Q4 2023 Astronics Corp Earnings Call
Participants
Craig Mychajluk; IR; Astroniics Corp.
Peter Gundermann; Chairman, President, and CEO; Astronics Corp.
Dave Burney; CFO; Astronics Corp.
Pete Austin; Analyst; Truist Securities
Jon Tanwanteng; Analyst; CJS Securities
Ryan McKeveny; Analyst; Zelman & Associates
Tony Bancroft; Analyst; Gabelli
Presentation
Operator
Good day, and welcome to the Astronics Corporation fourth quarter fiscal year 2023 financial results conference call. All participants will be in listen-only mode. (Operator Instructions) Please note today's event is being recorded. I would now like to turn the conference over to Craig Mychajluk with Investor Relations. Please go ahead, sir.
Craig Mychajluk
Yes, thank you, and good afternoon, everyone. We certainly appreciate your time today and your interest in Astronics. On the call with me here today are Peter Gundermann, our Chairman, President and CEO; and Dave Burney, our Chief Financial Officer. should have a copy of our fourth quarter and full year 2023 financial results, which crossed the wires after the market closed today. You do not have the release, you can find it on our website at astronics.com. As you are aware, we may make forward-looking statements during the formal discussion and the Q&A session of this conference call. These statements apply to future events that are subject to risks and uncertainties as well as other factors that could cause actual results to differ materially from what is stated here today.
These risks and uncertainties and other factors are provided in the earnings release as well as with other documents filed with the Securities and Exchange Commission. You can find those documents on our website or at SEC.gov. during today's call, we'll also discuss some non-GAAP measures. We believe this will be useful in evaluating our performance. You should not consider the presentation of this additional information in isolation or as a substitute for results prepared in accordance with GAAP, we have provided reconciliations of non-GAAP measures with comparable GAAP measures in the tables that accompany today's release. So with that, let me turn it over to Pete to begin for excursions it up to everybody.
Peter Gundermann
Thanks for tuning in to our call. We ended 2023 on a pretty strong note and consider it in retrospect now a solid year of progress. Our fourth quarter results were enabled by a series of trends that have been affecting our business for some time. Those trends are continuing to shape our environment as we enter 2024, which we expect will be another year of progress.
I will dedicate my few minutes of comments this afternoon to describe these trends and the impact they are having on our business. Then Dave will talk you through some of the specifics of our financial statements, but first, some headlines from the fourth quarter fourth quarter revenue of $195 million was at the high end of our forecasted range and up 23.5% over the comparator quarter of 2020 to 2023, cumulative revenue of $689 million was up almost 29% over 2022. Higher volume drove improvements in financial profit measures. Our fourth quarter adjusted EBITDA, for example, was just shy of $25 million or 12.7% of sales year to date 2023, adjusted EBITDA was $55.6 million or 8.1% of sales in 2024. As previously announced, we expect revenue to be in the range of $760 million to $795 million, up at the midpoint, another 13% over where we closed 2023.
So about those trends, our fourth quarter results are really kind of the expected result of several trends affecting our business. None of these are names we've talked about them to varying degrees over recent quarterly calls. In other words, there was nothing really special that went into our fourth quarter to drive these results. It's more just the expected result of things that have been happening kind of under the surface for some time now, and I'll talk through them, not in any particular order, certainly not in the priority order. They're all important.
First of all, demand has been and continues to be just really strong. And for us, airline demand or travel has been strong everywhere you see this and pretty much any metric if you follow the aerospace industry, the one exception being China, international travel travel in and out of China remains pretty weak. But in most other major parts of the world travel is near or at or even above where it was in 2019 before the pandemic hit. With that production rate have major platforms have increased over time in our major markets despite some of the travails going on at Boeing seven, three seven.
There's upward pressure from some there's upward pressure, Airbus A. three, 53, 20, all trending up and for a company like us when more airplanes are being built and when more people are flying, that translates into improved or increased demand for us. And that's what we've been saying, not just in the fourth quarter, not just in 2023. But really for years now our book-to-bill in 2021 was a 1.3. In 2022, it was pretty much at the same level, 1.29 final number for 2023 looks a lot lower, 1.06, but that's dragged down a little bit by poor bookings in our Test business where the book-to-bill came in at 0.76.
