I just wanted to continue our program this morning, or this afternoon. Gosh! Time flies. My name is Gautam Khanna, TD Cowen analyst. I cover Astronics, and Aerospace and Defense broadly at Cowen. Very pleased to have with us Peter Gundermann, Chairman, President, and CEO, and Nancy Hedges, Chief Financial Officer of Astronics. Thank you for coming, guys. Thanks for having us. Thanks for having us, and, you're right, it's good to save the best for last, so. Yeah, exactly. I was just gonna ask Peter and Nancy to just give us a very quick kind of introduction of the company so that everyone knows what Astronics does, and then we'll go right into Q&A. Okay. Five minutes. A quick overview. We're an aerospace system supplier. We're 90% aerospace. We do have a second segment that we call Test, but most of our investors think of us as an aerospace company. We act like an aerospace company. We are 70% commercial transport- Mm-hmm ... and 10% military, 10% business jet, 10% test. That's a simple way to look at our company, and if you look back at our financials during the pandemic, that helps explain the drastic movement in our financial results. I mean, we got hit really hard by the pandemic. With that 70% exposure, we've also come storming back. We have... This year, we're expecting top-line revenue pushing $1 billion. We just reported, or we pre-reported a Q4. That was a record quarter for us. We just feel like 10%-15% growth and improved income statement results in 2026 are, you know, so close, we can taste it and feel it. It's gonna be a good year for us. In terms of product lines, approximately half our business is derived by in-flight entertainment or connectivity. It's what passengers do in the cabins of commercial airplanes. Everybody's carrying electronic devices, everybody wants to be connected and entertained, and we provide a wide range of products and enabling technologies to make that happen. We work with 200 some airlines around the world. We work with all the OEMs, we work with the big connectivity companies and the entertainment companies. We're kind of a nose-to-tail hardware company in that space. We also have a lighting strategic thrust. So exterior, if you look at airplane lights out on the tarmac or flying by at night, you see the red light, the green light, the flashing white lights. In the cabin, you have reading lights or emergency escape lights, area lights, certain signage, and in the cockpit, of course, there's all kinds of pilot interface products that allow control of the aircraft. We're active in all those areas. Mm-hmm. We're actually one of the world's largest aircraft lighting companies right now. And then, a smaller product thrust, but one that's getting a lot of attention, is what we call flight critical electrical power. So this is not a passenger amenity, but it's the basic electrical system that drives and powers the aircraft. We're specialists in small aircraft, not big ones, and we employ some very modern technologies or advanced technologies, specifically electronic circuit breakers and high reliability generation machines. So instead of traditional wound electric motors, they're actually permanent magnet or induction-based. And as a result, we've carved out a really unique position. We started in business jets, we're moving into military, the FLRAA program. MV-75 is one of our biggest opportunities. We're really punching over our weight on that program as a supplier to Bell. And, it's gonna be one of the largest ship sets or the largest ship set our company's ever had. Right. Additionally, as it turns out, in today's world, with all the interest in drones and CCAs in particular, not the small ones, but the bigger ones, our system is ideally suited for that kind of aircraft that's autonomous or remotely piloted. Mm-hmm. Because you don't have to—you don't have a thermal switch. You have an electronic switch, which can be controlled remotely. So we're actively involved in that space and also EVTOLs. So any kind of small aircraft, the flight critical electrical system is something that we, we're—we have a pretty exciting value proposition for. Our Test business, just real quickly, it's a $70 million-$80 million business. It has been a struggle. We've done a lot of cost cutting. We have it, contributing now and positively, so we think we're in a good spot, and the great hope there is a radio test program for the U.S. Army. So like a $215 million IDIQ that we expect to turn on in sometime yet in the first half of 2026. So that should layer on, you know, $40 million or $50 million- Mm-hmm ... a year of profitable business on top of an $80 million base. Should be a good story. So a lot of tailwinds as we move into 2026, and we're pretty excited about it. ... Great! Is that enough? Yeah, that's perfect. No, it's a great overview. You did mention that you guys pre-announced Q4, and maybe if you could just talk through what drove the, the better results, both on sales and EBITDA. Like, what came in better than expected? Yeah, I don't think we feel like anything came in better than expected. Oh. It's just that it's a kind of a continuing trend. Yeah. you know, again, we bottomed out at $400 and- Forty-five. $45 million in 2021. Mm-hmm. You know, we have bounced back with some years... I think we averaged, like, 18% growth up until 2025. 