Q3 2019 Earnings Call
Welcome to the Herc Holdings third quarter 2019 earnings Conference call. Today's conference is being recorded after today's presentation.
Ask questions to ask a question you My press Star then one on your telephone keypad withdraw your question. Please press Star then I.
I would now like turn the conference over to Elizabeth forgot. Please go ahead.
Thank you Kevin and thank you welcome good morning, I'd like to welcome everyone to our third quarter earnings Conference call. Our press release in presentation Soccer filed earlier today and those are posted on the events page of our IR website IR that her rentals dotcom along with our current quarter. Thank you.
This morning, I'm, sorry, My Larry Silber, President Chief Executive Officer, and Mark hearing on senior Vice President Chief Financial Officer. They will review the third quarter. The nine month adults is known her industry outlook. The prepared remarks will be followed by helping to money, which will also includes the stressful senior Vice President and Chief operating officer.
Before I turn the call it a married or a few items I'd like to cover Chris Cidade Conference call will include forward looking statements. These statements are based on BARDA doesn't see it today and therefore in Belgium, and uncertainty I would caution you that our actual results could differ materially from the forward looking statements made on this call thesis.
Slide three of the presentation for a complete safe Harbor statement as opposed to risk factor section of our and report on Form 10-K for the year ended December 30 120 team.
In addition to the for NASA results presented on a GAAP basis will be discussing non-GAAP information that we believe it useful in evaluating the company operating performance reconciliations of these non-GAAP measures to the closest GAAP equivalent can be found in the conference call material.
Finally, a replay of this call can be accessed via dilution or three webcast under website replay instructions were included in our earnings release. This morning, we have not given permission for any other recording of this call and do not approve or synchrony transcribing typical I'll now turn the call over the Mary.
Lucky Elizabeth I'm. Good morning, I thought you also joining us or team continues to focus on quality of earnings to the execution of company watch all felt that makes you those two increased operating margins and profitability.
And then she was once again drove industry, leading year over year, a place improvement that contributed to higher adjusted EBITDA margins and dollar utilization in the third quarter.
We achieved excellent worried about flow through Oh, we booked a margin by reducing expenses in the quarter in 2019, we focused on the management of our net fleet capital expenditures to maximize return on capital and held always do adult.
This plot prior year, you're focusing on improving utilization of all different things before we commit capital to expand enough inside this does not mean the war more cautious about that's going to learn mark as we consider to remain school or interactions with contractors in coastal is reinforced our continued believes that the mark.
Good work, we participate more stable and growing albeit at a slower right.
These factors contributed to our conviction that 2019 will be another good year for her club goals and our adjusted EBITDA guidance for the full year two flux an improvement of approximately eight to talk or so or range of 740 million to $750 million.
Oh for kids are going up for those on slide five shows as well Bob to approve dollar utilization on EBITDA margin enhanced free cash flow and we do not leverage.
With respect to continue the like I know you're on your progress. It is important financial metrics and are committed to closing the gap between Herc went all although industry leading peers.
On slide, which we discussed one of our most important internal metrics. So good performance, we expect our entire team to focus on safety. So small since we don't customers in communities would be equipment and services. They require our team members provides a departure to talk to that makes sense you need anything a little.
The story throughout our locations we focus.
On the simple concept of a purpose day, which means no osha recordable incidents no a football water vehicle accidents and no VIP violations, Michelle we celebrate those locations reported a perfect safety them all of our branches recorded at least 90 restaurant perfect days during the third quarter.
2009, feeling with many of our locations reported 100% purpose days. Our goal is for can certainly with safety improvements throughout our entire organization.
Now please turn to slide number seven full summary of our financial results for the fourth quarter.
Well I'm dangerous parts, when we're off to a place that piece just reductions in lieu of webinars to improve profitability.
The result equipment rental revenue grew 2.4 plus.
$459.6 million.
Total love and those were $508.1 million down slightly compared to the fall period in 2018.
