Astronics (US:ATRO)2022-11-16 03:57Financial Data and Key Metrics Changes - The company reported third-quarter revenue of $131 million, which was below the expected $150 million, primarily due to supply chain issues and program delays [7][8] - Adjusted EBITDA for the quarter was negative 0.6%, reflecting margin pressure from lower volume and elevated input costs [17] - Bookings for the third quarter were strong at $184 million, resulting in a book-to-bill ratio of 1.4, indicating robust demand [18][19] Business Line Data and Key Metrics Changes - Consolidated sales increased to $131.4 million, driven by a 36% increase in the commercial transport market compared to the previous year [22] - General Aviation sales rose to $14.8 million, while military aerospace sales decreased to $12.5 million due to reduced non-recurring engineering revenue [23] - The test segment saw sales increase to $19.3 million, driven by higher instrument test and transit test volumes [23] Market Data and Key Metrics Changes - The commercial transport market showed significant recovery, with a 36% year-over-year increase in sales [22] - The company noted a strong demand for its products, particularly in the narrowbody and widebody segments, with expectations of increased aftermarket sales [50][66] Company Strategy and Development Direction - The company is optimistic about future revenue growth, projecting fourth-quarter revenue in the range of $140 million to $150 million and 2023 revenue between $640 million and $680 million [32][33] - The company is focusing on addressing supply chain challenges and expects improvements in lead times and inventory levels to support future growth [11][34] - The company is also working on securing significant contracts, such as the FLRAA and Army radio business, which could contribute an estimated $20 million to $25 million in revenue next year [59] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the ongoing supply chain issues but expressed optimism about improvements, indicating that lead times are beginning to decrease [11][12] - The company is facing margin pressures due to inflation and atypical costs but expects to pass some of these costs onto customers in future contracts [25][26] - Management remains confident in achieving breakeven EBITDA in the fourth quarter and anticipates a positive cash flow as inventory levels stabilize [40][54] Other Important Information - The company experienced atypical costs of $4.6 million in the third quarter due to lease exit costs and legal settlements [16] - The company has amended its credit facility, extending the expiration to November 2023, which provides more time to secure a long-term credit arrangement [27] Q&A Session Summary Question: Does the inventory built give confidence to shift revenue guidance? - Management indicated that they have good visibility on inventory for the fourth quarter, with some hotspots being actively managed [36][38] Question: What is the new estimate for breakeven on a pretax income basis? - Management stated that the GAAP pretax breakeven point is around $165 million, factoring in current spot buys [40] Question: What is the status of the refinancing process? - Management is targeting to complete refinancing before year-end and is confident about finalizing it in December [42] Question: What are the current production rates and their impact on guidance? - Management noted that production rates for Boeing's 737 MAX are stable, and there is a positive trend in aftermarket demand [50] Question: How much of the guidance includes FLRAA and Army radio business? - Management indicated that the guidance includes a risk-reduced estimate of $20 million to $25 million from these programs [58] Question: Is there potential for repricing contracts due to inflation? - Management clarified that while long-term contracts are less flexible, they are successfully repricing some products and addressing cost increases with customers [60][62] Question: What is the pricing situation for aftermarket business? - Management expressed confidence in the pricing for recent demand, noting that older price levels are under pressure but newer contracts are more favorable [64][66]