Q2 2024 Air Industries Group Earnings Call
Unnamed Speaker: .. .. .. .. .. ... [inaudible].
Speaker Change: DRAMATIC STRING QUARTEROSTE comments MOREnamoral SYMPHONY THANKS FOR WATCHING CCTV
Thank you very much for your time.
Speaker Change: [inaudible]
Scott Glassman: Hello, and welcome to the Air Industries Group's second quarter of 2024 from Scott Glassman. At the time, all participants are in a listen-only mode. A question in the industry session will follow the formal presentation. At that time, to answer the question to you, please press star one on your telephone to you, Dad. To regard your question from the two, please press star two. For participants, you speak for equipment and maybe necessary to pick up your hands at the request and the startings. If anyone wants to require an operator, assistance to earn a conference, please press star zero on your telephone to you, Dad.
Operator: ...... [inaudible] Hello, and welcome to the Air Industries Group second quarter of 2024. At this time, all participants are in a listen-only mode.
Speaker Change: [inaudible]
Speaker Change: Hello, and welcome to the Air Industries Group's second quarter of 2024 of Stop and Stock.
Operator: A question and answer session will follow the final presentation. At that time, to ask a question in the question queue, please press star 1 on your telephone keypad. To withdraw your question from the queue, please press star two. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the button.
Speaker Change: At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. At that time, to enter the question queue, please press star 1 on your telephone keypad. To withdraw your question from the queue, please press star 2. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Operator: If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. This call and the accompanying webcast may contain forward-looking statements as defined in Section 27A of the Securities Act of 1933 as amended, including statements regarding, among other things, the company's business strategy and growth strategy. Expressions which identify four of the statements speak only as of the date the statement is made. These forward-looking statements are based largely on our company's expectations and are subject to a number of risks and uncertainties, some of which are beyond our control and cannot be predicted or quantified.
Speaker Change: If anyone should require operator assistance during the conference, please press star zero on your cell phone keypad.
Scott Glassman: This call and the accompanying webcast may contain political statements as defined in Section 27A of the Securities Act of 1933, as amended, including statements regarding, among other things, the company's business strategy and growth strategy. Expressions which identify political statements speak only as of the date the statement is made. These forward-looking statements are based largely on our company's expectations and are subject to a number of risks and uncertainties, some of which are beyond our control. It cannot be predicted or quantified. Reaching developments and natural results could differ materially from those set forth in conflict templated by or underlying the forward-looking statements.
Operator: Future developments and actual results could differ materially from those set forth in, contemplated by, or underlying the forward-looking statement. In light of these risks and uncertainties, there can be no assurance that the forward-looking information will prove to be accurate.
Speaker Change: This call and the accompanying webcast may contain forward-looking statements as defined in Section 27A of the Securities Act of 1933 as amended, including statements regarding, among other things, the company's business strategy and growth strategy.
Speaker Change: Expressions which identify forward-looking statements speak only as of the date the statement is made.
Speaker Change: These forward-looking statements are based largely on our company's expectations and are subject to a number of risks and uncertainties, some of which are beyond our control and cannot be predicted or quantified.
Speaker Change: future developments and actual results could differ materially from those set forth in, contemplated by, or underlying the forward-looking statements.
Scott Glassman: In one of these risks and uncertainties, there can be no assurance that the forward-looking statement's information will prove to be accurate.
Speaker Change: In light of these risks and uncertainties, there can be no assurance that the forward-looking information will prove to be accurate.
Scott Glassman: This call does not constitute an offer to purchase any securities, nor a solicitation of a proxy consent, authorization, or agent designation with respect to a meeting of the company's shareholders.
Operator: This call does not constitute an offer to purchase any securities nor a solicitation of a proxy, consent, authorization, or agent designation with respect to a meeting of the company's shareholders. At this time, I would now like to turn the call over to Lou Melluzzo, President and CEO. Please go ahead.
Speaker Change: This call does not constitute an offer to purchase any securities nor a solicitation of a proxy, consent, authorization, or agent designation with respect to a meeting of the company's shareholders.
Scott Glassman: At this time, I would now like to turn the call over to Lou Miluto, President and CEO. Please go ahead.
Speaker Change: At this time, I would now like to turn the call over to Lou Melluzzo, President and CEO . Please go ahead.
Lou Miluto: Thank you, Joe.
Lou Miluto: And thank you all for joining us today. The results for the second quarter of 2024 are extremely encouraging. We are profitable for the quarter, which was an improvement over a loss in Q1. While we had a modest 2.8% increase in revenue for the quarter compared to last year, we achieved a significant increase in growth profit. For the quarter, growth profit increased by 474,000 or nearly 22% compared to Q2 of 2023. Just to get some perspective on our Q2 results, while revenue was down by 489,000, growth profit was 738,000, or nearly 39% higher than in the first quarter.
Lou Melluzzo: Thank you, Joe, and thank you all for joining us today. The results for the second quarter of 2024 are extremely encouraging. We were profitable for the quarter, which was an improvement over a loss in Q1. While we had a modest 2.8% increase in revenue for the quarter compared to last year, we achieved a significant increase in growth profits. For the quarter, gross profit increased by 474,000, or nearly 22% compared to Q2 of 2023, just to get some perspective on IQ2 results.
Speaker Change: Thank you, Joe, and thank you all for joining us today. The results for the second quarter of 2024 are extremely encouraging. We are profitable for the quarter, which was an improvement over a loss in Q1.
