M-tron Industries, Inc. (MPTI)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with the accompanying unaudited Condensed Consolidated Financial Statements, the notes thereto and the other unaudited financial data included in this Quarterly Report on Form 10-Q. The following discussion should also be read in conjunction with the audited Consolidated Financial Statements and the notes thereto, and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our Annual Report on Form 10-K, as filed with the Securities and Exchange Commission (the "SEC") on March 26, 2026. The terms the "Company," "Mtron," "MPTI," "we," "our" or "us" refer to M-tron Industries, Inc. and unless otherwise defined herein, capitalized terms used herein shall have the same meanings as set forth in our Condensed Consolidated Financial Statements and the notes thereto.

Unless otherwise stated, all dollar amounts are in thousands.

In addition to historical data, this discussion contains forward-looking statements about our business, operations and financial performance based on current expectations that involve risks, uncertainties and assumptions. Actual results may differ materially from those discussed in the forward-looking statements as a result of various factors. See the Cautionary Note Concerning Forward-Looking Statements included in this Quarterly Report on Form 10-Q.

Overview

Mtron is engaged in the designing, manufacturing and marketing of highly-engineered, high reliability frequency and spectrum control products used to control the frequency or timing of signals in electronic circuits in various applications. Mtron’s primary markets are aerospace & defense, avionics, industrials, and space.

The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of the Company and all of its majority-owned subsidiaries.

Trends and Uncertainties

We are not aware of any material trends or uncertainties, other than national economic conditions affecting our industry generally, that may reasonably be expected to have a material impact, favorable or unfavorable, on our revenues or income other than the one listed below and the risk factors disclosed in our Annual Report on Form 10-K, as filed with the SEC on March 26, 2026.

Tariffs

The current U.S. federal administration has imposed tariffs on certain products and materials entering the United States imported from other countries. Additionally, foreign governments have imposed retaliatory tariffs on products and materials exported from the United States. Following the Supreme Court’s February 2026 decision striking down certain tariffs, the Trump Administration announced its intention to invoke other laws to collect tariffs and announced new tariffs on imports from all countries. There remains substantial uncertainty regarding the duration of existing and newly announced tariffs, potential changes or pauses to such tariffs, tariff levels, and whether further additional tariffs or other retaliatory actions may be imposed, modified, or suspended, and the impacts of such actions on our business. To date, we have not seen an impact from tariffs on the demand for our products.

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Results of Operations

Three months ended June 30, 2026 compared to three months ended June 30, 2025

The following table presents our Condensed Consolidated Statements of Operations for the periods indicated:

Total Revenues

Total revenues increased $1,827, or 13.8%, from $13,282 for the three months ended June 30, 2025 to $15,109 for the three months ended June 30, 2026 primarily due to strong aerospace and defense, space, and avionics product shipments.

Total Costs and Expenses

Total costs and expenses increased $1,952, or 17.1%, from $11,438 for the three months ended June 30, 2025 to $13,390 for the three months ended June 30, 2026. The following items contributed to the overall increase:

Gross Margin

Gross margin (Revenues less Manufacturing cost of sales as a percentage of Revenues) decreased 240 basis points from 43.6% for the three months ended June 30, 2025 to 41.2% for the three months ended June 30, 2026 reflecting $470 of stock-based compensation related to 2025 bonuses and product mix partially offset by higher revenues and manufacturing efficiencies.

Total Other Income, Net

Total Other income, net increased $573, or 379.5%, from $151 for the three months ended June 30, 2025 to $724 for the three months ended June 30, 2026. The increase was primarily due to a $566, or 456.5%, increase in Interest income, net from $124 for the three months ended June 30, 2025 to $690 for the three months ended June 30, 2026 driven by higher balances invested in money market mutual funds.

Income Tax Expense

Income tax expense increased $138, or 31.7%, from $435 for the three months ended June 30, 2025 to $573 for the three months ended June 30, 2026 primarily due to the increase in Income before income taxes driven by the increase in revenues discussed above.

