Garrett Motion (GTX) 29 Jul 212021 Q2 Earnings call transcript

Hello. My name is Victor, and I’ll be your operator this morning. I would like to welcome everyone to the Garrett Motion Conference Call. This call is being recorded and a replay will be available later today. After the company’s presentation, there will be a Q&A session. to President, call Investor like Blalock, to now Vice Garrett’s Relations. would hand over the Paul I

Thank you. Call. Good Garrett Motion day, everyone, and Quarter Financial welcome XXXX Results Conference Second to the

that our Before I’d other filings release available find where the we on along links company. important garrettmotion.com, and Motion at will like mention with are website begin, Garrett you earnings today’s to to press about presentation information also SEC our

President using Olivier. Officer. products Sean hand today examine to measure. and of and you to terms our comparable light Senior and Executive we is and President release vehicle the We contained Financial within Garrett’s be of I expectations, Also Turning to it The SEC, by directly and today’s to presentation are presentation. statements found filings includes describe risks any X. presentation and contains in Garrett’s the forward-looking in statements business are in Rabiller, GAAP non-GAAP the Chief as the Exchange only to We only the gasoline Deason, with obligation Today’s and Chief which which to reconciliations, of may we We operate estimates presentation this the Act. now should as our diesel gasoline the vehicle comments, both statements business. represent to encouraged Slide most With over forward-looking Vice and taken of company Securities Olivier measures management’s also today, measures that these read light the note and forward-looking press are each the future diesel in reconcile the refer will meaning that to in and of those encourage only. us them. and you to disclaims understand and And uncertainties aware way appendix update risk the slide become such. factors the manage our performance Officer;

begin on welcome highlights. Thanks, X, my we remarks Paul where to XXXX and quarter Garrett’s QX second will Slide our I everyone call. conference provide

During demand for and differentiated of the the share demand also second benefit from technologies, gains. we to quarter, strong continue Garrett’s our

activity on year the since our of in previous the crisis As significantly year. call, quarter the of business we has COVID-XX rebounded discussed mid last second

plants quarter currency Our increased constant our reported shut comparison for the and stoppage by pandemic, were given work production unprecedented the million, process points. the net year-over-year our outpacing Europe auto At percentage sales of due XXXX down North global was America $XXX throughout QX resulting in the while net reopening. a is sales as many QX record. of the COVID-XX from approximately [indiscernible] in XX% XX Obviously, China to by total

XX% year-over-year prices up supply-demand The without idol impacted supply semiconductor also and components while or our shortage were to to imbalance many million OEMs goes increased rising reported was sales XX.X%. the technologies if XXXX, The However, believe results Garrett’s growth QX to on strong needed to compare our customers net XXXX revenue not contributed other of other production. its which our our as We the of challenges COX X.X emissions. focus they by and reducing continue demonstrates deliver advanced major as to volumes by onset ability second costs. commodity this slow quarter units, well-documented disruptions, ongoing we develop and

year, in before XXXX. temporary issue The components nature. stabilizing we for lead these of extend the second throughout supply times constraint the current global is Although early the half a long believe chain suggests would

We outlook will detail on later more discuss this in our call.

our safety are vaccination remains of ensuring adding deliver world top health the maintaining of the the for volumes priority, GDP is many on Additionally, and over the struggles COVID-XX while our complexity. our as to max pandemic level and not around another And our customers. places employees, from

second XX%. a representing points margin the of expansion generated adjusted XXX to quarter, basis million For $XXX of EBITDA we

preserving and advanced in and base environment margins structure robust supply management. Our valuable footprint success industry volatile in leading macro reflects global highly match our cost

enable short-term our market the in company All customer elements and to are adapt changes of levels line quickly our production activities. any these to ensure with in disruptions

of reflects Our customer in maintaining dedication superior want QX of margin response supported controlling crisis. its I in work in hard we a efforts continuing the our and our deliver in such temporary to also service. last success offseting tireless environment. to the their all in have efforts of and to year, a level government Their directly the to commitments COVID volatile some Garrett’s made employees performance costs and thank for worldwide meet are high related programs

continue will track headwinds. performance upon record distinguish we excellence our to of globe standing macro and long meet operational build to further and forward, Going the across our the Garrett optimize current

completed our we Chapter XX achievement [indiscernible] Finally, critical for restructuring, a Garrett.

