Q3 2022 Astronics Corp Earnings Call
Yeah.
Greetings and welcome to the restaurant ex Corporation third quarter fiscal year 2022 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. Please note. This conference is being recorded I'll now turn the conference over to your host.
Deborah Pawlowski you may begin.
Thank you Mollie and good afternoon, everyone. We certainly appreciate your time today and your interest in its journey.
On the call here with me are peaked under Dan <unk>, Our chairman, President and Chief Executive Officer, and Dave Burney, Our Chief Financial Officer.
You should have a copy of bar third quarter 2022 financial results, which we released just after the market closed today.
If you do not have the release you can find it on our website at <unk> Dot com.
As you are aware.
We may make some forward looking statements during the formal discussion and Q&A session. This conference call. These statements apply to future events and 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.
Risks and uncertainties and other factors are provided in the release and with other documents filed with Securities and Exchange Commission.
You can find those 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 yeah.
We've provided reconciliations of non-GAAP measures with comparable GAAP measures in the tables that accompany today's release.
Now, let me turn it over to.
Pete again Peter.
Thanks, Debbie and good afternoon, everybody and thank you for tuning in for our call.
Our agenda as usual we'll.
We mostly focused on the discussion of the recent quarter the third quarter of 2022.
And we will close with some forward looking production for both the fourth quarter and in the initial look at 2023.
I'll start and then I'll pass it over to Dave and I will finish up again.
So when.
When I look at the third quarter and then there's a there's a.
Basic.
At its most basic or it's a bad negative headline and Theres a pretty good headline the bad headline is that the revenue ramp that we expected to begin in the third quarter was delayed we did not get the ramp that we anticipated.
The good news is that demand during the quarter in terms of bookings continues to be.
Really strong which sets us up again for a.
The step change that.
So we think gets underway in the fourth quarter here in terms of volume and will carry into 2023.
So first of all let's talk about the delayed revenue ramp the negative headline.
And my view of the third quarter was essentially a misfire like a false start in a race.
We thought we would see revenue.
$150 million instead, we ended up at $131 million.
Delay led to a reset of our second half expectations and was mostly driven by a combination of supply chain problems and program delays, it's about 50 50.
It also.
It had the effect of delaying the expected ramp from the third quarter into the current quarter the fourth quarter of 2022.
So a little detail on supply chain problems and program delays and supply chain struggles are well documented.
Bodies experiencing I don't plan to go into a whole lot of detail about.
But from our perspective, there are a couple of bright spots.
One is that when the supply chain problems became apparent in our economy, especially in a world of electronics.
In the middle and late.
Our second half of 2021 lead times stretched out dramatically and we'll talk to you in a minute about how demand has fluctuated for us over the pandemic, but basically when demand came back in the second half for 2021, we started ordering parts that.
You know typically would have lead times are eight to 12 14 weeks and all of a sudden ever we're getting quotes back. It's it's 52 weeks.
Which served to retard our ability to handle.
A surge in demand well 52 weeks, it's come and gone and those parts are now starting to come in and if you looked at our inventory levels.
In the most recent quarter, you'll see that we've.
We've had a little buildup of inventory that obviously bad news in terms of working capital, but it's good news in terms of getting the parts that we've been waiting for it for about a year and which will set us up for the increased level of shipments that we anticipate.
In the current quarter and next quarter and the quarter after that.
The other thing is that were maybe a little bit of a contrarian here, but our perspective is that while supply chain has been a major disruption to our business and the many other businesses over the last year and a half we see signs of promise.
We run a handful 12 or 13 different operations and we do a pretty systematic reviews, some follow up with them and one of my regular question.
What's the supply chain look like is it getting better is it getting worse and for the first time in many quarters here.
The feedback that sentiment is that it's not getting worse, maybe getting a little bit better.
Not across the board, we're not out of the woods by any means but.
It seems to have plateaued, and we are hopeful and optimistic that we're going to continue to see lead times come down in some cases pricing comes back in a more normal realm and and that's.
Fundamental kind of expectation, but things are going to snap back.
Perfect in the coming quarters, but that they're not going to get any worse, we're optimistic about that.
I also wanted to talk a little bit about programs delays.
We have experienced a number of.
Award the layers that we thought were going to drive our second half right now it looks like theyre going to be delayed.
Delayed into 2023, maybe even in the late 2023.
One example of that is.
Is the flare award, which I've talked about in previous calls.
Future long range assault aircraft.
