Good day, and welcome to AstroNova's Fourth Quarter Fiscal Year 2017 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the call over to David Calusdian. Please go ahead.

Thank you. Good evening, everyone, and thank you for joining us. Hosting this morning's call are Greg Woods, AstroNova's President and CEO; and John Jordan, Vice President and CFO. Greg will begin the call by reviewing the company's operating highlights and business outlook. John will take you through the financials. Greg will make some concluding comments, and then management will be happy to take your questions. By now, you should have received a copy of the earnings release that was issued earlier today. If you do not have a copy, please go to the Investors section of the AstroNova website, www.astronovainc.com. Please note that statements made during today's call that are not statements of historical fact are considered forward-looking statements within the meaning of the Securities and Exchange Act of 1934. These forward-looking statements are based on a number of assumptions that could involve risks and uncertainties. Accordingly, actual results could differ materially. Such forward-looking statements speak only as of the date made, except as required by law. The company undertakes no obligation to update these forward-looking statements. For further information regarding the forward-looking statements and factors that may cause differences, please see the Risk Factors section in the AstroNova annual report on Form 10-K and other filings the company makes with the Securities and Exchange Commission. To supplement its consolidated financial statements presented in accordance with GAAP, AstroNova uses free cash flow, which the company defines as net cash from operating activities less capital expenditures. The company believes that the inclusion of these non-GAAP financial measures help investors gain meaningful understanding of the changes in core operating results. It can also help investors to make comparisons between the company and the other companies on both the GAAP and non-GAAP basis. Now I'll hand the call over to Greg Woods.

Thank you, David. Good morning, everyone. I'm pleased to review the company's fourth quarter and full year fiscal 2017 performance and provide perspective on our recent TrojanLabel acquisition. Turning first to our financial results. We achieved a record quarter in revenues at $25.7 million, representing an 8% increase over the prior year's fourth quarter. We also achieved record full year revenues of $98.4 million, an increase of 4% over the previous year's annual revenue. Product Identification revenues came in at $18.7 million, up 13% over the prior year and setting a new quarterly record for this segment. This result is underscored by the robust demand for our color inkjet printers and consumables, as color printer placements reached a record level. Our Test & Measurement segment posted revenues of $6.9 million, up 7% over the third quarter, but 3% lower than the prior year's fourth quarter sales. For the full year, both segments reported year-over-year growth. Product Identification revenues were up 4% over the prior year at $69.9 million with the increase traceable to the continued expansion of the company's digital inkjet color printers and consumables. The Test & Measurement segment reported revenues of $28.6 million for the year, also up 4% over the prior year, with the aerospace line of ToughWriter printers and consumables the key growth drivers. From a channel perspective, we experienced significant growth in the fourth quarter from our international markets, with revenues reaching $8.1 million, a double-digit increase over the previous year. The international growth was accomplished despite the adverse impact of foreign exchange rates based on the strong dollar. We also achieved year-over-year growth in our domestic markets with revenues at $17.5 million, representing a single-digit increase over the prior year. We continue to expand AstroNova's global presence by establishing new dealer relationships in China…

Thank you, Greg. Good morning, everyone. As Greg mentioned, revenue increased to a record $25.7 million in the fourth quarter and $98.5 million for the full year of 2017. Domestic revenue of $17.5 million was essentially the same as in the fiscal 2016 fourth quarter. Revenue from international sales increased 28.2%, with higher sales in most international markets. Fluctuations in foreign exchange rates reduced revenue by approximately $188,000. Revenue in the Product Identification segment contributed $18.7 million in the quarter, 13% more than the fourth quarter of fiscal 2016. Revenue for the Test & Measurement segment was $6.9 million, off about 3% from the same period a year earlier, largely reflecting transition to our next-generation data acquisition products and the timing of the aerospace order releases. The consumables product category continues to deliver strong recurring revenue with revenue of $14.8 million for the fourth quarter, 15% higher than the same period in fiscal 2016. Hardware revenue of $8.5 million was 7.4% lower than the fourth quarter of fiscal 2016, largely related to order timing as we ramp up the new products in both Product Identification and Test & Measurement. Revenue from service, parts and repairs contributed $2.4 million in the quarter, 27.7% more than the fourth quarter of fiscal 2016. For the year, consumables revenue was higher by 8.5%, hardware revenue was off by about 2.9%, and service, parts and repairs increased 5.1%. Gross margin increased 90 basis points in the quarter to 39.3% and gross profit increased to $10.1 million from $9.1 million in the same quarter of the prior year, primarily as a function of the revenue increase. Operating expenses increased $581,000 or 7% to $8.9 million in the fiscal 2017 fourth quarter from $8.3 million in the same period a year earlier. Transaction costs associated with the…

