• Sales for the quarter were $111.2 million
• Net loss was $8.1 million
• Adjusted EBITDA^* was $0.4 million
• Bookings for the quarter continued sequential improvement to $126.3 million; Achieved book-to-bill ratio of 1.14
• Aerospace segment book-to-bill of 1.32 for the quarter
• Backlog increased 5% sequentially to $312.7 million

*Adjusted EBITDA is a Non-GAAP Performance Measure. Please see the attached table for a reconciliation of adjusted EBITDA to GAAP net income.

Astronics Corporation (Nasdaq: ATRO) (“Astronics” or the “Company”), a leading supplier of advanced technologies and products to the global aerospace, defense and other mission critical industries, today reported financial results for the three and six months ended July 3, 2021.

Peter J. Gundermann, the Company’s President and CEO, commented, “Our second quarter was one of slow but steady progress. Our core aerospace markets strengthened as vaccinations took hold and passenger traffic accelerated. We are encouraged by our bookings trend, especially in our Aerospace segment, where we achieved a book-to-bill ratio of 1.32 for the quarter. We expect these bookings will drive higher sales in the second half of 2021.”

Second Quarter Results

*Adjusted EBITDA is a Non-GAAP Performance Measure. Please see the attached table for a reconciliation of adjusted EBITDA to GAAP net income.

Second Quarter 2021 Results (compared with the prior-year period, unless noted otherwise)

Consolidated sales were down $12.5 million from the second quarter of 2020. Aerospace sales were down $13.4 million, and Test System sales increased $0.8 million.

Consolidated operating loss was $5.9 million, compared with operating loss of $18.7 million in the prior-year period. The loss in the second quarter of 2021 was due to low volume related to the continued impacts of the COVID-19 pandemic on the global aerospace industry. This impact was partially offset by a $2.2 million non-cash reduction of the fair value of a contingent consideration liability related to the 2019 acquisition of Diagnosys Test Systems. The prior-year period reflected non-cash goodwill impairment charges of $12.6 million in the aerospace segment and restructuring-related severance charges of $4.9 million.

Consolidated net loss was $8.1 million, or $0.26 per diluted share, compared with net loss of $23.6 million, or $0.77 per diluted share, in the prior year. The after-tax impact of the prior year impairment was $0.41 per diluted share.

Consolidated adjusted EBITDA was $0.4 million, or 0.3% of consolidated sales, compared with adjusted EBITDA of $9.2 million, or 7.4% of consolidated sales, in the prior-year period.

Sequentially, compared with the first quarter of 2021, revenue grew 5%, net loss improved from $(11.9) million to $(8.1) million, and adjusted EBITDA improved from $(0.5) million to $0.4 million.

Supply chain pressures became increasingly impactful as the quarter progressed, mostly affecting delivery schedules but with some pricing pressure also. These pressures limited the Company’s ability to respond to accelerated or quick-turn delivery requests from customers. The Company estimates that revenue would have been $5 million to $10 million higher in the second quarter if its supply chain was performing normally.

Bookings were $126.3 million in the quarter resulting in a book-to-bill ratio of 1.14:1. Backlog at the end of the quarter was $312.7 million. Approximately $183.6 million, or 59%, of backlog is expected to ship in the remainder of 2021.

Year-to-date 2021 Results (compared with the prior-year period, unless noted otherwise)

Consolidated sales were down $64.3 million. Aerospace sales were down $73.0 million from the 2020 second quarter. Test System sales increased $8.7 million.

Consolidated operating loss was $15.4 million, compared with operating loss of $86.2 million in the prior-year period. The loss in both periods was due to low volume related to the continued impacts of the COVID-19 pandemic on the global aerospace industry. The loss in the second quarter of 2020 also reflected significant restructuring expense, including non-cash goodwill and other asset impairment charges of $87 million in the aerospace segment and restructuring related severance charges of $5.4 million. The current year period benefited from a $2.2 million non-cash reduction of the fair value of a contingent consideration liability.

Consolidated net loss was $20.0 million, or $0.65 per diluted share, compared with net loss of $90.5 million, or $2.94 per diluted share, in the prior year. The after-tax impact of the prior year impairment was $2.64 per diluted share.

Consolidated adjusted EBITDA loss was $0.1 million, or 0.1% of consolidated sales, compared with adjusted EBITDA of $25.9 million, or 9.2% of consolidated sales, in the prior-year period.

Aerospace Segment Review (refer to sales by market and segment data in accompanying tables)

Aerospace Second Quarter 2021 Results (compared with the prior-year period, unless noted otherwise)

Aerospace segment sales decreased $13.4 million, or 13.0%, to $89.2 million.

Commercial aerospace continues to see depressed sales relative to pre-pandemic levels. Sales to this market were $47.8 million, or 43.0% of consolidated revenue in the quarter, compared with $67.5 million, or 54.6% of consolidated revenue in the second quarter of 2020. Demand related to new build and retrofit narrow body aircraft is improving and expected to continue to build through 2021 and into the future. The improvement has been driven by growing domestic travel supporting increased production rates of the 737 MAX and narrow body aircraft being placed back in service. The production and utilization rates of widebody aircraft have remained very low as international travel has been slow to recover.

