Welcome to Johnson Controls' Second Quarter 2020 Earnings Call. Your lines have been placed on listen-only until the question-and-answer session. This conference is being recorded. If you have any objections, please disconnect at this time.

I will turn the call over to Antonella Franzen, Vice President and Chief Investor Relations and Communications Officer..

Good morning, and thank you for joining our conference call to discuss Johnson Controls' second quarter fiscal 2020 results. The press release and all related tables issued earlier this morning as well as the conference call slide presentation can be found on the Investor Relations portion of our website at johnsoncontrols.com..

Thanks, Antonella, and good morning, everyone. Thank you for joining us on today's call. I hope you and your families are staying safe and healthy during these extraordinary times. You may have noticed from our slide presentation, we are taking a very different approach compared to our traditional quarterly earnings call format.

In order to focus our discussion on addressing the impacts from the COVID-19 pandemic, as well as the steps we have taken as a company to partially mitigate the financial impacts and position the company to capitalize on the eventual recovery.

Although we have withdrawn our guidance for the year, I will provide some color commentary on how we are thinking about the second half later in the call. We'll allow plenty of time for your questions. Let's get started on Slide 3. Clearly, we are navigating through unprecedented times.

The ongoing COVID-19 pandemic has had profound impacts on the way we live our daily lives and the way companies run their businesses. We believe most of these impacts are largely transitory, but the dramatic slowdown in global economic conditions presents very real challenges..

Thanks, George, and good morning, everyone. So let's start with a quick look at our year-over-year EPS bridge on Slide 10.

Volume and mix including the estimated sales impact from COVID-19 of $350 million to $390 million, was a $0.10 headwind and this was offset by $0.04 of mitigating actions and a $0.02 tailwind and non-controlling interest as a result of lower earnings in our consolidated Hitachi JV.

The net $0.05 to $0.07 estimated EPS COVID impact we discussed on Slide 8 is included in these three columns. As expected synergies and productivity save, net financing charges and share account with tailwinds in the quarter..

Thanks, Brian. Let me spend a few minutes on our thoughts for the second half of our fiscal year on Slide 17. We are planning for an organic revenue decline in the range of 15% to 20% with the most significant impact expected in Q3.

As I mentioned, we have taken numerous actions both temporary and permanent in nature to help mitigate the financial impact. The benefit of these actions will keep the net decrementals on the revenue decline in the low 20s, which speaks to the value of the mitigating actions we are taking.

It is important to keep in mind that the $400 million to $450 million of mitigating actions are in addition to the $150 million of synergies and productivity we have committed for the year, of which $80 million is expected to be delivered in the second half.

Our focus is on controlling what we can control and that is ensuring we are financially and strategically well positioned when we exit this crisis. The permanent actions we have taken will ensure we have a lean cost structure while protecting our product and channel investments to lead the new norm as we go forward.

As the largest pure play buildings provider, we are leading the change to provide more resilient and flexible building spaces, safer environments, touchless or frictionless access and remote monitoring service delivery.

This combined with our position as a leader in intelligent and sustainable building solutions, enables us to deliver the outcomes that matter most to our customers.

Depth and breadth of our product portfolio combined with proven expertise and an expansive global footprint provides us with a unique advantage as the evolution of the built environment accelerates. With that, operator, please open up the lines for questions..

Thank you. We will now begin our question-and-answer session. Our first question comes from Jeff Sprague with Vertical Research. Your line is open..

Thank you. Good morning, everyone. Hope you're all well..

Good morning, Jeff..

Good morning, Jeff..

Good morning..

Good morning..

Just two from me real quickly. George, we did see a pretty abrupt impact on your orders and obviously this is unprecedented type situation. But I wonder if you could spend a little time on what the forward order, kind of horizon looks like.

Is there wavering in the pipeline? How are people feeling about kind on new construction projects? Obviously, the backlog is nice and gives you some support for awhile, but just wondering what's kind of on the new horizon to kind of backfill on the backlog?.

