Amaero Inc. CDI Q2 FY2026 earnings call

• Strategic Positioning: Amaero is positioned at the intersection of rebuilding the U.S. defense industrial base, reshoring sovereign manufacturing, and advanced additive manufacturing adoption. The company addresses critical bottlenecks in spherical metal powders and PM-HIP large complex parts.
• Capacity and Technology: Amaero operates three EIGA Premium atomizers with ~680 metric tons annual capacity. A fourth atomizer is expected in June 2027, increasing total capacity to 920 metric tons. The company has commissioned a custom titanium sieving system that doubled titanium throughput.
• Safety and Restart: Following safety incidents earlier in the year, titanium production was paused for six weeks for a comprehensive review with Jensen Hughes. Production resumed in late July with no order cancellations or employee attrition. Yield optimization is ongoing.
• Qualifications and Contracts: PM-HIP technology is qualified to manned space flight standards. Amaero secured its first LRIP contract with BPMI ($350k announced, part of larger pipeline) and a $4.5 million Department of War contract for alternative refractory alloys. Backlog stands at $13.4 million as of September 30, 2026.
• Financial Infrastructure: The company completed its IPO on Nasdaq, raising $17.0 million net proceeds. Fixed production costs are largely in place, setting the stage for operating leverage as revenue scales.

Revenue for the third quarter of 2026 totaled $4.1 million, representing a 35% year-over-year increase. The Metal Powders segment contributed $3.2 million (78% of total revenue), up 19% year-over-year, driven by ramping atomization capacity and expanded customer relationships. The PM-HIP segment contributed $0.9 million (22% of total revenue), surging 146% year-over-year, including initial revenue from the Low-Rate Initial Production (LRIP) contract with BPMI. Trailing twelve-month revenue reached $13.5 million, up 191% from the prior period.

• Q4 2026 Revenue Guidance: Management issued its first formal guidance, expecting Q4 revenue between $4.5 million and $5.0 million. This represents a year-over-year increase of 121%-146%.
• Full Year 2026 Revenue Guidance: Combined with prior results, full-year 2026 revenue is expected to be $16.0 million to $16.5 million, reflecting growth of 154%-162% compared to the prior year.
• Forward Outlook: Management anticipates continued operating leverage and gross margin improvement as revenue grows into the fixed cost base. Key operational milestones include bringing argon recycling online in Q1 2027 and the fourth atomizer in June 2027.

• Gross Margin Pressure: Q3 saw a gross loss of $4.4 million due to titanium production running below installed capacity post-restart and lower yields from the new sieving system optimization. Fixed production costs were expensed rather than absorbed into inventory.
• Safety Incidents: Earlier safety incidents required a significant pause in operations and a comprehensive facility review, highlighting operational risks associated with reactive metals and dust hazards.
• Government Funding Uncertainty: While current backlog is funded, there is risk regarding the FY 2027 defense appropriation budget and potential continuing resolutions, though management believes short-term CRs will not impact near-term revenues.
• Execution Risk: Scaling production and optimizing yield parameters remain critical execution challenges, particularly in achieving long-term target yields for titanium powder.

Q: Peter Arment asked about the status of the titanium process restart and whether the new sieving system is fully optimized, specifically inquiring about remaining bottlenecks and yield expectations. / A: Hank Holland stated that parameter optimization was largely dialed in by mid-September, with minor tweaks continuing through year-end. He noted that while yields were sub-optimal in Q3, they are expected to approach long-term targets over the course of Q4. Brett Paduch added that fixed costs in COGS are scaled, suggesting operating leverage should improve gross margins, though a six-week inventory lag means favorable trends may not fully appear until next calendar year.

Q: Peter Arment inquired if any of the reported backlog was unfunded due to the U.S. continuing resolution (CR) for FY 2027, asking if funding risks could impact future revenue recognition. / A: Hank Holland confirmed that all reported backlog consists of firm contracted orders with funding in place, except for two DoW payments totaling ~$700k recognized after June 30. He expressed confidence that even if the FY 2027 budget is delayed into early 2027, it would not impact calendar year 2027 or H1 2027 revenues, citing strong pipelines at tier-one supplier levels.

Q: Jaeson Schmidt asked for details on the composition of the $13.4 million backlog, specifically whether it includes large awards beyond the DoW contract or if it is broad-based, and sought timelines for further BPMI production contracts. / A: Hank Holland clarified that the DoW award ($4.5M) is a significant portion of the backlog. Beyond this, the backlog consists of ordinary course spot orders and 12-month purchase orders. Regarding BPMI, he emphasized that while the initial LRIP contract was small ($350k), it serves as a gateway to a series of subsequent production contracts currently in the pipeline, though no specific timeline or volume guidance can be provided yet.

Q: Doug Smith asked about demand signals for C103 refractory alloys related to hypersonic programs and the outlook for titanium demand, noting recent news flow. / A: Hank Holland acknowledged an uptick in C103 demand from defense and space sectors, recovering from delays caused by the FY 2025 government shutdown. However, he highlighted that the Department of War contract focuses on developing hafnium-free alternatives to niobium C103, as hafnium prices have surged 700%. Thus, while C103 demand is rising, there is also growing interest in alternative refractory alloys to mitigate raw material cost volatility.