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AIR INDUSTRIES GROUP (AIRI)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 net sales were $12.135M, down 13.7% YoY, yet gross margin expanded 320 bps to 16.8% on efficiency gains; Adjusted EBITDA rose 59% YoY to $0.576M .
  • Results missed Wall Street consensus: revenue $12.135M vs $14.0M* and EPS -$0.27 vs -$0.04*, reflecting timing/long lead times and elevated non-cash stock comp .
  • Management reaffirmed that FY 2025 results will exceed FY 2024; funded backlog reached a record ~$120M and TTM book-to-bill was 1.34x, supporting forward visibility .
  • Operational catalysts: margin improvement despite lower sales, debt reduced ~$1.6M since year-end, and raw materials flowing more steadily though lead times remain 9–15 months, positioning for improved throughput .

What Went Well and What Went Wrong

What Went Well

  • Gross margin expanded to 16.8% (+320 bps YoY) on improved operating efficiency despite revenue decline; Adjusted EBITDA increased to $0.576M (+59% YoY) .
  • Commercial momentum and backlog: TTM book-to-bill of 1.34x (above 1.20x industry standard); funded backlog increased by $2.7M to ~$120M; total backlog >$0.25B .
  • Balance sheet improvement: total debt reduced by ~$1.6M since 12/31/24; AR down >$2.0M; AP+accrued down ~$0.55M .

What Went Wrong

  • Top-line pressure: net sales fell 13.7% YoY to $12.135M, missing consensus; long material lead times pushed shipments out .
  • Higher OpEx from non-cash stock comp: operating expenses rose $0.615M YoY, with $0.412M from stock compensation, increasing operating loss to $(0.746)M .
  • EPS below expectations: reported -$0.27 vs -$0.04* consensus, driven by lower sales and elevated non-cash costs .

Financial Results

Quarterly Trend (oldest → newest)

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$12.555 $14.900 $12.135
Gross Profit ($USD Millions)$1.941 $2.400 $2.034
Gross Margin (%)15.5% 16.3% 16.8%
Operating Income (Loss) ($USD Millions)$0.067 $(0.111) $(0.746)
Net Income (Loss) ($USD Millions)$(0.404) $(0.554) $(0.988)
Adjusted EBITDA ($USD Millions)$0.845 N/A$0.576

Q1 2025 vs Prior Year (YoY)

MetricQ1 2024Q1 2025YoY Change
Revenue ($USD Millions)$14.061 $12.135 -13.7%
Gross Profit ($USD Millions)$1.906 $2.034 +6.7%
Gross Margin (%)13.6% 16.8% +320 bps
Operating Income (Loss) ($USD Millions)$(0.259) $(0.746) n/m
Net Income (Loss) ($USD Millions)$(0.706) $(0.988) -$0.282M
Adjusted EBITDA ($USD Millions)$0.362 $0.576 +$0.214M

EPS vs Estimates (Q1 2025)

MetricQ1 2025 ActualQ1 2025 Consensus*Surprise
Primary EPS ($)-$0.27 -$0.04*-$0.23
Revenue ($USD Millions)$12.135 $14.000*-$1.865M

Values retrieved from S&P Global.*

KPIs

KPIQ3 2024Q4 2024Q1 2025Commentary
Book-to-Bill (TTM)~1.40x 1.29x 1.34x Above 1.20x industry standard
Funded Backlog ($USD Millions)>$105 ~$118 ~$120 Record levels
Total Backlog>$0.25B >$0.25B >$0.25B Sustained strength
Total Debt Change (vs 12/31/24)——Reduced by ~$1.6M Deleveraging
AR Change (vs 12/31/24)——Decreased by >$2.0M Working capital improvement

Segment breakdown: Company does not provide segment reporting in Q1 materials .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
FY Outlook vs 2024FY 2025Expect improvement vs FY 2024 (directional) Reaffirm FY 2025 will exceed FY 2024 (directional) Maintained

