Amaero Inc. (3DA) Earnings Call Transcript & Summary

Good morning, and thank you for joining us for the Amaero Q4 FY '26 Investor Webinar. I'm Jane Morgan, Investor Media Relations Manager. Today, I am joined by our Chairman and CEO, Hank Holland, who is going to be running through the quarterly results as well as the presentation, which was lodged with the ASX this morning. As always, we will be taking questions from attendees following the presentation. [Operator Instructions]. Hank, I'll hand over to you.

Thank you very much, Jane. Good morning, and thank you for joining us. I'm Hank Holland, Chairman and CEO of Amaero. We're pleased to report our FY 2026 full year results, a year that marked a clear inflection point for Amaero as we completed our original 3-year capital investment program, scaled production capacity and delivered record revenue that landed squarely within our guidance range. Unless I state otherwise, I'll reference financials in Australian dollars. Full year FY 2026 revenue was $18.1 million, in line with our $18 million to $20 million guidance and up 376% versus FY 2025. The fourth quarter was the largest in our company's history with $7.8 million, a 417% increase year-over-year, even with approximately $1.3 million of contracted titanium shipments shifted into Q1 FY 2027 following a 6-week titanium production pause. Absent that timing shift, Q4 revenue would have been approximately $9.1 million and FY 2026 revenue would have been $19.4 million. I'll take you through our financial performance and the revenue trajectory, cover the $6.5 million contract we were just awarded by the U.S. Department of War, walk through our contracted backlog, update you on the completion of our capital investment program, the operational review at our Tennessee facility and cover the strategic milestones we advanced this quarter, including the completion of our redomiciliation in the United States, completion of PCAOB audit and confidential submission of draft registration statement on Form S-1 with the Securities and Exchange Commission. Then we'll open the line for questions. The headline is this. We set out 3 years ago to build the largest scale U.S. production of refractory and titanium alloy powders and to position Amaero as a leading PM-HIP manufacturer of complex near-net-shape parts. With approximately $80 million deployed as of June 2026, the program is now complete. And we're entering FY 2027 with expanded capacity, contracted backlog of $23.1 million, including $8.5 million of additional contracts secured since 30 June, of which $12.9 million relates to work currently scheduled to be completed by 31 December 2026. Let me start with the full year picture. FY 2026 revenue of $18.1 million was up 376% versus FY '25 and in line with the $18 million to $20 million guidance we disclosed in January. That figure breaks down as $15.6 million of powder revenue and $2.6 million from our PM-HIP business. The fourth quarter was a standout, $7.8 million in revenue, a record quarterly result and a 417% increase year-over-year. Q4 growth was supported by the shipment of 30 PM-HIP components alongside titanium refractory powders, reinforcing execution against contracted demand. As I noted, approximately $1.3 million of contracted titanium orders shifted into Q1 FY 2027 as a result of our 6-week production pause. Adjusting for that timing, Q4 would have been approximately $9.1 million and full year FY 2026, approximately $19.4 million. Our backlog stands at $23.1 million, and it continued to build with $8.5 million of additional contracts secured since 30 June, of which $12.9 million relates to work currently scheduled to be completed by 31 December 2026. That gives us meaningful forward revenue visibility as we enter FY 2027 with a backlog equal to approximately 128% of FY '26 revenue. Beyond the financials, the slide highlights the strategic initiatives we advanced during the year. We appointed Tim or TJ Johnson to the Board, completed our redomiciliation in the United States, completed our PCAOB audit and confidentially submitted a draft registration statement on Form S-1 with the SEC, positioning the company for a potential U.S. listing in late calendar year 2026 or early calendar year 2027, subject to equity market conditions and completion of SEC review process. We also capped the year with significant commercial progress. During the quarter, we secured a 12-month Master Purchasing Agreement with a minimum order of $7.8 million, and we announced a 3-year purchasing agreement with UPM. After the quarter end, we announced a PM-HIP production contract awarded by BPMI. And today, we announced a $6.5 million contract with the U.S. Department of War to develop alternative refractory alloys. I'll come back to these shortly. Stepping back to the trajectory. Trailing 12-month revenue reached $18.1 million, up 376% year-over-year with both business segments contributing. Powder revenue contributed approximately 86% of the full year results and PM-HIP approximately 14%. The quarterly progression tells the inflection story clearly. We moved from $4.7 million of revenue in Q1 to $3.1 million in Q2, $2.6 million in Q3 and then a step change to $7.8 million in Q4. With trailing 12-month growth for respective periods of 333% -- 336%, 423%, 301% and 417% across the 4 quarters. Adjusting Q4 for the $1.3 million of deferred titanium shipments, the quarter would have reached $9.1 million. Q4 growth was supported by the shipment of 30 PM-HIP components alongside titanium and refractory powders across 19 unique customers, demonstrating continued execution against contracted demand. PM-HIP manufacturing carries longer sales cycles and requires customer qualification. But those programs are fully underway, and we continue to expect PM-HIP to grow its share of revenue mix over time as the submarine