MOD - Earnings call transcript Q3 2020 | Modine Manufacturing Company

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Operator

Good morning, ladies and gentlemen. And welcome to Modine Manufacturing Company’s Third Quarter Fiscal 2020 Earnings Conference Call. At this point, all participants are in a listen-only mode. Later, we 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.

to conference like host, to now Ms. would turn over the your I President, and Investor Powers, Treasurer, Kathy Vice Relations Tax. Please go ahead.

Kathy Powers

Good quarter I for discuss President and morning. joining our President, our Burke; Chief Tom conference you And and Finance call and Mick CEO, Modine’s fiscal here am third results. XXXX with Modine’s Financial Vice thank Lucareli, to Officer.

webcast the PDF slides can our be Relations through the We file of which accessed the accessing on presentation, will link for be website by today’s Investor using section posted or either modine.com.

a will Tom and update our morning, the for there At This question-and-answer results outlook of be fiscal our and Mick rest session. an present provide end third year. the call, the will quarter of for ’XX, the for will

is Securities statements. in On Exchange forward-looking earnings our may contain in forward-looking the as well release as notice with call and regarding statements filings This outlined our Commission. company’s Slide our X

Burke. over my it’s pleasure that, Tom With the to call to turn

Tom Burke

Thank in you, were down the results everyone. These quarters Kathy, previous prior year. XX% third morning, million guidance. or $XX.X and with from our good line sales were Overall,

sales prior quarter $XX.X million the million, adjusted $XX due and year, segments. our in down primarily operating to from XX% Third VTS or income lower CIS volume was

As past reported slowed few last to markets quarter, stabilizing. the several of months, in appeared significantly our end be but conditions

during the Mick We’ve portion in sheet pleased million by that report our out cover I’m our also of during turning balance flow section. restructuring detail quarter, including this quarter, $XX.X a short-term other improved auto cash strengthened more debt. this highlights to As separation his per free and will our costs.

margins, operational focused it’s opportunities on team to efficiencies. enhance leadership and our identifying CIS keenly improve Under

in margins below segment quarter, our targets. last fallen mentioned have As this

grow business. our We our in business to strengthen coolers place and coils have plans

with significant I center this In priorities short-term making in center segment structural the team center due more has to one The is we making our data created sales organizational changes good the and challenges our portfolio. business. review. data our will we're of customer, strategic and concentration but how during cover manage to another volatility progress data addition, diversifying on

our exit on spent to and separate into the the automotive plan We segment auto business would the considerable an automotive investment of ‘XX. our fiscal diving quarterly VTS like results, segment, update in strategy. separating provide reporting time to start Before the I segment first quarter from managing and

and will Reporting necessary as setting legal it systems costly, While good and included automotive manufacturing this provide it This segment and and work away up standalone new and I was from entities. consuming transparency this investment new going improved has establishing market. complete. the operations, processes, business physically largely separating now been a transition forward time believe IT is we

separation leader and a successful to named We team seasoned dedicated have that’s support automotive management and of our committed customers.

possible. The on primary automotive separation to I our will to be showcase Modine’s exit the generate and business margins, capital to allow want anticipate will clear remains it as appeal and better cash to auto determined strategic Through more we our business, would to efficiently sell automotive and buyers. that to align previous divide business to as flows. which Modine, returns strategy higher of quickly business existing beneficial we us the efforts the new be the

numerous approach, to engaged we with potential have interested Specifically, different parties. separate been of actively buyers. this automotive we're two With business marketing our components revised

process far. encouraged with so revised We’re

commitments exceeding transition In when have to certain meeting timelines, we that address. as we lines. of and As these related products or to assess be we goal as their options may out would product remaining be customer our quickly our scenarios, exit possible will some or as complete our locations phase the there

maximize run by cash the first it clear, assets a rapidly are quarter the VTS our divesting objectives on most segment which and when possible cash to exit the business business. remainder and in as ’XX remaining from financial flow, cash heavy the as separate optimize business beginning of basis of value and automotive Our to we separately valuable neutral include fiscal segment, results the the duty will the of the plan report equipment new auto the earnings

growth We focus continue and improve shareholders. intensity, businesses decision right this new cash management's flows, opening our that margin, to investments. the up pursuing attention capital opportunities a will for believe path on company our and better for It our long-term lower higher is for higher organic inorganic and

quarter on X. results Now Page turning third our to

in decline segment experienced Sales the markets. the year. prior for vehicular XX% As from expected, sales the across VTS our we down were

