Ecolab Inc. (ECL) Earnings Call Transcript & Summary

Kick us off, if you don't mind, then. So this is Jonas Oxgaard from Bernstein. And thank you all for listening in. Just before we start, I just want to tell investors that we have questions online at Pigeonhole. So if you look at the left side of your screen, you can click on the Pigeonhole link, a new browser will open up. The video -- so the live stream will continue in the other browser. And you enter questions or vote on existing questions on the Pigeonhole. After the presentation, there will be a Procensus poll also on the left-hand side of the screen, and you will have live results immediately as you finish it. And if you have any technical problems, this is the first time we're doing this, please reach out to your sales contact or corporate marketing. So with that, it is my great pleasure to host Doug Baker yet again from Ecolab. And I believe Doug has some prepared remarks and presentation to do, and then we go to Q&A. So with that, Doug. Thank you.

Thank you, Jonas, and hello, everybody. So I'll walk through update of Ecolab and how we are seeing the world currently. I'll start, of course, with the cautionary statement. So now that I've done my duty, here are the real subject matters that I think makes sense. So first of all, as you may or may not know, we are spinning a portion of our business and it's occurring literally right now. And in the next week or 2, we would expect that this will be complete. So that's the near term. And the data you're going to see following this presentation really excludes our Upstream business, which as I'll say in a moment, is about a $2.3 billion business based on 2019 sales. Obviously, we're also in the midst of COVID. And COVID's having different and asymmetrical impacts on our business. Some market segments, it's bolstering demand dramatically; in others, it's hurting demand significantly. Long term, it's really, we believe, setting us up for even a more robust growth opportunity. So first, just a little more detail on the ChampionX separation, which is the Upstream business that we've had for several years. In total, the business comprises $2.3 billion sales. Our shareholders, after we execute the split, will own 62% of a new combined company because we're merging ChampionX with Apergy to create an RMT. The Ecolab shareholders will own 62%, and we will also get a cash payment of just short of $500 million. This is expected to be a tax-free transaction. And as we mentioned, it will be complete here, and just a question of days or weeks. Importantly, post this, we believe our positioning is even stronger. We expect also to maintain our current dividend and continue to grow it in the future as we have in the past. The market opportunity post-spin will still be dramatic and large. We will have an estimated 10% of $130 billion market. This excludes Upstream. And importantly, when you look at a Pareto chart of us versus competition, we're in a very advantaged position. And I will say the one thing COVID has done is it does give advantage to scale because of the need for technological advantage, not just in digital but also in antimicrobials, et cetera. So let me just give an update of what's been going on in the COVID period. First of all, our whole mantra has been we want to continue to be a company people can count on and a company people can be proud of. So we are really focused on making sure we do our part for communities, customers, our team and investors. And honestly, if you don't do your part for all of these, you can't do your part for any of them. We will, in our mind, emerge even stronger. We're focused on emerging stronger as a team, as a business and as a company. And I think we're making very good progress here. We've looked at this as 4 clear phases. Now certainly, the timing of these phases is mostly going to be dictated by disease progression. And we know that it's going to be different in each market. But the first is really how do you respond to the crisis? And I'll talk about steps that we've taken, but it's really around protecting our people, our customers and our company. Then we know as things in the curve flattens, we're really in this period in many of the markets, we need to make sure we're rethinking what's changed permanently and what's changed temporarily. Not everything that COVID has driven is going to be a permanent change. And these things are a lot harder to predict than, I think, most people think. But there are certain things that we're quite confident in, and we're doubling down on those investments, and I'll talk about that. And then it's really retooling, making sure that we get after the new investments and make them come to life and reignite the business post-COVID. And there will be a post-COVID. So here's what we've done in the first phase, really protecting our company. We, one, made sure we had plenty of cash to go through not only a severe scenario, but a catastrophic scenario. I basically asked our finance team to take severe and double it in terms of severity. And we wanted to make sure we had enough cash for that. Now the truth is we