Air Industries Group (AIRI) Q1 2025 Earnings Call May 15, 2025 04:15 PM ET Company Participants Luciano Melluzzo - President & CEOScott Glassman - CFO, Principal Accounting Officer & Secretary Conference Call Participants Howard Halpern - Principal Equity Analyst Operator Hello, and welcome to Air Industries Group First Quarter of twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. The question and answer session will follow the formal presentation. Please ...

Financial Data and Key Metrics Changes - Consolidated net sales for Q1 2025 were $12.1 million, down from $14.1 million in Q1 2024, indicating a decrease in sales [11] - Gross profit increased to approximately $2 million from $1.9 million in the previous year, with a gross margin percentage of 16.8%, up 320 basis points compared to Q1 2024 [11][12] - Operating loss increased to $746,000 in Q1 2025 from a loss of $259,000 in Q1 2024 [13] - Net loss for Q1 2025 was $988,000 or $0.27 per share, compared to a loss of $706,000 or $0.21 per share in Q1 2024 [13] - Adjusted EBITDA for Q1 2025 increased to $576,000, a rise of $214,000 or nearly 60% compared to Q1 2024 [13] Business Line Data and Key Metrics Changes - The company reported an increase in operational efficiency, achieving higher gross profit on lower sales [4][5] - The book-to-bill ratio was 1.34, reflecting a 20% improvement from the prior year and an 80% increase since Q1 2023, indicating a healthy business development effort [7][8] Market Data and Key Metrics Changes - Funded backlog reached a record $120 million, with total backlog exceeding $2.5 billion, both achieved during 2024 [8] - Raw material lead times have increased significantly, with current lead times ranging from nine to fifteen months [9] Company Strategy and Development Direction - The company is focusing on aggressive business development efforts, including participation in the Paris Air Show to onboard new customers [6] - The management is optimistic about future sales growth, supported by a strong backlog and improved bookings [8] Management's Comments on Operating Environment and Future Outlook - Management believes that the impact of tariffs on imports will be muted and does not expect significant benefits from the proposed increase in defense spending [15] - The company reaffirms its belief that full-year results for 2025 will exceed those of 2024, despite quarterly variations [16] Other Important Information - Total debt has been reduced by approximately $1.6 million, while accounts receivable decreased by over $2 million due to timing of sales and collections [14] Q&A Session Summary Question: Clarity on first quarter revenue and trends for the second quarter - Management indicated that the revenue decline was primarily due to long lead times and timing of purchase orders, but they are seeing an easing in acquiring materials [19][20] Question: Customer hesitation due to economic conditions - Management confirmed there is no hesitation from customers regarding ongoing programs, and they expect to meet delivery expectations [24][25] Question: Specific new customers targeted at the Paris Air Show - The company has scheduled meetings with large overseas manufacturers and is targeting customers in the electric vehicle sector [28][29] Question: Was the stock-based compensation a one-time event? - Management indicated that the stock-based compensation expense is likely to be lower in future quarters [30]

