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spk07: Greetings. Welcome to the Astronics Corporation third quarter fiscal year 2022 financial results conference call. At this time, all participants are in the 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 and telephone keypad. Please note this conference is being recorded. I'll now turn the conference over to your host, Deborah Polowski. You may begin.
spk01: Thanks, Jamali, and good afternoon, everyone. We certainly appreciate your time today and your interest in ASTRONIX. On the call here with me are Pete Gunderman, our Chairman, President, and Chief Executive Officer, and Dave Bernie, our Chief Financial Officer. You should have a copy of our third quarter 2022 financial results, which we released just after the markets closed today. If you do not have the release, you can find it on our website at ASTRONIX.com. As you are aware, We may make some forward-looking statements during the formal discussion and the Q&A session of this conference call. 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 and with other documents filed with Securities and Exchange Commission. You can find those documents on our website or at sbc.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've provided reconciliations of non-GAAP measures with comparable GAAP measures in the tables that accompany today's release. So with that, let me turn it over to Pete to begin. Peter?
spk05: Thanks, Debbie, and good afternoon, everybody. Thank you for tuning in to our call. Our agenda, as usual, will be mostly focused on a discussion of the recent quarter, the third quarter of 2022, and we will close with some forward-looking predictions for both the fourth quarter and an initial look at 2023. I'll start, and then I'll pass it over to Dave, and then I will finish up again. So when I look at the third quarter, I mean, there's a, at its basic, at its most basic, there's a bad negative headline and there's a pretty good headline. The bad headline is that the revenue ramp that we expected to begin in the third quarter was delayed. We did not get the ramp that we anticipated. The good news is that demand during the quarter in terms of bookings continues to be really strong, which sets us up again for a step change that we think is underway in the fourth quarter here in terms of volume and will carry into 2023. So first let's talk about the delayed revenue ramp, the negative headline. In my view, the third quarter was essentially a misfire. It was like a false start and a race. we thought we would see revenue of about 150 million. Instead, we ended up at 131 million. That delay led to a reset of our second half expectations and was mostly driven by a combination of supply chain problems and program delays, about 50-50. It also had the effect of delaying the expected ramp from the third quarter into the current quarter the fourth quarter of 2022. so a little detail on supply chain problems and program delays the supply chain struggles are well documented everybody's experiencing them i don't plan to go into a whole lot of detail about them but from our perspective there are a couple of bright spots One is that when the supply chain problems became apparent in our economy, especially in our world of electronics, in the middle and late of second half of 2021, lead times stretched out dramatically. And we'll talk in a minute about how demand has fluctuated for us over the pandemic. But basically, when demand came back in the second half of 2021, we started ordering parts that typically would have lead times of 8 to 12, 14 weeks, and all of a sudden we're getting quotes back at 52 weeks, which served to retard our ability to handle the surge in demand. Well, 52 weeks has come and gone, and those parts are now starting to come in. If you look at our inventory levels, In the most recent quarter, you will see that we've had a little buildup of inventory. That obviously is bad news in terms of working capital, but it's good news in terms of getting the parts that we've been waiting for for about a year, and which will set us up for the increased level of shipments that we anticipate in the current quarter and next quarter and the quarter after that. The other thing is that we're maybe a little bit of a contrarian here, but our perspective is that while supply chain has been a major disruption to our business and to many other businesses over the last year and a half, we see signs of promise. We run a handful, 12 or 13 different operations, and we do pretty systematic reviews and follow-up with them. And one of my regular questions is, What's the supply chain look like? Is it getting better? Is it getting worse? And for the first time in many quarters here, the feedback, the sentiment is that it's not getting worse, maybe getting a little bit better. Not across the board. We're not out of the woods by any means, but it seems to have plateaued. And we are hopeful and optimistic that we're going to continue to see lead times come down. In some cases, pricing comes back to a more normal realm, and that's a fundamental kind of expectation, not that things are going to snap back to perfect in the coming quarters, but that they're not going to get any worse. We're optimistic about that. I also want to talk a little bit about program delays. We have experienced a number of award delays that we thought were going to drive our second half that now look like they're going to be delayed into 2023, maybe even in the late 2023. One example of that is the FLARA award, which I've talked about in previous calls, future long-range assault aircraft, the Army's planned replacement for the Black Hawk. We're teamed with bell on their uh version of that and bell is competing with a team led by sikorsky this is a program that most of the