Q4 2019 Earnings Call

Greetings welcome to <unk> International fourth quarter 2019 earnings Conference call.

CEO as well as David Johnson, Chief Financial Officer.

Greetings.

To remind everyone that.

So.

Quarter 2019 earnings conference call.

Forward looking.

I'm, all participants will listen only mode.

Thanks.

A brief question answer session will follow the formal.

Such statements involve.

In two to acquire operator assistance during the conference.

Yeah.

Please press star zero from your telephone keypad.

Please refer to our.

At this conference is being recorded.

He gets press.

At this time I'll turn the conference over to John .

So I could cause.

Vice.

Yeah.

Mr.

Securely.

Thank you may begin.

[noise] aimed in our.

Thank you.

Forward looking.

Thank you everyone with me today, our bill.

And he referenced in our.

Discussion today that EBITDA.

David Johnson.

Adjusted EBITDA.

In Boston.

With that I'll turn it over to.

Turning to everyone that during this call we may make projection.

Hi, everyone.

Looking statements.

Please.

In.

Support that I.

Financial.

Actual results for both the.

Yeah.

Winter.

Involve.

For 2000 <unk>.

Yeah.

Actual results may differ materially.

Highlights.

Please refer to our assay.

David will go over the.

For.

That's very more.

These by important.

As I mentioned.

And then at.

As a.

That very strong year for our core.

Those contained in our.

You bet.

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$3 million.

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Any reference an.

And today that EBITDA.

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Adjusted EBITDA.

Mark Award Shimon.

I'll turn it over to.

Organization and our credit.

The.

Good morning, everyone.

Oh Hi following.

And please.

Report that core.

Action to the growth in.

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It's or.

Fourth quarter.

Sure.

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2000.

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And we increased our adjusted.

Let me begin with our highly.

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Keep.

Well here.

I too.

David will go over the.

Fourth quarter in more detail.

We also.

Excellent progress.

No.

On improving our library.

The transition.

We increased.

He said.

I'm going to 90 with it.

Yeah.

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<unk> billion dollars or.

Good point.

Okay.

Two.

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2000.

Where we were.

A remarkable achievement by everyone in our organization.

I do without going into <unk>.

For the.

A year ago.

Yeah.

That's all.

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The act or.

She died growth driven by the.

As a growth in EBITDA.

We were able to convert those.

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Okay.

At.

Which allowed.

So can improve our leverage position.

Like.

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And do.

Yes.

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Competitors.

So.

Marketplace.

We also.

What upon that.

Chris this year on.

South and then.

And leverage position.

We continue to grow the.

I wasn't.

Or 2020.

Exactly.

Our ratio.

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Adjusted EBITDA.

Down.

In service.

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If we were.

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Bye.

And $345 million.

Within a.

Business.

A year.

Yes that.

Even.

Our and the future.

Growth driven by the.

Sure.

Jack or.

Okay. Thank all of.

We were able to convert those.

I'm sorry.

Hi.

This year.

Which allowed.

On the call over to David.

Yes.

That's through our.

And for companies.

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Sedative Miss in the marketplace.

Thanks.

We plan to build upon that.

As Bill mentioned.

Yes.

That was very strong.

We continue to grow the.

Consolidated results.

2000.

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Specifically.

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Net sales were $502 million.

So EBITDA.

$24 million versus.

Correct.

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5 million.

As we anticipated dimension on or a.

Hours and.

Uh huh.

At core.

This.

Listen to drive that.

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Further.

In the future.

Between acquisitions also.

With all.

The $2 a revenue.

For their tremendous.

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This year.

Now I'll turn the call over to David.

Positive contributions were partially offset by.

Good border in more.

The prices and unfavorable foreign exchange.

Good morning to everyone.

Moving down.

But.

EBITDA.

Strong.

Our adjusted EBITDA.

To our.

Forward.

Consolidated results.

On slide.

Oh, 25%.

Were 500.

Huh.

For $2 million.

Towards.

$24 million versus prior year.

The two largest.

Anticipated mentioned on our last.

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The volume growth.

Sure.

The strong.

This winter.

Indeed.

$40 million.

Good for business.

Yes.

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Recent acquisitions also add.

Sure.

Billion dollars in revenue.

Good border.

Or just.

Your price versus.

Just cost was a benefit of $12 million.