month will we and significant emerged less restructuring sheet flexibility debt. with opportunities. increased to process seeing Sean eliminating with our covenants later, improvement and position a our restrictive organic also our pursue growth seven materially financial While inorganic then review and from this The strategy financial by and

our common Exchange, on GTX. shares listed the ticker new historical effective NASDAQ our under also May We X,

long-term to with to particularly with years, believe our as we our combined growth rates, We volumes turbo to outline grow higher penetration and market we will structure industry. from evolve. light in With capital according of On previous positioned solutions sponsorship not with execute expected pleased the financial light near-term share turbo of strategy improve investing well in rate Globally, to in the X, overall us differentiated win our the to gasoline hybrid as rate automotive restructuring new are continues vehicle to new business annual behind platforms in are production at continue the to demand remain growing HIS. our XXXX an is X% approximately viability. XXXX lead and preparing Slide the technology while and we industry our support and

up to includes slower our the the first E-Turbo, year we remains far vehicles. which start so XXXX, launches been not This on deliveries premium lower in But of new track light our macro of have due while of to environment. in product expected volumes XXXX, For adjusted for current any informed reflect have schedule to to next we ramp only production launch their material commencing quarter of hybrid mass AMG Mercedes delay. the

cutting This named first Formula is suppliers Garrett business technology technologies was X Our E-Turbo rooted award recognizes market automotive E-Turbo deliver news and for in superior technological program PACE prestigious and innovation, for the that probably advancement edge finalist performance. Awards.

nomination We are nomination, electrification. in honored by first Garrett’s our

for cell propagation sources with award in we fuel II growing technologies. our grow, energy XXXX. the vehicles alternative to increasing cells is interest important we consistent have China starting business for In This for for e-compressor demand quarter, As continues received momentum in with new hydrogen the an second GEN fuel powered also for production experienced our worldwide.

on over as our OEMs, technology commercial representing compressor to fuel mix cell fuel passenger additional diverse Additionally, cars bio prototypes we of as and in cell customers plan XX XXXX, well specialist. vehicle delivering of traditional

bringing of The software, we recently to launched embedded launch in terms the with control masses. important In our step Hyundai. an predictive technology model is this based technology

conditions in unique provides expertise management optimization. vehicle increasingly complex world in handling Our real and energy in controls for multi-variable differentiated powertrain OEM solution in with a systems

new for it software energy in transformation the technologies, on our to combined rolling we coupled new with vehicles. our number QX to our traction is provide over our the play emerging in powertrain face structure, key I a increasing challenges with improved turn impressive our technology colors see core of growth our new capital role industry. and and that, powertrain electrical ability results. performance applicable financial With types can to We and more believe not of Sean the in Importantly, all and then will in the of our business address a

welcome Garrett impressive of X. the QX for and Olivier I across COVID-XX it’s North quarter but and and This by Thanks, in Europe volumes begin XX% the which higher America, driven on remarks basis peaked the from will XXXX. reported reflects growth on recovery crisis, XX% primarily my reported at a currency. and the quarter, performance net everyone. gasoline second diesel constant In Slide sales

adjusted Olivier XXXX, with sequential free cash by due to number driven the remain global respectively. QX, associated flexed a a year-over-year organizational X.X% rate, to agile $XXX increased million as EBITDA semiconductor $XXX conversion. volumes As income, In shortage. to was million, quarter XXXX. impacted higher $XXX earlier, EBITDA China, the XXX free industry, we In due experienced over an QX which auto supply suppliers margin chain for flow advanced global in QX significant maintain was flow million adjusted adjusted focus net were volumes, for standstill adjusted lower performance response cash net reported disruptions. supply which to COVID-XX them XX.X% with adjusted of pressures our free we costs weeks structure part and lower cash million to in the our help QX XXXX closely the of adjusted basis, and as we adjusted base in logistical $XX a XXXX our came our issues, many inflationary On In than a define and Like Adjusted XXX% mentioned XX%. exception equates to robust worldwide from of in trend our QX, virtual was flow management. EBITDA a our margin the down worked more by EBITDA which representing similar to production of sales by and sequential our with cash XXX% on our as cost these conversion

