AstroNova, Inc.

Q4 2023 Earnings Conference Call


spk_0: today and welcome to the after know this school fourth quarter unfamiliar twenty two and three financial results conference call today is comfortable being recorded if you'd like to ask a question during the q and a portion of today's cool please do so by pressing start full of by one on your telephone key that i would now like on the computer or that the scott solomon of the complete investor relations been sharon merrill associate please go ahead sir
spk_1: there you emily
spk_2: good morning of mormon thanks for joining us open with mores call or greg would which president and chief executive officer david smith like president and chief financial officer word will discuss the companies operating carla david will take you to the financial that the high level regular it from computing comment the men management will be happy to take your questions by now you should have received a copy of the earnings recently issued this morning if you know have a copy to use go to the investors page of the action of the website w w w dot astronauts in a car please note that state made of today's call the updated historical fact are considered for looking statements meaning of the private securities litigation reform act of ninety ninety five he scored will be able to based on an under the assumption that pudding bog risks and uncertainties accordingly actual results could differ materially upset as required by law ripple effect and speak only other today march twenty third only twenty three you know the undertake no obligation to a before looking statements for further information regarding the avoid looking statements in the factors that nichol differences we see the risk factors in iraq astronauts un report on formed mk and other filings the company makes will be securities and exchange commission on today's called management will be referring to not get financial measures as you know the believes that the inclusion of these financial measures help investors gave a meaningful understanding of the changes the company's cooperating adults it also helps investors who wish to make comparisons between as you know that and other companies are both a gap and a non yeah pages a records deletion of the non gaap financial measures to their most directly comparable get measures is available in today's or enjoys it was an that alter and because of the good
spk_3: i get that
spk_4: good morning everyone and that you virginia like to begin by recognized the great work of art your numbers across the globe is contributing to a tropical year or astronaut against the backdrop of a challenging macro economic environment i'm place and geopolitical tensions pretty significant supply chain disruptions across our and markets throughout much of the year however our team remain focused on working through these issues and i'm meeting the needs of our customers like you didn't get a dry performance initiative to improve quality delivery cost efficiency and growth overall we grew thirty four percent on our revenue in the fourth quarter to a record thirty nine point nine million dollars the top line increase with attributable to games and both tigers with product application up five point seven million or twenty six percent to twenty eight point one million dollars and tested measurement of four point four million or sixty one percent nearly eleven point eight million dollars while supply chains remain challenge for certain products we have been able to resolve some of the more extreme supply chain issue be pregnant over the past two years with notable improvement in the fourth quarter particularly in our t in a statement a very the last quarter or unshakable backlog of schedule orders decreased by roughly a million dollars our we still left about one point one million schedule orders that were unfilled at the end of the quarter primarily in the chin and saying based on the work we are doing with our supply chain we expect to continue to make progress improving our on time shit as he move through fiscal twenty twenty four looking at growth drivers by stagnant just a measurement benefited from a combination of factors within our aerospace product group which manufactures market and services like that printers and electronics for commercial and defense customers these factors including favorable pricing just greater cost efficiencies and the ongoing production ramp up in aircraft deliberate in addition to hardware of it we've also seen further improvement in are supplied that this from our maintenance overhaul and repair services all driven by increases in passenger air traffic and fleet utilization today we produce and market a large range of flight deck printers including modeled acquired from to writer and honeywell in addition to our own top rate or family a product to further enhanced or manufacture efficiencies we continue to upgrade and transition customers to are more advanced and feature rich typewriter family printers during the that data acquisition portion of just measured segment we have one a number of designed for defence related programs and these agreements are presently working their way through the governmental procurement process while exact timing it tough to predict we're pleased to have been selected for the programs and look forward to keeping you updated on the progress of the award as he move through physical twenty four based on current business condition we are excited about the outlook parts of the measurement segment fiscal twenty twenty four switching over to the private education segment q for was the first or quarter with astra machine which we acquired and on while the acquisition is still in it's early day the business is performing very well and in line with their expectations as we advance to the integration process in particular
