Q2 2021 Astronics Corp Earnings Call
[music].
Greetings and welcome to the of strong ex Corporation second quarter 2021 financial results conference call at.
At this time all participants are in a listen only mode of course.
And the answer session will follow the formal presentation, if anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
Please note this conference is being recorded of them.
I'll now turn the conference over to your host Deborah Pawlowski Investor Relations for astronomy. Thank you you may begin.
Thank you Alex and good morning, everyone. We certainly appreciate your time today and your interest in its tronic I have here with me on Peter Gunderman, Our chairman, President and CEO and Dave Burney, Our Chief Financial Officer.
You should have a copy of the second quarter financial results that were released this morning, and if not you can find them on our website at <unk> Dot com.
He mentioned that we may make some forward looking statements during the formal discussion as well as during the Q&A session. These statements apply to future events that are subject to risks and uncertainties as well as other factors that could cause actual results to differ materially from what is stated here today. These risks and uncertainties and other factors of provided in our earnings release as well as with other documents filed with securities and exchange.
Range Commission the.
These documents can be found on our website or at SEC Gov.
During today's call. We will also discuss some non-GAAP financial measures. We believe that these will be useful in evaluating our performance you should not consider the presentation of this additional information in isolation or as a substitute for results in accordance with GAAP.
We have provided reconciliations of non-GAAP financial measures with comparable GAAP measures in the tables that accompany today's release with the.
That I will turn it over to Pete to begin Peter.
Thank you Debbie and good morning, everybody.
Our agenda. This morning is to talk through a summary of our second quarter.
Which frankly was a little bit of of mixed quarter.
On the 1 half of sales were a little bit lighter than we expected.
As was the income statement on the other hand, our record of aerospace markets continued to recover nicely and we believe we will be setting up a better second half of 'twenty or 'twenty..1 I'll do that summary to begin with then I'm going to turn it over to David for a more.
On a specific discussion on our.
Our income statement on balance sheet from special items that are happening or are expected to happen in the near future.
And we're also gonna be reinstituting from revenue guidance more than we have been since the pandemic took hold for a little bit of of risky item, but we're here on August we've well into the second half already.
Much of the business that we plan to execute on the second half is in the work. So it seems a reasonable time to do such a thing.
And then of course, we'll close on the questions and answers.
So the second semester or excuse me second quarter.
Revenue was frankly similar to previous quarters, we've had recently at about at $111 million.
We've been bouncing around a band from say 105 to 115 since the third quarter of last year.
And as 1 might expect we are not set up to be profitable at that revenue range.
Our goal has been and continues to be since the pandemic took hold to execute on our responsibilities in terms of development programs that we think are important to our future and stay cash positive and financially healthy waiting for the markets to recover for.
Frankly, when the pandemic took hold.
The late first quarter early second quarter of last year few of US would have expected that we would be sitting here a year later.
Leading to see strong recovery, but that's how long. It's taken then even now as all of you know.
There are some clouds on the horizon for the aerospace industry, especially with the Delta variant that we're all dealing with.
Our first quarter also was a little bit later than we expected in part because of supply chain problems, which have become a familiar refrain not only in our industry, but many industries. These days.
It's a little hard to estimate and it's not really in the Auditable number, but we feel that our second quarter absent any supply chain headaches would've been $5 million of 10 million higher in terms of revenue, which would have made our income statement look.
Quite a bit different than it does.
Still in many respects, we actually feel like we're making quite a bit of progress and we think that things are coming around and starting to recover pretty strongly even with our second quarter results when compared to the first quarter, we feel like we're on a pretty positive true.
<unk>.
<unk> and <unk>.
Both Dave and I feel like the first quarters of more relevant comparator actually than the year ago quarter, because the year ago quarter. When the pandemic was taking hold was.
Full of chaos of all around the world.
Compared to the first quarter revenue was up 5% of.
Our GAAP net income loss was reduced pretty substantially day, we'll talk through those numbers.
