Executive Summary

Q2 2025 revenue of $12.66M declined 6.7% YoY but beat S&P Global consensus of $12.0M; EPS of ($0.11) beat consensus of ($0.15), while EBITDA (SPGI basis) missed consensus ($0.57M actual vs $0.76M est). Management cited order delays and extended subcontractor lead times, plus higher non-cash stock comp, driving a net loss . Estimates from S&P Global marked with an asterisk; see disclaimer.
Gross margin compressed to 16.0% (–350 bps YoY) and operating income fell to $8K from $752K YoY; net swung to a loss of $0.42M from a $0.30M profit in Q2’24 .
Outlook was reset: management now expects 2H25 to be lower than 1H25, with Q4 the strongest quarter; workforce reduction to lower annual payroll by ~$1.0M and July ATM raised nearly $4.0M to strengthen the balance sheet .
Stock reaction catalysts: the 2H25 cut (near-term negative), improving adjusted EBITDA sequentially, record backlog commentary, and incremental aftermarket wins could support medium-term sentiment .

What Went Well and What Went Wrong

What Went Well

Sequential improvement in Adjusted EBITDA to $0.893M from $0.576M in Q1 on cost control despite softer sales; management highlighted cost actions underway .
Balance sheet fortification via ATM (~$4.0M gross proceeds) and record backlog backdrop; management reiterated long-term confidence .
Aftermarket traction evidenced by $5.4M B-52 landing gear contract in July and additional $6.9M aftermarket awards in early September (post-quarter), aligning with the strategic push into MRO spares .

What Went Wrong

Revenue and profitability deterioration YoY: net sales down 6.7%, gross margin down 350 bps to 16.0%, operating income fell to $8K, and net loss of $0.42M vs prior-year profit .
Operational headwinds: delayed customer orders and extended subcontractor lead times; non-cash stock compensation inflated OpEx (up 6.8% YoY in Q2; larger step-up was evident in Q1) .
Guidance reset: 2H25 guided lower than 1H25, offset partially by cost reductions and expectation that Q4 will be the strongest quarter .

Financial Results

Metric	Q2 2024	Q1 2025	Q2 2025
Revenue ($M)	$13.57	$12.14	$12.66
Gross Profit ($M)	$2.64	$2.03	$2.03
Gross Margin (%)	19.5%	16.8%	16.0%
Operating Expenses ($M)	$1.89	$2.78	$2.02
Operating Income ($M)	$0.75	($0.75)	$0.01
Net Income (Loss) ($M)	$0.30	($0.99)	($0.42)
Diluted EPS ($)	$0.09	($0.27)	($0.11)
Adjusted EBITDA (Non-GAAP, $M)	$1.41	$0.58	$0.89

Vs Estimates (S&P Global):

Metric	Q2 2025 Consensus	Q2 2025 Actual
Revenue ($M)	$12.00*	$12.66
Primary EPS ($)	($0.15)*	($0.11)
EBITDA ($M)	$0.76*	$0.57*
Estimates Count (EPS, Rev)	1 / 1*	—

Values marked with * are from S&P Global and lack document citations; “Values retrieved from S&P Global.”

Notes:

EBITDA in the estimates/actuals table reflects S&P Global’s EBITDA basis; company-reported non-GAAP Adjusted EBITDA for Q2 was $0.893M .

Segment breakdown: Not disclosed; AIRI reports consolidated results .

KPIs and Operating Metrics:

KPI	Q4 2024 (ref)	Q1 2025	Q2 2025
Book-to-Bill (TTM)	1.29x	1.34x	— (not updated)
Funded Backlog	~$118–$120M (record levels)	$120M (record)	“Record levels” (no figure)
Total Backlog	>$0.25B	>$0.25B	“Record levels” (no figure)
Cost Actions	—	—	Workforce reduction; ~$1.0M annual payroll savings
Balance Sheet	—	—	ATM raised nearly $4.0M gross in July 2025

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Overall results trajectory	FY 2025	Q1 call/PR: “reaffirm our belief that full-year 2025 results will exceed 2024”	2H25 expected lower than 1H25; Q4 expected strongest; no numerical guidance	Lowered near-term run-rate; FY25 directional no longer reaffirmed explicitly
Cost structure	Ongoing	—	Workforce reduction to reduce annual payroll by ~$1.0M	Cost-down actions initiated
Liquidity/capital	2H 2025	—	ATM completed in early July; nearly $4.0M gross proceeds	Balance sheet strengthened

No specific revenue, margin, tax, or segment guidance ranges were provided in Q2 materials .

Earnings Call Themes & Trends

Note: A Q2 2025 earnings call occurred, but transcript was not posted in our corpus; themes below reflect Q4’24 and Q1’25 calls with Q2 PR updates.

