Air Industries Group's Q3 2025: Contradictions Emerge on Backlog Conversion, Debt Strategy, and Supply Chain Sourcing

Date of Call: None provided

Financials Results

• Revenue: $10.3M, improvement vs Q3 2024 and vs the first two quarters of 2025
• EPS: Net loss of $0.01 per share (loss of $44K), improved from a loss of $404K in Q3 2024
• Gross Margin: 22.3% of sales ($2.3M gross profit), improved versus prior quarters and Q3 2024 due to cost-reduction initiatives

Business Commentary:

• Improved Financial Performance:
• Air Industries Group reported net sales of $10.3 million for Q3 2025, with a gross profit of $2.3 million or 22.3% of sales.

• This improvement reflects the benefits of cost reduction initiatives implemented earlier in the year.

• Reduced Net Loss:

• The company's net loss for the quarter was $44,000 or $0.01 per share, compared to a loss of $404,000 in Q3 2024.
• The reduction in net loss is attributed to the company's focus on operational discipline and profitability.

• Increased Adjusted EBITDA:
• Adjusted EBITDA for the 9 months ended September 30 was $2.7 million, up nearly 5% from the prior year.

• This increase is a result of the company's cost reduction efforts and improved operational efficiency.

• Balance Sheet and Debt Management:

• Total debt increased by approximately $2.4 million, with inventories increasing by $5.6 million to support future deliveries.
• The company is actively engaged in discussions with lenders regarding potential refinancing or extension of debt obligations to manage its financial liabilities.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted "measurable improvements in profitability and operational discipline," reporting net sales of $10.3M, gross profit of $2.3M (22.3%), operating income of $316K and a narrowed net loss of $44K versus $404K in Q3 2024; they stated confidence in the strength of the core business and backlog.

Contradiction Point 1

Backlog Conversion and Sales Trends

It involves the conversion rate of backlog to orders and the reasons behind fluctuations in sales, which are crucial for understanding the company's sales pipeline and performance.

N/A - N/A (The call had no specific questions asked by participants)

20251117-2025 Q3: Sales going down right now is a timing issue. We've had some customer approvals that just did not materialize timely enough to make the quarter, and a few other things of nature. - Luciano Melluzzo(CEO)

Why are sales declining? - Ethan Berenbaum (Private Investor)

2025Q2: Sales going down right now is a timing issue. We've had some customer approvals that just did not materialize timely enough to make the quarter, and a few other things of nature. Our backlog is still very healthy. It's the largest backlog we've ever had. - Luciano Melluzzo(CEO)

Contradiction Point 2

Debt Conversations and Capital Raise Strategy

It involves the company's financial strategy, specifically the negotiations with lenders and the need for further capital raises, which are critical for the company's financial health and investor confidence.

N/A - N/A (The call had no specific questions asked by participants)

20251117-2025 Q3: We are in conversations with our current lender as we speak. They have been very supportive of us over the past several years. I am confident that we will come to some sort of extension with them. - Scott Glassman(CFO)

Do you plan to raise capital by the end of the year? - Igor Novogratziv (Alaris Capital)

2025Q2: I would say that we are probably okay for now. I don't have anything currently in the works for that. But, we'll see what time brings. - Scott Glassman(CFO)

Contradiction Point 3

Customer Hesitations Due to Economic Issues

It involves the company's assessment of customer behavior in light of economic conditions, which could impact future sales and revenue projections.

N/A - N/A (The call had no specific questions asked by participants)

20251117-2025 Q3: Our programs are relatively insulated. - Lou Melluzzo(CEO)

Are customers hesitant due to recent economic issues? - Howard Halpern (Taglich Brothers)

2025Q1: The CH-53K and E-2D platforms are on track, and the F-35 may face some future pressures but remains a focus for growing our business. - Lou Melluzzo(CEO)

Contradiction Point 4

Material Availability and Lead Times

It directly impacts expectations regarding the production timeline and delivery capabilities, potentially influencing company revenue and investor expectations.

N/A - N/A (The call had no specific questions asked by participants)

20251117-2025 Q3: Materials are accessible now. The company has increased material purchases to stay ahead. - Lou Melluzzo(CEO)

Was Q1's revenue decline primarily due to long lead times, or were other factors involved? Can you elaborate on Q1 and discuss Q2 trends so far? - Howard Halpern (Taglich Brothers)

2025Q1: Longer lead times were noted, but materials are accessible now. - Lou Melluzzo(CEO)

Contradiction Point 5

Supply Chain and Raw Material Sourcing

It highlights potential inconsistencies in Air Industries Group's approach to sourcing raw materials, impacting supply chain resilience and operational efficiency.

Can you clarify the guidance for Q4 revenue and provide details on the key drivers behind the expected growth? - N/A

20251117-2025 Q3: On all the military programs, there's an EDAC to make sure that the products are sourced out of American soil, American mines. - Lou Melluzzo(CEO)

Do any raw materials in the supply chain originate from China, particularly rare earth elements? - Louie Ragusa (Hudson Research Group)

2024Q4: We have one product that is a commercial product that we do piggyback off the OEM's contract, and the OEMs has chosen China to be a supplier. - Lou Melluzzo(CEO)