Q4 2024 Astronics Corp Earnings Call
Operator: Greetings and welcome to the Astronics Corporation fourth quarter fiscal year 2024 financial. At this time, all participants are in listen-only mode.
Greetings and welcome to the restaurant ex Corporation fourth quarter fiscal year 2024 financial results.
At this time all participants are in a listen only mode.
Operator: A question-and-answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.
And answer session will follow the formal presentation.
If I didn't once you require operator assistance. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded.
Craig Mychajluk: It is now my pleasure to introduce Craig Mychajluk of Investor Relations for Astronics. Please go ahead.
Mahalik: It's now my pleasure to introduce correct Mahalik Investor Relations for strikes. Please go ahead.
Craig Mychajluk: Thank you and good afternoon everyone. We certainly appreciate your time today and your interest in Astronics.
Speaker Change: Yeah. Thank you and good afternoon, everyone. We certainly appreciate your time today and your interest in <unk>.
Craig Mychajluk: On the call with me here today is Pete Gundermann, our Chairman, President and CEO, and Nancy Hedges, our Chief Financial Officer. You should have a copy of our fourth quarter and full year 2024 results, which crossed the wires after the markets closed today. If you do not have the release, you can find it on our website at Astronics.com.
P Gunderman: On the call with me here today is P gunderman, our chairman President and CEO.
Speaker Change: Nancy hedges, our Chief Financial Officer.
Speaker Change: It should have a copy of our fourth quarter and full year 2024 results, which crossed the wires. After the market close today, we do not have the release you can find it on our website at <unk> Dot com.
Craig Mychajluk: As you are aware, we may make forward-looking statements during the formal discussion and the Q&A session of this conference call. 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 risks and uncertainties and other factors are provided in the earnings release, as well as with other documents filed with the Securities and Exchange Commission. You can find these documents on our website or at scc.gov.
Speaker Change: As you are aware, we may make forward looking statements during the formal discussion and Q&A session of this conference call.
Speaker Change: 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.
Speaker Change: These risks and uncertainties and other factors are provided in the earnings release as well as with other documents filed with the Securities and Exchange Commission.
Speaker Change: You can find these documents on our website or at SEC Gov.
Craig Mychajluk: During today's call, we'll also discuss some non-GAP measures, which we believe will be useful and evaluated in our performance. you should not consider the presentation of this additional information in isolation or as a substitute for results prepared in accordance with GAP. We have provided reconciliations of non-GAP measures with comparable GAP measures in the tables that accompany today's release.
During today's call. We'll also discuss some non-GAAP measures, which we believe will be useful in evaluating our performance you.
Speaker Change: 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.
Craig Mychajluk: So with that, let me turn it over to Pete to begin.
Pete: So with that let me turn it over to Pete to begin Pete.
Pete Gundermann: Thank you, Craig, and good afternoon, everybody. Welcome to the call. We feel our fourth quarter was a very strong close to 2024, which was a year of significant progress for the company.
Pete: Thank you Craig and good afternoon, everybody welcome to the call.
Pete: We feel our fourth quarter was a very strong close to 2024, which was a year of significant progress for the company I'll talk first about the quarter then about the year.
Pete Gundermann: I'll talk first about the quarter, then about the year. Nancy will go through some specifics of the financials, and then we'll turn our attention to a preview of 2025. Operationally, the fourth quarter was a very good quarter for astronics. Sales came in at $208.5 million, the high end of our forecasted range, once again. It was just short of our all-time high, which was way back in the third quarter of 2018, and we achieved this in spite of the Boeing strike, which essentially shut down our biggest program at our biggest customer. The volume was made possible by the continued improvement in our supply chain and operating efficiencies in our operations.
Nancy Hedges: Nancy will go through some specifics of the.
Nancy Hedges: Financials, and then we'll turn our attention to a preview of 2025.
Nancy Hedges: Operationally the fourth quarter was a very good quarter for <unk> sales.
Nancy Hedges: Sales came in at 208.5.
Nancy Hedges: 5 million the high end of our forecasted range once again.
Nancy Hedges: It was just short of our all time high which was way back in the third quarter of 2018, and we achieved this in spite of the Boeing strike, which essentially shut down our biggest program at our biggest customer.
Nancy Hedges: The volume was made possible by the continued improvement in our supply chain and operating efficiencies in our operations.
Pete Gundermann: Higher volume had a very positive impact on our margins, so progress was masked by some unusual factors or adjustments. I'll come back to them in a minute. Until then, I will speak to adjusted numbers as described in the press release. Headlines were adjusted operating income of 11.4% for the quarter, up from 5.9% last year. Adjusted net income was 8.1%, up from 3.3% last year. Adjusted EBITDA was $31.5 million, or 15.1% of sales. The positive margins led to positive cash from operations of $26.4 million in the quarter. It was our first seriously positive cash quarter since before the pandemic.
Nancy Hedges: Higher volume had a very positive impact on our margins.
Nancy Hedges: This was masked by some unusual factors or adjustments I'll come back to them in a minute until then I will speak to adjusted numbers as described in the press release.
Nancy Hedges: Headlines, where adjusted operating income of 11, 4% for the quarter up from five 9% last year.
Nancy Hedges: Adjusted net income was eight 1% up from three 3% last year.
Nancy Hedges: Adjusted EBITDA was 31, and a half million or 15, 1% of sales.
Nancy Hedges: Okay.
Nancy Hedges: The positive margins led to positive cash from operations of $26.4 million in the quarter.
Nancy Hedges: It was our first seriously positive cash quarter since before the pandemic.
Pete Gundermann: Our aerospace segment was the driver of the results. sales of $188.5 million was an all-time high, up 11.7% for the quarter. commercial aero and military aircraft continue to drive the results. Adjusted operating margin for our aerospace segment was 16% for the quarter, up from 10.2% last year. Obviously there were some significant adjustments in the quarter. A couple of them were true up. of situations that were initially covered in our third quarter release. The Lillium bankruptcy true-up of $1 million. And a warranty reserve for a field replacement program of a business jet came in for another $1.7 million, so $2.7 million total for those two.
Nancy Hedges: Our aerospace segment was the driver of the results.
Nancy Hedges: Sales of $188 5 million was an all time high up 11, 7% for the quarter.
Commercial Aero and military aircrafts continue to drive the results.
Nancy Hedges: Adjusted operating margin for Aerospace segment was 16% for the quarter up from 10, 2% last year.
Nancy Hedges: Okay.
Nancy Hedges: Obviously, there were some significant adjustments in the quarter a couple of them were true ups.
Nancy Hedges: Of situations that were initially covered in our third quarter release.
Liam: Hello, Liam bankruptcy true up of $1 million.
Liam: And a warranty reserve for our field replacement program of a business jet came up came in for another one 7 million so $2 7 million in total for those two.
