Q2 2020 Valmont Industries Inc Earnings Call
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Question answer session will follow the formal presentation.
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It's now my pleasure to introduce your host relay Campbell, Vice President Investor Relations in corporate Communications Ms. Campbell. Please go ahead.
Thank you Kevin Good morning, and welcome to Valmont Industries' second quarter 2020 earnings call.
With me on today's call or Steve Kaniewski, President and Chief Executive Officer.
After Appelbaum executive Vice President and Chief Financial Officer, and Tim Frances Senior Vice President corporate controller.
This morning, Steve will provide a brief summary of our second quarter results Cobot 19 business update and commentary on our strategy and long term business outlook.
I've never will review, our second quarter financial performance and provide an update on our third quarter outlook with closing remarks from Steve.
This will be followed by QNX.
A live webcast of this slide presentation will accompany today's discussion and is available for download from the webcast or on the investors page at <unk> Dot com.
A replay of today's call will be available for the next seven days.
Please note that this conference call is subject to our disclosure on forward looking statements, which applies to today's discussion and its outlined on slide two of the presentation. It will also be read in fall at the end of this call.
I would now like to turn the call over to our President and Chief Executive Officer, Steve Kaniewski.
Thank you were in a good morning, everyone and thank you for joining us.
Before reviewing our strong second quarter results I'd like to start with a couple of comments.
Since the beginning of the covert 19 pandemic, we have worked very hard to keep our in place safe and I blamed on our core values and resiliency as a company to guide.
Want to start by thanking our 10000 employees globally for their extraordinary efforts this quarter.
I have worked tirelessly during this pandemic to deliver solid operational and financial results.
Demonstrated a jody I quickly adapting to new ways of working at communicating indoor disruptions to their normal routines and remain flexible display closures, if some of our international facilities.
I'm extremely proud of how our teams have been managing through this crisis.
Taking care of our customers themselves and their families.
I'm also grateful to our global customers suppliers and stakeholders for their ongoing flexibility in understanding during these unprecedented times.
When we held our last earnings call three months ago. The challenges of the pandemic. We're just beginning to emerge and we were aware of only a few positive cases, our workforce. Since then there have been additional cases, although the current infection rate of our employees remains less than a half a percent of our total workforce.
I'm happy to report that all those who have tested positive are either recovery or have fully recovered.
Importantly to date, we've had no significant disruption to our operations directly attributed to the virus.
With that let me turn to a recap of our second quarter summarized on slide four of the presentation.
Net sales of $688.8 million declined $12 million or 1.7 per cent compared to last year.
Excluding $13.7 billion, an unfavorable currency impacts sales were flat.
Strong growth in the utility support structures segment was more than offset by expected lower sales in the coating segment due to covert 19 impacts a weaker industrial demand Oh.
Overall, both revenue and profitability were better than expected across all segments as we successfully manage pricing and operational performance.
Turning to the segments, starting with engineered support structures sales of $253.4 million declined 2.1 per cent compared to last year and flat year over year, when excluding unfavorable currency impacts.
We delivered a solid quarter of sales growth of lighting and traffic products in North America.
Benefiting from ongoing investments by state and local governments, the strengthening demand and transportation markets.
Globally wireless communication sales grew more than seven per cent compared to last year.
We are spending continue to drive demand in North American markets and our small cell products are beginning to gain traction as fiveg build outs are starting to ramp.
Project sales in Europe, mostly driven by a large fiveg project in the UK also contribute to Robert revenue growth.
Sales of access systems products were lower compared to last year, primarily driven by our strategic decision to exit certain product lines as well as impacts from pandemic led factory shutdowns.
Turning to utility support structures sales of $231.3 million grew 10.2 per cent compared to last year.
Sales of global transmission products increased significantly across all structured types amid ongoing investments to strengthen the grid.
Volume growth was also driven by strategic capacity additions in North American operations that we announced last year.
Sales in international markets, including solar trackers, and offshore wind structures were flat with last year.
I'm pleased to highlight that the global backlog of nearly $650 million remain strong at the ended the quarter and includes a large lot of structures order of approximately $17 billion for the North American market.
A result of our partnership with lock Weld Canadian market leader for steel loudest transmission towers.
