Q1 2020 Earnings Call
[music].
[noise] welcome to the waste connections first quarter Twentytwenty earnings conference call. During the presentation, all participants will be in listen only mode. Afterwards, we will conduct a question and answer session.
At that time, if we have a question. Please press the one fall by the for any telephone if I am talking a conference you need do each not there. Please press star zero as a reminder, this conference is being recorded there was they may 7th 2020.
I'd now like to turn comforting to Worthing Jackman present.
And CEO. Please go ahead.
Okay. Thank you operator and good morning.
I'd like to welcome everyone to this conference call to discuss our first quarter results and provide an update on the current operating environment.
We certainly hope everyone is doing well and staying safe during this unprecedented.
I'll begin the call for an update on our response to cope with 19 and its impact in our business.
Focusing specifically on our efforts to take care of the health and welfare of our employees and communities.
Merian Whitney our CFO will briefly review, our Q1 results and strong financial position.
I will then wrap up with a few trends, we're currently seeing and our business and potential implications for the full year before heading into Q1 day.
The first during the call over to Marianne for forward looking disclaimer and other housekeeping items.
Thank you wedding and good morning.
The discussion during today's call include forward looking statements made pursuant to the safe Harbor provisions for the U.S. Private Securities Litigation Reform Act of 1995, including forward looking information within the meeting a basketball Canadian Securities laws.
Actual results could differ materially from those made in such forward looking statements due to various risks and uncertainty.
Rise differentiated results.
Therefore, investing and people are greatest asset.
There's always the highest priority.
We'd like to look back from this period, one five or 20 years from now and no. We did the right thing for our employees.
From the onset of this pandemic, we established protocols and implemented operational changes focused on health hygiene and save distancing.
On home front, we look to provide a safety net for incoming family health and to that in it already incurred or committed almost $20 million in such labor related expenses.
Back in March we began providing full wages for employees feeling ill quarantine for any reason or simply watching after a loved one in up to 12 weeks for those with child care issues.
He's the combinations put our employees in the position to make the right decisions about their own health and that of their colleagues rather than feel compelled to show up for a paycheck or have to burn the P.T.
In addition, we've been providing supplemental wages for all the employees, whether union or non union remote are on site and any temporary workers.
We've also done the following expanded our employer really fun for those experiencing financial hardship.
Launched the waste connection scholarship program to assist our employees children to pursue and achieve their vocational technical than University education goals.
Fully covered covert 19 related testing that medical costs and extended access to medical benefits.
Waste connections is also stepping up in our communities through additional charitable contributions to assist food banks and families at risk meals for health care workers and higher risk populations and donations of critical P.P.
From a business standpoint, the revenue impact is mostly attributed to decreases in demand for a collection and disposal services, resulting from the shelter in place and other closure requirements imposed to limit or control the spread of code with 19.
As noted earlier Q1 results reflect the impact so we started to see in March as commercial collection activities slowed down due to service reductions were suspensions by customers, whose business activity was curtailed by such measures.
The third party dispose of volumes following similar patterns to hauling activity.
The impacts we've seen very by geography.
Beside the customer mixed in each market and the time again extent of shut down requirements across markets.
In general are smaller and more suburban a rural mark et cetera, and less impacted then the larger more densely populated markets, where we operate.
Canada or at least U.S.N.R. hardest hit areas.
In terms of operating costs on the commercial side, the extent to which we can reroute or otherwise adjust our operations to reflect lower activity levels varies by market and depends on the pace and severity of reductions as well as the expected timing and shape of any recovery.
That said, we are already realizing savings and many verbal costs, including third party brokerage and disposal labor and fuel along with reductions indiscretion area not essential expenses.
With regard to capital expenditures, we've proactively cut approximately 110 million for the year or about 20% of Catholics in liable to slow down an activity.
However will remain opportunistic during this period you have presented attractive offers to purchase additional fleet equipment or longer term landfill expansion acreage.
Marianne will provide more details about or Q1 results on the strength of our balance sheet, which we preposition for this period to provide optionality rock capital employment on M., and a and share repurchases.
We remain disciplines in our approach to evaluating pursuing strategic growth opportunities whether any good economies are bad.
And believe the free cash flow generation remains highly correlated to shareholder value creation.
We take the long term view and look forward to a recovery. If this economy continues to restart.
Now I'd like to pass the call them Marianne Oh, they provide an update on the current environment and potential applications for the full year before we got into queuing it.
Thank you where one.
In the first quarter revenue was 1.352, Marianne up 108, nine you know pick a prior year.
Acquisitions can say that since a year ago period can check it in about 64 million of wrapping around the corner, where about 59.6 million not at that that's true.