months previously lower sales higher to to I’ve wind recent vehicle mentioned, slowed automotive automotive, significantly from isolated been from customers. and Korea, the and in partially sales is our X%. due automotive This Overall, the and sales as sales Sales also off-highway by were were be were sales prior off-highway prior XX% to China. market offset the year XX%, we and Europe each down sales in Sales have sought. In vehicle particular year down sales lower primarily have our customers certain down and As a to in have key in programs down X% to were commercial Asia, Americas with drop the customers commercial India. continued to markets vehicle down. These across in were any not due region commercial globe. the in seen as volume weakness declines region to steep off-highway XX% China, down vehicular

is a prior Adjusted XXX basis was was the down margin segment for operating Adjusted year. points $X.X operating X.X%. to than in income which the lower million $X.X million quarter, VTS

structural plants responded changing costs the in downturn quickly business align cutting with in our We by markets to demand. customer have plans our our to operating

for control confidence improved are down our This on when and we operating improve drives SG&A improvements focused cycle. leverage and procurement markets as of In accelerating factors out other efficiencies, can’t highly reductions, margin the operating the addition, we such increases initiatives. near-term pull

strong solutions and bus relationships leading lever quarter, we industry our industry elements truck Our such than substantial talking as cutting markets. felt critical performance customers, as many And quality, the last are like more and to the that delivery forecasts declines volume for in continued as we with key were could customer discussed edge technologies prove in we EV expecting.

markets stabilized. So these XXXX. while any market in our year-over-year the several begin quarters rest for were challenged improvement believe not later beginning And largely to in be then meaningful next and seems rate We to The market some term is lining you're of of in recovery to longer these reasons projections. the the recover. declines with be in the then receive that There to outlook. the expecting line we silver decline with are be the and optimistic XXXX. calendar truck off-highway We're predicting calendar markets will weakening

key process. the On our is anticipate divestiture auto which side, volume, to relatively stable we

in expansion year revenue further to largest a to capacity Within temporary into prior half challenge strong growth segment CIS decline to due investment XX% fiscal continue turn in were Overall, The we decline. the sales Page in was demand. X, this was in expected prior from for Please sales more the customer and declined data in of capacity This large than sales drop our our year. segment, data Sales shared year. the one XX% segment cooler a low customer the excessive last our this CIS center to strong is in the a customer. saw market that accounted year center to result of next market sales is year. from

this volumes in low are business in currently recovery strong a for expecting very 'XX. We 'XX with fiscal fiscal

Refrigeration and end and sales driven the The decline were of by our prior majority operating negative year. Sales related income adjusted markets XX% decrease as refrigerated $X reported market profit, This transport down primarily sales and the well. refrigeration gross due sales customers segment mix. HVAC lower U.S. to driven decline to of was commercial million, the This was lower in down to by from volume

for The this strategic been related new place now, the has have a and for been quarter and set. priorities team actions over leadership in segment

coils the keenly profitability mentioned of on our last As are quarter, I we improving business. focused

manufacturing initiated low make costing and an have sufficient that margin, sure quotes certain releases. to reviewing aggressive our cost also cost have to and We're to reduction volume and processes. vertically strengthen on particularly pricing practices our integrate product operations We high our program components business

team diversify our will HVAC The to in conjunction hard team, of is base. more and customer to and this as cover part working to leader. over update. data was Building I take opportunities growth center I decided This under in consolidate done Building one our being HVAC the these efforts detail have advantage with

With products coolers to our some next be quarters market to in new on to share. of continued energy our expect recent very flat industrial weakness our to leveraging the American and planning the also team on data consumption resources our the reduce relatively with in several markets. supporting technology for and with cooler regard and are center we cost are year, sales We're in them. order coils communications upcoming total based grow market ownership and customer, we coatings North In limited business largest to our adding

reaching However, as projected long-term 'XX new with encouraging demand and sales highs. projections and calendar are potentially very

