Thank you for standing by. This is the conference operator. Welcome to the AirBoss of America Second Quarter 2025 Conference Call. [Operator Instructions] The conference is being recorded. I would now like to turn the conference over to Gren Schoch, Chairman and Co-CEO. Please go ahead.

Thank you, operator. Good morning, everyone. Thank you for joining us for the second -- Airbus second quarter results conference call. I'm Gren Schoch, and I'm the Chairman and Co-CEO of AirBoss. With me today are Chris Bitsakakis, our President and Co- CEO; Frank Ientile, our CFO; and Chris Figel, EVP and General Counsel. Our agenda today will start with a review of the operational highlights for the quarter, followed by a discussion of our financial results before we open the conference lines to questions. Before we begin, I'd like to remind listeners that our remarks today contain forward-looking statements, including our estimates of future developments. We invite listeners to review risk factors related to our business in our annual form and our MD&A, both of which are available on SEDAR and on our corporate website. Also, we will discuss certain non-GAAP measures, including EBITDA. Reconciliations of these measures are available in our MD&A. Finally, please note that our reporting currency is in U.S. dollars. References today will be in U.S. dollars unless we indicate otherwise. With that, I'll turn the call over to Chris for our operational review.

Thank you, Grant, and good morning, everyone. AirBoss experienced positive traction in Q2 2025 compared to Q2 2024, mainly driven by significant increases in AirBoss manufactured products defense products business, partially offset by reduced volumes at AirBoss Rubber Solutions. Compared to Q2 2024, consolidated Q2 2025 results have shown a 3.4% increase in sales -- 3.4% increase in sales, a gross profit increase of $7.7 million and an adjusted EBITDA improvement of just over $4 million. Despite the strong year-to-date results, AirBoss has been forced to continue to navigate obstacles related to economic and geopolitical challenges, including market softness, tariffs, inflationary pressure and the corresponding monetary policy and the potential for further escalating and retaliatory tariffs. While maintaining focus on risk mitigation plans, including managing costs and targeting continuous improvement initiatives. The sheer uncertainty and volatility in the industrial markets we serve has been creating significant upheaval for industrial output in the U.S. On average, industrial production of durable goods in the U.S. in May and June 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. Many of the individual markets that we serve are being affected by these factors, which have in turn created significant short-term pressure on the custom compounding market as is evident at AirBoss Rubber Solutions as well as many of our competitors. The company expects further uncertainty to persist in the coming quarters with volume recovery difficult to anticipate as any recovery could be impacted by the imposition of further tariffs, duties or other restrictions on trade. The company continues to evaluate and execute on contingency plans and is carefully executing on all available options to deal with these challenges, including rebalancing production and sales activities between the U.S. and Canada in order to minimize the impacts to the company and its customers. Despite the increased economic uncertainty, disruption of trade flows and increased costs and strains on supply chains resulting from these challenges, opportunities may arise for the company to leverage existing U.S. capacity to grow revenues related to the nearshoring of overseas imports. As an example, the molding operations of AirBoss Manufactured Products has quoted more opportunities in the first 6 months of 2025 than we had quoted all of 2024. Although difficult to predict how many of those opportunities will turn into new contracts, it is certainly a validation of the Made-in-America strategy long considered critical to our molding operations in the U.S. As mentioned earlier, ARS had a pronounced softness in Q2 2025 compared to Q2 2024. The segment experienced both revenue contraction and reduced margins driven by overall softness in most customer sectors, primarily caused by weaker demand and the shifting tariff situation. ARS remains committed to executing on its strategy to deliver strong results by focusing on specialized products, expanded production of a broader array of compounds and enhanced flexibility in attracting and launching new business. As a segment, ARS continued to invest in research and development to support enhanced collaboration with customers. As an example, the new silicone product line that was launched in November 2024 has facilitated the complete in-sourcing of all silicone compound requirements within AirBoss while also launching the first of what should be many new third-party customers utilizing AirBoss silicone materials. In terms of A&P, we experienced notable improvement in Q2 2025 compared to Q2 2024, primarily due to the defense products business continuing deliveries on previously announced contracts and additional overhead reductions carried out earlier in the prior year to help support profitable growth. Management at AMP also maintained its focus on operational improvements during Q2 2025 and continue to collaborate with key customers with the goal of leveraging opportunities aligned with its growth initiatives. The Defense Products business, despite its strong backlog this year, continues to collaborate closely with its suppliers and government partners to mitigate the previously announced delays to its Bandolier program and expects revenue to shift to the right as challenges related to the supply chain get rectified. Further updates will be provided as more information becomes available. The rubber molded products operations were impacted by continued volume softness related to the original equipment manufacturers adjusting production schedules due to the evolving impact of tariffs in the automotive sector. This business continued its focus on managing costs and a commitment to drive efficiencies and best-in-class automation as well as diversification of its product lines into adjacent nonautomotive sectors. Despite some of the supply chain upheaval precipitated by tariffs and counter tariffs, the long-term priorities of the company have remained the same. competence. We continue to focus on our core competencies to drive growth during these challenging times. With a strong defense backlog, significant U.S. available capacity to benefit from reshoring and the continuing market strength of our Rubber Solutions technology, we expect to navigate these near-term challenges and position ourselves well for the future. AirBoss will continue to focus on our long-term priorities while investing in core areas of the business to expand a solid foundation that will support long-term growth. I will now pass the call over to Frank for the financial review. Frank?

