Financial Data and Key Metrics Changes - For fiscal 2021, AstroNova reported a net income of $1.3 million, down $475,000 from the previous year, while adjusted EBITDA increased by $825,000 year-over-year [9][20] - The company experienced a 13% or $17.4 million decrease in overall revenue year-over-year, resulting in full-year operating income of $2.4 million, which remained level with fiscal 2020 [9][18] - Cash and equivalents at year-end 2021 were $11.4 million, significantly up from $4.2 million at the end of the prior year, while debt decreased from $19.8 million to $12.4 million [20][21] Segment Data and Key Metrics Changes - The Product Identification segment saw revenue increase by more than 13% to $23.4 million in Q4, with full-year segmental revenue reaching $90.3 million, marking eight consecutive years of growth [10][11] - Test & Measurement segment revenue dropped to $6.1 million in Q4 from $9.8 million in the same period of fiscal 2020, but showed a 19% sequential increase quarter-over-quarter [12][16] Market Data and Key Metrics Changes - Domestic revenue accounted for approximately 56% of total revenue in Q4, down from 63% in the same period of 2020, while international revenue increased to 44% from 37% [14] - The company noted a recovery in the commercial aerospace business, driven by the return of the Boeing 737 MAX and increasing passenger numbers due to vaccine rollouts [13][14] Company Strategy and Development Direction - AstroNova remains focused on innovation, planning to launch at least one major new product per year, alongside technology innovations and ancillary products [22] - The company is exploring M&A opportunities as part of its growth strategy, alongside product development and organic growth [27][28] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the recovery of the aerospace sector, predicting a return to pre-COVID revenue levels within two to four years, with expectations of higher margins due to cost reductions and operational efficiencies [49][50] - The company highlighted the importance of maintaining operational capacity and reinvesting in the business to support future growth [27][28] Other Important Information - AstroNova's liquidity profile has improved significantly, with a new bank credit agreement enhancing credit availability and reducing amortization payments [21] - The company has maintained operational continuity throughout the pandemic, being deemed an essential business [15] Q&A Session Summary Question: Are there any remaining restrictions on capital allocation after paying off the PPP loan? - Management indicated that there are no significant restrictions [25] Question: Is the company looking at M&A opportunities post-COVID? - Management confirmed that they are considering M&A opportunities while ensuring sufficient capacity for ongoing operations [26][28] Question: How will profits evolve as the aerospace sector recovers? - Management expects to see margin improvements as the aerospace sector ramps up, although initial recovery may be slow [30][49] Question: What new product introductions are planned for 2021? - Management hinted at a major product release during the fall trade show season but did not provide specific details [34] Question: How has COVID impacted airlines' decisions regarding new or upgraded printers? - Management noted that airlines are beginning to reengage in upgrading their printers as they recover financially [42][43] Question: How is the supply chain currently performing? - Management reported that while there are some supply chain challenges, a surplus from previous downturns is cushioning disruptions [45]

Part I. Financial Information This section presents AstroNova's unaudited condensed consolidated financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents AstroNova, Inc.'s unaudited condensed consolidated financial statements, including balance sheets, statements of income, comprehensive income, changes in shareholders' equity, and cash flows, along with detailed notes explaining the company's business, accounting policies, revenue recognition, debt, and segment performance [Unaudited Condensed Consolidated Balance Sheets](index=3&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) The balance sheets show AstroNova's financial position as of October 31, 2020, and January 31, 2020, indicating a decrease in total assets and liabilities, while shareholders' equity increased Unaudited Condensed Consolidated Balance Sheets | Metric | Oct 31, 2020 (in thousands) | Jan 31, 2020 (in thousands) | | :--------------------- | :-------------------------- | :-------------------------- | | Total Assets | $113,309 | $116,664 | | Total Liabilities | $40,271 | $45,289 | | Total Shareholders' Equity | $73,038 | $71,375 | [Unaudited Condensed Consolidated Statements of Income](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Income) The statements of income detail the company's financial performance for the three and nine months ended October 31, 2020, and November 2, 2019, revealing significant declines in revenue and net income for both periods Unaudited Condensed Consolidated Statements of Income | Metric (in thousands) | 3 Months Ended Oct 31, 2020 | 3 Months Ended Nov 2, 2019 | 9 Months Ended Oct 31, 2020 | 9 Months Ended Nov 2, 2019 | | :-------------------- | :-------------------------- | :------------------------- | :-------------------------- | :------------------------- | | Revenue | $28,017 | $33,318 | $86,595 | $102,967 | | Net Income | $12 | $456 | $447 | $3,108 | | Net Income per Share - Basic | $0.00 | $0.06 | $0.06 | $0.44 | | Net Income per Share - Diluted | $0.00 | $0.06 | $0.06 | $0.43 | [Unaudited Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) The statements of comprehensive income (loss) show a shift from comprehensive income to loss for the three-month period and a significant decrease for the nine-month period ended October 31, 2020, primarily influenced by foreign currency translation adjustments and changes in derivative values Unaudited Condensed Consolidated Statements of Comprehensive Income | Metric (in thousands) | 3 Months Ended Oct 31, 2020 | 3 Months Ended Nov 2, 2019 | 9 Months Ended Oct 31, 2020 | 9 Months Ended Nov 2, 2019 | | :-------------------- | :-------------------------- | :------------------------- | :-------------------------- | :------------------------- | | Net Income | $12 | $456 | $447 | $3,108 | | Other Comprehensive Income (Loss) | $(142) | $152 | $36 | $(305) | | Comprehensive Income (Loss) | $(130) | $608 | $483 | $2,803 | [Unaudited Condensed Consolidated Statements of Changes in Shareholders' Equity](index=7&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Shareholders'%20Equity) This statement details the changes in shareholders' equity for the nine months ended October 31, 2020, and November 2, 2019, showing an increase in total shareholders' equity in 2020, driven by share-based compensation and net income, despite a cash dividend payment and other comprehensive loss Unaudited Condensed Consolidated Statements of Changes in Shareholders' Equity | Metric | Balance Feb 1, 2020 | Balance Oct 31, 2020 | | :-------------------- | :------------------ | :------------------- | | Total Shareholders' Equity | $71,375 | $73,038 | **Key Changes (Nine Months Ended Oct 31, 2020):** * Share-Based Compensation: $1,687k * Common Stock – Cash Dividend: $(497)k * Net Income: $447k * Other Comprehensive Loss: $(221)k [Unaudited Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The cash flow statements outline the company's cash movements for the nine months ended October 31, 2020, and November 2, 2019, highlighting a significant increase in net cash provided by operating activities in 2020, alongside substantial financing activities including new debt and repayments Unaudited Condensed Consolidated Statements of Cash Flows | Metric (in thousands) | 9 Months Ended Oct 31, 2020 | 9 Months Ended Nov 2, 2019 | | :-------------------- | :-------------------------- | :------------------------- | | Net Cash Provided by Operating Activities | $11,667 | $988 | | Net Cash Used for Investing Activities | $(2,102) | $(2,422) | | Net Cash Used for Financing Activities | $(3,580) | $(1,574) | | Cash and Cash Equivalents, End of Period | $9,603 | $4,468 | [Notes to the Condensed Consolidated Financial Statements (unaudited)](index=9&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements%20(unaudited)) These notes provide detailed explanations and disclosures for the condensed consolidated financial statements, covering business operations, significant accounting policies, revenue recognition, debt, segment performance, and other financial instruments [Note 1 – Business and Basis of Presentation](index=9&type=section&id=Note%201%20%E2%80%93%20Business%20and%20Basis%20of%20Presentation) AstroNova, Inc. designs, develops, manufactures, and distributes specialty printers and data acquisition/analysis systems globally, operating through two segments: Product Identification (PI) and