Earnings Call: Q3 2020

Nov 3, 2020

Ladies and gentlemen, thank you for standing by and welcome to Ingersoll Rand's first quarter 2020 earnings conference call. At this time, all participants are in a listen only mode. After the speakers' presentation, there'll be a question and answer session. I would now like to hand the conference over to your first speaker today. Vikram Chini, Chief Financial Officer. Thank you. Please go ahead, sir. Thank you, and welcome to the Ingersoll Rand 2023rd quarter earnings call. I'm Vic Kinney, Ingersollorena's Chief Financial Officer, and with me today is Vicente Reynal, Chief Executive Officer. Our earnings release, which was issued yesterday, and a supplemental presentation, which will be referenced during the call, are both available on the Investor Relations section of our website, www.irc0. Com. In addition, a replay of this morning's conference call will be available later today. Before we get started, I want to remind everyone that certain statements on this call forward looking in nature and are subject to the risks and uncertainties discussed in our previous SEC filings, which you should read in conjunction with information provided on this call. Please review the forward looking statements on Slide 2 for more details. In addition, in today's remarks, we will refer to certain non GAAP financial measures. You can find a reference of these measures to the most comparable measure calculated and presented in accordance with GAAP in our slide presentation and in our earnings release, which are both available on the Investor Relations section of our website. Turning to slide 3, on today's call, we will provide an update on the integration efforts of the company as well as review our third quarter and total company and segment highlights. We will conclude today's call with a Q and A session. We ask that each caller keep to one question and one follow-up to allow for enough time for other participants. At this time, I'll turn the call over to Vicente. Thanks, Vic, and good morning to everyone. I want to start our call by thanking all our employees around the world for their hard work and commitment to the health and safety of our teams and their families. As we continue to navigate the COVID 19 pandemic, as well as their dedication to serving our with the continued proliferation of IRX throughout our organization delivered strong results we can all be proud of. Turning to Slide 4, I want to spend some time on our culture because it is a competitive advantage for us, particularly in the midst of a COVID-nineteen pandemic, our progress has been impressive. Let me point out a few examples of the in flight initiatives that are helping to foster our unique culture as we integrate both companies. We have now rolled out our purpose and value activation, to nearly the entire company. These are highly engaging one to one sessions where we work with our employees to discuss our purpose and values. And what it means to lead them every day. In addition, we have continued the only in our future forms which are virtual microphone holding to create open dialogue. To date, we have engaged and heard from over 70,000 employees. And our feedback is helping us simplify our internal processes. In the third quarter, we also conducted Our first, all employee engagement survey. We had a 95 participation rate across the entire company, which is nearly 15 percentage points. Higher than the manufacturing index with benchmark and puts us in the top quartile of participation. Our high engagement level is a positive reflection of employee satisfaction with working at Ingersoll Rand. And employee happiness is very important to us. And a great example of our employees leaving our focus on values and making a positive impact in our community is the dosage from team. Which sits in our Precision And Science Technology segment. The dosage team helped develop a method to deliver clean drinking water through an orphanage a remote location in Matacascara, using our technology of electricity free dosing pumps, Examples like these are happening around the company and are a strong proof of the culture we're building our Ingersoll brand, which firmly supports our purpose of needing us to help you make life better. Moving to Slide 5, one of our key values is thinking and acting like an owner. In the third quarter, we took a major step forward in bringing that value to life by making all of our employees, shareholders of the company. On September 21st, we were proud to virtually ring the opening bell at the New York Stock Exchange and announced the issuance of $150,000,000 in equity awards across our entire employee base. This is a meaningful distribution equal to 20% of an individual's base cash compensation. And as I've said before, this is not a thank you note to the team. Instead, this is a catalyst to have all 16,000 owners all moving in the same direction to drive change and create a value for all shareholders, including themselves. And like we did at Gardner Denver, we're tying the equity grant to a specific initiative of improving networking capital. We're training all employees on what it means to be an owner. And when we launched this in 2017, we improved working capital as percentage of sales at Gardner Denver by over 500 basis points in less than 2 years. So for all, we feel the feature is extremely bright at Ingersoll Rand and with 16,000 employee owners moving in a common direction, I am confident in our ability to create meaningful value. Turning to Slide 6, let me now provide an update on our integration efforts. We have built a strong foundation and are now pivoting to growth with a specific focus on executing our talent priorities, continuing to capture supply chain synergies and driving free cash flow. Which is allowing us to accelerate investments in IoT, digital and e commerce initiatives. And finally, advancing our work on the ESG front as we look to be a recognized leader in corporate social responsibility. It is an exciting time, I think this will run. As we continue to mail complementary cultures, as well as leverage our deep product portfolio to serve niche end markets and accelerate growth. So in speaking of our growth, let's turn to Slide 7 to showcase a few examples. The first example is focus on how we're leveraging a differentiated compression technology to penetrate the hydrogen refueling and dispensing niche market. Which is a high growth and rapidly changing market. As part of integration planning process, we did a lot of work to better understand these end market and the potential it could bring to our combined company. Haskell, with over 70 years of industry experience, he's one of the world leaders in offering the most reliable high pressure equipment and technology today. We're very excited about High School's comprehensive portfolio of specialized compression solutions. As we are well positioned to win share with turnkey refueling stations used for heavy duty vehicles and buses. And live duty passenger vehicles, we have now over 100 stations across the world and a technology leadership edge that we create over the past 12 months. One example of our investments in innovation here is the launch of a new small scale cost effective stand alone hydrogen fueling station, which is designed for small, simple plug and play installations. With a complexible configuration, it can be relocated from one location to another very easily for forklift applications. As we look ahead, the growth prospects in this space are extremely promising as the continued penetration of hydrogen fueling into key markets is expected to create a $2,500,000,000 addressable market for us by 2027. Turning to Slide 8. This second example demonstrates how we can leverage the breadth of our technologies, across multiple segments to win in targeted end markets like water and wastewater. Say, for example, a wastewater treatment plan shown on the picture. We have begun to leverage our technologies across the ICS and PST segment to drive further penetration in what is estimated to be a nearly $5,000,000,000 addressable market with a 5 year CAGR of at least 2 times GDP, utilizing IRX tools we're focused on capturing quick wins within our combined broader portfolio. 