Welcome everybody. Ladies and gentlemen, ladies, welcome to the annual and special meeting of the shareholders of Omni-Lite Industries Inc. My name is David Robbins, CEO of Omni-Lite Industries Canada Inc. I would like to welcome all of you here today on behalf of the corporation and thank you for attending. I would like to introduce Roger Dent, who will act as the Chair of the meeting.
Hello, everyone. Just wanna make sure that everyone can hear. If someone could just indicate that they can hear us, that would be great.
I hear you.
Yes, I hear you.
All right. The meeting will now come to order. I will ask Andrew Armstrong of Peterson McVicar LLP to act as secretary of the meeting. I requested that Melissa Rojo, representative from Computershare Investor Services, the registrar and transfer agent of the corporation shares service for the meeting. If there is anyone here who has not registered with the scrutineer, please do so now. I have the scrutineer's preliminary written report on attendance, which indicates a quorum of not less than two persons who are entitled to vote as required by Section 10.11 of the Corporation's bylaws. Unless there are any objections, I will dispense with reading of the report. Before commencing with the business of the meeting, I'd like to comment on the voting procedures. Shareholders will be asked to pass certain resolutions.
Simple majority affirmative votes cast in person or by proxy will be required to pass the ordinary resolutions to be heard today at the meeting. A super majority representing 2/3 of affirmative votes cast in person by proxy will be required to pass special resolutions to be heard today at the meeting. Voting will be conducted either by poll for certain resolutions or if requested or otherwise required, or by show of hands, and each shareholder entitled to vote will have one vote. Shareholders wishing to raise questions or comments pertaining to the business of the meeting should speak up, and when recognized by the chair, address their comments to the chair. There will be additional time for questions and comments following the conclusion of the formal meeting.
The notice calling this meeting was sent on September 25th, 2024 to registered shareholders and non-objecting beneficial owners of record as of September 24. I have proof of mailing, and it is available for inspection on request. Unless there are any objections, I'll dispense with reading of the notice of meeting. I now declare the meeting to be regularly called and properly constituted for the transaction.
My God.
If there are a couple of people who aren't muted, perhaps, if they could mute just, unless they have something to say, please. As set out on page 14 of the corporation's information circular, the first item of business is for the shareholders to receive the audited financial statements financial year ending December 31, 2023, together with the auditor's report thereon, copies of which were mailed to shareholders who so request. I now place these before the meeting. Unless anyone objects, I will now ask that someone move and someone second the resolution that the auditor's report be taken.
I so move.
I second the motion. I will ask all in favor to signify by raising hands. Opposed, if any? Motion has been carried. As stated on page 14 of the circular, the next item of business is to fix the number of directors at.
Okay.
Unless anyone objects, I will now ask that someone move the number of directors be fixed at five.
I so move.
I will ask all those in favor signify by raising their hands. Opposed, if any? Motion has been carried. As stated on pages 14 and 15 of the circular, the next item of business is the election of directors. The names of the five nominees to the board of directors for the ensuing year are set out in the corporation's information circular.
Declare David Robbins, Charles Samkoff, Roger Dent, Patrick Hutchins, and Jan Holland to be nominated for election to the board. Only the election of those persons named in the corporation's information circular may be voted for by proxy. Registered shareholders present at the meeting may cast their votes for the election of any other person nominated from the floor. Other than management's nominees named in the information circular for this meeting, no one has been nominated in accordance with procedures set out in the company's bylaw too. Accordingly, no further nominations will be accepted. I hereby declare the nominations closed. Would someone move a resolution for the election of the person nominated as a director?
I so move.
I second the motion. Motion is now open for discussion. If there's no discussion, I will now conduct the vote.
By show of hands, all those in favor of the motion. Opposed, if any? The motion has been carried. There being only five nominees for the five positions to be filled, there being sufficient proxies to elect these nominees, I now declare David Robbins, Charles Samkoff, Roger Dent, Patrick Hutchins, and Jan Holland to be elected as directors of the corporation to hold office until the close of the next annual meeting of shareholders of the corporation or until their successors, either elected or appointed in accordance with the provisions of the corporation's bylaws. As stated on page 16 of the circular, the next item of business is the appointment and remuneration of auditors of the corporation.
May I have a motion that MNP LLP be thereby appointed the corporation's auditors until the next annual general meeting of shareholders following this meeting with remuneration to be approved by the board of directors?
I so move.