Speaker Change: While we had a modest 2.8% increase in revenue for the quarter compared to last year, we achieved a significant increase in gross profit.
Speaker Change: For the quarter, gross profit increased by $474,000, or nearly 22% compared to Q2 of 2023.
Lou Melluzzo: While revenue was down by 489,000, gross profit was 738,000, or nearly 39% higher than in the first quarter. Our gross margin on sales increased from 13.6% to 19.5%. It is important to understand that profitability is highly dependent on several factors, such as product mix, timing, and a steady flow of raw materials.
Speaker Change: Just to get some perspective on our Q2 results, while revenue was down by 489,000. Gross profit was 738,000 or nearly 39% higher than in the first quarter.
Lou Miluto: Our growth margin on sales increased from 13.6% to 19.5%. It is important to understand that profitability is highly dependent on several factors such as product mix, timing, and a steady flow of raw material. Our Connecticut operations benefited from the ramp-up of the rotocraft product and the fruition of several company-wide profit enhancement initiatives that we have been working on over the last several months. This increased growth margins together with closely controlled expenses resulted in our return to profitability.
Speaker Change: Our gross margin on sales increased from 13.6% to 19.5%.
Speaker Change: It is important to understand that profitability is highly dependent on several factors such as product mix, timing, and a steady flow of raw material.
Lou Melluzzo: Our Connecticut operations benefited from the ramp-up of a Rotocraft product and the fruition of several company-wide profit enhancement initiatives that we have been working on over the last several months. This increased gross margin, together with closely controlled expenses, resulted in our return to profitability. In addition, I want to mention that we expect Q3 to reflect some softness as compared to our earlier quarters, followed by a stronger Q4. Now, let me turn to bookings. Our order flow continues to be strong. Bookings in Q2 were $16.5 million, growing 3.5 million, or 27%, from the level we achieved in Q1. We achieved a book to build ratio of 1.2 to 1.
Speaker Change: Our Connecticut operations benefited from the ramp-up of a Rotocraft product.
Speaker Change: and the fruition of several company-wide profit enhancement initiatives that we have been working on over the last several months. This increased gross margins, together with closely controlled expenses, resulted in our return to profitability.
Lou Miluto: In addition, I want to mention that we expect Q3 to reflect some softness as compared to our earlier quarters, quadders, followed by a stronger Q4.
Speaker Change: In addition, I want to mention that we expect Q3 to reflect some softness as compared to our earlier quarters.
Lou Miluto: Now let me turn to bookings. Our order flow continues to be strong. Bookings in Q2 were 16 and a half million dollars, growing 3.5 million, or 27 percent, from the level we achieved in Q1. We achieved a book-to-build ratio of 1.2 to 1. Given our strong bookings, our total-funded backlog at the end of Q2 was slightly over 100 million, which is a significant milestone. Our goal is to grow the backlog from here.
Speaker Change: followed by a stronger Q4.
Speaker Change: Now, let me turn to bookings. Our order flow continues to be strong. Bookings in Q2 were $16.5 million, growing $3.5 million, or 27%, from the level we achieved in Q1.
Speaker Change: We achieved a book-to-bill ratio of 1.2 to 1.
Lou Melluzzo: Given our strong bookies, our total funded backlog at the end of Q2 was slightly over a hundred million, which is a significant milestone. Our goal is to grow this backlog from here. Before turning the call over to Scott, I want to provide a brief summary of our recent visit to the Farnborough Air International Show. The show is a trade exhibition for the aerospace and defense industry and is attended by key primes and manufacturers. From our perspective, it was a great show.
Speaker Change: Given our strong bookings, our total funded backlog at the end of Q2 was slightly over $100 million, which is a significant milestone.
Lou Miluto: Before turning the call over to Scott, I want to provide a brief summary of our recent visit to the Farmboro Air International Show. The show is a trade exhibit for the aerospace and defense industry and is attended by key clients in manufacturing. From our perspective, it was a great show. Our schedule was booked full. We met and solidified relationships with both old and new customers and believe we have set the stage for great things to come.
Speaker Change: Our goal is to grow the backlog from here.
Speaker Change: Before turning the call over to Scott, I want to provide a brief summary of our recent visit to the Farnborough Air International Show. The show is a trade exhibit for the aerospace and defense industry and is attended by key primes and manufacturers.
Lou Melluzzo: Our schedule was full. We met and solidified relationships with both old and new customers and believe we have set the stage for great things to come. Now, let me turn the call over to Scott, who will discuss our Q2 results in more detail. I'll be back to add some closing commentary and a bit more specifics on our 2024 outlook before opening the call up to questions and answers. Scott, you may proceed. Thanks, Lou. I share their loose enthusiasm about the Q2 results. Let me discuss them in more detail.
Scott: From our perspective it was a great show. Our schedule was booked full. We met and solidified relationships with both old and new customers and believe we have set the stage for great things to come.
Scott Glassman: Now let me turn the call over to Scott, who will discuss our Q2 results in more detail.
Scott Glassman: Consolidated net sales for the second quarter ended June 30th, 2024 at 13.6 million. This represents a 2.8% increase as compared to the 13.2 million we achieved in Q2 of 2023. The improvement in our operating results is directly due to EECS gross margin, which was approximately $474,000, or 22% higher than Q2 of 2023 and $738,000, or 39% higher than the first quarter. During our last call, we expressed confidence that margins would improve, and they have. Although quarterly fluctuations may still occur, we believe the gross margin on a year-over-year basis will continue to show improvement. We continue to focus on keeping operating expenses controlled.
