Astronics Corporation

Good afternoon everyone and welcome to the Astronics Corporation third quarter 2023 financial results conference call. All participants will be in a listen-only mode. Should you need assistance please signal a conference specialist by pressing the star key followed by zero. After today's presentation there will be an opportunity to ask questions. To ask a question you may press star and then one using a touch-tone telephone. To withdraw your questions you may press star and two. Please also note today's event is being recorded. At this time, I'd like to turn the floor over to Deborah Polosky, Investor Relations for Astronix. Please go ahead.

Thank you, Jamie, and good afternoon, everyone. We certainly appreciate your time today and your interest in Astronix. Joining me on the call are Peter Gunderman, our Chairman, President, CEO, and Dave Burney, our Chief Financial Officer. You should have a copy of our third quarter 2023 financial results, which just crossed the wires after the market closed today. If you do not have the release, you can find it on our website at astronics.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 earnings release, as well as 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. Pete?

Thank you, Debbie, and good afternoon, everybody. Thanks for tuning in to our call. Our feeling is that the third quarter was a reasonably good quarter for our company, though there are many things to discuss, as usual. Dave and I will divide things up between us with respect to prepared comments, and then we'll take questions. Dave will focus on the nuts and bolts of the quarter, but I want to focus my time on what I consider to be the most important thing that is happening in our company these days and the most important thing for investors watching our company to understand, and that is the growth trajectory we have been on. and that will continue to feature prominently in the coming quarters. It is important to understand that trajectory, both where we have been and where we are going, in order to properly understand our company. I need to start with a bit of a history lesson that will be old news to those who know our company well. But setting the stage is important to understanding where we are and what is before us. I'll start by going way back to 2019, the good old days, pre-pandemic, when we had sales for the year of $773 million. We were at that time, and still today, heavily exposed to the commercial transport airplane market, both OEM and retrofit applications. They made up about 70% of our sales back in 2019. COVID arrived in early 2020 and hit the commercial transport industry hard and companies that were focused on it, like Astronix. We bottomed out in 2021 with revenue of $455 million. So we went from $773 down to $455. It was a fairly painful decline for our company. The only glimmer of hope back then was the bookings level, which started to pick up as the year progressed, especially in the narrow body market. Our book to bill in 2021 turned out to be 1.3. In most cases, or most times, a pretty successful performance. However, the supply chain snarls that were prominent at that time became apparent. And while we were booking business, we couldn't generate the revenue that we wanted to. So again, 2021 revenue of $455 million. In 2022, things began to improve significantly. Sales rose to $535 million, up 20% as the supply chain began to correct itself. Bookings, however, stayed strong throughout the year with a book to bill of 1.29. So while the supply chain began to improve, it did not improve enough for us to make progress with respect to what the market was asking for us. But still, 20% growth in normal times. We'd be pretty proud of that. Which brings us to 2023, where we are seeing continued recovery in the airline industry and also for our supply chain. Given our Q3 results, our third quarter results, and updated guidance issued today in our press release for our fourth quarter, we expect to end the year in a range of $680 to $690 million. At the midpoint, that would be up 28% over 2022. So 20% growth last year, 28% this year. Again, normally, those would be things to be proud of. I want to talk a little bit about that fourth quarter forecast, which you saw in the press release, which is 185 to 195 million. Those are big numbers compared to where we've been over the last three years since the pandemic hit. But first of all, we have the backlog to do it. In fact, we have the backlog to do more than that if the stars were to align and capacity were to come in full. in play in time, we could beat the high end of that range. But being prudently conservative, we think 185 and 195 million is a proper range to go out with.