Mercury Systems Inc (MRCY) 2024 Q2 法說會逐字稿

Good day, everyone, and welcome to the Mercury Systems Second Quarter Fiscal 2024 Conference Call. Today's call is being recorded.

大家好，歡迎參加 Mercury Systems 2024 財年第二季電話會議。今天的通話正在錄音。

At this time, for opening remarks and introductions, I'd like to turn the call over to the company's Executive Vice President and Chief Financial Officer, Dave Farnsworth. Go ahead, Mr. Farnsworth.

此時，我想將電話轉給公司執行副總裁兼財務長 Dave Farnsworth。繼續吧，法恩斯沃斯先生。

Good afternoon, and thank you for joining us. With me today is our Chairman and Chief Executive Officer, Bill Ballhaus.

下午好，感謝您加入我們。今天和我在一起的是我們的董事長兼執行長比爾鮑爾豪斯 (Bill Ballhaus)。

If you've not received a copy of the earnings press release we issued earlier this afternoon, you can find it on our website at mrcy.com.

如果您還沒有收到我們今天下午早些時候發布的收益新聞稿副本，您可以在我們的網站 mrcy.com 上找到它。

The slide presentation that Bill and I will be referring to is posted on the Investor Relations section of the website under Events & Presentations.

比爾和我將提到的幻燈片簡報發佈在網站的「投資者關係」部分的「活動和簡報」下。

Turning to Slide 2 in the presentation, I'd like to remind you that today's presentation includes forward-looking statements, including information regarding Mercury's financial outlook, future plans, objectives, business prospects and anticipated financial performance. These forward-looking statements are subject to future risks and uncertainties that could cause our actual results or performance to differ materially. All forward-looking statements should be considered in conjunction with the cautionary statements on Slide 2, in the earnings press release and the risk factors included in Mercury's SEC filings.

轉向簡報中的投影片 2，我想提醒您，今天的簡報包含前瞻性陳述，包括有關 Mercury 的財務前景、未來計劃、目標、業務前景和預期財務業績的資訊。這些前瞻性陳述受到未來風險和不確定性的影響，可能導致我們的實際結果或績效出現重大差異。所有前瞻性陳述應與收益新聞稿中幻燈片 2 中的警示性陳述以及 Mercury 向 SEC 提交的文件中包含的風險因素結合考慮。

I'd also like to mention that in addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, during our call, we will also discuss several non-GAAP financial measures, specifically adjusted income, adjusted earnings per share, adjusted EBITDA, free cash flow, organic revenue and acquired revenue. A reconciliation of these non-GAAP metrics is included as an appendix to today's slide presentation and in the earnings press release.

我還想提一下，除了按照公認會計原則（GAAP）報告財務表現外，在電話會議期間，我們還將討論一些非GAAP 財務指標，具體調整後收入、調整後每股收益、調整後每股收益、 EBITDA、自由現金流、有機收入和獲得的收入。這些非公認會計原則指標的調節作為今天投影片簡報和收益新聞稿的附錄。

I'll now turn the call over to Mercury's Chairman and CEO, Bill Ballhaus. Please turn to Slide 3.

現在我將把電話轉給 Mercury 董事長兼執行長 Bill Ballhaus。請翻到幻燈片 3。

Thanks, Dave. Good afternoon. Thank you for joining our Q2 FY '24 earnings call.

謝謝，戴夫。午安.感謝您參加我們的 24 財年第二季財報電話會議。

Today, I'd like to talk through three topics: first, some introductory comments on our business and results; second, an update on the progress we are making in each of our four priority areas: delivering predictable performance, building a thriving growth engine, expanding margins and driving improved free cash flow; and third, expectations for our performance both for FY '24 and longer term. Then I'll turn it over to Dave who will walk through our financial results and guidance in more detail.

今天我想講三個主題：一是對我們的業務和業績做一些介紹性的評論；其次，介紹我們在四個優先領域中取得的最新進展：提供可預測的業績、建立蓬勃發展的成長引擎、擴大利潤率和推動改善自由現金流；第三，對我們 24 財年及更長期業績的預期。然後我會將其交給戴夫，他將更詳細地介紹我們的財務表現和指導。

Please turn to Slide 4. As I've said in the past, while FY '24 is a transitional year, I'm optimistic about our strategic positioning as a leader in mission-critical processing at the edge, the attractiveness of our business model, and our outlook over time to deliver predictable organic growth while expanding margins and robust free cash flow.

請參閱投影片 4。正如我過去所說，雖然 24 財年是過渡年，但我對我們作為邊緣關鍵任務處理領導者的策略定位以及我們業務模式的吸引力持樂觀態度，以及我們的展望，隨著時間的推移，將實現可預測的有機成長，同時擴大利潤率和強勁的自由現金流。

During Q2, we made solid headway in each of our four priority focus areas and in addressing what we believe to be the two transitory dynamics in our business I referenced last quarter: transitioning our high mix of development programs to production and converting our high level of working capital into significant cash flow. We believe this progress is evident in three highlights from the quarter: strong bookings, solid free cash flow and better-than-expected progress in closing out our challenged programs, most of which are development in nature.

在第二季度，我們在四個優先重點領域中的每一個領域都取得了堅實的進展，並解決了我上季度提到的我們認為是我們業務中的兩個暫時動態：將我們的高組合開發計劃轉變為生產，並將我們的高水準營運資金轉化為大量現金流。我們認為，這一進展在本季度的三個亮點中得到了體現：強勁的預訂、穩定的自由現金流以及完成我們面臨的挑戰項目（其中大部分是開發性質）的進展好於預期。

First, we delivered near-record bookings in the quarter with a 1.65 book-to-bill. Our bookings were anchored by a number of important program wins that we believe will drive future growth. These awards reflect customer recognition of the unique value we deliver, their reliance on us for their most critical franchise programs and ongoing healthy demand.

首先，我們在本季交付了接近歷史記錄的預訂量，預訂比為 1.65。我們的預訂量以一系列重要的計劃勝利為基礎，我們相信這些計劃將推動未來的成長。這些獎項反映了客戶對我們提供的獨特價值的認可、他們對我們最重要的特許經營計劃的依賴以及持續健康的需求。

Second, we delivered strong positive free cash flow and a reduction in net working capital. We generated over $37 million in free cash flow in the quarter along with an approximately $70 million improvement in net working capital. These accomplishments were primarily driven by strong in-quarter collections, reductions in our unbilled receivables and inventory, and improved customer advance payment terms.

其次，我們實現了強勁的正自由現金流和淨營運資本的減少。本季我們產生了超過 3,700 萬美元的自由現金流，淨營運資本增加了約 7,000 萬美元。這些成就主要得益於強勁的季度收款、未開立發票應收帳款和庫存的減少以及客戶預付款條件的改善。

And third, we are making progress with retiring risk in and completing challenged programs. While the underlying performance of the business continues to be obscured by unanticipated cost growth on a subset of programs, we believe we have largely narrowed these risks from the original 20 challenged programs to 1 product line with game-changing technology that comprises approximately 25% of the original challenged programs. Although we are still working through this remaining set of challenged programs, we anticipate retiring these risks on slightly more than half of the remaining challenged programs in FY '24 and entering FY '25 with a much clearer path to deliver predictable organic growth, expanding margins and strong cash flow.

第三，我們在消除風險和完成有挑戰性的專案方面取得了進展。雖然業務的基本業績繼續受到部分項目的意外成本增長的影響，但我們相信，我們已在很大程度上將這些風險從最初的20 個有挑戰的項目縮小到1 個採用改變遊戲規則的技術的產品線，該產品線佔約25%原始的挑戰程序。儘管我們仍在努力解決這組剩餘的挑戰計劃，但我們預計在24 財年略超過一半的剩餘挑戰計劃中消除這些風險，並進入25 財年，以更清晰的路徑實現可預測的有機增長，擴大利潤率和強勁的現金流。

In addition to these Q2 highlights, we made significant progress this quarter in establishing the team and structure to lead Mercury through the next phase of our journey. We announced a reorganization to simplify and streamline our business by eliminating redundant corporate functions and consolidating a number of functional areas into a single operating unit under the leadership of Roger Wells as our Chief Operating Officer. In his previous role, leading our microelectronics division Roger delivered strong results and demonstrated an exceptional aptitude for scaling business operations and expanding and converting pipeline opportunities. We also announced the addition of Stuart Kupinsky to the leadership team as our Chief Legal Officer. Stuart brings a wealth of experience in legal leadership roles and a track record of driving dynamic change and value creation in a number of technology companies. I'm very pleased that Roger and Stuart have taken on these critical leadership roles.

除了第二季的這些亮點之外，本季我們在建立團隊和結構以帶領 Mercury 完成下一階段的旅程方面取得了重大進展。我們宣布進行重組，以簡化和精簡我們的業務，消除多餘的公司職能，並將多個職能領域整合為一個營運單位，由首席營運長羅傑威爾斯 (Roger Wells) 領導。 Roger 在之前領導我們的微電子部門期間取得了出色的業績，並展示了擴大業務運營以及擴展和轉換管道機會的卓越能力。我們也宣布任命 Stuart Kupinsky 加入領導團隊，擔任我們的首席法務官。 Stuart 在法律領導角色方面擁有豐富的經驗，並在多家科技公司推動動態變革和價值創造方面擁有良好的記錄。我很高興羅傑和史都華承擔了這些關鍵的領導角色。

Please turn to Slide 5. Following those introductory comments, I'd like to spend time on each of our four focus areas. Our first focus area is enhancing execution to deliver predictable performance. In Q2, we incurred a number of costs that obscured the underlying performance of the business. Specifically, we recognized approximately $48 million of such items that we believe are transitory, including nearly $31 million of program cost growth impact across our portfolio, approximately $12 million of manufacturing adjustments associated with specifically identified inventory reserves and higher scrap due to unfavorable yields, and nearly $5 million associated with contract settlements where we worked with customers to transition away from programs where we did not expect to see acceptable returns. These items, which, again, we believe are transitory, represented the vast majority of the year-over-year decline across our P&L metrics.

請轉到投影片 5。在這些介紹評論之後，我想花時間討論我們的四個重點領域。我們的第一個重點領域是增強執行力以提供可預測的績效。在第二季度，我們產生了許多成本，這些成本掩蓋了業務的基本績效。具體來說，我們確認了大約4800 萬美元的此類項目，我們認為這些項目是暫時的，包括對我們的投資組合的近3100 萬美元的項目成本增長影響，大約1200 萬美元的與專門確定的庫存儲備相關的製造調整以及由於不利的產量而導致的更高的廢品率，以及近 500 萬美元與合約和解相關，我們與客戶合作從我們預計不會獲得可接受回報的項目中過渡。我們再次認為這些項目是暫時的，占我們損益指標較去年同期下降的絕大多數。

As a reminder, program cost growth identified within a given period has an overweight impact on the financial results of that period. In accordance with GAAP, there is a cumulative adjustment to reduce progress and align margins on the life-to-date of the program, which results in a decrease to revenue and gross margin that permeates down to net income and adjusted EBITDA in the current period.

提醒一下，特定期間內確定的計劃成本增長對該時期的財務業績產生超重影響。根據 GAAP，會進行累積調整，以減少進度並調整專案迄今為止的利潤率，這會導致收入和毛利率下降，並滲透到本期淨利潤和調整後的 EBITDA 中。

Breaking down the nearly $31 million of program cost growth: $14 million of this impact was derived from our challenged programs with nearly all of the impact tied to one single program, approximately $8 million was spread across several development programs and the remaining $9 million related to multiple production programs. The challenged program impact was driven primarily by unexpected redesign and prototype efforts following initial development unit deliveries. Similarly, the remaining program cost growth was a function in part of revised baseline costs predicated on initial unit deliveries across several development and production programs. In addition, the program cost growth reflects a risk-adjusted outlook on program performance and estimates to complete across our program portfolio.