Scott: Now let me turn the call over to Scott who will discuss our Q2 results in more detail. I'll be back to add some closing commentary and a bit more specifics on our 2024 outlook before opening.
Scott Glassman: I'll be back to add some closing commentary and a bit more specifics on our 2024 outlook before opening the call up to questions and answers.
Scott Glassman: Scott, you may proceed. Thanks, Lou. I share loose enthusiasm about the Q2 results.
Scott: the call up to questions and answers.
Scott Glassman: For the second quarter, they were $1.9 million, which was $206,000, or 9.8% lower than the prior year's second quarter, and $273,000, or 12.6% less than Q1 of 2024. As a result of increased profitability and controlled expenses, the operating income exceeded three quarters of a million dollars compared to a modest operating income of just $72,000 in Q2 of 2023 and an operating loss of close to $260,000 in Q1 of 20 Finally, on the bottom line, we had net income of $298,000, or $0.09 per share, compared to a loss of $395,000, or negative $0.12 a share, in 2023, and a loss of $706,000, or a loss of $0.21 a share, in Q1 of 2024.
Scott: Scott.
Speaker Change: You may proceed.
Scott: Thanks, Lou. I share Lou's enthusiasm about the Q2 results. Let me discuss them in more detail.
Scott Glassman: Let me discuss them in more detail. Consolidated net sales for the second quarter ended June 30, 2024, for $13.6 million. This represents a 2.8 percent increase as compared to the $13.2 million we achieved in Q2 of 2023. The improvement in our operating results is directly due to significant growth margins, which is approximately 474,000, where 22 percent higher than Q2 of 2023, and 738,000, were 39 percent higher than the first quarter. During our last call, we expressed confidence that margins were to improve, and they have. Although quarterly fluctuations may still occur, we believe the growth margin on a year-over-year basis will continue to show improvement.
Scott: Consolidated net sales for the second quarter and to June 30th 2024 were 13.6 million. This represents a 2.8 percent increase as compared to the 13.2 million we achieved in Q2 of 2023.
Speaker Change: The improvement in our operating results is directly due to significantly gross margin, which was approximately 474,000, or 22% higher than Q2 of 2023, and 738,000, or 39% higher than the first quarter.
Speaker Change: During our last call, we expressed confidence that margins would improve, and they have. Although quarterly fluctuations may still occur, we believe the gross margin on a year-over-year basis will continue to show improvement.
Scott Glassman: We continue to focus on keeping operating expenses controlled. For the second quarter, they were 1.9 million, which was 206,000 or 9.8 percent lower than the prior year second quarter, and 273,000 or 12.6 percent less than Q1 of 2024. As a result of increased profitability and controlled expenses, we had operating income exceeding three quarters of a million dollars compared to a modest operating income of just 72,000 in Q2 of 2023, and an operating loss of close to 260,000 in Q1 of 2024. Finally, on the bottom line, the net income of $298,000 or 9 cents per share compared to a loss of $395,000 or negative $12 cents a share in 2023 and a loss of $706,000 or a loss of $21 cents a share in Q1 of $24.
Speaker Change: We continue to focus on keeping operating expenses controlled.
Speaker Change: For the second quarter, they were $1.9 million, which was $206,000, or 9.8% lower than the prior year's second quarter, and $273,000, or 12.6% less than Q1 of 2024.
Speaker Change: As a result of increased profitability and controlled expenses, the operating income exceeding three quarters of a million dollars compared to a modest operating income of just $72,000 in Q2 of 2023.
Speaker Change: and an operating loss of close to $260,000 in Q1 of 2024.
Speaker Change: Finally, on the bottom line, we had net income of $298,000, or $0.09 per share, compared to a loss of $395,000, or negative $0.12 a share, in 2023.
Speaker Change: and a loss of $706,000 or a loss of $0.21 a share in Q1 of 2024.
Scott Glassman: From the first quarter to the second quarter, our net income has increased by over a million dollars.
Scott Glassman: From the first quarter to the second quarter, our net income increased by over a million dollars. For the six months ended June 30, 2024, our adjusted EBITDA was $1,775,000, an improvement of nearly $236,000, or 15% from the prior year. A detailed reconciliation of EBITDA to GAAP was included in our press release that was issued last evening.
Speaker Change: From the first quarter to the second quarter, our net income has increased by over a million dollars.
Scott Glassman: For the six months ended June 30th, 2024, our adjusted EBITDA was $1,775,000, an improvement of nearly $236,000 or 15% from the prior year. A detailed reconciliation of EBITDA to GAAP was included in our press release that was issued last evening.
Speaker Change: For the six months into June 30th, 2024, our adjusted EBITDA was $1,775,000, and improvement of nearly 236,000 worth 15% from the prior year.
Speaker Change: A detailed reconciliation of Ibiza to GAP was included in our press release that was issued last evening.
Scott Glassman: As filed on Form AK earlier this year, we amended our credit facility and negotiated more favorable covenants. In this regard, I am pleased to report that we are in compliance with these covenants and expect to remain in compliance.
