AstroNova, Inc.

Good morning, everyone, and thank you for joining us. Hosting this morning's call are Greg Woods, AstroNova's President and CEO, and David Smith, the company's Chief Financial Officer.

Greg will discuss the company's operating results. David 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 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 Private Securities Litigation Reform 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 except as required by law. Any forward-looking statements speak only as of today, December 4, 2019. The company 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 AstraNova's annual report on Form 10-K and the other filings the company makes with the Securities and Exchange Commission. I'll now turn the call over to Greg.

Thank you, Scott. Good morning, everyone. Thank you for joining us on today's call. AstraNova's third quarter results reflected a continuation of the industry headwinds that affected revenue mix and margins in both our product identification and test and measurement segments in the second quarter of this fiscal year. As noted on our Q2 call, these near-term challenges do not compromise our confident, positive outlook or the strong secular tailwinds that we believe position us well for long-term profitability and growth. We continue to focus on accelerating revenue growth in areas not impacted by these specific headwinds and on improving operational efficiencies throughout the company. We are continuing to invest in new products and technologies, as well as strengthening our global talent to achieve our long-term strategic objectives. Looking at our segments, tests and measurements continue to be adversely affected by the ripple effect related to the grounding of the 737 MAX, which has been idled since March. As we discussed in our Q2 call, this grounding affects us not only in terms of new installs, but also deferrals on optional maintenance and retrofit printer upgrades to aircraft that are needed to fill the void until the MAX returns to service. As to when that will be, the status of this situation is well covered by the industry and general business press. Based on that information, we expect that the effects will continue through the fourth quarter and likely impact the first quarter as well. Boeing's longer-term outlook for the airplane remains robust, which bodes well for our long-term business as well. On a previous call, I also referenced the delay of a multi-year upgrade contract for the military avionics and related networking gear. The good news on that front is that we began to fill that order in Q3, and we expect to complete the shipments over the coming quarters. We're also pleased to see that our data acquisition line performed well during the third quarter. The reception to new products, including the Smart Quarter DDX100 and Daxus DX100, have been very positive. Also during the quarter, we demonstrated our data acquisition products at several industry events, including automotive testing expos in China and in suburban Detroit, and the Railway Interchange Expo in Minneapolis, and ITC 2019, a major telemetry show in Las Vegas. In our product identification segment, Third quarter revenue was flat with last year's third quarter, with some regions performing better than others. In Asia, we continued to experience some softness primarily as a result of weaker demand from a few customers in that region. Organizationally, we completed a major portion of the transition of our product identification business, started in Q2, from a regional structure to an integrated global management organization. With these latest changes, we now have in place dedicated leaders for global hardware, global supplies, and global service. This new structure enables AstroNova to enhance our overall effectiveness by clarifying roles and responsibilities, providing centralized accountability, and enabling rapid, coordinated response to industry trends and market intelligence. This is especially important as we grow our list of large global customers. On the new product front, the Quick Label QL300 and QL120X, and Trojan Label T2C continue to gain customers and have received positive reviews from following each installation. In September, those products were among the new color label printer offerings AstroNova featured at three major international trade shows, Pack Expo in Las Vegas, POC POC in Germany, and Label Expo 2019 in Brussels. During this quarter, we also introduced and several other new product identification solutions that complete this year's across-the-board refresh of our entire color-label printer offering. These include the QuickLabel QL850, TrojanLabel T3-OPX and the TrojanLabel T2L. These products expand our addressable label market and create new opportunities in the areas of digitally printed labels and flexible packaging. Customer feedback on these new products has also been very positive. We're also particularly excited about the new Trojan label T5, the all-in-one digital print and finish inline labeling system that extends our reach into the professional printing market. Finally, in Q2, I mentioned that our global IT upgrade program moved into the hardware upgrade phase. In Q3, I'm pleased to report that we have successfully completed the core hardware infrastructure upgrade from an array of disparate and aged hardware to the latest technology across the board. With this portion of the IT platform completed, we have started updating the endpoint hardware, software, and telephony across the company. We anticipate completing this phase of the project in the next few months. In parallel, we are making steady progress on our ERP conversion to the cloud-based NetSuite software. Presently, we are in the process of a very rigorous training and testing phase of that project. While this transition involves substantial time and expense, It will result in a globally unified, state-of-the-art IT infrastructure designed to significantly improve our competitiveness, reaction time, and productivity in fiscal year 21 and beyond. I'd like to commend our many AstraNova team members who have contributed significant time and effort on the implementation of these programs.