Omni-Lite Industries Canada Inc. ($OML)

Thank you for standing by. At this time, I would like to welcome everyone to the Omni-Lite Industries Investor Conference Call. [Operator Instructions] I would now like to turn the conference over to Amy Vetrano-Palmer, CFO. The floor is yours.

Thank you. Good afternoon, and thank you for joining us. With me today is our Interim Chief Executive Officer, David Robbins; and Board Director, Alex Ryzhikov. Our call is being recorded and will be available for playback, the details of which were 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 year-end 2025 results. After the remarks, we will open the call up for Q&A. If you have not received or seen a copy of the press release, which we issued yesterday morning, you can find it on our website at www.omni-lite.com or e-mail 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, 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 and changes to the health of the general economy, including the effects on the U.S. financial market, U.S. global commercial aerospace market, the U.S. Department of Defense budgets. All forward-looking statements should be considered in conjunction with the cautionary statements issued 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 reported financial results in accordance with International Financial Reporting Standards, or IFRS, during our call, we may also discuss or reference 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 results or metrics are in U.S. dollar. I would like now 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 fourth quarter 2025 performance, followed by comments on current business. Fourth quarter 2025 revenue of $4.1 million was an increase of 18% compared to the prior year fourth quarter. For fiscal 2025, revenue of $14.9 million was down 6% compared to FY 2024. The adjusted EBITDA in the quarter came in at $61,000, representing a disappointing 1.5% margin. The weak quarterly performance resulted from operating issues at the Cerritos facility, which has since been resolved as well as shipments at Monzite and DP Cast falling into Q1. Adjusted EBITDA for the FY 2025 was approximately $890,000, which again is a disappointment compared to 2024. Bookings for the fourth quarter of $5.5 million, however, resulting in a backlog of $8.8 million is a record for the company. Monzite bookings in the quarter were particularly strong, driven by -- largely by reorders for electronic components used on Eurofighter and a mobile ground-based missile and drone tracking radar program. The strong bookings trend outlook and pipeline for fasteners and electronics continues into 2026. With that, I'd like to turn the call over to Amy. Amy?

Thanks, Dave. Dave has addressed our revenue and outlook, so I'd like to take a few minutes to comment regards to cash. Adjusted free cash flow, defined as free cash flow from operations minus capital expenditures, was a source of approximately $451,000 in the quarter as compared to a source of $248,000 in the prior year. Year-to-date, free cash flow was a source of $1.1 million, which was down compared to 2024 of $1.8 million. We did use approximately $55,000 of CapEx improvements during the year. We also acquired Electronic Components or EComp with an acquisition net cost cash usage of $272,000. We finished the year with over $2.8 million in cash and no debt, which is a slight decrease over 2024. I would like to now turn the call over to Alex. Alex?

Thank you, Amy. Before we move to Q&A, I'd like to take a moment on behalf of the Board to thank Dave for his leadership and contribution since becoming CEO of Omni-Lite in 2018. As we have previously announced, once we retain a full-time CEO, Dave will turn his focus to our Monzite business. We see significant potential there, and I'm excited to see the progress Dave can make as he dedicates his full attention to realizing that opportunity. With that, Morgan, we're now ready to open the call for questions.

[Operator Instructions] Your first question comes from Rukun Duggal with Chandern.

Dave, you're moving to a President of Monzite, which tells us that you think that there is growth opportunity there. Can you tell us what pieces you need to put in place to generate much higher profitable revenue growth at Monzite?

Pieces to put in place. Well, we are currently operating at a pretty high margin. We expect the backlog at Monzite is high. And as I mentioned on this call that the bookings forecast we're expecting and have already received a lot of strong demand. So that's the thing that needs to put in place is the orders to come through, but we've got a pretty big backlog. So it's falling into place with the orders coming through and a high expectation for a strong book-to-bill in 2026. That's the single biggest driver as well as the rest of the company. Specifically, it's backlog driven. If backlog is up, the orders and the profitability follow.

That's helpful. And just to put some numbers around that, should we expect Monzite's performance in 2026 to look more like 2024 or look more like 2025? And I guess if you could split it out, how much of the $8.8 million backlog sits in Monzite?

Well, we're probably not prepared at this moment to have an exact number for you, but it's a healthy proportion of the backlog is Monzite. I'm glad in the way that you referenced 2024. So if you look at the progression of revenue from '24 to '25 now to expectations in 2026, there was a lot of, I would call, front-end loading of revenue in 2024 for Monzite prior to the election, prior to changes in administration. And there were some delays in orders in 2025, which you don't get the order, you can't deliver. So strong bookings for 3 successive quarters, 4 successive quarters at Monzite and then my talking about expectations in 2026 for that to continue points towards more like 2024, but not as more driven with continued need and not maybe a front-end loading a little bit that happened in '24. The reason I mentioned drone programs and missile programs is that they have a lot of legs. They're very evident today in today's world. So it's a good positioning that we feel in those programs.

