Q2 2020 Crane Co Earnings Call
[music].
Greetings and welcome to Greenco second quarter earnings call at this time, all participants Arnie listen only mode. A question answer session will follow the formal presentation. It's been what you're required to operate assistance. During the conference. Please press Star then on your telephone keypad as a reminder, discomfort with me and recorded I would now like to turn the conference over to you.
Hi, Jason Feldman, Vice President Investor Relations. Thank you you may begin.
Thank you operator, and good day, everyone welcome to our second quarter 2020, <unk> earnings release.
I'm, Jason Feldman, Vice President Investor Relations.
Our call. This morning, we at Max Mitchell, our President and Chief Executive Officer, and Rich Maue, Senior Vice President and Chief Financial Officer, who will start up or call with a few prepared remarks, after which we will respond to questions. Just a reminder, that the comments we make on this call. Today may include some forward looking statements. We refer you to the cautionary language at the bottom of or.
Thanks release it also at our annual report.
10-K, and subsequent filings pertaining to forward looking statements also during the call we will be using some non-GAAP numbers, which are reconciled the comparable GAAP numbers and the tables at the end of our press release and accompanying slide presentation, both of which are available on our website at www Dot Crane Co. Dot com and the Investor Relations section now, let me try to color to that.
Thank you Jay said, a good morning, everyone.
Last quarter's call. We did what few tried to give our best estimate of guidance for the year based on what we were seeing along with our extrapolations around recovery scenarios.
Well the environment is still highly uncertain I'm pleased to the directional accuracy of our guidance from last quarter, we narrowed our full year guidance range and raised the midpoint modestly.
As outlined in our press release last night, we reported second quarter adjusted EPS of 64 cents.
This was better than our guidance of 40 cents to 50 cents, but largely related to timing.
Specifically margins the food healing were better than we expected mainly because of mix sales and margins at aerospace <unk> electronics were better than we expected as the sharpest falloff in sales and orders happened a little later in the quarter than we expected.
Corporate costs in the second quarter were lower than expected because of the timing of a few items.
Adjusted sales of 681 million declined 19% compared to prior year with a 24% decline in core sales and a 1% negative impact from FX, partially offset by 6% acquisition benefit.
Operating margin excluding special items.
Of 8.9% compared to 15.6% last year.
That reflects a de leverage rate of 44%, excluding the impact of the instrumentation and sampling and covered Dallas and acquisitions the de leverage rate was 37%.
That reflects very solid execution, given the magnitude of the market decline, particularly since our cost actions were implemented implemented over the course of the quarter and we do not benefit from the full run rate until the latter part of the second quarter.
I will review second quarter results, including a comparison to the expectations provided during our last conference call Rich is going to provide an update on liquidity as well as details on our specific cost reduction measures to date.
Our updated guidance is based on actual results through June.
Combined with our detailed analytics and scenario assessment planning for the balance of the year.
Based on this we are narrowing our EPS guidance range for full year 2020 to 3030 cents to $4 intense efforts, which reflects a core sales decline of 17% to 21% and incremental gross cost savings, but at least 100 million this year.
We continue to expect free cash flow for approximately 200 250 million with capital spending of approximately 45 million.
Based on what we know today, we expect third quarter adjusted EPS.
Range of 70 cents to 85 cents per share.
From a cadence perspective, one item to note is that we expect the third quarter tax rate to be approximately 24.5%.
Dropping to the mid teens in the fourth quarter, given certain timing issues.
On a full year basis, we still expect the tax rate to approximately 21.5%.
Commenting on the first half of the year on the impact of the pandemic Aesynt seems I wish to comment on.
With travel opening up the last couple of months I've been particularly pleased by my visits across the us to every one of our businesses.
We have very effectively address store associates concerns and safety related to cold.
Once again I wish to thank our associates globally for their leadership and support and managing through these difficult times.
In addition, I'm proud of how we have taken enhance measures to be extremely fair adjust to our associates and helping everyone through these times of stressed and concern.
