Astronics (ATRO) 3 Aug 232023 Q2 Earnings call transcript

Good afternoon, and welcome to the Astronics Corporation Second Quarter Fiscal Year 2023 Financial Results Conference Call. [Operator Instructions].

I would now like to turn the conference over to Deborah Pawlowski, Investor Relations for Astronics. Please go ahead.

Thank you, Anthony, and good afternoon, everyone. time your your in appreciate certainly today interest and Astronics. We

Chief are: call Officer; our our here the Peter and Officer. with Burney, Executive On Chief me Gundermann, and Chairman, Dave Financial President

which a copy the second financial wires You should just today. of the have crossed closed quarter our XXXX results, market after

have you astronics.com. do can If on it not you find the release, at our website

as These of formal could we apply here as call. filed documents the you to some the as well today. the that other make events aware, future with differ and Securities are statements stated during may and with to Commission. discussion and risks are what release uncertainties this and is in results Q&A that session well actual These As provided statements forward-looking and factors other risks factors conference other materially cause as to are subject Exchange uncertainties from earnings the

or those find can You sec.gov. documents our website at on

will we non-GAAP in call, will financial evaluating our today's useful these believe also be During We performance. measures. some discuss

in not information of with consider presentation as results or in this the GAAP. substitute additional accordance should prepared a You for isolation

measures provided release. non-GAAP of have with the measures today's We that tables accompany comparable reconciliations in

So begin. to let turn Pete with that, Peter? it over me to

Thank you, you Thank Debbie, in. and good for tuning afternoon, everybody.

was over the to the since COVID strong about pretty easily of sum, XXXX. we've here in And had year. our our second a early rest our for talk the in quarter are think prospects quarter We second quarter took step for and best company, we forward our

that's and we catch one on. to to has better we've that to supply no over themes supply the volume come getting time a prominent goes pretty while that doubt. I results. the rates, recovering do And continues that our bit quite with chain, been that you'll to as X perfect, them, chain, up theme, lot There our not evident and our And volume We're production as in is over again second which through going our talk ramp. mean, is certainly are able are is a produce.

prominent we continued for the the the is through gives remains quarters products of as near-term recovery us This that future. theme The confidence move quarters third -- our very demand in strong.

Digging $XXX into set Sales $XXX then the strong year-over-year million; saw pattern and million; continues now, of recoveries last -- pretty in succession and were $XXX million. million sequentially. The million specifics. out XX% X, last million; up over a revenues $XXX XX% the of X $XXX $XXX quarters. of X then X, It

Our Aerospace segment was driver to of million. $XXX sales our the XX% year-over-year with key results up

by Sales million. Our $XX.X a were pretty XX% year-over-year comparison had Test down to difficult segment quarter.

year a we of last that $XX.X sales. to adjusted but of grants without entry briefly that Dave ago way talk a AMJP strangest adjustments a of the had will future. out the et $XXX,XXX near line adjusted had million, quarter All that have of in $XX.X moment, was we to improvement numbers jumps an minute. A in in the X.X% bottom but had nice Again, explain we from will a $XX it EBITDA was million, when and EBITDA Jumping which net X.X% the in or was for or any an through clean Dave recently quarter was many just EBITDA a and of be pretty earnouts, an line, compared loss we the sales. will the cetera. all, million, adjusted of EBITDA too, tax it think a major

but $XXX record coming talk wanted shipments, million. back half $XXX number I and I orders a bit to give in second quarter briefly million the million, book-to-bill one a little $XXX the million, to Of breadth strong of also the XXXX, strong to. of a once discuss We'll we of our were our hit out minute, business that X.XX $XXX Aerospace and hanging shipments. these with were second quarter, about demand million our of bookings particularly a a a again second XXXX, of is a of in On $XX.X come is book-to-bill mean releases scheduled of decent new of basically the little X.XX. where level. for note each time of that's even There is million half had we're of $XXX on went a kind in at last relatively Test this pre-pandemic X.XX. that's were backlog with where again press the side, setting bookings book-to-bill from bit over activities X days. to and back

The was order, program, we big There are or in were an earlier won working other something Test about Radio smaller some the big received $XX that that in IDIQ things that we for the $XX be on we program million now. Handheld before. a that had which $XX think over is order to we Test HHRTS. first test earlier delivery Sets significant radio We've the on but program million. the from a is the a talked X the called years. It's U.S. Marine order It's program on, this going happened million X delivery year HHRTS Corps. about second with quarter

that theory actually, winner waiting a the about the been are named the pretty competition prompt Another have the XXXX/T at anticipated but the technical the their and Long for it U.S. I'm here have that were talked for for reason radio Those Army. moving that radio that. operation a the platform. the recognizing test is And we ago, up armed bringing negotiations we Army march time, to that a XXXX/T directed into between forces story of who forward. procurement on a HHRTS for directed is U.S. while and complementary, next company. about past, still remember of are contract short, we're is may and test our program company architecture year it for following our in we procurement, And a

