EPS of $-0.04 increased by 81.2% from previous year
Gross margin of 35.3%
Net income of -311.00K
"Based on results from the first half of fiscal 2025 and the current business environment, AstroNova today reaffirmed its full year fiscal 2025 expectations for mid-single-digit percent organic revenue growth. However, we are lowering our full year adjusted EBITDA margin guidance to a range of 9% to 10%, reflecting the slower startup of MTEX." - Greg Woods
AstroNova Inc (ALOT) Q2 FY2025 Results Analysis: T&M rebound, MTEX integration progress, and a measured path to margin expansion
Executive Summary
Executive Summary: AstroNova delivered solid top-line growth in Q2 FY2025, underpinned by a 37% YoY surge in the Test & Measurement (T&M) segment and ongoing strength in Aerospace and Product Identification (PI). Reported revenue for the quarter was $40.5 million, up 14.1% YoY, with PI contributing meaningfully via MTEX’s May acquisition. However, MTEX’s early integration, onboarding and capacity realignment produced an operating loss of $1.4 million on less than $0.8 million of MTEX revenue in the quarter, leading management to forecast a multi-quarter ramp and revisited margins. Management reaffirmed mid-single-digit organic revenue growth for FY2025, but also lowered full-year adjusted EBITDA margin guidance to 9–10% as MTEX integration progresses, with a target of 13–14% in FY2026 once integration is complete. Bookings of $35.8 million and a backlog of $29.9 million reflect healthy demand in T&M and PI, but shipments were delayed from Q1 into Q2, impacting near-term profitability. On the balance sheet, AstroNova maintains liquidity above $20 million and a net debt position of roughly $42.4 million, alongside a cash balance of about $4.82 million at August 3, 2024. The company signals ongoing margin expansion and free cash flow generation as MTEX integrations stabilize, with synergistic potential from MTEX’s ink and printhead technologies. Investors should monitor MTEX integration milestones, the trajectory of the legacy business margin ramp, and working capital management as key drivers of the investment thesis going forward.
Key Performance Indicators
Revenue
40.54M
QoQ: 22.99% | YoY:14.12%
Gross Profit
14.33M
35.34% margin
QoQ: 19.66% | YoY:47.54%
Operating Income
1.06M
QoQ: -21.17% | YoY:188.56%
Net Income
-311.00K
QoQ: -126.33% | YoY:80.77%
EPS
-0.04
QoQ: -125.88% | YoY:81.18%
Revenue Trend
Margin Analysis
Key Insights
Q2 FY2025 revenue: $40.539 million, up 14.1% YoY; Ex-MTEX revenue up 12% YoY, indicating healthy organic growth outside the acquisition impact.
Q2 QoQ revenue growth: 23.0% (approximate) based on quarter-over-quarter movement in the reported figures.
Gross Profit and Margins
Non-GAAP gross margin: 35.6% for the quarter, in line with Q2 FY2024.
MTEX gross margin (non-GAAP): 6.8% due to integration costs and initial ramp; MTEX profitability recorded as a loss in the quarter.
Operating Performance
Financial Highlights
Revenue and Growth
- Q2 FY2025 revenue: $40.539 million, up 14.1% YoY; Ex-MTEX revenue up 12% YoY, indicating healthy organic growth outside the acquisition impact.
- Q2 QoQ revenue growth: 23.0% (approximate) based on quarter-over-quarter movement in the reported figures.
Gross Profit and Margins
- Gross profit: $14.326 million; gross margin 35.34% (GAAP).
- Non-GAAP gross margin: 35.6% for the quarter, in line with Q2 FY2024.
- MTEX gross margin (non-GAAP): 6.8% due to integration costs and initial ramp; MTEX profitability recorded as a loss in the quarter.
Operating Performance
- Operating income: $1.061 million; operating margin 2.62% on GAAP basis.
- EBITDA: $2.193 million; EBITDA margin 5.41%.
- Non-GAAP operating income: $2.2 million; non-GAAP operating margin aligns with overall cost structure and MTEX impact.
- Adjusted EBITDA: $3.9 million, up 5.3% YoY.
- Net income: -$0.311 million; net income margin -0.77%; EPS (GAAP and non-GAAP) negative due to MTEX integration costs and higher interest.
Cash Flow and Balance Sheet
- Operating cash flow (six months): $7.1 million; year-to-date free cash flow: $6.2 million.
- Net cash provided by/used in activities: Operating activities +$0.162 million for the quarter; investing activities -$21.067 million; financing activities +$21.545 million.
- Cash and equivalents: $4.824 million at 2024-08-03; total liquidity >$20 million.
- Balance sheet highlights: Total assets $169.0 million; total debt $47.27 million; net debt $42.44 million; current ratio 1.87; quick ratio 0.73; debt-to-equity ~0.52; equity $91.75 million.
Backlog and Bookings
- Bookings: $35.8 million in Q2 FY2025; Backlog: $29.9 million, down from Q1 due to timing of shipments; MTEX backlog anticipated to begin shipping in Q3-Q4 2025.
