Earnings call transcript Q1 2023

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Operator

Hello, and welcome to the Air Industries Group’s First Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

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 expectation regarding realization of its business strategy and growth strategy. statements, as forward-looking of the include call. this which speak of only date Expressions, are on and based and statements quantified. control forward-looking These largely predicted be to which beyond or number and of cannot are our a of some risks uncertainties, are our subject expectations company’s

will the Future solicitation prove no and the information call those or In forward-looking forward-looking not proxy forth developments light could assurance uncertainties, contemplated in, to of to from actual be accurate. does shareholders. any authorization company’s materially respect constitute results risks This purchase to there statements. a be securities an the can by meeting agent that consent of offer and these designation with nor differ set of or a a underlying

time, I go CEO. and call like Melluzzo, to now Please Lou to would turn over At the President ahead, sir. this

Lou Melluzzo

you would our results year Thank XXXX our and for everyone, beyond. us some detail outline contract thank you, recently Industries’ of balance the Air strategy joining and review on announced I Good wins Alicia. for quarter, to provide and for today. growth first afternoon, this the like

my the joining call has Pete announce to appointed Chairman and been today. of is that us it Board First, Industries pleasure Air this of Rettaliata is on

succeeds who Chairman, remains Taglich, Mike As he on the Board.

in company to AIM also we served growth forward benefit to Directors. Pete of our questions our will of highly his respected a President strategies. CEO session. and a review has is veteran subsidiary, over XX-year comments be Air leadership His Q&A during noted pursue we the Industries today, of Air guidance period, member aerospace happy exciting we’ll a release the will and perspective formal add respond including after of Pete our in business. the Board move as and earlier As the nearly roles our Industries He issued news of and at several

was of for of from ended first performance sales XXXX. or were increase an net for fourth with $X.X of XXXX first quarter. That decrease our compared quarter the but or looking X.X% quarter million quarter X% XXXX $XXX,XXX a XX, million. March Now at the XXXX, Consolidated of the $XX.X

previously, chain noted impacted that the to entire has have continued materials. in be delayed raw we negatively shipments by our arrival have disruptions As industry, particular, causing supply of affected

continued improve, fully to have resolved. problems conditions not While are the

for gross Gross XX% profit sales quarter the quarter was of X.X%. for XXXX. the first of of margin XX.X% was XXXX the the comparison, of by quarter In fourth versus first XXXX,

quarter during Mike certain fourth included will which XXXX adjustments, Recca discuss the However, his remarks.

operating of We the quarter a net incurred $XXX,XXX, a of fourth of and of the $XXX,XXX. for the first loss in quarter of quarter loss was loss the while This an compared quarter for loss XXXX $XXX,XXX the net $XX,XXX net in first with first of XXXX XXXX.

not the recent industries. the future are dynamics firmly with today create for results, I we satisfied While the in aerospace the industry will opportunities and tremendous believe of

a warning naval arresting We resources million Yesterday, see Demand of Group. commercial landscape, evolving and on at aircraft. $X two Industries the received early – Air glimpse modernize customer tactical the and contract new care provide award Hawkeye approximately a and that to naval airborne order geopolitical being need long-time ahead. is aerospace. U.S. E-XD The the we valued the for air recovery announced by the awards of growth a from of the opportunities driven we components originated

non-U.S. is new customer a gear from for F-XX come and yesterday for announced the components arresting Lightning combat award Second aircraft.

have customer booking bringing million. first located to for increased The to encouraging monthly It QX of the XXX% award outside the by from valued XXXX. $X.X U.S., second over $X.X that and is XXXX both million of average our is at total order the compared a is for orders QX

the we to by improving our sharply XX%. fixed can near-term, expenses. In quarter, delivery reengineering treated on And the our capacity up due projects, customers have past secondly, the that newer activities better by on leverage and our reduced at also profitability, they focused facilities purchased. our more primarily and are to efficiently we we During by scaling equipment so be

