Q2 2020 Waste Management Inc Earnings Call
[music].
And welcome to the waste management second quarter 2020 earnings release Conference call. At this time all participants are in a listen only mode. After the speaker presentation. There will be a question and answer section to ask a question. During the session you will need to press star one when you were tells them.
Please be advised that today's conference is being recorded if you require any further assistance. Please press star zero I would now like to hand, the conference over to your speaker today.
Equal senior director Investor Relations. Thank you. Please go ahead Sir.
Thank you Mary Ann Good morning, everyone and thank you for joining us for second quarter 2020 earnings Conference call with me this morning, or Jim Fish, President and Chief Executive Officer, John Boris Executive Vice President and Chief Operating Officer, Divina ranking executive Vice President and Chief Financial Officer do here prepared comment from each of them today, Jim will cover.
Hi level financial that provide a strategic update.
I will cover an operating overview and to be in what covered details of the financials.
Before we get started please note that we have filed a form 8-K. This morning that includes the earnings press release and is available on our website at Www Dot W.M. dotcom.
Form 8-K, the press release and is scheduled to the press release includes important information.
During the call you'll hear forward looking statements, which are based on current expectations projections, where opinions about future periods.
Also be discussing our updated financial outlook for 2020.
This outlook excludes transaction advisory costs and post closing financial contributions, resulting from our planned acquisition of advanced disposal services incorporated which maybe also referred to as adss.
Once we complete this acquisition, we expect to provided updated outlook.
All forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially.
Some of these risks and uncertainties are discussed in todays press release, and then <unk> filings with the FCC, including our most recent form 10-K and subsequent form 10-Q's.
John will discuss our results in the areas of yield and volume, which unless otherwise stated a horse is definitely references to internal revenue growth or RG from yield or volume.
During the call Jim Joan Intervenor will discuss operating EBITDA, which is income from operations before depreciation and amortization.
Any comparisons unless otherwise stated will be with the second quarter of 2019 it.
Net income Es operating EBITDA margin investing expense results have been adjusted to it has comparability by excluding certain items that management believes do not fundamentally that do that reflect a fundamental business performance or results of operations, including cost incurred in connection with the pending acquisition of Ats.
These adjusted measures in addition to free cash flow our non-GAAP measures. Please refer to the earnings press release of the tables, which can be found on the company's website at www Dot W.M. dotcom for reconciliations to the most comparable GAAP measures and additional information about our use of non-GAAP measures and non-GAAP projections.
This call is being recorded it will be available 24 hours a day beginning approximately what PM Easter time today until five P.M. eastern time on August 13th.
To hear a replay of the call over the Internet access the waste matter website at Www Dot W.M. dotcom.
Here, a telephonic replay of the call dial 8558, Fivenine to 056, it had a reservation code 916 for three to eight.
Time sensitive information provided during today's call, which has occurred on July Thirtyth 2020 may no longer be accurate at the time of a replay.
Any redistribution retransmission or rebroadcast of this call it any form without the express written consent of waste management is prohibited.
Now I'll turn the call over to waste led as president and CEO Jim fish.
Thanks, Ed Thank you for joining us.
The strength and resilience of our business was clearly demonstrated in the second quarter as our results exceeded our expectations.
At the outside of the quarter governments businesses across the continent, we're responding to the pandemic will stay at home orders and shutdowns of broad sections of the economy, resulting in short volume declines in our collection and disposal business.
Our immediate priorities, we're protecting our employees and providing safe and reliable service to our customers and communities.
With a framework in place to achieve those early priorities. We then focus on optimizing our business for the new environment and we saw measurable improvements as we progressed through the quarter.
Year over year declines in operating EBITDA in the collection and disposal business improved each month of the quarter as we were able to successfully flex down our operating costs eliminate discretionary spending and improve productivity.
I'm extremely proud of our team.
Clearly the shutdown of the entire economy had a dramatic impact on the top line of our business.
Even with a 10% decline in our second quarter revenues, our team was able to improve operating expenses as a percent of revenue.
By 30 basis points hold SGN, a expenses as a percent of revenue relatively flat and most importantly, deliver 10 basis points of operating EBITDA margin expansion.
As we progressed through the third quarter, we are firmly confidence in our operating model and are well positioned to deliver on the revised expectations. We have for the remainder of the year.
Our second quarter results prove that putting our people first so they can take care of our customers communities and the environment is the right approach to ultimately rewarding our shareholders.
Putting people first is fundamental not just to our SG philosophy, but to our business strategy.
On our first quarter call. We discussed the actions, we took to protect our employees health safety and financial well being.
We also took steps to support our customers, particularly the small and medium sized businesses that have been impacted most adversely during the cold with 19 pandemic.
We helped our customers right size their service levels temporarily paused price increases extended payment terms and gave a three month of service to qualifying open market small and medium business customers.
While these actions had a short term impact on our price metrics.
We've strengthened our customer relationships and increased customer loyalty.
Our customer churn for the second quarter was our lowest on record at 6.9%.
We've also seen significant increases in our net promoter scores.
More differentiated company.
At our Investor day last year.
We laid out our plan to continue to invest in technology to enhance our customers experience with us and increase the lifetime value of a W.M. customer.
At that time, we felt we had a strong plan to achieve some big technology wins over the next several years. However, during this pandemic several things have become abundantly clear to US first our customer service digitalization investments otherwise referred to as CST.
He is unquestionably the right approach.
This end to end digitalization of our entire customer experience from the first customer contact to the service confirmation.
We will be unmatched.
And as Weve.
And as we've seen during covert 19.
The company's with a superior end to end online model will truly be differentiated in the post Covidien world.
Second it became very clear to us early in this pandemic than we all move in unison as one organization towards the accomplishment of a goal.
There is nothing we can't accomplish and accomplish quickly.
No one within waste management thought we could move thousands of employees to a work from home environment in one weeks' time, but we did.
This gave us confidence that we can be more ambitious and agile when it comes through technology advances.
That's why we're now accelerating our efforts around CSD.
Using the onboard units the smart truck platform and our data and analytics capabilities all of which we've discussed for several years, we will seamlessly connect all the W.M. functions required to service our customers.
So we can give them a completely digitalized customer experience.
This will put us on par with other great companies and other industries, who have separated themselves through their own digitalization efforts will have more details as we roll this out but we expect to see some early wins this year.
And finally, we're excited about the milestone we reached on the advanced disposal acquisition last month.
At the end of June we announced a revised agreement with Mds. Additionally earlier.
