Astronics Corporation Reports 25% Growth in Sales in 2024 Third Quarter

Rhea-AI Summary

Astronics (ATRO) reported strong Q3 2024 results with sales increasing 25% to $203.7 million, the highest quarterly level since Q1 2019. The company's Aerospace segment achieved operating income of $14.3 million with adjusted operating margin of 14.2%. Despite recording a net loss of $11.7 million due to $7.0 million in refinancing costs, adjusted net income was $12.2 million. Adjusted EBITDA grew 207% to $27.1 million. The company generated $8.5 million in cash from operations and maintained a solid backlog of $611.9 million. Based on performance, Astronics revised its 2024 revenue guidance to $777-797 million.

Positive

• Sales grew 25% YoY to $203.7 million, highest since Q1 2019
• Adjusted EBITDA increased 207% to $27.1 million (13.3% margin)
• Aerospace segment adjusted operating margin improved to 14.2%
• Strong backlog of $611.9 million
• Commercial Transport sales increased 31.6% to $133.9 million

Negative

• Net loss of $11.7 million ($0.34 per share)
• $7.0 million loss on debt extinguishment
• $3.5 million warranty reserve for product field modification
• Test Systems segment operating at near break-even
• Potential significant legal damages in UK patent case up to $105 million

Insights

Financial Analyst

The Q3 2024 results show significant operational improvements for Astronics Sales increased 25% to $203.7 million, marking the highest quarterly level since Q1 2019. The Aerospace segment demonstrated strong performance with adjusted operating margins of 14.2%, despite challenges including a Boeing strike impact of approximately $2 million in revenue.

While the company reported a net loss of $11.7 million, this included $7.0 million in refinancing costs. The adjusted figures paint a more positive picture, with adjusted net income of $12.2 million and adjusted EBITDA growing 207% to $27.1 million. The company maintains a solid backlog of $611.9 million, though the book-to-bill ratio of 0.93x suggests a slight slowdown in new orders.

The revised 2024 revenue guidance of $777-797 million indicates continued growth trajectory. However, investors should monitor the ongoing legal proceedings, particularly the UK patent case where potential damages could range up to $105 million.

Legal Expert

The patent litigation situation presents significant financial risk. The multi-jurisdictional nature of the cases has produced mixed results: favorable outcomes in the US and France (patent invalidity), partial success in Germany with $3.5 million in penalties paid and $17.3 million reserved, but a concerning situation in the UK where the court fully upheld the patent infringement claims.

The pending UK damages ruling expected in late 2024 or early 2025 is particularly critical. While Astronics has reserved $7.4 million, the potential exposure of up to $105 million plus interest represents a material risk. The company's proactive engagement with lenders to arrange financing for potential damages demonstrates prudent risk management, though the outcome remains uncertain.

• Sales increased $40.8 million to $203.7 million, highest quarterly level since the first quarter of 2019
• Higher sales drove Aerospace operating income of $14.3 million, or 8.0%; Adjusted Aerospace operating income¹ was $25.3 million, or 14.2% of sales
• Net loss for the quarter of $11.7 million, or $0.34 per diluted share, included impact of $7.0 million in refinancing costs; Adjusted net income¹ was $12.2 million, or $0.35 per diluted share
• Adjusted EBITDA¹ grew 207% to $27.1 million, or 13.3% of sales, up $18.2 million over the prior-year period and up $6.8 million over trailing second quarter
• Generated $8.5 million in cash from operations in the quarter
• Bookings in the quarter were $189.2 million, driving backlog of $611.9 million with book to bill ratio of 0.93x
• Revised 2024 revenue guidance to a new range of $777 million to $797 million

EAST AURORA, N.Y.--(BUSINESS WIRE)-- Astronics Corporation (Nasdaq: ATRO) (“Astronics” or the “Company”), a leading supplier of advanced technologies and products to the global aerospace, defense, and other mission-critical industries, today reported financial results for the three and nine months ended September 28, 2024.

Astronics Segment Sales and Bookings (Graphic: Business Wire)

Peter J. Gundermann, Chairman, President and Chief Executive Officer, commented, “We delivered a solid third quarter operationally. Revenue was at the high end of our range, up 25% over the comparator quarter. Adjusted EBITDA was $27.1 million for the quarter and $91 million for the trailing twelve months. Operating margins improved from both volume and the initiatives we have executed to drive profitability. Our Aerospace segment adjusted operating margin was 14.2%. We are clearly making progress towards our operational goals, though our results include the impact of expenses related to our July refinancing, a customer bankruptcy and a warranty reserve. All in all, we feel it was another quarter of progress as we continue to recover from the disruption of the past few years.”

1 Adjusted gross profit, adjusted gross margin, adjusted operating income, adjusted operating margin, adjusted segment operating profit, adjusted segment operating margin, adjusted EBITDA, adjusted EBITDA margin, adjusted net income and adjusted diluted earnings per share (“EPS”) are Non-GAAP Performance Measures. Please see the reconciliation of GAAP to non-GAAP performance measures in the tables that accompany this release.