Pete Gundermann: We had another restructuring charge in our test business of $1.4 million. But the big adjustments had to do with an important step forward in our patent infringement dispute in the UK. We had legal expenses of $6.1 million in the quarter, largely for a damages trial that took place in October. We had refinance expenses of $3.2 million for some steps that we took to protect against the potential of a negative ruling in that damages trial. And then we increased our legal settlement reserve by $4.8 million, which sounds like a loss, but was actually a significant victory for us.
Liam: We had another restructuring charge in our test business of $1 4 million.
Liam: But the big adjustments had to do with important step forward in our patent infringement dispute in the UK, we had legal expenses of $6 1 million in the quarter.
Liam: Largely for our damages trial that took place in October.
Liam: We had refinance expenses of $3 2 million for some steps that we took to protect against the potential of a negative ruling in that damages trial Oh.
Liam: And then we increased our legal settlement reserve by $4 8 million.
Liam: Which sounds like a loss, but it was actually a significant victory for us those who have been following us closely know that there was a range of possible outcomes from that ruling.
Pete Gundermann: Those who have been following us closely know that there was a range of possible outcomes from that ruling. The actual outcome was very much in favor of our position compared to what it possibly could have done if it had gone the other way. But still, the award was $4.8 million higher than our accruals going into the hearing, so that shows up on our income statement in the fourth quarter.
Liam: The actual outcome was very much in favor of our position compared to what it is.
Liam: Possibly could've been if it had gone the other way.
Liam: But still the award was $4 8 million higher than our accruals going into the hearing so that shows up on our income statement and in the fourth quarter.
Pete Gundermann: The quarter provided a strong close to the year, which, as I said, was a year of significant recovery for the company. Sales grew to $795 million, up 15.4% over 2023. We've averaged over 20% growth over the last three-year period. Adjusted operating income was 7.7% up from 2.1% in 2023 and adjusted EBITDA was 12.1% for the year up from 8.1% in 2023. Finally, demand continues to be strong. Q4 bookings were $196 million, a book-to-bill of 0.94. We figure the Boeing strike hurt our bookings by about $10 million in each of the third quarter and the fourth quarter.
Liam: The quarter provided a strong close to the year, which as I said was a year of significant recovery for the company's sales grew to $795 million.
Liam: The 4% over 2023.
Liam: We've averaged over 20% growth over the last three year period.
Liam: Adjusted operating income was seven 7% up from two 1% in 2023 and adjusted EBITDA was 12, 1% for the year up from eight 1% in.
Liam: <unk> 2023.
Liam: Finally demand continues to be strong <unk> bookings were 196 million our book to Bill of <unk> 94.
Liam: We figure the Boeing strike hurdle bookings by about 10 million in each of the third quarter and the fourth quarter.
Pete Gundermann: Still, we ended the year with a backlog of $599 million.
Liam: Still we ended the year with a backlog of $599 million.
Pete Gundermann: I'm not going to spend a whole lot of time talking on the issues that are driving our results, tailwinds you might refer to them as, but it's worth mentioning our supply chain continues to improve and perform better and better. Our workforce is getting more efficient. and more accustomed to their responsibilities. We talked a while ago about how a significant portion of our workforce has been with us for less than three years, like 45 percent. Input cost pressures continue to subside. Pricing adjustments are taking hold and demand continues to be strong. All in all, a lot of tailwinds as we exit 2024 and go into 2025.
I'm not going to spend a whole lot of time talking on the issues that are driving our results tailwind you might refer to them in the house, but it's worth mentioning our supply chain continues to improve and perform better and better our workforce is getting more efficient.
Liam: And more accustomed to their responsibilities, we talked a while ago about how a significant portion of our workforce has been with us for less than three years like 45%.
Liam: Input cost pressures continue to subside pricing adjustments are taking hold and demand continues to be strong all in all a lot of tailwind as we exit 2024 and go into 2025.
Nancy Hedges: Now I'll turn it over to Nancy. Thanks, Pete. I'll now touch on some of the drivers behind our operational and financial results on a consolidated basis, followed by some segment-level highlights. We had a very solid quarter of continued growth in the fourth quarter of twenty-four, as Pete mentioned. Aerospace hit a new record in revenue. The strength of the underlying business and our ability to expand our margins were masked by a few atypical charges we had in the quarter, some of which Pete talked about. So allow me to walk you through those in a little bit more detail.
Nancy Hedges: Now I'll turn it over to Nancy.
Nancy Hedges: Thanks Pete.
Nancy Hedges: I'll now touch on some of the drivers behind our operational and financial results on a consolidated basis, followed by some segment level highlights we had a very solid quarter of continued growth in the fourth quarter of 'twenty four as Pete mentioned aerospace hit a new record in revenue.
Nancy Hedges: The strength of the underlying business and our ability to expand our margins were masked by a few atypical charges. We had in the quarter sounded like Steve talked about so allow me to walk you through that a little bit more detail.
Nancy Hedges: Profitability continues to strengthen, with gross profit up $10 million, or 25%, and gross margin expanded 3.5 points to 24.0% over the prior year quarter, demonstrating three consecutive quarters of margin expansion. Offsetting the Benefits of Higher Volume and Improved Operational Efficiency was an additional $1.7 million warranty reserve related to a product that requires a field modification, which we talked about last quarter. This was related to a custom electrical power system designed specifically for a business jet aircraft introduced in 2018 that was experiencing less than optimal reliability over time. We have been working closely with our customer on this issue and are implementing a fix that both our customer and our team believe will fully address the issue.
Nancy Hedges: Profitability continues to strengthen with gross profit up $10 million or 25%.
Nancy Hedges: Gross margin expanded three five points to 24.0% over.
Over the prior year quarter, demonstrating three consecutive quarters of margin expansion.
Nancy Hedges: Offsetting the benefits of higher volume and improved operational efficiency with an additional one $7 million warranty reserve related to a product that requires a field modification, which we talked about last quarter.
This was related to a custom electrical power system designed specifically for our business jet aircrafts introduced in 2018 that was experiencing less than optimal reliability overtime.
Nancy Hedges: We have been working closely with our customer on this issue and are implementing effects that all of our customer and our team believe will fully address the issue.
Nancy Hedges: In addition, we had a $0.8 million inventory charge related to the Lillium bankruptcy. There had been a glimmer of hope as they appeared to have found new financing back in December, but that didn't come through, so they're in bankruptcy again. Adjusting for both, non-gap gross margin expanded 470 basis points to 25.2%. Operating income increased $1.1 million, despite roughly $12 million in atypical SG&A costs, including the additional expense to true up our reserves for the UK Damages Award that Pete mentioned, elevated legal expenses, and some restructuring charges in our test segment. These included the $4.8 million incremental reserve for the payment of damages for the UKIP litigation award.
Nancy Hedges: In addition, we had at a point $8 million inventory charge related to the Lilly in bankruptcy.