Additionally, undergoing being and a panels modernization process cut our is with Connecticut operations requirements. and electricity roof solar a retrofitted further to new

to Toward to a strategic are end, long-term, consultants. pivoting we outside we that have opportunities believe of drive the with opportunities potential the analysis our intermediate growth. we towards that of compelling help Over market have conducted profitable most

markets actionable. and fit that effectively where we Our focused near-term significant identifying on process mid-term has have attractive and markets we capabilities the where and where can compete we can our to that are into volume visibility potential. profit been Targets include –

growth our of capture our and platforms new intended new Specifically, platforms, add strategies to expand are penetration existing markets.

fixed-wing example, great business as and rotary noted E-XD The engine served aircraft markets of our wins military I we aircraft seeking examples commercial a well F-XX For recent of of traditional additional actively platforms. are are earlier, military as and of expansion components. as in additional business, our existing

another opportunity. to Turning important

be years. XX% solid Navy our over entry our business. into submarine number core a nuclear significant industry the expanding to progress in with nuclear our required increase of with making rapidly submarine and projected few the competencies a aligns has by well are The submarines addition meet potential next the market, We which is to to the

substantial Industries suppliers that quality such can as We ultra-high Air required. to deliver standards for the see opportunity

We two won from the already contracts [Technical builders. Difficulty] suppliers submarine one of have two U.S.

forecasted ahead. seek this of to that as to the support in up more submarine the opportunities to our optimistic larger ramp new We lead are years industry the execution suppliers and significant continues project would successful

as our Sterling components. submarine and fact, in In uptick an is also division turbine ground-based engine seeing as rotorcraft well

by made want connections to very Our companies with. global came Paris are the new show development attended the aerospace that and team and The from the optimistic we well business of we work about future Show, just general. with very we Air back community, outlook in was numerous

the one That next existing importantly, persist and or In supply reflect by situation XXXX and encouraged challenging quarters. more summary, quarter first a that inroads platforms. new both continued for we our of in two environment, the the to chain are may said,

that, CFO, Recca, and With for the to going Mike conclude over to our we report, Q&A I’m remarks. turn will then it with and

Mike? So

Michael Recca

the year. and Thank some going Lou our lackluster. detail, quarter margin additional you, Lou. to will with I’m last gross adequate, year of profit provide but was agree and I particularly it that for was on kind first gross this

an million, last $X.X As million, ‘XX we reported, sales for first XXXX. that’s and increase X% from the quarter of $X.X Profit for that quarter million in was were the quarter down $XX.X of and were of first year. the first from

quarter, Gross of gross and was margin than for the for annual the XX.X%. that sales XX% last this first slightly higher year, which margin year was was

a profit here, So at me explain the for into take gross going minute the to gross weeds let XXXX. risk margin and of deep

So time, normal to that the normal at closing and during adjustments it’s to annual inventory. profit the And year-end, to That have have you margin. gross a adjustments generates that and in – audit. gross and review books affects

a not first: product or sold period of process we adjustments. work there determining X XXXX, slow-moving our as moved", percentage cost inventory. such returned and calculated in of method the to every the Previously, year of In And over obsolete we years. these inventory is were changed either a "not amount or this were that

XXXX. was we for with to of that overtime two contract XXX% be that Consulting of had as when had and like for. method estimated that Also, And to auditors, and last must complete. will our cost not we we losses into the was future reserve for losses changed the single accrued inventory a losing slow this that of continue contract complete year, XXX% contract. this the moving not considering moved Situations money. These will are inventory consistently years XXXX increase during this,

losses future that. contract. in we’ve gross We’ve items of profit increased margin the gross remaining open So for This the done XXXX. reduced anticipated on estimated sales, cost and the

our items gross for XX% adjustment After as calculated XX% margin the was full of for just these months discussed, a gross nine So year, last the XXXX. September of we two sales. margin year the for of

So X% to of we the get for XX%, months margin needed with XXXX. a just nine XX% to year, to for after have

plus XX equals XX. by times divided X So X, X,

margin gross of is these adjustments, our XX%, but are only because which recurring. was that not So two really

