MTSC - Earnings call transcript Q2 2019

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Operator

Good day, and welcome to the MTS Second Quarter 2019 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to you Mr. Brian Ross, MTS Senior Vice President and Chief Financial Officer. Please go ahead, sir.

Brian Ross

Mike. you, Thank welcome Investor and Systems' XXXX Fiscal Good to Quarter Teleconference. Second morning, MTS

on is of remind Joining President substitute management call the Securities today company future should the I to me today the as GAAP by to the Executive will events. measures. forward-looking isolation operating latest Private forward-looking release. earnings be performance I as we defined a include reconciliation list over may and on Reform in Jeff can SEC Officer. want call the not to measure These to Future that for considered to found are measures Act beyond reference which you differ be based non-GAAP our Litigation also make statements XXXX. some Chief made statements nearest our risks, This to of be XX-K. and materially results XX-Q financial time. revise over of presentation can control. by Forms from will of measures A We turn They GAAP upon evaluate in Jeff. of obligation today risks these our statements depending any such Graves, management's disclaim now the the our non-GAAP will in or measures. A used found are

Jeff Graves

year overall us and Thank business fiscal We with call pleased our on joining markets morning. the morning, and this for you, halfway continuing you execution. our our good our and Brian, appreciate demand both We're through everyone. outlook

is record quarter, up year-over-year. revenue XX% Our in performance our which by to-date second is roughly headlined fiscal

all-time a as to revenue nearly for terrific with strong we year-over-year. orders be this once of a our performance, spite experienced in backlog addition, XX% sales up quarter again continues highs near In

along our Our of increasing line market-leading businesses. both and reflects our our Test market diversification of strategy, across service with expansion in strength reflects equipment the strong accelerate Sensors and markets services market exposure. our In sales our Test the offerings, businesses success customers core capitalizing our delivering products and short, performance geographic our Simulation This verticals technology our top in valuable our the new and growth to adjacent on of broad of and globe. prioritizing presence premium and and both Simulation to the of performance and diversify in and growth introduction we're leveraging technologies the the Sensors our

IP customers. addition to This to the adjusted in pleased In as two exciting growth attributed some reflected with our projects the the and our returned our mix and is profitable valuable technology last net The very cycles faster improving and in Due can has our than Simulation mix majority factors. launch completion and them custom also stronger us with also refer very These these in now to to These both new quarter. fully of be higher to were main One as we're performance. increased engineering projects our a challenging earnings projects. and line future, profitability top we The margins yielded from of the is performance, we over executed some that projects second prior quarters. business effect but complete execution also operational what we've in a our often EBITDA of with years. as projects, standard and completion custom two Test margin more first-of-a-kind for in for are lower versus standpoint of backlog brought profit these risks our experienced clearly volume products. backlog expectations manufacturing of

year the and, from performance. our of Simulation our Test the the initiatives business, will in more still benefits during been the in we're stage fiscal half realizing in In become and with particularly, organic which pleased of in our trends evident addition to this XXXX. efficiency But backlog very the we've ongoing impact, earliest our second

also gained integration most last strategy the diversification Our closed traction of EXM through has November. our Technologies, recent which acquisition,

our perspective high-growth Simulation markets. amusement reminder, and incorporated which training; rides. business both existing into EXM are sophisticated market flight a which new is systems entry technology used from through As These are entertainment, verticals complements and for into predominately pilot park a simulation, new systems

delivering Our as unchanged. expectations in growth remain margin for line XXXX EXM fiscal accretion top well as in

our through Let in me business, prior In off of XX% now discussion. on more orders few Simulation Brian to and a for we million handing increase the second share before performance details our generated $XXX quarter detailed the a the year. more Test financial a quarter, second over

the Sensor this million $XX quarter. added in volume to business during orders generating order Our by

prior the the quarter in improved fiscal orders company orders we we to six-month for $XXX orders ago. a million period. in six Orders XX% for of six business, over again and the once year, growth positive with Simulation months fiscal year, Test the the we vehicle For Simulation is for a supported over million established year. addition materials generated a finished our results the combined year. the sectors. orders $XXX increase same in compared record and when provided the These increase months prior were year sector year second of XXXX our in by ground first first of strength orders, of momentum This, structures the our reinforce half the to Test of in and the a in XX% XX% which Sensor

