Q3 2025 AirBoss of America Corp Earnings Call

25 conference call for Airbus of America.

All lines have been placed on mute to prevent any background noise.

After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad,

If you would like to withdraw your question, press star 1 again, thank you.

I would now like to turn the call over to Greg shock, chairman and co-ceo please go ahead.

Thank you Eric. Uh, good morning everyone. And thank you for joining us for the Airbus third quarter results conference call. Uh, my name is Gran shocked. I'm the chairman and co-ceo of verbos with me today are Chris bits of cactus, our chairman, our sorry, our president and co-ceo Frankie and Tilly our CFO.

And Chris vigil, our EVP and general counsel our agenda today will start with a review of the operational highlights of the quarter followed by a discussion of our final Financial results before we open the conference line to questions. Before we We Begin. I'd like to remind listeners that are remarks today. Contain forward with me statements, including our estimates of future developments.

we invite listeners to review risk, factors related to our business and our annual information form, and our mdna, both of which are available on Cedar plus and our, our corporate website

Also, we discussed certain non-gaap measures, including habit, do reconciliations of these measures are available in our mdna.

And finally please note that our reporting currency is UN US Dollars. References today will be in US Dollars unless we indicate otherwise

With that, I'll now turn the call over to Chris Blitz Cactus for the operational review.

Thank you, Gren, and good morning everyone.

Are boss experience. Some real positive Traction in Q3 2025 compared to Q3 2024. Mainly driven by significant increases in airboss manufactured products, defense products business partially offset by reduced volumes at airboss rubber Solutions, during the quarter airboss maintained its focus on risk, mitigation plans, including further cost reductions and efficiency improvements to build both momentum at ARs and amp. We'll continue to navigate obstacles related to economic and geopolitical challenges, including Market softness, the US government shutdown, tariffs inflationary pressure, and the potential for further escalating and retaliatory, tariffs uncertainty is expected to persist in the short to midterm with the volume recovery difficult to anticipate as any recovery could be impacted by further tariffs duties. Other restrictions

Or trade or geopolitical and economic challenges.

The company commenced the relocation of its facility in Joseph. Maryland to Auburn Hills. Michigan a key. Step in improving long-term efficiency at airboss manufactured products. This transition will consolidate operations and is expected to reduce fixed costs and better align amps defense production.

Now, given the crossborder nature of the company's operations, a significant portion of the products manufactured by the company in Canada, are sold into the United States and may be subject to current or pending tariffs as well as additional tariffs, which could be enacted. Despite the fact that the majority of airboss products are covered under the usmca cuss SMA, the company continues to evaluate and execute on contingency plans to deal with any future potential challenges. That may present themselves as cusma gets renegotiated

despite the increase economic uncertainty, disruption of trade flows and increase costs and strains on Supply chains, manage and remains focused on the successful conversion of key opportunities to support future growth.

ARS experienced continued softness in Q3 2025 compared to Q3 2024.

Compared to last year, the segment experienced both Revenue contraction and reduced margins driven by overall softness in most customer sectors primarily caused by the shifting tariff situation. As customers in the United States, continue to manage their exposure created by tariffs on Global Supply chains.

ARS remains committed to executing on its strategy to deliver strong results. By focusing on specialized products, expanded production of a broader array of compounds and enhance flexibility and securing and launching new accounts as a segment, ARS continued to invest in research and development during the quarter to support enhanced collaboration with customers while preparing to launch new products.

Amp experienced notable Improvement in Q3 2025 compared to Q3 2024, primarily due to the defense products business continuing deliveries on previously announced contracts and a focus on its footprint optimization to help support profitable growth.

During Q3 2025 with further initiatives, focused on fixed cost. Reductions and continued, work with key customers to leverage opportunities aligned with its growth initiatives.

the defense products business continues to work closely with its suppliers and government Partners to mitigate the previously announced delays to the vandalier program with deliveries resuming in the final weeks of Q3 2025, and into Q Q4 2025, with completion expected in early 2026,

The rubber molded products operations were impacted by continued. Volume softness related to the original equipment manufacturers, the oems due to evolving impact of tariffs in the automotive sector.

This business continued its focus on managing costs and a commitment to drive efficiencies and best-in-class automation, as well as diversification of his product lines into adjacent sectors.