These positive contributions were partially offset by.

Site additional investments in the business.

Ladies and unfavorable foreign.

The timing of certain expenses.

Moving down to the adjusted EBITDA Bridge.

Moving to slide.

Our adjusted EBITDA for Q4 was 89 million.

GAAP.

Net income.

Okay.

Reached 41.

<unk> million dollars.

That's an EPS was one dollar and once that.

At large.

Up 8%.

Adjusted EBITDA.

It sounds to me.

Volume growth.

Reflecting the increase in.

Nick.

Darren.

So the exhibition.

Okay.

From.

Yeah.

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Volume growth.

So EBITDA margins.

The fourth quarter.

Excellent.

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This was a benefit of $12 million.

Since 280 basis.

This growth.

Part.

Set by additional investments in the business.

ER segment.

Sick.

In.

The timing of certain fixed.

It's actually go Raceway had another strong quarter with.

Moving to slide.

<unk> volume growth driven by solid.

Expansion in our.

Net income.

Yes.

Increased 41% adjusted.

Even though.

One dollar and.

Right slight.

Let me a.

From the.

$12 million.

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Our disciplined approach.

The increase.

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Adjusted earnings.

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Favorable shareco from ours.

Yes so.

Reaches over the.

Yeah.

Hi.

We acquired the assets and Rocky.

The margin for.

For the quarter was 17 point.

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And you see conduit sold under.

Improved 80 basis.

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Yes, its versus prior year.

This acquisition expands.

Moving to.

Our sits on.

Proves our geographic coverage in the West coast.

Bill rates they had another store.

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Further with.

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As a percent volume growth driven by solid.

Mechanical.

Susan.

In.

I think worries.

The business delivered very strong EBITDA growth.

For electrical Raceway.

Well I know in.

Yes.

And the MPN, that's adjusted EBITDA margin.

Our.

At this point.

Thanks.

Thanks.

And higher.

About 680 basis.

So.

Yes.

Quarter.

Okay.

We acquired the assets of Rocky Mountain Colby pipe.

Two corridor the.

Yes.

Great job of increasing marketing.

Yeah.

Okay.

Brand name.

It's allowed us to deliver an adjusted EBITDA margin percentage.

And improves our.

The coverage in the West Coast, United States. So our.

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Been conduit business.

Year to date net cash flow from operating.

Seem to them.

$210 million.

The key segments.

It was which.

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So were very strong EBITDA growth.

That's right.

Yeah.

This strong cash flow.

No.

Well the during.

MPN this adjusted EBITDA.

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And with the.

As well as reduce our total deposition body.

The base.

Got $40 million.

Q4 2000.

The reduction in our net debt and strong growth.

Order.

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But this.

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Of increasing margins and profitability.

We continue to be very pleased with.

And the adjusted EBITDA margin.

During a ratio was.

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Correct.

Like recurring.

Boy a year ago.

Slide eight.

Bill back to you for our out.

Flow from operating activities.

It was a 10 million dollar.

Our initial outlook.

Great.

Well on each one he.

That.

On slide.

35 million.

Do you all know markets.

Cash flow allowed us the.

Okay.

Multi during.

Trickle.

With the additional bolt on.

Just wanted to 2%.

Just.

20.

Our debt position by.

And that we see recently for MPS.

Referred to reduction in our net debt.

Oh.

So the early.

To date and.

Good.

Yes.

One.

The 3% for the year.

We continue to be very pleased with.

Eric.

So there are.

Axiom growth in both.

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Since the ratio was.

I knew.

Hi, My recent bolt on acquisition.

Bigger ago.

We expect to drive.

Back to you for our.

Okay topline growth.

Thanks, David.

Oh here.

Moving to our initial outlook.

We believe our strong financial.

By.

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Beyond the markets remains high.

20 Twond.

Last week.

And we.

Slide trickle.

That's.

Volume.

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For the year to be between 335.

And with the trends that we've seen recently.

In.

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In that.

So next year we.

Benefits from the higher volumes.

Okay and.

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So you have to be.

Our EBITDA.

Here.

These two factors combined.

Okay.

Following them growth in both.

Segment.

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And from our recent bolt on acquisitions.

Back.

We.

Our.

Exit drive.

Well exemption.

5%.

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On top line growth.

$10 million.

And incremental EBITDA.

