Q1 2020 Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the cubic Corporation's first quarter fiscal 2020 earnings conference call.
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I would now like to hand, the conference over to your speaker today, Kyrstin Nielsen Vice President of Investor Relations. Thank you. Please go ahead.
Hello, everyone and thank you for joining cubic's webcast I'm joined today by Brad Feldmann, Chairman, President and Chief Executive Officer, and and Schuman, AGA Executive Vice President and Chief Financial Officer before we begin I'll remind everyone that our presentation contains forward looking statements that are made pursuant to this.
Safe Harbor provisions of the Federal Securities laws. Our most recent SEC filings include risks factors that could cause the company's actual results could differ materially from our expectations.
In addition, we have included non-GAAP financial measures in our discussion reconciliations to the most directly comparable GAAP financial measures can be found in today's press release and in the appendix today's presentation with that I'd like to turn the call over to Brad.
Thank you Christian Thank you everyone for joining us today.
For today's call I'll start with a summary of keeping change underdressed performance for the first quarter.
Provided an update on her strategic priorities.
And Truman will then discuss financial results in greater detail.
And our fiscal 2020 outlook.
Turning to slide three.
Our strategic priority is to remain squarely focused on building technology driven market leading businesses.
Consistently delivering on our customer commitments through excellent project execution.
And positioning for the future by investing in digital platforms, and ADHD trial product innovation to better sherbert customers and to accelerate revenue and margin growth.
Turning to slide four.
First quarter shales from $328.8 million increased 8% year on year, reflecting growth across all segments.
Adjusted EBITDA of $11.4 million and adjusted loss per share of 12 shines represents declined year on year.
Largely due to necessary upfront growth in Josh much with our mission solutions businesses in key long term profitable contracts.
Overall, our performance was in line with the updated expectations, we communicated on January 14th at the Needham Conference.
At that time, we also communicated that Q1 would be impacted by delayed orders in our mission solutions businesses as result of the continuing resolution.
Despite a later timeframe, we remain confident and the full year outlook due to our significant backlog that provides strong visibility as well as expected orders and mission solutions, which will be second half weighted.
On January six we close the acquisitions or pick she adela rock that we announced in November and discussed on our Q4 earnings call.
In transportation, we signed an agreement with moving to co develop next generation mobile solutions for public transit agencies.
So a lot strategic execution this past quarter to position cubic for long term success across our businesses.
Lastly, we are pleased by Congress passage of comprehensive package of authorization and appropriations bills that provides for year long defense spending.
The D.O. de needs predictable and timely funding to sustain critically needed investments and to continue the progress made under the 2019 bipartisan budget agreement that amply funds requirements and that's why 20 and 21 and ends the threat of sequestration.
Turning to slide five.
Our strategy remains guided by our key priorities of winning the customer building next city building next mission building next training and living one cubic.
Let me provide a brief update on each of these focus areas.
Turning to slide six.
Winning the customer is our absolute focus because positive customer experience and greater quality outcomes are key to our competitive differentiation and sustainable profitable growth.
We're currently enhancing our customers experience a queue back through the formation of a new customer experience function.
Strategically position should be the voice of the customer and responsible for elevating our quality configuration management logistics and development teams into a new global integrated platform.
Ultimately, we are focused on setting the bar higher to delight customers and end users in every way they experience our product and service offerings.
In transportation, we are proud to support the mtc in its first ever means based fair payment program by providing eligibility verification customer service.
Cubic has managed the clipper card program since its implementation and 20, Chad and we have established a high customer service ratings with clipper customers.
We're pleased to support this pilot program to make tranche at more affordable for Bay area residents.
In January we launched cubic interactive.
Shopped, whereas the service advertising and loyalty rewards platform for public transportation.
We have signed on for advertisers and served over 100000 banner advertising impressions and over 46000 advertising video views since launch with week over week growth of 166%.
