Q1 2020 Earnings Call
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An archive webcast will be available two hours. After the end of the conference call. It can be accessed through the Investor Relations section of the Covanta website at Www Dot Covanta dotcom.
The transcript will also be archived on the company's website.
Please also note today's event is being recorded.
At this time for opening remarks, and introductions I'd like turn the conference call over to the minute Covantas Vice President of Investor Relations. Please go ahead.
Thank you Jamie Good morning, everyone. Welcome to Covantas first quarter 2020 conference call joining me on the call today will be Steve Jones, our president and CEO and Brad Helgeson, our CFO will provide an operationally business update review our financial results and then take your question.
During their prepared remarks, Stephen Brad will be referencing certain slides, we prepared to supplement the audio portion of this call. Those slides can be accessed now we're after the call on the Investor Relations section of our website Www dot commanded icon. These prepared remarks should be listen to in conjunction with these slides.
Now onto the safe Harbor and other preliminary notes.
The following discussion may contain forward looking statements and our actual results may differ materially from those expectations.
Information regarding factors that could cause such differences can be found in the company's reports and registration statement filed with the SEC.
The content of this conference call contains time sensitive information that is only accurate as of today that is live broadcast media 2020, we do not assume any obligation to update our forward looking information unless required by law any redistribution retransmission rebroadcast of this call in any form without the expressed written consent of Covanta is prohibited.
The information presented includes non-GAAP financial results.
Because these measures are not calculated in accordance with U.S. GAAP. They should not be considered in isolation from our financial statements, which have been prepared in accordance with cap for more information regarding definitions of our non-GAAP measures and how we use them as well as limitations as their usefulness for comparative purposes. Please see our press release, which was issued last night and was furnished to the FCC on form 8-K.
With that I'd like to turn the call over to our President and CEO, Steve Jones, Steve Thanks, Dan and good morning, everyone. I hope everyone is healthy and safe.
For those using the web deck, let's begin on slide three.
We had great start to the year during the first quarter, we generated $97 million of adjusted EBITDA and $19 million, our free cash flow, both showing strong growth.
And process 5.3 million tons of waste at 2% improvement over last year, driven primarily by improved plant availability.
The first quarter highlighted our ability to drive higher waste prices given the secular trends have reduced disposal capacity in our markets and growing demand for landfill alternatives.
With same store average tip fee price growth of nearly 5% in the quarter.
Continuing the trend that we demonstrated in 2019.
As pricing improvement stem from tight waste disposal market major contracts that we repriced during 2019 at higher prevailing prices as well as the escalators embedded in our contract.
Our covanta environmental solutions platform as a large contributor in the first quarter.
As we saw significant revenue growth and profiled waste at our waste to energy plant.
Which was up 18%.
And at our material processing facilities, where revenue grew 7%.
We revamped the CES sales and customer care team and systems in 2019, and these efforts clearly bore fruit in the first quarter.
While we can feel good about starting the year off on a strong note in Q1, the cobot 19 pandemic that emerged in mid March significantly impacting our operations markets customers employees is now our our overriding focus.
How we navigate this period will tell the story for 2020, and I believe will demonstrate the strength of our company.
As I discussed on our business update call a few weeks ago, we reacted decisively to mitigate the impact of cobot 19 pandemic on our employees facilities customers and financial.
As a result.
Our business continues to operate well on the challenging environment.
At its core Covanta operates critical infrastructure, providing essential services for our host communities and we've continued to do so with minimal operational disruption.
The majority of our waste and service revenue was stable in largely unaffected by the pandemic.
This includes our long term service fee contracts with municipalities.
Where we are relatively agnostic to waste volumes.
And our tip fee revenues that are generated from processing residential waste, which has remained strong.
We are seeing pressure on commercial MSW and profiled waste volume, which is largely generated from industrial into manufacturing sources.
Given the widespread stay at home and similar mandates in our core region.
However, given the location of our assets.
Our logistics and transfer station capabilities and the talent of our waste procurement team, we've been successful and backfilling any shortfall volumes to ensure consistent operations.
Regarding commodity based revenues things haven't changed too much since last quarter and while markets remain extremely challenging the impact on us is manageable.
Electricity prices are near historical lows and are expected to remain subdued in the near term.
While natural gas futures have recently began to move upward on the expectation of reduced drilling for oil and the potential reduction in associated gas.