Building products points $XX.X Page to America, to million, prior and by income HVAC increase XX.X%.This was customer offset air increased at by ventilation by Operating sales largely the heating basis operating lower X%, school partially higher Sales year margin favourable UK. sales driven in ventilation mix sales turn the for segment XX pricing. North X% and driven X. Please increased increased in primarily and to from conditioning

segment. strong to this be by performance position competitive continue the encouraged and We in our

seamless the to trends we and growing across by our have both teams. approach customer in allow business. our regions. change and In to reaching on This for shown a new, solution us CIS introducing We more highly by business winning better by indications new a center new offering. and developed has providing Building other in single more greater of growth to success market, This center with these expect remain the center resources across capabilities opportunities market to diversification continue HVAC products new CIS products and this focused growing in broader data capture as markets leverage experience the strategy regarded we're market structure data the focused is early combining customers. will geographic customer goal favourable and growing comprehensive order data end to we new segment Building along with The HVAC, a of

fiscal with major cloud in customer component Europe example, first the quarter, our strategy we a in key our forward. For in growth for secured order moving a shipment 'XX.This is computing of

our stronger trends that, see key markets in we macro to pull expect throughout positive remain growth as but starting little year. see remain ahead, calendar Looking the strong. back will markets bit, we they Within a to should

space. center centers, growth strong the collocation data and data For in continues cloud

the around toward in again. presence strong markets. UK general have market. certainty growth release capital We HVAC anticipate the The some the provide construction should to stability We into funding plans increased Brexit opening UK for

mentioned I new team newly global diversify data solid center has customers our plans earlier, with to ‘XX. in fiscal business engaged grow this As and

that, results turn XXXX. our of our over an overview would outlook fiscal update With to for to an to I Mick for like consolidated and

Mick Lucareli

everyone. morning, Good Slide Please X. to turn

VTS As market by were Tom, well and softness decline, drivers segments and CIS primary anticipated comparisons. the detailed we in difficult quarter, our revenue which resulted year-over-year continued through of the

the $XX million, was and gross downside As result along on in of million decline, $XX third with was declined Of million with XX%, and $XX profit structures. Gross margin to our based $XX in expectations or sales quarter of line reported, XX% the the truck off-highway conversion and million drop variable this sales largest XX.X%. XX%. resulting fixed standard declined declines our cost customer. data of in The over center

automotive and metals CIS exit product strategy, XXX impact our negatively and of from and equipment Besides the continued profit transfers gross to basis margin with had a no volume, corridor in impacted center the on materials impacting points. support relating Building sales. the resulting in HVAC decline strength in of approximately was was costs of improvement sales $X lower the Also sales mix, data gross by million

drivers main the was SG&A million. two behind quarter for SG&A There the $XX numbers. were

compensation expenses of the and benefits lower had cost reduction our seeing we this First, began quarter, plan.

products and the expensive all Second, the this strategy. the necessary separate we to our the management exit business have we streams the support transfer facilitate costs including to automotive work. a management related created Preparing program to a all complicated process, separation support fully to work office business and temporary To automotive process, plans. our exit is and program to

embedded the the quarter As segment. business been our within of standalone as that auto discussed multiple and company global fully be stood a out to needed previously, business. functioning we locations carve This VTS had a separated previously that required up throughout

legal we seller and a formal advisory incurred due process, Last, costs our to services. actual deal other launching diligence, Since accounting, sales relating streams. related work transaction and

of sale accounting, million During costs was included incurred $XX.X resources, $X work, related costs management and of the this we These Also, process, the the human tax, quarter, million incurred audit all million quarter, approximately we to including approximately the to of legal IT, fees. costs. separate related primarily business. to project separation costs and during $X

were tied there costs the diligence, other and seller Last, related process to advisory costs. and sale due legal to

During were majority or the the are quarter and will business. and forward costs approximately I incremental behind an separation that expenses sale disposition these and going actual vast us the of am most relate costs million. $X automotive the the encouraged of to

in of we any also million Adjusted balance SG&A from project costs or related X%.This measures that SG&A, $XX positive of to detailed Moving decreased was recorded to severance by included million cost lower the The the have to of was due reducing the SG&A compensation. including prior benefits $XX from some on compensation, expenses operating the lower of QX. $X report. year. $X This initial we structures, of incentive last income With we savings excluding million mainly or decrease news down cost amount to operational million and quarter. regards rest

the As mentioned, and helped reductions. led the to was a CIS. control lower and to compensation Lower expenses attributable cost quarter for previously VTS SG&A, offset initiatives which decline difficult volume

the this cost and includes of list an totalled These a the of to Of $XX U.S. adjustments As automotive $XX reconciliation SG&A full our recorded million sales. to adjustments itemized and million. results. appendix million remainder GAAP including amount, our divestiture, relates $XX.X in usual in

We and restructuring primarily reductions plant of also incurred consolidation million $X.X expenses, activities. of headcount which consists

facility $XXX,XXX. quarter a Finally, we of recorded in a the and closed manufacturing previously during Germany gain sold

guilty the prior year. income taxable Italy and earnings U.S. in per zero tax income, $X.XX, adjusted was a $X.XX was impact attributable largely the expense Our down adjusted and favorable in incentives tax from quarter to was share on