The Army's planned replacement for the Black Hawk.
Where teams with bell and their version of that and those competing with.
A team led by Sikorsky.
Sikorsky.
This is a program that most of the world are expected to be awarded in kind of May June July timeframe.
And then it flipped October here.
We are in November or maybe now it might happen by year end we.
Bell ones. This program, we expect to play a major role in their team and it will be probably.
One of the if not.
The largest one of the largest program so it's ever come to our company and it will require a significant amount of engineering and development work and we originally when this thing was supposed to be awarded in May June had a risk reduced them.
Included in our kind of budget and forecast for the second half of 2022, obviously that now at this point is split out.
Into 2023.
Similarly.
We made kind of a strange announcement on August 24th about a program called 45 49 Chi.
Which is a radio test down select that we won.
From the U S Army U S Army offer operates like 20 different radio.
Rights in their Arsenal.
A total of over 600000 radios.
And they ran a technical performance based competition between a number of suppliers, including us to pick a platform to go forward with as their standard tester.
We were selected as we hoped we would be but we originally thought that this down select would happen early in the year like in March or April and then June July and then finally, we were selected in August , but even after being selected.
Now we have the opportunity to negotiate basically a direct procurement contract with the army, which will take some time it means that.
What we had expected would be a solid contributor for the second half of 2022 will slide into 2023 and beyond it's a significant program and its all preliminary we don't know exactly how many and how many.
The year is this thing will go but indications are that it will be a significant test contract for us to be fair and we think of somewhere between 115 $200 million mm.
So.
Between supply chain and program delays in some cases were material.
We had to reset our our our second half expectations.
The third quarter also included some atypical costs $4 6 million and Dave will talk about these in some more detail, but we are exited or are exiting a long term lease to build than what's required some departure costs.
A customer accommodation of a legal settlement.
Some of which we expect will be reimbursed in the fourth quarter.
And we will certainly take the cost in the third quarter and if we get Reimport reimbursed that'll happen in the fourth quarter.
And finally of course in the third quarter like many companies or all companies were dealing with the effects of inflation on our production inputs.
We are heartened by the recent news that maybe the inflation.
Expectations are softening a little bit going forward and we think over time, we'll be able to work. This out like everybody else spot buyers will come down pricing and opportunities will go up.
It's a matched the increase in cost, but it definitely has a negative.
Impact on.
Pricing or on the margins in the third quarter.
So all of this results in margin pressure, the lower volumes would be elevated input cost. The atypical expenses. We ended up at the end of the day with an adjusted EBITDA of a negative <unk>, 6%.
The positive headline and it's a significant headline was continued strong demand in the market.
For our products, we had third quarter bookings of $184 million again against shipments of 131, that's a book to bill of one four.
And almost back to pre pandemic levels.
Pre pandemic the way the company was structured and was structured then we would expect to book in most quarters somewhere between 190 and $200 million that was the trajectory we were on to come into 184, and if you look at the chart on the last page of our press release, you'll see you'll see three out of.
In the last four quarters.
We're right around the $180 million.
In fact for the last four quarters, we had bookings of $685 million against shipments of 493.
So that's a book to bill of 139.
Leaves us with another record backlog of 547 million our highest ever.
Before I turn it over to Dave I wanted to define or or we get these questions every once in a while about how we count bookings how do we define our bookings and and it's a pretty conservative measure that we use basically we need in a delivery order with.
With a firm price and a firm delivery date.
Before we call it a booking.
So we exclude blanket orders or long term agreements that don't have specifics.
Pricing negotiation pricing determinations or delivery deadlines. So I'll use the 737 Max as an example, it's one of our historically largest production programs coming back thankfully.
We put a certain amount of product on every airplane and we have long term agreements with Boeing.
That book of business that stretches out for years and you know one way to count bookings would be to look at the term of the agreement say to 2027 or 25 or whatever the case may be.
And looked at their Skyline production chart and multiply the two together and call that backlog.
That's not how we do it in that case with 737 and Boeing for example.
Give us delivery orders on a regular basis.
Each quarter for delivery for the next quarter and that amount is.
Defines exactly what the product is and what the pricing is and what the delivery deadlines are that's what we included the booking nothing more.
So we're pretty consistent with that.
And I think.
It helps people understand what true demand is for our business.
Without no.
Getting messed up with with long term agreements and long term assumptions that might go along with it in some cases.
So again, great bookings for the third quarter, a continuation of great bookings for the last really the last five quarters.
