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spk03: Greetings. Welcome to the Astronics Corporation Second Quarter 2021 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Deborah Pawlowski, Investor Relations for Astronics. Thank you. You may begin.
spk01: Thank you, Alex, and good morning, everyone. We certainly appreciate your time today and your interest in Astronics. I have here with me Peter Gunderman, our Chairman, President, and CEO, and Dave Burney, our Chief Financial Officer. You should have a copy of the second quarter financial results that were released this morning, and if not, you can find them on our website at Astronics.com. Let me mention that we may make some forward-looking statements during the formal discussion as well as during the Q&A session. These statements apply to future events that are subject to risks and uncertainties, as well as other factors that could cause actual results to differ materially from what is stated here today. These risks and uncertainties and other factors are provided in our earnings release, as well as with other documents filed with Securities and Exchange Commission. These documents can be found on our website or at sec.gov. During today's call, we will also discuss some non-GAAP financial measures. We believe that these will be useful in evaluating our performance. You should not consider the presentation of this additional information in isolation or to substitute for results in accordance with GAAP. We have provided reconciliations of non-GAAP financial measures with comparable GAAP measures in the tables that accompany today's release. With that, I will turn it over to Pete to begin. Peter?
spk02: Thank you, Debbie, and good morning, everybody. Our agenda this morning is to talk through a summary of our second quarter. which frankly was a little bit of a mixed quarter. On the one hand, sales were a little bit lighter than we expected, as was the income statement. On the other hand, our core aerospace markets continue to recover nicely, and we believe we'll be setting up a better second half to 2021. I'll do that summary to begin with, then I'm going to turn it over to Dave for a more specific discussion on our income statement and balance sheet, some special items that are happening or are expected to happen in the near future. And we're also going to be reinstituting some revenue guidance more than we have been since the pandemic took hold. It's a little bit of a risky item, but we're here in August. We've well into the second half already. Much of the business that we plan to execute in the second half is in work, so it seems a reasonable time to do such a thing. And then, of course, we'll close with questions and answers. So the second quarter, revenue was, frankly, similar to previous quarters we've had recently at $111 million. We've been bouncing around a band from, say, $105 to $115 since the third quarter of last year. And as one might expect, we are not set up to be profitable at that revenue range. Our goal has been and continues to be since the pandemic took hold to execute on our responsibilities in terms of development programs that we think are important to our future and stay cash positive and financially healthy waiting for the markets to recover. Frankly, when the pandemic took hold in late first quarter, early second quarter of last year, few of us would have expected that we would be sitting here a year later waiting to see strong recovery. But that's how long it's taken. And even now, as all of you know, there are some clouds on the horizon for the aerospace industry, especially with the Delta variant that we're all dealing with. Our first quarter also was a little bit lighter than we expected, in part because of supply chain problems, which have become a familiar refrain not only in our industry but many industries these days. It's a little hard to estimate, and it's not really an auditable number, but we feel that our second quarter, absent any supply chain headaches, would have been 5 million to 10 million higher in terms of revenue, which would have made our income statement look quite a bit different than it does. Still, in many respects, we actually feel like we're making quite a bit of progress, and we think that things are coming around and starting to recover pretty strongly. Even with our second quarter results, when compared to the first quarter, we feel like we're on a pretty positive trend. And both Dave and I feel like the first quarter is a more relevant comparator actually than the year ago quarter because the year ago quarter when the pandemic was taking hold was full of chaos all around the world. Compared to the first quarter, revenue was up 5%. Our gap net income loss was reduced pretty substantially. Dave will talk through those numbers. Our adjusted EBITDA went from a slight loss to a slight profit and cash from operations improved from a negative 7 million to a positive 4.5 million. So we feel like we made progress even on a reduced revenue level. But the best news of the quarter is that our aerospace