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ATRO Astronics

Participants
Deborah Pawlowski IR
Pete Gundermann President and CEO
Dave Burney CFO
George Godfrey C.L. King & Associates
Ken Herbert Canaccord
Michael Ciarmoli SunTrust
Jon Tanwanteng CJS Securities
Dick Ryan Dougherty & Company
Mike Wallace White Pine Capital
Call transcript
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Operator

Greetings and welcome to Astronics Corporation Fourth Quarter and Full-Year 2018 Financial Results. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Deborah Pawlowski, Investor Relations for Astronics Corporation.

Deborah Pawlowski

morning, good and Dana; everyone. Thanks, your We here us certainly appreciate today. joining and Pete on Dave Gundermann, got CEO; the our Officer I've Financial President and Chief Burney, call. our

this sent should on available at the You news website if release the wires it have our earlier morning. astronics.com. is And not, across

that as statements the could uncertainties, are portion. factors differ you in apply These other from as As forward-looking to aware, as subject including teleconference, cause future Company may we actual results materially Commission. factors as Exchange this the where are that to These today. to statements with and are we and risks during the documents well well earnings are some events filed by outlined make during Securities the in release Q&A

find these at at our both documents website sec.gov. You and can

with to let call So, Pete to turn the me Peter. that, over begin.

Pete Gundermann

get that the and Thanks, before whatever And Debbie; should we assured over been you doesn't fact I Pete, I good in that have you can't morning, and my normal. I've am catch going, phone. assure sound voice everybody. I

call go. I I'm mute use advance. I may the attack here got get -- So, it. I'm to sometime not over apologize afraid button course of with ready a the the hit in cough and to

our good year on turn then on pretty a pretty So equal feel was talk we'll that, Company, quarter for attention XXXX, for about. minute, a to which which the and go our we But if about do silent feel I everything and that's what being strong XXXX. a we'll we results, all fourth about, that's post-mortem

about of XXth to semi over we've are issues space to the announce, but affect some that that continue primarily including announced test of the the calls, and relating the businesses closed this and three are that the month; to primarily there didn't there, usual, of couple some on dedicated likely XXth we'll the of or the on issues that month, business we to to this -- do also some of talk XXXX As our today. sale last

a our pretty strong; $XXX previous only second consolidated, third up So was highest revenue two fourth of backdrop, quarter after ever and our that our was quarters, XXXX. the with as quarter million, third the of ended

XX% growth that's Our of ago, about fourth the were or growth. of comparator growth, quarter was organic contributed million million year of results year-over-year. $XX the of up $XX period rest million a $XX $XX XX% organic Acquisitions million and about the over

strong and end the million the fourth revenue Our in XX% We segment fourth of had quarter a quarter. XXXX. of another up particularly quarter. record set $XXX comparator period over our a Aerospace in row, the record That's at

expected, end second of much conference call. result we Test both Our below was periods of $XX.X and period last million light, relatively of a was was business well pretty and press million, and That last or of year the predicted release what at our the third comparator that revenue below ago, of the last year. quarterly XX.X

was shows XXXX charge dramatically due of while in had XX.X%. margins of improvement. mind substantially end we quite we've the the at period, that signs contributor comparator was year-over-year XX.X the again, Test it and to from you got business highest of That's wanted the of XXXX to our strong That's Aerospace, were but in older operating as the of keep a quarters we third Net relatively with million, large in up income comparisons the be, where our strong not of colors the it's that comparisons solid look had a numbers. sales. and Second quarter for a when or impairment at in Armstrong X.X% business. million at at XX.X

combined million. businesses three for about, they about in about in we've AeroSat, months, nine of them thought group a would fourth third is from a turned Our loss and it loss below quarter but we particularly talked when now the turned we X.X we've with down of CCC, million. substantially collectively Armstrong, happy where be, an that. struggling operating as talked We're That's three XX.X in the operating the that quarter not

improvement. think to is XX.X X.X So, million million, we pretty good

for $XX.X here, of because the end in bookings quarter We only good the at of Diluted of quarter $XX of essentially from a number friends we end Armstrong. comparator is semi City XXXX. per that Net $X.XX of positively at state talked last expect income a program improvement million talk $XX.X with that of up backlog those $X.XX at bookings with that was combined million. achieved test the at when that the million, specifically has three of million, shipping in were $XX.X all-time businesses. our on the with per ended million earnings at the book-to-bill operating $XX.X versus of in $X.XX up in do quarter York ended or the XX% contributed substantially rate Test versus lower same record of per and in a businesses negatively $XX the that Advantest. with we progress book-to-bill of in by $XXX consolidated, but federal business high, losses generated record of a diluted $X.XX in million, compares February the pretty fourth of is XXXX, X.XX. Aerospace the a from the year that million sold with of the that's end about the XX tax strong. tax of revenues year period the our at New million in impairment We XXXX year star right were XXX to from as on combined ago; in XXX Again, loss the impacted position equally and million, growth. call, guess, The share was fourth inclusive change about between year-to-conclude, $XX.X continued impairment organic again, call. shipments of affected at more million things, was margins XX up of for about total pretty That's quarter split not million we'll of share total to we with Organically, Backlog had the a part charge million XXX I pretty even struggling of book-to-bill shipments, with was and X.XX. and growth made of or strong up of included an and we're of Not we sales, were that. there that arsenal the XXXX happy some of acquisitions the Armstrong. diluted roughly -- three $XX million, a Acquisitions the income for booking million growth. growth. bookings XXXX. million for charge million but X.X% by in It share a ended again X. up Net Year-to-date year XXX XXX% $XXX

get substantial Aerospace million, bookings that's Test in and at down X%, about $XX.X minute. we're bookings a XXXX improvement shipments up X%, million to Total for bookings we'll X%. million XXXX vesting by that -- for and $XXX were $XX.X in looking in XXXX, came XXXX about as were So, in in about

