Q3 2021 Astronics Corp Earnings Call
Greetings and welcome to the <unk> Corporation third quarter fiscal year, 2021, and financial results Conference call. 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 I would now like to turn the call over to Deborah Pawlowski of Investor Relations. Thank you you may begin.
Okay.
Thanks, Darryl and good morning, everyone. We appreciate your joining us here today.
On the call with me are peaked under men are president and CEO and Dave Burney, Our Chief Financial Officer.
You should have a copy of our third quarter 2021 financial results, which we released earlier this morning, and if not you can find them on our website at <unk> Dot com.
Let me mention first as you're likely aware that we may make some forward looking statements during the formal discussion as well as during the Q&A session. These.
These statements apply to future events that are subject to risks and uncertainties as well as other factors that could cause actual results to materially differ materially from what is stated here today. These risks and uncertainties and other factors are provided in the release as well as with other documents filed with Securities and Exchange Commission you can find the documents on our website or at SEC 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 have provided reconciliations of non-GAAP measures with comparable GAAP measures in the table that accompanies today with today's release.
With that let me turn it over to Pete to begin Pete.
Sure.
Thank you Tony and good morning, everybody.
Agenda. This morning is to review the third quarter again, which was a mixed quarter, if you've read the press release.
Sales were light.
As was the income statement on the other hand bookings were very strong with a consolidated book to Bill of 137. So our discussion we'll basically vacillate between reviewing the income statement, which is disappointing to us and bookings, which we're very pleased about.
Also sprinkled throughout the conversation will be a couple of significant cash events. They will go through the details, but we have an M. J P Award, which happened late in the quarter and had a minor impact on our income statement.
I have a bigger impact in the fourth quarter and the first quarter and also a subsequent to the third quarter, we sold a facility.
Which will be reflected in our fourth quarter results.
There's another kind of worthwhile cash event to spend some time on.
We will close with some expectations of the fourth quarter.
As far as we can see.
And a little bit of discussion on 2022, although we're not going to be at a point today, where we can provide much guidance going forward at this point.
So of course, Q3 summary sales were disappointing at $112 million.
We guided.
With our second quarter release.
Over 115 to 120, so we obviously missed our own target.
The Big Challenge frankly is supply chain related probably a recurring theme that you've heard about from a bunch of companies.
And secondly personnel challenges or shortages.
We figure the supply chain for the quarter was somewhere in the $8 million to $10 million range and we can talk through the specifics of how that plays out but long story short.
We use a lot of electronic assemblies on a lot of smaller components in our products and.
Our lead times are extended and unpredictable and leaves us less able to respond to short term requests for changes from customers. So.
Theres a constant churn among our customer base over the course of the quarter, sometimes they wanted to push things out a little bit that's not a problem.
But when they want to pull things in.
Can't respond these days the way, we normally could if our supply chain was acting normally so.
If you accept that $8 million to $10 million number that puts us at or above the predicted range and that's a I guess, a little frustrating backwards look at our third quarter.
In terms of personnel.
Across the company, where we are at about 2200 people right now.
We would like to be about 2400 and were actively trying to bring up our resources.
That shortage had some impact on our revenue levels in the third quarter, but it pales in comparison to what the supply chain problems.
Problems were.
Weak revenues hurt the income statement, obviously, but the bottom line does show some improvement over comparable revenue in previous quarters, the second quarter had comparable revenues of $111 million.
And adjusted EBITDA just above breakeven.
And the most recent quarter on similar revenues adjusted EBITDAR of about $2 8 million.
That has more to do with mix than anything more aerospace unless test we feel drove the positive EBITDA in.
In the third quarter.
I mentioned M. J P. You earlier for those unfamiliar with that stands for aviation manufacturing jobs Protection Act. It's a program that's been run by the department of transportation or a bunch of qualifications and requirements, we put in a application.
Probably six months ago five months ago.
Work done for that period of time scientists at the end of September.
Right, but we got the award and the end of September.
Dave will talk a little bit about what the requirements are.
But we basically got our full application amount of $14 7 million.
There was a small benefit in the third quarter of $1 1 million and a reduction of cost of goods.
It'll be a much more significant impact in the fourth quarter and the first quarter as the thing has a six month period of performance.
The bright spot in the quarter for sure was bookings.
