AstroNova Sales Slide Amid Restructuring

AstroNova (ALOT -11.74%) reported a 10.9% year-over-year revenue decline for the second quarter of fiscal 2026, with management emphasizing leadership changes, sales process restructuring, and strategic shifts in both product identification and aerospace segments. This summary highlights key management initiatives, operational challenges, and the near-term financial outlook based on the latest earnings call.AstroNova restructures sales for product ID turnaroundTheAstroNova(ALOT -11.74%) product identification (PI) segment experienced an 8.9% year-over-year revenue decline, primarily due to customer attrition and a $2.6 million drop in recurring supplies, parts, and service. New print solutions, including the QL 425, QL 435, and an upgraded Emtek-based 800 model, were launched in July and August, but have not yet contributed meaningfully to revenue."I reorganized sales into two teams: customer acquisition and customer retention. This reorients our focus on taking care of our current customers and winning back those we have lost while gaining new customers. Also working to change the skills of our sales team to align with our new product offerings. Our new print solutions, especially the significantly larger and higher value print solutions, we're now offering are capital projects for our customers. This is a very different sales process from how we have sold our legacy tabletop printers. The sales cycle is longer, and customers' needs are more specific. We've been making progress with our new go-to-market strategy and believe results will begin to demonstrate it over the next several quarters."-- Yorek Itmann, President and Chief Executive OfficerThis shift to a bifurcated, customer-focused sales structure marks a fundamental change in commercial execution, but near-term financial risk remains elevated until customer retention rates and sales from higher-value hardware stabilize.Aerospace segment faces volume and mix pressuresThe aerospace segment saw a 15.1% year-over-year revenue decline, driven by a difficult comparison with the prior year’s nonrecurring shipments and a $1.4 million, or 37%, drop in segment operating income. The ToughRider 640 flight deck printer ramp began in June, representing half of segment shipments, with management targeting over 80% adoption in upcoming quarters and highlighting stable long-term demand due to commercial aircraft build rates."During the quarter, we began shipping the ToughRider 640 to a major aircraft OEM. As a result, the ToughRider represented 50% of second-quarter shipments and remains on track to reach our target of over 80%. Forty-five percent of the segment's revenue is for aftermarket sales and service, and roughly 10% of hardware sales are dependent upon spare replacement machines. However, for new build aircraft, we like the long-term tailwind provided by growth in commercial aircraft build rates."-- Yorek Itmann, President and Chief Executive OfficerThe increasing share of ToughRider products and substantial exposure to aftermarket sales reinforce medium-term revenue visibility, but reliance on new build activity and high spare part demand exposes the business to cyclical risks linked to the aerospace industry.Debt restructuring and cash discipline support turnaroundAstroNova paid down $5.1 million in debt in the first half of the year, with cash and total liquidity at $10.4 million as of July 31, 2025, and a leverage ratio of 3.5 times funded debt to adjusted EBITDA. The bank granted a waiver on the fixed charge coverage ratio, and debt restructuring discussions are underway, expected to conclude within 60 days."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 sixty 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."-- Thomas DeByle, Chief Financial OfficerImproved cash discipline and proactive debt management are critical to supporting AstroNova’s turnaround strategy and providing financial flexibility for ongoing operational changes.Looking AheadManagement is targeting improvements in both margins and customer retention as key milestones. Orders for fiscal year 2026 were flat year over year at $35.9 million, while company backlog declined $4.6 million year over year to $25.3 million. No explicit quantitative forward guidance was provided, but management highlighted expected margin benefits in fiscal 2028 from the expiration of a Honeywell royalty agreement and indicated that the effectiveness of new printer platforms will become clear within the next few months.