GCP - Earnings call transcript Q1 2020 | GCP Applied Technologies Inc

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Operator

Good day everyone. Welcome to the GCP Applied Technologies First Quarter 2020 Earnings Call. Today's conference is being recorded. After today's presentation, there will be an opportunity to ask questions. [Operator Instructions].

to conference like to now would turn over the Mr. I DeCristofaro. Joe ahead, Please go sir.

Joseph DeCristofaro

thank us President for With everyone, Interim you Hello, and Officer. joining Officer Craig the are Chief Financial Executive us call on Randy Chief Dearth, and and Merrill, on call. today's

and slides click and earnings on Investors quarter's tab. available for on results GCPXX.com release Our website. go To to this are our download corresponding presentation copies, please the

may Federal comments variety our forward-looking will materially Securities or Laws. projected today results of a U.S. of Some statements implied Actual be differ to those from under due factors.

certain measures, in our We non-GAAP will more and in website. are detail discuss earnings on release financial which described our

margin References release. to of to margin financial rates gross adjusted comments discussion apply currency and the adjusted references both to forward-looking or EBIT in a comparable EBIT impact to and adjust EBIT margin, adjusted basis, growth to to Q&A. associated currency. remarks defined and EBITDA EBITDA, constant which adjusted press EBITDA refer and for adjusted in stated revenue Our refer on to on the as references our non-GAAP measures foreign prepared are refer margin, the statements this All to

will call I turn With that over to the Randy.

Randall Dearth

morning, good everyone. and you Thank

earnings So our last of how call. to first overnight. all The much deeply before turning pandemic and world quarter seemingly acknowledging changed our to COVID-XX want begin has the by our results, I since changed affected lives in has

healthcare as are the our sincere day by the virus essential moving our who So every for deep as sympathies and everyone impacted providers as on lives workers to been as we to who want much keep lines the express possible. the who front our well has gratitude

priority. our it GCP, one run as we be to of you. business employees us ensuring our For safety our thank goes will without number always And teams, health the that and the saying at

challenging service have conditions under they the of truly from and the meet expect employees the needs to past customers performed extraordinary our they been months to come throughout provide have admirably very and GCP. Our to suppliers

like crisis discuss doing take years the I'd level. seen taking health the to most global we to to are But strategic few we actions company minutes many take company next have to the what the through successfully complex and at in management we are a the manage the and team

As service a on sheet Number position; our protecting we strong day-to-day employees, reducing principles. and we and stakeholders; providing to liquidity the market current the other great manage crisis invest and of our to focusing customers, health our position; our plans closely maintain on scrutinizing spending and capital following our in customers balance in prudent to priorities the based expect are appropriate the us the basis, a levels and on welfare our from company and through one, suppliers market while conditions. fashion continuing expenses

GCP navigate period is very uncertainty. well positioned successfully this of to

maturities. Board with debt a and approach It and a balance have sheet to in management. management resulted has liquidity near no disciplined capital very significant Our maintained team strong term

manage a caused to COVID-XX pandemic. the ongoing indeed financial by the well competitive is differentiator sheet substantial and positioning uncertainty us balance as through Our successfully providing flexibility as challenges economic the

to we see find We once in explore cash will use sheet preserve and value market. to balance continue strength creating our our ways best for stability the the

our we a value. as are of executing on will key initiatives company's lose time, strategic same the to long-term driving the they not At sight

make GCP strategy a build additional restructuring advancing challenging growth, about complexity reminder our optimizing to momentum continuing success these removing company. our Materials and I'll we SCC's Building few achieved on implementing to to talk and a operating a sustainable priorities which in Specialty have in include stronger further As plans with go-to-market the and returning efficiency VERIFI, minutes, projects model

Nothing that posted and quarters. the since programs business in best delivering first than earnings seen performance positive recent are in maintaining improved working We XXXX, provide better results. evidence our quarter performance momentum, our our we have

