Q3 2020 Heritage-Crystal Clean Inc Earnings Call

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Ladies and gentlemen, today's conference is scheduled to begin shortly. Please continue to stand by. Thank you for your patience.

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Thursday

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Good morning, ladies and gentlemen and welcome to the heritage-crystal clean Incorporated third quarter 2020 earnings conference call. Jay's call is being recorded at this time. All callers microphones are muted. And you'll have an opportunity at the end of the presentation to ask questions instructions will be provided at that time for you. To queue up for your question. We ask that all callers limit themselves to one or two questions.

Some of the comments will make today are forward-looking. Generally the words aim anticipate believe could estimate expect intend May plan project should we'll be we'll continue will likely result would and similar Expressions identify forward-looking statements statements involve a number of risks and uncertainties that could cause actual results to differ materially from those anticipated by these forward-looking statements these risks and uncertainties include a variety of factors some of which are beyond our control.

These forward-looking statements speak as of today, and you should not rely on them as representing our views in the future. We undertake no obligation to update these statements after this call. Please refer to our filings including our annual report on form 10-K as well as our earnings release posted on our website for a more detailed description of the risk factors that may affect our results.

Copies of these documents may be obtained from the SUV or by visiting the investor relations section of our website. Also, please note that certain Financial measures. We may use on this call that same as earnings before interest taxes depreciation and amortization or Eve. And adjusted ebitda are non-gaap measures. Please see our website for reconciliations of these non-gaap to gaap for more information about our company, please visit our website at ww.w Crystal with us today from the cock are the president and chief executive officer missed your Brian Ricardo and the Chief Financial Officer Mister Mark Devita at this time. I would like to turn the call over to Brian Ricardo, please go ahead sir.

Thank you, Mike. Good morning, everyone and thank you for joining us today. This morning will begin with a quick update on the impact of the pandemic discuss our third cup results and cover our fourth-quarter Outlook.

During the third quarter we could send you to executing the company's pandemic response plan to combat the COVID-19 outbreak and do some business downturn and remain focused on ensuring the health or safety of all of our employees and their families as well as those customers. We have come in contact with

To safeguard the well-being of our employees and decrease the spread of the COVID-19 virus. We continue to execute the following steps during the third quarter.

provided additional personal protective equipment and sanitizers

utilize staggered work schedules to increase social distancing

allows high risk or impacted individuals to work from home when possible.

Thoroughly cleaned and disinfected our facilities as needed.

Close facilities temporarily as needed to prevent Contagion.

These steps along with the cooperation of our employees have allowed us to limit the number of confirmed or suspected cases of COVID-19 amongst our employees during the third quarter of total lost time from employees off the job to the COVID-19 related health issues was approximately 3700 hours company-wide.

Increased activity in our customers locations during the third quarter compared to the second quarter provide us the opportunity to exceed our expectations for the quarter the sound execution of the pandemic plan along the support of our hard-working employees allowed us to take advantage of this opportunity and produce very positive results in both of our reporting segments compared to our performance in the second quarter.

In the Environmental Services segment, we saw strong sequential growth LED bar containerize are waste and antifreeze businesses, which both posted double-digit percentage Revenue gained compared to the second quarter and our vacuum services business grew by 8.4% are almost 1 million on a sequential basis during the quarter.

This growth along with a full quarter's worth of cost control measures such as employee furloughs the elimination of certain positions management wage reductions and reduce travel expense allowed us to produce operating margin above our expectations for the third quarter.

I would now like to spend a little time talking about our little business during the third quarter the demand for crude oil and finish lubricants began to recover from the Lowe's experience and the second quarter Palm Harbor overall demand for finish lubricants and the base oil required to manufacture them are still below prior-year levels. This oversupplied Market continues to put pressure on the selling price for the oil change.

Well pricing is strict and compared to the second quarter during our fiscal third-quarter. The net back for our base oil was down by $0.62 per gallon compared to the same quarter of last year.

The pandemic continue to push vehicle miles driven lower as they were down double-digits on a percentage basis year-over-year for the majority of our third quarter similar to last quarter. This may challenging conditions in the used oil collection Market which led to a decline of approximately 13% and the volume of used oil. We were able to collect during the third quarter. However, the volume did represent a 29% increase and used oil collection compared to the second quarter.

