I think that we're, you know, really a program, a platform right now for strong value creation, not only through our core business, our organic business, which has got some really great growth prospects, but also we have a very strong balance sheet, and we have, you know, potential to do some nice and many transactions. And that's definitely one of our goals. Just in terms of the investment highlights, strong revenue growth and cash generation. So we've been profitable for many years. We have, you know, roughly 21%, 22% EBITDA margins. adjusted EBITDA margins. Very good tailwinds in our growth sectors, our long-term end markets. So aerospace and defense is getting stronger over the past several years, but it's been strong for many years. And then also the commercial aviation business is in a good spot with a lot of a long-term backlog going out to 2036. I think there's 16,000 airframes on order from Boeing an Airbus, and we are on every single airframe that they produce, so our growth there is pretty linear with the industry. As I mentioned before, we're a very unique capability, which is important for the defense sector. There's much more interest than there was 10 years ago on U.S. manufacturing capabilities, and so that's something we're investing quite a bit in. We produce in Orlando, Florida, and also in South Dakota, in a town called Yankton. I've been there for many years and have a really great employee base and loyal base, and that enables us to supply a lot of the larger defense programs. And then I think from a financial perspective, you know, we had really good performance, and we're well positioned for growth. So we'll talk about that a little bit. In terms of what makes us unique in addition to that is that if you look at the RF sector, the RF sector has been around since the 60s. It was basically founded by, you know, really smart engineers who left larger companies because they had a better way of making a particular product, and that's how our company started as well. So Emtron today was two separate companies in the 60s and 70s. Each of them was founded by an IEEE fellow, so a really smart engineer, and they had each found a way to build a better mousetrap, essentially. And then over time, we came together in the 2004 timeframe, and it's made us really what's pretty unique in the industry. We have a very broad product set compared to others. We have competitors in the filter world. We have competitors in the oscillator world, but we don't have any competitors that do both that we really run into frequently. And also we've taken a different approach than some have over the years. So the market itself is very delineated. There are a lot of suppliers to people like us, people that do plating, painting, machining, testing, et cetera. We've taken more of a vertical approach to it, so we've been vertically integrating those capabilities. And that's helped us deliver in a shorter time frame to our customers and also at a more effective price point with a little bit higher margin. So we're kind of gaining more control over our own destiny there. So we've made a lot of investments in that area. We have a blue-chip customer base. We'll show you a number of the names later on the slide. But, you know, I think all 10 top defense primes globally are big customers of ours. We have over 70 customers, I think, have been customers for over 10 years. And we also have a lot of new companies that are really growing significantly that have become strategic over the past couple of years, including many of the new defense primes or neoprimes, I think they're called. And then we've had nice market performance. Here's the management team. So I joined two years ago as CFO. My background is I spent a long time in banking. I was at Deutsche Bank and Alex Brown before that. So I raised a lot of money for companies in the sector and also was active in M&A. But I guess originally, you know, my founding was at Bain, my grounding was at Bain. And then I ran, I've run three companies in the government and defense sector. This is my third. Linda Biles, who's our EVP of finance, is essentially managing all of our accounting teams. She's been at Emtron for 20 years and has a longer career just in manufacturing, so extremely experienced on that side. And then Bill Drafts, who's our president and general manager, is down in florida he's really managing that facility in our in our yanking plants and capabilities he comes out of the industry and started out in product management and is an engineer has a lot of expertise and not only the market focus but also in just the manufacturer processing so so really really good group the board is also very diverse people come out of either industry we've had several people from l3 or even one of the l3 founders is on the board and then also the investment community, you know, mostly in New York. I'm not going to spend too much time on this