Good morning. My name is Christine, and I will be your conference operator today. At this time, I would like to welcome everyone to Tennant Company's 2020 Second Quarter Earnings Conference Call. This call is being recorded. [Operator Instructions] Thank you for participating in Tennant Company's 2020 Second Quarter Earnings Conference Call. Beginning today's meeting is, Mr. William Prate, Senior Director of Global Financial Planning and Analysis and Investor Relations for Tennant Company. Mr. Prate you may begin.

Thank you, Christine. Good morning, everyone, and welcome to Tennant Company's Second Quarter 2020 Earnings Conference Call. I'm William Prate, Senior Director of Global Financial Planning and Analysis, and Investor Relations. Joining me today are, Chris Killingstad, Tennant's President and CEO; Dave Huml, Chief Operating Officer; and Andy Cebulla, our interim CFO. Today, we will update you regarding our second quarter performance and our broader business impact of the coronavirus pandemic. Chris will brief you on our operations, Dave will discuss progress we're making on our enterprise strategy, and Andy, will cover the financials. After our remarks, we will open the call to questions. Please note a slide presentation accompanies this conference call and is available on our Investor Relations website at investors.tennantco.com. Before we begin, please be advised that, our remarks this morning, and our answers to questions may contain forward-looking statements, regarding the company's expectations of future performance. Such statements are subject to risks and uncertainties, and our actual results may differ materially from those contained in the statements. These risks and uncertainties are described in today's news release and the documents we file with the Securities and Exchange Commission. We encourage you to review those documents, particularly our Safe Harbor statement, for a description of the risks and uncertainties that may affect our results. Additionally on this conference call, we will discuss non-GAAP measures that include, or exclude certain items. Our 2020 second quarter earnings release includes comparable GAAP measures and a reconciliation of these non-GAAP measures to our GAAP results. Our earnings release was issued this morning via Business Wire, and is also posted on our Investor Relations website at investors.tennantco.com. Now, I'll turn the call over to Chris.

Thank you, William, and thank you everyone for joining us today. The global health crisis affects us all, and we hope you are staying safe and healthy. In its 150-year history, Tennant has demonstrated a deep commitment to customer service. We honor that commitment by providing the equipment, parts and service our customers need to keep their facilities clean and safe during this pandemic. Our top priority is the health and safety of our employees, customers and business partners. In discussing today's financial results, we will provide as much context as we can about what we're seeing and how we're responding to what continues to be a fluid and unpredictable situation. While our second quarter revenue was down year-over-year, we are encouraged by the fact that the decline was significantly less in June than in April and in May. Furthermore, our July order patterns are consistent with what we saw in June. As we outlined in our last call, we took certain actions to manage our costs and cash flow, while preserving our ability to ramp-up quickly, when global markets eventually recover. In the second quarter, we implemented a combination of reduced work schedules and furlough programs for employees globally, consistent with applicable laws and regulations. These actions also included pay reductions for our senior executives and board of directors. At the same time, we limited travel to business-critical trips only, implemented work-from-home processes where possible, reduced non-essential discretionary and project spending, adjusted our expected management incentives and participated in government programs where appropriate. Because of these actions, our profitability measures for the second quarter reflect some sizable cost savings, most of which we do not expect will repeat in the second half of the year. However, they are consistent with our commitment to successfully managing through this period of…

Thank you, Chris, and hello everyone. As Chris noted, we continue to push forward with our enterprise strategy, because it is central to how we can ultimately grow the business as markets start to recover. Although, we took significant expense reduction actions in the second quarter, we continued to fund and resource our strategic efforts. In fact, we are reaping the benefits in 2020 from actions we took last year, and have made important progress with new actions in the first half of 2020 that, I'd like to highlight for you. In analyzing our product portfolio globally, we've made significant progress with strategic pricing changes in addition to exits from margin-diluting products we announced last year, that we expect will lead to further improved gross margins as volumes return to normal. We've established standard product configurations for our most popular products and are keeping them in stock for ease of ordering and fast delivery. This will allow us to simplify how we sell, manufacture and service our machines, all of which improves our relationship with our customers and our ability to deliver improved business and operational results. Specifically in our North American business, we're using 80/20 methodology to segment our strategic account customer base and distribution channel partners. This helps us in focusing on our best customers, while reducing unwarranted discounting in order to improve efficiency and profitability. At the same time, as part of a geographic portfolio optimization initiative, we have restructured our Japan organization into a wholly indirect go-to-market channel. This will enable us to better leverage the strength of local channel partners in serving local customers. It also will allow us to align our cost structure to the profitability potential of that local market. In China, we've begin the consolidation of the manufacturing footprint of Tennant China…

