Q1 2020 Earnings Call
Ladies and gentlemen, thank you for standing by and walk into the S.P.X. Corporation, that's quite a 2020 earnings conference call. At this time I'll bet. Since it then another sitting on the mode. After the speaker presentation there'll be a question unanswered session ask a question. During this session you want me suppose star one on your toes.
Please goodbye Saturdays conference as being recorded if you acquire any for those are since she's got stars you know I when I look in the confidential speaker today paulk like like President of Investorrelations. Please go ahead Sir.
Thank you in good afternoon, everyone. Thanks for joining us.
With me on the call today, or gene low or President and Chief Executive Officer, and Scott Sprawl, Our Chief Financial Officer.
The press release containing our first quarter results was issue today after market close.
You can find the release and are running slide presentation as well as a link to what life Webcasted. This call and the industrial relations section of our website at S.P.X. Dot com.
Encourage you to review or disclosure and discussion of gap results in the press release and to follow along with the slide presentation during our prepared remarks.
Replay of the web cast will be available on our website until may 7th.
As a reminder, portions of our presentation comments or forward looking and subject to safe Harbor provisions.
He's also note the risk factors that are most recent F.C.C. filings, including our disclosures related to the ongoing coded 1910 denike.
Or comments today will largely focus on adjusted financial results.
You can find detailed reconciliations of historical adjusted figures to their respective got measures the appendix today's presentation.
Or segment reporting structure combines the results separate heat transfer.
South African operations into an all other category, which is excluded from our adjusted results.
Alright adjusted earnings per share.
So excludes non service pension items.
Including our true up as Actuarially also actuarial assumptions amortization expense and one time costs associated with acquisitions.
Finally, we will be conducting virtual meetings with investors during the second quarter.
Putting our participation in the Oppenheimer industrial growth conference on May 5th.
Additionally, we will be virtually hosting or annual stockholder meeting on Thursday may 14th at eight A.M. eastern time.
What's that altering the call over to Jean.
Thanks, Paul Good afternoon, everyone. Thanks for joining us.
Before we get started I hope that all of you and your families are safe and well.
These are certainly challenging time and we appreciate your support as we all navigate through the house prices.
I also wanted to take the opportunity to thank the entire SPX team for their strength.
Continued perseverance.
I'm really impressive how are people have adapted succeeded in it rapidly changing environment.
On the call today will provide you with a brief update on our overall results and segment performances for the first quarter.
Well also get into a more detailed discussion regarding the impacts of the Kobe 19 pandemic. The actions, we have taken and our process for dealing with continue to uncertainty.
Now all touch on some of the highlights from the quarter.
We had a strong first quarter with a salad increase in revenue and adjusted operating margin.
The Kobe 19 impact to the quarter relatively small and concentrated in China.
However, during March the impact accelerated as containment measures implemented in Europe, and the Americas quickly took effect, while China on the other hand began to reopen.
Given the rapidly changing business environment and the economic uncertainty surrounding the pandemic. We are withdrawing are full year 2020 guidance.
S P accented the quarter with a strong balance sheet and liquidity position and we believe that company as well positioned to manage through the current situation.
Turning to our adjusted result, the quarter.
Revenues increased 3.9% from the prior year to $365 million and U.P.S. was 62 cents an increase of 21.6%.
We experienced revenue growth in our detection and measurement and engineered solutions segments.
This growth was partially offset by lower age pack eating volumes associated with warmer winter weather compared with a much colder.
Period.
We also experienced strong operating income growth driven primarily by a solid operational performance and our engineered loosened effect.
Now provide you with an update on the current state of operation and the actions, we have taken to safeguard or employees.
Or facilities have not seen any material interruption in operation.
Our businesses and the products, we manufacture are essential under the definition of critical infrastructure and the current applicable government orders.
These include products and services that enable the operation and maintenance of communications networks, the electric grid water and waste water systems and other key element of our infrastructure.
Later in the call our review the end market research in more detail.
We have also implemented strict and clear procedures to prevent the spread of chronic virus.
Tucked our team members and our communities.
These include work from home practices wherever feasible restricting facility access social distancing.
Modified work schedule and widespread use of masks.
We also modified or leave and other personnel policies to accommodate unique needs of our alright, [noise] our employees during these challenging times.
We have a covert 19 task force that I am a part of.
<unk> daily to monitor and adapt our practices were needed and to provide guidance and tools for our businesses and corporate groups to meet the needs of our employees and their customers.
