AirBoss Announces Q2 Results and Continued Strength...AirBoss Announces 2nd Quarter Results and Continued Strength in Its Opportunity Pipeline. NEWMARKET, Ontario, Aug. 04, 2022 (GLOBE NEWSWIRE) -- AirBoss of America Corp. (TSX: BOS)(OTCQX:ABSSF) (the “Company” or “AirBoss”) today announced its second quarter results as it pursues new revenue opportunities through the remainder of 2022. The Company will host a conference call and webcast to discuss the results on August 5th at 9 a.m. ET, the details of which are outlined below. All dollar amounts are shown in thousands of United States dollars ("U.S. $" or "$"), except per share amounts, unless otherwise noted.
Recent Highlights
- Generated EBITDA of $10.46 million;
- Net Debt to EBITDA ratio at June 30, 2022 (“Q2 2022”) was 1.29x;
- Declared a quarterly dividend of C$0.10 per common share; and
- Maintained an opportunity pipeline in excess of $1.5 billion at AirBoss Defense Group..
“Our results for the second quarter of 2022 showed the impacts of challenging market conditions and contract timing, beneficially offset by strong performance within our Rubber Solutions segment supported by an expanded product line-up and enhanced production capabilities,” stated Chris Bitsakakis, President and COO of AirBoss. “The Company continues to pursue strategies to mitigate the impacts of supply chain, input cost inflation, and labor challenges on each of our business segments. AirBoss has proven its ability to successfully deliver against large-scale supply agreements during challenging market conditions, and we believe this skillset combined with our expanded and highly innovative product lineup position us well to secure new sales from our strong pipeline of opportunities.”
“The Rubber Solutions segment continued to optimize production and capitalize on elevated demand in Q2 2022, and this led to significant growth over the corresponding period in 2021. New, specialized products and capabilities we have developed both in-house and through acquisitions have equipped this segment with an expanded portfolio of compounds and better access to our end markets. Our team has strong opportunities to further build our customer base and the profitability within Rubber Solutions.”
“For our AirBoss Defense Group segment, we remain competitively positioned to secure and execute on large-scale sales opportunities, supported by innovative products such as our Blast Gauge System which is focused on ensuring the safety of military personnel and increased military budgets worldwide which are creating opportunities for our traditional defense products like the Husky, Bandolier and CBRN-E equipment,” noted Gren Schoch, Chairman and CEO of AirBoss. “The demand drivers for the products in our ADG portfolio remain strong and our opportunity pipeline across the business continues to sit at record levels.”
| | Three-months ended June 30 | Six-months ended June 30 |
In thousands of US dollars, except share data
| | |
| (unaudited) | 2022 | 2021 | | 2022 | | 2021 | |
| Financial results: | | | | |
| Net sales | 110,547 | 118,449 | | 255,020 | | 225,778 | |
| Profit | 2,492 | 18,320 | | 12,068 | | 24,639 | |
| Adjusted Profit1 | 2,492 | 18,474 | | 12,068 | | 24,793 | |
| Earnings per share (US$) | | | | |
| – Basic | 0.09 | 0.68 | | 0.45 | | 0.91 | |
| – Diluted | 0.09 | 0.65 | | 0.43 | | 0.87 | |
| Adjusted earnings per share1 (US$) | | | | |
| – Basic | 0.09 | 0.68 | | 0.45 | | 0.92 | |
| – Diluted | 0.09 | 0.65 | | 0.43 | | 0.88 | |
| EBITDA1 | 10,460 | 24,914 | | 30,155 | | 39,304 | |
| Adjusted EBITDA1 | 10,460 | 25,068 | | 30,155 | | 39,458 | |
| Net cash provided by operating activities | 9,878 | (6,693 | ) | (22,808 | ) | (10,669 | ) |
