SPX FLOW (FLOW) 1 Aug 202020 Q2 Earnings call transcript

Good morning, ladies and gentlemen, and welcome to the SPX FLOW Q2 2020 Earnings Call. At this time, all participants are in a listen-only mode. Later will conduct a question and answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Scott Gaffner, Vice President of Investor Relations, Strategic Insights.

morning, good and Whitney everyone. Thanks, us Thanks second discussion our a XXXX for financial joining quarter highlights. of for This morning, XXXX. we performance issued a news release three ending for detailing months June XX, the our financial to The along webcast be on news accessed today website spxflow.com. with presentation can at release, our during be the the used on also today. website replay will our A be available later

today's will start me the operating quarter, and call second Officer. CEO a Vice Easley, an a along quarter then the Jaime we and Chief provide on an year, with and capital on the are Financial milestones and second continue on of deployment. update some Jaime highlights actions will pandemic, invest details for our the Joining some how managing cycle, our update President strategic a transformation. with of of Taking through agenda, safety message; through our will our at we solid look and with the of in up highlights with results, walk through Marc wrap Michael, Marc how discussion Marc along and on thoughts performance President sheet to the working are key of in direction. our assumptions balance full cost hit our we've the

we'll Following questions. call remarks, the our prepared for open

elements in I'll over SEC measures. non-GAAP In reconciliations our affect that Those begin, in And that presentation, for we markets. them adjusted may – on based all are recent our to the ask statements that with subject this we've a our filings. business today's that impact current and are factors forward-looking and we that, Before brief it risk of view contains reminder of of to identified elements light. provided presentation performance you Marc. view turn Principal our change, Appendix and the of are most

Scott. joining call. for introduction, us everyone and for Thanks Good the on the morning, thank you

were challenges and the the entered quarter, second unprecedented. As economic health we

Our has the our effective nimble operating demonstrate which response strong to headwinds. second COVID-XX structure, an to resilient led quarter results and

During believe business. the capital reached on filed margins. improved celebration gross had We of low-margin levels record to key in following that achieved achievements to $XXX sale through quarter, At these for large began we of which end often in we Energy realized share program. are has $XX quarter in notes the our We and savings. July redemption operations. excess milestones XX, annualized to the of million organization deserve essentially the but result senior this We quarter, I extraordinary no will the our interest the of some second safety in We And of be the dry-dairy completed buyback our of times, subdued, return investors backlog. projects Power close highlighted. our XXXX, due million the

journey with As our I We to this personally company a has to been forward. that one us journey we approach five next thank now September, public phase high of and the would year stakeholder each as our this enter performance. with every on anniversary foot like

We will from moving but economic the be defense. are cycle, prudent current we during to offense

strong the through profitably. cash invest grow us position stable to allows Our financial generation cycle to and

a been culture, to which do of safety has our thing our first the important people-first global compromise. is a safety as our the Wherever people This that today our think world, pandemic. our and call, I started begin safety, team never resilient approach right of the Just the earnings in we we I'll health, of are last with backbone an is to encourage always. The well-being priority COVID-XX message. aspect we and

key before, in safety said milestones had I quarter. As we several the

our thank month employees the was Tracy keep leaders site would the to and injuries. and to recordable safe tireless for efforts EHS like our without professionals, their any first I organization healthy. whole our had we've June Beaudry Specifically, and

manage and principles capital the regarding combination The our the and continue on through cost XX%, sheet reflective of report maintain productivity we of navigate support and situation, to create intact, a The the the business I'm that of higher quality portfolio balance in in common quarter with X.X financial I be the remain than the we XXX orders to versus backlog and margin free our points quarterly has our our characteristics we members, business strategic leverage our am proving demand gross deployment. points think is continues essential the a of prioritize pleased long-term Despite together strengthened better historic of ability start system positioning downturn. customers flow planning up strong process challenging are safety, the position at continuity, come a offensively in points health of this resilient of XXX up approaching Through at reflective strategy. to preserve mature yielding through containment, business. net actions our selective strategy, our we XXXX. undertook this us beginning the team our relentless remain around purpose quarter, scenario to liquidity, XXXX As operating which growth applications. is and business performance margins XXX team strong higher on times our focus and and and margin a guiding generated revenue to cycles. sequentially. a environment, cash our more orders, to our and team confident to execute ended well-being than effectively past more quality versus up with and We