Third Quarter Results

	Three Months Ended										Nine Months Ended
($ in thousands)	September 28, 2024				September 30, 2023			% Change			September 28, 2024				September 30, 2023			% Change
Sales	$	203,698			$	162,922		25.0	%		$	586,886			$	493,914		18.8	%
Income (Loss) from Operations	$	8,374			$	(14,479	)	157.8	%		$	17,590			$	(14,453	)	221.7	%
Operating Margin %		4.1	%			(8.9	)%					3.0	%			(2.9	)%
Net Gain on Sale of Business	$	—			$	—					$	—			$	(3,427	)
Loss on Extinguishment of Debt	$	6,987			$	—					$	6,987			$	—
Net Loss	$	(11,738	)		$	(16,983	)	30.9	%		$	(13,383	)		$	(33,397	)	59.9	%
Net Loss %		(5.8	)%			(10.4	)%					(2.3	)%			(6.8	)%
Adjusted Net Income (Loss)1	$	12,163			$	(2,262	)	637.7	%		$	21,287			$	(3,892	)	646.9	%
Adjusted EBITDA1	$	27,059			$	8,827		206.5	%		$	66,375			$	30,749		115.9	%
Adjusted EBITDA Margin %1		13.3	%			5.4	%					11.3	%			6.2	%

Third Quarter 2024 Results (compared with the prior-year period, unless noted otherwise)

Consolidated sales were up $40.8 million, or 25.0%. Aerospace sales increased $35.5 million and Test Systems sales increased $5.3 million.

Gross profit increased $22.1 million to $42.7 million, or 21.0% of sales. Adjusted gross profit¹ for the 2024 third quarter was $47.2 million, or 23.2% of sales. Third quarter gross profit was negatively impacted by a $3.5 million atypical warranty reserve related to a new product launch that requires a field modification, and a $0.9 million inventory reserve related to a bankruptcy filing for an Aerospace customer. The comparator quarter of 2023 included a $3.6 million write-down of inventory related to a separate customer bankruptcy.

Third quarter 2024 selling, general and administrative expenses (“SG&A”) included $1.3 million in reserves for outstanding receivables and fixed asset impairment related to the bankruptcy filing of an Aerospace customer compared to a separate bankruptcy reserve of $7.5 million against outstanding receivables in the prior year.

Despite the unusual impacts to gross profit and operating income, consolidated operating income increased $22.9 million to $8.4 million, or 4.1% of sales, compared with operating loss of $14.5 million in the prior-year period. Adjusted operating income¹ for the 2024 third quarter was $19.6 million, or 9.6% of sales.

Improved operating income reflects the operating leverage gained on higher sales volume, partially offset by $4.5 million for resumed incentive programs, an increase of $1.9 million in litigation-related legal expenses and reserve adjustments in 2024 and a $3.2 million increase in non-bankruptcy related inventory reserves.

Third quarter 2024 expenses included a $3.2 million call premium on the previous term loan and the write-off of $3.8 million of associated deferred financing costs. The $7.0 million total has been reflected as Loss on Extinguishment of Debt.

Tax expense in the quarter was $6.6 million, primarily due to a valuation allowance applied against the deferred tax asset associated with research and development costs that are required to be capitalized for tax purposes.

Consolidated net loss was $11.7 million, or $0.34 per diluted share, measurably improved compared with the net loss of $17.0 million, or $0.51 per diluted share, in the prior year. Adjusted net income¹ for the 2024 third quarter was $12.2 million, or $0.35 per diluted share.

Consolidated adjusted EBITDA¹ increased to $27.1 million, or 13.3% of consolidated sales, compared with adjusted EBITDA¹ of $8.8 million, or 5.4% of consolidated sales, in the prior-year period primarily as a result of increased profitability from higher sales.

Bookings were $189.2 million in the quarter resulting in a book-to-bill ratio of 0.93:1. For the trailing twelve months, bookings totaled $795.5 million and the book-to-bill ratio was 1.02:1.

Aerospace Segment Review (refer to sales by market and segment data in accompanying tables)

Aerospace Third Quarter 2024 Results (compared with the prior-year period, unless noted otherwise)

Aerospace segment sales increased $35.5 million, or 24.9%, to $177.6 million. The improvement was driven by a 31.6% increase, or $32.1 million, in Commercial Transport sales. Sales to this market were $133.9 million, or 65.8% of consolidated sales in the quarter, compared with $101.7 million, or 62.5% of consolidated sales in the third quarter of 2023. Growth was primarily related to increased demand by airlines for inflight entertainment & connectivity (“IFEC”) products which are in Electrical Power & Motion and Avionics product groups.

Military Aircraft sales increased $5.0 million, or 30.0%, to $21.7 million, driven by progress on the FLRAA program. General Aviation sales increased $1.9 million, or 11.6%, to $18.1 million due to higher VVIP sales. Other sales decreased $3.6 million as the Company is winding down its non-core contract manufacturing arrangements.

Aerospace segment operating profit of $14.3 million was up $21.7 million compared with operating loss of $7.5 million in the same period last year. Operating margin was 8.0%. Adjusted Aerospace operating profit¹ was $25.3 million, an increase of $20.3 million, or over five times the prior-year period. Adjusted Aerospace operating margin¹ expanded 10.7 points to 14.2% reflecting the leverage gained on higher volume and improving production efficiencies.

The segment’s operating profit in the third quarter of 2024 was impacted by $3.5 million in warranty expense related to the previously-mentioned field modification, $5.1 million in litigation-related legal expenses and reserve adjustments related to an ongoing patent dispute, $3.9 million in inventory reserves, $3.2 million in compensation expense related to the resumption of the Company’s incentive programs, and a non-cash reserve associated with a customer bankruptcy of $2.2 million.