Test & Measurement (T&M). The financial statements are unaudited and prepared in accordance with U.S. GAAP, with estimates considering the impact of COVID-19 - AstroNova operates two business segments: **Product Identification (PI)** for specialty printing systems and related supplies, and **Test & Measurement (T&M)** for aerospace flight deck printers and data acquisition systems[17](index=17&type=chunk)[18](index=18&type=chunk) - The company has a global presence with direct sales/service centers in multiple countries and over 225 independent dealers in more than 60 countries[16](index=16&type=chunk) - Management's financial estimates consider the unknown future impacts of the COVID-19 pandemic[20](index=20&type=chunk) [Note 2 – Summary of Significant Accounting Policies Update](index=10&type=section&id=Note%202%20%E2%80%93%20Summary%20of%20Significant%20Accounting%20Policies%20Update) The company's accounting policies remain consistent with its prior annual report, with the recent adoption of ASU 2018-13 (Fair Value Measurement) having no material impact. The company is evaluating ASU 2020-04 (Reference Rate Reform) but does not expect a material impact - ASU 2018-13, 'Fair Value Measurement,' was adopted effective February 1, 2020, with **no material impact** on consolidated financial statements[23](index=23&type=chunk) - ASU 2020-04, 'Reference Rate Reform,' is currently being evaluated, but **no material impact** on consolidated financial statements is expected[24](index=24&type=chunk) [Note 3 – Revenue Recognition](index=10&type=section&id=Note%203%20%E2%80%93%20Revenue%20Recognition) Revenue is primarily derived from hardware sales, related supplies, repairs, maintenance, and service agreements. The report disaggregates revenue by geographic market and major product types, showing a decline in hardware and service revenue but a slight increase in supplies revenue for the three months ended October 31, 2020 - Revenue is derived from the sale of hardware (digital color label printers, OEM printing systems, portable data acquisition systems, airborne printers), related supplies, repairs and maintenance, and service agreements[26](index=26&type=chunk) Revenue by Major Product Types (in thousands) | Product Type | 3 Months Ended Oct 31, 2020 | 3 Months Ended Nov 2, 2019 | Change (%) | | :----------- | :-------------------------- | :------------------------- | :--------- | | Hardware | $7,667 | $12,160 | -36.9% | | Supplies | $17,996 | $17,655 | +1.9% | | Service & Other | $2,354 | $3,503 | -32.8% | | **Total** | **$28,017** | **$33,318** | **-15.9%** | | Product Type | 9 Months Ended Oct 31, 2020 | 9 Months Ended Nov 2, 2019 | Change (%) | | :----------- | :-------------------------- | :------------------------- | :--------- | | Hardware | $25,021 | $37,514 | -33.3% | | Supplies | $54,254 | $55,463 | -2.2% | | Service & Other | $7,320 | $9,990 | -26.7% | | **Total** | **$86,595** | **$102,967** | **-15.9%** | - Contract liabilities (deferred revenue) decreased from **$466,000** at January 31, 2020, to **$313,000** at October 31, 2020, primarily due to revenue recognition from advanced billings[30](index=30&type=chunk) [Note 4 – Net Income Per Common Share](index=11&type=section&id=Note%204%20%E2%80%93%20Net%20Income%20Per%20Common%20Share) This note provides the calculation of basic and diluted net income per common share, showing a decrease in both basic and diluted EPS for the three and nine months ended October 31, 2020, compared to the prior year Net Income Per Common Share | Metric | 3 Months Ended Oct 31, 2020 | 3 Months Ended Nov 2, 2019 | 9 Months Ended Oct 31, 2020 | 9 Months Ended Nov 2, 2019 | | :----- | :-------------------------- | :------------------------- | :-------------------------- | :------------------------- | | Basic | $0.00 | $0.06 | $0.06 | $0.44 | | Diluted | $0.00 | $0.06 | $0.06 | $0.43 | Weighted Average Common Shares Outstanding (in thousands) | Metric | 3 Months Ended Oct 31, 2020 | 3 Months Ended Nov 2, 2019 | 9 Months Ended Oct 31, 2020 | 9 Months Ended Nov 2, 2019 | | :----- | :-------------------------- | :------------------------- | :-------------------------- | :------------------------- | | Basic | 7,120 | 7,047 | 7,100 | 7,013 | | Diluted | 7,185 | 7,199 | 7,137 | 7,272 | [Note 5 – Intangible Assets](index=12&type=section&id=Note%205%20%E2%80%93%20Intangible%20Assets) This note details the company's intangible assets, primarily customer contract relationships and existing technology, which decreased from $25.383 million at January 31, 2020, to $22.413 million at October 31, 2020, due to amortization. No impairments were recorded Intangible Assets, Net (in thousands) | Metric | Oct 31, 2020 | Jan 31, 2020 | | :----- | :----------- | :----------- | | Net Carrying Amount | $22,413 | $25,383 | Amortization Expense (in thousands) | Period | 3 Months Ended Oct 31, 2020 | 3 Months Ended Nov 2, 2019 | 9 Months Ended Oct 31, 2020 | 9 Months Ended Nov 2, 2019 | | :----- | :-------------------------- | :------------------------- | :-------------------------- | :------------------------- | | Expense | $1,000 | $1,100 | $3,100 | $3,200 | Estimated Amortization Expense for Next Five Fiscal Years (in thousands) | Fiscal Year | Estimated Amortization Expense | | :---------- | :----------------------------- | | 2021 | $999 | | 2022 | $3,979 | | 2023 | $3,972 | | 2024 | $3,975 | | 2025 | $3,395 | [Note 6 – Inventories](index=12&type=section&id=Note%206%20%E2%80%93%20Inventories) Inventories are valued at the lower of cost (first-in, first-out) and net realizable value, comprising materials, work-in-process, and finished goods. Total inventories, net of reserve, decreased from $33.925 million at January 31, 2020, to $30.868 million at October 31, 2020, primarily due to an increased inventory reserve Inventories, Net (in thousands) | Metric | Oct 31, 2020 | Jan 31, 2020 | | :----- | :----------- | :----------- | | Materials and Supplies | $21,058 | $20,151 | | Work-In-Process | $1,631 | $1,408 | | Finished Goods | $16,464 | $17,992 | | Inventory Reserve | $(8,285) | $(5,626) | | **Total Inventories, net** | **$30,868** | **$33,925** | [Note 7 – Credit Agreement and Debt](index=13&type=section&id=Note%207%20%E2%80%93%20Credit%20Agreement%20and%20Debt) AstroNova entered into an Amended and Restated Credit Agreement on July 30, 2020, refinancing existing debt with a new $15.2 million term loan and a $10.0 million revolving credit facility. The company repaid the entire outstanding balance under the revolving line of credit by October 31, 2020, and the new agreement includes various financial and non-financial covenants - On July 30, 2020, AstroNova entered into an Amended and Restated Credit Agreement (A&R Credit Agreement) with Bank of America, N.A., refinancing outstanding term loans and a portion of revolving loans[39](index=39&type=chunk)[41](index=41&type=chunk) - The A&R Credit Agreement provides for a **$15.2 million term loan** and a **$10.0 million revolving credit facility**, with **no outstanding balance** on the revolving line of credit at October 31, 2020[41](index=41&type=chunk)[42](index=42&type=chunk) - The loans bear interest at a variable rate based on LIBOR or a fluctuating reference rate, plus a margin tied to the company's consolidated leverage ratio, and are subject to various financial and non-financial covenants[45](index=45&type=chunk)[49](index=49&type=chunk) Long-Term Debt (in thousands) | Metric | Oct 31, 2020 | Jan 31, 2020 | | :----- | :----------- | :----------- | | USD Term Loan | $13,628 | $13,034 | | Debt Issuance Costs, net | $(156) | $(111) | | Current Portion of Term Loans | $(4,984) | $(5,208) | | **Long-Term Debt** | **$8,488** | **$7,715** | [Note 8 – Paycheck Protection Program Loan](index=15&type=section&id=Note%208%20%E2%80%93%20Paycheck%20Protection%20Program%20Loan) On May 6, 2020, AstroNova secured a $4.4 million PPP Loan, maturing May 6, 2022, with a 1.0% annual interest rate. Payments are deferred until SBA forgiveness determination, and the company intends to apply for full forgiveness in Q4 fiscal 2021, having utilized proceeds for qualifying expenses - AstroNova borrowed **$4.4 million** under the Paycheck Protection Program (PPP Loan) on May 6, 2020, with a **1.0% annual interest rate** and a maturity date of May 6, 2022[55](index=55&type=chunk)[56](index=56&type=chunk) - No payments are due on the PPP Loan until the SBA determines the forgiveness amount, provided an application is submitted within ten months from the end of the twenty-four-week period following disbursement[56](index=56&type=chunk) - The company has fully utilized the PPP Loan proceeds for qualifying expenses (payroll, rent, utilities, interest on certain debt) and expects to apply for **full forgiveness** in the fourth quarter of the current fiscal year[58](index=58&type=chunk) [Note 9 – Derivative Financial Instruments and Risk Management](index=15&type=section&id=Note%209%20%E2%80%93%20Derivative%20Financial%20Instruments%20and%20Risk%20Management) AstroNova