Q3 2020 Stericycle Inc Earnings Call
[music].
Good morning, and welcome Steris cycles third quarter earnings Conference call.
All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
After todays presentation, there will be an opportunity to ask questions. Please note. This event is being recorded.
I would like to turn the conference over to Mr., Andrew I was vice President of Investor Relations. Please go ahead.
Throughout the call we may reference specific slides from the presentation.
I'll now turn the call over to Sydney Miller.
Thank you Andrew and welcome everyone to today's call during the third quarter Stericycle continued to proactively manage our business through the uncertain economic conditions driven by the COVID-19 pandemic, we delivered solid results in the quarter with strong free cash flow generation additional net debt reduction.
And improved operating leverage our global revenues for regulated waste in compliance services showed organic growth over third quarter last year, and our secure information destruction organic revenues improved compared to the second quarter of 2020, reinforcing the fact that our team provides essential serve.
Mrs to health care providers and other businesses around the world.
Before reviewing the progress on our five key priorities I'd like to give you an update on our global safety culture transformation.
I am pleased to report that through the third quarter of this year compared to the same period in 2019, our team reduced the total recordable incident right by 22% in the vehicle accident rate by 30%.
<unk> commitment by giving us some of our highest customer satisfaction scores across regulated wasting complaint services and secure information destruction in all North America channels. It as a parent that our customers appreciate the value we bring and we are realizing the benefits of our quality of revenue efforts as evidenced by organic growth of one.
9% in regulated wasting compliant services this quarter when excluding the impact on maritime way services from the pandemic.
Moving on to operational efficiency as we managed through volatile times, we remained focused on controlling variable and discretionary costs with the safety of our team in mind. We continue to tightly managed travel. We're also closely monitoring our daily operational in consulting spend and we are steadfast in our commitment to improve performance.
And deficiencies in our field operations.
The planned deployment of the rest of our North American ERP system until 2021. However, we are not sitting idle in the interim we are making progress mining data from our legacy systems and tools to gain business insights built scorecards and improved performance.
Additionally over the past several months, we accelerated the deployment of certain technologies associated with our North American ERP system, including our new employee travel and expense system and a global tax management system.
I'll now turn the call over to Janet to review our financial results.
Services delivered revenues of $187.3 million compared to $222.6 million in the third quarter of 2019.
Excluding a $1.3 million or positive impact from Esso key pricing organic revenues declined 16.8%, reflecting pandemic related business disruption.
In North America secure information destruction organic revenues were down 14.3% compared to third quarter, 2019, which reflected a decrease in service stops of approximately the same percentage wise.
While still below pre pandemic levels secure information destruction revenues improved sequentially quarter over quarter.
Tax expenses of 15.1 million due to higher non deductible divestiture related charges.
This loss was offset by a reduction in interest expense of $12.2 million as a result of lower interest rates and lower debt balances.
You us GAAP cash flow from operations for the first nine months of 2020 was $365.2 million compared to $201.2 million for the comparable period last year the year over year improvement of $164 million primarily includes.
One lower payments for legal and professional fees annual incentive compensation and prepaid software totaling $50.5 million to lower accounts receivable of 26.6 million driven by collections exceeding revenues and collection process improvements.
Three lower accounts payable of 17.4 million, primarily driven by reduced costs.
Divestitures contributed approximately 150 basis points of this improvement operating efficiencies contributed almost 80 basis points.
These were partially offset by 70 basis points of discretionary and onetime expenses that included an increase in the annual incentive compensation accrual.
Adjusted diluted earnings per share was 68 cents compared to 80 cents in the third quarter of 2019.
As illustrated on the bridge on slide eight the variance in adjusted earnings per share was due to the following.
12 cents reduction from the impact of divestitures and foreign exchange rates seven.
Out of operations.
We commenced that phase launch of some of the ERP shared services and data capabilities to unlock valued sooner and reduce overall implementation risk it.
Cindy mentioned, we recently deployed the North American employee travel and expense management and global tax management systems, which are both part of our overall ERP capability sweet.
As we turned towards Erp's spending outlook for 2021, we estimate ERP testing training data conversion and deployment costs of $45 million to $55 million, which will be adjusted out of ongoing operations.
<unk> in the mid 20% range compared to last year.
