Q2 2020 US Ecology Inc Earnings Call
Welcome to the U.S. he called <unk> second quarter 2020, <unk> earnings Conference call.
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Well now turn the conference <unk> Chief Financial Officer. Please go ahead Sir.
Good morning, and thank you for joining us today.
Joining me on the call. This morning, our chairman President and Chief Chief Executive Officer, Jeff Feeler.
Executive Vice President and Chief operating Officer, Simon Bell, an executive Vice President of sales and marketing Steve Welling.
Before we begin please note that certain statements contained in this conference call that do not describe historical facts are forward looking statements is defined in the private Securities Litigation Reform Act of 1995.
Forward looking statements include risks and uncertainties actual results may differ materially from those expressed or implied by such statements.
Factors that could cause results to differ materially from those expressed include but are not limited to those discussed in the company's filings with the Securities and Exchange Commission.
These risks and uncertainties also include but are not limited to statements regarding the continued impact of the cobot 19 pandemic on our business.
Correct and Almac impact of specific end markets in which we operate and our expectations for the financial results for 2020.
Management cannot control or predict many factors that determine future results listeners should not place undue reliance on forward looking statements, which reflect management's views only on the dig such statements are made.
We undertake no obligation to revise or update any forward looking statements or to make any other forward looking statements, whether as a result of new information future events or otherwise.
For those joining by webcast you can follow along with today's presentation for those listening by phone you can access today's presentation on our website at www Dot U.S. ecology Dot com.
Throughout yesterday's earnings release, and our Colin presentation today, we refer to adjusted EBITDA adjusted earnings per diluted share cash earnings per diluted share an adjusted free cash flow.
These metrics are not determined in accordance with generally accepted accounting principles and therefore susceptible to varying calculations a.
Definition calculation and reconciliation to the financial statements of adjusted earnings per diluted share cash earnings per diluted share adjusted EBITDA and adjusted free cash flow can be found an exhibit a our earnings release. We believe these non-GAAP metrics are useful in evaluating our reported results.
We'd also like to point out that our second quarter results, including contribution from the NRC Group Holdings acquisition closed on November 1st 2019 throughout this presentation, we often refer to NRC group holdings as NRC.
We've also provided data on a standalone basis for U.S. ecology, which is referred to as legacy us ecology. Similarly for Standalone NRC data, we referred to that group as legacy NRC.
This aggregation is an attempt or fried provide increased transparency and understanding of the underlying business without I'd like turn the call over to Jeff. Thank you, Eric and good morning, everyone.
I Hope you and your family said remained safe during these uncertain times before I have Eric review, the second quarter results I'd like to update everyone on how you us ecology as managing through the last few months given the impact of Cobot 19.
To the economy and our customers, but those that are following our webcast presentation. Please direct your attention to flight sex.
During the second quarter in response to the Cobot 19 pandemic, we took swift action to deploy safety protocols throughout our organization mobilize 30% of our workforce to work from home.
Using our established networks and expanding our procurement channels, we were able to secure valuable.
<unk> to ensure that our teams and customers were properly protected.
With our Sir our services deem assumption central by the U.S. government, we implemented our business continuity plans and I'm pleased to report that we've been able to remain operational during the entire pandemic, thus far with no lost days.
This focus on safety process and protecting our team members was critical in mitigating the spread of the disease, particularly in hot zones, where many of our team members are deployed.
To safeguard the financial strength of the company, we implemented a proactive imprudent measures to our operating plan reduce the reducing capital cost and capital spending our capital preservation initiatives included a reduction of approximately 30% to our planned 2020 capital expenditures the suspension of our quarterly <unk>.
Cash dividend cost controls, including deferment of credit non critical activities elimination of discretionary spending and rightsizing the organization where needed.
These actions are anticipated to generate up to $70 million of annual cash savings.
Providing the flexibility preserve our talented workforce and position us to take advantage of the opportunities as the market rebounds.
These actions also supplement our strong operational cash flow generation, providing added financial flexibility as we navigate these unprecedented times in fact, our free cash flow during the quarter almost tripled prior year levels, allowing us to strengthen our balance sheet and improve our net debt.
