Q2 2020 Badger Daylighting Ltd Earnings Call
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I should you want me to press Star one on your telephone if you require any further assistance. Please press star Zero I would now like they have the conference over to your speaker today, Paul Vanderburgh. Thank you. Please go ahead.
Thanks to key trio good morning, everyone and thanks for joining Badgers 2020, Q2 Investor call with me today is our CFO during your work ski and Jay Bachmann, Our vice President of financial operations.
Badger's 2022nd quarter earnings M. DNA in financial statements were released after the merger closed yesterday and are available on the Investor section of our website and also on SEDAR.
We are required to note that some of the statements made on today's call may contain forward looking information in fact, all statements made today, which are not statements of historical fact are considered to be forward looking statements.
We make these forward looking statements based on certain assumptions that we consider to be reasonable. However forward looking statements are always subject to certain risks and uncertainties and undue reliance should not be placed upon them as actual results may differ materially from those expressed or implied.
For more information about material assumptions risks and uncertainties that may be relevant to such forward looking statements. Please refer to our Q2 press release and management discussion and analysis, along with Badgers 2019 annual Mdna and the 2009.
Further such statements speak only as today's date and Badger does not undertake to update any forward looking statements.
So for Q2, the quarter was without a question at time of unprecedented economic and business uncertainty.
We focused on three major business areas during the quarter number one the health and safety of our employees and customers number two on reducing cost and on business restructuring and three strengthening badger's financial positions. We're very pleased with the progress we made in each of these three areas.
With health and safety as Badgers Overwriting focus I'm proud of our response to the cold with 19 pandemic in our ability to continue to safely service our customers with are essential services through these unusual times.
Our ability to continue to say of safely service customers is a testament to the hardware and dedication of our entire team.
The improvements made to operating costs drove better margins, even did not notwithstanding 17% lower revenue than we had last year.
The strength of Badgers proven and flexible business model is reflected in our Q2 financial results.
And third we acted to preserve capital and ensure liquidity given the economic uncertainty and Badgers financial position continues to be solid.
Before I get more into the details I would like to highlight that our second quarter results include a number of nonrecurring items, which affected margins and net earnings. It was a busy quarter. A detailed summary of these costs and their impact is summarized in the Q2 earnings release.
For revenue our revenue in Q2 was 83% of the prior year quarter.
Revenues were impacted due to the broad economic slowdown as the result of coal that combined with lower revenues associated with oil and gas.
Revenues in the quarter trended positively for each successive month with June revenue trends being more positives in April.
And also they also they were positive on a month over month basis and on a year over year basis.
We were encouraged to see ongoing recovery from March and the improvements in customer activity.
We continue to see modest improvements with July and August month to date revenue being approximately 85% to 90% of their prior year comparative.
Revenue in customer activity levels continue to very regionally due to the variability in the reopening of the economy.
Although we are in the early stages of the economic reopening it's encouraging to see the improvements in customer activity levels.
As you know the majority of work. We do is on projects that are already approved permitted in finance and we all know that with infrastructure competing a project is what turns the cash.
We continue to stay close to our customers to ensure that we can meet their future needs as activity levels improve.
RPT for the second quarter was 23458.
Dollars compared to $32265 in the prior year quarter.
As a reminder, RPT for Q1 2020 was $24966. So Q2 ended up slightly lower.
RPT was directly impacted by the reduction in activity due to cold 19, not a down.
We continue to focus on fleet optimization and also on labor cost management.
This was reflected in the Q2 RPT of 31000 for those trucks that were operated during the quarter.
This really helps put some perspective about our direct labor management.
This 31000 compares to 32265 RPT for Q2 last year.
Fleet optimization and direct Labor management continues to focus for us.
This focus will of course be helped by any further improvements in customer activity as we go through the rest of the year and into 2021.
On gross profit margin margin was solid in the quarter I was very pleased especially considering the 17% lower revenue.
Gross margin for the quarter was 34.5%, which is 310 basis points higher than the prior year.
The improvement in margin was driven by execution on our cost reduction initiatives. The net benefit of that Canadian emergency ways wage subsidy program, it's easier for me to say queues and that being offset by our nonrecurring restructuring costs.
Excluding the impact of the queues and the nonrecurring costs gross margin in the quarter would've been 32.5%.
As a reminder, badger's prior year quarterly results included a onetime $5 million benefit related to that recovery of the PG, a knee receivable, which badger had previously written off.