Thanks, Chris, and good morning, everyone. As a reminder, all dollar amounts presented today are in U.S. dollars, except for dividends per share, which are in Canadian dollars. Percentage changes compare Q2 of 2025 to Q2 of 2024, unless otherwise noted. To be respectful of your time today, I will aim to be brief in my summary of our Q2 2025 results. Starting from the top line, AirBoss' consolidated net sales for Q2 2025 were $98.6 million, an increase of 3.4% from the prior year. The increase was primarily due to higher volumes at manufactured products, partially offset by lower sales at Rubber Solutions. Consolidated gross profit for Q2 2025 increased by $7.7 million to $16.2 million compared with Q2 2024, and consolidated adjusted EBITDA for Q2 2025 increased to $10.2 million from a prior year of $6.1 million. In both cases, the increase was driven by improved volume and mix at manufactured products, along with an inventory write-down in the comparative period, partially offset by volume softness and unfavorable mix at Rubber Solutions. Turning now to our individual segments. Net sales at AirBoss Rubber Solutions for Q2 2025 decreased by 13.7% to $50.9 million from $59 million in Q2 of 2024. Volume decreased by 15.9% with decreases in most sectors Tolling volume was down 31.6%, while non-tolling volume was down 15.5%. Gross profit at AirBoss Rubber Solutions for Q2 2025 decreased to $6.6 million from $10.3 million in Q2 of 2024. Gross margin percentage decreased to 13% of net sales from 17.4% of net sales in Q2 2024. The decreases were due to unfavorable mix and lower volume driven by market softness and economic uncertainty, partially offset by managing controllable overhead costs and continuous improvement initiatives. Net sales at Manufactured Products for Q2 2025 increased by 35.2% to $55 million from $40.7 million in Q2 of 2024. The increase was mainly due to improved sales in the Defense Products business, partially offset by softness in the rubber molded products business. Gross profit at Manufactured Products for Q2 2025 increased to $9.6 million from negative $1.8 million in Q2 2024. Gross margin percentage increased to 17.4% of net sales from negative 4.4% of net sales in Q2 of 2024. This was primarily the result of a $6 million inventory write-down for gowns and gloves in the comparative period and improvements in the Defense products business, operational cost improvements and reduced overhead costs, partially offset by unfavorable volume and product mix in the rubber molded products business. Turning again to the consolidated results. Free cash flow for Q2 2025 was $11.2 million compared to $7.3 million at the end of Q2 2024. During Q2 2025, the company invested $1.8 million versus $3.9 million in Q2 2024. Capital expenditures were related to growth initiatives, cost savings and minor plant upgrades within ARS and AMP. By the end of Q2 2025, our net debt balance was $86.3 million versus $98.9 million at the end of 2024. We expect to fund the company's 2025 operating cash requirements, including required working capital investments, capital expenditures and scheduled debt repayments from cash on hand, cash flow from operations and committed borrowing capacity. The company has a credit facility that provides for a maximum borrowing of up to $125 million with a $25 million accordion. As of June 30, 2025, the total available borrowing capacity under the facility was $77.2 million with $39.7 million drawn. With that, I will now turn the call over to Chris. Chris?

Thank you, Frank. Operator, at this point, we can open the line up for Q&A.

The first question comes from Ahmed Abdullah from National Bank of Canada.

On the AMP margin profile, you highlighted that mix has played a role here. But can you give us a bit more color because the Q2 revenue splits look somewhat similar to Q1 between defense and auto, yet margins have jumped quite a bit. So how should we think about the margin profile for the segment going into the second half and into next year?

Yes, Ahmed, thanks for your question. I mean, again, I think as a result of some of the deliveries of the new awards, specifically in the defense products business and the concentration of those, specifically around Bandol and MALO, I think that's what's really made it accretive relative to the more historical profile from the GP perspective. However, going forward, as Chris had mentioned, there is some challenges with the supply chain related to the Bandol, which could cause some softness there and could obviously bring it back to a more traditional trajectory from a gross margin.

