Q1 2020 Earnings Call

Greetings and welcome to the jump there Inc. first quarter 2020, <unk> earnings conference call.

At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.

If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

As a reminder, this conference is being recorded.

I'd now like turn the conference over to your host using Brentano with Investor Relations Corporate Communications. Please go ahead.

Thank you operator, and good morning, everyone and thank you for joining us today.

Just on earnings results were released earlier this morning, and a copy of the release is available at Jen Hsun Dot com.

Additionally, a webcast replay of today's call will be available later today on the Investor Relations section of Gendarmes website <unk>.

During this call we may make forward looking statements within the meaning of federal security laws.

Eight months reflect our current views with respect to future events and financial performance.

We undertake no obligation to update them and actual results may differ materially.

Please see gentlemen, FCC filings, including the latest 10-K and subsequent reports for disclosure, it's up our risk factors and other risks and uncertainties underlining such forward looking statements.

During the call we may discuss non-GAAP financial measures as defined by FCC regulation G.

Reconciliations of these non-GAAP financial measures to the comparable GAAP financial measures are included in our earnings release or Investor presentation.

On the call with me today, our Phil I alert, President and Chief Executive Officer, and Mattel and versa, Chief Financial Officer.

During their remarks, so in the tail, we'll be referring to a presentation deck that we have made available on our website and Jensen dot com slash events.

After their prepared remarks, we won't be pleased to take your questions.

Now I'd like to tape turned to call over to Phil.

Thank you James Good morning, everyone and thank you for joining us today.

As we're all well aware the outbreak of the global pandemic has created a significant hardship and challenge worldwide.

Our Hearts go out to the communities in individuals deeply affected by the covert 19 pandemic.

We'd like to express our gratitude for all of those on the front line, including healthcare workers first responders and other a central service providers.

On the outside of the pandemic our top priority has remained clear the health safety and support of our global team members and the communities we serve.

Now, let me move to slide four coping 19 will have severe economic ramifications the full extent of which are still to be determined.

Since launching our focus growth strategy two years ago, we built a strong foundation from a capital liquidity and balance sheet perspective.

No one can perfectly predict the severity or longevity of the viruses impact on a global economy, we moved quickly to take additional actions to further improve our financial flexibility and conserve cash.

Shown on slide four these include.

We drew down an additional $169 million under our revolving credit facility in March.

We have right reprioritize capital expenditures and a reducing our planned capital spending.

We are actively reducing operating expenses.

We're deferring a portion of employee compensation, beginning may onest, including a 30% to 40% deferral ideal executive level and a 20% deferral for all other Sally salaried employees.

We are managing working capital with strong discipline to improve cash flow.

Turning to slide five.

Let me give you a quick update on the current status of our operations.

As of this morning, the majority of our offices and manufacturing facilities outside of North America our open.

In North America, we're still waiting for many OEM customers to resume operations and for government approval to reopen our plants in Mexico.

However, our medical operation in Cincinnati is considered essential and is operating at full capacity.

In addition, our facility in Burlington, Canada is primarily supporting the medical business at partial capacity.

In Europe, our manufacturing facilities in North Macedonia, and Ukraine, as well as our warehouse in Hungary are partially open to support unlimited customer orders.

In Asia, our plants in China, and Vietnam are fully operational, but we are adjusting our capacity based on reduced customer demands.

As you can see our Asia based operations, where the first to come back online and we have leveraged our learnings from those facilities to identify and implement the appropriate coven 19 safe work practices and protocols and our other manufacturing facilities around the world.

We are actively managing our response to the situation at each of the region's taking into consideration government mandates and health and safety guidelines.

As our customers are coming back online, we are ramping up our production where possible inline with demand always taking into account the health and safety of our team members.

We have implemented a global task force to manage our supply chain and to ensure a proper flow of components from our key partners.

So far we are meeting all customer requirements and we're managing this dynamic situation on a real time basis.

Now onto the first quarter highlights on slide six.

Despite the challenging environment, we delivered solid financial results for the quarter.

First we were able to continue to outperform in automotive versus the key markets that we serve.

