AstroNova Inc (ANOV) reported its Q3 Fiscal 2025 earnings, revealing a mixed financial performance. The company's revenue increased by 7.7% year-over-year to $40.4 million, while its earnings per share (EPS) declined to $0.06 from $0.37 in the previous year. The market reacted negatively, with AstroNova's stock price dropping 6.63% pre-market, reflecting investor concerns over declining profitability and paused financial guidance.
Key Takeaways
- Revenue increased by 7.7% year-over-year.
- EPS dropped significantly from $0.37 to $0.06.
- Gross profit margin decreased to 33.9% from 39.4%.
- Stock price fell by 6.63% pre-market.
- Financial guidance for fiscal 2025 and 2026 has been paused.
Company Performance
AstroNova's performance in Q3 Fiscal 2025 showed growth in revenue but a decline in profitability. The company's focus on integrating new technology and expanding its aerospace product line contributed to revenue growth. However, challenges in operational efficiency and integration of acquisitions impacted margins and earnings.
Financial Highlights
- Revenue: $40.4 million, up 7.7% year-over-year.
- Earnings per share: $0.06, down from $0.37 the previous year.
- Gross profit margin: 33.9%, down from 39.4%.
- Non-GAAP operating income: $1.6 million, down from $4.6 million.
- Adjusted EBITDA: $3.2 million, down from $5.7 million.
Earnings vs. Forecast
No specific earnings forecast was provided for comparison. However, the decline in EPS and operating income indicates underperformance relative to previous periods.
Market Reaction
AstroNova's stock fell 6.63% in pre-market trading, reflecting investor concerns over declining profitability and the company's decision to pause financial guidance. The stock's movement towards its 52-week low suggests cautious sentiment amid broader market trends.
Company Outlook
AstroNova has paused its financial guidance for fiscal 2025 and 2026, citing integration challenges with the Emtek acquisition. The company plans to present long-term financial targets in March and expects stronger aerospace shipments following the resolution of a Boeing (NYSE:BA) strike.
Executive Commentary
CEO Greg Woods emphasized the strategic benefits of the Emtek acquisition despite its complexities, stating, "Although the path of fully realizing the benefits of the Emtek's acquisition is longer and more complex than anticipated, the strategic upside is significant." CFO Tom DeByle highlighted cost management efforts, saying, "We are initiating a comprehensive evaluation of costs and expenses to ensure they align with our strategic priorities and operational goals."
Q&A
During the earnings call, analysts inquired about the impact of delayed Boeing orders and the integration of Emtek, with management confirming challenges in these areas but expressing optimism about future growth prospects.
Risks and Challenges
- Integration challenges with recent acquisitions could affect operational efficiency.
- Declining profit margins may impact future profitability.
- Market uncertainties, including supply chain disruptions and macroeconomic pressures, pose risks.
- Paused financial guidance may lead to investor uncertainty.
- Competition in the aerospace segment could pressure market share.
Full transcript - AstroNova Inc (ALOT) Q3 2025:
Conference Operator: Good morning, and welcome to the AstroNova Fiscal Third Quarter 2025 Financial Results Conference Call. Today's call is being recorded. I would now like to turn the conference call over to Scott Solomon of the company's Investor Relations firm, Sharon Merrill Advisors.
Please go ahead, sir. Thank you,
Scott Solomon, Investor Relations, Sharon Merrill Advisors: Esra, and good morning, everyone. Our Q3 fiscal 2025 earnings release and the slide presentation accompanying management's prepared remarks are posted to the Investors page of our website, www.astronovainc.com. Turning to Slide 2 of that presentation, statements made on today's call that are not statements of historical fact are considered forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward looking statements are based on a number of assumptions that could involve risks and uncertainties. Accordingly, actual results could differ materially except as required by law.
Any forward looking statements speak only as of today, December 12, 2024. AstroNova undertakes no obligation to update these forward looking statements. For other information regarding the forward looking statements and the factors that may cause differences, please see the risk factors in AstroNova's Annual Report on Form 10 ks and other filings that the company makes with the Securities and Exchange Commission. On today's call, management will refer to non GAAP financial measures. AstroNova believes that the inclusion of these financial measures helps investors gain a meaningful understanding of the changes in the company's core operating results and helps investors who wish to make comparisons between AstroNova and other companies on both a GAAP and a non GAAP basis.
The non GAAP financial measures are reconciled to the most directly comparable GAAP measures in today's earnings release. Turning to slide 3, hosting this morning's call are Greg Woods, AstroNova's President and Chief Executive Officer and Tom DeByle, AstroNova's VP and Chief Financial Officer. Greg will begin the call with an overview of the company's 3rd quarter performance. Tom will discuss segment results. Greg will make some concluding comments and then management will be happy to take your questions.
