ATRO

• Overall Q2 2026 Performance • Astronix delivered record revenue, operating profit, bookings, and backlog in Q2 2026, with total sales of $260 million (up 27% year-over-year) and adjusted EBITDA of $51.5 million (more than double the prior year) at 19.8% of sales, a modern-day high. • Gross profit expanded 760 basis points to 33.4% of sales, driven by higher volume, improved productivity, and a $2 million IEPA tariff refund. GAAP operating income was a record $40.5 million (15.6% of sales), and net income was $35.1 million ($0.75 per diluted share). • Generated $30.1 million in operating cash flow, with $5.7 million in capital expenditures; long-term debt decreased to $310.3 million at quarter-end, with total available liquidity of $253.2 million.

Margin Improvement Drivers • Volume growth: Quarterly bookings have risen steadily from a pandemic-era 100 million to 150 million to an all-time high of $306 million in Q2 2026, with four consecutive quarters of sequential growth: 210 million, 257 million, 290 million, 306 million. Higher bookings drive higher shipments, improving overhead absorption and profitability as the company grows into its post-pandemic cost structure. • Pricing optimization: Most inflation-impacted long-term contracts have now been repriced, with roughly 25% remaining to be repriced over the next 12 to 18 months. Shorter-term business is now priced to value rather than cost, further supporting margin gains. • Organizational efficiency: Annual employee turnover has dropped to half of pandemic peaks (now well below 10% in many locations), creating a more stable, experienced workforce that improves efficiency and quality. • Structural portfolio simplification: Seven production sites have been shut down and consolidated, and non-strategic product lines have been discontinued to focus on core high-value businesses, with additional structural optimization planned.

Key Operational Milestones • Secured a $27 million booking for FLARA MD-75 development work for the MV-75 (U.S. Army Black Hawk replacement program, the largest military program in the company's history), with a final small order expected in early 2027 to complete the engineering development phase. • Received the long-awaited $45 million full-rate production go-ahead for the U.S. Army 4549T radio test program, with deliveries over the next 18 months and expected annual similar orders for 4 to 5 years; when full-rate, test business margins will match aerospace segment levels. • Completed a 20% B-share distribution to shareholders in June 2026 to replenish and rebalance the share count to historical norms, rewarding long-term shareholders. • Received a favorable ruling from the UK Court of Appeals in the long-running patent dispute with Lufthansa Technic; the U.S. portion of the dispute is closed, and a final resolution across multiple jurisdictions could come by the end of 2026. • The BMA acquisition (closed October 2025) is progressing as expected: integration is underway, and it has already contributed $5.9 million in seat motion sales in Q2. • Global ERP implementation is ongoing, with $700,000 in incremental operating expense and $4 million in capitalized costs incurred in the first half of 2026.

• Full-year 2026 revenue guidance has been raised to $1.02 to $1.04 billion, representing the first time the company will cross the $1 billion annual revenue threshold.
• Q3 2026 sales are expected to be in the range of $265 to $275 million, which would set another quarterly sales record, with Q4 revenue expected to improve modestly from Q3 levels.
• Full-year 2026 capital expenditures are expected to remain in the range of $40 to $45 million, with the Seattle facility consolidation concluding in Q3 2026, and the company expects to be free cash flow positive for the remainder of 2026.
• An additional $40 to $50 million valuation allowance release for deferred tax assets may be recognized in 2026 if sufficient objective evidence of future taxable income is obtained.
• $6 to $8 million in additional future IEPA tariff refunds are expected, though the timing of receipts remains uncertain.
• The MV-75 FLARA program is expected to generate approximately $35 million in revenue in 2026. R&D spending is expected to continue running at $10 to $12 million per quarter.

Aerospace Segment: Q2 2026 sales reached a record $237.3 million, a 22.6% increase year-over-year, accounting for 91.3% of total company revenue. Breakdown by product line: In-flight entertainment and connectivity sales grew 19% year-over-year to $126 million; Landing and safety sales increased 5.5% year-over-year to $59.2 million; Flight critical electrical power sales rose 49.4% year-over-year to $23.7 million; Seat motion sales increased $12 million year-over-year to $22.2 million, including a $5.9 million contribution from the BMA acquisition. Aerospace segment operating profit was $48.3 million (20.3% of sales), up from $18 million (9.3% of sales) year-over-year; adjusted operating profit was $50.7 million with an adjusted margin of 21.4%. Bookings were $243.1 million for a 1.02 book-to-bill ratio, and ending backlog was a record $657.2 million.