And we think that sets us up for a good short term future here going into wrapping up 2022 and going into 2023.
At this point I'll turn it over to Dave to go over some of the specifics of the third quarter.
Thanks Pete.
While our sales continue to improve we continue to experience margin and cash flow headwinds.
This was $4 $6 million of what I'd call atypical costs in the quarter.
Consolidated sales increased to $131 4 million and was led primarily by continued growth in the recovering commercial transport market.
Which was up 36% compared with last year's third quarter and up 13% sequentially from the second quarter.
General Aviation sales increased by $2 $6 million to $14 8 million due to increased volume primarily of our antenna sales and enhanced vision systems into that market.
While military aerospace sales decreased by $4 6 million to $12 $5 million due primarily to a reduction in nonrecurring engineering revenue compared with the prior year.
Test segment sales increased by $3 $2 million to $19 3 million was driven by increased instrument test in transit test volume.
Despite this top line growth, we continued to struggle with our margins.
Sales increase of $19 6 million compared to the previous year's quarter. Historically, we would expect to see 40% to 45% of that sale sales increase or about $8 million or so drop to operating profit.
But we didn't see that you saw our operating loss.
Loss from operations actually increased by $98 million.
From a loss of four and a half million to a loss of $14 3 million.
So here's some of the items and the headwinds that happened during the quarter compared to a year ago.
Continued high level of spot buys to source inventory.
This is estimated to cost us about $4 million during the quarter.
We expect these type of bias to continue but to wind down as we move through the next 12 months.
As supply chain improves.
We had several atypical costs did not we do not expect to continue to be recurring in the future, including $4 million to settle ongoing legal dispute and customer accommodation.
We do however, as Pete mentioned expect it will be indemnified for a portion of these costs in the future.
Additionally, $450000 and lease termination costs were accrued as we're relocating our Irvine test operation into a different location in Irvine.
Inflation's impact relating to material and labor cost is estimated to be in the range of 7% to 8% or about $8 million to $9 million for the quarter compared to a year ago.
We expect over time, we'll be able to pass these costs to our customers as we enter into future contracts, but there will be a lag.
Some contracts have been renewed with more favorable pricing and some are in the works and some will not open up for another year or two but we're working on those.
Additionally, we've not been realizing customary margins on several of our newer test segment development programs.
We do expect higher margins on the follow on orders relating to those development programs that we've received or expect to receive in the future.
And finally in last year's third quarter, we did recognized $1 $1 million of grant from the a M. J P program offsetting cost of goods sold that we don't have this year.
Switching to the balance sheet.
We had a difficult quarter with respect to cash our net debt was $156 million at the end of the quarter up $133 million at the beginning of the year cash flows from operations in the third quarter were a negative $28 8 million.
Largely caused by inventory, which increased $16 1 million during the quarter.
Driven again once again by our growing sales backlog and the move to the right of some sales programs and.
And complicated by supply chain inefficiencies.
Receivables growth also increased $16 $7 million during the quarter.
And this was compounded by the negative EBITDA margins that we had in the quarter or basically breakeven EBITDA margins in the quarter.
We did have some.
We do have some progress to report in terms of an.
The amended credit facility that we completed yesterday.
With the cooperation of our Bank group, we extended the expiration of the revolving credit facility.
This time to the end of November 2023.
Extension will provide more time to get a long term credit arrangement in place as the process has been moving slower than expected.
You may recall that three months ago. When we reported we were targeting having this done by now.
While we're not finished yet once again or maybe still in the final stretch and expect that we will have a new facility in place before the end of the year.
Some select changes to the terms of the revolver.
Revolver will remain at $180 million through December 20th that decreased to $170 million.
The sulfur pricing spread will increase to sulfur plus 550 basis points through January 16th.
Then increase to sell for plus 100 or 850 basis points thereafter.
We're required to maintain a trailing 12 month adjusted EBITDA of $15 million for the quarter ending December 31st in March 31.
$25 million for the remaining quarters thereafter.
Minimum liquidity through December 31st measured monthly is required to be $10 million.
Increasing to $15 million thereafter.
There was a 10 basis points amendment fee.
That's that's all I have.
Okay. So for.
For the rest of this for now I'd like to.
Suggest that.
You turn your attention to the Bar chart on the last page of the press release I'm going to talk about this a little bit to explain kind of where we've done and where we're going.
As a company through the Covid.
Period here.
