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Image source: The Motley Fool. Tuesday, Aug. 11, 2026 at 4:45 p.m. ET Chairman, President and Chief Executive Officer - Peter Gundermann Chief Financial Officer - Nancy Hedges Investor Relations - Deborah Pawlowski Operator: Greetings, and welcome to the Astronics Corporation Second Quarter Fiscal Year 2026 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Deborah Pawlowski, Investor Relations for ATRO. Please go ahead. Deborah Pawlowski: Thanks, Joe, and good afternoon, everyone. We certainly appreciate your time today and your interest in Astronics. On the call with me here are Peter Gundermann, our Chairman, President and CEO; and Nancy Hedges, our Chief Financial Officer. You should have a copy of our second quarter 2026 financial results, which crossed the wires after the market closed today. If you do not have the release, you can find it on our website at astronics.com. As you are likely aware, we may make some forward-looking statements during the formal discussion and the Q&A session of this conference call. These statements apply to future events that are subject to risks and uncertainties as well as other factors that could cause actual results to differ materially from what is stated here today. These risks and uncertainties and other factors are provided in the earnings release as well as with other documents filed with the Securities and Exchange Commission. You can find those documents on our website as well as at sec.gov. During today's call, we will have some non-GAAP measures that we'll discuss, which we believe will be useful in evaluating our performance. You should not consider the presentation of this additional information in isolation or as a substitute for GAAP results. We have provided reconciliations of non-GAAP measures with comparable GAAP measures in the tables that accompany today's release. So with that, I will turn it over to Pete to begin. Peter Gundermann: Thanks, Debbie, and hello, everybody, and welcome to the call. We're here to talk about our second quarter results and our outlook for the remainder of 2026. Nancy and I will do our usual back and forth and then open up the lines for questions. In summary, the second quarter was very strong for Astronics. We set records all over the place for revenue, for operating profit, for bookings, for backlog and more. Our adjusted EBITDA was just shy of 20% of sales, which is a modern day high. It was a very good quarter from every angle, and we feel good about it. It also puts us in a great position as we enter the second half of the year. We have strong momentum and are raising our revenue guidance to $1.02 billion to $1.04 billion. We'll talk more about this at the end of our presentation, but we are excited to finally be crossing the $1 billion threshold. Nancy will talk through Q2 numbers in due course. But first, I want to focus a little on margins. We've been working on our margin profile heavily, and we have made significant progress. Our adjusted EBITDA margin, for example, was in the low to mid-teens just 1 year ago in the first half of 2025 and practically all of 2024 for that matter, and now we are pushing 20%. There are a number of levers that we have used to accomplish this, and I'll discuss them one by one. The first lever and arguably the most important is the strong market demand that we see for our products as evidenced by the bookings trends we have been experiencing. A few years ago, at the height of the pandemic, we averaged bookings of $100 million to $150 million per quarter. Since then, our bookings level has risen steadily, culminating in our Q2 bookings of $306 million, which is an all-time high. Indeed, over the last 4 quarters, our sequential booking totals have been in order, $210 million, $257 million, $290 million and now $306 million. Bookings can be lumpy, of course, and we can't count on that type of progression indefinitely, but the overall trend is prominent and unmistakable. In our first quarter call, I discussed a range of factors driving our bookings. I'm not going to go into a lot of detail here to repeat all that. But to recap, they were: first, increasing aircraft production rates; second, airline passengers desire to be entertained and connected at all times; third, the growth of our flight critical power franchise for smaller and emerging aircraft; fourth, the trend towards high-end aircraft seating that uses our seat motion systems; and fifth, the expected growth in our test business based on the U.S. Army radio test program that we have been talking about for some time. Interested listeners who want to review that discussion to check out the transcript that's available on our website. Higher bookings, of course, leads to higher shipments and higher shipments leads to better overhead absorption and increased profitability. I have said many times in recent years that we were not sized to be profitable at the reduced revenue levels we saw during the pandemic. Now we are growing into our cost structure and our income statement is responding well. In the second quarter, there were a couple of bookings that deserve special mention. The first was a $27 million booking for FLRAA MV-75 development work, which is a follow-on to a $57 million order we received back in 2025. We expect another relatively small order in early 2027, which should carry us to completion of the engineering development phase of the program. The MV-75 is the U.S. Army's planned replacement for the Black Hawk helicopter and promises to be the largest military program our company has ever seen. I don't intend to go into more details on it now, but I recommend that interested listeners who are unfamiliar do some research and look that one up. The MV-75 will be a big deal in our future. The other significant booking in the quarter was the long-awaited production go ahead for our radio test program with the U.S. Army called 4549/T. The order was for $45 million and will cover deliveries over the next 18 months. We expect similar orders annually for the next 4 to 5 years under an IDIQ award we received back in 2024. The production award was not a significant factor to our Q2 results, but will begin to be so as production ramps up in the second half of this year. When it is in full swing, we expect margins in our test business to be comparable with what we get from our Aerospace segment today. The second margin lever we have been using is pricing. About 1/3 of our volume involves deliveries that are tied to long-term contracts, typically with terms of 3 to 5 years. On these contracts, our pricing suffered when inflation picked up during the pandemic. Inflation has since cooled down generally, and we have been able to reprice most of the affected long-term contracts, which has certainly benefited our overall profitability. We estimate that we are still waiting to reprice about 1/4 of our long-term contracts, which will come due over the next 12 to 18 months. The majority of our business is shorter term in nature, and we have learned to price to value more than to cost, which has also driven increased profitability. We believe that the cumulative effect of pricing actions has been and will continue to be an important aspect of our margin improvement journey. The third lever for discussion is organizational efficiency. And the point here is that we have suffered very high employee turnover during the pandemic at times approaching 20% in a year. High turnover meant that we had a workforce that was relatively inexperienced in their jobs, and that in turn hurt our efficiency and our quality. Today, our employee turnover rate has dropped to about half of what it was. And in many of our locations, it's well below 10%. As our workforce has become more stable, it has also become more effective and competent. I'm describing the well-known learning curve principle. And while it is hard to measure, we certainly see our workforce becoming more efficient and predictable, which helps deliver better margins. The final lever with respect to margins that I want to discuss is structural to our organization, which some might call simplification or portfolio shaping, which we have done a fair amount of in recent years. As evidenced, we have shut down and consolidated 7 production sites in recent years and discontinued or limited a number of product lines and/or businesses. This activity helps us stay focused on the product lines and customers that matter to us the most. And there's more to do on this front. As our business accelerates and we continue to evaluate our market goals and competitive positioning, we will work to make sure our organization is structured appropriately to align with those goals. So those are the 4 levers that are driving our improving margins, volume, pricing, efficiency and simplification. But what's exciting is that each of these levers has room to run. In other words, the actions we have taken continue to be active, and we expect will lead to further margin improvement in the coming periods. So we are not at the end of our margin journey at all, but methodically moving along the process. Finally, before I turn it over to Nancy, there are a couple of other topics from our second quarter worthy of discussion. The first is the B share distribution that we did during the quarter, announced on June 1 and executed on June 29. It was a 20% distribution of B shares to all shareholders of record and was intended to reward shareholders and encourage long-term interest in the