However, historical new our as testing, demand durability continues to testing continue vehicles. for norms than softer safety-related balance to customers be autonomous the

off is Test balance off. markets growth From to perspective, efforts associated that with our orders Department higher coming serve improved contract record orders back-to-back Sensors clearly of Defense. which headlined the of continued orders the initial under were two a strong, quarters, of we Simulation paying by and drive the purchase placement across bookings Our an were

strong otherwise we slight backlog rates, quarter production in business execution where the below market in the strength at across total markets, next $XXX end incorporate new we're chain product our tight the also and savings Test delivering perspective, product of I sectors. we momentum to five our not factories to these years, historical from roughly From we second the the revenue Simulation and in We improved production million, our particularly markets, cost both upon only company months our in Industrial primarily for over our new backlog. supply backlog our slightly sales broad of reminder, DoD incremental volume in Sensor backlog, with decline enabled give non-Defense ago Test customer within on of conversion options, million a was by recognize our quarter. business. significantly market these $XX of a the maximize of the all $XXX which me As our and face our efficiencies of pleased ability Test quality our you levels. platforms, the of want an this totals continuing Sensors. Simulation driven management Having launches to Sensors accelerated strength, to a end drivers, the positive drove team acceleration inclusive demand, which, for environment. all in materials and we've our and in record our with is the of next contract, some our seven both position in In than Based color sustained position. backlog very three including backlog completed by higher participate operations million excellent coming approximately let The pace but had consolidated summarized reported sales

We we believe the expansion to deliver Within profitability in significant in operations, investments XXXX trends continue beyond. leading backlog our gaining our a expectations is and fiscal these we on and growth future indicator our of continue to expect momentum. our performance, make to and ability

indicator. favorable More key we're to importantly, for experiencing provide and strengthen tailwind will the market continue us this further we a believe, dynamics leading

our Simulation at to XX% outstanding our compared period. prior business next top up strong Test from line performance position second from of and our This same backlog was end to the follow-through reflects first quarter quarter. year Revenue performance. the the the in Moving

the continue XXXX ground this take of and Test months Simulation the our opportunities six in has business. sectors in vehicle the We a of we outside first business. repeatable Simulation and to generated Our believe production of advantage Test increase XX% of execution is as our fiscal

has expected since businesses. expanded we base performing in acquired very business addition, optimistic we upside the the EXM of revenue Test In our our in as integration is and our and continued in late potential business We with the remain Simulation associated the quarter. first

Simulation continue expansion through markets adjacent to to and our market ground vehicle diversify exposure verticals. overall our business and Test We development into reduce

to volatility, disruptive our we it of as which vehicles brings to be workforce to financial planning our and attractive, higher can testing view ground performance. While the new we that overall recognize continue somewhat

continued more We're growth beginning Our in and engineering we therefore, leverage this demand markets focus participation, effort. trends benefits and greater our see objective, world-leading can with where broaden our our market see motion to in we gaining a control. technology on favorable force in strong efficiency to adjacent where is of and our the consistency expertise operations

substantially, our XX% today. norm reduced of from XX% historical overall to While sales roughly a vehicle revenue have from increased ground have markets

Through to continued top overall growth help XX% for we'll the strength in shift this products that which a Test key trend to expectations continues average next Sensors the profile few supported orders experience of margins future, attain profit us growth, grow expect by our confidence indicated Demand this of of reconcile Looking Simulation steady expect were continuing business, ground I'd at our improved favorable in our and first in market in This in target and percentage forward, trends. half markets second years. the volatility of vehicle XX-plus we and the performance decreased XX% Sensor total. declines consistent percent industrial Test like quarter, annual take revenue our the our Simulation orders more economic by with to business business. in to to line our this we while the second over showed mix gives geographies and business. be in across as as

for year. ramp-up the introduction DoD X our and the attributable mark the fiscal grow being of of revenue was expect production which the Sensors average of new Sensors to of some and above first the X% to contract on of in the in shipments, below mark. reflected delivered continue with number growth initial We halfway some At a of the This XXXX, range, years business the strictly timing products. our months double-digit for this record revenues of to

double-digit As we second the were strong rate run we second that quarter, supports in the believe growth half year. of we exited our a at

for line XXXX. This top fiscal and to through full and growth roughly we This in expect would backlog the expected range XXXX. X% EBITDA continue should market the trend U.S. performance for to puts margin X% to allow the military, respectively. targeted revenue Sensors Sensors us Given XX%, outlook Sensors our of and our our margin this performance gross fiscal for deliver of XX% year