Results for the first 10 lots of the quarter conditions out easily exceed our q. on revenue outlet that comes with 19 related declines Metallica ways Tech tend to be in March impacted revenue in the period by an estimated $12 million or about 100 basis points of organic growth.
Primarily volume.
As a result solid waste price plus value for the recorder with 5.2%, it's price the 5.6% and buying a negative 40 basis point.
Primarily to lower commercial I had to be and third parties extensive volumes in regions, where they come with 19 related shelter in place orders and business close your requirements were imposed earlier in the corridor or one more stringent that in other markets.
Oh, and let it affected regions incurred Canada, where province wide closures and suspension of construction activity travel outside right now and are eastern region, which increases New York City, where commercial service reductions roller four times the level of over our taxes across all of our market.
On the other hand volumes in our western region, another geography impacted by earlier closures more positive.
Over 3.5% quarter teach what strong start to the including additional year contract.
Let's get you every year results in the first quarter by line of business.
Commercial collection revenue increased approximately 5.4%, mostly due to price increase.
<unk> revenue increased approximately 6% on a combination of higher called up about 2.5% and rather than it could pop up 3.5%.
Solid waste landfill tonnage increased about 6% on higher and this w. Thomas up about 3% led by increases in Florida and on the West Coast and higher special waist up 17% would increase is across our regions in the U.S., but our largest increases in the northeast.
D times were down about 2% and she was primarily due to reductions in Canada and the northeast.
As noted earlier trends started the quarter more favorably and deteriorated in March looking specifically at the same story day adjusted results in March.
Commercial revenue with about 2% less than half the increase for the quarter landfills hands were down 1% and roll off calls for down 4%.
Okay to one revenues from recycled commodities landfill gas and renewal energy credits or rent.
Excluding acquisitions in the aggregate they were down about 5.4 million or 16% year over year, I know safety down about 30% at $53 per ton and runs down 25%, averaging 134 $1.30 per cent in the corner.
Detrimental margin of approximately 130% of recycling due to the combination of lower commodity values and higher recycling processing costs, a third party facilities.
The margin impact from recycling and ran so that the dragon about 40 basis points and true sense any <unk>.
Oh see see prices have increased to over $100 per time in fact, some market setting prices of over $200 per time.
However, they collapse of oil prices has eroded the value of recycled plastics such that the net effect on the current value in the basket <unk> is an estimated increase of approximately 20% from two one but down about 15% year over year.
When prices have also declined since quarter and stepping down sequentially to about one dollar.
Primarily to lower crude and resulting concerns about a potential slowed down in the demand program.
Living next to N.P. weights activity.
We recorded 59.4 million of D.N.P. waste revenue in a corner.
At the upper end of our outlook as activity held up in spite of further rig count declines and the collapse and the price of crude during the period.
<unk> said, the M.T. waste revenue and she wandered down about 6% year over year and down in about 5% sequentially from choose for due primarily to lower pricing and activity levels in the Permian and Gulf of Mexico.
Since quarter, and we have seen the monthly revenue round rate dropped by over 45%.
Adjust to be bit docks at two one as reconciled an hour earnings release with 408.5 million about 3.5 million above our outlets for the period.
Adjusted EBITDA as a per cent of revenue into one was 30.2% down 80 basis points here every year, but exceeding our expectations by 40 basis point.
Margins reflect the 40 basis point impact from lower cycle commodity values and rents noted earlier as well as an estimated 20 basis points in tact from lower margin acquisitions completed since a year ago period, and an estimated 50 basis point margin drag from the one additional day in the corridor due to leap year.
That underlying solid waste collection transferring disposal margins were up around 30 basis point in spite of an estimated 20 basis points impact from the high margin Detrimentals uncovered 19 related revenue losses, and additional coded 19 related expenses.
Fuel expense into one was about 3.7% of revenue down about 20 basis points due partly to a C.N.G. credit of approximately $900000. We averaged approximately 257 per gallon for D.S.L. in the corridor down two sounds coming here as a period in down 12 cents sequentially.
Four.
Intrinsic sassnet of interest earnings in the quarter increase by 1.8 million over the prior year period to 35.8 million.
Due to a combination of higher total borrowing as compared to the prior year period as lower interest earnings from invested cash balance.
How are effective tax rate for the first quarter, what 16.7% slightly lower than expected due to a higher credit related to the best thing of equity grounds and the period.
Cap and adjusted net income per diluted sharing to one as reconciled in our earnings 40, or 54 cents, a 65 cents respectively.
From the current period reflect the previously noted two cents per share impacts from Europe, and your reductions in recycling and ran plus an additional two cents per share impacts from the high detrimentals on the estimated coated 19 related revenue impact and incremental coded 19 related expenses.
Adjusted for cash flow into one with 235.7 million for 17.4% of revenue.
Capital expenditures for 137.8 million up 23.6 million and 20.7% year over here.
