Air Industries (AIRI) 12 May 212021 Q1 Earnings call transcript

Good day, and welcome to the Air Industries Group 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 Form for See related risk.

as to results, expenses and used finds charges, stock-based noncash method is a similarly and measure amortization liquidity EBITDA nonrecurring expenses because depreciation to of the it and This and useful the understand excluding evaluate measures such outlays compensation and cash impact of of supplemental capital other consideration impact items. sources companies. from prior as may calculation of used by in differ uses titled of management other calculation working potential

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

as quarter Thank for who Industries' Good you, thank for XXXX. yesterday's in. of you Todd. and summarize afternoon the we results afternoon, first this we to call anyone for confusion apologize And tried for Air us joining

it normal. to new is normal, a has Business and returned not

During shipments the employees COVID-XX-related December are to modest of last The their them. We so now starting this government, these X struggling many and have increase to of were machinists to A the companies, companies in that get QX. in We are packages Like CNC and industry positions achieve workplace, fill lot this, in the currently by back open we delayed requesting creating are to many find employees. able other a other like are finding stabilize. stimulus sales. to some ourselves, alone. out across capacity. to we to competing with for and put difficulties absenteeism, begun Despite has businesses, XX the return year, business we experienced some board

capital million new new give an also investment machines. large $X we a year, like our would have equipment, in total I X invested over program. of on update Last to

is this up and of running. equipment All

open to are solved have Connecticut. as produce New facility operation. finding moved we some of to our engineering part, from we problem work. These some Sterling in filling our is for well the machines Island created investments the this also Perhaps, by These received partially an in We activity have offload the seen very our accounts Long starting request in York military essence, decline help equipment by in from customers. In RFQ, and product rebound the capacity business been quote have for new that bookings. commercial by

to in monitor During the the first ratio million quarter, book-to-bill sales. closely compared our booked we new We of ratio, $XX over booked business business. new

of to goal X.X:X. ratio a Our is maintain

just strong fully March For trailing XX $XX.X this X months the this funded our again, These we from XXXX, orders represents of firm goal And customers. at our have bookings kept backlog ended are X.XX:X. million. point at shy

XX%, aerospace. defense, is primarily the you about Industries know, predominantly The As pandemic Air commercial business effects the the may of commercial of negative been the in market. segment felt COVID-XX balanced with have

We very have lucky. been

both been ground by commercial While we products we fully for jet for increases of cancellations some make in orders and offset, gear have landing product, have these offset engines for ground-based. seen

airliners, in our of the is smaller high One used from products regional airlines. is on which demand

and would Recca, to Mike recap. with CFO, financial over Then I the to call the closing my Mike? I'll to turn questions. like for call thoughts return up our open the

Thank Lou. you,

quarter year, to little it first about Gross a was quarter last for the about increase first $XXX,XXX the for sales profit mentioned, were sales. Gross of profit being higher the XXXX, about Lou X%. XX% of and with was compared slightly declined As than disappointing. the by quarter

because began benefits particular, insurance, in a and $X manufacturing principally equipment. plan for increased benefits, in new million employee health we by we increased Now costs factors: this overhead was depreciation is and on first, spent in caused Employee year several increases depreciation. here January. new had And costs,

Gross due but help. which no where the order, we've had alluded to depressed difficulty commercial were as Also, we cancellation to, finding of a had profit revenue. said, also aircraft had sales cost Lou profit and the Lou as just of percentage recovered our

we fewer the have production We prior in employees XXXX did than in year.

total in the So the in for shop. about this were And quarter, reduced year year XXXX. X,XXX than production less this hours we last

The overhead increased So with is the burden. a hours higher news news, each good the bad carried sales fewer these of hours.

fully then XXXX hours can hopefully, additional to incentives hours remain return So increased end, special when And and should unemployment levels cost. the to should staff in we up. the absorb

by in operating XXXX. the costs gross $XXX,XXX than were was in more lower profit for about costs. quarter Operating decline offset than The less

gross was the for a with operating $XXX,XXX net gain down cost $XXX,XXX, quarter. of down profit So by $XXX,XXX,

