Good morning, everyone and welcome to the FARO Technologies First Quarter and Fiscal Year 2020 Earnings Call. For opening remarks and introductions, I'll now turn the call over to Mike Funari at Sapphire Investor Relations. Please go ahead..

Thank you and good morning. With me today from FARO are Michael Burger, Chief Executive Officer and Allen Muhich, Chief Financial Officer. Yesterday, after the close, the company released its financial results for the first quarter of 2020. The related press release and Form 10-Q for the first are available on FARO's website at www.faro.com.

In order to help you better understand the company and its results, management may make forward-looking statements during the course of this call. These statements can be identified by words, such as expect, will, believe, anticipate, plan, potential, continue, goal, objective, intend, may and similar words.

It is possible that the company's actual results may differ materially from those projected in the forward-looking statements. Important factors that may cause actual results to differ materially are set forth in yesterday's press release and in the company's Form 10-K for the year ended December 31 and Form 10-Q for the quarter ended March 31, 2020.

During today's conference call, management will discuss certain financial measures that are not presented in accordance with US Generally Accepted Accounting Principles or non-GAAP financial measures. In the press release you will find additional disclosures regarding these non-GAAP measures, including reconciliations to compare GAAP measures.

While not recognized in the GAAP management believes these non-GAAP financial measures provide investors with relevant, period-to-period comparisons of core operations. However these should not be considered in isolation or as a substitute for a measure of financial performance prepared in accordance with GAAP.

Now, I’d like to turn the call over to Michael..

Thank you, Mike. Good morning and welcome to our call. Before discussing our first quarter results, I'd like to take a moment to address the situation we're all currently living in.

While countries and organizations around the world work to implement plans to combat the spread of COVID-19, we at FARO have been focused on taking the necessary actions to ensure the safety of our workforce, and to minimize the disruption to our customers. All of our global manufacturing facilities currently remain open.

The US government has deemed FARO to be a critical infrastructure industry, and Singapore has granted us an exception to their recent closure mandate. Our facility in Germany has remained open for both manufacturing and customer service operations.

We have used this opportunity to build finished goods inventory as a means to offset future unexpected factory closures. At this time, we are confident that our supply chain logistics and operations teams will continue to meet our customer shipment requirements, while maintaining the highest level of service and support for our customers.

In our customer discussions, it is clear that many of the initiatives that require 3D measurement remain active. However, our customers are still trying to understand the extent to which their own businesses will be impacted and how they need to adjust in these uncertain times.

While we have not seen meaningful order cancellations, we have seen a large number of projects being delayed. Within the public safety market for example, funding often requires public purchasing approvals, which given the more pressing needs being placed on governments at this time began to slow in March.

Geographically, we've seen business in Europe and the United States slow fairly dramatically. India has come to a virtual standstill. However, China's recent activity levels have increased.

All indications point to regions continuing to be affected at different times and magnitudes, which will likely lead to intermittent strength and weaknesses across our end markets, and to which time conditions normalize. One market that could be particularly hard hit for an extended period of time is, aerospace.

I should note that historically aerospace has accounted for about 5% to 7% of FARO's total revenue. Given this uncertainty, as a company, we are focused on managing the aspects of our business within our control and preparing action plans around various demand scenarios which may emerge.

We are fortunate to have a strong balance sheet and a robust restructuring plan, which was well underway at the time we began to feel the impact of COVID-19. To complement these activities, if the need arises, we also have identified additional options that ensure that we maintain sufficient resources to navigate potential situations as they arise.

With the actions announced last quarter, and tighter expense control, we believe we can reduce our adjusted quarterly revenue EBITDA breakeven levels to between $58 million and $63 million as we enter this September quarter.

That said, as an organization it is important that we remain nimble enough to manage through this fluid time, while at the same time striking a balance between taking the necessary steps to improve our operating model while making the necessary investments in key growth initiatives.

In February, we announced several key changes in how we will manage our business in the future. And despite the current world situation, we've made significant progress. Our sales team has responded well to the revised go to market strategy.

