ATRO Astronics

Deborah Pawlowski Chairman, Chief Executive Officer and Founder-KEI Advisors, LLC
Pete Gundermann Chairman, President and Chief Executive Officer
Dave Burney Chief Financial Officer
Jon Tanwanteng CJS Securities
Ken Herbert Canaccord Genuity
George Godfrey CL King
Dick Ryan Dougherty & Company
Call transcript
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Greetings, and welcome to the Astronics Fourth Quarter 2019 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Deborah Pawlowski, Investor Relations. Thank you.

You may begin.

Deborah Pawlowski

morning, good and Christine, everyone. Thanks, time We Astronics. your in and appreciate your interest today

Joining Gundermann, Officer. are and call me the on Pete Dave our CEO; Burney, our Chief Financial and President Chairman,

XXXX You a financial which them not, released should were on if and this And can copy the results, morning. have early you full fourth of our year quarter find at website

as formal make as the well me likely may risks to statements are well could These that first, session. that apply during other as as we you future some mention what with Exchange Commission. discussion during results with statements this the provided on today. Let that stated aware, forward-looking and events uncertainties and in here cause and factors as subject other Q&A to the or release Securities can factors documents actual our from These well as documents website are differ at earnings to filed as is found be uncertainties materially These risks and other are

today's measures. be We discuss our believe non-GAAP call, financial performance. will in evaluating useful also these we During will

You substitute should in results presentation not with information this accordance for GAAP. prepared as or consider in isolation additional the a of

accompany GAAP of measures have to We tables that provided non-GAAP measures today's in reconciliations comparable release. the

let that, to turn Pete me With it Peter? begin. to over

Pete Gundermann

good Debbiee everybody. morning Thanks, and

a and but number test on answer us numbers the of side the it quarter turn today he's There little normal are is and Dave fourth that bit forward. issues major the and Then three facing future question looking of two some a with start the on talk see in the sheet a and extent going the and we both them, on the to backward statement going at of through the and to walk it agenda Our not side. income bit we'll discussion end. as balance follows. to can little do I'm a the the aerospace to about and I'm over a the the little company, to only bit going looking

the released were a expect events production room part So challenge revenue we as stated When of with talked, time assumptions guidance specifically, And return the the to ramp XXX quick the XX we we last first that issued quarter when there or a that revenue year in some out and of in month, probably at at we a results starting XX November, for that see pretty the for MAX major from airplanes XXXX. sometime in third a would probably assumed we segment time guidance, go the end. amongst us. aerospace XXX the week near would elephant is service XXXX at preliminary that into and eventually XX

That's based good programs, of largest it's airplane It's XX for month $X our revenue. way fast and shy airplanes proved XX or a business units airplanes of remain about a grounded. effect as a a that's we plus just $XXX,XXX production million each gone zero in instead us. its a expectations on month XXX XX going XX Those to aircraft have of month about one month. built, off to put product because zero The actually

reluctant of out offer. capacity the they the and are world to XXX around airplanes take service that The for passenger the aftermarket products for airlines have, essentially the airplanes cuts they grounded their that of given amenity, capacity we lack

amenity shortage – most the most, you know sector of a and It not critical So know, of of as flight capacity. our aftermarket. is in that an we you many do is with

deferral, tendency a a been have kind process out year last where late starting programs late. of pushing in seen have towards little We the were

that's million, you go back which bookings, were to level. for recent that XXX QX of got press at as you our well to that a our in evidenced years of the page is history, off are bookings pace the few This last see release, us aerospace be

question, we our restart? ask At of to not on don't customers, discussions how and ourselves questions this not will know. So so Boeing. we, so said of we how and respond of those will with production they starts, when an a resolution for to service will of to react pause the they to Once figure really when implemented return been we'll get and continue specifically airlines airplanes also Boeing this out I we when XXX that's clear question. and on and at questions by as FAA discussions much will That's airlines, production service will going a to kind we normal. have point, course occur? a have asking are return point have There's And the those what

much are meantime, that operations So dare the cost the as in as of we our given have lack specific our in them structure clarity, managed XXX. we down the to

approximately on side. dealing operations, aerospace XX that mostly the on major with the direct we're down side those We’re issue one in people, that's

