Q2 2020 Garmin Ltd Earnings Call
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These constraints might be recorded I would like to turn the conference obituary host Ms. tabby SEC now.
Good morning, we'd like to welcome you to Garmin Limited second quarter 2020 earnings call. Please note that the earnings press release unrelated slides are available at garments Investor relations side on the Internet at Www Dot Garvin Dot Com flash stock and archive. The webcast you really a transcript will also be available on our website. This earnings call includes projections.
Other forward looking statements regarding Garmin limited and its business any statements regarding our future financial condition revenues earnings gross margin operating margins future dividends market shares product introduction future demand for products and plans and objectives in the future impact of actual or potential cyber attacks are forward looking statements. The forward looking at.
Some circumstances discussed in his earnings call may not occur and actual results could differ materially as a result of risk factors affecting garments information concerning these risk factors is in contained in our form 10-K, and second quarter 2020 form 10-Q filed with the Securities and Exchange Commission in particular, there are significant uncertainty about the duration and impact the code.
Good night team kinda like this means everything else could change at any time in any statement about the impact until the 19 on the company's business results and outlook is the best estimate based on the information available as of today's date presenting on behalf of Garmin Limited. This morning arc Clickable, President and Chief Executive Officer, and jump and Chief Financial Officer, and Treasurer at this time.
I'd like to turn the call over to Cook handle.
Thank you Jerry and good morning, everyone.
As announced earlier today Garmin reported strong second quarter financial results during a period of extreme uncertainty created by the cobot 19 pandemic.
As reported last time, the onset of the current a virus endemic and measures taken to control the spread of the buyers had a significant impact on the economy.
On retailers.
Emerson.
The month of April was particularly challenging for every business, including Garmin.
However conditions steadily improved.
We ended the quarter with significant growth momentum.
Consolidated revenue came in at 870 million down only 9% on a year over year basis.
We experienced strong growth from certain online channels, including Garmin Dot com.
Which partially offset weaker weakness from retailers who are disrupted during the early phases of the pandemic.
We also delivered strong profitability.
Gross margin was 59.3%.
Operating margin was 21.7% with operating income of 188 million for the quarter.
This resulted in GAAP EPS of 96 cents and pro forma EPS of 91 cents for the quarter.
Doug will provide additional financial details in a moment, but first I'd like to make a few remarks on the performance of our business segments.
[noise], starting with the fitness segment revenue increased 17% driven by strong consumer interest in health and fitness.
Sales of advance Wearables and cycling products were very strong in the quarter.
Gross and operating margins were 53% and 24% respectively.
We recently acquired first the analytics are longtime partner and leading provider of physiological analytics technology for health fitness and athletic performance.
This acquisition will help us achieve even greater levels of innovation.
That will benefit consumers.
Looking forward, we expect that the interest in health and fitness will remain very strong.
We're ready to seize this opportunity with a great lineup of new products.
More new products on the way.
[noise] looking next it marine revenue increased 4% as boating and fishing became popular pastimes during the pandemic.
Many boat builders were idle during the quarter, which tempered our growth.
The retail sales were very strong led by chart plotters and Panoptix owners.
Gross and operating margins were 59% and 28% respectively.
During the quarter, we launched products solar or first screen smartwatch, featuring solar charging technology.
Looking forward interest in our marine products remains very strong.
We anticipate an extended rain season this year.
Voters maximize their time on the water and boat builders worked through production backlogs.
Additionally, we intend to leverage our compelling product lineup to capture additional market share.
Turning next to the outdoor segment revenue decreased 2%.
Weakness in traditional handheld categories was mostly offset by growth in adventure watches.
Gross margin and operating margin was 65% and 33% respectively.
We recently incorporated solar charging technology into the Phoenix six to six as the instinct line and tactics Delta Smartwatches.
The interesting solar sets, a new standard and low power technology by achieving unlimited smart watch operation using only the energy harvested from the Sun.
We expected our solar harvesting technology will be a significant differentiator for us in the smart watch market.
Interesting adventure and outdoor activity remains very strong.