Second the motion. Motion's now open for discussion. If there's no discussion, I'll ask those in favor to signify by raising your hand. Opposed, any? The motion has been carried. As stated on page 16 of the circular, the next item of business is to ratify the continuation of the corporation's stock option plan. The option plan is a 10% rolling stock option plan whereby the number of common shares available for issuance is equal to 10% of the issued and outstanding common shares. May I now have a motion to the approval of the corporation's option plan?
I so move.
I second the motion. Motion's open for discussion. If there's no discussion, I will ask for a vote on the matter. Please raise your hand if you're in favor of the motion. Opposed, if any. The motion has been carried. We've now concluded the formal business of the meeting. Is there any other matter a shareholder wishes to raise before we move into the informal presentation? There's no further business to be brought before the meeting. I will now call for a motion that the meeting be terminated, following which we'll be able to address shareholders' questions.
I so move.
I second the motion. Motion's open for discussion. If there's no discussion, I will ask all those in favor to signify by raising your hand. Opposed, if any. I declare the motion carried and the meeting terminated. Thank you for attending.
I'd like to take the opportunity to say a few words in light of a few weeks from now or early mid-November to be releasing our Q3. I think, you know, take a moment in time, this snapshot kind of captures, I think the Omni-Lite story in many ways. It tells who we are and where we're going.
Can we have it up on the screen?
Yeah. It's kind of an informal presentation.
Okay.
This is all from the deck that I've, that I've recently put on our website.
Okay
distributed, so it's nothing new.
Okay.
Just a bit of the numbers is our trailing twelve-month revenue is $15.2 million U.S. Adjusted EBITDA is nearly CAD 1.8 million, and our free cash flow is CAD 1.1 million. We've got 15.9 million diluted shares. Market cap in U.S. of nearly $18 million. Cash of net cash of CAD 2.1 million. Our Cal Nano investment worth, you know, somewhere between CAD 8 million and CAD 9 million. Our share price, I think today it's, you know, around CAD 1.50 .
Who we are is, you know, we're a consolidator of aerospace and defense components in a growing aerospace and defense market, a little more specifically, very specialized components that are used in advanced aircraft and other long-lived assets that have long useful life. That's really the niche. Being a consolidator, what that really means is that, you know, we're really focused on profitable growth and redistributing that growth and those earnings into growing and consolidating more technologies to build a platform that has values really for our customers and value as a company, as a producer of component, you know, very precision aerospace-type components.
Today's performance, I think does highlight maybe the history of the company in that the company was founded producing very complex parts, very hard to manufacturing parts, but did it, you know, at a good profit and decided to reinvest that profit into, you know, namely capital equipment for the early years of its life. It goes to the business model that if you're building really precision, high-performance components, what comes with that is the is a very exciting profit margin capability. That's our motto and our theme is to focus on those kind of components that have that kind of margin and expand on that.
A little bit of that was demonstrated with the acquisition of Monzite in 2018. That's how I became involved with the company, through that acquisition. It brought to the table, electronics, highly integrated electronics, which again, went to the thesis of a high-performance component on high-value assets and at the same kind of a profit margin. We expanded that in DP Cast with the acquisition of DP Cast in 2022. Is continued to, again, with that breadth of competencies, has delivered some revenue growth and some earnings profile that we're steadily, you know, attaining, our target of 25% organic growth, a 25% kind of EBITDA contribution.
Our numbers, at least, trailing twelve months, is at 26% organic growth and a gross margin of 19.7% and an EBITDA margin of 11.8%. We're on track to at least continue to improve on those numbers. At those numbers, they're generating cash and we're looking to, you know, we're looking to continue to generate cash and have our eyes on the next acquisition that we look to augment what we have, build on that portfolio that we have in order to continue on that track of creating some value and attaining those kind of growth those growth aspirations.
Our recent performance, I think, at least, demonstrates to a large extent a track record of being able to deliver on that promise. That's a little bit of the story, the Omni-Lite story. With that, I'd like to you know, if there's any comments or questions or interests.
I think that's not what you're doing, but the Cal Nano stake.
A little bit on the Cal Nano stake. Well, we did sell a few shares back a month ago. You know, as part of our long-term strategy of it, at some point, taking and converting that, I mean, it's been a good investment for us. It continues to be a good investment for us and, you know, we're taking the opportunity when we can to convert some of that. It remains a good investment for us, so we're being prudent in how we manage that.
