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AIR INDUSTRIES GROUP (AIRI)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 revenue was $14.9M, up 11.9% YoY and +18.7% QoQ; gross margin was 16.3% (vs 15.5% in Q3 and 15.96% in Q4 2023). EPS missed by a wide margin due to higher non-cash stock compensation, driving an operating loss of $0.11M and net loss of $0.55M .
  • Full-year 2024 delivered tangible improvement: net sales $55.1M (+7% YoY), gross margin 16.2% (+180 bps YoY), operating income turned positive ($0.46M), and adjusted EBITDA rose to $3.64M (+35%) .
  • Backlog and order momentum are key catalysts: book-to-bill improved to 1.29x; funded backlog approached $118M and total backlog exceeded $250M, supported by major CH‑53K ($33M), E‑2D ($11M), and F‑35 ($4M) awards .
  • Management reiterated confidence in continuing improvements and expects 2025 year-end results to exceed 2024, noting domestic sourcing mitigates tariff risk and commercial-material price protection on one product .

What Went Well and What Went Wrong

What Went Well

  • Sustained margin expansion: Q4 gross margin of 16.3% slightly above Q4 2023, with full-year 2024 gross margin at 16.2% (+180bps YoY). CEO: “We achieved record bookings, grew revenue, expanded gross margins, and returned to positive operating income.”
  • Order flow and backlog strength: Book-to-bill improved to 1.29x; funded backlog rose to nearly $118M and total backlog exceeded $250M—supported by CH‑53K, E‑2D, and F‑35 contracts .
  • Operational execution improvements: Northrop Grumman Supplier Excellence award; CEO highlighted delivery performance and shop-floor efficiency upgrades, including new equipment and solar installation .

What Went Wrong

  • Q4 profitability headwind: Operating loss of $0.11M and net loss of $0.55M driven primarily by higher non-cash stock compensation expense in the quarter, reversing Q4 2023 profitability .
  • Sequential cost pressure: Despite revenue and gross profit gains, higher OpEx (stock comp) compressed quarterly operating results vs prior year .
  • Tariff/macro uncertainty: Management addressed potential tariff and defense budget risks; while mitigated by domestic sourcing, they acknowledged possible input price impacts and reliance on OEM decisions for one commercial-material source .

Financial Results

Quarterly Comparison (Oldest → Newest)

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$13.572 $12.555 $14.900
Gross Profit ($USD Millions)$2.644 $1.941 $2.400
Gross Margin (%)19.5% 15.5% 16.3%
Operating Income ($USD Millions)$0.752 $0.067 -$0.111
Net Income ($USD Millions)$0.298 -$0.404 -$0.554
Diluted EPS ($USD)$0.09 -$0.12 -$0.17*

Values marked with * retrieved from S&P Global.

Q4 YoY Comparison

MetricQ4 2023Q4 2024
Revenue ($USD Millions)$13.469 $14.900
Gross Profit ($USD Millions)$2.200 $2.400
Gross Margin (%)15.96% 16.3%
Operating Income ($USD Millions)$0.587 -$0.111
Net Income ($USD Millions)$0.181 -$0.554
Diluted EPS ($USD)$0.06*-$0.17*

Values marked with * retrieved from S&P Global.

Q4 2024 Actual vs Consensus

MetricConsensusActualSurprise
Revenue ($USD Millions)$14.0*$14.9 $0.9 (+6.4%) — bold beat
EPS ($USD)$0.02*-$0.17*-$0.19 — bold miss

Values marked with * retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales ($USD)FY 2024≥$50.0M target $55.1M (prelim) Raised/Beat vs guidance
Adjusted EBITDA ($USD)FY 2024“Significantly better than 2023” $3.641M vs $2.697M in 2023 Achieved, above 2023
FY Results (qualitative)FY 2025N/A“Year-end 2025 results will exceed 2024” (qualitative) Raised outlook (no numeric range)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
Book-to-bill & backlogFunded backlog just over $100M; book-to-bill >1.20x Funded backlog >$105M; book-to-bill nearly 1.40x Book-to-bill 1.29x; funded backlog almost $118M; total backlog >$250M Robust and rising backlog; book-to-bill remains healthy
Capex & equipmentRetrofitting machines; new CMM; frugal capex Limited disclosureTwo new large machines in CT; solar, roof upgrades; capex likely lower ex pre-committed items Targeted investment to support growth; lower capex after current installs
Supply chainTiming/material flow affects margins Fluctuations from on-boarding and supply chain Tariff risk discussed; domestic sourcing; price-protection on one commercial product Execution improving; tariff risk monitored and mitigated
Defense/commercial programsRotorcraft ramp; Farnborough outreach Strategic focus on portfolio expansion, MRO, outreach CH‑53K ($33M), E‑2D ($11M), F‑35 (~$4M) awards expand platform exposure Strengthening across multiple platforms
Banking & covenantsIn compliance; improved covenants In compliance; expect to remain Remain in compliance Stable financial footing

Management Commentary

  • CEO perspective on 2024 progress: “We achieved record bookings, grew revenue, expanded gross margins, and returned to positive operating income.”
  • Backlog strength and 2025 outlook: “Our funded backlog… reached an all-time high, and total backlog now exceeds $250 million… we believe year-end 2025 results will exceed those of 2024.”
  • Operations upgrade: “The operations are impeccable… duplicate machines across the board… two new large machines being installed in Connecticut… solar-paneled facility, brand new roof.”
  • Macro/tariffs: “Our business is heavily weighed to the military aerospace… required to source most raw materials domestically… one commercial product sourced from China has a price protection clause.”

Q&A Highlights

  • Supply chain and tariffs: Analyst asked about rare earths and China sourcing; management emphasized domestic sourcing for military, price protection for one commercial product, and conversations to reshore materials as needed .
  • Operational efficiency and capex: Management highlighted polished floor operations, new machines, CT facility upgrades; capex expected lower in 2025 beyond pre-committed installs, but will invest if large programs demand capacity .
  • Program starts and margin trajectory: Fewer new starts vs post-COVID period; more mature programs supporting margin improvement over time .
  • Near-term color: Limited specifics on Q1; gross margin dollars in line with internal expectations; results to be reported imminently .

Estimates Context

  • Q4 2024 revenue beat consensus: $14.9M actual vs $14.0M consensus (+6.4%). EPS missed: -$0.17 actual vs $0.02 consensus, driven primarily by higher non-cash stock compensation in OpEx in the quarter .
  • Coverage depth: Consensus was based on one estimate for both revenue and EPS, limiting robustness of external expectations. Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Backlog-driven visibility: Record total backlog >$250M and funded backlog ~$118M support multi-quarter runway; book-to-bill at 1.29x remains above industry benchmark .
  • Margin trajectory improving: Full-year gross margin expanded 180 bps YoY; operational improvements and program maturity should support further margin gains, albeit uneven quarter-to-quarter .
  • Q4 EPS miss was non-cash driven: Elevated stock comp skewed quarterly OpEx; watch future OpEx normalization and mix to gauge earnings power .
  • Platform diversification: New CH‑53K, E‑2D, and F‑35 awards broaden exposure and should aid scale benefits and overhead absorption as deliveries ramp .
  • 2025 outlook constructive: Management expects year-end 2025 to exceed 2024; monitor cadence of deliveries, new equipment ramp in CT, and tariff dynamics .
  • Balance sheet/covenants stable: Company remains in compliance; solar installation and equipment adds support manufacturing efficiencies .
  • Trading lens: Near-term catalysts include backlog conversion pace and any incremental awards; narrative risk tied to tariff headlines and quarterly OpEx volatility .

Values marked with * retrieved from S&P Global.