Q1 2022 Astronics Corp Earnings Call
Greetings and welcome to the <unk> Corporation first quarter fiscal year 2022 financial results.
At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.
If anyone should require operator assistance. During this conference. Please press star zero on your telephone keypad. Please.
Please note that this conference is being recorded.
I will now turn the conference over to our host Deborah Pawlowski Investor Relations for <unk> Corporation. Thank you you may begin.
Yeah.
Thanks, Diego and good morning, everyone. We appreciate you joining us here today.
On the call with me are Pete Gunderman, our chairman, President and Chief Executive Officer, and Dave Burney, Our Chief Financial Officer.
You should have a copy of our first quarter 2022 financial results, which we released earlier this morning.
If not you can find the release 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. These statements apply to future events that are subject to risks and uncertainties as well as other factors that could cause actual results to differ materially from what is stated here today. These are.
Risks and uncertainties and other factors are provided in the release as long as with other documents filed with Securities and Exchange Commission.
You can find the documents on our web site, where it S E C dot 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 tables that accompany today's release.
So with that let me turn it over to Pete to begin Peter.
Thank you Devin and good morning, everybody. Thanks for tuning in for our call here.
The agenda.
Oh as follows I'm going to start by talking about a couple of prominent forces, which have been affecting our company for some time, but have really come to a heavier in the first quarter.
And.
Then I'm going to turn it over to Dave to talk through our financials, including some pretty strong cash results.
Over the course of the quarter.
I'll take it back and then we will talk about our forward look for the remainder of 2022 and revisit our guidance.
And some of the issues affecting that and then go to Q&A at the end.
So the two prominent forces affecting our company one negative one positive and if you read our press release, you've seen them both pretty prominently displayed.
The negative one is supply chain struggles were not unique here and I don't intend to present the pieces, but I do want to describe how the supply chain is affecting.
Our performance it was pretty significant in the first quarter and it's something that's been growing.
A positive force as continued strong demand from the market for our products and for our services bookings were really strong backlogs set another record and it's setting up for what will undoubtedly be a pretty exciting second half of.
2022 so the supply chain.
Hi, This is something that's become more and more of an issue over the last six to nine months basically as demand started picking up for us.
That's where I'm supply chain struggles became more and more apparent in the first quarter.
Was as bad as ever.
We went into the quarter thinking that we would have revenues somewhere north of 130 million, we ended up with 116 and a reduction.
Occurred kind of steadily over the course of the quarter than we'd realized the necessary components that we needed to build their products were not.
Coming in as expected or whereas really agreed to by our suppliers.
It's a very unpredictable situation products that are that we buy and have bought forever that have pretty standard and stable lead times of maybe three or four or six weeks or whatever the case may be all of a sudden and turned in 'twenty.
For 30 or even longer.
And it's really kind of across the board, although the worst situations for us are in the area of electronics.
Large percentage of what we build and produce for customers involves electronic components and electronic components seem to be the sweet spot of the worldwide supply chain shortage.
And that is the case with US I think it's kind of thing that affects pretty much everybody in business. These days, who produces a product.
But you know, it's especially bad for companies that have to buy.
Chips, another electronic components, which are designed into products.
That you produce.
But again I don't want to turn it into a thesis, but I do have to say that as far as we can tell the situation is not really improving I keep asking our people that every time.
Can and nobody's willing to step forward.
And say that the situation in general is getting better.
<unk> gotten a lot better at identifying problems early and responding to them as proactively as possible.
Sometimes that involves spot bothersome special purchase techniques, which can be expensive. So there's always a little bit of a reality check as to when a problem Pops up what are the possible solutions and how expensive would get.
But it's obviously a worldwide problem, it's affecting a lot of companies and it got us in the first quarter.
We'll talk about the rest of 'twenty 'twenty. Two later, but we have incorporated what we know as best we can with reasonable buffers into our revenue guidance going forward. So.
We are sticking with our revenue guidance that we are.
The issue that in our last call and there is some margin for.
Supply chain problems, which.
Which may raise their head that being the case however.
These things are unpredictable its a little bit difficult to know for sure how things are going to work out with any particular product or any particular period, but more on that later.
The positive force that continues to drive our business is bookings.
We had bookings of 175 million in the first quarter. That's a book to bill of over 1.5, and its our second quarter in a row and the fourth quarter last year, we had a book to Bill of 153, so two very strong booking quarters.
Would have left us with a record backlog.
