Good day, and welcome to the WESCO First Quarter 2020 Earnings Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask question. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Will Ruthrauff. Please go ahead.

Thank you, Brandon. Good morning, ladies and gentlemen. Thank you for joining us. Joining me on today's call are John Engel, Chairman, President and CEO; and Dave Schulz, Senior Vice President and Chief Financial Officer. This conference call includes forward-looking statements. And therefore, actual results may differ materially from expectations. Please see the webcast slides for additional risk factors and disclosures. For additional information on WESCO International, please refer to the company's SEC filings, including the risk factors described therein. The following presentation includes a discussion of certain non-GAAP financial measures. Information required by Regulation G of the Exchange Act with respect to such non-GAAP financial measures can be obtained via WESCO's website at wesco.com. Means to access this conference call via webcast was disclosed in the press release and was posted on our corporate website. Replay of this conference call will be archived and available for the next seven days. With that, I'll turn the call over to John Engel.

Thank you, Will. Good morning, everyone, and thank you for joining us for today's call. On behalf of WESCO, I hope that all of you who have been staying healthy and safe in these challenging times. We prepared a thorough update for you today. I'll lead off with a few introductory remarks, then Dave will take you through our first quarter results, and then I'll return to provide some additional comments on the state of the business, and also an update on the excellent progress we're making on the acquisition of Anixter. Since we last spoke in March, the spread of the COVID-19 global pandemic and the government imposed shutdowns impacted our customers and suppliers across all of our end markets. In response to this crisis we've taken quick and decisive actions centered on three top priority. Number one, protecting our employees. The health and safety of our employees is always our top priority and we took the necessary steps to implement increased safety, sanitizing and social distancing protocols, as well as remote work and shifting strategies to provide continuity to our operation. For our branches and distribution centers, we implemented a blue team, white team approach where half of the team works in the facility at a given time. If an employee is diagnosed with COVID-19, we send the employee home, sanitize the facility and then bring the other team in to maintain the operation. We also instituted a reward and recognition bonus for our front line employees. Number two, super serving our customer, we implemented our business continuity plan and have kept all US and Canadian facilities operational to serve our customers and their essential businesses. We implemented daily impact reporting to provide customers with real time supply chain constraints into the availability of their needed products and…

Thank you, John, and good morning everyone. I'll start with an overview beginning on page 4. Reported sales in the quarter were up 0.4%, below our outlook of 2% to 5% provided in late January. Results were tracking within the outlook range through the middle of March but then dropped off the last two weeks of the quarter and in outside the range due to the impact from the global coronavirus pandemic. We estimate that COVID-19 negatively impact sales by over $50 million in the quarter. Gross margin increased 50 basis points versus the fourth quarter of 2019, reflecting the traction we are getting on our margin improvement initiatives. After adjusting for expenses related to the Anixter merger, our SG&A was down versus the prior year due to reductions in variable compensation expense and represented an improvement to SG&A as a percentage of sales compared to the prior year. Adjusted operating margin was 3.3%, slightly below our outlook range due to the lower sales level during the last two weeks of the quarter. April month-to-date reported sales were down 16% through Tuesday, April 28. We continue to support our customers and their essential businesses with growth continuing in utilities, broadband and safety. We are leveraging our global supply chain to source highly sought after personal protective equipment and have received substantial amounts of unsolicited feedback from our customers detailing our extra efforts to support their businesses. John will provide a detailed update on the Anixter acquisition a bit later in the call, as we have made substantial progress and remain on track to close in Q2 or Q3. Turning to slide 5, this summarizes the organic sales growth by end market and geography, you can see on the right hand side that organic sales pattern in the quarter was 2%…

