Q1 2026 Astronics Corp Earnings Call

Operator 3: Greetings, and welcome to the Astronics Corporation Q1 Fiscal Year 2026 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Deborah Pawlowski, investor relations for Astronics. Please go ahead.

Operator: Greetings, and welcome to the Astronics Corporation Q1 Fiscal Year 2026 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Deborah Pawlowski, investor relations for Astronics. Please go ahead.

Speaker #2: A question-and-answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.

Speaker #2: It is now my pleasure to introduce Deborah Pawlowski, Investor Relations for ASTRONICS. Please go ahead. Thanks, Rochelle, and good afternoon, everyone. We certainly appreciate your time today and your interest in ASTRONICS.

Deborah K. Pawlowski: Thanks, Rochelle. Good afternoon, everyone. We certainly appreciate your time today and your interest in Astronics. On the call with me here are Peter J. Gundermann, our chairman, president, and CEO, and Nancy L. Hedges, our chief financial officer. You should have a copy of our Q1 2026 financial results, which crossed the wires after the market closed today. If you do not have the release, you can find it on our website at astronics.com. As you are aware, we may make some forward-looking statements during the formal discussion and the Q&A session on this conference call. These statements apply to future events that are subject to risks and uncertainties as well as other factors that could cause actual results to differ materially from what is stated here today.

Deborah Pawlowski: Thanks, Rochelle. Good afternoon, everyone. We certainly appreciate your time today and your interest in Astronics. On the call with me here are Peter J. Gundermann, our chairman, president, and CEO, and Nancy L. Hedges, our chief financial officer. You should have a copy of our Q1 2026 financial results, which crossed the wires after the market closed today. If you do not have the release, you can find it on our website at astronics.com. As you are aware, we may make some forward-looking statements during the formal discussion and the Q&A session on this conference call. These statements apply to future events that are subject to risks and uncertainties as well as other factors that could cause actual results to differ materially from what is stated here today.

Speaker #2: On the call with me here are Peter Gundermann, our Chairman, President, and CEO; and Nancy Hedges, our Chief Financial Officer. You should have a copy of our first quarter 2026 financial results, which crossed the wires after the market closed today.

Speaker #2: If you do not have the release, you can find it on our website at astronics.com. As you are aware, we may make some forward-looking statements during the formal discussion and the Q&A session of this conference call.

Speaker #2: These statements apply to future events that are subject to risks and uncertainties as well as other factors that could cause actual results to differ materially from what is stated here today.

Speaker #2: These risks and uncertainties, and other factors, are provided in the earnings release as well as with other documents filed with the Securities and Exchange Commission.

Deborah K. Pawlowski: These risks and uncertainties and other factors are provided in the earnings release as well as with other documents filed with Securities and Exchange Commission. You can find those documents on our website as well as at sec.gov. During today's call, we'll have some non-GAAP measures that we'll discuss, which we believe will be useful in evaluating our performance. You should not consider the presentation of this additional information in isolation or as a substitute for results prepared in accordance with GAAP. We have provided reconciliations of non-GAAP measures with comparable GAAP measures in the tables that accompany today's release. With that, I will turn it over to Pete to begin. Peter?

Deborah Pawlowski: These risks and uncertainties and other factors are provided in the earnings release as well as with other documents filed with Securities and Exchange Commission. You can find those documents on our website as well as at sec.gov. During today's call, we'll have some non-GAAP measures that we'll discuss, which we believe will be useful in evaluating our performance. You should not consider the presentation of this additional information in isolation or as a substitute for results prepared in accordance with GAAP. We have provided reconciliations of non-GAAP measures with comparable GAAP measures in the tables that accompany today's release. With that, I will turn it over to Pete to begin. Peter?

Speaker #2: You can find those documents on our website as well as at ASEC.gov. During today's call, we'll have some non-GAAP measures that we'll discuss, which we believe will be useful in evaluating our performance.

Speaker #2: You should not consider the presentation of this additional information in isolation or as a substitute for results prepared in accordance with GAAP. We have provided reconciliations of non-GAAP measures with comparable GAAP measures in the tables that accompany today's release.

Speaker #2: So with that, I will turn it over to Pete to begin. Peter? Thanks, Debbie, and hello, everybody. Welcome to the call. We're here to talk about our first quarter results and our outlook for the remainder of the year.

Peter J. Gundermann: Thanks, Debbie. Hello, everybody. Welcome to the call. We're here to talk about our Q1 results and our outlook for the remainder of the year. Nancy and I will do our usual back and forth and then open up the lines for questions. In summary, the Q1, we feel, was a strong start to the year for Astronics. Revenue of $230 million was at the high end of our guided range and our second-highest quarterly total ever, second only to the previous quarter, the Q4 of 2025. The strong volume, combined with the range of improvement initiatives we have put in place across the business, resulted in solid margin improvement compared to the year-ago quarter.

Peter Gundermann: Thanks, Debbie. Hello, everybody. Welcome to the call. We're here to talk about our Q1 results and our outlook for the remainder of the year. Nancy and I will do our usual back and forth and then open up the lines for questions. In summary, the Q1, we feel, was a strong start to the year for Astronics. Revenue of $230 million was at the high end of our guided range and our second-highest quarterly total ever, second only to the previous quarter, the Q4 of 2025. The strong volume, combined with the range of improvement initiatives we have put in place across the business, resulted in solid margin improvement compared to the year-ago quarter.

Speaker #2: Nancy and I will do our usual back-and-forth, and then open up the lines for questions. In summary, the first quarter, we feel, was a strong start to the year for ASTRONICS.

Speaker #2: Revenue of $230 million was at the high end of our guided range, and our second highest quarterly total ever, second only to the previous quarter, the fourth quarter of 2025.

Speaker #2: The strong volume, combined with the range of improvement initiatives we have put in place across the business, resulted in solid margin improvement compared to the year-ago quarter.

Speaker #2: I'll leave it to Nancy to talk through the details, but I will point out that our adjusted EBITDA margin of 16.4% compared to 14.9% in the comparator quarter shows continued improvement in this important metric.

Peter J. Gundermann: I'll leave it to Nancy to talk through the details, but I will point out that our adjusted EBITDA margin of 16.4% compared to 14.9% in the comparator quarter shows continued improvement in this important metric. I also want to call attention to our bookings, which were on the high end of $290 million in the quarter for a book-to-bill of 1.26. The bookings total was an all-time record, and even though we had a strong shipping quarter, resulted in a backlog of $734 million at the end of the quarter, which is another all-time record. We call attention to our bookings because it is a leading indicator of where our business will be going in the near to midterm.

Peter Gundermann: I'll leave it to Nancy to talk through the details, but I will point out that our adjusted EBITDA margin of 16.4% compared to 14.9% in the comparator quarter shows continued improvement in this important metric. I also want to call attention to our bookings, which were on the high end of $290 million in the quarter for a book-to-bill of 1.26. The bookings total was an all-time record, and even though we had a strong shipping quarter, resulted in a backlog of $734 million at the end of the quarter, which is another all-time record. We call attention to our bookings because it is a leading indicator of where our business will be going in the near to midterm.

Speaker #2: I also want to call attention to our bookings, which were on the high end of $290 million in the quarter for a book-to-bill of $1.26.

Speaker #2: The bookings total was an all-time record, and even though we had a strong shipping quarter, resulted in a backlog of $734 million at the end of the quarter, which is another all-time record.

Speaker #2: We call attention to our bookings because it is a leading indicator of where our business will be going in the near to midterm. Bookings can certainly be lumpy quarter to quarter, but the overall trend, say, over a rolling four-quarter period, is telling.

Peter J. Gundermann: Bookings can certainly be lumpy quarter to quarter, but the overall trend, say, over a rolling four-quarter period, is telling. Further, the strong booking performance in Q1 was not the result of any large or unusual orders that boosted the total. Rather, it was driven by growing customer demand across our business, demonstrating strong market conditions for our full range of products. Our strong start to 2026 has caused us to increase our expectations for the rest of the year. We are increasing our revenue guidance to the range of $970 million to $1 billion, up from the original range of $950 to 990 million. The midpoint of the new range would be a 14% increase over 2025 sales. The high end of the range, which is certainly possible, would be an increase of 16%.

Peter Gundermann: Bookings can certainly be lumpy quarter to quarter, but the overall trend, say, over a rolling four-quarter period, is telling. Further, the strong booking performance in Q1 was not the result of any large or unusual orders that boosted the total. Rather, it was driven by growing customer demand across our business, demonstrating strong market conditions for our full range of products. Our strong start to 2026 has caused us to increase our expectations for the rest of the year. We are increasing our revenue guidance to the range of $970 million to $1 billion, up from the original range of $950 to 990 million. The midpoint of the new range would be a 14% increase over 2025 sales. The high end of the range, which is certainly possible, would be an increase of 16%.

Speaker #2: Further, the strong booking performance in the first quarter was not the result of any large or unusual orders that boosted the total. Rather, it was driven by growing customer demand across our business, demonstrating strong market conditions for our full range of products.

Speaker #2: Our strong start to 2026 has caused us to increase our expectations for the rest of the year. We're increasing our revenue guidance to the range of $970 million to $1 billion up from the original range of $950 to $990.

Speaker #2: The midpoint of the new range would be a 14% increase over 2025 sales, the high end of the range, which is certainly possible, would be an increase of 16%.

Speaker #2: This is all assumed to be organic growth. As an aside, because I know we will get questions, we have seen no impact from the current slate of global geopolitical confrontations on our business, and I'm particularly referring to the Iran war.

Peter J. Gundermann: This is all assumed to be organic growth. As an aside, because I know we will get questions, we have seen no impact from the current slate of global geopolitical confrontations on our business, and I'm particularly referring to the Iran war. We have seen no war-related pushouts, delays, or cancellations since hostilities began in late February. We believe we are well-positioned for a strong showing in 2026 and are benefiting from a wide range of factors that are driving us forward. I'm going to turn it over to Nancy now to cover some of the specifics of our Q1 results as well as the change to our reporting practice. When I get the mic back, I'll briefly talk through the major market tailwinds that we are enjoying. Nancy?

Peter Gundermann: This is all assumed to be organic growth. As an aside, because I know we will get questions, we have seen no impact from the current slate of global geopolitical confrontations on our business, and I'm particularly referring to the Iran war. We have seen no war-related pushouts, delays, or cancellations since hostilities began in late February. We believe we are well-positioned for a strong showing in 2026 and are benefiting from a wide range of factors that are driving us forward. I'm going to turn it over to Nancy now to cover some of the specifics of our Q1 results as well as the change to our reporting practice. When I get the mic back, I'll briefly talk through the major market tailwinds that we are enjoying. Nancy?

Speaker #2: We have seen no war-related push-outs, delays, or cancellations since hostilities began in late February. We believe we are well-positioned for a strong showing in 2026, and our benefiting from a wide range of factors that are driving us forward.

Speaker #2: I'm going to turn it over to Nancy now to cover some of the specifics of our first quarter results as well as the change to our reporting practice.

Speaker #2: But when I get the mic back, I'll briefly talk through the major market tailwinds that we are enjoying. Nancy?

Speaker #3: Thanks, Pete, and good afternoon, everyone. I'll walk through our first quarter results in more detail. Provide some color by segment, review cash flow and the balance sheet, and then close with key financial priorities for 2026.

Nancy L. Hedges: Thanks, Pete. Good afternoon, everyone. I'll walk through our Q1 results in more detail, provide some color by segment, review cash flow and the balance sheet, then close with key financial priorities for 2026. As Pete noted, Q1 was a solid start to the year with strong top-line growth, meaningful margin expansion, and record bookings and backlog that support our decision to raise the full-year outlook. Q1 sales were $231 million, including $4.6 million from the BMA acquisition. Sales grew 12% from $206 million in Q1 2025. Growth was driven primarily by strength in our aerospace segment with continued robust demand in commercial transport, solid contributions from general aviation for VVIP projects, and improving results in test systems.

