Q2 2020 Vertiv Holdings Co Earnings Call
[music].
At this time I would like to welcome everyone to versus second quarter 2020 earnings Conference call.
All lines have been placed on mute to prevent any background noise.
Please note that this call is being recorded.
I would now like to turns the program over to your host for today's conference call Lin Max either Vice President of Investor Relations.
Great. Thank you Rocco good morning, and lumped into Bergen second quarter 2020 earnings Conference call. Joining me today, our Virtus Executive Chairman, David Cody Chief Executive Officer, Rob Johnson, Chief Financial Officer, David Collins, and she's strategy in development officer, Gary meter per.
Before we begin I'd point out during the course of this call. We will make forward looking statements regarding future events, including the future financial and operations operating performance of burden of these forward looking statements are subject to material risks and uncertainties that could cause actual results to differ materially from those.
And the forward looking statements [laughter].
Josh Mary language included in today's earnings release, and you can learn more about these risks cannot registration statement, our proxy statement and other filings with the FCC.
Any forward looking statements made today are based on assumptions that we believed to be reasonable as of the state. We undertake no obligation to update these statements as a result to new information our future events. During this call. We will offer that both GAAP and non-GAAP financial measures, our GAAP results and GAAP to non-GAAP reconciliations can be.
Found in our earnings press release and in the Investor Slide deck found on our website at investors that burden dotcom.
With that I'll turn the call for purchase executive Chairman David Cody.
Thanks, and good morning, everyone.
For the last time, we spoke in early May everyone. We're still trying to determine what the implications to covert we're going to be.
And exactly what type of recession, we were going out.
Today three months later well from things are more clear. There are also many things that are still not Claire.
What is clear however is how verdict is executing during this time.
As many of you know one of my monitors businesses growing while holding fixed costs constant.
Well that's easy in theory, it's not so easy in practice.
What I can tell you is that both Rob and Dave founder of fully embraced the concept in are deploying it with inverted in an aggressive manner.
One of my other beliefs is achieving two seemingly conflicting objectives at the same time.
Where this seems difficult it is in fact very doable.
Inside inverted we're employing the same mindset by managing our cost very closely.
But at the same time, we've been ramping up R&D spending so we continue innovating for our customers today and tomorrow.
We're also working on strategy development, just a few weeks ago robs team went through a week long strategy review that I participated in for its entirety.
Don't worry it was all remote there is absolutely no shortage of ideas on how to grow our top and bottom line now there's lot of work due to bring this life, but it sure was a great starting point for the company.
We can't know for sure the economic environment globally over the next several months, but I am very confident in our ability to navigate these waters and come out the other side a significantly better company, so that I'll turn the call over to Rob.
Thank you, Dave and good morning, everyone up before I get into the slides I want to tell you about how proud I am as the Veritiv team serving customers tournament pandemic has not been without its challenges.
Point across the company and located in countries across the globe.
To address issues of all time brought on by some of it.
They've done a creatively they've done an energetic link and they've done it passionately.
I couldn't ask for better team and I'm truly grateful to them and for how they have always put the customer first.
Let's get into the slides on slide four.
Overall, the demand side of our business held up as orders were up 5% organically from Q2 2019.
Last quarter, we talked about executing with an all time high backlog of 1.6 billion.
And now I'm proud and happy to report that our backlog is even greater than that at about approximately 1.8 billion.
We will talk over the next few slides about both the supply and the demand side of our business.
From a profitability standpoint, we delivered 145 million of adjusted EBITDA, which is relatively flat from last year's Q2.
Although Q2 have hundred $28 million lower sales than Q2 2019, we managed our contribution margin is very well and held our costs in line as Dave Coty mentioned in his opening comments.
We had approximately 30 million year over year, a favorable cost actions deliveries in the quarter, David Fallon will elaborate on later I.
From a liquidity standpoint, we had a very strong quarter ending at 530 name and we generated over $60 million of free cash flow.
Next on this slide.
We do you want to provide some range for expected Q3 performance.
We are anticipating implications of covert to continue to fluctuate, but we expect our organic sales to be up between four and 6% in our adjusted EBITDA will be up 10% at the midpoint from Q3 of last year.
