Kate Lowrey - Director of IR Vic Richey - Chairman and CEO Gary Muenster - VP and CFO.

Jim Giannakouros - Oppenheimer Kevin Maczka - BB&T Capital Markets Jon Tanwanteng - CJS Securities Ben Hearnsberger - Stephens Sean Hannan - Needham & Company John Quealy - Canaccord.

Good day ladies and gentlemen, and welcome to ESCO's 2015 Year End Earnings Conference Call. Today's conference is being recorded. With us today are Vic Richey, Chairman and CEO; Gary Muenster, Vice President and CFO. And now, to present the forward-looking statements, I would like to turn the call over to Kate Lowrey, Director of Investor Relations.

Please go ahead ma'am..

Thank you.

Statements made during this call regarding 2016 and beyond EPS, EPS - As Adjusted, EBIT, tax rate, future growth, profitability in revenue, operating margin, sales, acquisitions, implementation of the Company's capital allocation strategy, the costs, benefits and timing of restructuring and cost production activities, corporate costs and other statements which are not strictly historical are forward-looking statements within the meaning in the Safe Harbor provisions of the federal securities laws.

These statements are based on current expectations and assumptions and actual results may differ materially from those projected in the forward-looking statements due to risks and uncertainties that exist in the Company's operations and business environment, including, but not limited to the risk factors referenced in the Company's press release issued today, which will be included as an exhibit to the Company's Form 8-K to be filed.

We undertake no duty to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. In addition, during this call, the Company may discuss some non-GAAP financial measures in describing the Company's operating results.

A reconciliation of these measures to the most comparable GAAP measures can be found in a press release issued today and found on the Company's website at www.escotechnologies.com, under the link Investor Relations. Now I'll turn the call over to Vic..

Thanks, Kate, and good afternoon. Before I provide my perspective, I’ll turn it over to Gary for few financial highlights..

Thanks, Vic. As a reminder on October 8, we announced certain restructuring actions related to our lower margins, international operations primarily in the Test business and also provided a preliminary update of our expected FY '15 results.

In that announcement, we laid up the details of the 16 restructuring actions and the expected cost savings and called out the 5.6 million of non-cash charges in the Test business that impacted this year's results.

We also noted that we expected Filtration, Doble and Corporate's year end performance to be at or above previous expectations and I'm pleased to report that we realized these higher expectations as we closed out the year.

Our FY '15 restructuring actions are well underway and are being implemented at the cost level we anticipated and on the schedule we projected. We expect to begin realizing identified cost savings and operating benefits in the second half of fiscal 2016. Turning to the release.

We reported EPS of $1.59 per share from continuing operations which is negatively impacted by the $5.6 million of non-cash charges that we noted earlier. During the year, sales increased $8 million at Doble. As a result, the new product introductions and the contribution of ENOSERV proportion of Crissair.

Filtration sales increased despite the previously expected sales decrease at VACCO related to the SLS program which was rebased line at the start of the year.

The commercial aerospace business at PTI and Crissair significantly outperformed expectations and TEQ recovered quite nicely from what was expected to be a sales decline due to the Q1 impact of the KAZ retooling the production requirements for the Gen 2 product as described at the beginning of the year.

The test business reported a $4 million sales decrease during the year resulting from the softness within the global shielding markets. In response to this, KAZ was able to partially mitigate its impact by reducing their SG&A spending by $4 million year-over-year.

Our operating strength has recognized in FY '15 was clearly driven the continued up-cycle in the commercial aerospace markets at PIT and Crissair, a 24% EBITDA margin at Doble despite additional spending on sales and marketing, outstanding performance at TEQ where we delivered a solid EBITDA margin despite its Q1 KAZ headwind and the rigorous cost management resulting in lower corporate spending.

While the overall performance in TEQ was disappointing, we addressed the situation with significant and aggressive cost reduction actions which will have intangible and meaningful impact on Test's operating margin beginning in FY '16 and being realized for years to come.