Total revenues were impacted by the planned reductions of music woman disposals in the core which mark really on well described more fully later in all cases intrusion.
Reported net income in the third quarter of 2000 unlikely that $9.4 million or 32 cents per diluted share.
This quarter included $53.6 million of pre tax costs related to avoid dumpster. Another 2020 to 2024 knows and the production costs related to the issuance of all 5.5% marriage, and then maybe I'll agreement.
Excluding the impact of cost were moving through the refinancing spent all I'm restructuring cost and related taxes. Adjusted net income in the third quarter 2019 increased 17.7% to $43.2 million and our net income per diluted share increased 16 alike.
After some good dollar coordinate compared to last year.
Adjusted EBITDA increased 3.9 puts on $309.4 million, reflecting reductions in asking your name and our initiative to control direct operating expenses adjusted EBITDA margin was 41.2 flu shot in the third quarter.
Well I think about four to help push up compared with last years third quarter, reflecting demand in our targeted markets underscores the wall pricing tool.
Well, what do you have at least losses on whats markets are stable and our customers recognize the value of professional services and support for Rod.
There was an approach in the mix contributed to the year over year improvement in dollar utilization in the third quarter 2019, with an increase of 160 basis points. The 40.8 those.
Moving to slide number eight which illustrates the continuing improvements being made in the quarter of 2019 third quarter compared with 2018, well to me up a lot of illustrates our year over year place and over the last two years, well, we've improved rates year over year for even longer.
Now 14 straight quarters with the latest quarter up 4% over last year.
Slide also shows average billing that always see was up four tenths of 1% to 3.94 billion in the third quarter of 2019 over last year, we took a conservative approach this year and Oh, we're going to fleet in the quarter about flat last year by controlling all fleets.
And disposing of older equipment.
Our goal was to improve our volume growth improving utilization or outlooks fleet on one during the third quarter 2000 like June was down 1.6% compared with a strong 3000 only to the quarter.
While we didn't get the time utilization improvement we are hopeful in the quarter. We're still plays with the overall revenue growth, which was driven by lower pricing gains.
Now please turn to slide number nine.
We'll go through the study improvements we've made year over year in dollar utilization as well as the seasonal impact of volume on the good news third quarter dollar utilization wage, 40.8% and it goes to 160 basis points at all from a strong third quarter performance in 2018 misread place worthless.
The improved pricing and mix me too.
However, you know jobs at September Thirtyth, 2019 was 44 months compared with 46 months, So lets say period last year.
Together, our pro solutions and Procontractor equipment now accounted for approximately $836 million I've always to blame for about 21% of our total fleet I Wouldnt be ended the third quarter of 2019, you continue to be felt like out of our food categories in our attendance.
Now please turn to slide number 10.
Oh started his daughter further diversification of our customers and markets as well as industry mix third quarter local rental revenue grew by 4.9% year over year when a job was to about 61% of when 11 of budgeted local nothing structural projects at the local level contributed to positive gains.
Well actually go revenue represented about 39% of the total in the third quarter and increased 1.7% compared with last year.
Oh rental revenue by major customer segment for 2018, they've shown in the proposition toward the upper right hand corner of the slot.
Contractors represented 34% of a kilo rental revenue fell by industrial customers were 27%.
Other customers, which include commercial and we self service hospitality health care Recreation Entertainment on special events represent a 21% of a little little Webinars and infrastructure and government increased 32% of its all.
Well, if the new customer accounts continued to be solid throughout the quarter, both at the local and national account level.
Continue to focus on maintaining a solid pipeline for future growth opportunities in all of our targeted end markets as well as long as a portfolio of equipment used by our current customer base. Please turn to slide number 11.
Certain economic and industry metrics I began to show some mixed signals with all the new taught him.
Architecture billing any Dutch put this activity nine to 12 months. So it's all below 50 in August the index recently has been reporting and it started waiting to alone the 50 love it.