SCC's in in of fire and XXX North for sales especially from activity due with are results, the due quarter; number healthy the healthy guidance, wins, would points America and proofing; of well XX% expectations SCC sales basis million; environment row as of EBITDA margin an profitability Building is points the to construction with the growth North margin expansion. America, challenging. favorable reduced pleased continued to and volumes; gross SBM fifth from of This improvement in that of basis shifted XXX project quarter most quarter There basis like highlight extremely up growth margin points. in rapidly in a activity the gross of margin Envelope including: up in in the growth strong to performance $XX XXX that million of $XXX region adjusted EBIT quarter X% year-over-year the the very exceeding despite as in to sales total our I'm of I sales improvement X% accomplishments

positive continued XX% growth and with the sales truck XX% installed VERIFI's in our quarter. momentum year-over-year growth in base

to the On VERIFI than reached United's the XXX Penn the majority and may you -- also of recall fleet fleet. topic in of an on agreement VERIFI, Penn Singapore trucks with implement United we more

for commitment this in customer XX a approximately past interest week secured Australia with the the trucks, also continues. We

million our see in first our challenges to as adjusted on over is the how free proud overcome our we progressed. management. of focus quarter, to planned can quarter $XX continue working together capital generated work Most decline of as our flow a the million to in execute cash $XX expenses, the about all, restructuring to improvement I'm presented XXXX. in first you in operating of of programs very on due $XX the strong by team compared use we the and quarter virus This of the an million As

units. business individual our to now turning So

for lines by in strategic product term. residential presence Envelope restoring our geographies that segments particularly American market and growing in goal long in increasing term profitable near growth the Building SBM our under-served organic in sustainable are North remains Our in

also awareness plan our segments and to the and expanding launch portfolio accelerating of includes and adjacent mid-tier new premium the and segments. product for market accessory products larger Our

SCC, core our by markets, prioritize in we profitability service For continue including emphasizing to modernizing will efficient. our operations to more model become

for elements. Our includes strategy SCC three

and optimize plan portfolio admixtures we to First, model. our best-in-class reinvigorate our our business leveraging by product core to continuing and refresh service

driving second customers. The of is the by VERIFI existing new SCC our of adoption and element strategy

had portion process business not admixture gain to VERIFI. data Our in strategy the of installs than is without and the with additional otherwise grow would have truck the additional business we

our as The approach is strengthen the products expand strategy in by as to product introductions specialty our of precast We systems engineered these markets segment. plan element SCC some of to cement additives, for new well unique third leveraging pouring our segments. our go-to-market and

on GCP whole. the commitments to are CEO, Directors become our and Board our forecasting focused meeting as a we Turning I and market. will continue to of we If to now financial provide improved to

experts. a We modify specific our model of continue to will to out expertise higher our to also fit organizational build further of appropriate team the strategy where construction best-in-class needs and

our our Pursuing earnings cost priority. and business processes of eliminate that out quality top the in a complexity will has remain initiatives been and improve

as targeting and initiatives in we are in expected Our working million are $XX restructuring savings XXXX.

targeting by XXXX. of on $XX well plan annualized million savings approximately in are We our

over designed provide which rate next earnings planned. we rate as two project, is the Our also time reduce proceeding to over we points additional a believe tax optimize And the X.X opportunity is percentage tax compared our to by reminder, to rates. that three to years tax as to historical optimization have our

sight each for to earnings. about weather are point about detail and reference economic these in Craig talk meeting of million focus, of $X suppliers we our As terms steps operational will absolutely a our and continued represents of not tax in But the taking uncertainty. or point is in under-invest GCP, needs forward percentage critical the capabilities. moving customers our will and more we of assumptions lose in

at the strategy, actions long the to possible, invest our level deliver term. and in on announced are the the execute We our continuing customers for company on highest significant we've service

turn like who over financial review company's the thoughts now quarter to and will call would I performance on for outlook. the to Craig the our

Craig Merrill

everybody. and morning, Greg thank Randy, you, good

on and growth a constant Just all associated comments reminder, currency a rates basis. are my in revenue

Before the regions impact considering the are quarter, we for pleased our say, me QX, to performance during which in quarter. the in and some overall very the summarize just pandemic, particularly let results of started production our with and countries impact we demand our on an financial have

tremendous a working complexities the from the did job of Our situation the onset. through teams right

of the spoke were on strategic of manufacturing was This the In X%. pandemic, in by market well the primarily and as due first mainly up in that North restrictions past. regions quarter, we a lower America offset about as activity result the exits construction volumes to the impact sales other government-imposed as COVID-XX performance

