AirBoss Announces First Quarter 2023 Results

NEWMARKET, Ontario, May 09, 2023 (GLOBE NEWSWIRE) — AirBoss of America Corp. (TSX: BOS)(OCTQX: ABSSF) (the “Company” or “AirBoss”) today announced its first quarter 2023 results. The Company’s annual general meeting will be held on Wednesday, May 10^th, 2023, at 9:00 a.m. (EDT). Following the formal portion of the meeting, management will provide a presentation including a discussion of Q1 2023 results. The meeting will be accessible via live webcast or by dialing in to the numbers provided later in this release. All dollar amounts are shown in thousands of United States dollars (“U.S. $” or “$”), except per share amounts, unless otherwise noted.

Recent Highlights

• Cash from operations increased by $38.7 million to $6.0 million for the three-month period ended March 31, 2023 (“Q1 2023”) vs. the three-month period ended March 31, 2022 (“Q1 2022”); and
• Declared a quarterly dividend of C$0.10 per common share.

“Our business segments maintained their focus on strong operational execution and continued to pursue new sales opportunities during the first quarter of 2023. The quarter’s financial results benefitted from strong performance at Engineered Products, which has begun to benefit from investments in automation while operating in a more normalized contractual environment,” said Chris Bitsakakis, President and COO of AirBoss. “Within our Rubber Solutions segment, softer customer demand in the opening months of 2023 led to a slight decline in net sales as compared to Q1 last year, however, we began to see modest demand improvements toward the latter part of the quarter.”

“The stable footing we gained within Rubber Solutions and Engineered Products through the end of 2022 has brought important operational and financial diversification to our platform,” said Gren Schoch, Chairman and CEO of AirBoss. “As we advance into 2023, we are making solid progress on delivery against the test-kit contract award ADG successfully secured in Q4. As well, we remain highly focused on targeting new survivability sales opportunities for ADG’s innovative portfolio of survivability solutions, including our Blast Gauge System, AirBoss 100^TM Half Mask Respirator, and others, which continues to competitively position us to win new business.”

Financial Results

Consolidated net sales in Q1 2023 decreased by 19.0% to $117,076 compared with Q1 2022. The decrease was primarily attributable to the delivery to HHS of nitrile patient examination gloves in Q1 2022, partially offset by a strong recovery at the Engineered Products segment.

Consolidated gross profit for Q1 2023 decreased by $9,664 to $21,937, compared with Q1 2022, driven primarily by lower volumes at ADG related to HHS nitrile patient examination glove contract deliveries in Q1 2022, in addition to continued raw material price increases, partially offset by modest reductions in freight across the organization and improved execution at Engineered Products. Gross profit as a percentage of net sales decreased to 18.7% in Q1 2023 compared with 21.9% for Q1 2022, primarily due to a change in product mix at ADG, partially offset by improved execution at Engineered Products.

Adjusted EBITDA for Q1 2023 decreased by 47.6% to $10,320, compared to $19,695 in Q1 2022, with the decrease driven primarily by lower volumes at ADG related to HHS nitrile patient examination glove contract deliveries in Q1 2022, in addition to continued raw material price, partially offset by modest reductions in freight across the organization and improved execution at Engineered Products.

Financial Position

The Company retains a $250 million credit facility and a net debt to TTM EBITDA ratio of 2.99x as at March 31, 2023.

Dividend

The Board of Directors of the Company has approved a quarterly dividend of C$0.10 per common share, to be paid on July 17, 2023 to shareholders of record at June 30, 2023.

Segmented Results

In the AirBoss Defense Group segment, net sales decreased by 55.2%, to $28,643 in Q1 2023 compared to Q1 2022. The decrease was primarily the result of deliveries under the large HHS nitrile patient examination glove contract in Q1 2022, partially offset by improved volumes from defense products manufactured at Engineered Products. Gross profit at AirBoss Defense Group for Q1 2023 decreased by 68.4% to $8,748, from $27,671 in Q1 2022. The decrease was primarily the result of deliveries under the large HHS nitrile patient examination glove contract in Q1 2022.

In the Rubber Solutions segment, net sales decreased by 2.7% to $55,154 in Q1 2023, compared with Q1 2022. Volume was down 24.1% with decreases across the vast majority of sectors due to decreased momentum at most customer’s operations as a carryover from softness in the prior quarter. Tolling volume was down 81.0% while non-tolling was down 9.0%. Gross profit in Q1 2023 decreased by 5.3% to $7,584 from $8,008 in Q1 2022, primarily the result of volume reductions and product mix partially offset by managing controllable overhead costs and driving continuous improvement initiatives.

At Engineered Products, net sales for Q1 2023 increased by 37.1%, to $40,915, compared with Q1 2022. The increase was due to higher volumes in SUV and light truck platforms despite the ongoing global electronic chip shortages and economic headwinds related to ongoing freight, logistics and, to a lesser extent, raw material supply challenges, which continue to impact production schedules across all OEMs and Tier 1 suppliers. Gross profit at the Engineered Products segment for Q1 2023 increased to $5,605 from $(4,078) in Q1 2022. This was primarily a result of improved arrangements with key suppliers and customers, as well as product mix in the automotive sector in addition to operational cost containment, and managing overhead costs.