Aerospace bookings were $173.6 million for a book-to-bill ratio of 0.98:1. Backlog for the Aerospace segment was $543.6 million at quarter end and excludes $9.3 million of backlog that was associated with the customer bankruptcy referred to previously.

Mr. Gundermann commented, “Our Aerospace business had a strong quarter, with sales up 24.9% over the comparator quarter and adjusted operating income¹ achieving our targeted mid-teens level of 14.2%. We achieved this despite the Boeing strike, which hurt revenue in the quarter by about $2 million, with bookings impacted by approximately $7 million to $8 million. Given the measurably improved profitability, we are pleased with our Aerospace performance during the quarter.”

Test Systems Segment Review (refer to sales by market and segment data in accompanying tables)

Test Systems Third Quarter 2024 Results (compared with the prior-year period, unless noted otherwise)

Test Systems segment sales were $26.1 million, up $5.3 million. The improvement was driven by the U.S. Marine Corps’ Handheld Radio Test Sets (“HHRTS”) and the U.S. Army’s TS-4549/T programs, which contributed $5.3 million and $1.2 million, respectively, in sales during the quarter.

Test Systems segment operating loss was near break-even, compared with operating loss of $1.8 million in the third quarter of 2023. The improvement was the result of lower litigation-related legal expenses, partially offset by additional compensation expense from the resumption of the Company’s incentive programs. Test Systems continues to be negatively affected by mix and under absorption of fixed costs at current volume levels.

Additional restructuring initiatives were implemented in the 2024 fourth quarter. In October 2024, the Company offered a voluntary separation program which is currently expected to provide annualized savings of approximately $2 million, beginning in the first quarter of 2025. The Company expects to record severance expense of approximately $1 million in the fourth quarter of 2024 related to this initiative.

Bookings for the Test Systems segment in the quarter were $15.6 million. The book-to-bill ratio was 0.60:1 for the quarter. Backlog for the Test Systems segment was $68.2 million at quarter end.

Mr. Gundermann commented, “Our Test business had some success in the third quarter, with revenue up 25.6%. The business has initiated further restructuring to focus on the most critical initiatives going forward, including the radio test program for the U.S. Army, which is now expected to enter volume production in the second half of 2025.”

Liquidity and Financing

Cash provided by operations in the third quarter of 2024 was $8.5 million, primarily the result of increased net income, after adjusted for non-cash expenses.

Capital expenditures in the quarter were $1.9 million and $5.2 million year-to-date. Net debt was $174.6 million, up from $161.2 million at December 31, 2023.

On July 11, 2024, the Company announced it had amended and expanded its revolving line of credit and refinanced its term loan. The refinancing provided improved liquidity, lower cash costs, and greater financial flexibility for the Company. The refinancing was comprised of an expanded asset-based line of credit and a reduced, lower-cost term loan. Both mature in July 2027.

Legal Proceedings

Since 2010, the Company has been defending itself in a long-running series of patent infringement cases brought by a single plaintiff. Cases were filed in the United States, France, Germany, and the United Kingdom (UK).

The United States case was resolved in 2017, when the court found that the patent was not novel and was therefore invalid.

The French case similarly found that the subject patent was invalid, though the plaintiff is seeking to appeal that decision.

The German court dismissed some claims of the patent but upheld others and found that Astronics had been infringing. The Company has paid $3.5 million in penalties and interest to date and has taken a reserve of $17.3 million to cover estimated damages and associated interest. Damages proceedings in this case are likely to conclude in 2026.

Unlike in the US, French, and German proceedings, the UK court fully upheld the subject patent and found that the Company was infringing. A damages hearing was conducted in October 2024 and a ruling is expected later this year or early in 2025. Astronics reserved $7.4 million to cover anticipated damages, but the plaintiff is seeking damages of up to approximately $105 million, excluding interest. Based on UK legal practices, the Company expects that some amount of damages may be due in early 2025. The Company is engaged with its lenders to seek to arrange financing to cover the wide range of possible outcomes and satisfy any potential damages award as required.

The Company believes that permission will be granted to either or both of the parties to appeal the judgement to a higher court subsequently.

All patents related to the infringement cases have expired years ago and the lawsuits do not restrict the Company’s current business activities.

2024 Outlook

The Company expects fourth quarter sales of $190 million to $210 million and is adjusting its 2024 revenue guidance to $777 million to $797 million. The midpoint of this range would be a 14.2% increase over 2023 sales. Astronics considered the broad range of factors affecting the business, including the work stoppage at Boeing, in issuing its guidance.

Backlog at the end of the third quarter was $611.9 million. Planned capital expenditures in 2024 are expected to be in the range of $9 million to $11 million.

Mr. Gundermann commented, “We are closing in on another year of strong double-digit growth. Assuming we attain the mid-point of the range for 2024, we will have averaged 21% growth over each of the last three years. Our profitability has benefited from the growth and the many improvement initiatives we have implemented over the last several years, and we believe 2025 will see a continuation of these trends.”

Third Quarter 2024 Webcast and Conference Call

The Company will host a teleconference today at 4:45 p.m. ET. During the teleconference, management will review the financial and operating results for the period and discuss Astronics’ corporate strategy and outlook. A question-and-answer session will follow.

The Astronics conference call can be accessed by calling (201) 493-6784. The listen-only audio webcast can be monitored at investors.astronics.com. To listen to the archived call, dial (412) 317-6671 and enter replay pin number 13749130. The telephonic replay will be available from 8:00 p.m. on the day of the call through Wednesday, November 20, 2024. The webcast replay can be accessed via the investor relations section of the Company’s website where a transcript will also be posted once available.