For the last 12 months bookings have totaled $633 million, that's over sales of $455 million. So for a rolling 12 month interval or book to Bill has been 1.39.
It's important to note that in these bookings totals there's really nothing special in terms of new significant big chunks of business.
So far so it's really been kind of a ground swell of orders from across our product line, which is especially encouraging.
So our markets are coming back and the demand that used to exist for our products pre pandemic.
<unk> is increasingly.
You know back in play.
Aerospace in particular has been really strong our aerospace book to Bill in the first quarter was $1 five nine.
Aerospace amounted to 90% of our bookings over the last year and if you look at the Rolling 12 months the book to Bill.
148 for our aerospace business.
All these numbers by the way are being taken off the table on the back of our press release, the last page of our press release, I Should've mentioned that earlier.
For aerospace again, a very strong terms quarter to quarter over the rolling 12 months period.
Well basically bookings quarter by quarter. They went from 118 million to 142 million to 148 million and now to 161 million. So the aerospace bookings are definitely going the right way.
One of the interesting observations in the bookings is that we are seeing some evidence of wide body.
Sure.
Resurrection, I guess I would call. It some some kind of a resumption of wide body orders. Some of our products are specific to narrow body applications and some of them are specific to wide body applications and we're seeing early signs of some kind of rebirth of wide body demand, which has really been door.
For most of the time of the pandemic.
Yeah.
Our test business demand has.
Has it been a little bit weaker with lower bookings in early 2021, resulting in low sales now.
Our quarter one backlog consolidated.
As I mentioned is a new record of 475 million.
That's an increase from early 2021 when our backlog was 283 million. So obviously the bookings.
Positioned us well in terms of work to be executed we need to have a supply chain cooperate. So we can do the work and turn the backlog and into revenue.
Yeah.
Last time, we had a backlog anywhere near current levels was really late 2018.
At that time, our annual sales level was running at around $800 million a year.
So those are the two big forces that are that I think about when I think of our first quarter supply chain struggles and.
Strong demand from the market and.
I'm going to pass it over to Dave now to talk to the specifics of our income statement and I'll take it back and we'll talk about our forecast for the rest of 'twenty two.
At the end here.
Right. Thanks, Pete our consolidated revenue was $116 million in the quarter up almost 10% from last year's first quarter.
Flat sequentially from the fourth quarter of 2021.
It's still not where we need to be to get to breakeven, which is around $160 million per.
Per quarter in revenue two to hit GAAP breakeven we.
We don't expect to get to break even until the second half of the year as Pete mentioned, we're expecting some significant growth on the top line.
In the third and fourth quarter this year.
As well as improved <unk>.
Topline growth in the second quarter.
Although not expected to get to the point, where it will be GAAP breakeven in the second quarter.
Aerospace revenue was $101 million in test revenue was $15 million for the quarter.
Consolidated gross margin was $19 9 million or 17, 2% with a loss from operations of $4 $2 million.
A slight adjusted EBITDA loss of $353000 after removing the impacts of the M. J P grant and the gain from the earn out for the sale of the semiconductor business.
Margins continued to be compressed as a result of the lower revenue in the quarter and increased cost of raw materials.
Roughly $3 million of raw material costs in the quarter relates to what we call spot buys as we source materials outside of our typical supply contracts to meet customer demand.
Outside of the spot buys we've experienced general inflation relating to our materials and labor.
Between five and 10%.
As Pete mentioned supply chain continues to be our biggest challenge as lead times are continually moving around making planning a challenge and limiting our ability to book and ship orders quickly, but we're managing through it we've.
We've had about $140 million of backlog scheduled for delivery in the second quarter, but we anticipate some of that may push out.
Until the second half of the year.
And we have about $220 million of backlog scheduled right now for the second half of the year as Pete mentioned, we will need to get some book and ship orders.
Which are within our.
Our typical range for the second half of the year.
Quarter was not as noisy as the fourth quarter of last year, but we did have some atypical income and expense items.
We recognized $6 million of the a M. G. P. Cramps is a reduction of cost of goods sold.
We recognized and received earn out income, which is below operations of $11 3 million for the 2021 earn out period.
We also received $10 $7 million for the 2020 earn out period, which was recognized in the fourth quarter was 2020.
We have a bit of an odd income tax expense rate, which reflects new tax treatment.
For R&D expenses that requires these expenses to be amortized over a five year period.
Rather than Expensed as incurred and this is part of the tax Reform Act of 2017.
