Good morning. My name is Rocco, and I will be your conference operator for today. At this time, I would like to welcome everyone to Vertu's 2nd quarter 2020 earnings conference call. All lines have been placed on mute to prevent any background noise. Please note this call is being recorded.
I would now like to turn the program over to your host for today's conference call, Lynn Maxiner, Vice President of Investor Relations.
Great. Thank you, Rocco. Good morning, and welcome to Verde's 2nd quarter 2020 earnings conference call. Joining me today are Virta's Executive Chairman, David Cody, Chief Executive Officer, Rob Johnson Chief Financial Officer, David Fallon, and Chief Strategy And Development Officer, Gary Mater Perm. Before we begin, I point out during the course of this call, We will make forward looking statements regarding future events, including the future financial and operational operating performance of Vertiv.
These forward looking statements are subject to material risks and uncertainties that could cause actual results to differ materially from those in the forward looking statements. Cautionary language included in today's earnings release, and you can learn more about these risks in our registration statement, our proxy statement, and other filings with the SEC. Any forward looking statements made today are based on assumptions that we believe to be reasonable as of this date. We undertake no obligation to update these statements as a result on both GAAP and non GAAP financial measures. Our GAAP results and GAAP to non GAAP reconciliations can be found in our earnings press release and in the Investors slide deck found on our website at investors.virtive dot com.
With that, I'll turn the call over to the Executive Chairman, David Cody.
Thanks, and good morning, everyone. Well, the last time we spoke in early May, everyone was still trying to determine what the implications of COVID were going to be and exactly what type of recession we were going to have. Today, 3 months later, while some things are more clear. There are also many things that are still not clear. What is clear, however, is how Verde is executing during this time?
As many of you know, one of my mantras business is growing while holding fixed cost constant. And while that's easy in theory, it's not so easy in practice. What I can tell you is that both Rob and Dave Fallon have fully embrace the concept and are deploying it with Invertive in an aggressive manner. One of my other beliefs is achieving 2 seemingly conflicting objectives that same time, where this seems difficult, it is, in fact, very doable. Inside a verdict where point the same mindset by managing our costs very closely, but at the same time, we've been ramping up R and D spending so we continue innovating for our customers today and tomorrow.
We're also working on strategy development, just a few weeks ago, Rob's team went through a week long strategy review that I participated in for its entirety. Don't worry. It was all remote. There is absolutely no shortage of ideas on how to grow our top and bottom line. Now there's a lot of work to do to bring this light, but it sure was a great starting point for the company.
We can't our ability to navigate these waters and come out the other side a significantly better company.
Thank you, Dave, and good morning, everyone. Before I get into the slides, I want to tell you about how proud I am of the Vertiv team. Serving customer's turn of pandemic has not been without its challenges. Employees across the company and located in countries across the globe have addressed issues of all kinds brought on by COVID. They've done it creatively, they've done it energetically, and they've done it passionately.
I couldn't ask for a better team, and I'm truly grateful to them and for how they have always put the customer first. Let's get into the slides. On Slide 4, overall, the demand side of our business held up as orders were up 5% organically from Q2 twenty nineteen. Last quarter, we talked about exiting with an all time high backlog of $1,600,000,000. And now I'm proud and happy to report that our backlog is even greater than that at about approximately $1,800,000,000.
We will talk over the next few slides about both the supply and the demand side of our business. From a profitability standpoint, we delivered $145,000,000 of adjusted EBITDA, which is relatively flat from last year's Q2. Although, Q2 had 128 $1,000,000 lower sales than Q2 of 2019, we managed our contribution margins very well and held our costs in line as Dave Cote mentioned in his opening comments. We had approximately $30,000,000 year over year favorable to cost actions delivered in the quarter that David Fallon will elaborate on later. From a liquidity standpoint, we had a very strong quarter ending at $530,000,000 and we generated over $60,000,000 of free cash flow.