world expected to be awarded in kind of a may june july time frame then it flipped to october and here we are in november and maybe now it might happen by year end we If Bell wins this program, we expect to play a major role on their team, and it will be probably one of the, if not the largest, one of the largest programs that's ever come to our company. And it will require a significant amount of engineering and development work. And we originally, when this thing was supposed to be awarded in May, June, had a risk-reduced amount included in our program. kind of budget and forecast for the second half of 2022. Obviously that now at this point has slid out into 2023. Similarly, we made kind of a strange announcement on August 24th about a program called 4549T, which is a radio test down select that we won. from the US Army. The US Army operates like 20 different radio types in their arsenal, a total of over 600,000 radios, and they ran a technical performance-based competition between a number of suppliers, including us, to pick a platform to go forward with as their standard tester. We were selected as we hoped we would be, but we originally thought that this down select would happen early in the year, like in March or April, and then June, July, and then finally we were selected in August. But even after being selected, now we have the opportunity to negotiate basically a directed procurement contract with the Army, which will take some time and means that what we had expected would be a solid contributor for the second half of 2022 will slide into 2023 and beyond. It's a significant program and it's all preliminary. We don't know exactly how many and how many years this thing will go, but indications are that it'll be a significant test contract for us to the tune we think of somewhere between $150 and $200 million. So between supply chain and program delays that in some cases were material, we had to reset our second half expectations. The third quarter also included some atypical costs, $4.6 million. Dave will talk about these in some more detail, but we exited or are exiting a long-term lease to building, which required some departure costs, a customer accommodation, and a legal settlement, some of which we expect will be reimbursed in the fourth quarter. The accounting rules say we take the cost in the third quarter, and if we get reimbursed, that will happen in the fourth quarter. And finally, of course, in the third quarter, like many companies or all companies, we're dealing with the effects of inflation on our production inputs. We are heartened by the recent news that maybe the inflation expectations are softening a little bit going forward. We think over time we'll be able to work this out like everybody else. Spot buys will come down. Pricing opportunities will go up. to match the increase in cost, but it definitely had a negative impact on pricing or on margins in the third quarter. So all this results in margin pressure. The lower volume, the elevated input cost, the atypical expenses, we ended up at the end of the day with an adjusted EBITDA of a negative 0.6%. The positive headline, and it's a significant headline, was continued strong demand in the market for our products. We had third quarter bookings of 184 million. Again, against shipments of 131. That's a book to bill of 1.4. And almost back to pre-pandemic levels. Pre-pandemic, the way the company is structured and was structured then, we would expect to book in most quarters somewhere between 190 and 200 million. That was the trajectory we were on. To come into 184, and if you look at the chart on the last page of our press release, you'll see three out of the last four quarters were right around 180 million. In fact, for the last four quarters, we had bookings of 685 million. against shipments of 493. So that's a book to build of 1.39. Leads us with another record backlog of 547 million, our highest ever. Before I turn it over to Dave, I wanted to define or we get these questions every once in a while about how we count bookings. How do we define a booking? And it's a pretty conservative measure that we use. Basically, we need a delivery order with a firm price and a firm delivery date before we call it a booking. So we exclude blanket orders or long-term agreements that don't have specific pricing negotiations, pricing determinations or delivery deadlines. So I use the 737 Max, as an example, it's one of our historically largest production programs coming back, thankfully. We put a certain amount of product on every airplane, and we have long-term agreements with Boeing for that book of business that stretches out for years. One way to count bookings would be to look at the term of the agreement, say the 2027 or 2025 or whatever the case may be, and look at their skyline production chart and multiply the two together and call that backlog. That's not how we do it. In that case, with 737 and Boeing, for example, they give us delivery orders on a regular basis, say each quarter for delivery for the next quarter. And that amount is which is, you know, defines exactly what the product is and what the pricing is and what the delivery deadlines are. That's what we include as a booking, nothing more. So we're pretty consistent with that and I think helps people understand what true demand is for our business without getting messed up with long-term agreements and long-term assumptions that might go along with it in some cases. So again, Great bookings for the third quarter, a continuation of great bookings for the last, really the last five quarters. And we think that sets us up for a good short-term future here going into wrapping up 2022 and going into 2023. At this point, I'll turn it over to Dave to go over some of the specifics of the third quarter. Thanks, Pete.
