Earnings call transcript: Air Industries Group Q2 2025 sees stock fall 13.95%

Air Industries Group (AIRI) reported its Q2 2025 earnings, revealing a consolidated net sales decline of 6.7% year-over-year. The company recorded a net loss of $422,000, equating to $0.11 per share. According to InvestingPro data, the company has not been profitable over the last twelve months, with a negative return on equity of -11%. Despite strategic initiatives and new orders, the stock fell sharply by 13.95% after the earnings announcement, closing at $3.37, with aftermarket trading showing a further decrease of 2.08%.

Key Takeaways

• Air Industries Group’s net sales decreased by 6.7% from the same quarter last year.
• The company reported a net loss of $422,000, or $0.11 per share.
• Stock price dropped by 13.95% following the earnings release.
• New orders and long-term agreements were secured, including a significant contract from an existing customer.
• The company implemented cost-cutting measures expected to save $1 million annually.

Company Performance

Air Industries Group experienced a challenging Q2 2025, with net sales falling to $12.7 million, a 6.7% decline from Q2 2024. The gross profit stood at $2 million, representing 16% of sales. Despite these challenges, the company continued to secure new business, including $10 million in new orders for aftermarket products and the largest long-term agreement in its history.

Financial Highlights

• Revenue: $12.7 million, down 6.7% year-over-year
• Net Loss: $422,000, or $0.11 per share
• Adjusted EBITDA for the first half: $1.469 million, a 17% decrease from the previous year
• Total Debt: Reduced by over $1 million
• Inventory: Increased by $1.3 million
• Accounts Receivable: Decreased by close to $2 million

Market Reaction

Following the earnings report, Air Industries Group’s stock fell by 13.95%, closing at $3.37. This decline was further compounded in aftermarket trading, where the stock saw an additional drop of 2.08%, reaching $3.30. InvestingPro analysis shows the stock is now trading near its 52-week low of $3.00, with a market capitalization of just $10.95 million. The stock’s performance reflects investor concerns over the company’s declining sales and profitability despite securing new contracts and reducing debt. InvestingPro subscribers have access to 6 additional key insights about AIRI’s financial health and market position.

Outlook & Guidance

Air Industries Group anticipates a weaker performance in the second half of 2025 compared to the first half, with expectations of the strongest results in Q4. The company remains optimistic about its long-term outlook, supported by a robust backlog of over $120 million in firm, fully-funded orders and long-term contracts extending to 2027.

Executive Commentary

CEO Lou Maluso expressed confidence in the company’s future, stating, "Despite recent headwinds, I remain confident of our long-term business outlook." He also highlighted the importance of manned aircraft, noting, "Drones will only aid manned aircraft... They don’t have a human brain."

Risks and Challenges

• Extended lead times for raw materials, ranging from 6 to 18 months.
• Ongoing cost-cutting measures, including workforce reductions.
• Pressure from declining sales and profitability.
• Dependence on defense spending and government contracts.
• Potential challenges in converting backlog into revenue.

Q&A

During the earnings call, analysts questioned the company’s credit facility maturity in December and potential capital raises. Discussions also covered backlog conversion rates and the continued relevance of manned aircraft in the defense sector.

Full transcript - Air Industries Group (AIRI) Q2 2025:

Joe, Conference Call Moderator, Air Industries Group: Hello, and welcome to the Air Industries Group Second Quarter of twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press 0 on your telephone keypad. As a reminder, this conference is being recorded.

This call may contain forward looking statements as defined in section 27 a of the Securities Act of 1933 as amended, including statements regarding, among other things, the company’s business strategy and growth strategy. Expressions which identify forward looking statements speak only as of the date this statement is made. These forward looking statements are based largely on our company’s expectations and are subject to a number of risks and uncertainties, some of which are beyond our control and cannot be predicted or quantified. These future developments and actual results could differ materially from those set forth in, contemplated by or underlying the forward looking statements. In light of these risks and uncertainties, there can be no assurance that the forward looking information will prove to be accurate.

