Q2 2020 Earnings Call

[music].

Ladies and gentlemen.

Your first standing by and welcome to the E. T E connectivity second quarter earnings call for fiscal year 2020.

Time, all lines are in listen only mode. Later, we'll conduct a question and answer session to ask a question during that time, you don't need to press star one on your telephone if you require any further assistance star zero.

As a reminder, today's call is being recorded.

I'd now like to turn the conference over to your hosts today, Vice President of Investor relation Sujal Shah. Please go ahead.

Good morning, Thank you for joining our conference call to discuss Te Connectivitys second quarter 2020 results with me today, our Chief Executive Officer, Terrence Curtin Chief Financial Officer, He's Miss.

During this call will be providing certain forward looking information and we ask you to review the forward looking cautionary statements included in today's press release.

In addition, we will use certain non-GAAP measures in our discussion. This morning, we ask you to review the sections of our press release, the accompanying slide presentation that address the use of these items.

Yes release unrelated tables, along with a slide presentation can be found on the Investor relations portion of our website at <unk> Dot com.

Due to the large number of participants on the Q and a portion of today's call. We're asking everyone to limit themselves to one question to make sure. We can give everyone an opportunity to ask questions. During the allotted time.

We are willing to take follow up questions, but ask that you rejoin the queue. If you have a second question.

Now, let me circle during the call over to tenants for opening comments.

Thank you should Joel and thank you everyone for joining us today to cover our second quarter results.

Insights around what we're seeing in real time and how this is expected to impact on since we look forward.

We were all living through a challenging environment brought about by the global Cobot 19 Panda.

Well, we had her last earnings call, just 90 days ago and provided or out.

It was before the initial onsite at home in China.

We did not include any expected impacts in order to guidance.

I'm very pleased that despite the impacts we were able to deliver.

Okay patients and meet the commitments, we made to our customers as well as our shareholders during the quarter.

Before I get into the results I do want to thank our employees.

As you all know we are global company with engineering and manufacturing operations around the world.

And the safety of our employees have been primary concern.

I would like to express my gratitude and appreciation to our teams for their dedication as we navigate the cobot 19 crisis and continue to effectively serve our customers as they also we're trying to figure out how to navigate this crisis.

A few things I think stand out in a response to this crisis.

First as a company, we were able to prioritize the safety of our employees, while demonstrating strong execution with our customers.

Our engineering customer service and other non manufacturing teams adapted well to promote and online work to ensure innovation and service to our customers.

You know I also believe we demonstrated operations resiliency.

You know in China, we brought back our plants online relatively quickly considering the environment.

And steadily increase utilization levels to minimize the impact in the quarter.

All of our factories are up and running in China.

And he's will highlight where we are manufacturing in Europe, and North American his section a little bit later.

And lastly, I believe we demonstrated agility.

And it gives us confidence about our ability to continue to adapt to changing conditions.

Our employees have been extraordinary in supporting our communities customers and each other.

What I've seen in the past few months gives me confidence in our position coming out of this crisis.

Well talk more about what we expect over the next few months, but I am proud of the performance resilience and Flexibilities of our team in this quarter.

So if you could let me start talking about result, and they'll begin on slide three and I'll handle frame out the key points of today's call.

We delivered sales that were in line with our guidance and adjusted earnings per share that was above the high end of our guidance range with strong performance across all three of our segments.

Adjusted operating margins were up 16% and reflect the diversity of our portfolio and the early execution of cost reduction actions, placing T. In a position of strength at a time with continued uncertainty.

Another key point is that our balance sheet, a strong can we have ample liquidity.

A key part of our business model is a strong free cash flow engine that is resilient in periods like this.

We expect to generate well in excess of $1 billion of free cash flow. This year and we also have $2.3 billion with liquidity available.

Also as we look for you know there is limited visibility of future demand.

We do expect to see greater cobot 19 related impacts in our business in the second half.

With particular market weakness and transportation as well as in the commercial aerospace market.

As a result, we are estimating that our sales could be down approximately 25% sequentially into quarter three from our quarter two levels.

And lastly, as we look beyond the crisis.

We do remain excited about where we position t. strategically.

I'm convinced will get through the crisis and there is no change to our margin expansion.

We expect to improve our earnings power by continuing to execute footprint consolidation plans, while accelerating additional cost reductions in light of the weaker demand environment.

When markets do stabilize and return to growth, we're well positioned to benefit from a recovery in China, which is about 20% of our business as well as a broader recovery in the automotive and transportation markets.

