AirBoss of America Corp

TSX:BOS

Earnings Call Transcript 2022-Q3

[Operator]

Good day, and welcome to the AirBoss of America Third Quarter Conference Call. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Gren Schoch, Chairman and Chief Executive Officer. Please go ahead, sir.

[Peter Schoch, executive]

Thank you, operator. Good morning, everybody, and thank you for joining us for the AirBoss Third Quarter '22 results conference call. My name is Gren Schoch. I'm the Chairman and CEO of AirBoss. With me here today is Chris Bitsakakis, our President and COO; Frank Ientile, our CFO; Chris Figel, EVP and General Counsel. And on the conference line, we have Patrick Callahan, CEO of AirBoss Defense Group. Our agenda today will start with the highlights from our operations for Q3, followed by a brief review of our financial results. We'll then open the call to questions.

Before we begin, I'd like to remind investors 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 information 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. And finally, please note that our reporting currency is in U.S. dollars. And with that, I'll turn the call over to Chris for our operational review.

[Chris Bitsakakis, executive]

Thank you, Gren, and good morning, everyone. I'll start today by discussing our main activities within Q3 of 2022, along with the outlook for our business segments as we advance into the final quarter of 2022 and beyond.

In aggregate, our 3 business segments are aggressively managing our operations while dealing with challenging and ever-changing market conditions. We continue to face issues with labor, freight, logistics and price escalations for raw materials, although we are starting to see some improvement indicators in all areas for the medium term. The components of our business that require additional focus, given current market dynamics are clear to us as we proactively execute on changes to reduce costs and gain efficiencies. We continue to pursue new ways to profitably serve our customers through a continual focus on product innovations designed to secure more business in our current markets, while expanding revenues from adjacent markets.

Our consolidated decline in sales as compared to the corresponding quarter in 2021 was mainly driven by reduced revenues within our AirBoss Defense Group due to the absence of large-scale PPE deliveries to HHS as well as the continued cost pressures that were felt within our Engineered Products business segment. These declines were partially offset of AirBoss Rubber Solutions by another quarter of excellent results, supported by product innovations, new manufacturing capabilities and an expanding customer base. Focused execution by our AirBoss Rubber Solutions team delivered strong growth in revenues and gross margins in the third quarter.

More specifically by each business unit, ADG Q3 2022 revenues compared to the corresponding period last year declined given the absence of large-scale PPE sales. However, global market demand for protective military and health care equipment remains high and procurement budgets remain funded in many of the main global markets despite the fact that we continue to face unprecedented sourcing delays related to our largest sales opportunities. Global demand for our protective equipment was validated with our recent announcement of new orders related to our highly specialized Husky 2G vehicles.

A total of $40.6 million of new agreements were signed with 2 global customers. The first $35 million order for 10 Husky 2G vehicles will be delivered directly by ADG over the next 16 months, and the second order for 3 Husky 2G vehicles will, in partnership with our exclusive supply partner, DCD, be delivered over 6 months under with an aggregate value of $8.3 million. The Husky 2G is a great example of how our culture of innovation continues to promote the safety and survivability of military personnel around the world.

Looking more broadly at ADG's current product portfolio, we continue to pursue exciting new sales opportunities for products like our Blast Gauge system, which is a lightweight wearable blast overpressure sensor designed to detect and protect soldiers from traumatic brain injury. Our Bandolier product line is also generating significant interest around the world, while our AIRBOSS 100 HALF MASKRESPIRATOR has been officially launched and is being promoted within first responder communities.

Moving next to AirBoss Rubber Solutions, or ARS. In Q3, we further extended the success we have had in leveraging our investments in this business to upgrade equipment, increase our compounding capabilities and build on the advantages we've gained through our recent acquisition of Ace Elastomer. These efforts supported year-over-year gains in production and sales volume and new customer relationships across a wider array of industries. ARS nearly doubled its gross profit contribution to our business over Q3 of 2021, and we continue to see new places where in partnership with our customers, we can make R&D investments to develop new products and sales opportunities within the segment.