Our lightest manufacturing facility in India is an exclusive subcontractor for lock Walt.
Customers will benefit from both companies combined expertise to provide quality structures greater supply flexibility and enhance service levels.
Production for this order will commence in the fourth quarter of 2020 with most of the revenue recognized throughout 2021.
Moving to coatings sales of $80 million decreased 18.7% compared to last year as expected.
External volumes were lower due to covert 19 impacts to end customers and temporary facility closures.
Moving to irrigation segment sales of $150.6 million declined 3% compared to last year.
Excluding unfavorable currency impacts sales were flat.
In North America sales were down 3.7%.
Higher sales of irrigation products and pricing for more than offset by lower industrial tubing sales driven by lower steel costs.
International sales grew organically across all regions offset by a negative currency impact.
Very strong demand in Brazil led to another quarter of record sales in local currency.
Well impacts from covert 19 have caused disruptions in Brazil.
Our cultural market remains strong.
This past May we learned that Agra show the largest annual farm show in Brazil, which she is about 150000 growers attend would be cancelled due to the pandemic.
As many of you know this show has historically generated a significant number of orders.
Upon learning of the cancellation, our local irrigation team creatively organize their own exclusive virtual show spanning nearly two weeks, including Webinars and virtual round tables.
This was a first in the industry, leading to millions of <unk> orders received.
We believe this affirms our position as the market leader, demonstrating our commitment to serve customers and grow market share.
Turning to slide five.
As we have communicated over the past several years acquisitions have been a strategic focus of ours.
I would like to take a few minutes to highlight two recent small but strategic acquisitions that advance our strategies of adjacent market growth and technology leadership.
First we purchased a majority stake in Soleris, a unique provider of solar energy solutions for the Brazilian agricultural market.
Our strategy to expand their services globally through the strength of our valley dealer network will provide us a first to market solar power offering for growers.
Going to market as Valmont solar solutions, we can now offer a distributor generation solution for powering pivots and other farm equipment to optimize the efficiency of growers operations and provide data monitoring solutions that are unmatched in the industry.
Expanding this product into Africa, the middle East and other developing markets overtime allows us to offer innovative options, where the electrical grid is lacking and or generation sources are not viable.
These solutions also play an important role in reducing environmental impacts and supporting communities.
Furthering our commitment to sustainability and yes, you principles.
We also acquired the assets a precision king a subscription based AG Tech company that provides remote sensing and monitoring solutions for the U.S. market.
With this acquisition our number of global connected devices is now approximately 102000 and year to date technology sales grew to more than $32 million.
We remain focused on acquisitions and investments that provide value to our customers through technology and data solutions with an emphasis on bolt ons that adds to the larger AG tech ecosystem. We're in the process of building.
I would like to walk and both of these teams development.
In prior quarters I've spoken with you about valley insights artificial intelligence base crop monitoring and detection service.
Using imagery to detect crop health issues. This advanced service alerts to grow or two problem areas for remediation.
Together with our partner Prosper technologies, we recently expanded it to commercial growers and four states and I'm excited to share that we've already reached our goal to monitor 5 million acres six months ahead of schedule.
More than 300 growers on 4800 fields are now benefiting from the service and feedback has been extremely positive.
Recently, we back we began conducting field test using sensors mounted on valley irrigation machines.
Located just a few meters from the plant. These sensors collect high resolution images day and night, capturing significantly greater details then drone Ariel or satellite imagery can provide.
At a much lower cost profile.
Examples are shown on slide 27 through 29 in the appendix of this presentation.
These sensors are a key milestone in our strategic roadmap to transform the center pivot to an autonomous crop management machine and we look forward to updating you more in future quarters.
Importantly, and as we've said before where we attribute our success here to a very strong collaboration with our World class dealer network, which is critical to grow our education and market adoption of these technology products.
I'll now turn to slide six for an update on the specific actions, we've taken to help mitigate the business impacts of covert 19th.
First and foremost.
The safety of our employees continues to be our number one priority.
We remain vigilant in adhering to safe distancing procedures and processes and all of our facilities and work areas.
We have continued our remote work policy across our administration teams where possible to limit the number of individuals at our manufacturing facilities.
