Hello and welcome to the Air Industries Conference Call. My name is Josh, coordinator for today's event. Please note today’s conference is being recorded and for the duration of the call, your lines will be on listen-only. However, you will have the opportunity to ask questions at the end of the call. [Operator Instructions] Except for the historical information contained herein the matters discussed in this presentation contained forward-looking statements. The accuracy of these statements is subject to significant risks and uncertainties. Actual results could differ materially from those contained in the forward-looking statements. See the company’s SEC filings on Forms 10-K and 10-Q for important information about the company and related risks. EBITDA is used as a supplemental liquidity measure because management finds it useful to understand and evaluate results, excluding the impact of non-cash depreciation and amortization charges, stock-based compensation expenses, and non-recurring expenses and outlays prior to consideration of the impact of other potential sources and uses of cash, such as working capital items. This calculation may differ in method of calculation from similarly titled measures used by other companies. I will now hand you over to your host, Lou Melluzzo, President and CEO to begin today's conference. Thank you.

Thank you, Josh. Good afternoon, everyone, and thank you for joining us today. We saw a significant increase in new business activity in the third quarter and we made further progress in our strategic initiatives. However, supply chain challenges persisted, delaying our receipt of both components and raw materials, which impeded our shipments and third quarter sales. Fortunately, the supply chain issue seems to be improving and we hope that that trend continues, but still had an impact on the third quarter. Net sales for the third quarter of 2022 were $13.3 million, or 5% lower than the second quarter of 2022 and 7.6% lower than the third quarter last year. Primarily as a result of the sales decline the net loss for the quarter was $142,000 and adjusted EBITDA was $801,000. We expect our fourth quarter sales to be stronger than the third quarter with stronger sales growth as 2023 progresses. We did see sequential growth across several platforms in the third quarter, reflecting the benefits of our diverse customer and platform base. Those included the US Navy's E-2D advanced Hawkeye aircraft, and the F-35 Joint Strike Fighter aircraft. We are looking forward to the remainder of this year at the 2023 with a great deal of excitement. That's based on current level of quoting activity that seemed to take off following the Farnborough Airshow. We also see evidence that the government entities responsible for procurement, such as the Defense Logistics agencies are increasing their level of activity. Our confidence is also based on our major new businesses wins this -- thus far this year. For example, in the past nine months those have included and most recently a five-year $2.2 million long-term agreement or LTA for the Blackhawk helicopter bringing to 12 the number of Blackhawk LTAs we…

Thank you, Lou. Let me provides some additional detail on the results for the third quarter and nine months. As Lou said, sales for the third quarter were $13.3 million bringing year-to-date sales to $39.3 million, that's $4.2 million lower than the $43.5 million for the nine months of 2021. The primary cause of sales decline was due to delayed shipment that Lou discussed and declining shipments for Blackhawk helicopter product. We are -- we have announced that we have finishing all old and beginning new LTAs with Sikorsky and these last for approximately five years. All -- these are all for Blackhawk products. In the transition from an old LTA to a new one, it's normal for orders and for products and their shipments of products to be a little choppy. One reason for this can be the older LTA may have lower prices than the new and customers therefore have an incentive to buy ahead at the lower prices and delay ordering at the new higher prices. Shipments to Sikorsky in Q3 was significantly lower than the quarterly for the first half. And it's caused by fewer orders received early in the year. For the fourth quarter, we are projecting and very confident that Sikorsky shipment will return to normal. For all our other aircraft platforms, there were no major variances in shipments. Gross profit. Gross profit in the third quarter was $2.2 million, or 16.9% of sales versus $2.0 million, or 14% of sales in the prior year. For the nine months, gross profit was $6.7 million again, 17.1% of sales versus $6.4 million or 14.7% of sales for the nine months of 2021. I need to remind you that for our largest subsidiary, we use the gross profit method of calculating inventory and those gross profit…