company. B shares have been an important part of our capital structure since the early 1980s. And because they don't trade, but are convertible to common at any time, the share count drops over time as investors transition their holdings. The recent distribution was to replenish and rebalance the share count to historical norms. We have done approximately 20 share distributions over the years, about half of which have involved B shares. The final issue on my list is the decision by the U.K. Court of Appeals in our long-running patent dispute with Lufthansa Technik. This is a dispute that has been winding its way or maybe I should say, grinding its way through the courts in the U.S., U.K., France and Germany since 2010. We won in the U.S. and the matter there is closed and final. The U.K. was the second jurisdiction to hear the case, and we feel good about where that is headed. The damages case heard in late 2025 went our way, and this most recent ruling altered the original ruling for the better. A final appeal to the U.K. Supreme Court is possible if the court agrees to hear it, which at this point is uncertain. There will be an appeal in France in October of a lower court's ruling in validating the subject patent, while Germany waits in the background. So the battle continues, but it is exciting to think that with a little luck, we may have line of sight to conclusion of the matter in the U.S., the U.K., if there's no appeal to the Supreme Court and France, if the lower court's nullification of the patent is upheld. All this could happen by the end of the year. With all that being said, I'll turn it over to Nancy now to review second quarter accounting results. Nancy? Nancy Hedges: Thanks, Pete, and good afternoon, everyone. I'll walk through our second quarter results in more detail, provide color on our product lines and segments, review cash flow and the balance sheet and then close with our outlook. As Pete noted, the second quarter was an important proving ground for the profitability of our operating model and the organization delivered. Sales reached a record $260 million, up 27% from the prior year period. Higher volume, improving productivity and continued execution across the organization drove significant margin expansion, record operating income and an adjusted EBITDA margin of 19.8%. We also delivered record bookings and backlog, providing strong visibility as we move through the balance of the year. Gross profit increased to $86.9 million or 33.4% of sales compared with $52.8 million or 25.8% of sales in the prior year period. The 760 basis point expansion reflects higher volume, improved productivity and a $2 million IEEPA tariff refund recognized during the quarter. The refund contributed about 70 basis points of margin and somewhat offset what we now view as an ongoing tariff run rate at current volumes of about $3 million to $4 million per quarter prior to any mitigation. Also for context, the prior year quarter was adversely impacted by a $5.8 million charge associated with aerospace simplification initiatives and a $6.9 million impact from unfavorable revisions to estimated cost to complete certain long-term mass transit contracts in our Test Systems segment. R&D expense was $10.9 million, down modestly from $11.6 million in the prior year quarter. We continue to expect R&D to run roughly about $10 million to $12 million per quarter. However, it can fluctuate based on project and customer activity. SG&A expense was $35.6 million, down about $900,000 year-over-year and declined to 13.7% of sales from 17.8%. Lower litigation-related expense was largely offset by higher wages and benefits, higher incentive compensation costs associated with improved profitability and incremental expenses related to BMA, which we acquired last October. Income from operations was a record $40.5 million or 15.6% of sales. Given the factors affecting last year's quarter, the comparison on a GAAP basis isn't truly meaningful. Looking sequentially, though, operating income increased $13.2 million over our first quarter this year, driven by the $29 million increase in revenue. I'll note, though, that the second quarter did have the benefit of the $2 million tariff refund. On an adjusted basis, operating income was $43.2 million and adjusted operating margin was 16.6%, which compares with 8.9% in the prior year period. An approximate $800,000 or 24.7% decline in interest expense reflects the lower interest rates following our September 2025 refinancing activities. Tax expense was $2.8 million in the quarter, reflecting the benefit of a partial reversal of our valuation allowance as well as the expected expensing of R&D costs that are -- that's now permitted under the new tax law. Based on our current outlook, we expect to release the portion of our valuation allowance associated with deferred tax assets that are expected to be realized from our 2026 income. The benefit of that release will continue to be reflected in normal course during the second half of 2026. As we move through the third and fourth quarters, we'll also continue to evaluate the potential for an additional valuation allowance release of approximately $40 million to $50 million. Any such release would be recognized in the period when we have objectively verifiable evidence of sufficient future taxable income beyond 2026 to support realization of those deferred tax assets. Our strong performance in the quarter dropped through to the bottom line with net income of $35.1 million or $0.75 per diluted share and adjusted net income of $32.6 million or approximately $0.70 per diluted share. The weighted average share count for all periods reflect the 20% Class B stock distribution that was done in June. Adjusted EBITDA was $51.5 million, more than double the $25.4 million reported in the prior year quarter and up 36% or $13.6 million over the trailing first quarter. Adjusted EBITDA margin also expanded 340 basis points compared with the first quarter to 19.8% of sales. This performance reflects the operating leverage in our model as volume grows, along with the ongoing benefits of our productivity and simplification efforts. Turning to Aerospace. Segment sales were a record $237.3 million, an increase of $43.7 million or 22.6% from the prior year period. We had growth across all our markets, which include commercial transport, military aircraft and general aviation. I'll review our major product lines, starting with our largest product category, in-flight entertainment and connectivity, which had sales growth of 19% to $126 million. Growth was driven by continued demand for our connectivity and passenger power products, including strength in our commercial transport and VVIP applications. Planning and Safety sales increased 5.5% to $59.2 million. This product line continued to grow on solid underlying demand from improving aircraft build rates. Flight critical electrical power sales increased 49.4% to $23.7 million, reflecting stronger demand for airframe power products, particularly in the military aircraft market. With the finalization of the engineering contracts for the MV-75 FLRAA program, we're expecting to achieve approximately $35 million in revenue on that program in 2026. Heat Motion sales increased $12 million to $22.2 million. The increase reflects strong market demand as well as the $5.9 million contribution from the BMA acquisition. Aerospace segment operating profit was $48.3 million or 20.3% of sales, measurably improved over $18 million or 9.3% of sales in the prior year quarter, which granted did have a lot of noise. The improvement in profitability reflects leverage on higher volume, improving production efficiencies, the $2 million tariff refund, lower litigation-related expense and the absence of current year simplification charges. The strong operating leverage inherent in the Aerospace business is best analyzed sequentially, where operating leverage, excluding the tariff refund benefit was 47%. On an adjusted basis, Aerospace operating profit was $50.7 million and adjusted Aerospace operating margin was 21.4%, an increase of 510 basis points from the prior year period. Aerospace bookings were $243.1 million for a book-to-bill ratio of 1.02. During the quarter, as Pete mentioned, the contract for the current engineering phase of the MV-75 FLRAA program was finalized, resulting in a $27.4 million booking. Aerospace backlog ended with the quarter at a record $657.2 million. Turning to Tech Systems. Sales were $22.7 million, up $11.6 million from the prior year period. The comparison also reflects the $6.4 million reduction in the prior year revenue, resulting from revisions to estimated cost to complete certain long-term mass transit contracts. Segment operating profit was $600,000 compared with an operating loss last year. Current quarter profitability was impacted by approximately $4.1 million of 0 margin revenue related primarily to raw material purchases for the U.S. Army and U.S. Marine Corps radio test programs. Because those programs are revenue recognition over time, we recognize revenue as costs are incurred rather than upon shipment. Likewise, margin on that raw material-related revenue will be recognized as production progresses through the remainder of '26. While ramping, the program won't necessarily demonstrate the solid margin profile of the program, but should begin to be realized as we exit the year. Test Systems bookings were $63.1 million for a book-to-bill ratio of 2.78. That included the $44.7 million order from the