So while the dynamics can change we did want to share with you. What we are currently seen playing out in Q3.
Well on this topic later.
Finally, we want to add just a bit of color around 2021, as we see things right now the demand side is holding up and our backlog should be robust as we exit the ended this year.
We know the dynamics with cobot could ultimately change the topline, but what is in our people is our cost.
Q3, we will be announcement before being activities that will save us approximately 50 to 70 million in 2021.
Cash cost to execute of approximately 50 to 70 million.
We are fine tuning the details, but we feel confident about the programs get underpinned numbers.
Turning to slide five.
We use this slide with our board last week and the heat maps towards to illustrate the pockets of strength within each region.
The chart a simple, but it really is the real time view, we have them a band side of things. It is qualitative in nature and depicts our view on the level of health and activity in each of the markets we serve.
We continue to see a strong level of activity in every reason in the cloud and co location market as indicated by the six green buttons and the first two top rose.
Emerging vital applications, such as online education, telemedicine video and gaming are benefiting our cloud and colocation customers and that surge in demand is benefiting us as well.
In contrast to the cloud and Togo business, we see the enterprise small to medium business continuing to be challenged by cobot as indicated by the red and yellow button in growth rate.
This segment is spending some money.
We just started to see a resurgence from the segment in China, but overall this class customer is not spending as they did prior to cope.
Switching to telecom side of things, both Asia and America is strong right now China has has gotten on the Fiveg bandwagon major way and our telecom customers in us continue to invest in their network and you can see indicated by the two green buttons in run floor.
Finally, our CRM business more often than not as we've always said, we'll track approximately GDP over the longer run.
But sometimes the quarterly timing can be different.
Well. This segment has held up better than expected things are relatively flat in the space.
So certainly some puts and takes but overall when you consider our mix of data center business Veritiv is seeing positive growth.
The application people use everyday continue to be more and more vital following the onset of coated and those applications need to be process stored in transmission.
And all of this continues to be a great backdrop for our business.
Moving on to slide six to remediate to reiterate the overall demand is strong and as evidenced by our strong order rates and record backlog.
While our channel business is sauce due to the enterprise and small and medium business segment being down our larger project base orders rates are on track.
One thing I haven't touched on yet, though aside access that access and some of the market. This is is very challenging we see this continuing to be an area of uncertainty as governments control access to countries and localities and ultimately customers control our ability to deliver install.
Singapore for example continues to be almost entirely shut down from a data center standpoint, and India things fluctuate day to day, and sometimes even an hour basis.
On the supply side the majority of our operations are running normally and we continue to ramp production.
My prior comment on India is appropriate from both the standpoint of demand and supply and Mexico continues you continues to be a daily work item for us as we address labor issue.
Our customers are experiencing constraints by trade industries, which we continue to work through.
Cobalt has strengthened our proficiency and anticipating potential roadblocks and proactively mitigating mission before they become concerned.
With that I'll turn it over to Dave talented walk us through the financials David.
Thanks, Rob turning to slide seven this page summarizes our second quarter financial results versus last year, net sales were down $128 million or 11%, including.
$28 million due to unfavorable changes in foreign currency as most global currencies are weaker versus the U.S. dollar compared to last year.
Including the euro and the RMB, which represent approximately.
60% of our foreign currency exposure.
The remaining 100 million dollar reduction in net sales was primarily driven by Americas in EMEA.
Each organically down double digits as a result of cobot 19 and year over year timing of larger projects.
Despite the $128 million reduction in that sale second quarter, adjusted EBITDA declined just $2 million and actually increased $5 million when adjusted for foreign currency.
Fixed costs were down $35 million from last year's second quarter, primarily as result of cobot 19 cost actions implemented at the beginning of the quarter.
And we still anticipate an approximate $60 million full year benefit from coated 19 cost actions compared to our beginning of the year guidance.
Including $35 million in the second quarter $15 million in the third quarter and $10 million in the fourth quarter.
Second quarter contribution margin improved year over year due to continued progress with both pricing and productivity initiatives.
Adjusted EBITDA margin improved 150 basis points from last year.
Primarily driven by this improved contribution.
Margin percentage.
Second quarter free cash flow as we move far this to the right.
