Modine Manufacturing Company (MOD) 2021 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to Modine Manufacturing Company's First Quarter Fiscal 2021 Earnings Conference Call. (Operator Instructions) As a reminder, this conference call is being recorded.

各位女士、各位先生，早安，歡迎參加 Modine Manufacturing Company 2021 會計年度第一季財報電話會議。（接線員指示）提醒各位，本次電話會議將被錄音。

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

現在我想把電話會議交給本次主持人——財務、投資人關係與稅務副總裁 Kathy Powers 女士。女士，請開始。

Good morning, and thank you for joining our conference call to discuss Modine's first quarter fiscal 2021 results. I am here with Vice President, Finance and Chief Financial Officer, Mick Lucareli.

各位早安，感謝各位參加我們的電話會議，一同討論 Modine 2021 會計年度第一季的業績。我與財務副總裁兼財務長 Mick Lucareli 一同出席。

Last night, we issued a press release announcing a CEO transition plan which included the announcement that Mick has also been named Interim President and Chief Executive Officer effective immediately while the Board conducts a search for a permanent CEO. The Board is very thankful for the more than 12 years that Tom Burke served as President and CEO, and he will remain with the company in an advisory role until August 28, 2020, to ensure a smooth transition. The Board decided that this was the right time to make a leadership change and is committed to finding the right leader that will execute our industrial strategy and accelerate Modine's future growth. We remain committed to our current strategy, including the exit of the automotive business. The Board is confident that Mick and the rest of our senior leadership team will continue to execute against our strategic vision until that leader is in place. We will not provide any further details about the transition on this call but we will certainly provide updates as the search progresses.

昨晚，我們發布新聞稿，宣布一項執行長交接計畫，其中也宣布 Mick 已被任命為臨時總裁兼執行長，即刻生效，董事會將同時展開永久執行長的遴選。董事會非常感謝 Tom Burke 在超過 12 年期間擔任總裁暨執行長的貢獻；他將以顧問身分留任至 2020 年 8 月 28 日，以確保順利交接。董事會認為現在是進行領導階層調整的適當時機，並致力於尋找能夠執行我們的工業策略、加速 Modine 未來成長的合適領導人。我們仍將堅守現行策略，包括退出汽車業務。董事會有信心，在新任領導人到位之前，Mick 與其餘高階管理團隊將持續依照我們的策略願景推進執行。我們不會在本次電話會議中提供更多交接細節，但會在遴選進展時適時更新。

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

接著談本季表現。今天的簡報將使用投影片，各位可透過網路直播連結觀看，或至我們網站 modine.com 的投資人關係專區下載 PDF 檔。

On Slide 2 is our notice regarding forward-looking statements. This call may contain forward-looking statements as outlined in our earnings release as well as in our company's filings with the Securities and Exchange Commission.

投影片第 2 頁為前瞻性陳述之聲明。本次電話會議可能包含前瞻性陳述，相關內容如同我們的財報新聞稿以及公司向美國證券交易委員會提交之文件所述。

With that, it is my pleasure to turn the call over to Mick Lucareli.

接下來，我很高興把電話會議交給 Mick Lucareli。

Thank you, Kathy, and good morning, everyone. Although it was a challenging quarter, Q1 revenue and earnings were in line with our expectations, and the positive free cash flow was better than anticipated.

謝謝 Kathy，各位早安。雖然本季充滿挑戰，但第一季營收與獲利符合我們的預期，而正向自由現金流也優於預期。

From an operational standpoint, all plants have been opened since late May, but most are running at reduced capacity. All locations are following strict measures to protect our employees' health and safety including social distancing, wearing face masks and following enhanced sanitation protocols.

從營運角度來看，自 5 月下旬起所有工廠皆已復工，但多數仍以較低產能運轉。所有據點均採取嚴格措施以保障員工健康與安全，包括保持社交距離、配戴口罩，以及加強清潔消毒流程。

Also during this downturn, we're evaluating ways to improve our manufacturing efficiency. As a result, we made progress on several important operational initiatives during the quarter, the most important of which was the consolidation of the CIS manufacturing footprint in China. We expect this to be complete in September and provide immediate cost savings while still providing sufficient capacity for growth in the region.

此外，在本次景氣下行期間，我們也在評估提升製造效率的方法。因此，本季我們在多項重要營運計畫上取得進展，其中最重要的是整併我們在中國的 CIS 製造據點。我們預期將於 9 月完成，並可立即帶來成本節省，同時仍能提供足夠產能以支撐區域成長。

Another priority is tightly managing our CapEx spend as part of efforts to maintain positive cash flow. Capital spending was relatively low this quarter, and we continue to target a 25% reduction overall in CapEx spending from the prior year.

另一項重點是嚴格控管資本支出（CapEx），以維持正向現金流。本季資本支出相對偏低，我們仍以較前一年度整體資本支出降低 25% 為目標。

Strategically, we are moving forward with the automotive exit. We've spent a significant amount of time and money separating the automotive business last year in support of this strategy. Our automotive business is now successfully carved out as a separate reporting segment from what we are now calling our Heavy Duty Equipment segment, or HDE. As a reminder, HDE will focus on several heavy duty markets, including medium and heavy truck, bus and specialty vehicle, agriculture and construction equipment and power generation. Unfortunately, the automotive exit has taken longer than expected and was further delayed by the onset of COVID-19. I am encouraged as we have successfully reengaged with interested parties and we are progressing with a number of productive conversations. I can't provide a definitive time line, but rest assured this is our top strategic priority. In the meantime, we will be running the business to optimize earnings and cash flow.

在策略面，我們持續推進退出汽車業務。去年為支持此策略，我們投入大量時間與資金將汽車業務分拆。我們的汽車業務目前已成功切割，並作為獨立的報導部門，與我們現在稱為重型設備（Heavy Duty Equipment，HDE）部門區隔。提醒各位，HDE 將聚焦多個重型市場，包括中型與重型卡車、巴士與特種車輛、農業與工程建設設備，以及發電。遺憾的是，退出汽車業務所需時間比預期更長，且又因 COVID-19 的爆發而進一步延宕。我感到鼓舞的是，我們已成功重新與有興趣的各方接洽，並正推進多項具建設性的討論。我無法提供明確時間表，但請放心，這是我們最優先的策略重點。在此期間，我們將以最佳化獲利與現金流的方式來經營該業務。

On the growth side, we are reallocating more resources to our data center business. As discussed last quarter, we believe we can grow our share in data center cooling, which is a large and growing market. Our existing products in the U.K. and relationships with customers provide leverage for expansion into the European and North American markets. Ultimately, our right to win in these markets is linked to our ability to provide a full customized solution within our global footprint. Our goal is to provide our customers with the lowest possible total cost of ownership by maximizing system efficiency. With a clear strategy, prioritized tactics, we are looking to accelerate our growth plan over the next several years.

在成長方面，我們正將更多資源重新配置至資料中心業務。如同上季所述，我們相信可在資料中心散熱這個龐大且持續成長的市場中提升市占。我們在英國既有的產品與客戶關係，為我們拓展歐洲與北美市場提供槓桿。最終，我們在這些市場的致勝關鍵，取決於能否在全球布局下提供完整的客製化解決方案。我們的目標是透過最大化系統效率，為客戶提供最低的總持有成本（TCO）。在明確策略與優先戰術的支持下，我們希望在未來數年加速成長計畫。

Now let's cover our first quarter segment results. Please turn to Page 4. Sales in our CIS segment were down significantly in the quarter, impacted by COVID-related plant closures and the general economic slowdown. Overall, sales were down 27% with the largest drop to commercial HVAC and refrigeration customers. Please note that more than 20% of the sales decline in the quarter is related to 1 large data center customer. The pullback in data center construction is consistent with our expectations as this customer expects lower volumes to continue for the balance of fiscal '21 with a strong recovery next fiscal year.