The lots or of over actually area. and little in and feel that is more a quite problem major three a bit we last of issue is that about half that making this so. control the we're talked the second progress or And one bit we're a we've companies problem like in kids year

three. the was but quarter average an distance sustainably summary $X.X the woods. basically from or of a $XXX,XXX from in near over million, quarters, Armstrong, breakeven breakeven profitable operation it brief $X at operating down the in our throughout to basically about three in where and expect past the we two we feel the fourth be We've of talked down loss probably $XXX,XXX the think Chicago. CSC We've quarters. down into fourth quarter first but XXXX. shouting okay, was of out past three about taken this locations of basically integrated the of of The three talked million, first woods We've Armstrong's Armstrong out lot, within We the it's it point, three in Chicago it's average and so we've to which the that's at loss, is a not how the Armstrong's combined

of fourth for year, quarter CCC relatively a we've is the lot, challenge, fourth which bit again CCC in million The loss. concluded development state its average about been X.X struggling way to had up of highlight quarters that it's compared a good art a longer. a Avenir ended $XXX,XXX over in our management is down the that quarter. with process first fourth CCC with quarter second the which airplanes is the big here loss, cabin VVIP is its little but product, the $X.X system for for three

with So going breakeven the development increase at forward expense or near basically revenue to in we for expect combined brings also all of CCC that drop XXXX.

that a brings to That were review business AeroSat of were a call I do planning doing us last the and restructure. to our we announced in AeroSat, we

We level year about beginning the in today have about the from at $XX is implemented to business that down million million to give focus $XX the break XXX even basically one. XX the four has initiatives today. restructuring, headcount from the business about the the it’s about of To gone down and restructuring, of a from bringing you to of business scope, the indication substantial an

ending charges quite for be would was we at process than were a thought when bit This they started more an about quarter. not and restructuring the $XX inexpensive we the impairment up exercise, the million

down expect AeroSat break forward of the operating even going in evolved drop level we that loss that's towards million have half to getting and $X a QX, the that a of at end to approximately year.

problem three operating kids million. the when loss, restructuring at XXXX charges and So about looking $XX.X for – impairments the and excluding you're cumulatively was

be be get AeroSat general the XXXX We at there depending but past. on of things near are won't evolve loss there be been end quite or a as confident how going cumulatively, today, that's in what in with breakeven, the they've anywhere near the numbers minor to could we to

XXXX. or and we've third is UK is longer we not first last talked well an is to been we when also. since more story Germany. we expected The quarter we It playing are legal process expect advance were this think ago is in issue third the in five U.S. critical. process The issue took we out out XXXX, ongoing technology decision our filings than question France in appeal had court's frankly charge original call important. in it. disagree in the reserve And is aerospace designed in have it and we XXXX. the into The in process now we had Germany, segment been will initiated The a on they that going were the years – in that fourth fact, is a also. this The out about both figured XXXX that’s and in the here. XXXX not we We appealing We that, deficient and the and was

In we Germany, than the the and significantly the the the that downsized ended. down years patent over couple in last December defeated In still patent the stood of basically reduced case we was penalty or and but U.S. was came anticipated. higher

resolved, bit of order moving So forward. sure million Germany is things news we a as to But around we don't again, the major appeal took until at expect number there's could in we estimate. of for lot a that and bounce a we heard a reserve know XX.X we parts Germany. this the XXXX, bringing all point, of some additional, don't for XX.X in is the be so million to that and going an and total There's it think bit go that little to

getting in to will many The these probably think on either mostly XXXX again cases. and news. will happen started. France issues just second don't UK France too we expect We of are that and UK here be XXXX first, be

our test it the a shows statements product was in year a company, sale. income test sold was saw of forces that, sure XXXX gain February million I'm from a price their test net $XX gain million, talking of our We semiconductor the that significant affecting the followers sale segment, of away a on Moving business our bit remember business, in XXXX about line, up about as in transition. on $XXX aerospace our

test revenue was in our semiconductor XXXX, from a product drop-off. the year, total The for million $X.X $XX million in XXXX It substantial. line big so was

shows presentation revenue lot misleading the purposes the why four in of an year-over-year are adjusted reason So gain gone sales XXXX, or recognition comparisons bit quarters the a in XXXX. to revenue on big stronger is the XXXX, a this a we've over quite part and shows GAAP of