Yes. Let me start Jeff by just giving my thoughts on the non-resi construction and then I'll give you a kind of sense on where we are here in April. We are tracking the macro trends and third-party data closely. I would say that we've had incredible discussions with our customers and understanding what their plans are.

I would say that through, as we look at our order pipeline, although it's still up, it has moved to the right, purely timing. What I would say about a quarter. Certainly because of that it is what drove us to take the actions that we're taking now, both temporary as well as the permanent cost – the cost structure changes.

And I do believe that there'll be some continued disruptions here which we have limited visibility today. But I think it's kind of tough to look beyond the next six to nine months. I believe short term, our backlog position as Brian discussed positions us here to bridge the gap.

And if I were to play out what's happened here, when I look at Q2, we did have a demand air pocket and started certainly in China, Hong Kong, Japan, some of our larger markets in Asia Pac. And then with the shutdowns that occurred in North America and EMEA/LA, that continued and we see that continuing here in third quarter.

We did see an impact on service a bit, but that was mainly because of sites being shut down. We do expect that to come back pretty well here as we get through the quarter.

So as we laid out our plan based on what we learned on the second half of March obviously, we looked at April and we said orders would potentially be down somewhere kind of high teens, 20%. Based on the daily activity that I've seen and we're watching this every day. It's coming in at about that level. What I would say within that Asia Pac is better.

And so what you can see in the pipeline and the orders suggest that that will get back to a more normal by the fourth quarter. And so that is encouraging based on what we're seeing happening in APAC.

But certainly as you would expect with all of the shutdowns that occurred in EMEA/LA as well as in North America until our customers come back to work and we're actively engaging with them.

It's hard to put that clearer picture together, but based on the interactions I've seen, I am fairly confident that over the next three months we'll see continued improvement. So, although it's kind of high teens orders in April, that'll continue to improve as we go through the second half..

Thanks for that. And maybe a follow up, maybe it's for Brian.

But on the $400 million to $450 million of cost reductions, how much of that is kind of structural in nature that we could kind of think about carrying over into next fiscal year?.

So as you would expect, we started early. What we saw happening in China, obviously, we have a big footprint there. And so we began immediate actions. Now some of the actions are temporary, such as unpaid time off, furloughs, other employee compensation, reduced travel. You can imagine all of those actions.

And then the other is looking at this from a structural standpoint that we've been able to now proceed with and we'll have a much bigger impact as we move forward. As we look at the world today and what has happened, what I would tell you it has really changed the way we're working virtually.

And very quickly we had all of our salary teams working remotely with full security as well as access to Microsoft Teams and the like so we could stay engaged. And so with all of that happening, as we look going forward, it gives us opportunities to think differently and think about our cost structure and ultimately enhance our productivity.

And so as you look at the actions we took of the $400 million to $450 million of the mitigating actions expected to come through in the second half, about 80% are temporary. And then the other impact in the quarter are the structural actions that we're taking.

Recognizing that though, that's only one – it's only really the benefit of about one quarter. Then as you project that in 2021, we actually have a margin structure that with the volumes that we're anticipating, that we’ll actually have better margin structure.

And when we look at the buckets of cost, you will about 60% is comp and ben, and that's the result of the furloughs and other employee comp and some of the restructuring. You get 30% that’s indirect spend and about 10% in facilities, Jeff..

All right, thanks for that. That’s all I have. I will talk soon..

Thank you. Our next question comes from Steve Tusa with JPMorgan. Your line is open..

Hey guys good morning. .

Good morning Steve..

Good morning Steve..

Good morning Steve..

Thanks for all the detail on the breakout and all this costs. Lots of big numbers being thrown out there. Temporary, you guys seem to be doing some structural stuff as well. So that seems to be a positive.

Any color at all on kind of how this 15% to 20% breaks down kind of quarter-to-quarter, or should we just assume that it's within a band kind of stable for third and fourth quarter?.

