AstroNova reports Q3 fiscal 2026 net income of $0.4 million, driven by strategic initiatives and a 24% increase in aerospace orders year-over-year.

Greetings. Welcome to AstroNova's third quarter fiscal year 2026 financial results. @ this time, all participants are in listen only mode. The question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press Star zero from your telephone keypad. Please note this conference is being recorded at this time. I'll turn the conference over to Deborah Pawlowski, Investor Relations for AstroNova. Thank you, Deborah. You may now.

Begin. Thank you and good morning everyone. We certainly appreciate your interest in Astronova and thank you for sharing your time with us today. Joining me on our call are Yorick Itman, our President and Chief Executive Officer, and Tom DeByle, our Chief Financial Officer. You should have the earnings release that crossed the wires earlier this morning as well as the slides that will accompany our conversation today. If not, you can find these documents on the investor relations section of our website astronovainc.com. Please turn to slide 2 to review cautionary statements. As you are likely aware, during the formal presentation as well as the Q and A session, management may make some forward looking statements about our current plans, beliefs and and expectations. These statements apply to future events that are subject to risks, uncertainties and other factors that could cause actual results to differ materially from what is stated here today. These risks, uncertainties and other factors are provided in the earnings release as well as in other documents filed by the Company with the securities and Exchange Commission. These documents can be found on our website or@sec.gov Also, as noted on the slide, management will refer to some non GAAP financial measures. We believe these will be useful in evaluating our performance. However, you should not consider the presentation of this additional information in isolation or as a substitute for results prepared in accordance with GAAP. You can find reconciliations of non GAAP measures with comparable GAAP measures in the tables that accompany today's release and slides. So now if you will turn to slide three, I'll turn the call over to Jorik to.

Begin. Jorik thank you Deborah. Good morning everyone and thank you for joining us today. Our third quarter results are an early demonstration of our execution on the plan to transform AstroNova. Our priorities remain focused on improving customer engagement, strengthening operational performance and building a culture of accountability and urgency. While we're early in our transformation efforts, there were clear signs of progress across both segments in the quarter, including meaningful improvements in margins and cash generation. I am encouraged by the momentum we're building inside the organization. If you turn to Slide 4, I will talk through sales by segment product ID delivered year over year, revenue growth in Q3 supported by improved execution across the business. Our mill and sheet flat pack printer business or Astro Machine performed well with sales up 14% as productivity improvements enabled increased shipment cycles. We also had higher shipments sequentially of direct to package overprint printers including the redesigned AJ 800. Sales increase as updated systems reach customers and we continued to gain valuable feedback. The reorganization of commercial sales, which focused separate teams on customer retention and customer acquisition, has gained traction. Sales of our legacy desktop label printers increased nearly 5% over last year's third quarter and was up 6% over the second quarter of this fiscal year. We are improving engagement with our existing customers, reconnecting with customers we had previously lost, and developing a clearer understanding of the sales cycles for our newer higher value printer platforms. We also continue to advance and validate our next generation print solutions with upgraded MTECH units. Now in customer environments, we are gaining insight we need to refine the product and ensure our offering meet customer expectations. Turning to aerospace, the business maintained its leading market position with major aircraft manufacturers. We continue to make progress transitioning customers to our TopRider product family. Customer adoption remains strong and shipments of the TopRider exceeded 80% of total flight deck printers in the quarter. We also saw healthy demand patterns this last quarter. Orders increased 24% year over year and we benefited from improving production schedules at our major OEMs. aerospace remains a stable and profitable business for us and we expect industry build rates to remain a positive tailwind as we head into the fourth quarter and fiscal 2027. Across AstroNova. We continue to strengthen our culture around customer centricity, transparent communication and disciplined operating focus. With that, I will turn it over to Tom to review the.

