Zebra Technologies Corp Q1 FY2020 Earnings Call

Good day, and welcome to the Q1 2020 Zebra Technologies Earnings Conference Call. All participants will be in a listen-only mode. After today’s presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Mike Steele, Vice President, Investor Relations. Please go ahead.

Before we begin, I need to inform you that certain statements made on this call are forward-looking and subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations and assumptions and are subject to risks and uncertainties. Actual results could differ materially due to factors discussed in our filings with the Securities and Exchange Commission. During this call, we will make reference to non-GAAP financial measures as we describe our business performance. You can find reconciliations of our GAAP to non-GAAP results in today’s earnings press release and at the end of this slide presentation. This presentation will include prepared remarks from Anders Gustafsson, our Chief Executive Officer; and Olivier Leonetti, our Chief Financial Officer. Anders will begin with our first quarter results. Then Olivier will provide additional detail on the financials and discuss our outlook. Anders will conclude with opportunities to advance our Enterprise Asset Intelligence vision and trends we are seeing in our end markets. Following the prepared remarks, Joe Heel, our Senior Vice President of Global Sales, will join us as we take your questions. Also, throughout this presentation, unless otherwise indicated, our references to sales growth are year-over-year on a constant currency basis and exclude results from the recently acquired Cortexica, Temptime and Profitect businesses for the 12 months following each acquisition. This presentation is being simulcast on our website and will be archived there for at least one year. Now, I’ll turn the call over to Anders.

Thank you, Mike. Good morning, everyone, and thank you for joining us. First, I would like to say that our top priority at this time is the health and wellbeing of our employees, customers and partners. We are grateful to all of the frontline workers, especially those sacrificing their personal safety, so that all of us can continue to live and work safely through this challenging time. Those on our customers’ front lines are heroes serving in hospitals, grocery stores, delivery vehicles, warehouses and other parts of the central supply chains that help keep our lives as normal as possible. Many Zebra employees are also on the frontline supporting the build and repair of products and solutions that are essential to our customers, doing their jobs safely and efficiently. To all of those heroes, we say thank you. The financial results we published this morning reflect a challenging first quarter environment. We realized a net sales decline of 1%. Adjusted EBITDA margin of 19.1%, which contracted by 200 basis points and non-GAAP diluted earnings per share of $2.67, a 9% decrease from the prior year. We had a strong start to the year and January and February generally played out to our expectations; however, late in the quarter as COVID-19 evolved into a global pandemic. We experienced significant supply chain disruption including product manufacturing delays, restrictions on transportation of goods, and a temporary closure in late March of a key distribution center supplying the Americas. We took extraordinary steps to produce and supply our mission-critical products to customers around the world. Our team was agile, pivoting our resources quickly to closely monitor the situation and take bold action. For example, we chartered planes to expedite product delivery from China to North America and Europe to meet customer commitments. Despite best efforts, we were unable to completely fulfill our order book in the quarter, resulting in a high backlog as we entered Q2. Production in China is now returning to normal and we have stabilized our global supply chain through mitigating actions. In addition to the supply chain challenges, we saw softer demand through the channel globally and China sales were very weak with COVID-19 exacerbating trends that had already been soft due to trade tensions. However, in any environment, enterprises worldwide utilized our solutions to address the evolving needs of their customers. In this changing environment, our solutions have become even more necessary for our customers. I would like to highlight a few notable Q1 wins supporting critical use cases in omni-channel, e-commerce, and healthcare. One of the world’s largest mass merchants purchased 40,000 of our ZQ6 series mobile printers to address a number of front of store use cases, including online store pickup, pharmacy fulfillment, and shelf tagging. Additionally, we deployed several thousand TC5 series mobile computers to a large e-commerce player in Asia. This follows our competitive takeaway win last year of their printing and scanning business. With COVID-19, this e-tailer’s demand is growing exponentially. They have been hiring staff and we are working with them on additional solutions. In healthcare, we supported the NHS Nightingale temporary hospital in the UK. We provided installed solutions supporting the identification and flow of COVID-19 patients. Nurses at NHS have also been using our TC5 series healthcare mobile computers to arrange virtual visits between patients and their loved ones. As expected, transitory effects of tariffs and expedited shipping expenses weighed heavily on Q1 gross margin and EPS. We have taken decisive actions to mitigate this impact, which drove operating expense leverage, despite lower sales volume. We continue to remain agile and take appropriate action as results are pressured due to these challenging macroeconomic conditions. With that, I will now turn the call over to Olivier to review our Q1 financial results and discuss our outlook.

