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. ...