細分近 3,100 萬美元的計劃成本增長：其中 1,400 萬美元的影響來自我們面臨挑戰的計劃，幾乎所有影響都與一個計劃相關，大約 800 萬美元分佈在多個開發計劃中，其餘 900 萬美元與多個生產計劃。受到挑戰的專案影響主要是由初始開發單元交付後意外的重新設計和原型工作所驅動的。同樣，剩餘的專案成本成長是根據多個開發和生產專案的初始單位交付量預測的修訂基準成本的一部分。此外，計劃成本成長反映了對計劃績效的風險調整前景以及對整個計劃組合完成的估計。

As shown on Slide 6, with respect to the challenged programs, during the second quarter, we made better-than-anticipated progress by completing, exiting or retiring risk on an additional 4 of the original 19 programs. Together with the 4 completed through Q1, we believe we have now retired risk on 8 of the original 19 challenged programs that have driven earnings volatility in recent quarters. For the remaining programs, we expect to close out more than half over the remainder of the fiscal year.

如投影片 6 所示，對於受到挑戰的項目，在第二季度，我們取得了好於預期的進展，完成、退出或消除了最初 19 個項目中的另外 4 個項目的風險。加上第一季完成的 4 個項目，我們相信我們現在已經消除了最初 19 個挑戰項目中的 8 個項目的風險，這些項目導致了近幾個季度的盈利波動。其餘項目，我們預計將在本財年剩餘時間內完成一半以上。

The balance of open challenged programs as well as the one program where we experienced significant program cost growth in the quarter are tied to a common processing architecture. So while we experienced a significant P&L impact during the quarter, we believe we had made progress in isolating the primary go-forward development risk in the challenged programs to this one technology area. Of note, our differentiation based on this technology has afforded us sole-source positions on critical programs, and the functionality we provide is mandated on these programs. As such, we, and we believe our customers, are committed to success in this area. The challenges we are facing are related to efficiently and cost effectively maturing the manufacturing process to support the transition to scale production on these programs where we see significant growth potential at attractive margins.

開放式挑戰專案的平衡以及我們在本季度經歷了專案成本顯著成長的一個專案都與通用處理架構相關。因此，雖然我們在本季度經歷了重大的損益影響，但我們相信我們在隔離這一技術領域的受挑戰項目的主要前進開發風險方面取得了進展。值得注意的是，我們基於這項技術的差異化為我們提供了關鍵程序的唯一來源位置，而我們提供的功能是這些程序的強制要求。因此，我們以及我們的客戶都致力於在這一領域取得成功。我們面臨的挑戰與高效且具有成本效益地成熟製造流程有關，以支持這些項目向規模生產的過渡，我們看到這些項目具有巨大的成長潛力和誘人的利潤。

Even for the 1 challenged program with cost growth this quarter, the current margin outlook remains above our consolidated program gross margin profile. In addition, this common processing architecture is being developed within an isolated part of our business, representing approximately 20% of our revenue, which has experienced the majority of the revenue and earnings volatility that we saw in Q2 and that we expect to see within the fiscal year. We believe resolving the challenges in this technology will go a long way to restoring the growth and profitability in this part of the business and Mercury as a whole. So despite the challenges we're working through, and the corresponding investment, we believe we are well positioned as a sole-source provider with large growth opportunities and solid margins as we seek to execute on the remaining development efforts and transition these programs to production.

即使對於本季成本成長的 1 個面臨挑戰的計劃，當前的利潤率前景仍高於我們的綜合計劃毛利率狀況。此外，這種通用處理架構是在我們業務的一個獨立部分中開發的，約占我們收入的 20%，該部分經歷了我們在第二季度看到的大部分收入和盈利波動，並且我們預計在財政年度。我們相信，解決這項技術的挑戰將對恢復這部分業務以及整個 Mercury 的成長和獲利能力大有幫助。因此，儘管我們正在克服挑戰並進行相應的投資，但我們相信，我們作為獨家供應商處於有利地位，擁有巨大的成長機會和穩固的利潤，因為我們尋求執行剩餘的開發工作並將這些計劃過渡到生產。

Please turn to Slide 7, turning now to the second focus area of driving organic growth. Bookings for the quarter were a near-record $325 million, resulting in a 1.65 book-to-bill. We had several exciting awards for both development and production programs in the quarter. Two marquee wins in the quarter are worth noting.

請翻到投影片 7，現在轉向推動有機成長的第二個重點領域。該季度的預訂量接近創紀錄的 3.25 億美元，預訂出貨比為 1.65。本季我們的開發和生產項目獲得了多個令人興奮的獎項。本季的兩場大勝值得注意。

We received our first production award for LTAMDS. This is an exciting and important award coming earlier than originally anticipated. While we don't expect significant revenue from this program in FY '24, we expect this program to drive organic growth in FY '25 and ultimately become our largest revenue contributor in the future.

我們憑藉 LAMDS 獲得了第一個製作獎。這是一個令人興奮且重要的獎項，比最初預期的要早到來。雖然我們預計該計劃不會在 24 財年帶來可觀的收入，但我們預計該計劃將推動 25 財年的有機成長，並最終成為我們未來最大的收入貢獻者。

We also won a large development program on a strategic weapons system, which we anticipate will drive growth in the near term and stronger growth in the future as it transitions to production. This program, while well within our technical capabilities, was awarded as a cost-plus contract with favorable billing terms of at least monthly, thereby reducing the potential earnings and cash volatility through development.

我們還贏得了一項關於戰略武器系統的大型開發計劃，我們預計該系統將在短期內推動成長，並在未來過渡到生產時實現更強勁的成長。該計劃雖然完全符合我們的技術能力，但被授予成本加成合同，並具有至少每月一次的優惠計費條款，從而減少了開發過程中的潛在收益和現金波動。

While we still expect the majority of our contracts to be firm fixed price, we are exploring opportunities to take certain development contracts on a cost type basis, where appropriate. In addition, as I have discussed before, we are working to incorporate more robust terms in all of our contracts to more clearly define scope, support improved execution and customer satisfaction, and shorten cash conversion cycles.

雖然我們仍然預期大部分合約都是固定價格，但我們正在探索在適當的情況下以成本類型為基礎簽訂某些開發合約的機會。此外，正如我之前所討論的，我們正在努力在所有合約中納入更穩健的條款，以更明確地定義範圍，支持改進執行和客戶滿意度，並縮短現金轉換週期。

Finally, last week, we received a large follow-on award to provide our solid-state data recorders for a large defense space program. This technology, which was introduced only a few years ago, is now the largest driver of growth in the military space market for Mercury, and we expect further growth opportunities for this unique commercially developed offering.

最後，上週，我們獲得了一項大型後續獎項，為大型國防太空計畫提供固態數據記錄器。這項技術僅在幾年前推出，現已成為 Mercury 軍事太空市場成長的最大推動力，我們預計這種獨特的商業開發產品將有進一步的成長機會。

These awards are important not only because of their value and impact on our long-term growth but also because they reflect our customers' continued trust in Mercury to support their most critical franchise programs.

這些獎項之所以重要，不僅因為它們的價值和對我們長期成長的影響，還因為它們反映了我們的客戶對水星支持其最關鍵的特許經營計劃的持續信任。

I mentioned last quarter that this effort to build an organic growth engine will occur over a longer period of time given the time confidence involved with improving book-to-bill levels and that our near-term growth will be fueled by the transition of development programs to production where we are well positioned in the back half of this year and early FY '25. Demand remains strong, and we anticipate the strong bookings momentum to continue through the year.

我上個季度提到，鑑於提高訂單出貨量水平所涉及的時間信心，建立有機增長引擎的努力將在更長的時間內進行，並且我們的近期增長將由發展計劃的過渡推動我們在今年下半年和25 財年初期處於有利位置。需求依然強勁，我們預計今年強勁的預訂動能將持續。

Please turn to Slide 8, now turning to our third priority focus area, addressing our cost structure to expand margins. As we mentioned last quarter, to achieve our EBITDA margin targets, we are focused on the following levers: executing on our development programs and minimizing cost growth impacts, getting back to a historical 20-80 mix of development to production programs, driving organic growth to generate positive operating leverage and achieving cost efficiencies.

請轉到投影片 8，現在轉到我們的第三個優先重點領域，解決我們的成本結構以擴大利潤。正如我們上季度所提到的，為了實現我們的EBITDA 利潤率目標，我們專注於以下槓桿：執行我們的開發計劃並最大限度地減少成本增長影響，回到歷史上20-80 的開發到生產計劃組合，推動有機成長產生積極的營運槓桿並實現成本效益。

In Q1, we took a series of actions designed to better align our cost structure with our scale and our financial expectations. These actions are on track to generate $24 million in annual run rate savings primarily related to SG&A efficiencies.

在第一季度，我們採取了一系列行動，旨在更好地使我們的成本結構與我們的規模和財務預期保持一致。這些行動預計每年節省 2,400 萬美元的營運費用，主要與 SG&A 效率相關。

In January, we announced a corporate reorganization in which we streamlined and simplified our operations, consolidating our two-division structure to a single integrated structure, incorporating all of our lines of business and matrix business functions, reporting into Roger Wells who was appointed Chief Operating Officer. This integrated approach is designed to clarify accountability and eliminate redundancy. In total, we expect this action to deliver an incremental $20 million in annual run rate savings, bringing our total action run rate savings to $44 million, of which approximately $24 million to $26 million will be recognized inside the fiscal year. Though we continue to see negative operating leverage in FY '24 given little revenue volume, these structural reductions will be evident in our margin profile as we expect to return to growth in FY '25 and beyond.

一月份，我們宣布了一項公司重組，其中我們精簡並簡化了我們的運營，將我們的兩個部門結構合併為一個單一的綜合結構，整合了我們所有的業務線和矩陣業務職能，並向被任命為營運長的羅傑威爾斯匯報官。這種綜合方法旨在澄清責任並消除冗餘。總的來說，我們預計這項行動將每年節省 2,000 萬美元的營運費用，使我們的行動運行費用節省總額達到 4,400 萬美元，其中約 2,400 萬至 2,600 萬美元將在本財年內確認。儘管由於收入量很少，我們在 24 財年繼續看到負營運槓桿，但這些結構性下降將在我​​們的利潤狀況中反映出來，因為我們預計在 25 財年及以後將恢復成長。

Please turn to Slide 9, finally, regarding our fourth priority focus, to drive improved free cash flow. I am pleased to report that in Q2, we delivered over $37 million in positive free cash flow. We made progress on converting our unbilled receivables, which were down nearly $38 million in the quarter, and we continue to have strong collection trends across our billed receivables. In addition, we continue to pursue advanced payments on certain contracts, which is reflected in the $23 million increase in deferred revenue in the quarter. In total, net working capital decreased $70 million or over 10% in the quarter. We continue to expect unbilled receivables to burn down through the fiscal year as we apply resources to completing hardware deliveries and especially as we continue to resolve challenged programs. We also continue to expect inventory to decline as we receive follow-on production awards.

最後，請參閱投影片 9，以了解我們的第四個優先重點，即推動自由現金流的改善。我很高興地報告，第二季我們實現了超過 3700 萬美元的正自由現金流。我們在轉換未開立應收帳款方面取得了進展，本季減少了近 3,800 萬美元，而且我們的開立發票應收帳款持續保持強勁的收款趨勢。此外，我們繼續尋求某些合約的預付款，這反映在本季遞延收入增加 2,300 萬美元。本季淨營運資本總計減少 7,000 萬美元，即減少 10% 以上。我們繼續預計，隨著我們運用資源來完成硬體交付，特別是在我們繼續解決有問題的項目時，未開票應收帳款將在整個財年中消耗殆盡。我們也繼續預計，隨著我們獲得後續生產合同，庫存將會下降。

At the end of the quarter, we had cash and cash equivalents of $169 million. Net debt of $448 million is down $39 million in the quarter, reflective of our free cash flow generation. We expect to be cash flow positive for the second half of the year, which we believe will allow us significant flexibility to allocate capital.