| Free cash flow1 | 7,727 | (9,731 | ) | (27,100 | ) | (18,947 | ) |
| Dividends declared per share (CAD$) | 0.10 | 0.10 | | 0.20 | | 0.17 | |
| Capital additions | 2,155 | 3,055 | | 4,296 | | 12,836 | |
| Financial position: | June 30, 2022 | | December 31, 2021 | |
| Total assets | 462,421 | | | 443,264 | |
| Debt2 | 112,015 | | | 80,563 | |
| Net Debt1 | 90,612 | | | 56,033 | |
| Shareholders’ equity | 243,436 | | | 235,148 | |
| Outstanding shares (#) * | 27,092,041 | | | 26,993,181 | |
| *27,092,041 at August 4, 2022 | | | | |
1 See Non-IFRS and Other Financial Measures.
2 Debt as at June 30, 2022 and December 31, 2021 include lease liabilities of $16,282 and $17,399, respectively.
Financial Results
Consolidated net sales for Q2 2022 decreased by 6.7% to $110,547 compared to the three-month period ended June 30, 2021 (“Q2 2021”). This decrease was primarily attributable to AirBoss Defense Group's (“ADG”) delivery of Powered Air-Purifying Respirators (“PAPRs”) and nitrile gloves to the U.S. Department for Health and Human Services (“HHS”) in the prior year, further decreased by softening in the Engineered Products segment. These decreases were offset by the increased sales at Rubber Solutions across the majority of its customer sectors. Consolidated net sales for 2022 year-to-date increased by 13.0% to $255,020 compared with 2021 year-to-date driven by a 51.6% increase in sales at Rubber Solutions.
Consolidated gross profit for Q2 2022 decreased by $18,503 to $14,800, compared with Q2 2021, driven by lower volumes at ADG related to PAPR and nitrile glove deliveries recognized in the same period in 2021 and lower volume at Engineered Products, partially offset by a strong improvement at Rubber Solutions driven by higher volumes. Gross profit as a percentage of net sales was reduced to 13.4% in Q2 2022 compared with 28.1% for Q2 2021, primarily due to a change in product mix at ADG, raw material, freight and labor related challenges impacting each segment to varying degrees and no government-directed wage subsidies compared to last year, partially offset by improvements at Rubber Solutions. Consolidated gross profit for 2022 year-to-date decreased by $12,677 to $46,401 compared with 2021 year-to-date, driven by lower volume at ADG and margin compression at Engineered Products due to labor, freight and raw material increases, partially offset by significant improvements at Rubber Solutions. Gross profit as a percentage of net sales decreased to 18.2% for 2022 year-to-date compared with 26.2% for 2021 year-to-date. These decreases were primarily a result of lower margin at the ADG and Engineered Products segments, including approximately $8,000 of government-directed wage subsidies recognized for the same period in 2021, partially offset by the continued improvement at Rubber Solutions.
Adjusted EBITDA for Q2 2022 decreased by 58.3% compared to Q2 2021 and decreased by 23.6% for the six-month period ended June 30, 2022 compared with the six-month period ended June 30, 2021.
Financial Position
The Company retains a $250 million credit facility and a net debt to TTM EBITDA ratio of 1.29.
Dividend
The Board of Directors of the Company has approved a quarterly dividend of C$0.10 per common share, to be paid on October 17, 2022 to shareholders of record at September 30, 2022.
Segment Results
Net sales in the AirBoss Defense Group segment decreased by 54.5% to $25,839 for Q2 2022 from $56,785 in Q2 2021 and by 11.8% to $89,801 for 2022 year-to-date, from $101,847 for 2021 year-to-date. In both cases, the decreases were primarily the result of delivery of PAPRs and nitrile gloves to HHS in 2021. Gross profit at AirBoss Defense Group decreased by 61.2% to $9,754 for the quarter and by 18.7% to $37,425 year-to-date, from the comparable periods in 2021. The decrease in gross profit for Q2 2022 was primarily the result of deliveries of PAPRs and nitrile gloves to HHS in 2021 and the elimination of government-directed wage subsidies, partially offset by favorable mix of certain other portfolio products. The decrease in gross profit year-to-date was primarily the result of deliveries of PAPRs and nitrile gloves to HHS in 2021 and the elimination of government-directed wage subsidies, partially offset by a continued focus on controllable operational cost containment and managing overhead costs.
