Hello, everyone, and thank you for joining today's Omni-Lite Industries Investor Call. As a reminder, all lines are in a muted or listen only mode to prevent any background noise. After today's prepared remarks, we will have a question-and-answer session and instructions will follow. To get us started with opening remarks and introductions, I am pleased to turn the floor over to Amy Vetrano-Palmer. Welcome.
Good afternoon and thank you for joining us. With me today is our Interim Chief Executive Officer, David Robbins, and Alex Ryzhikov from the Board of Directors. Our call is being recorded and will be available for playback, the details of which was in our press release issued this morning. The purpose of this call is to provide an update on Omni-Lite's financial performance and operations for our second quarter 2026 results, which was released this morning, August 19th. After our remarks, we will open up the line for any question-and-answer. If you have not received or seen a copy of our press release, which we did release this morning, you can find it on our website at www.omni-lite.com or email at d.robbins@omni-lite.com.
Before I get started, I would like to remind you that today's discussion will or may include forward-looking statements, including information regarding Omni-Lite's performance based on our views of the company's business and the environments in which we operate, our future plans, objectives, and business prospects, and anticipated financial performance. These forward-looking statements are subject to future risks and uncertainties that could cause the actual results or performance to differ materially. We are also mindful of the risks and impacts of changes of the health of the general economy, including the effects of the U.S. financial market, U.S. and global commercial aerospace markets, and the U.S. Department of Defense budgets. All forward-looking statements should be considered in conjunction with the cautionary statements contained in our press release in Omni-Lite's SEDAR+ filings. The company disclaims any obligation to update any forward-looking statements that are discussed during this call.
I'd also like to mention that in addition to reported financial results in accordance to IFRS during our call, we may also discuss or reference non-IFRS financial measures such as adjusted EBITDA and free cash flow. A reconciliation of these metrics, if applicable, is included in our filings and press release. Lastly, unless noted, any reference or discussion of our financial results and metrics are in US dollars. I would like to now turn the call over to David. David?
Thanks, Amy. Good afternoon, everyone, and thanks for joining us. I would like to make a few comments about our second quarter and year-to-date 2026 performance, followed by comments on current business. Second quarter 2026 revenue was a record for Omni-Lite at $4.8 million. We saw strong revenue in the quarter driven by a combination of increases in forged fastener products and electronic components. Adjusted EBITDA for the second quarter 2026 was $926,000 with a year-to-date adjusted EBITDA of $1.8 million. This EBITDA contribution reflects generally a good mix of continuous production versus low volume production of forged components and electronic components business, as well as increased contribution from our casting components business. Bookings for the second quarter were $6.4 million, which represents a 1.34 book-to-bill ratio and resulted in a backlog of $10.7 million as we go into third quarter.
Bookings in the second quarter generally mirrored the climate over the last four quarters of strong demand for forged fastener components, including newer rivet components, increased demand for missile defense related electronic components, and jet engine casting components. Our targeted new product opportunity bid visibility is in the tens of parts, which is historically healthy, and we expect to convert many in the coming quarters, which is a driver of future potential revenue 12-18 months out. With that, I would like to turn the call back over to Amy. Amy?
Thanks, David. David has addressed revenue and EBITDA, and I will make a few comments regarding our cash. Adjusted free cash flow, which we have defined as cash flow from operations minus capital expenditures and adding back lease expense, was a source of approximately $132,000. We continue to be debt free and maintain a strong cash balance of $3.1 million, which is up about $213,000 over a year ago today. We do expect to continue to have a strong source of cash as we go through the year as receivables turn into cash. This does complete our prepared remarks and we would like to open up the call now for questions.
Ladies and gentlemen joining over the phones today, if you would like to ask a question at this time, simply press star followed by the digit 1 on your telephone keypad. Pressing star and one will place your line into a queue and I will open your lines individually and you will be invited to post your question. Once again, ladies and gentlemen, that is star and one if you have a question. We will hear first from Rukun Duggal at Chandern. Please go ahead.
Hi, David. Hi, Amy. Hi, Alex.