Nancy Hedges: Thanks, Pete. Good afternoon, everyone. I'll walk through our Q1 results in more detail, provide some color by segment, review cash flow and the balance sheet, then close with key financial priorities for 2026. As Pete noted, Q1 was a solid start to the year with strong top-line growth, meaningful margin expansion, and record bookings and backlog that support our decision to raise the full-year outlook. Q1 sales were $231 million, including $4.6 million from the BMA acquisition. Sales grew 12% from $206 million in Q1 2025. Growth was driven primarily by strength in our aerospace segment with continued robust demand in commercial transport, solid contributions from general aviation for VVIP projects, and improving results in test systems.

Speaker #3: As Pete noted, Q1 was a solid start to the year with strong top-line growth, meaningful margin expansion, and record bookings and backlog that support our decision to raise the full-year outlook.

Speaker #3: First quarter sales were $231 million, including $4.6 million from the BMA acquisition. Sales grew 12% from $206 million in the first quarter of 2025.

Speaker #3: Growth was driven primarily by strength in our aerospace segment, with continued robust demand and commercial transport, solid contributions from General Aviation for VVIP projects, and improving results in test systems.

Speaker #3: Growth profit increased to $75 million, or 32.6% of sales, compared with $61 million or 29.5% of sales in the prior year period. The $310 basis point gross margin expansion was driven by higher volume, improved productivity, and a 2.8 million cumulative catch-up adjustment on the MV75 program, which added about $120 basis points of margin based on updated program estimates.

Nancy L. Hedges: Gross profit increased to $75 million or 32.6% of sales, compared with $61 million or 29.5% of sales in the prior year period. The 310 basis point gross margin expansion was driven by higher volume, improved productivity, and a $2.8 million cumulative catch-up adjustment on the MV-75 program, which added about 120 basis points of margin based on updated program estimates. These benefits were partially offset by a $1.7 million increase in tariff expenses. Last year's first quarter also included a $1.9 million negative revision on a long-term mass transit contract in test systems which depressed the prior year margin.

Nancy Hedges: Gross profit increased to $75 million or 32.6% of sales, compared with $61 million or 29.5% of sales in the prior year period. The 310 basis point gross margin expansion was driven by higher volume, improved productivity, and a $2.8 million cumulative catch-up adjustment on the MV-75 program, which added about 120 basis points of margin based on updated program estimates. These benefits were partially offset by a $1.7 million increase in tariff expenses. Last year's first quarter also included a $1.9 million negative revision on a long-term mass transit contract in test systems which depressed the prior year margin.

Speaker #3: These benefits were partially offset by a 1.7 million increase in tariff expenses. Last year's first quarter also included a 1.9 million negative revision on a long-term mass transit contract in test systems, which depressed the prior year margin.

Speaker #3: R&D expense was about $12 million in the quarter, up modestly from $11 million a year ago, reflecting the timing of projects and consistent with our intent to continue investing in differentiated technology.

Nancy L. Hedges: R&D expense was about $12 million in the quarter, up modestly from $11 million a year ago, reflecting the timing of projects and consistent with our intent to continue investing in differentiated technology. Selling, general, and administrative expense decreased slightly to $35.8 million from $36.6 million, and declined as a percent of sales to 15.5% from 17.8% in the prior year, reflecting operating leverage and substantially lower litigation-related expense year over year, partially offset by higher wages, incentive compensation, and incremental costs from the acquired BMA business. Income from operations more than doubled to $27.2 million from $13.1 million in the prior year quarter.

Nancy Hedges: R&D expense was about $12 million in the quarter, up modestly from $11 million a year ago, reflecting the timing of projects and consistent with our intent to continue investing in differentiated technology. Selling, general, and administrative expense decreased slightly to $35.8 million from $36.6 million, and declined as a percent of sales to 15.5% from 17.8% in the prior year, reflecting operating leverage and substantially lower litigation-related expense year over year, partially offset by higher wages, incentive compensation, and incremental costs from the acquired BMA business. Income from operations more than doubled to $27.2 million from $13.1 million in the prior year quarter.

Speaker #3: Selling general and administrative expense decreased slightly to $35.8 million, from $36.6 million. And declined as a percent of sales to $15.5% from $17.8% in the prior year.

Speaker #3: Reflecting operating leverage and substantially lower litigation-related expense year over year, partially offset by higher wages, incentive compensation, and incremental costs from the acquired BMA business.

Speaker #3: Income from operations more than doubled to $27.2 million, from $13.1 million in the prior year quarter. On an adjusted basis, which excludes litigation-related items, ERP consulting and certain other non-recurring items, operating income was $29.6 million, and adjusted operating margin was $12.8%, up 180 basis points from 11% in the prior year period.

Nancy L. Hedges: On an adjusted basis, which excludes litigation-related items, ERP consulting, and certain other non-recurring items, operating income was $29.6 million, and adjusted operating margin was 12.8%, up 180 basis points from 11% in the prior year period. Interest expense was $2.3 million in the quarter, down $800,000 or 25.8% from $3.2 million a year ago, primarily reflecting the lower interest rate environment following our September 2025 refinancing. As you know, taxes have been quite variable the last few years.

Nancy Hedges: On an adjusted basis, which excludes litigation-related items, ERP consulting, and certain other non-recurring items, operating income was $29.6 million, and adjusted operating margin was 12.8%, up 180 basis points from 11% in the prior year period. Interest expense was $2.3 million in the quarter, down $800,000 or 25.8% from $3.2 million a year ago, primarily reflecting the lower interest rate environment following our September 2025 refinancing. As you know, taxes have been quite variable the last few years.

Speaker #3: Interest expense was $2.3 million in the quarter, down $800,000, or 25.8%, from $3.2 million a year ago, primarily reflecting the lower interest rate environment following our September 2025 refinancing.

Speaker #3: As you know, taxes have been quite variable the last few years. In the quarter, we recorded a tax benefit of $800,000, driven largely by a $2.7 million discrete adjustment related to stock-based compensation, a valuation allowance reversal, and the treatment of R&D costs.

Nancy L. Hedges: In the quarter, we recorded a tax benefit of $800,000, driven largely by a $2.7 million discrete adjustment related to stock-based compensation, a valuation allowance reversal, and the treatment of R&D costs. This compares with a $600,000 tax expense in the prior year period, which included a discrete $1.1 million benefit. While on the topic of taxes, I should point out that we expect in the coming quarters, possibly as early as Q2, to meet the accounting requirements to release the valuation allowance related to our deferred tax assets, having demonstrated sufficient earnings power to utilize that asset. The reversal will result in a significant one-time tax benefit in the applicable quarter.

Nancy Hedges: In the quarter, we recorded a tax benefit of $800,000, driven largely by a $2.7 million discrete adjustment related to stock-based compensation, a valuation allowance reversal, and the treatment of R&D costs. This compares with a $600,000 tax expense in the prior year period, which included a discrete $1.1 million benefit. While on the topic of taxes, I should point out that we expect in the coming quarters, possibly as early as Q2, to meet the accounting requirements to release the valuation allowance related to our deferred tax assets, having demonstrated sufficient earnings power to utilize that asset. The reversal will result in a significant one-time tax benefit in the applicable quarter.

Speaker #3: This compares with a $600,000 tax expense in the prior year period, which included a discrete $1.1 million benefit. While on the topic of taxes, I should point out that we expect, in the coming quarters—possibly as early as the second quarter—to meet the accounting requirements to release the valuation allowance related to our deferred tax assets, having demonstrated sufficient earnings power to utilize that asset.

Speaker #3: The reversal will result in a significant one-time tax benefit in the applicable quarter. Net income for the quarter was $25.5 million, or 67 cents per diluted share, compared with $9.5 million or 26 cents per diluted share in the first quarter of '25.

Nancy L. Hedges: Net income for the quarter was $25.5 million or $0.67 per diluted share, compared with $9.5 million or $0.26 per diluted share in Q1 2025. Adjusted net income was $22.5 million, up 32.6% from $17 million last year. Adjusted diluted EPS in Q1 2026 was $0.59, up from $0.44 per diluted share in the prior year period. Adjusted EBITDA was $37.9 million in the quarter, up 23.3% from $30.7 million in the prior year period. Adjusted EBITDA margin expanded 150 basis points to 16.4% of sales. As Pete mentioned, this continues the margin improvement trajectory we've been focused on over the last several quarters.

Nancy Hedges: Net income for the quarter was $25.5 million or $0.67 per diluted share, compared with $9.5 million or $0.26 per diluted share in Q1 2025. Adjusted net income was $22.5 million, up 32.6% from $17 million last year. Adjusted diluted EPS in Q1 2026 was $0.59, up from $0.44 per diluted share in the prior year period. Adjusted EBITDA was $37.9 million in the quarter, up 23.3% from $30.7 million in the prior year period. Adjusted EBITDA margin expanded 150 basis points to 16.4% of sales. As Pete mentioned, this continues the margin improvement trajectory we've been focused on over the last several quarters.

Speaker #3: Adjusted net income was $22.5 million, up 32.6% from $17 million last year. Adjusted diluted EPS in the 2026 first quarter was $59 cents, up from 44 cents per diluted share in the prior year period.

Speaker #3: Adjusted EBITDA was $37.9 million in the quarter, up 23.3% from $30.7 million in the prior year period. Adjusted EBITDA margin expanded 150 basis points to 16.4% of sales.

Speaker #3: As Pete mentioned, this continues the margin improvement trajectory we've been focused on over the last several quarters. Weighted average diluted shares outstanding were $38.2 million in the quarter, down from $43 million in the prior year period.

Nancy L. Hedges: Weighted average diluted shares outstanding were 38.2 million in the quarter, down from 43 million in the prior year period. That decrease was largely driven by the repurchase of a portion of our outstanding convertible notes completed in 2025. Turning to the segments, starting with Aerospace. Aerospace segment sales were $213.8 million in the quarter, which is an increase of $22.4 million or 11.7%. Commercial transport sales increased 13.7% to $156.4 million, driven by higher demand for seat motion and lighting and safety products, along with continued strength in in-flight entertainment and connectivity or IFEC. General aviation sales grew 40.7% to $21.4 million, primarily on higher IFEC product sales into the VVIP market.

Nancy Hedges: Weighted average diluted shares outstanding were 38.2 million in the quarter, down from 43 million in the prior year period. That decrease was largely driven by the repurchase of a portion of our outstanding convertible notes completed in 2025. Turning to the segments, starting with Aerospace. Aerospace segment sales were $213.8 million in the quarter, which is an increase of $22.4 million or 11.7%. Commercial transport sales increased 13.7% to $156.4 million, driven by higher demand for seat motion and lighting and safety products, along with continued strength in in-flight entertainment and connectivity or. General aviation sales grew 40.7% to $21.4 million, primarily on higher IFEC product sales into the VVIP market.

Speaker #3: That decrease was largely driven by the repurchase of a portion of our outstanding convertible notes completed in 2025. Turning to the segments, starting with aerospace, aerospace segment sales were $213.8 million in the quarter, which is an increase of 22.4 million or 11.7%.

Speaker #3: Commercial transport sales increased $13.7% to $156.4 million, driven by higher demand for seat motion and lighting and safety products, along with continued strength in in-flight entertainment and connectivity, or IFEC.

Speaker #3: General Aviation sales grew 40.7% to $21.4 million, primarily on higher IFEC product sales into the VVIP market, while military aircraft sales were essentially flat year over year at $33.5 million.

