Good day, and welcome to the NN, Incorporated Fourth Quarter and Full Year 2017 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Matt Heiter, Senior Vice President and General Counsel. Please go ahead.

Thank you, Operator. Good morning, everyone, and thanks for joining us. I'm Matt Heiter, Senior Vice President and General Counsel. On behalf of our team, I'd like to welcome you to NN's fourth quarter and full year 2017 earnings conference call. Our presenters this morning are President and Chief Executive Officer, Rich Holder; and Senior Vice President and Chief Financial Officer, Tom Burwell. If anyone needs a copy of the press release or the supplemental presentation, please contact Abernathy MacGregor at 212-371-5999, and they'll be happy to send you a copy. Before we begin, I'd ask that you take note of the cautionary language regarding forward-looking statements contained in today's press release, supplemental presentation and in the Risk Factors section in the company's 10-K for the year ended December 31, 2016. The same language applies to the comments made on today's conference call, including the Q&A session as well as the live webcast. Our presentation today will contain forward-looking statements regarding sales, margins, foreign exchange rates, cash flow, tax rate, acquisitions, synergies, future operating results, performance of our worldwide markets and other topics. These statements should be used with caution and are subject to various risks and uncertainties, many of which are outside of the company's control. The presentation also includes certain non-GAAP measures as defined by SEC rules. A reconciliation of such non-GAAP measures is contained in the tables in the final section of the press release and the supplemental presentation. First, we'll give an update and overview of the full year and fourth quarter, then afterwards, we'll open up the line for questions. With that said, Rich, I'll turn the call over to you.

Thanks Matt. Good morning everyone, and welcome to our year-end and fourth-quarter earnings call. As usual, we’ll walk you through the deck as Matt said, and then we'll open the line for questions. Before I jump into the presentation, I just thought I maybe take a minute to frame our discussion this morning. It's been an eventful year specifically year-end and I think it's worth talking about a couple of things. Number one, we have been fortunate to be much more successful in contract win than candidly then we had in our plan and had expected. So that's a good thing. We're winning at a far better hit rate than we thought we would. So that's a wonderful thing. The consequence of those wins however is upfront investments in advance of production shipments anywhere between six months to 12 months, and so as we walked to the presentation today you'll see where that spending in advance of these production shipments has put some pressure on margin, and what will try to do is we'll work through the day's point that out to you where those pressure points to give you a great understanding of how these things are flowing through the enterprise but we are extremely excited around our success and our hit rate on some of these new programs. It is - it's really wonderful, I can probably wax on for the entire call about that. The other thing I wanted to point out is that with the advent of the new Tax Act in concert with our selling of the Bearing business, divestiture of the Bering business brings with it an inordinate amount of complexity around our tax structure. So we are in the mode of working through diligently our tax structure as we speak in advance of…

Thanks Rich. So you’ll see starting on Page 5 with adjusted diluted earnings per share we were - adjusted earnings included by $0.31 of EPS and that was driven by profit from the 6% organic growth that we experienced in sales throughout the year. To a lesser extent, EPS has also benefited from the lower interest cost. We’ve been lowering our interest cost with debt refinancing that we've done opportunistically over the last 12 to 18 months. So that has impacted our EPS in addition to the sales growth. Sales growth for the year was 6% and it was almost all organic growth and we witnessed robust sales growth in each one of our vertical end markets. I mean as Rich mentioned, we've won many multiyear sale program during 2017 that we will continue to see this trend - this growth trend through - in 2018 and beyond. Turning to Page 6 on the gross margin. The flex productivity which is our main metric that does profitability on our sales growth was as expected. The gross margin was slightly impacted by some of the growth of the growth investments that we made that Rich mentioned for the new sales programs. We undertook the starting in Q3 for lesser extent but really Q4 was where the big impact started on these investments in order to get ready for the start of production on programs in 2018. Adjusted operating margin was down 1.2% and this was primarily driven by the - maintaining the infrastructure investment that we had on the PBC divesture. As we mentioned we invested a lot, professionalizing the enterprise, and increasing talent to the organization, and we are holding onto that so we can continue to grow and enable us to hit our strategic goals in 2018 and beyond.…