SBM quarter. the We were successful capturing price in SCC and in both

cost have this be There our We we but margin customer strong to expect lap the has continues SCC some substantially expansion. to commitments the year associated produced QX. in SCC half market be product exit at completed that, program, reductions of with trailing first of which the will end

to favorable primarily gross both improved exits mix, gross GCP's pricing, our was in particularly and productivity favorable strategy. unfavorable mix as by points lower restructuring SBM due activities, to offset lower This XXX in to impact market product XX.X% regional basis due comparisons well SCC the margin as and driven increased VERIFI margin product partially by and year-over-year. of

programs. increase corporate we performance period. As to basis X.X% prior XXXX. EBITDA and an basis higher lower margin since benefits points the GCP due in primarily due quarter Randy VERIFI margin GCP EBIT cost, year restructuring to earnings our first compared margin margin gross XXX the to to model our EBIT and to mentioned, XXX had best due XX% to from increased increased points

had XXX our a and increased including product growth profit, impact North X% by at and X% to markets points but million, favorable unfortunately performance Looking well Asia which America to we basis sales Pacific, restructuring a costs, SCC pricing, of impact spoke strategic in were SCC of SCC's regional past. The undertaken the while the had mix. COVID-XX we as on offset continue in as impact improved material have of due to lower plan the up actions margins the were favorable that -- segments gross gross the positive specifically, the which $XXX exit down about to X%

was of in in other the Segment amortization gross higher growth margin increased higher and increase line gross operating profit VERIFI depreciation operating X% expenses attributable with to to and an due we initiatives. forward-invest to operating Segment product increased prior as as basis by income points mostly primarily XX year X.X% quarter, the offset higher costs, partially margin. compared related

X% income higher segment amortization, operating and to SCC profit. depreciation in Excluding gross increased primarily due

solid residential and strong pricing Turning in which fire COVID-XX SBM. improved year-over-year volumes, performance to including revenue year-over-year was proofing due down X% impact X% Building in volumes to from Asia lower and up North lower offset SBM's by Envelope the year-over-year. Halex America, with was volumes and

SBM's declined due Asia was offset down lower productivity to compared to closure year. XX% basis the gross COVID-XX margin compared volumes quarter primarily segment income operating the sales resulting of the gross last first XXXX in quarter facilities pandemic. XXX and to operating from lower in reduced our profit, expenses to lower which particularly temporary of to due points SBM's due

Now turning back GCP. to

first due optimization operational margin improved summary, to our XXX in Just gross mostly and price. points, in basis the materials improvements, quarter,

in in to spend corporate attributable the total offset Our overall contributing spend And restructuring as work compensation investments expenses strategic by and expenses lower health XXXX of reduced the with expenses XXXX counts year. reduced and from reduction overall drop. QX and year year-over-year and expenses and restructuring the welfare reduced cost administration lower was benefits. million declined and savings, mainly prior head programs to increased QX an $X during we and and versus XXXX through operating due this other to slightly salary all benefit by The general

alignment own and Corporate and resulting quarter due restructuring lower stock-based of cost compared our executive primarily million costs were year's last allocation cost compensation, operating segments. and of on $X.X of lower certain to from first to their organizational down XX%

for XX%, approximately year-over-year was CARES tax tax quarter to due Act. the the improvement rate largely the benefits adjusted of Our an

greater supply hand, and QX focus payables demand lower lower the greater XXXX. quarter Adjusted and overall capital lower $XX $XX vendor quarter was use days very management versus free million inventories, XXXX. results the That's on working year-over-year due cash in strong compared to $XX prior in for collections flow generation of resulting forecasting and and million improved spend with than in million improvement including better year-over-year capital to in QX on a was

move through to region inventory transparency continuing forward into to operations. are the and individual improve of management with increased initiatives payables We receivables, country our that designed are and our

improve these cash and to continue the initiatives to and expect flow We year time. efficiency our over throughout

for has this XXXX. predict pandemic time COVID-XX Now uncertainty. turning to on the outlook at difficult our tremendous extent pandemic of The the and is business. impact duration to our obviously It of created the

not uncertainty sheet. we we are at balance is given As are time a this but XXXX providing for currently financial color result, we follows. navigate The as well-positioned can to strong this share our guidance