Turning cash that we anticipated, quarter and to improved fourth will I'm continue in Slide X, quarter. to as that expect during the report the flow pleased

costs a and flow quarter impacted million On earnings exit cash decreased related to cash Third has net higher and automotive $XX strategy. free lower was debt capital by the been $XX basis cash year-to-date flow plus million. working

costs flow strategic these make SG&A investments to will covered I automotive our the As separation program comprised the the on so. a costs. needed quarter deal in are costs, we to costs support some important management The a leg, cash related strategy. statement usually and or and general, In hit

To us. will are I the the made costs should we future to balance Besides we a improvements flow, remaining flows of vast majority anticipate cash separation sheet the sales. of that the that potential some am linked quarter. behind process, sale directly any encouraged Most during benefit asset cash additional costs from improved repeat, and be

recently to debt. leverage ratio notes and declined, debt senior prepaid net It’s of used another to not was also August issued due long-term our financing, the but on long-term our X.X. sheet. savings. notes million benefit, and with in short-term result mentioned, interest proceeds I And will new in $XXX balance As coming reclassified Plus, repay million we secure $XXX future as we only debt

results our trends, and to and sales are turn income. our let's our operating X. we guidance holding for fiscal anticipated Slide quarter Based on on ‘XX third guidance Now market adjusted

with We tax a range adjusted per lower guidance of $X assumption. earnings $X.XX are to a due our increasing on share a to

adjusted tax to around full-year be is now projected Our rate estimated XX%.

on into We separate and a the moving fiscal strategy. exit operations automotive segment year. discontinued look new we While the in remain business to includes separation our that or the forward focused business, guidance

Tom, turn that, to it With I'll you. back

Tom Burke

a There's are the Mick. Thanks, of great us, of but we path. on deal work ahead right

to best be of business automotive process longer taking place plan phasing solution achieve anticipated, have shareholders. business possible the Although in the than logical buyers us our the orderly a visibility our have markets allow state there of our that’ll of to business but we in will to and into a differently, are helped The to those timing the best the fashion is end to transitioning our and customer process, no segment downturn interruptions. we now up greater Rolling run businesses it automotive as in selling markets. off the of to assets separate here interest originally ensure the hasn't

but also softened We a our have core and largest clearly auto and spent business, to our have center time a money we on experienced decline large our data in customer. sales exiting markets significant

cash a this items these impact and on flows our of had All year. significant results

encouraged very and be our truck to has company and opportunities. CIS business us. about data after the the a clear of in with new The front clear new to is a will business. center our opportunities team I approach improving different am auto leadership new margin the a on divestiture leading place However, plan in Modine off-highway global focus improve profile

developing others last reflect an the and to set to actions are targets operating achieve We we these plan savings quarter.

will earnings fiscal our report next in May. fourth expectations our We year share we when quarter for

with that, take And questions. we'll your

Operator

[Operator Instructions] with Our Company. & from Shlisky first Mike question Dougherty comes

Mike Shlisky

it Are is are out know problem? know companies maybe some straight the with what's dive some want there on issues what's business. kind of downstream thoughts other the there do given give that in Just some logistics? there there? can there pricing? there of buckets it challenges. pricing any -- if I other you more you in a But Maybe going some still customer investment, is -- that’s up Are you and on undercutting of of guess us CIS kind customer maybe in that’s -- of to that first is you thematically, behind one I

Tom Burke

those starting some just with And covering let question. points. me of kind Great colour give

relationship this okay. is great with absolutely off a customer, First there

Our in servicing super teams and have them. of constant We're done supporting in job communication.

build-outs, a that a that have a the the this is think peak in is customer. that fiscal to been program build always lumpy them we supports had, this dedicated back, clear -- had you from kind on of had year. if we’re a business We've we on us beginning, they've happened fiscal year out what weekly in basis. capacity like. in capacity going low What's looks that said We for ‘XX it some They comes with of blurred team a which and

year mentioned, a I the to impact it's come that's that. As next fiscal in and strong going while, really have we for to an think going back following

problems far no commercially, or have As in with and service undercutting support our established -- them, not as no, entrants made that relationship, on share new okay, and we pricing, we or clear. us. coming It's

