Q1 2020 Earnings Call
Good morning, everyone and welcome to the Faro technologies first quarter 2020 earnings call for opening remarks, and introductions I will now turn the call over to Mike Sorry, Sapphire Investor Relations. Please go ahead.
Thank you good morning.
Me today from so Michael Berger, Chief Executive Officer, and Alan You Rich Chief Financial Officer.
Yesterday after the close the company released its financial results for the first quarter of 2020.
<unk> related press release and form 10-Q for the first quarter are available at barrels website at www Dot Faro dotcom.
In order to help you better understand the company. Its results management may make forward looking statements. During the course of this call. These statements can be identified by words, such as expect will believe anticipate plan potential continue goal objective intend may and similar words it as Paul.
Well the Companys actual results may differ materially from those projected in these forward looking statements.
Certain factors that may cause actual results to differ materially are set forth in yesterday's press release into the company's form 10-K for the year ended December 30, Onest and form 10-Q for the quarter ended March 31st 2020.
During today's conference call management will discuss certain financial measures that are not presented in accordance with got.
Yes, generally accepted accounting principles, excuse me or non-GAAP financial measures.
In the press release, you will find additional disclosures regarding these non-GAAP measures, including reconciliations to comparable GAAP measures.
Not recognize under GAAP management believes these non-GAAP financial measures provide investors with relevant period to period comparisons of core operations.
However, they should not be considered in isolation or as a substitute for a measure of fashion performance prepared in accordance with got.
Now I'd like to turn the call over to Michael.
Thank you, Mike Good morning, and welcome to our call.
Before discussing our first quarter results I'd like to take a moment to address the situation world.
Well countries and organizations around the world what to implement plans to combat the spread of two but actually we are focused on taking the necessary actions to ensure the safety of our workforce and to minimize disruption to our customers.
All of our global manufacturing facilities currently remain open.
U.S. government has deans faro to be a critical infrastructure industry and Singapore has granted US an exception to the recent closure mandate.
Our facility in Germany has remained open for both manufacturing in customer service operations.
We have use this opportunity to build finished goods inventory as a means to offset future unexpected factory closures.
At this time, we are confident our supply chain logistics and operations teams continued to meet our customer shipment requirements, while maintaining the highest level service it's important for customers.
And our customer discussions it it is clear that many of the initiatives that required threed measurement remain active.
However, our customers are still trying to understand the extent to which their own businesses will be impacted in how they need to adjust and these uncertain times.
While we have not seen meaningful order cancellations, we have seen a large number projects being delayed.
Within the public safety market for example, funding often requires public purchasing approvals.
Which given the more pressing needs being placed on governments at this time began to slow in March.
Geographically, we'd seen business in Europe, and United States slope fairly dramatically, India has come to a virtual standstill. However trains recent activity levels have increased.
All indications point to regions continuing to be affected at different times, and magnitudes, which will likely lead to intermittent strengths and weaknesses across our end markets until which time conditions normalize.
One market there could be particularly hard hit for an extended period of time is aerospace.
I should know that historically aerospace is accounted for about 5% to 7% Apparels total revenue.
Given this uncertainty as a company we are focused on managing the aspects of our business within our control and preparing actually plans around various demand scenarios, which may emerge.
We're fortunate to have a strong balance sheet and a robust restructuring plan, which was well underway at the time, we began to feel the impact to cope with my team.
To complement these activities if the need arises. We also have identified additional options didn't ensure that we maintain sufficient resources and they are navigate potential situations as they arise.
With the actions announced last quarter and tighter expense control. We believe we can reduce our adjusted quarterly revenue EBITDA breakeven levels to between 58 and $63 million as we entered this September quarter.
That said as an organization. It is important we remain nimble enough to manage through this fluid Todd well at the same time striking a balance between taking the necessary steps.
To improve our operating model, while making the necessary investments in key growth initiatives.
In February we announced several key changes in how we will manage our business in the future and despite the current world situation, we've made significant progress.
Our sales team has responded well to the revised go to market strategy, they're excited about the prospect of owning accounts, orange or geography, and being given the opportunity to sell the full breadth apparels product line.
We've already seen greater sales alignment in collaboration as we bought our sales team together under one global leader.