In a moment I will provide an update to our long range guidance, but first I'd like to note that given the economic uncertainty. We presently operate end because of the pandemic. The following outlook includes forward looking statements as contemplated in our safe Harbor provision at the opening of this call.
On our second quarter earnings call. We noted that we had commenced our annual process of updating our long range plan and we continue to assess the evolving economic impacts of the pandemic as a result of this planning process. We are providing our updated five year outlook, one we expect organic.
Revenues to grow at a compounded annual rate of 3% to 5% would 2020 as the base year. Two we expect to generate at least 400 million in annual free cash flow between 2024, and 2025, primarily driven by operating margin expansion three we expect to achieve a key.
Covenant debt leverage ratio below three times between 2022 and 2023.
This outlook is based on currently known items and certain business assumptions, including current foreign exchange rates and estimates for SDLP pricing. This outlook also excludes future acquisitions and divestitures I will now turn the call back to Cindy.
Thank you Janet.
Past, two and a half quarters have been among the most unusual and challenging time that businesses have had to face just like temporary business closures and economic uncertainty around the globe. Our team has made meaningful progress towards their cycles transformation. This.
This progress is demonstrated in our financial results, but also in the cultural evolution of our team.
We are building a team that is learning to be constructively dissatisfied and seek continuous improvement as our quality of revenue initiatives deliver organic growth our commercial teams gain confidence and push further.
As we use data to drive decisions our leaders are asking for even more details and dashboards and as we see the benefit of standardized processes. Our field operations leaders are more enthusiastic for the next implementation our successes are contagious.
I'm very proud of the progress we've made and excited about what lies ahead for our team members our customers and our shareholders.
Operator, please open the line for Q and a.
Well now begin the question answer session.
That's good question you May proceed Star then one on your Touchtone phone.
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Please note to limit yourself to one question and one follow up.
This time, we'll pause momentarily to assemble the roster.
First question comes from David Mann Day of Baird. Please go ahead.
Hi, good morning, everyone. Thank you.
First on the ERP implementation costs, just to be clear, you're saying that in 2021 and you.
You will experience expenditures.
Okay, I should say expenses of 20 to 25 million to run the old system and 30 to 35 to run the new system with the 20 to 25 being adjusted out in the 30 to 35, obviously not adjusted out is that correct Oh good morning, Dave So a little change on that so what.
It's going to be adjusted out is the cost to finish the appointment of the system that is not to run the legacy systems. So the deployment, so where we have a development system that we're maintaining right now and we will continue to maintain till we flip it and turn the switch on and put it into production at the time the switch turns into production.
That is adjusted out of earnings will go up into normal operations and albeit at a higher cost because then you're actually have a full production system going as well as depreciation and kicking in so we will be maintaining the cost of the legacy systems underneath that to the transition because we need to keep them running in the intrastate.
We also need to keep our eyes that they're running beyond 2021 to maintain to support the international businesses.
Okay, Alright, thank you for that.
And then.
As it relates to the capital expenditures for the ERP and for the total company in 2021 can you remind us what you're contemplating there.
So the the deployment costs will be we're we're estimating though I'm, we're still finalizing those plans around 40% capital and expense and the rest will be expense for those deployment costs. It will be adjusted out of operations. When we turn the switch and we have that prorated portion of the running that's all expense.
Okay.
All right and then the second question is on your route planning efforts you flagged long haul as the the opportunity you're targeting right. Now are you also looking at smaller service routes and I guess I'm just trying to gauge where you think you are today versus where you could ultimately be once you get better tools and better better visibility into.
You too.
2021, second half and into 2022.
Yes, Dave this is Cindy thanks for the question. So yeah were where it it's both an <unk> or I should say, it's all so right now as we were going into certain operations and if we're making any equipment changes improvements or getting more efficient in certain areas. As you can imagine it would benefit us to drive more volume into some of those air.
He is so I would really call our our optimization strategy very dynamic. So as we have if we were to have an incinerator go down as you can imagine we would take the opportunity to re route to be most efficient, but if we have something new that's coming up and online we do the same.
So for us on that operational efficiency thing when we're talking about changing the overall you know way we operate the overall master operating plans certainly on a macro level and then on a on a by facility level. All of those things are really quite dynamic and and and have the potential to change at any given point in time.
But opt to optimizing it and making the decisions day by day week by week and month by month to make sure that were being as efficient as possible is really what the team is is very very focused on.