We took appropriate rightsizing actions and and intentionally measured pace to ensure proper care and communication and businesses, where it was clear because the volume impact would be sustained.
And during my visit even in the face of Cobra challenges have been incredibly impressed with the pace of continuous improvement execution innovation across our locations in every business from technology roadmap execution to selling initiatives facility transformations and new product introductions. Our teams continue to execute at a very high level from this will ask.
What we pay off does end markets recover.
I will highlight some of these successes as I move forward.
Let me move now to our recent performance and forward guidance by business segment.
Fluid handling core sales declined 21% in the quarter.
In line with our expectations margins of 11.2% were modestly above our expectations largely as a result of mix with a total deleverage rate of 26%.
And with a 20% deleverage rate, excluding the impact of the ins acquisition.
Overall food handling is trending in line with our expectations and there is no change to our topline guidance for any part of this business.
Organs are likely to dip a little in the third quarter, reflecting the likely mix.
With the full year margins similar to the second quarter.
On an FX neutral basis core orders declined 17% compared to last year and 14% sequentially.
FX neutral core backlog, however, increased 7% compared to last year in 2% sequentially.
Change in orders is more representative of underlying demand conditions in the backlog increase was driven by our nuclear services business, which has largely been unaffected by coal that.
It has substantial seasonality impacting the timing of its backlog in sales.
Cool hailing has executed extremely well both on continuing to serve our customers on cost reduction measures.
Managing a challenging supply chain.
In addition to do those priorities fluid handling has continued to drive substantial success with key growth initiatives, including further commercialization of new products.
Including our new top law, our new line of Triple offset valves are Toby.
With our Triple offset product line remember that this was a range of products. We first introduced in 2018.
We've gotten substantial traction and gain share towards the target we shared with you at Investor Day, a 50 million in sales by 2023.
This was an entirely new product lines. The crane that has differentiated from competing products with its in line seal design ability to limit fugitive emissions and as pressure sealed bearing that extends the products like.
We've had great success with this product is severe service chemical and petrochemical applications, particularly in Europe and China.
And it is already margin accretive to our process valve business.
We are well ahead of our expectations for the year tracking at 40%, 40% year over year order growth through the first half.
While we expect that rate to soften somewhat we still expect to end the year with orders up more than 30% in markets down to the 20% range without question, we are gaining share.
Following on the success of the TV. The team is introducing a complete metal ceded ball valve platform for 2021 for critical applications and corrosive and erosive environments also differentiated by reduced emissions sealing technology and longer product life.
This is a non traditional space. The crane is not serve historically, we expect this to grow into a 20 million product within five years.
Our large diameter polypropylene line pipe launches seeing similar success as we described Investor day, New product line that has substantial benefits over the incumbent legacy solutions in the chemical petrochemical power and refinery markets.
While power and refinery markets are challenged today, we have pushed into other adjacent areas, including chemicals and other applications, which require high volumes of flow paired with extreme resistance to corrosion and erosion.
Despite the challenging markets year to date orders are flat to last year, we expect to end the year up approximately 30% our funnel has been flat, reflecting difficult markets, but we've been able to grow by doubling our win rate over the last several months, we expect us to be a $25 million product within a few years.
And our pumps business, we continue to see robust quoting activity for our new line of chopper cost across a wide variety of applications from traditional municipal lift stations to new markets, such as poultry processing plants.
Within this business. We also continue to make substantial progress with testing of our new razor grinder pump, which is scheduled to formally launch this fall.
Our new ins acquisition is already seeing progress within cranes, leveraging our global sales team in China.
An enormous XOMA brand of sleep plug valves for the chemical market, we're introducing a breakthrough improvement in 2021 that materially reduces required torque reducing the size of the required actuator and lowers the total cost of and automation package by as much as 20%.
We expect this to generate some name and sales by 2024.
With the benefit from these wins, while the benefit from these wins is being overwhelmed by end markets under substantial covert related pressure.
The traction we are gaining with initiatives gives us comfort that we will exit this downturn in an excellent position to rebound and outgrow during the eventual recovery.