Next, on this slide, we do want to provide some range for expected Q3 performance. We are anticipating implications of COVID to continue to fluctuate, but we expect our organic sales to be up between 4% 6%, and our adjusted EBITDA will be up 10% at the midpoint from Q3 of last year. So while the dynamics can change, We did want to share with you what we are currently seeing playing out in Q3. More on this topic later. Finally, we want to add just a bit of color around 2021.
As we see things right now, the demand side is holding up and our backlog should be robust as we exit the end of this year. We know the dynamics with COVID could ultimately change the top line, but what is in our control is our cost. In Q3, we will be announcing excessing activities that will save us approximately $50,000,000 to $70,000,000 in 2021. With the cash cost to execute of approximately $50,000,000 to $70,000,000. We are fine tuning the details, but we feel confident about the programs that underpinned these numbers.
Turning to Slide 5. We used this slide with our board last week as a heat and out of sorts to illustrate the pockets of strength within each region. The chart is simple, but it relates to real time view we have on the land side of things. It is qualitative in nature and depicts our view on the level of health and activity in each of the markets we serve. We continue to see a strong level of activity in every region in the cloud and colocation market, as indicated by the 6 green buttons in the first two top rows.
Emerging vital applications such as online education, telemedicine, video and gaming are benefiting our cloud and colocation customers, and that surge in demand is benefiting us as well. In contrast to the cloud and colo business, we see the enterprise and small to medium business continuing to be challenged by COVID, as indicated by the red and yellow buttons in row 3. This segment is spending some money. We've started to see a resurgence from the segment in China but overall, this classic customer is not spending as they did prior to COVID. Switching to telecom side of things, both Asia and America is strong right now.
China has gotten on the 5G bandwagon in a major way, and our telecom customers in the U. S. Continue to invest in their network as you can see indicated by the 2 green buttons in Road 4. Finally, our C and I business more often than not, as we've always said, will track approximately GDP over the longer run. But sometimes, the quarterly timing can be different.
While this segment has held up better than expected, Things are relatively flat in the space. So certainly some puts and takes, but overall, when you consider our mix of data center business, vertive and seeing positive growth. The application people use every day continues to be more and more vital following the onset of COVID, and those applications need to be processed, stored and transmitted. And all of this continues to be a great backdrop for our business. Moving on to Slide 6.
To reiterate, to reiterate, the overall demand is strong and as evidenced by our strong order rates and record backlog. While our channel business is soft due to the enterprise and Small and medium business segment being down, our larger project based orders rates are on track. One thing I haven't touched on yet though is site access. Site access in some of the markets is very challenging. We see this continuing to be an area of uncertainty as governments control access to countries and localities and, ultimately, customers control our ability to deliver install.
Singapore, for example, continues to be almost entirely shut down from a data center standpoint. In India, things fluctuate day to day and sometimes even an hour to hour basis. On the supply side, the majority of our operations are running normally, and we continue to ramp production. My prior comment on India is appropriate from both the standpoint of demand and supply. And Mexico continues to continues to be a daily work item for us as we address the labor issue.
Our customers are experiencing constraints by trade Industries, which we continue to work through. COVID has strengthened our proficiency and anticipating potential roadblocks and proactively mitigating issues before they become concerned. With that, I'll turn it over to Dave Fowler to walk us through the financials. David?
Thanks, Rob. Turning to Slide 7. This page summarizes our 2nd quarter financial results versus last year. Net sales were down $128,000,000 or 11%, including $28,000,000 due to unfavorable changes in foreign currency. As most global currencies are weaker versus the U.
S. Dollar compared to last year, including the euro and the RMB which in net sales was primarily driven by Americas and EMEA, each organically down double digits as a result of COVID-nineteen and year over year timing of larger projects. Despite declined just $2,000,000 and actually increased $5,000,000 when adjusted for foreign currency. Fixed costs were down $35,000,000 from last year's second quarter, primarily as a result of COVID-nineteen cost actions, implemented at the beginning of the quarter from COVID-nineteen cost actions compared to our beginning of in the second quarter, $15,000,000 in the 3rd quarter and $10,000,000 in the 4th quarter. 2nd quarter contribution margin improved year over year due to continued progress with both pricing and productivity initiatives.
