Greetings. Welcome to the Astronics Corporation fourth quarter fiscal year 2022 financial results. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Craig Mychajluk, Investor Relations. You may begin.
Yeah. Thank you, and good afternoon, everyone. We certainly appreciate your time today and your interest in Astronics. On the call here with me are Peter Gundermann, our Chairman, President, and Chief Executive Officer, and Dave Burney, our Chief Financial Officer. You should have a copy of our fourth quarter and full year 2022 financial results, which we released just after the market closed today. If you do not have the release, you can find it at our website, astronics.com. As you are aware, we may make some 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 can 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 and 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 will also discuss some Non-GAAP financial measures. We believe these 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. Let me turn it over to Pete to begin. Pete?
Thanks, Craig. Good afternoon, everybody. Thanks for tuning in for our fourth quarter conference call. As usual or as is often the case, I've tried to simplify the headlines for the quarter and the things that I would broadly categorize as good news, things that I think will be well received by our investor base, and some other things that are less good, maybe bad, challenges that we want to also give equal time to. We will kind of close with turning our attention away from 2022 and turning towards 2023 and talking about what we expect to happen in the current year and how we think it's gonna play out, recognizing that it's pretty early and a lot can happen. The good news headlines. Strong demand continues as evidenced by our bookings.
$182 million in bookings is a very solid performance. Our second highest since COVID came in, and a very good close for the year. We'll talk in detail about bookings and how that's translated into a record backlog and how that sets us up for a solid opening frame for 2023. We'll also talk about some reasons why we think that strong bookings level is very likely to continue based on how our market is evolving and how some of our programs are playing out. Second positive, good news headline is that the revenue ramp that we've been looking for, we believe has begun.
We have, since COVID struck, been stuck in a quarterly revenue band of about $105 million-$130 million and just seemed to have a really hard time getting beyond that level until the fourth quarter. $159 million, frankly, was higher than we thought we would be as we started the quarter. We think it's a positive indicator again, as we head into 2023, and it gives us more confidence that our supply chain is pulling out of the real funk that it was in for most of the second half of 2021 and the first half or two-thirds of 2022. Not to say it's perfect, but we think it's getting better, not getting worse. Third good news headline is that we got our refinance completed. That was technically a January event, not a fourth quarter event, but there was a lot happening behind the scenes in the fourth quarter to bring that about, and we wanna talk that over in adequate detail when we get to it.
If I flip over to the other side of the coin, kind of the bad news things that you might pick up on or might be concerned about. Margins were under pressure, primarily due to inflation that we've incurred and some special charges that we have paid to compensate for supply chain snafus. That was apparent if you look at our cost structure or margins for the quarter. Dave will talk through that in some detail.
Also, during the quarter, it became apparent that a couple of programs that we think overall long term are gonna be very positive contributors to our success are gonna be delayed over what we thought they would be. I'm talking specifically about a major test program that we've talked about before for the Army, a TS-4549/T called. It's a radio test program. FLRAA. Good news, bad news. Good news is that we're on the Bell team, and Bell was selected by Army, for the U.S. Army for that program. Bad news is, as everybody probably knows, it's under protest, and that means that we're kind of at a standing stop, whereas we were hoping by now to be underway. We'll turn our attention at the end to 2023 preview.
We are maintaining earlier guidance of $640 million-$680 million. That's a big step up from 2022, we realize, but we believe we have some pretty solid reasons to think that that's achievable. Supply chain, of course, will be critical, and we'll tell you what we know about our supply chain, but it's early. We think that $640 million-$680 million dollar range has upside potential and downside risk, depending on how the supply chain performs as we get into the first half of 2023. Taking those topics in the range I just discussed, demand continues to be very strong. Fourth quarter bookings of $182 million, as I mentioned, second highest booking result since COVID, only behind the previous quarter, the third quarter of 2022.
Bookings for all of 2022 were $690 million. That's a book-to-bill of 1.29 for the year. Sets us up with a record backlog of $571 million as we began 2023. You might be interested to know that our previous record backlog pre-COVID was $416 million in late 2018. That was a year when we did about $800 million in revenue. $416 million was our previous high. Today, we're at $571 million, or as we entered the first quarter, we were at $571 million. It's a big step up. Of that $571 million, $451 million is scheduled for delivery in 2023.
