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Astronics Corporation Reports Second Quarter 2022 Financial Results

·20-min read
  • Sales for the quarter were $129.1 million, up 16% over prior-year period

  • Operating loss was $8.4 million without benefit of AMJP grant and earnouts

  • Bookings totaled $148.4 million, up 17% over prior-year period; Achieved book-to-bill ratio of 1.15

  • Backlog increased 19% from year end 2021 to a record $494.4 million; Aerospace backlog reached a record $410.8 million

EAST AURORA, N.Y., August 10, 2022--(BUSINESS WIRE)--Astronics Corporation (Nasdaq: ATRO) ("Astronics" or the "Company"), a leading supplier of advanced technologies and products to the global aerospace, defense and other mission critical industries, today reported financial results for the three and six months ended July 2, 2022.

Peter J. Gundermann, Chairman, President and Chief Executive Officer, commented, "Our second quarter sales of $129 million were our highest since the pandemic took hold in the first quarter of 2020, significantly exceeding the average revenue of $114 million in our previous four quarters. Demand stayed strong through the quarter, with consolidated bookings of $148 million. Our cumulative bookings for the last four quarters were $655 million, easily exceeding shipments during that same period of $473 million. These orders have resulted in another record backlog at the end of the second quarter and is expected to drive a significant sales ramp in the second half of 2022."

He added, "Margins were under pressure in the second quarter, in part because we did not receive any AMJP nor earnout benefits like we have in recent quarters, but also because of inflation and supply chain challenges that are common these days. We are passing these costs on as we can, but our ability to respond in the short term is limited. Encouragingly, we have some evidence that our supply chain is beginning to loosen up, although risks remain."

Second Quarter Results

Three Months Ended

Six Months Ended

($ in thousands)

July 2, 2022

July 3, 2021

% Change

July 2, 2022

July 3, 2021

% Change

Sales

$

129,127

$

111,158

16.2

%

$

245,303

$

217,015

13.0

%

Loss from Operations

$

(8,396

)

$

(5,920

)

(41.8

)%

$

(12,563

)

$

(15,432

)

18.6

%

Operating Margin %

(6.5

)%

(5.3

)%

(5.1

)%

(7.1

)%

Net Gain on Sale of Business

$

$

$

(11,284

)

$

Net Loss

$

(11,010

)

$

(8,099

)

(35.9

)%

$

(14,111

)

$

(20,008

)

29.5

%

Net Loss %

(8.5

)%

(7.3

)%

(5.8

)%

(9.2

)%

*Adjusted EBITDA

$

1,209

$

363

233.1

%

$

856

$

(133

)

743.6

%

*Adjusted EBITDA Margin %

0.9

%

0.3

%

0.3

%

(0.1

)%

*Adjusted EBITDA is a Non-GAAP Performance Measure. Please see the attached table for a reconciliation of adjusted EBITDA to GAAP net income.

Second Quarter 2022 Results (compared with the prior-year period, unless noted otherwise)

Consolidated sales were up $18.0 million from the second quarter of 2021. Aerospace sales were up $20.1 million, or 22.5%, while Test System sales decreased $2.1 million.

Consolidated operating loss was $8.4 million, compared with operating loss of $5.9 million in the prior-year period. The prior year period benefited by a $2.2 million non-cash reduction of the fair value of a contingent consideration liability related to the 2019 acquisition of Diagnosys Test Systems that offset SG&A expenses. Compared with the first quarter of 2022, operating loss increased as a result of not having the benefit of the $6.0 million Aviation Manufacturing Jobs Protection Program grant combined with the impact of material and labor inflation, addressing supply chain constraints to meet customer requirements, the lag in price increases implemented where possible to offset higher costs and product mix.

Tax expense in the quarter was $0.6 million primarily due to the impact of the required capitalization of research and development costs for tax purposes.

Consolidated net loss was $11.0 million, or $0.34 per diluted share, compared with net loss of $8.1 million, or $0.26 per diluted share, in the prior year.

Consolidated adjusted EBITDA improved to $1.2 million, or 0.9% of consolidated sales, compared with adjusted EBITDA of $0.4 million, or 0.3% of consolidated sales, in the prior-year period.