Military Aircraft sales increased $2.7 million, or 19.6%, to $16.8 million. Improvement year-over-year includes incremental non-recurring engineering revenue associated with new programs under development.

Business Jet sales were down $0.5 million, or 3.5%, to $15.0 million.

Other revenue increased $4.2 million to $9.6 million driven by increased contract manufacturing programs.

Aerospace segment operating loss was $2.7 million compared with operating loss of $17.1 million for the same period last year. Leverage lost on reduced sales significantly impacted operating results. Aerospace operating profit in the prior-year period was impacted by goodwill impairment charges of $12.6 million and restructuring-related severance charges of $4.6 million, as previously discussed.

Sequentially, compared with the first quarter of 2021, aerospace revenue grew 10% and operating loss improved from $(5.6) million to $(2.7) million.

Aerospace bookings in the second quarter of 2021 were $118.2 million for a book-to-bill ratio of 1.32:1. Bookings were up 18% sequentially and up 173% over the comparator quarter of 2020, continuing the strong trend of improvement since the pandemic took hold. Backlog for the Aerospace segment was $239.1 million at the end of the second quarter of 2021.

Aerospace Year-to-date 2021 Results (compared with the prior-year period, unless noted otherwise)

Aerospace segment sales decreased $73.0 million, or 30.0%, to $170.6 million. Sales continued to be negatively affected by reasons stated during the quarter.

Aerospace segment operating loss was $8.3 million compared with operating loss of $80.2 million for the same period last year. Leverage lost on reduced commercial aircraft sales significantly impacted operating results. Aerospace operating profit in the prior-year period was impacted by impairment charges of $87.0 million, of which $86.3 million was related to goodwill, and restructuring-related severance charges of $5.1 million.

Mr. Gundermann commented, “Our aerospace business is seeing solid demand recovery, most evident in narrowbody commercial transports and general aviation. This has driven higher bookings and a solid 1.28 book-to-bill ratio for the first half of 2021, despite continued weakness in the widebody international market, which is well documented.”

Test Systems Segment Review (refer to sales by market and segment data in accompanying tables)

Test Systems Second Quarter 2021 Results (compared with the prior-year period, unless noted otherwise)

Test Systems segment sales were $21.9 million, up $0.8 million compared with the prior-year period.

Test Systems operating loss was $0.9 million, or 4.3% of sales, compared with operating profit of $2.6 million, or 12.4% of sales, in the second quarter of 2020. Operating profit in the second quarter of 2021 was negatively affected by $1.0 million in legal fees related to infringement claims and contractual disputes. Operating results in 2020 benefited from $1.2 million in semiconductor warranty revenue.

Bookings for the Test Systems segment in the quarter were $8.2 million, for a book-to-bill ratio of 0.37:1 for the quarter. Backlog was $73.6 million at the end of the second quarter of 2021.

Mr. Gundermann noted, “Our Test business experienced low bookings of $8.2 million in the second quarter, which was about one-third of what we expected. We believe orders were delayed mostly because of the pandemic, and not due to competitive pressures. This challenges our near-term prospects for the business, but we believe the orders will come in as the pandemic recedes.”

Test Systems Year-to-date 2021 Results (compared with the prior-year period, unless noted otherwise)

Test Systems segment sales were $46.4 million, up $8.7 million compared with the prior-year period.

Test Systems operating profit was $0.2 million, or 0.5% of sales, compared with $3.3 million, or 8.9% of sales, in the second quarter of 2020. Operating profit in the first half of 2021 was negatively affected by $1.9 million in legal fees for the same reasons as the quarter. Operating results in 2020 benefited from $2.8 million in semiconductor warranty revenue.

Liquidity and Financing

Cash provided by operations totaled $4.5 million in the second quarter of 2021, compared with cash used in operations of $(6.9) million in the first quarter. Cash on hand at the end of the quarter was $33.6 million. Net debt was reduced by $2.9 million to $139.4 million during the second quarter.

In May 2020, the Company executed an amendment to its credit agreement (the “amended facility”) which reduced the revolving credit line from $500 million to $375 million and modified financial covenants to accommodate for the economic situation given the pandemic. At July 3, 2021, the Company was in compliance with all covenants of the amended facility and expects to remain compliant.

In February 2021, the Company was notified by the acquirer of its semiconductor business, which was sold in February 2019, that $10.7 million is payable to Astronics for earnouts related to 2020. In April 2021, the acquirer provided a revised calculation, reducing the amount payable to the Company to $7.1 million for the 2020 earnout. The Company is currently reviewing the calculations and underlying data and expects to record the additional gain on the sale when that review is complete and the issue resolved.

