ATRO 10-K & 10-Q changes, risk factors and insider trading

The markets we serve are cyclical and sensitive to domestic and foreign economic conditions, conflicts and events, which may cause our operating results to fluctuate. The markets we serve are sensitive to fluctuations in general business cycles, global pandemics, domestic and foreign governmental tariffs, trade and monetary policies, national and international conflicts, and economic conditions and events. While both domestic air travel and international air travel utilizing primarily widebody aircraft have recovered from the impact of the COVID-19 pandemic, if a global health crisis similar to the COVID-19 pandemic were to occur in the future, we may find it difficult to access our existing financing or obtain additional financing and/or fund our operations and meet our debt service obligations. Any new pandemic or other future public health crisiscrisis, and efforts to contain such public health crises, could materially adversely affect our business, financial condition and results of operations.

In our Aerospace segment, demand by the general aviation markets for our products is dependent upon several factors, including capital investment, product innovations, economic growth and wealth creation and technology upgrades. The commercial aerospace market is a global duopoly where Boeing and Airbus SE (“Airbus”) serve as the OEMs. Their production health is vital to our performance. Historical disruptions, such as quality control challenges and factory labor actions, have previously hindered our scalability. Future shifts in their production rates remain a primary factor in our projected results. In addition, the commercial airline industry is highly cyclical, with significant downturns in the past and sensitivity to such things as fuel price increases, labor disputes, global economic conditions, availability of capital to fund new aircraft purchase and upgrades of existing aircraft and passenger demand. Any change in these factors could result in a further reduction in the amount of discretionary air travel and the ability of airlines to invest in new aircraft or to upgrade existing aircraft. Therefore, our business is directly affected by economic factors outside of our control and other trends that affect our customers in the commercial aerospace industry. These factors could reduce orders for new aircraft and could reduce airline investment in cabin upgrades for which we supply products, thus reducing our sales and profits. A reduction in air travel may also result in our commercial airline customers being unable to pay our invoices on a timely basis or at all.

We are a supplier on various new aircraft programs just entering or expected to begin production in the future. As with any new program, there is risk as to whether the aircraft or program will be successful and accepted by the market. As is customary for our industry, we purchase inventory and invest in specific capital equipment to support our production requirements generally based on delivery schedules provided by our customer. If a program or aircraft is not successful, we may have to write-off all or a part of the inventory, accounts receivable and capital equipment related to the program. A write-off of these assets could result in a significant reduction of earnings and cause covenant violations relating to our debt agreements. This could result in our being unable to borrow additional funds under the ABLour Revolving Credit Facility or being obliged to refinance or renegotiate our indebtedness on potentially unfavorable terms for us.

Our products are sold in highly competitive markets. Some of ourOur competitors areinclude larger, more diversified corporations and vertically integrated companies that may have greater financial, marketing, production and research and development resources than we do. As a result, certain of our competitors may be better able to withstand the effects of periodic economic downturns or other market changing events. Our operations and financial performance will be negatively impacted if our competitors:

We depend on government contracts and subcontracts with defense prime contractors and subcontractors that may not be fully funded, may be terminated, or may be awarded to our competitors. The failure to be awarded these contracts, the failure to receive funding or the termination of one or more of these contracts could reduce our sales. Sales to the U.S. government and its prime contractors and subcontractors represent a significant portion of our business. The funding of these programs is generally subject to annual congressional appropriations, and presidential and congressional priorities are unpredictable and subject to change. In recent years, U.S. government appropriations have been affected by larger U.S. government budgetary issues and related legislation, and the U.S. government has been unable to complete its budget process before the end of its fiscal year, resulting in both governmental shutdowns and continuing resolutions providing only enough funds for U.S. government agencies to continue operating at prior-year levels. Our business, program performance, and results of operations could be impacted by the resulting disruptions to federal government offices, workers, and operations. We cannot be certain that current levels of congressional funding for programs involving our products or services will continue and that our business related to these products and services will not decline or increase at currently anticipated levels, or that we will not be subject to delays in the negotiation or award of contracts or purchase orders or increased costs due to changes in the funding of U.S. government programs or government shutdowns. In addition, government expenditures for defense programs may decline or these defense programs may be terminated. A decline in governmental expenditures, a change in spending priorities, or the U.S. government’s termination of existing contracts may result in a reduction in the volume of government contracts awarded to us. Furthermore, on government contracts for which we are a subcontractor and not the prime contractor, the U.S. government could terminate the prime contract for convenience or otherwise, irrespective of our performance as a subcontractor. Also, sales to the U.S. government and its contractors, as well as foreign military and government customers, either directly or as a subcontractor to other contractors, often use a competitive bidding process and have unique purchasing and delivery requirements, which often makes the timing of sales to these customers unpredictable. We have resources applied to specific government contracts, and if any of those contracts were terminated, we may incur substantial costs redeploying those resources and our business, financial condition, results of operations, and cash flows may be materially adversely affected.

If we are unable to adapt to technological change, demand for our products may be reduced. The technologies related to our products have undergone, and in the future may undergo, significant changes. To succeed in the future, we will need to continue to design, develop, manufacture, assemble, test, market and support new products and enhancements on a timely and cost-effective basis, and we cannot be certain that we will be able to do so successfully, if at all, or on a timely, cost effective, or repeatable basis. Our competitors may develop technologies and products that are more effective than those we develop or that render our technology and products obsolete or noncompetitive. Furthermore, our products could become unmarketable if new industry standards emerge. We may have to modify our products significantly in the future to remain competitive, and new products we introduce may not be accepted by our customers. Increased vertical integration by our customers may reduce the demand for our solutions and increase competition in our target markets.