don't even believe we're going to get near the severe scenario in terms of how bad it could have been, so we are in fine shape. And the reason for this is I'd rather have a problem of too much interest payment temporarily versus not enough cash if a calamity occurred. Because with cash, you can think forward and not worry about the near-term so much in terms of just day-to-day. And that's exactly what we've done. We've taken a lot of steps to protect our people. We have 130 manufacturing facilities around the world, all are operating. We've had very few COVID incidences in these factories. One, we got face masks for everybody; we've done social distancing where we needed to in those plants; we've reduced nonessential workers out of those facilities to stop extra vectors of disease transmission from coming into the facilities; we've heightened our hygiene. We basically emptied our offices temporarily through this whole thing to protect those folks. And for our people that actually call on customers in the field, we've set up new scenarios where they're using electronic capabilities and digital capabilities much more aggressively than we did in the past. We think net, this is going to be a real positive because it's forced the adoption of a lot of the digital technologies that we've invested in but haven't had full adoption of. But we are seeing it now. And finally, by protecting our people, we are able to protect our customers, and they protect our communities. Because the field and tech support is still there, it's provided globally, we will go in when we needed. And we've also maintained and actually heightened production during this time because we've had significant demand up on surface sanitizers, hand sanitizers and hand soaps. And this is anywhere from 3x normal demand to 8 to 10x normal demand. So obviously, a lot of work and planning has gone into how do we meet this heightened demand? And what is the expectation going forward? We think the demand will be up, ongoing. We don't believe it's going to be 10x forever, but we've maximized sanitizer production going to 3 shifts. We've moved manufacturing lines. We've added sanitizer production and facilities that have never done it before because they were actually facilities built for volatile materials so that we could do it safely. We're shipping sanitizers in packaging we've never imagined before. We've had some unusually large orders from several governments around the world, and they've taken it in bulk. So our team has been agile, they've been scrappy, they've gotten after this, and I think, done a very good job in a very different -- difficult situation. Bioquell is an acquisition that we made, which is really a space decontamination technology using vaporized hydrogen peroxide. It's very sophisticated, historically used principally in Life Sciences, think pharmaceutical clean rooms and the like, that if you ever do have a contamination issue in one of these facilities, this is a technology you would use. So it's at a very, very high standard. What we've now learned is that Bioquell also meets very important needs outside of the Life Sciences arena. And so our demand there has grown substantially as well. So sometimes better be lucky than good. We bought that business at the right time, and it's proving to be very valuable, not just in Life Sciences, but also in Healthcare and extend it into other facilities as well. And then finally, we're accelerating our digital transformation. So we've been on this journey for 6 years. We've talked repeatedly about how much money we're investing here and why we believe it's advantaged us long term. We have unique streams of information, we have unique know-how. Taking the know-how that we'll glean from the digital connection is going to give us great advantage in meeting customer needs long term. And I will tell you what, it's put us in an advantaged position right now. Because the fact that we can monitor over 30,000 customer sites digitally enables us to provide unbelievable service to those customers even when we physically can't be in there. So the things that we're doing, and the customers note how advantaged this has made them. So our demand now for extending this across a number of customers has gone up because they want to be connected everywhere if they're only partially connected. So that will continue to be a real emphasis. We've done a number of things for emergency health care facilities that had to go up. We had a story about the Four Seasons in Manhattan where the Four Seasons' owner decided to make that available to medical professionals who are emergency providers during the COVID difficulties in Manhattan. Well, this meant a number of potential COVID carriers are coming into that facility. So how do we change that environment so that it's safe for everybody who's working there? And we work closely with Four Seasons and other outside providers to change this in a weekend. So we've done many other things around the world where temporary facility's gone up, we've been called in. We've done rapid response to other needs: Laundry, viricidal programs for military in Italy, et