Looking more segments. at our specifically

That's we years. one exercise achieved Our as fourth came the highest and losses profit Aerospace were inclined to where for XX%, it would segment. break even, new is of in revenues record said, are get was have really could businesses million up operating $X.X in those million exactly sales, Aerospace out from three million a Operating our be, quarter three striving XX.X%. at back $XXX If $XXX.X quarter, period. the been comparator XX.X% XX% I the to to in in to million, strong assume row record $XX.X profit but a or or of in of quarter we stragglers not compared the the we've our run that

businesses, best improvement for focus to reducing progress. that Bookings, opportunities continue continue we ago, three as making to our the mentioned we we're operating the believe those and I So, on losses moments of margin to in sets us and slightly our shipments backlog of ahead of for ending X quarter highest book-to-bill well our fourth the Aerospace and into million, ever segment is up were XXXX. $XXX.X of Aerospace think entry $XXX million

year the of of $XX our XX% back for up we're made whole in Aerospace had total will year, sales our Operating profit Looking million increase businesses the loss the total. troubled million. test XXXX. our at increase, it or sale Again, three in with XX% that operating the XX% semi $XXX for over up of $XX of future of working XXXX. the million revenues will from of with were business, consolidated million our XX.X% They compared year XX% $XX.X the with an that was for segment,

you breakeven, If exercise in have about at XX.X%. to operating assume Aerospace they do a to come our were the were profit would segment

were of the seated X% million, the bookings Looking over shipments the $XXX shipments, year. year-to-date with even so by course record the of

in Power up sales press Motion sales. of these our XX% at our continues release some & press XX in of bottom balanced business put line the table at the makes release, that well specifically about consolidated days to by Looking Page the line of our we and on opinion, Electrical our Aerospace our tables of product product be my

almost Our contributor picked XX% about the pretty to combination in was a Power is of year-and-a-half up product, well, pretty a to to up they're the explain Lighting & we and market result consolidated primarily helping grouping Avionics is XX% power share good quite the that things, Safety for contributor have, overall capability year but last couple where that continues our XX% & up quarter, other big over in-seat all of which we very adds and and our XX%, increasingly in well. that's have becoming that it's a the line for a Electrical certainly do seat a growth. and makes of about doing motion there, Motion product bit

up line, product year. mostly year, product the being largely Telefonix ends XXX% for our come December shows of XXXX the Safety where up our XX% line. Avionics is Lighting from categorized, the that up in Avionics acquisition & chart And because is that's revenues that of Our of

volume expected; by were which customers. the third your over That's that when In strongly. indicator business. report revenues, to a end of product to came groupings as and quarter, second much and the year. million, down after up the as our schedules, good quarter pretty light dictated are at in nice to the year biggest three the are the about be mentioned, last well quarter, that's XX% dictated from $XX.X was obviously able Test I pace at from So, Switching by

So, was it we surprised. were not coming, knew we

Our operating that pretty in profit lower volume of $XXX,XXX, for fourth the segment sales. was meager quarter on the X%

$XXX.X Operating a strong of $XX However, from XX% up the in sales. Revenue that million, on year Test profit volume had was was million, X.X% XXXX. pretty XX.X million that's XXXX. for

on with see XXXX year-to-date pretty $XX in that's can book-to-bill If ends strong you $XX XXX XXX the Semiconductor strong. shipments look of quarter our semiconductor press easily that million, are versus by Test million, from demand. million We'll was quarter in as the million And for at very It of were just than I driven in semiconductor you going a come again X.XX. relatively Page a X.XX; that's back mentioned, doubled revenues million. our million charts book-to-bill to backlog demand XXXX. up of year were of Bookings to minute. that XX release, a a bookings more $XX XX in the

was product had semiconductor a business, that remember us, a line. stayed earn-out on million; that, in and No at than in expecting revenue for few was plan for forecast on script announced Page they doubt, Last charts the we transaction of opportunity was at valuation the XXth, for at the million change through XXXX words contract semiconductor arrangement, again, been change week, which the step the had the instead a XXXX the product material to approximately revert million we a the you in tables had It in we in likely XXX people release it million we but cash on working business. issued actually. value enough terms. to Advantest a badly and manufacturing in this bring simple and to level in see of the an learned was release, surprised I years. February XX on XXXX, the for late-December closing product four can was closing, sell were would press happened be in we had changes to we XX XXXX far the to roughly substantially closed, to year, last line I'm We manufacturing XX press XXXX at been get based we is, that some had the we, on contract in what a million there same at opportunity to of the called you those semiconductor of about sale Excuse guess, elevated change So change to put December, company of substantial I under programs of with cash in or business And that, XXX that expectations the that again, the above our that end more XXXX business. earn-out million. if hands, an XX arrangement. was And cause me, explanation back a the of saying anything different else. no and and by line XX, some part toward back happy to If of visibility, that the expected,

surprise. when such with it that context the in a it trade in and what's semiconductor but So world to in and also surprise also, general, on not consumer general it going tensions us maybe was in us, for trends look disappointing industry and of in at electronics trends retrospect, a was was you

internal in are we and we than array million, thing with have XXX the of to a frankly better us look at reach, end good cash to specifically So line that also they communications which work place will product the XXX Advantest our all we Test manufacturing do, we primary we at today's general, was and that we and and believe think have to we change, in business can a that customers comprehensive that the Aerospace they're on million our What not to we a the thing down from business, think bit it of presence have little US global to to happen in we make the world. closing better the a in day, today. forecast it investor first both more and that focusing pretty for but weren't the us. a in that's you have an we section dealing when wider decided do more around for of think at happy backlog have means has that this community going -- business in much off and is that get operations They external and but is company ready for shape we and our the event of contract Defense in more Aerospace we're world some and which benefit a allows abrupt focus with

on I because generated about sell, results second, cash for and the not we've Dave, talk mute quarter. balance our think only the fourth I'm a with sheet, going let to you in some both go

