Q2 2020 GCP Applied Technologies Inc Earnings Call

[music].

Good morning, and welcome to the GCP applied technologies second quarter 2020, <unk> earnings Conference call.

Today from GCP applied technology, It's Randy Dearth, President and Chief Executive Officer, quite Merrill Chief Financial Officer, and Best Peak, how Vice President Investor Relations.

During today's presentation, all participants will be in listen only mode should you need any assistance. Please ignore conference specialist by pressing the star keep all that by zero.

After today's presentation, there will be an opportunity to ask a question to ask a question you May Press Star then one on your telephone keypad to withdraw from the question Q. Please press Star then too.

But it's not this advantage in recorded.

I would now like to turn the conference over to seek out. Please go ahead.

Thank you, Okay, Hello, everyone and thank you for joining us on today's call with a summer fall or Randy Dearth, President and Chief Executive Officer, and Craig Merrill Chief Financial Officer.

Our earnings release and corresponding presentation slides for this quarter's results are available on our website to download copies. Please go to D.C.P.A.T. dot com and click on Investor tab.

Some of our comments today will include forward looking statements under U.S. Federal Securities laws actual results may differ materially from those projected or implied due to a variety of factors, including but not limited to the impacts of cobot 19.

Please see a full description of information using forward looking statements in our earnings release.

We will discuss certain non-GAAP financial measures, which are described in more detail in or Orients relief and on our website.

Our comments on forward looking statements and non-GAAP financial measures apply both to the prepared marks and the culinary.

References to EBITDA refer to adjusted EBITDA references to EBITDA to adjusted EBIT and references to margin River refer to adjusted gross margin adjusted EBITDA merger or adjusted EBIT margin as defined in our press release.

All revenues and associated growth rates in this discussion our stated on a comparable constant currency basis, which adjusts for the impact of foreign currency with that Randy I'll turn the call over to you.

Thanks, Betty and good morning.

So before I begin todays discussion on GCP second quarter I do want to update you on GC piece engagement with its new board members were elected at the May 28, 2020 annual meeting.

Management has been working constructively with the board is to help them provide insight on activities to improve our performance and build a greater understanding of our business. We appreciate the engagement as they continue to work actively alongside our business leaders to drive the business forward.

The newly formed strategy operating in risk Committee has been advising management on a variety of topics, including strategy operations go to market product innovation and operating expenses progress on all fronts is being made and I look forward to sharing more in the coming quarters I.

I would like to take this opportunity to congratulate Craig Merrell on being appointed or permanent CFO.

Worked with Craig closely since I joined GCP and find them to be a valuable partner for me My executive leadership team and the board. So again congratulations Craig.

Turning to the second quarter, please refer to slides four or five and six in our presentation.

Our organization operations performed well during the second quarter in the face of the ongoing global Corona virus pandemic.

We continue to demonstrate our ability to manage cost deliver on margin expansion and positive operating cash flow. Despite the drop in global construction.

I want to thank our employees across the globe for their dedication during these ever changing times due to the krona virus.

We implemented changes in our operating environment to ensure our employees remain safe and healthy.

Our multifaceted response to the government imposed and voluntary factory shutdowns resulted in minimal disruptions to our business I could not be more proud of our employees as they came together to support one another our customers and our vendors.

It goes without saying that ensuring the health and safety for our employees will always be are number one priority.

As discussed during our first quarter earnings call, we were seeing significantly lower volumes in April and May impeded by Lockdowns across the globe due to the krona virus.

In June as the regions began to reopen revenue started to trend up for the first time since March in many of our markets our experiences in line with industry trends and our customers continue to depend on us during the quarter to support their needs.

Why revenues have continued in line with June in our position in our markets is strong.

Let's begin by talking about our FCC business.

FCC revenues, which rebounded in June were about flat with June 2019, after experiencing the 30% decline in the first two months of the quarter.

In North America, our largest region.

Cc had 6% growth in the month of June versus prior year June.

Several large north American projects started during the quarter, which will continue into 2021.

European volumes rebounded in June exceeding June 2019 volumes by 2% is the region reopened after being locked down in April and May.