spk06: While our sales continue to improve, we continue to experience margin and cash flow headwinds. As well as $4.6 million of what I'd call atypical costs in the quarter, consolidated sales increased to $131.4 million. It was led primarily by continued growth in the recovering commercial transport market, which was up 36% compared with last year's third quarter and up 13%. sequentially from the second quarter. General aviation sales increased by $2.6 million to $14.8 million due to increased volume primarily of our antenna sales and enhanced vision systems into that market, while military aerospace sales decreased by $4.6 million to $12.5 million due primarily to a reduction in non-recurring engineering revenue compared with the prior year. Test segment sales increased by $3.2 million to $19.3 million and was driven by increased instrument test and transit test volume. Despite this top line growth, we continue to struggle with our margins. Sales increase of $19.6 million compared to the previous year's quarter. Historically, we would expect to see 40% to 45% of that sales increase or about $8 million or so drop to operating profit But we didn't see that. We saw our operating loss from operations actually increased by $9.8 million, from a loss of $4.5 million to a loss of $14.3 million. So here's some of the items in the headwinds that happened during the quarter compared to a year ago. Continued high level of spot buys to source inventory. This is estimated to cost us about $4 million during the quarter. We expect these type of buys to continue, but to wind down as we move through the next 12 months as supply chain improves. We have several atypical costs that we do not expect to continue to be recurring in the future, including $4 million to settle on ongoing legal dispute and customer accommodation. We do, however, as Pete mentioned, expect it will be indemnified for a portion of these costs in the future. Additionally, $450,000 in lease termination costs were accrued as we're relocating our Irvine test operation into a different location in Irvine. Inflation's impact relating to material and labor costs is estimated to be in the range of 7 to 8 percent, or about $8 to $9 million for the quarter compared to a year ago. We expect over time we'll be able to pass these costs to our customers as we enter into future contracts, but there will be a lag. Some contracts have been renewed with more favorable pricing and some are in the works and some will not open up for another year or two, but we're working on those. Additionally, we've not been realizing customary margins on several of our newer test segment development programs. We do expect higher margins on the follow-on orders relating to those development programs that we've received or expect to receive in the future. And finally, in last year's third quarter, we did recognize $1.1 million of grant from the AMJP program offsetting cost of goods sold that we don't have this year. Switching to the balance sheet, We had a difficult quarter with respect to cash. Our net debt was $156 million at the end of the quarter, up $133 million at the beginning of the year. Cash flows from operations in the third quarter were a negative $28.8 million, largely caused by inventory, which increased $16.1 million during the quarter, driven once again by our growing sales backlog and the move to the right of some sales programs. and complicated by supply chain inefficiencies. Receivables growth also increased by $16.7 million during the quarter, and this was compounded by the negative EBITDA margins that we had in the quarter, or basically breakeven EBITDA margins in the quarter. We did have some... We do have some progress to report in terms of an amended credit facility that we completed yesterday. With the cooperation of our bank group, we extended the expiration of the revolving credit facility, this time to the end of November 2023. The extension will provide more time to get a long-term credit arrangement in place as the process has been moving slower than expected. You may recall that three months ago when we reported We were targeting having this done by now. While we're not finished yet, we're once again, we're maybe still in the final stretch and expect that we'll have a new facility in place before the end of the year. Some select changes to the terms of the revolver. The revolver will remain at $180 million through December 20th and decrease to $170 million. The SOFR pricing spread will increase to SOFR plus 550 basis points through January 16th, then increase to SOFR plus 800 or 850 basis points thereafter. We're required to maintain trailing 12 month adjusted EBITDA of 15 million for the quarter ending December 31st and March 31st, then 25 million for the remaining quarters thereafter. Minimum liquidity through December 31st measured monthly is required to be 10 million, increasing to 15 million thereafter.
spk04: And there was a 10 basis points amendment fee. That's all I have.