Dave Burney

cash back operations talking Pete flow sale strong generating the where in just strong the flow Okay. million the business year big of $XXX February, is million end we us one was up of the that quarter, Thanks. about the cash to but on while million, down in we certainly year-to-date the semi track quarter from going from for we've finished generation. waiting flow be year that to that flow our very operations should back $XX of had million, was for think a fourth for $XX about to us which a brought Yes, cash about at in debt $XXX event about the end last and Outstanding cash at to of terms been of a we very get year. from

And plus basis to cash pre-tax a by XXX the were I end strong again right $XXX million we year Our And on of have first the bit our when at we conclude We quarter about little which further I $XXX a of from we LIBOR reduce be rate could load sale, quarter, have proceeds senior business about current the sale million now. facility. use based million debt down our the we to that have our credit as facility to go from $XXX of adjusted to trailing lower expect expect down credit points. about first $XXX semiconductor that as is do borrowing revolver the the on flow million expect And somewhat senior on operations. our another available EBITDA. four-quarter

the That there's business. they the segment was So the on do XX% been had we when XX% ready XX% off the growing in have buy be but as authorization deployment if the Aerospace opportunity balance which in because has continued shares to the was the fund a sales had, two was back somebody know focused little will flexibility one other will customers growth the Pete, year-to-date of about to based to full our several in I continue again. acquisitions. segment, question, on our year that about years sales. and also capital all We sheet other of one could bit getting structure we be another to year: and speak you're capital present and plenty on, had our a and I growth our be our Aerospace for We of focus to ask last if exercise it to that continues measured right against opportunities the over

Pete Gundermann

you. Thank I'm done coughing.

December, are today. with in the at that midpoint to XXXX, $XXX million would for issued million we growth and forecast for represent guidance at $XXX of sticking that X% look we the switching Aerospace XXXX, So initial

guidance have that Test $XX initiating themselves are the of $XX up million XXXX. in to now We aligned million shoes

from to at If guidance that for XXXX. would semiconductor the represent back you out midpoint XXXX were that we sold base, XX% growth proceeds the about

So guidance, we looking bottom $XXX might XXXX. curious a of of consolidated and don't about million; revenue want for to midpoint We consolidated, million that range and we're talk growth. about couple things at I $XXX range, be a again, thinking issue about that guidance at as the line of into you do but move about of XXXX seeing be X% we'd be

increased potential our wild a from The first the this I That's technical guess, possible for CFO for XXXX $XX about is in the recently based he's on to assumptions of set million and whole but from subject. learned Company cost. new tariff million these in time expense in talk about time about tariff incremental compared We term to $X.X talking of XXXX. on us a my

be our three point. number is best Armstrong, there had operating progress more other is million words $XX things hidden businesses, with could that could through to-date. combined progress there $XX.X production, of are and to-date, about spend but troubled that's lot quarters. way, So three at our CCC, third guess could the $XX.X the of this losses talking but tariffs million kind happy to few we're And not of, we last at. aware could not quarter about looking of we're a we happen, AeroSat, A suppliers million of In tariffs go year the resource the

more a loss quarter. been operating quarters, million $X.X was than three million, we've about quarter So little per million. $X through averaging $X Fourth

that. to predictability which but be we're of total we some think million quite from should settle where million, million, a our think $XX would see as XXXX better be things going we bit to down starting would obviously $XX annualized do out. million, we're $X.X $XX to than So

X.X fourth similar We the as to from dramatic would happened it loss in million In talked a go that's X.X be million, quarter. fact, end now about we're the improvement to for a quarter. we will up be think a XX we there think million likely quarter, year-to-date to million first over quarter fourth million to but we're saw about we from of the less about fourth of the to about pretty in quarter, things we in a that few going fourth range break-even being X.X quarter, drop number as And we X.X in going in expect first reasons, the rough the the think XXXX. originally

happen happen? companies substantially how one to will is that uptick up So, going believe dealing our neighborhood future dealing you're XXXX with collectively that's upside about XXXX. those We by be they're and cutout. a is obviously, revenues plan revenue. They Well, for with to XX at that, million the in somewhere thing of in that you're in on in million, going three XX but year, potential substantial there's when to in going a firm the ended

So, that's seeing operating of that to of going the going manageable but are we year. year a or and loss get that range, by end critical us think second of that ramps to bunch seeing this into things, half for be it's critical we're be the to some start

that at to are with is losses We we demand, we reason with is We So not market. it. our opportunities businesses we are and there these are advantageous we're and customers, part the operate why think there offerings some have competitive desired see some think inherent the sticking by that indefinitely. That's and in goal of it? substantial sticking

profitable to them we like to break other that. most to them even we members got contributing make Our Company can goal is businesses. of just before the do get But

obviously So, forward. to attention our this calls as to that goal, and to on going progress, continues continue will draw be needed think make we we it and like

fair total of semi for and pretty professional engineers much number the all we're been the in that did, now, it has Aerospace we to managers, program XX% strong business looking a are test went pretty never better we We us, situated now and our that than So stand that with them to think right our think Advantest. business time drove it's or and the we good XXXX. for good is think business, we're year good excited. another a which was move it's We our forward employees A&D think and employees business, good a that for our XX-plus on people its of it's move, and think of is own,

So think open up Dana, questions. with that, it for I we'll

Operator

[Operator C.L. from Instructions] & Godfrey George the with Please line comes proceed your King with question Our of question. first Associates.