About Astronics Corporation

Astronics Corporation (Nasdaq: ATRO) serves the world’s aerospace, defense, and other mission-critical industries with proven innovative technology solutions. Astronics works side-by-side with customers, integrating its array of power, connectivity, lighting, structures, interiors, and test technologies to solve complex challenges. For over 50 years, Astronics has delivered creative, customer-focused solutions with exceptional responsiveness. Today, global airframe manufacturers, airlines, military branches, completion centers, and Fortune 500 companies rely on the collaborative spirit and innovation of Astronics. The Company’s strategy is to increase its value by developing technologies and capabilities that provide innovative solutions to its targeted markets.

Safe Harbor Statement

This news release contains forward-looking statements as defined by the Securities Exchange Act of 1934. One can identify these forward-looking statements by the use of the words “expect,” “anticipate,” “plan,” “may,” “will,” “estimate,” “feeling” or other similar expressions and include all statements with regard to the timing for the ruling on the Company’s UK and French patent infringement damages proceedings and the amount of any such damages that may become due and payable by the Company as a result, the Company’s ability to appeal the ruling on the Company’s UK patent infringement damages claim, the timing as to when the damages in the UK patent infringement claim will become due and payable, achieving any revenue or profitability expectations, aircraft production rates, the effectiveness on profitability of cost reduction efforts, the level of liquidity and its sufficiency to meet current needs, the level of cash generation, the level of demand by customers and markets. Because such statements apply to future events, they are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated by the statements. Important factors that could cause actual results to differ materially from what may be stated here include the trend in growth with passenger power and connectivity on airplanes, the state of the aerospace and defense industries, the market acceptance of newly developed products, internal production capabilities, the timing of orders received, the status of customer certification processes and delivery schedules, the demand for and market acceptance of new or existing aircraft which contain the Company’s products, the impact of regulatory activity and public scrutiny on production rates of a major U.S. aircraft manufacturer, the need for new and advanced test and simulation equipment, customer preferences and relationships, the effectiveness of the Company’s supply chain, and other factors which are described in filings by Astronics with the Securities and Exchange Commission. Except as required by applicable law, the Company assumes no obligation to update forward-looking information in this news release whether to reflect changed assumptions, the occurrence of unanticipated events or changes in future operating results, financial conditions or prospects, or otherwise.

FINANCIAL TABLES FOLLOW

ASTRONICS CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS DATA
(Unaudited, $ in thousands, except per share amounts)
	Three Months Ended								Nine Months Ended
	9/28/2024				9/30/2023				9/28/2024				9/30/2023
Sales	$	203,698			$	162,922			$	586,886			$	493,914
Cost of products sold		160,955				142,304				468,598				413,091
Gross profit		42,743				20,618				118,288				80,823
Gross margin		21.0	%			12.7	%			20.2	%			16.4	%
Selling, general and administrative		34,369				35,097				100,698				95,276
SG&A % of sales		16.9	%			21.5	%			17.2	%			19.3	%
Income (loss) from operations		8,374				(14,479	)			17,590				(14,453	)
Operating margin		4.1	%			(8.9	)%			3.0	%			(2.9	)%
Net gain on sale of business		—				—				—				(3,427	)
Loss on extinguishment of debt		6,987				—				6,987				—
Other expense (income)		343				348				1,214				(562	)
Interest expense, net		6,217				5,991				17,832				17,381
Loss before tax		(5,173	)			(20,818	)			(8,443	)			(27,845	)
Income tax expense (benefit)		6,565				(3,835	)			4,940				5,552
Net loss	$	(11,738	)		$	(16,983	)		$	(13,383	)		$	(33,397	)
Net loss % of sales		(5.8	)%			(10.4	)%			(2.3	)%			(6.8	)%
Basic loss per share:	$	(0.34	)		$	(0.51	)		$	(0.38	)		$	(1.02	)
Diluted loss per share:	$	(0.34	)		$	(0.51	)		$	(0.38	)		$	(1.02	)
Adjusted net income (loss)1	$	12,163			$	(2,262	)		$	21,287			$	(3,892	)
Adjusted diluted earnings (loss) per share1	$	0.35			$	(0.07	)		$	0.61			$	(0.12	)
Weighted average diluted shares outstanding (in thousands)		35,011				33,000				34,961				32,707
Capital expenditures	$	1,850			$	2,231			$	5,244			$	6,037
Depreciation and amortization	$	6,041			$	6,385			$	18,572			$	19,758

1 Adjusted Net Income and adjusted diluted EPS are Non-GAAP Performance Measures. Please see the reconciliation of GAAP to non-GAAP performance measures in the tables that accompany this release.

Use of Non-GAAP Financial Metrics and Additional Financial Information

In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, Astronics provides Adjusted Non-GAAP information as additional information for its operating results. References to Adjusted Non-GAAP information are to non-GAAP financial measures. These measures are not required by, in accordance with, or an alternative for, GAAP and may be different from non-GAAP financial measures used by other companies. Astronics management uses these measures for reviewing the financial results of Astronics for budget planning purposes and for making operational and financial decisions. Management believes that providing these non-GAAP financial measures to investors, as a supplement to GAAP financial measures, help investors evaluate Astronics core operating and financial performance and business trends consistent with how management evaluates such performance and trends.

