Earnings Call: Q1 2020

May 14, 2020

Good morning, good afternoon, good evening, ladies and gentlemen. Welcome to the Sensorlight International 20 21st Quarter Results Earnings Call. Please note that this event is being recorded. I'd now like to hand over the conference to Mr. William Yu, Senior Director of Investor Relations. Thank you. Mr. Yu, please go ahead. Thank you very much, operator. Hello, everyone. Thank you for joining the Q1 earnings call. Today, we have our CEO, Karl Gendreau and our CFO, Reza Tellegani with us. And our CEO, Carl Gendreau will begin with a few opening remarks. Thank you very much. Okay, great. Thanks, William. Thanks, everyone, for joining us, and good morning, good evening, wherever you are. So I'm on Slide 4, William, and really wanted to give you an update. Reza will walk through some of the details, but what we're doing in the business right now is actively managing through the challenges in front of us, in front of many companies. When I think about what we are doing, 1st and foremost, we are paying close attention to health and safety of our employees and families and customers and our suppliers, all very important to us. And we continue to keep that in front of us. We are really actively and responsibly managing our store operations. As you know, most of our stores around the globe are temporarily closed. We are starting to see some openings around the world including this weekend in the U. S. We will start to open a few stores. And many of our wholesale customers are in the exact same spot where stores are closed. We are starting to see some openings. But we are following the guidance and the guidelines from the countries or in the U. S. From the states, which are important as well and following that very closely. What I would say on the storefront is, we are not rushing to be the first to open. So as we see stores opening in the U. S, we are being very careful around opening and there is no need for us to be first in a center to open. So we are watching that very closely. So we will open in a very conservative way as we see things move. Our key focus is, as you can imagine, are around preserving cash and adjusting the organization from perspective and a cash perspective with the pressures we are seeing. So we are very aggressively reducing our operating expenses. We will go through much more of that in the presentation. But we are doing what you would expect us to do and that's we have had very quick actions and we have ongoing actions to right size the business for what's in front of us. We have pulled some big levers and I think when we were together in March we talked about some of this, we're talking about the year end results. We very aggressively have pulled the levers that we've often talked about as having. So we've significantly reduced advertising. That will generate well over $125,000,000 of in year savings. We put a near freeze on CapEx, so significant drop in CapEx. It will be largely what we spent in Q2. The rest of the year will be largely locked down. That will generate close to $90,000,000 versus what we had planned. And I think we mentioned this at the year end, we won't have a distribution to shareholders. Last year's number was $125,000,000 So these actions alone generate pretty close to $350,000,000 in kind of immediate cash savings. And then we are tightly managing product purchases. One of the strengths of our business is this wonderful outsourced supply network. We produce ourselves only 10% of what we sell. So we've been able to very quickly and actively push back on our product purchases, which is helping us manage cash flow and the balance sheet quite well. We did a lot of work in the last 3 or 4 weeks. From the last time we talked to folks off of our year end numbers, we've done a lot to sure up the balance sheet and put us into what I would label as a terrific liquidity position to navigate a prolonged crisis in front of us. So on March 16, we extended amended and extended our existing facilities. We also stepped up availability under our revolver. On March 20, we drew down most of the revolver to put cash in hand, dollars810,000,000 We in the last 2 weeks we've negotiated and secured covenant relief with our lenders through Q3 of next year. So what I would say is through the end of next year we've got amazing covenant relief with great support from our lenders. We are very happy with that and our lenders were wonderfully supportive. Reza will go through the details of that a little later, but we've really built the room on the covenant side for a wonderful period of time through the end of next year. We then decided to take advantage of the markets that had opened up in front of us and took what I would label as some additional security and closed an additional term loan B facility for $600,000,000 at good pricing and this market, Reza will cover that as well. And so when you add all of these actions on the balance sheet and liquidity, we are sitting today with $1,800,000,000 of liquidity comfortably in hand for us to navigate through this, the challenges. And our view is that gives us runway all the way through much of next year. And for us, it's there's a lot of cushion here, but it was the right thing for us to do and a lot of companies have done that. And I'm quite happy with what Reza and the team was able to pull together here on that side. As I said, our supplier is very important to us. We outsourced a lot of our suppliers. We're working very close with our suppliers. And we're watching as they manage through the crisis as well as we have pushed back, they have pushed back. Many of our suppliers have closed their factories temporarily which is exactly the right things to do and we stay close to them. And we have a wonderful supplier base and our teams are doing a great job of staying connected there as well. And lastly, and I mentioned it because we launched it just a few weeks ago with the issuance of our ESG report. We launched our Responsible Journey, which is our enhanced ESG program. And that report, I'm very happy with. I would highly recommend people take a look at that. And it really lays out kind of the direction we are in moving this business to be the leader in sustainability in our industry, which I and the team have high confidence in. So I go to next page. It's clear COVID-nineteen is having a significant impact on our business. Our sales for Q1 were down 26%. We had guided a range of 25% to 30%, I think at the year end numbers and that's where it played out. March was down 55% and April, I'll cover shortly, was down more than that as you'd anticipate. Most of our stores globally are temporarily closed. We're just starting to see some open China a handful of weeks ago. In the U. S, we're starting to open and just in a few isolated spots in Europe. But largely, our stores are closed and largely, as I said, our wholesale customers are closed. As you know travel restrictions are reducing demand for our travel products. One of the strengths of our business and what we have been working on for the last 12 years that I have been involved in the business is kind of diversifying the mix of the business. So today we are 41% non travel and 59% travel. So we have got a nice mix of business. We are seeing both under strain, but I am quite happy with what I see in the non travel category. And that will be important as we start to step out of here as travel maybe moves a little slower, our non travel products will be well positioned to help us navigate as the world starts to turn back on. But we will see significant impacts in Q2 as I said. And what we are seeing in April, in my view, will carry into Q2. And we are seeing travel virtually stopped in April and my sense for most of May it's virtually stopped. Though we see some slight movements as I see even in the news clips in the U. S, the planes that are traveling in the U. S. Are quite full. And so I do think people's desire and propensity to travel will come back as it starts to open up. Despite quick actions and we did take quick actions in March, I might say starting at the end of February and into March, our EBITDA was down quite significantly in Q1, down $79,000,000 but still positive at $5,000,000 But most of the benefit of the actions we've taken really will be felt kind of Q2 forward. So that is largely without the benefit of significant actions that we are taking including the big levers that I talked about. As I covered, we amended the credit agreement, which really was important to us to move covenants out of the way. The last call we had, we spent a lot of time talking about what the covenants look like. And again, with this terrific support from our lender group, we've been able to kind of reset a covenant path for us that just gives us the flexibility we need to navigate the business to the other side of the world moving again. And that really does carry us well