markets continue to show signs of recovery relative to where they were earlier in the pandemic. on a global basis or a macro basis, business jet and GA orders have been very strong for major OEMs. I won't repeat it, but you've probably seen book the bills in the industry for our OEM customers of, in some cases, 1.5 up to two or even higher. And narrow body transport activity has been very strong. with increasing utilization, especially in the U.S. and China, but also in other places around the world, and plans to increase production rates both in Seattle and in Toulouse. Military aircraft, a third part of our aerospace business, has been pretty consistent throughout the pandemic and remains so. The strength in the market has led to pretty solid improvement in our aerospace bookings. Our aerospace bookings in the second quarter were 118 million, which was a book to bill of 1.32. 1.32 is normally something we would be jumping for joy about. It continues a string of steady improvement in bookings on a quarterly basis since the pandemic took hold. Going back to the second quarter of last year, we hit a low point of 43 million. And since then, our quarterly totals have been, we went from 43 to 65 to 74 to 100 and now to 118. So we're pleased with that trajectory, keeping in mind, of course, that in 2019, before the pandemic took hold, we were running typically in the $175 million quarterly booking range. So even though $118 million is a solid book to build. It's still a ways away from where we were pre-pandemic. And given that historically a significant part of our business has been wide-body related and wide-body continues to be very weak in terms of utilization and flights and production rates, It's unclear at this point how long it's going to take to get back to that level. It's probably reasonable to assume that 175 million quarterly aerospace bookings is going to be a challenge until we see some wide body recovery. And again, the Delta variant has pushed back recovery that we thought was going to be taking place right about now, actually. Moving away from aerospace towards test, our test bookings performance hit a real soft spot in the second quarter. $8 million, which is a real drop off compared to the $24 million average that we've had for the previous four quarters. Our plan for the quarter wasn't $8 million, it was actually in excess of $20 million. We blame COVID, frankly, for a lot of the delay and not necessarily for competitive losses. There's a handful of programs that we are pursuing, we're still pursuing. They've been delayed. We feel because of COVID, we can't point to a competitive loss that brought us from our expectation of over $20 million down to $8 million for the quarter. So That being the case, we would hope for and expect a rebound in bookings for our test business in the current quarter and in the fourth quarter of this year. Taken together, aerospace and test consolidated bookings for the quarter were $126 million. That's a book to bill of $1.14, which we're still pretty pleased with, leaving us with a backlog at the end of the second quarter of I'll jump straight to our expectations before turning it over to Dave of what we expect to happen in the third quarter and the fourth quarter, and that is we're predicting revenues in the $115 to $120 million range for both of those quarters. We expect the fourth quarter to be slightly higher than the third quarter based on schedule. And we believe that that kind of revenue performance, given the way the company's set up right now, will get us in the range of break even on our income statement and solidly positive on an adjusted EBITDA basis. There are risks. The major one that I already referenced is there are supply chain challenges. These are things that everybody's wrestling with these days. It makes running a business a little bit unpredictable. Our sense is that things aren't getting much worse at the moment, but we don't see them getting a whole lot better either. So that's a complicating factor, and we'll have to see how things work out in the next, you know, not just two quarters, but frankly probably a little bit longer as the world kind of gets back to some level of normalcy. Also, our revenue projection for the third and fourth quarter is dependent on some level of book and ship business, quick orders that come in and go out that are somewhat unexpected, and there's usually a regular flow to them. Those orders had largely dried up when the pandemic took hold, which made earlier predictions much more difficult. They're starting to come back, and we're assuming continued progress in a book and ship business. So we have a healthy backlog. We're getting book and ship orders. Supply chain is a risk. But when you balance it all out, we think 115 to 120 is where we're going to be. Said another way, though, if we could wave a magic wand and solve supply chain, we would, we think, comfortably be above 120 on average. So we are building in some level of conservatism there in those numbers, hopefully enough. With that, I'll turn it over to Dave.
