Good morning, and welcome to the AstroNova Fiscal Fourth Quarter and Full-Year 2024 Financial Results Conference Call. Today's conference is being recorded. I would now like to turn the conference over to David Calusdian of the company's Investor Relations firm, Sharon Merrill Advisors. Please go ahead, sir.

Thank you, Carla, and good morning, everyone. By now you should have received a copy of the earnings release issued this morning. If you've not received a copy, please go to the Investors page of the AstroNova website, www.astronovainc.com. Please note that beginning this quarter we will be using an earnings slide deck that follows along with our prepared remarks. You may access the deck on the Investors section of our website at astronovainc.com. under events and presentations. Turning to slide two in that deck. 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, March 22, 2024. AstroNova undertakes no obligation to update these forward-looking statements. For other 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 that the company makes with the Securities and Exchange Commission. On today's call, management will refer 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 and also helps investors, who wish to make comparisons between AstroNova and other companies on both a GAAP and 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. Turning to slide three, joining me on this call this morning are Greg Woods, AstroNova’s President and Chief Executive Officer; and David Smith, Vice President and Chief Financial Officer. Greg will discuss segment operating highlights and share the company's fiscal 2025 financial targets and outlook. David will take you through the financials at a high level. Greg will make some concluding comments and then management will be happy to take your questions. If you've not received a copy of this morning's earnings release, please go to the investors page of the AstroNova website at astronovainc.com. Now please turn to slide four as I turn the call over to Greg.

Thank you, David. And good morning, everyone. I'd like to begin by recognizing the excellent work of the AstroNova team. Every one of our more than 360 team members contributed to our solid performance in fiscal 2024. Their skills, dedication, and hard work are the driving force behind what we accomplished this year, moving AstroNova to a stronger and more profitable financial trajectory. As I reflect on fiscal 2024, three key achievements actually stand out. First, the strategic realignment of our product identification segment, which we completed last summer. By consolidating PI, we have created a far leaner and more efficient business. Our strategic focus is on delivering the best engineered solutions for our customers and the highest return opportunities for the company. The simplification of our PI segment enables us to do just that. Second, the resurgence of our test and measurement segment, which in fiscal 2024, posted its highest revenue in four years. Our portfolio of aerospace products and MRO services is the primary driver powering the T&M segment. Fueled largely by the rebounding commercial air travel and aircraft build rates, T&M is well on its way to returning to its pre-COVID highs. And third, the launching of new PI products in fiscal 2024 in each of our QuickLabel, TrojanLabel, and Astro Machine brands. These include the QuickLabel 900, the TrojanLabel T2 Pro and T3 Pro, as well as Astro Machine's two new flat pack printing solutions. All of these new products feature improved performance and expanded printing width capability. The initial deliveries of these products have been well received by our customers, and we expect them to gain full production momentum in the second-half of this fiscal year. Turning to our full-year results on slide five, we reported fiscal 2024 revenue of more than $148 million, the…

Thanks, Greg, and good morning, everybody. Greg acknowledged the tremendous AstroNova team effort and I'll say that I'm happy and proud that we’re proud of it. We've made great strides in focusing our investments and streamlining our cost structure and we all share our great enthusiasm about the future. The initiatives he outlined do put us in what I believe is a clear path to execute on our longer-term financial objectives. A key metric, we generated strong cash flow for the year with cash from operating activities at $12.4 million, from which we paid down $7 million of debt on our revolving credit facility. Debt reduction is our current primary use of cash after the working capital and modest capital expenditures inherent in supporting the business. We have ample unused capacity, committed in the credit facility with the bank. Turning to slide eight and our fourth quarter results. The $39.6 million of Q4 revenue was in line with the comparable period in fiscal ‘23, with a 10% increase in T&M, largely offsetting a 5% decline in PI. GAAP gross margin of 37.2% in the fourth quarter increased by 320 basis points from the same period in fiscal ‘23, reflecting a more favorable mix in PI in the 2024 period. Operating expenses for the quarter were down $634,000 or approximately 6% year-over-year to $10.8 million. The key driver was a 10% decline in selling and marketing expense, which reflected the benefit of our strategic realignment of the PI segment. It is also overall a function of a broad-based commitment to efficient use of our resources throughout the organization in keeping with the AstroNova operating system. When we announced the restructuring last August, we projected an annualized cost savings of more than $2.4 million. All of the elements of that restructuring are…