They're excited about the prospect of owning accounts or geographies and being given the opportunity to sell the full breadth of FARO's product line. We've already seen greater sales alignment and collaboration as we brought our sales team together under one global leader.

Further, the current remote working environment has brought other opportunities for how we interact with our customers to the forefront. For years, FARO has invested in web based demonstration studios that have been underutilized despite efforts to drive adoption.

Today, given the force of adoption of all things virtual, our studios utilization has nearly doubled. We're also having outstanding turnout to web based customer training sessions that more effectively and efficiently leverage our product expertise.

If there's a silver lining for us in this difficult time it is that these types of activities are becoming ingrained in our culture, which helps us further increase the scalability of our go-to-market approach.

On the product front, we recently announced the latest release of our CAM2 software which is an initial step towards enhancing our software suite and developing a more solutions-based product offering.

This latest iteration is an example of utilizing our marketing organization to develop a software experience, which directly addresses our customers' everyday process needs, while lowering their initial investment outlay by offering it on a subscription basis.

Finally, we've worked hard to globalize and centralize some of our back office processes that are yielding significant improvements at a reduced cost. All of this combined with careful expense management enabled our first quarter non-GAAP operating expense of $44.3 million that was $5 million lower than Q1 2019 and $9 million lower than Q4 2019.

This is good progress toward our stated success model. As we discussed in our last call, our goal is to increase the differentiation and value of our products through our software and solutions strategy.

By gaining an increased understanding of the problems our customers are trying to solve, we believe we can more effectively deliver full solutions that meet or exceed these needs. I am optimistic.

Despite the near term global challenges, the steps that we are taking will enable FARO to emerge a stronger, more efficient business with a highly scalable financial model. With that, I'll turn the call over to Allen for an overview of our first quarter financial results..

Thank you, Michael and good morning everyone. First quarter revenue was 79.5 million down 15% when compared to 93.6 million in the first quarter of 2019. As a result of the continuing soft demand environment in our served markets, and the start of COVID-19 related order push outs we saw in March.

As most of you know a meaningful amount of our business is conducted in the final month of the quarter and we were pleasantly surprised with the efforts of our sales team to close business in March, resulting in orders that while softer than typical, held up fairly well given the circumstances.

Product sales were 56.5 million as compared to 71.6 million in Q1 of 2019. This decrease was primarily a result of decreased demand across all our served markets, partially offset by several large deals in our tracker product line within the metrology market, which shipped during the quarter.

Service revenue of 23 million was up 1 million when compared to Q1 of 2019, which continues to demonstrate the recurring nature of this revenue stream. New order bookings were 77.9 million for the first quarter of 2020, down 23% as compared with 100.7 million for the first quarter of 2019.

I mentioned on our February conference call that we had received orders late in the fourth quarter of 2019 that we were unable to ship in Q4. Those products shipped in Q1 resulting in a modestly negative book to bill.

Related to the business transformation actions announced in February, in the first quarter, we incurred 13.7 million in non-recurring charges that were predominantly for cash severance to be paid affected employees around the globe.

As a reminder, we expect to incur 75 million to 85 million in total non-recurring charges associated with the implementation of our plan, with nearly 63 million incurred in the last two quarters. GAAP gross margin was 55.2% and non-GAAP gross margin was 55.5% for the first quarter of 2020, as compared with 56.9% for the same prior year period.

The reduced gross margin is a result of the overall reduction in revenue, which adversely affected our fixed cost absorption.

GAAP operating expenses were 60.4 million and included approximately 13.7 million of the previously mentioned restructuring charges, as well as 2.7 million in acquisition related intangible amortization and stock compensation expenses.

Non-GAAP operating expenses of 44.3 million were 4.6 million lower than Q1 of 2019, as the company benefited from one month of cost savings related to restructuring actions, as well as some prudent steps taken to further reduce our run rate spending, given the current demand environment.

GAAP operating loss was 16.6 million for the first quarter of 2020 as compared with operating income of 400,000 for the first quarter of 2019 as a result of the lower demand environment. Adjusted EBITDA was 3.1 million or 4% of sales. Our GAAP net loss was 14.8 million or $0.84 per share.

