AstroNova, Inc. Q4 FY2026 Earnings Call

Greetings. Welcome to AstroNova, fourth quarter, fiscal year, 2026 financial results call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Deborah Pulaski, Investor Relations for AstroNova. Thank you. You may begin.

Thank you and good morning everyone. We appreciate your interest in AstroNova and thank you for taking the time to join us today. With me on the call are Yorick Itman, our President and Chief Executive Officer, and Tom DeVile, our Chief Financial Officer. You should have a copy of the earnings release that crossed the wires after market closed yesterday, as well as the slide deck that will accompany our conversation today. If you do not, you can find both documents on the Investor Relations section of our website at www.astronovainc.com. Please turn to slide 2 for our cautionary statements. As a reminder during this call, we may make some forward-looking statements about our current plans, beliefs, and expectations. These statements relate to future events and results and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied today. These risks and uncertainties are described in today's earnings release and in our filings with Securities and Exchange Commission, which are available on our website and at sec.gov. We do not undertake any obligation to update these forward-looking statements. We also will be referring to certain non-GAAP financial measures. We believe these measures provide investors with additional insight into our core operating performance. However, they should not be considered in isolation or the substitute for GAAP results. Reconciliations of non-GAAP-to-GAAP measures are included in the tables that accompany both today's release and the slide presentation. With that, please turn to slide three and I'll hand the call over to Yorick to discuss the quarter and our progress. Yorick? Thank you, Debbie, and good morning,

everyone. We appreciate you joining us today. As we said on my first conference call reporting the second quarter of fiscal 2026 we expected the second half to perform better than the first half of the year the second half of fiscal 2026 was a reset period for estronova and our results reflect the early benefits of the changes we have made across the business we entered the year with a focus on stabilizing the company improving cash generation reducing debt and raising accountability across both segments and we delivered against those priorities operationally the product identification turnaround is gaining momentum in the product id we're executing against a clearer go-to-market and operational strategy by applying more robust analytics to understand our value proposition and where we have the best opportunity to win we have a clearer view of where we are the stickiest with our customers our products and full surface capability are appreciated in these applications we have focused our sales resources to better address these markets which has entailed changes in talent and structure operationally we are addressing productivity and efficiencies to strengthen our competitive position while also to support a stronger margin profile Our Eris Praise business continues to perform well. We are benefiting from a favorable product mix and a strong demand for our Tough Rider solutions. We had a very strong order quarter and have several tailwinds that should continue to benefit the business. Importantly, we exited the year with a solid backlog in both segments, providing a good visibility heading into fiscal 2027. As you know, we announced that the Board is evaluating a range of potential strategic alternatives, which may include, among other things, a sale of all or part of the company, a strategic investment, a merger, or other business combination. Other strategic or financial options are continuing to execute on our organic strategic plan. We are early in the process, and as you would expect we cannot speculate on the outcome if you turn to slide four i will walk you through our sales results as shown on the slide our performance picked up in the second half of the year and we believe that momentum is carrying into the fiscal 2027. product id second half sales were up 4.2 percent over the first half of the year as our customer-centric sales approach gained traction. Notably, product ID orders were 27.5 million, up 2.9 million year-over-year, resulting in a book-to-bill ratio of 104%, and that crop increased by 1.1 million sequentially as our new go-to-market strategy continued to gain traction. Our new sales and marketing strategy is focused on applications where we tend to win and where customer relationships are the stickiest. This is often where our print solutions are part of a customer product in a highly regulated markets. Over the past several quarters we have sharpened our focus on three key verticals of life science, industrial, chemical markets. In these verticals our label and packaging solutions are directly embedded in customer products and workflows making reliability durability and regulatory compliance critical for our customer outcomes in these applications labels can change frequently to address regulatory updates must be durable to withstand heavy handling and harsh environments and both the label and the ink must meet regulatory standards turn to aerospace second-half sales also improved over the first half orders in aerospace were 13.6 million, resulting in a book-to-build ratio of 122%, and year-end backlog was $12 million, reflecting sustained demand from OEMs as aircraft build rates continue to recover. A key driver in aerospace is the ongoing transition to our Top Rider product family. Top Rider now represents more than 80% of total flight deck printers' shipments, positioning as well as aircraft utilization and build rates increase looking ahead a major role of the obligation will expire in the third quarter of fiscal 2027 representing approximately a 2 million annualized benefit to gross profit that will be fully realized beginning in the fourth quarter we're also making operational improvements in the business driving greater efficiency and productivity in our service and repair operation. With that, I will turn it over to Tom to walk us through the financial details. Tom? Thank you, Yorick, and good morning, everyone. Fourth quarter