接下來說明第一季各事業部門的表現，請翻到第 4 頁。我們 CIS 部門本季銷售大幅下滑，主要受 COVID 相關停工以及整體經濟放緩影響。整體銷售下滑 27%，其中以商用 HVAC 與冷凍冷藏客戶的降幅最大。請注意，本季銷售下滑中超過 20% 與 1 家大型資料中心客戶有關。該客戶縮減資料中心建置符合我們的預期；該客戶預期 2021 會計年度剩餘期間的出貨量仍將偏低，但下一會計年度將強勁復甦。

In addition, the team is making improvements to our business model in order to improve variable margins. For example, we are focused on cost reductions at our manufacturing facilities and improvements in our pricing models. Our procurement group has been successful in lowering our material costs, while other cost savings initiatives are driving SG&A savings.

此外，團隊正改善我們的商業模式，以提升變動毛利率。例如，我們聚焦於製造據點的成本降低，以及定價模型的改善。我們的採購團隊已成功降低材料成本，而其他節省成本的計畫也正帶動銷售、一般及管理費用（SG&A）的節省。

On the growth side, we are making significant strides with our coating business, where we have introduced an antimicrobial coating that complements the anticorrosive properties of our existing spray coat products. This product has great potential in HVAC systems for hospitals, hotels, restaurants, schools and anywhere else bacteria, mold or fungi are a concern. We're also seeing a strong uptick in orders for products to the recreational vehicle market.

在成長方面，我們的塗層業務取得顯著進展；我們推出一款抗菌塗層，可與既有噴塗產品的防腐蝕特性相輔相成。此產品在醫院、飯店、餐廳、學校等 HVAC 系統，以及任何對細菌、黴菌或真菌有所疑慮的場域，都具有很大潛力。我們也看到休閒車（RV）市場相關產品的訂單明顯增加。

There remains a great deal of work to do in CIS but the framework is in place to improve profit margins and capitalize on the volume recovery as we go forward.

CIS 仍有大量工作要做，但我們已建立可提升獲利率的架構，並能在未來隨著需求量回升時把握機會。

Please turn to Page 5. Building HVAC sales held up relatively well given the pandemic, down 3% in the first quarter. This was primarily driven by lower sales of heating and ventilation products, partially offset by higher data center sales in the U.K.

請翻到第 5 頁。儘管受到疫情影響，建築 HVAC 的銷售表現相對穩健，第一季僅下滑 3%。主要原因是供暖與通風產品銷售下降，但部分被英國資料中心銷售增加所抵銷。

I want to highlight that adjusted EBITDA increased 30% from the prior year, primarily due to improved pricing and lower material and labor costs as well as improved operating leverage as a result of management cost actions. This type of performance demonstrates the potential for Modine after we address the auto business and reallocate capital.

我想特別指出，調整後 EBITDA 較前一年度增加 30%，主要來自定價改善、材料與人工成本下降，以及管理層成本措施帶來的營運槓桿提升。這樣的表現顯示，在我們處理汽車業務並重新配置資本之後，Modine 具備相當的潛力。

We expect growth in Building HVAC to be driven by data center sales where our order book remains strong. We anticipate that North American heating and ventilation will be relatively flat to the prior year, but this remains somewhat dependent on weather conditions. We also expect cost savings actions taken during the quarter will drive earnings improvements as we make strategic investments to grow the data center business.

我們預期建築 HVAC 的成長將由資料中心銷售帶動，目前我們的訂單能見度仍然強勁。我們預期北美供暖與通風業務相較前一年度大致持平，但仍在一定程度上取決於天候狀況。我們也預期本季採取的節省成本措施將帶動獲利改善，同時我們將進行策略性投資以擴大資料中心業務。

Please turn to Slide 6. As expected, we had a significant revenue decline in our Heavy Duty Equipment, or HDE, segment. As a reminder, most of these markets were entering a downturn before the pandemic, then the markets further softened as the pandemic spread and impacted the global economy.

請翻到投影片第 6 頁。如同預期，我們的重型設備（HDE）部門營收大幅下滑。提醒各位，這些市場在疫情爆發前就已進入下行週期，隨後疫情擴散並衝擊全球經濟，使市場進一步走弱。

Sales for the HDE segment were down 43% from the prior year. On a more positive note, the markets appear to be stabilizing in June as compared to April and May, and we are beginning to have more confidence in customer order projections.

HDE 部門銷售較前一年度下滑 43%。較為正面的訊號是，相較於 4 月與 5 月，6 月市場似乎正在趨於穩定，我們也開始對客戶訂單預測更有信心。

Last quarter, we mentioned our customer outlook was extremely limited. We now appear to be through the worst of this challenge and have heightened confidence in our customer data. In addition, we are seeing recovery in growth in the China construction market. Although we are predicting a year-over-year sales decline to continue, we anticipate the rate of decline to stabilize and improve. With a focused team on HDE, we are strengthening customer relationships while focusing on cost-effective solutions and superior service.

上季我們提到，客戶展望極為有限。現在看來，我們似乎已度過最艱難的階段，並對客戶數據的可信度更有把握。此外，我們也看到中國建築市場的成長正在復甦。雖然我們預測年對年銷售下滑仍將持續，但預期下滑幅度將趨於穩定並逐步改善。透過專注於 HDE 的團隊，我們正強化客戶關係，同時聚焦具成本效益的解決方案與更優質的服務。

Recently, we were awarded 2 supplier awards in Asia, and we continue to win gen set business. In the transit and school bus market, we are winning incremental business with the industry-leading OEMs. There is significant activity in this market to industrialize alternative powertrains that range from hybrids to fuel cell and full battery electric, all of which require advanced thermal management solutions. Modine has developed a full portfolio of cooling modules and complete battery thermal management systems to address the needs of these growing markets.

近期，我們在亞洲獲得了 2 項供應商獎項，且我們持續贏得發電機組（gen set）業務。在大眾運輸與校車市場，我們正與業界領先的 OEM 贏得增量業務。此市場正積極推動替代動力系統的產業化，範圍涵蓋混合動力、燃料電池以及全電池電動化，這些都需要先進的熱管理解決方案。Modine 已開發完整的冷卻模組產品組合與完整的電池熱管理系統，以滿足這些成長市場的需求。

Another benefit of separating the automotive business is that it highlights further areas for improvement in the HDE segment, both short term and long term. For example, we have aggressively reduced SG&A and have accessed government support programs where possible. We have also lowered our level of capital spending to conserve cash and are aggressively working to reduce working capital.

將汽車業務分拆的另一項好處，是能凸顯 HDE 事業部在短期與長期仍有進一步改善的領域。例如，我們已大幅削減 SG&A，並在可行之處取得政府支持方案。我們也降低資本支出水準以保存現金，並積極致力於降低營運資金。

Please turn to Slide 7. I'd like to now shift to our new segment, Automotive, which is the auto business, previously reported as part of the VTS segment. As we communicated last year with the announcement of our automotive exit strategy, this business is challenged from a margin and cash flow perspective as we focus on reallocating capital amongst our segments. Combined with the COVID impact, you can clearly see the challenges we face in this segment. Isolating the business with a separate team and objective is a critical step as we continue our exit strategy.

