Firan Technology Group Corp

TSX:FTG

Good morning, everyone. My name is Ludi, and I will be your conference operator today. I would like to welcome everyone to the FTG Q2 2025 Analyst Call. [Operator Instructions] Please note that this call is being recorded.

I would now like to turn over to Brad Bourne, President and Chief Executive Officer of Firan Technology Group. Mr. Bourne, you may proceed.

Thank you. Good morning. I'm Brad Bourne, President of Firan Technology Group Corporation, or FTG. Also on the call today is Jamie Crichton , our Chief Financial Officer.

Before we go any further, I must caution you that this call may contain forward-looking statements. Such statements are based on the current expectations of management of the company and inherently involve numerous risks and uncertainties, known and unknown, including economic factors in the company's industry generally. The preceding list is not exhaustive of all possible factors. Such forward-looking statements are not guarantees of future performance, and actual events and results could differ materially from those expressed or implied by forward-looking statements made by the company. The listener is cautioned to consider these and other factors carefully when making decisions with respect to the company and not place undue reliance on forward-looking statements. The company does not undertake and has no specific intention to update any forward-looking statements written or oral that may be made from time to time by or on its behalf, whether as a result of new information, future events or otherwise.

Well, we set another sales record for FTG in our second quarter of 2025. We also had record EBITDA and adjusted EBITDA in the quarter. I'd like to thank everyone at FTG for their hard work and their contributions to our continued success. In the second quarter of 2025, FTG accomplished many financial goals, including our total bookings in the quarter reached $45.8 million. Our quarter end backlog stood at $133.5 million, a 9% rise from the previous year-end. We achieved record revenue of $48.7 million, a 25.6% increase over Q2 last year. We achieved record adjusted EBITDA of $8.7 million in the quarter, up from $6.5 million in Q2 last year. Our net earnings rose by 36% to $3.5 million. And we maintained a strong balance sheet with net debt of $13.5 million, including $12.8 million of government loans or approximately 0.4x trailing 12-month EBITDA.

Our operating cash flow less lease payments was $5.8 million for the first half of 2025. Other accomplishments in our second quarter included our recent acquisition, FLYHT achieved profitability in Q2. There's certainly lots more work to do there, but it's great to see some early results and positive results for them. Also related to FLYHT, they achieved their first supplemental type certificate, or STC, from Transport Canada for its AFIRS Edge product on the Boeing 737. More STCs for this product are underway for additional aircraft types and additional geographic regions.

We finalized the facility design and signed a lease for our planned aerospace facility in Hyderabad, India with a target completion date of late 2025. Initial start-up capital has also been invested in the new operation officially now called FTG Aerospace Hyderabad. We completed qualification orders for some high-volume U.S. Defense programs in the quarter and received new qualification orders on further U.S. Defense programs.

And partly in Q1 and partly in Q2, we have strengthened our leadership team with the addition of Bill Sezate as Executive Vice President, FTG Circuits. Bill comes with extensive experience in all aspects of the circuit board industry, and he will be responsible for all 6 of FTG Circuits businesses. In addition, Marko Viinikka joined FTG in a newly created role as Executive Vice President, FTG Aerospace. Marko comes with extensive experience in all aspects of the aerospace industry. Marko will be responsible for the 4 FTG Aerospace sites as well as the site under construction in India. And finally, yesterday, we added Russell Davis -- David to our Board of Directors. Russell has unique experience as a Board member of privately held companies, including Davie Shipbuilding Canada, and as a senior executive in public and private corporations and as a senior partner in financial services firm, Deloitte and corporate finance and M&A advisory services. Jamie will provide more details on our Q2 results shortly.

Let me turn to some external items. Our end market demand remains strong. Airbus delivered 766 aircraft last year, but more importantly, they're looking to ramp to over 1,000 aircraft annually in the next few years. We have a backlog of over 8,000 orders, which is over a decade worth of production at current production rates. For 2025, they are projecting growth of 7% over last year.

