Revenue Growth and Tailwinds
Consolidated revenue increased to $39.4M from $37.7M a year ago, up ~4.5% YoY. Sequentially up from $37.5M. Tariff mitigation and foreign currency translation contributed approximately $0.7M and $0.6M respectively (total ~$1.3M) to the quarter.
Aerospace Segment Outperformance
Aerospace revenue grew 16.3% YoY to $13.3M. Commercial Aircraft sales rose 46% YoY and hardware revenue increased by $2.5M (38% YoY). Aerospace orders were $19.5M with a book-to-bill of 147% and aerospace backlog ended at $18.2M (more than double prior year).
Strong Orders, Book-to-Bill and Backlog
Total orders were $46.3M, up ~33% YoY, producing a book-to-bill ratio of 118%. Total backlog was $32.4M. Product ID orders increased to $26.8M and Product ID backlog rose sequentially to $14.2M, improving revenue visibility.
Margin Expansion and Profitability Improvement
Gross profit rose to $14.4M from $12.0M and gross margin expanded to 36.6% (+490 bps YoY). Adjusted gross margin was 36.9% (+410 bps YoY). Operating income increased $1.0M to $1.6M; non-GAAP operating income increased 70% to $2.6M. Adjusted EBITDA increased to $4.1M with a 10.5% adjusted EBITDA margin. Net income improved by $0.7M (positive vs. a prior-year loss); non-GAAP net income was $1.4M or $0.19/sh.
Cash Generation and Balance Sheet Progress
Generated $3.0M of cash from operations and $3.0M of free cash flow in the quarter. Debt was reduced by $1.7M to $36.0M (down from $44.8M a year ago). Ended quarter with $17.4M in liquidity (cash $4.7M + $12.7M revolver capacity). Net debt leverage improved to 2.6x, inside covenants. Capital expenditures were minimal at $36k.
Resolution of Arbitration and Anticipated Royalties Benefit
Comprehensive settlement agreement resolved arbitration and related proceedings tied to the MTEX acquisition, removing a source of uncertainty. Company expects expiration of a major royalty obligation in Q3 FY2027, providing approximately $2.0M of annualized gross profit beginning in Q4.
Operational Investments and Go-to-Market Improvements
Added a global sales director and a global operations director to reshape channels and improve manufacturing/processes. Product ID go-to-market is gaining traction in targeted verticals (life sciences, chemical, industrial) and desktop labeling revenue grew sequentially.