Group 1 - AstroNova (NASDAQ: ALOT) reported a negative Q2 performance due to customer delays and challenges in integrating the recently acquired MTEX [2] - The company is undergoing a full-scale organizational realignment in response to these issues [2]

Core Insights - AstroNova, Inc. reported a significant decline in profitability for the third quarter of fiscal 2025, with net income dropping to 6 cents per share on a non-GAAP basis compared to 37 cents per share in the same quarter last year [1] - The company's net revenues increased by 7.7% year-over-year to $40.4 million, but GAAP net income fell sharply by 91.3% to $0.2 million from $2.8 million a year ago [2] - Gross margins contracted significantly, with GAAP gross margin declining to 33.9% from 39.4% in the prior year, attributed to higher operating costs and an unfavorable product mix [3] Financial Performance - The Product Identification (PI) segment reported revenues of $26.3 million, slightly down from $26.5 million a year ago, with operating income dropping to $1.9 million from $4.8 million [5] - The Test & Measurement (T&M) segment saw revenues grow by 28.2% year-over-year to $14.1 million, with operating income increasing to $3.3 million [6] - Overall operating expenses rose to $12.5 million from $10.2 million a year ago, reflecting increased selling, marketing, and administrative costs [9] Management Commentary - CEO Greg Woods acknowledged the disappointing profitability, citing challenges from the MTEX NS acquisition and delays in a major inkjet printer order [7] - The integration of MTEX has been more resource-intensive than expected, with MTEX reporting an operating loss of $1.1 million on $1.7 million in revenues [7] - Management remains optimistic about MTEX's innovative technology and plans to integrate its features across AstroNova's product portfolio [8] Guidance and Future Outlook - AstroNova has suspended its fiscal 2025 and 2026 financial guidance due to uncertainties related to the MTEX integration process [11] - The company plans to provide long-term financial targets during its fiscal 2025 full-year earnings release in March 2025 [11] - The integration challenges are being addressed through a structural realignment within MTEX and a company-wide cost-saving program [12]

Revenue Performance - Revenue for the third quarter of fiscal year 2024 was $40.4 million, a 7.7% increase from $37.5 million in the same quarter of the previous year[77]. - For the first nine months of fiscal year 2024, total revenue was $113.9 million, a 5.0% increase from $108.5 million in the same period last year[81]. - Domestic revenue for the third quarter was $23.5 million, a 12.1% increase from $21.0 million in the prior year, while international revenue was $16.9 million, reflecting a 2.1% increase[77]. Segment Performance - Product Identification (PI) segment revenue was $26.3 million, accounting for 65.1% of total revenue, a decrease of 0.9% compared to $26.5 million in the prior year[77]. - Test and Measurement (T&M) segment revenue increased by 28.2% to $14.1 million, up from $11.0 million in the previous year[77]. - Revenue from the PI segment decreased by $0.7 million or 1.0% to $76.7 million for the first nine months of the current year compared to $77.4 million in the prior year, primarily due to lower sales of legacy hardware and delayed product releases[87]. - The T&M segment revenue increased by $6.2 million or 19.9% to $37.3 million for the first nine months of the current fiscal year, driven by increased parts and repairs revenue in aerospace product lines[89]. Profitability and Expenses - Gross profit for the third quarter was $13.7 million, a 7.2% decrease from $14.8 million in the prior year, with a gross profit margin of 33.9%[79]. - Operating expenses for the third quarter increased by 22.5% to $12.5 million, primarily due to $1.3 million in operating costs from the newly acquired MTEX[79]. - Net income for the third quarter was $0.2 million, or $0.03 per diluted share, significantly down from $2.8 million, or $0.37 per diluted share, in the prior year[79]. - The PI segment recognized a current quarter operating income of $1.9 million, reflecting a profit margin of 7.1%, down from the prior year's margin of 18.1%[87]. - The T&M segment's third quarter operating profit was $3.3 million, with a profit margin of 23.0%, slightly down from 23.2% in the prior year[88]. Acquisition and Financing - The