I like 10 extend the special thank you to this team for their tireless efforts.
In addition across the enterprise, we have taken multiple axes to reduce near term cost in cash usage.
Jazz, reducing discretionary spending.
Traveling cutbacks and strictly controlling hiring among other items.
We have also taken further actions in those businesses most impacted in the near term.
Will continue to assess the situation and the need for further action.
All of our businesses in our corporate teams have developed plans to further address profitability in cash generation.
Should additional steps become the sorry.
At this point in the call I, usually discuss updates on or value creation road map, such as new product initiatives operational excellence programs unemployed development.
Today, I want to make a comment about how our culture and values are team and our prophecies have helped position the company to deal successfully with the current environment.
Our business system has yielded significant benefit in implementing additional safety procedures as well as providing robust data gathering and analysis capabilities to help drive better decision, making in planning.
Our teams have been able to adapt successfully to a rapidly changing environment by leveraging the company wide prophecies in practice here, we have put in place to drive efficiency.
These include coordinating efforts through our manufacturing and supply chain councils.
Frequently assessing Prague progress.
And taking timely actions to resolve logistical and sourcing challenges.
Currently we anticipate that our supply chain.
Will support our near term demand expectations.
I'm very proud of the leadership and accountability of our teams.
Have shown and the resilience and flexibility they have demonstrated.
Allowed us to continue operating effectively in this difficult situation.
And now I'll try the crawl over to Scott to review our financial performance.
Thanks, Jean I'll start with our results for the first quarter.
On a gap basis reported earnings per share 50 cents.
On any justice basis, which excludes the impact of the items noted by Paul.
P. S was 62 cents, an increase of 21.6% from the prior year.
Overall are solid results for the first quarter were driven by detection of measurement in engineering solutions segments.
Turning now to our adjusted results.
Revenues increased 3.9% during the quarter.
Booted, 3.7% growth from acquisitions as well as modest organic growth.
You're ganic growth was driven by or detection of measurement engineer solution segment.
Offset by organic decline in our age back second.
Segment income grew $7.5 million for 16.2%.
Adjusted segment margins expanded 150 basis points.
The increase in in common margin were due to higher volumes margin expansion in engineering solutions.
No I'll walk you through the detail results by segment, starting with each back.
But a quarter revenues decrease 7.7%.
In 8.5% increase from the acquisition S.G.S. Patterson, Kelly was more than offset buying organic decline of 15.7%.
Modest negative currency effect.
The decline in organic revenue due primarily to lower market demand for eating products.
Quarter of 2019 are heating business benefited from stronger than typical seasonal demand.
During the first quarter of 2020 heating degree days, when notably weaker with an average historical levels.
While they're trying to cooling business experience lower volumes associated with Kobe 19 virus.
This was largely offset by higher revenue another regions.
Second income decrease by $2.6 million or 14.1%.
Margins decreased 100 basis points.
The decline in in calling him margin were due to lower heating riveting, partially offset by rubin's or America's Columbus.
And detection of measurement revenues increased eight per cent, including 2.5% increase from the fabric acquisition.
In a negative currency effect of 90 basis points.
<unk> revenues increased 6.4%.
I really do to favorable project timing in our transportation business.
Adjusted revenue.
Segment income margin was 21.8% or decrease of 150 basis points that was largely due to weigh less favorable business mix.
At the end of Q1, we saw a minor in packs from cope with 19, particularly in our radio <unk> or locators business.
Which is our earliest psycho business in Q. to your mouth seeing you broader impact, which we'll discuss later in call.
An engineering solutions revenues for the quarter increase 12.2% flipping higher sales in both our transformers process cooling businesses.
Segment income increased $9.9 million.
Margins increase 580 basis points to 11.6%.
Higher throughput and improved execution in our transformers business in higher volumes and our process cooling but.
During the quarter, our Transformers business continued to benefit from the operational improvements achieved throughout 2019 not process cooling business benefited from the timing of service projects as well as continue traction on our component sales initially.
Turning out to our financial position.
We entered 2020 with a strong balance sheet that position as well to navigate the current environment.
At the end of the first quarter, our net leverage ratio was 1.6 times and we had cashing equivalent so $163 million.
And late March we drew $100 million on our revolving credit facility to preempt any potential concerns about cash availability in the bank Mark.
During the quarter adjusted free cash flow was approximately $3 million.
Excludes cashews in South Africa of about $3 million.
