Astronics Corporation Reports 2025 Third Quarter Financial Results

Peter J. Gundermann, Chairman, President and Chief Executive Officer, commented, “We had a solid third quarter, demonstrating continued operational progress to meet strong customer demand with revenue stabilizing above $200 million per quarter. Strong sales supported operating margin expansion, reflecting both meaningful operating leverage on increased volume and the impact of our profitability initiatives. Recent refinancing actions provide us with enhanced financial flexibility and greater liquidity to support our business while minimizing potential dilution in the future. The refinancing combined with the market demand we are experiencing sets us up for a strong finish to 2025 and an exciting 2026.”

Third Quarter Results

Third Quarter 2025 Results (compared with the prior-year period, unless noted otherwise)

Growth in sales was driven by the Aerospace segment’s continued strength in demand primarily from the Commercial Transport market. Aerospace sales increased $15.2 million, or 8.5%, which more than offset a $7.4 million decline in Test Systems sales.

Gross profit increased $9.3 million to $64.5 million, or 30.5% of sales, an improvement over gross margin of 27.1% in the comparator quarter, primarily attributable to higher volume, pricing initiatives and improved productivity. Third quarter gross profit in the prior year was negatively impacted by a $3.5 million atypical warranty reserve.

Tariff expense in the current quarter was approximately $4 million. Based on current tariff rates in effect today, Astronics believes the potential incremental impact to annual costs of materials related to direct and known indirect effects is in the range of $15 million to $20 million before mitigation and assuming no exemptions for aerospace-related products. The Company believes that certain actions including pass-through pricing, supply chain restructuring, duty drawbacks, the implementation of free trade zones, and other operational adjustments will significantly reduce the anticipated impacts of tariffs over time. The Company expects that tariff rates will remain in flux in the near future and will refine its strategy as the situation becomes more stable.

In the third quarter of 2025, selling, general and administrative expenses (“SG&A”) decreased $3.1 million. Litigation-related expenses were down $4.3 million, somewhat offset by $1.2 million in higher legal and accounting expenses related to acquisitions. R&D was down $2.3 million reflecting the timing of projects. The prior-year period was negatively impacted by $1.3 million in reserves related to the bankruptcy filing of an Aerospace customer.

Operating margin expansion of 680 basis points and adjusted operating margin² expansion of 270 basis points was the result of leverage on higher volume, improved productivity in the Aerospace segment, coupled with savings from the recent Test Systems cost rationalization activities.

A $32.6 million Loss on Settlement of Debt was the result of certain costs incurred related to the partial repurchase of convertible notes due 2030 discussed in the Balance Sheet and Liquidity section below, compared to a Loss on Settlement of Debt of $7.0 million in the prior year.

Interest expense was down $3.3 million, or 53.0%, on lower rates following 2024 refinancing activities. Tax benefit in the quarter was $1.2 million compared with a tax expense of $6.6 million in the prior-year period, mostly as a result of a valuation allowance reversal associated with research and development costs that are expected to be expensed for tax purposes in the current year under the One Big Beautiful Bill Act.

Consolidated net loss of $0.31 per diluted share improved from a net loss of $0.34 per diluted share in the prior-year period from the strength in sales and profitability that more than offset the incremental loss on settlement of debt. Adjusted net income² per share increased $0.15 per diluted share, or 44%, to $0.49 per diluted share, demonstrating the impact of stronger profitability and lower interest expense.

Consolidated adjusted EBITDA² increased 20.9% to $32.7 million and was 15.5% of consolidated sales. The Company is targeting high teen to 20% or better adjusted EBITDA² margins.

Bookings of $210.4 million in the quarter resulted in a book-to-bill ratio of 1.00:1. For the trailing twelve months, bookings totaled $863.0 million and the book-to-bill ratio was 1.04:1. Backlog at the end of the quarter was $646.7 million.

Aerospace Segment Review (compared with the prior-year period, unless noted otherwise)

Aerospace segment sales of $192.7 million increased $15.2 million, or 8.5%. Sales in the Commercial Transport market increased $15.4 million, or 11.5%. Growth was primarily related to increased demand by airlines for cabin power, seat motion and system certification products and services. Military Aircraft sales increased $5.9 million, or 27.1%, to $27.6 million, driven by increased demand for lighting and safety products. General Aviation sales decreased $4.2 million, or 23.0%, to $13.9 million due to lower airframe power and inflight entertainment & connectivity (“IFEC”) product sales to the VVIP market due to the timing of programs. Other sales decreased $1.9 million as the Company has wound down its non-core contract manufacturing arrangements.