Our inability to adequately enforce and protect our intellectual property or defend against assertions of infringement could prevent or restrict our ability to compete. We rely on patents, trademarks and proprietary knowledge and technology, both internally developed and acquired, in order to maintain a competitive advantage. Our inability to defend against the unauthorized use of these intellectual property rights and assets could have an adverse effect on our results of operations and financial condition. We cannot assure you that our means of protecting our intellectual property rights in the United States or abroad will be adequate, or that others will not develop technologies similar or superior to our technology or design around our proprietary rights. Litigation may be necessary to protect our intellectual property rights or defend against claims of infringement. This litigation could result in significant costs and divert our management’s focus away from our core business operations. Refer to the risk factor below under the heading “Currently, our subsidiary, Astronics Advanced Electronic Systems Corp., is a defendant in actions filed in various jurisdictions by Lufthansa Technik AG relating to an allegation of patent infringement and based on rulings to date, we have concluded that losses related to these proceedings are probable” and Note 19, Legal Proceedings,Proceedings and Other Matters, to the Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, of this report for further discussion.

If critical components or raw materials used to manufacture our products or used in our development programs become scarce or unavailable, then we may incur delays in manufacturing and delivery of our products and in completing our development programs, which has damaged, and could continue to damage, our business, results of operations and financial condition. Due to increased demand across a range of industries, the global supply chain for certain critical components and raw materials used in the manufacture of our products and used in our development programs has in the past experienced, and may in future periods experience, significant strain. Recent spending by hyperscalers and others to support AI is beginning to pressure supply chains for goods used to manufacture our products. A constrained supply environment has in the past adversely affected, and could in the future adversely affect, availability, lead times and the cost of components, and could impact our ability to timely complete development programs, respond to accelerated or quick-turn delivery requests from customers, or meet customer demand and product delivery dates for our end customers in situations where we cannot timely secure adequate supply of these components. Moreover, if any of our suppliers become financially unstable, or otherwise unable or unwilling to provide us with raw materials or components, then we may have to find new suppliers. It may take several months to locate alternative suppliers, if required, or to redesign our products to accommodate components from different suppliers. We may experience significant delays in manufacturing and shipping our products to customers and incur additional development, manufacturing and other costs to establish alternative sources of supply if we lose any of these sources or are required to redesign our products. We cannot predict if we will be able to obtain replacement components within the time frames that we require at an acceptable cost, if at all.

Price inflation for labor and materials, further exacerbated by thepolitical Russianand invasioneconomic instability could adversely affect our business, results of Ukraineoperations orand thefinancial Israel-Hamascondition. war,Price inflation for labor and materials, further exacerbated by political and economic instability could adversely affect our business, results of operations and financial condition. We have experienced considerable price inflation in our costs for labor and materials in recent years, which has materially adversely affected our business, results of operations and financial condition. We may not be able to pass through to our customers inflationary cost increases under our existing fixed-price contracts. Our ability to raise prices to reflect increased costs may be limited by competitive conditions in the market for our products and services. Russia’s invasion of UkraineUkraine, and theother Israel-Hamasinstances of political and economic instability, including civil unrest, acts of terrorism, war, and prolongedother conflictarmed in either such situation,conflict, may continue to result in increased inflation, escalating energy and commodity prices and increasing costs of materials. We continue to work to mitigate such pressures on our business operations as they develop. To the extent thesuch warpolitical inand Ukraineeconomic or the Israel-Hamas warinstability adversely affects our business as discussed above, it may also have the effect of heightening many of the other risks described herein, such as those relating to cybersecurity, supply chain, volatility in prices and market conditions, any of which could negatively affect our business and financial condition.

The construction of aircraft is heavily regulated, and failure to comply with applicable laws could reduce our sales or require us to incur additional costs to achieve compliance, and we may incur significant expenses to comply with new or more stringent governmental regulation. The aerospace industry is highly regulated in the United States by the FAA and in other countries by similar agencies. We must be certified by the FAA and, in some cases, by individual OEMs in order to engineer and service parts, components and aerostructures used in specific aircraft models. If any of our material authorizations or approvals were revoked or suspended, our operations would be adversely affected. New or more stringent governmental regulations may be adopted, or industry oversight heightened in the future, and we may incur significant expenses to comply with any new regulations or any heightened industry oversight. In addition, in January 2024, the FAA ordered the temporary grounding of Boeing 737-9 MAX aircraft as a result of an incident where a Boeing 737-9 MAX lost a “door plug.” This incident and the subsequent investigation, and the potential for more issues to be identified during further investigations, could result in a suspension or reduction of manufacturing of 737 MAX aircraft by Boeing. Air travelers may also respond negatively to the 737 MAX aircraft due to perceived safety concerns, which could negatively impact Boeing. Boeing is a major customer of ours and any financial or customer losses it suffers may result in a negative impact on our business, financial condition and results of operations.

In addition, recent U.S. government administrations have relied on executive orders in lieu of federal legislation to implement regulatory policy and objectives, and the U.S. Supreme Court has recently issued decisions that have added uncertainty to the federal regulatory apparatus. Each of these developments could exacerbate regulatory unpredictability. We may be unable to anticipate changes in regulatory regimes of the U.S. federal government administration and, therefore, be unable to make timely operational or other changes, assuming we are in a position to effectively respond to any such change, which may not be the case, or to ensure compliance with federal regulations or executive orders. Executive orders or regulatory priorities issued or rescinded by the U.S. federal government administration may require us to make additional capital expenditures or incur additional costs, or cause a delay or the abandonment of projects or awarded contracts, which could materially adversely affect our business, results of operations and financial conditioncondition. In addition, increased regulatory uncertainty following the forementioned U.S. Supreme Court decisions could result in delays and other impediments to the federal agency rulemaking process, which could materially adversely affect our business, results of operations and financial conditioncondition.