Army So moving is program forward. the

We a by happens understanding contract year-end awarded are And will the if it very latest. way, that that the opinion positive boost at the that, quarter that of -- our should or be results. be to fourth

press with to to we eVTOLs. very mention with briefly commonly was -- I'd called electric Second release like out had is came recently. something do It aircraft,

an now. of our family range is a most of products a We airplanes aircraft. arrangement we of attention developed by have any electrical power wide generation company number distribution employed Lilium, know, for these right number And previously capabilities have under a also aircraft of one can or a be as basically one but there's OEMs of in is -- developing you we've eVTOL that of had German movement, leaders attracted a other presumably we And small with of and companies. in from specialties the eVTOL that of And these ways. the development announced

the of obviously people in operation putting orders are press XX contract or so they it's commercially is about interesting. available are safe of them, employ over that kinds we to development need And the these aircraft. big the but And talked -- or $XX they think and disagree speak. develop can We, We differ and for our off-the-shelf nearly These customers. products electric of they orders, release, XX they that order in approximately for door, the and are that market. to value and certifiable our not approach prospects million the foot today, getting put can to aircraft of a

it's to we're think So development. be excited be going of watch, we're pleased market it. that to an a interesting We with part to and

out also press PSUs. We passenger product was That's service Airbus units of couple specialties. June. put the AXXX One early on a one releases our of in or

bunch sit before. If you commercial lights, that some of head of not reading a your that above that one system. different air a probably oxygen unit some systems, airplane couple tried oxygen -- Hopefully, you've a things, in emergency handling contains

is And have first that's of this award communication, And an usually the a major us. we time pretty some button, work product AXXX done airplane. call from this for Airbus Airbus on a kind

We So going excited program. we're a significant it. pretty think about it's be pretty to

kind probably is in flown kind you've gathering feel, airplane. seems you've and It's market. to it. it a now. an It It different of be of a AXXX, the has different If production on in pretty noticed success good

products to scheduled be are ramp year XXXX XXXX. Our early a about -- to into or late from in production now

this system, press next-generation Finally, power an ago. while in-seat we was in-seat put out a a release about power

element talked have been Southwest about This and or we with we world ago. and USB we're happy to developed narrow-body the deliver Type that XX narrow-body the we it for release our Type more competitive own the more. own press to we to year about for committing primarily grew kind And into a airplanes. we the The about is about during a What a successful. world. then, designed were A airlines power And options since narrow-body in that franchise with the we that pandemic. of IP, hundred a C Southwest over XX-watt the developed Specifically is system X,XXX taken friends and airplanes world, very really major couple for a marketing we've been and and very up to transferred it's wide-body technology it

system for candidate these out systems, GX called candidate systems, there And AXXX all in-seat systems. that a the airplanes. talking these UltraLite are and ISP, aircraft Now, for the I'm power HHRTS, the lot about of product airplanes and products this PSUs the narrow-body eVTOL narrow-body here, what's for that

course much were the developed All of of pretty these the over pandemic.

cut we out. in to like with had So costs? about you how caught happy in I'm many decided cases, do us got thought companies where exciting up decisions Where futures. investing? lot to we, And some A make do pandemic had who in that programs this of keep investing keep the you worked

out of decisions those that All of examples are have worked well. these

starting really going years months major these forward. not show backlog, become to statement income and are next prominently helping the over business they yet, things expect our up in they're our of our will and I that elements So but base,

to for of I'll the me income turn it our balance over for sheet. some to Dave talk enough statement specifics of the So through moment, and

Pete. some Thanks, supply to that the chain good range, had top end finish as in strong quarter. came really in cooperation our allowed a for we the Sales of June at

which year, will by our since income with million, $X.X the compared was was we've second German $XX.X quarter because interest and high including rate compared of to improvement was the quarter. lawsuit. quarter lower for of the first million income which adjustment million our XXXX first operating that muted positive that a applied somewhat for legal not that accrued were million, an quarter, about the $X.X for be we costs a had penalties last with improvement year's operating $X.X improvement The Our this

