Astronics Corporation (ATRO) Q1 2017 Earnings Report, Transcript and Summary

Greetings, and welcome to the Astronics Corporation First Quarter 2017 Financial Results Conference Call. At this time all participants are in a listen-only-mode. A brief Question-and-Answer Session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Deborah Pawlowski, Investor Relations for Astronics Corporation. Thank you. You may begin.

Thanks, Danielle, and good morning, everyone. We appreciate your time today and your interest in Astronics. We have here with me Peter Gundermann, our President and CEO; and Dave Burney, our Chief Financial Officer. Pete's going to go through his prepared remarks, and then we'll open it up for questions and answers. You should have in hand the news release across the wire this morning, which is available on our website at www.astronics.com. As you are aware, we may make some forward-looking statements during the formal presentation as well as during the Q&A portion of this teleconference. These statements apply to future events that are subject to risks and uncertainties as well as other factors that could cause the actual results to differ materially from where we are today. These factors are outlined in the earnings release as well as in the documents filed by the company with the Securities and Exchange Commission. You can find these documents both at our website and at www.sec.gov. So with that, let me turn it over to Pete to begin. Peter?

Thank you, Debbie, and good morning, everybody. We're going to talk through our Q1 results, which were largely as expected and similar to the preceding 2 quarters. We're going to take a revised look at our 2017 expectations, which have been downgraded somewhat since our initial guidance. And we're going to talk briefly an acquisition we announced in the first -- just after the first quarter closed of Custom Control Concepts, a company that we will refer to regularly as CCC going forward. So first quarter, largely as expected, consistent with the third quarter and fourth quarter of 2016, and we expect at the end of the day, when we look back, it will be our weakest quarter of 2017. Revenue was $152 million, slightly below our comparator quarter of Q1 2016 but above -- about even sequentially with the third quarter last year when we had revenues of $155 million and the fourth quarter when we had revenues of $154 million. Aerospace sales were just under $137 million, which was up from Q3, which was -- and up from Q4, but below our second quarter record from last year when we had sales of $142 million. Test sales were $15.6 million, which represents a low watermark in recent years. Bottom line consolidated for the quarter, net income was $11.6 million, 7.6% of sales, diluted earnings per share of $0.38, about even with our comparator quarter of 2016. The effective tax rate helped our consolidated results at 25.2% for the quarter compared to 30.5% a year ago. E&D expenses were $22.9 million, 15% of sales. We expect that percentage should drop in the coming quarters as the sales volume increases. Bookings consolidated were $147 million, up about $10 million from both of the previous two quarters; a book-to-bill of about 0.97, leaving us at the end of the quarter with a backlog of $253 million. Moving to our Aerospace segment specifically, revenues were $137 million, 90% of our total, about even with last year, down about 1.2%. It was our second quarter of pretty solid volume increases since our low point of Q3 2016. Operating profit for our Aerospace segment was $19.8 million, 14.4% of sales, up from 13.5% in the comparator quarter one year ago. Bookings were a little light, $122.8 million, a book-to-bill of 0.9. Usually at this point, when I'm talking about segments, I go through the tables that we present in our press release. But given that we're only talking about the first quarter at this point, and I'm kind of hesitant to draw big trends on one quarter, we're not going to go through it in detail. But I do want to call your attention to a couple of lines. And I'm talking specifically about the tables on page seven of our press release. Our commercial transport sales, on the top chart, top table there, we're $109 million, down about 3% from our total in the comparator quarter a year ago when we had sales of about $113 million. And on the bottom table, Electrical Power & Motion sales in the first quarter were $72.4 million, down about 4% from $75.4 million one year ago. One of the trends that we're observing in the business is more weaker-than-expected wide-body conditions out there. Our commercial transport sales in that top table are largely weighted towards commercial transport sales and same with our Electrical Power & Motion in the lower table, largely weighted towards wide-body sales. And there are a few dynamics that we want to talk through that are affecting our revised budget. We'll get to our forecast a little bit later at the end here. But what we're noticing is that not only are wide-body production rates slightly down and expected to stay down, but the aftermarket element that we actively participate in also seems to be leveling out and stabilizing. We've seen strong growth over the last few years in wide-body markets. And for a variety of reasons, at the moment, it seems like we're in a soft patch. It's a long discussion as to how that came to be and how it might turn around, but it's pretty widely known that production rates, especially of 777 and 380 and 330, and in particular, 747 have slowed over the last year. But it also appears that the aftermarket element that we participate in with those kinds of airframes is also slowing kind of at the same time. So whereas we've seen a lot of growth in wide-bodies, at the moment, we are seeing that flattening out a little bit. There are a couple of other dynamics going on in the aerospace which we're struggling with a little bit. One has to do with some schedule slides. We have a ramp built into our expectations for this year. As often happens, the actual entry point of new programs can be a little bit hard to pin down and predict in advance. When we we're putting our initial numbers together as the year turns, back in December, January, we had certain expectations of timing. And those timings, to some extent, have slid back to the point that we feel we need to make adjustments to our forecast. So that's the second element. The third element, which is, I think, generally recognized in the industry, is that there's been a lot of price down pressure starting at the top of the food chain, so to speak, with the OEMs and filtering through the supply base. And we've largely been immune to that up till now. We've certainly seen some pressures. But we're continuing to see pressures that we think will begin to affect us as we move more through this year. It's not a totally terrible situation in that the -- in exchange for these negotiated exchanges, we get certain things that we want like longer-term agreements. And we also have the opportunity, we think, to apply pressure to our supply base to protect margins. It's kind of a standard thing when a company is forced to reconsider some of its pricing. It's forced at -- or it takes the opportunity at the same time to look at its supply base and see what it can do to rationalize and protect itself from a financial perspective. So we're facing these 3 things and we'll try to quantify them for you in our revised budget when we get there at the end of this presentation. But these are pretty standard, I think, elements going on in the industry. The one thing that is maybe a little bit new is the aftermarket and the wide-body side that we are finding it's a little bit weaker than we expected. And