We believe these measured steps have prevented our factories from becoming a vector point for infections and are grateful for the health and well being of our employees, who are the backbone of our company servicing our customers keeping our factories operational.
Turning to slide seven.
A reminder, that our products and solutions are considered essential as they support critical infrastructure sectors and food security as defined by many global government agencies.
Most of our manufacturing facilities have continued regular operations since the pandemic began.
And we're pleased to report that all facilities that were temporarily closed have resumed operations to pre pandemic levels.
From a macro standpoint, we continue to expect stable input costs improved labor availability and lower employee turnover.
We recognize that there are potential longer term economic headwinds in the markets, we serve that could impact our businesses in the future.
And we continue to work with our global teams to closely monitor market conditions and customer patterns.
Turning to slide eight as we outlined last quarter, the covert impacts to our business very across the portfolio and our the basis for which we continue to assess the balance of the here.
The risk profiles of the segments have not changed since last quarter, and Abner will speak to our third quarter indications and assumptions later in the call.
Across our footprint, we continue to closely manage discretionary spending and capital expenses until the impact from the pandemic is more clear.
As our business portfolio is diversified with different business cycles are experienced teams can withstand market challenges.
We carefully planned for different scenarios and are confident in the actions and adjustments that needs to be made and we'll execute accordingly as conditions dictate.
With that I'll now turn the call over to Avner for a second quarter financial review and update to our third quarter outlook.
Thank you, Steve and good morning, everyone before I begin I want to make a few opening remarks about my first quarter as CFO for Vilma.
Over the past 90 days I've been spending time learning the organization getting up to speed under business drivers, meaning with the financing I P team executive management team and digitally connecting with colleague it's clear that Belmont has a very knowledgeable experienced and talented team and I'm excited to lead our fine.
Organization to becoming a true strategic partner to our businesses, we have a lot of strength as well as opportunities, including around optimizing working capital maximizing free cash.
And improving return on invested capital I believe that with a combination of robust shared services utilizing advanced technology data and lean practices. We can transform the finance function to business partners and strategic enabler developing centers of excellence and accelerating initiative to drive shareholders.
I'm excited for our future and look forward to sharing more details with you in the coming quarters.
Moving to second quarter results My comments will focus on the adjusted results as outlined in press release, and then the Reg G disclosure in the presentation appendix.
Please also note that for comparison purposes references to 29 teen operating income and earnings per share exclude delightful method of accounting for inventory, which was discontinued at the beginning of fiscal 2020.
Turning to slide 10.
Second quarter operating income of $65.7 million were 9.5% of sales grew 3% compared to last year on comparable sale solid performance and our three largest segments offset lower profitability in the coating segment.
Second quarter diluted earnings per share of $2 grew approximately 10% compared to last year.
During the quarter, we incurred incremental expenses related to covert 19 impact, which on a net basis totaled approximately two and a half million dollars or nine cents per share second quarter tax rate on an adjusted basis up 25%, what's comparable to last year.
Turning to the segment on slide 11 in engineered support structures operating income of $22.9 million or 9% of sales increased 90 basis points over last year. Overall, we were very pleased with the continued pricing discipline and strong volumes in north American market in international markets.
The affects of them on facility closures, primarily in France in India impacted margins.
This quarter, we executed on planned restructuring actions across the company and the details our noticed I know that I noted on slide 38 in the presentation.
Specifically in access system, we reported non cash goodwill and tradename impairment charges, a $16.6 million and improving the other expenses associated with exiting the noncore supply and installed product offering which will reduce operating costs going forward. Excluding these charges second quarter.
Profitability was comparable to the first quarter and improved compared to the second half of 29 team.
Moving to slide 12, and the utility support structures segment operating income of $25.3 million were 11% of sales increased 340 basis points over last year stronger volumes improved operational performance and a better quality of earnings in Q3 national businesses drove the profitability improve.
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Turning to slide 13 in the coating segment operating income of $10.4 million or 13% of sale was 240 basis points lower than last year as expected lower volumes from economic impacts and temporary facility closure.
So Seattle with Cobot led to operating do leverage moving to slide 14 in irrigation segment operating income of $22.4 million or 14.8% Upsale increased 90 basis points compared to last year profitability improvement was led by pricing and higher sales volume.