截至本季末，我們擁有現金和現金等價物 1.69 億美元。本季淨債務 4.48 億美元減少了 3,900 萬美元，這反映了我們自由現金流的產生。我們預計下半年現金流將為正，這將使我們能夠靈活地分配資本。

Please turn to Slide 10. As I have discussed, we continue to make progress on our four priority focus areas. Even so, for the first 6 months, our revenue and earnings are below expectations primarily due to higher-than-expected cost growth and other charges as we retire risk across the portfolio especially related to our challenged programs. Aside from these headwinds, which we believe are temporary, I continue to believe this is a business capable of ultimately delivering above-average industry growth with low to mid-20% adjusted EBITDA margins.

請參閱投影片 10。正如我所討論的，我們繼續在四個優先重點領域取得進展。即便如此，在前6 個月，我們的收入和收益仍低於預期，主要是由於成本增長和其他費用高於預期，因為我們消除了整個投資組合的風險，特別是與我們面臨挑戰的項目相關的風險。除了我們認為是暫時的這些不利因素之外，我仍然相信該業務最終能夠實現高於行業平均水平的增長，調整後 EBITDA 利潤率為 20% 至中低水平。

In the second half of the year, we plan to continue to work on the transitions I discussed earlier: shifting our large portfolio of development programs to production, especially the majority of our remaining challenged programs, and focusing our operational capacity on burning down our large net working capital balances particularly in unbilled receivables and inventory.

在今年下半年，我們計劃繼續致力於我之前討論過的轉型：將我們的大型開發項目組合轉向生產，特別是我們剩餘的大部分有挑戰性的項目，並將我們的運營能力集中在燒毀我們的大型專案上。淨營運資本餘額，特別是未開立的應收帳款和庫存。

Turning to guidance. We're going to do this a bit differently for the remainder of the year as we work toward completing these transitions. Based on our first half revenue and our outlook for the second half, we are updating our guidance for full year FY '24 revenue from the prior range of $950 million to $1 billion to a revised range of $800 million to $850 million. The reduction in revenue guidance is based in part on our first half revenue performance, particularly in the second quarter, which included significant revenue reductions due to program cost growth. The reduction in revenue guidance is also based on reduced volumes expected in the second half as we continue to apply our operational capacity to advance late-stage development programs and shift against legacy unbilled balances.

轉向指導。在今年剩下的時間裡，我們將採取一些不同的方法來努力完成這些轉變。根據我們上半年的營收和下半年的展望，我們將 24 財年全年營收指引從先前的 9.5 億美元至 10 億美元調整為 8 億至 8.5 億美元。收入指引的減少部分是基於我們上半年的收入表現，特別是第二季度，其中包括由於專案成本增長而導致的收入大幅減少。收入指引的減少也是基於下半年預計銷售的減少，因為我們將繼續運用我們的營運能力來推進後期開發計劃並轉向遺留的未開票餘額。

As a reminder, we expect the completing late-stage development programs will reduce unbilled receivables, release cash and unlock production revenue, which should drive growth and margins. This work is critically important to unlocking value, but we'll continue to deliver little revenue in FY '24.

提醒一下，我們預計完成後期開發計畫將減少未開立應收帳款，釋放現金並釋放生產收入，這將推動成長和利潤。這項工作對於釋放價值至關重要，但我們在 24 財年將繼續帶來很少的收入。

Let me spend a little more time on the volume reduction because it is significant. As we discussed in Q1, we continue to implement a more cash-efficient operating approach with operational capacity focused on completing late-stage development programs and releasing unbilled receivables. This approach should generate cash including the way to higher growth, higher margin production revenue.

讓我多花一點時間來討論體積的減少，因為它意義重大。正如我們在第一季所討論的，我們繼續實施現金效率更高的營運方法，營運能力專注於完成後期開發項目和釋放未開立應收帳款。這種方法應該會產生現金，包括實現更高成長、更高利潤率的生產收入。

However, there's little revenue associated with completing this work in the near term. In addition, as we look to the second half, we are implementing a more mature process designed to ensure we have a robust low-risk approach to transition from development to scale production, particularly as it relates to the common processing architecture I mentioned previously. This work is important as part of our priority to restore predictability and profitability into the business. We will maintain the flexibility in terms of timing and, in some cases, cost in H2 to get this right.

然而，短期內完成這項工作幾乎沒有什麼收入。此外，展望下半年，我們正在實施更成熟的流程，旨在確保我們擁有穩健的低風險方法來從開發過渡到規模生產，特別是因為它與我之前提到的通用處理架構相關。這項工作非常重要，是我們恢復業務可預測性和盈利能力的優先事項的一部分。我們將在時間安排方面保持靈活性，在某些情況下，在下半年的成本方面也將保持靈活性，以實現這一目標。

Turning to our outlook for earnings, including GAAP net loss and adjusted EBITDA. The reduction in our expected revenue range due to the volatility we have seen and expect to continue to see in a small subset of programs related to a single technology offering, coupled with our focus on completing hardware deliveries in order to reduce unbilled balances, naturally results in a reduction to our GAAP earnings and adjusted EBITDA expectations as well. That said, it is difficult to provide reliable guidance estimates beyond revenue for the remainder of the year.

談到我們的獲利前景，包括 GAAP 淨虧損和調整後 EBITDA。由於我們已經看到並預計在與單一技術產品相關的一小部分計劃中繼續看到波動，我們預期收入範圍的減少，加上我們專注於完成硬體交付以減少未開票餘額，自然會導致我們的GAAP 收益和調整後的EBITDA 預期也有所減少。也就是說，除了今年剩餘時間的收入之外，很難提供可靠的指導預測。

Consistent with Q2, we may take additional actions to settle contractual arrangements that do not yield acceptable returns or align to our long-term strategy. We may also make continued adjustments to our cost structure, where appropriate, designed to position us for positive operating leverage in FY '25 and beyond.

與第二季一致，我們可能會採取額外行動來解決無法產生可接受回報或不符合我們長期策略的合約安排。我們也可能在適當的情況下持續調整我們的成本結構，旨在使我們在 25 財年及以後獲得積極的營運槓桿。

Our objective for the remainder of the year is to maintain the flexibility to take this as necessary to complete this work as quickly as possible in order to position the company for what we believe will be a return to predictable organic growth, improved profitability and strong cash flow in FY '25. So we are withdrawing our full year FY '24 GAAP and non-GAAP net earnings guidance, including adjusted EBITDA, provided on November 7, 2023.

我們今年剩餘時間的目標是保持靈活性，在必要時盡快完成這項工作，以使公司能夠恢復可預測的有機增長、提高盈利能力和強勁的現金。25 財年的流量。因此，我們將撤回 2023 年 11 月 7 日提供的 24 財年全年 GAAP 和非 GAAP 淨利潤指引，包括調整後的 EBITDA。

As I have said in prior calls, demand remains strong. Our outlook for bookings is unchanged, and we continue to expect strong bookings for the second half with full year bookings expected to exceed $1 billion. In addition, while we expect limited free cash flow in Q3 given the strong Q2 results, we believe we will be cash flow positive for the second half and full fiscal year.

正如我在之前的電話會議中所說，需求仍然強勁。我們的預訂前景沒有變化，我們繼續預計下半年的預訂量將強勁，全年預訂量預計將超過 10 億美元。此外，鑑於第二季的強勁業績，我們預計第三季的自由現金流有限，但我們相信下半年和整個財年的現金流將為正值。

As Dave will discuss, total net leverage, based on our credit agreement definition, is well within our covenant thresholds and we expect cash generation to strengthen our balance sheet as we progress through the year.

正如戴夫將討論的那樣，根據我們的信貸協議定義，總淨槓桿率完全在我們的契約門檻之內，我們預計隨著今年的進展，現金產生將加強我們的資產負債表。

As we proceed through the second half of FY '24, our goals are as follows: complete or retire risk on more than half of the remaining challenged programs; retire the risk associated with the common processing technology I mentioned earlier and validate a highly producible, scalable design that can be released into production; and validate capacity requirements and our ability to ramp production against our expected large and growing backlog in Q4 and into FY '25. Success in these areas, along with consistent performance against internal expectations, will give me and Dave the comfort to reestablish guidance across all financial metrics.

當我們進入 24 財年下半年時，我們的目標如下： 完成或取消一半以上剩餘挑戰專案的風險；消除與我之前提到的常見處理技術相關的風險，並驗證可投入生產的高生產力、可擴展設計；並驗證產能需求以及我們根據第四季度和 25 財年預期的大量且不斷增長的積壓訂單提高產量的能力。這些領域的成功，以及與內部預期一致的表現，將使我和戴夫放心地重新建立所有財務指標的指導。

To summarize, we are pleased with the progress we made in bookings and free cash flow in the quarter and expect strong results in these areas for the year. We will continue to assess our organization and cost structure through the second half to position ourselves for positive operating leverage in FY '25 and beyond. We continue to make progress on our challenged programs and are working diligently towards the goal of a quarter free of material program execution volatility in our financial results. We look forward to showing progress in this area when we speak next quarter.

總而言之，我們對本季在預訂和自由現金流方面取得的進展感到滿意，並預計今年這些領域將取得強勁業績。我們將在下半年繼續評估我們的組織和成本結構，以便在 25 財年及以後獲得積極的營運槓桿。我們繼續在面臨挑戰的專案上取得進展，並正在努力實現季度財務業績沒有重大專案執行波動的目標。我們期待在下個季度發表講話時展示該領域的進展。

With that, I'll turn the call over to Dave to walk through the financial results for the second quarter, and I look forward to your questions. Dave?

接下來，我將把電話轉給戴夫，介紹第二季度的財務業績，並期待您的提問。戴夫？

Thank you, Bill. I'll start with our second quarter fiscal '24 results and then discuss our full year fiscal '24 outlook.

謝謝你，比爾。我將從我們的 24 財年第二季業績開始，然後討論我們的 24 財年全年展望。

As expected, our financial performance in the second quarter was below that of the prior year across all P&L metrics. As discussed in our last earnings call, fiscal '24 is a transition year where the organization is seeking to execute on both our challenged and development programs and then progress to the follow-on production awards. Through that transition, we expect to recognize the small proportion of remaining revenues on the challenged program contracts, but more importantly, we expect to move towards releasing significant working capital balances especially related to unbilled receivables. We then anticipate shifting our resources to execute on the follow-on production awards, which we believe will begin to rebalance our program portfolio more heavily towards higher-margin predictable production programs as well as consume existing inventories. We continue to expect this transition to occur throughout fiscal '24 and into fiscal '25.

正如預期的那樣，我們第二季的所有損益指標的財務表現均低於去年同期。正如我們在上次財報電話會議中所討論的，24 財年是一個過渡年，該組織正在尋求執行我們的挑戰計劃和發展計劃，然後取得後續生產獎。透過這項轉變，我們預計將認識到受質疑的專案合約中剩餘收入的一小部分，但更重要的是，我們預計將釋放大量營運資金餘額，特別是與未開立應收帳款相關的營運資金餘額。然後，我們預計將我們的資源轉移到執行後續生產任務上，我們相信這將開始重新平衡我們的項目組合，更多地轉向利潤率更高的可預測生產項目，並消耗現有庫存。我們繼續預期這一轉變將在整個 24 財年和 25 財年發生。

In Q2, we made meaningful progress towards this rebalance with some positive early indicators emerging. First, our bookings for the quarter were $325 million with a book-to-bill of 1.65. Second, we completed, exited or retired risk on 4 more challenged programs in the quarter for a total of 8 programs through the first half of fiscal '24, better than the 5 we had expected. We continue to be on track to transition a majority of the approximately 20 challenged programs by the end of the fiscal year. Finally, we generated over $45 million of operating cash flow, $37 million of free cash flow and improved working capital by approximately $70 million in the quarter. Cash flow generation in the quarter was primarily a result of strong collections, including a higher volume of customer advances, as we successfully negotiated more favorable billing terms on newer awards.

