Astronics (NASDAQ:ATRO) released first-quarter financial results and hosted an earnings call on Tuesday. Read the complete transcript below.

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Summary

Astronics reported a strong start to 2026 with Q1 revenue reaching $230 million, the second highest quarterly total ever, and an adjusted EBITDA margin of 16.4%.

The company set record bookings of $290 million, resulting in a backlog of $734 million, driven by widespread customer demand across its product lines.

Astronics increased its full-year 2026 revenue guidance to $970 million - $1 billion, reflecting a 14-16% increase over 2025, all assumed to be organic growth.

The aerospace segment saw a 12% sales increase, with commercial transport, general aviation, and test systems contributing to growth; adjusted operating margins improved to 12.8%.

Key strategic updates include the company's focus on rising commercial aircraft production, demand for in-flight entertainment and connectivity (IFEC), and growth opportunities in flight-critical electrical power and seat motion systems.

Management noted no impact from global geopolitical tensions, specifically in Iran, on the business and emphasized strong market conditions and operational improvements as drivers of growth.

Full Transcript

OPERATOR

Greetings and welcome to The Astronics Corporation First Quarter 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. Thanks Rachelle and good afternoon everyone. We certainly appreciate your time today and your interest in Astronics. On the call with me here are Peter Gunderman, 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. If you do not have the release, you can find it on our [email protected] as you are aware, we may make some forward looking statements during the formal discussion and the Q and A session of 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. 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 [email protected] during today's call we will 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. So with that I will turn it over to Pete to begin.

Peter Gunderman (Chairman, President and CEO)

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. 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. 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. 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. 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 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 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. 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. 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%. 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 conflict. 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 first quarter results as well as a change to our reporting practice. But when I get the mic back I'll briefly talk through the major market tailwinds that we are enjoying.

Nancy Hedges (Chief Financial Officer)

Nancy 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. 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. 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. 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. 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 MV75 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. R and 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 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. 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, evaluation allowance reversal and the treatment of R and 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 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, 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 $0.67 per diluted share, compared with $9.5 million or $0.26 per diluted share in 1Q25. Adjusted net income was 22.5 million, up 32.6% from 17 million last year. Adjusted diluted EPS in the 2026 first quarter 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 and 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. Weighted average diluted Shares outstanding were 38.2 million in the quarter, down from 43 million in the prior year period. Debt 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, while military aircraft sales were essentially flat year over year at 33.5 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 thrust which we had 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. 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. 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 1Q25. 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, 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 the first quarter of 2025 which included the initial MV75 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. 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 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. 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. 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 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. 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. 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 the second quarter. As a reminder, we expect CAPEX for full year 2026 to be in the range of 40 to 45 million dollars. 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, 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. 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 and L as incremental operating expense and the remainder to be capitalized and reflected as a cash outflow from operations over the five year life of the project. We anticipate total spend of 35 to 40 million dollars, of which roughly 25 million will be capitalized. Before turning it back to Pete, I'll briefly summarize our outlook for the second quarter. 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. 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, 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 US 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. And with that, I'll turn it back to Pete for some final comments before we open the line for questions. Pete

Peter Gunderman (Chairman, President and CEO)

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. 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 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. 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. 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 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. 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 MV75 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. 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. 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%. And fifth, we expect our test business to accelerate in the second half of the year as the US Army Radio test program finally moves into production. We've taken significant cost out of the business over the last couple years and incremental volume on this program will have a meaningful positive impact 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 five years. We are expecting A production turn on in the coming weeks, making the program an important contributor in the second half of 2020. So 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. And that ends our prepared remarks. So, Rochelle, I think we can open up for questions now.

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 start. Thank you. Our first question today will come from John Tag Wongtin with CJS Securities.

John Tag Wongtin

Hey, good afternoon. Thank you for taking my questions in. 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 Mid east airline customers or maybe more airlines going out of business like Spirit, but maybe going up the chain? Just help us think through the scenario there.

Peter Gunderman (Chairman, President and CEO)

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 that to bounce back when the conflict ceases, 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 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 they tend to be, you know, more bare bones in terms of their product offerings. So I don't see that as a major risk for our company. I, I also, you know, in a worst case scenario, if, 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. 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? We're going to be in uncharted territory. But that's. That is not our feeling today. It's kind of a weird situation. You know, 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. So there is a little bit of a disconnect between this ranging conflict and the way our business feels inside our four walls. But, you know, for now, that's how it is.