If we take the benefit of the sale of that receivable out of the prior year quarter.
Badger current quarter adjusted margin of 32% would have been 420 basis points above last year.
We're pleased that the Q2 cost reduction initiatives benefited our financial results, so quickly and as disclosed in our earnings results were well positioned for continued improvements in margins and revenues in the second half.
We would though also like to note that the second half operating expenses will be impacted by a modest increase in dollar spend on direct cost in such areas as sales and admin.
As we've seen improvement in activity, we have been selectively bringing back furloughed employees overall, though this is very positive in any employees that come back will be based on a higher revenues.
Also as noted in the earnings release, the impact of the cues program is anticipated to be less meaningful in the second half due to updated program requirements and Badgers revenue improvements as you know that program benefits are calculated each month based on a decline in this year's revenue from the corresponding.
Revenue in them in the month prior year.
Adjusted EBITDA for the second quarter was 35.6 million compared to $39.2 million last year with an EBITDA margin of 26.4% compared to 24.3%.
Included in adjusted EBITDA is a net benefit of $600000 related to nonrecurring items details of which are fully noted in the earnings release.
The 600000 net benefit consist of 5.2 million related to the cues program.
That being offset by 4.6 million in net restructuring costs.
Excluding these items Q2, 2020, adjusted EBITDA margin would've been 26.0% compared to 24.3% last year.
Again, this would not reflect a comparison of the accounts receivable recovery in Q2 last year.
As we discussed in the past several quarters, we anticipated a lower gionee expense run rate as 2020 progressed.
And the required spend on it and ERP related cost moderates. This year. This trend is playing out as expected and I'm happy to report that our financial results are now, reflecting the lower run rates.
Gionee as a percentage of revenue for the second quarter, excluding the impact of nonrecurring items was 6.5% compared to 7% in the prior year.
We're pleased that our efforts to leverage our administrative scale post post ERP implementation and formation of the shared services center, which was accelerated during the quarter are demonstrating the benefits.
As noted in our Q2 quarter release were consistent with our Q1 2020 release.
And we continue to anticipate or 2020, 2021, DNA expense to be approximately $40 million.
But of course will continue to review this area for additional opportunities.
And as discussed on this call last quarter, we continue to review all aspects of the business in order to drive enhancements in operating performance.
Our third focus area in the corridor with maintaining badger strong balance sheet and financial flexibility.
As part of our Colvin response plan to preserve capital and liquidity, we curtailed production of Hydrovacs and other capital expenditures.
As a result during Q2, we completed 12, new Hydrovacs and retired 13.
Badger intends to continue with lower capital spending until we have additional clarity on what's going to happen with the market the economy and customer activity levels.
We of course are focused on driving feet fleet utilization and we'll certainly be looking to move equipment and drive utilization before we add additional units.
We do expect to continue to match continue to manufacture a small number of specialty units combined with a small number of the dead for new generation five hydrovacs throughout the second half.
Badger continues to maintain a strong financial and liquidity position.
At June Thirtyth, the company had an excess that 325 million in total liquidity available through a combination of cash on hand of approximately 25 million in 300 million and committed credit facilities.
We ended Q2, our total debt less cash on hand to EBITDA ratio was 1.2 times well within our financial Covenant of four times under the credit agreements.
We also made good progress on management of our accounts receivable portfolio during the quarter I'm, particularly pleased with the internal process improvements that Darren in the finance team together with John Kelley and the operations team made in Q2, it's been a real partnership.
This progress has been supported by improved visibility into operations and improved functionality from our ERP system and this helped us improve our credit credit credit granting our billing administration and collections processes.
Front at front to back.
We are looking forward to continued progress on a are in the second half.
So a couple of closing comments before we open it up for questions.
These are undoubtedly unprecedented times.
We anticipate that economic uncertainty will continue until the pandemic has brought under control and society and the economy can return to with some somehow to a state of normalcy.
We've taken a range of actions to manage through this environment, which we believe were required and prudent we're pleased with their results.
We focused on health and safety, we positioned our cost structure to reflect lower activity, while taking advantage of the ERP system.
We preserve capital so that in the near term, we utilize capital efficiently, but more importantly to ensure that capitals available for future growth in the opportunity we see for Badger services.
Despite the unusual environment, we're in nothing since the onset of coal that causes us to change our view of the significant us and Canadian opportunity for non destructive excavation services and in Badgers long term growth prospects.