cetera. We've done stress reduction for our foodservice and hospitality customers and partners who've been in business with for decades but are going through an unbelievable, difficult time. And so we've had some flat fee billing situations where we basically said, "Look, we'll discontinue this for a 3-month period. We'll just extend your contracts 3 months on the back end," to give them some relief while they literally are going through almost a 0-sales scenario. They're going to have difficulty paying it anyway, so we wanted to make sure we got in front of this and showed them that we are united in the difficulties they're going through. And then finally, we're all over planning for recovery. We've been doing a lot of work with our hospitality customers, our cruise customers, our restaurant customers, et cetera, because the truth is, this has been a very asymmetrical impact, as I just alluded to. So if you look at the right of this chart, you can see customers really where you've had demand-plus: Healthcare, Life Sciences, grocery. Grocery, really, for a period of time, is having a huge move in the share of stomach battle that they've had for years vis-a-vis foodservice. All of us are now buying a lot more of our food from grocery stores than we were just a short time ago from restaurants. As a consequence, their sales are up 30% and 40%. Plus, they've got heightened hygiene standards, so our sales to them are up even more. So it's very significant in terms of what's going on there. On the flip side, you've got full-service restaurants have had to basically close dining rooms for an extended period of time; cruise lines which are all on -- in dock; lodging establishments; et cetera, who are seeing the worst of times. Now what we've shared with the financial community is net, the difficulties in the far left outweigh the positives in the far right. So for the year 2020, we expect this to be a minor negative on our top line and therefore a negative on EPS as well in total. But that's really because of the impact is so acute in Q2, in particular, because that's where we had restaurants and lodging basically shut down around the world simultaneously for a period of time. We expect that the challenges will lessen as we go through the year. Therefore, we would expect Q2 to be the low point; Q3 to be modestly better; and Q4, even better than Q3 as we ramp up through a recovery period. And you can see specifically what type of sales impact each of these segments have. So demand-plus. The segments in demand-plus: Food & Beverage, Healthcare, food and retail, Life Sciences, comprised in 2019, 33% of our sales. This excludes Upstream. And if you go down to the bottom, it was roughly 31% of our sales. Full-service restaurants around the world represent about 14% of our sales. Lodging, and this would include our water technologies, our Food & Beverage, our housekeeping and laundry, represent about 8% in total of our sales around the world. So those are depressed. Those at the top are positively impacted, but you can understand that there's a different impact dependent upon segment. Net, we sit here today very well positioned to help our customers, therefore, our communities. We're financially strong. We think we're strategically quite well positioned. Our team is focused on customers. That's really where we want them focused. We know that ultimately, this will pass. It's hard to imagine now for all of us, but a new normal will emerge. And we think that new normal, there's a couple of truths. One is hygiene standards are most likely. And we think people's attention to hygiene, personal to hygiene space, hygiene in restaurants, hygiene in hotels, hygiene in public spaces, is going to remain heightened for a long period of time. And there's a lot of consumer research to suggest this is so. We also think digital connection tools are going to become even more important long term as all of us have learned and become more facile in our ability to use these tools, working remotely, but also working with customers remotely. So our cleaner, safer, healthier positioning, we believe, will even be more right. And also, our ESG advantages, we believe, are going to be very, very important going forward, too. So as we look at our long-term opportunities, it really does start with our positioning. Our positioning around cleaner, safer, healthier, safe food, clean water, healthy environment, we think, is as strong as it's ever been. We also know we have huge opportunities in virtually every business. This chart shows, say in foodservice, the total opportunity in 2019, which is depicted by the green bar and what we've captured today in the blue. So people ask me, "Well, will restaurants shrink?" They might, short term. There might be fewer. So okay, bring the green bar back a little bit to the left. We still have huge, significant room to grow in that business, both in existing customers and also with new customers. So we don't believe, long term, our ability to grow in foodservice will be impaired in any way. Will it, short term? Certainly, it will be this year, as we've already mentioned, but we don't believe