What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-05-13 compared with 2025-11-06 · 91 added, 144 removed, 115 unchanged (67% of the section changed)

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(The following should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in the 2025 10-K.)

Astronics Corporation, through its subsidiaries, is a leading supplier of advanced technologies and products to the global aerospace and defense industries.

Our products and services include advanced, high-performance electrical power generation and distribution systems, seat motion solutions, lighting and safety systems, avionics products, aircraft structures, systems certification, and automated test systems.

Astronics Corporation, through its subsidiaries, is a leading provider of advanced technologies to the global aerospace, defense, and electronics industries.

Our products and services include advanced, high-performance inflight entertainment and connectivity products and services, lighting and safety systems, flight critical electrical power generation and distribution systems, seat motion systems and automated test systems.

We have two reportable segments, Aerospace and Test Systems.

Our Aerospace segment has principal operating facilities in the United States, Canada, France and Germany (arising from our October 2025 acquisition) and an engineering office in Ukraine.

Our Aerospace segment has principal operating facilities in the United States, Canada, France and Germany and an engineering office in Ukraine.

Our Test Systems segment has principal operating facilities in the United States and an engineering office in India.

Our Aerospace segment designs and manufactures products for the global aerospace industry.

Product lines include lighting and safety systems, electrical power generation, distribution and seat motion systems, aircraft structures, avionics products, systems certification, and other products.

Product lines include lighting and safety systems, electrical power generation, distribution and seat motion systems, inflight entertainment and connectivity products, and other products.

Our primary Aerospace customers are the airframe manufacturers (“OEM”) that build aircraft for the commercial transport, military and general aviation markets, suppliers to those OEMs, aircraft operators such as airlines, suppliers to the aircraft operators, and branches of the U.S.

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There can be significant periods of time between orders in this business, which may result in large fluctuations of sales and profit levels and backlog from period to period.

Test Systems segment customers include the USDOD, prime contractors to the USDOD, mass transit operators and prime contractors to mass transit operators.

Test Systems segment customers include the USDOW, prime contractors to the USDOW, mass transit operators and prime contractors to mass transit operators.

Each of the markets that we serve presents opportunities that we expect will provide growth for the Company over the long-term.

We continue to look for opportunities in all of our markets to capitalize on our core competencies to expand our existing business and to grow through strategic acquisitions.

The main challenges that we continue to face include varying levels of supply chain pressures, material availability and cost increases (including costs associated with the recent imposition of tariffs by the United States and other countries discussed herein), labor availability and cost, and improving shareholder value through increasing profitability.

The main challenges that we continue to face include varying levels of supply chain pressures, material availability and cost increases (including costs associated with the imposition of tariffs by the United States and other countries discussed herein), labor availability and cost, and improving shareholder value through increasing profitability.

Increasing profitability is dependent on many things, primarily sales growth, both acquired and organic, and the Company’s ability to pass cost increases along to customers and control operating expenses, and to identify means of creating improved productivity.

Sales are driven by increased build rates for existing aircraft, market acceptance and economic success of new aircraft and our products, continued government funding of defense programs, the Company’s ability to obtain production contracts for parts we currently supply or have been selected to design and develop for new aircraft platforms and continually identifying and winning new business for our Test Systems segment.

Reduced aircraft build rates driven by regulatory actions impacting OEM production, a weak economy, aircraft groundings, tight credit markets, reduced air passenger travel, tariffs impacting OEM demand, and an increasing supply of used aircraft on the market would likely result in reduced demand for our products, which will result in lower profits.

Reduced aircraft build rates driven by regulatory actions impacting OEM production, a weak economy, aircraft groundings, tight credit markets, fuel price spikes, reduced air passenger travel, tariffs impacting OEM demand, and an increasing supply of used aircraft on the market would likely result in reduced demand for our products, which will result in lower profits.

Reduction of defense spending may result in fewer opportunities for us to compete, which could result in lower profits in the future.

Many of our newer development programs are based on new and unproven technology and at the same time we are challenged to develop the technology on a schedule that is consistent with specific programs.

Delays in delivery schedules and incremental costs resulting from tariffs and other trade policy matters, supply chain pressures, and labor market pressures have in the past resulted in, and

could in the future also result in, lower profits.