Our non-GAAP net loss was 400,000 or $0.02 per share for the first quarter 2020 compared to non-GAAP earnings of $0.20 per share in Q1 2019. We continue to manage and maintain a strong capital structure with a cash balance of 173.2 million and no debt.

In the first quarter of 2020, we generated 14.7 million in cash, primarily driven by collections of outstanding receivables.

As Michael mentioned, while visibility into the demand environment from our customers remained limited, we are confident that restructuring efforts outlined in February, together with tighter expense controls will enable us to achieve breakeven adjusted EBITDA on 58 million to 63 million of revenue.

This concludes our prepared remarks at this time and we'd be pleased to take any of your questions.

Are you there?.

[Operator Instructions] We'll go first to Jim Ricchiuti from Needham & Company. Please go ahead..

Hi. Thank you. Good morning..

Good morning Jim..

Yeah, by the way, thanks for the color on aerospace. I'm wondering, Michael or Allen, if you might be able to give us some senses to the automotive exposure just given the concerns folks have in that segment of the market.

What does that represent roughly?.

We actually haven't publicly stated that, Jim. I would imagine it's probably a bit bigger than the aerospace segment, but I don't have an actual number in front of me. So I'm not going to quote, but I will say that we've actually had relatively positive impact or news recently from some of our automotive customers.

And yeah, I think we're all concerned about the end demand market on them. But it does look like particularly Europe and China looks like factories are coming back to work and some of the projects that we're involved in, still look like they're on track.

So it's relatively positive news, unlike aerospace, which doesn't – we're not getting any of that indication whatsoever today..

Okay and that actually ties into the next question, Michael. You alluded to some project delays. I think we understand public safety and then public safety market, but within that metrology business, actually factory to factory floor business.

Where are you seeing some project delays and is there any color you have? First month of the quarter is tough, but just in terms of any color on bookings. Thanks..

Well, I think we track very diligently and very often are – what we call our funnel, which is the opportunities that our sales people have identified that potentially will close within the quarter. And our funnel, as we mentioned in the script, we've seen some project delays we've seen very few project cancellations.

To answer your first question around the metrology market, we have seen actually some pricing strength as it relates to the opportunities that exist. Our funnel is not growing, but it is – and it is getting pushed out because I think a lot of a lot of the companies that we've been dealing with, frankly just don't know what to expect.

But I think Allen mentioned in his portion we saw really good traction on our tracker, which actually is relatively new for us. And, and it looks like that may continue into the first quarter or into the second quarter and that's primarily metrology..

Okay, thanks. I'll jump back in the queue. Thank you..

Thank you, Jim..

We will go next to Andrew DeGasperi with Berenberg. Please go ahead..

Good morning and thanks for taking my question. I guess maybe first, I know you highlighted metrology and public safety markets.

Can you maybe tell us how the construction vertical is doing from the laser scanner protection Ben perspective?.

Yeah, I think if you look at where – regionally we were very strong in the construction world, we're, we're very strong in Europe, followed by North America and then in Asia, and I think the construction industry in general has been hit pretty hard in Europe.

However we're now, I think we're all getting indications that Europe is coming back to work slowly. We're obviously not in that situation in the United States.

So I think the scanner business was hit relatively probably the hardest of all of our market segments by virtue of our strength in Europe, which was hit really hard by COVID and then followed by the United States.

I think it is encouraging that Europe is going back to work and there is talk now in the United States that construction sites will be allowed to proceed. I think public safety which is also a participant in the scanner business.

I think that's going to be a little longer because I just don't think it's a priority in most government and certainly police stations around certainly North America and Europe. So I think the scanner business was probably the hardest hit although we're seeing signs that the construction business is coming back..

That's helpful and then on the CAM2 software release, I know it's only been a few weeks since you've essentially released that.

I just wondering how customers have received that and B, I mean, do you have any other plans for the rest of the year in terms of releasing new subscription type software for any of the verticals that you currently serve?.