2025 was a slower year, 8% growth or so, but a strong year of fine-tuning the cost structure and getting margins where we want them. So the Q4 saw just a continuation, continuing build trend. It was a record quarter for us. Yeah. Of course, volume, more than anything, drives bottom-line results, so we typically say that we can expect, like, a 40% marginal contribution on incremental- Yeah ... revenue dollars. So when you, I think our first three quarters averaged, like, 210, $210 million. Mm-hmm. We came in, you know, much closer to 230 in the, or 240 in the- Yeah, 240, yeah. In the Q4. Okay. So we think that's a new neighborhood for us, and it provides a good base as we get into 2026. It raises the question on visibility. Like, what... Walking into a quarter, how much kind of book and ship in the same quarter? Do you guys have. I'm just curious, like, how the backlog actually converts. Uh, mm. Yeah, I don't have that number off the top of my head, but I know about 75% of our revenue will ship within a year. Within a year? Uh- Yep. There is, there still is a fair amount of Book-and-Ship business. Okay. 'Cause it's interesting, you walked into Q4. Maybe you guys knew it was gonna be better than what the guidance was, but your point is, it wasn't particularly surprising. It wasn't like there was a surge of orders or something weird that was unexpected. If you look back at, really our last probably six, seven quarters, ever since the supply chain kind of quieted down- Yeah ... and, you know, OEM production rates stabilized and started to increase, we've actually beat our guidance pretty regularly- Yeah ... or been right at the high end or slightly beyond, and Q4 was kind of another one of those- Gotcha ... but just at a higher level. Okay. And you're not seeing any sort of pull forwards or anything weird with, around tariffs or anything else? There's no comp issue as we move into 2026. I mean, you guided 10-10, 10%-15% sales growth, 40% contribution margins or better. So if there is any, it's not obvious to us on the outside. I'm just curious, was there any headwind? Tariff headwind? Tariff or yeah. There definitely was, I mean, tariffs- Battery- Tariffs don't help. No, I agree. They hurt. And if they're ever applied kind of reciprocally by other countries on us- Yeah ... it's gonna be another story. But, no, there was nothing kind of fluky in it. Okay. We're not pulling stuff in. Lead times are coming down a little bit. Okay ... so, that makes our backlog look even better- Right ... because otherwise, you know, as lead times come down, backlog should shrink a little bit. We are, again, at a record backlog, even with normalizing lead time, so we're pretty happy about that. What's allowing the lead times to compress? Supply chain. Mm-hmm. Supply chain's better. Yep. Where's the biggest improvement been? Electronics out of Asia. Okay. You know, you guys have described of the 70% or so of sales that's commercial air transport, half is new line, off the line, new production. Yep. Half is retrofit. Yep. Can you talk a little bit about the retrofit business and what you're seeing there, and how do you work with the airlines to make it happen? How far in advance do you typically do so? I think there's an increasing recognition on the part of the airlines that in-flight entertainment and connectivity are absolutely critical. Mm-hmm. Not flight critical, but passenger critical. Yep. You know, there was a time when airlines, especially in the narrow-body world, felt like, "You know, we don't fly that far. People don't need to be on their phones or computers or whatever- Right ... and it's heavy, and it's expensive," but pretty much today, there's widespread recognition that actually, people wanna be connected, even on a short little flight, and they wanna get off the airplane with a fully charged device, so power is important. Sure. And so the interesting thing about our business is that if you think of the life cycles in your average consumer electronics- Mm-hmm ... they're relatively short compared to what we see in the airline or the aerospace industry. Sure. Right? You put a brake system, say, on a 737, it's largely gonna be there for 30 years. Right. I mean, you might rebuild it, repair it, refurb it, but you're not gonna change it. Sure. What's interesting about our business is that a new 787 rolling off the production line is configured with a certain in-flight entertainment system. That in-flight entertainment system is not gonna be there for 30 years. Right. It might be there for 5 or 7. Yep. So the retrofit opportunity is huge for us because there's constant pressure on the part of the airlines to keep up with consumer electronics. Right. That's everything from power to WAP protocols to satellite constellations. It's- Yeah ... it's a constant upgrade opportunity for a company like us. Right. The way to think about it is, you know, people wanna be able to do in airplanes what they can do in their living rooms, and the reality is that the airplane's always gonna be behind the times, so there's gonna be constant pressure to upgrade those systems. Yep, and so do the airlines? Like, do you work directly with the airlines? Do you work with- So- ... seating manufacturers? I'm just curious, like, what's your access to market? We sit right in the middle of the cabin in many respects. We work with 200-some airlines around the world, because they always wanna know, what the next thing's gonna be, and they, in some cases, buy directly from us. We'll work with the in-flight entertainment