AstroNova (ALOT) Q1 2027 Earnings Transcript

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DATE

Monday, June 8, 2026 at 8:15 a.m. ET

CALL PARTICIPANTS

• President and Chief Executive Officer — Jorik Ittmann
• Chief Financial Officer and Treasurer — Thomas DeByle

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TAKEAWAYS

• Revenue -- $39.4 million, up over 4% year over year and increasing from $37.5 million sequentially from Q4.
• Aerospace Sales -- $13.3 million, up 16.3% year over year, with commercial aircraft sales up 46% and hardware revenue increasing $2.5 million for 38% year-over-year growth.
• Product Identification Segment Revenue -- Modestly decreased year over year, with desktop labeling revenue rising sequentially and aftermarket revenue holding at approximately 82% of segment sales.
• Total Bookings -- Increased 32.6% year over year, with Aerospace driving order growth and Product ID orders also higher.
• Gross Profit -- Rose to $14.4 million from $12 million, driving a gross margin expansion of 490 basis points to 36.6%; adjusted gross margin was 36.9%, up 410 basis points year over year.
• Operating Income -- Increased $1 million to $1.6 million, despite higher legal and professional fees; non-GAAP operating income rose 70% to $2.6 million.
• Segment Operating Income -- Aerospace non-GAAP operating income was $3.4 million, representing 25.6% of segment revenue; Product ID non-GAAP operating income more than doubled year over year.
• Net Income -- Rose by $0.7 million (or $0.08 per diluted share), moving from a net loss in the prior year to positive territory; non-GAAP net income was $1.4 million, or $0.19 per diluted share.
• Adjusted EBITDA -- Increased to $4.1 million, with a margin of 10.5%, supported by performance improvements and cost management.
• Cash Flow & Liquidity -- Generated $3 million of cash from operations, reduced debt by $1.7 million to $36 million, with $17.4 million in overall liquidity ($4.7 million in cash, $12.7 million borrowing capacity).
• Free Cash Flow -- Remained at $3 million, as capital expenditures totaled $36,000 for the quarter.
• Order Momentum -- Total orders reached $46.3 million (up 33%), producing a book-to-bill ratio of 118%; total backlog at period end was $32.4 million.
• Aerospace Backlog -- Closed at $18.2 million, more than double the level from the prior year, with orders of $19.5 million and a book-to-bill ratio of 147% for the segment.
• Product ID Orders and Backlog -- Orders rose to $26.8 million, backlog improved sequentially to $14.2 million.
• Legal Resolution -- The company finalized a comprehensive settlement agreement in May related to the MTEX acquisition, resolving all arbitration and related proceedings.
• Strategic Alternatives Process -- Management confirmed, "the Board is evaluating a range of potential strategic alternatives to maximize shareholder value," with no additional updates offered during the call.
• Royalty Expiration Impact -- Management stated, "expiration of a major royalty obligation in the third quarter of fiscal 2027. This will provide approximately $2 million of annualized gross profit benefit beginning in the fourth quarter."
• Leadership Hires -- Additions included a global sales director and a global operations director, aimed at channel alignment and manufacturing process improvement.

SUMMARY

The company reported positive year-over-year revenue and backlog growth, propelled predominantly by demand and orders in the Aerospace segment. Non-GAAP margins widened, and profitability improved materially versus the prior year, with disciplined cost controls contributing to both operating income and EBITDA expansion. Debt reduction and strengthened liquidity positioned the balance sheet for further operational flexibility, as working capital investment supported backlog growth. The company highlighted the MTEX legal resolution as eliminating uncertainty, and management disclosed that the expiration of a significant royalty obligation in the upcoming quarter will add an estimated $2 million in annualized gross profit. The Board’s ongoing review of strategic alternatives remained active, but no timeline or specific outcomes were discussed on the call.

• Management conveyed confidence in the "traction" of the targeted verticals within Product ID and indicated continued pipeline conversion focus.
• The sequential improvement in desktop labeling revenue was specifically cited, reflecting underlying momentum despite total segment sales declining modestly year over year.
• Legal and professional fee expenses were elevated, though operating profitability increased regardless.
• Company investments in sales and operations leadership were linked to efforts to improve channel alignment and manufacturing scrutiny.
• Customer feedback was characterized as providing "good visibility and support confidence" for order and backlog trends, which management referenced in justifying their positive outlook.

