Q4 2021 Astronics Corp Earnings Call
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Okay.
Greetings and welcome to the <unk> Corporation fourth quarter fiscal year 2021 financial results Conference call. At this time, all participants are in a listen only mode.
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'd now like to turn the call over to Deborah Pawlowski Investor Relations for restaurant Ex Corporation. Thank you you may begin.
Thanks, Darryl and good morning, everyone. We appreciate your time today and your interest in astronomy.
Joining me on the call are Pete Gunderman, our president CEO , and chairman, President and CEO and Dave Burney, Our Chief Financial Officer, you should have a copy of our fourth quarter 2021 financial results, which we released earlier this morning.
And if not you can find it on our website at <unk> Dot com.
As you are likely aware, we may make some forward looking statements during the formal discussion as well as during the Q&A session.
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 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've provided reconciliations of non-GAAP measures with comparable GAAP measures in the table that accompanies today's release.
So with that let me turn it over to Pete to begin Peter.
Thank you Debbie and good morning, everybody. Thanks for tuning in for our year end 2021 conference call.
Yeah.
Or topics today include a range of fourth quarter headlines.
Sales were in the expected range of 116 million, but the income statement was clouded by a pretty long list of unusual items. They will walk us through those in a few minutes.
The highlight of the quarter, which I'll spend some time covering where bookings.
Way up again.
Book to Bill of 1.53 for the quarter.
Set us up with a record backlog at year end.
We also have reworked our financing arrangement with our banks getting a small three month extension they will talk through that.
And then we will spend some time looking at our 2022 and it's a cut to the chase we expect it to be a year of strong growth for a lot of caveats here as you might expect but.
We are establishing an initial range for revenue for 2020 to 550 to 600 million.
The midpoint, there would represent something like 30% growth over where we ended up for 2021 .
And then we'll end up with questions and answers.
So.
Fourth quarter summary sales as I said 116 million last time, we talked we predicted a range of 115 to 118. So we were safely in there.
This was despite ongoing supply chain and labor challenges, which will be a theme throughout this conversation.
And it is not inconsistent with what's going on out there in the world in general.
We ended the year with what we feel was about 15 to 17 million of scheduled product, but could not ship for one reason or another.
Typically you're having to do with supply chain challenges.
Yeah.
That's where labor we're operating at about 20 to 100 people right now before the pandemic. We were at about 3400, and we would like to be right now about 2400. So we're facing challenges on the labor side again, we'll talk about that a little bit more later, when we talk about our current environment going forward.
Good.
Okay.
We don't expect to be profitable with $116 million and depending on the metric you look at we work GAAP net income was one 4%.
Or 1.6 million and adjusted EBITDA of a negative 800000 or a negative <unk>, 7% again, Dave will walk through the <unk>.
Forces that were in play in our fourth quarter results.
Yeah.
The bright spot as I said was book gains of 177 million against shipments of 116 billion for a book to Bill of 1.53.
Both of our segments had very strong bookings performance was in the fourth quarter, but consolidated.
Over the last four quarters. The trend has been very encouraging the last four quarters being all four quarters of 2021.
In succession, we went from $120 million in the first quarter to 126 million to 154 million to $177 million.
And bookings.
For a total of 577 for the year and.
And our book to Bill of 1.3, let's remember that $577 million booking when we try to explain our anticipated growth in 2022.
Okay.
Looking at Aero bookings aerospace.
For the quarter was 148 million and a book to Bill of 149, that's two quarters in a row at 1.49.
Yeah.
The total for the cumulative total for the last four quarters was 509 million again for an impressive book to bill for the year of 1.39.
Our test segment had a rebound quarter with respect to bookings of $30 million.
That's a book to Bill of one seven to the $30 million was.
Somewhat compensates for very weak bookings in the second quarter and third quarter.
We set up a time that we weren't losing things they were just delayed and a lot of them came through in the fourth quarter, helping to cover those weak spots in the second quarter in the third quarter.
But we're not out of the woods in the sense that we continue to see COVID-19 related delays and the order flow in our test business.
For the year.
We had booked the bookings of $68 million versus shipments of 80 million a book to Bill of 0.86, So we look to improve that booking performance over the course.