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Six months ended June 30, 2026 compared to six months ended June 30, 2025

The following table presents our Condensed Consolidated Statements of Operations for the periods indicated:

Total Revenues

Total revenues increased $3,781, or 14.5%, from $26,014 for the six months ended June 30, 2025 to $29,795 for the six months ended June 30, 2026 primarily due to strong aerospace and defense program and avionics shipments.

Total Costs and Expenses

Total costs and expenses increased $3,309, or 14.9%, from $22,157 for the six months ended June 30, 2025 to $25,466 for the six months ended June 30, 2026. The following items contributed to the overall increase:

Gross Margin

Gross margin (Revenues less Manufacturing cost of sales as a percentage of Revenues) remained flat at 43.0% for the six months ended June 30, 2026 and 2025.

Total Other Income (Expense), Net

Total Other income (expense), net increased $720, or 285.7%, from $252 for the six months ended June 30, 2025 to $972 for the six months ended June 30, 2026. The increase was primarily due to a $825, or 351.1%, increase in Interest income, net from $235 for the six months ended June 30, 2025 to $1,060 for the six months ended June 30, 2026 primarily due to higher balances invested in money market mutual funds.

The increase was partially offset by a $105, or 617.6%, decrease in Other income (expense), net from $17 for the six months ended June 30, 2025 to ($88) for the six months ended June 30, 2026 primarily due to unfavorable currency movements.

Income Tax Expense

Income tax expense increased $124, or 13.5%, from $919 for the six months ended June 30, 2025 to $1,043 for the six months ended June 30, 2026 primarily due to the increase in Income before income taxes driven by the increase in revenues discussed above.

Backlog

As of June 30, 2026, our order backlog was $83,968, an increase of $7,543, or 9.9%, from $76,425 as of December 31, 2025 and an increase of $22,769, or 37.2%, from $61,199 as of June 30, 2025. The increase in backlog from December 31, 2025 reflects the continued strength of our aerospace & defense and avionics customer orders.

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Non-GAAP Financial Measures

To supplement our Condensed Consolidated Financial Statements presented on a GAAP basis, the Company presents its financial condition and results of operations in the way it believes will be most meaningful and representative of its business results. Some of the measurements the Company uses are "Non-GAAP financial measures" under SEC rules and regulations. The non-GAAP financial measures the Company pre

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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis together with our audited consolidated financial statements and the accompanying notes. This discussion contains forward-looking statements, including statements regarding our expected financial position, business and financing plans. These statements involve risks and uncertainties. Our actual results could differ materially from the results described in or implied by these forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Report, particularly under the headings "Cautionary Statement Concerning Forward-Looking Statements" and "Risk Factors."

Unless otherwise stated, all dollar amounts are in thousands.

Overview

Mtron is engaged in the designing, manufacturing and marketing of highly-engineered, high reliability frequency and spectrum control products used to control the frequency or timing of signals in electronic circuits in various applications. Mtron’s primary markets are aerospace and defense, space, and avionics.

The accompanying consolidated financial statements include the accounts of the Company and all of its majority-owned subsidiaries.

For a discussion of the year ended December 31, 2024 compared to the year ended December 31, 2023, refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 27, 2025, which is available free of charge on the SEC's website at https://www.sec.gov and on our website at ir.mtron.com.

Trends and Uncertainties

We are not aware of any material trends or uncertainties, other than the global economic conditions affecting our industry generally, that may reasonably be expected to have a material impact, favorable or unfavorable, on our revenues or income other than those listed in Part I, Item 1A, Risk Factors, of this Annual Report on Form 10-K.

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Results of Operations

The following table presents our Consolidated Statements of Operations for the periods indicated:

2025 compared to 2024

Total Revenues

Total revenues increased $5,405, or 11.0%, from $49,012 in 2024 to $54,417 in 2025 primarily due to strong defense program product and solution shipments, as well as an increase in shipments in the avionics and industrials sectors.

Total Costs and Expenses

Total costs and expenses increased $4,508, or 11.4%, from $39,618 in 2024 to $44,126 in 2025 primarily due to:

The Company's total costs and expenses for 2024 included bonus expense of approximately $1.5 million, or 3.0% of revenues, which was not incurred in 2025.

