Good day, and welcome to the Q1 2020 Zebra Technologies Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Mike Steele, Vice President, Investor Relations. Please go ahead.

Before we begin, I need to inform you that certain statements made on this call are forward-looking and subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations and assumptions and are subject to risks and uncertainties. Actual results could differ materially due to factors discussed in our filings with the Securities and Exchange Commission. During this call, we will make reference to non-GAAP financial measures as we describe our business performance. You can find reconciliations of our GAAP to non-GAAP results in today’s earnings press release and at the end of this slide presentation. This presentation will include prepared remarks from Anders Gustafsson, our Chief Executive Officer; and Olivier Leonetti, our Chief Financial Officer. Anders will begin with our first quarter results. Then Olivier will provide additional detail on the financials and discuss our outlook. Anders will conclude with opportunities to advance our Enterprise Asset Intelligence vision and trends we are seeing in our end markets. Following the prepared remarks, Joe Heel, our Senior Vice President of Global Sales, will join us as we take your questions. Also, throughout this presentation, unless otherwise indicated, our references to sales growth are year-over-year on a constant currency basis and exclude results from the recently acquired Cortexica, Temptime and Profitect businesses for the 12 months following each acquisition. This presentation is being simulcast on our website at investors.zebra.com and will be archived there for at least one year. Now, I’ll turn the call over to Anders.

Thank you, Mike. Good morning, everyone, and thank you for joining us. First, I would like to say that our top priority at this time is to health and wellbeing of our employees, customers and partners. We are grateful to all of the frontline workers, especially those sacrificing their personal safety, so that all of us can continue to live and work safely through this challenging time. Those on our customers’ front lines are heroes serving in hospitals, grocery stores, delivery vehicles, warehouses and other parts of the central supply chains that help keep our lives as normal as possible. Many Zebra employees are also on the frontline supporting the build and repair of products and solutions that are essential to our customers, doing their jobs safely and efficiently. To all of those heroes, we say thank you. The financial results we published this morning reflect a challenging first quarter environment. We realized a net sales decline of 1%. Adjusted EBITDA margin of 19.1%, which contracted by 200 basis points and non-GAAP diluted earnings per share of $2.67, a 9% decrease from the prior year. We had a strong start to the year and January and February generally played out to our expectations; however, late in the quarter as COVID-19 evolved into a global pandemic. We experienced significant supply chain disruption including product manufacturing delays, restrictions on transportation of goods, and a temporary closure in late March of a key distribution center supplying the Americas. We took extraordinary steps to produce and supply our mission critical products to customers around the world. Our team was agile, pivoting our resources quickly to closely monitor the situation and take bold action. For example, we chartered plans to expedite product delivery from China to North America and Europe to meet customer commitments. Despite…

Thank you, Anders. Let us walk through the P&L on Slide 6. Net sales declined 1.3% in the first quarter, less than 1% on an organic basis before the impacts of currencies and acquisition. The COVID-19 pandemic caused supply and demand impacts to our consolidated sales growth of approximately seven percentage points. Despite our sales decline, we believe that we generally are performed in the market globally. Our Enterprise Visibility & Mobility segment sales was most impacted by the COVID-19 disruption and sales decreased 2.9%. The largest supply chain impact was the temporary closure in North American distribution center that Anders referenced, which delayed shipments of mobile computers into the channel. Asset Intelligence & Tracking segment sales increased 3.2% with relative strength in printing and Zebra retail solutions. We saw a solid growth in managed and professional services across both segments of the business, primarily driven by solid attach rates on increased product sales over the last 12 months. Our Locations solutions business was lower due to a pause in project spending. Turning to our regions, in North America, sales were flat, declining mobile computing due to COVID-19 supply chain challenges was offset by growth in all other major categories. EMEA sales increased 7%, with relative strength in mobile computing, printing and services. We saw particular strength in Central Europe. Sales in our Asia Pacific region declined 21%, driven by COVID-19 impacts on top of continued softness in China due to trade tensions. China was down 35%, driving most of the original sales decline. Latin America sales declined 11% led by lower mobile computing sales, largely impacted by supply chain disruption. Adjusted gross margin contracted 200 basis point to 45.2%, driven primarily by List 4 tariffs and expedited freight as well as unfavorable large order mix. Adjusted operating expenses declined…