Payment <unk> merchandising technologies core sales declined 25% with margins at 8.1% both very closely in line with our expectations.
Excluding the Commons Allison acquisition, the deleverage rate was 47%, reflecting negative mix, a crane currency, which as expected had lower sales to the U.S. government as well as a sharp drop and are very high margin payment business.
There were some incrementally positive developments in our currency business, but the recovery in our payment innovations and merchandising businesses is somewhat slower than we originally expected.
Overall for the segment. However, there is no change to our expectation to total sales, including the Cummins Allison acquisition benefit will be in a range of up to low single digits to to a decline of as much as approximately 10%.
Starting with currency the biggest changed is that the us treasury issued an upward revised yearly currency order wide.
Last October we explained to you that to US government had excess inventory of printed bank notes as well as currency substrate as a result in 2020 why go.
Were 5.2 billion nodes.
Was substantially lower than the prior years of the Treasury and Bureau of engraving and printing intended to destock back to more normal inventory levels.
That is stocking has progressed more quickly than expected as cobot has increased demand for most denominations of cash.
The revised currency order for the government's fiscal 2020 was increased from 5.2 billion to 6.2 billion notes.
Still lower than fiscal 2019, but about 20% above the original order that was issued last summer.
Production is already increased to meet the set of demand.
While we will not receive the official 2021 third from other month or so as previously communicated my personal expectation from our data analytics is that orders will revert to historic norms banding approximately 6.5 to 7 billion notes.
We are incrementally positive on the outlook for crane currency this year with full year sales growth likely in the teams.
This business has had incredible CBS success with improved process control variation reduction than the improvement is reading through in our results across all sites.
Our micro optics technology team is second to none with algorithmic geometric encryption that continues to develop new breakthrough anti counterfeiting products with a growing portfolio of products suitable for all of our customers' needs across all denominations of nuts.
And we now offer a full suite of micro optics solutions at various price points and levels of sophistication also invest investing in rich pipeline of continued breakthrough technology.
We're also continuing to work closely with U.S. government on the plans for eventual new series of notes, which would be really exciting opportunity for our security business since your core substrate demand.
And our vending business second quarter core sales were down more than 40%. This is a short cycle business with limited backlog and visibility, but we expect continued pressure is primary bending locations are in office building schools manufacturing facilities, many of which are currently closer operating with substantially fewer people.
We do expect some improvement later this year probably in the fourth quarter.
In April we told you we expected vending sales declined 30% to 40% for the full year, we're still comfortable that range, but probably closer to the down 40% ended the range.
While cobot has had a substantial impact on demand here.
This business has driven continued improvement in their primary facility manufacturing facility breakthrough improvements on both flow and productivity.
Our paint business is on a short cycle business seeing substantially lower demand across all verticals, including retail casino vending financial services and transportation.
We continue to believe that there will be benefit to the retail and financial services verticals in the medium term as banks and retail locations like grocery and big box stores look to improve not only productivity. The now also hygiene by limiting direct contact between customers and employees.
However, while we are seeing little actual movement on new projects interest level remains very high with increased outreach discussion and our Q activity.
On a full year basis, we still expect this business to see us core sales decline in the 20% to 35% range for probably closer to the 35% ended that range.
We also still expect the contribution of approximately 150 to 170 million sales when it comes Allison acquisition.
Across this segment, we a lot of exciting initiatives, particularly in the retail gaming and financial services segments of payment.
Continuing to see in a steady incremental interest in our pay pod solutions in the current cobot environment as more businesses are exploring options to automate transactions and minimize direct human contact and interaction.
In Europe, we're seeing growing interest from a wide range of customers such as bakeries put your shops convenience stores pharmacies. In addition to continued deployment of installed units, we have a number of trials underway with smaller chains of stores.
In the United States, we are not leveraging the Cummins Allison sales organization to aggressively market the pay pod solution to our existing customer base, we use Commons Allison in the back office and now we are generating numerous sales leads with these same customers in the front end of the locations.