Thank you, Dave, and hello everyone. Please note that in my comments today any references to earnings per share both GAAP and non-GAAP are on a fully diluted basis. As Chris noted, Tennant's second quarter results reflect the negative impact of the coronavirus pandemic. For the second quarter of 2020, Tennant reported net sales of $214 million, down approximately 29% year-over-year. Organic sales which exclude the impact of currency effect, declined 27.2%. The decline in sales during the second quarter of 2020 was greater in the first two months of the quarter than in the last month of the quarter. Organic sales declined 31.6% and 38.5% in April and May respectively with the decline in sales dropping to 12.4% in June. The decline in revenue for the quarter was the result of continued slowdowns in some end markets amid widespread disruption to our customers' operations. In addition, we are currently seeing a decline in July order rates that are consistent with the level we saw in June. While we are encouraged by the reduction in the rate of sales declines that we experienced in the quarter, we cannot say whether these month-to-month trends will continue in the second half of the year given the unpredictability of the pandemic. Turning to the bottom line for the second quarter. We reported net earnings of $14.3 million or $0.77 per share down from $14.8 million or $0.81 per share in the year ago period. Adjusted EPS which excludes certain nonoperational items and amortization expense totaled $0.96 compared with $1.35 in the prior year. Let's take a closer look at our second quarter sales results by geography. As a reminder, we group sales into three geographies, the Americas, which includes all of North America and Latin America; EMEA, which covers Europe the Middle East…

Thank you. [Operator Instructions] Your first question comes from the line of Mike Shlisky from Colliers Securities. Your line is open.

Thank you and good morning, everybody.

Good morning.

Good morning.

I wanted to start on your comments, Andy, about -- it must have been on slide 14, that $15 million in the savings will not repeat in future quarters, that part you bold there. I guess, really, first, is that $15 million on an annualized basis or a quarterly basis? Just to make sure, I got that right. And then, maybe, secondly, will it just all come back in one big lump here in the third quarter, or will the expense reductions and other cost actions, kind of, gradually come back as the sales come back?

So, thanks for your question, Mike. So, first off, the $15 million is the savings we had in the quarter, in the second quarter that we experienced, that helped boost our EBITDA result. And so, that's the first part of your question. The second part, you think of things like government savings programs that we were able to take advantage of. That was about $5 million of that savings in the quarter that we're not expecting to repeat in future quarters. And another example is the employee actions, some of the furloughs or work reductions we took in the quarter, to reduce our expenses. As Chris mentioned, we're not planning any broad-base actions at the current time, so we wouldn't expect to see those kind of savings in future quarters. It’s just a couple of examples. Does that make sense?

Okay, okay. I would suppose then, obviously, if orders get a little bit better than this quarter and you have better sales that'll at least offset some of those costs coming back. So, I guess, maybe it won't be just lumping $15 million less, once you get to top line together. Okay, that's fine. You also mention -- I think, it was Dave, you mentioned in some of your comments using the 80/20 methodology to kind of get some additional efficiencies out of the business. I'm kind of curious, are you implementing that as a very wide scale company-wide basis with maybe an outside firm or some kind of a broad strategy, or are you just kind of using some basic principles that are kind of well known today to get that kind of benefit going?

Yes. Thanks for your question, Mike. We've educated ourselves on 80/20 methodology, but it is just one of many tools we have in the toolset, as we analyze our business for improvement going forward. So we’re using -- I would say, we're using the most appropriate tool that's available to us in each instance to drive our strategy.