Further the current remote working environment has brought other opportunities for how we interact with their customers to the poor crop.
For years Ferro has invested in web based demonstration studios that had been underutilized despite efforts to drive adoption.
Today, given the force adoption of all things virtual our studios utilization is nearly doubled.
We're also having outstanding turned out to web based customer training sessions that more effectively and efficiently leverage our product expertise.
If there's a silver lining for us in this difficult time. It is that these types of activities are becoming ingrained in our culture, which helps us further increase the scalability of our go to market approach.
On the product front, we recently announced the latest release of our Gen. Two software, which is an initial step towards enhancing our software suite and developing a more solutions based product offering.
This latest iteration is example of utilizing our marketing organization to develop a software experience, which directly addresses our customers every day process needs.
While lowering their initial investment outweighed by offering and on a subscription basis.
Finally, we've worked hard to globalize and centralize some of our back office processes that are yielding significant improvements at a reduced cost.
All of this combined with careful expense management enabled our first quarter non-GAAP operating expense of $44.3 million that was $5 million lower than Q1, 2019, and $9 million lower than Q4 2019.
This is good progress toward our stated success model.
As we've discussed on our last call. Our goal is to increase the differentiation and value of our products to our software and solutions strategy.
By gaining an increased understanding of the problems our customers are trying to salt. We believe we can more effectively deliver full solutions that meet or exceed these needs.
I am optimistic despite the near term global challenges.
Steps that we are taking will enable faro to emerge a stronger more efficient business with a highly scalable financial model.
With that I'll turn the call over to Alan for an overview of our first quarter financial results.
Thank you Michael and good morning, everyone.
First quarter revenue was 70 to 79.5 million down 15% when compared to 93.6 million in the first quarter of 20 <unk> as a result at the continuing soft demand environment in our served markets and the start of Cobot 19 related order push outs, we saw in March.
Most of you know a meaningful amount of our business is conducted in the final month of the court we were pleasantly surprised at the efforts of our sales team to close business in March built in in order that while softer than typical held up fairly well given the circumstances.
Product sales were 56.5 million as compared to 71.6 million in Q1 up 2019.
This decrease was primarily a result decreased demand across all our served markets, partially offset by several large deals in our tracker product line within the metrology market, which shipped during the quarter.
Service revenue of 23 million was up 1 million when compared to Q1 of 2019, which continues to demonstrate the recurring nature of this revenue stream.
New order bookings were 77.9 million for the first quarter of 2020 down 23% as compared with 100.7 million for the first quarter of 2019.
I mentioned on our February conference call. We had received orders late in the fourth quarter of 2019 that we were unable to ship in Q4.
Those products shipped in Q1, resulting in a modestly negative book to Bill.
Related to the business transformation actions announced in February in the first quarter, we incurred at 13.7 million a nonrecurring charges that were predominantly for cash severance to be paid affected employees around the globe.
As a reminder, we expect to enter 75 to 85 million in total nonrecurring charges associated with the implementation of our plan with nearly 63 million incurred in the last two quarters.
GAAP gross margin was 55.2% and non-GAAP gross margin was 55.5% for the first quarter of 2020 as compared with 56.9% for the same prior year period.
The reduced gross margin as a result at the overall reduction in revenue, which adversely affected our fixed cost absorption.
GAAP operating expenses were 60.4 million and included approximately 13.7 million of the previously mentioned restructuring charges as well with 2.7 million in acquisition related intangible amortization and stock compensation expenses.
Non-GAAP operating expenses of 44 point Threemillion were 4.6 million lower than Q1 of 2019.
The company benefited from one month of cost savings related to restructuring actions as well as some prudent steps taken to further reduce our run rate spending given the current demand environment.
GAAP operating loss was 16.6 million for the first quarter of 2020 as compared with operating income of 400000 for the first quarter of 2019 as a result at the lower demand environment.
Adjusted EBITDA was 3.1 million or 4% of sales.
Our GAAP GAAP net loss was 14.8 million or 84 cents per share our non-GAAP net loss was 400000 or two cents per share for the first quarter 2020 compared to non-GAAP earnings of 20 cents per share in Q1 29.