Scott Glassman: As filed on Form 8K earlier this year, we amended our credit facility and negotiated more favorable covenants. In this regard, I am pleased to report that we are in compliance with these covenants and expect to remain in compliance. Now, let me quickly highlight a few items on the balance sheet. Compared to December 31, 2023, our total debt is up by $1.6 million to $24,939,000. 7% increase. This was due to the completion of the installation of solar panels at our Connecticut manufacturing facility, and an increase in our equipment term loan that was made with our recent amendment to our banking agreement.
Speaker Change: As far as I'm concerned,
Speaker Change: As filed on Form 8K earlier this year, we amended our credit facility and negotiated more favorable covenants. In this regard, I am pleased to report that we are in compliance with these covenants and expect to remain in compliance.
Scott Glassman: Inventory is slightly lower, which reflects timing and carefully monitoring inventory levels with a goal to improve our working capital requirements. Cash receivable is essentially unchanged, but other working capital accounts, such as accounts payable and accrued expenses, are down by about half a million dollars. And with that, I will turn the call back to Lou for some closing remarks and an update on our 2024 business outlook.
Scott Glassman: Now, let me quickly highlight a few items on the balance sheet. Compared to December 31st, 2023, our total debt is up by $1.6 million to $24,939,000, a 7% increase. This was due to the completion of the installation of solar panels at our Connecticut manufacturing facility, an increase in our equipment, term loan that was made with our recent amendment to our banking agreement. Inventory is slightly lower, which reflects timing and carefully monitoring inventory levels with a goal to improve our working capital requirements. Accounts receivable are essentially unchanged, but other working capital accounts, such as accounts payable and accrued expenses, are down by about half a million dollars.
Speaker Change: Now let me quickly highlight a few items on the balance sheet.
Speaker Change: Compared to December 31st, 2023, our total debt is up by $1.6 million to $24,939,000.
Speaker Change: 7% increase. This was due to the completion of the installation of solar panels that are Connecticut Manufacturing Facility, an increase in our equipment, term loan that was made with our recent amendment to our banking agreement.
Speaker Change: Inventory is slightly lower, which reflects timing and carefully monitoring inventory levels with a goal to improve our working capital requirements.
Speaker Change: Accounts receivable are essentially unchanged, but other working capital...
Speaker Change: accounts such as accounts payable and accrued expenses are down by about half a million dollars. And with that I will turn the call back to Lou for some closing remarks and an update on our 2024 business outlook. Lou? Thank You Scott.
Lou Miluto: With that, I will turn the call back to Lou for some closing remarks and an update on our 2024 business outlook. Lou, thank you, Scott. First half of fiscal 2024, reflecting strength, strong order flow, and improvement from last year, I feel confident about our second half. With two quarters under our belt, fiscal 2024 is on track to be a year of significant growth. Although it remains difficult to predict the timing of orders, raw materials, and delivery times for finished products, the company reaffirms our target of net sales for fiscal 2024 to be at least $50 million.
Lou Melluzzo: Thank you, Scott. The first half of fiscal 2024 reflected strength, strong order flow, and an improvement from last year. I feel confident about our second half.
Lou Melluzzo: 1.5 of fiscal 2024 reflecting strength, strong order flow, and an improvement from last year. I feel confident about our second half.
Lou Melluzzo: With two quarters under our belt, fiscal 2024 is on track to be a year of significant growth. Although it remains difficult to predict the timing of orders, raw materials, and delivery times for finished products, the company reaffirms its target of net sales for fiscal 2024 being at least $50 million, with adjusted EBITDA in 2024 being significantly better than in 2023. Additionally, we are working on a number of large booking opportunities that we expect to finalize.
Speaker Change: With two quarters under our belt, fiscal 2024 is on track to be a year of significant growth.
Speaker Change: Although it remains difficult to predict the timing of orders, raw materials, and delivery times for finished products,
Speaker Change: The company reaffirms our target of net sales for fiscal 2024 to be at least $50 million, with adjusted EBITDA in 2024 being significantly better than in 2023.
Lou Miluto: With adjusted EBITDA in 2024 being significantly better than in 2023. Additionally, we are working on a number of large booking opportunities that we expect to finalize soon. If we are successful in closing these opportunities before the end of our fiscal 2024, not only will we achieve growth at 2024, but 2025 will be even better.
Speaker Change: Additionally, we are working on a number of large booking opportunities.
Speaker Change: that we expect to finalize soon. If we are successful in closing these opportunities before the end of our fiscal 2024, not only will we achieve growth in 2024, but 2025 will be even better.
Scott Glassman: With that, Joe, I would like to open the call to our questions and answer portion.
Lou Melluzzo: If we are successful in closing these opportunities before the end of our fiscal 2024, not only will we achieve growth in 2024, but 2025 will be even better. With that, Joe, I would like to open the call to our questions and answers portion. Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star 1 on your telephone keypad, and a confirmation tone will indicate your line is in the queue. You may press star 2 if you would like to remove your question from the queue. For our participants using speaker equipment, it may be necessary to pick up your handset before pressing the start button.
Speaker Change: With that, Joe, I would like to open the call to our questions and answer portion.
Scott Glassman: Thank you.
Operator: Please, gentlemen, as a reminder, if you would like to ask a question, please press star one on your telephone keypad, and a confirmation column will indicate your line is in the queue. You may first start, too, if you would like to remove your question from, and our first question comes from the line of Howard Halpern with Haggletch Brothers.
Joe: Thank you.