1st, we're focused on increasing customer share wallet by offering a broader set of product solutions. We have identified already by more than 15 new sales channels to penetrate. 2nd, we're coordinating internally our large project funnel to ensure all relevant businesses and brands are involved in bids with the goal of maximizing the content of Ingersoll Rand products in any project. And third, by combining demand generation database contact across the two segments, We have now over 32,000 contacts with an expectation to increase by 40% in the U. S. Alone as part of our impact daily management We're now beginning to educate these and entire universe of potential customers about our technologies and solutions and dedicated digital campaigns. Our retail in the early days, as we just launched this initiative, we have already seen an increase of over $30,000,000 in our funnel. This commercial synergy is just the beginning of what we believe will be a feature where we connect all the technologies to optimize the entire process. And given the work we are already doing on IoT, we feel that we're well positioned to capture this opportunity giving our deep know how of the types of sensors and controllers require in our products to best optimize the data acquisition and analytics. Let me now turn over the call to Vic for an overview on the financials. Vic? Thanks, Vicente. Moving to slide 9, overall, we are extremely pleased with our performance in Q3 and industrial end markets saw a gradual sequential momentum throughout the quarter. We saw a similar trend across the majority of our businesses as total company orders and revenue increased 13% and 6% respectively as compared to 2Q The Precision And Science segment saw slight sequential declines in orders, which was in line with expectations due to the large COVID related orders for medical pump we saw in the first half of the year that we did not expect to repeat. As we continue to navigate these uncertain times, our goal is to continue to manage those areas within our control by utilizing IRx to maximize the value capture on productivity and synergy initiatives and maintain ample liquidity. And the team did exactly add as they delivered adjusted EBITDA $284,000,000 and adjusted EBITDA margins of 21.3%. This was a 220 basis point improvement for the 2nd quarter. On a year over year basis, despite double digit revenue declines, Margins were up 150 basis points and when adjusted for the high pressure solutions segment, total company margins improved 240 basis points. The teams are continuing to execute of our stated target of $250,000,000. Our strong commercial and operational execution led the company wide decrementals of only 6% which marks our lowest level seen thus far in 2020. From a cash flow and capital structure perspective, we saw similar strong performance as free cash flow grew to $179,000,000. Liquidity now stands at $2,300,000,000. And as a reminder, as if the transaction had happened on January 1, 2018 to assist in clean comparatives for the quarter. The detailed assumptions and adjustments used in these supplemental be found in the appendix to these slides and our earnings release. Turning to Slide 10. From a total company perspective, FX adjusted orders and revenue declined 8% 11%, respectively, which is a meaningful improvement from the comparable 21% and 19% declines we saw in the and quarter. While COVID continues to create challenges, we saw continued stabilization in core markets in the Americas and EMEA particularly in the IT and S segment. Both regions saw high single digit order declines on a total quarter basis for core compressor blower vacuum equipment with the strongest month occurring in September. And Asia Pacific continued to show positive trends on both revenue and orders led by China. Specialty Vehicles saw strong orders performance, up 29% ex FX as the momentum for consumer vehicles continues at record levels. And as expected, the High Pressure Solutions segment saw order declines of slightly over 80% due to continued overcapacity in the market and depressed activity levels. Overall, we posted a strong book to bill of 1.02 for the quarter, which was slightly better than level seen in the prior year of 1.0. The company delivered $284,000,000 of adjusted EBITDA, a decline of only 3% versus prior year, even with the headwinds caused by that pandemic. In IKS, Precision And Science And Specialty Vehicles segments all saw a year over year improvement in adjusted EBITDA and strong triple digit margin expansion. All sets were seen in the High Pressure Solutions segment as well as higher corporate costs, which saw a large benefit in prior year costs due to reduced incentive compensation costs as well as in year investments, primarily around infrastructure and growth initiatives to stand up a new company. Turning to slide 11, free cash flow for the quarter was $179,000,000, driven by the strong operational performance across the business. Working capital improvements and continued cost savings and CapEx prioritization initiatives in the current uncertain environment. CapEx during the quarter totaled $8,000,000. Free cash flow included $26,000,000 of outflows related to the transaction comprised of $13,000,000 of synergy delivery spend and $12,000,000 of company stand up related spend. A leverage perspective, we finished at 2.5 times, which was an 0.1 improvement as compared to prior quarter despite $10,000,000 of lower LTM adjusted EBITDA. We would expect to continue to see leverage remain in the 2.5 times range or slightly better as of this year. And we feel comfortable with our current leverage position and see a path to being at 2 point 0 times or better in the relatively near term. On the right side of the page, you can see the breakdown of total company liquidity, which now stands at $2,300,000,000 based on $1,300,000,000 of cash nearly $1,000,000,000 of availability on our revolving credit facility. Spire at the end of the year. We were not intending to renew the RSA moving into 2021 due to our enhanced liquidity profile and given the fact that the overall impact on liquidity from the ARPA exit was less than 2%. As of September end, all the company's legacy fixed interest rates loss have now expired. This is expected to yield at approximately $5,000,000 cash interest benefit in Q4 as compared to Q3 at current interest rate levels. And as the company's debt profile is now 100% fully floating, we'll be examining the appropriate fixed versus floating structure moving forward from a risk management perspective. In total, liquidity has now increased $730,000,000 from the end of Q1, giving us ample dry powder to execute on our organic and inorganic growth strategies. Moving to slide 12, we continue to see strong momentum on our cost synergy delivery efforts. Within the quarter, we accelerated the phasing of this initiative and we have now already executed $150,000,000 structural cost reductions with approximately $80,000,000 to $85,000,000 of those savings expected to be realized in 2020. On procurement synergies, we have captured $40,000,000 to $50,000,000 with approximately $15,000,000 to $20,000,000 of savings expected to be delivered in 2020. This represents an increase of $20,000,000 of executed actions as compared to prior quarter. And as a reminder, our funnel for direct material lines and synergies are based on 2019 direct material spend. In total, we now expect to deliver approximately 40% of our overall synergy target in 2020, which is approximately $100,000,000 of savings. In addition, we now expect to deliver approximately 70% of our cumulative synergy savings by the end of 2021, and approximately 85% by the end of 2022 with the balance coming in 2023. As we have previously communicated, we are keeping the overall cost synergy target at $250,000,000 over a 3 year timeframe to remain prudent on volume dependent synergies like procurement and ITV given the current environment, and we'll provide an overall update when we give 2021 guidance during our February 2021 earnings call. We also continued to make strong progress on lowering decremental margins. Total company decrementals were only 6% with IT and S, Precision And Science, and specialty vehicles, all seen strong flow through and high pressure solutions managing deferential below 