Our Aerospace segment, which is the vast majority of our business, came in with a book-to-bill for the year of 1.1. So 10% of our shipments with that demand. Our backlog has consistently set new highs quarter after quarter after quarter. The only exception being the fourth quarter where if it came down ever so slightly. The second trend, which is worthy of mentioning is in addition to demand, is the continuing improvement in our supply chain constraints in 2021 and 22, 2022 left us handicapped, and it gave us a hard time trying to respond to the increases in demand I was just talking about, but those really started to dissipate and straighten out as we worked our way through 2023 and that continued through the fourth quarter. That's not perfect.
There are still challenges, but the headaches are much fewer and farther between than they were earlier on in the pandemic. And that supply chain performance is a major reason why we are able to execute on our backlog as 2023 due to a close and why we are confident being able to predict another year of pretty solid growth for 2020 for another. Another trend that needs MENTIONED is the really big improvement in personnel, labor, availability and consistency. But we have seen recently, especially as 2023, we're on again, like a lot of companies, great resignation. While we were used to turnover in the low single digits on a percentage basis in most of our operations during the peak of the pandemic, we saw turnovers approaching 20%, which is fundamentally a different situation that has settled down.
As a result, our workforce in generally general is much less tenured than it was before the pandemic. And it's taken some time to get the culture going again, get the learning curves going again and getting people working together as a team. But we're seeing that improve and we're seeing turnover dropped back to those kinds of rates that we were used to saying years ago, there's still more turnover. It's not like it was before, but it's dropped dramatically from where it was at the peak of the pandemic. And finally, inflationary pressures of the last 24 months or so have also disappoint dissipated pretty dramatically. Obviously, the Fed not back where they want to be.
We all know that. But in terms of the pressures we see from suppliers, in particular and other cost of the inputs for our business, the pressures have dissipated and have become more reasonable. So you add all that together. And one of the things that I wanted to point out also as I look back at what's going on in our business is everything is getting quite a bit more predictable when it used to be, to be honest, from the peak of the pandemic with supply chain headaches and turnover and inflation it, it was a challenge to accurately predict where the business was going to be and how it is going to perform.
That's coming much more into focus as we worked our way through 2023 and now as we enter 2024, some evidence for you to consider back in the fall of 2022, when we were putting our 2023 plan together we issued initial revenue guidance of 640 to $680 million. We came in at 688. That's actually pretty accurate compared to what happened in the year or two before that. And not only that. But our internal forecast was within 1% of where we actually ended up and for the cumulative year and 2023. And similarly, with the fourth quarter, we issued revenue guidance of one 85 to 1 95. We came in right at the high end of that range.
Again, another example of improved predictability, which is really critical for optimizing the business and executing a plan as we go forward and as we go forward with respect to 2024, the trends I just discussed and the strong finish we had to 2023 together give us confidence it will be another year of solid recovery. Our initial outlook in terms of the sales forecast is $760 million to $795 million at the midpoint. That's a year of 13% growth over 2023, it's a low percentage growth compared to what we saw in 2023 and in 2022. But it's one that's welcome for a couple of reasons. First of all it will get us back to the revenue range of where we were pre pandemic.
Finally, it's been a long journey. In 2019. We had sales of $772 million and the midpoint of this range would be 778. We have the business and the backlog to do more than that. But our expectation our goal is to be at the high end of that range, seven, 67, 95, and even at 13% growth, it would cap another year of pretty strong performance if you look at top line, 2022, 2023 and 2024, at the midpoint, we would see $535 million turning into $689 million, turning into $778 million as we work through 2024, we're also going to have a increased emphasis on margins that's something that you always have worked on and worry about when you run a business. But frankly, we knew as we were operating through the pandemic, that we would not be profitable at those lower sales levels. There's no way a company like ours.
The way we're structured right now is going to make money at $535 million, but as we move into the high seven hundreds. And with the performance that we saw in the fourth quarter, we think there will be room to optimize and improve our profitability as we work through the year, we expect 2024 to start somewhat slowly. We expect first quarter sales to be 170 to $175 million. That's a little bit of a step back from where we were with the fourth quarter. And that's a pattern that we've been in for various reasons over the last six quarters or so, where we're up a little bit down a little bit up a little bit down a little bit, but the trend overall continues to be positive as you can look past one quarter at a time, there are a few things we can point to that are going to be affecting us in the first quarter.
