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spk00: Good day, ladies and gentlemen, and welcome to the OmniLight Industries Investor Conference Call. All lines have been placed on a listen-only mode, and the floor will be open for questions and comments following the presentation. If you should require assistance throughout the conference, please press star zero on your telephone keypad to reach a live operator. At this time, it is my pleasure to turn the floor over to your host, call leaders. Sir, the floor is yours.
spk05: Thank you very much. Good day, everyone, 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, Monday, May 2nd. The purpose of this call is to provide an update on OmniLight's financial performance and operations as we filed our total year 2021 results yesterday evening. May 2nd. After our remarks, we'll open the line up for Q&A. If you've not received or seen a copy of our press release, which we issued yesterday, you can find it on our website at www.omnilight.com or email us at d.lobbins at omnilight.com or c.leaders at omnilight.com to request a copy. Before we get started, I'd like to remind you that today's discussion will be or may include forward-looking statements, including information regarding OmniLight's performance based on our views of the company's business and the environments 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 of the current COVID-19 pandemic, which hopefully is trailing off, the 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 include in OmniLight's CDAR filings. The company disclaims any 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 Standards, or IFRS, during our call, we may also discuss or reference non-IFRS financial measures, specifically adjusted EBITDA, pro forma adjusted EBITDA, pre-cash flow, and adjusted pre-cash flow. A reconciliation of these non-financial IFRS metrics, if applicable, are included in our CDOT 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. Dave?
spk02: Thanks, Carl. Good afternoon, everyone, and thanks for joining us. I'd like to make a few comments about our fourth quarter and full year 2021 performance and provide some preliminary remarks on our first quarter 2022 results, followed by comments on our current business climate. We ended the challenging 2021 year at $5.8 million in revenue, down 14% from our 2020 revenue mark, but ended the year with stronger fourth quarter sales and strategically active. Our fourth quarter revenue of $1.7 million, up 29% year over year, reflects the start of recovery in a commercial aerospace and positions the company to benefit from continuing recovery in a commercial aerospace. Stable domestic defense spending and growing international defense spending. In the fourth quarter, we closed the sale lease back of our California facility, which strengthened our liquidity and helped fuel the acquisition of DP CAS at the end of the year. Our ending backlog of 2.3 million represents another sequential increase in the inclusion of DPCAS backlog. In summary, we ended the year positioning ourselves to deliver some top line growth. And look at the first quarter 2022, revenue is 2.4 million, which represents an 86% increase year over year and reflects stronger backlog and the inclusion of DPCAS revenue. In the quarter, Supply chain and logistics pressures both negatively impacted our ability to deliver products, but positively added to our funded backlog growth rate and new client acquisition prospects. These supply chain uncertainties are driving strategic planning on OEMs to expand the supply base and the need for an agile, responsive, domestic precision manufacturing, as well as onshoring of precision metal forming and casting products for these high-value platforms. And lastly, I'm happy to announce that Amy Vitrano Palmer will be named Chief Financial Officer for Army Light with the retirement of Carl Leaders. Amy's experience creating and leading high-performance financial and operational structures within a growth-oriented business, very similar to Carl's background, gives me great confidence she will highly contribute to our mission. I also want to thank Carl for his contributions here at Army Light and previously with me in successful prior senior leadership teams. With that, I'd like to turn the call back over to Carl.
spk01: Carl?