We have incurred losses in prior fiscal years and our future profitability is not certain. For the years ended December 31, 2024, 20232024 and 2022,2023, we incurred a net loss of $16.2 million, $26.4 million and $35.7$26.4 million, respectively. OurAlthough we achieved net income in the year ended December 31, 2025, our operating results for future periods are subject to numerous uncertainties and we cannot be certain that we will be profitable or that we will not experience substantial net losses in the future. If we are not able to increasemaintain revenue or reduce our costs, we may not be able to achieve profitability in future periods and our business, financial condition, results of operations and cash flows may be materially adversely affected.

Our ABL Revolving Credit Facility contains financial and restrictive covenants that we may be unable to satisfy, and that, if not satisfied, could result in the acceleration of any outstanding indebtedness thereunder and limit our ability to borrow additional funds. In addition, the terms of our ABL Revolving Credit Facility contains covenants that restrict our current and future operations, particularly our ability to take certain actions. Our ABL Revolving Credit Facility subjects us to various financial and other affirmative and negative covenants with which we must comply on an ongoing or periodic basis. These include financial covenants pertaining to minimuma excesstotal availabilityleverage andratio minimumrequirement, fixeda chargeconsolidated interest coverage ratio requirements.requirement and a secured net debt leverage ratio requirement. An unexpected decline in our revenues or operating income, including occurring as a result of events beyond our control, could cause us to violate our financial covenants. A covenant violation could result in a default under the ABL Revolving Credit Facility. If any such default occurs, the lenders may elect to declare all outstanding borrowings, together with accrued interest and other amounts payable thereunder, to be immediately due and payable. Further, as the amount available to us under our ABL Revolving Credit Facility is subject to borrowing base calculations determined by the value of accounts receivable, inventory, real estate and machinery and equipment, an unexpected decline in the value of these assets would require a mandatory prepayment. If any of these events were to occur, we may not be able to pay our debts and other monetary obligations as they come due, and our ability to continue to operate as a going concern could be impaired, which could in turn cause a significant decline in our common stock price and could result in a significant loss of value for our shareholders. Furthermore, the lenders also have the right in these circumstances to terminate any commitments they have to provide further borrowings, which could leave us without access to sufficient liquidity to operate our business. In addition, following an event of default, the lenders under the ABL Revolving Credit Facility will have the right to proceed against the collateral granted to them to secure the debt, which includes our available accounts receivable, inventory, machinery and equipment, real estate and intellectual property. If the debt under the ABL Revolving Credit Facility were to be accelerated, we cannot assure you that our assets would be sufficient to repay in full our debt.

Our inability to raise funds necessary to repurchase, or settle conversions of, our Convertible Notes upon a fundamental change as described in the indenture governing the Convertible Notes, may lead to defaults under such indenture and under agreements governing our existing or future indebtedness. On December 3, 2024, wethe Company issued an$165.0 million aggregate principal amount of $165 million 5.500% Convertible Senior Notes due March 15, 2030, unless earlier converted, redeemed or repurchased. The interest rate is fixed at 5.500% per annum and is payable semi-annually in arrears on March 15 and September 15 of each year, beginning on March 15, 2025. On September 15, 2025, the Company issued $225.0 million of Convertible Senior Notes due 2031. These 2031 Convertible Notes do not bear interest and are convertible under the terms of the 2031 Convertible Notes. Proceeds from the 2031 Convertible Notes were used to repurchase $132.0 million of the 2030 Convertible Notes and enter into capped call transactions to reduce potential dilution to the Company’s common stock upon conversion of the 2031 Convertible Notes.

If a fundamental change (as defined in the indentureindentures governing the Convertible Notes) occurs, then, subject to limited exceptions, holders of our Convertible Notes may require the Company to repurchase all or any their Convertible Notes for cash. If we repurchase the Convertible Notes for cash or settle such Convertible Notes by cash or by a combination of cash and shares of our common stock in the event a holder of our Convertible Notes elects to convert their Convertible Notes following a fundamental change, we will be required to make cash payments with respect to the Convertible Notes being converted or repurchased.

However, we may not have enough available cash or be able to obtain financing at the time we are required to make purchases of the Convertible Notes being surrendered or converted. In addition, our ability to repurchase the Convertible Notes or to pay cash upon conversion of Convertible Notes is limited by the ABL Revolving Credit Facility and may also be limited by law, by regulatory authority or by agreements that will govern our future indebtedness. Our failure to repurchase Convertible Notes at a time when the repurchase is required by the indenture governing the Convertible Notes or to pay cash payable on future conversions of the Convertible Notes as required by such indenture would constitute a default under such indenture. A default under the indenture governing the Convertible Notes or the fundamental change itself could also lead to a default under the ABL Revolving Credit Facility.

Subject to the limits contained in our ABL Revolving Credit Facility, weWe may incur additional debt from time to time to finance working capital, capital expenditures, investments or acquisitions, or for other purposes. If we do so, the risks described above related to our debt could intensify.