We also industrial onboard spending forecast for 2019, that's the my growth of 5.5 for example, the 2018 and struggling tenths of 1% in 2020.
The contrast, what conversations with our industrial customers I'm, calling tractors in all markets indicates onto those for continued growth in spending in both the short and medium term horizon.
You asked nonresidential spending is expected to be positive in 2009 to one.
1.1 quick shot this strong growth in public spending dollars current estimates were 2022, just a slowdown in spending was a decline of 2.9, whose job, but clearly volumes in absolute dollar levels are sufficient to create 30 more rental demand.
Longer term the North American IRA forecast for industry did the rental revenue growth remains robust with compound annual growth projected at 3.8% drew 2023.
Our strategy to focus on urban markets cover jobs report are growing size urban customers increasingly use lateral dalsa space and cost constraints.
Secular trends will contribute to study industry growth as rentals expand beyond traditional rental equipment categories.
Please turn to slide number 12.
We've added four new Greenfield location, so far this year in high growth urban markets such as Boston.
Our North Carolina, Orlando, Florida and relocated several branches in other urban markets. So that will get how is mostly used to support our urban density novel knock on this slide also shows you the growth expectations by state and province over the last five years based on forecast by the motor levels.
She is.
It's early for cross flows that board assist with Sun over the next five years in the West South West in Southeast region of the U.S. in Western Canada.
Expect our end markets to remain strong in 220, Twond and we'll continue to focus on self help initiatives to improve our operating margins in a positive environment.
Let me turn the call over to our CFO material will discuss our financial results in more detail another beyond I'll summarize before we open it up your question.
Thank you Larry and good morning, everyone. Please turn to slide 14 for the details of the third quarter 2019 themselves.
Equipment rental revenue increased 2.4, proceeding and 449 million to 459.6 million in big quarter of 2019.
Year over year growth was driven primarily by improved pricing, but was partially offset by a reduction in recurring revenue.
As part of L. soak up initiatives for 2019, we'd be successfully focusing on utilizing your own rental fleet and reaching that.
Excluding recurring revenue from our results fuel richer, where the new increased 4.5% year over year.
Pricing clearly drug Robbins wherever you grow its fleet on rates declined 1.6 became compete with strong third quarter last year.
It's their image and that's certainly for 2019 with self help with a focus on utilizing existing fleet.
The quarter, we got the REIT structure, right, but not the utilization.
We've always stated that we would prefer a point of right overboard upon utilization their expectation going into the quarter was that we could drive volume growth bar proving out some utilization, we do not quite get the results we speak to.
It's a challenge waiting to go volume when the organization is holding or we see flat we remain focused on the challenge or whatever and expect their results to improve with ongoing focus.
In addition, the big quarter seasonally one of the slowest for equipment rental sales and we would you still sales of lethal equipment and sales of new equipment products and services a big quarter.
Our strategic reductions and take the total revenues, which decreased 1.6% year over year to 508.1 million.
So to that in more details and their revenue comparisons slot.
We reported net income of 1.4 million well suited usage food all each year. This gives this quarter compete with need income of 46.2 million or adults 60 people each year in 2009 thing.
She was results also included 39.6 million in pretax costs related to the responded to I've got the.
Excluding these costs as well as spinoff that speeds restructuring costs and related taxes adjusted do they come in the third quarter 2019 was 43.2 million or go 48 to deleverage this year compared with 56.7 million. We're adults, we see even with all due to cheer last year.
Well details regarding a meeting can bridge and the non-GAAP reconciliations are included in our opinion.
Adjusted EBITDA in the good quarter of 2019 increased 39 to see people are going to see well suited for 9 million to 209.4 million over the same period in 2018.
Adjusted EBITDA margin improved 220 basis points year over year to 41.20.
Sure.
The good quarter reflected excellent progress in terms of junk food, we reported repudiate both fruit 83.3 to see definitive benefited from reductions in re rent expenses as well as reductions I missed your night.