40% for the first time this year. We also mentioned last quarter that we were expecting to see approximately $30,000,000 to $35,000,000 of the short term cost actions that were taken in Q2 come back to the P and L. The team did a nice job managing those costs and we solely only saw approximately 10,000,000 come back to the P and L. Given the gradual recovery of the overall market, as well as very recent COVID related lockdowns in several countries, we are now expecting the full return to $30,000,000 to $35,000,000 cost base to extend into 2020 I will now turn it back over to Vicente to discuss the segments. Thanks, Vic. So moving to Slide 3rd seen and starting with the Industrial Technologies And Services. Overall, this segment performed better than expected with organic orders and revenue down 8% and 9%, respectively, resulting in a book to bill ratio of 1. Despite the revenue decline, the team delivered strong adjusted EBITDA that was up 9% and an adjusted EBITDA margin of 24 percent, up 3 70 basis points year over year. Moving to commercial performance, while we know that many like to compare, the entire ITS segment, again, some of our peers, that comparison can be a bit challenging, given that we have several different businesses in this segment. Last quarter, we broke down the segment based on our internal business structure. In the period of transparency, and desire to help you understand the business, we are now showing a product line breakdown. Starting with compressors, which represents about 65 percent of the segment, we saw orders down mid single digit and revenue down low single digit A further breakdown into oil free and oil lubricated products will show that oil free was up low double digit in revenue, which we believe demonstrates the success of our strategic focus in this category. As well as market resiliency for oil free products. From an oil lubricated perspective, orders and revenue were down mid to high single digits. Mainly driven by small rotary compressors, while a large compressors continued to outperform. Regarding the regional split, for revenue on compressors, In the Americas, the North America team performed comparatively better at down low single digits, while Latin America was down in the mid single digit. Mainland Europe was down low single digits while India, Middle East and Africa continued to see a decline in the mid teens. Which is a great improvement from Q2 levels of down nearly 40%, formerly with revenue up mid single digits, driven by positive growth in China, while Southeast Asia is still seeing declines due to COVID shutdowns in some countries. Moving to banking on blowers, we represents approximately 20% of the segment. Orders were down low single digits, driven by mid single decline in the blower business partially offset with positive order momentum in our longer cycled NASH and Garo Viking businesses. We were encouraged also to see that industrial banking business in Europe was relatively flat compared to down double digits in the second quarter. Which is a sign that our OEM customers are seeing some underlying improvements in their markets. Moving next to the Power Tools And Listing, which is 10% of the segment, the total business was down high teens in orders and mid-20s in revenue. The encouraging sign here is that the rapid improvement from last quarter where we were down low 40s in orders. The tool business has materially improved from the 2nd quarter, while lifting and material handling business remained depressed. And as we have said in the past, our focus here has been to materially improve the profitability of this business. And we're very happy with how the team has executed. Delivering 2 seventy basis points of sequential adjusted EBITDA margin expansion. In this quarter, we want to highlight one of our growth synergies, which is the expansion of our oil free compressor launch in Europe. You may recall, we launched a radical new technology in the oil space within Gardner Denver just a few years ago. This patented technology delivers completely oil less air with a value proposition on Match in the market. At that time, the Gardner Denver channel was not properly set up an experience enough to sell such a unique product focused on total cost of ownership in the oil free space. However, the Ingersoll Rand team has a lot of experience in selling oil to products. And within the matter of months, we have relaunched the Product under the Ingersoll Rand brand and leverage the English online channel. We have also trained over 400 channel partners and our funnel has increased to $15,000,000 in a matter of months. It is good to note that more than 20% of that funnel increase was generated purely with demand generation efforts. Moving to Slide 14, we'll review the Precision And Science Technology segment. Overall, organic orders were down 9%. As expected, total order levels were down 3% sequentially, but when normalizing for the COVID related orders, that we saw on the medical side of the business in subsequent quarter, the sequential improvement was actually positive. Revenue performance was quite strong at down only 1% organically, driving a strong performance within the business were the dosaturn and medical businesses, which delivered double digit revenue growth. The Precision And Science Technology team also delivered strong adjusted EBITDA that was up 14% on relatively flat revenue. This led to a very resilient adjusted EBITDA margin of 30.7% up 350 basis points year over year and 40 basis points sequentially, again, driven by solid execution and use of tools to drive productivity enhancements. On this call, we're excited to introduce Alvin Pump to the Ingersoll Rand family. Alden is a leader in the manufacturing of electric peristaltic pumps, which is one of the highest growth, positive displacement technologies. We see strong commercial synergies as we leverage Albin alongside our ARO and Milton Roy brands and plan to leverage the positioning time global network and channel to accelerate growth at Albyn. This is a great example of the type of bolt on acquisitions we're very excited about for the company. Moving to Slide 15 and the Specialty Vehicle Technology segment, overall Q3 was another strong performance for the specialty vehicle technology team, with organic orders and revenue up 29% 1%, respectively. Adjusted EBITDA of $38,000,000 increased 36% year over year leading to an adjusted EBITDA margin of 19.7 percent, which represents 510 basis points improvement versus prior year. Proliteration of the IRX toolkit is allowing the specialty vehicles team to capture strong end market demand the consumer vehicle segment and grow our share. The strength is based on continued digital demand generation activities, comparing new product launches, including lithium and a 6 passenger offering and extremely consistent production and channel performance. We're also pleased with the traction on the launch of a 2nd generation lithium battery for the golf car market. We're seeing an improvement in cost reliability and range, which we believe is now leading in the industry. Aftermarket also continues to be a strong focus including our club card connect platform, which is showcased on the right side of the slide, with over 100,000 connected vehicles, FlovedCard Connect is a GPS enabled technology platform that provides fleet managers with car control features such as geo fencing and location based speed control, as well as asset management tools such as the ability to monitor the location of the growth cars and report vehicle diagnostics. Moving to slide 16 and the high pressure solution segment, the business performed largely in line with expectations. And it continued low demand in the oil and gas industry. Orders and revenue were down 81% and down 68%, respectively. Nearly 90% of the revenue base continues to come from aftermarket parts and services, with consumable continuing to be the most stable component of the revenue base. I am truly proud of the team for their proactive efforts and productivity improvements around cost management controls, which allows us to deliver positive adjusted EBITDA of $1,000,000, and decrement of below 40% despite the meaningful revenue declines. As we look ahead to the fourth quarter, although we're seeing