In addition, we resumed our share repurchase program in a quarter and deployed about 160 million two we purchase approximately 1.27 million shares.
We completed two public debt offerings during the quarter totaling 1.1 billion.
600 million of 2.6% 10 year senior notes in January.
And 500 million a three point O., 5% 30 years senior notes in February.
Which further diversified our in depth sources extended the average tenor and lowered our all an average cost of debt to approximately 3.1%.
Debt outstanding a quarter AD was about 5.2 billion an hour leverage ratio as defined in our credit agreement ended the corridor at approximately 2.9 times that to eat the top with cash balances approximately $1.2 billion.
We accumulated cash during march to maximize our flexibility during a period of heightened cope with 19 related concerns in the banking and capital markets.
Since that time, we had paid down $500 million on our revolver, bringing down cash balances to approximately 725 million.
Compliance leverage to approximately 2.6 times debt to eat the top.
Regardless on a net that basis, our leverage is approximately 2.3 time <unk> that <unk> with liquidity of approximately $2 billion and no near term debt maturities.
And now let me turn the call back over toward thing to discuss the current environment and trends in the business.
Thank you Marianne.
There's there's still good a good deal of uncertainty around the trajectory of a pandemic, it's resulting macro economic impact under the ration of that impact.
The severity of continuation of varying impacts across markets. The pacers shape of any economic recovery and any additional acquisitions completed during the year well influenced the extent to which are results are infected.
As such rather than providing outlook as we usually do based on current economic conditions. We believe it is appropriate to suspend the original outlook. We provided for 2020, and we intend to update or pull out full year 2020 outlook. When we report our second quarter results.
That being said I think it's helpful to look at April is that month should reflect the depth of any covitz 19 related impacts.
As noted in our rooms relief, we are encouraged by our results in April as revenue want a record of basis was down approximately 6% you're over here or 1.4%, excluding Canada in the northeast U.S., which were hardest hit.
Solid waste collection transferring to scold the revenue one of the same store basis declined about 6.9% or down just 3.1%, excluding Canada in the northeast.
The M.P. waste revenue was down about 33%.
Any aggregate adjust to the bit that margins decreased by an estimated 200 basis points you over here in the month.
Primarily due to incremental costs related to cope with Nite pain and to a lesser extent the reduction I.B.M.P. waste activity.
Any economic recovery should reduce this impact going forward.
Our daily tracker suggests that the worst may in fact be behind us.
Our data indicates that the peso declines in solid waste and are most affected markets peaked late March and slowed considerably during April.
Late April we saw a mid to high single digit percentage optics off a weekly lows Atlanta insolvent with landfill volumes and roll off activity.
With over 70% of locations showing improvement.
Additionally, about 12 per cent of commercial customers and nine per cent of associated revenue in competitive markets. We track that had suspended or reduce service during due to cope with 19.
Since reached out for either resumption of service or an increase in frequency.
New business track the competitive markets outweighed losses earlier this week.
Increases wait decreases and net new business turn positive again.
Of course, we recognize that our data is limited and the trajectory of any recovery is unpredictable.
That said, we were encouraged by encouraged by the improving trends, we were saying look forward to Guinea greater clarity if more states other begin or continue to relax restrictions Wendy crude.
That's cool with 19 related revenue losses recover so too should be estimated margin impact we saw in April.
Recent revenue margin trends, along with reductions in capital expenditures all of which were outline at our earnings released and discuss today.
Should enable analysts and investors to better calibrate expectations for the full year.
We believe these recent trends could result in revenue of about 5.25 billion for the full year.
With large winds down about 200 basis points you're over here.
And about a 50 per cent conversion Oh, adjusted even two adjusted free cash flow.
But as previously noted we're waiting until our second quarter results to up their official 2020 outlook as will be three months smarter about the pace with any recovery.
In summary, we were extremely pleased with our results of the first quarter of 2020, and we're encouraged by recent solid waste trends.
We recognized early on going into this period on certainty that our communities would count on us as an essential services provider and we on each other on our commitments.
Protecting the health safety on welfare of our employees discarded every decision we've made.
<unk>, reducing employee concerns regarding income healthcare and family obligations is critical to providing is exceptional service.
Or operating performance. During this period reflects the benefit of that focus and is a testament to the dedication a tireless efforts of every ways connections employee whether in the field at work and remotely.
Which has been truly inspirational.
Oh frontline employs attendance has been near perfect. These past several weeks.
And we saw sequential improvement in monthly safety related incidents, which decreased by approximately 24% in April.
Waste connections as well positioned to navigate this unprecedented period roommate discipline and executing our growth strategy and believe the strengths of our culture or people that are financial profile will continue to differentiate our execution and financial performance.
I appreciate your time today, Oh now turn this call over to the operator open up the last few questions.