Delays in delivery schedules and incremental costs resulting from tariffs and other trade policy matters, supply chain pressures, and labor market pressures have in the past

resulted in, and could in the future also result in, lower profits.

We will continue to address these challenges by working to improve operating efficiencies and focusing on executing on the growth opportunities currently in front of us.

On October 22, 2025, the Company entered into a $300 million senior secured, cash flow-based revolving credit facility (the “New Revolver”).

The New Revolver replaces the Company’s ABL Revolving Credit Facility, which was terminated on October 22, 2025.

The New Revolver subjects us to various financial and other affirmative and negative covenants with which we must comply on an ongoing or periodic basis.

On October 22, 2025, the Company entered into the $300.0 million senior secured Revolving Credit Facility.

The Revolving Credit Facility replaced the Company’s ABL Revolving Credit Facility which was terminated on October 22, 2025.

The Revolving Credit Facility subjects us to various financial and other affirmative and negative covenants with which we must comply on an ongoing or periodic basis.

These include financial covenants pertaining to a total leverage ratio, a consolidated interest coverage ratio, and a secured net debt leverage ratio requirement.

An unexpected decline in our revenues or operating income, including occurring as a result of events beyond our control, could cause us to violate our financial covenants.

While the Company expects to remain in compliance with the required financial covenants for the duration of the agreement, any unexpected negative impacts to our business, including as a result of declines in aircraft production rates from expectations or production delays resulting from regulatory actions or labor strikes affecting OEMs, additional supply chain pressures, tariffs and our ability to mitigate tariff effects, the timing of customer orders, our ability to meet customer delivery schedules, or labor availability and cost pressures, could result in lower revenues and reduced financial profits, and, as a result thereof, our inability to satisfy the financial covenants in our New Revolver.

Challenges affecting the commercial aviation industry or key participants can adversely impact the demand for our products and services, the timing of orders, deliveries and related payments and other factors.

We are monitoring the production levels and anticipated ramp-up at The Boeing Company, and we continue to align with them on production expectations.

We are monitoring the ongoing conflict between Russia and Ukraine and the related export controls and financial and economic sanctions imposed on certain industry sectors, including the aviation sector, and parties in Russia by the U.S., the U.K., the European Union and others.

Although the conflict has not resulted in a direct material adverse impact on our business to date, the implications of the Russia and Ukraine conflict in the short-term and long-term are difficult to predict at this time.

Factors such as increased energy costs, the availability of certain raw materials for aircraft manufacturers, embargoes on flights from Russian airlines, sanctions on Russian companies, and the stability of Ukrainian customers could impact the global economy and aviation sector.

We are monitoring the production levels and anticipated ramp-ups at Boeing and Airbus, and we continue to align our operations with their production expectations.

We are monitoring the ongoing conflicts between Russia and Ukraine, conflicts in the Middle East, as well as other geopolitical tensions and conflicts around the world, and the potential impact of related export controls, financial and economic sanctions, and other restrictions imposed by the U.S., the U.K., the European Union, and other countries.

While these conflict have not resulted in a direct material adverse impact on our business to date, the implications of global conflicts in the short-term and long-term are difficult to predict.

Factors such as increased energy costs, disruptions in the availability of certain raw materials, restrictions on air travel or trade with affected regions, sanctions on companies or industries, shifts in customer stability, and broader impacts on the global economy and aviation sector could pose risks to our operations and financial performance.

Recent Acquisitions

On June 30, 2025, the Company purchased the membership interests of Envoy Aerospace, LLC, located in Aurora, Illinois.

Envoy Aerospace is an FAA Organization Designation Authorization (“ODA”) services provider.

On June 30, 2025, the Company purchased the membership interests of Envoy Aerospace, located in Aurora, Illinois.

Envoy Aerospace is an FAA ODA services provider.

Envoy Aerospace is included in our Aerospace segment.

The total purchase price was approximately $8.3 million, net of cash acquired and the estimated closing adjustment.

On October 13, 2025, the Company acquired all of the issued and outstanding capital stock of Bühler Motor Aviation (“BMA”), located in Uhldingen-Mühlhofen, Germany.

On October 13, 2025, the Company acquired all of the issued and outstanding capital stock of BMA, located in Uhldingen-Mühlhofen, Germany.

