Good day, welcome to the AstroNova's first fiscal quarter 2024 financial results conference call. Today's conference call is being recorded. I would now like to turn the conference over to Scott Solomon of the company's investor relations firm, Sharon Merrill Associates. Please go ahead, sir. Thank you, Ellen. Good morning, everyone, thanks for joining us. Hosting this morning's call are Greg Woods, AstroNova's President and Chief Executive Officer, and David Smith, Vice President and Chief Financial Officer. Greg will discuss the company's operating highlights. David will take you through the financials at a high level. Greg will make some concluding comments, management will be happy to take your questions. By now, you should have received a copy of the earnings release that was issued this morning. If you don't have a copy, please go to the investors page of the AstroNova website, www.astronovainc.com. Please note that statements made on today's call that are not statements of historical fact are considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on a number of assumptions that could involve risks and uncertainties. Accordingly, actual results could differ materially except as required by law. Any forward-looking statements speak only as of today, June 8th, 2023, and AstroNova undertakes no obligation to update these forward-looking statements. For further information regarding the forward-looking statements and the factors that may cause differences, please see the risk factors in AstroNova's annual report on Form 10-K and other filings the company makes with the Securities and Exchange Commission. On today's call, management will be referring to non-GAAP financial measures. AstroNova believes that the inclusion of these financial measures helps investors gain a meaningful understanding of the changes in the company's core operating results. It also helps investors who wish to make comparisons between AstroNova and other companies on both a GAAP and a non-GAAP basis. A reconciliation of the non-GAAP financial measures to their most directly comparable GAAP measures is available in today's earnings release. With that, I'll turn the call over to Greg. Thank you, Scott. Good morning, everyone, thank you for joining us. Despite a macroeconomic climate that remains volatile, we delivered a solid first quarter performance. Our results highlighted our progress in three key areas. First, integrating the acquisition of Astro Machine. Second, maintaining disciplined expense management. Third, capitalizing on the continuing rebound of the commercial aviation market. Through the exceptional work of our team members around the globe, we generated double-digit revenue growth in both our Product Identification and Test and Measurement segments. Our aggressive focus on implementing and maintaining cost discipline measures helped drive a 91% increase in operating income. This increase translated to a 160 basis point improvement in operating margin. On the bottom line, net income grew to $800,000 or $0.11 per diluted share, compared with $400,000 or $0.06 per diluted share in the same period of fiscal 2023. Let's look at each of the segments, beginning with Product Identification, which reported first quarter revenue of $25.1 million, nearly 16% higher than the year earlier period. The increase was driven by the addition of Astro Machine, which we acquired in August of last year. The integration of Astro Machine is proceeding on plan with a rapid level of cross-pollination in terms of engineering, manufacturing, and product development between our operations in West Warwick and Elk Grove Village. For example, our first jointly developed printer has already been completed and will be released later this month, and at least one more additional jointly developed printer should be released before the end of the year. First quarter segment operating profit margin improved 350 basis points to 10%, reflecting the higher Product ID revenue from a more favorable mix in the 2024 period. Going forward, we expect revenue mix to also benefit from the retrofitting of printers in the field that were sidelined since last year by a supplier-related ink quality issue, as those units are restored and returned to full production. We expect this issue to be fully resolved before the end of the fiscal year. We kicked off our Product ID trade show season last month with great responses at two large European trade shows in Germany, interpack 2023 in Düsseldorf, and a couple of weeks later, FESPA Global Print Expo in Munich. The shows featured a number of our latest products and accessories, and we were delighted by the number of high-quality leads we generated and the traction our new products are gaining with customers across an array of applications. Also last month, we hit another important milestone with the launch of our e-commerce site, giving customers the ability