Pricing standpoint, we experienced increased pressure on our charge to collect used oil has previously idle re refining capacity came back online and other outlets for used oil reopened off this increased demand for used all feedstock during the third quarter and contributed to a decline in our street price of $0.15 per gallon compared to the second quarter.

However, our charge for oil during the third quarter did represent a significant thirty-two cents per gallon increase on a year-over-year basis.

With the rebound inactivity off of the pandemic and do slows of the second quarter. We are happy to report the able to run our Refinery at capacity during the third quarter of that produce eleven point four million gallons of Base oil, which was slightly above our expectations.

As we move forward we estimate that in the fourth quarter of the environmental services segment will see a very slight Revenue growth on a normalized basis compared to the third quarter from an operating standpoint. We believe the fourth quarter will continue to be challenging but we were hopeful margins will be consistent with Q3 levels.

Despite the fact that we have furloughed workers returning in the fourth quarter.

For the oil business segment perspective. We're experiencing lower season with a man for Basil in the beginning of the quarter. These factors will limit our ability to raise our base oil net back in line with recent post of increases from Virgin producers.

However, we expect our base oil net back during the fourth quarter to remain in line with the third quarter results.

Somebody used oil standpoint. We expect experience a slight deterioration in our charge for used oil which reflects typical seasonality.

While we believe we have seen the work of the impact of the COVID-19 pandemic on our financial results. We are monitoring the situation closely. We are aware that daily COVID-19 inspection rate spiked over fifty thousand new cases several times over the past week or two increased COVID-19 infection results could raise a good result in newer additional shelter-in-place orders, which could negatively impact the demand for our services the health of our Workforce and our results of operations Financial conditions and Cashing close.

Even though we have found stability in our business our results with remainder of twenty-twenty and into twenty Twenty-One are still hard to predict at this point.

However, based on our performance over the past seven months. The one thing I am counted off is knowing all of our employees are determined to continue to provide the high level of service. Our customers have come to expect and the same amount as possible. I'm also pleased that we were able to maintain a strong balance sheet of what we believe was the low point of the pandemic induced down to earn earn a good position to take advantage of the current market conditions with that. Mark will take us through our third quarter Financial results. Thanks Brian. Good morning, everyone. Your evidence of a certain place in Corning was 87.1 Million compared to 104.8 million for the same quarter 2019 it decrease at 16.9%

That income attributable.

And shareholders for the third quarter was 4 million compared to net income of six million in the year-earlier quarter diluted earnings per share were $0.17 compared to diluted earnings per share of twenty-six cents in the year-ago quarter is Brian mentioned. We saw a significant improvement in our business during the third quarter. We are encouraged by the sequential growth produced in both of our segments resulting in an increase of divorce and 7.6 million or 9.6% from the second quarter of 2014.

Moving on to environmental services for the third quarter segment revenues were sixty two point four million compared to $69 million in the third quarter of 2019. 9.5% wage increase was primarily due to COVID-19 related volume decline in most of our products and service lines partially offset by favorable pricing variances in our parts cleaning and container on a sequential basis. We saw a 4.4% increase in revenue from the second quarter as our customers began to recover from the effects of the pandemic wage Environmental Services profit before corporate sg&a expense is 14.6 million compared to 17.8 million in the year-ago quarter, but was eight point two million dollars higher the second quarter of 2020.

Operating margin for the corner ten minutes twenty 3.4% compared to 25.7% in the third quarter of 2019 while we didn't quite equal last year's performance package quarter operating margin was 9.4% points higher than our second quarter results. Overall. We are pleased with the operating performance during the quarter as the cost control initiatives find them to minimize the negative impact of the pandemic induce economic conditions a little business segment revenues decreased 31.1% 24.7 million - 35.8 million in the third quarter of fiscal 2019 as the COVID-19 pandemic continue to drive increased demand for finish lubricant directly impacting both the demand a month for Pedro fata.