slide, but it does give you a feel for it. We've been very innovative since the beginning. So we started in 1965. We were one of the first developers of certain types of filters and oscillators at the time. We've been involved in the space industry since the late 60s. We came together in 2004, as I mentioned before, and, you know, that innovation continues. So we've had a very good year selling, for example, internally compensated oscillators this year. That was a product that we developed in the late teens, and I think we were the only ones that are doing it right now. And that's really created a great opportunity for us in the short term. But if you look at our revenue base, it's about 30% of the revenue each year comes from products that were developed for the past three or four years. And we continue to really emphasize that, and it gives us a lot of legs to continue to grow and stay very current. Here's our product portfolio, and I mentioned before this is pretty – very broad for our sector. A lot of companies in this space will do one particular type of filter or one oscillator, and they grow to $8 or $10 million of revenue, and they're content with that. We've taken a different approach. We have a broad family of products, and we also purchase products from other companies, which we integrate into modules and subsystems. And so we're trying to deliver more value to our customers and maintain a greater share of their bombs. And that's something we're going to continue to do as well, and that's the RF solutions business on the bottom. That's about 7% of revenue, but that's growing quite a bit. So our core strength is in crystal filters and oscillators. We have a lot of expertise in that area. I think we're considered probably one of the leading houses in each of those categories, and our customers are very, very satisfied with the kind of quality we deliver there. So we're really known for building extremely high-reliable products. And this I had mentioned before, but this just shows you kind of the rate of change that we're doing. So 30% of last year's revenue came from products developed since 2021. It'll be higher this year, as a matter of fact. So we've had a lot of bookings in the past three or four months for new products. So this will be one of our strongest years, I think, for this metric. But the ASPs continue to go up, and the content from new products continues to rise. Here are some of our main target markets. So defense is 70% of revenue. It's going to be growing over the next coming years. I think it will be kind of constant this year, but we do expect it to continue to grow. So the area – and then commercial aircraft is our second biggest market. That's 20 percent. And then the balance is made up of SATCOM and space applications as well as some smaller industrial markets. But really the growth long term is from aerospace and defense. And this year in particular, that's really been strong for radar and electronic warfare. But I think the longer trend term there is – we will continue to do a lot there. But the precision gun munitions has been an extremely kind of rich vein for us, and that's going to continue to grow. So I expect a lot of growth in that area, kind of in the out years and the 20s. And a lot of this has been driven by kind of the new Department of War, rewriting the rules of procurement, as well as just the rapid pace of technology change in the Defense Department and in warfare in general. Kind of a move towards smaller systems, autonomy, drones, standoff weapons, and then also lower-cost weapons potentially. So like some of the newer programs like for low-cost cruise missiles and things like that. And all these systems depend on really good sensor data, AI, the integration of information and data from all these sources, and control of electromagnetic spectrum. So jamming and EW and all are really critical. And these are all areas that we really have a lot to contribute to. So it's been a real boost to our business. The Department of War is really trying to take some advanced, move forward the ball in terms of how the government does procurement. It's a really slow process, as many of you know, in the Defense Department. It takes a long time to build up a good customer base there. We've already done that. We have 45 programs of record that we service. But they are trying to shorten that time cycle. And so you're seeing that a lot in the drone engagements. with Drone Domination, Replicator 1 and 2, and other programs that seek to put more money into the market, into contractors' hands to develop better products, you know, quicker. And we're definitely seeing the benefit of that. And I think the implications for suppliers like us is that we're seeing quicker cycle times, you know, with the neoprimes, and then we're seeing potentially much higher volumes and growth rates with some of our longer-term programs with the traditional primes.

