• Revenue: $198.1 million, up 14% year-over-year and 7% sequentially.

• Adjusted EBITDA: 10.2%, up from 9.1% last year, totaling $20.2 million compared to $15.9 million.

• Bookings: $219 million, with a book-to-bill ratio of 1.11.

• Backlog: Record backlog of $633 million, with $402 million scheduled to ship in the second half of 2024.

• Aerospace Segment Revenue: $177 million, representing 90% of consolidated sales, with 11.7% year-over-year growth.

• Test Segment Revenue: Included $7 million from the 4549T radio test contract.

• Gross Margin: 21%, up 220 basis points from last year.

• Operating Margin: 3.8%, up 240 basis points from last year.

• Operating Income: $7.6 million, with a 45% operating leverage on incremental sales.

• Restructuring and Severance Costs: $1.3 million, primarily in the Test segment.

• Inventory: Increased 0.6% compared to the first quarter.

• CapEx: $1.8 million in the quarter, $3.4 million year-to-date, with full-year plans of $17 million to $22 million.

• Refinancing: Expanded asset-based line of credit to $200 million and a reduced term loan, lowering annual cash cost for debt service by $10 million to $11 million.

• Revenue Guidance: Increased to $780 million to $800 million for the year, up from $760 million to $795 million.

• Third Quarter Revenue Forecast: $195 million to $205 million.

• Warning! GuruFocus has detected 6 Warning Signs with ATRO.

Release Date: August 01, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Astronics Corp (NASDAQ:ATRO) reported strong sales of $198 million for the second quarter, exceeding guidance and marking a return to pre-pandemic levels.

• The Aerospace segment, which accounts for nearly 90% of sales, showed solid growth with an 11.7% year-over-year increase in revenue.

• The company achieved a record backlog of $633 million, with $402 million scheduled to ship in the second half of 2024.

• Astronics Corp (NASDAQ:ATRO) successfully refinanced its debt, resulting in lower interest rates, reduced amortization, and improved liquidity.

• The company was awarded a significant $215 million radio test contract by the US Army, with initial revenue already recognized.

Negative Points

• The Test segment experienced a 'reset quarter' with restructuring costs and a $3.5 million estimate to complete adjustment, impacting sales and margins.

• Despite improvements, the Test segment still reported an operating loss of $5.3 million for the quarter.

• The company faces challenges with workforce efficiency, as 43% of employees have been with the company for less than three years.

• Astronics Corp (NASDAQ:ATRO) anticipates a $7.5 million impact on the third quarter income statement due to refinancing-related costs.

• There is uncertainty regarding the timeline for full-rate production of the radio test contract, potentially delaying revenue ramp-up.

Q & A Highlights

Q: Are you still comfortable with achieving mid-teens EBITDA margin by the end of the year? A: Peter Gundermann, CEO: It's going to be close. We have a healthy backlog and demonstrated incremental margins that should get us there if our top line performs as expected. The unknown is how our Test business will respond to recent changes. We have a good shot at reaching that target. David Burney, CFO: Assuming no significant adjustments like in Q2, achieving mid-teen EBITDA is possible.

Q: When do you expect cash flow to catch up with earnings? A: David Burney, CFO: We anticipate significant improvement in cash flows in the second half of the year.

Q: When will Test revenue ramp up as you execute the new contract? A: Peter Gundermann, CEO: We expect production to start at the earliest by mid-next year, but it could be slower. It depends on our progress and the Army's resource allocation.

Q: Any impact from Delta's operational issues on your business? A: Peter Gundermann, CEO: No significant impact. Their long-term plans remain unchanged, and we don't see direct ramifications for us.

Q: Do you have visibility on shipments to Boeing and Airbus, and how does inventory in the channel affect you? A: Peter Gundermann, CEO: Bookings are driven by demand for updating in-flight entertainment and connectivity, not directly correlated with production rates. We don't see significant inventory buildup in the channel.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.