<unk>.
Thank you [laughter], if you will like to register question. Please press the one file by the four on your telephone you hear a three tone Papaconstantinou request. It's a question has been answered and you would like to which I you are at the station. He's press the one hop on it to me when I'm on Peace plan first question.
Our first question comes to line up <unk> with our we see capital markets.
The question.
Thanks, very much a good morning, everyone hope, everyone safe and and keeping well.
My My my first question here is on the overall impact a an insight you provided worthing here and and to April and judging by what we're spending the rest of the industry industry. Certainly you know the pills that are reported it sounds like your your impact is less onerous in April.
Hitting higher lows than than peers I know at least one of your peers should that the and market is not really.
A determining factor, but you know you're opening comments suggest that it did could could you give us some clarity as to why you think your if indeed you you feel you are doing better than the industry and what would be some of the reasons.
Well again, but I think it goes back to our original strategy like we do believe longer term that franchise markets and rowlett suburban markets alcohol arm.
You know larger more competitive more fragmented markets I think when you strip out again it'd be a pack of Canada, which was a national shut down and the northeast I think you see by revenue on a dollar basis being down as low as it is for the T. for the pandemic in its worst month.
Prove that.
But obviously the volume growth that Marianne disgusting to one coming off the west coast, and leading leading our Oh up the volume growth also is indicative of that.
So, though I think the you know the strategy is is you.
You know, there's there's right and good times, a bad times I would say that you know look when you. The other companies talks about you know trends and it changes in in landfill volumes are collection activity hours et cetera.
But I would say generally in the broader you get in geographic reach you know if some areas you know the trends are similar by company, which just that we probably have less rather overall basis exposed to that which differentiates the how the consolidated was also we report.
Makes sense my follow up here is on a acquisitions you know if you <unk>, perhaps you could give us some insight as to how the the 10 or is is is proceeding here is that summer to your volumes, where you know April things go very quiet nourishing any signs of life either.
You know from from a seller standpoint, and and and multiples there talk a bit about how you know just logistically you go about enacting a transaction in this environment or or do you think that <unk> transactions will ultimately hold off your until later in the year.
But the level of activity really changed for US obviously, the the pace of of getting it's assigning has slowed a little bit.
You know in situations, where you need government consents to get contracts no data that has slowed down obviously based on how things are slow down and the city Hall, So guilty to register real estate and things like that have slowed down obviously, the the back and forth as a little bit different between attorneys you know diligence rooms.
Already digital and so it's from that standpoint information flow is still going strong.
The quality companies or quality companies before pandemic during a pandemic it after a pen and so yeah. The dialog we're having the companies that we're pursuing again hasn't slowed down I, just think the pace of signing and closing yeah. It was likely push you know two to three months at a minimum.
Things that we thought would have signed or close by the by this call you know likely looking at you know late Q2 at the earliest.
Okay. Appreciate the time, there's always hope everyone's keepsakes. Thank you.
Thank you.
Our next question comes from the line pans out unless I mean, we caffeine too specific question.
Hi, it's John.
So could you just talk about commercial container with Hey look like an early may or late April and how relative to weights are in the first week of April. Thanks.
Yeah, I mean, I I think the where people throw around stats like yards weights et cetera, you know I think.
It's hard for you guys to calibrate that towards what's how do I feel a modeling right and so yeah I've always thought the best the best source is just looking at the actual you know dollars on.
<unk> right.
If you look at you know commercial on a small container side.
If you look out for we would call kind of.
A month to month or or or you know year over year.
If you look at April as an example April month to month was down about 9% over March.
If you look at you know the permanent roll off side. It was down you know almost 12% month to month and so it's calibrating around that 10% or so number and again as your eggs things exiting April to moving into may in it already talked about the <unk>.
And do business trends that were saying earlier this week and those numbers turning positive I would expect the the month month trends to to start improving as you look at me upgrades April.
Great. Thank you that's very helpful.
Andrew My last question could you just give us a sense of landfill pricing and how to think about that fig.
I've.
Several Paul.
We'll just continue to drop killer.
Sorry, John So I I I would say how high level on pricing because as you know, we we always talk about pricing in the aggregate given that half the wasted our landfills comes out the bar on the tracks you know similar background in the industry.
So we we think about it in in the aggregate and as you know we guidance about 5% price for the year and said it would start higher and decrease over the course of the year and yeah. The way we look at pricing that hasn't changed much there may be some instances, where you don't push quite as hard in the in the desk. So that the pandemic in a market with it but the shut down.
Certainly and to maybe there's a P.P. eyes that gets delayed or pushed off <unk> subsequent corridor, but in general as we think about pricing for the following year now maybe 5% ends up more like four and a half for the for the.
