M-Tron Industries Inc (MPTI) 2023 Q4 法說會逐字稿

Good morning. My name is Dennis and I will be your conference operator today. At this time, I would like to welcome everyone to the M-tron Industries, Inc., an investor call for fiscal 2023 results.

(Operator Instructions) I would now like to turn the conference over to James Tivy, Chief Financial Officer. Please go ahead.

Thank you, Dennis. Good morning, everyone, and thanks for joining our 2023 Q4 and annual earnings call. Please note that this call will be recorded and we anticipate making the recording available on our website shortly after the call. We have issued our 10-K yesterday evening reporting our fourth fiscal quarter of 2023 along with the annual results.

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 there, too, contained within our 2023 10-K, which has been filed with the SEC on March 25, 2024. This discussion may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1,933 and Section 21 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 are not guarantees of future performance.

With that, I'll now turn the call over to Mike Ferrantino, our CEO.

Thank you, James. Good morning and thank you to our shareholders for your interest in us and attending our annual earnings call. The completion of the fourth quarter also marks the completion of our first full calendar year as a public company.

As a brief reminder, MtronPTI has been providing RF solutions to the marketplace since 1965. We are a global company with three manufacturing locations in the US and India. With consistent investment in research and development, we have a robust product pipeline averaging 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 continues to demonstrate significant tailwinds. Design winds in these markets tend to be very sticky and program life cycles are long.

Let me now summarize for you where MtronPTI stands for the 2023 year. Total revenues for the year ended December 31, 2023, or $41.2 million, a 29.3% increase from the prior year, reflecting strong aerospace and defense product shipments. Gross margins improved to 40.7% compared to 35.6%, reflecting our increase in business volume and effects of product mix changes.

Our order backlog was $47.8 million, an increase of 3.6% compared to the prior year. In 2023, our book to bill ratio was 1.04. Our sales funnel continues to be strong as we continue with new product offerings while focusing on providing excellent technical solutions and customer service.

During the fourth quarter, all MtronPTI full-time employees below the executive level were issued a one-time stock option grant based on their respective years of service. The purpose of the grant was to reward employees for their past contribution to the company and serve to align employee interests with those of the stockholders. The company recorded $2 million of stock-based compensation expense related to this one-time grant during the fourth quarter, which will have no impact on our 2024 financial outlook or results.

The company reported an operating income of $4.3 million for 2023 compared to operating income of $2.9 million for the prior year. This increase reflects higher revenues and margins, effects from product mix changes, offset by increased engineering, selling, and administrative expenses. Excluding the $2 million one-time expense for stock options, engineering, selling, and administrative expenses would have been 25.4% of revenue versus 26.6% recorded for the prior year.

Our quarterly income before income taxes grew incremental each quarter during 2023, from $700,000 in Q1 to $2 million in Q3. Without the impact of the $2 million one-time expense related to stock options grants, we would have recorded $2.1 million income before taxes for the fourth quarter of 2023.

Net income was $3.5 million for the year ending December 31 compared to $1.8 million for the prior year. Diluted income per share was $1.28 versus $0.67 per share for the prior year.

Adjusted EBITDA, a non-GAAP measure, was $7.7 million for the 2023 year versus $4 million for the prior year, a portion of which was reported on a standalone basis. Note that adjusted EBITDA does not include any adjustments for the potential impact from the additional cost of being a publicly traded company. Management calculated the incremental direct cost of being a public company, which do not have any comparable amounts in the prior year when results were presented partially on a standalone basis at $107,000 and $842,000 for the quarter and year ended December 31, 2023, respectively.

In conclusion, with a strong backlog and a robust pipeline, we believe we are well positioned for continued organic growth. We are working diligently to drive efficiencies throughout the organization by leveraging our India operation while making key investments in talent and equipment to improve yields and reduce cycle times. We're also working hard on potential acquisitions with a focus on companies or carveouts that provide synergistic products, increased technical capabilities, and or access to new and growing markets.