FCC in Latin America was impacted by reduction in demand due to lock down to most of the countries, which continued through to June.

In the Asia region, China began to recover during the quarter, Although southeast Asia, and Australia remained locked down during June.

Our verify business continues to grow although at a slower pace versus pre kobin 19, due to the downturn in the global construction industry.

Now turning to SPM, we saw a slowdown in project activity and distributor demand during April may with volumes down 37%. During this two month period, particularly in markets experienced construction restrictions were shelter in place orders.

Sales volumes improved in June with North America, which is our largest region ending the month, 1.5% behind June of 2019.

We continue to win and progress on large project activity, including airports bridges and office building projects, we secured a number of infrastructure projects in North America, which will support us in the second half.

Additionally, some projects of began pre pandemic continued to progress during the second quarter.

GCP products applied in the other outdoor applications, such as our fireproofing product line experienced less of a negative impact.

The positive momentum during the month of June continued through July we see a stronger third quarter compared with the second quarter. While we are mindful of local hot spots that may impact our customers due to the cobot 19 virus.

Our strategic goal for SPM is for sustainable organic growth, particularly in our North American building envelope and residential product lines.

And by increasing our presence in underserved segments in market geographies that are profitable and growing in the long term.

Our plan also includes expanding our product portfolio awareness to adjacent market segments and accelerating the launch of new in the specialty products for the premium in mid tier segments.

This program is starting to gain traction and is evident in our year over year June revenues in North America.

I'm also pleased to report the launch of two new products for weather barriers and surface coatings that we believe will gain traction in the coming quarters.

There were several other accomplishments from the second quarter I'd like to highlight.

See piece gross margin improved 130 basis points in the second quarter to 39.1%.

Fccs gross margin improved for the six consecutive quarter.

This is the result of our continued focus on our manufacturing in freight productivity initiatives that we started in 2019.

We also saw the benefit of raw material deflation throughout the quarter.

Second quarter, selling general and administrative costs decreased by approximately 8%, mainly due to lower employee and related costs during the quarter as a result of or restructuring programs and lower discretionary spending.

Cost containment actions, including reduced travel were put in place during the quarter in response to the crisis.

GCP is cap cash position remains very strong with $318.2 million of cash on the balance sheet at the end of June.

Net cash provided by operating activities. During the six months ended June 20 June 2020 totaled $17.6 million as we continued to execute on our working capital improvement projects.

I'm happy to report that we completed the sale of GCP East, Cambridge headquarters on July 30, Onest 2020.

Planning is underway to locate a bidding location for our headquarters the 125 million dollar transaction unlocks value for GCP shareholders. In this consistent with the company's commitment to invigorated, it's focused on profitable growth value creation and appropriate capital allocation strategies.

In addition, today, we announced the approval by GCP GCP. His board of directors of the 100 million dollar stock buyback program.

With the authorization in place management will work with the board to determine the best way to execute on this program.

I'd now like to turn the call over to Craig who will review the Companys financial performance in more detail along with segment results and our comments on the third quarter correct.

Thank you Randy and good morning, everybody. Just a reminder, all revenue and associated growth rates in my comments are on a constant currency basis before we summarize our second quarter. Let me first just say that we're very pleased with our results for the quarter and year to date, considering the challenging operating environment during the second quarter.

Our teams remain focused on their objectives and continue to provide a high level of service and commitment to our customers, albeit more challenging with the current environment.

First I will focus on the revenues for the quarter.

GCP sales of 200 million were 23.7% lower than prior year due to the impact of government imposed restrictions on construction activities and manufacturing as a result of cobot 19.

Impacts due to covert 19 varied by product line and geography during the quarter, but generally remained within the 25% to 35% unfavorable impact expected as we entered the second quarter.

Although the demand in April and May was down significantly our June revenues did rebound for GCP overall, and specifically in North America as the economy opened up.

Although.

And North America revenues finished 2% up for June versus prior year, and we see continued strength in North America in July Europe, Asia, and Latin America also finished June much stronger than the first two months of the quarter. However, the rebound was not as generous and it was in North America due to a slower overall.