However, Revenue increased five million or 25.2% quarter of a quarter as economic activity improves some pandemic close.

Another sign of recovery was our 76% sequential increase in basal and gallons produced in the third quarter from the second quarter of 2020 with production being in line with the third quarter of 2019 at the refinery operated at 100.9% of capacity operating margin for the quarter came in and 3.4% compared to 10.5% during 3rd quarter of 2019. But the segments margin increased 31.6 percentage points from the second quarter of 2020.

From a baseball standpoint and sold 9:49 million gallons in the third quarter and our netback increased $0.08 per gallon compared to the second quarter of 2014 Chef corporate extremely expensive ten point five million decrease one point five million compared to the third quarter of 2019. The decrease is mainly driven by lower compensation costs to wages options partially offset by higher salaries expenses sg&a expenses as a percentage of Revenue 12.1% compared to 11.5% from the year-ago quarter month Higher by the decline in Revenue, even after the third quarter was 11 million compared to twelve point five million in the year-ago quarter, but up considerably from the 2.5 the 2.5 billion dollars a year for the second quarter of this year.

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4.2 million for the quarter compared the 14.6 million in the prior year quarter, the third quarter results represented a 14.9 improvement over the second quarter oil companies effective tax rate so that the recording system is 22.7% compared to 27.1% in the third quarter of fiscal 2019 with a great decrease is principally attributable to the opposing effect on the tax rate from the changes in year-to-date earnings.

For the quarter, we generated five million in operating cash flow and 1.6 million of free cash flow and in the corner and 1.9 million higher than the second quarter when 52.5 million of cash on him despite the continued challenges presented by the COVID-19 outbreak. We maintained a strong Barrel sheet in that cash position as of the end of the third quarter may not expect the impact of the pandemic divorce us to exercise any portion of our revolving Loan in the coming quarters.

During the third quarter. We we started our a position related activity and we continue to explore several opportunities as we look to leverage our strong balance sheet to execute on potential deal. We believe can create value for shareholders.

In conclusion, we are very pleased with the quarter-over-quarter Improvement in both of our segments despite. The challenges presented by the COVID-19 pandemic. It's Improvement would not have been possible without the fact that part of our employees. They continue to provide our customers with the excellent service in come to expect from heritage-crystal clean. We are cautiously optimistic of the opportunities for life will continue and hope everyone stays safe and now they during these challenging times this concludes our prepared remarks and we'll now turn the call back over to Mike to take your questions.

At this time, I would like to inform everyone to ask a question. You will need to press star one on your telephone to withdraw your question, press the pound or hash key off and buy what we can file the Q&A roster. Your first question comes from David Matthew from. Please. Go ahead.

Thank you. Good morning, guys. How are you? I'm great. Thank you very much. First off. I thinking back to the last quarter. You were expecting yes segment profit to be up to three hundred basis points. Can you outline the sources of outperformance that you realize to get to the 940 just took the over the biggest areas of outperformance relative to your expectations 90 days ago.

Well, when we looked at where we all perform, you know, Revenue was a little bit better than we thought So that obviously helps leverage our cost solvent was better off our cost in labor. We're better drop in fuel costs were better. So it was you know, a lot of different contributing factors, but those were the biggest there's other smaller ones like with care costs continue to be low waste waste internalization help a little bit concerned rotation. So there were a lot of contributors like the solvent and better MAC machines and drums labor and the truck related ones are probably the biggest lovers.

Okay, and then on the oil business?

Literally you expected some improvement. I don't know if you were expecting to actually turn a profit there and and assuming you didn't could you talk there to about the main sources that surprised you I know you went through the net back and the the CFO but any any details on things that just sort of went, um how you did not expect them to go during the quarter positively dead. Yeah David, I think we we guided Our Hope was that we would get the break even for the quarter of our remember our our comments in Q2. If you remember in Q2 wage down for three weeks, we had an extended turnaround. We only produced six and a half million gallons. We seated our production for the quarter of we had eleven point four million gallons of the quarter rcpg at the Platte was almost a record. It was our second best performance since I've been here and it's 3 and 1/2 years. So we had outstanding for Thursday.

