Release Date: July 11, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Second quarter bookings of $58.7 million, up 46% over Q2 last year.
- Second quarter revenues of $38.8 million, up 14% over Q2 last year.
- Adjusted net earnings in Q2 2024 of $2.6 million, up 13% over Q2 2023.
- Achieved second quarter adjusted EBITDA of $6.5 million, up 25% over Q2 last year.
- Free cash flow of $2 million in the quarter, an increase of $2.4 million over Q2 2023.
Negative Points
- Gross margin rate for Q2 2024 was 27.9%, down from 29.4% in Q2 2023.
- Lower sales of simulator products negatively impacted gross margin.
- Production impacts from ERP transition in March and April.
- Aerospace business was down $3.6 million in Q2 versus Q2 last year.
- Challenges with staffing levels and production throughput at some sites.
Q & A Highlights
Q: Good morning and congrats on a strong quarter and the record backlog. Just my first question has to do with the bookings within C919, is this tracking in line or ahead of where you might have originally expected?
A: We started the C919 program 12 years ago, which was behind our expectations by about seven years. However, on a quarterly basis, it is now tracking ahead in terms of the ramp in production. We have between 170 shipsets over the next 2.5 years, which is faster than previously projected.
Q: How should we think about that contract? Is that loaded upfront and then drawn down over the two years? Or is there potential for additional renewals before it ties completely?
A: We won't be drawing it down during that period. There will be some add-ons for spares orders during this period. Before this contract runs out, additional years will be added on the back end. This is an annuity program that should provide ongoing revenue for the next 20 years if everything goes according to plan.
Q: Switching gears to the staffing levels, how are you feeling about your productive capacity?
A: We are good with the current staffing levels but might tweak them slightly. We are adding some staff in our aerospace Toronto facility to address past-due orders. There might be small additions at other sites, but overall, we have the capacity for more than $200 million in revenue, which would require additional staffing.
Q: There's been a lot of news on Boeing, and you mentioned that deliveries have slowed down year over year. Is there any indication that the supply chain has slowed down?
A: There is some noise in the supply chain, but Boeing is cautious about reducing production rates. While this has dragged out longer than expected, it is not something that worries us at this point as it won't materially impact our results in the coming quarters.
Q: How do you think about M&A for the remainder of fiscal '24 and '25?
A: We are comfortable with the current operations and have time to focus more on M&A. We have investigated several opportunities, some of which are not a great fit, but others look interesting. We have the balance sheet to pull the trigger if we find the right opportunity.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