On the balance sheet, we continue to maintain a modest level of net debt which stood at $11 million as of September 30. Additionally we remain committed to our capital allocation strategy which includes share repurchases and dividends and as such we returned over $27 million to shareholders during the year.

We expect to continue to opportunistically repurchase shares in the open market during 2016. A significant highlight of the year was the strength of our entered orders and our ending backlog.

We booked $562 million in orders in FY '15 which reflects a $25 million or 8% increase in ending backlog which currently stands at $328 million as of September 30. The current backlog in our order profile as we enter FY '16 supports our sales outlook as described in the release.

Regarding our guidance as we noted in the release, our expected results will include the impact of the restructuring charges and therefore our guidance and subsequent reporting will be presented on an EPS - As Adjusted basis which will exclude these defined charges.

The majority of the charges net back will occur during the first half of the year as we expect to be substantially complete by March 31. Therefore we expect FY '16 EPS - As Adjusted to be in the range of $1.90 to $2 a share with a quarterly EPS profile similar to FY '15.

Additionally, commenting on our longer term view, we continue to see meaningful sales, EBIT and EPS growth across the business segments consistent with the expectations communicated in our 2014 Analyst Day presentation.

When comparing our guidance to FY '15, we’re expecting meaningful increases in both sales and EBIT at Filtration and Doble and a lower operating cost structure at Test along with normalized spending at Corporate, which therefore drives the favorable FY '16 EPS comparisons.

In closing, when comparing our EPS - As Adjusted results, we’re projecting tax rate of approximately 35%. I will be happy to address any specific financial questions when we get to the Q&A and I'll turn it back over to Vic now..

Thanks Gary. As outlined in the release and as Gary commented, our 2015 performance came in from a slightly different than originally anticipated. Our Fluid Flow and utility solutions businesses performed well ahead of expectations, which offset much of the softness in Test.

This year reinforced one of the major benefits of maintaining our multi segment business. As Gary mentioned, the aerospace business performed well with the results stronger than expected. The downturn on the SLS program at VACCO was not as severe as we anticipated. Going into the year, an SLS orders received during 2015 or Doble for an outlook.

One of the key drivers that continues to strengthen our commercial aerospace business truly well ahead of our near term plan led by orders for the A350 which has been higher than expected. This has continued in October as we received another large order on the A350 start of the year.

Another bright spot is our execution which is a result of improved operating margins over the last year. The outlook for this business remains strong as we enter 2016. TEQ performed well evidenced by nearly 18% EBIT margin delivered in Q4.

TEQ is a solid business with above the average industry margins resulting from our well defined niche in medical markets. While identifying the future growth opportunities at TEQ, we saw solid opportunity to supplement this growth by adding Fremont Plastics. This is also a niche supplier to the medical market.

Fremont not only has scale and profitability at a reasonable acquisition price, it also provides additional manufacturing space overhead capabilities, further improved tax sales growth and operating margins.

Doble continued its strong performance in 2015 and it's great to see the success we’re having with our new offerings to augment what is already a market leading set of products, services and solutions. Moving on to our outlook for 2016, I am excited about the prospects as we enter this year.

While we had to take some tough actions to improve our cost structure, I am convinced these actions will result in a meaningful improvement in our operating results as we go forward. When completed, we’ll have a more efficient, less complex, lower cost operating structure which should yield significantly improved margins.

Our recent meetings have reinforced our earlier view of FY '16 in the next couple of years. We continue to see solid tangible growth opportunities in sales, EBIT and EPS. Let me call a few of those out. Doble was recently awarded their first significant order for the Doble Prime product which is a legally developed online solutions package.

They also won their first full scale deployment of the Doble ARMS. The pipeline for this solution continues to be strong as we're currently in discussion with over 50 utilities. The sale cycle can be long given the nature of the product and since we’ve been working on a number of these channels for quite some time it’s good to see tangible results.

Doble also recently won its first significant contract for the Doble Universal Controller, which is a field force automation product. Both the Doble universal controller and Doble Prime our new products developed using existing building blocks minimizing development comp and expense.