of the our line complements it company, half October. our test second responders acquisitions first reshape business, smaller or some a border patrol. an Freedom Diagnosys product the Diagnosys couple hopes Technologies radio focus the and to military transit in area we forces Freedom of a test more we In little for this for in product July XXXX added onward. and a XXXX, a refocus at police like is is train or geared test, that's into strong municipal area for users line in bit have fit complimentary gotten we've with pretty and and

the in the on backing about strong to a due that business a not organically of XX%. an saw where XXXX semiconductor strong XXXX organic, are range the of on year is Margins kind test very sneak but test in basis part XX%; accounting, acquisition. few Our we adjusted minutes in about talk pretty of growth the be of we to future another in out purchase preview growth one-third we'll sales two-thirds expect but them side expect

aerospace We're not thinking business release the by should February that a test issuing we some rescinded on growth in We year business of issued be unknowns you But our earlier press know, isn't Xrd. a world. this on test as XXXX. obviously that the affected the month XX% We're in today. guidance

bit With talk back Dave and through over pass numbers it that little it later. take to I'll the to a

Dave Burney

Thanks, touched the noise there lot a – Pete. was cut on fourth through. Pete quarter to in of

full costs year adjusted GAAP business, removing results XXXX. owned semiconductor to So sold sense we from he mentioned, test and sales in addition of as direct February of for XXXX to looking in results, but to which our at talk the it makes

release our statements on the morning non-GAAP the impact impairment help an from these the XX financial Page the just understand legal an ongoing core of will and business, the spoke included information. GAAP measures Pete business of this reconciling restructuring in for moved the believe of numbers antenna to. few XX the reserve users a we that Also, and press charges the better tables to non-GAAP are performance We

divested impacted can Also, see operating of consolidated at to by if to down you statement $XXX.X these also the sales sales of due to you million. freedom $X.X fourth They footnotes the on business, of geographically fourth and refer communications our to a were semiconductor sales. test decline in income $XX.X the income million the items. bottom added lines quarter release, the acquisitions. Page Those the $X.X statement results; segment. quarter added the X test This diagnosis partially Getting reflects from by offset million were million

to non-GAAP GAAP of and Aerospace sales on I'd to X.X% you XX million million by XXXX, the where for $XX.X $XX.X information. a the reflects an Page of operations increased release lost me quarter this and reserve like restructuring We of segment decreased from point impairment with million, follow ongoing where the $XXX.X the reconciliation of GAAP is to had of which we have fourth press in charges lawsuit.

to took that $XX.X million. legal are segment. and in antenna business, Both those aerospace in the we the relating of And specifically by More business. restructuring increased additionally, million charges the totaling of $XX.X refocusing reserve our we

X.X% Additionally removed million we compared of sales generated $X.X prior the this year, margin direct to up semiconductor with operating or with these adjusted aid by $XXX.X the adjusted adjusted ended year Making to year. operating and an million in each the last period. adjustments of of comparing X.X% business we income in profit test in

primarily affected costs, quarter fourth higher and both aerospace XXXX margin in by warranty In was operating the segment. legal

inventory to businesses. typically the the operating by We margins margin $X would contribution the XX% be on margins the affecting little expect to acquisitions. range. in of Additionally, yielded acquired was for up accounting XX% to sales very sales basis million to of related test stepped due those That required

million GAAP the year’s aerospace communication quarter. The $XXX.X compared $X.X or mainly X.X% the from and $XX.X to the operations the quarter, for $X.X or the in The XX.X% million. loss sales to in fourth Going entertainment with to which segment drop aerospace soft segment sales decreased was prior segment million. million quarter line, avionics product in-flight relating declined by was hardware aerospace

for warranty antenna the as losses last businesses year, the And fourth had breakeven or a previously increased expenses. The sales X.X% breakeven fourth Aerospace Pete restructuring operating million have the quarter of of charges, have fourth business mentioned impacted to was the forward income and legal impairment of negatively run near and adjusted Adjusting struggling these $X.X the $XX.X The the to had year. mentioned, XX.X% with and the million excluding legal the was of reserve, quarter XXXX by been by margins compared path been we in get this end would XXXX. XX% to businesses, quarter they closer to XX%. three

in businesses, Systems the the Test The sales the Go segment acquire sales year. $XX.X by million rose million compared $XX.X to XXXX in in $X.X were the in sales – the fourth quarter from quarter. in business fourth million was quarter $XX.X which $XX.X both driven this out contributed semiconductor increase of XXXX quarter. the sales the segment, with test sales from million million periods, into Adjusting

