Q2 2025 AstroNova Inc Earnings Call

Unknown Attendee: Ladies and gentlemen, thank you for your patience. The Astra Nova fiscal second quarter, 2025 financial results conference call will begin in approximately one minute's time.

Ladies and gentlemen, thank you for your patience the Austrian April fiscal second quarter 2025 financial results conference call will begin in approximately one minutes time.

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Speaker Change: Good morning, and welcome to the Astro knife out fiscal second quarter 2025 financial results Conference call today's call is being recorded.

Speaker Change: I would now like to turn the conference call I thought just Scott Solomon.

Speaker Change: <unk> Investor Relations fun Sharon Merrill.

Speaker Change: Please go ahead Sir.

Speaker Change: Yeah.

Speaker Change: Thank you. Thank you Candice and good morning, everyone. If you've not received a copy of this morning's earnings release. Please go to the investors page of the Astrodome, a website www dot <unk> dot com.

Speaker Change: We are under the events and presentations section you will also find the slide presentation accompanying managements prepared remarks.

Speaker Change: Turning to slide two.

Speaker Change: It's 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 risks.

Speaker Change: A number of assumptions that could involve risks and uncertainties accordingly actual results could differ materially except as required by law.

Speaker Change: Any forward looking statements speak only as of today September 16 2024.

Speaker Change: <unk> undertakes no obligation to update these forward looking statements.

For other information regarding the forward looking statements and the factors that may cause differences.

Speaker Change: The risk factors in <unk> annual report on Form 10-K, 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 passed in <unk> believes that the inclusion of these financial measures helps investors gain a meaningful understanding of changes in the company's core operating results and helped investors who wish to make comparisons between asking our and other companies on both a GAAP and a non-GAAP basis.

Unknown Attendee: 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.

Speaker Change: The non-GAAP financial measures are reconciled to the most directly comparable GAAP measures in today's earnings release.

Scott Solomon: Turning to slide three, hosting this morning's call, are Greg Woods, AstroNova's president and chief executive officer, and Tom DeBiles, vice-president and chief financial officer. Greg will discuss the company's second quarter operating highlights, and Tom will take you to the financials at a high level.

Speaker Change: Turning to slide three hosting this morning's call are Greg Woods, <unk>, President and Chief Executive Officer, and Tom <unk>, Vice President and Chief Financial Officer, Greg will discuss the company's second quarter operating highlights and Tom will take you through the financials at a high level.

Scott Solomon: Greg will make some concluding comments, and then management will be happy to take your questions. I'm pleased to turn to slide four as I turn the call over to Greg.

Speaker Change: <unk> will make some concluding comments and then management will be happy to take your questions.

Greg Woods: Turning to slide four as I turn the call over to Greg.

Gregory Woods: Thank you, Scott.

Scott Solomon: Thank you Scott.

Gregory Woods: Good morning, everyone, and thank you for joining the call. This morning, I'm speaking with you from France, where later today, I'll be meeting with our regional sales team as part of a broader visit to several locations across the Amir region, focusing on our M-TEX integration plans. We see significant growth opportunities here, particularly with the addition of M-TEX, the newest member of the AstroNova family. Turning to our results, we delivered solid prop-line growth in the second quarter, driven primarily by our testing measurement segment. With the supply chain shortages that impacted Q1 now mostly resolved, the TNM segment bounced back in the second quarter, posting 37% revenue growth.

Speaker Change: Morning, everyone and thank you for joining the call.

Speaker Change: This morning, I am speaking with you from France, where later today I will be meeting with our regional sales team as part of a broader visit to several locations across the EMEA region, focusing on our <unk> integration plans.

Speaker Change: We see significant growth opportunities here, particularly with the addition of <unk> the newest member of the <unk> family.

Speaker Change: Turning to our results, we delivered solid topline growth in the second quarter, driven primarily by our test and measurement segment with.

Speaker Change: With the supply chain shortages that impacted Q1, now mostly resolved the TNF segment bounce back in the second quarter, posting 37% revenue growth.

Gregory Woods: TNM segments operating profit margin of 20.7% was up 900 basis points from the same period last year, and up 11% of basis points from Q1 of this year. Within the aerospace product line, we're seeing robust demand for printers and supplies, as well as for our maintenance, repair, and overhaul services. This strong demand is fueled by the sustained post-COVID recovery of the global aviation market. In the quarter, we continue to gain traction in the converting of our aerospace customers to our top-rated branded printers. These printers offer upgraded technology, providing customers a more streamlined parts and service experience.

Speaker Change: <unk> segment operating profit margin of 28, 7% was up 900 basis points from the same period last year and up 1100 basis points from Q1 of this year.

Speaker Change: Within the aerospace product line, we're seeing robust demand for printers and supplies as well as for our maintenance repair and overhaul services.

Speaker Change: This strong demand is fueled by the sustained post COVID-19 recovery of the global aviation market.

Speaker Change: In the quarter, we continued to gain traction in the converting of our aerospace customers too are tough freighter branded printers. These printers offer upgraded technology, providing customers a more streamlined parts and service experience.

Gregory Woods: For us, the benefit is reduced manufacturing costs, which in turn supports durable margins. In addition, AstroNova Aerospace has recently been awarded several new military contracts, including a follow-on agreement for a large U.S. Air Force program. Negotiations are in process for other military platforms, as well. In our part of the notification segment, the highlight of the quarter was their acquisition of M-TEX and May. This business compliments our PI portfolio with advanced printing technologies tailored to key market segments, including packaging, labeling, textiles, and industrial applications. Prior to the acquisition, M-TEX was an entrepreneurial private company that lacked many of the processes necessary to be quickly integrated into the AstroNova company.

Speaker Change: For us the benefit is reduced manufacturing costs, which in turn supports durable margins.

In addition.

Speaker Change: <unk> Aerospace has recently been awarded several new military contracts, including a follow on agreement for a large U S. Air Force program negotiations are in process for other military platforms as well.