Nancy Hedges: There had been a glimmer of hope and they appear to have found new financing back in December but that didn't come through so they're in bankruptcy again.
Nancy Hedges: Adjusting for both non-GAAP gross margin expanded 470 basis points to 25, 2%.
Nancy Hedges: Operating income increased $1 1 million, despite roughly $12 million in atypical SG&A costs, including the additional expense to true up or is there something you can pay damages are worried that Pete mentioned.
Nancy Hedges: Elevated legal expenses and some restructuring charges in our test segment.
Nancy Hedges: These included the $4.8 million incremental reserve for the payment of damages for the U K I P Litigation Award.
Nancy Hedges: We also had $6 million in litigation-related legal expenses and $1.4 million in costs for the further restructuring of our test system segment. Adjusting for all the atypical items, non-gap adjusted operating margin for the fourth quarter was 11.4%, a significant improvement over the prior year and the trailing third quarter. adjusted EBITDA margin was 15.1%. Below the operating line was $3 million in costs related to the extinguishment of our previous term loan that was fully paid down in the fourth quarter. The interest savings resulting from the restructuring of that previous term loan and our ABL debt, which were at a blended rate of roughly 9%, to the convertible debt that's at a rate of 5.5%, results in a $5.6 million annual reduction in interest expense.
Nancy Hedges: Also had $6 million in litigation related legal expenses and $1 4 million in costs for the further restructuring of our test systems segment.
Nancy Hedges: Adjusting for all the atypical items non-GAAP adjusted operating margin for the fourth quarter was 11, 4% a significant improvement over the prior year.
Nancy Hedges: The trailing third quarter.
Nancy Hedges: Adjusted EBITDA margin was 15, 1%.
Nancy Hedges: Below the operating line was $3 million in costs related to the extinguishment of our previous term loan that was fully paid down in the fourth quarter.
The interest savings, resulting from the restructuring of that previous term loan and our ABL debt, which were at a blended rate of roughly 9% to the convertible debt that's at a rate of 5.5%.
Nancy Hedges: It resulted in a $5 6 million dollar annual reduction in interest expense.
Nancy Hedges: Net loss for the quarter was $0.08 per diluted share. Non-GAAP-adjusted earnings per share was $0.48 compared with non-GAAP-adjusted earnings per share in last year's quarter of $0.19 and a non-GAAP earnings per share in the trailing third quarter of $0.35 per share. We generated $26.4 million in cash from operations for the quarter, which, as Pete mentioned, is our largest largest cash generating quarter since the third quarter of 2019. The improved cash flow is driven by improved conversion of profits after non-cash adjustments and lower working capital requirements. Net debt at the end of the quarter was about $157 million, down $18 million from the prior quarter.
Nancy Hedges: Net loss for the quarter was eight cents per diluted share.
Nancy Hedges: non-GAAP adjusted earnings per share was 48 cents compared with non-GAAP adjusted earnings per share in last year's quarter of 19 cents and non-GAAP earnings per share in the trailing third quarter of 35 cents per share.
Nancy Hedges: We generated $26 $4 million in cash from operations for the quarter, which as Pete mentioned is our largest cat largest cash generating quarter since the third quarter of 2019.
Nancy Hedges: The improved cash flow driven by improved conversion of profits after noncash adjustments and lower and lower working capital requirements.
Net debt at the end of the quarter was about $157 million down $18 million from the prior quarter.
Nancy Hedges: We ended the quarter with $18.4 million in cash and roughly $188 million available to draw on our recently amended revolving credit facility. As you know, we issued $165 million of 5.5% convertible senior notes on December 3rd of last year. The conversion price is $22.89 per share, representing a 30% premium over the closing stock price on November 25th, 2024. The notes mature on March 15th, 2030, but are callable and redeemable by us on or after March 28th, 2028. Redemptions require the stock price to be 130% of the conversion price for 20 of the 30 trading days preceding any quarter end or trading at approximately $30 per share.
Nancy Hedges: We ended the quarter with $18 $4 million in cash and roughly 108 hundred $88 million available to draw at our recently amended revolving credit facility.
Nancy Hedges: As you know we issued $165 million of five 5% convertible senior notes on December 3rd of last year.
Nancy Hedges: The conversion price is $22 89 per share representing a 30% premium over the closing stock price on November 25 2024.
Nancy Hedges: The notes mature on March 15th 2030, but are callable and redeemable by by Us on or after March 28 2028.
Nancy Hedges: Redemptions required the stock price to be 130% of the conversion price for 20 of the 30 trading days preceding any quarter and are trading at approximately $30 per share.
Nancy Hedges: The notes are classified as a long-term liability on our balance sheet at the end of the year. The near-term potential dilution impact on EPS is about 7.2 million shares. However, it's important to note that once callable or if redeemed, we do have the flexibility to settle the notes in cash as well as stock. And our intention is to minimize dilution by, at a minimum, affecting a net share settlement with $165 million principal paid in cash, measurably reducing the dilution effect. In fact, given our outlook on improving profitability and the very favorable ruling in the UK, we feel we'll be in a strong position to cover the notes with cash.
Nancy Hedges: The notes are classified as a long term liability on our balance sheet at the end of the year.
Nancy Hedges: The near term potential dilution impact on EPS is about $7 2 million shares.
Nancy Hedges: However, it's important to note that once callable or if redeemed we do have the flexibility to settle the notes in cash as well as stock and our intention is to minimize dilution by at a minimum affecting our net share settlement with $165 million principal paid in cash measurably, reducing the dilution effect.
Nancy Hedges: In fact, given our outlook on improving profitability and the very favorable ruling in the U K, we feel we'll be in a strong position to cover the notes with cash.
Nancy Hedges: We also plan to use some of our available liquidity to reinvest in the business to be in a position to be able to meet our growth plans.
Nancy Hedges: We also plan to use some of our available liquidity to reinvest in the business to be in a position to be able to meet our growth plans.
Nancy Hedges: Capital expenditures are expected to be approximately $35-40 million in 2025, which is a higher level than our last few years while we were managing our liquidity through the pandemic. In addition to catching up on deferred spending, we are also planning a facility consolidation and additional capacity to allow for future growth. We currently have about $216 million in available liquidity and have nothing currently outstanding on our revolver. We expect that given our expectations of improving profitability, that we will be in a position to convert our asset-based revolver to a cash-based revolver that will provide greater financial flexibility at some point in the not-so-distant future.
Nancy Hedges: Capital expenditures are expected to be approximately $35 million to $40 million in 2025, which is a higher level than our last few years, while we are managing our liquidity through the pandemic.
Nancy Hedges: In addition to catching up on deferred spending we are also planning a facility consolidation and additional capacity to allow for future growth.
Nancy Hedges: We currently have about $216 million in available liquidity and have nothing currently outstanding on our revolver.
