Air Industries (AIRI) 8 Mar 222021 Q4 Earnings call transcript

Good day, ladies and gentlemen and welcome to the Air Industries Fourth Quarter and Full Year 2021 Conference Call. Today's conference is being recorded.

For Air Industries' Safe Harbor statement except for the historical information contained herein, and 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 of 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 Mr. At turn this time, the I'd conference over to Lou Melluzzo. Please go ahead.

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

operating Our million, year quarter ago, of the to we results. profitable sales a strong for Group increased year our increased nearly sales same $XX of as period XXXX. X.X caps XX.X% operating faster. accomplished Industries for fourth increase of the to growth our million of full X.X% XXXX for sales. three in margin delivering from Consolidated bringing the quarter net fourth year Air goal an full XX.X% or This was improvement increase gross basis for Gross XXX of increased XX.X% year an is times profit of $XX.X points, from from XX.X%, while leverage, gross profit a percentage XXXX. points Further underscore sales continued

to $X.X plus which our to our his we year aircraft. percentages order gear They long-term agreements. excess statement, gross landing predominantly for a for in an $X components of was expect and manufacture our We pleased over and award related military's number F-XX XXXX of was in jet awarded years. of have follow-on and major Agreement. for turbofan, aircraft for estimated F-XX joint produce held thrust make and extension for commercial existing with strategy aviation in XXXX. purchase This by a The in Engineering many we of engine adds Recca, including landing XXX. in its of which our Term contract used excess a record is component our components in is produce Boeing had Air product. Navy minimum will Airbus strike term for of our We income on the strategic used to subsidiary of program improvements it another business awards. value program million improve largest Engineering of landing A award in license important F-XX We and components business that the LTA our I'm was used profitability many million F-XX fighter to life shoppes win to for maintain new on to generation complete margin AXXX the goal heavy-lift strong $XX critical deliver GTF the chatbots exhaust in This report and extension or a components with release world's The wins. of revenue also million Sterling turbine XXXX gear LTA especially Boeing furthers to our aircraft, manufacture fighter complete for is for version A component million the of the rest PW-XXXX to the license, held Sterling's case expected the transitioning jet orders of was flow footing a commercial a LTA the our million to latest the of aircraft. engine, variants on our the aircraft. first step included the took a report. even F-XX in backlog Sterling fifth a began period for generate its important forward discuss The the Mike Force, XXXX. exciting struts, fighter between best remaining the We Long $X.X with sales from produce over award of and geared the an product landing LTA beginning aircraft. The the new This gear part perspective, with is $X the to three-year commercial In three CH-XXK U.S. from a on of new Navy long-term $XX aircraft. Marines. helicopter million. all CFO gear

with of We Helicopter components for awarded three than critical value an also million. were a total combined $XX new more LTAs the for estimated Blackhawk of

We for components are more for Blackhawk XX proud to critical the have than years. manufactured

our line. of product to XXXX is our expand in goals One

Towards we for $X.X landing contract with to in awarded Force's a U.S. gear approximately the XXXX. produce the of that end, of a million deliveries were Air BX-B components with value

While Air Industries' from that's is some is the order been aircraft not in a for portfolio customer, established for platform long time. it an

X announced its slight XXXX. $XX million, exploration the recent this $XX end see a to the Warning XXXX. landing and total, $XX.X December At totaling timing million or to in and awarded received two contract a XX, completed from XXXX, were And in benefits our to year. in those first between of expect million complete, we revenue begin backlog supplier Advanced XXXX be install Early agreements totaled we restart. U.S. expected the customer complete to landing are year gear months for a due manufacture existing We Hawkeye, Deliveries of produce ready components ancillary new XXXX. more would In will the LTAs than aircraft. in Mainly decrease and Airborne gear we major main and in E-XD Finally, an starting as to OEMs. to the orders a to Tier long-term

have XXXX, deploying delivery funded our profitability. As capital efforts, a XXXX. our of since only is customers. our continually I backlog We self-sufficiency our starting earnings To and support on-time improve investment began our May we in to and orders robust comprised the program record affirm enhance our improve call, on XX-month last which composition fully from efficiencies

purchase have two about written has for and this order each Our $X capital large $XXX the million few next We costing totaled $XXX,XXX the so on costing in have million. we orders investment order XXXX machines million new placed a machine between currently in $X.X year, - third far days.