U.S. Army initiating full rate production for the 4549 program, which is expected to support deliveries over the next 18 months. Test Systems backlog ended the quarter at $123.3 million. Turning to cash flow and the balance sheet. We generated $30.1 million in cash from operations during the second quarter, reflecting higher cash earnings, partially offset by higher working capital requirements, including inventory to support our expected growth. Capital expenditures were $5.7 million in the quarter and $16.9 million year-to-date. We continue to make the necessary catch-up investments in the business, including the consolidation of operations and capacity improvements at our Seattle facility. We continue to expect full year CapEx to be in the range of $40 million to $45 million with the Seattle consolidation, which is concluding here in the third quarter. We expect to be free cash flow positive for the remainder of the year. Long-term debt decreased by $24.1 million from year-end to $310.3 million at the end of the quarter. Our capital priorities are internal investments and debt reduction at this time. Although acquisitions, if the right fit and price are not out of the question. We believe we have the financial flexibility with our available liquidity, which was $253.2 million at quarter end. We also continue to advance our global ERP implementation. Through the first half of the year, we incurred approximately $700,000 in incremental operating expense and capitalized approximately $4 million in costs related to the project. Visibility on our spending on the project is pretty straightforward. You can find the capitalized amount on the cash flow statement under cloud computing implementation costs, and we adjust out the external expenses from adjusted EBITDA. Turning to our outlook. I'll briefly summarize what we expect for our third quarter. We expect third quarter sales to be in the range of $265 million to $275 million, which would represent another quarterly sales record. We expect fourth quarter revenue rate to improve modestly from there. Regarding margins, the second quarter demonstrated progress toward our high teens adjusted operating margins. We'll benefit at some point from the estimated $6 million to $8 million of future IEEPA tariff refunds, though timing of any receipts remains uncertain. Continued volume leverage and the addition of the U.S. Army radio test program should contribute while mix can add some variability as well. We're pleased with the progress made during the first half of the year. Our focus remains on executing against the opportunities in front of us, supporting growth while maintaining the discipline necessary to sustain strong profitability and cash generation. And with that, I'll turn it back to Pete for final comments. Peter Gundermann: Thanks, Nancy. I'd just like to reiterate what Nancy said about the second half of 2026. We're pleased with our second quarter results and with the first half for that matter, and we are entering the second half of the year with lots of momentum. Our forecast has us crossing the $1 billion threshold for the first time, and we look forward to living on the other side of that line. And that ends our prepared remarks. Joe, we can open it up for questions now. Operator: [Operator Instructions] And our first question comes from the line of Greg Palm with Craig-Hallum. Jackson Schroeder: This is Jackson Schroeder on for Greg Palm. First off, congrats on the quarter, more impressive results. I just wanted to see if you could start out on what really surprised you in the quarter relative to when we were going into it, whether that be end markets, customers, I mean, whatever segments you want to say, but we really just surprised in the quarter. Peter Gundermann: I don't know if there were any real surprises. We went in with a certain forecast. And actually, what has become kind of routine is we beat our internal forecast. I think I didn't do this in preparation for this call. But I think if we go back and look at like the last 6 quarters or so, every quarter, we come in right at the top of the range or a little bit beyond it. So I wasn't very surprised by that at all, nor was I surprised by the 2 big bookings that we talked about. We've been anticipating the radio test booking for the U.S. Army forever. I mean we thought we were going to get that last fall and then a bunch of things happened like the government shutdown, so on and so forth. But momentum was building, and we were trying to lean into that a little bit in our first quarter call and it actually came up like, I think, the next day or pretty close to it. And then the -- similarly with the FLRAA MV-75, that program is getting a lot of attention in our company. It's going very well, and we have a very constructive working relationship with Bell. We were expecting, though that, that would happen a little bit sooner than it did. So we -- again, big orders tend to take longer than you would think originally. But beyond that, I can't say there was anything that was a real big surprise. I mean, like I spelled out in my little speech here, higher volume is a major driver for higher margins. And we've been seeing our volume increase. And as our volume increases, our margins increase. So it's a good virtuous cycle there. Nancy, I don't know if there's any surprises you'd like to point to. Nancy Hedges: No, I agree with that. It's just general strength in the industry. Jackson Schroeder: Perfect. And then maybe if you could talk more on like these emerging aircraft trends, thinking eVTOLs, some of the drones and other opportunities in defense. How are you guys kind of playing into that? Is there anything from like a product development perspective you can touch on and where you kind of see for demand in there? Peter Gundermann: Yes. I don't know if there's much we can say that we haven't already said. We are quite involved and invested in the eVTOL market and some of our technologies, especially on the power generation side, play very nicely in the drone unmanned or autonomous aircraft side. Those programs are progressing. eVTOL aircraft are moving closer to certification and actually flying missions. So we're excited about those things. We do not have a big commitment to those in our 2026 forecast. It's more of an if come, I would say, in 2027. So we're going to start our 2027 ground-up planning over the next couple of months. And I think it will be -- there'll be a bigger role for those programs in 2027. But at this point, it's still pretty preliminary, and there's not much more to say than what I just said. Operator: The next question comes from the line of Jon Tanwanteng with CJS Securities. Will Gildea: This is Will on for Jon. How should we think about your Test segment margins as you ramp up production for the Army radio test business over the next 2 to 3 quarters? Peter Gundermann: Well, I'm pretty optimistic about it. So I think you should be, too. It's a really well-priced program, and we're going to get into it as quickly as we can. However, we're going to walk before we run. So the exact pace of implementation is a little bit hard to predict. I think it's safe to say that as we exit the fourth quarter, we'll be at full run rate production. And that -- once we get into full run rate production, that $44 million order should be -- should last about a year of effort. So depending on how quickly we can accelerate and get going in the third quarter here and the fourth quarter, I expect there will be good it will reflect well in our financials. Once we're in full rate production, we are expecting that the margin profile in our Test business should start to approach what we routinely get out of our aerospace business, maybe not up at the 20% EBITDA level, but pretty close. So we'll know for sure as that program ramps, and we'll be sure to talk about it on these calls. I think by the time the fourth quarter is done and we're moving into the first quarter, we'll have a really good idea of where that's going to end up. Nancy, would you say anything different? Nancy Hedges: Yes, I would agree with that. Will Gildea: That is very helpful. And just one more for me. Can you talk about the transition to LEO satellite connectivity and how you're seeing that play out in your markets and opportunity set? Peter Gundermann: I'm optimistic about the transition to LEO. There's not much I can say about it today, but we are working the situation pretty hard. The short-term impact, though, is disruption for some of our GEO customers and GEO programs. So it's probably worth pointing out that parts of our business, I mean, we're doing pretty well overall, but there certainly are parts of our business that are a little bit under the weather and the GEO part of our business is one of those. Think of it as maybe a $60 million piece of business at this point on an annualized basis. But I think the opportunity that's out there for LEO for us more than offsets the short-term pain that the GEO market is experiencing. So not much official we can say today, but we are working it hard, and we're optimistic about the prospects. Operator: The next question comes from the line of Gautam Khanna with TD Cowen. Gautam Khanna: I had a couple of questions. First, curious on your pricing comment. How much of that has already manifested in -- of the stuff you repriced in the Q2 numbers? And should we think that in the second half, we're going to have higher pricing than what was experienced in the second quarter? And then I have a