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AstroNova (ATRO), a small-cap technology company with a market capitalization of $81.8 million, reported a net loss of $1.2 million in Q2 2026, with revenue falling to $36.1 million, a 10.9% year-over-year decline. The company's stock price dropped by 6.35% to $11.5 in pre-market trading. The earnings call highlighted challenges in the Product Identification segment and ongoing efforts to restructure operations and enhance cash generation.
InvestingPro analysis reveals several key insights about AstroNova's current position, including its unprofitable status over the last twelve months and recent strong returns. Subscribers can access additional exclusive ProTips and detailed financial metrics on the platform.
Key Takeaways
- Q2 2026 revenue declined by 10.9% to $36.1 million.
- The net loss was $1.2 million, translating to $0.16 per share.
- Stock price fell 6.35% in pre-market trading.
- New product launches include the QL425 and QL435 label printers.
- Cost reductions of $3 million were implemented.
Company Performance
AstroNova faced a challenging quarter with a significant drop in revenue compared to the previous year, despite maintaining a healthy current ratio of 1.67. The company is experiencing difficulties in its Product Identification segment, primarily due to customer attrition. The Aerospace segment shows potential for improvement, with anticipated growth linked to Boeing's increased production rates. The company's restructuring efforts, including a revamped sales team and cost-cutting measures, aim to stabilize operations and improve profitability, building on its trailing twelve-month revenue growth of 7.14%.
Financial Highlights
- Revenue: $36.1 million (down 10.9% YoY)
- Net Loss: $1.2 million ($0.16 per share)
- Adjusted EBITDA: $2.1 million (down $1.8 million YoY)
- Gross Profit: $11.6 million (down $2.7 million YoY)
Market Reaction
AstroNova's stock declined by 6.35% to $11.5 in pre-market trading following the earnings announcement. The stock is currently trading near its 52-week low of $7.53, reflecting investor concerns over the company's declining revenue and net loss. According to InvestingPro Fair Value analysis, the stock appears slightly undervalued at current levels. The broader market trends and sector performance have also been volatile, influencing investor sentiment.
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Outlook & Guidance
AstroNova's management expects improved gross margins in the Aerospace segment in the second half of the year, driven by increased production rates from major aircraft manufacturers like Boeing. The company is focusing on customer re-engagement and process simplification to enhance future performance. Long-term EPS and revenue forecasts for fiscal years 2026 and 2027 indicate potential challenges ahead, with projected EPS losses and modest revenue growth.
Executive Commentary
CEO Yorick Eitman emphasized the importance of executing the company's plan to regain stakeholder trust. CFO Tom DeByle highlighted the focus on growing sales, driving product profitability, generating cash, and reducing debt. Both executives stressed the need for operational rethinking and a stronger emphasis on cash generation.
Risks and Challenges
- Continued customer attrition in the Product Identification segment.
- Dependence on fluctuating aircraft build rates in the Aerospace segment.
- Macroeconomic pressures affecting overall market demand.
- Execution risks related to restructuring and cost-cutting initiatives.
- Potential challenges in validating new product line capabilities.
AstroNova is navigating a complex market environment with strategic initiatives aimed at reversing its current financial trajectory. With an overall Financial Health Score of "FAIR" from InvestingPro, the company remains focused on innovation and operational efficiency to drive long-term growth and profitability.
Discover the complete AstroNova story with an in-depth Pro Research Report, available exclusively to InvestingPro subscribers, offering expert analysis and actionable insights for informed investment decisions.
Full transcript - AstroNova Inc (ALOT) Q2 2026:
Conference Operator: Greetings and welcome to AstroNova's second quarter fiscal year 2026 financial results. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference to your host, Debbie Polowski. Thank you. You may begin.
Debbie Polowski, Investor Relations, AstroNova: Thank you, and good morning, everyone. We certainly appreciate your interest in AstroNova, and thank you for sharing your time with us today. I am pleased to introduce to you Yorick Eitman, who is appointed President and Chief Executive Officer of AstroNova, effective August 15 this year. Also joining us is Tom DeByle, our Chief Financial Officer, who should be familiar to most of you. 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 segment of our website, AstroNova, Inc. Please turn to slide two to review cautionary statements. As you are likely aware, during the formal presentation, as well as the Q&A session, management may make some forward-looking statements about our current plans, beliefs, 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 at 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 slide.
Now, if you will turn to slide three, I will turn the call over to Yorick. Yorick?