The first is we're intentionally walking away and winding down some kind of a noncore non aerospace business that we pursued and picked up early on in the pandemic to help keep our factories fall those pieces of business are generally not as profitable. So we are prioritizing profitable aerospace work as we wind them down, though there's a little bit of a hole in our in our income statement it will last for a quarter or so. There also is a little bit of a reschedule going on with Boeing on the seven three seven that's been in the news I think people have heard it and seen it. Boeing is and has been our biggest customers, seven three seven is one of our biggest programs. It's not our biggest program and we put product on that airplane from a number of different facilities through a number of different routes.
And the messages we get are not entirely consistent from operating unit to operating unit. But there is it seems an overall or a general rescheduling going on, which will probably deflate first quarter sales a little bit resulting in the range that we're giving. And then finally, just a kind of a mix of customer schedule issues with that, you can sell product and deliver products when the customers want it. So we're expecting Q1 to be 170 to 175. That's no indication whatsoever of wavering demand. We expect to climb pretty dramatically from there in the second quarter, and we expect the second half to be quite strong relative to anything we've seen since well before the pandemic took hold.
One other comment on 2024. We have been talking for some time about a Army radio test program, we call it 45 40 90. It's something that we were announced for winter of for a year-and-a-half ago now. And we have been waiting for a directed procurement, sole-source contract negotiation to take place. It is underway currently. We have not previously been able to talk about having positive momentum in this area, but we certainly have quite a bit of it now and so much so that we're expecting to see award there, most likely, though, not absolutely for sure, in the second quarter.
So more on that as it happens a little bit of a review is that this is for a platform of test equipment, but the U.S. Army could use or will use to test the full range of their family of radios and they have quite a few radios in use. It will be an IDIQ program, but we expect it to be $200 million to $300 million over four to five years. And if you look at our test business, which is operating at about an $80 million level and you can imagine the impact of dropping in $30 million to $40 million of sales a year once this thing gets and gets underway. So more on that as it happens, but that's one of the items, which certainly will have an influence in our 2024 plan, and we'll talk about it more as we know more most likely in our Q1 call. That's the end of my prepared remarks or do you want to take it away and talk about financials? Sure.
Dave Burney
Thanks, P-Com. As Pete mentioned, we had a very strong fourth quarter customer demand, supply chain and our operations executed at a high level during the quarter. The top line was driven by strong sales to all of our aerospace markets. That combined were up $30.4 million or 22% compared to the fourth quarter of last year. Commercial transport, our largest end market was particularly strong, with sales up $21 million from last year's fourth quarter test segment sales also increased compared to last year from $19.8 million to $26.5 million.
In terms of margins, we had a pretty clean quarter with no significant unusual costs or income. The one one item that we called out those in the fourth quarter includes a full year of bonuses that were not determined until year end and therefore not accrued each quarter as we went through the year. So Q4 reflects bonuses of $4.2 million. That's the full year amount. These bonuses will be paid in stock to preserve cash, and they're the first bonuses that we've paid since 2019. The top line growth drove our margin expansion, demonstrating the leverage we can get on incremental sales consolidated operating income increased by $10.9 million to $7.8 million or 4.5% or 4%, driven by the sales growth.
Looking at segment performance, the Aerospace segment, which represented 86% of our consolidated sales, had operating income of 8.5%. Adjusting for the full year of bonuses that were recognized in the quarter Aerospace operating margins would have been closer to 10%, which is back in the neighborhood of pre-pandemic levels. This margin expansion demonstrates the leverage we can achieve from incremental sales as we've said before, depending on mix, we tend to think of our contribution margin in aerospace being around 40%. The test segment continues to be challenged by underutilization program mix and high legal costs. Sales were up $6.7 million over the comparative quarter last year.