terminated its cross-currency interest rate swap and interest rate swap on July 30, 2020, due to the A&R Credit Agreement, incurring a cash cost of approximately $0.7 million. The termination resulted in reclassification of accumulated other comprehensive loss related to the cross-currency swap into earnings, while the interest rate swap balance is being amortized - On July 30, 2020, AstroNova terminated its cross-currency interest rate swap and interest rate swap agreements, which were previously used to manage interest rate and foreign currency exchange risks[62](index=62&type=chunk) - The termination resulted in a cash cost of approximately **$0.7 million**[62](index=62&type=chunk) - A balance of **$58,000** in accumulated other comprehensive loss related to the cross-currency interest rate swap was reclassified into earnings, while **$0.2 million** related to the interest rate swap is being amortized into earnings[62](index=62&type=chunk) [Note 10 – Royalty Obligation](index=16&type=section&id=Note%2010%20%E2%80%93%20Royalty%20Obligation) The company has a guaranteed minimum royalty obligation of $15.0 million over ten years to Honeywell International, Inc. for a license to manufacture flight deck printers. As of October 31, 2020, $5.0 million has been paid, with $2.0 million classified as current liability and $6.6 million as long-term. No excess royalty expense was incurred in the current three or nine-month periods - AstroNova has a guaranteed minimum royalty payment obligation of **$15.0 million** over ten years to Honeywell International, Inc. for an exclusive license to manufacture narrow-format flight deck printers[65](index=65&type=chunk) - As of October 31, 2020, **$5.0 million** of the guaranteed minimum royalty obligation has been paid[67](index=67&type=chunk) Royalty Obligation (in thousands) | Metric | Oct 31, 2020 | | :----- | :----------- | | Current Portion of Royalty Obligation | $2,000 | | Long-Term Portion of Royalty Obligation | $6,624 | - No excess royalty expense was incurred for the three and nine months ended October 31, 2020, compared to **$0.1 million** and **$0.8 million**, respectively, in the prior year periods[67](index=67&type=chunk) [Note 11 – Leases](index=17&type=section&id=Note%2011%20%E2%80%93%20Leases) AstroNova leases facilities globally, with remaining lease terms of 1 to 8 years. As of October 31, 2020, Right of Use Assets were $1.436 million and total lease liabilities were $1.481 million, with a weighted-average remaining lease term of 5.3 years and a discount rate of 4.0% Operating Leases (in thousands) | Metric | Oct 31, 2020 | Jan 31, 2020 | | :----- | :----------- | :----------- | | Right of Use Assets | $1,436 | $1,661 | | Lease Liabilities – Current | $376 | $416 | | Lease Liabilities – Long Term | $1,105 | $1,279 | - As of October 31, 2020, the weighted-average remaining lease term for operating leases is **5.3 years**, and the weighted-average discount rate is **4.0%**[69](index=69&type=chunk) Operating Lease Costs (in thousands) | Period | 3 Months Ended Oct 31, 2020 | 3 Months Ended Nov 2, 2019 | 9 Months Ended Oct 31, 2020 | 9 Months Ended Nov 2, 2019 | | :----- | :-------------------------- | :------------------------- | :-------------------------- | :------------------------- | | Operating Lease Costs | $120 | $119 | $362 | $329 | [Note 12 – Accumulated Other Comprehensive Loss](index=18&type=section&id=Note%2012%20%E2%80%93%20Accumulated%20Other%20Comprehensive%20Loss) Accumulated Other Comprehensive Loss (AOCL) decreased from $(1,093)k at January 31, 2020, to $(1,057)k at October 31, 2020. This change was influenced by foreign currency translation adjustments and reclassifications from cash flow hedges to earnings due to derivative terminations Changes in Accumulated Other Comprehensive Loss (in thousands) | Component | Balance at Jan 31, 2020 | Other Comprehensive Loss before reclassification | Amounts reclassified from AOCL to Earnings | Cross-Currency Interest Rate Swap Termination | Balance at Oct 31, 2020 | | :-------- | :---------------------- | :--------------------------------------------- | :----------------------------------------- | :------------------------------------------ | :---------------------- | | Foreign Currency Translation Adjustments | $(985) | $53 | — | — | $(932) | | Cash Flow Hedges | $(108) | $(255) | $193 | $45 | $(125) | | **Total** | **$(1,093)** | **$(202)** | **$193** | **$45** | **$(1,057)** | [Note 13 – Share-Based Compensation](index=18&type=section&id=Note%2013%20%E2%80%93%20Share-Based%20Compensation) AstroNova has several equity incentive plans, including the 2018 Plan, 2015 Plan, and 2007 Plan, and a Non-Employee Director Annual Compensation Program. Total share-based compensation expense for the nine months ended October 31, 2020, was $1.687 million, an increase from the prior year Share-Based Compensation Expense (in thousands) | Metric | 3 Months Ended Oct 31, 2020 | 3 Months Ended Nov 2, 2019 | 9 Months Ended Oct 31, 2020 | 9 Months Ended Nov 2, 2019 | | :----- | :-------------------------- | :------------------------- | :-------------------------- | :------------------------- | | Stock Options | $126 | $148 | $390 | $487 | | Restricted Stock Awards and Units | $462 | $371 | $1,284 | $1,074 | | Employee Stock Purchase Plan | $3 | $6 | $13 | $15 | | **Total** | **$591** | **$525** | **$1,687** | **$1,576** | - As of October 31, 2020, approximately **$0.4 million** of unrecognized compensation expense related to stock options and **$2.0 million** related to RSUs and RSAs are expected to be recognized over a weighted average period of approximately **0.9 years**[77](index=77&type=chunk)[78](index=78&type=chunk) - Under the Employee Stock Purchase Plan, **12,098 shares** were purchased during the nine months ended October 31, 2020, at a **15% discount**[79](index=79&type=chunk) [Note 14 – Income Taxes](index=20&type=section&id=Note%2014%20%E2%80%93%20Income%20Taxes) The effective tax rate for the three months ended October 31, 2020, was 160.0% (benefit of $32k), and for the nine months, it was 45.9% (expense of $379k). These rates were significantly impacted by decreased forecasted operating results, shortfall tax expenses, and adjustments from foreign tax returns, partially offset by tax benefits from the expiration of the statute of limitations Effective Tax Rates | Period | Fiscal 2021 (Oct 31, 2020) | Fiscal 2020 (Nov 2, 2019) | | :----- | :------------------------- | :------------------------ | | 3 Months Ended | 160.0% | (118.2)% | | 9 Months Ended | 45.9% | 5.5% | Income Tax (Benefit) Provision (in thousands) | Period | 3 Months Ended Oct 31, 2020 | 3 Months Ended Nov 2, 2019 | 9 Months Ended Oct 31, 2020 | 9 Months Ended Nov 2, 2019 | | :----- | :-------------------------- | :------------------------- | :-------------------------- | :------------------------- | | Income Tax (Benefit) Provision | $(32) | $(247) | $379 | $182 | - The effective tax rates were impacted by a significant decrease in forecasted operating results for fiscal 2021, shortfall tax expenses, and adjustments from foreign tax returns, partially offset by tax benefits from the expiration of the statute of limitations on uncertain tax positions[81](index=81&type=chunk)[82](index=82&type=chunk) - Cumulative unrecognized tax benefits totaled **$319,000** as of October 31, 2020, down from **$362,000** as of January 31, 2020[83](index=83&type=chunk) [Note 15 – Segment Information](index=21&type=section&id=Note%2015%20%E2%80%93%20Segment%20Information) AstroNova reports two segments: Product Identification (PI) and Test & Measurement (T&M). PI revenue increased by 5.3% in Q3 2021, while T&M revenue decreased by 55.8% due to the Boeing 737 MAX grounding and COVID-19. For the nine months, PI revenue slightly decreased by 0.9%, and T&M revenue significantly decreased by 44.5% Revenue by Segment (in thousands) | Segment | 3 Months Ended Oct 31, 2020 | 3 Months Ended Nov 2, 2019 | Change (%) | | :------ | :-------------------------- | :------------------------- | :--------- | | Product Identification | $22,898 | $21,749 | +5.3% | | Test & Measurement | $5,119 | $11,569 | -55.8% | | **Total** | **$28,017** | **$33,318** | **-15.9%** | | Segment | 9 Months Ended Oct 31, 2020 | 9 Months Ended Nov 2, 2019 | Change (%) | | :------ | :-------------------------- | :------------------------- | :--------- | | Product Identification | $66,907 | $67,484 | -0.9% | | Test & Measurement | $19,688 | $35,483 | -44.5% | | **Total** | **$86,595** | **$102,967** | **-15.9%** | Segment Operating Profit (Loss) (in thousands) | Segment | 3 Months Ended Oct 31, 2020 | 3 Months Ended Nov 2, 2019 | Change (%) | | :------ | :-------------------------- | :------------------------- | :--------- | | Product Identification | $3,521 | $1,880 | +87.3% | | Test & Measurement | $(751) | $1,397 | -153.8% | | Segment | 9 Months Ended Oct 31, 2020 | 9 Months Ended Nov 2, 2019 | Change (%) | | :------ | :-------------------------- | :------------------------- | :--------- | | Product