Q1 2020 Earnings Call

May 7, 2020

[music].

At this time I'd like to welcome everyone to the video technologies first quarter Twentytwenty earnings Conference call.

Today's call is being recorded.

All participants will be in addition, only mode until the formal question and answer portion of the call.

If anyone should require off the radar assistance during the call. Please press star zero on your telephone keypad.

I would now like to introduce Mr. MACT Giordano, Vice President I'm Treasurer, Mr. Giordano, you may not begun.

Good morning.

Thank you for joining us for videos earnings conference call covering the first quarter 20 Twond.

On today's call, we have like napkins and Bob writer joined <unk>, Our lead independent director you can find a copy of our earnings release and presentation materials on the Investor Relations page others video dotcom.

Like and thanks to everyone for joining us today.

I'd like to Echo Mikes sentiment and hope all of you and your families are doing well.

Let's move the slide number three an overview of the various accents. We've taken in response over 19 pandemic.

<unk> products and services were being the central.

States, Canada and certain other international governance.

This further underscores the credit quality of our products and services to everyday life and we are proud to be able to support the increase duty cycles on our equipment.

<unk> of the stay at home directories around the world today.

As a result, we were able to maintain the majority of our production in sales activities.

To ensure the health and safety over our employees and customers. We move quickly to deploy enhanced safety protocol well also focusing on ensuring the continuity of our operations.

First with regard to employee in customer safety, we moved quickly to form a covert 19 task force, which group is composed of a dedicated team of employees, who are actively monitoring situation through daily assessments and driving the appropriate business and safety response measures.

These assessments include monitoring governmental directives and state orders and making any subsequent modifications I've seen necessary to ensure the safety of our employees unsafe operation of our sites on a daily basis.

One primary area focus has been establishing direct and <unk> in communication with our employees around the world.

Companywide advisories regional in country specific communications and a dedicated intranet side are among the many initiatives we put in place.

We have also modified our manufacturing locations by applying very up social distancing measures factory layout modification and installing remote elevated temperature monitoring systems.

Many employees some been unable to work from home with full I.T. support.

In addition, we made a number of modifications that R.A.D.I. stores in warehouses to provide for additional social system thing and the other recommended health protocols in an effort to further protect our employees suppliers and customers.

These steps are being taken with the goal of ensuring business continuity through keeping our manufacturing sites operational where it's safe to do so.

All of the said the covert 19 crisis has had a negative impact on ourselves.

Most of our manufacturing locations remain open although we are experiencing some challenges related to our P.N.S. locations in Mexico.

Now, we do not anticipate significant negative disruptions to our inventories or supply chain.

Today, the vast majority of our 80 ranchers remain open or under modified operations, an all distribution center should remain open.

As you would expect we're in constant contact with our supply chain partners and working together to adapt to a rapidly changing environment.

We are also using this time to focus on building, our digital capabilities, including R.E. Commerce platform as well as our web based training and digital business.

This is a fast growing channel of distribution for us and we want the take full advantage of the technology available to reach even more customers.

Transition to new ways of doing business.

Yeah, absolutely the search for permanent C.E.O. and see if I remain a high priority and we are moving forward expeditiously in our search for the right candidates to leverage video and the days in the years ahead.

In addition to our focus on safety and continuity, we've taken a number of proactive steps to execute targeted cost reduction initiatives and strengthen our liquidity in response to cope with 19.

<unk> side, we implemented a salary reduction plan for certain employees.

Furlough program and we are greatly restricting business travel.

These decisions were not need the impact our employees on our customers during a difficult time.

However, these actions would be necessary given the unprecedented challenges facing the global economy in our industry as a whole.

We've restricted new hiring activity during the current uncertainty close tones or reduce non essential capital expenditures and have eliminated director service fees for the entire board of directors for the first quarter.

We are also leveraging our financial an operational review to accelerate <unk> takeout initiatives wherever possible.

Moving forward, we will remain focused on costing productivity as we went to manage our cross structure and best rely on our operations with changing market conditions.

