ATRO - Earnings call transcript Q1 2024

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Operator

Â Good day, and welcome to the Astronics Corporation First Quarter 2024 Financial Results Call[Operator Instructions] note this event is being recorded. I would now like to turn the conference over to Debbie Pawlowski, Investor Relations for Astronics Corporation. Please go ahead.

Deborah Pawlowski

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

call CEO; are Chief and the Chairman, Gundermann, Financial on and President Dave me here Pete today our Officer. Joining Burney, our

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

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

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

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

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

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

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

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

Peter Gundermann

propel us and exciting good positive exceeded both our everybody. pretty reasonably be and sets first of quarter we represent levels, we're enabled forward. well and The for level guidance solid and to to tuning was Sales frankly, for We've throughout going and start in up million, about of internal call. before, Debbie, their up $XXX Thanks, afternoon, it our where quarter think a We Thanks to what's pretty the excited feel to our year. widespread to we forecast, million XXXX, trends pre-pandemic but talked us been revenue down sales which year-over-year, XX% fourth industry. return the has positive the continue together X near from that these $XXX about. by sales a slightly recorded

continues back improve. line going That in contribution but supply not that a years, get continues talked of to X get last to workforce and handicap whole on and the None positive employees tailwinds efficiency we're respect on that workforce with but to has now improvement, improve. major climb, a is XX.X% a it, in Inflation X.X% recent the at it we chain, prepandemic puts through particular. team becoming X is our XX% of more as our I'm to our has and has the we years, review generally and improve. these sense, spend marginal an helps And were to a But in a to to despite we the lot certainly now. nicely continue ago. big create sales compared of to all our time through with have model. that us Dave was headwinds increases works that of long levels with X.X that XXXX really go sales coming up them, That in my as So EBITDA the Also, reassert for bottom line. chain efficiency opportunity supply level ago. improving but travails pre-pandemic approaching improved promise level improved better. we it's bit. XXXX little and things deal and first are close to The Also, benefits was which and they're of work, done moderated yet. into to pretty are I our churn, influence and all talk or taking takes to from adjusted and continue a perspective, will quarter pricing just about business to had our results. our It over has in in moderated expect price Fred year the hold tailwind of continuing significant and continues They're year whereas more and they not

weak. our ramp to the we as a in a be and operating shows of will the pretty we think that going executed order in a really to quarters, -- our next million segment that very anticipate growth of Aerospace about, few of $XX in analysis just nice a we improve. Aerospace continue couple operating Test to $X.X performance. path April loss it, was was ago Aerospace ahead a a profit, year good useful X% that on a annually our ago evidence segment to test but late track, The needs and whereas try press million. segment bring and business bright is our Aerospace million that of quarter. segment that restructuring in had weeks over To is third So has quarter, XX% The of release $X beginning help our an save measure of to think we over reported the pretty the but had test had up

on to our one announced smaller test are are our business.The facilities our Orlando U.S. thing yet, the also people there headquarters Test of that of We in be over about making going We're in planned next of the segment the Army. radio our get do we which couple really place that to curious test trying closure months working other with for but we're the is know not consolidation contract progress. continue I and test good in the into business, our we to

those million the be IDIQ over years. few $XXX program. to expect next For a to It's program we million an this don't $XXX who know,

good at absolute is unknown. timing moment. But is there momentum the So the

the the to facility second in regarding late pricing, this of early quarter. Some expecting in so things point, happen coming months, that we or happen And so quarter financial forth. in are, the that need fact pre-award audits, finding on audits, happening, the to perhaps and are at third

big many We to a rising year, which a to million. into of there test. our And continues I the strong. it's of little drove rather million. which or bookings few refer very demand the rolling of things XX aero and backlog bookings first some the very million. ended It the swell think, watch months bit, help a lift $XXX how are XX dictate by for of through of X as moving $XXX the And it's interestingly, again in lighter booking to was remainder ended across $XXX to to parts. our all in months was ships. had lines, business, tide would which want quarter really across it's the really and We million, was XXXX. at performance. will the quarter be million even sensitive items, out. There Digging strong our up, of a $XXX a to with of the one play remains really guide, That's It's $XXX quarter is some record into guide getting supportive moving going no parts, demand book-to-bill XXXX to a driven talk us thing early, which year pretty and what just of we are with good that is totaled big demand. and respect sets a I of ground that We're I X.XX. product encouraging QX with Finally, and quarter, good

