Ladies and gentlemen, we'd like to thank you for standing by, and welcome to the Teledyne First Quarter Earnings Call of 2022. [Operator Instructions] And as a reminder, today's call will be recorded. I would now like to turn the conference over to our facilitator, Mr. Jason VanWees. Please go ahead, sir.

Thank you, Steve. This is Jason VanWees, Vice Chairman of Teledyne, and I'd like to welcome everyone to Teledyne's First Quarter 2022 Earnings Release Conference Call. We released our earnings earlier this morning before the market opened. Joining me today are Teledyne's Chairman, President and CEO, Robert Mehrabian; Senior Vice President and CFO, Sue Main; and Senior Vice President, General Counsel, Chief Compliance Officer and Secretary, Melanie Cibik. Also joining today is Edwin Roks, Executive VP of Teledyne. After remarks by Robert and Sue, we will ask for your questions. Of course, though, before we get started, our attorneys have reminded me to tell you that all forward-looking statements made this morning are subject to various assumptions, risks and caveats, as noted in the earnings release and our periodic SEC filings, and the actual results may differ materially. In order to avoid potential selective disclosures, this call is simultaneously being webcast and a replay, both via webcast and dial-in, will be available for approximately one month. Here is Robert.

Thank you, Jason, and good morning, everyone, to our 19th [ph] earnings call since our spin-off in November of 2019, at which point, our stock price was approximately $9 a share. We began today -- we began 2002, we began with the greatest first quarter sales, earnings and adjusted operating margin in our company's history. Our results and operational execution continue to reflect exceptionally well-balanced business portfolio across both end markets and geographies. Demand throughout our short-cycle instrumentation and imaging businesses remain very robust, resulting in total organic sales growth of 7.8%, including approximately 100 basis points of currency translation headwind. We achieved record orders for our electronic test and measurement instrumentation and industrial imaging sensors and systems, even in a typically weak first quarter for these businesses. Sales from our longer-cycle commercial aerospace and marine businesses increased considerably from last year and backlog also grew. Both our GAAP and non-GAAP earnings were first quarter records. GAAP earnings per share was exactly doubled compared with 2021 and non-GAAP earnings increased 34%. I want to emphasize that our non-GAAP earnings exclude only acquired intangible asset amortization. But in the first quarter, it also excluded a large tax benefit related to FLIR foreign tax matters, which only appear in the GAAP results. While free cash flow was lower than last year, it reflected the following guidance: First, bond interest payments of over $36 million made only in the first quarter and again, will be made in the third quarter; second, annual incentive compensation paid only in the first quarter; and third, a significant investment in inventory to derisk revenue in future periods. These items will not be repeated in the second quarter. Nevertheless, our leverage ratio declined to 2.8x from 3.8x immediately after the FLIR transaction in May of 2021. Turning to…

Thank you, Robert and good morning everyone. I will first discuss some additional financials for the quarter not covered by Robert, and then I will discuss our second quarter and full year 2022 outlook. In the first quarter, adjusted cash flow from operating activities was $79.7 million compared with cash flow of $124.9 million for the same period of 2021. The adjusted cash flow excludes a onetime payment of $296.4 million to the Swedish tax authority related to a disputed pre-acquisition 2018 tax reassessment issued to a FLIR subsidiary in Sweden. Adjusted free cash flow, that is cash from operating activities less capital expenditures, was $58.7 million in the first quarter of 2022 compared with $110.1 million in 2021. Capital expenditures were $21 million in the first quarter compared to $17.6 million for the same period of 2021. Depreciation and amortization expense was $86.9 million for the first quarter of 2022 compared to $29.3 million in 2021. We ended the quarter with approximately $3.85 billion of net debt. That is approximately $4.13 billion of debt, less cash of $284.3 million. Our stock compensation expense was $4.3 million in the first quarter of 2022 compared to $4.2 million for the same period of 2021. Turning to our outlook. Management currently believes that GAAP earnings per share in the second quarter of 2022 will be in the range of $3.44 to $3.55 per share with non-GAAP earnings in the range of $4.32 to $4.40. For the full year 2022, our GAAP earnings per share outlook is $15.34 to $15.66 and on a non-GAAP basis, $17.75 to $18. The latter being an increase at the midpoint to our prior outlook of $17.60 to $18 that we provided in January. The 2022 full year estimated tax rate, excluding discrete items, is expected to be 23.1%. I'll now pass the call back to Robert.

Thank you, Sue. And operator, we'd like to take questions. If you're ready to proceed with the questions-and-answers, please go ahead.