Given the range we talked about for 2023, that leaves $200 million of what we might call book and ship over the course of the year in the normal course. That's a pretty achievable number. That's pretty low. Our supply chain gives us reason to be a little bit cautious about it's one thing to get the order, it's another thing to turn around and ship it. $200 million over the course of 12 months book and ship is pretty modest compared to what we've been used to. We expect to see strong demand continue for a couple of reasons. Our recovery so far has largely been based on the narrow body regional market for the commercial transport industry. Now it appears wide body long haul is coming back pretty strongly.
Pre-COVID, we were approximately 50/50 narrow body, wide body. Wide bodies have spent most of COVID parked in the desert. Narrow bodies are where the action has been as regional travel barriers have come down. But now, with wide body coming back, we have reason to believe that we're gonna see another kind of, source of strength from demand in the market, and we're looking forward to that. You probably read the headlines. They're all over the place. Airlines are pulling wide body airplanes out of storage and pressing them back into service that, not too long ago, most experts in the industry were predicting would never fly again. A380s, A340s, even some 747s. But demand has come back strong enough that airlines are taking the expense of resurrecting these airplanes, and that's good for us. Airplanes flying is good for us.
Similarly, or also along the way, production rates for the prominent wide body airplanes today, specifically 787 at Boeing and A350, they're talking about upward revisions to plans there. There are challenges, there are capacity issues to come across, but I guess my point is that as we look at what's been driving our demand, it's primarily been narrow body. We think wide bodies, and we've seen this happening over the last few quarters, we think wide body's gonna be more and more of a contributor as we go forward, and that's good for a company like us. Also along these lines, the opening up of China from travel restrictions is a very positive sign. Geographically, the recovery in the commercial airline industry has been driven by the U.S. and by Europe. Asia has lagged.
China is, you know, obviously a very popular location in Asia. It's hard for the industry worldwide to recover without China recovering. China opening up to less strenuous travel restrictions as they did in early December, we think is gonna have a very positive impact on our industry overall. The second issue I wanted to call attention to, reason why we think demand is gonna continue to be pretty strong, is that while we have talked about a number of pretty major program wins over the last year, those program wins are not really reflected in our booking level to date. We think these programs collectively are gonna be worth hundreds of millions of dollars, but today, if I were to add them up in backlog, they're probably less than $20 million cumulative.
I'm talking about programs that we've announced, Southwest win that we announced, probably, boy, a year and a half ago now. An antenna program that we're doing with Safran. The TS-4549/T program, some activity that we have going in the electric airplane market and also FLRAA. I guess we haven't talked as a conference call since the Bell decision came down. I think most people who follow our company know this, but we are on the Bell team. We're doing most of the electrical system right after generation to end-use system. Of course, assuming the protest doesn't disrupt things, we expect this program will be a real significant program. Hard to overstate its significance for our company over the long haul.
We're under a little bit of a gag order. I can't say much more than that. We certainly don't know what the inner workings are of the protest that's going on currently. That is one that we think is a major driver. Again, there are a couple other programs that we're not at liberty to talk about that are similarly significant. All of these we expect to start contributing to bookings and to demand in the coming quarters. As of today, or as of the end of the fourth quarter, I think it was less than $20 million, all of these things cumulatively. I want to switch from bookings and demand to the revenue ramp, as I mentioned.
Since COVID hit, we've really been stuck in a band of 105 to $130 million in bookings, or in, excuse me, in quarterly revenue, even though bookings have been much higher. Our quarter four revenue of $159 million is a significant step up towards where we need to be in 2023 to meet our goals and to satisfy customer demand. The limiting factor through 2022 has been, first, supply chain, and second, people. Much more of a supply chain issue than a people issue. You know, when all's said and done, we're gonna look back on 2022 as a year of really strong demand and really disrupted supply chains, where, you know, we had 20% growth, and usually we would expect 20% growth to be cause for celebration.
Frankly, we were aiming a lot higher when the year started. We saw the demand coming back. Our original plans for 2022 anticipated growth well beyond 20%. We ended up at 20% because we were constrained by supply chains. While our supply chain is not perfect, as I mentioned earlier, we do feel it is improving. A year ago, we saw regular negative surprise disruptions coming across the line. Today, there are more and more positive surprises and fewer and fewer negative surprises. Hiccups still happen, but they're fewer, and we're better at responding to them, frankly. A year ago, we weren't used to dealing with the level of detail and climbing down our supply chain to our supplier's suppliers as well as effectively as we can and do today.
