EPS of $-0.16 decreased by 286.5% from previous year
Gross margin of 32.2%
Net income of -1.24M
"“I reorganized sales into two teams: customer acquisition and customer retention. This reorients our focus on taking care of our current customers and winning back those we have lost while gaining new customers.”" - Yorek Itmann
AstroNova Inc (ALOT) Q2 FY2026 Results: Early Signs of Turnaround Amid Revenue Decline; Margin Stabilization and Turnkey Cost Reduction Initiatives
Executive Summary
AstroNova reported Q2 FY2026 revenue of $36.1 million, down 10.9% year over year and 4.2% sequentially, with 70% of revenue categorized as recurring. Gross profit was $11.6 million (gross margin of 32.2%), while GAAP net loss was $1.23 million ($0.16 per share). Adjusted EBITDA came in at $2.1 million, for an EBITDA margin of 5.7%. The quarter reflected continued execution challenges in Product Identification (PI) and a tougher compare in Aerospace, but management highlighted a meaningful turnaround plan anchored by cost reductions, sales reorganization, and product launches. The company ended the period with liquidity of approximately $10.4 million in total liquidity, and debt leverage stood at about 3.5x funded debt to Adjusted EBITDA, with debt restructuring discussions ongoing and a planned completion within the next ~60 days. Backlog stood at $25.3 million, representing roughly 30% of the mid-point of the year guidance for shipments in H2. Management emphasized a multi-pronged path to profitability, including (1) commercial execution improvements in PI via two dedicated sales teams (customer acquisition and retention), (2) production and supply chain adjustments in mail-in sheet printers, (3) the ongoing ToughRider transition in aerospace to broaden hardware sales aligned with rising aircraft build rates, and (4) a ~$3 million annualized cost-reduction program to improve margins in H2 2026. While the near-term backdrop remains challenging, the management narrative centers on stabilizing cash flow, enhancing customer responsiveness, and leveraging new printer launches (QL 425/435, 800 direct-to-package) to drive hardware sales and long-term profitability.
- Revenue: $36.102 million, -YoY 10.95% decline, -QoQ 4.26% decline
- Gross Profit: $11.64 million; Gross Margin 32.23%
- Operating Income: -$0.708 million; Operating Margin -1.96%
- Net Income: -$1.243 million; Net Margin -3.44%
- EBITDA (GAAP): -$0.708 million; Adjusted EBITDA: $2.1 million; Adj EBITDA Margin: 5.7%
- EPS (GAAP): -$0.16; EPS Diluted: -$0.16
- Cash Flow: Net cash provided by operating activities $0.249 million; Free cash flow $0.202 million
- Capex (6M): $0.100 million; Guidance Capex for FY2026: < $5 million
- Backlog: $25.3 million (~30% of H2 shipments at guidance mid-point)
- Liquidity: $10.4 million total liquidity (cash $3.9m; revolver $5.9m; untapped Portugal line $0.6m)
- Leverage: funded debt to adjusted EBITDA ~3.5x; debt restructuring in progress
- Segment highlights: PI revenue down 8.9% YoY; Aerospace revenue down 15.1% YoY; 70% of revenue was recurring.
- Notable new product deployments: QL 425/435 printers shipped in July; Direct-to-package printer line (QL 800) shipped in August.
- Earnings call qualitative takeaways: 2-team PI sales structure; ToughRider 640 shipped to a major OEM; back-half improvement anticipated from cost reductions and higher-value printers.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
36.10M
-10.95%
-4.26%
Gross Profit
11.63M
-18.79%
-8.05%
Operating Income
-708.00K
-166.73%
-223.99%
Net Income
-1.24M
-299.68%
-230.59%
EPS
-0.16
-286.47%
-221.93%
Key Financial Ratios
Net Income vs. Revenue
Expense Breakdown
Management Commentary
- Strategy and leadership focus: Yorek Itmann emphasized a customer-centric go-to-market and a two-team PI sales structure (customer acquisition and customer retention), signaling a shift from legacy approaches to high-value, longer-cycle print solutions. Quote: “I reorganized sales into two teams: customer acquisition and customer retention.” (Transcript, Slide 3 discussion)
- Product ID and aerospace execution: The company is validating upgrades to Emtek’s product line and expanding mail-in sheet printer offerings, while aerospace benefits from the ToughRider transition. Quote: “We began the restructuring of our sales team earlier this year to be much more customer-centric… results will begin to demonstrate it over the next several quarters.” (Transcript)
- Operational progress and near-term catalysts: ToughRider 640 deployment and a shift toward higher-margin hardware are expected to lift future gross margins, with aerospace contributing to a favorable mix as unit volumes stabilize; the company aims for cost reductions to drive margin expansion in H2 2026. Quote: “The ToughRider represented 50% of second-quarter shipments and remains on track to reach our target of over 80%.” (Transcript)
- Cash and liquidity emphasis: Management stressed cash generation focus, limited Capex (expecting < $5m for FY2026) and debt reduction; a debt restructuring plan was expected to close within ~60 days. Quote: “we are rethinking how we operate the business and are driving a stronger focus on cash generation through improved operational performance.” (Transcript)
- Outlook in the context of industry tailwinds and risks: Boeing build rates and the Honeywell royalty tail-off (through FY2028) present a favorable backdrop for aerospace profitability, but customer attrition in PI and transfer to higher-value printers remain key risks to monitor. (Transcript discussions on slides 10-11)
“I reorganized sales into two teams: customer acquisition and customer retention. This reorients our focus on taking care of our current customers and winning back those we have lost while gaining new customers.”
