Good day, everyone, and welcome to the Astronics Corporation Second Quarter 2024 Financial Results Conference Call. All participants will be in a listen-only mode. Please also note today's event is being recorded. At this time, I'd like to turn the floor over to Debra Pawlowski. Ma'am, please go ahead.

Thanks, Jamie, and good afternoon, everyone. We certainly appreciate your time today and your interest in Astronics. Joining me on the call are Pete Gundermann, our Chairman, President and CEO; and Dave Burney, our Chief Financial Officer. You should have a copy of our second quarter 2024 financial results, which crossed the wires after the market closed today. If you do not have the release, you can find it on our website at astronics.com. As you are aware, we may make some forward-looking statements during the formal discussion and the Q&A session of this conference call. These statements apply to future events that are subject to risks and uncertainties as well as other factors that could cause actual results to differ materially from what is stated here today. These risks and uncertainties and other factors are provided in the earnings release as well as with other documents filed with the Securities and Exchange Commission. You can find these documents on our website or at sec.gov. During today's call, we will also discuss some non-GAAP measures. We believe these will be useful in evaluating our performance. You should not consider the presentation of this additional information in isolation or as a substitute for results prepared in accordance with GAAP. We have provided reconciliations of non-GAAP measures with comparable GAAP measures in the tables that accompany today's release. With that, let me turn the call over to Pete to begin. Peter?

Thank you, Debbie, and good afternoon, everybody. Thanks for tuning into our call. We're going to talk about second quarter results obviously, dig into some specifics of the recent refinance efforts, or refinance process that we went through earlier in July, and close the call by talking through our expectations for the remainder of 2024. So, long story short, we feel that the second quarter was a very good quarter for Astronics. Simply put, strong sales, improving margins and very strong bookings. Our Aerospace segment, which is just shy of 90% of our sales year-to-date had a very good quarter. Our Test segment, approximately 10% of our sales had what I would term as a reset quarter. We'll get into the segment results a little bit later, but as I already mentioned, we also, after the quarter close, accomplished a refinance in early July, which we feel is a very important step forward for the financial health of our company. Running through some overall consolidated numbers, again, sales of $198 million exceeded our guidance for the quarter. That's happened a handful of times recently, has become a little bit of a trend. Up 14% year-over-year in the comparator quarter and up 7% sequentially from the first quarter. The sales level marks a return, frankly, to pre-pandemic levels. The sales level was enabled by positive trends that continue to propel us forward. And these are things that we talked about the last few calls. I'm not going to go into them a whole lot of detail, but we continue to see moderating inflation. We continue to see price increases that we have implemented taking hold and beginning to have an effect on our business. And most importantly, our supply chain, which is very much global in nature, continues to improve. Also, our workforce turnover has reduced from the very high levels of 2022 and 2023, and the efficiency of our workforce is improving, and I expect will continue to improve. A tidbit of number which may surprise you, it did me when we ran these numbers, our workforce currently totals about 2,600 people and 43% of them at the end of the second quarter had been with us for less than three years. That's almost half, and it's a much higher percentage than what we are typically accustomed to. I don't think it's unique. I think a lot of companies in our space are dealing with the same realities, and it makes it challenging to step on the gas and immediately have a response in terms of organizational efficiency. But we're getting better and it's starting to show in our financials. The income statement is improving with the sales level. Dave will talk through a lot of the details in just a few minutes. The adjusted EBITDA for the quarter was 10.2%, up from 9.1% last year or $20.2 million compared to $15.9 million. That's an improvement, but we expect more of it as we go through the year as our sales continue to climb and as our supply chain continues to improve and as our workforce efficiency and quality improves, and as price increases continue to take hold. Also, and it shouldn't be understated, demand continues to be very strong. Our