We are ready to seizing this opportunity with a great lineup of recently introduced products.
With more new products and new categories.
[noise] [noise] [noise], turning next to the aviation segment revenue decreased 31% as the pandemic created economic uncertainty that negatively impacted OEM partners and retrofit activity.
In addition sales of 80 as feed products rapidly declined as we expected after the U.S. mandate passed and the market mature.
Gross and operating margins were 73% and 12% respectively.
During the quarter auto land, a certified marking the beginning of the new era for General Aviation safety technology.
Auto land is already available in flying on the paper M. 600, and dot her TV on 940.
An additional certifications are on the way.
For the remainder of the year, we anticipate aviation will continue to face challenging headwinds.
However, we remain confident in the long term outlook for the segment.
As interest in general Aviation remains high.
And we are prepared with a strong lineup of products for every aircraft application.
In addition, we believe that advance safety technology, such as auto land will make general aviation accessible to more people, which in turn is expected to grow the market.
Yes.
Finally for the auto segment revenue decreased 46% as automakers idled their factories and driving activity decreased significantly.
Gross margin was 47%.
With an operating loss of 10 million in the quarter driven by the investment we're making to complete several significant programs.
Specialty R&D and truck categories, where a bright spot during the quarter.
We launched several products, including new diesel navigators oversize displays and enhance reading teachers and our new the RV Eightninety navigator designed specifically for the needs of the RV and camping lifestyle.
Looking forward, we anticipate that revenue from OEM products will grow in the back half of the year as we complete several OEM programs.
Additionally, we continue to invest in specialty products and expect to enter new market verticals.
Yes.
And finally, most of you are aware the recent cyber attack that led to a network outage affecting much of our website.
And consumer facing applications.
We immediately assess the nature of the attack and started remediation efforts.
Yes, no indication that any customer data was access lost or stolen.
Additionally, the functionality of Garmin products was not affected other than the ability to access some online services.
Critical affected business systems have been restored and we expect to restore remaining systems in the coming days.
We appreciate the patients in kind words of support we've received from customers and friends. During this challenge.
So that concludes my remarks next Doug will walk us through additional details on financial results. Okay.
As cliff good morning, everyone.
I'll begin by reviewing our second quarter financial results.
Comments on the balance sheet cash flow statement in Texas.
<unk> revenue of $870 million for second quarter, representing 9% decrease year over year.
Gross margin was 59.3% 100 basis point decrease prior year.
Operating expenses percentage of sales, 37.6% 220 basis point increase prior year.
Operating income was $188 million, 26% decrease year over year.
Operating margin was 21.7% Iron 10 basis point decrease in the prior year.
Our GAAP EPS was 96 cents former U P. S 91 cents.
Next we look at our second quarter revenue by segment.
We achieved revenue of $870 million tumor five segments posting growth led by the fitness segment strong revenue growth of 17%.
I assume the charge, we have a diversified business model for multi segment and geography perspective [noise].
Looking at our year to date revenue for the first six months 2020.
Consolidated revenue slots or prior year, but through your segments posting growth led by fitness were 20% growth marine 12% growth.
Geography, EMEA is up 6% America's flat for the prior year [noise].
Looking next operating expenses for Sunpower operating expenses increased by $8 million or 2%.
Research and development increased $17 million year over year, primarily due to investments engineering resources.
I've tried to expenses decreased approximately $12 million to the prior quarter due to lower media spend.
Fish in a increased $3 million credit prior quarter, primarily due to increases in personnel related expenses.
Few highlights from the balance sheet cash flow statement and taxes.
We ended the quarter with cash Mark was securities for approximately $2.7 billion and no debt.
Accounts receivable increased sequentially fiber $24 million decrease year over year in line with second quarter sales.
Inventory balance increase while the sequential you basis, our strategy increased data supply sport increasingly diversified product lines timing of product launches a transition to a higher percentage of ocean shipments credit here.
The second quarter 2020, Gener free cash flow $142 million 62 million dollar increase prior quarter.