Yorick Eitman, President and Chief Executive Officer, AstroNova: Thank you, Debbie. Good morning, everyone, and thank you for joining us today. I'm excited to take on this new leadership role and confident in the future of AstroNova. We have a leading market position in aerospace with a loyal customer base and long-term contracts as a first-tier supplier to major aircraft manufacturers. In our Product Identification segment, our new commercial print technologies have begun to ship. As these new print solutions are validated by our customers, we expect to be able to address the full funnel of interest we have been generating to drive sales. I know we have a lot of work to do to get our growth and profitability on track. On slide three, you see my priorities for AstroNova. Starting first with our Product Identification segment, we began the restructuring of our sales team earlier this year to be much more customer-centric.
The company has been losing customers over the last number of years, and I believe it's because of how we went to market and how our sales organization was compensated. 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. We are also working to change the skills of our sales team to align with our new product offerings. Our new print solutions, especially the significantly larger and higher-value print solutions we're now offering, are capital projects for our customers. This is a very different sales process from how we have sold our legacy tabletop printers. The sales cycle is longer, and customers' needs are more specific.
We've been making progress with our new go-to-market strategy and believe results will begin to demonstrate it over the next several quarters. Our success is also dependent upon a couple of other hurdles we're currently addressing. First, we have to validate with customers that the upgrades we have made to the MTEX product line meet their needs, including print quality, speed, reliability, durability, and lower operating costs. We have shipped several of the models, with another to be on the way this week. If results come out as we expect, we can drive more sales. If not, we will have to rethink that portfolio. Second, as this might be news to you, we have a different kind of problem with our product line for our partners who serve the mill and sheet printer line. We have had a hard time keeping up with demand.
We have redesigned products for that market, and we have excellent partners serving those customers. Our partners and their customers like the products. We just haven't been able to make enough of these products. Our PI leadership team is actively engaged now in order to capitalize on this opportunity. Turning to aerospace now, even though revenue declined compared with last year's second quarter, we believe that business is performing on key metrics such as transitioning to our TOUGHWRITER flight deck printers from legacy equipment. During the quarter, we began shipping the TOUGHWRITER 640 to a major aircraft OEM. As a result, the TOUGHWRITER represented 50% of second quarter shipments and remained on track to reach our target of over 80% by fiscal year end. Aerospace can be a lumpy business from quarter to quarter.
Nearly 45% of the segment's revenue is for aftermarket sales and service, and roughly 10% of hardware sales are dependent upon spare replacement machines. However, for new build aircraft, we lack the long-term tailwind provided by growth in commercial aircraft build rates. We're also making changes in the culture of AstroNova. We have great talent within the organization that needs to be unleashed yet held accountable. I am working to create a more collaborative culture that puts the customer first. I'm excited on how the team has embraced change and believe we can develop into an organization that delivers. We have to execute our plan to regain trust with our key stakeholders, including customers, employees, and not least, investors.
I believe that if we can demonstrate AstroNova can make progress in our markets with our customers, strengthen earnings power, and be straightforward and transparent while delivering on our promises, we will build credibility with you. Tom, I will turn it to you now to review the financials.
Tom DeByle, Chief Financial Officer, AstroNova: Thank you, Yorick, and good morning, everyone. On slide four, you can see the second quarter revenue of $36.1 million declined 10.9% year over year and sequentially 4.2%. 70% of this quarter's revenue was recurring. By segment, Product Identification and Aerospace decreased 8.9% and 15.1% respectively. Lower sales in Product Identification in the quarter were primarily driven by a $2.6 million decline in recurring supplies, parts, and service from customer attrition. This is partially offset by higher demand for the mail and sheet flat-pack products. In July, we began shipping our new professional label printers, the QL425 and QL435 model. In August, we shipped the AJ800, a new direct-to-package printer line that was upgraded from the former MTEX model.
For Aerospace, the year-over-year decline was a result of a tough comparison against last year's second quarter, which benefited from $1.3 million in unusually large spare printer shipments to both the airline and the defense customer, as well as non-recurring engineering revenue from an OEM project. For the first half of fiscal 2026, revenue of $73.8 million increased marginally year over year due to higher hardware sales, offsetting the decline in recurring supplies, parts, and service revenue. Turning to slide five, gross profit in the second quarter was $11.6 million, down $2.7 million year over year, reflecting lower sales and unfavorable mix primarily related to the decline in Aerospace volume. For the first half of fiscal 2026, gross profit was $24.3 million, or 32.9% of sales, a $2 million decline from the same period last year as a result of less favorable product mix, primarily in the Aerospace segment.