Are there any operational synergies between Omni-Lite and Cal Nano, or is it purely a financial?
There are some modest, very modest synergies. You know, Omni-Lite made the investment in Cal Nano many years ago. The reason it's not under the Omni-Lite umbrella, and it's its own separate entity, it has the same theme of producing very high performance, very specialized components. It uses a different technology. It's Cal Nano is more of a disruptive, potentially disruptive technology. Very interesting, exciting. That's different from Omni-Lite, which takes very well-established techniques and manufacturing techniques, perfects them, and then scales them to produce, you know, a component. In a sense, they're a little bit different. With that thesis, that's why Omni-Lite and Cal Nano are separate entities.
They're in the sense that they're producing components, high performance components, there is a little bit of synergy. It's mostly an investment that was made because there was a thought that there was a future and a need for that type of component and it's proven out to be that case.
Sorry if I missed this, where are you with, like, capacity and utilization? You had mentioned on your last call that, you know, selling some of the Cal Nano might be a bit to fund growth. Just wondering whether the existing footprint might be able to grow with that.
We estimate, you know, in our three locations that, you know, they're about the same and they're less than 50% of capacity. For the most part, well capitalized in terms of CapEx. You know, our CapEx requirements, we think are fairly modest, at least to double our revenue.
Okay.
As you saw with Cal Nano investment, is there capital gains tax owing or do you have tax shields that's offset that?
Well, there are some, haven't really done an in-depth analysis of all the tax implications, but we'll utilize any that we have.
Gain is going to be a big number.
Yeah.
The shares are held by the Canadian parent. The, you know, the Canadian parent in the normal course generates tax losses because it has overheads and historically didn't have revenue.
Right.
There's some shield there. There may be some shields potentially through the cast of U.S. operations. You know, do not own the shares.
You mentioned, looking at potential acquisitions, but with CAD 2 million in cash and a market cap of CAD 20 million, I'm assuming you're thinking small, relatively small incremental rather than transformational acquisitions.
Yes, 100%. I wouldn't leave out, but I think the target is small, one that's digestible and one that fits the profile that I laid out, which is that is producing parts already in aerospace either qualified or close to it. That has a profile similar to what we're doing. I think the opportunity that we have is we've got a great base. We cover the majority of the, you know, between covering electronics, forming metals, and casting metals is a great base to build on, kind of moving up the food chain. If we didn't have such a wide base, it may be a little bit nichey.
We have a great platform to kind of expand vertically, but it would be, you know, I would say strategically and one that's digestible. One of the things that I think allowed us to leverage DP Cast, it's been a process, but a continuing one that continues to grow in the right direction, is its size and the ability to put in business systems that can help leverage whether it's sales channels, whether it's operational performance, running the business. That's more attainable on a small size. Yeah, our targets are well, you know, it's strategic in nature and not based on breadth.
Yeah. Challenges that Boeing is having and that Airbus is having around their supply chain, like you've still been able to grow revenue really nicely this year. Do you see those having any presenting problems going forward, or you're kind of insulated from that?
Well, a lot of our components, you know, we're not too captive to any one particular customer. Although Boeing, you know, is a, you know, our customers or a customer of our customer. Say that it would have no effect, you know, wouldn't probably be saying it has no effect, but it hasn't had a big effect. Again, a lot of our components are not one platform by design.
I think the effort it takes to develop highly engineered whether it's highly engineered fasteners or a component, a form component, a cast component that goes on a jet engine or a gantry sensor, you know, for a missile, is typically those kinds of components if you spent the money to develop components like that, you're gonna put it on multiple platforms because it has a legacy. We have the luxury a little bit that we're not one platform-centric or not one customer-centric. You know, part of that is by design. You know, the need for components, you know, there's still a very much an ongoing need.
I think and we'll see how this whole Boeing thing works out, but, to a large extent, it hasn't had much of an effect on us.
Any questions from online?
When you break down geographically, are you able to do much in terms of breaking down by segment, sort of, you know, where the growth has come from? Or where do you foresee sort of that?
You know, I would say the breakout that we've talked about still remains, which is, you know, on the forming side, it tends to be faster and structural type of components, and it will continue just by its nature. I think a little bit of exciting kind of opportunity there, as I've mentioned in one of my recent press releases, is that, you know, it's not directly related to cross-selling, but is the opportunity to put Inconel fasteners, which are more used on a jet engine versus a structural on a fuselage. As you know, you know, we're putting castings on jet engines also.