Identification | $9,813 | $6,990 | +40.4% | | Test & Measurement | $(1,314) | $5,533 | -123.7% | [Note 16 – Fair Value](index=21&type=section&id=Note%2016%20%E2%80%93%20Fair%20Value) The company's financial liabilities measured at fair value, primarily derivative instruments, were zero at October 31, 2020, following the termination of swap contracts. Long-term debt is not recorded at fair value but its fair value is estimated using discounted cash flows and classified as Level 3 Liabilities Measured at Fair Value (in thousands) | Liability | Oct 31, 2020 | Jan 31, 2020 | | :-------- | :----------- | :----------- | | Cross-Currency Interest Rate Swap Contract | $0 | $250 | | Interest Rate Swap Contract | $0 | $96 | | Earnout Liability | $0 | $14 | | **Total Liabilities** | **$0** | **$360** | Long-Term Debt and Related Current Maturities (in thousands) | Metric | Fair Value (Oct 31, 2020) | Carrying Value (Oct 31, 2020) | | :----- | :------------------------ | :---------------------------- | | Long-Term debt and related current maturities | $13,637 | $13,628 | - Derivative instruments were measured at fair value using readily observable market inputs and classified as Level 2. Long-term debt's fair value is estimated by discounting future cash flows using current interest rates and classified as Level 3[85](index=85&type=chunk)[87](index=87&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on AstroNova's financial condition and operational results, detailing business segments, the impact of COVID-19 on both Product Identification and Test & Measurement segments, a comparative analysis of financial performance, and an overview of liquidity and indebtedness [Business Overview](index=22&type=section&id=Business%20Overview) AstroNova is a multinational company specializing in data visualization technologies, offering specialty printers and data acquisition/analysis systems through its Product Identification (PI) and Test & Measurement (T&M) segments. The company's growth strategy focuses on organic innovation and strategic acquisitions, notably the Honeywell agreement for aerospace printers - AstroNova leverages proprietary data visualization technologies to design, develop, manufacture, distribute, and service specialty printers and data acquisition/analysis systems[89](index=89&type=chunk) - The company operates through two segments: **Product Identification (PI)**, offering digital label printers and supplies, and **Test and Measurement (T&M)**, providing data acquisition systems and aerospace printers[89](index=89&type=chunk) - Growth strategy centers on organic growth through product innovation (R&D) and strategic acquisitions, such as the exclusive license to manufacture Honeywell's narrow-format flight deck printers for Boeing 737 and Airbus 320 aircraft[90](index=90&type=chunk)[91](index=91&type=chunk) [COVID-19 Update - Overview](index=23&type=section&id=COVID-19%20Update%20-%20Overview) The COVID-19 pandemic has materially impacted AstroNova's business, leading to operational modifications, staffing reductions (furloughs, work-share programs), and increased remote work. While manufacturing capacity was maintained initially, a recent surge in infections has caused increased absenteeism, longer order fulfillment times, and reduced revenue, with potential for future raw material difficulties - The global COVID-19 pandemic has materially and adversely affected AstroNova's business, impacting operations, customers, suppliers, and financial markets[93](index=93&type=chunk) - The company implemented staffing reductions (furloughs, work-share programs) and increased remote work for non-production team members[94](index=94&type=chunk)[95](index=95&type=chunk) - Subsequent to the fiscal third quarter, increased COVID-19 infections in manufacturing facilities led to higher absenteeism, reduced productive capacity, longer order fulfillment times, and reduced revenue[97](index=97&type=chunk) - Experienced limited and temporary difficulties in obtaining raw materials and components, with potential for more extensive impacts in the future[98](index=98&type=chunk) [Product Identification Update](index=23&type=section&id=Product%20Identification%20Update) The PI segment experienced adverse impacts on hardware sales due to travel restrictions and trade show cancellations, but offset this with digital advertising and remote demonstrations. Demand for ink, toner, media, and parts supplies remained strong, particularly from food & beverage and other consumer goods customers, contributing favorably to operating results - Sales of Product Identification hardware products were adversely impacted by travel restrictions and the cancellation of trade shows[99](index=99&type=chunk) - Negative impacts were offset by increased reliance on digital advertising and internet-based marketing techniques, including remote video demonstrations[99](index=99&type=chunk) - Demand for ink, toner, media, and parts supplies remained strong, especially from food & beverage and other consumer goods customers, favorably contributing to operating results[101](index=101&type=chunk) [Test & Measurement Update](index=24&type=section&id=Test%20%26%20Measurement%20Update) The T&M segment has been severely impacted by the Boeing 737 MAX grounding and the COVID-19 pandemic's effect on global air travel. This has led to very low new printer orders and shipments, reduced demand for most aircraft models, and declines in aerospace spare products, paper, parts, and repairs. The recovery timing and pace remain uncertain, dependent on vaccine availability and air travel demand - Sales of flight deck printers for narrow-body Boeing 737 aircraft were severely impacted by the **737 MAX grounding** and production halt[103](index=103&type=chunk)[105](index=105&type=chunk) - Global air travel demand precipitously declined due to the COVID-19 pandemic, leading to reduced order demand from airlines for new aircraft and significantly impacting demand for aerospace spare products, paper, parts, and repairs[106](index=106&type=chunk)[107](index=107&type=chunk) - The timing and rate of industry recovery remain uncertain, dependent on the availability and acceptance of effective vaccines and treatments for COVID-19[106](index=106&type=chunk) [Results of Operations](index=25&type=section&id=Results%20of%20Operations) This section analyzes AstroNova's financial performance for the three and nine months ended October 31, 2020, compared to the prior year, highlighting significant revenue declines, particularly in the T&M segment, and the resulting impact on gross profit, operating expenses, and net income [Three Months Ended October 31, 2020 vs. Three Months Ended November 2, 2019](index=25&type=section&id=Three%20Months%20Ended%20October%2031,%202020%20vs.%20Three%20Months%20Ended%20November%202,%202019) For the three months ended October 31, 2020, total revenue decreased by 15.9% to $28.0 million, primarily due to a 55.8% decline in the T&M segment, partially offset by a 5.3% increase in PI. Net income significantly dropped to $12k ($0.00 diluted EPS) from $0.5 million ($0.06 diluted EPS) in the prior year, driven by lower revenue, less favorable product mix, and increased other expenses Revenue by Segment (in thousands) | Segment | Oct 31, 2020 | Nov 2, 2019 | % Change | | :------ | :----------- | :---------- | :------- | | Product Identification | $22,898 | $21,749 | 5.3% | | T&M | $5,119 | $11,569 | (55.8)% | | **Total** | **$28,017** | **$33,318** | **(15.9)%**| - Hardware revenue decreased by **36.9%** to **$7.6 million**, primarily due to a **56.2% decrease** in the T&M segment, partially offset by a **4.8% increase** in PI hardware sales[110](index=110&type=chunk) - Supplies revenue increased by **1.9%** to **$18.0 million**, driven by ink jet and electrophotographic supplies in the PI segment[111](index=111&type=chunk) - Gross profit margin declined by **2.2 percentage points** to **34.7%**, primarily due to decreased revenue and less favorable product mix[113](index=113&type=chunk) - Operating expenses decreased by **21.4%** to **$9.3 million**, driven by reductions in selling and marketing, general and administrative, and R&D expenses[114](index=114&type=chunk) - Net income was **$12,000** (**$0.00 diluted EPS**), a significant decrease from **$0.5 million** (**$0.06 diluted EPS**) in the prior year[118](index=118&type=chunk) [Nine Months Ended October 31, 2020 vs. Nine Months Ended November 2, 2019](index=26&type=section&id=Nine%20Months%20Ended%20October%2031,%202020%20vs.