Financial Performance - Net sales for the three months ended March 31, 2025, were $12,135,000, a decrease of $1,926,000 or 13.7% compared to $14,061,000 for the same period in 2024[104] - Gross profit for the three months ended March 31, 2025, was $2,034,000, an increase of $128,000 or 6.72% from $1,906,000 in the same period of 2024, with a gross profit margin rising to 16.8% from 13.6%[108] - Operating expenses increased to $2,780,000 for the three months ended March 31, 2025, up $615,000 or 28.41% from $2,165,000 in the same period of 2024, representing 22.9% of net sales[109] - Net loss for the three months ended March 31, 2025, was $988,000, compared to a net loss of $706,000 for the same period in 2024, reflecting a 39.94% increase in losses[111] Cash Flow and Liquidity - Cash decreased by $468,000 or 62.15% to $285,000 as of March 31, 2025, compared to $753,000 as of December 31, 2024[105] - Working capital decreased by $1,400,000 or 11.89% to $10,376,000 as of March 31, 2025, from $11,776,000 as of December 31, 2024[105] - For the three months ended March 31, 2025, cash provided by operating activities was $1,525,000, compared to a cash flow use of $232,000 for the same period in 2024, indicating a significant improvement[122] - Cash used in investing activities was $1,217,000 for the three months ended March 31, 2025, up from $111,000 in the same period of 2024, reflecting ongoing investments in property and equipment[123] - Cash used in financing activities for the three months ended March 31, 2025, was $776,000, which included a decrease in borrowings under the Current Credit Facility by $284,000[125] - The company believes it has sufficient liquidity to meet its financial obligations for the next twelve months, based on current revenue visibility and backlog strength[119] Contracts and Backlog - Total unfilled contract values amounted to $270.3 million as of March 31, 2025, including a backlog of $120.6 million[103] Debt and Financing - The company entered into an Eighth Amendment on January 30, 2025, providing for an additional Term Loan of $1,640,000 for equipment acquisition[117] - As of March 31, 2025, the outstanding amount under the Revolving Line of Credit was $11,204,000, with $8,796,000 available for growth[119] - The company is exploring potential extensions or refinancing of its obligations under the Current Credit Facility, which may involve higher interest rates or more restrictive covenants[120] Customer Concentration - Lockheed Martin accounted for 39.6% of net sales in 2025, up from 25.9% in 2024, while RTX accounted for 28.9% in 2025, down from 33.4% in 2024[106] Operational Efficiency - The company plans to invest approximately $750,000 during the remainder of 2025 for new or upgraded equipment to enhance production efficiency[124] Accounting and Reporting - The company has not experienced any material changes to its critical accounting estimates compared to the previous year, maintaining consistency in financial reporting[129] - The increase in cash flow from operations was primarily due to a decrease in accounts receivable and the collection of contract costs receivable[122] Financial Ratios - The Fixed Charge Coverage Ratio achieved as of March 31, 2025, was 1.19x, exceeding the required 1.05x[113] Off-Balance Sheet Arrangements - The company has no off-balance sheet arrangements as of March 31, 2025, indicating a straightforward financial position[126]

Financial Performance - Net sales for the three months ended March 31, 2025, were $12.1 million, a 13.7% decrease from $14.1 million in the same period of 2024[2] - Gross profit increased by $100,000 or 6.7% to $2.0 million, with gross profit as a percentage of sales rising to 16.8%, an increase of 320 basis points from 13.6% in 2024[2] - Operating expenses increased by $615,000 or 28.4%, primarily due to a $412,000 increase in non-cash stock compensation expense[2] - Operating loss was $746,000, compared to an operating loss of $259,000 in 2024[2] - Net loss for the first quarter of 2025 increased by $282,000 to $988,000[2] - Adjusted EBITDA improved to $576,000, representing a 59.1% increase over 2024[4] Operational Metrics - The Book-to-Bill ratio was 1.34 to 1.00 at the end of the first quarter of 2025, nearly a 20% improvement from the prior year[4] - Funded backlog of firm customer orders increased by $2.7 million or 2.3%, while total backlog continues to exceed a quarter of a billion dollars[9] Future Outlook - The company reaffirms belief that full-year 2025 results will exceed those of 2024[9] - Operating loss increased primarily due to higher non-cash stock compensation expenses, which accounted for 67% of the increase in operating expenses[4]

Company Performance - Air Industries (AIRI) closed at $3.62, reflecting a -0.55% change from the previous day, underperforming the S&P 500's gain of 1.47% [1] - Over the past month, Air Industries' shares increased by 7.06%, outperforming the Aerospace sector's gain of 2.34% and the S&P 500's loss of 0.47% [1] Earnings Projections - The upcoming EPS for Air Industries is projected at -$0.04, indicating an 80.95% increase compared to the same quarter last year [2] - Revenue is expected to be $14 million, showing a 0.43% decline from the year-ago quarter [2] - For the full year, analysts expect earnings of -$0.23 per share and revenue of $57.05 million, representing changes of +43.9% and +3.52% respectively from last year [3] Analyst Estimates and Rankings - Recent changes to analyst estimates for Air Industries are crucial as they reflect short-term business trends, with positive revisions indicating a favorable business outlook [4] - The Zacks Rank system, which ranges from 1 (Strong Buy) to 5 (Strong Sell), currently ranks Air Industries as 5 (Strong Sell), with a consensus EPS projection having moved 228.57% lower in the past 30 days [6] - The Aerospace - Defense industry has a Zacks Industry Rank of 146, placing it in the bottom 41% of over 250 industries, suggesting underperformance compared to higher-ranked industries [7]