Yeah.
Late last year, we refinanced our credit facility extending the final maturity ended December of 2000, it 24 significantly reducing your term amortization requirements and expanding our primary financial covenant.
The combination of remaining borrowing capacity on a revolver and our cash balance provide us with approximately $350 million of readily accessible liquidity.
To give you a sense of the headroom. We currently have on her leverage covenant.
Our current that not that level or L.P.M., you've doubt would have to decline by 50% to 60%.
While we generate zero free cash flow to reach the maximum that that you can tell ratio of 3.75 times under our credit agreement.
Well this is a time of significant uncertainty.
We believe that the positioning of our businesses points to a much less of your scenario.
Already in Q2, you have taken actions to mitigate the anticipated impact the Kobe 19 pandemic, mostly around the elimination non essential costs.
And as we think about how the second half this year and 2021 may play out if model various scenarios.
These include further costs actions alone aligned to how we see the severity of the downturn playing out young you too and the potential shape and recovery.
With our current cost structure, we anticipate we could implement tens of millions of dollars temporary cost reduction measures relatively quickly.
Without sacrificing our ability to serve customer man.
And we could implement more permanent action isn't necessary.
With respect to capital of deployment.
Oh current priority is to ensure that we have ample liquidity in this uncertain environment.
How many activities is have slowed considerably given our current situation.
As we begin to see greater and market stability and improved visibility into the shape of recovery, we wouldn't just pay returning to a more growth oriented capitals and appointment strategy.
Once we get to that point, we will deploy capital a manner that we believe maximizing shareholder.
Turning toward your term outlook in some color on our segments.
Due to the uncertain economic and business conditions created by covert 19, where withdrawing our full your guidance.
It is difficult to assess the impact of the current environment on our results.
Yeah, we believe that the diversity of our businesses in Denmark is when are significant level replacement driven demand for critical applications help dampen our overall sensitivity to the macro economy.
This is consistent with historical performance of our current portfolio during recessions, including the period around the 2008 financial crisis.
A few minutes Gino provide some additional detail on our and market conditions.
You will see that there are portions of our business that are experiencing notable reductions and volume.
Others are growing based on the strength of our backlog in confirmation of demand from key customers.
Ultimately the impact on our full your results will be determined by how quickly our customers can get back to normal work routines.
As well as by the pace of economic recovery, which of course, we cannot reasonably forecasts.
However to give you a sense of near term performance for Q2, we believe these results modeling organic revenue decline approximately 10%.
Offset by the benefit of the S.G.S. in Paterson Kelly acquisitions that we completed in the second half of 2019.
We would also anticipate that this organic decline include the benefit of your over your growth in our engineers <unk> solution segment, driven by or Transformers business.
This scenario is subject to several assumptions, including that our facilities. Our customers are supply chain remain largely functional and that we do not experienced significant event driven disruption such as governor.
While we typically provide additional modeling details in the appendix or earnings presentation mini that figures are scenario dependent and currently difficult to estimate.
However in today's appendix, we have included estimated detrimental in incremental margins by segment.
As well as some additional color to help you with modeling.
Specifically for engineer solution segment.
Would anticipate Q2 margins to be similar to our most recent quarters only significant operational improvements implemented during 2019.
On a year on year basis. They would this would imply higher than typical incremental margins in q. too.
Lastly, we spend a significant amount of time assessing various scenarios.
If conditions require for further action, we are ready to implement plans to moderate further negative impacts on our results and preserve liquidity.
Now trying to call over to gene for some commentary on our end markets and is closing remarks.
Thanks Scott.
As you move to the current uncertain certain period.
It is useful to understand where the demand for S.P.X.s products comes from and how demand has reacted to economic downturns in the past [noise].
Looking at a breakdown of last year's revenue more than half is associated with regulated electric water and other utilities or government spending.
Products keep critical infrastructure functioning safely and efficiently.
Consequences of not having them or high.
While nearly 30% of our exposures to nonresidential market.
It is a mixed up more cyclical demand such as office and other commercial construction as well as more stable and markets such as institutional in areas that are currently seeing increased demand such as health care and data centers.
Are residential exposure was approximately 11% last year.
It is primarily break fix and break replays boiler demand.
Which has historically shown a low correlation with G.D.P. into high correlation with winter weather.
As we've noted recent market demand for heating products is down significantly year on year due primarily to the warmer second half of the 2019 2020 eating season.
