Astronics at 16th Annual Midwest Ideas Conference: Aerospace Recovery and Growth

On Wednesday, 27 August 2025, Astronics Corporation (NASDAQ:ATRO) presented at the 16th Annual Midwest Ideas Conference, outlining its strategic direction and financial health. The company, heavily impacted by the pandemic, is witnessing a recovery in its Aerospace segment, which constitutes the majority of its business. However, challenges like tariffs and supply chain issues persist.

Key Takeaways

• Astronics’ Aerospace segment accounts for 90% of revenue, with significant recovery post-pandemic.
• Second quarter sales reached $204.7 million, boosted by record Aerospace sales.
• The company faces a potential $20 million impact from tariffs, primarily from Malaysia and China.
• Astronics has $191 million in liquidity, supporting growth initiatives like the FLRAA program.
• Capital expenditures are expected to rise to $40-50 million in 2025.

Financial Results

Astronics reported second quarter sales of $204.7 million, with the Aerospace segment alone contributing $193.6 million, marking a record performance. Despite a $6.4 million EAC adjustment affecting the Test segment, the company achieved a trailing twelve-month revenue of $823 million. Adjusted net income increased by $6.5 million to $13.7 million or $0.38 per diluted share. The company maintains a strong liquidity position with $191 million available, including $178 million under its revolving credit facility.

Operational Updates

The company is strategically focused on four verticals: In-Flight Entertainment and Connectivity (IFE&C), Aircraft Lighting, Flight Critical Electrical Power, and Test Systems. IFE&C represents half of the business, with Astronics holding a dominant market share in in-seat power solutions. The company is also advancing a $90 million development program for the FLRAA initiative, which will continue through 2026/2027.

Future Outlook

Astronics anticipates continued strong performance in the Aerospace segment, driven by increased aircraft production rates from Boeing and Airbus. The FLRAA program is expected to significantly impact business as production approaches 2029-2030. The company is also addressing tariff challenges and exploring alternative materials for rare earth magnets to mitigate supply chain issues.

Q&A Highlights

During the Q&A session, Astronics addressed the potential $20 million impact from tariffs, with half stemming from Malaysia. The company is exploring mitigation strategies but awaits clarity on tariff rates. Boeing’s planned production increases, including the 737 to 42 per month, present a significant growth opportunity, as does Airbus’ production ramp-up.

For a deeper dive into Astronics’ strategic plans and financial performance, readers are encouraged to refer to the full transcript below.

Full transcript - 16th Annual Midwest Ideas Conference:

Operator: Hello, everybody. Your next presentation will be Astronics traded on NASDAQ, ticker a t r o. With the company today, we have Peter Gunderman, chairman, president, and CEO, and Nancy Hedges, VP and CFO.

Peter Gunderman, Chairman, President, and CEO, Astronics: Hello everybody. I am Pete, that’s Nancy. In case there was any confusion, I see some familiar faces, so thank you for being with us. This afternoon. I’m going to spend a few minutes going through an overview of our business.

Then Nancy is going to talk through some of the numbers associated with our recent events. I think we will plan to hold questions until the end. But if you have something really burning that you just have to ask, you can raise your hand. We’ll try to fit it in during the middle of the presentation. So here are some overview numbers of our company.

Market cap just above a billion dollars these days. We’re trading at a fifty two week high or really close to it. We have two classes of stock or B shares have 10 votes, common shares have one vote, 31 common, 4,000,000 Bs. Pretty strong institutional ownership and pretty strong insider ownership also. A couple ways to look at our company.

The pie chart on the left here shows you that we have two segments. Aerospace is 90%. Test runs around 10%. We look and act and feel a lot like an aerospace company much more so than a test company. That’s how people typically think about us.

The pie chart on the right looks at our major markets and the big portion of the pie is commercial aerospace. These are commercial airplanes built by companies like Boeing and Airbus and operated by airlines around the world. That’s our biggest market. Behind that we have a defense and government market of about 20% of recent twelve month sales and general aviation is a smaller 8%. That bigger commercial aerospace portion of the pie has been consistent for many years and it explains our behavior and experience during the pandemic.