Thanks, Dave. Turning to page 10, integration planning activities for the transformational combination of WESCO and Anixter are accelerating. And I must tell you that we are more excited than ever about the opportunity to create the premier electrical and datacom distribution and supply chain services company. We've made substantial progress on the path to close the acquisition of Anixter. Committed debt financing is in place, and the waiting period for Hart-Scott-Rodino have expired. We receive regulatory approvals in Turkey and Russia, and earlier this month, the Anixter stockholders voted overwhelmingly in support of this transaction. The remaining regulatory approvals in Canada and Mexico are in process and we're currently responding to a supplementary information request in Canada. We continue to expect to close this transaction in the second or third quarter. The integration planning that began in January has rapidly evolved and today consists of dozens of joint integration teams, comprised of both WESCO and Anixter personnel that are working on numerous value creation initiatives for launch upon closing. Over 500 separate initiatives have been identified and developed to date. The amount of work that these teams have accomplished in a short period of time is impressive. More importantly, the high degree of collaboration among these teams have been inspiring and underscores the strong cultural alignment between the two companies. I would like to thank the WESCO and Anixter integration team members for the great progress they have made to date. The integration planning process is uncovering a higher degree of operational synergies than we originally anticipated. And the strong alignment of values and priorities across the integration teams gives us great confidence that the future of the combined enterprise is bright. Now moving to page 11, as we consider the future of the combined enterprise, there are numerous…

We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Deane Dray with RBC Capital Markets. Please go ahead.

Thank you. Good morning, everyone. And I especially like these new look slides that you debuted today.

Thank you, Deane. Good morning. I hope you're staying healthy and safe.

Yes, sir. And wishing you all the same. Hey, look, fully appreciate the suspension of guidance, but you did give some color on April which was helpful and we're trying to put that down 16% in context. And some of the other distributors who have more like safety and cleaning mix are - look like they were not down as much. So, if you give some color there? And Dave said, you called out three end markets or three verticals, utilities, broadband and safety being up, was that a comment sequentially, was that a year-over-year? So, if we could start there, that would be helpful.

Yes. Sure, Deane. That's year-over-year and that's a continuation of the trend that we saw in the first quarter. Those are the businesses that Dave spiked out. And the few other public distributors that you mentioned have a very different mix than us, I think, as you know. So, when you - and so I would say there is also another much closer competitor it's European based that has also reported results and their results through April were down measurably - a measurably larger degree than ours are. So, here is how I think about the 16%, I'll give you a couple comments. And I've been in this business for more than a couple cycles and I have reflected quite a bit on this going back to the great global recession, because that was in my early CEO days. This was very different, it happened quickly, very quickly, obviously. And a lot of them the demand declines are driven by government imposed shutdowns and other businesses furloughing and curtailing parts of their business. If you compare and contrast this to the great global recession, we lost 25% on our top line, our sales are down 25% on a full year basis in 2009. And there were times moving through that year where we saw obviously declines much greater than that in some of the worst months. So, we're at a 16% level right now, it's been relatively stable through the month of April. So, there is a little additional color. It's not like it moved around a lot. We don't have the sales for obviously today or yesterday yet [ph]. But this is true. With a couple of days remaining, we are down at 16% and as I said it's held relatively stable nowhere near the levels that we saw…

Okay, that's really helpful. And I don't want to parse too much just for the month of April. But since you are giving some color there, what is down the most and I would guess that Construction is probably the one that initially was down, but then there were a number of cities who did resume construction activity, but since you are so levered to that where and how has that played out so far?

It's Construction, Deane. So, and it's very much driven by location and, let's call it, geography. So, it's not consistent as you would expect, because - and that's true - particularly true across the US and Canada for that matter, because different municipalities and different locations are - have different rules in terms of what is deemed an essential business and what the requirements are for these businesses to operate. So, we put a tremendous process in place where we're monitoring all that real time. We've been meeting daily with a war room management approach and we're positioned to really try to maximize where we can. We've been deemed an essential business. So, we're still supporting our customers and focused on meeting their needs. They have got some clear challenges, but it is clearly Construction. And as you saw from the Q1 results to a little greater degree in Canada, which you saw in March compared to the US in our webcast deck, I will say this, what's also interesting at this point we're seeing is predominantly project delays and not cancellation, which is interesting. So, I think, that gives us some degree of confidence that when some of these imposed shutdowns start to get relieved that delayed project activities will kick back in.