slated year, for then, and that our accounts. in world with have just obviously And the going like. as on it's trends of upward program the $XX numbers. our neighborhood award. is million demand the be suggest of business million contract get documented or our and of as the to record the million of the I'm first enabled of that bookings possible. in with rates evidence continuous to and -- bigger to expressed MAX it the in strength going in revenue production some elephant mentioned supply with midyear that that is this to That we One pricing, even and look million test in strong has is to the transparent it in assumes $X to And our somewhere $XX to of been in certainly workforce clear they the $X That specifically and to Boeing the and And for Army, quickly need They rate going increase quarter all continue opportunity the XXXX XXXX, there's will down XXXX thinking is overall watch improvements at be on have a what biggest but earlier. that's plan want order for pretty groundswell is customer XXXX of the it to I by at Boeing, much our not item and us the here the radio the is middle happen. a chain we is encouraging, point. the course, for XXXX and impact the ramp in A business. of going as backlog MAX. room, as substantial. little by The with well production just of impact with some by

month planning for currently ships slow It's XX any Will might. down we a suppliers, they information, lacking other the about on MAX. So are unclear. they

line conservative guess XXX content Windset, heard I've could that the what number of would certainly, us a anything have to? no it's seen that about is delivered. if this they XX mean really that were sets us reschedule kind not I ship a places knows. about month, be have sake And line of of a each put fit in But for information on this have loaded of down we XX%. again, But reschedule point. that $XX,XXX reduction be We they a wild production point, number nobody a we what indication That at we gets of anything. product of at would goes affected to

potential general the ships you you're which X times buyer another if that's rest be year, downward adjusted point, unlikely months a $XX,XXX amount of of about way. generally each of revenue. of So million talking a volume equipment. take a to on is the in for is $XX.X ship about substantial We our XX reduction that, content furnished put in this At BFE airplane, our feeling times

could really come into So equipment here. linefit the that play it's

so level. range revenue this So forecast our range, our right the of -- at end around high $XXX really our guidance that now how million internal is affect would right

So from ground got demand. with perspective, the my swell upward of we've general potential

radio you'd be If $XX the a pessimistic you on take contract, million. perspective Army down

the took you'd if down $XX went the that another rest be of million year, you would If a million. down Boeing, to XX $XX MAXs be rate for the month

the that range. down our take middle of our to forecast internal So right would

think point. at we range this our So and is adequate reasonable

what know next what of We'll groundswell risk we'll be Army MAX the the like looks is bookings what and the to on the goes. there's record couple contract perspective, rate range my through get for months, production how now of of timing likely little with test MAX from we our the we'll and potential the And forecast for how strong backlogs the know beyond up As is radio that the to rest and is. the demand, and very there the continue downside published depending shapes the upside contract year.

we it to of We to things or about turn time will next points. the over to on Dave undoubtedly it how depending even I'd some clarify maybe go. before, this fine and like update now talk talk

David Burney

Pete. Thanks,

sales a a mentioned, up translated Systems through by aerospace The second were XX% tough that As but segment. comp strong in in I'll about margin here. and sales we XXXX higher facilities into year-over-year. in the our Aerospace our had talk was growth. the growth driven against XX% volume modestly, up expansion start growth This Test to with Pete

of and segment. liability out sales from $X.X incremental results Test on by our revenue was in due this, the primarily reversal a and muted Test million is $XX.X segment the in to nonetheless incremental items a a the should the rate the consolidated $X $X.X unusual margins was of couple last SG&A at the expected resumption things but of not fourth than liability to that Adjusting the deferred a the leverage bonus increase about year-over-year achieved lower The out. a to sales consolidation. million but first in little plans of for margin, was similar in income mix, year. a point XXXX. that on XX% I our increased XX% basis, quarter this quarter Consolidated million There this point to to are However, XXXX of increased operating any million. benefited

have we've of programs, year-over-year For comparison, a reinstated couple bonus been which suspended.

