Good day, ladies and gentlemen. And welcome to your Q1 2019 TransDigm Group Incorporated Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct the question-and-answer session and instructions will be given at that time [Operator Instructions]. As a reminder, today's conference will be recorded. I would now like to turn the call over to Liza Sabol, with Investor Relations. Ma'am, you may begin.

Thank you, and welcome to TransDigm's fiscal 2019 first quarter earnings conference call. Presenting this morning are TransDigm's Executive Chairman, Nick Howley; President and Chief Executive Officer, Kevin Stein; and Chief Financial Officer, Mike Lisman. A replay of today's broadcast will be available for the next week and dial-in information can be found in this morning's press release or on our Web site at transdigm.com. Before we begin, the company would like to remind you that statements made during this call, which are not historical facts, are forward-looking statements. For further information about important factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements, please refer to the company's latest filings with the SEC available on our Web site or at sec.gov. We'd also like to advise you that during the course of the call, we will be referring to EBITDA, specifically EBITDA as defined, adjusted net income and adjusted earnings per share, all of which are non-GAAP financial measures. Please see the tables and related footnotes in the earnings release for a presentation of the most directly comparable GAAP measures and a reconciliation of EBITDA, EBITDA as defined, adjusted net income earnings per share to those measures. I will now turn the call over to Nick.

Good morning, and thanks for calling in. Today, I'll start off with summary concepts or comments, as usual and our consistent strategy, a few comments on the fiscal year and first quarter fiscal year, a quick update on the Esterline deal and related issues and a few comments on the status of the inspector general audit. Kevin and Mike will review the business performance for the quarter and the outlook for the year. To reiterate, we believe our business model is unique in the industry, both in its consistency and its ability to create intrinsic shareholder value through all phases of the cycle. To summarize some of the reasons why we believe this, about 90% of our sales are generated by proprietary products and over three quarters of our net sales come from products for which we believe we are the sole source provider. Most of our EBITDA comes from aftermarket revenues, which typically have higher margins and provide relative stability in the downturn. Our long-standing goal is to give our shareholders private equity like returns with the liquidity of a public market. To do this, we have to stay focused on both the details of value creation, as well as careful allocation of our capital. We follow a consistent long-term strategy. Specifically, we own and operate proprietary aerospace businesses with significant aftermarket content. Second, we utilize a simple well proven value-based operating methodology. Third, we have a very decentralized organization structure and unique compensation system closely aligned with our shareholders. Fourth, we acquired businesses that fit with our strategy and where we see a clear path to a PE like return. And lastly, our capital structure and our capital allocation are a keep part of our value creation methodology. Fiscal year '19 is off to a good start. Q1…

Thanks Nick. Today, I'll review our results by key markets then discuss the profitability of the business for the quarter. And finally provide revised guidance for the fiscal year. As you've seen, we had a strong first quarter and a good start to the year. Mike will provide more details on the financials. But our first quarter operations, revenue and EBITDA as defined, were up nicely over last year. Q1 GAAP revenues were up 17% versus prior year Q1 and EBITDA as defined was up 21% over the prior year with strong margins and 49% of revenue. Bookings or incoming orders are the real story here, however, with pro forma of Q1 bookings up 20% compared to the year-ago period, a robust increase observed across all aerospace market segments. Now, we will review our revenues by market category. For the remainder of the call, I will provide color commentary on a pro forma basis, compared to the prior year periods in 2018. That is assuming we own the same mix of businesses in both periods. In the commercial market, which makes-up close to 70% of our revenue, we will split our discussion to OEM and aftermarket. In our commercial OEM market, Q1 revenues have increased approximately 13% when compared with Q1 of fiscal year 2018. Commercial transport OEM revenues, which make-up the majority of our commercial OEM business, were up 10% in Q1 when compared to the prior year period. Bookings in the quarter were strong and outpaced sales by a wide margin. For most of 2018, we commented that the softness we were experiencing in the OEM market was a transient as our ship-set content had experienced no negative revisions. Now in Q1 of fiscal year '19, we are seeing growth across narrowbody and widebody form factors once again.…