In addition, since the first quarter during the second quarter, we amended our credit agreement to temporarily increased our leverage covenant through March 31 to 2022, allowing for further financial flexibility.
I continue to be thoroughly impressed with the dedication execution and adaptability of our 3500 team members, who have continued to service our customers. Despite these unparalleled and stressful conditions. They continue to provide safe and compliant compliance solutions to protect human health and the environment, which is exactly what is needed today.
This includes our cobot 19 safe operations program, a new proactive cleaning and de <unk> decontamination solutions package for commercial and government customers. This most <unk> multi facet of program supports a full range of business needs to safely reopened and resume operations and.
Putting one time or ongoing decontamination preventative cleaning and waste disposal services all from one trusted partner.
Through the ended July we completed 1700, cobot 19 responses, which accelerated in late June and July as infection rates increased on reopening.
Looking at the quarter, we saw revenue declines across most business units compared with our budgeted 2020 expectations.
As expected the month of May what's the low point slightly below April levels, we saw a noticeable pick up in June as businesses started to reopen.
Looking ahead, we are cautiously optimistic that we will continue to see sequential monthly improvement barring any major pockets of the United States or eastern Canada shutting down again.
Despite the external challenges caused by the pandemic. Our teams continued to move the company forward through the execution of long term strategic initiatives.
Specifically during the quarter, we completed the construction and expansion of our enhanced drum handling capabilities that our net Nevada operation, which will allow for more efficient treatment.
Implemented five new retail account programs implemented are smarter sorting retail technology pilot program in three key markets.
<unk> point $4 million of capital on New high ROI growth project.
Launched a new customer interface technology that we believe will be best in class for our customers to use use our services obtain Dan data and manage their waste management needs.
Opened up our global Emergency response operations center commence the reconstruction of our Grandview stabilization building.
Focused on a number of environmental social and governance initiatives, including advancing our diversity and inclusion program and starting the operation of our aerosol recycling technology.
And these significant accomplishments were carried out while making material progress on the NRC integrate integration efforts. This is just a small sample of what we've been doing during the pandemic.
Shifting to the highlights on the quarter.
From a financial side on slide eight my big takeaway for the quarter is the resiliency of our business model, despite the headwinds and turbulent turbulence in many of the markets that we serve including energy the diversification of our services and collection of irreplaceable assets allow it allowed us to continue to.
Generate strong key.
Cash and produced solid financial results.
During the quarter total revenue was $213.9 million up 37% over the same quarter last year.
NRC contributed $70.4 million into second quarter of 2020.
And was down 19% sequentially from the first quarter of 2020.
Legacy Us ecology saw a revenue decline of 8% compared to the second quarter last year.
And 7% declined sequentially from the first quarter 2020.
During the quarter total company adjusted EBITDA was $38.7 million legacy US ecology is adjusted EBITDA was down 6%, winning excluding over $2 million of insurance proceeds for business interruption claims recognized in the second quarter of 2019.
Sequentially legacy US ecology is adjusted EBITDA was up 8% from the first quarter of 2020.
NRC contributed $5.2 million of adjusted EBITDA during the quarter, which included a 2.1 million dollar adjusted EBITDA loss from our energy waste disposal services business, which was hardest hit of all of our business lines.
We reported an adjusted loss of eight cents per diluted share, which included a higher than expected effective income tax rate due to the near breakeven results and included approximately 14 cents per diluted share of noncash amortization of intangibles related to NRC as.
I mentioned earlier earlier on despite the softer results, we were able to increase our free cash flow to $18.7 million during the quarter up from $6.5 million in the same quarter last year.
Diving into some more details on slide nine legacy Us ecology environmental services segment revenue declined 9%.
Base business was the primary contributor of that decline down 10% from the second quarter last year and down 8% sequentially from the first quarter of <unk> 2020.
We continued to see growth in our event business, which was up 12% year over year end up 2% sequentially from the first quarter 2020, helping to offset.
Some of the impact of the shutdown had on our base business.
We also were able to expand our environmental services segment EBITDA margin in the second quarter of 2020 by over 240 basis points to 44.1% compared to the same quarter last year.
In our legacy field and industrial services segment business revenue declined 6% in the second quarter from the same quarter last year.
Most of the service lines were negatively impacted by the pandemic shelter in place orders.