Excluding the impact of foreign currency translation or 9.4% decrease in first quarter organic automotive revenue.

Compares to a decline of 24% and vehicle production for our key markets.

North America, Europe, China, Japan and Korea.

Adjusting for our lower revenue exposure in China, which represented only 6% of revenue in the quarter.

We outperformed actual light vehicle production by approximately 560 basis points.

Second we achieved record quarterly revenue in medical growing nearly 50% year over year or 27%, excluding the impact from the acquisition of Steeler.

Hospitals across the U.S. in Europe are using our blankets all solution to support temperature management of cobot 19 patients to improve outcomes.

Third we managed our expenses with discipline, reducing SGN, a expenses by 20% year over year.

A portion of which was attributable to the divestitures of CSC industrial Chambers and GPG.

Finally, we significantly improved cash flow from operations compared to the first quarter of 2019.

We generated nearly $30 million of cash flow from operations in the first quarter of 2020 and over $140 million in the last 12 months.

Our business model, which generate substantial cash flow along with our strong balance sheet with total liquidity at $450 million at quarter end.

We will provide the financial flexibility to help safeguard against the current uncertainties in the marketplace.

The tail will provide more details on our financial results in a few minutes.

Before I get into the details of the quarter I would like to share that Ford Motor Company announced that they would manufacturer powered air purifying respirators as part of their response to the Kobin 19 pandemic.

The core of the Respirator design is the electronic control or which adjust the power level of an air blower.

I'm very proud that Ford has selected jumped there to be their partner to design and supply the electronic controller in this vital equipment used to protect <unk> healthcare workers in the fight against totaled 19.

Now turning to automotive highlights on slide seven.

In the first quarter, we launched our automotive solutions on 39 different vehicles across 19 Oems.

Including Ford, Julie General Motors, Great Wall, Honda, Hyundai Kia and Volkswagen.

We continue to see momentum for our Ccs product and we launched on the Buick Encore Chong on P.S.A.D.S. nine sedan.

Hyundai Kona.

Hyundai Mighty Qia, Sorento, and say I see Rx seven roby.

And battery thermal management, we started production of our proprietary battery heating solution for the plug in hybrid Jeep renegade through our customer LG Chem in the fourth quarter and we've now launched on a second vehicle the Jeep compass.

I'm pleased to share that our manufacturing facilities in Tunisia, and supply in Mexico, and in long Fong and Shenzhen, China have each earn the coveted 2019 supplier quality Excellence award from General Motors.

This award acknowledges top performing suppliers that meet a very stringent set of quality performance criteria.

I'd like to congratulate our global operations team for their hard work and commitment to deliver the highest level of quality and service for our key customer.

On the technology front, we continue to make great progress on climate sense development project with luxury German Asian, and U.S. automakers.

In 2019 General Motors and generators jointly presented our development project results at the society of automotive Engineers thermal management systems Symposium.

The results were subsequently highlighted in a number of industrial publications, including the Green car Congress charged electric vehicle magazine and most recently in the March addition of automotive engineering that highlighted new approaches and thermal management.

Lastly, I'm excited to share that we made a strategic acquisition of promethium its portfolio of innovative thermal management technologies in the first quarter.

Through a combination of in house innovation and strategic investments like this we're developing innovative next generation products engineered to deliver industry, leading comfort with more energy efficiency.

I'd like to thank our global R&D team for their continued efforts and expanding our technology leadership, even in these challenging times.

Now on to slide eight where you can see that in the first quarter, we secured $120 million in new program awards across five different customers.

While the award level is lower than prior quarters, given the current environment, we continue to win over 80% of our opportunities.

Well there are many delayed awards in the first quarter, we are seeing increased activity and more wins in the second quarter.

In the first quarter, we won multiple Ccs awards, including platform wins with afford Everest Hyundai Creta, Keith Sportage as well as the revealing our one S.S. UBI and our warranty truck.

Within is one of our newest customers.

Electric vehicle manufacturers are now leveraging our solutions to enhance comfort, while significantly improving energy efficiency and range.

As a further example, I'd like to share that we've just one strategic Ccs award for the Hyundai Genesis EDI platforms.