We are highly hedged for the remainder of 2020 and see limited remaining downside risks.
As we looked at 2021, we are already over 50% hedged on our expose position at price is similar to our 2020 hedge levels.
This activity is in line with our disciplined risk management strategy.
While we are ultimately long on electricity our goal remains to minimize near term volatility.
In light of reduced economic activity during the cobot 19 pandemic, we have seen a reduction in demand for our scrap metal.
That said other sellers of scrap rely on the collection of metals from areas like auto scrapping.
And a slowdown in these activities is quickly reducing supply of material.
The supply response is helping to support prices even this even in this low demand environment.
Importantly, given the investments we've made in separating and upgrading our metals, we continue to find markets for our product.
Looking beyond the current situation I want to remind you of the fundamental value proposition proposition of Covanta as a company, we're focused on leading the world and sustainable waste management.
And our businesses levered to ongoing secular growth trends in waste disposal.
This provides us the opportunity to drive incremental value from our critical assets, while offering to potential for new investment opportunity.
We will continue to invest in growth over the near term. This will be focused on the UK projects and our first taps facility in Fairless Hills, Pennsylvania.
These are the most strategic opportunities we have in front of us and offer the highest rates of returns on investment.
In the UK, our first three projects are in construction and we expect to begin seeing cash flow.
From the UK in 2022.
As a brief update on our comp from our conference call a few weeks ago. The URL skate project in Scotland is now in the process of restarting construction activities.
I'm proud of our success in UK to date and excited about the opportunities ahead of us.
Supporting these initiatives is a flexible balance sheet with no near term maturities and ample liquidity.
By lowering our dividend and focusing our growth investments, we are enabling a fast fair pathway to reducing our leverage which we believe offers more value and less risk to all stakeholders.
I'll still offering attractive shareholder payouts.
Now, let's move to slide four to take a closer look at our waste revenue in this environment.
While the waste market as well followed by investors. The current situation calls for a deeper dive on how the pandemic and economic shutdown, our impacting covanta, specifically overall, our volume process will remain relatively steady.
With softness in certain waste streams translating to us as temporary pressure on tip fee prices.
This is different than how the integrated waste collection and landfill companies experienced this environment.
As a reminder, in 2019, we generated about 1.4 billion in waste and service revenue.
Of which approximately 70%, we'll see very little impact from co bid 19.
As I mentioned earlier. This includes all of our long term service fee contracts with municipalities.
Where we are relatively agnostic to waste volumes.
And about half of our tip fee revenue, which is based on processing residential waste under long term contract.
We have felt some downward pressure on roughly 30% of our waste revenue, including commercial MSW and profiled waste.
Which together represent the other half of our tip fee revenue.
And environmental services offered by Covanta environmental solutions.
As our waste to energy plants are designed to run full our goal is to procure sufficient additional ways to offset any declines in existing waste streams.
One of our first options here is to tap into our transfer station in 2019 over 200000 tons.
Received at our transfer stations were sent to dispose, let third party outlet.
Where appropriate we are now internalizing some of these ton.
Second we're going back to some of our key customers and asking for more waste.
And then lastly in some cases were simply casting a wider net to accept waste from additional haulers.
On the profiled waste side, we have a diverse customer base that is balanced across areas, including environmental services chemicals, food and beverage consumer products.
Manufacturing in health care I'll note that we have very limited exposure to oil and gas.
While overall profiled waste volumes to our waste to energy plants or down in the 15% 20% range. In April this has been particularly driven by our exposure to certain sectors like auto manufacturing.
While volume for many other sectors sectors has showed little limited impact.
Now please turn to slide five.
Rather than try to guess when and how things when will normalize.
We can give you a sense for what we're seeing in the business today on the current economic conditions.
First we estimate that backfilling shortfalls in commercial and industrial volumes with lower price alternative waste sources as currently reducing tip fee revenue by $5 million per month.
Or an impact of four to $6 per tonne on our overall average tip fee.
To be clear this isn't a calendar year prediction, but rather a current run rate that will evolve as the macro environment changes.
Note that the majority of our existing commercial and industrial volumes are still largely unaffected.
But on the portion where we do need to find replacement tons.
The price Delta can be significant depending on the location and waste type.
As commercial activity improves we anticipate these headwinds will abate.
But this is where we are today.