You know, there's a bit of geography, but also, you know, where it goes on a plane. That's been a good opportunity, and I think driven there's just fewer manufacturers working with these specialized metals and, you know, the jet engine business has been, you know, plagued with supplier problems due to that same very nature of they're rare. There are not that many suppliers. On the electronic side, there's a new technology, you know, called gallium nitride, which I've made mention of, which is a newer semiconductor. It's not completely new, but it's starting to find its way into a lot of systems where range of performance and power efficiency are important, so things like drones or things like, you know, autonomous vehicles.
GaN technology is an exciting area and that most notably has an effect with for electronics, but other lightweight materials that we form and cast can have an application of the same type of, you know, lightweight, very efficient sensor kind of electronics. On again, on the casting side with just the problems with supply chain in general, with very complex shaped, whether tubing or fluid handling on jet engines, again, specialized material, very few manufacturers that are qualified. Delivery, long delivery for our competitors there have given a real opportunity at, let's say for our casting to get, you know, gain market share. Those three areas really are driving a lot of growth.
You've got pretty ambitious goals for gross margin, 50%, EBITDA margin 25%. You seem to be making good progress. Essentially, if you're a 3rd-tier supplier to an industry where the big guys dominate, is the business capable of being highly profitable? I'm thinking of the automotive industry where the big customer says, "This is how much we'll pay this year. Next year, we'll pay 10% less. The year after that, we'll pay 10% less." You determine the price of the supplier. I'm thinking of Avcorp in Vancouver. I'm thinking of CME Aerospace. They are always getting these orders, but they never seem to work out as profitable as they had hoped for.
That's a very good question. I think it comes to when I mentioned sort of niche applications and not commoditized, even within the aerospace is if you really build the niche, the ones that are very difficult to manufacture, the ones that are an Inconel fastener, for example, or a highly engineered fastener, five-part fastener that includes being able to produce complex shapes in a certain volume to the type of quality. You can demand that, you could demand that profit margin, but it means staying true to that thesis, staying away from. The balance would be maybe sacrificing a potential growth opportunity at the sacrifice of margin. Our choice is, we're gonna take the margin first, right?
Not get into that commoditized. You know, almost by definition, there are, our calculus is that there's enough opportunities for growth within those niches. Again, it comes down to staying focused on that and then having, you know, producing reliably to our customers. Their best chance at the next win is to demonstrate on-time delivery, quality from your previous one. Again, the cycle time, when we're talking about these types of components, you know, the downside can be it takes a year, 18 months to produce the initial parts to get qualified. Again, then it has the useful life. These systems have very long lives, measured in decades. You get the annuity of that, you know, that part.
Some of it is just discipline in staying to that thesis, and we are committed to that because that drives our whole, you know, generate cash, drives our growth. It kind of goes hand in hand with our thinking.
Okay. Good.
You know, how does Omni-Lite stand to fare in a, you know, more protectionist U.S. and globe? Just thinking if the, if, you know, election goes a certain way and, you know, tariffs had to deal with that kind of effect on the island in a major way.
We don't source anything, any raw materials from internationally. It's all domestic. Most of that is driven for the fact that, you know, a disproportionate amount of our components are either aerospace or defense and control. We're limited by supply chain in that sense. All of our manufacturing is, you know, onshore. We're doing it ourselves. I mean, that's our, is what we do. We have In fact, if anything, the bit of the onshoring really stands to benefit, you know, those kind of geopolitical kind of things stand to help us, not, you know, not hurt us.
Okay. Thanks.
Any further questions? Not to call out Frank, but I've never heard Frank be as quiet as he is.
Well, maybe I can ask one.
Sure.
Maybe that has been addressed, but I think I'm sure the largest financial asset on the balance sheet is of stake in Cal Nano. I'd like to, you know, spend a little bit of time just to understand how the stake is being managed. Who on the board would be responsible for making decisions on, you know, when we convert some of that position into cash?
The board decides, but, you know, in terms of.
When you say the board, everyone on the board makes the decision.
Well, the board as a group makes a decision.
Got it. Got it. Roger would participate in the decision as well on whether we sell or keep the stake in Cal Nano.
Well, if there's a reason to any time if there's a
Yeah
self-interest, then it's not, then you're not included in the vote.
It is a discussion.
Sure.
Like, it's not like there's a resolution at a vote.