construction Our then essential our country of the They were time into the base down with continue And and most been will been for exceptions. during in May June. substantial economic and cases disruption a the slowdown transition improve economic many more all considered for begin to world for shut around the very regional reopened. most be we lockdowns since products plants during in the continue The into to during the this At the experienced few world and facilities quarter. April have China in several an be and impacted will around and expectation where activity able quarter the regional May is of facilities than our countries subside volumes month to has and to May first expect in and to May and the are during have warehouse restart. global the second to test in the economies month we most to world operate

the for the our will products on expect this our during product by and reduce demand XX% geography. period of we second to result impact for quarter, pandemic a COVID-XX XX% line As overall depending

to the levels return year to We uncertainty slowly progresses expect and customers to of to as closer remains our XXXX. our demand remainder normal facilities for to to and QX, disruptions are likely improve and beyond considerable but the obviously continue

million programs original $XX that million our approximately restructuring our to identified compared cost additional from Aside XXXX plan for implemented. have have $XX we of opportunities savings to we

to the material We work offset and some volume raw expect through also deflation year. way the modestly our we improve to declines as of

planned million continue initiatives original reduced We or year. discussed, for we our execute as have programs capital on previously $XX the to and of by XXXX planned our will restructuring about and in XX% spend expenditures to XX% about capital

reduced be will capital well-positioned conditions current have instituted have we the that than expected have position scenario, on plans should of the the ensure quite the period the volumes. year contingency capital current remain in throughout to I to future. worse strong and target cash this Our revenues and shape changing cadence uncertainty based for from emerge to of we actual out with stable In working programs and outlined, financial our and we event conditions respond we which developed the turn

GCP. in industry Looking of and the beyond construction we the pandemic, confident are long-term the fundamentals

all our to starting improve our position. programs initiatives, As you performance from maintain the can impact results, strong take see to and financial savings are financial QX capital restructuring, of our working the hold

allow the that will confident pandemic when be and current the stabilize. are our patterns to globally to the us We demand will start markets navigate for well-positioned we and plans

back With will that, Randy. turn I you. to over Thank it

Randall Dearth

Craig. Thanks,

Our first and are continued demonstrate clearly of. very team which performance quarter executive results meaningful I improvement, my proud

priority. and absolutely our our success safety continue are key will to teams top be Our your health to and

want choice this initiatives. of not competitive crisis, GCP programs to ambitious effort programs that pandemic. a and talent groups, achieve and the we the will development employer after to to schedules, attract goals of We ensure and novel during remains through compensation stop retain and during Both will an work our diversity of work employee including myriad best formation

total will this in to monitor continue Especially We have our around crisis. time Today additional crisis, we to competitive position. initiatives balance and on liquidity cash implement to liquidity sources of working our in million capital will solidifying this performance. revolving be closely cash to form we while maximum in XXXX, continue bringing cash sheet $XXX our the ensure navigating to Maintaining maturing a key in position of credit access this flexibility million million. in $XXX $XXX will facility

also published website, set I'm goals Earth continue joined We contribution which one our practices when I happy Day. of report the which that sustainability, available The is first sustainable sustainability our to report, GCP. outlines focus structures. will have to commitment on on and report social we I on our more to to and was construction and environmental our stewardship

optimize in metrics product processes GCP's footprint build global enhanced will to production and We and to reporting and sustainability people upon report the first leverage continue their our sustainability future. our with offerings,

we share with are our I commercially we some where tell and present technically. good that very to people a on often the where and thoughts employees Before segments I are like positions we we good would market products, good where are both I in outstanding are going. conclude, company and

I think with for company this create but agree value is can continue tell our a a can great always we our will can that lot where an be that our area we critics, employees to I shareholders. of

When I to success. for work in cost up removing legacy joined company company utilizing better was evident resources, setting complexity, and it had that future the GCP, this do removing

modernizing early teams I'm sales processes, to planning the XXXX. and Our our our utilization. process, completely chain global processes site site launched happy improving and our on capital relationships, all allocation have initiative outdated and focusing operations clear was The focus our I supply of first establishing overhauling outsource rationalizing in addressed on product procedures freight say SKUs, procurement these. asset

the right XXXX, $XX our to from on-hand, from direction. XX% to this improved days our and XX%, in by down in already inventory saw million XXXX compared And XX% definitely we

and are addition, our down. freight are costs In up our outbound deliveries on-time

teams management now. on modernized the new, in creating are our the quality task focus undertaking current Our process, chain is supply

model, and is lead approved, clear specific overseeing around organizational customers. markets; is business unit is business with couldn't having have of unit and is our address happy my I coalesced aligned global innovation needs aligned business more focus goals; clear to Teams streamlined corporate of laid with focus activities; the P&L the by is in a August, accountability. product the I champion this needs model better to organization better-prepared out Last how development on which working. and be new their board