Turning to cash flow and slice Christine we delivered solid operating cash flow of $88.2 million this quarter, leading to a 33% improvement in year to date operating cash flows compared to last year.
Relentless focus on working capital management is delivering results, especially during these uncertain time, along with a more stable raw material cost environment.
As I mentioned in my opening remarks, optimizing free cash flow will be an even greater focus going forward.
Turning to capital deployment, but year to date summer it's shown in slide 16.
Capital spending this quarter was $24 million and we remain focused on strategically investing in future growth opportunities, while ensuring optimal liquidity during the quarter, we deployed $7 million for two strategic acquisition immature at approximately $10 million of capital to shareholders through dividend ending this quarter with.
Approximately $353 million of cash.
Moving now to slide 17 for balance sheet highlights, we recalibrated our capital spending plans for 2020, which are expected to range between $80 million to $90 million, we continue to aggressively manage spend and prioritize strategic investments internally.
Early in second quarter, we drew down $75 million that our 600 billion dollar revolving credit facility to ensure sufficient liquidity amid the uncertainty of a pandemic.
As a result of strong cash flow and favorable business performance. We repaid this amount unfold during the quarter our balance sheet, a strong with no significant long term debt maturities until 2044, and our leverage ratio of total debt to adjusted EBITDA of 2.3 times remained within our desire to range of one in Uh Huh.
After two and a half time.
Let me know turning to slide 18 for an update to our outlook, including key financial metric and assumptions for this quarter.
Net sales are estimated to be between 680 and $700 million <unk> operating income margins between 8% to 9% of net so excluding any restructuring activity key assumptions supporting this outlook are summarized on this slide.
Turning to slide 19 in engineered support structures. Our current backlog is yielding good visibility to third quarter lighting and traffic sale. The long term market trends for both transportation and wireless communication structures and components in North America remain solid however visibility beyond this quarter is less clear given the combination of.
States lower tax receipts and recent decision to reverse reopening in some states both of which could impact order timing.
Further wireless communication sales within the quarter are harder to predict due to the timing of shipments.
Sales in international markets are expected to be down slightly compared to last year due to ongoing economic effects from the pandemic and a strong U.S. dollar access system revenue are expected to be similar to the first two quarters of this year, but lower than 29 team as we continue to rightsize that business for future market condition.
Third quarter profitability for the for this product line is expected to gradually improved compared to second quarter 2020. Adjusted result, and this has been accounted for in our outlook.
Moving to the utility support structures segment, our strong backlog and the benefit of capacity additions are providing good visibility to the third quarter.
Segment revenue was expected to increase approximately 20% compared to prior year, which includes the large transmission order in northern Europe received last quarter and higher solar project sales in coatings, we expect demand to remain muted due to current global economic activity levels coating sales tend to correlate to ended.
It's real production level and the operations will lever and de lever the most with changes to volume.
Moving to irrigation continued weakness in agricultural commodity prices is expected, especially corn and soybeans net farm income levels are not expected to improve in the near term and this metric has historically been the best indicator of demand for this segment a continued challenging ethanol market strong U.S. dollar and uncertainty.
Around the timing of international projects can all impact quarterly sales a reminder, that third quarter is lower sales quarter compared to the rest of the year due to normal business seasonality. Finally, we expect solid third quarter cash flow driven by additional emphasis on working capital management, the deferment of estimated U.S. tax.
Payments into third quarter are included in our operating cash flow estimate with that I will now turn the call back over to Steve.
Thank you avner.
Moving to slide 20, as we stated last quarter the fundamental market drivers of our business remain intact in engineered support structures government investment in infrastructure development across lighting and transportation markets is expected on some level as past recessions and associated stimulus funding initiatives have shown.
We are encouraged that 17 states have already implemented or proposed fuel tax increases in 2020, which are generally used to fund road and highway projects.
In Europe recent announcements of infrastructure stimulus packages will drive additional market demand there.
Growth in wireless communication structures and components, particularly in Fiveg are expected to accelerate into 2021 as carriers investments are supporting an increasing number of work and school at home environments.
The current pandemic has elevated the critical need for wireless connectivity in rural areas.
I'm excited to announce that Valmont recently joined the American connection project broadband coalition.
