AstroNova, Inc. Aktie

Greetings. Welcome to AstroNova's First Quarter Fiscal Year 2027 Financial Results Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to Deb Pawlowski, Investor Relations. Thank you. You may begin.

Thank you, and good morning, everyone. We appreciate your interest in AstroNova. With me are Jorik Ittmann, our President and Chief Executive Officer; and Tom DeByle, our Chief Financial Officer. You should have a copy of the earnings release that crossed the wires after market close as well as the slide deck for today's call. If you do not, you can find both on the Investor Relations section of our website.

Please turn to Slide 2 for our cautionary statement. As a reminder, during this call, we may make forward-looking statements about our current plans, beliefs and expectations. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied. These risks and uncertainties are described in today's earnings release and in our SEC filings, which are available on our website and at sec.gov. We do not undertake any obligation to update these forward-looking statements.

We will also refer to certain non-GAAP financial measures. We believe these measures provide investors with additional insight into our core operating performance. However, they should not be considered in isolation or as a substitute for GAAP results. Reconciliations of non-GAAP to GAAP measures are included in the tables accompanying today's release and slide presentation.

With that, please turn to Slide 3, and I'll hand the call over to Jorik to discuss the quarter and our progress. Jorik?

Thank you, Debbie, and good morning, everyone. We had a solid start to fiscal 2027, continuing the momentum from the second half of last year as we drive greater sales, marketing and operating discipline. First quarter revenue grew over 4%, primarily due to the strong Aerospace performance, while margins also expanded nicely resulting in an adjusted EBITDA margin of 10.5%.

Our bookings grew 32.6%, also driven by Aerospace, and our Product ID order rate is averaging up on a trailing 12-month basis. Aerospace was the primary driver of our first quarter results. The predominance of ToughWriter shipments and strong industry tailwinds are delivering growth and profitability. Commercial Aircraft build rates are projected to increase over the next few years, and we have captured a significant share of that opportunity with our ToughWriter printers.

We're also working to improve our aftermarket service processes to increase throughput and capture more of that attractive business. In Product ID, we're making good progress, although revenue was slightly down from the prior year period. Operating income doubled. Higher and sustained sales of certain legacy products helped offset the impact of the ongoing transition to our newer Direct-to-Packaging Printer platform. This, along with improving productivity and better cost control supported margin expansion. The comprehensive settlement agreement announced in May resolved the arbitration and related proceedings tied to the MTEX acquisition and mutually discharge all liabilities arising from related agreements. This removes a source of uncertainty and distraction and allows us to stay focused on execution, customer service and realizing the strategic value of the platform within Product ID.

We continue to make investments in the team to sustain our momentum. We have recently added a global sales director who is reshaping our channels to market. While we have strong channel partners, they are not aligned with the markets we are targeting. As discussed last quarter, the life sciences, chemical and industrial markets value the technical capabilities and quality of our printers and labels. In these markets, we're a critical element to address regulatory requirements, safety and longevity.

We also have added a global operations director, adding much needed talent to take a critical eye at our manufacturing processes and footprint. As you know, the Board is evaluating a range of potential strategic alternatives to maximize shareholder value. That process is ongoing. We will not speculate on potential outcomes, timing or specific alternatives. We do not intend to comment further unless and until the Board approves a specific course of action or disclosure is otherwise required. At the same time, we remain fully focused on running the business. improving performance and executing the strategy that is driving better results across both segments.

With that, please turn to Slide 4, and I will hand the call over to Tom to review the financials in more detail. Tom?

Thank you, Jorik, and good morning, everyone. As shown on the slide, consolidated revenue increased to $39.4 million in the quarter from $37.7 million a year ago and from $37.5 million in the fourth quarter. Tariff mitigation actions contributed approximately $0.7 million to revenue in the quarter and foreign currency translation provided a $0.6 million benefit.

Aerospace was a clear driver, with sales up 16.3% year-over-year to $13.3 million. Commercial Aircraft sales increased 46%, supported by increasing build rates. We also had strength in Regional and Biz Jet Aircraft resulting in hardware revenue increasing $2.5 million or 38% year-over-year. In Product ID, Revenue was down modestly, but underlying trends are encouraging. Desktop Labeling revenue grew sequentially. Aftermarket revenue remained approximately 82% of segment sales and orders were up year-over-year.

The Direct-to-Package business remains in transition from our legacy platform to newer products. And while this transition affected our first quarter revenue, we believe it positions us better over the long term with a strong technology platform and a clear road map for our customers.

Please turn to Slide 5. Gross profit increased to $14.4 million from $12 million in the prior year quarter, and gross margin expanded 490 basis points to 36.6%. On an adjusted basis, gross margin was 36.9%, up 410 basis points year-over-year, reflecting Aerospace volume, better mix and ongoing operational improvements.

Turning to Slide 6. Higher gross profit combined with cost containment initiatives resulted in an operating income increasing $1 million to $1.6 million. While operating expenses included higher legal and professional fees, we still delivered a substantial improvement in profitability. Non-GAAP operating income increased 70% to $2.6 million. Aerospace non-GAAP operating income was $3.4 million or 25.6% of revenue and Product ID non-GAAP operating income more than doubled year-over-year.

Turning to Slide 7. Our progress has translated to an improving bottom line. Net income increased by $0.7 million or $0.08 per diluted share compared with a net loss in the prior year period. This also reflects lower interest expense, which decreased by $0.2 million year-over-year to $0.7 million as a result of lower outstanding debt. Non-GAAP net income was $1.4 million or $0.19 per diluted share. Adjusted EBITDA increased to $4.1 million, and adjusted EBITDA margin improved to 10.5%, reflecting both stronger underlying performance and disciplined cost management.

If you turn to Slide 8, I'll review cash flow, debt reduction and liquidity. We generated $3 million of cash from operations, reduced debt by $1.7 million to $36 million and ended the quarter with $17.4 million in liquidity, including $4.7 million in cash and cash equivalents and $12.7 million of borrowing capacity on our revolver. Stronger cash earnings were partially offset by higher working capital requirements due to the timing of receivable and inventory's needs to support growth.

Capital expenditures were only $36,000 in the quarter, which resulted in a free cash flow of $3 million. Debt was $36 million at the end of the quarter, down from $37.7 million at fiscal year-end and $44.8 million a year ago. Our net debt leverage ratio improved to 2.6x, well inside our covenant threshold. Overall, we are pleased with the continued progress we are making in improving profitability, generating cash and strengthening our balance sheet.

Turning to Slide 9. Total orders in the quarter were $46.3 million, up 33% over the prior year period, producing a book-to-bill ratio of 118%. Total backlog ended the quarter at $32.4 million. Growth in orders was also driven by Aerospace, which had orders of $19.5 million and a book-to-bill ratio of 147%. Aerospace backlog at the end of the quarter was $18.2 million, more than double the prior year level.

Product ID orders increased to $26.8 million. Backlog rose sequentially to $14.2 million, and our go-to-market strategy continues to gain traction in the verticals where our solutions are the most differentiated and the customer relationships tend to be the stickiest. Our orders and backlog trends along with customer feedback, provide good visibility and support confidence in the direction of the business. With that, please turn to Slide 10, and I'll hand the call back to Jorik to conclude our comments. Jorik?

Thank you, Tom. We are encouraged by the start to fiscal 2027 and believe the business is moving in the right direction. In Aerospace, we continue to see favorable demand trends and the benefit of the ToughWriter transition. In Product ID, our focus remains on converting pipeline into revenue growth, improving operational consistency and supporting the migration to our new technology platforms while building on the traction we are seeing in our target verticals.

Looking ahead, our positive outlook is supported by strong Aerospace demand, improving execution in Product ID, growing backlog and the anticipated expiration of a major royalty obligation in the third quarter of fiscal 2027. This will provide approximately $2 million of annualized gross profit benefit beginning in the fourth quarter.

As we move through the year, we remain committed to creating value for shareholders that includes continuing to execute our operating plan, while the Board evaluates strategic alternatives. With improving margins, stronger backlog and a continued debt reduction, AstroNova is better positioned to deliver more consistent and resilient performance.

With that, operator, we're ready to open the line for questions.

[Operator Instructions]

There are no questions at this time. I would like to turn the call back over to management for closing remarks.

Thank you, everyone. I mean we truly appreciate your support going through this journey to all the employees. Thank you for your hard work and dedication. It is truly appreciated. Thank you. .

This will conclude today's conference. You may disconnect at this time, and thank you for your participation.

Greetings. Welcome to AstroNova Fourth Quarter Fiscal Year 2026 Financial Results Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to Deborah Pawlowski, Investor Relations for AstroNova. Thank you. You may begin.

Thank you, and good morning, everyone. We appreciate your interest in AstroNova, and thank you for taking the time to join us today. With me on the call are Jorik Ittmann, our President and Chief Executive Officer; and Tom DeByle, our Chief Financial Officer.

You should have a copy of the earnings release that crossed the wires after market closed yesterday as well as the slide deck that will accompany our conversation today. If you do not, you can find both documents on the Investor Relations section of our website at astronovainc.com.

Please turn to Slide 2 for our cautionary statements. As a reminder, during this call, we may make some forward-looking statements about our current plans, beliefs and expectations. These statements relate to future events and results and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied today. These risks and uncertainties are described in today's earnings release and in our filings with the Securities and Exchange Commission, which are available on our website and at sec.gov. We do not undertake any obligation to update these forward-looking statements.

We also will be referring to certain non-GAAP financial measures. We believe these measures provide investors with additional insight into our core operating performance. However, they should not be considered in isolation or as a substitute for GAAP results. Reconciliations of non-GAAP to GAAP measures are included in the tables that accompany both today's release and the slide presentation.

With that, please turn to Slide 3, and I'll hand the call over to Jorik to discuss the quarter and our progress. Jorik?

Thank you, Debbie, and good morning, everyone. We appreciate you joining us today. As we said on my first conference call reporting the second quarter of fiscal 2026, we expected the second half to perform better than the first half of the year. The second half of fiscal 2026 was a reset period for AstroNova, and our results reflect the early benefits of the changes we have made across the business. We entered the year with a focus on stabilizing the company, improving cash generation, reducing debt and raising accountability across both segments, and we delivered against those priorities.

Operationally, the Product Identification turnaround is gaining momentum. In the Product ID, we're executing against a clear go-to-market and operational strategy. By applying more robust analytics to understand our value proposition and where we have the best opportunity to win, we have a clearer view of where we are the stickiest with our customers. Our products and full-service capability are appreciated in these applications. We have focused our sales resources to better address these markets, which has entailed changes in talent and structure.

Operationally, we are addressing productivity and efficiencies to strengthen our competitive position while also to support a stronger margin profile. Our Aerospace business continues to perform well. We are benefiting from a favorable product mix and a strong demand for our ToughWriter solutions. We had a very strong order quarter and have several tailwinds that should continue to benefit the business. Importantly, we exited the year with a solid backlog in both segments, providing a good visibility heading into fiscal 2027.