請翻到第 7 頁投影片。接下來我想轉到我們的新事業部「汽車（Automotive）」，也就是先前作為 VTS 事業部一部分所揭露的汽車業務。如同我們去年在宣布汽車退出策略時所溝通的，當我們專注於在各事業部之間重新配置資本時，該業務在毛利率與現金流角度面臨挑戰。再加上 COVID 的影響，您可以清楚看到我們在此事業部所面臨的挑戰。以獨立團隊與目標來隔離此業務，是我們持續推進退出策略的關鍵一步。

As most of you know, the global automotive industry has been one of the hardest hit by the global pandemic. Sales in the Automotive segment were down 45% from the prior year with the biggest decrease coming in Europe which is also our largest market. Sales in Asia were relatively flat from the prior year. In North America, sales were down in line with the market. Sales during the quarter were also significantly impacted by customer shutdowns as all of our automotive plants were eventually forced to close. All plants were reopened by the end of May, and we began to see a recovery in June, particularly in Europe.

如各位所知，全球汽車產業是受全球疫情衝擊最嚴重的產業之一。汽車事業部銷售額較去年同期下滑 45%，其中最大降幅來自歐洲，而歐洲也是我們最大的市場。亞洲銷售額與去年同期大致持平。在北美，銷售額下滑幅度與市場一致。本季銷售也受到客戶停工的重大影響，因為我們所有汽車工廠最終都被迫關閉。所有工廠在 5 月底前已重新開工，而我們在 6 月開始看到復甦，尤其是在歐洲。

Similar to the HDE segment, there's been a strong focus on cost control in this segment as a result of the volume decline. Again, it's difficult to predict a market outlook for this segment, but overall, we expect the market in Asia to be flat to slightly up; in Europe and North America to be down 10% to 20% from the prior year. We expect the first quarter to be a low point for us with sequential improvements in revenue and earnings each quarter. Rest assured that this business is being managed much differently than in the past with an emphasis on cash flow, while we reallocate capital to the higher margin businesses.

與 HDE 事業部類似，由於出貨量下滑，本事業部也高度聚焦於成本控制。同樣地，這個事業部的市場前景難以預測，但整體而言，我們預期亞洲市場持平至小幅成長；歐洲與北美則較去年同期下滑 10% 至 20%。我們預期第一季將是低點，之後每一季的營收與獲利將逐季改善。請放心，這項業務的管理方式已與過去大不相同，將以現金流為重點，同時我們把資本重新配置到毛利率較高的業務。

Please turn to Slide 8. As we navigate difficult market conditions brought on by the pandemic, we've taken actions to minimize their downside results and prepare for an eventual recovery. First quarter sales declined by $181 million or 34% led by slower demand in vehicular markets, commercial HVAC&R markets and with our largest data center customer. Downside conversion on the lower revenue was supported by favorable operating performance and labor cost reductions across all segments.

請翻到第 8 頁投影片。在疫情帶來的艱困市場環境下，我們已採取行動以將不利影響降至最低，並為最終復甦做好準備。第一季銷售額下滑 1.81 億美元（或 34%），主要由車用市場、商用 HVAC&R 市場需求放緩，以及我們最大資料中心客戶需求下降所致。較低營收的負向轉換（downside conversion）則受惠於各事業部有利的營運表現與勞動成本降低而獲得支撐。

Our gross profit decreased by $37 million to $46 million, resulting in a gross margin of 13.3%. Despite the gross profit decline, I want to highlight the progress achieved in our Building HVAC segment, which is one of our targeted future growth areas.

我們的毛利減少 3,700 萬美元至 4,600 萬美元，使毛利率為 13.3%。儘管毛利下滑，我想強調我們在建築 HVAC 事業部所取得的進展，該事業部是我們鎖定的未來成長領域之一。

SG&A of $45 million was lower than the prior year by $19 million or 30%. This decrease was driven by lower spending on the automotive exit strategy and difficult actions to lower employee compensation costs and discretionary spending. While we anticipate a recovery in the second half of our fiscal year, we have expanded our savings initiatives to address potential headwinds.

SG&A 為 4,500 萬美元，較去年同期減少 1,900 萬美元（或 30%）。此降幅主要來自汽車退出策略支出降低，以及我們採取艱難措施以降低員工薪酬成本與非必要支出。雖然我們預期在本會計年度下半年將出現復甦，但我們已擴大節省計畫，以因應可能的逆風。

Adjusted EBITDA of $20 million was down $27 million from the prior year. This was driven by the previously mentioned volume decline and partially offset by favorable gross margin performance and SG&A reduction.

調整後 EBITDA 為 2,000 萬美元，較去年同期減少 2,700 萬美元。主要原因是前述的出貨量下滑，部分被較佳的毛利率表現與 SG&A 降低所抵銷。

As usual, our appendix includes an itemized list of adjustments and a full reconciliation to our U.S. GAAP results. Our first quarter adjustments totaled $5.1 million, including $4.6 million from restructuring activities as we reduce head count and consolidate footprint. As previously discussed, the automotive separation costs were minimal in the quarter.

如往常一樣，我們的附錄包含調整項目的明細清單，以及與美國 GAAP 結果的完整調節表。我們第一季調整項目合計 510 萬美元，其中 460 萬美元來自重整活動，因我們正在縮減人力並整併據點。如先前所述，本季汽車分拆成本極低。

We had a small tax benefit in the quarter on the pre-tax loss. This was driven by losses in jurisdictions with valuation allowances and by changes in the mix of foreign and U.S. earnings. Adjusted earnings per share was a negative $0.09, down $0.40 from the prior year.

本季我們在稅前虧損上出現小幅稅務利益。這主要是因為在設有估值備抵（valuation allowance）的司法管轄區出現虧損，以及海外與美國獲利組合變動所致。調整後每股盈餘為負 0.09 美元，較去年同期下降 0.40 美元。

Turning to Slide 9. I'm very pleased with our first quarter free cash flow of $3.2 million, which represents a $23 million improvement from the prior year. We typically experience negative cash flow in the first quarter. Our adjusted free cash flow was nearly $11 million. The positive cash flow was driven by a number of items, including lower spending on the automotive exit strategy, good working capital management and lower capital spending.

接著看第 9 頁投影片。我對第一季自由現金流 320 萬美元感到非常滿意，較去年同期改善 2,300 萬美元。我們通常在第一季會出現負現金流。我們的調整後自由現金流接近 1,100 萬美元。正向現金流由多項因素帶動，包括汽車退出策略支出降低、良好的營運資金管理以及資本支出降低。

Net debt decreased slightly during the quarter, and our leverage ratio of 2.9x was well within our covenant limits. I want to highlight, in these difficult times, we continue to have ample liquidity to run the business and execute our strategies.

本季淨負債小幅下降，我們的槓桿比率 2.9 倍，遠在契約限制範圍內。我想強調，在這些艱難時期，我們仍具備充足流動性以營運業務並執行策略。

Now let's turn to Slide 10 for our fiscal '21 outlook. With so much uncertainty surrounding the global economic recovery, we will not be providing formal guidance at this time. Instead, we will provide high-level insights and outlook for the balance of the fiscal year.

現在請看第 10 頁投影片，說明我們 2021 會計年度的展望。由於全球經濟復甦存在高度不確定性，我們目前不提供正式指引。取而代之，我們將就本會計年度剩餘期間提供高層次的觀察與展望。

Although we are pleased with the performance of our plants worldwide, we are still planning for difficult market conditions to continue through the summer, especially in our vehicular markets, with a slow recovery in the second half of our fiscal year. There have been no major changes to our market outlook since we reported last quarter, and we expect the data center market to continue to drive growth in our Building HVAC segment.

