Release Date: November 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Air Industries Group (AIRI, Financial) reported a 2.1% increase in consolidated net sales for Q3 2024 compared to the same period last year.
- The company's gross profit increased by over $700,000 or 58% compared to 2023, with gross profit as a percentage of sales rising by more than 5 percentage points.
- AIRI's backlog of undelivered fully funded customer orders surpassed $104 million, marking a 22% increase since January 1, 2024.
- The company achieved operating income of $67,000, a substantial improvement over the loss of $796,000 in Q3 2023.
- Adjusted EBITDA improved significantly, with an increase of $898,000 for the quarter and $1,134,000 for the nine months.
Negative Points
- Despite improvements, AIRI reported a net loss of $404,000 or $0.12 per share for Q3 2024.
- Total debt increased by $1,666,000 or 7.1% from December 31, 2023, reaching $24,976,000.
- The gross margin of 15.5% remains below the company's historical average, indicating room for further improvement.
- Material lead times have increased significantly, impacting production timelines.
- There is a dramatic price increase across materials, affecting cost structures and potentially impacting future profitability.
Q & A Highlights
Q: Can you describe the dynamics behind the fluctuation in gross margin? Do you anticipate the overall gross profit margin trend to improve over the next few years?
A: The fluctuation in gross margin is tied to the mix of products shipped in any given quarter. The products have long lead times, and production is based on customers' schedules, causing timing fluctuations. We believe overall margins will improve over the next several years, though fluctuations will continue quarter-to-quarter and year-to-year. (Scott Glassman, CFO)
Q: What are the macro trends supporting you and your customer base over the next 12 to 24 months?
A: The Department of Defense has fewer employees now than four years ago, leading to delayed maintenance. We expect significant spending over the next several years to restore aircraft fleet readiness, especially given global conflicts. (Scott Glassman, CFO)
Q: With the change in administration, where do you see your segment's backlog increasing most?
A: We anticipate an uptick in aftermarket parts due to aging US fleets and global conflicts. We have also struck an agreement to service NATO countries, which could further increase demand. (Luciano Melluzzo, CEO)
Q: Regarding the $117 million order and $280 million backlog announced in August, can you clarify the current backlog status?
A: The $104 million backlog is firm funded orders for the next 18-24 months. The $280 million represents the total potential value over the life of long-term contracts, which are not fully funded yet. (Luciano Melluzzo, CEO; Scott Glassman, CFO)
Q: What programs do you have in place to optimize workflows and improve production efficiency?
A: We have a continuous improvement coordinator focused on scheduling and equipment utilization. We also collaborate with external consultants like CCAT and ConSTEP to streamline operations and improve efficiency. (Luciano Melluzzo, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