Speaker Change: Ladies and gentlemen, that's a reminder, if you'd like to ask a question, please press star one on your telephone keypad and a confirmation telephone, willing to take your line as in the queue. You may press star two if you would like to remove your question from the queue. If our participants use your speaker or from it, and maybe necessary to pick up your hands-on keyboard for some of the strategies.
Operator: And our first question comes from the line of Howard Halpern with the Haglitz Brothers. Please proceed. Congratulations guys, a fantastic quarter. Hi Howard, how are you doing today? Hi Howard, thank you. You did mention briefly that Q4 will be a lot stronger than Q3. Is that in terms of revenue and margin or just in terms of revenue for QA? And are there new programs starting, I guess, in Q3 that might hamper Rose Margin a little bit?
Speaker Change: And our first question comes from the line of Howard Halpern with Hagwich Brothers. Please proceed.
Howard Halpern: Please proceed. Congratulations, guys. Fantastic quarter.
Lou Miluto: Hi, Howard.
Speaker Change: Congratulations guys, fantastic quarter.
Lou Miluto: How are you doing today? Hi, Howard.
Lou Miluto: Thank you.
Howard Halpern: You did mention briefly that, you know, Q4 will be stronger than Q3. Is that in terms of revenue and margin, or just in terms of revenue for Q3? And are there new programs starting, I guess, in Q3 that might hamper Rose Margin a little bit?
Speaker Change: Hi Howard, how are you doing today? Hi Howard, thank you. You did mention briefly that, you know, Q4 will be a lot stronger than Q3.
Howard Halpern: Is that in terms of revenue and margin, or just in terms of revenue for Q3? And are there new programs starting, I guess, in Q3 that might hamper gross margin a little bit?
Thank you very much for your time.
Operator: Hi Howard, so Q3 is going to be a combination of lower sales and lower margin, which will obviously give you lower margin dollars, and probably a slightly lower margin percentage as well, which, as we said, will turn around in the fourth quarter.
Lou Miluto: Hi, Howard. So Q3 is going to be a combination of lower sales and lower, which will obviously give you lower margin dollars. Probably slightly lower margin percentage as well, which, as we said, will turn around in the fourth quarter.
Howard Halpern: Hi Howard, so Q3 is going to be a combination of lower sales and
Scott Glassman: Hello, and welcome to the Air Industries Group's second quarter of 2024 from Scott Glassman. At the time, all participants are in a listen-only mode. A question in the industry session will follow the formal presentation. At that time, to answer the question to you, please press star one on your telephone to you, Dad. To regard your question from the two, please press star two. For participants, you speak for equipment and maybe necessary to pick up your hands at the request and the startings. If anyone wants to require an operator, assistance to earn a conference, please press star zero on your telephone to you, Dad.
Speaker Change: lower margin, which will obviously give you lower margin dollars.
Speaker Change: probably a slightly lower margin percentage as well, which, as we said, we'll turn around in the fourth quarter. It has to do with some customer push-outs.
Howard Halpern: It has to do with some customer pushouts and things of that nature, but we are confident that the year will be as we have laid out. Howard, it's timing of orders and material flows, you know; the pipeline is full. It's a very positive thing for the balance of the year. Okay, uh, are there any additional projects that you are doing in-house to create efficiencies, or is that type of capital spending coming to an end where you'll start paying down some debt? We've been very frugal this year with capital spending.
Lou Miluto: It has to do with some customer pushouts and things of that nature, but we are confident that the year will be as we have laid out. Howard, it's timing of orders in material flow. You know, the pipeline is full; the very positive thing for the balance of the year. Okay.
Speaker Change: and things of that nature but we are confident that the year will be as we have laid out. It's timing of orders in the aerial flow. The pipeline is full, the very positive thing for the balance of the year.
Howard Halpern: Are there any additional projects that you are, you know, doing in-house to create efficiencies? Or is that type of capital spending coming to an end, where you'll start paying down some debt? Well, we've been very frugal this year with capital spending. You know, we retrofitted it. We haven't; we purchased one new coordinate measuring machine in the early, early this year. I think to the tune of about $300,000, but other than that, we had three machines in the shop that have been there for a while. That's its old buyer, and it has a great capability to respect those machines.
Scott Glassman: This call and the accompanying webcast may contain political statements as defined in section 27A of the Securities Act of 1933 as amended, including statements regarding, among other things, the company's business strategy and growth strategy. Expressions which identify political statements speak only as of the date the statement is made. These forward-looking statements are based largely on our company's expectations and are subject to a number of risks and uncertainties, some of which are beyond open control.
Speaker Change: Okay. Are there any additional projects that you are doing in-house to create efficiencies or is that type of capital spending coming to an end where you'll start paying on some of that?
Speaker Change: We've been very frugal this year with capital spending.
Lou Melluzzo: We retrofitted. We purchased one new corded measuring machine early this year, I think to the tune of about $300,000, but other than that, we had three machines in the shop that have been there for a while. It's old iron, and it has great capability. Three spinning machines.
Speaker Change: We retrofitted, we haven't, we purchased one new coordinate measuring machines in the early, early this year, I think to the tune of about $300,000, but other than, other than that.
Scott Glassman: It cannot be predicted or quantified. Reaching developments and natural results could differ materially from those set forth in conflict templated by or underlying the forward-looking statements. In one of these risks and uncertainties, there can be no assurance that the forward-looking statement's information will prove to be accurate.