Returned to normal construction activities.

UK volume has been steadily improving but at a little slower rate then continental Europe.

China volumes have come back since the country reopened and the rest of Asia, including Australia continues to improve but are still impacted by cobot 19 government restrictions.

Latin America volume steadily improved during the quarter. However, some countries remain under Lockdown. We're lockdowns are not present, we're seeing good construction activity and volumes globally.

With respect to price.

CP was close to flat year over year at up 0.1% price decline FCC captured price, most notably in Latin America, where in country inflation due to currency devaluations occurred and we increased price appropriately.

SPM, North America, and Asia regions experienced some price pressure and which was expected in the current deflationary period when oil prices are at historical lows. The teams acted quickly though to can continue to secure appropriate volumes and margins during the quarter on current and future project bids.

[music].

GCP is gross margin increased a 130 basis points to 39.1%, primarily due to lower raw material labor and freight costs driven by operational productivity, which were partially offset by the unfavorable impact of reduced operating leverage during the period to lower sales and production volumes.

Selling general and administration costs of 65.7 million improved by 5.7 million or approximately 8% during the quarter benefiting from lower employee and related costs due to restructuring management of other discretionary costs, including advertising and favorable in.

Impact of the Cobot 19 restrictions on travel entertainment and other operational activities.

Some second quarter restructuring activities did move to the second half of the year due to the limited access to offices and travel restrictions, which have made it difficult to execute in some countries due to cobot 19, we will continue to execute on our restructuring plan and are currently assessing our ESG in a position relative to overall.

Sales volumes in the environment managing these costs as a high priority as we monitor our performance metrics and expected volumes over the next three to six months.

GCP is loss from continuing operations attributed to GCP shareholders was 1.3 million compared.

To income from continuing operations attributable to GCP shareholders of 3.1 million for second quarter 2019.

The change was primarily due to lower gross profit due to lower sales volumes, partially offset by reduced restructuring and repositioning costs, lower selling and general administration costs and slightly lower tax expense.

Cps adjusted EBIT margin ended the quarter at 6.8% versus 9.6% in the prior year quarter, primarily due to lower gross profit as a result of volume declines, partially offset by lower selling general and administration costs.

Adjusted EBITDA margin was 12.8% for the second quarter or 100 basis points lower than the same period 2019.

Looking at the specific performance of our two segments you can refer to pages 10, and 11 FCC sales were down 20.5% to 119.5 million.

North America's revenues declined 10.7% in the quarter as construction in most states was deemed essential and our customer network in North America continued to service their customers, although at a slower pace versus prior year during the quarter. However, reorder rates in June were well ahead of prior.

A year.

Other regional sales declined in other regions 27, 30% versus prior year during the quarter with the sales declines all mostly attributable to build to cope with 19.

Impacts in Asia, Europe, and Latin America due to covert 19 have been slightly more prolonged and deeper versus North America.

Revenue in June versus the same period for 2019 in North America, and Europe, both increased 5.7% and 1.6% respectively compared with June 2019 price gains also occurred in Latin America, and Europe on a nominal basis.

With slightly offset volume declines during the quarter.

Fccs gross margin improved by 350 basis points during the second quarter six consecutive quarter of gross margin improvement as Randy mentioned raw material deflation operation and logistics productivity and favorable regional mix all contributed to margin expansion.

Segment income was 9.9 million with an operating margin of 8.5%, which decreased 90 basis points compared with the prior year quarter, primarily due to lower sales volume.

Unfavorably impacted by operating leverage partially offset by higher gross margin.

SBM sales.

Totaled 80.5 million during the second quarter, a 28% decline versus the second quarter 2019, due to challenging construction markets as a result of cobot 19.

Sales volumes in April may were below 2019 volumes due to reduced construction and manufacturing.

Distributors in April and May did not restock at a normal pace due to the uncertainty of the impacts of cobot 19 on future product demand.

North America volumes did however rebound in June as reconstruction resumed in many North America locations with distributors reordering and larger projects restarting once customer Kobin 19 safety procedures were instituted.

In line with government and state recommendations.

