Q1 2025 Air Industries Group Earnings Call
Speaker Change: [music].
Hello, and welcome to Air Industries group's first quarter of 2025 earnings Conference call.
Operator: Hello and welcome to Air Industries Group first quarter of 2025 earnings conference call. At this time, all participants are in a listen-only mode. Question and Answer Session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded.
At this time all participants are in a listen only mode.
A question and answer session will follow the formal presentation.
What you require operator assistance during the conference. Please press star zero on your telephone keypad.
Please note this conference is being recorded.
Operator: This call 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 forward-looking 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. Future developments and actual results could differ materially from those set forth and contemplated by or underlying the forward-looking statement.
This call may contain forward looking statements as defined in section 27, a 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 forward looking 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.
Future developments and actual results could differ materially from those set forth and contemplated by or underlying the forward looking statements in light of these risks and uncertainties. There can be no assurance that the forward looking information will prove to be accurate.
Operator: In light of these risks and uncertainties, there can be no assurance that the forward-looking information will prove to be accurate.
Operator: This call does not constitute an offer to purchase any securities nor a solicitation of proxy, consent, authorization, or agent designation with respect to a meeting of the company's shareholders.
This call does not constitute an offer to purchase any securities nor solicitation of proxy consent authorization or agent designation with respect to a meeting of the company's shareholders at.
Daryl: At this time, I would now like to turn the call over to Lou Melluzzo, President and CEO. Please go ahead, sir. Thank you, Daryl. Thank you all for joining us.
At this time I would now like to turn the call over to Lou Maluso, President and CEO. Please go ahead Sir.
Lou Maluso: Thank you Daryl and thank you all for joining us today.
Luciano Melluzzo: We just recently, on April 16, had our year-end conference call. Not too much has transpired since. But for the first quarter, our sales were lower compared to 2024. Despite this, gross profit increased. We have worked many hours trying to increase the efficiency of our operations and making more money on fewer sales is a good measure that those efforts are paying off. Scott will go into more detail on the numbers, but I note that in the first quarter, our operating loss increased. This was largely due to an increase in non-cash expense for stock compensation.
Lou Maluso: We just recently on April 16th at our year end conference call Maximo too much has transpired since then.
Lou Maluso: For the first quarter, our sales were lower compared to 2024. Despite this gross profit increased.
We have work many hours trying to increase the efficiency of our operations and making more money on fewer sales as a good measure that those efforts are paying off.
Speaker Change: <unk> will go into more details on the numbers, but I note that in the first quarter, our operating loss increased.
Speaker Change: This was largely due to an increase in noncash expense for stock compensation.
Luciano Melluzzo: I would like to focus on our business development efforts. In the first quarter, we accelerated an already aggressive program. As part of this, I am excited to share that once again, we will be attending the Paris Air Show in June. We have attended the last several shows, both in Paris and in alternate years in England. These shows have been very successful for us, resulting in the onboarding of several major new customers. The aerospace industry uses a book to bill ratio. This metric is the total of new business book divided by sales bill to customer. It is an excellent metric to measure the health of a business development.
Speaker Change: I would like to focus on our business development efforts in.
Speaker Change: In the first quarter, we accelerated and they're ready aggressive program as part of this I am excited to share that once again, we will be attending the Paris Air show in June.
Speaker Change: We have attended the last several shows both in Paris and in alternate years in England.
Speaker Change: These shows have been very successful for us, resulting in the on boarding of several major new customers.
Speaker Change: The aerospace industry uses a book to Bill ratio. This metric is a total of new business booked divided by sales billed to customers.
Speaker Change: That's an excellent metric to measure the health of our business development effort.
Luciano Melluzzo: If the ratio is below one, not enough new business is being booked, and it is likely that future sales will decline. A ratio of 1.2 to 1 generally reflects a growing business. Our ratio calculated on a trailing 12 month basis was 1.34 to 1 at the end of the first quarter. This is above the industry standard, and almost a 20% improvement from the prior year. And since the first quarter of 2023, it had increased by 80%.
Speaker Change: If the ratio is below one not enough new business is being booked and it is likely that future sales will decline.
Speaker Change: The ratio of one point to the one January reflects a growing business our ratio calculated on a trailing 12 month basis was 1.34 to one at the end of the first quarter.
Speaker Change: This is above the industry standard and almost a 20% improvement from the prior year and since the first quarter of 2023, it had increased by 80%.