In our Engineered Products segment, or AEP, our management team continues to accelerate their efforts to secure updated pricing with core customers so we can resume profitable operations within this business. As we work on these challenges, in this environment of hyperinflation, we remain focused on operational improvements, including the leveraging of recent technological investments in automation designed to reduce our production costs.

Looking forward, we continue to work hard to capitalize on our innovations and our scalable production capabilities to convert our pipeline of opportunities to contract wins. Our longer-term priorities remain: for ARS to grow our presence as a specialty and traditional rubber compound supplier of choice with defensible leadership positions in our key product lines. For ADG, to leverage its innovative product portfolio and proven manufacturing capabilities to grow its revenues in the survivability solutions and PPE consumables marketplace. For AEP, our focus is new customer relationships, containing costs and creating durable cost improvements and expanding both our product lineup and the market sectors we address as we are able to correct prior contractual issues that we are currently negotiating on.

And finally, across our 3 segments, we continue to assess exciting new M&A opportunities that could accelerate the strategic plans of our 3 groups. With that, I'll now pass the call over to Frank for the financial review. Frank?

[Frank Ientile, executive]

Thank you, Chris, and good morning, everyone. As a reminder, dollar amounts discussed today are U.S. dollars. Percentage growth figures are for Q3 2022 versus Q3 2021, unless otherwise noted. External net sales decreased 6.6% to $104.7 million on a consolidated basis, largely due to deliveries of the nitrile gloves of HHS in Q3 of 2021, while Rubber Solutions extended its track record of strong results for Q3.

Consolidated gross profit for Q3 was negative $47 million compared to $25.8 million in Q3 of 2021, primarily driven by the $57 million noncash write-down at ADG related to the nitrile glove inventory. The delivery of nitrile gloves at HHS in Q3 of 2021 and lower sales volume at Engineered Products. These factors were partially offset by strong traction at Rubber Solutions Q3 '22 consolidated gross profit margin adjusted for the effects of inventory write-down was 9.5%.

Adjusted EBITDA for Q3 was $1.3 million with the decline compared to Q3 of 2021, mainly due to the delivery to HHS in 2021 and lower volume at Engineered Products, partially offset by strong improvements at Rubber Solutions. As a percentage of sales, operating expenses for Q3 2022 declined to 14.1%, which was down from 15.1% in Q3 of 2021. The decreases were primarily due to lower stock-based compensation, lower selling costs, partially offset by higher professional fees and the inclusion of Ace and larger foreign exchange loss.

Adjusted profit for Q3 of '22 was negative $11.8 million or negative $0.44 per share compared to $7 million or $0.25 per diluted share in Q3 of 2021. This decline is due to the deliveries to HHS during Q3 of '21, a higher effective tax rate in Q3, partially offset by lower operating expenses.

Turning now to our individual segments. ADG's net sales decreased to $23.6 million, a decline of 55% due to the HHS deliveries in Q3 of '21. Q3 gross profit at AirBoss Defense Group was negative $51.3 million or $5.7 million, excluding the $57 million noncash glove write-down. Gross profit declined from $22.8 million in Q3 '21, mainly driven by the delivery of nitrile gloves to HHS in Q3 of '21, partially offset by favorable sales volume at ADG's industrial line of products.

Net sales at Rubber Solutions increased to $58.5 million, a 47% improvement over Q3 of '21. The sales strength of ARS further demonstrates the benefits gained in this segment, supported by the expanded selection of specialty rubber compounds expanded production capabilities. The increase was primarily the result of improvements in nontolling volume, managing controllable overhead costs, partially offset by labor challenges and logistics costs. Gross profit within ARS increased by 96% to $8.4 million. Gross margin percentage at ARS improved to 14.3%, which favorably compared to Q3 of 2021 at 10.7%. This was primarily due to higher production and sales volume, improved nontolling volumes and ongoing efforts to manage controllable overhead costs. This was partially offset by labor and logistics costs.