Thanks Kevin. I'll recap the financial highlights for the first quarter, and then provide some more info on the guidance update. First quarter net sales were $993 million, up 17% from the prior year. Organic sales growth for the quarter was 11.6% and the balance of the sales increase was from our three fiscal '18 acquisitions, Kirkhill, Extant, and Skandia. Our first quarter gross profit increased 18% to $564 million and was 56.8% of sales compared to 56.2% in the first quarter of the prior year. As called out on the Slide comments, we had 1.5 points of margin headwind from the new acquisitions, but still made it to over 1.5 point of gross margin improvement from the execution of our value drivers on the base business. Moving on to taxes, the year-over-year comparisons get slightly confusing here due to the one-time impact of tax reform last year. This also is the year-over-year EPS comparisons. For the first quarter, our effective GAAP income tax rate was a provision of 21.5% compared to a benefit of 63.4% in last year's first quarter. To remind you, last year our tax rates were significantly reduced due to the enactment of tax reform in the U.S., and we recorded a one-time net benefit of $147 million. There is no update to our full year effective tax rate assumptions at this time. So excluding Esterline, we're still anticipating the GAAP cash and adjusted rates to all be in the range of 21% to 23%. Moving onto EPS, I want to first point out that the decrease in both the current quarter GAAP and adjusted EPS was due to the previously mentioned enactment of tax reform. If you remove the one-time benefit of $147 million, which equates to $2.65 per share so that you can do…

Thanks Mike. Before we open the lines, I'd ask you to just keep your questions to two per caller and then reinsert yourself into the queue, to allow everyone to have an opportunity to ask questions. Operator, please open the lines.

Thank you [Operator Instructions]. And our first question comes from the line of Carter Copeland with Melius Research. Your line is now open.

Just two quick ones. One, Kevin or Nick, I wondered if you could comment on what look like pretty strong quarter of performance out of Esterline. I mean, I know you've obviously have enclosed and whatnot, but just looking at that set of results and it stood out. I wondered if you might give us some color on what you, from the outside end, what you thought may have driven that and how you fill about it? And secondly, just with respect to the recent news flow around the A380 and the potential closure of that line and into that product. What you think the risks maybe? Obviously, when we close a product line, there is destocking and stuff that happens that can be somewhat abrupt. And I just wondered if you could maybe walk us through your thoughts on that?

Yes, let me address the first and Kevin will take the second question. Carter, we just don’t want to comment on the first quarter public filing by Esterline. I don't think it's our place to elaborate on that. It’s not our place yet to elaborate on their public filing. So I'm just going to have to pass on that.

And Carter on the A380, I've read the same announcements and news. We're starting to study what if any real impact that would be. The A380 rates have come down quite a bit over the last little while, so effective in real. So the contribution in our numbers is not huge. So we need to study that more and have a better answer in the future.

Do you sense, Kevin, that there's a decent amount of inventory in the system?

I do not have a sense for that to be honest. I think that it's been held pretty closely. So I don't have better inside there.

Thank you. Our next question comes from Robert Spingarn with Credit Suisse. Your line is now open.

I wanted to talk about the margin a little bit. It was quite strong, notwithstanding, I guess, some of that dilution from acquisitions. The gross margin, I think both in the fourth quarter the fourth fiscal quarter and in this quarter, are as good as I've seen a while. Kevin, could you delve into that a little bit? And to what extent is that operating leverage, productivity, pricing, what are we looking at here?

I think we're looking at all of our value drivers coming into place. It's all of contributions, whether it's we're driving value pricing or productivity, or winning new business. So it's really everything, I can't comment that one is more successful than the other in the current quarter.

And then just a quick one. You mentioned the higher acquisition expenses for Esterline, I guess Mike did. Is there anything specific to that?

Its banker fees and legal fees for the most part that you see written through what's in there today.

And just higher than expected -- I mean, is that typical in what you've seen in the past, or is there anything notable?

Given the size of this acquisitions, those dollar amounts are higher than the typical there.

Given the size of this acquisition, but I don’t think the fees are any difference than we thought. The fees are what we thought they'd be.

Thank you. Our following question comes from Myles Walton with UBS. Your line is now open.

Nick, I was wondering if you could, or Kevin, comment on the integrations required. Obviously, it sounds it get hard and/or promoted a few people to add to Bob's integration team for Esterline. And I'm them curious you have $3 billion pro forma cash on the balance sheet at year-end. Would you enter enough acquisitions to satisfy that amount, or you almost feel a little overwhelmed with Esterline integration? How do you balance the availability of your cash for versus the availability of your talent to integrate?