This growth in dealing with.
Yeah, we did the I imagine it rose to 44.9 to see during the quarter. This year, an increase of 990 basis points food food quarter in 2019.
The increase every day, we see and it's good for 2001 team by George would fall to see over the prior year.
We are focusing carefully on fleet at the location little to ensure that we're maximizing fleet utilization before Nike further additions or we see the in the third quarter was 3.94 billion.
Ill focus on rights delivered excellent results in the quarter pricing improved 4.5 to senior year, holding up, especially well considering that a year ago right from a big quota were up by 3.2%.
Slide 15 focuses on the changes and further review for the third quarter nine month period.
Equipment rigs working you grew 3.4% to 459 point Sixmillion, although the increase was impacted by strategic reductions that really wherever you compared with last year's quarter.
Pure rental revenue was up 4.5 to see it year over year.
And third quarter of 2000, 19000 with liquidity Claude 50.6 million excluding currency.
The lower year over year sales in this quarter or fix it the companies need carefully planned for 2019, because we continue to improve kicking the can age both working on improving time utilization.
A lot of this bullshit girls with rental equipment in the third quarter with through auction channels and accounted for 52% total sales for the computer 45 to see than the prior year.
We generated proceeds of approximately 40% of always see due to the logic concentration of walks in sales during the quarter.
On Slide 16, we review the Q3 adjusted EBITDA Bridge, the adjusted EBIT, yet because the quarter was 209.4 million an increase of 3.9 to see student $49 million compared to 201.5 million in the third quarter 2018.
But it shows the largest contributor was increased equipment rental revenue growth of 11.1 million as compared to prior year.
Direct operating costs rose slightly by 3 million, excluding currency compared to the third quarter of 2018 as you continue to control expenses with improved operating efficiencies, such as lower reread and delivery and freight expenses.
Doctors that partially offset in the third quarter by increased facility costs as well as increased personnel and personnel related expenses.
Selling general and administrative costs were lower in the third quarter 2019, primarily due to the reduction of consulting and professional fees.
These reductions were partially offset by additional selling expenses.
The good news is the contribution from that go into business without the impact of sales of equipment and supplies.
We believe read the DJ provides a better comparison with their industry peers as it excludes the impact of varies appreciation policies.
Third quarter 2019 read that they flow through is once again strong at 83.3% drove the margin of 44.9.
An increase of 90 basis points compared with the Q3 2018.
On slide 17, we've broken out athlete expenditures in disposals, although no easy cost basis.
Provided a rolling balance of the always evaluate outside of late.
Quarterly breakdown of this information is there so in your opinion.
Total leads that we see with 3.94 billion as if it didn't appear to 2009 feet.
The average always get their rental fleet during the quarter was about flat. It was an increase the joke with folks getting over the prior year quarter.
The third quarter 2009 feet expenditures that we see were 172 million with fleet disposals of 89 million.
The average age of that disposals in the third quarter was 80 mile.
On a cash basis, if he kept pace for the nine months was 349.8 million compared with 428.4 million in the prior year.
Non fleet capital expenditures for the quarter totaled 34.9 million down from 58.5 million in 2018.
We reduced the average age of athlete to approximately 44 months ending the quarter.
46 month in the comparable period last year.
On slide 18, we can see the total did was 2.2 billion as of September 32019 about the signs as the prior year.
The average decreased to three times compared with 3.4 times in the comparable quarter and it was solidly within our targeted range of 2.5 buttons to 3.5 times.
We had ample liquidity of over 1 billion as a ship seem to be 2019.
The nine month ended September 32019, free cash flow the deposit of 65.5 million compared with a negative free cash flow of $108 million last year, a substantial improvement.
On slide 19 based on their expectation positive demand in their markets continued margin improvement focus to tightly manage operating expenses directly to me guidance range for adjusted EBITDA for 2000 like the.
Our new guidance range it shouldn't hundred 40 million to 750 million or an increase of eight became proceed compared to 2019.