company entered into an agreement to acquire MTEX New Solution, S.A., a manufacturer of digital printing equipment, on May 4, 2024[76]. - The company entered into a revised credit agreement to finance the MTEX acquisition, increasing the revolving credit facility from $25.0 million to $30.0 million until January 31, 2025[90]. - The company assumed long-term debt obligations of MTEX, including a term loan of EUR 1.5 million ($1.6 million) with monthly payments of EUR 17,402 ($18,795) starting October 2024[97]. - The MTEX Government Grant Term Loans, classified as long-term debt, have a current balance of EUR 1.0 million ($1.1 million) and provide interest-free financing as long as monthly principal payments are made[97]. - The company entered into a secured equipment loan facility agreement in January 2024, borrowing $0.8 million at a fixed interest rate of 7.06%[96]. Cash Flow and Balance Sheet - As of November 2, 2024, the company had cash and cash equivalents of $4.4 million and $9.9 million available for borrowing under its revolving credit facility[92]. - The company reported net cash provided by operating activities of $2.3 million for the first nine months of fiscal 2025, down from $5.9 million in the same period last year[98]. - Accounts receivable increased to $25.2 million at the end of the third quarter of fiscal 2025, compared to $23.1 million at year-end, with days sales outstanding rising to 56 days from 52 days[98]. - Inventory balance was $48.6 million at the end of the third quarter of fiscal 2025, up from $46.4 million at year-end, while inventory days on hand decreased to 164 days from 168 days[98]. - Cash position at November 2, 2024, was $4.4 million, slightly down from $4.5 million at year-end, primarily due to lower cash from operations and cash outflows[98]. Risks and Challenges - Company continues to face risks related to general economic conditions and the lingering impact of COVID-19[103]. - Risks include competition in specialty printer acquisition industries and the ability to control cost structure[103]. - Company acknowledges risks associated with international sales and operations, including foreign currency impacts[103]. - The ability to integrate and realize expected benefits from acquisitions such as MTEX and Astro Machine is crucial[103]. - Compliance with governmental laws and regulations is essential for maintaining effective internal controls[103]. - Company emphasizes the importance of developing and introducing new products for market acceptance[103]. - Company highlights the need to maintain adequate self-insurance accruals for employee health care benefits[103]. - Company may not be able to ship delayed hardware items on the expected timeline[103]. - No material changes to market risk disclosures during the nine months ended November 2, 2024[105].

Financial Data and Key Metrics Changes - Net revenue for Q3 increased by 7.7% to $40.4 million, driven by growth in the Test & Measurement (T&M) segment, offsetting a modest decline in the Product Identification (PI) segment [23] - Gross profit margin decreased to 33.9% from 39.4% in the prior year, attributed to lower margins at MTEX, sales mix, and reduced European hardware sales [24] - Non-GAAP operating expenses rose by 19.3% to $12.1 million, with MTEX accounting for $1.3 million of the increase [25] - Non-GAAP operating income fell to $1.6 million from $4.6 million year-over-year, primarily due to higher costs and a loss of $1.1 million related to MTEX [26] - Adjusted EBITDA decreased to $3.2 million from $5.7 million in the prior year [26] Business Line Data and Key Metrics Changes - PI segment revenue declined by 1% to $26.3 million, with a 7.2% drop in sales excluding MTEX, mainly due to lower hardware sales [27] - PI segment operating profit was $1.9 million, or 7.2% of revenue, down from $4.8 million or 18.1% in the prior year [28] - T&M segment revenue surged by 28.2% to $14.1 million, driven by the Aerospace product line, with operating margins increasing to $3.3 million from $2.6 million [29] Market Data and Key Metrics Changes - Backlog as of November 2, 2024, was $27.1 million, down from $31.2 million at the end of Q3 fiscal 2024 [26] - Cash and cash equivalents decreased to $4.4 million, with funded debt increasing to $48.9 million [30] Company Strategy and Development Direction - The company is focused on accelerating MTEX's path to profitability and has realigned its