儘管我們對全球各地工廠的表現感到滿意，我們仍規劃艱困的市場狀況將持續到夏季，尤其是在車用市場，並預期本會計年度下半年將緩慢復甦。自上季報告以來，我們的市場展望沒有重大變化，且我們預期資料中心市場將持續帶動建築 HVAC 事業部的成長。

We are clearly seeing positive trends, but the recovery will be slow. We expect second quarter sales will be sequentially higher than the first quarter but could be down as much as 20% from the prior year. We will continue to offset negative volumes with cost actions, including salary and benefit reductions, furloughs and shortened work weeks where appropriate.

我們確實看到正向趨勢，但復甦將會緩慢。我們預期第二季銷售額將較第一季逐季增加，但可能仍較去年同期下滑最多 20%。我們將持續以成本措施抵銷不利的出貨量，包括在適當情況下調降薪資與福利、實施無薪假（furloughs）以及縮短工時。

In addition, we continue to aggressively manage our cash through lower CapEx spending and working capital management and expect this to result in positive cash flow for the year. Maintaining a strong balance sheet and preserving cash is a high priority.

此外，我們持續透過降低資本支出（CapEx）與營運資金管理來積極管理現金，並預期這將使全年現金流為正。維持強健的資產負債表並保存現金是高度優先事項。

We continue to navigate through this crisis with an equal focus on cost control, cash generation and targeted growth. Modine will emerge stronger with a better mix of higher margin and growth businesses.

我們持續度過這場危機，同時同等重視成本控制、現金創造與目標式成長。Modine 將以更佳的高毛利與成長型業務組合，變得更加強健。

In closing, I'd like to take a moment to acknowledge David Leiker from Robert W. Baird, who passed away recently. David was a highly respected analyst, and more importantly, a great person. It was a pleasure to work with David and his engagement during these calls will be greatly missed.

最後，我想花點時間悼念 Robert W. Baird 的 David Leiker，他近日不幸辭世。David 是備受尊敬的分析師，更重要的是，他是一位非常好的人。能與 David 共事是我的榮幸，我們將非常想念他在這些電話會議中的投入與參與。

I'd like to personally thank Tom Burke who established a world-class culture at Modine and served as a mentor for many. We're undergoing a lot of changes but are fortunate to have a strong and experienced leadership team and dedicated employees around the world. Our cost-cutting actions have impacted everyone in the company, and we have not made these decisions lightly. Modine's progress and success is due to the sacrifice and dedication of all employees around the globe.

我也想親自感謝 Tom Burke，他在 Modine 建立了世界級的文化，並擔任許多人的導師。我們正在經歷許多變革，但很幸運擁有一支強大且經驗豐富的領導團隊，以及遍布全球的敬業員工。我們的成本削減行動影響了公司內的每一個人，我們並非輕率做出這些決定。Modine 的進展與成功，來自全球所有員工的犧牲與奉獻。

With that, we'll take your questions.

接下來，我們將開始回答各位的提問。

(Operator Instructions) Our first question is from Mike Shlisky of Colliers Securities.

（接線員指示）我們的第一個問題來自 Colliers Securities 的 Mike Shlisky。

And I'll dedicate my questions to David who I also knew was a great guy as well. So just starting off with your outlook for the vehicular markets for the year, you had mentioned that it will be kind of a slow recovery in the back half of the year. Does that kind of imply that the second fiscal quarter here will be not much better than the first?

我也想把我的問題獻給 David，我也認識他，知道他同樣是一位很棒的人。那麼先從你們對今年車用市場的展望開始，你們提到今年下半年將是較慢的復甦。這是否意味著本會計年度第二季的表現不會比第一季好太多？

Yes. Mike, we're expecting second quarter to be sequentially better than Q1. And versus a 34%, 35% revenue decline in Q1, we think Q2 will be sequentially better, but revenue will be down. It could be, as I said, between 15% and 20% down versus the 35%. And then we expect, as we continue, Q3 and Q4 will sequentially be better as we go through the year.

是的。Mike，我們預期第二季會較第一季呈現連續改善。相較於第一季營收下滑34%、35%，我們認為第二季在連續比較上會更好，但營收仍會下滑。正如我所說，可能會是下滑15%到20%，相較於35%的下滑幅度。接著我們預期，隨著我們持續推進，第三季與第四季在連續比較上也會隨著年度進程而逐季改善。

Okay. Switching to the search for a new CEO. Can you tell us if you're looking at mostly internal candidates? Or do you know if the Board has engaged with an outside recruiter to find somebody there?

好的。轉到尋找新任CEO這件事。你能否告訴我們，你們主要是在看內部候選人嗎？或者你是否知道董事會是否已聘請外部獵才公司來尋找人選？

Yes. So Mike, as you could imagine, the Board got a search committee. I'm not involved with the Board discussions, but I can share with you what we've issued in the press release and what the Board has shared, and that is they have engaged with a search firm, that is well underway and that they're going to consider both external and internal candidates in the process.

是的。所以Mike，如你所想，董事會成立了搜尋委員會。我沒有參與董事會的討論，但我可以跟你分享我們在新聞稿中發布的內容以及董事會所分享的資訊，也就是他們已經委託一家獵才/搜尋公司，目前進展順利，並且在過程中會同時考量外部與內部候選人。

Okay. Turning to your auto -- to the auto -- potential auto sale, that business. Are you engaging with the same buyer that you were looking at before? Or have you basically started a whole revenue process at this point?

好的。談到你們的汽車——汽車——潛在汽車業務出售。你們是否仍在與之前接觸的同一位買方洽談？還是你們在此時基本上已經重新啟動一個完整的流程？

Yes. It's -- as we talked last -- in our Q4 and Tom was talking coming a little -- I'd say coming out of the pandemic, but as things were starting to stabilize, we reengaged with both: parties that had been active pre-COVID and those that hadn't really fully engaged. So there's been a combination of buyers jumping right back in and then new ones becoming more engaged.

是的。這——正如我們上次談到的——在第四季時Tom也提到，隨著——我會說是走出疫情，但更準確地說是當情勢開始穩定時——我們重新與兩類對象接觸：一是COVID之前就很積極的買方，二是之前沒有真正深入參與的買方。因此，現在是既有買方迅速回來、同時也有新買方變得更積極參與的組合。

Okay. I wanted to also ask, it's been a bit of a hot topic these days, that is alternatively-fueled trucks. I guess can you share with us a little bit more detail about what does Modine have to offer to a hydrogen fuel cell system compared to, let's say, a regular battery-powered or diesel-powered vehicle? Is this -- is it a similar content per vehicle? I guess I'll start off there, but maybe I should also ask you the same question, [it's been said] that you guys have developed a full portfolio of products to meet these truck makers' needs in this area. Do you have any feel for whether your competitors have gone as far as you have to work with the OEMs and get a full product lineup going?