At Boeing, they shipped just under 350 planes last year, down from about 500 in 2023. The drop was due in part to the safety incident on the Alaska Air 737 as well as the machinists strike they had last year. But looking forward, Boeing has plans to ramp their production to almost 700 planes annually in the next 2 years. Boeing's backlog is almost 6,000 planes, so also over a decade's worth of orders at current production rate. In the first half of this year, Boeing shipped over 250 aircraft, but they have recovered from last year's challenges and are back on a growth plan. While 2024 might have been a low point for Boeing, it has become clear that Airbus is outperforming Boeing in the air transport market with a 2:1 advantage on aircraft shipped in the last year and a 60% market share on order backlog. This has implications for FTG's plans going forward.

In the business jet market, Bombardier reported mid-single-digit shipment increases last year. They're not providing guidance for this year due to the uncertainty around U.S. tariffs, which are okay for them for now, but are still somewhat fluid. Recently, however, Bombardier announced a new order for 50 aircraft with options for 70 more, which represents almost another year of backlog for them. They're also pushing hard to add a defense component to their business and have had some success in selling the business jets for defense applications.

In the helicopter market, Bell Helicopter reported 5% overall revenue growth last year, but they also have some key U.S. military helicopter wins in the last few years that will drive significant growth going forward. Airbus helicopters had a backlog of 942 aircraft at the end of Q1 this year, which represents about 5 years of production. All of this bodes well for us as we look to future demand in the coming years. I've also looked at results from some key defense contractors. For instance, Lockheed Martin's reporting 4% revenue growth this year.

Also related to defense, Boeing was selected to develop and produce the Next-Generation Air Dominance fighter. This is good news for them. And based on the supply chain approach of the previous air superiority fighter, the F-22, I would expect sourcing for this new program will be for U.S.-only suppliers. We did have small content on the F-22 when it was in production through our Chatsworth facility. We are much better positioned now to increase our content on U.S.-only procurements with 5 U.S.-based sites.

Also, there are new commitments from all NATO members, including Canada, to ramp defense spending to 3.5% of GDP with another 1.5% for defense infrastructure. And Canada has said they will increase defense spending this year to 2% of GDP. Again, all this indicates significant increases in defense budgets for all European countries and for Canada. And the U.S. is looking to increase defense spending next year as well.

Looking at the longer term, Boeing's most recent 20-year forecast for commercial aerospace shows significant long-term industry growth, and it continued to show 20% of all new aircraft deliveries going to China and close to 40% going to Asia, as has been the case in their recent forecast. The business jet market has already seen traffic recover. A recent business jet market forecast from Honeywell similarly predicts growth in this market in the coming years with near-term double-digit growth rates for the sector. The simulator market mirrors the end market application. But as we always remind everyone about this market, it is lumpy, so large year-to-year variations do occur.

So as we have said for many years, FTG's goal is to participate in all segments of the aerospace and defense markets as each market moves through their independent business cycle. It is not often all segments are growing. That seems to be the case now.

Beyond all this, let me give you a quick update on some key metrics for FTG for our second quarter. First, as already noted, the leading indicator of our business is our bookings or new orders. Our bookings were $45.8 million in the quarter. This resulted in the backlog of $133 million. Our second quarter sales were $48.7 million, up $9.9 million or 26% above Q2 last year. The growth is approximately 45% from organic growth and 55% resulting from the acquisition of FLYHT.

In our Aerospace business, sales were up $5.7 million or 56% in Q2 this year compared to Q2 last year. The increase is primarily due to the acquisition of FLYHT in Q1 this year. Our Aerospace Chatsworth site had a tough quarter, offset by strong growth in Toronto. Our Tianjin facility had modest growth in the quarter. On the Circuit side of the business, sales in our second quarter this year were up $4 million or 14% over Q2 last year. All of this growth is organic. Of note, our strongest percentage growth was from our joint venture in China and the largest dollar growth was from our Circuits Toronto, followed by our Circuits Minnetonka facility.

Overall at FTG, our top 5 customers accounted for 52.8% of total revenue in our second quarter. This compares to 56% last year. It's always good to see the drop in customer concentration as we add sites and expand our customer base, partly through the acquisition of FLYHT. Airlines were 2 of our top 20 customers in Q2 due to the FLYHT acquisition. 56 -- sorry, 67.5% of sales are to U.S.-based customers in the quarter. This includes sales by U.S. sites as well as sales from FTG sites in Canada or China. This compares to 80.5% in Q2 last year.