Financials. Thank you Jorik and good morning everyone. Turning to slide 5, gross profit in the second quarter was 14.2 million up 3.5% year over year over year and gross margin expanded 240 basis points on lower revenue. Sequentially, gross margin expanded 400 basis points driven by higher volume, productivity improvements and improved mix. Year to date, fiscal 26 gross profit was 38.5 million or 34.1% of sales, a 1.5 million decline from the same period last year as a result of less favorable product mix associated with an atypical shipment of printheads in the aerospace segment. Looking at slide 6 product ID operating income was 1.9 million consistent with the prior year period. Higher volume and a more favorable mix help offset the 0.7 million inventory provision related to a warehouse closure and segment true up as well as a 0.3 million goodwill impairment charge on an adjusted basis, operating income increased by 50% to 2.9 million or 10.6% of sales. Moving to Slide 7, aerospace operating income for the quarter was 4.5 million, up 39% from last year. This was driven by cost reductions and a 0.3 million benefit from the previously mentioned inventory. True up between segments Sequentially we saw the benefit of a shift towards the TopRider systems which contributed to improved mix and expected to remain a margin tailwind year to date. The impact of royalty payments on cost of goods sold was 1.8 million and are expected to be 2.3 million for the full year. This is down about half a million from fiscal 2025 going into fiscal 2027. A major royalty agreement expires in September 2026, providing about 2.2 million annualized margin tailwind to be fully realized beginning in the fourth quarter. Turning to Slide 8, our net income was 0.4 million or $0.05 per share, reflecting improved financial performance this quarter. Adjusted EBITDA was 4.2 million, up 29% from the prior year. Adjusted EBITDA margin for the third quarter was 10.7%. Moving to Slide 9, we had a strong quarter of cash generation which was very encouraging. Cash provided from operations in the third quarter of fiscal 2026 was was 3.4 million up from the prior year due to strong cash earnings and reduced working capital requirements primarily due to lower inventory mostly in the aerospace segment. Astronova is a very capital light business. Capex year to date was 0.2 million and we are expecting CAPEX for the full year to be less than 0.5 million. We refinanced our credit facility during the quarter, extending the maturity out to 2028 and by consolidating our foreign debt into the US and providing temporary expansion of our revolver. The refinance lowered our principal payments and converted term euro debt to US dollar debt. Our new credit agreement provides us greater flexibility as we continue to strengthen the business. This quarter we paid down 3.2 million in debt and have reduced the debt by 6.4 million year to date. Our net debt leverage ratio at the end of the quarter was at 3.38, comfortably below the maximum 4.75 coverage ratio allowed in our lending agreement. Our fixed charge coverage ratio was 1.27 at the end of the quarter versus the minimum requirement of 1.05. As of October 31, 2025. We had $13.5 million in total liquidity including $3.6 million in cash and $9.9 million available on the revolver. We remained focused on improving cash generation, being disciplined in our capital allocation and reducing leverage over time. Now Please turn to slide 10 and I'll hand the call back to.

Yorick. Thanks Tom. We had orders of 35.9 million in the third quarter of fiscal 2026, which were down 1.7 million from the prior year period and relatively unchanged sequentially as improvements in aerospace offset a slightly weaker order quarter for Product ID. In Product ID orders were impacted by delays in renewing blanket orders with certain customers which we expect to see return in the fourth quarter. The team now continues to engage more directly with current, past and prospective customers to rebuild our consistency and strengthen the pipeline. In aerospace, we had strong order activity from major OEMs as their inventories came down. We expect our shipments going forward to be more in line with with the OEM's improving build rates. While quarterly order patterns can vary, the underlying production environment remains constructive and the ongoing transition to our top rider product line continues to support a better mix. Lower backlog at quarter end was driven by a decline in Product ID which was not fully offset by growth in Aerospace backlog. The decline in Product ID backlog was due to higher shipments of mill and sheet flat pack printers and the timing associated with blanket orders. If you will turn to Slide 11, I will summarize the work currently underway to put Astronova on track to deliver stronger profitability and improve sales. Many of the initiatives we introduced last quarter are now well in motion and we are beginning to see the benefits across the organization. We continue to strengthen our culture around customer centricity, transparency and disciplined execution. Teams are collaborating more effectively, decision making is faster and we are aligning the organization around clear priorities. The reason we have focused our executive leadership on the higher value long sales cycle products given our experience there and the significance difference in the type of sale versus our shorter cycle desktop printer. By doing so we can also better leverage the sales team experience on shorter cycle wins across the company. We're containing cost improving processes, simplifying our operation. The 3 million in annualized cost reductions we've discussed previously are now fully implemented and we saw full impact of the savings in the third quarter. We are investing in growth as well. We have added some new sales talent and to build a pipeline of qualified opportunities. Our employing active digital marketing outreach campaigns which are complemented by exhibits at high impact industry events. We're also employing a very disciplined qualification process to prioritize the use of resources, improve forecasting quality and maintain pipeline integrity. Our ongoing transition to autonomous inkjet printhead platform will enable greater supply chain flexibility. And in aerospace, the upcoming royalty roll off in fiscal 2027 remains a meaningful long term margin opportunity. We are reiterating our guidance. For the full year of fiscal 2026, we expect to deliver full year revenue of $149 million to $154 million, which implies fourth quarter revenue of 36 to 41 million, and we expect adjusted EBITDA margin to be in the 7.5 to 8.5% range. We're creating stability across the business. The team is aligned and committed and we're executing with greater sense of urgency. While there is still work ahead, we're confident of our ability to improve performance and deliver a stronger, more resilient Astronova Operator let's open the line for.

Questions. Thank you. We'll now be conducting a question and answer session. If you'd like to ask the question at this time, please press Star one from your telephone keypad and a confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to withdraw your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, that's Star one for a question. We'll pause a moment to assemble the queue. Thank you. Thank you. Once again, that is Star one to ask a question. Thank you. Our first question comes from the line of questions. And actually we did have no questions at this time. I'll turn the floor back to management for closing. Remarks. Thank.

You. Thank you everyone for participating in this call. We appreciate it. There are no questions today. Thank you for your. Time.

Thank you gentlemen. This will conclude today's conference. You may now disconnect your lines. At this time. We thank you for your participation. Have a wonderful day.