some market recovery, we have the unknown of extended holidays later in the quarter as well as continued pandemic headwinds. Looking forward to 2021, we remain encouraged with how the business is positioned from a product offering and cost structure perspective. We feel there is some pent up demand in the market, which will return at some point in beginning with the service and repair work and we're well positioned to capture this opportunity with the premier service centers like our Permian facility that is highlighted on the right side of the slide. Moving to slide 17, we want to provide a quick snapshot of how the business has performed thus far in the 4th quarter. Through the 1st 3 weeks of October, the total company is now mid single digits in orders with book to bill at greater than 1. Within the Industrial Technology And Services segment, the reasons are largely trending in line with the year over year order trends that we saw in the third quarter. And the powertrain business continues to see sequential improvements. The Precision And Science Technology segment is currently positive year over year. And the specialty vehicle segment is continuing to see healthy momentum on the consumer side, coupled with growth seasonality. The high pressure solutions segment is down 30% to 25%, which is encouraging, but we see limited expectations for activity in December. We're not providing formal Q4 or total year guidance at this time, but from a high level perspective, we expect the gradual market recovery to continue in the fourth quarter with revenue trending positively on a sequential basis. Industrial Technology And Specialty Vehicles segment should support most of that strength given normal seasonality in the shorter cycle components of industrial technology as well as larger projects that will shift later in the quarter. For the Precision And Science Technology And High Precious Solutions segments, we expect a comparable revenue performance relative to the 3rd quarter. From a margin perspective, we will continue to aggressively manage the incrementals and expect to be below 30%. We're expecting some headwinds in the 4th quarter compared what we saw in the third quarter, mainly unfavorable product mix in precision and science due to a lower contribution from medical as the COVID related backlog has largely shipped and in specialty vehicles as mix shifts more towards growth. Which carries a lower margin than the consumer, which has been very strong. We also expect the cost base to increase slightly, as we continue to invest inorganic initiatives to fuel long term growth. It is also worth noting that this assumes no additional material headwinds the pandemic. We haven't seen any notable impact on order rates just yet, but we're monitoring closely and we will be ready to execute our playbook as we have successfully done this year to react quickly to any business interruptions. Moving to slide 18, as we wrap up today's call, I want to reiterate that we're excited by our progress. While we're still in the early stages of our transformation, we have taken meaningful steps forward in creating a differentiated culture and improving the performance of the company. And now with 16,000 employees who are now owners of the company, I am confident that we can continue to transform English program and deliver increased value to all of our shareholders. With that, I'll turn the call back to the operator and hope for Your first question comes from Julia Mitchell from Barclays. Please go ahead. Your line is open. Hi, good morning. Good morning. Good morning. Maybe just the first question around operating leverage, as we look ahead to a more normalized sort of recovery stage, you had 60% sequential incremental margins, I think in Q3, so extremely high level and understand, that those incrementals will moderate as the recovery matures, but maybe any kind of placeholder as you're thinking about the net off of temporary costs coming back the ongoing synergy extraction and the extent to which you'll manage those incrementals via ongoing reinvestments as well? Yeah. Hey, Julian. This is Vic. I'll I'll I'll start with that and and let Vicente weigh in as well. You're absolutely right. I think Q3 was extremely strong quarter for all the reasons you mentioned. I think as we think forward, as we look into Q4, as we mentioned, we don't expect the sequential incrementals to look quite as strong. Our view as we look kind of forward and frankly even look into 2021 is that we think that normalized incrementals kind of across the portfolio on a base level should play in that kind of 30% to 35% range with obviously some upside opportunity for the synergy extraction. Remember, there are some cost normalization and things of that nature that will continue to kind of unfold as we move into 2021 as we mentioned. But I think, 30% to 35% is probably a good base level to use with some upside opportunity as synergies start to materialize into 2021 and thereafter. That's very helpful. Thank you. And then my second question, really around the free cash flow. Very strong in the 9 months, you know, $470,000,000 odd 125% conversion to adjusted net realize that it's the 1st sort of year of the combined entity, and maybe there are some one time pieces moving around, the working capital move perhaps a bit abnormal this year. So Just wondered, what you could indicate in terms of free cash conversion expectations as you look out. And also within this year's number, what's the total synergy and stand up cash outflow for the year? Please? Yeah, Julian. I think we would expect to be greater than or equal to a 100% of adjusted net income on a free cash flow perspective. I think what we're excited about is that, yes, you have seen that, some very good momentum on the free cash generation. And the most important piece here is that we still feel we have plenty of levers, for us to improve, you know, what, you know, clearly one that we talked about here is how we're rallying up, all 16,000 employee owners in the company around their working capital, as a percentage of sales and how we believe we can unlock a good amount of cash getting everyone focused on that perspective as we did with the Gardner Denver in the past. And then other levers such as tax our tax rate. We spoke a lot about that. That's also offering a good meaningful opportunity, and So I think, you know, the exciting piece here, Julian, is that we still have, more improvement opportunities. And Julian, on the second piece in terms of some of the moving components and kind of what we've spent thus far from a free cash perspective, specifically on the synergy and stand up costs. In the first half of the year, we had about $80,000,000 between the 1st and second quarter of cash outflows. And then you can see in Q3, we had about $26,000,000. So you've had a little over $100,000,000 of cash outflows thus far specifically for synergy and stand up spend to the 1st 3 quarters. And we would expect right now that Q4 should look comparable to what you saw in Q3 as we've guided before. So I can kind of give you an idea of kind of just the call it one time, but really the synergy and stand up related spend that has flowed through free cash flow. Fantastic. Thank you. Your next question comes from Michael Halloran from Baird. Good morning, Mike. Good morning, Mike. So why don't we start with, some thoughts as we're thinking about year. Just a lot of uncertainty out there qualitatively, how are you guys positioning things internally in your core businesses? As we said, as we sit here, what's the only thought process? How are you guys going about iterations for next year? And any kind of high level thoughts on that side? Yes, Mike, you know, clearly, you know, we're now in the midst of that cycle of, kind of getting with the teams through, through our budget cycle for 2021. And this is part of our process, as we completed our strategic plans a couple of months ago, you know, while we don't have full visibility, I mean, we like what we see from the micro indicators, PMI, I assume, I mean, across the world, showing some continual gradual improvement So we're encouraged about this. But we know that there's some uncertainties that we've covered in many of the global markets and load downs. Think