In fact, we believe that heightened society safety awareness driven by the virus will ultimately support further demand for non destructive excavation.
Badger's proven business model supported by our operating scale and flexibility our diversification of end use in geographic markets along with the major strong operating track record across all stages of that economic cycle supports achieving our near term results and also our long term growth aspiration.
Badger's model proved out in Q2 2020.
We remain focused on generating long term growth than driving shareholder returns consistent with our communication in previous quarters, our long term strategic financial and operational milestones are.
Number one to double us revenues from fiscal 2019 levels over the next three to five years.
To target adjusted EBITDA growth of 15% on average over the next three to five years.
To target annualized adjusted EBITDA margins in the 28% to 29% range and maintaining utilization and targeted revenue per truck in excess of $30000.
So with those comments lets turn it back to to the key DTRA for questions.
Thank you at this time, if you like to asking question. Please press star one all your telephone keypad will participate the capacity today roster.
Your first question comes from the line Yuri Lynk with Canaccord Genuity.
Hi, Good morning, Paul Hey, Gary.
Nice quarter, just wanted to dig in a little bit more on the on the margin improvement we saw record results for moving part so.
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Can you kind of characterize the on the one area the.
Better available labor occurring in the quarter and lower labor costs over time not stop.
Where some of the more structural changes, you're making were back office consolidation and some of these other initiatives you're able to undertake with European players or just trying to get our current for.
Relative contribution and how sustainable it is.
Okay. Yes. Good good question Yuri just a couple of quick comments on direct labor.
The reason that we wanted to share the the 31000 RPT for the quarter on the units. We operated was just this that to get get some more visibility for investors.
And that's really the story.
The RPT for the entire fleet, including trucks that are part don't really tell the story. So John in the ops team did a really really nice job in managing direct labor and and you really get some sense into that from the 31000.
RPT for those trucks that were operated.
And Darren why don't you I've been talking a lot why don't you comment on the on the GNS shared.
Good morning year, it's nice to hear your voice again.
So one on the DNA side of things all the activity that we implemented in the quarter was actually planned.
Not only as part of the shared services implementation, but also.
Post here P. effectiveness.
Pakistan really proud of of the team in all the changes that we made I think effectively and smartly in the quarter.
I think the thread that you might be pulling out on your question is how we compromised long term growth with short term cost cutting and is simply answer is no.
So we've sized the group of the Genie group.
So its size the DNA cost to us support revenue in excess of $1 billion.
So we feel like there is a tremendous amount of runway to to support our growth without having to add any kind of meaningful costs in the genies side of things and there is sustainable cost.
I think we're really stage, we anticipated that we would have taken most of the costs out in Q3 in Q4, and I think the hardware for the team, we rotate able to take out more costs in Q3.
Those costs are sustainable to support the long term growth and value creation for the business.
Yes, and the other part of that Erie back to the direct costs.
We have the indirect section of direct costs, which is the staffers as opposed to the labor the direct labor on the trucks and as you know.
We furloughed are laid off approximately 30% of our non operator workforce.
In this and we step back and took a really hard look at it after three or four years of significant growth. It was time to take a look and we use the downturn has that time to do that yet as I mentioned in the comments earlier, we're selectively adding back some positions, but that that would be in those.
Areas, where we're seeing the revenue recover and it would be the sales and admin support positions that would be justified by that revenue. So we're going to continue to be pretty tight on that and we'll see the dollar spend go up but.
The plan is any positions added back.
We have this uncertainty will be linked to revenue opportunities.
Okay.
And.
Thank you seven.
Well marks on the and DNA.
Revenue was still tracking level on.
Lower.
Earlier this quarter.
Can you just touched on some of the areas or charges.
That are selling.
The most pronounced weakness on some of the ones that are stronger.
Yep and in my comments would be be compared to what and that would be last year. So I'll make those comments based on last year and on a regional basis, but the weaker area is no surprise to anyone on the call would be our oil and gas focused areas. So you look in Alberta, Saskatchewan out.
Side of the municipal work in Alberta, we're doing we're doing really well with municipal work, but the oil and gas continued soft.
Right on down through the mountain states in into the Permian. So that's that's where it's fairly saw no surprise to anyone there.
And those are the areas were down year over year.
At the same time, though.
We have been absolutely delighted with the cost management that our regional managers.
Have maintained in those areas in fact, we've had some of our.