Speaker Change: We had three machines in the shop that have been there for a while. It's old iron and it has great capability, three spindle machines. It's what you need in this business.
Lou Miluto: It's what you need in this business. And we spent roughly $300,000 per machine to bring it up to the 21st century. So basically, new controls, new brains, and these things. And we will reap the benefit on up. We're looking; our pipeline of potential orders is immense. I mean immense. So we don't want to get caught short. We wanted to make sure that we had machines to be able to produce this work for a fortune enough to win some of this.
Lou Melluzzo: It's what you need in this business, and we spent roughly $300,000 per machine to bring it up to the 21st century. So basically, new controls, new brains in these things, and we will reap the benefit on. We're looking, our pipeline of potential orders is immense, and climbing on a mat. So we don't want to get caught short.
Speaker Change: and we spent roughly $300,000 per machine.
Speaker Change: to bring it up to the 21st century. So basically new controls, new brains in these things, and we will reap the benefit on, we're looking, our pipeline of potential orders is immense.
Scott Glassman: This call does not constitute an offer to purchase any securities nor a solicitation of a proxy consent authorization or agent designation with respect to a meeting of the company's shareholders.
Speaker Change: and I'll try me in the match.
Lou Melluzzo: We wanted to make sure that we had machines to be able to produce this work if we're fortunate enough to win some of these projects coming up. Because in this industry, you're a year out from getting things repaired and getting equipment in. So we went ahead and spent the money to prepare for a potential floodgate of new opportunities coming down. And in terms of those opportunities, and maybe in conjunction with the air show, too, what are those opportunities? You know, as you said, old and potentially new customers, but are the programs brand new, or will they be similar to some of the other programs that you have that are ongoing?
Speaker Change: So, we don't want to get caught short, we wanted to make sure that we had machines to be able to produce this work of 440 enough to win some of this saw.
Luciano Melluzzo: At this time, I would now like to turn the call over to Lou Miluto, President and CEO. Please go ahead. Thank you, Joe. And thank you all for joining us today. The results for the second quarter of 2024 are extremely encouraging. We are profitable for the quarter, which was an improvement over a loss in Q1. While we had a modest 2.8% increase in revenue for the quarter compared to last year, we achieved a significant increase in growth profit.
Lou Miluto: So some of these projects are coming up because in this industry, you're a year out and getting things repaired and equipment. And so we went ahead and spent the money to prepare for, you know, potential floodgates of new opportunities coming down the pike.
Speaker Change: Some of these projects coming up because in this industry, you're a year out and getting things repaired and equipment in. So we went ahead and concentrate the money to prepare for potential floodgate of new opportunities coming down the pike.
Howard Halpern: And in terms of those opportunities and maybe in conjunction with the air show too, those opportunities are they, you know, like you said, you know, new old and potentially new customers.
Speaker Change: and in terms of those opportunities and maybe in conjunction with the air show too. Those are the opportunities of A.
Luciano Melluzzo: For the quarter, growth profit increased by 474,000 or nearly 22% compared to Q2 of 2023. Just to get some perspective on our Q2 results, while revenue was down by 489,000, growth profit was 738,000 or nearly 39% higher than in the first quarter. Our growth margin on sales increased from 13.6% to 19.5%. It is important to understand the profitability is highly dependent on several factors such as product mix, timing and a steady flow of raw material.
Speaker Change: You said old and potentially new customers, but are the programs brand new or will they be similar to some of the other programs that you have that are ongoing?
Lou Miluto: But are the programs brand new, or will they be similar to some of the other programs that you have that are ongoing? It's all aerospace programs, you know, predominantly air industries group is roughly 85% military programs. But in light of what's happened to the commercial aviation and Boeing, there's been a lot more opportunities on the other side of the fence on the commercial side, which we, you know, we have one product here in our Bay Shore facility in New York. That's commercial. Everything else in that's our thrust. So, you know, we're pursuing; we're pursuing both military and commercial work.
Lou Melluzzo: It's all aerospace programs, you know, predominantly Air Industries Group is roughly 85% military programs, but in light of what's happened to commercial aviation and Boeing, there have been a lot more opportunities on the other side of the fence, on the commercial side, which we are. We have one product here in our Bayshore facility in New York that's commercial, everything else, and that's our thrust truck. So, you know, we're pursuing both military and commercial work.
Speaker Change: It's all aerospace programs, you know, predominantly air industry's group is roughly 85% military programs, but...
Speaker Change: in light of what's happened to the commercially aviation and bawling.
Speaker Change: there's been a lot more opportunities on the other side of the fence on the commercial side which we are you know we have we have one product here in our Bayshore facility in New York that's commercial everything else and that's our thrust strut
Luciano Melluzzo: Our Connecticut operations benefited from the ramp-up of the rotocraft product and the fruition of several company-wide profit enhancement initiatives that we have been working on over the last several months. This increased growth margins together with closely controlled expenses resulted in our return to profitability.
Speaker Change: We're pursuing both military and commercial work, commercial would be a relatively new frontier for us here in New York. We do a lot more commercial in our Connecticut operations.
Lou Melluzzo: Commercial work would be a relatively new frontier for us here in New York. We do a lot more commercial work in our Connecticut operations, but it's the same equipment, it's the same materials, it's the same way to approach the work, so it's nothing new to us. It just hasn't been as lucrative as military work in the past.