second quarter bookings were $219 million. That's a book-to-bill of 1.11, and it was strong demand really across our range of product lines. It's really nice when you have a high shipping quarter and an even higher booking quarter that makes you feel really confident about the near-term future of the business. Our 12-month bookings at the end of the second quarter were $783 million. That again is a number that's approaching pre-pandemic levels. And we ended the quarter with a record backlog again of $633 million, with importantly $402 million scheduled to ship in the second half of 2024. Looking at our segments, simply put, again aerospace, our Aerospace segment had a really nice quarter. It's 90% of our consolidated sales. And basically, as Aerospace goes, Astronics goes. Solid growth of 11.7% year-over-year, $177 million in revenue with good margin improvement. Dave will talk through those details in a second. I want to spend a few minutes talking about Test and what I described earlier as a reset quarter. We had a restructuring in April that I think we talked about on our first quarter call, and it was designed to save about $4 million annually beginning in the current quarter, the third quarter of 2024. So that restructuring was accomplished. And as part of that, we closed a facility in Texas, a smaller one, about 30 people or so, and consolidated those results in our Orlando headquarters. It's similar to a consolidation we implemented last year of an operation up in the Boston area and another one that we have announced but not yet accomplished for a smaller U.K. operation. All of these are designed to simplify the business, simplify the operations, and lower costs, and we're well underway with that effort. An unfortunate development in the second quarter was an estimate to complete adjustment of $3.5 million for a couple of revenue over time or otherwise people might know it as a percentage of completion jobs in our transit test business. These resulted in sales and margin reductions of $3.5 million in the quarter, and it's basically a result of doing a ground-up review of those programs and learning or deciding or discovering that we weren't as far along in terms of a development effort as we thought we were. We should get that revenue back over the next few quarters. The contribution on it is something we're going to have to wait and see what that's all about. But that was a negative development for our Test business, but we feel sets us up pretty good for the second half of the year getting it behind us. Most importantly, in the second quarter we were finally awarded that radio test contract by the U.S. Army that you've heard me talk about almost for two years now. It was an IDIQ or indefinite delivery, indefinite quantity contract for radio test equipment that is designed to allow the U.S. Army to test its full range of radios proactively and to diagnose failures in the field or in the lab or wherever. It is a big program. It's funded to be $215 million. We understand that there's clearly demand in the field at the Army to consume that amount of money, and we expect that it will be consumed in the coming years. The initial contract came with an award for $15.5 million and $7.2 million of that was recognized as revenue in the second quarter. We expect the majority of the remainder, a total of about $10 million to $12 million, will be recognized over the course of 2024. And that initial delivery order was for engineering, qualification and low-rate initial production tests. The question remains, when will full rate production begin? And we don't know the answer to that yet. We have some tests we need to get through as part of the initial LRIP award. We also are dependent on the Army getting through some of their tests. Our best guess is that it's mid-2025 or later, but probably will be commenced by the early part of 2026. More on that as it happens over the coming months. For that program, along with the cost reductions that we've implemented, we expect we'll put the test business on a much better footing compared to where it's been over the last quarter, last few quarters. Finally, the refinance that we announced early in July. This is a big deal for our company. It is basically a larger improved ABL revolver facility combined with a reduced less expensive term loan and the combination of the two in sum provides us a lower combined interest rate, much lower amortization compared to what we had before, an improved level of available liquidity, and friendlier covenants. In sum, it's an important step towards the recovery of our company and gives us the flexibility financially to make the investments we need to make to realize the opportunities that are ahead of us in the near future. I'll turn it over to Dave at this point to talk through some of the details of the quarter and the refinance package.