Aerospace segment operating profit of $31.2 million, or 16.2% of sales, improved over the prior-year period reflecting the leverage gained on higher volume, pricing initiatives, and improving production efficiencies, combined with a $4.4 million decrease in litigation-related expenses. The prior year was impacted by a $3.5 million atypical warranty reserve and a non-cash reserve associated with a customer bankruptcy of $2.2 million. Adjusted Aerospace operating profit² increased 27.1% to $32.1 million, or 16.7% of sales, a 240-basis point expansion over the comparator quarter.

Aerospace bookings were $191.9 million for a book-to-bill ratio of 1.00:1. Backlog for the Aerospace segment was $572.5 million at quarter end.

Mr. Gundermann commented, “Our Aerospace business had a strong third quarter achieving a 16.2% operating margin, well surpassing our near-term margin target and a testament to its potential. Sales also reflected the consistent improvement in demand we are seeing. We believe the tailwinds driving our Aerospace business will accelerate as we close out 2025 and continue into 2026 and beyond.”

Test Systems Segment Review (compared with the prior-year period, unless noted otherwise)

Test Systems segment sales of $18.7 million were down $7.4 million from the comparator quarter in 2024. The decrease was driven by lower sales of radio test sets in general as full rate production for the U.S. Army program has not yet begun.

Test Systems segment operating profit was near break-even in both periods. Test Systems continues to be negatively affected by mix and under absorption of fixed costs at current volume levels.

Bookings for the Test Systems segment in the quarter were $18.5 million. The book-to-bill ratio was 0.99:1 for the quarter. Backlog for the Test Systems segment was $74.3 million at quarter end.

Mr. Gundermann commented, “Our Test business had a break-even operating profit on relatively low sales, which demonstrates the significant cost-cutting initiatives we have implemented across the business. We expect it will become profitable once our radio test program begins for the U.S. Army. We expect to receive production orders near year-end or shortly thereafter.”

Balance Sheet and Liquidity

Cash provided by operations in the third quarter of 2025 was $34.2 million, reflecting higher cash earnings and lower working capital requirements. Capital expenditures in the quarter were $13.2 million.

Long-term debt, net of cash, increased $164.2 million to $314.4 million at quarter end compared with $150.2 million at the end of 2024. On September 16, 2025, the Company issued $225 million aggregate principal amount of 0% Convertible Senior Notes for net proceeds of approximately $217 million. The Notes will mature on January 15, 2031, unless earlier converted, redeemed or repurchased. The Company will settle the principal in cash and has the flexibility to settle any premium in stock, cash or a combination of both. The conversion price of the 0% Convertible Senior Notes is $54.87; however, as the Company also purchased capped call options, there is no potential dilution unless the stock price exceeds the upper strike price of $83.41.

The Company used net proceeds from the offering in part to repurchase approximately $132.0 million, or 80%, of the aggregate principal amount of its 5.500% Convertible Senior Notes due 2030 and pay the $26.9 million cost for the capped calls. Subsequent to the repurchase, there was $33 million of principal outstanding on the Notes due 2030. Borrowings of $85.0 million under the ABL Revolving Credit Facility and $11.0 million in cash provided the balance of payment for the repurchase of the Notes due 2030. In addition to the costs that were required to be recorded as an expense in the income statement, as discussed above, other repurchase-related costs, including the cost of the capped call, were required to be classified as a reduction of shareholders’ equity. As a result, shareholders’ equity has decreased by $152.4 million.

The refinancing resulted in the elimination of approximately 5.8 million shares of potential dilution. Approximately 1.44 million shares of potential dilution remain under the outstanding 5.500% Convertible Senior Notes due 2030.

Subsequent to the end of the quarter, on October 22, 2025, the Company entered into a new $300 million senior secured, cash flow-based revolving credit facility (the “New Revolver”). The New Revolver matures in October 2030 and replaces the previous ABL Revolving Credit Facility that was scheduled to mature in 2027. The New Revolver, which enhances financial flexibility to support the Company’s growth initiatives, also has an accordion feature, which allows the Company to request incremental commitments of up to $100 million plus additional incremental amounts so long as maximum leverage requirements are met.

The New Revolver will accrue interest at a floating rate equal to SOFR plus the applicable margin ranging from 125 basis points to 213 basis points based on leverage.

The Company had available liquidity of $111.9 million at the end of the third quarter.

Nancy L. Hedges, Chief Financial Officer, commented, “Our execution on the financing events to repurchase 80% of the $165 million of 5.5% Notes due 2030 was a proactive move to both eliminate future potential dilution of almost 5.8 million shares as well as measurably reduce the future cost of conversion. The continued appreciation in our stock price above the $22.89 conversion price was making the cost of future cash settlement very expensive. Given the tailwinds we see in the aerospace and defense industries and the opportunities to meaningfully grow revenue and earnings, we felt this was an opportune time to execute the refinancing and take advantage of current capital markets trends which allowed us to issue a 0% convertible bond. While the accounting treatment was complex, and our balance sheet now has more debt and less equity, the end result is less dilution, lower cost of conversion, lower cost of debt and greater financial flexibility. We believe this was an action that benefits our shareholders both now and in the years to come.”