This would typically create a deferred tax asset as it is it's just a timing difference and has no impact on the tax rate, but because we have a cumulative trailing three year loss.
We fully reserved our deferred tax assets at this point.
This will reverse when we produce cumulative trailing three year income in the future.
There's a lot of speculation regarding the treatment of the R&D tax expense.
And it may be rolled back or pushed out later this year.
That happens.
Again, we'll will reverse the impact of this.
Bookings and backlog continue to be strong bookings for the quarter were $176 million and a book to bill ratio of one five times.
With $160 million $161 million in aerospace and a book to Bill of 159 in aerospace.
Test bookings were $15 million and our book to Bill of about one times and the backlog at the end of the quarter again as Pete mentioned was a record of $475 million.
Turning to the segments, the aerospace segment, while not profitable absent the impact of the a M. J P program.
It's measurable improvement compared to the first quarter of 2021.
Sales were up significantly as well.
Our bookings backlog and our pipeline of opportunities.
The segment's operating margin benefited from $6 million relating to the a M. J P Grant program, which is an offset.
In operating cost.
And cost of goods sold.
It offsets higher wages and benefit and cost of materials that we experienced in the quarter compared to the first quarter of last year.
Commercial transport market continues to strengthen for us and sales were up 64 $64 million up 10% sequentially from the fourth quarter and up 68% from last year's first quarter.
Military market and business jet markets remain sequentially steady.
The test segment can you can use to be somewhat sluggish with sales down $9 7 million from last year's first quarter, resulting in an operating loss of $1 $8 million.
The sales drop was primarily in the military market.
Orders continued to be light in the segment, but there are several large opportunities that we're pursuing and that both.
And both the transit area in the military area in the test segment.
Turning to the cash in our balance sheet and that we had a strong quarter with respect to cash taking and $36 $4 million.
Relate and $5 2 million of that was related to the a M. J P Grant.
$9 2 million was from tax refunds and 22 million were from earn out payments. Our net debt is now $113 million.
The 2021 fiscal year.
Cash flow from operations was slightly positive at $316000.
Cash used by operations reflects.
Increases in net working capital assets that were offset by the tax refunds of $9 $2 million and the second a M. J P grant installment of $5 $2 million.
Proceeds from the earn out of 22 million were received in the quarter and reflected in cash flows from investing activities.
At the end of the quarter, we were compliant with our debt covenants with our leverage ratio calculated in accordance with the credit agreement of $3 seven eight times adjusted EBITDA.
Versus the maximum leverage limit of 475 times maximum leverage covenant will remain at 475 times through the second quarter.
Then dropped to 375 times going forward.
We continue to forecast compliance, even as our maximum leverage covenant drops to 375 times in the third and fourth quarter.
And we're forecasting profitability to increase as we move through the year.
Our revolving credit facility expires in May of 2023, and we're working to replace the revolver over the next few months with the goal of having a new long term facility in place before we reported in the second quarter.
Right.
Pete.
Okay and looking ahead, we are maintaining.
Our revenue guidance for the rest of 2022, which calls for.
Revenues of between $550 million and $600 million.
We have an internal forecast that actually exceeds that range slightly.
So you can see what kind of margin, we're building them for potential supply chain disruption.
And supply chain as I said earlier is likely to remain a factor as we move through the remainder of 2022.
The midpoint of that range 550 to 600 million would represent about 30% growth over 2021, and we had sales of about $450 million.
The high end would represent a growth of about 35%.
Are those numbers are realistic that's a big step forward.
We think so of course.
A reminder, I talked earlier that the trailing 12 months of bookings were 632 million. So a forecast of 550 to 600 seems to jive with that number pretty well.
Also our first quarter backlog was a record $475 million with 364 million scheduled to ship in the remainder of 'twenty two.
That would.
Would you suggest we need another approximately 100 million of kind of book and ship business, which in the normal course.
It should be pretty achievable for our business.
We expect the second quarter to be somewhere in the neighborhood of 125 to 135 million.
If you run the numbers and added to the midpoint for the first quarter that would show 40 plus.
Plus first time, 42% of 2022 volume in the first half.
And much more maybe 50, 860% in the second half so we're obviously expecting.
Ramp and again, if you use the midpoint some make some assumptions. This implies quarterly revenue of about 165 million on average in the third quarter and the fourth quarter, Although we expect.
The third quarter to be a little bit lower in the fourth quarter to be a little bit higher.