I also want to point out though, while we're talking about these things, that it's not a change in circumstances from a competitive standpoint. It's not as though big programs we were counting on are being canceled. It's as though we're suffering any kind of downgrade with our customer relationships. We think, in general, we're very well positioned. We continue to be in a very nice part of the business. And we think long term, we wouldn't trade places with too many companies that we know. But in the short term, we're dealing with some of these issues on the wide-body side and pricing and scheduling of new programs. The last thing to talk about on Aerospace is our -- the acquisition we announced, the Custom Control Concepts or CCC. CCC is a direct competitor -- was a direct competitor of ours in the VVIP market. VVIP markets are private aircraft or head of state aircraft, commercial transports converted to very, very large and expensive business jets, simplistically speaking. And Custom Control Concepts and our PGA operation both provide in-flight entertainment and cabin management systems for these types of aircraft. This purchase was a little bit of a contrarian purchase to be frank. The market is weak today in part because of global events, the drop in the price of oil, turmoil in the Middle East, for example, and also, life cycles of the commercial airplanes that buyers use for this market. 777, for example, is in between, waiting 777X and 350's just getting out, for example. So it's a little bit of a market that's very slow right now, but we expect, overtime, it will rebound. And when it does, we think that a proper coordination and alignment of what we're doing at PGA and what we can do at CCC could make us a pretty strong and profitable competitor. But for the time being, just to quantify it, this year, 2017, we're expecting incremental revenues from CCC in the neighborhood of about $12 million, and our purchase price was about $12 million also. We also do not expect significant income statement impact in 2017, but we're hopeful for positive results as we move forward and as that VVIP market responds. Moving over to our Test Systems segment. Our first quarter revenues were $15.6 million. That's down substantially about 27% from where we were a year ago and made up about 10% of our consolidated sales. The segment on that low volume was just above breakeven with an operating profit of about 2% of sales so Q1 was essentially a low watermark for our Test Systems segment in recent years. That's the lowest revenue, lowest profit performance we've had. We expect bigger things though, and bookings in the first quarter are an indication of that. Bookings were $24.2 million for a pretty impressive book-to-bill of 1.56. When we get to the forecast, you'll see that we're expecting substantial increases in our Test business on a quarterly basis rolling forward, and we believe that we are operating in what I call a target-rich environment. There are a number of pretty large potential programs out there that we are pursuing. And if those programs are awarded when we expect them to be awarded and if they are as big as we expect them to be, then we will hit our budgeted revenue number of about $100 million this year. So that's the task. That's the goal. And even though the revenue level was pretty below in Q1, my observation is that the business is pretty optimistic and has these bigger targets or a number of, a larger number of big targets in sight today than it ever has before. Our Q1 backlog at the end of the quarter, given those strong bookings, was $47.5 million. Moving to our balance sheet. Pretty stable, continues to be pretty healthy. At the end of Q1, cash of $10.7 million, total debt of $141 million for a net debt of about $131 million. Our capital expenditures in the quarter were about $2.8 million. During the quarter, we purchased approximately 148,000 shares on a market of $4.4 million -- for an aggregate cost of $4.4 million. Since the inception of our buyback program, we have purchased 671,000 shares for a total cost of about $22 million. That means that we have remaining room on our authorization of about $28 million. So talking about our guidance going forward. We revised our 2017 revenue guidance to $635 million to $690 million. That's down slightly from $640 million to $720 million. If you take the midpoints of both of those ranges, the new range is down about 2.5% from the old range. Further, if we were to achieve the midpoint of the new range, our year -- total revenues in 2017 will be up 4.6% over our 2016 actuals. Our revised expectations for Aerospace are $545 million to $580 million. The entire drop in the forecast is related to Aerospace with the midpoint being down about 3% from previous forecasts. Test systems, we tightened from $80 million to $120 million to $90 million to $110 million, midpoint obviously being flat from the old forecast to the new. We expect the year to build as it passes. Our second quarter expectation is to see revenues up $5 million to $10 million and growing successively from there. Understanding the forecast. A few things to keep in mind. I talked about our CCC acquisition. We do have $12 million included in the Aerospace for the remainder of the year. So the apple-to-apple drop, if you want to look at the old forecast to the new forecast and back out CCC, would actually be about 4.4% or $30 million. Again, all that drop would be on the Aerospace, and I talked about some of the headwinds that we're facing, particularly with respect to wide-bodies and program slides and some price renegotiations. And to the extent that we can quantify them today, and I'm sure we're going to get these questions, we would say that approximately -- that the wide-body situation is responsible for about 50%, half of our drop from the original forecast to the new forecast. That -- the schedule issue explains about a quarter of the drop, 25% of the drop. And price, we expect, at the end of the day, when we look back at this year, will be about another 25%. So that's roughly the allocation. When you look at risks, one of the big risks has to do with timing and schedules. Our -- we are expecting a ramp in both parts of the business really going towards the end of the year but especially on our Test side. And the issue that we will be watching very closely is the expected awards of programs that we expect to get going on. Those, we're obviously taking some reserve by lowering our forecast now in response to some of the schedule things that we see. But there is, I guess, we think, equal balance of downside risk and upside potential based on the anticipated timing and size of awards which we're pursuing. So we'll obviously spread that news as quickly as we can as those things are ironed out in the future. So it's kind of a strange message, I guess. We're downgrading our forecast a little bit, but we also remain very optimistic in our business. We are not downgrading our forecast because of competitive threats or because of customer challenges or problems. We continue to believe that we're very well positioned. We continue to believe that our customers really enjoy working with us and look at us as a source of innovation. And we think that we've got some really great targets. We think there are some things in the market working against us, working against pretty much all participants in the market right now. We are no exception. But we think as the year progresses, it'll be a stronger year and a better year than 2016. And it's early to talk about, but we expect that we will be charging into 2018 with quite a bit of momentum. So I think that concludes my prepared remarks. Danielle, we can open it up for questions at this point.