We continue to mean <unk>, maintaining strong capital structure with a cash balance of 173.2 million and no debt.
In the first quarter of 2020, we generated 14.7 million in cash primarily driven by collections of outstanding receivables.
As Michael mentioned, well visibility into the demand environment from our customers remain limited. We are confident restructuring act efforts outlined in February together with tighter expense controls will enable us to achieve breakeven adjusted EBITDA on 58 to 63 million of revenue.
This concludes our prepared remarks at this time and we'd be pleased to take any of your question.
[noise].
Oh are you there.
I am here, yes now.
Please standby.
If you would like to ask a question today, Please press star and one on your Touchtone phone.
Maybe try yourself from the question Q bypassing the pound key.
Again that star and one.
I agree we've got a Jim Ricchiuti.
We'll go first to Jim Ricchiuti from Needham and company. Please go ahead right.
Thank you good morning, Yeah.
Thanks for the color on the aerospace I'm wondering Michael or Alan If you if you might be able to give us some sense as to the automotive exposure just given the concerns folks have in that segment of the market what does that represent roughly.
We actually have them publicly stated that Jim it's.
I would imagine it's a.
Probably a.
A bit bigger than the.
Then the aerospace segment, but I don't have an actual number in front of me. So I'm I'm not going to quote, but I will say that we've actually had relatively positive impacts or news recently from some of our automotive customers and yeah. I think we're all concerned about the end demand market on them, but it does look.
Like particularly Europe, and China looks like factories are coming back to work and some of the projects that were involved in.
Still look like they're on track. So it's it's relatively positive news, unlike aerospace which doesn't.
We're not getting any of that indication whatsoever today.
Okay, and then actually ties into the next question Michael.
You alluded to.
Some project delays.
I think we understand public safety than public safety market, but within within that metrology business to exit in factory to factory floor business. We're where are you seeing some project delays and is there any color you have.
First one for the quarters tops, but I'm just in terms of any color on bookings. Thanks.
Well I think we track a very diligently and a very often are what we call our funnel, which is the opportunities that that our salespeople.
Identified that potentially will close within the quarter and our funnel as we mentioned in the script. We've seen some project delays we've seen very few project cancellations to answer your your first question around the metrology market.
We have seen actually said some pricing strength as it relates to the opportunities that exist or funnel is not growing but it is and it is getting pushed out.
Because I think a lot of a lot of the company's that we've been dealing with frankly, just don't know what they.
I want to expect but I think Alan mentioned in his portion we saw really good traction on our tracker, which actually is a relatively new for us and and it looks like that make continue into the first quarter and that or into the second quarter and that's primarily metrology.
Okay. Thanks, I'll jump back into queue. Thank you.
Thank you Jim.
Well go next to Andrew Degasperi with Bad Burke.
Please go ahead.
Good morning, or not thanks for taking my question.
I guess, maybe for I know you highlighted the college and public safety market can you maybe tell us how good a construction verticals doing hum that you know the laser scanner because her from <unk> perspective.
Yeah, I think if you look at where regionally we were very strong and need and the construction world, where we're very strong in Europe, followed by North America, and then in Asia and I think the construction industry in general has been hit pretty hard in Europe.
However, we're now I think we're all are getting a indications that Europe is coming back to work slowly a we're we're we're obviously not enough situation in the United States. So I think a the scanner business was hit relatively probably the hardest of all of our market segments.
By virtue of our strength in Europe, which was hit really hard bayko that and then followed by the United States.
I think it is encouraging that Europe is going back to work and there is talk now in the United States that construction sites will be allowed to to proceed.
I think public safety, which is also a participant in the scanner business I.
I think that's going to be a little longer.
All right because I just don't think it's a priority in most government. It's certainly please stations around certainly North American Europe. So I think the the scanner business was probably the hardest hit although were we are seeing signs that the construction business is coming back.
That's helpful and then.
On the Cantu software release, I know that totally that a few weeks since your.
Essentially a release that I, just wondering how as customers had received that.
And B. I mean that you have any other plans for the rest of your answer as it relates to a subscription type software from her for any of the verticals.
Sure.
