Hello and welcome to the Air Industries Group Preliminary Fourth Quarter and Full Year 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference call is being recorded. This call and the accompanying webcast may contain forward-looking statements as defined in Section 27A of the Securities Act of 1933 as amended, including statements regarding, among other things, the company's business strategy and growth strategy. Expressions which identify forward-looking statements speak only as of the date the statement is made. These forward-looking statements are based largely on our company's expectations and are subject to a number of risks and uncertainties, some of which are beyond our control and cannot be predicted or quantified. Future developments and actual results could differ materially from those set forth and contemplated by, or underlying the forward-looking statements. In light of these risks and uncertainties, there can be no assurance that the forward looking information will prove to be accurate. This call does not constitute an offer to purchase any security, nor a solicitation of a proxy, consent, authorization or agent designation with respect to a meeting of the company's shareholders. At this time, I'd now like to turn the call over to your host, Mr. Lou Melluzzo, President and CEO. Please go ahead, sir.

Thank you, Rob. Thank you everyone for joining us today. The fourth quarter of 2023 marked a robust conclusion to a year filled with significant progress and strategic positioning for growth. Notably, Q4 reflects the highest net sales of 2023, outperforming all other quarters of this year. We also achieved our peak quarterly operating income and adjusted EBITDA for the year. I will let Scott, our CFO, discuss our preliminary financial results in more detail, but before I do, I just want to say it is clear to me our results are showing progress and are tangible evidence of the success of our strategy. Based on the strength of our bookings, backlog and growing opportunity set, I have no doubt that fiscal 2024 is shaping up to be a year of growth. Let me dive right into why I'm so confident. First, during fiscal 2023, we booked $62.3 million of orders compared to $40.2 million in 2022. This represents a 55% increase. That is quite an accomplishment. Second, our book-to-bill ratio, which is simply bookings divided by net sales, was a ratio of 1.2 to 1 a significant improvement over the 0.75 to 1 we achieved in 2022. Given the opportunities we see and although timing is always difficult to predict, I believe it is likely we will exceed the 1.2 ratio for 2024, which is a good indicator that not only 2024 will be a year of growth, but 2025 will be as well. Third, our backlog, which can be considered funded backlog, stood at $98.3 million, marking a $14.7 increase from the $85.7 million we had on December 31, 2022. Our funded backlog represents the net future sales we expect to realize from funded orders received. These funded orders approved by our customers come from long-term agreements, spot…

Thanks Lou. Q4 was a really solid finish to the year, consolidated net sales for the fourth quarter ended December 31, 2023, with $13.5 million. This was comparable to the amount we achieved in Q4 of last year, but was also the highest quarterly level of sales all year long. For the year, sales approximated $51.5 million. Gross profit as a percentage of sales in Q4 was 16%. For the year, our gross profit was 14.4%, which was slightly higher than the 14% we achieved in 2022. As a reminder, in Q4 of last year, we only achieved the 5.1% gross margin, which was due to the write down of obsolete inventory. Operating expenses in Q4 of 2023 were $1.6 million, comparable to the amount in Q4 of 2022, but lower than earlier fiscal quarters of 2023. Our Q4 2023 results benefited from a change in the way we administer our bonus programs. Although I won't go into specifics for competitive reasons, our board is in the process of finalizing bonus plans to incorporate more equity for Senior Executives to further align them with shareholders. At some point, we will share the specifics. Our Q4 operating income was a positive $587,000 compared to Q4 2022 when we had a loss of $820,000. For the year, our operating loss was $295,000 as compared to the $194,000 operating loss we experienced in fiscal 2022. Interest expense in Q4 was $448,000 as compared to $403,000 in Q4 of 2022. For the year, interest expense was $1.9 million, up significantly from the $1.4 million in 2022. This increase was almost entirely attributable to the increase in interest rates by the Fed, which impact the applicable interest rates we pay on our credit facility. Finally, on the bottom line, net income was $181,000 for the…

Thank you, Scott. All in all, I want to reiterate my confidence in 2024. With strong bookings and continually expanding opportunities, I am confident about our future and expect 2024 to be a year of growth. As everyone knows, the timing of orders, the receipt of raw materials, and the delivery of goods are challenging to predict, especially given the industry wide supply chain issues. From my perspective, net sales for the fiscal 2024 are expected to be at least $50 million, if not slightly higher than those of 2023 levels, and adjusted EBITDA in 2024 being significantly better than the 2023. Given everything that's happening globally, I am excited about our position to achieve such growth. As the year progresses, we intend to provide updates as appropriate. With that, I concluded my remarks, and at this point, I would like to turn it over to Rob to open the lines for Q&A portion. Rob, would you please do the honors?