How you doing?
With these last two earnings releases, all the work you guys are putting in is certainly showing. I wanted to talk about DP Cast a little bit because when I look at your numbers this last quarter, Canada, at least based on the numbers in your MD&A, grew 30% sequentially and became a bigger slice of the mix. Yet consolidated gross margins were pretty steady at about 33%. That kind of suggests that DP Cast's margin profile stepped up in this quarter. Is it fair to now assume that DP Cast is now reasonably profitable? I think in May you told us that the contract re-up that we negotiated last year was back-end loaded. Can you give us a sense of what DP Cast might look like in the second half once the pricing and volume fully kicks in?
Well, certainly directionally Q2, DP Cast performance in Q2 was directionally what we had predicted for a while. Yeah, we continue to expect that with the contract pricing in the second half to have a positive effect. There's always some variables around, but I think Q2 sort of reflected an increase that is attributable to better pricing and operational improvements that are ongoing.
Okay. Just to talk about sort of the backlog a little bit. I think last quarter we talked about the rule of thumb that roughly half the backlog turns into next quarter's revenue plus spot. The math worked pretty much right down the middle of that formula this quarter. So half the $10.7 million in backlog would point to something like $5.3 million in Q3 before spot. Are DP Cast revenues or anticipated revenues also sitting in that backlog number, or does that business run more than spot? Because if the back half loaded contract volumes aren't in the $10.7 million, then I'm guessing the second half could look reasonably better than the formula alone suggests.
No, DP Cast backlog is in there, and all the businesses run as a combination of the spot by near term as well as some visibility. I think in my last call, I mentioned that we have a little bit more visibility than normal, but still that rough 50%. I'd be careful thinking that's an exact 50%, but we're still in that zone where a lot of our backlog does convert in the next quarter. But to get to this was a pretty good bookings quarter. They got us backlog up over 10. It does point, though, towards very robust revenue over the next couple quarters when we have a backlog like that.
Just talking about backlog in a little bit more detail. David, I think in the release you talked about organic expansion in fasteners and electronics. It sounds like volume and price on the installed base. Can you talk about the qualification funnel a little bit, especially with eComp a year in? I think in May you talked about PAC-3 content, and can you talk about sort of specific new platforms you're actively qualifying on or second sourcing? I think in your prepared remarks, you talked about I think it was 10 components. The more detail there, I think would be better.
Well, it's hard to, without getting into exact programs and their forecast, to really give that much more color. But I would say that one of the drivers of this, our recent bookings, positive book-to-bill ratio, and our increasing revenue is that we, and I kind of mentioned it in my narrative here, was that it's a good mix of sort of continuous production versus low volume production. What that translates means it's more what I would call programs of record that have high demand. So you mentioned PAC-3. I've mentioned that several times. So that's just one of a particularly program that has some good visibility and some ongoing needs, and there's demand that's out years, right? Then I mentioned forged collars that have a particularly strong continuous production and some pretty good visibility. So I would characterize it.
A year ago, if you listen to the tape, I mentioned that we had booked, at the time it was a couple hundred thousand dollars worth of new components that in a year from now could turn into some meaningful revenue, and that's what happens, right? Usually programs, if you hit it right, they can have some more what I call continuous production. We have, I would say, several, less than 10 and more than four, that are in that zone where we're almost nearly continuous production of either a part or a family of parts. I think my best advice is to continue to watch our bookings. As our bookings go, and if we're booking positive book-to-bill on a continuous basis, or more often than not, that's the sign to look for.
On the programs as a whole, is there something structural that may make the duration and the size of bookings potentially increase over time, and that becomes sort of a testament to how structural some of the shifts are?
Well, it's how good you are at picking the right programs, right? Picking a program like PAC-3, that was a good call, right? There's a lot of visibility. We have, and I've tried to mention them. I did mention rivets. I had talked about that before as a whole new family of product in our fastener. Rivets have high demand in both military and commercial air transport. That was a new product development similar to our blind bolts, but added a whole new element. We're enjoying that. There's a combination of new components that are very related, but that also is some good programs that are really running into a good space. I mention missile defense because there's a lot of new program development. There's drones with sensors that need for missile defense or missile interception.