And related business shutdowns, especially those service lines that required our field teams to be onsite.
This led to an EBITDA margin contraction during the quarter.
Bright spot continues to be our strong growth in our small quantity generation services led by our retail services.
Strong year over year growth in our retail services more than offset double digit declines and other small quantity.
Services like lab pack, LTL and household hazardous waste, which were more impacted by the shelter in place orders.
Our emergency response by business line also saw year over year increase increases as our legacy US ecology operations responded to cobot 19, decontamination services benefiting from the cross selling efforts of NRC services offset offsetting the lower industrial based emerging.
The response activities.
Despite positive developments in our business in June and into July evolving health crisis, and its impact on local regional business activity levels is resulting into it in a continued level of unprecedent uncertainty in the industrial economy.
As such.
It continues to be difficult to provide 2020 guidance with any degree of accurate accuracy.
We do expect our second quarter will be the lowest.
Quarter in 2020 with a healthy recovery anticipated in the second half of the year. Despite this second half recovery operating results will remain below our original expectations, we established pre cobot.
Many of our field services that were hit the hardest by the economic shut down are expected to resume at an accelerated pace, but are not expected to recover to pre covered levels in 2020.
We expect our base business to continue its rebound at a slower pace marrying industrial activity.
Partially offsetting expected based business softness will be continued growth in our event business on active shipments and a strong pipeline a project expected to commence in the third and fourth quarter. So this year.
We expect industrial based emergency response services to increase as business activity level increases. This will be in addition to responding to the high demand cobot 19.
Decontamination events, they have continued to accelerate as the infection rates rise.
As well as other weather and natural disaster responses.
We experienced in the second quarter.
As we experienced in the second quarter, our energy exposed businesses that ARX <unk> were the most severely impacted and we expect them to be operating at near breakeven from an adjusted EBITDA basis for the full year in 2020.
Despite the overall lower levels of business activities, we do not we do expect to deliver strong year over year free cash flow generation and 2020 over 2019 levels.
In summary, the financial flexibility of our business model continued free cash flow generation strong financial liquidity provided by cash on hand in available capacity on the company's lines of credit and the dedicated workforce will allow us to navigate these challenging times and position the company to quickly capital.
Lies on opportunities for growth as business conditions begin to recover.
With that I'll turn it over to Eric for some more details.
Thanks, Jeff.
As I covered the detailed financial review I'll be discussing consolidated resumed results. The include NRC before I dive into the legacy us ecology standalone results for the quarter and the full year.
Starting with consolidated results on slide 12 revenue for the second quarter of 2020 was $213.9 million.
Revenue for the environmental services segment was $110.4 million for the second quarter of 2020 compared to $112.8 million in the second quarter of 2019.
NRC contributed $7.3 million of environmental services segment revenue in the second quarter of 2020.
The field and industrial services segment delivered revenue of $103.5 million in the second quarter of 2020 compared to $43 million in the second quarter last year.
NRC contributed $63.1 million of F.I.S. segment revenue in the second quarter of 2020.
Total gross margin was 25% in the second quarter down from 32% in the second quarter of 2019 treatment and disposal margins for our environmental services segment were 39% in the second quarter of 2020 and reflected a loss of $2 million from Nrcs energy disposal and services business.
Gross margin for our field industrial services segment was 13% in the second quarter of 2020 compared to 15% in the second quarter of 2019.
Selling general and administrative spending Orest Gionee was $48.5 million and included $17.5 million for NRC as well as $3 million and consolidated development in integration expense.
This compared SG any of $26 million in the second quarter last year, when excluding $2.5 million of business development expenses, and a 4.5 million dollar favorable property insurance recovery that was not repeat in the second quarter of 2020.
Adjusted loss per diluted share was eight cents in the second quarter of 2020 compared to adjusted earnings per diluted share of 66 cents in the same quarter last year.
Cash earnings per diluted share, which adds back the per share impact of the amortization of intangible assets to adjusted earnings per share was 13 cents in the second quarter of 2020 compared to 75 cents per share in the second quarter of 2019.
Consolidated adjusted EBITDA was $38.7 million in the second quarter of 2020 up 2% from the same quarter last year, reflecting $5.2 million from NRC. This was partially offset by a 6% decline from the legacy us ecology business, when excluding $2.2 million of business in a row.