companies. The most prominent ones are Panasonic and Thales. Mm-hmm ... and a Safran company that just went private, or was spun off. And we also work with connectivity companies, so think of Viasat, Inmarsat, Intelsat, people like that. Yep. We have to be offerable at Boeing and Airbus, so we have full ranges of offerability there. And then we have to... you're right, the seat companies are very important, too. If you're a company that designs and develops seats, and you're gonna go through all that expensive crash testing- Yeah ... you wanna make sure that you can accommodate our hardware because we have such high market share- Right ... in many things, so we work with them. We don't necessarily sell to them very often, but if you walk around an interiors show, for example. Mm-hmm ... you'll see a lot of different seats, and if you look underneath or you look through the details, you'll see a lot of Astronics equipment in all the different booths. Yeah ... 'cause they wanna demonstrate that they know how to work with our system. Gotcha. We're kind of right in the middle of everything there. Does the retrofit side of the business look pretty strong in 2026 and beyond? It correlates with airline profits. Mm-hmm. Airlines have generally been, you know, starting to make money, and they've been pulling a lot of airplanes that were parked in the desert. Those all had to be retrofitted. Right. and yeah, we, we view it as a pretty consistent part of our business these days. We say 50/50, 50% line fit, 50% aftermarket or retrofit. It's kind of the same sale, by the way. Mm-hmm. Most companies in the aerospace industry think of aftermarket as a margin opportunity. Yeah. For us, it's kind of the same sale. It doesn't matter if it goes aftermarket or line fit, it's generally the same product being used the same way by the same customers. Sure, gotcha. And actually, it's interesting 'cause on the... You guys have talked about the difference between wide-body aircraft penetration opportunities for in-flight entertainment versus narrow-body. Could you give the audience a little bit of flavor on how those are different? The big difference is seat back displays. I mean- Okay ... a wide-body airplane, pretty much every seat of every airplane, built over the last 10-plus years has a screen in the back of every seat. Narrow-body, and they also have streaming content, they also have, you know, satellite connectivity of some sort, usually. Narrow-body is much more limited. New aircraft being built generally have streaming content and maybe some type of satellite connectivity built on. 60%-70% have power for the passengers, but the installed base around the world is much lower than that. Right. So there's a big aftermarket opportunity as airlines increasingly outfit or their existing installed base of aircraft. Mm-hmm ... which is something we're actively involved in, and that's part of how we get 50/50. Gotcha. There's a lot of activity, both in ramping production rates, Boeing, Airbus, narrow-body, wide-body, but also in the aftermarket, especially in the narrow-body world. That makes sense. One of the things that people sometimes ask us is, Starlink is becoming, you know, a bigger player in Wi-Fi on aircraft. Like, United talks about it, what have you. Do you guys... How do they play into this ecosystem, and how do you play- With that? -yeah. So. So let me broaden it out a little bit and talk about LEO- Yep ... Low Earth Orbit instead of Starlink specifically. Yep. It's another example of that constant technical technology churn I call it. Mm-hmm. Mm-hmm. You know, over the last decade, maybe a little bit longer, the prominent pioneering connectivity technology was air-to-ground, a company called Gogo- Yep ... which is now, well, Intelsat or SES. And then it went to geostationary or geosynchronous satellite technologies, KU first and then KA- Mm-hmm ... and now LEO is on the scene. We don't fly satellites- Right. ... and we're not really active in antenna technologies. We do stuff in the airplane- Mm-hmm ... and the stuff in the airplane is kind of the same, it all has to be there, regardless of what the connectivity technology is. Okay. So we have found a way, over time, to transition from ATG familiarity and involvement to KU to KA, and I'm quite confident that LEO will be more of the same. As far as the market dynamics, you're right, Starlink has a lead... and Starlink is making a lot of waves- Yeah. but they're not the only ones involved. Gotcha. Telesat, Eutelsat, Amazon is developing a network. Right. We expect it's gonna become a more competitive landscape. Right ... in the, in the very near future. But to your point, it doesn't really matter. It doesn't really matter. We can work with any of them- Gotcha ... or all of them. And again, our connections with the airline can be very helpful also in navigating those, that changing technology, 'cause we know what they're gonna do- Yep. No, Well in advance. Of course. You know, you mentioned kind of the retrofit cycles tend to be 5-7 years. We've seen just in the, you know, your phone example, the old plugs, I don't know what the heck they call them now, it's USB-C. Mm-hmm. Is that one of the triggering events for this kind of retrofit cycle right now, is upgrading the power outlets themselves? It's a great example, yeah. Yeah. We actually, we developed that technology way back probably 25 years ago. Mm-hmm. It was originally DC only, 'cause