million year margin prior of adjusted have approximately discussed. of as loss by with adjusted compared or the in was year. $X.X million sales loss operating million Test $X.X Operating I margin little an impacted segment no had of that this previously operating $X

the For XXXX. year, $XX.X were million, consolidated sales decrease million $XXX.X full of from

million, $XXX business we for gives Again X.X% This million. business. sales to Aerospace $XX from million for us increased test adjusted increase increased of from $XX sales the or an need which exclude divested test million semiconductor each ongoing by and sales of $XX period. by compatibility, sales the was

million, to compared year legal previously Applying was of of XXXX. reserve operations million XXXX million discussed million restructuring million or $XX.X of XXXX. GAAP from from the direct impairment million consolidated charges $X.X remove the was income operations for income income same million the business XX.X% adjusted semiconductor $XX.X and $XX.X the with margins from and operating $X.X adjustments with in adjusted X.X% in $XX.X or compared in $XX.X of

million. $XXX.X $XX.X million sales million. & by increased year. and for accrual and by the the sales XX.X% with compared increased Lighting prior profit million $XX Motion operating million decreased sales the Avionics was X.X% adjusting Aerospace or million year of million; with segment and operating the GAAP year. the legal & increased for in was Power $XX.X compared $XX.X income Aerospace Electrical sales year after impairment X.X% $XX.X charges to Full prior Adjusted or $XX.X restructuring Safety

year as entirely the was with operating Aerospace tariff in February business impacted was test Full with the increased warranty to million $X.X costs. increased costs, XXXX Test prior million were negatively divestment profit in segment. $XX.X in million as XXXX of and compared the XXXX. well which The Test by year decline due semiconductor XXXX. segment $XXX.X sales increased compared the legal

adjusted Adjusting Removing XXXX in divested in in Test result was segment $XX.X sales segment of Most and second direct GAAP sales loss a added $XX.X business million charges from XXXX. the the operating XX.X% loss XXXX, Organic million XXXX restructuring sales million were million million $X.X the of in of we each operating that million. increased was acquisitions in the the divested with from out sales profit up business, of compared adjusted million from margin XXXX the $XX.X was $XX.X of XXXX. million. $XX.X million recorded for profit period, in adjusted and quarter. the $X $XX.X $XX.X

Over to the balance sheet.

X.X on leverage million And by continues to be reflects of in was borrowing debt good first sheet by in semiconductor the defined This is agreement. Our the was times Net the we trailing business recognized a as our $XX sale balance EBITDA gain quarter. that adjusted the defined shape. fourth quarter $XXX ratio million. agreement, the the

EBITDA. still X.X have very would ratio times low Excluding that game, been the leverage at

Our for borrowing revolver revolving maximum X.XX – our times capacity. is

share of release February on a issued press we Regarding announcing the Xrd, a capital buyback. deployment pausing

MAX the surrounding conservative service of the on a we and to uncertainty markets, timing course to XXX return feel on impact of Coronavirus the take the might have view most that action is the the deployment. production prudent and capital our Given

we're for a the this on quarter, XXX,XXX shares of cash, In down Focusing $X.X XX,XXX fourth $XXX,XXX becomes we back cost clearer back prior shares did at purchased of in debt XXXX, at year share we paying a cost until us. the conserving pausing our and to picture the million. buy of another

Pete Gundermann


year revenue So think not of service early bit as still We is then. clear. some to airlines. we or than XXXX, pulling May, again, a our beforehand, that looking release May for the issued situation it We have today, February in on estimate some guidance quality the If production will clear. press we rest now, Unfortunately, clarity. forward on the again, hoping get a I'm quarter we to estimate But Xrd, a return the were we first talk the that I return for and need results for that situation expectation we for guidance is a got need firmer release. we'll of for sooner until predictions the reporting to reasonable when later. MAX, rather a issue XXX that little

February predicting. will we million and to shouting late $XXX we're quarter be the million revenue However, within XX% first We're of is in Aerospace. what it end first to are distance $XXX expecting quarter. be of the of light;

a work. service. expecting rest even some reasonable significantly have year the the and XXX from strengthen that of kind book production end towards to of MAX we return apart that's schedule biased depends, to activity, will as the of on But year the progresses. Again, return We our that with of the obviously, are we

half as The first are be is them much, can, reluctant more enough, surprised publish we've results So been will expect or that by as soon half. back expectations we one point. this to we when second we – having stronger pull we it I do how the the to but question guess, to than and issuing at and another, way again we

for that So now. think prepared up Christine, can open we questions remarks. our concludes I it


first Thank with line proceed Securities. question the with Instructions] question. Tanwanteng Please comes from you. Our of [Operator your CJS Jon

Jon Tanwanteng

Good for question. Thank you taking my morning gentlemen.