好的。我也想問一個最近很熱門的話題，也就是替代燃料卡車。我想你能否多分享一些細節：相較於一般電池驅動或柴油車，Modine在氫燃料電池系統上能提供什麼？每台車的內容價值（content per vehicle）是否相近？我先從這裡開始，但我也想問同一個問題——[有人說]你們已經開發出完整的產品組合來滿足這些卡車製造商在這個領域的需求。你是否覺得你們的競爭對手在與OEM合作、並建立完整產品線方面，已經做到跟你們一樣深入？

Yes. So a few -- I mean there's a lot in there, Mike, I think. So on the specialty bus, specialty vehicle side, we have a leading position there. And from a leading share position, we feel very confident based on our book of business and the trends we see moving very rapidly there towards -- especially on the electric side, that we've got a competitive advantage. The truck side is picking up pace as well. The number of inbound calls and development projects has been increasing. And as you mentioned, there's a full slate of product offerings, including the battery thermal management systems that we've been actively working on with several key customers. That, like the rest of the truck, my assumption is our competitors are working as hard as we are. I can't comment whether we're ahead of them or -- I think all parties are pushing hard on that regard on the truck side.

是的。所以——裡面有幾點——我是說，Mike，這裡面內容很多。我先說在特種巴士、特種車輛這一端，我們在那裡處於領先地位。基於領先的市占地位，從我們的在手訂單（book of business）以及我們看到的趨勢——尤其是在電動化端快速移動——我們對自身的競爭優勢非常有信心。卡車端也在加速。我們收到的主動洽詢電話與開發專案數量都在增加。正如你提到的，我們有完整的一系列產品供應，包括我們正與數個關鍵客戶積極合作的電池熱管理系統。至於其他卡車相關領域，我的假設是競爭對手也跟我們一樣努力。我無法評論我們是否領先他們或——我認為在卡車端，各方都在這方面全力推進。

We're excited because I think I -- my estimation is the dollar value of content and the opportunity for us on a profit margin standpoint is improved anytime there's a technology change. So we're excited about the opportunity. As the truck -- we see truck going that way. Also, good progress. I think the team was talking about, in Germany, there was a large stimulus package released like $7 billion worth for transit and commercial vehicle incentives to electrification and hydrogen-based vehicles. So we see things picking up, Mike, and anytime there's a technology change, that's a good opportunity for us.

我們很興奮，因為我——我的估計是，只要發生技術變革，從每台車的內容金額與我們的利潤率機會角度來看，通常都會改善。所以我們對這個機會感到興奮。就卡車而言——我們看到卡車正朝這個方向發展——也有不錯的進展。我想團隊提到，在德國，推出了一個大型刺激方案，大約70億美元，用於大眾運輸與商用車電動化及氫能車的補助激勵。因此我們看到動能正在提升，Mike，而任何技術變革對我們而言都是很好的機會。

I want to throw one last one in there. And just can you give us your thoughts on the aluminum and general raw material market, both in the quarter and maybe in the current second quarter so far?

我最後再補一題。你能否談談鋁以及一般原物料市場的看法，不論是本季的情況，或是目前第二季迄今的狀況？

Yes. It's been favorable for us this year coming down. We see it -- it's been holding stable, which is good. We do have some expectations in the second half of the year that we may see a slight rise in aluminum. But generally, this has been something that's been in our favor this year and we don't see as a major obstacle going forward.

是的。今年對我們而言是有利的，因為價格在下滑。我們看到——目前維持穩定，這很好。我們確實預期在今年下半年鋁價可能會小幅上升。但整體而言，這今年一直是對我們有利的因素，我們也不認為未來會成為主要障礙。

Your next question is from Joseph Mondillo of Sidoti & Company.

下一個問題來自Sidoti & Company的Joseph Mondillo。

Hope you are doing well. I wanted to start with -- on the cost side, just wondering how significant is that consolidation in China of the CIS segment and then maybe just broadly if you've been able to take out any costs on a permanent basis.

希望你一切都好。我想先從——成本面開始問，想了解在中國對CIS事業部門進行整併的影響有多大？另外更廣泛地說，你們是否已能在永久性基礎上削減任何成本？

Yes. So the -- on the China project, that's a plant consolidation and we estimate about $2 million of annualized savings. Those savings will start to kick in, in the September quarter. And there's also a little bit of government incentives built in. So that, I think, total charge and cost to consolidate those plants is around $2 million or a little under and the first year savings on that will be $2 million. There's a quick payback. And then with regards to our cost-cutting actions this year, part of our SDG actions that started last year, we estimate about $10 million of permanent cost reduction actions this year. And then as part of COVID activities that are more temporary in nature, there's about $14 million or $15 million worth of temporary actions, cost-cutting measures that are in our outlook for this year that won't be permanent. At some point, those will return.

是的。所以——關於中國專案，那是一項工廠整併，我們估計年化節省約200萬美元。這些節省將在9月季度開始顯現。另外也包含一些政府補助。因此，我認為整併這些工廠的總費用與成本約為200萬美元或略低，而第一年的節省也將是200萬美元。回收期很快。至於今年的成本削減行動，作為我們去年開始的SDG行動的一部分，我們估計今年約有1,000萬美元的永久性成本降低措施。另外，作為較偏向短期性的COVID相關措施，我們今年展望中包含約1,400萬到1,500萬美元的暫時性行動/成本削減措施，這些不會是永久性的。在某個時間點，這些將會回復。

Okay. And so a couple of follow-ups there. The $2 million related to the China footprint, is that baked into the $10 million that you're originally expecting? Or is that incremental to the $10 million?

好的。那我有幾個追問。與中國據點相關的200萬美元，是否已包含在你們原先預期的1,000萬美元之內？還是這是額外增加、在那1,000萬美元之外？

Yes. That's incremental as part of our cost of goods sold reduction.

是的。這是額外增加的，屬於我們降低銷貨成本（cost of goods sold）的部分。

Okay. And the $14 million to $15 million, that's mainly savings that you see this year, although I'm sure volume dependent. So at this time, you expect to see those savings this year and start to return in '21 barring a stronger recovery in volumes.

好的。那1,400萬到1,500萬美元主要是你們今年看到的節省，雖然我確定會受出貨量影響。所以以目前來看，你們預期今年會看到這些節省，並在2021年開始回復，除非出貨量出現更強勁的復甦。

Yes, correct. We're -- the run rate we're at this year, our SG&A will probably -- the run rate we're on probably between $195 million and $200 million. I would say, normalized, when people are still -- employees are still under wage reductions and that type of activity, a normal SG&A run rate is probably about $15 million higher than that.

是的，正確。我們——以今年目前的執行水準來看，我們的SG&A（銷售、一般及行政費用）年化水準可能——我們目前的年化水準大概在1.95億到2.00億美元之間。我會說，在正常化情況下，當員工不再處於薪資調降等這類措施之下時，正常的SG&A年化水準可能會比這個高約1,500萬美元。

Okay. Perfect. The CIS segment, I thought -- I have in my notes that you stated that you were sort of anticipating maybe a 20% decline at that data center customer. And in the presentation, you noted that you anticipate flat to up this year. So have things shifted maybe with stay-at-home and cloud activity? Could you just update us what your thoughts on that particular revenue stream?

好的。完美。關於CIS事業部門，我記得——我在筆記裡寫到你曾表示，你們原本預期那個資料中心客戶可能會下滑約20%。但在簡報中，你提到你預期今年持平到成長。所以是否因為居家辦公與雲端活動而有所改變？你能否更新一下你對那一特定營收來源的看法？

Yes. No, I think I confused you on that message. We expect the market to be flat to up. We still see growth in the data center market. In CIS, we're clearly expecting our data center revenue to be down this year, and that's because so much of CIS is driven by 1 customer. And then -- but I do -- what I do want to be clear about is we are -- we need -- we know we need to diversify our customer base on data center, and we are -- the Building HVAC, the data center growth outside of the 1 customer this quarter was north of 50%, and we're anticipating 40% to 50% type data center growth this year for Modine out -- excluding the 1 customer.