Changes in tax laws and regulations or exposure to additional tax liabilities could adversely affect our financial results. Changes in U.S. (federal or state) or foreign tax laws and regulations, or their interpretation and application, including those with retroactive effect, could result in increases in our tax expense and affect profitability and cash flows. For example, beginning in 2022, the Tax Cuts and Jobs Act of 2017 eliminated the option to deduct research and development expenditures immediately in the year incurred and requires taxpayers to amortize such expenditures over five years for tax purposes. The most significant impact of this provision iswas to the cash tax liability for 2024 and 2023 (as the liability for 2022 iswas partially offset by certain tax credits and loss carryforwards); the impact willwould decline annually thereafter over the five-year amortization period to an immaterial amount in year six. Furthermore,On complianceJuly 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law by the president of the United States. It includes a broad range of tax reform provisions affecting businesses, including extending and modifying certain key Tax Cuts & Jobs Act of 2017. One impact of OBBBA was that the ability to deduct research and development expenditures immediately in the year incurred was restored for tax years beginning in 2025 and the ability to deduct research and development costs that were previously capitalized prior to 2025. Compliance with the tax regimes we are subject to is difficult and expensive. If we fail to adhere, or are alleged to have failed to adhere, to any applicable federal, state, or foreign laws or regulations, or if such laws or regulations negatively affect sales of our products, our business, financial condition and results of operations may be materially adversely affected. In addition, our future results could be materially adversely affected by changes in applicable federal, state, and foreign laws and regulations, or the interpretation or enforcement thereof (including tax-rate changes, new tax laws such as the proposed 15% global minimum tax under the Organisation for Economic Co-operation and Development Pillar Two, Global Anti-Base Erosion Rules, or revised tax law interpretations).

We are subject to financing and interest rate exposure risks that could adversely affect our business, liquidity and operating results. Changes in the availability, terms and cost of capital, and increases in interest rates could cause our cost of doing business to increase and place us at a competitive disadvantage. At December 31, 2024, the $10.0 million outstanding on our ABL Revolving Credit Facility is subject to variable interest rates.

Currently, our subsidiary, Astronics Advanced Electronic Systems Corp., is a defendant in actions filed in various jurisdictions by Lufthansa Technik AG relating to an allegation of patent infringement and based on rulings to date, we have concluded that losses related to these proceedings are probable and the amounts of such losses could be substantial. Lufthansa Technik AG (“Lufthansa”) filed actions against us in Germany, the UK and France. In both Germany and the UK, the Company has been found to infringe the patents of Lufthansa and will be subject to monetary damagesdamages. and estimatesEstimates of whichthe Germany matters have been accrued as liabilities in our financial statements. However, the actual amount of damages that may be addressed in the future could be substantially higher than the amounts that have been accrued as liabilities in our financial statements.statements or paid to date. In February 2025, a judgment quantified the amount payable in aggregate in respect of the profits derived from infringing Lufthansa’s UK patent by the defendants as $11.9 million. AnyFollowing additionala amountsconsequential requiredhearing toon beMarch paid20, 2025, the amount was adjusted upwards by the$0.5 Companymillion related to certainthe otherresolution factorsof peripherala provisional item. There was a further consequential hearing on May 16, 2025 which addressed applications concerning interest on the ordered damages, permission to appeal the damagescourt’s award,findings includingin these matters, as well as the issue of reimbursement of legal fees related toin the damages proceedings,phase willof bethe determinedlitigation. atThe follow-upCompany hearingswas expectedordered to occurmake payments of $5.7 million in therelation firstto halfinterest and $3.5 million for partial reimbursement of Lufthansa’s legal costs. All amounts due were paid in 2025. AnBoth appeal,the ifCompany any,and wouldLufthansa likelyhave been granted permission to appeal the rulings by the UK High Court of Justice. The appeals are scheduled to be heard by the UK Court of Appeal in earlyMarch 2026. Additional amounts may be payable by the Company based on the appeal ruling. Such amounts could be substantial.

Refer to Note 19, Legal Proceedings,Proceedings and Other Matters, of our Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, of this report for discussion on this and other legal proceedings.

ThisThe uncertainty with respect to U.S. trade policy includes: (i) the possibility of further altering of the existing tariffs or penalties on products manufactured outside of the United States, including the U.S. government’s 25% tariff on a range of products from ChinaStates; (ii) the effects stemming from the removal of such previously imposed tariffs; (iii) subsequent tariffs imposed by the United States on any other countries; and (iv) potential tariffs imposed by trading partners on U.S. exports. The institution of trade tariffs on items imported by us from other countries could increase our costs, whicheither directly from tariffs incurred on foreign-produced products and components we directly purchase and import into the U.S. or indirectly as a result of our suppliers passing increased tariff-related costs onto us in the form of product and component price increases, which, in either such case, could have a negative impact on our business. If we attempt to renegotiate prices with suppliers or diversify our supply chain in response to tariffs, such efforts may not yield immediate results or may be ineffective. We may also consider increasing prices to customers; however, this could reduce the competitiveness of our products and adversely affect sales. If we fail to manage these dynamics successfully, our gross margins and profitability could be materially adversely affected.

We also cannot predict whether, and to what extent, there may be changes to international trade agreements or whether new or additional quotas, duties, tariffs, exchange controls or other restrictions on our products will be changed or imposed. In addition, an open conflict or war across any region could affect our ability to obtain raw materials. For example, the current military conflict between Russia and Ukraine, and related sanctions, export controls or other actions that may be initiated by nations, including the United States, the European Union or Russia (e.g., potential cyberattacks, disruption of energy flows, etc.) or potential sanctions or relevant export controls related to China or Taiwan or other regional conflicts could adversely affect our business and/or ourresults supplyof chainoperations or our business partners or customers in other countries beyond Russia and Ukraine.countries. Although we currently maintain alternative sources for raw materials, if we are unable to source our products from the countries where we wish to purchase them, either because of the occurrence or threat of wars or other conflicts, regulatory changes or for any other reason, or if the cost of doing so increases, it could materially adversely affect our business, financial condition and results of operations. Disruptions in the supply of raw materials and components could temporarily impair our ability to manufacture our products for our customers or require us to pay higher prices to obtain these raw materials or components from other sources, which could materially adversely affect our business and our results of operations.