INDUSTRY GLOSSARY

• Book-to-Bill Ratio: The ratio of orders received to product shipped and billed within a period, used to assess demand trends and backlog building.
• Backlog: The value of committed orders not yet fulfilled or recognized as revenue by period-end.
• Aftermarket Revenue: Revenue derived from the sale of consumables and service parts linked to products previously sold.
• Direct-to-Packaging Printer: Printing platform that enables digital printing directly onto packaging, bypassing traditional pre-printed labels.
• Royalty Obligation: A recurring payment commitment tied to the use of certain intellectual property, ending for AstroNova in the next fiscal quarter for added gross profit benefit.

Full Conference Call Transcript

Jorik Ittmann: Thank you, Debbie, and good morning, everyone. We had a solid start to fiscal 2027, continuing the momentum from the second half of last year as we drive greater sales, marketing and operating discipline. First quarter revenue grew over 4%, primarily due to the strong Aerospace performance, while margins also expanded nicely resulting in an adjusted EBITDA margin of 10.5%. Our bookings grew 32.6%, also driven by Aerospace, and our Product ID order rate is averaging up on a trailing 12-month basis. Aerospace was the primary driver of our first quarter results. The predominance of ToughWriter shipments and strong industry tailwinds are delivering growth and profitability.

Commercial Aircraft build rates are projected to increase over the next few years, and we have captured a significant share of that opportunity with our ToughWriter printers. We're also working to improve our aftermarket service processes to increase throughput and capture more of that attractive business. In Product ID, we're making good progress, although revenue was slightly down from the prior year period. Operating income doubled. Higher and sustained sales of certain legacy products helped offset the impact of the ongoing transition to our newer Direct-to-Packaging Printer platform. This, along with improving productivity and better cost control supported margin expansion.

The comprehensive settlement agreement announced in May resolved the arbitration and related proceedings tied to the MTEX acquisition and mutually discharge all liabilities arising from related agreements. This removes a source of uncertainty and distraction and allows us to stay focused on execution, customer service and realizing the strategic value of the platform within Product ID. We continue to make investments in the team to sustain our momentum. We have recently added a global sales director who is reshaping our channels to market. While we have strong channel partners, they are not aligned with the markets we are targeting.

As discussed last quarter, the life sciences, chemical and industrial markets value the technical capabilities and quality of our printers and labels. In these markets, we're a critical element to address regulatory requirements, safety and longevity. We also have added a global operations director, adding much needed talent to take a critical eye at our manufacturing processes and footprint. As you know, the Board is evaluating a range of potential strategic alternatives to maximize shareholder value. That process is ongoing. We will not speculate on potential outcomes, timing or specific alternatives. We do not intend to comment further unless and until the Board approves a specific course of action or disclosure is otherwise required.

At the same time, we remain fully focused on running the business. improving performance and executing the strategy that is driving better results across both segments. With that, please turn to Slide 4, and I will hand the call over to Tom to review the financials in more detail. Tom?

Thomas DeByle: Thank you, Jorik, and good morning, everyone. As shown on the slide, consolidated revenue increased to $39.4 million in the quarter from $37.7 million a year ago and from $37.5 million in the fourth quarter. Tariff mitigation actions contributed approximately $0.7 million to revenue in the quarter and foreign currency translation provided a $0.6 million benefit. Aerospace was a clear driver, with sales up 16.3% year-over-year to $13.3 million. Commercial Aircraft sales increased 46%, supported by increasing build rates. We also had strength in Regional and Biz Jet Aircraft resulting in hardware revenue increasing $2.5 million or 38% year-over-year. In Product ID, Revenue was down modestly, but underlying trends are encouraging. Desktop Labeling revenue grew sequentially.