While sales grew by 5% into the U.S., sales grew by 58% in Canada, 120% in Asia and 170% into Europe as we benefit from previous efforts to expand globally, including things like our content on the C919 aircraft in China and acquiring FLYHT with sales globally. This increase in sales outside the U.S. are helpful in the event of any tariffs the U.S. might impose. Our goal is to continue to grow our non-U.S. revenue for our non-U.S. sites. In Q2 this year, 32% of our total revenues came from our Aerospace business compared to 25.5% in Q2 last year. The Aerospace business share increased due to the strong growth at Aerospace Toronto and the acquisition of FLYHT.

I would now like to turn the call over to Jamie, who will summarize our financial results for Q2 2025. And afterwards, I will talk about some key priorities we are working on. Jamie?

Thanks, Brad, and good morning, everyone. I'd like to provide some additional detail on our financial performance for Q2. On sales of $48.7 million, FTG achieved a gross margin of $15.9 million or 32.6% in Q2 '25 compared to $10.8 million or 27.9% on sales of $38.8 million in Q2 '24. For Q2 '25, the FLYHT acquisition contributed approximately $2.1 million of incremental gross margin. Excluding the acquisition, gross margin dollars increased by $2.6 million on incremental sales of $4.5 million as a result of operational improvements, particularly within the Circuits segment and foreign -- favorable foreign exchange rates in Q2 '25. The average FX rate in Q25 was $0.04 or 3% above the rate for Q2 2024.

Gross margin in Q2 2025 also benefited from a partial forgiveness of a loan from the Ontario government of $400,000. Gross margin within the Aerospace segment was constrained in Q2 by delayed qualification of a new product line, which has delayed the related revenue. On a sequential basis, Q2 '25 gross margin increased by $2.5 million or 1.5 margin points relative to Q1 '25 on a sales increase of [ $5.059 million ]. Annualized revenue per employee in Q2 '25 was $259,000, which was up 11% from the prior year quarter.

SG&A expense was $6.8 million or 14.1% of sales in Q2 '25 as compared to $4.8 million or 12.3% of sales in Q2 '24. The increase in SG&A includes $1.3 million of expenses from FLYHT, $62,000 for the Hyderabad start-up effort and higher performance compensation expense. R&D costs for Q2 '25 were $2.4 million or 5% of sales compared to $1.6 million or 4.1% of sales for Q2 '24. R&D efforts include process development in the Circuits segment and efforts to develop and qualify products for future aerospace programs.

FX expense in Q2 '25 was $0.4 million greater than Q2 '24 and $1.3 million more than Q1 2025. A component of FX expense is the quarter end revaluation of U.S. dollar-denominated balance sheet items, primarily cash, receivables, payables and bank debt. The FX rates for the last 3 consecutive quarter end dates are $1.40 at Q4 '24, up to $1.44 for Q1 '25 and then back down to $1.38 at Q2 '25. In Q2 2025, translation of U.S. dollar balance sheet items was a $700,000 drag on earnings, whereas in Q1 2025, this was a lift of earnings of approximately $600,000.

FTG continues to manage FX and gold [ risk ] replacement of forward contracts. Our FX contract portfolio amounts to USD 52.9 million with a weighted average contract rate of $1.34 over a duration of 36 months. Gold forwards, we have 1,050 troy ounces at an average price just under USD 3,000 per ounce with a duration of 18 months.

Adjusted EBITDA was $8.7 million or 17.9% of sales for Q2 '25 as compared to $6.5 million or 16.7% of sales for Q2 2024. EBITDA adjustments were limited to stock-based comp in both periods and India start-up costs of $62,000 in the current quarter. Adjusted EBITDA for the trailing 12 months period ended Q2 '25 is $31.9 million or 17.7% on sales of $185.7 million with a net debt equal to 0.4x adjusted EBITDA for the trailing 12-month period. Investment in CapEx and deferred development in Q2 '25 was $1.5 million or [ 3% ] of revenue. FTG expects investment in CapEx and deferred development to run in this range for the duration of 2025.

Operating cash flow less lease liability payments is $5.8 million for the first half of 2025, broken down as a positive $8.1 million in Q1 and negative $2.3 million for Q2. Cash flow for the first half of 2025 and Q2 reflects a buildup of working capital levels supported sales growth. I would also note that FTG made income tax payments of $2.2 million in Q2 '25, which included some catch-up for Q1. We are entering the second half of 2025 with a backlog exceeding $133 million. Our focus will be continuing to deliver quality products to our customers on a timely basis and improving the efficiency of our operations. Our complete set of Q2 filings are now on sedarplus.com.