Second quarter, 2020 put an effective tax rate 6.8%.
Excluding the impact of $14 million income tax benefit due to release uncertain tax position reserves associated with the 2014 intercompany restructuring former effective tax rate was 40% compared to 18.9% prior quarter.
Chris is primarily due to electro property migration transaction.
Concludes our former remarks May you. Please open the line for Tonight.
Ladies and gentlemen, if you have a question at this time. Please press the star and then the number one key I touched on in California.
If your question has been answered you wish to remove.
Also on the Q Besides the county.
[noise] rehab first question from the line of Paul Joe Your line is now open.
Hi, Thanks, Thanks for taking my questions I'm. So just on aviation you mentioned you know a long recovery here and you do have you know tough comps on a DSP to end the year you know, but do you think we've kind of Troughed and teach you in your view and are you seeing any kind of uptick and demand in July.
And then on the margins looks like your gross margins are pretty steady from the last quarter I'm. What can you do kind of on the Opex side in the near term to kind of shore profitability. There and you know any one time on items kind of hitting aviation or mostly just lower revenue impact.
Yeah, good morning called.
Definitely we've seen improvements in the sales across all the segments from April including.
On aviation as I mentioned, it does take a little more time for that market to recover but we're very optimistic about.
The future there and definitely those trends I think our continuing as we as we move into July and expected to to do so throughout the ended the year.
In terms of up margins, particularly the operating margin side of things.
We do have because of the lower volumes, we do have some additional overhead expenses that are being absorbed in the business.
But as trends continue to improve overtime, we would expect those two to wash out.
And then how big is the auto wind opportunity in your view and kind of respective impact on gross margins.
Yeah, I think as as it as a feature as a category is it's an incremental adder that what we see is that auto land is.
As a unique technology differentiating for us that that helps our system stand out compared to others in the market.
And so consequently, we see it as a significant differentiator for our entire cockpit system line.
Okay and then my last question just talk tax what was the contribution in the quarter and did you see some uptick in demand kind of given shelter in place around the globe and you know any update how that how the business is kind of scaling in the U.S. Thank you.
Yeah, we're including tax now within what we call the cycling category.
So the the <unk>.
Results that we talked about the increase interest in cycling is definitely taxes, a part of that as well as our cycling head unit.
There was a lot of interest in these products and continues to be with a lot of people focusing on indoor activities in the backlogs are very strong. So we're working to catch up with demand.
Thank you.
Thank you.
Next question is from the line of Nick.
Your line is now open.
Yeah. Thanks, Thanks for taking the question Hi, guys and congrats on great execution results.
Thank you.
Oh.
Can you talk about the sustainability of especially on the other consumer facing market. It's a the fitness the all doors and maybe a little bit in the marine.
Lastly, I think a lot of investors have expected the stimulus and North America and part of Europe as drove.
A lot of.
You know money in the coast pockets on the consumer spend that has helped spending and discretionary items, but how do you see that demand sustaining into the second half and any color color you can give us on how you're thinking about the September quarter, Directionally I know, you're not guiding but typically seasonally has been down now obviously is a much.
It's more unique situation. So how are you thinking of sequential performance in September quarter overall that'll be helpful.
Yes, so the stimulus I suppose a when people have more money. They do spend that which is the intent of of the program I would say, though that as we look forward and there's uncertainty around what stimulus for how much it would be we still see a lot of.
Interest from retailers and excitement around things coming up in the second half. So we believe that with their indications plus what we're hearing back from consumers that the product categories that were in are the ones where people will spend their money.
In terms of a September we don't comment in terms of forward guidance as I mentioned in my remarks, you know, we did exit the quarter with the strong momentum and we're continuing to to experience down and so we're focusing on making sure that we can fill all of the demand for the quarter and also for the back half of the year.
Okay, and just as gross margin I'm very strong and congrats I believe you know you had a little bit more you were a little bit more aggressive on the discounting so drive consumer demand, which actually pay it off but when you talk about strength and cycling are you guys. Seeing also in addition to tax maybe.