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions]. Our first question comes from Dick Ryan with Dougherty & Company.

So if you just circle back into some of the comments on Aero and Test? You talked about the wide-body issues. How does the narrow-body side of the In-Seat Power look? And where are you seeing the price pressure? Is it in PSUs, is it In-Seat Power where you're really seeing that price pressure hit on the Aero side?

Sure, Dick. The narrow-body market continues to look very positive. I mean, production rates are going up, adaption is going up. We are, I talked to the guys who are on the front end of that business, and we're as busy as ever filling out proposals, and the guys have never kind of, never seen it like that. So we think the indications are very positive. But the reality is that a lot of the proposals that we're making right now realistically are going to be more 2018 events than 2017 events. So we think it continues to be very positive, and we're building year-over-year well. But today, narrow bodies are probably not much more than a quarter of our total In-Seat Power sales. So we're still largely driven by what happens on the wide-body side, and that's part of the reality that we are facing. I think over time, that split will become much more even between wide-body and narrow-body, and we continue to have a lot of success protecting our market share on the narrow-body side. So it's not a question of narrow bodies getting weaker. It's just that it's a smaller part of the overall pie. So that's the answer to that question. In terms of price pressures, I guess, I wouldn't narrow it down to specific products as much as an overall trend in the business, in the industry. And I think we've somehow largely escaped it up until now. But we're looking at what the reality is in the market, and the OEMs kind of set the tone. So we got a taste of that a little bit in our business with the OEMs over the last year, year and half. But what happens is that suppliers then who have to face those kinds of pricing pressures with their customers turn around and try to protect our margins by doing the same things to their suppliers. So we do a lot of work directly with OEMs. But we do quite a bit of work with other companies in all parts of our business that in turn do work for the OEMs, and so we're dealing with it at that level right now. I guess, our perspective is that it gives us a little bit of top line pressure on the revenue side. But we are doing the same thing in terms of kind of trying to work our supply base and trying to work our cost structure to protect margins. And I think by and large, we have been and will continue to be successful at that. So this isn't just a couple points of price that results in a couple points of margin. It's not that bad. In fact, we don't think it's going to be all that worrisome at the end of the day once we get through doing some of the things we need to do. But on the top line side, which is where we issue guidance, we feel it appropriate to make a downward revision at this point.