Profile. Okay. That's helpful. So back half of the year should be a bit more normalized than this onetime kind of timing. Is that how we should kind of understand it?

Yes. And more timing or scheduling really because that's really the flow of sort of how the distribution of the program is going. But obviously, we'll keep people informed as we move forward and we learn more information.

Okay. And just on the increased activity in the rubber molded product side, I mean, traction seems to be growing there despite the choppy backdrop. How are these new production awards you highlighted structured as it relates to tariffs? Are there some automatic like pass-through mechanisms that you can utilize? Or will you have to give up some margin if tariffs were to rise from current levels?

I mean we've done a pretty good job ever since the first Trump administration in streamlining our supply chain in the U.S. to utilize as many U.S. raw materials as possible. And so these current -- these new awards that we've received at the rubber molding business under AMP have been awards for U.S. production and utilizing U.S. raw materials. So the latest material costs that we've had, we've been able to apply the most recent costs. And we have been in conversations with the automotive customers about their willingness to offset tariffs. But I'd say, in our case, we've done a good job to keep most or all the raw materials localized anyway.

The next question comes from Tim James from TD Cowen.

My first question, very general, I think looking at Canada's defense opportunities, are you seeing any specific signs at this point of -- and it may be early days, but are you seeing any specific signs of potential defense work as a result of Canada's recent plans to significantly accelerate defense spending? Any actual kind of discussions with Canadian defense officials at this point?

As you can imagine, Tim, we are having ongoing conversations with Canadian defense officials. We -- at least once a week, we're meeting with staff from the Ministry of Defense, and we're talking about multiple opportunities. So there's a lot more conversation going on now about opportunities that we could participate in. There hasn't been multiple requests for quote come out yet, but that's always kind of the next step. But we're certainly seeing a lot more conversation around the needs of the Canadian Armed Forces and how AirBoss can participate in that, and there are ongoing discussions at least weekly.

Okay. That's helpful. My second question, and forgive me if you covered this earlier, I actually missed a brief part of the call. But can you talk about sort of in Rubber Solutions, just kind of mix influences either in the quarter and as you think about it going forward, I'm thinking about kind of color compounding sort of product mix, just sort of directionally as you move forward, and I know you've been looking at doing more sort of customized, if I can call it that compounding that drives higher margins. Where do you stand on that? Are you seeing progress? What's the outlook?

Yes. Yes. Actually, we are seeing progress. Of course, the more customized solutions, the more specialized compounds also tend to be lower volume. So in terms of driving the mix, it takes a little bit longer for that to happen. But we first launched our first color mixing line in 2019. And just a few years ago, we bought Ace Elastomer, which is has a very strong share of the color compounding market in the U.S. And they've been relatively stable. And of course, on those more specialty compounds, the margin profile is higher. And in November, as you know, we launched our first silicone line, which was the next sort of step in our specialized compounding strategy. And since then, we have in-sourced all of our own silicone compound requirements, all the silicone molding that was going on at AMP used to be utilizing outside raw material or outside compounding for the silicone. So we've in-sourced all of that silicon, and we have multiple customers that we are in trials with to take more of that work on. And in this quarter -- in the last quarter, I should say, we launched our first third-party customer, and there's multiple other ones that are in the lab that are being ramped up. So that's our next step. We do have more thoughts beyond silicon. But as you see the color and the silicone and other specialty compounds ramp up, you'll see that margin profile update upwards. Having said that, and I mentioned it in the early remarks, is the industrial output in the U.S. has been relatively low. And so the open capacity has necessitated us and our competitors to get a bit more aggressive on pricing to defend. And so that -- some of that improvement in the margin profile, as you can see in this last quarter, has dropped a little bit because of the slow market that we're in. So it's all kind of puts and calls. But if you normalize all that out, and we saw that coming into this year, year-after-year improvements in the margin profile at ARS. If we -- when we get through all this tariff and economic and geopolitical concerns that we have for the overall industrial market in the U.S., I think we'll be back on to that trajectory of year-over-year improvements in margin profile. And the silicone line that we've launched is sort of the next driver of that.

Okay. That's helpful. Actually, I'm going to sneak one more question in, if I could. You cite in terms of manufactured products, one of the pressures that the business is experiencing relates to increased vehicle inventories. I just want to confirm, is that a reference to your customers or indicating they've got sort of higher inventories and therefore, aren't needing as much product from you? Is that the gist of that?

Yes. The big auto suppliers, they build to inventory. And when the inventory levels get to a level that they're concerned that the sales won't support them, they then slow down their production output. So we have found in the past year, it's been fairly flat to slow and depending on which customer, like if you look at Stellantis, for example, they had a very down year last year. And so once inventory levels get to a certain point, they will either take weeks of production out or shifts out or just slow down the production line to kind of regulate that. So we're on -- so we're always looking at the vehicle inventories, the sales figures, and that kind of gives us an early indication of where production schedules are going to land.