Thank you, Anders. Let us walk through the P&L on Slide 6. Net sales declined 1.3% in the first quarter, less than 1% on an organic basis before the impacts of currencies and acquisition. The COVID-19 pandemic caused supply and demand impacts to our consolidated sales growth of approximately seven percentage points. Despite our sales decline, we believe that we generally performed well in the market globally. Our Enterprise Visibility & Mobility segment sales were most impacted by the COVID-19 disruption and sales decreased 2.9%. The largest supply chain impact was the temporary closure in our North American distribution center that Anders referenced, which delayed shipments of mobile computers into the channel. Asset Intelligence & Tracking segment sales increased 3.2% with relative strength in printing and Zebra retail solutions. We saw solid growth in managed and professional services across both segments of the business, primarily driven by solid attach rates on increased product sales over the last 12 months. Our Locations solutions business was lower due to a pause in project spending. Turning to our regions, in North America, sales were flat, with declining mobile computing due to COVID-19 supply chain challenges offset by growth in all other major categories. EMEA sales increased 7%, with relative strength in mobile computing, printing, and services. We saw particular strength in Central Europe. Sales in our Asia Pacific region declined 21%, driven by COVID-19 impacts on top of continued softness in China due to trade tensions. China was down 35%, driving most of the overall sales decline. Latin America sales declined 11%, led by lower mobile computing sales, largely impacted by supply chain disruption. Adjusted gross margin contracted 200 basis points to 45.2%, driven primarily by List 4 tariffs and expedited freight as well as an unfavorable large order mix. Adjusted operating expenses declined $5 million from the prior year period and improved 10 basis points as a percentage of sales. This improvement was primarily due to prudent cost management and lower incentive compensation, partially offset by the inclusion of expenses from recently acquired businesses. First quarter adjusted EBITDA margin was 19.1%, a 200 basis point decrease from the prior period driven entirely by lower gross margin. We drove non-GAAP earnings per diluted share of $2.67, a 9% year-over-year decrease inclusive of a $0.17 negative impact from the transitory effects of tariffs and expedited freight expenses. Turning now to the balance sheet and cash flow highlights on Slide 7. We generated $95 million of free cash flow in Q1. This was higher than the prior period, primarily due to lower use of working capital. We repurchased $200 million of shares in Q1, leaving $753 million of remaining capacity under the authorization. From a debt leverage perspective, we ended the quarter at a modest 1.5 times net debt-to-adjusted EBITDA ratio. Turning to Slide 8. We are well equipped to navigate the unprecedented global environment that we are facing. As I just mentioned, our balance sheet is in excellent shape with low debt levels and $740 million of capacity under our revolver. We deliver mission-critical solutions across increasingly diverse end-markets. Our capital-light business model has a highly variable cost structure due to our outsourcing of product manufacturing, driving the vast majority of our sales volume to third-party distribution. We also have a strong free cash flow profile with a flexible cost structure and capital expenditures typically less than 1.5% of sales. We also have a track record of preserving profitability and cash flow in challenging times. We use a playbook to take appropriate actions in various scenarios, preserving capacity for investments in the business that improve our competitive position. Let us turn to our outlook. Given the low visibility due to COVID-19, we are withdrawing our outlook for full year net sales, adjusted EBITDA margin, and free cash flow. We now expect these three metrics to be lower than last year, which we will address through cost actions we announced concerning our profitability and cash flow. Q2 and Q3 are expected to be particularly challenging quarters based on macroeconomic forecasts, independent market research, and feedback from our partners and customers. In this uncertain environment, we have done extensive scenario planning and identified many operational and financial levers that we can pull. It is imperative that we stick to our principles of acting swiftly to preserve profitability while doing no harm to the business to reinforce our culture. This enables us to prioritize strategic investments, so we are much stronger than the competition as the market rebounds. As Anders mentioned, we entered the second quarter with a strong backlog driven by temporary supply chain disruptions from the pandemic. As the virus has spread, end market weakness is affecting all of our major geographies across the globe. The impact is more pronounced in our run rate business through the channel as third-party distributors are calibrating inventory levels. Given these pressures and elevated uncertainty, we expect net sales to decline in Q2 between 11% and 17%. This outlook assumes an approximately 50 basis point positive impact from recent acquisitions and an approximately one percentage point negative impact from foreign currency changes. We believe Q2 adjusted EBITDA margin would be between 18% and 19%, which assumes lower operating expenses and lower gross margin reflecting a $5 million impact from List 4 tariffs and approximately $9 million of costs to mitigate supply chain disruption from COVID-19. Collectively, these transitory items, I expect to impact margin by approximately 150 basis points and EPS by $0.22. Non-GAAP diluted EPS is expected to be in the range of $2.10 to $2.50. Please reference additional 2020 modeling assumptions.