While the hiccups happen, they're fewer and fewer, and we're better and better at responding to them. Our refi, refinance, it was a complicated and drawn-out process. We finally completed it on January nineteenth, as most of you undoubtedly know. It's a deal that we feel is adequate to get us through, the rest of the COVID recovery and frankly reflects the reality of our macroeconomic environment and the position that the company is in at this point in the cycle. We need to perform, but if we can do what we think we can do, it should be an adequate facility for us for the time being, and Dave will cover some of those details in just a minute. The bad news, headlines, two of them I talked about, margins under pressure.
We had elevated input costs, and those costs are gonna take some time to sort out. We have portions of our business where we can react pretty quickly. The order cycles are short. Frankly, a lot of the strong bookings that we've been taking are very helpful because we've been able to work in pricing that reflects the current cost structure. It's the longer-term, older contracts that in many cases tend to cause us problems. We also tend to run into troubles when supply chain has a hiccup, and we have to make what we call spot buys or pay expedite fees. Those activities are getting fewer and fewer. They're winding down, and we expect them to continue to wind down, but they were a pretty major source of margin pressure or erosion in the fourth quarter.
As we move through 2023, we expect that position to improve. A couple of program delays that I mentioned earlier, TS-4549/T, the U.S. Army radio test set program. As a reminder, we were identified or named back in August as the winner of a technical evaluation that the U.S. Army ran between a product we provided and those of a couple competitors. The next step at that point was to negotiate and develop a sole source production contract or a directed procurement. Going forward, we expected that directed procurement would be in place, you know, probably by now, if not by the end of the year. It's become apparent now that it's gonna be much later than that.
We're now thinking as we understand the Army's processes, that this could last until the middle of the year or even a little bit later, before we get under contract and before that program starts seriously contributing. Depending on long lead funding and a couple of other things that are to be determined, it's unclear at this point when that program's gonna contribute. We believe that that order will be somewhere in the neighborhood of $150 million-$200 million in revenue. We expect it will run over 2 to 3 years, and we're eager to get at it, but we just can't get going until the Army wants us to. The other program that is stretching out because of the protest is the FLRAA program that I talked about earlier.
We thought that we would be underway by now, it appears that the protest period will last at least through April 6th or 7th, I believe it is. We will not be under contract. We're basically dead in the water at this point. That'll be a 2nd quarter start, we believe, rather than a 1st quarter start. With that amount of coverage, I think I'll turn it over to Dave at this point. He's got some Q4 specifics to talk through and also a summary of our refinance. Dave?
Okay. Thanks, Pete. Following on to some of the points Pete made, with regard to our sales and bookings, they continued to improve through the fourth quarter. The primary driver for both bookings and sales increase was the commercial transport market. Sales to this market were up 76% to about $103 million, which was an increase of a little over $44 million from last year's fourth quarter and up just over $24 million sequentially from the third quarter. Globally, air travel continues to improve, driving demand for the aircraft retrofit spend and increasing OEM build rates. There are a lot of puts and takes to compare last year's P&L to this year's, but the main driver was the increased margin on the sales ramp, partially offset by higher input costs.
Additionally, the 2021 fourth quarter had the benefit of $7.5 million from the AMJP grant program and a $5 million gain from the building that we sold in that quarter. This was partially offset in that quarter by a full year's accrual for our 401(k) cost as we reinstated the company contribution in the fourth quarter of last year and higher legal fees. The 2022 fourth quarter, on the other hand, had the benefit of a $1.5 million gain relating to the litigation settlement. Contribution margin on incremental sales is running at about 40% right now. This is somewhat lower than our pre-pandemic contribution margins, which were typically closer to 45%-50%. These are being impacted by input costs on labor and materials.
The margins continue to face headwinds primarily from supply chain predictability, which impacts shop floor efficiency, as well as increased input costs that eventually will gradually be mitigated as we pass on these costs through new contracts. It does appear that the trajectory of the inflation that we experienced through 2021 and early 2022 has slowed significantly. We continue to source hard-to-find parts on the spot market, which is a significant impact to our margins. In the fourth quarter, these spot buys were roughly $2 million above our standard cost for these parts. We are expecting the impact of these spot buys to reduce as we move through this year. Switching to the balance sheet and cash flow for the company.
Cash flow from operations for the fourth quarter improved and was a positive $10.8 million as our net loss improved as compared with prior quarters this year. Net working capital remained flat with the third quarter, inventory growth was minimal during the quarter, which was a significant improvement over the last three quarters, where inventory levels increased roughly $34 million during the first three quarters of 2022. Increased receivables were offset by lower prepaid expenses and increased accounts payable. We are forecasting our inventory levels to drop as we move through the year as supply chain stabilizes and the shop floor becomes more efficient. CapEx for the quarter was $3.4 million, a little below our forecast.