Strategic Outlook
- MTEX integration: Slower initial ramp with higher integration costs; management guides MTEX to contribute $8–$10 million in revenue for FY2025; expects improved margins as the integration progresses.
- Guidance: Mid-single-digit organic revenue growth for FY2025; adjusted EBITDA margin guidance reduced to 9–10% for FY2025; in FY2026, target EBITDA margin of 13–14% as MTEX integrates; long-term margin progression target of +100bp in each of the following two years.
- Capital allocation: Focus on debt reduction and working capital optimization; potential for organic investments or additional acquisitions if compelling opportunities arise; Board reviews buybacks/dividends quarterly.
Competitive and Industry Context
- Segment dynamics: Aerospace and T&M remain resilient with macro recovery; MTEX expands PI with advanced printing technologies for packaging, labeling, textiles, and industrial applications.
- Margin discipline: Legacy business guided to mid-teens EBITDA margins by FY2026; MTEX is currently dilutive to margins but carries high-margin potential from ink and printhead technology.
Risk Factors
- MTEX integration risk: Delays in revenue ramp and higher than anticipated integration costs; potential for slower margin expansion than guided if MTEX execution lags.
- Concentration risk: A large proportion of revenue in the US and Europe; geopolitical and aerospace defense demand cycles may influence order flow.
- Balance sheet risk: Net debt remains significant relative to cash; ongoing focus on reducing working capital and debt paydown to sustain liquidity.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
40.54M
14.12%
22.99%
Gross Profit
14.33M
47.54%
19.66%
Operating Income
1.06M
188.56%
-21.17%
Net Income
-311.00K
80.77%
-126.33%
EPS
-0.04
81.18%
-125.88%
Key Financial Ratios
currentRatio
1.87
grossProfitMargin
35.3%
operatingProfitMargin
2.62%
netProfitMargin
-0.77%
returnOnAssets
-0.18%
returnOnEquity
-0.34%
debtEquityRatio
0.52
operatingCashFlowPerShare
$0.02
freeCashFlowPerShare
$-0.02
priceToBookRatio
1.2
priceEarningsRatio
-88.57
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Themes and management commentary from the earnings call:
- MTEX integration progress and margin trajectory: Greg Woods stated that MTEX's integration costs diverted resources and that back-end margins were affected in Q2, with MTEX contributing less than $0.8 million in revenue and an operating loss of $1.4 million in the quarter. He noted that the company expects MTEX to contribute $8 million to $10 million in revenue for FY2025 as volumes are shipped from backlog in Q3 and Q4, and that the integration will ramp through the remainder of the year. Quote: “we expect to begin shipping that backlog in the third and fourth quarters, which will enable the business to meet our targeted revenue contribution of $8 million to $10 million for fiscal 2025.”
- Guidance and margin trajectory: Greg reaffirmed mid-single-digit organic revenue growth for FY2025 but lowered the adjusted EBITDA margin guidance to 9%–10% for FY2025 due to MTEX startup costs, with a pursuit to reach 13%–14% in FY2026 post-integration. Quote: “Based on results from the first half of fiscal 2025 and the current business environment, AstroNova today reaffirmed its full year fiscal 2025 expectations for mid-single-digit percent organic revenue growth. However, we are lowering our full year adjusted EBITDA margin guidance to a range of 9% to 10%, reflecting the slower startup of MTEX.”
- Margin and profitability in MTEX vs legacy business: Tom DeByle highlighted non-GAAP gross margins at 35.6% for the quarter, with MTEX non-GAAP gross margin at 6.8%, illustrating the near-term drag on overall margins from MTEX’s integration phase. He noted higher MTEX operating costs and the non-GAAP operating income of $2.2 million, impacted by MTEX’s losses and integration costs. Quote: “Non-GAAP gross profit margins for the quarter were 35.6%, which is consistent with the Q2 of fiscal 2024. MTEX non-GAAP gross profit margin was 6.8%.”
- Demand dynamics and backlog: Greg Woods highlighted robust demand in T&M (37% YoY revenue growth) and aerospace, with a strong MTEX product backlog and a strategy to convert MTEX customers to AstroNova’s ecosystem for better parts and service alignment, which should improve margins through scale and efficiencies. Bookings were $35.8 million in Q2, vs. $30.1 million a year ago; backlog end-Q2 was $29.9 million. Quote: “Bookings in Q2 were $35.8 million compared with $30.1 million in the second quarter a year ago.”
Based on results from the first half of fiscal 2025 and the current business environment, AstroNova today reaffirmed its full year fiscal 2025 expectations for mid-single-digit percent organic revenue growth. However, we are lowering our full year adjusted EBITDA margin guidance to a range of 9% to 10%, reflecting the slower startup of MTEX.
— Greg Woods
After the full integration, we expect our consolidated adjusted EBITDA margin to be in the initial target range of 13% to 14% in FY 2026.