Some of our best actually happy at our best cost management in those areas Alberta.
Certain states region, and south central so very very pleased about our management's response, there and on the other into the spectrum.
We've had some of our Midwest markets, Ohio Valley, and upper Midwest that were a little softer this time last year with all the all the wet weather.
It's actually been very solid year over year and those are older more mature us markets.
We have.
Very experienced management, there and they've done a really nice job managing through this downturn with cold and manage expenses, but also in recovering as the markets have recovered. So those would be the bookends and west coast continues to be salad bdcs pretty good year over year.
The northeast was was fairly hammered by coal that as everybody knows.
And Thats come back and.
Down the east coast.
It's been kind of a checkerboard with we're really different customers are at different stages, but but by and large recovering from the March lows.
Okay.
I'm sure although the question so while I'll hop back in queue. Thanks.
Okay. Thanks Sherri.
Your next question comes from the line Maggie.
Double with Stifel.
Thank you.
Question on working capital improvement.
Pretty significant.
17 million to cash from operations.
I'm wondering if you can help us understand how much does with resulting from improved working capital efficiency initiatives that you've undertaken.
Versus just a decrease in the operational activity levels during the quarter.
Yep may im going to let Darren answer this because he and his team have just done a phenomenal job and my overall comment would be we made really significant progress in the last four five months.
With getting improved processes and systems in place for our processes, So, but Darren can talk about the details I could not be more pleased on the way this is going.
Hi, good morning, and it's nice to hear from you again as well.
I won't get into all the technical stuff that we have done although.
I'm very proud of but the team has done and we've moved the needle quite materially, but I think to answer your question quite.
Right off the top is we didnt see a reduction in our working capital requirements because of reduction in sales volume. So if you look at the revenue volume that we had in Q1 versus Q2, there within a couple million dollars of each other so it was all process improvement and being more focused on our collective.
These.
To put it more simply what we've done as we've taken a risk based approach and a more systematic approach to managing collection of our receivables as well as granting credit.
Which which has helped us.
Really move the needle in one quarter. We've also made some changes to the leadership in the staffing in the collection is group and.
I'll call out Kim Kiggins, who is now the head of the group has done a great job. There. We've also implemented a new collections monitoring tool called get paid to put that into perspective, a collector could typically talk to 100 customers in a week.
Three systems upgrade they can now touch over 300 customers in a week.
And were a lot more organized on on asking for our money back.
Probably another data point Thats helpful is we really focused on the higher risks first to collect.
So when you start looking at our aging buckets.
What you're seeing in Q2 numbers is meaningful reduction in the sub.
90 days I will tell you as of Monday My age report we've made.
6 million dollar reduction in the over 90 day bucket and in particular $3.5 million reduction in the over 120 820 day bucket. So we're.
We've done some great work to date, but there's still a lot a lot more work to be done.
Okay.
So.
Year to date, there's been quite a big improvement if I look at the working capital spending and I'm curious.
To your last point that there's more work to be done.
Should we be expecting a similarly material step change and working capital to the back half of this year or would you say you're.
Hi, there now three quarters and the way through the improvement.
It sounds like by box, making there.
So we're going to hold on to it.
I would say that we're going to have some material changes in our in our cash used to fund working capital maybe said differently, we will be smarter stewards of our shareholders' capital.
It's going to take some time.
Only caveat I will say is I don't know what's going to happen in.
In the global market in particular, the North American market.
We're seeing some signs of social unrest answer certain pockets don't know, how thats going to manifest into People's.
Preservation of cash, but if the world was to stay the same as as it is today.
Pretty confident we'll make some material improvements, but I do want to give myself a little bit of wiggle room.
Okay.
Okay. One final question on my end.
Im quite curious to hear how your customers have been doing realize that you have a very large number of customers, but Tom.
Perhaps.
Just a bit of background in terms of how they've handled through the crisis.
They're preparing for the remainder of the year and if you've noticed any sort of trends that have developed in that area.
Yes, no megi great. Great question, that's that's something very near and Dear to our to our Hearts and we're trying to stay close to all of our customers.
And hold as I as I discussed in the last quarter, we viewed the activity with coal that is it's almost like a checkerboard with thousands of squares and each customer has their own circumstances.
We continue to see a range of activity, but generally people have gotten back to work and our customers are in the infrastructure business either providing essential services that are required for day to day life.