Nancy Hedges: We expect that given our expectations of improving profitability that we will be in a position to convert our asset based revolver to a cash based revolver that will provide greater financial flexibility at some point in the not so distant future.
Nancy Hedges: We could use that excess liquidity in other efforts, including acquisitions or to buy back shares, which we believe are trading at a discount, or as I noted previously, to settle some or all of the convertible bonds and cash.
Nancy Hedges: We could use that excess liquidity and other efforts, including acquisitions or to buy back shares, which we believe are trading at a discount.
Nancy Hedges: As I noted previously used to settle some or all of the convertible bonds in cash.
Nancy Hedges: Moving on to our segment level results, let me cover some key factors driving profitability within our aerospace segment. Our aerospace segment is roughly 90% of our business. The segment had record sales in the quarter of $188.5 million, which is an 11.7% increase over the fourth quarter in 2023, and 6% up over the trailing quarter. Growth was driven largely by a $16.7 million increase in commercial transport sales, primarily related to increased demand by the airlines for cabin power and in-flight entertainment and connectivity products. This was somewhat offset by lower sales of commercial lighting and safety products resulting from the Boeing strike.
Nancy Hedges: Moving on to our segment level results, let me cover some key factors driving profitability within our aerospace segment.
Nancy Hedges: Our aerospace segment is roughly 90% of our business. The segment had record sales in the quarter of $188 5 million, which is an 11, 7% increase over the fourth quarter in 'twenty, three and 6% up over the trailing quarter.
Nancy Hedges: Growth was driven largely by a $16 $7 million increase in commercial transport sales primarily related to increased demand by the airlines for our cabin power and in flight entertainment and connectivity products.
Nancy Hedges: This was somewhat offset by lower sales of commercial lighting and safety products, resulting from the Boeing strike.
Nancy Hedges: Operating profit for Aerospace improved $2.5 million year-over-year and was also up $2.5 million, or 18%, over the trailing quarter. Adjusted operating profit was $30.2 million in the quarter compared with $17.2 million in the prior year period and $25.3 million in the third quarter. On an adjusted basis, aerospace demonstrated 45% operating leverage on the higher volume from the third to the fourth quarter. Adjusted operating margin improved 5.8 points year over year to 16.0% and improved 180 basis points sequentially.
Nancy Hedges: Operating profit for aerospace improved $2 $5 million year over year, and was also up $2 $5 million or 18% over the trailing quarter.
Nancy Hedges: Adjusted operating profit was $30 2 million in the quarter compared with $17 2 million in the prior year period, and $25 3 million in the third quarter.
Nancy Hedges: On an adjusted basis aerospace demonstrated 45% operating leverage on the higher volume from the third to the fourth quarter.
Nancy Hedges: Adjusted operating margin improved five eight points year over year to 16.0% and improved 180 basis points sequentially.
Nancy Hedges: Turning to the test segment, the test business operating profit was roughly breakeven, but modestly improved over the fourth quarter of 2023. The 2024 fourth quarter had $1.4 million in restructuring charges, although litigation expenses were down about $700,000. We expect to begin realizing approximately $4 to $5 million in annual cost savings beginning in the first quarter of 2025 resulting from the restructuring. However, we are also anticipating a week-first half for this business. Timing on the 4549T Army Radio Test Program will define the profitability profile for the test business this year. Obviously the sooner production kicks in, the better.
Nancy Hedges: Turning to the test segment.
Nancy Hedges: The test business operating profit was roughly breakeven, but modestly improved over the fourth quarter of 2023.
Nancy Hedges: The 2020 for fourth quarter had $1 $4 million in restructuring charges, although litigation expenses were down about $700000.
Nancy Hedges: We expect to begin realizing approximately $4 million to $5 million in annual cost savings beginning in the first quarter of 2025, resulting from the restructuring.
Nancy Hedges: However, we are also anticipating a weak first half for this business.
Nancy Hedges: Timing on the 45090 Army Radio test program will define the profitability profile for the test business this year.
Nancy Hedges: Obviously, the sooner and production kicks in and the better.
Nancy Hedges: tests adjusted operating margin with 7.3 percent and improvement over the 2.5 percent of the comparative quarter demonstrating the benefits from the restructuring initiatives implemented during 2024.
Nancy Hedges: Test's adjusted operating margin was seven 3% an improvement over the two 5% of the comparative quarter, demonstrating the benefits from the restructuring initiatives implemented during 2024.
Nancy Hedges: And with that, let me turn it back to Pete.
Pete: And with that let me turn it back to Pete.
Pete Gundermann: Pete? Thank you, Nancy.
Nancy Hedges: Thank you Nancy.
Pete Gundermann: Most of you are aware that we have been involved in a lengthy patent infringement suit brought by a European plaintiff relevant to our NC Power product line for many years, since way back in 2010. This situation has gotten more than a little attention over the last few months, so I thought I'd provide a little update as to where we stand today. Legal proceedings over the years have been held or are being held in the U.S., France, Germany, and the U.K. in the USA and France. The patent was found to be invalid. So the French decision is being appealed.
Nancy Hedges: Most of you are aware that we have been involved in a lengthy patent infringement suit brought by European points us relevant to our in seat power product line.
Nancy Hedges: For many years since way back in 2010 at.
Nancy Hedges: This situation has got more than a little attention over the last few months.
Nancy Hedges: Provide a little update as to where we stand today.
Nancy Hedges: Legal proceedings over the years have been held or are being held in the U S.
Nancy Hedges: Thats, Germany and the UK.
Nancy Hedges: In the USA and France.
Speaker Change: The patent that was found to be invalid.
Speaker Change: So the French decision is being appealed we expect a decision.
Pete Gundermann: We expect a decision there in the coming months. Germany dismissed some of the claims of the patent but upheld others and found that Astronix had been infringing. The company paid $3.5 million in penalties and interest in 2020 and has taken a reserve of $17.3 million to cover remaining estimated damages and associated interest. We expect, but don't know, that proceedings there may commence in 2026. UK Court, however, found the entire patent to be valid and found Astronics to be infringing. A damages hearing was held in October. We had reserved $7.4 million to cover anticipated damages, but the plaintiff claimed damages of up to approximately $105 million in that hearing.
Speaker Change: They're in the coming months.
Speaker Change: Germany dismissed some of the claims of the patent, but upheld others and found that <unk> had been infringing.
Speaker Change: The company paid $3 $5 million in penalties and interest in 2020.
Speaker Change: It's taken a reserve of $17 3 million to cover remaining estimated damages and associated interest.
Speaker Change: We expect but don't know the proceedings there may commence in 2026.
Speaker Change: U K court however.
Speaker Change: Entire patent to be valid and found a strong X three infringement damages hearing was held in October.
Speaker Change: We had reserved seven 4 million to cover anticipated damages.