Speaker Change: Enterprise and education segment, the highlight of the quarter was our acquisition of <unk> in May.

Speaker Change: This business complements our pi portfolio with advanced printing technologies tailored to key market segments, including packaging labeling.

Speaker Change: Next tiles and industrial applications.

Speaker Change: Prior to the acquisition.

Speaker Change: <unk> was an entrepreneurial private company.

Speaker Change: Many of the processes necessary to be quickly integrated into the yesterday the company.

Gregory Woods: Integration projects have been consuming more resources than anticipated, and M-TEX got off to a slow start in the quarter, generating revenue of less than $0.8 million, with an operating loss of $1.4 million. We expect it to take through the remainder of fiscal 2025 to transition M-Tex's systems, processes, and business tools to those that the AstroNova operating system. It's important to point out that we remain very excited about M-Tex's core strengths, including its engineering and manufacturing capabilities, and especially its game-changing ink and print head technologies. In the coming months, we will be developing additional resources to force integrating that technology into more of our product identification products.

Speaker Change: Integration projects have been consuming more resources than anticipated and MTX got off to a slow start in the quarter generating revenue of less than $8 million with an operating loss of $1 $4 million.

Speaker Change: We expect it to take through the remainder of fiscal 2025 to transition in Texas systems.

Speaker Change: <unk> and business tools to those of the <unk> operating system.

Speaker Change: It's important to point out that we remain very excited about <unk> core strengths, including its engineering and manufacturing capabilities, and especially it's game changing ink and printing technologies.

Speaker Change: In the coming months, we will be devoting additional resources towards integrating that technology into more of our product identification products.

Gregory Woods: On the positive side, the integration process has revealed many strong synergies, particularly in their vertically integrated engineering and manufacturing operations, which have proven to be highly efficient. This operational efficiency reduces reliance on outside suppliers and enables greater control over the production schedules and costs. We've attended several large trade shows since the acquisition, showcasing the breadth of the M-Tex product line, and as a result, we have built a strong M-Tex product backlog. We expect to begin shipping net backlog in the third and fourth quarters, which will enable the business to meet our targeted revenue contribution of $8 to $10 million for fiscal 2025.

Speaker Change: Positive Todd.

Speaker Change: The integration process has revealed many strong synergies, particularly in their vertically integrated engineering and manufacturing operations, which have proven to be highly efficient.

Speaker Change: Operational efficiency reduces reliance on outside suppliers and enables greater control over the production schedules and costs.

Speaker Change: We've attended several large trade shows since the acquisition.

Speaker Change: Casing, the breath of the <unk> product line and as a result, we have built a strong <unk> product backlog.

Speaker Change: We expect to begin shipping that backlog in the third and fourth quarters, which will enable the business to meet our targeted revenue contribution of $8 million to $10 million for fiscal 2025.

Gregory Woods: I'd like to quickly touch on guidance based on results from the first half of fiscal 2025, and the current business environment. Ashenovic today reaffirmed its full-year fiscal 2025 expectations for mid-single digit percent organic revenue growth. However, we are lowering our full-year adjusted EBIT margin guidance to a range of 9 to 10 percent, reflecting the slower startup of M-Tex acquisition. After the full integration, we expect our consolidated adjusted EBIT margin to be in the initial target range of 13 to 14 percent in FY26. Moving to our product identification segment on slide 5, Q2 revenue increased by more than 5 percent year-over-year, driven by the M-Tex acquisition, supplies, and a nice bounce back in the quick label and Trojan label hardware.

Speaker Change: I'd like to quickly touch on guidance.

Speaker Change: Based on results from the first half of fiscal 2025, and the current business environment. As noted today reaffirmed its full year fiscal 2025 expectations for mid single digit percent organic revenue growth power.

Speaker Change: However, we are lowering our full year adjusted EBITDA margin guidance to a range of 9% to 10%.

<unk> the slower startup of <unk> acquisition.

Speaker Change: After the full integration, we expect our consolidated adjusted EBITDA margin to be in the initial target range of 13% to 14% in FY 'twenty six.

Speaker Change: Moving to our product and application segment on slide five.

Speaker Change: Q2 revenue increased by more than 5% year over year, driven by the <unk> acquisition supplies and a nice bounce back in the quick label and Trojan label hardware.

Gregory Woods: Excluding the M-Tex acquisition, revenue was up 2.4 percent, and non-GAAP operating profit was up 26.5 percent. Our next generation flat pack and mail-related printing solutions have been well-received in the market, and we can take further momentum in the second half of the year as we begin volume shipments of these new products. Turning to our T&M segment on slide 6, as I mentioned, our aerospace product line is performing well, driven by the increasing global demand for air travel in our T&M product line. Orderflow remains a bit lumpy, as expected due to the unpredictable timing of military orders in that area.

Excluding the <unk> acquisition revenue was up two 4% and non-GAAP operating profit was up 26, 5%.

Speaker Change: Our next generation flat pack and mail related printing solutions have been well received in the market and we anticipate further momentum in the second half of the year as we began volume shipments of these new products.

Speaker Change: Turning to our <unk> segment on slide six.

Speaker Change: As I mentioned, our aerospace product line is performing well driven by the increasing global demand for air travel.

Speaker Change: In our <unk> product line.

Speaker Change: Order flow remains a bit lumpy as expected due to the unpredictable timing of military orders in that area.

Gregory Woods: That said, we've seen a steady demand for non-military data recorders, primarily for power and transportation applications. Stay tuned for some updates on exciting new generation of T&M product platforms that are in the works. Moving to slide 7, supplies accounted for 55.1 percent of revenue in the second quarter versus 55.5 percent in Q2 of last year. Hardware accounted for 30.5 percent of revenue compared with 31.7 percent last year. In the service and other category, made up 14.4 percent of revenue in the quarter compared with 12.8 percent last year. Geographically, sales to the United States account for 65.4% of total revenue in Q2, FY25, compared with 63.1% in FY24.

Speaker Change: As said, we've seen a steady demand for non military data recorders, primarily for power and transportation applications Steve.