spk07: Thanks, Pete. As Pete said, rather than going through the typical comparisons to the previous year's comparator quarter, which was a period of transition and adjustment as we entered into the pandemic and responded, I think it would be more useful to spend time comparing sequentially to the first quarter of this year You probably all have read the comparisons to last year's second quarter in the press release, so repeating them wouldn't add a whole lot of value at this point. So generally, we feel like we've been making progress, particularly in the aerospace segment. Looking back one quarter of the first quarter of this year, it was a bit of a step back as our consolidated sales dipped from $114 million in the fourth quarter of last year down to $106 million in the first quarter of this year, so it was nice to see our sales rebound in the second quarter, improving to $111.2 million. In particular, the aerospace segment had a strong sequential improvement, with sales increasing to $89.2 million from $81.4 million in the first quarter. Consolidated loss from operations also improved sequentially when compared with the first quarter. as did adjusted EBITDA, cash flow from operations, and consolidated bookings. In the first quarter, we had a loss from operations of $9.5 million. The second quarter loss from operations was reduced by $3.6 million to $5.9 million. I should point out that the second quarter results do reflect the benefit of a $2.2 million non-cash reduction to SG&A costs related to an adjustment to our contingent consideration liability for the diagnosis test acquisition from 2019. Negatively impacting the quarter was about $1 million in legal fees at our test segment relating to several matters. We do expect this rate of spend on legal costs to continue with the test segment until the matters are resolved. Adjusted EBITDA improved from $859,000 negative. It improved $859,000 to positive $363,000 during the quarter. Cash flows from operations in the second quarter was a positive $4.5 million compared with a negative cash flow from operations in the first quarter of $6.9 million. So we saw some pretty significant improvement there. Also encouraging was the improvement in our bookings, as Pete mentioned, particularly in aerospace. Consolidated bookings continued the trend of improvement that we've seen over each of the last four quarters. In particular, the aerospace segment bookings of $118 million were up about $18 million sequentially compared with the first quarter, and up $44 million over the 2020 fourth quarter bookings. On another note, we've announced to employees that we will be consolidating our Fort Lauderdale lighting and safety operation into our East Aurora facility. The transition will take place over the next six months and the building is being put up for sale. The market seems pretty good and we believe that the building has a value in the range of $9 million. On another note, We're finalizing our 2020 tax returns, and we expect refunds relating to net operating loss carrybacks to be in the range of $7 to $9 million, which we expect to receive toward the end of this year or early next year. And then regarding our debt levels, as you can see looking at our balance sheet, our net debt was reduced during the quarter by $2.9 million to $139.4 million. And we're forecasting to remain compliant with our debt covenants. Beginning with the third quarter, our primary financial covenant will revert back to a maximum leverage covenant, which would be six times adjusted EBITDA as defined in the credit agreement. And that definition does allow us to exclude certain non-cash expenses that you can see by looking at the statement of cash flows. The non-cash operating expenses are the majority of those. That concludes my statements. Pete? Thanks, Dave.
spk02: Alex, I think this concludes our prepared remarks. Why don't we open it up for questions and answers now?
spk03: Thank you. At this time, we will be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from Michael Ciamoli with Truist. Please proceed with your question.
spk06: Hey, good morning, guys. Thanks for taking the question. Good morning. Good morning. Since you just mentioned it on the debt and the covenants, can you just walk us through, did you say third quarter of this year it reverts to the max of six times?
spk07: Yeah, we switch off of the covenants that we've been on for the past year and a half or so away from the interest coverage ratio and revert back to a maximum leverage ratio, which will be set at six times for the third quarter. Then it'll drop to 5.5 times in the fourth quarter.
spk06: So, and that's on trailing 12 months. I mean, the trailing 12 EBITDA, 7 million. I mean, even if I have you doing 4 to 5 million of EBITDA, I mean, how do you get compliant with a trailing 12 month? I mean, you mentioned other non-cash adjustments. What else? I mean, you've got adjusted EBITDA. What else is getting added to get you in compliant with a net debt that'll be 140? You know, I would think you... kind of need something. Just can you walk me through that? It seems like you need at least $22 million, $24 million of EBITDA to get compliance.
spk07: It'll be a combination of lowering our net debt over the period of time. There are some levers that we can pull in the agreement to allow us to exclude some other costs. We have a lever that allows us to include up to $10 million of legal costs. from the calculation and all the other non-cash EBITDA stuff that is defined in the agreement that you wouldn't see in a typical EBITDA calculation.
spk06: Okay, so the $10 million of legal. Okay, perfect. Maybe, Pete, on the bookings that you're seeing, can you parse that out a little bit more on where you're seeing the strength? Do you have that visibility? I mean, I'm assuming it's for narrow body, but are you seeing some of the airlines come in with sort of aftermarket retrofit orders? Are you seeing any kind of different ordering trends based on geographic locations?