As you know, we announced that the Board is evaluating a range of potential strategic alternatives, which may include, among other things, a sale of all or part of the company, a strategic investment, a merger or other business combination, other strategic or financial options or continuing to execute on our organic strategic plan. We are early in the process, and as you would expect, we cannot speculate on the outcome.

If you turn to Slide 4, I will walk you through our sales results. As shown on the slide, our performance picked up in the second half of the year, and we believe that momentum is carrying into the fiscal 2027. Product ID second half sales were up 4.2% over the first half of the year as our customer-centric sales approach gained traction. Notably, Product ID orders were $27.5 million, up $2.9 million year-over-year, resulting in a book-to-bill ratio of 104% and backlog increased by $1.1 million sequentially as our new go-to-market strategy continued to gain traction.

Our new sales and marketing strategy is focused on applications where we tend to win and where customer relationships are the stickiest. This is often where our print solutions are part of a customer product in a highly regulated markets. Over the past several quarters, we have sharpened our focus on 3 key verticals of life science, industrial, chemical markets. In these verticals, our label and packaging solutions are directly embedded in customer products and workflows, making reliability, durability and regulatory compliance critical for our customer outcomes. In these applications, labels can change frequently to address regulatory updates must be durable to withstand heavy handling in harsh environments and both the label and the ink must meet regulatory standards.

Turning to Aerospace. Second half sales also improved over the first half. Orders in Aerospace were $13.6 million, resulting in a book-to-bill ratio of 122% and year-end backlog was $12 million, reflecting sustained demand from OEMs as aircraft build rates continue to recover. A key driver in Aerospace is the ongoing transition to our ToughWriter product family. ToughWriter now represents more than 80% of total flight deck printers shipments, positioning us well as aircraft utilization and build rates increase.

Looking ahead, a major royalty obligation will expire in the third quarter of fiscal 2027, representing approximately a $2 million annualized benefit to gross profit that will be fully realized beginning in the fourth quarter. We're also making operational improvements in the business, driving greater efficiency and productivity in our service and repair operation.

With that, I will turn it over to Tom to walk us through the financial details. Tom?

Thank you, Jorik, and good morning, everyone. Fourth quarter revenue was $37.5 million, up $0.2 million compared with the prior year period as growth in our Product ID slightly more than offset our lower Aerospace revenue. Tariff mitigation actions contributed approximately $0.6 million to revenue in the quarter, and the foreign currency translation provided a $0.8 million benefit. For the full year, revenue was $150.5 million compared with $151.3 million last year. As Jorik noted, second half revenue grew nearly 4% over the first half, and the demand we are building from our sales efforts supports our expectation for mid-single-digit growth in our fiscal 2027.

Please turn to Slide 5. Gross profit for the fourth quarter was $11.3 million and gross margin was 30.2%, reflecting a contraction of 250 to 260 basis points year-over-year, primarily to lower volume and mix. On a non-GAAP basis, gross profit was $11.9 million and non-GAAP gross margin was 31.7%. It is also worth noting that the second half gross profit increased 8% and margin expanded 130 basis points. Given our size, quarter-to-quarter comparisons can sometimes mask the changes occurring in the business, and we believe the trailing periods since our second half reset provide a better view of the progress we are making with our strategy.

Turning to Slide 6. Last year's fourth quarter was impacted by a $13.4 million goodwill impairment charge, which makes the year-over-year comparison less meaningful. Here, too, the first half and second half comparison is more realistic. Under new leadership, we had $1.3 million in operating profit in the second half of fiscal '26 compared with the loss in the first half. On a non-GAAP basis, operating profit grew by more than 90% and operating margin expanded 220 basis points.

Turning to Slide 7. You can see our adjusted EBITDA performance. Starting with GAAP results. Net loss for the quarter was $1.1 million or $0.15 per diluted share versus a net loss of $15.6 million or $2.07 per share in the prior year quarter, which again included the goodwill impairment charge. Non-GAAP net loss was $0.3 million or $0.04 per share. Adjusted EBITDA in the fourth quarter grew 18% to $3.3 million, while adjusted EBITDA margin expanded 130 basis points to 8.8%. For the full fiscal year 2026, adjusted EBITDA was $12.7 million, up $0.4 million, and adjusted EBITDA margin improved 20 basis points to 8.4%. Comparing the second half with the first half, adjusted EBITDA grew 44% and margin expanded 270 basis points, again, demonstrating the progress resulting from the actions we have taken across the organization.

If you turn to Slide 8, I'll review our improved cash generation, debt reduction and liquidity. Cash provided by operating activities in the fourth quarter was $3.7 million compared with $2.5 million in the prior year period, reflecting stronger cash earnings and lower working capital needs, particularly inventory. For the full year, cash from operations was $11.7 million, a meaningful improvement over fiscal 2025. Capital expenditures were tightly controlled at $0.3 million for the year compared with $1.2 million in the prior year. This also highlights capital-light nature of our business. We use the stronger cash generation to further deleverage the balance sheet.

During the fourth quarter, we reduced debt by $2.7 million, bringing total debt to $37.6 million as of January 31, 2026, down from the $46.7 million at the end of fiscal 2025. We ended the year with $4.1 million of cash and cash equivalents and total liquidity of $15.9 million, including $11.8 million of borrowing capacity on our revolver. Our net debt leverage ratio was 2.97 at year-end, well inside our 4.5 covenant, and our fixed charge coverage ratio was 1.43 versus the 1.05 requirement. Overall, we are pleased with the progress we have made in strengthening the balance sheet and enhancing our financial flexibility.

Turning to Slide 9. I'll briefly review orders and backlog. As most of you know, our orders can vary from period to period, especially in Aerospace because of the size and timing of customer projects. So quarter-to-quarter order patterns do not necessarily reflect underlying demand. Total orders in the quarter of $41.1 million were up 6.5% over the prior year period, driven by over 12% growth in the Product ID orders. Demand for our label printing products has improved with renewed energy and focus of our sales and marketing organization. Aerospace demand, which is subject to customer project timing reflects improved aircraft build by the major OEMs.

At year-end, backlog of $25.5 million was down from $28.3 million in the prior year. During the second half, we reduced our backlog in our Mail & Sheet/Flatpack Printers that was long past overdue by improving productivity in the operation. As Jorik mentioned, we have added leadership talent in both the segment for both operations and sales that we expect to help further drive demand and production output while streamlining costs. Aerospace backlog was up 17.6%, driven by increasing demand from our OEMs and the timing of deliveries.

With that, please turn to Slide 10, and I'll hand the call back to Jorik to discuss our outlook.

Thanks, Tom. Let me reiterate that fiscal 2026 was a foundational reset year for AstroNova, particularly in the second half of the year. Across the organization, we have been driving culture change around customer centricity and transparency, disciplined, data-driven decision-making at the time we are simplifying operation, containing costs and refining our organizational structure to support continued improvement in execution. We have spent the last 6 months positioning AstroNova for improved and more sustainable performance.

Looking ahead, for fiscal 2027, we expect mid-single-digit revenue growth and expansion in adjusted EBITDA margin. In Aerospace, we anticipated measured top line growth supported by rising aircraft utilization and favorable shift in product mix and the expiration of a major royalty obligation in the third quarter of fiscal 2027, which will provide an approximate $2 million annualized contribution to gross profit beginning in the fourth quarter.

In Product ID, our focus is on converting our growing commercial pipeline into consistent revenue growth while continuing to improve operational performance and profitability. As we navigate this next phase, we remain committed to create value for our shareholders. This includes evaluating all strategic alternatives that can enhance that value, as I discussed earlier. With a more disciplined operating model, a stronger balance sheet and attractive opportunities across both segments, we believe AstroNova is on a path to deliver stronger and more resilient performance over time.

With that, operator, we're ready to open the line for questions.

[Operator Instructions] There are no questions at this time. I would like to turn the conference back over to management for closing remarks.

Thank you. This will conclude today's conference. You may disconnect at this time, and thank you for your participation.

Greetings. Welcome to AstroNova's Third Quarter Fiscal Year 2026 Financial Results. [Operator Instructions] 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 Jorik Ittmann, 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 day. 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&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 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 3, I'll turn the call over to Jorik to begin. Jorik?

Thank you, Debbie. 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 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 Mail & Sheet Flatpack Printer business or Astro Machine performed well, with sales up 14% as productivity improvements enabled increased shipment levels. We also had higher shipments sequentially of direct-to-package overprint printers, including the redesigned AJ-800. Sales increase has updated systems, reach customers and 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 have previously lost and developing a clear understanding of the sales cycles for our newer fair value printer platforms.

We also continue to advance and validate our next-generation print solutions. With upgraded MTEX units now in customer environments, we are gaining insight, we need to refine the product and ensure our offerings 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 ToughWriter product family. Customer adoption remains strong, and shipments of the ToughWriter exceeded 80% of total flight deck printer 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 tailwinds 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, and gross margin expanded 240 basis points on lower revenue. Sequentially, gross margin expanded 100 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 the atypical shipment of print heads 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 helped 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 ToughWriter 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 $0.5 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 $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 maturity out to 2028 and beyond, consolidating our foreign debt into the U.S. and providing temporary expansion of our revolver. The refinance lowered our principal payments and converted term euro debt to U.S. 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 allow 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 remain 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 Jorik.

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 shorting 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 the OEMs improving build rates. While quarterly order patterns can vary, the underlying production environment remains constructive, and the ongoing transition to our ToughWriter 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 mail and sheet flatpack printers and the timing associated with blanket orders.

If you will turn to Slide 11, I will summarize that we're currently underway with AstroNova on track to deliver stronger profitability and improved sales. Many of the initiatives we introduced last quarter are now well in motion, and we are beginning to see 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 significant difference in the type of sales 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 costs, improving processes, simplifying our operation. The $3 million in annualized cost reductions, we have discussed previously, are now fully implemented, and we saw a full impact of the savings in the third quarter. We're investing in growth as well. We had -- 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 user -- the use of resources, improve forecast and quality and maintain pipeline integrity.

Our ongoing transition to autonomous ink-printed platform will enable greater supply chain flexibility. In an 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 million 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 a greater sense of urgency. While there is still work ahead, we are confident of our ability to improve performance and deliver a stronger, more resilient AstroNova.

Operator, let's open the line for questions.

[Operator Instructions] We did have no question 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.

Greetings, and welcome to AstroNova's Second Quarter Fiscal Year 2026 Financial Results. [Operator Instructions]. As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Debbie Pawlowski. Thank you. You may begin.

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, Jorik Ittmann, 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 2 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 and uncertainties and other factors are provided in the earnings release as well as in other documents filed by the company with Securities and 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 slides.

We will turn to Slide 3 and I will turn the call over to Jorik. Jorik?

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. But I know we have a lot of work to do to get our growth and profitability on track.

On Slide 3, you see my priorities for AstroNova. Starting first with our Product ID 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. I believe it's because of how we went to market and how our sales organization was compensated. I have reorganized sales into 2 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're 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 our capital projects for our customers. This is a very different sales process from how we have solved 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 are currently addressing.