And in Japan, we are gaining traction with pay bottom base station solutions in numerous studies, particularly convenient stores.
We're also seeing more discussions and interest in jointly developing kiosk based solutions with a number of partners for various applications. Some of these applications have been relatively traditional such as bill payment kiosks for cell phone providers in other cases were working with kiosk manufacturers to integrate our paper cash models into full kiosks solutions.
Particularly for the fast food industry.
We've also made substantial progress focused on the gaming market working with one of our partners to offer an E ticket solution integrated with our easy tracks connect software, providing a cashless option for slot machines, expanding our presence not only in cash but cashless solutions.
In addition to the successes, we have had commercializing new products.
We're also continuing to invest in next generation note and coin validation technology consistent with our technology Roadmaps.
As a business, where given the short cycle nature of the business. We've seen a very sharp reduction of sales. However, the level of activity in customer interest is very hot.
We are pursuing numerous exciting opportunities. The real question is timing as we still have lower visibility visibility than normal.
And at Aerospace <unk> electronics core sales declined 23% with margins of 15.4%.
Both sales and margins were modestly better than we expected based on the timing of rate reductions and aftermarket shipments.
Our overall outlook is unchanged, we continue to expect for full year sales down in the 20% to 25% range.
While near term end market demand challenges in commercial aerospace will drive reduced customer spending.
We continue investing and are making excellent progress on many customer program opportunities.
Except for final spending to support completion of major single program wins from years ago. Most of our engineering investments today are largely aimed at differentiated solutions for increased electrification requirements spanning both commercial and military and markets.
For example, in our microwave business.
We have over 20 funded new products in development for 10 different defense radar applications, but we're working on today, which on a relative basis is significantly more than our historic four to five programs.
And we typically are working on at any point in time.
This is directly a result of driving specific technology enhancing investments around low noise solutions stack filters and hybrid converters that we started several years ago.
Long term investments benefiting results today, as we move to winning higher value added integrated microwave assemblies, rather than only components.
On the military side, we're making significant gains with our high power electrical conversion business with continued investments in development, serving the increasing customer demands for various highpower radar applications.
You May recall, we announced a major program win with Raytheon last fall for their missile defense radar platform a program with a value comparable to a mid sized aircraft platform and which will ultimately replace the Patriot missile system.
I'm pleased to report that during the quarter, we delivered our first key milestone for this program and equally important we want to more high profile programs with another major defense contractor leveraging the same strategic investments for similar high power radar applications.
Well known multiyear programs again excellent progress by the team.
And our brake control business, while most large program work is substantially behind us we secured and are working nine development programs today.
While smaller in size. These programs include unique brake control algorithms tailored to our customers applications. While also advancing our core underlying technology, including increased sensing capabilities.
And a good mix between commercial and military programs and a unique multiyear military revenue opportunity that we are pursuing and a platform having a significant installed base of aircraft.
In our testing solution, we are investing increased power conversion efficiency and driving wireless sensing solutions, among other things and in fluid management moving into near adjacent.
Such as coolant pumps to enable delivery of more complete fluid solutions to our customers.
Again in both these solutions improving our capabilities for increased electrification and technology requirements moving forward.
And operationally I couldn't be more pleased as we want our fifth Airbus supplier to the year awards within the last six years with improved ratings year over year and 11 of 12 categories.
And ensure materials.
Core sales declined 40% with margins of 7.1%, reflecting a deleverage rate of 23%.
Most of the RV manufacturers shutdown production completely through April in early May for production has been restarted in most parts of the industry.
The building products market also slow with sales through retail home improvement channel is performing well for more than offset by weaker sales for commercial applications, where we have a particular strength with quick serve restaurants.
You, probably all seen a lot of positive press about the opportunity for the RV industry.
In the medium term are these will be incrementally attractive to families looking for domestic and isolated safe vacation alternative.
We are just now starting to see increased demand flow through to us, but we are optimistic at a renewed demand rebirth of the RV lifestyle us come consumers and are seeing early signals of a meaningful uptick.