BMA is an established manufacturer of aircraft seat actuation systems with a broad product portfolio that includes actuators, electronics, control panels, pneumatic systems, and lighting.

BMA will be included in our Aerospace segment.

BMA is included in our Aerospace segment.

The total purchase price was approximately $18.0 million, net of cash acquired and the estimated closing adjustment.

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In addition, the OBBBA makes changes to certain U.S.

corporate tax provisions, many of which are not in effect until 2026.

Key provisions of the Tax Act relevant to the Company’s operations include immediate expensing of certain domestic research and development expenses and domestic capital expenditures beginning in 2025 as well as changes to various U.S.

international tax provisions going forward.

These provisions of the Tax Act have favorably impacted the Company’s effective tax rate and cash tax rate for the 2025 tax year and are expected to have favorable impacts in future years.

Changes in tax laws may affect recorded deferred tax assets and deferred tax liabilities and our effective tax rate in the future and the Company is continuing to evaluate the impacts of the new legislation.

Appropriations for the U.S.

Government’s fiscal year 2026 funding bill were not enacted by September 30, 2025, and on October 1, 2025, the U.S.

Government entered a shutdown, which is ongoing.

If a prolonged government shutdown occurs, it could result in program disruptions, limit the U.S.

Government’s ability to progress programs and make timely payments and impact new program starts.

A prolonged shutdown could have material consequences for our Company, our employees, our suppliers and our industry and could have a material adverse effect on our financial position, results of operations and/or cash flows.

corporate tax provisions, many of which were not in effect until 2026.

Key provisions of the OBBBA relevant to the Company’s operations include immediate expensing of certain domestic research and development expenses and domestic capital expenditures beginning in 2025 as well as changes to various U.S.

international tax provisions beginning in 2026.

The Company anticipates it will elect to deduct the remaining previously capitalized domestic research and development costs equally between 2025 and 2026 and expense domestic research and development costs as incurred for the 2025 and 2026 tax years.

On February 20, 2026, the U.S.

Supreme Court struck down certain tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”).

Following the Supreme Court decision, the U.S.

Administration announced a new 10% global tariff under Section 122 of the Trade Act of 1974, which was subsequently struck down on May 7, 2026 by the U.S.

Court of International Trade.

As of the filing date, it remains uncertain what impact these decisions will have on our future financial results, including the process and availability of obtaining refunds of amounts previously paid for the IEEPA tariffs or any fluctuations of the level of replacement tariffs imposed or the addition of any new tariffs through other means.

CONSOLIDATED RESULTS OF OPERATIONS

Nine Months Ended Three Months Ended

($ in thousands) September 27, 2025 September 28, 2024 September 27, 2025 September 28, 2024

Three Months Ended

($ in thousands) April 4, 2026 March 29, 2025

Sales $ 230,619 $ 205,936

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SG&A Expenses as a Percentage of Sales 15.5 % 17.8 %

Loss on Settlement of Debt $ 32,644 $ 6,987 $ 32,644 $ 6,987

Interest Expense, Net $ 2,336 $ 3,150

Effective Tax Rate (3.0) % 6.3 %

Net Loss $ (256) $ (13,383) $ (11,098) $ (11,738)

Net Income $ 25,540 $ 9,528

A discussion by segment can be found in “Segment Results of Operations” in this MD&A.

CONSOLIDATED THIRD QUARTER RESULTS

CONSOLIDATED FIRST QUARTER RESULTS

Growth in sales was driven by the Aerospace segment’s continued strength in demand primarily from the Commercial Transport market.

Aerospace sales increased $15.2 million, or 8.5%, which more than offset a $7.4 million decline in Test Systems sales.

Consolidated cost of products sold in the third quarter of 2025 was $146.9 million, compared with $148.5 million in the same prior-year period.

Tariff expense in the current quarter was approximately $4 million.

The prior year was negatively impacted by a $3.5 million atypical warranty reserve.

Both periods reflect the change in presentation for research & development expenses (“R&D”), which is now identified as an expense item on the income statement below gross profit.

In the third quarter of 2025, SG&A decreased $3.1 million.