Great. That's very helpful color. Just last question from me is for Dave. The expectation is that industrial distributors like WESCO tend to be very reliable and high free cash flow conversion companies in downturn. So, the expectation is there. Just want to see how that is going to come through. This quarter it looked like the conversion was lighter versus your first quarter seasonal conversion. So, if you can address if there were something one time that would have skewed that?

Deane, I'll highlight a couple of things on our net working capital in the first quarter. First, inventory was a source of cash, so our inventory levels actually came down. Obviously, as we started getting some preview of the impact on demand, we took the appropriate actions to manage our inventory. Also what you saw was the shape of our sales growth within the quarter. We did have a higher receivables balance, which is generally consistent with what we've seen in the past. So as you continue to see the sequential growth from January through March, we generally tend to have a cash draw due to receivables. But going back to your point as we go through this downturn, we fully expect that we will generate significant free cash flow, primarily driven by working capital plans. We are laser focused on that. Our team is doing an excellent job managing the controllables, the inventory and managing the collections coming in. So, we are very comfortable that our model will retain intact.

Thank you. And best of luck to everyone.

Thanks, Deane.

Our next question comes from Sam Darkatsh with Raymond James. Please go ahead.

Good morning, John. Good morning, Dave.

Hi, Sam.

And obviously, wishing good health to you both and to your entire organization. Three quick questions, if I might, if you indulge me. First, your largest vendor Eaton, obviously, has some - a fair amount of exposure to Mexican manufacturing with forced production shutdowns. Are you seeing any issues with extended lead times or fill rate degradation either with Eaton or throughout the supply chain from folks in Mexico?

Sam, first, let me - I hope you and your family are staying healthy and safe. Let me start with that. That's of utmost importance. Thank you for the question. We have, in Mexico, the rules and the regulations and the direction relative to how certain businesses have been operating had been a bit more stringent than - I would say, than the US. And Eaton like some of our other suppliers that have Mexican-based manufacturing have done an exceptional job of managing their operations that are Mexico based. So, at this point, we've - remember, when you think of the whole value chain, we've got a rhythm to the algorithms we run. We've had demand drop off in certain areas and then we've got very robust set of inventories and we're very focused on inventory availability and fill rate. And so there is sufficient inventory, I think, in the value chain coupled with our supplier partners who are in Mexico, Eaton at the top of the list. We're doing an exceptional job of managing given the given the world regulations and constraints that they are dealing with. So, so far, I would say that this is more demand side driven than supply side driven at this point.

Got you. Second question for Dave, if I might, the $600 million in year three free cash flow was good to see although obviously there is some counter-cyclical elements to free cash flow. So, I'm trying to unpack what the macro assumptions you're making to get to that $600 million assumption, Dave. What sort of organic growth rates or organic sales base are you looking at in year three versus, let's say, 2019. What kind of a macro backdrop would be required to hit that $600 million on a sustained basis as opposed to a working capital driven basis?

Sam, clearly, we're not providing a 2020 outlook, it's a great question. I think the way that I would ask that you would think about this is, look at the history and when you take a look at the cash flow generation of these combined companies, just looking at some of the data that we've already provided, you're looking at almost $400 million historically in free cash flow generation. And on top of that we've got $200 million of cost synergies on top of that. That gives us the confidence. We've run several scenarios on how we would get to the accretion dilution. We're not going to provide that information to you today, but we're very confident in our ability to generate that greater than $600 million of free cash in the out years.

My last question, if I might, the stock has recovered a bit of late, is there a price and if so, generally speaking, where is it John and Dave, where you might reconsider using equity financing beyond the preferred in order to finance the Anixter deal?

As you know Sam, and I think as the market understands we moved to all-debt financing. Again, we're highly confident in the resiliency of our business model and the strong free cash flow generation. And we're full speed ahead with 100% debt financing.

Very good. Thank you both.

Thank you, Sam.

Our next question comes from Luke Junk with Baird. Please go ahead.

Good morning, guys. Good to hear from you both.

Good morning, Luke.

