Butler National Corporation (BUKS) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Today is Monday, March 15, and welcome to the Butler National Corporation Third Quarter Fiscal 2021 Financial Results Conference Call. [Operator Instructions] Your call leaders for today's call are David Drewitz, Creative Options Communications; Clark Stewart, President and CEO; Craig Stewart, President of Aerospace Group. I would now like to turn the call over to Mr. David Drewitz. Mr. Drewitz, you may begin, sir.

Thank you, and good morning to everyone. Before Mr. Stewart begins, I would like to draw your attention to, except for historical information contained herein, the statements in this conference call are forward-looking and made pursuant to the safe harbor provision as outlined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties, which may cause Butler National's actual results in future periods to differ materially from forecasted results. Those risks include, among other things, the loss of market share through competition or otherwise, the introduction of competing technologies by other companies, new governmental safety, health and environmental regulations, which could require Butler to make significant capital expenditures. The forward-looking statements included in this conference call are only made of the date of this call, and Butler National undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances. Important factors that could cause actual results to differ materially from the expectations reflected in the forward-looking statements include, but are not limited to, factors described under the caption Risk Factors in the company's annual report on Form 10-K filed with the Securities and Exchange Commission. So with that statement completed, I'm going to turn the call over to Mr. Clark Stewart. Mr. Stewart, it's all yours.

Thank you, Mr. Drewitz. Good morning, ladies and gentlemen. We appreciate you taking your time to visit with us about Butler National Corporation. Basically, we had a fairly good 9 months, given the fact that our revenue changes -- changed significantly in Aerospace products during the 9-month period and in the last quarter. The key area is that we deal with the big jobs and paying dollar jobs, and all we need is a couple of those to change from one quarter to the next, and all of a sudden, the revenue changes. And then, we feel the results of the container business being a highly tactics cost operation. And so, given the fact we were closed 22 days in May for the Casino, we're running about 6% behind on the container revenue for the year, and I guess, we feel like from that standpoint, we're doing a pretty good job. We're 6% line in Kansas, and the rest of our fellow casinos are more than 10% to 15% behind the previous year. So I think that our marketing efforts and our market is much different market than the other 3 are in, and we're really pleased with that. And we are doing a pretty good job there. Our revenue was down for the 3 months, $2.2 million; and our revenue down for the 9 months, $9.7 million. So that kind of reflects the difference. Now what I would tell you is that we do have major jobs at Avcon, and the backlog is strong, about $17 million. And we're pleased with where we are. We think that given the fact that everything shut down and we're limited in Dodge City to the number of guests that we really can accommodate with all the social distancing and all the -- and the rest of the requirements for COVID, we're pleased with Avcon. We just need more people, as always. And Craig Stewart is here, the Vice President of Aerospace and our President in Aerospace in Missouri, and I'll let him comment on Avcon, if you want, and the rest of the Aerospace.

All right. We're -- the avionics business is down relative to last year, primarily due to ADS-B and then some on the Gun Control side as well. Those things were -- it is -- we knew we're going to get past the point where we weren't doing too many of those anymore. Most of those were cases on paperwork. The business segment out in Arizona has been down a little bit, just fewer orders from our primary customer. Avcon, we're excited about where Avcon is. We've got backlog out through the next couple of years. We're probably at almost capacity for the next 6 months and taking more phone calls than we can probably handle here every day, so it's -- we've -- we're seeing at Avcon is going to continue to be really strong over the next 6 months to a year, and could be permanent in that, but that's what we have visibility to at this point.

I guess, Mr. Drewitz, I don't have anything else to comment on. I'm ready for questions, and I'm sure we'll have some questions on something.

All right. Operator, let's open it up to questions, please.

[Operator Instructions] And we have a question from Sam Rebotsky with SER Asset Management.

Should I assume what we're improving, we're looking to open up -- as far as the COVID, do we expect things to improve significantly once the COVID is opened up and you're able to -- have all your employees taking a shot, or where are we in this whole process?

Sam, let's take it in 2 pieces. As far as the Casino is concerned, we're still noted to 413 machines or something like that compared to our authorized 650. And the bigger casinos in Kansas are asking the question, when can we change that? So we would expect some of that will start to change. Our -- we expect to do probably -- we've had the best January we ever had, and we expect March and April to be strong. Also, February is so like -- is what you say, it's down just a little, but not much. We're really strong there. And I think we will -- there will be some changes on the COVID restrictions as we move forward here.