Our seven products which is most capable test set on a market has been commercially launched and has gaining good customer acceptance as we book several new orders within the past six weeks. Bottom line, Doble is looking good in investment we've made or paying dividends.

On a Test front, our FY '16 outlook has improved based on a cost reduction actions and progress and savings we see coming out of the back end of this process. I'm excited about the future as the Test backlog - overall backlog continues to grow which goes well for our '16 outlook.

Regarding acquisitions, we see momentum with these activities but we do continue to be prudent. The recent major acquisitions that have taken place in aerospace market have commanded very high multiples.

We will continue to take a deliberate approach looking for small to medium size niche players which we can acquire for reasonable multiple providing the EPS accretion and acceptable return. There continues to be several opportunities out there which we're evaluating and continue working hard to supplement our organic growth.

So in summary we had a solid year and have taken actions to reduce our cost structure. We are on a track for a strong '16 as we’re well positioned for profitable growth in all three segments. Our focus remains constant to improve our operational performance and execute on our growth opportunities both organic and through acquisitions.

So now I'll be glad to answer any questions you have..

[Operator Instructions] Our first question comes from the line of Jim Giannakouros with Oppenheimer. Your line is open. Please go ahead..

Good afternoon.

On the Test business if you can help me understand I mean it’s been tracking below I guess our expectations here, I think it’s just brought under performance both here and in Europe, you still tracking below 2000 folks sales levels there, are they particular end markets to blame, I guess what I’m struggling with this - how should we be thinking about longer term gross prospects in that business I guess after you're done with your another way of restructuring and repositioning..

Well, obviously we have seen some headwinds on the sales side of that - solid growth of it.

So the approach we are taking now is given that reality, I mean end markets are more challenging than your additional grow the business to give that reality, there is a primary reason we decided to take some significant cost reduction activities because we need to get the margins up and shorter term we think that’s - this is the best way to deal and get our cost structure more in line.

Longer term I mean it’s a healthy business, if the markets are healthy some of them are developed in a little bit slower than what we have anticipated for instance the E&P market is not accelerated as much we thought.

I think this is going to happen at some point but it just wasn’t happening fast enough for us so we just take the action to get the margin improvement that we – is achievable..

Okay. Thanks and if I then switch over to Doble if my math is right on just core growth it seems that, you’re anticipating accelerating growth and I assume it’s because of the - of your healthy order book.

What exactly is driving that as those wins that you sided earlier and if you can talk about expected revenue mix between hardware and software solutions in - that’s taken your '16 expectations..

Yes, let me answer the last half of that first I think you’re going to see our service revenues go up at a higher rate and what you see the hardware go up.

I mean hardware still growing but we’re in a lot more attraction to service, and this is good because the margins there obviously are a little better and this happen - customer providing services is a positive thing because more you do that more opportunity you have to sell hardware.

But really the growth that we see couple of things we did make an acquisition last year will have that for full year, the acquisition - that gives us some immediate kind of growth for that growing looking for.

The other thing is really the products that we developed and we have been talking in a last couple of years about new product developments whether be there on seven, whether be there – universal controller, the one that talked about today.

So really the growth that we’re seeing outside of - kind of make in growth we have with M7 really are those new products because each of those products other than M7 are totally new products force. So that’s even a uptick for '16..

Thanks Vic. .

Thank you. And our next question comes from the line of Kevin Maczka with BB&T Capital Markets. Your line is open. Please go ahead..

First question I guess just to be clear.

Gary, are you calling this a 47 same quarter and 61 if you back out that charge?.

Yes, the reason we didn’t get into a lot of detail on the quarter is we preannounced on October 8 to set the expectation there. So the way we highlighted the 5.6 million and the $0.14 back then was steering in that direction at that point in time, that was a relative impact of that.

So between the third quarter charges and the fourth quarter charges, we just felt it was simpler and more efficient for you guys to figure out how to look at the year. So that’s why we kept the basis as the year and in the 9 months was so that you, kind of, back into it.