Yes, let me say, you are right. We have a lot of cash we're building up and we borrow a lot of money to -- and we borrowed and we're maintaining that. I don’t know, Myles, what we will do with that. I would say we would be reticent to take on right now an acquisition of the size of Esterline again, so we swallowed that a little bit. It would have to be a hugely compelling value for us to look at that. But the normal range of acquisitions, I would think we're fine for. And I think your follow-up questions what you're doing with all the cash and the answer to that is we'll decide after we buy. We will take a look at could we get this acquisition close, we'll see what the range of opportunities look like and we will make a decision.

I don’t have much to answer. But to say that succession planning has been an important parts of this company's process for quite a long time. And we've been focused on adding talent, developing talent for quite a while. So I do not think we're tapped out organizationally on what we can take on. As Nick said, we would probably wait a little while to bite off another Esterline size acquisition if that came along today. But the general course of business flow, we continue to stay in the acquisition market and believe we're not tapped out on bandwidth. It really has a lot to do with the way we integrate businesses, and our decentralized control allows us to have more bandwidth to take on acquisitions.

And just one clarification, the size of your aftermarket for defense versus OE defense at this point, is what relatively?

We don’t comment on the individual pieces. Do we?

They are about the same, but we don’t comment on the exact match to that.

Thank you. Our next question comes from Robert Stallard with Vertical Research. Your line is now open.

Nick or Kevin, the big debt issuance you did last week, and one of the rating agencies downgraded your debt rating as a result of that. Is was wondering if you could comment what their beef was with this situation, whether this might have an impact on the cost of debt going forward?

Mike, you might. I don’t think they downgraded…

I think the corporate rating remain B one B plus with negative outlook from each.

And they almost always get when you're going to do a big issue and they hold the rating. They almost always give a negative outlook, which says, we're going to evaluate as we go forward. [Multiple Speakers]…

And then on the defense side, you also have very good result in the first quarter, and you commented that the bookings were also strong. I was wondering if you could maybe characterize and what you think is driving that. Is it more shorter cycle demand that's coming through, which makes you a little bit reticent to raise the guidance to the year? Or is this something that's probably longer term more visible that could have like?

I think the defense aftermarket business is following to your shorter-term horizon bucket. We are seeing stronger performance there in terms of bookings growth. I think we're looking at the guidance. As I said in the prepared comments, one quarter it's hard to develop a trend from that, need to see some more data points to evaluate the market segments. Certainly, it's encouraging so far and maybe we're just being conservative.

Thank you. And our next question comes from Ken Herbert with Canaccord. Your line is now open.

Either Kevin or Nick, I just wanted to see if you can provide a little more detail on the commercial aftermarket. I mean you highlighted that broadly you had very strong bookings across the business. And I think you said commercial aftermarket bookings up over 20%. But you also commented, Kevin, that you really didn't see any meaningful change, I guess across the businesses with the strength that continued here. On the commercial aftermarket, in particular, can you just remind us again how much of that business would you estimate is total book and ship? And then maybe what else would you like to see there to get a little bit more comfortable with perhaps upside to the full year guidance in terms of that market?

I think look what I would say is we're just being cautious. We're one quarter in and would like to see some more. The bookings were strong in the quarter, as we commented up 20%. I did commented maybe some of the freight fundamentals were not as strong. We've seen some, going forward, maybe that that will ease a bit in growth in the future maybe. I was just trying to provide some color for the future that it may not be as rosy as the bookings might indicate. The interiors market discretionary interiors, a little softer start to the year but that's anticipated to come back strong in the second half. So I think we feel comfortable with our mid-to-high single-digits guidance around the commercial aftermarket segment. If we continue to see strong bookings, the bulk of which are still book and ship in the quarter, then we will look to evaluate that in the future but one quarter does not a trend make yet.

I think just a couple things. One, we don’t need to indicate any negative view on that, just that we're always wary when the fundamental -- the underlying demand still looks good, looks about the same it did the beginning of year. We like to see more than one or two -- one data point before we change trend.

Specifically, on the freighter markets, I know 2018 was a really big year for conversions and I know some of the freight traffic seems to have been slowing on the margin. I think it probably was a pretty good year for you last year. Can you just quantify maybe how much you think that could be down this year? And I know it’s not a big piece of the business overall. But is that a material headwind that we should really watch that could soften? Or how should we think about freighter markets in particular?

