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

Hello, and thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Omni-Lite Industries, Inc. Investor Conference Call. [Operator Instructions] I would now like to turn the conference over to Amy Vetrano-Palmer, CFO. Please go ahead.

Good morning, and thank you for joining us. 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 on Monday. The purpose of this call is to provide an update on Omni-Lite's financial performance and operations as we filed our third quarter results on November 10. After our remarks, we will open up for any Q&A. If you have not received a copy of our press release, which was issued, you can find it on our website at www.omni-lite.com or e-mail d.robbins@www.omni-lite.com to request a copy. Before I get started, I would like to remind you 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's business and the environments in which we 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 into the health of our general economy, including the effects of the current U.S. financial market, U.S. global commercial aerospace market, the U.S. 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 dismisses 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 to IFRS, during our call, we may also discuss some 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, all reference or discussion of our financial results or 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 third quarter and year-to-date 2025 performance, followed by comments on the current business. Third quarter 2025 revenue was $4 million, which marks an increase of 7% from fiscal year 2024. Year-to-date 9-month revenue of $10.8 million is a decrease from $12.4 million 9-month revenue in 2024. Adjusted EBITDA for the third quarter 2025 was $325,000 with a year-to-date adjusted EBITDA of $828,000. While at the surface, the numbers show down revenue and down EBITDA on a year-over-year comparative 9-month basis, the underlying story is there were some delays in bookings of major programs for electronic products to start the year. But the bookings and backlog trend over the past 6 quarters has been strong. This, coupled with an expectation of a favorably repriced long-term agreement for castings to start 2026 points to growth in the profit profile with a look to 2026. Additionally, we expect the strong bookings to continue with need for domestic producers of engineered fasteners, complex castings and high-performance electronics for aerospace and defense needs, given the climate of strong air travel and national security missile defense priorities. We are and remain active in our pursuit of aerospace and defense manufacturing businesses to acquire and look to expand our efforts in order to create a pipeline of acquisition opportunities that fit our return objectives and platform expansion themes. With that, I'd like to turn the call back over to Amy. Amy?

Thanks, Dave. Dave addressed our revenue and EBITDA, so I will make a few comments in regards to cash. Adjusted free cash flow, which is defined as cash flow from operations minus any capital expenditures, was approximately $161,000 in the quarter. This resulted in a balance of USD 3 million. We currently remain debt-free and do have a continued strong balance sheet, which does contain an investment of approximately 1.9 in Cal Nano stock. With a strong positive EBITDA and strong revenue we have had all year, we do expect to continue to see a source of cash as we close out the remainder of 2025. This completes our prepared remarks, and we would like to open up the call for any questions.

[Operator Instructions] Our first question will come from the line of [ Reuben Dugle with Chandard LP ].

Dave, it's been good to see Omni-Lite continue to steadily improve. I think, in the past and in presentations, you mentioned that you see the company as a mini [ TransDigm ], which ties to the long-term revenue growth goals and margin goals that you've laid out. And I think you mentioned sort of an acquisition strategy as well towards the end of your prepared remarks. Do you think you now have access to the capital? And does the company have the operating bench to accelerate that mini TransDigm strategy?

Well, short term, I think we definitely have the team and the capacity to execute on 1 or 2 acquisitions. I think, as we move forward to have be a serial acquirer, we would look to add depth to the team to effectuate that. But certainly, short term, we have the team. And I think, from my comments, looking to expand also the breadth and what we're looking at, expand that pipeline, put the effort into generating a whole pipeline because acquisitions, while sometimes can happen quickly, very often, they take some time to mature. So having an active and a more robust pipeline increases the chance that we can do an acquisition that meets our objectives. I think like a TransDigm or HEICO or others that have been successful, it's about having a disciplined approach to having approach to buying and what basis you buy and what's your return objectives and need to stay disciplined to that. And having more -- having a larger array of targets increases that likelihood. And we're pretty optimistic. The landscape has a lot of targets out there. I think, with a lot of private companies that have aging-out owners over the next 10 years, it's a fertile landscape at least target acquisition.

[Operator Instructions] We'll take our next question from the line of [ Peter Imhof ], a private investor.

Just in terms of that question on the acquisitions, can you maybe elaborate just in terms of like size of acquisitions or what would be maybe too big and what kind of multiples? And then just a second question, just on the castings business, you guys alluded to the contract being renegotiated. So is that already being renegotiated and we should just start to see that flow through? Or are you guys still in the midst of working on that contract?

So we haven't made an announcement that it has been done, but I've alluded to it. So we feel very optimistic that we will near term sign that contract, but haven't been able to make that announcement, but feel very confident it will happen soon and take effect in early -- the start of 2026. And on the second part is our acquisition targets, the theme is if you want to think on a size, $2 million to $10 million revenue kind of range, a $1 million to $5 million on an EBITDA is generally a range that we're looking at. They're digestible -- at least at this stage, they're digestible. And we think the likelihood in that range, it's a company that we can buy right and improve. It's the type of company that ideally, we look for companies that have some profit profile and have a legacy serving aerospace and defense manufacturing needs, but suffer sometimes from not understanding pricing profile or really how to grow their business and leverage their business. So that's a type of acquisition target where we can buy it and buy it at a multiple that can give us our 15% return on invested capital kind of return rate, but that we can improve and add to the portfolio of our current products.

Okay. And then just another question just in terms of tariffs and FX, like how has that had any effect on you? I mean I've been on a few conference calls, and some of the smaller companies saying it hasn't really had much effect at this point in time, depending -- because you've got manufacturing here in Canada as well. So maybe if you can just expand on that.