Okay. Thank you so much.
Thank you next question come from Brian Butler of Stifel. Please go ahead.
Good morning, Thank you very much for taking my question.
Morning, Brian.
Just on the regulated medical waste could you give a little bit of color on the 0.8% growth. When you exclude the maritime is that is that volume or is that price can a little bit of detail there would be great.
Yeah, I think I'll start and then if janet or wants to add anything so Brian. Thanks for that question I think you know the 0.8% that we're looking at in terms of it is the organic growth. So we can get that a couple of different ways. I think if you take a look at the quality of revenue initiatives that we've put out there so far whether it's the deal review Committee.
Ah that's helping to drive growth if you take a look at we we have better customer engagement. That's based on the realignment that we've done with them with our commercial resources.
I think all of those things are we're learning where to look we're learning how to win where we're taking scalable solutions that we have learned that work for certain areas in certain size hospitals or certain you know certain segments of our of our customer base and then we're figuring out how to make sure that we expand that and look look more.
Broadly so for us.
And remember you know we're doing we're pleased with that number but and we're looking at this year versus last year. When it was was everything was normal if you will and I don't even know what normal is anymore, but you know that's what it was so for US today, you know to continue to show the positive growth.
Year over year in still times that are are are kind of uncertain.
We're very pleased in by the efforts of the team.
Okay, Great and then the follow up on that just when you think about that October update that you gave it sounds like axe. The maritime again, the regulated medical waste is kind of getting close to or if not above maybe the pre kobin levels, while a S. I'd.
<unk> continues to be impacted any color on you know kind of through.
You know the trend you're seeing on getting back to pre cobot levels for both the regular medical waste and and as I did.
Yeah, I think you know I'm not I'm I'm very very cautious I think we're very cautious in eating trying to say you know when when will we be out of coke because really in essence, what you're asking is you know will we be out of cobiz, where we'd be back to where prior to co bid you know life life was and I I think you know still today.
Hey, as we've seen different economies just different geographies go back into shut down mode. If you take a look globally. If you take a look here in the U.S. just based on some states I don't I can't talk to the trending what I am encouraged by is is the numbers from a regulated waste perspective, certainly year on year, we leased.
We'll continue to bring services forward that are that are bringing accretive value and then if I take a look at secure information destruction, what we need to make sure. We do is we continue to show incremental improvement from prior quarters in prior months and we constantly monitor that and I think we are seeing that trajectory going the right direction.
But the trend is the wind it will be you know like it was in February if you will I I'm I'm not good enough with the Crystal ball to know when when the economies are when the the pandemic will be kind of lifted from from the global economy.
Okay, and then if I could slip one last one I'm sure any update on the divestiture I'm just kind of the pipeline and timing I know there are still some items out there, but what could we look for fourth quarter 2021.
Yeah, I think a couple of things you know sit having having completed seven since January of 2019 and quite frankly, it's been seven we had one early on in the year in 2019, and then the bulk of them. The balance has been over the last last year. So we're still very busy handling current P.S.
Days and running those side by side to make sure that that the divestitures and are going as as they should we do leave portfolio rationalization is one of the key priorities because it remains a priority. We will will we will execute I think when the time is right and when you know we believe.
That that things are as best they could be but right now all business units I think continue to focus on our cultural transformation and on delivering value to our customers and focused on organic growth. So I can't give you anything specific I. Just know that you know we continue to stay focused and and I think it's been evidenced in the result.
As we get you know a little tighter and asked we can put resources towards core businesses. You know I'm very proud of the results. The team continues to deliver.
Okay, great. Thank you very much for taking my questions. Thank.
Thank you thanks for that.
Thank you. The next question comes from Sean Dodge RBC capital markets. Please go ahead.
Thanks, Good morning, and congratulations on the strong progress again this quarter.
And then just maybe on the on the gross margins those were up considerably both year on year and sequentially to a level.
You are generated in 2016 and that's despite.
I I dragged from the lower as I'd activity and somewhat depressed paper prices is there any way you can help give us a sense of or frame the amount of the drag the lower as they de activities happening right now I know Cindy you said.
Pretty much everybody back to work, but what your route activity still down.
11 is percent I.
And then as things continue normalizing how should we be thinking about gross margins the trajectory there into the end of the year end and 2021 so.
