AstroNova(US:ALOT)2020-12-07 16:30Financial 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]