So you would -- would you say, we've turned the corner as far as the casino, and we would look to do something with somebody? Have we been talking to people about doing something relative to with the casino?

Well, so far, we haven't been talking to anybody about doing anything with it other than trying to operate in the COVID environment and with the restrictions that are out there, and we seem to be doing okay with that. And so...

Are we breaking even, or are we losing money?

Oh, no, we're making money. We're positive. Yes, we're positive, and if you look at the -- not like to say the numbers, the 6% behind the 9-month period, and that 6% is more -- we make up more than the 6% if we haven't been closed for the 22 days in May of 2020. So now we're feeling good, and the casino is making money. What you're seeing in the financial statements is the fact that when the casino makes money, it's despite any other stable business. It makes money over the fixed cost, and the fixed costs are pretty high. And so as you move above that, we make more money, as you know. And so we feel pretty good about that. Now in the airplane business, when you move above, that fixed cost is a little bit lower, except for the cost of all the STCs and everything. When that one moves above, you put a lot of money in the bank because your margins are a whole lot higher in the airplane business. So what we've got here is 2 segments. One, we hope for and is, in fact, stable year-to-year, and the other one we know has about a 5-year cycle of ups and downs. And so depending on what's happening, you're liable to have big profitable quarters and weak quarters. So that's where we're going with it. Craig, do you want to comment?

Yes. Sam, the one thing I would tell you is that we're missing from Aerospace side is we don't -- that's been good and bad because we haven't had the expenses of the travel and going to the shows and doing that kind of thing, but we're also missing the face-to-face interaction with some of our customers and potential customers. It doesn't seem to have affected us yet, and I think that's primarily because nobody is able to do it. But once everything starts getting back open and they start having shows like NBAA and EBACE and a lot of these trade shows, and our guys are able to travel and go get in front of customers, we're hoping that, that will continue this cycle of good numbers forward where we can stay busy longer.

So we would say that once COVID opens up, people are able to interact more, the contracts will flow more. We expect to bid on more contracts, or what do we expect?

Well, it would be hard for us to take more jobs than what we've got right now in the hanger. But what we're hoping for, at some point, the number of phones call that we get that are just people requesting stuff for how these figures would slow down and we're going to need to be out pushing the products and making sure that the pipeline stays full . And that's where the sooner we can get out and start doing that, the sooner we can make sure that we keep driving up the demand for our products. I think we've done an extremely good job of being forward-looking and figuring out, okay, what products are typical customers going to want. And so there is demand for it, whether we're out pushing the product or not at this point. But what we've got to do is get back out in front of them as soon as we can so that we can piece this going as long as possible.

What percent of the production are we working at?

I would say, Avcon, we're probably at 98% to 110%. We're actually, probably over the next few months, we'll be over what I thought our capacity would be. Here as we look towards May, it's more of a labor shortage than there's anything else. And so, we're actively looking for more employees and looking to get creative about how we get things done to be able to satisfy the customers' needs.

So how many more employees would we like to hire?

It depends on what kind of employee and how well-trained enough they are at the -- in this sweet little world. I mean, we could probably hire somewhere between 10 and 12 employees over the next couple of months at Avcon.

Okay. Well, good luck. It sounds like you're working on both divisions. You're very close to improving more significantly. Good luck. And hopefully, it comes to the bottom line.

Thanks, Sam.

You bet. Well, we've got some of it to the bottom line, Sam. We did make some money, so we're doing okay from that standpoint.

Well, that's great.

Thanks for your questions. We appreciate it. We have any other questions?

[Operator Instructions]

It sounds like we don't have...

We have no further questions. No, sir.

Clark, do you have some closing statements?

No, I think we're pleased with how things are going, and we're looking at capacity, both from space and number of people down at Newton. We're in the process of building some extra capacity here in Olathe, and that will release some of the load, but it's definitely -- we're restricted by space and qualified people. So we're working hard at it, and I think we will have a successful year.

Thank you.

Thank you very much for your time. We appreciate you joining us.

Thank you, everyone.

This concludes today's conference call. Thank you for attending.