Lou Miluto: Commercial would be a relatively new frontier for us here in New York. We do a lot more commercial in our Connecticut operations. Ltd.
Speaker Change: But, it's the same equipment, it's the same materials, it's the same way to approach the work so it's nothing new to us, it's just a commercial in the past hasn't been.
Luciano Melluzzo: In addition, I want to mention that we expect Q3 to reflect some softness as compared to our earlier qualters, quadders, followed by a stronger Q4.
Howard Halpern: We all know that, that's no secret, but Boeing with the 767 and the 787 and all these other new programs, and despite the issues that they've had with them, a lot of people during COVID that were commercially based went out of business. So we're finding that the market is looking for companies such as ours for commercial applications, and we plan on taking advantage of it. Okay, well, I look forward to those announcements yet to come. Keep up the great work, guys. Thank you, Howard. Thank you, Howard.
Speaker Change: as lucrative as military work, we all know that, that's no secret, but bowing with the 767 and the 787 and all these other new programs and despite the issues that they've had with it.
Luciano Melluzzo: Now let me turn to bookings. Our order flow continues to be strong. Bookings in Q2 were 16 and a half million dollars, growing 3.5 million or 27 percent from the level we achieved in Q1. We achieved a book to build ratio of 1.2 to 1. Given our strong bookings, our total-funded backlog at the end of Q2 was slightly over 100 million, which is a significant milestone.
Speaker Change: You know, a lot of people during COVID that were commercially based went out of business. So we're finding that the market is looking for companies such as ours for commercial applications and we plan on taking advantage of it.
Howard Halpern: Okay, well I look forward to those announcements yet to come. Keep up the great work, guys. Thank you, Howard.
Speaker Change: Okay, well I look forward to those announcements yet to come. Keep up the great work guys.
Lou Miluto: Thanks, Howard. Thank you.
Luciano Melluzzo: Our goal is to grow the backlog from here.
Speaker Change: Thank you Howard. Thanks Howard.
Luciano Melluzzo: Before turning the call over to Scott, I want to provide a brief summary of our recent visit to the Farmboro Air International Show. The show is a trade exhibit for the aerospace and defense industry and is attended by key clients in manufacturing. From our perspective, it was a great show. Our schedule was booked full. We met and solidified relationships with both old and new customers and believe we have set the stage for great things to come.
Operator: There are no further questions like this time.
Operator: Thank you. There are no further questions at this time; now, I'll turn the call back to Lou Melluzzo for closing remarks. Thank you, Joe. Thank you all for taking the time to be on this call today and for your interest in Air Industries Group. We look forward to updating you on our progress on the next call. Thank you again. Joe, with that, if there are no further questions or anything, you may terminate the call or end it. Thank you. This concludes today's conference. You may now disconnect your lines at this time. Enjoy the rest of your day.
Speaker Change: [inaudible]
Speaker Change: Thank you.
Lou Miluto: Now I'll turn the call back to Melluzzo for closing remarks. Thank you, Joe. Thank you all for taking the time to be on this call today and for your interest in Air Industries Group. We look forward to updating you on our progress on the next call. Thank you again. Joe with that.
Speaker Change: and there are no further questions like this, so I'll turn the call back to the Rumi Luzzo for closing remarks.
Rumi Luzzo: Thank you, Job.
Rumi Luzzo: Thank you all for taking the time to be on this call today and for your interest in air industry school. We look forward to updating you Ana and our progress on the next call.
Operator: If there's no further questions or anything, you may terminate the call or end the call. Thank you.
Speaker Change: Thank you again, Joe. With that, if there's no further questions or anything, you may terminate the call or end the call.
Luciano Melluzzo: Now let me turn to call over to Scott who will discuss our Q2 results in more detail. I'll be back to add some closing commentary and a bit more specifics on our 2024 outlook before opening the call up to questions and answers. Scott, you may proceed.
Operator: This concludes today's conference. You may now disconnect your line for this time. Enjoy the rest of your day.
Speaker Change: Thank you. This concludes today's conference.
Scott Glassman: Thanks, Lou. I share loose enthusiasm about the Q2 results. Let me discuss them in more detail.
Scott Glassman: Consolidated net sales for the second quarter ended June 30, 2024 for $13.6 million. This represents a 2.8 percent increase as compared to the $13.2 million we achieved in Q2 of 2023. The improvement in our operating results is directly due to significant growth margins, which is approximately 474,000, where 22 percent higher than Q2 of 2023, and 738,000, were 39 percent higher than the first quarter. During our last call, we expressed confidence that margins were to improve and they have.
Scott Glassman: Although quarterly fluctuations may still occur, we believe the growth margin on a year over year basis will continue to show improvement. We continue to focus on keeping operating expenses controlled. For the second quarter, they were 1.9 million, which was 206,000 or 9.8 percent lower than the prior year second quarter, and 273,000 or 12.6 percent less than Q1 of 2024. As a result of increased profitability and controlled expenses, we had operating income exceeding three quarters of a million dollars compared to a modest operating income of just 72,000 in Q2 of 2023, and an operating loss of close to 260,000 in Q1 of 2024.
Scott Glassman: Finally, on the bottom line, the net income of $298,000 or 9 cents per share compared to a loss of $395,000 or negative $12 cents a share in 2023 and a loss of $706,000 or a loss of $21 cents a share in Q1 of $24. From the first quarter to the second quarter, our net income has increased by over a million dollars. For the six months ended June 30th, 2024, our adjusted EBITDA was $1,775,000, an improvement of nearly 236,000 or 15% from the prior year.