[Operator Instructions] Our first question will come from the line of Greg Konrad of Jefferies. Please go ahead.

Good morning.

Good morning, Greg.

This might be a little bit greedy, and I appreciate the conservative nature of forecasting. But it sounded like you took up the organic growth outlook quite a bit with maybe a more minimal change in EPS that you announced this morning for the year. Can you maybe talk about the dynamics there? And then maybe given the comments on the supply chain, maybe some of the offsets to what seems like maybe slightly better volume.

I don't know, Greg. What did you call it? Greedy?

Greedy on that part, though.

No, frankly, we are a conservative company. Right now, sitting here, we're worried about inflation, which is, as you know, is difficult. Supply chain issues, while we're managing them and have managed them successfully are still uncertain. There is no certainty as when that will change. So having said that, we expect revenue to grow. It was about – I think in January, I said it was 4.6% organic growth. Now I'm indicating with 6% or maybe a little more. Nevertheless having said that, we have to be conservative, because there's too much uncertainty. There's the supply chain, there's the inflation, there's the war in Europe. There's the shutdowns in China. And this is not the time to be information. This is the time to kind of focus on what we know we can deliver and go from there. So that's my answer to that. I don't know if that helps, Greg, or not?

Yes. That's helpful. And then, I mean, just kind of baselining the outlook with the quarter. When I look at the margin, some of the segments were well ahead of at least our expectations, maybe digital imaging fell a little bit short. Can you maybe just level set us on the outlook for the year for margins by segment and kind of what you're expecting today?

Sure. Let's start with digital imaging. For the full year, and I'm going to combine digital imaging together, FLIR and legacy Teledyne. We think for the full year, it will be about 23.3%. That's full year 2022, slightly less than what it was in full year 2021. Now in January, we were a little more present about that. We thought it would be closer to 23.9%. But we think now 23.3% is a better number, primarily because we are experiencing some supply chain issues there, plus we're having to pay higher prices when we do find the components that we need. Moving to the Instrumentation segment. In January, I mentioned that it would be about 22.8%, the margin. We're increasing that note by 50 basis points because of the tailwind that we have in test and measurement, oscilloscopes and protocol, we're increasing that margin now from 23.8% to 24.3%. Moving to Aerospace and Defense, the margin we expect to increase substantially from what we projected in January. In January, we projected a margin of 21.9%, and we expect it to grow almost 190 basis points to 24%. On the flip side, in our Engineered Systems segment, which has revenue of about $400 million, and it's primarily government businesses, we expect margins to end lower than what we expected in January and be at 10.4%. And so you roll all of that up for the segment. Right now, we're expecting the margin for all the segments combined to be 22.7%. And then when you put in corporate expense, et cetera, the total company margin would be 24.5%. I hope that helps, Greg.

That's helpful. And I'm just going to sneak in one last one. I mean, you mentioned defense and kind of the increased opportunities. And I think at one point, people are worried about defense maybe bringing down the overall growth rate of Teledyne. Is there any way to maybe quantify what you're seeing in terms of maybe what you thought of as kind of the long-term defense growth rate prior and then post some of the budget tailwinds in NATO kind of what you're thinking at going forward today?

Okay. Let me start with Q1. Overall, we saw some decreased in defense across our portfolio from Q1 of last year, about 2.5%. And most of that experience came in Teledyne FLIR. Now having said that, the longer term, we think our defense sales should decrease in the mid-single digits, which is if you take a negative 2.5% and go to, let's say, 5% or so, that 7.5% turnaround that would be though at the end of 2022 or likely 2022 and 2024. And the reason I say that is, while we've kind of chewed away on our defense backlog, we're not seeing significant opportunities, both in Europe as well as across the board in FMS sales. And I can give you examples of that. But we're seeing real demand for products that we have, especially in the FLIR businesses, Teledyne FLIR businesses. Some of them directly a result of the Ukraine conflict and some of them are, of course, because of the increased budgets that are coming in the nature alike.

Thank you.

Thank you, Greg.

Our next question will come from the line of Jim Ricchiuti of Needham & Company. Please go ahead.

Hi, thank you. Good morning. Robert, just in light of the comments you just made, I'm wondering, are you – is Teledyne thinking differently about longer-term inorganic opportunities in defense over the years, you guys have focused mainly on building up the commercial portfolio, and you've done that quite well. But I'm just wondering, as you think about the business, are you has anything changed in the way you're thinking about M&A going forward?