into the end of next year from a covenant relief perspective. And as I said, we had $1,200,000,000 in cash at the end of March and we topped that up with a $600,000,000 term loan B with favorable terms and also allows us to repayment option on the other side of this so we can repay that without significant penalties when we see the business recovering. And that gives us wonderful liquidity for what could be a prolonged pressure on our business. On Slide 6, we have taken immediate actions and we continue to take actions. I think it's very important to realize the actions we talked about in March and the actions we are taking in April are deep and aggressive. As I talk to our teams, I tell people to be bold in decisions and these are tough things to do. These are headcount reductions and everything you expect a company to do, we are doing, largely because many of our team members here have experience in kind of navigating the business when it has little bumps. And this is one of the bigger bumps we face. And so we are being aggressive here and that will continue. We have seen some business starting to return to normal, but I tell you as things open up, it's very slow. So even in China where we've seen things open up, the sales levels in location we've opened are very low and I expect them to stay low. I think Q2 will be largely challenged. Our retail operations largely shut down with mandatory lockdowns, but our e commerce business generally around the world is moving. We've had some distribution centers needed to close, but e commerce has continued and under strain, but performing just a bit, part of the reason why we're not down more. Our wholesale customers had some sales as we were in to March as we stepped into April, they've continued a bit, but largely the sales that have continued were things in the flow and our wholesale customers as you'd expect for the same reasons, our stores are closed. They've pushed back on ordering as well. So the relationship and the dialogue with our bigger customers stays very fluid and active for later in the year. From a trend perspective, this fire started in January. I remember exactly where it was when I heard it. We were together at a senior team meeting. Our January sales were down 8%. February was down 15%, largely from what we were seeing in Asia. March quickly became -55% as the rest of the world got plugged into the situation. Our April sales are down 80%. And I think that gives you a sense for the impacts. We are not alone. Many companies are in the same boat. And I would anticipate our Q2 number largely looks like that, so down 80. May is feeling about the same. We are starting to see some openings here as we get to the end of May. Maybe June is a tad better. But I think for purposes of thinking about the business, I think Q2 will be down in that range. And I think it's important because we are managing the business against that backdrop. I do think Q3 and Q4 will show levels of improvement. But I think there will be still highly challenged quarters and it will be better than Q2, but still kind of meaningfully down. And I think the reason I say that is because we are how we are executing the strategy on pulling levers and adjusting the cost structure of the business. We're being bold in not pretending that there's some recovery in the back half. And I think smart companies will act that way, so we set the cost structure the right way for the business. And as I said, we're very focused on cutting operating expenses, not only to conserve cash in the short term, but really to right size the business to the future, which is really critical for us to get this thing set up, so that as we step into next year, we're in the right place, for this business to step in. And we will step in. We will be the player in this industry and the brands in this industry that will be in that position to do that. And that is largely off the back of and I won't cover all the numbers off of what we've done on the balance sheet side to give this business the time and liquidity to navigate through what's effectively the external pressures of the business. But in the background, be assured we're working full speed ahead on making sure our cost structure is in the right place for when we start to see the business meaningfully recover. Just from Sevin and Reza will cover this more, just a backdrop of what Q1 looked like. So again down 26% constant currency. You can see the sales number. Our gross margin down slightly and really has to do more with mix than anything. Our margins have kind of continued to be in the right zone. And you can see the EBITDA impact from that dip largely off the back of the margin drop. Reza will cover more detail a bridge for Q1 for you. And on Slide 8, you can see it really affected all regions. Obviously, Asia started earlier, a bigger impact for Q1 for Asia. Europe and U. S. Largely look the same. Europe a little bit higher on a reported basis. And Latin America was slow to kind of catch up to what was going on with the virus, but they definitely caught up by the end of the quarter and they were down constant currency around 8%. And I will finish here on just some positives because in the light of everything, there is a lot of really wonderful things going on in our business. And as I think I said on our last call, Samsonite in March celebrated its 110th anniversary and really this heritage on innovation and what makes our portfolio of brands and our business wonderful. And we also on the back of that have launched our sustainable, our responsible journey which is our ESG program. And again this is a program that I think has been well thought out, well presented in our reporting. It focuses on key quadrants of the business, really people focused, innovation focused, which is kind of built in our 110 year of heritage, this thriving supply chain and how we manage that supply chain in a responsible way and carbon actions. And just on carbon actions as we started and stepped into this, we have already reduced our carbon footprint by 6.6%. And for our owned and operated facilities, we are not so far off from being carbon neutral for the business. We significantly are expanding the use of recycled materials. Recyclix is one of the materials that we are using. And we've launched over the last quietly over the last few years 50 lines that are incorporating this. And we've diverted over 52,000,000 bottles as we have really just started to step into the story here on recycled materials. And if you are in my office, you would see a wonderful collection of really amazing products that starts to heavily incorporate recycled materials into what we do. And I have no doubt that we will be the most sustainable luggage company in this industry. We are very focused on it. Our teams are very energized. And as we step out of the crisis, it will be one of these wonderful stepping points that we will have, as we start to move forward. And I am quite excited to share that with the world as we start to step out as well. So, with that I'll turn it to Reza and I'll kind of jump in right at the end to give some further outlook. And we're on Slide 11. So just to add a little bit of color to the quarter results. Kyle mentioned the sales were down obviously 27.7% or 26.1% on a constant currency basis. It was across the world in terms of the breakdown and you saw the regional breakdown on an earlier slide. But just to give you a little bit of color on some of the countries that we've talked about on the last few calls, the U. S. Was down a little bit shy of $68,000,000 China was down 28.8 percent South Korea down 22.9 percent and Hong Kong down 13.9 percent The reason we highlighted those is just to give you a benefit of we talked about those specific markets on previous calls. So roughly around $133,000,000 of it was in those markets and then the rest of the world down 84, which adds up to that $217,000,000 down. The pressures are being felt across the globe, obviously. As Kyle said, China, at least the stores are 100 percent open now, which is good news, but it's very much in its infancy. So the traffic numbers are starting to grow slowly. But as we sit here right now, we don't anticipate a major recovery sitting here in Q2. It's really the back half of the year where we're looking forward to some of that starting to reverse itself. So we're managing that business for cost right now. In terms of gross margin, obviously, there was some gross margin pressure as well. The direct to consumer channels were impacted more seriously at the beginning of this. So some of the wholesale markets were still holding up. But given the fact that DTC as you close all of the stores, you start to see some of that gross margin decline due to that. And when you flow that through to EBITDA, obviously, we've taken very aggressive actions on costs, so we're continuing to do that and you're going to continue to see us do