Overview

During Q1 2023, AirBoss remained focused on operational execution, growth initiatives and key investments. AirBoss Engineered Products (“AEP”) maintained strong traction and worked diligently to build on momentum established in the prior quarter with key suppliers and customers to strengthen its financial situation for long term sustainability. AirBoss Rubber Solutions (“ARS”) had modest improvements in demand, specifically in volumes, towards the end of the quarter and AirBoss Defense Group (“ADG”) had improvements driven by test kit deliveries, with attention on strategic priorities focused on conversion of sales opportunities for the latter part of 2023. The Company continued addressing the ongoing economic impacts being experienced to varying degrees in each segment. Labor, logistics challenges, and raw material price escalations, continue to create obstacles that each segment is working through to build momentum. The continued recovery in volumes in 2023 for each segment remain subject to the ongoing management of the stable and sustained operations of businesses globally, which remains complex and volatile considering evolving and ongoing challenges such as continued inflation pressure and ongoing global conflicts, as well as successful conversion of sales opportunities.

The Rubber Solutions segment saw modest improvements in demand towards the end of Q1 2023 compared to the prior quarter with some signs of recovery. Despite the economic headwinds noted above, the segment remains focused on executing its strategy of delivering 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. As a segment, Rubber Solutions continued to invest in research and development to support enhanced collaboration with customers and remained focused on expanding on Ace Elastomer’s (“Ace”) specialized products into its wide range of solutions.

ADG remains focused on its survivability solutions platform while targeting traditional defense contracts, which management believes could result in the execution of opportunities over the next several years. In addition, ADG continues to work with its key customers to leverage the opportunities in its pipeline, as was evidenced with the fulfillment of a portion of the test kit award during the quarter. The pipeline remains robust and is expected to support growth initiatives, subject to timing as delays in the conversion of these opportunities are expected to continue through the next few quarters. In particular, execution of the previously announced awards for Husky 2G vehicles has been delayed due to ongoing global challenges, and management now anticipates execution of those orders to commence later in 2023. Management continues to believe that the future sourcing of personal protective equipment (“PPE”) for first responders and healthcare professionals will remain a necessity and priority for front line workers, evidenced by the strong pipeline of PPE-related opportunities that ADG is currently pursuing.

Within the Engineered Products segment, the momentum generated in the prior quarter continued through Q1 2023, despite the ongoing challenges of raw material price increases, supply chain challenges and production volatility by the original equipment manufacturers (OEMs). Engineered Products continued to work with key suppliers and customers to deliver improved financial results in the quarter versus the same quarter in the prior year. Management also continued to focus on operational improvements including managing variable costs and sustaining a stable hourly workforce, while dealing with volume volatility in the automotive sector and specifically on AEP’ products for SUV, light truck and mini-van platforms. The segment also continued its focus and commitment to drive efficiencies and best-in-class automation, as well as diversification of its product lines into sectors adjacent to the automotive space.

Despite the continued headwinds associated with economic and geopolitical issues, the Company’s longer-term priorities remain intact and include:

1. 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;
2. 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;
3. Driving improved performance from Engineered Products through a combination of disciplined cost containment, client relationship expansion, new product development and sector diversification; and
4. 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 accretive transactions.

Annual General and Special Meeting and Q1 Results Earnings Webcast

The Company’s Annual General Meeting for Shareholders will occur May 10, 2023 at 9:00 a.m. (EDT). Following the formal portion of the Meeting, management will provide a webcast presentation including discussion of Q1 2023 results.

For webcast access, please log-in online at https://bit.ly/3lgBzC5 (Microsoft Teams broadcast). We recommend that viewers log in at least 15 minutes before the Meeting starts. If watching the meeting online, it is important to remain connected to the internet at all times during the Meeting. It is each person’s responsibility to ensure connectivity for the duration of the Meeting. The live webcast will include a facility for shareholders to enter questions for management.

For telephone access, please dial in at 1-800-319-4610 or 1-416-915-3239, access code: 55506. Callers should dial-in five to 10 minutes before the Meeting starts and ask to join the call. When prompted, the access code should be provided.

About Airboss

AirBoss of America is a leading and diversified developer, manufacturer and provider of innovative survivability solutions, advanced custom rubber compounds and finished rubber products that are designed to outperform in the most challenging environments. Founded in 1989, the company operates through three divisions. AirBoss Defense Group is a global leader in personal and respiratory protective equipment and technology for the defense, healthcare, medical and first responder communities. AirBoss Rubber Solutions is a top-tier North American custom rubber compounder with 500 million turn pounds of annual capacity. AirBoss Engineered Products is a supplier of innovative anti-vibration solutions to the North American automotive market and other sectors. The Company’s shares trade on the TSX under the symbol BOS and on the OTCQX under the symbol ABSSF. Visit www.airboss.com for more information.