Luciano Melluzzo: We have laid a firm foundation for future sales growth. Bookings lead to backlog, and our success in bookings is reflected in our backlog. Our funded backlog supported by firm orders from customers is a record $120 million. Our total backlog, including forecast, but not yet firm customer orders, is more than a quarter billion dollars. These levels were achieved during 2024 and are at record levels for Air Industries. Bookings lead to backlog and backlog leads to sales.
Speaker Change: We have laid a firm foundation for future sales growth bookings lead to backlog and our success in bookings as reflected in our backlog.
Speaker Change: Our funded backlog supported by firm orders from customers is at a record $120 million.
Speaker Change: Our total backlog, including forecast, but not yet firm customer orders is more than a quarter $1 billion.
Speaker Change: These levels were achieved during 2024 and are at record levels for you or injuries.
Speaker Change: Bookings lead to backlog backlog leads to sales, but to make sales we need tab raw materials.
Luciano Melluzzo: But to make sales, we need to have raw material. raw materials are flowing more steadily to us and to others. However, over the past several years, the initial lead time, the time from order placement to receipt on our dock have grown exponentially. they remain very long. If we receive an order from a customer today, an order material today, it may be nine months to 15 months before we can begin to cut metal and make the product. While this is frustrating, it is a reality of the industry.
Raw materials are flowing more steadily to us and to others. However over the past several years. The initial lead time to time from order placement to receipt on our dock has grown exponentially.
Speaker Change: They remain very long today.
Speaker Change: If we receive an order from a customer today northern material today. It may be nine months to 15 months before we could begin to cut metal and make the product.
While this is frustrating it is a reality of the industry.
Scott Glassman: I'm going to turn the call over to Scott, who will discuss first quarter results, and then come back from some closing arguments, Scott. Thanks, Lou. Let me discuss the results of Q1 2025 in some more detail. Consolidated net sales for the first quarter ended March 31, 2025 were $12.1 million. This was lower than the $14.1 million we achieved during Q1 of 2024. However, and rather more importantly, our gross margin for the first quarter increased by over $100,000 on these lower sales to about $2 million from the $1.9 million in 2024. Our gross margin percentage for the quarter was 16.8%, an increase of 320 basis points compared to the first quarter of 2024.
Speaker Change: I'm going to turn the call over to Scott, who will discuss first quarter results and then come back from some closing arguments Scott.
Scott: Thanks, Lou let me discuss the results of Q1 'twenty 'twenty five in some more detail consolidated net sales for the first quarter ended March 31, 2025 were $12 1 million. This was lower than the $14 1 million, we achieved during Q1 of 'twenty 'twenty four.
Scott: However, and rather more importantly, our gross margin for the first quarter increased by over $100000 on these lower sales to about $2 million from the 1.9 million in 2020 for a gross margin percentage for the quarter was 16, 8% an increase of 320 basis point.
Scott: Compared to the first quarter of 2024.
Scott Glassman: I would also like to note that this margin percentage was higher than the full year of 2024. While a gross margin of 16.8% does still remain below our historical average, we anticipate continuing to improve this in the future. As I mentioned a few weeks ago when discussing our year-end results, we continue to control our operating expenses despite the inflationary environment. For the first quarter, they were 2.8 million, an increase of 615,000, or 28.4% higher than last year. of this increase, 412,000 was related to an increase in stock compensation expense, which is a non cash expense.
Scott: I'd also like to note that this margin percentage was higher than the full year of 2024, while the gross margin of 16, 8%. Those are still remain below our historical average we anticipate continuing to improve this in the future.
Scott: As I mentioned, a few weeks ago when discussing our year end results, we continue to control our operating expenses, despite the inflationary environment.
Scott: For the first quarter, they were $2 8 million, an increase of 615000 or 28, 4% higher than last year.
Scott: This increase 412000 was related to an increase in stock compensation expense, which is a noncash expense and that accounted for 67% of the increase absent. This noncash expense the increase would have been slightly above 9%.
Scott Glassman: And that accounted for 67% of the increase. Absent this non cash expense, the increase would have been slightly above 9%. We had a loss from operations of $746,000 in the first quarter of 2025, as compared to a loss of $259,000 during the same period in 2025. Finally, on the bottom line, we had a net loss of $988,000 or 27 cents a share in 2025 as compared to a loss of $706,000 or 21 cents a share in the first quarter of 2024. Our adjusted EBITDA for the first quarter was increased to $576,000, which was an increase of $214,000, or nearly 60% compared to the first quarter of 2020.