these in Jaime with $X $X.X in redemption on July $XXX This presentation. value more and $XX allocation of items review our annual the detail us of note senior in share will XXXX. in our later capital part XX, billion will as million our mentioned, savings due than repurchases we announced more of ample of result priorities to interest model, million. as liquidity the included million move allowed quarter which the Our creation in forward of

and going The in second margin the important of second the considering business significant and is completed Power our teams low-margin of systems we of milestone high a we've our quarter, in closed execution transformation less cyclical second performance quarter projects, achieving believe In in created that Energy revenue with million margin of the improvement especially streams, for I QX, for process the forward. the the marks exit quarter an headwinds. proud also divestiture $XXX of approximately macroeconomic our transformation am business solutions also the of large, and company high We quality extremely we sustainable a the in Food essentially business. level milestone resulting dry-dairy proceeds. net as allowing Beverage of the for strategic delivered early

that by which began we recession pandemic. gross has see can over compounded in margin posted XX% quarters steady of been progression that with the past XXXX, You the a the industrial despite six global

I Beverage current of weakness. business, streams I the orders by X%, of XX% by significant manufacturing COVID-XX most actions impacted with commercial a reflective sequentially environment. and of are As than short-cycle results strategic margin Food combined were Industrial our resiliency quality improved and teams. categories accomplishment the to following expected up high markets. weaker level operational better before, believe global The being said performance sustainable with down improved macroeconomic industrial product revenue which the orders offset this create improvement expected is moderately our the Sequentially, and the in

Industrial While than planned down, the QX. our we better these start results were for business of at

of activity which essential for at industrial capital lines of this held a than in COVID-XX. as And in Beverage Pacific, Food weaker anticipated, in a strong our delayed following quarter orders due As were current spending orders budgets were orders we some equipment bid the Sequentially, first is America, basis, Europe original environment. moderately impacted with Food our in On up in digits, which environment. largest low turn delays to pandemic global North impact XX% rates product experienced North in a in first highlighting in and June. aftermarket Encouragingly, Industrial in orders down Encouragingly, I'll cautiously Component historically rebound China the with F&B and capital doubled were the equipment of by region deployed X% about America markets from sales over and reflective pandemic. due current call be orders resiliency was being significant Systems stable QX. deferrals early aftermarket Jaime. in markets. the were service better to time, nearly continue have our the Europe in In part orders level, to up project low-single orders up in and business the Asia quarter. Beverage, the increasing experienced been these wins systems to

lines. from into exit quarter. tight to strategic low-margin we down product saw lower much I'll to no size. our but dry productivity declined than XX.X%, everyone. a Revenues cost backlog segment decision year-over-year QX. XX.X% morning, strong and Beverage and due mainly I dry-dairy heading lower the am Food down points orders XX% Organically, XX% projects end-markets. to to due good X.X%, our income were second to glad due has net Despite had less the severe end-market Thanks, in were demand, in revenues that quarter. shipments, and Marc, and benefit significant the low-margin recap say significant the rose price strength impact was the organic cost. but from of execution, XXX of anticipated margins level of declined decline to of with our second brief positive controls the initiatives, also project Orders We quarter begin the resilient

income. still conversion full Importantly, adjusted cash a net we and cash of for free generated quarter XXX% in than greater we $XX year, the the million flow of expect

was by as XXX were was accelerated orders basis organic the second that were at reflecting our initiatives. impacts and margins to by significantly headwinds, well these the slowdown Organic and executed impacted in businesses XX.X%, short-cycle short-cycle hydraulic down dehydration global and lower the of Looking activity back driven level XX%, economic of team was due margin began XX% points year-over-year with COVID-XX. half cost beginning of the revenues. segments, XXXX the declined short-cycle in slowdown. drive contained decremental the which industrial containment global and year-over-year to down Despite Industrial; in quarter and productivity XX%, Segment by the predominantly revenue