Okay. Jim, good morning to you. First, let me back up and say, the way we look at defense, which is now about with FLIR included, Teledyne FLIR, it's about 25% of our portfolio. The way we like to think about that part of our portfolio is kind of like a shock absorber. When commercial businesses go up and down, especially if they go down and you have serious inflation and other things become very negative, it acts like a shock absorber. But having said that, you also have to look at what's happening across the world. And the way we see it is that the conflicts have caused significant change in demand for products, especially our products from our perspective. And we think we should be ready, which we are to enjoy the fruits of that. Having said that, I am not really that convinced, that we should change the balance of our portfolio towards defense. And I say that – with an M&A. And I say that because that I don't really think it's very prudent for a company like Teledyne to change strategy because of something that has happened or is happening. And I think our primary growth engine has always been our commercial businesses, and we have more opportunities there. So I think in M&A, we'll probably focus on commercial businesses. Having said that, we bought FLIR, and FLIR had a substantial defense business. And we observed it, but defense is good. It's got a predictable backlog, but it's not really – it doesn't have the kind of margins you can enjoy in the commercial domain.

Got it. Thank you for that. And also, I appreciate the color on the segments in terms of the way you're viewing the operating margins for the year. I wonder if you could turn for a moment to gross margins, which were quite strong in Q1. And I'm wondering if you could elaborate on what some of the biggest factors were in that and maybe how we should be thinking about gross margins going forward. I know there's some puts and takes, obviously, some of the cost pressures, but mix also. But is there any color you could provide on the strength there?

Yes. Jim, you're obviously very familiar with Teledyne. If you look at our Q1 gross margins last year, it was about 38.9% for the legacy Teledyne. We didn't have FLIR at the time. FLIR, on the other hand, Teledyne FLIR, enjoys higher gross margins than us about 55% or did historically or 50%, I'm sorry. So when you combine those two together, the combined company gross margin in the first quarter moved from 38.9% to 43%. Having said that, we also enjoyed higher margins in our test and measurement businesses because they grew significantly 19.2%, that's in our Instruments group. And our Aerospace and Defense margins moved up huge because of the about 50% increase in our commercial aerospace business. So we enjoyed two tailwinds: one, buying a business, which is now a significant part of our portfolio that had higher gross margins than our legacy businesses. And then turnaround that we experienced in our commercial aerospace business and then really good record or there's a revenue in our Test and Measurement businesses.

In commercial air, presumably, you see that recovery continuing. It looks like from – at least from what we're hearing from hearing elsewhere. Is that fair to say?

Yes, I would say, so we do have some concern going forward only because the comps are going to be a little tougher in Q3, Q4. Last year, when the first quarter, we were in a trough, as you remember what we're encouraged. We do a lot of both OEM products for commercial aircraft. But we also do a lot of aftermarket products. So we're encouraged. Let me put it that.

Okay, thanks. I’ll jump back in the queue.

Thanks, Jim.

Our next question will come from the line of Joe Giordano of Cowen. Please go ahead.

Hey, good morning guys.

Good morning, Joe.

So, I just wanted to start with the growth rate in the FLIR defense portfolio for the quarter. I know that was down. So FLIR overall was down year-on-year. Just how was that – how did that 1Q play out relative to what you were thinking internally three months ago? And has your overall like mid-single-digit growth for the FLIR portfolio this year changed? And maybe you can – if you want to loop that in with like your updated views on organic growth by segment, that’s probably helpful too.

Sure. As you well know, Joe, FLIR, as you’ve mentioned, the defense business is in FLIR, they declined year-over-year. If you went to the historical defense business. They declined about 10.9% year-over-year, but that’s also consistent with our own Engineered Systems segment that declined about 9% year-over-year. Some of the primes that we were listening to this week, their businesses declined about 8%. Having said that, we think in Q2, the FLIR defense and our overall defense should be relatively flat and a pickup in the third and fourth quarters. I’m going to say, plus 5%. And the reason I say that is because the overall market that we’re seeing and the opportunities that we’re seeing in the defense businesses are positive. Both in Europe, as well as in this country. So, when you look at it that way, yes, we did have a decline in Q1, but we had a decline in our existing defense business with specially Engineered Systems which also will recover as the year goes forward. In the year, overall, now you’ve got to look at the other side of FLIR, which is their commercial businesses. The commercial businesses did reasonably well in the first quarter. They went up about 2.3% compared to last year. And last year, they had a little bit, not much, but they had a little bit of sales in elevated skin temperature products. So in total, I think we expect for the year, the revenue year-over-year to go up for the overall FLIR business, Teledyne FLIR, I should say, to about – from what was last year, $1.895 billion, if you rolled it all in historical as well as after the acquisition, to about 1.97% [ph], which would be the highest over the last two years. That will be a combination of defense and commercial. I hope that answers the question, Joe?