Speaker Change: But the point of claimed damages of up to approximately $105 million.
Pete Gundermann: That's a big difference. The decision came down on February 21st, requiring Astronics to pay damages of $11.8 million. We consider this a very favorable ruling compared to the range of possible outcomes. The company expects the damages due to be paid in the first half of 2025. There will be a couple of follow-on hearings in coming months to decide certain other issues peripheral to the ruling, such as the award of possible interest charges and assignment of legal fees. We do not have a basis to estimate what these may be at this time. There's a line of logic that says they could be zero, or they could be somewhat substantial, but we do not expect them in any event to be any more than the damages award.
Speaker Change: Hero and that's a big difference.
Speaker Change: The decision came down on February 21st requiring a strikes to pay damages.
Speaker Change: 7.8 volume.
Speaker Change: Consider this a very favorable ruling compared to the range of possible outcomes.
Speaker Change: The company expects the damages due to be paid in the first half of 2025.
Speaker Change: There will be a couple of follow on hearings in coming months to decide certain other issues peripheral to the ruling such as the award of possible interest charges and assignment of legal fees.
Speaker Change: Do not have a basis to estimate what these may be at this time.
Speaker Change: There is a line of logic that says that it could be zero or they could be somewhat substantial but we do not expect them in any event to be any more than the damages award.
Pete Gundermann: An appeal to a higher court is possible in the matter brought by one or both of the parties. Such an appeal would likely be heard in the first half of 2026.
Speaker Change: And appeal to a higher court as possible in the matter.
Speaker Change: One or both of the parties such an appeal would likely be heard in the first half of 2026.
Speaker Change: Yeah.
Pete Gundermann: It's important to understand that all of the subject patents expired years ago and do not restrict the business of our company today in any way whatsoever. So, with that being said...
Speaker Change: It is important to understand that all of the subject patents expired years ago, and do not restrict the business of our company today in any way whatsoever.
Speaker Change: So with that being said.
Pete Gundermann: As we look at 2025, we're feeling really good about our position here early in the year. Our balance sheet and liquidity position is the strongest it has been in five years. Our backlog is at a record high for the beginning of any new year. Our supply chain and employee base is increasingly effective, productive, and efficient. Our volume has been ramping and our margin profile has been improving along with it. We are maintaining our initial 2025 sales guide at this point of $820 to $860 million. We are expecting first quarter sales to be in the range of $190 to $205 million, so a little bit lighter than the quarter we just experienced.
Speaker Change: As we look at 2020, we're feeling really good about our position here early in the year.
Our balance sheet liquidity position is the strongest it has been in five years.
Speaker Change: Our backlog is at a record high for the beginning of any new year.
Speaker Change: Supply chain and employee base is increasingly effective productive and efficient.
Speaker Change: Our volume has been ramping in our margin profile has been improving along with it.
Speaker Change: We are maintaining our initial 2025 sales guide at this point of $820 million to $860 million.
Speaker Change: We are expecting first quarter sales to be in the range of $190 million to $205 million, so a little bit lighter than the quarter, we just experienced.
Pete Gundermann: We are expecting sales to ramp as the year progresses, especially in the second half.
Speaker Change: We are expecting sales to ramp as the year progresses, especially in the second half.
Operator: That concludes our prepared remarks for the call. We can open up the line now for questions. Ladies and gentlemen, if you would like to ask a question, please press star 1 on your telephone keypad and a confirmation tone will indicate your line is in the You may press star 2 if you would like to remove your question. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start button.
Speaker Change: That concludes our prepared remarks for the call and open up the line for questions.
Speaker Change: Yeah.
Speaker Change: Ladies and gentlemen, if you would like to ask a question. Please press star one on your telephone keypad.
Speaker Change: Confirmation tone will indicate your line is in the question queue you.
Speaker Change: You May press Star two if you would like to remove your question from the Q.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Jon Tanwanteng: And our first question comes from the line of Jon Tanwanteng with CJS Securities. Hey, good afternoon, again. Thank you.
Speaker Change: And our first question comes from the line of John 10, one.
Speaker Change: With CJS Securities. Please proceed.
Speaker Change: Hey, good afternoon, guys. Thank you for taking my questions and congrats on the U K U K is coming.
Speaker Change: Coming out.
Pete Gundermann: I guess my first question is, could you talk about the potential of the future of astrophysics? The other open-ended cases out there to have damages claims in or around that neighborhood or to that scale. It's a bit of an open question, John. In France, I mean, it could be zero, you know, if the appeal court maintains the dismissal of the patent. I mean, if that decision comes down that way, then we're done in France, just like we're done in the U.S. If it comes back that they want some further investigation by a lower court to discuss the validity of the patent, it'll kick us back into some kind of litigation cycle that could go on for some time where we have to decide or the court will have to re-decide if the patent is valid.
Speaker Change: Yes, Brian there I guess my first question.
Speaker Change: Could you talk about the potential.
Speaker Change: For the other open indicate how damages claim around the neighborhood or does that scale is that possible at this point or do you think you have a good handle on what's going on.
Speaker Change:
Speaker Change: It's a bit of an open question John in France.
Speaker Change: It could be zero.
Speaker Change: If the if the appeal court maintains the dismissal of the patent.
Speaker Change: That decision comes down that way.
Speaker Change: Then we're done in France, just like we've done in the U S.
Speaker Change: If it comes back.
Speaker Change: Want some further investigation by a lower court to discuss the validity of the past little kicked us back into some kind of litigation cycle that could go on for some time, where.
Speaker Change: Where we have to decide where the court will have to redesign.
Pete Gundermann: And if it's valid, if we're infringing, and if we're infringing what the damages could be, and it's just, you know, it's hard to predict how that could end up or how long it could take. I could be another couple years. And Germany is relatively advanced, but there they found there's no question about patent validity. There is a question about damages.
Speaker Change: <unk> is valid and if it's valid if were infringing and if were infringing what the damages could be.
Speaker Change: Just.
It's hard to predict.
Speaker Change: How that should end up or how long it could take I mean, the way things have been going at realistically it could be another couple of years in.
Speaker Change: In Germany.
Speaker Change: Relatively advanced their phone there is no question about patent validity. There is a question about damages.
Pete Gundermann: and we have been thinking that both of those will wait until the UK issue is resolved. This U.K. issue obviously went in our favor in a very big way, so we don't know what the other side's going to do. We expect to figure that out over the next few months. Our guess is that if there's an appeal, that the other two will slow roll while that appeal takes shape. But I think if you step back and you look at it, we were concerned on the heels of our October hearing that we might face a big loss here.
Speaker Change: We had been thinking that both of those will wait until the UK issue is resolved.
Speaker Change: The UK issue, obviously went in our favor.
Speaker Change: Very big way. So we don't know what the other side is gonna do we expect to figure that out over the next few months.
