Financial Performance Overview of Air T, Inc.

Air T, Inc. is a holding company with a diverse portfolio of operating businesses and financial assets. The company’s goal is to strategically diversify its earnings power and grow its free cash flow per share over time.

Air T operates in four main industry segments: overnight air cargo, ground equipment sales, commercial aircraft and parts, and corporate/other. Each segment has separate management teams and offers different products and services.

Third Quarter Fiscal 2025 Results

In the third quarter of fiscal 2025, Air T’s consolidated revenue increased by 22.2% to $77.9 million compared to the same period last year. This was driven by strong performance across all of the company’s business segments:

• Overnight Air Cargo revenue increased 5.4% to $30.6 million, due to a larger fleet of aircraft.
• Ground Equipment Sales revenue jumped 40.3% to $11.8 million, with more deicing trucks sold and higher parts/service revenue.
• Commercial Jet Engines and Parts revenue grew 35.4% to $32.7 million, primarily from higher component sales at the Contrail subsidiary.
• Corporate and Other revenue rose 27.6% to $2.8 million, mainly from increased software subscriptions.

Consolidated operating income for the quarter was $1.8 million, compared to an operating loss of $1.6 million in the prior year period. This improvement was driven by the higher revenues and better profitability in the Ground Equipment Sales and Commercial Jet Engines and Parts segments.

However, non-operating expenses increased by $2.4 million, primarily due to higher interest expense and foreign currency losses. Overall, the company recorded a net loss of $0.9 million for the quarter.

First Nine Months of Fiscal 2025 Results

For the first nine months of fiscal 2025, Air T’s consolidated revenue increased 5.3% to $225.5 million compared to the same period last year. The key drivers were:

• Overnight Air Cargo revenue grew 8.5% to $92.2 million
• Ground Equipment Sales revenue rose 3.6% to $33.7 million
• Commercial Jet Engines and Parts revenue increased 1.5% to $91.9 million
• Corporate and Other revenue was up 25.2% to $7.9 million

Consolidated operating income for the nine-month period was $5.1 million, a significant improvement from the $0.2 million operating loss in the prior year period. This was primarily due to the higher profitability in the Commercial Jet Engines and Parts segment.

Non-operating expenses were relatively flat year-over-year, with a $1.5 million increase in interest expense offset by a $2.5 million increase in income from equity method investments. The company recorded $0.8 million in income tax expense for the nine-month period.

Segment Performance

The Overnight Air Cargo segment has been a steady performer, with revenue growth of 5.4% in Q3 and 8.5% in the first nine months, driven by a larger aircraft fleet. However, operating margins were pressured by higher maintenance costs.

The Ground Equipment Sales segment saw a 40.3% revenue increase in Q3 and 3.6% for the nine-month period, due to more deicing truck sales and higher parts/service revenue. Profitability improved, but margins remained challenged by changes in customer and product mix.

The Commercial Jet Engines and Parts segment had an exceptional quarter, with revenue up 35.4% and operating income of $2.6 million, compared to a loss in the prior year. This was fueled by strong component part sales at the Contrail subsidiary, as airlines focused on maintaining their existing aircraft fleets.

The Corporate and Other segment, which includes the parent company and smaller business units, reported higher revenues but also saw increased operating losses, mainly from higher health insurance costs.

Liquidity and Capital Resources

As of December 31, 2024, Air T had $18.8 million in cash and cash equivalents, as well as $22.8 million in available credit facilities. The company’s working capital decreased by $13.3 million from March 31, 2024, primarily due to a $22.2 million reduction in inventory and a $3.2 million increase in short-term debt.

During the period, Air T took several actions to strengthen its financial position:

• Contrail, a majority-owned subsidiary, entered into a $4.6 million loan agreement to fund the redemption of a minority ownership interest.
• The company and its subsidiaries entered into a new $26.9 million credit facility with Alerus Financial, which was used to pay off the previous credit facility.
• Contrail also obtained a $10 million term loan from Old National Bank to finance aircraft-related investments.
• Air T and a subsidiary issued $30 million in senior secured notes to Honeywell, expanding an existing agreement.

Management believes Air T has sufficient liquidity to meet its obligations for at least the next 12 months.

Seasonality and Other Factors

The Ground Equipment Sales segment is typically seasonal, with lower revenues and profits in the first and fourth fiscal quarters as deicing equipment is delivered ahead of the winter season. The other segments have not shown material seasonal trends.

Air T faces risks related to cybersecurity, with potential breaches that could compromise its systems and data. The company has invested in security measures, but acknowledges the evolving nature of cyber threats.

Inflation and rising interest rates also present uncertainties that could impact the company’s financial condition and results. Air T believes its current estimates and assumptions are reasonable, but the fluid economic environment creates material risks.

Outlook

While Air T faced some headwinds in the quarter, the overall performance for the first nine months of fiscal 2025 was encouraging, with revenue growth, improved profitability, and strengthened liquidity. The company’s diversified business model and strategic initiatives appear to be paying off.

Looking ahead, Air T will need to closely monitor cost pressures, particularly in its Overnight Air Cargo and Ground Equipment Sales segments. Maintaining strong customer relationships and operational efficiency will be critical. The Commercial Jet Engines and Parts segment’s momentum is a positive sign, but the company must be vigilant about managing risks in this volatile industry.

Overall, Air T seems well-positioned to navigate the current economic environment and continue executing on its strategy to drive long-term growth and shareholder value.