That’s helpful. Thank you. I was just curious like your point on this is not the time to be effervescent and full year outlook because of what’s going on in supply chain and what’s going on with inflation. I think that’s totally fair. If you look at your portfolio, like what’s the most concerning part? Like which do you think is the least protected of all your businesses, if something which happen negative globally?

I don’t want eventually I guess, because I don’t know. But let me say this. We have intentionally balanced our portfolio for just these kinds of times. When times get uncertain, various parts of our portfolio absorb the shock from the market and from the economies. That’s why if you look at our history, when things – bad things happen, right afterwards, some other companies may not deal with it as well. Right after it works, we buy someone that has not done as well. So, I would say that I feel comfortable with our portfolio. We’re guiding the Street on what we think we can deliver. And we don’t want to be too as the world effervescent. On the other hand, if bad things continue happening as they are now might be a good opportunity for us coming out of this with a significant M&A. We don’t see a warning sign at this time, Joe.

Okay. And if I could just one last quick one. The test and measurement growth is really strong again. How sustainable is that at that level? Do we start moderating on the rates and kind of stay on a gross dollar basis at similar levels? How do you think about that business?

Well, again, going with our team, I’m going to say net GAAP earnings, gap of growth, net growth for the year should be about 4.5%, 5%, even though we had such a good first quarter. We’re seeing better orders, by the way, even the last three weeks. But that’s an area that we sell a significant amount of products in China. And nobody knows what’s going to happen with the lockdowns there. And it’s a short-cycle business and the comps are going to be tougher as we move forward because we did pretty well the last three quarters of last year. So, I would say, we’ve increased our outlook from January a little bit from, let’s say, 4% to 4.5%. We stay with that for now to see how things evolve as time goes on.

Thanks guys.

Our next question comes from the line of Andrew Buscaglia of Berenberg. Please go ahead.

Hey good morning guys.

Good morning, Andrew.

So, I was hoping you could maybe add a little bit more commentary, specifically, you obviously sound more positive on defense and government business, specifically with FLIR, too. And FLIR has always kind of talked about these big longer-term programs of record they were after and very positive on their Unmanned Systems business, which was small, but – it’s definitely an area they saw a big source of growth. Are the – when you make those comments, are you referencing those things like that? Or is there any other color you can give specifically into what kind of the nature of these awards are or potential opportunities you said?

Yes. Let me first comment on the long-term legacy systems and programs of record. Some of that has happened, will happen. Some of it, I’m not so sure, because I don’t look through the same lens as the previous management did. Having said that, there are significant opportunities in Soldier Borne Sensor systems. And when you mentioned the unmanned systems, there’s a range of as you well know, if you move to the air, there is, of course, the Black Hornet. Black Hornet 3, which is 5 inches in size, very silent, and go about a mile, come back performing GPS-denied environment. We’re seeing real interest in that, and that’s doing very well. On the flip side, on the grant systems, our PackBots are doing really well. Actually, some of them, we saw some videos are being used in Ukraine, by the Ukrainan forces that we trained before the war. In the [indiscernible] that we have, they’re used and they’re doing very well. Some of them actually are were on the new Ukraine’s new helicopters in Kiev. Our IR sensors going to various drone manufacturers. And we’re seeing a lot of demand across all of our unmanned systems for not just drones, but also for the sensors that go on top of those. We also have, in the longer term, as you said, programs. We also have an interesting opportunity, which has to do with a larger drone. That’s a little bit like what is known as the Switchblade. That drone would be, if we can achieve a program of record, coming to the words you said. If we can achieve program of record for that drone, that would be a real winner. It’s in the final stages of prototyping, we should be able to get some revenue by the end of the year. It has really strong capability. It’s a vertical takeoff and landing drone. It has opportunities to carry munitions. It’s recoverable. That is if you wave off an assignment, you can wave it within the last two seconds and bring it back. It’s got 30-minute flight time and you kind of go out 20 kilometers. So, when I think about something like that, that’s akin to an opportunity that we can enjoy when we get that certified and flying. Having said all of that, I think it’s important to recognize that getting into programs of record is not that easy. And what we like to focus on is get what you can now sell what you can now and then plan for in the future over the long term, but don’t hedge all of your eggs in that basket. I don’t know whether that helps or not.