Bookings were $148.4 million in the quarter resulting in a book-to-bill ratio of 1.15:1. Backlog at the end of the quarter reached another record of $494.4 million for the third consecutive quarter. Approximately $278.0 million, or 56%, of backlog is expected to ship in the remainder of 2022.

Aerospace Segment Review (refer to sales by market and segment data in accompanying tables)

Aerospace Second Quarter 2022 Results (compared with the prior-year period, unless noted otherwise)

Aerospace segment sales increased $20.1 million, or 22.5%, to $109.3 million. Commercial aerospace sales increased 44.9%, or $21.5 million, and drove the improvement. Sales to this market were $69.2 million compared with $47.8 million in the second quarter of 2021. Improving domestic airline travel that is driving higher fleet utilization and increased narrowbody production rates, including the 737 MAX, resulted in higher demand for Astronics’ products.

General Aviation sales increased $3.1 million, or 20.9%, to a near record $18.1 million due in part to higher demand in the business jet market for antenna products. The Company expects the strong end user demand in the business jet industry to drive higher OEM production rates in the near future, resulting in higher demand for its products.

Military Aircraft sales decreased $2.9 million, or 17.3%, to $13.9 million. The prior-year period benefited from incremental non-recurring engineering revenue associated with development programs and higher sales of avionics products.

Aerospace segment operating loss was $3.3 million compared with operating loss of $2.7 million for the same period last year. Higher operating losses were driven by inflationary impacts on input costs and inefficiencies associated with production execution due to supply chain constraints that restricted shipment volume.

Aerospace bookings in the second quarter of 2022 were $126.0 million for a book-to-bill ratio of 1.15:1. Bookings were down 22% sequentially, but up 7% over the comparator quarter of 2021, continuing the strong trend of improvement since the pandemic took hold. Backlog for the Aerospace segment was a record $410.8 million at the end of the second quarter of 2022.

Mr. Gundermann commented, "During the quarter, we announced some significant program wins. These included the award by Southwest Airlines to provide in-seat power systems, selection by Safran to provide satellite communication hardware for Airbus aircraft and being named the designer and developer of the electrical power distribution system for the Lilium eVTOL aircraft, our first announced eVTOL program. While these wins did not contribute meaningfully to bookings in the quarter, we expect they will be major drivers for our business going forward."

Test Systems Segment Review (refer to sales by market and segment data in accompanying tables)

Test Systems Second Quarter 2022 Results (compared with the prior-year period, unless noted otherwise)

Test Systems segment sales were $19.8 million, down $2.1 million compared with the prior-year period driven by lower defense revenue.

Test Systems was nearly break-even compared with operating loss of $0.9 million, or (4.3)% of sales, in the second quarter of 2021. Continued lower volume has driven operating losses in the second quarters of 2022 and 2021.

Bookings for the Test Systems segment in the quarter were $22.4 million, for a book-to-bill ratio of 1.13:1 for the quarter. Backlog was $83.6 million at the end of the second quarter of 2022.

Mr. Gundermann noted, "Our Test business has been pursuing some significant awards which have been delayed to the second half of the year. Our go-forward plan assumes that these awards will be made in the near future, supporting our plans for 2023 and beyond."

Liquidity and Financing

Cash on hand at the end of the quarter was $10.7 million and capital expenditures in the quarter were $1.3 million. Net debt was down to $125.3 million, compared with $133.2 million at the end of 2021.

On August 9, 2022, the Company entered into an amended and extended revolving credit facility with its bank group. The purpose of the amendment was to extend the scheduled expiration of the agreement from May 30, 2023 to August 31, 2023, giving the Company more time to complete the refinancing of its revolving credit facility, which it expects to have complete in the coming months. The Company was in compliance with its financial covenants as of July 2, 2022.

Dave Burney, Chief Financial Officer, commented, "We have made steady progress towards refinancing our existing lending facility, and we expect the process will be completed in the coming weeks. The extension gives us time to finalize an appropriate agreement in collaboration with our bank group."

