Omni-Lite Industries Canada Inc.

Hello everyone and thank you for joining today's Omni-Lite Industries investor call. As a reminder, all lines are in a muted or listen-only mode to prevent any background noise, but after today's prepared remarks, we will have a question and answer session and instructions will follow. To get us started with opening remarks and introductions, I am pleased to turn the floor over to Amy Vetrano-Palmer. Welcome.

Good afternoon and thank you for joining us. With me today is our Interim Chief Executive Officer, David Robbins, and Alex Ridzkov from the Board of Directors. Our call is being recorded and will be available for playback, the details of which was in our press release issued this morning. The purpose of this call is to provide an update on OmniLite's financial performance and operations for our second quarter 2026 results, which was released this morning, August 19th. After our remarks, we will open up the line for any Q&A. If you have not received or seen a copy of our press release, which we did release this morning, you can find it on our website at www.omni-lite.com or email at d.robbins at omni-lite.com. Before I get started, I would like to remind you that today's discussion will or may include forward-looking statements, including information regarding OmniLite's performance based on our views of the company's business and the environments in which we operate, our future plans, objectives, and business prospects, and anticipated financial performance. These forward-looking statements are subject to future risks and uncertainties that could cause the actual results or performance to differ materially. We are also mindful of the risks and impacts it changes the health of the general economy, including the effects of the U.S. financial market, 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 in Omni-Lite CDAR Plus filings. The company disclaims any obligation to update any forward-looking statements that are discussed during this call. I'd also like to mention that in addition to reported financial results in accordance to IFRS during our call, we may also discuss or reference non-IFRS financial measures such as adjusted EBITDA and free cash flow. Reconciliation of these metrics, if applicable, is included in our filings and press release. Lastly and less noted, any reference or discussion of our financial results and metrics are in U.S. dollars. I would like to now turn the call over to Dave. Dave.

Thanks, Amy. Good afternoon, everyone, and thanks for joining us. I'd like to make a few comments about our second quarter and year-to-date 2026 performance, followed by comments on current business. Second quarter 2026 revenue was a record for OmniLite at $4.8 million. We saw strong revenue in the quarter driven by a combination of increases in forged fastener Products, and Electronic Components. Adjusted EBITDA for the second quarter of 2026 was $926,000, with a year-to-date adjusted EBITDA of $1.8 million. This EBITDA contribution reflects generally a good mix of continuous production versus low-volume production of forged components and electronic components business, as well as increased contribution from our casting components business. Bookings for the second quarter were 6.4 million, which represents a 1.34 book-to-bill ratio, and resulted in a backlog of 10.7 million as we go into third quarter. Bookings in the second quarter generally mirrored the climate over the last four quarters of strong demand for Ford fastener components, including newer rivet components, increased demand for missile defense-related electronic components, and JetEngine casting components. Our targeted new product opportunity bid visibility is in the tens of parts, which is historically healthy, and we expect to convert many in the coming quarters, which is a driver of future potential revenue 12 to 18 months out. With that, I'd like to turn the call back over to Amy. Amy?

Thanks, Dave. Dave has addressed revenue and EBITDA, and I will make a few comments regarding our cash. adjusted free cash flow, which we have defined as cash flow from operations minus capital expenditures and adding back lease expense was a source of approximately $132,000. We continue to be debt-free and maintain a strong cash balance of $3.1 million, which is up about $213,000 over a year ago today. We do expect to continue to have a strong source of cash as we go through the year as receivables turn into cash. This does complete our prepared remarks and we would like to open up the call now for questions.

Ladies and gentlemen, joining over the phones today, if you would like to ask a question at this time, simply press star followed by the digit one on your telephone keypad. Pressing star and one will place your line into a queue and I will open your lines individually and you will be invited to post your question. Once again, ladies and gentlemen, that is star and one. If you have a question, we will hear first from Rukun Dugal at Chandrano. Please go ahead.

Hi, Dave. Hi, Amy. Hi, Alex.

How are you doing?