Q3 net sales at AEP increased by 3% to $29.2 million due to a favorable mix in the SUV, light truck and minivan platforms, partially offset by lower production of other automotive platforms and certain molded defense products. Despite the increase in sales at AEP, gross profit declined to negative $4.1 million. This was primarily due to the impacts of continued global electronic chip shortages on key segments in the automotive sector, raw material escalation, logistics and labor challenges, partially offset by focusing on controllable operational cost management.

In Q3, free cash flow was negative $18.5 million and cash consumed by working capital was $17.3 million. The working capital outflow was primarily due to an increase in inventory. CapEx, including intangibles, was approximately $2.7 million for Q3, primarily focused on cost-saving initiatives and equipment upgrades. CapEx has been approximately $12 million over the trailing 12 months. Our balance sheet and liquidity remains supportive of our investment to drive organic growth as well as for the pursuit of opportunistic M&A. As of September 30, 2022, a total of $130 million of our $250 million credit facility remains available. Our net leverage at the end of Q3, which is defined as net debt divided by our trailing 12-month adjusted EBITDA was 1.92x. That concludes our comments. Operator, back to you.

[Operator]

[Operator Instructions] Our first question today will come from David Ocampo with Cormark Securities.

[David Ocampo, analyst]

My first question is on the nitrile glove inventory write-down, particularly as it relates to disposing of the gloves. I think you guys called out in your prior release that it no longer met your safety requirements. I was hoping you could expand a little bit more on that and if there's any read-through on any future orders based on the safety standards there?

[Chris Bitsakakis, executive]

Yes, I can take that, David. There was a small percentage of the gloves that became damaged in the adverse storage conditions that they were kept in. They kind of stuck together and created a bit of a problem. But those are the ones that are not salable. Does that answer your question?

[David Ocampo, analyst]

Yes. Yes, it does. It does. And then on the ADG margins, they've come down quite a bit, even excluding the inventory write-down, I think it was closer to 10%. And historically, I think you've been running closer to 20%. So just curious if there's any onetime or any unusual items that are in there.

[Frank Ientile, executive]

No, there's not one-timers. It was more a question of mix. And as you know, for the Industrial segment, obviously, the material flow-through mechanism would have an impact in our Acton Vale location in addition to some of the elements that have higher material costs and obviously lower margin from that perspective. So I would contribute it primarily more to mix, David, than anything else.

[David Ocampo, analyst]

Right. So you don't think this is a kind of a go-forward run rate on your base business?

[Frank Ientile, executive]

No. I mean I think as we move forward, and obviously, as we've announced with the Husky's, et cetera, we think it's going to move in a positive direction upward.

[David Ocampo, analyst]

Okay. And then, Frank, maybe this one is for you on the leverage. I know it's 1.92x right now, but it does contain some periods with elevated performance just given the nitrile glove orders in Q1 and in Q4 of last year. Is there any concern on a go-forward basis, I think your covenants are at 3.2x. And if you factor in the Q4 performance, is there any concern there? Or is this something that you assume will naturally resolve itself as AEP contracts get renegotiated.

[Frank Ientile, executive]

Yes. I would say, so our ceiling with the covenant is 3.75. And based on where we are now, we're comfortable with our leverage and sort of as we move forward, obviously, there's some opportunities that will support staying within compliance.

[Operator]

And our next question will come from Yuri Lynk with Canaccord Genuity.

[Yuri Lynk, analyst]

Wondering if you can give us an update on the bid funnel. I didn't see any mention of the prior -- I think it was $1.5 billion. Can you give us an update on that?

[Peter Schoch, executive]

It's gone down by $45 million because we just converted one of the opportunities, which was the Husky, but the major components that are in that pipeline are still active. I don't want to go through them individually, but there are -- more than half could be awarded before the end of the year.

[Yuri Lynk, analyst]

Okay. Does the -- do the execution issues that you had on the glove order kind of give you pause in terms of getting involved with products that you don't control the manufacturing of at all. And I don't know if any of those are in the bid funnel, but it would be helpful if you could call those out if it's applicable.

[Peter Schoch, executive]

Well, certainly, we would maybe do things a little bit differently with the knowledge of 2020 hindsight. Most of the problems that didn't come as a result of us not manufacturing it, but they came as a result of delivery issues because of the huge supply chain congestion that we experienced late last year. In the opportunity pipeline, there's nothing that isn't manufactured in North America. So that obviously has a much lower risk profile than anything that's manufactured offshore. Does that answer your question?