long term. And you can see the other industries, we have similar stories. We have a very significant ESG position and advantage. The advantage is really borne by the fact that what we do for customers automatically brings environmental benefits and economic benefits simultaneously. When we put our programs in, we focus on delivering world-class standards in hygiene, in safety or in food safety, but we do it by reducing water and energy footprints. And that creates cost advantage for us so that they can afford to buy our more expensive technology. But in total, the use cost because of the savings in water and energy, it's less to use our technology than it is other technology, which may be priced lower but cost more in use. So by nature, we create environmental benefits. We're also all over employee safety. We make sure that we run the right way. If we make a mistake, we admit it and fix it and move on. So as a result, we have very strong government practices, we believe; we have very good social practices; and we will work to continue to improve in these areas. We think this is going to continue to be a very important strength of ours and an advantage of ours long term. And it's also important to our customers. And here, we're depicting a number of our large customers. And I can go through 10 pages of logos like this, showing where we have strong relationships already. So I think out of the Fortune 50, we're at something like 42 or 43 of those companies are customers of ours. So we've got very strong penetration here, and we'll continue to try to build this out because we're really focused on where the growth is. And it's 2 places: It's in unsold customers, where we've got a $72 billion opportunity; but importantly, in customers we've already penetrated, there's another $45 billion on top of the $13 billion we already sell. This is true in restaurants, it's true in hotels, it's true in virtually every category or segment that we compete in. And our value proposition, which I alluded to earlier, is really strengthened by the fact that our products great -- give great hygiene results, safety results, et cetera, to the customers who use them, but they do it in a way that reduces water and energy footprints. And we reduce that at times, 40% and 50%, which honestly more than pays for the cost of our product and it also brings not just economic but dramatic sustainability benefits. So to give you a few examples. Recently, we've introduced our MarketGuard 365 program. And this is really a program for the food retail trade which allows them to digitize food safety and other checklists that they execute daily in their operations and previously was captured on paper in all their stores, and honestly, not able to be aggregated or used in any way. We've rolled out an app that they now use in their stores that allows them to capture this data digitally. We are then able to also use and compare this data with data that we collect remotely, digitally, also with outside data. We can then show them how they compare on cost and others with average food retailers and also how they can improve their operations, both from a cost and safety operation. This already is delivering significant benefits, and it makes them better operators and creates significant value. In this customer alone, we estimate it's going to save over $2.5 million a year. Legionella is another great example. So we have a Legionella safety program that's been rolled out around the world, which is doing a number of things. We're already monitoring real-time what's going on in a number of the cooling towers that are used in buildings to basically cool the buildings. Now obviously, cooling tower season is most heavily skewed to the summer. Summer is also when Legionella risk inherently goes up because Legionella likes warmer weather. What we're able to do is monitor water quality real-time in the cooling tower. We take this and also combine it with weather data, Legionella outbreak data and others and can create predictive models around when Legionella risk will be at its highest point for a given customer site and what steps they can take to eliminate or reduce that risk. Or does that trigger heightened hygiene steps that are needed through this? So all of these things help customers reduce risk, operate more efficiently. And in total, in a customer that we've run out -- or rolled this out to, we estimate cost avoidance, around $2.6 million. But most importantly, it also prevents them from having any outbreaks which creates brand problems and all the rest, and obviously, human health issues. Another example recently, and we highlighted -- or will highlight it in upcoming sustainability report, is at ADM, we put together a program where we are rolling out, globally in ADM facilities, a combined water, food safety platform program. What this will enable us to do is drive even further heightened food safety standards but also drive significant economic and sustainability advantages. In total, it will reduce their water consumption by 2.3 billion gallons a year. Now if you want a comparison, that's more water than we at Ecolab use in