With the addition of this award gentle is now the exclusive provider of all Ccs solutions for the Genesis brand.

I'm also very excited to share that we want our first electronic air cooling board for infotainment and head up displays with Mercedes for their entire future lineup of battery electric vehicles.

This is an important milestone for gender as we continue to expand value propositions to our customers and add content to vehicles.

Now, let's turn to slide nine for a discussion of our medical business.

Many of our medical products play a critical role in helping to fight Cobot 19.

The medical team team is doing an exceptional job in meeting increased customer demand, while keeping our team member safe.

In the first quarter, we delivered record quarterly revenue growing nearly 50% year over year or 27%, excluding the benefit of the acquisition of Steeler.

During the quarter, we recorded a substantial increase in blankets roll equipment and consumables shipments across the U.S. and Europe to support temperature management of Kobin 19 patients, which helps to improve outcomes.

Our liquid our liquid based patient thermal management solution was selected by several large U.S. hospital systems to treat hi, fevers of Coven 19 patients.

These include Northwell Health, New York States largest healthcare provider.

Stony Brook University Hospital, the largest academic medical center on long Island.

University of Rochester Medical Center in New York, and Northwestern Memorial Hospital in Chicago, just to name a few.

In addition, we achieved strong growth in our new you've ATRIO cardiovascular surgical advanced temperature management system.

We continue to leverage our expertise in thermal technology and medical device design and production to further develop our product port pipeline for continued revenue growth.

To summarize on slide 10.

Over the past few years, we'd have steadfastly executed against our strategic plan to focus our growth divest noncore businesses.

And our cost structure and bring innovative solutions to the market to drive long term growth.

As we are faced with a worldwide pandemic that has significant implications for our customers and our company I'm extremely proud of the agility flexibility and dedication that I've witnessed from our more than 11000 employees globally. As we continue to successfully deliver on our commitments to our customers shareholders and other stakeholders.

We will remain highly focused on strong execution, delivering delivering critical medical equipment to enable hospitals to manage patient temperature needs.

Empowering Ford motor to build air pop powered air purifying respirators and as production lines ramp up again.

Deliver our unique thermal solutions to Oems and tier one suppliers worldwide.

With our capability to pivot our resources to meet immediate customer needs, coupled with our strong balance sheet and financial resources.

Im confident in our ability to weather the storm and emerge as an even stronger company in the future.

With that I'll turn the call over to the tail for a little more color on the financial results.

Thank you, Phil and 10-Q, two everyone joining the call today. So let me start on slide 11.

Focus on the items that the most significantly impacted our first quarter results.

So for the quarter product revenues declined by 11% compared to the same period of last year.

And if we adjust for the impact of effects. Our overall part of the revenue decreased by approximately 10%.

The primary driver of the year over year decline was the impact of the cobot 19 outbreak, which accounted for approximately 27.

Revenue shortfall in the quarter.

If we exclude the impact of coping 19, our revenues in the quarter would've been pretty much flat year over year.

Our automotive segment was significantly impacted by to covert 19 outbreak and revenue declined 11% year over year or down 9%, if we exclude effects.

In comparison according to your chance latest data light vehicle production declined 24%, what our key markets of North America, Europe, China, Japan and Korea.

While our automotive business was impacted by cooling 19 in all depart aligns.

We saw strength Eatingwell heaters, where revenue was up 13% year over year due to higher ball.

CA Ford and BW.

In addition, RV revenue BTM was also up 4% primarily due to the newly launched immediate program.

These revenue increases were offset by a decline in all the other part of funny.

Typically ccs revenues decreased by 13% however, excluding the impact of Coven 19, and the fix Ccs revenues would have grown 4%.

Seater revenues decreased 30%, but similar to Ccs would have growing 1%, excluding the impact of cold in 19 NFX.

Automotive cables revenue decreased 7% due to lower orders from Bosch and electronics revenue was down 19%, primarily due to the continued decline in volume related to RV.

And platform cancellations that occurred later in 2019.

If we move to the industrial segment revenue declined 22% compared to the first quarter of last year.

And this decline was entirely due to the dispositions GBT indices Xendesktop chamber businesses in 2019.