User engagement has been strong and since launch we have awarded nearly 1 million loyalty points, which can be turned into transit value and used to subsidize are paid for transit rides are redeemed for various INAP offers.
I am use our pilot market and there is tremendous opportunity to grow cubic interactive with our other customers around the globe.
We will continue to develop and rollout enhancements to the cubic interactive platform, which is a key foundational pillar of our digital pivot in transportation.
Lastly in defense training, we are leveraging our core experience in game based training to expand into new commercial verticals. This quarter. We held successful demonstrations of our digital game based training platform.
With both defense and commercial customers validating the technology and concept for point of need.
Turning to slide seven.
The first quarter, we booked a five year extension to upgrade Chicago's ventral fare collection system for $323 million plus financing costs totaling 377 million.
As we discussed on our November earnings call venture 3.0 will continue to position the Chicago Transit authority as the cutting edge of tranche and payment technology with enhancements of account management features equipment replacement and the implementation of open architecture standards with ETP.
Size to set the foundation for mobility as a service in the first quarter. We signed an early works agreement on our Boston contract with the DTA and we expect to close on the full contract by fiscal Q3.
We announced the formation of cubic intelligent transportation systems business Kubrick Itps through the integration of our recently acquired traffic where and grid smart businesses.
This combination sets the stage for future growth and allows us to better leverage our products and go to market synergies, while driving operational efficiency.
Additionally, I'm pleased to report on the open house for stage, one of the Singapore Thompson East Coast line, and the public launch of new cubic equipment.
The event was a great success with positive customer feedback and included a demonstration of the transport Minister having a wide video call on the cubic assisted service kiosk with the ticketing contact center operator.
Turning to slide eight.
We continue to partner with World class technology companies to create competitive and compelling solutions for our customers.
Which we expect to lead to new revenue streams and increased margins for cubic.
I'm very pleased with cubic's advancements in mobile, including our leading share of mobile ticketing in the U.S. our collaborations to integrate contact was transferred cards with Google pay an Apple pay and our recently announced a partnership with move it the provider of the world's most popular urban mobility.
Patient.
By integrating move its multi modal journey planning into cubic's industry, leading mobile ticketing and payment offering we will offer a wonderful kind platform with the seamless highly differentiated user experience.
Under the partnership cubic will integrate move its rich mobility as a service CPI is with Cubic's traveler apt to include service alerts nearby Transit service lines, multi modal trip planning and real time arrival information.
As part of our agreement cubic and move it intend to collaborate to bring additional mass offerings to public transit agencies around the world.
Turning to slide nine.
Cubic was one of 22 awardees on the US armies global Tactical advanced communication systems to contract vehicle. She touched too is a 5.1 billion dollar 10 year indefinite delivery indefinite quantity contract covering information technology.
Services and hardware to support the development of a tactical communications network for soldiers.
This strategic wins, which led by our Gator team and enables cubic to compete for future communication solutions.
As an update to our next generation Troposcatter program, we're awarded our first delivery order were $29 million.
Lastly, the legislative Appropriations support T program orders for delivery this fiscal year, which gives us confidence in the full year outlook.
Turning to slide 10.
As we discussed on the November call in Defense training, We received key awards at the beginning of fiscal 2020 led by Air training programs for Korea cutter, and the United States Air Force.
We also discussed additional future growth opportunities for our new live virtual constructive LBC applications in Q1. After successful demonstration we're down selected for phase three for the for Sean Force next program, which defines the future for training for the United.
States Marine Corps.
Turning to slide 11, as a global company, we recognize the importance of being socially accountable to our employees our customers our shareholders and the communities in which we operate.
I'm very pleased to welcome Richard ACA those to cubic to lead our global corporate social responsibility strategy.
Richard brings a strong background, leading environmental health safety quality and responsible business programs for global companies.
Diversity and inclusion are essential for unlocking and accelerating innovation within our teams as part of our diversity and inclusion strategy. We successfully launched 10 employee resource groups, specifically designed to create opportunities for belonging development in Richmond.