Note (1): Debt as at March 31, 2023 and December 31, 2022, includes lease liabilities of $14,660 and $15,007, respectively (see Significant Account Policies in the Company’s FY2022 MD&A).

Note (2): Non – IFRS Financial Measures: This earnings release is based on financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”) and Non-IFRS Financial Measures. Management believes that these measures provide useful information to investors in measuring the financial performance of the Company. These measures do not have a standardized meaning prescribed by IFRS and therefore they may not be comparable to similarly titled measures presented by other companies and should not be construed as an alternative to other financial measures determined in accordance with IFRS. These terms are not a measure of performance under IFRS and should not be considered in isolation or as a substitute for net income under IFRS.
        
EBITDA and Adjusted EBITDA are non-IFRS measures used to measure the Company’s ability to generate cash from operations for debt service, to finance working capital and capital expenditures, potential acquisitions and to pay dividends. EBITDA is defined as earnings before income taxes, finance costs, depreciation, amortization, and impairment costs. Adjusted EBITDA is defined as EBITDA excluding acquisition costs, and non-recurring costs. A reconciliation of Profit to EBITDA and Adjusted EBITDA is below.

Adjusted profit is a non-IFRS measure defined as profit before acquisition costs and non-recurring costs. This measure and Adjusted earnings per share are used to evaluate operating results of the Company. A reconciliation of Profit to Adjusted profit and Adjusted earnings per share is below.

Net Debt measures the financial indebtedness of the Company assuming that all cash on hand is used to repay a portion of the outstanding debt. A reconciliation of loans and borrowings to Net Debt is below.

Free cash flow is a non-IFRS measure used to evaluate cash flow after investing in the maintenance or expansion of the Company’s business. It is defined as cash provided by operating activities, less cash expenditures on long-term assets. A reconciliation of cash from operating activities to free cash flow is below.

AIRBOSS FORWARD LOOKING INFORMATION DISCLAIMER

Certain statements contained or incorporated by reference herein, including those that express management’s expectations or estimates of future developments or AirBoss’ future performance, constitute “forward-looking information” or “forward-looking statements” within the meaning of applicable securities laws, and can generally be identified by words such as “will”, “may”, “could” “expects”, “believes”, “anticipates”, “forecasts”, “plans”, “intends” or similar expressions. These statements are not historical facts but instead represent management’s expectations, estimates and projections regarding future events and performance.

Statements containing forward-looking information are necessarily based upon a number of opinions, estimates and assumptions that, while considered reasonable by management at the time the statements are made, are inherently subject to significant business, economic and competitive risks, uncertainties and contingencies. AirBoss cautions that such forward-looking information involves known and unknown contingencies, uncertainties and other risks that may cause AirBoss’ actual financial results, performance or achievements to be materially different from its estimated future results, performance or achievements expressed or implied by the forward-looking information. Numerous factors could cause actual results to differ materially from those in the forward-looking information, including without limitation: impact of general economic conditions, notably including its impact on demand for rubber solutions and products; dependence on key customers; global defense budgets, notably in the Company’s target markets, and success of the Company in obtaining new or extended defense contracts; cyclical trends in the tire and automotive, construction, mining and retail industries; sufficient availability of raw materials at economical costs; weather conditions affecting raw materials, production and sales; AirBoss’ ability to maintain existing customers or develop new customers in light of increased competition; AirBoss’ ability to successfully integrate acquisitions of other businesses and/or companies or to realize on the anticipated benefits thereof; changes in accounting policies and methods, including uncertainties associated with critical accounting assumptions and estimates; changes in the value of the Canadian dollar relative to the US dollar; changes in tax laws; current and future litigation; ability to obtain financing on acceptable terms; environmental damage and non-compliance with environmental laws and regulations; impact of global health situations; potential product liability and warranty claims and equipment malfunction. The continued COVID-19 pandemic could also negatively impact the Company’s operations and financial results in future periods. There is increased uncertainty associated with future operating assumptions and expectations as compared to prior periods. As such, it is not possible to estimate the impacts the continued COVID-19 pandemic will have on the Company’s financial position or results of operations in future periods. While the direct impacts of COVID-19 are not determinable at this time, the Company has a credit facility that can provide financing up to $250,000. This list is not exhaustive of the factors that may affect any of AirBoss’ forward-looking information.

All of the forward-looking information in this press release is expressly qualified by these cautionary statements. Investors are cautioned not to put undue reliance on forward-looking information. All subsequent written and oral forward-looking information attributable to AirBoss or persons acting on its behalf are expressly qualified in their entirety by this notice. Forward-looking information contained herein is made as of the date of this Interim Report and, whether as a result of new information, future events or otherwise, AirBoss disclaims any intent or obligation to update publicly the forward-looking information except as required by applicable laws. Risks and uncertainties about AirBoss’ business are more fully discussed under the heading “Risk Factors” in our most recent Annual Information Form and are otherwise disclosed in our filings with securities regulatory authorities which are available on SEDAR at www.sedar.com.

CONTACT: Investor Contact: investor.relations@airboss.com

Media Contact: media@airboss.com