So, it's not a large, like, wide scale company-wide consultant-given plan, just your own operation improvements. Is that a way to say it?

I think that's a fair characterization. The GPS strategy that we've articulated in the past is really the holistic broad enterprise framework we're using and there are a number of tools within that framework.

Okay. I wanted to ask also about your new compact products. Especially, in the U.S, I'm curious, how penetrated are you in the restaurant and small coffee shop end market? I always thought that some of your stuff was really meant for larger square footage like an airport, or a very large store, or restaurant. Is there a real organic opportunity within North America on those smaller compact products?

Yes. Great question. Historically, our share has been lower in some of these small space markets or smaller spaces within larger environments for our customers. We recognized this years back and started expanding both our portfolio to service those applications and also our channel's ability to reach those customers. And so, really the CT 5 was the product I mentioned in the narrative, is just the next step in our advances into that important marketplace to improve our market share there.

Okay. Perhaps one last -- yes, go..

This is Chris. I would just -- I'd say, historically, it's been the part of the market where we've been most underrepresented. We've always been interested in figuring out a way to enter. It's a little more complicated than our historical vertical markets. But I think with these two new products that are getting our customers to become excited to move away from mop and bucket to mechanized cleaning, especially now when cleaning is becoming a high order priority for them. And it's actually getting some interest, because we have a product also I think as Dave said, that's at the right entry-level price point. And that was always the challenge, so I think we have the right product that does a very professional job. And it's at the right price point that is creating interest in, a market segment fast food restaurants, convenience stores, gas stations where we really have very little if, in many cases no presence today. So, it's a potentially exciting opportunity, down the road. You're not going to see this thing take off right away, but it's our first foray into it.

Got it. That is a lot of square footage, so sounds very promising.

Right.

And perhaps that would piggy back onto my last question for you maybe just for Chris. This past quarter in the – sorry, on the first quarter call, I recall you, you said, it was kind of a theory that with millions of folks getting sick worldwide. And a lot of folks dying out there with this pandemic, there could be a tie-in to an increased focused on cleanliness in the workplace and in public areas going forward. I do recognize that was very cautious and very strange time in the market. But can you update us now? Is that theory what you're hearing from customers becoming the reality here? Are people out there looking to clean things more in a lot more businesses today, than in the past?

Well, I think, it remains a theory. We're not seeing it play out in the marketplace yet, at least for our products. We do believe that, in the medium to longer term that, more robust cleaning protocols will be put in place. And that people will adhere to a higher standard of clean which should bode well for our product portfolio also bode well for products like AMR. But right now, the majority of customers around the world are, still very focused on high-touch cleaning, using sanitation, chemicals and devices to hold the pandemic at bay. And we think that floor cleaning has not yet returned, to a priority part of their cleaning protocol. So we showed that in June, our sales were down less than they were, in April and May. And that is mostly because we're seeing more of our customers open up so that's where we're starting to see the benefit. We're not yet seeing the benefit from a higher standard of clean. But the good news is that we have very strong and intimate relationships with our customers around the world. And we're having this conversation with them. And we will be the first to know, because we're trying to influence them in this direction, when that trend starts to turn.

Got it. That's sounds great. I will hop back in queue. Thanks so much.

Your next question comes from the line of Chris Moore from CJS Securities. You line is open.

Good morning. This is Stefanos Crist calling in for Chris.

Hi, Stefanos. Good morning.

Good morning. You mentioned, declines in June were less severe, than the declines in April, could you possibly quantify that for us maybe April versus May and versus June?

Yeah. They said in the remarks, April was low-30% reductions in sales. And May was upper-30s I think 38%. And June we're on 12.5% reductions in sales. And as Chris just mentioned as well in July, the trend we're seeing in our orders is consistent with the June level.

Got it. Thank you. And besides any COVID-related shutdowns, what are the biggest uncertainties, facing Tennant in the second half of the year?