It’s beginning to feel a little bit like history at this point, but we all remember when airlines stopped flying and passengers stopped flying and travel restrictions were in place. And that really hit our company hard. The bar chart here on the left looks at our sales from 2019 which was pre pandemic up through where we expect to end up in 2025. And you can see that we really experienced the bottom falling out of our business from $770,000,000 down to $445,000,000 And since then, we’ve been climbing back. So, it’s a bad news, good news kind of story.

The pandemic hit us hard. But bookings have been really strong. And as the world has recovered in terms of supply chain and inflation and employee churn, our business has come back pretty strongly. So, bookings have been very strong. Backlog is at or near a record high.

So we are feeling pretty good about our prospects going forward. If you read our press releases, we break our business down a number of different ways. The product line list on the left is one of those ways. But the more, I guess the better way to understand the business I think has to do with the pie chart on the right where we break our business in a strategic thrust or you can think of these as verticals, kind of areas of business focus. And the rest of my presentation is basically going to work through these four verticals or strategic thrust.

The biggest one, half our business is in flight entertainment and connectivity. So, if you sit in the passenger compartment of a commercial airplane and you do anything with electronics, there’s a really good chance that you’re touching our products. If you plug your computer or your iPad or your phone into an electrical outlet, that’s probably ours. If you stream content, you’re very likely using our wireless access points. If you’re going off airplane, you might be using some of our connection equipment that helps the airplane connect to satellite constellations.

If you are watching a movie on a flat screen in the seat ahead of you, That’s probably our electrical power system driving that system also. Half our business, big part of our business, we’ll spend a fair amount of time talking about it. Next biggest portion is aircraft lighting. We’re actually at this point probably one of the world’s probably the world’s largest lighting aerospace lighting company. We’re active in all types of airplanes, military, commercial, private and we are active in the cockpit.

We are active in the cabin and we are active in the exterior of the airplane. We will spend some time talking about that. And then thirdly, on the aerospace side is our flight critical electrical power. We are going to talk about electrical power here, there and everywhere as we go through this presentation. In the cabin, the IFE, in flight entertainment part of electrical power is a passenger amenity.

That is for people like us who fly in commercial airplanes and plug in your computers. This other type of electrical power is flight critical which means it’s not a passenger amenity. It’s one of the basic systems on the airplane powering the avionics, powering landing gear, powering communication, navigation, all the critical stuff on the airplane. If that system fails, then the airplane has trouble. It’s very important.

And then finally our fourth strategic is our test systems business. We’ll spend a little bit of time on that, but it’s only 10% of our volume. So it’s going to get like less than 10% of our time. So starting with in flight entertainment, what is it? Most airplanes these days more and more have some level of passenger electronics to entertain or to communicate or to surf the internet, whatever it is that passengers want to do.

There are some basic elements to the system and they are shown here in different ways. We are unique in the industry in that we have a very broad range of hardware that we offer our customers. Who are our customers? They are typically in flight entertainment companies. The big ones are Panasonic or Talos or Safran.

Or we are selling to connectivity Internet service providers. Think of companies like ViaSat, Inmarsat, SES, there is a range of them. And these companies need our hardware basically to complete the system and have it perform as intended on an aircraft. And again, we are unique in that we have a wide range. We have competitors in various portions or various elements of a system.

We do not have competitors that offer comprehensively the whole system kind of knows the tail and that gives us certain marketing and scale advantages. One of the things we are best known for is power. This is how we really got active in the cabin. We essentially developed in seat power or passenger power and we have a dominant market share. The slide here says 90% plus.

We think it’s quite a bit higher than 90%. 200 airlines around the world, a big part of our presence with the OEMs, with the airlines. And it’s basically from this starting point that we rounded out that product line with the wireless access points and the other ancillary equipment that we developed or gained by acquisition over the last decade. Moving on to lighting. I mentioned lighting in the cockpit, lighting on the exterior and lighting in the cabin.

There is a range of products shown on this slide. We are active in all three areas in all types of aircraft. Some pictures tell a story here. That is in the upper left is a Joint Strike Fighter, an F-thirty five. We do the exterior legging suite directly with Lockheed on that airplane.

Lower left, that’s kind of a weird picture, but that’s from the perspective of sitting in a cabin of a seven thirty seven. That’s what we call the passenger service unit that’s above your head. It’s got reading lights in it. It’s got the air gaspers. It’s got an emergency oxygen system.

It’s standard equipment on every seven thirty seven. We also do this work on seven seventy seven which has been really light the last few years, but some of you may know that Boeing is in the process of certifying the 777X. That’s going to be a good contributor for us in the next few years. We also do this kind of work for the Airbus A220 which was formerly known as the Bombardier C Series that Airbus bought a few years back. So, a good mix of military, commercial and private or business jet aviation.

There is a cockpit picture there that is a Cessna jet I believe and it has got a lot of Collins avionics in it and we do a lot of work. Collins, Rockwell Collins or the former Rockwell Collins is a big customer of ours. Finally, critical electrical power. Again, this is basic power that makes the airplane go. And our unique sauce here is we developed a very high-tech electrical power system that is uniquely suited for smaller aircraft.

We don’t do flight critical electrical power for big airplanes like a seven thirty seven. We wouldn’t get involved there. Boeing wouldn’t let us get involved there. But there are a range of smaller aircraft military, business jet, eVTOL that we are very involved in. Our secret sauce involves electronic circuit breakers.

The big difference there is electronic circuits are flexible and programmable and can be remotely located in a cockpit compared to thermal fuses which is the technique of yesterday and still prominent in a lot of airplanes today. And also high reliability starter generators instead of traditional wound machines that generate electricity driven off an engine. Ours are based on induction or permanent magnets. So much less friction, much longer life, more expensive but better performance. There is a picture sometimes, know, tells a thousand words.

The cockpit on the left is a Lear 45. It’s an older airplane but not that old. There’s a lot of them out on the tarmac and you notice the busyness of the cockpit especially the big circuit breaker panels on the left and right side of cockpit here. Those are thermal fuses basically. Something goes wrong with the circuit and one of those fuses pops and there may or may not be a system that tells the pilot that something happened.

He or she may have to notice that the circuit breaker popped by observation and then figure out what to do about it. Traditional thermal based fuses in an aircraft at this point in this day we feel are pretty obsolete. The picture on the right looks very different and it is very different. That is a Pilatus PC 24. It is a modern airplane built out of Switzerland.

And you notice there are no obvious circuit breakers in that cockpit. And the reason is that we did the electrical system on this airplane or we provide the electrical system and we use electronic circuit breakers. So, an electronic circuit breaker is basically a miniature computerized circuit that monitors a load and cuts it off or manages it as it is programmed to do. It can be located remotely and it can be automated. If you are a pilot in that airplane and something goes wrong and a circuit pops, the system is smart enough to do the, first few steps anyway of an emergency procedure before the pilot even knows that something happened.

It is much safer. It is also much more reliable, much more stable over time. And it is really we think the way of the future. One program that we talk about and are pretty proud of is something called the FLRAA program for the US Army. The US Army is the FLRAA stands for Future Long Range Assault Aircraft.

The US Army is developing this aircraft with Bell, a Textron company and we are doing the entire electrical system on this aircraft. And it is a big deal. The airplane is going to be the intended replacement for the Sikorsky Blackhawk. There are some 4,000 Blackhawks out there. There isn’t an official count for how many Flera aircraft are going to be built, otherwise known as the V-two 80.

But most people involved in the industry expect that number to be up around 2,000 or so when it is all said and done. And our shipset content is still being determined. It is going to be dependent on evolving aircraft needs which we’re still working through with Bell. But we expect it’s going to be somewhere in the million dollar range. So for a company of our size, this is a real needle mover and this aircraft is expected to get into production as we approach 2029, 02/1930.

It could be a couple years earlier depending on how the Army decides to execute the program. They are investigating various options right now. But this is a program where a company like us is very much swinging above our weight. I am not going to go through this entirely, but you can just scan the names of the aircraft. And the point of this is to give you a little bit of an idea of the content that we have on various airplanes.

We are for a company of our size, know, this year, we are planning to be somewhere in the $850,000,000 range. We have got really long fingers. We are involved in the major commercial transports. We are involved in a wide range of military aircraft and business aircraft also. This is not a comprehensive list of course, but representative of the range of capabilities and products that we offer.

A quick overview of our test business. Our test business has two major pursuits. One is radio test for military and government agencies. We have a major program underway right now with the Marines that is $40,000,000 five year kind of program. We have an even bigger one on the books for the Army that’s going to be a $200,000,000 program for four or five years.

We expect or hope to get that started finally after long delays at the turn of the year here, 2026. Our test business is about an $80,000,000 business. So, you layer on a $200,000,000 program over four or five years, you can kind of see what the impact might be. We think it is going to be very positive. The second pursuit of our test business has to do with trains, with subway systems.

We have won a couple significant programs, one with New York, one with Atlanta prior to the pandemic. It has been a dry market since then. Many of you are from major cities, major cities have transit systems that transit systems have been struggling with work from home trends, ridership is way down, financing is down and it’s a bit of a tough market right now. We think long term there are and will be opportunities. But at this point we just have those two programs to work on.

Those two programs have been our first two programs into this market. And let me just say that we’ve learned a lot. If you look at our financials, they’ve been difficult. We just took a pretty big EAC adjustment in the second quarter. We think will clean up these two programs as we work towards conclusion which will be at the 2026 or early in 2027.

So with that, I think I will turn it over to Nancy to talk through our recent financials.

Nancy Hedges, VP and CFO, Astronics: Thanks, Pete. Just a handful of slides to go through here. Our second quarter sales came in at about $204,700,000 driven largely by about a 193,600,000.0 in our Aerospace segment, which was a record for the segment. Those record sales helped to offset the adjustment Pete mentioned earlier. We had about a 6,400,000 negative impact on sales related to the adjustment to those estimated cost to complete those mass transit contracts in our test segment.

Turning to bookings, you can see our bookings for the quarter were 177,000,000. They can be lumpy as you can certainly see here. Our bookings were were lower just primarily as a result of timing. We came off a record first quarter booking level, but we’re not concerned about the lower bookings. Our our opportunities remain robust, and we aren’t seeing a decline in our demand.

Backlog remains elevated at $645,000,000. The vast majority of that is deliverable within twelve months. We have historically been a book and ship type business, but the supply chain issues of the last several years here have resulted in customers placing orders earlier than they had been pre pandemic. So as those as those lead times have come down and the supply chain issues have largely resolved, we’re we’re seeing the order time order timing normalizing. So that could be that we expect that we may see a little bit lower bookings in the future as a result of that.

As a point of reference though, for the trailing twelve month period here, we’re at $823,000,000 of revenue, which is roughly consistent with where we were in the immediate pre pandemic period. In that period when we had 800,000,000 of annualized revenue, we had just over $400,000,000 of backlog. Okay. Turning to gross profit. Our GAAP gross profit for the second quarter was $52,800,000 and was negatively impacted by that EAC adjustment that I mentioned earlier, which had a 6,900,000 effect on gross profit.

In addition, we executed on some restructuring actions in our aerospace segment. So we incurred some costs related to product portfolio shaping and some resulting footprint rationalization actions, which amounted to $5,800,000 in charges affecting our GAAP gross profit. We do provide some adjusted gross profit and operating profit and margin data here on this slide, which takes out some of the atypical costs so you can better see the performance of the underlying business. On an adjusted basis, our gross margin was 29.2% for the quarter. We did not adjust out in in this adjusted number, we did not adjust out the impact of the EAC adjustment.

At the operating profit level as the operating profit level in the Aerospace segment has been demonstrating strong operating leverage driven by strong growth and operating efficiencies that helped to offset the somewhat weak results in the Test segment for the quarter. Encouraging though encouragingly, though, we do expect the 2025 to be much improved in the test segment as the volume picks up and the benefits from recent cost savings initiatives become more visible. And as these are adjusted measures, I’d refer you to the to the slides at the back of the deck that present more information on those adjustments and the calculation of our adjusted metrics. K. Quickly on EPS and EBITDA.

After adjusting for restructuring in aerospace that I talked about, some litigation related costs and charges and some other smaller, less significant items, our adjusted net income for the quarter increased about 6 and a half million dollars to 13,700,000.0 or 38¢ per diluted share. This demonstrates stronger profitability and also lower interest expense. Our consolidate adjusted EBITDA over on the right, that increased 25.5% to $25,400,000 and was 12.4% of our consolidated sales. And again, we didn’t add back the EAC adjustment to that to that metric. K.

Finally, coming to our balance sheet and cash flows. We generated $13,000,000 worth of operating cash flow in the 2025. That’s despite some pretty heavy payments that we made in the in the second quarter related to a a legal settlement. We paid about $22,000,000 in damages interest and legal fee reimbursement related to some UK patent litigation that that we were facing. And we also paid about $13,000,000 in the first half related to income tax payments and some of that related to true up payments from 2024.

We’re in a good position with more than sufficient liquidity and financial flexibility to invest in our organic growth opportunities like Pete addressed. This provides us cushion to continue to invest in our growth. And to that end, you can see our our 2025 CapEx expectations are elevated to we’re expecting 40 to $50,000,000 for 2025. And that higher level is a combination of catch up capital expenditures as we’ve operated on a very lean budget over the last four or five years here. Coupled with CapEx related to facility consolidation and expansion, which helps us to be ready for the FLIR program when that kicks off in a couple of years that we which we expect to be a game changer for our company.

At the end of the second quarter, we had about a 191,000,000 in total liquidity, primarily consisting of a 178,000,000 in availability under our asset based revolving credit facility and about $13,000,000 of cash on hand. This provides us with the cushion that we would need to weather any uncertainties related to the remaining patent litigation that we’re addressing. In closing, this is a very exciting time for Astronics. We’ve got solid visibility into the next five years and believe we can execute to deliver value for our shareholders. We

Peter Gunderman, Chairman, President, and CEO, Astronics: have nine minutes left. So now is a good time to ask questions or we can do this again and start over. Tariffs and rare earth magnets. They are both a problem. Our observation is that the tariff world keeps evolving and changing and it’s hard to know where it’s going to land even today.

If the current rates that are in place were to stay there, we think that the unmitigated impact on our business would be about $20,000,000 We think half of that comes from Malaysia frankly. So if you want to watch our company and pay attention to tariffs, watch Malaysia. Our product from Malaysia is generally material that we could move. We could move elsewhere if we need to. But at this point it’s not obvious where else we would go because all the tariff rates are in flux everywhere.

So what do you do? But half of it comes from Malaysia. Roughly a quarter of it comes from China including some rare earths and other components that frankly are difficult to source. I’ll come back to that in a second. But at this point, China is on another ninety day extension of temporary tariffs.

So again, who knows where that goes and what that looks like at the end. And then a quarter of the tariff load comes from Canada Mexico which we think is generally going to be USMCA compliant. And we’re in the process of trying to understand that and get that more clarified. So we think there’s a whole range of mitigation opportunities we can pursue. We haven’t pulled the trigger on anything significant yet because we just don’t know what we are aiming at.

So getting back to rare earths, kind of an interesting story. We do use some rare earths and electrical motors in some of our products. One of our product lines which we don’t talk a whole lot about but we are actually pretty prominent in worldwide is the high end aircraft seat market. So we don’t fly this way, maybe you do. But when you sit in a first class seat or a business class and you want to recline or you want to lie flat or you want to put up the divider to separate yourself from your pesky neighbor, There are little motors that do all that stuff.