Improved a $128 million from last year's second quarter in part due to.
$59 million lower cash interest, resulting from the significant debt paydown pursuant to the spec transaction and the subsequent debt refinancing.
We will review other drivers of higher year over year free cash flow in a couple of slides.
Next turning to slide eight.
This paid summarizes our second quarter segment results.
Organic net sales in the Americas were down $79 or 14%, primarily driven by the continued negative impact from cobot 19.
And from the normal variability of year over year timing of larger projects.
Estimated at about $8 million.
It was a very similar story in EMEA, where organic net net sales declined $32 million or 13%.
EMEA was also negatively impacted by code that 19 and by approximately $15 million from normal variability of larger projects.
Organic net sales in Asia Pac increased $11 million with between 15 and $20 million of this increase due to timing of larger projects.
Otherwise relatively flat year over year organic net sales in Asia Pac were driven by double digit growth in China.
Which represents between 60% to 70% of apacs topline.
And this growth in China was offset by double digit declines in the rest of Asia, including India.
Demonstrating that although China seems to be transitioning from the negative effects of cobot 19.
Certain other geographies within APAC continued to be challenged.
From a profitability perspective, adjusted EBITDA as a percentage of sales increased across the board in all regions.
Primarily driven by improved contribution margins in both the Americas and EMEA.
And from lower fixed costs as a percentage of sales in Asia Pac as fixed costs.
In that region declined while net sales were relatively flat.
Next turning to slide nine.
The chart on this page bridge in second quarter free cash flow from last year.
Before reviewing free cash flow, we do want to reiterate our direction from the first quarter earnings call that we continue to hold.
No concerns related to liquidity and we're actually incrementally more optimistic based upon the 84 million dollar increase.
In liquidity during the quarter.
We anticipate our liquidity position to growth should 0.8 at the end of each for the third fourth quarters based on our expectation of strong free cash flow generation in the second half of the year consistent with timing in prior years.
Now returning to the chart.
Second quarter free cash flow of $62 million increased $128 million from last year's second quarter, driven by $45 million higher net income, despite a $22 million increase and non cash charges, including a $12 million ERP impairment.
A significant driver of higher net income was lower interest expense driven by this fact transaction and subsequent debt refinancing.
And of course, we had related $59 million reduction in cash interest.
Which certainly contributed to the higher year over year free cash flow.
Cash used for.
Signed $44 million, but a good portion of this benefit in the quarter was due to the timing of favorable cash receipts at the end of June we estimate between 20 and $30 million that we otherwise expected to receive in the third quarter.
Second quarter free cash flow also benefited from lower capital expenditures, but a good portion of this reduction.
It was also due to timing as we deferred capex investment to the second half of the year based on the Kogan 19 uncertainty we were managing at the beginning of the quarter.
Next turning to slide 10.
This page summarizes our financial guidance for the third quarter as we illustrated in the earnings release.
Although uncertainty Browning co. The 19 has certainly mitigated since we spoke in early May there is still lack that submission visibility to provide specific financial guidance beyond a few months.
Accordingly, we provide our expectations for only the third quarter and this guidance assumes that what we experience in July continues through August and September which of course is subject to change based upon uncertainty with over 19.
We are effectively approach in financial goals for this year one quarter at a time.
Based upon what we know today, we expect third quarter organic net sales to increase between four and 6% from last year's third quarter.
And although project that organic growth from prior year differs by region with America's expected to be relatively flat in APAC and EMEA expected to grow mid to upper single digits.
All three regions should grow sequentially from the second quarter in upper single digits.
This sequential growth is not driven by seasonality as our third quarter net sales.
Declined sequentially from the second quarter in each of the last two years.
Of course, we expect third quarter sales in all three regions to continue to be negatively influenced by over 19, and our topline results will be dependent upon access the customer sites and our customers' ability and willingness to accept shipments.
We expect third quarter, adjusted EBITDA of approximately $150 million at the midpoint.
10% higher than last year's third quarter, and adjusted EBITDA margin to expand approximately 90 basis points at the midpoint.
Primarily driven by relatively flat fix cost fixed cost constant while topline is growing mid single digits.
Impairing, our third quarter guidance to our second quarter results. Although top line is expected to grow approximately 10% sequentially at the midpoint.