%20Nine%20Months%20Ended%20November%202,%202019) For the nine months ended October 31, 2020, total revenue decreased by 15.9% to $86.6 million, with PI revenue slightly down by 0.9% and T&M revenue significantly down by 44.5%. Net income was $0.4 million ($0.06 diluted EPS), a substantial decrease from $3.1 million ($0.43 diluted EPS) in the prior year, primarily due to lower revenue and less favorable product mix, despite reduced operating expenses Revenue by Segment (in thousands) | Segment | Oct 31, 2020 | Nov 2, 2019 | % Change | | :------ | :----------- | :---------- | :------- | | Product Identification | $66,907 | $67,484 | (0.9)% | | T&M | $19,688 | $35,483 | (44.5)% | | **Total** | **$86,595** | **$102,967**| **(15.9)%**| - Hardware revenue decreased by **33.3%** to **$25.0 million**, primarily due to a **44.3% decline** in the T&M segment[120](index=120&type=chunk) - Supplies revenue decreased by **2.2%** to **$54.3 million**, mainly due to lower sales in the aerospace product group within the T&M segment[121](index=121&type=chunk) - Gross profit margin decreased by **2.3 percentage points** to **35.1%**, attributable to decreased revenue and less favorable product mix[123](index=123&type=chunk) - Operating expenses decreased by **15.5%** to **$29.1 million**, driven by lower selling and marketing, general and administrative, and R&D expenses[124](index=124&type=chunk) - Net income was **$0.4 million** (**$0.06 diluted EPS**), a substantial decrease from **$3.1 million** (**$0.43 diluted EPS**) in the prior year[127](index=127&type=chunk) [Segment Analysis](index=27&type=section&id=Segment%20Analysis) This section provides a detailed analysis of the revenue and operating profit (loss) for AstroNova's Product Identification (PI) and Test & Measurement (T&M) segments for both the three and nine months ended October 31, 2020, highlighting the divergent performance of the two segments [Product Identification](index=28&type=section&id=Product%20Identification) The Product Identification segment saw a 5.3% revenue increase in Q3 2021 to $22.9 million, driven by supplies and the new T3-OPX product launch, leading to an 87.3% increase in segment operating profit to $3.5 million. For the nine months, revenue slightly decreased by 0.9% to $66.9 million, but operating profit increased by 40.4% to $9.8 million due to lower operating costs Product Identification Segment Performance (in thousands) | Metric | 3 Months Ended Oct 31, 2020 | 3 Months Ended Nov 2, 2019 | 9 Months Ended Oct 31, 2020 | 9 Months Ended Nov 2, 2019 | | :----- | :-------------------------- | :------------------------- | :-------------------------- | :------------------------- | | Revenue | $22,898 | $21,749 | $66,907 | $67,484 | | Segment Operating Profit | $3,521 | $1,880 | $9,813 | $6,990 | | Profit Margin | 15.4% | 8.6% | 14.7% | 10.4% | - Q3 revenue growth was primarily attributable to increases in supplies for TrojanLabel and QuickLabel product groups, and a significant contribution from the new T3-OPX product launch[129](index=129&type=chunk) - The increase in current year segment operating profit and margin for both periods was primarily due to increased sales (Q3) and lower operating costs (Q3 and 9M)[129](index=129&type=chunk)[130](index=130&type=chunk) [Test & Measurement—T&M](index=28&type=section&id=Test%20%26%20Measurement%E2%80%94T%26M) The T&M segment experienced a significant 55.8% revenue decrease in Q3 2021 to $5.1 million, and a 44.5% decrease for the nine months to $19.7 million. This decline was primarily due to the Boeing 737 MAX grounding and reduced air travel from COVID-19, resulting in an operating loss of $0.8 million in Q3 and $1.3 million for the nine months Test & Measurement Segment Performance (in thousands) | Metric | 3 Months Ended Oct 31, 2020 | 3 Months Ended Nov 2, 2019 | 9 Months Ended Oct 31, 2020 | 9 Months Ended Nov 2, 2019 | | :----- | :-------------------------- | :------------------------- | :-------------------------- | :------------------------- | | Revenue | $5,119 | $11,569 | $19,688 | $35,483 | | Segment Operating Profit (Loss) | $(751) | $1,397 | $(1,314) | $5,533 | | Profit Margin | (14.7)% | 12.1% | (6.7)% | 15.6% | - The decrease in T&M revenue for both periods was primarily attributable to the decline in sales of aerospace product lines due to the **Boeing 737 MAX grounding** and the dramatic drop in air travel from COVID-19[131](index=131&type=chunk)[132](index=132&type=chunk) - The segment shifted from an operating profit in the prior year to an operating loss in both the three and nine months ended October 31, 2020, due to lower sales revenue[131](index=131&type=chunk)[132](index=132&type=chunk) [Financial Condition and Liquidity](index=28&type=section&id=Financial%20Condition%20and%20Liquidity) This section discusses AstroNova's financial condition and liquidity, detailing the impact of COVID-19 and the 737 MAX grounding on its credit facilities, the successful renegotiation of debt, the acquisition of a PPP loan, and the company's cash flow dynamics [Overview](index=28&type=section&id=Overview) AstroNova's liquidity was impacted by declining 737 MAX revenue and COVID-19, leading to a waiver of financial covenants in Q1 fiscal 2021. The company subsequently renegotiated its credit facilities with Bank of America (A&R Credit Agreement) and secured a $4.4 million PPP Loan, significantly improving its liquidity profile. Cash and cash equivalents stood at $9.6 million at October 31, 2020, with $10.0 million available under the revolving credit facility - Deterioration of financial condition due to **737 MAX revenue decline** and COVID-19 impacts led to a violation of financial covenants in Q1 fiscal 2021, for which a waiver was obtained[134](index=134&type=chunk) - A new Amended and Restated Credit Agreement (A&R Credit Agreement) was entered into on July 30, 2020, refinancing existing debt and providing a **$10.0 million revolving credit facility**[136](index=136&type=chunk)[138](index=138&type=chunk) - A **$4.4 million Paycheck Protection Program (PPP) Loan** was secured on May 6, 2020, and the quarterly cash dividend was suspended to preserve cash[139](index=139&type=chunk)[141](index=141&type=chunk) - Cash and cash equivalents were **$9.6 million** at October 31, 2020, with **$10.0 million available** under the revolving credit facility, indicating a significant improvement in liquidity[142](index=142&type=chunk) [Indebtedness](index=29&type=section&id=Indebtedness) The A&R Credit Agreement outlines term loan repayment schedules through June 2022 and allows for voluntary prepayments. Loans bear variable interest rates tied to LIBOR or a reference rate, plus a margin based on the consolidated leverage ratio. The agreement includes financial and non-financial covenants, and obligations are secured by company assets. The $4.4 million PPP Loan is unsecured, bears 1.0% interest, and is expected to be applied for forgiveness in Q4 fiscal 2021 - The A&R Credit Agreement term loan has quarterly principal payments ranging from **$0.8 million to $1.4 million**, with the remaining balance due on **June 15, 2022**[143](index=143&type=chunk) - Loans bear interest at a variable rate based on LIBOR or a fluctuating reference rate, plus a margin that varies with the consolidated leverage ratio (**2.15%-3.65% for LIBOR, 1.15%-2.65% for reference rate**)[147](index=147&type=chunk) - The agreement includes various financial covenants (e.g., maximum consolidated leverage ratio, minimum EBITDA) and non-financial covenants (e.g., limits on future indebtedness, dividends, M&A)[148](index=148&type=chunk) - The **$4.4 million PPP Loan** is unsecured, bears **1.0% interest**, and the company intends to apply for forgiveness in Q4 fiscal 2021, having utilized proceeds for qualifying expenses[152](index=152&type=chunk)[154](index=154&type=chunk) [Cash Flow](index=31&type=section&id=Cash%20Flow) Net cash provided by operating activities significantly increased to $11.7 million for the nine months ended October 31, 2020, from $1.0 million in the prior year, primarily due to improved working capital. This was driven by a decrease in accounts receivable and inventory, partially offset by cash used for property, plant, and equipment, debt repayments, and dividends - Net cash provided by operating activities increased significantly to **$11.7 million** for the first nine months of fiscal 2021, compared to **$1.0 million** in the prior year, primarily due to increased cash from working capital changes[156](index=156&type=chunk) - Accounts receivable decreased by **$4.1 million** to **$15.7 million**, and days sales outstanding (DSO) improved to **47 days** from **55 days**, largely due to a decline in aerospace product sales which have longer collection cycles[157](index=157&type=chunk) - Inventory decreased to **$30.9 million** from **$33.9 million**, driven by sell-through of supplies in the Product Identification segment, though inventory days on hand slightly increased[158](index=158&type=chunk) - Key cash inflows included **$4.4 million** from the PPP loan and **$3.5 million** from long-term debt refinance, partially offset by **$6.5 million** net cash decrease on the revolving line of credit, debt repayments, and dividends paid[159](index=159&type=chunk) [Contractual Obligations, Commitments and Contingencies](index=31&type=section&id=Contractual%20Obligations,%20Commitments%20and%20Contingencies) There have been no material changes to the company's contractual