Earlier this week, we and Ats introduced to an agreement.
And amendments to the previously announced agreement with Tfl Environmental and GFL is now contracted.
To purchase all anticipated regulatory divestitures for $863.5 million.
We expect both transactions to close by the end of third quarter of 2020, once we receive regulatory approval and the approval of the Ats shareholders.
With all the additional work we've done since the deal was announced in April 2019, we're confident in our projection to achieve more than $100 million and synergies.
Even though divestitures are greater than we originally expected.
We are looking forward to completing this transaction integrating the adss team and operations and creating long term value for our shareholders as we add 3 million additional customers to our platform and service capabilities.
Turning to our full year outlook, our second quarter results combined with the early stages of economic recovery provide greater clarity for our 2020 financial results.
This has allowed us to again provide full year guidance based on current economic conditions and.
And before the contribution from Ats.
We now expect a revenue decline of between four and 5% when compared to 2019 adjusted operating EBITDA margin in the range of 28% to 28.5% and free cash flow approaching $2 billion again completely exclusive of the impact from adss.
Our impressive cost flexing in the second quarter combined with the recovery from the reopening of North America.
Both of which we anticipate will carry into the back half the year mitigates, what certainly would've been a more significant impact from a pandemic.
In closing despite the challenging backdrop, we're confident in our ability to continue to meet our commitments to our customers and deliver solid 2020 results.
During these unprecedented times our business model has once again proven its resilience.
And we remain focused on using this opportunity and our technology investments to create a differentiated customer experience that puts our customers at the center of everything we do.
To increase workplace flexibility.
For our Pete.
With that.
I will turn the call over to John to discuss our operational results for the quarter.
Thanks, Jim and good morning, everybody.
Our team has remained focused on the fundamentals of providing safe reliable and efficient service to our customers. Despite the challenging backdrop.
Our focus on execution paid off in the second quarter as we improved efficiency across the commercial industrial in residential lines of business.
By calibrating our cost of the current volume environment. We achieved total operating total company operating EBITDA of 28.8%, a 10 basis point improvement over 2019.
The volume recovery trend, we're seeing is encouraging volume declines in the collection and disposal business improved throughout the second quarter.
Through the first few weeks of July we see further volume improvements despite certain areas of the country slowing their plans to reopen.
We've adopted a proactive approach the service restoration and to date, we have resumed service for more than half of the commercial and industrial volumes that were suspended with the March shutdowns.
While we are seeing some markets recover faster than others. We're encouraged that commercial businesses. The backbone of the us economy are showing strong signs of recovery.
While residential container weights a decline from their peak increases they are still elevated by mid single digits when compared to last year.
This strengthens our case with municipalities as we work to improve the profitability of our residential business and change the structure of residential contracts it'll take some time to reshape this business, but we are making headway.
Turning landfill line external volumes for the quarter were down a little more than 18% or around 13%. If you adjust for natural disaster volumes in 2019.
Similar to what we experienced with our collection volumes, our landfill volumes improved throughout the quarter with June being the best month down 11% compared to June of 2019, adjusted for workdays and natural disasters looking specifically at MSM, MSW volume, which tends to be the most resilient and a good indicator of trends, particularly during recovery the quarter was.
Downright, 9%, while June improved two or 3.5% decline.
Moving to pricing, we have taken intentional customer focused efforts to help our small business customers in this tough economic climate, which we believe will generate long term customer loyalty and we're already seeing signs of it in our numbers.
As Jim mentioned, our net promoter scores increased we took these steps knowing that there would be downward pressure on pricing metrics in the second quarter, but we see these consequences as short term as we stay disciplined in executing our pricing programs second quarter core price was one 1.3%. This includes almost 3% core price in the landfill business.
3.1% in the transfer business as we continue the positive momentum with post collection pricing initiatives.
We remain committed to the pricing discipline, we've worked hard to instill to cover our rising costs and protect our margins in July core price is starting to trend back toward pre pandemic levels.
Our impressive cost blessing drove the solid results for the quarter, we improved operating expenses as a percentage of revenue by 30 basis points compared to the prior year.
The team increased efficiency across all collection lines of business, along with significantly decreasing overtime hours, reducing routes and optimizing the fleet overtime costs decreased 30% in the collection line of business in the second quarter driven by reductions in the commercial and industrial businesses.
With regard to maintenance our focus on asset utilization of our fleet is yielding results, we reduce downtime by 23% in the second quarter, achieving 99% fleet availability.
Year to date the improvement in downtime hours has resulted in $5 million. A savings were also flexing down our post collection operating costs by reducing variable expenses, such as overtime and heavy equipment operating hours.
Second quarter overtime costs decreased by 39% across the landfill transfer and recycling businesses.
The team has done a good job of managing costs through this pandemic and we expect that to continue through the second half of 2020.
And lastly, let me briefly touch on recycling the good news that in the second quarter. We continued the trend of improving operating EBITDA for the business for the quarter, we improved the bottom line by nearly $8 million driven by a stronger blended commodity to rate of $57 per tonne are focused on operating expenses and continued progress toward a fee for service model.
We remain confident that our strategy for recycling, including our recent investment in Mirth technology in Chicago is pushing our recycling business toward operational environmental and economic sustainability.
So overall, our second quarter results exceeded our expectations as we demonstrated our ability of proactively manage our operations in uncertain times I'm extremely proud of the hard work of the men and women on the front lines, who were instrumental and flexing costs down while continuing to provide high quality service to our customers.
And with that I'll now turn the call over to Divina to this further discuss our second quarter financial results and full year outlook.
Thanks, John and good morning.
We're pleased with our second quarter financial results, which reflect the resilience of our business model that strong execution of our frontline team members to safely and efficiently serve our customers and community of each day and a solid proactive sector Thats. Our team has taken to manage cost from capital expenditures and this dynamic environment.
Our strong performance in the second quarter positioned us to deliver on our top financial priority.
Strong adjusted EBITDA margin and robust net cash provided by operating activities and free cash flow.
As we started to assess the impacts of covered 19 on our business several months ago. We quickly focused on the EBITDA margin impacts that revenue declines in our highest margin industrial commercial on landfill lines of business might have on honored on our near term result.
We initially estimated that 2020, adjusted EBITDA margins could be impacted by as much as 100 basis points.
And then second quarter of 2020, which we expect to have the toughest revenue comparisons of the year, we manage cost to deliver on adjusted EBITDA margin that meaningfully exceeded those initial expectation.
