Kaman Corporation

Good day, ladies and gentlemen, and welcome to the Command Corporation third quarter 2021 conference call. At this time, all participant lines are in listen only mode. Later, we'll conduct a question and answer session and instructions will be given at that time. To ask a question, you would need to press star then one on your telephone. As a reminder, this conference call is being recorded. If anyone should require operator assistance, please press star then zero. I would now like to hand the conference over to your host today, Rebecca Stapp, Vice President, Controller. Please go ahead.

Good morning. I'd like to welcome everyone to Command's third quarter 2021 earnings call. Conducting the call today are Ian Walsh, Chairman, President, and Chief Executive Officer, and Jamie Coogan, Senior Vice President and Chief Financial Officer. Before we begin, I'd like to note that some of the information discussed during today's call will consist of forward-looking statements. setting forth our current expectations with respect to the future of our business, the economy and other future events. These include projections of revenue, earnings and other financial items, statements on plans and objectives of the company or its management, statements of future economic performance and assumptions underlying these statements regarding the company and its business. The company's actual results could differ materially from those indicated in any forward-looking statements due to many factors, the most important of which are described in the company's latest filings with the Securities and Exchange Commission, including the company's third quarter 2021 results included on Form 10-Q and the current report on Form 8-K filed yesterday evening together with our earnings release. We also expect to discuss certain financial measures and information that are non-GAAP measures as defined in applicable SEC rules and regulations. Reconciliations to the company's GAAP measures are included in the earnings release filed with yesterday's 8K. Finally, we posted an earnings call supplement to our website that is designed to provide additional context on our financial performance, key events for the period, and additional information on the makeup of our sales. You can find this presentation at www.command.com slash investors slash presentations. With that, I'll turn the call over to Ian Walsh.

Good morning, everyone, and thank you for joining our third quarter 2021 earnings call. I'd like to begin today's call with a brief summary of the quarter, followed by updates on operations and several of our strategic R&D growth initiatives. I'll then turn the call over to Jamie for a more detailed discussion of our financial results. Our business continues to perform extremely well, and we are on target to deliver to our revised full-year expectations. Third quarter revenue was $179.8 million, compared to $214 million in the prior year period. As we continue to recover from the impact of the pandemic, we are seeing stronger volume in key areas like medical and industrial platforms. The third quarter also marked the first time we have demonstrated year-over-year growth in our bearings business since the start of the pandemic, and total sales for our springs, seals, and contacts are now fully recovered and outpacing pre-pandemic levels. Gains in these areas were offset by anticipated declines in safe and armed devices as we had record JPF deliveries in the prior year, and our commercial aerospace products continue to operate below pre-pandemic levels. Notably, all of our higher margin, highly engineered products are performing well. This is translating to strong profit performance in the period with adjusted EBITDA of 27.8 million, or 15.5 percent as percentage of sales in the quarter. This result was up 70 basis points sequentially, driven by strong gross margin performance in the quarter, but trailed the prior year of 35.5 million, or 16.6 percent, due to lower FUSE deliveries year over year. Turning to our products and beginning with bearings, demand continued to improve during the quarter, and we delivered growth across the majority of the portfolio. Our sales volume to Boeing and Airbus increased sequentially for self-lubricating bearings, and we saw an increase in engine aftermarket components. As commercial airline traffic continues to rebound, we anticipate this trend to continue. Moving to spring seals and contacts, volume and performance continue to improve in the third quarter. We remain well ahead of pre-pandemic levels and are now beginning to see the full benefit from the ball seal acquisition with strong profit contribution. We are confident in the continued growth We'll see for the remainder of the year in these products. Looking at our KMAX program, recall that the last quarter we shifted the second KMAX delivery to the second half of the year due to a customer financing and timing of their fleet. I'm excited to announce we recently signed contracts with two customers for KMAX aircraft for anticipated delivery in the fourth quarter. Finally, in our structures programs, we continue to be below pre-pandemic levels as a result of the commercial aerospace recovery and some challenges related to workforce levels in some of our facilities. Despite these headwinds, profitability was up sequentially as we benefited from the deployment of our operations excellence model. Turning to our business development efforts, we are very enthusiastic with the progress we are making on several key initiatives. The core of Command is innovation, and Command has a rich 75 history of delivering highly engineered custom solutions to our customers. Today, we believe there are significant opportunities as our industries embrace new technologies that will transform A&D and space travel at a pace not seen since the early days of human flight. I am proud to say that we are investing in and well positioned to participate in this wave of innovation in autonomous flight, eVTOL, and the space economy. Given our broad product portfolio, we are serving many of the leading companies in these markets, and we expect to continue to be a trusted partner. Beginning with autonomous flight, I am pleased to report that during the quarter, we unveiled Cargo UAV Aerial System, a purpose-built, medium lift, autonomous aircraft, an event held on our Bloomfield campus in September. This cargo hauling system's compact design makes it easy to transport to overseas operating sites, but is also highly capable with 800 pounds of payload capacity. Our initial addressable market is the U.S. military, which represents a strong use case and a straightforward path to production. Longer term, the platform capabilities lend themselves to a wide range of commercial applications and was designed to be upgradable to EV capability as next generation battery technologies improves. A link to a video of the event can be found on our website. We continue to make progress on Titan UAV Aerial System, an unmanned heavy lift logistics helicopter in support of our customer's requirements. Last week, we successfully demonstrated the autonomy and obstacle avoidance technology has been integrated into our KMAX aircraft for the United States Marine Corps. We received positive feedback from this demonstration, validating our efforts as we continue to upgrade the software and prove out this autonomous heavy lift capability. As I previously highlighted, products manufactured using our proprietary titanium-diffused hardening process provides us with several opportunities to expand our customer base and provide meaningful solutions to a broad range of end markets. This process opens up new engineered applications by providing the lightweight and high-strength benefits of titanium alloys while improving surface hardness, durability, and wear characteristics. Our proprietary process hardens the titanium surface in order to benefit from the properties of titanium with sustainable hardness in more rugged applications. Customer interest to date has been very strong, and we already have products using TDH process in space, eVTOL, and AMD applications. but we believe there is a much wider commercial use case for this process beyond these markets. We have asked our team to identify the total addressable market, and we look forward to sharing those details as they become available. Next, I'd like to touch on some specific high growth end markets where we're gaining traction. Beginning with eVTOL, Command is very well positioned to become a trusted partner to a range of emerging eVTOL manufacturers. We are platform agnostic, as our technologies such as titanium-diffuse hardening process, seals, springs, and contacts, and self-lubricating bearings aid in reducing weight for these next-generation vehicles. For example, our rotary seal applications are currently used in the vertical takeoff unit of a leading eVTOL manufacturer's propeller system, and we recently received another award from the same eVTOL provider to deliver specialty bearings technologies made from our TDH material. We expect to deliver these bearings in the fourth quarter with validation testing expected for the first quarter of 2022. Additionally, we have been approached or in active discussions with several emerging eVTOL companies across the globe. Turning to end market opportunities and space applications, our focus on highly engineered solutions have positioned us well with emerging space exploration companies. As space and launch companies continue to commercialize and build volume, we anticipate we will gain a growing share of content across manufacturers, and launch service providers. We currently have applications on every major commercial launch vehicle in the United States. Now I'll turn the call over to Jamie for a closer look at the numbers. Jamie?