Adjusted EBITDA is expected to expand less than 5%.
Relatively lower profit growth is driven by higher projected fixed costs in the third quarter versus the second quarter, primarily due to a $20 million reduction in the benefit from cobot 19 cost actions.
In addition, we plan despite.
The uncertainty related to covert 19 to continue to ramp up of R&D and growth initiatives spending in the third quarter.
Third quarter contribution margin as a percentage of sales is expected to remain relatively consistent with the second quarter.
With that said I turn it back over to Rob.
Thanks, David.
Turning to slide 11, here's a bit more detail regarding our perspective on 2021.
From our radar screen right now.
We see the cloud Colocation and telecom markets continuing to be pretty healthy entering into 2021.
It's clearly too early to call with the enterprise market will look like.
But the total datacenter landscape, we are still expecting to see what growth.
Our record backlog of 1.1 billion dollar gives us good visibility and confidence on the revenue side.
And towards the back half a 2021, we will start seeing the R&D investments pay off with even more products and solutions hitting the market.
On the margin side as we've discussed several times, we are firm believers and practices of holding fixed costs constant and those efforts will be in full swing during 2021.
As this in we plan to announce restructuring actions in Q3, which we will expect to reduce fixed costs by approximately $50 million to $70 million.
Plus an additional variable cost benefit.
These projects are varied entering into the final scoping stages to support these fixed cost reduction projects, we anticipate incurring cash costs between 50 and $70 million, including capital in the we'll evaluate these cash all for likely restructuring reserves to even be recorded in third quarter.
So while it's too early we did want to provide you with a glimpse of what we potentially are seeing play out in 2021 at least based on what we know today.
Now turning to slide 12 and in closing.
I want to thank you for your support over the past quarter and in the quarters to come.
We participate in a great industry, where we have a leadership position and never has critical digital infrastructure to support vital application been so important as it is now.
Our backlog the last month and approach we have implemented and our liquidity positions are in great shape as we continue to operate during this dynamic time.
We continue to invest in the future while simultaneously managing for today. This strategic approach will compare us to even be more successful when we emerge from this pandemic.
And the world adaption of new normal.
Thank you for your support stay healthy I'll now turn the call over to the operator, who opened it up for questions.
Thank you well one I'll begin the question answer session.
In order to ask a question press for the number one on your telephone keypad, well pause for just a moment to compile the acuity.
Today's first question comes from Scott Davis with really this research. Please go ahead.
Hey, good morning, guys on.
Books, encouraging results look encouraging outlook looks encouraging so.
Happy about that.
I want to give color on a couple of things if you don't mind and I Hope you can hear me, Okay and were still have powered out a tier and.
Where I live in the northeast.
Yes.
Okay. Thanks, the 60 million dollar cost out for the year that is how is there any of that 60 that you think you could hold onto.
Into 2021, I assume these are mostly like lower TNT and things like that lower comp accruals, but.
Are there other parts of that you think that could become permanent not temporary.
Yes, Scott this is David absolutely so.
You hit it on the had about 20 million of that is discretionary related to TNT and that is certainly.
The bucket of cost that we are targeting too.
Effectively keep the out of the business heading into next year, and we certainly have learned a new way.
[music].
It.
Doing our business while.
Doing things virtually so.
So that 20 million, we certainly would target to keep out of the business, but just a quick point.
You know with the macro goal of keeping fixed costs constant we will target to even offset the other $40 million. So.
That 40 million if it if it does come back into the business our planning heading into 2021 would.
The to identify other reductions to offset it so.
Effectively realizing the benefit of the full 60 million heading into 2021.
Okay helpful.
Helpful and then.
Got a technical question here Fiveg projects I.
I would imagine they would be somewhat lumpy maybe.
Not as visible as traditional data center, but I really don't know, it's a it's a new newer market, obviously, but can you help us understand what what those projects typically look like and.
And and how they might differ from a traditional data center.
Project.
Sure Hi, Scott This is Rob Jonathan.
Yes, what we're seeing and China announced a while back during the co bad debt part of their stimulus was too.