Okay. You mentioned competition isn't really an issue. But refresh me, when does the patent for In-Seat Power expire?

There's a series of them, but most of them are already expired. And again, on to -- out to talk about the competition element, there are companies out there for sure who look at the success we've had in this segment, in -- of In-Seat Power specifically, we're talking about here. And so again, you walk around trade shows, and I did this just a few weeks ago in Hamburg, Germany, our big interiors show was there. But we continue to enjoy very strong relationships with customers, and we continue to do pretty well, and we are not aware of any substantial programs that haven't gone our way. So that's why I say that the competitive side isn't what's driving our thoughts about our revenue guidance for 2017

Okay. And last one for me on Test. Can you parse your comments on Test [indiscernible] between the commercial and the military side?

Actually, the news today is that we see pretty positive opportunities on both sides. If you look at our revenues for the quarter, we were, let me see what that is. It's, we were largely weighted towards Aerospace & Defense, and we continue to see pretty good growth there. And when we look out at what's available on the market, we see quite a few attractive programs that we're pursuing. So I expect as the year wears on, we will be able to talk about substantial wins on both sides of the business. The schedule aspect is the one item of risk here, I think. I mean, of course, we could lose the programs, but we've had a pretty good win rate. And based on the feedback we get from the market, we think we're very well positioned for some of these programs. It's a question of when they're actually going to be cut loose and whether it'll be early enough in the year for us to do much this year. That's what we have to wait and see. But we're pretty optimistic on both sides. And obviously, if we have revenue of $15 million in Q1 and we're expecting to get to $100 million over the course of the year, we have to win some pretty good programs to get there.

Can you just update what's, or how you're viewing the Apple follow-on or what you're hearing from that side?

I can't really talk specifically about them. But other than to reiterate, in that market in general, we're pretty optimistic. It's certainly an element that we expect to rise. We did $4.6 million in the first quarter. And as we roll forward towards $100 million at the end of the year, we expect that our semiconductor business will be a contributor to that increase.

Our next question comes from George Godfrey with CL King & Associates.

I wanted to ask about the wide-body market specifically and you commented on the aftermarket. Are they flying the planes less in your opinion or keeping cabins older longer and so therefore, that market is soft today but perhaps strengthens down the road? And then the second question, on the narrow-body market, what percentage of planes would you say are produced today with In-Seat Power right there today versus three years ago? I think you said the market is 20% penetrated narrow-body, 65% penetrated wide-body on the electrical side. But I'm just curious, production rates today with the power already there versus where we were three years ago, say.

Okay. Let's do that one first because it's relatively straightforward. Three years ago, if you were to look at, monitor airplanes coming off of the production line, both in Toulouse and, or I guess, Hamburg and Seattle, 370 and 320, you would hardly ever see a seat with In-Seat Power on it. They just weren't that, it wasn't that big a deal 3 years ago, and those airplanes that were getting power were largely getting it an aftermarket modification. In fact, I don't, I'm not sure we were really offerable three years ago. In other words, if airlines wanted to have Boeing do it, they couldn't three years ago. Today, if you were to stand at the end of those production lines and monitor seats coming off on new airplanes, you'd probably see something proportional to our market share, probably somewhere in the 10% and 20% range. It's pretty low. We would -- and in most of the installations these days we think are more aftermarket rather than line-fed. But as we roll forward, we would expect those percentages to increase so that more and more seats coming off the production line have power on them. That's the second question you asked. The first question has to do with the aftermarket, and I think what we're seeing is -- I don't think the airplanes are flying less necessarily. I think there's just a cooling off of modifications from the airlines themselves. And there could be a bunch of different reasons for that. There could be some economic stress involved, although I think it's equally as likely that a lot of the airlines are kind of reconsidering their path forward with respect to providers. And that tends to slow down the state of the business. So one of the realities in the IFE market -- and we're involved in the IFE market, but we're not an IFE provider. It's important to keep that in mind. A few years ago, it was relatively simple. The advent of connectivity, however, has brought in more and more players. So it's a pretty complex market. And airlines have more options today than they did, say, 5, 10 years ago. So part of my thinking is that there's a little bit of a pause going on where airlines are reconsidering their path. And so I would expect the aftermarket to pick up when those paths are reconsidered and they start acting on them. I would expect it also to pick up when new wide-body models get into production, most notably, the 777X and the 350.