With the benefit of this strong performance in our economic outlook. We now expect 2020, adjusted EBITDA margin to be in the range of 28% to 28.5% are flat to down 50 basis points on a year over year basis.
Our strong adjusted EBITDA results is the largest single contributor to our cash flow results in the second quarter.
Our net cash flow from operations with $856 million or about 24% of revenue in the quarter.
As we thought the end of March there's pressure on working capital from a slowdown in customer theme, which we attribute to customers taking steps to protect their own financial position.
We are taking proactive steps of work with our customers to ensure that these pressures on working capital our managed and balances are collected for services provided.
Despite of these efforts we expect the delay in the timing of cash receipts from customers could create an 80 to 100 million dollar headwind in the working capital contributions to free cash flow in 2020.
Our operating cash flow for the quarter also reflects the impact of the deferral of payroll tax payments as provided for Vidacare that.
This deferral benefited our current quarter cash flow by about $40 million and we expect the full year benefit to be $125 million.
Second quarter capital spending with $436 million.
Hundred $42 million lower than the second quarter of 2019.
While we continue to prioritize investments in the long term growth of our business, we have decreased our capital spending to align with the current economic outlook.
Majority of the targeted reductions with the results of adjustments and landfill sell construction schedules and a decrease in the purchase of steel containers.
We will not reduce the amount of capital allocated to our fleet in 2020, but are considering the current volume environment as we finalize our planning for truck builds in deliveries in 2021.
At the beginning of the second quarter, we targeted at a 10% decrease in capital spending from the initial range of $1.7 billion to $1.8 billion for 2020.
The team has worked hard to execute on this plan for focused and disciplined to reductions and capital expenditures and in spite of the volume recovery, that's tracking above our prior expectations and our plan to accelerate the pace of CSD, we expect to deliver on this call and have revised our 2020 outlook for full year capital.
Expenditures to between 1.55 and $1.65 billion.
In the second quarter 2020, our business generated $423 million the free cash flow.
Despite the challenges from Cobot 19, our cash conversion was in the low 40% range and increase compared to the second quarter of 2019.
For the full year, we expect our solid operating performance and disciplined capital spending to yield free cash flow approaching $2 billion, excluding the impact of 80 yet.
As a reminder, when we originally established our 2020 free cash flow outlook, we excluded the impact of Ats, including advisory and integration planning costs from the target.
We plan to provide a more complete view of the free cash flow impact with the acquisition post close.
Through June Thirtyth, our operating cash flow and free cash flow included $45 million paid for integration planning effort.
Our strong free cash flow positions us to invest in our business and return cash to our shareholders.
And the second quarter, we paid $230 million and dividends.
We remain fully committed to our dividend program a strong balance sheet that provides certainty through any economic cycle and balanced allocation of remaining available cash to strategic acquisitions and share repurchases.
And the near term as we further develop our outlook for volume recoveries and position ourselves for successful close of the Ats acquisition, we will continue to conserve cash and focus on a modest deleveraging towards our long term targeted range of two and a half to three times total debt to EBITDA.
Turning to as DNA costs second quarter, SDMA was $353 million, a decrease of $32 million compared to the same period last year.
As DNA as a percentage of revenue was 9.9% despite the significant revenue declined in the quarter.
These results include lower incentive compensation accruals as well as the steps we've taken to reduce discretionary spending in response to business impacts related to cover 19.
Even as the business environment begins to improve we're maintaining extreme discipline and evaluating our ongoing level of spending for non essential cost such as consulting travel and entertainment.
Our cost management actions were partially offset by an increase in our bad debt expense of $12 million in the quarter.
In light of the trend we have seen in our receivables in the acceleration of CSD, which will increase as DNA spending in the back half a year, we expect full year adjusted EPS DNA to be slightly higher than 10% of revenue.
We're confident we're on the right path with CST to continue to differentiate our service and provide long term value to our customers and shareholders.
Finally, our strong balance sheet and liquidity position us well for the current economic environment as well as funding the acquisition of 80 yet.
Current Unforecasted post acquisition leverage ratios are well within the financial covenant of our revolving credit facilities, and we have more than $3 billion of available capacity under our primary revolving credit facility.
Additionally, this week, we closed on a 3 billion dollar 364 day revolving credit facility that positions us to immediately fund the transaction at close and then look for the right window to access the capital markets for long term financing alternatives.
Our solid financial results this quarter demonstrate the resiliency of our business and the success, we are having an dynamically managing our costs I want to thank the entire waste management team for their hard work, which allows us to deliver on our commitments to our customers communities and shareholders.
With that Marianne, let's open the line for questions.
Thank you as a reminder to ask a question you will need to press star one on your telephone to withdraw your question, Chris the pound cake. Please standby wildly compile the Q and a roster.
Thanks.
Our first question comes from the line of Brian Maguire Goldman Sachs.
Good morning, everyone, it's difficult for Brian.
Good morning. Thanks.
Actually my question.
Appreciate the color in the detailed the provided so far on the exit rate volumes for QQ and how things were looking in June.
And it sounds like things media are still sequentially improving through offers to into July but this up and maybe if you could quantify any of those numbers.
Amongst the different lines of business if you could.
Sure, Yes, we are to your point seeing.
July continue to.
To accelerate albeit at a slightly slower pace I mean look as this this kind of went from.
Zero two to not not 70 miles an hour, but probably zero to 60 miles an hour pretty fast and now we're we're moving back towards.
70 miles an hour, but over the one area that.
John focused on was was really MSW that has really been impressive.
The second area, that's and were down three three and half percent and MSW.
The other one that was surprising to us because we expressed some some concern about it in the first quarter was commercial and and edits low points.
Commercial line of business was down.
As much as 15% say, even more in some areas and that has has returned to down kind of five or 6%. So it's.
It's really rebounded and it continues now through July to show to to show improvement. The one that that kind of is starting to jump a bit right. Now. That's that's good for US is special waste it had been down even through June it had been down pretty significantly on a year over year basis.
And when I looked at the rolling weak numbers, which compare to prior year just yesterday.
Those numbers are starting to really show.
Show improvement in special waste. So we're now actually up double digits, there and special waste, whereas we had been down.
Deep into double digits previously so so we are pleased with the progress we're showing on.
On virtually all of our our waste streams and Arnold our collection lines of business.
I appreciate the detail certainly encouraging.
Maybe if I could just get tough August the updated guidance.
