Good morning, ladies and gentlemen. Today is Tuesday, July 20, and welcome to the Butler National Corporation Fourth Quarter Fiscal Year-End 2021 Financial Results Conference Call. [Operator Instructions] Your call leaders for today's call are David Drewitz, Creative Options Communications; Clark Stewart, President and CEO; and Craig Stewart, President of Aerospace Group. I would now like to turn the call over to Mr. David Drewitz. Mr. Drewitz, you may begin, sir.

I appreciate that. Thank you, and good morning to everyone. Before Mr. Stewart begins, I would like to draw your attention to except for historical information contained herein, the statements in this conference call are forward-looking and made pursuant to the safe harbor provisions as outlined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties, which may cause Butler National actual results in future periods to differ materially from forecasted results. Those risks include, among other things, the loss of market share through competition or otherwise; the introduction of competing technology by other companies, new governmental safety, health and environmental regulations, which could require Butler to make significant capital expenditures. The forward-looking statements included in this conference call are only made as of the date of this call, and Butler National undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances. Important factors that could cause actual results to differ materially from the expectations reflected in these forward-looking statements include, but are not limited to, factors described under the caption Risk Factors in the company's annual report on Form 10-K filed with the Securities and Exchange Commission. Okay. With that statement completed, I would like to turn the call over to Mr. Clark Stewart. Mr. Stewart, it's all yours. Clark D. Stewart: Thank you, Mr. Drewitz. Good morning, ladies and gentlemen. Just make a few comments about our year in the last fourth quarter. We're excited about our ventures through the COVID environment, even though our revenue did decrease about 7% from what it was a year ago. And as you might recall, the Boot Hill Casino was closed for 44 days during fiscal year '20. And we are pleased to be with a 7% increase showing some recovery. We continue to operate with some state-required limited capacity in certain areas. And we eventually think that will free up and allow us to operate with full step and everything as best we can. Net income was $2.5 million this last -- in 2021 compared to $3.2 million in 2020. This is a decrease of approximately 22%. And as I was saying to you, the COVID regulations affected some part of that. We continue to work to improve the efficiencies, as it says in your press release. We discussed the details of the first 3 quarters as we went through the conference call during the year. So I'm going to talk most about the fourth quarter. We're very excited about the future based on our results in the fourth quarter and the results of the backlog. Aerospace was up slightly due to the strong quarter, and aircraft modifications revenue increased 42% in the fourth quarter to $17.9 million compared to $12.6 million in the fourth quarter last year. We must point out that the situation with Aerospace is the orders are big ones, and when they complete, even though we do some percentage of completion, there are still significant changes in revenue and in profit. So that is just the nature of the airplane business, and that seems to be what's been going on for years. So the fourth quarter resulted in a net income of $624,000 compared to $1.4 million loss a year ago because of the closing of the casino and other scheduling items. The backlog at July 1 is $25.5 million. That's up 32% from what it was a year ago. So I think that's a significant increase, and we're pleased to have that. We were concerned that, that backlog might not be there, but as the orders turned out, we -- it came through. So having said that, let's talk about Aerospace in detail. If you read your press release, it tells you that revenue decreased 17% and so on. We continue to spend money on the STCs, and that's aggressive, but our costs did increase $23.3 million versus $22.9 million, which is okay. And basically, overall on Aerospace, I'll let you comment on it, Craig. I think that Aerospace has significantly improved over what we thought we were going to be. And I'll let you do that, and then we'll talk about the casino. Craig D. Stewart: So we're very excited about where we're at in the Aerospace business. The modification segment in Newton continues to be operating at almost capacity, if not an overcapacity at some point. So we're excited the backlog looks to continue to extend out there where we should be busy for at least the next 6 months at the same rates we are today. The business out in Arizona, we've gotten a number of significant orders here between April 30 and July 1 that caused the majority of that backlog to increase to go from $19.8 million, which is a strong backlog, all the way up to $25.5 million, which is the highest I can remember it being. So we're excited about where we're going with Aerospace. I do believe we had a typo in the press release. I think our -- where we had $2.5 million net income versus $3.2 million a year ago, I believe that should have been operating income because our total -- our net income for the fiscal year was $1.4 million this year versus $4.2 million a year ago. But I think we'll need to go back and look at that, but we've got -- I think there's a typo in the press release there, but we'll let you know on that. But the correct number for net income for the fiscal year is $1.4 million versus $4.2 million a year ago. Clark D. Stewart: Thank you, Craig. On the casino, the Professional Services segment, revenue was up 7% to $30.2 million versus '21 (sic) [ '20 ] where we did $28.3 million. Remember, we were closed for a considerable number of days. Costs decreased 8%, and that was good. Costs were 47% of revenue in 2021 and 55% in 2020. Essentially, we're short of people and we can't hire them, and that's really what's going on. So everybody is working a little harder than before, and we're getting by. As far as the expenses, they decreased 5%, which we would expect that with the mix of the patrons. And they were 36% this year versus 41% last year of revenue. The key item here is that the operating income increased 299%, but don't get excited about that. Remember, we're missing almost 1.5 months of business in 2021. So the overall analysis of the casino, we're very pleased that the older patrons are starting to return this summer. We had a significant period of time where we had the younger people coming and very few older people willing to travel that distance and risk the COVID risk. So I think we're trying to move back toward a little more normal operation. And we still have some regulations or some requirements to comply with the state COVID regulations and the local COVID regulations and everybody's opinions as to what should happen. But we're happy with what's happening. The numbers are going back up, the number of patrons, and we're having great weather out there, with the [indiscernible] up and the rain and everything else is on the good side. But we shouldn't -- we're comparing everything to 2019, which is our last full year of operations, and we are beating those numbers and we're beating that budget slightly. Craig D. Stewart: May I also... Clark D. Stewart: Yes. Go... Craig D. Stewart: I figured out where we -- those numbers that we read, those -- the net income that's listed in the press release, the $2.5 million and the $3.2 million for last year, those are net income prior to subtracting or adding back the noncontrolling interest in BHCMC. So that's net income with the casino as a whole, not just our 60% of the numbers. So those are correct for net income, but understand there -- it's before the noncontrolling interest. So that's why they differ from the net income in the table above. Thanks. Clark D. Stewart: Yes. It's better to look at them as 100% of the volume and talk about that as opposed to trying to divide it out. I understand that when we get ready to do the accounting, we book our share of 60% of the revenue throughout the net income, I'm sorry. Backlog is very strong. And Craig, you and Aric want to discuss the backlog and even further? Craig D. Stewart: No, I think we're good with that. We can answer any questions if anybody has them when we get to the question-and-answer part. Clark D. Stewart: So I think as far as I'm concerned, David, I'm finished with my comments. I think we're very excited about where we're going, and I think we've certainly weathered the storm thus far, and I think it's going to be a better year this next year in the casino business for sure, and we know from the backlog that the airplane business should be back to what was there 2 years ago. Remember, though -- remember, the airplane business is a cyclical business, and it does this over a 5-year period. So we get excited, but it will turn around. Thank you very much, Mr. Drewitz. Let's see what questions we have.