the FAA- Right ... was reluctant to let AC be in the cabin of an airplane, although we have- Ah ... AC in pretty much everywhere else. And eventually, we got there, so it was 110 volts AC. And then it was USB Type-A, and most recently, USB Type-C. And I will predict boldly here... that you're gonna see another evolution coming forward, which will be wireless charging in- Mm-hmm ... the cabins of airplanes. You're already seeing it if you fly international first class in some airlines. But, the magnetic back- Yep ... might enable the mounting of a phone on the seat ahead of you, so you can charge and stream content, like a seat back display, but it's not a seat back display. Gotcha. So. Is that something you guys are already kind of working to address? Maybe. Okay. That's fine. No, it's interesting. Yeah, yeah. That's good. We are actively involved. Okay. Now, I imagine the customers are bringing you along with them. You're working with them to do this- Absolutely ... speculative. Absolutely. No, part of what we do is act as a liaison between the consumer electronics industry and the airlines. Mm-hmm. So, we're very much up to speed with what is happening with consumer electronics. And the airlines have learned to come to us to help them anticipate what the next wave of technology is gonna be, and what they should look out for and try to integrate. Okay, gotcha. I know we... I didn't wanna skip over FLRAA, 'cause that program seems to be, the MV-75 seems to be accelerating, it appears. And if you could talk a little bit about how that impacts Astronics and when? Like, how, how should we think about the ramp on that program? It's a huge program for us. Our ship set content is still being developed. We're doing the entire electrical distribution system after the generators, before the end use systems on the aircraft. Bell has been a good, solid, long-term customer of ours. I talked very briefly about the technology that we employ for small aircraft. Mm. We did their 525 first, we did the 505 second. We ended up on their FARA entry, which, you know- Yeah ... is no more. Sure. Then FLRAA. They kind of use us as their outsourced electrical engineering department. It's an example of how, in this industry, if you do a good job for a customer, they tend to be pretty loyal. Mm-hmm. The FLRAA aircraft is very electrically intensive. It's being designed for a wide range of missions. Our product ship set, while it's still being negotiated, I'm suggesting that people model it in at $1 million a ship- Mm-hmm ... which is very significant for a company our size. Production rates are all over the map. Right. Nobody necessarily knows. The number 1,000 seems to be a low estimate for that people use. 2,000. Yeah ... seems to be a more common estimate. We are well along in our development process at this point. It's, for us, a total of about $100 million, let's say, and we're probably a third through it- Mm-hmm ... at this point. We expect to wrap it up, towards the end of 2026 and into 2027. And, and then there's an open debate, you know, about accelerating that program and ramping it up. And, and you probably are as familiar with that as I am, so. Yeah. No, I gotcha. So. Is there a big aftermarket opportunity on that program once it gets fielded or? There should be. Yeah, absolutely. I mean, it, you know, they're still building Black Hawks, right? Right. They started that program in the 1970s. We expect a similar production run and long use case with- Mm-hmm ... the FLRAA program, and it ought to be a real game changer for our company. Okay. We didn't talk about general aviation, but what do you guys do there? Um, lighting- Yep ... and flight critical electrical power. Okay, so that's what you're talking about. So Pilatus PC-24, Cessna Denali, Cicada, Daher, what am I... drawing a blank. But we do- Yeah ... again, if it's a small aircraft- Yep ... and they wanna have an advanced electrical system, we're kind of the only—we're the ones who do that. Okay, gotcha. I wanted to just touch on M&A, 'cause last year you guys did a couple acquisitions. Mm-hmm. Could you talk about what the M&A strategy is? What are you looking to—what do you look for and— ... We take an open book to acquisitions. We have bought companies for product line extensions, we've bought companies for customer relationships, we've bought companies for market share. So, in some times, you know, you buy a company, and you know it's gonna be a kind of a reboot- Mm. and require a lot of effort, and sometimes you buy it and let it run. Right. We're open to all those kind of strategies. We have not been very active over the last five years. During the pandemic, we didn't have the balance sheet to do it, frankly. Right. And as we come out of it now, we've done some refinancing. Our balance sheet looks a lot better, so we're more capable now, and we have our eyes open. But frankly, we're pretty convinced that the best thing we can do is focus on the opportunities that are right in front of us. Mm ... on our plate. If we execute well, we'll create a lot of value there. Mm. Acquisitions are exciting, they're fun, they're also a little bit risky. Yeah. Right. The last thing we wanna do is distract ourselves- Right ... with all the opportunities that we have, so. Is the pipeline pretty full, though? I mean, it was- It's picking up. Okay. Yeah, I'd say it's picking up. You know, I think that there were a lot of transactions on hold- Mm ... while the industry worked through the pandemic. Yeah. So I think deal flow will start to pick up, yes. Gotcha. Actually, it does beg the question on the balance sheet, and I did wanna touch on this. Nancy, a little bit about the convert. So you originally had a convert, and that was—if you could talk about the genesis for why that happened, and then you refi'd the convert, which was a, accretive move, and if you could talk about- Sure. So, That whole process. About a year or so ago, a year and a half ago, we have an outstanding patent litigation, and our attorneys were advising us, we should prepare for potentially a negative outcome. Mm-hmm. So, looking at our different funding potential funding sources, we decided on a convert. We did a $165 million, 5.5% convert. Right. Subsequently, that ruling came in much better than was anticipated. Instead of $112 million that they were seeking, the award was $12 million, so Right, right. But ultimately, the conversion price of that original bond was about $23. We have blown past that. We also... So we decided to, as we continued to go past the conversion price, that bond was getting expensive to settle. So again, looking at our options that were available, we entered into a new convert $225 million 0% note. We bought back 80% of the initial convert. Mm-hmm. That eliminated 5.8 million shares of potential dilution to shareholders. Mm-hmm. and it lowered our average cost of debt. So, the conversion price on that's 54, about $55, which again, we've gone past that as well. But this time around, we purchased what's called a capped call- Mm-hmm ... which basically sets the conversion price functionally at about $83. So up to, up to between that conversion price and the upper limit on the capped call, there's no exposure that would be covered by the capped call counterparties. So we're not- it's not dilutive to the shareholders unless and until our stock price exceeds that upper limit on the capped call. Gotcha. And at that point, it sort of gradually- Yes ... becomes more dilutive. Yep. Are there any plans to deal with that convert, I mean, to deal with the dilution in any way proactively? Is there anything you can do? We're not gonna do another one. I mean, there's things we can do, but at this point, it's not an immediate priority for us. We're continuing to strengthen our balance sheet. Yeah. We recently also entered into a new revolving credit facility with a higher limit. Okay. We're feeling pretty, pretty confident with our balance sheet right now. Gotcha. I would just add that, on the second convert, we committed to paying back the coupon in cash, so there's no dilution- On the principal, yeah. ... on the principal. And it only is a possible dilution on the excess value over the $83 Capped Call price. So- Okay ... and we can pay that back in cash, too, and so we have four years to figure that out. Gotcha. It's a relatively low level of dilution compared to a full convert. Right. Yeah. Okay, that's actually pretty, pretty smart. One other thing I was gonna get on, you'd mentioned it at the outset, which was the test system segment, which we didn't spend much time on, but the contract you were expecting or are expecting, sort of what has been the delay? 'Cause you've had the equipment at the ready for a while, and- Yeah ... sort of what's the catalyst for that contract moving forward? So the contract is basically to provide a test station to the U.S. Army that would allow them to verify functional performance or diagnose faults in any of the 28 families of radios that they use. As you can imagine, the U.S. Army has a lot of soldiers. The soldiers use pretty complex radios for coordination and communication when they go out and do their jobs. And they wanna make sure that those things are working functionally. And they operate around the world. So instead of having a dedicated test capability for each family of radio, they want one that can do the whole job. So the U.S. Army picked our system two years ago? Oh! Three years ago? 4. I think 4 years ago now. A long time ago. And we developed it and rounded it out, and we've been waiting for a production turn-on ever since. And I am very impressed with what our armed forces can do, and quickly when they want to. Yes. They just don't always want to. Got it. Yeah, no, I get it. So it's just been slow to take off. The previous technology that they standardized on was supplied by another company, and that system's obsolete. It can't be supported, so they're cannibalizing those systems in order to keep the train rolling, so to speak. Okay. So there's clear demand and a requirement in the user community. We feel it's a matter of when and not if. And all of the kind of pre-production steps that have been required are largely complete or, you know, within sight. So it's really a matter of getting signatures and getting the authorization going. Okay. We thought, you know, last summer or last fall, that we'd be turned on by the end of the year. The government shutdown did not help us. Right. And then it came... You know, everyone came back to work just in time to enjoy the holidays. So now everybody's back at the desk, and we're thinking we get turned on sometime, probably early in the Q2 is what we're thinking. Okay. Well, thank you very much, guys. I appreciate you participating in our conference again. Thanks for inviting us. Yep. Thank you, Peter. Thank you. Yes. Thanks, Nancy. Thanks.