ASTRONICS CORPORATION
RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA
(Unaudited, $ in thousands)
	Consolidated
	Three Months Ended								Nine Months Ended
	9/28/2024				9/30/2023				9/28/2024				9/30/2023
Net loss	$	(11,738	)		$	(16,983	)		$	(13,383	)		$	(33,397	)
Add back (deduct):
Interest expense		6,217				5,991				17,832				17,381
Income tax (benefit) expense		6,565				(3,835	)			4,940				5,552
Depreciation and amortization expense		6,041				6,385				18,572				19,758
Equity-based compensation expense		1,772				1,611				6,414				5,603
Non-cash annual stock bonus accrual		—				—				1,448				—
Non-cash 401K contribution and quarterly bonus accrual		—				1,237				3,454				3,773
Restructuring-related charges including severance		259				—				1,033				564
Legal reserve, settlements and recoveries		(332	)			(1,227	)			(332	)			(2,532	)
Litigation-related legal expenses		5,558				4,574				13,680				14,024
Equity investment accrued payable write-off		—				—				—				(1,800	)
Net gain on sale of business		—				—				—				(3,427	)
Loss on extinguishment of debt		6,987				—				6,987				—
Non-cash reserves for customer bankruptcy		2,203				11,074				2,203				11,074
Warranty reserve		3,527				—				3,527				—
Deferred liability recovery		—				—				—				(5,824	)
Adjusted EBITDA	$	27,059			$	8,827			$	66,375			$	30,749
Sales	$	203,698			$	162,922			$	586,886			$	493,914
Adjusted EBITDA margin %		13.3	%			5.4	%			11.3	%			6.2	%

Adjusted EBITDA is defined as net income before interest expense, income taxes, depreciation, amortization, and other adjustments. Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by sales. Adjusted EBITDA and Adjusted EBITDA Margin are not measures determined in accordance with GAAP and may not be comparable with Adjusted EBITDA and Adjusted EBITDA Margin as used by other companies. Nevertheless, the Company believes that providing non-GAAP financial measures, such as Adjusted EBITDA and Adjusted EBITDA Margin, are important for investors and other readers of the Company’s financial statements.

ASTRONICS CORPORATION
RECONCILIATION OF GROSS PROFIT TO ADJUSTED GROSS PROFIT
(Unaudited, $ in thousands)
	Consolidated
	Three Months Ended								Nine Months Ended
	9/28/2024				9/30/2023				9/28/2024				9/30/2023
Gross profit	$	42,743			$	20,618			$	118,288			$	80,823
Add back (deduct):
Warranty reserve		3,527				—				3,527				—
Non-cash reserves for customer bankruptcy		909				3,601				909				3,601
Deferred liability recovery		—				—				—				(5,824	)
Adjusted gross profit	$	47,179			$	24,219			$	122,724			$	78,600
Sales	$	203,698			$	162,922			$	586,886			$	493,914
Gross margin		21.0	%			12.7	%			20.2	%			16.4	%
Adjusted gross margin		23.2	%			14.9	%			20.9	%			15.9	%

Adjusted Gross Profit is defined as gross profit as reported, adjusted for certain items. Adjusted Gross Profit Margin is defined as Adjusted Gross Profit divided by sales. Adjusted Gross Profit and Adjusted Gross Margin are not measures determined in accordance with GAAP and may not be comparable with Adjusted Gross Profit and Adjusted Gross Profit Margin as used by other companies. Nevertheless, the Company believes that providing non-GAAP financial measures, such as Adjusted Gross Profit and Adjusted Gross Profit Margin, are important for investors and other readers of the Company’s financial statements and assists in understanding the comparison of the current quarter’s and current year's gross profit and gross profit margin to the historical periods' gross profit, as well as facilitates a more meaningful comparison of the Company’s gross profit and gross profit margin to that of other companies.

ASTRONICS CORPORATION
RECONCILIATION OF OPERATING INCOME TO ADJUSTED OPERATING INCOME
(Unaudited, $ in thousands)
	Consolidated
	Three Months Ended								Nine Months Ended
	9/28/2024				9/30/2023				9/28/2024				9/30/2023
Income (loss) from operations	$	8,374			$	(14,479	)		$	17,590			$	(14,453	)
Add back (deduct):
Restructuring-related charges including severance		259				—				1,033				564
Legal reserve, settlements and recoveries		(332	)			(1,227	)			(332	)			(2,532	)
Litigation-related legal expenses		5,558				4,574				13,680				14,024
Non-cash reserves for customer bankruptcy		2,203				11,074				2,203				11,074
Warranty reserve		3,527				—				3,527				—
Deferred liability recovery		—				—				—				(5,824	)
Adjusted operating income (loss)	$	19,589			$	(58	)		$	37,701			$	2,853
Sales	$	203,698			$	162,922			$	586,886			$	493,914
Operating margin		4.1	%			(8.9	)%			3.0	%			(2.9	)%
Adjusted operating margin		9.6	%			—	%			6.4	%			0.6	%

Adjusted Operating Income is defined as income from operations as reported, adjusted for certain items. Adjusted Operating Margin is defined as Adjusted Operating Income divided by sales. Adjusted Operating Income and Adjusted Operating Margin are not measures determined in accordance with GAAP and may not be comparable with Adjusted Operating Income and Adjusted Operating Margin as used by other companies. Nevertheless, the Company believes that providing non-GAAP financial measures, such as Adjusted Operating Income and Adjusted Operating Margin, are important for investors and other readers of the Company’s financial statements and assists in understanding the comparison of the current quarter’s and current year's income from operations to the historical periods' income from operations and operating margin, as well as facilitates a more meaningful comparison of the Company’s income from operations and operating margin to that of other companies.