Financial performance from.

Given the strong positive.

Thank you.

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You want.

20.

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And we.

Scar.

Yes.

They support.

Year to be between 300.

Okay.

Five and 300.

Yeah.

Billion.

The powers in 20 Twond.

Our next year, we expect the benefits from the higher volumes and productivity.

Correct.

Brive our EBITDA.

He $3 and <unk>.

Theres combined.

Research and.

And.

The 15.

The increase of approximately.

Point Piper.

In addition, we.

We expect.

Great.

Our most recent acquisition.

And.

Okay.

Hi.

Rob.

$5 million.

Turning to the first quarter.

There's a mental.

And by core our adjusted.

Given the strong positive.

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Trudges that weve.

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Just want to.

20.

Selling.

I would suggest.

There is an input.

Yes range is between 80.

Good for an.

Okay.

It will.

The impact of 10.

Sorry.

If million.

Before.

Twond.

Our full year 2000.

Moving to the bottom line.

And we.

Look build upon.

Yes it.

Yes.

To be between $3 and.

And in new year.

Resellers and.

Our main focus on.

The increase of.

Export.

So.

And positioning the company for long terms.

I mean.

Gosh.

Hi solid.

20.

Thank you.

1090 it.

Into the first.

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Oscar.

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And for total accor.

Good.

Right.

That's driving value.

Yes.

Our.

22.

There's huge.

$7 million.

You're welcome.

Sorry.

Yes it.

Turning to recent acquisitions, we completed this year.

Besides.

Okay.

We're excited to have you as.

The awkward team.

Since Q4.

Brighter.

Our full year.

Ill now open the line.

Working.

Yeah.

Were very strong and we look to build upon.

Well now be conducting a question answer session.

As we begin in new year.

Sure.

Please press star one from your telephone keypad.

At core.

I should tell indicate your line is in the question Q.

And as you for long.

Let me first start to feel like to move your question from the Q.

Since then for their efforts.

No serious weaker.

Looking at.

Right that's way to pick up your handset.

Poor pressing the star.

To consistently driving value.

Next question.

You are holders into the future I also want to welcome.

All of employees from the recent acquisitions, we completed this year.

The.

Yes, we are.

See with your question.

Excuse.

Yeah.

As part of the Act.

Good morning, guys.

Operator.

Marni Andrew good morning.

Yeah, Hi ins for.

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So can you talk about your volume growth and I have to Scotland Raceway in Q4, I think that's the highest volume growth we've seen from your since early.

Yeah.

And the confirmation tell indicate your line is in the question Keith.

For the can you give us more color.

To feel free to move your question from the Q.

Okay growth going forward.

Ticker.

Product Kuwait.

Your handset before pursuing starkey.

Two quarters.

His phone please hold we pull for questions.

Well, there's some new products, but what are you doing differently now.

Thank you.

A couple.

Question is from the line of Andrew capital It's a.

Summarizing what you said, but then I'll add one other piece of color.

Yes.

We are driving a new.

Andrew Good morning.

Hi, good product categories.

Talk about your volume growth to 6.5% in Raceway in Q4 I think.

Oh.

Good volume growth, we've seen from since early.

It's Andrew that I just.

The five new products during the quarter that help growth. The can you give us more color into your ability to.

This quarter, so I think in our previous guidance.

New product related drift.

She above average growth.

So the next few quarters.

Last quarter, sorry, just want to.

Focus on new products, but what are you doing.

Work, if you look at slide nine of the DAC that we're expecting to grow.

This is Andrew wine I do think.

Hi present next year, but I went back and.

I had one other piece of color.

No problem is Q.

We are driving the new.

Recorder going.

Product categories are going up high single digit.

That's helpful dog than in past calls you've talked about having six to nine months of visibility.

Thing Andrew that I.

<unk> distributor to contractors have any raceway anatomy.

For ball.

Last year.

Forecast low single digit might good.

In our previous guidance.

Fred markets going forward, obviously, we're continuing to see from you know relatively weak start stay there have you seen any deterioration.

Hi can framework, if you look at slide nine of the deck that we're expecting to grow.

<unk>.

With acquisitions around 5% next year, but I went back and.

Very consistent what we've always articulated it.

Three quarter going.

It's a low single digit but in some ways to labor shortage out there is acting as a governor so literally even just yesterday's we wrapped up our.