2022 Outlook

Mr. Gundermann commented, "We are revising our expected 2022 revenue to be in the range of $550 million to $580 million, which incorporates a reduction at the high end of the range from previous guidance. The midpoint of this range would mean growth for the year of 27% over 2021 and implies average quarterly revenue of $160 million in the second half, a significant step up from recent levels. This ramp is expected to be weighted more toward the fourth quarter, however, and while we continue to be challenged by ongoing supply chain challenges, we believe today that this expansion in revenue is necessary and achievable. Higher volume will help satisfy customer demand, along with improved profitability and momentum as we close out 2022."

Planned capital expenditures for 2022 are expected to be approximately $9 million to $10 million.

Second Quarter 2022 Webcast and Conference Call

The Company will host a teleconference today at 11:00 a.m. ET. During the teleconference, management will review the financial and operating results for the period and discuss Astronics’ corporate strategy and outlook. A question-and-answer session will follow.

The Astronics conference call can be accessed by calling 201.493.6784. The listen-only audio webcast can be monitored at investors.astronics.com. To listen to the archived call, dial 412.317.6671 and enter replay pin number 13731543. The telephonic replay will be available from 2:00 p.m. on the day of the call through Wednesday, August 17, 2022. A transcript of the call will also be posted to the Company’s Web site once available.

About Astronics Corporation

Astronics Corporation (Nasdaq: ATRO) serves the world’s aerospace, defense, and other mission critical industries with proven, innovative technology solutions. Astronics works side-by-side with customers, integrating its array of power, connectivity, lighting, structures, interiors, and test technologies to solve complex challenges. For over 50 years, Astronics has delivered creative, customer-focused solutions with exceptional responsiveness. Today, global airframe manufacturers, airlines, military branches, completion centers, and Fortune 500 companies rely on the collaborative spirit and innovation of Astronics. The Company’s strategy is to increase its value by developing technologies and capabilities that provide innovative solutions to its targeted markets.

Safe Harbor Statement

This news release contains forward-looking statements as defined by the Securities Exchange Act of 1934. One can identify these forward-looking statements by the use of the words "expect," "anticipate," "plan," "may," "will," "estimate" or other similar expressions and include all statements with regard to the impact of COVID-19 on the Company and its future, reaching any revenue or Adjusted EBITDA margin expectations, being in compliance with credit agreement covenants and executing a revised credit agreement, expected revenue from recently announced programs, the recovery of the commercial aerospace and test systems markets, expected program awards for the Test segment, and the outcome of demand streams or expectations of demand by customers and markets. Because such statements apply to future events, they are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated by the statements. Important factors that could cause actual results to differ materially from what may be stated here include the continued global impact of COVID-19 and related governmental and other actions taken in response, trend in growth with passenger power and connectivity on airplanes, the state of the aerospace and defense industries, the market acceptance of newly developed products, internal production capabilities, the timing of orders received, the status of customer certification processes and delivery schedules, the demand for and market acceptance of new or existing aircraft which contain the Company’s products, the need for new and advanced test and simulation equipment, customer preferences and relationships, and other factors which are described in filings by Astronics with the Securities and Exchange Commission. The Company assumes no obligation to update forward-looking information in this news release whether to reflect changed assumptions, the occurrence of unanticipated events or changes in future operating results, financial conditions or prospects, or otherwise.

FINANCIAL TABLES FOLLOW

ASTRONICS CORPORATION

CONSOLIDATED STATEMENT OF OPERATIONS DATA

(Unaudited, $ in thousands except per share data)

Three Months Ended

Six Months Ended

7/2/2022

7/3/2021

7/2/2022

7/3/2021

Sales

$

129,127

$

111,158

$

245,303

$

217,015

Cost of products sold

113,418

95,763

209,661

187,347

Gross profit

15,709

15,395

35,642

29,668

Gross margin

12.2

%

13.8

%

14.5

%

13.7

%

Selling, general and administrative 1

24,105

21,315

48,205

45,100

SG&A % of sales

18.7

%

19.2

%

19.7

%

20.8

%

Loss from operations

(8,396

)

(5,920

)

(12,563

)

(15,432

)

Operating margin

(6.5

)%

(5.3

)%

(5.1

)%

(7.1

)%

Net gain on sale of business

(11,284

)