Our adjusted EBITDA of 1 from a slight loss to a slight profit and cash from operations improved from a negative.
The negative 7 million 2 of positive $4.5 million.
So we feel like we've made progress even on a reduced revenue level.
But the best news of the quarter is that our aerospace markets continue to show signs of recovery relative to where they were earlier in the pandemic.
On a global basis on a macro basis business jet and GAA orders have been very strong for major Oems. So I won't repeat it but you've probably seen book to bills in the industry for our OEM customers.
In some cases, 1.5 up to 2 or even higher.
And narrow body transport activity has been very strong with increasing utilization, especially in the U S and China, but also in other places around the world.
And plans to increase production rates, both in Seattle and in to lose.
Military aircraft for the third part of our aerospace business has been pretty consistent throughout the pandemic and remains so.
The strength in the market has led to pretty solid improvement in the our aerospace bookings our aerospace bookings in the second quarter.
For $118 million, which was the book to Bill of 1.3 to 132 is normally something we would be jumping for joy of about.
It continues our string of steady improvement in bookings on a quarterly basis since the pandemic took hold.
Going back to the second quarter of last year, we hit a low point of $43 million.
And since then our quarterly totals have been we went from 43% of 65 to 74 to 100 and out of 118. So we're pleased with that trajectory.
Keeping in mind of course debt in 2019 before the pandemic took hold.
We were running typically in the $175 million quarterly booking range, so even though the $118 million of solid book to Bill It's still a ways away from where we were pre pandemic.
And.
Given that historically, a significant part of our business has been wide body related and wide body.
It continues to.
Be very weak in terms of utilization on flights in the production rates.
It's unclear at this point, how long, it's going to take to get back to that level, it's probably reasonable to assume that of $175 million quarterly aerospace bookings is going to be a challenge.
Until we see some wide body recovery and again the Delta variance has has pushed back recovery that we thought was going to be taking place.
Right about now actually.
Moving away from aerospace towards test, our test bookings performance hit of real soft spot in the second quarter.
$8 million, which is the real drop off compared to the.
The $24 million average debt, we've had for the previous for quarters.
Our plan for the quarter wasn't 8 million it was actually in excess of $20 million.
We blame Covid frankly for a lot of the delay and not necessarily for competitive losses. There is a handful of programs that we're pursuing we're still pursuing.
They've been delayed we feel because of Covid, we can't point to a competitive loss that brought us from our expectation of over 20 million down to $8 million for the quarter. So that being the case, we would hope for and expect a rebound in bookings for our test business.
The current quarter.
And in the fourth quarter of this year.
Taken together aerospace and test the consolidated bookings for the quarter were $126 million. That's the book to Bill of 1.1 for which we're still pretty pleased with.
Leaving us with the backlog at the end of the second quarter of $313 million.
Okay.
I'll jump straight to.
On our expectations before turning it over to Dave.
Of what we expect to happen in the third quarter on the fourth quarter on that as we're predicting revenues and the $115 million to $120 million range for both of those quarters, we expect the fourth quarter to be slightly higher than the third quarter.
Based on schedule.
And we believe that that kind of revenue performance given the way. The company is set up right now will get us in the range of <unk>.
Breakeven on our income statement and solidly positive on an adjusted EBITDA basis.
There are risks.
The major 1 that I already referenced as the.
Our supply chain challenges.
These are things that everybody's wrestling with these days.
It makes running a business a little bit unpredictable, our sense is that things aren't getting much worse at the moment.
But we don't see them getting a whole lot better either so that's a complicating factor.
And we'll have to see how things.
Work out.
In the next you know.
Not just 2 quarters, but frankly, probably a little bit longer as the world kind of gets back to some level of.
Of normalcy also our revenue prediction projections for the third and fourth quarter is dependent on some level of book and ship business.
Quick orders that come in and go out that are somewhat.
Unexpected and there's usually a regular flow to them those orders had largely dried up when the pandemic took hold which made earlier predictions much more difficult. They are starting to come back in we're assuming continued progress.