Thank you, Olivier. Slide 12 highlights how we are enhancing the value proposition for our customers. Our solutions are even more critical today than ever as we give the frontline and edge by empowering them with technology to do their job most effectively. Industry-leading companies trust Zebra to equip their workers and facilities with the solutions that bring their mission-critical operations to the next level. We are uniquely positioned to address this challenge because we have a deep understanding of workflows and unmatched access to frontline operational data from our vast installed base. We can address big global problems such as ensuring food safety across the supply chain or a broad range of more localized issues like increasing bed turns in the hospital, modernizing distribution centers to satisfy e-commerce demands or ensuring that retail associates and store inventory are optimized to maintain product availability. We have been bringing our Enterprise Asset Intelligence vision to life for our customers. We are doing this by enabling them to identify their assets through barcode, RFID and computer vision. Locate their assets with our vertical-specific solutions and understand their condition, such as temperature, trailer capacity and device security, so that their frontline workers can take the best next action in real-time. Methods for sensing, analyzing and acting on operational data from the frontline of business have undergone massive transformation in past years as the on-demand economy has taken hold. Inefficient manual processes have evolved into workflows that are augmented and enriched by purpose-built technologies, including hardware, software and intelligent edge solutions that bring it all together. Businesses are now demanding information about what is happening at the edge of their operations so that they can run their entire operation smoother, safer and smarter. They generate large volumes of data and are uncertain how to…

Thanks, Anders. We will now open the call for Q&A. We ask that you limit yourself to one question and a follow-up, so that we can get to as many of you as possible.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And today’s first question comes from Andrew Buscaglia with Berenberg. Please go ahead.

Hey, guys. Thanks for taking my question. I wanted to touch on your Q2 sales guide. You had a good backlog into the quarter, and it seemed as though you Asia – your North America sales seemed to be okay this quarter. So I’m wondering, is this just a function of your backlog? And beyond that, is there a concern you just haven’t quite seen the effect of this hit other regions outside of Asia?

Andrew, good morning. We have today a lower visibility of the business due to the impact of COVID-19. And we are basically pegged as a business to the economy. And a lot of what we see in Q2 is a question mark on the length of the stay at home and also the impact of the various stimulus packages, either current or to come. And if you study the company over the recent past, we have an history of rebounding quickly when the economy restarts. Now when it comes to Q2, specifically, what we see today is obviously the impact only due to COVID, we believe we are in a strong competitive position. We believe that, for example, in Q1, we have gained shares. We had a strong backlog entering the quarter. And we see today from a top line standpoint mainly an impact being more pronounced on run rate, which is part of the business going through distribution. And we have seen our distributors, partners adjusting the level inventory. So this is what we see today going on. But we believe we have a strong value proposition, which works well in good and bad times, and we’re going to be ready to manage this downturn, Andrew.

Okay. And then your guidance for EBITDA margin. I think it was a bit ahead of where some people were expecting. Directionally, is this a function of your gross margins being up sequentially? What’s really – what’s behind that margin guidance? That’s – sort of ballpark.

So if you look at – of course, so if you look at EBITDA, at the midpoint, the EBITDA margin will decline year-on-year by about 270 basis points, so 270 basis points. 1.5%, so 150 basis points is due to one-off items, either associated with tariffs or associated with the management of the pandemic, mainly impacting our freight expense. And then the balance is a point of margin being lost due to run rate mix. So if you look at today, if we disaggregate the revenue between bid and run rate, run rate margin is much higher than bids, and we have seen the run rate of revenue declining. However, the margin profile for run rate and bid have been increasing sequentially now for a few quarters. So what you see at play in the profitability is a margin impact and largely – large proportion of the margin impact being due to tariff and C19. From an OpEx standpoint, we believe we’re going to be able to retain the OpEx as a proportion of revenue constant or relative to last year.

Okay. Got it. Thank you.

And our next question today comes from Paul Coster at JPMorgan. Please go ahead.

Yes, thanks for taking my question. I’ve got two. The first one is, can you give us your latest thoughts on the USPS projects? And I know as we throw the second question in now and that is, it sounds like you expect the channel to destock. Is that a 2Q phenomenon in the guidance? Or do you think it will take more than one quarter for them to do that? And can you quantify that in any way?