We customer related responsible customer team experience. engagement processes of to overseeing established who's a all last the year for the

have America the more which in be conversions went X% In through as year since portal, and new ebusiness of short this portal had about many tools first such quarter, planned DASH the its success the late with implementation sales last gaining Plus traction customer GCP time North Our our launched months. in coming of launch. tremendous salesforce.com GCP Other shortly. our in will

Head Naren, our executing top on SBM that efficiently discussed Global calls reevaluating has and our global investor has of strategy one As two last of upon been SBM, his priorities. our

as go-to-market is clear top we and in the both a understand developments, successful our ensuring implementing to be the reach It's leading markets, invest have a required recall, in market to to and for presence focus the importantly, new our you retain to adjacent doing is SBM new As being business the plan the plan more will approaches. commercial firm This prioritizing while consulting develop broadening implemented development may future. adding where We're our with in global continuing current key on past. product But we leading areas that Naren with and worked a me priority. resources this pricing to situation. we action been better of and

year patents we new we capabilities. global trademarks. Thinking granted alone, XX product we have impressed new with XXX patents, over product been new I registered and and a of XX consistently product filed Last were our innovation R&D launches,

priorities well business Our works global as innovation with allocations. department setting teams as resource on our

market-led been project [Indiscernible] in data as as with type have return well clear management metrics. conjunction used

labs We I'm through needs innovation expert, resources how of have align deliver technical led continues And integrated experienced, to that and Dr. made also the market. excited of to better utilized and to Seth to we Jyoti see value. acquisition seasoned the capability by an personnel the have global

good company simple, The a very great. goal make very is

question of where specific of a expertise We the clear get continued are status doubt do cost will I to focus we hiring on our and no absolutely well management quo, With have way there. so. on continued needed, accountability,

and to efforts to of want a independent, maintaining spend experienced been an our the minutes us. I and Lastly, majority priority on dialog GCP's shareholders board committed to replace has of Board. a super active maintaining Starboard's is GCP with couple long an diverse for

made and appointed on As last the than we reasonable already our outlined over have significant board past refreshed years. in offering half within a months resolution several our More we've in communications, board numerous to shareholders board. proxy few situation, attempts been this the other reach representation to of the has shareholder

only control should during single to shareholder board. be has discussions, unshakable that allowed two those our So been over position shareholders, negotiating exert the or no effective

our board GCP Despite communications, detailed and protect to responsibly are offers balance. in that we in acted interest shareholders. has recent our have the We settlement sought we believe genuinely of has

actions all to the We shareholders. that interest GCP will we are best continue take believe in of

the best the determine the believe most forward is to the investment and believe As to our is for they future appropriate outcome their in GCP of allow shareholders company. such, we path

is were the quarter The company. really improve our call and initiatives purpose of that implemented to discuss to performance our today's first

conversations today on on comments to further and not results. will or focused your proxy our contest keep our the asking on our be with taking We shareholders questions

hard So team would and my devote the appreciate it. wrap challenging employees and like GCP extremely truly all my to personally effort behalf I they I on work for to thanking of comments our by continue leadership under conditions. up to of

With look that, our for and to call I thank joining forward like questions. you your we would to taking say

Operator

our [Operator with Research. Instructions]. We'll Rosemarie from take G. Morbelli question first

Rosemarie Morbelli

though mention you on have subject. even a about particular you'd question Randy, it, not do one did talk Good I morning, everyone.

company what attempt that wondering concluded GCP help that made remaining had you has hold value you independent since to it. year have If of control you last for caused takeover the all shareholders of from operation another shareholders? I the So, you benefit the take on was support would if operations. appreciate understand without in a review your could and us progress largest company to strategic us could about and I of premium that, help shareholders learned would the them improving

