Q4 2020 Resideo Technologies Inc Earnings Call
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Total revenue.
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[music].
Ladies and gentlemen at this time I would like to welcome everyone to the residual technologies fourth quarter 2020 earnings Conference call today's call is being recorded.
All participants will be in a listen only mode until the formal question and answer portion of the call.
It is now my pleasure to introduce Mr. Jason Willey Senior director of Investor Relations. Mr. <unk>, you may now begin Sir.
Good morning, everyone and thank you for joining us for resilience fourth quarter and full year 2020 earnings conference call on today's call will be Jay Gal Bakr residual Chief Executive Officer, and Tony Trunzo, Our Chief Financial Officer. The copy of our earnings release related presentation materials are available on the Investor Relations page of our website at investors day.
For the year Dot com.
We would like to remind you that this morning's presentation contains forward looking statements statements other than historical facts made during this call may constitute forward looking statements and are not guarantees of future performance for our result.
And involve a number of risks and uncertainties actual results may differ materially from those in the forward looking statements as a result of the number of factors, including those described from time to time and resilient filings with the Securities and Exchange Commission. The company assumes no obligation to update any forward looking statements.
During our call today, we may refer the certain non-GAAP financial information a reconciliation of our GAAP to non-GAAP results is included in the company's earnings press release and accompanying presentation, both of which can be found on the Investor Relations section of our website we.
We identify the principal risks and uncertainties that affect our performance and our annual report on form 10-K, and other SEC filings I would also like to remind everyone that we will host a virtual investor day on the morning of Thursday March 11th information regarding the that is available on our Investor Relations website with that I will now turn the call over to Jack.
Thank you, Jason and good morning, everyone.
We closed 2020 with the strong Q4.
Delivering better than expected revenue and profitability and making significant progress on our transformation efforts.
Demand in our residential markets remain robust and the.
The Adi team again delivered impressive growth in the face of mixed market conditions and our commercial categories.
Our strong finish to 2020 enabled us to achieve modest revenue growth for the full year.
Despite the young president of COVID-19 related challenges, we and the global economy face during the year.
While we remain in the early stages of our transformation efforts initial progress contributed to the margin expansion, we delivered in the second half of 2020.
This profitability improvement combined with an increased focus on cash management generated operating cash flow of $244 million in 2020 up from 'twenty up from $23 million in 2019.
Improving cash generation is one element of the significant progress we have made and solidifying our balance sheet and enhancing our financial flexibility.
In late 2020, we completed a follow on equity offering raising $279 million.
And after our debt refinancing in early February we have no significant maturities before 2026.
We are well positioned to make long term value enhancing investments and both of our businesses and augment these organic initiatives within the organic opportunities.
Following a challenging first half of the year, we saw meaningful improvement in end market demand beginning in the early summer.
In the second half of 2020, we delivered strong year over year top line growth in both segments.
And significant margin expansion of products and solutions.
Investments in our operations and strong execution from our supply chain organization.
<unk> for us to deliver for customers as demand accelerated.
As we enter 2021, we.
We see a number of positive structural trends across the markets we serve.
People continue to spend more time in their homes and are directing their attention and investment to renovation and repair projects.
Security has risen and prominence in the minds of many home and business owners.
Trends in residential new construction also remain favorable.
Our broad port.
<unk> portfolio of products solutions unmatched relationships with the pro channel.
And distribution reach across home and commercial security markets positions us to capitalize on these positive market dynamics, which we believe have durability.
Since I joined residual and May I have focused on accelerating our transformation efforts in building a world class leadership team.
Within products and solutions, we reorganized the break down silos that existed in the old line of business and engineering structure.
We have brought the customer back front and center and are ensuring feedback happens across product management.
<unk> and engineering.
We have re prioritized customer service with that organization now reporting directly into Phil Theodore President of products and solutions.
We've taken several steps towards reinvigorating innovation and technology development across the organization.
Beginning with bringing Jeff Frank on Board.