Scott: We had a loss from operations of $746000 in the first quarter of 2025 as compared to a loss of 259000 during the same period in 2024.
Scott: Finally on the bottom line, we had a net loss of $988000 or 27 cents a share in 2025 as compared to a loss of 706000 or 21 cents a share in the first quarter of 'twenty 'twenty four.
Scott: Our adjusted EBITDA for the first quarter was increased to 576000, which was an increase of 214000 or nearly 60% compared to the first quarter of 2024.
Scott Glassman: I am also very pleased to report that we remain in compliance with all of our covenants with our loan agreement with our lender. Now, let me quickly highlight a few items on the balance sheet compared to December 31, 2024. Our total debt has been reduced by approximately $1.6 million. Our inventory has remained stable, increasing slightly more than $100,000. As this is our largest asset, we monitor this diligently. A cast receivable has decreased by over 2 million and this is a function of the timing of sales and collection. accounts payable plus accrued expenses have also decreased by about $550,000.
I am also very pleased to report that we remain in compliance with all of our covenants with our loan agreement with our lender.
Scott: Now let me quickly highlight a few items on the balance sheet compared to December 31, 'twenty 'twenty four.
Scott: Our total debt has been reduced by approximately $1.6 million.
Scott: Our inventory has remained stable increase.
Scott: Increasing slightly more than $100000 as this is our largest asset we monitor this diligently.
Accounts receivable has decreased by over 2 million.
Scott: And this is a function of the timing of sales and collections accounts payable plus accrued expenses have also decreased by about $550000.
Luciano Melluzzo: And with that, I will turn the call back to Lou for some closing remarks and an update on our business outlook for the remainder of 2025. Lou? Thank you, Scott. Earlier this year, when discussing the 2024 results, we discussed the possible impacts of tariffs and changes in the defense budget on our future. The situation has clarified somewhat and we can now see it more clearly as as to Tara. We are now pretty convinced that any impact on tariffs on imports will be muted. Tariffs will not affect the one item we import as we have price protection from our customers.
Lou Maluso: And with that I will turn the call back to Lou for some closing remarks, and an update on our business outlook for the remainder of 2025 blue.
Lou Maluso: Thank you Scott.
Lou Maluso: Earlier this year when discussing the 'twenty 'twenty four results, we discussed the possible impacts of tariffs and changes in the defense budget on our future.
The situation has clarified somewhat and we can now see it more clearly.
Lou Maluso: As as to tariffs, we're now pretty convinced that any impact on tariffs on imports will be muted tariffs will not affect the one item we import as we have price protection from our customers.
Luciano Melluzzo: The defense spending. The proposed Pentagon budget has been described as a surge budget, perhaps increasing spending to $1 trillion. We do not expect any significant benefit from the surge in spending. But by the same token, we do not expect any material reduction from a possible reordering of spending priorities. As we stand here today, and as we stated in our press release this morning, while quarterly results during 2025 will vary, we reaffirm our belief that the full year of 2025 will exceed the results of 2025.
Lou Maluso: The defense spending the proposed Pentagon budget has a has been described as a surge budget, perhaps increasing spending to one trillion dollars. We do not expect any significant significant benefit from the surge in spending but by the same token we do not expect any material reduction from a possible reorder then.
Lou Maluso: About spending priorities.
Lou Maluso: As we stand here today and as we stated in our press release this morning.
Lou Maluso: While quarterly results during 2025 will vary.
Lou Maluso: We affirm our belief that the full year of 2025 weeks.
Lou Maluso: We exceed the results of 2024.
Speaker Change: With that Ah Daryl I'd like to open up the call to questions and answers if you may.
Daryl: With that, Daryl, I'd like to open up the call to questions and answers, if you may. Thank you.
Speaker Change: Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad a.
Operator: We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone. A confirmation tone will indicate your line is in the question. may press star two to remove yourself.
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Operator: Participants using speaker equipment, it may be necessary to pick up your handset before pressing the start One moment, please, for your first question.
Speaker Change: One moment. Please for your first question.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Our first questions come from the line of Howard Halpern with the Tankless Brothers. Please proceed with your questions.
Howard Halpern: Our first questions come from the line of Howard Halpern with the Taglish Brothers. Please proceed with your questions. Good afternoon, guys. How are you doing, Howard? Hey, Howard, how are you?