Among our global talent force.
We're also supporting wildfire relief efforts in Australia.
Drew monetary donations and partnering with a nonprofit organization help got NGL and their global disaster immediate response team.
Furthermore, we are on standby to support with our Gator inflatable satellite communications terminal to provide stationary fire camp conductivity to fire fighters and aid workers on the ground.
At this point I'll ask anshuman to describe our financial results in more detail.
Thank you, Brad and Hello, everyone. Please turn to slide 12 to cover the financial highlights for the quarter.
Sales in Q1 were 329 million up 8% as reported and 6% on an organic basis driven by growth in all three segments.
Adjusted EBITDA for the quarter was 11.4 million, which reflects growth in transportation and defense trending and incremental investments and mission solutions.
Foreign currency translation did not have a meaningful impact on adjusted EBITDA This quarter.
Adjusted loss per share was negative 12 cents.
Reflecting lower adjusted EBITDA and higher taxes and depreciation.
Our effective tax rate for Q1 was negative 64%, which differs from the effective tax rate of negative 31% for the first quarter of last year and the statutory rate of 21%.
We recognized tax expense on a pre tax loss, primarily due to jurisdictional mix of earnings as foreign income resulted in foreign tax expense, where you asked losses cannot be benefited due to the valuation allowance in the U.S.
We also recorded an increase in U.S. beat and state cash tax expense.
Adjusted free cash flow was negative 34 million in the first quarter an improvement over the first quarter of last year.
Our net leverage at quarter end was 2.6 times and outperform on net leverage.
The big see on Delora acquisitions, which both closed in January 3.8 times.
Turning to slide 13, our primary focus is on integrating our acquisition and driving strong growth, while lowering our net leverage ratio, but we will continue to give consideration to disciplined highly strategic transformational acquisitions to further enhance our portfolio.
We also expect to significantly improve our free cash flow and are targeting a three year average free cash flow conversion up approximately 100% off our GAAP net income recognizing that we are project based business and year to year cash flow can be lumpy.
Moving to the transportation segments results on Slide 14, our book to Bill ratio was 2.2 times, reflecting the Chicago contract extension to upgrade the Ventra fare collection system as Brad mentioned, we signed an early works agreement with the Boston MPT and expect to have the full contract completed in the third call.
This fiscal year.
Sales grew 4% as reported and 2% on organic basis, driven by project delivery on a fair collection project adjusted EBITDA margin increased meaningfully in the first quarter, leading to a 110 basis point increase reflecting higher sales Boston early works lower R&D and cost optimization.
Moving to slide 15.
And our mission solutions business sales grew 27% as reported and 20% on organic basis.
Adjusted EBITDA reflects 8.7 million of accelerated investment and Troposcatter, an additional investment and the MQ 25 program, which are booked long term profitable franchise contracts. Both contracts are expected to drive profitable growth by twentytwenty too with accretive margins when production ramps.
We also experienced some short term delays and expected orders for Gator out of the result of the continuing resolution.
We expect to receive these orders in the second half of the fiscal year.
Turning to slide 16, our global defense business returned to growth this quarter with robust bookings and strong sales growth of 6% driven by air training.
Adjusted EBITDA margins of 9.2% increase 180 basis points, reflecting higher sales and cost saving initiatives.
Turning to slide 17 for the fiscal year Twentytwenty, we are reaffirming our previously issued guidance and continue to expect sales in the range of 1.58 billion to 1.64 billion adjusted EBITDA in the range of 170 million 290 million and adjusted EPS in the right.
Range of $3.10 to $3.70.
For the second quarter, while sales are expected to be up both year over year and sequentially. We expect adjusted EBITDA to be roughly flat sequentially driven by the timing off high margin Gator shipments and mission solutions, which are expected primarily in Q4.
Our expectations for the second quarter also reflect the timing of Boston financial close which is expected in fiscal Q3.