Topic	Previous Mentions (Q4 2024, Q1 2025)	Current Period (Q2 2025)	Trend
Backlog/book-to-bill	Record funded backlog (~$118–$120M) and total backlog >$0.25B; TTM book-to-bill 1.29x improving to 1.34x in Q1	“Backlog remains at record levels”; benefits expected in FY2026+	Stable-high backlog; revenue conversion slower-near term
Supply chain lead times	Materials flowing but lead times extended to 9–15 months; meeting delivery expectations	Delays in customer orders and extended subcontractor lead times impacted Q2 results	Persistent constraint; still a profit headwind
Defense budget/tariffs	Tariff impact muted; price protection on one China-sourced item; defense spend mix seen as supportive for key programs	No update in Q2 PR; reaffirmed long-term demand backdrop	Neutral-supportive
Aftermarket expansion	Strategic focus; strong new contract flow late 2024/early 2025	$5.4M B-52 aftermarket order (July) and $6.9M aftermarket awards (Sept) post-Q2	Momentum building in MRO aftermarket
Operations efficiency/Capex	Efficiency improvements; new machines in CT; capex moderating after installs	Cost actions (workforce reduction) to streamline costs	Cost structure tightening
Non-cash stock comp	Drove OpEx higher and losses in Q1	Continued pressure contributing to Q2 loss	Easing later in year per Q1 Q&A; still elevated in Q2

Management Commentary

“The second quarter of 2025 presented challenges, primarily delays in customer orders and extended lead times from subcontractors… combined with higher non-cash stock compensation expenses, [which] contributed to a net loss for the quarter.” – CEO Lou Melluzzo .
“We… now expect overall second-half results in 2025 to be lower than the first half, with our fourth quarter expected to be the strongest by far.” – CEO Lou Melluzzo .
“We have implemented cost-saving initiatives, including a workforce reduction that should reduce annual payroll by approximately $1.0 million.” – CEO Lou Melluzzo .
“In early July 2025, we… raised nearly $4.0 million in gross proceeds [via ATM]… Our backlog remains at record levels… benefits… will be realized in fiscal 2026 and beyond.” – CEO Lou Melluzzo .

Q&A Highlights

Q2 2025 earnings call transcript was not available in our corpus; key points above reflect press release commentary .
For context from Q1 2025 Q&A: management noted materially longer raw material lead times (9–15 months) but meeting customer delivery cadence; programs (E-2D, CH-53K) seen as relatively insulated; stock-comp expense expected to be lower in future quarters .
Balance sheet and covenant compliance were affirmed in Q1; inventory/AR managed closely .

Estimates Context

Q2 2025 results vs S&P Global consensus: revenue beat ($12.66M actual vs $12.00M est), EPS beat (–$0.11 vs –$0.15), EBITDA miss ($0.57M vs $0.76M). Coverage was limited (one estimate for revenue and EPS). Values marked with * from S&P Global .
Values marked with * are from S&P Global and lack document citations; “Values retrieved from S&P Global.”

Metric	Q2 2025 Consensus	Q2 2025 Actual
Revenue ($M)	$12.00*	$12.66
Primary EPS ($)	($0.15)*	($0.11)
EBITDA ($M)	$0.76*	$0.57*

Implications for estimates:

Top-line likely sees modest upward revisions on the beat, but management’s 2H cut may cap FY25 revenue bridges .
EPS could see slight upward tweaks for Q2 actuals; however, lower 2H run-rate and cost dynamics (non-cash stock comp) argue for cautious FY25 EPS recalibration .
Given constrained EBITDA vs consensus and weaker 2H outlook, FY25 EBITDA estimates may drift lower near term.

Key Takeaways for Investors

Near-term reset: Management lowered 2H25 run-rate expectations, a likely negative trading catalyst; Q4 expected to be strongest but below prior run-rate narrative .
Mixed print: Revenue/EPS beats vs consensus offset by EBITDA shortfall (SPGI basis) and YoY margin compression; adjusted EBITDA improved sequentially .
Execution focus: Workforce reduction (~$1.0M annualized savings) and operating efficiency remain pivotal to protect margins amid supply-chain elongation .
Balance sheet strengthened: ~$4.0M ATM raise provides flexibility; compliance with lending covenants affirmed on Q1 call .
Backlog supports medium-term thesis: record backlog with incremental aftermarket contracts (B-52; fixed-wing/rotorcraft MRO) underpins FY26+ visibility; watch conversion timing .
Monitor cost normalization: Non-cash stock comp weighed on 1H; management suggested easing later, which would support operating leverage if volumes stabilize .
Watch catalysts: Additional aftermarket wins, evidence of supply-chain normalization, and clarity on FY25 exit run-rate into FY26 could be key stock movers .

AIR INDUSTRIES GROUP (AIRI)·Q2 2025 Earnings Summary