And with that, I will turn the call back to Brad.

Thanks, Jamie. Let me delve into some important items for the future of FTG, starting with a potentially negative item. Tariffs or threat of tariffs from the U.S. are the new normal and certain uncertainty surrounds these tariffs. This makes it challenging to plan and react to, but we are focused on this every day as it evolves. We have 2 sites in China, which are now subject to U.S. tariffs, but as a relatively small portion of their work ships to the U.S. For Aerospace Tianjin, this should have minimal impact as the site ships completed products to Canadian and Chinese customers. They ship some components and subassemblies to our Toronto site who then make final products for shipments to U.S. customers.

For our circuit board joint venture, a small amount of work ships to the U.S. and will be subject to the new tariff. Over the past 5 years, they've had a tariff of 25% on their exports to the U.S., but they've also had work from Canada and Europe that will not be subject to U.S. tariffs. Our growth plans for this business is to focus on customers in China, Europe and Canada, and we are making progress on these plans. Our U.S. sites ship almost exclusively to U.S. customers, so there will not be any tariffs on shipments to their end customers. But they are starting to see some tariffs on input costs for raw materials they buy, some of which come from Europe or Asia. So far, the impact is immaterial, but we will continue to track this in the coming quarters.

And then surprisingly, at this moment, the FTG sites in the best situation are our Canadian sites. They are not subject to any tariffs on input costs. And at this moment, we are not subject to any tariffs on shipments to U.S. customers as FTG products are USMCA compliant. But every day is a new day. So all of this could change at any time. As a reminder, we estimated about 55% of sales to customers last year located in the U.S. originated from FTG sites in Canada or China. While we are not exposed to tariffs between Canada and the U.S. at this moment, if they did happen, we do not believe the impact would be immediate. It will take time for the aerospace and defense supply chain to react to tariffs and find alternate sources of supply. But we are concerned, and we're taking actions to mitigate any impact to FTG.

First, our acquisitions in the U.S. over the past years have reduced our exposure as they are inside the wall and would not be subject to tariffs on sales. Going along with this, our long-term strategy to be a global player has resulted in sales inside of North America of over $26 million last year and was already $27 million in the first half of this year. We are taking additional steps. In 2024, we made a conscious decision to find ways to increase our exposure to Airbus, not because of tariffs, but because they are a stronger performer in the air transport market. But whatever we do in this regard can help mitigate U.S. tariffs.

And more recently, we have made a conscious decision to pivot away from the U.S. market for our sites based outside the U.S. Obviously, a focus on Airbus is part of this. In Q1 this year, we announced a significant new contract with De Havilland on their Canadair 515 water bomber aircraft. This is an example of a Canadian program that we will sort -- support from our Toronto or Canadian facility. We are looking to become more locally focused by aligning U.S. customers with our U.S. manufacturing sites and our non-U.S. customers with non-U.S. manufacturing sites. We have identified $4 million to $5 million of revenue for non-U.S. customers currently being manufactured in the U.S. We have begun the process of moving this work out of our U.S. sites thereby potentially freeing up some capacity to move work in the other direction.

The acquisition of FLYHT will also help mitigate our exposure to tariffs. FLYHT's largest customer is in Canada, and they sell globally. As we look to in-source the manufacturing of FLYHT products, we will do so in a manner to minimize our exposure to tariffs. While on the topic of FLYHT, we acquired it for a couple of strategic reasons. First, we've expressed our desire to increase our activity in the high-margin aftermarket segment of our business for a number of years, and the acquisition of FLYHT does this. Also, as noted earlier, we are looking for ways to increase our activity with Airbus, and FLYHT has a SATCOM radio that is installed as a factory option on new Airbus aircraft. They are sold via a licensing agreement with an average annual volume of 200 to 300 units. Finally, we think the timing on this acquisition could be superb. FLYHT has spent significant time and money investing in updating products and developing new products, and the bulk of these investments are done. We think we can leverage these investments to generate strong results for the company going forward.