that through Q2. But those have run rate benefits that you'll see in the back half of the year. So if we take out a lot of headcounts and some expenses sitting here in March, you don't necessarily see the benefit of it in Q1. But as time goes on, that will flow through. And more importantly, as the business recovers in next year, those are we are looking forward to some permanent savings that will position us well in terms of improving the gross margin profile of this business going into the future. So this is not just about managing a crisis, but it's also about setting the foundation for having a good gross margin going into the future. Working our way to the adjusted net income line, obviously, the biggest component of that decrease is the tax effect of the adjusted EBITDA decrease. So if you're looking at that $27,000,000 going down to negative $38,600,000 or rounded to $39,000,000 $80,000,000 of that is just the tax affected adjusted EBITDA decrease and that's partially offset by some net interest expense improvement and taxes as well year over year. Moving to Page 2 I'm sorry, Page 12. The net sales have decreased by 26.1% for the reasons that we've talked about. Adjusted EBITDA decreased by 79.8 percent, adjusted net income by 65.8 percent. We did have a restructuring expense of $6,700,000 primarily associated with severance and headcount reductions. We're going $700,000 I have a separate slide to go through the calculation of that. $700,000 I have a separate slide to go through the calculation of that. And that's basically comprised of $68,400,000 which is the lease right of use assets, obviously, as the store performance has come down on the projection of some of the stores. We have to continue to monitor those and look at the impairment levels for those. 19.3 percent of PP and E related to that. And then due to basically where our market cap has been and looking at the future prospects of the business and the projections, we've had to basically take an impairment charge on goodwill and trade names. That's largely a write down of due to the Tumi acquisition that was done a couple of years ago, just in terms of adjusting the values there. Again, I have a breakdown of that on a subsequent slide. Most importantly, all of this is non cash. So just be aware of that. Cash flow from operating activities was down $57,000,000 compared to last year. Obviously, we had a very good year from a cash flow perspective and we're hyper, hyper focused on managing cash flow and looking at how we work manage net working capital during the course of the year as well. Net working capital efficiency, this is just a report. It's largely due to the fact that if you're looking at the sales number and the decline, it's at 20.1%, which is obviously higher than our targets, especially given where we were as we were very proud of where we ended December, but when sales drop like this, it has an impact on that metric. CapEx in Q1, Kyle mentioned this, dollars 17,900,000 in Q1. This is largely being frozen for the remainder of the year. So there was some stuff that was already in flight in Q1 that we had to basically complete. But as we think about the remainder of the year, there's a virtual freeze in terms of what we are looking at for CapEx. There's a little bit that will still roll into Q2, but then beyond that, we're really shrinking that amount down. And so there's a $90,000,000 reduction expected from our original plan of $129,000,000 for this year, which Kyle alluded to earlier as well. Our net debt position is $1,400,000,000 as of March 31. This is before we did the additional $600,000,000 raise in the term loan B market. And our cash position was $1,168,000,000 and then we had some revolver availability. So we had about $1,200,000,000 of liquidity coming into at the end of the quarter before we did the raise of the additional term loan. So with that, we're about $1,800,000,000 of liquidity. On Page 14, we got a lot of questions around covenants on the last call, so I thought I would just spend a minute just walking everybody through it proactively. So from a covenant perspective, we were fine at the end of the year. And sitting here right now, even though we've gotten these amendments, we still are in compliance with our covenant. So just for awareness, as we finish this quarter, we are not having a waiver or anything like that of our covenants for this quarter. We're doing it proactively from next quarter on forward. So our debt covenants, if you're looking at our pro form a total net leverage ratio, it's 2.68 times and our interest coverage is 9.24 times. Again, this is what's on our compliance certificates that's submitted to our lenders. Just to give you a sense for that, that compares to 2.6 3. So it's just a marginal difference compared to where we were at the end of the year. And from a cash interest perspective, we were at 8.16. The benefit of our covenants is that we can basically take add backs as we take aggressive restructuring actions. So it looks at it on a pro form a basis for those actions. So I just wanted to be clear that it's not like we had covenant pressure sitting here at the end of Q1, which is what we said at the year end results a couple of months ago as well. But having said that, and looking at the revenue environment and given the fact that just to quite frankly de risk the concern around this, we felt that it would behoove us to proactively go and work with our lenders to get covenant relief. And as expected, but very much appreciated, everybody was super supportive. So our entire bank group, almost every single lender, I think it was like 98% ended up signing up to this. And what we have now, so all of our covenants, so our if you're looking at our net leverage as well as our cash interest coverage, are effectively suspended. So starting with Q2, the only thing that's being measured is minimum liquidity. And I know there's 2 different minimum liquidity thresholds and I want to be clear on this because I think there's questions around this with the term loan B. So as it relates to our senior secured facility, so our revolver, our term loan A, we're basically being measured to a minimum liquidity of $500,000,000 That's it. So there is separate and distinct a minimum liquidity that's lower than this for our term loan B, but it's not like you add the 2. So the way to think about this is the only covenant that we have to worry about till literally I think the next time we measure it is going to be November of next year. So it's basically Q3 of 2021 is the first measurement period and that certificate usually goes out around November 15. At that point is the next time we would revert back to the original covenants that we have. So between now and then, which is over a year and change, 5 quarters effectively, the only thing that we're looking at is minimum liquidity of 500,000,000 dollars That's it. At that stage, once we revert back, if we haven't repaid the term loan B, there is a minimum liquidity covenant in the term loan B that's lower than this. So it's like 200, 250 or thereabouts. But our expectation quite honestly with the term loan B is we have it as insurance and assuming that the business recovers, we have every intention of repaying it and delevering again. So that was one of the main advantages of being able to access the term loan B market is the payability of it as compared to a high yield bond. So that's an important point of note as well. So we renegotiated a covenant relief with all of our lenders. We're focused on minimum liquidity. And the new facility that we just basically raised was 600,000,000 term loan B. The pricing on that was LIBOR plus 4.50 with a 1% LIBOR floor and it was issued at an OID of 97. So basically what that would mean is the net proceeds that we would get are approximately net of fees and expenses and etcetera would be about 575,000,000 dollars of cash being added. And I'm sure if there's other questions on that, we can cover it in the Q and A section, but those are the highlights as it relates to the balance sheet. On Page 15, we get into the details of the goodwill. So again, it's a non cash impairment charge of 732,000,000 dollars The way that's broken up is goodwill is we're writing down goodwill of $496,000,000 primarily in North America, it's basically done by business units, it's primarily in North America and a portion of it in Asia. And then trade names are being marked down by 236,000,000 Again, as I mentioned, it's primarily due to the Tumi acquisition. So the largest component of that is a markdown on Tumi. It's about 207,000,000 if memory serves. And then in addition to that, we have impairment charges of $87,700,000 that are attributable to retail locations. This is similar to what you've seen in previous quarters. So thanks to IFRS 16, we have to basically look at the projections of our entire store fleet every quarter. And obviously due to the