Excellent. Thank you for the that. And let's now turn it over to questions and the answer segment. And if you have questions, go ahead and start asking.

[Operator Instructions] And we have a question from Sam Rebotsky.

Do you have any indication, what do you -- the increase in the backlog in the aerospace, is there anything specific that you could attribute to? And how much larger of a backlog do you expect going further?

Sam, thanks for the question. The majority of the increase in the backlog this year is due to gun control unit orders. And so we've received a lot of those between April 30 and July 1. And so those orders are from our main customer out there. And those will probably be delivered over 18 months to 2 years. The new orders that we just received, it's kind of cyclical in terms of what they order based on the contracts they're getting. This last quarter or the last 3 months, they had a significant increase in requirements. And so we're excited about that. It's hard to tell based on what their forecast is, when those will come and whether we'll be delivering more than they order or how that will work out whether we're going to have an increase or decrease in the backlog. From a modification standpoint, it's been pretty constant in terms of what the backlog has been there. And I would anticipate it staying relatively the same here over the next 3 to 6 months as we deliver orders and get new orders in. Does that answer your question?

Yes. That sounds good. And the profitability of these new orders, are they -- do we expect improvement in profitability?

There'll be the normal -- the gun control units will be the standard profitability that we normally have off of those, which is pretty good. The modification segment, we're operating at our normal rate there as well. These are -- we're not taking projects right now that are not profitable projects and not at that normal rate. We just don't have the capacity to take them. So we're pretty selective about what we're adding in there. Like in the modification business, we're not taking a lot of projects that are going to be the maintenance-type projects. In fact, we're not taking any of those kind of projects. We just don't make the money on those.