And operating loss improved from a loss of $4 million to a loss of $200,000 in this year's fourth quarter. Interest rates remain a headwind with our current debt structure and high sulfur rates. Our cash interest expense for the quarter was about $5.1 million, which equates to about an effective rate of about 12%. At the end of the quarter, we had outstanding debt of $172.5 million. And now that we're recovering from a tough period over the last few years, we will have more alternatives available to us in terms of debt structure, and we'll be reviewing options going forward. Cash used in operations in the quarter was $1.7 million and the net loss adjusted for noncash expenses provided $26.2 million. It was offset by an increase in net operating assets, which used $27.8 million.
Looking at the components of the operating assets where we consume much of the cash generated from operations we continued to make progress in managing our inventory, which was a struggle earlier in 2023. In the fourth quarter, we're able to reduce inventory levels by $10.7 million exclusive of reserves. The improvement was welcome, but we're still not where we need to be, which is a goal of getting our inventory turnover back close to pre-pandemic levels. We're forecasting improvement as we move through 2024, but still face some headwinds as the supply chain, while improved compared to a year ago, is still not a well-oiled machine and lead times remain longer than they were pre-pandemic.
The $19 million increase of accounts receivable in the fourth quarter was due to the high level high sales level and timing being weighted in the second half of the year. For the second half of the quarter, I should say liquidity continues to be tight. We were active using our at-the-market program to sell 500,000 shares at an average price of $15.65, raising $7.6 million to fund working capital needed until we realize the cash flow from the growing sales. The ATM program for the full year sold $1.3 million shares and net proceeds were $21.3 million, while in the third and fourth quarters this equates to about 4% dilution. We're compliant with our debt covenants and are forecasting continued compliance.
And in summary, as we move into 2024 focuses on operational execution, optimizing our debt structure and improving our inventory turnover. Free cash flow will be used to reduce outstanding debt as we move through 2024. And we're expecting free cash flow to grow as we move through the year. That concludes my remarks.Pete, back to you and Craig over to you if you want to open it up for questions.
Question and Answer Session
Operator
(Operator Instructions) Pete Austin, Truist Securities.
Pete Austin
Hey, good evening, guys. I'm on for Mike Ciarmoli this evening. Thanks for taking our questions. And so first, I just wanted to start with anything you could give us on how margins are looking to start the year, just given that your first quarter sales guidance puts you at a similar level to where you were in the second quarter of last year and you had EBITDA margins of around 9% in that quarter. Is that a good starting point for what you might do in the first quarter? Or are there any notable changes to your cost structure incentive you call out whether it's labor or productivity or other inputs in the business? Just anything that would change how we look at what margins potentially might be?
Dave Burney
Pete, I could I could take that, but that's not. I wouldn't say that there's any significant cost structure changes in the first quarter. As I commented earlier, our contribution margin tends to be somewhere around 40% depending on product mix. So that works the same way as the top line goes down. So that would be a starting point.
I think the other thing to look at what would be the fourth quarter which, as I mentioned, contain a full year's worth of bonuses in that fourth quarter. So if you're if you're going to trying to do a bridge between Q4 and Q1, you need to make an adjustment for the full year worth of bonuses in the fourth quarter and adjust that profit and in Q4 for that.
Pete Austin
Okay. That's helpful. Thanks. So then I'm also wanted to see if we could get a little more detail on the assumed revenue growth in 2024. Are you assuming a similar revenue split by segments for revenue in 2024? Or does your guidance assume relatively higher growth in either aero or test? We would anticipate most of the growth coming on minerals. That's where the big upside and that's where the penalty was from the pandemic. And that's where the big turnaround really has that. I mean, if you look at our business by sources of income, our test business actually was relatively stable.
It didn't go down a lot. So it's probably not going to go up a lot until we get this Army radio test program resolve and figured out. And similarly, business jet revenues were have been relatively stable. The last quarter was particularly strong enabled by supply chain and military aircraft also or has been pretty stable. So the big swing. So it goes from $772 million down to $450 million or whatever it was was largely on the commercial transport side of the business. And the rebound back to that level also is largely on the commercial transport side of the business.
Great, thanks. And I just had one last one on the bookings environment on some looks like in the fourth quarter, your book to bill was a little bit lower versus what you put up in the rest of the year, although understood that, that soft relative to a higher revenue number, but just wanted to get a sense how are bookings trending to begin the first quarter in aerospace so far? I don't know if I had to say much specifically there, I can tell you that we have regular some regular interactions among the sales professionals across our business.