industrial base demand converts into production contracts. Turning to a milestone we're especially proud of. We were awarded a contract valued at approximately $6.5 million or USD 4.5 million from the U.S. Department of War for the development of alternative refractory alloy powders. This is a 13-month development program expected to be completed in August 2027. The program's objective is to reduce refractory alloy powder costs while reducing reliance on foreign sources for critical raw materials. Under the program, we will down-select 2 alternative high-temperature refractory alloys and produce powders using our advanced gas atomization technology. It further establishes Amaero's role in the next-generation refractory alloy powders for hypersonic and space applications. The contract includes progress payments based on project milestones with approximately 40% of revenue expected to be recognized in Q3, Q4 of calendar year '26 and approximately 50% to be recognized in Q1 and Q2 of calendar year '27. Our contracted backlog is a direct reflection of the commercial momentum we've built. As of today, backlog stands at $23.1 million or USD 15.9 million. That's up from $14.6 million or USD 10 million as of 30 June, reflecting an $8.5 million of additional contracts secured since quarter end. Within the total, $12.9 million relates to work currently scheduled to be completed by 31 December 2026. That backlog is supported by purchase orders and customer contracts and includes both powder and PM-HIP revenue, reflecting broadening commercial traction. Within it, we've contracted more than 28 metric tons of titanium powder for Q3 calendar year 2026, and the backlog now spans 26 unique customers. PM-HIP contracting momentum continues to build, supported by the submarine industrial base demand. As the company has confidentially submitted a draft registration statement on Form S-1 with the Securities and Exchange Commission relating to the proposed initial public offering of shares in the United States and based on Rule 135 under the Securities Act of 1933, the company will not provide further financial guidance. This is a slide I've been looking forward to presenting for 3 years. With approximately $80 million deployed as of June 2026, we have completed our original 3-year capital investment program on schedule and on budget, and Amaero is at a clear inflection point having commissioned production capacity and begun scaling revenue. Over the 3-year period ending 30 June, we made deliberate and disciplined investments in tangible assets, growing from approximately $18 million to $80 million. That capital delivered 3 commissioned EIGA atomizers with a fourth on order, an argon recycling plant that will be commissioned early calendar year 2027, the completed fit-out of our Tennessee facility and the commencement of commercial powder sales. We now sit in the calendar year '26, '27 phase, scaling production and revenue growth with 680 metric tons per year of powder capacity to date, increasing to 920 metric tons per year in 2027. Dedicated PM-HIP capacity and exclusive supplier agreements. Beyond that, in calendar year 2008 and forward, our focus turns to margin expansion and accelerating operating leverage. As I've said before, as other companies are just beginning a multiyear capital investment plan, we have concluded ours. We are positioned to take immediate advantage of the favorable tailwinds for the defense industrial base, sovereign manufacturing and critical minerals supply chain. Let me walk through Q4 cash bridge. We started the quarter with a cash position of $38.3 million, including restricted cash. From there, EXIM disbursements totaled $6.9 million, net cash in operations equaled $6.5 million, inventory purchases of $4.4 million, capital expenditures of $8.5 million and a foreign exchange impact of negative $0.4 million. That brought us to a June 30 closing balance of $25.2 million, including restricted cash. Adjusting for the final EXIM disbursement of $4.7 million expected in July, our pro forma cash position is $29.9 million. Importantly, cash used in operations during the quarter included approximately $1.4 million of nonrecurring expenses relating to the redomiciliation, the PCAOB audit and the potential IPO. Separately, we also amended our EXIM Bank credit agreement in June, increasing the total commitment from USD 22.8 million to USD 26.1 million, an increase of USD 3.3 million in nondilutive capital. Let me turn to operations, and I want to address our Tennessee facility directly. During the quarter, we experienced 2 contained safety incidents at the facility. In response, we completed a comprehensive process system and facility safety review with Jensen Hughes, a leader in safety and risk-based engineering and implemented the resulting remediation and improvements. We adopted a safety-first approach throughout. And while we are mindful of our customers' need for reliable supply, we elected to temporarily pause titanium powder production while these improvements were implemented. Titanium powder production has since resumed following a 6-week pause, approximately $1.3 million or USD 0.9 million of titanium powder orders were deferred to Q1 FY 2027 as a result. Critically, there were no purchase order cancellations and no employee attrition during the pause. And PM-HIP manufacturing and refractory powder production were not impacted, including the completion of the $4.6 million titomic refractory powder order. On the expansion side, we completed commissioning of our third EIGA premium atomizer ahead of schedule, and we now operate 3 EIGA atomizers, 1 for refractory and 2 for titanium, representing annual production capacity of approximately 200 metric tons of refractory alloy powder and approximately 480 metric tons of titanium alloy powder. Our argon recycling plant remains on track