And what you have there hopefully youre looking at a color version rather than a black and white version.
But for each of the quarters from the first quarter of 2020 through the last quarter third quarter of 2022.
Bar on the left or the Green bar, if you're looking at is our bookings for that quarter in the blue bar in the bar on the right.
As our shipments.
First focus on the left the bars are the green bars, the booking trends and you can see that when the lockdown happened in the first and second quarter of 2020, our bookings went off a cliff and we basically went from 160 566 million down 60 volume.
And then it climbed back kind of quickly but to a reduced level in a plateaued right around $120 million for three quarters.
That was largely a period that restricted travel and locked down.
Work from home all of that stuff you might remember from Covid.
Then about a year ago in the third quarter of 2021, when those lockdowns were lifted demands her thoughts first narrow body.
We're not talking about it a whole lot on this call, but we are seeing many signs of increased wide body.
Travel also these days, which is very exciting.
And bookings took off up to 160 to 180.
Last quarter to 184.
<unk> million dollars so bookings.
Bookings again bouncing back pretty quickly, especially over the last.
Last year.
The blue bars, the bars on the right reflects our shipments and we fell and followed bookings down for a couple of quarters bottoming out in the third quarter of 2020, and then kind of plateauing.
Basically at that $100 million to $120 million level up until.
Two quarters ago, when we kind of broke through 120 broke through 130.
But still obviously over the last year lagging dimmed.
Demand significantly and that's really when the when the supply chain problems with the world happens that all happened around the third quarter of last years second quarter of last year demand took off.
And we had a hard time matching it and we're still struggling to do so, but we were ordering materials way back then.
Those materials are starting to come in and they've talked about the inventory ramp.
And it gives us confidence that we can execute on the orders in front of us.
Going forward. So again, if you look at the last four quarters.
We had total bookings of $685 million against sales of 493 sales have to catch up.
That's our mission that's our challenge so what are our expectations are we are.
Expecting the fourth quarter revenue in the quarter, we're in right now.
We will be in the range of $140 million to $150 million range.
We're aiming for the high end of that range, we have some challenges, but we think that's a safe range as of our most recent reading we are on track.
To do that from a from a volume standpoint in the curve.
Quarter.
Looking forward it's it's.
Typical this time of year, we take a first look at the year that that's coming and we are.
Working on but finishing up our budgeting process for 2023.
On bookings that we've experienced today.
And the brokered backlog that we have a $547 million.
We think that we're gonna be in the range of $640 million.
So 680 million next year and that would.
Represent a significant level of growth over where this year is going to end up.
So you know being a 525 $530 million range. So that's a that's a big challenge.
It's largely dependent on getting the parts that we need but our indications are that the supply chain is loosening up and.
In any event is not getting any worse. So we think.
That we have the.
Planning in place to bring those parts of the house and the convert them into revenue.
We think it's gonna be a really good year.
Yeah.
Obviously, we'll update more on that as we get closer and get into it.
And there are some things that are important to get nailed down like Florida, and 45, 40 90, but.
But we think we have the pieces in place to make.
But you are a reality.
So I think that ends our prepared remarks.
Sean I would like to.
Open it up to questions at this point.
And at this time, we will be conducting our question and answer session.
I'd like to ask a question. Please press star one on your telephone keypad.
Constantly from tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
And our first question comes from the line of John Wayne Tang with CJS Securities. Please proceed with your.
Hi, Good afternoon, guys. Thanks for taking my question I was just wondering because the inventory that you've built give us that confidence to ship to your revenue guidance or do you still are you still waiting on parts that could that could push out things towards the end of the quarter.
You're talking about the fourth quarter John .
That's correct.
We we think we are pretty good line of sight to inventory for the fourth quarter. There are a couple of hotspots there always are.
And we're working those pretty aggressively but our internal target is at the high end of that range or just beyond it.
And so by putting that range in there, we think were giving reasonable allowance.
For material problems that could still pop up but at this point, we're obviously pretty well into the quarter and learn.
You can learn encouraged that were on track so far so.
We think we're all right.
Okay great.
Dave I was wondering what your new estimate.
John when you might achieve breakeven.
Pretax income or a cash flow basis.
Just given the you know the inflation underlying that the push out to the other wrap and obviously you know your expectations for how the refinancing.
Refinancing might play out.
Yeah I think.
Our quarterly GAAP.
Pretax breakeven points.
In the neighborhood of $160 million.
With.