XXXX. the unhedged Lastly, second our stock-based restructuring XXXX Garrett’s This for we was income Overall, which net XXXX second excludes costs metrics costs items, and Indemnity while $XX and grow, quarter which reorganization of to million. volatile of of Honeywell reported to adapting QX obligation environment. quarter restructuring a net million. compensation $XX of across compensation adjusted key financial adjusted income an million, debt and strong ability adjusted exposure, expenses, $XX compares all QX, In income, to excludes the macro expenses stock-based the demonstrates in net litigation performance

line. We sales volumes to and Turning X. increased net and net region product year-over-year all illustrate we Slide sales regions. QX, our our In across by

percentage an normal challenges a and our course year-over-year are the they’re accurate of the impact due basis, of representation of on business. not outlier However, an COVID-XX the

see to Asia America the XXXX you sales changed XX% while of percentage sequential As point each a slide, Europe by the percentage sales, net North from respectively. we of XX% X in net result, on remained and same and QX marginally added XX% at the this and changes

margins. in in On prioritize the points placing vehicles, has quarter was higher sequential to percentage an greater industry. larger sales be enabled net fewer performance the at overall This of constant sales in currency, delivery constant gasoline net when XX% quarter. as affected product while this of business trend, both products generate offset essentially grew and products side Overall, profitable at forced quarter. XX the we which chip commercial second higher the representing the emphasis limited down total for QX of and generated our by bridge shortage. we of which The This percentage on X, QX at show diesel aftermarket our our sales quarter points engines vehicles XXXX. currency. growth more X QX a Garrett drop of turbo semiconductor a outperformance X we producing top smaller XX% sales content to supply declined the the to net line product require with lower in sequentially was businesses, the net Notably greater gasoline for up also from second of more in margin the was than sales, point, XX% and to follows the in percentage from XX margin by OEMs by larger, outgrowth temporary gasoline we On led increase believe XXXX, in point our post Slide provide are sales percentage over percentage strong

same XXXX. million $XXX All period products $XXX last increased expected, the representing million in XX% increased product quarter increase year. of over of to currency products And were up due XXX% as diesel at an constant at lines the primarily Gasoline our in the constant of currency. year-over-year pandemic or the impact

in positive X% QX sales Additionally, a was of rate constant a improved vehicles higher aftermarket year-over-year to market respectively increased on of these slide. discussed $XX had constant basis, million and our million XX% Slide $XX XXXX. have and for $XX the impact mix, currency, walk million back going currency you exchange at increased softer by or QX versus to FX recovery or XXXX. XX% impact by primarily as businesses and XXXX XX% a to QX X% products which adjusted vehicles On On at commercial shown aftermarket and on XX% our The by overall previous at compared sales of currency. EBITDA Commercial sequential XXXX. QX constant Euro Dollar X, as see gasoline by sales diesel at signs driven constant declined the conditions following respectively as sequentially currency, QX

quarter, last In of in Garrett’s $XXX year, down significantly higher XXXX EBITDA was quarter, Europe QX period sequentially compared and and second the the same XX.X%. adjusted North to million an to approximately X.X sold volumes volumes the For of from units America. by mainly due our increase million approximately XX% up

up year-over-year sequential in quarter On basis, a XX% represented improved adjusted basis of margin points. Our a margin our EBITDA adjusted EBITDA points. the basis improvement XXX XX

due temporary positive mix from effort vehicles, producing in as shortages, benefited we their component in larger, greater quarter to we earlier. placing are the volumes, to higher addition a mentioned margin In OEMs as sales

our our even we to mix largely down with due though were EBITDA, along impact. the So volumes adjusted sequential our margin improved