Speaker Change: Our guess is that if there is an appeal that the other two will slow rule, while that appeal takes shape.
Speaker Change: If you step back and you look at it we were concerned on the heels of our October hearing that we might face a big loss here in retrospect.
Pete Gundermann: In retrospect, it's a pretty big win. It's possible that we will have strong winds in the U.S. and France and the U.K. here going forward, and then the question becomes Germany. But the other side has been pretty aggressive throughout this ordeal and has been making pretty big claims of the legal system. So far, you know, we're pretty happy with how it's worked out. We're hoping for more of the same.
Speaker Change: It's a pretty big win.
Speaker Change: And you know.
Speaker Change: It's possible that we will have strong wins in the U S and France.
Speaker Change: China here going forward and then the question becomes Germany.
Speaker Change: But the other side has been pretty aggressive throughout this sort of deal and has been making pretty big claims of the legal system. So.
Speaker Change: So far we are.
Speaker Change: Really happy with how it's worked out we're hoping for more of the same.
Speaker Change: Yeah.
Speaker Change: Okay great.
Nancy Hedges: Could you talk a little bit more about the... http://www.spacevidcast.com Do you want to talk, Nancy? Yes, so the CapEx, I think, will be fairly level-loaded throughout the year. We have some facility consolidation that we're planning to do here, which is going to be the primary driver for the increased level of CapEx that you're seeing compared to what are kind of our normal ranges. Our normal range tends to be in the $12 to $20 million a year pre-pandemic, depending on what we had going on. So that uplift that you're seeing is a combination of the normal deferred maintenance from the last several years that we're catching up on, and then another $15 to $18 million net of some tenant improvement allowances to build out a facility to allow for expansion as we grow the business.
Speaker Change: Could you talk a little bit more about the increased capex. This year, what are you planning to fund and maybe the cadence of cash flows and see if you could touch on that.
Speaker Change: Well, it's all expenses.
Speaker Change: Yes, so the Capex will I think will be fairly level loaded throughout the year and we have some facility consolidation that we're planning to do here, which is going to be the you know the the primary driver for the increased level of capex that you're seeing compared to what our kind of our normal range as our normal <unk>.
Speaker Change: <unk> tends to be in the $12 million to $20 million a year pre pandemic, depending on what we had going on so that that uplift that you're seeing is a combination of of the deferred normal deferred maintenance that up from the last several years that we're catching up on and then another.
$15 million to $18 million net of tenant improvement allowances.
Speaker Change: And to build out a facility to allow for expansion as we as we grow the business.
Pete Gundermann: I would just add that we've really had the company on a starvation diet for the last you know four years as our liquidity situation was really tight and you know Nancy said our normal cap rate capital expenditures were kind of 10 to 20 million we've been living in the you know three five seven million dollar range which is which is not sustainable long term we feel like we've made it through and we feel like we're going to be cash positive and I think the fourth quarter was a really good demonstration of that so it's time to uh it's time to you know kind of turn the corner a little bit and make investments where investments need to happen to execute on the opportunities that are ahead of us in the business Thank you.
Speaker Change: Okay.
Speaker Change: I would just add that we've really had the company on a starvation diet for the last four years as our liquidity situation was really tight.
Speaker Change: Nancy said, our normal cap rate capital expenditures were kind of 10 to 20 million we've been living in the <unk>.
Speaker Change: $357 million range, which is which is not sustainable long term.
Speaker Change: Feel like we've made it through and we feel like we're going to be cash positive.
Speaker Change: The fourth quarter was a really good demonstration of that.
Speaker Change: It's time to it's time to kind of turn the corner, a little bit and make investments where the investments need to happen to actually execute on the opportunities that are ahead of us in the business.
Speaker Change: Great. Thank you last one if I could sneak it in just any thought.
Jon Tanwanteng: Last one, if I could sneak it in.
Michael Ciarmoli: Any thoughts on... and the various military programs that are used. defense budget reallocations or changes.
Speaker Change: Sean.
Speaker Change: There is military programs that you have out there I guess the topic Du jour with.
Speaker Change: Potential defense budget Reallocations of changes if you think any of those programs might be vulnerable.
Pete Gundermann: Not that we're aware of. I would just, I would categorize our military programs into three major buckets on the aerospace side in particular. We do a lot of spare parts for aircraft that are flying and have been built over the last 20, 30 years, and those aircraft are critical. They fly every day, so those spare parts sales are going to continue. And then we do more and more work on small drone-like aircraft, which are increasingly in favor. So we would think that that's an area that might get more funding, not less. The big program, though, that has everybody's attention is the FLARA program, the B-280, and that's a big targeted investment for the U.S.
Speaker Change: Not that we're aware of.
Speaker Change: Just a I would characterize our military programs into three major buckets on the aerospace side in particular.
We do a lot of spare parts for aircraft that are flying and it's been built over the last 2030 years and those aircraft are critical.
Speaker Change: They fly every day so those spare parts sales are going to continue.
Speaker Change: As best we can tell.
Speaker Change: And then we do more and more work on on small drone like aircraft, which are.
Speaker Change: Our increasingly in favor. So we would think that that's an area that might get more funding not less.
Speaker Change: The bigger program, though that has everybody's attention is the Florida program would be too early.
Speaker Change: And that's a big targeted investment for for the U S. Army is the biggest aviation program going.
Pete Gundermann: Army. It's their biggest aviation program going, and it's important to us. And, you know, we think it's got pretty broad support across the Army and across and the government. But, you know, we'll have to wait and see how that shapes out.
Speaker Change: It's important to us.
Speaker Change: And we think it's got pretty broad support across the arms and across.
Speaker Change: The government, but we.
Speaker Change: We'll have to wait and see how the how that shapes out certainly the.
Pete Gundermann: Certainly the... You know, the actions of the government have been a little unpredictable so far, but we think that program has pretty strong support.
Speaker Change: You know the actions of the government have been a little unpredictable so far but we think that program has pretty strong support.
Michael Ciarmoli: Great.
Operator: Thank you.
Speaker Change: Great. Thank you.
Speaker Change: Yeah.
Operator: Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star 1 on your telephone.
Speaker Change: Ladies and gentlemen, as a reminder, if you would like to ask a question. Please press star one on your telephone keypad.
Michael Ciarmoli: And the next question comes from the line of Michael Ciarmoli with Truist Securities. Hey, evening guys. Nice results. Thanks for taking the questions. Just on the 25 Outlook, any color you can give us on kind of the aero test split? I know you said, you know, test is going to be weaker in the first half and probably more dependent on the... The Ramp of the Army radio program there and then, I mean, the margin, I guess, even on the guidance to the margins and an arrow really strong.
Speaker Change: And the next question comes from the line of Michael <unk> with <unk> Securities. Please proceed.
Michael: Hey evening, guys nice results, thanks for taking the questions.