contribution Test $X first result quarter announced earnings margins. savings million in continues that improving compared in this cost Driving XX% margin incremental And with segment aerospace key relative quarter sequential headcount revenue depressed first begin address X high increased piece top the the growth are a and improvement our record term, past margins in to the translating and starting call, as quarters To we with quarter. the will to sales the sales into restructuring struggle recovery. the was we're to that a seeing remain as on short margin of is that a about over levels. of the line reduction levels the per backlog the highlighting order cost strong its QX. and the It's on

were the involved those, to rate. by legal million slightly be million legal to the a for Still, begin order the the which once begins. radio for, contract costs continues offset costs to that Pete lower expect reserve anticipation were lawsuits test that the reduction mentioned, of test they program, staffed in the high partially SG&A we a mentioned we with. interest that relating cost Legal of program quarter Corps Army I due relating growth first in will is And radio XXXX/T Marine $X.X HHRTS received $X.X is our we're revenue structure a and task to recently awarded. in

the quarter. expense $X.X million was Tax for

to said rate. this of our us really tax tax normal strange a effective rate valuation representative a for I've for cash record assets, not deferred As rate. Because cumulative require or allowance tax several a loss, X-year pretax creating tax the is our of quarters, guidelines

$X -- We of tax year rate this to X year million to cash in tax cash to expect XX. not the year full be be our tax range to That's this $X million. X,

the the create effective be take that incurred. a There's of of tax by has asset, reducing X so deferred rather rate. costs to requiring particular a that normally is discussion All defer a valuation moved eliminate against it Congress asset, tax new result but been this part some of we forward. rules R&D than or amortized to creates tax would over allowance because nothing it This deducted rate, years as but odd far, code,

debt sheet. Regarding in balance the

where where be investment you first to support expected can as the the quarter, sheet, our by be. second from from from $X continues we or Cash was it by to used our growing significantly used during million, significant cash improved in see backlog. to million. As operations the not still Cash operation inventory remains tight which to balance was the grow but from a flow liquidity need quarter first quarter, was the operations $XX.X improvement

inventory of the second caused by the specifically, quarter were increase quarter being growth. sales some $XX stranded pieces and long toward The to in and payables sales quarter. an This, in supply has receivables Our in Unfortunately, sales of our year-over-year These the lead increases expenses. product. about offset month times, the quarters, second for waiting inventory weighted the ship in has that's improved million. inventory complete in and in in by chain items, order higher lead few seeing inventory increases remains quarter there $X levels resulting and increase final in despite our combined by growth $XX.X income this long increased accrued receivable significantly heavily and the investment last year partially over inefficiency XX% statement with the the improvement, million million and large to last driven

of forecasting are move that levels year. we inventory our peaked the expect inventory our We has half drop to the begin and as to second through

with -- to of weren't be of reconciliation lot compliant continued There year. the net of cash turning EBITDA We whole loss debt the forecasting remainder the covenants flow continue positive and on release. compliance to for our are the a X adjusted to Page and

it see of the would $X.X which expenses based to was by I quarter, You were really where the partially rate the unusual say, items, can a $X.X ruling reserve legal by a adjustment in on the court, only legal relating X lowered lower to clean interest legal that the were costs the a million million. pretty high offset German

significant million. $XX.X last year it So again, a is where which solid step-up Pete. were for had, from at was million, adjusted I we quarter EBITDA all running a $X.X That's us at

Okay.

the us our focused XXXX million, million at the had part. we these million, We holding forecast, revenue now are scheduled we $XXX the million of in of midpoint a backlog range, together supply entered date with chain for go in $XXX firm are that forward, we Looking on end the have million, our we're get period we to backlog $XXX level half to backlog second range. the of things the some means delivery half but confidence that current have $XXX out the If are program. approximately category. order a first future and untrue, of $XXX Scheduled sales us that it call much and to we X a have million, of $XXX a don't we those would very high high scheduled execute firm and we any in order, into of

changes, on predict, then time orders expect a total, in for for -- amount especially the but certain of first will be interval But consider fourth period, So in book-and-ship, in are number million X-month $XXX $XX scheduled is net period, very modest, and but these top or of second pop-ups there pretty pop-up names X-month half on. we that the especially any or in over a to pull-in we that, a goes half, can the million different it, or $XXX pull-ins achievable. of and the some difficult million the the as add to quarter it would any

end think that the of high that we range. towards So are going directionally we

to in to similar we lower, we apart, the a It higher, second quarter. quarters fourth X it quarter be neighborhood, the the it's could that bit be little a one going what leaving And to quarter be the Breaking that's be think. third but step-down. could yet, expect real little to a we of is. part be a has foresight the large going and be step-up that the the range into to potential are is that have changes net or a why don't are the it way relatively We

it's not Another getting reality better, perfect. is talking chain that about, been it's supply because inefficiencies that we've but of

pattern a week particular ship a quarter. disproportionate days amount in where of We final have final any developed our we product of or the

in XX% of was week. the neighborhood this like neighborhood the XX somewhere quarter, the last In last -- in it in somewhere came of