With these last two earnings releases, all the work you guys are putting in is certainly showing. I wanted to talk about DPCAS a little bit because when I look at your numbers this last quarter, Canada, at least based on the numbers in your MD&A, grew 30% sequentially and became a bigger slice of the mix. yet consolidated gross margins were pretty steady at about 33%. So that kind of suggests that DPCAST's margin profile stepped up in this quarter. Is it fair to now assume that DPCAST is now reasonably profitable? And I think in May you told us that the contract re-up that we negotiated last year was back-end loaded. Can you give us a sense of kind of what DPCAS might look like in the second half once the pricing and volume fully kicks in?

Well, certainly directionally Q2, you know, DPCAS performance in Q2 was directionally what we had predicted for a while. And yeah, we continue to expect that with the contract pricing in the second half to to have a positive effect. So there's always some variables around, but I think Q2 sort of reflected an increase that is attributable to better pricing and operational improvements that are ongoing.

Okay, and just to talk about sort of the backlog a little bit, I think last quarter we talked about the rule of thumb that roughly half the backlog turns into next quarter's revenue plus spot. And the math worked pretty much right down in the middle of that formula this quarter. So half the 10.7 million in backlog would point to something like 5.3 million in Q3 before spot. Are DPCAST revenues or anticipated revenues also sitting in that backlog number or does that business run more than spot? Because, you know, if the back half loaded contract volumes aren't in the 10.7 million, then I'm guessing the second half could look reasonably better than the formula alone suggests.

No, DPCAST backlog is in there and, you know, they run, all the businesses run as a combination of some, you know, The Spot by Near Term, as well as some visibility. I think in my last call, I mentioned that we have a little bit more visibility than normal, but still, that rough 50%, I'd be careful thinking that that's an exact 50%, but we're still in that zone where a lot of our backlog does convert in the next quarter. But to get to this was a pretty good bookings quarter. They got us backlog up over 10. It does point, though, towards very robust revenue over the next couple quarters when we have a backlog like that.

And just talking about backlog in a little bit more detail. Dave, I think in the release you talked about organic expansion and fasteners and electronics, which sounds like volume and price on the installer base. Can you talk about the qualification funnel a little bit, especially with e-comp a year in? I think in May you talked about pack-free content and you talked about sort of specific new platforms you're actively qualifying on or second sourcing. I think in your prepared remarks you talked about I think it was 10 components. The more detail there, I think, would be better.

Well, it's hard to, you know, without getting into, you know, exact programs and their forecast, you know, to really give that much more color. But I would say that, you know, one of the drivers, you know, of this Our recent bookings, positive book-to-bill ratio and our increasing revenue, and I kind of mentioned it in my narrative here, was that it's a good mix of sort of continuous production versus low-volume production. And what that translates means it's more what I would call programs of record that have high demand. So, you know, you mentioned PAC-3. I've mentioned that several times. So that's just one of a particularly, you know, program that has, you know, some good visibility and some ongoing needs and there's been strong, there's demand that's, you know, out years, right? And then I mentioned Forge Callers that have a particularly strong continuous production and some pretty good visibility. So, I would characterize it, so a year ago, if you listen to the tape, I mentioned that we had booked, at the time it was a couple hundred thousand dollars worth of new components that in a year from now could turn into some meaningful revenue and that's what happens, right? So as those programs, so usually programs If you hit it right, they can have some more what I call continuous production. So we have, I would say, several, less than 10 and more than four that are in that zone where we're almost nearly continuous production of either a part or a family of parts. I think my best advice is to continue to watch our bookings. As our bookings go, and if we're booking positive book to bill on a continuous basis or more often than not, that's the sign to look for.

The programs as a whole, is there something structural that may make may make the duration and the size of bookings potentially increase over time, and that becomes sort of a testament to how structural some of the shifts are?