We discussed of have previously our bring to product in-house. processing initiative

to begin Our first paint next the few shortly bring expect in after. painting process weeks in-houses to the complete we painting, and booths products

profitably. intend we said continually in manufacture equipment, release, Air our product more invest I Industries world-class As today's enabling and modernize and efficiently more to to

Air over military manufacturers, the aircraft, U.S. want is the that today's strong and necessity frontline in tragic Ukraine Industries' overwhelmingly to many, business I Before Industries' that Air the not value I Mike to used events are point in fighter components Recca, aircraft. ready-to-fight check most if the to call turn a emphasize on critical release. reinforce of of military. another

deployed Defenses state-of-the-art recently has U.S. of the been Allies. States the our aircraft NATO to fact, In Baltic Black F-XX bolster the from and bases to Air Sea

with the CFO, attention. call like Let all supporting over Mike? our that of Industries to Recca, me your emphasize our mission. and I of to your you that, Group Air our warfighters for follow-up turn would questions-and-answers. our Thank crucial With this pride we further will in Michael then products are

Lou's gross Lou. quarter sales discussed you, already and the in profit year. for Thank the

additional results on some and I'd sheet. So the balance to operating on focus like

what's the we the how explain used I'll and estimate means profit called that we have gross profit what interim method. calculate gross gross Historically, gross year. is periods, profit. profit prior using from gross for historical First we And profit

a adjustments the year. have end factors. year, some to make Now, or small year, the in in affects change November, volume, last which complete other versus the this that is costs and we essentially, typically year inventory during valuation. or of may of account But the mix from sales what some At we a was product resulting absorption

quarter margin of gross were true-up a breakeven costs that, ago. decreased to replace and best. like time, last for whose to product then mix. a profit at inventory product few XXXX, an year full labor product for replace of In the This that increases points gross for sales the product increase LTA discussed XXXX, that percentage little in significantly gross rendering essentially the Following those we're was year product driver fourth the able of over change Lou sales have we adjustment Sales increased those adjust we primary from a an and was year. had million. profit as and welcome in such account much by profit and as carrying or in resources $X.X margin. gross with use profit This profit in the increase higher a X.X minutes The the the

loser. or higher product is back at will profit the longer no but zero much a LTA, this recently be zero Now received price and a in

remained increasing year. costs in even about for full operating is sales. This - growth by Our X% XX% include controlled in well the in XXXX modestly achieved the face of very

However, increasing and we operating increase pressure in minimizing costs. XXXX any to alert are we focused in inflationary on

was profit up, are slightly down. flat, operating expenses gross So

That's So operating loss of $X.X to the million. XXXX in compared improved was million to for XXXX. a income $X.X year

have from in of $X.X income $X.X due changes. COVID-related law to the from swing XXXX $X.X $X.X forgiveness Net operations benefit loans, income. year million from $X for net income was million. million PPP we million included continuing income an a refund tax tax in But this income was $X.X and million of last and a So operating million the in year full tax

So had in two income. similar a we loss XXXX items, including XXXX of to income net-in about those improved we million net net XXXX, $X.X $X had million and operating in by

double-digits was significantly sales. sheet $X.X We which accrued to include had XXXX expenses. finally year inventory adjusted the accounts reduced disruption EBITDA COVID during strengthened only compensation Our of a totaled million, increased ended by XX.X% of also million $X.X and the stock-based and balance payable with

sales to controlled back XX XXXX. well million there been compared or have are in $X.X nearly by of days XX% outstanding now reduced Our XX and XX

line which called Webster by reduced million credit revolving also formerly was combination and were Sterling $X.X with Bank, a of term Bank, XX%. National along Our

in since the these been Now full compliance XXth in Sterling inception. covenants with XXXX. loan we got since of We've January Webster financial

improved combined results, extend our approximately, three and this credit the both revolving maturity the Webster term I think to improving the our four induce of XX, from line December with years to sheet, today. XXXX facility, years balance loan credit our by and

we a Webster relationship So have long-term Bank. with

liability call current If forward us was That's to million liability. I questions. pass a sufficient credit credit as our back year-end have. working $XX require consider plan. reclassify for look Lou the opposed revolving rules accounting to your us certainly the However, line that we long-term execute I'll long-term at line about to to a - to the capital to all

Thank you, Mike.

