Astronics (NASDAQ:ATRO) executives outlined the company’s aerospace-focused portfolio, improving operating trends, and key growth catalysts during a TD Cowen conference discussion with analyst Gautam Khanna. Chairman, President and CEO Peter Gundermann and CFO Nancy Hedges also addressed the company’s recent convertible note refinancing and provided an update on the company’s Test segment and a pending U.S. Army program.
Company overview and 2026 outlook
Gundermann described Astronics as “an aerospace system supplier” with roughly 90% of revenue tied to aerospace and the remainder in a Test segment. He characterized the business mix as about 70% commercial transport, 10% military, 10% business jet, and 10% test, noting that the heavy commercial exposure contributed to the company’s sharp pandemic-era downturn and subsequent recovery.
Drivers behind the record quarter and backlog visibility
Asked what drove the stronger fourth-quarter performance on sales and EBITDA, Gundermann said management did not view the results as unexpected, describing them as a continuation of a multi-quarter trend as supply chain conditions improved and OEM production rates stabilized and increased.
He noted the company bottomed out at approximately $445 million in revenue in 2021 and said Astronics averaged about 18% growth through 2025, with 2025 itself closer to roughly 8% growth as the company focused on “fine-tuning the cost structure and getting margins where we want them.” He added that volume is a key driver of profitability and that the company typically expects about a 40% marginal contribution on incremental revenue. In the discussion, management contrasted average quarterly revenue in the first three quarters of about $210 million with fourth-quarter results “much closer to 230” and ultimately “240.”
On visibility, Gundermann said he did not have the specific “book-and-ship” figure at hand but stated that about 75% of revenue ships within a year. He also said lead times have been coming down, which he suggested makes the company’s record backlog more notable because backlog would typically shrink as lead times normalize. He attributed the lead-time improvement primarily to a better supply chain, citing “electronics out of Asia” as an area of significant improvement. On tariffs, he said they “don’t help” but indicated there was nothing “fluky” in the quarter and that the company was not pulling demand forward.
Cabin electronics: line-fit and retrofit, plus technology churn
Gundermann said roughly half of Astronics’ business is tied to in-flight entertainment and connectivity—hardware and enabling technologies supporting passenger power and connectivity in commercial aircraft cabins. He said the company works with “200 some airlines around the world,” as well as OEMs and major connectivity and entertainment providers.
He emphasized that airline cabin technology turns over faster than many other aircraft systems, describing a typical in-flight entertainment configuration on a new wide-body aircraft as lasting “5 or 7” years rather than decades. That shorter cycle, he argued, creates a recurring retrofit opportunity as airlines attempt to keep pace with consumer electronics.
The company described its commercial transport exposure as roughly split between line-fit production and retrofit/aftermarket work. Gundermann also said that, unlike many aerospace suppliers that view aftermarket primarily as a margin expansion opportunity, Astronics’ aftermarket sale is often “kind of the same sale” as line-fit in terms of product and customer application.
He also discussed differences between wide-body and narrow-body markets, saying wide-body aircraft generally feature seat-back displays, while narrow-body aircraft more often rely on streaming content and may have satellite connectivity, with passenger power installed on “60%-70%” of new aircraft but a lower percentage in the global installed base—supporting further aftermarket opportunity as airlines upgrade existing fleets.
On changing connectivity technologies, Gundermann framed Starlink as part of a broader shift toward low Earth orbit (LEO) networks. He said Astronics does not provide satellites or antennas, but rather equipment inside the aircraft that is needed regardless of which connectivity constellation is used, and he expressed confidence the company can adapt as the industry transitions from air-to-ground to geostationary solutions and now to LEO.
Discussing power evolution specifically, he cited the progression from DC-only cabin power to 110V AC and then USB Type-A and Type-C. He predicted that “wireless charging” will be the next evolution and said Astronics is “actively involved” in that area, describing part of the company’s role as serving as a liaison between consumer electronics trends and airline needs.
Military and Test segment catalysts: FLRAA and the U.S. Army radio test program
Gundermann highlighted “flight critical electrical power” as an area of growing attention, focused on the basic electrical system that powers aircraft—particularly smaller platforms—using technologies such as electronic circuit breakers and advanced generation machines. He said the company is moving from business jets into military programs, specifically citing Bell’s FLRAA effort and the MV-75 aircraft as a major opportunity.
On FLRAA, he said Astronics is responsible for the electrical distribution system “after the generators, before the end use systems.” While shipset content is still being negotiated, he suggested investors model it at “$1 million a ship,” calling it potentially the company’s largest shipset. He said production-rate estimates vary, referencing figures of 1,000 aircraft as a low estimate and 2,000 as more common. He described total development work for Astronics on the program as about $100 million and said the company is roughly a third of the way through, expecting to wrap development toward the end of 2026 and into 2027. Gundermann also said he expects meaningful aftermarket opportunity once fielded, drawing a comparison to the long production run of the Black Hawk.
For the Test segment, Gundermann said it is a $70 million to $80 million business that has been a struggle but is now contributing positively after cost cuts. He called the “great hope” in that segment a radio test program for the U.S. Army—a “$215 million IDIQ” that Astronics expects to begin in the first half of 2026. He said this could add $40 million to $50 million per year of profitable business on top of the current base. On timing, he explained that Astronics developed the test station years ago and has been waiting for the production “turn-on,” with delays driven by the pace of government processes; he added that prior expectations for a late-year start were hindered by a government shutdown.
Balance sheet actions and convertible note refinancing
Hedges detailed the rationale for Astronics’ convertible financing decisions. She said the company issued a $165 million, 5.5% convertible note roughly a year to a year and a half ago as a precautionary measure amid an outstanding patent litigation, based on legal advice to prepare for a potential negative outcome. She said the eventual ruling was “much better than was anticipated,” with an award of $12 million versus $112 million sought.
Hedges said that as the stock price moved above the original conversion price (about $23), the company chose to refinance by issuing a $225 million 0% convertible note and buying back 80% of the initial convert. She said the move eliminated 5.8 million shares of potential dilution and lowered the company’s average cost of debt. She said the new convert’s conversion price is about $54 to $55, and the company also purchased a capped call that effectively sets the functional conversion price at about $83, limiting dilution until the stock exceeds that upper level.
Management said addressing the remaining potential dilution is not an immediate priority, with a focus on further strengthening the balance sheet. Hedges added that the company recently entered into a new revolving credit facility with a higher limit. Gundermann said the company committed to paying the coupon in cash on the second convert and noted the company has “four years to figure that out” regarding any potential dilution above the capped call level.
About Astronics (NASDAQ:ATRO)
Astronics Corporation (NASDAQ: ATRO) is a global leader in the design and manufacture of advanced technologies primarily for the aerospace, defense and semiconductor industries. Headquartered in East Aurora, New York, the company was founded in 1968 and has grown through a combination of internal development and strategic acquisitions. Astronics operates multiple business units focused on power conversion, distribution and control; cabin electronics and connectivity; aircraft lighting and safety solutions; and automated test systems.
The company’s aerospace products include onboard power generation and management systems, in-flight entertainment and connectivity hardware, LED and fluorescent lighting for aircraft cabins and cockpits, and safety equipment such as escape slide power units.