the most important thing for me to highlight here and we're highlighting with the team is that I believe that we have been able to demonstrate how we're able to adjust and adapt to whatever environment looks like. And you can see that, from the down market and how we have control our decrementals, very well as, at the same time, while investing. So I think, the way that where we're working with the teams is, you know, have a perspective in terms of good gradual continuous sequential Nothing, but more important, making sure that we're making the right investments while controlling, you know, the cost and continued improvements in our company. I would say too as well, maybe Mike, to add to that is, you know, right now, we feel good about kind of the backlog in terms of our loan cycle businesses, like, like, you know, like we have, you know, whether large compressors or some of our larger vacuum businesses, And, and also with the specialty vehicles, I mean, they have a very solid backlog too as well heading into, into 2021. So a list at this point in time, I mean, we, we're going to be working with the teams and the budgets and building as we kind of go for 2021 with a high level of just flexibility. No. That makes sense. And then, maybe help with, some puts and takes on the on the option capital optionality side. 1, how you're thinking about the current portfolio as it sits here today? Do changes there? And then secondarily, you know, you're in a good balance sheet position, you know, Vic mentioned earlier towards 2 times in the near future here. How are you thinking about M and A? What's funnel look like? And then secondarily, are are buyback something you guys are considering in the near term? Yeah. Mike, I think I think this is our, as you saw, we got our 3 phases and we spoke a lot openly about our kind of phase 3 or portfolio optionality that gives us plenty of opportunity for us to evaluate that. And that is equal on both sides, as you said, optionality on potential divestitures, but at the same time, on the M and A. And the M and A, the M and A I tell you the funnel is very, very active. We're very excited with, helping, that at the that we just made. A lot of these acquisitions as well. I think the interesting thing is that we continue to source those ourselves in the sense that we're finding that being proactive and working with a lot of these companies in our relationships is really unlocking the opportunity to be able to be more prudent and discipline in the terms of multiples that we pay. So I think the M and A, funnel is is very, very active. And and we're really excited about, what we have, ahead of us in that in that case. In the buyback side? Any thoughts there? Not at this point, I I would say, Mike. I mean, because we see very good opportunities for us, in the M and A. And you have seen how we're able to, from a pre post multiple reviews that post multiple synergies dramatically. So we just see some greater payback right now in the M and A. That makes a lot of sense. Thanks, Fintech. Appreciate it. Your next question comes from Jeff Sprague from Vertical Research. Please go ahead. Your line is open. Thank you. Good morning, everyone. Hey, just coming back to kind of the synergy question, you know, what, as you think about kind of the funnel, right, I just wonder if the funnel, really the complexion of the funnel changing at all? And, some of your concerns just about kind of, the ability to travel and all these sorts of things kind of getting at the $2.50, doesn't really seem to have kind of worn out, right? It seems like you're actually getting at maybe a little bit quicker than you thought. So really kind of two questions. The speed with which you can kind of continue to knock out the 2 fit feet and whether there's anything really moving around on the 350 and when that might move from kind of funnel to actual firm target. Yes, sure, Geoff. This is Vic. I'll take that one. You're absolutely right. We've been pretty pleased with how we've been actually able to execute on the synergy funnel at point in time. As we've mentioned, I don't think that, frankly, the COVID environment has really prevented us from executing on the funnel. We've with frankly a lot of the activities, particularly on the structural side. And I'd say the beginning phases of the procurement, frankly, before the merger even was really was really was completed. So that's really been able to accelerate what we've been able to see. And you've seen that we've actually sequentially every quarter we've even accelerated the cadence, including now where we're saying about 40% of the savings to be delivered here in 2020. 70% by next year and then 85% by the year thereafter, which is considerably, I'd say, sped up compared to what original expectations are. So I'd say at this point in time continuing to kind of move forward, I don't think the COVID environment has dramatically stopped things. We didn't found ways to do things like ITV and workshops and tear downs in a virtual manner, not how we planned it originally, but still being able to execute. And then in terms of the larger funnel in excess of greater than 50. I'd say the complexion to your point is still largely the same. Really what the head of us here is much more direct material oriented savings as well as footprint. And as we mentioned, the direct material side does have a big component that's obviously tied to the volume equation, which, as I mentioned, as we get better visibility 2021 and thereafter, I think we'll be able to give an update accordingly. And the footprint piece largely has not changed. I did ask the piece that clearly in this environment by a little bit more difficult to execute on. The good news is the funnel is continuing to progress quite nicely, and we'd always plan to be executing on that footprint funnel really into 20212020 nothing's really changed in that manner. So I'd say we're still pleased with how things are progressing and we've largely accelerated what's within our control. Great. Thanks for that. And just back to IT and S on some of the kind of the, kind of heavier CapEx oriented parts of the business. I just gave us the order color and appreciate that. I just wonder if you could give us a little bit more color though, just on what your customers are saying, how the cap FX outlook in some of these vertical markets that are more industrially sensitive, look as we perhaps look into at least the 1st part of 2021. Yes, I think the good, I mean, we're encouraged in terms of how we're seeing the conversations with the customers. I mean, obviously, we spoke earlier in the year, how things were kind of slow. But we are seeing some fairly good momentum on some of these kind of non cycle businesses that require some very large capital investment. So we're encouraged with the conversations that our teams are having it. We saw also some of that here in the 2nd quarter and, you know, we always said that the 4th quarter, it's a quarter where we expect a lot of these, kind of orders to get closed and, and booked into the, into the orders. So at least we're encouraged with that. And that was a little bit of the commentary I made about going into 2021 that we're at least positive in terms of the backlog that we have coming into the year with these businesses. And obviously more encouraged about how our teams are pursuing you know, more aggressively, a lot of these kind of large investments that are kind of getting frito. Thank you, Jeff. Your next question comes from Nigel Coe from Wolfe Research. Please go ahead. Your line is open. Thanks. Good morning. So I wanted to switch to, your upstream oil and gas high pressure HPS. Obviously encouraging trends there seems like we've found a flaw, and we're starting to improve sequentially. A couple of questions there. 