Yes, so Steve, as we looked at the third and fourth quarter and try to model this and how it's going to play out based on what we learned in March, certainly the larger impact will be in Q3. And we are tracking Asia-Pac will be better because they are now in the recovery mode.

But as you look at EMEA/LA and North America, April will be the toughest month and that'll continue to get better through the quarter. But if you look at the two quarters, the larger impact is going to be in Q3..

Got it..

And so that's why as we saw this happening, we took the actions that we took on very proactively with the temporary actions and then, really then went into the next phase of our permanent cost reductions, which is going to play out, well not only in the second half, but it will set us up well for 2021.

And that's what gets us to the net decrementals to be in the low 20s, in the second half. And then when you look at that combined with the – that combines with the addition of the $150 million of the plan, synergies and productivity that we’ll achieve for the year. About $80 million of that is actually in the second half of the year..

Got it..

Just to help you with the models as well, then below the decrementals, I mean, we continue to take a hard look at our corporate cost structure. I have taken additional actions really as a result of The COVID situation, so our corporate expense now which original guidance was $330 to $340, we would now be in that $265 to $275 range.

And then for net financing cost, even though we've taken on some more debt since we suspended our share repurchase program, those two pretty much offset. So net financing costs, we're going to retain at that $245 to $255 level.

And then when you look at minority interests or non-controlling interests as a result of some of the pressures that we're seeing in our Hitachi JV, our original guide for non-controlling interest was $210 to $220 and we're moving that down now to $150 to $170, given the pressure we're seeing in Hitachi.

So those are kind of three below the line items that'll be helpful to you as you update your models..

Great, very helpful. Just one last one from me.

So if you are down at kind of the lower end of the range of that in 3Q, kind of the 15 to 20, I mean does that mean like install related stuff, because I would think services would maybe hold up a little better or maybe there's some shutdown impacts, maybe that's the difference, but does that mean install is down like in the 30s?.

No, no. When you look at the way this plays out is the install – the pressure on install is actually access to sites and all the shutdowns that have occurred in EMEA/LA, it started in China. So when you look at what happened in China in the second quarter, our install was done about 30%, I believe, or thereabouts.

And so that will be coming back in third quarter and fourth quarter. When you look at service in Asia Pac, it was down about 7%. Now a lot of that is purely because of access to facilities in the sites that we provide service to. When you look at EMEA/LA and North America, certainly that started at the end of March and that's continuing through April.

So we do see an impact, like I said, starting out. And when I, when I gave those previous numbers, those are orders. As far as revenue we’ll be similarly at the higher end of the decline here in April, but we believe that that will sequentially get better as a quarter plays out.

And so installs mainly access to sites and then service was purely temporary because of the shutdowns. But we believe that that will – April be the toughest and we'll get better monthly on a go-forward basis..

Totally, totally makes sense. Okay. Thanks guys. Appreciate it..

Thank you. Our next question comes from, Scott Davis, with Melius Research. Your line is open..

Hi, good morning guys..

Good morning, Scott..

Thanks for the color on everything. So it’s early in the morning. But I'm just kind of curious George, a couple of your comments about just what perhaps the building customer may do going forward from whether it's UV-light, or filtration, or some sort of retrofit to perhaps just improve the air quality the building is.

Is it too early to have those conversations with your customers? Is it just everybody just scrambling to stay alive right now? And is that a real theme you think that there will be a fair amount of spend that needs to occur to clean the air?.

Yes Scott, what I would say is we’re in very active engagements with our customers in defining what the new norm is going to be and what technology can do to ultimately address some of the new challenges. Some of what you discussed is absolutely front and center.

Initially it's as simple as adding IR scanners so that we can do temperature checks and the like, it's sanitation, it's enhanced filtration and other technologies that can ultimately drive purification of the air. What I talked about in my, my prepared remarks, I would categorize it in four key buckets.