Please turn to Slide 4 as I turn the call over to Greg.
Greg Woods, President and Chief Executive Officer, AstroNova: Thank you, Scott. Good morning, everyone, and thank you for joining us today. Let me start by addressing our Q3 performance. Overall, the results were disappointing. We saw a significant decrease in consolidated margins and a notable year over year increase in our operating expenses.
Much of this is tied to the ongoing integration of Emtek's NS into our product identification segment, an integration that has proven to be far more time consuming and resource intensive than we anticipated when we completed the acquisition in May. In the Q3, Emtek had an operating loss of $1,100,000 on revenue of $1,700,000 While we did see some sequential revenue improvement, the initial sales volumes, revenue contributions and margins did not meet our expectations. We have been mobilizing quickly to rectify this situation. Our focus now is on accelerating Emtek's path to profitability and ensuring its foundational capabilities are positioned to support stronger performance in the quarters ahead. To facilitate this, we recently completed a full realignment of MTech's organizational reporting structure.
All of MTech's key functions, sales and marketing, manufacturing, technology, finance and human resources now report directly to AstroNova leadership. This change aims to speed up the implementation of consistent best practices within MTech's sales process, ensuring it aligns with our product identification segment standards and the broader operational excellence we strive for across our company. During the MTech's integration process, the AstroNova team discovered certain details that appear to be inconsistent with the information originally provided by the seller as part of our definitive agreements. We are continuing to research these matters and are seeking potential remedies from the seller under these agreements. Given the confidential nature of our customer relationships, we will not be taking questions on this topic on today's call.
As part of the integration process, we have launched an AstroNova wide cost reduction and product line rationalization initiative. This is a comprehensive effort aimed not only at reducing expenses, but also at refining our product portfolio to sharpen our competitive edge. Early progress is encouraging. We've closed some significant new orders that underscore the market's confidence in our evolving offerings. However, we anticipate that the full integration and optimization of Emtek's operations will extend through mid calendar year 2025.
We recognize that this is a multi phase journey, but we are committed to working through each step deliberately and strategically to drive sustainable long term gains. One product launch update from our PI segment. In fiscal Q4, we began shipping a large inkjet printer order that had been delayed to allow some customer requested enhancements. We expect that the order will contribute several $1,000,000 to our PI segment's top line over the next several quarters. Moving to Slide 5, despite the integration related challenges, I want to emphasize our continued confidence in MTech's technology.
Their inkjet printing solutions combined with their unique real time printer monitoring and management software remain compelling. In the quarters ahead and in conjunction with our product rationalization program, we intend to integrate MTech's technology into most of our product lines. We also plan to retrofit several models within our large global installed base. We believe this approach will ultimately give our customers improved performance and a lower total cost of ownership. Turning to Slide 6.
Our total revenue increased nearly 8% in the 3rd quarter driven largely by the momentum in the aerospace product line within our Test and Measurement segment. Our role as the leading supplier of flight deck printers and electronics for commercial, defense and business aviation continues to provide strong competitive advantage for AstroNova. The segment's performance would have been even stronger had it not been for the nearly 2 months Boeing strike, which delayed shipments. With the strike now resolved, we're ramping shipments back up and we expect stronger sales volume as we close out fiscal 2025. As shown in Slide 7, when considering the longer term outlook for our T and M segment, keep in mind 2 key factors that are expected to drive margin enhancement in the coming years.
Today, about 43% of our aerospace printership shipments are represented by our proprietary ToughWriter brands. The remaining 57% of shipments are acquired FlightCheck printer brands. As we have discussed on prior calls, we are in the process of upgrading customers from the 3 acquired brands to our Tufrider branded wide and narrow format printers. By the end of fiscal 2027, we estimate that our ToughWriter brand will account for approximately 89% of our shipments. We expect this ToughWriter transition plan to be completed by the end of fiscal year 2027, resulting in enhanced technology experience and streamlined parts and services for our customers.
By having fewer SKUs, the transition will reduce our overall manufacturing costs thereby improving margins. In addition to those benefits, our projected royalty expenses as shown on Slide 8 dropped dramatically from over $4,000,000 per year in fiscal 2025 through 2017 to just $375,000 in fiscal 2028. Now let me turn the call over to Tom for the financial review. Tom?
Tom DeByle, VP and Chief Financial Officer, AstroNova: Thank you, Greg, and good morning, everyone. Let me begin with an overview of our financial performance on Slide 9. Net revenue for the Q3 was up 7.7% to $40,400,000 with growth in our TM segment offsetting a modest revenue decline in PI. Excluding Amtech's, total net revenue increased 3% for the quarter. Gross profit margin for the 3rd quarter was 33.9 percent compared with 39.4% in the prior year period.