It was 2022 and we have a number of pursuits that we think could decisively kind of change the equation of the game if we're successful.
Yeah.
So the bookings left us at year end with a backlog of 416 million as I said, that's a new record for the company.
Up from 283 million as the year began and so we started at 283, we ended up for 16.
A little less them from history. The last time, we were at that level with our backlog.
We were doing annual sales of about 800 million that was late in 2018. So.
That backlog is something we take quite a bit of comfort in as we enter 2022.
I'll turn it over to Dave here at this point to talk through the details of the income statement.
Our financing situation.
Okay. Thanks Peter.
Skip going through the sales of the topline again, Pete covered that pretty thoroughly there and just jump right down to margins in some of the some of the items that impacted the margins for the fourth quarter.
Steve mentioned, it was a pretty noisy quarter.
I think the easiest way to to walk through it is to point you to our adjusted EBITDA reconciliation.
On page nine in the press release and talked to the items on there as are most of those items.
There are going to be the noise.
Through our income statement in the quarter.
So we had GAAP net income of $1 $6 million and adjusted EBIT loss of $800000 in the fourth quarter.
There's a number of puts and takes here positive and negative items that had impact.
We received an unfavorable ruling from the Appeals court in the United Kingdom regarding the ongoing patent infringement litigation.
A lower court ruled that the patent was valid.
The strikes had been infringing and Lufthansa technique patents and our appeal was dismissed.
Based on the information available to US we recorded an estimated damages loss, including interest in the amount of $8 $4 million.
This is included in our SG&A costs in the fourth quarter.
Our next item as we committed in the fourth quarter to reinstate a company contribution to our 401K plans.
Other retirement plans the company contribution was suspended when we entered the pandemic in early 2020.
Noncash company contribution to a four one K plans for 2021 will be funded with the shares of a Spanish common stock. They will issue out of treasury shares with a value of $4 $2 million.
At the current stock price this equates to roughly 300000 shares which is less than 1% of the shares outstanding.
Well no is that is roughly a full year's worth of.
The annual expense there that we recorded in the fourth quarter. So going forward, we expect the run rate for the 401K expense in 2022 to run.
About roughly 1 million to $1 $2 million per quarter, which can be paid in either cash or stock.
<unk>.
Next item is we recognized $7 $6 million of the $14 $7 million a M. J P. Grant is a reduction of cost of sales in the fourth quarter.
We expect to recognize an additional $6 million in the first quarter of 2022 and received the second cash installment of about $5 million also in the first quarter.
You remember we received the first installment.
Back at the end of the end of the third quarter.
Yeah.
Next item is as a part of our consolidation plan in October we closed on the sale of our Fort Lauderdale building.
This resulted in a gain of $5 million.
Net cash proceeds of about $8 8 million.
That operation will be relocating to our E store in New York Operation.
Lastly in December we came to terms with the buyer of our semiconductor test business regarding the calculation of earn out payments.
This resulted in a gain of $10 $7 million that was recognized in the fourth quarter relating to the 2020 earn out period.
Proceeds were received in January .
We expect the second earn out for the 2021 earn out period and the amount of approximately $11 $2 million.
We've received the earn out calculation and are in the process of reviewing net calculation upon acceptance, we will receive the payment within 10 days.
There are a few other items that are not in this that affected the quarter as well.
Okay.
But had a large impact on the P&L.
We need to know we sold $2 million of excess raw materials during the quarter.
Hum.
For no margin.
And so if you when you look at ourselves you have to consider that there were $2 million of sales at no margin in there that affected the margin percentage.
We also had high customer accommodation costs relating to supply chain delays and warranty cost, which combined totaled $2 $2 million in the quarter.
Additionally, we increased our estimated cost to complete several over time programs that reduced margins by about $1 million in the fourth quarter.
Jumping to cash for our cash flow from operations was good in the fourth quarter was $13 million in the quarter driven by lower investment in networking capital and cash provided from operating income.
Net debt at the end of the quarter was $133 million, that's down $20 million from the end of the third quarter.
Our focus will continue to be deleveraging is removed through 2022.
Yeah.
We mentioned Pete mentioned earlier that we amended and closed on an amendment on our revolving credit facility.