The other thing that's great with our cash flow is that we will continue to invest in content growth opportunities to enable outperformance versus underlying end markets and we will continue to benefit from the secular trends across the businesses and where we position TV.

So if you could I'd appreciate it we could turn to slide floor, and four and I'll get into review a few additional highlights from the second quarter.

Sales of $3.2 billion were in line with our guidance and it was down 6% on a reported basis and 5% organically year over year.

Our orders grew sequentially, we saw a book to Bill one on 1.05.

And then these orders reflect that our customers securing supply chain a components in an uncertain supply and demand environment.

In fact, our orders in the quarter were higher than we expected when we started the quarter.

But I think a key point is that late in the quarter, we did see a falloff in orders in certain businesses, which continued into April and.

And I'll discuss that more when I talk to the next slide.

From an earnings perspective, our adjusted operating margins were above 16% and adjusted earnings per share of $1.29 exceeded the high end of our guidance driven by the strong execution of our teams in all segments.

And reinforcing my earlier comments on our cash generative business model year to date free cash flow was up 34% versus the prior year.

And in the second quarter pre cash flow was approximately $310 million.

With approximately $430 million be returned to shareholders during the quarter.

Going forward, we remain committed for dividend, but we'll continue to evaluate our share buyback plans in light of the uncertain market conditions.

As we look forward and we are withdrawing our guidance for the full year.

Well, we are providing a high level view a quarter three as compared to quarter too.

For the third quarter, we believe that our sales could be down approximately 25% sequentially with a roughly 45% sequential fall through to adjusted operating income on the sequential revenue decline.

This reflects the order trends, we're seeing with market weakness driven primarily in the transportation and commercial aerospace markets, along with some inventory and supply chain corrections I will discuss.

Well, we can influence some market environment or how cold it will impact our customers. We remain committed to execute on the levers we can control to drive our cost reduction of footprint consolidation plan well continue invest in the long term growth and content opportunities.

Okay.

So please turn to slide five and let me get the order trends not only in the quarter, but also what we've seen since quarter end.

The second quarter orders were at $3.4 billion and stronger than expected as customers secured supply of components in an uncertain supply chain environment, particularly in China.

While we were impacted by the Kogut related shutdowns in China early in February.

I am pleased with how quickly we brought her 18 factories back online.

Due to the high levels of automation or revenue was minimally impacted in the quarter and we were able to maintain production to meet our customer commitments, even with periods of labor shortages.

I believe this demonstrates that our core manufacturing capability to source of differentiation.

For TV as well as our customers.

As you can see on the chart, we've laid out the sequential orders for quarter, one quarter to some not going to spend as much time when the actual numbers in quarter, two but I want to spend time of what we're seeing in late March through April to provide a more accurate picture of demand going forward.

As the Americas in Europe, we're being impacted by code.

And transportation, we saw the drop off of orders that started both in auto and commercial transportation late in March and continued into April.

As you know our customers have closed factory starting late in March in Europe, and North America.

I'm also sure you've seen some of the announcements discussing the plant closures as well as the assumptions one production can return.

And industrial we sold erosion of orders in commercial aerospace, but we have ongoing strength of orders in our defense business, our medical business and our energy business and our energy business services the power utilities of the work.

In communications, we have seen stronger demand and data and devices for cloud Blace applications as datacenter build out further capacity to handle the increase in high speed data traffic and storage as well as trying to recovery.

And in China, which represents about 20% of our sales.

Yes in March and April or orders have basically returned to pre lunar new year levels before the coated outbreak occurred in China.

So we are seeing a recovery in China across many of our business.

So let me turn to slide six and I can frame how these trends connect to our sales do a quarter three and this is a new chart that we included a for you.

We are highlighting some of the major sequential drivers from quarter to quarter, three and our assumptions on this slide.

But I do want to highlight we aren't capturing all the puts and takes of our different businesses in the quarter.

Directionally, we are expecting sales to decline approximately 25% sequentially into quarter, three and we put these in the four buckets.

The first bucket is around auto production.

We do expect auto production globally to decline by approximately one third sequentially from the 18 million vehicles globally produced in the second quarter, two approximately 12 million vehicles being produced in the third quarter, which is online with aegis is view.

This production decline in auto will drive about half of our sequential decline of total company revenue.

The second bucket isn't expected reduction in commercial aerospace market of approximately one third due to lower production.

By the large airframe manufacturers.

So these first two buckets are really market related.

The third bucket is around the auto supply chain.