What we learned in this hospital response, in this healthcare response is, I think, there is a view that that space is going to be much more flexible and that's across verticals and what can be done to create flexible space.

It's going to be safer environments as you say, not only the air purification but then touch-less and frictionless, everything within buildings and infrastructure. What I would say is it's going to be more automation that ties to more automation, which ultimately plays to our strengths. So those are the trends.

And I would tell you Scott that very actively engaged with other CEO's and a bunch of our customers in really defining what the new norm will be. And then from an innovation standpoint, we're already deploying resources, very actively working in partnership with our customers to be able to deliver on these types of solutions..

Okay. That sounds interesting.

So just to somewhat separate less positive topics, just when you think about your backlog, is there a certain percentage of it that you can consider at a high risk, like hotels, things like that, that just – the projects just may not get off the ground in the next few years?.

So right out of the gate we have really gone through all of the backlog recognizing that there is going to be some industries that are going to be extremely challenged given what the impact that this has had. And I would tell you that most of what we've seen from that has been where projects have been pushed to the right.

And so although we've seen short term, the inability to convert, although I would tell you the activity is still very high. We've had thousands of customer engagements via video meetings on continuing to stay engaged and ultimately executing on their demand and being able to support them.

And so when I look at the backlog where it was actually up 4% that's purely because of the way how things played out from a revenue turn standpoint.

I believe that – and the pipeline is actually up then, although there'll be some that are going to be delayed and potentially canceled because of the state of the industry, I think, that there's new demand that's back-filling that that's coming into the pipeline as fast, given what we see today..

I would just add to that we haven't done a backlog review of the $9 billion though. And as George said, sitting here today, we have not seen a significant number of cancellations. We have seen more delays versus cancellation. So it's something we monitor every month in the ops meetings that we have with our business units.

And we'll keep a close eye on it..

Okay. Thank you. That's encouraging. Good luck guys. Stay safe..

Likewise..

Thanks..

Thank you. Our next question comes from Nigel Coe with Wolfe Research. Your line is open..

Thanks. Good morning guys..

Good morning Nigel..

Good morning..

Good morning. So I want to go back to the second half outlook, recognizing that the 15%, 20% is a planning range.

Could you maybe just I mean, I think Steve might have tried – kind of dug into this a little bit, but how do you see service within that 15% to 20%? And then if you could break out how you view Fire, versus Security, versus HVAC service within that kind of range you put out there?.

Yes, so we look at – well, I'll give you a sense on Q2 and then how that continues to play out here over the third and fourth quarter. When you look at products, let's start with products down 8% in Q2 will continue at – that'll be a little bit worse in Q3 mainly because of the residential HVAC, which we talked about in the prepared remarks.

And then when you look at the mix of that it will be pretty much across all of the domains. Although BMS is actually holding up pretty well, our digital businesses are holding up well, so most of the decline is being driven by HVAC, as well as Fire & Security.

When you look at the Field, the Field was down 3%, service was up one, but that was with North American EMEA/LA up offset with the decline in Asia Pac down 7%. And so as I said earlier, I believe that service, we will see some short term impacts in service even in EMEA/LA in North America here over the next one to two months.

But I believe that the service based on our backlog and the demand from L&M, that'll continue to come back over time. On the install side, as I said, we have a good backlog and purely – right now it's purely because of the shutdowns that's impacting our ability to be able to convert the install revenue.

And so as we saw, as I said, it's going to start off at the higher end of that impact. In some cases maybe a little bit worse because even in China, we saw our install get impacted by 30% with the complete shutdown.

But as that goes forward with more access to customer sites into projects, we see that continuing to improve through the quarter with service coming back sooner than the total install..

So would you expect sales to be within that range at the low end, or would it be below the low end of that 15%?.

Yes, so Nigel, as everyone we’re trying to project what we see happening. This is really based on what we've seen in the last few weeks.

I am encouraged that because we've been deemed essential everywhere we work across the globe, recognize that we've stayed pretty much in operations, although we've had some disruptions, we maintained our operations because of the criticality of what we do, supporting our customers.