That's helpful. And I just had a question for Alex as well. Alex, if we move from Monzite and we look at some of the other business units, I was trying to get a sense of sort of the growth levers at the other business units. So Q4 results showed sort of organic growth in fasteners and castings and you've renegotiated pricing at DP Cast. So what pieces do you need to put in place to generate much higher profitable revenue growth at forging fasteners at DP Cast and even EComp?

Well, maybe I'll touch on DP Cast first. I think in the past, we talked about the meaningful contract that was renegotiated and pricing there. Inherently, DP is a lumpy business. So I would say on a quarterly basis, occasionally, you will not see the full benefit of this new pricing translated into better results. But I would say, as you look at 2026, we still continue to expect significant improvement in DP Cast. I think Cerritos, we addressed the operational issues that we saw in the quarter. We stated those have been addressed. And so you should expect sequentially to see improvement in that business. I think as in any business, you do need increased demand. And I would say you can see that in terms of underlying end markets that the demand remains healthy. There are some additional resources that we've already brought to both DP and Cerritos that we expect to translate into improved operating results, not necessarily immediately, but over time. So I would say those are initial elements. And obviously, as we look for a full-time CEO, that's going to be a large part of their responsibility as well in finding the right resources to grow both of those assets where I think the growth potential is significant. So that's how I'd describe it now. And for EComp, I'll let Dave comment on that.

Yes. Specifically with EComp, it's a very targeted program by program. The investment thesis there was that they had a position -- EComp had a position, quasi-qualified supplier at several divisions of General Dynamics and at Raytheon, and we're looking to leverage that on a program basis. We've made announcements about opportunities on a couple of particular programs, one, including Aegis, which is a named program that has a lot of future. So as largely a sales organization, marketing, it's all about being on the right -- as an approved supplier on the right programs. And so we're well positioned there just by the nature of approval and ability to support these key programs.

That's perfect. And one last one for me, and then I'll leave the floor. So Alex, you've retained an executive search firm for the CEO role to lead the next chapter of growth here. Can you give us a sense of the profile that you're looking for? Is this someone with M&A and roll-up experience? And can you give us a sense of where you are in the process? Do you expect to have someone seated by a particular point this year?

So if I had to distill it, I would say we're looking for a really strong operator above everything else. We believe our metalworking businesses that you referenced, DP and Cerritos have significantly higher earning potential than what we've demonstrated historically. So we want someone who knows what great looks like and can drive organization to that level. We don't have a specific timeline. We're not in a rush. As I mentioned in my remarks to your earlier questions, we have already brought additional resources to assist DP Cast and Cerritos. So the business is moving forward as we are conducting the search process. And our objective is to find the right person for that next leg of transformation. So no specific date set will take our time, but we're not just sitting around waiting. We're putting pieces in place as we search for a full-time CEO.

[Operator Instructions] Your next question comes from [ Manny Kramer ], a private investor.

Yes. Dave can you answer? How does the oil price rise affect you? And can you do something to increase your sales price due to the cost of oil getting higher?

Well, energy probably has the biggest impact in our DP Cast facility. Energy isn't a big part of -- well, maybe a bit in our fastener production, too. But it's not a huge part of our business. We're pretty efficient operators. But having said that, on your pricing, we are looking to -- given our positioning with our customers that generally, if we're not sole source, we're a small 1 of 2 or 1 of 3 sources. So we're looking to try in this environment where costs are rising everywhere, whether it's the price of gold, whether it's price of material, we're looking to at least extract our value that we're bringing and in anticipation of higher cost of materials, reflecting that in our prices to our customers. So it's something we've particularly spent a lot of time, but especially in light of these events in the last 90 days, even looking at it again. But -- so pricing is right up at the top of our agenda as we bid to our customers and energy is just one of many. Prices of other commodities is another. Labor costs, it's right in the mix.

Also, any -- are you doing anything about AI to reduce cost of labor?

There's pockets, especially on the administration side of things, sales help. We're incorporating some CRM tools that utilize AI to help us reach our customers in our footprint. On the operational side, I can't really point to too much that we're doing there, but more on the front end and sales and admin side.

That concludes our Q&A session. I will now turn the conference back over to Amy Vetrano-Palmer, CFO, for closing remarks.

Thank you again, everyone, for joining us today. We look forward to hosting Q1 financial results here shortly. And thank you again. Bye-bye.

This concludes today's call. Thank you for attending. You may now disconnect, and have a wonderful rest of your day.