ASTRONICS CORPORATION
RECONCILIATION OF NET INCOME AND DILUTED EARNINGS PER SHARE TO ADJUSTED NET INCOME AND ADJUSTED DILUTED EARNINGS PER SHARE
(Unaudited, $ in thousands, except per share amounts)
	Consolidated
	Three Months Ended								Nine Months Ended
	9/28/2024				9/30/2023				9/28/2024				9/30/2023
Net loss	$	(11,738	)		$	(16,983	)		$	(13,383	)		$	(33,397	)
Add back (deduct):
Amortization of intangibles		3,188				3,381				9,728				10,577
Restructuring-related charges including severance		259				—				1,033				564
Legal reserve, settlements and recoveries		(332	)			(1,227	)			(332	)			(2,532	)
Litigation-related legal expenses		5,558				4,574				13,680				14,024
Equity investment accrued payable write-off		—				—				—				(1,800	)
Net gain on sale of business		—				—				—				(3,427	)
Loss on extinguishment of debt		6,987				—				6,987				—
Non-cash reserves for customer bankruptcy		2,203				11,074				2,203				11,074
Warranty reserve		3,527				—				3,527				—
Deferred liability recovery		—				—				—				(5,824	)
Normalize tax rate1		2,511				(3,081	)			(2,156	)			6,849
Adjusted net income (loss)	$	12,163			$	(2,262	)		$	21,287			$	(3,892	)
Weighted average diluted shares outstanding (in thousands)		35,011				33,000				34,961				32,707
Diluted loss per share	$	(0.34	)		$	(0.51	)		$	(0.38	)		$	(1.02	)
Adjusted diluted earnings (loss) per share	$	0.35			$	(0.07	)		$	0.61			$	(0.12	)

Adjusted Net Income and Adjusted Diluted EPS are defined as net income and diluted EPS as reported, adjusted for certain items, including amortization of intangibles, and also adjusted for a normalized tax rate. Adjusted Net Income and Adjusted Diluted EPS are not measures determined in accordance with GAAP and may not be comparable with the measures used by other companies. Nevertheless, the Company believes that providing non-GAAP financial measures, such as Adjusted Net Income and Adjusted Diluted EPS, are important for investors and other readers of the Company’s financial statements and assists in understanding the comparison of the current quarter’s and current year's net income and diluted EPS to the historical periods' net income and diluted EPS, as well as facilitates a more meaningful comparison of the Company’s net income and diluted EPS to that of other companies. The Company believes that presenting Adjusted Diluted EPS provides a better understanding of its earnings power inclusive of adjusting for the non-cash amortization of intangible assets, reflecting the Company’s strategy to grow through acquisitions as well as organically.

1 Applies a normalized tax rate of 25% to GAAP pre-tax income and non-GAAP adjustments above, which are each pre-tax.

ASTRONICS CORPORATION
SEGMENT SALES AND OPERATING PROFIT
(Unaudited, $ in thousands)
	Three Months Ended							Nine Months Ended
	9/28/2024			9/30/2023				9/28/2024			9/30/2023
Sales
Aerospace	$	177,564		$	142,116			$	518,187		$	436,217
Less inter-segment		(10	)		(12	)			(52	)		(134	)
Total Aerospace		177,554			142,104				518,135			436,083
Test Systems		26,183			20,818				68,790			57,831
Less inter-segment		(39	)		—				(39	)		—
Total Test Systems		26,144			20,818				68,751			57,831
Total consolidated sales		203,698			162,922				586,886			493,914
Segment operating profit (loss) and margins
Aerospace		14,251			(7,464	)			45,628			10,342
		8.0	%		(5.3	)%			8.8	%		2.4	%
Test Systems		(13	)		(1,781	)			(8,428	)		(8,521	)
		—	%		(8.6	)%			(12.3	)%		(14.7	)%
Total segment operating profit (loss)		14,238			(9,245	)			37,200			1,821
Net gain on sale of business		—			—				—			(3,427	)
Loss on extinguishment of debt		6,987			—				6,987			—
Interest expense		6,217			5,991				17,832			17,381
Corporate expenses and other		6,207			5,582				20,824			15,712
Loss before taxes	$	(5,173	)	$	(20,818	)		$	(8,443	)	$	(27,845	)