It isn’t, yes. I see the same fundamentals that you see and FTKs cooling, slowing down maybe some concerns about the macroeconomic trade environment. I don't know. So I'm just cautious there that I was -- I think we're all surprised that freight was as strong as it was in the quarter. Just commenting that that's strength may not continue. But I don’t have any indication to say that it is cooling except the fundamentals of the market.

Thank you. Our following question comes from David Strauss with Barclays. Your line is now open.

So I guess Nick or Kevin, I thought with the announcement with when you announced Esterline that you were considering using some of the cash on the balance sheet. What made you decide to finance the entire deal? Was it the M&A pipeline that you see out there, was it just solely the attractiveness of the capital markets and where you could do the deal?

I think David we were pretty vague about how we would finance when we announced it. I think what we said is we had a fair amount of cash. And I don’t think we went much further than that. I think the credit markets looked quite good to us. And we don’t have anything specific on the horizon just credit markets look good to us. It looks like they are very attractive source of capital. So we've decided to go a little bigger.

Kirkhill, how is that progressing?

Kirkhill continues to perform well. We've seen some improvements since ownership. We don’t comment on the margins or the individual details. But we've seen gradual improvement there as we plan. So I think Nick or I, we both talked about Kirkhill was a nice lab experiment for Esterline and it continues to perform well. So we're happy with what we've got there and the way it's performing.

And last one the Esterline, the intangible amortization that you would expect to run through your adjusted numbers. Do you have an estimate for that at this point?

I think you probably looked at the pro forma financials that were filed with the bond documents, and it's $20 million and that could change as we work through the final accounting.

Thank you. Our next question comes from Hunter Keay with Wolfe Research. Your line is now open.

Just question or comment, I think you said OE business jet and helos, the top line growth of over 20% but you said it was hard to sustain that. But you also said bookings were up over 20%. Did I hear that correctly and can you just flush that out a little bit more please?

Yes, let me read the exact quote here back, just so I'm not confusing myself. I said business jet and helicopter OEM revenues make up 20%. Revenues in this combined market were up over 20% compared to same period. Bookings in the submarket outpaced sales in total with strong business jet bookings but weaker helicopter bookings. So that's what I said that. What was the question again above…

Well, I think you also noted some questions around the sustainability of that growth rate. I'm just trying to tie that to the booking commentary you gave as well?

Well, we see strong bookings there largely, or they are in the business jet sector and its large-format cabins mostly, that's what we're seeing. We're seeing some slowness in orders on the helicopter side. The bookings are strong, sales are up but we do see some weakness there. Again, I'm trying to comment, provide a little color on the fundamentals of the business jet. We do see growing OEM demand, large form factor, of course. But we just look for the stability in the market and the takeoff, and landing cycles has not been robust. We're not seeing a tremendous amount of growth there, so we're cautious. And I'm just trying to highlight much like in the freight markets some caution around the future.

And then question for Mike. I'm just curious to hear your personal views on leverage, how they've evolved maybe over the course of your career before you got to TransDigm? And how your time at TransDigm has maybe evolved, your own views on balance sheet, maintenance and leverage? Thanks.

My background is in the private equity industry. So I think I am more familiar with seeing companies that operate at TransDigm site leverage ratios. And I think going forward as we've shared with you guys previously, we intend to continue to keep relatively high leverage ratios relative to the rest of our A&D peers. But I don’t think my thinking or background has evolved a ton overtime it hasn't changed a ton since coming to TransDigm either.

Obviously, Mike's significant background in private equity was a very attractive attribute to us.

Thank you. Our next question comes from Michael Ciarmoli with SunTrust. Your line is now open.

Nick or Kevin, just I could understand and appreciate the conservatism, especially in some of the shorter cycle markets. But you had the real strong commercial OE growth in the current quarter. I mean, I would think just given the rate increases, the visibility there, you'd have a little bit more comfort in that market channel, maybe A380 aside. But anything that you're seeing in the OE side of the market that would give you reason for pause on the commercial side?

No, nothing is giving us pause. We are just the same concerns about raising guidance, one data point does not align make. So if it continues this way and we see future quarters, we would look to revise. But right now, yes, maybe it's just conservative but we're leaving it as is for right now.

And then just on the overall revenue front. Organic growth, I know it's seems, maybe two years ago, there was speculation you guys couldn’t really grow organically anymore. And here you put up one of the best organic growth rates in quite some time. Can you give any color what really drove that volume versus price? I mean, did you see volume material volume increases in all markets, or was there more price in certain markets? Any color if you could parse out that growth? Just it was such a good rate that we haven't really seen in quite some time?

