M-tron Industries Q2 2026 Earnings Call Transcript

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August 13, 2026

Key Takeaways

  • Positive Sentiment: Revenue rose 13.8% to $15.1 million, while adjusted EBITDA increased 41.7% to $3.4 million, driven by strong aerospace and defense shipments, particularly in avionics.
  • Positive Sentiment: Backlog grew 37.2% year over year to $84 million, with three consecutive quarters of strong book-to-bill ratios and rising demand for counter-drone, electronic warfare, missile guidance, space, and avionics products.
  • Negative Sentiment: Gross margin fell to 41.2% from 43.6%, and management expects approximately 41.5%–43.5% margins in the second half as new programs ramp, tariffs persist, and production faces near-term growing pains.
  • Negative Sentiment: Net income increased to $1.9 million, but diluted EPS declined to $0.43 from $0.53 because the April 2026 rights offering increased the share count; the quarter also included $1.0 million of non-cash stock compensation expense.
  • Positive Sentiment: M-tron is expanding manufacturing capacity and automation, exploring acquisitions after its rights offering, and expects stronger growth through 2026–2027, with more substantial revenue benefits from defense-program reprioritization beginning in 2028.
AI Generated. May Contain Errors.
Earnings Conference Call
M-tron Industries Q2 2026
00:00 / 00:00

Transcript Sections

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Operator

I will now hand the conference over to Linda Biles, EVP of Finance. Please go ahead.

Linda Biles
EVP of Finance at M-tron

Good morning, everyone. Thank you for joining our 2026 M-tron 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 second 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 as contained within our 2025 10-K, which was filed on March 26, 2026, with the SEC.

Linda Biles
EVP of Finance at M-tron

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 SEC. 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 statements.

Linda Biles
EVP of Finance at M-tron

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 Pforr.

Cameron Pforr
CEO at M-tron

Thank you, Linda, and good morning, everyone. Thank you for attending our second quarter FY 2026 earnings call. We are pleased to discuss our strong first half results for the fiscal year 2026 and our outlook going forward. As a reminder, M-tron designs and manufactures highly engineered RF solutions, including electronic components and subassemblies used to control the frequency and timing of signals in electronic circuits.

Cameron Pforr
CEO at M-tron

We are 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 are 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 particular strong growth in avionics shipments.

Cameron Pforr
CEO at M-tron

Our backlog continues to increase with strong growth over the past year in aerospace and defense and space orders, and we've now had 3/4 in a row with very strong book-to-bill ratios. With consistent operating performance, we've 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 FY 2026 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.

Cameron Pforr
CEO at M-tron

The revenue increased 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 space shipments. 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 $500,000 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.

Cameron Pforr
CEO at M-tron

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 diluted share for the three months ended June 30th, 2026, compared with $1.6 million or $0.53 per diluted 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.

Cameron Pforr
CEO at M-tron

We do not expect this type and magnitude of expense to recur in the future periods. Even with net income increasing, we saw a decrease in earnings per share due to the increase in weighted shares outstanding related to our rights offering that was completed in April of 2026. Adjusted EBITDA was $3.4 million for the three months ended June 30th, 2026, compared with $2.4 million for the three months ended June 30, 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.

Cameron Pforr
CEO at M-tron

Backlog increased 37.2% to $84 million as of June 30th, 2026, 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 defense program orders, several large orders for new solutions for counter-drone and electronic warfare received during the past two quarters, and an increase in space industry orders as well. We continue to execute well on our strategy of continually moving into more program business, which now makes up the vast majority of our aerospace and defense revenues.

Cameron Pforr
CEO at M-tron

We have also had heavy order volume this spring in the counter-drone area, where we're supplying oscillators for 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.

Cameron Pforr
CEO at M-tron

We're also engaged with the defense primes on long-term supply agreements for many of these missile systems for which 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. 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.

Cameron Pforr
CEO at M-tron

We now expect to see our first purchase orders from these increased volumes due to these agreements in probably the first quarter of 2027, and that would be for 2028 production. We're beginning to get increased visibility now on the volumes required. Meanwhile, we have strong growth in many of our current precision-guided munition production orders. On many of these program design slots, we're a sole source provider, and we stand to reap many benefits of defense spending in this area that we support continues to grow.

Cameron Pforr
CEO at M-tron

Some of you have asked also about the continued impact of tariffs. Q2 fiscal year 2025 was the first full quarter of impact of the tariffs. We remain impacted by tariffs across the majority of our products. However, it's been reduced slightly this year after the Supreme Court ruling. We saw a 1.1% impact on gross margins this past quarter compared to 1.25% a year ago in Q2 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.

Cameron Pforr
CEO at M-tron

We believe that we will continue to grow at a slightly accelerated rate through 2026 and 2027, 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 2027 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.

Cameron Pforr
CEO at M-tron

We will continue to update the market as we learn more from our customers about the production volumes expectations on these 2027 and 2028 production orders and beyond. M-tron plays a critical role in defense of our nation by providing U.S.-sourced and highly engineered components for the U.S. and allied 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 2026 and 2027 production for products that we just introduced to market a year ago and sold approximately $200,000 of in 2025.

Cameron Pforr
CEO at M-tron

We have also strengthened our balance sheet to signal to our customers that we have market staying power. 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 acquisition and investments.

Cameron Pforr
CEO at M-tron

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 in 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.