Bob will address our liquidity in more detail.

But I'd like to touch on a few highlights.

First we fully drew down or 350 million dollar revolver solely as a conservative measure and to ensure we have ample liquidity as the code at 19 situation trailer develops.

In addition actions are underway to reduce our net working capital through key process refinements inventory reductions.

We also intend to continue our dialog with Honeywell regarding the overall relationship and have initially agreed to the the from him until the end of July $42 million of certainly second quarter payments as we announced in April.

Now, let's move to slide number for for an update on our financial an operational review.

As we outlined on our last call phase one of the financial an operational review has three primary areas and focus revenue and gross margin grow that's G.N.A. optimization and working capital management.

Today on pleads to share that we have made good progress against each of these targeted areas. We are also reiterating our goal of driving $30 million to $40 million of adjusted eat about improvements in 2020 from the S. and L. initiative, despite impact of the covert 1910 dynamic.

In terms of a progress update let's start with revenue and gross margin row, where we began implementing product and pricing rationalization action in the first quarter.

<unk>, we have eliminated a number of lower volume a lower margins cues many of which were either job dilutive whipping disproportionally higher cost of served.

In addition, we have successfully we negotiated approximately 50 per cent of our targeted direct material contract with a focus on value engineering and logistics.

Last quarter, we discussed our strategy to standardize common components and better align our offerings with customer and market demand patterns. We made progress on these fronts during the quarter and are seen as design culture, starting to permeate the organization that is more customer focus and manufacturing efficiency aware.

The true fruits of this labor will take time to become fully apparent in our financials, but we see the tide moving in the right direction.

In terms of S.G.N.A. optimization today, we have executed approximately 35% our organization reduction initiatives in our remaining reductions are nearing finalization.

We have also executed approximately 25% of or indirect cost reduction plan with outside services marketing an I.T. being primary drivers Leslie we have taken action to improve our overall working capital management. This includes improving or inventory management processes for 2020.

As well as improving receivable collections and credit term extension processes.

Since argue for call, we made a good progress and analyzing our phase two initiatives.

We had continued the assessment of our operational footprint undeveloped potential alternatives, there will improve our financial position of product quality and speed to market.

Expected continue this process and announce major changes as they are implemented.

Now all turn it over to Bob for review of our financial performance and capital structure.

Makes me.

Let's begin with move on to one woman like on the.

During the quarter consolidated revenue decreased 3% on a gafisas this is down 2% constant currents.

Revenue form is driven by 6% growth in 89.

More than Ausnet <unk> working.

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Recovered 19, Indiana comedians negatively impacts males and forming <unk>.

Consolidated the junk who's down 22% quarter, primarily because of what we're sales volume and grew mixed with <unk> over 19.

As disclosing the earns rooms with no we have modify their definition of addressing you could die.

Crime and prior orders you have to do the job now ex both expense and cash payments associated with the Honeywell versus like Britain.

These items and not related to the underlying new operating performance.

Cash payments will not be.

If we weren't <unk>.

You know original guidance for 2020.

35 million dollar cash payments the corner for a total of $140 million cash payments from your which was dumped me riding your definition of jumps and whatnot.

We also be classified research and development costs from costs. So.

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This change would be reflected in all your consent.

We we just why not even classification better reflects young line caught in industry Mac.

During our <unk>, we provided some context of expected keen on 2001, retton, though and adjusting to the dog room.

But you expected to one financial results as compared to the previous your your nominal worth when you're too violent one guy.

Or q. on 2020 performance was printing slightly better in those two one expectations prior to the impact cool 19.

Are actually more revenue download single digits.

What we can see <unk> call, while a jumping the gossiping is slightly better than those expectations primarily.

Mix you know.

The Kobe 19 endemic has kind of negative impact on already which started towards the end of the quarter continues through today.

<unk> total was video sales are down 25%.

Maybe I down 21 from C.N.N.P.N.S. down <unk>.