I think it's important in this business to recognize that revenues can at times be lumpy. They can be really strong and unexpectedly strong at times one quarter to the next. It's a lumpy business. It has to do with managing of inventories and the supply chain and other factors. So we again want to be appropriately conservative in the way we look at this. Not seeing concerns in the future but just want to be appropriately conservative without getting ourselves ahead.

Was there anything in the quarter, I mean any big chunky deliveries or positives…

No, actually there weren’t any. On the OEM side, commercial OEM, we did see a return of wide bodies that we have seen some related softness to last year. I think I was a little surprised that the amount of narrow-body orders that came in as well. So I think orders and sales are both pointing to better wide-body of narrow-body performance.

I think in the overall, the fundamental market conditions, so you might -- we thought they were a year ago. And as Kevin says, we're always careful that one data point doesn’t make a line.

Nick, just one last one on Esterline, you probably going to punt on this, but I'll try and ask. Can you give us a sense of what you guys might be targeting for cost synergies? I mean, just knowing the Esterline model, knowing that you had Kirkhill as the lab experiment. I mean, do you have a ballpark synergy target just on the cost side of what you realistically think you can immediately take out of that business?

I'd like the comment on it, except they snapped the ball over my head. So I can't. I think we've given you as much guidance as we can on that. We told you we expect the private equity like return based on the certain capital structure that we've given you is an assumption. And I think that's about the most specificity I can give.

Thank you. Our following question comes from Gautam Khanna with Cowen. Your line is now open.

I wanted to ask just if you could comment on the interiors market within the commercial aerospace aftermarket, and if you are seeing any change in trend there positive or negative?

On the discretionary interiors, that's our Schneller and Pexco business. We have seen the year begin a little slower than we have liked or than we anticipated. But the order book for the second half of the year seems to indicate that that will be a transient softness. So, we're anticipating the interiors will recover and perform well for the year.

And Nick maybe just for you, if you could talk about what level of leverage would you actually be comfortable taking the balance sheet up to in this type of credit and economic environment for the right transaction recognizing…

Yes, I just don’t want to comment on that. I think you've seen a number of year history of our leverage. If I was trying to figure out what we're going to do, that's probably not a bad idea to look at what the history has been and I think that's around where we feel comfortable. But I wouldn't want to comment on what we might do if the situation was right. On some interim basis, we have no plans right now. But I'm very reticent to comment on what you are doing in capital market conditions before it exists.

I hear you. I guess what I'm asking is generally you feel pretty strong about the macro, it seems like [Multiple Speakers] about the macro and the health of the aero market and like…

We don’t have any unique insight other than anybody else does. We see all the -- we saw all the market data and we know what our numbers look like. And we still feel pretty good, I get it that we're late in the cycle. But we try to be pretty consistent in the way we run the businesses and the way we capitalize on.

Thank you. Our next question comes from Sheila Kahyaoglu with Jefferies. Your line is now open.

Kevin and Nick, you talked about a few organizational changes and promotions just going back to Myles's questions a bit more. Can you give us how you are going to tackle this deal versus other deals just given the relative size? Any qualitative color would be helpful.

I actually don’t think we're going approach it really all that different. We are going to have a focused team to work on it. We're putting some dedicated resources on it. But we're going to use the same integration playbook that we always use. And so we have some resources to apply to it, both in finance as you heard, there is obviously other folks that were able to dedicate to the Esterline integration team, senior group controllers and like that they will help round out the team. We've been I think planning for something significant for a while and putting resources in place, stretching folks, getting our EVPs ready. We have another wave of potential folks ready depending on what's needed. So the succession planning and people development as a way of business is really what we've been working on for a very long time. So I don't feel -- I'm not as concerned on the resource side. And I think we will have the people to put on the Esterline integration team to make it successful.

And then just one follow-up on commercial aftermarket. I know it could be lumpy and you guys have tough comps last year, but just looking at the passenger side of the business. It seems that have grown at about 6% rate. You look at your air traffic, it's that great. So it's growing slightly below that if you exclude price. Any color you could give what you saw in this quarter on maybe repairs versus ad-hoc or replacement business?