Finally in industrial demand made up approximately eight per cent of our revenue and is among the areas that experience more economic sensitivity, but again, there's a component of replacement and service revenue here that is typically remained wrestling during downturns.
But this background I think is helpful to review, how we think about the cadence of our business cycles any typical economic downturn.
Recognizing of course, the the current environment is unique.
While our early cycle businesses, such as location in a portion of commercial H. facts are experiencing initial declines the late the late or recycle businesses, most notably transformers exhibit stability.
And continue to perform with little impact on the result.
This is due to customer spending profiles that are less sensitive to G.D.P.
And then the case of Transformers extensive backlog some of which extends out more than a year.
Well some of our early Psycho businesses have high in Sacramento margin. They also have quickly adoptable cost structures and can remain highly profitable in the face of lower sale.
This is what we witnessed with our locator is business during the financial crisis and what we are currently thing.
If a recession is deep and persistent eventually we would expect to see an impact on the later psycho businesses as well.
However, if history as a guide by that point, we'd be seeing a recovery in our early psycho businesses with high incremental margins boosted by earlier costs and testing.
Obviously, we're in a very fluid.
Very dynamic environment, and we will continue to assess the situation is a gathering new information.
We believe that this favorable composition of our business and and market position S.P.X. to manage through a difficult economic environment.
Oh, a diversified portfolio has a high percentage of replacement sales and diverse drivers that can help balance our results during a recession like the period around the financial crisis of 2008.
Looking at a breakdown of last year segment EBIT, a large percentage was generated by businesses that have historically shown and are currently showing less overall sensitivity macro environment.
Chantalay. These businesses have drivers that are more durable growing economic cycle.
And the businesses that are experiencing a greater impact from the current crisis generate a lower portion of segment even though.
Combined with our strong balance sheet and liquidity, we believe that this positioning provides a buffer against any extensive weakness in are more sensitive business.
Before I turn the call back to Paul I'd like to say that I'm pleased with our strong performance for the quarter.
While the near term outlook has been affected by the ongoing health crisis, we are well positioned to manage through the impact with our strong balance sheet and liquidity position as well as strong and diverse end market positions for numerous essential product and services.
This is not going to be an easy road, but we expect that we will continue to be an overall solid position as we work our way through the crisis.
Scott noted, we still faced several unknowns when planning for different scenarios.
We continue to make employee safety our top priority.
While taking actions to dampen the impact of the virus on our customers and on our near term profitability in cash generation.
As the economy reopens more broadly and we're able to gradually resume normal activities. We expected aspects, we'll be poised to return to its growth in value creation journey.
In the meantime, we hope you all remain safe and healthy.
We appreciate your interest in support as we now have a gate our way through these difficult times.
And now I'll turn the call back over to Paul.
Thanks Jean.
No ready to go to questions.
Yeah.
Thank you.
Asked the question underneath the past star one on your telephone.
Retrying question catch the pound key you stand by <unk> Yeah.
Our first question comes from buying granted Oppenheimer airline sounds okay.
Good afternoon, guys, so let's start to the.
<unk> things Brent.
I appreciate all the the color regarding in markets smells yours, and near term demand sensitivities I'm.
Hoping we could focus they're a little bit more if we look at slide 20, how should we think it down Runrate sales performance you know April raid second quarter expectations, Scott Ugly you said.
Decline of 10 per cent.
Nets of all these exposures.
How should we think it down.
Yeah.
Of growth or decline moving from you know less severe it's in more secure range of that spectrum.
Yeah.
Yeah, I think the the purpose wasn't necessarily to show different age that those levels, but more or just where where they are being more directly impacted.
Specific too huge to either side overall, 10% organic decline Oh, you have to offset that with the acquisition growth, which would be similar to what we saw in Q1, so around 3%.
And then if you look within organic as I said to my my remarks, we expect growth in engineering solutions.
So you're really feeling the effect of the decline in each back and and actually a measurement specifically within the commercial portions of age back well, but we're also seeing recovery in in our Asia Pacific business, China's specifically, but you know that's a smaller piece of our portfolio and then at our locator business.
So those are you know.
The organic growth and in engineered you know that's always a you know modest lower single digit type of a number. So then you can kinda back into the combined organic decline across the other two.
Yeah, that's awful thank you.
And any additional insight or directional guide you can offer on detection measurement project pining.
Over the near term and how that that factors and you know the incremental detrimental range you put out there.