The an area God insist nifty kept its been just as a top of the previous range to 400 million to 410 million planned reduction in capital spending over the prior year Luckily the expectation of improve the but the I should continue to contribute to strong free cash flow through the year.
Overall strategy is expected to continue to provide ample liquidity and financial flexibility to fund strategic growth to improve their operating margins this year that customers and create value for shareholders and now I'll pass the call declaring.
Thanks, Mark I'd like to summarize where we are today from a strategic initiatives has continued to drive growth in rental revenues improved dollar utilization.
Third the adjusted EBITDA margin by 220 basis points to 41.2%.
Increase dollar utilization 160 basis points for 40.8%, we improved year to date free cash flow from negative $180 million in 2018 to partner with 65.5 million in 2019.
Our operating initiatives will continue to contribute to strong EBITDA flow through for the full year 2019, net leverage is expected to be at the lower end of our targeted way too and I have to three and a half times by yearend.
On the full year 2019 dollar utilization and EBITDA margins are expected to improve leading to our updated adjusted EBITDA guidance.
We have assembled an outstanding too and I want to thank each and every one our team her for their hard work and commitment to our business and our customers. We're committed to achieving our stated goals through solid execution to improve value for our shareholders customers and employees now we'd like to open the lines for questions.
Thank you as a reminder, ladies and gentlemen, if you do wish to ask a question.
By pressing star one on your telephone keypad.
We will now take our first [laughter] Jerry Revich of Goldman Sachs. Please go ahead Sir.
Hi, Good morning, this is Dan Rudolf merger arbitrage.
Good morning, Gong How're you.
Good how are you.
You are wonderful thanks.
Great just wanted to start on the topic of pricing discipline.
There are any reason to believe that industry pricing discipline.
What will be less volatile and this cycle and then it was maybe in the past or are there any tools or specific industry dynamics that you all think would dampen pricing volatility as we progressed through the later stage another cycle.
Yeah, I look I think that are just as a matter of course the industry as much.
Much better no situated today than it was during any previous cycle, partly as a result, the consolidation, but more importantly, as a result of the tools that we all have employee per day in the market. So I would like to round out I would expect that they'll be much more discipline.
As we go into a when we go into you know any kind of a cycle goes you know what I tell my.
Larry saying it gets with all the consolidation is kind of a big get bigger ER and the investment everyone's made and technology you can see that large pricing with our proprietary optimum store, but we're just we're all the industry is driving better pricing and I think that's just leads to better discipline.
Got it and and as you begin to think about 2020 or equipment procurement can you give us an idea what type of price inflation, you you might face on new equipment purchases and then how is your ability to manage that potential inflation evolved in recent years.
Yeah look I will say, we're in a very early stages of Ah discussing 2020 fleet requirements with our key vendor.
But I would expect not or inflation and they'll be similar to what are what we experienced last year.
Got it thank you.
Thank you.
Our next question comes from John Healy of North Coast Research. Please go ahead.
I think you well, Jonathan Ah Hey, guys I can definitely headquarter one of the asking about.
2020 potential you look up and revenue growth level in the business today and you know, it's very clear that.
Yeah closing the gap relative to peers on margins is the main objective on what sort of a revenue, but the level do you think the company needs to get.
To show further contraction and that and that's spread versus peers.
Yes, Hi, John I mean, we're still looking we're still looking for sort of.
Hi single digit revenue growth going it's 2020 in market feel similar to what we've got a 2019, so it should be supportive.
If the continued right growth a challenging ourselves on a per talking utilization and with sort of mid cap examples of these animals.
Consistent with my team, we can still be sort of low single digit.
Growth in sleep, so that's sort of adds up to sort of high single digits and that's that's our expectation going into 2020.
Great and then when they think about just P.S. Jumei line you guys have done a really nice job, they're managing that or hospital in the last three quarters Hum how much more you know trimming is there and how do we think about us unique or kindness relative to revenue growth at this point in the cycle.