— Greg Woods
Forward Guidance
Forward-Looking Outlook and Management Guidance:
- Revenue trajectory: Management reiterates mid-single-digit organic revenue growth for FY2025, supported by ongoing demand in Aerospace and T&M, and the integration of MTEX which is expected to contribute $8–$10 million in revenue for FY2025 as shipments begin from the backlog in Q3 and Q4.
- Margin trajectory: FY2025 adjusted EBITDA margin guidance lowered to 9–10% due to MTEX startup costs; post-integration, the company targets 13–14% EBITDA margin in FY2026, followed by further margin expansion of about 100 basis points in each of the two subsequent years.
- Cash flow and balance sheet: The company emphasizes debt paydown and working-capital optimization; liquidity remains strong with over $20 million in available liquidity and free cash flow of $6.2 million for the first six months of FY2025. Monitoring points include MTEX integration progress, working capital reduction, and product mix impacts on gross and operating margins.
- Key factors investors should monitor: (1) MTEX revenue ramp and margin realization; (2) the pace of backlog shipments in Q3–Q4 and the resulting impact on annual revenue and EBITDA; (3) the trajectory of organic growth in PI and T&M; (4) debt levels, interest expense, and cash conversion cycles; (5) any additional M&A activity or capital returns policy as board reviews buybacks or dividends.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
ALOT Focus
35.34%
2.62%
-0.34%
-88.57%
AGMH
44.80%
-3.64%
-1.73%
-62.80%
TACT
50.60%
-3.78%
-0.83%
-29.30%
KTCC
6.77%
-0.99%
-4.11%
-2.24%
INVE
9.11%
-99.70%
-9.55%
-3.92%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Investment Outlook: AstroNova is transitioning from an integration-driven margin drag to a potentially higher-margin growth trajectory, anchored by MTEX-enabled adjacencies and the ongoing strength in T&M and aerospace markets. The FY2025 guide points to mid-single-digit organic growth, with MTEX revenue contribution of $8–$10 million expected in the year and EBITDA margins expanding from 9-10% in FY2025 to 13-14% in FY2026, a trajectory that could unlock meaningful value if the integration milestones are met on schedule. Key catalysts include MTEX backlog shipments in Q3–Q4, the successful deployment of MTEX ink and printhead technologies across PI, and stronger working-capital management that could bolster free cash flow. Valuation remains a consideration given the company’s leverage and the EV/EBITDA framework implied by the current multiple in the peer context. Investors should monitor MTEX’s profitability ramp, integration milestones, the evolution of the PI/T&M mix, and ability to sustain organic growth while reducing debt. A prudent approach is to view AstroNova as a near-term transition story with meaningful longer-term upside if MTEX delivers on its margin and revenue potential, underpinned by a resilient aerospace market and continued demand for advanced printing and data acquisition solutions.
Key Investment Factors
Growth Potential
Growth potential centers on MTEX integration leveraging AstroNova’s existing manufacturing and distribution networks, as MTEX’s ink and printhead technologies could unlock higher-margin adjacencies within PI and new industrial segments. The company also benefits from continued demand in aerospace print solutions and T&M data-recording services as aviation markets recover post-pandemic.
Profitability Risk
Key risks include MTEX integration execution risk and the timing of revenue ramp, potential margin dilution in the near term, reliance on aerospace/defense order cycles, and macroeconomic headwinds affecting discretionary manufacturing spending. Financing risk remains due to a meaningful net debt load that requires ongoing liquidity management.
Financial Position
Solid liquidity with over $20 million available and a cash balance of ~$4.82 million, but a net debt position of approximately $42.44 million as of 2024-08-03. Balance sheet shows total assets of $169.0 million and total liabilities of $77.27 million, with equity of $91.75 million. Leverage remains a focus, with ongoing working-capital optimization and debt-paydown strategies.
SWOT Analysis
Strengths
Diversified product portfolio across PI and TM, with aerospace demand supporting growth in higher-margin product lines.
MTEX acquisition accelerates entry into high-growth segments (packaging, labeling, textiles, industrial), with synergies from vertically integrated engineering and manufacturing.
Solid backlog ($29.9m) and bookings ($35.8m) indicating healthy demand, especially in T&M.
Strong end-market tailwinds in aviation and post-COVID airline growth supporting aftermarket services and printers.
Weaknesses
MTEX integration is slower than anticipated, depressing near-term profitability and causing higher costs.
MTEX gross margin (6.8%) remains well below legacy margins, creating near-term dilution to group margins.
Consolidated net income declined for the quarter due to MTEX-related costs and higher interest expense.
Opportunities
MTEX technology could lift margins in PI through new ink and printhead capabilities and cross-sell across AstroNova product lines.
Backlog conversion in Q3–Q4 2025 to support revenue ramp and offset integration costs.
Operational synergies in vertical integration may reduce supplier reliance and lower production costs.
Threats
Execution risk of MTEX integration, potential delays extending the margin recovery curve.
Cyclicality and defense spending sensitivity in aerospace could impact bookings and maintenance revenue.
Interest expense and leverage keep financial flexibility under pressure if MTEX ramp lags.
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