AirBoss of America Corp

TSX:BOS

Earnings Call Transcript 2021-Q4

[Operator]

Thank you for standing by. This is the conference operator. Welcome to the Airbus of America Fourth Quarter 2021 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Gren Schoch, Chief Executive Officer. Please go ahead, sir.

[Peter Schoch, executive]

Thank you, operator. Good morning, everybody, and thank you for joining the AirBoss Q4 and full year '21 results conference call. My name is Gren Schoch. I'm the Chairman and CEO of Airbus. Here with me today are Chris Bitsakakis, our President and COO; Frank Ientile, our CFO; and Chris Figel, our EVP and General Counsel, is on the conference call. In terms of an agenda, we will take a few minutes to review some operational highlights for the quarter and the year and briefly review our financial results before opening the call to questions. Before we begin, I'd like to remind you today's remarks include non-IFRS measures. Reconciliations between our IFRS and non-IFRS results can be found in our MD&A. Additionally, management's outlook for '22 and beyond anticipated financial and operating results, our plans and objectives and our answers to your questions will contain forward-looking information within the meaning of applicable securities laws. In particular, expectations around the impact of the COVID pandemic potential acquisitions, results of operations and financial condition and that of our customers and partners are uncertain and subject to change. This forward-looking information represents our expectations as of today and accordingly is subject to change. Such information is based on current assumptions that may not materialize and is subject to a number of important risks and uncertainties. Actual results may differ materially and listeners are cautioned not to place undue reliance on this forward-looking information. A description of the risks that may affect future results is contained in AirBoss' AIF and MDA, which is available on our corporate website and in our filings with SEDAR at www.sedar.com. With that, I'm going to turn the call over to Chris for an operational review.

[Chris Bitsakakis, executive]