Litigation-related expenses were down $4.3 million, somewhat offset by $1.2 million in higher legal and accounting expenses related to acquisitions.

R&D was down $2.3 million reflecting the timing of projects.

The prior-year period was negatively impacted by $1.3 million in reserves related to the bankruptcy filing of an Aerospace customer.

A $32.6 million Loss on Settlement of Debt was the result of certain costs incurred related to the partial repurchase of convertible notes due 2030 discussed in the Liquidity and Capital Resources section below, compared to a Loss on Settlement of Debt of $7.0 million in the prior year.

Interest expense was down $3.3 million, or 53.0%, on lower rates following the 2024 refinancing activities.

Tax benefit in the quarter was $1.2 million compared with a tax expense of $6.6 million in the prior-year period, mostly as a result of a valuation allowance reversal associated with research and development costs that are expected to be expensed for tax purposes in the current year under the One Big Beautiful Bill Act.

Consolidated net loss of $0.31 per diluted share improved from $0.34 per diluted share in the prior-year period from the strength in sales and profitability that more than offset the incremental loss on settlement of debt.

Aerospace sales increased $22.4 million, or 11.7%, while Test Systems sales grew $2.2 million, or 15.4%.

In the prior year, first quarter consolidated sales and gross profit was negatively impacted by a $1.9 million revision of estimated costs to complete a long-term mass transit contract in the Test Systems segment.

Consolidated cost of products sold in the first quarter of 2026 was $155.5 million, compared with $145.1 million in the same prior-year period primarily attributable to higher volume and a $1.7 million increase in tariff expenses.

SG&A decreased $0.8 million.

Litigation-related expenses were down $1.2 million and the prior-year period included a $6.2 million reserve adjustment to the damage award relating to the patent infringement dispute in the UK.

Appeals to the UK damage award are scheduled to be heard in July 2026.

These decreases were mostly offset by higher wages and benefits, higher incentive-based compensation expenses driven by increased profitability, and the incremental expenses related with the acquired BMA business.

R&D was up $1.0 million reflecting the timing of projects.

Interest expense was down $0.8 million, or 25.8%, on lower rates following the September 2025 refinancing activities.

Tax benefit in the quarter was $0.8 million compared with a tax expense of $0.6 million in the prior-year period, mostly as a result of a $2.7 million discrete adjustment for the expected benefit of a stock-based compensation deduction along with a valuation allowance reversal associated with an expected net operating loss deduction and with research and development costs that are expected to be expensed for tax purposes in the current year under the One Big Beautiful Bill Act.

Tax expense in the prior year was partially offset by a $1.1 million discrete adjustment to reverse certain federal and state deferred tax liabilities.

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

Bookings of $290.4 million in the quarter resulted in a book-to-bill ratio of 1.26:1.

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Backlog at the end of the quarter was $734.3 million.

CONSOLIDATED YEAR-TO-DATE RESULTS

Growth in sales was driven by the Aerospace segment due to continued strength in demand primarily from the Commercial Transport and Military Aircraft markets.

Aerospace sales increased $59.6 million, or 11.5%, which more than offset the $24.4 million decline in Test Systems sales.

Consolidated sales were negatively impacted by $8.3 million, resulting from revisions of estimated costs to complete certain long-term mass transit contracts in the Test Systems segment.

Consolidated cost of products sold in 2025 was $443.9 million, compared with $428.6 million in the same prior-year period.

The increase was primarily due to higher sales volume.

Additionally, simplification initiatives in the Aerospace segment, including costs related to footprint rationalization and product portfolio shaping activities, resulted in $5.8 million in charges within cost of products sold during the year.

The prior year was impacted by a $3.5 million atypical warranty reserve previously

Both periods reflect the change in presentation for R&D, which is now identified as an expense item on the income statement below gross profit.

In 2025, the $3.7 million increase in SG&A included a $9.7 million reserve adjustment relating to a patent infringement dispute in the UK.

This included a $0.5 million increase to the original damages award reserve of $11.9 million, $5.7 million in interest expense related to the damages award, and a $3.5 million legal fee reimbursement charge.

This increase was partially offset by a $6.7 million decrease in litigation-related legal expenses.

R&D was down $7.2 million reflecting the timing of projects.

