AstroNova Stock Plunges 5.8% Since Q3 Earnings Release

Shares of AstroNova, Inc. ALOT have lost 5.8% since the company reported its earnings for the quarter ended Nov. 2, 2024. This compares to the S&P 500 index’s -0.1% change over the same time frame. Over the past month, the stock moved 1.1% compared with the S&P 500’s 3% change.

The company reported a third-quarter fiscal 2025 net income of 6 cents per share on a non-GAAP basis compared with 37 cents per share last year. 

AstroNova reported net revenues of $40.4 million for third-quarter fiscal 2025, up 7.7% from $37.5 million in the same quarter last year. However, GAAP net income dropped sharply to $0.2 million from $2.8 million a year ago, reflecting a 91.3% decline. On a non-GAAP basis, net income was $0.5 million compared with $2.8 million last year. 

Gross margins contracted significantly, with GAAP gross margin declining to 33.9%, down from 39.4% in third-quarter fiscal 2024, due to higher operating costs and an unfavorable product mix.

Operating margins also declined, with the GAAP operating margin declining to 3.1%, a steep drop from 12.3% in the prior-year quarter. Adjusted EBITDA fell 43%, from $5.7 million to $3.2 million, highlighting profitability challenges despite top-line growth.

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Segment Performance and Business Metrics

Product Identification Segment (PI):

Revenues in the PI segment were $26.3 million, slightly down from $26.5 million a year ago. This was due to delayed product launches and weaker European sales. The segment's operating income dropped significantly to $1.9 million (7.1% margin) from $4.8 million (18.1% margin) in third-quarter fiscal 2024. The decrease was due to acquisition-related costs, reduced sales volumes, and higher expenses tied to the MTEX integration.

Test & Measurement Segment (T&M):

Revenues in the T&M segment grew 28.2% year over year to $14.1 million, driven by strong performance in the Aerospace product line despite temporary setbacks from a two-month Boeing strike. Segment operating income increased to $3.3 million (23% margin) from $2.6 million (23.2% margin) a year ago.

Bookings for the quarter were $37.6 million, up from $35.5 million in the prior year, while backlog decreased to $27.1 million from $31.2 million.

Management Commentary

CEO Greg Woods acknowledged disappointing profitability in the quarter, citing challenges related to the MTEX NS acquisition and delays in a major inkjet printer order. The MTEX integration has proven more resource-intensive than anticipated, with MTEX posting an operating loss of $1.1 million on $1.7 million in revenues. AstroNova has reorganized MTEX’s reporting structure and launched a company-wide cost reduction and product rationalization initiative, which is expected to continue through mid-2025.

Despite these setbacks, management remains optimistic about MTEX's innovative inkjet printing technology and plans to integrate its features across AstroNova’s broader product portfolio to enhance customer value and competitiveness.

Factors Influencing Results

The significant margin contraction stemmed from increased costs related to the MTEX acquisition, a weaker product mix, and delays in product launches. Additionally, operating expenses rose to $12.5 million from $10.2 million a year ago, reflecting higher selling, marketing, and administrative costs. The T&M segment’s performance was partially hampered by the Boeing strike, although the resumption of shipments post-strike is expected to support future revenue growth.

Guidance

AstroNova has suspended its fiscal 2025 and 2026 financial guidance, reflecting uncertainties tied to the extended MTEX integration process. The company plans to provide long-term financial targets during its fiscal 2025 full-year earnings release in March 2025.

Other Developments

AstroNova completed the MTEX NS acquisition in May 2024, incurring $19.1 million in acquisition-related costs. To address the integration challenges, the company has implemented a structural realignment within MTEX and initiated a cost-saving program across the organization. This effort aims to streamline operations and enhance product offerings, though the benefits are expected to materialize gradually over the next several quarters.

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