Now that we own FLYHT, we have 3 key actions: first, we need to reduce costs. FLYHT took significant costs out last September and another $1 million dropped out due to the elimination of their public company costs when we closed our deal. We will continue to manage their costs going forward. Secondly, we need to sell the new products they develop. This is really the key action now. So let me delve a little deeper into this. There are 3 products that matter. There's a SATCOM radio that is sold into the aftermarket and licensed for delivery to Airbus as a factory option.

For the aftermarket, the product is established and sales are well established and ongoing. The product can be used as a safety backup voice system or it can be used to transmit data useful for the airline over the Iridium satellite system. When it is used for airline data over Iridium, FLYHT gets a recurring revenue stream reselling Iridium data services. The licensing agreement for Airbus has been in a hiatus mode for the past few years due to a multiyear delivery in 2022, but this is expected to kick in again starting next year, which is expected to result in a multimillion dollar uptick when it does.

Second product, there's a Water Vapor Sensing System or WVSS-II. Its purpose is to collect humidity outside the aircraft as it flies and provide this data to weather agencies such as NOAA in the U.S. and U.K. Met in England who find it useful in weather forecasting. This product design was modernized and updated last year. It was in qualification testing when we acquired FLYHT. Qual testing is now complete. There are firm orders from both NOAA and U.K. Met. These can ship as we complete STCs for the relevant aircraft types expected to be ERJs and Boeing 737. Once in service, there's also a data revenue stream associated with this product.

Also related to this product, there are potentially commercial and military applications for it to monitor aircraft contrails, and we are exploring these. And the third product is brand new. It's a 5G wireless quick access recorder or WQAR. This product collects data from the aircraft in flight and downloads it to airline operations, while at the gate using a wireless or cell phone connection. The FLYHT product is the first 5G WQAR on the market. This product is qualified. The key now is to get approvals to install it on various aircraft types. The Boeing 737 approval has been received in Canada. This will now be expanded to Europe and China, which are expected to be the largest markets for this product. Aircraft testing for the A320 family of aircraft is also complete in Europe. Once approved in Europe, the priority will be expand the approval to again include China. We have the FTG -- the FLYHT sales team focused on aggressively selling all of these products as they become available.

And finally, our third priority for FLYHT is to in-source manufacturing to capture this margin within FTG. We are now looking at options for both the SATCOM radio and the WQAR product from our facilities potentially in the U.S., Canada or China. These actions should enable FLYHT to become a positive addition to FTG and further mitigate risk from U.S. tariffs. And as mentioned earlier, FLYHT was profitable in Q2 this year.

Also, as announced in Q1, we are implementing plans to open our aerospace facility in Hyderabad, India. We have been working on these plans throughout 2024. First, our decision to expand geographically was partly us looking for insurance policy against anything negative that could happen to our China operations, but is also partly to expand into new regions with growth potential.

As we analyzed options, we concluded India is a very cost-effective place for manufacturing and with Prime Minister Modi's, Make in India policy, coupled with significant defense spending, it would be an ideal place to operate. We selected Hyderabad as it has become an aerospace hub primarily focused on manufacturing. Our legal entity is established. We have selected to have a facility build-to-suit due to the favorable location and the option to expand if or when necessary. This decision does mean we will have to wait for most of this year to get our facility completed. In the meantime, we will be sourcing the necessary equipment to be ready to go. Our estimated total investment is forecast to be approximately $2 million. While not the original intent, we believe this initiative could also help any negative impact from U.S. tariffs.

And finally, we are developing plans to add sales resources in Canada, Europe and even Asia to support our pivot away from the U.S. market. This would be for both the legacy FTG sites as well as FLYHT. As we enter Q3 2025, we see continued strong demand across most sites. Of our $133 million backlog, over $60 million is due in Q3 this year. But as we note each year, our Q3 includes the summer months of June, July and August, and we typically lose about a week of production due to summer vacations. We are expecting to grow in 2025. The easiest aspects of our growth will be having the FLYHT acquisition as part of FTG for over 11 months in the year. We also expect there will be organic growth.

The geopolitical situation in China remains complex. In 2024, both our operations in China had another record year, notwithstanding the uncertainty. But we have repatriated cash back to Canada during 2022, 2023 and 2024. And in total, we've now brought back $3.6 million in cash, and we are repatriating more in 2025. By doing this, we don't have surplus cash stranded in China and it reduces our exposure if things deteriorate between China and the West. On a more positive note in China, the C919 program is now in production, and this will benefit our Chinese operations going forward and make us less susceptible to any geopolitical uncertainties.

