Executive Summary

Revenue grew 7.7% year over year to $40.4M, but margins compressed materially; GAAP gross margin fell 550 bps to 33.9% and non-GAAP operating margin dropped to 4.0%, as MTEX integration losses and mix pressure weighed on profitability .
Non-GAAP diluted EPS was $0.06 versus $0.37 a year ago; adjusted EBITDA declined to $3.2M from $5.7M YoY, reflecting MTEX’s $1.1M operating loss on $1.7M revenue and lower European hardware sales .
Management withdrew FY25 and FY26 financial guidance, citing extended MTEX integration and a company-wide cost reduction and product line rationalization; longer-term targets will be provided on the March call .
Aerospace (T&M) remained a bright spot at $14.1M revenue (+28% YoY), tempered by a nearly two-month Boeing strike; shipments are ramping post-strike, with margins set to benefit longer term from ToughWriter mix shift and royalty declines .
A large legacy inkjet printer order began shipping in fiscal Q4 after customer-requested enhancements; several million dollars of PI segment revenue are expected over coming quarters, a potential near-term revenue catalyst .

What Went Well and What Went Wrong

What Went Well

Aerospace momentum: T&M revenue rose 28.2% YoY to $14.1M; operating profit rose to $3.3M (23.0% margin), supported by demand for flight deck printers and supplies despite strike timing .
Strategic product transition: Management expects ToughWriter printers to reach ~89% of shipments by FY27, driving margin gains and manufacturing efficiency as SKUs and royalty burdens decline sharply by FY28 .
Bookings growth despite headwinds: Q3 bookings were $37.6M vs. $35.5M last year, indicating demand resiliency amid MTEX integration challenges .

Management quotes:

“Overall, our third-quarter performance was disappointing… impacted by the ongoing integration of MTEX NS in our Product Identification segment…”
“We remain confident in MTEX’s game-changing inkjet printing technology… and unique, real-time, printer monitoring and management software.”
“With the [Boeing] strike now resolved, shipments… are ramping back up, and we expect sales volume… to improve as we close out fiscal 2025.”

What Went Wrong

Margin compression: GAAP gross margin fell to 33.9% (–550 bps YoY), and non-GAAP operating margin dropped to 4.0% (–830 bps YoY), driven by MTEX losses, unfavorable mix, and lower European hardware sales .
MTEX integration drag: MTEX posted a $1.1M operating loss on $1.7M revenue; non-GAAP MTEX gross margin was 6.8% in Q2 and remained a headwind in Q3 as integration required higher costs and diverted resources .
Guidance withdrawn: Prior targets (FY25 adjusted EBITDA margin 9–10%, FY26 13–14%) were removed; uncertainty around MTEX’s timing to profitability and integration complexity increased estimate risk .

Financial Results

Metric	Units	Q1 FY25	Q2 FY25	Q3 FY25
Revenue	$USD Millions	$33.0	$40.539	$40.422
GAAP Gross Margin	%	36.3%	35.3%	33.9%
GAAP Operating Margin	%	4.1%	2.6%	3.1%
GAAP Diluted EPS	$	$0.15	$(0.04)	$0.03
Non-GAAP Diluted EPS	$	N/A	$0.08	$0.06
Adjusted EBITDA	$USD Millions	$2.465	$3.851	$3.228

Segment breakdown

Segment	Metric	Q1 FY25	Q2 FY25	Q3 FY25
Product Identification (PI)	Revenue ($USD Millions)	$23.185	$27.165	$26.317
Product Identification (PI)	Segment Operating Profit ($USD Millions)	$2.991	$2.348	$1.868
Test & Measurement (T&M)	Revenue ($USD Millions)	$9.776	$13.374	$14.105
Test & Measurement (T&M)	Segment Operating Profit ($USD Millions)	$1.722	$3.834	$3.251

Key KPIs

KPI	Units	Q1 FY25	Q2 FY25	Q3 FY25
Bookings	$USD Millions	$33.1	$35.8	$37.6
Backlog (period-end)	$USD Millions	$31.6	$29.9	$27.1
Cash and Cash Equivalents	$USD Millions	$3.990	$4.824	$4.432
Funded Debt (approx.)	$USD Millions	$15.6 (Q1 end)	~$32.28 (LT+ST+revolver)	~$48.9 (incl. revolver, LT, ST)

Estimate comparison (consensus unavailable via S&P Global today)

Metric	Period	Actual	Consensus	Surprise
Revenue	Q3 FY25	$40.422M	Unavailable	N/A
EPS (GAAP Diluted)	Q3 FY25	$0.03	Unavailable	N/A
EPS (Non-GAAP Diluted)	Q3 FY25	$0.06	Unavailable	N/A

Note: Wall Street consensus via S&P Global was unavailable at time of request due to data access limitations. We attempted retrieval but received an API limit error; will update when accessible.