George Godfrey

in on on the Pete, And you the sell is need on up each for on product what what just buying ramp light have their to ramp product? holding shed what partners customer or do your that about fulfill order Thanks. product, can have obligations you up to one? I the sell by goes talk you Maybe of to holds then to have three how be that able businesses. but you mean do is, to could, the revenue ready, you each the three and businesses, if you

Pete Gundermann

more get a Sure, there move for with different from struggling CCC, we program development technology that might a pretty they've walk so high it profile customer or make less each to that like the Kuehn, the We year the over doubling Armstrong, for then the pretty of struggled milestone From and execution functional -- answers West program and major -- both out, proven the is for away engineering George, our is in into work little big feel industry I and and it's to to company named core involved delivered, it from it a at think, they've and And and revenue looking good Maybe bit of that than to core Day slightest it to been successful make we done. and merged key and and is they've get that part we're really I'll given are not a be get and you get investment incur those those want a you need a more CCC a option well question. expectation our had this met different with course customer skills the the to the with company in work. a foremost. there this revenues running of it. really good the that's market at this standpoint, Mike of We in integrating of And businesses smaller Armstrong the were them we first East, based did company, certification successful done would, than Telefonix, was that greater even the back and and is a CCC bought December, guy and Investor company a a program. their at pretty they business. three. who's we've deal, issue substantially job a that the company since mightily to on is we thought forth

to So, best it's right been and and in of opportunities now actually of three those bigger find a punch is capabilities, terms kind shape of risk of in up they're apply opportunity. the the low weaknesses, the under strengthening and building competency to say new to market a one-two and out Armstrong a going well way. I'd

came Coast, have be about on with stuck were and company, the about instead antenna line AeroSat I we in Transoceanic, might prominently so. start is different primarily of not talking they if up seems WiFi smaller ago or And that program program, with with been programs, It's tail tail for Transoceanic jets access. tail a partnership partnered bigger of a antenna of to companies we that for about today a to three two, and for us then call year-and-a-half it a we and East That services an now the troubled year-and-a-half we've that on So, or most basically bring sits list. businesses mount. group type leaves out talk the business AeroSat starting the a on few mount this a discussion at would to life

doing of into the eventually, a into turned teaming apart I months, and is months, they're off got things of structure was, that well came everybody new is going perspective, perspective six-month be a structure turned old thought those and the XX sales above and think plan teaming quite a where of the the XX by handful get months, development way is in and one our early one that program and from we've fell flying effort to to six it quarter. earnest that was kicked months structure kind into second turned a nine our account about together from teaming in and airplanes new

wrap arbitrary of up, go. test and some of off bit things we've of We more we'll but get in as got bit getting or three will good to sequence And XXX% become companies. hopefully more that you little flavor a it in think time, the of whether of plan we ramps, that gives and think based with of on to a that, sales, little of it a kicked ready that these was that we part is we close the operating of our year kind place bring XX% a those a should for we're earlier comment a down order. to think We of going partners, short and that level significant manageable the we're think in the if sales program, that expectations double losses to my the much three. the plan, more come to or So revenue sales

George Godfrey

to for of what Aerospace what is, questions. like Dave, for out & to you, you my And going an look is you the take business is Defense Pete, question Thank portion Got the just in if it. idea XXXX just for taking Thank like. we Test semiconductor, one margin the business look that. for that get

Dave Burney

spitting that in structural -- think, the is below, throughout be. on it be year. distance any absent the changes is be above for we'll will right ballpark think it, expectation, XXXX where that's or at of we our in our now break-even Yes, looking mentioned little forecast Test business, to be so break-even, to little Pete But that's within the I a but the in of

George Godfrey

York the includes deal, that City New And correct?

Dave Burney

Yes.

Operator

question proceed line with Please comes Our next question. Ken of from the Herbert Canaccord. your with

Ken Herbert

of a to $XX realistic CCC, half Pete, it was maybe loss fourth first is numbers a it think or million, I $XX in assumption? you take about from cadence XXXX the million, provided, is one three give this the just the that quarter sounds that to businesses, from maybe step then expect and you of what further, like Armstrong take it sort AeroSat the year

Pete Gundermann

would conservative. I that's hope

Ken Herbert

the step Okay, maybe you bit so like the quarter get of sounds back the it the year? second or half a second third from into to improvement of the to a as see you first of sort a

Pete Gundermann

Correct.

Ken Herbert

antenna this that at of the really kick is and or that this know on meaningful that Okay, is there always talked a but businesses, is as historically mix sort -- is date? at part forward-fit retrofit in could XXXX opportunity that opportunity look I in a is about opportunity, something and of that you've specifically a as I AeroSat, later or those or a the for

Pete Gundermann

very OEMs certainly because It's quickest observant trend buck, that a in anybody opportunity, and retrofit think, target as for that's certainly go our to question. topic, going initial they of space there's the house. do of biggest the really and also Connectivity is best or interested aftermarket are like, the you a what's pull you in airplanes if that opportunities. an is bang the side are in is good is forward-fit expect, the an might the might new to that on for something very used. of a We the installed and lines this they product or very there us that find There hot speak, is airplane aftermarket buying to imagine, for so needs base to as But after.

with, both doing aftermarket to we and opportunity. So ready partners we're our with an we can what primarily pursuing but it's antennas, think, to in be begin

Ken Herbert

couple And just a clarification. of of points

incremental I impact. really that Is last of the year sort headwind million headwind said And think versus or million the this sort sort million X.X is X.X million tariff you X X.X of -- an a XX year. XX is the XXXX. in the or million of sort of highlighted You million incremental versus

Pete Gundermann

Yeah, what of incremental I the meant million to expense total. year, last million say versus was the million XX X.X so tariff X.X

Ken Herbert

you'd in I it. for or about absolute the $XXX about percent do any that like on the of And to you ended talked didn't should XXXX E&D an here year. commentary you or haven't We Yes, just spend then talk about maybe think or up million and level either that sort I'm sales how of where we the sort of however can about ended for wondering that XXXX or year. in at with one.