spk05: Okay, so for the rest of this, or for now, I'd like to suggest that... You turn your attention to the bar chart on the last page of the press release. I'm going to talk about this a little bit to explain kind of where we've been and where we're going as a company through the COVID period here. And what you have there, hopefully you're looking at a color version rather than a black and white version. But for each of the quarters from the first quarter of 2020 through the last quarter, third quarter of 2022, the bar on the left or the green bar, if you're looking at it, is our bookings for that quarter. And the blue bar, the bar on the right, is our shipments. first focus on the left bars or the green bars, the booking trends. And you can see that when the lockdown happened in the first and second quarter of 2020, our bookings went off a cliff and we basically went from 165, 166 million down to 60 million. And then it climbed back kind of quickly, but to a reduced level and a plateaued right around 120 million for three quarters. That was largely a period of restricted travel and lockdown. You know, work from home, all that stuff you might remember from COVID. Then about a year ago, in the third quarter of 2021, when those lockdowns were lifted, demand took off. First narrow body. We're not talking about it a whole lot on this call, but we're seeing many signs of increased wide body activity. travel also these days, which is very exciting. And bookings took off up to 160, 180, and in the last quarter, 184 million. So bookings, again, bouncing back pretty quickly, especially over the last year. The blue bars, the bars on the right, reflect our shipments, and we fell and followed bookings down for a couple of quarters, bottoming out in the third quarter of 2020, and then kind of plateauing basically at that 100 to 120 million level up until two quarters ago when we kind of broke through 120, broke through 130, but still obviously over the last year lagging demand significantly, and that's really when the supply chain problems that gripped the world happened. That all happened around the third quarter of last year, second quarter of last year. Demand took off, and we had a hard time matching it, and we're still struggling to do so. But we were ordering materials way back then, and those materials are starting to come in. Dave talked about the inventory ramp. And it gives us confidence that we can execute on the orders in front of us going forward. So again, if you look at the last four quarters, we had total bookings of $685 million against sales of $493 million. Sales have to catch up. That's our mission. That's our challenge. So what are our expectations? We are expecting that fourth quarter revenue, the quarter we're in right now, will be in the range of 140 to 150 million. We're aiming for the high end of that range. We have some challenges, but we think that's a safe range, and as of our most recent reading, we are on track to do that from a volume standpoint in the current order.
spk04: Looking forward, it's possible
spk05: Typical this time of year, we take a first look at the year that's coming, and we are kind of working on but finishing up our budgeting process for 2023. Based on bookings that we've experienced today and the record backlog that we have of 547 million, we think that we're going to be in the range of 640 million to 680 million next year. And that would represent a significant level of growth over where this year is gonna end up, which will be in the 525, $530 million range. So that's a big challenge. It's largely dependent on getting the parts that we need, but our indications are that the supply chain is loosening up And in any event, it's not getting any worse. So we think that we have the planning in place to bring those parts in the house and to convert them into revenue. And we think it's going to be a really good year. Obviously, we'll update more on that as we get closer and get into it. And there are some things that are important to get nailed down, like FLARA and 4549T. But we think we have the pieces in place to make that year a reality. So I think that ends our prepared remarks.
spk04: Shandi, I'd like to open it up to questions at this point.
spk07: And at this time, we will be conducting our question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. And our first question comes from the line of John Tan-Wen Tang with CJS Securities. Please proceed with your.
spk03: Hi, good afternoon, guys. Thanks for taking my questions. I was just wondering, does the inventory that you've built give you that confidence to ship to your revenue guidance, or are you still waiting on parts that could push out things towards the end of the quarter?
spk04: Are you talking about the fourth quarter, John? Yes, correct.
spk05: We think we have a pretty good line of sight to inventory for the fourth quarter. There are a couple hot spots. There always are. And we're working those pretty aggressively. But our internal target is at the high end of that range or just beyond it. And so by putting that range in there, we think we're giving reasonable allowance for material problems that could still pop up. But at this point, we're obviously pretty well into the quarter. And we're encouraged that we're on track so far.
spk04: We think we're all right.
spk03: Okay, great. Dave, I was wondering what your new estimate of when you might achieve break-even just on a pre-tax income or a cash flow basis, just given the inflation underlying, the push out to the ramp, and obviously your expectations for how the refinancing might play out.
spk04: I think our quarterly gap is, pre-tax break even points in the neighborhood of 160 million.
spk06: When the spot buys go away, we experienced 3 million or so in spot buys this quarter. With those, I'd say our gap break even points probably about 165 million right now with those spot buys.
