Operator: Thanks you for joining us, and welcome to the M-tron Earnings Call for Second Quarter 26. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. I will now hand the conference over to Linda Biles, EVP of Finance. Please go ahead.

Linda Biles: Good morning, everyone. Thank you for joining our 26 M-tron Q2 earnings call. Please note that this call will be recorded, and we will make the recording available on our website www.emtron.com, shortly after the call. Yesterday afternoon, we released our earnings for the second fiscal quarter of 26. 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 30 k which was filed on March 26, 2026 with the SEC. This discussion may contain forward-looking within the meaning of 27A of the Act of 1.93 thousand and Section 21E of the Securities and Exchange Act of 1.93 thousand. 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 its 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. The company undertakes no obligation 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: Thank you, Linda, and good morning, everyone. Thank you for attending our second quarter FY 26 earnings call. We are pleased to discuss our strong first half results for the fiscal year 26 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. We are a global company with 3 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 26 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. Our backlog continues to increase with strong growth over the past year in aerospace and defense, and space orders, and we have now had 3 quarters in a row with very strong book to bill ratios. With consistent operating performance, we have been able to continue to make strategic investments in research and development, continue to increase the market profile of the company and prime the pump for future growth. Yesterday afternoon, we reported the following Q2 FY 26 results. Total revenues for the second quarter, $15.1 million, a 13.8% increase over $13.3 million of revenue in the same period last year. 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 26 were 41.2% compared to 43.6% for the second quarter in 2025. This number reflects approximately $500 thousand of noncash stock based compensation directly related to our 2025 annual bonus. A charge not expected to recur at comparable levels in future quarters. 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 3 months ended June 30, 2026. compared with $1.6 million or $0.53 per diluted share for the 3 months ended June 30, 2025. The net income figure includes a $1 million non-cash stock compensation expense directly related to the accelerated vesting of stock-based 2025 annual bonus. This prior year period does not include such a charge for the 2024 annual bonus. Again, 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 2026. Adjusted EBITDA was $3.4 million for the 3 months ended June 30, 2026, compared with $2.4 million for the 3 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. Backlog increased 37.2% to $84 million as of June 30, 2020 compared with $61.2 million of backlog as of June 30, 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 this past 2 quarters. 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. We have also had heavy order volume this spring in the counter drone area, where we are supplying oscillators from phased array radar. Being used for both mobile and stationary counter drone solutions. These systems are being deployed for both military and border control. We have also had strong orders for electronic warfare, missile guidance systems, and repeat orders for tactical communication radios. We are also engaged with the defense primes on long term supply agreements for many of these missile systems for which they recently signed 7-year framework agreements. We are putting in longer term bids for the current programs, We 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. Now 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. We now expect to see our first purchase orders from these increased volumes due to these agreements in probably the first quarter of 27 and that would be for 2028 production. And we are 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 are a sole source provider, and we stand to reap many benefits of defense spending in this area. That we support continues to grow. Some of you have asked also about the continued impact of tariffs. Q2 fiscal year 25 was the first year that we were-- was the first full quarter of impact to the tariffs. We remain impacted by tariffs across the majority of our products. However, it is 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 25. 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. We believe that we will continue to grow at a slightly accelerated rate through 2026 and 2027, and we will begin to see more significant impact to our 2028 revenues from the strategic reshuffling and prioritizing of certain military systems we are 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 moved to a full rate of production. But overall, earnings continue to increase as revenue should increase at a higher rate than operating expenses. We will continue to update the market as we learn more from our customers about the production volumes expectations on these 2027 and 28 production orders and beyond. M-tron plays a critical role in defense of our nation, by providing US-sourced and highly engineered components for the US 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 2 quarters, for example, we have received $12 million in new orders for 26 and 27 production for products that we just introduced to market a year ago and sold approximately $200 thousand of. In 2025. 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 engineering talent pool through both acquisition and investments. During the quarter, for example, the company made an investment in an innovative dual use synchronization and timing systems company Skyline Instruments Corporation. Skyline is making significant advancements critical for the synchronization of RF sensor data and 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. 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. And I also encourage you to follow us on LinkedIn as well as we communicate updates on our press releases on the website. Anyway, 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 1 question and 1 follow-up, if you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 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 Bear with Ascend Wealth Advisors. Please go ahead. Your line is now open.

John Bear: Thank you. Good morning, Cameron. Question on your outlook on M&A. I know the rights offering bolstered your cash balance and so forth. So just wondering if you can comment on that. What you see there potentially. I would be happy to. We are working on some things and just wondering how that is coming along.

Cameron Pforr: Yeah. We are. We have been talking to a number of companies. Since the, we completed the rights offering, we have had kind of an increase in deal flow. so, we now have more banks actively engaged in giving us ideas, which we appreciate. And we have been following up with some of those opportunities. And we hope we still hope to get a deal done this year. We are also starting to hire or for our corporate development team. So trying to make that a more formal process and a better process in the company. So we do anticipate accelerating that.

John Bear: And how much, increase in bid order and order activity and so forth. So I am assuming that your throughput 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: No. Great question, John. So we are actually we have had very strong bookings growth throughout this year. The past 3 quarters have been very strong And I would say that it looks like it will continue to be strong. So right now, we are very focused on increasing our manufacturing capacity and kind of scalability. And we have made a number of investments in kind of accelerate our investments earlier this year just to meet the needs for our customers. So we are we are going to continue looking at that as well.

John Bear: Very good. Thanks very much for taking my questions.

Cameron Pforr: 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: 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: Yeah. I would say so the backlog has been very strong, Anja, and, you know, appreciate your question on this. We have had, you know, 3 quarters in a row of a very good, you know, bookings, and the book to bill ratio has been, you know, well above 1. Right now, we have considerable backlog not only for the next 2 quarters. We have more backlog than we actually currently anticipate producing in those 2 quarters. We are trying to figure out how we can handle that. But, also, the backlog goes out through 2028. And we have, you know, more than half of next year's, production already in the backlog. And that is you know, we are only halfway through the year, really.

Anja Soderstrom: Okay. Thank you. And you mentioned for the gross margin, you expect that to sort of contract in the second half due to ramping 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: Yeah. Well, what we are faced with is really, really rapid expansion for several products that are relatively new to us. And so we are making investments to try to automate that production, and to improve the margins there. We are 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, you know, it is 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, you know, maybe 41.5 to 43.5 range, maybe 44%. But, certainly not any higher than that, I think. You know, realistically, we are probably in the middle of that range.

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

Cameron Pforr: Yeah. I do see you know, as we get more comfortable with the production of certain products, you know, the margin will go up a little bit. Just because of, being more efficient. And so I do think that if you look at the larger programs, you know, the margins tend to go up over the first 2 or 3, you know, 1 to 2 quarters, and then they flatten out. After that, the benefits you can get really are from, you know, increased automation on a line, And so I do think that the margins will be slightly better next year. But I think this year, we have had such strong bookings in the first half of the year with products with a very rapid ramp that will have you know, probably a point impact on our gross margins.

Anja Soderstrom: Okay. Thank you. And then I am 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: Sure. Yeah. Several of them. First of all, they are, a consumer of oscillators. So we hope to, over time, you know, be a supplier there, potentially. 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 you know, areas where GPS is either fragile or denied. So trying to understand, how we adapt our RF product line to meet, you know, future needs.

Anja Soderstrom: Okay. Thank you. That was all for me.

Cameron Pforr: Mhmm. 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: Okay. Well, I would 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@M-tron.com. Should you have any additional questions. And 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.