Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

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 and Combined 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 27, 2025. 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 27, 2025.

Tariffs

During the nine months ended September 30, 2025, the current U.S. federal administration imposed tariffs on certain products and materials imported into the United States from its trading partners. Additionally, foreign governments have imposed retaliatory tariffs on products and materials exported from the United States. These actions have resulted in market volatility and uncertainty regarding the ultimate effect of the tariffs on global economic conditions, and could further impact the global market for defense, avionics, and other commercial goods. The increase in tariffs have caused an increase in Manufacturing cost of sales, but based on preliminary analysis, we do not anticipate that the tariffs will have a material impact on our operations. The Company is pursuing various avenues to reduce the potential impact, including seeking exemptions and evaluating alternative sources of materials. Based on current conditions, tariffs incurred to date have not had a material impact on our results, but we will continue to monitor developments and assess potential implications as trade policies evolve.

Results of Operations

Three months ended September 30, 2025 compared to three months ended September 30, 2024

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

		Three Months Ended September 30,
(in thousands)		2025				2024				$ Change				% Change
Revenues		$	14,170			$	13,214			$	956				7.2	%
Costs and expenses:
Manufacturing cost of sales			7,891				6,904				987				14.3	%
Engineering, selling and administrative			3,729				3,389				340				10.0	%
Total costs and expenses			11,620				10,293				1,327				12.9	%
Operating income			2,550				2,921				(371	)			-12.7	%
Other income:
Interest income, net			143				63				80				127.0	%
Other income, net			70				24				46				191.7	%
Total other income, net			213				87				126				144.8	%
Income before income taxes			2,763				3,008				(245	)			-8.1	%
Income tax expense			931				741				190				25.6	%
Net income		$	1,832			$	2,267			$	(435	)			-19.2	%

Total Revenues

Total revenues increased $956, or 7.2%, from $13,214 for the three months ended September 30, 2024 to $14,170 for the three months ended September 30, 2025 primarily due to strong growth in avionics, space, and industrials product shipments.

Total Costs and Expenses

Total costs and expenses increased $1,327, or 12.9%, from $10,293 for the three months ended September 30, 2024 to $11,620 for the three months ended September 30, 2025. The following items contributed to the overall increase:

•

a $987, or 14.3%, increase in Manufacturing cost of sales from $6,904 for the three months ended September 30, 2024 to $7,891 for the three months ended September 30, 2025 primarily due to the increase in production of several new products, which result in higher initial manufacturing costs, as well as the impact of tariffs; and

•

a $340, or 10.0%, increase in Engineering, selling and administrative from $3,389 for the three months ended September 30, 2024 to $3,729 for the three months ended September 30, 2025 driven by higher research and development investment; higher sales commissions consistent with the increase in revenues; higher stock-based compensation; and an increase in administrative and corporate expenses consistent with the overall growth in the business.

Gross Margin

Gross margin (Revenues less Manufacturing cost of sales as a percentage of Revenues) decreased 350 basis points from 47.8% for the three months ended September 30, 2024 to 44.3% for the three months ended September 30, 2025 reflecting product mix and higher tariff-related costs.

Total Other Income, Net

Total Other income, net increased $126, or 144.8%, from $87 for the three months ended September 30, 2024 to $213 for the three months ended September 30, 2025. The following items contributed to the overall increase:

•

a $80, or 127.0%, increase in Interest income, net from $63 for the three months ended September 30, 2024 to $143 for the three months ended September 30, 2025 from higher interest income earned on investments in money market mutual fund; and

•

a $46, or 191.7%, increase in Other income, net from $24 for the three months ended September 30, 2024 to $70 for the three months ended September 30, 2025 primarily due to a gain on the disposal of a fixed asset.

Income Tax Expense

Income tax expense increased $190, or 25.6%, from $741 for the three months ended September 30, 2024 to $931 for the three months ended September 30, 2025 primarily due to a one-time adjustment to reverse previously recorded deferred tax assets associated with capitalized research and development expenditures related to the enactment of the One Big Beautiful Bill Act ("OBBBA") partially offset by the decrease in Income before income taxes.