This group brings together nearly 50 diverse stakeholders advocating for public and private sector investment to bring high speed Internet infrastructure to all households businesses and farms in rural areas.
As a provider of both wireless communication products and irrigation technology solutions. This initiative will greatly benefit many communities that need this investment.
In utility our robust backlog demonstrates the ongoing demand and necessity for grid hardening and renewable energy solutions independent of general economic trends.
Our coatings business closely follows industrial production trends and general economic activity.
The drivers remains solid as over the long term preservation of critical infrastructure and the increasing number of economies that are actively fighting the costs of corrosion will drive the need to extend the life of steel products globally.
And in irrigation our products and technology help meet the demand for increased food production to support growing populations around the world.
The sustainable management of water resources and optimization of farm inputs and supporting growers conservation efforts are just a few of the long term drivers that support demand for our business.
In international markets governments, increasing needs for food security and agricultural land development, including infrastructure for power generation and supplying water to farms creates opportunities for large projects.
We continue to have very very strong pipeline of project business, but as we always say timing of shipments can be hard to predict based on local factors.
In summary on slide 21, our strong performance through the first half of this year is a testament to the agility of our team and our ability to manage well through uncertainty and change.
We anticipate a challenges and responded quickly employing alternate work arrangements implementing health and safety protocols to ensure the protection of our employees and communities and reinforcing our supply chains.
At Belmont one of the keys to our success is the diversity of our global workforce.
We operate in 22 countries with many different cultures traditions and languages are core value of integrity means we will do the right thing every day, even when no one is watching.
We continue to build upon our commitment to environmental and social excellence, including demonstrating the value that we bring to our communities and our commitment to be an inclusive and diverse workforce.
While the disruptions for from covert 19 continue to create short term business challenges. The long term enduring drivers of our businesses have not changed and are not expected to change once we get through the current crisis.
I will now turn the call back over to overnight.
Thank you Steve Kevin at this time, you may open up the call for questions.
Certainly well now be conducting your question answer session.
Let me play from the question Q. Please press star one of your telephone keypad, a confirmation tone would indicate your line is it one question Q.
You mean press star to if you'd like to <unk> question.
Participants using speaker equipment, and maybe necessary to pick up your handset before pressing star one.
We also ask you ask one follow up one question and one follow up then please return to the Q1 moment. Please what we pull for questions.
Our first question today is coming from Chris Moore from CJS Securities. Your line is now live.
Hey, good morning, guys. Congratulations good morning.
Good morning, Thank you.
Yeah just start.
Operating margins.
Good margin I pretty much in Q2 is 90%.
Mid point for Q3, it's 8.5% maybe you could just talk a bit about.
The margins are likely to be lower in Q3.
Yeah, Chris This is Steve just to kind of put some color to that when we looked at the models.
This is historically a low point.
In the year for irrigation and as such that is our number one profit driver.
So that was one of the factors that we took into consideration of the other is the fact that the coatings market, which is our second most profitable segment also has some still.
Some traction to gain back steam from the economic slowdown and then in utility there is more of our revenue coming from international markets. This quarter.
And that tends to have a little bit lower margin profile than just the north American market.
Got it very helpful.
Just maybe switch gears, the $17 million Ladha structure order I'm just.
With with flock, well make can talk a little bit more about that partnership moving forward does it have any impact on margins. When you. When you you know.
Partner with them or kind of <unk>.
I see that moving forward.
Yeah. So yes, lack weld is a base them in the Qubec province of Canada, which tends to be one of the largest lattice structure markets in the world.
And so it's a real good combination for us to work with them, we can bring a lower cost alternative out of India.
And that helps them to service their customer base and they have the relationships there that or not always the easiest otherwise to break into so from a margin profile. It should provide relatively good lattice type margins, which are not necessarily as good as the monopole margins, but.
Again, as we look globally to expand the lattice market, 95% of all structures around the world. Our lives. So provides a real good growth Avenue for us and high utilization of our plant in India.
We purchased a couple of years ago.
Got it very helpful I'll jump back in queue. Thanks, guys.
Thank you. My next question today can be from Brent Thielman from D.A. Davidson. Your line is the alive.
Great. Thank you good morning.
Running.
You know really kind of a more of a broader question. If you just talk about you know action by competitors, maybe that you're seeing now around the globe your operations just around pricing discipline around it.