Great. And then just one last follow-up. If I look at the bookings number for this quarter, I want to focus on Aerospace, down about 13% year-over-year, and a year ago, it was only down 0.5%. So just trying to gauge how much heavy lifting or real grunt work has to be done here to achieve the midpoint of that Aerospace revenue goal given that we're already in a double-digit hole on the bookings growth.

Yes. That's a very good question and that's one of the things we're watching pretty closely. Obviously, bookings are not where we need them to be. But we believe that we derisked the guidance quite a bit given what we see today. And we think that there are enough programs out there, but we obviously do need to see bookings increase as we roll forward in order to meet at that midpoint. So to the extent that there's risk in our program at this point for 2017 on the Aerospace side, it's schedule. That's the risk.

Our next question comes from Michael Ciarmoli with SunTrust.

Hey good morning guys. Thanks for taking my questions. Maybe just to stay on that bookings topic. How much of the backlog, of your total Aerospace backlog, are you expecting to ship in the remainder of '17? And maybe just given some of the timing here, the scheduling, is there any risk that there could be some of destocking at some of your major customers, like Panasonic, that might have an impact here on bookings as well?

I don't think so, Michael. I think most of our customers carry, are pretty lean and don't carry a whole lot of inventory. So that's not one of the major concerns that we see. I think what we're talking about, part of what we're talking about is as we get through the year, we get forecasts from our major customers, Boeing, all the OEMs and most of our major subsystem customers also. So we think that we are seeing what they're seeing. Are they seeing what they're telling us they're going to need from us. It's not a situation where they built up inventory too much, at least that I can think of them. I'm looking at Dave, and I don't think we see that necessarily. As for the forecast, how much of it's going to be shipped this year, we would probably, we don't really have that here. We probably say it's like 80%, 85%.

Yes, the majority of it.

Vast majority of it.

Okay, okay. And then just, I mean, the wide-body weakness and some of these pressures have been out there. So I guess, did you guys see a material change in this market from when you issued the guidance in mid-February? I mean, 777 weakness was out there, A380. Did anything materially change in that wide-body? I guess, production market maybe not so much, but it sounds like, I guess, on that, that aftermarket side changed, that was the biggest area?

Yes, that's exactly right. The production side has been well publicized, as you say. And it's hard for us to know based on how we get to the wide-body world. It's hard for us to know what portion of our shipments go to line-fit and what portion of our shipments go to aftermarket. And historically, we've seen them somewhat ebb and flow, so that we can kind of 60-40 one way or 60-40 the other. And our assumption has been that we would continue to see stronger aftermarket even in the face of declines in OEM. But again, we get forecast from our major customers. We do work comprehensively in this industry, so we're kind of uniquely positioned to see what everybody's doing with respect to our type of system or the systems that we support. And as the years progressed and as we've looked at those forecasts, it gives us pretty, better clarity as to where we are going to end up. So what's changed is the sense that we have that the aftermarket side is going to be weaker than we thought it was. It's still strong. I mean, it's not as though, just, I guess, I'd just point one thing. We're locking in at a pretty high level. It's a changing growth rate to more of a flat structure. But it's not necessarily the kind of thing where we're expecting declines at all. We're kind of locking in at record highs. And our best guess is that we're going to float around this level plus or minus until the new airplanes start coming out.

Okay. On the pricing side. The margin implications you guys have said you're working the supply base and the cost structure there. I mean, can you give any sort of color? I mean, margin is better than they were the past 2 quarters this quarter, but the Aerospace margins have been sort of on a downward slide since 2011. I mean, does this create even more challenges on the margin side? Do you think your margins in Aerospace could be up year-over-year in '17 versus '16?