In addition, we're also seeing some impact from reduced volumes at our material processing facilities, where environmental services revenue is currently running lower by 15% to 20%.
However, as compared to our waste to energy facilities.
This business can respond by reducing costs, such as labor transportation and disposal as a result, we estimate the decremental margins on lower revenue of less than 50%.
Outside of waste revving revenue, we're seeing some impacts operationally there incremental cost of operating in this environment, including areas like ERP and other supplies disinfecting services and increased over time.
Further and led to some of the general challenges operating in this environment. It is inevitable inevitable, we will see negative impacts on throughput and efficiency.
As previously announced we expect to partially offset these items through proactive cost savings initiatives.
Including discretionary cost reduction hiring freezes temporary salary reduction.
Furloughs and reduce bonus and tunnel in total we expect $15 million to $30 million in total cost savings in 2020.
This discussion does not touch on the potential impact of the pandemic on commodity prices, but as usual or worse, we are separately, providing our outlook for commodity volumes prices in revenue in the appendix to the presentation.
Fundamentally this is a highly contracted and stable business, where we generally have good visibility and for the majority of the business. This has not changed with that I'll hand, the call over to Brad to discuss our financial results in greater detail.
Thanks, Steve Good morning, everyone I'll begin my review of our financial performance with revenue on slide seven.
Total revenue for the quarter was $468 million up $15 million or 3% from the first quarter 2019.
Organic growth, excluding the impact of commodities contributed $28 million driven by strong waste price improvement higher plant availability in the quarter in additional revenue related to our new wholesale electricity load serving contract in New Jersey.
Commodities had a significant negative impact as we saw a $12 million decline related to lower market prices for energy and metals.
On the year over year basis average power prices across PJM, and the new England ISO were down approximately 40%.
While the ferrous scrap HMS number one index and the old cast high side scrap aluminum index were lower by 20% and 15% respectively.
Transactions reduced revenue by 4 million with the benefit of the startup of the Manhattan Marine transfer station more than offset by asset divestitures.
Long term contract transitions represented a 3 million dollar benefits or revenue, reflecting new contract of two of our plants on long Island.
Now moving on to slide eight.
Adjusted EBITDA was $97 million in the quarter of $13 million increase compared to Q1 2019.
Excluding commodities adjusted EBITDA improved by $21 million organically led by stronger waste prices waste to energy plant production and lower maintenance outage expense.
Core business organic growth was over 20% in the first quarter.
The $12 million headwind from commodity prices that I just discussed translated directly from revenue to the adjusted EBITDA line.
The net contribution from transactions was $2 million, representing the benefit from the Manhattan MTS.
While long term contract transitions at the two plants on long island contributed $1 million to EBITDA.
Turning to slide nine.
Free cash flow was $19 million in the quarter compared to $6 million in Q1 last year.
The $13 million increase in adjusted EBITDA was partially offset by higher maintenance capital expenditures in the quarter.
In light of our maintenance capital plan for 2020, we expect this to be a recurring item in year over year comparisons throughout the year.
During Q1 2019, we incurred cash costs in connection with the closure of our Warren facility and for severance, which did not reoccur in Q1 2020, providing a 7 million dollar favorable comparison year over year.
Working capital provided a modest benefit in the quarter largely consistent with Q1 last year.
Now please turn to slide 10 were all review our growth investment activity.
As discussed during our recent business and capital allocation update call in April we plan to focus growth investment primarily on our UK project in the startup of the tops facility in 2020.
We will be highly disciplined and making any additional discretionary investments this year, which this outlook reflects.
During the first quarter, we invested $8 million in tops, and we expect to spend about $15 million in total this year.
The plan doesn't start up and testing right now and some of our payments to our vendors will not be released until next year. After the plant has met extended operating performance test.
We plan to invest a little over $30 million in this project in total.
Upon reaching financial close on the numerous project in the UK in the first quarter. We received both a premium from Georgi to buy into the project and a recovery of development costs, similar rookery, but with smaller amounts involved given the relative size ownership and economics of the project.
With the amounts received for both projects. We currently have approximately $22 million in our unconsolidated joint venture to can now be invested in project construction.
As you can see in our outlook presented here, we anticipate that these funds who effectively cover any planned spend for the UK project in 2020 with little net new investment required from Covanta corporate funds.
Please turn to slide 11 roll provide an update on our balance sheet.
At March 31, net debt was approximately $2.5 billion up $41 million from year end.