Adjusted EBITDA margin improved 150 basis points from last year, primarily driven by this improved contribution margin percentage. 2nd quarter free cash flow, as we move farthest to the right, improved $128,000,000 from last year's second quarter, in part due to $59,000,000 lower cash interest resulting from the significant debt pay down pursuant to the SPAC transaction and the subsequent debt refinancing. We will review other drivers of higher year over year free cash flow in a couple of slides. Next, turning to Slide 8, This page summarizes our 2nd quarter segment results. Organic net sales in the Americas were down 79 dollars or 14%, primarily driven by the continued negative impact from COVID-nineteen and from the normal variability of year over It was a very similar story in EMEA, where organic net sales declined $32,000,000 or 13%.
EMEA was also negatively impacted by COVID-nineteen and by approximately $15,000,000 from normal variability of larger projects. Organic net sales in APAC increased $11,000,000 with between $15,201,000,000 of this increase due to the timing of larger projects otherwise relatively flat year over year organic net sales in APAC were driven by double digit growth in China, which represents between 60% 70% of APAC's top line, And this growth in China was offset by double digit declines in the rest of Asia, including India. Demonstrating that although China seems to be transitioning from the negative effects of COVID-nineteen, certain other geographies within APAC continue to be challenged. From a profitability perspective, adjusted EBITDA as a percentage of sales increased across the board in all regions, primarily driven by improved contribution margin in both the Americas and EMEA and from lower fixed costs as a percentage of sales in 8 back as fixed costs in that region declined while net sales were relatively flat. Next, turning to Slide 9.
The chart on this page bridges 2nd quarter free cash flow from last year But before reviewing free cash flow, we do want to reiterate our direction from the first quarter earnings call. That we continued to hold, no concerns related to liquidity. And we're actually incrementally more optimistic based upon the $84,000,000 increase in liquidity during fee at the end of each third, 4th quarters based on our expectation of strong free cash flow generation in the second half of the year, consistent with timing in prior years. Now returning to cash flow of $62,000,000 increased $128,000,000 from last year's second quarter, driven by $45,000,000 higher net income, despite a $22,000,000 increase in non cash charges, including a $12,000,000 ERP impairment. A significant driver of higher net income was lower interest expense driven by the SPAC transaction and subsequent debt refinancing.
And of course, we had a related $59,000,000 reduction in cash interest which certainly contributed to the higher year over year free cash flow. Cash used forecast declined $44,000,000, But a good portion of this benefit in the quarter was due to the timing of favorable cash receipts at the end of June. We estimate between $20,000,000 $30,000,000 that we otherwise expected to receive in the 3rd quarter. 2nd quarter free cash flow also benefited from lower capital expenditures, but a good portion of this reduction was also due to timing as we deferred CapEx investment to the second half of the year based on the COVID-nineteen uncertainty we were managing at the beginning of This page summarizes our financial guidance for the third quarter as we illustrated in the earnings release. Although uncertainty surrounding COVID-nineteen has certainly mitigated since we spoke in early May, there is still lack of sufficient visibility to provide specific financial guidance beyond a few months.
Accordingly, we provide our applications for only the third quarter. And this guidance assumes that what we experienced in July continues through August September, which of course is subject to change based upon uncertainty with COVID-nineteen. We are effectively approaching financial guidance for this year, 1 quarter at a time. Based upon what we know today, we expect 3rd quarter organic net sales to increase between 4% 6%, from last year's third quarter. And although projected organic growth from prior year differs by region, with Americas expected to be relatively flat, in APAC and EMEA expected to grow mid to upper single digits, all three regions should grow sequentially from the second quarter in upper single digits.
This sequential growth is not driven by seasonality as our 3rd quarter sales, declined sequentially from the second quarter in each of the last 2 years. Of course, we expect 3rd quarter net sales in all three regions to continue to be negatively influenced by COVID-nineteen and our top line results will be dependent upon access to customer sites and our customer's ability and willingness to accept shipments. We expect 3rd quarter adjusted EBITDA of approximately $150,000,000 at the approximately 90 basis points at the midpoint, primarily driven by relatively flat fixed costs, fixed costs constant, while top line is growing mid single digits. Comparing our 3rd quarter guidance to our 2nd quarter results, although top line is expected to grow approximately 10% sequentially at the midpoint. Adjusted EBITDA is expected to expand less than 5%.