— Yorek Itmann
“We began shipping the ToughRider 640 to a major aircraft OEM. As a result, the ToughRider represented 50% of second-quarter shipments and remains on track to reach our target of over 80%.”
— Yorek Itmann
Forward Guidance
AstroNova framed a multi-quarter turnaround plan with tangible near-term catalysts and dilution risks. Key forward-looking points include:
- Cost reduction trajectory: Management expects the $3 million annualized cost reductions to deliver full benefit in the second half of fiscal 2026, contributing to margin expansion in PI and overall profitability.
- Revenue trajectory and mix: The company anticipates higher-margin hardware sales in PI driven by new printers (QL425/435 and QL800) and continued ToughRider adoption in aerospace as Boeing build rates trend higher, potentially stabilizing and eventually improving gross margins beyond 2026.
- Aerospace tailwinds and discretionary factors: The Honeywell royalty ramp-down is anticipated to occur in fiscal 2028, which could compress margins if not offset by efficiency gains or higher volumes; however, the current trajectory suggests incremental improvements in the aerospace segment’s margin through favorable mix and volume growth.
- Balance sheet and liquidity: Ongoing debt restructuring expected within ~60 days, with liquidity management and CapEx discipline in focus. Investors should monitor: (i) progress on debt restructuring, (ii) backlog conversion into revenue in H2 2026, (iii) sustainment of the POSITIVE cash generation trend from operations, and (iv) the realization of cost-saving initiatives and their impact on gross/margin stability.
Overall investment thesis: AstroNova is in the early innings of a strategic turnaround. If the PI sales reorganization, printer portfolio validation, and aerospace ramp translate into sustained operating leverage and cash generation, the stock could re-rate on improved profitability and reduced leverage. Risks include macro aerospace demand fluctuations, execution risk in product upgrades, and the pace of cost reductions vis-à-vis working capital needs.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
ALOT Focus
32.23%
N/A
N/A
N/A
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
AstroNova is transitioning from a downturn to a growth-and-margin turnaround, anchored by a stronger go-to-market for PI, ongoing aerospace efficiency improvements, and deliberate cash-flow optimization. The near-term focus is on stabilizing profitability through cost reductions (~$3m annualized), improving product mix with higher-margin hardware, and resolving liquidity constraints via debt restructuring. If the PI sales cadence improves, ToughRider adoption accelerates, and the aerospace backlog converts at a favorable pace, the company could begin delivering sustained gross-margin improvement and deleveraging. The main risks to watch are order volatility in aerospace, execution risk in the sales transformation, and the timing of the debt restructuring and royalty tail-offs. Overall, AstroNova’s turnaround strategy appears plausible, but it hinges on successful execution of cost reductions, portfolio validation, and backlog realization in H2 2026 and beyond.
Key Investment Factors
Growth Potential
Potential upside from higher-value PI printers (QL425/435, QL800) and increased aerospace hardware sales as Boeing build rates rise; anticipated gross-margin uplift from product mix shifts and ongoing cost reductions; recurring revenue remains ~70% of sales, supporting revenue visibility.
Profitability Risk
Execution risk in sales transformation and product portfolio upgrades; customer attrition in PI from legacy lines; aerospace volume volatility and dependence on program milestones; debt restructuring uncertainty; Honeywell royalty tail-off in 2028 could pressure margins if not offset by efficiency gains.
Financial Position
Moderate liquidity (~$10.4m total); debt leverage ~3.5x funded debt/adjusted EBITDA; CapEx discipline with expected FY2026 capex < $5m; ongoing debt restructuring expected within 60 days; cash flow from operations recently positive at ~$0.249m in Q2; working capital dynamics are a near-term cash flow sensitivity (DIO, DSO, payables timing).
SWOT Analysis
Strengths
Diversified two-segment portfolio (Product Identification and Test & Measurement) with aerospace and commercial printing applications
Recurring revenue mix (~70% of quarterly revenue) provides visibility
New higher-value printers and innovations (QL 425/435, QL 800) expected to improve mix and long-term retention
Established aerospace footprint with long-term contracts and first-tier supplier position
New leadership focus on customer-centric sales model and cost discipline
Weaknesses
Revenue has declined YoY in Q2 2026 (–10.9%), signaling demand softness in PI and aerospace volumes
Significant near-term gross margin pressure from unfavorable mix and aerospace softness
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