First, we have to validate with customers that the upgrades we have made to the MTEX product line meets 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 our 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 Mail & 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 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 we remain 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 revenues for aftermarket sales and service and roughly 10% of hardware sales are dependent upon spare replacement machines. However, for new build aircraft, we like 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 a 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, strengthening 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.

Thank you, Jorik, and good morning, everyone. On Slide 4, you can see the second quarter revenue of $36.1 million declined 10.9% year-over-year and sequentially 4.2%. 70% of the quarter's revenue was reoccurring. By segment, Product ID and Aerospace decreased 8.9% and 15.1%, respectively. Lower sale Product Identification in the quarter were primarily driven by $2.6 million decline in recurring supplies, parts and service from customer attrition. This was partially offset by higher demand for the Mail & Sheet flat pack products. In July, we began shipping our professional label printers, the QL-425 and 435 models. And in August, we shipped the AJ-800, 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 a $1.3 million in unusually large spare printer shipments to both the airline and the defense customer as well as nonrecurring 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 5. 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 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 improve on similar volume since we began shipping the ToughWriter to a major OEM in June, higher volume and improved mix in the Product ID should drive margins as well.

Look at Slide 6. Product ID 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 6 months of fiscal '26, 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 7. 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 8. 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 9. Cash provided from operations in the first half of fiscal '26 was $4.6 million and down from the prior year based on everything we have covered here. As Jorik 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 almost $0.1 million in the first 6 months of the year. We have been constraining our capital investments and expect CapEx for the fiscal year to be less than $0.5 million. We paid down $5.1 million in debt through the first half of fiscal '26 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 3.5x. 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 ID 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 Jorik.

Thanks, Tom. We had orders of $30.9 million in the second quarter of fiscal 2026, which were relatively unchanged from the prior year period but up $1 million sequentially as the sold 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 represent 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, and 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 reengage 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 a new higher-value printers.

We also are addressing production challenges in the Mail & 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 $3 million in annualized cost reductions in the second half of the fiscal year with a much better understanding of the potential of our new printers over the next few months.

And 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 for AstroNova.

Operator, let's open the line for questions.

[Operator Instructions].

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.

[Audio Gap] There will obviously be subjective matters of opinion. You can find important disclosures and factual information in our definitive proxy statement available on our website and also at sec.gov. Please also note that this discussion is being recorded and a replay will subsequently be made available.

With that, the goal of this town hall is for you to have the opportunity to interact with our slate of nominees in a pretty informal and conversational way. We recently published a presentation titled Building a Better AstroNova, which is available on our website and at sec.gov. But please review that on your own time. We're not going to go through it here.

So the format today, we're going to start with about a 20-minute panel discussion and then open it up for your questions. So at the end of our panel discussion, I'll provide Q&A instructions.

Before I turn it over to the rest of the nominees for a much better looking, and more interesting than I am, I'd like to start for just a few minutes by sharing a little bit about who I am, kind of what my personal motivations are, right? The kind of background that generally doesn't make it into an SEC filing.

I want you to know why I'm doing this, and I want you to see me as a real person rather than just some anonymous person behind the keyboard. So in the company's filings, they like to call me inexperienced and unqualified, and I guess that's because I'm 31 years old. I built a business managing over $80 million of capital that our clients have entrusted us with. And I attribute that success at my young age, mostly to my parents, actually, who sacrificed a lot to get me to where I am today.

My parents home schooled me, which means that I was able to start community college when I was 13 years old. At 17, I went to the University of Texas at Dallas on a National Merit scholarship where I got a bachelors in biochemistry and then and MDA. While going to school, I also work full time, first as an editor for Seeking Alpha and then later has an analyst for a fund in Dallas. I launched Askeladden shortly thereafter.

Since my mother home schooled me, we were a single income household, most of the time. My dad was an engineer and a quality manager, and he faced a number of layoffs when I was a kid. So he often ended up working two jobs or double shifts to make ends meet. So I understood the value of money really well from a young age and what it meant to not have enough. And clearly, that planted the seeds for my career today.

And with that, I think it's easy to think about stock prices as some of them over concept, right? They go up, they go down, they bounce around, what does it matter? Well, our clients had asked a lot, they range from individual savings for retirement to large charitable organizations that fund medical research and college scholarships and things like that.

So actually some consequences. And the fact that AstroNova hasn't delivered on its promises means that real people have real problems. I'll give you a couple of examples, right?

So one of my clients has a son with severe autism. His wife is an attorney and it's her passion and her dream to strike out on her own and start a law firm that addresses the unique challenges faced by parents of special needs kids. Because of AstroNova's underperformance, she has less start-up capital. The same goes for my client that fund scholarships. The same kind that paid for a middle class kid like me to go to college and be able to start my life without student debt. And I'm not okay with that.

I really care about my clients. And so as AstroNova has continued to report poor results over the past few years and the stock price has languished, we've repeatedly tried to engage with Mr. Woods and the company to address our concerns. Before we went public with this proxy contest, we repeatedly encouraged Mr. Woods and the rest of the Board of Directors to work with us behind the scenes to restore shareholder value. They didn't even respond to our e-mails.

I think it's really sad that AstroNova's Board has decided to spend all this time and money and allowed us to become a distraction instead of simply showing some accountability. They could have apologized for the mistakes they've made. They could have worked collaboratively with us to fix them, but they chose not to.

AstroNova's CEO and Board approved the MTEX acquisition a year ago, and it's been an unmitigated disaster. MTEX has lost millions of dollars and AstroNova had to ask the bank for an extension to pay back its debt. Profits last year were down significantly. In response, AstroNova initiated a restructuring wherein they laid off 10% of their workforce.

So what that means is frontline employees, people like my dad, who did nothing wrong. They lost their job because of the CEO and the Board's mistake. Yes, the CEO and everyone on the board still has their job. They're still getting paid a lot of money. I don't think that's right. It's part of why I'm committed to not accepting any cash or stock compensation if I'm elected as a Director of AstroNova.

So my mission is to build a better AstroNova for everyone involved, but I certainly can't do that alone. In fact, my colleagues who are here with me today have far more to offer for AstroNova than I do. So I'm very, very excited to get the chance to introduce you all to all of them.

So with that, I'm going to start with Mr. Shawn Kravetz. Shawn runs a microcap fund called Esplanade Capital. And as I've gotten to know him over the past few months, he's a truly delightful person to talk to. So Sean, I know we've talked several times about your experience at Nevada Gold and its situation when you join, kind of bears a lot of similarities to AstroNova. It was an underperforming company, had kind of lost its way, had an acquisition that had gone wrong.

Why don't we share a little bit about your experiences there and how you think they relate to where AstroNova finds itself today?

Sure. Thanks so much, Samir. And thanks to everyone for joining us this morning.

Once upon a time, actually in 2016, Nevada Gold & Casinos was a nice little casino operator; solidly profitable, a good balance sheet, traded at about 5x EBITDA with a nearly 20% free cash flow yield. Microcap investors would view that as a diamond in the rough. And I assure you it wasn't Wynn Resorts or MGM.

At the time, the incumbent Board had decided that building cash and/or buying back stock was just not exciting enough for them. And in what I view as a desperate attempt to grow and in their minds, try to gain more relevance, they made an acquisition, borrowing money and buying a company with zero synergy at roughly 7x EBITDA. Just for comparison's sake, the scale of that acquisition was roughly similar to MTEX versus AstroNova.

Of course, the new company, the new acquisition underperformed almost immediately with profit and cash flow collapsing. I joined that board with a trusted colleague of mine, and we helped them focus on analyzing and turning around the acquired business, optimizing the existing business, while putting a moratorium on new acquisitions and actually starting to assess and implement the best paths to maximizing long-term risk-adjusted shareholder value. We ultimately engaged a banker, pursued strategic alternatives and the company was sold to a strategic buyer roughly 3 years after I joined at a very attractive premium for all shareholders.

That's great. And one of the things you've mentioned to me recently, as we've been speaking, is that the more you've learned about AstroNova as we've gone through this process, all these interviews we've done with the industry experts, things like that, the more you become excited about its potential, right? And I think one of the things you and I share, Shawn, as generalists is since we look at so many different industries, we're often able to bring in that outside perspective.

For example, from my point of view, given product IDs, 80% recurring revenue, and the potential for decades long customer relationships, I think there's obvious lessons to learn from these best-in-class software companies that drive over 100% net retention at CAC/LTV type business model.

So could you share what it is that you find about AstroNova? What do you think -- why you think this is such an intriguing opportunity and why you're ready to roll up your sleeves here?

Gladly. To be clear, unlike Samir in Askeladden who are the largest shareholder, we do not own any stock at this time. That actually affords me a certain clarity, the dispassionate chance to assess the company. And while this is by no means a stock recommendation, this is the very type of investment we have sought in our 25 years at Esplanade Capital, but with one caveat, and it's a big one. The company needs the right governance and it's sorely lacking in it. Without that, I and Esplanade would probably have run the other way.

The task ahead is hard work. It's eminently doable, but with the right people, structures, commitments and incentives, it's doable. I suspect when I look at AstroNova, I suspect that many of the right people are already at AstroNova. That's exciting to me. They are working hard, and they're probably really frustrated just like you, its shareholders.

With that said, some of the likely solution includes the people on this town hall meeting. When I look at AstroNova, the aerospace business is a gem. The PI business is not, but it could be and it should be. Despite so many strategic financial and operational missteps in the past decade plus, AstroNova remains a very promising opportunity with the right governance.

So I'm excited about the promise but we need to get the businesses right with rigorous analysis, sound decision-making, strong implementation. We need to get the strategy and capital allocation right.

I continue to believe there is great value waiting to be unleashed there. I hope it gets unleashed before it's too late, and I sincerely hope I can play some role in helping to unleash it.

That's wonderful. Next, I'll turn to Jeff. Jeff Sands is the founding partner of Dorset Partners, and he is a professional turnaround artists. He literally wrote the book on turnarounds.

Jeff, you've won the turnaround of the year award, I think, 3 times. You owned businesses that are days or weeks away from failure and you get them back on track. Jeff, roughly how many businesses have you helped turn around?

Probably 25 or 30 hands-on leadership and I would say another double that in an advisory role without hands-on leadership.

And you've dealt with a number in aerospace as an example, correct?

Yes, at least a half dozen, including the former Boeing Canada, which I helped -- actually worked on a couple of different times and then did a massive renegotiation with Boeing in 2020 during the downturn.

Yes. So with that background, what jumps out at you when you look at AstroNova? And how did that shape the plan that you and I and the rest of the nominees have formed for addressing the challenges during the first 60 days?

The first two things that jumped out are two sides of the same coin. We're in trouble with the bank, which is an existential threat to the business and our cash has been depleted. And that's really what needs to be addressed first is getting stability underneath our feet. It's not rocket science. It just takes discipline.