These results include the impact covert 19 in other current and prior your revenue coupons.

The economy opens up you'd expect revenue to improve but we cannot anticipate how the crisis was ball.

We have conducted surveys of homeowners and preliminary results with wrap that the majority of our customers <unk> meeting their plans hockey.

We think the majority of our recently lost revenue has not disappeared, but just moved further into the latter part of this year.

It's worth noting.

Partially mitigate the code is 19 impact from targeted cost reduction that we can across all of our business.

These measures include smelling you'd auctions travel restrictions implementation of a furlough program.

We also restricted you hiring activity and eliminated the service the drawing board of directors for the first one.

Do the timing <unk> owning a partial impact on from one results.

Moving forward will continue to actively manage our business and we'll evaluate the additional measures you take your mind our costs structure, the the impact of code to bank.

Now move Regnante discussion at 80, I <unk> recorder on a constant currency basis, then finish now 7%.

<unk> woman's body behind the period was solved, especially considering and to see the negative impact of Cobras 90 March.

How many be acquisition added about 1% to then go through the corner.

<unk> prior year as 11 Greens was offset by you could product line and customer next ongoing investments in our in commas Black one and commercial headcount in branch expansions to support future revenue.

On the economy side, you see big opportunities to expand this you know any I would increase telesales now and improve website additional e. commerce software investment. We believe this channel provides a great opportunity each customers.

Turning out a products and solutions <unk>, we're down 14% on a gaffe basis and 13% in consonants.

The revenue declining one is driven by more volumes across a journey comfort and R.T.S.

The overall volume decline opinion answers driven in part on the overlap of a particularly strong first quarter of 2000 lines and.

Product some solutions to just to either finished down 35% compared to you one of last year.

Decline is driven by lower volumes this quarter as well as unfavorable product and channel mix.

Mixture lower margin connected thermostats, a lower margins <unk> security product and mode trade channel sales in the R.T.S. business all impact this mix.

Trimming now the slide number six which shows the key variance drivers of our total revenue and adjust the job performance in Q1 total company revenue down 3% as important in 2% on a constant constant basis.

On a gafisas, maybe I revenues, <unk> $44 million or wherever U.P.N.X. would down $72 million compared to if you want up last year.

Overall currently in packaging, one with a negative $9 million.

Or just have you been down to 199 million compared to 127 million <unk> last year.

Both years <unk> any expense for cash payment pursuant to the Honeywell reimbursement agreed.

By far the biggest negative drivers year over year decline with the combination of volume down 32 million <unk> reduction in Christ mix down $17 million.

As previously discussed we experienced negative midship with each business thing.

Condition as baby I grows faster and products in some regions totally video experiences lower profit margins <unk> segment, lower marking business.

We had a $16 million adjusted you've got benefit from our transformation programs and another $8 million related to the cost reduction interested implemented due to call the nineties.

He's transformational cost reductions with like a savings from previous years headcount reduction initiative and initial savings from our financial in operational you.

The company's 19 costs vaccines were driven by reduced headcount costs from salary productions for loans and other corporate cost reduction mountains.

You expect koby 19 reductions to be temper.

As we would turn to normal compensation methodology, new impacted the crisis on our business inside.

Lassman there was about $3 million incremental costs reflected on why it has other due primarily to engineering and sales headcount investments made in 2019.

Regarding a food <unk>, we stayed in October 19 update cousins, given the rapidly evolving operating conditions and Mark and I'm certainly caused by Cobas 19, we with.

Our school year 2020 outlook like many others, you're unable accurately estimate the impact cause it 19 on our performance in financial results as this time.

We will continue to closely monitored impacts of quitting nine keen on business and markets and provide enough data as a group.

Now take a few minutes to discuss or the clarity capital structure on slide number so.

In terms of cash in the community our cash balance of March 31st.

We're using the mouse.

The drawn down funds available under 300 million dollar revolving credit facility, which we did as a conservative manager to enhancement liquidity.

We continue to focus on reducing our networking capital investment and who's playing capital spending.