Conversely, we still continue strengthening our medical business, where revenues increased more than 48% year over year or 27%. If we exclude the benefit from the acquisitions theater.

This increase was primarily due to the high demand of blankets.

As I was out of the Cobot 19 pandemic.

If we move to gross margin gross margin for the quarter was 28.9% compares to 29.2% into year ago period.

30 basis point decrease was due to the annual customer price reductions and the lower automotive volume due to covert 19.

Sure the offset by labor productivity at the factories supplier cost reductions and the positive sales mix is the result of this trends in our medical business.

Gross margin also improved 40 basis points sequentially compared to the fourth quarter 2019, and this was primarily driven by the positive sales mix lower manufacturing fixed cost.

If we move to operating expenses operating expenses were 47.4 million in the quarter.

And this amount included 3.8 million of restructuring charges related to our footprint realignment initiative that we announced last September.

As well as other discrete restructuring actions.

Additionally, last year's first quarter, we incurred approximately 1.1 million of.

Transition costs that did not repeat this quarter.

So if we adjust for the restructuring charges in both periods and for CFO transition costs operating expenses were 43.6 million down from 50.5 million the first quarter 2019.

The year over year decline of more than 13% was primarily driven by the impact of the divestiture of the CZ industrial chambers and JBT businesses.

So what is junaid due to lower headcount reduced travel costs and lower R&D costs.

Most in the quarter, we incurred in the lower stock compensation costs of approximately 2 million is that is out of the mark to market. The revaluation of stock appreciation rights at the end of March.

We expect that this onetime benefit will normalize in the upcoming quarters when the equity market stabilizes.

Adjusted EBITDA of 32.7 million decreased two and a half million or 7%, it's going to prior period.

However, adjusted EBITDA rate or 14.3% improved 70 basis points in spite of the lower volume is the result of our continued focus on cost reduction initiatives.

And finally adjusted EPS in the quarter was 51 cents a share compared to 55 cents a share into first quarter of last year.

Our tax rate in the quarter was approximately 31% slightly higher than our expected range of 27% to 29% and the higher tax rate in the quarter was driven by lower income low tax jurisdictions, you to the impact of covert 19.

If we move to slide 12 to the balance sheet, our cash position at the entered the quarter was 225 million, including two and a half million over just click the cash coming from the disposition of this year Xendesktop chamber business.

Our cash position in the quarter increased by 172 million, primarily as a result over the 169 million drawdown from the revolver. They we executed in the middle of March is a pretty cautionary measure.

As of April 30, we had approximately 230 million in cash cash equivalents and restricted cash.

In the first quarter, we generated 29, and a half million in cash from operating activities compared to approximately 7 million in the prior year quarter.

Additionally, we had approximately 9 million of cash outlay for our share repurchase program.

And 3 million of cash expenditure for the strategic investment income meetings technology portfolio.

Our net debt decreased by 19 million during the quarter from 30 million. The end of 2019 to 11 million at the end of the first quarter of 2020 and as a result, our net leverage ratio as of March 30, Onest was 0.08.

As of the entered a first quarter. The total debt stood at approximately 234 million, including the cash receipts from the revolver drawdown.

Based on the trailing 12 months consolidated adjusted EBITDA ended on March 31st we had approximately 227 million of remaining availability on our credit line.

Should we expect will be lower at the end of the second quarter.

Now as you're aware, we drew our guidance for 2020 late March due to the uncertainty of the macro economic environment. However, I would like to provide a little bit more detail to look feel mentioned at the beginning to call regarding the actions that we've been taking seems to covert 19 outbreak.

So first of all as soon as the dramatic impact of the outpace flake became clear in early March.

We suspended our share repurchase program in order to preserve liquidity.

We also completed a Florida view of our operations and decided to Reprioritize and reduce our capital expenditures by 20% to 40% from our original plan or 42.

Moreover, we are reducing our operating expenses by eliminating noncritical discretionary cost. In addition to what we had already accomplished through the first quarter of 2020.

And finally negotiating extended payment terms with our sourcing partners where possible.

So now let me talk about what we're seeing the second quarter.

