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spk01: Good day, ladies and gentlemen, and welcome to the OmniLight Industries, Inc. second quarter 2021 conference call. After the presentation, there will be a question and answer session. If you should require assistance during the call, please press star zero and an operator will assist you. At this time, it's my pleasure to turn the floor over to Mr. Carl Leaders, CFO. Sir, the floor is yours.
spk02: Thank you very much. Good morning, and thank you for joining us. With me today is our Chief Executive Officer, Dave Robbins. Our call is being recorded and will be available for playback, the details of which are contained in our press release issued yesterday morning, Wednesday, August 25th. The purpose of this call is to provide an update on OmniLight's financial performance and operations as we filed our second quarter 2021 results yesterday. After our remarks, we'll open up the line for Q&A. If you've not received or seen a copy of our press release, which we issued yesterday morning, you can find it at our website, www.omnialight.com, or email us at d.robbins at omnialight.com or c.leaders at omnialight.com to request a copy. Before we get started, I'd like to remind you that today's discussion will or may include forward-looking statements, including information regarding OmniLight's performance based on our views of the company's business and the environment in which they operate, our future plans, objectives, business prospects, and anticipated financial performance. These forward-looking statements are subject to future risks and uncertainties that could cause our actual results or performance to differ materially. We are also mindful of the risks and impacts of changes in the health of the general economy, including the effects from the current COVID-19 pandemic, U.S. and global commercial aerospace markets, and the U.S. Department of Defense budgets. All forward-looking statements should be considered in conjunction with the cautionary statements contained in our press release and the risk factors included in OmniLight's CDAR compilings. The company disclaims in the obligation to update any forward-looking statements that may be discussed during this call. I'd also like to mention that in addition to reporting financial results in accordance with the International Financial Reporting Statements, or IFRS, during our call, we may also discuss or reference non-IFRS financial measures, specifically adjusted EBITDA, pro forma adjusted EBITDA, and free cash flow. A reconciliation of these non-IFRS metrics, if applicable, is included in our applicable CDAR filings and press releases. Lastly, unless noted, any reference or discussion of our financial results or metrics are in U.S. dollars. I'd now like to turn the call over to Dave.
spk05: Thanks, Carl. Good day, everyone, and thank you for joining us on today's second quarter fiscal 2021 investor call. Our agenda for today's call is as follows. First, I will make a few comments about our second quarter results, followed by some remarks about our current business and strategy, and then Carl will conclude our portion of the call with a review of our recently reported results. Our Q2 2021 financial performance results reflect the effects of our operational strategy, which is closely focused on all aspects of operational efficiency, closely managing costs and cash flows while continuing to fund development of new design wins. Our fiscal 2021 second quarter revenue of $1.2 million was essentially flat compared to 2021 first quarter revenue and a decrease of 26% on a year-over-year basis. This year-over-year revenue decrease was attributed to COVID-19 related declines in commercial aerospace markets for new aerostructure production, partially offset by an increase in non-commercial aerospace revenue. For Outlook, we see the signs of the start of commercial aerospace recovery in the second half of 2021. Evidence from our current funded backlog of over $1.7 million submits an expected uptick in commercial aerospace revenue. Potential future growth is projected to come from new product pipelines and development, including electronic components used in missile defense system upgrades, titanium-engineered fastener components used for lightweight aerostructures, and high-strength engine components for increased fuel efficiency. And finally, we are substantially through our sale-leaseback process of our real estate holdings and look for this to help fund our investment in organic and acquisition growth. With that, I'd like to turn the call Back over to Carl. Carl?
spk02: Thanks, Dave. As Dave mentioned, our second quarter 2021 revenue was approximately $1.2 million as compared to $1.27 million in the first quarter of 2021 and $1.6 million in the second quarter of 2020. Sequentially, we are at approximately the same level of sales and down 26% as compared to the second quarter of 2020. Also, as Dave mentioned, the decrease in revenue is largely due to the impact of COVID-19 pandemic on commercial aerospace and other markets. Adjusted EBITDA defined as earnings before interest taxes, depreciation, amortization, stock compensation, and non-recurring items was a loss of $258,000 as compared to a loss of $143,000 in the second quarter of 2020. As discussed in the past, At the current level of revenue, we are still experiencing unabsorbed manufacturing costs associated with lower production volumes. While we aren't happy to be in negative adjusted EBITDA territory, we are pleased that on a $400,000 sales drop, we only gave up about $100,000 in adjusted EBITDA. This is the result of the efficiencies related to our third quarter 2020 restructuring and our focus on process improvement and spending control. As things turn positive and revenues increase, we expect a pretty steep slope up in terms of adjusted EBITDA. Free cash flow, defined as cash flow from operations minus capital expenditures, was a use of approximately $93,000, as compared to a use of $127,000 in the first quarter of 2021, or an improvement of $34,000, or roughly 27%. This completes our prepared remarks. We'd now like to open the call for questions.