Dave Burney

XXX when for years Yes, or costs I acquired we XX when ended absent We that last fluctuations year-over-year. ago The can it's do period talking million driver the kind in about E&D at understanding the or buy spend it We over businesses. years, began leveled was important more about up one. of year. an about out, period couple E&D of

change forward the is would see talk XXX I We going points, million had rate in is maybe there a about in in expect, similar we some some to XXXX, looks of run of of it, in going is, we type and of the percentage forward, significant about XXXX. couple out XXXX run what to it it XXXX. So we'll for dependent rate like, looking expect the saw the change be inflationary spend. to would will when lot a on salaries kind we it plan

Ken Herbert

about sort a as customers backlog get finally, discretionary going maybe of else just just at some high then, growing of much your and you seat interiors level, around It of sort the of about in Can really with share, you're you're like but seeing motion in there. really in-seat modification talk like, sounds how taking terms growth airline businesses, product. spend on and everything we in growth of And what efforts that's with maybe Aerospace? it power part power I to much, know talk nice in-seat Pete, don't the segment sounds the other

Pete Gundermann

other time systems for in would in-flight in-seat toward world. in Sure. and so. power. I a We, mean, it's I be very, words, a gain for general, strong a stand-alone for long see say platform demand entertainment, prominence it continues power in to IFE, seatback in without continued continues power the obviously the to us trend airplanes systems, strong been around narrow-body

narrow-body wide-bodies of The airplanes go content customers those our IFE, providers of to So, is no get ours. to our will approach in large get are terms streaming displays. continue type who to through IFE wide-bodies getting increasingly IFE that, application are the the airlines. and so And directly very more and to to of a seatback them general of to our most do continues airplanes be approach on seatback is approach in

and means to, product it. really same with grow computers, with general, particular as and world used in of well and world. and for the many XXX narrow-body work we on cellphones that airplanes them, -- And with XXX, doing buying we in prominence demand airlines but the same as some continues aren't to the airplanes have they So connectivity all increasing are with they people in around maybe iPads our

Operator

comes proceed next from Our question with question. your with Michael line of Ciarmoli the Please SunTrust.

Michael Ciarmoli

go I in the is grows at can it we Pete, guidance? those those that assuming three Aerospace just midpoint, embedded million that I million something business -- for that X%. at your you're businesses if to $XX the from of mean like $XX assume I million, only go the the three $XX of back rest if mean, implies sort companies growth

us of thinking So of baked can type that the or you into give sort you're growth is guidance? what

Pete Gundermann

it guidance range. discounted put lower doing way the not we to guidance We some put risk as the end at for -- the It higher of exactly the we in is you're of move end and math. we range the the baked that into the there

Michael Ciarmoli

Okay.

if puts to and some see of mean, I mean, Okay. and what sales less antenna to XX% XXXX? growth, Fair confident those to of going just, then I being in are likely takes you're enough. or that less going breakeven, update, status about you are growth, I we how yet any the And the but I there? get you mean, antenna the kind it antenna? last the performed to in were see give waiting on know, when is the think, update broad maybe can network. what's the gave Is us or we I marketplace there see

Pete Gundermann

a marketplace It's flying the sense in it's that on airplanes. bunch around the It's of out. in

we remember and flying have, systems might old network point. You all under out a I been of believe, those airplanes swapped handful had this the at

airplane that's are well. nodes the believe -- very airplanes new that test network for the those going we and essentially So acting as all

without tell to for $XX granular million level substantial As sales. going of come anywhere we're companies doing we you, But can what expectations, prefer million, I to not in terms get too what. $XX antenna near not that to

Michael Ciarmoli

I Okay. Do you that left accomplished? mean, is would be significant be what the the there first testing anticipate timing for has to sales?

Pete Gundermann

be we're think kind of what it's things there, established ready here think, think of up, actually incremental contract the things do, our I more go. the need and No, might sales to of that getting are warmed beyond we scope. structure kind but to done kind kind of cycle getting we We've we there

Michael Ciarmoli

owner, players. whether jet, I'm on need connectivity. this. jet Okay. And mean, have in I'm I Viasat, business but if just educate just then already Honeywell, to I existing players of go I cycle those and this -- out to a trying to going figure if established me business bandwidth, lot our probably what obviously sales I'm could, Collins. other mean, transoceanic if just solution? drives you What's all corporation out we out am I it's the create I to There's say, flying against Why retrofit? mean, retrofit I'm it's going my and a there already

Pete Gundermann

debate versus some there's you they competitors extent. listed the mean, Ka would Ku. to I a -- Well, there be are whole competitors of most

and whole there. a to So pros cons lengthy there's debate as

Ku that is satellites online the frankly throughput better and coverage with belief global to Our high differentiators Ku offer disappear. competitive between tend and offers coming Ka

there's we that at So, overly think an field intimidating there competitors this point. not out of

ocean there much airplanes levels. lot Ka, not thing other older assumption is That connected. kind starting of the it over not even Ku, lower The is true, the most but are that is technology, already of flying a

and up be demand there for is that's of is that now the basically targeting. modern line older to right could It these kind be Ka where that offerable. standards pent-up brought airplanes think we're to we So,

part I move I we community upward with of a the to got there is that's begin we've think the we think, getting believe maybe to is the Ka point that, the is, think to that's there, a itself earlier can to displace splash. go want of we where and mean, think proves talking, more with We opportunity at where apparent as OEMs, HTS reason or back George's good price Ken's volume we bigger the Ka and Ku. presence make and user aftermarket with that satellites, a we starts Ku questions becomes