That's an area where we're on some growing programs, maybe not to the extent of PAC-3, but programs that as they turn from low rate to more production. It's sometimes difficult to see time exactly, but it's been a healthy environment. If you look at maybe the last year as a benchmark.
Thanks, David. That's very helpful. I wanted to talk about margins a little bit because, in your investor presentation, you laid out a 50% gross margin target. These last two quarters, the gross margin has been remarkably consistent. It came in about 33%. I wanted to just talk through what gets you from here, the 33% that you've just hit, to 50%. Is it mainly DP Cast operating at a more steady state margin, or is there more to the bridge? If it's DP Cast do we get closer as time goes on?
In the press release, I mentioned pricing. Really this quarter, especially this quarter, I guess, was a predictor a little bit of where that 50% comes from. At 50%, it means all operations have to be close to that. Certainly the pricing adjustment is reflected in their better DP Cast better performance, as well as some improvements in productivity. Pricing isn't necessarily only related to DP Cast. It's something ongoing that's part of a disciplined pricing approach that we take. I think Q2 actually reflects where that even 50% comes from. We're looking to improve further. That's still a target. That's still a target of ours, is to be in that 40%-50% gross margin roll, and we're getting close.
David, if I understand that better, as we roll into Q3 and Q4, as we start to see more pricing in DP Cast, then the trajectory should start looking a little better. Is that the expectation?
Well, certainly knowing we have more back end of properly priced parts is certainly helping, yes.
Okay. CapEx just a little bit. The company has historically had very, very low CapEx, and I did notice that it is rising, and the release mentions investing in manufacturing productivity. My understanding is that your current plant can already handle materially higher revenues. Is there a specific area you are focusing the investment in? I just wanted to sort of get a little bit more color there.
Well, I think if you look at the actual number, yes, it is an increase over something that is sort of ridiculously low.
Yeah.
These are very modest investments. I think it is maybe just on a little bit of color, there has been some investment on the electronic side to keep up with ongoing visibility into production and environment that we do not normally see that kind of visibility. There has been some there, and I would say just modest places where we can replace out further automation. Sometimes it is not putting a whole robotic system, but it could be a small cobot or something that sort of mechanizes a piece of something. That is ongoing. I expect at least there will be more of that than almost none. We are not seeing any huge needs for material, large purchases. There can be some more of these labor-saving initiatives, but we do not see any near-term needs for CapEx, major CapEx.
Okay. That is perfect. My final question is for Alex Ryzhikov. Alex Ryzhikov, I think this last quarter, at least in the MD&A, you could see that there is investment in people, both maybe just to improve manufacturing a little bit, and there were also some consulting expenses, which I associated with just the search for a Chief Executive Officer. If you could just talk through that process a little bit and what you are thinking, that would be helpful.
Sure. I think you are right. There are multiple components. We are not going to break them down, but some of them relate to the Chief Executive Officer search process, which I think on the last call, I mentioned that we were going to be deliberate, we are going to take our time. We have made progress, but it is something that we are not going to announce until we have, obviously, something finalized and ready to announce. The work continues and hopefully we will be able to announce something with everyone in the future. As it relates to some of the additional expenses, we mentioned consultant expenses, and I think also probably on that call, I mentioned that we have brought additional resources to assist with DP Cast as well as Cerritos. Those are reflected in the P&L today.
Again, some of them will go away, pieces of that will stay there, and again, to be determined with the hiring of a full-time Chief Executive Officer. I hope that answers it.
No, that is perfect. No, thanks so much. All the work you guys are putting in is certainly showing. That is it for me. Thanks very much.
Thanks, Rukun.
We have no further signals from our phone audience. Ladies and gentlemen, this does conclude today's Omni-Lite Industries investor call. We do thank you all for your participation, as well as those who signaled for a question. You may now disconnect your lines. We hope that you enjoy the rest of your day.