In June North America, SPM sales were down 1.5% versus prior year June however, positive year over year reorder patterns were evident in July.

Business in France, Germany, Italy in the UK for SPM also improved during June once overall restrictions were lifted.

Be EMS gross margin declined 140 basis points to 39.7% compared to the second quarter of 2019 due to the unfavorable impact of lower sales, resulting in reduced operating leverage and increased inventory write off year over year, partially offset by raw material deflation and productivity.

The EMS segment operating income was 11 million with operating margins at 13.8%, a 610 basis point decline versus prior year. This was due mainly to lower sales volume unfavorably impacting operating leverage and lower gross profit, partially offset by the benefits of reduced discretionary costs and employee related costs during.

In the quarter.

Now turning back specifically to GCP.

GCP the effective tax rate was 136.4% for the quarter that included the reversal of the first quarter Cares Act tax benefit resulting from changes in our forecasted income for the year. The company no longer expects to have a net operating loss carry back for 2020 of which it did expect in Q1 forecast.

Gcs peas net cash provided by operating activities was 17.6 million for the six months ended June Thirtyth 2020 versus a usage of cash of $13.1 million for the six months ended June 30, Onest 2019.

Adjusted free cash flow totaled $18 million for the first six months compared with a usage and total of 12.3 million. During the same period in 2019 accounts receivable management improved 20.8 million vendor payables delivered a 4.1 million dollar improvement.

And inventories generated a 1.7 million dollar improvement compared to the prior six month, we continue to improve the transparency of our working capital initiatives throughout the regions and within our respective country operations and we are seeing the result of these efforts which will continue.

Please refer to slides 12, and 13 for a discussion on GC piece first half performance.

GCP is net sales for the first six months totaled 419.4 million decreasing 14% compared with the prior year, mainly due to the second quarter impact of cobot 19 on volumes.

Gross margin for the six months increased 130 basis points to 38.4%.

The net loss attributable to GCP shareholders in the first six months.

Totaled <unk> point 2 million.

Compared with net income attributable shareholders of 24 million for the first half of June 2019. The change resulted mainly from the reduced sales volume to covert 19 in the second quarter, partially offset by reduced operating expenses adjusted EBIT was $27.8 million for the first six months or.

25.1% unfavorable for the same period in 2019 again, mainly due to the impact to cobot 19.

Turning to our outlook for 2020.

Although it continues to be difficult to predict the duration, an extent of the impact of the pandemic on our business over the next six months and beyond as events unfold. The near term view is as follows.

As discussed June's positive volume trends have continued into July and we expect the third quarter to be a significant improvement over the second quarter planned unfunded construction projects have resumed or are coming online with construction sites, having implemented additional health and safety protocols, along with social distancing.

These efforts are important for construction domain active while hot spots may arise, while we expect to demand to improve and slowly returned to close to normal levels as the year progresses. Some projects have moved into 2021, which may dampen some demand in the latter half of the year and we are monitoring this.

Closely.

As for the third quarter of which we have the best view, we expect the impact of Kobin 19 pandemic to reduce overall demand for our products by approximately 5% versus prior year in constant currency.

We also expect raw material deflation to provide a modest offset to the forecasted volume declines. However, we will continue deliver productivity to support our margins. We remain focused on our operating expenses, which we have continued to improve sequentially during the year.

And in addition to our restructuring programs, which will continue we have identified additional cost savings opportunities and I've learned a lot during the cobot 19 period on how to perform at a lower cost base, while we service our customers very well.

We are implementing these learnings as we move through the year, we remain on track to the planned capital expenditure reduction of 25 million in 2020, or a reduction of 35% to 45% from our original plan capital spending and we expect our cash position will grow throughout the year based on the working capital programs, we have initiated.

The reduce capex target versus original plans and of course, the sale of our Cambridge site the share repurchase program announced will be funded with our existing cash balance.

Looking beyond the pandemic, we're confident in long term fundamentals of GCP and the construction industry. We're confident that our current plans will allow us to navigate the pandemic and will be but well positioned as the overall construction demand stabilizes somewhat during the second half of the year, while we focus on our overall cost position as a company.