So right adding that capacity just orders we for their utilized capacity. build-out and they're more now, low-end build-outs they anticipate capacity their half further before started on waiting the more for

the market very is more. the Saying brought diversifying from with HVAC, them another diversification provider. growing, that, improving focus with generating, going standpoint. And taking, in order new this The -- CIS that the structure, cloud to pleased I'm the but this services and is we we've to launch best did customer strategy of other resources putting land fiscal to organization single-year in intent the brought next this with with from not Building customer only of We which together work year year. search a and

grow about with just to the to lumpiness, live I'm have that more customer susceptibility build we than we're going the and nothing less concerned as to fact them. the see diversify and base there's we're yeah, So, other but

Mike Shlisky

reductions Can this last quarter. Thanks also come the not into ask that. a months to give you about action debt sure SG&A? might whether suddenly mentioned quarter when when might into us wanted in sense in to have I various us some incurred and Okay. few as it. And COGS, and timing be be past of I'm those what the cost can you be what you might as give some sense maybe hit? the to for might

Tom Burke

cost as I'll take let we we've see Mick to of basis on making focusing let adjust markets. and start than that me that very the we we’ve -- some We've adapt pressures aggressive -- going here. forward to what seen our last it these Well, from in quarter in sure stated been

let meet So colour other kind million little across anticipating to we've $XX detail to had procurement and plus cost-focused see out. our mentioned were that in rolling more I significant things reduction Mick that that of to that driving and a that in on businesses million. logistics give $XX target in in how of force we I'll

Mick Lucareli

we Yeah, million were savings, reductions the total we $XX our in in people targeting savings that January. Tom and cost began Mike, about referenced,

well we severance $X far our evenly run rate do charges, right rate. million. $X million, and way on in We've run costs million around savings of are quarter and the goods here to And $XX the $XX rate of cost $X about that. And on that had split a so to cost savings so million SG&A. million run It's between about then severance of fairly talked

Mike Shlisky

prepared Okay. the a Great. auto get more also couple your mentioned that quick, remarks. I real separation few in clarifications you on to wanted and of had things a

putting this It's that. few in targeting more in be to your that business, of to least ask, did financials that the separate you some can and fiscal two the might in auto you say currently into there sounds in like clarify sense I very business? most new you as two sell be your also It not wind to you'll the number numbers, First, to you're at have how maybe starting SEC the want were you more And going precede sounds earnings going one process parts of -- you to you to to the the separating this fiscal are XXXX? auto quarters actually curious like if as are the XXXX -- in down business? third, kind officially pursuing -- then if Or other? going of be sales business? your results be a of or you’re some I close it than wanted secondly, of EBITDA that portfolio

Tom Burke

Okay.

I'll because the over concerns because challenges are But, and Mick to the concerns some roughly one business. was that rate. We different there pull more EBITDA Through of and that to run everything and backing everything was - some sell that up, complete announced So still plug, auto the in take here. back as ago we've got to there year process as three strategy elements million. found our yes, the just same. to we a far that be market out that only the $XXX to turn automotive, is others. is And the to process is some we're questions business and in come when and globally, three, so that than decided January going we end to of value looking the at how because are

Our focus segment. long strategic to leave know that automotive term sell we the want and business - we

the there been auto. but the train or cool back. engine an products business, and didn't we'd go what kinds module cool detail, business, brought groups is looking technical the front natural at are in power liquid really into of we've And of there's And So and car. perimeter typically two air call it - cooling inside related of which we there's I the

buyers have either way. in Our potential interest

separate to looking divesting at processes. and those So that they're --and we selling decided splitting in

business mentioned -- looking of we we portion that their that engaged separate have with. have part timeline separate quality the a call mentioned come process as divesting opportunity we into from is dealing positive make with and we're to of with of it, a those we're the complete that but other segment, we We potential underway. go I finish pool, at will process approach then And that expect that well. And a that first all But we to that we're buyers set timeline one a now, place to focus that in I of with that buyers and couple, fashion the months the We in potential there on months wanted to of quality it the right higher Timeline, out actively a So as we're engagement a take we the to the high and business, that value okay, be in split not process an is of I to this line. want proceeds engage see where next several to is that putting maximize next the that buyers approach. liquid that. there. couple process feel sure

potentially with side, to with, engage how moves other the we'll on from communicating that On forward be and we're buyers there. working

general of again, we to handle I’ll EBITDA question. the that's picture are. So, what kind And let the Mick of