Thank you, John. We are pleased with our financial and operational accomplishments in fiscal 2017, highlighted by record revenue, solid operating income and new products in both segments. In TrojanLabel, we've acquired a great business with products that deliver the best value proposition for customers in the mini-press and specialty printing markets. As we move into fiscal 2018, we remain focused on executing our long-term strategic growth initiatives. These initiatives are designed to expand our business through new product introductions, geographic channel expansion and investments that strengthen our brands and improve our operational efficiency. And with that, John and I will be happy to take your questions. Operator?

[Operator Instructions] And our first question comes from Tom Spiro with Spiro Capital.

I had a couple of questions about the QL-800. I wondered as our sales of hardware in the Product Identification segment and consumables shift towards the QL-800 what the margin implications will be? Does QL-800 have a similar gross margin? Does consumables have similar gross margins? What will that mix shift imply?

Yes, it's pretty similar, Tom. I mean, it depends on what consumables they take. There's a likelihood that the QL-800 will actually use more consumables. So the consumables per product versus our 4-inch product would actually go up. It's obviously early days, but that's what we've seen with our previous 8-inch shipped products, the Kiaro! 200.

And are the gross margins generally comparable between the Kiaro! and the QL-800?

Yes, they are similar. It's may be slightly less on the 800 and a little bit more on the consumables for the 800, so it probably balances out.

I see. And is the QL-800 going to be the first of family of QL products? Or is that it?

It's actually the second. So we had the QL-111, which we introduced about a year before that. But that was -- we didn't really call it a full new product, because it was a modification of our Kiaro! 100. So this is a totally new from a ground-up product in terms of the transport and really everything in the product is different than the Kiaro! line.

Sure. But as -- with the Kiaro!, I remember we came out with the D line, we had the narrow, the wide. We had -- ended up with, I think, perhaps, maybe half a dozen versions. Is that the goal for the QL as well or no?

Yes, yes, there is another -- well, there's multiple versions. So we have a 5-year product road map, and the road map pretty much has a tick at least once a year of a new product coming out in that family.

I see. And lastly, John, in your commentary, I think you gave us the operating income numbers for the company without the acquisition expenses and I missed them. Could you repeat them, please?

Yes. We were at $359,000 for the quarter -- increased $359,000 to $1.2 million. And if we take out the acquisition costs, it's $1.9 million.

[Operator Instructions] And our next question comes from Steve Busch with Everglades Resources.

So are we still buying back stock at all? I know we haven't done any in a while, but is there still a plan? And do we see now that we're back on a growth track to restart that program at all?

We actually -- there is a board authorization for a number of shares, and it's really -- it hasn't gone away. So it's really been a constant, quite frankly. Again, I mean, we do have authorization, but we're not doing anything different than we have been.

Right. Okay. And we used to have a number that you would give that was the, I don't want to call it the backlog, but it was the kind of your airline orders long term. Do you still have that number?

Yes, we aren't actually publishing that number right now. So you can -- people can make their own judgments on it. If the question is, do you go out, the contracts don't really have a fixed end date. So some of them go out indefinitely, some are 10, some are 20 years. But if you take a look at the marketplace and look at where, for example, wide-format printers are used, yes, we have the majority of that market share. And the narrow-format, of course, we're just jumping in there. So you can pull together your own estimates on that.

All right. So you don't give that old backlog number, whatever it was called?

Yes, we stopped publishing that over and discussing that well over a year ago.

And we will now hear from Charlie Doe [ph].

Just wondering what your inventory increase was for the quarter and the year?

Yes, for the year, it's about $5 million. It was $14 million at year-end last year. I will give you the precise number in a second. So we were at $19.5 million at year-end. And last year at year-end, we were at $14.9 million.

Almost like a $5 million increase in inventory?

Yes, $4.5 million, say.

Right. And how does the CapEx for the year compare to your long-run expectations in your 5-year plan?

We are a little less this year. About half of what our normal plan would be at, say, $2.5 million. We didn't buy any substantial machinery and equipment this year, but we have plans coming up when we will be spending somewhat more in CapEx.

In fiscal year '18?