I'll turn it now back over to Randy Thank you.

Thanks, Craig just a few closing remarks, let me just say again that we have welcome to review board members and their enthusiasm and interest in working with the GCP leadership team has been constructive the working relationships have been very engaging and we look forward to jointly continuing to create value for our GCP shareholders.

Despite the challenges the koby 19 virus presented in the second quarter. Our teams around the globe continued to focus on our customers and we are happy to see June rebound as it did we will continue this focus going forward and our strong balance sheet, which features significant liquidity no near term debt maturities is competitive differentiator that provide some.

Annual financial flexibility and positions us well to successfully managed through the ongoing economic challenges and uncertainty caused by the cobot 19 pandemic.

With the sale of the Cambridge facility in the stock buyback program, we're committed to maintaining a flexible liquidity base and along with the board. We will continue to evaluate all alternatives for the effective and efficient use of cash.

I would like to wrap up my comments by thanking our employees personally and on behalf of my leadership team for all the hard work and efforts. They continue to devote to GCP under extremely challenging conditions I really appreciate that thank you today for joining our call and we now look forward to taking your questions.

You will now begin the question and answer question to ask a question you May Quest Socgen was on your touched on.

If you are using his speakerphone. Please pick up your handset before passing the key to draw from your question. Please press Star then Q.

My first question is from Mike Harrison Seaport Global Securities. Please go ahead.

Hi, good morning.

Morning, Mike morning, Mike.

Congratulations to Craig on the permit goals.

So.

Thank you Mike wanted to ask.

If you can talk about it sounds like you're pretty confident in the direction things on the trends that you're seeing in North America. I was wondering if you could maybe give a little bit more color on what you're seeing in other regions.

Maybe specific areas, where you feel like you feel like they're making better progress toward normal construction activity or some areas, where you have more concern or more uncertainty on the piece of that progress toward normal.

No. It's a good question, Mike and just like we see here in North American we hear about every day on the news some states are reopening faster than others in our getting back to some some type of normalcy will the same can be set of around certain countries in Europe as well as certain countries in the Asia Pacific region. Some have just been much slower due to restrictions and also.

Due to some hot spots of resurface and getting back to normal activity. So we're going to follow that through the next quarter to see what happens we do believe that the construction activity in that those two regions Europe and in the APAC region will indeed start coming back in the third quarter. We just don't know the paced by which that's going to happen again due mostly to these restrict.

Ones.

Alright, and then in terms of the restructuring.

You mentioned some additional cost areas.

Thank you.

Learned to operate on a lower cost base.

I guess I'm just trying to apply your guidance of 5% impact of total bid on the topline trying to think about how that looks on the bottom line as you may be hang on just some of these additional cost actions that you've delivered and continue to see improvement.

In the raw material environment.

This is another good question, Mike, We've obviously gone through an experiment here over the past four months or so on a global basis to see how can we run our company differently. Given the fact that we have to work differently in this pandemic and there's a lot of lessons that come out of that in terms of working home strategies, how we service our customers differently, how we do virtual.

Go lives in virtual test trials with their customers. So a lot of those learnings we're going to take going forward as most companies are and we do believe that's going to lead to lower cost of how we run our operations. We've also learned a lot at our plants in terms of inventory management again, driven by this crisis in terms of different techniques in different processes that.

Weve built in to be able to to better manage our inventory and better manage how we service to customers globally. So lot of lessons. We've learned in the goal would be going forward that these lessons are going to find their way to the bottom line and if you want to add Curt.

Yes, Mike It's a good question we've done a lot of just.

Priority as our new employee safety of course during this whole process and we could do we're doing a lot of virtual training with our customers were doing.

Mixed designed training with our customers virtually we're starting to learn that sometimes in our customers' behavior is starting to come around a little bit that thats acceptable we.

We also implemented GC plus.

Program of ordering online that Randy and the customer service group in the ITC group implemented about six months ago, we're seeing traction on that now just orders coming through online versus a sales rep or someone having to take these orders, which obviously is costly when it has to be handed off to eight different people to take.

Orders.