Yeah, I think we feel good about the project timing specifically when we're talking about you you you're talking about transportation and communication technologies. Most we're we're the biggest peace project is.
The thing that we're watching is really customer access their ability to take acceptance of shipments or come in and do final inspections. Those are the things that could probably in in fact it the the most but we don't you that is it as they certainly an issue for the near term. It's more of you know could something in Q.
<unk>, three or even potentially things that we're looking to execute Q3 come in earlier.
Do a little bit with all the disruptions going on right now, it's a little bit hard to really accurately pinpoint though.
Yeah.
One more if I can any color you can offer on commercial boiler trends.
And you know cope with 19 intact I know that's not yet a major product line for you, but it has been a nice growth initiatives just wondering how that's friendly.
Yeah, you know I would say if you look at our commercial business. You know for there is a portion of that that is typically linked to new buildings, where there is typically a longer lead lead time.
And we don't see much impact at this point in time, there's also a a portion of a break six we're upgrading older boilers.
We would expect to see somewhat of a similar impact on our commercial boiler business as we do on our commercial cooling business they have.
Think similar similar drivers. So we we would expect some modest impact there, but but not a significant or severe impact there.
[noise], okay. Thanks again.
Right.
I think yeah. I next question comes from <unk> Gee look better curvy such partners. Your mind is open.
Hey, good morning, guys Huh appreciate all the extra color he gave.
Right right.
Right.
Yep <unk>, just a a finer points on cost actions why is the size of the savings that you currently have been hand from some of the discretionary actions. You've taken then then it just thinking about some of the you know modularity or or or perhaps the variability of of the market outlook you know.
Oh, how large of a bucket of actions do you have kind of at your disposal to go forward here.
Sure take that one so you know <unk> what else say is we're yeah. We're looking at this we've obviously taken the actions here in Q2 and have I'll say a play book of actions. We can take one of the keys, though is when you look at what actions we would take it's not necessarily every action would be taken across the enterprise.
Evenly.
As we said we have businesses like Transformers that is growing unhealthy.
And need it support for expansion and that's obviously, a very sizable part of our earnings profile that we want to to continue sport versus other size and we talked about locators impartial and portions of the H. back commercial side of the business.
In in the heating side, which is more weather related really unrelated to Kobe. It just happens to be same timeframe. Yeah. We're we're taking oh say, we're taking further actions and that kind of the rest of the business. So it's a poor it's it's a a playbook have access to take but based on the severity that we see for the businesses, but it's not.
Applied equally across all businesses.
So that said you know we we've taken the axis here in Q. to put in place, we're really looking to see how we're going to be exiting what Steve <unk> evolution of treatment identification tracing and kinda as the economy start opening up how can they stay open.
You know, it's going to be a lot of a big indicators, along with our or order books of what the second half and beyond could look like.
If we were to keep the actions that we have in place and extend to the balance we.
We feel like just in 2020, there would be in the neighborhood of 15 $20 million Oh cost reduction from kind of our L.T.M. Q1 <unk> position.
Okay, Yeah perfect.
And and then just coming back to you know March April trends. We you know whether it's you know orders her sales are able to provide some order of magnitude of you know what that range looks like and I would assume that you know what you're seeing in April <unk>, you know informing that down 10% or you're expecting some improve.
In in May and June.
It is I mean, who I would say that off you know coming in April or so far in April.
<unk> as we would expect and and kind of a line that that 10% decline and you know you're seeing it in in for the H. back businesses within the America's M. within EEMEA, but you're seeing a sharp rebound back in in a in China.
Kind of those what looks like there was a more of a pause and it's getting a sharp recovery here in in the in the month.
And then we are definitely seeing in the locator businesses.
Their businesses. It you know looking month to month on on the project side of those businesses.
And quarter to quarter, it's not as relevant on a year over year basis, it's more from our expectation that let's say things are progressing along with our expectations. There and then we're we're seeing that activity within engineered but looking at the quarterly activity or right now is less relevant because of our backlogs coverage that goes.
Yeah. The majority this year and into 2021, so orders now are largely.
2021, indicative not 2020 indefinitely.
You know what.
I think about a brat is you know engineered is holding strong.
On on bookings and a good portion detection and measurement is very steady and we're saying nice activities. They're the one exception would be the location business, where witches or shortest psycho businesses, where we've seen the most significant impact.
And then an A.H. back we're having to modest.
Modest and back there.