spk_2: we have already made good progress integrating product between or to sales channels
spk_4: after machine has historically produce good operating margin and we are focused on further integration with our sales channels to grow the top line and drive additional profitability through better customer focus operational improvements and accelerated new product about remain excited and carpet and about the new component of our president occasion business as a cross platform in the years ahead
spk_2: by combining the resources that are joint research and develop games we will soon after you several new product offerings
spk_4: she was it offerings which target current and prospective are and customers lovers much of this technology is that are very successful directed package over printing solutions separately during the fourth quarter we launched with production really of the que l a one hundred or full color label printer design for small businesses just getting started it would be in how they look pretty as well as larger enterprise that require a large number of distributed print stations throughout their facilities production shipments are underway and initial customers spot to this new solution that been very odd the driver behind the introductory level printer watch it to deploy are unique all solution bottle to a wider audience where my customers new to in house on demand digital legal printing in take full advantage of our combined easy to access printer would carefully mass applied and stuff
spk_5: this offer
spk_4: before turn the calibre david i just like a comment on are proving financial strength or balance sheet remain healthy and we begin a new fiscal year on a solid financial footing with reduce leveraged metrics at year end we continue to pursue the and then a portion of our growth strategy and are confident we will have plenty of the execute the right strategic acquisitions are strong backlog and helping order demand position get the set for continued execution on our strategic priorities powered by the as you know the operating system the foundation of our continuous improvement strategy we are excited about the opportunity to grow across the market research and not during the call david for the financial ripping
spk_6: thanks gray a good morning everybody i'm alana few comments as on like gregg said about the quarter in the full your financial performance a comment on their liquidity and the impact of the as machine acquisition on a results and on the your and balance sheet
spk_4: on the top line will year
spk_2: we're going to grow by double digits crossed all three major categories contributing to this was twelve and a half million dollars in extra machine revenue since acquisition on eight four august fourth the is this past year
spk_6: tobias revenues increased twelve percent eighty two point one million accounting for about fifty seven percent of total sales i were revenue is up thirty five percent to forty three point four million or thirty percent of total sales
spk_2: irena thirteen percent of sales came from
spk_7: blair
spk_6: which contributed forty one which increased forty one percent to eighteen million much of that growth was attributable to as gregg said the profitable repair service and will be part of a product that
spk_2: as greg noted that fueled by aircraft utilization and is closely like to that on you're still plenty twenty three gross profit was up ten percent dollars for down on a margin perspective
spk_7: by three hundred and eighty basis points for thirty three point eight percent
spk_2: percentage decrease was mostly due to the mix and actors astor machines lower gross margins as we talked about for compared to the court t i business
spk_7: the answer machine business model has lower or splattered bottles gross margin model
spk_6: but it has more rule operating margins press release references both the gap results in the nine gap results and we reconcile those in the exhibits to the release in a lot of detail we've adjusted even a as a measure of profitability and operating formats and the twelve months ended january thirty first adjusted david the a excluding the acquisition cost of about seven hundred and twenty thousand
spk_2: or totaled eleven point one million that's compared to seven point three million and fiscal twenty twenty two which excludes both a large cures act benefits
spk_7: and the right off of her legacy earpiece system
spk_6: product id stagnant operating profit for the fourth quarter of twenty twenty three was one point nine million compared to one point five million in the same period last year where the school year dagnall operating profit with seven point nine million compared with nine million in fiscal twenty twenty two exclude dignitaries like with it
spk_7: with a period of ownership beginning august fourth after machines contributions one point six male
spk_6: pnm segment nine gap operating profit for the fourth quarter
spk_7: was three point two million compared with half a million in the same period last year and for the full year of twenty twenty three vienna nine gap operating profit was nine nine compared to
spk_6: it point six man in fiscal twenty two again excluded only cares activities
spk_7: the school twenty twenty three operating expenses for forty point seven million compared to forty million last year increases were do the agenda that your machine for half a year