Gross profit margins were down in the quarter due to lower margins at Amtech sales mix and lower European hardware sales. Non GAAP operating expenses for the Q3 were $12,100,000 up 19.3% from the prior year period. Amtech accounted for 1 point $3,000,000 of the increase. The remaining cost increases related to headcount additions of key personnel and sales and finance organization, prototype expenses and higher information technology costs. Non GAAP operating income came in at $1,600,000 for the 3rd quarter versus $4,600,000 in the year earlier period, primarily due to higher costs in 2025 period and a loss of $1,100,000 related to Emtek.
As in the Q2, costs and management tension to further align the Emtek's product, services and control environment with those of AstroNova affected our results. Adjusted EBITDA for the Q3 of fiscal 2025 was $3,200,000 compared with $5,700,000 in the prior year period. Non GAAP diluted earnings per share was $0.06 compared with $0.37 in the Q3 a year ago. Bookings were $37,600,000 in the 3rd quarter compared with $35,500,000 in the year earlier period. Backlog as of November 2, 2024 was $27,100,000 compared with $31,200,000 at the end of the Q3 of fiscal 2024.
Turning to our PI segment results on Slide 10. Revenue was down 1% from the prior year period to $26,300,000 Excluding the Amtech acquisition, sales in PI were down 7.2%, primarily due to lower hardware sales. PI segment operating profit in the Q3 of fiscal 2025 was $1,900,000 or 7.2 percent of revenue. This compares with $4,800,000 or 18.1 percent of segment revenue in the Q3 of fiscal 2024. The decrease reflects higher costs in fiscal 2025, in part associated with the Emtek's acquisition, product mix, lower sales volume in Europe and the delayed product release.
Moving to slide 11. Test and Measurement segment revenue increased 28.2% from the prior year period to $14,100,000 driven by the Aerospace product line. Reflecting the top line growth, operating margins were $3,300,000 for Q3 fiscal 'twenty five versus $2,600,000 in the prior year, up $700,000 or 26.9%. Looking at our balance sheet and leverage on slide 12. Cash and cash equivalents at the end of the quarter were $4,400,000 down $400,000 from the end of Q2.
Funded debt increased to $48,900,000 at the end of Q3, up from $45,600,000 at the end of Q2. The liquidity was $14,700,000 at the end of the quarter, down from Q2 by 7,200,000 dollars The drop in liquidity reflects higher accounts receivable in aerospace shipments with longer payment terms, lower accounts payable as the timing of payments to key suppliers all occurred in Q3 FY 'twenty five. AstroNova also supported Amtech with a $2,700,000 of working capital loan directly from our revolver. Turning to cash flow on Slide 13. Through the 1st 9 months of fiscal 2025, we generated cash from operations of $2,300,000 compared with $5,900,000 for the same period of fiscal 2024.
Year to date free cash flow was $1,200,000 versus $4,600,000 for the same period a year earlier. During the quarter, we used cash from operations of $4,700,000 dollars This was driven by higher aerospace accounts receivable, lower accounts payable and lower EBITDA versus prior quarter. As Greg noted, we are initiating a comprehensive evaluation of costs and expenses to ensure they align with our strategic priorities and operational goals. Given the extended integration timeline for Emtek, we no longer will be providing guidance for fiscal 2025 and 2026. Instead, we plan to provide longer term targets.
We look forward to presenting the results of these evaluations along with the financial targets on our call in March. Now I'll turn the call over to Greg for closing comments. Greg?
Greg Woods, President and Chief Executive Officer, AstroNova: Thanks, Tom. Summarizing on Slide 14, we believe that the integrating Vemtex's innovative technology with AstroNova's existing strength, our operational excellence, established customer relationships and strong brand recognition, we can accelerate growth in our core markets and strengthen our position as the innovative leader in advanced product identification solutions. Although the path of fully realizing the benefits of the Emtek's acquisition is longer and more complex than anticipated, the strategic upside is significant. Now, Tom and I will be happy to take your questions. Operator, please open the line for Q and A.
Conference Operator: Thank you very much. Our first question comes from Brandon Daniel with Itay Capital. Brandon, your line is now open. Please go ahead.
Brandon Daniel, Analyst, Itay Capital: Hey, guys. Good morning. Sorry if I missed this in the earlier comments. Just some clarity here. On that inkjet order that's being delayed, is that related to the legacy business or the Intex business?
Greg Woods, President and Chief Executive Officer, AstroNova: It's a little bit hard hearing you, Brandon. Can you repeat this is Greg. Can you repeat that question, please?