For the year for 2020 with the revenues expected to be down 4% to 5% disciplined maybe if you could you help public to better understand kind of moving parts. There is that basically assume that pricing yield through a hold flat from TQ levels for the rest of the year and maybe just the moving parts between pressing yield in volume and what your expectations are there.
Yes.
Yes, it's a great question or not specifically, giving outlook for the back half of the year on the price and volume component, but what I would say.
Jim just gave tremendous color with regard to the improving volume outlook on I think that that coupled with the fact that the Q2 execution on pricing was intentional and focused on being customer centric and so we certainly expect an improving results in the back half of the year on price. So you can expect that the yield coming.
It gets back to closer to normal levels, our outlook for 2020, and and proving volume trend. When we look at the back half specifically, we're projecting that you have a decline in revenue of in the range of 3.5% to 5.5% and.
That more significant in Q3, and then papers in Q4, two about half the Q3 levels, what we're projecting I do want to point out, particularly given what we're seeing in the market today that fuel prices did have a 2% impact on the revenue line in Q2 difficult to predict that specifically we.
Werent predicting any added pressure on the topline from fuel in the back half of the year, but that certainly out of our control and not necessarily representative of the strong execution of the business, which we're really encouraged to see the momentum that we saw at the end of Q3 Q2 and beginning into Q3.
John appreciate our detailed thanks, good looking quarter.
Thank you.
Your next question comes from the line of Walter Spracklin RBC capital markets.
Good.
Hi, good morning.
So I'd like to start with margins, obviously here you've guided to impressive cost control doing much better than what you would.
I thought you would be able to do which is great.
Just curious on the structural nature. This when volumes start to come back can we see operating leverage such that you can maintain and I will give you alluded to a better organization were strong organization postcode does that mean, you can run and you expect to run at merging.
Above historical trends one.
I suppose integrated.
Or or what we would you see that when volumes come back resources would have to come back as well and and get you back to more normalized kind of historical levels.
Yeah, Walter I'll I'll start this one I think is it really interesting question rather than specific on postpaid, yes margin I'm going to focus really on W. on base business, because we're going to wait to give any financial outlook for the integration of Ats until post close, but when we think about the strong margin execution in the second.
Quarter, I mean hats off to our operators and the front line for doing a tremendous job and I think what you saw in those results is that we got the most expensive our out of the route and we got the most expensive chop off of the offer the street and so through efficiency through improved maintenance improved downtime.
There were really fundamental tremendous improvements and the operating nature of the business and those are things that.
The team is working hard to see how we hold onto an oppose covet environment with improvement in volume outlook in commercial and industrial collection I do think the residential collection margin impact that we've talked about we're focused more on the price side of that equation to be sure that we recover the increase in our cost to serve.
But looking for efficiency in that part of the business as well in terms of the strong execution during Q2, and how we think about that for the remainder of the year I think the improving volume trends and price.
Prices really an important piece of that because we delivered this margin result in spite of having a lower contributions from core price, which we see really flow all the way through on margin, so, particularly impressive when you consider that aspect.
There are certain elements of the cost structure that increase in the back half of the year as an example fuel tax credits.
Or something that we got a benefit for in the fourth quarter of 2019, instead of that being a second half.
The year phenomenon. This year those are spread those benefits are spread over the course of years. So that had some margin pressure on the back half as does the increased acceleration.
Of spend on CSD, which Jim spoke about so really strong execution and operations and we expect that to continue particularly with the improving volume backdrop.
Okay, that's that's great and encouraging as well so moving on to price I know you just alluded to it.
Can you can you speak to what happened with core price as you mentioned you did not get the benefit of.
Core price and one is the risk and how does it work that im imply are you implied here that it is going to come back.
Does that does come back because the overall macro environment and easier to drive forward reserve or is there something more more detailed to that in addition to what you had mentioned with regard to residential recapturing some of those higher volume through higher pricing.
Yes, I mean, I think there's a couple of points to make here with respect to price and maybe the first one would be to your to your last point there I mean, there's there's this price discipline that that we've talked about this morning that.
That remains we certainly haven't lost any price discipline, but we felt like that it was absolutely the right approach to take during the quarter.
To to pause.
On on these price increases and some fees and also to to really help small business.
Merge out of this by giving them a.
Free month of service I mean.
That's I can't imagine if I were a small business owners sitting in my living room opening my mail and getting the my big price increase from waste management that would not have gone over well with with me as a small business owners. So.
It was it was unquestionably the right approach to take in Q2 and honestly into Q3 that will will persist two to a lesser degree.
Because some of these small businesses have not reopened and what we told them with respect to the Fremont. The service was that we would give you you're pretty much. The service. Once you reopened so I'm sitting in downtown Houston and there are a lot of small businesses that have not opened in the central business District here I suspect. It's the same another big cities.
So we will still see some of that weakness in pricing, but but the point that I think demeanor was really touching on was that.
When you think about price discipline and once we get passed this this short term co would affect the price discipline is still there John talked about it too in terms of landfills and transfer.
That is something that is truly ingrained in our culture and so we don't we don't.
We don't kind of kicked out to the curve.
When when covert goes away that becomes immediately reestablished but there is a there there was of course in Q2 big impact from.
From this this more.
Kind of sympathetic approach to these customers and we'll see some of that in Q3 as well.
Okay makes a lot of thanks appreciate as always thanks.
You bet.
Your next question comes from the line of Sean Eastman Keybanc capital.
Hi, Tim Thanks for taking my questions. So compliments on a on a good second quarter performance here.
Wanted to drill and on the second half I mean.
I'm, just trying to understand where you see that big swing factors.
In the second half 20, so visibility clearly improved around the volumes, but I'm just curious where you think some conservatism still warranted in that second half outlook.
Just maybe where you guys don't want to get over your skis just yet.
Yes, as we think about trajectory here from a revenue margin perspective in the second half.
Yes, Sean I I'll start that and then I think the others can add some color I think the plays that we start that discussion is on the topline and as I mentioned the outlook for the back half of the year is currently revenues being down three and a half the 5.5% when you look.
Look at how we finished June and see July.
Coming together, we do think that.
There there are some potential for optimism in.
The topline results for the back half of the year, but it's appropriate for us to be reserved and going too far in terms of how quickly we start to see the recovery certainly with.
The number of case increases that has been seen across the southern part of the United States and and so thats really where that back half question Mark starts, but we we feel really good that 4% to 5% is representative of how we'll finish the year in terms of the cost part of the equation you know it really.
Does come down to the operating cost leverage as the biggest driver.