outlook driven and the for quarter-to-date generally With and quarter business. Sensors Sensors opportunity Asia, represented trend strength the Americas Europe growth the From bullish in both in extremely demand weaker Industrial for geographic primarily being second was by our units in in company sales, strong our markets in held and with the year-to-date. in and a we the total. This a the remain business and region perspective, the continuing by about our DoD Test

enter anticipate trends to foreseeable we we As future. continue third for these the the quarter,

fiscal in pleased the our and So second trends and performance up, see ahead. XXXX sum a performance we're to of market with first strong half position half our

For we Simulation. Structures expect for equipment markets market, in while no and significant growth change expanded Simulation and vehicles Materials our our in our market business, anticipate ground and Test our we

to Test year half in continue services the grow beyond. the addition, and In will of second

half strong ups, keep a half the growth a the growth this margin from we've both that popular focusing heavy is tariffs. over second we've perspective, may business strong year-over-year Sensors related product ramp backlog we of believe will growth, is doing revenue position, level. a half we expect and our gross introductions several what customer and in in execution satisfaction. production Given From be double-digit direct of on performance, to strength providing our comparative surpass Simulation that perspective. other of impact we To Tests while tough be in deliver to With a One total addressed performance to new doing, a and continuing lifting after the of EBITDA few strong. a lot first year-over-year China been need last anticipate this we basis, and first it in question performance and our our on quarters trade simply key the unparalleled

on many growth of an you of and us. know, area China represent for they many our we for significant As focused markets years

in strong China We an with in demand continue to increase orders. see year-over-year

headline we've import well-positioned addition, also experienced In challenges not any we're enactments navigate only and inflation. believe the from to of see export already but global potentially effects the impacts tariffs in of the long a macroeconomic it's term simply the macroeconomy. market minimal in seeming the slight tariff and we minimize raw only news, degradation the have on materials remain a longer The that could effect to more this because

However, we we about remain to serve momentum future see very positive we in continue our markets steady bullish to and in China, there. the

our to to to like over the I'd outlook. Now Brian? results further discuss Brian turn our call back financial and

Brian Ross

particular, business. those by start how our pleased to with performance we and in trends Test our are reiterating like Simulation and, of I'd Jeff. you, Thank

improvement, in revenue strength quarterly touched confident improving this gratifying top our With and on are last and comparisons. the of year-over-year it revenue, steady momentum improving XXXX the second levels bottom with the see right line record move ahead. primarily into to order the focus over backlog EXM, first focus upon on performance. couple XXXX. steady half entire the fiscal I will of the our both lines addition business a future the bright maintained performance pace in significant business quarter bottom and with strength have already and throughout Jeff the we and results orders was backlog of fiscal and coupled of recent of years, We a

with start gross will margin. I So

margin X XXX was two more significant business Simulation a by our in to With increase decrease is and for between our there gross growth quarter this consolidated business gross businesses This margin declined six the period. in simply quarters. three revenue Simulation for Sensors our the was dampened gross toward as Test change first dollars month the gross in margin, this in percentage. in rate attributable point quarter, the margin While basis mix than the Test both of our our significant shift lower consolidated and the mix and

is individual line X.X% which business margin by rate the last cost our value income the purchase and with increase to quarter, margin and Sensors the fair the points and of months Test same An an because X.X% $XXX,XXX, unit, metric Simulation products. Test variable new declined increased first important acquisition X in to from for our introduction operations to primarily team XX at rate production Looking fiscal inefficiencies overall the from slight versus large comparison basis even out from compensation from adjustment our gross year, increases in business effort offsetting gross accounting The valuations to bottom the expense. a quarter XXX shows abnormally of XXXX, a call business for to that for by in improve basis related EXM of number Simulation performance. concerted results points inventory increased of

fiscal first XX.X%. seen we margin X the to year, the For have months rate decline of this

resolved believe Sensors fiscal to rate expect business the most and which the margin this target we for is full return for of these manufacturing ongoing have the However, our to year, issues business. XX% approximately we see for

addition these drive have improvement. their their both effects, to and cost productivity lower businesses In to mix-driven that ongoing continue programs begun structures