So with that, just to kind of summarize 2017, if we haven't said it enough, we have driven growth. We feel really positive and really energized and excited about the amount of growth we've driven and where the growth lays in for the long-term sustainability of the organization. The PBC divestiture was a big move and properly diversifying and being able to balance the company across end markets that - and how they performed on the economic cycle. So, the big move for us and starting that redeployment of proceeds with the acquisition of DRT Medical and, of course, a couple of weeks ago with Bridgemedica continues to take - found the strategic path that we've always laid out to you. Cash flow are in line with expectations given the divesture of PBC, and I’ll leave you with this for 2017. We continue to ready the enterprise for growth. The way I have been describing 2017 is that we think we are at the end of the beginning. And so, we're very excited going forward. Jumping into Q4, we'll just hit that really quickly. Highlights of Q4, again, program wins required additional investments. I can't point that out enough. It was significant. It was somewhere around a point of margin that we’ve decided to strategically invest in the business. But nonetheless I think you'll see that $130 million in growth over the course of the next 18 months to two years. I think it's a great investment. Sales were at $156.1 million, and that's 10%, which I'm pretty sure that is what we said would - that's what we called, quarter-to-quarter 10% growth, in spite of the fact that we had the fewest production days of any quarter. Adjusted diluted earnings per share of $0.30. Adjusted EBITDA of $27 million. Again, we acquired DRT in October. We're really excited to have them as part of the family. It brings with it a drug delivery capability that we're really excited about. And we repaid $8 million in debt in the fourth quarter. Let me let Tom go through the numbers, and then I'll come back and summarize again.

And so, turning to the adjusted diluted earnings per share on Page 13, the $0.09 increase in EPS was driven primarily by the 10% sales growth that we experienced in the quarter. And the 10% sales growth was led by the PEP segment, and we really had seen the aerospace growth that we talked about and also the medical and electrical increased sales due to the share gains that we've had within that segment. Turning to the gross margin, the growth-oriented investments that we made really had the biggest impact in Q4. They started late in Q3 but really impacted Q4 in order to get ready for start of productions and the full run start of productions in the second half of 2018. So, that’s really why you see more of an impact on the growth margin in Q4. The adjusted operating margin as we mentioned for the full year is impacted by the infrastructure cost that we've held post the PBC divestiture in order as we've said to get us ready for the sustained growth and to achieve our strategic plan. Adjusted EBITDA margin was fairly in line with expectations. That's like productivity on the additional sales was as expected and again slightly offset by the growth that we had investments. The biggest driver within the SG&A on Page 15 is we had $3 million of M&A costs related to the DRT acquisition plus some other ongoing integration activities that we’ve had within the business. On Page 16, turning to Autocam Precision Components Group 4.3% increase in sales was as expected and again a common theme, similar to what we have for the full year. We've seen global growth within both the CAFE and the industrial end markets in each one of the geographies in which we operate. And the adjusted operating margin was impact of the APC group really, the investments they made the short-term impact, they were really gearing up for these large multi-year programs they going to start up in the second half of 2018. The PEP group on Page 17, 7% organic growth as we mentioned was led by the Life Sciences Group and the electrical or Life Sciences end market and the electrical end market share gains. And the profits on the additional sales drove the operating margin but they were impacted by the growth and the investment we've made which we have in 2018 and beyond.