There are certain elements of cost overtime being one of them, which John spoke a lot about in terms of our ability to flex the number of overtime hours that translated into $45 million of operating cost savings in the second quarter and and that's a tremendous results, but ensuring that as we see volumes grow.
Back and whether it be the efficiency part of the business increased traffic on the road thinking about how we manage the workday that $45 million of savings is something that we have our eye on.
Other elements of the Labor line, which is the biggest single component of our cost structure is really where we're focused the pieces that are in SGN. Today, we have at hand, I would tell you that the results that you saw.
In the second quarter, we're confident that we can continue to deliver as I mentioned, the increased investment and CSD in the back half of the year means that those costs will increase that that's an intentional investment for the long term growth and customer centric nature of our business.
Yes, and one quick thing and I think John let's touch on Opex to but Sean when you think about the conversation. We just had about price obviously it was unique uniquely soft I mean.
But that softness dissipates over over the next quarter or two back too much more of a normalized level of.
Price increases and where we've been prior to covert so thats certainly is upside for us and but we knew the downside was going to be there and it was the right thing to do and then and then of course volume, which we talked about early early on in this call and we think that volume while it has started to slow from the really steep increase that we.
In June it's still is increasing and I talked about special waste showing some really nice improvement.
And then MSW and.
Commercial industrial has has lagged a little bit its showed a nice pick up but.
We are seeing some differences by geography, and it's interesting when you look at at the kind of the the southern part of our network versus the northern all of our network. The northern part of our network, whether was the U.S. or Canada tended to shutdown.
More quickly and reopened a little later and so we think.
There's some real opportunity I was in Boston, a couple of weeks ago and honestly Boston.
For the first time and since covert.
Really started is starting to feel opened I mean, we were in restaurants eating and side and so those businesses are starting to reopen and and so while Boston and our new England area is still down relative to some of the areas in the south.
That will provide more of a kind of spike upturn in volume four markets like New England, New Jersey, New York Those Pennsylvania.
Sean the only thing I would add to your point about getting over our skis I think when you look at and as Jim mentioned, we were looking at this literally on a daily basis by region by line of business is making sure that we continue to hold tight on the rains in terms of adding cost back and I think when you look in some of the numbers, we all referenced in our prepared remarks uneven as late as yesterday looking.
At the ratio volume coming back and what we're still able to do on the cost side, specifically overtime as the Bina mentioned, that's the area, where we are absolutely focused and I will tell you the ratios of volume volumes coming back versus overtime is still favorable and I think thats why when you think about us having the margins we had in Q2 compared to.
Where we lost the volume, which was really landfill commercial and industrial for the team to hold that the hold those margins and there's puts and takes unit to Bina mentioned some of them is really impressive, but I think getting out over our skis that we are absolutely focused on making sure. We keep the rains very tight on Opex as we watch this volume volume shift.
Got it Super helpful.
Next one for me hopefully a little quicker.
Could you help bridge us from the down 100 basis points year over year margin outlook you provided on the one few call to the revised flat to down 50 basis points and just any granularity between the volume recovery cost control.
That bridge would be appreciated.
Yes, I don't know that I can get Super granular core you, but what I would tell you as you've hit on two of the primary factors. So.
Volume recovery outpaced our expectations and so that certainly had some upside impact on the margin detrimental impact that we had originally predicted and then cost control, particularly on the operating line.
Was even better than expected based on what we know the margins of these these lines of business to be I mentioned overtime, specifically help them off our costs or another example, where we saw some some value to to the results.
From a granularity perspective, you know I guess, what I would tell you is that.
No health and welfare by itself as an example is just one of those cost categories, that's difficult to predict but it had.
Mark.
Contribution and around 25 to 50 basis points is is what we see as a benefit for the year in health and welfare costs alone.
Appreciate it very helpful. Thanks, Thanks for the time.
Got.
Your next question comes from the line of Hamzah Mazari Jefferies.
Good morning, Thank you.
My first question is just around the election, if U.S. tax reform goes away is that a 300 million dollar headwinds to you I guess pre tax reform.
The free cash flow base I think was one point close to 1.7 billion then at one to 2 billion. There was a big step change and then you also have bonus depreciation potentially going away too. So you know maybe if you could frame for us.
You know how to think about potential tax headwind clearly, we don't know what will happen with the election.
Yes, you know I think comes about last point is really the most important one for us and rather than get too granular in terms of specific clean measuring what we think tax reform could do I think we all know that we went from a 35% rate to 22% and so that dramatic.
Change in the us.
The tax rate to ongoing business, that's going to have consequences. The bonus depreciation that you mentioned could have consequences, but.
Just.
None of us are going to be able to predict the outcome of the election or than any follow on impacts to tax policy.
Should there be a change in.
A significant shift in and here's an office. So I think you've framed it well I think all of the pieces that you mentioned are the ones that we are paying attention to and the level of impact to cash is something that is significant and and therefore.
We'll have a close eye on that but not trying to predict at this point.
Got it understood.
And then just on customer churn was it was pretty good.
Traditionally half of customer churn for the sector has been bankruptcies and so what stimulus running out I appreciate you guided.
Revenue growth down 4% to 5%, but do you think that were out of the words on commercial specifically do you think that small business bankruptcies are going to be potential risk.
As you think about your your revenue growth over the next 12 13 months.
Anything you're hearing from your customers or I realize you don't have a crystal ball, but so any any comments you can make high levels would be appreciated.
Yep comps. This is John So we've mentioned in early on when we were in the Q1 and early innings of this that we were seeing cancellations just under 1%, we're seeing that number's crept up to about two and a half a little bit north of that but it's leveled out there. So we're not seeing big numbers in terms of cancellations, what we have seen what we talked about is.
Obviously folks turning off their service are causing their service and then gradually turning it back on I think the one number we can center around is whether its commercial or industrial we are over 50% recovered in terms of units and honestly. If you look at commercial we all know education is a fairly good size chunk of our.
Of the portfolio, there and with the uncertainty there are actually our commercial recoveries over 60%. If you net out the education facilities, which we all know is kind of a moving target at this point.
Good God Lastly, I'll turn it over just on the DSW transaction synergies over 100 million on a smaller revenue base, maybe you could just frame for us where youre seeing the upside come from.
And 100 million does not include revenue synergies correct. Thank you.
The that's correct what I would tell you Hamzah is obviously in this process, particularly around cobot has taken a little bit longer and I guess silver lining is its afforded us the opportunity to do that much more work and we have that much more confidence.