period the result expenses $XXX.X business from million performance business $X of due our the million, from have and this in of a compensation in drive a the leverage businesses. cost by needs in to variable closely increase and resulted half the the costs efforts manage the year. increased to of points operating continue additional These keep expense same we for of compared X-month million undertake dollar and year as EXM $XX.X percentage expense an with in X.X million when as the respectively, revenue operating prior $X to the well as quarter first aligned investments the improvement prudent be of basis, for to for have to our our expenses percent On of We to mainly profitability. strong

first for million acquisition-related Total the expected million from EXM are of and in to of for incurred amortization the acquisition expenses fiscal acquisition $X.X of an credit be to quarter also expense We intangible increased costs line half the the interest additional the year. of acquisition in drawdown no revolving EXM. of more $X XXXX of due additional than for $X.X of the $X.X Net slightly million million of EXM.

items in of XX.X% rate tax expect expected we the period effective first discrete measurement our include the We an true-up The enacted XXXX. overall year, be effective rate quarter $X annual fiscal tax was quarter. to $X.X minimal in to recorded and only interest due XXXX. the benefit expense additional XX.X% excluding Tax recorded tax tax for the quarter per finalization rest of X-months of range second December a discrete effective any the indicative million the is rate the quarter for to for for amount second that for The the Act million in the million for $X.X and which of was of period

the XX%. for is effective fiscal XX% guidance tax rate to Our full year

the performance adjusted and by XX% Simulation quarter, of and $XX.X our driven quarter, line year million improved primarily the EBITDA For business. increased Test prior from top bottom versus

EBITDA and to business XXXX and XX.X% revenue Test has business near fiscal our increased in of Our XX%. Simulation is Sensors adjusted hovering

share include discrete in in for XXXX per the diluted the benefits X-month an per Tax fiscal $X.XX our year QX $X.XX. Act. with improvement result share yielded QX us GAAP of per share diluted in diluted GAAP X-month performance over of To per the $X.XX, our earnings Our everyone, remind earnings prior year, a tax to a of earnings relation XX% share XXXX additional recorded $X.XX

second X-months $X.XX period Our year. for adjusted and quarter for the the this diluted EPS was $X.XX

to X, achieve EPS the cash operating generation XX%. we million tangible year debt of decrease first line issuance revenue for which quarter of our of debt July We $XX well with $XX.X from of X.X% and fully annual extinguished performance diluted our million ended The flow, with for portion us July guidance. with free slight the XXXX. ended where XXXX. flow We $XX We normal be full of cash has cash, in is $XXX the first from XXXX. year our end half of the a quarter with million in of EPS consolidated unit total the free positioned cash million, of will which equity on in quarter ended is line the Our generated quarter fiscal the XXXX a

Going expect us forward, help flow our debt. free cash strong available balances pay to we down and cash

As our a bringing debt our times reminder, leverage. to eight before have the acquisition gross EXM, down for of we leverage ratio quarters consecutive reduced X.XX

pay been down XXXX, the of purchase four our from long to the of debt only optimism for With and through the which the continued ratio improvement since at by times business. only to times temporarily end currently date X.XX to in additional a is to a combination the like to Simulation of the and November regarding continues than of We sit the EXM results debt months included at almost acquisition, marks of discuss leverage this leverage few decline business. in prior a we financial to term set potential for of the our out end acquisition, currently EXM XXXX increased fiscal in driving all the leverage for we level adjusted within acquisition our date hit XX, forecast Having acquisition, leverage EBITDA Test the performance. roughly and leverage I four QX, our to less would our points times acquisition. back included X.X

G&A of acquisition. $X.X accounting part and we the assets X preliminary statements within consolidated purchase amortization of as of intangible first our the recorded amounts for in the acquired million expense year, For months have financial

record We $XXX,XXX amortization approximately expect in fiscal remaining of $X.X in a total each expense million the quarters. to for of or XXXX X

recorded third acquisition. preliminary of months in cost recognized sales. $X quarter, adjustment, $XXX,XXX of balance $X.X which as In remaining additional of through the cost the all fair costs are of million was to Approximately value increased be inventory recorded six the sales approximately addition, a first we recognized XXXX, which for upon inventory with million