Relatively lower profit growth is driven by higher projected fixed costs in the third quarter versus the 2nd quarter primarily due to a $20,000,000 reduction in the benefit from COVID 19 cost actions. In addition, we plan despite, the uncertainty related to COVID-nineteen to continue to ramp up of R and D and growth initiatives spending in the third quarter. 3rd quarter contribution margin as a percentage of sales is expect it to remain relatively consistent with
Thanks, David. Turning to Slide 11. Here's a bit more detail regarding our perspective on 2021. From our radar screen right now, we see the cloud, publication and telecom markets continuing to be pretty healthy entering into 2021. It's clearly too early to call what the enterprise market will look like, but the total data center landscape, we are still expecting to see it grow.
Our record backlog of $1,800,000,000 gives us good visibility and confidence on the revenue side. And towards the back half of 2021, we will start seeing the R and D investments pay off with even more products and solutions hitting the market. On the margin side, as we've discussed several times, We are firm believers and practitioners upholding fixed cost constant and those efforts will be in full swing during 2021. To this end, we plan to announce restructuring actions in Q3, which we will expect to reduce fixed costs by approximately $50,000,000 to $70,000,000, plus additional variable cost benefit. These projects are varied and are entering into the final scoping stages.
To support these fixed cost reduction projects, we anticipate incurring cash costs between $50,000,000 $70,000,000. Including capital, and we will evaluate these cash balances for a likely restructuring reserve to be recorded in third quarter. So while it's too early, we did want to provide you with a glimpse of what we potentially are seeing play out in 2021, at least based on what we know today. Now, turning to Slide 12 and in closing. I want to thank you for your support over the past quarter and in the quarters to come.
We participate in a great industry where we have a leadership position and never has critical digital infrastructure to support vital application been so important as it is now. Time. We continue to invest in the future, while simultaneously managing for today. This strategic approach will prepare us to even be more successful when we emerge from this pandemic. And the world adapts to the new normal.
Thank you for your support. Stay healthy. I'll now turn the call over to the
Today's first question comes from Scott Davis with Melius Research. Please go ahead.
Hey, good morning guys and, looks encouraging. The results look encouraging. Outlook looks encouraging. So, I'm happy about that. Anyways, I want to get color on a couple of things, if you don't mind.
And I hope you can hear me okay, and we still have power outage here and where I live in the Northeast. The $60,000,000 cost out for the year,
is there any
of that $60,000,000 that you think you could hold on to into 2021. I assume these are mostly like lower T and E and things like that, lower comp accruals. But are there parts of that you think that could become permanent, not temporary?
Yes, Scott. This is David. Absolutely. So You hit it on the head, about $20,000,000 of that is discretionary related to T And E. And that is certainly the bucket of costs that we are targeting to effectively keep out of the business heading into next year.
And, you know, we certainly have learned a new way of, doing our business while doing things virtually. So, so that $20,000,000, we certainly would target to keep out of the business. But just a quick point, with the macro goal of keeping fixed costs constant, we will target to even offset the other $40,000,000. So, that $40,000,000 if it does come back into the business, our planning heading into 2021 would be to identify other reductions to offset it. So, effectively realizing the benefit of the full $60,000,000 heading into 2021.
Okay, helpful. And then just kind of technical question here. 5g Projects I would imagine they would be somewhat lumpy, maybe not as visible as traditional data center, but I really don't know. It's a a newer market, obviously. But can you help us understand what those projects typically look like and how they might differ from a traditional data center, project?
Sure. Hi, Scott. This is Rob Johnson. Yes, what we're seeing, trying to announce, a while back during the COVID, part of their stimulus was to really go after 5G and expand. So they put tens of 1,000,000,000 of dollars into doing that.