Other expense, net of other income

291

547

753

1,081

Interest expense, net

1,662

1,699

3,293

3,457

Loss before tax

(10,349

)

(8,166

)

(5,325

)

(19,970

)

Income tax expense (benefit)

661

(67

)

8,786

38

Net loss

$

(11,010

)

$

(8,099

)

$

(14,111

)

$

(20,008

)

Net loss % of sales

(8.5

)%

(7.3

)%

(5.8

)%

(9.2

)%

*Basic loss per share:

$

(0.34

)

$

(0.26

)

$

(0.44

)

$

(0.65

)

*Diluted loss per share:

$

(0.34

)

$

(0.26

)

$

(0.44

)

$

(0.65

)

*Weighted average diluted shares outstanding (in thousands)

32,082

30,926

32,007

30,914

Capital expenditures

$

1,333

$

1,661

$

2,493

$

3,566

Depreciation and amortization

$

7,000

$

7,426

$

14,088

$

14,879

1 Includes fair value adjustment of contingent consideration liabilities, which was a $2.2 million benefit in the three and six months ended July 3, 2021.

ASTRONICS CORPORATION

SEGMENT DATA

(Unaudited, $ in thousands)

Three Months Ended

Six Months Ended

7/2/2022

7/3/2021

7/2/2022

7/3/2021

Sales

Aerospace

$

109,300

$

89,220

$

210,694

$

170,650

Less inter-segment

(10

)

(10

)

(14

)

Total Aerospace

109,290

89,220

210,684

170,636

Test Systems

19,840

21,938

34,638

46,683

Less inter-segment

(3

)

(19

)

(304

)

Total Test Systems

19,837

21,938

34,619

46,379

Total consolidated sales

129,127

111,158

245,303

217,015

Segment operating (loss) profit and margins

Aerospace

(3,276

)

(2,706

)

(226

)

(8,269

)

(3.0

)%

(3.0

)%

(0.1

)%

(4.8

)%

Test Systems

(26

)

(946

)

(1,813

)

243

(0.1

)%

(4.3

)%

(5.2

)%

0.5

%

Total segment operating loss

(3,302

)

(3,652

)

(2,039

)

(8,026

)

Net gain on sale of business

(11,284

)

Interest expense

1,662

1,699

3,293

3,457

Corporate expenses and other 1

5,385

2,815

11,277

8,487

Loss before taxes

$

(10,349

)

$

(8,166

)

$

(5,325

)

$

(19,970

)

1 Includes fair value adjustment of contingent consideration liabilities, which was a $2.2 million benefit in the three and six months ended July 3, 2021.

Reconciliation to Non-GAAP Performance Measures

In addition to reporting net income, a U.S. generally accepted accounting principle ("GAAP") measure, we present Adjusted EBITDA (earnings before interest, income taxes, depreciation and amortization, non-cash equity-based compensation expense, goodwill, intangible and long-lived asset impairment charges, equity investment income or loss, legal reserves, settlements and recoveries, restructuring charges, gains or losses associated with the sale of businesses and grant benefits recorded related to the AMJP program), which is a non-GAAP measure. The Company’s management believes Adjusted EBITDA is an important measure of operating performance because it allows management, investors and others to evaluate and compare the performance of its core operations from period to period by removing the impact of the capital structure (interest), tangible and intangible asset base (depreciation and amortization), taxes, equity-based compensation expense, goodwill, intangible and long-lived asset impairment charges, equity investment income or loss, legal reserves, settlements and recoveries, restructuring charges, fair value adjustments to the valuation of contingent consideration liabilities, gains or losses associated with the sale of businesses and grant benefits recorded related to the AMJP program, which is not commensurate with the core activities of the reporting period in which it is included. As such, the Company uses Adjusted EBITDA as a measure of performance when evaluating its business and as a basis for planning and forecasting. Adjusted EBITDA is not a measure of financial performance under GAAP and is not calculated through the application of GAAP. As such, it should not be considered as a substitute for the GAAP measure of net income and, therefore, should not be used in isolation of, but in conjunction with, the GAAP measure. Adjusted EBITDA, as presented, may produce results that vary from the GAAP measure and may not be comparable to a similarly defined non-GAAP measure used by other companies.