We continue to assess possible corporate development opportunities that could fit with either of our businesses, but our near-term priority is to integrate our recent acquisitions. With a focus on operational excellence in all parts of FTG, our strong financial performance last year and the first half of this year, our recent acquisitions and our key sales wins, we are confident on a strong long-term growth trajectory. This concludes our presentation. I thank you for your attention. I would now like to open the phones for any questions. Ludy?

[Operator Instructions] With that, our first question comes from the line of Nick Corcoran with Acumen Capital.

Congrats on the record quarter.

Thanks, Nick.

Just my first question on the backlog. It was relatively flat from the last quarter. Is this where we should expect the backlog to settle? And what would potentially drive it higher?

Yes. I'm not sure I expect it to settle, but we do see a little ups and downs each quarter based on significant events. In Q1 this year, we booked, for instance, De Havilland water bomber contract. That was a multimillion dollar contract. So it spiked Q1 up a little bit. We didn't have any significant events like that in our Q2. So that's why it remained relatively flat. And I guess the other one for Q2 is almost all our backlog is in U.S. dollars. And so the exchange rate can cause our backlog to move up and down. And Jamie might correct me, but I think we had about a $6 million impact on FX in the quarter in our backlog just due to FX rates. But having said that, going forward, we have lots of interesting opportunities. And I'm expecting that we can see some good wins and continued growth in our backlog as we progress through the rest of the year.

That's good color. Maybe switching to FLYHT. I know you talked about in-sourcing production of their products. Any indication what the time line for this would be?

Yes. I'm going to start with, I would have thought it would be by now, but it's not. So we're a little bit late in making that happen. It's proving to be a little bit more complex. But it's also -- the original plan was simple. I was going to push production of the first product, the SATCOM radio into the Chatsworth site. And then tariffs and the uncertainty of tariffs has complicated our decision. And so it's causing us to delay a little bit and consider what is the right site or is it more than one site and where we want to manufacture this stuff. So that has definitely slowed us down, and it's proved to be a little bit more complex than anticipated initially to get this production going. So long answer. I'm hoping we are up and running, I'm going to say, this year, but it's that sort of time line right now.

And your next question comes from the line of Russell Stanley with Beacon Securities.

Congrats on the quarter. Just understanding some sensitivity perhaps here, but you noted you qualified for some new high-volume U.S. Defense programs. Wondering if you can elaborate on what you're adding there.

Yes and no. I'll add a little bit. So for sure, these programs are for our circuit board side of the business and really in our U.S. sites given its U.S. military programs. It's -- we're still working on or negotiating and working through what the upside will be for FTG. So I don't have firm numbers, but I would expect it's in the multimillion dollar range. So we're not dealing with hundreds of thousands of dollars here. But I don't have a final number because we don't have it yet.

Understood. And as always, appreciate the color around what you're seeing from some of the major end customers and everything, as you noted, looks to be strong on the demand front. I'm wondering at the program level, have you seen any softness or any hiccups in any specific programs? I maybe call it the C919 given the tariff where disruption of some exports to that of components there. But have you seen anything else at the program level, any hiccups in demand that you can call out?

Well, I think through that. I'll talk about C919. So you're right that I don't know when it was a month or so ago, the U.S. decided to block export of engines for the C919. That has been removed. And so those exports have begun again. So that's the good news. It could have been a significant impact to that program for this year. It looks like it won't be. But again, every day is a new day, so we'll see what happens. Other than that, no. I'd say we always in aerospace, everyone's schedules prove to be slightly more optimistic than the way they turn out. But it's -- like I said, day-to-day stuff on whether it's new development programs or just getting things ramped up. It always drags out a little bit, but nothing beyond the normal.

Got it. And maybe one last question for me, just on the working capital front and specifically payables. I think you used some cash to pay those down during the quarter. Anything chunky or one-off in there that we should -- that you'd call out? Or should we regard current payable levels relative to sales or COGS as a more normal level going forward?