Our consolidated leverage ratio was six times down from 6.1 times at December 31, and our senior credit facility Covenant ratio was 2.2 times, which is flat with year end than substantially below the covenant limit of four times.
Our available liquidity under our revolver was $425 million at March 30 Onest.
I'd like to take this opportunity to revisit the discussion around leverage from our call a few weeks ago.
The revision to our dividend policy and focus of our growth investment plan will increase the cash flow that we retain overtime and thus accelerate the pace the pace of deleveraging all else being equal.
While it's premature to lay out a timeline for when we will reach specific targets, especially given the current limits on business visibility. This shifting capital allocation policy represents a fundamental reprioritization of balance sheet improvement and puts the company firmly on a path, which we think is in the best interest of all stakeholders.
Now before we turn it over to Q and I'd like to headed back to Steve for some concluding comments, Steve. Thanks, Brad I want to take a moment and reiterate a few things.
We spoken a lot this morning about our various initiatives to manage through this environment.
There is no crystal ball, we can't say when things will return to normal.
Well, we can say is a business has a very high degree of resiliency and stability.
And we're also operating is normally as possible we are valued partner to our clients and continue to provide the same high level of service that is expected from us.
Our initiatives to grow the business are unchanged and we remain focused on these opportunities.
Waste to energy investments take patience and perseverance.
But as we saw the Dublin, they pay off handsomely.
In the UK, we remain focused on.
On growth with three facilities and construction and multiple others in development.
New development activities in the US are at an earlier stage, but as I've mentioned before we're seeing more activity. For example, as you may have recently seen in the press we're in negotiations with our client and Pascoe County, Florida to support the potential expansion of their waste to energy plan. This will take time to play out but it's deposit.
The sign on the potential for domestic growth.
And of our strong position in the market.
As always we appreciate your interest and support and I'd like to open the lines for questions now.
Operator can we move on that acuity.
Ladies and gentlemen at this point will begin the question and answer session to ask a question you May Press Star then one using a touchstone telephone.
We're using a speaker phone we do ask you. Please pick up your handset before pressing the key.
So it's all your questions you May press star too.
We also note that ask that you. Please limit yourselves to one question and a follow up. Please note that you may reenter. The question do you have additional questions.
At this time, we'll pause momentarily to assemble our roster.
And our first question today comes from Noah Kaye from Oppenheimer. Please go ahead with your question.
Hey, good morning, Thanks for taking the questions and providing all the details very helpful for modeling if I could ask one more that will help us.
You called out some of the.
Higher operating costs around the positive inefficiencies and.
Supplies overtime, if we just sort of takes a look at April.
How what did that.
Actually translate to in terms of increased plant operating and other expenses what kind of.
Run rate higher with that in terms of millions if you can quantify that.
Yes, I know, it's Brad it's difficult to quantify that at the moment, we have a good view on on adjusted our close process on revenue for April we haven't fully closed the flocks and also I think given the.
So the evolution of the rapidly evolving.
Situation here.
He doesn't make sense for too fine a point on the on the operating costs.
Impact.
Yes, I think we just wanted to make sure that people work as we think about how this may impact to us on the fuel think about those potential impact.
But then of course, our intention is to offset.
Those impacts if not more than than what we incur Additionally, with the cost reduction initiatives.
Okay. I appreciate that it's sort of went missing feature but I think you've given us the piece. So the others. If I could just sort of try to simply capture those.
Assuming no improvement in the business environment, you're basically looking at it trends from today carry forward for the rest of the year I just want to give a baseline here looking at something like.
15 million in the quarter, So 45 million lower EBITDA for the year from if the mix.
Maybe 5 million or so from 100000, let volume.
Call. It low single mid single digit million lower EBITDA from energy, maybe high single digits from environmental services, whatever the Opex days and then you get back some of that with this savings program right I mean.
Implies something like $40 million to $50 million EBITDA walk, if we don't get any improvement.
Is that a fairway.
About it based on current trends.
It is youve covered all the all the major categories and again just to confirm what you said thats thats, assuming the environment that we're operating in at this moment remains as is through the rest of the year, but but yes.
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All right that's extremely helpful. If I could nikin.
One more if you can just give us quick update on protos matching all kinds of processes are slowed because of the end of it but just any color there on.
Expectations for that solar Gen and into financial close.