Validated over $153 5 million book to Bill of 137 that continues a very positive trend over the last four quarters and I'm going to throw out a bunch of numbers, which are evident in the table on the last page of our press release.
The last four quarters total bookings have trended very positively 116 to 120 to 126 to 154 over the last four quarters.
Total for the last four quarters $516 million of book to Bill of 116 over shipments over the last four quarters.
The numbers are driven by a very positive aerospace trend and a negative test trends, so a real mix change.
The business in terms of bookings are all bookings in this most recent quarter were $142 million.
For a book to Bill of 149, so 50% higher than shipments and again the sequence over the last four quarters. If you look at that table is very noteworthy from our perspective.
$74 million.
So a $100 million to 118 million to $142 million.
That means the total for the last four quarters in our Aerospace segment was 435 of book to Bill of one two to one.
One caveat in there is that in the most recent quarter, we did get a significant amount of bookings that are categorized in our aerospace group, but when they ship they will appear as.
In the other category.
Which we expect to happen over 2022.
Of that total is somewhere in the neighborhood of about 17 million.
The aerospace news is driven by.
Pretty a pretty solid set of good news across most of the industry that we serve us narrow body activity in particular is very strong.
Flights are up load factors are up and production rates are ramping with the primarily driven by 737 Max.
We're shipping in the mid to high teens. These days, where we were through the third quarter in terms of ship sets per month.
And retrofit activity is.
Picking up noticeably.
So we think that's been a major driver not only for the strength in the last quarter, but looking forward, we see a target rich environment. There that we expect will drive us very positively.
For the for the foreseeable future.
Widebody activity on the other hand remains pretty subdued.
But we are encouraged by the current using of international travel restrictions, particularly in the U S, which should pick up where should promote.
Widebody utilization as we close out 2021 and enter 2022.
Okay.
Similarly business jet demand.
The Oems has been very strong and I'm sure you've all read about the book to bills that are the major Oems are reporting.
We should benefit from that in terms of higher production rates forecast for 2022.
We aren't necessarily seeing that in our production yet theres a lag between their orders and.
So they're from their customers and their orders to us.
We're sitting on that and looking to see what our 2022 production rates are going to be like we expect them to be higher.
And finally military aircraft about 10% of our business in a typical year.
As stable remains strong.
Mostly driven by F 35, these days and a few other premier programs.
While I'm talking about the aerospace market and industry I do want to.
Take a little bit of a detour here and talk about an emerging.
Opportunity, which we're pretty excited about and some of you have probably read about there.
It is a trend or a number of startups in the industry and more established companies also.
Our developing electric aircraft and often these aircraft are.
Categorized as E VTOL airplanes electric vertical takeoff and landing airplanes, but also conventional aircraft with electric propulsion.
We are of the opinion.
After having done some development and a pretty comprehensive review of the industry that some of our skill set is directly applicable to these type of aircrafts.
We haven't talked about it too much.
Kind of a main course of conversation over the last.
A couple of years, but we have been developed busy developing a franchise of electrical power distribution, primarily for smaller airplanes.
And.
Many of you have heard me talk about or us talk about programs like the textron Denali or the Pilatus PC 12, or the bell 500 to five.
More recently, we've been talking about our involvement in the fera and flare or a competition for the U S Army future lift.
This.
Capabilities, we have and the expertise we have developed it.
Is increasingly apparent is directly applicable to this emerging electric.
E V tall segment of the industry.
And.
I don't have a whole lot of predictions beyond this here today other than to.
This little bit of introduction, because we expect that as we wrap up this year and move into next year.
This part of our business will will get a few headlines and we expect that are that it should be a promising area of AR for us to plan as we go forward.
Skipping over to our test business test has had a tough spell here, it's been a downward trend with both sales and bookings under pressure the last few quarters.
We think of it as an 80 million dollar plus business. So we need to average at least $20 million a quarter in bookings to keep things healthy.
In the last few have been about half of that our second quarter was about eight point.
2 million in this quarter third quarter was $11, one way off where we want to be.
We've talked about it before and the story has not changed we feel like these delays in orders are largely related to the COVID-19 pandemic.
And the work from home scenario that a lot of our customers in this space are dealing with them. We do not feel that we have lost anything competitively.
And we are seeing some signs of life. Our October bookings subsequent to the third quarter or the first month of the fourth quarter.
