AstroNova, Inc. Q2 FY2025 earnings call

• Greg Woods started by discussing operating highlights, mentioning solid top line growth in Test and Measurement due to resolved supply chain issues, strong demand in aerospace product line including printers, supplies, and maintenance services, and recent military contracts. - In Product Identification, highlighted the May acquisition of MTEX, though integration has been slower than anticipated with revenue less than $0.8 million and operating loss of $1.4 million in Q2, but expects MTEX to contribute $8 million to $10 million in fiscal 2025. - Tom DeByle introduced himself, discussed financial performance on GAAP and non-GAAP basis, with revenue up 14.1% in Q2, non-GAAP gross profit margins 35.6%, operating expenses increased due to MTEX integration costs, and adjusted EBITDA up 5.3%. - Mentioned participation in trade shows like Labelexpo and PRINTING United Expo, showcasing new products and innovations. - Introduced new CFO Tom DeByle.

Test and Measurement segment: Delivered solid top line growth with 37% revenue growth in Q2, operating profit margin of 28.7% up 900 basis points from same period last year and 1,100 basis points from Q1. Product Identification segment: Q2 revenue increased by more than 5% year-over-year, driven by MTEX acquisition, supplies, and bounce back in QuickLabel and TrojanLabel hardware. Excluding MTEX, revenue was up 2.4% and non-GAAP operating profit was up 26.5%. Revenue contribution by category: Supplies accounted for 55.1% of revenue in Q2 FY ‘25 versus 55.5% in Q2 of last year. Hardware accounted for 30.5% compared with 31.7% last year. Service and other category made up 14.4% compared with 12.8% last year. Geographically: Sales to the United States accounted for 65.4% of total revenue in Q2 FY ‘25 compared with 63.1% in FY ‘24. Sales to Europe were at 25.2% compared with 28% last year. Rest of the world accounted for 9.4% compared with 8.9% in Q2 of FY ‘24.

• Reaffirmed full year fiscal 2025 expectations for mid-single-digit percent organic revenue growth. - Lowered full year adjusted EBITDA margin guidance to a range of 9% to 10% due to slower M-TEX acquisition startup. - Targets adjusted EBITDA margin of 13% to 14% in FY ‘26. - Aims for a 100 basis point increase in adjusted EBITDA margins over each of the following two fiscal years.

• Integration of MTEX has consumed more resources than anticipated, leading to slower startup and initial losses. - Forward-looking statements involve risks and uncertainties, actual results could differ materially. - Supply chain issues, though mostly resolved, could potentially impact operations.

Q: Robert Van Voorhis asked about the difference in MTEX's EBITDA margins from previous expectations, with Greg Woods explaining additional integration costs diverted them from daily work, and mentioned MTEX has a good backlog building out.

Q: Robert Van Voorhis further asked about milestones for MTEX, with Greg Woods stating they expect MTEX to contribute $8 million to $10 million in fiscal 2025 and are working on integration, though not giving exact profitability timeline.

Q: Robert Van Voorhis inquired about M&A strategy vs other capital uses, with Greg Woods stating focus is on MTEX integration and organic uses, and M&A opportunities exist in their markets.

Q: Brandon Daniel followed up on margins and adjusted EBITDA guidance, with Greg Woods explaining they're working through MTEX integration and expecting ramp-up in future periods.

Q: Brandon Daniel asked about capital use beyond MTEX, with Greg Woods stating focus is on paying down debt, MTEX integration, and organic uses, and Board reviews buyback/dividend opportunities quarterly.