to research and purchase AstroNova printers and supplies directly over the Internet. It's ideal for new customers searching for a solution, as well as existing customers that want to reorder or check their account order status. The site provides a convenient, user-friendly experience. Initial customer response has been very positive, and we will continue to add products and functionality to the site throughout the year. Turning to the Test and Measurement segment, revenue increased 11% year-over-year to $10.3 million, driven by continuing improvement of the commercial aerospace market. Segment operating profit was up modestly, but margin was down 50 basis points to 20.1% of revenue. With the projected global demand for air travel in the coming decades, the outlook for our aerospace printers, supplies, and services is strong. Airbus anticipates 46,930 aircraft in service by 2041, up from 22,800 in 2020. A total of 39,490 of those are expected to be new deliveries, with 60% to support growth and 40% to replace aircraft that will be retired from service. Boeing likewise projects a massive jump in airline fleets over the next 18 years. Turning to the data acquisition portion of Test and Measurement segment. In addition to our core aerospace and defense programs, we have landed several new power generation monitoring projects due to the exceptional accuracy and performance of our data acquisition products. We look forward to growing this new segment in the coming quarters. Finally, we were pleased to see the company-wide bookings in the first quarter were up over 18%, $38.4 million. With further strengthening of our backlog, that totaled $38.7 million at quarter end. Backlog is up more than 32% year-over-year and more than 8% sequentially from the fiscal year-end. Now, let me turn the call over to David for additional financial review. Thanks, Greg. Good morning, everybody. At the top line, we've posted 13% revenue increase to $35.4 million and solid contributions from both segments. We always highlight the revenue recurring revenue nature of our overall business model. Looking at revenue by type, hardware revenue grew by more than 25% to $11.7 million, driven primarily by the addition of Astro Machine in the Product ID segment. Supplies revenue increased by more than 6% to $19.1 million, reflecting demand growth in both segments. The service and other category was up by more than 24% to $4.7 million. In total, hardware revenue accounted for 33% of the total revenue in the first quarter, supplies 54%, and service and other, the remaining 13%. As a percentage of revenue, both hardware and service were up year-over-year, while supplies revenue was down about 4%. Greg noted the cost control in the quarter. Operating expenses as a percentage of revenue decreased to 30.8% in the first quarter from 32.1% in the same quarter last year. Which, along with a 40 basis point increase in gross margins led to a 160 basis point increase in operating profit margin. I'll note that the operating expense this quarter was lower than the prior two quarters. That remains a very strict focus for us. From a geographic perspective, domestic revenue accounted for 64.5% of total revenue, up from 63.4% in the first quarter of the same quarter last year. International revenue accounted for 35.5% of total revenue, compared with 36.6% a year earlier. In dollars, we saw double-digit growth in Asia and Central and South America in the quarter, and high single-percentage growth in Europe. Adjusted EBITDA, which we define as normal EBITDA, plus the share-based compensation, increased to $3.1 million, or 8.6% of revenue, compared to 6.2% of revenue last year. Cash was a million and a half dollars higher at the end of the year. Total debt at quarter end was $29.7 million, slightly lower than year-end. Total debt to trailing twelve-month EBITDA is calculated in our bank agreement, includes a full year of Astro Machine, and that's checks in at 2.2x. On the historical GAAP financials, the debt to adjusted EBITDA would be 2.6x. We're comfortable with this level. We do expect leverage, though, to decline through the year, absent any acquisitions. We've got sufficient capacity to support our business, the operating needs primarily, and we will use about $1.7 million of secured financing for some new capital equipment that will upgrade our hardware and supplies manufacturing equipment to improve efficiency and keep up with demand growth. Inventory investment increased in the quarter a little bit, primarily to support our T&M segment. We're still experiencing some supply chain struggles in the T&M electronic components area, and in a few instances in the PI segment as well, where we need to purchase extra buffer stocks. However, there are clear signs that the supply chain issues in aggregate are, and we're confident that our inventory will shrink as we move through the year. We'll use