spk03: Okay, great. And then just any best estimate for what's left to complete the refinancing? What are the items left and kind of the time that you think it'll take?
spk04: Well, our target is to get something done
spk06: Before your end here, we're working with a couple of options there in terms of it's still basically the same structure we talked about before with a combination of an asset based loan that's supported by working capital receivables and inventory and a term loan that would be supported by real estate and machinery and equipment. Same basic structure there and target is to get it done as soon as possible. You know, I'm confident we'll get something done in the first half of December. But, you know, if you read through the amendment we just did, it's highly in our benefit to get something done sooner rather than later. So I'm confident we'll get something done in December here.
spk04: Okay, great. Good luck. Thank you.
spk07: And again, as a reminder, if anyone has any questions, you may press star 1 on your telephone keypad to join the queue. Our next question comes from the line of Michael Siramoli with Truist. Please proceed with your question.
spk02: Hey, good evening, guys. Thanks for taking the question. Dave, maybe just to stay on the credit facility issue. You mentioned the EBITDA levels on a trailing basis. It sounds like you won't be EBITDA positive in the fourth quarter, but what sort of the bank definition of EBITDA, what was sort of the bank-defined EBITDA this quarter? It sounds like there's going to be a challenge to get to a sustaining EBITDA level here.
spk04: I would say that we will be cash or EBITDA positive in the fourth quarter. So, you know, our forecast has us being compliant.
spk02: Okay.
spk06: Even though you just said we wouldn't have entered into an amendment that we were forecasting to not be compliant with.
spk04: Right.
spk02: Okay, yeah. I mean, it's just, yeah, I just haven't seen one of these take this long. So, you know, I would imagine the EBITDA levels are a bit of a challenge, but okay. And then what, I mean, Pete, you gave a pretty detailed analysis of, you know, kind of the color on the bookings. So within the bookings, I mean, what are you seeing for near-term production rates, you know, that's underlined? The 2023, I mean, supply chain, obviously, you know, maybe a little bit better, still challenges. You know, we've got some other big suppliers, say the engines and supply chain is going to last all year. But, you know, what are sort of the underlying rates that's anchoring this guidance?
spk04: You mean for the OEM production rates? Yeah.
spk05: Yeah, I mean, they're pretty much as published. I mean, Boeing has us running on 28 to 30 units a month on 737 MAX. And business jet volumes are not going down. They're going up. Military volumes are pretty easy to predict. The take rate on a lot of our cabin electronics product lines, like NC Power and you know, wireless access points, things like that, which are optional in the narrow body world are pretty strong. They're trending to like 70% or so of new aircraft production, both, you know, at Boeing and Airbus. So that definitely helps. And I hinted that, you know, the the wide-body resurgence is actually very beneficial for us. I mean, before the pandemic, half our commercial transport sales were wide-body versus narrow-body. Narrow-body has bounced back with the resumption of domestic short-haul travel. And predictions even 10 months ago were that a lot of the wide-bodies that were parked in the desert would never come back, but they are. And they are because demand's coming back, too. I'm particularly encouraged by some of the recent news out of China that, you know, as a major driver of international long-haul travel, and half the world's largest airlines are Chinese, and they have been running at, like, you know, 5% of their pre-pandemic international route structure. So we think those trends are pretty positive. The products of ours that go into wide bodies are definitely picking up. So, you know, it's not just production rates that drive our business. Half of our commercial transport sales pre-pandemic were aftermarket. So, you know, we're encouraged by 737 MAX getting back up to rate. We're encouraged by, you know, hopefully 787 getting back into production. But we're not dependent on those necessarily to see some kind of resurgence in demand. Certainly what we're seeing, at least in the wide value world, is more aftermarket driven than line fit.
spk02: Okay, got it. And then just last one, maybe just Dave again, expectations and just thinking about, you know, I guess it sounds like there's obviously working capital, which a lot of companies are experiencing. Some of that should unwind, but just thinking, I guess, about the puts and takes, I mean, it sounds like that facility is going to be over 11%, I guess, if you draw on that. So, just how should we think about free cash flow or even conversion as we look into 23?
spk04: We will turn to cash flow positive as we move through the year.