And of book and ship business. So.
We have a healthy backlog were getting book and ship orders and supply chain as of risk, but when you balance it all out we think of 115 to 120 is.
Is where we're going to be said another way, though if we could wave a magic wand and solve supply chain.
We would we think comfortably be above a 120 on average so we are building in some level of.
The conservatism there in those numbers hopefully enough.
With that I'll turn it over to Dave.
Thanks Pete.
As Pete said, rather than going through the typical comparisons to the previous year's comparator quarter.
Which was a period of transition and adjustment as we entered into the pandemic and responded I think it would be more useful to spend time comparing sequentially to the first quarter of this year.
You, probably all the red the comparisons to last year's second quarter on the press release of repeating them wouldn't add a whole lot of value at this point.
So generally we feel like we've been making progress, particularly in the aerospace segment looking back 1 quarter of the first quarter of this year.
It was a bit of a step back as our consolidated sales dipped from $114 million in the fourth quarter of last year down to $106 million in the first quarter of this year. So it was nice to see our sales rebound in the second quarter, improving to $111.2 million in particular.
The aerospace segment had a strong sequential improvement.
With sales increasing to $89.2 million from $81.4 million in the first quarter.
Consolidated loss from operations also improved sequentially when compared with the first quarter as did adjusted EBITDA cash flow from operations and consolidated bookings.
In the first quarter, we had a loss from operations of $9.5 million second quarter loss from operations was reduced by $3.6 million to $5.9 million.
I should point out that the second quarter results do reflect the benefit of the $2.2 million noncash reduction.
SG&A costs related to an adjustment to our contingent consideration liability for the diagnosis test the acquisition from 2019.
Negatively impacting the quarter was about $1 million in legal fees at our test segment relating to several matters.
We do expect this rate of spend on legal cost to continue with the test segment until the matters are resolved.
Adjusted EBIT improved from $859000.
Okay.
And the negative it improved $859000 to positive $363000 during the quarter.
Cash flow from operations in the second quarter was a positive for $5 million compared with a negative cash flow from operations in the first quarter of $6.9 million.
So we saw some pretty significant improvement there.
Also encouraging was the improvement in our bookings as Pete mentioned, particularly in aerospace consolidated bookings continued the trend of improvement that we've seen over each of the last 4 quarters in particular, the aerospace segment bookings of $118 million were up about $18 million sequentially compared with the first quarter.
And up $44 million over the 2024th quarter bookings.
On another note.
We've announced 2 employees that we will be consolidating our fort Lauderdale lighting and safety operation into our East Aurora facility.
The transition will take place over the next 6 months and the building is being put up for sale.
The market seems pretty good and we believe that the building has the value in the range of $9 million.
On another note.
We're finalizing our 2020 tax returns and we expect refunds relating to net operating loss carry backs to be in the range of $7.9 million $7 million to $9 million.
Which we expect to receive toward the end of this year for early next year.
And then regarding our debt levels of as you can see looking at our balance sheet. Our net debt was reduced during the quarter by $2.9 million to $139.4 million.
And we're forecasting to remain compliant with our debt covenants.
Beginning with the third quarter, our primary financial Covenant will revert back to a maximum leverage covenant, which would be 6 times adjusted EBITDA as defined in the credit agreement.
Definition does allow us to exclude certain noncash expenses.
That you could you can see by looking at the at the statement of cash flows for the noncash operating expenses out of the majority of those.
That concludes my statements Pete Thanks.
Thanks, Dave Alex I think.
This concludes our prepared remarks, why don't we open it up for questions and answers now.
Thank you at this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star 1 on your telephone keypad.
Confirmation tone will indicate your line is and the question for you you.
You May press star 2 if you'd like to remove your question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the stocky.
Our first question comes from Michael for your Moly with Shirley. Please proceed with your question.
Hey, good morning, guys. Thanks for taking the question.
Good morning.
Good morning.