As we conclude, I would like to thank our dedicated customers for their continued orders in support of our products along with our team of worldwide employees and representatives who continue to execute diligently on our plans for growth, each of whom are ultimately responsible for providing our shareholders with excellent financial results.

I'll now open the floor to questions. Operator, please open the call to any questions.

(Operator Instructions) Anja Soderstrom, Sidoti.

Hi and thank you for taking my questions, and congratulations on the phenomenal year. I'm curious for the fourth quarter for the revenue and backlog, we saw some sort of a sequential decline there. Is there any seasonality there or any lumpiness or anything that we should be aware of and how should we think about it going forward?

Yeah, Anja, thank you for the question. The fourth-quarter revenue numbers had a little bit of seasonality built into them, but in general, it really just reflected timing of customer requests. I think, looking forward, we continue to strive for quarter-over-quarter growth, especially on an annualized basis, and we'll continue to do that.

Okay, thank you. And in terms of the gross margin, you've been helped there by the higher revenue but also by product mix. Is that product mix contain the room for improvement there or is this the sort of new normal gross margin here within that expect -- continue to expand or should we see that continue to expand or is this sort of the level we can expect it to be at or is there going to be lumpiness there as well?

Sure, thank you, Anja. In general, I think we expect to see continued gross marginal improvements, not only from the expansion of new product revenue, which is driving quite a bit of it as well as we continue to focus on efficiencies within the organization.

Okay, thank you. And then in terms of CapEx then, that was a bit elevated. What -- how should we think about that going forward and what are you sending it at?

So in general, our CapEx budget is really being spent on two primary things: increasing capacity as well as increasing our capabilities as we bring new products to market. We are requiring additional capabilities both on the testing side of things as well as on the manufacturing side of things. In general, our target is in that 2.5% of revenue range.

Okay. And in terms of the capacity, how much more capacity do you have to support the expected growth?

So certainly, in the foreseeable future, we have adequate capacity both in terms of our footprints as well as in terms of the equipment we have. We are not running multiple shifts so we have room to expand in that aspect as well.

Okay, thank you. That was all for me from that. I'll get back in queue.

Thank you, Anja.

(Operator Instructions) Jordan Kimmel, MagnetInvesting Insights.

Yeah, hi, good morning, and this is Jordan, and I just had a quick question. The thing I'm trying to get a handle on is the product mix and it seems, based on revenue, you have so many products. You're talking about even new products and I'm just trying to get an idea if there's a pie chart or so -- what is the real product mix? What's the biggest products and -- it just seems like an enormous amount of things on your website that you sell based on the revenue.

Yeah, sure, Jordan. Thank you for the question. In general, we can break our product into primary categories: Spectrum Control, Frequency Control, and then Resonators and Integrated Products. So Spectrum Control would represent about 50% of our revenue. Frequency Control is about 30%. And Resonators and Integrated Products is about 20% of revenue. Does that answer your question?

I mean, those are three big categories. When you go on the site and you look -- try to get a handle on it, it seems like -- I think of Home Depot almost in the amount of SKUs and the impressive revenue growth is -- I'm really intrigued by the company, but it just seems like, I can't even imagine how much of each one you sell or what this actually looks like in terms of -- how can you have that many products?

Right, so to try to give a little more color to that, so a large portion of what we sell are what I would call slight variations on core products. So as an example, if you take a look at an OCXO, one given OCXO, which would have a set of capabilities, what could have maybe 50 different SKUs where it's a slight variation in frequency for a specific end used by a specific end customer but all being built on the same court package.

Okay, and continued success, I think you're in the right industry, and I was a drop surprised that the revenue growth wasn't even higher, but congratulations on the corner and continued success.

Well, thank you very much, Jordan.

(Operator Instructions) And at this time, there appear to be no further questions. I will turn the call back over to Mike for any closing remarks.

All right, thank you. I guess I would just like to thank everybody for their interest in MtronPTI. We look forward to really executing again in 2024 on your behalf. And, everybody, please have a great day.

This concludes today's conference call. Thank you all for participating. You may now disconnect.