Yeah.

Our board meetings, and we're fortunate to have a lady.

Having raceway in that.

Large electrical contractor and the board voice of customer or the contractors is consistent with me on the road.

Obviously, we've continued to see Herman.

Peterson.

We.

Comers.

Any deterioration.

The.

Do you expect.

Gets you can now and are you.

Thank you.

And as far as we can see which Andrew as you say so we six to nine mine so.

Since it is very consistent with what we've always articulated in.

Okay and already.

We continue its low single.

If you had.

I am ways to labor shortage out there is acting as a governor so literally even just yesterday's we wrapped up our.

Just.

Our board meetings, and we're fortunate to have a lady.

The 10 was bigger than that.

For a large electrical contractor in the board grab voice of customer the contractors is consistent with me on the road.

Well level of Tracy.

For distributors, and so forth and customers contractors.

Yeah.

Yeah.

Andrew and in my mind.

Food can Hindu.

Are you if you look at the comments I just gave in your guidance in other words.

Six to nine months so.

A phenomenal year with up almost 20% EBIT died and that's off of a 2018 that was also up 19.

Some of that wise on mix in dry.

The.

Value.

Contribution from price versus.

It's kinda in caution.

Thats, where the numbers even in the table is bigger than that.

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I, just think about what isn't more normal contribution for you.

With that there could be tend to.

And as volatile as they've been.

It worked out in.

First cost contribution.

Has been definitely 20.

And get it they feel for what.

The run rate for.

And then my mind.

With that I think our to our if you look at the comments I just gave in our guidance in other words.

Andrew.

We had a phenomenal year with up almost 20% EBITDA at NSS off of a 2018 that was also up 19 parse percent some of that was on mix in driving.

And for you.

Oh.

One of the reasons kinda and caution.

And how you're thinking about.

Hope to get back any.

The vision I mean within that that's a 15 million.

Since we are guiding that there could be $10 million to $15 million. This spread so you can kind of work that in.

I'm sorry.

Numbers we.

Hi, good about it more linear.

But feel for what we think the run rate for fiscal 2020 would be.

Got it did that.

Thanks, good quarter.

Bill mentioned.

Thank you Andrew.

But in our guidance this little bit headwind for price for Cisco.

Deepa Raghavan with Wells Fargo.

Doctors roll out in Hawaii.

On everyone.

Yeah.

Good morning.

<unk>.

Okay.

<unk>.

As far as well, that's why 19 and then.

Oh, you're thinking about the first half.

And really strong.

Estimation, I mean within that 10 to 15 million.

Oh, that's probably work.

The more weighted.

So far.

Uh huh.

You know at least potential headwind put into.

That's.

Our current.

Thinking about it more linear lease spread out.

Oh, sorry, what was this price cost or was this.

All.

On the top.

Right.

Oh right, even though.

It does bill mentioned we.

Yes.

But in our guidance.

But.

So what would be on the top line.

This versus cost.

When you look at the way the quarters rollout.

No acquisitions in there too but.

How does that you know, what's the contract or what's the headwind from.

Yeah.

Oh.

Our fly 19 and then.

Fiscal 19, it was down.

So when big it's not a mid single.

So those costs.

Good.

Probably where we have most of our.

Yes, so we're expecting right now we.

Our into.

I did on price or is this cost being 10 to 15 I would.

It was.

I mean purposes I assume that that's the same.

In cells and the reason why say that is.

Okay.

Somewhat flatten out at.

We caution.

Beyond the top line.

And we're starting to see a little bit of then.

I mean, you is low single digits, you probably have some acquisitions in there too but.

How does it look sequentially lets the headwind from.

Pushing through various.

Faster.

Sunday.

So fiscal 19 it was down.

See private.

Slow to mid single.

600%.

Good.

What are you expecting or yes, so we're expecting right now we.

Our businesses then it looks like it.

We intend to.

Hey nicely to your.

Good.

What was the margin improvement.

So same on sales and the reason why say that is.

You know productivity not core business systems.

Because.

Oh.

And also we are starting to see a little bit of an.

Okay at least directionally.

The.

Because you asked for but that's been going.

We feel were some of.

So far.

<unk> companies have been.

Our potential and.

Through various.

Okay.

$40 a ton increase.

I mean any color there.

Planning purposes.