<unk> came in at just shy of $12 million 11, nine so we booked more in October than we did in the third quarter, which was more in the second quarter. So the optimist in me says that hopefully things are starting to break loose and our fourth quarter bookings level should put us back on a healthy track.
Taken together, we ended the quarter with a backlog of 354 million.
That's up from the beginning of the year. When we began with 283 million and we think sets us up pretty well for expectations going forward, which I'll talk about more in a few minutes, but for now I want to turn it over to Dave to go through some of the specifics of the income statement and our banking arrangements.
Some of the cash events.
Thanks Pete.
Consolidated sales in the third quarter were $111 $8 million later than we expected.
But up 5% from last year's third quarter and flat sequentially with the second quarter of this year going into the quarter, we are expecting higher revenues, but material shortages had a larger impact than expected it.
At the end of the quarter, we had about $8 million to $10 million of backlog as Pete mentioned it that we could have shipped if we had the inventory to complete the work.
Aerospace segment sales continued to improve with sales up 16% over last year's third quarter and up seven 3% sequentially from the second quarter.
And up 17, 6% from the first quarter of this year.
Most of the improvement this year has been in the commercial transport market, which had sales of $57 5 million or 36% increase compared to the third quarter of last year and.
And up 24% sequentially from the second quarter.
Driving the increase is increased volume of our seats and passenger power products.
These activities with the airlines have increased additionally, volume increases for passenger service units primarily for the 737 Max has increased.
In the test segment revenue declined by about 33% compared with last year's third quarter, driven by decreases in defense and transit areas.
Operating margins improved compared with last year's third quarter, reflecting the higher sales volume and the recognition of $1 $1 million of a M. J P money.
We received the proceeds for about half of the $14 $7 million grant during the quarter.
But we will recognize the income from the grant over a six month period that started near the end of September when the grant agreement was signed.
We expect that we will recognize about $7 million as a benefit to gross profit in the fourth quarter with the remainder recognized in the first quarter of 2022.
We expect our second cash installment of approximately $5 million to $6 million to be received in December of this year and the balance upon final reconciliation of the allowable labor costs in mid next year.
And J P is a grant program administered by the Department of Transportation that provides grants to eligible aerospace companies.
To support those companies in retaining jobs in the area of commercial Aero space.
Grant based on an estimate of eligible labor costs over a six month period and requires grantees to retain those jobs.
Okay.
Switching over to a little bit of a forward look we're forecasting near term margin headwinds as we move into 2022 due to increased raw material costs and shortages as well as tight labor market the supply chain situation is complicated.
And changing on a daily basis and difficult to predict.
Alright.
Regarding tax rate.
Some of you will notice that we have a bit of a strange tax tax rate typically in a period of loss you see a tax benefit.
<unk> continues to look a little strange as we fully reserve and we'll continue to reserve all of our deferred tax assets.
We fully expect to be able to realize these and utilize these assets to offset future income tax expense, but the guidance for accounting for such assets. When the company has had several years of losses requires us to fully reserve them we.
We do not expect we will have any federal cash income tax expense or a GAAP income tax.
Or benefit through the 2022 and into 2023 periods.
In terms of liquidity liquidity and debt.
We were in.
And continue to forecast to be in compliance with our debt covenants.
For covenant purposes, we were slightly below our maximum leverage limit of six times adjusted EBITDA for the quarter.
Forecast the topline growth in the coming quarters as well as some positive one time items such as the AMG AAM J P Grant.
Sales of Fort Lauderdale building and tax refunds will help.
The Fort Lauderdale building sales.
Was concluded at the beginning of October so it was a fourth quarter event and as part of our planned facility consolidation.
The consolidation is expected to be completed by the end of the second quarter in 2022, we're forecasting a rolling four quarter EBIDTA margin improvements as we move through 2022 with the goal of moving our leverage below three five times adjusted EBITDA.
Our maximum leverage for the fourth quarter of this year is five five times and is based on net debt as a reminder.
Yeah.
Short note on cash flow cash flow from operations for the third quarter was poor and was driven by an increase of about $21 million and net working capital in the quarter.
The larger pieces of the working capital changes during the quarter were accounts receivable, which increased by $10 million inventory increased by $4 million and payables were down by six.
Having an impact on the receivable balance was increased sales to customers with payment terms of 90 days during the quarter.
So that that is driving a lot of the receivable increase that you see on the balance sheet.