We extended the terms of the credit facility by three months to the end of May.
2023.
The purpose of this was to move the.
The.
The determination date of the revolver.
Beyond the 12 month period.
Where we're going to file our financial statements as well as to give us time to.
Considering an appropriate longer term facility as we move into the summer and expect to increase our profitability in the second half of the year.
Select key modifications to the amended agreement includes a $225000 amendment fee, which was 10 basis points.
Yeah.
The revolver was reduced from insights from 375 million to $225 million.
Yeah.
And our revised definition of adjusted EBITDA, which now excludes income from earn out payments and asset sales.
An increase in the maximum leverage ratio to 475 times adjusted EBITDA through the second quarter of 2022, then reverting to 375 times adjusted EBIT thereafter.
The pricing grid was revised to be based on sulfur is a library is going away and the top draw on leverage which is above four times adjusted EBITDA is priced at sofa.
With a floor of 100 basis points, plus 325 basis points.
The top Undrawn fee is also priced at sulfur with a floor of 100 basis points, plus 40 basis points and there's a first lien on all of our real estate.
Based on our financial projections, we're forecasting to remain compliant with our financial covenants for the duration of the agreement maximum permitted leverage at the end of the fourth quarter 2021.
It was about permitted leverage was five five times and our calculated leverage is about five times for the quarter.
Okay.
It's our intention to replace the amended agreement.
Within the law with a new long term agreement in the near future here will begin working on that.
As soon as possible.
That's it for me.
Okay, I'm going to switch topics now and look ahead to 2022.
I mentioned earlier that we are establishing an initial revenue guidance of 550 million to $600 million.
The midpoint of that 575 would represent a 30% growth over where we ended up for 2021 and the high end would be 35% growth. Those are obviously very big numbers.
And a reasonable person might ask how we're going to do that.
And part of the answer.
It basically comes back to bookings and backlog I mentioned earlier that our 2021 bookings were 577 million that's right in the middle.
So if you assume things that were booked in 2021 need to ship in 2022, we've got to ramp up our internal production capacity to that level.
Over the course of the year to execute on those orders.
Our internal forecast is actually above the high end of that range in other words orders, we expect to get combined with backlog that's already scheduled gets us above 600 million.
But we are discounting our totals are somewhat for the challenging operating environment that we are a we are working with I mentioned earlier the 'twenty 'twenty. One we ended the year with 15 to 17 million of scheduled <unk>.
Backlog that we could not deliver because of supply chain problems.
Our opening backlog for 2022 again was 416 million on 340 of that is scheduled for 2022.
So the math suggests to get to the midpoint, we need to book and ship 235 million. Additionally, that's a very achievable number by historical standards historical norms for our business.
Our current look at the year has first half sales.
Amounting to about 40% of the total and second half sales about 60% of the total.
We expect to start slow and accelerate and ramp.
As the year progresses.
Our first quarter sales will be marginally above where we think where where the fourth quarter ended up.
A few words on our business environment.
We've talked a lot in the call so far I've talked to a lot of the call so far about demand accelerating.
It has been largely narrow body based in the aerospace side of our business and not wide body.
So as I look forward most industry experts are predicting some kind of wide body rebound in 2020 three 'twenty 'twenty four time frame and that's what we would expect to see too.
So most of the strength that we're seeing right now is narrow body based.
But qualitatively I would.
Ah I would describe the bookings that we're seeing not as big new wins.
More so just the return of business broadly.
Various programs and customers that we've worked with all along.
At the same time as we look forward are we.
We see a pretty impressive range of new business opportunities, which we are pursuing.
I've been with the company for many many years now and it is not common but it has not been common for us to have a range of things ahead of us.
That we do at the moment, so from a bookings standpoint, even though we've seen a pretty good ramp there are significant opportunities ahead of us and we look forward to closing some of those and talking about them more specifically.
As the year progresses.
On the flip side, the operating environment is very.
Very challenging, but unbelievable operating environment out there again, unlike anything I've seen them 30 plus years.
The geopolitical tensions has everybody's attention right now it happens that we actually have a engineering operation in.
Ukraine.
Western Ukraine and reviews, if you look at the map, it's where it by up to Polish border. So it's a relatively safe place to be but we are.