Our stock price is volatile. For the year ended December 31, 2024,2025, our closing stock price ranged from a low of $15.59$15.60 to a high of $23.39.$55.71. The price of our common stock has been and likely will continue to be subject to wide fluctuations in response to a number of events and factors, such as:

•news reports relating to trends in our markets or adverse happenings at our customers; and

•the cancellation of major contracts or programs with our customers; and

In addition, the stock market in general, and the market prices for companies in the aerospace and defense industry in particular, have experienced significant price and volume fluctuations that often have been unrelated to the operating performance of the companies affected by these fluctuations. These broad market fluctuations may adversely affect the market price of our common stock, regardless of our operating performance. Global health crises, suchgovernment asshutdowns theand recentgeopolitical COVID-19instability, pandemic,each with thebroad breadthmarket of its impact worldwide,impact, and particularly on the aerospace industry, could also cause significant volatility in the market price.

We have two reportable segments, Aerospace and Test Systems. Our Aerospace segment has principal operating facilities in the United States, CanadaCanada, France and FranceGermany and an engineering office in Ukraine. Our Test Systems segment has principal operating facilities in the United States and an engineering office in India.

Our Aerospace segment designs and manufactures products for the global aerospace industry. Product lines include lighting and safety systems, electrical power generation, distribution and seat motion systems, aircraft structures, avionics products, systems certification, and other products. Our primary Aerospace customers are the airframe manufacturers (“OEM”) that build aircraft for the commercial transport, military and general aviation markets, suppliers to those OEMs, aircraft operators such as airlines, suppliers to the aircraft operators, and branches of the U.S. Department of Defense (“USDOD”). Our Test Systems segment designs, develops, manufactures and maintains automated test systems that support the aerospace and defense and mass transit industries as well as training and simulation devices for both commercial and military applications.industries. In the Test Systems segment, Astronics’ products are sold to a global customer base including OEMs and prime government contractors for both electronics and military products.

Important factors affecting our growth and profitability are the rate at which new aircraft are produced, government funding and timing of awards of military programs, our ability to have our products designed into new aircraft, the rates at which aircraft owners, including commercial airlines, refurbish or install upgrades to their aircraft and supply chain and labor market pressures. New aircraft build rates and aircraft ownersowners’ spending on upgrades and refurbishments is cyclical and dependent on the strength of the global economy. Once one of our products is designed into a new aircraft, the spare parts business associated thereto is also frequently retained by the Company. Future growth and profitability of the Test Systems business is dependent on developing and procuring new and follow-on business. The nature of our Test Systems business is such that it pursues large, often multi-year, projects. There can be significant periods of time between orders in this business, which may result in large fluctuations of sales and profit levels and backlog from period to period. Test Systems segment customers include the USDOD, prime contractors to the USDOD, mass transit operators and prime contractors to mass transit operators.

The main challenges that we continue to face include varying levels of supply chain pressures, material availability and cost increases (including costs associated with the imposition of tariffs by the United States and other countries discussed herein), labor availability and cost, and improving shareholder value through increasing profitability. Increasing profitability is dependent on many things, primarily sales growth, both acquired and organic, and the Company’s ability to pass cost increases along to customers and control operating expenses, and to identify means of creating improved productivity. Sales are driven by increased build rates for existing aircraft, market acceptance and economic success of new aircraft and our products, continued government funding of defense programs, the Company’s ability to obtain production contracts for parts we currently supply or have been selected to design and develop for new aircraft platforms and continually identifying and winning new business for our Test Systems segment.

Reduced aircraft build rates driven by regulatory actions impacting OEM production, a weak economy, aircraft groundings, tight credit markets, reduced air passenger travel, tariffs impacting OEM demand, and an increasing supply of used aircraft on the market would likely result in reduced demand for our products, which will result in lower profits. Reduction of defense spending may result in fewer opportunities for us to compete, which could result in lower profits in the future. Many of our newer development programs are based on new and unproven technology and at the same time we are challenged to develop the technology on a schedule that is consistent with specific programs. Delays in delivery schedules and incremental costs resulting from tariffs and other trade policy matters, supply chain,chain tariffpressures, and labor ratemarket pressures have in the past resulted,resulted in, and could in the future also result in, lower profits. We will continue to address these challenges by working to improve operating efficiencies and focusing on executing on the growth opportunities currently in front of us.

See Item 1A, Risk Factors, of this report for an additional discussion of risks associated with our potential inability to satisfy the financial and restrictive covenants set forth in the ABL Revolving Credit Facility.

We are monitoring the ongoing conflict between Russia and UkraineUkraine, as well as other geopolitical tensions and conflicts around the world, and the potential impact of related export controls andcontrols, financial and economic sanctions imposed on certain industry sectors, including the aviation sector,sanctions, and partiesother inrestrictions Russiaimposed by the U.S., the U.K., the European UnionUnion, and others.other Althoughcountries. While the Russia-Ukraine conflict has not resulted in a direct material adverse impact on our business to date, the implications of theboth Russiathis and Ukraineother conflictglobal conflicts in the short-term and long-term are difficult to predict at this time.predict. Factors such as increased energy costs, disruptions in the availability of certain raw materialsmaterials, for aircraft manufacturers, embargoesrestrictions on flightsair fromtravel Russianor airlines,trade with affected regions, sanctions on Russiancompanies companies,or industries, shifts in customer stability, and thebroader stabilityimpacts of Ukrainian customers could impacton the global economy and aviation sector.sector could pose risks to our operations and financial performance.

In October 2024, a customer reported within the Aerospace segment declared bankruptcy. As a result, the Company recorded a full reserve of $1.0 million for outstanding receivables, a reserve of $1.7 million for inventory and $0.6 million for impairment of fixed assets. In November 2023, a non-core contract manufacturing customer reported within the Aerospace segment filed for bankruptcy under Chapter 11. As a result, the Company recorded a full reserve of $7.5 million for outstanding accounts receivable and a reserve of $3.6 million for inventory. The associated assets existed prior to 2023.