Aftermarket revenue remained approximately 82% of segment sales and orders were up year-over-year. The Direct-to-Package business remains in transition from our legacy platform to newer products. And while this transition affected our first quarter revenue, we believe it positions us better over the long term with a strong technology platform and a clear road map for our customers. Please turn to Slide 5. Gross profit increased to $14.4 million from $12 million in the prior year quarter, and gross margin expanded 490 basis points to 36.6%. On an adjusted basis, gross margin was 36.9%, up 410 basis points year-over-year, reflecting Aerospace volume, better mix and ongoing operational improvements. Turning to Slide 6.

Higher gross profit combined with cost containment initiatives resulted in an operating income increasing $1 million to $1.6 million. While operating expenses included higher legal and professional fees, we still delivered a substantial improvement in profitability. Non-GAAP operating income increased 70% to $2.6 million. Aerospace non-GAAP operating income was $3.4 million or 25.6% of revenue and Product ID non-GAAP operating income more than doubled year-over-year. Turning to Slide 7. Our progress has translated to an improving bottom line. Net income increased by $0.7 million or $0.08 per diluted share compared with a net loss in the prior year period.

This also reflects lower interest expense, which decreased by $0.2 million year-over-year to $0.7 million as a result of lower outstanding debt. Non-GAAP net income was $1.4 million or $0.19 per diluted share. Adjusted EBITDA increased to $4.1 million, and adjusted EBITDA margin improved to 10.5%, reflecting both stronger underlying performance and disciplined cost management. If you turn to Slide 8, I'll review cash flow, debt reduction and liquidity. We generated $3 million of cash from operations, reduced debt by $1.7 million to $36 million and ended the quarter with $17.4 million in liquidity, including $4.7 million in cash and cash equivalents and $12.7 million of borrowing capacity on our revolver.

Stronger cash earnings were partially offset by higher working capital requirements due to the timing of receivable and inventory's needs to support growth. Capital expenditures were only $36,000 in the quarter, which resulted in a free cash flow of $3 million. Debt was $36 million at the end of the quarter, down from $37.7 million at fiscal year-end and $44.8 million a year ago. Our net debt leverage ratio improved to 2.6x, well inside our covenant threshold. Overall, we are pleased with the continued progress we are making in improving profitability, generating cash and strengthening our balance sheet. Turning to Slide 9.

Total orders in the quarter were $46.3 million, up 33% over the prior year period, producing a book-to-bill ratio of 118%. Total backlog ended the quarter at $32.4 million. Growth in orders was also driven by Aerospace, which had orders of $19.5 million and a book-to-bill ratio of 147%. Aerospace backlog at the end of the quarter was $18.2 million, more than double the prior year level. Product ID orders increased to $26.8 million. Backlog rose sequentially to $14.2 million, and our go-to-market strategy continues to gain traction in the verticals where our solutions are the most differentiated and the customer relationships tend to be the stickiest.

Our orders and backlog trends along with customer feedback, provide good visibility and support confidence in the direction of the business. With that, please turn to Slide 10, and I'll hand the call back to Jorik to conclude our comments. Jorik?

Jorik Ittmann: Thank you, Tom. We are encouraged by the start to fiscal 2027 and believe the business is moving in the right direction. In Aerospace, we continue to see favorable demand trends and the benefit of the ToughWriter transition. In Product ID, our focus remains on converting pipeline into revenue growth, improving operational consistency and supporting the migration to our new technology platforms while building on the traction we are seeing in our target verticals. Looking ahead, our positive outlook is supported by strong Aerospace demand, improving execution in Product ID, growing backlog and the anticipated expiration of a major royalty obligation in the third quarter of fiscal 2027.

This will provide approximately $2 million of annualized gross profit benefit beginning in the fourth quarter. As we move through the year, we remain committed to creating value for shareholders that includes continuing to execute our operating plan, while the Board evaluates strategic alternatives. With improving margins, stronger backlog and a continued debt reduction, AstroNova is better positioned to deliver more consistent and resilient performance. With that, operator, we're ready to open the line for questions.

Operator: [Operator Instructions] There are no questions at this time. I would like to turn the call back over to management for closing remarks.

Jorik Ittmann: Thank you, everyone. I mean we truly appreciate your support going through this journey to all the employees. Thank you for your hard work and dedication. It is truly appreciated. Thank you. .

Operator: This will conclude today's conference. You may disconnect at this time, and thank you for your participation.

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