The expenses in the current year include a $32.6 million loss on settlement of debt as a result of a partial repurchase of convertible notes due 2030, compared to a loss on settlement of debt of $7.0 million in the prior year.

As a result of the lower outstanding borrowings and the reduced cost of debt resulting from the refinancing in December 2024, interest expense was down $8.7 million, or 48.6%.

Tax benefit in the nine months ended September 27, 2025 was less than $0.1 million compared with a tax expense of $4.9 million in the prior-year period, primarily due to a valuation allowance reversal associated with research and development costs that are expected to be expensed for tax purposes in the current year under the OBBBA, along with a $1.1 million discrete adjustment to reverse certain federal and state deferred tax liabilities.

Stronger profitability and lower interest expense resulted in consolidated net loss of $0.3 million, or $0.01 per diluted share, up from the net loss of $13.4 million, or $0.38 per diluted share, in the same prior-year period.

Bookings of $667.1 million in the nine months ended September 27, 2025 resulted in a book-to-bill ratio of 1.07:1.

SEGMENT RESULTS OF OPERATIONS

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Cost of products sold and other operating expenses are directly identifiable to the respective segment.

Operating profit is reconciled to loss before income taxes in Note 14, Segment Information, to the Consolidated Condensed Financial Statements in Item 1, Financial Statement, of this report.

Operating profit is reconciled to income before income taxes in Note 14, Segment Information, to the Consolidated Condensed Financial Statements in Item 1, Financial Statement, of this report.

AEROSPACE SEGMENT

Nine Months Ended Three Months Ended

($ in thousands) September 27, 2025 September 28, 2024 September 27, 2025 September 28, 2024

Three Months Ended

($ in thousands) April 4, 2026 March 29, 2025

Sales $ 213,843 $ 191,388

Less Inter-segment Sales

(34) (52) — (10)

Total Aerospace Sales

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Operating Margin 16.5 % 11.6 %

Aerospace Sales by Market

(In thousands)

Aerospace Sales by Market Three Months Ended

(In thousands) April 4, 2026 March 29, 2025

Commercial Transport $ 156,419 $ 137,542

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$ 213,820 $ 191,375

Aerospace Sales by Product Line

(In thousands)

Electrical Power & Motion $ 296,541 $ 263,919 $ 101,295 $ 90,467

Aerospace Sales by Product Line Three Months Ended

(In thousands) April 4, 2026 March 29, 2025

Inflight Entertainment & Connectivity $ 110,748 $ 103,110

Lighting & Safety 52,807 51,957

Avionics 91,452 83,716 26,168 29,151

Systems Certification 15,842 12,272 7,938 4,460

Structures 9,947 8,798 3,627 2,613

Flight Critical Electrical Power 24,763 21,314

Seat Motion 19,879 6,672

Other 5,623 8,322

$ 213,820 $ 191,375

(In thousands) September 27, 2025 December 31, 2024

Beginning in the current year, the Company reorganized its product line structure to align with changes in internal reporting.

Prior‑period disaggregated revenue information has been recast to conform to the current‑period presentation.

(In thousands) April 4, 2026 December 31, 2025

$ 604,480 $ 570,294

$ 651,364 $ 600,803

AEROSPACE THIRD QUARTER RESULTS

AEROSPACE FIRST QUARTER RESULTS

Aerospace segment sales of $213.8 million increased $22.4 million, or 11.7%.

Sales in the Commercial Transport market increased $18.9 million, or 13.7%.

Growth was primarily related to increased demand by airlines for cabin power, seat motion and system certification products and services.

Military Aircraft sales increased $5.9 million, or 27.1%, to $27.6 million, driven by increased demand for lighting and safety products.

General Aviation sales decreased $4.2 million, or 23.0%, to $13.9 million due to lower airframe power and inflight entertainment & connectivity (“IFEC”) product sales to the VVIP market due to the timing of programs.

Growth was primarily related to increased demand for seat motion and lighting and safety products.

General Aviation sales increased $6.2 million, or 40.7%, to $21.4 million due to higher inflight entertainment & connectivity (“IFEC”) product sales to the VVIP market.

Military Aircraft sales remained consistent with the prior-year period.

Other sales decreased $2.9 million as the Company has wound down its non-core contract manufacturing arrangements.