impact of COVID-nineteen, we have to look at a reasonable estimation of not only what we are looking at today, but also what the recovery would look like next year and that's led to an impairment that would trigger that. And similarly, the trigger for the impairment that happened for the trade names and the goodwill is the same thing. So one of the largest component is where our market cap is right now due to COVID-nineteen again. And that's the triggering event that's caused us to do this right now. In addition to that, we have restructuring expense of $6,700,000 We covered that a little bit earlier. That's largely due to the severance that we're paying due to our headcount reduction. On Page 16, Kyle has covered some of this. So there's about $340,000,000 of cash savings already beyond what's our fixed operating cost savings. And that's the cut in advertising that we talked about. We suspended the distribution to shareholders, dollars 90,000,000 cut in CapEx and software purchases. So that's already been actioned. In addition to that, we have a lot of activity really around how do we get annualized cost savings. And so we are starting to look at headcount reductions and looking at the store fleet as well. And so as we look at that already in Q1, and again you have to bear in mind this is basically a month's work in Q1 with a significant amount that's happening right now in Q2 as well. But there's run rate savings of about $21,000,000 that's also been added to that due to that permanent headcount reductions that we have done there. There is other restructuring initiatives that are in play. We have already closed 29 stores in Q1. You should expect that there will be a further reduction in that in a material amount in Q2 as well. And we are absolutely aggressively negotiating rents. To the extent possible, we like the variable model. So we try to negotiate to see if we can go to a variable rent structure if possible. In other cases, with the threat of shutting down stores, we're getting significant reductions in rent. We really are trying to do this not necessarily only temporary, but to try to get run rate benefits that improves that rolls into next year as well. So we will leave it as we are expecting significant savings for the remainder of the year to come from all of these initiatives. And in the year, we have about $16,000,000 that have already been actioned in Q1. Again, there is definitely much more that you're going to be seeing as this goes forward. On Page 17, just a little bit of a bridge. Taking from Q1 last year to Q1 of this year. Obviously, the biggest component of it is the gross profit decrease from lower sales. So $123,000,000 of the decline is due to that. You have about $11,400,000 gross profit that has to do with lower margin, but the primary component of it is lower sales, offset by the reduction in advertising which we actioned in March. And already some of the SG and A decreases are showing benefit as well. So you have about $41,000,000 of SG and A decrease improving our position there. We spent a bit of time on the balance sheet already on Page 18, but I think the biggest components are we've talked about the fact that we drew down on the revolver. And again, this is the balance sheet as of the end of the quarter, so it doesn't reflect the incremental term loan of $600,000,000 that's come in. But I think the real point here is really around liquidity. Our net debt position stands at $1428,000,000 at the end of March. And there is a little bit of a carrying expense as it relates to the incremental debt. We just felt more comfortable and felt more secure having the cash actually in our bank account as opposed to revolver availability, just given the environment. So there is a little bit of negative carry that comes with that. But we feel that it's insurance that we feel comfortable carrying in the shorter term. Obviously, as the overall economic environment improves, maybe we will revisit that. But for now, we feel pretty good about our overall liquidity position of 1,800,000,000 dollars that stands as we sit here today. Working capital on Page 19. We have been very, very aggressive in terms of trying to make sure that we manage to make sure inventories don't start to balloon here. So we have worked with our suppliers. Our suppliers have been super supportive in terms of trying to maintain and hold back shipments and hold back deliveries and we are not basically placing a lot of orders until we start to work down our inventory levels. So we feel pretty good in terms of sitting here a couple of months ago, we had some questions around our supply network. The good news is the supply network is functioning and it's available to us. It's actually the reverse as we sit here now where we're basically trying to say we need to be very disciplined about placing new orders. So I think as we look over the next couple of quarters, you are going to see us only starting to basically open that spigot up as the stores reopen and to make sure that we manage inventory levels accordingly. But obviously, if you are looking at year over year, which is what you see on this slide, there is a 76 $800,000 differential between where we sit this year versus last year as well. I am sure we might get some questions around bad debt. So I'll just proactively try to address that now as well. As of Q1, we basically have reserves in place and we've increased that. So we're at 20 point $7,000,000 is the bad debt reserve that we have at Q1. There really hasn't been that much activity. So if you're thinking about the people that we have as our wholesale customers and the retail channel is obviously fine. But if you think about our wholesale customers, some of our largest wholesale customers are e tailers like Amazon and others. And if you look at the U. S, it's very the Walmarts of the world, the Costcos of the world, and that's the case around the globe. You do have exposure to some smaller mom and pops as you think about Europe and some of the other areas. But so far actually, we have been in a pretty good position. We are looking at increasing the reserve just expecting that some retail channels may have difficulty. But it hasn't been anything major for us and I think you should just be aware of that, that we have only had literally one customer in Europe. And in that case, we just took the inventory back and was €200,000 of exposure. So there really hasn't been much in that department so far. Looking at Slide 20, CapEx, we've covered this. Again, this is looking at a Q1 over Q2. There was an increase because we were basically operating the business and the largest component of it was a bunch of R and D because we had a lot of new product introductions that we are looking at for the back half of the year. So some of that spend already happened in Q1. I think the point really here is that as you are looking at the remainder of the year, this number is going to be significantly lower than what you saw last year. And that just shows the operational flexibility we have in terms of having an asset light model. So with that, I'll turn it back over to Kyle. Okay, great. Thanks, Reza. Okay, so we are really in Phase 2 of what we are focused on. And I thought here for outlook, I think near term focus is probably just as relevant as kind of our normal longer term focus. And I'll give you a little about initial phase was really around making sure that we followed the protocols and we kept everybody safe across our whole family, so ourselves, our employees, customers and partners and suppliers. And it continues to be at the very top of our mind and our list, particularly as we start to open stores in certain markets. But we moved into really next phase and I would say we had moved into it at the end of Q1 and are deeply into it now, which is really around making sure we are taking significant actions to adjust the cost structure of the business, preserve cash as we said. And I think the right way to think about this is right size the business and the cost structure for the future which I think will have some long impacts from this as we even as we step into next year. We're very focused here. As we said a few times, we pulled these immediate levers, generate some immediate cash savings. But what we're really focused on today is these actions to ensure we optimize the business on a go forward basis. We have really significant liquidity guys. When I sit here today, I have all the confidence that we will navigate through what the cycle will be for this. And we've got the balance sheet to do that. And what we accomplished in the last few weeks, I think just as Reza said, laid on the right level of insurance for us and we're very confident. We're not taking it lightly. We're being aggressive on actions, but we clearly have the balance sheet to be the player that's here on the other side of this. Many of our smaller competitors will