We're forecasting CapEx for 2023 to be in the range of $17 million-$20 million, which is back in line with our typical spending levels after the last couple of years of cash conservation. At the end of the year, our net debt was $150.2 million, which was down from $156 million at the end of the third quarter. We're forecasting to be cash flow positive for the year, the positive cash flow will be used to reduce debt. We're expecting cash outflow relating to our 2022 taxes that will be paid in 2023 to be about $6 million during the year.
This all relates to the new tax treatment for R&D costs, where we're now required to put them on the balance sheet and capitalize them and expense them over 5 years. To the credit facility update, on January 19th, we announced that we had closed on our new debt financing, which we had been working on for the better part of the year. The new financing structure replaces the cash flow-based revolving credit facility that was set to expire in November 2023 with two asset-based credit facilities. The two pieces to the new debt structure are a 4-year $90 million term loan and a 3-year $115 million revolving credit facility.
The term loan will bear interest at SOFR plus 8.75%, and the revolving credit facility will bear interest at SOFR plus 2.25% to 2.75%, depending on the available balance. Scheduled principal payments on the term note will begin in the second quarter. Scheduled principal payments are $788,000 in the second quarter, $1.5 million in the third quarter, and $2.25 million each quarter thereafter. The term note is not callable in the first year, and in the second year, there's a 4% prepayment penalty, and in the third year, there's a 1.5% prepayment penalty. Based on a SOFR rate of 5%, we're forecasting weighted average cash interest rate in 2023 to be between 10% and 12%.
2023 quarterly cash interest expense is expected to be approximately $4.5 million per quarter. GAAP interest expense on the income statement will include amortization of upfront costs and will be higher by about $700,000 per quarter. Total upfront fees and closing costs were approximately $8.6 million that will be amortized over the life of the loans. Important financial covenants are minimum adjusted EBITDA covenant, a minimum excess availability, and a maximum CapEx covenant, all of which are outlined in the lending agreement that was filed back in January 19th. We feel comfortable with being able to remain compliant with these covenants given our current forecast. Just a quick note on the tax rate. I expect we'll get a question on that.
The effective tax rate is basically meaningless for this year, as it has been for the past year. The more important number to focus on is our cash taxes, we expect our cash taxes that we will pay in 2023 will be about $6 million-$7 million, primarily for the tax year of 2022. This all relates to the new tax treatment for the research and development accounting. Our full tax rate for the year is going to be a negative 500%. I'm just telling you this because somebody's going to ask, and it doesn't make any sense. What this means is in quarters with a profit, we have a tax benefit, and for quarters with a loss, we're going to have a tax expense because it's a negative 500% tax rate.
I know it makes no sense to an ordinary person. This is a result of having to fully reserve for our deferred tax assets until we generate cumulative pre-tax income over a three-year period. We're not recognizing the income statement impact for the deferred tax assets that are being created by this timing difference. Pete. That's all I had.
Okay. Turning to 2023. We are maintaining our initial 2023 revenue guide of $640 million-$680 million. That may seem like a pretty big jump from 2022's $535 million, but there are a couple things to think about. At the midpoint of that 2023 range, we would be seeing something like 23% growth over 2022. That's actually just slightly more than what we did in 2022 over 2021. We saw 20% growth in 2022. That initial range anticipates 23% growth in 2023. It's certainly a step, but it's a step we've already done once and We have the backlog to do it.
Another piece of data supportive of that range, again, $640-$680, is that our last four quarters bookings were $690, and four of our last five quarters were right up around $180. If you annualize that, you get to $720. The orders are coming in. We've demonstrated 20%-23% growth. You know, the big assumptions beyond that are that COVID continues to moderate around the world. That seems to be happening, that people are traveling, travel restrictions are coming down. We've talked about China. Certainly, I assume a majority of people on the call have been on commercial airplanes over the last couple months. They are packed and loaded, and it doesn't seem to matter where you are or where you're going.
People wanna travel, as long as COVID seems tame, and with China opening up, we expect solid growth in our markets or solid demand in our markets. The other big assumption, of course, is the supply chain. We expect to see a cautious but steady improvement. Again, problems still exist, but we're better at recognizing them and resolving them when they do occur. We're recognizing that we think we're gonna continue to get more positive surprises, which mean lead times are gonna come down or availability is gonna increase, and fewer negative surprises. The cadence of 2023, we're actually expecting first quarter revenues to be a little bit lighter than what the fourth quarter was.