In our integration plans and it's given us the opportunity to look more closely the granular level not just about kind of the normal SG nay corporate overhead synergies, but really getting a little bit further into the details and have that much more confidence in what we're going to be able to execute against in the field and that's really what's driving that number.
Got it thank you.
Thanks, Tom the.
Your next question comes from the line of Kyle imply Deutsche Bank.
Okay.
Hey, good morning, Thanks, taking my question I.
I wanted to go back to some of the regional differences that you briefly touched on is it possible to describe how the recovery has progressed and some of the states that were first reopen and now are seeing a bit of rising Toby cases states, such as Florida, Georgia, Texas.
Have you seen an installed on the recovery in these states any theres declines in recent weeks.
So it's an interesting question that we expected.
To be asked today when I look at our commercial line of business and I look at those states that you just mentioned so the big for kind of in terms of Spike case, Spike have been Texas, Arizona, Georgia, Florida, right and so when I look at three of three of those are our best three in terms of year over year comparisons.
Our best three and turns a year over year comparisons right now our Texas.
Georgia, and Arizona, those or are those are the best three out of 17 areas. Those are the top three in terms of commercial yards year over year comparison, So I would tell you that the spike.
And when you when you walk around Houston.
What's happening is that everybody's weren't a mask, but but businesses if not all the sudden gone back to April or may they're staying open but people are just more diligent about about wearing masks and we're starting to see those cases level off I heard Scott God lead last week on a business Council called.
Talk about the fact that you're starting to see it, particularly in Arizona, Texas those cases level off so so our business is actually quite strong there and as I said, just a few minutes ago, where weve, where we've seen a little bit of a lag our in those those areas that that closed.
Pretty quickly and then have stayed close the longest such as new England, such as kind of the greater mid Atlantic area, Pennsylvania, but those are also starting to show some rebounds.
As well, particularly as they stay as they start to move where some of these other states already our which has a reopening of businesses just with with the.
Kind of a mask rule in place. So we're pretty we're pretty encouraged by what we're seeing with respect to commercial reopenings. It's the one thing that probably stood out to us. The most because we were leased certain about us when we discussed at the end of Q1.
That's very helpful. I want to see also go back to the pricing discussion a bit and just curious if you could talk about the competitive environment and pricing behavior.
Especially among some of the smaller players in notably different recently.
As all of that kind of volume impacts that some of these players may be experiencing.
I mean look I, we haven't seen anything.
Over the over the last couple of months.
But.
I really can only speak to our own price discipline.
And I would tell you the as I said earlier that that we are we haven't lost an ounce of price discipline, what we what you've seen in terms of price erosion. If you want to call. It that was intentional and that we will recover it's just we're going to ourselves to get through this this hopefully this short term impact from cobot.
Sounds good I'll leave there thanks.
Thank you.
Your next question comes from the line of Tyler Brown Raymond James.
Hey, good morning, everyone.
Hey, giving I hate to beat on the pricing optics here, but can you isolate the revenue dollar impact at the price increase in FY suspensions had in the quarter.
We hadnt, specifically quantify that I mean, I think the best way to think about it as the delta between the yield.
That we reported and the 2.5% guide that we would have given for the year and I think that telecom is representative of what you you could say that that the price impact was for the quarter.
Okay. So now.
Yes, sorry go ahead.
I was just can say the only thing. This is John I would add is if you look at the.
If you look at landfill and transfer station I would point to that in terms of the where we remain disciplined I mean, so the impact really been commercial and industrial but the other lines of business. We continue to show like performance.
Right right. So not only was there a dollar contribution that was unusually low and correct me if I'm wrong here, but you also had a bit of a denominator problem. When your volumes were down 10%. So I'm guessing that was also a driver in the pricing optics. So I mean, just to be I mean, there's been a lot talked about this but to be just crystal clear there has now.
I'm going to change and in your fundamental pricing strategy.
Not at absolutely not okay, and then John So I appreciate the ready container weight comments.
And I know, we talked about this last quarter, but what is the level of urgency around resi pricing specifically I know you talk that it will take time, but if I take a walk back in history. You didn't you guys meaningfully move resi pricing I think he was around the financial crisis. If I recall. So can this be a material driver in 21.
I listened Tyler I mean, we've talked about the added weights in the pressure that's put on a line of business Here's what I can tell you is that the additional weights that have come via this pandemic are certainly another discussion point, we need to have with some of those.
Residential customers.
But we started this program before that now I can't speak to what happened back their financial crisis of Trust you on that one I am sure we've probably add some efforts at the time.
What I can tell you is that and Jim has mentioned this a few times we've seen obviously a lot of pressure on the residential line of business, we see margin erosion.
My plan with the team and we have this down to the contract by region by area to execute against long before there's pandemic started I will tell you what just what this pandemic has certainly helped US with is when you talk about further moving that line of business to automation container rising being able to capture the waste be able to price and get paid for the services.
His including disposal that you provide for this is certainly.
An opportunity to to highlight that.
Right. Okay. No. That's that's fantastic and then just my last one here do you not so I know 2021 seems like it's a long way away, but well well the cares act represent call. It an idiosyncratic headwind to cash flow next year is that something that we need to start contemplating.
Yeah, that's definitely something that we've got our eye on the $125 million that I talked about for the carriers that deferral of payroll taxes that something that has.
Hits Us in 2021, because you effectively have a doubling.
Of that obligation in the euro hide that I think that yes. It's half of next year happened 2021, and then another half in 2022, great things really important though is that the flow through impacts.
The really strong.
Revenue acceleration that you should start to see in 2021 as some of.
The covered 19 volume impacts and those pricing.
Policy decisions that we made in the second quarter. We anniversary. Those you know I think the flow through of that to cash flow should help us to offset that that year over year headwind, but you're exactly right. Okay, sorry, someone I wanted to corollary there on.
To the clear cares act with working capital on DSL I mean, we're obviously seeing it impacts.
This year and that's that's not unexpected at all or not surprising it also.
I'd like to thank that that's as we get into 2021.
So starts to normalize.
Okay. That's very helpful. Thanks, guys.
Thank you Tom.
Your next question comes from the line of David Manthey Baird.
Good morning, Thanks for taking my question.
Building on a previous comment last quarter, you detailed the weekly upward trajectory of your rollout business is sort of evidence of the improvement you are starting to see and based on your comments I assume that trend continued but in the geographies like like there in Texas are here in Florida, where the cobot cases have worsened.