Thanks Tom. So again, the fourth quarter story goes much like the year. Strong organic sales growth, a ton of share gains, really excited about that. Extremely excited about these multiyear contractual wins that we’ve had and it’s across all segments of the business. The acquisition of DRT again, really excited about that. Again, it brings us a drug delivery capability that, that really helps to round out the portfolio and so our Life Sciences business is really starting to come together from a portfolio perspective and we're very excited about it. And again we repaid $8 million in debt in the fourth quarter and cash was as expected. Just sort of no surprises there. So, let's move over to guidance. So when you get the first quarter, guidance is, just jump straight into the guidance, it's a $164 million to $169 million on the top line. So good solid mid-single digit growth as we move into the first quarter of the year. You see margins start to return to that kind of normal range so $11 million to $11.5 million as the investments that we're making start to taper off. We are still making investments, right. So in the first quarter, we still have margin pressure that is directly related to the investments but we'll continue to prudently manage that as we go through, as we go through the year. Adjusted EBITDA, $28 million to $30 million. Again, we're maintaining the incremental - the appropriate incremental on our growth. As expected, we focus a lot on the flex productivity and making sure we drop-through the appropriate incremental, and so that holds. Adjusted diluted EPS, $0.32 to $0.36. Again, and flex is holding. As we move over to full year, on the top line, we're looking at somewhere between $40 million and $70 million worth of growth. And so, we're seeing $660 million to $690 million at this point. And we're experiencing sales growth across the entire portfolio. Operating margins of 11.5% to 12%, in part because the spending tapers off second half of the year and some of these programs start to launch into production quantities the second half of the year. And additionally, the infrastructure issue will be abated no later than the end of third quarter. So put all that together, I think margins start to come back even stronger than they were previously. Adjusted EBITDA, $116 million to $123 million. Adjusted EPS, $1.30 to $1.50. CapEx is $40 million to $47 million. Again, we continue to invest in the enterprise and for the long-term sustainability and strong long-term growth program. So, CapEx, between $40 million and $47 million. Free cash, between $25 million and $33 million, which is in line with the strategic plan. So, there is the guidance. With that, I'll just go ahead and have the operator open the line of questioning, and we can talk through anything you like.

[Operator Instructions] And we'll take our first question from Charlie Brady with SunTrust Robinson Humphrey.

You touched on a little bit about the margin impact from the investments that are happening. I wonder if you could maybe quantify that a little bit more on a margin impact particularly in Q1 and then I guess for the full year as well. And then also as these programs ramp up, can you give us some sense of from a modeling perspective kind of the ramp of the topline growth rate as we move through the year particularly in 2H?

So let me let me give you a sense of when these things hit the - they hit the top and bottom. We will start on roughly 30% of those programs will be shipping in production quantities in the second half of the year, all right? So, when you think about the margin expectations and how you model that, all these programs have been - have come into the enterprise at a margin rate that is better than the average margin rate of the enterprise. So, I won't say how much more, but certainly better than our average margin rate. And for the most part, $45 million to $50 million of it has come in with a much lower capital intensity rate than the average of the enterprise, right? So, that will manifest itself as well, okay? With respect to the continued investment, I would tell you that I think we will have - and again, this is assuming we have a steady state. We will have an overhang on margins for the better part of the first half. I think we have baked the spending somewhere around the middle of the year under the assumption that we don’t win yet another big program that will require us to spend, right? So, we certainly have a margin target that we’re going after, and we want to manage the business to maintain the margins appropriately. But at the end of the day, the long-term growth and sustainability of the businesses is always top of mind. So, I think it's fair to say kind of that 11% to 12% range is going to be where we are, and if we get the opportunity to invest even more and hold on to that 11% to 12% range, we're probably going to do it.

And you're speaking for 2018 when you say the 11% to 12% range, correct?

I am. Yes. Correct.

So, I know you don't want to give 2019 guidance clearly, but I'm just trying to frame this. It would be helpful I think for folks to frame it because we're spending a good amount of money to get these programs up. We're spending for the growth that's going to come. Can you quantify in any sort of way if - let's assume you don’t win any more program wins, unlikely, but for the assumption purpose, let's do that. And so the spending abates, we going into 2019, we don't have the level of spending but we have all these programs ramping at a higher margin level than the company average today. I guess I'm trying to get a sense of what the potential margin lift would be in that kind of scenario with the understanding that you probably going to get more problem with program win but still have to invest. But just to isolate it a little bit, to give people a sense of where is the upside from here relative from today because we're paying for it kind of early and getting it later.

So round numbers and, again, using your scenario, right, so the world - so the stagnant, stable, and unpredictable. It would be roughly between two and three points. It's the way to think about it. If nothing else happened, everything stayed the same, we didn't do any more investing, and we rolled into 2019 with this mature program, it would be between two and three points. A point, a little over a point would be associated with the abatement of the SG&A issue and the other two would be associated with the investment. So we would be having a somewhere around let's call it, 14% to 16% operating margin kind of discussion for the corporation.

One more for me, I'll get back in the queue. We got a lot of discussion about material cost inflation with potential tariffs. Can you just comment maybe what the impact would be and how that looks as COGS I guess is still fluid but to give us a sense of potential impact and opportunity for you to offset that? Thanks.