spk01: Thank you. And ladies and gentlemen, if you'd like to ask a question at this time, it is star one on your touchtone telephone. Please make sure your mute function is turned off to allow your signal to reach our equipment. Again, that's star one at this time on your touchtone phone to ask a question. We'll pause just a moment. Again, ladies and gentlemen, Star 1 to ask a question. Star 1 at this time, please. We do have a question coming through. It's from Daniel Marks with Stonehouse Capital.
spk04: Good morning, gentlemen. Just one question. In your press release and in your comments, David, you mentioned you're very close on monetizing the real estate in order to hopefully find an acquisition of some kind. Is there any more flavor you can give us on that? And specifically, are there any expenses in SG&A related to that, i.e., have you hired an investment bank? Are you paying the board to extra fees to do any work on that front? Thank you.
spk05: So the flavor is that it's a pretty good landscape out there, and we've been busy, you know, leveraging that landscape. And we're pretty optimistic that there's some potential, you know, very good deals out there. I'll kind of leave it at that for the landscape on labor. And in terms of cost, well, we've been busy. So, yes, there have been some costs. I won't get into specifically in which bucket, but, you know, there have been some costs related to, you know, to that activity.
spk04: And is any of that cost going to your board members like your last deal did?
spk05: Well, I can't really comment on that specifically at this point. Okay.
spk01: Anything further, Mr. Marks? No, that was it. Thank you very much. All right. Thank you. And again, ladies and gentlemen, that's Star 1 on your touch-tone telephone. Star 1 at this time, please. We do have a couple more questions coming through. First one from Emmanuel Kramer, who is a private investor.
spk00: Yeah, hi, Dave. Good quarter. I hope things are going to move up. How do you see the balance between commercial and defense change in the near future and further out?
spk05: Well, certainly we expect some changes things getting back to normal and they're heading in the right direction in 2020, second half of 2021 for commercial aerospace and getting better even yet in 2022. But we expect there's opportunities to even further growth in the commercial aerospace basically due to opportunities that arise out of disruption in the infrastructure to support new builds. So there's opportunities there. So I would characterize it as a pretty good balance between non-commercial aerospace and a robust defense and other industrial applications where we've got a pipeline of new growth opportunities, which we're working on. So, you know, a very balanced kind of growth profile for those businesses.
spk01: Thank you. We do have a question coming through from Frank Wisniewski, private investor.
spk03: Hi. Good morning, Dave. Two questions. You mentioned that the backlog was about 1.7 I believe, at the end of the quarter. What is the comparable figure for the end of the first quarter?
spk05: So it was 1.1 at the end of the first quarter. And heading into Q2, I had commented that it was close to 1.7. And so it's up a little bit even from that. uh so the progression has been one one and then one seven and now north of one seven um and notably with you know the expectation that revenue is is on the rise so when backlog is the same or up and you're shipping more you know it's a good sign okay and my my second question would be uh your acquisition strategy
spk03: Would that be within your electronics area or the fastener area or something totally different?
spk05: So it's both. But the larger strategy is high performance components used in high value assets that have long life. So precision, robust components. So it could be related to fasteners and forging. could be related to electronics or, you know, an adjunct component that fits that description, you know, especially if it had more, you know, content on an airborne platform that we're currently on or a related aerospace and defense high-value asset component that meets those. So I think both areas and in a broader sense, too.
spk03: Okay. And then one final thing, if I could. The proceeds from your monetization of your real estate and facilities, you know, look to be pretty substantial relative to the market capitalization of the company now. I know you can't comment this, but I've mentioned to you before, and... And I'll mention it again, but I think that some of those proceeds could be well used by repurchasing some of your stock under book value. I'll just make that as an observation as opposed to a question. Thanks, Dave. Okay, you got it.
spk01: And ladies and gentlemen, I'd like to give everybody a final opportunity today to ask a question. It's star one on your touchtone telephone. Star one at this time, please. There are no further questions left in the queue.
spk02: Well, thank you all for joining us today. Appreciate your time and have a great rest of the day.
spk01: Ladies and gentlemen, this does conclude today's conference. We appreciate your participation. You may disconnect at this time. Have a great day.
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