Yeah. There are obviously jami feel really good about where we are will probably try to hold a flattish going forward and try to you know level volume or even our locations there might be some you know marks all in place and cruisers and dog was obvious to listen Scott.
As you grow volume, but we're going outside of the oldest watertown leverage volume Mark you want to add though.
Yes, I think that yeah most of the.
Consulting costs in 2019 sort of run off by the end of interest this year in terms of the year over year cost. So the sort of getting into I sort of flat aligned for various you're not going forward.
And that just final question from yet I think he had mentioned you'd be at the low under the leverage range and you know 2020 of EBIT that girls I would imagine that free cash flow I would only be stronger surgeon or the priorities are any ways that we should be thinking about you guys deploying that incremental free cash flow in 2020 or is it a situation.
Where are you might just with the cash on the books kind of build and not have I don't have a rainy day fund to some degree.
I think we've been pretty consistent with that sort of messaging that we will continue to pay down deep with with free cash flow.
The short to medium too.
So and that's the its design primary goal going forward.
Thank you guys.
Hi, good job.
We were not take our next question from Seth Weber of RBC capital markets. Please go ahead.
Hi, This is brining on for SAS good morning.
Good morning wondering if you just wondering if you could give more color on the positive commentary that you're hearing from your customer or is there any particular end markets that you're seeing that I'm more optimistic than ours.
And then can you remind us your exposure to upstream oil and gas and comment on customer demand there.
All right that this occurs so you know end market demand and what we're hearing from our customer pretty much groups across all regions, where we serve in North America.
No the LNG part.
Our own Jean.
Market actually ticked up a hair or year over year.
So we're seeing even though there is a bit of weakness in that market. I think are performing well. We were very focused on you know the capital that we deployed into that market over the last year and say, we're doing well there. So overall pretty good market across North America, Yeah, and I'd add to that remain.
Over over the last four plus years, we've dramatically reduced or dependency on the upstream oil and gas market. So we've been very selective about where we participate where we play.
Okay. Thank you.
Our next question comes from Stephen Ramsey of Thompson Research Group. Please go ahead.
Good morning.
We're no longer.
Good. Thank you Oh, sorry, I'm on the Capex plan.
Net capex now you're 50 million.
Fleet on rent down a tick and then raising a go into the high end of the net Capex range.
It just sounds like it would be tilting to oriented. So what is driving you guys are the factors driving you to add fleet now at this point.
Sure.
Yeah, I think Stephen it's in order to notice that AFCAP expanding this year is down significantly from prior year. So I think it's almost 20% reduction and mid cap rates year over year at this at the top either they are right. So that's the main driver was of the fleets down.
Year over year, and it's no real change to our audience range. We're just sitting in on the top end and there was still opportunities to connect capex and but fleet into certain locations and were taking advantage of it gives us substantial decrease year over year, what you might the main driver the secret.
James.
Great and then maybe on Oh.
Construction projects.
Let me talk to how that impacts your specialty we need for or is.
<unk> is especially.
As much on.
Structure.
Yeah, I Love you know infrastructure continues to be very high growth market for us, particularly as you know we're focused on urban markets high density markets in North America, and you know with the not even have a fair amount I don't know funded in the local and state level so infrastructure.
The strong first continues to be strong and grow I would say that our specialty equipment doesn't necessarily impact that infrastructure business too much certainly there's a little bit on offenders, when our specialty gear in pro solutions, a procontractor product more supports our general no.
Restoration remediation and local contractor business.
So it's more of our classic gear, which is the 80% of our total a that supports the infrastructure up given.
Great and then lastly, I'm thinking one on re rent.
The bulk of this opportunity.
The benefit of used <unk> revenue is that now passed this and this is more.
Kind of ongoing we were impact or where is that still kind of a tailwind to results and reduce that from the high level.
I think the B.