Yes, so protocols were in the process now finding and ERP, So engineering procurement construction contractor to build the plant for us.
We're talking to several deferring.
The contractor, we're going to use ran into some issues during the year the pre pre pre cove it and so we had a pivot towards another set of of the P.C. contractor. So we're working on that now.
They appreciate that thanks for the update sure.
Our next question comes from Tyler Brown from Raymond James. Please go with your question.
Hey, good morning, guys.
Good morning.
Hey, Ah so see great color on waste pricing I think we all understand maybe why prices jogging down you keep the burners full. However, my question is how contractually locked in are you in some of these new rate I mean, if you gave a holler enacted <unk> advantageous enough deal to redirect tons to one.
Of your plan did you have to give them that rate for some duration or is that not the case I guess my simple question is how quickly can waste pricing migrate back up.
Yeah, It's interesting dark me half an hour talking about this yesterday yeah. These are short term deal so.
Anklet were already looking at some of these deals as as the stay at home order start to dissipate and waste is starting to come back into the more commercial wasted start to come back into the marketplace. We're starting to up pivot now back to our our kind of our normal flow back to our normal customers that we get flow from so I'm not <unk>, they don't really locked in for any.
Significant period of time.
Okay. That's very helpful and I know you guys, probably won't get two granular like week to week, but.
Has your contract Uncontracted price.
<unk> improved versus <unk> pane or is that just to granular.
Let me, let me say this because I you know I've heard this question with some of the other somebody the other bigger waste integrated waste companies. You know we're we're we're in the same general business as those guys. We're seeing you know, we're we're expecting a similar recovery.
The low point for us.
'cause again I've heard this question a few times. So let me let me deal and then the low point for US was kind of Easter week. So mid mid early to mid April when Mrs stayed home and shelter and place orders weren't full force since that time at the commercial industrial business have restarted we've seen a stabilization and modest improvement in.
Volumes and both commercial ways.
And profile waste or facilities, though.
That's that's kind of the position we're in now so you know again, if you look at mid April was was particularly challenging but it's kind of moved up from there and.
From a pricing standpoint, you know that that that that following that trend.
Right, Okay, right very very helpful and <unk>, maybe my last one so but I just want to make sure I have it all but the 5 million a month impact on Tippy's, that's basically 100 per cent detrimental because it's all price.
15% to 20% decline in environmental services I think you said was that about a 50 per cent detrimental and then lastly, I think you're guiding down to some 5 million and service be revenue.
Is that 100 per cent Sacramento or just how do we think about all those.
Yeah. So the the the first part it is 100% Sacramento. That's just that's just a net different price.
On environmental services, Yeah, Steve said actually expect to detrimental to be probably less than 50 per cent. You know if you want to use 50% of the rule of thumb is probably fine and then on on the surface be revenue. That's really just a function of Oh. The fact that we earn a additional waste service fees under hour or.
Surface be contracts and so Steve comment is prepared remarks that were you know we're relatively volume agnostic. We do have see a a very small impact to the extent that volumes are running a little lower and that's really a function of the fact that under a number of these contracts municipalities, bringing that's primarily residential.
But also some commercial so so the the volumes are running a bit lower on the surface to be deals yeah, that's not 100% Sacramento, but it's but it but it's pretty high.
Okay [noise], Okay, alright, thank you guys.
[noise]. Our next question comes from Mario.
Quarter Racy from Jeffries. Please go ahead with your question.
Hi, guys hope, everyone safe and while just kind of looking longer term and I I think obviously from from what you said things that have more or less bottomed or stabilized.
<unk> a longer term I guess.
What is the mic shift in commercial doesn't come back as quickly or just kind of is a structural change in the business is their opportunity to get pricing on that lower price by business.
It just <unk> trying to think theoretically about at longer term.
Yeah, I think I think though I think that will I mean is is is volumes come back into the market I think you'll see more of a stabilization on pricing on it <unk>. It depends on the region no I'm in so in some regions I think we've got more pricing power in other regions less pricing power. So it it really is reason specific but.
You know I I think there will be <unk>, the the secular trends aren't going to change our aren't changing in in the market. There's limit more limited landfill capacity and we're still seeing customers, who want to go to a a non landfill option and so that's been helping our business.
Right and I don't know if you mentioned any of the on the regular medical we part of your business, but any any kind of update there would be great and then what is your and market exposure look like in terms of I guess large quantity versus small quantity hospitals preventative care and things like that any any sense.
