Astronics (ATRO) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue for the first quarter was $206 million, an 11$17 million from $2 million last year, while adjusted EBITDA increased to$30.7 million from $17.6 million [5][12] - Adjusted EBITDA margin was approximately 15$60.8 million, with gross margin expanding to 29.5% from 25.7% [13] Business Line Data and Key Metrics Changes - Aerospace segment revenue reached $191.4 million, a 17$31 million [9][17] - Test segment sales were $14.6 million, down from the previous year, resulting in an adjusted operating loss of$1.5 million due to a $1.9 million adjustment on a long-term contract [9][18] Market Data and Key Metrics Changes - First quarter bookings were strong at$280 million, yielding a book-to-bill ratio of 1.36, with a record backlog [6] - Military sales in the Aerospace segment nearly doubled, up 95%, driven by the FLRAA program [16] Company Strategy and Development Direction - The company remains focused on margin expansion, free cash flow generation, and continuous improvement [23] - There is an ongoing review of business segments to assess potential restructuring or product management strategies [34] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the revenue forecast for 2025, maintaining a range of $820 million to$860 million, while acknowledging potential upside and downside risks [25][26] - The company is preparing for potential tariff impacts, estimating obligations between $10 million to$20 million, and is considering various strategies to mitigate these effects [26][27] Other Important Information - Operating cash flow improved significantly to $20.6 million from$2 million in the previous year [19] - Long-term debt net of cash was reduced to $134.2 million, with total liquidity at approximately$194 million [21][22] Q&A Session Summary Question: How much mitigation can be done this year to offset the tariff impact? - Management indicated it is difficult to quantify timing without knowing the exact tariffs, but they are considering various alternatives [30][31] Question: Does the review of each business indicate potential restructuring? - Management stated the review could lead to restructuring or product management changes, but it is premature to discuss specifics [34] Question: What are the expectations regarding Boeing's production needs? - Management has not heard of major changes from Boeing and is encouraged by their production progress [37] Question: Can more detail be provided on demand growth from airlines versus OEMs? - Demand has been strong from both airlines and OEMs, with commercial transport sales being roughly 50% line fit and 50% aftermarket [45] Question: Is the $1.9 million charge in the Test segment contained? - There is potential risk associated with the charge, and management is conducting a review to assess the situation [48] Question: What is the worst-case scenario for legal fees related to the UK settlement? - The worst-case estimate for legal fees is around$7.2 million, with the overall situation being better than initially feared [50]