So trying to put that charge into the quarter and how would you look at the other things, we thought was more confusing than just say here is the stake in the ground on the year, here is the charges that impacted it and then you could back into it so and also long round about answer but that’s how our thinking was..

But is that a yes or no on the 47 and the 61?.

That 5.6 hit in the fourth quarter for the most part in the pieces that were earlier in the year. So I think if you looked at just, kind of, the roll up, it would be in the upper 40s..

Okay. On Filtration, so we are looking at high single digit revenue growth in '16 but flattish margins. A couple of questions on that. It seems like VACCO is growing faster with the SLS program and that’s usually higher margin. So I’m wondering if that’s true why we are not getting a little bit better margin leverage on high single digit growth.

Can we start on that one?.

Yes, the short answer is the A350 is great program, we’re in the earlier phase of that and as we - this next year, so it’s going to carry a lower margin cause we have to put all the infrastructure in place to be able to perform on that program but we are running at a lower rate than what we will eventually do.

So as we fast forward a couple of years, we get up to rate on that program, you’ll see the margins expand. The other P7 and you're right at VACCO and so as that are margin program but the other thing that we are running to is a level of spares that we receive particularly from the Navy because those are very high margins.

We had a really strong year end '15 on the spares. We are not anticipating that in '16. Hopefully that will change but the way that we modeled this out is that we have a lower level of spares more in line with what we’ve seen historically. So those are the two biggest things that are having some impact on the margin '16..

Okay.

Are you able to say about how big your SLS business was in '15?.

Yes, it was in the low 20. So 22 million, 23 million of revenue and low higher on the order which is great news as we go into '16 because if you recall the rebaseline at the start of year, they are kind of flat lining it for the couple of years and now we are seeing acceleration.

So having the orders greater than the sales certainly supports our outlook in that regards. So if you were to peg it at 22 million, 23 million in '15, it should be incrementally higher as we go into '16 based on the order book we have which is over 25 million that came in this year..

Got it. And could I just sneak one in on Doble here. So sales were down in the quarter on Doble, I think that came in a bit shy of what we were looking for.

Can you just talk about that? What happened in the quarter, because of course you’re expecting much better growth next year and since we have software growth next year, what kind of strong incremental should we be looking at there?.

Let me answer the first part of that. I mean the biggest issue that we had was the Saudi contract which we got awarded very late in the year. We anticipate getting that awarded earlier in the quarter. In a way that works - work on it until we got it.

So we only got about 2 weeks worth of the Saudi contract in 2015 where we anticipated almost all quarter of that contract. So that’s really the biggest reason was down something it’s - I know it's on systemic issue was really the timing of that one contract which that’s a big contract for us and a nicely profitable contract as well..

And then, on the second part of your question Kevin on the software, especially as it relates to ENOSERV, you get two things in your favor you get the calendar because you only had it for half a year or so compared to a full year next year and that pulls in EBIT margins greater than Doble's aggregate margins.

So, you should think of that in the kind of the 30th, low 30s range because of the software margins that you get of there. So, it’s incrementally positive as you get the calendar effect in – it pulls you on the highest EBIT margins in the company..

Okay, got it. Thank you..

Thank you. And our next question comes from the line of Ben Hearnsberger with Stephens. Your line is open. Please go ahead. Ben, your line could be on mute. All right, we’ll move on to our next question from Jon Tanwanteng with CJS Securities. Your line is open. Please go ahead..

Hi, guys thanks for taking my questions. Can you give little bit more color on Fremont I am assuming highest energy what was the price you paid what kind of revenues and you guys were generate that kind of stuff..

We really haven't disclosed that. It is pretty small company means under $10 million and we have paid the single digits on multiples, you know it’s a nice business it’s all medical, the margins are even significantly higher than what we have in the core tech business. So, it’s going to be nice add for us.

The other thing it really does is a lot of larger customers. We are always concerned about just having a single facility - for disaster recovery type things. So, this gave us second facility, so we can relate that concern.