Scott Glassman: A detailed reconciliation of EBITDA to GAAP was included in our press release that was issued last evening. As filed on form AK earlier this year, we amended our credit facility and negotiated more favorable covenants. In this regard, I am pleased to report that we are in compliance with these covenants and expect to remain in compliance.
Scott Glassman: Now, let me quickly highlight a few items on the balance sheet. Compared to December 31st, 2023, our total debt is up by $1.6 million to $24,939,000, a 7% increase. This was due to the completion of the installation of solar panels at our Connecticut manufacturing facility, an increase in our equipment, term loan that was made with our recent amendment to our banking agreement. Inventory is slightly lower, which reflects timing and carefully monitoring inventory levels with a goal to improve our working capital requirements. Accounts receivable are essentially unchanged, but other working capital accounts such as accounts payable and accrued expenses are down by about half a million dollars.
Luciano Melluzzo: With that, I will turn the call back to Lou for some closing remarks and update on our 2024 business outlook. Lou, thank you Scott. First half of fiscal 2024, reflecting strength, strong order flow and improvement from last year, I feel confident about our second half. With two quarters under our belt, fiscal 2024 is on track to be a year of significant growth. Although it remains difficult to predict the timing of orders, raw materials, and delivery times for finished products, the company reaffirms our target of net sales for fiscal 2024 to be at least $50 million.
Luciano Melluzzo: With adjusted EBITDA in 2024 being significantly better than in 2023. Additionally, we are working on a number of large booking opportunities that we expect to finalize soon. If we are successful in closing these opportunities before the end of our fiscal 2024, not only will we achieve growth at 2024, but 2025 will be even better.
Scott Glassman: With that, Joe, I would like to open the call to our questions and answer portion. Thank you. Please, gentlemen, as a reminder, if you would like to ask a question, please press star one on your telephone keypad, and a confirmation column will indicate your line is in the queue.
Howard Halpern: You may first start, too, if you would like to remove your question from and our first question comes from the line of Howard Halpern with Haggletch Brothers. Please proceed. Congratulations, guys.
Howard Halpern: Fantastic quarter. Hi, Howard. How are you doing today? Hi, Howard. Thank you. You did mention briefly that, you know, Q4 will be stronger than Q3. Is that in terms of revenue and margin or just in terms of revenue for Q3? And are there new programs starting, I guess, in Q3 that might hamper Rose Margin a little bit? Hi, Howard. So Q3 is going to be a combination of lower sales and lower, which will obviously give you lower margin dollars.
Howard Halpern: Probably slightly lower margin percentage as well, which, as we said, will turn around in the fourth quarter. It has to do with some customer pushouts and things of that nature, but we are confident that the year will be as we have laid out. Howard, it's timing of orders in material flow. You know, the pipeline is full, the very positive thing for the balance of the year.
Howard Halpern: Okay. Are there any additional projects that you are, you know, doing in-house to create efficiencies? Or is that type of capital spending coming to an end where you'll start paying down some debt? Well, we've been very frugal this year with capital spending. You know, we retrofitted it. We haven't, we purchased one new coordinate measuring machines in the early, early this year. I think to the tune of about $300,000, but other than that, we had three machines in the shop that have been there for a while.
Howard Halpern: That's its old buyer and it has a great capability to respect those machines. It's what you need in this business. And we spent roughly $300,000 per machine to bring it up to the 21st century. So basically new controls, new brains and these things. And we will reap the benefit on up. We're looking, our pipeline of potential orders is immense. I mean immense. So we don't want to get caught short. We wanted to make sure that we had machines to be able to produce this work for a fortune enough to win some of this.
Howard Halpern: So some of these projects coming up because in this industry, you're a year out and getting things repaired and equipment. And so we went ahead and spent the money to prepare for, you know, potential floodgates of new opportunities coming down the pike. And in terms of those opportunities and maybe in conjunction with the air show too, those opportunities are they, you know, like you said, you know, new old and potentially new customers.
Howard Halpern: But are the programs brand new or will they be similar to some of the other programs that you have that are ongoing? It's all aerospace programs, you know, predominantly air industries group is roughly 85% military programs. But in light of what's happened to the commercial aviation and Boeing, there's been a lot more opportunities on the other side of the fence on the commercial side, which we, you know, we have, we have one product here in our Bay Shore facility in New York.
Howard Halpern: That's commercial everything else in that's our thrust. So, you know, we're pursuing, we're pursuing both military and commercial work. Commercial would be a relatively new frontier for us here in New York. We do a lot more commercial in our Connecticut operations.
Howard Halpern: Ltd.
Howard Halpern: Okay, well I look forward to those announcements yet to come. Keep up the great work, guys. Thank you Howard. Thanks Howard. Thank you.
Operator: There are no further questions like this time.
Luciano Melluzzo: Now I'll turn the call back to Melluzzo for closing remarks. Thank you Joe. Thank you all for taking the time to be on this call today and for your interest in Air Industries Group.
Luciano Melluzzo: We look forward to updating you on our progress on the next call. Thank you again. Joe with that.
Operator: If there's no further questions or anything, you may terminate the call or end the call. Thank you.
Operator: This concludes today's conference. You may now disconnect your line for this time. Enjoy the rest of your day.