On the working capital fund, we're improving process needs across receivables animals, and and or which should benefit the company. After the code is 19 crisis path.

In April.

Videoing Honeywell had agreed to defer approximately $42 million in payments feed a honeywell too until July 30th.

This includes $35 million and payment.

Reimbursement agreement and 7 million dollar and payments in connection with their trademark license.

We agreed to this arrangement with Honeywell as part of the ongoing dialogue regarding our relationship which we expect to continue you to.

Turning the capital structure, our next significant maturity is due in 2023.

As of March 31st you in compliance with my debt comes in addition to the first name is the only well you also reach an agreement to incorporate the leverage ratio included in our credit agreement Amendment in December 2019 into the Honeywell reimbursement agreement.

Moving forward you continue to focus on strengthening our liquidity and cash position as navigate the challenging operating environment caused by the pulled his 19 pandemic.

Oh now trying to call back over to Andy for his somebody remarks and.

In summary, we go over to one really well so we're in line with the expectations, we laid out 2019 year and call.

We accomplish this despite the negative impact of covert 19, which began impacting our business and money.

Today is focused our communications on the measures on the actions, we took to save their employees and our customers.

Has been a little remain a number one priority.

I want to reiterate how crowded we are of our employees and how they've responded with unprecedented situation.

They had been there for us with 100% commitment and dedication and I want to underscore are deep level of gratitude for that.

We've made some hard with citizens to better align our cost structure with the conditions that we have seen across of business.

Near term disability into our markets remain limited.

Rapidly changing cold at night in situation.

Forward, we will continue to actively manage our business with a focus on our cost reduction initiatives and liquidity in the near term.

We've made great progress, thus far implementing our financial and operating review initiatives and remain on track for our full miracle.

We have seen some opportunities to accelerate certainly across any liquidity actions and we will continue to to capitalize on leave as they arrived.

Well some court in difficult times to matter for the short term. It's also important to not lose sight of the longer term into that and we have made great progress on several new product can.

We look forward to providing more detail in this area in the near future.

What city are remains I company with established global scale strong brand recognition and then extensive and loyal quote channel.

Products I trusted across the globe in homes on the wall and behind the wall.

We believe the actions we have taken today as well as the ongoing execution of our financial operating review.

Position with video to capitalize on the growth opportunities business conditions begin to normalize.

Thanks for your time today, unless open up the call for questions operator.

Yes, Sir.

They didn't Jasmine, if you would like to signals to ask a question t.'s tested it to the coach styrofoam up by the digits. One on your telephone keypad again star followed by the digit one on your telephone keypad, if you need to remove yourself from the queue.

For any reason you compress at the start funded by the digit too.

We can know pass to our first question from John Nevado Bank of America. Please go ahead.

Hey, guys I think you've taken my questions today first one is on.

Quitted D. I'm just curious if he's guys have had discussions with the banks on increasing the revolver capacity and perhaps and renegotiate doing the plant step down in the Max celebrity ratio, which I believe ticks down to 475 at the end of the year.

Yeah hydrolysis handy hit above you want to handle this one.

Yeah sure.

Hi, John Yeah, I mean look.

You know, we're always talk in the banks on on on a lot of different things. We have a very good relationship. There is you know we didn't we passed start covenants for for Q1, we we happens specifically talked to them about increasing any kind of with barbara capacity or or or anything like that it's more just in the north.

The course of business that work, we're having conversations with them.

Okay, and then you know understanding that you guys are not providing guidance just curious how we should think about cap x. This year and maybe your ability to flex sit down on the maybe it'd be helpful to you could provide kind of a meat and it's got backs level.

Yeah. Good question, so look when when this happened and we start paying attention to a lot more attention to liquidity, obviously capital spending was was part of that and the the business units were great and participating so until we see I'd say a bit more clarity around my cold It will pass.

We're kind of just on operating like operating necessity <unk>. So I you know I I would probably say I think last year, we spent capital somewhere around $85 million something like that <unk> I I think we could probably reduce that down to you know until the the crisis passes.