spk_4: and a slightly higher wages and benefits and higher travel related expenses
spk_7: as the pandemic ended and were able to get back to leading customers face to face again
spk_4: plan is to hold very tight control and operating expenses and fiscal twenty twenty four and expect to piece of it will be only modestly
spk_2: at the end of the third quarter we estimated the allocation of the astor machine purchase price to the assets were it and we finalize that in the fourth quarter
spk_4: it grew to include it in that act allocation or the customer relationship and trade name and genitals i know that were appraised at just under three and a half million dollars and we're gonna amortize that over five years so it will amount to a non cash charge of just under seven hundred thousand dollars per year
spk_7: and just and and three hundred and forty get as and since the acquisition
spk_2: in accordance with gap that the on the sales and marketing line
spk_7: well also vital as the fixed asset appraisal and the lancaster
spk_6: an expensive a half year on hundred seventy
spk_4: the details of the ask your machine balance sheet will be in a footnote in the ten k when they smile at that he said
spk_7: spite the borrowings in the third order to acquire after machine or over all financial capacity strong
spk_4: er det to eat at the gay leverage ratio is declining as reduce debt by four point four male and a quarter and increase the a bit da including the acquisition of that esther machine
spk_7: we negotiate a new covenant structure when we refinanced or credit so these to accomplish the acquisition and were well inside those covenants
spk_4: as a result of those facts we blew the have incremental boring capacity if when we need it and we're in frequent contact with our bankers about our plans on top of their own credit facility availability or bank agreement provides term loan equivalent secured financing of capital equipment
spk_7: and will likely borrow about one point seven million for that purpose this year as we planned upgrade our hardware supplies manufacturing equipment to keep up with expect demand growth
spk_6: in fiscal plenty for
spk_8: and with that not during the call back to greg
spk_4: think that it we finish all the challenging pit bull twenty twenty three with a crescendo in the fourth quarter based on current market conditions respect to continue our growth with improving results and fiscal twenty twenty four the gradual recovery of the commercial aviation market as the loader tested measurement segments return to growth trajectory we're taking steps to further enhance efficiency of our airspace product lineup to the continued migration to our top rate of failure printers and are i'll look for the business is part of it in our product an application segment the integration of astra machine is proceeding on plant and we'll have the benefit of a full year revenue from the business and fit for twenty twenty four the new products and operational upgrade plan for after machine shouldn't have your world growth and profitability or delegation that as we move forward now even i'll be happy to take your question
spk_0: upper lip liner question thank you and you'd like to ask a question please do so now by pressing start five by the number one on your telephone keypad if you change your mind and oblige be removed from the key people start and then take one parent was your question please ensure that your device and your microphone are unleash lately
spk_2: a first question comes from the line of ptc date with for taking company peter please go ahead
spk_4: greg i noticed that inventory accounts receivable of up is do you expect to be bringing bill yeah that funding that that we are working out through the air we're taking advantage of pricing efficiencies as well we're fine we're still in a situation where case we have them ill buy more than we need to secure the supplies
spk_2: but they mention that starting to decrease in terms of supplier reliability increasing so expecting it to bring that doubt it's due to the year
spk_9: yeah peter what about bad they don't exist either
spk_7: at a just also i knew included in those numbers are
spk_4: the consolidation of the as term a shame
spk_2: so they they got hooked up a the year in part because we we bought a tumbling
spk_7: okay what about capital spending the to and next
spk_6: this year
spk_2: what i said my comments what david
spk_4: okay so you will be generating a lot of excess cash flow the next do you expect use that you'd pay down debt that
spk_10: er i mean libya we all ended the capital allocation to the okay
spk_4: it's it's like
spk_0: it just seems like the garlic it's okay thank you very much your
spk_11: of your mind that the any further questions today paid off the now by pressing start for the by the number one hundred the phone keypad
spk_12: on next question comes from conspire with styria capital please go ahead come
spk_11: the time spiral good morning
spk_13: more into
spk_4: how just a couple had a greg you mentioned on the data acquisition side a business that if i understood you you want a couple of contracts in korea with government and now begin to pick in this school year do you expect those those revenues from those contracts to be material to the income statement
spk_14: yeah the test and measurement the data you are the business familiar what else are referring to and ya it the data acquisition of the smaller part of the test the measurement segment but it was in that product but certainly would be significant than you or make an impact on the overall financial