not, but we will be. And that gives us great comfort as we're pushing ourselves forward. We have recovery plan in place as far as opening stores. And I think one of our more challenging moments will be when we start to open and traffic is down. And so I'm putting a lot of pressure on the business to make sure that we're careful on the reopening so that we manage our costs the right way and we keep everybody safe. But as it starts to open, we'll be very diligent on ensuring that we are optimizing on the saving size. And again, I do think many small players will have nowhere to go on our space. And as you know, we operate in a very fragmented market, and I think that's important. We have a very global business, both from a geographic perspective, but we've also been diversifying the business over the years, as you know. And so we have got a mix of brands that play across price points. Each of those will turn on and operate differently. And so I am quite happy to have that diversity. And we've got this amazing piece of business that I would label as non travel. So if we see travel luggage a little slower to turn on, the rest of our business is wonderfully positioned. And even in the moments that our sales are under pressure, we can see the non travel categories playing well. And for brands like Tumi where more than 60% of its business is non travel, that's very powerful. And it's spread across the globe that way. So this piece of business, I think, will turn on faster. And so we're that will be one of the benefits we have against the backdrop of our business. And our teams are doing some really hard work right now. We all are as we take cost out of the business. And when we talk about it, we are being very, very aggressive here. And one of our jobs is to ensure we stay energized and empowered to kind of navigate through this and we will. And our teams are. I talked to our senior team on a very regular basis and we are all very much locked arms here to do what we need to do. We are all thinking the same way. We have known each other for a long time. And we are excited to kind of step out of this with this innovation story that I said around sustainability. And I think it will be one of these amazing pieces of the puzzle here as the business turns back on and we will have a wonderful platform to be stepping on as we do that. And so our teams are focused there as well. And in the backdrop of everything that's going on, we are looking at innovation that's tied to how do we do add protection to our products, antibacterial, maybe antiviral protection to our products. And so our teams are doing a lot of work on that front as well. And we'll be launching stuff very quickly on the antibacterial side. There will be consumers that are focused there. And there's some very exciting opportunities on the antiviral side that our teams are starting to think about. And maybe a little bit longer tail, but it will be a piece of what you'd expect from this kind of business. From who we are in this industry as far as leading with innovation, you should expect that we'll be leaning into that quite heavily as well as our businesses turn back on. And again, we'll be the only guys in this industry that have the scale to make that happen. So with that, William, I'll turn it off to you for questions. Thank you, everyone. Great. Thank you very much, Kyle. Thank you very much, Reza, for the presentation. And now we will go to Q and A. So operator, can you check who's online? And our first question is coming from Erwan with HSBC U. S. And Erwan, please go ahead. Yes. Hi. Good morning, gentlemen or evening, depending. Three questions, if I can. A lot of consumer companies in different subsectors, whether it's cosmetics or sporting goods or others are talking about a few green shoots in Mainland China and Korea. Now I understand April was dramatically down and that's probably across the board, across the industry. But I'm just wondering if you can mention what you're seeing more specifically for these 2 markets, if there are any green shoots there. Secondly, I maybe I missed this, but I think you said you were down 26% in Q1. Could you give us the split between travel and non travel if you have it for the quarter? And then thirdly, if we think about inventory management as the majority of the world is shut today, when things reopen notably in the West, how do you think about dealing with the inventory, I. E. Should we assess that you'll be keeping the product longer on the shelf because part of it is carryover products? Or should you be shipping to outlets or should you be discounting in the existing stores? How do we get to a point where inventory to sales gets to a more comfortable level towards the end of the year or maybe early next? Thank you. Okay, great. Thanks, Eric. I'll take 2 and I'll let Reza because I think you have the numbers, the travel, non travel split with. I think for Asia green shoots, I think, as I said during the call, I think I wouldn't necessarily call them green shoots, but they're signs of movement. And so China, for example, we started to see things open. They started to come back. But China, for the month of April is looking like down 75% roughly from a result perspective. We saw an initial turn on and then as we're all kind of watching the news on a regular basis today, trying to quickly kind of throttle a little bit. And I think Hong Kong for those who are in Hong Kong, I think a similar thing happened where Hong Kong started to move and then it had a stutter But I would say, Erwin, there's a lot of inertia for things to start to open up again, right? And I think we'll May will look largely like April, is my read on May right now. We see little pockets of movement, but on a blended basis, it's not so different. And I'm really thinking June will be very telling because in the U. S, for example, I think we're seeing lots of things start to move really at the end of May. And so I think we'll learn a lot in June as far as what that tells us. Just for scale, we're going to open 30 Tumi stores this coming weekend and really get a read in the U. S. And get a read for what that's telling us. And as you can imagine, there is a lot of work to do to reopen. The way stores and locations are reopening and the procedures you need to follow and all of that. So we are opening these stores, 1, to get a read, 2, to these sales more non travel than travel, which is helpful. And 3rd, it will give us some learnings as far as what it's telling us and how you interact with the consumer and how do you interact virtually with the consumer and all these kind of things are playing in. The other piece is our e commerce business, which is down, but it's performed better obviously than the rest. And we've had some weird moments where some of our e commerce businesses are actually up year over year. There is our Gregory brand, which is an outdoor active brand on a blended basis has been slightly up because consumers are buying online and they are looking to get outside. And so we have seen some benefits there as a good measure of our non travel business. Our eBags business which has been we are in the midst of kind of aggressively integrating that here in some Mansfield. But that's had some positive stories as well as consumer. 1, we've been moving some inventory with eBags just so we can kind of transition that business the right way. But 2, we have seen consumers moving and buying in that space. And so I think our e commerce focus and mix and we have been really driving well, I think we will be well positioned to capitalize on that. We have seen it's still down, but better than kind of the average of everything else. And so I think there are some clear green shoots there. And I have been so happy and comfortable with the team that we have pushing this that I think that will be a real positive for us as we move forward and I think we are well played there and we are watching that very closely. As far as inventory management, one of the benefits of our business is, as you mostly know, is we are not a heavy season business. So we don't have a big spring sell in, fall sell in, a big buy in that a lot of apparel guys I think are struggling at the moment with. Our stuff has staying power. And so as we manage development and we manage inventory levels, we are pushing things. So things that we might have been launching in Q4, we shifted those launches to Q1 or Q2. And to be honest with you, it doesn't have any real impact on our business other than we have a cycle of newness that we like to work in. But it's not that I've got a seasonal sell in that I'm trying to capture. So our ability to manage our inventory is probably going to be one of our best strengths with the structure that we have. Our inventory for April, even though April was down 8%, is largely the same number as what it was in May, because we were able to shut the valve off and we're able