This continues with the recent alignment of resources to create the software and engineering organization optimized to deliver services through a common platform.
Across the board these efforts position the organization to move quicker to address customer needs and accelerate new product and market development.
While many actions are only a few months old I am encouraged by the early results the new ways of the organization is interacting and the exciting opportunities that are already arisen.
Combined with steps that were taken through out 2020 to reduce our cost base and refocus resources, we are well positioned to pursue pursue growth.
While focusing on scalable efficient business processes.
With that I.
I will turn the call over to Tony to discuss our fourth quarter and 2020 financial performance in more detail.
Thank you Jay and good morning, everybody.
Both Adi and products and solutions exceeded our expectations in Q4 Consol.
Consolidated revenue was $1 $5 billion, an increase of 15% compared to Q4 last year for.
For the full year 2020 revenue was up 2% and the strong second half offset the negative impact of COVID-19 in the first half of the year.
Q4 gross margin of 28, 2% was up 420 basis points from Q4 of 2019.
Due to improved cost absorption lower inventory expenses and cost savings from transformation programs.
Selling general and administrative expenses for the fourth quarter totaled $271 million.
Of 12% from Q4 last year.
In Q included in Q4, SG&A was $29 million increase in bonus expense from improved business performance and a onetime COVID-19 related bonus as well as increased expenses related to transformation programs and investments in the business.
Operating profit for the fourth quarter was $152 million or 10, one percentage of sales compared to $72 million for five five percentage of sales last year.
For all of the 2020 operating profit was $311 million for six one percentage of sales up from $258 million or five two percentage of sales for 2019.
We delivered over $50 million of net savings from transformation initiatives in 2020 compared to our target of $30 million to $40 million.
Major factors behind the savings include lower SG&A through head count reductions and savings on the indirect spending.
As well as sales activation and direct procurement programs that positively impacted revenue and Cogs.
In 2021, and beyond we will continue to focus on reducing costs, while increasing the scalability efficiency and control in the business.
Of this work will be visible to our progress on expanding gross margin leveraging our cost base to improve operating margin and driving cash generation.
Products and solutions Q4 revenue of $676 million was up 18% due to improved demand across each of our major channels OEM trade security dealers and retail.
Backlog, while lower than at the beginning of Q4 remains above historic levels.
This reflects both positive demand and global sourcing constraints that are impacting our manufacturing operations and supply chain.
Products and solutions operating profit in Q4 was $166 million for 24 six percentage of sales.
Paired with the $84 million or 14, 6% of sales in Q4 2019.
The improved performance reflects operating leverage from higher volume.
As well as reduce inventory expenses to transformation program savings.
Adi revenue of $825 million increased 13% year over year in the fourth quarter compared with a strong Q4 2019.
Daily sales average for the fourth quarter was $12 5 million up 10% compared with $11 4 million in Q4 2019.
Demand was strong and residential oriented categories, including intrusion of networking, while more commercial centric categories, such as fire and access control of slower activity.
Adi's investments in E Commerce, and digital selling tools helped to drive e-commerce revenue sales of over $100 million in Q4.
Almost 40% year over year.
Adi will continue to invest in digital sales tools designed to drive sales force effectiveness and enable better customer service in 2021.
Over time these investments will enable a more consultative selling approach and focus on higher value transactions.
Yes.
Adi operating profit was $59 million or seven two percentage of sales up 13% from Q4 2019.
Adi operating profit benefited from higher revenue and a continued focus on cost management, partially offset by increased investment activity as well as restructuring costs in Europe.
Corporate costs for the quarter for $73 million or for 9% of sales.
Paired with $64 million also for 9% of sales in the fourth quarter of 2019.
For the full year 2020, corporate costs for $291 million for five seven percentage of sales.
With $279 million.
For five six percentage of sales for 2019.
The growth for the full year reflects costs associated with transformation initiatives as well as increased bonus and pension expense, partially offset by transformation program savings and lower spin related costs.
Consolidated cash from operations for the full year 2024 was $244 million.