It's full year sit down nominally no real change in in our outlook on how we think about pricing and you may recall, we weren't emphasizing and opportunity and landfill pricing, where all winter type flat in terms of our Ganic Red strategy. In this year is no different from others.
There's been a consistent theme corrupt.
The industry in recognition of the cost to operate a landfill an expanded landfill.
That you know generally the price and trends are moving higher and we don't see that a baby.
<unk>. Thank you.
Our next question comes to the line of color White with the two blank you see the question.
Good morning, hope everyone doing well.
I know it's relatively early in this pandemic and obviously companies are focused on more important things in terms of stabilizing their business, but just curious have you seen any material change and price little behavior. Among competitors that is any kind of cause for concern for you guys.
No I mean, if you again for from our standpoint, you know, we've simply set up by saying supposed to be done for the are ready to look at the competition.
Frankly like those if it hit really hard and this pandemic a lot supplies, though you know probably many smaller companies are reaching out to the P.P.C. Lonesome.
And if you get a health plan to subsidize their payroll look I mean, you know for those that to operate a commercial obviously those folks have been here on the commercial site residential remember.
Most many.
Many competitors on the residential side do not Oh, landfills, and so as waste it shifted to residential side of the heavier loads up 20 or 30%.
That's a that's pressure the cost structure within those with the most companies on their female based on rising disposable costs.
So there's there's there's nothing more cost standpoint.
Those companies that is moving down that's that's suggests they should be lower the prices I mean this is.
This is almost a second wave quite thing requirements is in this industry of the persuade things to change it besides kind of recently.
Second wave effect of a of a pressures that many companies having on the cost side with the need to stay discipline on the fly side. So.
We have not seen any degradation in in the display them behavior are people really because of the macro.
Oh, that's helpful. And then obviously on the commercial side, it's rubber while it's hard in terms of <unk>.
When businesses reopen but curiously taking pride for more details on what you're seeing within a temporary roll off particularly in regards to kind of construction activity in housing and just general expectations that going forward.
Or so yeah. If we if we look at at roll off for instance, and and look at the trial in Austin and how we were covered since then we stopped pulls down 17% at the trial they've are covered up 9% of them, they're still down 10% of some of the peak and over 70% of our locations have channel.
<unk> interesting really pretty broad based in terms of that the return including markets in Canada for instance, which for hardest hit we are seeing construction started up again and I would expect to see more as you know in places like Quebec, where construction activity would begin again and of course, there's some season now.
Impact as well from that but so that that's an indication of of a coast. If I. If I look at April O., six typically they're down about 16% and revenues around <unk> down around 20%, which would be consistent with your rate per call declining on low weight.
So that all hangs together and you know well lots revenue in the aggregate down over about 20% year over year in April and down about 11% from March.
But thank you good luck in about two there.
Thank you.
I was reminded to register for question piece, that's the one five minutes for our next question comes in a line of Prime acquire with Goldman Sachs, especially with the question.
Hey, good morning, everyone up your all doing well.
Just trying to come back to the the different in the regional differences in a in in April and and the outlook.
And it just seems like some of it was in in the in the more competitive legacy be progressive market <unk> just by chance that just you know wondering if you think there's anything to that other than the government restrictions on lockdown than kind of where the virus was more acute and.
Kind of back to the yeah I like twice in these these I think are more oh more competitive markets in general if you think that.
You know as as businesses come back there'll be any dislocations or you know the fact that these are more competitive that could be more challenging for pricing the way that the volume to kind of hit those markets.
Sure well, if if you look yeah <unk> a way to look at it to focus on <unk> the volume activity and if you look at those yeah. They are are eastern region, and Canada, which included these hardest hit Marquette yep, you'd see by him down 20% on.
Average and you can track that with our central region are western region in Southern region again kind of highlighting the differences in the types that markets. Those are all down in the 76% to 8% range and two very consistent with what we're seeing in that that customer activity, whereas I mentioned friends.
Sense in New York that they reductions what four times the overall impact that we've seen suggesting you know in volume is Tim volume down kinda, 12% in April four times that amount when you're down 50 per cent. That's the impact of that dramatic a shuts down in a place like New York City.
So I I think that those trends are consistent with the other data read giving you about where we're seeing noise reduction.
And and the areas, where you've you've seen a little bit of a sequential pick up late in in the month are there's more the harder hit areas like New York and then the more milder areas like the central state or are you seeing any degradation any further degradation. There I guess I'm I'm, just starting to starting to wonder if there's maybe yeah. Some of the regions that have held up better maybe.
Just a delayed reaction versus the market silver worse off coming back a little bit.
No I tell you the the most competent folks we have with regards to the current activity in the outlet to an activity. You know are in that 70% of the bucket that we've talked about before meeting West coast plain stage the south.