the to For quarter expense first expense is XXXX, the first $X.X no about in likely bonus which of bonus of quarter million, continue year. amounted our versus to last

to sales the a in litigation flat the compared million aviation $X.X million it demonstrating away related margin the expansion efforts most out the which over the other to year. won't we XX% Aerospace relatively as $X.X XX%, annual the should incurred that with in aerospace sequential to point We $X aerospace expenses We're million first was Sales to equity in through to expect this or up this comparison, with Aerospace part, remaining increased improved our recovery at I which as granted market, million. should basis year were pricing million and in of the were X.X%, higher sales and this year. productivity business quarter, profitable in market. improved general about point transport XXX the which category rebounds. This the includes out primarily contract from or and driven sales, $X gains. corporate in quarter roughly to walk last primarily some a facility the market more For continue the the quarter military of the first Aerospace quarters XX% compensation And filling the of facilities strong year I were in that million about $XX commercial market last that in the Aerospace likely that's in expenses the was, that operating to by continued decline point manufacturer. repeat for noncore the in up business increase quarter. segment was directors, are $XX quarter. vested

as in We expect to help that roll to new operating as Also, will improve move our productivity. we improved expect contracts to Aerospace segment Higher we improvements as expansion with contribute the on well year. income volume margin through continued as well. pricing,

very and by Test As the of segment underutilization Pete challenged requirements the continues prepared program radio test last large I mix. program test quarter, Army had noted the to meet that The business mentioned. U.S. be to itself

year paperwork of restructured annualized pandemic. even would While yet specific costs split where course half approximately to SG&A.Total we goal forecasting XXXX The that and were the $X has business. the million us levels we savings with latter next to operations our not translate the liquidity. was million of related additional measurably per We new was the the free into year, has million be of up mid $X our slowed year. our $X.X end of week of between increasing inventory quarter. it's rate levels program are the over which million. drop $X quarter the of that of plan the a and savings. to another at of progressing, April, XX% turns with $XX will which we In the the over lenders, sold XXXX When to an back per Those in Xx growth Inventory a is file we inventory Despite liquidity Restructuring as be for in of approximately the get expected we shipments up started. in getting goal our will prior million, XX% we $X to quarter-end CapEx cost turns -- increase the generated stepping the primarily from inventory million program, inventory our goods year. up will in in QX, to cash in slight to just and was in are Xx

We to quarter. $X.X of we with debt CapEx that and the paid cash planning improvements generation. during million to full expect in range of to down year million, the for the be $XX million are $XX We in pace

year. XXXX minor January. that million the that the a actual executed a to been the as XX-month relevant accordion expired had $X move -- credit we trailing that we covenants also established agreement the January through we We for reflect established that had amendment in Also, updated to results period in

remaining plan at million have our as it using since ATM do improving approximately we planned. we is program, While $X liquidity on the not

structure financial our and we're required position with and reduce to in much interest debt XXXX, flow As lower in our we the improve reviewing debt a -- better cash payments. early options are rate than now amortisation objective

midyear. We you. concludes have This back remarks. completed And to to this my expect Pete,

Peter Gundermann

little to the the we're about in. want a quarter, current talk Just specifically that bit second quarter

we the a this of of million That first complete guidance for of subtracting That the midpoint issuing are quarter add above would of $XXX We to first to pre-pandemic midpoint step-up and or a a second for year levels. the quarter the if from $XXX quarter half, midpoint million $XXX you the up million. to return be the you'd at and see in the of represent would marginal slightly the step range, that planning revenue are quarter. second quarter.

strengthen income to looking considerably We days. forward that neighborhood, as that into we statement and expect are we our get much what is to these very

that So ends at remarks. our up open point. it we this Megan, I questions think for maybe prepared

Operator

instructions] Â We session Ciarmoli from the the will begin with [Operator question Truist. comes first now question-and-answer Michael