And with our second quarter auto sales well ahead of production I'll talk about.

There was a component inventory build by our customers in the quarter.

As a result, we expect approximately $200 million of inventory adjustments by our customers in the third quarter.

And this should be temporary effect as that inventory bleed off.

And then the fourth bucket cover supply chain impacts outside of auto.

T at our customers have a number of factories that are temporarily shut down due to cope with 19 as a result of government actions.

We expect to resulting supply chain disruptions to impact the number of our other businesses and this will cause a reduction of approximately $100 million in the quarter.

Okay as we go through this quarter.

I want to highlight this is the near term impact that we're seeing due to the pandemic.

But longer term, we expect to continue to benefit from broad secular trends across our businesses.

Based upon the leading market positions that we bill.

So let me now turn briefly discuss segment results in the quarter.

And we projected with a full details on slide seven through nine for your reference I'm just kind of touching.

Hi, leveled horribly.

And our transportation segment sales were down 5% organically year over year with declines in each of our business.

Auto sales were down 2% organically with global production declines being down 20%.

Our relatively stronger performance was driven by our customer supply chain build ahead, a factory closures as well as the continued benefit of content growth.

While we are in a volatile demand environment.

We continue expect increased production of hybrid and electric vehicles and ongoing adoption autonomous features which will continue our market outperformance that we've had for quite some time now.

And sensors I want to highlight that we recently completed the acquisition of for sensor, which will now be included in our financial results beginning in the third quarter.

In the industrial segment, our sales declined 3% organically year over year as we expected.

We saw declines in commercial aerospace and industrial equipment as a result of the market weakness.

However, we are seeing stability in defense medical and energy due to positive underlying trends and expect those businesses to continue to be stable as we move through the rest of the year.

In communications sales and margins came in as we expected.

And while data and devices declined in the second quarter, we are seeing growth and high speed and cloud applications and expect this to continue into our third quarter.

So with that as a backdrop, let me turn it over to ease who will get into more details on the financials and then I'll come back and cover our expectations for the third quarter.

Thanks to parents and good morning, everyone. Please turn to slide 10, where I'll provide more details on the Q2 financials.

Adjusted operating income was 519 million with an adjusted operating margin of 16.2%.

Adjusted EPS was $1.29 exceeding the high end of guidance.

GAAP operating loss was $415 million due to a onetime noncash charge in the quarter of 900 million. This reflects a partial impairment of the goodwill associated with our sensors business.

Also include or 22 million of restructuring and other charges and $12 million of acquisition charges.

We continue to expect restructuring charges in the range of 200 to 250 million for this fiscal year.

GAAP EPS was a loss of $1.35 for the quarter included noncash charge of $2.67 related to the goodwill impairment and restructuring acquisitions and other charges of eight cents.

On the other side, we also had a tax related benefit of 12 cents related to the pre separation tax matters and the termination of the tax sharing agreement shared previously.

The adjusted effective tax rate in Q2 was 16.1% and for the third quarter, we would expect a similar rate.

And if you turn to slide 11.

Sales of $3.2 billion were down two were down over 200 million year over year, including an impact of $60 million from currency exchange rates, but we were able to maintain adjusted operating margins over 16% in the quarters I mentioned.

As Terrence mentioned earlier, we already had a number of actions underway ahead of this downturn, which helped us maintain healthy operating margins for the past two years, we've been executing our margin expansion plans in the industrial segment and about a year ago, we kicked up our factory footprint consolidation efforts and transportation.

We continue to execute on these plans and our accelerating certain cost actions due to the recent drop and volumes.

I now want to give you an update from an operational perspective.

We are operating all of our fab in China, and most of our factors throughout Asia.

Most of our vectors in Europe for operating with the including the recent reopening of our factories in Italy and Spain.

In North America, all of our factories are open in the us, but we do have some plant shutdown in Mexico, including those serving automotive.

And many of our customers are going through temporary.

Downs of their manufacturing operations in different regions and all of this volatility has caused has resulted in supply chain dynamics that Terrence discussed previously.

In the quarter cash from operation from continued operations was 481 million, whereas free cash flow was 311 million and we returned 433 million to shareholders through dividends and share repurchases in the quarter.

And if you'll turn to slide 12 to review, our cash flow and liquidity and this is a newer slide that we thought pertinent for this call today.

We have a history of strong free cash flow generation and for the current year, our free cash flow is up 34% year to date.

Versus the prior year for our fiscal year, we expect free cash flow the well above 1 billion.