Pete Gundermann

Good morning.

Jon Tanwanteng

XXX. think heading was you I down Pete, were if that. in related people, a catch with, charge in referred maybe there to operations XX those down think producing. they're cost start to evident How QX, savings in if I in operating that related to to we didn't you And were coming the expect of should still Aerospace margin QX forward? the I and expense not because

Pete Gundermann

that they much and associated a in restructuring wasn't book reductions, I good late wouldn't us it's so it QX, of see business of the charge on QX. much think say a XXX. fair it's probably those with for you There But were to

proportionately execute to other way much we a costs hard because cutting So have in to business maintain we really too volume have just that have have infrastructure when goes those and we the operations down, we time on.

going that? cycle So back XXX. on margins get compress add want you it's production Dave, some to to anything to we until into regular

Dave Burney

No, I that's accurate. think

Jon Tanwanteng

Okay. the Boeing of if by up doing we given to that And assume starting when we XXXX, get does to actually midyear, the – I end beginning, back right overcapacity actually your being but planes for maybe XX aftermarket aggressive between XX in what don't particularly production, planes by business, the over now? assuming you're XX somewhere XX, know all FAA, the kind and run come or are but get

Pete Gundermann

question affects down at announces good factories, of you that quantity, us it that too of honest, those to they're shut permanently models long that about that much because the to and you're the is us. our back. question, into two very plug aftermarket But it's Jon. asking XXX doesn't us bounce some we or side a restart of stay important same capacity lose be harder for are question very asking assuming then production to The our easy going a If kind it's ourselves. Boeing whatever It's for To ways. into

the pretend we going it's the the those how planes at through in We've a to be With sidelines, the frankly, that. situation there of this are I've to return I to do many and in wildly that's understand assume gone beyond you're in but to bit don't situation. how know. closely. of to the get that, quarter. would to resuming has don't where behavior, as We service, faster But industry kind little kind asking an And a we start even predictions it. long which And a I for service, linked unknown like is predictions, airlines seen X.X know experts this been mean we're normal years, seen never that, take back I've is as on airlines varying much hiccup. when question of would I a don't predictions that

– think know question. wait airplanes It's they that have we a keep need to keep in to can't yet. airplanes going of with it other X.X that So one we years be, they're fair but start to air, it get are that their and to could in plans their but also until for and answer. you It's example, I on be that honestly answer that We here are it's It if asking, takes they for want and in to and sure know hands need asking, more get think sit and airplanes that could tell resumed it's to I upgrades the work. conservative the into knowing airlines just them fleet their immediately, the their one we the can I when the fleets. hand, they one advance that don't the some

Jon Tanwanteng

queue service, of And the those Okay. to many in on how That's products would those have fair. your on are that installed XXX color I back How more the, a many to maybe planes get be on lots I assume. them? now. come into guess, aftermarket quickest the will are Maybe them Because installed? bit right sitting

Pete Gundermann

few would have production they on builds, Very they new aftermarket, few. no product of are got of it, Half off so the just have them them so our definition. very line, by aftermarket

are service or other years years new X.X half out than so, a less mean. been I maybe. airplanes, relatively The for in X.X there year

Jon Tanwanteng

With be to a lot power on them while them upgraded in-seat opportunity an be for connectivity sitting and there? then all sitting and to

Pete Gundermann

that. I touching can nobody's those you, tell airplanes. Nobody's doing

Jon Tanwanteng

one. last one Dave,

of was there took? legal outside that much into you that and expense Just does the how XXXX? roll warranty And over reserve

Dave Burney

it overall Well, quarter. into was I the expense the expect million don't $X in Combined, warranty XXXX. about

Jon Tanwanteng

And bigger side Got than it. same? they the warranty the about the side was legal were or

Dave Burney

it. about was two-thirds warranty the of No,

Jon Tanwanteng

Okay. may QX Got anymore we that aware it. Are in or forward? you QX that there or impact should any of going charges be other

Dave Burney

No. No.