Randall Dearth

morning, that process much And of results. end been conducted determined a very that showing and you're best that public correct process, again taking Rosemarie, forward we that and was Good alternatives much, indeed much work path consultation, thorough the after about. path the have that we the absolutely strategic at Board that's we're and the

comment are a this indeed that. plan I'm I'll forth shareholders. on was going strategic Now, that's out right putting to but not the information Rosemarie, to regarding made build specific back our comments time to to from of I that think quite going at alternatives us we context about conversation that this confidential, I'm But strategic bit process was there best to keep the and process, the it process at and refer looking outcome. the you again, published

Rosemarie Morbelli

the more on regarding then little dropped? bit the Thank a material what you operations, to at of doing I has of the quarters? the what could because expect you upcoming are which but And touch you. offset in could profitability which impact understand COVID-XX, looking building

Randall Dearth

in We've as reduced done we cost-cutting our spending. we plans have capital our Well, have we mentioned already, we've implemented. remarks, that contingency

to day-to-day next everybody on like evolving right watching and what basis. else see we're So the now, it's comes

in countries and the many we're out, continue SBM sell running, regions in our happy around have door and able pointed As SCC. to Craig on we the is the business open to both sign has been been world and that

the sell, can continue customers, to we'll we as crazy. to long is as still world So but sell our

for up, longer, we going and are bit we on countries out that instance anticipating out that to find Tuesday were certain closed For countries told vice to versa, they will we find they're were be on Monday, little now. not were Tuesday opening be a on that open

decisions management So ever-changing the and dynamic, we'll get crisis take team the that we it's and data and an necessary as will make business. maintain team appropriate the but to our our actions

Rosemarie Morbelli

good right, you thank very All much luck. and

Randall Dearth

Thanks, Rosemarie.

Operator

Laurence go with Jefferies. We'll Instructions]. [Operator next Alexander to

Unidentified Analyst

on How actually for Laurence. it's Dan [ph] are morning, good Hi, you? Braziller

Randall Dearth

Fine, Dan. morning. Good

Unidentified Analyst

provide where if additional And mentioned absorption I know from? volumes exactly to you given is savings what savings towards that's you and larger wondering coming unfavorable wanted cost going fixed meet was coming previously extent You on by to be everything could I is savings in if that lower on? announced. color going to a that

Craig Merrill

what most take February Yes, by with [ph]. closures country I than Good and went March a went plants that, in It's team through pandemic our is hit Yes, probably the got Laurence of diligent China earlier in the and through leadership we program. Craig. can morning. a we -- very our had originally lot advertising, and to the the cost of entertainment, in shutdown some we discretionary, built that travel extent We've got because we've and that marketing identified that happen are plans into expenses of some won't down. and current just locked those of just

cut back those we marketing that had So that there's on spend, have we volume the And We've that forward-thinking had also we've And economy they slightly gets we'll to some until other put specifically decline. see it and and that there. areas the advertising on to But then then we some there is of so the other back in country-by-country and some ones then that just we're the in normal. SCC. spend G&A on is so offset those, just for in, had others. there planned headcounts SBM to trimmed investment an AOP on

versus see enough we'll tight. and place So But we've million but to volumes, more. that's million whether offset number that our and or you're got if to also to do $XX $XX really original contingency to an comes about that that plan all plans have be in will got the correct, in need all, we've we

Unidentified Analyst

helpful. very very, actually was That you. Thank

to you hit you in -- I about thought I mentioned than You China it in I'm earlier Asia, just that was thought thinking overall? others. China smaller I mostly guess had exposure Asia thought China exposures I North outside of sales your I big America, and Am it China? of X% mean and in Latin obviously was mis-remembering? America. U.S., than I less Southeast Europe

Randall Dearth

No.

two [ph]. months was is Laurence Wuhan the facility. area, facility, from in you're which had correct, production. a You're The only located our is specifically almost down Hubei is difference which We for SBM when

of that it's So even overall revenue a piece impact us base. smaller though did our

Unidentified Analyst

very much. you Thank

Operator

And are like right. at this it questions time. there All no looks

call. So, participation, disconnect. that conclude today's your may will We you you for thank now

GCP Applied (GCP) 10 May 202020 Q1 Earnings call transcript