And that concludes my remarks Pete.
Okay. So.
Looking ahead.
We are forecasting fourth quarter revenue of $115 million to $118 million.
We did consider supply chain constraints in determining this number.
Our third quarter backlog of $354 million.
Our fourth quarter backlog at the beginning was $354 million $113 million of which is scheduled to ship in the fourth quarter. So you might think getting from $113 million into the range of $115 million to $118 million shouldnt be that hard and I would agree with you.
In normal circumstances kind of book and ship business. If we go in with $113 million, we might expect to be in the mid 100 <unk> at least.
But given the supply chain constraints, it's just difficult to count on doing that so there is noise.
An opportunity I guess, both on the high side and the loan side, but our best chance best range right now is $115 million to $118 million.
We're not ready to predict 2022, yet.
Hopefully, we will be comfortable saying something when we talk about our fourth quarter results.
But we are comfortable saying that we expect it will be a strong year of strong double digit growth.
We believe everything's kind of lining up such that.
You know unless there's some kind of.
Another variant round, which would be terrible.
Or something crazy in the World, We think we're in for a strong double digit year.
Looking forward to 2022, frankly can't wait to get there.
So I think that ends our <unk>.
<unk>.
Planned remarks, Daryl who want to open it up for questions now would be good.
Thank you we will now be conducting a question and answer session.
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One moment, please while we poll for your questions.
Our first question is coming from the line of Jon <unk> with CJS Securities. Please proceed with your questions.
Hi, Good morning, guys. Thank you for taking my question. My first one is on Pete I was wondering if you give us a little more color regarding that.
Bit of aerospace.
And to test I'm not sure.
What exactly that means and what kind of product line.
Can you say that again, John I'm not sure I followed.
I think you said that you book something into aerospace that you said.
It would have gone into the other segment I'm not sure I quite understand.
Oh no no no no other other.
Take out our revenue into military.
Business jet commercial and other and it'll show up in other.
Okay.
In the aerospace segment.
Okay got it that makes more sense now okay.
And I caught the comment that you had planned for you know supply chain disruptions in Q4, I was just wondering if you'd be $8 million to $10 million or pushed out that much into Q4 from Q3 is there an expectation of the same amount as you go into Q4 and rolling into 2022 or is that number going to increase or decrease I'm. Just wondering how you tried to handicap.
That going forward.
Yeah.
Really good question and.
I think we think it's going to get a little bit bigger going forward.
We do regular reviews with.
With our business units and one of my recurring questions is.
As the supply chain picture getting better or getting worse.
And we have I don't know 12 13 different operating units and nobody is telling me, it's getting better frankly at this point.
And.
Some are saying, it's kind of stay on the same nobody but nobody is telling me, it's getting better so that tells me that.
As a group, it's probably getting a little worse.
Which is discouraging.
So we tried to factor that into what we expect is going to happen in the fourth quarter and we'll obviously report a number when we get there.
But we think we hope that $1 15 to 118 numbers pretty safe.
Got it.
All right.
I was just wondering what what are your thoughts on wide body production and retrofits going into next year now that.
These travel restrictions lifting and frankly, everybody is hoping and waiting for that so is it in line with expectations or do you think there might be some upside just help us understand how much is being made now versus how much you think.
It will get to next year.
I don't expect production rates necessarily to move much next year.
I think the.
Well publicized rates by Boeing and Airbus probably take this into account, but we would hope that there would be activity on the retrofit side for our main products for commercial transports, which are mostly in flight entertainment related and I guess I would tell you that if the narrow body.
Trends are any indication when it comes back it should come back pretty strong.
So production rates are nice, but aftermarket has nice also I would expect to benefit from an aftermarket pick up.
Before production rate pick up.
Okay, great. Thanks, I'll jump back in queue.
Okay.
Thank you. Our next question comes from the line of Michael <unk> with <unk> Securities. Please proceed with your questions.
Hey, good morning, guys. Thanks for taking the questions.
Okay.
The first just can you reconcile that.
Adjusting or adding anything else back to the EBITDA to get to the covenant.
Covenant level I think you said.
The rolling four quarter leverage should improve to below two times, but are there any other inputs.
No no <unk>.
I don't I don't think if I, if I said, the rolling four quarter EBITDA leverage.
To two times.
That was a mistake.
I said at three five times.
Alright, I said, that's what our that's what.