our share position; from F and full revenue $X.XX earnings business; line earnings reconciliation fiscal Moving share and growth half supported the rate our mix; to and G Test our EBITDA found million; our in to increase per guidance of in and $XXX $X.XX; of can increased contributions acquisition. by in adjusted a remain demonstrated guidance. million. to of of in GAAP as and first backlog million to $XXX growth EBITDA second adjusted EXM GAAP of Sensors We press in These $X.XX expectations to diluted release. EPS business in per The to confident X $XXX significant the are of XXXX Simulation $X.XX; adjusted performance; year exhibit business $XXX be month's of our improving top outstanding the year our in million the

long you will For many of year. fluctuations MTS, remember have you quarterly Simulation business followed throughout the that and that experiences often Test our

be our of the of in expect year timing of the the down slightly second turns, the the to year. half Given backlog first we revenue from half

will with still with it and bottom up performance strong Test the for especially year In year trends fiscal very a performance first and our and to pleased our the top of XXXX notable prior summary, the be half the business. However, line comparisons. Simulation from are we step

expanding to solutions focused of into due well that diversification market; served high-growth the to Simulation favorable products in growing new continue technologies continued demographics our includes for staying meeting and by strategy markets. Test on and be portfolio the rapidly Sensors and We evolving our demands adjacent the

fully community Before our call with to event plans. our to the help strategy we wanted understand September Jeff, at to in share and exciting an the turn you back headquarters I are hosting business I over investor

Markets about short expect Planning done under invitations is planning September. in way to details order. save week be during be Capital dates, are first held first the we our and well the and Day agenda We the of formal to

back on the how now to in I front will Jeff. excited is we the team entire will opportunity capitalize over of Our call share turn to and with us. you engaged

Jeff Graves

Thanks, Brian.

trends on and the So through clear first flow all businesses, in performance with the we're and The was the the of year, our for momentum. outlook backlog a pleased to second Test and months Simulation nicely quarter orders provides the in the robust of X continued it our executing highlights and reiterate, record to while growth of revenue Sensors for both the rest year. and our profitability backlog maintaining our support our to revenue

As bottom and These and the continued be we've in MTS over core core invest to are EXM in business and line. the we've proven mentioned but both the year, Simulation beneficial, ability last to organic also only to maximize have in line see very the and its starting to our not investments to investments positive the integrate contribution project Test top in return to date. execution, growth on on those our

to our growth For an strong second exciting look Sensors we performance. half forward business, organic with and margin

new on we remainder in As the from keep we the their introduction excellent loss continue current leveraging of year: I momentum an need EXM need our the First, trajectory. which of second, tenets is technologies Simulation nonvehicle-related and opportunities; strength and successfully half the need taking key to work on without the of third, and executing business, any to stated year; we Test four to integrate focused for earlier, in the on we're of product sensors, hard intently first advantage

forward. So on success and well executing continued we're these each far, of moving tenets anticipate

are take questions. I happy and Brian that, your to with So

Operator

Fargo. Raghavan have Wells We from question with our Instructions] [Operator first Deepa

Deepa Raghavan

appreciate the that. of I pretty But if lower. color you questions tighten strong, Good some order could despite backlog be I across provided morning. sequentially you strong, being that'd have, growth segments, nice. Test just the Great

and out that Simulation then called market environment. soft with and contrasted Test You

you this are what of sustained be ahead? gives the the can that that curious going some drivers confidence Just

Jeff Graves

for Thanks straightforward. say it's pretty Deepa. the I would question,

of fiber seeing is at have the applications of it look and needs of for you other and on materials use growing If you're materials is testing enormous and XX our Test used and with a the been equipment composites dramatic to driven by materials. being now, now. right verticals services growth over world. automotive because carbon proliferation advanced exotic that introduction years. the in aircraft used And us being business, other testing they're driving the amount in equipment in of Simulation particularly, the from on an And in composites new And

you So have from materials. derive data these to specific design

that's factor. one So

Another part are additive technology. The additive S-shaped with the one conventional of is implications advancement manufacturing now manufacturing is the additive make ability often seeing wonderful, properties made in part but an different than really the completely through manufacturing. to material We're techniques. in a