the free cash to reduce debt. With that, I'll turn the call back to Greg. Thanks, David. In closing, we began fiscal 2024 with improved results that mark an important step towards our larger goal of driving sustained top-line growth and margin enhancement. Barring any downturn in the global economy, fiscal 2024 should see continued momentum in the commercial aerospace business, which we expect to contribute favorably to the performance of our T&M segment. In Product ID, our focus is on innovation, with multiple new products slated for launch this year and other technology initiatives underway across our lines of business. Now, David and I will be happy to take your questions. Operator? Thank you. We are now entering our Q&A session. If you would like to register a question, please press star followed by one on your telephone keypad, and you will join the question queue. If you change your mind and would like to revoke your question, please press star followed by two on your keypad. When preparing to ask your question, please make sure that your line is muted locally. Unmuted locally, sorry. Our first question comes from Samir Patel. Samir, your line is now open. Hey, guys. One question on the Product ID side. I know this is the first Q1 that you have the Astro Machine business in there, and I noticed that there was a sequential step down in revenue from kind of the Q3, Q4 levels. Is there some seasonality to that business? There we don't have a good enough for a read exactly on that, but there does seem to be a favorability of the second half of the year from the, you know, numbers that we've looked at. A few of the customers that we've talked to kind of bear that out, although they don't commit exactly to that kind of cycle, but it seems to be that type of a cycle. It tends to do. Okay. Kind of Q3, Q4, you know, supplies build up is what we've seen. Okay. That makes sense. I'll hop back in the queue, and I might have a couple others. Thanks. Okay, sure. As a reminder, if you would like to ask a question, please press star followed by one on your telephone keypad. Our next question comes from Peter Sidoti, from the Sidoti & Co. Peter, your line is now open. Please go ahead. Good morning. gentlemen, two quick questions. One, can you give me a capital spending budget for this year? We can give you an approximate. David, do you want to address that? Yeah. We've got about 1.8, sort of legitimately in the pipeline. I'm gonna estimate that we'll end up at about $2 million. Okay. The excess cash flow from operations will be used to pay down debt. Is that the assumption, unless an acquisition comes along? Yes, that's correct. That makes sense. Mm-hmm. Inventories, do you think they'll stay flat given the growth, or do you think you'll be able to bring them down? We should be able to bring them down. I'm not going to commit to a number, but I think the supply chain, as I said in my comments, I think the supply chain issues are abating, and we're gonna concentrate on getting the inventory levels down over the balance of the year. It's a slow process, but we will get them down. Right. Okay. Yeah. One softball question, Greg. What's your economic assumptions for 2023 at this point? My economic assumptions? Yeah. What do you think is gonna happen with the economy over the next 12 months, and how do you think it'll affect you? There's all different views of what's going on. Yeah, well, you know, I'll have to admit, I'm not an economist, but, you know, right now, you know, as I mentioned in my big driver I mentioned in the presentation there is, you know, we do see a very strong demand in the aerospace. That's probably the strongest indicator that seems to be, you know, solidly up. You know, as long as the economy works well and, you know, doesn't seem to be affected at all so far. We see that as a big driver. Okay, you see no slowing down in any of your sectors at this point? Well, I said in the aerospace, you know, in our Product ID, you know, it's a very global business in a lot of different market segments, you know, so it's hard to predict exactly, you know, what the macroeconomy may or may not affect that. Obviously, the better the economy, the better we'll do. Yeah. Okay, thank you very much, gentlemen. Sure. Thank you. If you would like to register a question, please press one. Please press star followed by one on your telephone keypad. Our next question comes from Tom Spiro, from Spiro Capital. Tom, your line is now open. Please go ahead. Tom Spiro Capital. Good morning. Morning, Tom. Morning. On Product ID. As I recall, Astro Machine's revenues, annual revenues, run in the low to mid-20s, something like $5 million-$6 million a quarter. If I'm right about that, and if it did something like that in Q1, it would look to me like what I'll call core Product ID, was down. Am I right? We don't break it out exactly, but, yeah, I would say the growth