No. We said it. It's the fact that, many of our customers have been closed down. Some are cautiously opening. Some are running at reduced capacity. Standard floor cleaning does not remain a priority at this stage as they do the high-touch disinfectant cleaning. So I think the biggest uncertainty going into the market, into the second half is that trend does not improve. And of course we anticipate it's going to be a pretty bumpy ride in the second half. And if there were to be a significant disruption, another closedown in a broad-base manner in the U.S. market or elsewhere that would obviously also have a significant impact on our business. But what we're doing is we have done a lot of very detailed scenario planning for a whole host of things that could play out. And we know how we need to react in each of those cases to manage the business especially through this uncertain time and are prepared to pull the necessary triggers quickly, to stabilize the business.

Yeah. Just to build on that, I think, to us we kind of look at it -- it's really the pace of the recovery. I know you asked about, outside of coronavirus. It's just so dominant right now with our end markets. It's really how quickly that pace recovers how quickly our customers open and how quickly they're going to invest in some capital. That's really the risks, we're looking at.

Right. And the other thing, I would say is, in the last quarter, we said, if you looked at what customer segments were performing better on a relative basis it was essential retail, warehousing, logistics. That remains the case. Manufacturing remains very slow. Our building service contractors have shifted really to this high-touch disinfecting cleaning. That's impacting our business. Hospitality is also down and healthcare which we had an initial bump in the first quarter that helped us, that has not repeated in the second quarter. So healthcare remains down as a vertical market for us. So we haven't seen much shift. Our hope is that, we're beginning to see some activity some life in some of these other vertical markets. Once that starts to happen I think that our trajectory will begin to improve.

Got it. That make sense. Thank you.

Your next question comes from the line of Marco Rodriguez from Stonegate Capital Markets. Your line is open.

Good morning. Thank you for taking my question.

Good morning.

Good morning.

Good morning.

I wanted to talk a little bit about, the enterprise strategy specifically, on the reduction of your operational complexity. You highlighted a couple of things you did or you're working on right now, in terms of obviously exiting some product lines and then establishing some standard configurations for manufacturing. I was wondering if maybe you could just talk more as far as where you are on that roadmap. Are you still in the early innings? Are we mid-cycle or towards the end as far as that specific area of your strategy?

Thanks, Marco. This is Dave. I'll respond to your question. First and foremost, we are very excited and committed to the GPS enterprise strategy and it is the primary means we expect to deliver on our long-range financial targets. Where we're at in the journey, we really developed this over the years 2018 -- late 2018 through 2019. And 2020 represents the first full year of activation of this strategy in the business. And so given that our strategic horizon is four years, I would say we're really still in the early days of the execution of this strategy. We're very encouraged by what's possible within our business and the entire company including leadership team is committed to execution even in the midst of the challenges with operating within the pandemic. What I highlighted for you in the narrative was some of the more recent developments and we expect to have more details as we continue to roll forward with the strategy.

And just to build on that, if you look at standard configurations, which we believe is a really big deal both from a customer's perspective and our ability to deliver with shorter lead times and overtime. It may also take some cost out of our products to compete more effectively on price. We've really just launched that. Our hope is that maybe by the end of September that 90% of our Tennant machines have the standard configuration. It means they have it. That doesn't mean that we've actually fully educated the sales force so that's fully educated the customer base. So this is the part of our product portfolio that starts flowing through. So on that piece, I don't think we're seeing any benefit yet. And as Dave mentioned, the work we've done in Japan, really hasn't shown any results yet because that's still a work in progress. And definitely in China the integration of the two businesses Tennant and Gaomei that's work in progress right now. And I wouldn't anticipate really seeing a readout of those benefits maybe Dave until 2021 in any significant way.

I think that’s right.

So Dave's characterization of where we are in most of these things is early innings. I concur with that.

All right. Very helpful. Then switching here to the $15 million in benefits you recognized from the one-time cost cuts. Can you maybe discuss, what's the split between SG&A and cost of goods or was it primarily down in SG&A?

It was in both. But we're not [ph] lacking the details of that. We're focusing on EBITDA and I think that's -- we talked about this $15 million in EBITDA, but it was a little bit in both. You could think of it that way.