The way I I think it is too early to really give you feedback on on <unk>, obviously, we work with customers through the definition of what can to need to the next version needed to look like and as I mentioned in her script. Our marketing organization was was intimately involved in talking to targeted.
Customers and so the feedback has been very positive from them I think it's a bit early to talk about the general market reception of it but but we're we're encouraged.
And and the answer to your second question is absolutely. We will continue to be a very prolific in our software offerings and as you know once once Oh software suite is out there there is constant updates and so we're in that mode. We're on that treadmill. If you well so are we expect.
That.
Other other key projects or a key software platforms will continue to be updated and.
And actually we have a very busy a new product release calendar for a 2020 and we are I'm I'm proud to say that we have actually I don't believe that we're going to Miss a beat in that regard. So I'm I'm I'm encouraged by our ability to <unk> to work remotely and still collaborate.
Yeah.
Following up on that I mean, just totally the sales process given the current environment I mean, how does that shows.
Because of the previously <unk>.
Obviously, your madigan, you're probably <unk> [laughter], you, probably a lot of various role.
But.
Can you maybe like elaborate a little more like How's charburger sales people approaching that for the state.
Well Yeah of course, yes, I mean, it's it's a dramatic change clearly and where ya.
You know many customers in the beginning of March started a basically waving us off from actually visiting facilities and I think now that is probably the standard if not the rule.
Clearly I think toward the middle of March 3rd week in March.
I think companies began to be much more approachable and much more available frankly, because I think that everybody was trying to figure out exactly what does look like right. So our but our sales guys. We're very diligent we know who our customers are where we have made contact I don't think it says.
He is a as it used to be clearly because there you're you're calling people's cellphones et cetera, or writing emails and saying Hey can you call me back. So I think that that process has been probably a little bit belabored, but.
As I mentioned, our are our web studios in which we can do virtual product demos.
As a is little literally doubled in terms of the numbers of demos that were for the number of <unk> appointments that we have in our web studios also I think we are we have enabled many of our selling our salespeople actually be able to do demonstrations or in.
Their homes and so that is I think unable to different approach, but I think where we're finding probably the most success is really in some of these web based training and and frankly, even Youtube we're doing a lot of you too but with a huge.
Spots on a product demonstrations and so it has changed dramatically Andrew I think.
What is exciting about it I believe is that when things do kind of go back to normal we're not going to lose this bag of tricks that we'd have been developing here and I I actually think it makes us much more efficient being able to do web based demos earlier in this like it earlier in the sales cycle, a we have now data that says.
Actually it helps the helps the success right.
So we're trying to figure out where where this is going to end up but I'm I'm very proud of our sales guys and <unk> and they're extremely tenacious and as al mentioned.
We were pleasantly surprised with where we are despite kind of the situation that we're in.
That's very helpful. Thanks, I'll jump back in the <unk>. Thank you Andrew.
Well go next to Richard Eastman with Baird.
Yes, good morning.
Richard.
Morning questions.
Is it possible that you could talk us a little bit of color around.
The geographic revenue declines I think you kind of touched on EMEA being [noise].
Maybe.
More heavily weighted towards the construction market was the with the scanner products I'm curious what how to metrology business stood there you know when you're talking about you know the industrial metrology business and maybe some thoughts around the cadence you know in North America is what was a media.
As we head.
You know into and you know we're into the second quarter here.
Well I think you know it's funny <unk> my visual of how this looks from a regional perspective is effectively.
Three signing weighs out of phase right. We saw a negative side. So we saw a huge trough in Asia first trying to kind of went down hard and and then followed by Japan, South Korea, So and that was kind of the beginning Europe was second.
And certainly North America was was third and I think so if you. If you look at that in terms of phase where we are now in the cycle is as we were beginning to feel comfortable about China's activities.
Oh, we're we're seeing some strength and and if nothing else firming up forecast coming out of out of Asia Asia Pacific with two Big exceptions, I think Japan goes kinda up and down and they're kind of all over the place frankly, a as it relates to what they're trying to do and clearly into.
<unk> is shut down hard so with those two exceptions Asia look we're beginning to see strength in Asia.