in the Q1 was driven by the Astro Machine business. Correct. You know, it's not simply the growth. It looks like product, core Product ID was down. Well, we don't break out the different segments, Tom. Okay. Yeah. The quality issue. I think the quality issue first emerged in fiscal 2022, as I recall from one of your annual reports, and if I understood you, your comments earlier, it's going to be resolved by the end of this fiscal year. That seems to take a very long time. Why? We actually are on our third iteration of a fix for that, to be honest with you. What happened is we worked with the supplier, and their first two recommendations, which we implemented, did not prove effective in the long run. We reverted to a third that we tested very stringently in the last four or five months, and that does seem to be working very well. Now we're rolling that out across the board. Unfortunately, some of the machines we upgraded, we have to upgrade again to this latest fix. The good news is it does look very sustainable now. Which product lines are affected by the quality issue? It's most of the TrojanLabel products. Yeah, most of the TrojanLabel products. Actually, it's very little of the QuickLabel. It's mostly in the TrojanLabel line. If someone has one of. I was gonna say, it works for some applications fine, but in certain applications it didn't perform as well as it needs to be, and that's why we're redoing those machines. I see. I see. If I'm one of the folks who has one of the affected machines, does the problem prevent me from using the machine at all, or simply do I use it at a lower rate? What do I do? You may be able. It depends on your application. Like I said, some applications, and there's different types of labels and different applications of our labels in a wide variety of markets. Some see no issue at all. Some see an intermittent issue, where we can, you know, address that, you know, kind of just treating the symptoms but not the root cause. Others just, it doesn't work, for their application because they have very specific application requirements. as I. Several hundred printers, yeah. As I recall, we did receive some modest compensation from the vendor, a couple of years ago for this problem. Are we expecting further compensation for what we've suffered or no? We can't disclose that exactly because it has to do with an agreement that we made, but, it's a combination of, you know, some concessions and then, future concessions and, you know, a variety of elements, but there's not a clear payment like we had, at the outset there. Okay. All right. This is most helpful, Greg. Thank you very much, and good luck. Thanks, Tom. Thank you. Our next question comes from Samir Patel from Askeladden Capital. Samir, your line is now open. Please go ahead. Hey, David, following up on the inventories issue, I know you don't want to be pinned down to a specific number, but if I just look at the data I pulled here, and I don't know if this is accurate, but it looks like from October of 2002 all the way through, you know, call it mid to late 2018, your inventory turns were kind of at five or above, except for, you know, a very brief period early in that decade. You know, today those inventory turns, according to my data source, are at 3.3. Is there something structural about your business where as these supply chain headwinds abate, I mean, do you think getting back to maybe that, you know, 4.5x inventory turns is a reasonable target, or is there something structurally different in the business today? I love the question. I wish I'd been around long enough to have that in my bones. There's nothing about the business inherently that should keep us from getting back to those levels. I think that the aerospace business will always turn slower than the Product ID business for a variety of reasons, including the fact that you have to support these printers for a very, very long time. You know, if you have old technology, you have to do last time buys to make sure that you have the components to build the printers, you know, over that entire period. I think that's sort of the long-term drag on inventory turns. The Product ID business turns inventories much more quickly. We did have a slowdown across the board during this most recent struggles with the aerospace business and the pandemic and so forth. No, I think our turns should improve in the PI business. I think there are secular reasons why the aerospace business should improve. No, I think our turns should improve over the next couple of years. That makes sense. I mean, another way of looking at it is the last time that your revenues were at comparable levels on a trailing basis, your inventories were at, I think, $35 million, according to this data, as opposed to $50 million now. I mean, I know you're not wanting to put out a number, but it sounds like it could be quite meaningful. I guess, what