On February 13, 2019, the Company completed a divestiture of its semiconductor test business within the Test Systems segment. The total proceeds of the divestiture included two elements of contingent purchase consideration (“earnout”). In March 2022, the Company agreed with the earnout calculation for the calendar 2021 earnout in the amount of $11.3 million. The Company recorded the gain and received the payment in the first quarter of 2022. In March 2023, the Company agreed with thea final earnout calculation for the calendar 2022 earnout in the amount of $3.4 million. The Company recorded the gain and received the payment in the first quarter of 2023. We are not eligible for any further earnout payments related to this divestiture.

The commercial transport market is our largest end market with sales driven by new aircraft production and aftermarket airline retrofit programs. In the commercial transport market, while many of our key long-term fundamentals remain intact, we continue to see residual, though improving, near-term market pressure due to effects of certain supply chain challenges. We have experienced improvement throughout 20242025 driven by improved activity with our airline customers,customers thoughand recovery from negative effects on production was negatively affected byfrom the quality control issues and labor workforce stoppage on the 737 MAX.MAX experienced in late 2024. Aircraft build rates improved in 2025, and are expected to continue to improveramp during 20252026 and 20262027 from current levels as production of both the 737 MAX and A-320 are expected to increase, and the aftermarket is expected to strengthen over the course of the year as aircraft utilization and load factors increase. International travel utilizing primarily widebody aircraft ishas closereturned to pre-pandemic levels and we believe widebody aircraft production rates will continue to directionally match air traffic volumes.

Maintaining and growing sales to the commercial transport market will depend not only on continued market recovery post-pandemic, but also on airlines’ capital spending budgets for cabin upgrades as well as the purchase of new aircraft by global airlines. This spending by the airlines is impacted by their profits, cash flow and available financing as well as competitive pressures between the airlines to improve the travel experience for their passengers. We expect that new aircraft will be equipped with more passenger and aircraft connectivity and in-seat power than previous generation aircraft which drives demand for our avionics and power products. This market has historically experienced strong growth from airlines installing in-seat passenger power systems on their existing and newly delivered aircraft. Our ability to maintain and grow sales to this market depends on our ability to maintain our technological advantages over our competitors and maintain our relationships with major in-flight entertainment suppliers and global airlines.

Sales to the general aviation market consist mostly of line-fit products driven by aircraft build rates although there are some aftermarket sales as well. Sales to the general aviation market include sales of lighting and safety products, avionics products, and electrical power and seat motion products. Sales to this market totaled approximately 9.3%8.1% of our consolidated sales in 20242025 and amounted to $74.3$69.8 million.

We use the discounted cash flow method to estimate the fair value of each of our reporting units. The discounted cash flow method incorporates various assumptions, the most significant being projected sales growth rates, operating profit margins and cash flows, the terminal growth rate and the discount rate. Management projects sales growth rates, operating margins and cash flows based on eachthe reporting unit’s current business, expected developments and operational strategies. If the carrying value of the reporting unit exceeds its fair value, goodwill is considered impaired and the impairment loss is recorded for the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying value of goodwill.

The Company’s fourfive reporting units remaining with goodwill as of the first day of our fourth quarter were subject to the annual goodwill impairment test. Based on our quantitative assessments of our reporting units, we concluded that goodwill was not impaired in 2024,2025, 20232024 or 2022.2023.

Growth in sales werewas driven by the Aerospace segment due to continued strength in demand for the Aerospace segment primarily from the Commercial Transport market. Aerospace sales wereincreased up $101.9$90.6 million, or 16.8%,12.8%, whilewhich more than offset the $23.9 million decline in Test Systems sales. Consolidated sales increasedwere $4.4negatively impacted by $8.3 million onfrom higherrevisions radioof testestimated revenue.costs Theto prior-yearcomplete periodcertain long-term mass transit contracts in the Test Systems sales benefited from the reversal of a $5.8 million deferred revenue liability recorded with a previous acquisition.segment.

ImpactingThe netcurrent incomeyear wasincludes a $32.6 million loss on settlement of debt as a result of a partial repurchase of the 2030 Convertible Notes, compared to a loss on settlement of debt of $10.1 million forin the lossprior on extinguishment of debtyear, which includedwas related to the $4.5 million in call premiums on the previous term loansloans, which were extinguished upon issuance of the 2030 Convertible Notes, and the write-off of $5.6 million of associated deferred financing costs.

Tax expense was $2.6 million compared with a tax expense of $8.3 million wasin the prior year, primarily due to a valuation allowance applied against the deferred tax assetreversal associated with research and development costs that are requiredexpected to be capitalizedexpensed for tax purposes,purposes comparedin the current year under the OBBBA, along with a tax expense of $0.1$1.0 million inadjustment theto priorreverse year.certain federal and state deferred tax liabilities.

Consolidated net lossincome wasof $16.2 million, or $0.46$0.81 per diluted share,share comparedimproved withfrom a net loss of $26.4 million, or $0.80$(0.46) per diluted share,share in the prior year.year from the strength in operating profit and lower interest expense.