organizational structure to enhance operational efficiency [11] - A comprehensive cost reduction and product line rationalization initiative has been launched to refine the product portfolio and reduce expenses [13] - The integration of MTEX's technology into existing product lines is planned to improve customer performance and reduce total cost of ownership [17] Management Comments on Operating Environment and Future Outlook - Management acknowledged the disappointing results due to integration challenges with MTEX, which are expected to extend through mid-calendar year 2025 [14] - The company is committed to a multi-phase journey to drive sustainable long-term gains despite the complexities of the MTEX acquisition [15] - Future guidance for fiscal 2025 and 2026 has been withdrawn, with a focus on presenting longer-term targets in March [33] Other Important Information - The company experienced a significant increase in operating expenses due to headcount additions and higher IT costs [25] - The integration process revealed inconsistencies with information provided by the seller, prompting further investigation [12] Q&A Session Summary Question: Clarification on the delayed inkjet order - The delayed inkjet order is related to the legacy business, specifically a large customer request for enhancements to a new generation product [42] Question: MTEX expenses in corporate G&A - MTEX's selling expenses for the quarter were $839,000, with additional R&D and G&A expenses detailed [49] Question: Impact of delayed Boeing orders on margins - Delayed Boeing orders, which are typically high margin, contributed to the sequential decline in margins [52] Question: Sequential PI margins explanation - The decline in PI margins was primarily due to a mix of delayed orders and other factors in the legacy business [54]

Financial Performance - Net revenue for Q3 FY 2025 was $40.4 million, representing a year-over-year increase of 7.7% from $37.5 million in Q3 FY 2024[3]. - Net revenue for the three months ended November 2, 2024, was $40,422 million, an increase from $37,549 million for the same period last year, representing a growth of 5%[24]. - For the nine months ended November 2, 2024, net revenue was $113,922 million, up from $108,493 million, reflecting a growth of 5%[24]. - Revenue for the three months ended November 2, 2024, was $40,422 thousand, an increase of 7.9% compared to $37,549 thousand for the same period in 2023[30]. - Revenue for the nine months ended November 2, 2024, was $113,922 thousand, an increase of 5.4% from $108,493 thousand for the same period in 2023[30]. Profitability - GAAP net income fell to $0.2 million, or $0.03 per diluted share, down 91.3% and 91.9% respectively compared to Q3 FY 2024[3][10]. - Net income for the three months ended November 2, 2024, was $240 million, a significant decline from $2,752 million in the prior year[24]. - Operating income for the three months ended November 2, 2024, decreased to $1,264 million, resulting in an operating margin of 3.1%, compared to 12.3% in the same period last year[24]. - Operating profit for the three months ended November 2, 2024, was $5,119 thousand, down 30.4% from $7,352 thousand in the prior year[30]. - Non-GAAP net income for the three months ended November 2, 2024, was $513 thousand, compared to $2,752 thousand for the same period in 2023[32]. - Adjusted EBITDA for Q3 FY 2025 was $3.2 million, down from $5.7 million in the same period last year[10]. - Adjusted EBITDA for the three months ended November 2, 2024, was $3,228 thousand, down from $5,656 thousand in the prior year[34]. Segment Performance - The Product Identification segment revenue was $26.3 million, slightly down from $26.5 million in Q3 FY 2024, with operating income dropping to $1.9 million[14]. - The Test & Measurement segment revenue increased to $14.1 million from $11.0 million in Q3 FY 2024, with operating income at $3.3 million[15]. - The company reported an operating loss of $(814) million for the three months and $(1,700) million for the nine months in the MTEX segment[40]. - Adjusted MTEX (Non-GAAP) revenue for the three months was $1,738 million, and for the nine months, it was $2,506 million[40]. - The total segment excluding MTEX (Non-GAAP) revenue for the three months was $24,579 million, and for the nine months, it was $74,161 million[40]. Costs and Expenses - GAAP gross margin decreased to 33.9% in Q3 FY 2025 from 39.4% in Q3 FY 