The Knicks about business. Thank you.
Yeah, we had three facilities that are permitted do except for regulating medical waste.
And so we believe we have the leading market position. There. So we're we've been pleased with that the third plan began to take shipments in the third quarter of a 2018 and so these plans to provide a secure path for regulating medical waste, it's actually been interesting during the pandemic, we'd originally anticipated that regulated medical waste would would would ramp.
<unk> ramped up in the first quarter, you know you saw that 42% figure that we've mentioned, but it actually with the with the doctor's offices closing any slowdown in elective surgery regular <unk> medical waste kind of kind of slowed down also so as we start to Steve's doctors' offices opening my Doctor's office just sent me.
The other day, they're opening up and then elective procedures will start up again here I think you'll see a ramp up in regulating medical waste because on top of all that you.
You got to cover in 19 weight.
And and how that's all plane and so we originally thought that would that would yeah and you saw it in China. There was a lot of Kobe 19 way coming through the system, we haven't seen that come to us at this point because the other two things I mentioned, the doctor's offices and the elective surgeries are down so it's been kind of a a mixed bag as we got into the Kobe.
<unk>.
Yeah, and then I'll just add a little more and Steve are touched on the trends, but if it gets probably useful to to restate that you know we're not we're not in the hospital is we're not in the doctor's offices of course, we leave that to our partners, putting stare recycle. So you know and Steve describe the general trends, but but frankly for us we don't.
Really see a difference you know whether it's a small quantity or large quantity generator for us. What's relevant is is it is it must incinerate material or or not and that just impact on the on the on the market price for the material.
Great. Thank you so much.
<unk>.
Our next question comes from Brian leave from Goldman Sachs. What's your what's your question.
Hey, guys come on it takes for taking the questions hope everyone is a is safe and Rob.
[noise] question on on on the price and I know, there's been a lot of focus here and appreciate the the granular color on the four to $6 per ton impact here you are stating that it's not on the entire 30 per cent on the volume that's kind of in that Blue part of the Pie chart on page four so could you help size.
I know, what what you know what impact or what.
Part of that mixes actually seeing the pricing impacts right now.
Yeah. He paid Bryant is right. So we we intentionally and kept this at a pretty high level to essentially your give the give the market what we see as sort of the punch line and really not get into too much detail on on on specific volumes in specific markets etcetera, I would tell you though that.
It is a a minority of the 30% is is actually showing up as lower volume.
And but in those instances.
In many cases, the price delta can be pretty significant so the the most the most obvious example would be profiled ways that we may need to backfield, depending on the location with bought M.S.W. of course, our average price on profiled ways is over $100. A time for that can be there can be a pretty steep delta, but again in the scheme.
Things even within the 30 it it's not it's not a majority of that that volume.
Okay fair enough that that helps and then just a second question here on the the cost savings <unk>.
Yeah, I I would imagine some of this is gonna get phased in but can you give us a sense of you know how much of that $15 million to $30 million has already flowing through as of today are as as you know.
The end of Keyuan into cute too and then what the K. and achieving you know the the rest of that cost savings is moving through the year.
Yeah. So we we we've started I mean, some of the things we've started and we're we're fairly you know quick out of the gates on Furloughing and pay reduction started several weeks ago, so they're they're flowing through travel entertainment.
And and and discretionary spending that was easy to to shut off. So you know you take the mid pointed out 15 to 30. It it it's it's coming in pretty pretty evenly right now as we as we start to work through then you know this coping period. So it's not it's not it's not extremely lumpy if I was modeling it I'd I'd make it pretty.
Pretty smooth through that period.
Okay. Thanks, guys.
Yeah.
Our next question comes from Jeff Sober from B.M.O. Capital. Please go ahead with your question.
Thanks, So much you mentioned to negotiations going out with pastoral County, Florida, I wanted to focus on that a little bit I'm not asking for specific the math transaction or potential transaction.
Do you really think there is possibility that you might be more domestic growth or is this may be just a lot on.
Oh, no we've got several discussions going on right now Jeff interesting with passive county, the the one of the there there's a kick off meeting today on on the on the discussion so that one's been in the press. So we figured we'd mentioned it there's a two or three others that were actively ah talking to folks what's.