And large in a situation like this, the answers are there. We know what to do. We just -- largely, we just have to do them. So if you look at cash reserves, about $20 million was spent on the MTEX acquisition, which you've already said has not panned out well at all. And that's really what put us into a tail spend. All our cash went away and then the earnings declined as well.

When we look at the company, it's got $51 million in inventory, essentially sitting idle. You got $51 million in cash tied up, $10 million of that should be pulled out of inventory and put into growth opportunities. Sales, marketing, engineering, R&D, quality systems. Things that will strengthen the company, protect the jobs and deliver returns to shareholders.

The cash -- despite the fact that all the cash [indiscernible] (13:56) to MTEX, there's still enough working capital within the business to run -- not just to run well and address its problems, but also to gain strength and get the bank away from her door, and give us breathing room to work on longer-term solutions.

I'll just continue real quickly. MTEX clearly needs to be sorted out, and we need solid ground under our feet. I know what it's like to make a mistake and then try to like half deal with it, have kind of covered up as it's falling apart in my hands. And it's just horrible, and it doesn't work and you always regret it afterwards. I think there needs to be a really objective third-party arms nonemotional look at MTEX. It is what it is. We just have to understand what it is, deal with it and make the best of it.

But the mindset that got us into the MTEX mess is not the mindset that's going to get us out of it. And that's often my role is just an outside perspective that can call spade spades and set a plan and get moving.

Absolutely. And I think one of the things you and I have discussed a lot too is, obviously, this company needs some disruption, right? You just said it, you can't just keep doing things the same way you've been doing and expect different results.

On the other hand, it's a relatively small company. Any company only has so much organizational capacity for change. To use an aerospace analogy, we don't have time for a shop visit. We got to change the engines on the plane while it's still flying, right? So how do we do that without the plane falling out of the sky? How do we minimize the disruption as we get in here and try and institute a new culture and new change?

Critically, the company is underperforming and objectively, it's worst in class. But also objectively, the company is still doing a lot of things write and has a lot of positive attributes.

The bank issue creates a sense of urgency, but it's not an emergency. It's not all hands on deck. We're still producing positive cash flow. We've still got lots of good attributes. And what normally happens is, what almost always happens is, the employees know what's working and not. I don't have to bring in secret magical formulas that no one's ever thought of. The employees know what works and what doesn't. They know what they want to do and the changes they want to make but either haven't been allowed to, or haven't felt they had the voice to do that.

So largely, it's going to them and saying, hey, you guys know what's working here? What do we need to do more of, what do we need to do less of? What's the one dumbest thing we're doing that we need to stop? What's the one thing that frustrates you the most that you want to do? Explain it to me if that makes sense, lets get after it and start implementing the sensible things that we all know.

Business is never that magic or mysterious. It's just doing the right things over and over and building on results and those early wins, freeing up cash and reinvesting in sales, engineering, et cetera. Then that buys us time, it gives us breathing room to do the longer-term solutions, figuring out our technology platform, and the more strategic decisions.

But they build on each other. Folks are going to have to work harder. But when you're working harder with a good plan and notching wins on the scoreboard, it's so much more enjoyable than the drudgery of getting pushed back not being frustrated that you can't do the right things and the sense of failure or just the lack of winning is a drudgery in itself. And if your objective will be working harder, but putting wins on the board, it just -- it feels a whole lot better than the alternative.

Well, I can't wait to get started. Boyd, your turn, Boyd is the VP of Corporate Development at Franklin Covey. You spent a lot of time in your career evaluating acquisitions, doing due diligence, integrating them.

I think one of the things you say you're most proud of is passing up the okay, or good acquisitions for the great ones, right?

Absolutely right, Samir.

Well, I doubt MTEX would have gotten pass to you had you been on the board last year. But we can't change the past, right? And I think we pointed out a lot of the problems, but at this stage, we need to shift and start thinking about the more hopeful future, right?

So MTEX is still losing us $1 million a quarter. Clearly, one of the critical things to address as Jeff and Shawn both referenced. You've successfully integrated businesses and driven P&L growth. You're also uniquely fluent in Portuguese, which means you can literally speak MTEX's employees' language. So what are we going to do to fix MTEX?

Yes. Thank you for the question, Samir, and thank you all for joining the town hall today.

I'm genuinely excited about the opportunity in front of AstroNova and confident in our ability to effect meaningful change if elected. I also want to say how impressed I am with the exceptional qualifications and perspectives of each of my fellow nominees.

Now on to your specific question. You're absolutely right. Had I been on the board last year, the MTEX acquisition likely would have looked very different, if not avoided altogether. But we can't change the past. What we can do is focus constructively on how we move forward and potentially unlock the value of the MTEX acquisition.

I'll offer a quick -- three quick thoughts. First, go on a listening campaign. This is where I bring a unique strength that you mentioned. I speak Portuguese, and I've led M&A integrations in the past. We need to keep an open mind and we really need to listen.

The first step in fixing MTEX is to engage directly with both the team in Portugal and the team at headquarters. I'd like to personally be involved with the Portugal team to understand their reality and have real conversations in their own language, and begin building trust. Building that trust and alignment starts with deep listening and mutual understanding.

Number two, assess key strengths and weaknesses. We must do a cold clear-eyed assessment of MTEX's strengths and weaknesses strategically, operationally and financially. And number three, decide if it is a fit and leverage its strengths. The most important part of determining whether MTEX is a business model fit or -- and a cultural fit. Not everything broken can or should be fixed. However, if MTEX is a fit, then we lean in strategically. MTEX could give us better pricing power and supplier flexibility. MTEX may give us access to new customer segments or geographies, especially in Europe, we could build around the strengths.

In summary, fixing MTEX is not about hope or hype. It's about disciplined decision-making. We listen first, assess with rigor and make decisions that will maximize value. I personally am excited to roll out my sleeves and get involved.

That's great. Ryan, last but not least, you were the co-CEO and the CFO of Profire Energy until its successful sale to CECO in January. One of the things I know that made you attractive to CECO was Profire's track record of driving organic growth in a niche industrial business, right, despite the fact that you operated in challenging end markets. And unlike AstroNova, you didn't have the benefit of all this recurring revenue.

I know that you accomplished this through kind of both deep customer relationships, as well as building channel partnerships that helped you diversify into new vertical markets. Can you talk about Profire's successful go-to-market strategy and how you see applicable parallels to AstroNova?

Yes, certainly. Thank you, Samir, and thanks to everyone joining today. This is a great opportunity to talk to everybody.

At Profire, we focused heavily for many years on really understanding what our end customer markets are, we do a niche combustion technology. A lot of that is sold into that oil field, a lot of it into other industries that we're expanding into. But we sell to the end user, the operators. We sell to the OEMs who build the equipment that our technology goes on. We sell to integrators who are hired by the operator, or the OEM, to help integrate and upgrade. We sell to service companies who are out there doing service work and so forth.

So for us, it's really about knowing each of our customer profiles, what type of individuals are making the buying decisions? Where they get their information? How they're sourced? What authorities they have? So we've spent a lot of time understanding that information, developing marketing content and then going out into each of those areas, whether it's our website, we put a lot of time and content into the website to make sure that it's driving leads, that as customers are searching Google, or whatever, that they're giving -- driven to our site. That generates a ton of leads for us.

Specific marketing campaigns targeted at each one of those categories, those groups. So for us, it's really about understanding that customer profile and finding ways to reach those customers. We do trade shows every so often, and it's important to have some presence at a trade show but that only gets you so far. That only gets some visibility to the product, but it's really understanding social media, where are these people going and looking to find information? What terms are they using to search for and making sure that we have content that's going to be relevant and get those hits. That's been hugely beneficial for us.

2023 was a record year for Profire. 2024 was then followed up with our best year in company history. And now even under the CECO umbrella, we're still on track to having at least meeting our best last year, and a lot of that comes down to not only just high-quality product that we produce and really care about, but knowing our customers and being able to support our customers through service, tech support and so forth. And it's knowing that customer really makes a difference.

Right. That makes sense. And a follow up, Ryan. One of the things that you and I often discussed over many years was the struggle of being a public Microcap right, from liquidity challenges to difficulty attracting institutional investors to the ever-increasing costs of regulatory compliance, all that.

I think you were approached by CECO last summer, if I remember correctly, and you worked through them with multiple rounds of negotiation over several months to achieve a 60% all cash premium for Profire shareholders. And I know that Profire had a great, very employee-focused culture as well, really a team mentality.

So maybe talk about experience and why as a public company Board member and CEO, you thought that selling to a strategic buyer was the right move for all stakeholders instead of continuing a stand-alone strategy?

Yes. Great question. At Profire, we've, for years, taken a very strategic approach to all of our options, our alternatives. Organic growth diversification into other industries, M&A acquisitions of our own, as well as potential acquisitions from an interested acquirer.

We tried to always have all of those opportunities open and in active discussion with the board, with the executive team as to really how are we maximizing value for our shareholders. So the CECO opportunity for us was unsolicited. We weren't out there seeking. We didn't put the business up for sale even though, like I mentioned, that was always a possibility in trying to deal with all the challenges of a microcap company. And the lack of recognition in the share price for even the -- as I mentioned, the great performance that we were achieving, we never felt that it was fully recognized.

So again, just those discussions amongst the leadership team and the Board on what are our strategic alternatives. So we were actually getting fairly along the path of doing one or two acquisitions ourselves, dealing with some of the challenges in acquiring a private business, and their lack of reporting or lack of information. Those were some of the challenges we faced when CECO came to us.

So at that point, we again had the discussions with the Board, we made sure we had the right legal advisers, the right banking advisers and through that process went through that strategic alternatives review. The price that was initially offered to us from CECO wasn't any good. We felt we could pursue our own path and do our own M&A and get much greater value than that. So we turned them down. Of course, that got them to respond and come back with another offer. Unfortunately, for them, we said, sorry, that's still not going to cut it.

And so there are multiple rounds of this process. And throughout that, we even went back to them and said, look, this is what we believe our company is worth. This is where we think we can continue to go our own route and do great things. And through those iterations, we were able to get them up to a point where the Board did finally feel that it was of significant value to the shareholder that we could bring that value today versus the value that -- or the time that it would take us to achieve that going on our own and continuing as a public company.

So ultimately, we did get to that position where we felt we drove solid good value for our shareholder. And it was also about strategic alignment with CECO. Was CECO a company that we wanted to align with? Did they have the right culture for us, the right fit? Were they going in the right direction that we felt was going to be best for our employees? So all of those other factors came into play, not just where we're getting the full value for the shareholder.

Absolutely. Well, I think you all had so many interesting things to say that we've run a little bit over way intended for the panel here, and we really want to get to Q&A.

One more quick one, if you can just give a 20-second answer first for Ryan and Boyd. Both of you joined our campaign because you've known me in my investment process for the better part of a decade as leaders at your public company, right? So what's your experience been in working with us? Do you think we're constructive and [indiscernible] (45:31)to shareholders?