This call does not constitute an offer to purchase any securities nor solicitation of a proxy consent authorization or agent designation with respect to a meeting of the company’s shareholders. At this time, I would now like to turn the call over to Lou Maluso, President and CEO. Please go ahead, sir. Thank you, Joe, and thank you all for joining us today. There is no avoiding the fact that our results for the second quarter and June 2025 were disappointing.

In the second quarter, we faced some headwinds. Delays in customer approvals, extended lead times from subcontractors definitely impacted our results. Combined with a higher noncash stock compensation, we had a net loss for the quarter. Despite this, adjusted EBITDA for the first half remained positive. This resulted from the ability to manage costs.

To further increase profitability, we have implemented cost cutting initiatives, including a workforce reduction that will reduce annual payroll by some $1,000,000 The savings may be a little bit more. Looking to the second half, reflecting the impact of these issues, we have adjusted our outlook. We now expect overall second quarter second half results in 2025 to be lower than the first half. We do believe that the fourth quarter will be the strongest quarter of the year. In spite of recent headwinds, I remain confident of our long term business outlook.

In 2025, we successfully completed an at the market ATM offering, raising nearly $4,000,000 in gross proceeds from the sale of $1,300,000.0653 common shares, further strengthening our balance sheet. Our backlog, reflecting sustained demand for our products, grew to record levels in the 2025. The long lead times for raw materials, the long time necessary to manufacture our highly complex sophisticated products means the sales from our extended backlog will begin to be realized in fiscal twenty twenty six and in future years. An example highlights this. We recently announced a contract worth over 5,000,000 for landing gear components for the b 52 aircraft.

We have ordered the required raw material and expect it will arrive in mid twenty twenty six. We anticipate making the first delivery late in the 2026, but the overwhelming percentage of sales and deliveries will be in 2027. That means a July 2025 order yield deliveries in 2027, a year and a half or up to two years later. Since returning from the Paris Air Show in late June, our business development team has been extremely busy following up on new opportunities. We conducted several dozen meetings during the show encompassing both customers, prospects and suppliers.

The meetings were fruitful in terms of assessing the current business climate, future opportunities and engaging with our supply chain. With that said, I’d like to turn the call over to Scott, who will discuss the financial results in more detail and come back for some closing comments. Scott? Thank you, Lou, and good afternoon, everyone. As Lou mentioned, our results for the second quarter and the 2025 fell short.

Let me discuss the results in some more detail. Consolidated net sales for the second quarter ended 06/30/2025, were $12,700,000 This represents a decrease of about $800,000 or 6.7% for the same quarter in 2024. Gross profit was $2,000,000 which represents 16% of sales for Q2. Though inflation has moderated, prices are still increasing. We have been very successful in controlling our operating expenses.

Adjusting for noncash stock compensation expense, our consolidated operating costs were slightly lower this year as compared to 2024. Operating income of $8,000 in the 2025 as compared to operating income of $752,000 in 2024. We had a net loss of 4 and $22,000 or $0.11 per share during 2025 as compared to net income of $298,000 or $09 per share in 2024. For the six months ended 06/30/2025, our adjusted EBITDA was $1,469,000 a decrease of $306,000 or 17% from the prior year six month period. Let me quickly highlight some items on our balance sheet.

Our total debt has declined by a little more than $1,000,000 Inventory has increased by about $1,300,000 Accounts receivable has decreased by close to $2,000,000 and accounts payable and accrued expenses have increased by approximately $1,200,000 As Lou mentioned earlier, we completed our at the market offering in early July, raising nearly $4,000,000 selling over 1,000,000 shares at an average price of about $3.95 per share. This enhances our balance sheet, increasing our liquidity and reducing our net debt as of July by nearly $4,000,000 And with that, I will return the call over to Lou. Thanks, Scott. 2025 has been an interesting year for aerospace. The administration has unveiled plans to fund the f 47, which is a sixth generation fighter awarded to Boeing.

There’s talk of the e two d crossing the lines and being adopted by the air force. There’s a proposal on the table for a new f dash a dash x x, which is a sixth generation fighter for the Navy, which would replace the F-eighteen and would be in support of the F-thirty five C. As support providers to these big OEMs and government direct, we are excite we are in exciting times in this business. I would like to highlight some of the recent accomplishments that Air Industries has had. We’ve been on a mission to recover from a decreased revenue stream with certain legacy customers By reinforcing relationships with our other existing customers, we have made a big push to add new clients, new aircraft platforms, and expand into new markets.