<unk> mentioned it on.
On the the debt in the covenants can you just walk us through did you say third quarter of this year it reverts to the Max of 6 times.
Yeah, we go to.
We switch off of the.
Sure.
The covenants that we have been on for the past.
You're on a half or so.
Away from the interest coverage ratio.
And revert back to a maximum leverage ratio, which will be set at 6 times for the third quarter. Then it will drop to 5.5 times in the fourth quarter.
So and that's on trailing 12 months I mean, the trailing 12, EBITDA 7 new I mean, even if I have you doing $4 million to $5 million of EBITDA I mean, how do you how do you get compliant with the trailing 12 month I mean, you mentioned other noncash adjustments what else you've got adjusted EBITDA what else is getting.
Added to.
Yeah in compliant with our net debt that there'll be a 140.
Let me thank you.
Kind of need something what just can you walk me through that it seems like you need at the at least 20.22 million 24 million of EBITDA to get compliant.
It'll be a combination of lowering our net debt over the period of time. There are some levers that we can pull in the agreement to allow us to exclude some of some other costs.
We have of Levered. It allows us to include up to $10 million of legal costs from the calculation of Cai.
Okay.
And all the other non cash.
Okay EBIT the stuff that.
As defined in the agreement.
But you wouldn't see in a typical EBITDA calculation, okay. Okay. So the $10 million of biodiesel okay perfect.
Just on the.
Maybe Pete on the debt.
Bookings that you're seeing can you parse that out a little bit more on where youre seeing the strength you have that visibility on the I'm, assuming it's for narrow body, but are you are you seeing some of the airlines.
Come in with sort of aftermarket retrofit orders are you seeing any kind of different ordering trends based on geographic locations.
As you as you might expect it's where the airlines are flying mostly so.
The 2 hottest domestic markets were narrow body activity has pretty.
Pretty much returned to normal are pretty within shouting distance of it as the U S and China.
So so that's been where a lot of the activity has been U S Airlines have been.
Are looking pretty aggressively at improving their fleet. They have had a year to think about things that they want to do in other actually starting to do them.
So we're seeing sort of a lot of activity there of course Boeing ramping up the Max is very helpful to us.
As you know was our largest production program in 2019 so.
<unk> suffered without it and the <unk> hundred 20 rate is.
Very robust and rumored to be getting stronger also which is an important program for us not in terms of line fit necessarily but.
When the airlines that are customers of ours by those airplanes, we ended up putting hardware on them. So so that's pretty important.
And the whole.
Business jet area, though it's not showing up in strength in our.
Shipments at this point on a comparison basis.
The all indications are the rates are going to be improving there and we're seeing increased activity on that basis also and then finally the other thing I would mention is we got a pretty significant order in our antenna business in the quarter.
Yes.
Which.
Which was really nice to see we continue to have pretty good success, there with our partner Collins aerospace.
Sure.
That's 1 area, where you know if we could deliver everything now.
They would probably take it so.
Unfortunately of pretty complex product with a lot of sub components of that come from all over the place so.
It's an example of some of the things that were struggling against from a production basis, but I'd say, it's pretty much across the board Michael it's been a healthy environment. Okay.
Okay. Okay got it last 1 on then I'll I'll jump back in the queue or you think you guys are profitable at the operating income level on the second half and David I guess are there any cost we should be aware of associated with the on.
The Florida are closing in on the transition to Aurora.
Yes first on the.
Okay.
On the cost side of the the transition I think for the balance of the sheer the savings that we'll see as we.
Transition up here it will be.
Neutral with the with the transition costs. So I don't think there's much impact on 2021.
Im going forward.
Probably a couple of million dollars on savings.
Once the transition is complete.
Okay got.
Got it.
And then just the thank you Keith.
The second half run rate I know youre kind of fluttering around breakeven I think at 115, I mean, it sounds like do you think you could be profitable operating income in the fourth quarter, where do you think even yes, yes of course I do I think.
