Quarterly Report for Quarter Ending March 31, 2026 (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 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 defense, aerospace, space, and avionics.

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.

Results of Operations

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

		Three Months Ended March 31,
(in thousands)		2026				2025				$ Change				% Change
Revenues		$	14,686			$	12,732			$	1,954				15.3	%
Costs and expenses:
Manufacturing cost of sales			8,092				7,326				766				10.5	%
Engineering, selling and administrative			3,984				3,393				591				17.4	%
Total costs and expenses			12,076				10,719				1,357				12.7	%
Operating income			2,610				2,013				597				29.7	%
Other income:
Interest income, net			370				111				259				233.3	%
Other expense, net			(122	)			(10	)			(112	)			1,120.0	%
Total other income, net			248				101				147				145.5	%
Income before income taxes			2,858				2,114				744				35.2	%
Income tax expense			470				484				(14	)			(2.9	%)
Net income		$	2,388			$	1,630			$	758				46.5	%

Three months ended March 31, 2026 compared to three months ended March 31, 2025

Total Revenues

Total revenues increased $1,954, or 15.3%, from $12,732 for the three months ended March 31, 2025 to $14,686 for the three months ended March 31, 2026 primarily due to strong defense product shipments as well as higher avionics sector shipments.

Total Costs and Expenses

Total expenses increased $1,357, or 12.7%, from $10,719 for the three months ended March 31, 2025 to $12,076 for the three months ended March 31, 2026. The increase is primarily due to the following:

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a $766, or 10.5%, increase in Manufacturing cost of sales from $7,326 for the three months ended March 31, 2025 to $8,092 for the three months ended March 31, 2026 driven by higher revenues partially offset by manufacturing efficiencies; and

•

a $591, or 17.4%, increase in Engineering, selling and administrative from $3,393 for the three months ended March 31, 2025 to $3,984 for the three months ended March 31, 2026 from higher research and development costs, higher sales commissions related to an increase in revenues, and an increase in 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) increased 244 basis points from 42.5% for the three months ended March 31, 2025 to 44.9% for the three months ended March 31, 2026 reflecting higher revenues, product mix, and manufacturing efficiencies.

Total Other Income, Net

Total Other income, net increased $147, or 145.5%, from $101 for the three months ended March 31, 2025 to $248 for the three months ended March 31, 2026. The increase is primarily due to a $259, or 233.3%, increase in Interest income, net from $111 for the three months ended March 31, 2025 to $370 for the three months ended March 31, 2026 driven by higher balances invested in money market mutual funds.

The increase was partially offset by a $112, or 1,120.0%, decrease in Other income (expense), net from ($10) for the three months ended March 31, 2025 to ($122) for the three months ended March 31, 2026 primarily due to unfavorable currency movements related to our India production facility.

Income Tax Expense

Income tax expense decreased $14, or 2.9%, from $484 for the three months ended March 31, 2025 to $470 for the three months ended March 31, 2026 primarily due to temporary differences related to stock compensation partially offset by the increase in Income before incomes taxes.

Backlog

As of March 31, 2026, our order backlog was $76,834, an increase of $409, or 0.5%, from $76,425 as of December 31, 2025 and an increase of $21,333, or 38.4%, from $55,501 as of March 31, 2025. The increase in backlog from December 31, 2025 is primarily driven by orders in the aerospace and defense, avionics, and space sectors during the quarter. The nature of a program centric business model materially affects backlog based on the timing and size of the 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 March 31,
(in thousands, except share data)		2026				2025
Income before income taxes		$	2,858			$	2,114
Adjustments:
Interest income			(370	)			(111	)
Depreciation			302				250
Amortization			-				-
Total adjustments			(68	)			139
EBITDA			2,790				2,253
Non-cash stock compensation			382				249
Adjusted EBITDA		$	3,172			$	2,502

Three months ended March 31, 2026 compared to three months ended March 31, 2025

Adjusted EBITDA increased $670 from $2,502 for the three months ended March 31, 2025 to $3,172 for the three months ended March 31, 2026 primarily due to higher revenues and improved gross margins.

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 March 31, 2026 and December 31, 2025, Cash and cash equivalents were $51,958 and $20,891, respectively.