Thank you, Olivier. Slide 12 highlights how we are enhancing the value proposition for our customers. Our solutions are even more critical today than ever as we empower frontline workers with technology to do their jobs most effectively. Industry-leading companies trust Zebra to equip their workers and facilities with the solutions that bring their mission-critical operations to the next level. We are uniquely positioned to address this challenge because we have a deep understanding of workflows and unmatched access to frontline operational data from our vast installed base. We can address big global problems such as ensuring food safety across the supply chain or more localized issues like increasing bed turns in hospitals, modernizing distribution centers to satisfy e-commerce demands, or ensuring that retail associates and store inventory are optimized to maintain product availability. We have been bringing our Enterprise Asset Intelligence vision to life for our customers. We are doing this by enabling them to identify their assets through barcode, RFID, and computer vision. Locate their assets with our vertical-specific solutions and understand their condition, such as temperature, trailer capacity, and device security, so that their frontline workers can take the best next action in real-time. Methods for sensing, analyzing, and acting on operational data from the frontline of business have undergone massive transformation in past years as the on-demand economy has taken hold. Inefficient manual processes have evolved into workflows that are augmented and enriched by purpose-built technologies, including hardware, software, and intelligent edge solutions that bring it all together. Businesses are now demanding information about what is happening at the edge of their operations so that they can run their entire operation smoother, safer, and smarter. They generate large volumes of data and are uncertain how to take all those disparate points of information and effectively put it to work in near real-time. We have been investing in software solutions and services that help our customers leverage real-time data to better orchestrate their workflows and gain a performance advantage. Investments in advancing our capabilities in this area remain a top priority. On Slide 13, we highlight the primary vertical markets that we serve. Exciting longer-term growth remains, and new ones are evolving as customers in these markets are pressured to improve their technological capabilities in an increasingly on-demand economy. That said, we are seeing mixed trends in this challenging environment depending on the subsector. Many of our customers are deemed essential businesses, while various others may be temporarily closed. In healthcare, the pandemic dramatically increases the need for additional acute care capacity, which is the primary area that we serve. Our suite of purpose-built healthcare solutions are enabling pop-up hospitals, drive-through testing facilities, and labs to scale quickly and provide safe and efficient care. Other parts of healthcare have seen a slowdown as government mandates in many locations have paused noncritical care and elective procedures until further notice. Approximately two-thirds of our business in retail is with mass merchants, grocers, and e-tailers who serve essential customer needs. Many retailers rely on our technology to execute their omnichannel fulfillment effectively. E-commerce and Buy Online Pick Up In Store transactions have increased as more consumers navigate purchasing from their homes. However, social distancing and stay-at-home orders are further impacting department stores and certain apparel retailers who are heavily reliant on in-store purchases. In the transportation and logistics space, increased online purchasing from households is driving incremental parcel volume and delivery, which drives increased demand for our solutions. Conversely, government-mandated restrictions are severely pressuring passenger airlines, rental car providers, and certain segments of the distribution industry. The manufacturing sector has been challenged with global trade tensions and is facing additional challenges today as stay-at-home orders have deemed many discrete manufacturers, such as auto, aviation, and specialty goods, nonessential. That said, some of these customers have responded to their idle operations by producing medical equipment like ventilators, utilizing our solutions. Many segments within process manufacturing, such as food and pharmaceutical companies, remain essential and are less impacted. In closing, we are confident that our business fundamentals and strategy are sound and that this crisis will not last. By focusing on serving our customers’ needs and continued investment in innovation, we expect to extend our market leadership position as the market rebounds. Now I’ll hand the call back over to Mike.

Thanks, Anders. We will now open the call for Q&A. We ask that you limit yourself to one question and a follow-up, so that we can get to as many of you as possible.

Thank you. We will now begin the question-and-answer session. And today’s first question comes from Andrew Buscaglia with Berenberg. Please go ahead.

