Astronics Corporation

Welcome to the Astronics Corporation third quarter fiscal year 2021 financial results conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the call over to Deborah Pilowski of Investor Relations. Thank you. You may begin.

Thanks, Daryl, and good morning, everyone. We appreciate your joining us here today. On the call with me are Pete Gunderman, our president and CEO, and Dave Burney, our chief financial officer. You should have a copy of our third quarter 2021 financial results, which we released earlier this morning, and if not, you can find them on our website at astronics.com. Let me mention first, as you're likely aware, that we may make some forward-looking statements during the formal discussion as well as during the Q&A session. These statements apply to future events that are subject to risks and uncertainties, as well as other factors that could cause actual results to differ materially from what is stated here today. These risks and uncertainties and other factors are provided in the release, as well as with other documents filed with the Securities and Exchange Commission. You can find the documents on our website or at sec.gov. During today's call, we will also discuss some non-GAAP financial measures. We believe these will be useful in evaluating our performance You should not consider the presentation of this additional information in isolation or as a substitute for results prepared in accordance with GAAP. We have provided reconciliations of non-GAAP measures with comparable GAAP measures in the table that accompanies today's release. With that, let me turn it over to Pete to begin. Peter?

Thank you, Debbie, and good morning, everybody. Our agenda this morning is to review the third quarter again, which was a mixed quarter. If you've read the press release, Sales were light, as was the income statement. On the other hand, bookings were very strong with a consolidated book to bill of 1.37. So our discussion will basically vacillate between reviewing the income statement, which is disappointing to us, and bookings, which we're very pleased about. Also sprinkled throughout the conversation will be a couple of significant cash events, Dave will go through the details, but we have an AMJP award which happened late in the quarter and had a minor impact on our income statement. It'll have a bigger impact in the fourth quarter and the first quarter and also subsequent to the third quarter. We sold a facility which will be reflected in our fourth quarter results, but is another kind of worthwhile cash event to spend some time on. We'll close with some expectations of the fourth quarter. as far as we can see, and a little bit of discussion on 2022, although we're not gonna be at a point today where we can provide much guidance going forward at this point. So a Q3 summary, sales were disappointing at 112 million. We guided with our second quarter release to sales of 115 to 120, so we obviously missed our own target. The big challenge, frankly, is supply chain related, probably a recurring theme that you've heard about from a bunch of companies. And secondly, personnel challenges or shortages. We figure the supply chain hit for the quarter was somewhere in the $8 to $10 million range, and we can talk through the specifics of how that plays out. But long story short, We use a lot of electronic assemblies and a lot of smaller components in our products, and lead times are extended and unpredictable and leaves us less able to respond to short-term requests for changes from customers. So there's a constant churn among our customer base over the course of a quarter. Sometimes they want to push things out a little bit. That's not a problem. But when they want to pull things in, We can't respond these days the way we normally could if our supply chain was acting normally. So if you accept the $8 to $10 million number, that puts us at or above the predicted range. And that's, I guess, the frustrating backwards look at our third quarter. In terms of personnel across the company, we are at about 2,200 people right now. We would like to be about 2,400, and we're actively trying to bring up our resources. That shortage had some impact on our revenue levels in the third quarter, but it pales in comparison to what the supply chain problems were. Weak revenues hurt the income statement, obviously, but the bottom line does show some improvement over comparable revenue in previous quarters. The second quarter had comparable revenues of $111 million and adjusted EBITDA just above break even in the most recent quarter. On similar revenues, adjusted EBITDA of about $2.8 million. That has more to do with mix than anything, more aerospace and less test, we feel drove the positive EBITDA in the third quarter. I mentioned AMJP earlier. For those unfamiliar, that stands for Aviation Manufacturing Jobs Protection Act. It's a program that's been run by the Department of Transportation. There are a bunch of qualifications and requirements. We put in an application probably six months ago, five months ago.