time frame do you expect that to be realized? I mean, is that kind of 24 months? Is that 12 months or somewhere in between? Well, yeah, I mean, the business is bigger, we bought Astro Machine, the inventories are gonna have a little bit of a step up. I think it's gonna take. During this year, we expect, you know, I said in the comments, I think our cash flow generation as we move through the year, the inventory levels are gonna get better. I'm not committing to a specific number. Okay. Hopefully, we'll be able to improve that, you know, in future years as well. I, you know, that's speculative at this point. Okay. Yeah, Samir, this is Greg. I could add a little bit of color to that if you, if you'd like, and I think we've said this in the past as well, is that, you know, when we had these supply chain issues, you know, going back over a year now, you know, where we found issues. Especially on our supplies, part of our PI business, we definitely stocked up above our normal run rates. That, you know, that'll start to bleed off. Actually, it's just orders for those suppliers are typically six to eight months in the future. Some of that is actually gonna bleed off this year, and it'll continue into next year. Okay, perfect. One topic you haven't talked about for a little while is, I know you implemented the new ERP system. You were excited about some of the visibility that gave you. I think you're, you know, integrating Astro Machine. Maybe just talk about some of the benefits there and how you see that helping you run the business going forward. One of the biggest benefits is having it integrated amongst our different, you know, operations. Here in West Warwick, you know, we're very far through the process. It's now a matter of, you know, kind of, you know, optimizing processes. We kicked it off very rapidly at Astro Machine because it's, you know, it's here domestic, it's a smaller operation. We expect to have that one done, you know, probably by the October kind of timeframe. It's moving very quickly. Then we move directly to the branch locations. You know, Canada, U.K., France, and Germany have different instances of NetSuite that they've had over time. We just need to consolidate all of those, which that'll be the focus after Astro Machine. Getting everyone on the same system, clears up a fair amount of inefficiencies that we have to deal with, you know, mainly in the financial reporting side of the business. The CRM systems, having those integrated, 'cause that's also part of NetSuite, that just helps the whole sales and marketing team, you know globally what's going on instantaneously. Gotcha. I guess, I guess I'm excited to hear about e-commerce next time, but probably wait for more data. As far as M&A. If you want to check it out, I was gonna say, just go to our AstroNova Product ID site and click on the Shop button, you can explore it on your own. I will do that. As far as M&A, I mean, I know timing is kind of not within your control, but do you want to talk about the pipeline or, you know, are you seeing more opportunities on the Test and Measurement side, the Product ID side, both of them? Yeah. It's, you know, it's pretty good in terms of, number of, elements. We typically have, you know, a handful, you know, I'd say, whatever, you know, four to six, things that we're looking at, seriously, both in Test and Measurement segment and in the Product ID segment. You know, and, you know, there's a few that look, interesting. It's... You never know, though, right? It looks interesting. You start talking and, you know, if we don't like what we see, we'll walk away. You can see we're kind of conservative in the type of deals we do. You know, obviously, if we find, or we get one of those closely to the parameters we have for Astro Machine, you know, we'll be jumping on it, and, you know, we'll have, you know, we've heard about what's going on with the balance sheet, so we should be in a good position to do a nice deal later in the year if we can get the right one, you know, vetted out from our diligence efforts. Okay. Greg, I actually did what you said. I am on the e-commerce website. I'm only seeing the ability to buy printers and presses. Am I missing sort of the supplies component of that, or is that a different part of the website? No, you can go in there. You can buy label, all different labels. You actually can buy them. Oh, I see it now. Unfortunately, you bought a competitor printer, you can actually buy the labels for that printer, too, to get better results. Good to know. All right, well, I'll turn it over. Thank you, guys. All right. Thanks, Samir. Thank you. Our next question comes from George Melas-Kyriazi from MKH Management. George, your line is now open. Please go ahead. Thank you. Good morning, gentlemen. A follow-up on. Hi, George. Hi, good morning. Follow-up on Tom Spiro's questions about the quality issue. It clearly