Got it. And were there any other cost cuts that were realized in the quarter that are more permanent in nature? In other words were there more than $15 million of cost reductions that benefited the quarter?

No, no. A lot of the actions that we talked about and we took were more temporary in nature given the pandemic. And again keep in mind one of our primary focusing we're trying to do is make sure when markets recover and they will recover that we're ready to ramp up and meet our customers' needs. So that's really one of our key principals, we talked about last quarter and we held true to in the second quarter that we really want to be ready when this pandemic subsides.

Got it. And then just also, so I'm understanding the dynamics you're seeing from your customers with their -- obviously a lot of places were shutdown in Q2, early parts of Q2. But presumably most places are opening up or at least operating at some form of capacity whether it's reduced capacity or what not. But I would assume that they would still be focused on cleaning. But if I'm understanding you correctly and correct me if I'm wrong, it sounds like perhaps some of the customers are shifting some of their spend at least temporarily from cleaning floors to more of a sanitation type aspects. Is that fair?

Yes. That's fair. That has been the priority is high touch surface disinfecting cleaning to keep the pandemic at bay and floor cleaning has not been a core part of that protocol at least until now. And you're right that many of our customers were shutdown in parts of the second quarter. And we think that the June improvement is completely due to more customers opening up and beginning to order again. And we've seen that trend carry over to July. And so that's at least a promising early signal. But I would say that as we look into the back half of the year, there is no definitive signal that we're going to see things improve dramatically. And, of course, there could be another major disruption to the business if things start to close down again. So we're anticipating, it's going to be pretty bumpy. And if we could maintain the June, July level and maybe improve on that a little bit as we go forward that's how we're modeling our business right now.

So two things I'd add to Chris' comments is, one, keep in mind for many of our customers this is a capital expenditure. So some of them are pausing in what they buy. They're not necessarily shifting that. In some cases they are, but they're pausing and waiting until things -- maybe they're closed but even if they're open they're pausing. The second thing I'd add is that the comments we talked about service and PNC. We certainly saw less of an impact particularly in the last month of the quarter. So as we move into that customers are shifting -- they're choosing to maintain their equipment first. I mean, the first thing they're doing as opposed to a new capital investment. So that's where we're seeing some of that -- maybe a quicker recovery than on the capital side.

Yeah. And service is usually a leading indicator of improvement historically. That's the way it worked in the last recession.

Got it. Very, very helpful. Then I was wondering if maybe you can talk a little bit about your revolver. You obviously took it down. You expressed the idea that obviously it was defensive in nature just given the great uncertainty on the pandemic. But you repaid it back it looks like pretty soon after you took it down. And it sounds like you're still expecting some choppiness, but some level of confidence in the second half of the year on terms of your overall business. But maybe you could just talk about your thoughts there on the revolver.

Yeah. So like we talked about cash flow in the quarter was pretty strong, and we feel pretty good about that. And customers we've got a good customer base. They're still paying and we feel pretty comfortable with that. We've talked about publicly some opportunities we have to manage our inventory and that could be another potential source for us. So given those new positive cash flow and the cash balance we still have at the end of the quarter and the fact that we've got a great relationship with our banks and can always draw on the facility if need be, we didn't think it was necessary to have the cash just sitting in our banks right now. So felt comfortable with the situation one, we were covering a little bit; and two just, the cash that we have and the cash flow we saw in the quarter.

Got it. And last quick question for me. Just wondering, just given all the volatility up there in the market as it relates to the competitive dynamics and competitors in different regions are there -- aside from some of the new products that you're launching, are there any other advantageous strategic initiatives that you might be looking at whether that's positioning for acquisitions or other type of product launches in the near future?

One, we're continuing -- we talked about AMR in the quarter. We've mentioned it continued to be a bright spot for us. We didn't get specific on the numbers, but it continued to be a bright spot. We've continued to invest in expanding that offering. Now, we're not there yet. We haven't announced anything yet, but that's an area that we'll continue to invest and hope to expand. And Dave talked a bit about the small space as well. So those are a couple of areas that we can highlight -- I think we could their potential.