Speaker Change: Stay tuned for some updates on exciting new generation of TM product platforms that are in the works.

Speaker Change: Moving to slide seven.

Speaker Change: Supply is accounted for 55, 1% of revenue in the second quarter versus 55, 5% in Q2 of last year.

Speaker Change: Hardware accounted for 35% of revenue compared with 31, 7% last year.

Speaker Change: And the service that other category made up 14, 4% of revenue in the quarter compared with 12, 8% last year.

Speaker Change: Geographically sales.

Speaker Change: Sales to the oil states accounted for 65, 4% of total revenue in Q2.

Speaker Change: FY 'twenty five compared with 63, 1% in FY 'twenty four.

Gregory Woods: Sales to Europe were at 25.2% compared with 28% last year, and rest of the world account for 9.4% compared with 8.9% in Q2 of FY24.

Speaker Change: Sales to Europe were at 25, 2% compared with 28% last year.

Speaker Change: And rest of world accounted for nine 4% compared with eight 9% in Q2 FY 'twenty four.

Gregory Woods: Turning to slide 8, last week we exhibited at two of the year's big trade shows, Label Expo in Chicago and Printing United Expo in Las Vegas. At Label Expo, we demonstrated the latest version of our Q2 Pro for high-speed labeling applications, as well as the M-TEX Adam 3, our wide format A3 with high-speed label printer. At last week's Printing United Expo, we showcased several groundbreaking M-TEX products, including the Multi-800, a versatile direct-to-package printing system, capable of printing on a wide array of materials, and two of the state-of-the-art direct-to-film printers, including a UV ink model and the first of its kind, game-changing powderless model.

Speaker Change: Turning to slide eight.

Speaker Change: Last week, we exhibited at two of the year's Big Tradeshows label Expo in Chicago, and printing United Expo in Las Vegas.

Speaker Change: At label Expo, we demonstrated the latest version of our <unk> Pro for high speed labeling applications as well as the <unk> Adams III, our wide format <unk> with high speed label printer.

Speaker Change: At last week's printing United Exco, we showcased several groundbreaking <unk> products, including the multi 800, a versatile direct to packaged printing system capable of printing on a wide array of materials.

Speaker Change: Two of the state of the art direct to film printers, including a UV ink model and the first of its kind game changing powder list model, they've got a lot of attention of the show.

Gregory Woods: They got a lot of attention at the show. In addition to M-TEX's impressive lineup, AstroNova also highlighted its latest innovations, including the quick-label QL 1200S for professional quality inkjet sheet labels and the Trojan label T3O-PX, which addresses the growing demand for short-run sustainable packaging solutions.

Speaker Change: In addition to <unk> impressive lineup.

Speaker Change: <unk> also highlighted its latest innovations, including the quick label QL 200 S for professional quality inkjet sheet labels and the Trojan label, <unk>, which addresses the growing demand for short run the sustainable packaging solutions.

Gregory Woods: Now, it's my pleasure to introduce our new Chief Financial Officer, Tom DeBio, who joined AstroNova as Vice President, Treasurer, and CFO in June. Tom brings more than 25 years of experience in financial leadership roles, including a time of CFO for several industrial manufacturing companies. His deep expertise in financial strategy and operations, and his service on the boards of prominent organizations, make him an invaluable addition to our leadership team. We're excited to have Tom on board, and I'm confident that his insights and leadership will help guide AstroNova to continue financial success.

Speaker Change: Now, it's my pleasure to introduce our new Chief Financial Officer, Tom <unk>.

Speaker Change: Who joined us for Nova as Vice President Treasurer, and CFO and Jim.

Tom <unk>: Tom brings more than 25 years of experience in financial leadership roles, including his time as CFO for several industrial manufacturing companies.

Tom <unk>: His deep expertise in financial strategy and operations and his service on the boards of prominent organizations make him an invaluable addition to our leadership team.

Speaker Change: We're excited to have Tom on board and I'm confident that his insights and leadership will help guide Astro Nova to continued financial success Tom.

Thomas DeBio: Tom? Thanks, Greg, and good morning, everyone. I'm excited to be part of the AstroNova team and look forward to contributing to the company's growth and success. In the coming month, I'm eager to work closely with the team to ensure we continue to execute our financial and operational strategies while delivering long-term value to our shareholders. This morning, I'll present results on a gap and on a non-gap basis. However, we'll talk mostly to the non-GAAP results as there were adjustments in both periods. We show our reconciliation of GAAP to non-GAAP measures in our press release, which is available in the Investor Relations section of our website at astroNova.com.

Tom <unk>: Tom.

Tom <unk>: Thanks, Greg and good morning, everyone.

Speaker Change: I need to be part of the astronaut with team and look forward to contributing to the company's growth and success in.

Speaker Change: In the coming months I'm eager to work closely with the team to ensure we continue to execute our financial and operational strategies, while delivering long term value to our shareholders.

Speaker Change: This morning, I'll present results on a GAAP and on a.

Speaker Change: non-GAAP basis, However, we will talking mostly to the non-GAAP results.

Speaker Change: There were adjustments in both periods.

Speaker Change: We show a reconciliation of GAAP to non-GAAP measures in our press release, which is available in the Investor Relations section of our website at Astro Nova Dot com.

Thomas DeBio: With that, I'll take you through the financial performance for the second quarter. Starting with slide 9, revenue for the quarter was 40.5 million, up 14.1% from the prior year period. Excluding Amtex, revenue was up 12%. Both segments in AstroNova had sales increases year-over-year, led by the test-and-measurement segments, strong growth in both aerospace and test-and-measurement product lines. Non-GaF gross profit margins for the quarter were 35.6%, which is consistent with the Q2 Fiscal 24. Non-GaF gross profit margins were positively impacted in Q2 fiscal 25 by volume and non-reacreen items in the aerospace product line, offset by lower margins and M-tex.

Speaker Change: With that I will take you through the financial performance for the second quarter.