Or there are projects that they need to get up and running to get them operating so the cash flow can start going and.
That's that's a real advantage of are essential service focus there so by and large that's been the trend.
But just some more color we have a range of customers. We've seen municipalities that have just powered through.
The crisis and the intention as we're going to keep all our people working.
And then we have had contractor customers, who large ones that shutdown entirely.
Even up for a month back in March when this kicked in saying, we don't know exactly what's going to happen, we're going to take a time out for a month.
Until we get all the safety aspects of this right and of course there. They are now they have now for months now been back working but that was the range of response that we saw.
But but folks are back working now to the extent possible and.
Thats the real positive trend.
I am delighted with our July and August trending at 85% to 90%. So far we were last year and as everyone on the call nosed Summer times are busy outdoor construction season.
I would have I would have given my right arm to get back to this level you know it on about April six so I think we're I think we're in a pretty good spot compared to what Weve, where we thought we might have been when we're talking to last quarter.
Thank you very much gentlemen, I will get back in line.
Thanks Megan.
Your next question comes from the line of Matthew weeks with industrial Lyon.
Good morning.
Hey, Matthew.
So I just wanted to quickly just go back to margins real quick and kind of excluding those one time, saying that benefit in 2019, the restructuring costs.
This year.
Margin improvement was very strong.
And I guess I just wanted to ask where you guys. It all surprised by exactly how strong the margins where in the quarter.
Yes, well.
When we went into this we had our plan we knew we had to take a really good look at costs and and I think I might have even use the term I know I did at the board meeting.
In April and May to use the term on the Q1 call is we're going to take an opportunity to reset.
And look at a cost reset to the extent possible and you know when when you. When you look at the type of economic hit that we all took.
Business gets pretty simple and you focused on those things that are controllable and you can't worry about what happens with the pandemic, but we can focus on whats controllable. So that's what we did and.
We really were really pleased with their results.
And it wasn't it wasn't just with the operations. It wasn't just with trying to control direct costs. When we went top to bottom on the income statement. So it's kind of late spring cleanup. After the winter after four years of of a lot of growth.
We took that to Ernest and so that that reset is going to be there.
But there will be some things that will will creep back in I talked about adding back sales and admin positions as revenue required recovers.
And.
The cues benefit is going to going to fall off overtime Thats, a structural calculations. So that's going to fall off overtime, but we tried to provide visibility.
In the in the details in this quarter, so everybody could gauge that and but when taking all those one offs away.
Gets a significant significant movement in margin.
And to me it now been involved with Badger for years now the operating leverage in this business model is extraordinary and that's why we've really focused on all the things that we have getting the platform in place our systems and processes in place our ERP system in place and.
As these foundational blocks get put into place.
Future growth in the future Badger.
It's going to help us leverage all that for better margins in the future and that's why I've I've been confident in our target of 28% to 29% EBITDA margin is this goes and quarters like this give us some visibility into that into that future and.
Thats what were going for Matthew.
Okay. Thanks for the color on that.
Just one follow up question and you mentioned focusing on the things that you can control.
Maybe shifting over to something that maybe you can't control as much.
Did you see a better and at all from.
Lower fuel costs in the quarter was that an impact I think that's been mentioned before that fuel is generally your second largest direct expense did you see a significant impact, but all the fuel side.
Yep no what fuel fuel is our third largest expense and our first largest expenses direct labor around the trucks, depending on location, 35% to 40% of revenue the new to have maintenance on the trucks, 6% to 7% of revenue and then fuel plus or minus 5% of revenue. So we did see the benefit of lower fuel.
<unk> costs.
And and that's that's always a positive.
We have continued to make very good progress on our fuel surcharges.
And those of course are lower.
As the fuel costs are lower now that we actually have fuel surcharges based on a fuel cost index, so theres visibility to the customers, but even with the lower fuel costs. The the certainty fuel surcharges are still benefited us so.
We're in a good position, but our surcharge implementation percentage has continued to go up throughout all this time frame so.
Our folks and Johns team in the field continues to do a very good job.
On all of that.
And can be able to to have a surcharge to offset variability and fuel expense.
Is the ultimate hedging tool and the organizations done a nice job there.
Okay. So as I understand that essentially probably most of that.
Okay hedged and it's only about 5% of revenue anyway. So it wasn't really a hugely material impact on the margin side that.
No Im really pleased with how weve.