Yeah, and maybe just a sneak in one more thinking about the front log in H. track you know what is your visibility I would imagine there's some delays and it's tough to get to work sites and whatnot, but you know if this does it open back I mean other projects that you know or or just delayed and you know under way, but continue and then just thinking you know.
Further you know further into the second half in 21, you know how the pipeline marks in a in each right.
So <unk> h. back I'll I'll kind of break it into the two pieces of how we think about it so cooling and then heating really on the cooling side is reminder, that's approximately half new half or placement.
The replacement revenue is always seems to be there it it actually a very very steady throughout different market.
The the new build a is influenced by the Dodge index. So like if you were to see a a a really big recession or you could see a decline in demand now. We're typically later in the cycle. So typically from the time of new building, we would get the P.O. around seven minute seven months.
Later, so there'd be a delay so buildings that are <unk> as undead are being constructed.
We would expect that to go for for some period of time, but in looking at this you know on that portion of the business and and looking at the H.I. cooling the in the and again. This is a unique circumstance, but the peak to trough decline in our.
Cooling business is approximately 15%.
The 2008 recession. So if we do go into a bad recession.
It would be reasonable to assume a similar demand profile is that.
On the H. backside, it's different yeah, I'm, sorry on the heating side is different.
Because it's really driven much more by break fix and break replace we think that's north of the eighties, 80% of the demand profile.
And you when you know we are innovating new products, we are broadening a different portions of the market, but but that is very very steady and.
You know I would say for Q2 and cues three you have a little bit of what I would almost call artificial demand that's where people are are doing their stock cops.
Ah the distributors get us some discounts you know to tend to stock up and Q2 and Q3 and if there are liquidity concerns within our customer base, you could see a little bit of suppressed demand there, but really the the demand is driven by.
Break fix and so we we wouldn't anticipate that to to evaporate, but you could see some some some timing chefs there. So I don't know if that's helpful. But that's how we think about your now would I would just add that in talking about the eating yeah, we won traditionally or sort wish they when we come off of.
The week, you know kind of that that Q1 shoulder eating season, when there's a weak demand in that portion of the season. It's it's natural and it's the trend that that that the channel is more conservative in their buying behaviors. During the cutest you three time frame until you get to the more natural demand coming through acute bore and so we we.
We are experiencing that we expected that and I would say it probably is a little bit more exacerbated now in the current environment just given the macro in the concerns around liquidity throughout by everybody.
Okay, the gray color appreciated and congratulate all the effort to navigate the situation.
<unk>.
But things but.
Yeah I'm next question comes from Joe Montana.
Yeah mine is open.
Hi, good afternoon number one.
Hi, Joe afternoon, so the H. back business just in terms of the quarter, how how would you describe how much the organic decline was related to the warm weather and and the boiler business and then how much would it be related to sort of the cove it effects.
Yeah. It would the the yeah. The the vast majority of it was related to the heating side of the business in the whether it was about $4 million of impact and from coated in China and <unk>.
And cooling in cooling yet and the but really from an overall h. back the predominant driver was for both the revenue in the margin performance was the heating demand.
I remember that it was coming off a very very high com for Q1 of 2000 in 19.
Okay, and I don't know if we can get this granularity you just in terms of sort of in you know the month of March and as we entered a the month of April 8th fact business overall could you I don't know if you want to quantify anything but could you describe what you saw you know towards the end of March and April.
So.
Decline of activity.
Just <unk> I'll just pick up from where we were just talking I think what we started seeing is in in China. You started seeing the recovery in there trying to <unk> trying to cooling business, where it was very <unk>, you know down significantly in Q1.
But it's coming back sharply here from an order perspective in cute and you really purchased you too.
Men were seen Oh say the reverse effect to that you started seeing declines.
In in the Americas, which is our largest portion of that group and and worst continues you could declines there is Jean Jean just mentioned.
And then on the H. back heating side of the business, it's really the <unk>, it's really the weather behavior that I just mentioned.
Okay.
What about.
<unk> <unk> <unk> sort of dried up or had an effect here too or are you continuing this sort of broke out for the rest of the year.
My my comments actually were around the bookings trends the orders trends.
Okay.
And just in terms of commercial H. back.
Do you have any visibility to see you know with with the the shut down in a I mean I imagine a lot of this is related <unk> you know shutdowns in the second quarter job sites being shut down do you have any visibility into your thoughts on a recovery in the back half of the year relative to where where I'm too.
Q.
