Air Industries Group

Hello and welcome to Air Industries Group first quarter of 2025 earnings conference call. At this time, all participants are in a listen-only mode. The question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. This call may contain forward-looking statements as defined in Section 27A of the Securities Act of 1933 as amended, including statements regarding, among other things, the company's business strategy and growth strategy. Expressions which identify forward-looking statements speak only as of the date the statement is made. These forward-looking statements are based largely on our company's expectations and are subject to a number of risks and uncertainties. some of which are beyond our control and cannot be predicted or quantified. Future developments and actual results could differ materially from those set forth in, contemplated by, or underlying the forward-looking statements. In light of these risks and uncertainties, there can be no assurance that the forward-looking information will prove to be accurate. This call does not constitute an offer to purchase any securities nor solicitation of proxy, consent, authorization, or agent designation with respect to a meeting of the company's shareholders. At this time, I would now like to turn the call over to Lou Maluzzo, President and CEO. Please go ahead, sir.

Thank you, Daryl, and thank you all for joining us today. We just recently, on April 16, had our year-end conference call. Not too much has transpired since then, but for the first quarter, our sales were lower compared to 2024. Despite this, Gross profit increased. We have worked many hours trying to increase the efficiency of our operations, and making more money on fewer sales is a good measure that those efforts are paying off. Scott will go into more details on the numbers, but I note that in the first quarter, our operating loss increased. This was largely due to an increase in non-cash expense for stock compensation. I would like to focus on our business development efforts. In the first quarter, we accelerated an already aggressive program. As part of this, I am excited to share that once again, we will be attending the Paris Air Show in June. We have attended the last several shows both in Paris and in alternate years in England. These shows have been very successful for us, resulting in the onboarding of several major new customers. The aerospace industry uses a book-to-bill ratio. This metric is the total of new business booked divided by sales billed to customers. It is an excellent metric to measure the health of a business development effort. If the ratio is below 1, not enough new business is being booked, and it is likely that future sales will decline. A ratio of 1.2 to 1 generally reflects a growing business. Our ratio calculated on a trailing 12-month basis was 1.34 to 1 at the end of the first quarter. This is above the industry standard and almost a 20% improvement from the prior year. And since the first quarter of 2023, it has increased by 80%. We have laid a firm foundation for future sales growth. Bookings lead the backlog, and our success in bookings is reflected in our backlog. Our funded backlog, supported by firm orders from customers, is at a record $120 million. Our total backlog, including forecast but not yet firm customer orders, is more than a quarter billion dollars. These levels were achieved during 2024 and are at record levels for air industries. Bookings lead to backlog, and backlog leads to sales. But to make sales, we need to have raw materials. Raw materials are flowing more steadily to us and to others. However, over the past several years, The initial lead time, the time from order placement to receipt on our dock have grown exponentially. They remain very long today. If we receive an order from a customer today, an order material today, it may be nine months to 15 months before we can begin to cut metal and make the product. While this is frustrating, it is a reality of the industry. I'm gonna turn the call over to Scott who will discuss first quarter results and then come back from some closing arguments. Scott?

Thanks, Lou. Let me discuss the results of Q1 2025 in some more detail. Consolidated net sales for the first quarter ended March 31st, 2025, were 12.1 million. This was lower than the 14.1 million we achieved during Q1 of 2024. However, and rather more importantly, Our gross margin for the first quarter increased by over $100,000 on these lower sales to about 2 million from the 1.9 million in 2024. Our gross margin percentage for the quarter was 16.8%, an increase of 320 basis points compared to the first quarter of 2024. I would also like to note that this margin percentage was higher than the full year of 2024. While a gross margin of 16.8%, does still remain below our historical average, we anticipate continuing to improve this in the future. As I mentioned a few weeks ago when discussing our year-end results, we continue to control our operating expenses despite the inflationary environment. For the first quarter, they were $2.8 million, an increase of $615,000, or 28.4% higher than last year. Of this increase, $412,000 was related to an increase in stock compensation expense, which is a non-cash expense, and that accounted for 67% of the increase. Absent this non-cash expense, the increase would have been slightly above 9%. We had a loss from operations of $746,000 in the first quarter of 2025 as compared to a loss of $259,000 during the same period in 2024. Finally, on the bottom line, we had a net loss of $988,000 or 27 cents a share in 2025 as compared to a loss of $706,000 or 21 cents a share in the first quarter of 2024. Our adjusted EBITDA for the first quarter was increased to $576,000 which was an increase of 214,000 or nearly 60% compared to the first quarter of 2024. I'm also very pleased to report that we remain in compliance with all of our covenants with our loan agreement with our lender. Now, let me quickly highlight a few items on the balance sheet compared to December 31st, 2024. Our total debt has been reduced by approximately $1.6 million. Our inventory has remained stable increasing slightly more than $100,000. As this is our largest asset, we monitor this diligently. Accounts receivable has decreased by over 2 million, and this is a function of the timing of sales and collections. Accounts payable plus accrued expenses have also decreased by about $550,000. And with that, I will turn the call back to Lou for some closing remarks and an update on our business outlook for the remainder of 2025. Lou? Thank you, Scott.