Note: No quantitative ranges (revenue/EPS/EBITDA/margins) were provided in Q1 2025 materials .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
Supply chain lead timesQ3: “predictability… remains difficult”; backlog growing . Q4: raw materials mostly domestic; concerns about tariffs; long lead times .Lead times remain 9–15 months; raw materials flowing more steadily; meeting customer cadence .Improving material flow; long lead-time persists.
Tariffs/macroQ4: tariffs risk mostly mitigated (price protection on one commercial item); defense budget re-prioritization not expected to materially harm programs .Impact of tariffs expected to be muted; defense “surge” budget unlikely to materially change AIRI’s exposure .Stable/muted impact.
Product/program performanceQ3: execution driving margin gains . Q4: CH-53K in full-rate production; E-2D core platform .Continued E-2D shipments; F-35 may see quantity pressure but content expansion opportunity; attending Paris Air Show to drive new customers .Focused growth on core platforms; customer expansion.
Backlog & book-to-billQ3: TTM ~1.40x; funded backlog >$105M . Q4: funded ~$118M; total >$0.25B; TTM 1.29x .TTM 1.34x; funded backlog ~$120M; total >$0.25B .Strengthening; record levels.
Operational efficiency & marginsQ3: GM 15.5% (+550 bps YoY) . Q4: GM 16.3% .GM 16.8%; higher than full-year 2024 GM .Upward margin trajectory.
Capex & facilitiesQ4: two large machines installed in CT; solar; 2025 capex likely lower excluding commitments .No new capex specifics in Q1 call.Facilities upgrades near completion; capex discipline.
Balance sheet & covenantsQ4: in compliance; debt increased due to solar/revolver .Debt reduced ~$1.6M; still in covenant compliance .Improving leverage; compliant.

Management Commentary

  • “Gross margin on sales increased by 320 basis points to 16.8%, demonstrating the results of our increased focus on operating efficiency.” — CEO Lou Melluzzo .
  • “Our Book-to-Bill ratio… was 1.34 to 1.00… above… 1.20 to 1.00 and nearly a 20% improvement from the prior year.” — CEO Lou Melluzzo .
  • “Absent [non-cash stock compensation], the [OpEx] increase would have been slightly above 9%… net loss of $988,000 or $0.27 a share.” — CFO Scott Glassman .
  • “Tariffs will not affect the one item we import as we have price protection… we reaffirm our belief that full-year 2025 results will exceed those of 2024.” — CEO Lou Melluzzo .
  • “Our funded backlog supported by firm customer orders is at a record $120 million… total backlog… more than $0.25 billion.” — CEO Lou Melluzzo .

Q&A Highlights

  • Drivers of Q1 revenue softness: timing of materials ordered a year ago and extended lead times; nevertheless, AIRI is meeting delivery cadence for key customers .
  • Platform outlook: E‑2D shipments on schedule; CH‑53K remains strong; F‑35 may face unit pressure but AIRI aims to increase content per aircraft .
  • Stock-based compensation: elevated in Q1; expense “likely lower in future quarters,” clarifying OpEx trajectory .
  • Business development: Paris Air Show meetings scheduled with large overseas manufacturers, including electric aviation initiatives to broaden customer base .
  • Balance sheet: continued covenant compliance; debt reduction and working capital improvements since year-end .

Estimates Context

  • Coverage is thin (only 1 estimate), but AIRI missed consensus on both revenue and EPS: $12.135M actual vs $14.0M*, and -$0.27 actual vs -$0.04* .
  • Given improving margins and backlog strength alongside long material lead times, estimates may need to temper near-term revenue while baking in margin gains and lower non-cash OpEx in subsequent quarters .

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Margin resilience: AIRI expanded gross margin to 16.8% despite a 13.7% YoY sales decline, underpinning earnings power as throughput normalizes .
  • Backlog supports visibility: TTM book-to-bill of 1.34x and funded backlog ~$120M signal multi-quarter delivery runway; total backlog >$0.25B .
  • Near-term headwind: extended material lead times (9–15 months) and Q1’s elevated stock comp drove the miss vs consensus; watch for lower non-cash OpEx in coming quarters .
  • Balance sheet trending better: ~$1.6M debt reduction, AR down >$2.0M, AP+accrued down ~$0.55M from year-end; covenant compliance maintained .
  • Program mix: E‑2D remains a stable core platform; CH‑53K in full-rate production; potential to expand F‑35 content offsets possible unit pressure .
  • FY25 outlook: management reaffirmed FY25 to exceed FY24—no quantitative ranges, but trajectory supported by backlog/margin improvements .
  • Trading setup: Miss vs estimates with improving fundamentals can create dislocations; monitor execution on material flow and OpEx normalization, and any new orders from Paris Air Show as potential catalysts .