And the I guess I would describe the environment as continuing to be target, Rich, and we think that there continues to be pretty strong demand. And so we're going to watch, of course, because bookings over the first quarter and second quarter will start to have and impact on revenue as we work towards the end of the year. But the feedback I'm getting the tone of our team is pretty positive there. And on the test side, if we get this radio test program under wraps and underway sometime soon, that will have a pretty positive influence. Also in the years we get towards the end of it.
Dave Burney
Great. I'll jump back in queue. Thanks, sir.
Operator
Jon Tanwanteng, CJS Securities.
Jon Tanwanteng
Hi, good afternoon and thank you for taking my questions and congrats on that. Nice performance in the quarter. To my first question is, can you talk about the Army's recent fare cancellation and the reallocation of resources to flare and maybe tell us how that impacts you over the longer term?
Peter Gundermann
Well, it's a little bit of an early question, John's because we don't really know how this ramp up is going to is going to happen, as you know, and probably most listeners on the call know, we are tuned as we're part of the of the Bell we took a floating bill won that competition against the Sikorsky Lockheed teams and the two are set to compete against fare.
Yes, I just I can't speak for the Army. I can't speak for Bill and we're still learning the details. But I would tell you, I guess from my perspective that freeing up the system and the money to concentrate on Flora makes sense to me and is good for us. So we can concentrate our resources. You know, again, I can't speak for Bell, but and concentrate their resources on one program instead of two and the only also so phone, so I'm okay with it, especially since we were on the winning team, that's all right with me.
Fair enough. Got it.
Jon Tanwanteng
And can you give us just a little bit more color on the demand from Boeing that you're expecting beyond Q1? You mentioned on a whole for me scheduling. And I was just wondering what your assumptions are in production run rates or the demand rates from you as you go through the year and what's assumed in the guidance?
Peter Gundermann
Yes, I didn't. I didn't mean to imply a whole that seems to be more of a reschedule. So no, Boeing has been anticipating a ramp on seven, three seven and like many suppliers, I think we were getting those kinds of queues we ship basically as they tell us to and they update shipping plans to us in our higher volume facilities like every 12 or 15 weeks and we don't always know what their production rate is. You would assume that our production rate is somehow correlated to their production rate, but everyone's allow it becomes apparent that they're a little bit ahead of us or they're a little bit behind us.
And our hunch is that they were a little bit behind us, though they probably accumulated some inventory there. And they're rescheduling things. But I think we're still thinking that the word on the street is that they're going to build that 35 to 38 or seven, three, seven months and and while that's not 45 or whatever they plan to go to by the end of 2024, it's a heck of a lot more than they're building back in 2020, which I think was about zero. So so it's a minor kind of headache for us, but it's not a it's not a whole by any means. It's just a reallocation of inventory, I would say.
Jon Tanwanteng
Got it. Thank you. Appreciate it.
Operator
Ryan McKeveny, Zelman
Ryan McKeveny
Hi, good afternoon. Thank you for taking my time. Congratulations on your results and the continued recovery from the pandemic. And I think it speaks to the quality of the business and the management team at a more general question, if I may. And when you think about the sort of broader Lighting & Safety market and in your panel business.Could you just talk a little bit about the competitive landscape there?
Who the key competitors are you your current market share dynamics there? It's still very fragmented and how you see that market evolving and the opportunity set there? Sure. So you're asking about our lighting business in general, right?
Peter Gundermann
Yes, that's one of our major thrusts for those who don't know and we do we're involved in aircraft lighting really across the spectrum business, Jet, military, commercial transport. We're active in the cockpit. We're active on the exterior, and we're active in the cabin. So the range of products include the lights you see on the outside of the airplane, the flashing light or red or when green or landing lights, if you are sitting in the cabin and you push that reading lights, but you're headed in the three Southern or Triple Seven. That's our assembly for sure.
And if you're in the you're in the talk that there's a whole bunch of things that light up a whole bunch of indicators, and we do a lot of work through major avionics companies that end up in aircraft cockpits. I would venture to say that we are one of the larger aircraft lighting companies in the world. We do lighting in various places in our company. But if you add it all together, we're one of the larger and the competitive nature of the business with our lighting product line, like some of our other product lines, the consolidation that's happened in the industry over the last 15, 10, 15 years has has made us one of the more prominent stand-alone available suppliers to the big OEMs.