our 130 manufacturing facilities, combined, in a year. So in one facility, we'll save more water than we actually use. And this savings of water translates automatically into a savings of energy. Because when you reduce water, you reduce energy that's needed to transport, heat and treat water. And then combined, they are going to save nearly $30 million annually as a consequence of this rollout. This is a great illustration of how our programs create huge value for our customers and why we believe our advantage is really relevant no matter what the economic situation is. So why did ADM buy? Did they buy because of the sustainability advantages? Or did they buy because of the economic advantages? The truth is they bought because of both of them, that one or the other isn't enough. When you have the strength of both, you've got a really compelling story. And as a result, this has enabled us over 2019 to save an estimated 200 billion gallons of water combined through our customer impact. That is 100x the water that we use in our facilities. This resulted in over 28 trillion BTUs of energy conserved. We prevented over 1 million food-borne illnesses. We have big impact around the world. We help facilities generate over 20% of the world's power by managing the water and electrical plants. We produce and help the food safety at over 45% of the processed milk supply. So there's a number of these facilities and touch points that we have that really illustrate how strong our impact is around the world. So we have a very strong, we believe, strategic and operating position, and this results in a strong financial position. So if you look at our cash flow, we've been very steady in terms of improving cash flow performance over the years. And if you look at where we were pre-Nalco transaction or our transaction back in '08, '09, even during the darkest periods, we are a cash generator. And our forecast this year, even in every one of our scenarios, is we would be a positive cash generator which gives us a lot of freedom to move. Doesn't mean that we wouldn't have a week of negative cash flow, but we wouldn't over any reasonable period of time. And in last year, our cash increased 20% versus a strong 2018. So we sit in a good position, and this is really driven by increased earnings and smart uses of cash within the company. It's the combination. But the #1 driver is grow the business, and we've got ample opportunity to do that. So as a consequence, we've also been able to be not only a cash machine, but a solid return cash to customers and return cash through share buybacks. Now typically, we use share buybacks to neutralize equity used within the company for other places. We will have modest impacts in terms of share count down as a consequence of this. But we've also been strong in upping our dividend routinely year after year, and we would expect to continue that progress after we quickly settle out post-spin as we move forward as well. So summary. We look at our long-term opportunities as, honestly, probably even stronger as a consequence of COVID. Nobody would hope for COVID, but we believe the heightened hygiene standards; the reliance in digital, where we've made significant investments; and frankly, other advantages that we have, will be even more heightened as a consequence. We know that 2020 is going to be a difficult year. We have said repeatedly that we are not going to manage 2020 for optics. What we're focusing on in 2020 is we're managing 2020 in a way that strengthens us for the long term. So while we have reduced our capital spend expectations, we have not reduced key investments in any of the digital moves or any of the other moves that we think are going to be absolutely important. Our antimicrobial R&D spend will be up this year, not down. Our spend on increasing antimicrobial manufacturing capabilities is going to be up this year, not down year-on-year. And our digital spend will remain up this year, not down. We want to make sure that we're doing smart things. We think slashing those this year to make our P&L look modestly better is a really dumb trade for shareholders and for customers long term, so we're not going to go do it. At the same time, obviously, we are cutting spend other places that we don't feel will advantage us long term. So you can imagine, all discretionary spend is down. You can imagine our travel spend, like everybody else's, is considerably down, et cetera. So all those things are happening. So in summary, we chase a huge market. We have advantaged position versus competition. We think our operating benefits, our model of creating value for customers, our inherent ESG advantages that we have built over the last 20 years, all put us in an advantaged position long term. And COVID's heightened hygiene awareness, et cetera, we think, only heightens these advantages. But the strong consistent financials, strong cash -- free cash flow and return advantages that we have, we think, carry on going forward. And we plan to continue to be a company people are going to be proud to own, proud to work for and proud to buy from. So there you have it. Thank you, Jonas.