[Yuri Lynk, analyst]

Yes. That's fair. That's fair. Last one for me. Just Engineered Products, I mean, continue to lose a lot of money there. What's your appetite for this to continue into 2023?

[Peter Schoch, executive]

We have no appetite to continue losing money at -- in products.

[Yuri Lynk, analyst]

Yes. I understand that, Gren, but the script is kind of the same as what we heard last quarter. I understand you're in a difficult position with your customers, but what's going to -- I guess, ask the question another way, what's going to change between now and the next 6 to 9 months that's going to lessen these losses?

[Peter Schoch, executive]

It's a really sensitive topic at the moment because we are in advanced negotiations with our customers. But I stated at the end of the last quarter that we were not going to continue to lose money in that division, and we won't.

[Operator]

And our next question will come from Kevin Chiang with CIBC.

[Kevin Chiang, analyst]

Maybe, Chris, you mentioned in response to David's question around the damage gloves due to adverse storage conditions. Were those stored in an AirBoss facility? Or is that through a third party? I'm just wondering if you have any recourse if it is with a third party for those damage gloves.

[Chris Bitsakakis, executive]

Well, we definitely have some recourse all around this glove scenario, that particular issue is because they were stored. They had remained in the sea containers outside in California, and they became damaged because of the intense heat. But generally speaking, there is some recourse enough to go around in a variety of things that could have been handled better by our suppliers and our agents. And so we are going after that sort of recourse at some point. We'll see what we can negotiate. But certainly, the one thing to remember is, despite this global pandemic and the unprecedented supply chain issues of the past 2 years, AirBoss Defense Group, was still the #1 importer of nitrile gloves during a global pandemic to the U.S. government.

And that hasn't gone unnoticed by the U.S. government despite sort of the way it's kind of ended up at the end of it, when the pandemic kind of eased off. We still have really solidified a reputation with the U.S. government to be able to in very difficult circumstances supply and deliver products at the greatest need that they have. And as Grant mentioned earlier, our pipeline is still quite strong, and there are some fairly impactful potential awards in there that we are working diligently on.

And those will be sourced and manufactured in North America, which takes a lot of this global logistics piece out of the equation. So yes, there's recourse. Yes, things kind of lined up a little bit against us, both with shipping, supply chain, pandemic and everything else you can imagine. But if nothing else, we've solidified a reputation with the government and that's put us in very good standing to continue to grow as we go forward.

[Kevin Chiang, analyst]

That's great color. Gren, you mentioned, optimistic, maybe half the pipeline could be bid or announced maybe by year end. You obviously won the Husky orders so congrats on that. Just wondering, are you seeing an increase in activity here as we rolled over to a new budget cycle? Has it really been just that?

Because I know you called out earlier this year, just some of the -- I guess, some of the U.S. budget cycle in the previous fiscal year seemed to be a constraining factor is having rolled over to October, starting a new fiscal year. Has that accelerated some of this bid activity? I know there's a gown bid out there that should be announced shortly as well. Just is it as simple as that?

[Peter Schoch, executive]

So, yes, I mean, that's a good example that had been put on hold 2 or 3x over the last year. It's back active again. There are -- I'm cautiously optimistic that we're starting to see money flow again. If you look at the contracts that are awarded daily, there's a marked improvement there in the last month or so. Also the military side of things is getting a lot more activity than we have seen in the past. I mean through the last 8 or 9 months, there's been a lot of request for information, and now we're starting to see requests for quote switches as they're in the new budget year for many governments, they are now starting to actually go out and ask for quotes instead of our advise. Patrick's on the line, I don't know if you want to add anything, Patrick?

[Patrick Callahan, executive]

No, you said it well, Gren. Certainly, whenever you have a changeover in fiscal year, these large acquisition authorities are given relatively the same budget they were given the year before and then the plus up funding or additional money comes in throughout the year and then obviously, the presidential budget gets signed in spring, but they have a large tranche of money based off of what they spent the year before. And some of the programs that were not executed or delayed are priorities now.