Speaker Change: Pete just on the.
Michael: 25 outlook.
Michael: Any any color you can give us on kind of the Aero test split I know you said test is going to be weaker in the first half and probably more dependent on the.
Michael: The ramp of the Army Radio program, there and then I mean, the March I guess, even on the guidance to the margins.
Michael: Arrow really strong I think maybe one of the best you guys add on record and any color on kind of adjusted margins into 'twenty five.
Pete Gundermann: I think maybe one of the best you guys had on record any any color on on kind of adjusted margins into 25. Well, you know, we've been playing a long game here, maybe longer than we expected, thinking that the business was coming back and being a little bit, you know, wishing it was coming back faster, but it came back pretty steadily and strongly over the last eight, ten quarters, really. And we see that kind of continued split, so kind of 90-10 is probably a reasonable assumption going forward. We expect Aero to continue to have pretty strong margins and pretty strong results, and I guess our feeling is that there's some upside potential to that forecast.
Michael:
Michael: We've been playing a long game here, maybe longer than we expected thinking about the business was coming back and being a little bit.
Michael: Wishing that what's coming back faster, but it came back pretty steadily and strongly over the last 810 quarters really.
Michael: And we see that kind of continued split so kind of 90 10 is probably a reasonable assumption going forward.
Michael: We expect <unk> to continue to have pretty strong margins and produced strong results.
Michael: I guess, our feeling is that there's some upside potential to that forecast.
Pete Gundermann: largely in the area of commercial transport production rates at Boeing. You know, we we built our current forecast. on the assumption of 25 737s a month for the first eight months and 30 for the last four. And at this point, the indications are that Boeing's going to exceed that. Obviously, we're not limiting, we're not going to limit Boeing to those numbers. If they want to order more, we'll build more, but you got to put something into a forecast. And that's the assumption that we use. So I think there's upside potential to that part of our business.
Michael: Largely in the area of commercial transport production rates at Boeing.
Michael:
Michael: We built our current forecast.
Michael: On the assumption of 25 730 Sevens a month for the first eight months of 30 for the last four.
Michael: And at this point the indications are that Boeing is going to exceed that obviously, we're not limiting we're not gonna limit Boeing to those numbers if they want to order more we'll build more but you've got to put something into a forecast.
Michael: And that's the assumptions that we use so I think there is upside potential.
Nancy Hedges: To that part of our business on the test side. The real issue is this $45 49 T Radio test program that Nancy was talking about.
Pete Gundermann: On the test side, the real issue is this 4549T radio test program that Nancy was talking about, which we're hoping gets into production in the fourth quarter. That's going to be a significant contributor. You might call it a game changer for our test business. It'll be very obvious in 2025. The question is when it's going to get going, or excuse me, 2026. The question is when it's going to get going in the end of 2025. We're hoping for a full quarter. of contribution in that business. Okay, okay.
Nancy Hedges: Which we're hoping to get this under production in the fourth quarter, that's going to be a significant.
Nancy Hedges: Contributor.
Nancy Hedges: Might call it a game changer for our test business it'll be very obvious from 2025. The question is when it's going to get going or excuse me 2026. The question is when it's going to get going in at the end of 2025, we're hoping for a full quarter.
Nancy Hedges: Contribution from that business.
Pete Gundermann: Um, and then what, what should we expect with I know, it's a very fluid environment, but tariffs, I think you kind of back in the, it was the 2019 period or so you kind of called out a $10 million impact any, any thoughts around tariffs and how you might kind of respond to that? Well, it's a changing picture, as you know, so it's a little premature to say for sure. We feel that our supply chain over the years has kind of fixed itself and minimized its impact or its dependence on China. I mean, we use a lot of electronic components.
Nancy Hedges: Okay. Okay.
Nancy Hedges: And then what.
Nancy Hedges: What should we expect I know, it's a very fluid environment with tariffs I think you kind of back in.
Nancy Hedges: It was in 2019 period, or so you kind of called out a $10 million impact any any thoughts around tariffs and how you might kind of respond to that.
Nancy Hedges: Hum.
Nancy Hedges: As a changing picture as you know so it's a little premature to say for sure we feel that our supply chain over the years.
Nancy Hedges: As kind of a fixed itself and minimize that impact or its dependence on China. I mean, we use a lot of electronic components. So ultimately.
Pete Gundermann: So ultimately, China is the source of a lot of things that we do. But more and more of the value add has been moved out of China into other countries over the years. Mexico isn't much of a big deal to us from a supply chain. We do have an operating company in Canada, which will, to a large extent, ship to the U.S. So, you know, that will be a topic for discussion, but most of those... contracts, we would think would obligate the buyer or the importer to actually pay those tariffs. So we don't think that's a big deal.
Nancy Hedges: China is the source of a lot of things that that we do but more and more of the value add has been moved out of China into other countries over the years.
Nancy Hedges: Mexico isn't much of a big deal to us from a supply chain.
Nancy Hedges: We do have an operating company.
Speaker Change: Canada, which will.
Speaker Change: To a large extent to the U S.
Speaker Change:
Speaker Change: So that will be a topic for discussion, but most of those.
Speaker Change: Contracts, we would think.
Speaker Change: Obligate the buyer or the importer to actually pay those tariffs. So we don't think that's a big deal, but then again.
Pete Gundermann: But then again, you know, there could be we do a lot of sales to Europe, we do a lot of sales to Asia and other parts of the world. So depending on how out of control this whole situation gets, it could get, it could be quite fluid, as you said. Got it.
Speaker Change: There could be.
Speaker Change: We do a lot of sales to Europe, we do a lot of sales to.
Speaker Change: Asia and other parts of the world So depending on how other control. This whole situation gets it could get to it could be quite fluid as you said.
Michael Ciarmoli: Um, okay.
Speaker Change: Got it.
Michael Ciarmoli: And then, um.
Speaker Change: Okay and then.
Michael Ciarmoli: Last one for me, just on the retrofit side of the market, Pete, what do you guys see in there? I'm kind of reading and hearing that, you know, there's, you know, some of the challenges with business class seats and just a lot of the capacity being used up to support some of the older planes flying is creating some challenges on the retrofit market. Anything you're seeing in terms of, you know, supply chains or bottleneck issues there, or are you kind of seeing good demand? And, you know, if there's any color on growth in that portion of the business in 25.
Speaker Change: Last one for me just on the retrofit side of the market Peter.
Speaker Change: <unk>, you kind of reading and hearing that there is.
Speaker Change: Some of the challenges with business class seats, and just a lot of the capacity being used up to support.
Speaker Change: Some of the older planes flying is creating some challenges on the retrofit market any anything youre seeing in terms of.
Speaker Change: Supply chains are bottleneck issues, there or are you kind of seeing good demand.
Speaker Change: If theres any color on growth in that portion of the business and 25.