Speaker Change: Oh, Hey, good afternoon guys.
Speaker Change: How are you doing how are they Howard how are you okay.
Luciano Melluzzo: I guess a little clarity on first quarter revenue. Was it really a function more of you know, the long lead times and what was it more when purchase orders were coming in? If you could just add some color to first quarter and and what are you seeing in the trends so far for the second quarter? So, Howard, as I say, as I stated earlier, you know, the products that we ship this first quarter, the material you know, probably came about a year ago, or in some cases, a little longer. So at that time, it was definitely an issue with with getting materials timely.
Speaker Change: A little clarity on our first quarter revenue was it really a function more of.
Speaker Change: The long lead time and or was it more when purchase orders were coming in.
Speaker Change: If you could just add some color to our first quarter EM and what are you seeing in the trend somewhat from the second quarter.
Howard Halpern: So Howard.
Howard Halpern: As I say as I stated earlier, you know the products that we shipped this first quarter at a material.
Howard Halpern: You know probably came about a year ago or in some cases, a little longer so.
Howard Halpern: At that time, it was definitely an issue with what's getting materials timely.
Luciano Melluzzo: I said, we are seeing some definitely an ease in acquiring materials, the lead times have gotten exponentially longer, there's no question about it. But at least we have access to these materials. So even though we piggyback on a lot of OEMs, you know, purchase orders, the mills just are not producing materials and, you know, in the three to six months like we are accustomed to in this business in the past. So We are getting material. Like I said, the stuff that we had problems in the past, we're getting, we're getting those materials. It's just taking a little longer.
Howard Halpern: Okay.
Howard Halpern: We are seeing some definitely at ease in acquiring materials. The lead times, if that's gotten exponentially longer there's no question about it but at least we have access to these materials. So even though we piggy back on a lot of Oems.
Howard Halpern: Purchase orders.
Howard Halpern: The mills just are not producing materials in the three to six months like we're accustomed to in this business in the past so are we.
Howard Halpern: We are getting material like I said the stuff that we had problems in the past we're getting we're getting those materials has just taken a little longer we've ordered a few more pieces than we need to try to get ahead of the try to get ahead of the curve, but that's the reality of the business just because it's gotten.
Luciano Melluzzo: We've ordered a few more pieces than we need to try to get ahead of the curve. But that's the reality of the business.
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Howard Halpern: <unk> gotten.
Howard Halpern: Pushed out, but we are meeting our customers' delivery expectations for share it back with some customers.
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Unknown Executive: And were you speaking with Unknown crew chief Although I don't speak with fault Unknown man 6. We are meeting our customers delivery expectations. right right at the doorstep, we've caught up and we're delivering to their cadence. So that's a non issue. Okay, and it remains pretty solid. No hesitation on your customers due to everything that's been going on the past couple of months economically. No, there's been no hesitation at all.
Howard Halpern: Right right at the doorstep, we have caught up and were delivering to their cadence so that that's a nonissue.
Howard Halpern: Okay.
Howard Halpern: And.
Howard Halpern: Pretty solid no.
Howard Halpern: No hesitation on your customers due to everything that's been going on in the past couple of months economically.
Howard Halpern: No there's been no hesitation at all no.
Luciano Melluzzo: Now on the on the programs that we are involved with, we feel they're, you know, relatively insulated. I mean, you know, the CH 53k Sikorsky is behind in qualifications. We don't foresee that slowing up. We're still shipping last year's requirements because we couldn't get material. So I think we'll be good on that.
Howard Halpern: And the programs that we are involved with we feel theyre relatively insulated.
Speaker Change: The CH 53 K a.
Speaker Change: So of course skews behind and qualifications, we don't foresee that slowing up where were still shipping last year's requirement because we couldn't get materials. So I think we'll be good on that.
Luciano Melluzzo: On the E2D, the big platform that we have for Northrop, there's There's four, there's eight planes. Four, I think, four or five are domestic and the rest four overseas. We feel that those those will ship as scheduled.
Speaker Change: On the <unk>, the big platform that we have for north or theirs.
Speaker Change: There's four there's eight planes for I think four or five or domestic and the rest of world sees we feel that those those will ship as scheduled.