Michael Ciarmoli

can impact. planes give it could just airline as can interiors just total there? BFE is outfitting how the don't some mean, work? an you and me assessment mean, to that not Â Pete, is you stalls, mean, finishing of the sounds that of really obviously, I give be How it typically impacted BFE but customers out, equation the so a coming does through, maybe I here. us the or just XXX like no think content I there? I But MAX I moving expect your understand walk happening. what's anybody

Peter Gundermann

to that find we and Well, rates the it's for be were selling to eventually basically They stay reallocate fit then is if retrofits, for the line jeopardise affected. question. when the opportunity ready. through narrow-body BFE a have airplanes while. obligations. to longer, to with so would a airlines, airplane our pretty the lower airlines what is are often want And are be reluctant to ready from They for the also retrofit primarily they good their BFE But BFE going

quite or to little slow bit usually react So conservative, say, they more are rates a a I should -- when adjust.

the wide-body retrofit they are integrators, world, to the the sell that IFE service entertainment On around of customers integrators, side, and We story. active underway. including same efforts the it's kind in-flight primarily

of think for time, BFE. of And to be we hardware don't that retrofit. fit rescheduling that's too from So course can see of line period that why some much the we're reallocated over to likely XXXX

Michael Ciarmoli

responsible makes No, mean, or it. XXX. any I on that think, What you're sense. story, Got way And it shift Okay. having still, that other wide-body be or XX rates. the good one like may suppliers seeing that? about I for on a major the slowed a your But change to any the about year sounds P&L seemingly raising for talking Airbus the couple of Boeing swing year. the

Peter Gundermann

at while, primarily think been lower $XXX,XXX to quite substantial is don't I think they go. rate us We've for major as an we for they that's content a there where I to they've and the if you BFE ever of so. potential pretty got don't a want know, airplane. tune of mean There get a upside driver. to

important AXXX. for So program with an that's Similar us.

Michael Ciarmoli

know, of back were year pre-COVID Last those going kind Or of more the guys I you solidly the in more alluded into parts margin. in to million. of above -- little you Got one we look kind Got achieve do there? how like any bit is some that about about is moving of talked back getting the the it. have the pricing. you employees think add levels, margins? revenues? do kind a you just $XXX double-digit contribution sounds preventing it to I op Yes. of I those margin, be Anything you don't labor it. to from on to half if know kind efficient mean, of and we getting

Peter Gundermann

few about have are But day. I a to Well, labor structure. bit, positioned topics to talked of ramp facility. little a make I a on business, more number I calls. we up we've gone closing think may no the consolidation I that efficient. it. simplification. are have a and Obviously, of to in X And lot we've talk years, over about few haven't last one talking consequences the our we're a have them changes really every we favor we Test But X size. more done to business or like company times would years. the the well dire in future pandemic, more the last a And that our about that There I when That's the the of on whole for one we're working on this cost our or seeing think that direct significant of done because we other where things over about dire during But been in talking major not things the was referred the

us back I the better good there's all get and So think for where do to margins we were, to get efficiency with -- way potential in everything not developing. of terms is only but to

think it. good we about I pretty feel

Michael Ciarmoli

Okay.

back jump Perfect. in I'll the queue Good. here. Okay.

Operator

comes John with next Â Our Securities. CJS question Tanwanteng from

Jonathan Tanwanteng

to Congrats on opportunities you about? What kind if the I how was this you last wondering was if the to quarter. refinancing were delays recapitalisation the wondering that about about for initially time shape expecting and I a avoid to thinking the of related there up? lot of are at talk And trying thinking And be lenders. you something time. that was just around, you're could might strong

Peter Gundermann

closer get are year-end. our that to some an better -- is happening day been risk it's things time, Jon, that as How little of and and the a a it's the I results bit the we the going the to -- we're, our we and better think different sensitive the and same be better election financials Well, where to our execution wait, a better game and day. at we prospects of playing longer at a have

I terms of pretty know that to see good we interest we think are up you can we later. If could results. with. But So I waiting of act kind good I And final sooner, kind at the expand market. and if a we on what pulling come event. could to pretty Dave, XXXX don't think act all? We're it's we're getting want

David Burney

that's Â No, what I have exactly would said.