Thank you, Gren, and Good morning, everyone. I am pleased to report that 2021 was another strong year for AirBoss in terms of growth, profitability and free cash flow generation. Our ability to deliver results despite the complex and ever-changing environment was bolstered by 2 key acquisitions: BlackBox Biometrics or B3, and Ace Elastomer, solidifying the medium- to long-term scale of our business. In Q4 of 2021, we generated our highest quarterly net sales in the company's history, coupled with the largest cash flow generation ever delivered by AirBoss in one quarter. In 2021, we utilized our financial flexibility to accomplish multiple strategic growth initiatives and they are as follows: we completed delivery of our Powered Air Purifying Respirators and related peripherals to HHS and then started to execute on even larger HHS order for nitrile gloves, becoming the #1 importer of nitrile gloves to the United States for the year. We announced a record and continually growing pipeline in ADG of over USD 1.5 billion, the largest in the company's history. We completed payments related to the acquisition and a full control of the AirBoss Defense Group. We acquired B3, giving us full control and protection of its blast gauge technology prior to anticipated sourcing of major government contracts for overpressure protection for soldiers. We invested in the design and development of our AirBoss 100 Half Mask Respirator, a more portable alternative to our successful FlexAir powered air purifying respirator at a lower price and have just recently received NIOSH approval for this exciting new product. We successfully completed the acquisition of Ace Elastomer, which has propelled AirBoss Rubber Solutions into a market-leading position in color and specialty rubber compounding and this has expanded our geographic penetration in the U.S. and will also help facilitate further growth westward. And at AirBoss Engineered Products, we completed our modernization program, having now invested in and installed new technology to improve automation and efficiency. We were able to increase our quarterly dividends by 43%. We renewed our normal course issuer bid and we increased our revolving credit availability to USD 250 million, up from USD 60 million at the end of 2020 with an accordion of USD 75 million, up from USD 50 million, providing enhanced financial flexibility to fund large contract working capital requirements, as well as opportunistic acquisitions. Our strategic and careful use of our financial flexibility in 2021 has put us in a position to continue to grow organically and inorganically. And despite the significant investments, we expect to find ourselves in a similar financial position with growth momentum going forward. We are entering 2022 in an extremely strong financial position along with a record growth pipeline of opportunities of over USD 1.5 billion, the largest in the company's history. Our balance sheet strength provides us with enhanced flexibility to execute on more large-scale contracts and positions us well to execute opportunistically on both organic and inorganic growth initiatives, broadening our product lines and regional presence, particularly as potential acquisition targets may lack the balance sheet strength to weather any economic challenges that may arise. The company's ability to generate cash and utilize that cash to continue to grow is a derivative of the solid operational and tactical execution of detailed growth plans driven by strategic focus on productivity, innovation and diversification as the main driving forces behind both top and bottom line growth. Notably, we introduced a combination of domestic sourcing and advanced buying tactics, along with developing alternative raw material sources, both domestically and internationally to help mitigate the impact of numerous global challenges on our business. Despite the significant and extensive obstacles associated with COVID-19, including unprecedented supply chain challenges and record raw material price increases, we continue to perform well on a consolidated basis and effectively manage our operations through the fourth quarter and the year. While we expect the industry headwinds to continue in 2022, we have solidified our position this year as a leading supplier of personal protective equipment to the health care and survivability sectors, while making investments to position AirBoss Defense Group, Airbus Rubber Solutions and Airbus Engineered Products for strong performance coming out of the pandemic as the economy stabilizes. As it relates to ADG, the segment continued deliveries of nitrile patient examination gloves for HHS. We continued execution under this contract, which provided a strong financial backdrop to offset raw material logistics and labor challenges faced by the other groups. By the end of Q1 2022, we expect to have executed successful and close to USD 0.5 billion of orders from the U.S. government, cementing our status as a trusted large-scale supplier of protective equipment for frontline health care, defense and law enforcement personnel, able to deliver high-quality products during the most challenging of supply chain dynamics. We continue to pursue more large-scale government health care and PPE contracts and other survivability equipment contracts, as well as domestic and international contracts for supplier CBRN Wearables and potential orders for new Husky 2G vehicles and related vehicle sensors and equipment in our record USD 1.5 billion plus pipeline. As I noted previously, our sales pipeline only includes active or imminent sales opportunities and excludes the potential competition for the supply of gas masks to the U.S. military, which we are hopeful to compete for and win as our industry-leading Low Burden Masks in recent years in Canada and Australia. It also excludes large-scale rollout of our Blast Gauges, which are currently in field testing with the U.S. Army and in competition for the U.S. Special Operations Command. While in the short to midterm, ADG is anticipated to continue to be our primary driver of profits, we are also expecting improvements in our Rubber Solutions and Engineered Products segments, though there is still potential for COVID-19 related weakness, including ongoing supply chain challenges further exasperated with the invasion of Ukraine. At ARS, we have seen increased top line growth momentum through -- although margins were compressed by the rapid escalation of pandemic-related raw materials, freight and labor challenges, while realizing a marked reduction of government subsidies designed to soften the financial impact of pandemic-related labor cost escalations. We are, however, seeing continued benefits of the sizable capital investments that we have made in ARS over the past few years. ARS recorded strong year-over-year increases in volumes, as well as progressive traction this quarter with increases across the vast majority of sectors due to increased momentum at most customers' operations. However, in the face of great challenges come important opportunities, and as such, the company continues to take advantage of its scale and global supply chain management expertise to onboard new customers, seeking new suppliers in the current environment to drive volume and growth in the core markets. At Engineered Products, we had a transformative year despite the continued impact of record raw material increases, significant supply chain challenges and electronic chip shortages as OEMs continue to shutter production with new vehicle inventories at record lows, while demand remains very strong. We have continued to focus on our 3-part strategy to reduce operating expenses, produce more innovative higher-margin products and expanded to nonautomotive sectors. In Q4, we continued to focus on our operational improvement plan, including managing variable costs and focusing on sustaining a stable workforce, while weathering the volume volatility in the automotive sector and specifically on our products for SUV, light truck and minivan platforms. We continue to focus our commitment to drive efficiencies and best-in-class automation, including the installation of 22 new injection presses as part of a multiyear investment in addition to the addition of 2 state-of-the-art automated work cells. The segment also continued its focus on diversification of its product lines into sectors adjacent to the automotive space. We remain committed to continuing to address the key challenges in the antivibration business, focusing on margin improvement, targeted cost management and improving our pricing strategies with raw material indexing and investments in advanced manufacturing. Despite near-term supply chain challenges, our longer-term priority remains to drive improved performance at AEP through a combination of disciplined cost containment, client relationship expansion, new product development, sector diversification and a more aggressive stance on the renegotiation of low-margin contracts that do not allow for raw material escalation clauses that are very common in the automotive sector. Our ability in 2021 to pass on the exponential increases in raw material, freight logistics and labor costs was quite limited given the inflexible nature of automotive contracts. Despite that, we made some progress last year and we continue to make progress this year with many of our customers agreeing on relief measures related to unprecedented raw material inflationary pressure. As an overall organization, our continued momentum has placed us in a strong financial position and has given us the ability to be aggressive with opportunities that present themselves. While we have a clear strategy to grow organically and have proven our ability to execute as such, historically, we have also undertaken strategic M&A in order to make critical acquisitions, diversify our products and customer base and penetrate new sectors. We continue to seek ways to leverage our balance sheet, strength and accelerate our growth strategy through M&A as evidenced by our recent acquisition of Ace. As it relates to the outlook, our growth is not dependent on M&A. It is difficult to predict the continued normalization of the economy in the near term due to the impact of COVID-19, including global supply chain issues that have been further exasperated with the war in Ukraine. But as I stated previously, the outlook remains healthy over the medium term with industry estimates for approximately 4% top line growth over the next 5 years. We have obviously outperformed the industry over the past number of years with revenue and adjusted EBITDA compounded annual growth rates of 34% and 58% respectively since 2019. Our aim remains to continue expanding our market share, while increasing our margins through a combination of product mix and operational efficiencies, complemented with strategic and disciplined M&A. Our focus remains to cultivate strong internal processes that lead to organic growth in excess of market growth, while assessing both tuck-in and transformational acquisitions as we look to leverage our strong balance sheet to accelerate our strategic growth targets. With that, I will now pass over to Frank for the financial review. Frank?