Yes. Good morning, Paul. I will take both of these ones. First, on USPS. USPS contract continues as per our expectations. As we’ve talked about before, this is a multiyear contract. We certainly feel very proud of it, biggest in our history. I think highlights the strength of our value proposition and the strength of our relationships. Our teams – our respective teams, the Zebra team and the USPS team, they continue to work very closely together. Both sides are very engaged. So there’s no expectations or signs from our side that this will be pushed out in any way. As we said in our last quarter call, we do expect to begin ramping up in Q2, or ramping deliveries in Q2. And we do assume or expect that the majority of all the orders will be deployed by the end of 2021 as the backend is kind of gated by – when the U.S. carriers stop 3G service. And at that point, USPS will need to have moved off to new devices. We have received new orders beyond the current orders, so some new use cases, but within same framework for an additional 30,000 units. So, the business with USPS for us continues to be good. And we certainly look forward to starting to deploy in earnest. And then the other one on destocking the channel, at the moment I would say on a global basis, our distribution partners who are the ones who hold inventory are holding a normal days on hand inventory. We don’t see it being high or low, particularly, it’s going to be within the band considered to be normal. What we tend to see early in the downturn is that when sales out goes down, from a disti perspective, they adjust their days on hand, which means they don’t have to buy as much in the short term. And then that tends to be more of a one quarter type of activity. So here we are assuming that there will be a reduction in the run rate for our distis and partners, which will cause some level of lesser inventory or maintain – you have maintain the same level of days on hand inventory. Thank you.

And our next question comes from Keith Housum with Northcoast Research. Please go ahead.

Good morning guys. Anders you are one of the few guys that’s been around since the great recession back in 2008, 2009. Can you give me some of your thoughts in terms of how, I guess, your customers are responding now? And is there that same level of fear now that you had back then? I think we understand how your business has changed. But what was your interpretation of how the customers are reacting?

I think the – obviously, there’s a very different drivers for this crisis versus the 2009 crisis. So I’d say our customers today are probably not as – well, back up and say, it very much now depends on which kind of vertical or sub segment of the business you are in. I think in 2009 every customer has concerns about liquidity, and so forth. Here we have a bit of a have and have not. So if you’re a mass merchant, a grocer, e-tailer, or in healthcare, some of the delivery businesses, you are doing very well. They are super, super busy. And if you are more of a brick-and-mortar retailer selling apparel, you might be having shut down all your stores. I think from a customer behavior perspective, I’d say when the orders around work-from-home started to be enacted it probably took two, three weeks for our customers to kind of scramble and get themselves organized to adapt to the new kind of working environments. They were very focused on just making sure their operations were – continue to run. But in the last – the last month I’d say they started to come back and start engaging with us on both current and more future oriented projects. And we are trying to be – make sure we make good use of video conferencing to continue to engage and have the sessions with our customers. And I don’t perceive that our customers overall or maybe as concerned with how long, or how are they going to come out of this recession. Maybe it feels like they have a bit more confidence.

Got it, thank you. And then, I think, I heard some of this in your script, but can you clarify again, like what percentage of your business do you think has done to essential customers?

We didn’t talk about it from the entire business, but if you look at retail specifically, which is our largest vertical, two thirds of our business there goes to mass merchants, grocers and e-tailers. And those are all deemed essential. Yes, we’ve seen some interesting trends there that as people are adjusted to buying from home, not necessarily visiting the store as much. So Buy Online Pick Up In Store has become much more popular. Grocery volumes have gone up materially, but Buy Online Pick Up In Store has gone up exponentially. And I think that’s a consumer behavior that is unlikely to work back to what it was. I think consumers have now learned a new way of shopping that they like. Then if you move, look to healthcare there we have, I would say, the majority of our business is tied to essential activities, acute care, specifically. And we have been part of pop-up hospitals, drive-through test facilities and just scaling existing the care facilities to be able to take care of the number of Covid-19 patients that come in. But obviously there’s parts of healthcare that has been deemed non-essential, but that’s a smaller part of our business that do elective care and so forth. Within transportation logistics, that’s a – I can’t really have – I don’t have a good percentage number, but a good part of that business is obviously also a part of the essential economy, making sure that the essential supply chains work all the way from pharmaceuticals, to food, to e-commerce. I’d say here for us the last mile of delivery so many more deliveries to households today and the last mile delivery drivers tend to have our type of devices. And so that’s been helpful. But on the other hand, we see other transportation logistics businesses like aviation, auto, rental car companies and so forth that are under a lot of pressure. And lastly, manufacturing, there, I’d say a lot of the discrete manufacturers, such as auto, aviation and specialty goods, nonessential. They make up less than 5% of our total revenues. While most, I would say, process manufacturing companies like food and pharma are deemed essential for us.