Are you seeing actual declines in any lines of business or where you, indicating you're just seeing a leveling off in the pace of recovery.
Yeah, It's really alive, it's really the latter we're not seeing declines than any line of business we're seeing.
As I mentioned that a nice increase in special waste some of that's through our couple of coal combustion residual projects, but not seeing declines anywhere it's just.
By geography, it's it's 11 leveling a little little bit, where where we saw big big spikes up and in June and it's starting to accelerate a little bit in some of those places that were slower to reopen.
Okay. Thank you and last quarter, you said that 10% of your commercial customers had a change in service in less than 1% canceled could you give us an update on those data points for the second quarter or the same ballpark.
Yes, I mentioned earlier that 1% number crept up to about 2.5% and has leveled off there, it's a little higher than that to be exact but what we've seen is that is and those are the customers that are in have been impacted and identified as having a cobot impact so.
Two and a half 2.6% I think is about right, where we leveled off in terms of cancellations.
Thank you very much.
You bet.
Your next question comes from the line of Noah Kaye Oppenheimer.
Hi, good morning, Thanks for taking the question.
With Jim you mentioned are expecting the.
I think that's an early wins from this yet the effort as you engage and then investment development, but whats the customers do you expect are likely to value those offerings more any way to dimension out as well what you think this could contribute organic growth.
Yes, I think I think theres going to be.
In the in the near term more of a.
More of a cost impacts.
Bottom line impact and then more of a.
Our topline impacts longer term as we truly kind of differentiate ourselves.
And so its and by the way, it's why we kind of chose to accelerate this we've talked about it we talked about at Investor day last year. So this isn't a strategy. That's that's that's on familiar to you is just one that we've chosen to accelerate for for a couple of reasons. One is that we really felt like we learned that when we do accelerate something we can make it happen.
Quickly for all as I said in my script all.
In unison behind it.
So I do think there will be some changes in how our customer does business with us and that will impact us a bit on the cost side and then over time, we think that really starts to separate us from APAC.
Yes, infants and then just to go back to the residential line of business.
John appreciate your.
Commentary around levers for both pricing and.
Hi, technology investments, but since you got the very granular.
Plant, we're just share with us the target or a goal.
Our your profitability improvement in the residential line of business.
Well I think what Weve, Jim as mentioned on are doing on other calls as that we've been sub 10% from an EBIT line and clearly getting well above that is the direction, we're going to go.
I see I, certainly see opportunities to get into the high teens or 20% over time.
And we're making some headway and to be real specific by price when Tyler asked a question when I looked at even for Q2 with the elevated wage we still on a same store sales comparison made margin improvement quarter over quarter. In Q2. So we feel really confident about that plan and I think the granularity is going to be helpful. For us as we look at investment opportunities that residents.
So on a business going forward to make sure we're deploying a dollar so right when I've said on other calls.
We don't want to do it for practice, we want to make sure I get the right returns right margins in a REIT protections in those agreements and in some cases, we're gonna have to make some tough decisions were were fully willing to do that.
Perfect. Thanks, I'll turn it over.
Yeah.
Your next question comes from the line of Jeff Silber BMO capital markets.
Thanks, so much in Oakland I'll, just that's a couple of quick ones you talk a little bit about pricing from a competitive perspective I'm. Just wondering are you seeing in any smaller all are closed or under pressure that might provide some M&A tuck in opportunities.
I don't know that I've seen our I haven't heard of any that have closed.
I have heard of some places where they are running short on drivers.
So.
That's not necessarily.
Great indication for them and that I can't tell you whether that is is a longer term trends, which we've talked a lot about.
Previously that Thats.
NZ and millennials don't want to drive trucks and so therefore, there is pressure on the pool I don't know, whether that's that said or whether it is.
Or what than what the pressures are coming from and I have heard that I've not heard though of any closures.
Okay, that's a very interesting on the drivers.
One number you'll talk about much internalization I know it picked up the last couple of quarters.
Is that because we're seeing lift third party disposal coming in or you truly disclosing more of your own collected weights. Thanks.
It's probably a bit of both.
Jeff. This is John I think I think in the table is up about 200 basis points give me 180 basis points for the quarter 190 year to date I might have the inverted, but almost 200 basis points.
So clearly what we're seeing some volume pressure at the landfill, we're always reevaluating, what's the best use of our network and those landfill asset so without having a number of from me, it's probably a combination of both some third party volumes that were that went out in Q2, and our decision to backfill some of those volumes, where it made sense for us.
Okay. That's really helpful. Thanks, so much.
Okay.
Your next question comes from line of Michael Hoffman Stifel.
Thank you, Jim Divina and John per the questions Hope all of you and your families are well.
Thanks, Michael you Michael.
So I'm going to ask the question a different way the Dina the original guidance was to an app for the year yield.
We did to tune the first quarter.
If you had the pandemic what was the budget for second quarter.
Yield and is that yeah without it.
Yeah, We got network Merrily budget, Yeah, we don't necessarily budget, Michael our yield quarter to quarter, we certainly have that two and a half for sense. You saw some of the early impacts on the Q1 results that you just mentioned from target 19, because there were some early steps on fees as.
An example to proactively engage with the customers on the right way given what we were saying.
I would tell you. We we've tried to estimate where we think the yield number end up coming in for 2020, and it's just a really difficult number because of the impact of units on the measure, but what we focus more on is that core price execution, and we expect healthy recover.
Right and core price execution in the back half of the year.
Okay.
Okay.
Sean on recycling it the trend holds theres, a 80 million dollar year over year gain in revenues in that business, but when I'm thinking about before.
Per cent, 4% to 5% down revenue I got to account for that and then I got the then there is a follow on question about fuel I got I count, Florida to think about the down revenue.
Well I think Michael certainly there what's been there was a bit of a tailwind in Q2 with fiber prices, specifically RCC going up but as you probably know we've already seen that retract back.
And while we had a good quarter in Q2 I would tell you had just a little bit under half of that was driven by price. The rest of it was really Brent and team doing a great job on managing operating expenses in SG, ne and other ancillary costs. So that's what drove the other half of that improvement so.
We're not.
We still think recycling is going to be a tailwind in the back half of the year not as big though because that revenue numbers not going to hold through the balance of the year, We don't think.
Okay, and then could you share with us what your fuel average fuel costs was.
To Q 20 versus 19, and then what it was in Threeq 19, So we can try and accurately model that given that move that much.
Well I can get you those specifics the after the call Michael but what I would tell you is the fuel impact to the quarter was $60 million.