Going operating to on expenses.

that For points ‘XX. of the first an increase just $X.XX and $XXX,XXX over to was here. of quarter other quarter million or make X.X% from of are million $X XXXX, some I want first we’re the But in there

were costs last $XXX,XXX of debt. operating reduced recovery In a by year XXXX, bad

Fortune our XXX, are Fortune actually XX companies. Now mostly sometimes customers the

rules, and about of So bad and a bad we we a really $XXX,XXX. some must don’t expense there’s when costs a shipment In were disputed again, payment in under And these a there This accounting dispute delayed be lowered But until paid quantity are on negative delayed. times debts. we resolved, were question or payment invoices to can it’s resolved. some it other operating have consider debt recovered is a XXXX. be and XXXX, the

audit our basically it same new firm a the and fee, paid merged had the we had XXXX, installments. in – was In firm but different different

the in paid than of we So the audit fee $XX,XXX in quarter the year. first had we about prior more

were So expenses two reduced for the operating expenses – XXXX, of considering and the which in audit the which years increased fees XXXX, of bad expenses even. debt income timing the essentially

this and $XXX,XXX increased is over net XXXX XX% due the for a to of on friends quarter our the $XXX,XXX. expense, the interest in $XX,XXX increased loss our entirely Federal loss compared prior Our to at net or And of year. hand actions by Reserve. The the other was

the more very to our remains Moving balance sheet adequate Balance certainly strong needs. for on sheet. and than

strictly payable, current, very accounts receivables accounts are line. Our in

has balloon our which remained but being pandemic inventory, overall debt slowly reduce nonetheless during Our reduced and unchanged. is the

my our Pete so new ends his Chairman, over call for comments, That turn to Rettaliata remarks. the I’ll

Peter Rettaliata

Board. Taglich new it believe I’d changing to our Chairman was when to as accelerate my a step and post everyone. to asked aerospace COVID. are afternoon, time at involvement I that his in looking growth when feeling of was that our me time we was experience strategy and the Mike Good like that I delighted increase marketplace program up to say the

is exciting some this helping And in and great company done itself this and my to prospects program. leadership Once think me. talent. close increase I’ve changing So things capability to role prepare terrific. I’m for of terms to the for increased continue this company. again, very and new been marketplace The delighted in the very will growth I I address be has to always close are now,

for is Thanks. this watch hope all go exciting through very So me, to you very us it’s exciting for I this and period.

Lou Melluzzo

Pete. you, Thank

We’re excited you. to have

Peter Rettaliata

to back, good I be So guess.

Lou Melluzzo

up would With like Alicia, may. you if to the we session to open Q&A call that, our

Operator

you. Thank

be Instructions] session. a now will conducting question-and-answer [Operator We you. Thank

Halpern Our comes Howard with proceed Please question with question. from Brothers. first Taglich your

Howard Halpern

Pete. back, welcome and guys, afternoon, Good

Peter Rettaliata

Howard. afternoon, Good

Lou Melluzzo

afternoon. Good

Howard Halpern

I your – of guess, that on what be over to to are my terms maybe primary focus too In going gross going help and improve the time? is factors focus are margin

Peter Rettaliata

biggest period in the which with have that and and some those we’re of very and of operational for projects it the Does we’re supply to next way the of in in capable and because us customers, really our more future. you’d couple sense? of to equipment the difficult produced we a factor clouded concentration past There the more increasing a of make investments like efficiently decision-making big exhibited has that we’ve think time better some made do capacity, period has over all that performance itself some issues was in COVID to to real competitive like way I years. the that a the not produce that the capability quote really in really is chain seeing performing some allows in to that we’d on that that our for been things

Howard Halpern

to near as gross Yes. that supply abate? continually drive XX% And least issues term, will improvement area? back But could in at the we chain that see the margin