As a compared $XXX,XXX this a operating the by we profit quarter an increased year. QX as had first to in result, operating in profit of loss year last

a net had to we quarter, this loss of a small the XXXX. For $XXX,XXX. profit in And compared

million. due $X.X about this, net a tax last legislation-related $XXX,XXX. entirely would to been profit benefit the XXXX loss However, COVID was Without have year our in of

XXXX, in X/X. than the So more we by loss reduced

of positive quarter, bank We So cash by $XXX,XXX. debt had was out Generated our we EBITDA $X.X reduced for million. $XXX,XXX. flow the of

close on cash $XXX,XXX and to $XX,XXX. expenses payable and by receivable accrued Our And declined hand [ accounts ]. increased accounts by

adequate. remains So position more result, as a our liquidity than

Lou, I'll might and Lou, to any questions I the have. call you that, up. you're to And look with turn back forward

Thank Mike. you,

COVID-XX call ]. the close me seen becoming [ with less a and let few as thoughts. The Now are less disruptions of

to. we remain equipment the are been and starting meetings, these addressed, into positive future. The as see have very so some Our business and clients back allow producing face-to-face to getting trends new bottlenecks are towards is Internal conducting our optimistic about are are as office. product. We some we accustomed

up I to participant up the open that, questions. to calls lines, open would would please like you Todd, With please? the

Caller, And go Instructions] first take [Operator please ahead. we'll question. our

Brothers. This John yesterday, I Taglich no to is but tried avail. from Nobile

have questions. So few a I

hoping of forward. and talk could the about for receive a expected program First one, orders for landing possibly expectations in going month, of that and are for was to what million you F-XX, last you little excess quantify this additional orders the you I kind. your components received $X F-XX gear this

John, are thing. as we -- know, produce gear. to F-XX landing you we an licensed F-XX, Well, ongoing That's are

So that's, we're I This XX months I know, X a over, it don't buy quoting or deliverable think, parts. years? always was spot Mike, was

think it months. XX I was

we've around a the the lot the or So order F-XX matter parts, or and got of placing irons when a in get just an is. requirements fire need it's they on of to

off a is as of of other in XXXX. got NY-XX with this hopefully in I year. were LTAs Sikorsky taking LTAs far a out is due the had end that that new September We this going of XXXX. As There to orders, here be package of us. Everything for just on is coming kind been just of much ironed introduced. is the pretty before year

Multiyear.

said, a The with out contract we F-XX, ironed That's as first be this it's received Multiyear. initial F-XX, another Sikorsky. multiyear X-year to order. year. going our another with that's we client

other and we're the over to I'm products So the with. going get sure, a that will There's few involved course spot of fire. we buys in year, other have the irons

you in Okay. new And machinery. XXXX, made large capital the investments in

million. to to was $X.X reduce... was it close all think million, $X I It help

Yes. It $X million. was

a you XX-month period. this was was all the the out getting I had And huge backlog in had to million. backlog, because that you the $X experienced bottleneck trouble reduce guess with suppliers Yes. help it

little And in just months the about So wanted talk be do could this to regard. new the backlog this you've how your that much with you XX if I equipment? a to ship that you you progress made in specifically believe would see of able next

us we state-of-the-art a kind done X-axis of has it's couple X given that of a, equipment pieces new -- our Most were of the the eliminated equipment Well, machines. parts. for things of into of equipment it X options bigger has bought backlog; b, the us:

is any in machine, granted, got it. on just X-axis a axis, manufacturing X and a with got axis could rotary X you about any component, Now X-axis world, geometries a machine. you you produce

So where up kind all on. sitting. of the manufacture it several we going across given and a it it, us one to opportunity It's in it's set forget to and opened to machines part it up get program were

our look it to lot and bought from holes. in insights us honing past, the now a increased we very And of capacity for We capacity have XX. that that large a XX-inch us that able we far do in too for -- components gives diameter very more to stroke in only capability are was other get fancier it the to X big work which of precise capacity a the also machine, has a ramped it's which the geometries, to complex And from us past. XX-inch not throughput, be to more axles inches doing. into being a up were some at stroke, do increased other geometries department, the we to So able able to in additional honing given weren't the