Cash Flow Activity

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

		As of March 31,
(in thousands)		2026				2025
Cash and cash equivalents, beginning of period		$	20,891			$	12,641
Cash provided by operating activities			2,118				1,607
Cash used in investing activities			(452	)			(586	)
Cash provided by financing activities			29,401				-
Net change in cash and cash equivalents			31,067				1,021
Cash and cash equivalents, end of period		$	51,958			$	13,662

Operating Activities

Cash provided by operating activities was $2,118 for the three months ended March 31, 2026 compared to $1,607 for the three months ended March 31, 2025, an increase of $511, primarily due to the following:

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Higher net income;

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Higher non-cash adjustments, including:

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Depreciation, which increased $52 from $250 for the three months ended March 31, 2025 to $302 for the three months ended March 31, 2026;

•

Stock-based compensation increased $133 from $249 for the three months ended March 31, 2025 to $382 for the three months ended March 31, 2026;

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Working capital movements, including:

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Accounts receivable, which increased $1,420 for the three months ended March 31, 2026 compared to a decrease of $124 for the three months ended March 31, 2025, reflecting the timing and mix of customer orders;

•

Inventories, net, which increased $677 for the three months ended March 31, 2026 compared to a decrease of $144 for the three months ended March 31, 2025, supporting anticipated growth in future sales;

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Prepaid expenses and other assets, which decreased $222 for the three months ended March 31, 2026 compared to a decrease of $68 for the three months ended March 31, 2025, reflecting higher amortization of prepaid expenses in 2026;

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Accounts payable, accrued compensation and other expenses, and other liabilities, which increased $986 for the three months ended March 31, 2026 compared to a decrease of $865 for the three months ended March 31, 2025, reflecting higher accounts payable balances in 2026 consistent with the increase in backlog and cash bonuses that were paid in 2025 that did not occur in 2026.

Our working capital metrics and ratios were as follows:

(in thousands)		March 31, 2026				December 31, 2025
Current assets		$	71,935			$	61,217
Less: Current liabilities			6,116				4,891
Working capital		$	65,819			$	56,326
Current ratio			11.8				12.5

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 $452 for the three months ended March 31, 2026 compared to cash used in investing activities of $586 for the three months ended March 31, 2025, a decrease of $134, primarily due to the timing of capital projects, where delivery is expected at a future date.

Financing Activities

Cash provided by financing activities was $29,401 for the three months ended March 31, 2026 compared to cash provided by financing activities of $0 for the three months ended March 31, 2025, an increase of $29,401, primarily due to the settlement of warrants in January 2026 as well as 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 March 31, 2026 and December 31, 2025, 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 December 31, 2025, we entered into an amended and restated credit agreement (the "Credit Agreement") with Fifth Third Bank, National Association ("Fifth Third Bank"), replacing our prior credit facility with Fifth Third Bank (the "Previous Credit Agreement"). The Credit Agreement provides for a $10.0 million revolving credit facility (the "Revolving Facility") and a $10.0 million delayed draw term loan facility (the "Delayed Draw Facility"). Borrowings under the Revolving Facility and the Delayed Draw Facility bear interest at a rate based on the Secured Overnight Financing Rate ("SOFR") plus a margin ranging from 2.00% to 3.00%, determined by the Company's leverage ratio, with a SOFR floor of 0.00%. The Company will pay a fee on the average unused daily amount of the facilities at a rate ranging from 0.20% and 0.30%, determined by the Company's leverage ratio. Amounts outstanding under the Revolving Facility are due at maturity on December 31, 2028, and advances under the Delayed Draw Facility are available for a period of 36 months from the date of the Credit Agreement, with each advance maturing 36 months after funding and subject to quarterly amortization requirements. The Credit Agreement contains various affirmative and negative covenants that are customary for transactions of this type, including limitations on the incurrence of debt and liabilities, as well as financial reporting requirements. The Credit Agreement also imposes certain financial covenants based on the following criteria: (a) Leverage Ratio and (b) Fixed Charge Coverage Ratio (each as defined in the Credit Agreement). All loans pursuant to the Credit Agreement are secured by a first-priority lien on substantially all of the personal property of the Company. See Note 7 - Revolving Credit Agreement to the Condensed Consolidated Financial Statements included in Item 1. Financial Information of this Report for details of the Credit Agreement.

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 26, 2026.