Overall, we continue to expect segment sales down in the low 30% range.
For the full year.
I'll turn it over to rich maue low loss.
Little more color.
Thank you Max and good morning, everyone to start with a brief update on our financial status, our balance sheet strength and cash flow generation allows us to remain confident managing through this downturn continuing to drive our long term strategic growth initiatives.
We are managing all aspects of our cash flow carefully and that effort showed in the second quarter cash flow results.
Capital expenditures in the second quarter of 2020 were 6 million compared to $16 million last year second quarter 2020 free cash flow was 106 million compared to 137 million last year and putting us out solidly on track to deliver on our full year free cash flow guidance of 200 to 250 million.
We continue to expect 2020 capital expenditures of approximately 45 million as most discretionary capex is to being deferred.
We're prioritizing spend towards investments that ensure we come out of this period stronger.
As of June Thirtyth 2020, we have approximately 900 million of liquidity comprised of 592 million in cash and 308 million available under our revolving credit facility.
As a reminder, we do not have any bond maturities before 2023, we believe that we have ample liquidity for the current environment and we have no need or plan to draw on our revolving credit facility. At this time, we expect that we will reduce leverage naturally over the course of 2020, leaving the year on a stronger financial position than we entered it.
From a cost perspective, we are on track to meet or exceed our target of 100 million in gross realized savings in 2020.
Based on our outlook today that is still the right amount appropriately balancing near term results with longer term investments to strengthen our competitive position and prepare us to outgrow the eventual recovery.
All strategic growth initiatives are still funded and we have reviewed all proposed reductions in force in great detail to ensure that we are protecting as many as a sort of our associates critical to our long term success as possible.
Even if we're not able to fully utilize them in the near term.
He also completed an internal merger in July moving our merchandising business into the vending vertical within the crane payment innovations business. This will result in cost savings related to de layering in the elimination of a business unit President another management synergies. However, the primary driver of the move was to ensure a better coordination collaboration between.
Our vending hardware business and our payment business to develop even more sophisticated connectivity solutions for our customers and how we continue to evolve our complete system product line production and manufacturing strategy. In addition to sales capabilities.
With that said, let's get to your questions.
Thank you operator.
At this time, we will conduct a question and answer. This question if you like to US and question. Please press star one on your telephone keypad.
Information tone indicate your line is in a question Q you May press star too if you like to remove your question from the Q.
Pensions and speaker equipment and may be necessary to pick up your hands that before president Starkey one moment, while people first question.
Our first question comes from Matt Summerville with da Davidson. Please proceed with your question.
Thanks.
As Jim.
First are you seeing any impact in your business as of yet from that upwardly revised print to order and do you feel the BP, we'll be able to ramp up production to meet that demand and then as a follow up maybe talk about what you're seeing the game of the currency business as it relates to international government.
[music].
We have.
Demand revised why go.
Was put into effect, we are we have adjusted to meet that demand.
The BP is able to meet that demand from every indication that that we see I think as we look forward I feel pretty confident Matt just on our own analysis.
There's nothing.
The government is shared with us.
Officially but we feel pretty pretty confident that will be it certainly an increase from the revised.
Existing like coat.
So thats a fuel solid and Weve I think the supply chain is ready to.
Produce that required.
Demands for the Treasury.
Question on international we're seeing still see solids.
Double digit improvement the teams are executing really really well our technology is winning the microthread.
Technology as a clear differentiator.
The outstanding printing facility that we have in Malta as a differentiator.
We are seeing similar.
Uplift from some cash demands by various countries as well related to two cold so things in the business overall very strong.
And then just as a follow up and I apologize if you step this and I missed what should what would be your decremental expectation for the overall company on a core basis in the back half of the year. Thank you.
Yes ill take that Matt so from a on a core basis, so excluding the ins acquisition and Cummins Allison.
We feel a full year of that 30% to 35% is still the right number.
As we are as we're looking at things today.
Great. Thank you guys.
Welcome.