Bad debt and the percentage hedging the implied percentage hedging in the surcharges that the team has built up and it's improved in each of the last three years since we started it so it's not as big impact.
And it's not as big impact because of our operating success.
In the surcharges.
Okay. Thanks.
For me I'll turn the call back.
Thanks Matthew.
And your next question comes from the line of Jonathan Labourers with BMO capital markets.
Good morning.
Good morning, Jonathan you guys have high.
I missed the side multitasking today.
But on the.
Substantial gross margin improvement for the us business I understand like.
Thank you explained well how a portion of was related to getting a fuel surcharges and.
The or fuel costs coming down.
But.
There is a few other good items in there.
Is there any way to size.
How much of that related to overtime.
Hey, going down.
Because I would assume that if revenue goes back to.
Hi, prior prior level.
You would see or even at this level and the future you'll see the overtime pay go back up at some point.
Yes, that's a that's a good question.
Jonathan Im not really sure how to answer that.
It's the overtime is going to be very local market specific and it's not going to be a consistent trend. It would be we for example, we have a job that we're trying to close out.
Or or you have some kind of emergency response that requires a certain amount of work to get done.
So that one is not is easy to predict.
But.
For example, overtime in the quarter was lower in general.
In it than it would have been in last year, when we were busier and operators were more difficult to recruit.
But I don't really view that is something that would be a structural difference year over year.
And it's something that our local area managers will always have to think about do I bring on another operator.
So how much of our my working my my staff.
And let's that incremental operator add thats really key.
So its I don't really view that is something thats going to be structurally different a year from now and I didnt see it is structurally that different a year ago.
Okay.
That's helpful color, Thanks, and again apologies if I missed this but just on.
The revenue outlook.
Are you seeing any indication that there could be formal restrictions on construction activity.
Or other end market activity and that any of your.
Is your jurisdictions for example in the south or the west.
Yes, I mean, if you go back to Mark we did see some local municipalities.
Attempt to imposed total economic shutdown, including construction when the pandemic first fit in there were some markets in the northeast that went that direction, but it they backed away from very quickly on for a lot of reasons because of essential work that has to get done. So I think everyone is really sorted that out and.
And we haven't really seen any of that we have seen some slowness in permit granting and certain jurisdictions because of government employees being working from home and.
It seems like in some jurisdictions working from home with the the building.
Agencies in the government's does not allow them to do permits so we've seen some of those.
Type of dislocations, but it's very spotty and city by city.
Specific so we but we've been living with that for a few months now that's nothing really new.
Okay I appreciate the color around.
Corrugated today revenue being 85% to 90% of prior year.
How do you have seen any slowing over the past.
Weaker to help people are looking for high frequency data points.
Yes, well we have we're all looking for the same data points Thats why we share the July and August run rate, but I mean I mean.
You get different activity week to week.
And Thats normal in this business.
You get up a big project, we could have a turnaround at an industrial facility that could drive some regional utilization and we could be working 24 hours on some turnarounds, but those come and go but thats not any different than badgers normal business model and and so.
So I know Thats, why we try to provide that visibility.
We are providing as good information as we had yesterday for our directors at the board meeting in our disclosure.
The one thing that yes, all of US just have to live with is the fact that because of the economic uncertainty in our visibility is just not what it used to be and it's going to be there for awhile and that's why we've been so focused on our cost structure.
Thats the best thing, we can do in the biggest lever we can pull as we continue to manage through this uncertainty and that's that's the part of Badgers business model. That's to me. So exciting is that the operating leverage is there and the good times and we have the flexibility in the bad times.
Okay. Thanks for your comments.
Yes, thanks, Jonathan.
I guess, if you like to asking question I start one.
Your next question comes from the line of Jeff.
Beverly with Peterson company.
Good morning, guys couple of clarification questions.
Fuel surcharge that you spoke to a couple of months ago is there a lagging are staggered element to the fuel costs versus the fuel surcharge implementation.
Well, we basically rate, we basically we base. It on ended published indices, Jeff So to the extent that the indices may be lagging their monthly index. So theres not much of a leg.
So for example in April and May if you've realized very low fuel prices.
With the fuel surcharges have been adjusted that similar pace for those months or would you see a potential stagger based on those indices.
I wouldn't see more than about a month lag.
Okay.
The cost reduction side.
The Mdna you guys talk about sort of 25 million of annualized cost reduction.
How much of that would have been realized or implemented in Q2.