follow-up. Peter Gundermann: I would say not materially, but I think what you see now is what we're going to get with respect to pricing. The answer to your first question is a little bit hard to quantify. But I guess our feeling is that we're like 75% or 80% of the way through the big price adjustment journey that we were on as a result of the inflation that hit during the pandemic. But there is still more to go. And over the next 12 to 18 months, the remaining part of our long-term contracts should be renegotiated. That will be helpful. And we do have a fair amount of our business that is more short-term oriented. So there is pricing flexibility there in the sense that you don't get locked in long-term pricing. So if we get a disruption on the cost side, certainly, we can adjust there more quickly, whereas the long-term contracts are more difficult to manage in a changing environment. So I feel pretty good about where we are. A year ago, it was much more of a challenge. Two years ago, it was a real problem. I think we feel like we're on the other side of the -- near the end of the tunnel with respect to pricing now. Gautam Khanna: That's helpful. And then just curious about your expectations for second half mix. if anything? I know you called out the $2 million refund, but anything else in kind of the margin expectations in the second half that you could give us and then what it is going to be? Peter Gundermann: And the big thing there is the radio test program for the U.S. Army that we were talking about, just layering in that in the second half should pretty significantly change the margin profile in our test business, which has been hurting us more than helping us over the last few years. So that's the big mix issue. There will be other puts and takes in the aerospace part of our business. But at this point, I don't feel like there's anything that's too noteworthy that we know for sure that we can talk about. Gautam Khanna: Okay. And last one on MV-75. How much visibility do you have with Textron the prime on what you got because I know they have the funding concern if it's not done by September 30. But just do you guys have orders beyond September 30 to work on it? Peter Gundermann: We do -- we have orders, and we do work very closely with Bell. I can't say that we know anything about the funding status that's not generally known out there in the world. They've done a pretty good job, in my view, of being transparent to the extent they can about the situation. But they've been covering us. And so we feel good about that. We also recognize that our portion of the development cost of this program is probably pretty small compared to some other companies. So maybe we're not involved in some of the discussions that other companies are. I can't tell you that for sure. But we're -- overall, we remain highly enthusiastic about that program. We feel like our part of it is going very well, and we get supported well by Bell. So it's all good. Operator: [Operator Instructions] The next question comes from the line of Alexandra Mandery with Truist Securities. Alexandra Eleni Mandery: Great results. So how is the acquisition of BMA performed relative to your expectations? And what is your appetite for M&A going forward? Are there any capabilities you look to add or geographies to expand into or increase content in? Peter Gundermann: We're pretty pleased with the BMA acquisition so far. It's a smaller operation, and it was part of a private company. So bringing it up to public company standards in terms of accounting and the U.S. GAAP rules are quite different than the company is located in Germany. So it's used to -- private company German accounting. So there's some transition there. It also had a parent that was involved in the German automotive industry primarily, but also some other industrial areas, and that's been a difficult environment for a while. So they were a little bit capital starved. We're fixing that. We think they have good technology, good products, good relationships with customers. They're not as profitable as the rest of our aerospace business, so we're going to work on that. That's another part of the long-term contracting challenge with pricing, frankly. But I'd say, overall, it's going pretty well. We have it reporting through our French operation. Those 2 companies were competitors. Now they're learning to work together. And that seems to be going pretty well, too, both our French team at PGA and Chateauroux and the BMA group at Lake Constance want to make that work. So we're encouraged by how that process is playing out also. As for your second question, we have done a number of acquisitions over the years. We've been pretty quiet on acquisitions over the last few years during the pandemic because our balance sheet, frankly, wouldn't allow us to do much, and there wasn't much to do. I mean there wasn't a whole lot of movement in the commercial aerospace market in terms of M&A activity during that period of time. We think our balance sheet is largely fixed now, and we think that the M&A market is opening up. So we're seeing a steady flow of opportunities. And we are looking, but we are also mindful that we have just a great opportunity set ahead of us in terms of generic internal growth. So our first priority is definitely to execute on those programs. If M&A comes up, we'll take a look. I think we're capable and qualified to do that at this point. But that isn't -- we're not a company that's going to depend on M&A for a big part of our growth opportunity going forward. That's more -- I would call that more incidental if and when it happens. Does that make sense? Alexandra Eleni Mandery: No, totally. And I appreciate that color. And I guess one follow-up. So you mentioned labor has improved and there are continued opportunities for improvement. What are the efforts you've taken to retain labor thus far and finding new labor? Peter Gundermann: Alex, I don't know if it's you or it's me, but that was really choppy, and I couldn't really hear you. Alexandra Eleni Mandery: Hopefully, you can hear me a bit better now. Just wanted to see if you had any color on the efforts you've taken to retain labor and finding new labor. Joe, is there any way you can clear her line more? Nancy Hedges: Look Joe, is there any way you can clear her line more. Operator: Not sure about it, Alexandra's question was is there any way you retain labor or? Nancy Hedges: Okay. Peter Gundermann: Now, you're choppy, too, Joe. So maybe it's on our line. Operator: Alexandra, can you repeat your question one more time? Alexandra Eleni Mandery: Yes. I just wanted to see if you guys had any color on the efforts you've taken to retain labor thus far and finding new labor. Peter Gundermann: We're going to try to call in our cell phone momentarily . See you in Texas. Operator: Okay. Ladies and gentleman, please stand as we are trying to fix this technical issue. Thank you. Okay, everybody. The speakers are back in. Alexandra, if you're still there, can you restate your question, please? Alexandra Eleni Mandery: Hopefully, you guys can hear me now. I just wanted to see if you had any color on the efforts you've taken to retain labor thus far and finding new labor. Peter Gundermann: Sure. And we can hear you, Alex. Sorry about that. Yes, it's interesting. as kind of an armchair economist. We have -- we're a smaller company, but we run operations really all across our country, Seattle, L.A., Florida, New Hampshire, New York, Chicago. And it's interesting that there are pressures in different places at different times. But for the most part, they all -- the markets all kind of moved together. So during the great resignation during the pandemic, we had trouble hiring everywhere. And today, the labor market has, from my perspective, kind of bounced back and people have become much more available, including a lot of people who left who decided maybe the grass wasn't greener on the other side and are interested in coming back. So at this point, we don't feel that hiring is a major issue. There are retention challenges in the sense that especially for certain production-related jobs, if you have 10 openings, you might have to hire 14 people to get 10 that stick. So our turnover metrics still don't look the way they did prior to the pandemic. But we went from 3,000 people down to 2,200. And as you climb back up to 3,000, instead of hiring 800, you got to hire, I don't know, 1,200 or something to make that work. So it's never easy. It's always a challenge, but I would say that we feel much better about labor availability than we did at any other time during the last 3 or 4 years. Again, Nancy, would you change that at all? Nancy Hedges: No, I wouldn't. Peter Gundermann: Okay. That's what I like about Nancy. She very rarely changes what I say. So does that answer your question, Alex? Alexandra Eleni Mandery: Yes. Perfect. Operator: Thank you. Ladies and gentlemen, this concludes question-and-answer session, and this also concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation. Before you buy stock in Astronics, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Astronics wasn’t one of them. The 10 stocks that made the cut are built for long-term growth and could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $409,970!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,381,040!* That performance is why people listen. With a track record of beating the S&P 500 by nearly 5x, Stock Advisor offers a distinct advantage. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built for the long haul. See the 10 stocks » *Stock Advisor returns as of August 18, 2026. This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has positions in and recommends Astronics. The Motley Fool has a disclosure policy. Astronics (ATRO) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool

Astronics’ second quarter performance was marked by robust demand across its aerospace and defense end markets, resulting in double-digit revenue growth and notable margin expansion. Management attributed the strong results to higher volumes, improved organizational efficiency, and pricing actions, particularly in response to rising aircraft production and ongoing recovery in air travel. CEO Peter Gundermann emphasized that “higher bookings, of course, leads to higher shipments and higher shipments leads to better overhead absorption and increased profitability.” The company also saw record backlog levels, driven by large new orders in both its aerospace and test systems businesses. Is now the time to buy ATRO? Find out in our full research report (it’s free). Revenue: $260 million vs analyst estimates of $245.3 million (27% year-on-year growth, 6% beat) Adjusted EPS: $0.70 vs analyst estimates of $0.61 (15.1% beat) Adjusted EBITDA: $51.55 million vs analyst estimates of $43.6 million (19.8% margin, 18.2% beat) The company lifted its revenue guidance for the full year to $1.03 billion at the midpoint from $985 million, a 4.6% increase Operating Margin: 14.8%, up from 7.1% in the same quarter last year Backlog: $780.6 million at quarter end, up 20.9% year on year Market Capitalization: $4.00 billion While we enjoy listening to the management’s commentary, our favorite part of earnings calls is the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention. Jackson Schroeder (Craig-Hallum): Asked about surprise factors in the quarter. CEO Peter Gundermann replied that results were in line with internal expectations, with strong volume and bookings being anticipated. Jackson Schroeder (Craig-Hallum): Inquired about Astronics' position in eVTOL and drone markets. Gundermann explained that involvement is significant on the power generation side, but material revenue contributions are expected more in 2027 than 2026. Will Gildea (CJS Securities): Asked about margin trajectory for the Test segment as Army radio test production ramps. Gundermann projected margins approaching those of the aerospace business as the program reaches full rate production in late 2026. Will Gildea (CJS Securities): Sought insight on the impact of LEO satellite connectivity transition. Gundermann described near-term disruption in legacy GEO business but expressed optimism about larger LEO market opportunities. Alexandra Eleni Mandery (Truist Securities): Questioned progress of the BMA acquisition and approach to M&A. Gundermann said BMA integration is progressing, with future M&A viewed as opportunistic given the strong organic growth pipeline. In the upcoming quarters, the StockStory team will closely monitor (1) the pace of backlog conversion into revenue, especially for the MV-75 and U.S. Army radio test programs; (2) further progress on contract repricing and realization of anticipated margin improvements; and (3) early signs of revenue contribution from new aerospace technologies, including eVTOL and LEO satellite solutions. Developments in the company’s long-standing patent litigation and tariff environment will also be key watchpoints. Astronics currently trades at $92.73, up from $74.91 just before the earnings. Is there an opportunity in the stock? The answer lies in our full research report (it’s free for active Edge members). ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren’t just high-quality businesses. Something is happening with them right now. Elite fundamentals meet near-term momentum — both boxes checked at the same time. Find out which stocks our AI platform is flagging this week. See this week’s Strong Momentum stocks — FREE. Get Our Strong Momentum Stocks for Free HERE. Stocks that have made our list include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,552% between June 2020 and June 2025). Find your next big winner with StockStory today.

Earnings results often indicate what direction a company will take in the months ahead. With Q2 behind us, let’s have a look at Astronics (NASDAQ:ATRO) and its peers. Aerospace companies often possess technical expertise and have made significant capital investments to produce complex products. It is an industry where innovation is important, and lately, emissions and automation are in focus, so companies that boast advances in these areas can take market share. On the other hand, demand for aerospace products can ebb and flow with economic cycles and geopolitical tensions, which can be particularly painful for companies with high fixed costs. The 14 aerospace stocks we track reported a strong Q2. As a group, revenues beat analysts’ consensus estimates by 1.7% while next quarter’s revenue guidance was 5.5% above. In light of this news, share prices of the companies have held steady as they are up 2.9% on average since the latest earnings results. Integrating power outlets into many Boeing aircraft, Astronics (NASDAQ:ATRO) is a provider of technologies and services to the global aerospace, defense, and electronics industries. Astronics reported revenues of $260 million, up 27% year on year. This print exceeded analysts’ expectations by 6%. Overall, it was a stunning quarter for the company with an impressive beat of analysts’ EBITDA estimates and full-year revenue guidance exceeding analysts’ expectations. Astronics achieved the highest full-year guidance raise among its peers. Unsurprisingly, the stock is up 20.5% since reporting and currently trades at $90.27. Read why we think that Astronics is one of the best aerospace stocks, our full report is free. With its materials flying in nearly every commercial and military aircraft in service today, ATI (NYSE:ATI) produces highly specialized materials and components for aerospace, defense, medical, and energy applications using advanced metallurgy and manufacturing processes. ATI reported revenues of $1.26 billion, up 10.6% year on year, outperforming analysts’ expectations by 3.4%. The business had a stunning quarter with an impressive beat of analysts’ EBITDA estimates and a beat of analysts’ EPS estimates. The market seems happy with the results as the stock is up 12.4% since reporting. It currently trades at $230.50. Is now the time to buy ATI? Access our full analysis of the earnings results here, it’s free. Providing a one-stop shop that integrates multiple services and product offerings, AerSale (NASDAQ:ASLE) delivers full-service support to mid-life commercial aircraft. AerSale reported revenues of $70.93 million, down 33.9% year on year, falling short of analysts’ expectations by 12.7%. It was a disappointing quarter as it posted a significant miss of analysts’ EBITDA estimates and a significant miss of analysts’ EPS estimates. AerSale delivered the weakest performance against analyst estimates and slowest revenue growth in the group. As expected, the stock is down 10.9% since the results and currently trades at $5.62. Read our full analysis of AerSale’s results here. The first third-party MRO approved by the FAA for Safety Management System Requirements, AAR (NYSE:AIR) is a provider of aircraft maintenance services AAR reported revenues of $928 million, up 26.1% year on year. This result topped analysts’ expectations by 3.9%. It was an exceptional quarter as it also recorded revenue guidance for next quarter beating analysts’ expectations and an impressive beat of analysts’ EBITDA estimates. The stock is up 5.3% since reporting and currently trades at $148.95. Read our full, actionable report on AAR here, it’s free. Inventing the first forged aluminum truck wheel, Howmet (NYSE:HWM) specializes in lightweight metals engineering and manufacturing multi-material components used in vehicles. Howmet reported revenues of $2.55 billion, up 24.1% year on year. This number surpassed analysts’ expectations by 4.9%. Overall, it was an exceptional quarter as it also produced full-year EBITDA guidance exceeding analysts’ expectations and full-year revenue guidance exceeding analysts’ expectations. Howmet had the weakest guidance update among its peers. The stock is down 2.9% since reporting and currently trades at $282.95. Read our full, actionable report on Howmet here, it’s free. Over the past year, investors have been forced to repeatedly answer the same question: what is the market’s biggest risk? The answer has changed several times, and each shift has reshaped market leadership. Late in 2025 and early 2026, artificial intelligence became the market’s primary uncertainty. Investors questioned whether AI would erode software pricing power and weaken competitive moats as AI made it easier to replicate once-differentiated products. By the spring, technology took a back seat to geopolitics. The U.S. conflict with Iran briefly became the market’s dominant narrative, raising concerns about oil prices, inflation, and global growth. But as energy markets remained orderly and fears of a prolonged supply disruption faded, investors quickly turned their focus back to fundamentals. Want to invest in winners with rock-solid fundamentals? Check out our 9 Best Market-Beating Stocks and add them to your watchlist. These companies are poised for growth regardless of the political or macroeconomic climate.

