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

Good day, ladies and gentlemen, and welcome to the Omni-Lite Industries Inc. Investor Conference Call. Our host for today's call is Amy Vetrano-Palmer, Chief Financial Officer. [Operator Instructions] I would like to now turn the call over to your host, Amy, you may begin.

Thank you, and good afternoon. 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 are 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 filed our second quarter 2025 results yesterday, August 13. After our remarks, I will open up the line for Q&A. If you have not received a copy of the press release, which was issued yesterday, you'll find it on our website at www.omni-lite.com or by e-mail at d.robbins@omni-lite.com. Before we get started, I would like to remind everyone that today's discussion will or may include some forward-looking statements, including information regarding Omni-Lite's performance based on our views of the company 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 the actual results or performance to differ materially. We are also mindful of the risks and impacts and changes in the health of the general economy, including the effects from the U.S. financial market, U.S. global commercial aerospace markets, the U.S. Department of Defense budgets. All forward-looking statements should be considered in conjunction with our cautionary statements contained in our press release and risk factors included on 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 financial reporting results in accordance with International Financial Reporting Standards, or IFRS, during our call, we may also discuss and reference non-IFRS financial measures, specifically adjusted EBITDA, pro forma adjusted EBITDA, adjusted and free cash flow. A reconciliation of these non-IFRS metrics, if applicable, is included in our SEDAR filings and press releases. Lastly, unless otherwise noted, any reference or discussion of our financial results or metrics are in U.S. dollars. I would now like to 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 2025 performance, followed by comments on current business. Second quarter 2025 revenue was $3.5 million, up 5% over first quarter of 2025 from growth in aerospace fastener components and contributions from our recent acquisition of eComp. Adjusted EBITDA for the second quarter 2025 was $95,000 with a year-to-date adjusted EBITDA of $503,000. The EBITDA also marks a continued effort to all locations making a positive contribution to EBITDA and an improvement over prior year. Bookings for the first quarter were $2.5 million, which keeps backlog at a strong $6.3 million as we go into third quarter. We also received a large order early in third quarter of $1.4 million on 2 critical defense programs. Metal forming business revenue is up year-to-date double digit and demand for commercial air transport and defense aerospace component needs are increasing as competition continues to extend on what was already long lead times. We have been able to take market share based on our ability to convert from prototype to low rate of production, then full production in 6 months or less. The continuing and growing needs for engineering fastener components for high-performance commercial and defense airborne platforms, coupled with capacity constraints is signaling to us to continue to invest in highly skilled machine labor training for what we are seeing as sustained demand growth. The castings business revenue is growing at its top 4 customers, offset a little bit by a reduction in revenue at many of its small customers as we continue to rationalize to products and product families that can contribute to our financial return targets. Negotiations are progressing well in our significant and singular corporate-wide long-term pricing agreement with our largest casting customer. Our expectations are to finalize that agreement in the fourth quarter with pricing that represents value to them and value to us as pricing that meets our financial targets. In our electronics business, demand continues to grow on the backdrop of increased global tensions that bring safety and threat determines a rising funding priority. Increased demand for rocket drone and missile defense for domestic and battlefield needs has increased production requirements over the next several years for multiple current programs and some development programs for sensor electronics we produce. In all of our engineering and manufacturing businesses, our ability to engineer a process to reliably produce products with exacting specification in months and not years was the heart of winning but equally important, keeping lead times into production our competitive moat and business model. The horizon for our newly acquired electronics distribution business is dominated by obsolescence and modernization sustaining legacy weapon system, including AEGIS, Patriot and Virginia and Ohio-class submarines, which have planned double-digit growth projections. With that, I'd like to turn the call back over to Amy. Amy?

Thank you, Dave. Dave has addressed revenue and outlook, so I will just make a few comments regarding cash. Adjusted cash flow as defined from cash flow from operations minus capital expenditures, was a source of approximately $170,000 during the quarter. We also did purchase eComp, as Dave mentioned, which was an all-cash transaction for USD 350,000. We continue to remain debt-free and do continue to keep a strong balance sheet with $2.9 million in cash, which is up from $1.7 million a year ago. We do expect to continue to see a strong source of cash as we go through the year as receivables turn to cash. This does complete our prepared remarks. We would like to open the call up to any questions.

[Operator Instructions] Your first question comes from [ Peter Imhof ], a private investor.

Just in terms of the backlog. So I mean, the backlog has been moving up over the last couple of quarters. But when I look at the revenue recognition for the last couple of quarters, it hasn't really been up. So I'm just wondering in terms of the backlog, is that more back-end loaded? Or is it taking longer for that stuff to come to fruition? Maybe you can just explain that.

Yes. Well, it's not too much back-end loaded -- a preponderance of the backlog will ship this year in 2025. I think the most notable thing is electronics has been down, as I referenced, due to lack of backlog. So the $1.4 million recently announced fills that backlog. So most of the revenue shortfall has been in the electronics business. I commented a couple of quarters ago that we were expecting some large orders. We're able to report recently that large order. So really, it's the timing of that order or orders that led to a little shortfall, but not just not from backlog being out into far into 2026. It's -- the majority of that backlog is due to ship in this fiscal year.

Okay. And then -- sorry, so right now, you're saying the backlog is $6.3 million. But with that additional $1.4 million contract you just signed, does that make the backlog $7.7 million? Or is that $1.4 million already included in the $6.3 million?