Option insurance recoveries in the second quarter of 2019.
Shifting to legacy US ecology results on slide 13 revenues were $143.5 million in the second quarter of 2020 down 8% from $155.8 million in the second quarter last year.
Our environmental services segment revenues were down 9% to $103.1 million on a 25% decrease in transportation revenue and a 4% decrease in treatment and disposal revenue.
As Jeff mentioned, the primary decline in our treatment and disposal revenue was a 10% decrease in base business.
Partially offset by a 12% increase an event business and the second quarter of 2020 compared to the second quarter last year.
Legacy Us ecology field and industrial services revenue was $40.4 million in the second quarter of 2020 down 6% driven primarily by lower revenues in our transportation and logistics and industrial services business lines, partially offset by strong growth in our emergency response, and small quantity generation service line.
Lines.
Gross margin for the legacy US ecology business was 33% in the second quarter up slightly from 32% in the second quarter last year aren't bear on fire mental services segment treatment and disposal margin was 45% for both the second quarters of 2020 and 2019.
Treatment and disposal margin for the second quarter of 2019.
Benefited by approximately $2.2 million and business interruption insurance recoveries that were not repeated in the second quarter 2020.
Excluding this insurance recovery in the second quarter of 2019, we saw a 290 basis point improvement in the second quarter of 2020 on a more favorable service mix.
Gross margin for the legacy Us ecology field and industrial services segment declined to 11% in the second quarter of 2020 compared to 15% in the second quarter of 2019 on a less favorable service mix and lower revenues, resulting from a shutdown.
SGN eight for the legacy us for legacy US ecology was $29 million compared to $24 million in the second quarter last year.
SDMA for the second quarter of 2019 reflect reflected the favorable $4.5 million property insurance recovery that was not repeated in the second quarter. This year.
The increase in S. you need for the second quarter of 2020 was also partially due to higher insurance costs and higher labor and benefits related costs compared to the second quarter of 2019.
Legacy Us ecology, adjusted EBITDA was down 12% to $33.5 million for the second quarter of 2020. This compares to $37.9 million in the second quarter last year.
Looking at the first six months of 2020 for legacy Us ecology. Despite the shutdown, we delivered strong results with year over year growth.
Revenue for the first six months of 2020 was up 4% to $297.6 million.
This was driven by 4% growth in our environmental services segment, and 4% growth in our field and industrial services segment compared to the first six months of 2019.
In addition to revenue growth, we were able to expand our gross margin by 68 basis points, which drove adjusted EBITDA to $64.4 million for the first six months of 2020, which was up 5% over the same period last year.
Turning to slide 15, we exited the quarter with the strong balance sheet and strong liquidity, we had cash of $122.5 million and net borrowings of $739 million at June Thirtyth 2020.
This was an improvement over our balance sheet at March 30, Onest 2020.
Our operating cash flow increased to $59.5 million in the first six months of 2020 up 53% from $38.9 million in the first six months of 2019, driving our adjusted free cash flow up 86% to $34.6 million compared to $18.6 million in the first six months of 2000.
19.
Looking at our overall debt position at June Thirtyth 2020, we had approximately $69 million of available capacity on a revolving line of credit in addition to the cash on hand.
Our total outstanding debt is $861.5 million, which includes $448 million for our term loan b facility that matures in 2026, with only 1% required amortization or $4.5 million per year.
The overall current average cash interest in our debt is approximately 3%.
Our $500 million revolving credit facility has to financial covenants.
A leverage ratio of our total outstanding debt and capital leases to our trailing 12 month bank calculated adjusted EBITDA and an interest coverage ratio.
As Jeff mentioned in June 2020, we entered into an amendment of our credit agreement to temporarily increased the leverage ratio from four times up to 5.5 times, depending on the quarter before returning back to the four times level by the end of the first quarter of 2022.
Our leverage ratio per the bank calculation at June Thirtyth 2020 was approximately 3.8 times under the original four times level.
Overall, despite the current market conditions and the cover 19 pandemic, our solid liquidity and strong balance sheet will allow us to continue to operate the business with a long term focus and position us for a strong exit from the pandemic.