Find winning stocks in any market cycle. Join 7 million investors using Simply Wall St's investing ideas for FREE. Astronics stock has produced a very strong run over the past five years, yet the current share price sits at a clear premium to what both the Discounted Cash Flow (DCF) intrinsic value estimate and the broader valuation checks suggest. With the stock up sharply in recent periods and every major valuation framework pointing to an expensive reading, investors are being asked to pay up for the current story. Astronics has delivered a roughly 7x total return over the past five years, which puts added focus on whether recent gains leave much room for error. Expectations that Astronics can keep converting growth into reliable cash flows may support a higher valuation. However, any setback in profitability or cash generation could quickly pressure a premium price. Astronics scores 0 out of 6 on our broader valuation checks, which means the stock currently looks expensive rather than like a clear bargain on this framework 0/6 valuation score. The issue now is whether Astronics' recent share price strength can be justified by its intrinsic value estimate and fundamentals, or whether the current premium leaves limited upside relative to the risks. Astronics delivered 207.9% returns over the last year. See how this stacks up to the rest of the Aerospace & Defense industry. The Discounted Cash Flow (DCF) model values Astronics by projecting future cash that can be returned to shareholders and bringing it back to today. On this measure, Astronics starts from latest twelve month free cash flow of about $43.7 million and assumes that cash generation grows from here rather than shrinking. Based on these projections, the model arrives at an estimated intrinsic value of about $66 per share. When set against the current share price, that DCF estimate implies Astronics trades at a roughly 33% premium to its intrinsic value. That premium sits alongside headline multiples such as an 83.3x P/E and a P/B of 23.4, which reflect meaningful ongoing cash flow strength in the current price. For investors, the key question is whether Astronics can sustain the projected cash flows that are now embedded in the share price. On this DCF view, Astronics stock currently appears significantly overvalued relative to the model’s assumptions. Our Discounted Cash Flow (DCF) analysis suggests Astronics may be overvalued by 33.0%. Discover 49 high quality undervalued stocks or create your own screener to find better value opportunities. Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Astronics. P/E is a useful lens for Astronics because earnings are a key focus for many investors trying to judge how much they are paying for each dollar of profit. On this measure, Astronics trades on a P/E of about 83.3x, which is much higher than the Aerospace & Defense industry average of around 39.1x. It also sits above the peer group average of roughly 44.9x. This gap suggests the market is assigning Astronics a significant premium relative to comparable companies based on current earnings. That kind of multiple usually reflects strong confidence in the quality or durability of the profit stream. For investors, it means the current price already incorporates optimistic expectations, so any disappointment in future earnings could matter more for the share price than it might for a stock on a lower multiple. On the P/E multiple, Astronics stock appears expensive compared with both its industry and peer averages. See what the numbers say about this price — find out in our valuation breakdown. Simply Wall St Narratives for Astronics aim to close the gap between the high multiples above and the assumptions that could justify them. The narratives set out clear scenarios for Astronics' future growth, margins and earnings, and link each view to a specific number that reflects how those factors and the key risks might evolve, so you can come back to them on the Community page as fresh information emerges. The Astronics community is sharply split, with one camp seeing the current price as an entry into a long runway and the other focused on execution and concentration risks. Bull case: 12% undervalued Read the full Bull Case to see why Astronics could be undervalued Bear case: 11% overvalued Read the full Bear Case to see why Astronics could be overvalued Do you think there's more to the story for Astronics? Head over to our Community to see what others are saying! For Astronics, both the Discounted Cash Flow (DCF) intrinsic value estimate and the earnings multiples currently point to an overvalued stock. The DCF view indicates a sizable premium to the intrinsic value estimate, while the elevated P/E suggests the market already incorporates optimistic assumptions on profitability and cash generation. The crux for investors is whether Astronics can deliver the cash flows and margins implied by this pricing. If execution on earnings quality and free cash flow holds up, the current premium may remain intact. If not, a high bar on expectations leaves limited room for disappointment. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include ATRO. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Achieved record revenue and bookings driven by a virtuous cycle where higher volume improves overhead absorption and profitability across the cost structure. Implemented a multi-year pricing strategy to reprice approximately 75% to 80% of long-term contracts that were negatively impacted by pandemic-era inflation. Realized significant operational efficiency gains as employee turnover rates dropped by half, allowing the workforce to move further down the learning curve. Executed structural portfolio shaping by consolidating seven production sites and discontinuing non-core product lines to focus on high-priority customers. Capitalized on strong market demand for aircraft connectivity, high-end seat motion systems, and flight-critical power for emerging aircraft platforms. Advanced the U.S. Army radio test program (4549/T) to full-rate production, which is expected to align Test segment margins with the higher-performing Aerospace segment. Raised full-year 2026 revenue guidance to a range of $1.02 billion to $1.04 billion, marking the first time the company expects to cross the $1 billion threshold. Anticipates third quarter sales between $265 million and $275 million, with further modest improvement in the revenue run rate expected for the fourth quarter. Expects to be free cash flow positive for the remainder of 2026 as major capital investments, including the Seattle facility consolidation, conclude in Q3. Projects continued margin expansion through the renegotiation of the remaining 25% of long-term contracts over the next 12 to 18 months. Assumes the U.S. Army radio test program will reach full run-rate production by the end of Q4 2026, supporting deliveries for the next 18 months. Recognized a $2 million tariff refund in Q2, though management notes an ongoing tariff run rate of $3 million to $4 million per quarter prior to mitigation. Identified $6 million to $8 million in potential future tariff refunds, though the specific timing of these receipts remains uncertain. Evaluating a potential $40 million to $50 million valuation allowance release depending on verifiable evidence of future taxable income beyond 2026. Monitoring a long-running patent dispute with Lufthansa Technik, with potential resolution in the U.K. and France expected by the end of the year. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. Management expects Test margins to approach Aerospace levels (near 20% EBITDA) once full-rate production is achieved by the end of Q4. The $44 million order is expected to cover approximately one year of production effort once the ramp-up phase is complete. The transition to Low Earth Orbit (LEO) satellites is causing short-term disruption for the legacy Geostationary (GEO) business, affecting roughly $60 million in annual revenue. Management believes the long-term opportunity in LEO connectivity more than offsets the current GEO market weakness. With the balance sheet largely fixed, management is seeing a steady flow of opportunities but remains focused on internal growth as the primary priority. Future acquisitions would be considered 'incidental' rather than a core dependency for meeting growth targets. Labor availability has improved significantly compared to the pandemic period, with turnover rates returning toward historical norms. Management noted that while hiring remains a challenge, they are seeing former employees return as the 'great resignation' trends fade.