spk05: Thanks, Dave. Dave addressed revenue and the business front, so I'll limit my comments to cash and adjusted EBITDA. In December, we completed the sale and leaseback of our facility in Cerritos, California. The sale generated approximately $6.6 million in cash before taxes and a gain of approximately $1.767 million. Approximately $1.5 million of the proceeds were used to pay off our bank debt. Also in December, we used approximately $3.46 million in cash and issued 3,079,000 shares valued at $2.062 million to purchase Designed Precision Castings, Inc., or DPCAST, an investment casting operation based in Brampton, Ontario. In early 2022, an affiliate of the sellers of BP Cast purchased an additional 1 million shares of OmniLite stock at Canadian $1.25 per share. Also during the year, we received approximately $400,000 in PP2 loan proceeds. This loan was forgiven by the SBA and recorded as income in the fourth quarter of 2021. Free cash flow, defined as cash flow before operations minus capital expenditures, included $404,000 of one-time DP cash-related transaction expenses and $293,000 of one-time capitalized rent expenses associated with the Cerritos facility leaseback. When adjusted for these amounts, adjusted free cash flow was a use of approximately $461,000. as compared to a use of 19,000 in the fourth quarter of 2020. We minimized the adjusted free cash flow usage to 461,000 and the adjusted EBITDA decline to only 130,000 in spite of a 14% or approximately $900,000 reduction in revenue. Also worthy of note is that we were able to reduce our inventory pre DP-CAS acquisition by approximately $500,000 during the year, bringing our two-year inventory reduction to approximately $1.1 million. While the inventory reduction had a negative effect on adjusted EBITDA for the fourth quarter, EBITDA as a percentage of sales improved significantly over last year's fourth quarter. At year-end, we had $2.4 million in cash and added another approximately $985,000 in early 2022 as a result of all private placement. This completes our prepared remarks and we'd now like to open the call for questions.
spk00: Thank you. The floor is now open for questions. If you do have a question, please press star 1 on your telephone keypad at this time. If your question has been answered, you can remove yourself from the queue by pressing 1. Again, ladies and gentlemen, it's star 1. And our first question comes from Emmanuel Kramer. Go ahead.
spk03: Emmanuel Kramer Thank you for the good quarter and year end. You mentioned some new orders. Is that from DPCAST or regular OmniLight? And in which area is that, in defense or in the regular commercial?
spk02: Well, there's been several new orders. We're referring to some commercial aerospace orders performing, and defense orders have been fairly strong.
spk03: Okay. A follow-up. There's a report that Boeing had problems with the production of snafus, which was mentioned in the Wall Street Journal, and it mentions it was involved in titanium parts and glue and fasteners. How does this affect you, if any?
spk02: The fasteners that we're supplying to Boeing and Airbus through large OEMs are both titanium and steel products, and they're highly engineered. I'm not aware that this article that you're referring to has anything to do with the fasteners that we're producing.
spk03: Thank you very much. Thank you.
spk00: Again, ladies and gentlemen, to ask a question on the phone, it's Star 1. Please hold while we poll for questions. And our next question comes from Frank Winooski. Go ahead, Frank.
spk04: Close enough. Hi, Dave. You guys have a busy couple of months here, obviously, and very successful, I think. A couple of questions. The preliminary revenues for the first quarter, that includes all of DP in there for the first quarter? Yes, it does. And... How would the non-DP business have fared in the first quarter? It sounds like you had a reasonably robust period then with the old OmniLite also. Is that correct?
spk02: So the revenue for the breakout in revenue for Q1, as my comments sort of suggest, is fairly strong for all companies. for all three in the sense that there's been some booking activities, strong needs and booking activities for all three groups.
spk04: Okay. All right. And that's just a question. I think I know the answer. But will you be breaking out in more detail your three different areas at any point in time?
spk02: From a formal, from a, you know, down to the bottom line, top line revenue, I think there's going to be, there'll be some more specifics, I think, you know, not break out down to every P&L line, but there could be more references towards different products. So casting products versus form and metal forming versus electronic. So, you know, we've done that in the past. We've talked about defense electronics bookings as well as some metal forming. So we'll continue. And with casting now in the mix, I would expect that, you know, there'll be made references to these different technologies from time to time for sure.
spk04: Good, good. What was the number? You had over $2 million on the balance sheet in cash now? Correct, yes. And that's as of the year end, or is that as of right now?
spk05: As of year end, it was $2.4 million, and we added another approximately a million with the private placement. All right, good. Then, of course, we have uses of cash.
spk04: Yep.
spk05: So, but, yep.
spk04: What are your plans? Are there more acquisitions that you're looking for, or are you going to lay low for a while to consolidate and get a feel for DP?
spk02: No, we're certainly going to, you know, working with DPCAST to help, you know, leverage their pipeline of opportunities and get some synergies, you know, back office synergies, which is ongoing, which we expect to be able to leverage. But that won't stop, that's not stopping us from continuing to, you know, pursue other acquisition opportunities. I think the landscape and the environment is, very rich for that, given a lot of factors, including COVID. And that's actually, you know, one of the benefits, I think, of, you know, Amy, you know, now coming in and her experience with acquisitions was kind of a key element in what we wanted in, you know, in our CFO. So that portends that, you know, I expect to be active in that area. We're very continuing on.