spk_13: ill when you look at those kind of run rate that we're at right now i won't be ill orders of magnitude but the important when for that team i see and on the product i didn't pay him a side of the house the last quarter or to our own to ask me astral a machine a business if i if i back out and revenues from that acquisition i just did this quickly
spk_11: it looked to me like the revenues from what i would call
spk_15: identification or legacy product identification
spk_4: and put down at where am i right or perhaps i'm not getting the numbers correctly
spk_16: yeah they were and they're basically fly
spk_4: and yet which was a little disappointing and had to do with some i didn't you mentioned before we had some bad no it's fight for supply of from one of our buyers really crowd that the happy that refit some of the and think that the field and we're working our way through that process now we're probably about halfway through that really gets involved with kind of washing out the bad a new weaken their that good cause the know those machines not to produce as much as radical as we expected
spk_13: but me out what they were coming back out of there right now so i think by the end of que one of most the that are behind us little bit clean up and you too
spk_17: but enjoy i had problematic like that were affected let that are doing fine
spk_18: that's great that's okay okay and if if if the programmatic a product we had a problem that we had that came from one of our suppliers are we seeking compensation from that supplier
spk_19: of course
spk_4: then that comes in different okay well i know how has it has going on
spk_20: last what what had happened
spk_14: then i'll be a lot do it we gotta mutually agreeable a way to work our way out that the with the i don't like the details of it that that public better you know it'll help but as we go into a quite quarrels with
spk_21: okay great
spk_0: max max and good luck
spk_22: i thank them
spk_23: can we take on next question as a final reminder to ask any questions today people he said now by pressing start by the number one on your telephone keypad and with the our next question comes from george miller with mk hate management george please go ahead did you read morning regen david
spk_22: i'm more enjoyed my laying a question with moments bemoaning was very much along call
spk_23: you know question on revenue in the in the d a segment so i didn't use you do you answered some of that but maybe i can ask you to a little bit more details on that
spk_4: he said he will probably new ink and
spk_24: when it starts
spk_18: a started well a little bit actually a the beginning of last year but it just became a bigger issue about the middle of the year
spk_23: okay
spk_22: in kenya and then we deploy your children that about
spk_4: yet again i mean that you know a little i mean i didn't the matters time later that with you is roughly flat
spk_25: but then their own then if you take out the contribution to master machine the the bed with down quite a bit so just joined on that they did you have you had extra cost and less revenue at that because of that problem
spk_4: yeah i've added a hitter in a couple to go away though you why she three way so number one the machine that are impacted don't run or don't run it off and right you get less revenue and know that's kind of the are typically ancient supplies that it or you higher margin product or us
spk_25: and then you have the issue of fun
spk_4: you're having to spend a test the and baker technical support teams get you out in repair the yeah because we didn't warrant a products that we sell true to our and customers
spk_25: and then you have
spk_24: it he cost of those supplies the go out there so it has up as a warrant to expand an actual technical support costs for us
spk_22: to do you think it over
spk_4: okay
spk_9: and that you'd probably gonna have that the new by the news they say that how much was the warranty expense in the ear in the coding
spk_26: yeah i don't think we divulge that journal specific number
spk_23: okay okay with you get significant with you
spk_9: he okay
spk_23: and when you get your how we a true and that's that getting back to a long time to solve the problem because you get started like at the beginning of last year i mean that has run through
spk_4: at least twelve months rights and so help help us understand how do problem like that get some well first all you gotta ya it it shows up the be a few issues in different locations for different reasons been at that is to the issue really is getting to the root cause he you treat down at a variety of different yeah it was a temple it out should change that and then at work and so he had the technical team both from suppliers well their own team have you got your lot of dynastic the figure it out please they they didn't come up and solution
spk_23: the now it takes and implemented because you gotta get ill it requires a physical chain and about flushing as a machine beatty to make it a simple terms and then change got a couple of minutes and one once you do that they were commodity and but it yet we have step one hundred machine in the field so he can't do them all and insulated
spk_15: okay
spk_4: and me i asked how many how many him supplies you have
spk_23: maybe i'm getting a to next month there are no
spk_27: oh yeah we have you actually quite a few different suppliers
spk_28: and in more than can't really
spk_23: okay and the problem woot woot was with just one
spk_29: correct
spk_4: okay
spk_0: okay pigmy
spk_2: it's a nice or so
spk_0: okay

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