I think it is too early to really give you feedback on. Obviously, we worked with customers through the definition of what CAM2 needed – the next version needed to look like And as I mentioned in our script, our marketing organization was intimately involved in talking to targeted customers and so the feedback has been very positive from them.

I think it's a bit early to talk about the general market reception of it, but we're encouraged. And the answer to your second question is absolutely, we will continue to be very prolific in our software offerings. And as you know, once a software suite is out there, it's constant updates.

And so we're in that mode, we're on that treadmill, if you will. So we expect that other key projects or key software platforms will continue to be updated. And actually, we have a very busy new product release calendar for 2020 and we are – I'm proud to say that we have actually – I don't believe that we're going miss a beat in that regard.

So I'm, I'm encouraged by our ability to work remotely and still collaborate..

Yeah. And I'm following up on that. I mean, just generally the sales process given the current environment. I mean, how has that changed relative to the previously – I mean, you – has this – obviously, you're probably doing a lot of virtual.

But I guess, can you maybe like elaborate a little more like, how is – how are the sales people approaching that from this stage?.

Well, yeah, of course. Yes. I mean, it's, it's a dramatic change, clearly and we – many customers in the beginning of March started basically waving us off from actually visiting facilities. And I think now that is probably the standard, if not the rule.

Clearly, I think, toward the middle of March, third week in March, I think companies began to be much more approachable. And much more available, frankly because I think everybody was trying to figure out exactly what this looked like right. So our – but our sales guys were very diligent, we know who our customers are and we have made contact.

I don't think it's as easy as it used to be clearly because we're calling people's cell phones, et cetera or writing emails and saying, hey, can you call me back? So I think that that process has been probably a little bit labored.

But as I mentioned, our web studios in which we can do virtual product demos, has literally doubled in terms of the numbers of demos that were or the number of appointments that we have in our web studios. Also, I think we have enabled many of our selling – our sales people to actually be able to do demonstrations in their homes.

And so that has I think enabled a different approach. But I think where we're finding probably the most success is really in some of these web-based training and frankly, even YouTube, we're doing a lot of YouTube with a huge response on product demonstrations. And so it has changed dramatically Andrew.

I think what is exciting about it I believe is that when things do kind of go back to normal, we are not going to lose this bag of tricks that we have been developing here. And I actually think it makes us much more efficient, being able to do web based demos earlier in the sales cycle. We have now data that says actually it helps the success rate.

So we're trying to figure out where this is going to end up. But I'm very proud of our sales guys and they're extremely tenacious and as Al mentioned, we were pleasantly surprised with where we are despite kind of the situation that we're in..

That's very helpful. Thanks. I'll jump back in the queue..

Thank you, Andrew..

We will go next to Richard Eastman with Baird..

Yes. Good morning..

Hi, Richard..

Good morning, few questions, is it possible that you could tell us a little bit of color around the geographic revenue declines? I think you kind of touched on EMEA being maybe more heavily weighted towards the construction market with the standard product.

I'm curious how the metrology business did there when you're talking about the industrial metrology business, and maybe some thoughts around the cadence in North America as well as EMEA, as we head into and we're into the second quarter here..

Well, I think it's funny. My visual of how this looks from a regional perspective is effectively three sine waves out of phase, right. We saw negative sine waves. So we saw a huge trough in Asia first, China kind of went down hard and then followed by Japan and South Korea and that was kind of the beginning.

Europe was second and certainly North America was third. And I think, so if you look at that in terms of phase, where we are now in the cycle is, we're beginning to feel comfortable about China's activities. We're seeing some strength and if nothing else, firming up forecasts coming out of Asia Pacific, with two big exceptions.

I think Japan goes kind of up and down and they're kind of all over the place frankly, as it relates to what they're trying to do and clearly India is shut down hard. So with those two exceptions, Asia look – we're beginning to see strength in Asia.

As it relates to Europe, where we are in that phases that we're beginning to smell, and it's just – it's just sound – sounds like things are – the activities is coming up. We're seeing that Germany is releasing and allowing smaller companies to go back to work.