You know any anything that causes you concern there.
You know it very segment this segment, but what I would tell you is.
Just from our own commitment is we will be the price leader.
And we have seen at times, some competitors that back off of that they want to give back steel, let's say some of the decrease in steel and zinc.
Even though the market's a robust and so we're going to stay disciplined around the fact that we're going to get a market based price and not a price that's based upon the raw materials because there's so many other inputs. There's so many other challenges and delivering particularly our engineered products to the market that seems to be very counterproductive.
We've not seen anything on a large scale of any kind of price erosion with the let's say softer steel markets.
The softer zinc markets. So we've seen pretty good discipline with the exception of a couple of players here and there were no order by order basis tends to be that way.
You know the larger they order you tend to maybe get a little bit more discontinuity in the way people price, but generally I think most of the market players are behaving.
Okay.
Okay. Thanks for that and then I guess, maybe you could you talk about the outlook or prospects or any visibility you have around that.
Kind of the larger internationally irrigation projects and what that sort of looks like you over the next 12 months.
Yeah, we have a very good pipeline of potential international orders.
The strong U.S. dollar as we've mentioned before can impact the timing because they have to raise capital and some of these markets.
In order to open up Lcs with us.
But the food security issue has really been strong driver in project activity internationally.
As we mentioned, we saw organic growth and all of our international markets. Despite everything else that's going on.
And Brazil, particularly strong so between just the organic nature of some of the developed markets as well as the project base piece in lets say eastern Europe, the middle Eastern Africa.
It looks pretty good.
We look out over the next year.
On the timing will be uncertain, but the project level is definitely increased.
Okay, great. Thank you.
Thanks, Brian.
Thank you. My next question today is coming from Joe It can from William Blair. Your line is I love it.
Hi, Good morning. This is Joe on for Brian Drab today, Thanks for taking my question.
First I was just wondering on the the let US a structures order you touched on the lot Weld partnership a I was wondering if you could just talk little bit more broadly about that business I'm not traction in that business and.
Kind of what your strategy is there.
Yeah, you know the lattice business being that predominant structure type globally has been an emphasis for us over the last couple of years.
We.
We have purchased a facility and Hello, India, a little over two years ago and it takes time to build a portfolio and the Lattus area.
So one of the things that lock well does for US is give us a nice large project.
As a so called a library of of structures that now we can use in bidding other LATIS projects around the world and in North America.
You know, we're strategically located in India from a cost perspective.
And India it tends to be one of the it is the most dominant lattice.
Providers outside of China for China itself.
And so we feel very good that the lock well partnership will help them and help us and are really provide a growth platform for us outside of just the monopole market.
Thanks, That's really helpful. And then switching gears on the large European transmission order.
That order begin to ship at all that this quarter or can you update us somewhat what the timing for that is and.
Is there any potential for a further work with that customer going forward.
Ah yes. So there was no shipments in the second quarter, we will be shipping on the back half of this year and into the first half of next year.
It is a large customer these are big projects for interconnections of alternative energy across Europe.
And so there are some follow on potentials thereafter, so we feel with strong execution. Good quality good timing of our shipments there's definitely the ability for us to have some follow on work.
Got it thanks for taking my question.
Thanks.
Thank you as a reminder, that star one to be placed and good question Q. Our next question today is coming from Jon Braatz from Kansas City Capital. Your line is that a lot good morning, Steve.
Good morning, Johnson Steve.
You know in face of this covert 19, a lot of companies really slashed their budgets and and laid off people furloughed people and so on.
That really wasn't the case at valent was that.
There weren't a lot of necessarily cost reductions because a covert 19.
It is that the case.
That's correct, yeah, we kind of tried to quantify it there with the two and a half million dollar impact in the quarter <unk>.
That was our additional costs.
Some of that was retention bonuses for our frontline personnel.
We'll probably have about a half million dollars of drag for quarters. We look forward just for you know distancing P.P. any some people being.
You know quarantined as they come in contact with others.
But generally we worked through.
Majority of the quarter with the rare exception of you know about a handful plants internationally that we had to shut down.
So.
Those we didnt have the revenue we didn't have the operating profit. We also didn't have the cost so they kind of self correct as everything comes back online.