for commissioning in Q1 calendar year 2027, and our fourth EIGA is on track for commissioning in June 2027. Turning to the corporate side. Our redomiciliation in the United States is now complete. This positions Amaero as a sovereign advanced materials and manufacturing leader. Amaero Inc., a Delaware Corporation, is now our ultimate parent company. Shareholders retain equivalent economic ownership via CDIs. Our ASX listing is maintained under the existing 3DA ticker. And our operations strategy and management remain unchanged. The time line played out as planned. We announced our intention to redomicile in February. Tim Johnson was nominated to the Board in March. The scheme booklet was distributed in May. Shareholder approval was received at the AGM on June 5, and the redomiciliation became effective on June 22. We also completed our PCAOB audit in July, aligning us to U.S. reporting standards and confidentially submitted a draft registration statement on Form S-1 with the SEC. Again, given Rule 135 under the Securities Act of 1933, the company will now be prohibited to further -- to comment further on the potential initial public offering of shares in the United States, and the company refers investors to prior ASX announcements. The redomiciliation supports 3 important objectives. First, the U.S. market positioning. It aligns us with U.S. defense and sovereign manufacturing growth, gives us greater visibility to U.S. customers and stakeholders, improves comparability with U.S. listed peers and positions us to satisfy foreign ownership, control and influence or FOCI requirements supporting eligibility for classified defense contracts. Second, capital access. A U.S. domicile gives us access to a larger, deeper investor base, the potential for improved valuation and liquidity and enhanced access to lower-cost debt and equity capital. Third, strategic flexibility. It simplifies our structure for potential M&A and partnerships, aligns us better with U.S. strategic counterparties and positions this company for a potential U.S. IPO and listing in late calendar year '26 or early calendar year '27, subject to equity market conditions and the completion of the SEC review process. On the last point, subsequent to the quarter end on 15 July, we confidentially submitted a draft registration statement on Form S-1 with the SEC relating to a proposed initial public offering of our common stock in the United States, subject to market and other conditions as well as completion of the SEC review process. On the commercial front, the other award that deserves special attention announced after quarter end on 1 July is our first low-rate initial production award from Bechtel Plant Machinery, Inc., or BPMI, a prime defense contractor. The contract was valued at USD 344,000 to produce piping in support of critical submarine industrial base needs. This marks Amaero's transition from PM-HIP validation to production and solidifies the U.S. Navy's December 2025 letter of support. We've collaborated closely with BPMI and the U.S. Navy over the past 2 years across development, demonstration, first article and now low-rate initial production. Though not announced, 6 contracts were previously awarded by BPMI with work ranging from development and demonstration through to production, and this successful progression positions Amaero to begin receiving production contract awards for critical submarine components. The U.S. Navy has recently announced support for PM-HIP as a mature manufacturing technology and a viable alternative for large castings and forging supply chain challenges. And BPMI has previously indicated estimated demand for up to 400 PM-HIP components per year. We look forward to advancing qualification of more critical submarine components through continued collaboration with BPMI and with the U.S. Navy. I'd also note, during the quarter, we secured a Master Purchasing Agreement with a minimum commitment of $7.8 million for fiscal year 2027 for titanium alloy powder deliveries and executed a 3-year exclusive Master Purchasing Agreement with United Performance Metals, appointing UPM as a distributor partner and Amaero as its exclusive supplier of titanium alloy powders. Supported by an initial 4,000 kg order, these agreements expand our strategic partnerships and give us strong early visibility into next year's revenue ramp. Closing remarks. To bring it together, FY 2026 delivered on plan with revenue of $18.1 million and a record fourth quarter of $7.8 million. We completed our original 3-year approximately $80 million capital investment program on schedule and on budget. And we now operate 3 EIGA atomizers with 680 metric tons of annual powder capacity, scaling to 920 metric tons in 2027. We addressed the Tennessee safety incidents comprehensively and resumed titanium production with no order cancellations and no employee attrition. We completed our redomiciliation and PCAOB audit, confidentially submitted our Form S-1 to the SEC, and we're advancing towards a potential U.S. listing in late calendar year '26 or early calendar year 2027. Most importantly, we enter FY '27 with contracted backlog of $23.1 million, including $8.1 million (sic) [ $8.5 million ] secured since 30 June. And a growing pipeline of long-term agreements and contracted programs across defense, space, aviation and medical markets, capped by the $6.5 million Department of War contract and our first BPMI production contract. We are executing, we are scaling and Amaero is uniquely positioned as both a leading advanced materials business and a leading advanced manufacturing business, the largest scale U.S. producer of refractory and titanium alloy powders and a leader in PM-HIP manufacturing of complex near-net-shape parts for mission-critical components. Thank you for your time this morning, and I would welcome your questions.