[Frank Ientile, executive]

Thank you, Chris, and good morning, everyone. As a reminder, please note all dollar amounts presented are in U.S. dollars except for dividends per share, which are in Canadian dollars. Percentage growth figures are for Q4 2021 versus Q4 2020, unless otherwise noted. Starting from the top, compared to Q4 2020, external sales increased 88% to USD 249 million on a consolidated basis, with increases in AirBoss Defense Group and the Rubber Solutions segment, partially offset by decreases in the Engineered Products segment. Consolidated gross profit increased 28%, although margins declined primarily due to product mix in the ADG segment in addition to government-directed wage subsidies recognized in Q4 of 2020. Adjusted EBITDA decreased to USD 27 million from USD 33 million, primarily due to changes in gross profit, higher selling, general and administrative costs. Adjusted profit attributable to owners of the company was just over USD 15.5 million or USD 0.55 per diluted share compared to USD 15.9 million or USD 0.59 per diluted share in Q4 of 2020. ADG's net sales increased to 129% to USD 176 million, primarily due to the continued delivery of the HHS nitrile patient examination gloves in Q4 2021. Gross profit at AirBoss Defense Group increased by 33% to USD 48 million, primarily driven by the large nitrile glove order. Net sales at our AirBoss Rubber Solutions increased 66% as volumes were up 11%, with increases across the majority of sectors due to increased momentum at most customers' operations, further supported by the addition of Ace Elastomers despite residual disruptions due to supply chain issues and some softness due to the COVID-19 pandemic. Gross profit at ARS increased by 52%, driven by increased non-tolling volumes compared to Q4 2020. The addition of Ace Elastomers, managing and reducing the impact of COVID-related disruptions and managing controllable overhead costs, partially offset by higher raw material, labor and logistics costs in addition to a decrease in government-directed subsidies. Net sales in the Engineered Products segment decreased by 15% to USD 28 million due to softening volume and sales of the automotive sector, continued to manage volume volatility given the challenges with the global electronic chip shortages combined with raw material shortages in addition to freight and logistics constraints. This softness is anticipated to continue for the foreseeable future. Gross profit at AEP decreased by USD 2.6 million to a loss of USD 2.2 million. The decrease was primarily a result of significant raw material increases in addition to freight logistics and labor constraints, partially offset by continued focus on controllable operational cost containment. This was also further impacted by the automotive sector volatility due to the global electronic chip shortages. Free cash flow for the quarter was an inflow of approximately USD 133 million, with increased profits, cash generated from working capital of USD 111 million, offset by tax payments of USD 1 million. The working capital inflow was primarily related to the continued delivery of the nitrile gloves to HHS, partially offset by investments in inventory at the Rubber Solutions and at the Engineered Products segment for safety stock due to anticipated shipping delays. CapEx was USD 5 million in Q4 and USD 18 million for 2021. Our balance sheet and liquidity is in a strong position to support further M&A and other internal growth investments. Our revolving credit facility is USD 250 million with an accordion of USD 75 million. Approximately USD 66 million was drawn at the end of Q4. As at the end of the quarter, we had net debt of USD 56 million for a net leverage ratio of 0.7x EBITDA. With that, I will now turn the call over to Chris.

