Q3 2025 AstroNova Inc Earnings Call
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Speaker Change: Thank you very much everyone for holding this conference call will begin momentarily.
Speaker Change: [music].
Speaker Change: Good morning, and welcome to the Astro no, but the school 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.
Scott Solomon: Of the company's Investor Relations firm Sharon Merrill Advisors. Please go ahead Sir.
Scott Solomon: Thank you Asher and good morning, everyone.
Speaker Change: Our Q3 fiscal 2025 earnings release on the slide presentation accompanying managements prepared remarks are posted to the investors page of our website Www Dot Astro Nova Inc. Dot com.
Speaker Change: Turning to slide two 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 995.
Speaker Change: 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.
Speaker Change: Any forward looking statements speak only as of today December 12, 2020 for Astro undertakes no obligation to update these forward looking statements.
Other information regarding the forward looking statements and the factors that may cause differences. Please see the risk factors that should help with annual report on Form 10-K, and other filings the company makes with the Securities and Exchange Commission.
On today's call management will refer to non-GAAP financial measures.
Speaker Change: <unk> 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 it helps investors who wish to make comparisons between Astro Nova and other companies on both a GAAP and non-GAAP basis.
Speaker Change: non-GAAP financial measures are reconciled to the most directly comparable GAAP measures in today's earnings release.
Speaker Change: Turning to slide three hosting this morning's call are Greg Woods, Astro Novas, President and Chief Executive Officer, and Tom Tobias, asking VP and Chief Financial Officer.
Greg will begin the call with an overview of the Companys third quarter performance Todd will discuss segment results, Greg will make some concluding comments and then management will be happy to take your questions. Please.
Speaker Change: Please turn to slide four as I turn the call over to Greg.
Thank you Scott.
Greg Woods: Good morning, everyone and thank you for joining us today.
Greg Woods: Let me start by addressing our third quarter performance.
Overall the results were disappointing.
Greg Woods: We saw a significant decrease in consolidated margins and a notable year over year.
Greg Woods: Increase in our operating expenses.
Greg Woods: Much of this is tied to the ongoing integration of Amtech center into our product identification segment.
Greg Woods: And integration that has proven to be far more time consuming and resource intensive than we anticipated when we completed the acquisition in May.
Greg Woods: In the third quarter.
Greg Woods: <unk> had an operating loss of $1 1 million on revenue of $1 7 million.
Greg Woods: While we did see some sequential revenue improvement initial sales volumes revenue contributions and margins did not meet our expectations.
Greg Woods: We have been mobilizing quickly to rectify the situation.
Greg Woods: Our focus now is unacceptable rating <unk> path to profitability and ensuring its foundational capabilities our position to support stronger performance in the quarters ahead.
Greg Woods: To facilitate this.
Greg Woods: We recently completed a full realignment of N, Texas organizational reporting structure.
Greg Woods: All of <unk> key functions.
Greg Woods: And marketing manufacturing technology.
Yes, and human resources now report directly to astronauts leadership.
Greg Woods: This change aims to speed up the implementation of a consistent best practices within EM, Texas sales process.
Greg Woods: Ensuring it aligns with our product identification segment standards and the broader operational excellence, we strive for across our company.
Greg Woods: During the <unk> integration process, yes, another team discovered certain details that appear to be inconsistent with the information originally provided by the seller as part of our definitive agreements.
Greg Woods: We're continuing to research these matters.
Greg Woods: Seeking potential remedies from the seller under these agreements.
Greg Woods: Given the confidential nature of our customer relationships, we will not be taking questions on this topic on today's call.
Greg Woods: As part of the integration process, we have launched an astronomical wide cost reduction and product line rationalization initiative.
Greg Woods: This is a comprehensive effort aimed not only at reducing expenses, but also refining our product portfolio to sharpen our competitive edge.
Greg Woods: Early progress is encouraging.
Greg Woods: We've closed some significant new orders that underscore the market's confidence in our evolving offerings.
Greg Woods: However.
Greg Woods: We anticipate that the full integration and optimization of M. Texas operations will extend through mid calendar year 2025.
Greg Woods: 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.
Greg Woods: One product launch update from RPI segment.