With that I'll turn the call back to Jeff.
Thank you are.
In summary.
I'm very pleased with the quarter quarterly results given the unprecedented conditions facing us ecology in the world. The core legacy us ecology business really demonstrates the resiliency of its collection of assets and services.
Nrcs businesses that are tied to the industrial markets held up well and their emergency response expertise opened up new decontamination services that are in high demand today.
The NRC businesses that service as service the customers and the energy sector frankly got dealt a tough hand, one that goes beyond normal market cycles.
I'm pleased to see how our teams have rapidly redirected those business lines, taking costs out and prepare for the long term recovery, which will occur.
The quarter also showed strong cash flow generation potential of the combined company. Despite the lower anticipated results the resiliency.
Truly highlights the intrinsic value of the collection of businesses we have today.
Today, we are in excellent shape to navigate these turbulent conditions and create a sustainable future for us ecology his team members and stockholders.
In closing I'd like to thank our team members throughout the organization from the critical frontline workers to our leadership team for their extraordinary efforts and their unwavering commitment to servicing our customers and these most try and of times. We remain focused on those things we can control. So we can respond.
To the improving economic conditions and sees the growth opportunities that will ensue.
With that operator, we're ready open up the call for questions.
Thank you we weren't I'll begin my question answer session.
If you ask a question we lived press Star then one on your Touchtone phone.
Speakerphone. Please go ahead.
And the keys.
The majority of the question. Please press Star then.
Today's first question comes from Tyler wrong with Raymond James. Please go ahead.
Hey, good morning, guys.
Good morning.
Hey, Jeff. So you noted that you completed some 1700 deacons I think year to date, but I'm. Just curious was that maybe 10 to 15 million in revenue and just any thoughts about the remainder of the year there.
Yes, so year to date, which goes through basically July we're about 1700.
Pleaded job Theres a lot more in the Q.
That we've seen a lot of acceleration there from a revenue perspective.
No you give you through through June or I should say second quarters number.
It was it was about 12 million.
Second quarter, specifically, yeah year to date, we're running at about $14 million for $14 million.
Dollar revenue trend.
Okay perfect.
So I know, you're not giving guidance I completely get a things are fluid, but I am hoping for at least a little bit of help so kind of here I go but.
In the original 240 guide pre co bid I think it was comprised of say 90 million from NRC and I think that included say 40 million from energy disposal and about 150 in the legacy E call. So as we sit here today.
It feels like maybe there's a little bit not a lot, but some friction in the legacy he called the energy business has been cross spot crushed by Xone factors, that's probably no EBITDA and then the other 50 million of NRC also fuels down.
But then you also have some positives from the de Con work. So if I'm following the bread crumbs My logic is leading the on a path to somewhere in the high one hundreds for EBITDA. This year, I know, you're not giving guidance, but am I crazy off with my logic.
Yes, so I'll give you a little bit of color around here in the reality is what we see today may not be what we're seeing tomorrow and I'm just going to carry out at that way.
But you are directionally correct on the energy waste business, we thought that was going to deliver around $40 million EBITDA. This year.
That definitely is going to be close or near breakeven.
On that so that's taken right on top of that.
The legacy Us ecology business.
Is holding up very well.
You know if you really and this is this is a key think Eric covered and there is that if you look at year to date results were up year over year on revenue as well as EBITDA and its holding well we're seeing some positive signs we would have probably been at a point of exceeding what we thought if cobot didnt have happen.
[music].
Shifting to some of the the NRC business the ones that are tied to industrial activities.
Our actually holding up well end the our services are holding up holding up fairly well with the addition of the co bid work what's been apps that is industrial activity that is what we're expecting to improve come back in the second half of the year. So.
All in we're not giving guidance and one of the things that we kind of looked at as we've actually looked at what street estimates are out there and we think thats a fairly reasonable estimate that's out there right now and probably would be inline with what we would have given if we were to go if we were two of giving guidance. So.
That's where we're at now we need a little bit more time in space theme what happens in the in Q3 potentially even in Q4 and how the pandemic progresses until we're we're ready to reestablish official guidance.
Okay.
This is extremely extremely helpful.
Real quick Eric you proactively amended credit agreement I think in late June you ended the quarter at 3.8 and by the way.