to manage. And it's not that I'm sitting with a pile of inventory that's going to miss the sell in season. And so you will see us push some new development out of it. That's a lever we can do. It also adjusts our cost structure the right way without it having an impact on balance sheet, inventory or missing a season, which again is a huge strength of ours. So I think the way the teams are operating and thinking on that front is really wonderful. And I think it will really show its colors as we navigate through the year as far as how we manage inventory. And then, Reza, do you have any other? Yes. The breakdown, Erwin. So for travel, it was 57.7%, non travel was 42.3%. Just as a comparison for last year, travel was 58.2%, non travel was 41.8%. So you have the growth rate. I don't know if you have the growth rate in front of you, but as a mix, it's increased in that quarter, which gives you a good sense for the growth. Hi. Before we go on to take other calls, I just want to go through a couple of questions that we're seeing here online. Number 1, we have a question about our AR exposure to U. S. Department stores, Neiman Marcus having filed for Chapter 11 as is the JCPenney. So there is a question about what is our exposure there? I don't have it broken up by specific retailer in front of me, William, just so you know. But basically what I would tell you is in terms of the reserves that we have taken, we have already factored into anybody who we perceive is a bankruptcy risk or has filed. So the numbers that I said a little bit earlier in terms of the bad debt reserve that we increased it to about 20 includes that. So that also includes 1 retailer that filed for bankruptcy in Germany. But as it relates to the channel overall, we continue huge amount huge amount of exposure because typically what would happen is we deliver the inventory they pay us within a relatively short period of time. So it's not like there's this massive, massive exposure of AR to the wholesale, especially in the U. S. And these are 2 long standing customers of ours, William, but they are smaller on the mix of our customer mix. So I would say they are in the bottom kind of 20 5% from just a sales level perspective just from what they sell. So our exposure on these were not so significant. Our big customers, when you think about the U. S, Amazon's and Costco's and Walmart's, Target's a great customer. All these customers are wonderful long standing customers. Macy's is a wonderful customer. These guys are in good positions. The relationship is strong. We're I bumped into some of our and Q4 products. And so I feel Q3 and Q4 products. And so I feel very good. And there will be a few smaller ones that we're watching. But as Reza said, we largely had reserve for those at the end of March. I think our bad debt reserve went from $16,000,000 to $20,000,000 to $20,000,000 to $20,000,000 to give you a scale for kind of how we adjusted the bad debt dramatic because we don't have a lot of customer concentration either. So if you're thinking about the wholesale channel in the U. S. Especially, it's there's nobody that's all of a sudden like a 10% risk or anything like that. So and again to Kyle's point, the biggest ones are the Amazons of the world, etcetera. So they're better credit risk. Okay. What else, Wayne? Well, then some questions around guidance. Number 1, any guidance on EBITDA margin EBITDA going into 2nd quarter? Number 2, do we expect any additional impairment going into the second quarter? Okay. It's very hard to predict EBITDA from a guidance perspective. It will be a negative EBITDA guide. Our sales are down 80%. So it will be negative. We are taking a massive number of actions and so you should expect a negative number for sure As far as giving specific guidance, that's not something that I would or could do at the moment because we're it's a very fluid situation here into the start of May. So and then on On impairments, look, the reason for the larger kind of goodwill and trade name one is we had a very little headroom as we did our impairment testing at the end of last year. And given what happened with COVID-nineteen, like it necessitated another impairment test that we have to do. So I don't anticipate anything further as it relates to trade names or goodwill. The store component, unfortunately, because of IFRS 16, we have to do that every quarter. When we do it, we do take a projection that goes out. It's not simply looking at it and saying, oh, the stores are closed right now. So you do take a long term view on those things, but it is something that we have to monitor every quarter. So it's hard to judge on any given quarter what's going to happen. I will tell you that a lot of the weaker stores that normally you would take charges against are the ones that we'd probably be exiting as well. So if you think about our store closures, those are probably come off as well. So but I can't comment in terms of what I would anticipate that to be for Q2 or beyond, but there will be something. Yes. We were pretty thorough when we did this impairment work in Q1, William. So I think Reza said it right. I think we were I wouldn't anticipate anything material going forward, but there could be some store noise going forward. Thank you very much, gentlemen. Thank you. Operator, other questions on the line? Yes, William. And the next question is coming from Annie with Jefferies. Please go ahead. Hey, hi, management team. Hello. Can you hear me? Yes. Yes, we can. Okay. Great. Great. Yes. I have a question regarding, Carl, you mentioned about the 80% decline roughly in May or in April May. Could you share with us how it looks like for example, example by different like key markets so as to give us some idea? And then my second question is on the impairment. The impairment is about like 732,000,000. You just mentioned about the impairment for Tumi is about 200 something 1000000. What is the other breakdown by brands? So I'd love to get a little bit breakdown on that one. And then, yes, so these two questions first. And sorry, also regarding your long term strategy, I understand that we are closing down some of the weaker performing stores. Are we going to change our strategy on doing a bit more of the direct to customer type of like higher retail mix? And also in terms of outsourcing, we talked about like shifting a little bit of the sourcing from China to upside to like Southeast Asia and all the other areas. How are we going from on that front? Thank you. Okay, great. So the 80% decline, in simple terms, it looks almost consistent around the globe. There are little pockets that are slightly better than others, but when I look at kind of what we're seeing for April and what we're seeing into May, it's fairly consistent. So China was slightly better than 80% if we went to a specific market. There are some markets like Taiwan, which is small in our mix, but that's actually probably when I look at the country portfolio we have, that's probably managed COVID the best. But on a blended basis, region by region, we are largely down 80%. And when I look at the data, it's almost consistently across regions, so plus or minus in a few points. So, it's more or less similar. Very similar. Okay. And it might turn on differently as we move on. So as we see and this will be one of the strengths. I think Asia has the potential to be moving a little faster and there will be there is plenty of travel within Asia. So I think Asia could move faster. And we're watching kind of the world, but on balance right now everybody is in a similar place and we'll be watching together as we see it turn on. As far as D2C and mix, I don't think it changes strategy in and of itself. I think you might find on the other side of this that our retail mix as a percent of our sales will come down because we're going to be aggressive here. But it doesn't mean that we're abandoning that because I think in the right locations and for the right brands, that makes sense. As you know, Tumi's retail mix is an important piece of their puzzle. But what it does speak to is and it's not a new thing, so it's not really a change in strategy is how important e commerce is and we're not alone in saying that. But again, I'm very happy with what we're doing as a team and how we integrate e commerce with our brick and mortar stores and how do we make that all work, which we've been very focused on with omni channel and kind of all the pickup in store order online really kind of amazing pieces of work that we've been doing over the last few years I think will play nicely in. But I think on the other side of this you'll see our brick and mortar retail mix probably come down a little bit but it doesn't mean we're abandoning the strategy. We're just maybe rightsizing is the right way to use. As far as our out of China strategy, very much intact and the teams have done amazing work. I think on the last call but on