Action, we had really good utilization on the reduced number of routes trucks that we had on there. They got there was a record utilization number for the quarter with our route track help as well. And it was really just a very clean operating performance at the plant level and I commend our gas for it. We had a outstanding cost control with the plans of the quarter and then they do the hell of a job. That's a primary reasons, you know from a macro standpoint Mark talked a little bit about you know, the work that we've done on the fleet sides. We produced are you know, we we kind of changed philosophically we've like reduced our truck count by 120. We're not we don't have a lot of spare trucks life around we're doing a lot better job on routine maintenance, so we don't have to keep the extra spares that that's helping.

Our our margin performance and these lower Revenue. So pretty happy with our our Fleet group for the work that they've done.

Okay, sounds good. And then one last one for Mark could you walk us through any key considerations? We should think about relative to the fourth quarter. I believe you have seventy nine days there and it just any modeling aspect. You should keep in mind relative to this even more unusual. For you, you know, I would you hit on the key one that a lot of the themes that Brian mentioned and I even alluded to a little bit in in our in our prepared remarks speak to hopefully even or near even wage across the businesses, but that is the one Nuance. This is once every six years. We have the 17th week, but from a modeling perspective if you want to get granular I think a key is that with that lead comes off today till, you know, even here internally. We typically only model, you know, a fraction of a week as far as extra business days. So if you depending on how detailed you want to get you or or birth

What else is 5:30. That's modeling. I wouldn't do a full week. I do some fractions.

Because they're normally it's normally a seasonally a down time and then when you add the fact that there's literally a day or two or we're not even going to be operating it certainly wouldn't be the equivalent of a five-day week into two or three. That's for sure.

And that's the sales comment. Obviously, you're you'll have expenses related to those days. Exactly. Yeah, so as to our efficiency challenges whether it's you know, well, I need a route they businesses, you know, the plants are still going to be the plant is operating 24/7. Anyway after we will find Ramin so that won't really have an impact on that, you know for modeling purposes of the class. We're forecasting production 14.5 to 15 million gallons for the quarter last year. I think we were in the low 1553 if I remember yeah and when you think about about where we're going to be huge we can I mean we we have the we went through the same problems. You're going to go through it on Monday through Thursday. We have didn't really have any one around and shoot. So we are going to have some planning down time in Q4 and such a round quarter. We're not going to have the the real long.

Turn around and we typically have this time of year cuz we took it into two on top of just added shut down, but you know that that's one of the reasons why if you're you know, sequentially with them more time while the number that binds is alluded to is a little bit higher.

In addition, Thank you so much David. We're going to be doing some inspections which impact the plan a little bit odd. But yeah. Thanks again. Thank you.

Your next question comes from Jim from Needham & Company, please go ahead. Hi. Good morning morning. How are you? Well, thank you. Hope you guys are home. I wonder if good frame the COVID-19 impact in the quarter maybe relative to fiscal Q2 just from the standpoint. I don't recall the employee lost time in Q2 am interested in general the the tone with respect overall volumes with customers. Is there any way that you can frame that?

I'll let Bryan get to the real world home with the customers and give you that macron, but it's on a pure time standpoint. We had talked about, you know this time last quarter after that. We had experience about 5,000 hours. We're down to $3,700. So to 2 from an internal standpoint was definitely better from a pandemic impact. I will tell you off for you know, just with the rising infection rates, you know, we well while we're very comfortable with and we're getting really good at our practices that are actually there is some risk we have to say Vigilant you can see people on the regular every-day lives and there might be some carry over into our employees or employees are somewhat of a microcosm of birth population. Now they maybe we will get last we certainly hope not but there could be, you know, we could start to get closer back to what future was than birth.

thank you three but the time

That's why is a little tricky looking for the Q4, but I don't mind if you wanted to speak more to max volume Factor dependent on the customer. Yeah, I mean obviously we're in contact with our branches pretty routine basis. You read the economic indicators like like we do, you know manufacturing is down 7% compared to pre pandemic levels so that certainly rolling through our branch is customers are cautious. I mean, they're certainly worried about

potential further slow down because of entries COVID-19 is as we end of The Fall season, but overall the the mood at the Bratz level at the customer level is is positive or would love to see Therapeutics and vaccines.