Our next question comes from Nathan Jones with Stifel. Please proceed with your question.
Good morning, everyone when it's important.
I just like to start off with a broad question the on topline growth.
Got you guys have said, 17% to 21% for the full year, which given the first quarter was pretty date and gives you a range in the second half of down 17 to 25, which at the low end.
The same as you had into Q and doesn't imply much improvement in comparisons in the back half.
And now you actually do apps and AIDEA comparisons in the back half. So can you maybe give us a little more color on your expectations, there and what is kind of keeping that does comparisons pretty muted here in the back half.
Yes, what I would say Nathan is that.
And as you pointed out we really havent changed much in the way of our total outlook in terms of guidance by segment.
When you look at at the but there are some moving points as you point out when you look at the second half there isn't an overall meaningful uptick I would say.
But we do expect to see sequential improvement when thinking about moving from Q2 to Q3 in Q3 to Q4.
Crane currency for example in particular in Q3.
We're going to expect to see some tailwinds on that year over year comp.
With the U.S. government. However, that's muted a bit by some of the benefit that we saw in Q2, and aerospace electronics coming down a bit and in Q3.
And the natural progression of sales decline in some of the other businesses also offsetting so.
What I would say is that the rate of decline on a year over year basis improves for the most for the most part from Q2, but still on a sequential basis.
Not a meaningful uptick for the second half.
Okay and you guys. It also at that 100 115 million of cost taken out in 2020.
Max you talked about being pretty measured in the pace that you're going through that can you talk about where you are.
In executing that plan, how much more is still today and whether or not with you know another three month under your belt and little more clarity on what the demand pitch is likely to look like at least within <unk>.
A narrower range.
If there's any thought the plan to take some more structural cost out of the business.
Nathan ill take that so overall, what I would say is that we're tracking really nicely to the to the program that we communicated to you all in April.
It's tracking as expected most of the cost actions have been executed.
To date I think through the end of this month I would say 95% of those actions will have been fully executed on.
Theres still minor minor initiatives that will track to the balance of a year, but it's it's not as meaningful.
To the total.
As it relates to incremental actions or other things that we might do in response to demand changes again, I would say that our outlook for the balance of the year is consistent with what we thought in April so nothing in front of us.
Suggest we need to do anything and I would say that also includes our initial views on how we think the pace of this recovery is happening in terms of 2021.
We did talk a little bit about consolidation of vending into our vending vertical and CPI, there's some incremental savings there.
A few million bucks or so that'll be incremental.
Going forward.
Okay. Thanks, I'll pass it on.
Thanks, David Thanks.
Our next question comes from Ken Herbert with Canaccord. Please proceed with your question.
Yes, hi, good morning.
Maxon, Richard Jason how you doing.
Good morning.
Max I just wanted to start off high level.
The world's changed pretty substantially in the last three months ensure since your first quarter results.
I'm just curious as you sounds like you've met with a lot of your locations here domestically and her team members I'd imagine you've had extensive customer conversations is there anything particularly point to the truly stuck out either positively or negatively in terms of customer actions were intentions, Sammy maybe relative to what you expected a few months ago.
Or relative your expectations.
Well, that's an interesting question, we have such diverse end markets and customers, it's hard to over generalize on that one.
But probably would just say.
Look I think we were I think everybody was hoping for a little sharper recovery to go faster and.
Which is fascinating to see how various end markets.
Benefiting or not of from consumer behavior, whether you're stuck at home and some of the trends that are occurring on that some companies are benefiting from it.
You know where we're positioned.
Okay.
I think travel aerospace and just in terms of commercial travel. We're all seeing this play out real time and our own lives. This lockdown that continues to.
Change by state by geography.
Open close.
I think all of us had hoped.
That that would be a better situation. It certainly feels like it's going to be slower.
Longer.
And we're all going to pass the power through this and so I think customers are continuing to try to adjust to the realities.
Some of that.
Others, who are who are trying to come of ways to open as I mentioned.
Gaming Las Vegas, some each ticket solutions.