So certainly, when you said the gown -- the active gown competition. That is a priority for HHS right now. Yes, we are bidding on it. That is an opportunity that has been obviously disappointing on how long it's taken. The good news is it has been brief at industry days all the way down from the White House Task Force to HHS as an acquisition authority that this particular gown opportunity and a couple of other ones are priorities for HHS because they need the inventory.

But also, they will be examples as one of the first, if not the first, government contract let that is 100% U.S. manufactured and U.S. sourced, which means all materials are coming from the United States, all manufacturing is happening in the United States. And as you guys -- everybody on this call probably knows, that's a big change from the way the United States has done business for the last 30 years. And AirBoss Defense Group and AirBoss of America is one of the premier companies that has invested capital to be prepared for this kind of competition and has worked with the administration to move in that direction because we believe in it, but also we think it gives us a competitive advantage because we have put together a coalition of best-in-class manufacturers for some of this PPE work like gowns or surgical masks and things of that nature.

So yes, you're seeing an uptick in the new fiscal year. And Gren, you're right, the change in the military side has been very clear. One, the pandemic up until early this year still caused us problems. We could not get on to installations and meet with military customers. We could not get into acquisition commands and meet with them. We've been allowed to do that over the last couple of months.

And there's been a lot of catch-up over the last 2 years, where there's been really static, nothing going on in military acquisition, and that's starting to come back and come up very quickly because the DoD and MODs around the world that work with the U.S. on acquisition are trying to catch up on programs that they have just kind of left alone for the last 36 months. So we're seeing a lot of activity there. Certainly, the Husky order is an example of that internationally, but we're seeing a lot of activity on the U.S. side as well. And although we've had little delays on the health care side, those programs are now priorities for this current budget cycle, which is a good thing for all of us.

[Kevin Chiang, analyst]

That's great color, Patrick. Maybe last one for me, Gren, I understand the sensitivity as you talk with your auto customers within your AEP division. But I guess one of the things you've heard from other auto suppliers is maybe an increasing receptiveness from OEMs to help share the burden on some of the unexpected inflation that's obviously hit the supply chain, especially this year. Just wondering, are you seeing maybe from a tone perspective, a similar receptiveness from your auto customers versus maybe a year ago where historically they would have kind of stood firm on the contract turns. And I guess if that tone has changed, maybe that's driving some of the optimism around getting something rectified here.

[Chris Bitsakakis, executive]

Yes, I'd say you're probably right, Kevin, the tone has changed a little bit, and that's given us some opportunity to be optimistic. However, the devil is in the details, right? So once you get into negotiations, there's a lot of give and take and push and pull to try and get what we view as the type of deal that going forward, we can have a profitable division that remains profitable. And so I'd say, yes, the tone has changed compared to where it was 18 months ago, 12 months ago. There seems to be a greater spirit of cooperation.

However, the devil's in the details, and we're right in the middle of trying to get this thing tidied up because it's not one deal. It's we've-- it's 11 customers that we're negotiating with and putting a consortium of ideas and deals together that altogether then make sure that the business is profitable going forward. So -- however, I think the tone has changed and the willingness to make sure that they can continue to receive our parts and continue to build vehicles is certainly there.

[Kevin Chiang, analyst]

Perfect. I'll leave it there. Best of luck as you get through these bids and requests for information.

[Operator]

Our next question will come from Michael Robertson with National Bank Financial.

[Michael Storry-Robertson, analyst]

I just had a follow-up on the AEP margins. I appreciate that they're not where you want them to be yet, but did seem to improve a bit sequentially. And I was wondering if you could maybe speak to some of the drivers behind that. It sounds like it's probably too early for that to be related to implementation of pricing strategies. So I was wondering if it was maybe tech related to some manufacturing processes or you made some changes there that are starting to bear fruit? And if we should maybe look at that as sort of a turning point.