Okay.

So one of the areas that people have a lot of interest in is what's happening on the missile side in terms of stockpile depletion. The best source I think out there other than a bunch of podcasts really is probably the CSIS, which is a think tank in Washington. They have a small team that just tracks this area, so munitions, and they've published a report in April. They had an update in August, and they're just talking really about what were the stockpiles like for some of these exquisite munitions, they call them, before the war with Iran and where are we now. And even before the war, I think we had roughly 2,300 Pac-3 Patriot interceptors. The Army had two, three months before that come out and said they need to have a stockpile of 14,000 just to kind of show you how short we really are. Well, now we're down to less than 1,000, so not in great shape there, and there really is an effort to try to figure out how do they boost that production. And in many of these programs, we had reduced the number or the volume that we were producing quite dramatically. Like I think in the Tomahawk area, we were – I think we developed maybe 70, 75 missiles last year, whereas 10, 15 years ago, we were building 500 a year. So we had really let the stockpile start to dwindle. This is creating a great pressure to increase production, and it should result in an increase in our backlog. Both Raytheon and Lockheed had signed frame agreements with the Department of War in February. As it turns out, those were great indicators of what they want to do, but they weren't funded by the budget currently. So there's a reconciliation bill that's been tied up in Congress. The Pentagon has presented a budget for FY27, which had a really significant increase in expenditures for missiles, taking it from $43 billion a year to about $82 billion a year, so roughly a doubling. But those have not been passed yet. So what we're seeing is that we're being asked by the big primes to bid on these projects. And we were on the majority, a slight majority of those programs, probably 60 percent of them. And we're seeing that we're in a very good position to repeat that business as well as win some new slots. So I think some other suppliers haven't been able to scale as well or haven't supplied things as consistently. And so I think there's a good opportunity for us to grow. Anyway, that's what I wanted to say about that. So I think there's a lot of interest in this. I think what we're hearing now is probably that the POs for this, the purchase orders, are not going to come out until the actual budget is authorized. And the consensus, I guess, in Washington is that the budget is not going to get approved until after the midterm elections. So this is probably something that's shifting out of 26, probably happening early in 27. And there's always a lag in the defense industry because all the large primes need to add capacity themselves before they consume more materials. So we think this is going to impact us and our business in 2028. That's when we'll see the big uptick if it happens. But as I said before, it is obviously dependent on budget approval. Some of the areas that we're really seeing strong growth this year, and this was a little bit of a surprise, was in the radar area. We were a company five years ago weaker in radar than we wanted to be. We don't do a lot with the Navy, and so we were trying to improve that. So we spent a lot of time, you know, interacting with primes and other radar and newer radar vendors, trying to get into that market, building, you know, showing our products, building prototypes, letting them test, spending a lot of time with our engineers, understanding their problems. And this has really started to pay off for us. So earlier this year, we had received about nine and a half million of orders for a new type of radar. And the application was counter drones. So it was a smaller radar that was much less expensive, uses a different technology than traditional phased array. And we've had a really great win, a really great partnership there, and that's scaling dramatically. I think we did $150K with the company before last year, and then this year we'll probably do $6 million in revenue with them. And that's continuing. It's expected to grow like 3X every year for the next couple of years. So that's one that's really interesting. Also, pretty much all the fire control radars are being redesigned to handle different types of targets, so whether it's hypersonics or whether it's drones. And so we're competing for a number of those systems, and we're making very good progress. So I think we're going to have another, hopefully, another win later this fall for one of the big Navy systems. And I think this will be a good area of growth for us for the next several years. The other area is electronic warfare. So we had a big win with one of the neoprimes for filters for that market as well, and that's becoming ever more – that's a really important market. This was with a U.S. company. We also work with a lot of the British companies, which are probably the leaders in this field in general. So we work with BAE and Cobham and others that are great at this. And then I wanted to touch on commercial airspace just because it's a very different play. So here we're on every Airbus and Boeing airframe that I know of, at least in the commercial aircraft. And we have essentially the same footprint in all those planes. So we're on the same electronic subsystems. And this just gives you a feel for kind of the breadth of our applications. So we started out doing communications. So there'll be filters and oscillators for communication from ground control to the pilots. Now we've got also in-flight connectivity, you know, internet on the planes. We do things like navigational radar but also collision avoidance radar. And then I think what surprises people, we do a lot of flight controls. So a plane basically has a network, a data network, where it's sending data and requests from the cockpit to engines. And so we're part of that information flow as well. And so I think this is one area where we're growing kind of linearly with the market. And I think it's more or less fully saturated with these vendors. I don't know of a lot of other design slots right now, so what we're trying to do in this space is get on more like regional jets, so smaller aircraft. Some of the key drift drivers we highlighted, armament, weapon system replenishment, you know, global conflicts don't appear to be going away by the world's, you know, considered riskier now than it was five, ten years ago. A lot of modernization, and we're front and center there. The airframe backlog is real. It's a little bit of a lumpier market because there is an inventory component to it that you don't see in some of the other markets. So even though in the long term we're going to grow the same rate as airframe deliveries, some years they'll purchase more as they increase their inventories and other years they'll burn through it. And then we are trying to have a bigger footprint in some new markets. So space is one of them we've been in for a long time. Golden Dome contracts are just starting to come through. We're more involved in the MEO and GEO. satellite orbits, so higher Earth orbit. And we don't do much LEO work, which is kind of where a lot of the investor interest is these days. But we do see this as also a good opportunity for us. And then there are some other markets like test and measurement and medical systems where we'd like to have a better role, so on the commercial side. And then lastly, I think on the growth driver side, we have a really strong engineering team and manufacturing capability. And we're trying to figure out basically ways that we can scale our manufacturing to kind of meet the need. And that's much more, there's much more pressure on that side, I think, than on the booking side right now.

So here's our customer base.

Just wanted you to kind of see some of the names. They're all kind of leaders in their field. Pretty broad. I think there's really not many people that we're missing here. There's some that have asked not to be on here, right? Some of the neoprimes. But it's a very good smattering of like the who's who in each of these industries. And we are constantly working on getting on either new programs within the space or finding new up-and-coming companies that are, you know, going to be changing kind of how the market does things. And we've had some good success there.

Here's our footprint.