So let me start by saying that we were probably not smart enough to come up with what the appropriate impact if any there will be simply because I don't think we have enough information to do the analysis to look at that because keep in mind we don't know if this is going to be a tariff that's going to affect Slovenians steel, is it going - we buy steel from eight countries in the world. And so, today we don't know how that is going to affect us. But with that said, I've told you over and over, we have material pass-through contracts. So, the majority of it for sure will be passed through to our customers. So, immediate impact for us will be a timing function of how long does it take because we have some material pass-through contracts that we can pass through in 30 days. We have some that we have to wait till the quarter. So, let's assume worst case scenario we will pass this through in 90 days and we'll begin to abate this in 90 days. That is in invariably what's going to happen if this takes place, and in fact it is as blanket as it so far being discussed. Now, here's what you had to keep in mind, when you start talking about abatement for us, one of the reasons that we continue to have small plants located around the world is to have - to be local for local. And so, this is going to hit our customers. And invariably, what's going to happen is our customers going to say, I don't want to take the hit in North America if you could make the product somewhere else in the world. And so, we're going to say, absolutely, if you - because we're not going to lose the product. So, if need be, we'll make - we'll move the product from one factory that's getting inordinately hit as a result of the tariff to the Polish facility which - and we’ll buy a European deal, we’ll make it in Poland, we'll make it in France, and we’ll ship it in Poland, we’ll ship it in France. And so, we'll move to a more localized strategy to help our customers abate the issue or maybe, most notably, make sure our customers don't look somewhere else to try to and abate the problem. So, we have that in hand that we would do. I mean, if need be, we would pick up a line and move it to a factory somewhere else in order to help our customers do this because this can be, for our customers, a really big number.

And we'll take our next question from Brian Colley with Stephens.

So, just wanted to clarify one thing on the new program wins. So, that $130 million, that's an annual run rate, correct?

Yes.

So, could you just talk about your revenue and operating margin expectations by segment for this year and what the major drivers are for each?

When you say by segment, you're talking about in the 2018 construct?

Yes.

I can certainly give you - okay, so, recognize that in January, we announced that we have gone away from that type of segment reporting, and we've moved to power solutions, mobile solutions, Life Sciences. So when you think about 2018, our Life Sciences business will be kind of 16% to 18% operating margin type of business. Let's call it round numbers, $160 million to $180 million forecasted bps, round number. Our mobile solutions business all-in, including the JV's and everything else, is somewhere around $400 million. Net of the JV it’ll be three and change. I can't give you an exact number right now, but it’d be three and change. And it would be operating somewhere in the, let's call it, 11% to 12.5% operating margin space. Our power solutions business, which has our aerospace and our electrical business in it, will be let's call it $120 million - $130 million kind of top line space. The electrical side - well, blended margins will be, let's call it, 13% simply because of continued investment that will certainly happen on the aerospace side of that. We’ll keep the aerospace margin down between 10% and 11%, but the electrical margins will be somewhere between, probably 14% to 15%. So, that's how the enterprise high level stacks up, just in those ranges going forward. I don't have it for 2018 and APC format because of the changed to the different reporting segments. If you want to take it offline, we may be able to sort of backtrack that for you.

No, that was perfect. And those numbers you’re referring to were for 2018, correct?

Yes.

And secondly, just wondering if you could give an update on how the acquisition search is progressing and how the pipeline has evolved over the past, call it, four months? And has there been any change to your expectation on the timeline for getting something done?

I will tell you, I think we're just as bullish as we were four months ago. We are continuing to do our work. We are extremely confident that we will execute on our strategic plan as we've been saying. There isn't anything that has caused us given any pause in the execution of our strategic plan relative to acquisitions. And I mean, I've been really candid about it. Our focus is in the Life Science space, right? Not that we won't acquire anywhere else, but we're going heavy organic in mobile solution and in power solutions, and we're going both heavy organic and heavy acquisition in Life Sciences. That's why you saw DRT. That's why you saw Bridgemedica. And the pipeline is heavily weighted and heavily prioritized towards Life Sciences.

And then lastly, just wanted to move back to the program wins you discussed. So in the last conference call, you talked about some program wins. And I just wanted to clarify the ones you're talking about today. Are those incremental to what you spoke about last quarter and requiring incremental investment from that kind of from what you were expecting last quarter? Any discussion around that would be helpful.