Aerospace segment operating profit of $31.2 million, or 16.2% of sales, improved over the prior-year period reflecting the leverage gained on higher volume, pricing initiatives, and improving production efficiencies, combined with a $4.4 million decrease in litigation-related expenses.

The prior year was impacted by a $3.5 million atypical warranty reserve and a non-cash reserve associated with a customer bankruptcy of $2.2 million.

Aerospace segment operating profit of $35.3 million, or 16.5% of sales, improved over the prior-year period reflecting the leverage gained on higher volume, improving production efficiencies, a $2.8 million catch-up of profit on the MV-75 program based on revised program estimates, and a $7.0 million decrease in litigation-related expenses and legal reserve adjustments related to the UK patent dispute previously discussed.

Aerospace bookings were $264.4 million for a book-to-bill ratio of 1.24:1.

Backlog for the Aerospace segment was $651.4 million at quarter end.

AEROSPACE YEAR-TO-DATE RESULTS

Aerospace segment sales of $577.7 million increased $59.6 million, or 11.5%.

Sales in the Commercial Transport market increased $48.6 million, or 12.7%.

Growth was primarily related to increased demand by airlines for cabin power and IFEC products.

Military Aircraft sales increased $24.7 million, or 38.9%, to $88.3 million, driven by progress on the FLRAA program and increased demand for lighting and safety products.

General Aviation sales decreased $9.1 million, or 16.1%, to $47.5 million due to lower VVIP and airframe power sales due to timing of programs.

Aerospace segment operating profit of $71.5 million, or 12.4% of sales, improved over the prior-year period resulting from leverage gained on higher volume and improving production efficiencies and a $7.3 million decrease in litigation-related expenses, partially offset by the previously discussed $9.7 million true-up in legal reserves related to the UK patent dispute and $6.5 million in simplification initiatives.

Aerospace bookings were $610.2 million for a book-to-bill ratio of 1.06:1.

TEST SYSTEMS SEGMENT

Nine Months Ended Three Months Ended

($ in thousands) September 27, 2025 September 28, 2024 September 27, 2025 September 28, 2024

Three Months Ended

($ in thousands) April 4, 2026 March 29, 2025

Sales $ 16,824 $ 14,592

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Total Test Systems Sales $ 16,799 $ 14,561

Operating Loss $ (8,947) $ (8,428) $ (14) $ (13)

Operating Profit (Loss) $ 403 $ (2,223)

Operating Margin 2.4 % (15.3) %

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(In thousands)

September 27, 2025 December 31, 2024

April 4, 2026 December 31, 2025

$ 120,115 $ 119,603

Backlog $ 82,960 $ 73,692

TEST SYSTEMS THIRD QUARTER RESULTS

Test Systems segment sales of $18.7 million were down $7.4 million from the comparator quarter in 2024.

The decrease was driven by lower sales of radio test sets in general as full rate production for the U.S.

Army program has not yet begun.

Test Systems segment operating profit was near break-even in both periods.

Test Systems continues to be negatively affected by mix and under absorption of fixed costs at current volume levels.

TEST SYSTEMS FIRST QUARTER RESULTS

Test Systems segment sales of $16.8 million were up $2.2 million from the comparator quarter in 2025.

Segment sales in the prior-year period were negatively impacted by $1.9 million revision of estimated costs to complete a certain long-term mass transit Test contract reducing revenue recognized in the period.

Test Systems segment operating profit was $0.4 million, compared with an operating loss of $2.2 million in the first quarter of 2025.

Test Systems profitability, while improving, continues to be negatively affected by mix and under absorption of fixed costs at current volume levels.

Bookings for the Test Systems segment in the quarter were $26.1 million.

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Backlog for the Test Systems segment was $83.0 million at quarter end.

TEST SYSTEMS YEAR-TO-DATE RESULTS

Test Systems segment sales were $44.3 million, down $24.4 million from 2024.

The decrease was driven by lower sales on our U.S.

Army and U.S.

Marine Corps’ radio Test programs.

Additionally, segment sales were negatively impacted by $8.3 million due to revisions of estimated costs to complete certain long-term mass transit Test contracts.

The revisions resulted in reduced revenue recognized in the period due to lower estimates of the percentage of work completed on the programs.