What our goal is as we move into 'twenty two.
Okay Yeah.
No.
To get to the to the Covenant adjusted EBIT number you need to adjust.
Your traditional EBITDA.
The calculation for the noncash expense that.
Items that you have on the top top part of the income statement okay.
That's the largest and.
And we did utilize.
About $6 $6 million of excludable legal expense for the quarter to increase our adjusted EBITDA.
Okay, Okay got it got it.
That's helpful.
And then maybe just more on the supply chain.
Pete I guess, you know looking at aerospace you had that little bit of a million dollar $1 1 million tailwind, but you were just about at breakeven operating margins.
Probably could have been significantly better had you had that extra $8 million to $10 million drop through in there.
When we think about the pressures from supply chain and maybe inability to get product out the door can you can you specify if at.
All electronic components chips, and then can you maybe talk about the pricing environment as well.
Are you having to pay significantly more for some of your raw material inputs and whether there is freight logistics and how we should think about that going forward in terms of.
Impacting segment margins.
Sure.
We are seeing pressures in a wide range of commodities that we buy.
I would say the biggest general areas and electronic components, because we build a lot of electronics in a lot of assemblies.
Required chips in diodes, and passengers and components that come primarily from Asia.
So so that has definitely been a point of pain, but we're also seeing it in things that you might not expect.
Like plastics or even pain.
We do we.
We have some parts of our business that are heavily dependent on electric.
On on molding and die casting and things like that.
And even those kinds of materials has been problematic so.
So it's pretty widespread.
And part of the frustration frankly, some predictable you know you'll get it.
Bid on a program and you refresh your suppliers and you get pricing and lead times and you relate that to your customer and then the customer gives you an order and you go to place an order and something they said was eight weeks is now 30 weeks. So that's that kind of thing that can really screw up delivery schedule.
We are seeing some price pressure.
Primarily in the area of going out and doing spot buys because our blanket arrangements with existing subcontractors.
Our falling short Theyre, just not delivering on time.
So we are seeing some of that.
I think it's not.
And that's something that we would consider permanent at this point, but certainly.
Troubling and problematic I mean, it's going to play through our income statement in the beginning of next year, we're still trying to figure out exactly how to quantify it.
But our perspective is that.
Our customers want parts, and we have a history of servicing them to a certain standard.
And we're going out and buying some components over and above what existing backlog justifies in anticipation of being able to support those orders when they come in so it's a little bit of a guessing game to some extent.
But when you're looking at customers that expect things in 12 weeks, maybe and suppliers that are now.
Pushing things out to 20 or 30 weeks, you've got to kind of take proactive actions. So I'm going to turn it over to Dave to see if he wants to augment that discussion at all but.
Yes, it's particularly hard to quantify because it's you can take one group of materials.
Let's say resistors and some are available and some aren't available some have had 20% 30% price increases and some have not so it's.
It's not straight across the board situation.
On all similar components and it's difficult.
To project.
Got it.
What about pricing I mean are you increasing your prices to your customers I mean with a thank.
Thank you, probably still 80% to 90% market share globally.
I would think you'd have some success just pushing that through.
Either it's to to airline customers are the oes directly or.
Providers any any kind of color there.
Yes, I think youre right compared to a lot of companies, we probably have a little bit more pricing flexibility than short term ordering patterns.
That will allow us to do that but I use the word will allow us to do it not that we've done it already I mean in some parts of our business we have.
We have increased pricing to reflect the increased cost or reduced volume frankly, and we have blanket agreements with some of our major customers, which are volume dependent and the volumes dropped as part of that.
The whole pandemic.
Effect on the industry.
And then in some of our parts of our business. We're doing some other kind of innovative things like putting on some temporary surcharge.
To cover what we think are temporary increases in cost.
And that's actually kind of been working I guess, we haven't had much pushback on that so we definitely have an eye out for it.
But I would I would tell you that the price.
Increases that we've seen so far are outpacing the opportunities that we have to increase price and going to our customers. So over time that will equal out, but it's probably going to be.
Hopefully a three or four month lag could be a six month or a year lag.
Before it all kind of balances out.
Got it alright, perfect I'll jump back in the queue here.
Yeah.
Yeah.
Thank you. Our next question is coming from the line of <expletive> Ryan with <unk> Securities. Please proceed with your questions.
Thank you.
Hey, Pete.