All right. Thanks, Pete. As Pete discussed, we continued our strong momentum into the second quarter with consolidated sales growth of 14%, with strength across most product lines and notable increases in demand from the commercial transport and defense markets. Consolidated revenue was $198.1 million, and this is the highest we've seen since the fourth quarter of 2019. It's difficult to make comparisons to 2023 as we're still fighting through the pandemic parts shortages and high inflation and hadn't yet reimplemented bonus plans. I think it's more relevant for the most part to compare performance to the first quarter of this year, sequentially. As we frequently point out, there is inherently strong operating leverage in our business. The double-digit growth in sales compared with the second quarter last year translated into a 21% gross margin, which was up 220 basis points compared with last year, while operating margin improved 240 basis points to 3.8%. While these improvements are nice, our sales and profit were actually dampened by about $3.5 million due to an increase of estimated costs to complete that Pete had mentioned on mass transit test contracts. And this has had the effect of lowering sales and related margins by the same amount as the percentage of completion on those contracts was reduced. Also, $1.3 million of restructuring and severance costs, primarily in the Test segment, were recorded in the quarter. Consolidated operating income was $7.6 million and represents 45% operating leverage on the incremental sales over the first quarter of 2024. Adjusting for the estimated cost to complete revisions and the restructuring and severance costs, our consolidated operating profit would have been $12.4 million or about 6%. Still not where we want to be which is up in the double digits, but on the right track. As we've stated before, we feel we should be a company that should be able to achieve EBITDA margins in the high teens at least, and that translates to operating income in the 14% to 15% range for us. Sequentially, compared with the first quarter of this year, consolidated SG&A increased $1.3 million, primarily related to restructuring and severance costs of the Test segment, slightly higher legal costs, and being partially offset by lower equity compensation. Sequentially, again, corporate expenses declined by about $1 million as the first quarter had roughly $1 million of annual equity compensation granted and recognized in the quarter primarily to directors. We expect the $6.8 million in corporate costs to be about the run rate for the rest of the year. Looking at the segments compared again to the first quarter, Aerospace operating profit grew 59% on an 8% sales increase. The $19.3 million in operating profit for the Aerospace segment was its highest since the first quarter of 2019. The sequential improvement was a result of a strong contribution margin on the incremental sales and improved operating efficiency. Test sales were flat compared with the first quarter, while the operating loss increased $2.3 million to $5.3 million compared with the first quarter. Test sales reflects $7 million of revenue and related profit from the recently awarded 4549T radio test contract. Included in the Test segment loss was the $1.1 million in severance and restructuring costs and the $3.5 million reduction to sales related to the transit programs. Excluding these, the Test segment would have approached breakeven. As we continue to execute on new programs to grow revenue, we expect that the Test segment will approach breakeven by the end of the year. That's not to say we think this segment should operate at breakeven as we believe this business should also be able to achieve double-digit operating profit. But for that to happen, the top line needs to improve, and we need to get past the current program mix, which has weak profit profiles. 4549T will provide a significant step towards higher volumes with solid margin profile. We've taken steps to simplify the business, as Pete mentioned, by consolidating facilities and reducing the workforce during the last quarter, and we should see the impact of that as we move forward into next year. Moving on to the balance sheet. As we announced on July 11, we amended and expanded our asset-based revolving line of credit and refinanced the term loan. The refinancing included an expanded asset-based line of credit and a smaller, lower-cost term loan. The revolving line of credit was expanded to a $200 million maximum subject to the borrowing base, with an interest rate of SOFR plus 2.5% to 3%, varying based on our consolidated leverage ratio. We're currently at SOFR plus 3%. At closing, we had $128 million drawn on the facility and total availability of about $50 million. The new $55 million term loan interest rate reduced the interest rate by approximately 200 to 325 basis points to SOFR plus 5.5% to SOFR plus 6.75% depending on our leverage ratio, and importantly, reduced the mandatory annual principal payments from $9 million to $550,000 annually, saving us $8.5 million annually in principal payments. We're currently at SOFR plus 6.75% on that. In all, the refinancing improved liquidity, reduced our annual cash cost for debt service by about $10 million to $11 million, and provided overall greater financial flexibility. The term note and the revolving credit facility both expire in July 2027. Jumping forward a bit, this refinancing since it was completed in the third quarter will have an impact on our third quarter income statement. As the refinancing was a third quarter event, our third quarter will reflect some one-time costs relating to the write-off of some deferred financing costs from the old term loan and the revolving credit facility and the payment of the call premium on the old term note. These costs total approximately $7.5 million. About $7 million of these costs will be reflected in the third quarter as a loss on extinguishment of debt in our income statement with the residual $0.5 million recorded as interest expense in the third quarter. Our blended cash interest rate today is roughly 9.5% but could move if SOFR rates change or our leverage or drawn balance changes. Additionally, we'll have noncash amortization of the new upfront fees classified as interest expense of approximately $500,000 per quarter. Although it might not appear this way, we have been focusing resources on managing our inventory. Inventory increased a modest 0.6% compared with the first quarter and reflects the continued delay in several new programs that have moved out one or two quarters. We continue to target mid-3x turns per year for 2024 and a goal of over four turns per year in 2025, which gets us back to a more acceptable inventory turnover rate. CapEx was $1.8 million in the quarter and $3.4 million year-to-date, and we are planning CapEx for the full year to be in the range of $17 million to $22 million, so a pickup in the second half of the year. Much of that is related to machinery and equipment and test equipment that we need for the new programs that we're winning. We had no activity on our ATM program in the quarter and are not anticipating any further activity with that program. And this concludes my remarks. Pete, back to you.