Our long term capital strategy is to return two thirds of our free cash flow to shareholders through dividends and share buybacks and we remain committed to paying our dividend and we'll continue to thoughtfully evaluate share repurchases in light of evolving market conditions.

We're also reducing our plans for capital expenditures to approximately 575 million. This year, which is a reduction of about 100 million from our prior year 90 days ago. However, and this is important we remain committed to funding growth initiatives that will enable future growth opportunities that the lifeblood of our company.

We continue to execute on footprint consolidation plans and pursue additional opportunities to drive cost reductions.

Across our businesses, we have units that are being impacted to differing degrees and for those units that are most impacted we are implementing selective furloughed employees that are largely tied to where our corresponding customers have temporary factory closures.

We will continue to evaluate our cost structure as the demand environment evolves.

We are in a strong liquidity position with 2.3 billion available.

As the attach chart details our debt maturity ladder is gradual in early two February of this year, we raised 550 million euro debt at zero percent coupon. The use of the proceeds was for the acquisition of first sensor and Prefunding of our pending 350 million dollar debt maturity and.

Good.

At quarter end, we had a cash balance of approximately 800 million.

Given our strong cash position, we have not needed to be in the commercial pay commercial paper market for some time.

We have a 1.5 billion undrawn revolver committed by a strong bank group.

Within the revolver covenant, we expect to be well below the 3.75, rolling four quarter debt to EBITDA ratio going forward.

As a reference point with our current debt to EBITDA ratio of 1.5, we are well below that threshold.

With that I'll turn it over to Terence too.

Provide some additional commentary about the affordable.

Thanks, Keith and.

We have provided some details of our expectations going forward on slide show 13, So let me summarize with a few comments around the word on that page.

For quarter three.

From a market and demand perspective, we're expecting weakness to be driven by transportation and commercial aerospace as I've said.

In addition, we are expecting supply chain adjustments in auto as well as broader term supply chain impacts and other areas and we expect this supply chain impact both in auto and others to be temporary.

As a result, our best estimate for the quarter is an approximately 25% sequential sales decline with an approximate 45% fall through to adjusted operating income on that revenue decline.

And this fall through is greater than our typical fall through to the shortness in severity of the volume drop sequentially.

During the call we talked a lot about transportation on comair, but I do think it's important that we highlight the areas that are continuing to say stable as well as we benefit from and they are defense medical energy as well as Dave devices, and that's about a third of our revenue.

The other thing is we are in an excellent position to benefit as auto demand returns as well as China continues to recover.

And while fourth quarter visibility is limited.

Many believe that our quarter three to June quarter will be the low point in global auto production.

We expect that production will improve as we move past quarter, three and will benefit both from the production increases as well as inventory normalizing in the auto supply chain like I talked about.

While the demand environment is uncertain.

I am pleased with our operations resiliency that we've shown in our ability to continue to serve our customers. During this challenging time.

We have an excellent free cash flow generation model with ample liquidity.

And this allows us to continue investing content growth and other secular opportunities across our businesses to emerge stronger when our markets return back to growth.

And with that Suzhou, let's open it up for questions.

Hey, Marcella could you please give the instructions for the QNX session.

At this time I'd like to remind everyone in order to ask a question. Please press star and the number one on your telephone keypad in order to have timing all questions. Each participant is limited to one quick question, if you'd like to ask a follow up please reenter the queue.

Your first question comes from the line of Shawn Harrison from the capital Your line is open.

Hi, Good morning, everybody is going to hear from you.

Good morning, Sean.

Parents I wanted to just go to that last comment of auto production ended the second half of the calendar year and just maybe an idea of how much you could bounce back just upon a normalization of production schedules into the September quarter, I know I, just as a pretty robust figure out there and maybe that's not realistic but.

Down South was $12 million and then secondarily do you get the same type of margin uplift as production recovers versus.

The downtick, you're seeing into margin profile this quarter.

Sure. Thanks, Sean for the question when you think about automotive let me just take a step back first and where where do we think auto production was going to be before.

Started and even last quarter and I know, we talked about the suit 200 million dollar supply chain impact we thought the world was getting stable before covidien and there was going to be about 21 million units may per quarter on the planet.

And last quarter, it was 18 million.

And moving from about 21 that 18, a big chunk of that was China as it in China got impacted by coated.

And a little bit elsewhere in the world.

As we move to this 12 million.

From an 18 million to the 12.

We are seeing China production tick up but we're also seeing in the western parts of the world the impacts of the factory closures in Europe, and North America, and that's probably give me down collectively in the western World about 50%.