There’s strong and tangible evidence that we’ve succeeded at doing some of that. We received the largest long term agreement in our history from an established customers. Northrop Grumman, a longtime client, honored us with their Procedure Supplier Excellence Award. We have greatly increased our content on the CH 53 k helicopter, which is a new and fast growing and important platform. And we have just received, we have received more than $10,000,000 in new orders from new and existing clients for the aftermarket product.

This is a strong validation of our success in further penetrating into this aftermarket. Despite the challenges of past several quarters, I remain fully convinced that we will continuously improve and will monetize our large backlog. So with that, I’d like to open up the call for the Q and A portion, see if you have any questions. You may press star two if you would like to remove your question from the queue. For participants, you may speak to a public, and whether it’s necessary to pick up your handset before pressing the star keys.

One moment, please, while we poll for questions. Our first question comes from the line of Igor Novo Nordisk with Lions Capital. Please proceed.

Igor Novo Nordisk, Analyst, Lions Capital: Hello, and thank you for taking my question. I’m a new investor in your company. So I’m

Joe, Conference Call Moderator, Air Industries Group: Good afternoon.

Igor Novo Nordisk, Analyst, Lions Capital: Working with. Forgive me if I’m asking the questions, which are maybe a little bit basic, but I have quite a few. So maybe I’ll ask a couple, and there’s nobody else, and I’ll ask a few more. My first one is about your about your credit facility. So your credit facility is maturing in December.

And right now, you, I think, violated some of the covenants, which don’t seem to be all that critical because your EBITDA is still possible. Could you talk a little bit how you guys because you’re probably not gonna have a very good year this year, a lot of quarters before to the next year. So for a little bit of you kinda need to, you know, survive with your, you know, liquidity. How’s your conversation with the current lender? Do you think that will be extended or you’re talking to some other lenders?

Could you just talk a little bit about that?

Joe, Conference Call Moderator, Air Industries Group: So thank you for your question, Igor. We are in conversations with our current lender as we speak. They have been very supportive of us over the past several years, and I am confident that we will come to some sort of extension with them. I couldn’t possibly say on what terms that would be, but I do not believe we will have an issue. Further, as I indicated before, we did recently, you know, successfully raised about $4,000,000.

So that only enhances and adds to our liquidity for the remainder of the year.

Igor Novo Nordisk, Analyst, Lions Capital: Okay. Once you touched upon the raise, was it an opportunistic raise? Because if my math serves me correctly, in July, it was on a day when your job stock jumped for a short period of time above $4 and then just because of, I guess, a new order, or this is something you were planning to do? Or that was just a good opportunity to raise knowing that your quarter is not going to be particularly strong?

Joe, Conference Call Moderator, Air Industries Group: So back in December ’24, we started this process of we filed an s three that was effective in December 2024, and we started raising money then. We raised some money at the end of the year, as I said. And then in the first quarter through March, we had raised some additional funds, and then we had restarted this process, I wanna say, in late June prior to the market doing that in early July. So it was something that was already out there in the world. And at the time that the stock went took off that way, it just happened to work out.

Igor Novo Nordisk, Analyst, Lions Capital: I know it’s a little bit early to talk about this, but even you’re assuming everything’s gonna be okay past December with your lender. Do you think as things look at out at through the end of the year, you would need another capital raise, or you think you’re okay for now?

Joe, Conference Call Moderator, Air Industries Group: I would say that we are probably okay for now. I don’t have anything currently in the works for that, but, you know, we’ll see what time brings.

Igor Novo Nordisk, Analyst, Lions Capital: Okay. So let’s let’s if you don’t mind, just a couple of more questions, and I’ll get to the back of the queue. European sales, you don’t really have any significant European customers, But now the situation has changed, especially with the new tariff deal between where Europe is almost obligated to buy more from The US and also very increased European defense spending. I think this is where the biggest increase is happening. Do you anticipate getting some of the European sales, or this is not something you’re actively working on?