Company Performance - Air Industries (AIRI) stock closed at $3.40, reflecting a +1.65% increase from the previous day, outperforming the S&P 500's gain of 0.74% [1] - The stock has decreased by 12.4% over the past month, underperforming the Aerospace sector's decline of 4.39% and the S&P 500's drop of 4.77% [1] Earnings Forecast - The upcoming earnings report is expected to show an EPS of -$0.04, indicating an 80.95% increase compared to the same quarter last year [2] - Revenue is projected at $14 million, which represents a 0.43% decrease from the equivalent quarter last year [2] Annual Estimates - For the annual period, the Zacks Consensus Estimates predict an EPS of -$0.23 and revenue of $57.05 million, reflecting increases of +43.9% and +3.52% respectively from the previous year [3] - Changes in analyst estimates are crucial as they often indicate shifts in short-term business dynamics, with positive revisions suggesting a favorable business outlook [3][4] Zacks Rank and Industry Performance - The Zacks Rank system, which ranges from 1 (Strong Buy) to 5 (Strong Sell), has shown that 1 stocks have returned an average of +25% annually since 1988 [5] - Currently, Air Industries holds a Zacks Rank of 5 (Strong Sell), with a significant 228.57% decline in the Zacks Consensus EPS estimate over the past month [5] - The Aerospace - Defense industry is ranked 171 in the Zacks Industry Rank, placing it in the bottom 32% of over 250 industries, indicating underperformance compared to higher-ranked industries [6]

Company Overview - Air Industries (AIRI) closed at $3.25, reflecting a -1.22% change from the previous day's closing price, which is worse than the S&P 500's daily loss of 0.17% [1] - Over the past month, Air Industries' shares have decreased by 16.92%, underperforming the Aerospace sector's loss of 1.42% and the S&P 500's loss of 3.94% [2] Financial Performance - The upcoming financial results for Air Industries are anticipated, with a forecasted EPS of -$0.11, indicating a 47.62% improvement compared to the same quarter last year [3] - Revenue is expected to be $13.5 million, which represents a decline of 3.98% from the prior-year quarter [3] Analyst Estimates and Rankings - Recent changes to analyst estimates for Air Industries are being monitored, as positive revisions are seen as a favorable indicator for the company's business outlook [4] - The Zacks Rank system, which evaluates estimate changes, currently places Air Industries at a rank of 3 (Hold), with no changes in the consensus EPS estimate over the past month [6] Industry Context - The Aerospace - Defense industry, which includes Air Industries, has a Zacks Industry Rank of 164, positioning it in the bottom 34% of over 250 industries [7] - Research indicates that industries in the top 50% of the Zacks Rank tend to outperform those in the bottom half by a factor of 2 to 1 [7]