So is kind what right of puts it obviously number terms to the misstep wire at our end, right the in final forecast. change that to down relative of our really can any

material and We reduction the and getting implement of across going of able expect a margin increases starting purchases, because business improvement also in better, some benefit. chain contracts out, helping is continued lower little to a in also that's the been input spot forward, price the supply special the have of is to we've also that buys it, costs, permit that primarily

are about, it the we long-term to of it Dave improvement project run, how a our room business, that's operations. shaping will some implemented across think, get be pretty the to across and up pleased has but So we with margin talked

the this improvement finally, for the levels of income be all with will significant statements. So XXXX time pre-pandemic we approaching exciting with said, company rest and think revenues an our on

like if point, this at to are questions, open open -- up those. to them there we'd Anthony, So

Instructions]. [Operator

first from will come CJS question Securities. with Our Tanwanteng Jon

is range, margins. to doesn't revenue, give benefit you the $XXX to of high-end the what which did volume million you in or that drive Peter of leverage at that's Dave, similar QX, the in

in increasing? are just less price And actually of wondering spot volume the available what going increases you're that I'm talking about? as are kind So down buys, the is prices improvements

contracts, Yes. The that see They of them year the the about There's on spot have will the so think, entered priced million quarter. rolling inflation is we've And margins as buys start new million agreements things into running that as higher fade There'll that come in. And, Historically, and $X that. the leverage. for down. new we've -- were somewhere continue there new between a away. on improvement. they'll we'll $X couple expected million last over orders $X purchase I to been will they've be some some ultimately, continued are to in

will and The on legal on going come costs the port situations. go in depending what's various

So what's I think on think the I we're that's -- I of here. conservative to couple a we're likely going little And next the drop over on top there. being depending quarters, end, bit think, at

have we're to hoping the it way the will programs are we're us top that And that. that We increase think pipeline just that -- that right to chain we're is on extend our with supply over the some out hesitant get up -- end. I in now

my think that's it. that's on take my I So

the starts million as look to bit forward? there are how of Fair pipeline run and air kind the of ongoing Or going as $XXX-plus book you're fits design and the enough. should today, of on of order ongoing And then think you go seeing lumpiness that activity and we you just activity bookings, at recovery? rate ship is sustainable a little and that be

that question, to good a and need all we very eye on. something It's our it's keep

evident page but the trend the release, it mean, bar mean, since table pretty took that pandemic on it. been If press of can't little it's direction really by the bottom I miss of a quarters, on hold you not general but has our of X the existed jumps a the just the around look the as -- that you only I last page. it's -- chart bit, the at

our pretty point. them, those And and of seriously of -- at talked I we have won significant reflected just none a backlog, a this handful are of number in programs, really through and

others and are -- there. there that So like out

bookings pre-pandemic. million obviously, we And above we our to think, were really could get in to shipments pre-pandemic the exceed follow. do if good I have we level. this XXXX. get where that, standpoint, did ambition So quarter, And we to that then because million, in will there, to felt us is But a puts rate. from if annualize we $XXX $XXX that order And

So we than more I companies talk think, about most bookings, do.

a leading we're going, that's is market. attention we we for draw real internally why and the business us, the indicator to much good For it, when are think bookings and so both to where talking

Got me. for it. And last one then

Just from last flow think where it coming like cash over better tighter expected been do today? get X what quarters? -- that there it's than can I in any than seeing be is the It mean, you're the you seems that indication will

pretty buildup is. quarter quarters. plan the what the big and second for our inventory in the working that's tight saw X between Yes, It's capital receivables. been in past We a

one having are we we'll hardest the But we're at year. the hands So to be pretty flow that balance inventory cash receivables for around -- this positive the The point. are those converted internally quick. cash of to the is forecasting getting our time

will from Struhsaker next question with come Truist Securities. Our Sam

Mike margins was in same as think for you as to levels are the in getting returning of weaker? on peak. pre-pandemic curious, segment the forward? I kind Aerospace stronger, going this level, kind on past prior we I'm How It the about you're should guys tonight. Ciarmoli of at

it being I Difficulty]. to going at you're They're -- period depends on out looking what probably start [Technical mean

those once in on revenue basis, of in can levels, thinking once like a expect margins I'm pre-pandemic? go-forward like of to get we kind you back -- what you terms

are past to, new the to back in the Yes, happen kick higher through that into We're winning to margins we lot don't we getting half of pricing why to change contracts, increased lagging which terms here, year year. and see year and I program, second but on at that's to up that the need through able next the mix a and through pre-pandemic whole will different. new as margins. in in this We will get -- our programs I think we the going -- from can't year. isn't should But the we move any we new as next And reason catch up our there. fundamental -- there's materials our wages of costs yes, significant no be

along bigger the of kind then for that the chain the and guys And terms others on seeing lead line getting worse inventory extended might you issues any of parts Great. area the times? in? it going particular supply exactly impacting chain, guidance be supply in is where the of And there than that's are Is year?