Those projects tend to be smaller, but tend to be tens of thousands of sites. And basically with 5G, what you have to do is go into that cell tower upgrade the power system because 5G does require more power and maybe upgrade the thermal. So the opportunity for us is lots of little sites, but tens of thousands of those. And that's what we're seeing certainly, happen in China and we participate really well in China when it comes to the 5G rollout. Same thing in the U.
S, what you're finding is the networks get, very constrained because of all the work from home, school from home, people are upgrading those networks, upgrading, maintaining and upgrading the equipment there. And 5G, as you know, kind of a race between China and the U. S. That who can get there faster. So we're, we're enjoying that and I think that trend will continue not necessarily lumpy but pretty steady over the next couple of years.
Okay. Good luck guys. And congrats, Dave Cote, on the book. It's a great read. I loved it.
So
You've you're very kind, Scott. And I appreciate the plug for the book. And please, I have to admit I enjoyed yours also, especially that Honeywell chapter. We hope that in the next book, you write, Vertiv will show up.
Well, I hope so. Good luck. I hope it works out. Yeah, good early sign.
Thanks, guys.
And our next question today comes from Nicole DeBlase with Deutsche Bank. Please go ahead.
Yeah, thanks. Good morning, guys.
Good morning.
I thought that the framework around 3Q was helpful. Some of the regional color by the top line. But following up on that, is it possible for you guys to kind of parse out you know, do you expect to see EBITDA margins up year on year across all three regions like like you were able do this quarter or is there any lumpiness things that we should be aware of?
Yeah, Nicole. This is David Fallon. I would say although we don't want to necessarily give guidance in particular by region, our expectation would be that, that would be spread across all three regions. In implicit in the guide is effectively that fixed cost will be flat this year versus last year. And based on the leverage, across the three regions, we would anticipate EBITDA margins to increase globally.
And that's even with contribution margin likely staying relatively flat. So we would anticipate higher adjusted EBITDA margins to be spread across all three regions.
Got it. Okay. Thanks. And then, totally understand, the lack of visibility here in the current environment. But just as we're framing our own models into the fourth quarter, you know, what what kind of seasonality do you guys typically see that we should be aware of?
And I guess on top of that, you know, the large project lumpiness, is there anything to think about with respect to year on year versus 4Q 2019?
Yes. Hi, Nicole, I'll start and then David can chime in. Typically the second half of the year is bigger than the first half. So that's kind of in 4th quarter it's typically our largest quarter, in the year. The big projects ebb and flow and sometimes we talk about that say that we had a big project in EMEA this year and we didn't that didn't repeat itself.
But what I would say is, what we're seeing is strength as we talked about in the colo and hyperscale, which tend to be larger projects. And we're seeing that not just in any particular region, but all the regions. And what's going to be important for us going forward for the second half is is how site access and how delivery and how the availability of the trades are there to be able to deliver. There's certainly a can see by our backlog of pent up demand, and trade constraints can be a problem and site access can be a problem. But in general, we'll see for certain larger Q3 and then a larger Q4.
Okay. That's really helpful. I'll go ahead and pass it on. Thank you.
Thank you, Nicole.
And our next question today comes from Lance Vitanza with Cowen. Please go ahead.
Hi guys. Thanks for taking the questions. I guess I wanted to sort of better understand the 3Q guide for adjusted EBITDA. In the context, just given how strong the performance was in the second quarter and the favorable revenue guide for Q3, I thought that the adjusted EBITDA guide seemed actually seemed a little light as you have margin on a quarter on quarter basis actually going down about 75 basis points or so, despite sequential sales growth. So I'm just wondering, I know obviously you talked a little bit about the COVID cost actions, the $30,000,000, that benefited the 2nd quarter.
And I guess I would have thought I know you talked about this a couple of seconds ago, but a little bit more would have kind of carried into the third quarter. So I'm just wondering to what extent are you giving yourselves just some room to maneuver here or is there something in particular that we should be thinking about that would lead to that kind of a margin performance in the third quarter?
Yes, thanks, Lance. This is David. And, first, I'll lead off. We always like the midpoint of our guidance. We likely we'll provide ranges, but we're generally comfortable at the midpoint.
