Air Industries Group (NYSEAM:AIRI) Q3 2025 Earnings Call November 17, 2025 08:00 AM ET Company ParticipantsScott Glassman - CFOLou Melluzzo - President and CEOOperatorHello, and welcome to the Air Industries Group third uarter 2025 earnings conference call. At this time, all participants are on a listen-only mode. A brief question-and-answer session will follow the formal presentation. If you would like to ask a question during that time, please press star one on your telephone keypad. If you require operat ...

Financial Data and Key Metrics Changes - Net sales for Q3 2025 were $10.3 million, showing improvement compared to both the first two quarters of 2025 and Q3 2024 [6] - Gross profit was $2.3 million, representing 22.3% of sales, reflecting benefits from cost reduction initiatives [6] - Operating income was $316,000, with a net loss of $44,000 or $0.01 per share, compared to a loss of $404,000 in Q3 2024 [6] - Adjusted EBITDA for the nine months ended September 30th was $2.7 million, up nearly 5% from the prior year [6] - Total debt increased by approximately $2.4 million [7] Business Line Data and Key Metrics Changes - Inventory increased by $5.6 million due to investments in work in process inventory and materials for future deliveries [7] - Accounts receivable decreased by $2.1 million, while accounts payable increased by approximately $2 million [7] Market Data and Key Metrics Changes - The company reported strong backlog levels and healthy demand from both existing and new customers, indicating positive market conditions [8] Company Strategy and Development Direction - The company is focused on execution, cost control, and driving shareholder value, with confidence in the strength of its core business [8] - Ongoing discussions with lenders regarding potential refinancing or extension of obligations are a priority [4][8] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in a strong finish to fiscal 2025 and continued momentum into 2026 [8] Other Important Information - The company is actively engaged in discussions with lenders regarding its credit facility and subordinated debt [4] Q&A Session Summary - No questions were posed during the Q&A session, and the call concluded without further inquiries [10][11]

Core Insights - Air Industries (AIRI) reported a quarterly loss of $0.01 per share, significantly better than the Zacks Consensus Estimate of a loss of $0.22, and an improvement from a loss of $0.12 per share a year ago [1][2] - The company achieved an earnings surprise of +95.45% for the quarter, having previously been expected to post a loss of $0.15 per share but actually reporting a loss of $0.11 per share in the prior quarter [2] - Air Industries generated revenues of $10.31 million for the quarter ended September 2025, exceeding the Zacks Consensus Estimate by 3.09%, although this represents a decline from $12.56 million in the same quarter last year [3] Financial Performance - The company has surpassed consensus EPS estimates two times over the last four quarters [2] - Air Industries has also topped consensus revenue estimates two times in the last four quarters [3] - The current consensus EPS estimate for the upcoming quarter is -$0.02 on revenues of $13.5 million, and for the current fiscal year, it is -$0.61 on revenues of $48.29 million [8] Market Position - Air Industries shares have declined approximately 26.8% since the beginning of the year, contrasting with the S&P 500's gain of 14.6% [4] - The Zacks Industry Rank for Aerospace - Defense places it in the top 37% of over 250 Zacks industries, indicating a favorable position compared to the bottom 50% [9] Future Outlook - The sustainability of the stock's price movement will largely depend on management's commentary during the earnings call [4] - The estimate revisions trend for Air Industries was mixed ahead of the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, suggesting it is expected to perform in line with the market in the near future [7]

Financial Performance - Net sales for Q3 2025 were $10.3 million, a decrease of 17.9% compared to $12.6 million in Q3 2024[3] - For the nine months ended September 30, 2025, net sales were $35.1 million, down from $40.2 million in the same period of 2024[5] Profitability - Gross profit for Q3 2025 was $2.3 million, with a gross margin of 22.3%, up from 15.5% in Q3 2024[4] - Adjusted EBITDA for the nine months ended September 30, 2025, was $2.7 million, compared to $2.6 million in 2024[5] - Gross profit for the nine months ended September 30, 2025, was $6.4 million, with a gross margin of 18.1%[9] - Net loss for Q3 2025 was $44,000, significantly improved from a net loss of $404,000 in Q3 2024[4] - Operating loss for the nine months ended September 30, 2025, was $422,000, compared to an operating income of $560,000 in 2024[9] Operating Expenses - Operating expenses for Q3 2025 were $2.0 million, an increase of 5.6% from $1.9 million in Q3 2024[4] Future Outlook - The company aims to drive profitability and operational efficiency as it enters Q4 2025[8] - Air Industries Group will host a conference call on November 17, 2025, to discuss these financial results[11]