So based on the latest forecast how you chase is estimating a decline of four 4% in vehicle production put our key markets of North America, Europe, China, Japan and Korea.

Our expectation is that Oems will ramp up production slowly.

There will likely use up inventory cumulated prior to the shutdown before resuming significant orders from suppliers.

Please also keep in mind that the majority of our product revenues is in North America and in Europe.

Before we expect our second quarter automotive revenue to decrease year over year slightly more than DHS forecast.

Given the uncertainty the still exists we will not provide a full year 2020 guidance until we can gain or clarity on the future industry production levels and the ramp up of customer operations and there is a result, we are also postponing to a later date, our strategic update meeting for investors.

Which was originally scheduled on June nine.

So let me summarize we believe that our improved financial discipline implemented in 2018 at on free cash flow generation.

Our prudent approach to share buybacks.

Ample liquidity currently available combined with the steps that I, just mentioned will allow us to weather the storm.

Our current liquidity position should allow us to sustain a protracted market downturn nine with the April I.

Yes, just forecast over 21% decline in light vehicle production in our key markets in 2020.

So in conclusion.

Pandemic has created a very dynamic situation for all of us.

We will continue to monitor to market and make further adjustments as appropriate to maintain our financial health.

And continue to pursue growth opportunities.

With that I'll turn the call back to the operator for the Kuni session.

Thank you at this time will be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question Q you made press star to if you'd like to remove your question.

From the Q3 participant using speaker equipment, it may be necessary to pick up your handset for pressing the star Keith one moment, please while we pull for questions.

Your first question comes from line of Chris Van Horn with B. Riley FBR. Please proceed with your question.

Good morning, everyone. Thanks for taking my call and hope everyone is doing well.

Hi, Chris Hi, Chris Good morning.

So.

I guess in your conversations as you know as we're progressing here in April go on have you got you know we're hearing some product launches slated for 2020 are proceeding as planned or as best to their knowledge.

And some are being deferred you'll have you looked at kind of your product launch schedule, then and talk to the Oems and maybe give us an update on around that.

Yeah sure Chris We're obviously were very closely watching how that plays out.

Basically what we've seen it will kind of watch into 2020 and 21 launches.

Extremely closely over the ones that have the most meaningful impact.

We've seen 14 vehicle delays.

Over those the course of those couple of years so far.

And that's on a base at least a product projects, we have right now about 150 vehicles.

So that kind of puts it in perspective.

I.

I wouldn't be surprised to see some more flow end, but that's where we're at right now.

Got it okay.

And you've been.

Really really good at executing despite the challenges here.

I'm just curious on the on the cost side, what you've been able to kind of.

[noise] extract from there whats permanent versus more temporary heavy broken that out or could you break that up.

Yes, maybe metallic yet.

So I think Chris if you're referring to the the actions that we've been taking since.

The pandemic.

The pickup in the pandemic became clear I would say a couple of things.

And for most our first priority was to make sure that we had and we put affected the liquidity or the company. So they need to March we England. We confidently did go down 50% that they've all got roughly and then halted the share buybacks and then we looked at.

All our operations, starting we capex, which is a little bit easier one and we identified.

Opportunities to reduce Capex as I said in my prepared remarks.

By about 20% to 40%.

As to the original guidance that we gave in February and I'll give you a couple of examples of what.

We will be doing so first of all we delayed any capex spending should it into capacity expansion on deal.

The volume picture becomes clear.

We also delayed all kind of noncritical programs such as for example building improvements that we have planned throughout the year and some of the nonessential loyalty programs that you outlined in there. So I would expect these delays it to be effectively not in.

2020, and then we will be assess it will postpone they send expenditure will come through in 2021 of the later date once we have a better clear view of the order volume on the operational on the Opex side similar approach. So we did a bottoms up.

We kind of reduced all discretionary operating expenses, obviously travel but that this includes social training cost I'll say services cost we put the very strict controls on hirings. So all of these cost reduction that I would expect would yield.

Approximately about $10 million annualized benefits.

Starting from the.

Run rate that we had India into second quarter into first quarter I.

I think these costs will you will see there within the next.