Joe, Conference Call Moderator, Air Industries Group: Well, you know, Igor, I think some of it we we sell not not directly. Well, in some cases, we do, but it’s not a big portion of our business. But a lot of the spares and other things like that that we sell directly to the OEMs make their way over to, you know, globally. So it’s not just The US based. If our if our OEMs will have greater content for spares, certainly.

If the government otherwise, we’re selling to the U. S. Government predominantly. So it might have an impact, but I think it’s a little bit too early to say. As far as tariffs, although it does not affect us directly, I mean, all in all, we have one product in our entire company that we buy material from overseas that are, you know, that is tariff prone, and and that’s direct pass through to our clients as per our contract.

Other than that, the tariffs will probably affect the OEM, you know, the big the the Pratts and the, of course, sleeves and so forth in that. But we we’ve got some protection in in in that in that game. So we’re hoping that our sales will increase because of what’s happening, but it’s too early to tell.

Igor Novo Nordisk, Analyst, Lions Capital: Okay. So you anticipated my last question. I spoke specifically about the input of materials, especially now with steel tariffs and other raw material tariffs and things like that. Is do you have a lot of contract protection? In other words, say that built is a price margin already built in at the cost of the components as they’ll go?

So as

Joe, Conference Call Moderator, Air Industries Group: so as Lou was saying, there’s only one product that we manufacture that has material that comes from a foreign source, and that contract specifically has a price protection clause in it that is because of the material increases by more than 5%. Contractually, they are bound to pay the difference. So we have complete price protection basically built into that contract. That is the only contract that has foreign material in it.

Igor Novo Nordisk, Analyst, Lions Capital: Oh, I understand that. But I’m yeah. If I just may clarify, obviously, you buy the rest from US manufacturers, but US manufacturers eventually are gonna have to raise the price of their component. So I’m asking if they raise the price of their component, would you be forced to swallow the extra cost? Or that’s something we should have protected?

Joe, Conference Call Moderator, Air Industries Group: In some cases, probably half the cases, the product is supplied to us by the OEM. So if they raise the prices, it’s on them. In other cases, our clients have been very willing to work with us if it’s outside of the scope of the contract. So and anything that we can put price protection in at the at the early stage, we do.

Igor Novo Nordisk, Analyst, Lions Capital: Okay. So that’s I think that’s a good answer. Thank you very much for being patient with my questions, and I’ll get back in the queue with somebody else.

Joe, Conference Call Moderator, Air Industries Group: Thank you, sir. Thank you. Thank you. The next question comes from the line of Ivan Barenbaum, private investor. Please proceed.

Good afternoon. Thank you for taking my question. Just just to clarify why sales are going down. I’m not clear. Is it if you could just clarify some more and hopefully sales will start increasing.

Thank you. Thank you for the question. Sales going down right now is a timing issue. You know, we’ve had we’ve got some customers approvals that just did not materialize timely enough to make to make the quarter and and a few other things We got some first articles that have not come back on time.

Our backlog is still very healthy. It’s the largest backlog we’ve ever had. Materials that we thought would take six months, nine months have taken a year, year and a half. So there’s a lag in there in in what’s what’s going on in the industry. Thank you very much.

Thank you. And the next question comes from the line of Lawrence Katz, Riding and Buster. Please proceed. Yes. I just wondered, given that the sales have been essentially flat or even going down for years now, I wonder if you considered selling the company to maybe a larger come to a larger firm, and maybe they could make things move better.

That’s a great question, Lawrence. Sales have you know, in our in our Connecticut operations, we have grown three years in a row to the tune of about 60%, 5040% year on after year. In New York operations, we had a few years back, we had a big client move some work offshore to Poland to be exact, and we’ve made that work back up. So although it looks like sales have remained stagnant, we kind of built up from sea level, and we’ve got and we’re moving up. But so we have seen some growth.

It certainly has not come at the rate that I think you’re happy with. I can judging by the question, but we have seen some growth. And then to answer the second portion of your of your question as to why we haven’t sold, we’re we’re a public company. So if an opportunity should arise, we’re always either gonna buy or sell. That’s that’s what a public company does, and it needs to do what’s right for their shareholders.