Nancy L. Hedges: While military aircraft sales were essentially flat year-over-year at thirty-three and a half million. Other aerospace revenue declined by $2.9 million as we've wound down non-core contract manufacturing arrangements. The other segment won't be as meaningful going forward, but does include some non-core machined products. Beginning this quarter, we've recast our product line sales to align with our strategic thrusts, which we have been presenting supplementally in our investor presentations for several years. We believe this is a clearer and more effective presentation that explains the key drivers of the business. To provide perspective on the business by the new product categories, we've provided quarterly sales by product line for 2024 and 2025 as a supplemental table in the earnings release.

Nancy Hedges: While military aircraft sales were essentially flat year-over-year at thirty-three and a half million. Other aerospace revenue declined by $2.9 million as we've wound down non-core contract manufacturing arrangements. The other segment won't be as meaningful going forward, but does include some non-core machined products. Beginning this quarter, we've recast our product line sales to align with our strategic thrusts, which we have been presenting supplementally in our investor presentations for several years. We believe this is a clearer and more effective presentation that explains the key drivers of the business. To provide perspective on the business by the new product categories, we've provided quarterly sales by product line for 2024 and 2025 as a supplemental table in the earnings release.

Speaker #3: Other Aerospace revenue declined by $2.9 million as we've wound down non-core contract manufacturing arrangements. The Other segment won't be as meaningful going forward, but does include some non-core machined products.

Speaker #3: Beginning this quarter, we've recast our product line sales to align with our strategic thrusts, which we had been presenting supplementally in our investor presentations for several years.

Speaker #3: We believe this is a clearer and more effective presentation that explains the key drivers of the business. To provide perspective on the business by the new product categories, we've provided quarterly sales by product line for 2024 and 2025 as a supplemental table in the earnings release.

Speaker #3: Our largest product category is IFEC, which is comprised of passenger power as well as connectivity hardware, such as servers, motor managers, wireless access points, outside antenna equipment, and associated kits.

Nancy L. Hedges: Our largest product category is IFEC, which is comprised of passenger power as well as connectivity hardware such as servers, modem managers, wireless access points, outside antenna equipment, and associated kits. Revenue for these solutions was $110.7 million, up 7.4% year-over-year and representing just over 48% of our total sales. Our next largest product category is lighting and safety, which represents about 23% of sales and includes lighting for interior, exterior, and cockpit lighting, including evacuation path lighting, as well as safety equipment such as the passenger service units, emergency flashlights, survival kits, and other emergency system solutions. Revenue for this product category increased 1.6% to $52.8 million. Flight critical electrical power is, as the name implies, critical to the operation of the aircraft.

Nancy Hedges: Our largest product category is IFEC, which is comprised of passenger power as well as connectivity hardware such as servers, modem managers, wireless access points, outside antenna equipment, and associated kits. Revenue for these solutions was $110.7 million, up 7.4% year-over-year and representing just over 48% of our total sales. Our next largest product category is lighting and safety, which represents about 23% of sales and includes lighting for interior, exterior, and cockpit lighting, including evacuation path lighting, as well as safety equipment such as the passenger service units, emergency flashlights, survival kits, and other emergency system solutions. Revenue for this product category increased 1.6% to $52.8 million. Flight critical electrical power is, as the name implies, critical to the operation of the aircraft.

Speaker #3: Revenue for these solutions was $110.7 million, up 7.4% year over year and representing just over 48% of our total sales. Our next largest product category is lighting and safety, which represents about 23% of sales and includes lighting for interior, exterior, and cockpit applications, including evacuation path lighting, as well as safety equipment such as the passenger service units, emergency flashlights, survival kits, and other emergency system solutions.

Speaker #3: Revenue for this product category increased 1.6% to $52.8 million. Flight critical electrical power is, as the name implies, critical to the operation of the aircraft.

Speaker #3: This includes starter generators, electronic circuit breakers, and advanced switching technologies. Sales for this product category grew $16.2% to $24.8 million. Seat motion revenue was historically reported within our former electrical power and motion product group.

Nancy L. Hedges: This includes starter generators, electronic circuit breakers and advanced switching technologies. Sales for this product category grew 16.2% to $24.8 million. Seat motion revenue was historically reported within our former electrical power and motion product group. The seat motion product group has seen strong growth with sales of $13.2 million, up nearly 200% from $6.7 million in the prior year quarter, reflecting strong demand in the $4.6 million contribution of the BMA acquisition. Aerospace segment operating profit was $35.3 million or 16.5% of sales, an improvement from $22.3 million or 11.6% in Q1 2025.

Nancy Hedges: This includes starter generators, electronic circuit breakers and advanced switching technologies. Sales for this product category grew 16.2% to $24.8 million. Seat motion revenue was historically reported within our former electrical power and motion product group. The seat motion product group has seen strong growth with sales of $13.2 million, up nearly 200% from $6.7 million in the prior year quarter, reflecting strong demand in the $4.6 million contribution of the BMA acquisition. Aerospace segment operating profit was $35.3 million or 16.5% of sales, an improvement from $22.3 million or 11.6% in Q1 2025.

Speaker #3: The seat motion product group has seen strong growth with sales up $13.2 million, up nearly 200% from $6.7 million in the prior year quarter, reflecting strong demand and the $4.6 million contribution of the BMA acquisition.

Speaker #3: Aerospace segment operating profit was $35.3 million, or 16.5% of sales. An improvement from 22.3 million or 11.6% in the first quarter of '25. The improvement reflects higher volume, better production efficiencies, the MV75 profit catch-up, and a $7 million reduction in litigation-related expense and reserve adjustments related to the UK patent dispute.

Nancy L. Hedges: The improvement reflects higher volume, better production efficiencies, the MV-75 profit catch-up, and a $7 million reduction in litigation-related expense and reserve adjustments related to the UK patent dispute, partially offset by higher tariffs. On an adjusted basis, aerospace operating profit was $37.2 million, and adjusted aerospace operating margin expanded 120 basis points to 17.4%. Bookings in aerospace were $264.4 million, up 11% sequentially, and our second highest ever, trailing only Q1 2025, which included the initial MV-75 engineering order. The aerospace book-to-bill ratio was a very robust 1.24, with demand broad-based against product and market categories. Aerospace backlog reached a record $651.4 million at quarter end, up from $600.8 million at year-end 2025.

Nancy Hedges: The improvement reflects higher volume, better production efficiencies, the MV-75 profit catch-up, and a $7 million reduction in litigation-related expense and reserve adjustments related to the UK patent dispute, partially offset by higher tariffs. On an adjusted basis, aerospace operating profit was $37.2 million, and adjusted aerospace operating margin expanded 120 basis points to 17.4%. Bookings in aerospace were $264.4 million, up 11% sequentially, and our second highest ever, trailing only Q1 2025, which included the initial MV-75 engineering order. The aerospace book-to-bill ratio was a very robust 1.24, with demand broad-based against product and market categories. Aerospace backlog reached a record $651.4 million at quarter end, up from $600.8 million at year-end 2025.

Speaker #3: Partially offset by higher tariffs. On an adjusted basis, aerospace operating profit was $37.2 million, and adjusted aerospace operating margin expanded 120 basis points to 17.4%.

Speaker #3: Bookings in aerospace were $264.4 million, up 11% sequentially, and our second highest ever, trailing only the first quarter of 2025, which included the initial MV75 engineering order.

Speaker #3: The aerospace book-to-bill ratio was a very robust 1.24, with demand broad-based across product and market categories. Aerospace backlog reached a record $651.4 million at quarter-end, up from $600.8 million at year-end 2025.

Speaker #3: That gives a strong visibility into the remainder of the year and underpins our raised outlook. Turning to test systems, sales were $16.8 million in the quarter, up 2.2 million or 15.4% from $14.6 million in the prior year period.

Nancy L. Hedges: That gives us strong visibility into the remainder of the year and underpins our raised outlook. Turning to test systems, sales were $16.8 million in the quarter, up $2.2 million or 15.4% from $14.6 million in the prior year period. Again, recall that last year's Q1 sales and gross profit were negatively impacted by a $1.9 million cost estimate revision on a long-term mass transit contract, which reduced revenue and profit recognized in that period. Segment operating profit was slightly above break even at $400,000 compared with an operating loss last year.

Nancy Hedges: That gives us strong visibility into the remainder of the year and underpins our raised outlook. Turning to test systems, sales were $16.8 million in the quarter, up $2.2 million or 15.4% from $14.6 million in the prior year period. Again, recall that last year's Q1 sales and gross profit were negatively impacted by a $1.9 million cost estimate revision on a long-term mass transit contract, which reduced revenue and profit recognized in that period. Segment operating profit was slightly above break even at $400,000 compared with an operating loss last year.

Speaker #3: Again, recall that last year's first quarter sales and gross profit were negatively impacted by a $1.9 million cost estimate revision on a long-term mass transit contract, which reduced revenue and profit recognized in that period.

Speaker #3: Segment operating profit was slightly above break-even at $400,000, compared with an operating loss last year. The benefits from our cost rationalization and simplification initiatives have continued to take hold and provide a solid foundation from which we can expand once the production order for the Army radio test program is received, which we expect in the next several weeks.

Nancy L. Hedges: The benefits from our cost rationalization and simplification initiatives have continued to take hold and provide a solid foundation from which we can expand once the production order for the Army Radio Test Program is received, which we expect in the next several weeks. Bookings for test systems were $26.1 million, resulting in a book-to-bill ratio of 1.55. Backlog for the segment ended the quarter at $83 million. We plan on announcing the rate the Army Radio Test Program order when received, and expect the order will contribute to revenue for a year or more. Turning to cash in the balance sheet. We generated $10.6 million of cash from operations in Q1, compared with $20.6 million a year ago.

Nancy Hedges: The benefits from our cost rationalization and simplification initiatives have continued to take hold and provide a solid foundation from which we can expand once the production order for the Army Radio Test Program is received, which we expect in the next several weeks. Bookings for test systems were $26.1 million, resulting in a book-to-bill ratio of 1.55. Backlog for the segment ended the quarter at $83 million. We plan on announcing the rate the Army Radio Test Program order when received, and expect the order will contribute to revenue for a year or more. Turning to cash in the balance sheet. We generated $10.6 million of cash from operations in Q1, compared with $20.6 million a year ago.

Speaker #3: Bookings for test systems were $26.1 million, resulting in a booked bill ratio of 1.55. Backlog for the segment ended the quarter at $83 million.

Speaker #3: We plan on announcing the Army test program order when received and expect the order will contribute to revenue for a year or more. Turning to cash in the balance sheet, we generated $10.6 million of cash from operations in the first quarter, compared with $20.6 million a year ago.

Speaker #3: The year-over-year difference reflects higher working capital requirements to support anticipated revenue growth, including an increase in inventory, partially offset by higher cash earnings. Accounts receivable rose in line with sales, and we continue to manage past-due balances and collections closely.

Nancy L. Hedges: The year-over-year difference reflects higher working capital requirements to support anticipated revenue growth, including an increase in inventory, partially offset by higher cash earnings. Accounts receivable rose in line with sales. We continue to manage past due balances and collections closely. Capital expenditures were $11.2 million in the quarter, up from $2.1 million a year ago as we continue to invest in capacity, productivity, and facility consolidation. Elevated CapEx also reflects catch-up investments on previously deferred spending and the ongoing consolidation of operations and capacity expansion in our new Seattle facility, which we expect to complete here in Q2. As a reminder, we expect CapEx for full year 2026 to be in the range of $40 to $45 million.