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Eight to 12 months Morley backend loaded towards the end of the year and I would assume these costs to be.

Didnt cost reductions will be there to stay at least until we get a clear picture on the volume.

Okay, Great just to add on top of that obviously, we'll.

We'll be looking at really closely closely where.

Production volumes and orders from our customers kind of level out and.

Obviously, we'll we'll be preparing and are preparing adjustments to our overall cost structure to to meet that both on the cost of sales side and and Opex site.

Okay.

Great. Thanks, Thanks for all that color.

You know maybe on the on the award side.

A positive here, yes, the air cooling award with.

Paused decide on the on the medical site and the decremental margin on this.

On this 27 million was about 35% to 40% roughly in terms of rate.

As far as the second quarter is concerned.

Let me give your maybe a little bit color I would say so first of all the visibility. They we have right now on the second quarter still very very limited in terms of really exists.

But what I can say is starting from where where we are seen up happening on the top line as we are in the process of closing the amount of April.

We are seeing or revenue in the amount of April to be down year over year between 50 and 60%.

Which you know not not surprisingly and the.

<unk> the decline comes obviously.

In Europe, and and in North America, which is a little bit of a different regional mix of the decline compared experienced in the first quarter. So.

Your question on the on the margin I think what I would expect it did occur among the fundamental margin to be in the second quarter is to be obviously higher than what we experienced in the first quarter just for a couple of reasons first.

The the magnitude of deriving a decline is.

Significantly higher we are talking about a quarter with revenue almost half of what we had of last year.

But also the regional mix as I mentioned is different because it will be more weighted towards the North America and Europe, so that impacts on a negative way the decremental margin I would add also capital letter points that I think we need to consider as we look at the second quarter. First you know we will have to maintain some.

Our labor force in preparation for the ramp up post coven, 19, which is still pretty unclear as we speak.

Insert some of the locations, where we work we are required by the local government to continue to pay a certain percentage of the side of the of the people regardless of the volume.

And then depending on how they are unpopular play out and how steep the ramp up will be.

I would expect that we would incur some additional cost on premium freight expediting fees in order to serve our customers. That's also some of the items that we experienced as we ramped up backup Asia.

In the in the first quarter so.

You know that give you a little bit of color and water.

You know how far we are thinking about the decremental margin in the second quarter.

As far as your second question on cash. So I think we are pretty please don't where we started a year I think the if you look at.

The year over year Safeway improvement that we experienced in the second quarter.

Ninemillion versus 7 million last year that really came from working capital.

Improvement so it's a good start of the year.

In terms of what how the working capital will play out in the remaining three quarter.

It's all a function honestly or how steep their unpopular beep, but the way in the models that the different scenarios multiple scenarios that will be around in the past few weeks I would say that I would expect working capital in the next three quarters to be a drain to the cash flow for the company, but it's all depends on how the ramp up will be.

And the drain worldcom, most likely between the second quarter, depending on the timing of the ramp up.

Just just.

On the detrimental.

You said.

Detrimental.

Related back 35% to 40% to the second quarter.

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Oh, the 30, 40%.

Common mortar relation to the overall one q.

No no. So I would expect the so you gotta correctly that their mental margin in the first quarter was between 35, and 40% and I would expect the second quarter detrimental margin to be a little higher than that you put the reasons that I outlined.

Great well, thanks, so much and good luck.

Thank you very much they say.

Your next question comes from line of Scott Stember with C.O. King. Please proceed with your question.

Good morning, and thanks for taking my question.

<unk>.

Did you remind us before colder than all the maneuvers that you're taking place right now.

Variability of your cost structure.

Your ability to flex up and down.

Markets.

Yeah, I think that's an area we've taken pretty great Pride you can you can follow over the last several quarters.

Ah Argh gross margin performance you know, it's it's been consistently improving and even in Q1 under a lot of pressure we held it really close to you know kind of the going rate at almost 29%. So I think we've got lots of flexibility to maneuver are factory.

To adjust to demand we've got a good model there that that helps us do that obviously.

With a trough that we're facing in Q. too you know as Mateo just pointed out of that's a little bit more difficult to adjust to but I feel like.