The other thing it is that the hyper machines that they have are pretty comparable what we have, they do allow you to form a larger part so that opens up some different areas for us and we historically been able to do.

And then as we mentioned as well as everything as they have excess capacity since we look at growing that business and maybe potentially there is a vertical integration that gives us that flexibility that we simply didn’t have with tech, really out of space at a single location..

Got it. Was that come on the revenues or the price you paid - I am sorry..

It was the revenue..

The revenue, okay thanks.

And I would expect a little bit of ESCO expense step up on the acquisition fees and also just on the restructuring how much is that do you expect in Q1?.

On the corporate I think you are thinking about that right, we are really we are paying attention to a lot of other things this year so what I call the incremental spending a corporate that’s why you see a decrease in the corporate.

So I think if you rationalize that backup towards historical levels at first part of your question and relative to the restructuring obviously the benefits become realize the sooner if you’re done with all the churn. So, of the items you identified that I would say, some $6 to $7 million of the $9 million across will happen in the first quarter.

We are well on our way, I think the - at least the German piece for that we should be out of it probably first week of January kind of things so, that’s really helpful does on the benefits become realize much quicker in the U.K., takes a little bit longer just there is some live projects that we are running at the backlog and so we can just close the door.

We are going to complete those programs little turbulent to - in the Q2 and I would say from the Brazil side at Doble. It’s essentially complete today, but there will be some residual cost [indiscernible] if you put 80% of that cost in Q1, for GAAP reporting you know that will fair..

Okay, great, that’s helpful. And just to go back to earlier question, did the As Adjusted EPS for the quarter I mean - should we think about it as the charge and tax at the rate that you know what tax is and then -.

Yes..

Okay. Got it. Okay, great. Thank you very much..

Thank you. And our next question comes from the line of Ben Hearnsberger with Stephens. Your line is open. Please go ahead..

Hi, thanks for taking my question. I just have on M&A. It sounds like multiple remain high. I guess we you see the confidence that you can do the in organic growth necessary to meet your stated goal..

Yes, I mean we are just - we are having to take a different approach than a lot of people are and I talked about the multiples being high, I was referring specifically to the aerospace piece of it and larger transactions.

So, again, where we've been successful historically and I think we'll continue to be successful is the work initiatives, mainly privately owned businesses that people are concerned as much about where their business goes, as much as how much they get paid for it.

If you look at the acquisitions that we've made over the past, three or four years, that's where we've been successful. So it's very difficult once it gets into a bid process, because there is such a scarcity out there and things get bid up.

But I would say that as we review the list of things that we have under evaluation or in discussions with people. It's more robust than it has been, which surprised me a little bit, just because the - you would think a lot of these things would have already transpired.

But we've been getting not only things that we've identified but some unsolicited it incoming as well. So we're not going to rush out to do something to do something, but there does seem to be enough in the pipeline to give us some confidence we're going to be successful..

Okay. And then on the Doble Prime order and the Doble ARMS license, you said you are talking to 50 or so utilities.

What is the - what is the revenue opportunity I guess implied in that?.

So I think the reference is 50 clients was on ARMS and we're talking and it depends on what single year, multiple year, but it can be from 500,000 to multi million dollars $3 million on those types of products and that's really a nice high margin business.

We do think that's going to accelerate because the utilities are really looking to automate things and this is something that gives them the capability to have much better insight into what's going on the grid.

Historically they’ve done it the old-fashion way by sending people out looking at it and obviously with the tightness in the - the people – maybe getting the people to do that, the cost to do that.

We think this is a product that is well positioned to fill that void because it does allow them to setback and have a better understanding of how the performance of their grid is..

Okay. And then, Gary, I think you may have mentioned it, but I missed it.

How much of the $0.24 is assumed in your 1Q guide?.

I'd say about 80%, 80, 85% of that..

Okay. Great. Thank you..

Thank you. And our next question comes where the line of Sean Hannan with Needham & Company. Your line is now open. Please go ahead..