obligations, commitments, and contingencies since the Annual Report on Form 10-K for the fiscal year ended January 31, 2020, other than those arising in the ordinary course of business - No material changes to contractual obligations, commitments, and contingencies have occurred since the Annual Report on Form 10-K for the fiscal year ended January 31, 2020, beyond those in the ordinary course of business[160](index=160&type=chunk) [Critical Accounting Policies, Commitments and Certain Other Matters](index=31&type=section&id=Critical%20Accounting%20Policies,%20Commitments%20and%20Certain%20Other%20Matters) The preparation of financial statements requires management to make significant estimates and assumptions, which are continuously re-evaluated based on relevant factors, economic conditions, and product mix. While these estimates provide a meaningful basis, actual results may differ materially. No material changes to critical accounting policies have occurred since the prior Annual Report - The preparation of condensed consolidated financial statements requires management to make significant estimates and assumptions, including those related to revenue recognition, allowances for doubtful accounts, inventory valuation, income taxes, and impairment of long-lived assets and goodwill[161](index=161&type=chunk) - Estimates are based on available facts, historical experience, economic conditions, and management's assessment of future outcomes, with actual results potentially differing materially[162](index=162&type=chunk)[163](index=163&type=chunk) - There have been no material changes to the application of critical accounting policies as disclosed in the Annual Report on Form 10-K for the fiscal year ended January 31, 2020[163](index=163&type=chunk) [Forward-Looking Statements](index=32&type=section&id=Forward-Looking%20Statements) This section contains forward-looking statements, which are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. Key risk factors include the ongoing COVID-19 pandemic, general economic conditions, declining demand in T&M markets, competition, ability to innovate, foreign currency impacts, integration of acquisitions, financing, and the 737 MAX certification - The report contains forward-looking statements reflecting current expectations about future events and results, identified by words such as 'believes,' 'expects,' 'intends,' and 'plans'[165](index=165&type=chunk) - Actual results may differ materially due to risks and uncertainties, including the impact of the COVID-19 pandemic, general economic conditions, declining demand in test and measurement markets (especially defense and aerospace), competition, and the ability to develop new products[165](index=165&type=chunk) - Other factors include the impact of foreign currency exchange rates, the ability to integrate acquisitions, manage indebtedness, obtain financing, and difficulties with the 737 MAX certification[165](index=165&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=32&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) There were no material changes to the company's market risk disclosures during the nine months ended October 31, 2020, compared to those reported in its Annual Report on Form 10-K for the fiscal year ended January 31, 2020 - No material changes to market risk disclosures occurred during the nine months ended October 31, 2020, compared to the Annual Report on Form 10-K for the fiscal year ended January 31, 2020[166](index=166&type=chunk) [Item 4. Controls and Procedures](index=32&type=section&id=Item%204.%20Controls%20and%20Procedures) This section addresses the effectiveness of AstroNova's disclosure controls and procedures and reports on any changes in internal control over financial reporting, concluding that controls are effective and no material changes have occurred despite the challenges posed by the COVID-19 pandemic [Evaluation of Disclosure Controls and Procedures](index=32&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Management, with CEO and CFO participation, concluded that the company's disclosure controls and procedures were effective as of October 31, 2020, ensuring timely and accurate recording, processing, summarizing, and reporting of required information - Management, under the supervision of the CEO and CFO, concluded that disclosure controls and procedures were effective as of October 31, 2020[167](index=167&type=chunk) - The controls ensure that information required for Exchange Act reports is recorded, processed, summarized, and reported in a timely manner, and communicated to management for timely disclosure decisions[167](index=167&type=chunk) [Changes in Internal Control over Financial Reporting](index=32&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) There were no material changes in the company's internal control over financial reporting during the most recent fiscal quarter. Despite most non-production employees working remotely due to COVID-19, the company has not experienced any material impact on its internal controls and continues to monitor the situation - No material changes in internal control over financial reporting occurred during the most recent fiscal quarter[168](index=168&type=chunk) - Despite most non-production employees working remotely due to the COVID-19 pandemic, there has been no material impact on internal controls over financial reporting[168](index=168&type=chunk) - The company is continually monitoring and assessing the COVID-19 situation to minimize potential impacts on the design and operational effectiveness of internal controls[168](index=168&type=chunk) Part II. Other Information This section covers legal proceedings, updated risk factors, equity security sales, other material information, and a list of exhibits [Item 1. Legal Proceedings](index=33&type=section&id=Item%201.%20Legal%20Proceedings) There are no pending or threatened legal proceedings against AstroNova that are considered material to its financial position or results of operations - There are no pending or threatened legal proceedings against AstroNova that are material to its financial position or results of operations[170](index=170&type=chunk) [Item 1A. Risk Factors](index=33&type=section&id=Item%201A.%20Risk%20Factors) This section updates previously disclosed risk factors, emphasizing the material adverse effects of the ongoing COVID-19 pandemic on revenues, operations, and financial condition, including increased absenteeism in manufacturing, potential supply chain disruptions, and significant disruption to the aerospace industry. The company also highlights the risk of non-compliance with credit agreement covenants and the need for alternative financing - The ongoing COVID-19 pandemic has adversely affected and will likely continue to adversely affect AstroNova's revenues, results of operations, and financial condition[172](index=172&type=chunk) - Increased COVID-19 cases among manufacturing staff have led to increased absenteeism, reduced production capacity, and longer order fulfillment times, impacting revenues[173](index=173&type=chunk) - The aerospace industry, a key market for AstroNova, has been significantly disrupted by the COVID-19 outbreak, leading to a material adverse impact on financial results[177](index=177&type=chunk) - There is a risk of inability to comply with financial and non-financial covenants in the credit agreement with Bank of America, which could materially and adversely affect the business and financial condition[178](index=178&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=34&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During the third quarter of fiscal 2021 (August 1 to October 31), AstroNova did not repurchase any shares of its common stock under publicly announced plans or programs - No repurchases of common stock were made during the third quarter of fiscal 2021 (August 1 – October 31)[179](index=179&type=chunk) [Item 5. Other Information](index=34&type=section&id=Item%205.%20Other%20Information) On December 3, 2020, AstroNova and its Lender amended the A&R Credit Agreement to extend the deadline for property inspections and increase the maximum capital expenditures permitted for the second, third, and fourth quarters of fiscal year 2021 - On December 3, 2020, AstroNova and Bank of America, N.A. (the Lender) amended the A&R Credit Agreement[181](index=181&type=chunk) - The amendment extended the deadline for the Lender to complete certain property inspections[181](index=181&type=chunk) - The amendment increased the maximum amount of capital expenditures permitted during the second, third, and fourth quarters of fiscal year 2021[181](index=181&type=chunk) [Item 6. Exhibits](index=34&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including organizational documents, a change in control agreement, a letter agreement amending the A&R Credit Agreement, CEO/CFO certifications, and XBRL-related documents - Key exhibits include Restated Articles of Incorporation, By-laws, a Change in Control Agreement, a Letter Agreement dated December 3, 2020, with Bank of America, N.A., CEO and CFO Certifications (Sarbanes-Oxley Act), and various XBRL documents[182](index=182&type=chunk) [Signatures](index=36&type=section&id=Signatures) The report is duly signed on behalf of AstroNova, Inc. by Gregory A. Woods, President and Chief Executive Officer, and David S. Smith, Vice President, Chief Financial Officer and Treasurer, as of December 9, 2020 - The report was signed by Gregory A. Woods, President and Chief Executive Officer, and David S. Smith, Vice President, Chief Financial Officer and Treasurer[185](index=185&type=chunk) - The signing date for the report was December 9, 2020[185](index=185&type=chunk)