So that I hope that answers your question, Lawrence. Well, it yes. I I guess it is. I’ve been a shareholder for a very long time, and it’s and it just seems to me like it’s always a matter of the check is in the mail, but never gets here. We’re now at 12,000,000, and I don’t think we’ve been lower than that, that I can remember in quarters for a very long time.

We have all of we’re always told about the great backlog and all, but it never seems to result in in better numbers for the quarter. So I just wondered if maybe somebody else could could take the the, apparently ostensible expertise that’s there and make things work better. So that was all I wondered. I can’t answer that question. But I as I said before, if an opportunity arises, I’m sure that our shareholders and our board would approve it.

So Okay. Okay. At least or considerate. Would consider it. Right.

That’s the And the next question comes again from the line of Igor Novavarovatov with Myers Capital. So

Igor Novo Nordisk, Analyst, Lions Capital: my next question is about your backlog. Obviously, you have a record backlog, and I think that’s a lot a lot of investors are potentially excited by the future of the company. Could you just tell me historically how much of the backlog is actually historically converted into the actual order? My understanding is order time, Philly, at least, all cancelable. Right?

Because that’s mostly, like, the government orders. But, like, what is your historical sort of conversion percentage of a backlog to the order?

Joe, Conference Call Moderator, Air Industries Group: We put we we the backlog that we put out there is two parts. It is our firm backlog and our full backlog. Our firm backlog of it indicates an amount that can not really be canceled. It means that we have a firm order against it. And if it were to be canceled, there would be a termination liability.

Typically, once an order is placed, and it gets into the full backlog, meaning that it’s just an order. Right? As time progresses, we get releases against it, which then turn into sales. Obviously, those these orders are long term agreements, long term orders. So there is time over the course of several years where there would be releases against it.

So our our firm fully funded backlog right now, I think, Scott, correct me if I’m wrong, sits at about a 120 plus million dollars. That is correct statement. Those are orders that have are fully funded and released on it over the next eighteen months. 18 to 24. Yes.

18 to 24. I’m sorry. And then so that’s kind of what we our guiding light, that’s kind of what we go by. But order awards, you know, that that that shed out, you know, go out six, seven years, which nobody knows what’s gonna happen in seven years, but this is what we quoted and this is what they’ve committed to. But not against a full funded, you know, our next step of 02/1970.

Igor Novo Nordisk, Analyst, Lions Capital: Okay. And my final question is about the overall defense spending on The US side. So there was several months ago, there was a lot concern especially with Elon Musk being in a government school said that all the planes and helicopters are obsolete and everything is gonna be drones. I guess now that he’s no longer there, what’s the overall mood of using the aviation and traditional planes and helicopters or how is it looking over the years from a sort of self philosophy point of view and direction point of view of the defense department?

Joe, Conference Call Moderator, Air Industries Group: Although I’m not a mind reader, I can tell you that drones will only aid manned aircraft, will only be in a in a in a accordance with. I don’t see a manned aircraft going anywhere, at least in my in my lifetime. They they are a great product, and they’re inexpensive to build, and they’re expendable, and they have a lot of pluses to them. But they don’t have a human brain, and that’s not gonna go away anytime soon. So they would not be spending the money on the f 47, the new, the new aircraft that that was just awarded to, Boeing.

They would not be putting that kind of dollars into the budget, if if they thought that drones were gonna solve the problems in the next three years. So I I remain confident that that human aircraft will be around for a long time.

Igor Novo Nordisk, Analyst, Lions Capital: Alright. Thank you. I don’t have any more questions.

Joe, Conference Call Moderator, Air Industries Group: Thank you for your questions. We appreciate it. And there are no further questions at this time. So I’d like to turn the call back to Luno Ruta for closing remarks. Thank you, Jeff.

Thank you all for taking the time to be on the call today and for your question and your interest in the Air Industries Group, and we look forward to talking to you on the next call. Thanks, Joe. I think you can disconnect. Thank you. This concludes today’s conference.

You may disconnect your lines at this time, And thank you for your participation.

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