Michael Ciarmoli

I here one operating an can. just on then more bridge sort And just on of the, if income

three talked about the businesses. You

get in So maybe those cut losses half.

not and Adding losses what us cutting XXXX? maybe back, one-time growth I those some one-timers. and back amortization $XX XXXX? you is only that from other think, other -- just in of legal a XXXX adding sort be Can think you of earlier this you had items, And the might of the legal to into way million. income those range half, about some can bridging give or X-ish in right also operating in year then, the

Dave Burney

second at going that saw run XXXX. quarter And the Mike. you're rate worth costs The you through kind thinking that know, get amortization in of fourth Important, to quarter in year first as a can as talked of of, a when about the looking in the is $X legal here, rounding we one-time most quarter But you issue. we that a one at of I look far expenses. I full accrual million for for you're when

quarters sure throughout we first quarter each at three increased long-term relating that did fourth one program we to had So, accruals loss the not than some that, other mean, the CCC, I that have not I'm quarter. in

into next big year. things. continue expect to So, we were that Those don't the

call. So for get back we're you now I at the done the before with to but right I'll it expense, I'll don't have my fingertips get, amortization

Michael Ciarmoli

Got it. back Thank I'll jump in you. queue, guys. the

Dave Burney

XXXX. Yes, million I XX.X for got it. It's about

Operator

Our with next Tanwanteng the your line with from question Please question. Jon Securities. of proceed comes CJS

Jon Tanwanteng

through takes core go up hold you to are puts to morning not problem or businesses, you And Good likely quarters? ex as XXXX? that it's be what and roughly nice Aerospace expect the to and quarter. better, if that the XX.X% margin, Do through the

Pete Gundermann

what -- not you can you're I'm I sure understand Jon? again, it say

Jon Tanwanteng

Yes.

in QX. XX.X% So operating problem you ex had margins the businesses

Pete Gundermann

Right.

Jon Tanwanteng

next hold to that the expect year? up through you Do

Pete Gundermann

to margin up community our we're mean, three If think, about concern business most that is started in doing was was happening clock, basically these Yes. I reason comfortable was great. it's with some I back I and the in businesses investor And about pressure perspective pretty whole what our our we talking of the general. there general. profile the in

us are us fix. that that to we things think, We way. to expect here. we that don't three or still two out on anything else I dragging these have We feel down bottom And need

only pretty comfortable I kind are. some but we and hope it's But not three with of the we're mean, think and customers competitive world where again to all that. in struggling difficult is there's get I our general, ones the crowd. if was should contributing And low, this mean, I to or break become we do contributing maintain and even, that whatever part of continues to it have be higher. the them crowd itself, XX.X% to

Jon Tanwanteng

going or modestly what disclosed the in then another and press what business to about target back you have Test just year. be or being there? profitable the that? do to make you EBIT want that to an question cost-cutting release flatter of secondly, to and basis what And this efforts Was you were that those describing get you kind on And margins revenue

Pete Gundermann

little course of continue And we're close quarter a have can I got because, service question. our semiconductor some going you're bit maybe that guess, for get going is of till good the we the this In the over little over we I couple bit. well, EBIT we're a we've -- be basis kind very revenue, didn't some year. years. first a February we next of clarity. going I to in hedging to to XXth, press release, part We should to really see obligations but to also mean, there it's a Yes, of think mention breakeven

So will service sale. it's revenue Nothing there. involvement and market some related, residual that's on be based contractual semiconductor past more there

the tend bad, it's responding a challenge, that of a appreciate do our structure pretty to I semiconductor that really So the But mean, pretty learned And things business they the the good; learned I've adjust. it's is to see times; crew a to is is the of Test we've it's it's we changing business. been to that and a it's when And to this good, challenge. in point resourceful when that. been business. you have definitely appreciate, well lumpy this is will has stressful we've for had one it's at of turning and --

lot has On with that the was of to gone dedicated the a semiconductor overhead one structure hand, sale. the

So did of that the operation in is We've that. to our a structure still. that got. shared But our was headcount Irvine, that there's way related California not way, got lot down

plan remainder where of in we might other and other pretty our that in prospects So in what to are ourselves didn't of we're we have growth -- have the with business, a sale, like analysis diversify us. pursue transaction place. go But given things do volume. mean, pleased a we time didn't, this looking and I us forward instigate trying our to felt it, to did bring if at it that XX% organic year to good But should we we and leaves kind we to do out it this, we an and in again, the going this more of have businesses it's came kind it.

Test pretty Test the it's don't the businesses that. answers We're as think We we're business obviously, year on. be been our on but about business pleased our the the goes we going crisis. Aerospace a like have not don't to we'll certainly we've with So And side. on talking struggling be all point, about updating to talking this at pretend three

Jon Tanwanteng

or progressively off going But from do it the that is start pretty going year? and improves perspective, through margin a Okay. see to how then rough you Great.

Pete Gundermann

I can the of proceeds stabilize substantial I Well, out tell back end that. year. then the to the But you sale normalize mean, gain show it's the toward the and it's it'll off first the to start revenue you going going a weaker, in probably pretty of quarter, and of

Jon Tanwanteng

Okay. you. Thank Great.

