Mr. Chris Bitsakakis reports

AIRBOSS ANNOUNCES FIRST QUARTER 2023 RESULTS

Airboss of America Corp. has released its first quarter 2023 results. The company's annual general meeting will be held on Wednesday, May 10, 2023, at 9 a.m. EDT. Following the formal portion of the meeting, management will provide a presentation, including a discussion of Q1 2023 results. The meeting will be accessible via live webcast or by dialling in to the numbers provided later in this news release. All dollar amounts are shown in thousands of U.S. dollars, except per-share amounts, unless otherwise noted.

Recent highlights:

• Cash from operations increased by $38.7-million to $6.0-million for the three-month period ended March 31, 2023 (Q1 2023), versus the three-month period ended March 31, 2022 (Q1 2022);
• Declared a quarterly dividend of 10 Canadian cents per common share.

"Our business segments maintained their focus on strong operational execution and continued to pursue new sales opportunities during the first quarter of 2023. The quarter's financial results benefited from strong performance at engineered products, which has begun to benefit from investments in automation while operating in a more normalized contractual environment," said Chris Bitsakakis, president and chief operating officer of Airboss. "Within our rubber solutions segment, softer customer demand in the opening months of 2023 led to a slight decline in net sales as compared to Q1 last year, however, we began to see modest demand improvements toward the latter part of the quarter."

"The stable footing we gained within rubber solutions and engineered products through the end of 2022 has brought important operational and financial diversification to our platform," said Gren Schoch, chairman and chief executive officer of Airboss. "As we advance into 2023, we are making solid progress on delivery against the test kit contract award ADG successfully secured in Q4. As well, we remain highly focused on targeting new survivability sales opportunities for ADG's innovative portfolio of survivability solutions, including our blast gauge system, AirBoss 100 half mask respirator and others, which continues to competitively position us to win new business."

Financial results

Consolidated net sales in Q1 2023 decreased by 19.0 per cent to $117,076 compared with Q1 2022. The decrease was primarily attributable to the delivery to HHS of nitrile patient examination gloves in Q1 2022, partially offset by a strong recovery at the engineered products segment.

Consolidated gross profit for Q1 2023 decreased by $9,664 to $21,937, compared with Q1 2022, driven primarily by lower volumes at ADG related to HHS nitrile patient examination glove contract deliveries in Q1 2022, in addition to continued raw material price increases, partially offset by modest reductions in freight across the organization and improved execution at engineered products. Gross profit as a percentage of net sales decreased to 18.7 per cent in Q1 2023, compared with 21.9 per cent for Q1 2022, primarily due to a change in product mix at ADG, partially offset by improved execution at engineered products.

Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) for Q1 2023 decreased by 47.6 per cent to $10,168, compared with $19,695 in Q1 2022, with the decrease driven primarily by lower volumes at ADG related to HHS nitrile patient examination glove contract deliveries in Q1 2022, in addition to continued raw material price, partially offset by modest reductions in freight across the organization and improved execution at engineered products.

Financial position

The company retains a $250-million credit facility and a net-debt-to-TTM (trailing-12-month) EBITDA ratio of 2.99 times as at March 31, 2023.

Dividend

The board of directors of the company has approved a quarterly dividend of 10 Canadian cents per common share, to be paid on July 17, 2023, to shareholders of record at June 30, 2023.

Segmented results

In the Airboss defence group segment, net sales decreased by 55.2 per cent to $28,643 in Q1 2023 compared with Q1 2022. The decrease was primarily the result of deliveries under the large HHS nitrile patient examination glove contract in Q1 2022, partially offset by improved volumes from defence products manufactured at engineered products. Gross profit at Airboss defence group for Q1 2023 decreased by 68.4 per cent to $8,748, from $27,671 in Q1 2022. The decrease was primarily the result of deliveries under the large HHS nitrile patient examination glove contract in Q1 2022.

In the rubber solutions segment, net sales decreased by 2.7 per cent to $55,154 in Q1 2023, compared with Q1 2022. Volume was down 24.1 per cent with decreases across the vast majority of sectors due to decreased momentum at most customers' operations as a carryover from softness in the prior quarter. Tolling volume was down 81.0 per cent while non-tolling was down 9.0 per cent. Gross profit in Q1 2023 decreased by 5.3 per cent to $7,584 from $8,008 in Q1 2022, primarily the result of volume reductions and product mix, partially offset by managing controllable overhead costs and driving continuous improvement initiatives.

At engineered products, net sales for Q1 2023 increased by 37.1 per cent to $40,915, compared with Q1 2022. The increase was due to higher volumes in SUV and light truck platforms despite the continuing global electronic chip shortages and economic headwinds related to continuing freight, logistics and, to a lesser extent, raw material supply challenges, which continue to impact production schedules across all OEMs (original equipment manufacturers) and Tier 1 suppliers. Gross profit at the engineered products segment for Q1 2023 increased to $5,605 from negative $4,078 in Q1 2022. This was primarily a result of improved arrangements with key suppliers and customers, as well as product mix in the automotive sector, in addition to operational cost containment and managing overhead costs.