That's a function of just demand scheduling and some of these program slides that I was talking about earlier. Even though we're within a month of the end of the first quarter, it's a little difficult to know exactly what our supply chain performance is gonna be like. There's a relatively wide range on our revenue guidance for the first quarter. We're saying $140 million-$150 million. Of course, that's what we said in the fourth quarter. We ended up with $159 million. you know, we're doing our best. We do think that we're gonna see a positive mix change in the first quarter with respect to margins.
Model makers out there, you can't just knock off, say, $10 million or $12 million off of our fourth quarter results and do the simple exercise of, you know, knocking off 40% contribution margin or something like you might in normal times. We think the mix change is gonna get more positive, and we think that'll help our first quarter results. Of course, we're thinking that our production volume will ramp as the year progresses. We're thinking quarters two through four will be each in the range of $160 million to $185 million, starting at the lower end of that ramp and ending at the higher end. We will of course update this next time we talk.
Again, from a March perspective, there's, as I said earlier, upside potential, downside risk, but we feel it's important to give you our best look and our best perspective on where we think 2023 is gonna end up. We're excited to get there. We think it's gonna be a substantially better year than than what we saw in 2022 or the previous couple of years before that since COVID came on. I think that ends our prepared remarks. Jamal, why don't we take some questions if we have any?
Sure. At this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from the line of Jonathan Tanwanteng with CJS Securities. Please proceed with your question.
Hi. Good afternoon, guys. Thank you for taking my question. Obviously nice to see the supply improve. Just to double-check that the timing is what's going on in Q1 is not that you supply is constricting again or that maybe, you know, you had something that pushed out from Q3 into Q4, and you just caught up to that. Just help me understand the supply chain, you know, improved into Q1 from Q4 is the question really?
Yeah. It's a good question. It is not an easy answer. I think the way to answer it is that the top line is gonna move a little bit by program slides. We did pull a couple things that we were able to pull into the fourth quarter out of the first quarter, which left the first quarter a little bit light. I think the way to think about supply chain is that, you know, a year ago, we would place an order for a part, and where we might normally expect it to come in in 10 weeks or 15 weeks, all of a sudden, we were getting quotes for 52 weeks. The difference now is that in many cases, 52 is coming down, but it's still not 10 to 15.
The suppliers are more capable of hitting whatever they commit to, which is an improvement. It's not an improvement to the point where we can accelerate things very easily. Given our backlog, given the orders that we have in queue, if we had a supply chain that was cooperative or functioning like it used to, you know, first, we'd have no trouble filling this hole in the first quarter.
Given the way the supply chain's performing, while it's getting better, it's not getting better to the point where we can, you know, push and yank and pull all the levers that we, you know, are used to operating with. It's kind of a combination of all that. It's just a little bit of a clumsier process. Lead times are still a little bit longer. We do have, you know, the occasional hiccup. I hear about them fairly regularly. So it just limits our ability, we think, to respond in the short term to the first quarter the way it's looking. Dave, I don't know if you'd add anything to that.
No, I think that covers it. It's. You know, a lot of it is, as you said, we, you know, pre-COVID, we were able to respond really quickly to customer requests if they wanted something in six weeks or eight weeks. You know, it puts a damper on your ability to do that. I think generally speaking, what we're seeing is a little bit. You know, a lot more consistency than what we saw in supply chain six months ago or eight months ago, nine months ago. We're also seeing a flattening out of kind of the inflation that we saw as we went through last year. You know, prices aren't going down or costs aren't going down, but the trajectory certainly has flattened out, on a lot of the materials that we're buying.
Got it. No, that's all very helpful and good to hear. Dave, just a question for you. You mentioned the contribution margin was close to 40%. Obviously, you're still doing the spot buys. Pete, you mentioned improving mix in Q1. How should we think of that contribution margin going through the year? Should it be improving towards that 45% or even 50% as the spot buy goes down? Just to help us understand, you know, when you hit that, you know, $160 or $180, what does that, you know, incremental margin actually look like?
Yeah. The way we're forecasting, in particular with regard to the spot buys, which as I pointed out are not insignificant on a quarterly basis, is, We're expecting them to phase out as there's more normalization in the supply chain. We don't expect this to happen until we move into the second half of the year, so that by the fourth quarter, we're expecting it, you know, the spot buy cost to decrease. The other thing that we're expecting to see, as we mentioned earlier, as we roll into new contracts where our quotes have reflected higher costs and a higher selling price, those will start to become more meaningful as we move through the year and into next year as well.