Really go after Fiveg and expands they put tens of billions of dollars into doing that those projects tend to tend to be smaller but tend to be tens of thousands of sites and basically with Fiveg, which you have to do is go into that cell tower upgrade the power system, because fiveg does require more power and maybe upgrades.
Thermal so the opportunity for us is lots of little sites.
But tens of thousands of those and that's what we're seeing certainly.
Happen in China, and we participate.
Really well in China when it comes to the the Fiveg Rollouts same thing in the US what you're finding is the networks get.
Very constrained because of all the work from home school from home people are upgrading those networks upgrading maintaining in upgrading the equipment there and Fiveg is as you know kind of a race between China and the us that who can get there faster. So we're we're enjoying that and I think that trend.
Menu not necessarily lumpy, but pretty steady over the next couple of years.
Okay. Good luck guys and congrats their coating on the book, it's a great read I loved it so.
Yes, you are very kind, Scott and I appreciate the plug for the Balkan. Please I have to admit I enjoyed yours also especially that Honeywell chapter and.
We hope that in the next book you are right vertical will show up.
Well I hope so.
Good luck I hope it works out.
Yes, good early side.
Thanks, guys.
So next question comes from the core the boys with Foods. Please go ahead.
Yes, thanks, good morning, guys.
Good morning, scoring.
I thought that the framework around tricky with helpful.
The regional color by the topline, but following up on that is it possible for you guys to kind of parse out.
Do you expect to see EBITDA margins up year on year across all three regions like like you were able to do this quarter or is there any lumpiness things that we should be aware of.
Yeah. Nicole. This is this is Dave its Alan I I would say, although we don't want to necessarily give guidance in in particular by region.
Our expectation.
With the that that would be spread across all three regions.
You know inquests it in the guide is.
Effectively that fixed cost will be flat this year versus last year.
And based on the leverage.
Across the three regions, we would anticipate.
EBITDA margins.
To increase.
Globally.
[music].
And that's even with contribution margin likely staying relatively flat. So we would anticipate higher.
Adjusted EBITDA margins to be spread across all three regions.
Got it okay. Thanks, and then I'm totally understand.
The lack of visibility here in the current environment, but just as we're framing our own models into the fourth quarter.
What kind of seasonality do you guys typically see that we should be aware of and I guess on top of that you know the large project Lumpiness is there anything to think about with respect to year on year versus Fourq Your 19.
Yes, I recall start and then David can chime in we typically the second half the year is bigger than the first half so thats kind of and fourth quarter is typically our largest quarter.
In the in the year up deals the big projects have inflow and with sometimes we talk about that and say what we.
Had a big project in EMEA this year, and we didnt that didnt repeat itself, but what I would say is what we're seeing is strength as we talked about Nicole and hyperscale, which tend to be larger projects and we're seeing that not just in any particular region, but but all the regions and.
What's going to be important for us going forward for the second half is is how site access and how delivery and how the deal build ability of the trades are there to be able to deliver theres certainly a as you can see by our backlog of pent up demand.
And.
Great constraints can can be a problem inside access can be a problem, but in general.
We will see for certain.
A larger Q3, and then a larger all Q4.
Okay. That's really helpful. I'll go ahead that on thank you.
[music].
Our next question comes from Lance Vitanza with Charlotte. Please go ahead.
Hi, guys. Thanks for taking the questions I guess I wanted just sort of better understand the the Threeq guide for adjusted EBITDA.
In the context, just given how strong the performance was in the second quarter and the favorable revenue guide for Q3, I thought that the adjusted EBITDA Guide seems actually seemed a little light as you have margin on a quarter on quarter basis actually going down about 75 basis points are so despite.
Winchell sales growth. So I'm just wondering I know, obviously, you talked a little bit about the the cove it cost actions the $30 million.
Benefited the second quarter, and I guess I would've thought any you talked about this couple seconds ago, but a little bit more would've would have kind of.
Carried into the third quarter. So I'm, just wondering to what extent or you are you, giving yourselves just some room to maneuver here or is there something in particular that we should we thinking about that would lead to that kind of a margin performance in the third quarter.
Yeah, I think plants a this is this is David and.
First I'll lead off we always like the midpoint of our guidance.
We.
Likely will provide ranges, but we're generally comfortable at the midpoint.