Disturbed to say the least about what's going on in the Ukraine as many of you are I'm sure.
We're concerned about our people there we're doing what we can help but it's a way around our perspective these days for sure.
Closer to home.
The inflation that everybody's talking about is certainly evident to us in our business.
As we pull our operations most are seeing 5% to 10%.
Inflation pressure on average like many aerospace companies, we are locked into long term contracts on many of our major programs, which reduces our ability to respond on the pricing side, but we're doing our best to keep up with the world in the other areas and we will continue to do so as we go.
Through 2022.
And finally supply chain pressures.
You hear about it.
No different than anybody else in the supply chain is unpredictable at this point and unreliable.
I mentioned.
But we had 15 to 17 million of scheduled product that could not ship because of supply chain issues.
That understates the size of the problem frankly, because the supply chain situation reduces our ability to react and respond to customer requests when they want to pull things out so.
We have a much more than $15 million to $17 million of product that we could ship.
But customers would take if we could ship it but we know we can't because of the supply chain issues. So we never and never gets on the schedule in the first place.
The experts out there say that supply chain pressures may start to abate in.
In the second half of the year or the middle of the year, we sure hope that's correct.
But frankly, we don't see that happening at this point.
It's a day to day exercise across our business to figure out workarounds and replacements and flip institutions.
To keep the train on the tracks and so far so good but it is certainly a risk item as we move through 2022, and finally labor shortages.
I talked about this already I'm.
We're at about 2200, we'd need to ramp to execute the business in front of us It's a major focus.
Although all of ours and.
Again, we like everybody else in the world a labor shortage has seemed to be everywhere. So.
That's another challenge in our operating environment that we're facing.
Still given those pressures, we think 2022 will be a year of significant recovery.
It's not every day you get to put a business plan together that talks about 30% growth.
And.
By the end of the year, when we get to those kind of volumes we should achieve.
Consistent and.
And no positive.
Profit performance on our income statement. So we are certainly looking forward to that.
And I think with that.
Our prepared remarks are concluded barrel, let's open it up for questions.
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Our first questions come from the line of Michael <unk> with Truest. Please proceed with your question.
Hey, good morning, guys. Thanks for taking the questions.
I guess can you give me a little bit more detail on why you would be selling excess raw materials is that that's for a out of production or it just seems like given the current environment you'd want to have some buffer stock there was it once at aerospace was a test or what what was the rationale there.
Yeah. It was it was it was aerospace and it was.
Older generation raw materials to service older generation equipment that you know.
Somebody can do us and asked about it and.
You know, we would've ultimately used it over time, but it's not something that we identified.
As leading to to have for the current stuff we're selling.
Got it okay that makes sense.
And then any any longer term implications here with the with the patent infringement and the ruling there I mean does that.
Impact you know future profitability, our future sales or are there any I mean as part of the settlement are there any additional payments royalties you guys might have to pay in any more detail there.
Yeah.
Well, let me.
You know this has been going on for more than a decade. So I don't know how much time, you have but [laughter]. It's it's.
It's another step in the process.
I would describe it as losing a battle.
But we're still in my view, winning a war.
And just to give you the big picture here.
The litigation that's been going on in the U S, France, the UK and Germany.
I would argue that the most important countries by far are the.
U S and France, because those are the countries where wide body airplanes have been made.
Over the last 20 years for the most part.
And that's where most of the subject product has gone. So those are the most important countries.
A few years ago, we concluded and one in the U S case, and the relevant patent wasn't no.
At this point.
The patents in France is also being struck down.
But.
Lufthansa Technik has the ability to appeal.
Appeal that decision and we expect that hearing to happen.
In December of this year, but if that unless that appeal is successful you know the <unk>.
Vacations are that we're going to win in France to and <unk>.
And those are the two important countries. So the two lesser countries are Germany and the UK.
The UK cases, basically over except for a damages hearing.
Which we will which we believe will be in 2023.
So nothing yet this year.
And the number that we accrued I think it was $8 4 million in the fourth quarter is our best guess at where that's going to come down.
You can expect that the opposite side will have a different number in mind, but we will have to settle that when the time comes.
And then in Germany.
Let me just pick up a note here.