Right. And Charlie [ph], to give you a little more color on that, we've talked in the past about some of our high-volume label production equipment. And we did a project this year, as a matter of fact it's being finished as we speak on the first machine. The reason we want to buy -- we would have had a second one on board already. But we are adding some nice upgrades to that. We want to prove out that they actually do what we expect them to do. And then we'll get back in the order queue from the -- it's kind of a substantial investment for each one of those machines, several hundred thousand dollars. But if all goes well in the next couple of weeks, we will be putting an order in for another one very shortly. That is in our capital plan for this year.

Right. What kind of ROI are you expecting in terms of this CapEx expenditures on improving -- decreasing expenses?

Well, we certainly expect an ROI better than our cost of capital. But we wouldn't go into any further detail than that.

One thing I can tell you is about the machine I just talked about. The production efficiencies on that are about 2.5x our existing equipment. So it's a very nice improvement.

That's a substantial improvement. So regarding the recognized [ph] equipment, can you provide us with any insight into what percentage -- if you look at each of the contracts, how many -- what percentage are at full delivery during fiscal year '17, '18 and '19? In other words, what kind of growth are you expecting in those areas?

Yes. I mean, there's so many different contracts. I don't have the number on top of my head. But we've got a number that are ramping up that we've announced. I think if I go back to the more recent announcements, the 777 program, the 777X is a brand new program. The 787 is a project that we're on, that's ramping nicely. You can pretty much follow the aircraft deliveries and get a good feel for that, how the overall industry is going. And the most recent one I referenced is 737. The wide-format we just bought it, like I said, a little over year into that with the wide-format printer being available in their catalog. And if you look at the ramp of that, I think, Boeing is roughly calling about a 9% to 10% increase per year on that aircraft, and it's by far their highest running aircraft. If you look at that, I think, they are in the mid-40s right now, trying to get up into the 50s and maybe as high as 60 units per month, which if you look at some of the wide-body aircraft and they are more in low hundred kind of numbers -- hundreds as far as the annual deliveries. So it's kind of significant to be on that program and now both on the narrow and wide-format give us some great exposure. But that particular one, as I mentioned, the narrow-format, we probably won't see much for about 18 months or so.

Right. So would it be safe to say that it sounds like less than half of the existing contracts will be full year exposure for fiscal year 2018?

Yes, I can't put an exact number on there. What I can -- what you can use for planning purposes if you like, is you can take a look at the overall growth of the airline industry and know that we will be growing faster than that because we are adding contracts. We don't have full market share. So we aren't on every single plane that ships today. That's probably the best estimate I can give you.

And once again, we will hear from Tom Spiro with Spiro Capital.

Greg, I know we introduced a couple of new data acquisition products over the last year or so. I guess, I don't see them in the numbers yet. How they doing?

As I mentioned, the Daxus has been out a little over a year. I didn't even talk about that one today. But it's just a product, the DDX100, which is a Daxus that comes with a touchscreen, being well received. So we were held back on the approvals where we couldn't actually deliver some of those, so now we've got deliveries going out on those. But the Test & Measurement, the data acquisition piece of Test & Measurement is little similar to the aerospace in it takes a while to ramp up. In the case of data acquisition, it's not so much long-term contracts. It's more of adoption by customers. So the good news is that we're getting very good feedback with respect to the feature set, the price point, the packaging of the product, so we're very encouraged about that in 2018.

Are we actually getting commercial sales. No? I mean we're really selling them?

Yes, yes. The Daxus has been shipping for a while now, and the DDX100 started shipping right around the end of third quarter, beginning of fourth quarter.

I see. All right. We talked a little earlier about the CapEx. Can you give us a CapEx budget for the current fiscal year?

I don't think we put it out perspectively. But we would expect it to kind of, in general, that should be moving more towards our depreciation number. That's typically what we're running.

I see. And your R&D, we've talked about this in past quarters, seems to run much higher than it used to. I know some of that is acquisition expenses. What are your thoughts about -- sorry, not R&D, G&A. What are your thoughts about G&A as we move into the new year?

Yes, the G&A, I think the rate of growth -- well, I don't think, I know the rate of growth in our G&A is going to be much less than the top line. So we're going to start to see that pull in a bit. We had -- there was other, kind of, onetime items that we don't call out in there that we had in fiscal 2017. With regard to consultant size and things like that, some of the IT programs that got involved with that, which won't necessarily repeat in future years.

And with no further questions, I'll now turn the call back over to Mr. Woods for any additional or closing remarks.

Great. Thank you. So thank you, everyone, for joining us here this morning. We look forward to keeping you updated on our progress, and have a good day. Bye now.

And that concludes our conference for today. Thank you for your participation. You may now disconnect.