Speaker Change: Starting with slide nine revenue for the quarter was $40 5 million up 14, 1% from the prior year period, excluding them tax revenue was up 12%.

Speaker Change: Both segments.

Speaker Change: Astronaut, but had sales increases year over year led by the test and measurement segment strong growth in both aerospace and test and measurement product line.

Speaker Change: non-GAAP gross profit margins for the quarter was 35, 6%, which is consistent with Q2 of fiscal 'twenty for non.

Speaker Change: non-GAAP gross profit margins were positively impacted in Q2 fiscal 'twenty five by volume and non reoccurring items in the aerospace product line offset by lower margins in amtech.

Thomas DeBio: As you can see in the tables, both in the appendix of this presentation and in the earnings release, M-tex non-GaF gross profit margin was 6.8%. Operating expenses on a non-GaF basis for the quarter were 12.2 million and increased of 10.4 million in the prior year. The increase was largely due to operating costs at M-tex of 1.3 million. AstroNova legacy business excluding M-tex at higher costs and recruiting health care professionals' fees during the quarter versus the prior year. Non-GaF operating income came in at 2.2 million for the quarter versus 2.3 million a year ago. Primarily due to loss in M-tex of 1.3 million on a non-GaF basis.

Speaker Change: As you can see in the table both in the appendix of this presentation and in the earnings release.

Speaker Change: <unk> non-GAAP gross profit margin.

Was six.

Speaker Change: Six 8%.

Speaker Change: Operating expenses on a non-GAAP basis for the quarter were $12 2 million, an increase of $10 4 million in the product.

Speaker Change: In the prior year.

Speaker Change: The increase was largely due to operating cost at <unk> of $1 3 million Gastrinoma legacy business, excluding amtech at higher costs in recruiting healthcare professionals fees during the quarter versus the prior year.

Speaker Change: non-GAAP operating income came in at $2 2 million for the quarter versus $2 3 million a year ago.

Speaker Change: Primarily due to the loss in <unk> of $1 $3 million on a non-GAAP basis.

Thomas DeBio: Still, volume at M-tex and cost to further align the M-tex product services and control environment with those of AstroNova impacted our overall non-GaF results. Adjusted EBITDA for the second quarter of fiscal 25 was 3.9 million, up 5.3% from the prior year. Non-GaF deluded earnings share was, since compared with 15% for 15 cents in the second quarter a year ago. Non-GaF APS was impacted by M-tex and higher interest expense. Bookings in Q2 were 35.8 million compared with 30.1 million in the second quarter a year ago. Bookings were primarily higher due to the strong performance in the test and measurement segment.

Speaker Change: Sales volume at Amtech and class to further align the amtech product services and control environment with those of Aster, Nova impacted our overall non-GAAP results.

Speaker Change: Adjusted EBITDA for the second quarter of fiscal 25, with $3 9 million up five 3% from the prior year.

Speaker Change: non-GAAP diluted earnings per share was down compared with 15% for 15 in the second quarter, a year ago, non-GAAP EPS was impacted by amtech and higher interest expense.

Speaker Change: Bookings in Q2 were $35 8 million compared with $30 1 million in the second quarter, a year ago bookings were primarily higher due to the strong performance in the test and measurement segment.

Thomas DeBio: Backlog at the end of the second quarter was 29.9 million, down from the first quarter of 2025. This was due to delayed shipments from Q1, 2025, to shipments in Q2, 2025. Moving to our balance sheet and debt position on slide 10, cash and cash equivalent as of August 3, 2024, were 4.8 million, up 800,000 from the first quarter of this year. Funded debt increased due to the M-tex acquisition, as we amended our credit agreement and assumed local debt in Portugal of approximately 6 million euros, or 6.6 million in US dollars. Our liquidity is over 20 million and remains strong at the end of the second quarter.

Backlog at the end of the second quarter was $29 9 million down from the first quarter of 2025. This was due to delayed shipments from Q1 2025, two shipments in Q2 2025.

Speaker Change: Moving to our balance sheet.

Speaker Change: And debt position on slide 10, cash and cash equivalents as of.

Speaker Change: August three 2024 were $4 8 million up 800000 from the first quarter of this year.

Speaker Change: Funded debt increased due to the <unk> acquisition, because we amended our credit agreement and assumed local debt in Portugal of approximately 6 million euro or $6 6 million in U S dollars.

Speaker Change: Our liquidity is over $20 million and remained strong at the end of the second quarter.

Thomas DeBio: During the coming months, our focus on the balance sheet will be on reducing working capital, which we define as cost receivable plus inventory less accounts payable and paying down debt. Turning to slide 11, we generated cash from operations of $7.1 million for the first six months of fiscal 25, compared to $4.7 million for the same period the previous year. Our year-to-date free cash flow for the first six months of fiscal 25 was $6.2 million compared with $4.2 million in the previous period. Free cash flow increased primarily due to the higher net income and increased the cost payable in the current year.

Speaker Change: During the coming months are focused on the balance sheet will be on reducing working capital, which we define as accounts receivable plus inventory less accounts payable and paying down debt.

Turning to slide 11, we generated cash from operations of $7 1 million for the first six months of fiscal 'twenty.

Speaker Change: Paired with $4 7 million for the same period the previous year.

Speaker Change: Year to date free cash flow for the first six months of fiscal 'twenty was $6 2 million compared with six four.

Speaker Change: $4 2 million in the previous period.

Speaker Change: Free cash flow increased primarily due to the higher net income and increased accounts payable in the current year.

Gregory Woods: Now I'll turn the call back over to Greg for some closing comments.

Speaker Change: Now I'll turn the call back over to Greg for some closing comments.

Gregory Woods: Greg? Thank you, Tom. Turning to slide 12, as we look ahead, AstroNova remains committed to delivering value to our shareholders by staying focused on our core strategic initiatives. We reaffirm our expectations amid single-digit percent organic growth for the full fiscal year 2025. Additionally, we anticipate achieving an adjusted EBITDA margin of 9 to 10 percent for FY25 as we work through the full integration process with M-TEX. In FY26, we are targeting adjusted EBITDA margin to be in the range of 13 to 14 percent. Looking beyond FY26, we remain confident in our ability to drive continued margin improvement, targeting a hundred basis point increase in adjusted EBITDA margins over each of the following two fiscal years.