Hey, guys. Thanks for taking my question. I wanted to touch on your Q2 sales guide. You had a good backlog into the quarter, and it seemed as though your North America sales seemed to be okay this quarter. So I’m wondering, is this just a function of your backlog? And beyond that, is there a concern you just haven’t quite seen the effect of this hit other regions outside of Asia?

Andrew, good morning. We have today a lower visibility of the business due to the impact of COVID-19. We are essentially pegged as a business to the economy. A lot of what we see in Q2 is uncertain regarding the length of the stay-at-home orders and also the impact of various stimulus packages, either current or to come. If you study the company over the recent past, we have a history of rebounding quickly when the economy restarts. Now when it comes to Q2 specifically, the impact we are seeing today is primarily due to COVID, but we believe we have a strong competitive position. For example, in Q1, we gained market share. We entered the quarter with a strong backlog, and we are seeing today that the top line impact is mainly pronounced on run rate business, which is part of the business going through distribution. Our distributors and partners are adjusting inventory levels accordingly. But we believe we have a strong value proposition that works well in good and bad times, and we’re going to be ready to manage this downturn, Andrew.

Okay. And then your guidance for EBITDA margin. I think it was a bit ahead of where some people were expecting. Directionally, is this a function of your gross margins being up sequentially? What’s really behind that margin guidance?

If you look at the midpoint, the EBITDA margin will decline year-on-year by about 270 basis points. Of that, 150 basis points is due to one-off items, either associated with tariffs or associated with managing the pandemic, primarily impacting freight expenses. The balance is a loss in margin due to run rate mix. Today, if we disaggregate revenue between bid and run rate, run rate margin is much higher than bids, and we have seen run rate revenue declining. However, the margin profile for run rate and bid has been increasing sequentially now for a few quarters. The profitability is impacted by margins, and a large proportion of that impact is due to tariffs and COVID. From an OpEx standpoint, we believe we are going to be able to retain OpEx as a proportion of revenue constant or relative to last year.

Okay. Got it. Thank you.

And our next question today comes from Paul Coster at JPMorgan. Please go ahead.

Yes, thanks for taking my question. I’ve got two. The first one is, can you give us your latest thoughts on the USPS projects? And I know as we throw the second question in now and that is, it sounds like you expect the channel to destock. Is that a 2Q phenomenon in the guidance? Or do you think it will take more than one quarter for them to do that? And can you quantify that in any way?

Yes. Good morning, Paul. I will take both of these. First, on USPS. The USPS contract continues as per our expectations. As we’ve talked about before, this is a multiyear contract. We certainly feel proud of it; it is the biggest in our history and highlights the strength of our value proposition and relationships. Our teams continue to work very closely with USPS, and there are no expectations or signs from our side that this will be pushed out in any way. We do expect to begin ramping up deliveries in Q2. Most orders are expected to deploy by the end of 2021 as backend timing is gated by when U.S. carriers stop 3G service. We have received new orders beyond current orders for an additional 30,000 units, so our business with USPS continues to be strong. The other one on destocking the channel, currently our distribution partners are holding a normal days-on-hand inventory. We don’t see it being high or low; it’s normal. We tend to see early in downturns that when sales go down, they adjust their days on hand, which means they don’t have to buy as much in the short term. We are assuming there will be a reduction in the run rate for our distributors and partners.

And our next question comes from Keith Housum with Northcoast Research. Please go ahead.

Good morning guys. Anders, you are one of the few who’s been around since the great recession back in 2008, 2009. Can you give me some of your thoughts on how your customers are responding now? Is there that same level of fear now that you had back then? I think we understand how your business has changed, but what was your interpretation of how the customers are reacting?

The drivers for this crisis are very different from those of the 2009 crisis. Our customers today are probably not as fearful. It very much depends on the specific vertical or sub-segment of the business you are in. In 2009 every customer had concerns about liquidity, whereas today, some sectors are thriving while others are struggling. If you are a mass merchant, grocer, e-tailer, or in healthcare, you are doing well; you are very busy. However, if you are more of a brick-and-mortar retailer selling apparel, you may have had to shut down all your stores. When work-from-home orders started, it took our customers two to three weeks to reorganize their operations to adapt to new working environments. They were focused on ensuring their operations continued to run. However, in the last month, they’ve begun to engage with us on both current and more future-oriented projects. I don’t perceive that our customers are as concerned overall with how long this will last; they seem to have a bit more confidence.