Nine months ended September 30, 2025 compared to nine months ended September 30, 2024

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

		Nine Months Ended September 30,
(in thousands)		2025				2024				$ Change				% Change
Revenues		$	40,184			$	36,207			$	3,977				11.0	%
Costs and expenses:
Manufacturing cost of sales			22,707				19,617				3,090				15.8	%
Engineering, selling and administrative			11,070				9,773				1,297				13.3	%
Total costs and expenses			33,777				29,390				4,387				14.9	%
Operating income			6,407				6,817				(410	)			-6.0	%
Other income:
Interest income, net			378				139				239				171.9	%
Other income, net			87				61				26				42.6	%
Total other income, net			465				200				265				132.5	%
Income before income taxes			6,872				7,017				(145	)			-2.1	%
Income tax expense			1,850				1,520				330				21.7	%
Net income		$	5,022			$	5,497			$	(475	)			-8.6	%

Total Revenues

Total revenues increased $3,977, or 11.0%, from $36,207 for the nine months ended September 30, 2024 to $40,184 for the nine months ended September 30, 2025 primarily due to continued strong defense program product shipments.

Total Costs and Expenses

Total costs and expenses increased $4,387, or 14.9%, from $29,390 for the nine months ended September 30, 2024 to $33,777 for the nine months ended September 30, 2025. The following items contributed to the overall increase:

•

a $3,090, or 15.8%, increase in Manufacturing cost of sales from $19,617 for the nine months ended September 30, 2024 to $22,707 for the nine months ended September 30, 2025 primarily due to the increase in production of several new products, which result in higher initial manufacturing costs, as well as the impact of tariffs; and

•

a $1,297, or 13.3%, increase in Engineering, selling and administrative from $9,773 for the nine months ended September 30, 2024 to $11,070 for the nine months ended September 30, 2025 primarily due to higher research and development investment; higher sales commissions consistent with the increase in revenues; higher stock-based compensation; and an increase in administrative and corporate expenses to support the growth in revenues.

Gross Margin

Gross margin (Revenues less Manufacturing cost of sales as a percentage of Revenues) decreased 230 basis points from 45.8% for the nine months ended September 30, 2024 to 43.5% for the nine months ended September 30, 2025 reflecting product mix and higher tariff-related costs partially offset by the increase in revenues.

Total Other Income, Net

Total Other income, net increased $265, or 132.5%, from $200 for the nine months ended September 30, 2024 to $465 for the nine months ended September 30, 2025. The following items contributed to the overall increase:

•

a $239, or 171.9%, increase in Interest income, net from $139 for the nine months ended September 30, 2024 to $378 for the nine months ended September 30, 2025 primarily due to interest income earned on investments in money market mutual funds; and

•

a $26, or 42.6%, increase in Other income (expense), net from $61 for the nine months ended September 30, 2024 to $87 for the nine months ended September 30, 2025 primarily due to a gain on the disposal of a fixed asset partially offset by unfavorable foreign currency movements.

Income Tax Expense

Income tax expense increased $330, or 21.7%, from $1,520 for the nine months ended September 30, 2024 to $1,850 for the nine months ended September 30, 2025 primarily due a one-time adjustment to reverse previously recorded deferred tax assets associated with capitalized research and development expenditures related to the enactment of the One Big Beautiful Bill Act ("OBBBA") partially offset by the decrease in Income before income taxes.

Backlog

As of September 30, 2025, our order backlog was $58,798, an increase of $11,559, or 24.5%, from $47,239 as of December 31, 2024 and an increase of $19,035, or 47.9%, from $39,763 as of September 30, 2024. The increase in backlog from December 31, 2024 reflects the continued robust demand across aerospace and defense programs, new program launches, and higher avionics and space orders.

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 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 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 cash 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:

•

Interest income

•

Interest expense

•

Depreciation

•

Amortization

•

Non-cash stock-based compensation

•

Other discrete items that might have a significant impact on comparable GAAP measures and could distort the evaluation of our normal operating performance.

Reconciliation of GAAP Income Before Income Taxes to 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 September 30,								Nine Months Ended September 30,
(in thousands, except share data)		2025				2024				2025				2024
Income before income taxes		$	2,763			$	3,008			$	6,872			$	7,017
Adjustments:
Interest income			(143	)			(63	)			(378	)			(139	)
Depreciation			280				278				800				717
Amortization			-				-				-				5
Total adjustments			137				215				422				583
EBITDA			2,900				3,223				7,294				7,600
Non-cash stock compensation			276				77				803				485
Adjusted EBITDA		$	3,176			$	3,300			$	8,097			$	8,085

Three months ended September 30, 2025 compared to three months ended September 30, 2024

Adjusted EBITDA decreased $124 from $3,300 for the three months ended September 30, 2024 to $3,176 for the three months ended September 30, 2025 primarily due to lower gross margins discussed above and higher interest income partially offset higher stock-based compensation.

Nine months ended September 30, 2025 compared to nine months ended September 30, 2024

Adjusted EBITDA increased $12 from $8,085 for the nine months ended September 30, 2024 to $8,097 for the nine months ended September 30, 2025 primarily due to higher depreciation and higher stock-based compensation partially offset by lower gross margins discussed above and higher interest income.