Find winning stocks in any market cycle. Join 7 million investors using Simply Wall St's investing ideas for FREE. Astronics (ATRO) just released second quarter 2026 results, giving investors fresh numbers to assess the stock. The update covers both the three month period and the first half of the year. See our latest analysis for Astronics. Astronics is trading at US$74.91 after a small pullback over the past week, while the 30 day share price return of 3.32% and year to date share price return of 58.79% sit alongside a very large 5 year total shareholder return that suggests sustained positive momentum around the story following the latest earnings and guidance updates. If Astronics's recent move has you thinking about where else growth stories might emerge, this could be a good moment to scan 36 power grid technology and infrastructure stocks Astronics now sits near recent highs after a strong run and upbeat guidance, which raises a simple issue: Does the current price still leave enough upside potential to outweigh the risks for new buyers? The most followed narrative for Astronics sees fair value at $79.48, a little above the last close at $74.91, and ties that gap directly to specific growth and margin assumptions. Read the complete narrative. Want to see what turns those aircraft build rates into the current fair value for Astronics? The narrative leans on rising earnings, firmer margins, and a richer future profit multiple tied to those programs. The full set of projections is where the story really comes together. Result: Fair Value of $79.48 (UNDERVALUED) Have a read of the narrative in full and understand what's behind the forecasts. However, this Astronics narrative still hinges on clean execution in the Test Systems segment and effective management of tariff and legal cost pressures that have previously hit cash flows. Find out about the key risks to this Astronics narrative. The popular Astronics narrative points to a fair value of $79.48, which implies the stock is 5.7% undervalued. The market price tells a different story. Astronics trades on a P/E of 71x, compared with 38.9x for the US Aerospace & Defense industry and 44.3x for close peers, while the fair ratio sits at 41.9x. That is a sizeable gap and suggests the current price already bakes in a lot of optimism. The real question is whether future earnings progress justifies staying this far above where the fair ratio indicates the market could move. See what the numbers say about this price — find out in our valuation breakdown. If this Astronics story feels finely balanced between concern and optimism, take a closer look now and weigh both sides of the equation through 2 key rewards and 2 important warning signs If Astronics has your attention right now, do not stop there. Use this momentum to broaden your watchlist with other clear, data driven ideas. Spot potential breakouts early by scanning 19 elite penny stocks with strong financials that already show stronger financial underpinnings than many micro caps. Stack the odds in your favor by checking 49 high quality undervalued stocks where quality fundamentals and pricing appear out of sync. Build a steadier core to your portfolio with the 85 resilient stocks with low risk scores that focuses on companies scoring well on resilience. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include ATRO. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

This article first appeared on GuruFocus. Revenue: Record sales of $260 million, up 27% from the prior year period. Gross Profit: Increased to $86.9 million, or 33.4% of sales, compared with $52.8 million or 25.8% of sales in the prior year period. Operating Income: Record $40.5 million, or 15.6% of sales; adjusted operating income was $43.2 million with an adjusted operating margin of 16.6%. Net Income: $35.1 million, or $0.75 per diluted share; adjusted net income of $32.6 million or approximately $0.70 per diluted share. Adjusted EBITDA: $51.5 million, more than double the $25.4 million reported in the prior year quarter; adjusted EBITDA margin was 19.8% of sales. Bookings: Record $306 million in Q2, an all-time high; aerospace bookings were $243.1 million with a book-to-bill ratio of 1.02, and test systems bookings were $63.1 million with a book-to-bill ratio of 2.78. Backlog: Aerospace backlog ended the quarter at a record $657.2 million; test systems backlog ended at $123.3 million. Aerospace Segment Sales: Record $237.3 million, an increase of 22.6% from the prior year period; operating profit was $48.3 million or 20.3% of sales. Test Systems Segment Sales: $22.7 million, up $11.6 million from the prior year period; operating profit was $600,000 compared with an operating loss last year. In-Flight Entertainment and Connectivity Sales: Increased 19% to $126 million. Lighting and Safety Sales: Increased 5.5% to $59.2 million. Flight Critical Electrical Power Sales: Increased 49.4% to $23.7 million. Seat Motion Sales: Increased $12 million to $22.2 million. Cash Flow: Generated $30.1 million in cash from operations during the second quarter. Capital Expenditures: $5.7 million in the quarter and $16.9 million year to date; full year CapEx expected to be in the range of $40 million to $45 million. Long-Term Debt: Decreased by $24.1 million from year end to $310.3 million at the end of the quarter. R&D Expense: $10.9 million, down modestly from $11.9 million in the prior year quarter. SG&A Expense: $35.6 million, down about $900,000 year over year and declined to 13.7% of sales from 17.8%. Interest Expense: Declined by approximately $800,000 or 24.7%. Tax Expense: $2.8 million in the quarter, reflecting the benefit of a partial reversal of the valuation allowance. Warning! GuruFocus has detected 1 Warning Sign with MOBI. Is ATRO fairly valued? Test your thesis with our free DCF calculator. Release Date: August 11, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Record Q2 revenue of $260 million, up 27% year-over-year, with record operating profit and adjusted EBITDA margin of 19.8%. Record bookings of $306 million and backlog of $780.5 million, providing strong visibility for future growth. Raised full-year revenue guidance to $1.02-$1.04 billion, crossing the billion-dollar threshold for the first time. Significant margin expansion driven by volume leverage, pricing actions, improved workforce stability, and portfolio simplification. Major program wins: $45 million US Army radio test production order and $27 million FLRAA MV-75 development contract, positioning for long-term growth. Strong cash flow generation of $30.1 million from operations in Q2, with expectations of positive free cash flow for the remainder of the year. Successful B share distribution to reward shareholders and encourage long-term interest. Favorable legal developments in the UK patent dispute with Lufthansa Technik, with potential for resolution in multiple jurisdictions by year-end. Ongoing tariff costs of $3-$4 million per quarter, partially offset by a $2 million refund in Q2, with future refunds uncertain. Test systems segment profitability impacted by $4.1 million of zero-margin revenue related to raw material purchases for the US Army radio test program. GEO satellite connectivity market experiencing disruption due to the transition to LEO, affecting a $60 million annualized portion of the business. BMA acquisition is not yet as profitable as the rest of the aerospace segment, requiring integration and margin improvement efforts. Labor turnover, while improved, remains above pre-pandemic levels, requiring additional hiring to maintain workforce levels. Potential for additional valuation allowance release of $40-$50 million is uncertain and dependent on future taxable income evidence. Legal disputes with Lufthansa Technik continue in France and Germany, with an appeal in France scheduled for October, creating ongoing uncertainty. Q: How should we think about your test segment margins as you ramp up production for the Army radio test business over the next two to three quarters?A: Peter Gundermann (Chairman, President, CEO) stated he is optimistic about the program's margins, noting it is "really well-priced." He expects the company to reach full run-rate production by the end of the fourth quarter. Once at full rate, the margin profile for the test business should approach that of the aerospace segment, potentially near the 20% EBITDA