Financial Data and Key Metrics Changes - The operating margin in Q3 was 1.5%, an increase of 20 basis points from the same period last year [17] - EBITDA for the quarter was $1.7 million, representing 6.1% of revenue, while for the first nine months, EBITDA was $6.1 million or 7.1% of revenue [17] - Operating expenses declined by approximately $2.5 million or 21% year-over-year in Q3, and down $5.3 million or nearly 16% for the first nine months of fiscal year 2021 [15][16] Business Line Data and Key Metrics Changes - Product Identification revenue for the quarter was $22.9 million, up more than 5% year-over-year and nearly 6% sequentially, with segment operating profit increasing by 87% to $3.5 million [9] - Test & Measurement segment revenue was $5.1 million, down about $6.4 million year-over-year and $900,000 sequentially, reflecting the ongoing impact of COVID-19 and the 737 MAX grounding [12] Market Data and Key Metrics Changes - The Product Identification segment is experiencing strong demand driven by new product offerings and an enhanced digital presence, contributing to new customer acquisitions across North America, Europe, and Asia [8][22] - The Test & Measurement segment is expected to see a gradual recovery as the aviation industry improves, with recent developments such as the FAA's decision to clear the 737 MAX for return to service [12][13] Company Strategy and Development Direction - The company is focusing on cost control initiatives and aims to reduce operating expenses by more than $7 million compared to fiscal 2020, targeting expense reductions to exceed revenue decreases [15][16] - Innovations in technology and applied marketing are central to the growth strategy in the Product Identification segment, with new products aimed at increasing productivity and reducing waste [10] Management Comments on Operating Environment and Future Outlook - Management expressed optimism about the momentum in the Product Identification business continuing into Q4, with expectations for stronger revenue in the Test & Measurement segment driven by defense applications [20] - The company is hopeful that the third quarter represents a low point for the Test & Measurement segment, with potential positive signs from the aviation industry recovery [12][20] Other Important Information - Cash and cash equivalents at the end of the quarter were $9.6 million, with total debt reduced by $2.8 million from the previous period [17][18] - The company continues to pay guaranteed minimum royalties to Honeywell, with no excess royalty payments in Q3 due to a decline in aerospace volume [19] Q&A Session Summary Question: Can you give us a sense of how many new customers have come in? - The company is seeing widespread new customer acquisitions across North America, Europe, and Asia, driven by new products and market areas [22] Question: Any COVID driven business creating opportunities for you? - The company is experiencing growth in janitorial cleaning supplies, chemical products, and medical products, including new customers in the medical industry [24] Question: Is the sequential increase anticipated for the aero side driven by new military contracts? - The increase is a mix of a slow uptick in commercial business and new defense contracts expected to contribute in Q4 [27] Question: How much longer do you anticipate COVID issues impacting margins? - Management is hopeful to wrap up the Honeywell handoff this quarter, with a high probability of completion in Q4 [29]

Revenue Performance - Total revenue for the second quarter of fiscal 2020 was $27.7 million, a 17.4% decrease from $33.5 million in the same quarter of the previous year[118]. - Product Identification segment revenue was $21.6 million, accounting for 78.2% of total revenue, while Test and Measurement segment revenue was $6.0 million, representing 21.8% of total revenue, reflecting a 46.8% decline compared to the prior year[118]. - Revenue for the first six months of the current year was $58.6 million, a 15.9% decrease from $69.6 million in the prior year[129]. - Revenue from the Product Identification segment decreased 3.8% to $44.0 million in the first six months of the current year[140]. - Revenue from the Test & Measurement segment was $6.0 million for the second quarter, a 46.8% decrease from $11.3 million in the prior year[142]. - Revenue from the T&M segment was $14.6 million for the first six months of the current fiscal year, a 39.1% decrease compared to $23.9 million for the same period in the prior year[143]. Segment Performance - Hardware revenue decreased by 32.1% to $8.4 million, primarily due to a 44.3% decline in the Test and Measurement segment's hardware sales[120]. - Hardware revenue decreased by 31.6% to $17.4 million compared to $25.4 million in the prior year[130]. - Supplies revenue was $17.1 million, a 5.2% decrease from $18.1 million in the prior year, mainly due to lower sales in the QuickLabel product group[121]. - Supplies revenue was $36.3 million, a 4.1% decrease from $37.8 million in the prior year[131]. - Service and other revenues decreased by 29.5% to $2.1 million, primarily due to declines in repair revenue related to the aerospace printer product line[122]. - Service and other revenues were $5.0 million, a 23.4% decrease from $6.5 million in the prior year[132]. Profitability and Expenses - Gross profit for the current quarter was $9.8 million, an 18.3% decrease from $12.0 million in the prior year, with a gross profit margin of 35.4%[123]. - Operating expenses for the current quarter were $9.6 million, an 11.4% decrease from $10.8 million in the prior year[124]. - Current quarter selling and marketing expenses were $5.5 million, a 13.4% decrease compared to the prior year[124]. - Research and development (R&D) expenses were $1.5 million, a 16.4% decrease from $1.8 million in the prior year, representing 5.4% of revenue[124]. - Net income for the first six months of the current year was $0.4 million, or $0.06 per diluted share, compared to $2.7 million, or $0.36 per diluted share in the prior year[137]. Cash Flow and Liquidity - Net cash provided by operating activities was $9.2 million for the first six months of fiscal 2021, compared to $1.0 million for the same period of the previous year[164]. - Cash and cash equivalents were $11.2 million as of August 1, 2020, with an outstanding balance on the revolving line of credit of $2.0 million[152]. - The A&R Credit Agreement includes a term loan of $15.2 million and a $10.0 million revolving credit facility for general corporate purposes[148]. - The company borrowed $4.4 million under the Paycheck Protection Program, which is unsecured and bears interest at a rate of 1.0% per annum[161]. - The principal amount of each quarterly installment under the A&R Credit Agreement is $0.8 million for the first two quarters, increasing to $1.1 million and $1.4 million in subsequent quarters[153]. Market Conditions and Risks - The decline in demand for products has had a material adverse impact on revenues and results of operations, expected to continue until demand recovers[107]. - The COVID-19 pandemic has significantly impacted sales, particularly in the Product Identification hardware products due to travel restrictions and the cancellation of trade shows[108]. - The company acknowledges that estimates and assumptions used in financial statements may not be accurate, leading to potential material differences[171]. - Forward-looking statements indicate that actual results may differ due to various risks, including the ongoing COVID-19 pandemic and competition in the specialty printer industry[172]. - No material changes were reported in market risk disclosures for the six months ended August 1, 2020[174]. Inventory and Receivables - Accounts receivable balance decreased to $14.8 million at the end of the second quarter, down from $19.8 million at year end, reflecting a $5.0 million decrease due to lower sales[165]. - Inventory balance was $32.4 million at the end of the second quarter, down from $33.9 million at year end, with inventory days on hand increasing to 163 days from 151 days[166]. Credit and Payment Issues - The company experienced a limited number of cases where aerospace customers failed to pay on time, leading to increased reserves for potential losses[151].