Overall for Q2, we expect growth in both transportation and defense training, while mission solutions. Adjusted EBITDA is expected to be similar to Q1 for this fiscal year.
As a reminder, for the U.S., we calculate taxes on a discrete bases and for Q2 similar to Q1, we do not expect to record a benefit on U.S. losses.
We are a net taxpayer on our international income.
Lastly, as with prior years, we expect adjusted EBITDA to be back end loaded with greater than 50% or the full year amount in Q4.
Now I'll turn the call back over to Brad.
Thank you in Sherman.
Turning to slide 18.
I am pleased with our first quarter shales growth and additional contract wins and strategic progress across each business, while we continue to make incremental growth investments in mission solutions.
We remain confident in our expectations to deliver another strong year or growth in fiscal 20.
Now let's proceed to the QNX session.
Thank you as a reminder to ask a question you will need to press star one on your telephone.
To withdraw your question. Please press the pound key please standby, while we compile the culinary roster.
And your first question comes from the line of Michael Ciarmoli.
Hey, good evening guys. Thanks for taking the question here.
Maybe a either rather on Schuman I guess, maybe can you just give US you know as you're looking at the remainder of the year. You know we got an earlier passage of that defense budget. What are some of the puts and takes to the low end and the high end of the EPS range, what you know clearly I'm thinking.
I guess, some order delays things don't come in on time, but maybe if you could kind of just swear us up on that.
Yes. This is Brad ill speak broadly and.
Women will provide some detail.
In our cubic mission solutions business.
Theres a lot of products and the revenue is shipping based and.
We know that the orders are.
In the budget and we know that they're coming because contracting officers are doing what contracting officers do.
And so we expect all of these orders to come in and.
The cycle time to get the orders outage in time.
For the fiscal year, so its order delays primarily there.
In addition, we're ramping up as you remember we won those four large contracts.
New York in Boston, and very spend in San Francisco and.
New York has been ramped up quite a bit.
We're ramping up in Boston and the other two contracts. So that's how we'll see revenue growth in the second half.
Just to add up to what Brian said, our Cts business in a CGD business has created an 80% off its revenue in backlog.
There is some timing of the remaining book to Bill, but again, the strong visibility into the backlog.
Does drive growth and then the CMS businesses basically tied to the shipments which leads to the range in our full year adjusted EBITDA.
Got it helpful. And then maybe just one more Brad I mean, you mentioned the the partners additional revenue streams, I guess, Apple Google move it what's the process for integrating those and and extracting the value from either current transportation customers or or even upside.
In new customers I mean can you just walk us through you know maybe for example to move it relationship. How soon do you think you kind of start monetizing those partnerships.
I will speak to move it.
Directly at first.
As you might know move it has the largest amount of time.
Transit routing data that's multi modal.
And we of course lead with payments and so you know this strategic product or thought process as by combining payments and information we can create a much better user experience for people traveling around the city and we also can provide information too.
Transit agencies, so that they can do.
Deal with congestion.
Perhaps they come nudge people off of congested times with changes in rates and the like and so.
Because congestion is growing in cities. We see this is a great strategic move.
So the first part of the partnership had to do with Apiay calls to their.
Regarding engine and we're working on that.
I would expect us to have a technical solution in a couple of quarters and I would expect there to be revenue growth and margin growth next year as as a result up just integrating those JP eyes.
Got it that's helpful. A great. Thanks, guys I'll jump back in the queue here.
Okay.
Your next question comes from John Preventive.
Hey, good afternoon, everyone.
In this investments.
Studies before which is there any pattern or sort of parallel between investments that you made a trip of scatter or 25 or other iden or other items that you've identified just trying to see if there is that sort of ACA connective tissue as to why these things are deserving of more money.
And what I would say not unexpected, but maybe unplanned.
Hi anyway.
So let's break the two investments out into.
Individual pieces, so put troposcatter.
We.