And so most of the impact is purely because we haven't had the access to be able to perform what we do at customer sites. And so a lot of its dependent on that, and how countries open up, and how businesses open up and sites open up. So it's really dependent on that Nigel.

But based on what we see here in April, I'm encouraged based on what we've provided for a framework that we are in line with that..

Okay and I recognize it..

Another way to think about that, Nigel, is our service business is roughly what, 25%, 30% of the consolidated, we're giving a range here of 15% to 20% enterprise wide. So if you look at that and say our products business is about $8 billion, our service business is $6 billion and the remaining is the install piece.

I think the service decline is going to be lower than the 15% to 20% range we're given. And then install will be on – will be higher, a bit higher on the high end. And then products is just somewhat dependent upon how we ramp up in some of our manufacturing facilities.

George mentioned in his comments that right now we are in pretty good shape, we’re monitoring some things in Mexico and India, but some of it is dependent upon how quickly we can ramp back up from a manufacturing standpoint.

So the 15% to 20% is intended to be kind of a broad guide post here, but service would be lower on the low end or lower certainly than the 15% to 20% range..

Okay. Yes, that what I was trying to get to. Obviously, recognizing that there's not a lot of decimal points here on the numbers.

But George, can you quickly just address in China and Asia Pacific in April which businesses you've seen spring back quickly and which businesses are still somewhat depressed?.

So when you look at Asia Pac in total, it's pretty mixed. Starting with China, most companies are back to work. I wouldn't say things are back to total normal, but I would say probably in the 80% to 90% area. And we're coming back nicely. We've seen some nice pickup in orders and activity there.

Obviously there's still travel restrictions within the country. We are watching, what I would say, we're watching a couple of other areas closely, Singapore and India because of the current lockdowns and there are some pressures there. So when you look at our headquarters, we're back full operations at our headquarters in Shanghai.

So overall, I think, we're using that as a model and understanding how that plays out across these other countries. We do expect to see continued challenges in the region in the second half of the year with the larger impact in Q3.

If you look at specifically your question on China, I would say the biggest impact, as I said earlier, overall it's about 6% of our consolidated revenue. The revenues were down about 35% organically in the Field, in the Field-based businesses. And a lot of this was driven by our install business in China.

But even with that, the good news there is with the work we've done around gross margins with pricing and productivity, our margins are up nicely. And so on a go-forward basis, we feel good with the recovery that's going to play out there. And that seems to be happening as we sit here today through April.

And so we are somewhat encouraged by that trend. Now on products, we also have had the impact in products. It's about 5% of the total segment. As Brian talked about, we do have our facilities back in running.

The customers are coming back up, but it's not – I wouldn't say it's at a hundred percent, but it's encouraging that the activity has picked up pretty significantly here over the last few weeks..

Okay thanks George..

Our next question comes from Julian Mitchell with Barclays. Your line is open..

Hi, good morning..

Good morning Julian..

Maybe – good morning. Maybe just following up on that mix aspect, so is it fair to assume that your decremental margin outlook for the second half that should be embedding or could be embedding a fairly handsome margin mix tailwinds just because service is down a lot less than install. And maybe just clarify that.

And also how are you seeing the discipline on pricing across service, install and products, in terms of maybe the marketplace, as well as your own discipline in pricing practices?.

So let me start with the first question there Julian. When we talked about in the quarter and second quarter install was down greater than service in Asia Pac. And that was true as well as in North American and EMEA/LA. So that where we had a little bit of mix here in the quarter to come through because service was down less than install.

When you look at on a go-forward basis, that will probably still be true as it plays out, right. So that the install will be – there will be pressure there with the install coming back, service, we believe, will come back quicker. But we've seen pressure in both.

When you talk about pricing, we have been very successful in continuing to execute on price. For the year, we're still expecting about a point on the top line coming through our price realization. And that has continued even through this period of time with the pandemic..