Thanks, David. Summary is now on slide 12. AstroNova is well positioned as we move forward in fiscal 2025. We have well-respected brands across our businesses, we continue to launch innovative products that satisfy our customers' most challenging needs and strength in our leading market positions. This sets up a nice position for us to capitalize on strong secular trends in both our Product Identification and Test & Measurement segments, including the increasing demand for a wide range of printing solutions to satisfy mass customization and packaging for consumer goods, as well as the resurgent airline industry. We also continue to benefit from the high recurring revenue contribution from our supplies business and expect that to increase as we continue to place more hardware in the hands of our customers. And finally, we have a strong track record of value-generating M&A and we continue actively seeking complementary strategic acquisitions that broaden our presence and capabilities in our growth markets. We start the new year in a strong financial position and are committed to achieving our 2025 and long-term financial objectives. With that, Dave and I would be happy to take your questions. Operator?

Thank you, Greg. [Operator Instructions] We have a question from [Samuel Koenig] (ph) from Delta Analytics.

Good morning, Greg. Good morning, guys. Congratulations on the…

Good morning.

Good morning. Congratulations on the wonderful accomplishments this year. I think it's magnimonious and really is impressive. I just wanted to ask you one question regarding Boeing and Airbus. I understand if I'm correct that in the past year, you also began to put in your printers in Airbus. Is that correct?

Well, we've always said our -- I don't say always, we've had printers on the Airbus aircraft for quite a while. So that's, you know, true. As we have different brands on the different aircraft that we have.

What I wanted to ask you also was with all the detrimental news on Boeing and a lot of companies delaying their acquisitions of the different planes from Boeing and Boeing was also saying there was traps [Indiscernible] and other related items to this incident. How do you think that, that will affect you? Or will that be taken up by the increase in the Airbus orders?

Yes. As I mentioned earlier, the overall industry is growing. So we're on a wide range of aircraft. Obviously, in commercial, Boeing and Airbus are the biggest, but pretty much any aircraft that you might be flying on probably has our products on it. So in general, we're pretty well diversified there. As far as Boeing, I'm sure that they'll have -- they have these items to deal with. But looking at it from our standpoint, from a forecast and talking to their supply management people, our forecast and projections from them have not changed. So we're still shipping on schedule and expect that to increase. The increased rate might be a little bit less than what we anticipated last year going into this year. But hopefully, we'll see that pick up as we go later into the year.

And are you -- and my final question and wishing you all a great weekend and happy Easter is, are there upgrades coming in these printers? Do you have any upgrades at all? Or are these same like newer products and upgrades in the printers?

Well, as we mentioned in our press deck, last investor deck that we posted, we have a big encouragement program going on with airlines and aircraft manufacturers to transition to our ToughWriter brand, which is a more modern printer. So we have a number of airlines as well as OEMs taking us up on that. And we expect to have within the three-year period, the majority of our shipments transition to the ToughWriter brand, which is a newer, more up-to-date printer.

Thank you, guys, and keep up for good work.

Great. Thanks for your call.

[Operator Instructions] Our next question today comes from Samir Patel from Askeladden Capital Management. Please go ahead.

Hey, guys. Congrats again on the great quarter, and thanks for initiating guidance. I know we've been talking about that for a while. On that topic, I wanted to kind of dive into that guidance. So it's like there's some level of conservatism embedded in that, obviously, year-on-year growth, but it kind of seems more flattish to the last couple of quarters of the year. Is that attributable to seasonality, conservatism on the macro kind of given like the previous caller referenced some of the issues at Boeing. Maybe you could just kind of expound on that a little bit.

Yes. Hi, Samir, yes, it's -- we will like to kind of be in the lane there and not everything is predictable. So we don't see any huge headwinds with respect to that. And there are some things, obviously, that could move it higher as well. But that's what -- when we take a look at it right now, we're comfortable with what we said and if we need to revise that later in the year, if things -- if we get ahead of ourselves, we'll adjust it at that way.

Okay. So it's kind of that's what you're starting with. And then it's more -- I guess, the bias would be more towards upward revisions if things go well, that you're comfortable that kind of in the face of whatever things you anticipate might happen that you're not going to kind of come in below that. Is that a fair way of interpreting it?

Yes, that's a good way to think about it, yes.

Okay, okay. The second question was -- I know we've had this ongoing conversation on product ID emergence. They were obviously quite strong in Q3. Q4 kind of gets back to that Q2 level despite similar revenues. I know you mentioned in your script about the retrofit program. Can you kind of explain what was going on there and what we should think about for margins in that segment as we head into next year?