Greg Woods: In fiscal Q4, we began shipping a large inkjet printer order that had been delayed to allow.
Greg Woods: Some customer requested enhancements, we expect that the order will contribute several million dollars to RPI segment's top line over the next several quarters.
Greg Woods: Moving to slide five.
Greg Woods: Despite the integration related challenges I want to emphasize our continued confidence in <unk> technology there.
Greg Woods: The inkjet printing solutions combined with their unique real time printer monitoring and management software remain compelling.
Greg Woods: In the quarters ahead.
Greg Woods: And in conjunction with our product rationalization program.
Greg Woods: We intend to integrate in Texas technology into most of our product lines.
Greg Woods: We also plan to retrofit several models within our large global installed base.
Greg Woods: We believe this approach will ultimately give our customers improved performance and a lower total cost of ownership.
Greg Woods: Turning to slide six.
Greg Woods: Total revenue increased nearly 8% in the third quarter driven largely by the momentum in the aerospace product lines within our test and measurement segment.
Greg Woods: Our role as the leading supplier of flight deck printers, and electronics for commercial defense and business aviation.
Greg Woods: Continues to provide strong competitive advantage for <unk>.
Greg Woods: The segment's performance would have been even stronger had it not been for the nearly two months Boeing strike, which delayed shipments.
Greg Woods: With the strike now resolved, we're ramping shipments back up and we expect stronger sales volume as we close out fiscal 2025.
Greg Woods: As shown in slide seven when considering the longer term outlook for our <unk> segment keep in mind two key factors that are expected to drive margin enhancement in the coming years.
Greg Woods: Today about 43% of our aerospace printer shipments are represented by our proprietary tough rader brands the remaining 57% of shipments.
Greg Woods: Wired flight deck printer brands.
Greg Woods: As we have discussed on prior calls we are in the process of upgrading customers from the three acquired brands to our tough rader branded wide and narrow format printers.
Greg Woods: By the end of fiscal 2027, we estimate that our tough writer brand will account for approximately 89% of our shipments.
Greg Woods: We expect this tougher it a transition plan to be completed by the end of fiscal year 2027.
Greg Woods: <unk> and enhanced technology experience and streamline parts and services for our customers.
Greg Woods: By having fewer skus.
Greg Woods: Transition will reduce our overall manufacturing costs, thereby improving margins.
Greg Woods: In addition to those benefits are.
Greg Woods: Our projected royalty expenses as shown on slide eight.
Greg Woods: Dropped dramatically from over $4 million per year in fiscal 'twenty five through 27 just.
Greg Woods: 375000 in fiscal 2028.
Speaker Change: Now, let me turn the call over to Tom for the financial review.
Greg Woods: Tom.
Tom Tobias: Thank you Greg and good morning, everyone. Let me begin with an overview of our financial performance on slide nine.
Tom Tobias: Net revenue for the third quarter was up seven 7% to $40 4 million with growth in our Tms segment offsetting a modest revenue decline in Pi.
Excluding amtech.
Tom Tobias: Total net revenue increased 3% for the quarter grew.
Tom Tobias: Gross profit margin for the third quarter was 33, 9% compared with 39, 4% in the prior year period.
Tom Tobias: Gross profit margins were down in the quarter due to lower margins at amtech sales mix and lower European hardware sale.
Tom Tobias: non-GAAP operating expenses for the third quarter.
Tom Tobias: $12 1 million up 19, 3% from the prior year period.
Tom Tobias: <unk> accounted for $1.3 million of the increase the remaining cost increases related to head count additions of key personnel and sales and finance organization.
Tom Tobias: Prototype expenses and higher information technology costs.
Tom Tobias: non-GAAP operating income.
Came in at $1 6 million for the third quarter versus $4 6 million in the year earlier period, primarily due to higher costs in 2025 period, and a loss of $1 1 million related to amtech.
Tom Tobias: As in the second quarter cost and management attention.
Tom Tobias: To further align the amtech product services and control environment with those of Aster, Nova affected our results.
Tom Tobias: Adjusted EBITDA for the third quarter of fiscal 2025, with $3 2 million compared with $5 7 million in the prior year period.