Yes. I'll jump in quickly. I would fully agree. I've had a great relationship working with you, Samir, over, I don't even remember 8 years now or however long it was. And it was -- you were always there. You were always interested in our business. You put in the effort to understand our complex business and always had great feedback, thoughtful questions and you held us accountable.

There were times where I know you were frustrated with Profire and even frustrated with the microcap world that we lived in, but we had constructive conversations. We were interested in your feedback. You had good ideas. And we worked to implement those where we could. Where there were also times where we agreed to disagree, but that created a relationship of trust to where I would certainly be excited to continue that relationship with you and in this type of an opportunity going forward.

I'll hold on to what Ryan said, I've known Samir for close to 10 years. And in that time, I've always found him to be thoughtful, engaged, focused on the long term. He really takes the time to understand the business and he keeps the conversation centered on what actually drives value. But what stands out to me is how Samir shows up.

Even when raising hard questions, it's done in a respectful and in a constructive way. It's never been about making noise or creating pressure. It's about trying to make things better and he brings that kind of mindset you want from the shareholder. Samir is the type of long-term shareholders that we actually seek out.

Thanks, Boyd. So now for Q&A. AstroNova's quarterly conference calls have been pretty dead. There's been no Q&A for the past 2 calls. We want this to go very differently. Everyone is invited to ask questions, share their thoughts and comments. I'd like to say we don't have a monopoly on good ideas. So if you think we're wrong or there's something we're missing, please tell us. We genuinely love to hear and engage with your perspective.

We're going to prioritize live Q&A, but we do also have a number of pre-submitted questions from interested parties who had schedule conflicts. So we'll try to sprinkle those in as well if we have time.

From a logistics perspective, attendees are muted, so they should ask questions by using the raise hand button and the moderator will enable their microphone. You can also ask questions in the written Q&A box, which we can try and cover and you can also use that webinar chat box to chat with the presenters as needed.

And finally, just as a note here, our attendees today range from existing shareholders to potential shareholders. Also include current and former employees of AstroNova, people from the industry and at least one member of the media as far as we're aware. So we certainly welcome and encourage everyone to express their thoughts and opinions. But let's just try to be polite and mutually respectful of people coming from different perspectives.

So with that, I think we have some hands raised over here. We have at least one hand raised. Mike, do you want to take that one? Or do I do it?

I'm trying to unmute that individual. Give me a second, let me find it. Hold on for a second, please. There we go. Here we go. So he should unmute if that's already muted.

This is Brandon Daniel from Atai Capital. Thanks for hosting this and put together. I think my questions at a high level have already been answered in your intro on our disclosures.

But I'll just start with, has the company reached out to you at all since starting this? Have you reached out to them to try to reach an amicable agreement? Any comments there?

Yes. I mean we certainly remain open to resolving this in a constructive and amicable way, but we don't have any indications from the company at this time that they're interested in engaging with us or our ideas.

Yes. No, yes, it's interesting that they'd be so willing to continue to spend shareholder capital that way. So the next question is kind of evolving around your plans for management.

In the event, the hypothetical event of a victory, what is the current plan? I find it as a shareholder, I find it somewhat concerning that the management is so willing to lay off 10% of their global workforce because of seemingly the horrible decision that they made acquiring MTEX. But at the same time, there's been no cutting of their own salaries. So essentially, they are letting both employees and shareholders foot the bill for their entire mistake.

So would you look to change up the executive suite? And if so, how would you go about doing that?

That's a great question. Shawn, do you want to take that?

Sure. And Samir, please join me. There is not a concrete plan yet because we don't know enough of the answers yet. So we are not going in saying we are going to do this with this person or not do that with that. We believe there's a lot of talent there, and we would like to give that talent and opportunity to rise to the top. And we'll make whatever hard decisions need to be made.

Now clearly, the incumbents have not wrapped themselves in great performance over the past decade and you could see a justification for changes. But at this point, we want to understand the situation and bring the best people to AstroNova going forward.

And I'd add to that, I agree with Shawn and I'd add to that, that I think succession planning is an important governance function, right. Regardless of whether or not you are looking to make a leadership change just because, again, you need to be prepared for any and all contingencies, right, as a Board that's your responsibility.

And so one of the things we have been doing as we've done these interviews with industry experts is we have also identified a number of people who are either former AstroNova employees, who are former executives at other companies in the industry who looked at the situation they've said, hey, we also see a lot of opportunity here. And we'd love to participate in some way if there is room for synergy, right?

So whether that be kind of as a special consultant to the Board to help us with issues very specifically, like, for example, building out that direct channel strategy in that go-to-market. Or whether it was, as you know, a more permanent member of the leadership team, that's also an alternative. So thanks for the question.

Let's pull for some other questions. I don't see hands raised, Don't be shy people. We'll just start calling on random people like those college professors, we all dislike. While we're -- sorry, go ahead, Jeff.

If I can jump in real quick. I don't know if you've said it explicitly, but you did. I think it was about 30 interviews with either industry insiders, competitors who compete every day against AstroNova and former employees. I obviously read through and listened to all those, and it's the best treasure trove of information I've ever seen in the business. And we went from having a sense of what was going on to really deep insider info. It's incredible.

But to the last question, I just want to point out, over and over, there were specific people pointed out as real stars within the business which tells us there's folks that we need to put our arms around right away. Make sure they stay, make sure they're a valuable contributor, that their voice is heard and that they're part of the revitalization of AstroNova. And that we would have had that insider information without those interviews, but boy, that came across strongly.

That makes sense, Jeff. And I just want to clarify since Scott's not from the financial world when he's referring to insider information, he's not referring to SEC-type insider information, right? It's more -- I mean, Jeff comes from the financial but not the public equities world. He is just referring more industry insights that we've managed to generate by speaking to, again, these former employees, these competitors, suppliers, things like that, so.

I might actually add though some of the people on this call could step in and take any number of leadership roles at the company, that's not what we're talking about today. We're talking about thoughtful board members. And our experience helps make us very strong Board members and that some of the folks on this call could play leadership roles at the company, that's not the intent at all.

I think we have a question from George. And by the way, all attendees, you don't have to wait for the previous question to be answered before raising your hand. In fact, if you just keep your hand raised, then it might be easier for us to coordinate and make sure that we're getting to everyone's questions in a timely fashion. So Mike, can you unmute George?

Great. Thank you. Thanks for this forum. It's very informative. And I very much second Jeff's comments there about the research that you guys have done, particularly you, Samir, that's very impressive. I've been invested in AstroNova for 12 years, I think, and I learned just a massive amount reading your reports. I sort of have a follow-up question, most kind of like partly to what Sean was saying. And I'm just trying -- and I'm trying to push back a little bit, right? I think that's what investors do. Always is trying to understand how important it is for Board members to have experience in the industry itself. And this printing industry is kind of a puzzle, and that's partly where I learned a lot from your research, Samir, with some very large OEs, whether it's [ NAMJet,] HP and others controlling sort of the print head or the print engine technology, and it's being pretty much impossible for a company the size of AstroNova to rival that, to develop its own technology in a sustainable way. And so I'm just trying to say how well equipped are you guys to maneuver through this kind of like mini strategic mine field, which is this industry.

Yes. I think that's a great question. And I'm going to turn it over to Ryan. I think I'll just first comment to your point on our research that as a point of comparison, right, I mean, certainly, it'd be wonderful if we had certain print industry executives who, like I said, we've reached out to found over time if they were part of our slate, but the company has a nomination deadline, right? You can't necessarily add people beyond a certain time frame.

So that's certainly something you could look to do to add to the Board in the future. That being said, I think when you compare to the incumbent Board and you look at the lack of due diligence that was clearly conducted prior to the MTEX integration, right, despite these Board members having overseen this business for a very long time, being very unfamiliar, it seems with those things, right? I think we would certainly seek to be more open-minded, right, to really try and do that research to talk to the customers, to talk to peers, competitors, suppliers, everyone and really be hands-on Board members and really be trying to educate ourselves in the industry, which, again, Sean and I, that's what we do professionally, right?

That's what you do, George, is you go into companies that you may not know about their industry, you may not know about their specific market segment, even if you know about their industry and you learn what there is to learn about it, right, and figure out what the key strategic questions are. But Ryan, I know that you had some thoughts on kind of Board composition and industry experience versus outside perspectives.

Yes, certainly. And again, I'll point to my experiences at Profire and how we looked at this and how we considered it. Overall, I think it can be helpful to have Board members who have specific industry experience. But I also think it's very important to have Board members that have a wide range of experience that can cover different industries, but core talents and abilities in key areas like governance, financial expertise, all of those other broader areas. And what we focused on at Profire over time is we had a few Board members that had the key oil, natural gas industry experience.

But in certain areas, we try to find them in key areas where we thought that they could help us with relationships or open new doors. But for the most part, the Board members were advisers and directors to us. And so we made sure that we had those types of experts in technology, in the industry as hired within our sales team, our technology team, our executive team. And that's where the true core industry experience comes from.

Again, the Board members can be high-level advisers and maybe open a few doors. But as we had to rotate Board members over time at Profire, unfortunately, some of the worst Board members that we had were actually our industry experts. They weren't as helpful as we thought that they were going to be, and they were too busy running some of their own companies or other endeavors. And so those were the ones that we had to rotate out more than having the other more generalists with core experience in legal, governance, nomination, compensation, finance, those other types of experiences.

So I think it's very important to have a Board that has a breadth of experience. And I think the nominees that Samir has pulled together, again, in a short period of time, really bring a lot of that expertise certainly lacking printer industry experience. But those are things that as we've proven through the research that Samir has done, that can be learned. Obviously, there are pitfalls or there are other things that we have to navigate through. But we also need to make sure that the company itself has the right sales leadership experience, industry experience in their technology and so forth. And I think that's how my experience on a Board over the last 6 years and as being an executive adviser to the Board for 10 years, that's what I've seen.

I might only add, George, and thanks for the question. All else equal, of course, you'd want Board members with deep and rich domain expertise in the relevant businesses, but all else is not nearly equal. And so it will be up to the Board to make sure that the right people who are running the businesses are in the right roles.

So we have a couple of written questions here in the Q&A box. The first one is the working capital management or lack thereof has been frustrating to follow. What could AstroNova do differently, specifically from an inventory standpoint in the aerospace business? What percentage of the inventory is aerospace related versus product ID related? And what percentage of the inventory is ToughWriter that OEMs and airlines will purchase eventually, but on their own time line.

So I'll take the second half of that, which is -- and I can take another look here while I ask Jeff for part of this, but I don't believe that AstroNova provides that sort of SKU level or kind of segment level analysis of exactly where the inventory balances are going. So unfortunately, not able to answer that.

But with regards to what they could do differently, Jeff, I mean, that's one of your specialties, right, is going into businesses evaluating the working capital because a lot of times, it can take some of these strategic initiatives take longer, but that working capital, if you're payables, receivables, inventory, if you haven't been managing those tightly, that's kind of a big source of cash right there that certainly when you look at AstroNova could potentially match or exceed the actual business' cash flow over the course of a year, right, that you earn from your EBITDA. So Jeff, why don't you take the first part of that, and I'll just look to see if there's any additional information you can find for the shareholder.