Okay. With respect to the remainder of 2024, in our first quarter call we identified three watch items, which we felt would be important for how 2024 was going to shape up and work out. The first one was whether the demand groundswell that we have been seeing for many quarters up to that point would continue. The second one was whether we would get the 4549T contract award in a timely manner. And the third was, what would Boeing rates do with respect to their demand signals for us? The good news for today is that all three of those things seem to be in pretty good shape. We've talked about demand already. $219 million of bookings in the second quarter very well answered that question and we continue to be pretty optimistic about our prospects in the market. So demand continues to be very strong and is a helpful tailwind as we move into the second half of the year. The 4549T radio test contract with the Army came a little later than we'd hoped, but it still got into the second quarter, which is what the plan was. As we started the quarter, we are thinking again that that will provide $10 million to $12 million of revenue over the course of 2024, and it already did $7.2 million of that in the second quarter. It will be a reduced rate in the third quarter and the fourth quarter, but the important thing here is that the sooner we get through that engineering low-rate production portion of the program, the sooner we will get into full rate production. Again, assuming that that's consistent with the Army's expectations. We think it is. Finally, Boeing rates, I'm not going to tell this crowd on our call anything they don't already know, Boeing is committing to or has the goal to get up to 38 ships a month by the end of 2024. I talked in our last call that they had held us at 30 to 35 ships a month. They're still doing that, so we don't think they're building at that rate. They're building inventory apparently, but they don't want to turn their supply chain down and then try to turn it back up later in the year. We're expecting, although we don't know, that we will stay at this 30, 35 ships per month over the rest of the year. And eventually, they will accelerate beyond 38 a month. I'm sure they're planning that sometime in 2025. And when that happens, our rate probably will not increase accordingly while they burn off inventory. But that's where that arrangement stands for us at this point. So given all that, we are increasing our revenue guide to, for the year, to the range of $780 million to $800 million, that's up from the initial $760 million to $795. That would be a 15% increase over 2023 at the midpoint of the range. I mentioned earlier that at the end of the second quarter, we had scheduled a backlog of $402 million for the second half of the year. If you take our first half actual shipments and if we were to be successful shipping everything we've got scheduled in the second half, we would already be at the low end of that range without any additional book and ship orders over the course of the year. Now that was all as of the end of the second quarter. We typically do get a healthy amount of book-and-ship business, so assuming supply chain keeps up and assuming our capacity continues to develop, we should be in pretty comfortable shape with that stated range of $780 million to $800 million. We also announced in our press release that we are forecasting third quarter revenue of $195 million to $205 million, midpoint obviously $200 million, which is a relatively small step-up from our actual Q2 revenue that we're reporting today. But again, put the range on there for a reason. We have been in recent quarters pretty consistently at or above the high end of our ranges, and we haven't changed our forecasting technique significantly from last quarter to this quarter. If we were, however, in the third quarter to be at the midpoint of that range, again, $195 million to $205 million, that would imply something in the fourth quarter like $207 million to get to the midpoint of our new range of $780 to $800 million. I just spit a whole bunch of numbers out there. They're all in the press release to digest. But what it basically means is that we are anticipating a continued ramp in top line growth over the next couple of quarters. We believe that we have reset our test business so that it will not be anywhere near as big a drag on our financial results going forward. And if you look at the change from the first quarter to the second quarter and the marginal contribution in our Aerospace business in particular, we think we're set up for a pretty healthy close to the year, a pretty exciting close to the year in terms of recovery from the pandemic and rebuilding our income statement. And I think that concludes our prepared remarks. Jamie, we can open up the floor for questions at this point.