Luciano Melluzzo: You know, the F-35 might see some some pressures in the future. Maybe there might be a reduction in quantities. We just we just don't know. But our our take on that platform is not huge right now. We're looking to expand it. So even even if even if those planes decline in numbers, we feel that we can increase our content on the F-35 and we're diligently working to make sure that that happens. So we, you know, unless there's a some forsaken event that we are not aware of, we see that we see our products still continuing to flow as we have broadcasted them.
Speaker Change: The F 35 might see some some pressures and in the future maybe there might be a reduction in quantities. We just we just don't know, but our our take on that platform is not huge right now.
Speaker Change: We're looking to expand it so even even if even if those planes decline in numbers, we feel that we can increase our content on the F 35 and were diligently working to make sure that that happens. So we you know unless there's a.
Speaker Change: Some forsaken event that we are not aware of we see that we see our products still continuing to flow as we have forecasted them.
Speaker Change: Okay.
Luciano Melluzzo: Okay, and with a trip to the, you know, the Paris Air Show, are there Scott Glassman, Jaime Perez, Scott Glassman, Jaime Perez, Scott Glassman, Jaime Perez, So by the time we get to the Paris Air Show, our schedule has been has been booked fully. And there's definitely some interest from some large overseas, you know, manufacturers that we are we have scheduled meetings for said in the last the last time we were the show alternates between Paris and Farnsboro, England. And the last time we were there, we we managed to bring in several really large client.
Speaker Change: Trip queue that you know the Paris Air show they are.
Speaker Change: New customers that you are looking to I guess touch base base with and hope that they will become our new customers.
Speaker Change: So by the time, we get to the Paris Air show our schedule has been booked.
Speaker Change: Booked fully and Theres definitely some interest from some large oversea.
Speaker Change: Manufacturers that we have scheduled meetings or set in the last the last time, we were at the show alternates between Paris, and Farnborough, England and the last time, we were there we managed to bring in several really.
Speaker Change: Large clients. So the show has been very successful we are targeting some additional customers.
Luciano Melluzzo: So the show has been very successful. We are targeting some additional customers. You know, there's a lot of activity around the electric vehicle. Now that's, that's an investment in the future. There's no question about it. Uh, for the, for the electric takeoff, you know, the electric planes per se. So, uh, we've got some appointments with those, uh, and some meetings scheduled with those. So there, there are some things in the works. Yes.
Speaker Change: There's a lot of activity around the electric vehicle now.
Speaker Change: That's an investment in the future there's no question about it.
Speaker Change: For the for the electric Gov takeoff electric planes per se.
Speaker Change: We've got some appointments with those and some meeting scheduled with those so there are some things in the works yes.
Luciano Melluzzo: Okay. And one last one. Was this a one-time stock-based compensation event for this year? It will likely be, the expense will likely be lower in future quarters.
Speaker Change: Okay, and one last one but the one times, but is this a one time stock based compensation a event could this year.
Speaker Change: Hum.
Speaker Change: We will likely be the expense will likely be lower in future quarters.
Howard Halpern: Okay, I just wanted to make sure on that and thanks guys and keep up the great work. It's a nice lean machine that you that you have running there. Thanks, Howard. We appreciate it. Thank you. As a reminder, if you would like to ask a question, please press star one on your telephone.
Speaker Change: Okay. Okay, I just wanted to make sure on that and thanks, guys and keep up the great work nicely machine that you've got that you have running right now.
Howard Halpern: Thanks, Howard May calculate it.
Speaker Change: Thank you as a reminder, if you would like to ask a question. Please press star one on your telephone keypad.
Howard Halpern: Yeah.
Alumina: I'm not showing any further questions at this time I'll hand, the call back over to alumina Theres no for any closing remarks.
Operator: I'm not showing any further questions at this time.
Daryl: I'll hand the call back over to Lou Melluzzo for any closing. Thank you, Daryl.
Darryl: Thank you Darryl.
Luciano Melluzzo: Thank you all for being on the call today and for your interest in Air Industries Group. We look forward to updating you on our progress on the next call. And thank you again for everybody for taking the time to sit in on the call, Daryl. I think we're all set. Thank you so much.
Speaker Change: Thank you all for being on the call today and for your interest in Air Industries Group, We look forward to updating you on our progress on our next call.
Alumina: And thank you again for everybody for taking the time to.
Alumina: And on the call Daryl I think we're all set.
Speaker Change: Thank you. So much. This does conclude today's teleconference. We appreciate your participation you may disconnect. Your lines at this time enjoy the rest of your day.
Operator: This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day. [music]
Speaker Change: [music].
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: [music].