ASTRONICS CORPORATION
RECONCILIATION OF SEGMENT OPERATING PROFIT TO ADJUSTED SEGMENT OPERATING PROFIT
(Unaudited, $ in thousands)
	Three Months Ended								Nine Months Ended
	9/28/2024				9/30/2023				9/28/2024				9/30/2023
Aerospace operating profit (loss)	$	14,251			$	(7,464	)		$	45,628			$	10,342
Restructuring-related charges including severance		237				—				237				—
Legal reserve, settlements and recoveries		(332	)			(1,227	)			(332	)			(2,532	)
Litigation-related legal expenses		5,405				2,658				13,161				6,779
Non-cash reserves for customer bankruptcy		2,203				11,074				2,203				11,074
Warranty reserve		3,527				—				3,527				—
Adjusted Aerospace operating profit	$	25,291			$	5,041			$	64,424			$	25,663
Aerospace sales	$	177,554			$	142,104			$	518,135			$	436,083
Aerospace margin		8.0	%			(5.3	)%			8.8	%			2.4	%
Adjusted Aerospace margin		14.2	%			3.5	%			12.4	%			5.9	%
Test Systems operating loss	$	(13	)		$	(1,781	)		$	(8,428	)		$	(8,521	)
Restructuring-related charges including severance		22				—				796				564
Litigation-related legal expenses		153				1,916				519				7,245
Deferred liability recovery		—				—				—				(5,824	)
Adjusted Test Systems operating profit (loss)	$	162			$	135			$	(7,113	)		$	(6,536	)
Test Systems sales	$	26,144			$	20,818			$	68,751			$	57,831
Test Systems margin		—	%			(8.6	)%			(12.3	)%			(14.7	)%
Adjusted Test Systems margin		0.6	%			0.6	%			(10.3	)%			(11.3	)%

Adjusted Segment Operating Profit is defined as segment operating profit as reported, adjusted for certain items. Adjusted Segment Margin is defined as Adjusted Segment Operating Profit divided by segment sales. Adjusted Segment Operating Profit and Adjusted Segment Margin are not measures determined in accordance with GAAP and may not be comparable with Adjusted Segment Operating Profit and Adjusted Segment Margin as used by other companies. Nevertheless, the Company believes that providing non-GAAP financial measures, such as Adjusted Segment Operating Profit and Adjusted Segment Margin, are important for investors and other readers of the Company’s financial statements and assists in understanding the comparison of the current quarter’s and current year's segment operating profit to the historical periods' segment operating profit and segment margin, as well as facilitates a more meaningful comparison of the Company’s segment operating profit and segment margin to that of other companies.

ASTRONICS CORPORATION
CONSOLIDATED BALANCE SHEET DATA
($ in thousands)
	(unaudited)
	9/28/2024			12/31/2023
ASSETS
Cash and cash equivalents	$	5,177		$	4,756
Restricted cash		1,187			6,557
Accounts receivable and uncompleted contracts		193,494			172,108
Inventories		204,952			191,801
Other current assets		19,371			14,560
Property, plant and equipment, net		81,309			85,436
Other long-term assets		32,236			34,944
Intangible assets, net		55,702			65,420
Goodwill		58,169			58,210
Total assets	$	651,597		$	633,792
LIABILITIES AND SHAREHOLDERS' EQUITY
Current maturities of long-term debt	$	550		$	8,996
Accounts payable and accrued expenses		130,342			112,309
Customer advances and deferred revenue		19,144			22,029
Long-term debt		178,423			159,237
Other liabilities		73,934			81,703
Shareholders' equity		249,204			249,518
Total liabilities and shareholders' equity	$	651,597		$	633,792

ASTRONICS CORPORATION
CONSOLIDATED CASH FLOWS DATA
	Nine Months Ended
(Unaudited, $ in thousands)	9/28/2024				9/30/2023
Cash flows from operating activities:
Net loss	$	(13,383	)		$	(33,397	)
Adjustments to reconcile net loss to cash from operating activities:
Non-cash items:
Depreciation and amortization		18,572				19,758
Amortization of deferred financing fees		2,711				2,148
Provisions for non-cash losses on inventory and receivables		8,023				13,713
Equity-based compensation expense		6,414				5,603
Loss on extinguishment of debt		6,987				—
Net gain on sale of business		—				(3,427	)
Operating lease non-cash expense		3,869				3,816
Non-cash 401K contribution and quarterly bonus accrual		3,454				3,773
Non-cash annual stock bonus accrual		1,448				—
Non-cash litigation provision adjustment		—				(1,305	)
Non-cash deferred liability reversal		—				(5,824	)
Other		2,899				911
Cash flows from changes in operating assets and liabilities:
Accounts receivable		(22,712	)			(12,980	)
Inventories		(19,829	)			(24,024	)
Accounts payable		(3,304	)			4,033
Accrued expenses		13,517				5,111
Income taxes		798				3,443
Operating lease liabilities		(3,777	)			(3,660	)
Customer advance payments and deferred revenue		(2,919	)			(562	)
Supplemental retirement plan liabilities		(309	)			(304	)
Other assets and liabilities		1,690				898
Net cash provided (used) by operating activities		4,149				(22,276	)
Cash flows from investing activities:
Proceeds on sale of business and assets		—				3,427
Capital expenditures		(5,244	)			(6,037	)
Net cash used by investing activities		(5,244	)			(2,610	)
Cash flows from financing activities:
Proceeds from long-term debt		195,978				135,732
Principal payments on long-term debt		(187,498	)			(125,984	)
Stock award and employee stock purchase plan activity		(3,219	)			2,480
Financing-related costs		(5,863	)			(6,447	)
Financing extinguishment costs		(3,210	)			—
Proceeds from at-the-market stock sales		—				13,045
Other		(96	)			(47	)
Net cash (used) provided by financing activities		(3,908	)			18,779
Effect of exchange rates on cash		54				(20	)
Decrease in cash and cash equivalents and restricted cash		(4,949	)			(6,127	)
Cash and cash equivalents and restricted cash at beginning of period		11,313				13,778
Cash and cash equivalents and restricted cash at end of period	$	6,364			$	7,651
Supplemental disclosure of cash flow information
Interest paid	$	15,261			$	14,136
Income taxes refunded, net of payments	$	3,975			$	2,192