So the revenue.
In Twoq, yes.
Okay.
Okay.
And.
Just a point of clarification on the synergies just to be clear, it's a free cash flow number and it's a mixture of opex savings interest expense savings capital spending.
Presume that interest expense number did is up because rates are down versus expectation and then there's some incremental gains.
Got it and then Opex and Capex, that's the way to think about the pieces, but that's all I often standby.
I would tell you Michael that obviously, when we will re cut the deal which was really a month ago, obviously theres a reduced purchase price theres theres higher synergies that we commented on despite over $104 million of of divestitures and certainly there's going to be a lower cost the capex, but I'll, let them speak to that fine.
Dancing piece, Yeah, I think what's really important Michael is that the $100 million in a confidence and the more than $100 million of synergies is not reflecting our savings and the interest line.
The savings and the interest line is what we were thinking about in terms of the returns on this investment getting over our hurdle rate and cost of capital. We you know it's early for us to be able to speak to specifically how much of an interest savings there might be but certainly when when we look at their requirement to redeem the bonds and.
On a weighted average basis those were above 3.6% and if you can compare that to current interest rate. There certainly is some value to be had there. It's just too early for us to say, we are really excited to be in a position to be able to fund the transaction that closed, but this will be a phased process for us and we can't yet tell you.
But the long term financing might look like.
Fair enough and then a.
Mechanical question.
Boats on the 20 to assume DLJ gets that so there's a consent order not far behind that or about the same time.
What happens after you close it right away or is there is this I try and clean close at the end.
September would just mechanically what are we looking at.
You know I mean I.
I'm not sure I know the answer that I mean, we.
Because there is theres a number of pieces here involved but but what we did say was that this would be the end of Q3.
Which basically means sometime between the 25th of August and the Thirtyth of September which is a pretty pretty narrow window.
And.
It's hard though to say well, we want to do it on a certain dates because we just don't have enough enough.
Certainty to say, what we're going to do it at the end of a month or at the end of a quarter. That's not our objective. Our objective is to is to work through with with the DJ and.
And of course with Ats and get this final.
Okay, great. Thank you very much.
Yes.
Thanks, Michael.
Your next question comes from the line of Michelson insurer.
With the bank of America.
Good morning going on.
On my everybody I'll I'll I'll try to keep it short just Jim I know you guys have moved away from PPI over the years can you just remind us oh PPI exposure I understand you're driving pricing on the residential level different contracts, but.
I'm, just curious, but with its PPI how much of that your control really isn't there.
Months.
Well my and Sean I would tell you that if you look at our pricing performance, regardless of what Cpis done over the last quarter's handful years, we've moved further and further away from that I think the example, you gave is probably the best one which is.
Historically, the residential or franchise pieces of business have been tied to CPI or some fraction of that and I think our ability to drive 3% core price in residential, especially in this quarter as evidenced that we're moving further and further.
Away from that.
Got it just like help me understand like when we talk about the top line you guys provided a lot lot of color on Q3 Q4 on how should we think of the business as we kind of like exit 2020 with the first time, we think your mix of your business Len.
Residential right now being your high yield.
Does that kind of impact overall profitability going forward.
Well, it's a it's a bit of a hard question because there is a lot in the mix here I mean, it is interesting though.
Because.
Hi.
In terms of a true kind of year over year comparative basis, whether you're looking at EBITDA or whether you're looking at revenue or whatever you're looking at.
Honestly don't think we get to a fair apples to apples year over year.
Comparison until the first quarter 22, because I think 20, obviously 20 is disadvantaged.
And then 21 will be greatly advantaged versus prior year. So what we're kind of looking at is when do we get to a true.
Positive comparison versus 29 team and and I think that probably happens.
Sometime maybe as early as Q2 of next year.
Probably won't be Q1, but but certainly Q Q2, it looks like it could happen or acute Q2 Q3 is when I think we truly get to a a positive comparisons versus the same quarter in 2019, and then to your could you to your question about what pieces are going to be moving in the right direction, we've talked about a whole lot of them.
On the call. This morning definitely residential John talked about kind of sub 10% EBIT margins and a lot of work being applied to that.
Hi, guys, not representative or really of our cost structure anymore, and so starting to move municipalities away from that.
The price metric for us some of what John talked a lot about I would tell you. This is kind of all in John's court, but but start starting to institutionalize some of the changes that we've seen on the on the operation side and and maybe the same is true for SGN. A there is some some expense that we just that we just don't need.
Don't need to have as much.
Travel expenses as we thought we did.
The teams product that we use a lot the Microsoft product is a very very good product.
And so I think that will be a replacement for that and then as we think about.
Some of these wins that we've discussed with customer service digitalization.
That will start to really have a have a positive impact on us so theres a whole lot of.
Pieces here that go into this.
But but we think by the time, we get to 2021 kind of mid 2021, we're going to start seeing some.
Some positive comparisons to that 2019 period.
Understood I leave it there thank Jim.
Yes.
Our next question comes from a line of Kevin Chiang the RBC. Please go ahead.
Hi, Thanks for taking my question is just one quick one for me I notice that you change your methodology for or core price and that that did result in a.
In a revision to Q1 numbers I was wondering just purely a methodology change or did that.
Bring to late an untapped opportunity that you might not have been harvesting before in terms of pricing opportunities. As you look ahead here and as loans continue to recover.
This was purely a measurement change and we've actually made the decision in the fourth quarter and then just made an error and reporting our Q1 with everyone in the work from home mode and forgot that we had made the change in the fourth quarter and reverted to our old measure, but you know.
The conference and this is we got more precise data as we've been able to use technology more effectively across the network and measure units and as we got more precisely we were able to give you a more accurate and representative measure of core price and that's what we're using today.
Perfect. Thanks for the clarification.
Hi, there were no further questions I would now like to turn the conference over to Jim fish for any closing remarks.
Thank you so in closing today, I really want to reiterate what both John and Divina upset I want to recognize the men and women in our operations around North America.
They have not missed as a single day since the start of this pandemic and they are.
Of course, absolutely essential to keeping.
Keeping all of our streets clean ensuring that we are good stewards of our environment through recycling.
Providing a safe reliable service that is absolutely critical to all citizens. So thank you to all of our men and women our operations.
And thank you all to join for joining us.
Okay.
Ladies and gentlemen, this concludes today's waste management second quarter Twentytwenty earnings release Conference call.
Thank you for participating you may now disconnect.
Oh.
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