Nancy Hedges: The year-over-year difference reflects higher working capital requirements to support anticipated revenue growth, including an increase in inventory, partially offset by higher cash earnings. Accounts receivable rose in line with sales. We continue to manage past due balances and collections closely. Capital expenditures were $11.2 million in the quarter, up from $2.1 million a year ago as we continue to invest in capacity, productivity, and facility consolidation. Elevated CapEx also reflects catch-up investments on previously deferred spending and the ongoing consolidation of operations and capacity expansion in our new Seattle facility, which we expect to complete here in Q2. As a reminder, we expect CapEx for full year 2026 to be in the range of $40 to $45 million.

Speaker #3: Capital expenditures were $11.2 million in the quarter, up from $2.1 million a year ago, as we continue to invest in capacity, productivity, and facility consolidation.

Speaker #3: Elevated CapEx also reflects catch-up investments on previously deferred spending, and the ongoing consolidation of operations and capacity expansion in our new Seattle facility, which we expect to complete here in the second quarter.

Speaker #3: As a reminder, we expect CapEx for full year 2026 to be in the range of $40 to $45 million. We ended the quarter with total debt of $334.9 million, essentially unchanged from year-end, and cash and cash equivalents of $11.9 million.

Nancy L. Hedges: We ended the quarter with total debt of $334.9 million, essentially unchanged from year-end, and cash and cash equivalents of $11.9 million. We had $231.8 million of available liquidity at year-end, which includes 19.1% of available cash. I'm sorry, $19.1 million of available cash and undrawn capacity in our revolving credit facility. Our leverage position and liquidity provide us with flexibility to fund organic growth, support capital investments, and advance our strategic initiatives. I'll also remind you that we're in the early phases of implementing a new global enterprise resource planning system.

Nancy Hedges: We ended the quarter with total debt of $334.9 million, essentially unchanged from year-end, and cash and cash equivalents of $11.9 million. We had $231.8 million of available liquidity at year-end, which includes 19.1% of available cash. I'm sorry, $19.1 million of available cash and undrawn capacity in our revolving credit facility. Our leverage position and liquidity provide us with flexibility to fund organic growth, support capital investments, and advance our strategic initiatives. I'll also remind you that we're in the early phases of implementing a new global enterprise resource planning system.

Speaker #3: We had $231.8 million of available liquidity at year-end, which includes $19.1% of available cash—I'm sorry, $19.1 million of available cash—and undrawn capacity on our revolving credit facility.

Speaker #3: Our leveraged position and liquidity provide us with flexibility to fund organic growth, support capital investments, and advance our strategic initiatives. I'll also remind you that we're in the early phases of implementing a new global enterprise resource planning system.

Speaker #3: We expect to invest approximately $15 to $17 million in 2026 on this initiative, excluding internal operating expenses. With $2 to $3 million flowing through P&L as incremental operating expense, and the remainder to be capitalized and reflected as a cash outflow from operations.

Nancy L. Hedges: We expect to invest approximately $15 to 17 million in 2026 on this initiative, excluding internal operating expenses, with $2 to 3 million flowing through P&L as incremental operating expense and the remainder to be capitalized and reflected as a cash outflow from operations. Over the 5-year life of the project, we anticipate total spend of $35 to 40 million, of which roughly $25 million will be capitalized. Before turning it back to Pete, I'll briefly summarize our outlook for Q2. We expect Q2 sales to be in the range of $245 to 250 million, which would be a new quarterly record for our company. We expect revenue to step up further in H2 2026 as the Army Radio Test Program moves into production and our aerospace programs continue to ramp.

Nancy Hedges: We expect to invest approximately $15 to 17 million in 2026 on this initiative, excluding internal operating expenses, with $2 to 3 million flowing through P&L as incremental operating expense and the remainder to be capitalized and reflected as a cash outflow from operations. Over the 5-year life of the project, we anticipate total spend of $35 to 40 million, of which roughly $25 million will be capitalized. Before turning it back to Pete, I'll briefly summarize our outlook for Q2. We expect Q2 sales to be in the range of $245 to 250 million, which would be a new quarterly record for our company. We expect revenue to step up further in H2 2026 as the Army Radio Test Program moves into production and our aerospace programs continue to ramp.

Speaker #3: Over the five-year life of the project, we anticipate total spend of $35 to $40 million, of which roughly $25 million will be capitalized. Before turning it back to Pete, I'll briefly summarize our outlook for the second quarter.

Speaker #3: We expect second-quarter sales to be in the range of $245 to $250 million, which would be a new quarterly record for our company. And we expect revenue to step up further in the second half of 2026 as the Army radio test program moves into production and our aerospace programs continue to ramp.

Speaker #3: From a margin standpoint, our focus remains on achieving sustainable high-teens adjusted operating margins on a consolidated basis, with continued progress toward that goal in '26.

Nancy L. Hedges: From a margin standpoint, our focus remains on achieving sustainable high teens adjusted operating margins on a consolidated basis, with continued progress toward that goal in 2026. We expect to be supported by volume leverage, improved productivity, lower litigation costs, and a richer mix within both aerospace and test. We also expect Test Systems profitability to improve meaningfully as volume builds on the U.S. Army Radio Test Program, and as we continue to execute on cost and mix initiatives. We're pleased with our start to 2026 and believe we're well positioned to deliver another year of strong growth and improved profitability. With that, I'll turn it back to Pete for some final comments before we open the line for questions. Pete.

Nancy Hedges: From a margin standpoint, our focus remains on achieving sustainable high teens adjusted operating margins on a consolidated basis, with continued progress toward that goal in 2026. We expect to be supported by volume leverage, improved productivity, lower litigation costs, and a richer mix within both aerospace and test. We also expect Test Systems profitability to improve meaningfully as volume builds on the U.S. Army Radio Test Program, and as we continue to execute on cost and mix initiatives. We're pleased with our start to 2026 and believe we're well positioned to deliver another year of strong growth and improved profitability. With that, I'll turn it back to Pete for some final comments before we open the line for questions. Pete.

Speaker #3: We expect to be supported by volume leverage, improved productivity, lower litigation costs, and a richer mix within both aerospace and test. We also expect test systems profitability to improve meaningfully as volume builds on the U.S. Army radio test program and as we continue to execute on cost and mix initiatives.

Speaker #3: We're pleased with our start to 2026 and believe we're well positioned to deliver another year of strong growth and improved profitability. And with that, I'll turn it back to Pete for some final comments before we open the line for questions.

Speaker #3: Pete?

Speaker #2: Thank you, Nancy. Now, I want to spend a couple of minutes talking through the range of major market forces that are driving our business forward.

Peter J. Gundermann: Thank you, Nancy. Now, I want to spend a couple of minutes talking through the range of major market forces that are driving our business forward. Understanding these principles or these forces is key to understanding how our company is going to perform in the coming periods. There are five points that I want to make. The first one, and perhaps most obviously, rising production rates for commercial aircraft are very important for our company. About 70% of our sales go to commercial aircraft, with half of that going to the production of new aircraft and half going to aftermarket retrofits. New aircraft production at both Airbus and Boeing is therefore very important to us, and both OEMs are working to increase the rate of both their wide-body and narrow-body offerings as quickly as possible.

Peter Gundermann: Thank you, Nancy. Now, I want to spend a couple of minutes talking through the range of major market forces that are driving our business forward. Understanding these principles or these forces is key to understanding how our company is going to perform in the coming periods. There are five points that I want to make. The first one, and perhaps most obviously, rising production rates for commercial aircraft are very important for our company. About 70% of our sales go to commercial aircraft, with half of that going to the production of new aircraft and half going to aftermarket retrofits. New aircraft production at both Airbus and Boeing is therefore very important to us, and both OEMs are working to increase the rate of both their wide-body and narrow-body offerings as quickly as possible.

Speaker #2: Understanding these principles or these forces is key to understanding how our company is going to perform in the coming periods. There are five points that I want to make.

Speaker #2: The first one, and perhaps most obviously, rising production rates for commercial aircraft are very important for our company. About 70% of our sales go to commercial aircraft with half of that going to the production of new aircraft and half going to aftermarket retrofits.

Speaker #2: New aircraft production at both Airbus and Boeing is therefore very important to us, and both OEMs are working to increase the rate of both their wide-body and narrow-body offerings as quickly as possible.

Speaker #2: Both have plans to increase the rate of aircraft production in the coming years 30 to 50 percent from current levels, depending on the model.

Peter J. Gundermann: Both have plans to increase the rate of aircraft production in the coming years, 30% to 50% from current levels, depending on the model. It'll take time for these rate increases to be fully realized, but the rate increases are necessary due to the overwhelming demand from airlines around the globe. Additionally, the Boeing 777X will come online next year, which will be a significant program for us. Simply put, when the OEMs increase their build rates, we ship more product, and the table is set for significant and consistent rate increases in the coming years. Second, there is a clear trend whereby airline passengers want to be connected, entertained, and powered at all times, including when they're flying on airplanes. Airlines around the world are well aware of their passengers' wishes and are outfitting an increasing proportion of their fleets with the capabilities to accommodate their customers.

Peter Gundermann: Both have plans to increase the rate of aircraft production in the coming years, 30% to 50% from current levels, depending on the model. It'll take time for these rate increases to be fully realized, but the rate increases are necessary due to the overwhelming demand from airlines around the globe. Additionally, the Boeing 777X will come online next year, which will be a significant program for us. Simply put, when the OEMs increase their build rates, we ship more product, and the table is set for significant and consistent rate increases in the coming years. Second, there is a clear trend whereby airline passengers want to be connected, entertained, and powered at all times, including when they're flying on airplanes. Airlines around the world are well aware of their passengers' wishes and are outfitting an increasing proportion of their fleets with the capabilities to accommodate their customers.

Speaker #2: It'll take time for these rate increases to be fully realized, but the rate increases are necessary due to the overwhelming demand from airlines around the globe.

Speaker #2: Additionally, the Boeing 777 will come online next year, which will be a significant program for us. Simply put, when the OEMs increase their build rates, we ship more product, and the table is set for significant and consistent rate increases in the coming years.

Speaker #2: Second, there is a clear trend whereby airline passengers want to be connected entertained and powered at all times. Including when they're flying on airplanes.

Speaker #2: Airlines around the world are well aware of their passengers' wishes and are outfitting an increasing proportion of their fleets with the capabilities to accommodate their customers.

Speaker #2: Our company is well positioned to benefit from this trend as approximately half our sales comes from in-flight entertainment and connectivity or IFEC applications, which for us includes our passenger power or in-seat power franchise.

Peter J. Gundermann: Our company is well positioned to benefit from this trend, as approximately half our sales comes from in-flight entertainment and connectivity, or IFEC applications, which for us includes our passenger power or in-seat power franchise. We have the widest product range of all suppliers to this market and count the full range of IFE companies, connectivity companies, and over 200 airlines around the world as customers. As the airline industry outfits more and more aircraft to meet the expectations of their passengers, we stand to benefit. What is more, because the technology life cycles associated with connectivity and entertainment systems are short by aerospace standards, airlines are continually under pressure to make their IFEC offerings more up-to-date, and we get lots of opportunities to help them retrofit and upgrade their fleets consequentially. Third, our flight critical electrical power product line is an important growth opportunity.

Peter Gundermann: Our company is well positioned to benefit from this trend, as approximately half our sales comes from in-flight entertainment and connectivity, or IFEC applications, which for us includes our passenger power or in-seat power franchise. We have the widest product range of all suppliers to this market and count the full range of IFE companies, connectivity companies, and over 200 airlines around the world as customers. As the airline industry outfits more and more aircraft to meet the expectations of their passengers, we stand to benefit. What is more, because the technology life cycles associated with connectivity and entertainment systems are short by aerospace standards, airlines are continually under pressure to make their IFEC offerings more up-to-date, and we get lots of opportunities to help them retrofit and upgrade their fleets consequentially. Third, our flight critical electrical power product line is an important growth opportunity.