What's the status of the earn out.
On the semi business sale, where does that stand at this point.
No real change in that we're hoping to get that resolved here.
We have a.
Opportunity, perhaps later this month, where something may break loose, but we don't have anything new to report on that at this point.
Okay.
You've had some strong orders in the <unk> the <unk>.
Satellite tail Mount satellite antenna whats.
Has your outlook there I mean, and when you've had two bulk orders I think you'd probably classify them maybe not but.
Whats your outlook going into 'twenty two for the.
Town mounts.
It's pretty solid.
Percentage wise, it's probably going to be one of our fastest growing product lines in the business, but it's still relatively small I think we're expecting.
Revenues of about mid $20 million range, that's going to be up you.
30% to 50% and that's actually one of the areas just to tie all this together because it's all kind of.
Interrelated.
That's one of the areas, where we could probably deliver significantly more.
If we could get the parts, but it's a very complex assembly.
Got a pretty long supply chain and were really challenged to do that but thats that is an example, where we could especially here in the fourth quarter, we could probably do twice what we're actually planning to do if we could just get the parts.
Okay.
And can.
Can you comment on the down select maybe timing as you see it for a flare and how you're playing into now.
Either one or both.
Yeah.
While fares out of ways. It is behind flare ups. So.
I'll concentrate my discussion on flora.
We think that the architecture.
That the army wants.
Favors our technology very strongly.
We think theres going to be a down select between the Lockheed Sikorsky team and the bell team some time.
Late first quarter or end of the second quarter of <unk>.
Of 2022.
We are.
A primary team member of.
On the Bell team.
And our role there is pretty defined although still evolving.
And we're hopeful of opportunities with Sikorsky of Sikorsky team were to be successful, but that's less firm at this point.
But if the if the bell team lens it'll be a real significant program for us.
As early as the second half of next year from a development perspective.
And chipset contents will easily be the biggest we've ever seen and that type of product.
The electrical power distribution system.
To date, so more on that as it happens, but it's basically a first half 2022 event.
Okay, great. Thank you.
Okay.
Thank you. Our next question is coming from the line of Jon <unk> with CJS Securities. Please proceed with your questions.
Alright, thanks for the follow up.
I was wondering with the networking capital use and.
You know slightly up revenues and maybe a margin headwind next quarter.
Do you expect to remain with your covenants at quarter end and kind of what are the puts and takes to get there, especially with some of these onetime items you were talking about.
Yes, we do expect to remain.
Compliance and actually too.
Two to improve on our leverage ratio in the fourth quarter.
A couple of onetime things.
To rehash, a little bit we expect about $5 million of additional a M. J P cash to come in in the fourth quarter.
We're expecting while we received $9 million for the sale of the building just under $9 million mm.
At the beginning of the fourth quarter and we're expecting <unk>.
<unk> refunds of roughly $10 million to come in during during the fourth quarter. So you know.
$2023 $24 million of cash.
Cash inflow from from kind of non operating type of stuff there.
We will help and the top topline growth that we're expecting going from $111 million.
Third quarter.
Up $4 million to $5 million into the fourth quarter is going to add margin that's going to help the help there.
As well.
Okay, great. Thank you and then just as we head into next year. Pete I think you said you felt confident in double digit growth of strong double digit growth I was just wondering with what the component headwinds other inflation like.
Is that everything that's out there like plastic labor like you mentioned.
Hiring more people and retaining more people.
What kind of EBIT or EBITDA margins are possible in that environment and maybe.
I don't know if you're looking at a full year basis or maybe as we brought through the quarter I think get better how should we think about the potential next year. If you hit the growth targets that you're thinking about.
Well there are obviously a lot of big unknowns, and we don't typically give bottom line guidance. So.
If if we're reluctant to issue topline guidance at this point, it's the bottom lines, even that much more complex.
But if we can do strong double digits.
I would expect if things were to work halfway reasonably we're gonna be.
Well into double digit growth.
It ought to have a very strong positive impact.
To our income statement.
I don't think we're set up to get back to you now.
15% EBITDA numbers at this point, but we should take some pretty solid steps in that in that direction.
I think we need to table that discussion.
Before we get into any more detail until we can talk about revenue confidently.
But certainly we would expect to start.
<unk> start to see stronger adjusted.
Adjusted EBIT numbers.