Cameron Pforr
CEO at M-tron

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 Sidoti Small-Cap Virtual Conference later in September. Information for both of these events will be posted on our investor website. I also encourage you to follow us on LinkedIn as well as communicate the updates on our press releases on the website. Operator, thank you for your assistance today. Can you open the lines and allow the first question?

Operator

We will now begin the question-and-answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of John Bair with Ascend Wealth Advisors. Please go ahead, your line is now open.

John Bair
Analyst at Ascend Wealth Advisors

Thank you. Good morning, Cameron. Question on your outlook on M&A. I know the rights offering bolstered your cash balance and so forth. Just wondering if you can comment on that, what you see there potentially.

Cameron Pforr
CEO at M-tron

I'd be happy to.

John Bair
Analyst at Ascend Wealth Advisors

I know you said you were working on some things. Just wondering how that's coming along.

Cameron Pforr
CEO at M-tron

Yeah, we are. We have been talking to a number of companies. Since we completed the rights offering, we've had an increase in deal flow. We now have more banks actively engaged in giving us ideas, which we appreciate, and we've been following up with some of those opportunities. 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 a better resource in the company. We do anticipate accelerating that.

John Bair
Analyst at Ascend Wealth Advisors

How much increase in bid order and order activity and so forth? I'm assuming that your roof line and capability of keeping up with that is adequate at this point, and maybe some of that rights offering money utilized for increased production.

Cameron Pforr
CEO at M-tron

Mm-hmm. Yeah, great question, John. We've had very strong bookings growth throughout this year, and the past three quarters have been very strong. It looks like it'll continue to be strong. Right now, we're very focused on increasing our manufacturing capacity and scalability. We've made a number of investments, and accelerated our investments earlier this year just to meet the needs for our customers. We're going to continue looking at that as well.

John Bair
Analyst at Ascend Wealth Advisors

Very good. Thanks very much for taking my questions.

Cameron Pforr
CEO at M-tron

Mm-hmm. Thank you.

Operator

Your next question comes from the line of Anja Soderstrom with Sidoti. Please go ahead, your line is now open.

Anja Soderstrom
Anja Soderstrom
Analyst at Sidoti

Hi, thank you for taking my questions and congrats on the quarter. How much of the backlog do you expect to convert over the next 12 months, and has the timing of that conversion changed?

Cameron Pforr
CEO at M-tron

Yeah. So the backlogs are looking very strong, Anja, and appreciate your question on this. We've had three quarters in a row of very good bookings, and the book-to-bill ratio has been well above 1x. Right now, we have considerable backlog, not only for the next two quarters. We have more backlog than we actually currently anticipate producing in those two quarters, and we're trying to figure out how we can handle that. Also, the backlog goes out through 2028, and we have more than half of next year's production already in the backlog, and we're only halfway through the year, really.

Anja Soderstrom
Anja Soderstrom
Analyst at Sidoti

Okay. Thank you. You mentioned for the gross margin, you expect that to sort of contract in the second half due to ramping on new programs. But you also had an impact from the stock-based compensation for the second quarter. So how should we think about the contraction there for the second half?

Cameron Pforr
CEO at M-tron

Yeah. What we're faced is really rapid expansion for several products that are relatively new to us. So we are making investments to try to automate that production and to improve the margins there, and we're making good progress. But, as we continue to bring up several new programs with expectations of very rapid growth, there will be some growing pains there. So it's difficult to tell quarter-by-quarter what the margins will be, but I think with the tariffs continuing, we probably are going to see gross margins in the back half of the year somewhere in the maybe 41.5%-43.5% range, maybe 44%. But certainly not any higher than that. I think realistically, we're probably in the middle of that range.

Anja Soderstrom
Anja Soderstrom
Analyst at Sidoti

Then as you ramp those programs into 2027 and have the stock-based compensation comparison this year and the tariffs, that should have a positive impact then on the margins for next year, or how should we think about that?

Cameron Pforr
CEO at M-tron

Yeah, I do see as we get more comfortable with the production of certain products, the margins will go up a little bit just because of being more efficient. I do think that if you look at the larger programs, the margins tend to go up over the first one to two quarters, and then they flatten out. After that, the benefits you can get really are from increased automation on a line. 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 will have probably a point impact on our gross margins.

Anja Soderstrom
Anja Soderstrom
Analyst at Sidoti

Okay, thank you. I'm just curious with the Skyline Instruments Investment, what benefits do you expect that to bring for the company near term, and how should we think about that kind of strategic investment?

Cameron Pforr
CEO at M-tron

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

Anja Soderstrom
Anja Soderstrom
Analyst at Sidoti

Okay, thank you. That was all for me.

Cameron Pforr
CEO at M-tron

Thank you. Appreciate it.

Operator

There are no further questions at this time. We have reached the end of the Q&A session. I will now turn the call back to Cameron Pforr, CEO, for the closing remarks. Please go ahead.

Cameron Pforr
CEO at M-tron

Okay. Well, I'd like to thank everybody for participating in today's call and your interest in M-tron. Have a great day, and please contact us at ir.mtron.com should you have any additional questions. We look forward to seeing you at some of the events in the next couple of months.

Operator

This concludes today's call. Thank you for attending. You may now disconnect.

Analysts
    • Linda Biles
      EVP of Finance at M-tron
    • Cameron Pforr
      CEO at M-tron
    • John Bair
      Analyst at Ascend Wealth Advisors
    • Anja Soderstrom
      Analyst at Sidoti
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