Right but our priority right now is successfully managing through the uncertainty of the pandemic and continuing our innovation agenda. And you're seeing we are rolling out new products. But most importantly, we've said this is maintaining the integrity of our GPS strategy because all the initiatives within GPS are all about simplifying our business and improving our operating model that helps us now in the short term, but more importantly will allow us to get off to the fast start when markets recover that Andy talked about. That's where our focus is right now.

Got it. Understood. Thank you very much. I really appreciate your time.

Thank you.

Your next question comes from the line of Joseph Mondillo from Sidoti and Company. Your line is open. Joseph, if you are on mute, please unmute. Your line is open. And our next question comes from the line of Brett Kearney from Gabelli Funds. Your line is open.

Hi guys, good morning. Thanks for taking my question.

Good morning.

Good morning.

Great to hear AMR is still progressing well and continued customer interest in those other regions when that feasible again. I was wondering the nature of conversations you're having with customers on that front. Would you say it's consistent to kind of where we were even before the pandemic, or have new elements factored into customers' thinking in terms of every business has more considerations today, human occupancy levels as well as cleaning considerations? I'm just curious if any new dynamics have come into those ongoing conversations you have around the varied autonomous offering you have with customers.

No, I'd say the same dynamics as before the COVID play out now. The one thing that's changed is that, as companies are evaluating the cleaning protocols and they're realizing that they're going to have to be spending a lot more labor-intensive time on this high-touch disinfectant cleaning, they need to figure out a way to keep the entire facility clean and do it in a very efficient manner and so that they can shift the labor to these more high order cleaning priorities. And those customers that understand that are becoming more interested in AMR as a way to help them, not have to expand their labor pool, get all the cleaning jobs done, but get it done more efficient. So that's a conversation we're having with more of our customers now because of the pandemic that we really didn't have prior.

Okay. Great. Thanks so much.

Welcome.

Thank you.

[Operator Instructions] Your next question comes from the line of Mike Shlisky from Colliers Securities.

Hey guys. Thanks for taking these follow up questions from me here. And I want to follow up on some of the AMR questions and comments that were made. Is that market getting any more crowded these days? I do get the occasional forward email that's hey check out this product. It's also an automated scrubber, but they seem like they're from smaller startup-type organizations or someone's garage as opposed to a major company. But are any of the big companies, any of the four or five large players besides you going to that market with anything that's on the par with your AMR right now?

I would say you are correct in that many of the entrants are smaller entrepreneurial companies coming outside of our industry. And as we said in the beginning, the AMR equipment and the ability to perform is important, but more important and this is what they can't match is you need to have a sales and service infrastructure in place to support this to educate your customers, to help them change their cleaning processes to be successful and to gain the benefits that they believe are inherent in the AMR technology. None of them have that. I mean the cost of building those infrastructures is huge, so I think that's a real barrier to entry for a lot of the small players. When you look at players in our industry right now, there is really nobody who has commercialized an AMR product at scale other than us. So, we believe we have a significant lead and we like our position going forward.

Okay. Also, want to touch on some of the 2024 goals that are in the slides and the comments today's well. I just want to make sure, I'm clear on what the base year is. Are you counting this year as the base or are you counting 2019 or 2019 plus some normalized growth as your base for 2024?

Yes. Those are goals we obviously set before the coronavirus pandemic. So, not having given guidance, it's probably not fair to say 2020 is the base here because, we've got to think about it a little bit differently for next year which we aren't coming out with numbers for next year yet, but the base year would be prior to 2020 in our goals that we set out. If you think about it, we talked about it in February. And I think that thinking about prior years as a base is a better way to think about it.

So perhaps your guidance for 2020 that you gave in February that's a fair base perhaps, or is that close do you think?

Yes. I think that's probably a fair base. Of course, as we think about the recovery from the pandemic, we got to really then what that looks like and how that'll feel. I know a lot of people talk about these different rates of recovery. We mentioned earlier that the pace of recovery might impact that. So I don't want to give you the impression that's what we're saying about 2021 at this point. We haven't disclosed that yet. But going forward, ex-pandemic, yes the 2020 guidance that we laid out in February is a fair way to think about the base.