So tested will performance parts have be those to determine be. what to the

drivers western we've their world. of of many in geography industry seen and a our the systems growth and pleased years aircraft the we're with. So, materials we're materials seeing of that seeing same Americas, quite those automotive are advance industry, the growth because part that the China a they're the in standpoint, where their in From in introductions, revolution big the advanced is for in material use of

one a wind that long good that's that market structures very well. and us, are term testing strong So as there of a energy. In is for and there's piece two is energy areas us for

the that infrastructure, are bridges understanding robust that for world and China, in storms testing we at are to you places in if other the wind from then India, look a growth of heavy and markets blade, green and new demand throughout buildings So long violent that earthquakes look big those Asia, more entire the the the turbine this occurring turbine you And economy expect big in the growth for business and blades, that's infrastructure, initiatives. with itself, a need population for if to big, anything us wind continue and in centers growing designs. at ongoing building

evaluations, more moving and coming and of shaking more and large infrastructure. in selling either testing doing we're earth So equipment impacting for or the waves seismic

industry, to increased about. very simulation exposure So focus that. that are chain to parts are with those simulation a Americas, that both now excited in in the which we of EXM so motion of a on and then exotic there our very amusement big on part the about parks the those obviously. flight growth but whole only got pilot and, And in very which for world, realistic training, primarily of the already do immediate in people expertise parks pilot limited drive very in we're market these disposable gives viewed to to very, the you've China elsewhere entertainment capitalize in, as those businesses Asia, exhibits of, availability in with force excited exciting one view training, amusement to us moreover, motion. income infrastructure. markets we're meaning, growth Obviously, And the to not We and acquisition attend as entry of barriers and exciting and supply we all these now,

testing right we those would we love through meaningful growth forward. I and, us autonomous the exciting underestimate remain the believe for going our growth going part markets. will will an largely for for of And some for So nice the not now in because business, spend customers vehicles. us. automobiles, drive business it out-years, our our testing of us. of integral safety-related not any of really new It They're on a driving is growth part it But is remain

growth markets. is our adjacent the it. with happy we'll position we're But be really So, holding the in there,

Deepa Raghavan

with versus initial a now? than helpful were that that. heavy needs more as for updates part EXM talk underlying expected about quarter least and portfolio looks Can synergy of better the lifting very color. your you at that acquisition some it like that Perhaps more That's your Appreciate some expectations? now you some metrics of than have

Jeff Graves

brought of though, built very that the the it EXM, in electronic technology power, good with electrically-driven it for a brings addition acquired traditionally to we expanding leverage and for markets, in to big, eye our little electric systems advancement And across uplift a us. is are us When control. looking dramatic saw synergies very direct toward in was expanding company now that. markets are they out at does technology We've traditional on What that motion more with synergy force base cost us, high hydraulic motion. our grow that We into growth. an acquisition. drives, helping new technology Deepa base simpler, them they're precise Those very in systems. rapidly, to bring been we are EXM that heavy, now motion

they technology gotten but So over to really entry primarily on – into are then last it top and growth, synergies. off, markets had then decade, the I the into approvals say, And would the it's synergies already their services.

So EXM the that customers most service are of equipment. about on wanting the very supports rigorous

imagine systems can that entertainment. beings are or training these for pilot contain human You

basis. to services can that our an customers is and in provide service them require a infrastructure wonderful because Simulation So ongoing immediately add Test we those on

synergies lift a the business. advertise cost growth. around It's bring of business. EBITDA in but lovely performance over most an obviously, were We They immediate synergies. do in cash-generating real margin both the there no line, So also top

So performance and adjusted those we growth line are that business and they're EBITDA of the is metrics on top And focus that outlook strong. on, all cylinders. business, primarily quite firing the for

So with the pleased we're very to-date. acquisition

Deepa Raghavan

been At highs. been it it's least at cycle Understood. Last growing growth I'll to highs. on and spending growing one has for cycle me Defense on. pass basis,

Given Conversely, of the about spending Sensor X- some thinking what convert expect the you risks be if than of X-year to moderate? strength, target? would were your that wins the to some we are earlier should to

Jeff Graves

seen yes, terms you of more nothing in wanting rate, but Sensors we've customer delivery if faster, will. our So

some is just $XX million of up booked higher rates we'll outlook, out that. term and purchase annual optimism step-up ramped the into the a me But $XXX more And spending, we've see DoD that very of booked. half orders all year. these a the second a just platforms We've business continue people So complex. military then through We'll keep demand, in They're is contract, sensors a Sensor nice involved But FY [will us. than there's and of wind] our will lot And in terms backlog. guys portion got remainder do great posted of in and We've is continues production still million take obviously, XXXX. production contract, of in back. big roughly rest the we terms $XX translated now, the in of time. Obviously, you support into Deepa, to what believe, million of will be long modern Defense big the proliferation platforms. on about and to cyclicality this the give

more on or for the and the you runs in look under manned it require general, vehicle to ground at goes everything flies whether Sensors, they If all systems. or unmanned water,