Brandon Daniel, Analyst, Itay Capital: Yes. Hey, sorry. Is this better, Greg? Can you hear me now?
Greg Woods, President and Chief Executive Officer, AstroNova: Yes. It's just kind of a little bit muted, but go ahead.
Brandon Daniel, Analyst, Itay Capital: Yes. So I'll talk a little bit louder. On that Inkjet order, is that related to the legacy PI business or Intex? Sorry if I missed it earlier.
Greg Woods, President and Chief Executive Officer, AstroNova: That's a legacy business. It actually relates back to an order we got back at the beginning of the year actually. It's from a very large customer and a very good customer. And as they got the first units that we shipped out, they said, could you add this, could you add that? And obviously, we want to accommodate them.
So we put all those enhancements and they got even better product out of it. And we just started shipping those this month. So but yes, that's it's legacy product, but it's a new generation of product with also a different inkjet technology, but not the Emtek's technology.
Brandon Daniel, Analyst, Itay Capital: Okay, awesome. Thanks. Thanks for the question. I'll jump back in the queue.
Greg Woods, President and Chief Executive Officer, AstroNova: Sure.
Conference Operator: Thank you very much. Our next question is from Robert Van Voorhees with Venator Capital Management. Robert, your line is now open. Please go ahead. Robert, your line is now open.
Scott Solomon, Investor Relations, Sharon Merrill Advisors: Actually, maybe
Robert Van Voorhees, Analyst, Venator Capital Management: on the Go ahead. I just wanted to confirm. Can you guys hear me now? Sorry about that.
Greg Woods, President and Chief Executive Officer, AstroNova: Yes.
Robert Van Voorhees, Analyst, Venator Capital Management: So, I just have a couple of quick questions. So, for corporate G and A, can you just confirm how much of Emtek's expenses are in that line item? I think from the filing, I could gather it was around like $570,000 I think it's $270,000 G and A and then the $300,000 one time expense. I'm just curious, could you provide any color on that? Or is that right?
Greg Woods, President and Chief Executive Officer, AstroNova: Yes. Tom, go ahead. You can grab that one.
Tom DeByle, VP and Chief Financial Officer, AstroNova: Okay. Thank you. If you look at our press release, you can it's broken out on the final page 12, where you can see that the selling expenses for Amtech were $839,000 for the quarter, dollars 209,000 on research and development and we had $273,000 for the Amtech general and administrative expenses.
Brandon Daniel, Analyst, Itay Capital: Okay.
Robert Van Voorhees, Analyst, Venator Capital Management: And so in just the $300,000 one time acquisition expense, I assume that that is sort of in corporate G and A, so the general administrative line item below the segment operating profit, is that right?
Tom DeByle, VP and Chief Financial Officer, AstroNova: Yes. So in our corporate, we paid $420,000 actually and then it was offset by a credit balance at Emtek, which is reflected in their results. So Emtek, that's the real figures for Emtek as a standalone entity.
Robert Van Voorhees, Analyst, Venator Capital Management: Okay. Got it. Thanks. And then just a quick question on T and M. So I assume the delayed Boeing orders, those are pretty high margins.
So is that one of the reasons why margins would have declined sequentially? That would be my guess.
Greg Woods, President and Chief Executive Officer, AstroNova: Yes. That you're pretty much on track there. Yes. Those are typically higher margin orders. It varies between the different shipments we make there.
But those are good orders and we're glad to see them come back online.
Robert Van Voorhees, Analyst, Venator Capital Management: Okay. Got it. And then just my final one should be pretty quick. I think Brandon kind of answered this with the answer to his question. But just on sequential PID margins, I assume that's primarily mix, right?
That's just a result of the delayed order and then maybe some other stuff in the legacy business?
Greg Woods, President and Chief Executive Officer, AstroNova: Yes. That's a significant order that we have a lot of the inventory for already, which is good. So we're kind of cranking those out. But that was a big part of it. There's other mix things in there, but that's the biggest factor in the traditional business.
Robert Van Voorhees, Analyst, Venator Capital Management: Okay, got it. That's all my questions. Thanks.
Greg Woods, President and Chief Executive Officer, AstroNova: Sure.
Conference Operator: Thank you very much. We have no questions at this time. I will now turn the call back to Mr. Woods
Greg Woods, President and Chief Executive Officer, AstroNova: for closing comments. Well, thank you all for joining us here this morning. We look forward to keeping you updated on our progress and I hope everyone has a wonderful holiday season. Have a good day.
Conference Operator: Thank you very much, Greg. And thank you everyone for joining. This concludes today's call. You may now disconnect your lines.
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