Yeah, yeah.
It's really just a discussion.
I assume someone responsible for having a model or doing some type of validation or analysis on where we think the business is worth and when it's the right time to sell it, and I assume you participate in that discussion.
Yeah. I mean, I'm not sure that we have a model account, but, you know, the Board has discussions about it, and Dave is in charge of the trading decision.
Got it. Well, I guess, how is it valued then if you don't have, what's the valuation process for deciding when is the right time to sell?
Well, the board, I mean, the board has spent quite a bit of time analyzing that. You know, without getting into detail, we've had several thoughts. It's been an investment that, you know, goes back several years. It's an ongoing discussion the board, you know, takes seriously. I think evidenced by us, you know, making a small sale means that we're not You know, we're paying attention to it.
Well, that's what I'm trying to understand, right?
The other thing that's important is the urgency of disposal. If we had an acquisition that we were wishing to make.
Sure
That creates.
Yeah
a sense of urgency, and then you can make.
Yeah
comparison one versus the other, which alternative you prefer.
Well, I guess I'm trying to understand sort of the logic behind the decision-making in light of the trade. I think beyond the trade that I've seen on SEDI is roughly 100,000 shares that's been sold around CAD 1, right?
Yeah. You know, while Dave is not an insider at Cal Nano personally, we feel it is best practice to follow conventional trading blackouts. We made a small sale, and then we hit the quarterly trading blackout. That's why there was a sale and then a stop, termination of the sale.
I guess maybe why are we blacked out given the fact that, you know, We're not insiders, I guess?
No, no.
I assume we don't have.
We're not insider-
Yeah.
We're not insiders, to err on the side of caution, treat ourselves. Again, this has been a good investment for us. We're not looking to, you know, dispose of it overnight. We're looking to capitalize on it to the extent like any other investment.
Yeah. That's what I want you to do, right? As an owner, that makes perfect sense.
We are co-located with them to some degree, so we figured not being in a, you know, we don't have a prescribed timeline. We think it was more prudent to stay with, you know, consider ourselves as a. Even though we're not privy to any inside information, consider ourselves like an insider and just respect the blackout period. That was why.
Got it. It's just what confused me is if I think about your transactions in August, like I'm not sure how long of a blackout period Cal Nano has. Usually, it's a couple of weeks before they release earnings. I'm not sure. You would know better, Roger. If you felt that it was fairly valued or attractively valued at CAD 1, it seems surprising that you wouldn't have sold any when the volume has gone up and the stock price went at CAD 1.09. If you thought it's the decision of the board.
No, because it is a blackout.
It was a blackout.
Got it. You were prevented because you were in a blackout.
We always did a blackout on the last day of the quarter, and we stay in the blackout until 48 hours after the earnings release.
Got it.
The reality is most of the time we're in blackout.
Yeah.
They because obviously at year-end, you get an extra long blackout because the annual results aren't out until the first quarter is already finished, you're stuck in the first quarter blackout. The reality is there's like three six-week periods a year where we're not in blackout.
Got it. Well, it's Yeah. That, that strikes me as, again, I was surprised that you would be in the blackout, but I guess that explains why you know, haven't been active, and only sold 100,000 shares. I guess, you know, looking at the number of the volume that has traded, again, does it make sense to sell 100,000? Like, are you prevented from creating a block or finding that opportunity to transact a B2B?
No, we're not. No.
Yeah.
We've looked at whether that opportunity exists, so we're very We're treating that investment like you would with any. Look, it has a lot of value.
Well, you're the biggest shareholder because you have about 17% of the shares now.
Yes. Every time we sell, we have to do a SEDI filing within five days.
Yes.
You're sending signals every time you sell.
Yeah. Yeah.
It's a very delicate situation. You don't want people to think that there's seven million shares for sale 'cause then no one will buy a single share of that.
No, I agree. That's why I was surprised by a 100,000 share sale, right?
What do you do?
Yeah.
You try to find a block buyer, let's say they weren't in.
Yeah.
Do you just do nothing? Do you do something?
Got it. Yeah.
Find a strategic buyer for the company.
Yeah.
You can deliver them 17 percentage points off the milk.
I think the other thing by making a small sale, we told the market that, you know, if you want to buy some Cal Nano, you probably know where you can go to ask. No one's asked.
Surprising, yeah. Thank you.
Not to beat a dead horse here, but I'm not sure what the Canadian disclosure rules are, but do you have to report those sales as they're made?