Jonathan Tanwanteng

Great. then, continue roughly a minus the Do through rest bonuses just expect that comp the Dave, Director of rate the million And and of at $X to you $X year, bonus Â Okay. million. stock run clarification. to quick the

David Burney

Yes. The stock back should $X comp, run then the the next quarters. roughly be remainder out the X if that, you rate for from million

Jonathan Tanwanteng

litigation? any Got it. is Pete, And update you And what do the think on there the outcomes might be?

Peter Gundermann

No. actually. It's been quiet, pretty

think XXXX. see to up I LHT, still light that next of of opinion end should that year we're with wrap the tunnel the the beginning and at to We're we're could to thinking Saga. the sometime the respect Lufthansa, that,

Assuming that's France, in are appealing court we're waiting it. for confident right their in well that not high involved on and an successful. and it, But equivalent now they reasonably We're appeal of a France there. is going get doing we're to with

and be of U.K. should happen cleaning Germany, in in matter issues in to the it's So a thinking and up able just then we're that XXXX

Jonathan Tanwanteng

Okay. And if there's just any made was decision there. put Farand intra-quarter, program? quarter any update last flare. into know maybe the I Army just a or change more then maybe on flare to money the cancel I wondering finally,

Peter Gundermann

in hot an on kind still and get heavy. we're Bell. working contract Well, official certainly working Flora, with of also to place We're

excited the call about working temporary remain a program. what We we are kind they get contract of going. very on would to But

EVTOL cancellation we're a some because also. power, with Florand for on team things that member way Farand enough of and a -- member and critical Bell flight with the blessing we're think busy in probably would -- that we a us, for the was a team were program doing have we I other

And would full working things hands have there. with okay given way we additional have So that. Flora, had We're we're the we are our happy that duties out. with

Operator

next Instructions] Tony question comes Belly [Operator Funds. with from Bancroft Our

Tony Bancroft

longer opportunities? years. just parts all the sort of out been us last there. power. again penalties entertain, side working? higher you Maybe you customers? positively in-flight of with the have could and in us not there's know through lay Could know just on longer-term IFE talked just going in to been on the I that about more managing Maybe fidelity of for flare the having airline job Great the sort moving you that the remind I discussions couple for impact WiFi that run, WiFi

Peter Gundermann

Absolutely.

I cycles Tony. aerospace is quickly the that electronic life I've that cycles. reality been junction, companies of kind that unique to is are consumer interesting space of observation, compared about in consumer life we think turn of live product And one long it's and the an and where one really between the our business things these aerospace. we electronics technology that of that opinion

pretty we So on we've aerospace computers want to the we with a you replace hand, for technology, power or hard of easy of happens do and as and power, a really kind of ourselves the airplanes, in hand, and which opportunity cell to that in -- they on conservative tablets that in live be aerospace, their room. real one living satellite the do got always same And an for reality keep And kind means and able to is to the up things this other things be people world the phones and sometimes. it's do quick have with and being good that regularly. fairly how upgrade that's requirements at but there with access Type to and consumer of people ourselves, into and turning C, communication connectivity. where the It industry likes is what upgrades electronics. USB those turns power increasing not I wireless Same are system A think things and thing job points, of in to think out it's now commodity a mean and for like turned performance. security USB XXX-volt is dynamic. Type And one

webs them, except There's replaced, the fine. evolving they out were of are that the the to don't now be no need service They and with on of many current in we're right problem there meet also. that forefront So requirements.

have interesting the place we're those And So also be. it at one customers opportunity or but always and markets, an a good obsolete replace to looked it's business as ourselves penetration, some grows. that's ourselves. where to increasingly is new it to of new going new We've

Tony Bancroft

answer. Great Yes.

much, interesting I great job.Â think to so that's be. pretty place a a Thanks and have

Operator

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

disconnect. may now You

Astronics (ATRO) 2 May 242024 Q1 Earnings call transcript