So, John, a two-part question to start here. First, can you remind us of the breakdown between fixed and variable costs in your SG&A, especially relative to the current environment? And then second, you were very quick to act on cost back in 2009 and I'm just wondering, how much you think you can move the needle right now with the actions you've outlined this morning, and specifically, if you have some sort of decremental margin target in mind?

So Luke, on that second question, I missed a little part of that. Can you - I apologize, can you restate the front end of that? I missed that.

Yes. So, just said you were quick to act on the costs front back in 2009 and I'm just wondering how much you can move the needle right now with the actions you've outlined so far specifically whether you have some sort of decremental margin target?

So, I'll start and Dave - and Luke, again, I hope you and your family are staying healthy and safe. I'll start by saying that this is a really important point. I think, there is one thing that makes this time in this part of this cycle very, very different. And that is, we're pursuing the strategic transformational combination with Anixter. So, our efforts are very focused on aggressively getting to close and closing that transaction, we remain on track for Q2 and Q3. Why did I start answering the question that way? It's important to understand this that fundamentally we're going to use the integration plan and the delivery of the synergy as our "restructuring". It's going to be a new co, as we've outlined in detail. And so that's really important to understand. We're doubling the size of the company overnight once upon close. And then we're - all this terrific we're doing now is to prepare for day one execution, flawless day one execution. It's one of our top three priorities and the execution of those synergies start on day one. And so we've been very clear on the $200 million being a floor commitment and we're driving upside to that for cost synergies alone. And we outlined $68 million as the floor sign-up [ph] for year one. And so that's the way we're thinking about fundamentally re-engineering restructuring the enterprise we're going to do it in conjunction with the integration and execution. It's a really important point. Point one. Point two is, we've moved with great speed we think on taking the variable cost actions. And they are substantial on a go-forward basis, they are substantial, and - but we - in doing it the way that we did it, we're preserving the capacity and capability…

Sure. Looking at our SG&A, our people costs is roughly 70% of the total. The next two largest buckets are logistical footprint. So, our real estate and occupancy costs, followed by transportation, which obviously transportation is variable. So, clearly, as we think about our cost actions, we've been pulling the lever more so on the people costs in the near term as we go through the annexure integration. One of the things that we highlighted was the potential to consolidate the logistical footprint, which will attack the longer fixed costs with occupancy.

Okay. That's a lot of really helpful color, guys. Second, maybe a bigger picture question on the competitive environment that you're seeing right now. Just curious if there is any anecdotes you can share on how smaller distributors are faring right now or maybe more importantly share gain opportunities for larger company like WESCO in the current disruption? Thanks.

So, it's really interesting, again, we've been through numerous cycles in our tenure. And this one is interesting in the high degree of variation in terms of some of our customers are operational. And there is a very strong demand and we've got to support them. Other customers, parts of their business has strong demand and we got to support them. And then other customers have completely shut down their projects or their plans. So, and that - so that's what - that's the environment that the thousands and thousands of electrical distributors that we compete with at a local and regional level in US and Canada are facing. So, there is a kind of a wide degree of variation. That's the first point I would make. The second point that I would make is, in this - we are talking about this for some time and I think now more than ever given the kind of the nature of what drove this cycle - was driving this cycle, this will increase in importance dramatically. And we're hearing it from our customers, I think, it's just going to build from here and that is supply chain integrity. So, I just see that increasing dramatically because when you look at what's happened in this particular crisis, obviously there has been demand, some demand destruction, and it varies by end-market vertical, but there's also been supply chain disruption. And supply chain driven constraints has - had impacted the global supply chain. S, we alluded to that on that last page right before the summary about the emerging new - new and emerging secular growth trends that we think are absolutely will benefit both WESCO and Anixter individually and clearly on a combined basis. And so, I think, that's - it's a really important thing to understand because we've been able to utilize our very strong sets of supplier relationships and our global supply chain capability to support customer needs. In this cycle this far, when the global supply chain is very challenging to manage and navigate. But we've been able to use our tremendous relationship with our global supplier partners and our supply chain - overall supply chain capabilities to provide the much needed products and supplies that our customers are demanding even in this challenging part of the cycle. And that's why we spiked out a few of those examples. The only final point I would make is, and this is, I know this has been reported, but there are some distributors that I think are facing some significantly challenging times and are more distressed than others. And, again, I think it comes down to is where are they geographically located, what position was our balance sheet in as we're entering this cycle.