Speaker #2: We have the widest product range of all suppliers to this market and count the full range of IFE companies, connectivity companies, and over 200 airlines around the world as customers.

Speaker #2: As the airline industry outfits more and more aircraft to meet the expectations of their passengers, we stand to benefit. What is more, because the technology lifecycles associated with connectivity and entertainment systems are short by aerospace standards, airlines are continually under pressure to make their IFEC offerings more up to date and we get lots of opportunities to help them retrofit and upgrade their fleets.

Speaker #2: Consequentially, third, our flight-critical electrical power product line is an important growth opportunity. It is only 10% of our sales currently. But we expect big things from this product line in the coming years.

Peter J. Gundermann: It is only 10% of our sales currently, but we expect big things from this product line in the coming years. We serve the general aviation or business jet and small military aircraft market and have key positions on some important emerging programs like the MV-75, where we are a prominent supplier to Bell. We also have interesting positions in the coming wave of eVTOL aircraft and unpiloted drones, both of which are nearing certification and getting serious investment. Fourth, seat motion has become a more meaningful contributor to our growth profile. We're a leading provider of motion systems for high-end aircraft seating, and demand for premium seating is strong. Long-haul airlines around the world are reconfiguring their fleets to cater to high-end passengers, and we are benefiting.

Peter Gundermann: It is only 10% of our sales currently, but we expect big things from this product line in the coming years. We serve the general aviation or business jet and small military aircraft market and have key positions on some important emerging programs like the MV-75, where we are a prominent supplier to Bell. We also have interesting positions in the coming wave of eVTOL aircraft and unpiloted drones, both of which are nearing certification and getting serious investment. Fourth, seat motion has become a more meaningful contributor to our growth profile. We're a leading provider of motion systems for high-end aircraft seating, and demand for premium seating is strong. Long-haul airlines around the world are reconfiguring their fleets to cater to high-end passengers, and we are benefiting.

Speaker #2: We serve the general aviation or business jet and small military aircraft market and have key positions on some important emerging programs like the MV-75, where we are a prominent supplier to Bell.

Speaker #2: We also have interesting positions in the coming wave of EVTOL aircraft and unpiloted drones. Both of which are nearing certification and getting serious investment.

Speaker #2: Fourth, seat motion has become a more meaningful contributor to our growth profile. We're a leading provider of motion systems for high-end aircraft seating, and demand for premium seating is strong.

Speaker #2: Long-haul airlines around the world are reconfiguring their fleets to cater to high-end passengers and we are benefiting. The new product line categories detailed on page 12 of the press release shows first-quarter seat motion sales of 20 million, three times what it was last year.

Peter J. Gundermann: The new product line categories detailed on page 12 of the press release shows Q1 seat motion sales of $20 million, 3 times what it was last year. We expect that the Q1 rate will accelerate slightly as we move through 2026, such that year-over-year growth in 2026 will be north of 100%. Fifth, we expect our test business to accelerate in the second half of the year as the U.S. Army Radio Test Program finally moves into production. We've taken significant cost out of the business over the last couple of years, and incremental volume on this program will have a meaningful positive effect on both revenue and profitability. As a reminder, we were the sole source winner of an IDIQ program valued by the Army at $215 million, with an expected performance period of 5 years.

Peter Gundermann: The new product line categories detailed on page 12 of the press release shows Q1 seat motion sales of $20 million, 3 times what it was last year. We expect that the Q1 rate will accelerate slightly as we move through 2026, such that year-over-year growth in 2026 will be north of 100%. Fifth, we expect our test business to accelerate in the second half of the year as the U.S. Army Radio Test Program finally moves into production. We've taken significant cost out of the business over the last couple of years, and incremental volume on this program will have a meaningful positive effect on both revenue and profitability. As a reminder, we were the sole source winner of an IDIQ program valued by the Army at $215 million, with an expected performance period of 5 years.

Speaker #2: We expect that the Q1 rate will accelerate slightly as we move through 2026, such that year-over-year growth in 2026 will be north of 100%.

Speaker #2: And fifth, we expect our test business to accelerate in the second half of the year as the U.S. Army radio test program finally moves into production.

Speaker #2: We've taken significant costs out of the business over the last couple of years, and incremental volume on this program will have a meaningful positive effect on both revenue and profitability.

Speaker #2: As a reminder, we were the sole source winner of an IDIQ program valued by the Army at $215 million with an expected performance period of five years.

Speaker #2: We are expecting a production turn-on in the coming weeks, making the program an important contributor in the second half of 2026. So, those are the main tailwinds we see.

Peter J. Gundermann: We are expecting a production turn on in the coming weeks, making the program an important contributor in the H2 of 2026. Those are the main tailwinds we see. Rising aircraft production rates, continued demand for onboard connectivity, entertainment, and power, growth in flight critical electrical power in emerging aircraft, strong momentum in seat motion, and an improving outlook for test. We believe these forces will continue to build as we move through 2026 and beyond. That ends our prepared remarks. Rochelle, I think we can open up for questions now.

Peter Gundermann: We are expecting a production turn on in the coming weeks, making the program an important contributor in the H2 of 2026. Those are the main tailwinds we see. Rising aircraft production rates, continued demand for onboard connectivity, entertainment, and power, growth in flight critical electrical power in emerging aircraft, strong momentum in seat motion, and an improving outlook for test. We believe these forces will continue to build as we move through 2026 and beyond. That ends our prepared remarks. Rochelle, I think we can open up for questions now.

Speaker #2: Rising aircraft production rates, continued demand for onboard connectivity entertainment and power, growth in flight-critical electrical power in emerging aircraft, strong momentum in seat motion and an improving outlook for tests.

Speaker #2: We believe these forces will continue to build as we move through 2026 and beyond. And that ends our prepared remarks. So Rochelle, I think we can open up for questions now.

Speaker #1: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad.

Operator 3: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. Thank you. Our first question today will come from Jonathan Tanwanteng with CJS Securities.

Operator: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. Thank you. Our first question today will come from Jonathan Tanwanteng with CJS Securities.

Speaker #1: A confirmation tone will indicate your line is in the question queue. You may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys.

Speaker #1: Thank you. Our first question today will come from John Tagwangtan with CJS Securities.

Speaker #3: Hey, good afternoon. Thank you for taking my questions and nice quarter and outlook. Pete, I was wondering if you could just address I know you're seeing strength now from the airlines and there's all these underlying drivers for it, but I was wondering if you look further out and maybe the Iran conflict isn't resolved.

Jonathan Tanwanteng: Hey, good afternoon. Thank you for taking my questions, and nice quarter and outlook. Pete, I was wondering if you could just address. I know you're seeing strength now from the airlines and there's all these underlying drivers for it, but I was wondering if you look further out and maybe the Iran conflict isn't resolved, where would you expect to see weakness first? Is it from your Mideast airline customers or, you know, maybe more airlines going out of business like Spirit, but maybe going up the chain? Just help us think through the scenario there.

Jon Tanwanteng: Hey, good afternoon. Thank you for taking my questions, and nice quarter and outlook. Pete, I was wondering if you could just address. I know you're seeing strength now from the airlines and there's all these underlying drivers for it, but I was wondering if you look further out and maybe the Iran conflict isn't resolved, where would you expect to see weakness first? Is it from your Mideast airline customers or, you know, maybe more airlines going out of business like Spirit, but maybe going up the chain? Just help us think through the scenario there.

Speaker #3: Where would you expect to see weakness first? Is it from your Mideast airline customers or maybe more airlines going out of business like Spirit, but maybe going out the chain?

Speaker #3: Just help us think through the scenario there.

Peter J. Gundermann: Well, it's a little hard to read the future in this area, John, as you might expect. I guess my first instinct is just to I guess say what I said before in the prepared remarks, that we're not seeing any impact at this point. Certainly in terms of traffic and flights, the Middle East airlines are being affected. I would expect that not to be a permanent thing. I would expect for that to bounce back when the conflict ceases, however it ceases. I do think the rising fuel prices could be a more of a problem for the low-cost providers. You know, for better or for worse, low-cost providers are not typically our major customers for our IFEC products, you know, around the world.

Speaker #2: Well, it's a little hard to read the future in this area, John, as you might expect. I guess my first instinct is just to, I guess, say what I said before in the prepared remarks—that we're not seeing any impact at this point.

Peter Gundermann: Well, it's a little hard to read the future in this area, John, as you might expect. I guess my first instinct is just to I guess say what I said before in the prepared remarks, that we're not seeing any impact at this point. Certainly in terms of traffic and flights, the Middle East airlines are being affected. I would expect that not to be a permanent thing. I would expect for that to bounce back when the conflict ceases, however it ceases. I do think the rising fuel prices could be a more of a problem for the low-cost providers. You know, for better or for worse, low-cost providers are not typically our major customers for our IFEC products, you know, around the world.

Speaker #2: Certainly, in terms of traffic and flights, the Middle East airlines are being affected. I would expect that not to be a permanent thing. I would expect that to bounce back when the conflict ceases.

Speaker #2: However, it ceases, I do think the rising fuel prices could have a problem could be more of a problem for the low-cost providers. And for better or for worse, low-cost providers are not typically our major customers for our IFEC products.

Speaker #2: Around the world, they tend to be more bare bones in terms of their product offerings. So I don't see that as a major risk for our company.

Peter J. Gundermann: They tend to be, you know, more bare bones in terms of their product offerings. I don't see that as a major risk for our company. I also, you know, in a worst case scenario, if there's some kind of degradation in aircraft ordering, I'm expecting that there's so much extra demand out there that leasing companies, for example, would take the slots of any airlines that wanna give up their slots. Maybe I'm optimistic, but I don't see it being a big deal. Of course, the longer this goes and the worse it gets, who knows? We're gonna be in uncharted territory. That's, that is not our feeling today. It's kind of a weird situation, you know.

Peter Gundermann: They tend to be, you know, more bare bones in terms of their product offerings. I don't see that as a major risk for our company. I also, you know, in a worst case scenario, if there's some kind of degradation in aircraft ordering, I'm expecting that there's so much extra demand out there that leasing companies, for example, would take the slots of any airlines that wanna give up their slots. Maybe I'm optimistic, but I don't see it being a big deal. Of course, the longer this goes and the worse it gets, who knows? We're gonna be in uncharted territory. That's, that is not our feeling today. It's kind of a weird situation, you know.

Speaker #2: I also in a worst-case scenario, if there's some kind of degradation in aircraft ordering, I'm expecting that there's so much extra demand out there that leasing companies for example, would take the slots of any airlines that want to give up their slots.

Speaker #2: So maybe I'm optimistic, but I don't see it being a big deal. Of course, the longer this goes and the worse it gets, who knows?

Speaker #2: We're going to be an uncharted territory. But that is not our feeling today. It's kind of a weird situation. If we were just to look at our internal business and not pay attention to the internet or the news, we would think everything was going absolutely great in the world.

Peter J. Gundermann: If we were just to look at our internal business and not pay attention to the internet or the news, we would think everything was going absolutely great in the world. There is a little bit of a disconnect between this ranging conflict and the way our business feels inside our four walls. You know, for now, that's how it is.

Peter Gundermann: If we were just to look at our internal business and not pay attention to the internet or the news, we would think everything was going absolutely great in the world. There is a little bit of a disconnect between this ranging conflict and the way our business feels inside our four walls. You know, for now, that's how it is.

Speaker #2: So there is a little bit of a disconnect between this ranging conflict and the way our business feels inside our four walls. But for now, that's how it is.

