Astronics Corporation

Greetings and welcome to the Astronics Corporation third quarter fiscal year 2024 financial results. 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. It is now my pleasure to introduce your host, Craig Mahalik, Investor Relations. Thank you, sir. You may begin.

Thank you, and good afternoon, everyone. We certainly appreciate your time today and your interest in Astronix. Joining me on the call are Pete Gunderman, our Chairman, President, and CEO, Dave Burney, our Chief Financial Officer, and Nancy Hedges, our Corporate Controller. You should have a copy of our third quarter 2024 financial results, which cross the wires 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 forward-looking statements during the formal discussion in 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 the Securities and Exchange Commission. You can find these documents on our website or at sec.gov. During today's call, we'll 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. With that, let me turn the call over to Pete to begin.

Thank you, Craig, and good afternoon, everybody. I would like to begin this call by saying a few words about a couple people here in the room with me. Dave Verney will be retiring as our CFO early in 2025 after a tenure of 29 years with the company. 22 years ago, he and I took over the C-suite at about the same time. Revenues for our company at that time We're about $33 million, and this year we expect to, again, be in the $800 million range. So it has been quite a ride over these 29 years with Dave. He's been a tireless leader within our company and a trusted friend and partner for me, and he will be missed. Although I do have his cell phone number, and I know where he lives. So if needed, we'll pull him back in. Also with me is Nancy Hedges. She is a new name probably for most of the people on this call, but she will be succeeding Dave as our CFO in January. Nancy has been around for a while. She joined in 2014 as controller and principal accounting officer of our company and over the time since has established herself internally as a leader and top tier performer on our team. She's very familiar with our personnel, our operations, and the improvement initiatives we seek. And I am confident the investor community will get to know her and appreciate her talents as time goes on. I'm very confident she will do a very good job as CFO going forward. We'll hear from both Dave and Nancy in just a few minutes. I want to move to a couple of comments on the top you know, line trends that are affecting our company. Nothing really new here, but we felt operationally that the third quarter was a very good quarter for Astronix. Sales were strong, up 25 percent year over year and in the high end of our forecasted range once again. Adjusted net income was 12.2 million or 35 cents a share. Adjusted EBITDA was 27 million, 13% of sales. Our trailing 12 months adjusted EBITDA is 91 million at this point. Our aerospace segment gets a lot of the credit for the improvement. Sales for our aerospace segment, again, we're up 25% for the quarter and 19% for the year. And adjusted operating margin, was 14.2% in the quarter, up from 3.5% in the comparator period a year ago. So we continue to recover with our volume and our margin improvement initiatives. They're starting to show up strongly on the bottom line. We have a ways to go still, but we're making progress for sure. There are some kind of macro tailwinds which have been helping us over recent quarters and continue to help us. I'm not going to go into any of these in too much detail, but it's worth reminding ourselves kind of where we've been and where we're going. And the first and probably the most important thing is that our supply chain continues to improve and perform. We do regular reviews of our business units, and not too long ago, every problem was attributed one way or another to the supply chain. Today, those comments are fewer and farther between. There are still issues. There always will be. But in general, the supply chain continues to improve and enables our improved performance. Similarly, input cost pressures continue to subside. The inflation that we experienced over the last year and a half has gotten much quieter. Our workforce continues to improve and get more efficient. Some of you might remember on the last call I mentioned that we had something like 45 percent of our 3,000 employees have been with us for three years or less. That kind of turnover which again was attributable to the pandemic, is really hard to operate in. But as time goes on and people get more and more familiar with what they're doing and how to work with each other, our efficiency improves. Similarly, pricing adjustments, which we negotiated through that period of inflation are now coming more and more into effect. Some of our major programs are beginning to take on new pricing structures, which will be a contributor as we move forward through 2025. And finally, demand continues to be pretty strong. We are entering the fourth quarter with a backlog of 612 million. If you look back to like 2018, 2019, when we were last at an $800 million run rate, our backlog was much lower, like in the $400, $420 million range. So we're entering the fourth quarter at 612. That sets us up, we think, for continued results and continued improvement top line as we move forward. The press release talks a lot about adjusted measures. I thought it would be worth spending just a minute talking about some of the major adjustments in our third quarter. There were a few of them. We did a refinance in July, and as part of that refinance, we had to expense about $7 million of assets related to the old credit facility that are no longer applicable on our financial statements we also had legal expenses during the quarter of 5.6 million that was ramping up to a hearing that happened in the uk that i will talk about again later in the call and finally one of our e-vital customers lilium filed for bankruptcy just a couple weeks ago and we took a total of about 2.2 million in charges related to that. I wanted to comment that we are involved with a number of eVTOL customers, but we were more heavily involved with Lilium than we are with the others. So for people who are concerned about whether this is the first shoe of many shoes to drop in this segment, I would tell you I don't think that's the case. What we have done with most customers is developed a kind of a standard architecture off-the-shelf products that can be relatively easily integrated into their aircraft without a high degree of customization. So I don't feel we have the same level of exposure, though we are working with a pretty wide range of eVTOL aircraft that are being developed currently. Finally, we had a rare warranty reserve of $3.5 million. This is related to an electrical power system for a business jet aircraft that was experiencing less than desirable reliability over time. It's something that we introduced a few years ago, and it's supposed to perform better and longer than it has been. So we need to take some actions to fix that it's part of being a supplier with integrity and living up to our promises to our customers so it's kind of a long list and it's high dollars and we broke out a lot of our tables in our press release more than we usually do to help everybody understand where the expenses were fitting in and what the adjustments were and and what the company was performing like underneath With that all said, I'm going to turn it over to Dave, who's going to talk about our consolidated results, and then we'll go to Nancy to talk more a little bit about segment results.