Our effective tax rates for 20242025 and 20232024 were (106.1)%8.1% and (0.4106.1)%, respectively. Prior to 2022, research and development costs were deducted as incurred. However, beginning with the 2022 tax year, as required by the 2017 Tax Cuts and Jobs Act, these costs arewere required to be capitalized for tax purposes and amortized over five years. WhileIn this2025, wouldthe typicallyOne resultBig Beautiful Bill Act (“OBBBA”) restored the ability to deduct research and development expenditures immediately in the creationyear ofincurred an associated deferredfor tax asset,years duebeginning in 2025 and also provided the ability to deduct research and development costs that were previously capitalized prior to 2025. Due to our cumulative three-year pre-tax loss, a valuation allowance was applied against the deferred tax asset. In addition to state and foreign income taxes, the following items had the most significant impact on the difference between our statutory U.S. federal income tax rate (21% in 20242025 and 20232024) and our effective tax rate:

Operating profit, as presented below, is sales less cost of products sold and other operating expenses, excluding interest expense, other corporate expenses and other non-operating sales and expenses. Cost of products sold and other operating expenses are directly identifiable to the respective segment. Operating profit is reconciled to income (loss) before income taxes in Note 20, Segments, to the Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, of this report.

Our Aerospace segment designs and manufactures products for the global aerospace and defense industry. Product lines include lighting and safety systems, electrical power generation, distribution and seat motion systems, inflight entertainment and connectivity products, and other products. Our primary Aerospace customers are the airframe manufacturers (“OEM”) that build aircraft for the commercial transport, military and general aviation markets, suppliers to those OEMs, aircraft operators such as airlines, suppliers to the aircraft operators, and branches of the U.S. Department of Defense (“USDOD”). Our Test Systems segment designs, develops, manufactures and maintains automated test systems that support the aerospace and defensedefense, communications and mass transit industries. In the Test Systems segment, Astronics’ products are sold to a global customer base including OEMs and prime government contractors for both electronics and military products.

On October 22, 2025, the Company entered into the $300.0 million senior secured Revolving Credit Facility. The Revolving Credit Facility replaced the Company’s ABL Revolving Credit Facility which was terminated on October 22, 2025.terminated. The Revolving Credit Facility subjects us to various financial and other affirmative and negative covenants with which we must comply on an ongoing or periodic basis. These include financial covenants pertaining to a total leverage ratio, a consolidated interest coverage ratio, and a secured net debt leverage ratio requirement. An unexpected decline in our revenues or operating income, including occurring as a result of events beyond our control, could cause us to violate our financial covenants.

On February 20, 2026, the U.S. Supreme Court struck down certain tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”). Following the Supreme Court decision, the U.S. Administration announced a new 10% global tariff under Section 122 of the Trade Act of 1974, which was subsequently struck down on May 7, 2026 by the U.S. Court of International Trade. AsRefunds of the filing date, it remains uncertain what impact these decisions will have on our future financial results, including the process and availability of obtaining refunds of amounts previously paid fortariffs represent gain contingencies under ASC 450-30. Consistent with this guidance, the IEEPACompany tariffsrecognizes such refunds as a reduction of Cost of Products Sold in the period in which the gain is realized or anyrealizable, fluctuationsgenerally ofwhen thecash levelis ofreceived. replacementRefunds tariffsthat imposedhave been approved but not yet received, or thethat additionremain ofsubject anyto newappeal, tariffsfurther throughagency action, or other means.contingencies, are not recognized until realization criteria are met.

CONSOLIDATED FIRSTSECOND QUARTER RESULTS

Growth in sales was driven by the Aerospace segment’s continued strength in demand primarily from the Commercial Transport market.market, including $5.9 million from the acquisition of BMA. Aerospace sales increased $22.4$43.7 million, or 11.7%,22.6%, while Test Systems sales grew $2.2$11.6 million, or 15.4%.105.1%. InTest Systems sales in the prior year,year first quarter consolidated sales and gross profit waswere negatively impacted by a $1.9$6.4 million revisiondue to revisions of estimated costs to complete acertain long-term mass transit contract in the Test Systems segment.contracts.

Consolidated cost of products sold in the firstsecond quarter of 2026 was $155.5$173.1 million, compared with $145.1$151.9 million in the samesecond prior-yearquarter periodof 2025, primarily attributabledue to higher volumevolume. andThis increase was partially offset by a $1.7$2.0 million increase inIEEPA tariff expenses.refund. The prior year included a $5.8 million charge related to Aerospace simplification initiatives.

SG&A decreased $0.8$0.9 million. Litigation-related expenses were down $1.2$0.9 millionmillion, and the prior-year period included a $6.2$3.5 million reservelegal adjustmentfee toreimbursement the damage awardcharge relating to the patent infringement dispute in the UK. Appeals to the UK damage award are scheduled to be heard in July 2026. These decreases were mostly offset by higher wages and benefits, higher incentive-based compensation expenses driven by increased profitability, and the incremental expenses related withto the acquired BMA business. R&D was updown $1.0$0.7 million reflecting the timing of projects.

Interest expense was down $0.8 million, or 25.8%,24.7%, on lower rates following the September 2025 refinancing activities. Tax benefitexpense in the quarter wasof $0.8$2.8 million compared with a tax expense of $0.6 million inreflects the prior-year period, mostly as a resultbenefits of a $2.7 million discrete adjustment for the expected benefit of a stock-based compensation deduction along with apartial valuation allowance reversal associated with an expected net operating loss deduction and 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. Tax expense in the prior year was partially offset by a $1.1 million discrete adjustment to reverse certain federal and state deferred tax liabilities.expensed.

Consolidated net income of $0.67$0.75 per diluted share improved from $0.26$0.03 per diluted share in the prior-year period from stronger operating profit, lower interest expense and lower tax.profit.

Bookings of $290.4$306.2 million in the quarter resulted in a book-to-bill ratio of 1.261.18:1. For the trailing twelve months, bookings totaled $935.1$1.06 millionbillion and the book-to-bill ratio was 1.051.13:1. Backlog at the end of the quarter was $734.3$780.6 million.