Speaker #3: Got it. No, that's helpful. I was wondering, on the flip side, is there an opportunity to perhaps upgrade those planes that come out of Spirit if they move to other, stronger carriers or to leasing companies, like you might have mentioned?

Jonathan Tanwanteng: Got it. No, that's helpful. I was wondering on the flip side, is there an opportunity to perhaps upgrade those planes that come out of Spirit if they move to other stronger carriers or to leasing companies like you, like you might have mentioned?

Jon Tanwanteng: Got it. No, that's helpful. I was wondering on the flip side, is there an opportunity to perhaps upgrade those planes that come out of Spirit if they move to other stronger carriers or to leasing companies like you, like you might have mentioned?

Peter J. Gundermann: Absolutely. I mean, if the airlines go to, you know, some of our established airline customers, they would be, you know, reconfigured to come up to the standard of the adopting airline. That would help us. Spirit was not a major customer of ours. Not a customer at all, I don't think, other than what was line-fit on the aircraft. If it were to go to another airline, it could be a pickup for us.

Speaker #2: Absolutely. I mean, if the airlines go to some of our established airline customers, they would be reconfigured to come up to the standard of the adopting airlines.

Peter Gundermann: Absolutely. I mean, if the airlines go to, you know, some of our established airline customers, they would be, you know, reconfigured to come up to the standard of the adopting airline. That would help us. Spirit was not a major customer of ours. Not a customer at all, I don't think, other than what was line-fit on the aircraft. If it were to go to another airline, it could be a pickup for us.

Speaker #2: So that would help us. Spirit was not a major customer of ours. Not a customer at all, I don't think, other than what was line fit on the aircraft.

Speaker #2: So if it were to go to another airline, it could be a pickup for us.

Speaker #3: Got it. Last question, I'll jump back in queue. Can you just bridge us from the prior revenue guidance to the new one? What's increasing in the underlying assumptions?

Jonathan Tanwanteng: Got it. Last question, I'll jump back in queue. Can you just bridge us from the prior revenue guidance to the new one? What's, what's increasing in that, in the underlying assumptions?

Jon Tanwanteng: Got it. Last question, I'll jump back in queue. Can you just bridge us from the prior revenue guidance to the new one? What's, what's increasing in that, in the underlying assumptions?

Peter J. Gundermann: It's nothing single specific, I would say. It's across the board surge in demand and, you know, the whole machine that we've built in terms of operations continues to get better and better and better. In Q1, we were doing a pretty major relocation in one of our biggest operations in Seattle. That went smoothly. It makes us more and more encouraged that we're gonna continue to accelerate as we go forward. I'd also point to bookings in Q1, which were just super. You know, usually when we have really high bookings, it's because we got a really big order on some program from some customer. In this case, bookings were higher than we've ever seen and that wasn't the situation.

Speaker #2: It's nothing single specific, I would say. It's across the board surge in demand and the whole machine that we've built in terms of operations continues to get better and better and better.

Peter Gundermann: It's nothing single specific, I would say. It's across the board surge in demand and, you know, the whole machine that we've built in terms of operations continues to get better and better and better. In Q1, we were doing a pretty major relocation in one of our biggest operations in Seattle. That went smoothly. It makes us more and more encouraged that we're gonna continue to accelerate as we go forward. I'd also point to bookings in Q1, which were just super. You know, usually when we have really high bookings, it's because we got a really big order on some program from some customer. In this case, bookings were higher than we've ever seen and that wasn't the situation.

Speaker #2: In the first quarter, we were doing a pretty major relocation in one of our biggest operations in Seattle. That went smoothly. It makes us more and more encouraged that we're going to continue to accelerate as we go forward.

Speaker #2: I'd also point to bookings in the first quarter, which were just super, and usually when we have really, really high bookings, it's because we got a really, really big order on some program or from some customer.

Speaker #2: But in this case, bookings were as high as we higher than we've ever seen. And that wasn't the situation. There wasn't kind of the big single driver or couple of drivers that kind of put us over the top.

Peter J. Gundermann: There wasn't kind of a big single driver or couple drivers that kind of put us over the top. It was rather a surge in demand, really across the business. That's part of what prompted me to go through that laborious presentation of 5 points about what's driving our business. It really is very comprehensive, you know. 3 of those 5 points, if I'm not gonna replay them for you, but they were smaller parts of our business, 10% each. Those 3 10% pieces of business are looking at very significant growth initiatives in addition to the areas of our business that traditionally have driven our growth. It's an encouraging mix across the board, from my perspective.

Peter Gundermann: There wasn't kind of a big single driver or couple drivers that kind of put us over the top. It was rather a surge in demand, really across the business. That's part of what prompted me to go through that laborious presentation of 5 points about what's driving our business. It really is very comprehensive, you know. 3 of those 5 points, if I'm not gonna replay them for you, but they were smaller parts of our business, 10% each. Those 3 10% pieces of business are looking at very significant growth initiatives in addition to the areas of our business that traditionally have driven our growth. It's an encouraging mix across the board, from my perspective.

Speaker #2: It was rather a surge in demand, really across the business. And that's part of what prompted me to go through that laborious presentation of five points about what's driving our business.

Speaker #2: It really is very comprehensive. Three of those five points, if I'm not going to replay them for you, but they were smaller parts of our business.

Speaker #2: Ten percent each. And all three of those 10% pieces of business are looking at very significant growth initiatives, in addition to the areas of our business that traditionally have driven our growth.

Speaker #2: So it's an encouraging mix across the board from my perspective.

Speaker #3: Got it. Thanks, Pete. Good to hear the momentum.

Jonathan Tanwanteng: Got it. Thanks, Pete. Good to hear the momentum.

Jon Tanwanteng: Got it. Thanks, Pete. Good to hear the momentum.

Speaker #2: Thanks.

Peter J. Gundermann: Thanks.

Peter Gundermann: Thanks.

Speaker #1: And our next question we'll hear from Greg Palm with Craig Helm Capital Group.

Operator 3: Our next question we'll hear from Greg Palm with Craig-Hallum Capital Group.

Operator: Our next question we'll hear from Greg Palm with Craig-Hallum Capital Group.

Speaker #4: Yeah, thanks. Pete, for what it's worth, I think you laid out a pretty compelling investment thesis. So appreciate some of those thoughts. There was like an overwhelmingly I think positive sort of across a lot of parts of the business.

Greg Palm: Yeah, thanks. Pete, for what it's worth, I think you laid out a pretty compelling investment thesis, appreciate some of those thoughts. There was like an overwhelmingly, I think, positive sort of across a lot of parts of the business. Maybe I'll start with something that was a little bit softer relative to our expectations. Anything in the margins in Q1 that stood out on the negative side. You know, if we back out the $2.8 million catch-up, you know, I think it would have been a little bit more disappointing in terms of gross and EBITDA margins. Even with that, I think incrementals were a little bit light of what you realized last year. Just curious if anything, if you wanna call anything out specifically.

Greg Palm: Yeah, thanks. Pete, for what it's worth, I think you laid out a pretty compelling investment thesis, appreciate some of those thoughts. There was like an overwhelmingly, I think, positive sort of across a lot of parts of the business. Maybe I'll start with something that was a little bit softer relative to our expectations. Anything in the margins in Q1 that stood out on the negative side. You know, if we back out the $2.8 million catch-up, you know, I think it would have been a little bit more disappointing in terms of gross and EBITDA margins. Even with that, I think incrementals were a little bit light of what you realized last year. Just curious if anything, if you wanna call anything out specifically.

Speaker #4: So maybe I'll start with something that was a little bit softer relative to our expectations. But anything in the margins in Q1 that stood out on the negative side?

Speaker #4: If we back out the 2.8 million catch-up, I think it would have been a little bit more disappointing in terms of gross and EBITDA margins.

Speaker #4: And even with that, I think incrementals were a little bit light of what you realized last year. So, just curious if there's anything you want to call out specifically.

Speaker #1: Yeah. So I mean, there's the impact of tariffs, Greg. Tariffs were up almost $2 million. Year over year. So that's certainly a negative. We didn't have we haven't booked anything in terms of potential refunds for tariffs.

Peter J. Gundermann: Yeah.

Nancy Hedges: Yeah. I mean, there's the impact of tariffs, Greg. Tariffs were up almost $2 million year over year. That's, you know, that's certainly a negative. You know, we haven't booked anything in terms of potential refunds for tariffs. I mean, that could very well turn into a benefit as the year goes on, as that refund process plays out. We did incur $2 million of additional cost year over year related to the tariffs.

Nancy L. Hedges: I mean, there's the impact of tariffs, Greg. Tariffs were up almost $2 million year over year. That's, you know, that's certainly a negative. You know, we haven't booked anything in terms of potential refunds for tariffs. I mean, that could very well turn into a benefit as the year goes on, as that refund process plays out. We did incur $2 million of additional cost year over year related to the tariffs.

Speaker #1: So I mean, that could very well turn into a benefit as the year goes on as that refund process plays out. But yeah, we did incur $2 million of additional cost year over year related to the tariffs.

Speaker #2: But I would also point out that the one of the problems with our first quarter is it followed the fourth quarter. And the fourth quarter was a super quarter.

Greg Palm: Okay.

Greg Palm: Okay.

Peter J. Gundermann: I would also point out that the, you know, one of the problems with our Q1 is it followed the Q4.

Peter Gundermann: I would also point out that the, you know, one of the problems with our Q1 is it followed the Q4.

Nancy L. Hedges: Yeah.

Nancy Hedges: Yeah.

Peter J. Gundermann: Q4 was a super quarter. You know, Volume does a lot to a business, we predicted a drop-off in volume, not because of a drop-off in demand, but it was more just scheduling and timing more than anything else. Actually, volume was higher than our internal forecast and just above the high end of our range. We weren't disappointed with that. We thought it was a pretty good first step, especially since one of our biggest operations was involved in a move during the quarter. I think in the Q2, you know, is one of these, you know, show me kind of quarters. We're forecasting revenue at $245 million to $250 million.

Peter Gundermann: Q4 was a super quarter. You know, Volume does a lot to a business, we predicted a drop-off in volume, not because of a drop-off in demand, but it was more just scheduling and timing more than anything else. Actually, volume was higher than our internal forecast and just above the high end of our range. We weren't disappointed with that. We thought it was a pretty good first step, especially since one of our biggest operations was involved in a move during the quarter. I think in the Q2, you know, is one of these, you know, show me kind of quarters. We're forecasting revenue at $245 million to $250 million.

Speaker #2: So volume does a lot to a business. And we predicted a drop-off in volume not because of a drop-off in demand, but it was more just scheduling and timing more than anything else.

Speaker #2: And actually, volume was higher than our internal forecast and just above the high end of our range. So we weren't disappointed with that. We thought it was a pretty good first step, especially since one of our biggest operations was involved in a move.

Speaker #2: During the quarter. So I think in the second quarter, is one of these show me kind of quarters. We're forecasting revenue at 245 to 250.

Peter J. Gundermann: That would by far, even at the low end of that range, be a record for the company. We talk about incremental margins being important. This will be a chance to show, and I think it'll that'll be a really good indicator for where we're gonna be for the rest of the year.

Speaker #2: That would, by far—even at the low end of that range—be a record for the company. And we talk about incremental margins being important.

Peter Gundermann: That would by far, even at the low end of that range, be a record for the company. We talk about incremental margins being important. This will be a chance to show, and I think it'll that'll be a really good indicator for where we're gonna be for the rest of the year.

Speaker #2: This will be a chance to show it. I think it'll I think that'll be a really good indicator for where we're going to be for the rest of the year.