And I have not seen any of that detail. So I'm curious to know. The inventory days on hand is currently 186. Previously, there in 2018, they had -- 2019, they had 120 days. So the inventory is ballooned over 50% I don't think the business has changed that much. My point is, objectively, we just know it's too high. Even without the detail, it's basically half of our cost of goods sold valuation. So we're high compared to where we used to be. We're high compared to the industry. We're high compared to our competitors. So therefore, we know it's high.

How do you get it down? Basic stuff. We have to look at our MOQs. We have to look at our reorder quantities, maybe -- and I just don't know these answers. May we order less more frequently. But somehow or another, it has to be whittle down to what they already proved they can do historically. And then I'm repeating myself a bit here, and then it's a matter of redeploying that money to investments to better parts of the business, sales, marketing, et cetera. That's the simple answer to it all. It just needs to be managed, needs to be taken seriously. It's -- Mr. Woods has acknowledged many times that it's too high and has said publicly that it will come down next quarter, next quarter, next quarter. It hasn't. It's gone up instead. MTEX probably affected that somewhat. I don't know those details. But objectively, we know it can come down and somebody needs to just be accountable to bring it down and be measured on it.

And to follow up, and again, I don't see the kind of disclosure that we're looking for in the financials. To your ToughWriter question on Page F 20 of the Form 10-K for this year -- last year filed on April 15, 2025, it does specify that out of the -- there's $47 million -- $47.9 million in net inventory at year-end, but that's gone up since then, but there's a $9 million reserve. So your gross inventory is actually $57.6 million. Of that, you have $19.9 million that's in finished goods versus $15.6 million the prior year, and you have $35 million in materials and supplies versus $39 million in the prior year.

So to your point about ToughWriter, I don't think you can -- I don't think that's really a credible explanation for the excess inventory because their finished goods are smaller and that piece hasn't gone up by an enormous amount in dollar terms. I mean, Jeff, you've worked in a lot of industrial businesses. That inventory reserve, what do you think of that figure? What does that tell you about the business?

Well, they think they've got bad inventory, and we'll have to go and see what's obsolete, what's actually active and how they're managing it.

Another question from a shareholder here or sorry, prospective shareholder. Why does Samir and Shawn think that product ID could or should be a good business? My concern is that the multiple years of product quality issues plus net sales support has structurally and terminally impacted the business. There's a second part to the question, but let's address that first. Shawn, do you want to weigh in?

Sure. It has. We don't believe it's terminally. We hope that is too strong a word, but we're not sure yet. I don't want to oversell the PI business. But based on Samir's work and the team's work, there appears to be an opportunity that this has been undermanaged for year after year after year. And while at a high level, the industry may not be sort of one of the world's most attractive businesses, there is likely an opportunity to refine their market approach, their customer approach and by focusing on the relatively highest, most attractive niches. This is a very small piece of the customer's cost structure, but it really is quite mission-critical.

You get the labels wrong and you destroy the value of what the end customer is selling. So on the margin, and again, one can only know when you're deeply in it, we don't think this is terminal, and we think there's a lot of opportunity through focus, customer service, improving product and technology to right the ship and to create a very solid business here with or without acquisitions.

Yes. And I think if I'd weigh in some color from the industry work that we've done. One, everyone has their own different estimates of what the growth rate for the industry is, right? And a lot of that's going to relate to what specific products they're selling, what market segments, what geographies, right? You have to -- we're talking about this at a high level, but you kind of really have to talk about it at a micro level if you're trying to drive growth. That said, from the outside, based on the work we've done and we published this, I think we're reasonably confident that the industry overall is growing, right?

I mean we've spoken to multiple people who've kind of cited mid-single-digit type growth rates. Some people are experiencing higher growth, right, by employing really successful strategies. And then there's obviously your more mature market segments where you maybe don't have growth and it's more of a cash cow business. But that being said, the fact that you have these other these other companies in the industry that are, as best we can tell, demonstrating growth, right, that tells you that there is growth opportunity out there that some of our organic revenue decline is not due to the overall market shrinking, but rather due to us losing market share against our competitors, right? So that's factor number one.

And I think factor number two is, again, as a shareholder, right, my focus is not necessarily on revenues. My focus is on EBITDA, it's on cash flow. It's on free cash flow per share ultimately, right? What's driving free cash flow per share because I think all value investors believe that free cash flow per share is sort of your driver of intrinsic value over the longer term. And so if we look at the product ID business, right, and this is purely hypothetical. I don't know this for a fact, right? But let's just look at MTEX, right?

Over the past fiscal year, MTEX generated a few million a little over $4 million in revenue last fiscal year, but you have to annualize that. So it's maybe closer to $5 million to $6 million based on kind of last quarter's run rate. But at the same time, MTEX, as of the last disclosure is still losing $1 million a quarter, right? So are we better off, right, not having those revenues, right? As we discussed with Boyd earlier in the call, we need to very quickly go into that business. I mean we're talking about a company that's guiding to about $13 million, $15 million in EBITDA this year. And as of the last quarter, we're losing $1 million a quarter, $4 million for the year on MTEX. That's a huge chunk of money. right? So if you kind of extend that analysis more broadly, you do the Pareto analysis and within any product portfolio, you're going to have your stars, right, that are really margin generative. And then you have products that you have, but they may not even be worth the working capital that's invested in them, the sales force effort that's invested in trying to market them if they're not succeeding.

And so I would say that while we do want to reinvigorate revenue growth over the long term, we're also most focused on profitable segments of the market, right? And I think it is possible for the business to not grow the top line or perhaps even shrink the top line over the near term, but you grow EBIT, you grow EBITDA, you grow free cash flow by focusing on those profitable market segments. We interviewed that Domino executive who explained how by becoming that real solutions provider for tobacco, for potato bagging for some of these really niche applications, they were able to achieve double and triple margins, right? So my concern is much more around that.

And then to our strategic alternatives review, if it turns out that turning around this business is too much of a multiyear endeavor, right, then maybe you sell it to someone who already has those competencies in place, a strategic acquirer who can take it, take the customer base, take some of the good products and really drive that performance and create more growth opportunities for the business, its employees, the products, et cetera. The second part of this question is, do you have a general sense of what percentage of consumables makes of PID segment revenue and EBIT? My concern is that PID is effectively in runoff and mostly just selling ink and paper for the remaining life of outstanding hardware. So the Q4 -- and I'm pulling it up here, but the Q4 AstroNova presentation, not this quarter, but the past quarters, they had a nice disclosure on this breaking it out.

And if you look at it, it says that 80% of the Product ID segment revenue is driven by recurring revenue, at least as of last year, and they break it out as 18% hardware. So that's the new printers like you referenced, 30% media, 30% ink, 8% print heads, 7% toner and thermal transfer and 7% parts, service and other. And as far as the profitability, I don't believe they break that out, but they have disclosed over time naturally that their consumable sales are higher margin. Again, that Domino executive we spoke to said that while it's typical for 70%, 80% of revenues to be attributable to your consumables and aftermarket, it can actually be as high as 95% for the profit.

So again, we don't have that specific information from AstroNova. But based on their disclosures, I see no reason to assume that the majority of their profitability -- the overwhelming majority of their profitability is not attributable to the consumables. And as for your question, if it's effectively in runoff, I mean, I think right now, that might be an accurate characterization, and that's why as a shareholder, you look at that declining organic growth. And again, I didn't break this out because it's difficult because I wanted to do it by acquisition versus legacy, and it's difficult once you start trying to get into that additional dimension of consumables versus supplies. But obviously, if your revenues are declining, I mean, people who have printers continue to use them, writing, that's not a good sign for an installed base business. So that's why some of these sales revitalization efforts are critical.

So I think I addressed most of your question. You're welcome to type again if I miss anything. So I have -- I think this individual is still typing. While we wait for that individual, Shawn -- not Shawn, sorry, Jeff, a pre-submitted written question that we had, I think, from a couple of different people actually is we spent a lot of time talking about the PI business, but what are our expectations for the Aerospace business? And what type of improvements do we think we can drive there?

Again, it's hard to say without having the ability to look inside the business at more of the details. Our conversations, Samir, had been that things run in packs, good behaviors and bad behaviors run in packs. And if you've got quality issues, poor governance, decisions like MTEX, inventory levels, cash depletion, we can go on that it's unlikely you're going to find excellence around the next corner.

We heard a lot in the interviews that everybody said, and this sounds like a sweeping generalization, but all the marketing money spent on trade shows, they're not doing digital marketing, they're not doing outreach. You're not doing any of the marketing that's developed in the last 20 years to the frustration of both current and former employees, if that's the case, how could we possibly be an A player in aerospace? How could we possibly be performing at our best in that segment? If we're leaving meat on the bone everywhere else, we likely are there as well, and there's opportunities for improvement.

So as a generalist improver, it just screams opportunity to me. But again, we can't -- other than the public filings, that's the limit of our information, and it's hard to know what opportunities are really there. But all the indications are that there's lots of low-hanging fruit and lots of opportunities for improvement. And my guess is most employees have a short wish list in their head of things they can do to make everything better. And it will be easy for the Board to surface those ideas, bubble those ideas up to the surface and be able to really look at them and understand them quickly.

We have a couple of additional submitted questions here, one from a shareholder who wants to remain anonymous, but I happen to know the individual. They're a professional portfolio manager, but they are an individual shareholder in AstroNova. This individual says, the Astro Machine and MTEX acquisitions are inferior when you compare them to the aerospace or test and measurement.

I would encourage the Board to, one, strongly consider halting additional acquisitions in product ID; two, retain the GEM Aerospace; and three, seek strategic alternatives for the Product ID segment. retaining the smaller GEM and divesting the larger but okay business could provide the company with a comfortable net cash position and an Aerospace segment approaching $50 million in revenue with a very strong EBITDA margin.

And I'll take that one, right? And so I think I think you're absolutely right in your assessment of obviously, one of these businesses has much better results than the other and executing a turnaround is hard, right? And sometimes it may be better to build on your strengths than it is to sell the thing that's working and try and double down on the thing that's not.

And so look, what I'd say, though, right, is when you look at the Servotronics transaction that recently happened and that being a slightly smaller, certainly inferior business to our Aerospace segment, right, that's sold for more than AstroNova's enterprise value today. Conversely -- or not conversely, but additionally, TransDigm Group, I believe, was bought by Warburg Pincus earlier this year. I want to say that was about a 16, 17x EBITDA multiple. Don't quote me on that, larger business as well, right, but over $1 billion. But when you look at those sorts of multiples, right, and you look at where the stock price is today, I think the goal of our strategic alternatives process is to evaluate alternatives, right? And that's why we've not advocated. We're not saying, oh, we're going to sell aerospace and turn around product ID and then sell it. We're not saying we're going to continue operating these 2 businesses as stand-alones. We're not saying we're going to sell product ID and then we're going to reinvest those cash flows into businesses that look more like aerospace, right? The point is to know what our options are, right?