We accrued.
Way back in late 2027.
$17 3 million for what we believe damages will be in there.
But we are appealing that number.
So that appeal is also not going to happen until 2023, so basically.
Basically there's very little is going to happen in 2022, we'll have a case rate in December on the appeal in France.
We expect damages hearings in Germany, and the U K in 2023.
And we're appealing Germany and I think lead times is also appealing in Germany. So this is going to go on for a while.
But we think the accruals.
We're likely to have paid or that we know about are in the books at this point.
Okay.
Funding funding this ongoing war, what what should we expect for legal fees throw out there in 'twenty two.
Okay.
Yeah.
I think it's the same run rate as we've been going going here.
It doesn't run consistent it depends on what is actually happening in a given quarter and how much you know lawyer time was being spent during that quarter.
I expect it'll ramp up towards the end of the year here Okay.
Okay.
Got it and just one closing comment it's been a real learning experience for us and one we hope never to repeat but yeah. It's the same pattern.
In France, and the U K and Germany, some exact pattern.
It's dismissed in France, so far it's completely upheld in the U K and it's partially dismissed and partially upheld in Germany. So go figure.
Got it got it last question Pete you gave some color on on 22, and you talked about <unk> being slightly above and I guess at your midpoint $5 75, with 40% that that kind of puts you right at that 115, I mean is that implying that you're not going to be profitable in the first half.
Yeah, I think we are we've been running the business not necessarily to be profitable at the levels that we're experiencing.
Experiencing in terms of demand.
Our assumption has been that demand will return and volume will increase and we felt it was important to continue to keep the capacity.
To execute on the programs that our customers have trusted us with and for the most part those programs did not go away with the pandemic for better for worse. So we were under obligation to continue to execute and perform and and we have done so.
So what we need to do is have demand come back and have revenue come back to the point where.
We can cover those costs, then we would expect that to happen about midyear.
You'd answered any differently.
Just I wanted to add in the first quarter remember, Mike we will have $6 million of M. J P.
Grant Grant income offsetting Cogs for the first quarter, but absent that yeah, we would not be running at a profit at that at that level of sales yeah got it okay. Yeah, yeah yeah.
And the earn out to and I'll jump back in the queue. Thanks guys.
Thanks.
Thank you. Our next question is coming from the line of John .
T J S Securities. Please proceed with your questions.
Hi, Good morning, Thanks for taking my question Pete just a quick one for you.
Well have more distracting Q1, so far you're seeing a continuation of the of the increasing trend or is it the more steady state as you compared to Q4.
It's.
It's a good question where are you know you got a little ways to go here I would I do not expect we're gonna repeat fourth quarter and this quarter.
I think it might be a little bit of a step back but.
That by itself doesn't bother me as you know bookings can jump around all over the place, but but overall if you pull the mood of our salespeople I think they're all.
Quite excited at this point in terms of just how.
How much opportunity there is out there so.
It continues to be a good picture, even if we don't continue to ramp in the first quarter.
Okay, Great and then you mentioned, you're not seeing much improvement in the supply chain.
To clarify did you expect any released through the year or are you assuming the current status quo as we as we go through from the first half the second half.
Yeah that revenue guidance number does not assume much improvement frankly.
We got caught and learned some lessons in 2021 about lead times and things like that so we're assuming that those lead times.
Kind of stay in effect, so we're ordering in advance as much as possible.
In order to be prepared for that ramp when the time comes I. It is an incredibly challenging environment I mean, I'm sure you've heard tales from other companies, but the gymnastics that we'd have to do to figure out how to execute when you know a supplier for a program called up because you know those parts.
But you orders that I thought I would ship next week I'm not going to ship them for 20 weeks.
You know, it's just incredible so.
So that kind of background with that kind of background. It's it's hard to say things are improving and we can't say that but I'm, hoping they don't get a whole lot worse I mean, I don't think most I think I think we're kind of in the worst of it right now at least from what I can tell you know surveying industry out there.
We'd love to see a little bit of a rebound, but we're kind of assuming that things stay the same.
Through this year.
Okay, that's really helpful and yeah, I don't envy that job at all last one you mentioned your engineering operations in Ukraine, well, how many people do you have there kind of what's the size of that business number one and then number two do you have actually direct exposure to Ukraine, and Russia, either their airlines.