是的。不，我想我在那個訊息上讓你混淆了。我們預期市場會持平到成長。我們仍看到資料中心市場在成長。在CIS方面，我們很明確地預期今年我們的資料中心營收會下滑，原因是CIS有很大一部分是由單一客戶所驅動。不過——但我想要釐清的是，我們——我們知道我們需要在資料中心領域分散客戶基礎，而我們也正在這麼做。本季在建築HVAC方面、排除那一個客戶之外的資料中心成長超過50%，而我們預期今年Modine在——排除那一個客戶——資料中心成長大約會是40%到50%這樣的幅度。

Okay. And are you still looking for -- I mean just sort of backing in, it's -- I'm calculating that potentially, you could see, at that CIS data center customer, potentially a 50% increase in fiscal '22. Is that the kind of visibility that you have into fiscal '22?

好的。而且你們仍在尋找——我的意思是，稍微倒推一下，這——我在計算，可能你們在那個 CIS 資料中心客戶那邊，在 22 財年可能會看到 50% 的成長。這就是你們對 22 財年的可見度所能掌握的那種程度嗎？

Yes. We typically -- with regards to good orders and firm commitments and guidance from the customer, it typically goes 3 to 6 months out, but we have regular conversations with them. And for several months now, the indication from them is that there's a heavy ramp that they're planning for our next fiscal year. It should begin later this fiscal year, early calendar '21, but calendar '21, this customer is anticipating a ramp-up in their build rates, and that's been consistent.

是的。我們通常——就良好訂單、確定承諾以及客戶給予的指引而言，通常可見度大概是往後 3 到 6 個月，但我們會定期與他們溝通。而且過去幾個月以來，他們給我們的訊息一直是：他們正在為我們下一個財年規劃一個大幅拉升。這應該會在本財年稍晚、也就是 21 年曆年初開始，但在 21 年曆年，這位客戶預期他們的建置速率會加速拉升，而這個訊息一直都很一致。

Okay. And as far as your market outlook, I guess I got a little confused with market outlook and what you guys are anticipating, I can see that in the presentation now. Could you just decipher why the market outlook is different at commercial HVAC, at CIS and the ventilation and AC market outlook at BHVAC segment? And then related to this, could you comment on what your thoughts are with nonresidential construction? People are a little -- maybe a little concerned with the nonresidential construction starts in the second quarter and maybe we see a downturn towards the end of this year into early next calendar year.

好的。至於你們的市場展望，我想我對市場展望以及你們預期的內容有點困惑——我現在在簡報裡看到了。你能否解讀一下，為什麼商用 HVAC、CIS 的市場展望，會和 BHVAC 部門的通風與空調市場展望不同？另外相關地，你能否評論一下你們對非住宅建築的看法？大家對第二季非住宅建築開工量可能有點——也許有點擔心，並且可能在今年底到明年曆年初看到下滑。

Yes, for sure. So let me first talk about the difference between Building HVAC&R and CIS. The Building HVAC segment has a much heavier mix. The products in there are ventilation equipment, products that go into commercial AC. And on the CIS side, it's a heavy -- most of that are replacement coils that go into -- across the HVAC industry, including residential and refrigeration. So we're able to narrow down our markets a lot more in the Building HVAC side and we expect that commercial ventilation air-conditioning. And we also are seeing good orders. We help -- sell products into the school market, so that's why we expect a slightly better market outlook in Building HVAC. And then CIS, you can think about it, that's a pretty broad brush across the entire HVAC industry. And I said it's including residential and a lot of replacement business as well.

是的，當然。那我先談 Building HVAC&R 與 CIS 的差異。Building HVAC 部門的產品組合比重更偏重，其中的產品包括通風設備、用於商用空調的產品。而在 CIS 這邊，主要——大多數是替換用盤管，應用範圍橫跨整個 HVAC 產業，包括住宅與冷凍冷藏。因此在 Building HVAC 這邊，我們能把市場界定得更精準，我們預期商用通風與空調市場——而且我們也看到不錯的訂單。我們也——把產品賣到學校市場，所以這就是我們預期 Building HVAC 的市場展望會稍微好一些的原因。至於 CIS，你可以把它想成是對整個 HVAC 產業的一個相當廣泛的概括。我也提到它包含住宅端，以及相當多的替換需求。

And to your question -- I mean as we look about construction and that, we -- on the Building HVAC side, both heating and AC, in air-conditioning side, there's a lot of replacement business. It's a heavy replacement and high commercial applications. So when we think about the rest of the year, we are expecting kind of a flat heating market, but also weather plays a major component. And then we are seeing a real strong order book in Building HVAC that's giving us a lot of confidence as we head into the second half of the year, and those are custom solutions for either new or replacement applications.

至於你的問題——我的意思是，當我們看建築與相關情況時，我們——在 Building HVAC 這邊，不論是供暖或空調端，都有很大一部分是替換需求。它是以替換為主、且商用應用占比高。所以當我們看今年剩下的時間，我們預期供暖市場大致持平，但天氣也會是很重要的因素。然後我們在 Building HVAC 看到非常強勁的訂單簿，這讓我們在進入下半年時很有信心，而那些是針對新建或替換應用的客製化解決方案。

And then back to CIS, so much of that is short order replacement. We saw in that first quarter, the HVAC side was down about 24%, refrigeration down about 35%. It's much broader, really tied to the general economic conditions from the CIS side than any one indicator. Though one bright spot I pointed out is we do sell products that go into the recreational vehicle market. And with -- everybody seems to be taking travel vacations instead of flying, and we're seeing a good uptick in products in CIS, coils that go into the recreational vehicle market.

再回到 CIS，那裡很大一部分是短交期的替換訂單。我們在第一季看到，HVAC 端大約下滑 24%，冷凍冷藏下滑約 35%。它的範圍更廣，從 CIS 的角度來看，與其說跟任何單一指標相關，不如說更與整體經濟狀況緊密連動。不過我指出的一個亮點是，我們確實有銷售用於休旅車市場的產品。而且隨著——大家似乎都選擇自駕旅行度假而不是搭飛機，我們看到 CIS 的產品有不錯的上升動能，也就是用於休旅車市場的盤管。

Okay. And lastly, and I'll jump back in queue. Regarding the HDE segment, could you give us an idea of how your bookings trended from April and July? I'm guessing it was a pretty big fluctuation when you look at that on a monthly basis, just from what I've heard from some of the OEMs, but could you tell us what you've seen in your business there?

好的。最後一個問題，我就回到隊列。關於 HDE 部門，你能否讓我們了解一下你們的接單在 4 月到 7 月之間的走勢？我猜如果按月來看波動應該很大，從我聽一些 OEM 的說法也是如此，但你能告訴我們你們在那邊的業務實際看到什麼嗎？

Yes. So a couple of big changes we've seen. One across the board seems to be the most strength in recovery coming out of China. And I believe the month of June, excavator sales, not Modine but the market, was up like 60%. There's a lot of government incentives going on all the way across auto to trucking and off-highway equipment. So across the board, we're seeing, both in auto and HDE, probably the best recovery coming out of China. And then with regards to Europe and North America HDE, Europe seems to be strengthening a little bit quicker. Now in our HDE segment, Europe is a relatively small piece. We're a heavy North America base.