So some big ramps, some real acceleration compared to where we've been or backlog demands of its supply chain holds up and performs in the second quarter. The second half should be a much more positive from a financial perspective than the first half.
We will also continue to watch demand in the second half.
I described earlier that the.
The big amount of our bookings so far in recent times has really done from a ground swell of business kind of across the.
Across the business.
Without any kind of real big special items in there.
But I also want to tell you that we are pursuing a number of significant pieces of business, which collectively.
We will drive us not necessarily in 2022 but where you know you can look at the calendar all we're already almost halfway through now is the time when we start building.
Our business activity list for 2023 and beyond and over the next.
A few months and over the rest of this year.
I am hopeful that we're going to have some pretty significant new wins.
To talk about I've been with this company for many many years I don't Dave and I were talking last night.
I don't think we've had a time in.
In this business, where we've had such a wide array of significant opportunities in both segments.
Near term playing out and many of them are undisclosed at this point I can't talk about them in detail too much but some of them.
Maybe a couple of them I will a significant opportunity for us has to do with the army's future lift competition, which is playing out right now in flower.
Many of you know what that is it's a competition between the team led by Don a team led by Sikorsky and we are a solid number of the bell team playing a significant role.
That down select is supposed to happen in late summer early fall.
And we're doing the electrical power generation distribution system.
For that airplane for Bell.
It's a franchise or a product line, which we trademarked something called core power its flight critical electrical power for.
For smaller aircraft, primarily and that's the position that we've been building for quite a few years now and I'm not going to go into too much detail about it but it's a franchise that I think will become a very prominent part of our business going forward and certainly adult ones for.
That'll be a big deal for our company.
Immediately.
Also we did a press release this morning again back to core power in flight critical electrical power.
And the position that we have developed with respect to our electrical power distribution.
Flight critical electrical power distribution of small aircraft.
And the advent of electrical aircraft, which is a which is happening in various parts of the industry. Many of you know that.
<unk> electric more electric is becoming a big deal in aerospace in an effort to reduce.
A carbon footprint noise pollution, and create new business models and one of the terms being thrown a lot is electric vertical takeoff and landing new VTOL.
We have found that our core power expertise applies very well to this emerging E VTOL market in the EU VTOL market.
It's something that's getting a lot of attention.
Not only from the main OEM airframe businesses that exist in the world today, but also a bunch of entrepreneurial startups that have raised significant amounts of money in the stock market primarily are also in the public debt market and.
There are some pretty wild forecasts out there are reasonable people can support those forecast or disagree with them, but the important thing for today for this group is that our hour.
Our franchise has.
Has been or is being adapted to address the needs of the VTOL market and we are having.
Pretty interesting and fruitful discussions with a wide range of participants and I expect that we will play a role in this market of some significance going forward. So you can expect a though we don't have specific announcements to make today.
Expect that we will over the course of the next six to 12 months and.
See how all this plays out in the future but.
I've seen some of the aircraft.
Talk to some of the companies doing this kind of work and it's it's a pretty interesting to be a part of where we're excited to be a part of it.
Yeah.
So I think that ends our prepared remarks, we'll open it up for questions at this point.
Thank you.
And at this time, we will conduct a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
A confirmation tone will indicate that your line is in the question queue.
You May press the Star key followed by the number two if you would like to move your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
Okay.
Our first question comes from Pete Australian with Truest. Please state your question.
Hey, Good morning. This is Pete on for much moly. This morning, thanks for taking my questions.
So firstly I just wanted to ask on.
On the seven three set of Max what monthly rate are you currently producing two are you aligned with the underlying production rates at Boeing are there any differences in your rates that are driven by inventories or availability of materials.
No we assumed well it bounces around a little bit, but we are as best we can tell pretty well aligned with what Boeing is doing we think the we had an inventory buildup that happened when they've been shut down.
But they've they've pretty much shoot through that so.
They've got us at the same rate that they are producing at this point, which is you know high twenty's trending to 30.
Yeah.
Okay, Great and then just.
Follow up on <unk>, you mentioned in your release that you are seeing signs of a pick up on the wide body market as well or just could you give a little color on the main improvements youre seeing there and maybe what are you seeing any incremental headwinds from the delays on the 787 and now if you could just as a reminder.
What about as your revenue mix currently in terms of wide body versus narrow body.
Yeah.
Yeah.
A lot of questions. There I'd say the 787 slowdown is kind of flowing through the system already so.