[Chris Bitsakakis, executive]

Thank you, Frank. And with that, I would like to ask the operator to queue up the questions that may be waiting for us.

[Operator]

[Operator Instructions] Our first question is from Yuri Lynk with Canaccord.

[Yuri Lynk, analyst]

I just wanted to turn to the outlook and how to interpret some of the qualitative comments calling for another strong year in '22. Are you expecting EBITDA to be up this year versus '21?

[Peter Schoch, executive]

Yuri, we're not formally giving guidance yet. The reason for that is we have the largest pipeline that we've ever had in front of us. And -- there are many contracts in that, which we are expecting to be awarded. And obviously, the timing of the awards will affect how much of it goes into this year versus next year. And as soon as we know, we will let you know. But certainly, EBITDA will grow significantly when we get some of these awards.

[Yuri Lynk, analyst]

Okay. I mean, Gren, we -- I understand the pipeline is very healthy. But I mean we just came through, hopefully, peak COVID. There's a war starting overseas as we're all aware. Is there a commonality as to some of the delays behind announcing these awards? Or are they delayed at all? Or are they progressing as you thought they would? Just some color on the timing and any broader themes there.

[Peter Schoch, executive]

Well, probably the biggest one, which we were anticipated -- we were anticipating would have been awarded by now, but which still hasn't been awarded is the gown contract. And that is not delayed for any lack of demand reasons, is delayed for -- because of bureaucratic problems with the customer. There have been some wrenches thrown into some of the government procurement because of things like President Biden announcing that he had -- he was going to send an N95 mask to every American and a test kit to every American and the same agencies that are buying some of the other products from us had to scramble to fulfill those requests. Additionally, the war in Ukraine has created mess, well, I don't want to say confusion, but certainly, it's created a lot of work for people. So that's the bad news. The good news is that we've received probably more inbound inquiries on our CBRNE and other defense products in the last 2 weeks than we've received in the last year or so. So I don't think there's any issue with demand. These stockpiles are still basically low and need -- and will be replenished and built to record levels. And virtually every country is building up their defense budgets. Canada, Germany, Poland and strong defense budgets are usually good for us. And we haven't got any inquiries yet, which are advanced enough to make it into the pipeline number, but I expect they will.

[Operator]

Our next question is from Kevin Chiang with CIBC.

[Kevin Chiang, analyst]

Maybe just 2 for me. Just on the ADP side, it looks like the auto industry can't seem to capture break here and all this the Russian and Ukraine conflict is now creating another supply chain issue for that industry. Just any pressure that industry is seeing and maybe what you're seeing as a supplier to that industry? Just wondering how any negotiations are in terms of passing along any inflationary pressures that might be emanating from the more recent supply chain? Are you finding that the OEMs are receptive to some of the stuff they allowed last year? Or are you kind of back to the drawing board trying to pass these inflationary costs off on to them?

[Chris Bitsakakis, executive]

Well, Kevin, you know the auto industry probably better than most. But clearly, there's a couple of things. The pressure on the auto industry last year was really quite unprecedented on the supply chain side. And we thought very, very hard to get price increases. We were successful in some areas to be able to get indexing and those kinds of things established. However, we did have some major customers that were still holdouts in that. So, last year was very frustrating for us from that perspective. Coming into this year, however, one, we've taken a much more aggressive stance and secondly, it appears that the key customers that were holdouts are now finally starting to negotiate with us understanding that this is not a sustainable situation for us, especially at the time where the auto industry is still making profits because they have very little inventory, they're selling at high prices. So, they're still making profits, but the supply chain is really, really constrained. So, we've, this month, seen a breakthrough with some of the key holdouts that we had all of last year. And so we expect to see a bit more flexibility here as we go forward. Particularly important for us is to recover some of that lost revenue and profit, but also -- and more importantly is to get on these indices, so that it's an automatic mechanism for this pricing to be passed on. And we see it continue to accelerate as we speak. So it's extremely critical. And over the next little while, we're going to make sure that we get all those holdout customers signed up appropriately or also won't be sustainable for us that way.