Well, we were announced at the winner if a 325 million dollar idea Q and we got the first order for 29 million wherever we have all the nonrecurring engineering cost charge to that and as a result, we have a forward loss on that when you think off the remaining orders that will come after the first $29 million will be for production units and those are.
And to be profitable and accretive to.
Cubic's margins.
The same thing when you start thinking off the MQ 25. These are the initial units delivery, where you're taking all the engineering cost upfront on these units wart. This leads to as an opportunity to drive lower tends to mid tens of millions dollars. If revenue you are at good accretive margins to the CMS.
Yes. So these are long term profitable franchise programs like once your end your end for a very long durations that leads to good margins for the business and go drug for the business.
You know the idea is that on the nonrecurring and both of these were competitive.
And nonrecurring.
You know we felt like it was worthwhile to make an investment because on the recurring units that are end up in the President's budget in the palm there's great visibility on these units.
We make margins are considerably higher than the portfolio.
Do you need funding to come through for both of those programs in order to get those production thats, there or is or or.
Or is that is that kind of guaranteed at this point I get so how much of a risk at this investment so to speak.
So so.
We have a contract for with options.
For the production units, we've already negotiated at the deal is shot.
And once.
You've done the engineering and you're on the platform.
Given that the business arrangement has already been negotiated.
The probability of getting thrown off is near nail so that the risk factors. If the government continues those programs and you know which in the President's budget and.
These programs are needed Anders extreme visibility on how many.
Units, they're going to bought.
And then what tends to happen you know this is once you're on these franchise programs and number of years down the road to make changes and so you know they'll buy more units shore Stillwater change to the units because the mission might change.
And so that's why we call. These franchise programs these programs platforms.
In the department of Defense tend to go like for 50 years or something so they like goes a long time.
Great. Thanks, a lot blackens usable.
Your next question comes from Mark Strouse.
Yeah. Good afternoon. Thank you very much for taking my questions Hey, Brad how you doing.
Good.
Good Hey, so.
You seem to be making some good progress with met coals Nextcity vision can you just kind of update us on where you are in the hiring process to replace them and the type of candidate that Youre seeking <unk> are you looking for a visionary to maybe expand on that vision or are you really looking.
For somebody to has more operational expertise to really drive home the division as it stands.
Yes, so as you know we appointed low raw Escanaba me as a as the acting president and he's certainly in the mix of candidates were also headed to market and.
We have some good candidates that we're looking at.
We are looking for a proven PML leader that is run large businesses.
That are either transportation or IP centric.
I think we're very glad to have Madden the company and we wish him well and he did a great job with the Nextcity vision.
But you know we need to execute and and deliver on that you'll also note that we hired Kevin again last year, who was the chief Digital officer.
Hi, B M and the idea being that we would.
Think about.
Modifying our business model and start showing mass as a service if you will and so you saw an acquisition we did with Dell rock in the smaller cities, we're combining that with our next bus offering so that we can get paid if you will buy something like the ticket and increase the velocity.
Of of revenue.
In the cloud so.
I would say, we're trying to implement matched vision and we're trying to expand it by introducing platforms in the mix.
Okay. That's helpful. Thanks, Brent.
And then just in Sherman.
I believe you said the Vixia intolerant deals closed on January six.
It was any of the debt for those deals.
Taking on in this quarter, you just reported or should we kind of adjust our our AR balance sheets for the full $236 million on top of what you just reported.
The 236 million as incremental for the quarter the debt was.
Not in our Q1 results.
Okay perfect. That's it for me thank you very much.
Thanks Mark.
Your next question comes from Jim Ricchiuti.
Hi, Hi, Jim.
How are you Brad.
But you want I just wanted to ask you about the you want to de lever.
Just given what you're working on across the three businesses I was struck by the R&D being looks like down year over year.
I apologize.
Listening to this call outside of the office, if that numbers right and maybe talk a little bit.
What's driving that.
Where do you see R&D going forward over the balance of the year.
Yes, Jim So R&D was down for the quarter, but part of the reason it was down was related to these franchise programs, where we're doing the nonrecurring engineering.