2024, a decline of 550 basis points[3]. - Total operating expenses for the nine months ended November 2, 2024, increased to $36,342 million, compared to $31,993 million in the previous year[24]. - General and administrative expenses for the three months ended November 2, 2024, were $3,855 thousand, up from $2,734 thousand in the prior year[30]. - Selling and marketing expenses for the three months were $5,644 million, and for the nine months, they totaled $15,946 million[40]. - Research and development expenses amounted to $895 million for the three months and $2,200 million for the nine months[40]. Cash Flow and Balance Sheet - Net cash provided by operating activities for the nine months ended November 2, 2024, was $2,324 million, down from $5,902 million in the prior year[28]. - Cash and cash equivalents at the end of the period were $4,432 million, a slight decrease from $4,827 million at the end of the previous year[28]. - Total assets as of November 2, 2024, were $166,462 million, an increase from $133,251 million at the beginning of the year[26]. - Total liabilities increased to $74,289 million as of November 2, 2024, compared to $42,969 million at the beginning of the year[26]. Strategic Initiatives - AstroNova is no longer providing financial guidance for fiscal 2025 and 2026 due to extended integration timelines for MTEX[8]. - The company is implementing a comprehensive cost-reduction and product-line rationalization initiative to enhance its product portfolio[8].

Core Viewpoint - AstroNova, Inc. is positioned to leverage growth opportunities in the aerospace and digital printing markets, while facing operational and financial challenges that may impact its performance [1][9]. Group 1: Growth Opportunities - The global recovery in the aerospace sector has increased demand for AstroNova's Test & Measurement products, generating $23.2 million in revenues during the first half of fiscal 2025 [2]. - The Product Identification segment is benefiting from trends in the digital printing market, with the acquisition of MTEX expected to contribute $8–$10 million in fiscal 2025 revenues [3]. - Geographic expansion, particularly in Europe through MTEX, enhances growth potential, alongside leadership in tabletop digital label printing and innovative products like the QL-900 wide-format inkjet printer [4]. Group 2: Operational Efficiencies - Recent initiatives, including the consolidation of manufacturing facilities and a focus on high-margin products, are anticipated to improve profitability, with an EBITDA margin target of 13–14% by fiscal 2026 [5]. Group 3: Financial Challenges - Elevated debt levels following the MTEX acquisition, with funded debt at $45.6 million as of the second quarter of fiscal 2025, pose financial strain [6]. - Declining European revenue contribution and integration-related costs present challenges in capturing market share in this critical region [7]. - The company's share price has underperformed compared to broader industry trends, indicating investor caution despite trading at a discount to peers [8].

Revenue Performance - Revenue for the second quarter of 2024 was $40.5 million, a 14.1% increase compared to $35.5 million in the same period of 2023[95] - Domestic revenue for Q2 2024 was $23.8 million, up 18.2% from $20.1 million in Q2 2023[95] - International revenue for Q2 2024 was $16.8 million, representing 41.3% of total revenue and an 8.8% increase from Q2 2023[95] - Hardware revenue in Q2 2024 was $12.4 million, a 9.7% increase compared to $11.3 million in Q2 2023[95] - Supplies revenue in Q2 2024 was $22.3 million, a 13.4% increase compared to $19.7 million in Q2 2023[96] - Service and other revenues in Q2 2024 were $5.8 million, a 28.1% increase compared to $4.6 million in Q2 2023[96] - Revenue for the first six months of the current year was $73.5 million, a 3.6% increase compared to the previous year's first six months revenue[99] - Domestic revenue for the first half of the current year was $43.3 million, a 6.2% increase from the prior year's domestic revenue of $40.8 million[99] - International revenue for the first six months of the current year was $30.2 million, a 0.1% increase from the previous year's international revenue of $30.1 million[99] - Hardware revenue in the first six months of the current year was $21.2 million, a 7.4% decrease compared to the prior year's first six months hardware revenue of $22.9 million[99] - Supplies