Mick Lucareli

margin, Yes, single to around use X%, Mike, within is in mid there's the EBITDA of Tom challenged auto, the there specific of what are and significantly VTS and over probably within use margin significantly margins, leave totality higher auto would more I total and digit is Auto standpoint, I said and can below business disclosed years. broad the segment we of from business a capital of last VTS we've then user within in the is VTS well average. total and and as there, say largest But there down, largest a numbers. margins it's helpful, total I'll I we it. look, as guess, a margins. But auto as we year, share, been costs think EBITDA restructuring more there, segment’s below haven't a spectrum and this pretty fiscal five the our the last require, was But are VTS has broke

a forward. see intensity divestiture, and needs going business capital we that improvement post less only not the for but So auto margin

to know Tom, add want anything. you I if don't

Tom Burke

demonstrate And to period and term It's show mentioned it's can post have what during I enhanced important. we’re off think I segment as that like us and it allow starting year. we we I and used will look next -- that Yeah, that walled transparency the important, reporting doing divestiture. far the as exit the

when very to looking really that walled we're is basis shareholders be that's our show important a I'll -- what we're transparent shareholders the can think of process. kind to companies going We I call We'll to this that is what semi this pro our done look say divestiture off; on want it informed When element divesting. strategy. at are like keep you process. forma of to with

Mike Shlisky

now. Okay. Thank you. pass for along I will the more. back I'll it some hop I've in got queue.

Operator

D.A. from Next with Summerville question Davidson. comes Matt

Matt Summerville

Thanks.

Just the CIS on a follow-up business.

the executional to yet You sort the how genesis I of relative R markets. you've underlying to the is still business in And you HVAC to side you talk stabilized the curious see performing operational or guess piece. Do your is that market question some through of feel business share come? the is I'm commercial center data more on is feel had challenges. that

Tom Burke

And it's I good definitely a feel question. stabilized. It's

a We with whole operating both the the key new key focus that inside of and in leadership side. business have customer-facing positions the on business overall and growing bringing

on are finding delivering executing -- what we're the large timing, on customers and And both me, efficiencies with we cost, side distributors on has attack is side customers. and our performance that represented met pricing. market-facing focused on key So operational which and to all those we're on how excuse also on and both but going delivery the our on this delivery, with is we team to -- performance timing very the important and that besides small

actions. while is these position that at to margins feel we implementing I -- So of our holding improve share the and expect definitely all

next of customer stronger in customer other we’ll Our 'XX mentioned, anticipate customers and what the with large give two targeting have the XXX course, that shooting target We is with in XXX-basis-point improvement the in orders a again, timeframe as kind growing sales we're to that quantify for. from focus a we to the years the center data back plus. bounce we're business. you And included fiscal of

Mick Lucareli

been impacted RV The in other Matt on and that is also category us side sales, quarters specifically, thing couple transportation has really the broader last side. the refrigeration in has that the

category broad key RV. I people we know, two then look a a And community HPAC broad of that very of lot But the industry and as share So we statistics. specifically, see loss. transportation, on and have that business that in we and, at got top particular don't customers refrigeration

Tom Burke

of needs transportation driven just And now with right some right similar goods. refrigerated demand capacity for goes along that's to purely by as hand in truck is capacity with market refrigerated

Matt Summerville

has and is historical what remarks. be is you forward? expectation -- in then of the your XXX practice, part, in margin comment get pricing the Historically side, XXX speaking, made bps to been on -- How order to prepared the just And in back discipline HVAC a lack and should historical to important moment commercial what business? what get to for? just maybe a of then that price the has going the price just that you're ago And this looking R improvement bps and

Mick Lucareli

portion a it. it's mean I Yes, of

that based Right and sell on rules kind a portion exclusive of represent and I to with think follow towards are approach an discussions and bidding to us through that we that of the the business our had basis, discipline now, those new we've we're representatives the needs improve. business. good discipline going

to XXX, It's there But you’re with a want all some we're So see together directly. is is say I to but portion the improvement how factors to XXX, going I gunning go of think And hand, which for. of discipline. coiling I pricing don't talked other will that I hold is part what clearly hand much, about to want pricing so two time, quality, making a we okay, deliver that key in that think. we that point, of on on the sure portion a

-- one one pricing well as improve we’ll will as setting. besides other help discipline we over So the on the fix

Matt Summerville

to how million, being in Thank realized how realized Mick, of And buckets versus $XX is $XX follow-up what people-related that I the million cost fiscal mentioned you the a embedded be in are the should you in to million. get out to $XX as savings ‘XX? of then fiscal out sort then maybe million the you. much about Can your $XX And question, ‘XX think, talk of there? other $XX you major much million

Mick Lucareli

great Yeah, question.

