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spk00: ladies and gentlemen and welcome to your Omni light industry second quarter investor 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 to reach a live operator at this time it is my pleasure to turn the floor over to your host Amy Vetrano Palmer CFO ma'am the floor is yours
spk01: 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 in our press release issued yesterday. The purpose of this call is to provide an update on OmniLight's financial performance and operations as we filed our second quarter in year-to-date 2023 results yesterday morning, August 2nd. After our remarks, we will open the line for any Q&A. If you have not received a copy of our press release, which was issued yesterday, you can find it on our website at www.omni-light.com or email us at d.robbins at omni-light.com or a.vatronopalmer at omni-light.com to request a copy. Before we get started, I would 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, the environments in which they operate, our future plans, objectives, business prospects, and anticipated financial performance. These forward-looking statements are subject to future risk and uncertainties that could cause our actual results or performance to differ materially. We are also mindful of the risks and impacts and changes in the health of the general economy, including the effects of the current U.S. financial market and U.S. global commercial aerospace markets and defense budgets. All forward-looking statements should be considered in conjunction with the cautionary statements contained in our press release in the risk factors included in OmniLite 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 recorded financial results in accordance to its International Financial Reporting Standards, or IFRS, during our call we may also discuss or reference some non-IFRS financial measures. specifically adjusted EBITDA and free cash flow. A reconciliation of these non-IFRS metrics is available and included in our applicable CDAR filings and press release. Lastly, unless noted, any reference or discussion of our financial results or metrics is in U.S. dollars. I'd like to now turn the call over to Dave. Dave?
spk02: Thanks, Amy. Good morning, everyone, and thanks for joining us. I'd like to make a few comments about our second quarter 2023 performance and following comments on our current business. Second quarter 2023 revenue of $3 million marks an increase of 24% year-over-year second quarter 2022 and 12% up sequentially from first quarter 2023. Growth in the quarter was driven by a combination of increases in commercial air transport fastener products and defense electronics. Adjusted EBITDA for the second quarter 2023 was $168K, which is a continuation of its positive trajectory and an indication of our ongoing improvements in product production efficiency, managing costs, and product pricing. Further improvements will come from more efficient production of casting products, especially in aerospace and defense platform products. Bookings for the second quarter increased to $3.5 million, up sequentially from 3.2 million Q1 2023 and up year-over-year 3.4 million Q2 2022. Backlog at quarter end was a strong 4.7 million and I expect the majority of the backlog to shift in 2023. Commercial aerospace fastener demand and defense aerospace fasteners and electronics demand continues to drive the growth in revenue for 2023. and points towards continuation for the second half of 2023. Demand is growing for commercial aerospace engine casting components, evidenced by backlog into 2024 and development orders for new casting components. A new structural fastener and an automotive engine component in airborne sensor casting are in qualification phase with the expectation of pre-production and production heading into 2024. With that, I'd like to turn the call back over to Amy. Amy?
spk01: Thanks, Dave. Dave has addressed our revenue and EBITDA outlook, so I will just make a few comments regarding our cash. Adjusted free cash flow as defined as cash flow from operations minus capital expenditures was a source of cash of approximately $162,000 as compared to a use of cash of $555,000 in 2022. so an improvement of approximately 717,000. We did use approximately 41K for CapEx improvement purchases in our manufacturing process. We are continuing to see an increase within our WIP and finished goods, indicating a movement of our backlog. We did finish the quarter again with 1.3 million in cash and no debt, which is consistent with both how we ended Q1 2023 and the year of 2022. so we continue to maintain a strong cash balance. This does complete our prepared remarks, and we would like to open the call up now for questions.
spk00: Thank you. Ladies and gentlemen, the floor is now open for questions. If you do have a question, please press star 1 on your telephone keypad at this time. Again, that's star 1 if you do have a question or comment. Please hold as we poll for questions. And we'll take our first question from Manny Kramer. Please go ahead, Manny.
spk03: Yeah, thanks for a good quarter. And I just want to know how is the tax situation? Do you have any tax losses carry forward? Is it a fact that hopefully we're going to be profitable from now on? What's this tax situation?
spk01: Yeah, we do have some tax carry forward from prior years.
spk03: Thank you.
spk00: Thank you. And we'll take our next question from Frank Wineski. Please go ahead, Frank.