Test Systems segment operating loss was $8.9 million, compared with an operating loss of $8.4 million in the same prior-year period.

The revisions to the estimated costs to complete had a $8.8 million detrimental impact to operating income and masked the savings realized from recent restructuring activities.

Test Systems continues to be negatively affected by mix and under absorption of fixed costs at current volume levels.

Test Systems bookings were $56.9 million for a book-to-bill ratio of 1.28:1.

LIQUIDITY AND CAPITAL RESOURCES

Operating Activities:

Cash provided by operating activities totaled $47.2 million for the first nine months of 2025, as compared with $4.1 million cash provided by operating activities during the same period in 2024.

Cash flow from operating activities increased compared with the same period of 2024 reflecting higher cash earnings and lower working capital requirements.

Cash provided by operating activities in the first nine months of 2025 included $21.6 million in payments related to the UK patent dispute and $12.6 million in net income tax payments in Washington.

Cash provided by operating activities totaled $10.6 million for the first three months of 2026, as compared with $20.6 million cash provided by operating activities during the same period in 2025.

Cash flow from operating activities decreased compared with the same period of 2025 reflecting higher cash earnings offset by higher working capital requirements, including higher inventory levels to support anticipated revenue growth in the coming quarters.

Investing Activities:

Cash used for investing activities was $24.5 million for the first nine months of 2025 compared with $5.2 million in cash used for investing activities in the same period of 2024 representing acquisition activity in the current year and capital expenditures for each period.

The higher level of capital expenditures relates to the ongoing facility expansion activities.

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

Financing Activities:

Cash used for financing activities totaled $22.6 million for the first nine months of 2025, as compared with cash used for financing activities of $3.9 million during the same prior-year period.

The Company received net proceeds under its convertible notes and ABL revolving credit facilities of $14.2 million, offset by $26.9 million in payments for capped call transactions, in the first nine months of 2025 compared with net borrowings of $8.5 million in the same prior-year period.

Cash used for financing activities totaled $5.5 million for the first three months of 2026, as compared with cash used for financing activities of $11.4 million during the same prior-year period.

The Company made net payments of $8.9 million on its ABL facility in the prior-year period.

Cash on hand at the end of the quarter was $11.9 million.

Net debt was $331.1 million, compared with $324.8 million at the end of 2025.

The Company expects its cash flow from operations will provide sufficient cash flows to fund operations, including payment of any further amounts related to the Lufthansa matters.

The Company paid $21.6 million for ordered liabilities for damages, interest and legal fee reimbursement related to the UK matter in the second quarter of 2025.

The Company may also evaluate various actions and alternatives to enhance its profitability and cash generation from operating activities, which could include manufacturing efficiency initiatives, cost-reduction measures, working with vendors and suppliers to reduce lead times and expedite shipment of critical components, and working with customers to expedite receivable collections.

Our ability to maintain sufficient liquidity and comply with financial debt covenants is highly dependent upon achieving expected operating results.

Failure to achieve expected operating results could have a material adverse effect on our liquidity, our ability to obtain financing or access our existing financing, and our operations in the future and could allow our debt holders to demand payment of all outstanding amounts.

We are in compliance with all covenants under each of our financing arrangements.

See Note 7, Long-term Debt and Notes Payable, to the Consolidated Condensed Financial Statements in Item 1, Financial Statements, of this report for additional details.

As of April 4, 2026, we are in compliance with all covenants under each of our financing arrangements.

Our financing arrangements are more fully discussed in Note 7, Long-term Debt and Notes Payable, to the Consolidated Condensed Financial Statements in Item 1, Financial Statements, of this report for additional details.

The Company expects its cash flow from operations will provide sufficient cash flows to fund operations, including capital expenditures and payment of any further amounts related to the Lufthansa matters.

On August 8, 2023, the Company initiated an at-the-market equity offering program (the “ATM Program”) for the sale from time to time of shares of the Company’s common stock, par value $0.01 per share, having an aggregate offering price of up to $30.0 million.

During the three and nine months ended September 27, 2025, and September 28, 2024, the Company did not sell any shares of its common stock under the ATM Program.