At that higher revenue level, Dave I don't know if you want a comparable no I agree.
Thank you.
It's the top line and.
You know.
We're going to have the additional contribution margin from that.
Strong sales growth, we're expecting but there'll be some offset to it.
With with the inputs on cost going up a little bit there but.
I think we will start the process of working our way back.
We won't get into those double digit EBITDA multiples next year I don't think.
But certainly as we move into 2023, that's something that we're.
Is within range.
But I do think we will improve steadily as we move through 2000 22022.
Okay, Great and then last one for me just with regards to the Dewatered.
New orders in the quarter $153 million does that mean, you have line of sight to a quarter. That's about that Bacon revenue terms within the next two or three quarters or is the timing or lumpiness of that going to preclude that from happening as you see it just help me understand what the timing and lumpiness in the backlog looks like.
It's a good question I think we do have line of sight trending in that direction and when you look at the last four quarters cumulatively, we have bookings of 516 million.
And that's with.
280, or so in the last two quarters.
And if we get any kind of continued improvement.
We ought to be able to push that fourth quarter moving total.
To the close to the $600 million level, so sooner or later you got to ship that stuff right.
So.
We're obviously going to struggle, we think for a while with supply chain like everybody else in the world and.
And I don't know, where all the where all the workers want but hopefully some people start coming back into the labor market.
But the best takeaway from our position right now looking backward at the third quarter and even the early days of the fourth quarter is that demand picture is really strengthening nicely and so we think.
That's a very positive trend that Dave and I were talking this morning, and we unanimously both of us.
[laughter] feel that.
You'd much rather have.
Supply chain problems, and very strong demand rather than demand problems and no supply chain or supply chain working normally so.
If you have to have problems in one place or the other we like it where it is or I guess.
Sure I got it. Thanks good luck. Thank you.
Okay.
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Our next question is coming from the line of Michael Cherny Hollywood Truest. Please proceed with your question.
Hey, Thanks, guys for taking the follow up Pete what specifically I know you said that 17 million bookings that scenario goes into other.
What sort of products are they.
They are not aerospace related you might recall, Michael when the pandemic took hold.
We took some of our facility resources and personnel resources applied them toward.
Some of our contract design contract build programs.
And some of them are.
Apparently coming through and pretty significant volumes.
We talked about one I think we did an announcement.
Two quarters ago, or a few months ago about a hand-wash station using.
Occidental oxygenated ozone.
And that turns out to be a really big hit and organizations in facilities that are concerned about the COVID-19 pandemic and and so we've received some very strong orders there.
And that makes up the bulk of that $17 million, but I will tell you that there are others in the pipeline.
<unk> to predict at this point, but.
It's taken longer than we had hoped when we launched this kind of.
Initiative is our response to Covid, but.
It's gonna be.
We think pretty good business throughout 2022.
One of our drivers.
Got it.
Two other quick ones.
35, how are you guys thinking about that into next year is that going to be a potential headwind just given the rebate finding of that program.
Yeah.
Yeah.
Moving picture isn't it.
Yes.
35 is a pretty important program for us we have a ship set content.
Off the top of my head somewhere in the neighborhood of $80000 or so.
On that airplane.
Okay.
And it's an important program for us.
I guess rates are expected to drop a little bit next year, but there are other things in terms of upgrades and changes that we think might compensate. So we don't think that's going to be a serious headwind for us next year.
Okay.
Last one this might be a tougher one but I think in prior calls you've said the breakeven point for the company in terms of revenues might be.
<unk> hundred $15 million level do you have a sense I mean, I know, it's tougher right now with supply chain and elevated cost but just.
Think about.
Kind of a run rate business as you know.
You've obviously taken some cost actions, but should we think about 115, 120th it's sort of a breakeven level.
In terms of EBITDA breakeven.
I was thinking of operating income.
Okay.
Yeah.
For the reasons you said its tough its tough to predict there.
It's probably moved up a little bit from there.
Changes from day to day, given kind of where the material costs theyre going but.
<unk>.
The breakeven point has definitely gone up a little bit from where we were say a year ago in that regard.
Okay got it.
Perfect. Thanks, guys.
Yeah.
Thank you there are no further questions at this time I would like to turn the call back over to Mr. Gunderman for any closing comments.
No comments. Thank you for your attention today, and we look forward to talking to you again have a good day.
Yeah.
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Thanks.