In the Rubber Solutions segment, net sales for Q2 2022 increased by 50.9% to $63,180 and by 51.6% to $119,887 year-to-date from the comparable periods in 2021. For Q2 2022, volume was up 14.1% with increases across the vast majority of sectors due to increased momentum at most customers’ operations despite continuing supply chain challenges related to raw material supply and elevated freight costs. Year-to-date, volume was up 10.6% with increases across the majority of sectors and continued ramp up of most customers’ operations despite residual softness due to the COVID-19 pandemic. Tolling volume was up by 41.2% for the quarter and 15.9% year-to-date, and non-tolling volume was up by 8.8% for the quarter and 9.3% year to date, from the comparable periods in 2021. Gross profit in the Rubber Solutions segment increased by 78.3% to $9,791 for the quarter and by 66.4% to $17,799 year-to-date, from the comparable periods in 2021. For the quarter, this was primarily the result of improvement in mix, increased tolling and non-tolling volumes and managing controllable overhead costs, partially offset by increased raw material, labor and logistics costs and the elimination of government-directed wage subsidies. Year to date, the increase in gross profit was primarily as a result of improvement in non-tolling volumes and managing controllable overhead costs, partially offset by increased raw material, labor and logistics costs and the elimination of government-directed wage subsidies.
At Engineered Products, net sales in the quarter decreased by 2.8% to $26,841 and by 5.5% to $56,681 year-to-date from the comparable periods in 2021. For the quarter, the decrease was due to lower volumes in SUV, light truck and mini-van platforms related to the global electronic chip shortages combined with raw material shortages and freight and logistics bottlenecks, which continue to challenge production schedules across all OEMs and Tier 1 suppliers. Year-to-date, the decrease was due lower volumes in SUV, light truck and mini-van platforms compared to the same period in 2021. Compared to the same period in 2021, volume and sales decreased as the automotive sector continued to manage volume volatility given the challenges with the global electronic chip shortages in addition to freight and logistics constraints. Gross profit in the Engineered Products segment for Q2 2022 decreased to $(4,745) from $2,652 in Q2 2021 and to $(8,823) for 2022 year-to-date from $2,372 from 2021 year-to-date. For the quarter, this was primarily a result of a government-directed wage subsidy in 2021 and lower volumes in part due to the continued electronic ship shortages in addition to supply chain disruptions, partially offset by a continued focus on controllable operational cost containment. Year-to-date, the decrease in gross profit was primarily a result of a government-directed wage subsidy in 2021 and challenges associated with the global electronic chip shortages in the automotive sector combined with raw material shortages in addition to freight and logistics constraints higher labor, material and logistics costs partially offset by a continued focus on controllable operational cost containment and managing overhead costs.
Overview
The Company has continued to focus on operational execution, growth initiatives and investments while mitigating the impact of on-going global freight, labor and logistics challenges, raw material price escalations, constraints from the COVID-19 pandemic and increasing turbulence from geopolitical headwinds. Despite these evolving global challenges, AirBoss continues to focus on opportunities in AirBoss Defense Group’s (“ADG”) opportunity pipeline, with strong traction for the quarter in at AirBoss Rubber Solutions (“ARS”) and continued diligent work to address the related impacts to AirBoss Engineered Products (“AEP”). The Company remains committed to solidifying its position in the PPE, health care and survivability sectors and supporting its customers, employees and stakeholders.
Despite the challenging quarter, the Company continued to take the necessary risk mitigation steps within its supply chain by identifying alternative raw material sources both domestically and internationally. Continued recovery of volumes remains subject to the ongoing management of stable and sustained operations of businesses globally, which continues to be difficult to predict, especially considering the new and ongoing challenges including economic indicators driving inflation globally. Notwithstanding these challenges, including further constraints on our supply chain for the foreseeable future in 2022, the Company believes it is poised for continued opportunities during the remainder of the year.