spk02: As you might expect, it's where the airlines are flying mostly. So the two hottest domestic markets where narrow body activity has, you know, pretty much returned to normal or pretty, you know, within shouting distance of it is U.S. and China. So that's been where a lot of the activity has been. U.S. airlines have been, you know, are looking pretty aggressively at improving their fleet. They've had a year to think about things that they want to do, and now they're actually starting to do them. So we're seeing a lot of activity there. Of course, Boeing ramping up the MAX is very helpful to us. That, as you know, was our largest production program in 2019, so we've suffered without it. And the A320 rate is... very robust and rumored to be getting stronger also, which is an important program for us, not in terms of line fit necessarily, but when airlines that are customers of ours buy those airplanes, we end up putting hardware on them. So that's pretty important. And the whole business jet area, though it's not showing up in strength in our shipments at this point on a comparison basis. All indications are that rates are going to be improving there, and we're seeing increased activity on that basis also. And then finally, the other thing I would mention is we got a pretty significant order in our antenna business in the quarter, which was really nice to see. We continue to have pretty good success there with our partner Collins Aerospace. And that's one area where, you know, if we could deliver everything now, they'd probably take it. So it's unfortunately a pretty complex product with a lot of subcomponents that come from all over the place. So it's an example of some of the things that we're struggling against from a production basis. But I'd say it's pretty much across the board, Michael. It's been a healthy environment.
spk06: Okay. Okay, got it. Last one and then I'll jump back in the queue. Do you think you guys are profitable at the operating income level in the second half? And Dave, I guess, are there any costs we should be aware of associated with the Florida closing and the transition to Aurora?
spk07: Yeah, first on the cost side of the transition, I think for the balance of this year, the savings that we'll see as we you know, transition up here will be neutral with the transition costs. So I don't think there's much impact on 2021. Going forward, probably a couple million dollars in savings, you know, once the transition's complete.
spk06: Okay. Got it. And then just do you think you, you know, at the second half run rate, I know you're kind of fluttering around breakeven, I think, at 115. I mean, it sounds like, do you think you could be profitable operating income in the fourth quarter? Or do you think even in the fourth quarter?
spk07: Yeah, I do. I think by the fourth quarter, we're going to be right around that, you know, if we can hit that top line.
spk06: Okay, got it. Thanks, guys. I'll jump back in the queue.
spk03: Thank you. Our next question comes from John Conlington with CJS Securities. Please proceed with your questions.
spk05: Hey, good morning, guys. Thank you for taking my questions. My first one for you, Pete, I guess. Can you talk about how order rates have improved through the quarter on the aerospace side and how they've tended through July? And, you know, maybe a little bit more color in the order, just in terms of the timing, you know, how far ahead are your customers ordering for at this point? Is it two quarters? Is it three? Maybe start there and I'll ask somewhere after that.
spk02: Well, I think we're saying that we have, what, 185 million or something of our backlog at the end of the second quarter scheduled for the second half. So that gives you some sense of where it's flowing. And, you know, it's not necessarily an indication of capacity or anything when you talk about how far out we're scheduling because sometimes customers schedule to you know, dovetail with their production rates, which go out maybe a year and a half, even though we could build it in two months. And sometimes they're behind the eight ball and they want it in two months, and it's going to take us 52 weeks in today's environment to get materials. So it's a little bit of a mishmash kind of all over the place. But while I'm on the supplier issue, where it's affecting us is, you know, the We traditionally get a fair amount of pull-in and push-out. There's always that yin and yang, so to speak, among what we're trying to do with our customers in any period of time. And obviously pushing things out isn't too tough. We just have to agree. But where we're running into challenges on occasion is when customers want to pull things in. That's what's hurting us because our supply chain – if we're used to a certain level of performance, you know, say four weeks or ten weeks for something that we've been buying forever, and all of a sudden it's, you know, 30 weeks, that's the kind of thing that we see from time to time. So it limits our short-term flexibility to bring things in. So the scheduling of new orders is kind of a combination of when the customer wants it and when we can do it, when our supply chain can do it. But again, like I told Michael just a minute ago, I think it's safe to say that it's a groundswell of improvement kind of across the board with the notable exception of the wide body market. And I think I talked last time on our last quarter conference call, our traditional reliance has been Roughly 50% for commercial transports, 50% narrow body and 50% wide body. Historically, it was much more oriented towards wide body. But thankfully, the markets have evolved and our companies evolved so that we have pretty strong narrow body participation also. And it's a really good thing as the pandemic took hold and narrow bodies recovering and wide bodies not. So our... weighting between those two is likely to skew very strongly towards narrow bodies this year and, you know, maybe next year. But in order to get back to kind of the higher level of bookings that we were used to before, we've got to see some wide-body recovery. Sure.
spk05: Okay. Great. That's helpful, Collar. I guess the second piece is, you know, we've seen these increasing production numbers out of the major OEMs. Is that matching up with what you're seeing in your order books on the OEM side, or do they still have to burn through some inventory before they turn on the spigots for you? I'm just wondering if there's a lag effect at all.