In negotiation, there's this concept called BATNA, best alternative to negotiated agreement. And so the idea is, look, we have a stock that hasn't done well for any of our shareholders. And we have at least one business that is certainly worth a lot more than what the market is implying today. We have this other business that has challenges, but maybe there's people interested in that business. And so I think it's the fiduciary duty of the Board to evaluate what is our stand-alone strategy if we continue to continue operating these -- both of these businesses, right? What free cash flow per share can we generate over what time horizon like the analysis that Ryan was saying and what does that look like relative to our stock price versus if we were to sell one business, if we were to sell both businesses, maybe return some of that capital to shareholders, maybe reinvest it in one or both of the segments, right, what does that look like?

And I would say that being the company's largest shareholder, I'm certainly aligned with you and that I just want to maximize the value for my clients and then also for all AstroNova shareholders. So I think we're very intellectually flexible. We're not going in there with a plan saying, "Hey, do you want to sell this segment, we want to sell that segment? We need to do the analysis. But you can't do analysis unless you have good data and the data has to be based on actually going out there and seeing what the private market value of one or both segments is and then using that to figure out what is our capital allocation decision as a Board.

Ryan, do you want to weigh in there because I think that's relevant to what you were speaking about earlier with the CECO transaction?

Yes. I think for us, we always try to keep all of those options in mind and to continually have those topics of discussion as senior leaders being co-CEO and CFO, we have that at that level, but also regularly with the Board and taking a look at those understanding our duty to shareholders to maximize value, and that can come from a number of different alternatives, as you've described, a lot of different ways to look at it. We always wanted to make sure that we were running the business in a way that would be attractive for someone else to potentially want to acquire the business.

We wanted to look at our own opportunities from an M&A perspective. We did share buybacks at appropriate times. We were debt-free, so we didn't have to focus too much on debt reductions or other ways of driving value. We never did dividends, but it was a topic that came up in our interactions with shareholders. So I think just keeping all of those options open and available while pursuing the ones that seem to be the most attractive and drive the greatest value for shareholders at any point in time.

And I think a corollary that I'd like to address, and I want Boyd to jump in on this one because it's his area. But one thing that I would say that I'm very firm about is that for a reasonable period of time, and I don't have a number for you, right? But there is a complete moratorium on further M&A, right? I think if shareholders were to go to the company and the company were to say, "Oh, we're -- once we delever, we're planning to do more M&A. I think that is a horrible, like truly horrible idea, right? Because integration, running a business well, right, there's an organizational competency.

When you layer on a new business, right, into a foundation that already clearly has fracks in it, that's not a good idea. right? And so to the shareholders' question, I mean, I think until -- from a capital deployment standpoint, until we were -- first of all, there's the debt, right? I mean the debt has to be the #1 priority today. But beyond that, from a capital deployment standpoint, until you have your foundation solid on your -- get your own house in order and until you are able to fix the MTEC mistake that has already been made, the company is in no position over the near term or the medium term to be looking at deploying capital into other acquisitions, right? Because you have to build up that organizational competency first. Boyd, I mean, again, you've actually integrated businesses, I think you'd agree.

Yes. Look, we've got a situation where AstroNova is not delivering to any of the categories of stakeholders, not delivering to shareholders, not delivering to customers and not delivering to employees. And the word I've heard throughout this conversation today is focus. And so specific to your question right now, Samir, focus, there's only so much top leadership bandwidth and capacity and dealing with digesting the MTEX acquisition, to your point, should put a moratorium on all acquisition activity, not to mention the track record, the recent track record there. So totally in agreement with what you said, Samir.

So another question that we've had submitted from 2. And I think, Mike, you'll have to remind me, but I think we're up at 75 minutes. But another question that we have had submitted from a couple of different people. One is the manager of an RIA, another is a manager of family office, not currently involved, but very familiar with the business.

Does this have the asymmetry I generally seek in turnarounds? What am I playing for exactly? What's the upside case here? And I think that's a great question. And obviously, the process that we're going through, there are legal and regulatory considerations, right? So you'll notice all the footnotes in the material we put out, there's a reason we try not to make wild speculative statements about we think the stock price could be X or Y, but we can't make those sorts of claims or guarantees.

I mean I think that the way that I would frame that is particularly in the sale process, right? And there's a question here, by the way or a comment here from a shareholder saying Servotronics is an interesting data point, but we're talking about different technologies, the durability of the cash flows could be notably different. And I recognize those. I think if you just look at transaction multiples in general for aerospace assets, they tend to be a double-digit type EBITDA multiples. I don't think that's a controversial statement. You look at product ID, right? I mean, obviously, with the 80% recurring revenue and the ability to drive cash flows, there is a very interesting opportunity there. I think there's a couple of challenges, right?

One is just the segment level margins where it's not currently -- there's a slide in the back of our deck that you can go look at, but Brady and Zebra both deliver mid- to high teens EBITDA margins, and that's after allocating corporate overhead. AstroNova's Product ID segment is kind of in the high single, low double-digit type area, but that's before allocating segment overhead as being a public small company. And if you allocate that on the basis of revenue, it basically looks like that segment is either not making money or marginally, we're talking low single-digit type multiples -- not multiples, I apologize, margins.

And so when you think about repositioning that business, right, you think about, first of all, getting those segment level margins to the mid- to high teens, right? We've spoken to at least one person in the industry who thinks that it should be 20%, right? Then you have to do your own analysis of, okay, if there's a drag, if there's a 10% corporate overhead drag, can we address that? Can we not? Parts of that you can't deal with because there's just minimum public company costs. But then you think about, okay, so if you allocate that, if you get those margins to mid- to high single digits, you have $100 million in revenue that's highly recurring and you're able to generate even after corporate overhead, something that looks like $10 million in EBITDA out of that segment, right?

Obviously, a higher number at the segment level. And then you think about what's the recurring revenue business worth, right? And I'm not going to put numbers around that. But clearly, it's a business with $100 million in revenues and you look at where the market cap is today, you do some analysis around the aerospace business and what's that worth. Look, I guess the way I'd frame it, and again, I don't want to commit to any stock prices or anything like that because I don't think my counsel would be very happy with me if I did. But as a shareholder, right? I obviously -- I manage a portfolio of 15 to 20 names. That's our target. There's other things I can spend my time on. When I decided to initiate this effort and spend so much time and so much effort and so much money on one position, right, I obviously had sort of the intrinsic option to simply say, you know what, we're just going to walk away from this situation. It's not worth -- like I talked about the sunk cost fallacy with MTEX. We made a bad investment. It hasn't worked out. We're going to move on to some other investment, right? And we're just not going to spend our time on this one.

I mean, I think I'm a rational person. I hope from this call, you gleaned that I try to be a reasonable, rational, open-minded person. I am investing my time and effort into AstroNova because I think that there's a big opportunity here, right? I think this is a company that, as Sean has said, as Ryan has said, as Jeff has said, as Boyd has said from all these different perspectives, we see a lot of opportunity here, right? And so certainly, I'm not going to pitch anyone on the stock today if we are elected on the Board once we have our time -- once we have ability and time to wrap our minds around the business, we would certainly aim to put out an analysis to shareholders of what we think the opportunities are, what the potential paths are, what that could mean for shareholders, right?

Again, once we're able to do that analysis, once we are able to do that in a way that's compliant with regulations and things like that. But again, all of us are here today because we see opportunity. None of us here are here because we think, oh, this is a company that there's a little bit of opportunity. And so we're going to spend all this time and money and effort going after a small opportunity, right? We think that there's quite room for opportunity here. So I think that's probably all we have time for right now. But any last thoughts from the team? All silent.

I will just jump in and just say I appreciate the opportunity to speak with investors in my time at Profire last 10 years, we did a lot of investor outreach, earnings calls, conferences, non-deal roadshows. I think it's critical as a microcap small cap to reach out to investors, keep investors informed. And so I just really appreciate the engagement and the opportunity here.

Same goes for me. So Shawn, are you going to say something?

No. So yes, well, thanks, everyone, for joining today. We really appreciate it. A replay of this will be made available. My contact information is on my website and the proxy, and we are certainly more than happy to schedule follow-up one-on-one calls with myself with the nominees for anyone who's interested. We really do view ourselves as kind of the people's candidates, right? We're really trying to represent shareholders, and that's our #1 goal and priority. And so to the extent that you're able to contribute by giving us your wisdom, your ideas, your perspectives on the business from years of investing or industry operating experience that may be different from ours, we are thrilled and excited to hear from those and incorporate those into our approach.

So thanks again, everyone, for their time, and I hope you have a great rest of your day. Thanks to all the nominees for making the time.

Greetings. Welcome to AstroNova's First Quarter Fiscal Year 2026 Financial Results. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce Deborah Pawlowski, Investor Relations for AstroNova. Thank you. You may 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 Greg Woods, our President and Chief Executive Officer; and Tom DeByle, our Chief Financial Officer. You should have the earnings release that went out 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 at astronovainc.com.

If you would turn to Slide 2, we'll discuss the cautionary statement. 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 and uncertainties as well as 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 slides.

Now if you will please turn to Slide 3, I'll turn the call over to Greg. Greg?

Thank you, Debbie, and good morning, everyone, and thank you for joining us. Before I get into the details of the quarter, I want to reiterate our strategy to drive long-term revenue growth and improve profitability. AstroNova has a unique position in the global data visualization market with deeply embedded relationships, high-performance technology and a strong recurring revenue model. Our goal is to leverage our technologies and market position and our streamlined organization to deliver stronger growth and earnings with more predictable performance.

Core to the strategy are 3 strategic drivers. First, our Aerospace segment, which has a leading market share in cockpit printers is rapidly advancing the transition of customers from our legacy models to our high-performance and high-reliability ToughWriter printers. This transaction deepens our position with leading aerospace customers, decouples us from royalty costs associated with legacy products and simplifies our product portfolio which reduces supply chain complexity and inventory levels, improving cash generation and margins.

The transition also enables us to capture a larger percentage of aftermarket sales. Our ToughWriter technology enables us to better leverage the positive macro backdrop of the commercial aerospace market as both Boeing and Airbus continue to ramp up their build rates.

The second strategic driver is the launch of highly disruptive next-generation product identification solutions. These commercial scale printing solutions unlock new end markets with large customers that have higher volume printing needs. They also allow us to better control the supply chain for our ink and critical print engine components, lowering costs over time. This provides more avenues for growth and we have already been gaining traction with both new and existing customers.

And the third strategic driver is further streamlining operations through headcount reductions and restructuring while strengthening segment level accountability. We are working to structure incentive compensation with key performance indicators, including growth, profitability, cash generation and earnings per share to further improve alignment between management and shareholders. We are laser-focused on executing this strategy.