The rate of change will slow down going forward. So a lot of a dramatic reductions.
That's not really a tailwind that to tell what sort of reported revenues ideas.
But it's sort of a revenue shift in a in a margin improvement or so so the way to trying to change was there will be a speedy sort of reread level that will get to but as you know it is likely to continue at although at a slow right over the next couple of quarters.
Excellent thanks for the color.
Sure.
Again, if you do have a question. Please signal by pressing Star then one.
Our next question comes from Brian Sponheimer of Gabelli funds. Please go ahead.
Hi, good morning, everyone.
Morning, Brian how are you I'm actually what I hope you're doing well.
You know.
One clarification on the net Capex is that is that buying more or selling less fleet.
That's I mean, we're really just hit towards the hiring of the range shoot Q3 fleet was down but that's really good seasonal so you'll see a uptick into Q4 as.
As to the normal seasonality in terms of the cadence avail big sales.
I'm sorry, it was really just sitting in on the higher into the range rather than.
The anymore or or selling telling me.
Okay and it didn't wait to see you it is down 20% year over year sorry.
Hi, its high end of the rights that we started with them at a significant reduction from from prior yet.
Okay, I really small niche in the quarter any impact from hurricane that wasn't as far as branches that had shut down and then.
Nothing to clean up.
Yeah no it was.
The hurricane was sort of a good nothing quite frankly, a as much happier came off around in the impacted area has went on a rise in preparation of a major storm, so you're not going off the internet world.
Okay.
And.
As you.
Look at your disposal markets, putting more through the auction channel. This this quarter.
Versus.
And another messing song it yourself et cetera, how do you see that market shaping up and and what's your what's your thought.
The broader used equipment market right now.
Yeah, let me that sort of answer you know the first part maybe Bruce can answer the second part you know the first part is really a strategic decision for us to keep ourselves people focused on Renault, which is where we make our money on where the activity is and use our resources. Most appropriately. So you know we determine that.
While we still do a fair amount of wholesale and retail business. The vast majority of our of our activity due to the auction market. It's just more efficient and Ah margin differential isn't enough to distract or people on a regular basis to focus on even the retail or wholesale market. So you know I think.
Longer term on going forward, you, probably see more a lot of what we've.
Evolve through at a maybe Bruce can you know comment on the market in general Yeah, Hey, Brian So just overall market.
Stable and ER positive market for US right now every week, we see back to me into the future.
All right, great well before talking L. later in the myself again.
Right.
Our next question comes from my source of Baird. Please go ahead.
Larry acknowledging that you're trying to increase on the utilization rates on your existing fleet, but also taking into account that your your end users seem to be expressing out a pretty optimistic outlook.
As we look to 2020 and as you continue to change or rental mix and reduce the average age of your fleet.
2020, Capex is that kind of go up and if you. If you care to lay out arrange that would be that would be great and then I do have a follow up.
Oh, yeah, and they were still putting putting together the two to sort of plans in detail, but at parent expectation is that net capex will be in the same sort of range is what you're seeing in 2009 thing so no dramatic increase or decrease the media.
Okay and then my follow up is and this one's for you Mark on.
This has to do with kind of the de Levered. They did the deleveraging strategy might we expect that we're gonna ceasing debt pay downs on the A.B.L. or is that de leveraging going to be a little bit more towards really the expansion.
EBITDA or might we see some open market purchases of let's say some of the bonds that you recently issued.
I think the is that there will be ex absolute pay down enough that oh, yeah yell. So we are in a position.
We would we expect to be generated free cash flow, so that'll be applied to pay down the ideal.
Unlikely that will be in the bond market and in the short to medium to them.
Okay. Thank you very much.
This concludes our question answer session I would now like turn conference back over to your hosts for any closing remarks.
Hi, Thank you Kevin and thank you all for joining us today as always if you have any further questions. Please don't hesitate to call me and we look forward to see often thanks a lot.
The conference has now concluded thank you for attending today's presentation.
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