M-tron Industries(MPTI) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics - Total revenues for Q2 2024 were $11.8 million, a 16.4$10.14 million in Q2 2023 and a 67.2% increase from $7.06 million in Q2 2022 [6] - Gross margins for Q2 2024 were 46.6$1.75 million or $0.63 per diluted share, a 36.6$1.27 million in Q2 2023 and a 258% increase from $486,000 in Q2 2022 [6] - Adjusted EBITDA for Q2 2024 increased 30.7$2.52 million compared to $1.93 million in Q2 2023 and$841,000 in Q2 2022 [7] - Backlog as of June 30, 2024, was $45.3 million, down from$47.8 million at the end of 2023 and $51.5 million at the end of Q2 2023 [7] Business Line Data and Key Metrics - The company's growth is driven by strong defense program shipments, which have contributed to eight consecutive quarters of sequential growth [6] - The company is focusing on space and satellite, radar applications, and electronic warfare, with new products like the e-Vibe series OCXOs and Planar Filter Product Line [9] Market Data and Key Metrics - The aerospace and defense market remains strong, with commercial avionics performing well and space business gaining traction in design wins [13] - The company has good visibility for the remaining two quarters of 2024, with expected revenues of$46 million to $48 million and an end-of-year backlog of$49 million to $50 million [8] Company Strategy and Industry Competition - The company is executing a strategy of organic growth, focusing on core markets such as aerospace and defense, commercial avionics, and space [5] - The company is expanding its acquisition bandwidth to include undervalued companies both within and outside its subsector to drive top and bottom-line growth [9] Management Commentary on Operating Environment and Future Outlook - The company raised its 2024 revenue outlook to$46 million to $48 million, up from the previous range of$43 million to $45 million, due to strong defense-related sales and production shipments [8] - Management expects EBITDA margins to remain in the 19% to 21% range for the remainder of 2024 [8] Other Important Information - The company has three manufacturing locations in the US and India and has been a standalone public company since October 2022 [5] - The company is investing in research and development, which has led to higher engineering, selling, and administrative expenses [7] Q&A Session Summary Question: Gross Margin Improvement Potential - Gross margins are dependent on product mix, but there is room for improvement, with new products targeting margins in the 50% range [11] Question: M&A Environment - The M&A environment remains challenging, but the company is looking for synergistic opportunities within the RF chain [12] Question: End Market Demand - Aerospace and defense, commercial avionics, and space are strong markets, with solid tailwinds across all core markets [13] Question: Component Availability - The supply chain has stabilized, and component availability has not been a significant challenge in 2024 [14] Question: Avionics vs. Aerospace and Defense - The company separates commercial avionics from defense-related business, with aerospace and defense encompassing all defense-related activities [16] Question: M&A Integration - The company has capacity in its facilities and would consider integrating acquired companies into existing production sites, particularly in India for labor-intensive manufacturing [17] Question: Sole Source vs. Dual Source - The company has a mix of single and dual-source arrangements, with roughly half of revenues in defense and commercial aviation coming from each [19]