1, would you say a disproportionate amount of the temporary cost measures have gone into that business to sort of preserve the margins? And should we be dialing in some modest sequential improvement in that business similar to what we've seen in prior recoveries from here? Yes, Nigel, so definitely a good amount of temporary, but I mean, I would say it's similar in May to what we have done. If you remember, I mean, the HPS is a business that even, even banking the second half of last year, we started restructuring and and the business looks really different from a footprint perspective and also from the CapEx investment that we have done. So I think we're encouraged with what the team have been able to rapidly adjust and I think that that is really encouraging as we see, some of the kind of comeback, that that that we're seeing in the market. And then sequential growth from here, do you think that's reasonable based on customer conversations and what you've seen in the market? We think so. We think so, I mean, we're we're being kind of thoughtful and prudent from the perspective only just because you never know what's going to happen on on some of the holidays here after Thanksgiving and in Christmas. But based on fleet count, continues to increase sequentially. Our order rates continue to increase. This now, you know, year over year, as we pointed out in the 1st week of October, we're down only 30 to 35%, which is also encouraging, and, and, and, but we still also feel that the the the pent up demand, has not come through. So I think that that's also, highly encouraging, I would say. Okay, great. And then my follow-up question on ITS is, first of all, thanks for all the detail. I think you preempted about 10 questions with this detail. But how did services track within that mix. I mean, I know that was hit pretty hard by the shutdowns. I'm just wondering if we've seen some pent up demand coming through there and whether we're back to growth in services? Yes, no, good question, Emmanuel. I would say that you know, the big service business that we have is really mainly, I would say mostly in the U. S. And Europe where we mostly in many places will go direct We saw the good sequential improvement through the quarter. And what we have seen is that aftermarket and services, all that holistically, is roughly 2 times better than the whole goods. So, so than the complete. So I wouldn't call it as a massive pencil demand I'll just say kind of more gradual improvement as people are kind of getting and opening the locations to allow us to go and are kind of going, but nothing dramatic. Your next question comes from Rob Woodbiner from Melius Research. Go ahead. Your line is open. Hey, good morning, everyone. Good morning, Mark. So, Vicente, I think you've touched a couple times on sort of long cycle versus short cycle, you know, dynamics. But I wonder if you could just, tell us underlying demand sort of trends. Is there a very wide gap between the 2? How wide is it? Is it is it already narrowing down so you know that the longer cycle stuff is? In fact, you know, coming up, we're not just relying on short cycle stuff? I I it feels that way, Rob. I mean, it feels that, that that definitely, you know, you know, we can tell you that on the loan cycle business was actually positive, from our perspective in the, in the third quarter. So again, that could be sometimes spotty based on the size of project that you see, but we're seeing some good momentum in CO2 capture. We're seeing some good momentum in air separation and industrial gases. We're seeing some kind of projects that are more related to onshore and getting kind of release and allowing us to implement our technology on those. So we're seeing some good, good, I would say sequential improvement on that. I guess for me more encouraging is the conversations that our teams are having with the customers to be just much more active than what it was in the past. So, but is there a big separation between the two? Not dramatically, I would say, but encouraging signs on unbolt. Okay. That's very helpful. Thank you. If I can ask just one other, on, you know, pivoting growth on phase 2, wonder if you can characterize where you think you have the organization focused. Has the intense focus been on synergies the past few months and you've already internally sort of pivoted the growth with some of the the focus you're doing and that will show up in the next few quarters? Or where would you say you you put the organization right now? Thanks. Yes, Rob. That's a great, great question. And, you know, one of the things that we're able to do in our business with an increased amount of agility and nimbleness that we're driving with the use of Rx. And as you know, we have over 200 of those kind of every week with an impact daily management. And yeah, I mean, I can tell you that in our conversations, we talk a lot more about growth synergies now that we see some good momentum on the cost synergies So we still have the KPI on the cost synergies, but now we have added the KPI on the growth synergies. So the conversation is really pivoting more towards that. It takes time to see that, that's solid momentum, in the business. So, but again, you know, we were able to pivot and pivot kind of right in the, in the, you know, I'll say, you know, we did a mid, mid third quarter, kind of pivoting to that. And, so again, more encouraging and as kind of we go into 2021 that we could see some of the fruit of those actions that we're taking. Your next question comes from Stephen Volkmann from Jefferies. Please go ahead. Your line is open. If I could just go back to, some of your comments about the margin, incrementals, you know, I think we had originally thought about 30 ish percent this quarter. And obviously, you kind of blew that away and talked about some of the temporary costs not coming back as you expected. I'm just trying to understand how does that work? I mean, it sounds like you don't actually kind of drive that from a top down perspective. Maybe it's more driven by the businesses and obviously, I'm trying to think about how that all plays out in the fourth quarter. Thanks. Yeah. See, I'll I'll cut the words in. I mean, there's always we driven I mean, our teams, as I said, even as we are preparing our budgets for 2021, our teams are really attuned in terms of what incrementals and decrementals are kind of being viewed as for best in class. And we'll try to get to those I think when we provided some of the kind of conversation or no guidance, but, you know, framework as we were going into, into Q3, was a lot of discretionary cost that was supposed to come that obviously not all of that showed up, into the third quarter. But but I'd tell you that, you know, our our teams just pay close attention to a lot of these leading indicators that we're tracking. And, and I think in our commentary, we'll just kind of more attuned in terms of just telling you kind of what we expect to see, but obviously with the room for our teams to be able to drive further improvements to that. Okay. So so just to be clear then, Rick mentioned, I think, 35 ish percent incrementals. Is that the right way to think about fourth quarter? No. So, Steve, I think the way we were thinking about it is that was kind of more of a longer term into 2021 from a a fourth quarter perspective. And if you look year over year, I think in our in our prepared commentary, obviously, we're still going to see a, you know, a, you know, it's a challenged view versus prior year. We mentioned that decremental should be lower than 30%. And frankly, we would expect to be able to control it, you know, frankly lower than that level, pretty much more in line with probably levels you saw into 2Q realm or slightly better, clearly not as well as Q3, which was a 6%. Clearly, a lot of good tailwinds in some of the margin mix items we talked about. But I think Q4 specifically continued to see decrementals well below 30%. I think as we look further out and as hopefully the business turns to more for growth mode, that was kind of the comment as we look ahead. Great. Thank you. That's exactly what I was looking for. I should have said decremental. Sorry. So, that's all I got. Thank you. Your next question comes from Andy Kaplowitz from Citigroup. Please go ahead. Your line is open. Hey, good morning guys. Good morning, Andy. Can you give us a little more color on what you're seeing in terms of the growth within Precision's and decision in science. You mentioned the expected decline in the form PFS business. It was down 6% in Q3. GDI Medical I think was up 10%, but then you mentioned the overall segment is positive through the 1st weeks of Q4. So is PFS continuing to turn more positive, or is it