Our first question today comes from Jon Tanwanteng from CJS Securities.

Nice job on the bookings and the recovery here. I was wondering if you were still comfortable with the mid-teens EBITDA margin exiting the year. I think you've talked about that several times or maybe just below that. I know you're trying to get higher than that. But is that still in the picture with the way the backlog is and how your supply and prices are improving through the year?

Yes, I think it's going to be close. I think we've got a very healthy backlog, and we've demonstrated the incremental margins that should get us there if our top line does what we think it might do. The other obvious unknown at this point is how our Test business is going to respond to all the changes that happened in the second quarter. We're hoping that it makes big incremental contributions simply by avoiding the big hits. I would say it's going to be a push, but we think we have a good shot at being there. Dave, what would you say?

Yes, I think I would echo that. You make an assumption that we don't have any of these odd things that we had in the second quarter here with adjustments, significant adjustments to the estimated cost to complete that program and severance. I think getting up into the double digits and mid-teen area is an achievable level of adjusted EBITDA.

Got it. And when do you think cash flow will start to catch up to the earnings? It looks like you built some working capital here. I know you're working on inventory trends, obviously, but is there any thoughts on kind of when that actually converges and how much capital you might see this year?

Yes. I won't give you a quantitative answer here, but qualitatively, definitely the second half of the year is going to be a significant improvement in cash flows.

When do you expect Test revenue to increase as you begin to execute on this contract? Will it be around the middle of next year, or do we need to wait until 2026 to move beyond this low rate initial production program?

I think we need to wait and see on that, Jon. We just started the program a month ago and had a kickoff meeting with the Army, which gave us some insight into their intentions. It looks like the initial $15 million delivery order will be followed by another similar-sized order for further engineering development work for test program sets and other related engineering needs. Your main question is when we will begin production. We anticipate that the earliest will be the middle of next year, but it may take longer. It largely depends on how quickly we can complete our tasks and also on the Army's allocation of resources for these activities. We will have more clarity on this, and I expect it to be a regular topic in our quarterly calls going forward.

Okay. Last one, if I could sneak one in there. Just any thoughts on what happened to Delta, if that will flow through to you as one of your customers? Does their impact on operations have any effect on their spending?

No, not significantly. Their longer-term plans remain unchanged. We can't comment on what happened to them or why, but we don't see any direct implications for us from that situation.

Our next question comes from Michael Ciarmoli from Truist.

Pete, you have a clear view of the bookings and backlog. It seems like Boeing is trying to safeguard its suppliers. Do you have insights on what you are shipping directly to Boeing and Airbus? Also, what about the major seating suppliers and carriers? It appears there are numerous factors affecting these production rates. You mentioned some inventory in the channel; do you have visibility regarding the bookings?

I would say that our bookings are primarily driven by the demand for updating in-flight entertainment and connectivity equipment. We supply to channels that may not always align with production rates, which generally lead to airlines, and these can be for line-fit or retrofit installations. To summarize our booking trends, they are strong; there is significant demand for both retrofit and preparation for higher line-fit rates. We don't perceive a substantial inventory buildup at this time. However, if Boeing cannot increase their 87 and 37 rates, that could eventually pose a problem. Still, it appears that there is an expectation for those rates to rise, and plans are being made accordingly. Additionally, aspects of the industry such as seats and interiors often face challenges concerning supplier delivery and quality, making them less likely to scale back. The industry seems to be viewing this as an opportunity to enhance output and timeliness. Among our concerns, developing inventory in the channel is not a significant issue right now.

Got it. Are you seeing any changes in behavior or demand? I know you mentioned airline retrofitting. It seems that some low-cost carriers are facing challenges, and Southwest could benefit from finally modernizing. Is there any noticeable difference between the major airlines and the discount carriers?

Not really. I mean, Southwest has become a major customer for us this year. We're going to have revenue approaching the $20 million range, something like that. They are kind of catching up. They're one of our biggest certainly North American airlines that hadn't invested heavily in our product. They are doing so now. There are some fleets on some airlines where decisions are getting pushed out because of the inability for the OEMs to deliver the airplanes that the airlines want. I mean that's definitely happening. And we are seeing that in certain situations. But I mean, you step back and you look at our overall booking trends, we put that chart on the back of our press release, and I think it pretty effectively tells a story for a couple of years now. The booking bars are significantly ahead of the shipping bars, and that's ultimately not just building inventory, that's increasing strong demand kind of across the customer base. We're very much enjoying it and like to see it continue.

Got it. Got it. And then just last one for me, just shifting over to Test. The EAC in the quarter on the transit program, I mean, is there any additional risk on that contract? Did the BAC sort of write down the margin on a go-forward basis? Or do you have some residual kind of tail risk on this program? Just trying to understand if this is the front end of EACs or you think this kind of cleans it all up.

It's a very fair question based on our history here with this particular product line. But the way we've developed so far in terms of consolidating effort and shutting down ancillary operations and the fact that we're at the very tail end of the programs that are in question, leads us to believe that we're in pretty good shape. I mean, certainly, we took the reserve that we took or the adjustment that we took with an idea that that's all there's going to be. There might be more going forward at the smaller marginal end, but we don't see that at this point, and we're hoping for something quite a bit different.

Our next question comes from Scott Lewis from Lewis Capital.

Congrats on the nice quarter. I've got kind of a conceptual question about price increases. I know you guys are probably trying to capture the material cost increase you've seen. But I wonder if you're thinking about the increase in cost of capital with a kind of much higher interest rate environment? And maybe also your increased cost of protecting your IP. Do you think you have the ability to kind of capture those in your price increases going forward?

