Astronics (US:ATRO)2021-11-08 19:40Financial Data and Key Metrics Changes - Consolidated sales for Q3 2021 were $111.8 million, which was below the expected range of $115 million to $120 million, representing a 5% increase from the same quarter last year but flat sequentially from Q2 2021 [24][9] - Adjusted EBITDA for the quarter was approximately $2.8 million, showing improvement compared to previous quarters with similar revenues [11][25] - The company experienced a supply chain impact estimated between $8 million to $10 million for the quarter, affecting revenue generation [10][9] Business Line Data and Key Metrics Changes - Aerospace segment sales increased by 16% year-over-year to $57.5 million, driven by higher volumes in seat and passenger power products [25] - The Test segment saw a revenue decline of about 33% compared to the previous year's third quarter, attributed to decreases in defense and transit areas [25][21] - Bookings for the Aerospace segment were $142 million with a book-to-bill ratio of 1.49, indicating strong demand [15] Market Data and Key Metrics Changes - The aerospace market is experiencing a positive trend, particularly in narrowbody aircraft, with increased flight activity and production rates driven by the 737 MAX [16] - Military aircraft demand remains stable, primarily driven by the F35 program [18] - The Test segment continues to face challenges, with bookings significantly below the required levels to maintain a healthy business [21] Company Strategy and Development Direction - The company is focusing on emerging opportunities in the electric aircraft segment, leveraging its expertise in electrical power distribution [19][20] - Plans for facility consolidation are underway, expected to be completed by mid-2022, which aims to improve operational efficiency [28] - The company anticipates strong double-digit growth for 2022, contingent on resolving supply chain issues and labor shortages [31] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns about the worsening supply chain situation, with no signs of improvement from various operating units [37] - The company expects to recognize significant benefits from the AMJP grant in the upcoming quarters, which will positively impact gross profit [26] - Future EBITDA margins are expected to improve as top-line growth is anticipated, although challenges from rising material costs and labor shortages remain [66][67] Other Important Information - The company concluded the sale of a facility in Fort Lauderdale, which will contribute to cash flow in Q4 2021 [28] - Cash flow from operations was negatively impacted by a $21 million increase in net working capital during the quarter [29] Q&A Session Summary Question: Can you provide more details on the aerospace bookings that will go into the Test segment? - Management clarified that certain bookings categorized under aerospace will appear in the other revenue category when shipped, primarily due to contract build programs initiated during the pandemic [72][34] Question: What are the expectations for supply chain disruptions moving into Q4 and 2022? - Management anticipates that supply chain challenges may worsen, impacting revenue generation and operational efficiency [37] Question: How is the company addressing pricing pressures and cost increases? - The company is exploring temporary surcharges and has seen some success in passing on costs to customers, although overall price increases have not yet fully matched rising costs [51][52] Question: What is the outlook for the F35 program and its impact on the company? - Management expects the F35 program to remain important, with potential offsets from upgrades and changes despite anticipated rate drops [75] Question: What is the breakeven revenue level for the company currently? - The breakeven point has increased slightly due to rising material costs, making it difficult to predict accurately [76][77]