Speaker Change: Greg.

Speaker Change: Thank you Dan.

Speaker Change: Turning to slide 12.

Greg Woods: As we look ahead ask number remains committed to delivering value to our shareholders by staying focused on our core strategic initiatives, we reaffirm our expectations of mid single digit percent organic growth for the full fiscal year 2025. Additionally, we anticipate.

Speaker Change: Anticipating achieving an adjusted EBITDA margin of 9% to 10% for FY 'twenty five as we worked through the full integration process with <unk>.

Speaker Change: In FY 'twenty six we are targeting adjusted EBITDA margin to be in the range of 13% to 14%.

Speaker Change: Looking beyond FY 'twenty six remain confident in our ability to drive continued margin improvement targeting a 100 basis point increase in adjusted EBITDA margins over each of the following two fiscal years.

Gregory Woods: These goals reflect our strong operational foundation, commitment to innovation, and ability to adapt to evolving market conditions. We are well positioned to unlock further growth opportunities and create long-term value for our sheriffs and stakeholders.

Speaker Change: These goals reflect our strong operational foundation.

Moving to innovation and.

Speaker Change: And ability to adapt to evolving market conditions, we are well positioned to unlock further growth opportunities and create long term value for our shareholders and stakeholders.

Speaker Change: Okay.

Gregory Woods: Turning to now slide 13 for a wrap up, we're seeing strong demand across our key markets, especially in aerospace and testing measurement. The global recovery and growth in these sectors are providing us with solid opportunities. Our product identification segment continues to roll out innovative solutions that meet the evolving needs of our customers, and the addition of M-TEX further accelerates this process. Innovation is central to our growth, and we're just getting started. Our test and measurement segment is experiencing tremendous momentum, with significant revenue growth that demonstrates our ability to meet customer demands and tap into new markets.

Speaker Change: Turning to slide 13 for a wrap up.

Speaker Change: We're seeing strong demand across our key markets, especially in aerospace and test and measurement.

Speaker Change: The global recovery and growth in these sectors are providing us with solid opportunities.

Speaker Change: Our product on a vacation segment continues to rollout innovative solutions that meet the evolving needs of our customers and the addition of <unk> further accelerated this process.

Speaker Change: Innovation is central to our growth and we're just getting started.

Speaker Change: Our test and measurement segment is experiencing tremendous momentum with significant revenue growth demonstrates our ability to meet customer demands and tap into new markets.

Gregory Woods: The integration of M-TEX, while slower than originally anticipated, is already revealing synergies that have strong potential to drive efficiencies and expand our technology portfolio, particularly in new adjacent market areas. We have a solid balance sheet, giving stability support, ongoing operations, all while continue to deliver value to our shareholders.

Speaker Change: The integration of ametek's, while slower than originally anticipated is already revealing synergies that have strong potential to drive efficiencies and expand our technology portfolio, particularly in new adjacent market areas.

Speaker Change: We have a solid balance sheet, giving us the ability to support ongoing operations, all while continuing to deliver value to our shareholders.

Gregory Woods: Finally, none of this will be possible without our dedicated global team. Their commitment and talent are what drive our innovation success. I want to thank all our employees for their hard work and commitment to continuous improvement. With these factors in play, we're confident about the road ahead and excited to continue building on this momentum. And with that, Tom and I will take your questions.

Speaker Change: Finally.

Speaker Change: None of this would be possible without our dedicated global team there.

Speaker Change: Their commitment and talent are what drive our innovation success.

Speaker Change: I want to thank all our employees for their hard work and commitment to continuous improvement.

Speaker Change: With these factors in play we're confident about the road ahead and excited to continue building on this momentum.

Speaker Change: And with that Tom and I will take your questions. Operator, Please open the line for Q&A.

Unknown Attendee: Operator, please open the line for Q&A. Thank you. If you would like to register a question, please press star followed by one on your telephone keypad, ensuring your line is unmuted locally. If, for any reason, you'd like to restore your question, you can do so at any time by pressing star, followed by "We will pause here briefly to compile a Q&A roster."

Speaker Change: Thank you if you'd like to register a question. Please press star followed by one on your telephone keypad, ensuring your line is on mute locally if for any reason you would like to withdraw. Your question you can do so at any time my question Scott.

Speaker Change: Great.

Speaker Change: We will pause briefly to compile the Q&A roster.

Robert Van Veruch: Our first question comes from Robert Van Veruch of Van Tock Capital; your line is open, please go ahead. Good morning, Greg and Tom. Tom and I are going to meet you on the first call. I wanted to ask you a couple of quick questions, and I suspect the first one is more so for Greg. Greg on the M&A call for M-TEX, I think you were David mentioned that M-TEX had pretty handsome EBITDA margins. Obviously, from the release of this morning, it looks like they don't, both judging from the results as well as just to update the longer term guidance.

Speaker Change: Our first question comes from Robert Van.

Robert Van: The roofs of Bontoc capital. Your line is now open. Please go ahead.

Speaker Change: Hi, Good morning, Greg and Tom.

Speaker Change: Hey, Good morning, you meet you on my first call.

Speaker Change: So nice to meet you.

Speaker Change: Two a couple of quick yeah, I just wanted to ask a couple of quick questions.

Speaker Change: And I suspect the first one is more for Greg, but Greg on the M&A call for Amtech I think you heard David mentioned that <unk> had pretty handsome EBITDA margins.

Speaker Change: Sleep front or at least at this morning, it looks like they don't post judging from the results as well as just some updates on longer term guidance can you explain the difference a little bit.