As it relates to Europe, where we are in that phase is that we're beginning to smell and it's just it's just sounds sounds like things are are the activity is coming up a we're seeing that a Germany is is releasing and allowing a smaller companies to go back to work and frankly, you know that.
It's a big part of we have very large customers, but we also have a large grouping of a mid to small sized customers and so that that's good news for us.
So so I think where they're in the cycle is they they have bottomed out in and it looks like we're seeing signs that they're beginning to ramp.
I think in North America was the last to go down and frankly, probably.
We're probably still kind of on the bottom here I think we're bouncing along the bottom if I was just too to use that an allergy and we're hearing signs by state as we all are you know people trying to open up et cetera, but that I don't think that has a direct correlation to a lot of businesses and getting back to normal certainly I think the smaller businesses.
Well come back before some of the larger businesses and so what impact that has on revenue will be will be interesting. If you were to overlay that conversation with our three three markets I would argue that metrology was was hit but I think probably.
I'm not as hard as the construction the scanner business and.
In public safety, a went down really hard and I think for obvious reasons.
But again, if you look at the size of these businesses metrology for US is our largest business and I think this is why we were pleasantly surprised with where we ended up in the quarter. Despite effectively having a free fall in March followed by the by the the construction business and then a public safety.
I hope that's.
The only thing that I would add and you can see this and the numbers is the geographic mix of our bookings and revenue remained relatively steady with history and so I think Michael is exactly right in terms of the sine waves and it just happened within the quarter balanced. It there they are balancing themselves out as they ebb and flow and we end up similar to where Weve tradition.
Ben.
Yeah, I I would I.
I would guess and I don't know I loved us out, but I would I would imagine that that's going to change pretty dramatically in Q2 that mix.
Geography, and snacks I suspect it correct, yes, yeah.
And again, given the cadence here.
And the and kind of a typical conversion rates of your of your orders to revenue.
Obviously, we're seeing some deferrals there.
So again <unk> second quarter, when you're thinking about your revenue.
It would.
What's your confidence level will be relatively high that the second quarter. Your second quarter Faro second quarter revenue number would would be you know a bottom minute [laughter].
I mean, well [laughter].
I should be asking yeah.
Yes.
If I ask you.
<unk> <unk>.
Giving any kind of at board indication right now is literally suicide I mean I.
I certainly hope so how's that [laughter] that there.
No.
Just you know you made a comment though a round and I was.
Kinda casually linking the two but you made a comment around.
Your EBITDA a break even level.
I think in it.
Asked me if you could just repeat the timeline, but you had mentioned that revenue level of 58 to 63 million.
I would be kind of your EBITDA or adjusted EBITDA breakeven level going forward. He did you suggested that would be in place.
By September.
Yes.
Yes, we did.
Okay, all right and that's just timing of all the restructuring activities and you'll feel pretty good about.
You know by the end of September having most of.
That cost accounted for.
That's well I think what al said is it's going to be feathered in through Q2 in Q3, and so but but.
The actions have been taken the write offs of occurred right. We've had the conversation so everybody kinda knows what the model looks like but I think the timing of the restructuring that the actions that we took in February.
While I think motivations were different right. Our objective was to to clean up our RPL the timing couldn't have been more.
Better plan and I think it you know.
[noise] and the fact that we've actually taken a lot of the cost a lot of the head count that was needed to go that that that's occurred with one exception, which was in Europe, where.
Because of regulatory approvals, we've had to do that it's a battle actually affect that should happen.
During this quarter and so I think at the end of this quarter coming into the September quarter, we should be pretty much will be a lot cleaner piano perspective than than we were at the end of Q1.
Yes, Okay and just.
<unk> I, just one quick and you're going to go through and do your modeling and you will try to determine exactly you don't kinda <unk>, what does that mean and what it each one of the components within the financial statements look like and you'll end up with an operating expense level, but as less than what we ultimately.
Articulate the last quarter I, just want to be clear that that's not that's not where we think the new norm as but it's something we believe we can manage our way through during this downtime through deferring certain investments in deferring certain expenses, but again don't don't think that that the long term expense level. That's more of through this this short term situation.
And we find ourselves and prudently managing our our capital.
Okay. Okay. Good thought and it's just the last question.
A little bit about this the web process your sales process.
