Executive Summary
AstroNova reported Q3 FY2025 net revenue of $40.4 million, up 7.7% year-over-year, driven by strength in the Test & Measurement (T&M) segment, offset by a modest decline in Product Identification (PI). The company noted that MTEX NS integration has been more time-consuming and resource-intensive than anticipated, resulting in a $1.1 million MTEX operating loss on $1.7 million in MTEX revenue for the quarter. Management launched a comprehensive cost-reduction and product line rationalization initiative and realigned MTEX's organizational reporting to AstroNova leadership to accelerate integration and standardization of practices. Full MTEX optimization is expected to extend through mid-calendar year 2025, with ongoing plans to retrofit MTEX technology across most product lines and to migrate customers toward the ToughWriter brand to improve margins. Management suspended near-term annual guidance for fiscal 2025 and 2026, opting instead to present longer-term targets at the March update, reflecting the extended integration timeline. The inkjet printer upgrade for a large legacy PI order began shipping in Q4 and is expected to contribute several million dollars to PI revenues over the coming quarters. Overall, while the near-term profitability is pressured by MTEX-related costs and a weaker PI hardware mix, AstroNova remains positioned for potential margin expansion through the ToughWriter transition, lower royalty exposure, and a higher share of higher-margin T&M shipments as Boeing-related delays resolve.
Key Performance Indicators
QoQ: 19.13% | YoY:-72.63%
QoQ: 177.17% | YoY:-91.28%
QoQ: 177.05% | YoY:-91.38%
Key Insights
Revenue: $40.422 million; YoY +7.65%, QoQ −0.29%. Gross profit: $13.714 million; YoY −7.21%, QoQ −4.27%. Gross margin: 33.9%. Operating income: $1.264 million; YoY −72.63%, QoQ +19.13%. EBITDA: $2.516 million; EBITDA margin 6.22%. Net income: $0.240 million; YoY −91.28%, QoQ +177.17%. EPS: $0.0319 (diluted $0.0300). Bookings: $37.6 million (YoY +?); Backlog: $27.1 million (vs. $31.2 million in the prior-year Q3). PI segment revenue: $26.3 million (−1.0% YoY; −7.2% ex-MTEX), PI oper...
Financial Highlights
Revenue: $40.422 million; YoY +7.65%, QoQ −0.29%. Gross profit: $13.714 million; YoY −7.21%, QoQ −4.27%. Gross margin: 33.9%. Operating income: $1.264 million; YoY −72.63%, QoQ +19.13%. EBITDA: $2.516 million; EBITDA margin 6.22%. Net income: $0.240 million; YoY −91.28%, QoQ +177.17%. EPS: $0.0319 (diluted $0.0300). Bookings: $37.6 million (YoY +?); Backlog: $27.1 million (vs. $31.2 million in the prior-year Q3). PI segment revenue: $26.3 million (−1.0% YoY; −7.2% ex-MTEX), PI operating profit: $1.9 million (7.2% of revenue) vs $4.8 million (18.1%) prior year. T&M segment revenue: $14.1 million (+28.2% YoY), operating profit: $3.3 million (margin ~23.4% of segment revenue). Cash flow: operating cash flow −$4.742 million; free cash flow −$4.998 million; cash at period end $4.432 million; liquidity $14.7 million; funded debt $48.9 million; net debt $46.20 million. Liquidity constraint driven by higher Aerospace AR and timing of payables; MTEX loan support of $2.7 million from revolver. Key liquidity and leverage ratios: current ratio 1.83; quick ratio 0.77; cash ratio 0.10; gross margin 33.9%; operating margin 3.13%; net margin 0.59%.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
40.42M |
7.65% |
-0.29% |
| Gross Profit |
13.71M |
-7.21% |
-4.27% |
| Operating Income |
1.26M |
-72.63% |
19.13% |
| Net Income |
240.00K |
-91.28% |
177.17% |
| EPS |
0.03 |
-91.38% |
177.05% |
Key Financial Ratios
operatingProfitMargin
3.13%
operatingCashFlowPerShare
$-0.63
freeCashFlowPerShare
$-0.66
Management Commentary
Key management takeaways and quotes from the Q3 FY2025 earnings call and discussion:
- Strategy and MTEX integration progress: 'Overall, the results were disappointing. We saw a significant decrease in consolidated margins and a notable year-over-year increase in our operating expenses. Much of this is tied to the ongoing integration of MTEX NS into our Product Identification segment...' (Gregory Woods). The company has implemented a full MTEX realignment of reporting lines to AstroNova leadership to accelerate standardization and improve sales execution. Management expects full MTEX optimization to extend through mid-calendar year 2025 and intends to retrofit MTEX technology across most product lines.