No, we do report. Yeah.
They have to be reported within five calendar days on a public database.
Okay. Those would be, whatever the, where would those be printed?
It's a database called SEDI.
Okay, I got it.
All right, good. One other thing, David, I think you mentioned that, I'm having a little trouble hearing, but CAD 2.1 million on cash. Was that at the end of?
Q2. At the end of Q2.
End of Q2. I understand Cal Nano has just about wiped out its debt with you, those payments came in during the third quarter or would it be in the fourth quarter?
They still have debt as of the end of Q2.
At the end of Q2, yeah. I think Cal Nano said they paid, like, CAD 386,000 something to you.
Yeah.
Yeah, they made a payment in Q3, but there still is a balance remaining at the end of Q3.
Right. Okay. The CAD 2.1 million in cash at the end of Q2 will be increased by a certain amount by the end when you report Q3, right?
Yeah, when we release the Q3 numbers, we'll have that number in there.
Okay.
At Cal Nano's August 31st statement date, which is in the public domain, the remaining loan was just under CAD 600,000, and it's due in May 2025. You know, it is reasonable to assume that that debt will be paid by May 2025.
That's all publicly disclosed. That's all, yeah.
There's an option to spin the Cal Nano investment off to shareholders. Are you just about keeping it capital available through M&A? Why wouldn't you do that?
I mean, it's been thought about. You know, I think anytime an investment has this increase in value, it, you know, it's an option that, you know, we've had discussions about, as well as, you know, the idea that it has value in, you know, not necessarily converting it to cash, but its intrinsic value as a, you know, in its current form, in the sense of an acquisition. A particular type of acquisition that might have value. So that's its primary.
You mean like using the Cal Nano shares as currency?
Yeah
for Omni to acquire something?
Yes.
Okay.
As a possibility, a particular type of acquisition target might, and everything in between. The idea distribute to shareholders. The value, you know, our, you know, I think the dominant value that came out today is, potential acquisitions have, is, could have a better return, or at least we're analyzing the return value of that versus returning it to the shareholders, now. It's been something that we've discussed and thought about.
There are some complications on sending a dividend to U.S. shareholders. It is messy. It's not as clean as Canada, and it brings up some potential tax liabilities for Omni-Lite.
I mean, as you guys were obviously aware, like Cal Nano has become such a fully part of the company's value that it's almost like Omni-Lite's becoming a Cal Nano like tracker stock, and the Omni-Lite core operations are sort of like just a dead end of that. From my perspective as a shareholder, that doesn't make sense as a long-term situation. Like, you have to do something about that.
You sold chips. Yeah.
Can I just ask one more on the core operations? Like you've had really strong revenue growth this year. In terms of the drivers thinking ahead 12, 18 months, like is there anything changing materially, either positive or negative, that would make you think that the growth rate is slightly different from what it's been?
Well, my recent comments about, let's say, you know, Inconel fasteners, shortages on critical components on jet engines that, you know, require, let's say, casting technology and some [Inaudible], you know, [inaudible] these we believe are sustainable and will continue to help drive growth as well as newer components. I mean, we're looking to, you know, continue to add to that list. It's a balance between, you know. Again, part of the flywheel of our business is delivering to our customers. Again, we're putting, you know, high-performance components. You've got to earn the right to even do that in the beginning, you have to continually just kind of re-earn the right and not take one on and fumble.
Because if you fumble materially, that can really hurt your prospects and your subsequent growth. It's a balance between don't take on too much, I mean, we have capacity. The capacity to grow isn't necessarily the same as to take on new products. One is engineering. We've got a deep engineering experience, and then the other side of it is to produce what you've engineered. When I comment on the 50%, you know, that's more on the production side. On the development side, we do have limitations, but we have capacity. You know, I mentioned probably 18 months ago that was four or five new products, and that converted to, you know, a not the majority, but a good percentage of our current growth that we have.
We still have capacity to take on more and as we look ahead, that'll continue to be a driver is new components.
Maybe on DP Cast, maybe an update there on your relationship with Pratt and anything meaningful over the next 12 to 18 months we should think about any upside there potentially. How we should think about that business. I know it's taken a lot longer, maybe a little bit longer to get it to where you want it to be. How you feel over the next, you know, opportunities over the next 12 to 18 months in that business specifically.