Is your credit agreement you some sort of pro forma EBITDA for NRC calculation, because it just doesn't seem to map doesn't line up just north of 3.8.
Yes, so there within the agreement and the way the Covenant calculation works there is.
It's a it's an adjusted it takes our EBITDA and then there are some adjustments we get to take credit for things like some este estimated synergies are at or assume synergies for the next 24 months, we're able to take credit for some certain restructuring items that are considered those things. So so it's not just straight EBITDA.
We report there there are adjustments to it in the covenant okay. Okay. Okay, thats helpful, but as EBITDA kind of snakes through over the next couple of quarters. I mean, do you think that that leverage ratio is going to remain somewhat steady.
Or do you think it's going to kind of crest over the next couple of quarters.
Yes, as we look at it and again, not giving guidance, but as we look at our models and various sensitivities, which would have currently shows for 2020 is that we will probably crest at the end of the third quarter.
And then come back down a bit in the fourth quarter based on what we see today, we havent done to a lot of work on 2021, we've done some high level work, but as you look at it and we put a I put a slide in the in the presentation. Today I think at the page 16 that kind of shows you the step up in the India.
Amendment that we did and it shows that the the credit agreement with the New Amendment gives us the highest level at the into Q1 in 2021, which I think is where we probably crest.
Because typically Q ones, where we when we write up the highest but okay trend and as you look at that slide and how that flows up that's kind of in line with with again, what we expect right now at a high level with with a fair bit a cushion built into that that covenant level.
Okay, Okay that Tyler we negotiated cushion we definitely.
Yes, definitely definitely seems like it.
But real quickly on the Capex. So do you have kind of a good number there is it 60 to 65 million or.
Maybe my math is way off I'm not sure yeah, Yeah, we Tyler we still think it's in that range 60 to 65, which is which is around $30 million less than than what our initial guidance.
Okay, and just one last one so you mentioned it upfront, but where exactly is grandview. So I think in the original guide you guys were budgeting something like seven and a half million dollars for that build but today, you've only spent like.
Call it too.
Maybe it was backend weighted always has been back end weighted but did it get pushed out or are you not going to spend that money I'm just curious, what's what's kind of going on there.
Yes, we started the construction of the stabilization building in the second quarter, we expect that to be done November December timeframe right.
Ranges about what you said theres still some additional research insurance recoveries on that building in there and so thats in the 60 to 65 million of cap spend this year. We had originally thought we're going to push that off into 2021, but the reality is that we wanted to get that up and were operational on early take a long term.
Focus than I credit Simon to really pushing that forward.
Okay, great, but that is in the 60 to 65 good yes, okay. Okay, alright, guys I appreciate the time. Thank you. Thanks Tyler.
Our next question comes from Michael Hoffman with Stifel. Please go ahead.
Hey, Jeff Eric Thanks for taking the questions Hope you guys are doing well.
Good morning, good morning.
So the.
Cost cuts that were achieved in the second quarter.
Given the trends you're seeing what should we expect that reverses and maybe like bonus accruals stuff like that and what do you think you'll get the key.
Another way to sort of word that is do you think you've permanently moved up at least the low end of your incremental margins.
So so again, Michael we I think so I mean, it certainly a lot of our cost savings.
We've experienced so far are going to are going to be temporary things like travel.
Obviously, another big component is the financial component of our incentive plans, which are going to be a fair bit of savings this year, but but we have done some structural thing.
The largest of which are obviously and then or in the energy waste disposal business. The former sprint business. If you look at what we've done there in terms of Rightsizing Labor force in terms of.
Returning a lot of equipment, that's been on rental and things like that if you look at that annualized savings number kind of going forward.
That numbers in 2000 $25 million, a year range, and so pretty meaningful pretty significant that that would be structural pending the market completely turning around us needing to re hire people get cranking cranked back up but in the meantime.
That's probably the area the most meaningful structural reductions.
Okay.
And you don't anticipate.
A reversal of any of the.
Incentive comp accruals by the end of the year based on what you have as line of sight in the no guidance guidance.
That's correct.
Okay.
What would it take.
For those to come back.
Like as a percent of.
Some of the 240 original where would you have to land for you to have the incentive comp come back on.