Finally make their way into the marketplace as we get deeper into this and they would love to start next year with renewed activity. But overall very positive. Our Workforce is positive like wage that we put in our prepared remarks 3700 hours of COVID-19 case our losses, but our employees are as we said in our remarks, I mean very often they worked extremely hard they battled through this. I think we've been able to capture some market share from our customers because we didn't furlough as many people early. We've not had any service failures. So overall very pleased with where we are and beginning to see some optimism from our customer base, you know unemployment. I though you saw the numbers this morning we

A numbers game at higher than we expected. We've got thirteen million people unemployed. And let's hope that Congress gets up in the past and we could get the money flowing in the fall off for sure. So we're a bit worried about that. Yeah, I think some people have also mentioned into just found this out was you know, they allude to or look at vehicles have driven we offer that I only been able to get through July numbers, but with our corgis calendar, that's a good chunk of at least half of our quarter and you know, I think it was about 11% on a year-over-year only down, you know, that is a little bit more but it's not too awful too far off of what I eat on businesses off. Not that you know, we do do a lot of non-smoking vehicle, you know maintenance customers. So it's not a complete Apples to Apples you but you got producer price index. I think the last two months, of course early July to August and August to September.

I think it's in total up close to three-quarters of a percent. So it's you know, nothing's going into this this all cycle times are good, but they're in a building inspector. It depends on the car sales are quarter number for you. Probably saw that number. I believe 30% quarter-over-quarter. What's a good thing for us? I think

the pandemic certainly cause people to not utilize mass transit at least until the vaccine and the Therapeutics are out there and we'll see increase car traffic as we move deeper of a lot of people are traveling by car. I'm I'm noticing it in our commutes. We're almost back to normal.

Got it and follow-up question. He's just wondering how we might be thinking about some of these temporary cost actions that you took Mark and how long to layer in in the current quarter and maybe even early next year. I don't know if there's any, you know additional color you could provide on how we think about that. Thank you. You know as we've dug into it more, you know, when we're preparing not just for our forecast in the rest of the year our budget whatnot. I'm pretty optimistic. We've done intentionally why we've had furloughs both, you know in the support roles corporate back office stuff and and then our fuel person we've done some things to try and keep people not literally home, but you know protect their income, you know, we have a lot of people in the field that are commission-based and you know a lot of dead.

Having to decide their revenues going down to the the domino effect there and when you really look at it the actual dollars that we saved that we said the field level have em, you know, we we haven't, you know had giant Savings in other words. They're not embedded into three years of you know, Fantasyland suburbs all that the ultra-low-cost. So Thursday, we're pretty optimistic that long ago. We looked at it that those types of things aren't going to be in big ahead willing to say even though you know, you know, we're maybe bringing a few people or doing things to restore pay on the support side. We you know, we also have formulas that we had changed that will probably start to morph back to what our normal condition for me was wondering sell all in all I think we're in in decent shape. They're they're still going to be some hailing but they're not as strong as you might think.

Yeah, I agree with that. Structurally. We have made a a few changes. We rationalize some antifreeze capacity which will certainly be a permanent structural change in that was something we plan to do regardless of the the pandemic. We had too much antifreeze capacity with the recent acquisitions that we've done over the last 18 months. I mentioned wasting a generalization. I mentioned the rationalization of Rolling Stock all that was in the works and it's starting to show up in our performance.

Got it. Thank you. Congratulations on the Improvement versus the prior quarter and I hear thank you.

As a reminder to ask a question, press star one on your telephone keypad. Your next question comes from Kevin from Berrington research, please go ahead. Hey Kevin, Hey, good morning morning.

I'm just wondering how you're thinking about price increases and the Environmental Services business is you you know start to approach to life time of the year if they might be a little more muted than normal in this environment or what kind of what what your thought process is there. Yeah. I'll talk for my bankruptcy Off the Mark and maybe get into more specifics. We we actually had a meeting to discuss pricing yesterday certainly with you know inflation. We're seeing it off with our insurance cost Healthcare cost. We're certainly going to going to push a price increase to the marketplace. We're not going to talk specifics of its call.