Our next question comes from Nigel Coe with Wolfe Research. Please go ahead.

Hey, good morning, everybody, it's Brian [ph] on for Nigel this morning. First, could we just talk a little bit about pricing in the quarter maybe by end market, or geography and then how that's also trended through April so far?

Yes. Good morning. Just provide you, for the first quarter, pricing had very limited impact on our overall results. So, we saw a couple of increases in some product categories that was offset by some declines in others. So, it ends up being slightly positive, but we would call it neutral didn't round up to one obviously and we can't provide that through April at this point.

Okay. Thanks for that. And just touching on the new secular trends, the emerging secular trends, could you talk a little bit more about that supply chain relocating to North America and what you've seen so far from customers and things like that?

So, it's - this is kind of early days of what we think will be in emerging and growing a secular trend. Really the challenge is that the value change facing right now is scrambling for the critical products and supplies that are needed to keep those customers and operations running that are still running at this part of the cycle and we did some safety acquisitions if you go back five to ten years ago. We've got a terrific set of supplier relationships we've been able to provide the critically important personal protective equipment to our customers and our employees. And so I think, right now, the most of the activity in energies around how do we support the customers that are growing not just by us by everyone and ensure that the supply chain is not constraining the operations with our customers that have critical demand requirements to meet, but it is clearly taking a look at - clearly companies are all up and down the value chain. We're already hearing many discussions about taking a look at, okay, because there are challenges with the global supply chain. In terms of overall delivery, integrity and capability of - have we ended up getting dislocated global supply chains that need to be rethought. Quite frankly, a lot of these activities started with the implementation of tariffs. So, when tariffs are implemented, number of our supplier partners started looking at their global footprint and began to optimize their supply chains a bit differently given the tariffs that were implemented [ph]. And now you have this pandemic driven supply chain disruptions and dislocations and demand drop layered on top of that and we believe it's just going to accelerate very comprehensive view of global supply chain. And really, it's becoming more of a risk management now. So, our customers are saying, look, from a risk management perspective we need to ensure that we have integrity of supply. We've talked about this at length over the years. That's where a large global B2B wholesale distributor like a WESCO, like an Anixter for that matter, has terrific array of global supply chain relationship, is very well positioned to support that emerging - what we think is an emerging and growing secular trend going forward. And when you put our two businesses together and we double up the size of the company and our global footprint and capabilities expands on, as a result of that we are even in a better position to support our company [ph].

Great. Appreciate the color and stay safe.

Thanks.

Our next question comes from Patrick Baumann with J.P. Morgan. Please go ahead.

Hi, John. Hi, Dave. Good morning. Thanks for taking my questions.

Good morning, Pat.

Hope you're staying healthy and safe, Pat, you and your family.

Yes, doing my best. Thanks. Same to you. Maybe we could touch on, did you quantify the cost you expect to come out from the initiatives you cited in terms of SG&A dollars or what have you?

Yes. So, Pat, it's Dave Schulz, I'll provide some framework. So, overall, the people cost related actions that we've implemented for the balance of the year, we're looking at approximately $50 million of cost reductions. And that is a combination of the 401(k), the reductions to salaries and wages that we highlighted, which is currently expected through the end of the third quarter. And then some additional cost actions that we're taking to better manage our organization, given the downturn. So, rough around, I would call the people-related costs $50 million for the balance of 2020.

Okay. So, that's over the last three quarters you have $50 million of savings basically?

Correct.

Okay.

And again, some of these initiatives will not be fully implemented until the beginning of Q3, so you won't see the full benefit here in the second quarter. For example...

Well, because of effective margins...

Effective date of the reductions.

As we outlined on the first page, Pat. You can see that a number of actions were implemented prior up to this point. As I said we took some permanent headcount actions in the first quarter, some actions started - we started to take late third - late first quarter into April. But the other - the majority of these actions are effective as outlined on the first page.