With that if you'll turn to Slide 4, let me touch on the quarterly highlights. We believe that our first quarter of fiscal 2026 results are an early indication of the traction we are making with our strategy. We delivered double-digit growth in both segments and increased consolidated adjusted operating income by 13.5% year-over-year. This was driven by our continued ToughWriter transition, renewed defense shipments of $0.5 million, higher demand for our desktop label printers and a $1.4 million increase in product sales from last year's acquisition.

We also accelerated our previously announced $3 million annualized cost reduction plan by completing $1.9 million of annualized cost saving actions in the quarter, most of which will begin to be realized in the second quarter. We plan to complete the remainder of the cost-saving actions in the second quarter.

During Q1, we launched 3 next-generation product identification solutions ahead of schedule. The QL-425 and the QL-435 were launched as an extension of our flagship QuickLabel line of high-resolution color label printers, bringing a new level of speed, flexibility and cost efficiency to our professional labeling customers.

We also released a new direct-to-package printer, the AJ-800 and which enables printing on sustainable packaging materials like corrugated cardboard, die-cut boxes and paper bags as well as wood. And the AJ-800 expands our product portfolio into larger print media and higher volume production. We are ahead of schedule with the rollout of 2 additional next-generation products that we have in our pipeline. These are expected to be launched in the second quarter.

In Q1, we up trained and upgraded our sales team, implemented a new targeted sales strategy under our recently appointed segment leadership and restructured our go-to-market approach. We are pleased with the progress the team has made already and encouraged by the early interest and orders they have generated.

In Aerospace, at the end of the quarter, we announced a renewed $10 million multiyear contract win for the delivery of our ToughWriter products over the next 5 years to a prime defense contractor and shipments on this program began late in Q1. We expect to realize $1.7 million of revenue this fiscal year from this program.

The hard work and hard decisions we made over the past 6 months are improving results, but we still have more work to do. We expect our margin profile and aftermarket sales to strengthen as the rollout of our new Product ID solutions gain market acceptance and our ToughWriter transition continues to advance.

For the full year, we continue to expect to deliver revenue in the range of $160 million to $165 million and adjusted EBITDA margin in the range of 8.5% to 9.5%. This is a critical juncture for AstroNova, and we are confident in our ability to deliver long-term shareholder value through the focused execution of our strategy.

Looking at Slide 5. We will review orders and backlog and discuss the opportunities we are seeing in our markets. First quarter orders of $34.9 million were up 5.4% or $1.8 million compared with prior year period, driven by a combination of higher demand for new and existing product identification hardware and supplies. Product ID orders were up $3.3 million to $26.2 million. We secured a 3-year label supply contract with a multinational beauty company, which is a new account for us. We also captured a renewed upsized contract from a large private label coffee grocer in the U.K. This current customer also will be upgrading its entire fleet of QuickLabel printers.

While declines of $1.5 million in aerospace orders partially offset overall order growth, we continue to have strong demand for ToughWriters, reflecting the improved bill rates of the major commercial aircraft OEMs. As we have previously pointed out, aerospace orders can vary quarter-to-quarter based on timing of customer contracts. For example, shortly after the end of Q1, we received a $1 million ToughWriter printer order from an in-flight entertainment customer.

During the quarter, we did also further expand our space launch data acquisition business. We secured an order from a new customer Amazon Kuiper systems for our data acquisition systems to be used on their low earth orbit satellite program. Backlog for the quarter declined by $2.8 million year-over-year to $25.5 million, primarily driven by clearing previously delayed shipments. As we move through fiscal 2026, we expect to benefit from our new product introductions and the increasing build rates with Airbus and Boeing.

Before I pass the call over to Tom, please turn to Slide 6, and I will touch on what we are seeing regarding tariffs. The headline commentary is that, so far, the impacts have been negligible for our business. Our aerospace shipments are insulated from many of the tariffs due to the contracts we have in place, which essentially hedge our exposure on the sales side. Most of our exposure comes from the component part. However, due to the expense and regulatory difficulties associated with making changes to aerospace avionics, we typically carry large inventories of the most critical components. This gives us a multi-month protection from vendor and/or tariff issues.

For Product ID, our next-generation print engine allows us to source ink from across the world, providing flexibility on supply costs.

Additionally, our global manufacturing presence in the United States, Europe and Canada gives us more options for rerouting our shipments. To further combat tariffs, we implemented price increases on April 1 and tariff surcharges in the first week of May. We continue to remain agile and look for ways we can partner with and source from alternative suppliers to minimize cost impacts.

I'll now hand the call over to Tom for the financial review. Tom?

Thank you, Greg. Good morning, everyone. On Slide 7, you can see our first quarter revenue of $37.7 million grew 14.4% year-over-year and 0.9% sequentially. 83% of the quarter's revenue was recurring. The first quarter is a seasonally slow quarter, so we expect improvements throughout fiscal 2026.

Year-over-year revenue growth was 13.8% in product identification and 16.8% in aerospace. Product Identification sales increase for the quarter was driven by $1.4 million incremental MTEX sales and higher demand for tabletop and direct-to-package printers and supplies.

Importantly, we unveiled 3 new product identification solutions at the FESPA Global Print Expo in Germany. We expect these product launches to help drive Product Identification hardware sales in the second half of fiscal '26 with the continued growth of our recurring media and supply sales as we increase the installed base.

For Aerospace, increased printer shipments to a major OEM and the carryover of shipments to a defense contractor under the recently renewed contract primarily drove revenue growth. The $10 million multiyear contract award began shipping in the first quarter, and we expect to ship the remaining portion of the expected $1.7 million in orders before our fiscal year-end. We also expect an increase in the ToughWriter shipments from an existing commercial aerospace customer beginning in the second quarter as we had transitioned away from the legacy cockpit printers. ToughWriter aerospace printers were 42% of the first quarter shipments and we remain on track to double the percentage by the fiscal year-end.

Turning to Slide 8. Gross profit was $12.7 million, up $0.7 million increase year-over-year, representing 33.6% of sales. Adjusted gross profit was $13.1 million, a $1.1 million increase year-over-year, representing 34.6% of sales. The increase in gross profit was primarily driven by higher sales volume, but year-over-year margin was negatively impacted by dilution related to the acquisition and the legacy aerospace printer contract, which we expect to be completed by the end of the second quarter of fiscal 2026.

On an adjusted basis, gross margin increased 30 basis points from the trailing period, reflecting higher volume in the quarter. Going forward, we expect gross profit and margin to improve throughout fiscal '26 as we increase the percentage of ToughWriter sales and the next-generation product ID printer sales and supply.

Looking at Slide 9. Product ID operating income for the quarter was $2.8 million or 10.6% of sales compared with $3 million in the prior year period. On a non-GAAP basis, operating income was $3.1 million or 11.9% of revenue. The year-over-year and quarter-over-quarter improvement in non-GAAP operating income was driven by higher sales was partially offset by lower margins on the acquired legacy technology.

Looking at Slide 10. Aerospace operating income for the quarter was $2.8 million, a 24.2% of sales, compared to $1.7 million in the prior year period. On a non-GAAP basis, operating income was $2.9 million or 25.7% of revenue. The sequential and the year-over-year growth of operating income and margin were driven by improved product mix as we transition commercial and defense customers to our higher-margin ToughWriter solutions and benefited from operating leverage gained on higher volume. Operating income was partially offset by legacy printer contract that is expected to be completed in the second quarter. Aerospace operating expense was lower year-over-year as we benefited from a $0.3 million reserve reversal related to a commercial airline.

Turning to Slide 11. Net loss was $0.4 million or a negative $0.05 per share compared with net income of $1.2 million or $0.15 per share in the prior year period. Adjusted net income was $0.4 million or $0.05 per share. Adjusted EBITDA of $3.1 million increased 27.6% compared with the prior year period and grew 28% compared with the trailing fourth quarter of fiscal '25.

Adjusted EBITDA margin for the first quarter added 80 basis points year-over-year and sequentially. We are expecting operating expenses to be benefit from the restructuring program for the remainder of fiscal '26.

Moving to Slide 12. During the quarter, we strengthened our balance sheet by paying down $3.9 million in debt and improved liquidity. We ended the quarter with $12.6 million in total liquidity, including $5.4 million in cash and $7.2 million in revolver availability. Our leverage ratio of funded debt to EBITDA is 3.5x. Our targeted leverage ratio is approximately 2x. At the end of the quarter, we are in compliance with our covenants of our lending agreement.

Cash provided by operations in the first quarter was $4.4 million, down from $6.9 million in the prior year period. The decline was primarily driven by the timing of associated with bulk replenishment of legacy Inc., printed and media supplies amounting to about $3 million. We are focused on improving our inventory turns from current levels of approximately 2x to more than 3x over the fiscal '26 and '27 years. Capital expenditures were $60,000 in the quarter, and we expect to be less than $2 million for the full fiscal year.

Now please turn to Slide 13, and I'll hand the call back to Greg for closing comments.

Thanks, Tom. We are executing a clear strategy to deliver revenue growth and improve our profitability. We have implemented changes in the organization and are working diligently to deliver on our strategic plan. We believe that this quarter reflected a positive turning point in our business as we gained traction in both of our segments and controlled our costs. We have several catalysts that we are confident will propel our growth in fiscal 2026 and beyond.

First, we are focused on launching our innovative product ID solutions 3 of which have already been launched and are receiving strong customer interest and orders. We expect to launch 6 more disruptive solutions before the end of fiscal 2026.

Second, we continue to make rapid progress on the ToughWriter transition program with several large commercial and defense customers transitioning to ToughWriters that will ramp up shipping in Q2 and beyond.

Importantly, we are looking critically at our cost structure and cash flow generation. We are on track to complete our $3 million cost reduction program by Q2 and we will continue to manage our costs prudently as we roll out next-generation and higher-margin solutions across our Product ID and Aerospace segments.

We believe the actions we have taken in the past 6 to 12 months put us in a position to scale into new end markets and new geographies with high-margin solutions. Furthermore, we have additional long-term opportunities to improve margins through the roll-off of royalties from legacy cockpit printers and through our multisource ink supply program based on our new print engine technology.

We are reiterating our guidance for the full year of fiscal 2026. We expect to deliver full year revenue of $160 million to $165 million, a 7% year-over-year increase at the midpoint and adjusted EBITDA margin in the range of 8.5% to 9.5% and or an 80 basis point expansion year-over-year at the midpoint.

In summary, we are pleased with the progress that has been made this quarter, but we have more work to do. I want to thank our team for their hard work and position us for the future. We remain confident in our plan and believe we have the right people, infrastructure and go-to-market strategy in place to drive long-term growth and profitability.

Now Tom and I will be happy to take your questions.

[Operator Instructions] There are no questions at this time. I would like to turn the conference back over to management for closing remarks.

Great. Thank you, and thank you, everyone, for joining us here today. We look forward to keeping you updated on our progress at AstroNova, and enjoy the weekend, and we'll talk to you guys soon. Have a good day.

Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.