And frankly that's a big part of – we have very large customers, but we also have a large grouping of mid to small size customers. And so that's good news for us. So I think where they're in the cycle is they've bottomed out and it looks like we're seeing signs that they're beginning to ramp.

I think North America was the last to go down and frankly, probably – we're probably still kind of on the bottom here. I think we're bouncing along the bottom, if I was to use that analogy and we're hearing signs by state as we all are of people trying to open up et cetera.

But I don't think that has a direct correlation to a lot of businesses getting back to normal. Certainly I think the smaller businesses will come back before some of the larger businesses. And so what impact that has on revenue will be interesting.

If you were to overlay that conversation with our three markets, I would argue that metrology was hit, but I think probably not as hard as the construction and scanner business. And public safety went down really hard, and I think, for obvious reasons.

But again, if you look at the size of these businesses, metrology for us is our largest business and I think this is why we were pleasantly surprised with where we ended up in the quarter despite effectively having a free fall in March followed by the by construction business and then public safety. Allen, will add some color. Yeah..

The only thing that I would add and you can see this in the numbers is the geographic mix of our bookings and revenue remained relatively steady with history.

And so I think Michael's exactly right in terms of the sine waves, and it just happened that within the quarter it balanced – they're balancing themselves out, as they ebb and flow and we end up similar to where we've traditionally been..

Yeah, I would guess and I don't know how you feel about this Al. But I would imagine that that's going to change pretty dramatically in Q2, that mix, geography, mix..

I suspect, that's correct, yeah..

And then again, given the cadence here, and, and kind of a typical conversion rates of your orders to revenue we're seeing some deferrals there.

So again, second quarter when you're thinking about your revenue in your planning, would your confidence level be relatively high that the second quarter – your second quarter – FARO's second quarter revenue number would be a bottom? I mean, is this – you know what you think..

I should be asking. Yeah..

Well, if you ask me –.

If I ask you, I mean, honestly, giving any kind of forward indication right now is literally suicide. I mean, I certainly hope so.

How's that?.

Yeah. That's fair. Good as well.

You made a comment though around – and I was kind of casually linking these two, but you made a comment around your EBITDA breakeven level by – I think – I'm kind of asking you If you could just repeat the timeline, but you had mentioned that a revenue level of 58 million to 63 million would be kind of your EBITDA or adjusted EBITDA breakeven level going forward.

Did you suggest that that would be in place by September?.

Yes..

Yes, we did it..

Okay. All right and that's timing of all the restructuring activities. And you'll feel pretty good about by the end of September having most of that cost accounted for..

Well, I think what Al said is it's going to be feathered in through Q2 and Q3. And so – but the actions have been taken, the write offs have occurred, right, we've had the conversation, so everybody kind of knows what the model looks like.

But I think the timing of the restructuring, the actions that we took in February, while I think motivations were different, right, our objective was to clean up our P&L. That timing couldn't have been more – better planned.

And I think it – and the fact that we've actually taken a lot of the cost – a lot of the headcount that was needed to go that's occurred with one exception, which is in Europe, where because of regulatory approvals, we've had to do that. And so that'll actually affect. That should happen during this quarter end.

And so I think that the end of this quarter, coming into the September quarter, we should be pretty much – we'll be a lot cleaner from the P&L perspective than we were at the end of Q1..

Okay, and just –.

Just one quick add, you're going to go through and do your modeling and you'll try to determine exactly kind of what does that mean and what if each one of the components within the financial statements look like.

And you'll end up with an operating expense level that is less than what we ultimately articulated last quarter, and I just want to be clear that that's not where we think the new norm is. But it's something we believe we can manage our way through during this downtime through deferring certain investments and deferring certain expenses.

But again, don't think that that's the long-term expense level that's more of through this short term situation we find ourselves and prudently managing our capital. Okay. Good thought..

And then just as the last question, you talked a little bit about the web process, your sales process, are you approaching that as just basically that generating more qualified leads? Is the process established enough that you have any confidence or thought around the conversion rates of these web based sales demos?.