I I think it's an it's too and too many uncertainties, there which is part of you know that the reason why we bowl. The guidance is just not sure to be able to see what that visibility is we just try to give some sense for two two and what we're seeing in in in the immediacy a front in front of us.
Okay can I ask this so.
The month of April do you think that will be the trough or is the visibility still.
Sure.
Yeah.
Oh, I mean, our our hope like everybody is that you know things get under control here over the next two months and if nothing you know, we we'd get better testing, we get better some levels of treatment you know the opening up the the economy show that that can be managed the and the economy can stay open doesn't have to shut back down.
And then we can get back to some level of normalcy.
But really like everybody, we have to see that play out here and it's just such a fast moving.
Animal that we're dealing with that yeah. The next two weeks two months.
It's hard to predict.
Think will you know well well, obviously was more kind of back together here.
Talking about our two two results will will have a position on what we think for the second yeah.
Okay. You you mentioned, what the peak to trough was in the commercial H. back business back in 2008 I was wondering if you know or if you would like to share with the radio detection business did back then I'm just curious of how cyclicals a business could be sure and just.
Joe to be clear to the people dropped that I did mention there was really on the cooling side to that you know, which is put on they all commercial or or or be it'd be large variety of.
Customers there a radio I believe the peak to trough was in the neighborhood of 20 per cent.
On a constant currency basis on a constant currency basis, and the rest of the detection and measurement portfolio.
Actually grew during the.
The recession. So you know the one area that we do see real impact. The shortest cycle is is our locator business or radio detection brand, but as we've talked about many times over the years. When you do have a lot of a sink asynchronous drivers of demand and a lot of those are really right.
Tory driven in our detection and measurement.
This and we think that that those tend to hold up pretty well and and are not.
You know directly correlated with with G.D.P.. So that's that's where we were with.
Radio in in in the last recession, Yeah, I think it's fair to say you know we've we've been consistent same radio definitely kind of falls will global G.D.P. and and that's definitely overseen.
And then in the you know we're transportation communication technologies businesses, you know they they have different driver's those are kind of you know micro market drivers that don't necessarily follow the G.D.P.. That's what we saw back in the recession.
Any recession and that's what we're seeing now they're not going at the exact same there's there's obviously differences in there, but we just point that out to say.
They are they're acting similarly, the the the ultimate how high or how how divergent they are to the G.D.P. you.
Played itself out.
Mm.
Okay and then just one quick question on the costs restructuring that you're doing one word these initiated because I don't think I saw maybe I missed it but yeah.
The yeah.
These are we have not taken any restructuring actions. So these are all a temporary nature. So it's really ever talman, what we were going to set all non essential spent.
So whether it's travel span whether it's project <unk>.
You know any anything that's been temporary in nature or discretionary in nature. We've we've put though the lock on restricted had counted additions there have been certain areas, where we've done furloughs, but that's on the you know that's on the exception.
But so that it's those all more temporary type activities and of course partial within their is are you know U.S.T.I. program works on a predication rose.
We're not showing when I'm, just stating that right now so that there has a moderation effect as well.
Okay. Okay, <unk> I I guess just to follow up on that what would I guess, you would need to see more of a trend of Ah declines in the economy or what not to make an initiation to restructure a little more aggressive because a lot of companies that we've seen have gone about.
Doing some restructuring already but I would imagine maybe that's related to the fact that you are so asynchronous and maybe even if you're even your cyclical aspect of the company even not is actually tied to later psycho commercial.
Nonresidential, which could come back in the back half of the year is that sort of the thinking behind not making a bigger structural change at this point yep.
Yeah, Joe I think you you hit the nail on the head you know most of the most severe impacts are in.
Some of the other is some aerospace automotive.
A retail thing things like that that we really don't have a lot of exposure, we do have a different set of demand drivers but.
But if we were to see a severe and persistent recession to to come we we would be very well prepared to address that.
Yeah, We're just yeah, I would say right now you're you're right, we're trying to wait to see how things play out.
And to see if we think that this is a deep extended type of situation or is this going to be something a little bit shorter term at night, saying is going to be a cut of the recovery W. believes that but you know our priority is to help manage our workforce through this unprecedented time and try to take every every lover before we have.
Go down to those permanent productions.
Okay or thanks, a lot good luck.
Thank you things too.
Thank you here as in mind to ask a question you ever need to <unk> I one on your telephone I next question constant game <unk>, Yeah, Yeah, and it's open.