Yes, hi. Good evening. Thanks for taking my questions here. Can you hear me? So a high level question for you here. If I think about the challenges you guys have consistently been going through within test, I consider the - at times project nature that you see within the business, as well as the margin profile of the business.

And then I think about the types of volatility that we saw as a real drag in the consistent issues we saw that flipped on us and started to develop with the Aclara business.

At what point do we start to evaluate test more critically in terms of it being strategic to the portfolio here and to what degree is that type of analysis or discussion going on internally?.

Well, a couple of things. I mean, this - that is Aclara business, and it's much different business. I'm sure there's projects there, but we're talking about projects in $1 million to $10 million, sometimes larger. But to answer the second part of your question, I can't say there is anything specifically gone on with test.

I mean, look we do those types of evaluations all the time, and so whether it be any of our businesses I mean, whether it be an acquisition or divestiture, I mean, that's part of what our job is an what part of the what the board does.

And so there wider scrutiny goes on to this, I would say that today it does business we're still confident that they have bright future, we just had to get – we had to take action as I mentioned earlier, we saw the markets not developing as robustly as we thought, to get the cost structure in place, we had the cost structure in place and I think we'll be fine.

It's important to remember that, you know, we are number one in that market. I mean, we are the largest. We're the best and believe it or not the most profitable. We've had our challenges, but I think we understand what we need to do to get through those..

Okay. That's helpful. Then switching over to filtration side is really a very high level congress discussion. Now, there is certainly been a lot of news emerging around the slowdown of orders. That's now starting to go to the Boeing and the Airbus world. Just want to see if we can get your perspective in terms of how this ultimately could impact you.

Of course, some of it's going to be platform specific and I do realize that backlog still is pretty substantial and there can be a lag time here. But any view points from you Vic and Gary, would certainly be helpful? Thanks..

I think the good thing, I mean, let's say that is what we're seeing, the backlog or that the orders are slowing down. You have to understand they've got 8 years of backlog currently. So there is a lot can change between here and there. So the programs that we're on, the primary programs are doing very well.

So I don't have a near term concern about that and even a mid-term concern about that, just because of the strength of the backlog. It is very much platform specific. And so as we look at our forecast I think we've got a great mix of legacy programs.

We're been delivering for a long time where we get this there, where we get the aftermarket and new programs. So I think we're pretty well positioned.

I mean I would say that if we weren't on some of the newer platforms like the A350 there would be a bigger concern because the reality is there aren't a lot of new big programs that are being awarded right now. So fortunately we're aggressive when we needed to be aggressive and got on some of those key platforms..

And just, John, just to take that one more step and put a number behind it that people may or may not have caught in Vic's commentary about the orders in the last week. Obviously we're talking about last year. But we received an A350 order within the last couple days for about $7 million that was expected later in the year.

And so when we talk to the division folks on that the conversation with our customer is that they are just blowing and going on that thing. And so if there is a slowdown coming on the A350 it's not anywhere in our near term or mid term planning horizon based on the production rates that we're seeing and feeling.

So that's comforting to us for the growth and then the legacy platform like the 737 and things like that you are really not seeing a lot of headwind at that high runner is facing, and in fact with the max engine and that sort of thing they are seeing just the opposite and we're realizing the benefits of that.

So I think to Vic's point we're sitting in a really good spot because we're not concentrated on one platform. And so we diversified that risk over numerous platforms and then we have a big grower that at least for the next 3 years gives us tremendous comfort and visibility..

Sure. Understood. Okay. Thanks so much for taking my questions..

Thank you. [Operator Instructions] Our next question comes from the line of John Quealy with Canaccord. Your line is open. Please go ahead..

Hey. Good afternoon, Vic and Gary. How you've been? So a couple questions. First on Doble on the movement towards more software centric business and product cycles.

Can you just talk to us about the relative purchase decision timeframes, they are new products, new projects, modalities, Doble is s fantastic brand, but you're introducing in somewhat of a new category for your customer.

Is there a long evaluation time or how should we think this as you migrate your customer base towards a little more active life?.