But we did not layoff anybody as a result of the pandemic our demand profiles were with in let's say, our budgetary and kind of our forecast of where we expected to be so.
There's some attrition maybe that's not been replaced <unk>, but there's not been any need to have to slash costs. Okay. Okay, and then secondly.
As a as we approach the ended the year [noise].
The States you mentioned it states a state budgets in local budget, so probably you're gonna get tighter and tighter when do you think you might get a sense as to the impact.
These tighter budgets might have on infrastructure spending highway spending and and so on.
When do you think we might we might get a better <unk> sounds so what's what's going to happen.
Next year and so on.
In that.
Well from a federal level I would say that after the election.
I would really be the time that we would think about is there going to be an infrastructure spend.
How the you know there specific going to allocate money to the states as a result of the effects of coven.
At the state level, it's still going to be kind of a patchwork based on budget cycles based on the impact of Covidien States, Texas. As an example is a large market for us.
He was starting to reopen and then.
Now, they're going the other way and so.
You know, it's still hard to see clarity there, California, Florida. These are real big transportation markets.
And so what we've seen on our order intake side as related to that is we may get a couple of weeks that are down and then we get a couple of weeks that are up and it's really hard to tell if it's based on the fundamentals or simply that there's people now working that are proving projects and allocating the funds. So I think I've.
Mostly based on just duration as the third quarter goes on and some things get settled between you know federal bailouts and some budgetary things at the state level, hopefully, we'll get to see a little bit more clarity around that but I think it'll probably be into first.
Quarter next year before we really have a good outlook.
Of particularly transportation spend yep, Okay, alright, Thank you Steve.
[music].
[noise] Secret next question today, it's coming from Nathan Jones from Stifel. Your line is now alive.
Good morning, because Ah Adam following on from there.
Morning, Adam and good morning.
[noise], maybe following up on the aren't that has no end drag from social doesn't seem.
It was there anything in addition to that.
Maybe you can factory productivity and your manufacturing facilities and then on the flip side are you guys learning.
I mean any ways to drive productivity are you getting them gains from like will come home or anything like that.
Yeah, you know, we definitely are seeing some productivity gains that just come from having to travel less less time for people.
I have to spend the meetings.
You know just some real things that it probably brought in macro across many different organizations, we've seen that.
You know the half million that we would call out is really more around additional p. any some things around how we service food within the facilities.
As well as you know just the quarantining of people.
That have to be there so that number overtime made decreased slightly but it's a pretty good benchmark at least until the pandemic in a vaccine you know comes out.
But from a productivity perspective, we had a very productive quarter.
And we've been seeing productivity gains both from first quarter to second quarter I'm anticipating the same as we look at the third quarter, so not a not isn't necessarily a pop and productivity, but just simple blocking and tackling lean and agile type of gains as we look forward.
Okay, and then switching over to be a fiveg commentary.
Oh, sorry pretty positive I could you mentioned a work from home might be some evidence and warm cellular networks.
Greetings and quantify.
For the investment there or any other color on fiveg.
Yeah, I wouldn't say that it's pulling forward any investment these are mostly planned investments.
What it has done is the carriers have had to really kind of allocate their coverage.
As you know people are not going into downtown areas. There are sticking more to the suburban areas. The work from home that the school at home has done exactly the same and that would tend to help our business more than being concentrated in a city center because it would tend to be done more on towers and Paul.
Sales.
You know the rural broadband initiative.
It's comprised the only way you bring fiveg type speeds to rural areas, because you can't run fiber to the home.
To cover those kinds of connections so.
In a way the pandemic well kind of changed the demand profile of how fiveg rolls out, but we think the investment itself will be around the same and we've seen that reaffirmed my most of the large players in the industry.
Great. Thank you for taking my questions.
Thanks, Adam Thank you.
Thank you we reached end of our question answer session I like to trigger for back will be management for any further closing comments.
Thank you for joining us today as mentioned today's call will be available for playback on our website or by phone for the next seven days, we look forward to speaking with you again next quarter.
Greetings and welcome to the Debbie does Dallas again conference.
That does conclude today's teleconference. You may disconnect your lines at this time.
I have a wonderful day, we thank you for your participation today.