of goal with portion Group, for our growth improvement executed Let operating of of close strategy, year the and cap pursued thoughts. a this our on Air quarter the call we fourth continued few me Industries The as in results. growth

We first year. footing have started strategic strong important on in with and a of the wins XXXX months the two

a As issues. look will to than lingering of due in XXXX, differences we supply lower timing revenues first year to mostly ago, LTAs be chain in quarter some simmering, that

However, our should trend. profit margins revenue quarter of first XXXX. should QX offset significantly It above be the

to than and year profitability everybody call than XXXX And deliver continued open Keith, in participants. call up will to company I'd strong like accompanied thank up would throughout QX the the With please? line, open expect from year, at in like more full lower revenues, We a for a Bottom you I be to questions this by were point, better that, last equal will revenues be XXXX. profitable or their margins on up we can attention. XXXX. to to

[Operator go ahead. first question. We'll take Instructions] Please our

Mike. afternoon, taking for Lou good Thanks Hi for Thanks call. the and questions. my

First orders the on said what that announced the even these catch you of months, recent XX. to last you it two didn't I the months? million backlog now over just it the congratulations number. pretty came orders was as like backlog get $XX the that in update current I that two was was to being is December at you significant. over if last And could all, would what had

backlog $XX was XX, As of our million. December

XX.

from - that look putting in midst only our orders because backlog of we're an came at XX-month in them perspective. The now the we

of so out we falls So now this some that working in, are John. some are this out falls of we

not this up And we making $XXX,XXX in goes our orders But backlog on that the million. we John, into $X million. a for remember may LTAs, get immediately get $X against LTA five-year $XXX,XXX

And John when…

that even You're for be five-year going looking number backlog to the at good though a XX-month number? it's

don't portal we for our put what Right and us, it is I'm John put in saying customers do expect numbers as in they this they it into our when product. are the

midst So they're in the doing that. of

because a the guesstimate trued quarter quarters prior for profit what prior the explanation. you at the for the kind in understand. of about by Thanks profit looking had trued fourth million up three gross Mike the year I gross and would Okay you on to be. the up $X.X

it be this was to is don't that in you have situation actually up what going fourth and the say like I year at accurate? know this this an or Now last trued make And did you down. the quarter, fourth true would could you - typical, sure like profit if in is thing just gross really that ongoing time, is quarter your I

have are are not the the valuation, vat, years down. had. – moving us. the no accounts because just there of gross XX.X%. gone But - always increasingly and across It's lower not was to gross prices against of the a a going which us larger We going inventory account real-time been We're adjustments' reconciliation this against after accurate yet. the remarkably longer inventory, after market monthly we've the Historically, recent inventory the They're profit. adjustments, the have in realist the

expect don't I to be So repeated that next year.

certain we've last. in But was think year before the inventory was to wanted better to it we order noise. a, to it But gross it. couple lost be gets had that wait this magnitude we inklings releasing margin I the $XXX,XXX had than issues of

quantify there. which I said amount fourth be first roughly XXXX? Okay. of third a reported. There be for to that And quantify I brought were there that actually be just or into and substantial and that that if shipments any call had you in was was last that pushed that that actually going anticipated if quarter on amount quarter amount quarter the what the substantial you was quarter, up could wondering the amount anticipated was of you was that that was to pushed might into fourth

know, No cleared nobody the you tax outs. - John, push we've likes

to a pretty the were year. tax we diligent declare starting So new

it backlog, improvement which Okay. But X%. you a product there And up QX, this in your overdue have want it in I less said improvement in an to XX.X% that press showing further actually know obviously, than any QX, was overdue release, your had be improvement product? the to of was you was in nice

exactly zero Yes, there get get I'd it. was. in overdue, but I now, you can't quantify to be on But for to back to John you happy never you'd because….

go be to would see know, you customers, obviously, but Okay, happy that down.

the last year improvement me XX.X%. quarters' So last number over it last was of an year not excuse

correct. is That

Well, step there. a direction in the that's right

Customer if due - it customers cause can cause bad you a product…

so? Okay. Well single-digits are better than double-digit

is Industries. in Air Single-digit normal

that Is right? Okay.