[Chris Bitsakakis, executive]

Yes, I'd say so. And thanks for noticing because it is something that gets clouded with this issue that we're having on the pricing side. But the plant has -- is the most efficient it's ever been at this point. We brought online a second fully automated robotic work cell and that's in full production now. Our first robotic work cell has been updated with new software. Our new machines that have come on board. We were talking about a 30% to 45% improvement in cycle time.

When they first came in, it takes some time to get them tuned in and make sure that we're getting there, and we're starting to see all those improvements. And as such, the team at AirBoss Engineered Products has done an excellent job. And I think we have seen a bit of a turning point operationally there with all the investments that we had made, which -- why it makes it even more important that we were able to get the pricing strategies where they need to be. And then we'll -- the efficiency improvements will actually be more visible. But the team there has done an excellent job in a difficult environment to implement and execute on all those opportunities that they now I'd say, have turned the corner in that way.

[Operator]

And our next question will come from Ben Jekic with PI Financial.

[Ben Jekic, analyst]

Just a couple of quick questions. I think one of the analysts was -- I had some technical difficulties, but I think he was asking about -- and I apologize if I'm wrong, that you're not mentioning the $1.5 billion pipeline. Is that correct? And is there any reason behind that? Like I'm assuming it's really big. But I just wanted to ask about that.

[Peter Schoch, executive]

No, Ben, the pipeline is still intact. We've been mentioning that for some time now, and I think because it's taken so long to convert it, a lot of people are losing faith in it, but there is no reason to loose faith in it. We -- as I mentioned, more than half of that is our bids, which we are currently active on. And the timing is always -- has been the issue, but it does seem that the timing is finally getting closer.

[Ben Jekic, analyst]

Okay. And correct me if I'm wrong. So this number, whatever it is, but it's obviously very large. That sort of blends actual bids potential projects where you expect to have bids sort of interesting project. It's a bit of a mix in the pot? Or is it -- or did you put actual bids into everything? I'm just trying to gauge how likely -- how competitive there, how likely they are?

[Peter Schoch, executive]

Well, we've had a pretty good success rate on our bids so far, there's nothing that has been awarded to any competitors. We -- the pipeline consists mostly of projects that there are RFPs out on and some of which there have been RFPs and have been currently delayed, but we're being told they're coming back out. So there's nothing that's just -- like, for example, Blast Gauge is not in there. That type of thing would not be in there. So they're all projects that are real.

[Ben Jekic, analyst]

Okay. That was my question.

[Patrick Callahan, executive]

This is Patrick. Let me just add one thing to that. The majority of them, Gren, you're correct, that there are either bids that we are currently preparing to submit because there is an active submission date, so it's an active competition or there are bids that have been submitted and we're waiting to see if we've won, right? And a small number, as Gren said, our bids that we are preparing for that will be made active very, very soon as disclosed to the Street and to industry, both on the military side and on the health care side, as you've got bids coming very shortly.

But the majority of what you see in the pipeline are things that we are actively submitting soon. So it's an active bid or bids that we've already submitted and waiting for an answer. So these are -- when we think about in our industry for a pipeline, this is as close as you can get to real and to Gren's point, using Blast Gauge and, for example, next-generation mask, things that are down the road that we think could be very big for ADG. We don't include those yet because it's not an active bid process on those larger orders. That's down the road a little bit. But the pipeline that we're talking about is big is built of things that we are about to submit on or we have submitted on.

[Operator]

And our next question will come from Tim James with TD Securities.

[Tim James, analyst]

Just one big picture question, I guess, here regarding the defense business. Strategically, and maybe this is a question for Patrick, I suppose. How do you think about the defense portfolio as it sits today in terms of products, customers? And how would you like it ideally to look in, say, let's say, 5 years? I mean do you need more diversification in the customer and the product base? And if so, what direction would you like to see it going in ideally or what would be your plan?

[Patrick Callahan, executive]

Yes.That's a great question. It's a big question we have internally. One of the things that we've done the last couple of years, and I think you guys understand this is it's been a tough couple of years with operations for us because we've been so focused on delivery, right? And there's been a lot of good news in the last 2 years that we pivoted into -- not that we weren't in the health care space prior, but the health care space changed, right, dramatically with the pandemic, and we were a company that pivoted and we're able to deliver a tremendous amount of equipment World War II like deliveries.