We could probably cut 25% to 35% off that for this year.

Got it and then <unk> go ahead sorry.

No no completely Scott.

No I've demo you know look who will most spending capital we want <unk>, hi, I, our our projects right. So we don't want to defray high our project. So so once we see the crisis clearing up.

We'll be back to hey, what what a good idea to hear what are we invest in some more business as usual.

Makes sense and then finally on these search search for new C.O. CFPO curious if you guys have narrowed it down to you know a small number of candidates and then it Bob if you're hats and marine potential see over.

[noise]. So this is handy yeah. We we are progressing in that process on on on pleased with the way that it's going obviously, we we can't talk about exactly where we are in the process until we we have a an agreement in place, but it's it is moving forward well.

Our partners on this are there are doing a great job so.

Will certainly be back to you will send us we have a candidate selected.

Okay. Thanks, guys.

[laughter] like a now take next question from Jess Kester <unk> capital.

Thank you cause you discuss a little bit of that.

Incorporating.

You were lever, if you're leveraging covenant discussions into the Honeywell reimbursement agreements don't need the obviously, you're not going to give us direct you know.

Complete details, but I'd I'd like to hear a little bit more about how you know about how you're getting perhaps some leeway on.

Those those agreements with regard to your position was Honeywell.

Hey, Jeff It's handy Yeah, Bob one should go ahead and provide an update on the discussions today.

Yeah sure I mean, I looked up the the discussions to date or more with on a short term right when that when the crisis started we were in conversations with Honeywell and and I would say in a pretty good partnership mentality.

We were able to defray the second quarter payments, because you know you as everyone knows.

Where the pandemic, it's going to hit everyone's financial says is isn't the second quarter and so a honeywell allowed us to defray the licensing the payment and the indemnity payment for the second quarter and in addition, they agreed that the the.

The the adjusted either diverged covenant ratios that the agreed with the banks last year in the fall will also be adopted by Honeywell. So we're all working off the same either die leverage covered and so on the same page I think you know so so so that was good news from a partnership mentality and I think.

We just decided we have a lot of.

Interconnectivity between the two companies. So what we're hoping is that but we can just continue these productive conversations going forward and and make sure. We're on the same page.

So not not there isn't it is the only thing that's agreed were those specific things that were in the press release and then we just they continue ongoing discussions.

<unk> is it because there's so much interconnectivity between the two companies that they're allowing you to to to deal with the leverage agreements both the above that that it'd be reimbursement along to Honeywell.

I'm not I'm not sure if I understand I I understand that but I mean, obviously, we know there's a lot of internet connectivity right. We buy we buy some of their products, which still making things for them. There's there's a reasonable amount of T.S.A. agreements I'm still ongoing we you know we do make these payments to them.

And as you know the agreement last for for for 25 years, or so right. So they have a vested interests and making sure. We're we're a thriving business.

So I think that's that's probably why we came to those Ah resolutions in the second quarter, Okay, and and actually the the question around it is that the your your banks have agreed to your bags have agreed to.

It's called the fine the song you're either a as pre.

Pre reimbursements, a honeywell either die.

That you want to take that one.

[laughter].

[laughter] Oh, Yeah. Just this nothing we agreed to changed the definition the bank definition of either dot leverage right, but the fact that we we afraid this payment the $35 million does.

Help that calculation quite a bit because that will impact that you've got portion of the calculation positively.

And one question operation. So can you clearly you know clearly a in the first quarter.

While you were down you know you're not down 40, or 50 per cent, what what areas or use actually see continue the ongoing where are you actually continuing to let be let in she do large ongoing projects or even small projects.

Areas are are continuing to do relatively well for you in in in in the business and oil and dust and and as any of that in the residential are always most of that in in the commercial area.

Yeah great.

Oh go ahead go ahead I'm sorry.