spk04: Hi, Dave and Amy. A couple questions. You obviously are still optimistic on the casting side, but it doesn't look like there's been much progress to date. It looks pretty much flat year over year. Could you go into a little more – give me a little more color? on why you're so optimistic for the second half of the year, and relatedly, I assume that a lot of the inventory increase and the order increase must be coming from the casting operations, if you're that optimistic. Thanks.
spk02: Well, yeah, I think two good reasons why it's pretty optimistic. One is that there's evidence that on parts that are produced now that are on current platforms, especially into the aerospace and defense area, have the same kind of profit profile that the rest of the company is at, whether it's electronics or forging. So that's number one. And number two is there still is a mix issue where, you know, we've got a lot of development products going on right now. So it's a, there's still a bit of product rationalization going on, you know, since we've been, you know, looking to more focus on the, you know, higher margin aerospace and defense products and to a lesser extent, some of the maybe other commercial or programs that don't have that profile. So that's, you know, that mix is still happening and we're in development. So development, you don't have as much contribution in the development phase. So that's when I mentioned that there are several that are still in development, but now there has been one that is in qual phase. So those are the reasons that I'm optimistic about the future.
spk04: So that's specifically on the casting side?
spk02: Yes, specifically on the casting. Now, we still, there's some on, there's some Ford, you know, that automotive form part that is in Qual 2. So, yeah, that's part of, you know, the whole process when aerospace and defense is you get, go through that Qual process. You have to go through that Qual process, but specifically in casting. Yeah.
spk04: Yeah. And is the automotive line that you mentioned, that's casting also?
spk02: No, no, that one actually is a form part. Yeah, that's what I thought. Yeah, okay. It's been a small but a very steady part of the forming business is a very specialty area in automotive. You know, aerospace and defense dominates that, but there is a niche there and pretty excited about that opportunity too. So, yeah. Great.
spk04: Your SG&A – 400K a quarter, is that pretty much the go-forward run rate?
spk01: Yeah, we are expecting SG&A to stay in line quarter over quarter. We shouldn't see any major spikes in either direction. Okay.
spk04: And how about the same question for research? You're double those expenditures. Is that – and I assume that's because of the new qualification, new products – But does research continue to look that much?
spk01: Yeah. So because we've got so much going on with these new products, more is going into research. So as those go into research, that will come down, you know, a bit. But as new products come on, you know, so that's going to come in flows depending on what's going on for new product lines. But, yes, that is why it is up, you know, pretty significantly this quarter. Okay.
spk04: I noticed that, and I hadn't seen this before, and maybe I just missed it, but there's about a million and a half shares that were held in escrow for the casting operation, and they released, I guess, at the end of this year. Those aren't performance. Those are just pure pure collateral uh chance there's nothing no uh they're not um performance related are they yeah not performance just uh just ordinary course uh in the way in that the way the deal was structured but there's no there was not based on the performance okay they're good okay and one final one you you didn't mention the cal nano which obviously the price increase here had a uh had a pretty good impact on your earnings. What are you planning for that investment that you have? It's a pretty big part of your total market capitalization now.
spk02: Well, our posture has been to support. We have a lot at stake, and we're supporting, certainly, in any way we can, without distracting from our art business, support their efforts. And we'll continue to look at it. I mean, it's something we anticipated that there would be improvements from, let's say, two years ago. So it is good to see that they've made improvements. And we like the trajectory that they're on, too.
spk04: And they're still current on their payments to you.
spk01: They are. Yep.
spk04: Okay. And whether those reserves will be reversed, I guess we'll wait until the end of the year, the year in the coming.
spk01: Yeah. So we looked at, at the end of 2022, there wasn't enough, you know, there to say that we are ready to reverse that reserve. So we will look at it on an annual basis. But really, you know, we would need to see some pretty significant, you know, payments ahead, significant EBITDA coming out of them, significant cash flow to prove that, you know, they are going to be able to pay that within a given time. So we will look at it annually. I'm not sure if it'll specifically change this year, but, you know, it will be a good show to have a full you know, year and a half with payments that have been on time, timely, you know, nothing being missed. So it's just going to be something we continue to watch.
spk04: All right. And that is an all or nothing thing, right? I mean, it's not like you can, you know, reverse one half of the write off. Yeah.
spk01: I tried to push, you know, a small portion of it through the last year and was said, you know, all or nothing, not, we can't just do a portion.
spk04: I understand. Good. Thank you very much.
spk00: Once again, that's star one if you do have a question or comment. And there appear to be no further questions at this time. Ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time and have a great day.
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