Well, it's how good you are at picking the right programs, right? So, you know, like picking a program like PAC-3, that's a good call. there's a lot of visibility and so we have and I've tried to mention them I did mention Rivets I had talked about that before as a whole new family of product in our fastener and Rivets have high demand in both military and commercial air transport and so that was a That was a new product development, similar to our blind bolts, but added a whole new element. We're enjoying that as a combination of new components that are very related, but that also is some good programs that are really running into good space. I mentioned missile defense because There's a lot of new program development. There's drones with sensors that need for missile defense or missile interception. And so that's an area where we're on some growing programs, maybe not to the extent of PAC-3, but programs that as they turn from low rate to more production, It's sometimes difficult to see time exactly, but it's been a healthy environment. If you look at maybe the last year as a benchmark.

Thanks, Dave. That's very helpful. I wanted to talk about margins a little bit because in your investor presentation, you laid out a 50% gross margin target. And, you know, these last two quarters, the gross margin has been remarkably consistent. It came in about 33%. And I wanted to just talk to what gets you from, you know, here, the 33% that you've just hit to sort of 50%. Is it mainly DPCAST operating at a more steady state margin? or is there sort of more to the bridge? And if it's CP Cast, I mean, do we get closer as time goes on?

So, yeah, in the press release, you know, I mentioned pricing. So, really, this quarter, you know, especially this quarter, I guess, was... was a predictor, a little bit of where that 50% comes from. At 50%, it means all operations have to be close to that. And certainly the pricing adjustment is reflected in their better, TP-Cast's better performance as well as some improvements in productivity. And pricing isn't necessarily only related to, you know, related to DP cast. It also, it's something ongoing that's part of a disciplined pricing approach that, you know, that we take. And, yeah, you know, I think Q2 actually represents, you know, it sort of reflects where that even, that 50% comes from.

So we're looking to improve further.

That's still a target. That's still a target of ours is to be in that 40% to 50% gross margin role, and we're getting close.

David, if I understand that better, as we roll into Q3 and Q4, as we start to see more pricing, and DP Cast, then sort of the trajectory should sort of start looking a little better. Is that the expectation?

Well, it's certainly helping, you know, knowing we have more, you know, back end of properly priced parts, it's certainly helping, yes.

Okay, and just CapEx just a little bit. The company has historically had very very low CapEx and I didn't notice that it's rising and the release mentions investing in manufacturing productivity. My understanding is that your current plant can already handle materially higher revenues. So is there a specific area you're focusing the investment in and just wanted to sort of get a little bit more color there?

Well I think if you look at the actual number Yes, it's an increase over something that is sort of ridiculously low. So, I mean, these are very, very modest investments, but I think it's maybe just on a little bit of color. There's been some investment on the electronic side to keep up with ongoing visibility into production and Thank you for joining us. There'll be more of that than almost none. But we don't have any, we're not seeing any huge needs for material, large purchases. There can be some more of these labor-saving initiatives, but we don't see any near-term needs for CapEx, major CapEx.

Okay, that's perfect. And my final question is for Alex. Alex, I think this last quarter, at least in the MD&A, you could see that there's investment in people, both maybe just to improve manufacturing a little bit, and there were also some consulting expenses which are associated with just the search for a CEO. If you could just talk through that process a little bit and what you're thinking, that'd be helpful.

Sure. So I think you're right. I mean, there are multiple components. We're not going to break them down, but some of them relate to the CEO search process, which I think on the last call I mentioned that we were going to be deliberate. We're going to take our time. And, you know, we have made progress, but it is something that we're not going to announce until we have obviously something finalized and ready to announce so the work continues and you know hopefully we'll be able to announce something with everyone in the future as it relates to some of the additional expenses you know we mentioned consulting expenses and I think also probably on that call I mentioned that we have brought additional resources to assist with DP Cast, as well as Cerritos. And so those are reflected in the P&L today. Again, some of them will go away, pieces of that will stay there, and again, to be determined with the hiring of a full-time CEO. So I hope that answers it.

No, that's perfect. No, thanks so much. I mean, all the work you guys are putting in is certainly showing. That's it for me. Thanks very much. Thanks, Rukh.

And we have no further signals from our phone audience. Ladies and gentlemen, this does conclude today's Omni-Lite Industries investor call. We do thank you all for your participation as well as those who signaled for a question. You may now disconnect your lines. We hope that you enjoy the rest of your day.