$23 million in 2019.
The strong performance reflects our improved operating results and lower cash tax payments.
As Jay mentioned, we completed a follow on common equity offering in Q4.
The range $279 million expanded our research coverage and added several significant new shareholders who are registered.
As a result of of the offering and our strong cash generation.
The Q4 with cash and cash equivalents of $517 million and total outstanding debt of $1 2 billion.
In early February we refinanced our senior secured credit facilities consolidated two term loans into a single upsized $950 million term loan b due in 2028.
And extended and increased our revolving credit facility.
Separately, we redeemed $140 million of our senior unsecured notes.
In connection with the refinancing the Moody's upgraded <unk> corporate credit rating to be <unk>, three while standard <unk> poors firms its existing issuer rating of double B and changed the credit outlook from stable from negative.
These transactions combined with our strong cash flow of dramatically improved for videos financial structure reduce net leverage and positioned us for strategic growth initiatives.
Moving to our full year outlook. We currently expect 2021 revenue to be in the range of $5 2 billion to $5 4 billion.
Which implies year over year growth in the range of 3% to 6%.
Consolidated gross margin is expected to be in the range of 26% to 28% while GAAP operating profit is expected to be in the range of $450 million to $500 million.
Our 2021 outlook anticipates corporate expenses of approximately $225 million.
Capital expenditures of approximately $90 million and.
In effect of tax rate in the mid twenties and.
And net interest expense of approximately $47 million.
Note that Adi will have two fewer selling days in 2021 compared to 2020.
I think three more days in the first quarter and five fewer days in the fourth quarter.
As a reminder of the Honeywell reimbursement payments have limited tax deductibility, meaning the calculated tax rate on our pre tax income will likely be higher than our effective tax rate.
For the first quarter of 2021, we expect revenue in the range of $1 3 billion to $1 $35 billion.
An increase of 12% at the midpoint compared to Q1 2020.
Consolidated gross margin is expected to be in the range of 25% to 27% an increase at the midpoint of 190 basis points.
GAAP operating profit is expected to be in the range of $110 million to $120 million compared to $34 million last Q1.
Additionally, in Q1, we expect approximately $26 million.
Of costs related to the early extinguishment of debt, which will be reflected on the other expense line of our P&L.
Our outlook for both 2021 in Q1 takes into account supply chain constraints associated with COVID-19.
Higher freight the material expediting charges and market shortages of certain components such as microprocessors.
We are working aggressively to mitigate these impacts and are pleased with how our supply chain and operations teams have responded to the situations.
Also included share outlook for 2021, our incremental investments across the business.
At Adi. These investments include systems to accelerate our e-commerce offerings and sales effectiveness improve.
The improved customer experience and drive scalable growth.
Within products and solutions, we will be investing in incremental engineering and innovation capabilities customer experience manufacturing optimization.
And processes and systems enhancements aimed at accelerating revenue growth and improving gross margins.
As a reminder, moving forward, we will not reported adjusted EBITDA and instead, we'll focus on revenue gross profit operating profit and operating cash flow.
As we've stated previously we believe these GAAP metrics to then a clearer picture of the actual results against the non benchmark.
I'll now turn the call back to Jay for a few concluding remarks before we take questions.
Okay.
Thanks, Tony.
I'm proud of what the organization accomplished and what was the very unprecedented year.
For the entire resilient team stepped up to the immense challenges and personal and professional daily life brought about by COVID-19.
As a company we.
We excelled at navigating the numerous impacts of the global pandemic, while embracing the significant amount of organizational change.
I would like to thank all our employees for their efforts in ensuring that we continue to meet and exceed the needs of our customers across the globe.
We entered 2021 and a much stronger position than where we were of 12 months ago.
Both as an organization and the the demand we see across our markets.
We will continue to push aggressively on transformation.
Including accelerating the investments that will position the business for improved long term growth and profitability.
This includes the ecommerce expansion and tools to drive improved sales force effectiveness.
At Adi.