An additional point, Keith, as well, which we think is important, we think that the current situation would actually accelerate the secular trends we are serving. E-commerce, tracking, digitization of workflow, we believe that those trends are going to be even more important going forward.

Yes, I think, to that point we see that our solutions have become more necessary for our customers as we really do empower the frontline workers across all the end markets. So, these are the people who cannot perform their duties from home. They have to be in hospital, a grocery store or a delivery truck. So I think the crisis is helping to accelerate trends around digitization, automation across the industries.

And our next question today comes from Jim Ricchiuti with Needham & Company. Please go ahead.

Hi thank you. Good morning. I had a question on – Anders, maybe I just wanted to go back to your comment about the haves and have nots, and that Slide 13 where you talk about some of the essential parts of the business in terms of vertical channels. Is it fair to say that the essential components, whether it’s retail, e-commerce, healthcare, that that’s been – you are anticipating that as a net benefit in the first half of the year? Or put it another way, would you expect that that potentially if we’ve seen increasing investments in those areas that falls off in the second half in addition to the recessionary pressures that you are seeing in the traditional markets? I’m just trying to get a sense as – I think you can’t give guidance for the full year, but I’m just trying to get some feel for how that essential business might change from Q2 to Q3. I think you alluded to Q3, Olivier, being a particularly challenging quarter.

Yes. So we’re going to stop short of trying to give real color or guidance on the full year here. But I would say for us we do – our expectations is that this is a not a long-term change in how we operate and the world operates, but more of a several quarter activity. So we certainly expect it to impact Q2 and Q3. And then depending on how quickly the world rebounds we will follow. I’d say for us one of the benefits we have is that we have a very robust business, a very diversified business across product lines, vertical markets and geographies. And our value propositions tend to work in good times and bad times, right. Good times, our customers are expanding, they are investing in the business and they use our equipment to help them do that. In tougher times, they tend to trade OpEx for CapEx. So they try to use us to get more efficiencies. Say, right now at the eye of the hurricane here, we are seeing, obviously, the – many of the essential businesses are being very busy this year than they had been before. I think how they are behaving today is that they are generally very focused on just making sure they can scale up their operations and, scale up the use of technology, but not necessarily having the bandwidth to think very creatively about how to leverage new solutions. I think that will come when the world settles down a little bit more. Customers that are not operating today, say, people who have had to shut down their operations, we are talking to them, still to make sure that we stay engaged and figure out how can we help them drive more of the digitization and automation of their businesses as they come back. So we feel that we are – we want to engage with all the customers that we have. But the – obviously, the ones that are essential are much more active in both running their businesses and in looking to figure out how to scale them.

Let me add something it is Joe Heel speaking. The concept Jim, that you mentioned about the haves and the have nots that Anders described earlier, also applies to a certain extent within the central customers. So, for example, in healthcare customers, you have of course COVID-related activity which is at the moment receiving a lot of attention, and funding, and therefore also activity from us. But you also have elective procedures which are being put off and corresponding investments that hospitals are making are being postponed. Within retailers, you see a lot of things around Buy Online Pick Up In Store, but for example, automation activities like we showcased with robot solution that we introduced earlier, those are being paused. Now the good news is that we’re not yet seeing a drop off in confidence among those customers. The customers are still engaging with us remotely on those longer term solutions. And so we expect that that have not part will continue even in those essential sectors in the future.

And our next question today comes from Meta Marshall with Morgan Stanley. Please go ahead.

Hi, this is Eric on for Meta. Thanks for taking our question. Maybe just staying on the question of kind of conversations with customers, it sounds like for the most part you’ve seen maybe a pushing off of projects. But can you help us, I guess, contextualize, like how much could the reason potential just scaling down of maybe the size of some orders? Or have you seen any potential cancellations from may be customers most impacted?

So today we’ve only seen a limited number of push outs. We have not seen any cancellations or any scaling down of orders, as you put it. I think – and the customers that have pushed out tends to be the ones that are not operating today at all.