Yes. Sure. I mean, I mentioned in my comments, I mean it is a long he cycle. We've been working there with the ARMS product. I mean, it being in front of customers at one level or another for 18 months to 2 years. So it is a much longer sales cycle. Now, having said that, we're kind of through that.

So we're getting to the point now where we're getting some acceptance, people are starting to be very serious about this. So I think we'll start so see that. The other thing I would say, while its probably - one reason I like long sale cycle is everybody else has it as well.

And so as far as I know we are the only people that have a product that we can put in the field today and the customer can really go and work with. So there's not a comparable product. So I would say we're well ahead of any competition out there and people have to run really fast to catch up and they are going to have to go through that same cycle.

But certainly with software, particularly an enterprise type thing, there are other people that get involved. One of the great things about Doble, particularly with the core products is that maintenance engineer can make the decision. He gets the money, he makes the decision.

And he starts talking about putting software in place and you get a lot more people involved. I mean, this is more of an IT and seize we decision, but the great thing is once you get into that level then those guys can make a decision. But there - as you know working through these larger utilities can be a little weird – bureaucrat.

And so you kind of got to go through the steps to get there, but fortunately we've been at this a while and I think we're there..

And -.

And John, one thing -.

Go ahead..

Hi gentlemen, we had one more thing to that if I could hang for a second, just the other thing that’s important understanding the utility mindset and who our first couple of customers are as referenced customers are highly respected large utilities out on the West Coast. So I think the fact that people will look at that.

It will make a big difference into how they look at that stuff..

Yes. To that point, Gary, so you guys are – you've done real big jobs in the utility space in the past and this whole concept of multi dimensional, interchangeable systems, can you just break it down as utilities become more digitized that the Doble system isn’t stranded and it plugs and plays in different ERP systems.

Just talk about that how it fits into the broader ecosystem with so many things going on a systemic level at utilities?.

Well, that's one of the real benefits of this system. I mean, it was built, designed so that it's kind of agnostic to the hardware. So we don't care what kind of relays they have, we don't care what kind of tests they have, it can really go in any substation and it’s pretty openly coded. So that it's agnostic to the hardware that we see out there.

And one of the reasons we bought ENOSERV was they really brought a lot of that along with themselves and added to that. So we don't see this is something that's going to get put in and stranded. It's a very open architecture..

And in terms of your target market to Gary's point about some of the big Californian guys that you know quite well, are you targeting big IOUs that have done smart at the end point for the residential and then want to backfill infrastructure and get some value out of that network or is it a mixture of folks you're targeting for this?.

It's really across the board. I mean I would say that today it is a larger investor on utilities for what we're doing it doesn't matter if they have AMI in place or not because it's really you know more of a residential commercial end points. And what this system does is really more looking at the substations and the products around that.

So it's - it would not be driven by or limited by somebody having an AMI system or not..

Yes. My last question. So in the AMI smart grid world you’ve had a lot of multiple and value de-construction and you guys exited at a good time.

Are there properties out there in software services that you find multiples a little bit better than maybe filter or test? Can you comment on the relative attractiveness of some of the properties in the - in that space? Thanks again, guys..

Sure. You bet, John. There are absolutely some things out there and it's a matter of making sure do we – to the chapter what you alluded to.

There's a lot of software out there, but what we have to make sure as we evaluate those and those are the things could be dropped into what we have into ARMS system, rather than being have a one-off system because there are so many pieces of software out there addressing these types of things.

And if you don't have something that fits in its overall system like an ARMS system then I think you really do run the risk of having a product that you sell to a couple different utilities, but then that's it. And the other thing I would say is you can get some of these things at a decent price.

I mean, ENOSERV we paid a double - or a single digit multiple for that. So lot of it is just finding the right properties and getting them at the right time..

Thank you. And I'm showing no further questions at this time. And I would like to turn the conference back over to Vic Richey for any closing remarks..

Okay. Well, thanks to everyone for your interest today. I look forward to talking to you in the next call..

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..