revenue in the first half of the current year was $41.0 million, representing a 5.7% increase over the prior year's six months supplies revenue of $38.8 million[99] - Service and other revenues were $11.3 million in the first six months of the current year, a 22.2% increase compared to the prior year's first six months service and other revenues of $9.2 million[99] - Revenue from the PI segment increased $1.4 million or 5.4%, in the second quarter of the current year, with revenue of $27.2 million compared to $25.8 million in the same period of the prior year[102] - Revenue from the T&M segment was $13.4 million for the second quarter of the current fiscal year, representing a $3.6 million or 37.2% increase compared to revenue of $9.7 million for the same period in the prior year[104] Profit and Expenses - Gross profit for Q2 2024 was $14.3 million, a 47.5% increase compared to $9.7 million in Q2 2023[96] - Operating expenses for Q2 2024 were $13.3 million, a 21.6% increase compared to $10.9 million in Q2 2023[96] - R&D expenses in Q2 2024 were $1.4 million, a 9.3% decrease compared to Q2 2023, representing 3.5% of revenue[96] - Gross profit for the first six months of the current year was $26.3 million, a 19.0% increase compared to the prior year's gross profit of $22.1 million[99] - Operating expenses for the first six months of the current fiscal year were $23.9 million, a 9.4% increase compared to the prior year's first six months operating expenses of $21.8 million[99] Acquisitions and Integration - The company acquired MTEX New Solution, S.A. on May 6, 2024, integrating it into the Product Identification (PI) segment[93] - The company assumed MTEX's long-term debt obligations, including a term loan of EUR 1.5 million ($1.6 million) and government grant term loans of EUR 1.3 million ($1.5 million)[108] - The company paid $20.7 million for the MTEX acquisition, $3.3 million in principal payments on long-term debt, and $0.8 million in guaranteed royalty obligations during the quarter[109] - Risks related to tax rate changes, compliance with credit agreements, and integration of acquisitions like MTEX and Astro Machine[113] Financial Position and Cash Flow - Cash and cash equivalents as of August 3, 2024, were $4.8 million, with $13.0 million borrowed on the revolving line of credit and $17.0 million available for borrowing[105] - The company entered into a new term loan (Term A-2 Loan) of EUR 14.0 million and increased the revolving credit facility from $25.0 million to $30.0 million until January 31, 2025[105] - Net cash provided by operating activities for the first six months of fiscal 2025 was $7.1 million, compared to $4.7 million for the same period in fiscal 2024[109] - Inventory balance increased to $50.6 million at the end of Q2 fiscal 2025, up from $46.4 million at year-end, with inventory days on hand rising to 174 days from 168 days[109] - Accounts receivable increased to $23.5 million at the end of Q2 fiscal 2025, with days sales outstanding remaining at 49 days[109] - The Term A-2 Loan requires quarterly principal payments of EUR 583,333 through April 30, 2027, with the remaining balance due on August 4, 2027[106] - The company borrowed $0.8 million under a secured equipment loan facility with a fixed interest rate of 7.06%, maturing on January 23, 2029[107] - The revolving credit facility bears interest at a rate per annum equal to Term SOFR plus a margin ranging from 1.60% to 2.50%, depending on the company's consolidated leverage ratio[106] Risks and Uncertainties - Forward-looking statements involve risks and uncertainties, including general economic conditions, COVID-19 impact, and declining demand in test and measurement markets[113] - Risks include dependence on contract manufacturers, competition in specialty printer and data acquisition industries, and ability to control cost structure[113] - Potential risks from cybersecurity attacks, intellectual property disputes, and product failures due to design or manufacturing defects[113] - Challenges in attracting and retaining key employees, managing international sales, and foreign currency exchange rate impacts[113] - Potential inability to ship delayed hardware items on expected timelines[113] Market and Operational Risks - No material changes to market risk disclosures during the six months ended August 3, 2024[114]