Despite the many ongoing challenges in the US industrial economy year to date, Airbus Consolidated performance as shown significant Improvement year-over-year.

Is up by 13 million.

Adjusted IBA is up by 9 million dollars. Cash from operating activities up. 24 million. That debt is down by 16 million dollars from the beginning of 2025, and most importantly, net debt. The trailing 12 months, adjusted IBA has dropped from 4.67 times. At the end of Q3, 2024 to 2.7 times at the end of Q3 2025,

These metrics are strong indicators that the efficiency improvements across the Enterprise along with successful launch and execution of new program awards are driving. Strong improvements year-over-year for Airbus

While our short and medium-term actions are driving. Measurable improvements the company's long-term priorities, continue to be the growth.

Of the core rubber solutions by emphasizing rubber compounding as the core driver for sustainable growth and productivity focusing on Innovation and customer of compounding. While aiming to expand market, share through organic and inorganic means

At the same time, driving a growth strategy. In amp is critical for us as we focus on an expanded range of rubber molded products and and making sure that we are well positioned to take advantage of increased defense spending globally.

Airboss continues to focus on these long-term priorities while investing in court, areas of the business to expand a solid foundation that will support long-term growth on the foundation of the recently implemented efficiency improvements.

I will now pass the call over to Frank for the financial review, right? Thanks Chris and good morning everyone. As a reminder all dollar amounts presented today are in US Dollars, except for dividends per share, which are in Canadian dollars, percentage changes compared to Q3 of 2025 to Q3 of 2024. Unless otherwise noted

To be respectful of your time today. I will aim to be brief in my summary of our Q3 2025 results.

Starting from the top line are bosses Consolidated. Net sales for Q3 2025 were 100.4 million an increase of 4.4% from the prior year.

The increase was primarily due to higher volumes at manufactured products, partially offset by lower sales at rubber Solutions.

Consolidated gross profit for Q3 2025, increase by 0.4 million, to 16.5 million compared with 23 of 2024 and Consolidated adjusted ebit do for Q3 2025 increase to 7.3 million from a prior year of 6.4 million.

In both cases, the increases were driven by improved volume and mix at manufactured products. Partially offset by volume softness at rubber Solutions.

Turning. Now to our individual segments, net sales in the Airbus rubber solution segment for Q3 2025 decreased by 5.5% to 51.5 million from 54.5 million in Q3 2024.

The volume decreased by 7.9% with decreases in most sectors.

Totaling volume was down. 43.8% while non-polar volume was down 6.7%.

Gross profit at Airbus rubber solutions for Q3 2025 decreased by 23.9% to 6.3 million from 8.3 million in Q3 2024.

Gross margin percentage. Decreased to 12.2% of net sales from 15.1% of net sales in Q3 2024

The decreases were due to unfavorable mix and lower volume driven by market softness economic uncertainty. Partially offset by managing controllable overhead costs and continuous Improvement initiatives.

Gross profit at manufactured products for Q3 2025 increased to 10.2 million from 7.8 million and Q3 2024 gross margin percentage. Increased to 17.5% of net sales from 17.1% of net sales in Q3 2024. This was primarily the result of improvements in the defense products. Business operational cost improvements and reduced overhead costs executed in the quarter. In addition to favorable volume and product, mix in the rubber molded products business. Turning again to the Consolidated results, free cash flow for 23, 2025 was 4.9 million compared to -2.9 million in Q3 of 2024.

During Q3 2025 the company invested 3.6 million in property, plant, and Equipment versus 1.6 million in Q3 of 2024.

the capital expenditures were related to cost savings initiatives growth initiatives and minor plant upgrades within ARs and amp

By the end of Q3 2025, our net debt, balance was 82.9. Million versus 98.9 million at the end of 2024.

We expect to fund the company's 2025, operating cash requirements, including required working, capital Investments, Capital expenditures and scheduled debt, repayments from cash on hand cash, flow from operations and committed borrowing capacity. The company has a revolving credit facility that provides for a maximum borrowing, up to 125 million with a 25.

Million dollar accordion.

As of September 30th, 2025 the total available borrowing capacity under this facility was 76.4 million with 41.3 million drawn with that. I will now turn the call over to Chris.