AEROSPACE FIRSTSECOND QUARTER RESULTS

Aerospace segment sales of $213.8$237.3 million increased $22.4$43.7 million, or 11.7%.22.6%. Sales in the Commercial Transport market increased $18.9$31.4 million, or 13.7%.21.6%. Growth was primarily related to increased demand for seat motion and lighting and safety products. General Aviation sales increased $6.2 million, or 40.7%, to $21.4 million due to higher inflight entertainment & connectivity (“IFEC”) productproducts. General Aviation sales increased $9.2 million, or 50.3%, to the$27.6 million due to higher IFEC sales of VVIP market.products. Military Aircraft sales remainedincreased consistent$3.2 withmillion, theor prior-year11.7%, period.to Other$30.6 million due to increased sales decreasedof $2.9flight millioncritical asairframe thepower Company has wound down its non-core contract manufacturing arrangements.products.

Aerospace segment operating profit of $35.3$48.3 million, or 16.5%20.3% of sales, improved over the prior-year period reflecting the leverage gained on higher volume, improving production efficiencies, a $2.8$2.0 million catch-upIEEPA oftariff profit on the MV-75 program based on revised program estimates, andrefund, a $7.0$4.6 million decrease in litigation-related expenses and legal reserve adjustments related to the UK patent dispute previously discussed.discussed, and the absence of a $6.2 million charge for simplification initiatives in the prior-year period.

TEST SYSTEMS FIRSTSECOND QUARTER RESULTS

Test Systems segment sales of $16.8$22.7 million were up $2.2$11.6 million from the comparator quarter in 2025. Segment sales in the prior-year period were negatively impacted by $1.9a $6.4 million revision of estimated costs to complete a certain long-term mass transit Test contractcontracts reducing revenue recognized in the period.

Test Systems segment operating profit was $0.4$0.6 million, compared with an operating loss of $2.2$6.7 million in the firstsecond quarter of 2025. The revisions to the estimated costs to complete had a $6.9 million detrimental impact to operating income in the prior year. Test Systems profitability, while improving,profitability continues to be negatively affected by mix and under absorption of fixed costs at current volume levels.levels, as well as approximately $4.1 million of revenue in the current quarter at no margin related to dedicated raw materials for the U.S. Army and U.S. Marine Corps Radio Test programs. Margin on that revenue will be recognized through 2026 as production on those programs progress further.

Cash provided by operating activities totaled $10.6$40.7 million for the first threesix months of 2026, as compared with $20.6$13.0 million cash provided by operating activities during the same period in 2025. Cash flow from operating activities decreasedincreased compared with the same period of 2025 reflecting higher cash earnings offset by higher working capital requirements, including higher inventory levels to support anticipated revenue growth in the coming quarters. Cash provided by operating activities in the prior-year period included $21.6 million in payments related to the UK patent dispute and $12.8 million in net income tax payments.

Cash used for investing activities was $11.2$16.9 million for the first threesix months of 2026 compared with $2.1$6.7 million in cash used for investing activities in the same period of 2025 reflecting elevated capital expenditures for necessary catch-up investments on previously deferred spending as well as the consolidation of operations and capacity improvement in a new Seattle facility.

Cash used for financing activities totaled $5.5$32.7 million for the first threesix months of 2026, as compared with cash used for financing activities of $11.4$12.5 million during the same prior-year period. The Company made net payments on long-term debt of $8.9$25.0 million oncompared itsto ABL$10.0 facilitymillion in the prior-year period.

Our ability to maintain sufficient liquidity and comply with financial debt covenants is highly dependent upon achieving expected operating results. Failure to achieve expected operating results could have a material adverse effect on our liquidity, our ability to obtain financing or access our existing financing, and our operations in the future and could allow our debt holders to demand payment of all outstanding amounts. As of AprilJuly 4, 2026, we are in compliance with all covenants under each of our financing arrangements. Our financing arrangements are more fully discussed in Note 7, Long-term Debt and Notes Payable, to the Consolidated Condensed Financial Statements in Item 1, Financial Statements, of this report for additional details.

On August 8, 2023, the Company initiated an at-the-market equity offering program (the “ATM Program”) for the sale from time to time of shares of the Company’s common stock, par value $0.01 per share, having an aggregate offering price of up to $30.0 million. During the three and six months ended AprilJuly 4, 2026, and MarchJune 29,28, 2025, the Company did not sell any shares of its common stock under the ATM Program. As of AprilJuly 4, 2026, the Company had remaining capacity under the ATM Program to sell shares of common stock having an aggregate offering price up to approximately $8.2 million.

The Company’s backlog on AprilJuly 4, 2026 was $734.3$780.6 million compared with $674.5 million on December 31, 2025 and $673.0$645.4 million on MarchJune 29,28, 2025.

Although the majority of our sales, expenses, and cash flows are transacted in U.S. dollars, we have exposure to changes in foreign currency exchange rates related primarily to the Euro and the Canadian dollar. The Company believes that the impact of changes in foreign currency exchange rates on its business and financial results for the three and six months ended AprilJuly 4, 2026 was not significant.

The future impacts of U.S. trade policies, treaties, and tariffs and their residual effects, including economic uncertainty, inflationary environment, and disruption within the global supply chain, and aerospace industry, on our business remain uncertain. As we cannot predict what actions may ultimately be taken with respect to tariffs or trade relations between the United States and various other countries, what products may be subject to such actions, what actions may be taken by the other countries in retaliation, and what actions we may be able to take to address and mitigate such tariffs, the ultimate financial impact on our results cannot be reasonably estimated but could be material. The impact of tariffs on its business and financial results for the three and six months ended AprilJuly 4, 2026 was approximately $2.5$0.7 million.million and $3.2 million, respectively, net of $2.0 million of IEEPA tariff refunds.