Jon Tanwanteng

Okay. Great. Thank you.

Dave Burney

Thank you.


question Our with line Ken proceed your the comes Please of from with next question? Genuity. Herbert Canaccord

Ken Herbert

Good Dave. Hi. morning and Pete

Pete Gundermann

Good morning.

Ken Herbert

the MAX. or Boeing on of A – frame, sell ask PSUs to they production wanted getting suppliers in have that lot that like for of that indicated directly, should do, to April you just start time they're I around out the signals product that at else you you directly? obviously, on of MAX start comment you can rate. to your of expectations regarding stand else Is there as anything share lower sort discussions anything that and your or when can to ship sort again where might to Boeing again

Pete Gundermann

Sure. We do have ongoing discussions, but they're not point. firm at this

not we read But March, that. we and frame certain at don't of gotten general, this point. kind production it going, have slower line think, that for going that to response quite the we time, in to But guidance a of a that we up some If year. the don't describing, Ken, for and time April be on guidance similar firm rate – us, the did, things accommodations I enough, late for we out have put stood hear so you're positive some asking keep what just are frankly. of yet. in there, We've kind period So but to to would in at

Ken Herbert

do MAX, production, long will on the at you start how taken, margin Or we on to need And the be you've sort take? to do MAX the – how may Or that's that? you're it of ramp volume actions when what before cost margins? Okay, when to with reasonable. you segment think do progression about get back

Pete Gundermann

It’s good a question.

a up last can a could three the a think especially we mean at given shutdown, made we we even time, be back if big the production XX if manage margin the half until pretty think what get the get of that's the or we progress at back, and in good the for we'd did I I businesses. – other we've cost-cutting so steady can we're with us. at pickup state in half shape, month, I

most for part, airplanes that do little happening CCC's happen, with for for the parts most margin of the the of should little But kind to market because VVIP us bit affects And of XXX, the more CCC business. other is that has XXX, bit. in with nothing on pickup of part, pickup the what's a regardless which MAX a dependent

course, I've will So But back the important lot for of production. a we into already when reasons feel again, discussed. return better I then to get is also service

Ken Herbert

finally, did Okay. of two the That’s obviously on helpful. half And side small you second in the just XXXX. acquisitions test

capital As should – allocation, that how a Or better about on something little maybe about get here we M&A you're year? think is at? until is bit we activity just should And it getting this sidelined you still the looking we certainty think business?

Pete Gundermann


think I And little to it's to us of away a possibility – best our I takes first we because acquisition. have our on have of a priority some But attention to it. future the execute front mean to to always good bit eyes not available. when becomes it's say up probably candidate sidelined. can't you ourselves open, that acquisition extent, safe that you the prepare can that us from and things the we in is read as are it's for

say market right bit. I about and to back that think, now pulling that the a thinking twice in sellers are also, probably it's safe little probably most

is level the bit. down think little whole slowing activity a I So

Ken Herbert


your just with comments you've chain. chains, move a virus know about I some this business, supply been out question. working lot a on on yet think of maybe any either maybe Or Can of Just concern of the any around seeing, and one of on supply there, you you're great. to China on or demand? to your but work supply the that? give the how high-level of should uncertainty we Obviously, There's what would customer final more impact obviously chain color be extent lot that

Pete Gundermann

in three us. not a we this we've in have as is explanation hurting lot or say wasn't and But Yes. that impacts lack our not anything we're the and it, Well, there for you had an don't One now, seen uncertainty, anything market. it virus hurting are prepared about a right said, at demand because is, of of risk obviously, airlines it that airlines hearing as but to what fear point. hurts That's for used us. potential firm remarks

close it. our airlines. at got point, not have But on obviously driver. we've that's a relationships We So this major with eyes

The second potential supply. impact for us is sources of

vertically out We of sourcing China. are pretty integrated we some most of businesses, do but in our

tariff of For been better to in because of chains, a or lot trying worse, for actively move those part, and we've many of we've made good progress. expense, supply

wrinkles. China back in supply far, so aware where factories getting slowly slowly people But back getting answering major are are of calls. And to to not we're phone

circuit of So or we we're not electronic sources electrical, mechanical not of have sure supply. exactly metal terms there going do it's issue assembly, is much of to Most in if maybe, of not. what boards but some low or or terribly an we're pretty level limiting work

we So could most in else. somewhere of China do do we what

us. major not that's a for at So issue point, this

things you some and big and to have an take actually of or going to months airline, to a do those you to these trials that checks, sales we sale we is if the aftermarket an seeing before to they me, on run fit production anywhere process excuse going course you're through in the area, go And three typically activity typically quite flight of have the course, two and order, China. they and push out. third a bit get The kind and else world, in involves are efforts a have like process go can and of run