ADG continues to target traditional defense contracts, potentially valued at hundreds of millions of dollars globally over the next several years, for its broader portfolio of survivability solutions, especially given the current conflict unfolding in the Ukraine. In addition, ADG continues to work on the significant opportunities in its opportunity pipeline, which remains in excess of $1.5 billion and is expected to help drive growth, subject to timing as delays in the conversion of these opportunities are expected to continue through the third quarter of 2022. Management believes that the future sourcing of PPE for first responders and healthcare professionals will continue to be a necessity and priority for front line workers, evidenced by the strong pipeline of PPE-related opportunities that ADG is currently pursuing. ADG also continues to focus on the commercialization of the new AirBoss 100™ Half Mask Respirator across its network, following the previously announced receipt of NIOSH approval for this product.
The Rubber Solutions segment saw strong demand that exceeded volumes for the previous quarter and exceeded volumes for the same quarter in 2021, while it continued to focus on optimizing its equipment capacity, specifically in Scotland Neck, NC. The ongoing integration of Ace Elastomers continues to deliver strong results with specialized products, expanded production of a broader array of compounds (white and color and enhanced flexibility in attracting and fulfilling new business through identified synergies and margin expansion. The Company continues to take advantage of its scale and global supply chain management expertise to onboard new customers seeking new suppliers to drive volume and growth, including expanding into the U.S. South and Mid-West by leveraging Ace's geographic footprint. AirBoss continued to invest in its research and development expertise to support enhanced collaboration with customers and better reflect the Company’s focus on innovative and proprietary technical solutions.
The Engineered Products segment continued to be impacted by significant raw material price increases, supply chain challenges, labor challenges and electronic chip shortages impacting OEM production schedules. Management remains committed to addressing key challenges in the anti-vibration business including margin improvement with targeted cost management, enhanced pricing strategies with raw material indexing and investments in advanced manufacturing. To further accelerate pricing strategies with key customers, management has engaged the services of a top tier advisory services firm focused on the immediate goal of price optimization across several platforms. AEP also continued to focus on its operational improvement plan by managing variable costs and sustaining a stable hourly workforce while dealing with volume reductions in the automotive sector, as well as its commitment to drive efficiencies and best-in-class automation. This included significant investment in new injection presses and state of the art automated work cells, as previously mentioned. The segment also continued its focus on diversification of its product lines into sectors adjacent to the automotive space.
Despite the continued headwinds associated with COVID-19, the Company’s longer-term priorities remain intact and include:
- Growing the core Rubber Solutions segment by positioning it as a specialty supplier of choice in the consolidating North American market, with a growing focus on building defensible leadership positions in selected compounds;
- Capitalizing on ADG’s enhanced scale and capabilities to pursue an array of growth and value-creation opportunities in the broader survivability solutions segment serving both defense and first responder markets;
- Driving improved performance from Engineered Products through a combination of disciplined cost containment, client relationship expansion, new product development and sector diversification; and
- Targeting additional acquisition opportunities across the business with a focus on adding new compounds and products, technical capabilities, and geographic reach into selected North American and international markets.
As before, management remains dedicated to the creation of long-term value for all stakeholders through a combination of strategic initiatives that both drive organic growth and support possible transactions.
Conference Call Details and Investor Presentation
A conference call to discuss the quarterly results is scheduled for 9:00 a.m. ET on Friday, August 5, 2022. Please go to https://www.gowebcasting.com/11895 or dial in to the following numbers: 1-800-319-4610 or 416-915-3239, pass code: 55506. Please connect approximately 10 minutes prior to the call to ensure participation. A replay of the conference call as well as the Company’s updated investor presentation will also be made available at: https://airboss.com/investor-media-center.
Investor Contact: Chris Bitsakakis, President or Gren Schoch, CEO at 905-751-1188.
Media Contact: media@airboss.com