Beverage. and to Moving Food on

in Based delays mentioned, Organic first with the systems XXX being and XX% came the some an in markets. QX improve Despite has year-over-year. sequential out points rose undertook and dividends are more coming basis than this we on down and in The be that end-markets, cyclical assumptions quality exposure as balancing our the better the in orders revenue and majority Marc our business revenues strategic nicely pay quarter some performance. of the proven stable providing anticipated the year margins to quarter. China full were update through back rebound flat XX.X%, continues updated from organically, the XXXX view XX%, the starting to margin to in resilient As of in cycle, actions anticipated. an we quarter industrial were working the are laid to quarter. last income segment The orders following of out we our results regarding evident

assumptions As might original our the was highly depth economic were provided of you global the at uncertain. pandemic, the outlook when expect,

of lines demand aftermarket Our been we still our with we in By vary a volumes based our with existing order to XX% as XX% across to in to margin along better and gross experienced are XX% segment on attempts XX%. to expected taking margins anticipated orders execute were segment, and of QX. the as experience to margins the XX% organic now Organic product half still an function and second can tend as execution The XX% margins in to decline better than view is year prior has flex cautious of on prior. the order a higher-margin Decremental feared, an we expectation XX% trends expected and or XX% – backlog. segment to and down quarter, as all are perspective, than and to The trends the far expect versus decremental We XX% From well nuanced our now thus we levels. a in revenue experienced to range. the improving Beverage decline reopen. Food world in better is versus timing still improvement bit talking second of normalize more in systems, Industrial component near XX% velocity business. the at decremental to

we actionable are the As worst Marc will cost that and and noted, identified quarter. generating helped economic The longer the case They we are savings planned cycle our for have quarter outlook. the the the cautious we conditions prudent and scenarios playbook remain current began we the focused last long be were during broaden economic no on current actioning of over however, start worsen. run if likely given at us and to

of actioning the XXXX. takeout start costs During cost which were we $XX our the X% on that hiring, paused the reduced quarter. actionable quarter, We developed to made cost and are million we plans, significant variable in identified most X% to progress

We build are the modestly aid will starting as also to pushing cultural pipeline organization take our using generation teams change cash in activity to positive the cash conservation empowering we are decision-making an create over and quicker current that regarding crisis to opportunity of action, further by a time. down

well cash and modernize to our our at and development $XXX digital announced experience part here forma that to for and new at our million and are facilities, we technology intention future with and on increase velocity based stable following on to XX. we enhancements; innovation financial pro as earlier, the offense position our levels our effort, Lastly, to culture; support a strong and financial our brief customers. drive notes from showing August our our of XXXX our enhance drive and R&D, in are partnerships customer internal Taking end invest to a as of both as areas of These position, operations defense product the data-driven and QX, our financial as we include: mentioned productivity redeem full position look investments improve we to CapEx continue moving generation. of our look

a see, and and now leverage our over QX the available million capital and for Net through over working our have chart. We which $X.X all Based fund flexibility $XX as of allow this sheet by can we was end cash to at Between in at us billion illustrated flow cash on principles our we you this proceeds. to with invest times. line on to cycles. priorities of adjusted generated guiding allocation million revolver, use Power $XXX stated free of and on accounts quarter balance are receivable redemption, we just the economic hand we for of As to business saw improve driven balances. ample cash our X.X the financial lower Energy hand intend the maintain is on liquidity strong capital in for have

Our range target X.X net between leverage is times times. and X.X

below at we be environment. clearly this are this in this to level which prudent view We moment,

evaluate decisions Our investment all investment free most on to return cash we cash our compounding attractive shareholders. will generating be to WAC drive method After will attractive excess flows. based the to opportunities, efficient funding above ROIC

will capabilities for pipeline strategy that increasing to our that, We With also call have acquisition area. are is remarks. an to I focus and our and aligned we Marc over closing turn that in back the

Jaime. Thanks,

year the anniversary solid to the has and the quarter. along Through five journey of the profitable business, the a company a team higher of build near dry-dairy record we and margins foundation that sale revenue reflect on exit in Energy growth. evidenced of had admire have strategic approach this in Power XX% projects, gross the the quality low-margin with to created time as I've transforming As all for our a we accomplished public company,

in Our decisions. systems making portfolio our mix aiding operating is faster proving have more better resilient, matured, and us and

through us allocation times, cash in line low The with actions a that, up allows organization sheet with over potential has culture, to high-performing balance past the our questions. shift generation cycle with capital leverage the Our a framework. the just to us of a sustainable it at strength net of created X.X And the invest business that allows open and five offense. more to we'll our members with foundation years team for along

Your with Instructions] question of Jones first Nathan line is the [Operator from Stifel.

everyone. morning Good

Good morning, Nate.

Good morning, Nathan.