Tom Tobias: non-GAAP diluted earnings per share was six cents compared with 37 cents in the third quarter a year ago.
Tom Tobias: Bookings were $37 6 million in the third quarter compared with $35 5 million in the year earlier.
Tom Tobias: Period.
Tom Tobias: Backlog as of November <unk>, 2024 was $27 1 million compared with $31 2 million at the end of the third quarter of fiscal 2024.
Tom Tobias: Turning to our segment results on Slide 10 revenue was down 1% from the prior year period to $26 3 million.
Excluding the <unk> acquisition sales in Pi were down seven 2%, primarily due to lower hardware sales.
Tom Tobias: Segment operating profit in the third quarter of fiscal 2025 was $1 9 million or seven 2%.
Tom Tobias: Revenue. This compares with $4 8 million or 18, 1% of segment revenue in the third quarter of fiscal 2024.
Tom Tobias: The decrease reflects higher costs in fiscal 2025 in part associated with the <unk> acquisition product mix lower sales volume in Europe, and the delayed product release.
Tom Tobias: Moving to slide 11 test and measurement segment revenue increased 28, 2% from the prior year period to $14 1 million driven by the aerospace product line.
Tom Tobias: Reflecting the top line growth operating margins were $3 3 million for Q3 fiscal 'twenty five versus $2 6 million in the prior year.
Tom Tobias: <unk> 7 million or 26, 9%.
Tom Tobias: Looking at our balance sheet and leverage on slide 12.
Tom Tobias: Cash and cash equivalents at the end of the quarter were $4 4 million down 400000 from the end of Q2.
Funded debt increased to $48 9 million at the end of Q3 up from $45 6 million at the end of Q2.
Tom Tobias: The liquidity was $14 7 million at the end of the quarter.
Tom Tobias: Down from Q2 by $7 2 million.
Tom Tobias: The drop in liquidity reflects higher accounts receivable and aerospace shipments with longer payment terms lower accounts payable is the timing of payments to key suppliers all occurred in Q3 FY 'twenty five.
Tom Tobias: Astro Novo also supported text with a $2 7 million of working capital loan directly from our revolver.
Tom Tobias: Turning to <unk>.
Tom Tobias: Turning to cash flow on slide 13 through the first nine months of fiscal 2005, we generated cash from operations of $2 3 million compared with $5 9 million for the same period of fiscal 2024.
Tom Tobias: Year to date free cash flow was $1 2 million versus $4 6 million for the same period a year earlier.
Tom Tobias: During the quarter, we used cash from operations of $4 7 million.
Tom Tobias: This was driven by higher aerospace accounts receivable lower accounts payable and lower EBITDA versus prior quarter.
Speaker Change: As Greg noted, we are initiating a comprehensive evaluation of costs and expenses to ensure they align with our strategic priorities and operational goals.
Speaker Change: Given the extended integration timeline for amtech, we no longer will be providing guidance for fiscal 'twenty five 'twenty six.
Speaker Change: We plan to provide longer term targets, we look forward to presenting the results of this evaluation along with the financial targets on our call.
Speaker Change: In March.
Speaker Change: Now I will turn the call over to Greg for closing comments Greg.
Greg Woods: Thanks, Tom.
Greg Woods: Summarizing on slide 14.
Speaker Change: We believe that the integrating <unk> innovative technology with astronauts as existing strengths, our operational excellence established customer relationships and strong brand recognition.
Speaker Change: We can accelerate growth in our core markets and strengthen our position as the innovative leader in advanced product identification solutions.
Speaker Change: Although the path to fully realizing the benefits of the <unk> acquisition is longer and more complex than anticipated.
Speaker Change: Strategic upside is significant.
Speaker Change: Now, Tom and I will be happy to take your questions. Operator, Please open the line for Q&A.
Thank you very much if you would like to ask a question. Please press star followed by one on your telephone keypad now.
Speaker Change: Please ensure your devices and you said low to me.
Speaker Change: If you change your mind or your question has already been answered then please press star two.
Speaker Change: We will now pause to allow questions to be registered.
Speaker Change: Our first question comes from Brandon Danielle.
A tight capital Brendan Your line is now open. Please go ahead.