revenue was $37.5 million, up $0.2 million compared with the prior year period, as growth in our product ID slightly more than offset our lower aerospace revenue. Tariff mitigation actions contributed approximately $0.6 million to revenue in the quarter, and the foreign currency translation provided a $0.8 million benefit. For the full year, revenue was $150.5 million compared with $151.3 million last year. As Yorick noted, second-half revenue grew nearly 4% over the first half, and the demand we are building from our sales efforts supports our expectation for mid-single-digit growth in our fiscal 2027. Please turn to slide 5. Gross profit for the fourth quarter was 11.3 million and gross margin was 30.2 percent, reflecting a contraction of 250 to 260 basis points year over year, primarily to lower volume and mix. On a non-GAAP basis, gross profit was 11.9 million and non-GAAP gross margin was 31.7 percent. It is also worth noting that the second half gross profit increased eight percent and margin expanded 130 basis points. Given our size, quarter to quarter comparisons can sometimes mask the changes occurring in the business and we believe the trailing periods since our second half reset provide a better view of the progress we are making with our strategy. Turning to slide six, last year's fourth quarter was impacted by a $13.4 million goodwill impairment charge which makes the year over year comparison less meaningful. Here too the first half and second half comparison is more realistic. Under new leadership we had $1.3 million in operating profit in the second half of fiscal 26 compared with the loss in the first half. On a non-gap basis operating profit grew by more than 90% and operating margin expanded 220 basis points. Turning to slide 7, you can see our adjusted EBITDA performance. Starting with GAAP results, net loss for the quarter was 1.1 million or 15 cents per diluted share versus a net loss of 15.6 million or two dollars and seven cents per share in the prior year quarter, which again included the goodwill impairment charge. Non-GAAP net loss was 0.3 million or four cents per share. Adjusted EBITDA in the fourth quarter grew 18 percent to 3.3 million, while adjusted EBITDA margin expanded 130 basis points to 8.8 percent. For the full fiscal year 2026, adjusted EBITDA was 12.7 million, up 0.4 million, and adjusted EBITDA margin improved 20 basis points to 8.4%. Comparing the second half with the first half, adjusted EBITDA grew 44% and margin expanded 270 basis points, again demonstrating the progress resulting from the actions we have taken across the organization. If you turn to slide 8, I'll review our improved cash generation, debt reduction, and liquidity. Cash provided by operating activities in the fourth quarter was $3.7 million compared with $2.5 million in the prior year period, reflecting stronger cash earnings and lower working capital needs, particularly inventory. For the full year, cash from operation was $11.7 million, a meaningful improvement over fiscal 2025. Capital expenditures were tightly controlled at $0.3 million for the year compared with $1.2 million in the prior year. This also highlights the capital-like nature of our business. We used a stronger cash generation to further deleverage the balance sheet. During the fourth quarter, we reduced debt by $2.7 million, bringing total debt to $37.6 million as of January 31st, 2026, down from the $46.7 million at the end of fiscal 2025. We ended the year with $4.1 million of cash and cash equivalents, and total liquidity of $15.9 million, including $11.8 million of borrowing capacity on our revolver. Our net debt leverage ratio was 2.97 at year end, well inside our 4.5 covenant, and our fixed charge coverage ratio was 1.43 versus the 1.05 requirement. Overall, we are pleased with the progress we have made in strengthening the balance sheet and enhancing our financial flexibility. Turning to slide nine, I'll briefly review orders and backlog. As most of you know, our orders can vary from period to period, especially in aerospace, because of the size and timing of customer projects. So quarter to quarter order patterns do not necessarily reflect underlying demand. Total orders in the quarter of 41.1 million were up 6.5% over the prior year period, driven by over 12% growth in the product ID orders. Demand for our label printing products has improved with renewed energy and focus of our sales and marketing organization. Aerospace demand, which is subject to customer project timing, reflects improved aircraft build by the major OEMs. At year-end, backlog of $25.5 million was down from $28.3 million in the prior year. During the second half, we reduced our backlog in our mail-in sheet flat pack printers that was long past overdue by improving productivity in the operation. As Yorick mentioned, we have added leadership talent in both the segment for both operations and sales that we expect to help further drive demand and production output while streamlining costs. Aerospace backlog was up 17.6 percent driven by increasing demand from our oems and the timing of deliveries with that please turn to slide 10 and i'll hand the call back to york to discuss our outlook

thanks tom let me reiterate that fiscal 2026 was a foundational reset year for astra nova particularly in the second half of the year across the organization we've been driving culture change around customer centricity and transparency disciplined data-driven decision making at the time we are simplifying operation containing cost and refining our organizational structure to support continued improvement in execution we have spent the last six months positioning astro nova for improved and more sustainable performance looking ahead for fiscal 2027, we expect mid-single-digit revenue growth and expansion in adjusted EBITDA margin. In aerospace, we anticipated measured top-line growth supported by rising aircraft utilization and favorable shift in product mix and the expiration of a major royalty obligation in the third quarter of fiscal 2027, which will provide an approximate $2 million annualized contribution to gross profit beginning in the fourth quarter. In product ID, our Our focus is on converting our growing commercial pipeline into consistent revenue growth while continuing to improve operational performance and profitability. As we navigate this next phase, remain committed to create value for our shareholders. This includes evaluating all strategic alternatives that can enhance that value, as I discussed earlier, with a more disciplined operating model, a stronger balance sheet, and attractive opportunities across both segments, we believe astronaut is on the path to deliver stronger and more resilient performance over time. With that operator, we're ready to open the line for

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