Got it. That’s helpful. And then maybe just changing gears a bit. On share repurchases, understanding you kind of capitalize on the lower share price in the quarter. Like how should we think about the pace moving forward? Would you continue to be opportunistic? Or should we kind of expect may be more focused on cash flow preservation just looking at the uptick there?

So we feel strong about the cash flow generation of the company as we said, as I said, we believe we can protect the majority of the free cash flow of the company, even during this downturn. Now the priority for cash allocation is going to be to invest in the business either organically or inorganically. We bought $200 million worth of shares, so it’s about 2% of our shares outstanding. So at this stage, we are going to be mainly investing in the business and buyback would not be a priority. Now it’s not going to be totally off the table, but not a priority.

And our next question today comes from Richard Eastman at Robert W. Baird. Please go ahead.

Yes, good morning and thank you. Could you perhaps – Olivier could you perhaps just expand a little bit on the supply chain issues that you had in the quarter? And maybe just speak to this Malaysian facility, which I’m assuming was a subcontractor facility had some closure and some downtime. Is it up? And do you – could you just kind of give us a sense of how much revenue that may have impacted the first quarter?

I think I’ll start with this and then Olivier can help fill out some details. So if you go back until our Q4 call, we highlighted that COVID-19 would have an impact on our supply chain, but it was on the supply side of things. Since then the China has largely returned to normal. It took a little longer than expected, I would say. And there was dependent partly on where our contract manufacturing partners were located. So they had to return workers through a two-week quarantine periods, and so forth. But by the end of the quarter, our Chinese contract manufacturing partners were all working at over 90% capacity. So I think they became back a little bit slower, but it came back. We also then in the quarter tried to ramp up both our Vietnam and Malaysia facilities. And timing was a little more challenged as we were supposed to do that the Monday after the lunar New Year. And obviously no Chinese people were allowed to travel there to help set it up and to teach people. But we were, I think, quite agile and creative. So we set up video facilities so that we have people in China sitting and watching via video, what people in Vietnam and Malaysia were doing, to teach them as well as we could. And Vietnam facility has come up very nicely. It manufactured the same number of printers that we had expected, while the Malaysia facility started off a little slow, but then it got shutdown based on the Marshall Law that Malaysia implemented. But we’re using the same techniques to get that facility up and running. The impact on Q1, I think, was very modest from that perspective. We’ve diverted and try to make get as much out of China as we could. It had similar impact on tariffs as we now have to manufacture everything in China, or the vast majority of our products in China instead. And going forward, we expect that supply chain issues are going to be largely behind us. And what you see reflected in our guide for Q2 is many, some demand precious.

Yes, actually I think call out to our supply chain is in order. They’ve done an excellent job of being agile and working in a very dynamic situation to make sure that the – all these issues had minimal impact on Q1 and Q2.

And then just as a follow-up question, are there any receivables or credit issues that you are watching within – the virus don’t hold a lot of inventory, but are there any credit issues so we – that you are watching carefully?

So we are spending a lot of time on working capital, obviously DSO, most particularly. So far, the answer is no. And the way – again, we feel strong about our balance sheet, we feel strong about our free cash flow and we feel strong about our working capital. And we want to use, in selected cases, the strength of our balance sheet to increase the competitive position of the company. So from a credit standpoint so far no particular issues, and we want to help our partners to navigate through this difficult time using our balance sheet.

And one more thing maybe just to add some color on this. One thing that, I think, benefits us here is that our partners, their business is to resell our products. So if they are cut off from supply of our products, if they can’t get access to our products, their business goes away. So there is a strong incentive from our partners to pay us to make sure that they can stay current and continue to do business.

Our next question today comes from Brian Drab with William Blair. Please go ahead.

Hi, good morning. Thanks for taking my questions. I was wondering first if there’s any way that you could help us make, trying to quantify the backlog that you’re entering the second quarter with and maybe compare that to a typical quarter. Do you typically enter a quarter with, say, two or three weeks of backlog? And you have doubled that. Can you talk in some terms like that to give us a stance?

So the size of the backlog entering the quarter was not out of the ordinary. And this size was slightly higher due to some of the dispatch center issues we mentioned. So we had to shut down for about a day at the end of the quarter, one of our dispatch center and that was about $20 million below. So that would be part also of the opening backlog. Nothing out of the ordinary.

Yes, you can think of it as, the business continued to do well through the first quarter. So order flow was normal. And the one additional thing was that the $20 million that we couldn’t ship out of the North America or the Americas distribution center that flipped into Q2.