Before it'll be probably a slightly muted compared to where we were in past years driven by the need to support our customers. I mean, there's a lot of angst out in the field of the smaller manufacturing level, especially given we call on. So we're going to be will be muted but we're going to get out a price increase it certainly going to cover the inflationary pressures that we're going to feel moved into twenty Twenty-One. So it'll be on that positive through our performance and I think we're going to take some tactical standpoint take on folks that we haven't always taken. We did some of his life focus on those customers that maybe we've more aggressively priced in the past to to try and you know Target maybe waited a little more of those customers. I think it's instructed to think back during the Great Recession and what if you remember what we tried to do back then I don't know we've talked about it but dead.

But we'll get that done.

Try to actually do it to price increases you've covered up long enough to know we have some occasions have around, you know in the early November time thing physically, but definitely in the fall, we typically doing something across the board and we decide to do something mid-year them and it didn't go so well and you know, we try to be extra aggressive. So to reinforce, you know, what more clients comments really are informed by what's happened before what we have tried and what has worked. So we're pretty comfortable with the strategy we have for this year.

Okay, that's that's helpful color. I wanted to talk to about the acquisition pipeline. You mentioned you continue to pursue Acquisitions and his in this environment. If you know what you're seeing in the pipeline and and the willingness of targets to engage is off everything is kind of picking up in this environment or if they slowed or just maybe any characterization of the overall pipeline. Yeah. I've certainly picked up obviously month April May very slow. I mean with a dog free cash flow beginning to improve for the targets. We're certainly seeing renewed opportunities. We've got a a long list of a great Pipeline and our hope is over the next six months. We can close a couple of nice tuck-in deals that give us a little bit of Route density and phone number.

To the country where we need it. So we're we're optimistic and then Mark is as close to it as I am so he can comment if he wants but very optimistic that we'll get some deals done and the pipe life is good and lengthening and we've got specific targets that we're looking for based on where we want to grow the business and I think you guys know where my head is we were very comfortable with them to go out and collect used motor oil organically. We're focused at our acquisition efforts on E S Type services and continuing to improve our route density and and month where we don't have it and it's tough for us to make money without it.

Okay. No. No, that's that's yeah. No, that's great. That's all I had for now. Thanks for taking the question. I guess. Thank you. Thank you for calling in Kevin jorg question comes from Michael Hoffman from stifel, please. Go ahead and Mark glad to hear you're doing well. We wondered if you were going to call in. We were their birth any hard time.

So everybody's been trying to work their way around how to model this at this point and when we grossly oversimplify if we took three q and did the classic / 12 * 16 * something we're going to land in about where you think you're going to be. Is that what we're hearing Revenue wise and the question is good with that. That way there's not too much brain damage for you and Brian no, no, but it's so, you know, we're simple people itself like guys, right. So you heard back row, that we took we'll see some some slight incremental Revenue growth and we we've been ramping up our quotas. It's going to become more challenging. We're a bit worried about economic macro conditions not knowing where this thing's going to go in the fall over all the moves positive. We're seeing Improvement every. So,

Like you have a good model at the way you're modelling it. And then how do we think about the margin profile against this your own efforts to manage your cost structure off like a crisis of draw attention to costs and you pull things out that maybe didn't think you could now you have how do we think about that margin profile as we move into the fourth quarter is doing do we hold the margins from 3 to or do we have to give something back? Cuz you're taking some downtime or seasonal issues and oil help us out a little bit. Yeah. Well, they give you my perspective and Thursday from a macro standpoint and Mark and chime in and I'm certainly thinking flat when I when I look quarter-to-quarter, obviously, we're going to see some increased costs as we begin to bring back employees and we're off employees because we're seeing improving conditions out in the field and proving route density and certain Market places. So we're being strategic as we bring these people back. So that'll be ahead and win ballon. No,

So I have the revenue on the flipside that's going to improve it. And I think as you look at us as a company, we've had some overall structural improvements that have been in the works for four years and beginning to show up on our performance. And you know, even as you rationalize equipment you have cost associated with rationalizing equipment. You ultimately get rid of the equipment and that starts to flow through the income statement. I think we've done a better job on maintenance. We're doing a better job running our plants. We're doing a better job with up time, you know scheduled up time and unscheduled downtime at the refinery which improves our cpg. If you look at the schedule changes and oil we've seen a cpg Improvement in three years that's meaningful which allows us to make money and and a shity spread Market that we're experiencing right now, which is dead can tell you how proud We Are that we were able to be gross margin positive at the refinery and some of the worst conditions we've ever seen at least that I've seen as CEO so I'm worth it.