When the spot buys go away.
We experienced 3 million $3 million or so of spot buys this quarter.
So with those I would say, our GAAP breakeven points, probably about $165 million right now with those with those spot buys.
Okay, Great and then just any best estimate for you know what what's left to complete the refinancing what are the items left and kind of at the time that you think it will take.
Well, our target is to get something done.
Before year end here.
We're working with a couple of options there.
In terms of its it's still basically the same structure, we talked about before with a combination of an asset based loan is supported by.
Working capital receivables and inventory.
And a term loan that would be supported by our real estate and machinery and equipment.
Same basic structure, there and our target is to get it done as soon as possible.
Okay.
I'm confident we'll get something done in the first half in December but.
You know that.
If you if you read through the.
The amendment extend.
Amendment, we just did.
It's highly in our benefit to get something done sooner rather than later so that's.
I'm confident we'll get something done in the in December here.
Okay, great. Good luck. Thank you.
And again as a reminder, if anyone has any questions you May press star one on your telephone keypad to join the queue.
Our next question comes from the line of Michael.
Please proceed with your question.
Hey, good evening guys. Thanks for taking.
Taking the question.
Dave maybe just to stay on the call.
<unk> facility what.
And you mentioned that EBITDA levels on a trailing basis. It sounds like you won't be EBITDA positive.
In the fourth quarter, but what what sort of the.
The bank definition of EBITDA, what was sort of the bank defined EBITDA this quarter.
Now how do you get it.
It sounds like there's going to be a challenge to to get to a sustaining EBITDA level here.
I would say that I do.
We will be cash or EBITDA positive in the fourth quarter.
Yeah.
Uh huh.
So.
You know our test as us being compliant.
Okay, even though you just said.
Wasn't that breakeven.
We wouldn't have entered into an amendment that we were forecasting to not be compliant with.
Right.
Okay Yeah.
I mean, it's just yeah I just haven't seen one of these take take this long so.
I would imagine the EBITDA levels are a bit of a challenge but okay.
And then what I mean Pete.
Pete you you gave a pretty detailed analysis of <unk>.
The color on the bookings so within the bookings I mean, what are you seeing for near term production rates you know that.
Underlying.
The 2023, I mean supply chain, obviously, maybe a little bit better or still challenges.
We've got some other big supplier stay the engines and supply chain is going to last all year, but you know what what what are sort of the underlying rates. That's anchoring this guidance.
You mean for the OEM production rates.
Yeah.
Yeah, I mean, they're pretty much.
As published I mean, Boeing has us running a 28 to 30 units.
On 737 Max.
And business jet volumes are not going down they're going up military volumes are pretty easy to predict.
The take rate on a lot of alright.
Our cabin electronics product lines like in seat power and.
Wireless access points things like that which are optional in the narrow body world are a pretty strong they're trending to like 70% or so of new aircrafts production both.
At Boeing and Airbus So.
That definitely helps.
A hint to that.
You know the the widebody resurgence is actually very beneficial for us I mean before the pandemic have our commercial transport sales with a wide body versus narrow body.
Narrow body has bounced back with the resumption of domestic short haul travel.
And predictions, even you know.
10 months ago, where there's a lot of the wide bodies that were parked in the desert would never come back, but they are and they are because demands coming back to I'm, particularly encouraged by some of the recent news out of China as a major.
Major driver of international long haul travel in the half the world's largest airlines are Chinese and they have been running at like 5%.
Of their pre pandemic international route structure. So we.
We think those trends are pretty positive the products of ours.
Go into wide bodies are definitely picking up.
It's not just production rates that drive our business half of our commercial transport sales pre pandemic where aftermarket.
So you know we're encouraged by 737, Max getting back up the rate. We're encouraged by hopefully 78, seven getting back into production, but we're not dependent on those necessarily to see some kind of resurgence in demand.
Certainly what we're seeing at least in the wide body world is more aftermarket driven than mindset.
Okay.
Got it and then just last one maybe just Dave again.
Free.
Expectations.
And just thinking about I guess.
Yes.
It sounds like Theres, obviously, working capital, which a lot of companies are experiencing some of that should unwind, but just thinking I guess about the puts and takes I mean, it sounds like that that facility is going to be over 11% I guess, if you draw on that so just how should we think about free cash flow or or even conversion as well.
Look into 'twenty three.
Yes.
We will we will turn to cash flow positive as we move through the year.
Okay.
We saw this big buildup of inventory.