Got it, thank you. Can you clarify again what percentage of your business you think has done with essential customers?

We didn’t specify this for the entire business, but if you look at retail specifically, around two-thirds of our business goes to mass merchants, grocers, and e-tailers, which are all deemed essential. In healthcare, we have a majority of our business tied to essential activities related to acute care. We have been involved in pop-up hospitals and drive-through test facilities. Other parts of healthcare have seen a slowdown as government mandates have paused noncritical care. In transportation logistics, while I cannot provide a specific percentage, much of that business is also a part of the essential economy, ensuring that supply chains work from pharmaceuticals, to food, to e-commerce. The last mile of delivery has seen increased demand with more deliveries to households. However, aviation and some auto-related businesses are under a lot of pressure. Finally, many process manufacturing companies, like food and pharmaceutical companies, remain essential and are less impacted.

An additional point, Keith, is that we believe the current situation will actually accelerate the secular trends we are servicing: e-commerce, tracking, and digitization of workflow. We expect those trends to become even more important going forward.

To that point, we see that our solutions have become more necessary for our customers as we empower frontline workers across all end markets. These are the people who cannot perform their duties from home. They have to be in hospitals, grocery stores, or delivery trucks. This crisis is helping to accelerate trends around digitization and automation across industries.

And our next question today comes from Jim Ricchiuti with Needham & Company. Please go ahead.

Hi thank you. Good morning. I had a question on – Anders, maybe I just wanted to go back to your comment about the haves and have nots, and Slide 13 where you talk about some of the essential parts of the business in terms of vertical channels. Is it fair to say that the essential components, whether it’s retail, e-commerce, healthcare, that that’s been a net benefit in the first half of the year? Or put another way, would you expect that potentially we’ve seen increasing investments in those areas that may fall off in the second half, in addition to any recessionary pressures in traditional markets? I’m just trying to get a sense as you can’t give guidance for the full year, but I’m just trying to feel how that essential business might change from Q2 to Q3. I think you alluded to Q3, Olivier, being a particularly challenging quarter.

We’re going to stop short of trying to give real color on guidance for the full year. But I would say that we do not expect a long-term change in how we operate or how the world operates; it is more of several quarters activity. We do expect to impact Q2 and Q3. Depending on how quickly the world rebounds, we will follow accordingly. Our benefit is that we are a robust and diversified business across product lines, vertical markets, and geographies. Our value propositions tend to work well in both good and bad economic times. When times are good, customers are expanding and investing in the business, using our equipment to do that. In tougher times, they tend to trade OpEx for CapEx, looking for efficiencies. For now, many essential businesses are busy, focusing on scaling their operations, but may not have the bandwidth to leverage new solutions creatively. That will come when the world settles down more. Customers who have had to shut down their operations are being engaged remotely to see how we can help them drive more digitization and automation.

To add to what you mentioned, the concept of the haves and have-nots also applies within essential customers. In healthcare, there’s an acute focus on COVID-related activity with increased funding and attention, while elective procedures are postponed. In retail, we see activity around Buy Online Pick Up In Store; however, automation activities like certain showcased projects are being paused. The good news is we are not yet seeing a drop-off in confidence among those customers. They continue to engage with us remotely for longer-term solutions.

And our next question today comes from Meta Marshall with Morgan Stanley. Please go ahead.

Hi, this is Eric on behalf of Meta. Thanks for taking our question. Maybe just staying on the question of customer conversations, it sounds like for the most part you’ve seen some push-backs on projects. But can you help us contextualize how much could be potentially from scaling down of order sizes or if you have seen any cancellations?

So today, we’ve only seen limited push-outs. We have not seen any cancellations or scaling down of orders. The customers that have pushed out orders tend to be the ones that are not operating today; those have reached out to us.

Got it. That’s helpful. And then maybe just changing gears a bit. On share repurchases, understanding you aim to capitalize on the lower share price in the quarter. How should we think about the pace moving forward? Should we expect you to be more focused on cash flow preservation given the uptick?

We feel strong about the cash flow generation of the company. We believe we can protect the majority of the free cash flow of the company even during this downturn. The priority for cash allocation will focus on investing in the business, either organically or inorganically. We repurchased $200 million worth of shares, about 2% of our shares outstanding. So at this stage, we will be mainly investing in the business; buybacks will not be a priority. They are not totally off the table, but they are not a priority.