That's helpful. Thank you. And then my second question really just around the free cash flow conversion. So you've raised that guidance for the year.

Maybe I missed it, but if you could clarify perhaps what's changed on the capital spending front for fiscal 2020 and how confident you are that you'll be able to get those sizable working capital cash tailwinds in the second half? Are you seeing payment terms proving fairly regular? And is it easy to manage that balance of receivables and payables?.

So the free cash flow conversion going now from 95% to greater than a 100% is really a function of the net income pressure we're going to see in the second half.

As it relates to the metrics, I would tell you at the end of the second quarter trade working capital as a percentage of sales, we saw a 10 basis point improvement year-over-year, so not as much as we saw in the first quarter, but still we continue to make progress. It is an area we’re watching very closely in today's environment.

I think DSO is flat in the quarter and it's an area that we're watching very closely as we move forward. But I think with the policies and practices that we've got in place now through our cash management office, it's going to be a challenging environment from a cash flow standpoint.

We'll manage our trade working capital appropriately and we feel pretty good about landing someplace north of a 100% right now..

Great, thank you..

Thank you. Our next question comes from Joe Ritchie with Goldman Sachs. Your line is open..

Yes, thanks. Good morning everyone. Hope you are all well..

Hey, Joe, good morning..

George, maybe my first question, I know a couple of people have touched on this service versus install piece. But clearly like the service that has held up better in China during the COVID-19, shut downs. And clearly from an install perspective you need to be on-premise.

I guess the question that we are trying to understand is from a service perspective, how much of the business is – does not need to be on-premise, how much of it is kind of subscription based and can be more resilient in this downturn?.

Yes, so getting back to the service, service held up in Asia Pac better than the overall install and in China was down almost in line with the install, but coming back faster if I misled you there. And so when we look at now and it's mainly because of access to facilities and sites that we provide service to.

The rest of it overall Asia that only impacted overall Asia being down 7% with our install in Asia down even greater than that in total. So just to clarify on the first question.

And then the second part could you repeat that?.

Yes, Yes..

I guess the second part really was how much of the business – how much do you have to be on-premise for service for you to generate service revenue versus how much of it is potentially subscription-based, one is more resilient and you don't necessarily on-premise.

And just is there a portion of it that is a little bit more resilient that is not location?.

Hey George, why don't you let me jump in on this one a little bit?.

Yes. .

So Joe, I think, one way to think about it is when you look at our total service revenue, about half of it is performance service agreements and the other half would be more non-recurring time and material and things of that nature.

Now clearly when you look at that part, that's performance service arrangement, some of that is going to still require to be on-premise but some of it will be remote like monitoring and the such. So I mean don't have it all to that level of detail, but that's one split you can think of as you're trying to think about the piece that's more resilient.

And to the point you made earlier, I mean, if you take the performance in APAC during the quarter, clearly you can see that service held in better than the install side of the business. Even if you take a look at the global financial recession in the 2008, 2009 period, you would see something very similar to that as well.

Service went down, but clearly not to the extent that install did. So your point well taken, service is much more defensive, particularly in this type of environment and will definitely hold up better..

Helpful, thank you.

And if I could maybe just follow-up with Brian just from a balance sheet perspective, obviously, pending the buyback at this point, I guess just from a timing standpoint, how would you guys think about, reinstituting a buyback and being a little bit more aggressive with capital deployment from here?.

Yes, I think, the current plan is we'll continue to hold off on the buyback through the end of this year. And we think that's a prudent thing to do. And we'll reevaluate it as we think about 2021. But at this point in time I would tell you that as far as your models and so forth, I wouldn't assume any buyback for the remainder of fiscal 2020..

Okay. Fair enough. Thank you all..

Thank you. Our next question comes from Andrew Kaplowitz with Citi. Your line is open..

Good morning guys.

Hope you are well?.

Good morning..

Good morning. George how are you thinking about your Fire & Security businesses in general moving forward? When you look at APAC, Field is down 14%, but you see Fire & Security in the Field down only low single digits.

