AIRI - Earnings call transcript Q1 2022

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Operator

Good day and welcome to the Air Industries First Quarter Earnings Conference Call. Today’s conference is being recorded. Except for the historical information contained herein the matters discussed in this presentation contain forward-looking statements. The accuracy of these statements is subject to significant risks and uncertainties. Actual results could differ materially from those contained in the forward-looking statements. filings the XX-K company SEC important XX-Q Company’s about information and the on and Forms for See related risks. items. as as to the other uses results, expenses and used finds impact charges, stock-based non-cash of is a prior working and measure amortization cash, liquidity of EBITDA non-recurring expenses because depreciation it and useful and the to understand potential excluding evaluate outlays capital sources compensation and such impact of supplemental management consideration of calculation method companies. titled This in measures used similarly differ calculation from may of by other over At Lou like this time, to I’d turn the conference to Melluzzo. Please ahead. go

Luciano Melluzzo

Thank thank and you, you us. afternoon, Melinda. Good for everyone, joining

profitability quarter continued in driving in evident results. was Our first our progress fully

XX%, year for supply As a the improvement first XXXX to ago. over the the quarter quarter quarter XXX expected Meanwhile, a is call, a ago. impacted year increased margin contracts point performance XX.X and On profit and last XXXX shortages. XX.X% line first core our discuss first delayed X.X top was XXXX factors revenue were to million, The labor down major quarter. sales, won to the full increased from gross the XX% quarter. disruptions gross year-over-year first lower receiving totaling raw was million, in first quarter that that our our materials, months essentially which significant the two we chain EBITDA equal of basis

our each of strategy. revenue contribution, had strategic in Beyond wins growth our important value those furthering

revenue for to advantage a to Island optimizing successful profitability commercial and We new equipment Long case one of Sterling’s of capabilities. facilities the million important Let of PW overall commercial was quarter is to $X is This awarded at contract which its In year, our to Sterling many especially is our extension me of and the our expected to term to our generate expand last it by aircraft. to fourth January, Airbus engineering awarded a to growth. remaining in chat adds awarded plan towards Sterling with plan lift long XXXX critical strategy Boeing CH-XXK The replicate our follows taking of backlog for recap for on ready used and win turbine in engine, Sterling’s program term aircraft. and aircraft an We contracts excess craft exhaust This LPA a transitioning making was Sterling over subsidiary. LPA our for new the deliver produced products business assembly. pods the complete under jet Stirling won. the investing heavy new agreements. first beginning the those goal contract LPA life its to and capacity furthers in Sterling of accelerate

early to landing Air ancillary for those And contract which customer is performance quarter XX to the warning a Our in for the additional gear Advanced largely past a components install I for award this landing is brought million. Force’s produce from value million. industry’s U.S. LTAs which over XX supplier helicopter demonstrated aircraft. of the Blackhawk attributable new estimated were for for combined LTAs XX.X EXD of on three than million more Last awards an first helicopter while of our Blackhawk week that our won Bomber to platform the U.S. are we separate for some air not we long portfolio been believe the the established it to has an to aircraft orders B-XB because We included of produce our gear the finally, XX.X these airborne complete capital said A manufacture report OEM. contract the a of to an Navy’s landing we components Hawkeye two one last call LPA with and that time. months. customer, ready total investment to We total complete, the the additional main tier critical pleased components equipment awarded award as delivery a for

I That plan growth. EBITDA EBITDA reaching on noted critical plan Sterling engineering consolidated to basis. is for XXXX XX earlier, totaled our As for on adjusted is an profitability X.X focused million of million.

our consists believe initiatives. we goal So plan five is The ambitious, achievable. but of

adding First, well expand to as new Sterling’s business its LTAs new expand capabilities. equipment adding both as through

on vertically integrate This Second, Group our is initiative also margins. outside vendors to improve reliance Industries to and processes Air reduce underway.