X.X%, rates, was XQ of Just couple on second off with down the was questions order about quarter XX%. down a to start

You're back guess, the things in to that still that a XX%. about are XX% deteriorate the bit half? the I talk Can guiding things down year assumption little you driving, full

Sure, Yes. Nathan.

you down has from XX% improve resiliency mentioned, being So QX, than and really than the originally to of we year-over-year did business, to better we the as to but XX%. XX% to F&B down been are as outlook we exciting talked the planned. And being being the performing than down, XX% industrial QX planned, better better see, about, actually

essential reflective well and markets these we So, the in, on business the playing performing that are of front is in. all order

half So, couple consider look of the things year. at to second we the as of

especially you typically across is third globe, in seasonality there First, go to the Europe. as quarter the some

into So stay also Food pretty move again seasonality it we by that. we QX consideration the and through as we Beverage that took indicated segment, to look headwinds are of that but could we anticipating Industrial with some second and see continue if steady some half, in will through some

the kind the prudent think in as the given So do is thing that see. and built seasonality QX. current of real We've we a typical that the look to at we that's we and difference that's environment just

to in seem very Is that's conservative? that to the that would better mean, say first range it bottom-end of fairly range be conservative? you half, are that certainly, fair that bottom-end given I the XX% the than slightly of

Yes.

about orders, on to they through results to how we to second themselves we but are that as we developed. build it quarter the V-shaped And the about of about our was should QX present the move as So, is approach I the kind be thinking want had a prudent want in orders year. and half we QX should it the way in the think a we that, think everyone with think of that good way we

be kind thing But the environment and OE again, the being But uncertainty CapEx we how in good Industrial are, there. as there, the develop quarter that into into go build especially we're of to still And prudent, out markets current QX on things move of feel the some now. business able upon do that quarter. of be we'll third this all should see and the – we year, to want in, it’s the our look if where is improve of sitting right as given there to second can So, part the hopefully, to the through fourth we will half and into we right and we lot they of a and the space. the

sense. makes Then… That

then, add around And I'd wanted to Nate, systems. is about F&B

may really a be we you F&B So, the year, to systems recall of to had that line it’s up and second still expecting in the first in be half QX a bit from nice year year-over-year but going this half, the last that down.

So given that would a of of the part, range by upper-end be little still driven bit systems. that was in F&B that's

the SG&A as us give sales? about you structure? to percentage at the question SG&A thinking you maybe Is And any which in Okay. that level getting comments you of on environment. clearly about you the My XX, consolidated is of talk think sales. make SG&A you to to a Can level it I of a optimal state of Are percent first is sales? SG&A follow-up a a maintaining for sustainable as are reasonable clearly growing reductions of rebound. XX-odd lot, there to is on be understandable SG&A you structure? are at advantage in But what a the high number the know level. it up do percentage into take how the as percentage this decline need to that level can down half, too revenue capability that

Nathan. Yes

of second of couple certainly these hit cost. calling is, line. actioning we semi-variable $XX the the would A we're that to things that million what I'd a began of quarter, portion So SG&A say in

the Some as of in to be going that gross is well. part in margins

help saw the I the nice that quarter momentum in traction So, really toward half. and will throughout some second on that end building certainly the think

another in X% and to a in – relate we margin mention and part the announced we third other that the two-thirds in some be half then here X% about second savings did SG&A. I'll restructuring XXXX, is that is quarter line in to in The that SG&A programs going cost of out the is to of would that have gross in

we full year So, in are order as going and over you the what in at see SG&A and is revenues in benefit at this XXXX. half levels markets we will uncertain, those of revenues the are looks begin those kind of higher improve take year to are an clearly, to which really that to But then SG&A like. second half next we this this and the the there But go into year the are expected shape year second and line it’s up have the will while seeing, that to of see are to the in the see it next revenue, of aspect of second percent in year. half the revenues trends

a So you there is are that, time a it. growing of and outs with we modest the out an place. through to But X% a in is to this through this plan better X% can discretionary spending team mine cost I get of into tell absolute the cost then and the amount to and Marc lot focus

intention on and Orders as for about orders in are and the does looking add last as talked back. be quarter, is update, back start as to through to well about XX%. as to we the in just the leverage performed, come in Nathan, And significant. start the that ready our XX% the how the at we that, move these QX, businesses at those to orders to we've as already and shorter-cycle And they leverage that will come we when it stay that, talked respond business

So longer we'll business we And see view, where we a through that XXs. that bit. look could and XXXX, make back would the expect looks timeframe, that. bit that. return we’d to cycles If – point, look handle going move to like, well organizationally we are were were about we a a see of we we the low XXXX, down to the you’d term in Jaime's early to into again, The we through grow into – prior as position asked we ensure future the back to of what sure ready SG&A XXXX want grow do a restructuring it respond in business, some we we want to and to not

So, the bit yes, growth as down a coming we coming orders back, should the and pretty about inflated think that quickly. environment. current in back, come markets But again,

much. Great. Thank you I’ll it pass on. very

Nate. Thanks,

is next Your from question the line of Baird. Mike Halloran with

everyone. morning Good Hey.