You know the the the coastal Atlantic States really it's just a again the kind of what we call the northeast which in in our mind is New York City, Rhode Island, and Hudson Valley area, and Canada, that's where the leg is still happening.
And that's where frankly to volumes are off you know as Marianne said 30 to 50 per cent on in on average revenue dollar standpoint, you know cross those three areas and so is.
Those recover that'll be a nice hell when for us, but with regards to where it's been click a ticking up away from there. The expectation is it's still very strong.
Special waste will still have special case, we'll we'll still have some volatility here and there but again, it's just a nice gradual increase in activity.
Okay, Great I'll turn over thanks.
Our next question comes to align Apollo Brown with women teams.
It's a question.
Hey come on guys.
Taking morning.
Hey, where they just want to start yeah, it's not start with the Big picture question on the franchises. So I know Reggie container weights had been a problem in there was maybe some stream shift going on but.
Aren't the franchise is kinda governed by some sort of return on capital mechanism. So in theory, even if the complexity and the cost structure of the business inside of the franchise, maybe changes shouldn't you effectively be made whole overtime.
Yeah, you'll see that question collar, you'll see that and.
Thing next year right, we're in throw the cost this year.
And now we're tracking that we have a pretty good sense of what that is and that will get submitted within our reviews the upcoming year.
Okay. Okay. So forward, Okay that helps and then Marianne so really appreciate the margin helping April but at a high level can you unpack the 200 basis points, maybe how much of it was E.M.P. and then within solid waste I think there's still a couple of moving pieces, we got him in a delusion recycling incremental labor or maybe even if you will.
But just to any big pictures on how you build up to the 200 basis points.
Or so I I would say just stay with two big buckets and have E.N.P. and then solid waste N.P. in that 50 to 70 basis point range for the drag and therefore, what's left is solid waste in in you know <unk>, you know 130 that 100 and and and for.
Any basis point drag within that you're right. There's a drag from acquisition contribution by she'll be similar to Q1 down a little bit so maybe I'm 15 basis points, there and a little drag from recycled commodities in Iran.
The Tyler I think if you said if you step back a little further and really gauge how well are we doing how well as the frontline doing with regards to flexing the the cost model here given Sacramento.
On a solid waste five that hundred and 30 or so basis points with Marianne is referencing.
That all of the covert related costs that we have.
It was like this are put into our business help the front line.
That that account for all of that in other words, if you really wanted to get down beneath it and say how did we flex our business that you know on a year over year basis.
<unk>, we've overcome all of us.
Now, we're not going to have back over to related costs as we communicate the business. Because obviously there are other cost that I've ever gone from the business and so as you would get the anniversary covert related costs in the upcoming year.
You know those costs are likely to be back don't bother things coming into the the piano and so we think it'd be disingenuous for us as we think about it the Cherry pick you know what's going on adjusted number what's out on adjusted number and so we're just communicating this thing is on an ongoing basis.
Okay, and then <unk> yeah, Yeah go ahead.
That's going to add that when when where they talk high level about talking about margins for the full year, you could envision that that breakdown of that 200 basic point 'cause shifts during the course of the year. As we mentioned is we gave you an N.P. number for April for instance, we also said that current.
Current run rate is down 45% of what we thought she was for that implies and we sat down you know in May trying to call at 14 million to the tend to 11 million dollar range see you can see how during the course that she's too you might have similar detrimentals in the aggregate at April but the next ship and you could.
See that moving over the course of the year and N.P. accounting for a larger component up at 200.
Okay. That's how fun then my last one I'm gonna give this a try because we're then I'm trying to calibrate so if I take you one.
And I look at Q2, we've got let's just call. It mid single digit decline in revenue a couple of hundred basis points of declining <unk>.
That could hypothetically pain, you out around 375 of the bit die and then if we just assume maybe some less bad trends in three and four both on revenue and margins I mean.
Is it crazy to think that you, possibly pan out in 1516 range for the year hypothetically.
Well, you know Oh Robin operating guys on my hand, it's over the two.
Mm.
Do I I would say that that's consistent with where they high level.
Suggestion of the calibration until about 5.25 billion with margins down 200 basis points and the way I would think about it would be from the volume perspective as I mentioned here you can see E.N.P. declining over the course of the air and you can see you know if we start to to evaluate than that negative 12% to 13%.
Could that could but lived implied there'll be a step up to maybe it's negative tan in two three and negative negative eight and she's four I think that's similar math that we could get you to that same place yeah. Like we did what 31 per cent margins I'm rounding last year. So 200 down is 29%.
And that's simple math, but I get to Tibet Zip code and and obviously the peso recovery improves you know you got fewer and fewer months in the ear to benefit from that and so the volatility around a 5.25 number you know maybe maybe it's within one or 1.5% on another side bus prototype.