I don’t have a lot of additional color to offer on that. It tends to come out in time. I think the repair and overhaul market has been solid for us. You're directionally correct in your passenger segments of the commercial transport, it was a strong quarter for us and we continue to see good opportunity, both on MRO, repairs, overhaul and spare parts. The outside, the look through sales for the distribution sales, the POS for them remains very strong as well.

Thank you. Our next question comes from Peter Arment with Baird. Your line is now open.

Kevin, maybe just a quick one for you given all this growth that you're seeing. Are you seeing any stretch out in lead times that was in the supply chain or anything that is a watch item for you? Just given the strength that you mentioned across all your end market? Thanks.

We have seen some limited supply hiccups. Generally speaking, we tried to cover that with inventory buffers and our own work in progress to ensure that we can survive that. But we've seen some limited I don't want to say that we've seen none of that. I think it's isolated to a few areas, mostly around chemical processing, outside processing, not fundamental across the business. So we've seen a little bit of that but so far we're handling it.

Thank you. Our next question comes from Jason Rodgers with Great Lakes Review. Your line is now open.

What is the pro forma net leverage ratio, including Esterline?

As of 3/31, it's going to pick-up slightly to just over 6 times. But obviously that assumes no kind of cash payout or anything, just to put footnote that.

The next question was, are you planning on providing updated guidance once the acquisition closes or are you planning on waiting this quarter?

Once the acquisition closes, we will update our guidance and assumptions.

Well, I think I've said, once the acquisition closes and we feel comfortable with it. I wouldn’t expect something the day after we close.

And then finally, as far as your fiscal '19 forecast not including Esterline. What is the organic growth rate and tariff impacts you have embedded in that guidance?

We don’t have any tariff impact in our guidance at all. And so far we haven't seen anything significant.

And I just don’t think I know what [Multiple Speakers] at the beginning of the year, all within our long-term guidance here [Multiple Speakers] we gave at the beginning of the year plus the bump.

Thank you. Our next question comes from Seth Seifman with JPMorgan. Your line is now open.

I was wondering if you could talk, you guys have always managed cost pretty tightly. Margins were very impressive in the quarter. Were there any headcount actions or specific cost actions you took in either the September or December quarter that supported the profitability in the quarter?

No, nothing other than our normal approach to driving productivity on a daily basis, daily, weekly, monthly, it's a constant process, other than our normal approach, nothing specific that we can call out. So we're always looking to drive productivity and contain costs across our businesses.

And then just a follow-up on that real quick. To what extent did you view the strong growth in commercial OE that becoming a bigger part of the mix as a headwind for profitability that needed to be overcome in the quarter to put up the margins you did? Or was that not really an issue?

That was not an issue. I did not know that ahead of time that we would have such strong OE, and you'd have to overcome that. There was no special one-timers in the quarter that helped our profitability. So yes, there was none of that commercial OE helped deliver what it did. We saw the increases on the defense side. And on the defense aftermarket side those are all contributed, including commercial OE to our profitability.

And it is still fair to think that commercial OE has fairly well below average margin?

That's right, yes. And it also takes more headcount. So there's a lot of volume there. The commercial OE side of the house, we have to watch that closely.

Thank you [Operator Instructions]. Our next question comes from Rajeev Lalwani with Morgan Stanley. Your line is now open.

Nick, just coming back to your comments on getting close to wrapping up the IG audit. Is there any ongoing impact associated with that? You talked about the $16 million voluntary fund, I'm assuming that's onetime in nature. So just trying to get a sense of any pricing concessions going forward, any changes is business practice that you have to assume, such that it may impact margins or revenues. I think you know what I'm getting at…

Yes, you're right. It would be a onetime. And we're not suggesting we concur with that, by the way just to be clear. And we don’t know if any impact going forward. I'll just repeat, there is no allegations of any illegality or wrongdoing, or anything like that.

And then Kevin, just maybe for you, in terms of just your dialog with the OEMs over maybe the last couple of quarters. Has there been maybe a change in tone in terms of how they are trying to work with you, specifically pushing more royalties on some of your revenues? Any color you can provide will be great?

Yes, we have not seen any change in approach from OEMs asking for anything different than the approach that we always see. Nothing new.

Thank you. And I am showing no further questions at this time. I would now like to turn the call back to Liza Sabol for any closing remarks.

Thank you. That concludes our all for today and we'd like to thank you all for calling in this morning.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone, have a great day.