That business, I think it's where we are in the maturation process there is we're well on our way. As we talked about, they're now starting to contribute. You know, timeline in aerospace and defense, you know, the good part of the aerospace, if you're there, you produce, it's decades, you have annuity. The bad part of the defense, it does take time. A bit of the DP Cast story has been rationalizing its products. It does take time to get to shift all that capacity that was working on, let's say, more commoditized components to aerospace. In many ways, it's as fast as they can digest. It's less about us, but how fast you can just, you know, change that.
Its momentum is there. You know, I feel very confident that it'll continue to improve and to improve to the point where it can meet my model of, you know, 25% EBITDA, 40%-50% gross margins. A little bit of sort of on the growth side is very careful. At least my experience, what we try to do is don't push growth too much before you've earned the right and you're producing at a profit. Profit comes first. That sort of gives you the right to now take on the next component.
I think the organic growth out of the DP Cast might be attenuated a bit until we get a little closer to our target, but there is still growth opportunities there, but we're managing that more sort towards, you know, let's meet our profit profile before, you know, being too aggressive on the growth side.
Yeah. You mentioned in the past that you've probably underpriced some of the business historically. Well, DP Cast has prior to your acquisition, where they weren't earning the margin that, you know, would qualify as attractive margin for you. Are there opportunities, you know, I assume those contracts come for renewal from time to time. Are there opportunities in front of you to get improvement in price and to get your fair share?
Yeah. Yeah. I mean, I mentioned that I think in last press release and in comments about, you know, there's sort of this spot buy mentality that's been creeping into a lot of aerospace and defense instead away from long-term agreements. But you still have some long-term agreements, but there's opportunity even within a long-term agreement. It's, it's a, it's a negotiation with a customer. It can take time, but those opportunities do exist. Of course, when you have a renegotiation of a long-term agreement, that can, that can bring maybe from a time horizon and a more digital increase.
There may be opportunities, you know, at the end of 2025 to have even more sort of a profit expansion. Sometimes that repricing, I call that part of it is business rationalization, is because at a higher price, you may lose it because it's a commodity component.
Sure.
That's part of the whole process of staying disciplined to the profit profile and part of that whole business rationalization. We've made steady progress there, and 2025, we're expecting to do the same. At the end of 2025, you know, heading into 2026 may be even more of a digital increase with, you know, there's not too many LTAs that the company has, but there are a couple.
That exists. The 40%-50% gross margin, that's pretty, like, high specialization for the. Are you at that point yet with that? Or does that take much more CapEx or time to sort of?
Well, what you've seen and what we deliver is the blended, obviously.
Yeah.
There's a significant portion of what we're producing that is already at that 40%-50%. The blended, you know, how you arrive at it obviously is you have some lower and those are ones that we're, you know, that's the, you know, weaning off those.
Got it. Okay.
I think what's tempered also is it's difficult to meet that margin during the development phase. You know, part of it is, you know, when you get on a program, I mean, we make profit even on the early stage ones, but there is a bit of an investment. There is a little bit of depressed margin on those.
Sure.
Proportionally, you know, that we model that is that's the difference maybe between 40 and 50, not 40 and 35. You know, the blended rate lower is because not every program is at that. We have, you know, there's a significant number that already meet that margin.
The 40-50, that was for just DP Cast, or was that for Omni-Lite as a whole?
Well-
Everything?
Everything.
Okay.
Yeah.
Okay.
That's our corporate model.
Great.
It's interesting because these, in some ways, they're, you know, they're distinct, you know, electronics, microelectronics, casting, forging, or there are many similarities, and one of them is pricing profile. Whether if you're putting a rare type of electronic component, and you do it right and you can see the value it's bringing to a customer, it's actually eerie how close of a pricing model it is to a forged part. You're doing the same kind of, you know, and you're in that space. That's why as a corporate model, it's not a blending of 50% over here or 60% over here and 30% over here.
I think it's because of when you're doing those very specialized components, you know, that kind of premium is modeled.
Sure. Sounds like it. Yeah.
For anyone who's interested, the California Nanotechnologies annual meeting is in about 10 minutes. Okay
on a separate Zoom link.
You need to be a shareholder.
Well, you can join us again. If anybody wants to, you can join us again.
We all are shareholders.
Yeah.
Wow.
By, yes, not directly, but indirectly.
Great. Well, thank you very much, everybody.
Thank you.
Thank you, Roger. See you later.
Thank you.
Thanks, guys. Appreciate it.