Understood. And my second - my follow-up is, I appreciate all the color on the month-to-date April trends, super helpful. Just looking forward, I guess, if this persists or get even a little bit worse as the year moves forward and I'm just going to throw a number out here, let's say, EBITDA is down 30% because things have gotten a lot worse, just curious like how you describe your ability to endure net leverage that could approach high single-digits post the Anixter close? Curious if it triggers anything with debt covenants or anything like that? And on this front with the stock historically trading at 8 times EV to EBITDA, could it ultimately impact the way you guys decide to go about with the proceeds-mix [ph] or is the equity component small enough now that it doesn't really matter to getting the deal closed?

So, there is a lot of questions wrapped up in that question. So, I'll address the front end. Dave, you address the back of it. The front end, look, we've been through a series of cycles previously. I've been in this chair more than a decade now. That's neither good nor bad, expect to say that I did - I weathered the [indiscernible] through the great global recession. And, again, our sales levels were down, as I said, in 25% range across the whole year. And to average out across the whole year, to have that on a full year basis, it was down higher than that as we move - at different parts of the year. And we took a series of actions in waves throughout that year and we're very aggressive with adjusting our cost structure. Our leverage ticked up a little bit, but we also produce very strong free cash flow, because of the counter-cyclical nature of our business model. And then, we pivoted pretty quickly in 2010 into playing offence and then experienced an outstanding run over the next several years of very strong growth. We started playing offense when others hadn't even begun playing defense yet, quite frankly and experienced a several year run, a very strong growth, outstanding pull-through. And so we know how to manage through cycles and we're taking the same actions now. With that said, as I mentioned earlier, it is one big difference and that is we're going to double the size of this company through the transformational acquisition and in combination with Anixter. And that puts us in a very unique position, we think it's a more compelling now, this combination, because the integration plan execution and synergy delivery will be our restructuring that we have - that we reaffirmed here today in terms of the outstanding value creation potential with delivering the various cost synergies, sales growth synergies and cash generation synergies three years out. So, Dave, do you want to maybe tie the question or the answer closed with the leverage view?

Yes. Certainly, so clearly, these are uncertain times and we've run multiple scenarios. We're confident that we can drive leverage post the acquisition to our target range over suitable period of time. Our goal is to get within that range within three years that will obviously be impacted by the economics at the time. So, what's the shape of our recovery, what are the out years looking like. But we're very confident in the counter-cyclical cash flow model of the combined company. And, again, looking at the history, these two companies combined generated over $2 billion of free cash flow on before the Great Recession to 2011. Add to that, we're also going to have $200 million of cost synergies. And, again, so we're confident that we'll be able to manage to the leverage going forward.

Okay. But - appreciate the answer, but - so there is no - just to be clear, there is no like trigger in terms of the leverage if it's a certain level, because it - does it trigger anything with your debt covenants or...

We have no leverage covenants. We don't expect to have leverage covenants with the financing.

And that's why we put that page in the deck, Patrick. If you go back and look, we've outlined very clearly what - the strong balance sheet page.

Yes.

It's highly [ph] strong balance sheet page, which is page 6 which talks about our current facilities, the structure of those, it's covenant, very covenant light. And as Dave mentioned, we expect that our new facilities will be very similar to those. And I think what's really important to understand and Dave touched upon it is that, particularly for our inventory revolver and accounts receivable securitization, these are very high quality assets. If you look at our underlying inventories and how they performed through all the cycle, I mean, our inventories are very strong. And we've not - our inventories are not subject to an overall deflationary factor or effect. So that represents a very strong kind of backstop for the inventory revolver. And our AR securitization, again, we have an outstanding array of customer relationships, blue chip companies and that backstops our AR securitization. So, again, no leverage covenant, covenant-light outlined clearly on that page.

Yes. I guess, I should read this slide before I ask my question. Thanks a lot. Appreciate the color.

Our next question comes from Blake Hirschman from Stephens. Please go ahead.

Yes. Good morning, guys.

Good morning.