Financial Data and Key Metrics Changes - Revenue for Q2 2025 was $40.5 million, up 14.1% year-over-year, with a 12% increase excluding the MTEX acquisition [18] - Non-GAAP gross profit margins for the quarter were 35.6%, consistent with Q2 of fiscal '24, positively impacted by volume and non-recurring items in the aerospace product line [18] - Non-GAAP operating income was $2.2 million, slightly down from $2.3 million a year ago, primarily due to a loss in MTEX of $1.3 million [19] - Adjusted EBITDA for Q2 was $3.9 million, up 5.3% from the prior year [19] Business Line Data and Key Metrics Changes - The Test and Measurement (T&M) segment saw a revenue growth of 37%, with an operating profit margin of 28.7%, up 900 basis points year-over-year [7] - The Product Identification segment's revenue increased by over 5% year-over-year, driven by the MTEX acquisition and a recovery in QuickLabel and TrojanLabel hardware [11] - MTEX generated revenue of less than $0.8 million with an operating loss of $1.4 million, indicating challenges in integration and performance [9] Market Data and Key Metrics Changes - Sales to the United States accounted for 65.4% of total revenue in Q2 FY '25, up from 63.1% in FY '24, while sales to Europe decreased to 25.2% from 28% [13] - The backlog at the end of Q2 was $29.9 million, down from the first quarter of 2025 due to delayed shipments [20] Company Strategy and Development Direction - The company reaffirmed its expectations for mid-single-digit percent organic revenue growth for the full fiscal year 2025, while lowering adjusted EBITDA margin guidance to 9% to 10% due to MTEX integration challenges [10][22] - The focus remains on integrating MTEX and leveraging its advanced technologies to enhance product offerings and operational efficiencies [9][23] - Future targets include achieving an adjusted EBITDA margin of 13% to 14% in FY '26, with a commitment to continuous improvement and innovation [22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth opportunities within the aerospace and T&M sectors, driven by the global recovery in air travel [23] - The integration of MTEX is expected to reveal strong synergies that could enhance operational efficiency and expand the technology portfolio [23] - Management remains optimistic about the long-term potential of the MTEX acquisition despite current integration challenges [9][23] Other Important Information - Cash and cash equivalents as of August 3, 2024, were $4.8 million, with liquidity over $20 million [20] - The company 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 [21] Q&A Session Summary Question: Can you explain the difference in MTEX's EBITDA margins? - Management indicated that additional costs related to integration and system upgrades diverted resources from daily operations, impacting profitability [27][29] Question: What milestones should shareholders look for regarding MTEX's profitability? - Management noted that while Q2 results were not favorable, they expect MTEX to contribute $8 million to $10 million in revenue as integration progresses [31] Question: Why is M&A a key strategy moving forward? - Management emphasized the potential for significant returns from strategic acquisitions, particularly in aerospace and product identification sectors, while also considering organic growth opportunities [33] Question: How does the company plan to use capital going forward? - The focus will be on paying down debt and completing the integration of MTEX, with potential for share buybacks or dividends to be reviewed by the Board [43][44]

(20 AstroNova® 2 nd Quarter Fiscal 2025 Financial Results September 16, 2024 Forward-Looking Statements Information included in this presentation may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not statements of historical fact, but rather reflect our current expectations concerning future events and results. These statements may include the use of the words "believes," "expects," "intends," "plans," "anticipat ...

Exhibit 99.1 Nova® News Release AstroNova Reports Fiscal 2025 Second Quarter Financial Results Company to host conference call at 9:30 a.m. ET today • Revenue of $40.5 million, up 14.1% year over year • Gross margin of 35.3%, up 800 basis points year over year; non-GAAP gross margin of 35.6%, unchanged year over year • Operating income of $1.1 million; non-GAAP operating income of $2.2 million • Net loss per share of $(0.04) vs. $(0.22) in the second quarter of fiscal year 2024; non-GAAP diluted earnings pe ...