AstroNova, Inc.

Good morning and welcome to the AstroNova First Quarter Fiscal 2021 Financial Research Conference call. I'll now turn the call over to David Kalustyan, President of the company's investor relations firm, Sharon Merrill.

Thank you. 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 make a few comments on the financials. Greg will make 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, June 11, 2020. 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 AstroNova'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, David. Good morning, everyone, and thank you for joining us today. These are unprecedented and difficult times, particularly for those on the front lines of the COVID-19 crisis. But before we get into the details of the quarter, let me publicly acknowledge the doctors, nurses, and other health care first responders in our home state of Rhode Island and around the world for their heroism and personal sacrifice in battling the pandemic. At AstraNova, the health and well-being of our employees is a top priority. I'm pleased to report that the early actions we took to shift the significant number of our global team to off-site working while enhancing our cleaning and protection procedures in line with government and health agency requirements that our production facilities have proven to be successful. Throughout our facilities around the world, we have maintained production while keeping the health and safety of our employees, customers, suppliers, and communities at the forefront of our attention. I want to recognize the entire AstroNova team for their unyielding commitment during this unique period. They've done an outstanding job supporting our customers and one another. Their dedication makes it possible for us to continue providing our customers with the highest quality products and services every day. Not surprisingly, our first quarter results reflected the widespread economic disruption caused by COVID-19, which has touched virtually every industry in nearly every geographic region. In terms of our business, the impact was most pronounced in the aerospace unit of our test and measurement segment. Test and measurement revenue was down about $4 million, or 30% from the same period a year earlier. The effect of the virus on test and measurement in Q1 has only compounded the disruption created last year by the extended grounding of the Boeing 737 MAX aircraft. In the wake of that pandemic, aerospace OEMs have cut their production forecasts and airlines have dramatically scaled back their flight schedules, which of course means fewer planes in service. I know that everyone's interested in when we expect this downtrend to stabilize and industry momentum to pick up. Obviously, it's a fluid situation with a lot of variables. Based on the current environment, we expect results in the second quarter to be weaker than the first quarter. That said, we are seeing encouraging signs for gradual improvement beginning in the second half of the fiscal year. Airlines are beginning to restore flights. I think it's important to keep two things in mind. First, that the recovery of the commercial aerospace industry from this downtrend will be paced by narrow-body airplanes like the 737 MAX and the Airbus A320. These aircraft are very fuel-efficient and provide more mission flexibility to address the evolving needs of the global market than their wide-body counterparts. As a world leader in flight deck printers, we serve both segments. But narrow-body aircraft sales make up the majority of the market, and they are growing at a faster rate. That trend was a major driver in our decision to acquire Honeywell's narrow-format printer business in 2017.