The investment in the tools processes, and organizational structure to better measure and improve our NPI and sales execution within products and solutions and better aligning Adi and product solutions to expand opportunities between the two businesses.
Our focus of the management team remains on right sizing, our cost structure, improving our operational processes and execution and accelerating our innovation and product introduction process.
We believe execution across these initiatives will drive improved financial performance and long term value creation.
Finally, I'd like to remind everyone that we will host the virtual investor event on Thursday March 11th beginning of the 10 am eastern time.
We plan to further discuss the opportunities that exists within products and solutions, and Andy and Adi and outlining the longer term financial framework, we see for residual.
We hope you will join us for this event.
This concludes our prepared remarks.
Operator, we are now ready for questions.
Thank you if you would like to ask a question at this time. Please press star one on your telephone.
Our first question comes from John Lovallo from Bank of America. Please go ahead. Your line is open.
Hey, guys. Thank you for taking my questions.
The first one Tony just looking at the revenue outlook for the first quarter and for the full year.
It would seem to imply that the back half of the year could actually be down on the year over year basis is that consistent with what youre thinking.
Hey, John how are you the.
The guidance. We gave today is for is for 2021.
And for Q1, we're not really in a position to give quarterly or sort of half guidance. If you will but for sure in the second half of 2021.
Is going to have net 2020.
The second half of 2020 was very strong and the comparables in the in the second half of this year are going to be are definitely going to be tougher.
I think the.
We've also talked and we also talked about the fact that we had some supply chain constraints in the early part of the year that we're trying to manage the definitely weigh into the the cadence of our year as well.
Okay. That's helpful. And then I can certainly appreciate the focus on GAAP results just curious though.
Will you be breaking out restructuring costs stock comp spinoff costs et cetera, so of investors, who will be able to at least.
Reconcile the numbers to historical results or is that something you're just going back with incomplete.
We'll give you will give the stock comp will give you. The DNA, we will give you the kind of the.
What I'll call the the line item pieces of.
Of EBITDA, but in terms of.
In terms of restructuring expenses and those kinds of things as we've said before we're.
We see those as <unk>.
An ongoing activity within the business.
And we will talk about it and if they are significant I guess, it's possible that we could give a number but the expectation is that we want the we'll just be absorbing those costs into the.
Of the operations of the business and Thats the way we that's the.
The way, we have shaped our guidance our guidance includes costs associated with those kinds of things.
Okay, and then lastly, if we think about your guidance is there any more color you can give us the use of segment basis in terms of in terms of revenue and operating profit I guess, most notably on the trajectory of Pms margin.
No not at this point.
We have we've obviously seen some meaningful improvement in PFS margins.
We expect that to continue but at this point, we're not we're not in the position to get to give guidance by segment.
Hey, Thanks for the the time guys.
Thank you and our next question comes from Matthew Gary Anthony from me here.
Evercore. Please go ahead your line is open.
Thanks, a lot for taking my questions.
For a couple of as well I guess first of all I was hoping you could just touch on your calendar 'twenty, one operating income expectations.
The good step up in operating income dollars at the end of $165 million or so.
Wondering if you just touch on the one off the different buckets of its expansion of come from is it maybe of cross one of which the transformation savings mix just one of the big drivers for the operating dollar expansion in 'twenty one.
Sure Hey, Amit So a couple of things first of all.
We're seeing significant.
We're seeing a significant decline in SG&A this year and again I'm talking about GAAP numbers.
And we talked about the fact that our corporate expenses are going to drop by something on the order of seven the $65 million.
Next year, and we do anticipate seeing margin expansion.
At PNM in particular, even given the investments that we're going to be making in the business.
But that expansion at some level is going to be a product of the higher volumes.
But it's also a product of transformation programs and as I mentioned in my prepared remarks, there are there headwinds in terms of costs that are baked into our expectations for 2021.
Particularly from the standpoint of freight expediting charges additional costs associated with procuring critical components.
Of that are they are pretty meaningful there.