Gregory Woods: Can you explain the difference a little bit? Yeah, I basically had to do with additional costs, and don't be going into more detail if you'd like, but the costs of going through these processes and getting their systems up to speed kind of diverted them away from their daily work prior to the acquisition. So the machines and the supplies have very good margins, with in line or, in some cases, especially the supplies, better than our typical margins. Okay, so are those costs, are they backed out as part of a non-GAAP adjustment? Is that like the integration cost, or what is that?

Speaker Change: Yes, basically it had to do with additional cost that and Tom can.

Speaker Change: You go into more detail, if you'd like but the.

Speaker Change: The cost of going through these processes and getting their systems up to speed kind of diverted them away from their daily work prior to the acquisition.

Speaker Change: So the machines and the supplies have very good margins with in line or in some cases, especially the supplies better than our typical margins.

Speaker Change: Okay. So are those are those talks are they backed out as part of the non-GAAP adjustment is that like the integration costs or what is that.

Gregory Woods: Some of those are integration costs, and some of it is they aren't able to ship as much product as they would because we had them working on other integration-type things versus product manufacturing. So I mentioned they have a decent, actually very good backlog building up when we head in the show leads and things they've got. So you'll see that's picked up in Q3 and Q4, but you can't, you know, absorb those costs on such a low revenue. Right, okay.

Speaker Change: Some of those integration costs and some of it is they aren't able to ship as.

Speaker Change: As much product as they would have because we had them working on other integration type things versus product manufacturing.

Speaker Change: As I mentioned, they have a decent actually a very good backlog building out when you add in the show leaves and things that we've got.

Speaker Change: So youll see that pick up in Q3, and Q4, but you can't absorb those costs on such a low revenue.

Speaker Change: Right Okay.

Gregory Woods: So I guess longer term, what are the milestones we should be looking for outside shareholders regarding MTEX? Like when do we expect them to get to profitability, how, you know, what are the levers that we can pull that we should be on the lookout for? Just because I mean longer term for effort 26, I think we took down even a margin guidance, even though TNM, the highest margin businesses should do quite well. So I'm just trying to figure out what sort of the hold us accountable to for regarding MTEX. Yeah, so like I've mentioned in my comments, you know, we're working through this. You know, obviously, you know, Q2 was, you know, not a great result, obviously from a profitability point of view and for revenue point of view.

Speaker Change: So I guess longer term what are the milestones that we should be looking forward to outside shareholders.

Speaker Change: Guarding MTX like when do we expect them to get to profitability, how what are the levers that we can Paul.

Speaker Change: We should be on the lookout for just because I mean longer term for FY 'twenty six I think we took down EBITDA margin guidance you can now see it.

Speaker Change: And the highest margin business it should do quite well.

Speaker Change: I'm, just trying to figure out what sort of the hold us accountable to.

Speaker Change: Two part regarding amtech.

Yeah, So like I mentioned in my comments, we're working through obviously in Q.

Speaker Change: Q2.

Speaker Change: Got it Great result, obviously from a profitability point of view and for a revenue point of view so.

Gregory Woods: So, and I mentioned what they have, you know, in the backlog right now and that we reaffirmed that they'll contribute in that 8 to 10 million dollar range as far as, you know, the time period in which we own them. So, as that volume goes up, you know, the products, as, you know, I had mentioned in the past, you know, are good margin products and they have a healthy stream of orders already in house. So just getting those shipped out this year. Yeah, we're not giving exact guidance on when it's going to, you know, flip over the profitability, but, you know, we're looking forward to be, you know, continuously improving as we go through the year here and being in very good shape for next year.

Speaker Change: I mentioned, what they have in the backlog right now and that we reaffirm that they'll contribute in that $8 million to $10 million range as far as the time periods in which we own them.

Speaker Change: So as that volume goes up.

Speaker Change: <unk>.

Speaker Change: I had mentioned in the past they are good margin products than.

Speaker Change: They have a healthy stream of orders already in house, So just getting those shipped out.

Speaker Change: This year.

Speaker Change: Yes.

Speaker Change: Exact guidance on when that's going to.

Speaker Change: Lip over to profitability, but.

Speaker Change: We're looking forward to the.

Speaker Change: Continuously improving as we go through the year here and being very good shape for next year.

Gregory Woods: When we finish those and when we finish a little bit earlier, but right now, you know, we're saying it's going to take, you know, the better part of the second half of this year to get them through everything on the integration.

Speaker Change: Finish those when we finished a little bit earlier, but right now, we're saying it's going to take the better part of the second half of this year to get them through everything on the integration side.

Speaker Change: Right, Okay, and I guess just ask my my last question. So at recent conferences and I know, Tom you've been a part of that as well, but you guys have emphasized more M&A is a key strategy can you just I guess expand upon why.

Robert Van Veruch: I guess that's my last question. So at recent conferences, and I know Thomas has been a part of them as well, but you guys have emphasized more M&A as a key strategy. Can you just, I guess, expand upon why that is the plan moving forward. I mean, why not just distribute cash in some form of buybacks, which are generally referred to, or just this is evidence supposed to forcing yourself to look for something new. But I know Asher machine was great, but I mean, how many businesses are out there like that. So fire. Well, Dan, so the last question first, there are quite a few, but right now, you know, our focus for this year is, you know, getting the MTEX acquisition performing as we know it can.

Speaker Change: Why that is the plan moving forward I mean, why not just distribute cash in some form of buybacks, which are generally preferred or just is it dividends as opposed to forcing yourself to look for something new I know Astra machine was great, but I mean, how many business are out there like that.

Speaker Change: The fire.

Speaker Change: Well to answer the last question first there are quite a few but right now our focus for this year.

Speaker Change: Getting the <unk> acquisition performing as we know what Ken and obviously, we've got organic uses as well in terms of.

Gregory Woods: And obviously, we've got organic uses as well in terms of, you know, capital deployment. And if we don't have an M&A opportunity, when we've got those things running there, that is an opportunity for us to look at alternatives there. But so far, the M&A strategy combined with our organic product development and other investments have worked well for us. And the type of markets that we're in, you know, lend themselves well to that type of innovation. Yeah, we did three in aerospace and three in the PI. You know, for example, if another aerospace application acquisition opportunity came into about, you'd be looking at quite a good return on that type of investment.