For the second half of the year, we expect Aerospace gross margin to improve on similar volume since we began shipping the TOUGHWRITER 640 to a major OEM in June. Higher volume and improved mix in Product Identification should drive margins as well. Looking at slide six, Product Identification operating income for the quarter declined $0.4 million, or 18%. It was partially offset by a $0.5 million reduction in operating costs. In the first six months of fiscal 2026, GAAP operating income also declined. We expect improvements in sales, and with the impact of our cost reductions, we should see improving margins for the segment. Looking at slide seven, Aerospace operating income for the quarter was down $1.4 million, or 37%, due to sales volume and unfavorable mix. This was partially offset by $0.3 million in cost reductions.
For the first half of fiscal 2026, GAAP and adjusted operating income declined due to weak second quarter results. Turning to slide eight, our net loss was $1.2 million, or $0.16 per share, reflecting lower volume, partially offset by a $0.5 million tax benefit. Adjusted EBITDA was $2.1 million, down $1.8 million compared with the prior year period. Adjusted EBITDA margin for the second quarter was 5.7%. Moving to slide nine, cash provided from operations in the first half of fiscal 2026 was $4.6 million and down from the prior year based on everything we have covered here. As Yorick mentioned, we are rethinking how we operate the business and are driving a stronger focus on cash generation through improved operational performance. We are carefully managing our capital, and as a result, our CapEx was $0.1 million in the first six months of the year.
We have been constraining our capital investments and expect CapEx for the fiscal year to be less than half a million. We paid down $5.1 million in debt through the first half of fiscal 2026, and as of July 31, 2025, we have $10.4 million in total liquidity, including $3.9 million in cash, $5.9 million available on our revolver, and an untapped $0.6 million line of credit in Portugal. Our leverage ratio of funded debt to adjusted EBITDA was 3.5 times. The bank waived our fixed charge coverage ratio for the second quarter, and we are in discussions regarding restructuring of our debt, which we expect to have completed in the next 60 days. Our objective with the turnaround of Product Identification and continued advancement of the Aerospace segment is, on a consolidated basis, to grow sales, drive product profitability, generate cash, and pay down debt.
Now, please turn to slide 10, and I'll hand the call back to Yorick.
Yorick Eitman, President and Chief Executive Officer, AstroNova: Thanks, Tom. We had orders of $35.9 million in the second quarter of fiscal 2026, which were relatively unchanged from the prior year period, but up $1 million sequentially as solid improvements in aerospace more than offset a very weak order quarter for Product ID. As we discussed earlier, we have changed the team's structure and are actively meeting with current and past and prospective customers. Aerospace orders were up $3.8 million for the trailing first quarter. I'm seeing how much variation this business can have from quarter to quarter. We do expect that as Boeing increases its build rates and inventories level out, we should see steady growth in hardware sales related to new builds.
Backlog for the quarter was down $4.6 million year over year to $25.3 million and represented about 30% of expected shipments for the second half of the year at the midpoint of our guidance range. If you will turn to slide 11, I will summarize the work we have to do to put AstroNova on track to deliver stronger profitability and improve sales. There unfortunately is not any single lever to pull to make this work. We have to re-engage with our customers and simplify our processes to improve our responsiveness. We need to measurably improve our customer retention rate. We have to evolve our sales approach for new, higher-value printers. We also are addressing production challenges in the mill and sheet flat-pack printer operation. We need to streamline processes to take out costs and reduce our lead times.
We're simplifying operations in Portugal and better prioritizing and allocating our resources. I remain encouraged as we move forward. We expect to see a full benefit of the $3 million in annualized cost reductions in the second half of the fiscal year. We'll have a much better understanding of the potential of our new printers over the next few months. Our aerospace business provides a stable base with a couple of tailwinds, including increasing aircraft build rates and a benefit to profit margin we will realize in fiscal 2028 as Honeywell royalty rolls off. I'm looking forward to the challenge of improving the business and driving change toward AstroNova. Operator, let's open the line for questions.
Conference Operator: Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. As a reminder, if you'd like to ask a question, please press star one on your telephone keypad. One moment while we poll for questions. This concludes the question and answer session, and this concludes our conference for today. You may disconnect your lines at this time, and we thank you for your participation.
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