First off, I think, you guys were hopeful that gross margins would expand this year that was obviously a few months back. And a lot of things have changed. So I was just - I kind of looking update there if there is any kind of reasonable way to frame how those might kind of transpire through the rest of the year. And part two being if there is any commentary around how they have looked thus far in 2Q as sales have kind of pulled back? Thanks.

So, look, we don't guide gross margins. So, we're not going to guide it on this call. First, I'll answer it that way, but I will say, we're pleased with the 50 basis points of gross margin expansion that's up sequentially in Q1 versus Q4. We do think we're getting really - we thought we got it. We did get very good traction on our margin improvement initiatives. We have been talking about for a few quarters at the back end of last year of that time lag effect. That time lag effect started working to our advantage here in Q1 and coupled with our traction on our margin improvement initiatives. And the margins have held up thus far in April. So they're in line and are holding up consistent with Q1. So, it's a good start to the quarter, but again we're not going to guide from hereon now. We don't guide margins. We're not going to guide it here. But they are holding up thus far nicely in April, consistent with Q1.

Okay, great. Thanks for that. I'll turn it back.

Yes.

Our next question comes from Hamzah Mazari from Jefferies. Please go ahead.

Hey, good morning. Hope you guys are healthy and safe.

Same to you, Hamzah, to you and your family. Yes.

Thank you so much. My first question is just around, when you think about the Anixter integration, have you contemplated combining the sales force yet? Is that in the synergy number of $200 million? Is this product - I guess, there is some overlap on the revenue side. Have you thought about one sales force on cross selling? Or is that too complicated? I mean, certain past deals have had trouble with that some haven't, but just curious on your view?

So, great question. Thank you for that. And it's - we outlined - and this was back in the early March time frame when we had - we scheduled a specific investor call, Hamzah that outlined with the 8 to 10 page deck and Dave and I took all the investors through the Anixter transaction and the compelling attributes of that - of this transformational combination. And the reason I'm referencing that is, I'll take you back to a page that in that deck it's still out there in the public domain obviously that outlined the - we call it the detailed execution plan to deliver $200 million of announced cost synergies. And when you look at that, that $200 plus million of which, again, we're very pleased we're seeing upside to that, we're going to drive upsides against that. But if you look at it did not include the sales force. Okay. It was G&A, corporate overhead, supply chain and field operations and that was more around the back end of the business, Hamzah, not the front end, not front end being sales, sales management et cetera. Relative to the front end of the business, you beg a good - beg a great question, which is around the cross selling opportunities. The cross selling opportunities are substantial and we also outlined categorically to different areas of cross-sales opportunities in that presentation. So - and we're focused on delivering top line growth synergies because that's where our focus is on the sales force to really take an aggressively work the cross-selling opportunities. And when we get to the close obviously once the transaction closes, as we committed to when we outlined the compelling attributes of this deal, we'll be providing very clear markers. Here's all the elements of the various cost synergy plan, the sales growth synergies and the cash generation and we'll be measuring ourselves publicly on our progress against all three.

That's very helpful. Just a follow-up question. I'll turn it over. John, you mentioned project delays, no cancellations so far. Does the length of the duration of the recession change that or are these sort of projects that have already are too far along or are essential infrastructure that they just keep getting pushed out versus outright canceled?

Yes, I would say, it's been our experience in prior cycles. And I'd expect it will be similar here that when things are delayed, they typically aren't canceled. The only thing I will say is that there are certain end market verticals in industries that are facing much greater challenges than others. And so in some of those verticals, there may be some revisiting of what - if it was in the early days and I've just gotten started, it may be easier to cancel than one that's 20%, 25%, 30%, 35% through its execution. But by and large, I think what we expect is that the delay is just that a delay.

Got it. Thank you so much. Take care.

Right.

That concludes our question-and-answer session. I would like to turn the call back over to John Engel for any closing remarks.

Thank you all for your time this morning, again. Brian and Will be available to take your questions. We look forward to being able to meet with you in person as our investor events eventually resume and obviously, we're available to have telephonic meetings and as well as virtual meetings and absolutely we'll be responsive in that regard. In the meantime, please stay healthy and safe and our best to you and your family. Have a great day.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.