And I can help you with the.
The 150, adjusted EBITDA at the midpoint and how that.
Excuse me walk from the 145, some second quarter.
So.
Being a finance guy we try to get things as quantitative as possible. So we have about a 100 million dollar increase in sales from Q.
Q2 to Q3.
And if you throw a 40% to 45% contribution margin against that.
You get about 40 $45 million benefit.
And the headwind is certainly going to be on the fixed cost side as we.
Talked about on the on the in the prepared remarks.
And that could be in that 35 million plus range and.
20 million.
Of that is going to be related to.
Lower benefits from the Kogut actions and these are things that we benefited from in Q2 that we won't benefit in from in Q3.
Including furloughs and in certain geographies.
We were able to.
Receive some government subsidies. So that's a good portion of the higher fixed costs. The other component is our commitment to continue to invest in strategic initiatives and this is something that we talked about on the last couple of calls.
Heading into this year, our plan was to continue to invest in R&D as we.
Continue to increase that spend as a percentage of sales.
We continue to invest in markets that we believe have higher potential and profitable growth, including the channel.
In addition, we had some digital projects that we continue to invest in so.
The spending for those strategic initiatives.
Ramp up in the third quarter and that explains the remainder of the the fixed costs increased sequentially from Q2 Q3.
Super helpful. If I could just squeeze in one more on liquidity you mentioned that you are less worried about even less worried about liquidity given the outperforming some cash flow in the second quarter. So the implication of that is that 60 million of cash was not pulled forward from what you otherwise would've expected to generate in the second half I know.
You talked about you're still expecting a good second half, but it sounds like this is really like just incremental to what you would have expected. When you were making your budget say at the beginning of the year or is that is that fair.
I think that's partially fair item.
It.
Mr CODI always reminds.
Remind us how conservative finance guys can be it and when we look at cash flow, we certainly error on the side as being a little bit more conservative, but our second quarter free cash flow performance certainly was encouraging I think at this time in May we.
Hinted towards maybe a slightly negative free cash flow for Q2.
So we certainly outperformed that.
I did mention some of the favorable performance was was based on timing of cash receipts. So we received between 20 and $30 million literally on the last day of the money that we had anticipated to receive sometime mid July so that helped and certainly would borrow from from Q3.
But even with that taken into account our Q2.
Free cash flow was better than what we anticipated and certainly lends to the optimism that we have both for liquidity and related free cash flow generation for Q3.
In Q4.
Makes sense I understand thank you.
Lance just want one Littleton just further color on that I would say that you I think used the words, maybe less worried where we're not worried about our liquidity, we actually feel really good about our liquidity position, where we're going.
Through this over time, so there's a there's a there's no worries and we only see that getting stronger as we get a finished throughout the rest of this a second half of the year.
I understood. Thank you.
As a reminder, if you like to ask a question. Please press star of the number one.
Our next question today comes from works the way I mean, yes. Please go ahead.
Yes, thanks, very much for taking my questions.
I was hoping first to better understand the comments the company was making about backlog and if I understood properly the companys expecting backlog to be it a good level exiting the year can you elaborate on what's giving the company the confidence that the backlog is going to stay high as you move through the rest of this year and perhaps you could.
It also speak more specifically to your expectations for the Hyperscale portion of your business and how you're thinking about the sustainability of that end market, which certainly has a lot of good secular growth over the long term.
As a company as described in the past, but but theres some debate in the investment community about whether some of the spending going on in Hyperscale. This year is pull ahead of demand. Thanks.
Thanks, Mark this is Rob Jonathan I'll start off here.
First of all what gives us confidence and continued strong backlog going into 221 is our visibility in both our pipeline.
Which is which is very strong globally and what we're seeing from a firm on orders.
An expectation for orders growth. So we do expect to see orders growing the second half.
And so that gives us the confidence going through those those two things that I look at which pipelines that huge indicator of where things are going.
I can't anticipate what's going to happen on the enterprise inns small to medium business, but that's even a plus a the come a recovery comes fostering I would say in the second half as it as it relates to Hyperscale. What we're seeing globally is a combination of things it's not just the hyperscale building out.