Well, a lot of what we do is electronics-related.

So definitely answer of question that to I general seen electronics has our last think the that world would the include difficulties years. the over couple

some some all of in that Asia. have, We cases, into chains extended and supply move Asia, parts

with uncommon it's we've of And a bit more them. little components so, And some in of of couple complex that hundred to our also. a products for have dealt not

be you on one late. everything sit you the And all So need until need. other to you is there XXX the shelf have

time lead the getting come and down. responsiveness it's of level general better in that has So,

to today year we to or positive they are years, decidedly compared were negative. were all ago X The X where seem see surprises X.X they surprises ago certainly decidedly be where negative, years

components So still where many our on we're is the that XX But be place us lead have parts it go a in into clumsy for think want to in those weeks but parts able XX progress orders customers making I it times. cases. and get situation is still XX that, week or to and

we what some system, are our that the with also. puts suppliers times times with the from dealing we're lead in risk our demanding, the customers and balance to that's face lead trying part that of So

more I entire company. we of the all are it's terms doing think we think inventory Again, better. get And job, our we got business a in think most better of getting across parts but -- to consistent management,

that to is a and major focus, better hands we got on job deck, So all a do there.

the just in there? the if one Great. update Anything I on And more. FLRAA program? What's could sneak

is in some context activity. now, at I'm discuss looking shortly. to that about and this engaged right liberty public There to but are we not news it make

Instructions]. [Operator

with from Jon will Tanwanteng be question follow-up next CJS Our a Securities.

was going could quarter, they bit little of, if run going were you if expenses and Kind I any what's the you there's wondering be on a expect time more soon? into to go the the that detail in legal what rate for? an in forward

Well, one X and The the situations that's electrical outlets, couple last we really. I product -- dealing the been over playing countries in-seat the competitor, that to is power decade, long-running been and in much of U.K. with longest specifically our against we've do have U.S., Germany. The out a German mean with. has and France, court to is won done, that France, whether case very almost and the think, done, and either an depending U.S. done long time a be on direction. we that side's But could think done. we ago. one we pretty is It basically appeals way, it's in wants hear going other is our appeal. much

bit little The U.K. we more Germany a lost. The are U.K. and complicated.

play We've going out probably that's what that's that's or on phase. XXXX. going one we late to that's out been penalty be has be for XXXX-XXXX. in -- And also XXXX play there going So probably think accrued really will to to in forever, and a Germany going

few and that's months, bills been the last the so are high. active it So for why has

in We segment We started evolved basically it is off going have Test -- and copyright on got also a our us, then one dismissed. that patent dispute. into as brought -- It the against was a dispute. it's patent

thinking that significantly way stakes but no reduced, to get our we choice of the So had are remedies pursue there. legal to from but

end that on by we're I down and end -- the decisions of year, not, would depending shut the year. something done actually next it not could say. this be of wrap court will by That it yet. up If So will probably

Securities. Truist follow-up Sam with Struhsaker Our from next be question will a

prepared potential for million Just, the I eVTOLs. have total two you mentioned per quick clarifying questions. customer? that or systems your remarks, the Was In $XX

million for No, customers. $XX XX total it's the

Yes. Got it.

think was have I narrow-bodies. across per guys Okay. USB, rough any you within Do And the you that? product have that it the content then -- on USB-C dollar aircraft

pretty go $XX,XXX around inexpensive variable, just real the normally It's depends be mean could I of might would configure widely the more that in thumb say cabin. -- configuration, expenses, of might ship I where up their and on to the on highly think for want seats. A pretty installation variable one highly general I or to how it some rule airline be $XXX,XXX; $XXX,XXX it's but depending we classes a But certain a aircraft variable. priced wants

our Peter concludes for turn remarks. session. the I back like to would conference This closing to over any question-and-answer Gundermann

we're your to forward the second second day. a and set remarks. we Have half closing for year, look attention. was next We and for good the we close significant time. step to to you very good No forward. Thank Again, quarter think, think a talking you up a

conference has presentation. you now concluded. for The attending Thank today's

disconnect. You now may