But whenever you do that, some of the other strategic things that you look at internally gets pushed aside for some time, right? And that's something that we've -- for this -- the past year we've been trying to get back to and look at this exact question, what do we want to look at going forward. So we've been doing that. And on the military side, we have some great products that have been at AirBoss and at CSI for a long time. And our strategy there is that they are still very relevant. They are still needed. If you look at Chem/Bio equipment and/or the counter-IED equipment, we've been investing internally to make the next-generation version of those products.

So there's always a strategy that if you have a product that still has relevance and a future need, you have to -- sort of like the iPhone, right? You got to make the next generation of that product. And we're doing that, whether it be our next-generation gloves for the Chem/Bio community and special operations community, the next-generation mask that we're currently competing for in the United States with the direction they're going at the development program, improving our MALO boot cold weather equipment. We're investing internally for these products that have made AirBoss a tremendous amount of money and they protected people for decades. We're investing to make them -- to keep them relevant going forward. And we've done a lot of work with the customer to make sure this makes sense.

On top of that, we've invested in new products and acquired new products. And to answer your question, where I'd like to go, I would like to see us go in the electromechanical direction when you think about some of the software that we brought on with the Blast Gauge and having sensor technology that is a little bit more sophisticated, but you have to make sure that it makes sense and that there's a market for it. So we acquired that technology because there is a need and a requirement to have blast overpressure detection on every operator in the United States military over the next 10 years. And we have the premier product, and we've been investing internally in that product and competing right now at Special Operations Command to be named the system, and we're doing very well there.

So going in that direction and getting into some more of the sensor technology side is something that we're very excited about. Beyond that, on the health care side, obviously, we're doing very similar things. But for military, we have a very diverse portfolio. We're always looking to add in possible new products. So M&A for us is a strategy that we look at every day. The last 2 years, there has not been a lot of great opportunities for products that we thought really gave us the 1 plus 1 equals 3 solutions. So we've invested a lot of capital in our current products and programs that we know are real like Blast Gauge and the next generation mask.

But for new products and to diversify on our systems side, certainly looking to acquire possible businesses or products is something that we are looking at constantly. So 5 years from now, I do want us to maintain our position as the premier Chem/Bio company in the world. We compete in that space with folks like Avon, and we have a strategy to go after competitors in the U.S. and internationally on the mask filter, boot and glove side, and we're working on that very hard and we've made some strides there. I also want to maintain our position as one of the premier counter-IED businesses in the world. And we do that with the Husky, which is still today the premier explosive detection platform ever built, and we work very hard with our partners to keep that product relevant as we move forward.

And then the Blast Gauge is opening our aperture because it's taking us into a new world on the sensor side, that is a soldier system sensor, right? So it's an integrated sensor into the soldier ensemble that gets very, very sophisticatedly integrated into their ensemble to allow them to communicate with each other about overpressure and medical needs. And that's a much more sophisticated direction for us. I'd like to see us do some more of that.

And to finish that, one of the reasons we bought B3 was because they brought with them both great technology but incredible software engineers that allows us to move more in that direction. So as we create amazing rubber compounds that protect against ridiculous threats we are now bringing on engineers that allow us to be looking at software and algorithms and detection capability that takes us in a little bit more of a sophisticated direction. I think I would like to see us bring some more of that on the detection side into the business.

So maintaining our position as the Chem/Bio company of choice, counter-IED company of choice and looking at more products that bolster our survivability platform is something that I'm very excited about. But there's a tremendous amount of opportunity on our current products that we are improving every day and some budding products like Blast Gauge and the next-generation mask.

[Operator]

And this will conclude our question-and-answer session. I'd like to turn the conference back over to Chris Bitsakakis for any closing remarks.

[Chris Bitsakakis, executive]

Thank you, operator, and thank you very much, everyone, for attending today's call. Please reach out to us directly or through our Investor Relations team if you have any questions on our results or anything in general. Thank you very much. Goodbye, and have a great day.

[Operator]

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.