Dave Burney

expect to revenue year relating we that pick to Yeah. goes the on. the rail And up as program

Operator

Company. Dick question line proceed & comes the from next Ryan your Please with question. with of Our Dougherty

Dick Ryan

you. Thank

million maybe follow some two -- A&D Pete, of test going pipeline kind revenue; facilities on $XX you question, supporting of versus to million, position latest kind commentary broader into striving how So, I you a know But Can -- got there. the does there? that you up comment rationalization business? in about position. prime your supplier the of there obviously, are some for on $XX on talk maybe the get of you pipeline a a just to opportunity of when opportunity look

Pete Gundermann

while. in quite Yeah, it's strong than or as a we been think it's stronger

for regime that it's bookings market it change over robust opportunities have reasonably We last are our Washington. appears have there maybe in quoting to been happened but of reasonably to certainly couple a more and strong, years, waiting in strong. more Then been has happening of response activity us the been

So I'd say lumpy going more we a be comfortable. business. and more It's to

business when where good, have the there margins going the we a are be volume got are because when good, to is are they when it's the So to be times and lower times -- to be are worse.

growth or barring it's about to to or restructure are expect kind facilities like X% of or So open least kind keep in in -- at But our XX% We the navigate different as I mind be we substantial this. in that that, acquisition wide to not places. have we in that overall range. going not this year, to The it different and will of we about. talked of business. it's something be that we it's X% business, facilities two the two do eyes you things stay going do how We're replaceable, going have plugged with as

a trying slam not go of to people go-forward option. kind decide figure We dunk where out of a trying we got really from and to some kind of kind it's right here. So now that

were in to up. of imagine, late-December until very not you where the with that where going was As can a was itself. different ended than be we And we thought semiconductor exercise and up trivial sale we

has conclusion. We to we've focus actually. primary our done sale that to a that think successful So been bring

and is exercise what to we where have figure the we go left out now here. So from

end that So, expect release first more as comes quarter I the by results. of more quarter when on we first no we'll and the it certainly

Dick Ryan

potential down updates any opportunities, contracts on the EPDS Any current you road? and the the wins have

Pete Gundermann

Maybe we go-to or opinion, in consider and Power to one as part you, an us. ourselves, Distribution, kind of humble people established smaller because flight-critical a And kind have days to certainly and it's active -- look aircraft. overview, should power anything do hard was people to willing it start there don't we had the is we Dick. when of that a to the time of I my an these find business specific of in long for EPDS, have even Electronic

much of without we've -- maturity in you now that world of in we've to about established XXXX-XXXX now would well I doesn't it maybe financial this airplane such got developed jump at and more we to that don't bit results. more scars part more to being got but get capabilities it. so. to I going that, prove And we're industry be rate a think the knows everything, a in and We where high XXXX, little it's that dare don't architecture around people and it because when the industry pretty the the is our point -- pursue do very us have participation. ourselves at of consider up, bring we do do to it's a as we We've meaningful the at the the the hit least an invited say very, the everything, we something decide and

the revisit So that calls topic. homework why quarters doing over expose coming side of don't and the let me we'll a of have one the next of on these maybe you little

Operator

Canaccord. Ken is Our Instructions] a question question. with with follow-up from next question [Operator proceed Please your Herbert

Ken Herbert

follow-up. quick Pete, just one

one You've first here another easier the second-half. the in business got two comparisons in of on Aerospace with to the than half much XXXX quarters

considering a organic As aware we how just from progressed? of and be about the comps is growth, cadence anything across should XXXX standpoint there think we the XXXX

Pete Gundermann

good question. a It's

now then than first-half the get way second don't have not the there's the part expect of books up of that's year I'm half. half the and the looks that second aren't orders to -- time But it in year, moving expect We parts is be yet. bunch pop lot by the -- there are could of we the the now, we between there half it that -- of and the to the stronger a of just you in first right sure

the So was this a little going point there, bit don't we to but really bit I like I looks first-half were vague know, at be think little intentionally we a is because it stronger. --

Operator

proceed Ciarmoli the question. of question comes Michael next with Our your with Please from line SunTrust.

Michael Ciarmoli

Pete, going costs associated with how curves be start-up on the are thinking just Are there business, on that or you just any -- to about Test Just subway the should guess, expect program? that? ramps that about trying how program program, to I up. learning we think

Pete Gundermann

part bounds It's substantial to in another good look the question. It's past, little at bit award, observer. feel, outside of the done we in would of that the we've it's least, way because a a what outside it

or like wants On to alley, other up philosophy the in Test that of the our the right we've with that done drive the what it's hand, is in the Navy toward this arenas of customer other kind Marines remarkably or in similar case whatever. certain to including arenas defense

and there this things, of arena. world, time, learning just demand lots and and substantial are of in will be what same really set different. care our is it's me the rail Anytime little the I'm we pretty about in skill don't cities got that that opportunities, are, you subways. the in do risks something and curves to sure that. there of use bringing risk subways, of a And well that it different, customer. let who we're bit learning a is talking new around we've rail specifically So but is circled some what of definitely it you body I risk sense terms there's a how's think I'm there say or are, At our

involvement the the than prior to that our City the And is shift world and way been toward here. way New model, opportunity be we they're the could award future. So, different bit pretty we this done our of kind to little things the And going have are done a to are have market feeling a if good know in to interesting developments of thing. prior already this be go to that activity over we'll conversations Obviously, are and are discussions could lead as and lead awards which that our how engineering under we'll course other way, proceeding the other the an the going various could is to bidding how and is in involved know efforts, year, well responding. York

You going doing. York going anyway this a just just subway the in you I'm if City the just picking might on them what made will to pay statement imagine system, city that York but New DC pretty big a attention pick responsible has that for New rail maybe, our city, I'm much direction were to every guessing, the And is program. in US system City I'm at random,

we right, it and to that think do New cities. well, solve right it do the opportunities some could do if it had. if of historically we other we that we lead City other And in can problems York So we

knows. who excited it about We're though. So pretty

Operator

Our next question Wallace Pine Mike comes the of White proceed from Capital. with line Please question. with your

Mike Wallace

We're that? you plan us we thoughts cash. you about give the generating $XXX at Good. million you. the and Thank And get some flow the and year talk end receivable at to year. debt a despite some reduced from Test this to that's cash paying business just some over like of $XX the the some the the do job debt balance on year. down in what business little questions. bit Couple Looks do of on from with Can of million going Nice good that.