Flat, you know quarter-over-quarter with the government takes who I let Mark give some tracks around that I mean from somebody that standpoint. I really think

The the ability to do around the same. Margin is there I mentioned that you know for all the initiatives we've done that part of the one of the bus initiatives that we did do was trying to keep our people motivated and have modified programs. It wasn't just a month pay program, which is this much commission and revenue goes down. You're going to lose every dollar that so the fact that we help, you know, plus George that a little income then you can kind of feel that back and since it comes back and then that isn't that big a struggle but it really is about the longer-term are completely coincidental as far as the pandemic is concerned that Brian mentioned that they continue to bear fruit goals and you know some antifreeze Outlet locations in Georgia.

Those are the incremental world are the our truck cost, you know, those build you all contributors. And those are ones that can continue to contribute money.

Okay, so like I didn't talk about.

Oil, you know in terms of third-party supplier, I think you know, we collect 75% plus of our own internal supply to the plant. We're seeing some improvement and and third-party gallons are fo demand is is down a bit and I think from a macro standpoint of structural change standpoint, although we're not seeing any real benefit from a 20/20 the the whole complex is is a mess. You don't need the distillate. You're not not producing jet fuel. You don't have strong real strong demand for these aggregators am pulling together used motor oil that the blood for offshore locations. So I think we'll see structurally some improvement in our ability to collect gallons of the cheaper price from third parties as we move in the market and hopefully.

The industry will continue to be disciplined and continue to charge for a while, which we're going to have to do in this flat crude oil market place and we can continue to age to see stable spread conditions at some point base always going to going to kind of going to move in a better Direction. It has two. Yeah, I mean and it's a minor piece of prime mentioned. I'll give you the number off your over year varies down about 38% volume sales in Q3, and we're pretty much flatly with what we sold in New Jersey is like two point three million gallons, so

Okay, and then I understand hypotheticals are always a risk. If our if the world you live we're going to live in in 2021 is 90% of long-term average GMT. So you you know, that's where we're driving at 10% less than that sustainable.

Can can we get back to a conversation of better than middle single digit organic growth NES and then you know the assumption is palm oil Market always does rebalance. It's it's a matter of time and so by 21 will it have found its rebalancing point and whatever the spread is it's it's at least stable and therefore we you know that business will be easier to model as a result can that conversation actually happen in twenty one if it's you know, ninety percent of the empty.

Yeah, maybe in The Optimist. I'd like to think that we can get there. I mean obviously we're worried you you certainly heard that in our prepared remarks. I mean, none of em can

know what the future looks like in 2021 and where this Panda I'm just going to go but I certainly think that we can go out and capture market share. It's not like the industry was growing all that much before we were not able to get the double-digit growth and then in quarters, and I'd like to think we can get the mid single-digits. We've got a pretty motivated Workforce. Our pay structure is is geared toward helping us with Organic growth because our guys are commissioned.

And we're going to work as hard as we possibly can to get back there and then we'll later in organic. I mean, we'll lay in the inorganic the Acquisitions which we've been successful with and I think we'll continue to have some juice wrld. So I'm pretty bullish on on next year, you know provided we don't see the pandemic heat back up and we had more recessionary conditions.

and the bigger risk around that is government state-level government shutdown versus people just getting ill I mean if we don't shut anything down,