spk04: Okay, that's good. I'll get out now and come back in if later. Thanks a lot. Sure.
spk01: Again, ladies and gentlemen, it's Star 1 to ask a question on the phone.
spk00: And we have a question from Emmanuel Kramer.
spk03: David, any way you can, when you can expect DP to be accretive to earnings?
spk02: So we had previously announced and would sort of resonate that same thought that we have a positive contribution near the end of middle to the end of 2022.
spk04: um there's a strong pipeline which we need to convert but that's our uh what we're pointing towards um you know that time frame okay thanks very much hello next question comes from frank with new ski again go ahead frank thank you um the private placement you did uh congratulations uh whoever uh accomplished that it was a huge premium to the market price obviously What can you tell us about that acquirer? What's their background? What's their interest? You know, just give me some color on them.
spk02: So, Jan, as you know, well, I think you know, is on the board of Directors Army Light, a very big supporter. You know, I think we saw this. They saw, but, you know, collectively we saw this as, you know, an opportunity. So OmniLight presented a platform for dpCast to really leverage their, you know, their own casting platform, which, you know, has a very good customer base and a launchpad for some very interesting products. in its pipeline for you know long-running programs on you know whether jet engines or other um other programs in electric uh distribution gas and oil uh a broad portfolio of um a platform so i think you know that that placement was was done with uh very much in a supportive way collectively for where we're going. And Jan and other family members that have joined are very supportive of the combined entity.
spk04: Currency translations, is that a big worry for you, or is that something you have to monitor closely? Because now with DP, you know, you were a Canadian company, obviously, although... actually in the United States, but now I assume a lot of their revenues will be Canadian-based. I may be wrong in that, but give me your thoughts there.
spk05: They're a Canadian dollar functional currency company. They do a fair amount of their sales in U.S. dollars, and they generate a fair amount of U.S. dollar payables. But, you know, there is exposure, Canadian dollar exposure, and we are a U.S. dollar reporting company. So we will be experiencing translation effects as we go forward, and obviously we'll be monitoring that and trying to manage, you know, the net exposure as actively as we can. And if it becomes necessary, you know, we'll begin hedging. But at this point, we don't see it. I think natural hedges is the way we can handle it.
spk04: All right. Good. Thank you. Congratulations. You've done a great job over the last four or five months in fulfilling basically what you had said six or seven months ago you were going to do. So I congratulate you. Thank you. Thank you very much. Bye.
spk01: Thank you. Again, ladies and gentlemen, it's Star 1 to ask a question. And there appear to be no further questions at this time.
spk00: One more question from Frank. Hold on one second. Go ahead.
spk04: I probably should have got these all out of the way, but there's not much of a queue, I guess. Raw material import costs. There's been a lot of inflation in materials. both those used by old OmniLite and I assume by DP2. What's the current status of that from your standpoint? Are you having any trouble securing or more likely probably the inflationary impact of some of those input costs?
spk02: Well, Frank, it's both, and it hits electronics too. So, you know, it's something we're having to manage. We have – we continue now to – you know, we have good relationships with a lot of our suppliers that we've been buying materials for a while, and we're seeing our customers have – you know, as big a problem or bigger. So it's something we're managing. We're putting it in costing. So we're, you know, we're bidding with that in mind. So we've done, and it's safe to say in this previous quarter, it's affected our pricing. And there's understanding in the marketplace because everybody's in the same condition. And for the metal, the delivery, we've seen deliveries go from eight weeks of raw wire to 24 weeks. And we've seen price increases upwards of 30%. So our percentage of, in our cost of goods, our percentage of raw material can be 5% to 10%, or a bit more. We're reflecting that in pricing to our customers.
spk04: Okay. Any problems with the current backlog, the pricing and that? Or have you got enough inventory? I see your inventory went down, and I was just wondering whether you had enough inventory at the right price to fulfill your current backlog at the margins you originally expected.