[Kevin Chiang, analyst]

Right. No, that makes sense. And to your point, the OEMs, they've had some record profits here given some of the other tailwinds that they've benefited from. Maybe just my second question. I think a follow-up Gren, on your comments there to Yuri. Defense budgets are moving higher. There seems to be a growing consensus that more countries will commit to over 2% GDP to defense spending, obviously, NATO countries. In terms of what that means for you? Do you typically have to work for the next budget cycle, so the promises that are being made by Germany and Poland and maybe Canada and I think Frances out there to talking about spending more? Is that something that could end up in the pipeline in 2022? Or does this have to go to as a government approval cycle and budget cycle and this really becomes a 2023 opportunity for you and maybe the industry?

[Peter Schoch, executive]

I think it's some of both. I mean, there are some panic situations where people are just saying how much can you get to us how quickly type of situation. And obviously, we're not sitting on a ton of inventory. We can ramp up production pretty quickly. But right now, they're -- I would say they're in the information-gathering phase, trying to find out our capability and how quickly we can deliver some of the things that they want. They all have emergency funds, which they can draw immediately. But I think, generally, the threat of nuclear war had sort of faded. And I think a lot of people said earlier, well, we have to have this CBRNE protective equipment, but most of it was focused on chemical and now that Russia has threatened nuclear war, it's woken up some of the governments who had been spending money on other things rather than defense. Even our own government is making noises about increasing their defense spending. So, I think that's going to be a longer-term trend.

[Operator]

Our next question is from David Ocampo with Cormark Securities.

[David Ocampo, analyst]

And Gren, just circling back on your USD 1.5 billion pipeline and I appreciate the commentary around that. But I was wondering if you could point out how much or what percentage of the USD 1.5 billion you would characterize as kind of a more near-term opportunity you call it an announcement over the next 3 or 6 months versus kind of your longer-term opportunities that are in the USD 1.5 billion?

[Peter Schoch, executive]

Well, the entire pipeline is within -- between now and the end of '23. A significant portion of it we would expect decisions on in the next 3 to 6 months by well over half.

[David Ocampo, analyst]

Okay. And in the USD 1.5 billion is the U.S. low-burden gas mask contract included in there? And any...

[Peter Schoch, executive]

There's nothing included in that pipeline that isn't something which we've been asked to bid on. So the U.S. gas mask is not out yet or the also things like the blast gauge are not in there.

[David Ocampo, analyst]

Okay. That's helpful. And when you think about the low-burden gas mask, I know you haven't bid on it yet, but from your understanding, when you talk to the U.S. government, is the technical features of the masks more important to them versus pricing because I think that's why you guys lost out in Europe, but it may be a different situation here in the U.S.?

[Peter Schoch, executive]

So usually, the U.S. buys the best. But as I said, the -- it's not out yet and there's still a lot of work happening on the specifications, et cetera. So, we hope that our track record of performing in the last 2 years will help us. We hope, typically, the U.S. buys the best equipment on the market. not lowest price technically acceptable contract. But as I said, it's not out yet. So we -- our plans are to be the best, have the best mask and have the best price.

[David Ocampo, analyst]

Okay. That's helpful. And then just a last follow-up for Frank. Maybe you can tell us what percentage of the glove contract is left to be delivered here in Q1 or if anything got pushed into Q2?

[Frank Ientile, executive]

Yes. We've -- David, we've said we're not providing guidance at this point. As we had noted at the end of last year, roughly 70% of the contract was delivered. That was for the full year that we had mentioned and based on the guidance we gave in late December. So, it is a contract that is still in process.