Good morning.

similar assuming? to assumptions sequential A be some revenue revenue the you are context levels it? different there just and the you kind an are high-end? you question, what of assuming, iterations on about could XX% the what any guidance, to the of line, environment Essentially, XX% around low-end, to talk trends What would the kind get the

Yes.

stated to Just as mention look we on - are the Jaime the and of then in kind headwinds the biggest business maybe especially But things QX. America continued the we where on the existing, bit second first, can North year we of to as Industrial expect half was I'll seasonality be at in orders I Industrial orders, and the some it We've space. in some QX in look the also the revenue conversion. the at part put and slower the mention that having a orders on of

we rates how be difference is, different what the orders experience real wouldn't quarter. thinking the so there order So, conversion Industrial in we significantly at third when rates are look than those the think and that we typically about about we

say in mix a about flat. and of bit industrial. Yes. and we is What backlog is systems That's same OE toward lines see June, heavier F&B the last time some is, What as right. the backlog well, year that Mike, end compared as in backlog I'd the June to of of product the of

be orders revenues So, we that's spot going of really is half. range given that the to achieve upper-end opportunity what look on at we the have. or on as low-end to the see shorter-cycle think the Marc of QX we in second But nature that orders there about the as the we towards predicated protection in and is

thing about a at level, time, I And up also it's great as last versus other about mentioned, A that where XXX the basis backlog. similar this are we one year this year we looking Jaime mention thing points. would backlog at about the but, at it's are

through up the sets well second half. it revenue streams move again, high-quality for we So as

conversion. No. thought that sequential we expected it terms the the patterns and to And level an the range flexes a I or guidance at then, range? process? different be the the relatively is if type little normal are above assuming, upper-end of if from backlog of you’ve about the June, think other at bottom-end timeframe. is Are environment midpoint depending in sense of – And of it below, the you makes just if or there some this type more think But equilibrium about got on the it are in that bit July of you

exactly that's That's exactly Mike. No, Yes. right. right,

way? landscape the then, are projects pattern the changing And or that's relevant dairy changes on things, from purchasing of your in to customer Okay. the pattern Anything of perspective? a from your the you coming any mix side business, the types consumer that of purchasing of terms

is North quarter. quarter aftermarket America type share dynamics, is in about see North F&B happen bids picking would F&B. component component projects But that terms did where I What systems the kind in in America, of a in been more the for good news and what we in bit a was is, and as business up components less America, more slower bit business. in The runrate saw provide pretty has of about we of we it's business our the into the regional F&B I North been the steady. mentioned,

across see and to snapback good in in in North to In bids region and APAC, it’s business our China our in good orders America for early Systems and a QX aftermarket. the So here. saw especially components pick we up good starting

is board in F&B. across APAC. as performance holding F&B really to in So, up Europe pretty Europe, really things were see for well we excited And improved the the in

the there any the of emphasis we've pure again, products smaller changes. part percentage you Again, the the a now which typical just on towards. in If overall consumers dairy now dairy, that just business, non-dairy are the significant of business lot of wasn't double-click is a into had trending

are creating falling and we value. you projects we we revenue that well with higher performance. performing right is value The better fit Food revenue are pursue of in happy Beverage customers add margin a streams, that our that's ones And and see result are we where streams So do really now. as that where the these with through

last sneak And one could one if in. I Great.

corporate on Just of the you any line how help remainder on that unallocated expense the tracks for the year? the line, think

of couple items corporate the A Mike. line. in Yes,

So, what for culture, we to second line seeing. in there would And some are comp. I'd the is drive going incentive that be then, be depreciation as the corporate movements that we say, some the pay-for-performance

of set the will So, IT as the depreciated and that business sale Power end balance we of our that we so in that Obviously, then, parts And IT that, to internally. two to one-time non-cash, sheet non-repeating completed million up the look we what the quarter, on the technology organizations transitioned service Energy be had assets around work and of with cost but our $X say we will sit going corporate line. expense books or in some forward. I'd about and

there. footing firm the on had we that getting so, million $X forward, And going about

full So, those corporate are see year. line for you'll on the the expense biggest changes that the

runrate somewhere a second like a between? than or first more quarter runrate So, quarter

adjust What that the in quarter, out the I'd pull fees strategic that is we million, – sure about, that quarter. quarter. also are on GAAP first will second out $X.X more second the GAAP make worth are that that we'll pick strategic you’ll see the to it's is million – the you closer The sorry. say probably in costs It's on that up $X There of financials too. think, I have

it. I Great. gentlemen. appreciate Thanks,

Thanks, Mike.