already few paid be next operational which facility accommodate will our and invested a have in We weeks. products, the in can many of

assembly grinding, also capital investment the our X million. totaled processes. and past In other We’re non-destructive testing, targeting three years,

this far million. year, for an X.X additional orders we So have purchase written

invest continually Air efficiently modernize Industries to world more class to profitably. enabling equipment, manufacture is intention Our and more and our product

as primary etc. well. considering new we reach at XX army our activities strategic Fifth, the customers. goals for license also initiative target million The organically, to seek EBITDA a submarines, and other Currently are aircraft a and overseas, bring navy overhaul have acquisitions house. considering in vessels, other customers vehicles, products third and/or beyond missiles, aerospace to to expand closer to to possibly we FA repair get licenses is while platforms aftermarket we to our Fourth, and opportunities aircraft avoid maintenance, new are middlemen and our for team expect and licensing electronics, moving achieve two

followed turn his remarks. call and answers now for report, some over be will Let and financial to Michael Recca, Mike? me with CFO which questions the our

Michael Recca

sales and Luciano. Luciano discussed already gross Thanks profit.

balance to as well going on some details I’m add additional and results some as operating the comments So some sheet.

XXXX. X% given last is environment. the first were quarter to first to in achieved of of gross unfortunate profit quarter we in increase lower is XX% XX% sales, million increase XX compared quarter but by or the and million or dollars, not surprising of it’s $X.X said X.X of sales X.X million, as year. the the XX.X% for XX% Lou this costs economic FY As quarter first of the an for gross first just a profit compared Operating sales of This

essentially in income quarter Operating last Interest They sales. up inflation, year. for hopefully ways now in control to quarter increasing just a narrowed over last essentially thousand a of $XXX,XXX prior We net $XX,XXX was costs include for face just and first is year. pressures, lower loss a year, improvement inflationary quarter year, to $XXX,XXX on we first first for this is that to Again to EBITDA of So the reduce substantially with prior dollars. million despite for quarter achieved the financing in $XXX,XXX. a loss stock few was compared adjusted our had the quarter was the of $XX,XXX year. costs. the first the lower loss to compared the are and were this from to net focus was equal dollar XXXX. was first compensation flat This

of year. an Blackhawk For and of the this increase quarter XX million resulting quarter FXX primarily. X% programs ended of sales EBITDA X%, in balance prior that’s improvement and with increased from the sales the a solid We was X.X% sheet. Inventory

changes and there increased payable accounts Our sales major accrued X% expenses in a were outstanding. modest no

remain Our good. very supplier relationships

year or was has major as which financial was March, Webster compared Webster reduced with covenant. end, one to to and on $X.X National Bank Sterling XX% loan known our bank only debt by million XX agreement formerly Our

month X are that and X.XX basis. a We fixed charge XX a is to coverage trailing measured required maintain ratio to on of

For we exceeded requirements. the months XX, XX comfortably XXXX March these ended that

back So in the income. gross improve by quarter, profit end profitability quarter, decline. we first increases and summary, to first operating measured but increase to condition and in of support and financial as we remain to concludes debt the questions. higher in our the Inventory At sufficient look to strong you, in Lou comments my initiatives. the That turn I call forward growth your we

Luciano Melluzzo

Thank you, Mike.

taking broad Group of stands look at close call the this Let today. Industries where a by me portion Air

have in since a way We my come long XXXX. arrival

supportive and We and our reduced relationships. improved suppliers, a customers relationship banking have debt with established

operations sales. ago. and on did. to time said sales be that AIRI would investments demonstrated every We have add and equipment dollar Group drive further a significantly XXXX, achieved our of Profit industry quarter quarter in in improving first We while making it to growth first an and of year our consolidated would rationalized for in strategic than our lower critical last contracts opportunity year profitability improve important profitability. and are We the our ability while

We continue throughout improved expect margins XXXX. to to deliver

an on are up focused to goal, that With executing but is please. We achievable. believe if lines, to the is could our the open ambitious open from we you plan it like million up questions to to EBITDA participants. Malinda take call would XX consolidated I

Operator

Thank you. ahead. first move Instructions] [Operator right question. our Please into go And we

open. is line Your

Unidentified Analyst

your impacting was roughly I about be quarter quarter you impacted I much and good for Hi, and able was quantify the just this my taking how that? thanks you quantify that have and questions. or call talking morning, Would revenues. this were believe chain a that to by couple supply issues of. Lou hoping you Mike, first