So but for the lowest level to on most of our incentive comp plans for that for the financial component.
They start to pay out in the 80% to 85% up the target range.
So we'd have to be in the 80, 85% of of that call. It 240, EBITDA, which puts you at around 200.
Got it.
And then.
Within the.
[music].
The free cash flow backstop, which we appreciate the sort of round number $50 million or should we assume we take a 100% of that and pay down debt with it.
Yes, Michael the our capital priorities are going to be we're going to continue invest the the capex. That's in there, but then we will be de levering the business.
Okay.
And is there any timing related to the flow of that cash for the rest of the year are there some.
Oddities around cash tax payment cycles or interest payments. So we.
I don't find ourselves on a negative in the third quarter gone on my going to should not going about to do the 50 because of the timing of stuff like that.
Yeah, as we kind of look at it for the year I think third quarter.
We'll likely free cash flow for the third quarter will likely be be down quite a bit from the second quarter.
I don't think it'll be negative, but it'll be a lot lower in the than the second quarter, and then and then a really strong fourth quarter as what I'm expecting.
Okay.
If you can talk about.
You should do anything less than that 19 free cash does it put us in a situation, where we're basically at finishing the year at no less than overall business EPS 19, and then whatever the state of the World is there's we're back to 3% to 5% based growth.
Yeah event business is pretty regulated driven so it's it's not a lot of discretionary and.
And your industrial businesses, finding a leveling off and on back in that three to five kind of zone plus whatever is happening in retail growth. That's it's not the right way to think about it conceptually.
Yeah, barring the pandemic and its impact there I mean, I think that is a reasonable way to think about it. That's the challenges I think most businesses are having today is that we're battling something that is.
As unknowable.
And is outside.
Anybody's core expertise on here and its impact to the overall economy, but.
The that's probably a good way to think about it.
And when and then the in the yield on industrial and then services and the industrial weakness it goes into Q.
Are there particular.
Hi, I'm, assuming auto was exposure in Twoq, so that gets yeah, they're back online maybe not at high levels of production, but they're back on line and Thats one of the comebacks, but other end markets that stood out particularly that.
Or just.
Disrupted as either non essential are made decisions to close and now they're back online.
Yes, actually you know I think it more across the board I mean, you call out autos, Yeah. We had a we had a we added four shutdown and we almost had 100 plus people furloughed.
On there all of them back to work all the plants are up and operational and so that was a come back in June and its continuing to continuing to be good in that business and those business lines. When you start talking about where we saw a lot of.
On the field services side is where say lab pack, where you Didnt you had customers that didnt want us on flight I mean, they had their own protections in place they weren't award doing business and so those are starting to come back.
In there and.
That's that's where on the field services side and the second quarter. We saw most of the most of the drag the other one Michael we saw a pretty significant drag in the second quarter was and again. This is for film industrial services on the transportation and logistics, just just a lot less or fewer opportunities.
Things were shut down on the transportation side from from the services perspective in the second quarter.
Okay and then.
The emergency response piece of NRC no. It's it's typical business has been 15 20000 of these small little spills.
No its outbreaks of tank.
Weeks, a truck late leaks from things like that how did you see that pattern of that trend sequentially.
Is it consistent with.
The.
The onboarding again of the customer.
Broadly or is it more is that a big customer exposure small customer exposure I'm, just trying to understand how to think about influences.
It's really miles driven I mean, if you really get to at most of those accidents and occurrences on the E. R side is from transportation mishap, and we have seen recovery in all of that it's nowhere near pre corporate level and so that that's the positive sign is that we're seeing a recap.
Sorry, but I mean, I don't know where you're out in in the world, but our transportation levels are a lot down from a traffic pattern perspective.
In almost all of our markets that we've seen.
So this is the total country vehicle miles traveled and lots of cars on the road and they results and accidents and we've got to it because vehicle miles traveled or off the bottom in the there's a 70% recovery off the bottom, but we're still well below historic levels.
Rush hour things like that are nowhere near back that's that's what you're referring to that is what I'm, referring to and we actually started seeing all of that and that started recovering in June and we started seeing are what I call industrial activity. He our services that that's that's been.
Consistently going up.
And we've been continued to see that and in July as well.