Okay, that seems smaller than I would have thought. So that’s on, I mean like 2% of revenue so that’s enough for you to call that out. There is no other source of additional backlog entering 2Q?

Nothing of significance out of the ordinary.

Okay. And then I was just curious, it was – why did that facility, if you can talk about this, why did that distribution center have to shut down? Was that a state-driven decision or was there an illness there? And do you think that this is potentially a risk in the going forward with other distribution centers and facilities? Thanks.

So this was an outsourced facility, and there was a case of COVID-19. So they shut down for 36 hours and came back and ran a little slower. But even before then, we had started to take some pretty dramatic, drastic actions in making sure that we had team A, B, C, and so forth that we had put out more spacing between people taking a lot of actions to make sure that if anybody worked to get infected, it would impact as only a small team and not the entire facility. So if something like that were to happen again, I would expect it to have much less impact than it had in the first quarter. Another one, which is of size also, the quarter was very backend loaded for obvious reasons, right. The supply chain started slowly at the start and ended up strong. So we had to ship a lot in the last few days of the quarter, and a day of shipment was worth much more than ever before. But we are confident that today largely the risk from a distribution center standpoint is going to be mitigated going forward. We have very good plans to mitigate those risks now.

And our final question today comes from Jeff Kessler with Imperial Capital. Please go ahead.

Thank you. You have mentioned briefly the three acquisitions that you’ve made that were not part of the original discussion. Could you just update us on whether or not investment in them is going forward? And if so, what role have they played or could they play later on in the year and into 2021?

So I assume you talked about Temptime, Profitect and Cortexica.

Yes.

Yes. So I’d say all three are performing well. Temptime was the first one we made in the beginning of the 2019. They designed and manufactured visual time-temperature monitoring solutions. It goes on – a lot of them goes on vials of vaccines in the developing world. Obviously, great – it’s very topical today, although we don’t have a vaccine yet for COVID-19.

Kind of why I’m asking the question.

Yes. So we are obviously in contact with WHO and others to make sure that when that happens that we can offer our solutions to ensure that the transportation of that vaccine can be temperature controlled and quality controlled. Profitect was the second acquisition we did in June of last year. They do the prescriptive analytics taking lots of different data inputs from a variety of sources, primarily in retail, and using machine learning, AI to detect anomalies. And I’d say that’s even more critical today as retailers are trying to figure out what they have on the stores, what errors they have and how to quickly be able to assess and rectify that with – and being less dependent on having a physical presence in the store to be able to do this. And lastly, Cortexica, which was the computer vision company we acquired at the end of last year, this is a smaller business, mostly focused – our intent with that is to really leverage the competency of that team less so the kind of the product or the revenue stream. So they are very – been very active in engaging with building out our computer vision capabilities around our EMA robot, particularly, but also solutions. And they’ve been a great addition to our team, they have great skill sets.

Okay. Thank you. My follow-up is will be quick. It has to do with your partner program. You mentioned that some of your partners are essentially, if you don’t provide them product they have nothing to sell. The question is about have you made any tweaks in that program during this period of time as you’ve seen ebbs and flows in – ebbs and flows in your supply chain and going into through the channel that increases for some folks and have been decreasing for others? And what have you been doing with your partner program too, if you want to call it, to make it more efficient for both them and you?

Yes, I think this is an excellent question for Joe Heel.

So in our partner program, we’ve had a lot of requests from partners that we help them both technically with training, but also financially and with the program terms, in particular, like many of the programs, we have some elements in the program that are – or you can think of it like a frequent flyer program, where you have to reach certain levels. And we have already announced that we are adjusting those program terms, we’re essentially extending it for an additional year. We are also adjusting some of the thresholds that partners need to reach in order to earn their rebates. These are the typical things that you would do in response to a changing business environment when the partners can earn their targets. And I think so far it’s been quite well received because it means that the partners will be able to operate their businesses at the different levels and still achieve their targets.

Ladies and gentlemen, this concludes the question-and-answer session. I’d like to turn the conference back over to Mr. Gustafsson for any final remarks.

Thank you. Yes. I would like to thank our employees, customers and partners who are working the frontline. We remain committed to supporting you through this challenging time. Be safe, everyone.

Thank you. This concludes today’s conference call. You may now disconnect your lines. And have a wonderful day.