Sure I heard.

I assume that's a 100%.

Things I would mention then at 49.

That and my follow up to be.

Contributed.

So businesses then it looks like you know thats.

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Pretty nicely to your margin what was the margin improvement.

For and I would say the reason for that is.

And our productivity Natco business systems worse.

It's around productivity.

So then leverage.

He just in general the.

I think it will be in fiscal 2000 to at least Directionally does it improve that core businesses then going to.

All that kind.

Or.

And where our funnel is insulin so for us so.

Hey.

Into our effort.

So.

I tried would be a similar number to that which again would be.

Well things over the mentioned then.

And then what we did.

Team.

Year to say like a flight.

Because of approximately $15 million.

Your final one and I'll pass it on.

That's a capital deployment share.

Yeah.

Sure.

I would say the reason for that is.

Great and Thats all.

Strategic deployment initiatives.

Hi that dilution from.

So over the.

I would say just in general the.

So.

He has.

Ask about.

As a lot more rigor around the projects we have a system that tracks you know all the kind of projects and where our funnel is and saw him so for us. So.

It's an acquisition so that's one.

To our fight 20 guide would be a similar number to that which again would be.

But.

The three acts more than what we did.

You know annually every year.

18.

I don't put in our plan.

My final one and I'll pass it on.

The ability to buy back.

The share count.

The first.

First of.

Than you anticipated that sell 19 I mean this.

Securities remain the same.

In sum.

Our.

Okay.

Number one priority is.

So how do we think about.

And moving towards that.

So are you, saying it all.

All that we have stated.

Okay.

Really.

Just curious what your thoughts are on buybacks versus acquisition in fiscal 20. Thank you on our platform.

Doc and I, just would remind everyone that.

Okay.

No we.

But a little bit of.

For a third of the.

When it comes as stock.

You have had this.

Clearly every year.

No.

Put in our.

So backs, even though we have the ability to buy backs.

It's worth of.

The first.

Barry.

So.

So.

Yeah, we're not going.

At this point in time right now our priorities remain the same.

This back 50 million.

If we.

And priority is.

This cash.

Debt ratio and moving towards that two times goal that we have stated externally.

Number two tuck in M&A.

As a reminder, if you like to ask a question today my friend.

This would remind everyone that.

We have buyback.

Assemble the queue.

Further the company in the last couple of years. So we have had a substantial.

Buyback program last year, we bought back.

Thank you.

In the mid Twentys.

And coming from the line of John Walsh with Credit Suisse.

Please proceed with your question.

We're not going to simply tell you on a number would be but we do have the opportunity to buyback.

Familiar in this.

Hi, I'm sorry.

So.

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Scott.

Good point.

Productivity is adding about five or a solid mid single digit you know improvement in.

Thank you.

Adjusted EBITDA.

Yes, I wonder if you'd like to ask a question today Me press.

Commented.

Some of your telephone keypad.

Relatively early.

At the moment to assemble.

Productivity.

Is that a good place holder to think about what do you kind of having the pocket as we.

Thank you.

Bill out the years going forward from productivity.

John Walsh with credit Suisse.

I think so I paraphrase slightly differently I think.

Yes.

Our average and productivity versus beginning now a we didn't make a comment.

Here at least I think David.

All right. This is an STP strategic deployment process two years ago really enhanced her final.

You know improvement in.

We have a lot to go but I think that 15 million dollar number that that feels like a.

Pasture relatively early.

Sure.

Lastly innings and productivity.

Yes.

Gotcha and then.

You know.

Polder.

The the free cash flow conversion obviously.

Looking forward.

The strong.

Third.

This year.

Yeah, John I think so.

Paraphrase slightly.

Our fourth.

We currently I think.

So what's kind of this.

Creature in productivity versus beginning now we didn't make a comment.

Cash flow conversion on you know call it your job.

Started this isn't SDP strategic deployment process two years ago really enhanced our final.

Lastly.

Very humble way, we have a lot to go but I think that 15 million dollar number that that feels like a.

100%.

Good.

Yeah. This year, obviously was a very strong year.

And then.

Hi, John if you recall, we were little bit below that.

Book conversion obviously.

Determines whether were above or below is.

As you can.

Full year basis also in.

In.

In fact, it come why these are.

Fourth it's kind of this.

And so on so far so.