Pete Gundermann: It's been strong in part due to the, you know, aircraft production problems, both at Boeing and Airbus, so airplanes have been pulled out of the desert and modernized at a pretty strong clip. One of the nice things about our business, as you know, Michael, is the... you know, the eternal quest for updated consumer electronics, basically, and the things that people want to do in airplanes. So as those new seats get developed, there's a continual push for new updated technologies, and we benefit from that. It's a kind of a unique business where we replace a lot of our product, not necessarily because it doesn't work or needs to be fixed, but because the technology changes.
Speaker Change: It's been strong.
Speaker Change: Due to the.
Speaker Change: Aircraft production problems, both at Boeing and Airbus. So airplanes has been pulled out of the desert and modernized at a pretty strong clip.
Speaker Change: One of the nice things about our business as you know Michael.
Speaker Change: The eternal quest for updated consumer electronics space claim and the things that people want to do in the airplane. So as those new seats gets developed theres, a continual push for new updated technologies and we benefit from that.
Speaker Change: So kind of a unique business, where we replace a lot of our product not necessarily because it doesn't work.
Speaker Change: What needs to be fixed, but because the technology changes so.
Michael Ciarmoli: So it's a nice place to be. As those new seats are developed, they go into both new airplanes and into old airplanes that are being retrofitted. And we find opportunities along with the seat manufacturers for the benefit of the airlines. All right. Perfect. Thanks, guys.
Speaker Change: It's a nice place to be and as those new seats are developed they go into both new airplanes and into old airplanes that are being retrofitted and we we find.
Speaker Change: Opportunities along with the seat manufacturers.
Speaker Change: The benefits for the benefit of the airlines.
Speaker Change: Got it got it alright, perfect. Thanks, guys I'll jump back in the queue.
Michael Ciarmoli: I'll jump back into the queue.
Speaker Change: Alright.
Jon Tanwanteng: The next question will come again from the line of Jon Tanwanteng with CJSC. Hi, thanks for the follow-up. I was just wondering if you saw the order of rates from Boeing rebound. that order. Thank you. Yeah, the order's actually, uh... We haven't got a whole lot of new orders. What we do have is rescheduled old orders. So bookings have been a little bit light in the third and fourth quarter, as I mentioned. If you look back at those results. They look like a drop-off from the beginning of the year. I think a lot of that is Boeing anticipating a strike and rescheduling existing orders.
Speaker Change: The next question will come again from the line of John Ken One Tang with CJS Securities. Please proceed.
Alright, thanks for the follow up I was just wondering if you saw the order rates from Boeing rebound as you got into it back into production or are these still burning off that inventory, there and kind of how you see that.
Speaker Change: The order run rate.
Speaker Change: Okay.
Speaker Change: Yes, the orders actually.
Speaker Change: Havent, we havent got a whole lot of new orders, what we do have is reschedule the old orders.
Speaker Change: So.
Speaker Change: So bookings have been a little bit light in the third and fourth quarter as I mentioned, if you look back at those results.
Speaker Change: They looked like a drop off from the beginning of the year I think a lot of that is Boeing anticipating a strike and reschedule existing orders.
Pete Gundermann: But the cadence of deliveries that they're requesting is pretty strong. I mean, it's in line with what they're saying, and they're moving towards that 25 or 30 ships a month. from my perspective, more quickly than we might have expected. So it's encouraging. I think they've got some momentum, and that's a good thing. Now, the unknown there that we're going to have to balance out is inventory that's in the system. We think they've got, you know, two or three months of inventory of most of our products for 737 in various places in Seattle. So we expect that our turn-on rate will trail their production rate to some extent.
Speaker Change: The cadence of deliveries that they are requesting is it's pretty strong I mean, it's it's.
Speaker Change: In line with Ah.
Speaker Change: With what Theyre, saying theyre moving towards that 25 or 30 ships a month.
Speaker Change: From my perspective, more quickly than we might've expected so it's encouraging.
Speaker Change: They've got some momentum and Thats a good thing now.
Speaker Change: Unknown, there that we're going to have to balance out as inventory that's in the system.
Speaker Change: We think they've got.
Speaker Change: Two or three months of inventory of most of our products for 737 in various places in Seattle So.
Speaker Change: We expect that our turn on rate will trail their production rate to some extent.
Pete Gundermann: And that's why we're, you know, putting in our forecast 25 ships a month for most of 2025. But in general, you know, we're encouraged by the dialogue, we're encouraged by the discussion. We've had a lot of positive attention from Boeing and our facilities to make sure we're ready to go. And I think we're on a good track. It's potentially going to be a good story for 2025, unlike what it's been for the last couple of years. Thanks.
Speaker Change: And that's why we're putting in our forecast 25.
Trips a month for most of 2025, but in general we're encouraged by the dialogue were encouraged by the discussion.
Speaker Change: We've had a lot of positive attention from Boeing in our facilities to make sure we're ready to go.
Speaker Change: And I think we're on a good track.
Speaker Change: Potentially going to be a good story for 2025, Unlike what it's been for the last couple of years.
Pete Gundermann: Could you give us an update on municipal transit markets and what you're seeing out there? Yeah, we're hearing a lot of that.
Speaker Change: Got it thanks could you give us an update on municipal transit markets and what you're seeing out there, especially as you've seen it a lot more of these back to work.
Speaker Change: I'll take that.
Speaker Change: Yeah, we're hearing a lot of that I'm looking for data, there's some data that that's beginning.
Pete Gundermann: I'm looking for data. There's some data that that's beginning that, you know, return to office is picking up momentum in certain municipalities. But it hasn't materially changed the market at this point. As far as we can tell, I think, you know, think programs in our transit test. market are still alive, we think, but they regularly delayed to the right. So we're hopeful, though. I think, you know, it does have some real momentum. It's in places that needs it, frankly. So we're hopeful.
Speaker Change: Return to office is picking up momentum in certain municipalities.
Speaker Change: It hasnt materially changed the market at this point as far as we can tell I think.
Speaker Change: Great homes, and our transit test.
Speaker Change: Market are still alive, we think with Reg.
Speaker Change: Regularly delays to the right so.
Speaker Change: We're hopeful though I think it does have some real momentum.
Speaker Change: In places that needs it frankly so.
Michael Ciarmoli: It's a watch item. Got it. Thank you.
Speaker Change: We're hopeful.
It's a watch item.
Speaker Change: Got it thank you.
Speaker Change: Thank you.
Operator: Ladies and gentlemen, this will conclude the question and answer session and this will conclude today's webinar. You may disconnect your lines at this time and enjoy the rest of your day.
Speaker Change: Ladies and gentlemen, this will conclude our question and answer session and this will conclude today's conference you may do.
Speaker Change: Disconnect your lines at this time and enjoy the rest of your day.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Yeah.
Speaker Change: [music].