So how are you thinking about these businesses, which should be less cyclical than the rest of your portfolio versus that second half guide and down 15% to 20%?.

Yes, the Field when you look at Fire & Security for the quarter, the Fire & Security products were only down, low single digits and it was a mix. What really drove that was fire suppression and a lot of that was just timing of projects. And on the Field we were down about 2% and that was our low single digits and it was spread across the regions.

Now when you play that out, we're going to see similar type impacts in the third quarter, third and fourth quarter relative to the shutdowns and how that plays out. But it is a higher mix of service. So you see less of an impact in total because of that. And that's what we've got modeled.

We've got the businesses have been performing well and in spite of the challenges that we faced and we're prepared to continue to execute..

That's helpful. Maybe the opposite of that is if I just look at applied HVAC in products, it was down in the teens in Q2. I guess most of that was APAC related weakness, but does that suggest applied to be down more than 15% in 2020.

Maybe you can give us your outlook and sort of what you're seeing there are sort of larger projects? Are they just sort of getting deferred right now?.

Yes if you look at a commercial applied HVAC, revenue is down mid single digits and it's mainly driven by the Asia Pac decline, in being down high teens. And that was the bulk of it. When you look at orders about the same, it was down low-single digits and it's mainly driven by APAC and the full impact that we saw in the quarter because of the virus.

And so as we look at our pipeline, we really, as Brian said, we were trending pretty well on our secured orders right through February in EMEA/LA, in North America. And that was true with applied. And so with the impact here we think it's temporary. The pipeline is still there.

Some of the pipeline is being pushed to the right because of the timing of projects. But we still feel very good about our position, what we see in the pipeline our ability to be able to convert, now obviously pushed to the right..

And Andy, just one thing to jump in here. If you think about the criticality of the things we do both within Fire & Security and HVAC, clearly both very important, especially in the environment we're currently in. I think the important point is what George said, is there is a higher mix in service in the Fire & Security business versus HVAC.

So to that point as service will hold up better that kind of gives you an indication of the two different platforms..

Great, helpful. Be well guys..

Thanks. Operator we have time for one more question..

Thank you. Our last question comes from John Walsh with Credit Suisse. Your line is open..

Hi. Good morning..

Good morning..

Maybe just as a follow-up to that question, just wanted to know what you were, I think, you talked about the healthcare vertical earlier, wanted to know what you were hearing on kind of more of the public side, whether that's municipality, federal and maybe also education if you're – if that's part of where that pushing to the right is if decisions are being slower coming out of those verticals.

How you're thinking about that?.

Yes, what we've seen there – short term we've seen a push to the right within those projects also. We do believe we have a pipeline now of new projects that are coming in based on the way that we have responded to the crisis and creating new capacity and new capabilities. And so there is a lot of new projects that have been identified.

But when you look at the overall project base, it's been pushed to the right similar to what we've said with some of our other backlog.

I do believe that there's going to be some stimulus here in the institutional verticals relative to what's going to happen with the new norm as we discussed earlier, what's going to be required to get these facilities back in operating. So we see an opportunity there, although we're in the early stages of that.

And so that's something we're going to watch closely because, I think, based on what we do in the buildings that we support, I think, there's going to be a lot more opportunities. That all being said, I think, there is going to be some financial constraints. And so we're going to have to watch that closely as this plays out..

Great. And I'll just leave it there. In the interest of time, I appreciate the color..

Thank you..

Thanks.

George, do you want to make a couple of closing comments?.

Yes, just to wrap up the call, I want to thank everyone again for joining our call this morning. We are, as you know, we are navigating through these challenging times very well. We're well positioned both financially and strategically to capitalize on the recovery as it plays out. And again, I hope that you and your families remain safe.

And I look forward to speaking with many of you soon. So operator, that concludes our call..

Thank you for your participation in today's conference. Please disconnect at this time..