So we, you know, Orlando and Yankton are our chief manufacturing areas. We also do a lot in New Delhi. And New Delhi is ITAR registered. So we do some assembly there. We don't do a complete assembly of products there. That's kind of part of the requirement. But it's been really helpful for us to keep our costs down. And then lastly, I'm going to just – there's avenues for growth. So we are really trying to leverage our customer relationships. So when a new program starts at a prime, they often ask other program managers, who's a great vendor for you? That's been a really good source of revenue for us. We're also doing a lot of marketing. We do a lot of market-driven R&D. And then lastly, M&A is a very, very important function for us, and we're currently hiring on the corporate development side trying to get some things over the goal line. So I think, you know, I think with that, just the financial metrics are up online. We put this presentation up there. Just in terms of Q2 results, I'll give you a little bit of that here. We had a very good quarter. We did about $15.1 million of revenue last quarter. It was roughly 15% growth over the prior years, you know, first half of the year. Gross profits was in the 43% range. We had, you know, a non-recurring, non-cash expense during the quarter. If you were to adjust that, then they would have taken it to about, what, 44.5%, I think, percent. So it's, you know, staying very even, essentially. Adjusted EBITDA margins grew quite a bit over the prior year's half, like up 22%. And then our backlog has been very strong, and it is increasing. So we've taken our backlog up 37% over the past year. I do expect it to continue to build, you know, slowly throughout the year. and potentially in next year we could have a very big uptick, kind of depending on what happens on the missile side. And these growth targets, I think, we're kind of at an inflection point, I think, really, frankly. So when I joined the company, the numbers I was putting out as a long-term revenue growth target was I wanted to get to 10% growth consistently. And it was a little bit of a stretch, to be honest with you. Now we're at the point where I think we can do 12% relatively easily. Probably – that will probably increase a little bit over the years, and we could see a big inflection in 28 just depending upon how this defense budget works out, and time will tell there. Our gross margins bounce around a little bit just based on product mix. In general, we try to target making 50 percent gross margin on products, but we have a range. Every product is different, and a lot of that is just based on our ability to produce efficiently. So now we're trying to target somewhere in the 43 to 46 range. And we're impacted by about a percent right now from tariffs. But I think that we're going to scale and our business – we won't be scaling our operating expenses with our revenues. So our adjusted EBITDA margins will slowly increase. So we're in this range right now. And the way for us to get improved margins still is really doing more automation on the factory floor, and then getting more leverage from our operating expense. So anyway, I thought we'd leave a little bit of time for questions if you have it, and happy to cover things in more detail if you – yeah, sure. Yeah. No, not – yeah, certainly. So that was a successful offering. We had – I think the basic subscription took up about 82%, 83% of the – so most people participated. There was an over-suscription allotment, I guess, so it was fully subscribed. We did it really to raise capital. We were at a relatively good point in terms of the share price, and we really wanted to put more cash on the balance sheet. When I joined, we had $10 million on the balance sheet. We are putting $6 million to $7 million on the balance sheet right now after CapEx, so a year, maybe up to $8 million. So we are increasing it slowly, but this gives us more flexibility in terms of doing M&A, as well as it really strengthens our posture with our customers. So all these guys are looking at making very long-term commitments to the government for some major programs, and they're looking at their suppliers and trying to understand who can invest with us. They're not going to invest in our growth, so we're well-positioned to do that. And so the two main drivers are we want to have a strong balance sheet so we're not going to spend it all. We are looking for M&A opportunities, mostly in the RF component space, but we would also look at subsystem companies as well as system companies that we're in our area and we have some expertise on. If you look at some of the targets, we've been looking mostly at companies that produce products that we're already purchasing and integrating, so front end of the radio components. and we'd rather own those companies and capture some more of that margin and have more expertise and have a broader product portfolio. So those are the areas we're primarily looking at. So just to give you some ideas, it's like power amplifiers, low noise amplifiers, wave guides, different types of filters that we don't make like tunable filters, antennas, things like that. So these are things that we tend to bundle and build into little modules for our clients. And so – and we're trying to basically be a more strategic supplier. And so this broadening our product stream out does that with our customers but also with our manufacturer reps. You know, we have a greater mind share.

Okay.

Yeah. Yeah. No, great question. The short answer is yes but not to as great a degree as many other industries. So I'd say, you know, we do buy metals from overseas. So we buy steel and aluminum. them. It's mostly coming from Korea, Germany, Canada. So that's impacted by tariffs, not necessarily by embargoes. We also buy quartz crystals overseas. So quartz crystals used to be produced in the United States. There's only one manufacturer of them in the US right now, and they're not really financially competitive, unfortunately. So we buy primarily from Japan. The three makers of crystals or quartz crystals, the people that grow them, are in China, Russia, and Japan. So there's a – yeah, obviously we're cut off from Russia. We'd probably buy crystals from other people that have bought them from China potentially. But I would say that's kind of probably the one area that we have the most limitation on. Yeah. But not an issue with magnets or things like that. Yeah. Okay. Good. Any other questions? Gene? Yeah. Good. Yeah. I think there's a lot of upside. So we've got some, you know, I think this will be a really interesting year looking forward. We'll see how the defense budget comes out. But I'm very confident that, you know, when push comes to shove, there'll be a lot of investment in some of these areas that we focus on. So I think we made, you know, these decisions were made before I joined the company, but they made some good bets.

Okay.

Thank you very much. Appreciate it.