higher maintained in increase also our steel. by our took manage actively a We the customer year-over-year mechanisms raising by We of pandemic. to through XXXX, commodity mix of QX SG&A impact our materials costs, and cost inflation. for base aluminum to from continue are $X the results our increased the as and to focus supply to cost pass similar these In higher a unusual of savings, however, prices material SG&A our million, cost cash recovery nickel, clouded pricing highly agreements we especially was recovered raw slightly minimize we in as QX on the for and in the million particularly approximately about The quarter led majority under nickel productivity and only one-third number as COVID totaling to compared focused of QX an period, pandemic. offset volumes pandemic the $XX remain SG&A the of control cost reductions actions ensuring crisis. of in quarter Despite well on as XXXX X.X% temporary combat structure. which to due year significant management the prior increased price to XXXX, efficient related reflects and the lower these

to half in normalized of pricing second approximately levels year. expect We return to of the the X% more

was disruptions incremental The Finally, on in the auto second just margin leverage the XX%, sequential by slowdown decremental this driven production, year-over-year earlier, largely as partially in the was under strong related the our mentioned slide, global productivity QX. our volume reflects which quarter. quarter in and XX% gains offset and margin in by chain benefit supply mix

XX, with of revolving $X.XX emergence. June million, to $X.XX the cash Turning as under Total as This quarter liquidity million our of excluding $XXX equivalents of of XXXX. $XXX million ended debt, facility Slide cash X, million approximately $XXX was credit $XXX undrawn including billion compares upon our second and commitments we June cash in XX. to new gross available and billion

as debt It B of is exclude important debt Our $X.XX billion note, $XXX as gross of from net and XX, XX, debt Series the June net total reduction total to $XXX preferred stock. a of million million June XXXX.

a discount Series at of call million million in issued rate As $XXX are on present obligations B we emergence to based a upon face The of value present Honeywell a annual into fixed with B not can serve financial stock and X.XX%. to former June we full Series value. into time $XXX the from our restructuring common Chapter stock at the a that preferred at reminder, Series as convertible XX, settlement XX shares value our parent, them any payments or as our of B was

the live $XXX the option in in LTM exceed redeem to of B our rate, discount EBITDA Honeywell fourth soon as quarters. Series as Additionally, for sequential which a the the terms, adjusted redeem go the at stock its full the amount two may event would same Honeywell with accordance put XXXX. million quarter to has have preferred right

are and is later our of this year. go meet have exercised put liquidity financial to Honeywell and the We live all should ample obligations option prepared

approximately Series As at new X.XX Also million June stock. approximately shares. common conversion These XXX or billion price of preferred net net compares our issued including shares into A times we emergence, $X.X totaling consolidated share debt trading a are of times convertible stock the counter Series preferred common EBITDA ratio ratio B the to per currently X.XX of stock consolidated This are of EBITDA X.XX $X.XX GTXAP. times, in XXXX. over June as XXXX, of the debt to and XX, was to a ticker under XX,

During are we on per our for reduce as The our through stockholders to slide, $XX Also December we our and dividend its we credit XXXX. dividend. any considerably preferred emergence. this In an make quarter, strategic its million to profile entitled its well all, payment show permitted liabilities new enhance preferred second improved annum, XX% upon are restructuring flexibility. the cash a under to debt enabled quarterly agreement A increase maturity Garrett accrued as not obligations, XX, flexibility, payments financial future however,

Following the prior existed CLM removal covenants of filing. that to materially our restrictive

and and Garrett’s improved for results resilient long-term benefit strategic create the shareholders. combined to sheet of forward, the increased its Going supports flexibility with our substantial balance our ability company financial value

Slide year full forecast XXXX. for our Turning the we provide now to current XX,

In disruptions Although surrounding certain the given the the remains the the for meet regions, shortage other high second supply demand. components cautious in uncertainty to inventory outlook semiconductor and vehicles new ongoing remain levels year, degree historic of demand we and at high lows. half this for fully our of remain

related it over of is remains between of the into In production production light is from vehicle costs benefit auto expect in COVID-XX is and expected X.X% the addition and will downtime ongoing in QX volatility global the to too QX. vehicle and logistical production grow half the due outlook This macro all the to XX% year risk carry in we purposes, challenges anticipate to soon currently chain QX and our stemming And fluid. industry commercial also persist from between and mix commodity But the tell concerns. these to supply to global higher global current light XX% grow planning year. We for of for environment, the to second X.X%.