Speaker Change: Capital deployment, and if we don't have.

Speaker Change: M&A opportunity when we got those things running there that that is an opportunity for us to look at alternatives there but.

Speaker Change: So far the M&A strategy combined with our organic product development and other investments.

Speaker Change: Have worked well for us.

Speaker Change: With the type of markets that we're in.

Speaker Change: Lend themselves well to that type of innovation.

Speaker Change: Yes, we did three in aerospace and three in Ti.

Speaker Change: So for example of another aerospace application.

Act.

Speaker Change: Acquisition opportunity came to about.

Speaker Change: You'd be looking at quite a good.

Speaker Change: Return on that type of investment.

Gregory Woods: Or we wouldn't do it, of course, but the nice thing about it, you know, and I've talked about some previous calls, is we have pretty much all the approvals we need from all the major OEMs and even the smaller OEMs, as well as opportunity airlines. So we can drop one of those in very easily and create quite a bit of investment and opportunities for us.

Speaker Change: Or wouldn't do it of course, but the nice thing about it and I've talked about this on previous calls is we have pretty much all the approvals we need from all the major Oems and even the smaller Oems as well as over 200 Airlines. So we can drop one of those in very easily and create quite a bit of.

Speaker Change: Investment opportunities for us.

Unknown Attendee: All right, I think that's it for me for now. Thanks. Okay. Thank you.

Speaker Change: Alright, I think Thats a that's it for me for now thanks.

Speaker Change: Okay.

Speaker Change: Thanks Keith.

Unknown Attendee: As a reminder, if you'd like to ask a question, please press start followed by one on your telephone keypad.

Speaker Change: As a reminder, if you'd like to ask a question. Please press star followed by one on your telephone keypad. Our next question comes from the line of Brendan Daniel.

Brandon Daniel: Our next question comes from the line of Brandon Daniel, but at a capital. Your line is open; please go ahead. Hey, guys, I just kind of wanted to follow up on Robbie's questions around margins. So if I just look at what you've guided to previously, call it the base business legacy astronauta. You know, for 2026, you would essentially got it to around call it 15% even the margins, and if we just assume that business grows at mid single digits, which you've talked about in the past, that sort of implies that index is margins in 2026 or flat to down or maybe flat to low single digits. Is that accurate? Is what you're guiding to that?

<unk> capital. Your line is now open. Please go ahead.

Speaker Change: Hey, guys I, just kind of wanted to.

Speaker Change: Follow up on <unk> questions around margins. So if I just look at what your guidance you previously call. It the base business legacy Astra Nova.

Speaker Change: For 2026, you had essentially guided to around call it 15% EBITDA margins and if we just assume that business grows at mid single digits, which you've talked about in the past that sort of.

Speaker Change: Implies that and tax is margins in 2026 are flat to down or maybe flat to low single digits is that accurate is what youre guiding to that.

Gregory Woods: No, I'm not following that one exactly. They're Brandon. You're driving; you can't talk about gross margin, and then you're also talking about the justity bit in, so it's two different things. I'm talking; you know, I'm only talking strictly about just the diva. So the math again is assuming the legacy business grows at your prior guidance. So you hit 15% even the margins in 26 and just some mid single-digit growth. So if I run with that, that implies in text is that flat to low single digit margins, assuming double digit growth, and it really implies that they're actually so unprofitable in 26.

Speaker Change: No I'm not following that one exactly there Brian.

Speaker Change: You're driving.

Speaker Change #100: Talking about gross margin and then you're also talking about adjusted EBITDA. So it's two different things I am talking online only strictly talking about adjusted EBITDA.

Speaker Change #101: So that sort of the math again is assuming the legacy business grows at your prior guidance. So you had 15% EBITDA margins in 2006, and just some mid single digit growth if I run the risk that that implies and tax is that flat to <unk>.

Speaker Change #101: Oh single digit.

Speaker Change #100: Margins.

Speaker Change #103: Assuming double digit growth and it really implies that they are actually still unprofitable and 'twenty six so I'm trying to understand.

Gregory Woods: So I'm trying to understand where that delta is coming from. Yeah, so we originally we had said prior to, you know, the mtex integration kind of, you know, taking longer and costing more than we expected that we would be doing 13 to 14% this year. And then you're, that's what you're talking about, is then adding a hundred basis points to that in 26. That how you're getting to 15%. Yes, correct, yeah, for the legacy business, call it, yeah. Yeah, so we're just behind on that curve, so we're still looking at that same ramp, but we have to get them, you know, up to where we expect they would kind of start from. You know, so the basically pushes it out into FY26.

Speaker Change #103: Where that Delta is coming from basically.

Speaker Change #104: Yes. So we originally we had said prior to the Amtech integration kind of you know is taking longer and costing more than we expected that we would be doing 13% to 14% this year.

Speaker Change #105: And then that's what you're talking about adding a 100 basis point to that in 2006 is that how youre getting to 15%.

Yes, correct, yes for their legacy business call it yet.

Speaker Change #106: Yes, so we're just behind on that curve. So we're still looking at that same ramp, but we have to get them up to where we expect David kind of start from.

Speaker Change #107: So basically pushes it out.

Gregory Woods: And as we learn more and, you know, have that integration behind us and get the products out in the field from Mtex and, you know, see how they're doing on the supplies uptake, because there's a lot of new products that don't really have history yet on that, so we're kind of estimating where they would be. Assuming that's tracking higher than, we'll update our guidance there as well.

Speaker Change #107: FY 'twenty six and as we.

Speaker Change #107: Learn more.

Speaker Change #108: Have that integration behind us and get the products out in the field from.

Speaker Change #108: <unk> and <unk>.

Yes, they are doing on the supply is uptake because there's a lot of new products that don't really have history, yet on that so we're kind of estimating where they would be.