No, very helpful. No, sounds encouraging. And maybe you could comment, too, the other news this quarter is the consent agreement is going away. Can you just remind us the impact of that? It sounds like I forget if that is included in your kind of annual synergy estimate and where we stand with synergies from FLIR at this point?

Yes. That the total cost of that for FLIR and then Teledyne was at the order of $80-some million. It started in 2018. And we successfully ended it this quarter. We had some expenses in Q1. We also had to pay $3.5 million, the government that we obligated to pay. We’ve built that into the synergies for going forward already. But part of the reason that we’re able to have the synergies that we enjoyed with Teledyne FLIR is that when we bought them, we said, look, we expected to have accretion in the first year. And we thought that at the time the accretion would be somewhere between $40 million to $80 million this year. So, when I see it right now, I would guess, $80 million would be the low end, and it would be closer to $100 million in synergies. And that kind of absorbs some of the opportunities that we see now that the consent decrease behind us.

Okay. Got it.

Okay.

All right. Thank you.

Thank you. Thank you, Andrew.

Our next question will come from the line of Kristine Liwag of Morgan Stanley. Please go ahead.

Hey, good morning, everyone.

Good morning, Kristine.

Looking at the supply chain constraints, last quarter, you had mentioned that alternative sourcing has thus far proven successful in about 60% to 70% of cases. Are these trends holding steady, improving or worsening? And also what other initiatives can you implement to manage the risk?

Thank you, Kristine. That's a very good question. Let me start with the effect, the net effect. We think in the first quarter of this year, the one just behind us the effect of shortages affected us by about $74 million. We think going forward, that's not going to be changing all that much. Having said that we also were able to buy components, find components or redesign our products that let us sell over a $100 million of products that we couldn't have, if we had not enjoyed that. We have a very robust activity dealing with shortages in our procurement led by Paul DeLaRosa and 30 of our business units. So they do three things. First, they identify who has the shortages and what are the common suppliers for those shortages. And we then deal directly as a company with that supplier and prioritize what we can buy from them. So we may have shortages in various businesses, but one may not affect our revenue as much as the other. So we – that help us focus on the high priority ones. Second, we source from third parties, especially, we have our own people in the [indiscernible] plus we have some of our suppliers, primary suppliers for our semiconductor requirements that are looking for part. So if we're missing like 700 parts today, we may have already found maybe 450 parts that we can enjoy. But we have to of course bring them in and qualify them. We're not just going to take them and put them into our product. We have to qualify them, like we do everything else. And then we also, lastly, look at redesign that is, can we redesign not just a specific part, but can we redesign the product? I'd say the camera that we are selling to avoid the part that has significant shortage, especially if we see forward – looking forward. So long answer to your question is the following. One, yes, we're going to have some revenue shortfall because of that. But it's not going to be killing us. It's going be in the same level that we had. And part of it is alleviated, because we've also put in some inventory. That's one of the reasons that we talked about our cash. We've increased our inventory in setting on our shelves, our products, and also materials that we have either bought long term or products that once we get the part, we can get it out the door. There's a whole combination of these things that's kind of so far has helped us avoid significant effects on the company as a whole. I hope Kristine that answers your question.

Yes, Robert, that was really helpful. And then if I could do a follow on, is the supply chain issue that you're seeing for legacy Teledyne the same as what you're seeing for FLIR or is there a difference between the two?

Not much difference, Kristine. I think, there is digital imaging as an example, which is now 60% of our business. It's the same, because we make very similar products different end markets, similar product complexity, et cetera. So I would say it's the same. There's some exceptions here and there by and large, though that is the same.

Great, thank you very much, Robert.

Of course, Kristine.

Our next question comes from the line of Noah Poponak of Goldman Sachs. Please go ahead.

Hi, good morning, everyone.

Good morning, Noah.

Robert, can you quantify how much inventory you added in that buffer stock process?

I must say about 55 million. I hate to admit it, but it hurts me.

Well, it seems sensible with what's happening at the moment. And it sounds like you're saying you don't expect that to alleviate anytime soon. So you'll just hold that, hold the inventory balance at that level as opposed to burning that down through the year that extra piece.

We're going to burn down, Noah.

Okay.

It's either that or my clothes, but we're going to burn it down.

I mean, if you're not expecting supply chain to improve, won't you need to hold buffer stock?