Yes, very much so. Yes and yes. We've made a relatively sizable investment over many years building a number of web studios around the world. And we have data that suggests that if a web demo is done through the – or within the sales cycle, typically, the way it works is, in a normal sense.

Opportunities are founds – are selling an application teams basically engage with the customer. We do a web demo that basically allows them to see that the function of the product, then we try to schedule an in house demo where we actually do a demonstration on their product, what they will be using the tool for.

And that – and we find that when we go through that process of web demo and then physical demo that our conversion rate is much higher. Now that was under the normal circumstance. In today's world, obviously, doing physical demos on site are no longer possible.

So our customers are pulling us to have more access to our web studios as well as webinars as well as online training and all of these things that – frankly, we've enabled over multiple years, but we've had relatively low adoption rate.

I think that as I said in the script, I mean, the silver lining here is the fact that I think the new norm or at least certainly it's legitimized a lot of these capabilities that we have with our customers. And I think our objective as a company is to continue to actually push those as a methodology of doing as you've just asked.

It is a methodology of qualifying leads. And also, I think it helps us in the closure process. So we don't see these things going away post COVID, but it's – we don't really know what the new normal is going to look like yet. So I think our customers would love to have us in the facilities, and we're still going to have to go do that.

But we're really – I'm excited by the fact that we have this capability and we're able to kind of – we're still able to sell..

Got you, yeah, yeah, it's a nice to have I guess right now. Okay. Yeah. Thank you..

You're welcome. Thank you..

Thank you..

[Operator Instructions] And we'll go next to Jim Ricchiuti with Needham & Company..

Just wondering if you're seeing any change in the competitor behavior in this environment and to what extent you feel maybe just as a relates to these web studios, maybe you could also remind us how many of these you have and the extent to which that might provide a little bit of a competitive advantage? Or maybe some of your major competitors have moved in this direction as well in recent years?.

Well, actually, I'm not aware of our competitors having invested in web studio. I've not actually heard that. I think anecdotally, what we're hearing from our competitors is we've got one large competitor that seems to have shut down their factories and is close to depleting their inventory, which I think is a huge opportunity for us.

And we're all over that. As it relates to the number of web studios, I believe we have 23 globally.

And actually, that number has gone up pretty dramatically as we've enabled several of our regional sales people to have a studio capability in their home and so it's kind of a grassroots effect, but from our professional studio – professional quality studio, we've got 23..

Got it and as far as Michael getting in front of – as you try to execute on this new go-to-market strategy, obviously, you put this together before all this happened.

And I guess I'm trying to take a step back and saying, okay, is this – you appear to be a little better positioned and you're further along on this restructuring, but does this make the go-to-market strategy a little bit – how much more challenging does it make it, I guess is what I mean?.

I actually think it makes it easier for us. I mean, I think it makes it easier because frankly, everybody in the world has been reset, right.

We're all focused now on how do we actually virtually get to our customers? And so I think this situation has allowed – so our customers have had to reset their expectations on how to deal and who to deal with and how to deal with them? And so we're kind of now all the level playing field and COVID did that for us.

So the fact that we have now clearly identified who owns what accounts, we've clearly identified that our sales people own the entire portfolio, we are now a singular point of contact in each customer. And while I think, in a normal sense, that could add some confusion and frankly – and concern and risk.

I think it actually helps solidify our situation and that we now have a single point of contact, we know who owns the account, they know who owns them from FARO and I think it's streamlined and actually it will sync the process. So I'm very encouraged Jim and I – fingers crossed, I think it’s working..

Okay. Thanks a lot..

Thank you, Jim..

Thanks Jim..

[Operator Instructions] We'll go next to Greg Palm with Craig-Hallum Capital. Please go ahead..

Yeah, great, thanks. Hey, Michael, hey Allen, hope you guys are well here..

Hi, Greg..