To to to build out there's a lot of data sovereignty, you've seen eating a lot of stuff around people wanting date is stay in their country. So what we're seeing is a proliferation of data Center. Then we'll continue to see that really data centers in country for country type of thing and Theres a lot of build out you know going on in Europe Europe is.
It is red Hot when it comes to wrap.
Certainly seen it in the Middle East Africa, and then just really around the World South America. So we continue to see dated not slowing down the rate of growth of data that has to be process in store. So we're not looking at this as a bubble that hyperscale is building out a publication building out too much capacity from Omar.
Lens you know the next 18 24 month.
We see just a strong demand and the need for data centers and the was a pause as we talked about last year little bit of digestion as I'd say I'd say, we're probably a little bit behind now.
In order to fulfill the capacity that that's needed. So we do expect to see hyperscale.
Grow, but we lump hyperscale and Colocation together, because a lot of the co location companies certainly outside of the use of providing that capacity for those those hyper hyperscalers.
That's very helpful. Thanks.
A question I was hoping to better understand some of the dynamics in the channel business and again, we talked about it being soft I think that was just from a cyclical and end market perspective, but taking share within channel has been one of the opportunities. The company has focused on has that share gain opportunity then disruptive because of the corbin challenges in that market Weve.
Yes, or do you still feel confident about the company's ability to take share within the channel business over time. Thanks.
Great Great question, and you know channels, a huge part of our strategy and a huge investment for us.
Try pre cobot, we felt really good about our execution.
In the channel on a global basis that we were taking share and we're doing that through providing innovative products and new solutions. We had a plethora of launches and we'll continue to launch throughout this year and broaden our scope of offering of innovative products and solutions as well as being that easy to do easy button to go too.
Go to company and being less distributed or I would call under distributed or not over distributors like some of our competition and picking who we want to do business with has really helped us concentrate focus and gain share and get closer and tighter with them. So what I would say is while at the overall channel a.
Actually by the small medium business, we expect that to come back at some point in time, and we will continue to execute and but being a much stronger position because we continue to launch new products and programs.
In the channel so I'm very bullish on a global basis that we'll see as recovery comes back us of US doing what we said we're going to do in that sense, that's take share and and grow into new categories and channels.
Thank you for that color just just lastly from me they want to better understand the impact of co bid on your business this year.
Thanks.
First quarter call the company had talked about.
80 million of revenue at $30 million EBITDA that was.
What was it was negatively impacted because of coal that and I apologize if I just missed it I didnt catch a an update on what.
Over they have done to fundamentals and the second quarter.
Is there anymore.
On a state of a qualitative color you can provide about how kobin, maybe impacting your ability to complete.
Hey projects.
Into two or on the Threeq guidance from a revenue at a cost perspective. Thanks.
Yeah, I think as Rob mentioned.
In his prepared remarks that a certain geographies certainly continue to be negative negatively impacted and.
Certainly if you look at lower year over year sales those are a lot easier to.
Attribute directly to coded.
I would say universally if you look at our production and operations that.
We had minimal impact.
Being able to.
Procure supply and produce product and we had very little operational issues. If you will.
So we didnt specifically call out a.
<unk> dollar impact.
On the topline related to coded and that's.
Primarily because.
We look at everything that we're dealing with today is kind of fungible with code at 19.
So.
Overall, I think organically our sales.
We're off $100 million versus last year.
One of the things that we called out specifically in the first quarter year over year was the.
Impact of large projects and that certainly impacted us in Q2, but it was more regional based if you look at it overall, we probably only had about a.
$5 million headwind from the timing a large projects from from last year second quarter. So if you want to attribute the remainder reduction of the you know the 95 to co bid.
I wouldn't stop yet, but it's really hard for us too.
Specifically say.
What.
Sub components that 90 is cold it or that we otherwise would have been April too.
To deliver to customers.
Thank you very much.
Thank you learned over there are no further questions at this time, so that it was a cumulative session. However, I turn the conference back over to Rob Johnson for any closing remarks.
Thank you operator, I'm going to close the call by thanking our 19000 plus employees around the world.
There are hard work that they're doing every day to take care of our customers.
We appreciate everyone's time today as I said earlier, please stay safe and we look forward to speaking with you again. Thank you.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect have a wonderful day.