Core Viewpoint - Air Industries Group reported solid financial results for the third quarter and nine months ended September 30, 2025, showing improvements in Adjusted EBITDA and gross margins compared to the previous year [1][5]. Third Quarter Results - Net sales for Q3 2025 were $10.3 million, a decrease from $12.6 million in Q3 2024 [2]. - Adjusted EBITDA for Q3 2025 was $1.3 million, up from $845,000 in Q3 2024 [2]. - Gross profit for Q3 2025 was $2.3 million, with a gross margin of 22.3%, compared to 15.5% in Q3 2024 [3]. - Operating expenses increased by 5.6% to $2.0 million compared to Q3 2024 [3]. - The net loss for Q3 2025 was $44,000, significantly improved from a net loss of $404,000 in Q3 2024 [3]. Nine Months Results - Net sales for the nine months ended September 30, 2025, were $35.1 million, down from $40.2 million in the same period of 2024 [4]. - Adjusted EBITDA for the nine months was $2.7 million, slightly up from $2.6 million in 2024 [4]. - Gross profit for the nine months was $6.4 million, with a gross margin of 18.1%, compared to 16.2% in 2024 [7]. - Operating expenses for the nine months increased to $6.8 million, leading to an operating loss of $422,000, compared to an operating income of $560,000 in 2024 [7]. - The net loss for the nine months was $1.5 million, compared to a loss of $812,000 in 2024 [7]. Management Commentary - The CEO of Air Industries Group highlighted the solid results for Q3 2025, emphasizing improvements in Adjusted EBITDA and gross margins due to expense reduction efforts [5]. - The company remains focused on driving profitability and operational efficiency as it approaches the end of the fiscal year [5]. Company Overview - Air Industries Group is a leading manufacturer of precision components and assemblies for large aerospace and defense prime contractors, producing critical products such as landing gears and engine mounts [8].

Financial Performance - Net sales for the three months ended September 30, 2025, were $10,309,000, a decrease of $2,246,000, or 17.9%, compared to $12,555,000 for the same period in 2024[115] - Gross profit for the three months ended September 30, 2025, was $2,295,000, with a gross profit margin of 22.3%, an increase from 15.5% in the same period of 2024[117] - Operating expenses for the three months ended September 30, 2025, were $1,979,000, representing 19.2% of net sales, up from 14.9% in the same period of 2024[118] - Net loss for the three months ended September 30, 2025, was $44,000, a significant improvement compared to a net loss of $404,000 for the same period in 2024[120] - For the nine months ended September 30, 2025, net sales were $35,111,000, a decrease of $5,077,000, or 12.6%, compared to $40,188,000 for the same period in 2024[121] - Gross profit for the nine months ended September 30, 2025, was $6,357,000, with a gross profit margin of 18.1%, up from 16.2% in the same period of 2024[122] - Operating expenses for the nine months ended September 30, 2025, were $6,779,000, representing 19.3% of net sales, an increase from 14.8% in the same period of 2024[123] - Net loss for the nine months ended September 30, 2025, was $1,454,000, compared to a net loss of $812,000 for the same period in 2024, reflecting a significant increase in losses[125] Cash Flow and Financing - Cash decreased to $126,000 as of September 30, 2025, down 83.3% from $753,000 as of December 31, 2024[114] - Cash used in operating activities for the nine months ended September 30, 2025, was $754,000, a decline from cash generated of $508,000 in the same period of 2024[143] - Cash used in investing activities increased to $2,818,000 for the nine months ended September 30, 2025, compared to $1,493,000 in 2024, primarily for new property and equipment[145] - Cash provided by financing activities was $6,875,000 for the nine months ended September 30, 2025, which included a net increase in borrowings under the Current Credit Facility of $3,826,000[147] - The company raised $4,869,000 through the sale of 1,213,593 shares of common stock during the nine months ended September 30, 2025, with approximately $3,930,000 restricted for the Current Credit Facility lender[128] - The company has temporarily paused all equity raising activities while evaluating the most effective capital structure going forward due to ongoing negotiations with lenders[128] Debt and Equity - As of September 30, 2025, the company had outstanding indebtedness under the Current Credit Facility of $21,956,000, which includes a Revolving Loan of $15,838,000 and a Term Loan of $6,118,000[133] - The company is currently in default of certain covenants under the Current Credit Facility, including a failure to meet the required Fixed Charge Coverage Ratio of 1.05x as of June 30, 2025, achieving only 0.76x[131] Operational Adjustments - Management initiated cost-saving measures, including a workforce reduction, to align operating expenses with anticipated production volumes[141] - The company expects to invest approximately an additional $350,000 during the remainder of 2025 for tooling required to produce products[146] Backlog and Equity - Total unfilled contract values as of September 30, 2025, amounted to $269.0 million, including a backlog of $131.8 million[112] - Total stockholders' equity increased to $18,843,000 as of September 30, 2025, a rise of 26.1% from $14,948,000 as of December 31, 2024[114]