And I can help you with the the $150,000,000 adjusted EBITDA at the midpoint and how that, excuse me, walks from the $145,000,000 from the 2nd quarter. So being a finance guy, we try to get things as quantitative as possible. So we have about $100,000,000 in increase in sales from Q2 to Q3. And if you throw a 40% to 45% contribution margin against that, you know, you get about $40,000,000, $45,000,000 of of benefit. And the headwind is certainly gonna be on the fixed cost side as we talked about on the on the in the prepared remarks.
And that could be in that $35,000,000 plus range. And 20,000,000, of that is going to be related to lower benefits from the COVID actions. And these are things that we benefited from in Q2 that we won't benefit in, from in Q3. Including furloughs and in certain geographies, we were able to, you know, receive some government subsidies So that's a good portion of the higher fixed costs. The other component is our commitment to continue to invest in strategic initiatives.
And this is something that we've talked about on the last couple calls. Heading into this year, plan was to continue to invest in R&D as we, continue to increase that spend as a percentage of sales. We continue to invest in markets that we believe have higher potential and profitable growth, including the channel. In addition, we have some digital projects that we continue to invest in. So, the spending for those strategic initiatives ramp up in the third quarter.
And that explains the remainder of the fixed costs increase sequentially from Q2 to Q3.
Super helpful. If I could just squeeze in one more on liquidity. You mentioned that you're less worried about even less worried about liquidity given the outperformance on cash flow in the second quarter. So the implication of that is that that $60,000,000 of cash was not pulled forward from what you otherwise would have expected to generate in the second half. And I know you talked about you're still expecting a good second half, but it sounds like this is really like incremental to what you would have expected when you were making your budget say at the beginning of the year?
Is that fair?
I think that's partially fair. Mr. Cody always reminds reminds us how conservative finance guys can be. And, when we look at cash flow, we certainly error on the side of being a little bit more conservative. But our second quarter free cash flow performance certainly was encouraging.
I think At this time, in May, we, hinted towards maybe a slightly negative free cash flow for Q2. So we certainly outperformed that. I did mention some of the, the favorable performance was based on timing of cash receipts. So we received between $20,000,000 $30,000,000 literally in the last day of the month. That we had anticipated to receive sometime in July.
So that's helped and certainly would borrow from Q3. But even with that taken into account, our Q2 free cash flow was better than what we anticipated and certainly lends to the optimism that we have, both for liquidity and related free cash flow generation for Q3 in Q4.
Makes sense. I understand. Thank you.
And Lance, just one little just further color on that, I would say that, I think use the words maybe less worried. We're not worried about our liquidity. We actually feel really good about our liquidity position where we're going, through this COVID time. So there's there's no worries and we only see that getting stronger as we get finished throughout the rest of this second half of the year.
Understood. Thank
Our next question today comes from Mark Delaney at GS. Please go ahead.
Yes, thanks very much for taking the questions. I was hoping first to better understand the comments the company was making about backlog. And if I understood properly, the company's expecting backlog to be at a good level exiting the year. Can you elaborate on what's giving the company the confidence that the backlog is going to stay high as you move through the rest of this year. And perhaps you could also speak more specifically to your expectations for the hyperscale portion of your business and how you're thinking about the sustainability of that end market, which certainly has a lot of good secular growth over the long term, as a company has described it in the past, but there's some debate in the investment community about whether some of the spending going on at hyperscale this year is pull ahead of demand?
Thanks.
Hey, thanks, Mark. This is Rob Johnson. I'll start off here. First of all, what gives us confidence in the continued strong backlog going into 2021 is our visibility in both our pipeline which is very strong globally and what we're seeing from an orders, an expectation for orders growth. So we do expect to see orders grow in the 2nd half.
So that gives us the confidence going through. Those things that I look at, which pipeline is a huge indicator of where things are going. I can't anticipate what's going to happen on the enterprise and small to medium business, but even a plus if they, they come, the recovery comes faster, I would say, in the second half. As it relates to hyperscale, what we're seeing globally is a combination of things. It's not just the hyperscale building out to build out.