Are you approaching that is just basically that generating more qualified leads.
It is is that process you know established enough that you have any confidence for thought around the conversion rates of these you know web based sales demos.
Yes, very much so, yes and yes.
We've made a relatively sizable investment over many years and building a number of web studios and a round the world.
And we have data that suggests that if a web if a web a demo is done through the or within the sales cycle typically.
The way it works is a in a normal sense opportunities are our fails.
Our selling an application teams basically engage with the customer.
We do a web demo that basically allows them to see that the function of the product. Then we it then we try to schedule and in house demo, where we actually doing demonstration on.
Their product what they will be using the tool for and that and <unk> and we find that when we go through that that process of web demo and then physical demo that are our conversion rate is much higher.
Now that was under normal circumstances in today's world, obviously doing physical demos on site are no longer possible. So our customers are pulling us too to have more access to to our web web studios as well as a webinars as well as.
Online training and all of these things that frankly, we we've enabled over over multiple years, but we've had relatively low adoption rate.
The as I said in the script I mean, the silver lining here is the fact that I think the new norm or at least certainly.
It is it legitimized a lot of these capabilities that we have with our customers and I think our objective as it as a company is to continue that actually push those as a methodology of doing as you've just asked.
As a methodology of qualifying leads and also I think it helps us in the closure process. So.
We don't see these things going away post co bid, but but.
But it but it's.
We don't really know what what the new normal is going to look like yet. So I think our customers would love to have US you know in in the facilities and we're still gonna have to go do that but but we're really I'm excited by the fact that we had this capability and and were able to kind of.
We're still able to sell.
Gotcha Yep Yep <unk>.
Nice to have I guess right now.
Okay. Thank you.
You're welcome thank you.
Thank you [noise].
[laughter].
And as a reminder, that is star and one ask a question today.
Well go next to Jim Ricchiuti with Needham and company.
Just wondering if you're seeing any any change and that competitor behavior or in this environment, you know and to what extent you feel maybe just as it relates to these web studio maybe I'd also remind us how many of these you have and the extent to it.
So that might provide a little bit of a competitive advantage or maybe you. Yeah. Some of your major competitors have moved in this direction as well in recent years.
Well actually I'm not aware of our competitors.
Having invested in web studio I've, not actually heard that I think anecdotally what we're hearing from our competitors is we've got.
One large competitor that seems to have shut down there are factors and.
It's close to depleting their inventory, which I think there's a huge opportunity for us that we're all over that.
As it relates to the number of Web studios I believe we have 23 globally.
And ER and actually that number has gone up pretty dramatically as we've been able.
Several of our regional sales people to a have a studio capability in their home and so you know, it's kind of a grassroots effect, but but from a professional studio professional quality studio we've got 23.
Got it and.
As far as Michael getting in front of the as you try to execute on this new go to market strategy. Obviously, you had put this together before all this happen.
And I guess I'm trying to take a step back and saying Okay [laughter].
Is this.
You appear to be a little better positioning your further along in this restructuring but this is does this make the go to market strategy a little bit.
How much more challenging does it make it I guess is Russia, I I actually think it makes it easier for us I noticed dogs.
It makes it easier because frankly, everybody in the world. It's been reset right. We're all focused now on the how do we actually virtually give to our customers and so I think the situation has allowed.
So our customers have had to reset their expectations on how to deal and we to deal with and so and how to deal with them and so we're kind of now all the level playing field and and coated did that for us. So the fact that we have now clearly identified who owns what accounts weekly.
<unk> densify the that our sales people on the entire portfolio. We are now a singular point of contact each customer and while I think in a normal sense that could add some confusion and frankly, it and concern and risk I think it actually help solidify our situation and that we now have a single point of contact we know who.
Who owns the account they know who owns who owns them from Faro and it and I think its streamlined and actually the sink the process. So I'm very encouraged Jim and I.
Fingers crossed I think I think it's working.
Okay. Thanks, a lot.
Thank you Jim.
Thanks, Jim.
And again that star in one.
Our next to Greg Palm with Craig Hallum capital.
I had yeah.
Great. Thanks, Hey, Michael.
Hey, good well here right.