Core Viewpoint - Air Industries (AIRI) has been experiencing a decline in stock performance, with a return of -5.5% over the past month, contrasting with the Zacks S&P 500 composite's +1.3% change, and the Zacks Aerospace - Defense industry gaining 0.9% [2] Earnings Estimates - For the current quarter, Air Industries is expected to report a loss of $0.22 per share, reflecting a significant change of -83.3% from the same quarter last year, with the consensus estimate remaining unchanged over the last 30 days [5] - The consensus earnings estimate for the current fiscal year is -$0.61, indicating a change of -48.8% from the previous year, also remaining unchanged over the last month [5] - For the next fiscal year, the consensus earnings estimate is $0.35, showing a positive change of +42.6% from the prior year, with this estimate also unchanged [6] Revenue Growth - The consensus sales estimate for the current quarter is $10 million, indicating a year-over-year decline of -20.4% [11] - For the current fiscal year, the sales estimate is $48.29 million, reflecting a change of -12.4%, while the next fiscal year's estimate is $50 million, indicating a growth of +3.5% [11] Last Reported Results - In the last reported quarter, Air Industries generated revenues of $12.66 million, a year-over-year decrease of -6.7%, with an EPS of -$0.11 compared to $0.09 a year ago [12] - The reported revenues exceeded the Zacks Consensus Estimate of $12 million by +5.49%, and the EPS surprise was +26.67% [12] - Over the last four quarters, the company surpassed EPS estimates only once and topped consensus revenue estimates once [13] Valuation - Air Industries is graded A on the Zacks Value Style Score, indicating it is trading at a discount compared to its peers [17] - Valuation multiples such as price-to-earnings (P/E), price-to-sales (P/S), and price-to-cash flow (P/CF) are essential for determining whether the stock is fairly valued, overvalued, or undervalued [15][16] Overall Assessment - The Zacks Rank for Air Industries is 3 (Hold), suggesting that it may perform in line with the broader market in the near term [7][18]

Core Viewpoint - Air Industries (AIRI) is experiencing a decline in stock performance, with upcoming financial results expected to show significant decreases in earnings and revenue compared to the previous year [1][2][3]. Company Performance - In the latest trading session, Air Industries' stock was down 1.24% at $3.18, underperforming the S&P 500's daily loss of 0.53% [1]. - Over the past month, shares of Air Industries have appreciated by 3.87%, outperforming the Aerospace sector's gain of 2.66% and the S&P 500's gain of 1.13% [1]. Financial Projections - The upcoming earnings per share (EPS) for Air Industries is projected to be -$0.22, reflecting an 83.33% decrease from the same quarter last year [2]. - Revenue is expected to be $10 million, indicating a 20.38% decline compared to the corresponding quarter of the prior year [2]. - For the entire year, the Zacks Consensus Estimates forecast earnings of -$0.61 per share and revenue of $48.29 million, representing changes of -48.78% and -12.37%, respectively, compared to the previous year [3]. Analyst Estimates - Recent changes to analyst estimates for Air Industries are crucial for investors, as they reflect evolving short-term business trends [4]. - The Zacks Rank system, which incorporates estimate changes, currently ranks Air Industries at 4 (Sell) [6]. Industry Context - The Aerospace - Defense industry, which includes Air Industries, holds a Zacks Industry Rank of 162, placing it in the bottom 35% of over 250 industries [7]. - The Zacks Industry Rank assesses the strength of industry groups based on the average Zacks Rank of individual stocks, indicating that top-rated industries outperform the bottom half by a factor of 2 to 1 [7].