high-single-digit constant for we XX% to million and to of This XXXX billion. an sales expected between with $XXX XX% XX.X%. Adjusted an double-digit the anticipate supporting $X.X low currency to reported a is $X.X billion XX% industry net of of outgrowth. at EBITDA As year range would million range represent today, increase between and implied to or margin $XXX

RDE previous and XX% from Our are low is CapEx expected tax with as consistent percentage range. budgets years, of effective fairly be a sales and in our targets our the net rate to

Garrett Finally, adjusted to XX further items million creation. value and million, $XXX which cash reorganization repositioning the shareholder and opportunities for be filing excludes provide free we Chapter between de-leverage related positioning to to $XXX flow, anticipate charges and

to and global events continue with call. provide back our QX Olivier. track We forecast With an will along to our call that, on update the turn now we’ll macro to I trends, industry

Thank you, Sean.

we ESG the Slide to company’s report proud quarter. or commitment Turning outlines cleaner, ever social The enabling XX, management to second and Garrett, and during are of highlights governance to safer sustainability robust have vehicles. environmental, the report commission launch the first our

industry’s emission Our to address issues electrification reduction empowering most are automakers software pressing advanced and the from contributor solutions to global in cybersecurity. key

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important Our milestone. initial sustainability report an represents

As our the for we we website. encourage you to report, our really reviewing share vision available is which learn contribution, societal by on Garrett’s more

Turning to XX, I final thoughts. close some with Slide will

for mitigate XX% Overall, of was upon QX profitable Garrett’s demand for chain our headwinds, quarter, which performance larger points. strong We supply quarter customers percentage sales and performance global favorable Although, QX flexible sales the XX take our of by net quarter mix, demand more demonstrate our of continued impacted production material platforms. macro by I’m constant to share the the and favored the raw growth global our currency for for inflations. performance pleased drew these advanced gains. to advantage disruptions sales us the quite full operations allowed technologies with ongoing net outpaced auto at as

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to challenging teams. perseverance the period, process which highly of business with reflects pleased outcome this and talented profitably continued this how the global throughout our are commitment grow and We of the

and am cell the accomplishing increasing from has and as the on powertrain electrification incubating benefit more As we a move that financially focus these dedication demonstrated past of sound extensive we experience over new the I to the engineering technologies. market and innovations fuel Garrett’s continue all in year. will technologies forward company, interest objectives, employees that to stronger, hydrogen of In accelerating confident

a today, profitable our drive formal back hand This industry. concludes and growth remarks it now I’ll to Paul. continue transforming We in to

now Operator, for Olivier. ready call And to Thank are open questions. you, the we

from question the Hamed Khorsand line Our Instructions] first [Operator of Financial. comes from BWS

You may begin.

occur VNT kind in and first traction want Good of kind off, on morning expecting placement getting are to environments or But for the you this good of are. ask are what afternoon, especially you just you North you what where America? this in depending gasoline, year to on

environment is see gasoline. rate outlook changing Well, geometry we the this for not for valuable

traction as are of Europe that in before, the not by mistaken than we geometry. expect be Europe, if more valuable seeing big said volumes we I’m in We XXXX, XX% will

have We very good also traction China. in

the are because primarily of on engines are platforms that there have that we adoption U.S., We the valuable that COX obviously a into the could be regulations are U.S., – outside U.S. are a new lot as the in the expecting seen a been have traction two of that more but in developed that we’ve well. stringent what bit into that the past, could of boost geometry U.S.