And now let me just switch to the casino. You will open more days. How many days were you opened compared to previously? And what do you expect -- do you expect continuing increased opening in hours of availability for the casino? And is there any thoughts where are we relative to bringing a partner in or selling the operation relative to the casino? Clark D. Stewart: Well, let's make sure you understand. We're open 24 hours a day, 7 days a week, 365 days a year, other than when the state required us to be closed because of the COVID. In fiscal year 2021 that ended in April. We were closed 21 days in 2021 and 44 days in fiscal year '20, a total of 65 days. And when I mean closed, we were -- there were no customer -- no patrons or customers in the facility. We did some maintenance work, upgraded some electrical stuff and so on. But as far as any real activity there was none for those days. That's the reason when we look at it, we really look at 2019 as the comparison. So we're excited that it's turning around a little for us, and that's the good thing. That's the interruption in the business. Did that answer your question?

Well, part of it. I know we've been discussing doing something with the casino. We've gotten the full licenses, et cetera. Do we expect to bring a partner in or to improve this area? And what -- when would this happen? Clark D. Stewart: We probably will not have any partners that we have not contemplated. We are not in the position of wanting to sell our interest at this point. And so we're basically holding fast with the current partner we have. And we have discussed with him as it says in the annual report, from time to time, buying his interest and we continue to do that. And when something of bits of material, if it occurs, we will certainly let everyone know. But we discussed that probably every 3 months move forward and continue to go. We've kind of stopped doing that for the last 2 years because we hadn't had to fight the COVID war. So yes, we'll get back to that question and as if anything develops, we'll be glad to let everyone know.

Is there -- yes, with the casino, is there any way of bringing more gambling, more participating in new areas in Kansas? Like lotteries, et cetera? Is this -- yes? Clark D. Stewart: Let me answer that with a little different answer. But yes, the state is considering sportsbook, we are suggesting that, that be through the casinos, and that kind of got stalled this last year. Hopefully, next year, something productive will occur and that should have some effect on the number of patrons. As far as our performance relative to the other 3 casinos in the state, we seem to be outperforming them consistently as far as growth and patrons and all the other measures that we can measure. We seem to be doing better. So that's the positive aspect of all that Hopefully, we won't have any more shutdowns.

Well, that sounds good. Good luck to everything, all the employees and stockholders. Clark D. Stewart: Thank you, Sam. We're excited about the future of our business.

And we have a question from Keith Foley from Lion Bridge Partners.

If I could -- maybe I'll start with the casino. You mentioned that you had some challenges with your staffing. And I'm just wondering, as the casino ramps up, how close are you to full staffing? Or to, I'll say, 2019 staffing? Clark D. Stewart: Probably 80%. We're probably 20% short.

Okay. And... Clark D. Stewart: That's a plus or minus if -- but that's close.

Yes. Of course, of course. And then are you seeing any pressure in regards to compensation? There's a lot of articles in the news about different companies need to increase wages to attract staff. Are you seeing that at this point yet or are you just not seeing that? Clark D. Stewart: We are seeing that, that number is also about 20% to 25% more money being spent.

Okay. And then I'm kind of curious, during COVID, did you notice that your client base became more diversified? For example, were you picking up people that normally might go to Las Vegas or might normally go to other larger markets to gamble and said they kind of stayed close to home and made an hour drive or a couple of hours drive to visit the casino? Clark D. Stewart: No. We didn't see any change in the mix of where the customers were coming from. We saw a change in the age of the customers of how many were coming at the younger ages versus the older ones. And I think that was related to the -- to COVID. They're starting to come back now.

And are you also saying -- I'm sorry, go ahead. No, please. Clark D. Stewart: I was just going to say the spending was a little higher per person with the younger group than it was with the older one.

And are you seeing the hotel occupancy there at the Hampton Inn, is that back to 2019 levels? Or is that running short or running hot? Clark D. Stewart: I'd tell you, the hotel market in Dodge City is sold out.

That's encouraging. Clark D. Stewart: Everybody is sold out. So I mean it's not like we're looking for -- we are looking for rooms for our guests, and we have challenges to do that. Yes, that is a factor we had not had before. Of course, there's a lot of industrial development going on in Dodge City, which makes a big difference.

Okay. And then I saw on your website that there's currently 2 bookings for the United Wireless Arena or, I'll call it, summer and fall. And I was wondering, are more bookings expected? Or are there restrictions that are preventing additional bookings at this point like capacity restrictions? Clark D. Stewart: No. We're working to get more bookings. What we're trying -- we've got to be able to get more rooms so we can get more people into Dodge City and more people to the events. That is correct. We're working on that, and it's not a problem other than it's an opportunity to have more revenue if we can get that done. So I think that's the mission here.