There is a lot of data sovereignty. You've seen a lot of stuff around people wanting data to stay in their country. So what we're seeing is a proliferation of data centers and we'll continue to see that, really data centers in country, for country type of thing. And there's a lot of build out going on in Europe. Europe is red hot when it comes to that.
Certainly seen it in the Middle East Africa. And then just really around the world, South America. So we continue to see data not slowing down the rate of growth of data. That has to be processed and stored. So we're not looking at this as a bubble that scale is building out or colocation is building out too much capacity.
From our lens, the next 18, 24 months, We see just a strong demand and a need for data centers. There was a pause, as we talked about last year, a little bit of digestion, as I'd say, I'd say we're probably a little bit behind now, in order to fulfill the capacity that's needed. So we do expect to see hyperscale grow, but we lump high school and colocation together because a lot of the colocation companies, certainly outside of the U. S, are providing that capacity for those those HyperScalers.
That's very helpful. Thanks. For my second question, I was hoping to better understand some of the dynamics in the channel business. And I think we talked about it being soft. I think that was just from a cyclical and end market perspective, but taking share within channel has been one of the opportunities the company has focused on.
Has that share gain opportunity been disrupted because of the COVID challenges in the end market we've or do you still feel confident about the company's ability to take share within the channel business over time? Thanks.
Strategy and a huge investment for us. Try pre COVID, we felt really good about our execution. In the channel on a global basis that we were taking share. And we're doing that through providing innovative products and new solutions. Had a plethora of launches, and we'll continue to launch throughout this year and broaden our scope of offering of innovative products and solutions, as well as being that easy to do, easy button to go to company and being less distributed or I would call under not over distributed like some of our competition and picking who we want to do business with has really helped us concentrate focus and gain share and get closer and tighter with them.
So what I would say is while the overall channel has been impacted by the small and medium business. We expect that to come back at some point in time and we'll continue to execute and being a much stronger position because we continue to launch new products and programs, in the channel. So I'm very bullish on a global basis that we'll see as the recovery comes back us, us doing what we said we're going to do and that's, that's take share and grow in some new categories in the channel space.
Thank you for that color. Just lastly for me, I do want to better understand the impact of COVID on your business this year. I think in the first quarter call, the company had talked about $80,000,000 of revenue $30,000,000 of EBITDA that was was was negatively impacted because of COVID. And I apologize if I just missed it. I I didn't catch an update on on what COVID may have done to fundamentals in the second quarter.
Is there any more quantitative or qualitative color you can provide about how COVID may be your ability to complete projects in 2Q or in the 3Q guidance from a more revenue and a cost perspective?
Yes, I think as Rob mentioned, in his prepared remarks that, certain geographies certainly continue to be negatively impacted. And, certainly, if you look at lower year over year sales, those are a lot easier to attribute directly to COVID. I would say universally, if you look at our production and operations that we had a minimal impact, being able to, procure supply and produce product and We had very little operational issues, if
you will. So
we didn't specifically call out a dollar impact, on the top line related to COVID. And that's primarily because we look at everything that we're dealing with today is kind of fungible with COVID-nineteen. So, overall, I think organically, our sales were off $100,000,000 versus last year. One of the things that we called out specifically in the first quarter year over year was the impact of large projects. And that certainly impacted us in Q2, but it was more regional based.
If you look at it overall, we probably only had about a a $5,000,000 headwind from the timing of large projects from last year's second quarter. So if you want to attribute the remainder reduction of the the 95 to COVID, I wouldn't stop yet, but it's really hard for us to specifically say, what subcomponents that 90 is COVID or that we otherwise would have been able to deliver to customers?
Thank you very much.
Thank you. There
are no further questions at this time. So we'll That ends the Q And A session. I would like to turn the conference back over to Rob Johnson for any closing remarks.
Thank you, operator. I'm going to close the call by thanking our 19,000 plus employees around the world. For their hard work that they're doing every day to take care of our customers. We appreciate everyone's time today. As I said earlier, please stay safe and we look forward to speaking with you again.
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect and have a wonderful day.