So we as to view activities pursue new continue there. adaptable military ongoing to we'll our and sensor technology needs

So while – is overall demand upward again, an cyclic the military more in the is think ongoing out-years may the become sensors trend. proliferation of we in

Deepa Raghavan

on. Thank you. I’ll it pass

Brian Ross

Deepa. Thanks

Operator

do Russell Jeff a with have ClearBridge. from Instructions] question [Operator We

Jeff Russell

guys filing, you Could morning. please? shelf yesterday's on good comment Hi,

Brian Ross

Yes.

the part three falloff yes, there's expires current statement, a simply, our shelf quite mandatory that, on just in here first June. Just of so registration year

So of with expiring decided replace practice, just we filing. to corporate matter a a as good substantially the similar shelf

flexibility provides current registration raise plans the to so, shelf if in file having While have the go needed, to no the process without to process we the us future through of the do having money, again. on

Jeff Russell

the for clarification. thanks Great,

Brian Ross

Welcome. Thanks Jeff.

Operator

question next we Franzreb with Instructions] And from [Operator Company. & Sidoti have our John

John Franzreb

conference actually a delivery I'm test apologize, just going I on call. bit cycle. in I little a about the late little discuss to But wanted what's to

already we it we If a the best? was timing to offline. it little you expect that's be talk been you you a addressed cognizant take in than Is still little it But the going push-pull there stronger a Could this historically. about like of? Do seems fourth it, quarter bit to quarter can that the there on deliveries? need the be has of

Jeff Graves

will, spanning of lot consumed couple the number simple, engrossed a that last going first-of-a-kind the shipping resources in Really production custom cycle, a effects. factory. the through if been No. you large dampened a of large really projects John, pretty we've couple years, of and it's

and just quite they're running system behind were They and those at actually. get running painful So us, now to customer here. are well, through the installed sites,

initiatives So, what now supply mix And benefits more part, pretty On is, the you're and which, to is to a in own starting our efficiency the that standard a normalized return chain. factory custom projects. been year a see for heavily half we've in in of you're versus and last John, seeing, rates. of both just investing our in terms top of turn in backlog of

that it's combination. So

And and a the we've We efficiency mix that half. last and funding have from historical of normal been the a we're year to standard benefit initiatives more starting over custom.

John Franzreb

you're efficiencies? increased due saying Jeff, your to So times shortening cycle are

Jeff Graves

Yes. Yes, without a doubt, John.

days. I think it's early

a more of see year half. over and the you'll think that next I

John Franzreb

Okay.

we seasonally norm? should fourth on still strong So quarter expect to be no deliveries longer the or than is that

Brian Ross

it's Brian. Yes. hi, John,

So very half, be Simulation. strong up the generally second down of Test first the to and expect performance quarter the half year the compared half, talked first half of expect however, we a little stronger. do was and We be What call XXXX. second do obviously, the we on strong a in to to about that the be to fourth will compared

John Franzreb

one last taking are going the question, that how the you're are it. backlog, that some far And today Got out into of delivery orders cycles?

Jeff Graves

testing, of larger based projects, But turning on they're say, normal are on And average, particularly on orders times. three the us. for more materials month much faster custom cycle the that's XX history. some infrastructure mix, Well, John, to than not those orders, And then for much the strong I'd been certainly, they're kind of the months. different testing are six

depressed at while automotive still So through, fairly stuff, it's it's levels. coming

year are general and those kind has of not one been in what's standard a that kind backlog. the and But projects half year terms. driven of the So

John Franzreb

I for again. coming questions. my for thanks again, Okay late taking apologize

Jeff Graves

No problem the thanks for John, call.

Operator

in And showing Instructions] this at [Operator the currently queue. questions time, no I am

Mr. the Graves. hand So call I'll to now Jeff over back

Jeff Graves

Okay. Mike, thank you very much.

the to participating forward for our your again the and quarter. you progress We interest all for company. you thank updating great you, today look day. in and Thank next have on a call So in

Operator

ladies and Thank today's you, teleconference. This gentlemen. concludes

disconnect. now may You

MTS Systems (MTSC) 10 May 192019 Q2 Earnings call transcript