More back in the 19 sixties industrial kind of process. So we're seeing a lot of progress on kind of the new wave of how you do business.

And were tight and we're getting advantage of that in the in the cost base and we're not going to go back and invest the money back in there now that we see the advantage. So we expect savings to continue in Q3 and four relative to those and we're having good discussions with the whole team about how we continue that into 2021.

Even if things come back to normal and cobot 19 kind of relax a little bit so that's really a.

Quite a bit of money there if we can keep the momentum going I can't say exactly how much it will be in 2021, but we'll probably have a better idea as we go through Q3 and an additional point to make Mike that we'd like to add we're in the enviable position that we're going to be looking for new headquarters going forward as we've mentioned and having this learning of this new invite.

Permanent the we've been working in should play into our decision. So it's definitely.

The World has changed and we need to spend in consideration looking forward.

Alright, and then in terms of you mentioned some larger projects that looked like say, we're getting pushed into 2021.

Do you feel pretty confident at this point that these are delays and not cancellations, maybe just talk about kind of what you're seeing in terms the backlogs on some of those larger projects.

Yes so.

Good question, I mean, I wish I could answer you, a 100% that theyre delays not cancellations, but for right now they are delayed.

Theres certainly some projects that would have got started already in Q2.

They're not started there is some probably concern on funding and social distancing as you know these big projects when they start them. The timeline is very important to them. So I just think for now as long as the economy stays about where it's at and.

There is not incremental hot spots that people need to be concerned about I think there pushed out I don't think their canceled theres funding for the projects, there's still a lot of money around that's not the issue people just are a little bit more apprehensive.

To start a project specialty a big one right now with the social distancing specific hot spots, even on the supply chain side, we've actually given our customers little more confidence in our supply chain, our inventories is slightly higher than when they want to beat we want them to be but we've actually had some backup inventory just in case, one of our plants goes down and I think one.

Other companies start to do this.

Folks will have more comfort to spend the money on these big projects. So they can get full supply chain support from their customers.

All right and then last question for me is just maybe on the decision to authorized $100 million share repurchase can can you talk about your capital allocation priorities.

Going forward and maybe any guidance on the timing of this repurchase activity. Thanks.

Yes, no might we obviously have always had a pretty comprehensive view of capital allocation and returning our monies to shareholders now with the new board in place and we're excited again to have their input in their guidance into specifically the strategy operating risk committee will be working with management in going through the various options. We have what makes the best sense for.

The shareholders and increase the most value for shareholders. Obviously this was the first decision that was made regarding capital allocation the $100 million authorization for the buyback.

But the overall aboard once in the strategy operating committee once they get up and in functioning fully this will be a discussion point down going forward.

Okay.

Mike.

Yes, I'm all set thanks very much yes.

I'll just add Mike maybe up to one of your other questions. I mean, these big projects are in the infrastructure category, they're not in commercial at retail projects that type of thing. So we're more confident that are pushed out than than cancel just just a category. There is more confident for us.

The next question from Rosemarie Morbelli MTV research. Please go ahead.

Thank you and good morning, everyone.

Good morning, good morning Rosemarie.

You talked about.

[music].

On your strategy going forward.

So between that.

And why too.

During the current.

Yes.

During curve it can you share our lunch.

Looking about Jeff.

For your strategy going forward is there anything.

Very good luck.

Doing those two events.

No what I would say Rosemary weve been working very closely with the New board. We've had several meetings over the last couple of months and we're still in the phase of of sharing our current strategies and getting their input on areas that we can focus on differently in areas that ideas that they have that we can investigate so it's still in that phase of getting to know each other and putting for.

At the best strategy priest GCP going forward I'm really excited with what I've heard again mentioning this up the strategy operating risk committee on a lot of experience and lot of ideas and we're going to continue to work with them closely in the coming months and were to come on that but done but we're excited to have this different perspective on how the company could be doing things differently.

And Tim.

So then you incurred mid does so you'll have to Ken.

Yes.

Justin inbound discretionary cost.

Can you quantify how much of those.

Thank you will generate 2020 and.

You may not have odd number 2021, how much is coming back.