[Chris Bitsakakis, executive]

So just to add a little bit of color to that, David. We're delivering gloves every day as we speak. However, the supply chain challenges have been so exasperated by the Ukrainian thing that we're a little bit unsure exactly how much is going to be delivered by the end of this quarter. So -- but we are -- whatever it is left to contribute to deliver on this contract is currently in transit. So, we're working as fast as we can.

[David Ocampo, analyst]

And I guess a follow-up to that, Chris, with all the supply chain disruptions, would there be any negative impact to the margin profile and what's left to be delivered on that contract?

[Chris Bitsakakis, executive]

Yes. I mean it's possible. When you look at comparing boats with airplanes and all the different types of logistics, gymnastics that we've had to do over the past little while, there is some potential impact. However, when we first estimated this contract and when we first planned out in terms of our own internal and external guidance, we had planned for a certain percentage of high-cost logistics built into it. But what's happened recently with the Ukrainian thing has been far beyond what we expected. So, we still have some work to do on that. We don't expect a massive change in terms of gross margins. But certainly, we're under a little bit of pressure in that way.

[Operator]

Our next question is from Tim James with TD Securities.

[Tim James, analyst]

First question, just kind of a housekeeping question. I'm wondering if you can give us a sense for what total compounding volume was, how it changed year-over-year? If I'm not mistaken it or perhaps I missed it in the MD&A, but I think you've given on [ tooling and tolling ] independently. But I'm just wondering if you can give us a sense for the combined volume change?

[Chris Bitsakakis, executive]

Yes. Tim, the combined volume was up basically 11% year-over-year.

[Tim James, analyst]

Okay. Great. And then was there much of a -- I'm just thinking sequentially, sticking with the compounding here and kind of thinking the change in revenue versus the change in volume. Was there sort of sequential change in revenue a pretty good indication of the sequential change in volume as well? Or was there anything specific in terms of mix that would have changed the relationship there?

[Chris Bitsakakis, executive]

Yes. I mean overall, Tim, as we mentioned, the volume was up both on tolling and non-tolling in proportion relatively. So, I think it's pretty close in all of the sectors, were really substantially stronger than they were the prior year.

[Tim James, analyst]

Okay. I'm just wondering specifically relative to Q3, really nice growth there in Rubber Solutions revenue. Is that primarily related to just the sequential change in volume? Or is there other sort of mix-related factors that maybe come into play?

[Chris Bitsakakis, executive]

It's a combination, Tim, of the volume and the price, obviously, because with the escalations going on, there's always that change happening as well.

[Tim James, analyst]

Okay. Great. I just want to return to the question earlier about the pipeline opportunity, the USD 1.5 billion. Gren. And I think you mentioned maybe half or a little more than half of that could be awarded or decided in the next 3 to 6 months. How should we think about the revenue timing of that? Is that whatever success rate you have on that? Are those revenues to come in the next 12 months by the end of '22, the end of '23, what is the timing just generally for that pipeline?

[Peter Schoch, executive]

It varies, of course, by product in there. Some are for immediate delivery and some they are still saying they want it all delivered by this year, but it will be difficult to get it delivered by this year unless it's awarded really quickly. All of it will be between this year and the end of next year.

[Tim James, analyst]

Okay. That's helpful. And then just my last question on Engineered Products. I'm just wondering if you can give us any sort of a sense and I'm thinking very long term here on what the EBITDA margin potential is in that business? And maybe how long you think it could take to get there? And I'm thinking about the various levers in there, the equipment upgrades you've been making, the presses, the work cells, obviously, the work that you're doing and continue to do on getting cost pass-through to customers. When do you think this kind of initiative and -- or when do you think you can kind of mature the margin profile in that business? And is there any way you can give us a sense of what it could be?

[Chris Bitsakakis, executive]

So keep in mind, Tim, that because Airbus engineered products is one of the biggest customers for AirBoss Rubber Solutions, there's some embedded margin at ARS related to the product lines at AEP. So, we have to keep that in mind because, internally, we look at it both ways, right? In terms of most automotive companies right now, as they sit as pure automotive plays, they're normally in the single digits in terms of EBITDA margins. Our plan, however, is to transform that business into be 50% auto, 50% non-auto. And we have some really large scale non-automotive opportunities that we're currently working on that have a much higher margin profile closer to what you see on the Defense group side. So as those mature, I think we'll be able to -- first of all, we need to stabilize the auto side of the business with proper pricing. Once that happens and when we look at the embedded margins at ARS, you'll see a business that at least is positive even if it's not the highest margin segment that we have. However, once we start layering in the nonautomotive opportunities, particularly some of these bigger defense contracts, I think you'll see that come up quite significantly into the double digits. But it's going to take some number of years to have this all roll out, but that's our end play at this point.