For the last six or nine months.
We do expect the inventory build to <unk>.
Wind down and actually decrease our inventory levels as we move through next year.
That's going to provide a little bit of a tailwind there along with the top line growth and the margin that comes from the top line growth.
There so.
We are forecasting two.
To move through the year than the first quarter will probably be our weakest quarter there.
Next year, but as the sales grow there and we wind down the inventory I expect that.
Cash flow from operations to pick up significantly, especially in the second half of next year.
Got it okay perfect. Thanks, guys.
And again as a.
To remind you if you have any questions you May press star one on your telephone keypad to join the question and answer queue.
Our next question comes from the line again from Jon Tower in wing hang with C. J executes. Please proceed with your question.
Hi, Thanks for taking my follow up just wondering within the guidance that you have laid out for next year or this bracket how much flora and army radio business have you have you included in there.
And if you Havent you know how quickly could that start becoming a tailwind for you assuming that you went to that of course.
They're big.
Yeah.
I couldn't hear your question specifically was it how much flare isn't there for next year or Florida, and 45 49 is that what youre asking.
Yeah, I assume that you have some 45.
I'm sorry, the Army radio.
Remember the number but.
Not yet.
Yes, when you have its a risk reduced number I would say between the two of them.
It's somewhere in the 20 $25 million.
Range.
For for next year.
Okay got it and then we think there's pretty.
We think there's pretty significant upside potential there.
Especially on the 45 49, depending on how the army chooses to execute the program.
Okay understood and just a.
A question on pricing you said you mentioned that there's some of these programs out there that are one to two years away from your kind of your contract resets.
Is there no chance of going back to your customers and repricing under just based on the level of inflation that you have.
See I have to assume that youre basically taking and negative margins on these projects at this point, which doesn't sound great sustainable.
Well no I wouldn't say that that's the.
The long term contract.
Nature of our business in general isn't that big of a concern with repricing. There. Obviously are some products that are better priced than others and we are working to address that.
But a fair amount of our of our product.
Product portfolios relative turns relatively quickly so like a year year and a half something like that.
And those.
You know in some cases, we're being quite successful repricing them, we have a.
Situations, where we can make a delivery, but in order to do so we got to pay a big premium for.
A certain component we in many cases are going out to customers and asking them to cover that.
And they're doing so.
And in other cases, we're choosing to bite the bullet and do it ourselves for and the interest of keeping customer relationships cordial.
But you know.
It's going to take time for all of that to work itself out and were definitely not ahead of the cost increases we're responding to them.
Like most companies so.
It's downward pressure, but we are doing what we can where we think we can do.
You kind of get out in front of it and respond to it.
Got it thank you.
And our next question comes from the line of Michael.
Ceremony, what choices do you foresee with your question.
Hey, Thanks Pete.
On the pricing what are you seeing with the current bookings on the aftermarket side of the business I mean do you have.
Pick an airline customer or do you have some flexibility to increase the price on you know whether it's brake fix type work or if they are you know.
Doing some retrofits.
Getting some some reasonable pricing there.
Yeah, well I would I would say, we're pretty comfortable with the prices that we're getting most of what we're dealing with where we are pressure our older price levels that have been in place in the system for a while but.
A lot of the more recent demand.
We think it comes with a pretty a pretty reasonable pricing levels. The other thing I would say about our backlog and the range of.
Bigger programs that we've announced.
They're not in there yet I mean, they're just not there we talked about a pretty major award with southwest, but I think at the end of the third quarter. We had like 10 ship sets in there or something like that.
So so theres a lot of that to come 45 40 90. This is obviously not in there.
Sure.
<unk>.
So some of the others.
Yeah without going through the whole list I guess, we feel like if we can.
Get the volume up and get the new programs into production on margin profile will look quite a bit better than it does today, where we're stuck with these investments.
Centaury premiums that we have to pay spot buys.
And pricing from six months or a year ago when things were different.
So, we obviously have to cycle that through but I.
I think we'll get that done it's just a matter of time.
Got it perfect. Thanks, guys.
And we have reached the end of our question and answer session. I will now turn the call back over to Peter Gunn Newman for closing remarks.
Okay. Thank you and thanks, everybody for tuning in.
We look forward to talking to you at the when the fourth quarter's over probably in early February .
Have a good day.
And this concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.
[music].
Yeah.
[music].
Yes.
[music].
Yes.
Yes.
Yes.
Okay.