By us partnering with customers to help aid in this environment.
Pay pod increased level of interest.
Is being aided certainly currency in some of the demands that I think surprised.
And then customers with.
[music].
With cash usage.
Those are some interesting trends I would think.
Yes, yes, yes, yes.
Sorry.
Just to add just at a little bit I would say its bit what's difficult, but the question relative to what we thought in April I think we're all hopeful.
That would that things would improve quicker, but relative to our views then and now in where we are today not not all that different what I would say.
Little bit encouraging is on some of the engineering side.
With new product development initiatives and customers.
Working with us on on various initiatives right development programs the ones that Max mentioned for example, during the quarter enough his prepared remarks.
Our clearly still moving moving ahead, maybe a little bit slower you know you can't get to certain test facilities and Theres theres some headwinds in that regard, but encouraging to see that everybody realizes that this is temporary and at some point, we're all coming back.
So that's helpful. If I could just to drill down within aerospace and electronics for a second it sounds like sales were maybe a little better than you expected with some maybe some spillover from some aftermarket and OE sales are you seeing on the on the original equipment side are you seeing much customer destocking, yet or have you seen that it.
It sounds like that could be a fairly significant headwind for some suppliers and then on the aftermarket.
Did you see any any improvement as we went through the quarter from sort of April June or is there any comments you can make on maybe aftermarket trends your answer well through July.
Yes, I would I'd say on on Oh, we have the OE side, a little bit of what you said in terms of Destocking definitely.
I would say it was expected.
We have various where component supplier and the Oems will stock a bit and so there was some of that certainly.
Excuse me, but it but certainly expected.
On the aftermarket side, yes, we did see things gradually show some level of improvement as we went through the month in June and here in July but its sit out it's still pretty anemic, but but definitely hit hit a bottom I would say in that may timeframe and coming back a little bit in June here in June in here in July.
Great. Thanks, Rich I'll pass it back there.
Sure. Thanks.
Uh huh.
Our next question comes from Damian Congrats VBS. Please proceed with your question.
Hey, good morning, everyone would David good morning.
Morning.
What are the first ask you about fluid handling.
Look at times order rates.
Down 14% sequentially and 17%.
Versus last year.
Wondering if you could maybe give a sense on a monthly progression there and what are you seeing any improvement more recently.
Like how did that exit rate.
In June.
Imperative that 17%.
Yes, I would I would say.
Is again it was a bit of what we expected in a in the in the quarter.
We do expect us to be a lawfare recovery for fluid fluid handling again, consistent with what we said.
In April not a heck of a lot of sequential improvement in fact on the process side, we would expect that to continue to go down given the the backlog long cycle nature of that business.
On the commercial side I would say that we're starting to see some things.
Pickup a little bit, but again still year over year down.
At a level that fits our guidance range. So Q2, feeling like it was certainly the worst on the commercial side.
Still down year over year, Q3, Q4 pretty considerably, but improving from the Q2 rate.
If that helps Damian.
Thank you.
Just a follow up question on on PMP.
It sounded like.
Incremental tailwind and currency.
Great and 18 revised order.
But in the way, we should view that it sounded like you're slightly more negative than on vending and PPI. It's the way we should be that kind of effectively on a wash if you think about the that.
Currency.
Little bit better.
Lower negative and I think on unbending, PPI and and I guess.
Regarding Max you'd mentioned some medium term benefit you're expecting a in retail and financial services just wondering if there's any yes.
You can elaborate a little bit on timing.
Yes, quantifying that opportunity and I guess, just more importantly, whether you're.
Prepared to deliver on that or if it would require additional investment from here. Thanks.
Yes, we're prepared to to deliver.
As I mentioned that we haven't seen the.
The increase in in orders yet in tracking the funnel in our Q.
Activity and customer outreach and discussion it's very high so.
I think it's going to play out Damian.
As as the economy plays out.
Retail stores are going to open.
It's back to that question at the broader macroeconomic environment hospitals will start to pick up.