Winning the Troposcatter, which we had already started when we got a.
First order far troposcatter, the R&D cost stop being R&D from a being out perspective and move to cost of sales as part of the forward loss. So while we continue to spend.
Incrementally and innovation in the company. It just comes down to accounting classification between cost of sales line for some of these franchise programs and R&D line on the BNL.
Okay. That's helpful presence in the chat Jim Pragmatically.
We're continuing to invent new things hopefully quicker than our competitors to provide the very best solutions and.
No they might be a different pockets, if you're well, but we're continuing to same thing.
Okay.
And just thanks for by the way for.
Some of the directional guidance as it relates to.
The March quarter, but.
Curious is there anything we can say about I think we can appreciate the backend.
Loaded portion of the business on the defense side.
Finally, and mission solutions, but I'm wondering how we might think about the distribution of revenues.
Over the course of the balance of the year at Cts.
So cts will have some ramp in revenue driven by the timing of programs stuff. The one of the things that we did call out also when we give guidance was that we have included the Boston Green reset negotiations with the customer to conclude in Q3.
Okay and.
And that does have some revenue and profit impact as we've taken some costs and continue to encourage some cost, which we got recovery far as part of this up bigger contract, Greece reset that happens there is a small potential that gets accelerated into March but we expect.
Treatment now.
Okay.
Thank you.
Your next question comes from Lilly they'll Palmer.
I Laurie Thank you and.
Good afternoon, Brad onto mine and Kirsten.
Hey, Lloyd.
Hello, with your acquisition of del are up now close do you have the assets in infrastructure necessary to penetrate the tier two cities with the public transit payment solution than I was also wondering what does the pipeline look like for.
Tier two cities in terms of our peace and your positioning to to win them.
Yes. So we're obviously ready you probably remember that we actually bought a piece of del rock earlier, some smaller percentage of the company. So.
You know, we investigated or how we would go to market and shales channel one pipeline and we obviously thought it was a good investment otherwise we wouldn't have close to the whole deal.
You know, it's this pipeline a sizeable.
We don't we don't reveal that as you know I think we've stated publicly we have 15 cities now when we expect that to grow quite a bit, particularly with our next bus offering.
But remember we announced publicly that.
In San Francisco, the next bus offering have been selected as the future there and we had really improve the technology for next Boston are using.
You know AI algorithms to have a better prediction on when the buses coming and so we think the combination of those things will be very very attractive to our customers.
Okay, Thanks, and moving to defense you discussed your involvement in several franchise programs in response to an earlier question.
The Needham Conference Slide presentation, you indicated that your video data link solution on the F 35, the MQ 25, and the M- 60.
That should ramp you said to greater than 175 million.
In fiscal 2023, I was just wondering how that compares to what you're doing now in terms of revenue for those three video link platforms than what the trajectory is both to be for that revenue up until 2023, and if it is expected to have a.
Sharp fall off or if its or if that 175 million level sustainable after that.
Yes, so I.
I don't know the exact number but in our sort of datalink businesses portion I'll, just say its tens of millions of dollars today and so as you point out there will be very good growth with those franchise wins.
What tends to happen is as you know.
You know that was sort of a steady state that will continue.
You know for a few years and then what tends to happen is there are changes and we tend to provide more capability to customers. So I would expect.
Majority of the ramp to be sustainable.
Okay. Thanks, Brett.
Welcome.
Your next question comes from Ken Herbert.
Hi, Ken.
Hey, good morning, bread and I'm sure monitor good evening, how you doing.
Good.
I just wanted just wanted to start out.
Slide 13, with see sort of free cash flow outlook you provided its very helpful and I'm just curious if you get on tax out a little bit it looks like specifically working capital and lower capital spend ERP should should largely be equal as part of that bridge to 200% conversion, but how do we think about that sort of this.
Here and maybe how much below the 100% are you running this year and how does the average spread over the three year period.