So five zero and as we as we look forward.

Our customers are going to continue to ramp.

So when you think about 12 million unit impact I think it is reasonable to assume youre going to get an improvement into the fourth quarter as auto factories ramp back up and then in addition, we'll get the benefit as the supply chain works out. So I think theres a couple of factors that point to this quarter being a low point and in quarter three.

Great has production come back online, we get further recovery in China as well as we move back up were to be in the fourth quarter. There's lots of numbers out there you mentioned digest.

But we do think quarter three would be the low point.

The other thing on your fall down question and we would expect.

As we start to get whatever that level of production increases we do expect will get fall up.

At a pretty significant rate. So it's the levers that he talked about that we've been doing on the cost side coming into this which we're we're proud that we had those going that will give us some levers to work on during this but I do think you can expect pretty healthy fall up no different than the fall down and it doesn't change how we think about what were.

Entitled to from a margin in the markets and in a place like auto where we are.

Had a leading position in crisis is like this we've only got stronger and we're going to get stronger out of this one.

As our customers will for the partners that are going to be therefore, and they're going to Cts therefore everywhere in the world.

Okay. Thank you Sean create the next question please.

Your next question comes from the line of AD met dairy any from Evercore. Your line is open.

Yes, Rob good morning, guys out thanks for taking my question.

Good morning.

Yes, Kevin So I'm curious in a post call with world.

Do you see market share dynamics accelerate in favor of larger companies and do things trends like integrated solutions for connectors in sensors.

Coming more attractive to folks.

I'm trying to understand it wouldn't have gone through sessions in the past have you seen PE benefit from share gains as you go through a recovery.

Yes, the to the degree question and thank short I think what you see as companies go through.

We have benefited through these crisis is to gain share.

And I think back to await no nine a little bit while the company is very different.

We did gain share because of the financial stability, we have that he talked about and also our global customers really looking to how do we get deeper and who's going to support them and I actually believe that what you sold in our operational performance in the second quarter, we did benefit where other people can deliver we could.

And as people were trying to secure supply chain. They were looking for who could keep their supply chains going in an uncertain comp. So I do believe it to depreciate differentiation point.

I do think you know as we've always told new share doesn't move and big chunks in our industry.

They are going to be looking for the partners as they look forward and I think between how our engineering teams were able to shift over to online innovation, we didn't see a tail off in projects and also how we've been adapting our supply chain and also not only our is also helping our supply chain partner.

There is at or below us understand the safety protocols, we expect because they are an extension of us.

I am pretty proud of what we accomplished and I do think it creates opportunity for more stickiness as we come back.

And I do think its share opportunity and Thats one of the things we view positively about this crisis.

Okay. Thank you I'm. It we have next question. Please.

Your next question comes from the line of detailed guidance from Wells Fargo. Your line is open.

Hey, good morning.

The by Jeff is one of there's not much to control there.

So I'm not going to ask a little bit of forward looking question just like the the prior to.

You touched upon this a little bit turns but could you point to some specific signs of recovery, we should be monitoring for here in Europe, and North America, especially automotive vertical I mean granted we understand it won't be the same playbook as China or even the trajectory as China intend to sprint.

That's one part secondarily.

Look at you overall portfolio what are some of the verticals that we think that we should be looking forward to believed that.

Some segments does recover only and some that probably recover with AMAG. Thanks.

Sure no thanks depot, and I'm, probably going to spend more time when the second part of your questions. I do think it's important and I also think we spent a lot of time on the scrip framing and what we're seeing an auto income air but.

When you think about our portfolio.

There is a third of our portfolio that is feeling very little impact are minor impacts and.

Our data device cloud business.

Actually we continued to see an acceleration in those orders.

Our medical business.

Has been very stable our energy business has been stable and as we've been talking to you defense has stayed stable and remains at a very high level.

Data on below Theres about a third of PE that I would say right now is very stable from an order perspective, we may have some areas where in countries, where governments asks us to stay show up for a little bit.

But those indicators I think are continuing to remain stable and I feel good about how our teams are performing there that's about a third.

Then there is I would say, our industrial equipment business as well as our clients business. We do see some softness there both are benefiting from the recovery in China, both have big China presences.

But they are being impacted in the west and I do think they'll stay soft and unless they have different underlying drivers and M&A industrial business that would probably come back to more has how does capex play out over time as what you would look at there.

The third third businesses clearly transportation.

I think it does come in auto builds and I think we spent a lot time on that but what I would also always highlight to remember our unique position versus many companies where global.