是的。我們看到幾個重大變化。其中一個是，整體而言，復甦力道最強似乎來自中國。我記得 6 月份，挖掘機銷量——不是指 Modine，而是整體市場——大概成長了 60%。從汽車到卡車再到非公路設備，各領域都有很多政府激勵措施。所以整體來看，不論是汽車或 HDE，我們看到最好的復甦大概都來自中國。然後就歐洲與北美的 HDE 而言，歐洲似乎復甦得稍微快一些。不過在我們的 HDE 部門裡，歐洲占比相對小，我們主要是以北美為主。

And what we're seeing in North America from our last one or when we talked at the end of May, was very little customer communication. This may be what you're hearing. The customer communication and guidance with regards to order input, order entry was very limited. That's been firmed up. And what we've seen in the past month is a lot more stability. What the customers are ordering, they're taking for delivery. So we feel good about that, and that bodes well for the improvement in Q2. Though what's still an open question, even I think among the OEMs, is just how the second half -- our second half of the year will look, this September, December quarter and heading into early '21.

而我們在北美看到的情況，從上一次、或是我們在 5 月底談的時候來看，客戶溝通非常少。這可能就是你聽到的情況。就訂單輸入、訂單承接而言，客戶的溝通與指引非常有限。現在這些已經更明確了。而我們在過去一個月看到的是穩定性提高很多。客戶下的訂單，他們會按期提貨交付。所以我們對此感覺不錯，這也有利於第二季的改善。不過仍然有個未解的問題，我想即使在 OEM 之間也是如此：就是下半年——我們下半年——會是什麼樣子，也就是 9 月、12 月這一季，以及進入 21 年初的情況。

Your next question is from Matt Summerville of D.A. Davidson.

下一個問題來自 D.A. Davidson 的 Matt Summerville。

Mick, what's a realistic free cash flow conversion rate for Modine this year -- and how should we -- around net income? And then how should we be thinking about decremental margins across the businesses going forward?

Mick，今年 Modine 較為現實的自由現金流轉換率會是多少——相對於淨利而言我們應該如何看待？另外，往後我們應該如何看待各業務的遞減毛利率（decremental margins）？

Yes. So we had a good decremental -- we think of it as a gross margin conversion. I commented about our SG&A run rate for the first part of the -- or for the full year. Our Q1 downside conversion was just a little over 20%. And as we go through the year, I think we're targeting to hold it about that. If we are just converting at a variable rate and not taking out any fixed cost, our conversion rate would be 25% or 30% down on a gross profit line. So we're trying to pull that down and also manage fixed costs the best we can. So short answer, trying to hold it around a 20% downside conversion at the gross profit line. We don't necessarily look at free cash flow to a net income level, but we are targeting about $50 million of free cash flow this year. And so I think based on what we do, ratio to our EBITDA, I think probably do ratios to EBITDA, I think, anywhere between 30% to 50% of EBITDA would be what we'd be targeting.

是的。所以我們有不錯的遞減——我們把它視為毛利率轉換。我也評論過我們在今年前段——或全年——的 SG&A 執行率。我們第一季的下行轉換率略高於 20%。而隨著今年推進，我想我們的目標是大致維持在那個水準。如果我們只是以變動成本的方式轉換、而不移除任何固定成本，我們的轉換率在毛利線上會是 25% 或 30% 的下滑。所以我們正努力把它壓低，同時盡可能管理固定成本。簡而言之，就是在毛利線上把下行轉換率維持在約 20%。我們不一定用自由現金流去對應到淨利水準，但我們今年的目標是大約 5,000 萬美元的自由現金流。所以我想以我們的做法、相對於 EBITDA 的比率——我想用 EBITDA 來看比率——大概會以 EBITDA 的 30% 到 50% 作為目標區間。

Got it. And then you mentioned in your prepared remarks that you accessed government support programs. Was there any sort of P&L benefit from that in the quarter?

了解。然後你在事先準備的講稿中提到你們使用了政府支持計畫。這在本季的損益表上有任何形式的利益嗎？

Yes. So on the gross profit side, it's really a wash. For mostly across the globe, we have people on layoffs or temporary work, and then they collect unemployment. And then on the -- in Europe, it's a slightly different situation where they have the companies continue to pay for the workers' salary even though they're not working and then you get reimbursed or the worker gets reimbursed. So the short answer is, on the cost of goods, really a wash. In Europe, we do have what we call short workweek programs that are government sponsored. That's about a $5 million benefit of savings this year. And when I talked about $14 million or $15 million of cost savings that are really going to be temporary this year, that's part of it. About $5 million of it would be based on government programs.

是的。所以在毛利端，基本上是相互抵銷。因為在全球多數地區，我們有人員被資遣或暫時停工，然後他們領取失業救濟。而在——歐洲，情況稍有不同：公司即使員工沒有工作也會繼續支付薪資，之後你會獲得補償，或由員工獲得補償。所以簡單說，在銷貨成本上，基本上是相互抵銷。在歐洲，我們有我們所稱的政府補助的短工時（short workweek）計畫，今年大約帶來 500 萬美元的節省效益。而當我談到今年大約 1,400 萬或 1,500 萬美元、主要屬於暫時性的成本節省時，這就是其中一部分。其中約 500 萬美元是來自政府計畫。

Got it. And then you mentioned to a prior question kind of talking through the HDE business and how things trended over the course of the last few months. Can you maybe just spend a minute talking about the other 3 segments, maybe how far down incoming order rates fell on a year-over-year basis in April and then maybe how those are trending now in July just to get a feel for the cadence you've been experiencing?

了解。然後你在前一個問題中提到，算是談到 HDE 業務以及過去幾個月的走勢。你能不能花一點時間談談另外 3 個事業部門：例如 4 月份新進訂單率在年對年基礎上大概下滑到什麼程度？以及到了 7 月現在的趨勢如何？我想藉此感受一下你們所經歷的節奏變化。

Yes. The best way to answer it is when we headed into April and May, the amount of visibility and order intake almost completely stalled. At one point, we had 60% of our factories that were either closed or running at single shifts. And May -- starting in May, we started to see some firming up of late May orders. And June was really the first month we saw some stability where order is coming in and taking delivery. We also had some situations where customers weren't adjusting the order and they weren't taking the orders that were in the system, and we were trying to adjust to that as well. So I can't give you a firm sales numbers by month. But what I can tell you is we've seen a nice trend from April to May to June, and it seems to be continuing in July of what people are placing or they're taking, and the orders seem to be improving at the rate we've been projecting and planning on.

可以。最好的回答方式是：當我們進入 4 月和 5 月時，可見度與接單量幾乎完全停滯。有一段時間，我們有 60% 的工廠不是關閉，就是只以單班制運作。而 5 月——從 5 月開始，我們在 5 月下旬的訂單上開始看到一些回穩。6 月則是我們真正第一次看到一些穩定性：訂單進來、也能出貨交付。我們也遇到一些情況是客戶沒有調整訂單，但也沒有提走系統裡的訂單，我們也在嘗試因應調整。所以我沒辦法提供你按月的確切銷售數字。但我能告訴你的是，我們看到從 4 月到 5 月到 6 月有不錯的趨勢，而且 7 月看起來也在延續：不論是客戶下單或提貨，訂單似乎都在以我們預測與規劃的速度改善。

Got it.

了解。

Yes. I just wanted to clarify, when I mentioned cash flow, I was referencing adjusted free cash flow for the year. That's what we're targeting.

是的。我只是想澄清一下：我提到現金流時，指的是本年度的調整後自由現金流（adjusted free cash flow）。這是我們的目標。

(Operator Instructions) Your next question is from Joseph Mondillo of Sidoti & Company.