Michael Recca

I’m confident on not be if will for close we’ll it. that fiscal at this the very we banging to be, door year, XX% be they’d

better appears could a we absorption contracts, of – on have dramatic have Sterling have There there. for overhead gross on. materialized. new pricing to costs improved prospects have those a are our and operation We’ll much effect which margin have if engineering, the better We

Lou Melluzzo

our Mike, think best And of I not saying material slower been raw products because slower delivery deliveries. I’m products wrong have some of in

Peter Rettaliata

that. about question no There’s

Howard Halpern

will move margin Right. quarters the you towards And breakeven as that gross profitability improves, the as forward? operational drive

Michael Recca

There’s business. Gross profit everything. is no this in magic

increases interest we costs, can straight, operating higher the been, have cost We cost managing If I’d keep the good extremely in of operating to we them level. think, although I our the a result are to at of margin, gross gross keep the rates. get tell keep to our our like as giving We Board, operating to bank margin. we some

Howard Halpern

this maybe Well, things level inflation point. at will out Yes. with cooling,

Michael Recca

They from X%, go to went to to going from they’re X% X% XX%. not

– the we at we’re top. at not So looking I think if top, we’re the

Howard Halpern

just a higher-margin the perspective years could of the some the maybe And could four of areas, that business or business? sub. I over describe terms next the category? like type five Okay. guess, three, of Is sub expect you from area, the on two, in new that we nuclear Or

Lou Melluzzo

in So – business, high-end the we concentrating the that sub we’re are are parts Howard, the items. on

making not They So three. make XXX or to going year. not submarines it you’re a – make they’re two

where doing is in that the components high you’re priced So pricing respect, for definitely production these not rate. a

better much material more sophisticated lot margins, at couple content with a a doing more them. in You’re

$XXX parts or that shipping not So we’re $XXX. are

thousands tens and parts that better. of shipping the are We’re in

of better some the is show them. of crop put will we’re of agreement a we kind doing lot things fare which work when right more labor work on to margins into valves. could those So now, tend And green

Peter Rettaliata

one happening of think, of more are like I terms and business looking in and as tolerance more welding, battleships, that and close submarine become the performance more they and is less like more advanced things actually requirements. subs in incredible the have airplanes fits high-precision less that’s

going that. So our be money there’s to in that hope is more

Michael Recca

a have both at have than higher we’ve number historically, that in And experienced. business, And years looked ago. margins recently companies of we and significantly they

Howard Halpern

or said, year you a so, two get or produce you a be highly And and going you it’s – like Okay. to a that awarded and one once sticky once they contract contract, once contract right? supply

Michael Recca

want people because in hire an desperate not suppliers. sticky very Connecticut. they boat sure to are XX,XXX Connecticut. advertisement Southeastern Southeastern are they Electric Yes, in for new people other had I’m XX,XXX there the day,

from they’re about billion boats, That’s – talk two year. the $X to billion you so from to big three $X And increasing deal. a

Lou Melluzzo

a then do do What you’re needs just we the told, were and – Howard, actually work be to this now, you’re have don’t is done. shop they They doing again. going to if personnel out what it to

So your as panic soon as you’re it. guaranteed of this kind in work

Howard Halpern

sure produce Okay. making would in gaining the And – – will the helpful be to for necessary? assume very they product spot I you

Lou Melluzzo

Absolutely.

finding we’re very So they’re that helpful.

Howard Halpern

Okay. Well, up keep work. and the good thanks,

Lou Melluzzo

you Thank Thank question. you, Howard. the for

Peter Rettaliata

Thank you.

Operator

to for Melluzzo at turn floor Thank this time. you. would [Operator to further Instructions] back no I There over questions are the Mr. like closing comments.

Lou Melluzzo

Alicia. you, Thank

again, on Air the on once progress for to taking close the be that, for and interest call. Group. today with may to you So call. the updating all call our you your forward Alicia, thank Industries time you in on next We the look

Operator

This right. today’s concludes teleconference. All

disconnect this at for lines your participation. time. your Thank may You you

Air Industries (AIRI) 12 Jul 232023 Q1 Earnings call transcript