Okay, and then lastly from me.
Yes remediation in that field and industrial line is got to be highly discretionary so it kind as a canary in a coal mine what's happening with that.
It's actually trending up you know this kinda correlates a lot to our event business on the way side Remediations very similar we are not seeing customers polling projects, we're actually seeing a lot of customers, bringing bid proposal and things.
The table, so second half of the year for our remediation group is trending really positive right now with a number of account contracts that we've won.
And our plan to go so that's that's the irony in all this is.
Call up manufacturing down slightly just this is just from the shelter in place and things like that things that are on construction sites.
Remedial activity things like that it continues to move.
Alright, and then last for me on the retail side are there any major bids.
Outstanding that could lead to ongoing incremental growth here at this healthy double digit pace.
Sure Hey, Steve do you want to address up for Michael.
Sure Michael we actually have.
Or new awards that are kicking in they started in second quarter, but should benefit second half, but probably more than $9 million to $10 million just in ramping over the next few months. So.
Yes, the we are having success, there and we see future growth over the next couple of years.
Terrific. Thanks, Thanks for taking my questions everybody be safe during the weekend you too thanks Michael.
And as a reminder, ladies and gentlemen.
A question. Please press Star then one.
Okay. Next question comes from Jeff Silber BMO capital markets. Please go ahead.
Thanks, so much in your prepared remarks, we talked about the event business you mentioned the strong pipeline can we get a little bit more color in terms of the type of project in that pipeline and what you're expecting thanks.
Yeah, Yeah, Jeff I'm going to let Steve a address the event side.
Yes, so theres a combination of things we have multiple radioactive projects going to our sites in Idaho in Michigan, we'd have some court ordered cleanups with waste streams like Mercury and led and chromium. So it's a combination of things, but we're not seeing any slowing there the pipeline remains strong.
And that we continued on a quite a few of these projects over the last six months without much delay.
And when you have a quarter or projects those are considered essential even if an area that are locked down that still something that you're going to able to do.
Remediation and a lot of lot of areas is considered essential your cleaning up the environment. One of the reasons that some of these companies have continued to handle that work is think about.
Other parts of the economy being shut down theres not as much traffic you can get in and do the remediation without all the same concerns you can actually go faster, which means the remediation company is making more money, they're able to move trucks without all the the controls because there is not the same level of traffic or concern as if things were moving at full pace.
Okay, that's actually very interesting thanks for sharing that and then just a quick numbers question.
Your free cash flow is really strong were there any specific items to call out second quarter like I'm, assuming it was a payroll tax deferral anything up like that'll be great.
Yes, Jeff we did and are taking advantage of the payroll tax deferral, which we think for for the full year end 2020 is going to going to contribute about $8 million a free cash.
So a portion of that obviously that in there. The other piece that we saw a or one of the big drivers that we saw is.
We've actually.
But from a working capital perspective, we had a pretty strong quarter in the second quarter.
Good really good collections were monitoring collections very closely as is everyone.
And you know fingers crossed things are things are still going very well from that perspective.
So so you've seen seen some working capital pickups around our receivables.
And going the other way around the payables as well so I would say that was was one of the biggest drivers is just working capital.
And focusing and really getting doing a great job from a collections perspective.
Okay, great. Thanks for the call appreciate it.
Thanks, Jeff.
Your next question so as a follow up from power James. Please go ahead.
Hey, I'm not sure if Simon is on but I have an operating question. So pretty much all of your rail partners have implemented precision scheduled railroading I know you're a heavy rail user I'm just curious what you're seeing from a rail service perspective are you seeing better turn cycles.
Is that driving costs down are you guys rethinking your gondola needs.
I would say, it's really been steady as she goes I mean thinking back room projects have we seen improvement I can say I haven't heard many issues I think were they've been moving projects have been moving to pay so I'd say, it's really been very consistent.
Okay, Yes, I appreciate I just was curious thank you.
Hi, Thanks to other.
Ladies and gentlemen. This concludes the question answer session. During the conference back over to the management team produced on oil ours.
Just like to and the conference by thanking those who are attending and hopeful that you all stay safe during during the pandemic and looking forward to updating you next quarter.
Thank you Sir This concludes todays conference call. Thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.