They are balancing out the the benefits that I talked about and then finally, we are going to be making investments in the business. Those are as we've said before those are.
Those are the things we're going to continue to do to the extent, we think they can drive growth moving forward.
And when we've got things included in 2021 as well both at DNS and at Adi.
I think also of Tony I think it's worth adding just on the.
The major transformation.
<unk> for 2021 really covers a variety of different areas its cost of course.
Areas of Cogs like value engineering of our European footprint price optimization activities of our integrated business planning on the SG&A side.
The SKU rationalization and the legal entity rationalization, but also in the area of revenue probably of of profitability management office as part of this new transformation team.
So I think we have a lot of things in flight and the transformation area that will be impactful.
2021.
Got that.
It's really helpful and then.
For me you talked a couple of times about.
Thank you the inefficiencies and freight cost that sort of impacting the margins up.
The way to put a number around what these headwinds look like for you on a quarterly basis and how do you offset this is it going to be driven by some of these transformation things of Jay talked about or could.
Could we could you use this as the pricing mechanism for your customers.
Okay.
As of.
You want me to take that sure.
Net.
There's a lot of baked into that Amit.
The the <unk>.
Freight and logistics costs are real time, we saw from saw a significant increase in Q4.
Continues that elevated those elevated costs continued to be the case in Q1.
We had to sort of make some assumptions about how long that persists and those kinds of things and we've we've done our best to make that happen.
And yes, they are being offset by all of the things that the Jay just described.
Yes, I'd add.
As you know I mean.
This is going to be.
This is not new listening to us. This is going I think it would be of dynamic that.
In the electronics industries that most companies are going to face during this year.
So as Tony indicated earlier, we believe we have factored in kind of both sides of the equation right, what's going on out there in the <unk>.
Fly chain logistics challenges as well as of the.
In terms of what's going to happen from the component of industries and what have you in.
So some of this transformation and the other things that Tony talked about but we believe we have factored in in terms of our outlook.
And it's dynamic and it's kind of change as we go along of anybody has been the electronics industry, a long time know when these things happen.
Little bit of of bouncing ball as you're wrestling through for a given period of time when these dynamics take place and they seem to take place of about once every 10 years or something where you have one of these types of situations out there but.
Part of it is also due to the.
The demands that are out there in the various markets, so but as Tony said I think we have it.
Hopefully we have it all covered.
Perfect. That's it for me thank you.
Thank you for our next question comes from Jeff Kessler from Imperial Capital. Please go ahead. Your line is open.
Thank you.
Thank you for taking my question.
You've mentioned several times about investments that you made during the year and obviously you are going to be making in e-commerce.
At Adi.
Can you position yourself of what are you think of the company is right now against your major competitor, but it's for all the major one or two competitors both here in the United States and.
In the end of bread with regard to your position in E Commerce, and what you have to do to be on the same on the same plane with everyone else.
Okay.
Hey, Jeff It's Tony how are you hi, Tony.
I think so a couple of things about that.
We are.
Yes.
I don't know for ahead behind or equal specifically to our competitors, but what I can say is the growth in our E Commerce business has been dramatic.
Part of that is obviously the dynamic in the industry, but more importantly, we've invested.
Some significant amount of money already and we're going to invest and even more significant amount of money this year.
In driving our the entire e-commerce experience, making the ability for people to understand.
Our product suite online, what's what's available how it's available making that experience seamless and.
And really really driving people toward that.
Towards that channel is something that the focus and we expect that channel to grow pretty rapidly.
The.
The flip side of that and really one of the major objectives is to and this is I guess, it's an investment as well.
By doing that we will create the situation where our sales associates can be much more focused on sales rather than transactions and they can be more consultative as opposed to to gain transactions and it is not our expectation that we will scale back investment in our branches as of.
Part of E Commerce, we're going to maintain our investment at the at the branch level and probably grow it with the expectation that that will drive what I'll call more traditional channel sales growth as well. So we see the we see the e-commerce growth really is incremental and additive.