And that has it so far worked in our favor. And I'm hoping that it does for a long time because that's one of our differentiators is we're big enough to do what it is that we need to do what the customers are asking from us, but we're small enough to do it. We would like to thank and a more prompt and effective in customer-intimate Intermet kind of way. So the aerospace industry is like a lot of other industries, the reputation business, and we've been picking up share. So we're enthusiastic about it. And it's a one of our we consider our business to be based on four strategic thrusts and that's one of them.
Ryan McKeveny
Got it. That's very helpful. Maybe just a quick follow-up on that.
Peter Gundermann
I mean it I know it may be difficult to estimate. But when you think about your market share and sort of the main players that you're up against, particularly maybe in terms of the military segment your yes, are there any data points you have there that might be helping us to understand this a little better? Will we do the exterior lighting suite on the on the Joint Strike Fighter, the F-35, for example, that's a high volume, high value program and we have a big portion of it. We are not active in the cockpit and there's a story there. Back in the day, there were international workshare arrangements. So we were kind of precluded from that. But that would give you an example of of what we're involved with.
Dave Burney
Okay. Got it. Thank you.
Operator
Jon Tanwanteng, CJS Securities.
Jon Tanwanteng
I was wondering if you guys are you guys could walk through kind of your cash flow expectations for the year, especially as we head into Q1 and maybe revenue comes down, you collect on receivables, first of all, and second of all as your EBITDA climbs back up, what kind of conversion can you expect? Thank you, sir.
Dave Burney
Peter, I assume you want me to take balanced. If you look at go ahead. We're not in the same place, obviously, for those realistically. So we expect to return to cash flow positivity in the as we move through 2020 24, we'll start off slow as the top line is slow. But as we move through into the second third, fourth quarter expect to generate significant cash flow. Cash flow from operations and we'll have a increased cap ex for the year compared to where we've been during the pandemic, where we really cut back on spending.
There will be in the neighborhood of $20 million in terms of CapEx, a lot of that is related to two specific programs and new tooling for programs, testing setups for programs that we've won. And then I'm not going to give you specific numbers. We typically we've never given specific guidance and cash flow, but we do expect it to return to a significant cash flow generation as we move through the year. So that's a it's north of our significantly north of what our net income will be for the year.
Jon Tanwanteng
Got it. Thanks, Dave. And then any phasing to the CapEx plans as you go through the year?
Dave Burney
Yes, it's going to be more heavily weighted toward the back half of the year, I think, but not significant. And it's always a little bit difficult for us to predict specific quarters with the CapEx on a lot of things get moved out. Very rarely does anything get moved in. But I think for modeling purposes, I would probably look at it. It's going to be more or less rounding if you're trying to break it out separately by quarters, I probably just take your model and take the midpoint of our range and divide it by four, I think come.
Jon Tanwanteng
Okay. Fair enough. And then just finally, obviously with all that the cash flow questions, what's the expectations for potential refinancing and working down that high-cost debt that you have.
Dave Burney
As I mentioned, as we return to profitability here and positive cash flow, we'll have more options available to us not ready to get into those at this point. But obviously, we our interest cost is pretty high right now. And our our our amortization of our term loan by eats up a lot of cash. So we're going to we're going to continue to look look at the alternatives and meet the best options for us as we as we move through through the year here.
Jon Tanwanteng
Okay. Thank you.
Operator
(Operator Instructions) Tony Bancroft, Gabelli Funds.
Tony Bancroft
Great job on the quarter. Thanks for taking my call. My question, I just wanted to ask about follow-up to of the about Flora. Obviously, we listen to the tax change call the other week and the ads and really positive news. It seems like things are going well there. Maybe just more of a 30,000 foot view of Flora, any incremental updates there? I know you talked a lot about electrification of the aircraft and how you have just a comparative advantage there. Maybe just some color, just maybe a little review of how that program impact in Texas positively?