spk02: For the narrowbodies?
spk00: Yes.
spk02: No, I think we feel like most inventory has been burned off at this point. Okay, got it. We don't see that kind of lag.
spk05: Okay. Dave, I'm just wondering what the inflation does to your incremental margins in Q3 and in Q4, if you have any kind of color on that.
spk07: Well, it's a difficult thing to measure. It hasn't had a significant impact on us so far. You know, it's been, you know, the stuff that's gone, the impact is more coming from the longer lead times than it is the inflation at this point. You know, we've seen a couple of odds and ends of components that have gone up, but they're not having a material impact on the income statement at this point.
spk05: Got it. Thanks, guys.
spk03: Sure. Thank you. Our next question comes from Dick Ryan with Colliers. Please proceed with your question.
spk04: Thank you. Hey, Pete, a question on the earn out from the semi-sale. Can you give us an update what you're expecting or hope to expect? And is that cash used in the covenant calculation to kind of give you some cushion?
spk02: Well, first of all, it's been kind of a frustratingly slow process to try to bring to resolution. So I don't really have much of an update there. It appears we do have a disagreement, and we need to find a way to resolve it or work it out, and our current initiatives are geared more towards that end. So your question next will probably be when might it be resolved, and we just really don't know. I'd like to think this year, but it's unclear at this point. As for our covenant expectations, I mean, obviously, it'd be nice to get a resolve because it would give us some flexibility. We believe, I mean, both sides, I think, agree that we're owed an earn out. It's a dispute as to how much. But we're not reliant on that, and we're not building that into our assumptions. It's not as though we have a wall that we have to, or a cliff that we're going to go over if we can't resolve it. So, It's not particularly urgent from that perspective.
spk04: Okay. Where are the legal costs coming from on the test side? I'm not sure if that's something new or something that's been lingering.
spk02: It's kind of like when it rains, it pours. We've had this legal issue going on for years now on the aerospace side with Lufthansa. Technic. And, you know, we're thinking that might be resolved in 2022, but there are open issues there. And with COVID, all the courts are backed up all around the world. So we're not sure about that. But on the test side specifically, we have a similar dispute brewing with a competitor that it's hard to tell whether it's going to have long legs or not. We're We think it's going pretty strongly in our way, in our favor. We didn't bring the suit. We're defending here. And then we have a couple of brewing contractual disputes related to transactions we've done over the last couple years that are also getting a little bit of attention. Again, we don't think they're significant long term, but you've got to kind of go through the process. And I don't know if it's something in the water these days or What it is, you know, we've been kind of doing this for 30-some years. I've never seen this range of legal activity as a weapon, but that's almost what it feels like. So, you know, we don't know what to do other than kind of put our best foot forward and defend ourselves, and that's what we're doing.
spk04: Is that from some of the muni business you've gotten, or is that defense-related?
spk02: It has to do mostly with acquisitions. The contractual stuff has to do with acquisitions. And the bigger one, the looming one, is a technology infringement dispute.
spk04: Okay. Can you provide some more specifics on your BizJet antenna order? with Collins, kind of who, what, when, where? Was that a competitive win, or can you kind of handicap that race?
spk02: Well, it's kind of the same old story, just with a different verse. We've been working a long time to provide world-class connectivity to larger business jets. There's a clear need for that in the market. And we feel like our technology, our antenna is a critical component. We've had a few swings and misses with other partners before, but this program with Collins has really picked up speed. Collins is a little bit more conservative in our opinion than some other companies in the industry might be. So it's moving a little bit more slowly, but the results of comparison tests has been very positive. So we're getting to the point where it's a Collins program, so I can't really speak for them, but they're getting the STCs and the supplemental type certificates for various platforms, and they're selling to fleets, and on an aftermarket basis, there's seems to be a lot of demand. As you know, business jet usage is way up. The bigger business jets tend to fly internationally occasionally, and you've got to have KU service to do that mission comprehensively around the world at this point, which is where our antenna fits in. It's, you know, Collins is going to compete us to the extent that they need to, to probably keep us honest, make sure they're getting good value. But we feel our relationship with them is very strong and we have a roadmap where we're going to go from, you know, we went from the previous generation to the current generation and we'll go from the current generation to the next generation, which we are developing in collaboration with them. You know, there are also other Collins competitors out there. We're not aware of a similar kind of product that has global reach and global performance like our system does at this point. So we're pretty happy with the program.