And the build out that capability.
I would also add with Tony So Tony I think Tony hit the right on the.
They are in terms of what he has explained.
And we've been accelerating the investment during 2020, and we'll be doing a lot more with Rob and his team in 2021.
Combination of many initiatives around.
We call it touch the sales as Tony said E Commerce E Mail order automation of Adi.
Digital marketing and promotional and sales activation campaigns all of the things that go underneath that but.
We're very pleased at the progress that the Adi has made in this space and the.
To accelerate the.
The growth from that area. So this is an important part of.
Of the future.
Okay.
Alright, My follow up question is.
The most of your most of the your competitors that I do cover, particularly the ones in the particularly the ones in the security area has been talking about some one of the.
If you want the quota.
Down the expectation for revenue in 2021 as the economy as the economy slowly reopens and what I'm getting to here is debt.
It would be you've mentioned the you probably talk about it on March 11, the trying to get communication and get the close is one of the call for your information loop much tighter between Adi and.
And your product side, so that you have a pretty good idea of of what is going on.
How do you turn that into a competitive advantage, particularly.
You begin to see the small to medium business.
The area, where you will you do operate begin to open up a little bit.
So Jeff I guess I'd make a couple of comments about the U.
You hit on a critically important point, which is that connectivity between between PFS and Adi.
And we really believe that that is a powerful competitive advantage we've got obviously.
We're making real progress in terms of our NPI engine, and our innovation engine and driving that through a world class organization like Adi is a real opportunity and I point to the introduction of our pro series finally at the end of last year.
Which is one of the most and one of the most successful product introductions, if not the most successful product introduction.
Adi Zipper and never had and I think you are right I mean, there's more to discuss irrespective of that connectivity over time.
But I think that's going to be of critical lever for us.
In terms of the security market overall.
It continues to be strong.
Yeah.
Across the board right now.
And of the flow through on the operating margin it looks like your gross margins were you know.
Flattish for the quarter, while your EBITDA margins were up nicely or was that upside both kind of cost actions just trying to get a sense.
For if you E Commerce mix provides.
Longer term uplift the margins in general if you could quantify the benefit.
To the extent you can you know as as that channel growth accelerates and out of a follow up.
Sure.
Thanks, Thanks for the question Paul So a couple of things.
As we said e-commerce was about $100 million.
In Q4, so what is that.
12% of sales something in that ZIP code for for Adi.
Percentage is going to grow over time.
But as I said earlier, that's not necessarily because we expect to we expect all of that growth to be at the expense of what's happening in our in our branches we expect the.
We expect e-commerce to be of driver in and of itself as we improve our capabilities in that channel and it will grow faster by all expectations, then Adi as a whole, but we are going to continue to invest in the business and for.
From a.
It becomes a little bit of of circular discussion, but we've said this a number of times. We believe in the Adi business has executed exceptionally well for a really long time and it deserves incremental investment and we're putting incremental investments against that business and thats why youre not necessarily seeing.
Significant expansion in the margins right now is.
Because of that is because of that investment.
We'll continue to do that as long as we see returns against it and if those returns come in.
Accelerated revenue growth ahead of our competitors, which we've consistently seen.
That in and of itself is a value creating opportunity that will continue to put put dollars against sort.
For the margin the margin profile all other things equal if you were just steady state of the business.
You are right in the e-commerce should be.
A lot more profitable just because it's.
Just because it's got the lower overhead associated with it but that's really not the way we're thinking about it we're thinking about it is the sales accelerator and as an opportunity to continue to take share.
Okay.
Very helpful. Thank you for that.
And then on free cash flow nice finish to the year.
You had a.
Nice.
From working cap and 20 are there any kind of initiative to maybe drive further.
Benefits there or.
Is there going to be a slight drag this year on working cap just the puts and takes there.
And then what do you expect free cash flow for kind of shake out. This year. If you could also help us with the SEC.
Seasonality of cash flows to the extent you can I mean.
The 21 was quite volatile.
Yeah. So.