So hands say of we're watching airline things major supply, of to today. but traffic, where it, our are but again, nothing development major necessarily sources kind our areas three not programs and over, we wringing that

Ken Herbert

the for color. thanks Alright,

Pete Gundermann



King. from Our George question. line of Please with next Godfrey proceed CL comes the question with your

George Godfrey

Good you. Thank you question. taking morning thank and the

The should acquisitions and comments that such and but but example, the thinking about so And partners, Astronics with where we buyback. last doing think acquisitions, – in with have about on acquisitions the difficulty, complexity the your That's got more if therefore, may and we the can first brings business can partners wanted in and with deal business Pete, were more or you one, not, AeroSat, Do businesses five perhaps you challenges company just anticipating first your to you have. even that share buy, the faced the you've three semiconductor on. be thinking the arms more question. I is the lingering you or business follow-up, you around problems around do I'm the years of not allocated capital and issues volatility therefore, the towards you so keep more no, for these the the the saying

Pete Gundermann

charge I bring will certainly, grant And doubt it. complexities, about acquisitions no there. your

to that's few So a missed a in we've analysis, weigh obviously have from something recently. and here risk you

So learned said, point, like acquisition this carry a to pressure for open because forward. we some really feeling can keep of an that amount not and But eyes never tremendous you we've your you think I lessons we're know. have at And sure. do to I

about do think where compelling with we compared buying that's with else price is And the your I question now. capital a shares. of We're buybacks, share it to might use not other currently, right anything it

responsibility I a said, to of be managers little assets. we think Dave the a as bit company's have As conservative

trade-off the Given continue guess, external get aware we versus one to of permit. in of our major continual, we under slide the But to the I questions I control. we're the want investment, investment XXX of balance the opportunities priorities programs, and in internal will that MAX, think and market our as

George Godfrey

million year, contributing year I'm loss three-month second my operations, to were segment, versus period three last below was if Aerospace And, we're just a the I this I still $X.X Aerospace margin versus question the million. And $XXX those look then you the and what if I'm adjusted problem guessing talked ended add the And year the at specifically Okay. look $XXX is the margin and at looking to there. businesses million ago. about back the at

certain clearly mix So revenue that the my changing, the demand might if we the stated. question was less year is ago? the mix that through less profitable such – in than being product move profitability it of results didn't mix but the for Or a revenue it different, And revenue not is look come is, the profitable as customer fundamentally if today on you I forward? stream revenue

Dave Burney

an the we think also to increase that costs And were year have legal in warranty and the the had primarily we the also segment. I for increase anyways. before, in year the compared of George, tariffs – Aerospace we

George Godfrey


it So even every $XXX estimate, bit forward, just the ago. and today revenue going that mix or product very with is simple, shift as the so revenue profitable years five net should if or demand aerospace result be customer $XXX changes, specific was as of today

Dave Burney

today. mean, about I plus, on to Yes. leverage model the we typically that's we XX% our talk so have applicable the think sales I being still

George Godfrey

questions. Okay, thank my for you taking

Pete Gundermann

you. Thank


next question. question Please of Our Company. from the Dick line Dougherty proceed your & Ryan with with comes

Dick Ryan

QX Thank at Pete, profitability? you the anticipating you. are guys Say, level, guided

Pete Gundermann

be be We It level. Dick. – are will at but that profitable close, we should

Dick Ryan


Dave Burney

what don't make We're rate, and expect million – of at changes, significant to level It’s be expected staffed operating last revenue continue run while detailed at I kind – million more probably think. to that to that's million quarterly that, we've currently to run would making over changes we rate. months. going a clear, we a some six would some we up providing operate some we adjustments, guidance, level, point, than million expect, a $XXX not $XXX $XXX point. not to be is single-digit But – it's didn't quarterly the $XXX plus the were income staffed to we're some at if low business We we would if we at to seen that