Something else that we're not thinking of maybe the supply chain.
Bunch of questions. There so the Ukraine operation that we have a movie was about 42 people right now.
So not.
Not that big but it's all engineering so it.
It has a it has a significant impact in parts of our business.
And and Ah Levine as a pretty quiet in the rest of the area at this point compared to what's going on in the eastern and central parts of Ukraine.
If you look at a map and you think about it it's likely to continue to be pretty quiet impart because its like 45 miles or 50 miles or something from a Polish border.
Poland is NATO.
Thank you.
Who knows but.
I would think hostilities would be very low key that close to a NATO border.
So that's that part of your question Russia.
It was not so much a source of raw materials, but we do some some business in Russia, I mean Russian airlines.
Fly Russian people for the most part and they liked to be connected when they're flying in powered with their personal devices also and so.
Our revenue level, there isn't all that great, but it's probably safe to say, it's $5 million to $10 million on an average year I mean, sometimes if we're doing it outfit other new airline.
You know it can be higher and sometimes that can be lower.
You read about private jets quite a bit recently, we actually do some work for the private jet industry in Russia.
Primarily out of our French operation.
There will be a slight impact if the current Ah you know.
International business sentiment.
Established and then we get limited.
That hasn't happened yet I don't think that I'm aware of but we're obviously watching the headlines every day on waiting for.
For news from the government so the bigger the leave engineering operation in my opinion is a more significant item for us.
Incremental sales into Russia that we might be for Boeing at least for awhile.
Okay, great. Thank you and good luck to them.
Thanks.
Thank you. Our next question is come from the line of <expletive> Ryan with <unk>. Please proceed with your questions.
Yeah.
Thank you.
Say Pete down one last one on the legal side. This is the kind of saddle and old school I mean, this the patents you're talking about aren't on the current technology going forward is that correct.
Well there are pretty much expired at this point anyway. So it doesn't really matter, but this is pat.
Patents in question I don't actually have this in front of me, but I want to say, they're like from 1998 or something like that but there are a lot of water went under the bridge before the thing even erupted which is another.
A complaint of mines, but the rules are different in different parts of the world. So I guess that's okay.
Yeah.
In Q3, you said you had a push of eight to 10 million in revenue now. It's 15 to 17 is that the eight to 10 just turned to 15 to 17 or is that on top of what was already there in Q3.
Yeah.
It's a it's kind of it's it's hard to Oh, you've got a lot of moving parts, it's hard to.
Figure out what's what in terms of what slips into any particular quarter, because youre right. Some things slipped from the third quarter into the fourth quarter and some things slipped from the fourth quarter into the first quarter and what we decided to do was just kind of describe it at the end of a period how much work.
Is there that should have gone and would've gone under normal circumstances.
But what it did pick up in the fourth quarter from what we were experiencing up to that point so.
It's getting a little bit worse.
Over the course of 2021 and again, we're kind of forecasting the situation to remain at its current.
Levels current stasis through 2022.
Okay, where did the strength in test orders come from was that from municipalities kicking back in or something different.
Good question. It was a it was kind of across the board a number of different.
Programs that we were pursuing and frankly nothing that's all that major Oh, you May remember me commenting at the end of the second quarter and the third quarter to get there.
Bookings were low obviously, but.
We weren't losing anything it was just the stuff with sliding and.
And we blamed COVID-19 largely because you.
You know these are.
Orders that tend to come from defense.
Bases around the world or from municipalities when it has to do with.
Land mobile radio type stuff or.
Transit train test.
And everybody was working from home and you know.
And the thing just kind of ground to a halt what happened in the fourth quarter really was you know people started coming back in the office at least until omicron struck and and started releasing those orders so.
That's more what happened now I will say, though as we look forward I mentioned this kind of generically we have.
Pretty target rich environment out there in terms of significant programs.
And on our test side.
I would say there are two or three programs that that are critical for us in 2022.
And depending on when they hit they may not help 2022 very much but they sure will help 2023.
I look forward to talking to those when I can at this point we are expecting.
Let's see one of them to fall pretty much in the second quarter one of them.