on procurement it all our the some indirect procurement on and targeted a specifically activities process initiatives new mentioned $XX of a And to next into in call question spend. fiscal team, this -- four and we catchall. buckets, -- should the some would this be the next year, biggest five on million of the pricing, major The manufacturing the plus, year. bit, million Tom and in flowing the other. two then is targeting out million number got out obviously, largest the side to basket to balance VAV would and catch just improvements, would of focused there's of There then, procurement I year. fiscal about have balance we've little $XX the then a and of balance, --majority about of in year, $XX balance there's So The we're be heavily to your

Operator

Next question Baird. comes from David Leiker with

Erin Welcenbach

Welcenbach is morning. Erin This David. Good for on

Tom Burke

Erin. Hi,

Erin Welcenbach

terms seen I revisions your question So seems we've vehicle guidance of to continued kind the like have in changed. build my markets related is schedules. in know commercial first of downward it been the

quarter. wondering, any So a just process schedules causes what and restructuring maybe your seeing that actions? market well But last via that communicated you're was there that the continued for additional of need kind build downward in in revisions if perhaps customer

Tom Burke

studied the team as those this We think we got customer stable we're both American for least as being that about forward and We this what being about truck in North pretty we've at feel what is conditions is see, far market forwards far going we've outlook down down. last we've down from through. overall, feedback that data, expecting feel down where it's call. the XX% Well, going 'XX, we Europe, XX% mediums thing our underneath But as projected X%, backwards market on going analytics to we're as projections. that

we right sitting improvements, now we're going So We'll it's but back my stay 'XX. some at position at we've the ourselves to got depressed as mentioned the maybe we of rate in run seeing we start comments, the I prepared think half opening for. that calendar that think

Erin Welcenbach

time this right leadership CIS just why to the Okay. to HVAC then switching guess that? kind and this Any make Building between of is colour of combination you segments. And kind on leadership can of That's now share I helpful. transition? guess the I

Tom Burke

both customer. in UK, on a And one team center centred teams very comments, data cloud, great question. major in the couple deep or and earlier. dedicated other out ago. around technical a customers course, a acquired announced Building directly concentration with I support it's contemplating the asset the globally did competency a really Yeah, brought that's established and focused The a which then, forward years set CIS winning our business business the HVAC that on that The winning and collocation region that been has besides business, up cloud with wasn't really previous been one one of in since CIS of but supporting other with provide has CyrusOne we've CIS, we to business that job their team great in what announced have and with provider sales hand they great the relationship. the the we But

American now with So to us service bringing opportunity great together those UK, competency is want an support North we Europe base, North under resources capability teams that UK and two single to geographically grow had team provides one augment team, the leader on that the the both to that America, in and customer. the is which focused sits we but in and again a the

be it of majority one So Vice UK we're that which technical and today. have bringing leader, But to -- way. HVAC And switching the that that talent of we're business control his our Building resources looking America again, to capability. provide to President the customers is the to under under of has CIS servicing we'll competency UK key same North going from

loss any or a of making not there's transition. transition that So in inconsistency

we review very and that customer the with it's and received -- well. So

going very I'm the So to generate. growth about excited opportunity this is

Erin Welcenbach

typical last an additional sales just trying to frame cycle cloud like then looks the my or And question, you pursuit conversion you kind customer? win thanks. when of can Okay, are what

Tom Burke

clarify -- pursuit more? could little a you The just

Erin Welcenbach

Yeah.

I that of really kind question in revenue? initial is conversation timeline of actually going guess to additional after what identifying in the terms the customer opportunities, is terms So of or into converting

Tom Burke

great question. a That's

at we're in years quote the to approach in. they fairly quickly. customer would people can happen XX that I from is couple new I they a experience my months mean months that think out to I base kind bringing U.S. where to probably So building the XX want of with cycle, this looking of say. within project job go new And one

in nothing order we've production. automotive received clear lot vehicles you engineering So commercial in front There the cycle And proven let's and both that. manufacturing the say the the a sales to message sides. that and the is front or had support of it's and quicker to of capability you’ve is front clearly like is pursuit

We consider you. will

Building quickly. So teams in we’ve the that America support that bringing North leveraging opportunities HVAC capability is with broader -- global CIS new

think. your question. make did, answered so So Erin, that sure I I I

Erin Welcenbach

you. Thank Yeah, that was exactly what I was looking for.

Tom Burke

Okay.