Yes. We'll hold some, of course, we will Noah. But here's the thing. I think the combination of the things that I just mentioned, is making us feel a little more comfortable. The other thing is some of our businesses have been a little too conservative. We had a plan to reduce our inventory this year by a similar amount. So now it's gone up that much. So if we can bring it back that we still have ample inventory. We just have to move it around so that the measurement is such that it doesn't really hurt our cash flow. We have, for example – the problem we have, for example, with wafers. That's something that – that's long term, and we got to buy it. We buy 30,000 wafers in digital imaging. And we've got to buy it and we've got to keep it because that's one that you cannot buy in the market, whether it's East Asia or whether it's here, you can't buy that. So that one, we do. But there are other things that we can get rid of this year.

Okay. Are you still expecting total company bottom line, full year free cash to net income conversion over 100%?

Very close. Very close. At least, that's what I told the Board yesterday.

Okay. On the cost input inflation piece, what is the rate of increase that you're seeing at the moment?

Yes. That's a good question. There is – there's two parts to that. One of them is materials. And the other one is wages. On the material side, with everything that's going on in the world, our costs are increasing at this time, about 3.5% of our gross – cost of our goods. And frankly, we look at that from both the business side and also look at it from the corporate side. Wage inflation is a little less, maybe 3.25%. So – when you roll that up all together, we're seeing about cost increases of 3%, let's say. The flip side is we also are increasing prices ourselves, where we can, not in every program. We're pretty much offsetting that with price increases. So net-net, so far, being very careful and prudent in what we do. We've managed to negate those two when we'll have to work very hard to keep doing that.

Are you raising price at a rate equal to or slightly greater than the cost inflation? Or are you actually maintaining the price cost gap that you previously had?

I think we're – I would say we're maintaining.

So you already had pricing and you're accelerating the pricing to maintain the price cost gap?

That's it.

Okay. And then last thing I wanted to ask is you've discussed the – a new opportunity set evolving on the national security front. As the combined business now, what percentage of your defense or government related to national security revenues are domestic versus international?

Let me think, for example. I think about overall were 25%. I would say, about just under 20%, 19% is U.S. and DoD. And I'd say about 5% to 6% is foreign at this time.

Got it. Okay. Thank you. I appreciate it.

Thank you, Noah.

Our next question is a follow-up from the line of John – excuse me, Jim Ricchiuti of Needham & Company. Please go ahead.

Yes, I may have missed it, but Robert, I was wondering if you provided any information on book-to-bill, either for the company or for the segments if there was much variability in the book-to-bills that you saw in the different segments?

Yes. No, that's a good question, Jim. Let me start with the total company, if I may. Book-to-bill is pretty healthy. It's 1.09%. We have really good backlog, by the way, the highest backlog that I remember, we have about $2.95 billion of backlog. And we backlog, we define very carefully. It's kind of money that we already know is going to come in. So our book-to-bill of 1.09% is pretty healthy, but it's variable across the company. Let's start with the Digital Imaging. Digital Imaging is a little less than the whole company, it's about 1.04%, but still healthy. In instruments, it's close to the company total. It's at 1.08% with marine being a little higher than environmental marine being at 1.13%. And test and measurement being at 1.07%. Environmental at 1.04%. So the total instrumentation is same as the company at 1.08%. Aerospace and defense electronics, as I mentioned, because of the commercial aerospace comeback, we have a 1.13 book to bill and an engineer systems where our revenue went done for the reasons I mentioned, partly because we are not going to – we got out of the turbine engine business after the first quarter of last year, plus we've been eating into our backlog. We have some really nice additions. Our book to bill is 1.38, but I'm always cautious on that one because that's a long-term program lumpy program wins. So overall 1.09, that's pretty good for us in this environment.

Got it. That's helpful.

Thank you.

Thank you.

There are no further questions in queue at this time.

Thank you very much operator. I'll now ask Jason to conclude our conference call please.

Thanks Robert. And again, thanks everyone for joining us this morning. And if you do have follow-up questions, please feel free to call me at the number on earning release. And of course our earnings releases are available on our website, teledyne.com. Steve, if you could conclude today's conference call and provide the replay information, we would much appreciate it. Goodbye everyone.

Certainly Mr. VanWees. Ladies and gentlemen, that does conclude our conference call for today, which will be available for replay today at 2:00 p.m. Eastern time until May 27, midnight of that day. You may access the replay by dialing 866-207-1041 and entering an access code of 5805962. If you're dialing from an international location, please use 402-970-0847. And the access code of 5805962. Once again, on behalf of today's panel, we'd like to thank you for joining today's Teledyne teleconference call and thank you for using our service. Have a wonderful day. You may disconnect.