your and Over with product the year you in year? to of the how the more capital process could much you in-house this year, past investments current made you that processing was how much projected in-house be do done XXXX believe

didn't painting, talking Okay any in-house do zero shop When don't John, metal here. that's processing, Last different processed have processing two year, product plant. that. saying we we're plating, - about we painting, know, a of because like, amount about you questions we things we of

the and up end this booth Sterling thing up in getting set paint in of we've that we're at certified tail a action. So

supply obviously, year late - that we with months ordered have just arrived. chain - be were ago have supposed that ovens So in still to last disruption

Really.

we're moving So with moving we're that. forward forward,

which or once get hopefully or accommodate we take the the next roof years, can will we one going to close the grinding, put on next Nital as in So which over step, as of We'll in-house painting much done, QX, we April. before in done. Eventually, and under - end plan is etch. of getting early very couple be probably

to can put control roof. keep we relying be - will land, never things environmentally over. state it's will the But ongoing and the some of under processing friendly with we be an a thing, do. laws going it's anything And on So that still we'll for we the

your is the bottleneck it's only the can more in-house going line Bottom to obviously? bring reduce or help suppliers, with you

you going to to to more it couple two say scheduling. in you It's know having paint, It's be hours and they a problem. get line or and to back in call than days delayed of cue instead you're of will go yes goes in in if weeks, out product a nice out paint It's a get two your to and it that scheduling further.

one Engine have really margins sensitive the just to are know curious to just the in your further here. I gross or this segment, revenue levels Okay, and year question I outlook your for that Turbine prospects get segment this the beyond? XXXX

business Well, development. two we've in additional brought on personnel

and right throw that of Coast we actually traction the year, a that are opportunities up West he's handling some the made July, West brought obviously, and and can the works last facility we Farnborough with he's brought our outskirts we tremendous finally Hill I and a else which of Airshow So in prospects, any getting guy was reviewed, new for there. And new on things of that We this in any out America, about hasn't had And were at gain to really all it's guy Air doing out. on board. September starting Base. activity anything South brought we Coast there year activity, guess, Airshow August, Sterling we've Force on coding him. And been

seeing up the COVID for we're are people able lost make So ground business calls stepping be to where side things you. taking just up to instead development of of really

So - have these we expect all actions that results. will some

Okay.

that, Engine portion, Turbine a when think lot I I predominantly of think be commercial of excuse would segment good me? of a your So aircraft

here - of lot also. military products a engine jet There's

in sales segment? Okay, but predominantly, your Commercial commercial segment, that your are

engine. surprising. yes. But XX% It's But in have up currently there of is is I'd more then commercial it's to skewed only business Island military. it's up here, be Long the commercial not we Connecticut, And turbine thrush remaining the XX-XX, struts. it's that if product on that The is commercial

I'm what commercial Really and you looks because when at that. sales looking it hit like that your But back opened market. XXXX COVID in really even be a it XXXX, Okay. on opening impacted up obviously, up sales, further should know, is to XXXX

what commercial of to end outlook just your So as the I is was in your looking far as see, business XXXX?

are a we things year for that's RS proposals had product, And seen we not on true that activity some ago. seeing a statement John, commercial for

know, I placed. it's, matter time, it's our a So get you orders of think before

all Okay. I that's my questions. right for Thanks, All Lou Mike, taking have.

Thanks John.

Thanks John.

from… question take [Operator our Instructions] next We'll

got now? my gentlemen, I've position is your Hello, What right and Paul, cash name is you. question a for

doing Hi Paul.

run zero balance. checks happens get collection what line that every we customers have borrow Basically, cash our to our written. we've daily pays cover down a our then line. we We is we a we - credit borrow against from that And credit

given credit taken at checks line, basically, the we've haven't cash So in point any yet. and been balance from time, our cleared presented advances our but

So was is better and the - credit think about today, - what $X is it I the same. about million year at under availability measure line end, today is and our that

question. One more there back interest buying in any Is shares? at all

Not about at that, - not something right it's talked we to have we're but going do this away. point. But

very have. That's you much. all Thank I

you. Thank

Thank the call. you for

have appears further [Operator Instructions] we questions no It at this time.

you thank Okay, Keith.

at Keith on So attention questions. you once be Air time next Group for your our the on with conclude for thank Operator, to the all again, call. the time. you and your this Industries forward you We look thank and today for to may taking time, call you the progress on of updating that, call

participation. Thank you. this conference. appreciate gentlemen, and Ladies We your today's concludes

disconnect. now may You