Yeah. So I'll just I'll grant that one just so so generally you know the most of our A.D.I. locations are open and as you know that that's that's one of the main portal store customers and in that area I would say even during the periods of the greatest redux.

And then sales we still found that the larger come or for projects. This is but you know the projects are typically longer term. It's it's work would have built under contract and so forth with those.

We're ongoing and obviously based on the particular state. The project was going on in terms of what the governor. So those states were allowing and then we also on the P.N.S. side, you know many of our Oh yams have businesses that are being the sexual and they're demand continues as well and you know we continue to monitor we've already seen some improvements you know.

Daily sales, but but also still a fair degree of variability day to day. So I think it's hard to call. It beyond the data that we provided for the month of April at this point.

Okay.

Thank you.

Thanks.

We can have pasternak's question from Craig or when Ross <unk>. Please go ahead of time getting morning, and and and thanks for taking my questions I Hope girls well in this environment.

First thing I would ask about is the accrued liabilities in your cash flow 80 million. It's a very large chunk of your cashes in the corner.

Accrued liabilities can be a little black box for investors can you made me describe what the changes where there.

That draws $80 million and <unk> and is this something that that has potential to reverse.

Or are there potential cash puts into this cruel over the next couple of quarters.

Well. Thanks, Craig list is handy Bob why don't you go ahead and cover that to the extent that weekend.

Yeah sure Yeah, so you're looking at the the operating cash flow statement and you.

They use of cash on me the other crews and I.

I agree with you other foods can be a bit of a a catch all account, but essentially they changed prior year. The biggest thing was that a tax payment. If we made in in Q1 and the other the other big thing would have bad the funding of our four one k. aware and the previous years and you know tax payments move around throughout the year.

Depending on the jurisdiction so.

Different from the previous year and in the previous year I believe plenty well funded about four one k. So they they were the too big it's things that you know that accounts for like 70% to 80% of that back so that you cash.

Okay. So then this this this 80 million dollar curl shit that should be dramatically reduced now quarter such fair to expect.

Yes, we do cools God right, because we we we pay the taxes right. So that that's where your seen on the cash Melissa.

Excellent excellent.

Then.

The environment right. He made specific comments on April and then some comments on on trains. Since then you know as we look at our models and try and.

Try and figure out is this a Swedish as it says d. or a you what the the potential rebound days. It both 89 products Gee, maybe point us to what you're looking at for a indicators of business activity that that you use to manage to business.

I can you may be described for US you know.

Any changes to short term trends in there on on a weekly basis or or daily basis that that you feel might be indicative of brought our activity for your business.

[noise] <unk> handle the first piece of Andy and then I'll ask but I mean, I'm starving to handle the second part of your question last thought to talk about you know how we're looking at <unk> modeling standpoint, but.

The the issue that we've seen is more variability in the data. So it's too hard to call. What the recovery is going to look like at this point you know, there's just kind of a bigger beta around the number but I would say the average you know that the April numbers at this point, we don't have data better than that in terms. So.

Trying to pick an average for the quarter I think we've just got to look please.

Estates open up and get more operating location, specifically for 80 I was functioning.

But you want to talk a little bit about the before you're planning at this point.

Yeah, and just to follow up any of you look we're we're all tracking barely sales and we always have that we're paying more attention to it I'd say, we've both the baby I.P.N.S. the the business leaders, there and the and the commercial puncture really staying in contact with the customers he even even more than than before.

I'd also say you know we did this this survey that you know indicates when the state's opened up to end points that you.

You know these projects should return.

I look surveys or surveys, it's extrapolations right, but you know it was good news for US. We just came back with people don't intend on just canceling canceling projects that they had plans. The wife majority of them will will probably happen in the in the foreseeable future I I would also say that you know may sales.

Friends aren't much different than what we saw in April and back to end his point right.

We pulled guidance most companies pulled guidance because the the the features just so opaque as to when the states will open up and then you know in general how will consumers respond how much money will they have and and when do they do feel safe going going out into into society like normal.