Your next from Linzey Research. Brett question is Vertical with

Hey. Good everybody. morning,

Good morning.

Hey.

the baseline now I on we First quarters? on in coming obviously be you very the lower Have despite question dry-dairy been continue just think to gross all out and will performance. the a P&L? revenues margin here the color has do can impressive hit The the understand gross expectations the of progress essentially remix. new portfolio you margin profile business as march moved has higher whole moving great. the the Or Any

Yes.

margins to We of our to important a XX and angles the part We'd on several range objective. there And improve time an is gross margins. that. expect to period gross it's continue like our move into over of

focused First and and systems, of and factories really their are our our organization improving our part foremost, performance. on productivity

making So, into good are those good and a outcome. we cost back controls investments better to efficiencies areas get there,

so cost Pathway high-quality products customers to our of for part and system big So, is that at and part we've Excellence objective plays a that. a and program our in culture producing the part instilled our lower of solutions

the and which just too, some gross would margin that, that our materials general share cost overall then structure of supply I price our us line. also manage And on with working elements will look programs to Secondly, a X% opportunity. you that's product And out us. of lines afford are X% improve that as includes cost to help the we for chain and really we within costs, these positive at ability outcome

So, towards continue gross line a on of will number future. margin as look the improve go we to things our that different

planned. of then, forward? Okay. reverses you million more most That's what to great. semi-variable going the and are maybe sounds of shifting as internally bar, are new at ways are efficient $XX And of progressing you It view that the that really actions nature? piece cost be that structural just Or point? thinking as bucket $XX chart more in cost million slice fixed finding to bar is permanent some of that you like the out. Is then, that of more And

Brett. Hey,

So, bond costs, incentive comps. year fixed interest, chart, of redemption that just in part prior the be bar to that clear,

professional in what's call semi-variable line. that third-party we be labor, contractors, would of and that's discretionary What more cost et cetera. fees of T&E, supplies, So then, the

when category make in that be attacking as structural. the and going back our would the and line that cost are the are I structural which that that, And that's to large, I come is in So, out But, programs things cost costs that by and we normalize there, to is to attempting into semi-variable we mentioned, T&E, what such some expect to which business geared P&L. as towards. out. X% is, come in of what large say part is X% would There category, would the the a

Got it.

anticipated the restructuring savings? $XX of is so QX within that And that included you million did

correct. That's

thanks quarter. Alright, Okay. Great lot. Got it. a

Thank you.

Thank you.

from Your Barclays. next Mitchell is line question with the Julian of

This everyone. morning Good Hey. for on Julian. is Joao

morning. Good

really focusing with decrementals, starting the obviously, on Maybe in quarter. this strong performance Industrial here

into a I QX. guys think bit that based of implied on decrementals heading little that may kind are XX% working of be expecting sort that from the it widened you assumptions,

wanted I sequential are on thoughts to So your the of moving maybe the assumptions what pieces kind on get trend. there are, what just that

Sure. Yes.

the are which, Industrial going and look part, our margins. and the year, then, the the most above-company average if we have So at half that volume to F&B lines, be for gross product you of carry components our declines second by large

So, understand year. second half the to the second decline revenue to got of you last mix year half this

gets we were those But would XX% in XX% last to talked decrementals. question. to we've is, and what semi-variable asked about those XX% were intention flow to just through, say used working reducing that just if us So, the for I XX% the that about then to that would what would assumptions actions costs we've the be see in cost-containment the

the walk second decrementals So, half. kind the of on for that's

would either any trends you I Thank Got of the the just July know but helpful. it. maybe F&B data And order on month-to-date? sorry, recovering, beyond mentioned sales that of or quarter you. color or heading be anything - that maybe or then, of kind bid trends into interesting points year-to-date kind end

Sure. Yes.