At least volume.

Yes, so rosemary in Q2, maybe this will give you some guidance and I know some others might want to.

In Q2.

Both the six or I guess about $6 million of operating savings, we had mostly SGN a.

It's about a third a third a third its about third of restructuring about third actual implemented cost savings and about a third due to kind of lower activity due to cobot 19. So our challenge to ourselves is can we keep that third.

You know savings due to the cobot 19 lower activity. So it's a couple of million dollars a quarter. So were challenging ourselves to determine how we continue to get our volumes have prior year volumes and still still execute on that so that will get thats about all the guidance I can give right now.

But we're still working through that and to determine whether we can keep that through the year and not in terms of restructuring Rosemary we're focused on continuing the initiatives that we set forth supply chain initiatives and obviously looking at dumb asset management, better, but with the employee with New board were excited to some new lighting to come into that so.

Restructuring is not going to stop restructuring will continue and that will be be an input into our savings going forward.

Alright.

And I was wondering if you could give us a feel as to how varies by.

Populated jewelry.

Yes.

Yes.

Some of them trying to go out to them very very.

Very side, but you are also doing some vitro true trials.

Can you give us appeals cargo momentum in that particular area.

Yeah, we were actually pleasantly surprised on the revenues with verified during the quarter they were up 50% year over year.

In Q2, that's mainly due to the fact, we had more more equipment out there in Q2. This year than we did last year to the installs in the latter half of 2019.

The interesting part about that business is that they tend to use the trucks on any job that have verify so our trucks go first with the verify units on them because they need to keep their operations kind of solidified because that's the new operating model. There on so we didnt really see a lot of.

Decline.

Of usage of the verify units during the quarter.

And certainly not as much as maybe we saw the market and in North America. The market was pretty strong and Thats, where we got most of our units.

So thats why we had the 50% pop in revenue, we have seen slightly slowdown on installs of new customers only because it's difficult for them and social distancing and.

Managing the behavior of their organization.

At this time during cobot 19, they do have to change the behavior that organization to get the value. So we've seen a little bit a slowdown, but we did see.

You know in Australia, New Zealand and Asia, Some new contract signed during Q2 and even into Q3 here. So we're pretty pleased that the progress, but certainly it will be slightly slower on the installed in the second half here.

But brandt Randy do have any other companies I just wanted to say it as well I mean, it's unfortunate with our customers that we had hoped to have installs that they're just distracted with virus and it's difficult to install units when you need their health and you have the social distancing restrictions. So that's kind of slowed down to Craig's point.

Sure. Thanks, James I was wondering.

If you could give that.

The level of importance.

It's between residential section so thats what those section.

Sure. Thanks.

If you can talk of.

Now that the trends in each of those categories. What are you see.

Yes so.

North America is where we got the best visibility on the market data, but obviously globally, there, so I chess and others that come out with the data.

We're tend to be if you want to think about it about a third a third a third I mean about a third of our revenues tied to infrastructure, a third to commercial and about a third to residential and people could be software has surprised on the residential piece, but the North America concrete and cement basically goes into residential.

Also in that's a big part of our business.

We're pretty confident that infrastructure governments.

Yes, the spend on infrastructure going forward just to pump the economy. So we're pretty pretty confident that that's going to happen globally and they're going to there might be some delays here just on getting things going but we think we're we're going to good there on the residential the market seems strong I think you've seen the statistics to both in North America and around the world.

China Asia residential still keeps going strong so I think we're in good shape there.

Commercial could be slightly slower just you've seen the retail news.

There is obviously.

Some reconsideration on office space on what you really need for office space moving forward. So I would say commercials, probably the place where we might see a little bit more slower.

Uptake, but I think the infrastructure and the residential who will offset that and in fact, we get very good margin on the infrastructure. So we'll probably get to a margin mix that will offset any decline on the commercial side. If there is one moving forward.

Alright, Thank you very much.

Okay.

Question. Please press Star then one.

There are no additional questions at this time. This concludes our question and answer session.

I'll now turn it back to back people for closing remarks, Thank you Kate.

We appreciate your help today and thank you offer attending.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.