spk04: Okay, thank you.
spk03: Thank you. Our next question is a follow-up from Michael Ciamoli with Truist. Please proceed with your question.
spk06: Hey, guys. Thanks for taking this one. Did you guys see any incremental headwind or pressure from the 787 program? Pete, did you guys have that level of visibility? I mean, I know the whole wide-body market is weak, but that program seems to be the problem child more so than the rest out there.
spk02: Well, it certainly doesn't help. We have a little bit of standard line fit technology product on the 87. What is it? Fuel access. Yeah, it's maybe $30,000 a ship or something like that. But the bigger portion, which is practically line fit, though not technically line fit, is pretty much every 787, not pretty much, every 787 gets a seat back IFE system. And those seat back IFE systems come from one of two or three suppliers. And we provide power to those two or three suppliers. So we tend to have high content on the H7 for that. And that's typically up around a quarter million or something per ship. And so, yeah, they cut the production rate. That hurts, no doubt about it. The wide-body production market in general between rate reductions in Airbus and rate reductions at Boeing and delays on the 777 is not helpful, obviously. And it's disappointing that the major destinations in the world with the Delta variant are having a hard time opening up their doors because I think vaccinated people anyway want to travel. You can debate whether vaccination is appropriate or even effective with Delta, I suppose. But from an industry perspective, it would be really nice to see more of those doors open than what we're seeing today.
spk06: Yep. Got it. Got it. Shifting. What about test on a go forward here? I mean, this, this 8 million bookings, when does that start to kind of impact, you know, your your quarterly run rate here? I mean, should we get, you know, should we be kind of calibrating ourselves to maybe get a little bit more conservative? Have you seen any kind of changes, you know, quarter to date in that test order flow?
spk02: There are, no, we haven't really. It was a surprise to us. As I said, we went into the quarter thinking we'd be up around 24 million or something like that. We ended up at eight. That's not just a little miss, that's a huge miss. But the test business is open to that or susceptible to that in the sense that it's not a bunch of little orders typically, it's a few big orders, and if a few big orders get delayed out of one quarter into another, you can have that kind of effect. You've been following us long enough to know that sometimes we have bang-up quarters, and that means you get a lumping or a group of big orders that all happen to follow in the same quarter. So we don't get too excited about any particular miss, but what's different about the second quarter was that it seems like a lot of the misses were due to basically COVID restrictions with municipalities in particular. On the transit side, land radio and defense too. Everything just seems to be moving a little bit more slowly because A lot of people aren't in the office. They're working from home. It's harder to get a hold of them in that context. It's harder for them to make decisions or get approvals and push the paper the way it needs to be pushed in order to get us orders. I'm really interested to see how the work from home thing in that environment evolves in the fall here. I think there was an expectation that everyone was going to be back in the office. Maybe there still is to some extent. But if not, it's possible we could have another delay on orders. And to get to your question, that would start to affect us towards the end of this year, beginning of next year. So we're watching it pretty closely. I mean, the good news is that we didn't lose anything. It's not as though we had a $15 million program that went to zero because we lost it. It's still a $15 million program. We just got to wait for it to happen, we think. Got it. Perfect. All right. Thanks, guys. Thank you.
spk03: Thank you. Our next question is a follow-up from John Tan-Lemming with CJS Securities. Please proceed with your question.
spk05: Hi, guys. Just wanted to follow up on the previous questions around the test business. What's implied in your guidance in terms of test revenue and do you have to land those orders to make that revenue number or is that exclusive to that?
spk02: We are thinking that we're going to have test volume around 80 million or so this year. That could come into question if we don't have bookings in some level of significance over the next quarter, the next three months or so. You get past that, it doesn't really matter for this year. But we had a pretty healthy backlog going into it. I'm scrambling around for it, Dave. I don't know if you have that anywhere. So it's not an immediate crisis, if that's a way to answer your question, John.
spk05: Okay, no, I think I get it. Thank you.
spk03: Thank you. Ladies and gentlemen, we have reached the end of the question and answer session. I will now turn the call over to management for closing remarks.
spk02: No closing remarks. Thank you for your attention. We're pleased with the progress in the market, and we think that's going to bring improved results on our income statement. We're looking forward to that. Second half should be a healthier half compared to the first half. Thanks for your time. We look forward to reporting again in another three months. Have a good day.
spk03: This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation. Have a wonderful day.
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