really strengthen that GDI Medical Business? And could you give us more color on what's driving the improvement in PFS? Yes, Andy, I'll say that most of the businesses are kind of continuing to strengthen with the position in science and that you know, clearly, you you're seeing some of that here in, in earlier quarter. And and and when you when when we saw through throughout the quarter in the 3rd quarter, we saw continued improvement through the months of Q3. And then, Vicente, obviously, you spent time talking about hydrogen obviously ESG becomes more important every day. You just mentioned on shoring and the initiatives there. So if you look at all these sort of newer trends together, Is it having an impact on your business overall right now? And as you think about 'twenty one, how well positioned are you to sort of grow above market because of all these new trends that you guys are exposed to? That is a thing exciting piece there, Andy, that as a lot of these, kind of trends continue to go on our favor that perspective and not just by pure luck, but mainly because of the, I'll say call it self help innovation that the team is doing. I mean, we find some of these kind of growth secular trends and then we evaluate how can our technology be applicable to those trends and then we go deeply and then, and then create some unique differentiated situation. I think that is what is very different, in our case is that, that our teams are pretty agile on that. So, so, yeah, I mean, I think it's it's more going to be indicative in 2021 and further. You can see, I mean, expectations for hydrogen are just kind of massive in terms of growth. And, we want to be participants with our new, kind of, unique technology, but it's going to be kind of more, I'll say, medium to long term. Thanks, Cindy. Thank you. Your next question comes from David Raso from Evercore ISI. Please go ahead. Your line is open. Hi. Thank you for the time. A question about what's in the backlog for each business. The the color you provided on ITS appears to be a positive mix when I hear the the bigger compressors are are strong. And then within, precision, just thinking about medical, maybe that driving the growth diminishes a little bit. Should we think about that as maybe potentially a little bit of a, a less positive mix moving So I'm just trying to get a sense of what's in the backlog, what we have seen so far in October to better understand the mix development of the revenue within those two segments. Sure, David. I'll start kind of inverse order. You hit it on the head with with Precision And Science. We did definitely have a, I'd say, elevated medical backlog we were really leveraging through second quarter 3rd quarter and largely kind of shipping through here as against the beginning of fourth quarter. And the medical piece definitely had a little bit of a margin upside, comparatively speaking. So it's not to say that the balance of the Precision Science, it's actually healthy, healthy margins. It's just not quite at those those medical COVID related orders. So again, that'll normalize here as we move through 4th quarter and into 2021. On the IT and S side, it's actually not dramatically different. Each project is a little bit unique, but I would say that the margin profile is actually kind of comparable to what you see on the typically shorter cycle compressors or lower vacuum equipment. And as such, I would say that Q4 margin profile should be comparable to what you saw in Q3. It's project by project can look a little bit different, but I think in totality, it's, it's relatively comparable, especially given the, the momentum we've seen on margins across the balance of the short some of the lockdowns we've begun to see in Europe. Hopefully, we don't, we don't see any here, but when you think about a potential impact are you trying to get ahead of that a bit, maybe securing some kind of buffer component inventory, or are you just sort of playing it straight? And as it unfolds and unfolds. So just curious how you're reacting to potential, impact. But, I mean, I I I wouldn't call that we're accelerating any inventory as we speak. So, what our teams have been doing is that they, based on the lessons learned, I mean, they clearly work with the supplier so that the supplier can hold more buffer inventory for all of this is us holding that inventory, and I think I think we're we're we're prepared and and and working with the supply chain to be able to service us pro proactively. And so far, no implications on any facilities from some of the French or U. K. Or the lockdown lights we've seen in Germany? Terrific. Thank you. Appreciate it. Thank you. Sure, David. Your next question comes from Joe Ritchie from Goldman Sachs. Please go ahead. Your line is open. Thanks. Good morning, everybody. Vicente, can you maybe just touch on that, that offer opportunity that you're seeing, specifically on Eagle Ford side, with selling through your European channels. I'd love to know any kind of thoughts on cadence of that opportunity over the next couple of years? Yeah. Joe, I think this is actually, I mean, as you remember, we were pretty excited with the combination of the 2 companies because of the complementary technology and how much we consider oil free to be just a good kind of growth end market just based on the market that it plays. And so this is a very good opportunity because the English program team definitely has a lot of good experience selling oil free compressors. And I would say that at this point in time, we're just kind of scratching the surface still on just purely, kind of aligning the technologies to where the best channel could be for those technologies. So what we what you saw here is basically our kind of launch of that, oil free technology that we develop during the Gardner Denver days and having the Minnesota team have access to that through their channel. And the teams are very I mean, our channel partners as well as the direct teams are very excited positioning those technologies into the primarily food and pharma end markets. That's helpful color, Vicente. Thanks. I I think maybe one my one follow-up, I know we touched on this a little bit earlier on in ITS short cycle versus long cycle. Can you just remind us how much of your ITS business is tied to short cycle with the ISM improving versus, versus long side goal project related? You know, Joe, I'll take that 1. This is Vic. I would say that, you know, probably I would I would ballpark about 80%, 80% roughly speaking, is probably shorter, shorter cycle kind of typical standard fare compressor blower vacuum power tools type equipment. They're 15% to 20% somewhere in that range probably a little bit more tied to the longer cycle components of things around the larger centrifugal compressors as well as things like the share how kind of backing liquefier and Pump and Compressor business. So that's probably a pretty good indication. Your next question comes from John Walsh from Credit Suisse. Please go ahead. Your line is open. Hi. I was wondering if you could just first kind of touch on maybe your customer inventory level I'm thinking about kind of those distributors that are stocking the smaller side of the compression range? Yeah, John, I the the, you know, most, we we don't have that many distributors that will stock, a lot of our compressors and our exposure to the kind of smaller reciprocating compressors of that basically kind of the will be maybe the do it yourself or we also don't play on that. So I would say inventory levels are definitely not not seen by anybody kind of stuck in anything. Ecommerce is helpful. Great. And then I guess just thinking about some of the adjustments and as we go into next year, I guess there was a non cash impairment this quarter. The acquisition related expenses are ramping down. I mean, there's puts and takes, but how do we think about those items as we update our models for next year? Is there visibility into any big adjustments as you see it today? Sure, John. I'll take that one. So, you know, I think in terms of, as we said, you know, whether it be kind of the restructuring or acquisition related items, you can see that the large majority of the purchase accounting items have fled themselves through. So again, you saw