spk06: Okay. We saw this big buildup of inventory through the last six or nine months. We do expect the inventory build to wind down and actually decrease our inventory levels as we move through next year. That's going to provide a little bit of a tailwind there. along with the top line growth and the margin that comes from the top line growth there. So we are forecasting to move through the year. The first quarter will probably be our weakest quarter there next year. But as the sales grow there and we wind down the inventory, I expect the cash flow from operations to pick up significantly, especially in the second half of next year.
spk04: Got it. Okay, perfect. Thanks, guys.
spk07: And again, as a reminder, if you have any questions, you may press star one on your telephone keypad to join the question and answer queue. Our next question comes from the line, again, from John Tan Wang Tang with CJS Securities. Please proceed with your question.
spk03: Hi, Pete. Thanks for taking my follow-up. Just wondering, within the guidance that you have laid out for next year or those brackets, How much on FLARA and Army radio business have you included in there? And if you haven't, how quickly could those start becoming a tailwind for you, assuming that you win FLARA, of course?
spk04: John, I couldn't hear your question specifically.
spk05: Was it how much FLARA is in there for next year or FLARA and 4549? Is that what you're asking?
spk03: Yeah, I assume that you have some 45, I'm sorry, the Army radio business I don't remember the number, but it's not yet.
spk05: Yeah, we have – it's a risk-reduced number. I would say between the two of them, it's somewhere in the $20, $25 million range for next year.
spk04: Okay, got it. And then – We think there's pretty –
spk05: We think there's pretty significant upside potential there, especially on 45-49T, depending on how the Army chooses to execute the program.
spk03: Okay, understood. And just a question on pricing. You know, you mentioned that there's some of these programs out there that are one to two years away from having your contracts reset. Is there no chance of going back to your customers and repricing them just based on the level of inflation? I have to assume that you're basically taking a negative margin on these projects at this point, which doesn't sound very sustainable.
spk05: Well, no, I wouldn't say that that's a – the long-term contract nature of our business in general isn't that big a concern with repricing. There obviously are some products that are better priced than others. And we are working to address that. But a fair amount of our product portfolio turns relatively quickly. So like a year, year and a half, something like that. And those, you know, in some cases, we're being quite successful repricing them. And we have a situation where we can make a delivery, but in order to do so, we got to pay a big premium for a, a certain component, we, in many cases, are going out to customers and asking them to cover that, and they're doing so. And in other cases, we're choosing to bite the bullet and do it ourselves in the interest of keeping customer relationships cordial. But it's going to take time for all of that to work itself out, and we're definitely not ahead of the cost increases. We're responding to them. like most companies. So it's downward pressure, but we are doing what we can where we think we can to kind of get out in front of it and respond to it.
spk04: Got it. Thank you. And our next question comes in the line of Michael Ciaramoli with Truist.
spk07: Please proceed with your question.
spk02: Hey, thanks, Pete. Just to stay on the pricing, what are you seeing with the current bookings on the aftermarket side of the business? I mean, do you have, you know, pick an airline customer? Do you have some flexibility to increase the price on, you know, whether it's break-fix type work or if they are, you know, doing some retrofits? I mean, are you getting some reasonable pricing there?
spk05: Yeah, I would say we're pretty comfortable with the prices that we're getting. You know, most of what we're dealing with where we have pressure are older price levels that have been in place in the system for a while. But a lot of the more recent demands we think comes at pretty reasonable pricing levels. The other thing I would say about our backlog and the range of bigger programs that we've announced, They're not in there yet. I mean, they're just not there. We talked about a pretty major award with Southwest. I think at the end of the third quarter, we had like 10 ships that's in there or something like that. So there's a lot of that to come. 4549T is obviously not in there. And some of the others that, yeah, without going through the whole list, I guess we feel like if we can you know, get the volume up and get the new programs into production on large and profile will look quite a bit better than it does today where we're stuck with these, you know, inventory premiums that we have to pay, spot buys, and pricing from, you know, six months or a year ago when things were different. So we obviously have to cycle that through. But, you know, I think we'll get that done. It's just a matter of time.
spk04: Got it. Perfect. Thanks, guys.
spk07: And we have reached the end of our question and answer session. I'll now turn the call back over to Peter Gunderman for closing remarks.
spk05: Okay, thank you, and thanks, everybody, for tuning in. We look forward to talking to you when the fourth quarter is over, probably in early February.
spk04: Have a good day.
spk07: And this concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
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