在第二季度，我們在再平衡方面取得了有意義的進展，並出現了一些積極的早期指標。首先，本季我們的訂單量為 3.25 億美元，訂單出貨比為 1.65。其次，我們在本季完成、退出或消除了 4 個更具挑戰性的項目的風險，截至 24 財年上半年，總共有 8 個項目，優於我們預期的 5 個項目。我們繼續預計在本財年結束前完成大約 20 個受到挑戰的計劃中的大部分計劃。最後，本季我們產生了超過 4,500 萬美元的營運現金流、3,700 萬美元的自由現金流，營運資本增加了約 7,000 萬美元。本季現金流的產生主要歸功於強勁的收款，包括客戶預付款的增加，因為我們成功地就新的獎項談判了更優惠的計費條款。

With that, please turn to Slide 11, which details the Q2 results. Our bookings for the quarter were $325 million with a book-to-bill of 1.65, yielding backlog of $1.3 billion, up over $160 million or 14% year-over-year and $128 million or 11% sequentially. As Bill discussed, we received 2 large awards in the quarter. LTAMDS was received earlier than expected in fiscal '24 and signifies an important franchise production program for which we are a key supplier of processing capabilities. We also won a large cost-plus development program on a strategic weapons system with favorable billing terms.

接下來，請參閱投影片 11，其中詳細介紹了第二季的結果。本季我們的訂單量為 3.25 億美元，訂單出貨率為 1.65，積壓訂單量為 13 億美元，較去年同期成長超過 1.6 億美元，較去年同期成長 14%，較上季成長 1.28 億美元，成長 11%。正如比爾所討論的，我們在本季度獲得了 2 個大獎項。 LAMDS 在 24 財年收到的時間早於預期，這標誌著一項重要的特許經營生產計劃，我們是該計劃的加工能力的主要供應商。我們也以有利的計費條件贏得了戰略武器系統的大型成本加成開發計畫。

Revenues for the quarter were $197 million, down $32 million or 14% compared to the prior year of $230 million. As expected, revenues decreased year-over-year as we continue to prioritize resources to execute our challenged programs, transition from our higher mix of development programs and aim to better align our operating cadence with prudent working capital management.

該季度營收為 1.97 億美元，比去年同期的 2.3 億美元減少 3,200 萬美元，即 14%。正如預期的那樣，收入同比下降，因為我們繼續優先考慮資源來執行面臨挑戰的項目，從更高組合的發展項目過渡，並致力於使我們的營運節奏與審慎的營運資本管理更好地保持一致。

As Bill noted, we experienced nearly $31 million of cost growth impact in the quarter as compared to approximately $7 million in the prior year. The $31 million was comprised of $14 million related to our challenged programs and $17 million related to multiple development and production programs. In accordance with GAAP, this resulted in cumulative revenue adjustments to properly reflect progress on the programs due to the revised cost baselines, driving an overweight impact in the second quarter. The $14 million cost growth impact related to our challenged programs was almost entirely driven by a single program and was a result of facts and circumstances in the quarter, specifically on the cost growth related to unexpected redesign and prototype efforts of a common processing architecture following initial development unit deliveries.

正如 Bill 指出的，我們在本季經歷了近 3,100 萬美元的成本成長影響，而前一年約為 700 萬美元。 3100 萬美元包括與我們的挑戰項目相關的 1400 萬美元和與多個開發和生產項目相關的 1700 萬美元。根據公認會計原則，由於成本基準修訂，這導致累積收入調整，以正確反映專案進展，從而對第二季度產生超重影響。與我們面臨挑戰的專案相關的1,400 萬美元成本成長影響幾乎完全由單一專案驅動，並且是本季度事實和情況的結果，特別是與初始初始後通用處理架構的意外重新設計和原型工作相關的成本增長。開發單位交付。

While we executed largely in line with expectations across the remaining challenged programs, we did experience cost growth on certain other development and production programs in the quarter which impacted revenues in a similar manner but to a lesser extent. Of the remaining $17 million of cost growth impact, nearly $8 million related to development programs and $9 million related to production programs.

雖然我們對剩餘的有挑戰的項目的執行基本上符合預期，但本季度我們確實經歷了某些其他開發和生產項目的成本增長，這以類似的方式影響了收入，但程度較小。在剩餘 1700 萬美元的成本成長影響中，近 800 萬美元與開發案相關，900 萬美元與生產項目相關。

The cost growth within our development programs was primarily attributable to $6 million of cost growth across a suite of three development programs with similar performance obligations. A majority of this cost growth was due to a revised cost baseline predicated on initial development unit deliveries and extrapolated across the remaining backlog. Similarly, we had several production programs in the first half of the fiscal year for which actual costs incurred were trending higher than the prior cost estimates. This resulted in a revised cost baseline for the remaining backlog on these programs. In addition, we experienced minor technical issues resulting in incremental rework costs across several production programs in the quarter. The scope of the issues was narrow, risk mitigation plans are in place and the issues are expected to resolve and allow for delivery on these programs beginning in the third quarter.

我們的開發項目的成本成長主要歸因於具有類似績效義務的三個開發項目的 600 萬美元成本增長。成本成長的大部分歸因於根據初始開發單元交付量並根據剩餘積壓訂單推斷的修訂後的成本基準。同樣，我們在本財年上半年有幾個生產計劃，其實際成本趨勢高於先前的成本估算。這導致對這些計劃剩餘積壓的成本基準進行了修訂。此外，我們也遇到了一些小技術問題，導致本季多個生產項目的返工成本增加。問題的範圍很窄，風險緩解計劃已經到位，預計問題將得到解決並允許從第三季開始交付這些計劃。

Finally, as we build and mature integrated processes and management systems, we seek to continuously assess our judgments and estimates, including potential future risks and opportunities, based on the latest and best information available. We are applying our judgment consistently as we work through the full portfolio of programs.

最後，隨著我們建立並成熟綜合流程和管理系統，我們尋求根據最新和最佳的可用信息，不斷評估我們的判斷和估計，包括未來潛在的風險和機會。在完成整個專案組合時，我們始終如一地運用我們的判斷。

In addition, and consistent with prior earnings calls, we are shifting our operating cadence with the goal of more properly balancing our material purchases with contract awards and resource availability, driving better working capital results. These factors are contributing to a temporary volume shift in our total revenue, especially our overtime revenue, which decreased by approximately $25 million year-over-year. We expect this trend to continue through the remainder of fiscal '24.

此外，與先前的財報電話會議一致，我們正在改變營運節奏，目標是更適當地平衡材料採購與合約授予和資源可用性，從而推動更好的營運資本績效。這些因素導致我們的總收入暫時發生變化，尤其是加班收入，比去年同期減少了約 2,500 萬美元。我們預計這一趨勢將持續到 24 財年剩餘時間。

Gross margin for the second quarter decreased to 16% from 35.3% in the prior year. Gross margin contracted year-over-year primarily as a result of cost growth impacts as well as higher manufacturing adjustments especially as related to inventory reserves and scrap. As just discussed, we recorded approximately $31 million of cost growth impact in the second quarter. This represents approximately $23 million of incremental cost growth impact year-over-year, contributing to more than 50% of the margin reduction, as shown on Slide 15 in the appendix. The remaining decrease in gross margin year-over-year was primarily due to higher manufacturing adjustments of approximately $12 million related to inventory reserves and scrap.

第二季毛利率從去年同期的 35.3% 下降至 16%。毛利率年減主要是由於成本成長的影響以及更高的製造調整，特別是與庫存儲備和廢棄物相關的調整。正如剛才所討論的，我們在第二季度記錄了約 3,100 萬美元的成本成長影響。這意味著同比增量成本成長影響約為 2,300 萬美元，導致利潤率下降超過 50%，如附錄投影片 15 所示。毛利率年減主要是由於與庫存儲備和廢品相關的約 1,200 萬美元的製造調整增加。

With regard to inventory reserves, we recorded over $8 million more reserves in the quarter as compared to the prior 4-quarter run rate average. This was a result of specifically identified excess and obsolete inventory in the quarter primarily due to a shift in customer demand toward our next-generation product offering. In addition, we are actively marketing and selling certain of our slow-moving inventory, sometimes at a discount to the current carrying value.

關於庫存儲備，本季我們記錄的儲備比前 4 季的平均運行率增加了 800 萬美元以上。這是本季特別確定的過剩和過時庫存的結果，主要是由於客戶需求轉向我們的下一代產品。此外，我們也積極行銷和銷售某些滯銷庫存，有時會以低於當前帳面價值的折扣價出售。

With regard to scrap, we experienced higher levels of discrepant material especially related to the common processing architecture involved in several of our challenged programs. Due to the nature of the technology, the discrepant material is high value and cannot be reused or reworked. We have several initiatives underway designed to address more efficient and cost-effective producibility of these subsystems.

關於廢料，我們遇到了更高層次的差異材料，特別是與我們的幾個有挑戰性的專案中涉及的通用處理架構相關的材料。由於技術的性質，不合格材料價值很高，不能重複使用或重做。我們正在進行多項舉措，旨在提高這些子系統的生產效率和成本效益。

We expect gross margins to recover gradually in the second half of the fiscal year. That said, we believe the full year fiscal '24 gross margins will be below those of fiscal '23 given the higher-than-expected cost growth impacts through the first half of fiscal '24.

我們預計毛利率將在本財年下半年逐步恢復。也就是說，鑑於 24 財年上半年高於預期的成本成長影響，我們認為 24 財年全年毛利率將低於 23 財年毛利率。

As Bill discussed, we believe we have successfully narrowed the scope of risk across our challenged programs to a single technology related to our common processing architecture within one of our business units. We expect gross margins to continue to be impacted by unknown risks that may materialize as we progress these challenged programs through final stages of completion. In addition, we may continue to see cost growth impact as we transition from a higher-than-normal development program mix as well as continue to mature our operational management systems and reporting.

正如比爾所討論的，我們相信我們已經成功地將我們所面臨的挑戰項目的風險範圍縮小到與我們一個業務部門內的通用處理架構相關的單一技術。我們預計毛利率將繼續受到未知風險的影響，隨著我們將這些充滿挑戰的專案推進到完成的最後階段，這些風險可能會成為現實。此外，隨著我們從高於正常水平的開發計劃組合過渡以及繼續成熟我們的營運管理系統和報告，我們可能會繼續看到成本成長的影響。

Operating expenses decreased approximately $3.1 million year-over-year due to $2.1 million of restructuring charges as well as $1.3 million more of amortization expense in the prior year. That said, the second quarter of fiscal '24 included nearly $5 million of contract settlements resulting from negotiations to reduce performance obligations on customer contracts that do not align with our strategy or otherwise do not have acceptable returns in exchange for lower cash consideration. We believe these costs are not comparable to the prior year, and thus, our run rate operating expenses would have decreased nearly $8 million year-over-year, reflecting the cost savings actions executed in our first quarter fiscal '24.

由於重組費用 210 萬美元以及上一年攤銷費用增加 130 萬美元，營運費用年減約 310 萬美元。也就是說，24 財年第二季包括近500 萬美元的合約結算，這些結算是透過談判減少客戶合約的履約義務而產生的，這些合約與我們的策略不符，或者以較低的現金代價換取不可接受的回報。我們認為這些成本與上一年無法比較，因此，我們的營運費用將比去年同期減少近 800 萬美元，反映了我們在 24 財年第一季執行的成本節約行動。

As Bill mentioned, earlier this month, we announced an organizational consolidation of our divisions into one unified structure, incorporating multiple business units and supporting functions. The resulting workforce reduction is eliminating approximately 100 positions, resulting in expected restructuring charges of $10 million to $12 million in the third quarter. This cost savings action is expected to yield annual run rate savings of approximately $20 million.

正如比爾所提到的，本月早些時候，我們宣布將各部門組織整合為一個統一的結構，納入多個業務部門和支援職能。由此產生的勞動力減少將消除約 100 個職位，預計第三季的重組費用將達到 1,000 萬至 1,200 萬美元。這項成本節約行動預計每年可節省約 2,000 萬美元的營運費用。

In total, our cost savings actions in fiscal '24 are expected to yield over $40 million in annual run rate savings.