Like we did in the spring then we've hit some kind of status quo at least, you know, the whatever the threshold is that's the bigger risk is does somebody shut down your customer. Yeah, I agree that the severe, you know, it seems like the severity of illness or the the way we're able to treat it is getting better. And as long as that doesn't take a step back cuz people are more comfortable. No one wants to get it but you get a sense that people are fearful depending on if they have pre-existing conditions or a higher risk that if it's an illness no one wants but it's not it's not, you know life-threatening for a mess majority of the population and then Michael I don't think people are going to have made this comment earlier. I don't know if you heard it, but I don't think people are going to jump right back in the mass transit. I know I haven't

And I think you'll see you've seen the car sales up. I think you'll continue to see that what you know of a big piece of our business is automotive-related. So a little bit of optimism there them the number of cars will increase because families are going to have to buy another one and I'm thinking about it.

Yeah, I mean we were at long-term average car sales in September almost sixteen million which is, you know, considered up from 14 and change used car prices are as high as they've been in a long time. So well all that speak to what you're saying just to remind us in the you know, rough percentage Transportation driven Home Service intervals versus manufacturing Industrial Service. It's about fifty-fifty. Yeah, okay.

Okay. Thank you very much for taking Michael. Take care.

Your next question comes from Jerry sweetie from Roth Capital, please go ahead. Hi Jerry. How are you today? Good morning. I'm doing well. How are you guys doing with Brian you sort of touched upon this and this was really my question was just curious about the oil Market obviously a lot of dislocations, you know less jet fuel the whole as you said Market is the may be in turmoil with disarray. But yeah, and you also mentioned taking market share etcetera, you know, any any insight is to any structural changes that may come out of this that may benefit you or I may be some smaller collectors going out of business. You can fill that gap or or even negative headwinds that you may be facing off the market air travel could be down for an extended period of time and cetera and then you also are this, you know, IMO twenty-twenty. I dare ask how that actually even fits into the equation anymore dead.

Yeah, I think structurally we may have even mentioned it all the key to call. We have seen some smaller collectors Park trucks and go out of business. I can't tell me that they're not going to restart as market conditions. They are fo Market improves, but we have seen some improvement. As I said in the third party supply less competition out there less of a need to move the the RF. Oh volume two other outlets. The aggregators are not playing in the space because of what we think will be the long-term impact of IMO twenty twenty thousand ships not being able to burn that that material anymore. So we do think structurally will continue to see Improvement in in that part of the business, which will Aid to read refiners. So I changed our thinking in terms of long-term benefit of IMO 20/20. We just have to see the complex get

Back to more normal conditions. I mean, there's no shipping traffic out there. There's nothing that for distal. It's a lot. It's going to happen over the next six months. I think probably premature for me to answer that but I do think the third parties are going to be hurt that are not tied in to read refiners because the are fo markets tricky and that'll that'll help us near term. And then I do think long-term will get some benefit out of IMO 20/20 is we've consistently maintained because of what it's going to do to the aggregators. The people that were collecting to use Motorola competing with us.

I don't know if I answered God bless, you know.

Sorry, it's helpful. I mean It's Tricky it's hard to see if you had a little bit more insight than I do obviously and then another just high-level question on this is just more out of curiosity to some degree. But you know or any money markets doing considerably better than others and part of the reason I ask is, you know, almost a benchmark for going into the winter and maybe tracking how some of this month covet infections rise and fall just curious if some areas are doing better than others. You know, it's funny we talk about that as we prepared our price increase thinking and and working on budgets. It's been bouncing all over the the operate regionally and it just all depends on where the covin cage count is increasing that that's where the Market's off on the Impact versus improving, you know, the early part of the pandemic we were struggling in the Northeast. Obviously. They did a great job of locking down that improved conditions in North East Pittsburgh.

We started seeing hot spots in the South if we started to draw the struggling in the South. So it's it's kind of been bouncing around regionally, but overall, I mean, I think most people are becoming used to having to deal with it on a day-to-day basis and things have kind of leveled out. Regionally. I'm not seeing it bounced around as much as it was.

Yeah, that's helpful. I mean, it's very Regional and when you live in the Northeast, it's hard to see what's going on, Florida, California, and it's just it's helpful understand that perspective. So I appreciate it. That's it for my very good. Thank you very much.

That was our last question. Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.

Thursday