Okay. Okay, and then just watch on the cat backs, how much of that is E.M.P. versus solid waste I'm, assuming M.P.'s basically and hibernation.
20 million to that.
Okay, Okay again might thanks <unk>.
You expect to me I I made sure I noticed the the fact that.
Hello. This isn't a period of time, where you just you know have for down and they'll take advantage of opportunities on the capital side and so obviously be flex sit down we will work during the course of the year optimistically, we've already got a chance about a week ago to acquire very nice piece of property two it's a long.
<unk> one of our landfills.
Will continue to look for that this is an interesting time to be you know putting office on the table for that.
And frankly, I think given the amount of cancellations.
Fleet throughout this industry.
As well as weakness and and and yellow <unk> the man from the cat across the road et cetera, I suspect, we'll get an opportunity to to look to put some of that back in and wholesome at 21, and this year, it's potentially attractive pricing or we won't but obviously if you do get those opportunities we won't be shy.
We'll make sure you know about it okay.
Okay.
Appreciate thank you.
<unk>.
Our next question comes to mind <unk>, if people just to see what the question.
Hi to where they're Marianne certain questions.
Let's talk about what waste connections looks like going forward, because I I, what I'm hearing is.
A lot of quick reaction.
Did the right thing by the people, but as we recover.
I'm actually end up with a bad or incremental I doubt you add costs back at the pay she took them out how is the right way to think about who you are going forward.
Oh, that's absolutely right like told me first off what I tell you is.
Discussion about hours, reducing goatee total hours et cetera, you know that's no rear view mirror I mean, we know our costs structure <unk> two consecutive weeks on a nominal basis, a consistent with the reflection on the revenue side.
Like any.
Call it correction.
<unk> all companies typically come out of that with a slightly different cost structure and the way back up but then the cost that run better when you previously got to that level right.
And so I definitely expect that these incrementals that come through all this revenue increase.
You know should be very attractive at our folks are focused on that.
Okay, and then I want to follow up on one question about the behavior of the competitors.
Sort of fair observation over the last 10 years, the whole industry has learned the power price.
Public and private little big medium and therefore, more the smallest understand they'd be better off 80 per cent full at 100 per cent price on on a per cent port 80 per cent price.
Well again I think the the couple of things on products I mean, obviously, the the great recession, you know talk many companies.
You know you can't fight to tie the volume right and so retaining price just costs will go up retaining price is very important obviously, the just talked earlier you know what happened to resettle recycling also hit a lot of smaller companies, who depending on recycling to.
As a source of revenue to avoid a 50 right and that's recycling flux at all costs standpoint.
Also took these guys recycling facilities were you know two and three times or more tipsy at a at a landfill beckwith pricing pressures again, but obviously you have what we already talked about the pandemic. So I think the.
I think it's human nature to to understand the prices needed when costs go up construction costs equipment costs operating costs et cetera, now that says look they're always close you know we'll live on a lower margin well one you know close to the edge ballots happen in a in a free.
Segmented industry like this I mean still there's $17 billion immoral revenue and private company has and that will always great. Some level of price check embarrass markets.
But without a doubt.
You know when when they hide goes out on volumes from an economic contraction.
Oh, you have left this price.
It's not like costs have gone down so differently.
Right and then last one for me what what is Canada thing about the when they start reopening given they did it on a national basis.
Yeah, so so far Quebec husband early or to the table with regards to to you know.
Phasing in this reopening.
You know we saw for instance, constructions started being allowed in Quebec again, and you know our business on the on the roll off site was probably down you know 40% to 50%.
A number of polls.
And you know the early days of of that they turned back on you know we've got half of that reduction back recently.
So the staff back quickly to kind of only down 20% to 25% you know what is the first reaction.
Sleeves that market teams three open so you know so too will probably revenue.
Ontario.
Which is also you know affected severely I believe you know most people estimate that the fate early phasing of of a reopening that's going to happen middle of this month.
You know similar expectations around British Columbia.
You know Calgary and the whole kind of Alberta province area that that's all it would be probably a little bit slower and obviously there are other economic factors impacting that province, as as we all know due to oil and gas industry.
Okay. Thank you very much space safe and healthy.
Okay.
As a reminder to register for question. Please press the one file by up for.
My next question comes to line up <unk> Oppenheimer, but few the question.
Oh, great. Thanks for taking the questions and thanks for you know by providing your April revenue changes as well I'll be illustrated color I guess it can be done a little bit here. It looks like if I just sort of take that 6% April 17th declining carried accord for every quarter.
Yeah.
I do kind of get to that 5.25 billion for the year, but I just wanted to make sure. We're we're thinking about it to trends within that right. So.
Illustrate of laying at all hypothetical you know a little bit lower at U.P.D.
Maybe a little bit of improvement on solid waste volumes, but there's probably another variable in there right, which is which is and Monday contributions. So I guess just as it stands today, yeah can you help us out.