Overview

During Q1 2023, Airboss remained focused on operational execution, growth initiatives and key investments. Airboss engineered products (AEP) maintained strong traction and worked diligently to build on momentum established in the prior quarter with key suppliers and customers to strengthen its financial situation for long-term sustainability. Airboss rubber solutions (ARS) had modest improvements in demand, specifically in volumes, toward the end of the quarter and Airboss defence group (ADG) had improvements driven by test kit deliveries, with attention on strategic priorities focused on conversion of sales opportunities for the latter part of 2023. The company continued addressing the continuing economic impacts being experienced to varying degrees in each segment. Labour, logistics challenges and raw material price escalations continue to create obstacles that each segment is working through to build momentum. The continued recovery in volumes in 2023 for each segment remain subject to the continuing management of the stable and sustained operations of businesses globally, which remains complex and volatile considering evolving and continuing challenges, such as continued inflation pressure and continuing global conflicts, as well as successful conversion of sales opportunities.

The rubber solutions segment saw modest improvements in demand toward the end of Q1 2023, compared with the prior quarter, with some signs of recovery. Despite the economic headwinds noted above, the segment remains focused on executing its strategy of delivering strong results with specialized products, expanded production of a broader array of compounds (white and colour), and enhanced flexibility in attracting and fulfilling new business through identified synergies and margin expansion. As a segment, rubber solutions continued to invest in research and development to support enhanced collaboration with customers and remained focused on expanding on Ace Elastomer's specialized products into its wide range of solutions.

ADG remains focused on its survivability solutions platform while targeting traditional defence contracts, which management believes could result in the execution of opportunities over the next several years. In addition, ADG continues to work with its key customers to leverage the opportunities in its pipeline, as was evidenced with the fulfilment of a portion of the test kit award during the quarter. The pipeline remains robust and is expected to support growth initiatives, subject to timing as delays in the conversion of these opportunities are expected to continue through the next few quarters. In particular, execution of the previously announced awards for Husky 2G vehicles has been delayed due to continuing global challenges and management now anticipates execution of those orders to commence later in 2023. Management continues to believe that the future sourcing of personal protective equipment (PPE) for first responders and health care professionals will remain a necessity and priority for front line workers, evidenced by the strong pipeline of PPE-related (personal property equipment) opportunities that ADG is currently pursuing.

Within the engineered products segment, the momentum generated in the prior quarter continued through Q1 2023, despite the continuing challenges of raw material price increases, supply chain challenges and production volatility by the original equipment manufacturers (OEMs). Engineered products continued to work with key suppliers and customers to deliver improved financial results in the quarter versus the same quarter in the prior year. Management also continued to focus on operational improvements, including managing variable costs and sustaining a stable hourly work force, while dealing with volume volatility in the automotive sector and specifically on AEP's products for SUV, light truck and mini-van platforms. The segment also continued its focus and commitment to drive efficiencies and best-in-class automation, as well as diversification of its product lines into sectors adjacent to the automotive space.

Despite the continued headwinds associated with economic and geopolitical issues, the company's longer-term priorities remain intact and include:

• Growing the core rubber solutions segment by positioning it as a specialty supplier of choice in the consolidating North American market, with a growing focus on building defensible leadership positions in selected compounds;
• Capitalizing on ADG's enhanced scale and capabilities to pursue an array of growth and value-creation opportunities in the broader survivability solutions segment serving both defence and first responder markets;
• Driving improved performance from engineered products through a combination of disciplined cost containment, client relationship expansion, new product development and sector diversification;
• Targeting additional acquisition opportunities across the business with a focus on adding new compounds and products, technical capabilities, and geographic reach into selected North American and international markets.

As before, management remains dedicated to the creation of long-term value for all stakeholders through a combination of strategic initiatives that both drive organic growth and support possible accretive transactions.

Annual general and special meeting and Q1 results earnings webcast

The company's annual general meeting for shareholders will occur May 10, 2023, at 9 a.m. EDT. Following the formal portion of the meeting, management will provide a webcast presentation, including a discussion of Q1 2023 results.

For webcast access, please log in on-line. The company recommends that viewers log in at least 15 minutes before the meeting starts. If watching the meeting on-line, it is important to remain connected to the internet at all times during the meeting. It is each person's responsibility to ensure connectivity for the duration of the meeting. The live webcast will include a facility for shareholders to enter questions for management.

For telephone access, please dial in at 1-800-319-4610 or 1-416-915-3239, access code 55506. Callers should dial in five to 10 minutes before the meeting starts and ask to join the call. When prompted, the access code should be provided.

About Airboss of America Corp.

Airboss is a leading and diversified developer, manufacturer and provider of innovative survivability solutions, advanced custom rubber compounds and finished rubber products that are designed to outperform in the most challenging environments. Founded in 1989, the company operates through three divisions. Airboss defence group is a global leader in personal and respiratory protective equipment and technology for the defence, health care, medical and first responder communities. Airboss rubber solutions is a top-tier North American custom rubber compounder with 500 million turn pounds of annual capacity. Airboss engineered products is a supplier of innovative anti-vibration solutions to the North American automotive market and other sectors. The company's shares trade on the Toronto Stock Exchange under the symbol BOS and on the OTCQX under the symbol ABSSF.

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