2021 Outlook

Mr. Gundermann commented, “We had sales of $217 million in the first half of 2021 and are expecting an uptick in the second half to about $240 million, weighted slightly to the fourth quarter. We are assuming that the world will continue to make steady progress against the pandemic, and that supply chain stresses will not get worse. We will be watching eagerly for demand signals which will determine our expectations for 2022.”

At the end of the second quarter, the Company had backlog of $313 million, of which $184 million is expected to ship this year.

Planned capital expenditures for 2021 remain unchanged at approximately $10 million to $11 million.

Second Quarter 2021 Webcast and Conference Call

The Company will host a teleconference today at 11:00 a.m. ET. During the teleconference, management will review the financial and operating results for the period and discuss Astronics’ corporate strategy and outlook. A question-and-answer session will follow.

The Astronics conference call can be accessed by calling 201.493.6784. The listen-only audio webcast can be monitored at www.astronics.com. To listen to the archived call, dial 412.317.6671 and enter replay pin number 13721236. The telephonic replay will be available from 2:00 p.m. on the day of the call through Friday, August 13, 2021. A transcript of the call will also be posted to the Company’s Web site once available.

About Astronics Corporation

Astronics Corporation (Nasdaq: ATRO) serves the world’s aerospace, defense, and other mission critical industries with proven, innovative technology solutions. Astronics works side-by-side with customers, integrating its array of power, connectivity, lighting, structures, interiors, and test technologies to solve complex challenges. For over 50 years, Astronics has delivered creative, customer-focused solutions with exceptional responsiveness. Today, global airframe manufacturers, airlines, military branches, completion centers, and Fortune 500 companies rely on the collaborative spirit and innovation of Astronics. The Company’s strategy is to increase its value by developing technologies and capabilities that provide innovative solutions to its targeted markets.

Safe Harbor Statement

This news release contains forward-looking statements as defined by the Securities Exchange Act of 1934. One can identify these forward-looking statements by the use of the words “expect,” “anticipate,” “plan,” “may,” “will,” “estimate” or other similar expressions and include all statements with regard to the impact of COVID-19 on the Company and its future, reaching any revenue or Adjusted EBITDA margin expectations, being cash positive in 2021, the recovery of the commercial aerospace market, the opportunities to leverage capabilities in other markets and the outcome of demand streams or expectations of demand by customers and markets. Because such statements apply to future events, they are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated by the statements. Important factors that could cause actual results to differ materially from what may be stated here include the impact of the global outbreak of COVID-19 and governmental and other actions taken in response, trend in growth with passenger power and connectivity on airplanes, the state of the aerospace and defense industries, the market acceptance of newly developed products, internal production capabilities, the timing of orders received, the status of customer certification processes and delivery schedules, the demand for and market acceptance of new or existing aircraft which contain the Company’s products, the need for new and advanced test and simulation equipment, customer preferences and relationships, and other factors which are described in filings by Astronics with the Securities and Exchange Commission. The Company assumes no obligation to update forward-looking information in this news release whether to reflect changed assumptions, the occurrence of unanticipated events or changes in future operating results, financial conditions or prospects, or otherwise.

FINANCIAL TABLES FOLLOW

¹ Impairment loss primarily represents the goodwill impairment charges incurred in the Aerospace segment. Full impairment charges totaling $73.7 million were recorded in Q1 2020 for goodwill associated to the CSC, PGA and CCC reporting units and a partial goodwill impairment of $12.6 million was recorded at the PECO reporting unit in Q2 2020.

² Includes fair value adjustment of contingent consideration liabilities, which was a $2.2 million benefit in the three and six months ended July 3, 2021.

Reconciliation to Non-GAAP Performance Measures

In addition to reporting net income, a U.S. generally accepted accounting principle (“GAAP”) measure, we present Adjusted EBITDA (earnings before interest, income taxes, depreciation and amortization, non-cash equity-based compensation expense, goodwill, intangible and long-lived asset impairment charges, equity investment income or loss, legal reserves, settlements and recoveries, restructuring charges and gains or losses associated with the sale of businesses), which is a non-GAAP measure. The Company’s management believes Adjusted EBITDA is an important measure of operating performance because it allows management, investors and others to evaluate and compare the performance of its core operations from period to period by removing the impact of the capital structure (interest), tangible and intangible asset base (depreciation and amortization), taxes, equity-based compensation expense, goodwill, intangible and long-lived asset impairment charges, equity investment income or loss, legal reserves, settlements and recoveries, restructuring charges, fair value adjustments to the valuation of contingent consideration liabilities and gains or losses associated with the sale of businesses, which is not commensurate with the core activities of the reporting period in which it is included. As such, the Company uses Adjusted EBITDA as a measure of performance when evaluating its business and as a basis for planning and forecasting. Adjusted EBITDA is not a measure of financial performance under GAAP and is not calculated through the application of GAAP. As such, it should not be considered as a substitute for the GAAP measure of net income and, therefore, should not be used in isolation of, but in conjunction with, the GAAP measure. Adjusted EBITDA, as presented, may produce results that vary from the GAAP measure and may not be comparable to a similarly defined non-GAAP measure used by other companies.

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