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Organic Revenue Growth	FY 2025	Mid-single-digit % growth	No guidance provided	Withdrawn
Adjusted EBITDA Margin	FY 2025	13–14% (initial Q1) → Lowered to 9–10% (Q2)	No guidance provided	Withdrawn
Adjusted EBITDA Margin	FY 2026	13–14% target	No guidance provided	Withdrawn
Long-term targets	Multi-year	N/A	To be provided on March full-year call	New disclosure timing

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 & Q2)	Current Period (Q3 FY25)	Trend
MTEX integration & profitability	Q1: Acquisition to add $8–10M FY25 revenue; strategic technology; integration proceeding; debt raised to fund deal . Q2: Slow start ($0.8M revenue, $1.4M loss); lowered FY25 EBITDA margin to 9–10% .	Q3: $1.7M revenue and $1.1M operating loss; full realignment under AstroNova; cost reduction and product rationalization; guidance withdrawn .	Deteriorated near-term; timeline extended to mid-2025 .
Aerospace demand & operations	Q1: ~$3M of printers delayed due to supplier shortages; ToughWriter transition to improve margins . Q2: T&M revenue +37% YoY; non-recurring items benefited results .	Q3: +28% YoY; Boeing strike delayed shipments but now resolved; shipments ramping .	Improving; shipments resuming; structural margin lift expected via ToughWriter mix .
Margins & mix	Q1: GM 36.3%; PI mix improved . Q2: Non-GAAP GM 35.6%; MTEX non-GAAP GM 6.8% .	Q3: GM 33.9%; decline due to MTEX, mix, lower European hardware .	Pressured by MTEX and mix; recovery tied to integration progress.
Product launches (PI)	Q1: Next-gen mail-handling equipment order pushed for enhancements . Q2: Began shipping previously delayed order .	Q3: Large inkjet printer order delayed to Q4; now shipping with several million dollars expected over next quarters .	Positive catalyst beginning to flow in Q4.
Royalty and cost structure	Q1: ToughWriter transition to reduce manufacturing costs/royalties . Q2: T&M margin gains .	Q3: Royalty expense projected to decline from >$4M/yr FY25–27 to ~$0.375M in FY28 .	Structural margin tailwind in outer years.
Guidance posture	Q1: Reiterated FY25 organic growth mid-single digits; EBITDA 13–14% . Q2: Lowered FY25 EBITDA to 9–10%; FY26 13–14% .	Q3: Withdrew FY25/FY26 guidance; will provide long-term targets in March .	Increased uncertainty; estimates likely to reset.

Management Commentary

“MTEX had an operating loss of $1.1 million in the third quarter with revenue of $1.7 million… initial sales volume, revenue and margin contributions are well short of our targets” — Greg Woods (CEO) .
“We recently completed a total realignment of MTEX’s organizational reporting structure… now report directly to the AstroNova leadership team” — Greg Woods .
“Total revenue increased nearly 8%… driven by the continued momentum of the Aerospace product line within our T&M segment… nearly two-month Boeing strike… delayed shipments” — Greg Woods .
“Given the extended integration timeline for MTEX, we no longer will be providing guidance for fiscal ’25 and ’26… provide longer-term targets… on our call in March” — Thomas DeByle (CFO) .
“We estimate that our ToughWriter brand will account for approximately 89% of our shipments [by FY27]… projected royalty expenses… drop dramatically… to just $375,000 in fiscal 2028” — Greg Woods .

Q&A Highlights

Legacy vs. MTEX order: The delayed inkjet printer order relates to the legacy PI business, not MTEX; shipments began in fiscal Q4 after enhancements .
MTEX expense detail: Q3 MTEX selling expenses $839k, R&D $209k, G&A $273k; corporate paid $420k acquisition-related costs offset by MTEX credit balance .
Boeing strike effect: Higher-margin Boeing orders were delayed, contributing to margin declines; shipments resuming .
PI margins sequentially: Primarily mix-driven due to the delayed order; inventory ready and ramping .

Estimates Context

We attempted to retrieve Wall Street consensus from S&P Global for Q3 FY25 revenue and EPS but encountered an API limit error; as a result, consensus estimates were unavailable at the time of analysis. We will update comparisons once access is restored. Attempt details: request for “Primary EPS Consensus Mean” and “Revenue Consensus Mean” for Q3 FY2025 returned a daily limit exceeded error.

Key Takeaways for Investors

Near-term margin pressure likely persists until MTEX integration stabilizes; management is undertaking cost reductions and product rationalization to accelerate profitability improvement .
Aerospace remains the core earnings engine; post-strike shipment ramp and ToughWriter mix shift underpin medium-term margin expansion, with sizable royalty relief by FY28 .
Withdrawal of FY25/FY26 guidance increases estimate uncertainty; expect sell-side models to recalibrate lower on margins and higher on integration costs in the near term .
PI revenue has potential upside from the large inkjet order now shipping, contributing “several million dollars” over coming quarters; monitor execution and European hardware trends .
Balance sheet leverage rose with MTEX support (funded debt ~$48.9M; liquidity ~$14.7M); watch working capital, AR terms from aerospace shipments, and revolver usage .
Strategic MTEX technology integration (real-time monitoring software, printhead/ink systems) aims to lower customer TCO and enhance recurring revenue; successful integration would improve PI margins over time .
Longer-term targets will be provided in March; stock narrative hinges on evidence of MTEX operational fixes, PI order conversion, and sustained aerospace margin tailwinds .

AstroNova, Inc. (ALOT)·Q3 2025 Earnings Summary