Test Systems Segment: Q2 2026 sales were $22.7 million, an increase of $11.6 million year-over-year, accounting for 8.7% of total company revenue. The segment generated operating profit of $600,000, compared to an operating loss in the prior year period. Q2 2026 profitability was impacted by $4.1 million of zero-margin raw material purchase revenue for U.S. Army and Marine Corps radio test programs, with margin to be recognized as production progresses through 2026. Bookings were $63.1 million for a 2.78 book-to-bill ratio, and ending backlog was $123.3 million.

• Bookings growth is not guaranteed to continue its sequential upward trend, as bookings can be lumpy.
• The ongoing patent dispute with Lufthansa Technic remains unresolved in multiple jurisdictions, with a possible UK Supreme Court appeal, an upcoming appeal in France, and ongoing proceedings in Germany creating ongoing uncertainty.
• Test segment margins will remain suppressed in the near term as the U.S. Army radio test program ramps up, with $4.1 million of zero-margin raw material revenue already recognized in Q2 2026, and full margin will not be realized until production reaches full run rate.
• Approximately 25% of inflation-impacted long-term contracts still need to be repriced over the next 12 to 18 months, leaving residual margin pressure from prior inflation.
• Labor turnover and hiring challenges remain, even with improved availability: the company still needs to hire more candidates than the number of open positions to account for new hire attrition, and turnover metrics have not returned to pre-pandemic levels.
• Near-term weakness in the GEO satellite connectivity business partially offsets emerging LEO growth opportunities, creating near-term revenue pressure for this ~$60 million annual business.
• Large customer orders (such as the MV-75 and radio test programs) can experience delays beyond initial expectations, creating timing uncertainty for revenue and bookings.
• Program funding for the MV-75 program beyond September 30 remains uncertain, though the company has existing orders to continue work in the near term.

Q: What positive or negative surprises did management see in Q2 2026 results relative to pre-quarter expectations? How has the company positioned for emerging opportunities in electric vertical takeoff and landing (eVTOL) aircraft, drones, and defense autonomous platforms? / A: Management reported no major surprises, as the company has now beaten its internal forecast at the top end of guidance for the last six consecutive quarters. The two large expected bookings (MV-75 development and the 4549T radio test program) were slightly delayed from prior expectations due to external factors (U.S. government shutdown for 4549T) but ultimately closed in the quarter as anticipated. The company is already invested in eVTOL and drone/unmanned aircraft, where its existing power generation technology aligns well with market needs. These programs are not included in the 2026 financial forecast, are still preliminary, and will be incorporated into 2027 planning over the coming months.

Q: How should investors expect test segment margins to evolve as the U.S. Army radio test program ramps over the next two to three quarters? What is the impact of the LEO satellite connectivity transition on the company's market opportunity? / A: Management expects the 4549T program to reach full run rate production by the end of Q4 2026, and when fully ramped, test segment margins will approach the aerospace segment's current margin levels (near 20% adjusted EBITDA). The LEO satellite transition is a large long-term opportunity that the company is pursuing aggressively, but it has created near-term disruption and softness in the company's existing GEO satellite business, which is a ~$60 million annualized revenue segment currently under pressure. Management expects long-term LEO opportunities will more than offset this near-term GEO weakness.

Q: How much of the planned long-term contract repricing has already been reflected in Q2 results, and should investors expect additional pricing gains in the second half of 2026? What is the margin outlook for the second half, and what is the funding visibility for the MV-75 program? / A: Management estimates 75% to 80% of the required repricing of inflation-impacted long-term contracts is already complete, with no material incremental pricing gains expected in the second half of 2026. Short-term business already has full pricing flexibility, and the company is largely past the post-pandemic inflation pricing challenge. The biggest change to second half margin profile will come from the ramping 4549T radio test program, which will improve test segment profitability after years of underperformance. The company has existing orders for MV-75 work and a close, transparent relationship with prime contractor Bell, and while overall program funding beyond September 30 is not fully confirmed, Bell has continued to support the company's work on the program to date.

Q: How has the BMA acquisition performed relative to expectations, and what is the company's current appetite for additional M&A? What is the current state of labor availability and retention? / A: BMA integration is progressing well: the company is transitioning BMA from private German GAAP to U.S. public company accounting standards, addressing past capital constraints, and integrating BMA with the company's existing French aerospace operation. BMA has good technology and customer relationships, but is less profitable than core aerospace due to its own legacy long-term contracting pricing issues, which the company is working to resolve. The company's balance sheet is now strong enough to pursue M&A after post-pandemic deleveraging, and the M&A market has reopened, but internal growth remains the top priority, and M&A will only be pursued if the right opportunity at the right price emerges. Labor availability has improved dramatically compared to the pandemic era, with far less hiring pressure across all locations, though turnover is still slightly above pre-pandemic levels, requiring more hires than open positions to account for early attrition.