AirBoss of America Corporation's (ABSSF) Second Quarter 2025 Earnings Meeting Transcript

AirBoss of America Corp (OTCQX:ABSSF), a company that operates in the U.S. and Canada, is currently grappling with trade and tariff challenges impacting its manufacturing operations. These challenges stem from economic headwinds, inflationary pressures, and the risk of escalating tariffs and retaliatory trade measures.

The company is actively managing these trade-related risks by implementing contingency plans. These plans include rebalancing production and sales activities between the U.S. and Canada to mitigate tariff impacts. This strategic operational adjustment aims to minimize costs and supply chain disruptions caused by tariffs and the broader economic environment.

Despite these challenges, AirBoss is focused on continuous improvement and cost management to sustain its manufacturing momentum. However, ongoing uncertainties regarding volumes and potential additional tariff impositions pose difficulties in forecasting recovery for its manufacturing segments, particularly in AirBoss Rubber Solutions (ARS) and AirBoss Manufactured Products (AMP).

The increased costs and supply chain strains from these trade issues have contributed to a softened market environment and cautious financial outlook, as evidenced in recent earnings reports and analyst commentary.

In addition to these challenges, AirBoss is also exploring opportunities to grow revenues related to the nearshoring of overseas imports and is seeing potential defense work opportunities as a result of Canada's recent plans to significantly accelerate defense spending.

AirBoss Rubber Solutions experienced both revenue contraction and reduced margins in Q2 2025 compared to Q2 2024, primarily caused by weaker demand and shifting tariff situations. However, the company has been successful in streamlining its supply chain in the U.S., utilizing as many U.S. raw materials as possible.

The Defense Products business continues to collaborate closely with its suppliers and government partners to mitigate delays to its Bandolier program. The company is also having ongoing conversations with automotive customers about their willingness to offset tariffs, but the company has done a good job to keep most or all the raw materials localized anyway.

The latest awards received at the rubber molding business under AirBoss Manufactured Products (AMP) have been for U.S. production and utilizing U.S. raw materials.

AirBoss expects further uncertainty to persist in the coming quarters with volume recovery difficult to anticipate due to potential tariffs, duties or other restrictions on trade. The company will continue to focus on long-term priorities while investing in core areas of the business to expand a solid foundation that will support long-term growth.

In a recent earnings conference call, Chris Bitsakakis, Co-CEO & President of AirBoss, mentioned the company's progress in producing more customized, higher-margin color and silicone compounds, with the launch of its first silicone line in November 2021. He also explained that the slow industrial output in the U.S. has necessitated the company and its competitors to get a bit more aggressive on pricing to defend, which has resulted in some drop in the margin profile in the last quarter.

The industrial production of durable goods in the U.S. in May and June 2025 was the lowest it has been in the last 5 years, while construction spending has been on a steady decline over the last 12 months. Despite these challenges, AirBoss reported a 3.4% increase in sales in Q2 2025 compared to Q2 2024, with a gross profit increase of $7.7 million and an adjusted EBITDA improvement of $4 million.

AirBoss continues to work with its customers and suppliers to find opportunities to reacquire the critical raw material for the Bandolier program, which is in tight supply globally. The company is also working on a U.S. supplier for the critical raw material for the Bandolier program, although it's in tight demand in the U.S. as well.

In summary, trade tariffs and economic headwinds are currently complicating AirBoss's manufacturing operations across the U.S. and Canada by increasing costs and forcing operational shifts to manage cross-border trade risks. The company is actively navigating these challenges through strategic production rebalancing and risk mitigation efforts.

AirBoss is considering investment opportunities in the nearshoring of overseas imports as a means to circumvent trade-related issues.
The government's recent plans to significantly accelerate defense spending in Canada present potential business opportunities for AirBoss.
A strategic operational adjustment at AirBoss involves rebalancing production and sales activities between the U.S. and Canada to mitigate tariff impacts on its manufacturing operations.
Despite ongoing trade challenges, AirBoss is investing in core areas of the business to expand a solid foundation that will support long-term growth, including the launch of customized, higher-margin color and silicone compounds.

AirBoss of America Corporation's (ABSSF) Second Quarter 2025 Earnings Meeting Transcript