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

Good day, ladies and gentlemen, and welcome to your Omni-Lite Industries Inc. Q2 '24 Financial Results Conference Call. [Operator Instructions] At this time, it is my pleasure to turn the floor over to your host, Amy Vetrano-Palmer. Welcome, Amy. The floor is yours.

Thank you, and good morning. Thank you for joining us today. 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 is in our press release issued yesterday. The purpose of this call is to provide an update on Omni-Lite's financial performance and operations as we did file our second quarter 2024 results yesterday, July 31. 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 was issued yesterday, you may find it on our website at www.omni-lite.com or e-mail us at [email protected] 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 Omni-Lite's performance based on our views of the company's business and the environments in which they operate, our future plans, objectives, business prospects and anticipated financial performance. These forward-looking statements are subject to future risks and uncertainties that could cause our actual results or performance to differ materially. We are also mindful of the risks and impacts of changes in the health of the general economy, including effects of the current U.S. financial market, U.S. 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 and the risk factors included in Omni-Lite's SEDAR 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 reporting financial results in accordance with International Financial Reporting Standards, or IFRS, during our call, we may also discuss or reference any non-IFRS financial measures, specifically adjusted EBITDA and free cash flow. A reconciliation of these non-IFRS metrics, if applicable, is included in our SEDAR filings and press releases. Lastly, unless noted, any reference or discussion of our financial metrics are in U.S. dollars. I would like to now turn the call over to Dave. Dave?

Thanks, Amy. Good morning, everyone, and thanks for joining us. I'd like to make a few comments about our second quarter and year-to-date 2024 performance, followed by comments on current business. Second quarter 2024 revenue was a high watermark at $4.32 million, an increase of 42% from fiscal year 2023; and the year-to-date revenue was $8.6 million, a 49% increase year-over-year. Top line growth in the quarter was driven by a combination of increases in commercial aerospace components in general and specifically, newly designed Inconel fastener products and 2 missile sensor electronic components. Adjusted EBITDA for the second quarter 2024 was $552,000. For the year-to-date, adjusted EBITDA of $1.4 million. This EBITDA contribution level represents a combination of repeat production deliveries and investment in new product development, which was at a high level in our second quarter. Additionally, forged products, electronics and casting products all had positive EBITDA contribution and continued improvement over prior year. Bookings for the second quarter were $2.7 million, which levels the backlog at a healthy $4.7 million as we go into the third quarter. The bookings profile in the quarter was at a high proportion of near-term spot buys for Aerospace component supply chain shortages and engineering development orders. The drivers behind our bookings pipeline, namely healthy build rates for commercial aerospace and sustainment and investment in new sensor electronics for defense is at historic levels. We expect our bookings profile to reflect these high levels of rush spot buys on the commercial aerospace side and longer-term buys for defense components for named and newly developed missile programs for the second half of 2024. With that, I'd like to turn the call over to Amy. Amy?

Thanks, Dave. Dave has addressed revenue and EBITDA, so I will make a few comments regarding cash. Adjusted free cash flow defined as cash flow from operations minus capital expenditures, was a source of cash of approximately $848,000. We did see a significant increase in cash in the quarter by $617,000, resulting in a cash balance of over $1.7 million. We continue to be debt-free and maintain a strong balance sheet, which also contains an investment in Cal Nano balance of over $2.5 million as a result of our stock in Cal Nano. We do expect to continue to see a better source of cash as we go through the year and receivables turn into cash. This now completes our prepared remarks, and we would like to open the call up for questions.

Thank you. Ladies and gentlemen, the floor is now open for questions. [Operator Instructions] And we'll take our first question from Alexandre Ryzhikov from [ Altavest ].

Congratulations on solid top line in the quarter and the first half of the year. My question relates to the bookings [indiscernible] and commentary. I guess in your Q1 and Q2 press releases, you talked about anticipating heavy bookings through 2024. For me, healthy bookings would mean something that allows you to achieve your stated top line growth targets. I guess, is this consistent with your definition? And if not, how do you define healthy booking? And then I have a follow-up.

Well, I mean, healthy bookings, if you want to maintain a certain level, have to be a positive book-to-bill. We're on a -- we continue to be on a positive on a trailing 12-month basis on a positive book-to-bill. Q2 was a little lighter, but the color that I mentioned was it happened to be a quarter that was disproportionately high in spot buys, near-term and in some new development contracts and didn't happen to have. But the outlook is still strong in terms of our pipeline. So the expectation would be that we're booking at a rate faster than we're shipping.

Got it. No, I appreciate that. And the reason I'm asking, if I look at the first half, I think you said roughly flat, down slightly on your bookings year-over-year. And so that was -- if you want to see some growth year-over-year, that would imply that in the second half, your bookings have to be double what they were in the first half. And clearly, your commentary was quite positive on your outlook. I just want to make sure that you have enough visibility in your quote book to feel comfortable that you can see meaningful growth in the second half of the year, relative to the first half of the year.

Right. Yes. And I think the point a little bit was that these spot buys, what they do is they give you quick backlog that turns and what you can see is a little bit of diminished backlog because it never gets there. But certainly, looking at the bookings rate, the rate has to keep up with your revenue projection.

[Operator Instructions] And next, we'll go to an investor, [ Mattie Kramer ].

Yes. Thanks. Dave and Amy, good quarter, hope to see better. I just one know on the war front and the situation in Middle East and Europe and Ukraine. Is this having an effect on your expectations or any -- the election, would that have any effect on your future sales and earnings?

So in my comments, I mentioned missile defense specifically, and then funding on DoD levels for defense in general is very robust. The timing of these contract lets -- especially on some of these big name programs can be a little bit affected by things like the election. Don't see a bit of that, although there has been some. There has been some delays in actual funding requirements, but they're all -- they're in line with 2024 and into 2025. So I'm not expecting a big hit there, but they're very robust demand in the -- especially in the missile defense area that we were on some several programs. Some new programs and some name programs. And in general, I think the level of unrest in the world is the backdrop behind a lot of defense spending. Specifically, again, [indiscernible] which is border protection. Things that are happening in Ukraine and Israel are getting a lot of development. There's a lot of development going on right now, which we are participating in, to some degree and low levels, on newer missile defense programs or drone. Drone interdiction is definitely driven by a lot of the world situation right now.

[Operator Instructions] Okay. And there appear to be no further questions at this time. I'd like to turn the floor back over to Ms. Vetrano-Palmer.

Thank you again for joining us today, and we look forward to talking to everyone soon at -- in regards to our Q3 release. Thanks again.

Thank you. Ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation. You may disconnect at this time, and have a great day.