Yes, that's correct. This isn't - the $130 million is an incremental discussion than what we had in last quarter. The only part of the discussion that I will tell you, when I talked about increasing the capacity in the factory, last quarter we talked about the work we had to do in France which we started. And if you recall earlier I said our Polish facilities, so our entire European footprint now is getting larger. So the short answer is, yes, these are incremental.

And we’ll take our next question from Daniel Moore with CJS Securities.

I wanted to just give you a second or two maybe I know it’s smaller but talk a little bit about Bridgemedica product line where that fits in and your expectations for margins and growth as we look forward.

That would be great. So, Bridgemedica is based in Mansfield, Massachusetts. And candidly, the biggest strategic value that Bridgemedica brought to us is engineering. They are an engineering services organization. So, a lot of design, a lot of co-design work, and what falls out of that is production work. So, the way to think about the organization was they were selling mostly services, and by the way, making meth devices sort of by accident because the customers were asking them to do it because they provided such good services. So, Bridgemedica bolt on to the frontend of our Life Sciences business and becomes our heavy OEM design piece of the equation, right. We’ll talk about building more and more of our own intellectual property that we sell directly into the customers and having the engineering capability to do that. So, there's two ways to that. We can width and hire 35 engineers and figure this out or we could have bought an engineering services company. So, we bought engineering services company that was already profitable in services and in making product, right. We'll take the making product parts and put them in the appropriate factories within the enterprise and allow them to be the heavy services organization. And again, as we will sell the engineering services, as well as making the product. So, that’s really the exciting part of Bridgemedica. It brings the engineering capability that both we and our customers need to continue to penetrate the space. So, candidly, there is a space that if - when we get to this sort of $300 million-plus mark in Life Sciences, the game moves to an organic gain, and we have to have the regulatory capacity and the engineering capacity to keep driving double-digit organic growth. And so, that's part of the construct that Bridgemedica brings to it. The organization itself, on a margin expectation, I mean, its 19-ish percent EBITDA kind of business. And I think for the foreseeable future, if you carve that out, it's going to continue to be kind of 19% to 21%, but it is going to get deconstructed. The manufacturing plot is going to go back into the enterprise as part of synergy, and the engineering part is going to go into the engineering construct. So, it'll probably get lost a little bit, but it's always going to be, let's call it - it's going to be a low 20s kind of EBITDA business.

Helpful. Appreciate it.

Kind of a long answer to your question.

Now, switching gears a little. You’re obviously making the appropriate investments for growth right now. Just in terms of the tradeoff between financial leverage and delevering and growth, how long are you - how comfortable are you operating it in a 4-plus times? And as we think about 2019 and beyond, when do you think about letting a little bit more drop to the bottom line and delevering a little bit quicker?

So there's a lot of moving pieces in that question. I will tell you that I think if we - and were very confident in our plan around growth and replacing that EBITDA that we carved out as a result of the PBC divestiture on a much higher-profitability kind of business or businesses. The math tells us that if we are remotely successful in doing that, we will immediately bring leverage down, right. If we bring another $40 million of EBITDA back into the business on a lower top line, right, and a higher margin, we grow our way into handling the leverage issue. I don't think we will be at this leverage point much beyond the middle of the year because if we're unable to execute candidly then we'll pay down the debt. So, it's going to come down one way or the other, right. We're still holding a couple hundred almost $300 million on the balance sheet for redeployment. We will certainly know by the middle of the year. We will either be a bigger organization and more profitable organization which will handle the leverage, or we’ll be the same size that will pay down the debt which will handle the leverage. So, I think by the end of second half the leverage issue goes away.

And then lastly, just a couple of housekeeping. I know the tax rate is still in flux. What's the range that's embedded in your Q1 in fiscal 2018 guide, and if you have it, Tom, what does your guidance translate to on a GAAP basis for EPS? Thanks.

There's a table in the back where we do the - where you can find the GAAP number. I don't know top of my head. But the tax rate is kind of in the mid-20 for the year 2018. We are getting some benefit from a lower tax rate but then we have taxes around the globe that are at higher rates.