Pete Gundermann

doesn't have of let Dave them. kinds me Well, those checks when show up

Dave, So this you to do want answer question?

Dave Burney

million mentioned I we quarter initially. Yeah. that There earlier this we paid on I did, on later bill beginning think, we of the took debt $XXX is will short-term is estimate tax taxes on that. paid a million our be the probably second it the due be quarter. But $XXX down revolver. our $XX cash That down on about plan the and will as million, or

Mike Wallace

your isn't that? Okay. on Good. And What's year. any last there repurchase activity really share thoughts

Dave Burney

Again, continuing acquisitions priority. reinvesting and as the focus is the and on look growing business to at the

Mike Wallace

improvement business, Okay. saw Operating the year-over-year. margins nice in Aerospace some that

As think the bit we show for three troubled XXXX companies out should Aerospace into improvement other we margins business? started little look the operating to volumes, about of some how in as a

Dave Burney

some was operating think number a If achievable I that that's example in expect at Aerospace margins. of revenue, Yeah, quarter good nice a there. level we the I fourth the operate continued improvement of

continue expand that. at opportunities We to to look

$X.X million As headwind Pete segment incremental mentioned to our a million there. $XX the I earlier, facing say, tariffs; for cost increased mainly should Aerospace relating we are in

So continue explore that to presents a some of us bit China. buying as little electronics of we challenge from to to alternatives a those

good muddiness is comment my yes, the strange Aerospace real with was So, solid no quarter to a fourth quarter it.

Mike Wallace

Okay.

base off build that to about XXXX? would a be think of for good as So we

Dave Burney

for or we've continued have again, of one-off things a have and quarter. -- that it's certainly, that didn't happened, lot was any there have of unfortunately the the in fourth last to Aerospace, year we for two, Yes, muddiness

So quarter it us. is a for good representative

Mike Wallace

it Yes, your seen lift a in XXX next think through of that it's one them. could see and about XX from we the the we converting running the months you look business. it probably we've through quarters points last think cleaner of to improvements XXX several backlog points And as the of in and to should XX.X%? about How over revenues the

Dave Burney

say Yes, segment intentionally I guidance providing and as said, the would out operating but But to strong. from operating margins, expand on we there rest for you lot when the it the remaining will depend three specific that Pete is Aerospace of margins. opportunity problem businesses, margins the mix. is sales carve stay away of And really

CCC the CCC for to areas So those CCC, regard since those three to and had margin opportunity a don't are quarter, generally down, thing need the that units, there, earlier bookings bought us line happen. appropriately that's Aerospace to we were expect strong really big margins top the the it's margins the that bookings best fourth dropping business improvement. we out to there our challenge business our get And top in see probably AeroSat, we quarter. increase two what to were but -- mentioned at and our We to is different with we real for and growth bookings good are problem we line improve the more call had we specific a booking

Operator

& Our line proceed Godfrey Please last the King question. question George your comes with C.L. of Associates. from with

George Godfrey

you. Thank

M&A one. and say you you're share activity more the to Dave, is I before what focused want them quick And functioning a safe fully fixed we get Thanks. it businesses M&A authorization? but we with see Just you heard remaining activity? is the any where then, proceeds, on assume those three

Dave Burney

there share is acquisition I that the remain million opportunities. continuing fixing mutually wouldn't $XX And Yes, repurchase a of at from two is that the look authorization. exclusive problem to businesses say

shoulders have with running acquisition have continue opportunities. most businesses, us those those a with people work businesses, people at doing at are and team solid We that others the of the we now primary that behind two broad the are focus the and to that look

our there view to at two I businesses to fixing So don't ability as those acquisitions. continue look diluting

Pete Gundermann

to that, the script could would script if do perfectly can world be way I the the world it, perfectly. but add you that might you

So and if going was has be with for ago, ideally the your worked last and business case which just and our of things a things acquisition, candidates, to you super. acquisition ready in them to Telefonix how other you're year-and-two-months out on find good them the got which that when was are take best point acquisition you is whether

Telefonix while pleased to We've with we're that those are hits. one compensate have one the way involved all few, of for the that really people tell in recent most three was that's a and you ones that every in And the in of but more their acquisition these things a history. big So need in better a the working who other out. you had of hits big ones to once of acquisition, are that phase struggle game is will the

Operator

session. for we Ladies the like reached would of to closing and the gentlemen, end have Peter question-and-answer turn back the remarks. I call to And

Pete Gundermann

today. Well, a for And we're, we're Okay. And going but with are always really year. well-positioned worked pleased struggles, your there was into out. felt were again, how thanks overall, really think attention XXXX. we're good XXXX it we we There struggles, pretty

a the So good thanks to look you for day. your at end Have attention. to of the first again talking quarter. forward We

Operator

conference. today's concludes This

may your this disconnect at lines your you for time. You Thank participation.