calls that I was having, we're doing the financing. It's too bad that it's clouded with kind of COVID-nineteen because you're going to see this amazing piece of work by our U. S. Team and the sourcing team as far as shifting. We would clearly and I think we will still be, but the numbers will be a little cloudy because of the sales decline be well below 50% sourced for the U. S. Business from China. Doesn't mean that China is not important. China is a hugely important piece of our sourcing and other regions are using. But this U. S. Business was doing an amazing job. And you would have seen it in our gross margin this year that we were going to catch up to the challenges that were added by tariffs with the wonderful work that that team has done. And it's very much on track and it's very real. What we are seeing is we saw a few customers where they because as I said before, when we're outsourcing or moving from China, it's often the same factory owner or supplier that's opening capacity. We've seen a few of these guys just move to more aggressively just close the China facility and really just focus on the out of China facility. And so you'll see a little bit of that will actually just accelerate the shift in that strategy for us. So I think all of that's very good. As far as impairment by brand, Reza mentioned Tumi. The reason Tumi sticks out is because it's kind of the largest deal we've done and so when you're doing impairments. But our impairment charges largely just cover kind of this group of intangibles. So it's less brand specific in many ways. It's tied more to the entity has an impairment because of the impact of COVID-nineteen and you will end up with impairment charges that kind of carry across brands, but it's not that they're so brand specific, if you know what I mean. It really has to do with the overall impact of the business. And then you just look at the deals we've done and you can get a sense for where it is. That's why Tumi sticks out as having kind of a bigger impairment, but it's just because that's where the assets are from a deal perspective. Okay, got it. Thank you. Yes. Thank you. Yes. Thank you. William, any others? We have Morgan Stanley online. Yes. And the question is coming from Dustin with Morgan Stanley. So for the GP margin in the first quarter, that's down 100 and 85 basis points. And could you provide a breakdown between the impact from the U. S. Tariff and the channel mix shift? I would say most of it is channel mix shift. We were we had mix effect, but it has when I think about that shift, I would say the majority of that is around kind of this rapid retail mix shift. So our wholesale customers had carried on a little bit in March, whereas retail quickly started to shut down. So mostly mix. I don't have the exact mix in front of us. We can get back to you with that, but it's you'll see that it's largely mix driven. I think the U. S. Tariff fees started to should have impact on your GP margin in like Q2 and Q3 last year. So I would think for the Q1 this year, you would still or is that because you just mentioned that most of the sourcing have been moved outside China, such that already Yes, but it was still carrying because remember what you have to remember, Dustin, is the timing of the tariff impacts. So there was a big tariff step up that happened in I'm remembering the numbers like no, it was like the midyear one, the extra 15%. No, no, that's April. And so in Q1, you don't have you have a year over year still impact to that. So if I were guessing, it's 70% related to mix and 30% continued impact to tariffs because the other thing we're doing on this lead product side for the U. S. Was reengineering product. And so by the time we stepped into this year, we're getting some of the benefits of that. That's actually the biggest point, Dustin. So if you think about it, you had the 2 tranches of tariffs, you had the one that was at the end of 'eighteen and then you had one that was that hit us in Q2. But we also had about I can't remember the exact like call it like 89% sourcing in China at the beginning of Q1 last year versus now, we are like 50%. So between that shift and the reengineering, we haven't necessarily see in there. The margin actually in the U. S. Is going to be a really good story. But it's not until you get to kind of Q2 for that you get the year over year kind of comparative impact, if you know what I mean. Yes. And so sort of looking forward with the sort of market being reopened, you can look to like Q3 and Q4, how should we think about the gross margin profile? Are you going to do some of extra discounts to drive the track table or provide extra rebate or you will try to business a plan on the gross margin line? Any I think there is a little bit of pressure on margin because I think the marketplace will be a little bit mucky to be to use a good technical term. So we're we won't be as we said earlier, our ability to manage inventory is wonderful. But I think you'll see a little bit more kind of choppy competitive marketplace as people scramble. And so I think we could see some gross margin noise in the back half of the year, but I don't think it's more than 100. I have no idea to be honest with you because we're wondering and navigating. But I would guess kind of 100 to 200 basis points of gross margin pressure just because it's a little bit noisier out there as people try to figure out how they stay alive. And we will be managing that really just to make sure our competitive position. But we are not going to be you won't see us rushing to kind of liquidate and kind of liquidating channels that we wouldn't normally liquidate. That's not a position that we think we'll need to be in. But the competitive landscape will cause a little bit of pressure on the margin in the back half is our best read at the moment. Thank you. That's clear. And in terms of the distribution and the G and A cost in the Q1, would you be able to sort of break out that the cost that's being saved because of your active efforts? And how many sort of costs being saved because those are the costs related to the revenue. They are revenue based costs, so when the revenue drop, there are no costs drop, so that we can model through for the absolute dollar for the OpEx for the rest of this year? Yes, let me give you the Q versus Q breakdown, Dustin, because that so the first thing that I will say is a lot of the fixed cost reductions that we are doing actually would have been on the back half of the Q. So you wouldn't necessarily see the benefit in the quarter. So some of that will flow through as we roll forward to Q2 and Q3. But just to give you the breakdown for modeling purposes, so if you see a total SG and A number, so Q1 last year total SG and A was about 407,000,000 and then Q1 this year SG and A is about 344, So that's a reduction total SG and A was down about $63,000,000 kind of year over year for the quarter. The first component to back out of that is advertising. So advertising Q1 last year was about 49.5, advertising this year 34.7. And just going forward, just so you don't miss this, we really grabbed the advertising throttle by the middle of March, maybe 2nd week in March. So you don't really see it. When you on a go forward basis, I have told you what we are going to save annualized in advertising. If you look at we spent $40,000,000 in Q1 and I am saving $125,000,000 we are going to have very, very little advertising spend going forward for the rest of this year. And again, I'm working my way up for you just to be able to get the breakdown for you so you can model it. So the total SG and A excluding advertising, Q1 of this year $309,000,000 Q1 of last year was $357,000,000 So $48,000,000 reduction in non advertising SG and A. Now there is a component, the variable component of that went from about what we consider variable that flows naturally from the reduction in sales, things like freight, commissions, things like that, that went that was a reduction of about $36,000,000 quarter over quarter. So it would have been about 91.5 last quarter $55.7 this quarter. So then the remainder of that is the fixed component of it is the way that I would think about it. And the fixed includes like fixed selling and admin as well. So if we look at the dollar terms as a saving for the rest of this year, could it be is this a $47,000,000 saving on the non asset SG and A? And could we sort of assume like more than that number each quarter? It should be more than that, Joe. Because, Justin, if you think about it, that's the advertising, as Kyle just said, you only got basically 1 month or maybe a month and a half of benefit of that, and that's going to be significantly lower. And then the other component of it, even the cost that we have already taken out haven't flown through in the quarter. So just if we did nothing else, you're going to see a bigger reduction on that over time. So it should