Once we get clarity and what's Gonna Transpire you know later in this year.

We should be able to adjust pretty quickly to get to get back to that that runrate.

Got it as far as I guess.

Where you're facilities are operating at right now the ones that are open is it fair to assume at least a in may that obviously it will improve somewhat is you're in markets start to pick up production backup but is it fair to assume that there's a direct correlation between that and from the comics that you made about.

You expect sales to be particularly the automotive segment for a quarter.

Yeah, I I mean, obviously, we are going by the information that everyone else has a which is.

Europe is gradually ramping up right now still very low volume.

In North America is projected not confirmed out 100 per cent, but projected to start production may 18th.

And we're looking at that in made to be a very slow ramp up.

In fact.

My two we're we're a tier two supplier. So a lot of our product is is an inventory at the tier one suppliers.

Location. So we expect to you know, they're what's going to be a little bit of.

Delay in in a wrap ups, that's our expectation on our side, So which is why we project to have a little less.

A little a little more drop in the quarter, then maybe I H.S., which show.

But that said we're.

All of our plants are already we've we've restructure each of the plants around the <unk> are coven 19, playbook, including you know safety measures.

Social distancing within the plant, we've actually had to go through and reconfigure many of our work stations and assembly lines to allow further distancing, which was no easy task, but I'm very proud of the team for preparing it. So soon as that switch gets turned on we'll be able to we'll be able to keep up with demand really well, albeit a maybe slightly less per day.

Octave manner.

So all that said I think you know, it's kind of a wait and see let's see how the demand plays out.

Got it and just last question you know obviously appreciate the situation you guys are in obviously, it's pretty tough right now, particularly with.

You know production being down but can you talk about your ability for the year do you think to remain free cash positive just given your crystal ball and at some of the maneuvers that you can do on the working capital side.

Oh sure I think look I I think.

I would say the the work that we have done in a in the last since we launched the focus growth strategy a couple of years ago.

Around the building you know a strong foundation strong processes around generating free cash flow a manager working capital I really paying off I think we entered a year you know much you know better financial condition than where they're just on year on year and a half ago and this is really kind of to walk to the team has done I think.

<unk>.

If I look at our they used to pay two days to collect data.

I think <unk> mid sixties, and I think we still have some opportunities to to work on that and and and make sure that we collect some of the longstanding past that we have but again as I said before it's all going to be I think a function on no steep the ramp up will be.

And and you know how much during that would put into the into the working capital I would also say I think in terms of inventory right. Now we are seeking let it can be good position. So that style also should should help.

But obviously striving to maintain a as <unk> for 2020 Bucks for sure. It will be obviously no more than what we delivered in 19 2019.

Got it alright, thank you so much.

Thank you.

Ladies and gentlemen, we have reached the end of the question and answer session and I would like to turn to call back to Mister <unk> for closing remarks.

I. Thank you very much well. Thank you all for joining our call today I I did want to highlight you know one area, where maybe you a question wasn't asked and that's on the advanced development in innovation front one of the positive signs I see is that we consistently ah see our customers maintain folk.

<unk> on advanced technology that we're working on so climate sense. As an example are key partners have continued that effort and prioritize that as everyone knows Williams and suppliers are looking at ways to cut costs, we're encouraged that even in the midst of heavy.

Cut downs and a resource reviews that we're seeing our project still boil up to the critical level. So that's pretty exciting for us and and I'm very proud of our teams being flexible and creative to keep those projects moving forward on on all of our different businesses. So.

Well, that's it I love consistently shared in the past we remain very focused on operational execution innovation and cost improvement, which has become even more important in today's coven 19 environment.

I'm extremely proud of our teams agility flexibility and dedication deliver on our commitments to all of our stakeholders.

Despite these current uncertainties around an economic recovery and what that means for both Gen therm and our customers are strong liquidity in our continued to focus on productivity position as well to them or in the current current crisis.

With the ability to deliver significant long term shareholder value.

We appreciate your interests and your support and look forward to keeping you apprised of our progress. Thank you.

Just concludes today's conference. He made disconnect your lines at this time. Thank you for your participation.

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