Speaker #4: So sounds like you're pretty comfortable with saying incremental margins should improve quite a bit as that top line accelerates through the rest of the year.

Greg Palm: Sounds like you're pretty comfortable with saying incremental margin should improve quite a bit as that top line, you know, accelerates through the rest of the year. That's a fair statement?

Greg Palm: Sounds like you're pretty comfortable with saying incremental margin should improve quite a bit as that top line, you know, accelerates through the rest of the year. That's a fair statement?

Speaker #4: Is that a fair statement?

Peter J. Gundermann: Absolutely. Yep, that's what we're counting on.

Speaker #2: Absolutely. That's what we're—yep, that's what we're counting on.

Peter Gundermann: Absolutely. Yep, that's what we're counting on.

Speaker #4: Okay. And then on the radio test program—the long-awaited coming week—so it sounds like it's more definitive this time around. But just curious, what is built into this year's guide at this point in terms of revenue contribution, and just remind us what kind of a full run-rate annual contribution might look like for next year?

Greg Palm: Okay. On the Radio Test Program, you know, the long awaited coming weeks. It sounds like it's more definitive this time around, but just curious, what is built into this year's guide at this point in terms of revenue contribution? Just remind us what, you know, kind of a full run rate annual contribution might look like, you know, for next year.

Greg Palm: Okay. On the Radio Test Program, you know, the long awaited coming weeks. It sounds like it's more definitive this time around, but just curious, what is built into this year's guide at this point in terms of revenue contribution? Just remind us what, you know, kind of a full run rate annual contribution might look like, you know, for next year.

Peter J. Gundermann: Sure. We think a full year should be something like $40 to 50 million, and we're thinking it'll probably be a $20 million contribution in H2. It's a revenue over time program, which accelerates revenue over, you know, point in time. We are thinking that that award, I mean, all the hoops have been declared and jumped through, and as they say in the business, the paperwork's been on the general's desk, and we think there's a clock ticking that suggests a signature and potential award, although there could be a delay between signature and award, yet in Q2. We're pretty excited about that. I also need to You know, Greg, we love having your involvement in our business, but we've been waiting for this thing a heck of a lot longer than you have.

Speaker #2: Sure. We think a full year should be something like 40 to 50 million and we're thinking it'll probably be a 20 million contribution in the second half.

Peter Gundermann: Sure. We think a full year should be something like $40 to 50 million, and we're thinking it'll probably be a $20 million contribution in H2. It's a revenue over time program, which accelerates revenue over, you know, point in time. We are thinking that that award, I mean, all the hoops have been declared and jumped through, and as they say in the business, the paperwork's been on the general's desk, and we think there's a clock ticking that suggests a signature and potential award, although there could be a delay between signature and award, yet in Q2. We're pretty excited about that. I also need to You know, Greg, we love having your involvement in our business, but we've been waiting for this thing a heck of a lot longer than you have.

Speaker #2: It's a revenue over time program, which accelerates revenue over point in time. And we are thinking that that award I mean, all the hoops have been declared and jumped through.

Speaker #2: And as they say in the business, the paperwork's been on the general's desk. And we think there's a clock ticking that suggests a signature and potential award, although there could be a delay between signature and award.

Speaker #2: Yet in the second quarter. So we're pretty excited about that. I also need to Greg, we love having your involvement in our business, but we've been waiting for this thing a heck of a lot longer than you have.

Speaker #2: We want you to know that. So we're very much looking forward to saying we got it in hand and issuing that press release. It should come soon.

Peter J. Gundermann: Just want you to know that. We're very much looking forward to saying we got it in hand and issuing that press release. It should come soon.

Peter Gundermann: Just want you to know that. We're very much looking forward to saying we got it in hand and issuing that press release. It should come soon.

Speaker #4: Awesome. Sounds great. I will pass it off. Thanks.

Greg Palm: Awesome. Sounds great. I will pass it off. Thanks.

Greg Palm: Awesome. Sounds great. I will pass it off. Thanks.

Speaker #1: And next, we'll move to Gautam Khanna with TD Cowen.

Operator 3: Next we'll move to Gautam Khanna with TD Cowen.

Operator: Next we'll move to Gautam Khanna with TD Cowen.

Gautam Khanna: Guys, I was wondering if you could update us on what you think the mix will be between retrofit and OE in the commercial aerospace market segment this year?

Gautam Khanna: Guys, I was wondering if you could update us on what you think the mix will be between retrofit and OE in the commercial aerospace market segment this year?

Speaker #5: Guys, I was wondering if you could update us on what you think the mix will be between retrofit and OE in the commercial aerospace market segment this year?

Peter J. Gundermann: Our general guideline there is 50-50 for retrofit and OE, they're both doing well. Obviously, build rates you're well familiar with. You know, we're putting more and more content on narrow bodies and the wide body rates going up also, both at Boeing and Airbus, that's all positive. At the same time, there is this trend where airlines around the world are continually looking for ways to be more in step with their customer expectations, and customers increasingly have this demand to be connected and entertained and powered pretty much at all times. We're benefiting from that on the aftermarket or retrofit side also. I guess I'll take the opportunity also to remind that, for us, an aftermarket sale isn't necessarily a higher margin sale than line-fit.

Speaker #2: Our general guideline there is 50-50 for retrofit and OE. And they're both doing well. Obviously, build rates, you're well familiar with. We're putting more and more content on narrow bodies and the wide body rates going up also.

Peter Gundermann: Our general guideline there is 50-50 for retrofit and OE, they're both doing well. Obviously, build rates you're well familiar with. You know, we're putting more and more content on narrow bodies and the wide body rates going up also, both at Boeing and Airbus, that's all positive. At the same time, there is this trend where airlines around the world are continually looking for ways to be more in step with their customer expectations, and customers increasingly have this demand to be connected and entertained and powered pretty much at all times. We're benefiting from that on the aftermarket or retrofit side also. I guess I'll take the opportunity also to remind that, for us, an aftermarket sale isn't necessarily a higher margin sale than line-fit.

Speaker #2: Both at Boeing and Airbus, so that's all positive. But at this, and at the same time, there is this trend where airlines around the world are continually looking for ways to be more in step with their customer expectations.

Speaker #2: And customers increasingly have this demand to be connected and entertained and powered pretty much at all times. So we're benefiting from that on the aftermarket or retrofit side also.

Speaker #2: I guess I'll take the opportunity also to remind that for us, an aftermarket sale isn't necessarily a higher margin sale. Than line fit. They're pretty much the same deal because we're selling them to the airlines.

Peter J. Gundermann: They're pretty much the same deal because we're selling them to the airlines, selling product to the airlines, and the airlines will either decide to put the product on a retrofit application or they have a ship it to Boeing or Airbus for a line-fit application. It's kind of the same sale either way. I look at it as a nice diversity of market. You know, it hasn't happened in Well, I guess it did happen not too long ago, aircraft production can go down and retrofit applications can still hold steady or even increase and vice versa. At this point, we're seeing them both in a very strong position.

Peter Gundermann: They're pretty much the same deal because we're selling them to the airlines, selling product to the airlines, and the airlines will either decide to put the product on a retrofit application or they have a ship it to Boeing or Airbus for a line-fit application. It's kind of the same sale either way. I look at it as a nice diversity of market. You know, it hasn't happened in Well, I guess it did happen not too long ago, aircraft production can go down and retrofit applications can still hold steady or even increase and vice versa. At this point, we're seeing them both in a very strong position.

Speaker #2: Selling product to the airlines. And the airlines will either decide to put the product on a retrofit application or they have a ship at the Boeing or Airbus.

Speaker #2: For a line fit application. So it's kind of the same sale. Either way, but I look at it as a nice diversity of market.

Speaker #2: So sometimes it hasn't happened well. I guess it did happen—not too long ago. But aircraft production can go down, and retrofit applications can still hold steady or even increase.

Speaker #2: And vice versa. But at this point, we're seeing them both in a very strong position.

Speaker #5: That's helpful. And I understand your comments on demand are quite positive. I just want to make sure that extends so far into the second quarter as well.

Gautam Khanna: That's helpful. I understand your comments on demand are quite positive. I just wanna make sure that extends so far into Q2 as well. Has it been as broad-based as it was in Q1?

Gautam Khanna: That's helpful. I understand your comments on demand are quite positive. I just wanna make sure that extends so far into Q2 as well. Has it been as broad-based as it was in Q1?

Speaker #5: Has it been as broad-based as it was in the first quarter?

Speaker #2: Yes. Yep. We're comfortable with how it's specifically the last couple of months, you mean, since the hostilities began. Yeah. It's been we have had a positive book to bill in that period of time also.

Peter J. Gundermann: Yes. Yep. We're comfortable with how it's, specifically the last couple months, you mean?

Peter Gundermann: Yes. Yep. We're comfortable with how it's, specifically the last couple months, you mean?

Gautam Khanna: Yeah

Gautam Khanna: Yeah

Gautam Khanna: since the hostilities began. Yeah, it's been, it's, we have had a positive book-to-bill in that period of time also.

Peter Gundermann: since the hostilities began. Yeah, it's been, it's, we have had a positive book-to-bill in that period of time also.

Speaker #5: Okay. Are there any—I don't know what the right word is—but indirect impacts from higher fuel costs? I mean, not with respect to demand per se, but on the cost side or any other ways that that could creep into crimping profitability this year?

Gautam Khanna: Okay. Are there any, I don't know what the right word is, but indirect impacts from higher fuel costs? I mean, not with respect to demand per se, but on the cost side or any other ways that that could creep into crimping profitability this year.

Gautam Khanna: Okay. Are there any, I don't know what the right word is, but indirect impacts from higher fuel costs? I mean, not with respect to demand per se, but on the cost side or any other ways that that could creep into crimping profitability this year.

Peter J. Gundermann: Nothing specific to fuel costs for us. I mean, obviously, we're subject to inflationary pressures just like everybody else. If you believe that there's gonna be an increase in costs, I can't say that there's anything specific, other than perhaps we do use quite a bit of memory in some of our products, and memory electronic components, memory chips are definitely in a price squeeze right now. For our business overall, It hurts parts of our business, but it is not a major driver overall.

Speaker #2: Nothing specific to fuel costs for us. I mean, obviously, we're subject to inflationary pressures just like everybody else. So if you believe that there's going to be an increase in costs, I can't say that there's anything specific other than perhaps we do use quite a bit of memory in some of our products.

Peter Gundermann: Nothing specific to fuel costs for us. I mean, obviously, we're subject to inflationary pressures just like everybody else. If you believe that there's gonna be an increase in costs, I can't say that there's anything specific, other than perhaps we do use quite a bit of memory in some of our products, and memory electronic components, memory chips are definitely in a price squeeze right now. For our business overall, It hurts parts of our business, but it is not a major driver overall.

Speaker #2: And memory electronic components, memory chips are definitely in a price squeeze right now. But for our business overall, it hurts part of our business, but it is not a major driver overall.

Gautam Khanna: Have you guys, I don't know if you can comment on pricing and how that's trended, how much of a contribution that was to sales like for like in Q1, and if you're seeing any pushback with respect to pricing initiatives from customers.

Speaker #5: And have you guys—I don't know if you can comment on pricing and how that's trended—how much of a contribution that was to sales, like-for-like in the first quarter, and if you're seeing any pushback with respect to pricing initiatives?

Gautam Khanna: Have you guys, I don't know if you can comment on pricing and how that's trended, how much of a contribution that was to sales like for like in Q1, and if you're seeing any pushback with respect to pricing initiatives from customers.

Speaker #5: From customers?