Yes. Well, you know -- don't really have -- did never release exactly on that, but there was an adjustment that David could maybe talk about there in Q4. But setting that aside, what we're looking at as we go into this year, is that should -- those margins should be increasing because we're looking at more of those T2C and the other [children-related] (ph) products coming back online as you move through this year. And that helps drive the supplies revenue, which obviously helps growth, but also helps us on the margin side of things. David, do you want to add anything to that?

Yes. We did have some inventory adjustments in Astro Machine in the fourth quarter that sat on the margins there a little bit. Obviously, it was -- that's not something that's going to recur. So we think that the margins, the mix moving forward certainly well should improve from what happened in the fourth quarter.

The next question is from George Melas from MKH Management. Please go ahead.

Thank you, operator. Hi, Greg and David, the previous caller asked exactly my question. So I don't have any other, I'm sorry.

Okay. All right, good catching up with you.

Okay.

The next question is from Dennis Scannell from Rutabaga Capital. Please go ahead.

Yes, good morning, Greg and David, and just echoing what everybody else has said a really nice quarter and nice end of the year. Nice to see this rebound. So my question is also similar to the previous two questioners. So -- but maybe to get a little granular or frame it a little differently. So QuickLabel in the third quarter, by my numbers did -- I'm sorry, Product Identification did 18.1% operating margins, I think the highest I've ever seen and then we're 12% in the fourth quarter. And David, you said that maybe there were some inventory adjustments at Astro Machining. I know historically, the group has been as high as, I think, 14%. So kind of on a go-forward basis, can we look more at the high-teens for this business, like what we showed in the third quarter? Or were there some unusual things going on in the third quarter that make that kind of an unrealistic expectation?

So I'll answer it in general and maybe David can be more specific about it. But yes, the inventory adjustment that you mentioned had a big impact on it. And if -- when you average that out, you get more into the longer-term trend that we're talking about getting back into the -- I think we're kind of in the 14% range before. So driving more towards, kind of, that mid-teens, I think is a more realistic thing to think about as we go forward. [Multiple Speakers]

Yes. Go ahead, please David.

I agree with that. That's the way I would frame it. I would have said that you kind of take a look at the average there.

Absolutely. No, that sounds great. Thank you for the further clarity. That’s great. Thank you.

Alright, thanks, Dennis.

[Operator Instructions] Our next question is from Samir Patel for Askeladden Capital Management. Please go ahead. Your line is now open.

Yes. Hey, I think we got cut off. We're sorry about that. I just wanted to follow-up and see if you had any comments on the M&A pipeline.

Yes. Well, it's similar as we've talked about before. We've got some interesting opportunities in both T&M and the PI segment and we'll see if we can finish any of those up. Typically, it's about 1% or 2% of the things that we look at that we end up closing. But we're actively looking at it. As David mentioned, we're in great shape from a financial position to be able to pursue acquisitions in the size of the last one we did or even larger. So we're out there. And hopefully, we do something this year. And if not, it means we didn't find a good one here. So we're kind of prudent about that as well to make sure it's a good strategic fit and also that we don't overpay, of course.

Makes sense. And again, sorry, if you guys -- I'm not sure if you referenced this in the script, but David, we've talked about your inventory levels and kind of cash flow. You gave your guidance on EBITDA, but maybe we could talk a little bit about sort of cash flow dynamics that you expect this year? I mean, you expect inventories kind of to stay flattish at these levels to continue coming down. Any other kind of working capital or other items you call out?

Inventory continues to be a focus and it needs to be. We do see what I like to call areas of opportunity for improvement. We have had to make still some commitments to bring in inventory to support the supplies business, NPI on primarily ink, which has drawn off a lot of cash would have otherwise been able to pay down more debt more recently. And we continue to have some commitments that we need to make on the T&M side of the business. I think as we move through the year, the combination of improvement on the inventory side and obviously, the benefit of the higher margins are going to give us the ability to really go after the remaining portion of the revolving credit debt barring acquisitions, of course, which will cause us to take on more debt. And I think by the end of the year, we'll take a very large bite of what remains there and have the dry powder to do some things on the acquisition side and that will probably be the pattern. It's been the pattern for a while and we work that continuous, pay down the debt and redeploy it first to support operations and then to do acquisitions.

Makes sense. Thanks.

We currently have no further questions. So I will hand back over to Greg Woods to conclude.

Great. Thank you, operator. So thanks, everyone, for joining us here this morning. In June, we'll be presenting at the East Coast Ideas Conference in New York City. We hope to see many of you there in person as well, and have a great weekend, everyone. Bye now.

This concludes today's call. Thank you for joining. You may now disconnect your lines.