You know, the 40% contribution margin, I think, you know, the way we're forecasting is expecting that to gradually improve as we move through the year as well.
Great. Last one from me. Did you say that your cash tax burden will be $67 million this year, or was that a non-cash number?
What I intended to say was $6 million-$7 million.
Six to seven. Okay, understood. That, that caught me off guard. I apologize.
Oh, did you hear 60?
I heard 67 and maybe that was just my phone.
No, no. $6 million-$7 million. Yeah.
Understood. Thank you. Okay, I'll jump back in queue. Thanks a lot, guys.
Our next question comes from the line of Michael Ciarmoli with Truist Securities. Please proceed with your question.
Hey, good evening, guys. Thanks for taking the questions.
Hello.
How are ya? Peter or Dave, just to stay on that margin, kinda the contribution margin and just thinking about aerospace margins. I mean, given the volumes, you know, you put up, I think it was what, three eight, in the quarter. You know, should we expect a kind of steady increase in those aerospace margins as we move through the year and presumably, knock on wood, nothing kinda, you know, gets derailed here with supply chain, but we continue to see the demand flow through? Is that a reasonable expectation that the margins build off this level?
Yeah. I think Just when I speak to that 40%, I'm speaking to the incremental contribution margin. What'll happen also as the top line grows is better absorption of the fixed costs. Yeah, we would expect as aerospace continues to have top-line growth that we will see those margins continue to improve.
Okay. I mean, Pete, you talked a little bit about pricing. I mean, would you be able to kind of elaborate or kind of give us more detail in terms of what you think or what you're trying to push through for price increases and what that's kind of adding to the equation this year?
It's a little hard to quantify. I guess I would say that, for the most part, I think we're in pretty good shape, in part because we've had a lot of, you know, heavy demand, heavy bookings recently. Quite a bit of our revenue base, turns over on a pretty frequent basis. We certainly have long-term contracts on major programs. In some of those cases, we're able to increase prices. In some cases, we got to wait for the contract to renew. I guess I feel that, assuming that, you know, inflation doesn't hop along at ridiculously high rates for another two or three years, I think we're gonna ride it out, and I think we'll adjust in due course. I'm not considering it at this point a major issue.
That's not to say we don't have our stress points. We've got some parts of our business that are adjusting quite a bit better than other parts of our business, and we've got to fix that on a, you know, on an operational basis. But for the most part, I don't think we're gonna long term, be sitting here complaining about inflation as a reason why we can't achieve good margins.
Okay. Okay. I mean, it sounds like are you getting real pricing? I mean, are you pricing above inflation or, you know, just trying to keep pace with it or?
Yeah. We're for the most part, we're adjusting where we think it's going based on when we think we're gonna have to execute certain programs. We're also, you know, making some use of surcharges, and we're going to our customers and saying, "You know, this thing that you wanna buy is costing us a lot more than we expected." In many cases, customers are agreeing to pay that surcharge. In some cases.
Got it.
-that's being reworked into the base price. In some cases, it's a temporary arrangement that'll, you know, go away later. We'll have to deal with it then. For the most part, I feel like we're staying on top of it, and the relatively recent ramp in bookings works to our favor.
Got it. Got it. Then just, one more. I mean, you talked about wide bodies. Can you kind of just remind us, you know, what your ship set content there is? Then it seems like you called out some older platforms, so it seems like some of these older ones are seeing retrofit opportunities. I mean, we know where the A350 and the 787 are going right now, but. I guess I'm asking is it seemingly maybe more sort of retrofit demand right now? Then just, you know, maybe if you can give some color on the content.
Sure. We do a number of things in wide-body airplanes. The most prominent, though, are IFE related, right? Most every wide-body airplane that comes off a production line gets a seat back display in every seat, nose to tail. For quite a few years now, we have been the prominent provider of power, for example, to those systems, the major system manufacturers. When somebody buys a 787 or an A350, they check the boxes. They want provider A, B, or C, and whichever one they pick, they get Astronics as a power system. Additionally, we... depending on whether they pick A, B, or C, we might do other parts of the system, theoretically, file servers, wireless access points, data loaders, things like that. We also do wide fit work.