Operator

Mike have from a Shlisky Dougherty Company. with question Instructions] & [Operator We

Mike Shlisky

Thanks guys for follow-ups. these

ones quick a here. couple Just

the week on-highway was that last it buy in customers the offer made has of your announced First an major to one world. other

if Navistar's of an or could a and for once opportunity of Volkswagen's truck about feel it you they was combined? you truck do usual might be been us little it's I bit them and with business combining wondering already So both tell kind pretty well business as view business you entrenched when your

Tom Burke

we Yes, answer. your was you a about exactly good very and question because answered feel no, point that's that the one great

they the with engaged announced good deeply which we've with ago, the pursuing business have now and relationships and time business with that engage both which very We groups. been groups procurement both some significant initiative is first,

a award to other we’re position leading So were I supplier we panel. from Navistar about year that’s announced a in winner pleased great to their last that established in that -- team. very and I'm in diamond engagements feel our hear We've

to from So expect demonstrate that and can we that established a opportunity positive help there’s think both company supplies impact groups global this is an with we that.

Mike Shlisky

so issues wasn't you've it Asia, there the the has of that virus, Corona then, the And which Okay. you seen changes far? that describes month. of kind it's discussions any in your China Can topics one comment been -- in operation or mentioned on of or maybe and

Tom Burke

we materials where timeline partner at through inventory we we’re in we looking out to fiscal both kind today that most could impacted with supplier, anticipation thus leadership important. chain And going disruption We year. I'll mention is is all have I that the of if we're is think get procurement potential not have think disruption of some seen that's one -- what as far to our continuity through -- supply mitigation can of by any and we by risk that's doing that sit be what our

we're We've approach process have do assessing information so we what our customers. working both looking and mitigation. opportunities, risk can second suppliers letters so customers that with sent disruption, to that source options if -- at see we’re looking we our And we're this with

I up may way. well set come So we're think is demand what our

our holiday for is ground, XXth you waiting things to people physically post return the know shut pretty in Year to much down as February till work. for the and what are Chinese government, we're happening plants On New Chinese okay, the by

how people see going Monday, it's a to to okay. to get big portion on many So be work

how we'll And to customer up is and base up what course, of be running that our degree, as running and well. of so we're and much then, anticipating

much the and they how they're workforce shows Monday, we're seamlessly impact question forward. will we start way. I can't is. Monday home, next get set -- there they look operating now But our of restrictions I leadership we've to if that our, team as in much say, from work to an and think right of demonstrating because up But let's on China week think our sure now, on that people how just our to make So up have laptops they and working our right that is got customers ops that on

So we've it work develops. the for done all let's come prepare and I that may for -- to as therefore be feel prepared whatever at

Mike Shlisky

Okay.

a to at to world, lease to here one guess, customers on as new data visit last against kind these I costs large the is out low extra protected on can't you that business question the new get And one the potentially to by them sell you lot have product And in IPE? or design? to throw that are there? leverage are those me really of that broader bring engineering customer customers you're have centre centers. other quite data guess outset current of and pursuing in Let folks. Or I you designs trying that

Tom Burke

margin. we're say the I'll pleased first with Well,

last start the work So and forward. with let's

look We're So it's billion it. a market market. and we large about targeting $X at

of kind We’re and broken an cloud, three the smallest. enterprise being categories, enterprise, collocation into

and on so cloud specifically. focusing we're And collocation,

in from question place that proven capability is the earlier and capacity important. Baird have that you the upfront resources as is far demonstrates representative As right

we provider. new So out by I UK think example, that we're with well the positioned cloud as pointed just business weren't in in one I

capability to So of capacity kind that. the that we demonstrates the do have

as up far what's not swelled depends technology As customer. and by what's and

course, and the them we'll customers may we that's a and development this. have that. some IP leverage work with IP, direct we'll Of In cases, to very their engaged in support we other be support

technical competency in capacity, teams engineering base Building supported CIS, by in US America. North the a deep HVAC we have the UK So in both in in

leverage can leadership. the So think we we

and We are to transferring customers UK collocation the in -- capability key [Indiscernible] firm. establish its the to help over is develop that here that that -- strong these specifying engineers strong that self The relationships U.S. computing firms build on build that cloud the computing relationships via just that support both specifying depend

leverage leverage And at We to have market what that's kind advantage world. that that relationship can very good we are of around would we capabilities the global There that level. have say, I a companies this. key that

Operator

no showing questions I to the turn Kathy at now time. further like this back Powers. would am to conference I

Kathy Powers

have of everybody A us a Thank you. this will I replay call a Thanks hours. hope day. of for our couple in morning. great be joining website through available this

Operator

this today's Ladies for gentlemen, call. participating. Thank and concludes you conference

may You now disconnect.

Modine Manufacturing (MOD) 5 Feb 202020 Q3 Earnings call transcript