Updated 2025 Outlook

Astronics expects fourth quarter sales to be in the range of $225 to $235 million, a significant step up from the prior three quarters of the year. Total revenue for the year is expected to be in the range of $847 to $857 million, which would establish a record annual sales level for the Company. The midpoint of the revised range would be a 7.2% increase over 2024 sales.

Backlog at the end of the third quarter was $646.7 million, of which approximately 74% is expected to be recognized as revenue over the next twelve months. Planned capital expenditures in 2025 are expected to be in the range of $40 million to $50 million subject to the timing of spending related to a facility consolidation and build-out for its Seattle operations.

Mr. Gundermann commented, “We expect to have a strong finish to 2025, while establishing a new sales record in the fourth quarter. We anticipate that market conditions will stay strong, and our revenue level will stay elevated through 2026. While we are not ready to issue guidance at this time, our early look suggests we should see low double-digit growth for next year. We believe 2026 will be a very good year for Astronics.”

Third Quarter 2025 Webcast and Conference Call

The Company will host a teleconference today at 4:45 p.m. ET. During the teleconference, management will review the financial and operating results for the period and discuss Astronics’ corporate strategy and outlook. A question-and-answer session will follow.

The Astronics conference call can be accessed by calling (201) 493-6784. The listen-only audio webcast can be monitored at investors.astronics.com. To listen to the archived call, dial (412) 317-6671 and enter replay pin number 13755702. The telephonic replay will be available from 8:00 p.m. on the day of the call through Tuesday, November 18, 2025. The webcast replay can be accessed via the investor relations section of the Company’s website where a transcript will also be posted once available.

About Astronics Corporation

Astronics Corporation (Nasdaq: ATRO) serves the world’s aerospace, defense, and other mission-critical industries with proven innovative technology solutions. Astronics works side-by-side with customers, integrating its array of power, connectivity, lighting, structures, interiors, and test technologies to solve complex challenges. For over 50 years, Astronics has delivered creative, customer-focused solutions with exceptional responsiveness. Today, global airframe manufacturers, airlines, military branches, completion centers, and Fortune 500 companies rely on the collaborative spirit and innovation of Astronics. The Company’s strategy is to increase its value by developing technologies and capabilities that provide innovative solutions to its targeted markets.

Safe Harbor Statement

This news release contains forward-looking statements as defined by the Securities Exchange Act of 1934. One can identify these forward-looking statements by the use of the words “expect,” “anticipate,” “plan,” “may,” “will,” “estimate,” “feeling” or other similar expressions and include all statements with regard to the Company’s fourth quarter and full year 2025 outlook, the amount of capital expenditures for 2025, the amount of the impact of tariffs on costs for materials to the Company and level of mitigation potential with respect thereto, the amount of backlog to be recognized as revenue over the next twelve months, the strength and length of time associated with tailwinds for the Aerospace segment, the achievement of profitability in the Test segment, elevated revenue in 2026 that approaches double digits, and statements regarding the strategy of the Company and its outlook. Forward-looking statements also include all statements related to achieving any revenue or profitability expectations, expectations of continued growth, the level of liquidity, the level of cash generation, the level of demand by customers and markets and the amount of expected capital expenditures. Because such statements apply to future events, they are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated by the statements. Important factors that could cause actual results to differ materially from what may be stated here include the trend in growth with passenger power and connectivity on airplanes, the state of the aerospace and defense industries, the market acceptance of newly developed products, internal production capabilities, the timing of orders received, the status of customer certification processes and delivery schedules, the demand for and market acceptance of new or existing aircraft which contain the Company’s products, the impact of regulatory activity and public scrutiny on production rates of a major U.S. aircraft manufacturer, the need for new and advanced test equipment, customer preferences and relationships, the effectiveness of the Company’s supply chain, and other factors which are described in filings by Astronics with the Securities and Exchange Commission. Except as required by applicable law, the Company assumes no obligation to update forward-looking information in this news release whether to reflect changed assumptions, the occurrence of unanticipated events or changes in future operating results, financial conditions or prospects, or otherwise.

Use of Non-GAAP Financial Metrics and Additional Financial Information

In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, Astronics provides Adjusted Non-GAAP information as additional information for its operating results. References to Adjusted Non-GAAP information are to non-GAAP financial measures. These measures are not required by, in accordance with, or an alternative for, GAAP and may be different from non-GAAP financial measures used by other companies. Astronics management uses these measures for reviewing the financial results of Astronics for budget planning purposes and for making operational and financial decisions. Management believes that providing these non-GAAP financial measures to investors, as a supplement to GAAP financial measures, help investors evaluate Astronics core operating and financial performance and business trends consistent with how management evaluates such performance and trends.

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