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 September 30, 2025 and December 31, 2024, Cash and cash equivalents were $18,329 and $12,641, respectively.

Cash Flow Activity

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

		As of September 30,
(in thousands)		2025				2024
Cash and cash equivalents, beginning of period		$	12,641			$	3,913
Cash provided by operating activities			7,979				5,707
Cash used in investing activities			(2,205	)			(1,473	)
Cash (used in) provided by financing activities			(86	)			343
Net change in cash and cash equivalents			5,688				4,577
Cash and cash equivalents, end of period		$	18,329			$	8,490

Operating Activities

Cash provided by operating activities was $7,979 for the nine months ended September 30, 2025 compared to cash provided by operating activities of $5,707 for the nine months ended September 30, 2024, an increase of $2,272, primarily due to the following:

•

Stock-based compensation increased $318 from $485 for the nine months ended September 30, 2024 to $803 for the nine months ended September 30, 2025; and

•

Change in deferred tax assets increased $1,125 from ($59) for the nine months ended September 30, 2024 to $1,066 for the nine months ended September 30, 2025.

•

Net change in operating assets and liabilities increased $1,226 from ($938) for the nine months ended September 30, 2024 to $288 for the nine months ended September 30, 2025.

The increase was partially offset by a $475 decrease in Net income from $5,497 for the nine months ended September 30, 2024 to $5,022 for the nine months ended September 30, 2025.

Our working capital metrics and ratios were as follows:

(in thousands)		September 30, 2025				December 31, 2024
Current assets		$	34,913			$	29,752
Less: Current liabilities			5,062				5,216
Working capital		$	29,851			$	24,536
Current ratio			6.9				5.7

Management continues to focus on efficiently managing working capital requirements to match operating activity levels and will seek to deploy the Company's working capital where it will generate the greatest returns.

Investing Activities

Cash used in investing activities was $2,205 for the nine months ended September 30, 2025 compared to cash used in investing activities of $1,473 for the nine months ended September 30, 2024, an increase of $732, primarily due to the purchase of equipment to support growth, next generation product development, and operational efficiencies during the nine months ended September 30, 2025.

Financing Activities

Cash used in financing activities was $86 for the nine months ended September 30, 2025 compared to cash provided by financing activities of $343 for the nine months ended September 30, 2024, a decrease of $429, primarily due to costs incurred related to the issuance of warrants in April 2025 partially offset by the exercise of stock options.

Capital Resources

We believe that existing cash and cash equivalents, marketable securities and cash generated from operations will provide sufficient liquidity to meet our ongoing working capital and capital expenditure requirements for the next 12 months from the date of this filing. At various times throughout the year and as of September 30, 2025 and December 31, 2024, some deposits held at financial institutions were in excess of federally insured limits. The Company has not experienced any losses related to these balances.

Our Board of Directors has adhered to a practice of not paying cash dividends. This policy takes into account our long-term growth objectives, including our anticipated investments for organic growth, potential acquisitions and stockholders' desire for capital appreciation of their holdings.

Revolving Line of Credit

On June 15, 2022, the Company entered into a loan agreement (the "Loan Agreement") for a revolving line of credit with Fifth Third Bank, National Association ("Fifth Third Bank"), for up to $5,000 bearing interest at the Secured Overnight Financing Rate ("SOFR") plus a margin of 2.25%, with a SOFR floor of 0.00%. The Loan Agreement has a maturity date of June 15, 2026 and contains various affirmative and negative covenants that are customary for lines of credit and transactions of this type, including limitations on the incurrence of debt and liabilities, as well as financial reporting requirements. The Loan Agreement also imposes certain financial covenants based on Debt Service Coverage Ratio, Current Ratio, and the Ratio of Total Liabilities to Total Net Worth (as such terms are defined in the Loan Agreement). All loans pursuant to the Loan Agreement are secured by a continuing and unconditional first priority security interest in and to any and all property of the Company.

As of September 30, 2025 and December 31, 2024, there were no outstanding borrowings under the revolving line of credit with Fifth Third Bank.

Critical Accounting Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to adopt accounting policies related to estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period, as well as the related disclosure of contingent assets and liabilities at the date of the financial statements. On an ongoing basis, management evaluates its accounting policies, estimates and judgments, including those related to income taxes and inventories. Management bases its estimates and judgments on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.

There have been no material changes to the critical accounting estimates disclosed in our Annual Report on Form 10-K, as filed with the SEC on March 27, 2025.