Peter Gundermann
Sure. It's going to be a really important program long term for our company, right? When I look at it, I would say that it has the potential and probability to be the single largest program that the Company has ever over undertaken. And a lot of that has to do with the shipset content that we are developing. A lot of it's based on architectures that we've already proven out and and thus we think are relatively low risk. But the shipset content should be substantial and it's still moving around.
So it's premature to nail it down, but I think I've played this game with you tell me where, if you know if you take a theoretical wide body airplane and you can you imagine all the things we could possibly put and there's never been such an airplane is never done, but you know, an antenna on top and a full lighting suite on the exterior escape path lighting, a full load of PSCs, a full load of our IoT equipment. You'd probably get somewhere in the neighborhood of 700, 50,000 bucks. We'll with that airplane in terms of Astronics content and the range of numbers that we're talking about for Flow wall, Northrop So it's for us a pretty substantial opportunity.
I think we surprised some people in the industry that we were able to pull it off, and we're basically doing the entire electrical system from generators back to the generators to the end use systems. So all the electronic circuit breakers, a lot of you and switching on the electrical system we're involved with and obviously trying to plan for and support the range of what might that aircraft might be asked to do over 30 years of use or 40 years or use. It's a pretty big task, but And Bill has been a really good partner for us. And we've thought of something we've done there five oh five, we did they're five to five.
What we did there, Sarah prototype actually before flora and then we did flat. So we we'd know that organization pretty well. And I think they know us pretty well and we think it's going to be a I think it's going to be a really great program, something that only really needs as pretty good.
Tony Bancroft
Thank you. Again, we don't think we've been back this one, too. But with the sort of anything that you're seeing incremental also maybe a little more 30,000 a year with in-flight entertainment in the commercial on there on the commercial transport side, I'm sort of retrofitting cocktails as a customer. Just maybe you can give us a view on what the customer is is talking to you about and what they want in sort of a longer term view there? Just just any thoughts there.
Peter Gundermann
I'd say the biggest trend that we see is that narrow-body operators around the world are adopting in-seat power in a way that they never really happened before. It's a trend that was very helpful to us as we navigated through the pandemic as well as we did. But it's just picking up speed. So we developed the system largely in the pandemic or as the pandemic was beginning that where we're partnered with Southwest Airlines, Dave, we're the target customer and there was a lot of back and forth, and we developed a system on our dime with our IPs that day and doors and so far have agreed to put on the MAX fleet.
There's an energy portion of that fleet that I expect we'll be talking about at some portion some time also here in the near future, but but it turns out that so was a desire and the kind of the unique architecture of the system. I've found a lot of favor all around the world from India to China to Europe. So so we're we're booking a lot of orders there, and that will be a major driving force for us in the eyes of the asset world for a long time.
The other the other trend, I would say that's positive is that connectivity is getting better and more ubiquitous, not less. And and we are involved in that in a number of ways. Also with some of the leading connectivity suppliers. So and some of them are a little more reluctant to let us use their name than others, which and there the customer it's there right but so we're pretty active in that space. So that's also, I think, a positive trend that's going to serve us well for quite a while.
Tony Bancroft
And then lastly, anything with litigation and sort of what you guys have talked about in the K and anything updated update there? What's going on? And I know we've talked about a little bit before, but anything incremental?
Peter Gundermann
Well, we are to some situations. As you know, we have a long running dispute with Lufthansa Technik been going on for more than a decade, not much going on these days. There are little things happening here and there, but that's likely to pick up as we get towards the end of 2024. And there's a chance and I Well there's a chance that those things get resolved in 2025, which would be kind nice that would be a change as far as the Teradyne suite in our touch business we actually got a very favorable ruling in December where we basically won on all counts.
But of course, as these things go on either side has the right to appeal. We understand that the Teradyne intends to appeal. So the Orbit that that takes, it's a little bit unpredictable. It's probably something that will play out in the middle of 2024 but it shouldn't be at least to begin with as expensive as what we've been through because all the fact-finding has been found ourselves and we'd hoped for a little bit of a break there in terms of expense, but we won't know till we get there.
Tony Bancroft
Perfect.Thanks so much. Great job on the quarter. Looking forward to following you guys well done Thanks, Tony.
Peter Gundermann
Thank you.
Operator
And ladies and gentlemen, this concludes our question-and-answer session and today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.