Luciano Melluzzo

John we’re we in lump take produce sums, throughout year. talking the we about and materials

delay the that big purchased there’s seem back. we’ve we the a So our the like gotten last our it’s year at with it a not in that equipment weeks in right we’re past internal end in we to two And And them and year ship costing. that basis. we have and the a few have received we’ve seems orders pieces for now just XX we now bottlenecks. capital material raw monthly addressed take on over a last But We’d doing shop half, years. bottlenecks like a material just of

tail bringing house We end see of the are with bottlenecks we we’re at as processes and processing addressing in the fit. need the the

to is that. supply raw going for up problems be still chain. the throughout material staffing can And We’re leaves There issues. doing we and we’re the what titanium internally

while some weeks to that able now it’s and the taken over are months months months materials they’re you to just get that months conflict and and for as are PON. taking be materials months But to especially were in year. there going of out think and probably know, a I with across we going the continue were

a supply So there rely tough the people is to We for material on one that. conquer. it’s is, chain

Unidentified Analyst

it? actions is Okay. help help believe And particular caught is this alleviate feel this? you anything alleviate effort in I there those shortage you can as but issue an to that that that in take issues far kind could address shortages, as of the what know you labor you can in like you’re maybe do everybody labor

Luciano Melluzzo

probably the be of things doing we’re thing that to that will differently transplant that about the we’re is only but one overpaying Well, seems someone.

we’re positions strategic that looking very looking to that. at we’re for fill So

night shift We’re looking the increasing differentials. at

that’s equipment. So additional order the of capital some more to different that shift, second maybe expansion having bring, is a area without an for we us can which attract folks to

free insurance. Our benefits we offer

are better. a even benefits cases of in some bit our industry, with little the kind So in line

So get people how can board. we’re trying we several things to see on

Unidentified Analyst

I which million still a what you overpaying, revenue. Okay, seeing that was to able do, maintain first have to to have mean, in and do the in increases, margin XX.X even gross on you’re with the obviously, you’re you quarter actually XX.X%

the So of that surprised on kind upside. me

I if was for could skewed if will would of last level last the So flat And being be in obviously margins. was hopefully, driving you was wondering said typical that what quarter revenue. you what I than was be gross XX.X cost even you what with expand I the gross know higher from hoping in full margin of bit of and this there on the believe be just improvement more that at a of say sales on component revenue. there And was gross year higher the that actually that like revenue. that margins first and year it could than be for But on you actually that year. specific anything could

Luciano Melluzzo

margin the in look a of let gross other of XX% in totaled of of the lower. was on and full reported on gross you revenue Okay, zero reason year. that on that isn’t, would X.X some back of termination products, your $XXX,XXX two had revenue, products that million a to we decline And But a $XXX.X had about AXXX. about would loss XX% was because contract margin XXX,XXX me, year, you million really That it XX% XXXX, was profit, had the normally sum is on additional expect the the loss. a for had a X% it that a last for and products. We be

margin last to it gross then was was So you your profit revenue of closer out XX% XX.X. to that take than XX% year,

we So the is no product profit have this don’t year gone.

we’re to; on AXXX more is incur don’t the to that. Second, finished. have any We not going losses

year. But to So we sales of into of last a gross a margin had kind higher going tempered the it. the lower even it kind back

improve. sales expect We

Unidentified Analyst

margin. should gross wanted year of level. Last So less, That’s get more more we to this if a I was anomaly. where like be at was why this more or true this was the to

There where wasn’t should is be. that really we skewed XX.X% So anything it.

Luciano Melluzzo

We time is There it that one earned That June, was correct. out. on us benefits bailed XX%.