Oh, <unk> little bit of commentary I know about sort of the quarter, but you know how is the quarter tracking.
Hold it any anecdotal commentary on order trends January February baby early part of March I'm not sure. If there's any way to quantify activity pre coded versus maybe the last few weeks, which sounds like there was a pretty significant disruption.
Not really I think you know everything was pretty normal I think we felt like we were marching true.
A positive quarter and I think what we saw in as you know the way our backlog bills through the quarter. It. It really is heavily weighted toward the last four weeks or the quarter actually probably three weeks of the border and so with Covance hit in Ernest which I would argue is probably the first weekend in March.
When it really began to get weird.
I think we started working from home the first week in March and I think the rest of the rest of the certainly the United States began working from home.
In March and Europe was already going there and China was down so we began to kind of see some softening we saw some pushing of opportunities, but as I said in her script, we have not seen a large cancellations what we're seeing as in talking to our customers. Yeah, we still want US yeah, we needed a yeah, we're going to buy it.
We just don't know when yet we don't know when we're coming back to work we don't know.
Hmm when we come back to work what that does that demand environment will be and so it's just clear I mean, we have less visibility today than we do in a normal situation, which is not great. As you know already Greg. So you know it's it.
So we're very reticent to kind of make any commitments around revenue run rates are but I, but the positive thing and I think this is why we've mentioned it in our script.
We're not seeing we're not seeing people just shutting down and saying we don't need we're not gonna by this product. This year that has not actually happened in large scale. There's been a couple couple smaller guys that have we don't even over the coming back that kind of thing, but but our our typical run rate repeat business.
We have no no reasonably that's not going to be bought.
Yeah that makes sense.
Around that what is your sense.
For customer budgets I mean, just in terms of how much has been pushed out or delayed versus reduced curses all out canceled I mean do you have any fields you talk to your salesforce.
No. We don't you know it's hard to quantify again, if you overlay. We you know we've got 15000 customers on a three year cycle right. So it's a huge customer base and it's it's hard to quantify kind of in buckets. Because it is so diverse I think because it's so diverse that's that's.
A reason that our business has been a stable as it has been and I think in this situation. That's a very positive thing because we we sell across you know we kinda group it in three big markets, but the reality is weve.
Our customers pretty much map, probably 90% into those three big buckets. So we've got good coverage I think the metrology business will be the first to come back just because it is our our largest business and its spread over probably the largest customer base I think that's followed by the construction world as the construction.
In architectural firms come back on the online, which I think is imminent.
Certainly is coming back in Asia, it's lot of noise in Europe already and you know state by state, they're talking about allowing construction crews and start again.
And then and then I think public safety will be last just because I don't think it's a high priority for most of the government's today.
Okay.
And just to be clear you know if you look back on the first quarter performance did you see any negative impact from the implementation of the strategic plan in terms of headcount reductions or was there anything you know external whether that was production issues or supply chain impacts anything.
That was that maybe you can quantify intact.
Yeah, that's very soft and challenging macro that got worse.
No I I know I don't think our our restructuring had any it any into <unk> or any implication on our Q1 results. If anything they were positive in the context of our cost structure I think [noise].
Taking a I.
I don't believe that we walked away from opportunities because of a miscue in the selling organization or we from an operations perspective, I think we're operating probably better than we ever have as a company and so I'm I'm very encouraged by you know we got to new operations leader.
And and he's really done a fantastic job basically getting us very much focused on kind of the basics I will say and it was a line in the script, but I think it's important to point out that we in addition to a building for Q2, we have also made.
The investment to invest and at least eight quarters worth of inventory I'm finished goods in other words converting a lot of the raw materials that we already had into finished goods because of course, you never really know what's going to happen to a particular factory or.
Or particular location and so we think that that will actually bode very well for us again as things begin to normalize there could be a surge in demand and we need to be ready, we do not want manufacturing to be the all the.
The short straw there so.
And it was a risk, but we kept our factories busy and be views this kind of slowing to actually build inventory.
Yep seems like the prudent thing to do all right. Thanks to the color and good luck.
Thank you Sir I appreciate it thank you.
And this does conclude our acuity session and I call. We appreciate your participation and you may now disconnect.
Thank you.
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