Peter J. Gundermann: We are continuing to exercise price levers where we can, when we can. We are one of those companies that prefers to stay on the good side of our customers, so we don't use price as a weapon. We do, you know, wanna be paid for the value we create for our customers. We have, I feel, gotten much better at doing that over the last couple years. We, you know, you always have room to improve, and we will improve. It's slowing down though. It was a major issue over the last couple years. A lot of companies, us included, got behind the curve in terms of inflation and dealing with pricing opportunities with customers. I think we've corrected a lot of that. Not all of it.

Speaker #2: We are continuing to exercise price levers where we can, when we can. We are one of those companies that prefers to stay on the good side of our customers.

Peter Gundermann: We are continuing to exercise price levers where we can, when we can. We are one of those companies that prefers to stay on the good side of our customers, so we don't use price as a weapon. We do, you know, wanna be paid for the value we create for our customers. We have, I feel, gotten much better at doing that over the last couple years. We, you know, you always have room to improve, and we will improve. It's slowing down though. It was a major issue over the last couple years. A lot of companies, us included, got behind the curve in terms of inflation and dealing with pricing opportunities with customers. I think we've corrected a lot of that. Not all of it.

Speaker #2: So we don't use price as a weapon. But we do want to be paid for the value we create for our customers. So we have I feel gotten much better at doing that over the last couple of years.

Speaker #2: We always have room to improve. And we will improve. It's slowing down, though. It was a major issue over the last couple of years.

Speaker #2: A lot of companies, us included, got behind the curve in terms of inflation and dealing with pricing opportunities with customers. I think we've corrected a lot of that.

Speaker #2: Not all of it. We have a couple of major programs, which will be updated and upgraded over the course of this year. But for the most part, I think we've kind of run that route.

Peter J. Gundermann: We have a couple major programs which will be updated and upgraded over the course of this year. For the most part, I think we've kinda run that route, and I think we're in pretty good shape. You asked, I think, how much of the improvement now is driven, boy, that's a hard one to answer 'cause there are a lot of moving pieces. You know, the other thing we've done over the last year and a half, 2 years, is quite a bit of rationalization of our product lines and facilities. We've done quite a bit of moving and consolidating. We've exited a couple product lines and done a pretty comprehensive analysis of those opportunities. Again, all that will continue, and there will be further benefits, I think, from that.

Peter Gundermann: We have a couple major programs which will be updated and upgraded over the course of this year. For the most part, I think we've kinda run that route, and I think we're in pretty good shape. You asked, I think, how much of the improvement now is driven, boy, that's a hard one to answer 'cause there are a lot of moving pieces. You know, the other thing we've done over the last year and a half, 2 years, is quite a bit of rationalization of our product lines and facilities. We've done quite a bit of moving and consolidating. We've exited a couple product lines and done a pretty comprehensive analysis of those opportunities. Again, all that will continue, and there will be further benefits, I think, from that.

Speaker #2: And I think we're in pretty good shape. So you asked, I think, how much of the improvement now is driven—boy, that's a hard one to answer, because there are a lot of moving pieces.

Speaker #2: The other thing we've done over the last year, year and a half, two years is quite a bit of rationalization of our product lines and facilities.

Speaker #2: We've done quite a bit of moving and consolidating. We've exited a couple of product lines. And done a pretty comprehensive analysis of those opportunities.

Speaker #2: And again, all that will continue. And there will be further benefits, I think, from that. But for the most part, what I really liked about last year, growth stabilized a little bit.

Peter J. Gundermann: For the most part, what I really liked about last year, growth stabilized a little bit, and it gave us a chance to dial in and optimize a lot of those considerations. This year, I think it's gonna be more and more about growth, especially with the Q1 bookings, which we were, you know, again, pretty excited about. I think this is gonna be a year where we can get low to mid-teen organic growth on a, on a cost structure that's been rationalized and optimized. I think it'll be an encouraging picture, and the Q2, again, will be a real kinda litmus test for all that.

Peter Gundermann: For the most part, what I really liked about last year, growth stabilized a little bit, and it gave us a chance to dial in and optimize a lot of those considerations. This year, I think it's gonna be more and more about growth, especially with the Q1 bookings, which we were, you know, again, pretty excited about. I think this is gonna be a year where we can get low to mid-teen organic growth on a, on a cost structure that's been rationalized and optimized. I think it'll be an encouraging picture, and the Q2, again, will be a real kinda litmus test for all that.

Speaker #2: And it gave us a chance to dial in and optimize a lot of those considerations. This year, I think it's going to be more and more about growth, especially with the first quarter bookings.

Speaker #2: Which we were again pretty excited about. I think this is going to be a year where we can get low to mid-teen organic growth on a cost structure that's been rationalized and optimized.

Speaker #2: So, I think it'll be an encouraging picture. And the second quarter, again, will be a real kind of litmus test for all that.

Speaker #5: Thank you, guys.

Gautam Khanna: Thank you, guys.

Gautam Khanna: Thank you, guys.

Speaker #2: Thank you.

Peter J. Gundermann: Thank you.

Peter Gundermann: Thank you.

Speaker #1: And as a reminder, STAR 1, if you would like to ask a question, then we'll move on to a follow-up question from John Tanwangjan with CJS Securities.

Operator 3: As a reminder, it's star one if you would like to ask a question. We'll move on to a follow-up question from Jonathan Tanwanteng with CJS Securities.

Operator: As a reminder, it's star one if you would like to ask a question. We'll move on to a follow-up question from Jonathan Tanwanteng with CJS Securities.

Speaker #6: Hey, thank you for the follow-up. I was just wondering if you could provide an update just on the size of the EVTOL and autonomous opportunities that are out there.

Jonathan Tanwanteng: Hey, thank you for the follow-up. I was just wondering if you could provide an update just on the size of the eVTOL and autonomous opportunities that are out there, as you look into 2027 and 2028. Maybe the same question for the 777X, as it prepares to be certified and start shipping to customers.

Jon Tanwanteng: Hey, thank you for the follow-up. I was just wondering if you could provide an update just on the size of the eVTOL and autonomous opportunities that are out there, as you look into 2027 and 2028. Maybe the same question for the 777X, as it prepares to be certified and start shipping to customers.

Speaker #6: Are you looking at 27 and 28? And then maybe the same question for the 777X, as it prepares to be certified and start shipping to customers.

Peter J. Gundermann: Well, you're baiting me a little bit on the eVTOL question, John. There are widely divergent perspectives on the takeoff rate and the volume associated with that market. I think we're reluctant to go too big into the forecast 'cause there are a lot of companies competing for a pie that of unknown size, frankly. I will say, though, that we are well-diversified in the customers that we're working with. We've developed a off-the-shelf capability that they all need, and we are working with the vast majority of them. We think there will be winners. The question is which ones are gonna be winners? We don't know that specifically. I think they're gonna generally make very good progress towards certification. Certification's not gonna be the hangup.

Speaker #2: Well, you're baiting me a little bit on the EVTOL question, John. There are a widely divergent perspectives on the takeoff rate and the volume associated with that market.

Peter Gundermann: Well, you're baiting me a little bit on the eVTOL question, John. There are widely divergent perspectives on the takeoff rate and the volume associated with that market. I think we're reluctant to go too big into the forecast 'cause there are a lot of companies competing for a pie that of unknown size, frankly. I will say, though, that we are well-diversified in the customers that we're working with. We've developed a off-the-shelf capability that they all need, and we are working with the vast majority of them. We think there will be winners. The question is which ones are gonna be winners? We don't know that specifically. I think they're gonna generally make very good progress towards certification. Certification's not gonna be the hangup.

Speaker #2: I think we're reluctant to go too big into the forecast, because there are a lot of companies competing for a pie of unknown size, frankly.

Speaker #2: I will say, though, that we are well diversified in the customers that we're working with. We've developed an off-the-shelf capability that they all need.

Speaker #2: And we are working with the vast majority of them, and we think there will be winners. The question is, which ones are going to be winners.

Speaker #2: And we don't know that specifically. I think they're going to generally make very good progress towards certification. Certification is not going to be the hang-up.

Speaker #2: The hangup might be the business model. The aircraft are very different between the various suppliers. The business models are even more divergent. So it's unclear to us which ones are going to succeed.

Peter J. Gundermann: The hangup might be the business model that, you know, the aircraft are very different between the various suppliers. The business models are even more divergent. It's unclear to us which ones are gonna succeed. I will say our off-the-shelf approach to this market means that we're not going too far head over heels in any one program development or any two program development. We're not doing a lot. We're doing some certification work, and we're doing some, I'd call it, assisting engineering work, but we're not doing heavy NRE for any of the various OEMs at this point. We'll see how that goes. I think 2026, 2027 is gonna be a really critical year for certification, and then we'll see which business models take off. They're starting to fly.

Peter Gundermann: The hangup might be the business model that, you know, the aircraft are very different between the various suppliers. The business models are even more divergent. It's unclear to us which ones are gonna succeed. I will say our off-the-shelf approach to this market means that we're not going too far head over heels in any one program development or any two program development. We're not doing a lot. We're doing some certification work, and we're doing some, I'd call it, assisting engineering work, but we're not doing heavy NRE for any of the various OEMs at this point. We'll see how that goes. I think 2026, 2027 is gonna be a really critical year for certification, and then we'll see which business models take off. They're starting to fly.

Speaker #2: I will say our off-the-shelf approach to this market means that we're not going too far head over heels in any one program development or any two program development.

Speaker #2: We're not doing a lot. We're doing some certification work. And we're doing some I'd call it a system assisting engineering work. But we're not doing heavy NRE for any of the various OEMs.

Speaker #2: At this point, so we'll see how that goes. I think 2026, 2027 is going to be a really critical year for certification, and then we'll see which business models take off.

Speaker #2: They're starting to fly. There's a possibility that there will be some customer flights. I'll tell you, I will look forward to that opportunity personally.

Peter J. Gundermann: There's a possibility that there will be some customer flights. I'll tell you, I will look forward to that opportunity personally. I know a lot of people won't, but I would love to fly on one of those things, so I will do that as soon as I can. Your other question was what?

Peter Gundermann: There's a possibility that there will be some customer flights. I'll tell you, I will look forward to that opportunity personally. I know a lot of people won't, but I would love to fly on one of those things, so I will do that as soon as I can. Your other question was what?

Speaker #2: I know a lot of people won't. But I would love to fly on one of those things. So I will do that as soon as I can.

Speaker #2: And your other question was what?

Speaker #6: On the 777X?

Jonathan Tanwanteng: On the 777X.

Jon Tanwanteng: On the 777X.

Peter J. Gundermann: 777X.

Peter Gundermann: 777X I don't have that in front of me. I wanna say that 250 or so line-fit on each and every airplane. Then there's the IFE opportunity, which could be more optional, but could be another 250 or so per airplane.

Speaker #2: 777. I don't have that in front of me. I want to say that we're going to have 250 or so line-fit on each and every airplane.

Peter J. Gundermann: 777. I don't have that in front of me. I wanna say that 250 or so line-fit on each and every airplane. Then there's the IFE opportunity, which could be more optional, but could be another 250 or so per airplane.

Speaker #2: And then there's the IFE opportunity which could be more optional but could be another 250 or so per airplane.

Speaker #6: Got it. Thanks, Pete.

Jonathan Tanwanteng: Got it. Thanks, Pete.

Jon Tanwanteng: Got it. Thanks, Pete.

Speaker #2: Sure, John. Tanwangjan.

Peter J. Gundermann: Sure, John. San Juan time.

Peter Gundermann: Sure, John. San Juan time.

Speaker #1: Thank you. There are no further questions at this time. And this does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time.

Operator 3: Thank you. There are no further questions at this time. This does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time.

Operator: Thank you. There are no further questions at this time. This does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time.

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