During the winter, it's going to cover that Jeff I, just want make sure I understand your question correctly when you say.
I would have been implemented as our plan basis or.
What we accelerated.
So we realize when you talked about restructuring activities undertaken will generate annualized run rate savings of 10 million in essence, DNA and $15 million at all costs.
How much of that 25 annualized number did you actually realized Q2 versus implement and we'll realize in the second half a year or beyond okay.
I definitely understand your question now thank you for the clarity so I'll definitely answer it from M&A perspective, and maybe Paul can handle it from a direct cost perspective.
When we were giving our.
Our forecast or comments in Q1 call the.
$10 million reduction in Gionee was planned more over Q3 in Q4.
We accelerated that and we feel like the DNA cost reductions have actually been taken out.
Closing out the Q2 quarters. So those are cost that we believe our sustainable across the back half of the year and Paul If you want to kick the direct cost question.
On the on the direct cost side I mean, we made most of our.
Furloughs and lay offs and restructuring moves in April So April was really.
Very noisy month and May gave us a partial month the visibility and we had a much cleaner look at cost in June as we exited the quarter. So.
That run rate is just about all in place now.
So we I was pretty anxious to see the May and June cost roll ups, but that's that's basically where we stand.
Follow up too.
So and they are commentary a few minutes ago.
Just to understand or.
You.
When you look at your 90 plus days outstanding a are.
You have seen an improvement in terms of quality and collections there did I hear that correctly.
Yes, so the improvements in the numbers that I gave worse since the disclosure you saw for Q2, so as of Monday, we collected an extra as $6 million or reduction and net reduction in in a our by $6 million as of Monday and over 120 days. It was three and a half billion dollars. So.
We continue to see improvements in that aged bucket.
There is a fair amount of.
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Data cleanup that we did just to make sure that we were doing the rate having the right conversations in doing the rate actions for our customers in that in that bucket.
What I can say from a risk rating perspective.
Once we applied a risk rating against our overall our portfolio over 70% of our of our.
Roughly 24000 customers have a risk rating with a score better than than debt will be so we're finding that the collectability or at least the probabilities fault of those counterparties is pretty low which is translating into.
Likely a higher than anticipated.
Success rate in our collections.
Do you have.
A broader targets.
Line in terms of where you want to move so over the second half the year or going into next year.
In the second half of the year it might be a little bit hard to give that kind of target.
But for exiting 2021, we'd like to be we'd like to be sub 80 day dsos.
Last thing.
Just on Capex.
Oh, you referenced obviously.
The low run rate that you're expecting in the second half of the year for manufacturing.
What do you need to see from an end market standpoint, or fleet utilization standpoint to give you comfort to start to two.
To wrap up manufacturing again.
Yes, well I mean, if I don't see it really being any different than we've seen in past cycles.
You get into the high twentys and into into the 30000 range.
Our activities going to pick up quite a bit.
But as you know, Jeff and everyone on the call knows that's going to always be different in different regions.
And so as you get into the 27 $28000 range yield we picking up our activity from there.
Okay. Great. Thanks, guys. Appreciate the color and have great great job is a very challenging quarter.
Yes, Jeff.
The questions on a are really important and I just one more data point for the folks on the call.
You know with with our previously legacy systems.
We had several week delay in closing out tickets to actually invoicing and with our new system.
Unless there is a master service agreement in place.
And we have certain large customers that want weekly or monthly billing, we're doing all of our invoicing daily.
So there was up there was a.
Delay that was never reflected in our historically are in just between the time, we actually did the work and paid the cash out in operating expenses and in our building.
So I may get asked the question earlier and Jeff. Your question reminded me I want to dimension that when Maggie was on the call. So.
That's that's that's the value of our of our new business platform and and those are the things that you don't see on the financials, but they show up they show up in the cash in the bank account.
Well, thank you everyone.
I don't see any other the keytruda any other questions in queue.
There are no further questions at this time.
Okay. Thank you so.
We appreciate the the follow up in interest and Badger.
These are very interesting times in and in interesting times come opportunities and Thats the way Badger is.
It's approaching 2020 in 2021, so on behalf of all of US we thank our customers our employees.
Our operating partners.
Our suppliers and shareholders for your ongoing support and and that's really what makes badger succeed so be safe everyone.
Thank you for your participation. This concludes today's conference you may now disconnect.
Okay.
Okay.
Okay.
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