So diameters, do far -- if would. far we can greater bigger you

those didn't define quote have we direction products have time So do could that of we and that to are or those the in-house. of But the we take get in that's past. and things kind kind But taken. pursuing not

backlog. for you it's out. XX-month really your problems, I Would going backlog part, bottleneck, most would believe from So firm you've, say the the those an which that hindered alleviated really point? could should at you an say months, point that the not at with successfully be next equipment backlog really ship this that you million the this this $XX.X in XX issue

have our addressed. been Internally, believe, I mean, no. backlogs, I

processing outside double we're what So working needed to that trying on on. do. the still There's up we we everything. We're did to

was York, issues great So avenues. seek especially There say. the New XX strides, COVID during let's one out we there's the made working but housing processing in to still of we're through, other months

have sometimes or Connecticut Now or in process we Jersey California. another Georgia Ohio or house in or New

on of breath So of and time deep we had everything. a kind a of bit kind double to take up little

outside working So we are the as processes well.

the make better. should it backlog delivering on far far, So

that, A improvement Okay. large in a CapEx. I mean, substantial

they're and is So business traveling ease, more. specifically, more I from starting another the question believe enjoying to definitely people conditions, here, COVID airline

if So outlook expect in you I'm XXXX. curious from get to your segment for this profitability and Sterling just

in small I out the think profit quarter. a first you eked gross

to your rest outlook the So the for get I of just wanted year.

QX absolutely a We profit Yes. you're had gross in correct. Sterling. -- at We up small

up. market, are anybody quicker jets with it the definitely thought smaller activity picking We back the especially airlines commercial would. the than in seeing regional is come The

tickets, You that can of again. of a all pricing by tell sudden,

When thousands your the had actually during in back massive at we stock thousands up COVID and the So in-house Whitneys We're sticker everything came up work they a both GEs, from talking pulled picking initially. time, and employees because Pratt there -- layoff. of your commercial started the they in operations.

think everything to now work they're be through time. pull in-house able come -- of doing lot We're seeing so what to this that I a get back they But back.

it they that So pulled we're that had back, some had of now. work we the back seeing come

we than earlier sector starting of definitely show our So is far anticipated. commercial some had to signs life

I sequentially Well, that's and going is only margin. margin a hindrance due forward the gross to good hear, picking to really up obviously, anticipate, overall on being gross Sterling

see on that's in a column, it plus margin gross So a perspective. the at plus least to big

The on other there, Sterling facility. it. there a military-type work The was mentioned that we decent work Island our out thing, in machines amount my little of put work we had on with Long to up we the John, have synopsis that I'd that moved went

there burning though side we both some with there. the of the so layoff and additional finding really and here. commercial down have Even up burden So We -- the put maintained we're kind they're the find. on had we kind to market, a work we workforce, employees out, capacity ways major of didn't aerospace that hard was that over

of which John, manufacturing depressed XXXX, in margins. Yes. should $XXX,XXX had unabsorbed Sterling about you know, overhead,

Our there Long up product increase what absorb call the to to that Long I Island, goal is year Island this with throughput.

to their offset $XXX,XXX, the addition recognize Instance recognized. greatly be would but enhance that would So in the in cost be -- be which $XXX,XXX we that the it could profit segment, does, would other or margins.

hear. And your of was new $XX that million in the you business, of wondering provide release, breakdown specific in which press to on the ratio. new great book-to-bill helped if definitely mentioned That's could business. $XX programs I a No. million you

have not hand. that really at Do

The majority of it?

customer. it's spot from it's different -- buys There's of everything from not from different John, lot X person in There -- it's from is that, is not It's a different X so clients. -- -- avenues. several

I right. if sure towards a was majority it customer. X All geared really wasn't into

So...

No.

you the to it good it question close CapEx was Yes. -- that a about you that CapEx. But wanted to know made, I because make. to million And in It's $X norm last I to -- I the just going year, obviously, was investment that's forward. going not a be ask needed

the what wondering might expect for So us give if could just I CapEx was you XXXX. you

to up catching of years some had do. we John, Well,

we So do...