Thank you, Hank. I might just get you to stop sharing if you keep it up if you like. And again, thank you, everyone, for joining us. [Operator Instructions] We have received quite a few questions already. So let me jump into them. So revenue increased 376% year-on-year. What were the major drivers of this growth? And secondly, how much of this is repeatable into FY 2027?

Yes. So the nice thing about the model that we've approached and the way that we have sought long-term strategic agreements is it gives us much better visibility. And so approximately 80% of our revenue in FY '26 came from long-term agreements and contracts that we had announced. And going into FY '27, the backlog, again, over 80% of that backlog, okay, is from long-term agreements or contracts that we have prior announced. And so it gives us much better replication, if you will, and repeatability of that revenue going forward and much better visibility of that revenue going forward. As I mentioned, our backlog sitting here today is already over 125% of the full FY '26 revenue of $18.1 million.

Sorry, quite a few coming through. So let me just deal with these. So what is the utilization rate of the current atomizers?

Yes. So here, too, and we purposely scaled somewhat slowly, and we've invested ahead of demand. The reason that we've invested ahead of demand, let me start with titanium, and then I'll go to the other parts of our business. We -- as of the end of FY '26, we essentially got to 100% capacity utilization of our first atomizer. We then commissioned our second atomizer. We will begin ramping up production of that in the start of FY '27. But importantly, we've got underutilized capacity that enables us to go after some very large commercial opportunities that without having that [ underutilized ] capacity, we cannot land. I would expect as we go through FY '27, we will fully utilize the second atomizer by the time that we land the third atomizer and then again, have that underutilized capacity for some of these larger commercial opportunities. As it relates to -- and so over time, I would expect that the 3 atomizers dedicated to titanium would essentially have near 100% capacity utilization. On the refractory side, on the other hand, we don't expect over time to have more than 50% to 75% capacity utilization. And part of the reason for that is we purposely positioned Amaero as someone that can be very agile and responsive to customer needs, while the alternative suppliers have a much, much longer lead time, okay? These are much more expensive alloys, so they'll contribute significantly to our revenue, but we would expect to have a lower capacity utilization. On PM-HIP, we are just today, in fact, looking out of the window, there's a semi-truck with the crane bridge on it. We're installing a 15.5 ton crane as well as additional capacity in anticipation of other -- both larger number of production contracts as well as larger parts coming through the submarine industrial base. We've had significant expansion over recent months of PM-HIP. And so we've got significant underutilized capacity there as well.

Thank you, Hank. Just another one here. So with the new contract with the Department of War, is that likely to lead to a contract for the new refractory powder? And what volumes would we expect from that?