As of September 27, 2025, the Company had remaining capacity under the ATM Program to sell shares of common stock having an aggregate offering price up to approximately $8.2 million.

On October 22, 2025, the Company entered into a cash flow-based revolving credit facility and terminated the ABL Revolving Credit Facility.

See further discussion in Note 16, Subsequent Events, to the Consolidated Condensed Financial Statements in Item 1, Financial Statements, of this report.

During the three months ended April 4, 2026, and March 29, 2025, the Company did not sell any shares of its common stock under the ATM Program.

As of April 4, 2026, the Company had remaining capacity under the ATM Program to sell shares of common stock having an aggregate offering price up to approximately $8.2 million.

OFF BALANCE SHEET ARRANGEMENTS

We do not have any material off balance sheet arrangements that have or are reasonably likely to have a material future effect on our results of operations or financial condition.

The Company’s backlog on September 27, 2025 was $646.7 million compared with $599.2 million on December 31, 2024 and $611.9 million on September 28, 2024.

The Company’s backlog on April 4, 2026 was $734.3 million compared with $674.5 million on December 31, 2025 and $673.0 million on March 29, 2025.

CONTRACTUAL OBLIGATIONS AND COMMITMENTS

Our contractual obligations and commitments have not changed materially from the disclosures in our 2024 10-K, except as set forth below.

On September 15, 2025, the Company issued $225.0 million aggregate principal amount of 0.000% Convertible Senior Notes due 2031 (the “2031 Notes”).

The Company used part of the net proceeds to repurchase a portion of the 2030 Notes and the remainder to enter into the capped call transactions.

On October 22, 2025, the Company entered into a $300 million senior secured, cash flow-based revolving credit facility (the “New Revolver”).

The New Revolver replaces the Company’s ABL Revolving Credit Facility, which was terminated on October 22, 2025.

The scheduled maturity date for the New Revolver is October 16, 2030.

Refer to Note 7, Long-term Debt and Notes Payable, and Note 16, Subsequent Events, to the Consolidated Condensed Financial Statements in Item 1, Financial Statements, of this report, for additional information.

Our contractual obligations and commitments have not changed materially from the disclosures in our 2025 10-K.

Although the majority of our sales, expenses, and cash flows are transacted in U.S.

dollars, we have exposure to changes in foreign currency exchange rates related primarily to the Euro and the Canadian dollar.

The Company believes that the impact of changes in foreign currency exchange rates on its business and financial results for the three and nine months ended September 27, 2025 was not significant.

The Company believes that the impact of changes in foreign currency exchange rates on its business and financial results for the three months ended April 4, 2026 was not significant.

The future impacts of U.S.

trade policies, treaties, and tariffs and their residual effects, including economic uncertainty, inflationary environment, and disruption within the global supply chain, and aerospace industry, on our business remain uncertain.

As we cannot predict what actions may ultimately be taken with respect to tariffs or trade relations between the United States and China, Malaysia or other countries, what products may be subject to such actions, what actions may be taken by the other countries in retaliation, and what actions we may be able to take to address and mitigate such tariffs, the ultimate financial impact on our results cannot be reasonably estimated but could be material.

The impact of tariffs on its business and financial results for the three and nine months ended September 27, 2025 was approximately $4 million and $7 million, respectively.

As we cannot predict what actions may ultimately be taken with respect to tariffs or trade relations between the United States and various other countries, what products may be subject to such actions, what actions may be taken by the other countries in retaliation, and what actions we may be able to take to address and mitigate such tariffs, the ultimate financial impact on our results cannot be reasonably estimated but could be material.

The impact of tariffs on its business and financial results for the three months ended April 4, 2026 was approximately $2.5 million.

CRITICAL ACCOUNTING POLICIES

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Such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

These statements are not guarantees of future performance and are subject to several factors, risks and uncertainties, the impact or occurrence of which could cause actual results to differ materially from the expected results described in the forward-looking statements.

These statements are not guarantees of future performance and are subject to several factors, risks and uncertainties, the impact or occurrence of which could cause actual

results to differ materially from the expected results described in the forward-looking statements.

Certain of these factors, risks and uncertainties are discussed in the sections of this report entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” New factors, risks and uncertainties may emerge from time to time that may affect the forward-looking statements made herein.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis