Omni-Lite Industries Canada Inc. (OML) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Annual and Special Meeting, the meeting of the shareholders of Omni-Lite Industries Canada Inc. Corporation. My name is David Robbins, CEO of Omni-Lite Industries Canada Inc. and I'd like to welcome all of you here today on behalf of the corporation, and thank you for attending. I'd like to introduce Roger Dent, who will act as the Chair of the meeting.

Thank you, Dave. Meeting will now come to order. I will ask Andrew Armstrong of Peterson McVicar LLP to act as Secretary of the meeting. I've requested that Elissa Rojo and [ Kesa Rashiq, ] representatives from Computershare Investor Services Inc., the Registrar and Transfer Agent for the corporation shares serve as scrutineer for the meeting. Is anyone here who has not registered with the scrutineer, could you please do so now. I have the scrutineer's preliminary written report on attendance, which indicates a quorum of not less than 2 persons who are entitled to vote as required by Section 10, 11 of the corporation's bylaws. Unless there are any objections, I will dispense with reading of the report. Before commencing with the business of the meeting, I would like to comment on the voting procedures. Shareholders will be asked to pass certain resolutions. Simple majority of affirmative votes cast in person or by proxy will be required to pass the ordinary resolutions to be heard today at the meeting. A super majority representing 2/3 of 100 votes cast in person or by proxy will be required to pass the special resolutions being heard today at the meeting. Unless the poll is requested or otherwise acquired, voting will be conducted by saying I and each shareholder entitled to vote will have one vote. Shareholders wishing to raise questions or comments pertaining to the business before the meeting speak up and when recognized by the Chairman, address their comments to the Chairman. There will be additional time for general questions and comments following the conclusion of the formal meeting. The notice call of this meeting was sent on August 29, 2023 to the registered shareholders and non-objecting beneficial owners of record as of August 21, 2023. By a proof of mailing and is available for inspection on request unless there are any objections, I'll dispense with reading of the notice of the meeting. I now refer to the meeting to be regularly called and broadly constituted for the transaction business. As stated on Page 14 of the incorporation's information circular First item of business is for shareholders to receive the audited financial statements for the year ended December 31, 2022, together with the auditor's report thereon, copies of which were mailed to shareholders still requested. I now place these before the meeting. Unless anyone objects, I will now ask that someone move and second the resolution that the auditor's report be taken as read.

I so move.

I second.

I'll ask those in favor to signify by saying I. Oppose if any. Motion has been carried. As said on Page 14, the circular to the next item of business is to fix the number of directors at 5. Unless anyone objects, I will now ask that someone move that the number of directors be fixed at 5.

If I so move.

I second.

I will ask all those in favor to signify by saying I. Oppose if any. Motion has been carried. As said on Pages 14 and 15 of the circular, the next item of business is the election of directors, names of the 5 nominees to the Board of Directors in ensuing year are set up in the Corporation's information circular. I declare David Robbins, Charles Samkoff, Roger Dent, Patrick Hutchins; and Jan Holland to be nominated for election to the Board. Only the election of those persons named in the corporation's information circular may be voted for by proxy. Registered shareholders present at the meeting, may cast their votes to the election of any other person nominated on the floor other than management's nominees named in information circular. For this meeting, no one has been nominated in accordance with the procedures set out in the company's advanced notice bylaw. Accordingly, no further nominations facility, et cetera. I hereby declare the nominations closed. Can someone move therefore a resolution for the election of the versions nominated as directors.

I so move.

I second the motion.

The motion is now open for discussion. If there's no discussion, I will ask all those in favor to signify by saying I. Oppose if any. Motion has been carried. There are being only 5 nominees and 5 positions to be filled, and they're now being [indiscernible] to elect those nominees, I now declare David Robbins, Charles Samkoff, Roger Dent, Patrick Hutchins, Jan Holland to be elected as directly to the corporation hold office until the close of the next Annual meeting of the corporation or until their successors are duly elected or appointed in accordance with the provisions of the corporation's points. As said on Page 16 of the circular, the next item of business is the appointment and remuneration of auditors of the corporation. I have the motion that MNP LLP [indiscernible] accounts and they are [indiscernible] the corporation's auditors until the next Annual Meeting of Shareholders following this meeting with a remuneration to be approved by the Board of Directors.

I so move.

I second the motion. The motion is now open for discussion. There's no discussion, I'll ask those in favor to signify by saying I. The motion has been carried. As said on Page 16 of the circular, the next item of business is to ratify and improve the continuation of the corporation's stock option plan. The auction plan is a 10% rolling stock auction plan, whereby the number of common shares available for issuance is equal to 10% of the issued and outstanding common shares. I now have a motion for the approval of the corporation's auction plan.

I so move.

I second the motion. Motion is now open for discussion. There's no discussion, I will ask all those in favor to signify by saying I. Motion has been carried. We have concluded the formal business of the meeting. Is there any other matter that a shareholder wishes to raise? There's no further business to be brought before the meeting. I will now call for a motion that meeting to be terminated, following which we will be available to address shareholders' questions.

I so move.

I second the motion. Motion is open for discussion. There's no discussion, I'll ask almost in favor to signify by saying I. Oppose if any? I declare the motion carried and the meeting terminated. Thank you for attending.

Well, I'd like to take the opportunity to say a few words. Omni-Lite continues finishing our third quarter on an upward trajectory. Driven by demand for domestic supplies of rescission aerospace and defense, hardware and electronics. The major drivers for this are commercial and aerospace recovery and expansion needs for precision engineered fasteners and a growing missile defense electronics or PAC-3 capability and newly developed missile sensor electronics. Additionally, aerospace and defense castings for fluid management engine components and defense related electronics and structural and sensor components castings. These are connected to larger global needs for commercial growing commercial air transport growth in fleet and in fleet modernization, national defense and security needs in an increasing unstable world and increased industrial automation and robotics. We feel that Omni-Lite is well positioned to capitalize with our expertise in manufacturing on these growing trends. With that, I open up for any questions or comments.

I have a question here, John Tukums here a shareholder. This is a question to the Board of Directors that have lower stock ownership in the company. If you care to disclose your position and you kind of share what you'd like to see in the company in order to invest more personally in the company. And it's not to put you on the spot is to gather insights that would be valuable to us, David.

Sure. So I guess on the call today, I see we have Chuck Samkoff and Jan Holland. I assume that the question is probably not directed at Jan because he's a very significant shareholder and they go together with his family. In my own case, I don't know the number offhand. I think it's about 175,000 shares that I have together with my family, which I think is in a range that is material. And I think it's not an unreasonable amount of shares for a record of all and being a shareholder for many, many years. So I'm not sure that the question is directed at me, but if it is what I'd be looking for, I'd say, to a more probably -- it relates to larger market questions rather than Omni-Lite questions at this stage. It would probably for me be a improvement in the general tone in the small-cap marketplace as opposed to anything related to the company specifically, which I think at this stage, we're after a couple of tough years, during COVID, I think we're now a little bit at a much more interesting future. Jan I see you put your camera on. I don't know if you wanted to answer at this stage or Chuck, if you're there?

Jan here. I'm happy to jump in. So I support totally what Dave and the team [indiscernible] sorry, inside Omni-Lite, my apologies. I think the track they're on and the careful stewardship that they're running of the business is outstanding. I also like the fact that they are considering potential acquisitions and things of that sort. So I think the team is on a very constructive path and I think as Roger just alluded to, when the marketplace gets a little more friendly, I think you're going to see between management actions and marketplace environment, the business is going to go forward really well. So I think we got 3 really strong operating visions that have a good future, and I know they're looking to add things to that. of.

This is Chuck Samkoff. Just to add to Roger and Jan's comments, I do also echo what's occurring at Omni-Lite, both at DP cast out in the West Coast, Northeast and Nashville. I think we've come out of the consequences of COVID and the -- what was the exogenous events of commercial aerospace, and I think fully supportive, and I have very good perspective that things are improving. I think Q2 and as Dave alluded to, I think Q3 will be a further indication. I've been a long-term option warrant holder. And so I do, myself and my family will continue to increase our position in Omni-Lite. And as I said, I think we've got the right team. We've got the right assets. And ultimately, I think we're in a great position to exploit what is a cycle in the industry to deliver where others are not. Roger, can you hear me?

Roger, can you hear me?

Yes, go ahead, Pat.

Yes, it's Patrick Hutchins. So I'm on the West Coast. So I'm in proxy Omni-Lite and I've been involved for several years and that has been a foundation [indiscernible] It's a foundation of our business. Relationship aerospace industry. I'm from the aerospace industry. I wouldn't be involved unless I felt like we had strong foundation [indiscernible] we continue to grow our business side [indiscernible] castings with the military defense. So I'm also still in the market. Strong feeling towards trajectory. And my position in the company is I think approximately 50,000 shares which I purchased during COVID [indiscernible]

Does that answer your question?

Dave, speaking of acquisitions, could you give us a little more color on how things are developing at DP cast?

Well, we've been quite active and the marketplace is pretty open. I think coming out of COVID and now seeing the recovery of aerospace. There's been a softening, I think, more a realization of the future. So it's a fertile marketplace. We've been in discussions with several companies and the investment thesis is if it expands and augments our current precision manufacturing capability. So the profile would be smaller to a midsized company that has some technology that would expand our business and adds to our platform of precision manufacturing capabilities for aerospace and defense.

Yes. I was actually asking more about the DP cast and whether that might be turning profitable anytime soon.

Well, we're certainly on that trajectory. To be profitable. And we -- like -- I think I mentioned back at a conference call 1 or 2 of below is that we have many, many examples of the same kind of profit margin, our profit margin target at DP cast for some very high-performance precision casting. So it's our model and our belief that we'll get there because we have many, many examples of it within the company. And the reputation is well received at customers. So the customer is perceiving that high quality and they're looking for more castings. Our quoting has been very robust. So that's what gives me the confidence that they'll be a contributor.

Yes. I understand it was rather a tough turnaround, would you be kind of -- would you wait until you have been totally successful with DP cast before you make other acquisitions? Or how do you how do you feather that in new acquisitions with a previous acquisition that's not yet profitable?

Well, I certainly -- and the belief that it will be a contributor. So with that belief and my experience tells me that I can -- there was some confidence in that, that we've been out looking because we feel like as that close that this isn't a project that it's going to be years and more years in the making. They're plus.

And how would you fund acquisitions that you're looking at?

Very creatively. Well, every deal has its -- the seller has notions and what it wants, and we certainly have many levers to pull. And so there's not -- certainly one size fits all. I think you really have to tailor into the target and what their needs are. And certainly, what our equity value is at that time. So there's no one answer.

That's the point I was getting here. I certainly wouldn't encourage you to use equity on acquisition. Well, at this price.

Yes. Yes. Well, we're hopeful that we're not going to be in this place for much longer, but we have to deal with what we have to deal with. But certainly, we would look at all mechanisms to fund a deal.

Yes. No, I guess you've -- it was kind of a broken record on this, but before you do any acquisitions, I think it's important to not understand how attractive your own equity is and establish or at least consider some sort of a buyback but you've heard that from me before and so that's okay.

Well, no, it's something that the Board has and will continue to consider. It's another mechanism certainly in that whole range of financing.