A little bit more contribution from your traditional cycling outdoor products and that is.
Strong contributor to that gross margin essentially staying flat year over year is that or what to think about it.
Well, there's there's always product mix that comes into the overall gross margin for a segment.
We definitely saw increased sales of tax, which weve remarked in the past is edit out about a category average or slightly below and then we also saw strong sales of other products, which are category average or above so in general it it the extra product syntax, certainly didnt hurt us.
And the promotional activities were were targeted and and the mix of sales between retailers and online was such that we came out very well in the corner.
Okay, and then moving to sweat for our free cash flow I mean, I think is the second strongest the free cash flow in the second quarter in a while how should we think about the full year free cash flow or any thoughts on resuming the buyback.
Yes, so as it relates to a free cash flow in Q2, Yeah. We saw there is some are year over year improvement in some working capital items. There. So as we saw the receivables receipts were higher.
Year over year, just due to the lower.
Demand that we had in Q2 being lower from a standpoint at this point in time I know, we're not providing any forward looking guidance for free cash flow and at this point time, we do not plans for any stock buyback.
Okay last question for me I think clip here you mentioned that you expect some some new verticals so to answer it an idle.
I Wonder if thats on the OEM side I know you have a lot opportunity is there or on the PM decide and.
Any kind of what makes you most excited I know you're generally not commenting on any future products, but any kind of hands will be helpful.
I think we're moving fastest in innovative new products and new verticals on the consumer side across our business.
And again I get excited about all of the products that were doing.
Across the business I think we have some great things coming and I think.
We're very excited about those.
Okay got it thanks, guys. Good luck.
Thanks, Nick.
Next question is from the line of Ben Bollin. Your line is now open.
Good morning, everyone. Thanks, Thanks for taking the questions like everyone's doing well.
I wanted to start could you provide a little bit of color about where you think channel inventory is actually if you mentioned in the marine segment.
The boat builders are you know where idling, maybe constraints some supply or demand in the quarter.
Could you address what you're seeing there and then also in the broader wearables. Many other categories, where you're seeing maybe an imbalance in channel inventory out there.
Yes, so I would say in general at the channel level, we think things are in balance or even possibly lean at this point, we watch very closely the real time pull through of our products through registrations that we have.
And so consequently, we can we can definitely see the trends in the retail side of things and compare that to what we see in the channel and what we're shifting into the channel. So we're we're seeing a lot of strength on the consumer side of things, it's definitely not backing up in the channel and then if anything it's a little lean fund the both builder side, there, they're not necessarily a.
First of inventory they take a products as they need them, but on the retail side of marine sales have been very strong and we've been working hard with our retail partners on the marine side to keep up with demand.
Okay.
Another question I had.
Doug can you share any updates on where you are from a factory perspective I believe there is.
Some new facilities associated with.
Tax and then you've talked a little bit about you know this BMW tier one facility.
Where are you on the ramp in these facilities any thoughts on the timing and you know the capital outlay associated with those through the course of this year into next year.
Yeah, So basically I would say that.
Both of those facilities you mentioned the attacks manufacturing facility there, we haven't Europe as well as the OEM manufacturing facility in Europe. Both of those are on plan. So we both we expect both of those to be up and running here. A later in the year and actually things are going well from those and those would be basically.
Especially from the tax standpoint, I think would help us out because the increased demand were seeing or tax products to meet some of that demand.
But this rate.
Providing any up full forward looking guidance on any capex.
Okay.
Last question is.
Could you talk a little bit about how you you are treating.
The broader cobot situation with employees, where they're working you know the mix of maybe.
At your facilities versus.
At their homes, how that's coming back online and then any influence that pad on opex to date, maybe lower opex levels with less people less travel things like that and then any thoughts on you know how permanent this might be looking forward.
Yes, so we had been very careful as we've gone through this process to try to maintain a very safe workplace at the beginning we had most of our people at home.
Of course, as a as a production and distribution business, there's certain people that always have to be here.
But for the most part they were at home, we sense transition to about a third of our associates being on site and we've implemented protocols as we work here in our buildings across the world really.