Thank you. Much appreciated. I'll start just asking, in your last presentation in March, you had a slide saying that the world isn't ending. I notice that slide is no longer here. Is the world ending?

No. We don't believe the world's ending. Yes, I think this is -- and we've worked, I think, effectively in the company. When you're going through one of these events, and we're all living through history, and as we're learning firsthand, living through history is no fun. But anybody born in the year 1900 had to live through, right, World War I, the Great Depression. Then they got to enjoy World War II. And depending on where you live. Now they're 45 years old. So they lived through a lot of history, and not one of those events was much fun as they went through. And this one, in many ways, is obviously very challenging, but it will be behind us someday. And how we live through it, we think, is very important. Are we going to be proud of the steps that we've taken? Are we going to manage the company the right way for the long term? I mean, okay, I could guess -- I could go try to maximize Q2 at the detriment of the future, it seems to me a really stupid way to think about how you manage through these crises.

That makes sense. So let's focus on the near term for a moment then go to the longer-term questions. So we're more than halfway through 2Q and the shutdowns do appear to be easing. Can you give us a business update on where you're seeing the quarter and how you're thinking about Q3, Q4 at this point?

Yes. Jonas, as you know, like virtually every other company, I mean, we've suspended offering guidance because it's such a dynamic area. Even when we were moving into Q2, we expected that there would be some -- the beginning of openings in our second quarter, most likely. But you really won't see the full impact on whatever does open until Q3. I mean, even the restaurants that are opening, they're opening at either 30% of capacity, or at max, 50% of capacity. But as we watched in China, it takes a while for customers to feel comfortable coming back into the foodservice establishment. So what we've said, and we still believe, Q2 is going to be our most severely impacted quarter of the year. And that's because, for an extended period of time, you basically had all restaurants, hotels for that matter, virtually -- cruise lines, et cetera, almost at 0 consumption for a period of time. And so that's a very unique event and we know that's going to have a pretty dramatic impact on our quarter, but we would expect that to be -- Q2 to be the bottom, if you will, and quickly start moving back up. As I just mentioned, we aren't going to spend any time trying to make Q2 look any prettier than it is. It's just going to be au naturel. What we're really focused on, but we'll give -- we'll talk about what we're seeing in recovery of consumption and everything else. And we are of course seeing a recovery in consumption even within Q2 from the low points already, but it's nowhere near where it was a year ago.

Okay. We've got a lot of focus on sanitation. Do you see a long-term benefit here? Or do you expect people to genuinely change how they think about sanitation? And what kind of opportunity does that present for you?

Yes. I would say the 2 areas right now that we believe to be true is, one, yes, we think hygiene -- heightened hygiene awareness from consumers, which is really what drives customer change, is going to be an ongoing thing and will continue post-COVID. It's not going to be at the height of moving into COVID, but we do believe that, that's going to be a dynamic that's not going to go away. Second, we believe the capabilities around digital technology and the importance of leveraging it are also going to be heightened. And our advantage in the investment that we've already made as a company, I think the capabilities that we've already built, we're already seeing customer pull on those to be increasing during this period of time. And I think as companies look at the learnings they've had going through this, all of us are going to be working to improve our resilience. And one of the areas they can improve resilience in an area around food safety and food and beverage manufacturing plants, around safety or continuity of supply, say, in a data center, is really leveraging our remote technology capabilities more fully. And we believe that's going to have staying power. In those areas, we are all on in investments. We think there'll be other changes, too, that we're watching and looking to understand. And as those become clear, we'll start investing in those arenas, too.

Okay. And specifically, you stated before that you can't meet 15x growth in orders for hand sanitizers. You ramped up to 5x, I believe. So is there any change in this? Or do you expect any change?

Yes. We'd expect to ramp up even further than 5x and are on the way to doing that. What we were clear on is, I mean, literally, the 15x went up in a week. And all of a sudden, our orders on hand sanitizer, from a Monday to a Monday, were like 15x. Now of course, what did our customers expect? That we met every one of those orders. And like grocery store shelves, we were unable to do it. No supplier was able to handle it. Nobody can handle that. You don't have a bunch of plants mothballed waiting for the magical orders to appear. But we have taken a whole host of steps. I would expect we're going to be at 8 to 10x by the time we're through in terms of our capability to meet ongoing demand. And there's always an initial spike where people are building inventories, they're building stockpiles. And we saw this through H1N1, we saw it through SARS, in MERS and the rest. And then -- but you do see an ongoing effort. Every one of those events, sanitizer market was up, not down. And we'd expect this event, which is much larger than all of those, to have the same result. It won't -- it will not settle at the peak, but nor will it settle at the pre demand. It will settle at a higher level of demand than it was before we went into this.

Okay. On the flip side of the sanitation, hospitality and restaurants, the long-term forecast suggests that they're in for sustained lower occupancy and revenue, including some of them going bankrupt. What's your forecast for how the industry is going to evolve here? And what does that mean for you?

Well, I would say 2 things. Combined hospitality and foodservice represents 22% of our sales. We think the segment of that industry that's going to be most impacted is largely the independents. And our share is disproportionately in the larger players versus the independents. So even the impact, we think, will be not equally distributed across those segments, and our impact will be somewhat less than the average impact. Still, we'll be impacted. But I guess, our view is this: If you even look at our share in those segments, we have huge opportunity to grow. We are spending all kinds of time understanding steps that we're going to go take to increase our ability to help our customers. It will also mean increase our sales per unit. And we are going to focus very much on doing that in a way that brings advantage to customers in terms of financial benefits, but also brings financial benefits to the company. And we're quite confident that over any reasonable period of time, we'll be able to offset any damage done to those industries over the near term with a long-term view on how we can help them buy increasing, if you will, purchase per unit.