Speaker Change #108: Assuming that is tracking higher then we will update our guidance there as well.

Brandon Daniel: Got it, so just on the topic of maybe use as a capital going forward, you know, I've mentioned there, but I know there has been some mention of M&A at the road shows. I know Robbie had touched on that. I guess a question, you know, as an investor, Greg, you know, I've been around for a while and several of my peers are going around for longer. You know, when I'm looking at your share price on the legacy business, you know, call it $17 at the time for when you require mtex, I'm struggling to see how mtex was $24 million for mtex was a better use of capital than doing some sort of pinder offer or buyback.

Speaker Change #108: Got it so just on the topic of maybe uses of capital.

Going forward you know I'd mentioned, there I know there had been some mention of M&A at the Roadshows I know, Rob you had touched on that but I guess a question.

Speaker Change #109: As an investor you, Greg you know I've been around for a while and in several of my peers are going after longer.

Speaker Change #110: When I'm looking at your share price on the legacy business, you know call it $17 at the time.

Speaker Change #111: Or when you acquired <unk> I'm struggling to see how and tax was $24 million in Texas is a better use of capital than doing some sort of.

Speaker Change #111: Tender offer or our buyback so assuming.

Gregory Woods: Assuming, you know, your share price relatives here for a while longer, is that a, is that does that come into consideration, does the share buybacks come to consideration there because, yeah, just maybe some clarity on how, how we expect to get paid basically from acquisition of mtex and then what's your focus of capital use of capital going forward. Yeah, so go on the mtex and I mentioned that technology, you have to kind of wait to see what comes out with new products that we bring out next year, but some of their income print head technology, in particular, has significantly higher margins than what we have on our products and there's applications to integrate that type of technology into, you know, some of our existing products that we have in the drawing board.

Speaker Change #113: Your share price relishes here for a while longer is that a is that does that come into consideration the share buybacks come into consideration there because.

Speaker Change #113: Yes, just maybe some clarity on how or how we expect to.

Speaker Change #113: Get paid basically from the acquisition and tax and then what.

Speaker Change #113: Your focus on capital use of capital going forward.

Speaker Change #114: Yes, so again on the amtech, saying I mentioned the technology, you have to kind of wait and see what comes out with new products that we bring out next year, but.

Speaker Change #114: Some of their income printhead technology in particular has significantly higher margins than.

Speaker Change #114: What we have on our products and applications to integrate that type of technology into some of our existing or products that we have on the drawing board.

Gregory Woods: So that's really what we're looking at internally, and, you know, for positive reasons, we don't really talk about exactly how all that works. So that's why, yeah, that's one of the key drivers of why we made the investment. Yeah, and some of these things, you won't see it until we actually get those new products launched in the field and, you know, consuming supplies. So we don't just look at it as a, hey, it's a static business and here's what it does, and it's going to keep doing that is some kind of small growth rate. We think there'll be significant growth from that business as far as, you know, acquisitions or use of capital. Beyond that, you know, our focus right now is paid on debt.

Speaker Change #114: So that's really what we're looking at internally.

Speaker Change #115: For competitive reasons, we don't really talk about exactly how all that works.

Speaker Change #114: No.

Speaker Change #116: Yes, that's one of the key drivers of why you made the investment.

Speaker Change #116: And some.

Speaker Change #116: Some of these things.

Speaker Change #116: Won't see it until we actually get those new products launched in the field.

Speaker Change #116: Consuming suppliers.

Speaker Change #116: No.

Speaker Change #116: Don't just look at it as a static business and here's what it does then it's going to keep doing that at some kind of small growth rate, we think there'll be a significant growth from that business.

Speaker Change #116: As far as.

Yes acquisitions, our use of capital beyond that our focus right now is pay down debt.

Gregory Woods: You know, so get the integration of MTEX taking care of and pay down debt, and then obviously, you know, for organic uses like last year, we bought a new press because we couldn't keep up with the label demand. So those type of applications and then, you know, certainly if we don't have better uses for it, either for it. Acquisitions or organic Hill, we would consider those other opportunities as well. David, David, and whoever. That's something to get reviewed by the board, you know, every quarter. Got it, got it. All right. Appreciate it. Thanks. Okay. Thanks.

Speaker Change #116: So you get the integration.

<unk> taken care of and pay down debt and then obviously.

Speaker Change #116: For organic.

Speaker Change #117: Users like last year, we bought a new press, because we couldnt keep up with the label demand.

Speaker Change #117: So those type of applications and then.

Speaker Change #117: Certainly if we don't have better uses for it either for.

Speaker Change #118: Acquisitions or organic we would consider those other opportunities as well.

Speaker Change #118: Got it thank you to everybody for dividend or whatever but that's something that gets reviewed by the board every quarter.

Speaker Change #118: Got it got it alright appreciate it thanks, thanks guys.

Unknown Attendee: Thank you.

Speaker Change #118: Sure Brian Thanks.

Speaker Change #119: Thank you Sir with no additional questions at this time I would like to hand, the conference call back over to Mr. Woods for closing remark.

Gregory Woods: If there are no additional questions waiting at this time, I'd like to hand the conference call back over to Mr. Woods for closing remarks. Okay.

Okay, well. Thank you everyone for joining US here. This morning, and we look forward to keeping you updated on our progress and.

Unknown Attendee: Well, thank you everyone for joining us here this morning, and we look forward to keeping up in our progress and look forward to meeting with some of you. We know we've got some people who want to visit our facilities. We're always open to that. So we'll look forward to that and have a good week, everyone.

Speaker Change #119: Look forward to.

Mr. Woods: Meeting with some of you we know we've got some people want to visit our facilities. We're always open to that so I will look forward to that and have a good week everyone.

Unknown Attendee: Ladies and gentlemen, thank you for joining in today's call. Have a great rest of your day. You may now disconnect your line.

Mr. Woods: Ladies and gentlemen, thank you for joining in today's call have a great rest. Your day you may now disconnect your line.

Mr. Woods: Yeah.

Mr. Woods: [music].