I think a lot of that has to do -- the challenges going forward have less to do with the price negotiations because I think -- we think we have strategies in place to correct for that or manage it. Our bigger margin challenges have been with certain of our product lines that have been pretty weak. We've talked about antennas in the past. That continues to be a struggle. So the best way for us to fix our margins and the best way to show improvement is by fixing some of those areas in the business. And that's what we're attempting to do. And if our -- if we can hit our plan for the year, which inherently assumes some improvement in those areas, then the margin situation, from my perspective, will come along with it. It's a top line issue for the most part.

Okay, perfect. Alright, that's it from me. Thanks a lot guys.

Thank you

[Operator Instructions]. Our next question comes from Jon Tanwanteng with CJS Securities.

Good morning guys, thanks for taking my questions. Can you just talk about your pricing power given your market position in In-Seat Power? How much can you actually push back against that pressure there, if at all?

Well, that's a philosophical question. We are the strong market leader there. I think there are a lot of reasons for that. But mostly, it boils down to technical superiority, reliability and performance. With that comes some ability to price. But we're pretty careful with that compared to many other companies that are kind of name brands out there. Our objective is to maintain and grow long-term relationships with our customers. So I think it's -- there is the "what can you do" question and "what do you choose to do" question. And we try to find a balance where the customers feel like they're getting value. We have been able -- our interest often is to extend contracts and make sure that we're in pole position for new opportunities, and we choose to balance and prioritize it that way. So that's probably how I would answer it. We don't look at our market share as a big stick that we can beat our customers with. We look at it more as the reward and results of doing a really good job in our industry and for our customers.

Okay, got it. And then, Pete, going back to something you alluded to earlier with airlines choosing or pausing to choose a path. We've seen a number of disruptions in the commercial cabin and entertainment space over last year whether it's seat supply consolidation, accounting or FCPA issues, customers suing their vendors. Any sense of how might this be directly or indirectly impacting your In-Seat or other Aerospace components at all?

Yes. Well, you named a lot of the factors. I think there's, it's really hard to quantify. But I think my sense of it is that those disruptions, as you call them, have the net effect of slowing down decisions and programs in the industry. And when, and our product is typically purchased or planned for in conjunction with those other IFE-related programs. And so I think that to the extent that those disruptions slowdown decision-making and slowdown the implementation of new programs, we kind of get slowed down with it. Hard to quantify. I'll tell you that even in our company, there's not clear consensus on this issue. But I look at the disruptions that you're talking about, and I know how our product sometimes get bought along with those IFE decisions and sometimes are inherently included in the IFE decisions. It has to have a slowing effect on us also. Hard to quantify though.

Got it. And then just a quick update on the new antenna product that you expect to launch soon. When is that, is that on schedule, number one? And number two, maybe just talk about the potential market opportunity there.

It's largely on schedule. We have some STCs in place. We have some hardware flying, where we believe that we're kind of at the final strokes of getting the system completely in place with our partners, and everybody's got to do their job to make it all work. We think the demand is pretty strong, not only in the aftermarket, which was kind of our original goal, our original focus, but also potentially line-fit at OEMs, at large business jet manufacturers. So we are now pursuing kind of both sides. And I think it's a pretty optimistic picture. To the extent that we look at revenue increase opportunities towards the end of the year, it's largely based on that plan going forward. And we will update as we can. But so far, we think it does what it's supposed to do, and we think there's pretty strong customer interest in it.

Great. And then finally, just on the semi-test side. When you'd say that you're expecting good things out of that program towards the end of the year, are you talking about with an existing customer or was this with new customers or maybe a little bit of both?

Yes. It's, I can't really get too specific there, but it's both. New programs is probably the better way to think about it because a program can, it is important to have program wins regardless of who the customer is. We do have initiatives with a wide range of the industry right now. The one kind of traditional program that we have been working on is more of a dedicated situation for one customer. And we're awaiting news on that one also for this year. But new programs, at this point, given that we're already in May here, are going to be largely geared towards 2018 events, a little bit slower than we originally expected. But we're pursuing a variety of programs with a variety of participants in the industry and we're optimistic. We're getting good feedback.

Ladies and gentlemen, we have reached the end of our Q&A session. I'd like to turn the floor back to management for closing comments.

Thank you for your interest in the company. We think we're on a good track. And we'll look forward to talking to you again after Q2. Have a good day.

Thank you. Ladies and gentlemen, this concludes today's conference. You may disconnect your lines at this time. Thank you all for your participation.