increase with that. And again, we're taking even more actions in Q2. So when we do our Q2 release, you'll see even more cost reduction. So let's assume the total SG and A this year could be, I don't know, maybe $1,200,000,000 $1,300,000,000 in total. And how should we think about the cash burn for the Q2 and the Q3? Should we think about, like, for the Q2, the GP will be pretty low? And so should we sort of expect maybe like $300,000,000 kind of cash burn and Q3 depends on the recovery of the sales? Could it be sort of a 4 part number? And should we assuming you can achieve the working capital neutral, meaning you control your inventory, inventory level will not increase, So most of the cash burn will do the normal SG and A. That's what we're going to attempt to do, Dustin. And I think we have pretty good handle on these levers right now. There will be a cash burn in Q2, no doubt. But what's going to benefit some of that is the actions we are taking and they are aggressively going into play. It will be negative in Q2. It's probably a shade less than what you indicated is my sense. We are grabbing levers very quickly and so and it will improve every quarter from there. And our view is both on actions and the business starting to move and our ability to manage working capital against the backdrop of meaningful kind of sales decline and then starting to build again, I think we'll be able to manage it quite well. But Q2 is going to be the hotspot. And I think that kind of estimate maybe a shade lower than that is how I'm looking at it for Q2 and then getting better as every month moves on. And just to add to that because we said at the last call and I think it bears repeating, we feel really good about our liquidity position as it relates to that. So as we think about our cash burn levels and even the $600,000,000 that we ended up raising really is insurance. Coming out of it just a few months ago, we said we felt pretty good about where our liquidity was. I think even that number was probably headwinds to it. So but we just felt given the market was open, there's no such thing as too much liquidity. There's a little bit of a negative drag, but it's insurance. But as you think about the cash burn question, it shouldn't be one that gives us any cause around solvency or anything like that. I mean, like we feel pretty good about where we are. Yes. No, no, no. That's just from total model perspective. I think that's very good to have that started. Yes. Okay. That's the only reason because I think the question on the last call that was related to like, okay, could we do a rights issue or something like that? It's like the furthest thing from our there is absolutely no need for anything like that. Yes. That's very good to know. Thank you so much, Weta. Thank you, Tom. Thanks, Austin. Thanks, Austin. Great. Thank you. One last question from Invesco. Yes. And the question is coming from Ian Hagerberg from Invesco. Ian, please go ahead. Thanks very much. Hi, guys. I just wanted to follow-up on the I suppose a similar sort of line of questioning to Justin. In terms of working capital management, we saw working capital actually decline in absolute terms and obviously up as a percentage of sales. So should we I mean, should we be anticipating more release of working cash flow from working capital in Q2? Or is that too optimistic? I'm just sort of struggling to understand how it's going to behave. Yes. So what you are going to see in Q2 is we have shut the valve off from an inventory perspective as best we can. So I think our inventories are going to stay kind of in the zone. But what we will have is payments on the payable side against what we had brought in, in Q1. So I think you'll see working capital kind of draw down in now you'll have receivables that we're collecting and we're not really building receivables. But on balance, I think you'll see us the working capital picking up because we're losing the payables. And you know what I'm saying, we'll be paying for what we've brought in Q1. But the rest of it we'll be able to manage quite well and then there'll be a moment where that will level off. And then where it gets a little murkier is when we start to turn on and just managing the turn on and lining that up with the sales turning on and just getting that flow right. And as you know, when you buy it when you bring it in, you get we have this wonderful payable terms of 120 days. So it won't be immediate and by then the business is probably moving a bit better where we start to make payments on those payables which is really probably Q3 and Q4. But I think what you'll see is for Q2 and maybe a tail into Q3, that's just kind of paying off what we have brought in, but really well able to manage the inventory level. Okay. And as a related We have our own factories, just for just so you get a sense. We produce in Hungary, Belgium and India. We have those plants closed, have people on furlough as best as we can. And my view is we'll keep those plants closed for May, June and maybe even a tail into July, So that we are it's really around kind of managing and we have the flexibility the ability to do that in many of the markets where these plants are. The furlough opportunities are very strong, so very helpful. And these are plants we've run for a long time. We know how to grab those levers. Many of our suppliers have done the exact same thing, which is really important. They are managing as we are, which is shut those plants down and get the benefit of furlough and just be ready to turn them on. And so that helps us kind of shut that valve off in a meaningful way. And our supply team has done a really amazing job of kind of staying very close to our 3rd party suppliers. I know most of them personally. We tend to meet with them every year and they are as much as part of our family as a supplier and so we are managing that very closely with them and that's working well. So we can shut that valve off quite efficiently. By the time we get to kind of June, July we will start to turn it on. And I think that will be where we have to really pay attention to what we're doing as far as the flow in so we can manage the cash flow the right way as well. And a related question just in Q1, You saw an increase in debt Q over Q of about €120,000,000 or maybe slightly more than that. Working capital declined. I just wonder whether you could sort of fill in the gaps of the missing pieces in the cash flow there. Well, the biggest piece is the EBITDA declined by $80,000,000 right? So from a cash flow perspective, when I look at the quarter, it was around kind of the inflow of EBITDA for the quarter is probably the biggest piece. There was no other kind of wild movements on the from a cash perspective in Q1. Okay. And just a third one for me. Given the various facilities that have been drawn down, can you just give some guide on what the net interest costs will be once you take account of the new Term B facility? Yes. So just to give a breakdown on a quarterly basis? Yes, yes. So the good thing is actually absolute interest rates have come down because of everything that's happening. So there is a benefit of just floating rate that is now cheaper. So if you look at our interest expense this quarter, it was actually better. But the yes, let me just give you the component part in case you want to model it or others on the phone want to do it. So the $600,000,000 term loan B we just did is LIBOR plus 450 with a LIBOR floor of a point. So that's 5.5% is the effective yield on that. That's the most expensive piece we have. The remainder of it, when we did the refinancing a couple of months ago of the term loan A and the RC, as a result of the amendment we just did, so during the period that the covenants have reset, that's going to be now priced at L+200 with a 75 basis point LIBOR floor. So I don't expect LIBOR to be really moving much. So just call that 2.75 as an interest rate on that. And that would apply against $800,000,000 of term loan A and $810,000,000 which is what's drawn under the RC. So it's about $1,610,000,000 of that is at that price point. And then the old term loan B that's still in place, that's at LIBOR plus 175 and that's there's about 553,000,000 of term loans of that of term loan B1, because of the way that we refer to it. And then the senior notes, we have €350,000,000 that's at 3.5%. Okay. Thank you. I think the number is $20,000,000 or sub $20,000,000 in total by quarter. Okay. Thanks very much guys. Yes, thank you. Great. Yes, thank you very much, Kyle and Reza. Thank you. We really appreciate the questions. Thank you. Yes. Thank you. And we are way over time now. So we'll have to we'll have to call it for the night. Thank you very much, everyone. And as always, any questions, please feel free to reach out to me. Thanks. Thank you. Thank you. Thank you. Our conference call has been concluded. Thank you for your participation.