Astronics (US:ATRO)2022-05-06 20:49Financial Data and Key Metrics Changes - Consolidated revenue for Q1 2022 was $116 million, up nearly 10% from Q1 2021, but flat sequentially from Q4 2021 [16] - The company is not expected to reach breakeven until the second half of the year, with breakeven revenue estimated at around $160 million per quarter [16] - Consolidated gross margin was $19.9 million, representing 17.2%, with a loss from operations of $4.2 million [16][17] Business Line Data and Key Metrics Changes - Aerospace revenue was $101 million, while test revenue was $15 million for the quarter [16] - Aerospace bookings totaled $161 million with a book-to-bill ratio of 1.59, while test bookings were $15 million with a book-to-bill ratio of about 1 [20] - The aerospace segment showed significant improvement with sales up 68% from Q1 2021, while the test segment experienced a sales drop of $9.7 million from the previous year [20][21] Market Data and Key Metrics Changes - Bookings for the last 12 months totaled $633 million against sales of $455 million, resulting in a rolling 12-month book-to-bill ratio of 1.39 [12] - The commercial transport market is strengthening, with sales up 10% sequentially from Q4 2021 [20] - The military market and business jet markets remained steady, while the test segment is pursuing several large opportunities [21] Company Strategy and Development Direction - The company is maintaining its revenue guidance for 2022, projecting revenues between $550 million and $600 million, which would represent a growth of about 30% to 35% over 2021 [24][25] - The company is focusing on significant opportunities in both segments, particularly in the Army's future lift competition and the emerging eVTOL market [28][30] - The company is adapting its core power expertise to meet the needs of the eVTOL market, which is gaining attention from both established OEMs and startups [30][31] Management's Comments on Operating Environment and Future Outlook - Management highlighted ongoing supply chain struggles as a significant challenge, affecting the ability to meet customer demand [7][10] - Despite supply chain issues, management expressed confidence in achieving revenue growth in the second half of the year, supported by a strong backlog [11][24] - The company is optimistic about the potential for new business wins and the recovery of the aerospace market, particularly in wide-body orders [14][40] Other Important Information - The company recognized $6 million from the AMJP grant as a reduction in cost of goods sold, which helped offset higher wages and material costs [18][20] - Net debt decreased to $113 million from $133 million at the end of the previous fiscal year, with cash flow from operations slightly positive at $316,000 [22] Q&A Session Summary Question: Current production rate for the 737 Max and alignment with Boeing - The company is aligned with Boeing's production rates, currently in the high 20s trending to 30 [35] Question: Improvements in the wide-body market and impact of 787 delays - The slowdown of the 787 has already been absorbed, and there are signs of increased orders for products specific to wide-body applications [36][37] Question: Confidence in increasing sales despite supply chain issues - The company has scheduled work and sourced components, allowing for a ramp in production despite potential supply chain surprises [43][44] Question: Progress in closing the labor gap - The company is making progress in hiring, with an increase in applicant flow, but supply chain issues remain a greater concern [46][47] Question: Scale of potential new projects and their impact on growth - Potential new projects could exceed $500 million over their lifetime, with significant opportunities in both segments [49] Question: Ability to generate free cash flow amid improving sales - The company does not expect to generate significant free cash flow due to inefficiencies in inventory turnover [52][53] Question: Ability to pass on inflationary costs to customers - The company has been able to pass on price increases where possible, with customers generally receptive to the situation [56] Question: Impact of military spending on existing programs - Military spending is expected to increase, particularly for helicopter programs, in light of recent global security concerns [58]