Okay, great. And maybe one last one from me. Just curious on the search for a permanent CFO. As I recall on the initial announcement, Pete is going to stay on to help out until July 31, or tomorrow. So I want to know where you stand there with that part of the organization.

Yes. Well first and foremost, Andy as interim CFO and his team have done a terrific job and we haven't missed a beat. So I think it's important for you and others to know that. But what I can tell you is that we have commenced a search process. We're not going to talk about when that will be concluded but it has been kicked off.

Okay. Yes, thank you and yes I will also add we’ve been here also very impress with Andy as well. So it just seems that like so far you’ve definitely not missed the beat. Thanks so much for taking my question.

Your next question comes from the line of Joseph Mondillo from Sidotti and Company. Your line is open.

Hi, everyone. Good morning. Can you hear me…

Good morning. Hi, Joe. Yes, we can hear you.

Okay. I am getting some statics. So I just wanted to make sure. So my first question just regarding your productivity improvement plan, however you want to – however, you guys refer to that related to go to market strategy, supply chain, value engineering everything that we've talked about for a little while. You have a pretty detailed road map and plan going ahead. And I'm just wondering what the timetable of finishing a lot of that is. A year from now, should we expect a lot of that to be done? I understand that some of this is just an ongoing multi-year just ongoing but a lot of the heavy lifting – when do you think you'll be done with a good portion of that?

Yes. Thanks for your question, Joseph. This is Dave. I'll address the question. Really that's a four-year strategy. And we'll pace the execution of the initiatives within the strategy over that time period. And so we'd expect the impact to read out over the four years. It's not a case of doing all the work up front and harvesting the impact. We had to pace the individual initiatives based on a couple factors. One is lead time to execute. Some changes we contemplated making you just have to get started earlier because it takes longer to realized benefit. We also have to balance it against resource availability and so that's to make sure that we can execute well each of the initiatives. We've got to have the bandwidth to execute as we would like to. So it's really a four-year journey of execution across a broad range of initiatives within the business.

Okay. And then could you give us your thoughts or provide an update on your competitive landscape especially in this pretty challenging time how your competition's doing what you're seeing?

Yes. We're not seeing anything new or different. I think we're all trying to manage through this period of uncertainty as well as we can. What I can say is I don't think we've seen any new material initiatives from any of our competitors in terms of winning new customers, launching new products. I've said that we continue our lead in AMR and we've not seen any major incursion by anybody on that front. But it's not unusual that in this kind of a period that some competitors will resort to some pretty aggressive pricing. So I think that is – and it's more aggressive than we normally see. And that really may be the most important dynamic that we're looking at and dealing with right now.

Okay. And I may have missed this when you were talking about AMR but is the – you haven't introduced a new model outside of the T7 correct? And can we expect a new model being introduced with AMR capabilities at some point later this year?

Stay tuned. And just know we are – this is not a one off for us, right. This is a long-term strategy and we fully anticipate over time building a portfolio of capabilities in the AMR space. So we're not prepared to tell you when the next one is coming but stay tuned.

Okay. And then just to follow up with that and it'll be my last question. The R&D has come back on a percentage basis quite a bit in the second quarter and even in the first quarter a little bit when you look at the last three quarters of 2019. Just wondering what to make out of that, especially with the cash flow that you drove in the quarter. I thought we would continue the spending, especially thinking about AMR et cetera. So just wondering about R&D and how that looks going forward and what happened in the first half.

Well I think in environments like this we need to be cautious improvement across all our cost categories and we've had to do that as well within R&D. But what I can tell you is we have not in any way compromised any of the important innovation initiatives and we certainly have not compromised our work on AMR.

Okay. Great. Thanks for taking my questions. Have a good day.

Thank you, Joe.

Since there are no further questions at this time, I would like to turn the call over to management for closing remarks.

All right. Thank you, Christine. Again thank you all for joining us today. Once again, we hope you all stay safe and healthy. So this concludes our second quarter earnings call and you may now disconnect. Take care everybody.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.