Chris, thank you. Frank to wrap up Q3 2025 demonstrates, the resiliency and adaptability of the airboss team we are executing against our strategic priorities, streamlining operations investing in Innovation and reinforcing our balance sheet to ensure, sustainable growth and value creation. As we move into 2026, our Focus remains, clear delivering consistent. Cash flow advancing our defense programs, and taking advantage of the recently announced increases in defense spending throughout the world, expanding specialty rubber Solutions, and continue to improve operational, efficiency across all our businesses operator. At this point, we can open up the line for any Q&A.

Thank you. This time I would like to remind everyone in order to ask a question. Please press star. Followed by the number 1 on your telephone keypad.

Your first question comes from the line of Ahmed Abdullah with national National Bank Capital markets.

Please go ahead.

Hi, thank you for taking my question. Um,

Just to start for the air boss rubber Solutions. How how are volumes tracking early in Q4? Uh, are you seeing any signs of a rebound acknowledging? The what you mentioned in terms of macro uncertainty having an impact there?

Uh you, you'll notice that the Q3 uh Revenue in ARS was actually uh slight improvement over Q2. So we started to see a rebound uh already in Q3 even if it's fairly slight. And we've also been able to bring on new customers that are launching in Q4. Um, so we feel that there is some room for optimism there. Um, the only issue with that is quite often December is a bit of a strange month, as, you know, Ahmed because of holidays and, and that sort of thing and, and the, the November holidays for Thanksgiving. So, if you consider, you know, the, the net numbers in Q4, we're not prepared at this point to provide any guidance for that, but like I said, Q3 representative, uh, a slight rebound from, uh, if you would consider Q2 the trough, um, and we are launching new customers in Q4. So the other part of that is, you know, a lot of people are analyzing what's going on in the, um, us industrial base. And, uh,

Quite a bit of the Slowdown that we're seeing across all the all the, um, uh, customers that we have, including the big tire companies. You know, truck tire sales are are, are you probably know way down? Um, so we, which is why, you know, the tolling business not just for us, but all of our competitors has virtually disappeared. Um, but as the, uh, Supply chains, get rebalanced from all these tariffs around the world. Um, and the customers no longer have the, uh, inventory that they need to, um, to build their products. We expect the rebound, we're just not sure. Exactly when we'll, we'll see that in any sort of material way. But like I said, if you look at the numbers Q3 was a is a slight improvement over Q2.

Easier comps going forward. So we would hope a rebound would materialize at that point. Um, on the defense business, um, how much of this quarter saw, um, part of the Bandelier recommending deliveries because you do mention that it started in the few last few weeks of 3Q. So, I'm just trying to gauge how much of the Bandelier has contributed here?

Yeah, it's very small, um, we were able to, uh, as we, we had announced, uh, a problem with the supply chain of a key raw material ingredient, uh, for the Bandelier, uh, which we were able to solve that problem, uh, in conjunction with our customer, uh, and our suppliers, uh, during Q3. So we resumed shipments, but it's a fairly lengthy Revenue recognition for those shipments. So we expect to see, uh, a fairly strong, uh, spike in Bandelier sales for Q4, based on, uh, the resumption of our shipments late Q3

Okay. And when you announced that contract, it was 45 million dollars US. Uh, and you had mentioned that 20 million was already shipped prior to that, uh, are you still expecting 25 million of that, to still be shipped out in Q4 and into early 2026?

Yes, that that's that's right. Um, as you can imagine we're playing a little bit of catch-up from that little delay that we had to take to, to solve that issue. Um, so we're, we're trying to drive as, uh, the revenue to the left as much as we can. But again with uh, the fact that it's a fairly lengthy uh, delivery process, um, we're not exactly sure how much of that will be in Q4 versus q1. Um, but the numbers that we had, uh, reported on uh, previously, we expect to fulfill in that same time frame.

Uh perfect. I'll queue up again. Thank you.

There are no further questions this time I would now like to turn the call back over to uh Chris bitsakakis for closing remarks.

Please go ahead.

Great, thank you very much. I appreciate everybody's time this morning and uh we look forward to speaking to you again uh after our year, end numbers are available uh, in early 2026. Thank you.

ladies and gentlemen, this concludes today's call thank you all for joining and you may now disconnect