Thank you, Mike. Let me provide a brief summary of my comments today. We saw a significant increase in new business activity in the third quarter and made progress on our strategic initiatives. However, supply chain challenges impeded our third quarter shipment and sales. Even so, we are optimistic that we can deliver stronger sales for the 2022 fourth quarter and expect stronger growth as 2023 progresses. Our product and platform diversity our new business wins in 2022 and the current high level of quoting activity combined are the basis for our confidence for the remainder of the year and for 2023. To further support our opportunity and growth, we are continuing our strategic capital investment with a focus on expanding our capabilities, enhancing our efficiencies through vertical integration and further tapping the substantial opportunity of our Sterling engineering subsidiary. Let me also emphasize that we remain highly optimistic about the long-term prospects of their industries. We continue to serve major defense and commercial aerospace programs where demand is growing. Additionally, we are highly encouraged by our initial success in the adjacent nuclear submarine market. Air Industries Group remains committed to manufacturing products that meet or exceed the exacting safety and performance demands of the industries we address and to becoming an even more valuable partner to our customers. That concludes our report. And I would like to open the call to questions from participants. Josh, can you open up the lines, please?

Thank you very much. [Operator Instructions] Our first question comes from the line of Howard Halpern.

Hi. I'm with Taglich Brothers, and I'm pinch hitting for John today. He's out. Congratulations on navigating a tough quarter and still producing operating profit. That was nice to see. But in terms of, you talked about some of the headwinds with supply chain and materials and components, has that begun to ease? And if so, should we begin to see you increase shipments throughout the fourth quarter?

Well, we are seeing some improvements in the supply chain. Materials earlier this year actually started -- it started about third quarter of last year were very difficult to get, and we started some product late because of it. We had a pretty good size order that we expected material before the end of -- basically in December of last year that we didn't get until June of this year. So we lost six months on that order. We're starting to see some better flow of materials into our shop. There's still [Indiscernible] purchased hardware springs and particularly engineered springs and other items, sensors that are a little bit more challenging to get. But we are starting to see some easement in that, largely because some of the OEMs are ordering a lot in advance, where material used to be more just in time. Now we're starting to see Collins and your Boeings and your Pratts place order for material a year, sometimes two years in advance to try to ease some of this. So we're seeing some improvements. Hopefully, like I said, that trend continues.

Can I add one thing to that?

Sure.

Our products take a long time to make, six months, nine months, sometimes longer than a year. If you have a product -- if you have a shortage of material in the middle of that, so if I have a product half done we've worked on it for three months in a six-month cycle, and we have a product shortage or material shortage for another three months when that shortage is lifted, I still have a few months ago. So, if all the supply chain issues evaporated tomorrow, it does mean that all the problems are solved for the fourth quarter. But we do expect the third quarter -- fourth quarter rather, to be much stronger than the third.

Okay. And all things being equal, as we go into 2023, the new machinery, the testing and once everything gets fully up and running, do you expect that you'll be able to really increase productivity, increase gross and operating margin for all the different programs and even the new nuclear product shipments. Are you really encouraged that, that is going to kick in next fiscal year?

Well, what drives some of that is the type of orders that you get in, obviously, on the platforms that we already deliver on we know the quantities, we know what next year will bring. If you follow the forecast that the OEM puts out, some of these new opportunities that we're seeing, we're not well versed so far with the submarine business. Its lower quantities, higher value type products, a lot of valve work. So we know that [Electric Boat] (ph) is looking to hire 571 employees as of two weeks ago, the last report we got. So there are opportunities to be able to position ourselves in those types of industries. It's a little early to tell, what piece in a pie we can get, but they like some of the capacity that we're offering, what the machine tools that we've added in the last call it 18 months to 12 years, we put them in place to fill that capacity. And they're starting to recognize that we could be a place to go to. We will see -- we will see a gradual increase as time progresses.

Okay. Okay. Well, guys, keep up the good work.

And would you do us a favor and tell John we said hello.

I will. I will.

Thank you.

Okay. Bye.

Thank you very much. There are no further questions in the queue. [Operator Instructions] Okay. It looks like there are no further questions coming through, so I'll hand back over to Lou Melluzzo.

Thank you, Josh. So with that, once again, thank you all for talk -- for taking the time to be on the call today, and for your interest in Air Industries Group. We look forward to updating you on our progress on our next call. And in the meantime, we would like to extend our best wishes for the holiday season. With that, Josh, you may conclude the call.

Thank you very much for joining the call today. You may now disconnect your handsets.