And our next question today comes from Richard Eastman at Robert W. Baird. Please go ahead.

Yes, good morning and thank you. Could you perhaps expand a bit on the supply chain issues that you had in the quarter? Maybe just speak to the Malaysian facility, which I assume was a subcontractor facility and had some closure? Is it up? And could you just provide a sense of how much revenue that may have impacted the first quarter?

I will start with this and then Olivier can provide additional details. Back in our Q4 call, we highlighted COVID-19’s impact on our supply chain, primarily on the supply side. China has largely returned to normal now. It took longer than expected, primarily depending on where our contract manufacturing partners were located. By the end of the quarter, our Chinese partners were working at over 90% capacity. We also tried to ramp up our Vietnam and Malaysia facilities, but timing was more challenging due to COVID. In Malaysia, the facility was shut down based on the imposition of martial law. The impact on Q1 was modest; we diverted and made the maximum push from China. Moving forward, we expect that supply chain issues will be largely behind us, although our Q2 guidance reflects some demand pressure.

I think we should commend our supply chain team; they have done an excellent job being agile and working in a dynamic situation to ensure minimal impact on Q1 and Q2.

Just as a follow-up question, are there any receivables or credit issues that you are monitoring within the current environment?

We are focused on working capital, especially DSO. So far, there are no particular issues. We feel strong about our balance sheet, free cash flow, and working capital. We want to use our balance sheet strength to increase the competitive position of the company, so we haven’t identified any credit concerns thus far.

One additional point on this: Our partners’ business is reselling our products, and if they can’t access our products due to supply interruptions, their business is at risk. This creates a strong incentive for them to maintain their payments and stay current.

Our next question today comes from Brian Drab with William Blair. Please go ahead.

Hi, good morning. Thanks for taking my questions. I was wondering first if there’s any way you could help us quantify the backlog entering the second quarter and maybe compare that to a typical quarter. Do you typically enter a quarter with two or three weeks of backlog, and have you doubled that? Can you provide context regarding this?

The size of the backlog entering the quarter was not out of the ordinary. It was slightly higher due to some dispatch center issues we mentioned. We had a shutdown for about a day at the end of the quarter, about $20 million worth in backlog. Nothing out of the ordinary.

The business continued to perform well through the first quarter, so order flow was normal. The $20 million we couldn’t ship out of the North America distribution center has flipped into Q2.

Okay, that seems smaller than I would have thought. Is there any other significant source of additional backlog entering Q2?

Nothing of significance out of the ordinary.

Okay. And then I was curious why that distribution center had to shut down? Was that a state-driven decision or was there an illness there? Do you see this as a potential risk with other distribution centers moving forward?

This was an outsourced facility, and there was a COVID-19 case, leading to a 36-hour shutdown. They came back and ran a little slower. We made drastic actions to ensure proper spacing and team arrangements to minimize the impact of any infection. Should something like that occur again, I expect it will have a much lesser impact than it did in Q1. The quarter was backend-loaded for obvious reasons. The supply chain started slowly but ended strong. Overall, we are confident that the risk from a distribution center perspective is largely mitigated going forward.

And our final question today comes from Jeff Kessler with Imperial Capital. Please go ahead.

Thank you. You briefly mentioned the three acquisitions you made that were not part of the original discussion. Could you just update us on whether you’re continuing to invest in them? If so, what role have they played or could they play later on in the year and into 2021?

I assume you are referring to Temptime, Profitect, and Cortexica. All three are performing well. Temptime is focused on visual time-temperature monitoring solutions, especially relevant today. We are in contact with organizations to ensure that we can offer our solutions to guarantee temperature-controlled transport of any future vaccines. Profitect focuses on prescriptive analytics using machine learning to detect anomalies in retail data. This capability is more critical today as retailers assess their store inventories. Lastly, Cortexica, a smaller computer vision company we acquired, is helping us expand our computer vision capabilities, particularly around our EMA robot and other solutions. They have been a great addition to our team with their skill sets.

Thank you. This concludes the question-and-answer session. I’d like to turn the conference back over to Mr. Gustafsson for any final remarks.

Thank you. Yes, I would like to thank our employees, customers, and partners who are working the frontline. We remain committed to supporting you through this challenging time. Be safe, everyone.

Thank you. This concludes today’s conference call. You may now disconnect your lines. Have a wonderful day.