Core Viewpoint - Air Industries (AIRI) is facing significant challenges with projected earnings and revenue declines, indicating a tough financial outlook for the upcoming earnings release [2][3]. Company Summary - The stock price of Air Industries closed at $3.11, reflecting a daily increase of 1.63%, outperforming the S&P 500's decline of 0.5% [1]. - Prior to the recent trading day, Air Industries shares had decreased by 3.16%, underperforming the Aerospace sector's gain of 3.85% and the S&P 500's gain of 2.74% [1]. - The upcoming earnings per share (EPS) is projected at -$0.22, representing an 83.33% decrease compared to the same quarter last year [2]. - Revenue for the upcoming quarter is estimated at $10 million, indicating a 20.38% decline from the same quarter last year [2]. - For the entire fiscal year, the Zacks Consensus Estimates project an EPS of -$0.61 and revenue of $48.29 million, reflecting changes of -48.78% and -12.37% respectively from the prior year [3]. Analyst Estimates - Recent changes to analyst estimates for Air Industries suggest a shifting business landscape, with positive changes indicating a favorable outlook on business health and profitability [4]. - The Zacks Rank system, which assesses these estimate changes, currently ranks Air Industries at 4 (Sell), with a notable decline of 35.56% in the EPS estimate over the past month [5][6]. Industry Overview - The Aerospace - Defense industry, which includes Air Industries, holds a Zacks Industry Rank of 146, placing it in the bottom 41% of over 250 industries [7]. - The Zacks Industry Rank evaluates the strength of industry groups based on the average Zacks Rank of individual stocks, with top-rated industries outperforming lower-rated ones by a factor of 2 to 1 [7].

Financial Data and Key Metrics Changes - Consolidated net sales for Q2 2025 were $12.7 million, a decrease of approximately $800,000 or 6.7% compared to Q2 2024 [9] - Gross profit was $2 million, representing 16% of sales for Q2 2025 [9] - Adjusted EBITDA for the first half of 2025 was $1.469 million, a decrease of $306,000 or 17% from the prior year [10] - The company reported a net loss of $422,000 or $0.11 per share in 2025, compared to net income of $298,000 or $0.09 per share in 2024 [10] Business Line Data and Key Metrics Changes - The company faced delays in customer approvals and extended lead times from subcontractors, impacting overall results [4] - Cost-cutting initiatives, including a workforce reduction, are expected to save approximately $1 million annually [5] - The backlog grew to record levels, indicating sustained demand for products, with significant contracts such as a $5 million order for landing gear components for the B-52 aircraft [6] Market Data and Key Metrics Changes - The company noted that long lead times for raw materials and complex product manufacturing mean that sales from the backlog will primarily be realized in fiscal 2026 and beyond [6][7] - The business development team has been actively pursuing new opportunities, particularly following the Paris Air Show [7] Company Strategy and Development Direction - The company is focused on recovering from decreased revenue streams with legacy customers while reinforcing relationships with existing clients and expanding into new markets [12] - Recent accomplishments include receiving a significant long-term agreement from Northrop Grumman and increasing content on the CH-53K helicopter [13] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the disappointing results for Q2 2025 but expressed confidence in the long-term business outlook despite recent headwinds [5] - The company anticipates that the fourth quarter of 2025 will be the strongest quarter of the year [5] - Management emphasized that the backlog is healthy and that delays in customer approvals are temporary [32] Other Important Information - The company successfully completed an at-the-market offering, raising nearly $4 million, which enhances liquidity and reduces net debt [11] - Total debt has declined by over $1 million, while inventory has increased by about $1.3 million [11] Q&A Session Summary Question: Concerns about credit facility and liquidity - Management is in discussions with the current lender and is confident about extending the credit facility [19][20] Question: Nature of recent capital raise - The capital raise was part of a planned process initiated in December 2024, not solely opportunistic [21] Question: European sales potential - The company does not have significant European customers but is optimistic about potential sales due to increased European defense spending [23][26] Question: Clarification on declining sales - Sales decline is attributed to timing issues with customer approvals and delays in first articles [32][33] Question: Consideration of selling the company - Management stated that while sales have been stagnant, there has been growth in certain operations, and they are open to opportunities that benefit shareholders [36][39] Question: Backlog conversion rates - The backlog consists of firm and full backlog, with a significant portion being firm orders that cannot be easily canceled [41][43] Question: Future of manned aircraft vs. drones - Management believes that manned aircraft will continue to play a crucial role alongside drones, as they are not expected to be replaced in the near future [46][48]