A little bit of commentary. I know about sort of the quarter, but how was the quarter tracking pre-COVID? Any anecdotal commentary on order trends, January, February, maybe the early part of March. I'm not sure if there's any way to quantify activity pre-COVID versus maybe the last few weeks which sounds like it was a pretty significant disruption..

Not really, I think everything was pretty normal. I think we felt like we were marching through a positive quarter and I think what we saw – and as you know, the way our backlog builds through the quarter, it really is heavily weighted toward the last four weeks of the quarter, actually, probably three weeks of the quarter.

And so when COVID hit in earnest, which I would argue is probably the first week in March is when it really began to get weird. I think we started working from home in the first week in March. And I think the rest of – certainly the United States began working from home in March and Europe was already going there and China was down.

So we began to kind of see some softening, we saw some pushing of opportunities. But as I said, in our script, we have not seen large cancellations. What we're seeing is – in talking to our customers, yeah, we still want this, yeah, we need it and yeah, we're going to buy it. We just don't know when yet. We don't know when we're coming back to work.

We don't know, when we come back to work, what the demand environment will be. And so it's just clear.

I mean, we have less visibility today than we do in a normal situation, which is not great, as you know already Greg, so it's – so we're very reticent to kind of make any commitments around revenue run rates, but I – but the positive thing, and I think this is why we've mentioned it in our script that we're not seeing people shutting down and saying we don't need – we're not going to buy this product this year.

That has not actually happened in large scale. There's been a couple smaller guys saying, hey, we don't even know if we're coming back that kind of thing. But our typical run rate repeat business we know reasonably that's not going to be bought..

Yeah, that makes sense.

Around that, what is your sense for customer budgets? I mean, just in terms of how much has been pushed out or delayed versus reduced versus all out cancelled? I mean, do you have any feel as you talk to your sales force?.

No, we don't. It's hard to quantify. Again, if you overlay, we've got 15,000 customers on a three year cycle, right. So it's a huge customer base. And it's hard to quantify, kind of in buckets because it is so diverse. I think because it's so diverse that's a reason that our business has been as stable as it has been.

And I think in this situation, that's a very positive thing because we sell across – we kind of group it in three big markets, but the reality is our customers pretty much map, probably 90% into those three big buckets. So we've got good coverage.

I think the metrology business will be the first to come back just because of it is our largest business and it's spread over probably the largest customer base. I think that's followed by the construction world as the construction and architectural firms come back on online, which I think is imminent. Certainly, it's coming back in Asia.

It's a lot of noise in Europe already. And state by state, they're talking about allowing construction crews to start again. And then I think public safety will be last just because I don't think it's a high priority for most of the governments today..

Okay.

And just to be clear, if you look back on the first quarter performance, did you see any negative impact from the implementation of the strategic plan in terms of the headcount reductions or was there anything external, whether that was production issues or supply chain impacts, anything that was – that maybe you can quantify an impact versus just how very soft and challenging macro that got worse?.

No, I don't think our restructuring had any indicator – or any implication on our Q1 results, if anything, they were positive in the context of our cost structure, I think taking – I don't believe that we walked away from opportunities because of a miscue in the selling organization or from an operations perspective, I think we're operating probably better than we ever have as a company.

And so I'm very encouraged by – we got a new operations leader and he's really done a fantastic job basically getting us very much focused on kind of the basics.

I will say and it was aligned in the script, but I think it's important to point out that we in addition to building for Q2, we have also made the investment to invest in at least a quarters worth of inventory and finished goods.

In other words, converting a lot of the raw materials that we already had into finished goods because of course, you never really know what's going to happen to a particular factory or for a particular location. And so we think that that will actually bode very well for us.

Again as things begin to normalize, there could be a surge in demand and we need to be ready. We do not want manufacturing to be the short straw there. So it was a risk, but we kept our factories busy and we've used this kind of slowing to actually build inventory..

Yeah, seems like the prudent thing to do. Alright, thanks for the color and good luck going forward..

Thank you, sir. Appreciate it..

Thank you..

This does conclude our Q&A session and our call. We appreciate your participation and you may now disconnect..

Thank you..