Dick Ryan



or side, German any France historical a legal would goes more that U.K. growing? towards ruling U.S. towards is the there suggest precedent On the or a

Pete Gundermann

good to it very from out, The turns a country. question. vary rules, dramatically That's pretty country

started kind over you same material. over country. lawyers, Different process beginning you the that a So set and there each at is in go through, of and

from the kind the the But the the some the is well, in is of to of of damages, new I'm And in different. one the country, basically cost So – patent a little rules, talking the standpoint, expect be different, all good like period the things of a the repeating things, different, gets so other to the been they I calculation have of over. are bit times cost, guess, over performance level couple towards the techniques are way careful, got there bit product infringement it And this now, applicability but the because of I've a too. starting a is varies to one we've wouldn't that little code rules – argument countries. we same

not the wins wonder and And it notice the I U.S., in the but you in it'd U.S. company in wins many can't help how other two U.S. wins always know. German but run company and in to be wins moving maybe in company times Germany company U.S., just these and Germany, way that's the that the an I countries. neutral German we're experiment. But to works, the don't a interesting relatively turf

in extent there expect a So those be advantage, bit and more to there's the is, it to if the that but home little know that home even there's don't extent a a I you'd other advantage, to locations. two

Dick Ryan

more is that rolling the where thank the connectivity Pete? to your of you How competitive got Okay, kind satellite AeroSat's business on on air front, I as landscape on ground you've progress partners jet – can got do offering, out? today, handicap And sense the you obviously, offering options, focused that the business you. some is market you've what's and mean now think the well. looking? with new with of competition Say, your

Pete Gundermann

partner Well, a places. very in of they fingers lot a there They our lot main successful, of are company. and Aerospace, have lot and very credentialed are in Collins ventures, of is a a obviously, they

we pretty I'd And say so things think are far, going well.

improvements product, driven changes our and we the by partly on some partly a our made by combination side, have We product. makes driven their requests on side, to think compelling

ground domestically right, in going competitive you're to those as cheap But that it primarily flies plane today, may circumstances. the we're It's and go to how a work across many America are a better air North water, detailed and options relatively installation succeed, for over out don't airplanes work. to little effective, bigger put is optimistic. plans that there we're for And early but – there offerings to if

little this And cautious, I we our is. on to we and feel STCs. and giving market progresses, based installation exercise. this we're the focused as guess mostly And one our year At be able we're to – obviously, it's start that. should program, where really we're but So point, everything that's experience, bit certification on a rates very talking about we a got

Dick Ryan

Thank great. Okay, you.

Pete Gundermann

thank Sure, you.


next a alive. Godfrey George question Mr. there? proceed is you King. line George, is from with Our question. follow-up your Please question your Godfrey, with CL

George Godfrey

deal my I'm you question this back about or just with the issues, you. and and winning And that thank mentioned data where just – uses point complexity. the that a fully around as on that Sorry, that, Germany head, right to and issue as to great Does victory as lawsuit move just in just to in "You things." to the right, the thing time U.S. just not California you plant other Washington we the NPV to right to got say, use we an I've and process on thinking but you in on." Thanks. kicking using just recognize I'm focus I'm focus my have come want what, or the in know up need so of can't if it in winning is in we're where with I you're thought bandwidth say, other that "Yes, the bullet even and on bite I now. management's

Pete Gundermann

been time. just away based option, not activities background, Well, walk reasonable product – don't there I not activities about to way not the for is an the like The back, our XXXX, is we've in history more which there in-seat has XXXX, know, stems frankly. XX, case, of XX not option are little years, And that a XXXX, for, to a just line, on power in XXXX. parties, disagreement this a happened from that owned reasonable central and

or is we have you with something a prefer XXX don't have but guys spend go this, we choice. not either, have doing We'd We don't always to deal that choice. money through. this your don't not time but So to to prefer

it, extent, our not of of frivolous to got central option. compete those of that's it's an to much think things kind a core We one large is one but so to technologies. This we of

George Godfrey

for taking thanks the follow-up. Understood,

Pete Gundermann


for turn to the over reached of to question-and-answer session. have back We floor would now end closing comments. the I management the like

Pete Gundermann

Thank end with look you good the at for attention. forward of your first day. quarter. you a the talking to We'll Have


teleconference. gentlemen, this today's does conclude Ladies and

disconnect this your and at your day. have time. for you Thank lines wonderful may You participation, a