Yes.
Speaker Change: Hey, guys. Good morning, sorry, if I missed this in the earlier comments just some clarity here on that jet order thats been delayed is that related to the legacy business or the <unk> business.
Speaker Change: It's a little hard to hear you Brian.
Speaker Change: Greg can you repeat the question.
Oh, Yeah, Hey, sorry is this better Greg can you hear me now.
Speaker Change: Yes, just kind of a little bit muted, but go ahead go ahead.
Speaker Change: Yeah, So I'll talk a little bit louder on that order.
Speaker Change: Is that related to the legacy Pi business or impact I'm, sorry, if I missed there.
Speaker Change: Oh, that's a legacy business actually relates back to an order we got back at the beginning of the year actually.
Speaker Change: 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 in.
Speaker Change: Obviously willing to accommodate them so.
Speaker Change: We put all of those enhancement and they've got even better product out of it.
Speaker Change: And we just started shipping this month, so but yes.
Speaker Change: Its legacy product, but its a new generation of product with also different inkjet technology, but not the <unk> technology.
Speaker Change: Okay Awesome. Thanks, that's my only question.
Speaker Change: Sure.
Speaker Change: Thank you very much just as a reminder, if you would like to ask a question. Please press star one on your telephone keypad now.
Speaker Change: Our next question is from real Great fanfare is waived.
Speaker Change: So Nicole capital management Robert Your line is now open. Please go ahead.
Robert Your line is now.
Speaker Change: Go ahead I just wanted to confirm.
Speaker Change: Can you guys hear me now.
Speaker Change: Sorry about that yes.
Speaker Change: So I just have a couple of quick questions. So for corporate G&A Keith.
Speaker Change: Can you just confirm how much of an tax expenses are in that line item I think from the filing I could gather it was around like 570000, I think it's 270 G&A and then the 300 K one time expense. So I'm just curious can you provide any color on that.
Or is that right.
Speaker Change: Yeah. Tom go ahead, you can grab that one.
Tom Tobias: Okay. Thank you if you look at our press release.
Tom Tobias: It's broken out on the final page 12.
Tom Tobias: Mhm.
Tom Tobias: Where you can see that.
Tom Tobias: The selling expenses for <unk> were 839 for the quarter 209, Unreached research and development and we had 273000 for the amtech.
Tom Tobias: General and administrative expenses.
Speaker Change: Okay, and so just the 300000, a onetime acquisition expense I assume that that.
Speaker Change: Is sort of heading and corporate G&A, so that general and administrative line item below the segment operating profit is that right.
Speaker Change: Yes, so in our a corporate we paid 420000 actually and then it was offset by a credit accident balanced at amtech, which is reflected in their results. So.
Speaker Change: That's a real figures for Comtech as a standalone entity.
Speaker Change: Okay got it thanks.
Speaker Change: Then just a quick question on <unk>, so I assume the delayed billing orders those are pretty high margins. So is that one of the reasons why margins would have declined sequentially.
Speaker Change: That would be my guess.
Speaker Change: Yes, you're pretty much on track there yeah. Those are typically higher margin quarters. It varies between the different shipments we make there but.
Speaker Change: Yeah, those are getting good orders and we're glad to see them come back online now.
Speaker Change: Okay got it and then just my final one should be pretty quick I think Brendan.
Speaker Change: Answered this with the answer to his question, but just on sequential.
Speaker Change: Margins I assume thats, primarily a mix right. That's just a result of the delayed order and then maybe some other stuff in the legacy business.
Speaker Change: Yes.
Speaker Change: A significant order that we have a lot of the inventory for already which is good so whenever we're kind of cranking those out but.
Speaker Change: That was a big part of it if theres other mixed things in there, but that's the biggest factor in the traditional business.
Speaker Change: Okay got it that's all my questions. Thanks.
Sure.
Speaker Change: Thank you very much we have no questions at this time I will now turn the call back to Mr. Woods for closing comments.
Mr. Woods: 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.
Speaker Change: Have a good day.
Thank you very much Greg and thank you everyone for joining this concludes today's call you may now disconnect your lines.
Speaker Change: Yeah.
Speaker Change: [music].
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