mentioned rebound really at V-shaped had As I stage. and progressing I in exiting Early as we at in in a planned really or up for and of kind America saw was QX quarter are quarter bid really that the view of picking QX, slow April, sorry, a – Well, North when good the a May, outset we are am we rates this here looked of in QX, order I mentioned, – the in what June. see quarter. rates happen that's business, can necessarily overall. around component depends up. in conversion fourth the They picking America see. for how components happen customers is forward any to North – happen underlying at bid in with it's has F&B Those The But can to rate good their the F&B the point on capital business don't move third plans in It business in good runrate quarter. stayed steady in the They pretty deployment. time.

the about you market. the at thing look If again, Industrial biggest North American is Industrial,

that's impact, mentioned, stability is that big North QX in we quarter, short-cycle through important America. especially part stability we a we've As in across the and seen as Pacific move Asia the business Europe,

you. Thank Okay.

Your next question is Seaport. from Walter Liptak with

morning Good Thanks. Hi. everyone.

Good morning.

morning, Good Walt.

talk know got specific [Indiscernible] with you've general... this good about I on some it,

Hey, Walt. Walt, we are losing you there,

me Okay. Can okay now? you hear

you hear can now. We

drill Okay. down Great. little a Industrial wanted to more. the I bit into

Sure.

bit any third And refresh bidding the tools. more in I guess, just again in some inventory or idea the as like cases up pick a of is the are the start maybe opening you that increases pickup Industrial? Industrial the June And, little better the activity? causing quarter businesses virus happening that get to slowing, in started some hydraulic what's see And did like general July, in or of about a then, and cautiousness of

Yes.

be have turn that So turn the Industrial, through the the we and kind business. as the of shorter-cycle and business. It's flows to And hydraulics of the the we mentioned, company for on off. quickest and would our part Industrial business it in that the dehydration to quickest

to second the that are did dissimilar reporting. the see other develop quarter, what companies space So, in we in not

be now, we through Again planning pickup quarter. there right fourth in we with are QX. some move significant we change happen to that really as starting as view the any hopefully for to not into get So,

again, business project-related, Industrial performed biggest and quarter move the the picking some back to mentioned, economic part CapEx, timing tied some QX also see third entered the forward-looking that up it, from have as this with rolls second lower consideration, we've depending quarter what elements then the in kind in level the impacted from have to on We business. off. the that that's kind and mixer that that we the environment we business year of how customers we where layer that's the in seasonality that's into the to we But being So, do year, second typically of to do. of the overall, standpoint that's a taken of will as short-cycle current what half really, then of half are seasonality – I into flashing the as through

and equipment virus, for business and in is it same customers the you and picked is that we Beverage, is What have to factory Can new more the that with is It automating processors more capacity food Thanks. up. well. activity for then, this hearing try they helps. the is distancing from social expansions Food doing And are so floor, fewer Food or like are and some that et it Beverage tell can deal heard the components? area have cetera? bid the people sounds for other We've with thing on

Yes.

we we as business continue to expect move that Food our we from good again, and the mentioned, as So, performance Beverage year. half through and the of second

regions, the second improving business. were see it we was happy steady. Europe backdrop our nice really saw and rebound aftermarket the across improving how And in go and expectations again, in a we Systems performed really And Europe in also and the Pacific, Asia As our a versus really components Europe. to quarter then,

As systems big is is OEs to. well integrators it's supplying lot we is Food America, of get in and are biggest into not a which our where and business those for as as that There remember are integrators components North those America, systems again, as customers, Beverage, North that market. as

the with are in triangulating how or part bid we what them, on the that activities are North of up. working of the kind picked where projects those the and with being business typically, Components the are influences the integrators OEs America So business that's released

in business some our if where and and slowness a in It Components for has a not that COVID-XX, are the companies in before similar been even running beverage level. business and of a this because stayed part food COVID-XX scenario, exacerbated market. and at runrate the high such headwinds Food good seen underlying was So, North America Beverage been have in we've there has - really bit

are can Brownfield accustomed extensions. They be kind to getting the looking number say, up, which been new of product they would back programs can a normal They that to include things. they I environment, that of pick they're, that these can line doing now had upgrades So, at starting they be are planning, refurbishments.

