Astronics Corporation

Good day, everyone, and welcome to the Astronics Corporation's second quarter 2024 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 one using a touch-tone telephone. To withdraw your questions, you may press star and two. As a note, today's event is being recorded. At this time, I'd like to turn the floor over to Deborah Pawlowski. Ma'am, please go ahead.

Thanks, Jamie, and good afternoon, everyone. We certainly appreciate your time today and your interest in astronics. Joining me on the call are Pete Gunderman, our Chairman, President, and CEO, and Dave Burney, our Chief Financial Officer. You should have a copy of our second quarter 2024 financial results, which 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 these documents on our website or at scc.gov. During today's call, we will also discuss some non-GAAP 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 tables that accompany today's release. So with that, let me turn the call over to Pete to begin. Peter?

Thank you, Debbie, and good afternoon, everybody. Thanks for tuning in to our call. We're going to talk about second quarter results, obviously, dig into some specifics of a recent refinance effort that we, or refinance process that we went through earlier in July, and close the call by talking through our expectations for the remainder of 2024. So, long story short, we feel that the second quarter was a very good quarter for astronauts. Simply put, strong sales, improving margins, and very strong bookings. Our aerospace segment, which is just shy of 90% of our sales year to date, had a very good quarter. Our test segment, Approximately 10% of our sales had what I would term as a reset quarter. We'll get into the segment results a little bit later. But as I already mentioned, we also, after the quarter closed, accomplished a refinance in early July, which we feel is a very important step forward for the financial health of our company. So running through some overall consolidated numbers, again, sales of 198 million exceeded our guidance for the quarter. That's happened a handful of times recently. It's become a little bit of a trend. Up 14% year over year in the comparator quarter and up 7% sequentially from the first quarter. The sales level marks a return, frankly, to pre-pandemic levels. The sales level was enabled by positive trends that continue to propel us forward. And these are things that we talked about the last few calls. I'm not going to go into a whole lot of detail, but we continue to see moderating inflation. We continue to see price increases that we have implemented taking hold and beginning to have an effect on our business. And most importantly, our supply chain, which is very much global in nature, continues to improve. Also, our workforce turnover has reduced from the very high levels of 2022 and 2023, and the efficiency of our workforce is improving, and I expect will continue to improve. A tidbit of number which may surprise you, it did me when we ran these numbers, our workforce currently totals about 2,600 people And 43% of them at the end of the second quarter had been with us for less than three years. That's almost half. And it's a much higher percentage than what we are typically accustomed to. I don't think it's unique. I think a lot of companies in our space are dealing with the same realities. And it makes it challenging to step on the gas and immediately have a response in terms of organizational efficiency. But we're getting better. and it's starting to show in our financials. The income statement is improving with the sales level. Dave will talk through a lot of the details in just a few minutes. The adjusted EBITDA for the quarter was 10.2% up from 9.1% last year, or 20.2 million compared to 15.9 million. That's an improvement, But we expect more of it as we go through the year, as our sales continue to climb and as our supply chain continues to improve and as our workforce efficiency and quality improve and as price increases continue to take hold. Also, and it shouldn't be understated, demand continues to be very strong. Our second quarter bookings were $219 million. That's a book-to-bill of 1.11, and it was strong demand really across our range of product lines. It's really nice when you have a high shipping quarter and an even higher booking quarter that makes you feel really confident about the near-term future of the business. Our 12-month bookings at the end of the second quarter were 783 million. That again is a number that's approaching pre-pandemic levels. And we ended the quarter with a record backlog again of 633 million with importantly, 402 million scheduled to ship in the second half of 2024. Looking at our segments, Simply put, again, our aerospace segment had a really nice quarter. It's 90% of our consolidated sales. And basically, as aerospace goes, electronics goes. Solid growth of 11.7% year over year, $177 million in revenue with good margin improvement. Dave will talk through those details in a second. I want to spend a few minutes talking about tests. and what I described earlier as a reset quarter. We had a restructuring in April that I think we talked about on our first quarter call. And it was designed to save about $4 million annually beginning in the current quarter, the third quarter of 2024. So that restructuring was accomplished. And as part of that, we closed a facility in Texas, a smaller one, about 30 people or so, and consolidated those results in our Orlando headquarters. It's similar to a consolidation we implemented last year of an operation up in the Boston area and another one that we have announced but not yet accomplished for a smaller UK operation. All of these are designed to simplify the business, simplify the operations, and lower costs.