總的來說，我們在 24 財年的成本節約行動預計將節省超過 4,000 萬美元的年運行率。

GAAP net loss and loss per share in the second quarter was $45.6 million and $0.79, respectively, as compared to $10.9 million and $0.19, respectively, in the prior year. The increase in GAAP net loss is primarily a result of approximately $48 million of costs incurred in the quarter comprised of $31 million of program cost growth impacts, $12 million of inventory reserves and scrap expense as well as nearly $5 million of contract settlements. GAAP net loss was also impacted by the temporary volume shift in revenues as we align our operating cadence with prudent working capital management. These factors were partially offset by approximately $16 million of incremental tax benefit year-over-year.

第二季 GAAP 淨虧損和每股虧損分別為 4,560 萬美元和 0.79 美元，去年同期分別為 1,090 萬美元和 0.19 美元。 GAAP 淨虧損的增加主要是由於本季度產生的約 4,800 萬美元的成本，其中包括 3,100 萬美元的專案成本成長影響、1,200 萬美元的庫存儲備和報廢費用以及近 500 萬美元的合約結算費用。由於我們將營運節奏與審慎的營運資本管理保持一致，因此 GAAP 淨虧損也受到收入暫時變動的影響。這些因素被約 1600 萬美元的同比增量稅收優惠部分抵消。

Adjusted EBITDA for the second quarter was negative $21.3 million compared to $35.7 million in the prior year. Adjusted loss per share was $0.42 as compared to adjusted earnings per share of $0.26 in the prior year. Consistent with GAAP net loss and loss per share, the decrease was primarily a result of approximately $48 million of costs incurred in the quarter comprised of $31 million of program cost growth impacts, $12 million of inventory reserves and scrap expense as well as nearly $5 million of contract settlements. Adjusted EBITDA and adjusted loss per share was also impacted by the temporary volume shift in revenues as we align our operating cadence with prudent working capital management.

第二季調整後 EBITDA 為負 2,130 萬美元，而上年同期為 3,570 萬美元。調整後每股虧損為 0.42 美元，而上一年調整後每股收益為 0.26 美元。與 GAAP 淨虧損和每股虧損一致，下降的主要原因是本季產生約 4,800 萬美元的成本，其中包括 3,100 萬美元的專案成本成長影響、1,200 萬美元的庫存儲備和報廢費用以及近 500 萬美元的合約結算。由於我們將營運節奏與審慎的營運資本管理結合，調整後的 EBITDA 和調整後的每股虧損也受到收入暫時變動的影響。

Slide 12 presents Mercury's balance sheet for the last 5 quarters. We ended the second quarter with cash and cash equivalents of $169 million. We increased our borrowings by $40 million in the quarter, resulting in $616.5 million of funded debt under our revolver.

投影片 12 顯示了 Mercury 過去 5 個季度的資產負債表。第二季末，我們的現金和現金等價物為 1.69 億美元。本季我們增加了 4,000 萬美元的借款，導致我們的左輪融資債務達到 6.165 億美元。

As Bill discussed, total net leverage based on our credit agreement definitions is well within our covenant thresholds. Our debt agreement allows for adjustments beyond those included in our adjusted EBITDA definition, including adjustments related to some of the headwinds that we believe are temporarily driving earnings volatility and obscuring the underlying performance of the business. We are forecasting significant headroom in the covenants for the remainder of fiscal '24 and expect to end the year with lower gross debt and as we deploy the positive free cash flow generated through the remainder of the year to pay down debt.

正如比爾所討論的，基於我們的信貸協議定義的總淨槓桿率完全在我們的契約門檻之內。我們的債務協議允許進行調整後的 EBITDA 定義之外的調整，包括與我們認為暫時推動盈利波動並掩蓋業務基本業績的一些不利因素相關的調整。我們預計 24 財年剩餘時間的契約將有巨大的空間，並預計到年底債務總額會降低，並且我們將利用今年剩餘時間產生的正自由現金流來償還債務。

Billed receivables decreased approximately $9 million as a result of continued strong collections in the quarter. Unbilled receivables decreased approximately $38 million primarily due to successful execution and billings across the program portfolio as well as cumulative adjustments associated with the cost growth impact in the quarter and our contract settlements as previously discussed.

由於本季收款持續強勁，應收帳款減少了約 900 萬美元。未開立發票應收帳款減少了約 3,800 萬美元，主要是由於整個專案組合的成功執行和開票，以及與本季度成本增長影響和我們之前討論的合約結算相關的累積調整。

Inventory decreased approximately $8 million in the quarter primarily as a result of the incremental reserve and scrap activities.

本季庫存減少約 800 萬美元，主要是由於儲備和報廢活動增加。

Accounts payable decreased nearly $8 million, evidencing the shift in our operating cadence aimed at better aligning the timing of material purchases with both contract awards and resource availability.

應付帳款減少了近 800 萬美元，這證明我們的營運節奏發生了轉變，旨在更好地將材料採購時間與合約授予和資源可用性保持一致。

Deferred revenues increased approximately $23 million in the quarter, reflecting the higher volume of customer advances as we successfully negotiate more favorable billing terms on newer awards.

本季遞延收入增加了約 2,300 萬美元，反映出隨著我們成功就新合約談判出更優惠的計費條款，客戶預付款數量增加。

Working capital improved approximately $70 million in the second quarter as we transition through the completion of our challenged programs and start to shift the development and production mix in the program portfolio. We successfully converted unbilled to billed receivables and ultimately cash in the quarter through our focused execution efforts. We also negotiated advanced payments on a number of new contracts and reduced inventory growth through effective management of our material purchases. We expect this working capital trend to continue, resulting in further progress by the end of the fiscal year, primarily driven by decreases in unbilled receivables and inventory.

隨著我們完成有挑戰性的專案並開始改變專案組合中的開發和生產組合，第二季的營運資本增加了約 7,000 萬美元。透過我們集中的執行努力，我們成功地將未開立發票應收帳款轉換為已開立應收帳款，並最終在本季度兌現現金。我們也就一些新合約協商了預付款，並透過有效管理材料採購減少了庫存成長。我們預計這種營運資金趨勢將持續下去，並在本財年末取得進一步進展，這主要是由於未開票應收帳款和庫存的減少所致。

As we continue to execute, especially as related to our challenged programs, we expect to convert unbilled to billed receivables and then cash. In addition, we expect the mix of development programs to shift to better align with historical norms. And as we receive expected follow-on production awards, we believe we will consume inventory purchased in anticipation of these awards.

隨著我們繼續執行，特別是與我們面臨挑戰的計劃相關的項目，我們預計將未開立的應收帳款轉換為開立發票應收帳款，然後轉換為現金。此外，我們預期發展計畫的組合將會轉變，以更好地符合歷史規範。當我們收到預期的後續生產獎項時，我們相信我們將消耗因預期這些獎項而購買的庫存。

As we have discussed on prior calls, we consider 35% of trailing 12 months revenues to be a more appropriate level of working capital for the business.

正如我們在先前的電話會議中所討論的那樣，我們認為過去 12 個月收入的 35% 對於企業來說是更合適的營運資金水準。

Turning to cash flow on Slide 13. Free cash flow for the second quarter was $37.5 million as compared to $22.2 million in the prior year. As previously discussed, this was primarily a result of strong collections in the quarter, including a higher volume of customer advances, as we successfully negotiate more favorable billing terms on newer awards.

轉向幻燈片 13 上的現金流。第二季的自由現金流為 3,750 萬美元，去年同期為 2,220 萬美元。如前所述，這主要是由於本季收款強勁，包括客戶預付款數量增加，因為我們成功就新獎項協商了更優惠的計費條款。

I'll now turn to our financial guidance for the full year fiscal '24. Our results through the first half of fiscal '24 have been below expectations. In addition, we expect earnings volatility may continue for the remainder of the year, including as we make intentional decisions around the strategic alignment of our program portfolio, technology investments and working capital balances. As a result, our full year results are expected to fall short of the previously issued guidance.

我現在將談談我們 24 財年全年的財務指引。我們 24 財年上半年的業績低於預期。此外，我們預計今年剩餘時間內獲利波動可能會持續，包括我們圍繞專案組合、技術投資和營運資本餘額的策略調整做出有意的決策。因此，我們的全年業績預計將低於先前發布的指引。

At the start of the fiscal year, we shifted our guidance approach to guide annually rather than quarterly due to the expected volatility in financial performance as we pivoted focus to operational execution especially related to our challenged programs. We have taken several actions designed to improve predictability within a subset of our business, and key early indicators of progress emerged in the second quarter. We have successfully completed 8 of our approximately 20 challenged programs and believe we are on track to complete the majority of the challenged programs by the end of the fiscal year.

在本財年開始時，由於財務表現的預期波動，我們將指導方法從季度指導改為每年指導，因為我們將重點轉向了營運執行，特別是與我們面臨挑戰的專案相關的營運執行。我們採取了多項旨在提高部分業務的可預測性的行動，第二季出現了關鍵的早期進展指標。我們已經成功完成了大約 20 個挑戰項目中的 8 個，並相信我們預計在本財年結束前完成大部分挑戰項目。

That said, we have experienced development challenges on a single technology within one of our business units that spans several of our remaining challenged programs. These challenges will require heightened effort and potentially increased cost through the remainder of the fiscal year. We have quantified this risk, among others, across our program portfolio based on information available as of the second quarter as well as considered how best to allocate our resource capacity to further reduce working capital levels, resulting in a revised revenue range of $800 million to $850 million for fiscal '24.

也就是說，我們的一個業務部門在單一技術上遇到了開發挑戰，該技術跨越了我們剩餘的幾個面臨挑戰的專案。這些挑戰將需要在本財年剩餘時間內加大努力，並可能增加成本。我們根據截至第二季度的可用資訊量化了整個專案組合中的這一風險，並考慮瞭如何最好地分配我們的資源能力以進一步降低營運資本水平，從而將收入範圍調整為 8 億美元至24財年8.5 億美元。

Providing meaningful estimates of GAAP and non-GAAP measures beyond revenue is challenging, including in light of the continued actions we may need to take to complete our business transition in fiscal '24. Thus, we are withdrawing our GAAP and non-GAAP guidance outside of revenues as provided on our first quarter earnings call on November 7, 2023. While we are not formally guiding beyond revenues for the remainder of the fiscal year, we can provide further perspective over certain key financial metrics.

對收入以外的 GAAP 和非 GAAP 指標進行有意義的估計具有挑戰性，包括考慮到我們可能需要採取的持續行動來完成 24 財年的業務轉型。因此，我們將撤回2023 年11 月7 日第一季財報電話會議上提供的收入之外的GAAP 和非GAAP 指導。雖然我們沒有正式對本財年剩餘時間的收入進行指導，但我們可以提供進一步的觀點超過某些關鍵財務指標。

First, we expect the demand environment to continue to support strong bookings especially in the fourth quarter, yielding expected fiscal '24 bookings in excess of $1 billion. We continue to expect these bookings to be weighted more heavily towards production-based programs, supporting the start of a shift in the mix of development and production programs in our portfolio.

首先，我們預計需求環境將繼續支持強勁的預訂，尤其是在第四季度，預計 24 財年的預訂量將超過 10 億美元。我們仍然預計這些預訂將更偏向基於生產的計劃，以支持我們投資組合中開發和生產計劃組合的轉變。

Second, we believe we have narrowed the risk and scope of effort within our challenged programs to a single technology in one of our business units, with the remaining challenged programs executing largely in line with expectations. We have completed 8 of our approximately 20 challenged programs and continue to expect to complete a majority of all challenged programs by the end of the year.

其次，我們相信我們已經將我們的挑戰項目中的風險和工作範圍縮小到我們一個業務部門的單一技術，而其餘的挑戰項目的執行基本上符合預期。我們已經完成了大約 20 個挑戰項目中的 8 個，並繼續期望在今年年底前完成所有挑戰項目中的大部分。

The cost growth impacts incurred through the first half, coupled with the potential for continued volatility especially related to this single technology, will negatively impact revenues and gross margin for the remainder of the year. As such, we now expect both revenue and gross margin to trend lower than the prior year.

上半年發生的成本成長影響，加上特別是與該單一技術相關的持續波動的可能性，將對今年剩餘時間的收入和毛利率產生負面影響。因此，我們現在預計收入和毛利率將低於去年。

We believe operating leverage will improve as we progress through the year due to expected revenue and margin increases compounded by savings from the cost actions completed in both the first and third quarters of fiscal '24.

我們相信，隨著我們今年的進展，由於預期收入和利潤率的增長，再加上 24 財年第一和第三季完成的成本行動所節省的成本，營運槓桿將會提高。

We expect GAAP net loss and loss per share as well as adjusted EBITDA and adjusted loss per share for fiscal '24 will be meaningfully below the prior year.

我們預計 24 財年的 GAAP 淨虧損和每股虧損以及調整後 EBITDA 和調整後每股虧損將大幅低於前一年。

We expect positive cash flow for the fiscal year before any benefit from the potential passage of the R&D tax legislation currently before the Senate, which we anticipate would add more than $40 million of additional cash flow in fiscal '24.

我們預計，在參議院審議的研發稅立法可能獲得通過之前，本財年將出現正現金流，我們預計該立法將在 24 財年增加超過 4,000 萬美元的額外現金流。

While cash flow in the third quarter is projected to be near breakeven, we expect a significant improvement in the fourth quarter as we plan to complete a majority of our challenged programs, ship and build final product and convert unbilled receivables to billed receivables and then to cash.

雖然第三季的現金流預計將接近收支平衡，但我們預計第四季度將出現顯著改善，因為我們計劃完成大部分有挑戰性的項目，運輸和製造最終產品，並將未開票應收賬款轉換為開立發票應收帳款，然後現金。

We continue to expect positive free cash flow for the year. A government shutdown or prolonged continuing resolution may pose risk to our cash flow expectations.

我們繼續預計今年的自由現金流為正。政府關門或長期持續的解決方案可能會為我們的現金流量預期帶來風險。

As discussed, we expect further improvement in net working capital by the end of the fiscal year as we anticipate seeing reductions in unbilled receivables but also inventory with more meaningful reductions expected over the longer term.

如同所討論的，我們預計到本財年末淨營運資本將進一步改善，因為我們預計未開票應收帳款將減少，但從長遠來看，庫存將出現更有意義的減少。

In closing, we continue to be focused on four priorities: enhancing execution to deliver predictable performance, driving organic growth, addressing our cost structure to expand margins and driving improved free cash flow conversion and release. We believe executing on these priorities will not only enable a return to historical revenue growth and profitability but will also drive further margin expansion and cash conversion, demonstrating the long-term value creation potential of the business.

最後，我們繼續關註四個優先事項：增強執行力以提供可預測的績效、推動有機成長、解決成本結構以擴大利潤率以及推動改善自由現金流轉換和釋放。我們相信，執行這些優先事項不僅能夠恢復歷史收入成長和獲利能力，還將推動進一步的利潤擴張和現金轉換，以展示業務的長期價值創造潛力。

With that, I'll now turn the call back over to Bill.

這樣，我現在將把電話轉回給比爾。

Thanks, Dave. With that, operator, please proceed with the Q&A.

謝謝，戴夫。那麼，操作員，請繼續進行問答。

(Operator Instructions) The first question comes from the line from Peter Arment from Baird.

（操作員說明）第一個問題來自 Baird 的 Peter Arment。

Bill, I'm just trying to understand the cost growth breakdown. The $14 million that was derived from one of your challenged programs, I guess, it's just tied to one program, the $14 million of cost growth. Will that one specifically be eliminated as you're thinking about having the majority of these done this fiscal year? Or do we expect that that's one of the troubled ones that will linger a little bit?

比爾，我只是想了解成本成長的細目。我想，從您的一項受挑戰的專案中獲得的 1400 萬美元，它只與一個專案相關，即 1400 萬美元的成本增長。當您考慮在本財年完成其中的大部分工作時，是否會特別取消該專案？或者我們期望這是一個會持續一段時間的麻煩問題之一？

Peter, thanks very much for the question. The short answer is that program will be active for a while. But maybe if I gave some color on what was behind the cost growth, it might be helpful to understand what's happening with that program. And it's actually, in some ways, sort of unique.

彼得，非常感謝你的提問。簡而言之，該計劃將持續一段時間。但如果我對成本成長背後的原因進行一些說明，可能有助於了解該計劃的情況。實際上，在某些方面，它是獨一無二的。

This is a challenged program that includes development, low rate production and a production run. Most of our development programs just contain the development activities or low rate production. This one is unique in that it includes a long production run. And what we discovered in the quarter as we worked our way through development and then we worked our way through the first few units in production, that we got a good view on the unit economics or the unit costs that then informed an updated estimate on the production. And so the big cost growth in the quarter that we recognized was tied to the impacts of what we learned and how that pertained to the production. So while that program will be around for a while, we think we have a much clearer view of what we need to do to execute on that program and what the production will look like. So hopefully, that color commentary is helpful.

這是一個充滿挑戰的計劃，包括開發、低速生產和生產運作。我們的大多數開發計劃僅包含開發活動或低速生產。該產品的獨特之處在於它包括長期生產。我們在本季度發現，當我們透過開發方式進行開發，然後透過生產的前幾個單位進行工作時，我們對單位經濟效益或單位成本有了很好的了解，然後為更新的估計提供了資訊生產。因此，我們認識到本季成本的大幅成長與我們所了解的影響以及它與生產的關係有關。因此，雖然該程序將存在一段時間，但我們認為我們對執行該程序需要做什麼以及產品將是什麼樣子有了更清晰的了解。希望該顏色評論能有所幫助。

Very helpful. And just a follow-up, if I could, just given all the cost growth, and a lot of Mercury over the last several years was built up through kind of M&A, are any of the businesses impaired? Or how do we think about that, just thinking about risks from a financial standpoint?

很有幫助。如果可以的話，我想跟進一下，考慮到所有的成本增長，以及過去幾年水星公司的許多業務都是透過併購建立起來的，是否有任何業務受到損害？或者我們如何看待這個問題，只是從財務角度考慮風險？

Yes, I'll let Dave speak to that in a second. There's one more piece of color commentary that I wanted to make about the program that I referenced, and that is that, even after we made the adjustments to our ETC for the production run, the margin profile on that program is still above, what I call, the composite average of our gross margin across our full portfolio. So it's just another, I think, helpful piece of information to round out that picture.

是的，我稍後會讓戴夫談談這個問題。我還想對我所引用的程序進行一項彩色評論，那就是，即使我們對生產運行的 ETC 進行了調整，該程序的利潤率仍然高於我所期望的水平。電話，我們整個投資組合毛利率的綜合平均值。因此，我認為，這只是另一個有用的信息來完善這一圖景。

But on the impairment question, I'll go ahead and turn it over to Dave.

但關於減損問題，我將繼續將其交給戴夫。

Yes. Thanks, Bill. When we do an assessment around impairment, we do that at a gross level, so we don't look at the individual components. And we don't maintain goodwill at that level, we maintain it at the overall level, so we always do an analysis on the overall company and where we stand from a goodwill impairment standpoint.

是的。謝謝，比爾。當我們圍繞損害進行評估時，我們是在總體層面上進行評估，因此我們不會考慮各個組成部分。我們不會將商譽維持在這個水平上，而是將其維持在整體水平上，因此我們總是對整個公司以及從商譽減損的角度來看我們的立場進行分析。

Your next question comes from the line of Seth Seifman from JPMorgan.

您的下一個問題來自摩根大通的 Seth Seifman。

I wanted to ask first, I noticed in the filing that the percentage of sales to some of the key customers is down, kind of lower than it's been, below the 10% disclosable threshold. And I guess how do we kind of think about what that means? And how do we think about that with regard to the kind of underlying trend of prime contractor outsourcing that kind of underlies the Mercury business case?

我想先問一下，我在文件中註意到，對一些主要客戶的銷售百分比有所下降，比以往要低，低於 10% 的可披露門檻。我想我們如何思考這代表什麼？我們如何看待 Mercury 業務案例背後的主承包商外包的潛在趨勢？

Seth, this is Bill. I'll go ahead and take the question. Thank you very much, by the way. I think those percentages are going to bounce around a little bit quarter-to-quarter. So I wouldn't pay too -- or at least I personally don't pay too much attention to that. To the extent that they do go down, I think it does show the robustness of our backlog and the diversification of our backlog. And the thing that I'm really focused on, around customer health and desirability of our products in the marketplace and the strength of demand, is to look at our backlog. And right now, we're staring at a record backlog. We had a near-record bookings for the quarter, which I think is the strongest indicator of our customer health and the health of our business looking forward.

賽斯，這是比爾。我將繼續回答問題。順便說一句，非常感謝。我認為這些百分比將按季度略有反彈。所以我不會付太多錢——或者至少我個人並沒有太注意這一點。如果它們確實下降了，我認為這確實表明了我們積壓訂單的穩健性和積壓訂單的多元化。我真正關注的是客戶健康狀況、我們產品在市場上的受歡迎程度以及需求強度，那就是查看我們的積壓訂單。現在，我們面臨著創紀錄的積壓。我們本季的預訂量接近創紀錄，我認為這是我們客戶健康狀況和我們業務未來健康狀況的最強指標。

Dave, anything you want to add?

戴夫，你還有什麼要補充的嗎？

I would just mention that it is the threshold, at 10%, and it does vary. If you look at it historically, it varies. I think some of them dip just below and some of them pop just above in a given quarter. So I don't think there's a significant shift in any of these.

我只想提一下，這是 10% 的閾值，而且它確實有所不同。如果你從歷史的角度來看，情況會有所不同。我認為在特定季度中，有些會略低於，有些會略高於。所以我認為這些都沒有重大變化。

Yes. And again, I go back to the backlog, and I think that reflects the trust that our customers have in us with respect to their franchise programs. And we mentioned a couple of the specific bookings that we received in the quarter that I think speak to that fact.

是的。我再次回到積壓的問題，我認為這反映了客戶對我們的特許經營計劃的信任。我們提到了本季收到的一些具體預訂，我認為這說明了這一事實。

Okay. And then maybe just I think one of the key things that people think about as they -- or maybe one of the key ingredients in the model as you think about where -- without the guidance and with the results being so variable now, some number in the outyears to anchor around, and it's probably the gross margin. And so if you wanted to think about a kind of conservative case where things don't necessarily all turn out your way and some of these things -- you're still struggling with some of these things for a while, what's kind of a fair way to think about -- not necessarily next quarter but as people try to anchor around what the company might be able to do here in the future, a fair way to think about that gross margin number?

好的。然後，也許我認為人們在思考時所考慮的關鍵問題之一 - 或者可能是模型中的關鍵要素之一，因為你在沒有指導的情況下思考，而且結果現在如此多變，一些數字未來幾年要穩定的，可能就是毛利率。因此，如果你想考慮一種保守的情況，其中事情不一定都按照你的方式發展，其中一些事情 - 你仍然在與其中一些事情鬥爭一段時間，什麼是公平的思考的方式——不一定是下個季度，但當人們試圖圍繞公司未來可能做的事情時，思考毛利率數字的公平方式是什麼？

Yes. Seth, this is Bill. I'll start, and then Dave can chime in. I mean specifically, we don't guide to gross margins. What we have said, and which we continue to believe to be true, is that when you look across our portfolio, our range of gross margins is 30% typically for development programs and 40% for our production programs. And what really drives our gross margins is the mix associated with development and production. And so as we think about margin targets going forward, we more think about EBITDA targets going forward. And I would just refer you to the bridge that we put in prior investor presentations where we think key to getting to those margins is around minimizing the volatility in our development programs and the EAC impacts. And despite the numbers in the quarter, we feel like we're making very good progress to boxing the risk associated with the development programs and the EAC volatility.

是的。賽斯，這是比爾。我先開始，然後戴夫可以插話。我的意思是，具體而言，我們不提供毛利率指引。我們已經說過，我們仍然相信這是真的，當你縱觀我們的產品組合時，我們的毛利率範圍通常是開發項目的 30%，生產項目的毛利率範圍是 40%。真正推動我們毛利率的是與開發和生產相關的組合。因此，當我們考慮未來的利潤目標時，我們更考慮未來的 EBITDA 目標。我只想向您推薦我們在先前的投資者演示中提出的橋樑，我們認為獲得這些利潤的關鍵是最大限度地減少我們的開發計劃的波動性和 EAC 的影響。儘管本季出現了這樣的數字，但我們認為我們在控制與開發計劃和東非共同體波動性相關的風險方面取得了非常好的進展。

Second, it's transitioning the development programs to production, and we are making very good progress on that front. One of the big bookings in the quarter is evidence of that. But as we're progressing our way through development, we're getting closer line of sight to converting them to production; its continued efficiency in our cost structure; and again, this quarter, and with the negative operating leverage, it won't show through this year but we expect it to go through next year, the efficiencies that we've driven into our cost structure; and then ultimately, in the near term, driven by the organic growth associated with converting our production programs to development, positive operating leverage. And that's really the path from where we sit today to our targeted margins that are in the low to mid-20s, and that's still our view on the target margins for the business.

其次，它將開發計劃轉變為生產，我們在這方面取得了非常好的進展。本季的一筆大額預訂就是證明。但隨著我們在開發過程中取得進展，我們越來越接近將它們轉化為生產；我們的成本結構持續有效率；再說一遍，本季度，由於營運槓桿為負，今年不會表現出來，但我們預計明年會表現出來，我們已經將效率納入成本結構；最終，在短期內，受到將我們的生產計劃轉變為發展、積極的營運槓桿相關的有機成長的推動。這確實是我們從今天的位置到 20 多歲的目標利潤率的路徑，這仍然是我們對業務目標利潤率的看法。

So I'll pause there. Dave, anything that you would like to add to that?

所以我就在這裡暫停一下。戴夫，您還有什麼要補充的嗎？

I think that's right. And as Bill said, margins in the low 20s. He's referring to EBITDA margins, just to be sure. And we've reiterated and looked at and we still feel confident in the long-term model that we laid out in the past, then that is the gross margins that we believe this business should be able to generate and continue to believe that.

我認為這是對的。正如比爾所說，利潤率在 20 多歲左右。為了確定這一點，他指的是 EBITDA 利潤率。我們重申並研究過，我們仍然對我們過去製定的長期模型充滿信心，那就是我們認為這項業務應該能夠產生的毛利率，並繼續相信這一點。

And just to go back to -- to bring your question and the first question that we had on the call together, the one program that caused really the majority of the volatility in the quarter was a challenged program that included the development, the low rate production and the long production run. It had an impact in the quarter because we have revised estimates of our percent complete. And so we had some reversals in the quarter that basically had the cumulative catch-up in the quarter. But again, when we look at the gross margins of that program going forward, still above the average gross margins of our profile across that spectrum of 30% to 40% that I reiterated for development in our production programs. So hopefully, that's helpful. Hopefully, it gives you better insight in how we're thinking about the target margins of the business and really focused on target margins when it comes to EBITDA margins.

回到——把你的問題和我們在電話會議上提出的第一個問題放在一起，導致本季度大部分波動的一個計劃是一個充滿挑戰的計劃，包括開發、低利率生產和長期生產運行。它對本季度產生了影響，因為我們修改了對完成百分比的估計。因此，我們在本季出現了一些逆轉，基本上是在本季累積趕上來的。但同樣，當我們審視該計劃未來的毛利率時，仍然高於我在生產計劃中重申的 30% 至 40% 範圍內的平均毛利率。希望這會有所幫助。希望它能讓您更了解我們如何考慮業務的目標利潤率，以及在 EBITDA 利潤率方面如何真正專注於目標利潤率。

Your next question comes from the line of Jonathan Ho from William Blair.

你的下一個問題來自威廉布萊爾的喬納森何 (Jonathan Ho)。

Thank you for the additional color on the challenged programs that you just provided. One thing I wanted to better understand a little bit is that you have scrutinized these troubled programs and implemented processes in the past. Can you help us understand why it took so long to sort of identify these additional issues? And maybe help us understand why this time you have more confidence that you've got a handle on it.

感謝您為剛剛提供的受挑戰的程序提供了額外的顏色。我想更好地理解的一件事是，您過去已經仔細檢查過這些有問題的程序並實施了流程。您能否幫助我們理解為什麼需要這麼長時間才能識別這些額外問題？也許可以幫助我們理解為什麼這次你更有信心自己能掌控它。

Yes, Jonathan, thanks very much for the question. One thing that I'll iterate is where we're seeing EAC growth in the challenged programs, in general, it's not repeat issues. So if you look across the list of programs, the 19, with the exception of the 1, we had very little volatility in the quarter. Where we did see the issue on the 1 program represented the fact that we're progressing the program. So we worked our way through development. That's a positive. We worked our way through the low rate production. And as we did, we learned more about the unit economics, and specifically the unit cost, that informed our view of the production. So I understand the question around why it took so long, but it really has taken us progressing through the different phases of this program in particular. And again, this one has a different profile because it includes development, low rate production and a longer production run.

是的，喬納森，非常感謝你的提問。我要重申的一件事是，我們在受挑戰的專案中看到 EAC 成長，總的來說，這不是重複問題。因此，如果你查看一下計劃列表，除了 1 項之外的 19 項計劃，我們在本季度的波動性很小。我們在 1 號程序中確實看到了問題，這表明我們正在推進該程序。所以我們透過自己的方式進行開發。這是積極的。我們努力克服了低生產力的問題。正如我們所做的那樣，我們更多地了解了單位經濟學，特別是單位成本，這告訴我們對生產的看法。所以我理解為什麼花了這麼長時間的問題，但它確實讓我們在這個計劃的不同階段取得了進展。再說一遍，這個產品有不同的特點，因為它包括開發、低速生產和較長的生產運作。

On most of the development programs in general and our challenged programs, we have the opportunity to complete the development. So there may be some risk associated with completing the development. But at the end of the development, we get to the design baseline, we have an opportunity to execute on a small number of units so that we can get a good baseline for the unit economics, and in particular, the unit cost, and then we're able to factor that into bids for production contracts that are follow-on. So in this particular case where we have development, low rate production and a longer-run production associated with it, within this one program, we have the risk associated with those three phases, which is relatively unique. So it may seem like it took us a while to get to the EAC and really understanding it, but we had to do the work and progress through development and low rate production in order to inform and update our view on the production run. So that's really the background on that.

對於大多數一般的開發項目和我們面臨的挑戰項目，我們有機會完成開發。因此，完成開發可能存在一些風險。但在開發結束時，我們達到了設計基線，我們有機會在少量單位上執行，以便我們可以獲得單位經濟性的良好基線，特別是單位成本，然後我們能夠將其納入後續生產合約的投標中。因此，在這一特殊情況下，我們有開發、低速生產和與之相關的長期生產，在這個計劃中，我們面臨與這三個階段相關的風險，這是相對獨特的。因此，我們似乎花了一段時間才到達 EAC 並真正了解它，但我們必須透過開發和低速生產來完成工作和進展，以便告知和更新我們對生產運作的看法。這就是背景。

Just one quick one as a follow-up, how flexible have your partners been to sort of work with you on these revised either contract terms or prepayments? Does this have an impact on your future relationships as well?

作為後續行動，您的合作夥伴在這些修訂後的合約條款或預付款方面與您合作的靈活性如何？這對你以後的人際關係也有影響嗎？

On payments themselves, Jonathan, could you please clarify?

關於付款本身，喬納森，您能澄清一下嗎？

Yes. So you referenced sort of going back to renegotiate some of the contracts and then having some acceleration in terms of the payment. So I just wanted to understand if that impacts the relationships, whether your partners or end customers have been willing to work with you? I'm just trying to understand sort of the dynamics around those discussions.

是的。因此，您提到要回去重新談判一些合同，然後加快付款速度。所以我只是想了解這是否會影響關係，您的伴侶或最終客戶是否願意與您合作？我只是想了解這些討論的動態。

Yes. No, thank you for clarifying the question. And this ties back to what we've talked about now for a couple of quarters about, in general, our more cash-efficient approach to our operations. And that has a couple of comments. One is how we order material and better stage it with the timing of deliveries. And the second piece of it is the contract terms that we put in place so that we can better align progress with progress payments.

是的。不，謝謝你澄清這個問題。這與我們現在已經討論了幾個季度的內容有關，總的來說，我們的現金效率更高的營運方式。還有一些評論。一是我們如何訂購材料並根據交貨時間更好地安排材料。第二部分是我們制定的合約條款，以便我們能夠更好地使進度與進度付款保持一致。

Historically, and one of the reasons why we have a large unbilled balance, is our payment terms speak to us being able to bill invoice and collect cash only once we're complete and deliver the units. And so one of the things that we've done operationally is work to align our payment terms with progress payments. And so that, I think, is the "renegotiation" that you're referring to. And what I would say is, in general, it's not a big deal because our customers, in many ways, our incentives are aligned. So when we bill them, they're able to collect cost, invoice their customers and collect cash. So our incentives are aligned and, as a result, it's typically not a difficult conversation for us to have with our customers.

從歷史上看，我們擁有大量未開票餘額的原因之一是，我們的付款條件要求我們只有在完成並交付設備後才能開立發票並收取現金。因此，我們在營運上所做的事情之一就是努力使我們的付款條件與進度付款保持一致。所以，我認為，這就是你所指的「重新談判」。我想說的是，總的來說，這沒什麼大不了的，因為我們的客戶在許多方面與我們的激勵措施是一致的。因此，當我們向他們開立帳單時，他們能夠收取費用、向客戶開立發票並收取現金。因此，我們的激勵措施是一致的，因此，我們與客戶的對話通常並不困難。

Anything, Dave, that you would add to that?

戴夫，你還有什麼要補充的嗎？

I would add to that. When you think about the relationship, and you're asking about our customers and working with our customers, I mean, a reflection of our customers' thoughts and feelings working with us, I mean, I think it's reflected in the strong bookings we had that you see. These are customers who -- largely we have these customers, have had them for a long period of time, and they're working with us. Bill has met with several of the customers even on the areas with the challenged programs. He's working with those customers, and they want us to get to the answers, the final activity, so that we can get into production. They need these products where we have a unique capability to deliver these products. And you see it reflected in our growing backlog and in our bookings that we've seen. As Bill said, we see some transitory kind of impacts, but our customers understand that and are working with us.

我想補充一點。當你考慮這種關係時，當你詢問我們的客戶並與我們的客戶合作時，我的意思是，反映了我們客戶與我們合作的想法和感受，我的意思是，我認為這反映在我們的強勁預訂中你看到的。這些客戶——主要是我們擁有這些客戶，已經擁有他們很長一段時間了，他們正在與我們合作。比爾甚至在專案受到質疑的地區會見了幾位客戶。他正在與這些客戶合作，他們希望我們找到答案，完成最終的活動，以便我們可以投入生產。他們需要這些產品，而我們擁有提供這些產品的獨特能力。您可以在我們不斷增加的積壓訂單和我們所看到的預訂中看到這一點。正如比爾所說，我們看到了一些短暫的影響，但我們的客戶理解這一點並正在與我們合作。

Yes. And then the other thing I'll add, Jonathan, and this may have been part of what you're asking as well, we did mention that we had some contract fulfillment in the quarter that resulted in a transitory impact, I think, of $5 million. In general, those discussions and what was behind the settlements had nothing to do with us trying to negotiate different payment terms, better align payments with progress payments, et cetera, they were completely different matters, specific to those contractual relationships and not reflective of us trying to negotiate different terms with our customers. So in the event that, that was part of the question, I want to provide that color.

是的。然後我要補充的另一件事是，喬納森，這可能也是您所問問題的一部分，我們確實提到我們在本季度履行了一些合同，我認為這導致了暫時的影響500萬美元。總的來說，這些討論以及和解背後的內容與我們試圖談判不同的付款條件、更好地調整付款與進度付款等無關，它們是完全不同的問題，特定於那些合約關係，並不反映我們的情況嘗試與我們的客戶協商不同的條款。因此，如果這是問題的一部分，我想提供那種顏色。

Your next question comes from the line of Sheila Kahyaoglu from Jefferies.

您的下一個問題來自 Jefferies 的 Sheila Kahyaoglu。

This is Kyle Wenclawiak on for Sheila. I appreciate the legwork you guys are doing around cost savings and the cash focus nowadays. But I just want to hone in on the profitability guide for this year because it seems like the two uncertainties are kind of what you just mentioned around contract exits. So first question there is maybe how much of the backlog or revenue bridge is maybe up for negotiation? And then second part being the cost savings, it seems like a lot of that is pretty exhaustive, so maybe some color around why you didn't hone in on a more profit shakeout this year.

我是凱爾溫克拉維亞克 (Kyle Wenclawiak) 替希拉 (Sheila) 發言。我很欣賞你們現在圍繞著節省成本和關注現金所做的努力。但我只想重點討論今年的盈利能力指南，因為這兩個不確定性似乎就是您剛才提到的有關合約退出的問題。所以第一個問題是，有多少積壓或所得橋樑可能需要談判？第二部分是成本節約，看起來其中許多都相當詳盡，所以也許有一些關於為什麼你今年沒有磨練更多利潤的原因。

Yes. Let me see. I'll take a stab at the two questions, and then Dave, maybe can fill in. First, on just the cost savings piece of it, as we said in prior calls, I don't think of that as a onetime activity, I think of it as an ongoing activity to drive efficiency in our organization and our structure. And I think we've been pretty consistent in demonstrating that that's our focus with what we announced in Q1, the further enhancements that we rolled out in January, and we'll continue to look at opportunities to improve our cost structure. And I think that's a very natural thing to do in a business like ours that's been built up through acquisitions over a period of time, for us to continue to look for opportunities to better integrate the business.

是的。讓我看看。我會回答這兩個問題，然後戴夫也許可以回答。首先，正如我們在之前的電話中所說，就節省成本而言，我不認為這是一次性活動，我認為這是一項持續的活動，旨在提高我們組織和結構的效率。我認為我們一直在證明這是我們在第一季宣布的重點，我們在一月推出的進一步增強功能，並且我們將繼續尋找改善成本結構的機會。我認為，對於像我們這樣經過一段時間收購建立起來的企業來說，這是很自然的事情，讓我們繼續尋找機會更好地整合業務。

As far as the contract, I guess, on the first question around...

就合約而言，我想，關於第一個問題...

Yes, this is Dave, Kyle, if it's all right, if I understood the question, it was around, of the $1.3 billion of backlog we have, how much of that backlog do we think would be -- I don't know what the right word would be, potentially renegotiated. Is that what you driving for?

是的，我是戴夫，凱爾，如果可以的話，如果我理解了這個問題，問題是，我們有 13 億美元的積壓訂單，我們認為積壓訂單中有多少——我不知道是什麼正確的詞應該是「可能重新談判」。這就是你開車的目的嗎？

Yes, maybe how much of the backlog is maybe the lower margin work that you'd look to either exit or I mean, I guess, renegotiate.

是的，也許有多少積壓的工作可能是你希望退出的低利潤工作，或者我的意思是，我猜，重新談判。

I think about it very differently. That isn't a dynamic that we're currently thinking about or working on. I mean we feel very good about the backlog that we have in place. And again, like I said, it's a record backlog coming off of a great bookings quarter. The risk that we see in the business really is isolated to what we consider to be about 20% of the business. That's where we've seen volatility in the business. And the remaining 80% of our business has performed very predictably, and we expect it to continue to perform predictably. And we're really focused in not so much on contract renegotiations or anything like that, but it's the execution in the 20% of our business.

我的想法非常不同。這不是我們目前正在考慮或致力於的動態。我的意思是，我們對現有的積壓工作感到非常滿意。正如我所說，預訂季度的預訂積壓創歷史新高。我們在業務中看到的風險實際上只限於我們認為大約 20% 的業務。這就是我們看到業務波動的地方。我們其餘 80% 的業務表現非常可預測，我們預計它的表現將繼續可預測。我們真正關注的不是合約重新談判或類似的事情，而是我們 20% 業務的執行。

In particular, that includes this one common processing architecture technology that cuts across a few programs that we need to finalize the work that we have currently underway so that we can get to a design that is not just producible, which is where we are today, but producible at scale so that we can perform very predictably and profitably, and that's our focus. So it's less about the $1.2 billion backlog that we have, and it's more about this one part of our business that represents 20%. And this common technology is a subset of that 20%.

特別是，其中包括一種通用的處理架構技術，它跨越了我們完成當前正在進行的工作所需的一些程序，以便我們能夠獲得不僅僅是可生產的設計，這就是我們今天的處境，但可以大規模生產，以便我們能夠非常可預測地實現盈利，這就是我們的重點。因此，重要的不是我們 12 億美元的積壓訂單，而是我們業務中佔 20% 的部分。而這項通用技術只是這 20% 的一部分。

Yes. And that's not to say that we feel like 20% of the business is at risk. What we're saying is that there's contained within that segment of the business. That piece of the business is where we see the highest concentration of risk that we're working through. But as Bill said, Kyle, I don't see a significant exposure for renegotiation settlement in our backlog.

是的。這並不是說我們認為 20% 的業務面臨風險。我們所說的是包含在該業務部分中。這部分業務是我們正在處理的風險最集中的地方。但正如比爾所說，凱爾，我認為我們的積壓工作中沒有重大的重新談判解決方案。

And then I think the other thing that I would add relative to that area where we're focused on the technical work, we feel very good about our long-term positioning there because we're differentiated, we're sole-source, we're baselined on programs where the capability is mandatory. And our customers are incentivized, we believe, with us to get to the other side on these technical issues, so that we can get to the person runs and get the product into their hands. So hopefully, that paints a little bit clearer picture of the technical issues that we're describing.

然後我想我要補充的另一件事是，相對於我們專注於技術工作的領域，我們對我們在那裡的長期定位感到非常滿意，因為我們是差異化的，我們是唯一來源，我們以強制該能力的項目為基準。我們相信，我們的客戶會受到激勵，與我們一起在這些技術問題上達成共識，以便我們能夠與人溝通，並將產品交到他們手中。希望這能更清晰地描述我們所描述的技術問題。

Our next question comes from the line of Michael Ciarmoli from Truist Securities.

我們的下一個問題來自 Truist Securities 的 Michael Ciarmoli。

Just to stay on that topic, I mean, looking at the guidance cut, I mean, can't we just say the high end of the prior $1 billion to the low end now at $800 million, isn't that 20% of the business? So I mean, it seems like 20% of the overall business has been kind of compromised here.

就停留在這個主題上，我的意思是，看看指導意見的削減，我的意思是，我們不能直接說之前 10 億美元的高端到現在的 8 億美元的低端，這不是 20%嗎？商業？所以我的意思是，整體業務的 20% 似乎受到了影響。

Yes. And I think I would say that when we look at the reduction in the range, it is largely in that business unit where we see the biggest reduction in the revenue because as we looked at the first half and the adjustments that we've taken that have impacted revenue, they've largely been in that business, as Bill said. And as we look at the volume going forward, as we both talked about, we're going to get these programs lying flat on the development before we really start producing in volume into the production. And that transition, to make it seamless and to make it smooth without variability in the future, needs to be completed before we move ahead. And that's why you're seeing we're not having as much early material receipts as we've had in the past. We're managing that carefully, so we don't end up in a situation where things are -- where we brought in things that design changes are still happening, too. And so yes, a significant part of that reduction in the range is driven by that part of the business.

是的。我想我會說，當我們看到範圍的減少時，我們看到收入減少最多的業務部門主要是因為當我們看到上半年和我們採取的調整時正如比爾所說，影響了收入，他們主要從事該業務。當我們展望未來的產量時，正如我們都談到的那樣，在我們真正開始批量生產之前，我們將讓這些程序處於開發階段。在我們繼續前進之前，需要完成這種過渡，以使其無縫、順利且未來不會改變。這就是為什麼你會看到我們沒有像過去那麼多的早期材料收據。我們正在謹慎地管理這一點，因此我們不會最終陷入這樣的情況——我們引入的設計變更仍然在發生。所以，是的，範圍縮小的很大一部分是由這部分的業務所推動。

Yes. And I would just offer to that it's really a timing around that volume and pushing to the right of that volume. And that's as a result of us being very methodical and working our way through the technical issues to get to a robust baseline that we can produce very predictably and profitably and at scale. And the reason why we're doing that is because we're very excited about the prospects for this part of our business. It's highly differentiated. We have sole-source positions. We see a significant growth opportunity in front of us in this area with attractive gross margins, similar to when I walked through with the one challenged program where we had the major source of our impact this quarter still operating at very healthy growth margins going forward, and so we're very excited about our piece of this business. This volume reduction largely associated with that part of the business is a push out to the right.

是的。我只想說，這實際上是圍繞該卷的時間安排，並推到該卷的右側。這是因為我們非常有條理，努力解決技術問題，以達到一個可靠的基線，我們可以非常可預測地、盈利地大規模生產。我們這樣做的原因是我們對這部分業務的前景感到非常興奮。這是高度差異化的。我們有獨家來源的職位。我們在這一領域看到了一個巨大的成長機會，具有有吸引力的毛利率，類似於我完成一個充滿挑戰的計劃時，我們本季度影響力的主要來源仍然以非常健康的成長利潤率運營，因此，我們對這項業務感到非常興奮。這種數量的減少很大程度上與該部分業務相關，是向右推動。

And Michael, I would say it is a thoughtful, intentional view on our part of making that decision to not add to the risk profile by bringing that in by executing that early.

邁克爾，我想說，我們做出這樣的決定是經過深思熟慮的、有意的觀點，即不通過儘早執行來增加風險狀況。

Okay. Just the last one, the $150 million guidance cut at the midpoint, you called out the revenue headwind from cost growth in the quarter in volume in the quarter. What's sort of the breakdown for the year if you can bridge kind of the $23 million in cost growth you saw this quarter? Is it fairly balanced? Or how should we think about that?

好的。就在最後一項，即中點削減 1.5 億美元的指導意見中，您指出了本季成本成長帶來的營收逆風。如果您能彌補本季 2,300 萬美元的成本成長，那麼今年的細分情況會是怎樣的？是否相當平衡？或者說我們該如何思考這個問題？

Yes. I think the way I would look at it is, as we talked about, we're not trying to guide the back half from a profitability standpoint. If you take the first half and you take the reduction that we saw the shortfall in revenue, it's starting with that as the starting point that that's in the number for the year and then taking a look at exactly what Bill said, the intentional shifting of execution on contracts until we've got some of these things laying flat on that piece of our portfolio, not certainly on our entire portfolio.

是的。我認為我的看法是，正如我們所討論的，我們並不是試圖從盈利的角度來指導後半部分。如果你考慮上半年的情況，你會看到我們看到收入短缺的減少，那就以此為起點，即今年的數字，然後看看比爾所說的，故意轉移執行合同，直到我們將其中一些東西放在我們的投資組合的那一部分上，而不是我們的整個投資組合。

Mr. Ballhaus, it appears there are no further questions. Therefore, I would like to turn the call back over to you for any closing remarks.

鮑爾豪斯先生，看來沒有其他問題了。因此，我想將電話轉回給您，請您發表結束語。

Okay. Well, thank you very much. And I very much appreciate everybody listening into our call this afternoon and the questions, and we look forward to providing you an additional update next quarter. Thank you very much.

好的。好的，謝謝。我非常感謝大家今天下午收聽我們的電話會議並提出問題，我們期待在下個季度為您提供額外的更新。非常感謝。

This concludes today's conference call. Thank you for your participation. You may now disconnect.

今天的電話會議到此結束。感謝您的參與。您現在可以斷開連線。