By the fourth quarter, we're going to we're going to be right around that if we can if we can kind of hit that top line.
Okay got it thanks, guys I'll jump back in the queue.
Thank you. Our next question comes from John Ken on Ken with CJS Securities. Please proceed with your question.
Hey, good morning, guys. Thank you for taking my question.
Chris 1 for you Pete I guess can you talk about how order rates haven't true through the quarter on the aerospace side and how they tend to choose rely on.
Maybe a little bit more color in the water just in terms of the timing of.
Far ahead are you contemplating for at this point at the 2 quarters of the 3.
Maybe start there and ask for more after that.
Well I think we're saying that we have $185 million or something of our backlog at the end of the second quarter of scheduled for the second half so.
So that gives you some sense of where it's flowing.
And.
It's not necessarily an indication of <unk>.
Capacity or anything.
You've talked about how far out we're scheduling because sometimes customers schedule too.
Dovetail with their production rates, which go out maybe a year and a half even though we could build it in 2 months.
And sometimes they're behind the April on they want it in 2 months and it's going to take US 52 weeks in today's environment to get materials. So it's a little bit of a mishmash kind of all over the place but.
<unk>.
While I'm on the supplier issue, where it's affecting us is.
The.
We traditionally get a fair amount of pull in and pushed out theres always that Yin and Yang so to speak among.
What we're trying to do with our customers in any period of time, and obviously pushing things out isn't too tough we just have to agree.
But where we're running and the challenges on occasion is when people on that when customers want to pull things in that's what's hurting us because our supply chain.
We're used to a certain level of performance.
For weeks or 10 weeks for something that we've been buying forever and all of the sudden it's.
30 weeks.
That's the kind of thing that we see from time to time, so it limits, our short term flexibility to bring things M.
So.
The scheduling of new orders is kind of a combination of when the customer wants it and when we can do it when our supply chain can do it.
But again like I told Michael just a minute ago I think it's safe to say that it's a ground swell of.
The improvement kind of across the board with the notable exception of of the wide body market.
And.
I think I talked last time.
On our last quarter conference call the.
On.
Our traditional reliance has been roughly 50% for commercial transports, 50% narrow body and 50% of wide body.
Historically, it was much more oriented towards wide body, but thankfully the markets have evolved in our companies evolve so that we have pretty strong narrow body parts.
Participation also and it's a really good thing.
As the pandemic took hold of narrow bodies recovering on wide bodies not so.
On our weighting between those 2 is likely to skew very strongly towards narrow bodies of this year and maybe next year.
But in order to get back to kind of the higher level of bookings that we were used to before we got to see some wide body of recovery.
Sure.
That's great.
That's helpful color on.
I guess the second piece of it.
We've seen that these increasing production numbers out of the major Oems.
Is that matching up with what Youre seeing in your order book on the OEM side or is there still.
Do they still have the burnt through some inventory before they turn the spigot.
Tickets for Ya.
I'm just wondering if there's a lag effect at all.
For the narrow bodies.
Yes.
Yes no.
I think we feel like most inventory has been burned off at this point.
Okay got it.
We don't want you to add kind of lag.
Okay, David I'm, just wondering what the inflation.
Does your incremental margins in Q3 and into Q4 as you of any kind of color on that.
Well, it's a difficult thing to measure it hasnt had a significant impact on us so far.
It's Ben.
The stuff that's gone on the impact is more coming from the the longer lead times than it is the inflation at this point.
You know we've seen a couple of odds and ends of of components that have gone up but theyre not having a material impact on the income statement at this point.
Got it thanks guys.
Sure.
Our next question comes from <expletive> Ryan with Colliers. Please proceed with your question.
Thank you David B. The question on the earn out from the semi sales can you give us an update on what you're expecting or hope to expect and as that cash used in the.
The covenant calculation to kind of give you some cushion.
Okay.
Well first of all it's been a kind of a frustratingly slow process to try to bring into the resolution.
So I don't really have much of an update there.