Financial Performance - Net sales for fiscal 2024 were $55,108,000, an increase of $3,592,000 or 7.0% compared to $51,516,000 in 2023[140] - Gross profit for fiscal 2024 was $8,932,000, up from $7,428,000 in 2023, with a gross profit margin increase to 16.2% from 14.4%[143] - Operating expenses in fiscal 2024 totaled $8,473,000, representing 15.4% of net sales, compared to 15.0% in 2023[144] - The company reported a net loss of $1,366,000 for fiscal 2024, a reduction from a net loss of $2,131,000 in 2023, marking a 35.9% improvement[146] - The company achieved an EBITDA of $3,640,000 for the twelve months ending December 31, 2024, exceeding the required $2,800,000[148] Cash Flow and Investments - Cash increased by 117.63% to $753,000 as of December 31, 2024, compared to $346,000 in 2023[139] - For the fiscal year ended December 31, 2024, the company generated cash flows from operations of $324,000, a significant decrease from $4,862,000 in fiscal 2023[159] - Cash used in investing activities was $2,285,000 in 2024, compared to $2,112,000 in 2023, primarily for new property and equipment[160] - Cash provided by financing activities for the year ended December 31, 2024, was $2,368,000, with a net increase in borrowings under the Current Credit Facility of $2,238,000[162] - The company expects to invest approximately $1,600,000 in 2025 for new or upgraded equipment to enhance competitiveness[161] - The company is obligated to pay $43,500 as an Excess Cash Flow payment for the fiscal year ended December 31, 2024[153] Customer and Sales Breakdown - Major customers in 2024 included RTX (29.3%), Lockheed Martin (25.1%), and Northrop (18.3%), with Northrop's contribution significantly increasing from 3.6% in 2023[141] - The E-2 Hawkeye and UH-60 Black Hawk Helicopter platforms accounted for 24.0% and 23.1% of net sales, respectively, in 2024[142] Contractual Obligations and Amendments - As of December 31, 2024, total unfilled contract values amounted to $271.3 million, including a backlog of $117.9 million[137] - The company entered into a Fifth Amendment on August 4, 2023, waiving a default related to the Fixed Coverage Charge Ratio and increasing the purchase money secured debt limit to $2,000,000[151] - The Sixth Amendment on November 20, 2023, revised the Fixed Charge Coverage Ratio requirements to 1.10x for Q1 2024, 1.20x for Q2 2024, and 1.25x for subsequent quarters, while allowing capital expenditures up to $2,500,000 annually[151] - The Seventh Amendment on May 31, 2024, set EBITDA requirements of $740,000 for the six months ending June 30, 2024, $1,500,000 for the nine months ending September 30, 2024, and $2,800,000 for the twelve months ending December 31, 2024[151] - As of December 31, 2024, the company has a borrowing capacity of approximately $7,095,000 under the Revolving Loan[152] Operational Efficiency - The company operates two state-of-the-art manufacturing centers in the U.S. to enhance production efficiency and quality control[134] - The company plans to engage in discussions with lenders in 2025 to explore potential extensions or refinancing of obligations[156]

Financial Performance - For the year ended December 31, 2024, net sales reached $55.1 million, a 7% increase from $51.5 million in 2023[4] - Gross profit improved to $8.9 million in 2024, up 20.2% from $7.4 million in 2023, with gross profit as a percentage of sales rising to 16.2%[4] - Operating income was $459,000 in 2024, a significant turnaround from an operating loss of $295,000 in 2023[4] - Net loss for 2024 was reduced by $765,000 to $1.4 million, an improvement of 35.9% from the prior year[4] - Adjusted EBITDA for fiscal 2024 was $3.6 million, an increase of nearly $1.0 million or 35.3% from $2.7 million in 2023[5] - Operating expenses increased by 9.7% to $8.5 million in 2024, reflecting higher non-cash stock compensation expenses[4] Business Growth - New bookings increased by 15% compared to 2023, with a "book-to-bill" ratio of 1.30x, exceeding the aerospace industry benchmark of 1.20x[6] - Total backlog now exceeds $250 million, marking a new record for the company[6] - The company anticipates that year-end 2025 results will exceed those of 2024, continuing the positive trend established[10] Awards and Recognition - The company received the Northrop Grumman Supplier Excellence award in February 2025, an honor granted to less than 0.5% of their 11,000 suppliers[10]

Company Performance - Air Industries (AIRI) closed at $4, showing no change from the previous session, which is a narrower change compared to the S&P 500's 1.78% loss on the same day [1] - Over the past month, shares of Air Industries have decreased by 7.41%, underperforming the Aerospace sector's loss of 1.93% and the S&P 500's loss of 3.48% [1] Upcoming Earnings - The upcoming earnings per share (EPS) for Air Industries is projected at $0.02, indicating a significant 66.67% decline compared to the same quarter last year [2] - The consensus estimate for quarterly revenue is $14 million, reflecting a 3.93% increase from the year-ago period [2] Analyst Estimates - Recent adjustments to analyst estimates for Air Industries are crucial as they indicate changing near-term business trends, with positive revisions suggesting a favorable outlook on the company's health and profitability [3] - The Zacks Rank system, which incorporates these estimate changes, provides a rating system that can help investors make informed decisions [4] Zacks Rank and Industry Position - Air Industries currently holds a Zacks Rank of 3 (Hold), with the consensus EPS estimate remaining unchanged over the past month [5] - The Aerospace - Defense industry, part of the Aerospace sector, has a Zacks Industry Rank of 85, placing it in the top 34% of over 250 industries, indicating strong performance potential [6]