Oh sure.
Shark and so.
They're deliberately no numbers are on there and its graphical.
I'd say the working capital is going to be greater than the lower <unk> capital and ERP spend from a cash conversion perspective.
Talking about this fiscal year, it's going to be below 100%. Our conversion. The reason we haven't given specific guidance says.
The cash flow and our project business is lumpy and also certain shipments on the defense side are backend loaded. So if we ship in September we got the cash in October versus if it can chip in August we get the cash in September.
It will be better than last fiscal year for sure and job, but it's going to be below 100%. That's the are ramping up next year and Twentytwenty do.
Okay. That's helpful. I mean, it seems like you obviously got a lot of opportunities to invest for organic growth, which typically imply some working capital use amongst other things you, what's your confidence level onto amount about sort of hitting this conversion target on an average basis assuming youve.
Got a lot of opportunities to maybe continue to drive the business organically.
We feel pretty comfortable petting thats number.
We have to pay back some of the buildup in working capital that we had in the earlier part of the projects.
But the big four projects using cash is that these projects come to a tailwind that cash unwind from the balance sheet and gets return to our shareholders. So we've done that into cash. So we have factored into this modeled our continued growth in the business, which we expect to remain strong.
And still believe we'll be able to get to a three year cash conversion cycle up hundred percent of GAAP net income.
That's great. Thank you and then if I just couldn't be organic growth in Cts in the quarter.
Can you just remind us as it is new York City down this year relative to last year was fiscal 19, the peak or is that maybe flattish this year and maybe just a couple of the sort of the moving pieces around the.
The 2% growth in the quarter within Cts would be we'd be very helpful. Thank you.
So New York isn't down this year from it.
We're going to be delivering the b you do milestone this year, which has a lot of product being delivered.
It again from a project that business there are certain ramp up the off project and the timing of those projects, we just book Chicago.
In the quarter, that's going to start ramping up towards the end of the you are there certain ramp in our project in San Francisco The Bay area project.
So again, it's a the timing over the course of the are you will see some continued growth in the Cts business.
Great. Thanks, a bunch of on I'll pass it back there.
Thanks, Ken.
As a reminder, if you will have to ask a question. Please press star one on your telephone once again that star one on your telephone.
And your next question comes from Jon Raviv.
Hey, Thanks, a follow up here I'm just thinking about the.
In the conversation Cts clients can you talk a little more about the new venture upgrade and if you can sort of play that kind of approach.
How much barbecue play approaches and hoping that big city strategy helped permits mature strategy I'm, just sort of more on that.
Opening.
Okay opening opportunity. Thank you.
Yes, so embedded truck.
The customer want to add new technology that we're delivering in New York in Boston and the like and so that that's what necessitated the upgrade. They also wanted opium exercise to apply you know other kinds of applications. So.
We're re using a lot of the capability that we're delivering in New York in Boston.
My point out just generally that this is a pattern with our customers that we put the venture system and I think cap. It does in years ago, or so and then what tends to happen as these customers want to upgrade.
The capabilities that they have there and we've seen this pattern go on I think we've been in this business 50 years, and we've seen those patterns and so which is a great thing both for our customers. The fact that we continue or developing things with <unk> and other so.
Cities.
And and it's also helpful for us because it drives down the risk for both them and us. So it's really a great saying if you think about the and and this play obviously is a big city play.
You know if you think about it in our Cts business we're building.
Revenue streams that are sort of annuity like they go on for a long long time.
There is a design and build there's all went down and then halfway around the wet AMD theres, another dnbi and and on and on it goes so.
It's a very sticky business and we're very glad to be in it.
Thank you.
Yes sure.
And there are no further questions I'll now turn the conference bets of Brett Feldman for closing remarks.
Thank you everyone for joining us today, we appreciate your time and interest in Qubec. Thanks, So very much.
Ladies and gentlemen, this concludes todays conference call. Thank you for participating you may now disconnect.