ASTRONICS CORPORATION

RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA

(Unaudited, $ in thousands)

Consolidated

Three Months Ended

Six Months Ended

7/2/2022

7/3/2021

7/2/2022

7/3/2021

Net loss

$

(11,010

)

$

(8,099

)

$

(14,111

)

$

(20,008

)

Add back (deduct):

Interest expense

1,662

1,699

3,293

3,457

Income tax expense (benefit)

661

(67

)

8,786

38

Depreciation and amortization expense

7,000

7,426

14,088

14,879

Equity-based compensation expense

1,620

1,604

3,721

3,701

Contingent consideration liability fair value adjustment

(2,200

)

(2,200

)

Restructuring-related charges including severance

90

174

Non-cash accrued 401K contribution

1,186

2,197

AMJP grant benefit

(6,008

)

Net gain on sale of business

(11,284

)

Adjusted EBITDA

$

1,209

$

363

$

856

$

(133

)

Sales

$

129,127

$

111,158

$

245,303

$

217,015

Adjusted EBITDA margin

0.9

%

0.3

%

0.3

%

(0.1

)%

ASTRONICS CORPORATION

CONSOLIDATED BALANCE SHEET DATA

($ in thousands)

(unaudited)

7/2/2022

12/31/2021

ASSETS

Cash and cash equivalents

$

10,684

$

29,757

Accounts receivable and uncompleted contracts

118,342

107,439

Inventories

175,204

157,576

Other current assets

20,126

45,089

Property, plant and equipment, net

90,837

95,236

Other long-term assets

22,198

21,439

Intangible assets, net

86,638

94,320

Goodwill

58,252

58,282

Total assets

$

582,281

$

609,138

LIABILITIES AND SHAREHOLDERS' EQUITY

Current maturities of long-term debt

$

$

Accounts payable and accrued expenses

98,176

91,257

Customer advances and deferred revenue

26,790

27,356

Long-term debt

136,000

163,000

Other liabilities

70,639

70,921

Shareholders' equity

250,676

256,604

Total liabilities and shareholders' equity

$

582,281

$

609,138

ASTRONICS CORPORATION

CONSOLIDATED CASH FLOWS DATA

(Unaudited, $ in thousands)

Six Months Ended

(Unaudited, $ in thousands)

7/2/2022

7/3/2021

Cash flows from operating activities:

Net loss

$

(14,111

)

$

(20,008

)

Adjustments to reconcile net loss to cash from operating activities:

Depreciation and amortization

14,088

14,879

Provisions for non-cash losses on inventory and receivables

677

2,145

Equity-based compensation expense

3,721

3,701

Non-cash accrued 401(k) contribution

2,197

Deferred tax benefit

(153

)

Operating lease non-cash expense

2,928

2,343

Net gain on sale of business, before taxes

(11,284

)

Contingent consideration liability fair value adjustment

(2,200

)

Other

1,320

2,105

Cash flows from changes in operating assets and liabilities:

Accounts receivable

(11,449

)

(5,281

)

Inventories

(19,293

)

720

Accounts payable

11,660

4,210

Accrued expenses

(458

)

(946

)

Other current assets and liabilities

(3,030

)

(70

)

Customer advance payments and deferred revenue

(389

)

(927

)

Income taxes

16,909

(51

)

Operating lease liabilities

(3,601

)

(2,606

)

Supplemental retirement plan and other liabilities

(215

)

(199

)

Cash flows from operating activities

(10,330

)

(2,338

)

Cash flows from investing activities:

Proceeds on sale of business and assets

21,977

Capital expenditures

(2,493

)

(3,566

)

Cash flows from investing activities

19,484

(3,566

)

Cash flows from financing activities:

Proceeds from long-term debt

52,625

5,000

Principal payments on long-term debt

(79,625

)

(5,000

)

Stock award activity

104

(59

)

Finance lease principal payments

(55

)

(854

)

Debt acquisition costs

(771

)

Cash flows from financing activities

(27,722

)

(913

)

Effect of exchange rates on cash

(505

)