And we'll take our next question from Rob Brown with Lake Street Capital Markets.

On the incremental revenue, just wanted to get a sense of - you said your win rate was higher than you expected, maybe a sense on sort of why you're winning? What dynamics are going on to allow you to win and does this sort of change your organic growth thinking going forward?

It's a little bit different by geography. Certainly our wins in Europe have probably more to do with our competitors stumbling than anything else. So, we've been the benefactor of those stumbles, if you will. It's kind of an interesting scenario. We had a competitor that was moving into North America. I think they were to kind of scratch at our market. I think they were so laser focused on doing that that they forgot to pay attention to their own back door. They stumbled on products, created an issue, and we won two programs as a result of that stumbling. And in South America, we have had a concerted effort. The whole time that the market was down, we were working to diversify our business to do a heavy Fiat house, and we wanted to get TRW, Delphi, and some of the others. And we wanted to also increase the range of the products we were making. We put a lot of work in when that market was bleeding and a lot of folks were leaving. And now we're reaping the benefits of that because all - there’s a huge amount of investment going on in Brazil, the economy is strong. And so, I'll categorize it as the customers are remembering who their friends were during bad times. And so, we're winning in Latin America predominately for that. Asia, I will tell you that both our [indiscernible] and our JV are really doing well. Fundamentally, in Asia, we're just winning more programs with our same customers, because our customers are winning. So, I'd love to say, we did something special in Asia, we did. We took really good care of Bosch and those guys who are our big customers in Asia. And so, as they win and take share,…

That was a good overview. And then just maybe stepping back, what's sort of the organic growth rate you can get to without sort of these excess investments and then what organic growth rate kind of are you at with these excess investments?

So on a steady state, we think our organic growth rate, if you normalize everything and that's always a tough statement to make but let's assume we can actually do that. We are mid to high-single digit on a - I'll use your terminology, excess investment, I'm not sure that's a fair terminology. We have heavily capital intense businesses that just naturally require a big chunk of upfront spending that gets amortized over 5 to 10 years’ worth of production cycles. But using your terminology, we increased that price somewhere between 2 points and 3 points with the increased spending. Now inevitably what's going to happen is if our financial projections hold as we think they will, because of the scale of the enterprise that we will achieve in and around the end of 2018, the investment - how the investment flows to the enterprise will have a much lower impact on margin than it does today, right. Because part of what this is scale, right. We’re still fighting size. So every time we make an investment and we’re hitting someplace pretty hard, right. Every time we get a little bit bigger, we get a little bit more profitable, this problem gets a little smaller. And so when we are and we think we'll be of a scale towards the end of the year that this will become less and less of an issue, and certainly once we hit our strategic plan, one target of getting over the billion dollar hunk, this issue will probably completely abate itself just because of scale.

And we'll take our next question from Steve Barger with KeyBanc Capital Markets.

This is actually Ken Newman on for Steve. Thanks for taking my question. I wanted to go back to the program wins. When you were first ramping up the medical side of the - your medical business, you had a little bit of issues with trying to get some FDA approval. So, curious if you could just talk about how much of these new medical wins have to go through FDA approval or maybe just help us frame up how much risk is there to push out in shipment.

So, the short answer is they all have to go through FDA approval. It's just the nature of where we're playing and how we're playing. One of the things that we've done, we've talked a lot about this carrying an infrastructure piece of the equation that we spread through the business. One of the things that we've done and are doing is building our regulatory capacity within the enterprise. And we are really close to a point where we have a very, very robust core of regulatory affairs people, right? The significance of that group is to, and I say this from a marketing perspective, appropriately separate the parts through the regulatory activities, most notably FDA, UL all of those pieces. The reality of it is, is the more we can do, the more connected we are, the faster we can get these things move through the process. So, that really is the business benefit of having that group there. Secondly, one of the things we're doing with that group is we're taking it almost entirely out of the customer's hands, so we have control of it, right. So, what we think we've done with that is we've put all the guardrails around that we can to minimize the risk. With all that said, the FDA, we can normally get something through the FDA between three and six months. Does the opportunity exist for them to say, hey stop, it's going to be eight months? That absolutely happens. We don't anticipate any of that with any of these programs because again we're taking a really aggressive partnering posture with the customer and the FDA to try and get in front of anything that could derail the timing in any significant way.