ASTRONICS CORPORATION
SALES BY MARKET
(Unaudited, $ in thousands)
	Three Months Ended							Nine Months Ended						2024 YTD
	9/28/2024		9/30/2023		% Change			9/28/2024		9/30/2023		% Change		% of Sales
Aerospace Segment
Commercial Transport	$	133,850	$	101,724	31.6	%		$	383,679	$	308,016	24.6	%	65.4	%
Military Aircraft		21,685		16,687	30.0	%			63,545		44,335	43.3	%	10.8	%
General Aviation		18,077		16,193	11.6	%			56,643		60,656	(6.6	)%	9.7	%
Other		3,942		7,500	(47.4	)%			14,268		23,076	(38.2	)%	2.4	%
Aerospace Total		177,554		142,104	24.9	%			518,135		436,083	18.8	%	88.3	%
Test Systems Segment1
Government & Defense		26,144		20,818	25.6	%			68,751		57,831	18.9	%	11.7	%
Total Sales	$	203,698	$	162,922	25.0	%		$	586,886	$	493,914	18.8	%

SALES BY PRODUCT LINE
(Unaudited, $ in thousands)
	Three Months Ended							Nine Months Ended						2024 YTD
	9/28/2024		9/30/2023		% Change			9/28/2024		9/30/2023		% Change		% of Sales
Aerospace Segment
Electrical Power & Motion	$	90,467	$	64,312	40.7	%		$	263,919	$	185,712	42.1	%	45.0	%
Lighting & Safety		46,921		38,496	21.9	%			135,162		116,967	15.6	%	23.0	%
Avionics		29,151		22,347	30.4	%			83,716		83,011	0.8	%	14.3	%
Systems Certification		4,460		6,535	(31.8	)%			12,272		19,832	(38.1	)%	2.1	%
Structures		2,613		2,914	(10.3	)%			8,798		7,485	17.5	%	1.5	%
Other		3,942		7,500	(47.4	)%			14,268		23,076	(38.2	)%	2.4	%
Aerospace Total		177,554		142,104	24.9	%			518,135		436,083	18.8	%	88.3	%
Test Systems Segment1		26,144		20,818	25.6	%			68,751		57,831	18.9	%	11.7	%
Total Sales	$	203,698	$	162,922	25.0	%		$	586,886	$	493,914	18.8	%

1 Test Systems sales in the nine months ended September 30, 2023 included a $5.8 million reversal of a deferred revenue liability recorded with a previous acquisition.

ASTRONICS CORPORATION
ORDER AND BACKLOG TREND
(Unaudited, $ in thousands)
	Q4 2023		Q1 2024		Q2 2024		Q3 2024		Trailing Twelve Months
	9/30/2023		12/31/2023		3/30/2024		9/28/2024		9/28/2024
Sales
Aerospace	$	168,747	$	163,638	$	176,943	$	177,554	$	686,882
Test Systems		26,545		21,436		21,171		26,144		95,296
Total Sales	$	195,292	$	185,074	$	198,114	$	203,698	$	782,178
Bookings
Aerospace	$	172,106	$	184,149	$	192,515	$	173,569	$	722,339
Test Systems		11,176		19,986		26,359		15,597		73,118
Total Bookings	$	183,282	$	204,135	$	218,874	$	189,166	$	795,457
Backlog
Aerospace1	$	511,540	$	532,051	$	547,623	$	543,638
Test Systems		75,036		73,586		78,774		68,227
Total Backlog	$	586,576	$	605,637	$	626,397	$	611,865		N/A
Book:Bill Ratio
Aerospace		1.02		1.13		1.09		0.98		1.05
Test Systems		0.42		0.93		1.25		0.60		0.77
Total Book:Bill		0.94		1.10		1.10		0.93		1.02

1 In October of 2024, a customer reported within the Aerospace segment declared bankruptcy. Aerospace and Total Backlog included $9.3 million related to that customer. In the table and bar chart presented above, Aerospace and Total Bookings was reduced by $9.3 million, in the periods in which the original bookings occurred. While the customer has not cancelled those orders and seeks to reorganize and continue operations, we have removed all outstanding backlog until additional information is available to confirm whether those orders are expected to be satisfied. For a customer bankruptcy that occurred during 2023, Aerospace and Total Bookings of $2.6 million and $17.2 million was removed in second and third quarters of 2021, respectively.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20241106971275/en/

For more information:

Company:

David C. Burney, Chief Financial Officer

Phone: (716) 805-1599, ext. 159

Email: david.burney@astronics.com

Investor Relations:

Deborah K. Pawlowski, Kei Advisors LLC

Phone: (716) 843-3908

Email: dpawlowski@keiadvisors.com

Source: Astronics Corporation

FAQ

What was Astronics (ATRO) revenue growth in Q3 2024?

Astronics reported a 25% increase in sales to $203.7 million in Q3 2024 compared to the same period last year.

What was Astronics (ATRO) net loss in Q3 2024?

Astronics reported a net loss of $11.7 million, or $0.34 per diluted share, in Q3 2024.

What is Astronics (ATRO) revenue guidance for 2024?

Astronics revised its 2024 revenue guidance to a range of $777 million to $797 million.

What was Astronics (ATRO) backlog as of Q3 2024?

Astronics reported a backlog of $611.9 million at the end of Q3 2024.