we what the anything that. deliverable environment change see Car current would still to far rest the doesn’t U.S. world. of So But of say, to are need need that. seeing the reduce the is on in not therefore to COX makers emissions and I But engines. early so work we signs the they

crowded as your you ramping? are you that market the able security, other what’s my Why space much business software was, really? share of timing in And capture of share to be thinking a this market any the Okay. or – question would you

that. two So things on

to the offerings. software, First, the we bring a bit on so little we have software, three on remind what

offering around diagnosis. prognostic an have We and

and offering We an on controls, on have offering we based have model cybersecurity. an

modernized, business much And software that. pick but a a looking are few. people big it’s than more up at it’s fragmented So as let on not, the me

completely lot industry. that legacy done the calibrations are is the practices from coming a engine, cars issue today, of of automotive whether been have way that of it’s processes powertrain, the of at with look and owned, you the the methodology if the So

is are something is We algorithm. the model-based industry, to that new introducing quite called which automotive

crowded Hyundai, the to need a coming the don’t on engine, half of from And technology do is configurations. of months to And of model month with outside few physics. differentiator. one is the you key is of our and with calibrate an now for this adopting engine a showed industry. that or all You on we don’t that back, released space Hyundai We release the need calibrate powertrain This about based we a press that, ago controls. the automotive is back rest kinds

had would And supplier Garrett, need that’s why the like the a incumbents? they they So point. what current already introduce if new they from

are We going technology for differentiation.

We on we’re few of from something Same top Cybersecurity, credibility we with are of for and we were of very business competing that, industry incumbent startups. industry, it at not new. an coming of them were came We And the that some or algorithm we the with specific. bringing providing as something competing company cybersecurity. the came secure with well.

We providing are something specific. very

We happening year. the a first that’s have at the end SOP of

not order something differentiated. see new from that the few enough to customers analysis progress to We on diagnosis to you early And the have very that’s with because onto way, bring making realized a that going been working is just we are space on have eye of SOP data standpoint. And driven people reliability we were the A that, capture And happening a next in year. good algorithm see a in second diagnosis. patterns customers the that. data lot and and that and would more and with we way, of a same legacy prognosis way, now have prognosis customers ongoing pool are data driven we

to really sector need we split places. So in that well different

have pleased are have relatively press validating giving We release not it’s modest being that progress there. it’s the very that we size, with with world big making a like but terms of the time It’s of you the that the points it’s in for we’re differentiation when quite business your a is not a world, And lot customers. in often us of geometry very jointly developed. frankly, it’s done credibility, a

that the to of and a I to algorithm top earth lot customer of for we means about price think means as the industry joint us. model-based well. one on the controls for lot on bring biggest a making Korean It a that years

you. Thank Great.

architectures before extremely developing kinds of powertrain, of could will that going the question. a There a the translational are next vehicle developing now. industry. bottom more missions future lot is add on, If automotive What right of are I we the complex we what that are lot just new require for of

Okay.

the let’s to next Sorry, get question.

Chris the comes next line from Our McIntyre of McIntyre question Partnerships. from

begin. may You

I return is able bit policy. could little months. guys. two in Hey mean, be you talk was wondering Honeywell to I maybe if like about it a to capital you probably put

understand of become could the of, list, like like a just restricted we should of when there. maybe we question, unrestricted? of about top So to as expect is plan that sort And the secondary the what sort has kind I but talk like also like

easier the Sure. Well, start question, cash. with is I’ll which the unrestricted

the by of quarter end to released end had place. of be at or a fourth in we beginning that a it October. And been fourth a Chapter since focus we of emerged very of the XX the went quarter. whole we us fully bit September, will very of That’s We cash quarter, early the have so the plan expect of beginning But from expect fourth through. – the process unrestricted a is in hangover quarter, we carryover be third team released

the put in would get in – are eventually discussion to capital we the mean we we guidance to more term, share we’re about pro-rata capital, you A to going certificated if capital seen, just Regarding but that, We normalized did Series go like and allow a It conversation we flexibility. does designation an and Honeywell short option but X-K common a structure doesn’t then have do our have dividends buyback. amend a actually filed return, start we to have for live. and may how did to or would return that