The next question comes from Kevin Chiang from CIBC.

Just on the Bandolier, thanks for the comments you made in your prepared remarks. But I guess since, I guess, 4 months ago when you announced the delay, just wondering what -- I guess, what progress you made? Is it still kind of at a standstill now in terms of the delays you're seeing? Or do you have visibility on executing against this program and the targets you put out in terms of delivery by the, I guess, by the end of 2026?

Yes. When we made that first announcement, there's a critical raw material ingredient that's produced in Europe that gets exported into the U.S., and it's in very high demand and low supply globally. So it's a tricky raw material to get in the first place. And with all the trade concerns back and forth, it's been affected by that. When we first made the announcement on the delays, we were actually able to find some more of the material, be able to continue shipping. And we are now in a similar position where it's now in tight supply again. So we have multiple avenues to procure more of this raw material. So we don't -- it's actually not at a standstill exactly. We are working with our customers and our suppliers, and we're finding opportunities to reacquire this raw material. And so we're up. It's going to be very lumpy as the availability of this raw material kind of comes up and down. And so we continue to just reiterate to everyone that although we still expect to complete this contract, we -- it's going to be a little lumpier than we expected as we navigate these global supply chain issues on that particular one raw material that's so critical.

That's helpful. I guess with the U.S. and EU having come to a trade agreement, does that -- at least from your perspective, does that help the procurement of this? Or is it primarily, I guess, a capacity issue on the production of this input. And I guess to the extent that as you're procuring this product, which seems to be in short supply, like are there mitigating factors? I'm assuming that may be inflationary relative to the costs that you assumed when you put this bid forward originally?

Not really. I mean, although it's a very critical raw material, when you look at the overall cost of the product, the percentage impact of an increase in price on that material has some impact, but not really that material to us. So it's more so just the availability of that material. And it's definitely a capacity issue because it's in tight demand globally. However, I think with the initial concerns between the European Union and the U.S., there was some unwillingness, let's say, to direct more of that raw material here given that it was in such high demand all around the world. So I think now that there is a trade deal, I think it does help us in a way from a strategic standpoint, but it's still in short supply, and we're not sure their contracts have been awarded to pick up that supply. We are working on a U.S. supplier for this material, although it's in tight demand in the U.S. as well. So I'm relatively optimistic that we're going to find a workaround for that, but it's going to be a lot lumpier than we expected.

Okay. And maybe just last question for me. It sounds like you're looking at your I guess, your production options just given the trade uncertainty out there. Is that weighing on your cost profile at all in terms of, I guess, shifting production between Canada and the U.S. I guess, as you think about trying to mitigate potential tariffs, is that burdening your cost structure at all or maybe could burden your cost structure when you decide to make a specific decision on where you produce some of your goods in order to mitigate the tariff situation?

Well, it certainly did impact our cost structure in Q1 and Q2 because all of our U.S. customers that receive material exported from Canada, we had to requalify all those materials out of our plants in the Carolina's. And so we had to bear much of those costs for trials for formulation adjustments and all the things that we need to do to make sure that the material works the same way off of our lines in the U.S. as they do in Canada. So we certainly had some costs there. Of course, all the material that we make in Canada is covered under USMCA. So from that perspective, as long as the MCA stays intact, we shouldn't see any additional tariff costs, although there is concern out of the U.S. related to buying from Canada and then overnight having some massive new tariff applied to it. So I think a lot of that uncertainty is creating a little bit of concern. Our plants in the Carolina's are quite efficient. So I don't think it's a matter of costing that much more to produce down there. It's more so about the fact that we're not 100% sure where this is all going to end up in terms of protecting the USMCA. So if the USMCA is protected, we should be able to continue on business as normal. I think we think that once all these tariff concerns are kind of brought to a conclusion, we think the industrial output in the U.S. will settle down because what we're seeing is people are building up inventory of their imports prior to deadlines and then working away that inventory. And in any -- as you know, Kevin, manufacturing is not designed for puts and starts constantly. And so it's creating a lot of havoc in the industrial output and with our customers. But as all those things get settled, we think it's going to settle out, and we should be able to get back to business as normal. And whatever transfer we have to make to the U.S., we don't expect a major drop in margins because of that specific thing.

This concludes the question-and-answer session. I would like to turn the conference back over to Chris Bitsakakis for closing remarks.

Thank you, operator, and thank you, everyone, for attending our call today. We appreciate your support, and we're always available for any follow-up questions. Thank you again. Have a great day.

This brings to a close today's conference call. You may disconnect your lines. Thank you for participating.