spk02: Yeah, we're not anticipating any margin compression. We've been looking at this. It's more delivery impact, as I alluded to in Q1. Okay. Just physically, the wire wasn't there in time. You know, we couldn't ship. So it's more the delivery than the pricing. We've been watching very carefully, and we had some inventory, so... You know, we were able to manage any pricing increases. But the delivery is something of still, you know, we're very cognizant of it and working closely with our suppliers and our, you know, our OEM partners here to manage that as best as we can. But, you know, it's something that the whole market is dealing with.
spk04: Yeah, that's true. You're not at a disadvantage there. What are the major raw materials at DP? I know pretty much an OmniLite, but is the raw material input higher at DP, and what is it primarily?
spk02: Raw materials at DP are similar in the sense that their percentage of sales and the cost of that raw material is similar to OmniLite and electronics, for that matter, the placement profiles. And interestingly enough, part of what DP cast fit the OmniLite family was it was high performance, high strength, So they're very much in stainless steels, high-strength steels, cobalts, another material that they use. So similar materials, different form. It comes in powder versus wire, but very similar materials between DPCast and OmniLite.
spk04: And you say the raw material input into the final product is similar as a percentage? Yes. Okay, great. Well, yeah, you know, it's a problem for everyone, obviously, and that's why you manage the company, right?
spk02: Well, no, that's true, and as I alluded in my comments earlier, I think there's opportunities. You know, this is hitting a worldwide problem. And, you know, we're seeing the signs of the need for more, you know, an agile, responsive domestic producer of these high-value, high-performance components are in more demand. You know, the past two decades have seen a lot of sourcing in China and Mexico, Far East. And that, you know, that trend has started. But, you know, everything that's happened in the last three to six months has even, you know, expanded that, you know, that process.
spk04: Yeah, yeah, okay. That's interesting. You actually had some competitive components that were being sourced offshore then? Absolutely. Really? Okay. Interesting. Okay, yeah, that would be a good, obviously a good trend in your favor because supply chains are coming back. Yes. All right, thanks. I won't have any more. If I do, I'll get you on offline.
spk00: Okay, fine. Okay, thanks. And we do have a question from Emmanuel Kramer. Go ahead.
spk03: How, if any, does the war in Ukraine affect you on pricing and getting more defense orders and the Russian sanctions? Has anything an effect to you?
spk02: Well, what we can see for sure is... is that the war has affected the supply chain in a very meaningful way in electronics and in raw material, metal raw material. So it's just to Frank's point before, that's been a very big impact on supply chain and just the availability of materials. But having said that, I think it has increased the focus, especially in the European model on defense, European defense spending. We have seen some activity directly related to, you know, missile defense and defensive systems, you know, both for deployment in Europe and self-protection. So, you know, we have a fairly strong presence and focus on missile defense. Some of our electronics technology has a particular advantage there. So we've seen some activity related to that theme of missile defense and the advanced electronics that are needed there. And specifically with electronic components, I think the war in Ukraine has really exacerbated what was already a supply chain problem with electronics, and the supply of electronics component is, in some cases, have gone from 12-week supply or eight-week delivery to 52 weeks and more. So what that has created is, again, OEMs are looking to to secure material, you know, place orders in advance of what they might have before, especially for defense-related products, and just obsolescence. So it's created the need to redesign and an opportunity to put new components on systems because of obsolescence issues. So we have definitely seen increases in those themes. since the war in Ukraine.
spk03: And you're in the position to deliver on demand, like the U.S. government is sending some more military supplies
spk02: Well, our electronic components, you know, are designed to, you know, we have replacement technology for single source, let's say, ICs and chips. So, you know, we are positioned to be able to deliver related, you know, a replacement to an obsolete part, replacements using our highly integrated electronics, you know, technology and packaging. So, you know, we're hopeful that, you know, You know, these things could help, and we are seeing signs that it is helping drive some opportunity, specifically in, you know, electronics.
spk03: And it should affect your bottom line also, I guess.
spk02: Of course. We're, you know, we've got operating leverage, and we've got capacity. So, you know, as we grow, we will enjoy even a better future.
spk03: Okay, thanks very much. That's all for me.
spk01: Again, ladies and gentlemen, it's DARA 1.
spk00: And there appear to be no further questions at this time. I'd like to turn the floor back over to Carl Leder, sir, for any closing remarks.
spk05: Thank you all for joining the call, and I certainly appreciate your support and interest and questions. Have a great rest of the day.
spk00: Thank you. This does conclude today's conference. We thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.
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