It appears we do have a disagreement.
And we need to find a way to resolve it or work it out and are.
Current initiatives are geared more towards that and so your question of next will probably be when might it be resolved and we just really don't know.
I'd like to think this year, but.
It's unclear at this point.
As for our covenant expectations, I mean, obviously it would be nice to get a resolved because it would give us some flexibility.
We believe both sides I think agree that were owed an earn out of the dispute as to how much.
But we're not.
Rely on on that and we're not building that into our assumptions, it's not as though we have of wall that we have to our of clip that we're going to go over if we can't resolve it.
M <unk>.
So, it's not particularly urgent from that perspective.
Okay.
1 of the legal costs coming from on the test side.
Im not sure if that's something new or something thats been lingering.
We have a way of.
It's kind of like when it rains it pours we've had this.
Legal.
Issue going on for years now on the aerospace side with Lufthansa.
Technic.
And.
Sure.
We're thinking that might be resolved in 2022, but there are open issues, there and with Covid all of the courts are backed up all around the world. So we're not sure about that but on the test side, specifically, we have a similar dispute ruling with the competitor that.
It's hard to tell whether it's going to have long legs or not.
We think its going pretty strongly on our way in our favor we didn't bring the suite we're defending here.
And then we have a couple of brewing contractual disputes related to.
Transactions, we've done over the last couple of years debt that are also getting a little bit of attention again, we don't think there is significant long term, but you got to kind of go through the process and I don't know if it's something on the water these days or what it is.
We've been kind of doing this for 30 some years I've never seen this range of.
On the legal activity as a weapon, but thats almost what it feels like so.
We don't know what to do other than kind of put our best foot forward and defend ourselves and that's what we're doing.
Is that from some of the Muni business, you've done or is that defense related.
Well it has the due mostly with acquisitions.
The contractual stuff has to do with acquisitions.
Okay.
And the the.
The.
The the bigger 1 the looming 1 as the us.
The technology.
Infringement dispute.
Okay can you provide some more specifics on your biz jet the antenna order.
With Collyn.
Who what when where is that was that of competitive win or.
Can you kind of.
Andy cap that range.
Well, it's kind of of the same old story, just with a different verse.
We we've been working on a long time to provide.
The World class connectivity to larger business Jets, Theres, a clear need for that in the market and.
And we feel like our technology, our antenna is of critical component.
We've had a few swings and misses with other partners before but this program with Collins has really picked up speed.
Collins is a little bit more conservative in our opinion than some other companies in the industry might be so it's moving a little bit more slowly, but the results of comparison tests.
It has been very positive so we're getting to the point, where it's of Collins program. So I can't really speak for them, but theyre getting the STC is on various the supplemental type certificates for various platforms.
And they're selling to fleets and on an aftermarket basis.
Seems to be a lot of demand as you know.
The business jet usage is way up the bigger business jets tend to fly internationally occasionally and <unk>.
<unk> got to have Ku service to do that.
Do that mission.
Comprehensively around the world at this point, which is where our antenna fits and so.
Collins is going to compete us to the extent that they need to the probably keep us on us to make sure they're getting good value, but we feel our relationship with them is.
It's very strong and we of our roadmap.
Where we're going to go from we went from the previous generations of the current generation and we will go from the current generation for the next generation.
Which we are developing in collaboration with them.
There are also other Collins competitors out there we're not aware of the similar kind of product that has global reach and global performance.
Like our system does at this point so.
So we're pretty happy with the with the program.
Okay. Thank you.
Thank you. Our next question is a follow up from Mike Garcia Molly. Please materially. Please proceed with your question.
Hey, guys. Thanks for taking the fund did you guys see any incremental.
The headwind or pressure from the 787 program did you guys you guys have that level of visibility I mean, I know the whole wide body market is weak, but that program seems to be you know.
The problem child, more so than the rest out there.
Well it certainly doesn't help.
We have a little bit of standard line fit.
Product on the 87.