Yeah, Good evening guys.
Do you mean you Damian.
Think we covered a lot of ground must my questions been asked but I. Appreciate all of the you can't portfolio analysis across your business is.
Scott just just a clarification I think you alluded to about 15 to 20 million or so possible cops take out you know Ah Ah.
If things got worse it sounded like that was sort of does that.
The total number in terms of the non essential discretionary stuff you know how much have you actually executed already did it we can take up well flow through earnings this year.
Yeah. So I was I was trying to give the what that is the range that would be the impact of this year impact. This year just to the kind of Oh say a full year effect of the actions we have in place as of right. Now. So we're to continue this type of locked down and we don't see a benefit.
An improvement in the near term that would be the effect that we get this year and then there's further actions we could still take for I would say further Rob temporary options. We can take to go to go further obviously you'd get Q. Q1 effect because you start going in 2021, and then if we see it going longer.
That's where we would be looking at.
Potentially having the right size right size actions.
Okay make sex sex for clarifying.
Yeah, and then I wanted to ask you guys about transformers.
You know <unk>.
I kept it it's you know little bit longer be time, you guys are typically operating kind of nine.
Influx months.
<unk>, but you've kind of had this period, where we're running you know.
18 months two years, when he seems very strong growth and Transformers I mean, you know.
<unk>.
Double digit I'm, just wondering is there something to that fundamentally going on are you guys cleaning shares or something changing in the pricing environment, because that seems a little bit like outsized growth relative to how you guys have characterized that business <unk>, yeah, I think typically d. more kind of almost.
Single digits, G.D.P. type <unk>, right, and and I guess that as an add on to that.
You see the visibility there for the rest of year in in your your order backlog for Transformers is there any reason I need <unk> guidance across but business, but as a reason why you know your your wedding it'd be able to hit that eight and a half per cent, yes marching this year.
So let me let me start in general jump in I I think it's helpful to kind of.
Maybe go backwards, a little bit and about the the the performances transformers over the last several years.
Go back even 16 17, you know the business was performing extremely well, we're kind of double digit [noise].
Keep it does in the business.
Even a low double duty he bit and and then we had challenging 2018.
Oh that carried forward into 2000 and in 19, and she won a little bit and that's why you see kind of this comparison point of Q1 to Q1 is is really not <unk> you'd you'd better to compare cute <unk> see the sequential because we did have sequential improvement in the operations of the business the route.
2019, it just you know given the lead time, though that business. It takes a little while it is a little bit of lag to see it come through the financials, but we did see that through the shoe to forward in the business and then is continuing on.
Comments I talk what operational.
There's a natural thought about just thinking within the force for wall plant in that obviously is doing improvement, but it also includes our pricing approaches and disciplined and so there's been a lot of improvements there a lot of improvements to the trying to be price leaders in the market and given the string to our backlog or ability to be.
You select is in the in the market around the types of units.
Executing on so it's a it's a host of things that we're seeing improvement on and you know, we're we're pleased to where the businesses reforming extremely well.
And we do have good visibility and customer confirmations around before demand. So so we are feeling good.
About where we are in this year no. Good there'd be things out there that could change that yeah of course, but right now we're feeling we're feeling pretty good.
Yeah Day me I just that you know, we think that markets healthy you know you track.
Some of the public utilities, you know southern company reported today and actually confirmed they're a cop action is you know a lot of these rape cases that they put in place or three to five years in duration.
And we have a lot of relationships with a lot of these large large players. So we feel really good about the prospects the demand prospects of that over the next several years on your question about market share and other other areas I do think the team is executing really well.
And they are growing is you remember, we're very strong and me and power and we have a lower market share and E.H.B. and high voltage. We are expanding that we are growing that and and we are seeing some indications of some customer preference moving towards a more domestic.
Manufacturing now as a reminder, the large.
I was typically a lot a lot of that is imported from from Germany and into Europe, but we're saying some some potential chefs, there, which could be an opportunity, but but the teams done a nice job.
And we feel good about that business and the the Ford prospects there.
That's great. Thanks for all the color and good luck.
Thanks, Thanks, Damian it's too.
Thank you I'm not sure in any better question about this time.
<unk> Oh, that's a <unk>.
[noise], Okay, we'll things only be for dialing in a everybody be safe when we look forward to talking to you again next quarter. Thank you.
Lady from several members concurred today's conference call and keep up actress or dating you mean our disconnect.
Oh.
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