Try to unpack that a little bit in terms of in terms of where we are with respect to working capital.
We've done a good job we haven't.
Our inventory levels.
They reflect tightness in the supply chain I am not sure is that to expect from where we are today.
I wouldn't expect our inventory turns to improve just because were.
Frankly.
We're tight in a number of areas, where we'd like to have a little bit more safety stock, particularly given the the.
The continued strong demand.
In terms of of collections.
NAR.
<unk>.
2020 was was a very positive surprise to us we were prepared to see cigna.
The significant delays and significant impacts.
The impacts to the credit quality of our customers associated with Covid that didn't happen.
And there is opportunities to improve the the execution there.
But there are two I think the yes, I think our our days are pretty good.
One of the thing I'll call out of this as sort of a little bit more philosophical.
We're not believers in freeing up cash flow on the on the backs of our suppliers by by stretching payables. We did do that in the beginning of 2019 of our 2020.
During the Covid period, there was.
Everybody was cautious and we were cautious among the in terms of how we how we treated AP.
But we're current with our vendors and we expect to continue the current with our vendors and Thats that.
The philosophical approach, we're going to take.
Given all of the other initiatives in 2020, I don't want to point to a meaningful improvement in cash velocity in the cash cycle time.
In 2021, just because we're focused on a lot of other areas and we've got those inventory dynamics that we have to deal with.
And of any comments you can make line.
The seasonality of cash flow of who it was quite volatile in 2020.
Yes, I think.
I'm not sure that I.
Study that in great depth.
There shouldnt be tremendous seasonality associated with it.
January there's always a bunch of accruals at the end of the year of the pay in January.
And we will typically try to build inventory as we head into our somewhat busier season in Q3, and the early part of Q4, but broadly it shouldnt be as volatile going forward as it was in 2020.
Okay, great. Thank you very much.
Yeah.
Thank you and our next question comes from Christopher Keller from the sales. Please go ahead of your line is open.
Good morning, Thanks for taking the question I apologize. If this was already addressed earlier in the call I jumped on a little late can you.
Make some comments on your ESG, environmental social and governance initiatives, what you see to be the risks and opportunities. There how you can disclose this.
Items from the market. Thanks.
Thanks very much.
Chris Thanks, Thanks for the question and very much on point.
We are in the early days with respect to our ESG journey.
But we're absolutely committed to it and we think that we have of.
Strong position relative to ESG.
Because of the types of products that we provide and the opportunity for energy savings and other.
Other benefits that are not not just the functional benefits of the product.
We're going to have meaningfully more to say about that over time as I said at the journey, but it's one that I can tell you that our board.
And the management team are very much focused on.
It really the kind of broadens out not just in terms of ESG, but.
The Eni and we're really we're going to be moving forward on all of those fronts and we've got.
Activities going in the company on all of those fronts today.
I would add also that Tony the 9% right at the May just as a major focus for myself the whole management team.
The board.
We just finished up.
The board meeting here recently.
This is top of top of mind, so you'll hear a lot more about this as we move forward.
During 2021.
And by the way.
By the way Chris. Thank you. Thank you for the question.
This isn't something that has come up a ton yet with respect to resilient.
But it's we see it as an opportunity.
We see it as a business opportunity and we also see it as of cultural opportunity factory.
The build out what we're about as a company that helps define who we are as the company as it helps set the the culture of the various changes that we think that we've been driving over the last year.
It is critical to go not just I also actually they also include our employees and our customers and our Investor base.
Great I really appreciate that color and I look forward to hearing carrying more from the company as time goes on thanks for everyone. That's all I got my quick question, Chris. Thanks.
Thank you and that concludes our question for this time I will now turn the call back to Mr. James <unk> for closing remarks.
Thank you everyone for your participation.
Speaking with you over the coming weeks and hopefully you will join US on March 11th for virtual Investor Day.
The rest of your day, Thank you everyone.
Thank you for joining US today. This concludes our conference you may now disconnect.
Yeah.