affected machines that are in the field, so it impacts supply sales. Did it also impact hardware sales? Was it just harder to sell the Trojan machines given the issues that you were having? Yeah, in certain models, you know, mainly through our channel segment. We know which applications, you know, we can sell the, you know, the machines into. On a go-forward basis, we're able to do that incrementally. Now we have, of course, the fix in place, so we can go a little more aggressively on it. The channel. Yeah, you can imagine if you're a channel partner and you had a number of issues, you know, you're reluctant to do it until you see the new solution prove out and regain those, you know, sales. You know, a lot of what we're doing is working with the channel partners to get them back online, explain exactly what we did to make sure that we have a solid solution here. you know, that's working, but now they need to go back out and generate their customer sales. there was a hardware impact- Okay. for those reasons. Okay. Maybe help us understand, like, Trojan, what% of revenue is direct or how much is through the channel? How important is the channel for Trojan sales? It's, you know, it's an important piece of it. You know, there's a good amount of direct sales as well, but a lot of the OEMs, some of the larger accounts, happen to be either, you know, OEM accounts or channel accounts, for Trojan equipment, less so with the QuickLabel. Okay. Okay, great. maybe a question on the bookings. They seem to be really strong. Was there any particular area of strength, or was it sort of across the board? Was it like a few large deals? maybe give us just a little bit of color on the bookings. Yeah, there wasn't any, you know, an outsized deal that was involved there. It's pretty much, you know, spread across the different products in both the Test and Measurement segment and in the Product ID segment. You know. You know, the trend is, you know, the trend in the aerospace products is generally favorable. Okay. How do the aerospace guys order? I mean, is it very lumpy, or is it sort of just a continuous, kind of order patterns? Yeah, we wish it was the latter, but, you know, it's more the former, right? It depends on, you know. In the Test and Measurement segment, I'll put those into, you know, one, because that's how we report it. With the kind of data acquisition, those tend to be a lot of aerospace and defense government contracts, so that's very lumpy. The aerospace product lines, you know, it depends on which, you get a new airline who buys, you know, whatever, you know, say it's, 50 Airbus A320s or 50, you know, Boeing 737 airplanes, you know. They then, you know, come to us or go to Boeing or Airbus, and it depends on which product category you're talking about, and they put their orders in. That could be a big order. It might be spread over 12 months, or even longer. Sometimes it's a forecast. We can't even book it as an order, that's where that lumpiness comes in there. You know, sometimes we get some surge orders. The short term, "Hey, we need something in three months that wasn't forecast," that's pretty rare. We don't see a lot of that in the aerospace. It's pretty predictable. There's typically, you know, we're shipping product six months or more in advance of when it goes into the final assembly of the airplane. There's a spare parts part of it. You know, there's other parts of the business that can jump around as well. Okay. Okay, great. That's helpful. Just a final quick question for David. David, the G&A line, do you expect some leverage on that G&A line in the future as the business grows? I mean, basically as a percentage of revenue, do you see G&A as a percentage of revenue coming down? Yeah, that's the goal. It makes sense that that will happen. You know, we haven't talked about specific percentage from a guidance standpoint, but certainly, you know, it would make sense that that would happen, and that's our goal. I think that's what will happen. Okay. Is there a particular number you can give about the ERP implementation costs in the quarter? Most of the implementation costs, you know, are in the rearview mirror. We are spending some capital, on implementation at Astro Machine. We'll spend some more, on capital in the European convergence with the global system. Those numbers- Yeah. are in my overall guidance for capital spending this year. It's, they're not huge. Okay. Okay, great. Okay. Thank you very much. Thanks, George. Thank you. There are no more questions on the line, so I'll now hand back to Mr. Woods for any closing remarks. Great. Thanks a lot. Thank you, everyone, for joining us here this morning. We look forward to keeping you updated on our progress in the future. Have a good day. That concludes today's conference call. Thank you, everyone, for joining. You may now disconnect your lines. Have a lovely rest of your day. You too.