that dramatically decrease from Q2 to Q3. Think with regard to some of the restructuring items, you'll see the normal cadence of that as we move into 2021 as we still do have restructuring the for an optimization of things like that ahead of us. In terms of the trade name item, you're correct. We did have a small trade name impairment specific to the power tools and lifting unit within the IT and S segment, very discreet and can't go just a reflection of some of the revenue declines that we've seen in the power tools and listing piece specifically on the trade name side. So again, I would say that was one time in nature. As we look forward, we would expect that the interim adjustments to be very comparable to kind of the trajectory you're seeing with regards to restructuring some of the normal course adjustments. But other large adjustments and things of that nature, no, we wouldn't expect those. Those are very discrete and unique, in terms of what you've seen through the 1st 2 or 3 quarters of this year. Great, very helpful. Thank you. Your next question comes from Nathan Jones from Stifel. Please go ahead. Your line is open. Good morning, everyone. Good morning, Nathan. Good morning, Nathan. I've got a bit of a follow-up to, questions, Joe and Andy, before, on these new product developments and adjacent markets that you're moving into? And maybe if you're looking at over a little bit of a longer time, markets are going to grow, what they're going to grow. Do you guys have a number that you're targeting in order in growing that addressable market, over time? Like, do you think you can grow the addressable market 50 basis points a year, 100 points a year through these new product developments and acquisitions to get yourself into new markets to really expand that addressable market. Recently at the time? Oh, that's a really great question, Nathan. You know, clearly, you know, we have always been I can also say speaking not openly, but how the addressable market for us and how we wanted to, if you remember the days of the medical team, how we double that addressable market over a course of like 3 years. So I think it depends on it depends on the business, but clearly we want to continue to expand the addressable market. We don't have a peg at a number. But in the position and science team, it is clearly kind of dramatic in terms of how we want to increase the addressable market based on penetrating with the new technologies that will that the team is working. So but specifically to a number, I don't have it. We don't have it pegged. We just have it more asset holistically over the strategic period, which 3 years, we want to double the addressable market in some of the specific businesses that we're focusing ourselves. Fair enough. One other number caught my eye was the 29 percent auto growth in SBT. Can you talk about, you know, what's driving that number up how that impacts the outlook for 4th quarter and what's an average kind of book to ship on, in that business? Yeah. So the impact, the, I mean, the theme is is just executing really well on on a lot of initiatives and one around the new, the launch of new products on the consumer side. So basically these are kind of gold cards that are customized to your needs. You can go online and which I mean, you should do and I think go online and then kind of customize to your specific kind of desire and basically that kind of pretty unique solution for personalizing the vehicles for the individuals. And we have seen tremendous demand of that over the past couple of quarters I'll say that we're typically, I mean, based on the demand that we're seeing, it's typically, maybe, weeks, but not quarters in terms of kind of the backlog. And specifically, I don't want to call out a number just because we view it as kind of being very strategic in terms of how quickly we can deliver those, those those those gold cards, for for the consumer side. But it's driven by by a lot of the initiatives that the teams are doing around, you know, direct to consumer demand generation, as well as, you know, kind of new launches of product. We launch a new lithium battery, that extends the range of these, consumer cards. And, and also, you know, we spoke today on the call about the connectivity, the connectivity platform is also providing some good recurrent revenue streams for that team. Your last question comes from Ivana Dolesstra from Gordon Haskett. Please go ahead. Your line is open. Good morning, guys. Good morning, Ivana. Good morning, Ivana. So just to follow-up on specialty vehicles, what driving the this margin significant margin improvement, and is there a mix? Is mix a big driver and how do you expect it to kind of developed going forward? Sure, Bonnie. Yeah. Q3 was obviously an exceptionally strong, margin performance, really driven by kind of 2 main factors. 1 being the consumer piece, second being the aftermarket piece. So I think the mix frankly was the single biggest driver because consumer as we've spoken about before is the highest margin profile component of the entire portfolio? And Martin, frankly aftermarket is right there with it. When that consume when that comprises a healthier component of the mix, you can see kind of the margin profile that goes with it And then we've obviously done a lot with regards to I2V, you know, self help IRx initiatives, which you're seeing kind of play themselves out. I think as we think about Q4 and as we mentioned, again, consumer still expect to be strong, but this becomes a very typical, very strong golf shipment quarter. And golf just does frankly have a slightly lower margin profile comparatively speaking to consumer and the aftermarket component. So again, we would see expect to see the kind of margin profile normalize a little bit, but that's really mix driven but even then you're going to see meaningful margin expansion year over year. So again, we're quite pleased with kind of how the team is executing both on the self help productivity side. As well as just frankly in the top line side of the equation. Got it. And then one question on IT and S. How do margins compare between your core businesses compressors and blowers versus power tools and and other. And and what do you see as medium to long term targets for each? Sure. So, you know, we don't break down necessarily the sub components of the portfolio, but let's just say that I think that the as we historically said, the compressor blower and vacuum components actually all have, I'd say, fairly comparable margin profile. While there tends to be a little bit of mix between original equipment and aftermarket, what you can expect here is, though, compressors tend to have a higher aftermarket component, which tends to be a little bit healthier margin And as such, I'd say the compressor borrower backing piece tends to be a little bit healthier. Clearly, components of portfolio like power tools tend to be a lower margin profile. We've said that before. Think we're quite encouraged by the steps the team has taken, as I mentioned in the prepared remarks, you know, 270 basis points of sequential improvement as we move from a Q2 to Q3. I think in terms of medium to longer term targets, like we said, we feel very good about where the profile of the total segment is, kind of reaching that mid-20s range I think that's frankly we want to see kind of those levels and we have frankly a lot of opportunity with regards synergy execution and things like that that are going to kind of start delivered in 2021 onwards. So again, we haven't put a formal, I'd say, targeted nor have we put a cap on it. I think we're encouraged by what we're seeing. And yes, we would frankly still expect that the core component of the portfolio compressors blowers and backings to have a higher margin profile than the balance. Thank you. Thank you. We have no further questions. I would like to turn the call over to Vincente Renal for closing remarks. Thank you. And, thank you, everyone, for, for the interest in, in a good of the tremendous amount of work that our employees are doing here, even in this kind of difficult environment and delivering tremendous results. So Thank you, and thanks to our employees. Thank you. Have a good day. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.