Yes, I don't know. I was expecting you or someone to ask more on the other side on receivables or inventory, not on payables. So you trick me on that one. But I -- for sure, we used a lot of working capital in Q2. Overall, without being specific on any one of them, I would say it is at an elevated level, and I do expect working capital to come down in the coming quarters just due to some day-to-day nuisance things on both inventories and receivables at FTG. So it's a little bit elevated right now, and it will come back down in the coming quarters.

And your next question comes from the line of Robert Murphy with Raymond James.

Yes. So just first question, just on the Aerospace segment. Outside of incremental results from FLYHT for the balance of the year, how do you see organic growth kind of progressing into 3Q and then into 4Q? And then kind of what are some of your factors underpinning this outlook?

Yes. I don't have a firm growth number for the Aerospace business, but Q2 was definitely a little bit softer than I would have anticipated. We had some product that we had built and in the end, we could not ship out in the quarter, that hurt Q2 a little bit. We have really strong backlog across the business in aerospace and some of the defense contracts I talked about where we have got through qualification are to the benefit of Aerospace Chatsworth for. So backlog looks strong as long as we can work through stuff with our customers and get solid delivery dates, solid deliveries from our suppliers on components, you should see some pretty solid organic growth in the coming quarters.

Okay. Great. That's super helpful. And then just kind of on the margin there for Aerospace. I think you mentioned there was some delayed qualification of new product line in there that might have impacted in the quarter. Just wondering if you could provide a bit more -- kind of more color here and then kind of how we should see margins in the Aerospace segment kind of progressing here?

Yes. it's a great program. The one that Jamie was referring to is on the commercial aerospace side of things, we're doing some cockpit assemblies. Some of them go into Boeing aircraft, some of them go into Airbus aircraft. It's a great program. It's definitely worth millions of dollars for FTG. We thought we were through all of our development efforts at the end of last year, and we actually shipped some units. And then we got into a -- I don't know, some testing -- it was actually at Airbus and the testing caused everything to stop. In the end, nothing changed, but it caused a delay in the action. And so that's been a little bit frustrating.

On the previous question, I was asked about I built inventories of about $1 million of product that got built but could not ship in Q2. So I think we're close to getting through that and getting it all sorted out so we can start shipping products, but I thought that in previous quarters as well. So we'll see how we do this time. But I do think we're getting close and that will start to convert to regular revenue for the Aerospace business going forward. And even on that, the program is with our Aerospace Toronto facility, but because of the volume of that, we actually were building product in Toronto and in Chatsworth in Q2 to try to support the demand. Again, it turned out to be inventory as opposed to revenue in the quarter. But at some point, that inventory will become revenue.

Okay. Great. That's super helpful. And then just finally, just on India quickly. I was just wondering kind of when you expect to have sales visibility there?

Yes. So we're trying to do 2 things with our facility. One of them is to sell back to the West. And one of them is to penetrate the Indian market. For sure, the time line to generate revenue from the Indian market is going to be longer than selling back to the West. And so I don't know what to say. I'd be surprised if we had any significant sales to the Indian market through next year even. But selling back to the West, some of that's going to be -- we've got to get the site approved by customers, then we can transition exist work into that site. So it's really a capacity management opportunity for us. And so I would expect maybe mid next year, we'll start to see real revenue from that site for Western customers.

And your next question comes from the line of [ Sebastian Charland ] with [ Ag ] Capital.

Solid quarter, Bravo. I'm trying to compare the revenue margin profile between a commercial and a military aircraft from Firan's perspective. Can you provide a rough ratio or revenue contribution that we could expect from, let's say, one military versus a similar commercial single-aisle aircraft?

No. I just...

I got to try.

I think generally, I don't see a significant difference in margin, whether it's commercial aerospace or defense work. Occasionally, we're doing work directly with the U.S. government generally on aftermarket parts. So it goes through what's called the Defense Logistics Agency in the U.S., which is the agency set up to buy spares for the U.S. military. When we're dealing direct with the agency, we do get into some government costing rules and regulations. And generally, those rules depress margins a little bit because you have to support your price with costs and markups and everything, and we're going through one of those right now. But even with that, it's not a material difference. I really think I see similar margins on my commercial aerospace work as I do on almost all my defense work.

Okay. And per unit, like the revenue per unit, is it also similar or there could be more equipment on one or the other?