John Tag Wongtin

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?

Peter Gunderman (Chairman, President and CEO)

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 so that 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. So if it were to go to another airline, it could be a pickup for us.

John Tag Wongtin

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 that, in the underlying assumptions?

Peter Gunderman (Chairman, President and CEO)

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 the first quarter, we were doing a pretty major relocation and 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. I'd also point to bookings in the first quarter, which were just super. And you know, 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. But in this case, bookings were as high as higher than we've ever seen. And, and that wasn't the situation. 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. And that's part of what prompted me to go through that laborious presentation of five points about what's driving our business. It really is very comprehensive. Three of those five points. I'm not going to replay them for you, but they were smaller parts of our business, 10% each. And they're all those three 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. So it's an encouraging mix across the board from my perspective.

John Tag Wongtin

Got it. Thanks, Pete. Good to hear the momentum.

OPERATOR

Thanks. And our next question, we'll hear from Greg Palm with Craig Hallam Capital Group.

Greg Palm

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

Nancy Hedges (Chief Financial Officer)

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

Peter Gunderman (Chairman, President and CEO)

I would also point out that one of the problems with our first quarter is it followed the fourth quarter. The fourth quarter was a super quarter. 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. 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 during the quarter. So I think in the second quarter, you know, is one of these show me kind of quarters. We're forecasting revenue at 245 to 250. 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. 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.

Greg Palm

So sounds like you're pretty comfortable with saying incremental margin should improve quite a bit as that top line accelerates through the rest of the year. Is that a fair statement?

Peter Gunderman (Chairman, President and CEO)

Absolutely. That's what we're counting on.

Greg Palm

Okay. And then on the radio test program, you know, the long, long awaited coming, coming weeks. 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.

Peter Gunderman (Chairman, President and CEO)

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. 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 and as they say in the business, the paperwork spent 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 the second quarter. So 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. So we're very much looking forward to saying we got it in hand and issuing that press release. It should come soon.

Greg Palm

Awesome. Sounds great. I will pass it off. Thanks.

OPERATOR

And next we'll move to Gautam Khanna with TD Cowan.

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

Peter Gunderman (Chairman, President and CEO)

we 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. You know, we're putting more and more content on narrow bodies and the wide body rate's going up also 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. 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, 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, 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 for a linefit application. So it's kind of the same sale either way. But I look at it as a nice diversity of market. So sometimes it, you know, 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 and vice versa. But at this point we're seeing them both in a very strong position.

Gautam Khanna

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. Has it been as broad based as it. As it was in the first quarter? Yep. We're comfortable with how it's specifically the last couple months. You mean since the, since the hostilities began. Yet it's been. We have had a positive book to bill in that period of time also.

Peter Gunderman (Chairman, President and CEO)

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

Nothing specific to fuel costs for us. I mean, obviously we're subject to inflation 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 and memory electronic components, memory chips are definitely in a price squeeze right now. But for our business overall, that is not a very. It hurts part of our parts of our business, but it is not a major driver overall.

Peter Gunderman (Chairman, President and CEO)

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 from customers,

Gautam Khanna

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, 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 years. 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. We have a couple 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 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. 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. 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. 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 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 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. So I think it'll be an encouraging picture. Second quarter again will be a real kind of litmus test for all that.

John ten Wagian

And as a reminder at Star One, if you would like to ask a question, then we'll move on to a follow up question from John ten Wagian with CJS Securities.

Peter Gunderman (Chairman, President and CEO)

Thank you for the follow up. I was just wondering if you could provide an update just on the size of EVTOL and autonomous opportunities that are out there as you look into 27 and 28 and then maybe the same question for the 777X as it prepares to be certified and start shipping to customers.

John ten Wagian

Well, you're baiting me a little bit on the EVTOL question, John. They're a widely diverse, divergent perspectives on the takeoff rate and the, and the volume associated with that market. I think we're reluctant to go too big into the forecast because 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 off the shelf capability that they all need 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? 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. The hang up might be the business model that, you know, 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. 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 call it assisting engineering work. But we're not doing heavy NRE for any of the various OEMs 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. 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. 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. And your other question was what on the 777x777? 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. And then there's the IFE opportunity which could be more optional but could be another 250 or so per airplane.

Peter Gunderman (Chairman, President and CEO)

Got it. Thank you.

John ten Wagian

Sure. John Tan Wontang.

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