There are permanent magnets in those motors. And we source many of those from China like the rest of the world. And that’s becoming problematic. There’s been a little bit of a breakthrough in the logjam, so we’re hoping that the situation kind of resolves itself. But it turns out as part of our investigation we found that there are other potential materials that we can use other than rare earths that would satisfy this purpose.

The big difference is that they have a narrower operating range. But when you think about a motor in a high end aircraft seat, how wide a temperature range do you really need for that machine to operate? And it turns out that the comfort range for the permanent magnet far exceeds the comfort range of the individual who is sitting in the seat. We are looking at redesign options and requalification options to get away from the rare earth situation. At this point, between the relaxation of the rules and the potential redesigns we can go to, we are not feeling too stressed about that.

FLRAA. Yeah. It is a big deal. You can look it up. V two eighty or FLRAA.

It is the Army’s planned replacement for the Sikorsky Blackhawk. It’s in development right now. We’ve got a $90,000,000 development program that we’re about maybe 20% through that will carry us through 2026 and probably a little bit into 2027. The aircraft is a tilt rotor. So, it’s like the V22 if you know what that is.

It takes off with two rotors vertically and then transitions to horizontal flight. And it’s going to be a big deal. Unofficially or semi officially, the Army feels like that aircraft is critical for a potential conflict in Southeast Asia where there are big bodies of water and you got to move people and equipment into crowded territory over big stretches of water. They are trying to accelerate the program. And if you look and can find on the Bell website the Flara page and they talk about what they call team Flara.

There are a bunch of very big names in the program. It’s kind of a who’s who. And the neat thing about it is they list them alphabetically. So being astronics, we’re like first on the list. It’s marketing brilliance from many years ago.

But it’s going to be a big program for us. Take a potential of 2,000 airplanes multiply it by $1,000,000 an airplane and it’s hard to overstate the impact it’s going to have on our business. So the question has to do with Boeing production rates and our presentation does not adequately address this. So thank you for bringing it up. It’s a great tailwind for us.

You’re right. July went down. July they moved from Seattle to Charleston and for a while there had trouble building airplanes. And now it’s all seemingly coming back together. They are shipping at 38 a month right now.

My understanding is that they are going to be asking the FAA for permission to go up to 42 over the next couple months. And they recently issued a skyline which is their production kind of ramp over years where they want to get to 82 a month. It’s a big step. And it’s a very important program for us. We put roughly on average about $200,000 per airplane.

But it’s not the only piece of good news. Their seven eighty seven is also on a ramp. They are low mid single digits right now, planning to get to double digits. And you asked about Boeing, but the same picture holds true at Airbus. Airbus production is just as important to us as Boeing production.

We put more product on Boeing narrow bodies but Airbus builds a lot more narrow bodies. And they’re talking about going from mid fifties up to eighties. And the A350 which is their wide body offering at this point is also kind of low single digits, mid single digits planning to get to double digits over the next year or two. So, it’s a huge shot in the arm. And another thing that wasn’t necessarily heavily featured in our presentation is the marginal contribution of a revenue dollar for us is 40% to 50% to margins.

So, as revenue ramps, we have a lot of upside in terms of margin potential. It’s a good tailwind for us.

Operator: Is supply chain built out for that production?

Peter Gunderman, Chairman, President, and CEO, Astronics: Supply chain question. That’s more of a Boeing question than an Astronics question. If they want it, we’ll ship it. We’re not going to have a problem. But yeah, there are well known supply chain problems.

Engines are a problem. Interiors are somewhat of a problem. But in general, I think Boeing and Airbus are experiencing the same things that we have which is the supply chain is in a heck of a lot better shape today. In fact, I would dare say it’s about where it was before the pandemic started. So it’s not quite a non issue for us, but it’s pretty close.

And I think that’s generally true of manufacturers around the world. I’ve got a red light and a negative fifteen seconds on my clock. So does that mean that we’re done? Okay. Thank you very much for your

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