For for keeping safety.
We're anticipating that this is a long term deal we're not rushing to get people back but at the same time. We're also trying to focus on rotating people in and out of the facility to get them with their teammates to be able to interact.
And enjoy the dynamic environment that we have here at Garmin.
In terms of Opex impact, it's difficult to quantify but I would say, there's there's increased pressure for expenses of courses, we provided more benefits for our associates to be able to manage some of the difficulties they've they've had in their personal life with schools and and family members and also concerns for their own how Ah.
But but in general we feel like that's manageable and we're happy and we're very.
Pleased actually with how we've been able to work through this crisis so far.
Great. Thank you and best talking back at.
Thank you Ben.
Next question is from the line of real power. Your line is now open.
Oh, great. Thanks, Yeah, I guess a couple of questions.
For me to come back to one of the earlier questions or remarks, you know as we move almost into August here from July I mean, any reason to think.
That the trends you've seen a fitness outdoor marine Shouldnt continue through Q3, I mean, it sounds like you actually really strong note I assume that's continuing just just wanted to kind of confirm that first.
Yes, as I said in my remarks, we definitely see continued opportunity through the year in those categories, particularly as people are very interested in and health wellness fitness and outdoor activity an adventure. So those are very strong products. The Phoenix solar instinct solar is resonating very well and.
Of course, I think consumers are excited about what will happen in the back half as retailers start to get back to normal in terms of promotions and holidays.
Okay, and then second question, just thinking about supply chain and I guess, probably inventory to I mean anything you'd call out on supply chain front in terms of constraints or or concerns in terms of steel components for products and then the second pieces.
Look at the fitness category in particular, I know a lot of retailers have struggled to keep as many bicycles owners I'd like to spend goes we know strong retail demand on that front has done extended your products are there any issues with respect to having a lot them drown hand for retailers on recycling front.
Yes, so supply chain wise I think the early in the pandemic. The focus was on supply chain continuity and maintaining the flow of components we needed.
For our business as the pandemic evolved of course, then everyone worried about the economic downturn as things have come back if anything on where we've we've had challenge in supply chain is keeping up with the demand and that's part of what we've mentioned in terms of of gross margin. The freight costs were higher as we work to get proud.
Thats in place for retailers and opportunities that needed them.
Specifically around cycling definitely that has been an area of of constraint when it comes to product availability, especially in tax products again, we have a strong backlog of those.
And also with cycling computers, and those kinds of products. We are spending more on air freight as we try to get those in place at retailers cycling activities have been very popular with concise customers.
Okay, maybe just.
Just last question as you look at the geographic breakdown APAC a bit weaker than the other two regions.
And that's a region Oh I guess.
Returning I guess should be returning to normal more quickly should happen in Q2.
This would be interested in the color there what's the mix difference, maybe that's driving that relatively weaker performance in Asia Pac versus the other areas.
Hey pack has has performed very differently from the western markets I think the the pandemic and the concern over the pandemic was much stronger there than in some of the other regions, especially at first and so they've taken longer.
To come back each country has its own story, but of course, China has been a significant factor as well as a larger countries like Thailand as well, so hey, Pat kind of is a different narrative from the other geographies in Americas, I would say that aviation impacted us more.
Sure there than than the consumer side of things. So America's performance I feel was was very good and similar story in Europe, Although aviations impact is lower there, but still wasn't impact but.
In general when you exclude that I'm very pleased with the performance of those geographies.
Great. Thank you.
Next.
Next in line is Charlie Anderson Your line is now open.
Yes. Thank you for taking my questions and congrats on a great quarter.
I wanted to start yet I want to start with aviation clip.
Recall last quarter, you had some comments about potentially in aviation you could see some benefit there because of routes Cup from commercial aviation I Wonder if maybe you could just update us on your long term thoughts on aviation and do you still think they'll be benefits created by the pandemic as it relates to the portions of the market you participate a I'm not going to follow up.