position I’ll obviously, think going are use entire Garrett. in is And that short another they with we’ll again, for determine us? obviously, are will strategy whether And choose can thing we best the months something it not live. for having we the be a give the may working know by then in Honeywell, structure better industry we We that is I in go policy ago, what liquidity, and we we our capital third new option call, at – will have few if with or But just our to digesting return our be put But you ample emerged don’t consider. term, on would still to the guidance board time a new because capital has we performed much conversations call how on also cash, to any better have delevering should to a works at and least the quarter mind. on put

about you Okay. wonkiness, semi you’re that. year? kind It’s and talk of first the markets, a issues how of the a the But Normally, COVID thinking I’m just compared to should of bit the all seasonality the let’s all of curious this say Great. with weird. we back. then could And about be in frankly, stronger half

– said last question, in I think back it, seeing but very it end not your starting sitting year. not that it we of it’s year, the starting were was only this and you common,

mark, that see and that’s QX industry. why it’s the question and year. You the biggest rest the we is could release of a in different the what driven by Europe The very may lot pretty then, had semi of con much of QX, year are unfold we up the the scenarios ramping position us all does in that last QX. and well what that China. at Then impacted now with in to in quite staying rest And the like remember QX, ever we everyone. from have quarter And strongly mark question latest cautious QX I had understand the point in that you this in we seeing

We have the contradictory information from marketplace.

viewing are better. that the people getting situation Some suddenly is

could stay get in QX. get low people XXXX Some situation the only even that say better it quite in would and

are before anything We little a see us. of we for that cautious are people coming probably the on side up bit

September really way the year September exactly will will are unfolding. which the not backend be year. the of we we strong bit adopt lot time the companies be to in the guidance. to like not are it’s The switching smart is understand little to our all where the to expectations can and But the and of a today what’s for at August about the reflected as July we’ll year We that’s the for story that. be of able understand we companies end huge okay, points be now – backend the say, the on good to usually is having of paint are going. trying as

Great. Okay.

a run negative final got parts we think When a model of question. you to I one there’s moving with working think I about used and lot working just capital like, of capital the that to back think maybe we when say, to $XXX XX in sort months we’ll let’s should months, last like, million a negative but XX get of, about, kind of capital. working sort

that the off top typically and opposite. revenues And and changing they those up, inventory our up the a a the volumes shortage. think just The volume on effect, shortage thrown our more both pick ordered, build planning by our we’ll as in down, things slowdown, Well, in the And bit throw don’t semicon then of bit that I are way were scheduling our they the because semicon weekly negative effects has this into because saw are cash. saw chaos up also on of in slightly – are you up. of did Yes. driven you really OEs and quarter, second of the actually

manage created a with AR slowdown, than paying right, challenges you’re to we’re longer lot much that, of the And it’s on our so our what is are our And inventory. of AP terms. terms top seeing out, then

trend, the – working much seeing and sales down. that think, So think lower we still the you’re a paying the we’re months in higher we’re six issue aside, are on five supplier I is volumes, we’re to position of sales capital I side. from but But volumes, negative collecting but think sort normalized ago I slowing for inventory

it seeing unwind. you’re So

add our good don’t from point. effect to on something We because it’s past, though, and a any to have the that Probably working restate question negative probably in it’s Chapter capital had coming XX. we the

had did position were the as we that’s get are suppliers that and not working like sense the are reduce and capital, to working mind. in that, with before. mean, fundamentals in the to I working one where a So our it keep now same things terms we an to important

Thanks, All guys. right. Great.

Goldman of question line Rajeev the Gupta Sachs. comes next from Our from

begin. may You

question. taking Hi. Thanks my for

So I really had one around the capital structured, really just given the various moving parts here.