How do you guys viewing.

So.

Cash flow conversion on call it you're.

I would be too.

Just going.

D.

Thanks.

You know above that 100%.

So we typically.

You know obviously, the renewable projects hit nicely in the quarter I mean was data.

And our goal to be above.

Yes.

100%.

She is working capital there being one of those swings.

It's very strong year last year, John if you recall, we were a little bit below that.

Backlog ended the year.

Sure in.

After that.

I would say.

Above or below is.

It's Matt.

Is happening.

<unk> Fuller business.

Paul.

So when you add in it for free cash flow basis.

Our.

As much on par with all that.

So far so this year I would say is a very strong year. Our go forward goal would be to be above that 100%.

Next question is from the line.

And then I guess.

All.

The the renewable projects hit nicely in the quarter I mean was that.

Jeff on.

And if.

Maybe touching on the electrical Raceway volume guidance of 1% to 2% for next year can you maybe.

It is but we obviously had a strong ended the year.

Just.

Volume.

Does that have any.

Margin.

So net net.

Great question.

When you add in that from a free cash flow basis.

Or just.

As much on par with all of this.

<unk>.

Karen hotels as we go into next year.

Thank you for taking the question.

Hi areas with a little less.

Can skew.

So our warehouses.

Really.

Thanks question is from the line.

Exceptionally small on next there's some things like within healthcare, we have some more sophisticated products like luminary cable and so forth.

From the electric Myrisk way volume guidance of 1% to 2% for next year.

We're always driving we do as you saw how well.

Yeah.

I would.

You're seeing the most to maybe lease.

And selling more value added.

Any mix on your margin.

Stay because one vertical is off or one.

Good question.

Is that it's going significantly change.

The the largest growth is around how.

Okay.

Hotels.

As we go into next year.

Pretty much approaching that two times target.

With their warehouses.

A number that you.

As he.

[noise] annually or percentage of capital.

On the.

It seems like within healthcare, we have some more sophisticated products like luminary cable and so forth, but not enough to change our internal forecasts were always driving we do as you saw how well we've done.

HM.

Driving the.

Yeah Cross.

Selling more value added.

Switching.

Well go as far as say because one vertical is off or one is down.

Level.

Quite significantly change.

Activity would be appropriate, we think with our capital deployment and keeping our debt ratio in.

Much approaching that two times.

But the opportunities are there.

Hi, there either a number that you.

Our final.

M&A deployment annually or percentage of capital deployed.

Also maybe.

Listen.

Just apply and one of the multiples you're seeing.

Let's begin around our our core.

Yeah I'll handle.

On the low.

Question.

This past year, we deployed $100 million in.

But our.

Hey across.

Three.

So for.

The valuations are still in that.

I think about going forward.

The dirt range.

Somewhat level of M&A activity would be appropriate, we think with our capital deployment and keeping our debt ratio in check maybe a little bit north of that if the opportunities are there.

And the call back over to build walls for his closing comments.

Finally as.

But at the same as it's been.

Well, we conclude let me summarize.

Again.

Takeaways.

On this and.

T.

Oh, it's multiple financial metrics.

We own our.

19, once in its down being year.

Our electrical race slate at this point in time.

Oh, we improved our leverage position.

You know when you look at our last.

Bireme for companies that want Hansen support our.

For.

Just to kind of mid.

We expect our strong financial performance to continue for 2020, specifically.

We expect to increase our adjusted EBITDA to between 335 in $345 million.

Call back over to build walls for his closing comments.

Our team.

Our culture.

Before we conclude let me summarize.

Hey, voice to maintain focus and deliver upon our.

How full financial.

Housing in 19 wasn't.

Q4 years.

Share.

And interest in Accor.

We significantly improved our leverage position.

Really call.

Same time acquiring for companies that want hansen's.

Thank you.

Our plans for.

Okay, who did and you may now disconnect your lines at this time.

So.

For your participation.

For 2020, specifically, we expect to increase our adjusted EBITDA to between 335 and $345 million collectively our team our culture and the at core business system enable us to maintain focus and deliver upon our commitments to our customers and shareholders.

With that I want thank you for your support and interest in Accor I look forward to speaking with you during our next quarterly call. This concludes the call for today.

Thank you today's conference has concluded and you may now disconnect. Your lines at this time. Thank you for your participation.