level. Q: How much of the pricing improvements have already manifested in Q2 results, and should we expect higher pricing in the second half?A: Peter Gundermann (Chairman, President, CEO) indicated that the current results reflect most of the pricing journey, estimating they are 75% to 80% of the way through repricing long-term contracts affected by pandemic-era inflation. The remaining contracts will be renegotiated over the next 12 to 18 months, providing further benefits, but not materially changing the second-half outlook. Q: How has the acquisition of BMA performed relative to expectations, and what is your appetite for M&A going forward?A: Peter Gundermann (Chairman, President, CEO) said the BMA acquisition is going well, though it is less profitable than the rest of the aerospace business and requires integration efforts. Regarding M&A, the company's first priority is executing on internal growth opportunities, but with a fixed balance sheet, they are seeing a steady flow of opportunities and are capable of pursuing them if the right fit and price emerge. Q: Can you talk about the transition to LEO satellite connectivity and how that is playing out in your markets and opportunity set?A: Peter Gundermann (Chairman, President, CEO) expressed optimism about the LEO transition, noting the company is working the situation hard. While the shift is causing short-term disruption for GEO customers (a roughly $60 million annualized piece of business), the long-term opportunity in LEO more than offsets the near-term pain. Q: What really surprised you in the quarter relative to your expectations going in?A: Peter Gundermann (Chairman, President, CEO) stated there were no major surprises, as the company has consistently beaten its internal forecasts for the last six quarters. The two significant bookings (US Army radio test and FLRAA MV-75) were anticipated, though they took longer to finalize than originally expected. Q: How much visibility do you have with Textron on the MV-75 program, given potential funding concerns?A: Peter Gundermann (Chairman, President, CEO) confirmed the company has orders and works closely with Bell. While he cannot comment on funding status beyond public knowledge, Bell has been transparent and supportive. He noted Astronics' portion of the development cost is relatively small, and the company remains highly enthusiastic about the program. Q: What are the efforts you have taken to retain labor and find new labor?A: Peter Gundermann (Chairman, President, CEO) explained that the labor market has bounced back significantly from the pandemic-era "Great Resignation." While retention remains a challenge (hiring 14 people to get 10 that stick), the company feels much better about labor availability now than at any point in the last three to four years. Q: How should we think about the second-half mix and margin expectations, aside from the tariff refund?A: Peter Gundermann (Chairman, President, CEO) highlighted the US Army radio test program as the major mix shift, which should significantly improve the test business's margin profile in the second half. He noted no other noteworthy mix issues in the aerospace segment at this time. For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Astronics Corporation ATRO used its second-quarter 2026 earnings call to indicate margin gains. The company’s chairman, president and CEO Peter Gundermann framed the second half around volume leverage, margin improvement and a U.S. Army radio test ramp. The company raised 2026 revenue guidance to $1.02 billion to $1.04 billion and expects another third-quarter sales record. Record bookings of $306.2 million lifted backlog to $780.6 million, strengthening visibility into the outlook. The company reported adjusted earnings per share of 70 cents in the second quarter. Revenues of $260 million topped the Zacks Consensus Estimate of $245 million. Astronics Corporation price-consensus-eps-surprise-chart | Astronics Corporation Quote Gundermann said Astronics entered the second half with strong momentum after setting several records. The revised annual forecast would take sales above $1 billion for the first time. Vice president and CFO Nancy Hedges expects third-quarter sales of $265 million to $275 million, with fourth-quarter revenues improving modestly from there. About 82% of quarter-end backlog should convert to revenues within 12 months. Hedges maintained 2026 capital spending guidance of $40 million to $45 million, largely for the Seattle consolidation. She also expects positive free cash flow for the rest of the year. Gundermann identified four margin levers: volume, pricing, workforce efficiency and simplification. Adjusted EBITDA margin reached 19.8% in the second quarter, with further improvement still targeted. During Q&A, Gundermann said Astronics is roughly 75% to 80% through its major pricing reset. Remaining long-term contracts are expected to be renegotiated over the next 12 to 18 months. Hedges said the 33.4% gross margin included a $2 million tariff refund worth about 70 basis points. Tariffs run $3 million to $4 million quarterly at current volumes before mitigation, while another $6 million to $8 million of refunds is expected, with timing uncertain. Test Systems received a $44.7 million U.S. Army order for full-rate production of the TS-4549/T Radio Test Sets program. Gundermann expects a larger contribution as production builds through the second half. Hedges said the second quarter included about $4.1 million of revenues at no margin, mainly for dedicated raw materials tied to radio test programs. That margin is expected to be recognized as production progresses through 2026. A CJS Securities analyst asked about the ramp. Gundermann said full-run-rate production should be reached as the fourth quarter ends, after which Test Systems margins should approach Aerospace levels, though not necessarily a 20% EBITDA margin. Gundermann tied stronger bookings to aircraft production, passenger connectivity, flight-critical power, premium seat motion systems and defense testing. Aerospace bookings were $243.1 million, including a $27.4 million MV-75 FLRAA development booking. Hedges said Aerospace sales rose 22.6% to $237.3 million. Inflight Entertainment & Connectivity grew 19%, Flight Critical Electrical Power advanced 49.4% and Seat Motion sales more than doubled. A Craig-Hallum analyst asked about emerging aircraft. Gundermann said eVTOL and autonomous-aircraft opportunities remain active, especially in power generation, but are not a large part of the 2026 forecast and should have a bigger role in 2027 planning. Responding to CJS Securities, Gundermann described the GEO-to-LEO connectivity shift as a near-term disruption for a GEO business he pegged at about $60 million annualized. He said the LEO opportunity can more than offset that pressure. A Truist Securities analyst asked about BMA and acquisitions. Gundermann said BMA remains less profitable than the broader Aerospace business. Internal growth remains the first priority even as Astronics sees a steady flow of M&A opportunities. On labor, Gundermann told Truist that hiring is no longer a major issue, though retention remains challenging in some production roles. He said labor availability is better than at any point in the past three to four years. Gundermann remained focused on converting demand into higher sales, margins and cash generation, repeatedly emphasizing volume growth and operating execution as the core drivers. The second-half agenda centers on scaling the Army test program, sustaining Aerospace profitability, completing the Seattle consolidation and continuing selective pricing and efficiency work. ATRO sports a Zacks Rank #1 (Strong Buy), reflecting favorable earnings-estimate revision trends. Its Growth Score of B is supportive under the Style Score framework, while Value Score of D, Momentum Score of F and VGM Score of D are less favorable. You can see the complete list of today’s Zacks #1 Rank stocks here. Zacks Style Scores complement the rank, with A or B grades generally preferred alongside a favorable Zacks Rank. The current mix combines a strong rank with uneven style characteristics. The Zacks Rank can change as estimates are revised after the just-reported results. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Astronics Corporation (ATRO) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research