Financial Data and Key Metrics Changes - Revenue in the Product Identification segment decreased by 2% year-over-year and 3% sequentially, primarily due to COVID-19 restrictions impacting marketing opportunities [7][8] - Operating expenses declined by approximately 11% or $1.2 million from the year-ago quarter and by about 6% or $600,000 from the previous quarter [17][18] - EBITDA was reported at $2.32 million, representing 8.4% of revenue [23] Business Line Data and Key Metrics Changes - The Test & Measurement segment experienced a significant revenue decline of about 47% year-over-year and 29% sequentially, largely due to the grounding of the 737 MAX and the pandemic [13][14] - The Product Identification segment showed signs of recovery towards the end of the quarter, driven by digital sales and new product offerings [8][10] Market Data and Key Metrics Changes - North America showed strong performance in hardware sales, which is expected to positively impact future supplies revenue [12] - The aerospace market remains depressed, but there are signs of recovery with an increase in the percentage of U.S. commercial aircraft operated from 48% to 69% during the quarter [14][15] Company Strategy and Development Direction - The company is focusing on digital transformation and innovative sales strategies to adapt to the challenges posed by COVID-19 [8][10] - There is an emphasis on expanding market reach through new product offerings and digital marketing initiatives [10][11] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the growth potential in the Product Identification segment, expecting sequential revenue growth in the third and fourth quarters [24] - The company is cautiously optimistic about the aerospace market, noting that recovery may take time but is seeing positive trends [14][32] Other Important Information - The company successfully renegotiated its credit facility, improving liquidity and reducing debt [22][23] - Cash and equivalents at the end of the quarter were reported at $11.2 million, with total net debt reduced to $9.4 million [21][22] Q&A Session Summary Question: Guidance for aerospace business in Q3 and Q4 - Management indicated it is difficult to predict the aerospace market's recovery, but there are positive signs emerging [32] Question: Details on the recent ToughWriter contract win - The ToughWriter 640 is noted for its superior features compared to competitors, and the contract expands the company's market presence [34][35] Question: Expected volume from the ToughWriter contract - The contract is a multiyear deal, and while not all orders will be fulfilled in one year, some volume is expected to start next year [36][37]

Revenue Performance - Revenue for the first quarter of fiscal 2021 was $30.9 million, a 14.5% decrease compared to $36.2 million in the same quarter of the previous year[94]. - Product Identification segment revenue was $22.4 million, representing 72.4% of total revenue, while Test and Measurement segment revenue was $8.5 million, accounting for 27.6% of total revenue[94]. - Revenue from the Product Identification segment was $22.4 million, a 5.1% decrease compared to the same period last year, while segment operating profit increased to $3.1 million with a profit margin of 14.1%[103]. - The Test & Measurement (T&M) segment revenue was $8.5 million, a 32.2% decrease from $12.6 million in the prior year, resulting in a segment operating loss of $0.2 million and a negative profit margin of 1.8%[104]. Profitability and Expenses - Gross profit for the first quarter was $10.9 million, a 23.8% decrease from $14.2 million in the prior year, with a gross profit margin of 35.1%, down 430 basis points from 39.4%[96]. - Operating expenses decreased by 13.4% to $10.2 million, with selling and marketing expenses down 12.4% to $5.9 million[97]. - Research and development expenses were $1.9 million, a 3.3% decline from the previous year, but R&D spending as a percentage of revenue increased to 6.3%[97]. - The company reported a net income of $0.4 million or $0.06 per diluted share for the first quarter, a decrease from $1.7 million or $0.23 per diluted share in the prior year[101]. Impact of COVID-19 - The COVID-19 pandemic has significantly impacted demand for aerospace products, leading to reduced production rates and lower revenue expectations[85]. - The company is pursuing expense reduction and cash preservation initiatives due to the economic dislocation caused by the COVID-19 pandemic[90]. - The ongoing COVID-19 pandemic has adversely affected revenues and operational capacity, leading to delays and cancellations of orders, and difficulties in obtaining raw materials[138]. - The aerospace industry, which the company serves, has been significantly disrupted by COVID-19, impacting financial results and potentially leading to reduced demand for products[142]. - The company has maintained a substantial portion of manufacturing operational capacity while implementing health and safety protocols due to COVID-19[139]. Financial Position and Cash Flow - Cash and cash equivalents were reported at $11.1 million, with $6.0 million remaining available for borrowing under the revolving credit facility[109]. - Net cash provided by operating activities was $3.4 million for the first quarter of fiscal 2021, compared to $1.0 million for the same period in the previous year, primarily due to a decrease in cash used for working capital[125]. - Accounts receivable balance decreased to $18.5 million at the end of the first quarter, down from $19.8 million at year-end, reflecting a $1.3 million decrease related to lower sales[126]. - Inventory balance was $32.6 million at the end of the first quarter, down from $33.9 million at year-end, with inventory days on hand decreasing to 146 days from 151 days[127]. Debt and Financing - The company borrowed an additional $5.0 million on its revolving credit facility, with total borrowings outstanding at $11.5 million as of May 2, 2020[109]. - The company experienced a violation of a financial covenant in its Credit Agreement due to lower operating results, leading to negotiations for a restructuring of the agreement[106]. - The company intends to apply for forgiveness of a $4.4 million PPP Loan, which is subject to certain conditions[111]. - The company anticipates relying more on external financing sources due to a decline in demand for its products, particularly in the aerospace market[105]. - The company expects to maintain a minimum EBITDA of $9.5 million on a trailing twelve-month basis as per the credit agreement with Bank of America, but actual EBITDA dropped below this level due to reduced demand[143]. Agreements and Compliance - The company has entered into a Letter Agreement with Bank of America to waive noncompliance with certain financial covenants, but future compliance remains uncertain[124]. - The Letter Agreement requires a consolidated EBITDA of not less than $9.5 million on a trailing twelve-month basis as of June 30, 2020[146]. - The company is prohibited from making any dividend or stock repurchase payments through August 15, 2020, under the terms of the Letter Agreement[146]. - The company will not be permitted to request additional borrowings under the revolving line of credit until compliance with the credit agreement is achieved[146]. - The Letter Agreement allows for restricted payments only in compliance with the credit agreement after August 15, 2020[146]. Share Repurchase and Stock Transactions - During the first quarter of fiscal 2021, the company repurchased a total of 5,570 shares at an average price of $6.92 per share[144]. - The company delivered 402 shares of common stock to satisfy tax obligations related to restricted shares, valued at a weighted-average market value of $9.38 per share[144]. - An additional 5,168 shares were delivered by executives for tax obligations, valued at a weighted-average market value of $6.73 per share[144].

Financial Data and Key Metrics Changes - The first quarter results reflected a significant economic disruption due to COVID-19, with test and measurement revenue down approximately $4 million or 30% year-over-year [7] - Overall operating profit decreased by $1.6 million compared to the same quarter last year, with EBITDA margin reported at 6.7% [17] Business Line Data and Key Metrics Changes - Aerospace unit revenue was notably impacted, leading to a 30% decline in test and measurement revenue [7] - Product Identification segment revenue decreased by about $1.2 million or 5% from the record-setting first quarter of fiscal 2020, primarily due to restrictions on marketing opportunities [10] - Supplies business accounted for approximately 62% of total revenue, up from 55% in the prior year quarter, indicating strong demand in specific end markets [11] Market Data and Key Metrics Changes - Aerospace OEMs have reduced production forecasts, leading to fewer planes in service and a negative impact on the aerospace segment [8] - The recovery of the commercial aerospace industry is expected to be driven by narrow-body aircraft, which are growing at a faster rate than wide-body counterparts [9] Company Strategy and Development Direction - The company is focused on expanding its recurring revenue stream and enhancing e-commerce initiatives, including the launch of a new Product Identification website [12] - Cost control measures have been implemented, including a 5% headcount reduction and freezing executive compensation to mitigate the financial impact of COVID-19 [14][16] Management Comments on Operating Environment and Future Outlook - Management anticipates weaker results in the second quarter compared to the first quarter, but expects gradual improvement in the second half of the fiscal year as airlines begin to restore flights [8][18] - The company remains committed to supporting strategic objectives to capitalize on future growth opportunities post-COVID [18] Other Important Information - The company received a $4.4 million loan from the Paycheck Protection Program, improving its liquidity position [15] - The heavy non-cash amortization related to acquisitions was noted, with significant amounts attributed to depreciation and stock-based compensation [17] Q&A Session Summary Question: Outlook for Q2 performance across segments - Management indicated that the aerospace segment will primarily drive the sequential weakness, with Boeing's production restart being late in the game [20] Question: Performance of Product Identification segment - Management expressed uncertainty but noted that hardware and supplies seem to be holding up well, with a wider variability band in forecasts [21] Question: Inventory status for flight deck printers - It was clarified that Boeing has a low inventory of printers, as orders are placed directly by airlines [22] Question: Status of credit facility negotiations - Management is in the process of negotiating a new credit facility and expects a successful resolution [25]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended January 31, 2020 OR :=¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 0-13200 AstroNova, Inc. (Exact name of registrant as specified in its charter) Rhode Island 05-0318215 (State or other jurisdicti ...

AstroNova, Inc. (NASDAQ:ALOT) Q4 2020 Earnings Conference Call March 12, 2020 9:00 AM ET Company Participants David Smith - VP, CFO & Treasurer Gregory Woods - President, CEO & Director Conference Call Participants Samir Patel - Askeladden Capital Management Richard Ryan - Dougherty & Company George Melas - MKH Management Company David Calusdian - Sharon Merrill Associates Operator Good day, and welcome to the AstroNova Incorporated Fourth Quarter and Year-End Fiscal 2020 Financial Results Conference Call. ...