We are stronger in Asia, and Europe, and North America.

So I do ask you as you look at builds and I know this this group does.

The Asian and European build through are very important with North America sort of being a lower impact and I know, sometimes as being in the United States. We look at the us build more than the global builds but I think as Asia comes back in Europe comes back they are stronger positions and.

Very important to us.

And then the last market I haven't talked about that I would say I don't think I'm a surprise anybody is to calm aerospace the calm aerospace which is around $550 million up annual revenue for TV and I know in the comments I said, we expected to be off a third.

And sort of our waterfall from Q2 to Q3, we do think Thats a market thats not going to be coming back near term I think there's many other you can look at Boeing has said what Airbus is saying and elsewhere. That's one that is going to be down for awhile.

So I think I hope that answers the gamut of what.

You can look at some of the indicators and I also think it relates to some of the underlying and.

I appreciate the question.

Okay. Thank you deeper we have next question. Please.

Next question comes from the line of Christopher Glynn from Oppenheimer. Your line is open.

Thank you good morning.

Was curious to hear you talked about Terence the.

Us factories and facilities up and running Mexico.

Still pockets of shutdowns.

It is there any key differences between government mandates and how those roll through in their respective production regions and also any.

Major impacts of just how people workers are responding independent of government mandates.

No. Thanks for the question and I know Heath went through.

The prepared comments of where have we seen things.

What we have seen as government responses are very different.

And I would say the vast majority of the world because of where our products go we have been deemed essential and we have been able to Ron.

To make sure that our products continue to go out and all the applications. A support there are countries that have taken broader shutdown Heath mentioned in Europe, we had some in Italy, and Spain that were more severe than elsewhere, we had to take those down those factories are coming back up.

And then also in Mexico, Mexico has been one that has gone a little bit narrower or what they deem as essential spent much more around medical as well as food processing.

And they have been sort of individually, bringing other industries on and we're sort of following that Lee. So we are partially running in Mexico.

And so the government answers it around the world have been very different.

So that's one element on the people side, certainly we need to do the things that keep our employee safe.

And being a global company.

As China went through co bid, we learned a lot of practices that we're able to get us up in China quickly.

We're trying to regulation footed and we've been rolling those around the world and that's one of the things that I think our supply chain team has done a tremendous job as well as our crisis team to really make sure whether its protective equipment temperature screening and you can keep going how do we changed some of the layout some our factories to make sure you don't.

Concentrations of people.

And there are things you have some retraining of employees to make sure that theyre comfortable at the environment, they're coming back into.

And it's also we continue to invest in automation.

And that's something I do believe the investments we've made over the past handful years around automation have also allowed us to be less labor intensive in certain parts of the world than we were 510 years ago.

So like everybody, it's very complex, we're working through it and certainly for those areas that are ramping back up.

We have full procedures around how we get our employees back to work how do we prioritize our employees to come back to work to really make sure we keep site.

Okay. Thank you Chris. Thanks next question please.

Yeah.

One comes from the line of Wamsi Mohan from Bank of America. Your line is open.

Yes. Thank you good morning.

Hey turns.

Can you compare.

He is different this time downturn versus the last downturn. It feels like your breakevens are quite different trough margins appear a lot higher than it did last time around and if I could what would decremental margins have looked like in your fiscal <unk>.

Without the supply chain adjustments. Thank you.

Sorry, Wamsi I guess I'd have to take this question because it wasn't here in a way no knowledge. So I guess, it's pointed that may.

As we talk to allow the about and.

I know some companies have gone out and said as they're thinking about the guy they compare to only know nine is how their modeling there playbook.

I think there's some things that are some similar PE today versus eight number nine I would tell you theres a lot of things that are a lot different.

With all the moves we made the portfolio, where we position TV the costs actually we've taken so let me try to summarize what's what's the seem a little bit but also the things that I think we've improved the business in the portfolio.

The one thing that I would say the probably the number one.

Thing that is the same is the cash generation model we have.

Our cash generation will be very resilient during these times and as you all know we use working capital in times of growth and one of the things that when you do get a little bit of a cycle like this and you have some of these were going to generate free cash flow, we're going to adjust cap.

Thanks around capacity, we are going investing growth Capex and I think thats one of things as always allowed us back to the question earlier to get stronger during crisis is because we can continue to invest around growth, but also keep our strong cash generation milestone.

That's the big thing that I think is the same.

Now when you think about things that are different.

No.

I'm more focused and a lot stronger than.