Yes. I was viewing it as kind of a reopening opportunity as well on my side. Clark D. Stewart: Yes.

And then if I flip over to the aerospace, and I appreciate the updates already. But in your press release, you mentioned that you'd spent about $3.5 million on new SCT (sic) [ STC ]investments. And I was wondering, are the new orders that you referenced, are these kind of the first evidence, so to speak, of that investment? Or has the sales and marketing for these new products not really had a chance to aggressively been rolled out because of COVID travel restrictions or other restrictions that might have taken place?

I would say that what you're seeing is more existing product, increased orders for existing products. We have not marketed the new STC development at all at this point. And so that will -- as we get closer to completion of those STC products, we'll start the marketing efforts for those. But currently, there not in a position to where we're ready to be able to go out and talk to customers about them. Clark D. Stewart: You understand, the STC is a supplemental type certificate that allows us to modify the airplane structure, avionics, electronics, whatever you want to call it. Anything that we're changing, the time it takes to get the STC approved varies from 3 months to a year. And so by the time we get -- we spend the $3 million, by the time all that comes to fruition, that's probably at least a year later before we really start getting significant orders. So there's a big long lead time for all the paperwork.

Okay. And then how far along in that process are you with the -- would you say that you're close to like production prototypes to early-stage prototype status for some of this investment?

Yes. We are probably -- we're working -- there's 3 STCs that we're in the process of working, that we should be, we hope within a month to 2 months of completion on those STCs and then we can start work. A lot of those are dependent on when the FAA gets their paperwork done, and we can make sure we've got all their questions answered. So we're in that process at this point.

Okay. So it sounds like maybe the earliest we'd start to see these getting rolled out or orders coming in for these products would be the back half of this fiscal year and perhaps not until next fiscal year, am I reading that correctly?

Yes. I think that's pretty accurate. And understand, too, that, that amount of R&D spend is pretty typical for us on an annual basis. So it will -- from an expectation of going forward, I would say that you can expect that kind of R&D spend on an annual basis. Looking back historically, that's kind of where it's been. And it's -- part of it is just the maintenance of the business and making sure that we're both developing new products and maintaining the old products, adding different models, those kind of things to the current STCs as well.

Yes. Got it. And then maybe at the corporate level, if I could ask a couple more -- well, yes, if I could ask a couple more questions. Well, I saw that the SBA loan forgiveness has been granted, which is terrific news. I'm glad to hear that. I'm wondering, in your filings, I didn't see any other COVID-related forbearance or subsidies. And I'm just kind of curious if there were any that I may have missed that are coming to a conclusion? Or was the SBA loan, the only, I'll call it, COVID-related... Clark D. Stewart: That is the only -- the COVID-related thing that we had was that loan. That was -- that is it.

[Operator Instructions] And we have another question from Sam Rebotsky, SER Asset Management.

Yes. Have you been looking at any acquisitions in -- or expanding, whether it's the casino or the avionics? Has there been anything that's available that you've looked at that you'd like to make a bid for?

At this point, we're always out looking. At this point, we haven't seen anything that we would say is imminent or that we're even seriously considering at this point. But it is something that we're always out looking for, things that fit with our businesses and that would make sense. But right now, we haven't found anything that's imminent, I would say.

On the reverse side, have you heard anything from people that might like to acquire you, whether it's the avionics or the casino? Or merge the casino or -- anything that you've become aware of?

We've had no inquiries, yes, about buying any pieces of our business here recently.

Okay. Hopefully, something could go forward to increase the business, which will increase your stock price. Clark D. Stewart: Thanks, Sam.

And we have no further questions in queue at this time.

Clark, any closing statements? Clark D. Stewart: You bet. I'm excited about where we're going. I think we are operating pretty much at capacity in the aerospace side, and we're working to try to figure out how we get more capacity. And on the casino side, I think we're doing very well if we get all the restrictions lifted and get going forward under normal conditions with good economic conditions in the market area. We should have a have a good year. So I am excited about that. Thank you very much for your time. We appreciate all your questions, and we appreciate your interest in Butler National Corporation. Thank you. I am finished, Mr. Drewitz.

All right. Thank you, everybody, for joining, and have a great rest of the week.

This concludes today's conference call. Thank you for attending.