Spinning is a lot of these folks are looking that there are solid waste plan <unk> you know depending on the location seen in the need for additional disposal capacity.
In their in their municipalities are in or you know geographic areas and so that's that's driving to business and we haven't been.
At least for my tenure, we haven't been talking a lot about or have have had a lot of opportunities in the U.S.. It's been more outside the U.S. So we've been pleased with the fact that there seems to be a a a change in a in viewpoint in in I think you're going to see more energy from waist now in in the U.S. really <unk> really focused on <unk>.
Mansions up some existing facilities that we have out there.
Okay, that's <unk> <unk>, <unk> and I notice a horrific crisis and then I hate to ask this question, but do you think there are any <unk> silver lining for your business longer term Wolf things change.
Yeah, that's an interesting question I think.
No I think I think that kind of it and and I've had this from employees. You know do you know <unk> things will change from an employee standpoint, I think we'll get more remote there's a lot of articles about out there about how you know how the world's gonna change as it relates to the waste business I I don't I don't see as much we are seen quite frankly some recycling.
Program shut down which means that there's there's more waste coming through the waste stream and I think that'll continue and and I think you'll see that.
Continue even further and which means it'll be you know the more waste looking for a home. So I think it will tighten the market up a little bit it's my sense, but as a general manager. This is a pretty stable resilient business I don't see you know I don't see a lot of issues from from a drop off in ways I think if anything.
<unk>, we'll see the same waste levels, when we get back to whatever the new normal as or or maybe an uptick.
Okay create the color so much.
In our next question comes from Michael Hoffman from people. Please go ahead with your question.
Thank you, Steve Brad Dan for taking the question Echo I'm glad to hear your employers are safe and you might as well.
You all at a a terrific core business.
Incremental in one too I mean came in and 75% incremental.
If you follow through with all this cost cutting unless you're not what did you follow through with it and read this come back.
Possible the incremental on their <unk> recovery is better on that 75%.
They might cause Brad I suppose as possible I mean, it really depends on the the pace and the trajectory really Oh, Oh, the recovery, you know with which which obviously, we're not for wading into into predicting but but your your point is is a valid one which.
The one certainty of the numbers that we've laid out is the 15 to 30, we're we're doing it no matter what so depending on what the up what the recovery looks like you know I suppose as possible.
Well thought differently you take out the mid point, what does that 20 to something.
You you AD revenues faster than you would add costs.
Yeah, I think that's I think that's right you think you're gonna <unk> I think that's definitely a possibility.
Okay Cool and then I just want to make sure I understood. Your one comment Steve I got business bottoms in the Middle April it starts to kind of look like a switch so it's steep down short gradual slow recovery.
Did the AD blended average to the bottom as well or it does typically price things tend to have a longer tail before they've level and then they take slower to recover.
Yeah that was more of a volume comment you know the data I've been looking at it has been been more more volume base I think that the <unk> bottle a little bit after that but I think in direction with all moving <unk> you know we'll move in the same direction I happen you know so far I've been pleased with the recovery I have to stay and and and as we get more.
Or a state.
<unk> have any away from the shelter and how it stayed home and shelter and placed orders I.
I think we're going to see a a faster recovery.
Okay, and then it should be an interesting observation on tailing typing on the question of what's the silver lining and Sterett's teams out there trying to find volume are there fewer a third party players to find it from because they're struggling in this environment.
We haven't seen that yet I mean, and he's been around the waist industry longtime there's still there's still waste coming out. It's really a commercial side is is is is lower the residential side, we don't have as as good visibility as some of the the big Guy to or you know who the haulers, but there's there's still plenty you know there's still plenty of waste I think you're.
We're going to we're going to see that needs a home.
Okay. Thank you very much thanks.
Thanks, Michael.
Yeah, ladies and gentlemen, with that I always during the conference back over its management burning closing remarks.
Sure. Thank you for joining us on the call. This morning and for your continued interest in Covanta as you heard today were navigating through a challenging environment, but we remain focused on our long term goals I'm extremely thankful to our employees who are diligently performing in this environment, our successes accompany would not be possible without their continued outstanding.
So I want to thank them.
Remain excited about the company in our progress and we look forward to virtually meaning with many of you over the coming months as we have an active shareholder engagement schedule plan to stay safe be well one have a good day thing.
Yeah, ladies and gentlemen, with that will conclude today's conference call. We thank you for joining may now disconnect Airlines.