It's not uncommon for a wide body airplane on the production line, you know, to be somewhere in the neighborhood of $250,000 in revenue. I mean, in theory, it could be half a million or more. The aftermarket's important too. The aftermarket's important because this IFE product line, when you think about it's kind of where consumer electronics meets the aerospace industry. The aerospace industry has very long life cycles for most of the airplane. Consumer electronics does not, right? It turns over in two or three years. What you do today is obsolete two or three years from now. Even power, something as basic as that, or what people think of as basic is undergoing a lot of changes.
I mean, the world spent a lot of money and time, equipping their hotel rooms and restaurants and seating areas and airplanes with USB Type-A. Now USB Type-C is prominent. T hey're not compatible. They're completely different. One of the things that's great for just having airplanes flying is that life cycle effect takes place, and the systems need to be upgraded. If they're sitting in the desert, they don't need to be upgraded to be blunt. That's all helpful. We like airplanes flying.
Got it.
It doesn't really matter if they're new or old. We just like them flying.
Yep. Got it. Makes sense. Perfect. All right. Let me, I'll jump back in the queue here. Thanks, guys.
Okay.
All right. Next question comes from the line of John Tanwanteng with CJS Securities. Please just proceed with your question.
Hi, thanks for taking the follow-up. I just wanted to follow back on the wide body topic. How much wide body revenue do you have in the, in the forecast this year? Or how much was in the, in the revenue last year? Kind of what, you know, what was the prior peak, I guess? Do you think you get back there, if ever? Or is it, you know, 50% or 75% of where it used to be? Does it take two or three years to get there, maybe?
It's a very good question. Those are numbers that are really hard to. We have some products and product lines which are used exclusively on wide body, and we have some that are used exclusively on narrow body. We have some that are used on both. It's really hard to kind of figure out definitively where they're going. I can tell you that, I would say, just from what I understand of the business, that wide body revenue last year was probably running in the neighborhood of 10% or 15% of where it used to be. We're probably gonna move closer to 30% or 40% this year, from what I can tell. We're just we're taking a lot of orders in that are wide body specific.
I think what's interesting to me is you follow the, you know, experts in the industry, and whereas 6 months or 1 year ago, they were all predicting wide-body return and global airline traffic, getting back to 2019 levels sometime in the, you know, 2024, 2025 timeframe. More and more voices are now expecting or predicting that that's gonna happen mid-2023 or late 2023. Again, a lot of that depends on what happens in China, I suppose. We would expect, you know, demand for our wide-body products roughly to track with what demand is like for air travel in those kinds of airplanes.
If we see a recovery, you know, mid-year, I think that's probably a little optimistic, but mid-year or second half of 2023, I guess I'd expect our ordering patterns to be pretty much back to normal by then also. By the way, we're not that far off. I mean, we did $780 million, $770 million in 2019. You know, we just booked $690 million in 2022. It's not that far from here to there before we're kinda back at pre-COVID levels of ordering anyway. Then it's up to the supply chain to allow us to execute on it.
Got it. That's very helpful. Could you just give us a little more color on the expectations for FLRAA and the Army Radio Test Program? When they do actually start up and get going, what are the run rates you expect out of there? Is it consistent or is it lumpy? Just help us understand what the contributions are gonna look like.
Sure. Recognize that we know not much at this point. The 4549, the radio test program, we expect the initial award to be I would say between $150 million-$200 million. We think it's gonna be towards the high end of that. The timing on it is a little bit of a wild card at this point. There's gonna be a low-rate initial production. There's gonna be some qual testing involved. Eventually there's gonna be a production turn on. If all that happens sequentially, then, the major impact in our production, you know, theoretically, depending on lead times, may not happen till late 2024.
If we can stack those things or do them, you know, concurrently, then I think it becomes probably not a late 2023 thing, but probably an early 2024 thing. W e think that that initial order is just the beginning. This is gonna be a standard for the U.S. Army. They have a lot of radios and a lot of units and families that our product will be testing. We think could be a decade. More on that as it develops. FLRAA, I've used this analogy to describe the importance of this program for us. You, you've been following us for a while, John.
You know we have this electrical flight critical electrical power franchise that we've been building, and it's been pretty successful in terms of becoming a high-end standard in small aircraft and both the rotary wing, fixed wing jets, turboprops, and we are expanding it now into the electric eVTOL area. The FLRAA opportunity is kind of a night and day kinda difference in tenor from those other programs. Again, we have a little bit of a gag order, but I've used this analogy. I said, "Imagine a wide body airplane where we put absolutely everything that we might possibly put on that airplane that's in our toolkit." This is a little different than Mike how I answered Michael's question earlier, because this is a theoretical airplane that's never really existed.