No. I get know that. idea. to XXXX. wanted going to $X expect an I CapEx I'm not I mean just in million for

our It's upgrade quicker. to the but I yearly better, do we're of we is always to faster, to our is some equipment going stuff not possible basis. always world-class old, most because new, on eyes And something set that Yes. equipment become to million, going there's have a have and -- amount mean only great the $X to work on it's efficient equipment way to continually years way.

an So always we're to workflow. upgrade. greatly a always our can repair. going make to going try that piece to always We're enhance make We're to a going of equipment buy

Fair Okay. enough. And...

be last won't had the to magnitude year. It as we

like know like I was we there. line well, that. as hoping a should Like going is I had I flat of forward. in -- should first anticipate don't just expect $XXX,XXX quarter. typical didn't maybe this number I out just you No. out you put if that could the what

be $XXX,XXX installation line, would quarter a a -- the was the -- But for soft not the fair. $X $XXX,XXX would XXXX. the the terrible first of the year in of be of would estimate. in reasonable costs existing That But flat be million really invested final

Okay.

opportunistic opportunity. opportunity, an good a As

it I And use modeling for a the right. it I million which to diluted. you a wanted to I just actually what I get to as idea over I just previously diluted on should -- shares in had ask basis, expect. of what can say to the what an All little think share is I'd Okay. I like report what a fully put count. question is diluted purposes, if XX

would count? use as number to fair diluted what So your a be going forward share

be million are of XX X We There have XX would right? sources about million outstanding now that, good. dilution.

debt. have We convertible

We have options, and we have warrants.

$X.XX look and are because expires ones today, outstanding, XXX,XXX, warrants, beginning in group ], you but expire are exercise [ about of the somewhere in last if year, year higher going the it's in they $X.XX between than about most from year prices a from a Xs. this are now. And to million, on the today, X.X them of X.X those we are Now at November. expire And the May of of next XXX,XXX million significantly where

So about XXX,XXX at $X.XX.

is the combined options, million outstanding. it's on weighted. those the just about total, is It's This options. price all options divided exercise not Then there's X.X volume in total $X.XX by the the of

of that I'm And Then the that's million price convertible convertible debt. sorry, debt, convertible $X.X there's average $X,XXX,XXX $X.XX. an -- at of of

So shares. that's about X million

$X So it's about in X issuing million shares that could be issuable. proceeds But there's those. million also from

Good. Understood. Right.

is, or assuming line a I obviously, use is count, But least loss. line number to bottom cash So million so have with to to use. safe the share anti-dilutive, when assume a good forward a pretty but can't million, know number flow, it's you profit, that. XX going and because going a you it's bottom at XX It's your help so

That's correct.

Okay.

Just me one here. with Bear last question.

what expect forward wanted level it was this at almost first about to we're quarters, in below really $X a kept the the actually, you've the to be last just era to was the know that I quarters if should operating will it, But past you a here. And $X.X cut last million. going good $X.X million. million we down for quarter. X guys cost now -- year's at Looking And -- quarter, COVID because X expenses

here. $X bit forward, anticipate million going order creeping look that, in I So little as I or in from should if increase we to don't up maybe business at should it know an a support under as

don't go was the or bankrupt -- year that debt off. due write the we the abnormally quarter debts customers of sense have bad bad Well, our in like. We're high first a last to

debts much dispute GAAP much was was to have to for on returned it's the and age how billed, an as because We bad like. was there's purposes, how the "bad". But it where point

year. So the that of $XXX $XX There we was think recovered million. off, million amount $XXX-ish wrote about this We I a million. was

So That quarter-specific the swing, was that's to not recur. a expense. going

$X quarter million a appropriate. is to going I $X.X million forward, So think,

we [Operator Instructions] in have this Mr. at Melluzzo, time, queue. questions no

Thank you, Todd. Okay.

everyone, once your you time conclude be questions. for So again, call and and us taking with on may the Todd, to call. this for with attention you, today thank that, the

and gentlemen. conference. This ladies today's concludes you, Thank

You now may disconnect.