Means is we think our industry is a little bit better shape and most on that and which is what the serve the server confirmed for.

That's really that's really good to hear what are the things clients have been asking me for over that last number weeks it sure.

Your sales makes on the commercial side at 80, I I mean ready, it's it's actually pretty pretty easy easy to follow.

But <unk> you know two thirds of the business at 80, I really into commercial markets are you predominantly into thing selling it to things like strip malls and you know small office buildings or is this a more universal broad coverage across the the commercial construction based.

Mm.

Yeah, Craig I don't think we're going to run a position to provide that level of detail. At this point, then and like I say, there's been more variability. The the one thing that we have seen as I mentioned address question is more staying power with regard to the larger commercial products by projects.

I understood understood. It. Thanks again for taking my question some stay well.

Thank you you're kidding.

Okay.

We can have moved to our next question from Dean Zaffino Open Hymer. Please go ahead.

Hi, great. Thank you very much <unk> focusing on you know some a year and for your numbers aren't anatomy side, there's maybe a sense of.

The best performers divorce performers also maybe you could <unk> if he could that she couldn't right now there's some some whether that's going on I mean, our connection maybe she could help us quantify that.

Or you know what what happened as far as you know <unk> mapping members to give give us any more granularity on that or maybe you're gonna categories happy helpful. Thanks.

Thank you and yeah, I think we can cover some of the data within the N.S. above you want to do that.

Yeah sure I mean in it you know when you when you see the queue, we call it a computer segment rubbing right but.

All three lines of business rubbed down to prior year I would say security held up the best.

And then the probably the worst was R.T.S. and I'd say.

There's a lot of stuff going on R.T.S. use more I guess impulse oriented and I'd say the R.T.S. sales had happened when more along the Oh, yeah more cautious of lower margin channel and you know as you know we have had much warmer weather this year than prior year and that seems to be a a reasonable indicator for for R.T.S. on on comfort we had.

Some of the continuing product transition issues to a away from the traditional non connected thermostat. So the more connected thermostats, which are also kind of lower margin, but we saw you know reasonable sales tail off there and on six.

Purity I think we just saw the least sales tail off but maybe that you know people tape that more seriously.

If there's an issue there or or or if they really want to enhance the security in their homes are their offices, they take that more seriously than than comforting R.T.S. and maybe that's why those sales held up a little bit a little bit more but we also some negative next year there with the last year's launch a grip had a pretty.

Hi.

Sales them out and this year was a little less in that and that grip product because we've spoken to the poorest is probably on the lower margin sides, just kind of negative.

I get a profit next.

Okay great.

Oh, yes yep.

Sorry about that much is Andy again, all the sad one one other comments that this is more of a thesis railroad forecasts, but then we we touched upon it briefly on the prepared remarks, but.

Fundamentally we do know this a pretty strong correlation between demand for our products on duty cycle on the.

Overall systems that we served.

And just stay at home or certainly are going to increase d. cycles on the equipment with at home, so fundamentally that should drive demand longer term for us.

Okay, great amongst the follow up on on the <unk> negotiations, but it's great that you guys are actually having this discussion and running the relationship.

I'll be touched upon you know the amount of beat them, that's occasion payments with hynek <unk> broached.

They're just getting with the earnings pro for our company is different than it was during the spin.

And just getting on comedy that's been summer cooperatives, if you guys they sent room.

Forget even more cooperation.

Yeah, Yeah, we'd we'd love to see that but we we haven't had indepth conversations about that at this point, but it's certainly on our radar <unk>. We we have no fee on in terms of what kind of yardage, we would get there.

Okay. Thank you very much.

Thank you.

You May know pass for next question from.

<unk> caster <unk> <unk>.

I just went quick follow up a given what you've seen so far in terms of what is selling and whether it's not selling <unk> fleet for your channels and whether selling and what's not selling it to A.D. I.

Assuming we come out of this at some point in time over the next 12 months are there areas of your business that have that have margin.

And that have I.R.R.'s that viewed sake are going to be.

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