- Cost control and portfolio optimization: 'As part of the integration process, we have launched an AstroNova-wide cost reduction and product line rationalization initiative... early progress is encouraging.' (Greg Woods). MTEX related costs include MTEX selling expenses of $839k, R&D $209k, and MTEX G&A $273k in the quarter; corporate G&A related to MTEX was $420k with a $300k one-time acquisition expense (Tom DeByle clarifies).
- Financial performance trajectory and margin drivers: 'Net revenue for the third quarter was up 7.7%... Gross profit margin for the third quarter was 33.9%... down from 39.4% year-ago due to MTEX margins, mix and Europe hardware' (Tom DeByle). Boeing-related delays in the T&M segment depressed shipments, reducing potential margins, while resumed shipments are expected to lift volume.
- Segment dynamics and longer-term plan: 'PI revenue was down 1% YoY... excluding MTEX, PI would be down 7.2% due to lower hardware sales' and 'T&M revenue up 28.2% YoY, driven by Aerospace product line; margins benefited by strong demand but tempered by MTEX costs and mix' (Tom DeByle). Management highlights a longer-term plan to pivot toward the ToughWriter brand (43% now, target ~89% by fiscal 2027) to reduce SKUs, lower manufacturing costs, and cut royalty expenses from more than $4 million/year to $375k in FY2028.
- Guidance and outlook: 'Given the extended integration timeline for MTEX, we no longer will be providing guidance for fiscal 2025 and 2026. Instead, we plan to provide longer-term targets' (Tom DeByle). Management intends to present targets on the March call and emphasizes a strategy to accelerate MTEX’s integration and profitability.
- Market sentiment and near-term catalysts: The inkjet printer order for a large legacy PI customer began shipping in Q4 and is expected to contribute several million dollars to PI topline over the next several quarters, signaling potential for near-term PI upside despite a softer hardware mix.
MTEX had an operating loss of $1.1 million on revenue of $1.7 million. This integration has proven to be far more time consuming and resource intensive than we anticipated.
— Gregory Woods
Net revenue for the third quarter was up 7.7% to $40.4 million, with growth in our T&M segment, offsetting a modest revenue decline in PI. Excluding the MTEX, total net revenue increased 3% for the quarter.
— Thomas DeByle
Forward Guidance
Forward-looking assessment: AstroNova has suspended formal guidance for fiscal 2025 and 2026 due to the extended MTEX integration timeline. The company plans to share longer-term targets in March, reflecting the anticipated benefits of MTEX integration and the ToughWriter migration. Near-term catalysts include: (i) progress toward MTEX profitability as organizational reporting aligns and best practices are embedded; (ii) the inkjet upgrade program in PI driving incremental revenue over the next several quarters; (iii) continued ramp in the Aerospace-focused T&M segment as Boeing-related shipments resume and ToughWriter conversion reduces royalty burden; (iv) cost reductions and product line rationalization that could improve gross and operating margins over time. Risks include: (i) execution risk of MTEX integration, (ii) longer-than-anticipated payback from portfolio realignment and SKUs consolidation, (iii) dependency on aerospace and defense budgets, and (iv) potential macro weakness affecting hardware cycles. Our assessment is that, while near-term profitability remains pressured by MTEX-related costs and mix shifts, the longer-term margin profile could improve if management delivers the ToughWriter transition on schedule and MTEX technology is successfully embedded across the PI and broader product portfolio.