And two of them to call following the third quarter. So it's gonna be a little while until I can talk about it and probably.
But there are significant targets that we are that we are setting our sights on.
Okay can you can you talk about what your anticipation might be on the Aero side you talked about.
I haven't seen this sort of a level of opportunity I mean is this the commercial side there was a potential military down select how's the business jet world loved him.
It's it's the opportunities are pretty broad based.
I talked about well airlines are waking up around the world and.
Some are deciding to go forward with major installations.
And major changes from what they've done in the past you know the technology doesn't why still even if the airplanes are so so we're seeing a surge in demand there, including some new customers, which are which are impressive to me.
Hmm.
I've talked about E VTOL electric vertical takeoff and landing them opportunities and how that seems to be a good fit.
For the capabilities, we've developed for flight critical electrical power for smaller aircraft and and.
We don't have news today, but we are furthering our investigations, there and extending our reach and I expect.
Program Award announcements there in the near future.
My third one which is more.
Public matter of public record as you know we're teamed with Bell a.
Very closely on both on the on the flare on future lift opportunity.
And that is a down select there I think is expected in the third quarter of this year mid year stretching into the third quarter.
And it's a team led by Bill against the team led by Sikorsky, we're firmly entrenched on the bell side if.
When that would be a very good program for us.
If sikorsky awareness, where we're not necessarily out of it but we would expect or hope needs.
Reasonable to have a much smaller role on their team. So that's an example of some of the things we're looking at them.
And again nothing to announce today necessarily but we would expect to see awards towards the middle of the year.
Great. Thank you.
Thank you.
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Hey, guys. Thanks for taking a follow up.
Maybe teach to kind of dovetail in you know kind of what you're expecting on test and some of these programs, but more broadly I guess pricing.
Can you give any color as to you know.
How protected you are or you can be on price you know, whether it's you know.
Your your supplier furnished contracts with Boeing and Airbus versus buyer furnished equipment with the airlines and any escalators or.
Short short question is can you drive through significant price increases to both your aerospace and test customers.
Right.
I guess I would answer in the short term about half of our business realistically, it's pretty locked down.
Your agreement agreements on major programs.
You know there will be an opportunity.
But while you're in the term of the agreement the escalator clauses that you know give you some relief but not.
100% of what you're experiencing over the term of the contract so.
So and I think that's probably fairly typical for most of the aerospace companies. The other half I'd say, we have more flexibility there shorter term programs and they tend to be P O based and and in those cases, we're finding that but you know customers expect it in.
Do not actually resist too badly so that probably doesn't spell good things for inflation getting out of control or staying out of control across our economy, if everybody acts that away, but but but we are seeing some opportunity there and of course, you do with your Kansas.
To locked down cost as much as possible in these kinds of environments, but we've been doing that for a couple of years. So theres, probably not a whole lot more room to go there Dave I don't know if you'd call it.
Yeah, but the newer programs or contracts that we're quoting on we certainly consider the increased cost structurally when we when we price those but as pizza.
A fair amount of what we have learned to like.
Up to the three three or four of your four year programs.
With the larger Oems.
Okay. Even on like you know I know it might be a little bit hard for you guys behind aftermarket brake fix I mean, we're hearing broadly suppliers getting chemo anywhere from mid to high single digit up almost 20% price increases I mean, if you're having more success. I mean, you guys do you have what 80.
E D, 90% share out there with what certain product lines or are you getting pricing on the aftermarket side.
On the newer.
Newer orders, we can but a lot of aftermarket like pick a major airline.
We tend to have.
Establish pricing with them for a period of time and they can kind of order from a price sheet. I mean, you can't necessarily change the price sheet in the middle of that order.
Hmm.
But when it comes time to renegotiate a new vehicle.
When we can.
Okay got it.
Alright, perfect. Thanks, guys.
Sure.
Yeah.
Thank you there are no further questions at this time I would now like to turn the call back over to Pete to underpin for any closing comments.
No closing comments. Thank you for your interest we are.
We're glad 2021 is over and we're glad to be in 2022, we think it's going to be much more of a year of rebounds. So.
Look forward to reporting on it as it progresses.
Have a good day and talk to you next time.
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