If it comes down the production line, and we put power on it, we put a full suite of IFE equipment on it, we put an antenna on the roof, we put a radome in it, we put a full cockpit lighting suite, a full exterior lighting suite, a full interior lighting suite in terms of passenger service units, et cetera, et cetera. When you add all that up, you probably get to somewhere in the neighborhood of a $700,000-$750,000 airplane. While we aren't under contract, and there's movement in the ship set, and things are gonna change, we expect that our FLRAA content will be well north of that.
You ask, "Well, how many aircraft are they gonna build?" That's a whole another kind of guessing game at this point. You know, it's a replacement for the Black Hawk. There are 4,000 Black Hawks out there. Nobody expects a one-for-one replacement, but what do you expect? It's a little bit of a guessing game. Even if you guess conservatively for a company like us, it's a real significant, you know, over time, game-changer of a program.
Got it. No, that helps put it in perspective. Thank you, Pete. I assume that doesn't go to production until much later, though, in this decade, right? The initial development revenue is what we're thinking about, which would be.
Well, I think I'm older than you are, John, but we might both be retired before we know how far this program's gonna go, you know, and hit, you know, real volumes. It's, if it's anything like, Well, the Black Hawk's been in production now for 50 years, you know?
Right. No, that It could be, yeah. Okay, great. Last question from me, just on the labor issue, let's assume your supply chain cooperates, and you get all these wide body orders that you have to facilitate. Can you reach that 180 run rates with the workforce that you have now, or is it gonna take more work just to get those people in the door and then supplying that?
Yeah, for the most part, I guess my feeling is that labor isn't certainly not our biggest problem. Supply chain has been our biggest problem. Your question is insightful. If all of a sudden the supply chain snapped to attention, and, you know, the trucks pulled up full of parts, then yeah, we would be short labor to turn those that quickly. For the most part, in most places of our business, the labor side of it is a little bit better than what it was, say, a year and a half ago at the height of COVID. Nobody wanted to come out of their houses to work. That's changing a little bit. We certainly have parts of our business that are struggling for labor. For the most part, kind of across the board, I think that we have a general feeling that we're okay and that we can, you know, adjust our headcount and our capacity to the scheduling of the major programs as they happen. Dave, I don't know if you'd answer that any differently.
Nope.
So.
Okay, great. Thanks, guys. Obviously, you know, congrats on getting all this stuff done and over the finish line over the last couple months.
Thank you, John.
Our next question comes from the line of Michael Ciarmoli with Truist Securities. Please proceed with your question.
Hey, thanks, guys. John picked up my labor question there. Just on FLRAA too, Pete, is there anything assumed in the current year outlook for FLRAA revenue contribution from the development program?
We do have some. Yes, we have some NRE built in. As you might imagine, it's probably a couple year engineering effort. It's a little unclear how that's gonna play out at this point. We originally thought that it would be somewhere, you know, north of $30 million, south of $50 million over two and a half years. It's delayed. It's nothing in the first quarter. That hurts us a little bit. If it gets delayed for, let's say, something crazy happens, and the whole thing gets thrown up in the air with the, by the GAO, and they recompeted or whatever, and the whole year is lost, then that would be a significant, you know, downgrade to our internal forecast.
Okay.
At this point, we feel that we've got enough demand and enough excess demand that, you know, over the course of the year, while it's gonna change the shape of our first quarter a little bit, it's not, at this point, material to the whole year. Again, we're expecting the protest to be resolved early April. That's what we're hoping, and we expect to be kind of, you know, you know, to hit the starting blocks, you know, right then or pretty close to right then.
Does that, I mean, I think Lockheed filed a second complaint, which is, that there's a deadline on that for May 17th. I know the first decision is, I mean, does that have any implications given their additional complaint that they filed?
Not that I know of. Again, I don't know any inside knowledge about what the deliberations are on the protest.
Okay.
I can just say that the longer it goes, you know, the.
Yeah
it becomes a material detractor to our plans.
Got it. Got it. Perfect. All right. Thanks, guys.
Okay. Thank you.
It looks like we have reached the end of our question and answer session. I'll now turn the call back over to management for closing remarks.
Okay. No closing remarks. Thank you again for your attention. We feel like the fourth quarter was a step up to close 2022, and we're optimistic for 2023. We look forward to talking to you again next time. Have a good night.
This concludes today's conference, and you may disconnect your line at this time. Thank you for your participation.