Sure. Thank you. At this time, we'll be conducting a question-and-answer session. [Operator Instructions] Our first question comes from Howard Halpern with Taglich Brothers. Please proceed with your question.

Congratulations on finishing off a challenging year in a very good way.

Good afternoon, Howard. How are you today?

Okay. Can we talk, I guess, a little bit about the backlog and how you go about, I guess, incorporating new customers that may be small in nature now, but you'll be able to grow in the future. In terms of maybe new programs. Could you give a little perspective on, I guess, customer acquisitions, basically?

Absolutely. Howard, as you know, we. And I made a comment on this call. Predominantly, our work is centered around four big customers who also, Lockheed has the Lockheed portion and they have the Sikorsky portions. RTX has Collins and it has Pratt & Whitney and several others. So the clients that we were pursuing and the clients that we pursue are not, usually third or second, even second tier. These are large OEMs or government direct that for a company our size, once we get into these companies, it seems like there's a lot of areas that we can get involved into. So it just doesn't limit us to. Between the engine side of things and the landing gear side of things, the arresting side of things, the rotorcraft side of things, any typical company will have several avenues for us to pursue. spiral: So you can hit a lot of clients or potential clients very quickly and efficiently. And we've been successful. And that's not surprising. That's kind of what we do. We offer a very complex type product, that and one of our biggest attributes is that we cannot only make the product. It's not that we just make the component. We have the engineering, we have the assembly, and actually even a redesign, a small redesign if need be. So when a client sees the capabilities that we have and put on a table, it's relatively easy to see the value that they can get by dropping their product off at Air Industries.

Okay. And based on how now you structured the company, what kind of leverage could you create? So in terms of, I guess, the backlog and continue to grow the backlog, what kind of production can you, can we assume without material increase in CapEx spending or operating costs increasing?

Well, our 2024 CapEx is obviously minimal. We spent close to $13 million in the last several years on CapEx to get the company to a point where we are now. I mean you walk our shops, you see brand new machines, you see a lot of shiny new stuff. We've invested money into refurbishing older equipment in preparation for. We were going down this road in 2020. We are predominantly a 85%, maybe 90% military company. We service all the military programs. Our commercial content is very, very low. And in 2020, we were going to expand the commercial offerings that we could potentially get involved with and COVID hit commercial fell through the floor. But commercial for us is almost like the unexplored ground. There's a ton of opportunities, and it could all be done across the same machines that we have now. If we stay within the limits, obviously we're not going to make pistons and cylinders for the big airliners. Just too big for our equipment. But there's a lot of stuff that we can do on the commercial side that we have just not done in the past. And those are going to be things that we could bring to the table without really a huge investment or any investment in CapEx. So the next couple of years, Howard is going to be about filling the capacity in our shop and streamlining and efficiencies and trying to do more with less.

Okay. And just one last one modeling question. Would it be fair to say that the fourth quarter gross margin is something that you hope to achieve, at a minimum, for the full year 2024, and improve on going forward?

Hi, Howard, how are you? I would say that what we achieved in the fourth quarter by itself, the 16%, is something that we are anticipating will be what, where we are for 2024, if not better. Of course, depends on product mix, availability of material, and so forth. As Lou said, we have resolved thankfully, the supply, a lot of the supply chain issues, but material is still on short supply and very long lead time. So we anticipate that the 16% will hold throughout the year, if not be better, each quarter, and we'll see where it goes, each quarter. But I am strongly confident in that.

Okay, well, thanks and keep up the good work, guys.

Thank you.

Thank you for your questions Howard.

[Operator Instructions] There are no further questions at this time. At this point, I'd like to turn the call back over to Lou Melluzzo for closing comments.

Thank you, Rob. Thank you all 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 the progress on our next call. With that, Rob, you can conclude the call.

Thank you. This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.