(8

)

Decrease in cash and cash equivalents

(19,073

)

(6,825

)

Cash and cash equivalents at beginning of period

29,757

40,412

Cash and cash equivalents at end of period

$

10,684

$

33,587

ASTRONICS CORPORATION

SALES BY MARKET

(Unaudited, $ in thousands)

Three Months Ended

Six Months Ended

7/2/2022

7/3/2021

% Change

7/2/2022

7/3/2021

% Change

% of Sales

Aerospace Segment

Commercial Transport

$

69,243

$

47,793

44.9

%

$

133,332

$

86,001

55.0

%

54.3

%

Military

13,897

16,801

(17.3

)%

28,873

37,783

(23.6

)%

11.8

%

General Aviation

18,130

14,994

20.9

%

33,997

29,022

17.1

%

13.9

%

Other

8,020

9,632

(16.7

)%

14,482

17,830

(18.8

)%

5.9

%

Aerospace Total

109,290

89,220

22.5

%

210,684

170,636

23.5

%

85.9

%

Test Systems Segment

19,837

21,938

(9.6

)%

34,619

46,379

(25.4

)%

14.1

%

Total Sales

$

129,127

$

111,158

16.2

%

$

245,303

$

217,015

13.0

%

SALES BY PRODUCT LINE

(Unaudited, $ in thousands)

Three Months Ended

Six Months Ended

7/2/2022

7/3/2021

% Change

7/2/2022

7/3/2021

% Change

% of Sales

Aerospace Segment

Electrical Power & Motion

$

42,135

$

34,748

21.3

%

$

86,602

$

64,092

35.1

%

35.4

%

Lighting & Safety

31,388

24,368

28.8

%

60,599

51,468

17.7

%

24.7

%

Avionics

24,406

18,021

35.4

%

43,281

32,864

31.7

%

17.6

%

Systems Certification

1,669

960

73.9

%

2,671

1,838

45.3

%

1.1

%

Structures

1,672

1,491

12.1

%

3,049

2,544

19.9

%

1.2

%

Other

8,020

9,632

(16.7

)%

14,482

17,830

(18.8

)%

5.9

%

Aerospace Total

109,290

89,220

22.5

%

210,684

170,636

23.5

%

85.9

%

Test Systems Segment

19,837

21,938

(9.6

)%

34,619

46,379

(25.4

)%

14.1

%

Total Sales

$

129,127

$

111,158

16.2

%

$

245,303

$

217,015

13.0

%

ASTRONICS CORPORATION

ORDER AND BACKLOG TREND

(Unaudited, $ in thousands)

Q3 2021

Q4 2021

Q1 2022

Q2 2022

Trailing

Twelve Months

10/2/2021

12/31/2021

4/2/2022

7/2/2022

7/2/2022

Sales

Aerospace

$

95,766

$

98,836

$

101,394

$

109,290

$

405,286

Test Systems

16,075

17,216

14,782

19,837

67,910

Total Sales

$

111,841

$

116,052

$

116,176

$

129,127

$

473,196

Bookings

Aerospace

$

142,484

$

147,689

$

160,778

$

126,012

$

576,963

Test Systems

11,052

29,651

14,844

22,377

77,924

Total Bookings

$

153,536

$

177,340

$

175,622

$

148,389

$

654,887

Backlog

Aerospace

$

285,806

$

334,659

$

394,043

$

410,765

Test Systems

68,598

81,033

81,095

83,635

Total Backlog

$

354,404

$

415,692

$

475,138

$

494,400

N/A

Book:Bill Ratio

Aerospace

1.49

1.49

1.59

1.15

1.42

Test Systems

0.69

1.72

1.00

1.13

1.15

Total Book:Bill

1.37

1.53

1.51

1.15

1.38

View source version on businesswire.com: https://www.businesswire.com/news/home/20220810005200/en/

Contacts

Company:
David C. Burney, Chief Financial Officer
Phone: (716) 805-1599, ext. 159
Email: david.burney@astronics.com

Investor Relations:
Deborah K. Pawlowski, Kei Advisors LLC
Phone: (716) 843-3908
Email: dpawlowski@keiadvisors.com