Q3 Q4 into 2021.
But I feel pretty pretty bullish about the opportunities as we get cold it.
Behind us and things continue to open up and people are out in a more normal.
Environment.
On the payment question overall.
When you said, we're a little more negative.
We gave a range I think it's incredible.
The we gave guidance in that range in a time when no one else was and.
Within that range.
The little bit towards the lower end of that range. So.
Yeah, just temporary little bit instead of saying more negative within what we expected, but just more on the.
Downward side offset by currency I think Thats fair that the way you stated it was a bit of a wash through yes, yes, that's what it for the same thing.
Okay Fair enough appreciate the color guys I'll get back in the Q.
Thank you.
Once again to ask a question that start one when your telephone keypad. Our next question comes from Brett Linzey with vertical Research partners. Please proceed with your question.
Hey, good morning, everybody.
Good morning, I wanted to come back to the cost reduction saving so the 100 to 120 million sounds like Q3, you're going to get a full run rate. There could you just remind us how much of that total bucket is structural and what the carryover savings will look like in the 21, and then separately separately in terms of just the discretion.
Carrier temporary savings what did you realize in the quarter and do you expect some of those spending buckets to stay lower for longer.
Yes, so about about.
40% I would say is what we would referred to as structurally.
Changed for the next few years or couple of years.
To answer that question.
As it relates to that to the quarter itself.
We were.
To your point run rate basis in Q3 and about half that in in Q2.
Okay got it so so the 60% should we think of.
That coming back reversing in the next year or do you think you can.
Maintain lower levels of discretionary spend.
On the way you do business and just efficiencies just how you're thinking about the headway yet.
Exactly what you just said, it's not it's not like it's going to start coming back all but all that soon right, it's going to be aligned to what we see with respect to end markets and investments that we want to make but I would not look at that is cost coming back thats cost staying out but when demand comes back we'll make will be selective and careful about what we had.
Okay got it and then just shifting to an E. You mentioned orders started to slow later in the quarter. So you know I assume the Q3 topline steps down year over year versus Q2, what did the any order exit rates look like in that segment and then the high profile a high power radar.
In in the military could you just quantify in size.
That project and maybe just a finer point on the delivery cycle there.
Yeah on the on the order rates just I'm just trying to follow your question.
They paced what we expected it certainly on the aftermarket side.
Notably, notably worst we're in that 65% to 70% downrange on the commercial on the commercial aftermarket.
So.
On the overall on the overall quarter, but again improved a little bit.
From the run rate between May and June now here in July.
On the program.
I'm trying to I'm trying to think about which when you referring to the business, though the two to two wins that we had that built off of the first one.
We havent, we havent quantified that yet I would say theyre, they're meaningful to the business. We wouldn't have highlighted highlighted them if they weren't I would say that they.
Maybe.
I'd, rather not I'd, rather not say Brett.
And just wait here until we actually announce.
We're kinda notice okay ill leave it there are not pass along thanks, thanks for the color.
That's correct.
At this time I would like to turn the call back over to Max Mitchell for closing comments.
Well, thank you operator.
I would like to thank our teams around the world for their outstanding execution and perseverance in these challenging times across Craig we remain committed to ensuring a safe working environment for our associates, while continuing to drive execution innovation to best serve our customers. Later this week, we enter our annual strategic planning review process with one to two day meetings with each of our 11 businesses to review their long term.
Strategy.
Pandemic certainly creates some challenges for long term planning.
But it also reinforces the importance of this annual exercise for us as we continue to challenge ourselves, but the most critical strategic initiatives across Graeme.
While there is uncertainty today.
Never been more energized and excited about the opportunities lie ahead, we're working diligently to position crane for a market recovery as late great Little Richard One said, it's not the size of the ship to sizable waves. The crane are differentiated technology innovation continue to make big ways across the industries in which we participate in solidify our future.
Vertical growth. Thank you for your interest in credit and have great day.
Thank you. This does conclude today's teleconference. You may disconnect. Your lines at this time and have a great Dane.