on different is buyer customer that that to there are that outcome medium-sized smaller base, that host components go our a activities projects. with whole of influence of these So, the kind

were are the this M&A. Thanks. then, look Got about if what the I like like could at allocation doing it. Okay. might if – pipeline sounds it's you you that? this point and you internal one develops, as capital talking are about M&A wonder for you for talk appetite an more me. strategy, When than And the it last focus of

through that are Yes. Sure. I back that and Yes, It's CapEx But at well-defined. mean, digitization it's mean, It's with efforts. our product a diligence third-party definitely and integration. with in appreciate are the factories capabilities Walt. you due our development other looking and resources. and into we way programs, question, place. combination. programmatic asking data I we investing in how as It as I well a doing process. all internal we We've some M&A assessments built through have identification, built some starts

a good place in organization. process put the Vusa his very and Mlingo and by team broader So, functional

and M&A So at that. we looking spot to we are and in doing a in good fact, start are, doing

we're XX the opportunities. built to past XX months. funnel over the looking been has So good at And

that want our the market to we allocation today. strategy we'll creation, capital and It's want it we filter run it's value we advance and a we align opportunity. an to every don't our pay pay look attention to access those that as And filters think customer opportunities important or about greater Clearly, is with WAC. we definitely Importantly, technology at too, our future, structure. than heavy got create importantly, our to ROIC our through attention or have an got

twelve invest and our leverage, our cycles target we and would into period. commitment strong business If we a to within can back the be want net were to through ensure balance go get we within sheet would they outside net we happen target month maintain leverage. that stay as that So, our

for So, good process we funnel are place going to that's be developing. prudent. But a put got M&A. We've a in we

opportunities. over opportunity different in years strength a are than at played company We that. value to past an about a to in of really do of four opportunity we've creation point. been able looking get opportunities And the to with us to we sheet to way this And is lot balance at are the excited the historically. We grow M&A our this space. good the a defense It's look

Okay. Great.

guys. quarter you. Thank Good Okay.

you. Thank

Your is question RBC next from line the Deane of Capital. Dray with

Good Deane. morning. This is Jeff for on

you was for recovery on other quarter China. maybe how First is path in I about the recovery can how your view and just how impacted actually is And playing that a wondering an region performed give regions? if question us update the on the there out there? the activity has

quarter-to-quarter. in sequentially Good And a the China. were F&B Yes. view were sequential good. we I that's basis. is went really as providing on quarter improving Sure. components am Orders

that's think can that think now. we right view important the most about I

Industrial would do nice the orders describe But some China, based a projects. We I so, America. been, slow business mix which Industrial in were North better Systems, steady from not Systems to have quarter-to-quarter I dissimilar rebound, is of our F&B. nice as we have in Components And have China. as month-to-month really sequentially describe on in can business some timing And mentioned, business. and a different of views our in orders had QX really really, steady, business overall, then for getting of some our

of step across second the region has across view in steady we America and we been went they There as do into the it move part even region. the the regions China, than as Pacific question, how Europe? your improvement pandemic Asia did back and North to we from across sooner those So, Americas

and and prudent we have given managing sure size we've anticipate that hope second to and back our similar that is while for open how our plays yes, all at would out safe. customers again seen But, I we're markets to U.S. So, employees half as our planning as especially But all want stay to our across point of time on same that develops in ensuring up it the the we'll can year. business. why to a the market, the that's see there aspect make is respond we and to the keeping and ready spot we've accordingly been of your the we business at look

the margins? half we then, maybe really XXXX of I decrementals of Yes. higher are even some shifting of longer timeframe, the kind growth know the year. term But costs rate as are Is Or maybe out? could more take maybe these thinking to of how XX% thinking cost to in the around as you it helpful. That's to Thanks. decrementals? And kind about as expecting same XX% gears, shift you the shift permanent be incremental semi-variable it mode, back

Yes.

to mentioned seeing are our I the as we average Industrial year-over-year response, in the pressures product the earlier going So, second most above are are gross margins. be F&B in of volume in and that half in lines

cost by expect So, XX% see discretionary come say that's making margins, point, out we structural of those X% let's out, to incremental when are product going are benefited we - your program. that we some lines to cost the through to a to And then, which X% do back, XX%.

So that's thinking about incrementals are how XXXX and beyond. we in

we really value our are really customers. those orders go And the as operations the position. higher we'll because Yes. that, spot business in ready respond good that business in about I'll in to And just revenue a shorter The well have add. cycle today. be on leverage develop, to That's the start should we exciting the part. to this is excited

Great. Thank you.

You bet.

no At further this time, there questions. are

interest to us FLOW we time Whitney, everybody's SPX the Thanks, talk to appreciate in and and taking today.

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