No we're not we're not hurting anymore. There, it's all upside from here I would say.
As far as our products are.
I can tell you that there are certain types of in flight Entertainment systems, which are standard in wide body and not so present and narrow body and we make components that go into those systems and we've noticed an increase in the order for some of those products. They only go on wide bodies.
So.
Wide body demand must be it.
Improving maybe not on the production line because as you point out 787 for example is not increasing at this point.
But maybe more on an aftermarket maybe pulling airplanes out of storage and getting them ready to fly.
Our.
Our business mix and our commercial transport business before the pandemic was pretty evenly divided we were you know for practical purposes 50 50.
Wide body narrow body.
And 50, 50 line fit and the aftermarket.
That has skewed heavily especially when the when the Max was shut down.
Towards narrow body aftermarket.
Wide body was kind of down on both sides aftermarket and line fit and narrow body line fit was way down with the Max being down.
The Max coming back has really helped us a lot and it's a big part of why we think we're going to you know 2022 will be a significant year of improvement for us.
We're not counting on wide body production rates coming back in the near term future I mean, Boeing can't comment on that very you know.
Accurately we're not going to comment on it but.
But we have noticed the increase was in sales another product.
To give you an idea we make we make motion systems.
For high end aircraft seating typically found in long haul wide body first in business class sections, and we've noticed an uptick in orders for those kinds of programs to again that's for the most part those projects don't find a place on narrow body airplanes. So.
It's early and it's not real significant but you know theres a lot of industry prediction that wide body recovery will happen over.
Over the course of 2023, and 2024 and just like we're seeing strong demand and growing demand over the last 12 months, it's primarily been narrow body driven as narrow body airplanes have resumed flying.
And it's interesting to me to watch the beginnings of wide body ordering also so hopefully that's a sign for the wide bodies are going to be a production rates don't increase or the ones that are in storage are gonna be brought out in maybe airlines are starting to think about what they want to do what.
In terms of fleet upgrades and refurbishment or recovery in advance of increased flying you know it was early maybe this summer.
That answered your question.
Yes. It does thanks, a lot for the color a lot of jump back in the queue.
Okay. Thanks.
Yeah.
Thank you and once again to ask a question Press Star One. Our next question comes from Jon <unk> with CJS Securities. Please state your question.
Hey, good morning, Thank you for taking my questions My first one.
Yeah.
If youre not seeing so much improvement in the supply chain, what what's really giving you the confidence that you can actually increase sales.
Due to the guided level through the second quarter and second half are there.
Suppliers, telling you they can meet those volumes and you know what what's the track records on being able to do that at this point.
Well, it's a very fair question.
It is a little bit tricky to explain what we went through in the first quarter and then talk about that kind of ramp in the second half.
But the reality is that we have that work schedules and we've gone out and source those components.
And we have them on order so you.
You know if things if the supply chain performs we should see a ramp up.
The question is will we continue to see surprises then slips and we think we will.
But we don't know exactly which parts are gonna slip and we don't know cumulatively, what the effect is going to be but the overall velocity is going to increase no matter, what you know unless the world falls apart.
Because we have these orders and we've gone out and put the orders on our supply chain. So we can accommodate a reasonable amount of slippage.
To speak and still have significant ramps in the second half and that's how we've constructed.
Our revenue guidance that revenue forecast that makes sense. We can we can withstand quite a bit of slippage and still be in that range.
Yes. It does yeah. Thanks for clarifying that and then second just in terms of your own internal capacity have you made progress at all and in closing that on the labor gap that you've been talking about in prior quarters and can you meet that production level internally.
It's another good question.
The reality is that our supply chain snap to right now I'd, probably be telling you about a labor shortage, because I think I talked on the last call that we were a couple of hundred people below where we wanted it to be we're at 2200 I think at that time, and we wanted to be at 2400.
We're making pretty good progress, though on the labor side I mean, it's it's not.
You know the pressures arent gone for sure, but we are seeing a little bit of improvement in various markets.
We operate in not all markets and not all positions, but the production ramp that we're talking about is really a production floor kind of labor, where we where we need it and we are seeing a general loosening there we're seeing more.
Applicant flow for example for new position so.
You know its possible that becomes more and more of a pressure point as we start to ramp up volume in the second half, but at this point.
Where we're more concerned about supply chain been about labor.
Okay, great that makes sense and if I could slip in one more just you talked about these touch projects that could be awarded midyear, what's the what's the relative scale of it doesn't what would that mean for yogurt growth.
