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. 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 are 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 thereto 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 1933 and Section 21E 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 U.S. 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 wins 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, were $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 serves to align employee interests with those of the stockholders.…

[Operator Instructions] And your first question is from the line of Anja Soderstrom with Sidoti. Please go ahead.

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, any lumpiness or anything that we should be aware of? And how should we think about it going forward?

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

Sure. Thank you, Anja. In general, I think we expect to see continued gross margin improvement, 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 spend, that was a bit elevated. What -- how should we think about that going forward? And what are you spending 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 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 footprint 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. I will get back in queue.

Thank you, Anja.

[Operator Instructions] Your next question is from the line of Jordan Kimmel with Magnet Investing Insights. Please go ahead.

Yes, 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 is 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.

Yes. Sure, Jordan. Thank you for the question. In general, we can break our products into [technical difficulty] 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 resonated 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 skids you have and 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 …

Sure.

… you got 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 that could have maybe 50 different SKUs where a slight variation in frequency for a specific end use by a specific end customer, but all being built on the same core package.

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