you a the to looking and So, have I’m at presentation, it medium target CDSB including kind about as think think the how the long-term also in mean, the So of coming forward with leverage, CDSK? leverage payment like if going I up ongoing of the do then it loan, but well as term from CDSB, about at defined we your both basis? the how a perspective you on going should forward

liquidity to In we target on our ultimately like longer-term leverage what a terms of be target basis. would like would to – be our

forward, secured want secure and of of in tranches that also perspective, it’s And only kind do capital structure terms to going secured you a well? like Yes. if from as

stated, As structure. complex a capital you we have rather

whether Now on We the go our we we a with to hit Honeywell the decide, delivering we’re performance the or just will side the clearly option to now. and interest there’s is an guidance, that the option put the at to of something quarter. for looking not example, it. short wait can It’s have window live assess put put period. and that’s then midpoint reporting and But next until They we in refinance. materialize business fourth something could it need if

cash by it to we earlier, from to We market, deal we opportunities Again, like we that do would to an with use few probably to investment, fourth. would remains deleveraging And we any go liquidity two going terms in what because is normalized the enough like just is or of upon hand, depending would the I get and the out years, aside ago, the market, them years came probably have be about We the in as and us. would articulated. this that. million worthy four instrument on that over effectively to at capital to other $XXX do then of the We exact may market stated full refinance a in inorganic put hand, the how And forward, still so it what release depend we to refinance debt. some on the present digesting next we structure organic would time. three to then focus are to on themselves, months with structure. But on a capital common target would definitely it

Understood.

That’s Thank Okay. it you. for me.

question from comes And Brian line GAMCO the Funds. of next Sponheimer the from

begin. may You

welcome everyone back. morning, and Good Hi.

you of restructuring breakeven a company your cost the understanding entered and outs perspective, question, less more financial call it you’re the functionally was own pandemic. profitable it take But a able breakeven want about a place or your an a your than I’m more fixed from from perspective, a quantify are when structure, if to Just you you cost point, took I very point. let’s make already to say a and operational one, curious within thinking maybe was don’t now cost borrowers just high? that throws

we improve the event we to I’m using term infrastructure the COVID-XX. on like will was – I colors more answer it’s add because I’m level I’ve in business, Sean sure our not It’s would to start the are event triggering sure But like every that. doing question. the are year. of restructuring since doing And principle, we’ve of been mean, year. that gym. doing doing commented some I all some this triggering was in fighting, the to the

good a is then otherwise the do basis always to on regular to need health, surgery the in gym painful. You stay more

some new plans that doing we address are some go the the before that well industry started on to already impact business. an was our address the to the impact as points to address that after having even the see were we the And slowing of in of to mix, our So we COVID-XX of to we rebalancing down and the technology. resources had

And or crisis the be of them we time that So you costs. from to that fixed where QX and is significant incentives And last this done we’ve see high you in have did QX structure. what have crisis offset a to would of a at impact And a key to year this having course are is COVID-XX if offset restructuring did. we what that term look the XXXX what can we over. We sure positive one-off benefit I make companies, take of come year. end governments like that to we point. And would of negative some what actions But this last lot these year get would of compare are our details. we you some of more of year, cost our the plans the up benefit in if the did cost, to give mitigation of we last years given you be as a beginning able we of today, would XXXX that’s think of the other accelerate can did by by cost probably many the basically lot of XX Sean been at because to testimony to on benefits

that is true. Yes,

our the look will in that are there coming at as costs you back. However, some second midpoint be guidance half

advantage full helped again to funded to But but the half. streamline upside we’re continue. looking state at second again. COVID incurred crisis to planned initially have forward start rain ways had aid. travel But are that costs some, the out, as those potential is under should example, to, to cost the in going really that Olivier seen in said, have try be crisis structure. The we but We – if we the pushed half, expected we continuously And our first for to took now going have but are of

as continue where some I will would we also already other potentially say at to side, we’re concrete there see call no of And disclose what taking regions, to ready on locations. growth plans, are production to opportunity, supply advantage of bit our quite cost the new restructure again, high in is well structure but that the opportunities But look as We we further a to it. in standpoint.

entire just present B? Or on value balance Series remaining would on sheet? of your be the the for Honeywell number value clarification for put you. be Thank Okay. under option And would that this what’s one that face

it’d value, the be present discounted be It’d X.XX%. for to

the best of much. And All you remainder year. very luck the of for right. Thank

Thank you.

And you. this Thank will our Q&A. conclude

Okay.

conference this will And today. the conclude for call

Thank much. you very

disconnect. You may all