Yeah, I think my my view is still very much in line with that in fact, I feel like if anything many are coming out in the industry supporting that view, we see some of the partners and the charter side of things see a significant uptick in the number of people who are inquiring about and.
Proceeding with charter flights on over the concern over exposure on airlines.
And I think generally aviation definitely has.
A slower timetable when it comes to reacting to these kinds of demand changes, it's still a very small market, but but for sure.
We're seeing anecdotal evidence of customers being more interested and investing in in aircraft and an equipment.
Okay, Great and then for my follow up sort of curious about go to market strategy. I think there was a comment about you don't garmund dot com, helping out I Wonder if you think that's a permanent.
Change or are shifting the trajectory of direct to consumers a portion of your business, where that was more temporary because of.
Some demand that retailers can fill and then I'm also curious about advertising spending that was down a decent amount from a year ago wouldn't you also got some leverage there I wonder if there is a permanent change and maybe maybe most advertising or what that was just a function I'm sort of some of things are happening in the quarter.
Yes. So in terms of go to market on the website side of things like I do see that that shift would be a longer term in our business and.
Again, we we have a mix of all kinds of retail and product outlets situation. So we work with all of them, but we definitely see that customers are.
Gravitating towards online purchases, whether it's through a partner to Garmin and we did see a significant uptick as we mentioned in our own web sales, which we view as a positive.
Development in terms of advertising and what the dynamics are there there's really two things.
There was certainly impact because of the pandemic and everyone just pulling back a.
Because for a while everyone is glued to news channels and website, staying indoors and not doing much that as things evolve that quickly change and so we became very strategic and how we spent our advertising money focusing on digital and social channels as well as co op opportunities.
With retailers.
Let's see that continuing as well as we as we go forward as the situation remains very dynamic and retailers plans are very that dynamic.
Okay, great. Thank you so much thank you Charlotte [noise].
Next question is from the line of I'm fine.
I'm Fine Jeff Your line is now open.
Thank you. Thank you for taking my questions and congratulations on another great quarter. Thank you I haven't.
Hi, congratulations on the first be acquisition now some of the other companies that use the technology from first be that did they have like contracts to license the technology or you're going to continue to license technology do other firms or what is your view on licensing some of your technology.
As you also have great technology, and other areas and have you ever ever license technology to other companies before.
Yes first beat has a list of their own customers of course Garmin is is one of those into major one.
They will continue those relationships for the most part and I think there there could be.
Various adjustments on different priorities that they have they have.
A lot of activity with research and different things of course, but in general I would see that that the technology I would continue to be evolved and innovative for the benefit of customers.
Right. Then you know Sims auto land is such a innovative in incredible product and how do you see a way of leveraging that.
Innovation into automotive OEM.
Especially in some alternative or autonomous vehicle technology, Oh, if you saw that Ford announced a new partnership with Mobileye and I know you have a partnership with Ford with the Mustang Mcareavey.
As well as well so were working not only with the auto manufacturers, but some of the tech manufacturers like mobileye or Nvidia, which makes to the drive computer or even quell calm but has number of autonomous vehicle computers coming out.
I would say that auto land is solving a unique problem for.
The aviation market and Theres a lot of considerations in the technology around.
How airplanes operate in the aerospace system, and the nuances of airports and landing and communication and all of those things. So I think it's very specific there of course, there's there's fundamental control technologies that are probably extensible to.
Two other areas, but specifically for auto that problem is much different to solve and I wouldn't see a lot of overlap.
There, we do partner with others in the industry as well as on some of our OEM products that we would see ourselves, mostly they're serving as a component where technology provider as part of the bigger system.
What about extending the the solar screen technology to other handheld like <unk>.
With that that would be another item to have a solar charging.
Solar is a great technology for us that I'm, a really super excited about and it has a lot more applications that we can.
Apply it to a across our product lines and several segments.
And then without giving specific products and categories can you give us like <unk> and indication because you speak a lot about.
New innovative products to come in different categories could you give us some idea of these categories and products.
Well I think Garmin is all about adventure and activity and so these new products will will take us deeper into.