I understand how you're thinking about those different lovers and can you confirm you know maybe emanate contribution to start to.
In the back out I'm not sure closing deals.
Sure so yeah.
In a <unk> as you know is around 60 million in into one that's up to 40 30 28, it's sequential corridor there, but there's no. There's no additional acquisitions yet to close that are in that that are in that aspect.
Right, that's just <unk> already in place as we.
Answered this year right right to that Iraq, So where I think you were going no wins, then even know perhaps it uniform once a year over year revenue with the contribution of buckets are different and says it last acquisition contribution which means that there would be more banana packs a salad ways <unk> for instance.
And as I said, well you could envision is that E.N.P.
Yes sequentially worse in terms of the year over year decline and that solid waste could in your in that scenario get sequentially better meaning to eat less negative.
So I guess, that's really helpful. I get the question that falls from that is you know if there's less contribution from dilutive acquisition was on the question thing year and solid waste is getting better it's true that.
Potentially overwhelm D.P. impact in terms of should there be a set up from Oregon, They get better over the course, a university and 200 bits.
It's just that there's there's really no kind of.
Structural clusters compatibility and that is going to be a bigger drag just trying to think about it. Thanks.
Yeah, but you do have the growing dragon.
As you pointed out Marion pointed out by look I think it's yeah right now we're trying to calibrate you know folks expectations and frankly is once we know better around the you know trajectory of margins and the pace. The recovery will know more give a formal outlook and that would be the best time to.
<unk> air that formal outlook to you know what we tried to translate on today.
Yeah I appreciate that thanks very much.
Hmm.
Our next question <unk>, but keep you marking.
Mmm.
Hi, the morning, I was just wondering what kind of assumptions U.S., you mean about what they're in half or you might want like so are you expecting customary three sans serif nice it kind of the pirates novels anywhere at and that's the February <unk> or are you.
Seen customers kind of come back I don't know where service right.
No remember that I think is marrying laid out early or if you look at the the volume reduction is you know just in in April alone. You know April was down 11, or 12% or so in volume and you know as we said look maybe the quarter plays out on that same a range and perhaps that.
Proves to down 10, or or so or down down nine or so and then maybe it improves little bit more on Q4 to down nine and down 8%. So now though.
That kind of assumption is that assuming anything about getting back to prior levels. In my personal view is always been if this is going to be a a longer.
Longer versus shorter Ah recovery, obviously, you some sort of friends won't reopen and 35 million unemployed you know does it does affect the economy and so I've never would assume a a v. recovery and I think the way we've laid out current thoughts to be as transfer.
Aren't as possible reflect that.
Okay. Now that's helpful. I guess on recycling. So it's kind of a line at some like games. So it's they're social distancing measures in place that's kind of normal keeping kwiecien I'm not they're structural change not recycling baseness, yeah, maybe.
Higher processing class, but then also maybe higher in the P.C. prices like why supply going forward.
Yeah, I think there's there's a couple of observations on that you know obviously.
You know the current environment, you've got two things you know working against the supply of recycled materials and therefore, pushing the the value of Empire.
And that is obviously is we've had more remote working you said you know a lot less <unk>, what I would call. It seems strange coming out of the commercial customers right office buildings et cetera and back to buying.
What the shift and volumes too you know the home.
By the way you look at our M.S.W. volumes <unk> binds reflects a.
Meaning you know the volume is still out there, but problem is that more people are jamming contaminated waste streams into their recycling bins because.
They need more been capacity.
A long way of saying that I haven't got less of a clean string you got more of a commingle stream coming out of the residential and so that is increasingly contamination at much higher levels on the m. downstream.
Oh, and then you just as a more and that causes some facilities too. So it's a kind of mix I go people more relative to what the Guy is the finished product before and so.
Without a doubt recycling is having a 10 packs yeah.
Varies by market, obviously different types of facilities are better equipped for social distancing state doesn't seem than others, but that also has an impact.
So no recycling overall you know it's got many challenges as we sit here today and again for US. That's a very you know small part of our revenue stream.
Okay.
Appreciate that.
There are no for the questions registered at this time, however, I spend Minder just press the one hoping for any telephone classic question.
Okay. Thank you. So if there are no for the questions on behalf of our entire management team.
We appreciate your listening to an interest in the calls today Marianne and I are available today to answer any direct questions that we not cover that we were allowed to answer under regulation at the Reg G. and a flexible security flaws in Canada <unk>.
Thank you again, we miss being able to meet with you all in person and look forward to speaking with you at upcoming virtual investor conferences or or or that service call.
Thank you.
That desperate could've conference call for today, we thank you for your participation and athlete P. fiscal Caroline.
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Yeah.
Or.
Uh huh.