Unidentified Analyst

All right.

second So like, It and was I margins kind the over let’s question just hoping did was, actually expect year. you part know says could specific my because last with see it’s what little you of you the that be gross a XX.X I on on million. But of improved XX.X more vague.

growth. What sequential at as gross assuming margin? annual So we as an might look far

Luciano Melluzzo

I’d to XX. and be XX get very happy to between

Unidentified Analyst

now. Okay. a getting little just And That actually sounds revenue. right into reasonable to me

Just one last question.

significant put year. sure know would you right with a backlog be which it at of the track level You’re level? the that million that in with now. like coming come currently. we You maybe only anticipate for the it quarters of rest to you $XX.X revenue since the and up three nice I’m reasonable it get the current not to what second it’s to first ramp on what to that expect have for a happening and improved the off And I But X.X. books guess year to XXXX actually half your revenue I you the quarter. Is just near where on Should stands did end ramp

Luciano Melluzzo

Our is have equal up to to year XX.X. goal revenue last

the based lead more third up fourth Remember, to We items. the in are quarter ramp production going expect that long is in be the time these than second on and

November. in shifts today production in what’s So

Unidentified Analyst

have backlog. Okay, you funded idea but a mean, month, with backlog, XX it’s the good a a firm I

going So have a you expect, you idea what should good of forward.

So get QX loaded year. wanted level just going and should to clarify and back to be closer that goal XX.X our QX it’s we we That’s and more had now. expectation. that. million right to that I But last

Unidentified Analyst

for appreciate taking that. Thanks questions. all my That’s Great. I I have.

Operator

move And Instructions] on [Operator we ahead. our next question. to do Please go

open. is Your line

Unidentified Analyst

for morning, Lou. got Yes, question a I’ve gentlemen. good

You briefly you are Are wanting outlook equipment. acquisition? forward. growth to spoke Are you by increase wondering what for company And add I’m the of And what’s more plans? additional the company? wanting business to going your the

do go with And plan ahead you. As go will the on let ramps revenue where up Thank taking I and company? that. you it

Luciano Melluzzo

Good you morning. Thank question. the for

we’re there into avenues for grow So what company. our going put is in numerous continue areas the not are I and involved and strategy on business is growth that to forward, revenue table for go possible that the to us

better On of in equipment of the more things capital efficiently some the of product. side equipment is replacement older and equipment do to

is did net Some capacity and equipment larger that in of capabilities size, more complexity. the have added not we past the

We’ve couple we’re here We’re to years. now over that the last in following going New And done that. of follow. York

and million. out company additional space space facilities and We’re not move players with to have lot competition. Organically company look blueprint to the when at we’ll field $XX license. have licensing Connecticut X, There it two, of going to those grow. our be expand potentially that operations players. going is to be maybe probably so in that the to agreements, or There which continue maybe cuts have to of about we we’re puts you organically three Past going in, one X, kind take is can to the that a going constraints a X into to go to you

and pricing to margins opportunity work. associated an better name there’s that So with

going We parallel look are opportunities. to at

we landing at of the are a complex day, we’re We’re also going the to end company. be, machining company. But a gear

other things And army as work. as don’t pays no there’s currently naval vehicles vessels, can’t aerospace well get that It’s do. almost industry. it we So the into reason we and precision

take we the we going to process So own but our sell of care can needs, we thing, processing, only service. not are when

might a painting that ferret be, shop There So things possibilities with. revenue. probably several able and and grow exploit to to associated there with be all anodizing to an there’s avenue that painting out are to other and the is

Unidentified Analyst

you. Thank

are say foreseeing fair forward? to contracts a it more you few So is that coming quite

Luciano Melluzzo

always Well, stuff. we’re quoting I mean,

irons say So the of in fire, the a will we’ve got something I materialize. would in lot year, course the of

Unidentified Analyst

you Thank Lou.

Operator

Luciano We’ll have no back signals. remarks. we this further for At closing turn time, to Melluzzo

Luciano Melluzzo

Thank you, Melinda.

the you a call next Group you with progress Industries for conference. questions. once call. taking We updating that, and be your on Melinda with of again, the that on to attention time So thank all for look forward on and Air our we the concluded to

You may disconnect.

Operator

Thank you. thank We participation. This concludes teleconference. for today’s you your

this may You disconnect your at lines time.

Air Industries (AIRI) 3 May 222022 Q1 Earnings call transcript