Okay. You mentioned in your presentation that your relationship with these customers is a partnership. So if they're in sustained economic pressure out of this, does that mean you will sustain -- lower your fees with them?

No. Our trade, Jonas, is what we will work to do is lower their costs. And what we've done historically, if you go back to the -- just say, the ADM example that we showed earlier, we're quite confident that ADM has always had the highest standard on food safety. But by pushing the program, we are going to do it together with them on food safety and water, we believe their food safety standards will even be higher. We also believe that their costs are even going to be lower. Not the cost they're spending with us, the price, but the total cost because of the reduction in water and energy. In a hotel, our laundry program reduces their water and energy demand by 50% and 40%, respectively. So those costs more than offset the premium we charge for our program. So everything that we're designing, if you will, for lodging and foodservice operations, will still generate very attractive margins for us, but it's going to be designed that it also hugely benefits customers from a safety and economic standpoint by reducing their water, energy and in many cases labor needs. And so those are the equations we work on. But if you ignore the benefit from the customer, you do it at your peril. The #1 thing that we have to do is make our customers healthier. That's what we depend upon long term to continue to build our business. So that's really the focus. But you can do both simultaneously. We've done it for decades. And that's exactly the philosophy that we're looking at right now.

Okay. Which verticals, end markets, do you consider mature or will have more modest growth in the future? Regardless of COVID, I would say.

Which what?

So which end markets would you consider more mature and with more modest growth going forward?

Well, I -- look, I could find, I don't know, tech -- there's probably some small businesses we're in relatively. But honestly, I'd say to you, Jonas, I don't think there's a business in -- we're in that we don't feel we can continue to grow both the top line and the bottom line. When we get into a business where we no longer trust our ability to compete or trust the market, then we exit. And we have a long history of this. And everybody remembers all the acquisitions, they forget divestments. I mean, we were in the kitchen equipment repair business and we divested it. Fundamentally, we divested it because we knew how to grow the top line, finally, but we didn't know how to do it profitably over the long haul, or have confidence in the world of technological advantage, in the world of Uber, that, that business is necessarily going to be the same model long term. We are exiting the upstream oil and gas market. Fundamentally, when we look at the long-term future and we look at where we want to invest, I got to a position where people brought me 4 acquisitions in that market. I said no to all 4. With a little soul searching, I'm just no longer in an investment mode and a grow mode in that business. And when you get to that point, it's time to exit it because another owner needs to own it so that they can be full in. And when you're not full in, you got to get out. The markets that we're in today, the portfolio that we have, we feel very good. So Healthcare, we think there's huge upside long term, Life Sciences, Food & Beverage. Our water business, which is a huge business, institutional around foodservice and lodging and everything else, we feel very bullish about that business long term. Food safety has got long legs as a business idea. Water scarcity has long legs as a business idea. And those are really the key components that we bet on. Hygienic spaces have long legs. And so that's by and large what we sell to the markets we serve, and we think we're in a good position through economic up and downs to continue to prosper.

And so you're divesting the Upstream Energy business tomorrow, I believe. Are there any other businesses following that, that you would be looking at potentially divesting?

It's not exactly going tomorrow, but it's going soon. We're actually in the exchange period right now where we are determining, using VWAPs, what the specific number of shares a shareholder will get of Apergy if they turn in a share of Ecolab. So that's the period we're in right now. It's a 3-day period. Next week is when the split occurs. Yes. No, I don't think there's -- I mean, as we look at our portfolio, no. We feel our portfolio is in a very good position. We have nothing on the list, near term, that we think is going to cause us to want to move into divestment.

Okay. Okay. Yes, the shareholder vote is tomorrow, my mistake. Looking at the cash, any -- you mentioned in your presentation here that you're in a much better financial situation than many of your competitors. What kind of an opportunity does that translate to? I mean, do you believe there's an opportunity here to buy out some of the smaller ones?