[Operator]

[Operator Instructions] Our next question is from Ben Jekic with PI Financial.

[Ben Jekic, analyst]

I have 2 questions, mostly qualitative in nature. So first question is on your half mask. So my understanding is that it is similar quality, but a cheaper alternative to PAPR. And I wanted to ask, is there a potential risk of cannibalization at some point? Or is it opening demand to sort of incremental levels in the future? How will that fit in your whole portfolio of products?

[Chris Bitsakakis, executive]

Well, when you look at the powered air-purifying respirator, it costs hundreds of dollars, in the USD 600, USD 700 range. There's a powered motor to it. There's hoods and tubes and accessories. And it's really more geared towards a very high shedding environment and doesn't -- isn't necessarily that conducive to donning and doffing multiple times within an hour or whatever as you go in and out of certain situations. We designed the half mask to use the same filter technology that we have in the PAPR. This is where we get the 99.97% capability compared to an N95 mask, which is 95%. This is much more effective. It's more portable. It doesn't have the motor or the hood or the blower to it and has been designed in conjunction with first responders, who want to be able to be, let's say, in their ambulance, quickly put it on, attend to a patient, go back in the ambulance and take it off that sort of thing. So we don't see it really cannibalizing. It really is 2 different markets. There may be a little bit of overlap just because of the capability. But the entry point cost is so much lower, we think we'll be able to have more traction with first responders and with health care workers as well. It is still a pro mask, but we will also be making it available to the general public as well. So it's going to be an interesting sort of ramp-up. It may take a little bit of time to get the traction that we think it can get. But I don't see a huge overlap with the PAPR, uses a similar technology, but different price point, different application, much more portable and easier to use.

[Ben Jekic, analyst]

Got you. Great answer. And my second question is I guess on -- so USD 1.5 billion pipeline, you're asked to provide a bid if maybe, Gren, you can -- I don't know, maybe some anecdotal story or something like how does that work? You gave a price -- is that aligned in the [ sand ] price or the government sort of comes and says, you can do better than that? How about a 5% discount and play out their participants against each other? Or is it -- you give a price and then the government says, okay, please wait a month or 2 months, and we'll get back to you? Just trying to get a sense of these timings.

[Peter Schoch, executive]

So there are a number of things in the pipeline. Some are contracts tenders, which we have already bid on. We've gone through the RFI process and the government has down-selected a group of bidders and we're one of them. And we have -- and then they've asked for a firm proposal in terms of how many you can deliver, when you can deliver them and what price you're going to deliver them on and we've put a bid in. So some of it are opportunities that are that advanced. And some are of one step behind that, where the government has asked for our capabilities. They've told us they need x number, millions of dollars of them. We know that we're going to be 1 of the 2 or 3 or 4 bidders on it. And we haven't put the pricing yet, but we're in the negotiation -- technical negotiation phase of it. So -- but none of it would be something like the gas mask, which we know they're going to need at some stage, but we have no firm date on it and no firm proposal on it. So something like that would not be in it. So anything that's in that there's a very real opportunity. like, for example, we have a portion of that would be gowns, where you're aware of the government requirement for gowns. And there we will certainly be a finalist on that contract, so, but that's something which would be in it, what is behind some other things, which we have put in our final price on a fixed quantity of something for them.

[Operator]

There are no further questions registered at this time. I would like to turn the conference back over to Chris Bitsakakis for any closing remarks.

[Chris Bitsakakis, executive]

Thank you, everybody. Thank you, operator, and thank you, everyone, for attending this morning's call. We're very pleased with the performance that we have delivered last year and I want to take this opportunity to thank all of our employees across the organization that facilitated this kind of performance in an extremely difficult climate. We're excited about the future of the company going forward and we look forward to speaking with you again. So then we hope you're all keeping safe and well. Goodbye, and thanks again.

[Operator]

This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.