（接線員指示）下一個問題來自 Sidoti & Company 的 Joseph Mondillo。

Mick, just 2 quick follow-up questions. As far as, I guess, BHVAC and CIS, one of the concerns, I guess, within the HVAC space, just in general, is probably more so new construction but construction of retail, hotels, office. As you can imagine, those end markets potentially could see more of a multiyear hit to the market there just related to COVID. I'm wondering what your exposure is to those construction markets specifically?

Mick，我有兩個很快的追問。就 BHVAC 和 CIS 而言，我想在 HVAC 領域的一個擔憂，整體來說，可能更多是在新建案，尤其是零售、飯店、辦公室等建築施工。如你所想，這些終端市場可能因 COVID 而面臨更長達多年的衝擊。我想請問你們在這些建築市場上的曝險程度，具體來說有多大？

Yes, relatively small. We have a small and growing ventilation business. When you break that down, the ventilation and air-conditioning business is about 40% of a $200 million segment. And then that's split between the commercial applications and school -- the school business that I mentioned as well. Right now, we've got really good order intake, so we're feeling good. And a lot of that is -- don't -- as I mentioned, a fair amount of that is replacement. The only -- the one caution the team has said we're watching is making sure, on the school side, projects are fully funded. Sometimes we've seen where we've been awarded a project and then funding can get delayed, so based on us having kind of a small growing business and the mix that we have. And in the U.K., we have a lot of ventilation business that kind of goes into hospital settings. I forgot to mention that. There's been some positive trends, obviously, with COVID where we're getting orders and inquiries for equipment that go into hospital settings. So I think pretty balanced. I understand your concerns but it seems to be pretty balanced with regards to our HVAC business.

是的，相對較小。我們有一個規模不大但正在成長的通風業務。拆開來看，通風與空調業務約占一個 2 億美元事業部門的 40%。接著又分成商用應用，以及我剛提到的學校——學校業務。目前我們的接單狀況很好，所以我們感覺不錯。而其中相當一部分——如我所說——是汰換需求。團隊唯一提醒我們要留意的是：在學校端，要確保專案資金已完全到位。有時我們會看到專案已得標，但資金撥付可能延後；因此以我們這個規模不大且成長中的業務，以及目前的組合來看，在英國我們也有不少通風業務是用在醫院場域——我剛剛忘了提。顯然在 COVID 之下有一些正向趨勢，我們收到用於醫院場域設備的訂單與詢問。所以我認為相當均衡。我理解你的擔憂，但就我們的 HVAC 業務而言，看起來是相當平衡的。

Okay. And then at CIS, specifically, I know for a little while it's been a focus of trying to improve the margins at that business. Just wondering, could you remind us -- I can't remember if you had financial goals out there or targets -- but where you think the margins at this business could be and how long of a time line that would take?

好的。然後在 CIS 方面，我知道一段時間以來的重點之一是改善該業務的利潤率。想請你再提醒我們一下——我不記得你們是否曾對外提出財務目標或指標——你認為這個業務的利潤率可以達到什麼水準？以及大概需要多長的時間？

Yes. Tom has mentioned in the past, and I still firmly believe it, that our CIS segment should be operating at 12% to 13% EBITDA margins. We have been operating in the 10%, 11% range. A couple of things going on that -- over the last year, that's been a lot of noise. After fiscal '19, so last fiscal year, we saw a significant drop, 30%-plus type, with our data center business, which is -- impacts our mix and our margins. And then as we head into this year, there was another [planned] drop. So that's one thing happening behind the scenes. And then COVID as well, from a pure volume impact, has impacted our business. We do have a team isolating -- the biggest opportunity for us is our coils business, which is the largest business within CIS, $300 million to $400 million business.

是的。Tom 過去提過，我也仍然堅信，我們的 CIS 事業部門應該能達到 12% 到 13% 的 EBITDA 利潤率。我們目前大約是在 10%、11% 的區間。有幾件事在發生——過去一年雜音很多。在 2019 財年之後，也就是上一個財年，我們的資料中心業務出現顯著下滑，屬於 30% 以上的降幅——這會影響我們的產品組合與利潤率。然後進入今年時，還有另一個（計畫性的）下滑。所以這是背後的一個因素。另外，COVID 也從純粹的出貨量影響層面衝擊了我們的業務。我們確實有一個團隊在聚焦——我們最大的機會在於盤管（coils）業務，這是 CIS 內最大的業務，規模約 3 億到 4 億美元。

And we have a team focused on that, and we do see improvement, when you isolate the mix issue, data center, the volume issues -- and the last report, for example, we looked at the trends through last fiscal year, we saw an 80 basis point improvement through the work the team had done on costing and pricing. It's going to take a little while to work through there. And then there's also going to be some customers that we have to address pricing list that we may not retain. But obviously, when we do that, we feel strongly that it's the right decision for the company if we do not -- if we happen to lose a piece of business over low margin. I hope that answers your question.

我們有一個團隊專注在那裡；當你把組合問題（資料中心）與出貨量問題分開來看時，我們確實看到改善。舉例來說，在上一份報告中，我們檢視到上一個財年的趨勢，看到透過團隊在成本核算與定價上的工作，改善了 80 個基點。這需要一些時間才能完全消化。另外，也會有一些客戶我們必須調整其價格表，而我們可能無法留住他們。但很明顯地，當我們這麼做時，我們仍然強烈認為這對公司是正確的決策；如果因為低毛利而失去一部分業務，我們也能接受。希望這回答了你的問題。

Yes. No, it does. And just a quick follow-up related to that though, so more so related to the outlook at CIS. I don't -- I may have missed this in your prepared commentary, but data center is obviously expected to be down for a lot -- much of the year. And then refrigeration, I'm guessing, is probably the other big headwind in that segment. Relative to the decline that you saw in the first quarter, how do you think about the rest of the year as far as that 27% decline in the first quarter?

是的，有回答到。那再快速追問一下，這更偏向 CIS 的展望。我不確定我是否在你準備好的講稿中漏聽了，但資料中心顯然預期會在今年大部分時間下滑。然後冷凍（refrigeration）我猜也是該事業部門的另一個主要逆風。相較於你們第一季看到的下滑幅度，你怎麼看今年剩餘時間？尤其是第一季年減 27% 這件事。

Yes. Great question. It's very similar to how we see the rest of the company. And we see Q2 for CIS, and I'll just talk revenue, will be sequentially better not only in dollars but that percentage decline. And then we see Q3 better than Q2. And we're optimistic as we get to our Q4, and remember that's next calendar year, we start to see things starting to rebound and even start heading into a revenue growth territory. So we see sequential improvement each quarter.

是的，這個問題很好。它和我們看待公司其他部分的方式非常類似。我們認為 CIS 的第二季——我先只談營收——不僅金額會較前一季改善，降幅百分比也會收斂。接著我們認為第三季會比第二季更好。我們也很樂觀，到了第四季——請記得那是在下一個曆年——我們會開始看到情況回升，甚至開始進入營收成長的區間。所以我們看到每一季都會逐季改善。

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

目前顯示沒有其他問題。我現在把電話會議交回給 Kathy Powers。

Thank you. Thank you for joining us this morning. A replay of this call will be available through our website in about 2 hours. We hope you have a great day. Bye.

謝謝。感謝各位今天早上加入我們。本次電話會議的重播將在約 2 小時後於我們的網站提供。祝各位有美好的一天。再見。

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

各位女士、先生，今天的電話會議到此結束。感謝各位參與。您現在可以掛線。