What is the fuel axis, yeah, maybe its $30000 of ship for something like that but the bigger portion, which is practically line fit on that technically line fit.
Pretty much every 787.
Pretty much every 787 gets the seatback.
<unk> system and those seatback ISC systems come from 1 of 2 or 3 suppliers and we provide power to those 2 or 3 suppliers. So so we tend to have.
High content on the 87% for that and that's it.
Typically up around the quarter million or something per ship and so yeah. They cut the production rate that hurts no doubt about it.
On the wide body production market in general between the rate reductions and Airbus and rate reductions of Boeing and delays on the triple 7.
It is not helpful. Obviously.
And it's disappointing that.
The major destinations in the world with the Delta variant are having a hard time opening up there.
For us because I think vaccinated people anybody want to travel you can debate, whether vaccination is appropriate or even the effective with delta I suppose but.
From an industry perspective, it would be really nice to see more of those doors open.
What we're seeing today.
Yep got it got it.
Shifting what about.
Test on a.
Go forward here I mean this is <unk>.
8 million.
Bookings when does that start to kind of impact you are.
Quarterly run rate here I mean should we get the should we be kind of calibrating ourselves to maybe get a little bit more conservative have you seen any kind of changes.
The quarter to date in that that test order flow.
There are.
There are no we haven't we haven't really.
It was a surprise to us as I said, we went into the quarter of thinking.
It would be up a lot of around $24 million or something like that we ended up a day, that's not just a little Miss that's a huge of mis.
But the test business is open for that or susceptible to that in the sense that it's not a bunch of little orders typically its a few big orders and if a few big orders get delayed out of 1 quarter into another you can have that kind of affect you.
<unk> been following us long enough to know that sometimes we are dying of quarters and that means you get of lumping or <unk>.
Group of Big orders that all happen to follow on the same quarter. So.
So we don't get too excited about any particular, miss but what's different about the second quarter was that it seems like a lot of the misses were due to.
Basically COVID-19 restrictions with municipalities in particular.
On the transit side land radio and defense too I mean, everything just seems to be moving a little bit slow more slowly because of.
Lot of people aren't on the office of working from home. The it's harder to get a hold of them and that in that context is harder for them to make decisions.
To get approvals and push the paper the way it needs to be pushed in order to get us orders. So.
On.
No.
I'm really interested to see how the work from home thing in that environment evolves in the fall here.
There was an expectation that everyone's going to be back on the office, maybe theres still is to some extent, but if not it's possible. We could have another delay on orders and to get to your question that would start to affect us.
Towards the end of this year beginning of next year. So we're watching it pretty closely I mean, the good news is that we didn't lose anything it's not as though we had a $15 million program that went to zero because we lost it.
It's still of $15 million program, we just got to wait for it the App and we think.
Got it perfect alright, thanks, guys.
Thank you.
Thank you. Our next question is a follow up from John Todd of lending with CJS Securities. Please proceed with your question.
Hey, guys just wanted to follow up on the previous questions around the test business.
What's the implied in your guidance in terms of cash revenue and do you have to land those orders to make to make that revenue number where it is.
Is that exclusive of that.
We are thinking that we're going to have test volume of around $80 million or so this year.
That could come in the question if we don't have bookings in some level of significance over the next quarter. The next 3 months or so out of it get passed that it doesn't really matter for this year.
But we had a pretty healthy backlog going into it scrambling on on for Dave I don't know if you have that anymore.
Yeah.
So it's not an immediate crisis.
If that's the.
So that's the way to answer your question John.
Okay, I think I got it thank you.
Thank you.
Ladies and gentlemen, we have reached the end of the question and answer session I will now turn the call over to management for closing remarks.
No closing remarks, thank you for your attention.
Pleased with the progress on the market and we think thats going to bring improved results on our income statement, we're looking forward to that.
Second half should be a healthier half compared to the first half so.
Thanks for your time, we look forward to reporting again in another 3 months of a good day.
This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation have a wonderful day.