AstroNova(ALOT) - 2026 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The second quarter revenue was $36.1 million, a decline of 10.9% year over year and 4.2% sequentially, with 70% of this quarter's revenue being recurring [11] - Gross profit for the second quarter was $11.6 million, down $2.7 million year over year, reflecting lower sales and an unfavorable mix primarily related to the decline in Aerospace volume [12] - The net loss was $1.2 million, or $0.16 per share, partially offset by a $0.5 million tax benefit, with adjusted EBITDA at $2.1 million, down $1.8 million compared to the prior year [14] Business Line Data and Key Metrics Changes - Product Identification revenue decreased by 8.9%, primarily due to a $2.6 million decline in recurring supplies, parts, and service from customer attrition, although there was higher demand for mail and sheet flat-pack products [11] - Aerospace revenue declined by 15.1% year over year, attributed to a tough comparison against last year's second quarter, which included unusually large spare printer shipments [12] - Product Identification operating income for the quarter declined by $0.4 million, or 18%, while Aerospace operating income was down $1.4 million, or 37% [13] Market Data and Key Metrics Changes - Orders for the second quarter were $35.9 million, relatively unchanged from the prior year but up $1 million sequentially, with aerospace orders increasing by $3.8 million [18] - Backlog for the quarter decreased by $4.6 million year over year to $25.3 million, representing about 30% of expected shipments for the second half of the year [19] Company Strategy and Development Direction - The company is restructuring its sales team to focus on customer acquisition and retention, aiming to regain lost customers while attracting new ones [5] - There is a strong emphasis on validating new product offerings and improving the sales process for higher-value print solutions [6] - The company aims to grow sales, drive product profitability, generate cash, and pay down debt as part of its turnaround strategy [16] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenges in regaining customer trust and improving operational performance, emphasizing the need for a customer-centric approach [9] - The aerospace segment is expected to benefit from increasing aircraft build rates and improved profit margins in the future [20] - Management is optimistic about the potential of new printers and anticipates a full benefit from cost reductions in the second half of the fiscal year [20] Other Important Information - The company has been managing capital carefully, with CapEx expected to be less than half a million for the fiscal year [16] - The leverage ratio of funded debt to adjusted EBITDA was 3.5 times, with ongoing discussions regarding debt restructuring [16] Q&A Session Summary Question: What are the expectations for future sales growth? - Management expects steady growth in hardware sales related to new builds as Boeing increases its build rates and inventories level out [18] Question: How is the company addressing customer retention? - The company is re-engaging with customers and simplifying processes to improve responsiveness and retention rates [19]