Yes. I think the whole industry has exercised some muscles that had been kind of dormant for many, many years in terms of how to manage inflation. And we certainly have learned or relearned things that we knew a long time ago in terms of protecting ourselves in contracts and also identifying in our business those areas where we can increase prices on certain spare opportunities and one-off buys or retrofit buys or things like that. I think the whole industry is kind of shaking off the cobwebs and has gotten pretty good at that. And I would say we have too. I think we're doing a pretty good job of it. Our material cost is significantly higher than our direct labor cost. But we're protecting ourselves contractually on both sides with inflation indices and things like that that I think will leave us in a much stronger position. I'll also say that I think it's been such, so severe, not so much today but over the last two years, inflation pressures have been so significant, and they're so pervasive and everybody feels it, so that it was not terribly difficult to raise prices. Our customers were surprisingly accommodating because they were going through the same thing also from all suppliers. There was kind of an accepted understanding that you could change price levels and nobody liked it, we didn't like doing it ourselves, but you kind of had to, and everybody knew that. I do think that's kind of changing. I think it's going to be harder in the future to get those kind of price increases than it has been over the last year. I think everything is going to quiet down, but those long-term programs that are multiyear, when those come up for renegotiation, there will be big increases. And I think everybody involved on both sides of those kind of programs are aware of that. This dynamic will continue for two or three years even if the kind of ambient inflation rate drops back to the Fed's goal of 2% to 3%.

And then just my last question, have you seen anything with EV TOL programs either picking up or slowing down? What have you seen there?

Well, we are actively involved with a number of those EV programs on a fee-for-service or kind of an off-the-shelf architecture that we've developed for certain critical technologies. I would say the general nature of the industry is that in-service dates have slipped a little bit, maybe got a little bit more realistic compared to where they were initially. I think we're also entering a phase or have been in a phase for a while here where funding is going to be more challenging, especially for the startups. And I guess our feeling is that the airplanes are going to fly and the FAA and the ASA are going to figure out a certification path. The question is whether the business cases are going to develop in time to make a real industry out of it. And it will be interesting to watch. We are involved, as I said. We're not betting the farm by any stretch. But for people who are interested in that part of the industry, if it develops anywhere near some of the more optimistic scenarios that are out there, we should benefit pretty substantially from it.

Our next question is a follow-up from Jon Tanwanteng from CJS Securities.

Just wondering if you could give an update on litigation and expected expenses as you go through the year and beyond that.

It's been fairly quiet recently. We have some activity expected to increase towards the end of the year, primarily depending on a couple of decisions we anticipate, especially in France and the U.S. regarding the Teradyne situation. We have had strong wins in both jurisdictions, but the opposing party has appealed, and the court is willing to hear that appeal. The way that appeal is managed will impact our next steps. From my viewpoint, an exciting aspect is that we're already in the middle of 2024, and we believe there’s a good chance that these matters will be resolved before the end of 2025. While that may seem distant, considering how long these issues have been ongoing, we are quite optimistic about it.

Okay, great. I might be jumping ahead, but as your cash flow begins to improve and accumulate, what will your priorities be for that cash flow? Clearly, you will need to catch up on some capital expenditures and perhaps reach a more normalized level. Beyond that, what are your expectations for capital allocation?

I would say the first thing that we would be wanting to do would be to pay down our debt a little bit. Debt load is a little bit higher than we would like it for kind of a normal run rate situation. I mean in the past, we would lever up to these levels or even a little bit higher on the heels of an acquisition, but not having done an acquisition, this is a debt level that we would like to see reduced. And that's a function of what happens to our income statement and our cash flow over the foreseeable future. We do expect that the acquisition world is going to wake up a little bit. It's been pretty slow from our perspective. Certainly, deals are getting done, but there isn't much of a flow that we would be interested in. And I guess I would say that we feel we have such an opportunity ahead of us just to execute on the backlog that we have in place and the opportunities that we've won frankly, including during the pandemic, that our best way to create value is to execute on what we have on our plate in front of us. Acquisitions will be a secondary pursuit when our balance sheet makes us more capable there. Our first priority is simply to execute and take on debt. Dave, I don't know if you'd describe it any differently?

No, I'd say that that's the priority is to execute. And as we move through the next 12 months, rebuild our dry powder and liquidity and kind of be ready for next year.

And ladies and gentlemen, with that and showing no additional questions, ends today's question and answer session as well as today's conference. We do thank you for attending today's presentation and now disconnect your lines.