And then, I guess switching gears, I'm going to ask the M&A pipeline question a little differently. Obviously, you're focusing more on the Life Sciences part of your business, maybe can you kind of help frame the general revenue range size of these deals, what are you seeing in terms of multiples. Trying to really figure out what's the upside from M&A to the guidance as we look at it today.

So, I will tell you, relative to the multiples, I probably sound like a broken record, but we continue to say that we'll run up to 10 or 11 times for a big deal that solves a lot of issues in the enterprise. It'll be kind of a forward looking, it could be a 10 or 11 in the back but it will be a backward looking probably six or seven by the time we're done with synergies. Our normal that's for a big deal, our normal operating ranges is somewhere between seven and eight and kind of four and five backward looking. So, that inevitably is what BRT is going to be. And inevitably, that's what Bridgemedica is going to be. And so, I don't necessarily see anything in the construct that's going to have us miraculously change our posture relative to any of those things. As far as sizes of deals in the backlog, certainly we have deals ranging from better than $100 million in revenue to as little as $7 million in revenue. It's all about strategic fit. What problems are we trying to solve? What markets are we trying to penetrate? It's always and always will be about the construct of the strategic plan. And so, we want to play a drug delivery, we want to play an endo, we want to play an artho that's our - that's where we've targeted. And so, it's safe to assume that any and everything from Life Sciences in the pipeline has something to do with those three areas, and we will execute on the fashion of forward-looking eight/nine backward looking sort of four/five that's probably the best I can say.

And we'll take our next question from Stanley Elliott with Stifel.

Rich, you mentioned on some of the FDA work that you guys are taking on more risk and trying to help with the regulatory process. Are your competitors doing the same thing or do you see this is kind of a differentiator for you guys?

This is absolutely a differentiator for us. I will tell you sometimes when you look at some of the wins that we've had, I am absolutely convinced that what we actually sold was the regulatory affair more than the design and the - or at least as much as the design and the production work. It is a major monster headache for our customers, and they have to do it for their lead products. And so, if they can find a confident partner to handle it for the sub-products like we’re doing now, the benefit to them is far beyond price. It’s freeing up a kind of engineering and all those things. So, for sure, it’s a huge differentiator. Now, I will tell you there are others out there that are certainly trying to do it. And some are fairly successful, right? But it's not rampant. There's a handful of people that have thought of the scale and the engineering and regulatory wherewithal to be able to do it. But yes, there are others out there at least attempting it.

And I hate to keep talking about kind of the market growth piece but at the Analyst Day you guys have always been talking about high-single-digit growth. So what we are saying here is that with these recent contract wins that is in on top of high-single-digit organic growth, so effectively you're looking at something closer to kind of low-teens sort of organic?

I don't know that we're getting the low-teens, I think it would be fair to say we're in the low-double digits. I'm not sure that that - well, certainly not in 2018. 2019 might be a different story but yes, I mean, it's low - I would say low-double digit, it's probably the way to think about.

And then kind of on the same line, I know you guys have talked a lot about kind of 35% short of an incremental on additional volume growth and we have kind of the investments upfront. Is that implying that the incrementals on a go-forward basis are actually going to be higher than 35% or is that 35% blended and inclusive of this new level of investment on a go-forward basis.

No, I think it's fair to say that, I'll call it post the organization sort of settling down, right, it takes a minute to get everything in and lines are running properly. And on the other side of these investments, I think it's fair to say that the blended incremental of the organization will increase.

And lastly for me, in terms of kind of the free cash flow, is there any reason to assume that working capital would not end up being kind of more of a use in the coming year especially with some of these programs ramping.

I think that what we have is lumpy. So, we will have usage early in the year towards the middle of the year but I think net-net it will not - I don't think it'll be - the plan is in usage in a year. Even with the investments because we thought to get the sales back second half.

And therefore our plan has always improved within the inventory management in day-to-day inventory outstanding. So, that's really where you will get the offset with a temporary upfront investment.

It appears we have no further questions at this time.

Well, with that, I want to thank everyone for joining us today. And we will bring this conference call to a close. For those of you in the North East, be safe and stay inside.

And that concludes today's call. Thank you for your participation. You may now disconnect.