AirBoss Revenue Hits 3-Year High, Tariff Risk Clouds Outlook

AirBoss of America Corp. reported its highest quarterly revenue in three years during the second quarter, driven by defense contracts and a recovery in rubber volumes. The gains come with a warning from management: the completed Bandolier contract will create near-term softness, and cross-border trade exposure leaves the company vulnerable to U.S. tariff negotiations.

Consolidated sales rose 9.4% year over year to $107.9 million. Gross profit increased by $2.6 million to $18.8 million, with gross margin expanding to 17.4% from 16.4% a year earlier. President and Co-CEO Chris Bitsakakis described the quarter as a three-year high point for revenue. The performance reflected efforts to serve existing customers and create more flexible supply chains amid tariffs, inflation and geopolitical developments, he said.

Manufactured Products delivered the strongest segment-level improvement. Sales in the segment increased 13.9% to $62.7 million, driven by higher defense-products sales under previously awarded contracts and improved sales in the rubber molded-products business. Segment gross profit rose to $11.9 million from $9.6 million.

The Bandolier contract, however, has run its course. CFO Frank Ientile said the completion of the final delivery is expected to result in some softness entering the third quarter, which could moderately affect the segment's margin profile. He added that the engineered-products business continues to build momentum, citing robust automotive volumes and activity in non-automotive operations.

Rubber Solutions posted a 10.7% increase in sales to $56.4 million. Volume increased 16.4%, with non-tolling volume up 17.5%. Gross profit in the segment rose modestly to $6.9 million, but gross margin declined to 12.2% from 13% because of unfavorable mix and continued market pressure. Bitsakakis said Rubber Solutions recorded progressive volume growth for three consecutive quarters and reached a 12-month high in revenue. He attributed the improvement to new-customer wins and efforts to defend existing market share.

Management expects volume and margin volatility at Rubber Solutions for the foreseeable future and through most of 2026. Bitsakakis said the caution primarily reflects uncertainty in the company's end markets rather than current customer order patterns. Weak conditions in the U.S. industrial base have left open capacity across the industry, increasing pricing competition, he said.

The company has faced raw-material cost increases linked to Middle East developments, as many inputs for rubber production are connected to oil and petrochemicals. AirBoss has generally passed cost increases through to customers, but the timing can create pressure when competitors are working through lower-cost inventory. Management believes the market is becoming more level as those inventories are used and expects to pass through newer price increases more quickly in the third quarter.

The company is pursuing higher-margin specialty materials to improve the Rubber Solutions mix. Bitsakakis said AirBoss recently launched a silicone line and is beginning to build market momentum. The company expects silicone to have a more noticeable effect on the margin profile over the next six to eight months, though he said it will take several quarters to scale. AirBoss has also ordered specialty equipment for another polymer offering expected to arrive toward the end of 2026.

The cross-border risk is concentrated. Approximately 80% to 85% of Rubber Solutions volume goes across the U.S. border, while roughly 15% to 20% remains in Canada, according to management. Most products qualify under the USMCA/CUSMA framework, but the company maintains contingency plans for potential tariff duties, trade restrictions or future agreement renegotiations.

Net cash from operations was $1.8 million in the second quarter, down from $12.9 million a year earlier. Capital expenditures totaled $4 million, compared with $1.8 million a year earlier, tied to growth initiatives and upgrades at both segments' facilities. Net debt stood at $72.9 million at June 30, compared with $67.6 million at the end of the second quarter of 2025. The company had $78.3 million of available borrowing capacity under its asset-based revolving credit facility, with $31.4 million drawn.

Management said it expects to fund 2026 operating cash requirements, working-capital needs, capital expenditures and scheduled debt repayments through cash on hand, operating cash flow and committed borrowing capacity.

Bitsakakis said the company expects year-over-year growth in the second half, although the quarterly rate of growth may fluctuate. A significant U.S. economic event or further geopolitical disruption could slow that progress, he said.