Gross Margin

Gross margin (Revenues less Manufacturing cost of sales as a percentage of Revenues) decreased 180 basis points from 46.2% in 2024 to 44.4% in 2025 reflecting product mix and higher tariff-related costs.

Total Other Income, Net

Total other income, net increased $282, or 74.0%, from $381 in 2024 to $663 in 2025 primarily due to a $296 increase in Interest income, net from $243 in 2024 to $539 in 2025 driven by higher average balances invested in money market mutual funds.

Income Tax Expense

Income tax expense
increased
$368, or
17.2%, from
$2,139 in
2024 to
$2,507 in
2025 primarily due to the increase in Income before income taxes discussed above.

Backlog

As of December 31, 2025, our order backlog was $76,425, an increase of $29,186, or 61.8%, from $47,239 as of December 31, 2024. The increase in backlog from December 31, 2024 reflects the nature of a program centric business model, which can materially affect backlog based on the timing and size of these orders.

The backlog of unfilled orders includes amounts based on signed contracts and purchase orders, which are likely to be fulfilled substantially within the next 12 to 24 months. Order backlog is adjusted quarterly to reflect project cancellations, deferrals, revised project scope and cost. We expect to fill the vast majority of our order backlog as of December 31, 2025 during 2026 and 2027, but cannot provide assurances as to what portion of the order backlog will be fulfilled in any given year.

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Non-GAAP Financial Measures

To supplement our Consolidated Financial Statements presented on a U.S. GAAP basis, the Company presents its financial condition and results of operations in the way it believes will be most meaningful and representative of its business results. Some of the measurements the Company uses are "Non-GAAP financial measures" under SEC rules and regulations. The non-GAAP financial measures the Company presents are listed below and may not be comparable to similarly-named measures reported by other companies. The presentation of this additional information is not meant to be considered in isolation or as a substitute for net earnings or diluted earnings per share prepared in accordance with U.S. GAAP.

The Company uses the following operating performance measure because the Company believes it provides both management and investors with a more complete understanding of the underlying operational results and trends and our marketplace performance as well as a more accurate view of the Company's ability to generate profits:

Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization ("EBITDA") is derived by excluding the items set forth below from Income before income taxes. Excluded items include the following:

Reconciliation of GAAP Income Before Income Taxes to EBITDA and Non-GAAP Adjusted EBITDA

The following table presents a reconciliation of income before income taxes to Adjusted EBITDA, a non-GAAP measure:

Three months ended December 31, 2025 compared to three months ended December 31, 2024

Adjusted EBITDA increased $1,429 from $3,056 for the three months ended December 31, 2024 to $4,485 for the three months ended December 31, 2025. The increase was primarily due to higher revenues and lower engineering, selling and administrative expenses partially offset by lower gross margin discussed above.

Year ended 2025 compared to Year ended 2024

Adjusted EBITDA increased $1,441 from $11,141 in 2024 to $12,582 in 2025. The increase was primarily due to higher revenues discussed above, continued operating leverage, and lower incentive compensation partially offset by lower gross margin discussed above. Adjusted EBITDA in 2024 included bonus expense of approximately 3.0% of revenues, which was not incurred in 2025.

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Liquidity and Capital Resources

Overview

Liquidity refers to our ability to access sufficient sources of cash to meet the requirements of our operating, investing and financing activities.

Capital refers to our long-term financial resources available to support business operations and future growth.

Our ability to generate and maintain sufficient liquidity and capital depends on the profitability of the business, timing of cash flows, general economic conditions and access to the capital markets and the other sources of liquidity and capital described herein.

As of December 31, 2025 and 2024, Cash and cash equivalents were $20,891 and $12,641, respectively.

Cash Flow Activity

The following table presents the cash flow activity for the period indicated:

Operating Activities

Cash provided by operating activities was $10,659 in 2025 compared to $7,521 in 2024, an increase of $3,138 primarily due to the following:

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