The following is excerpted from the question-and-answer section of the transcript.
(Questions from industry analysts are provided in full, but answers are omitted - download the transcript to see the full question-and-answer session)
Question: Robert Van Voorhis - Vanatoc Capital - Analyst
: (multiple speakers) to meet you on the first call.
So I just wanted to ask a couple of quick -- Yeah, I just wanted to ask a couple of quick questions, and I suspect the first one's more so for Greg. But
Greg, on the M&A call for MTEX, I think you or David mentioned that MTEX had pretty handsome EBITDA margins. Obviously from the release this
morning, it looks like they don't, but judging from the results as well as just to update some longer-term guidance. Can you explain the difference
a little bit?
Question: Robert Van Voorhis - Vanatoc Capital - Analyst
: Okay. And so are those costs -- are they backed out as part of the non-GAAP adjustment, is that like the integration costs or what is that?
Question: Robert Van Voorhis - Vanatoc Capital - Analyst
: Right. Okay. So I guess longer term, what are the milestones that we should be looking for as outside shareholders regarding MTEX? Like when do
we expect them to get to profitability? How -- what are the levers that we can pull that we should be on the lookout for just because I mean, longer
term for FY26, I think we took down EBITDA margin guidance, even though T&M the highest margin businesses should do quite well. So I'm just
trying to figure out what they'll hold us accountable to -- regarding MTEX?
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SEPTEMBER 16, 2024 / 1:30PM, ALOT.OQ - Q2 2025 AstroNova Inc Earnings Call
Question: Robert Van Voorhis - Vanatoc Capital - Analyst
: Right. Okay. And I guess just as my last question, so at recent conferences and I know Tom, we've been a part of them as well. But you guys have
emphasized more M&A as a key strategy. Can you just I guess, expand upon why that is the plan moving forward? I mean, why not just distribute
cash in some form of buybacks, which are generally preferred or just as dividends as opposed to forcing yourself to look for something new. I know
Astro Machine was great but I mean how many business are out there like that to acquire?
Question: Brandon Daniel - Atai Capital Management - Analyst
: I just wanted to follow up on Robbie's questions around margins. So if I just look at what you've guided to previously, call it, the base business,
legacy AstroNova. For 2026, you had essentially guided to around, call it 15% EBITDA margins. And if we just assume that business grows at
mid-single digits, which you've talked about in the past, that implies that MTEX is margins in 2026 are flat to down or maybe flat- to low-single
digits. Is that accurate is what you're guiding to that?
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SEPTEMBER 16, 2024 / 1:30PM, ALOT.OQ - Q2 2025 AstroNova Inc Earnings Call
Question: Brandon Daniel - Atai Capital Management - Analyst
: I'm talking -- no, I'm only strictly talking about adjusted EBITDA. So the math again is assuming the legacy business grows at your prior guidance.
So you hit 15% EBITDA margins in '26 and just some mid-single-digit growth. If I run with that, that implies MTEX is at flat- to low-single-digit
margins, assuming double-digit growth. And it really implies that they're actually still unprofitable in '26. So I'm trying to understand where that
delta is coming from, basically.
Question: Brandon Daniel - Atai Capital Management - Analyst
: Yes, correct. Yes. For the legacy business. Call it, yes.
Question: Brandon Daniel - Atai Capital Management - Analyst
: Got it. So just on the topic of maybe uses of capital going forward, I'd mentioned there -- I know there has been some mention of M&A at the
roadshows. I know Robbie had touched on that, but I guess a question, as an investor, Greg, I've been around for a while and then several of my
peers have been around for longer. When I'm looking at your share price on the legacy business, call it, $17 at the time for when you required MTEX.
I'm struggling to see how MTEX was $24 million or MTEX was a better use of capital than doing some tender offer or buyback. So assuming your
share price relishes here for a while longer is that -- does that come into consideration? Does the share buybacks come into consideration there?
Because yeah, just maybe some clarity on how we expect to get paid basically from the acquisition of MTEX and then what's your focus of capital
-- use of capital going forward.
Question: Brandon Daniel - Atai Capital Management - Analyst
: Got it. Thank you (multiple speakers)--
Question: Brandon Daniel - Atai Capital Management - Analyst
: Got it. I appreciate. Thanks.
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