Well, I would say this. I think we've been in the -- we've always used M&A as a means to an end. If buying a company, strategically, is a good way for us to realize our strategic ambition, we are absolutely open to doing it. I think in the last 15 years, we bought like 110 companies. We've probably divested 18, 19 during that period, too. So we certainly are more on the buy period -- or buy side of this thing. Yes, if there are opportunities to continue to further our ends. Look, we're absolutely committed to being a leader in our business. And a leader means not just in size. I mean, the reason you become large is because you've got to be better. Our customers have to recognize that buying from you advantages them or they won't continue to do it. So our focus always, when we buy something is, does this enable us to be a better supplier to our customers or the segments that we want to compete in? If the answer to that is yes, because it increases our geographic reach or brings us technology or brings us talent, then we are in. When you go through periods of dislocation like this, certainly, on the other side, there are opportunities at times to maybe buy companies or enterprises that you couldn't have bought before because their fortunes either change or their attitudes change towards how they feel about their future, et cetera. All these things are unpredictable. But Nalco purchase was really on the backside of '08, '09. We announced it in the middle of '11. Takes a while for these things to shake out. But the truth was '08, '09 had real bearing on our ability to buy Nalco for a number of reasons. And so these things tend to have impacts that are not always predictable. We sit here at a very strong cash position, strong balance sheet position and a strong operating cash generation position, which means we'll have strategic ability going forward and the wherewithal to do something should the opportunities present themselves.

Okay. And so my impression is that you've built up some excess cash to prepare for a catastrophic scenario, which -- well, quite frankly, it doesn't seem to be happening right now. So that leaves you in a pretty good position. What's your thinking on how to use that cash?

I think for the near term, call it through this year, I think we want to fully understand COVID. We don't think the story is fully written yet. We hope it is, but we don't know that it is. That the reason we went and secured the cash position was as a safety net in case something terrible happened. And until we're through a period where we're highly confident terrible is not going to happen, we'll keep the cash. Once we're through that period, which could be in a year from now, we'll start -- we'll be responsible stewards of our shareholders' cash, as we've always been, and start looking at, do we pay down debt? What do we do? And I assume we'll probably pay down some debt once we're through this period.

Okay. And for our final question of the day as we're running out of time here, we're asking the same question to all the companies. I think you touched on a lot of this already, but as you think through and beyond the pandemic, how do you expect your priorities to shift? Especially as they relate to cost-cutting, increasing levels of investment or just doing things differently.

It's going to be interesting. I would say a couple of things. One, and I've alluded to this a couple of times, I think certainly, the capabilities that we've built digitally give us ways to, we think, manage and serve customers differently going forward. Now this does not, by any means say digital is going to replace field people. What it's going to do is enhance their ability to, one, be a lot more efficient in units, to get expert help right to the point of need immediately as opposed to on a second visit. It's also going to enable us to monitor customers over periods of time and be much more predictive as to when a service visit is required proactively versus on an emergency basis. All those things, we believe, we have more insight now than we did before. Because this period, if you will, probably accelerated what we thought we'd learn over the next 8 quarters into like a quarter. And so that's advantageous. I think working from home generally. I think it's not that offices are going to become completely ghost towns. I think that's a not-realistic prediction. People like to hang out with people. If you recall, all of your plane flights at night over the United States or Europe, there's clusters of light. So people tend to migrate and live together, that's how we've socialized. And we're also going to continue, to some degree, want to work together. But we're also going to have more freedom, I think, to do some of our work at home, do some of the work in the office, et cetera. So that will be a different way of working, et cetera. Those are all going to be changes. But hygienic standards, digital technology and the like, all of our expectations, when we walk into the office, when we walk into a restaurant, when we walk into a hotel or a government building or any other place, I think our expectations around visibility of clean and expectations of hygiene standards are going to be heightened for a long period of time.

Very good. Thank you so much. For those of you who are listening, don't forget the Procensus poll on the left-hand side of the screen. And thank you so much for all of you sticking with us here. With that, Doug, thank you.

Thank you, Jonas.