Those kinds of spaces markets faces and categories.
Probably like for example.
One of the some of the trends from the pandemic RV sales are on fire yesterday Polaris said, they saw unprecedented demand for P.T.V.'s and.
Personal watercraft and bikes you see opportunities.
We're going to see new products in those categories, and we see opportunities across all those kinds of specialty vehicles, and we're working hard to to appeal to a new group of customers that are discovering.
Those kinds of activities.
Very good thank you congratulations again.
Thank you I had.
Next question is from the line of Eric We're doing your line is now open.
Thank you in a good morning, guys. Congrats on the quarter I'm just following up on a few questions from earlier. So so first just a follow up on Ivens question there.
From a design standpoint, or there are there any inhibitors to ewing, including solar technology. In for example, Wearables products I guess, we'll start there and I've a follow up.
Actually Eric the solar components now are on our Wearables. So so the Phoenix line the instinct line.
The toxic tactics as well as the quanex those are all our smartwatch wearables and that's where we targeted that technology first.
Right I meant more on the fitness side, so the four run or any of the vivo was anything on that and.
Yes, there is no technical limitation to where it can go I think its best suited in environments, where where the devices are already naturally low power designs, because solar technology, while it's exciting it's it's still a very challenging to collect enough energy from the sun to to do.
Some of the things that the more advance wearables do but but in general it will continue to evolve will continue to improve it improve the efficiency and make it a real differentiator for Carmen.
Awesome very helpful. And then just as a follow up congrats on the pipe Rmbsix hundred auto land when.
I'm just curious you know from a high level you know we know that it in 2008 2009 aviation week was fairly weak, we'd just love to hear what you think and weak for an extended period of time, just would love to hear what you think about aviation.
Today during the current crisis relative to that time in any differences you see that you can compare and contrast, and then as a follow up to that is also just what inning. You think we're in with a DSP. Obviously the mandate has passed but if there's any kind of juice left in that tank and thanks.
Yes, so I'd say the similarities to 2008 and nine with regard to aviation.
Business performance.
In both cases, there was an economic shock that impacted the segment, but I think that's that's probably where the similarity and.
Back in 2008 in 2009, there was a significant oversupply of every kind of business jet and so as the financial crisis developed and companies were pulling back.
Individuals were pulling back Theres a lot of used aircraft on the market, which impacted valuations and even to this day, there's probably still intact from that more than 10 years.
On and I would say that at this time, though one of the positive things that we see is that activity in the light jet side of things, probably light and up to to light medium jazz is still very strong and as I mentioned in an earlier question that.
Net interest around charter and ownership in those class of aircraft is is remaining.
From so.
We're excited about that and we think even in the small aircraft side of things, there's more potential as people consider traveling by private aircraft as opposed to commercial aircraft.
And then on your question with 80 SB what inning are we end, we actually were an extra innings [laughter]. So.
We felt like 80 SP performed in terms of overall market adaptation much much better than anyone predicted at the very beginning stages.
And as we go for it it doesn't mean that we sell zero 80 SP products will continue to sell.
ASV products to new aircraft of course, they all need that and also as.
In the aftermarket we expect that.
Competitive systems will be upgraded that's a market opportunity for us to take share and of course products repairs and things that happened that require new system. So it will be just an ongoing business going forward.
Awesome. Thanks, if I could just sneak one last one in for Doug just in a passive commented on the trajectory of different Opex lines. Just wondering if you cannot provide any color there, but that's helping me. Thanks guys. Yeah, Yeah regarding operating expense in general will continue to make investments in our business really to grow that you know this.
I'm not able to provide any detail forward looking your guidance on opex, but we'll see to make investments appropriate to a driver business.
Thanks, guys congrats on the quarter.
Thank you Eric.
At this time I would like to turn it back to the speakers for any further comments.
I just like to thank everyone for joining the call today, Doug and I are available for call back have a great day.
Ladies and gentlemen. This concludes today's conference. Thank you all for your participation and have a wonderful day you may now disconnect.
[music].