Yes. So the AUD 6.5 million contract is a production contract for refractory alloy powders. And so essentially, what we're doing right now is the country -- certain alloys or certain metals such as hafnium, are up a lot on the order of 700% right, in recent years. And so we're looking for other alloys, other refractory alloys that have similar performance but have a lower and less volatile cost. And so we'll be working with the Department of War. We've had this in planning for some period of time. We will down-select 2 alternative refractory alloys that are high-temperature alloys. We will atomize those. We will PM-HIP parts, we will print parts, we will test those. We'll feed back that data to Department of War in hopes of qualifying other refractory alloys that, again, are lower cost and reduce our reliance on adversaries to source these materials. We would expect this to lead to additional contracts from the Department of War going forward. But initially, this is a $6.5 million contract for refractory alloy atomization over 13 months beginning August of this current calendar year through August of 2027.

Thank you, Hank. Bear with me. There's quite a few coming through changing pace. So do you have a view of the market demand and forecast for C103?

Yes. But I would also answer this question more broadly to refractories. So we've given a demand signal that was done by a third party. We first updated that maybe 3 years ago, updated that yet again maybe 1.5 years ago. And what I would say in general is C103 demand, albeit we have a number of contracts currently for C103 demand, both space companies and defense companies. In general, we don't see the demand for C103 scaling as much as we did in the out years in that earlier demand study. And the reason for that is we see it being substituted by other refractory alloys. Now for us, the result will be comparable revenue and comparable margins to what we had. And so it's interchangeable, if you would, will, with the C103 demand. So again, in total, we would see refractory revenue being about what we had assumed. Refractory contribution and margin being about what we had assumed, but the mix shifting from C103 to these other high-value refractory alloys such as tungsten molybdenum, such as other niobium variants that don't have hafnium as an example.

Wonderful. Next one here, just talking about the fact that there's no supply chain bottlenecks. So what is -- what are the number of fleet -- sorry, what's the number of fleet or atomizers you think the market could support in calendar year 2026, 2027?

So it very much depends. Again, refractory and titanium being very different markets. In titanium, the only 2 competitors that we have, we come across on a commercial demand basis is AP&C and Tekna, both based in Montreal, okay? Plasma atomization versus our gas atomization. Fantastic competitors, albeit not U.S. competitors, and that gives us an edge from a sovereign manufacturing standpoint. Those are our competitors, though, on titanium, and you're seeing significant growth in titanium demand. You've seen a number of companies recently announced significant expansion of their 3D printing fleet. That includes Velo3D, VulcanForms. There's been a half dozen companies in recent months Knust -Godwin. Again, there's any number of these that have announced a significant expansion of their 3D printing fleet. Of that, the #1 alloy, I would say, would be nickel 718 and the #2 alloy would be titanium 6-4, right? So this will lead to significant incremental demand for Amaero. And again, other than our 2 Canadian competitors, we will get the lion's share of that demand. I think that we will grow faster than the organic growth because we will take share from those Canadian competitors as well given the demand and the preference for U.S. sovereign manufacturing. On the refractory side, we have very few competitors. As you might know, there's only one other company that has qualified C103 and other refractories for space applications. That is ATI. ATI has a much, much longer lead time. It is also a higher cost. We've got a lower unit cost than ATI has. So again, we're uniquely positioned to the extent you need qualified refractory alloys, okay, with traceable feedstock, okay, which, by definition, qualified is going to have to have traceable feedstock. We are uniquely positioned in that domain.

Thank you, Hank. Again, jumping around quite a fair bit here. Obviously, on the incidents that it did happen, you did make a fair comment about that. But any other further comment on the status of the TOSHA investigation, which is their Tennessee Occupational Safety and Health Administration? What's the sort of time frame for them for their anticipated review to be concluded?

Yes. So to level set, the first incident we had in May relating to a processing piece of equipment is a blender. And we had, unfortunately, 2 of our workers suffered burn injuries. I'm glad to say that one of those workers came home about 4 weeks ago, maybe 5 weeks ago from the hospital. Another worker came home about 3 weeks ago from the hospital. So both of them thankfully are recovering and doing well. Anytime there is an injury in a manufacturing plant in the United States, you immediately contact either OSHA, which is a federal OSHA or some states such as Tennessee are administered by the state. So in our case, we have TOSHA or Tennessee OSHA. You immediately contact them and then they begin an investigation. And this is compulsory anytime there is an injury. That investigation can take anywhere from 3 to 6 months prior to the results coming out. We are cooperating fully with TOSHA and that investigation is underway. We do not have any further update at this point in time.

Thank you, Hank. We have another question that's come through congratulating you on the results as well. But just commenting if you're able to provide some comment on how long it would take Amaero to produce the powder related to fill the orders in the backlog.