'twenty three if you're mad at us.
Yeah.
Hello.
Uh huh.
Well, let me do a.
Significant John I mean, the programs are.
You know.
Over the life of the programs very easily over $500 million I mean, I'm just run the numbers in my head I'm looking at Dave but.
There are probably 678 of them.
In both segments and of course flare. If we were to be successful that's going to run for 20 years, who knows.
M. B a couple thousand airplanes, I mean, you could easily stretch those numbers too.
If you include that one, especially well over $1 billion frankly.
Yes.
It seems like a big opportunity good luck there.
Well, Thank you Bill let the bell.
Thank you and once again to ask a question press Star one.
Our next question comes from Pete Osterlund with Truest. Please go ahead.
Hey, guys. Thanks for taking the follow up I just had one quick one.
On cash flow generation, just with the guidance for sales to improve sequentially through year end do you think its feasible that you'd be able to get to breakeven on a free cash flow basis over the course of the year or are there any other.
Working capital or other considerations that might keep free cash flow negative even as the topline improves.
Yeah.
I don't think will create significant free cash flow as we.
As we ramp through the through.
Through the second half of the year.
The inventory component of working capital stuff is kind of is where we're most inefficient right now and on one hand, you know we have we have more inventory than we would typically have if you go back to the pre pandemic days.
Maybe as much as $40 million more inventory than we have with the with the sales level were at right now, but you can't turn around inventory either you don't want to slow that down and so I expect.
Well kind of tread water as we move through the year in terms of our free cash flow. There I think our as our margin picks up I think what we'll see as.
You know increased working.
Working capital components, there, but then at some point it will flip around to be a tailwind as we move through any normal supply chain environment into next year and as I said, you know our inventories turning much much slower than it used to turn prior to the pandemic and its because of these these supply chain challenges where.
You know you can have 99 out of 100 parks that you need to ship something and you're missing a washer and you can't ship.
It affects everything, but I think you know cash flow wise.
I think we should be able to depending on where the working capital and the inventory goes to be able to kind of tread water on on that.
Great. Thanks, a lot.
Thank you. Our next question comes from Jon <unk> with CJS Securities. Please go ahead.
Hi, yes, thanks for the follow up just one on pricing I was wondering because we've seen a lot of companies do this in the quarter.
If you've been able to pass on some of the more extraordinary inflationary coffee you've been seeing.
3 million extra spot cost that you talked about in first quarter.
If your customers have been amenable to that I think being.
Being transparent with that that's helped a lot of other companies that would cover and I'm wondering if.
If you've seen any receptivity at all.
We have seen that and.
Yes, we've been passing on price increases, where we can when we can and frankly for the most part we're pretty surprised with how co-operative everybody is about it.
I think you know.
Everybody is experiencing the same thing so it's it's.
It's never comes as a surprise that doesn't mean that customers are happy to pay more but for the most part we.
We have seen.
<unk> taken taken advantage of that ability.
To the extent that we can at the same time, we do have long term contracts on certain things, where that's not as easy to do.
But even in those.
Cases, we are initiating conversations with Kt occasionally.
Trying to keep the situation.
Spiraling out of control, but at this point.
We don't view that as our biggest headache or bigger headache is just getting parts in here in the first place and executing the demands of the customers are placing on us.
Got it one more follow up.
You mentioned the big projects that are in the pipeline, but I was wondering if there was actually any <unk>.
General thoughts on military spending.
Just given that the highest security concerns that we're seeing through the world not not on new programs, but existing programs and kind of how that might flow through to you guys.
Oh I'm not sure the.
Sure.
Well I think the army's future lift initiatives, probably become more of a priority right. That's one that's one thing that I would say.
Not too long ago people were saying that was never going to be another ground war. So why do we need a why do we need a ground force.
The recent events have probably changed the thinking on that significantly so I expect spending there to be up I'm not sure that translates much to an increase in.
Joint strike fighter fighting for example, or most other aerospace applications, but I think the helicopter programs probably become more important not less important.
With the Army's version of the future battlefield.
Understood. Thank you.
Thank you there are no further questions at this time I'll hand, the floor back to management for closing remarks.
Well. Thank you for your attention and time today, obviously, a interesting times for our company and we look forward to reporting second quarter results probably be early August .
Thanks for your time have a good day.
Thank you that concludes today's conference all parties may disconnect have a good day.