Yes, It can be either. It could be the same or it could be more or less. It really -- the content is depends on how successful our sales guys are in winning work. We have -- my favorite program for what it's worth is the military program. It's the C-130 aircraft that's made by Lockheed. And there's no reason I like that program. It's been around forever. It's been in production for about 50 years. It's not high volume, but it's there every year. But that is one where we do sell circuit boards, we do sell cockpit products. We sell simulator products. And so I like that one just because we're selling everything we have onto that platform. And yes, but each program is 100% dependent on what we get a shot at and what we're successful in winning, and it can vary widely from aircraft to aircraft.

Okay. That makes sense. So I guess I would compare like C-130, the Hercules as their higher revenue and perhaps the F-22, which I think you alluded earlier to less components approved -- a lesser one.

Right. And F-22 is now out of production. But yes, when it was in production, for sure, that was U.S. only. At the time that was in production, the only U.S. site we had was our Chatsworth Circuits facility. And so we had one circuit board on that aircraft. So yes, that was pretty low content. Hopefully, going forward on U.S.-only programs, we can get more because we have much more capacity and technology available in the U.S.

Good. Regarding the Bombardier record challenging global order that they announced last week, I think it was like over 50 planes almost looks like disguise NATO military order. Would it be reasonable to assume that Firan has a fair chance of getting a piece of that?

Yes, for sure. 2 avenues. Just about every cockpit panel in every Bombardier aircraft comes from us. And so we have great content in the cockpit. And so that's one avenue. The other one, generally, every Bombardier aircraft uses Collins Avionics, and we supply into Collins on their Avionics suite that ends up on those aircraft. So yes, I fully expect to have content on everything they manufacture, whether it's for business jet or military or any other application.

Next question comes from the line of Ashvin Moorjani with Edward Jones.

Congrats on the continued strong execution. And are you seeing any further opportunities on pricing and/or any low-hanging fruit projects that can generate a high ROIC? And if you could speak about the cash sharing ability of these projects, that would be helpful as well.

Yes, for sure, there is pricing opportunity. Our favorite one is expedited deliveries and we always see some of that. Maybe we're seeing a little bit more right now than we've seen through the last half of last year. But when a customer needs expedited deliveries, generally, that is a good pricing opportunity for us. And just overall demand. The demand in the market is strong, and that creates some pricing leverage as well. So yes, for sure on that. And I lost your second question, I'm sorry.

Just in terms of different projects, low-hanging fruit projects that generate a higher ROIC. You've been doing quite a bit with FLYHT, of course, congrats on that. But just any other opportunities to expand or to deploy capital that can generate a high cash return on that?

Yes. I don't know. I try to do that on everything we do here. I don't -- can't think of a specific program or something that's going to have a higher margin opportunity than others right now. I'm just trying to make stuff up -- I think right now, I'm in the process of moving my production of the cockpit assemblies for the C919 from my Toronto facility out to Tianjin. The price doesn't change, but my cost should drop as I move the work to China. So that should increase the margin on that opportunity. We're right in the midst of that. Hopefully, we will start producing -- we will start producing that work in Tianjin in Q3 this year. So that's one where we're going to expand margins. It's not a new program, but it's a margin opportunity. Yes, other than that, again, a little bit of pricing leverage can help expand margins. But I can't think of any specific program that's going to give us an uptick in margins or return on capital.

And do you see any further pricing on the previous acquisitions you made? Or do you feel like the pricing has been fully realized? Because you mentioned there was a gap in between what they were selling the products for in the past versus what you think you could sell them for?

Sure. No, it's a good question. And I do think there's still some opportunities. Our big acquisition in '23 was the site in Minnetonka. The first year -- we did some price increase in the first year, but we're running blind. We've now basically been running with our ERP system for the last year. Definitely, we're getting better cost data on all our products in Minnetonka. And knowing your cost is often helpful in pricing product. So definitely, there is still opportunities in Minnetonka to take advantage of our much improved data to adjust pricing as appropriate.

[Operator Instructions] And we have no further questions at this time. I would like to turn it back to Mr. Brad Bourne for closing remarks.

Okay. Thank you. A replay of the call will be available until Saturday, August 9 at the numbers listed on our press release. The replay will also be available on our website in a few days. And thank you all for your interest and participation. Thank you.

Thank you, presenters. And ladies and gentlemen, this concludes today's conference call. Thank you all for joining. You may now disconnect.