So the thank you for the question good morning, Sean So gross margin is largely mirroring the trends that we're seeing at the at the EBITDA level as well, which is driven by divestitures and and sustainable improvements that we're seeing in the performance, which largely are hitting the gross margin line. So just to recap that about half.
Assets due to divesting of low margin business. So that's a good portion of the basis point improvement, but we're also seeing sustainable improvements as we mentioned about $3 million to $5 million of core quarter, those largely hit gross margin because they're driven by the type of activities that happened in our own cost of revenue line.
And then we last quarter, we had some discretionary payments. This quarter. We are we're not seeing as much because we are hitting our internal targets. So we have we have upped our accrual from compared to last year for our incentive plans.
Okay. So I guess, a 42% this quarter that's because.
Fair kind of starting point or jumping off point for how we think about Fourq you and yeah. It's a good a good amount of that is sustainable because of divestitures and the sustainable operating improvements were seen.
Got it Okay and then in.
In our WCS, the maritime business with a bit of a drag in the quarter can you give us a sense of the size of that now what was the revenue contribution contribution from that in the quarter and then as we think about any potential recovery. There is that just focused on cleaning cruise ships. So it's a very closely tied to any activity there or is.
That business, a little bit more broad I guess, a a cross dinner time and yet when should we be looking at are tracking them. We.
Engage some sure you know any serious frozen recovered.
Yeah, So Sean I'll describe the business Janet can give you some of the specifics but in describing it. So we've got them you know cruise ships that travel once you're in international waters and you land at ports in the United States. All your waste is <unk> is considered APHIS, meaning it has the potential to bring in things to the country that aren't that you wouldn't be.
Well to bring in at a border as an example, if you got off a plane or or something like that so for us that that international those lines really drive a good bit of it and they drive that business because we have to take that waste treated it as if you know it potentially is carrying things that that shouldn't be coming into the country.
And then we take it and we we handle it accordingly with other regulated waste. So you know it's either Autoclaves were incinerated. So so for us that's what that business is so as you can imagine it's cruise ships are docked and people aren't on them and waste isn't being generated there's really you know that business essentially it has been shut down.
I think overall the that's part of we've got about 5% of total revenue Janet can correct me if I'm wrong about 5% of total revenue of the regulated waste you know falls into some of the different categories that are in there, whether its hazardous or or maritime and I think of that total about half of that 5%.
It is.
Is is the maritime Janet you want to give any other color or where are correct me, yes. So it. Thank you Cindy so in regulated medical waste and compliance services about 5%, it's what we call the other category and about half of that is in this maritime area.
Roughly is around 25 million in revenue that that is impacting our top line.
Okay. So so 25 million of revenue in the quarter and then we should think about that being down with that that's annual that painful so okay and how much is that down.
Yeah, I mean, it's a lot because no cruise ships are sailing. So you have no. It's yes, it's keeps coming back to port to be able to unload waste. So I I did see an announcement that a a november 1st that cruise ships were allowed to start selling again, but they'll probably be a delay and I think they're only going with their staff initially, but you know it's in the news.
Something we're monitoring pit that will be that will be driving that revenue stream.
Sure Okay, great. Thanks again.
Thanks, Sean.
Thank you next question is from Scott Schneeberger Oppenheimer. Please go ahead.
Thank you very much good morning all.
I guess, thanks for the update although we'll look warm October in the prepared in there. It's just curious could you could you take us through at first on regulated waste what progression you saw perhaps on a monthly basis through the quarter and a incurring.
Compare and contrast, what you think was was pandemic related and just just overall business improvement I know that's tricky to do maybe some thought on what you're seeing as far as discretionary services back at AAD and health care providers and what type of what inning, we are in people coming back in.
Having this before just to get a sense of the demand trend in that segment.
Yes. Thanks.
Yeah, I'll start with that one its Scott its a great to talk to you I think.
You know its I think what we're saying is we continue to see even from a year over year in and where we are we are seeing a improvement in regulated waste. We're very encouraged by it we do have a that the new service that we had launched within that which is you know taking non non traditional healthcare customers that.
That are generating some P.E. and we're picking that up and processing. It accordingly with all the other regulated waste now that's that's certainly that's early days with that particular service.
But I think in a macro level in view of of what we're looking at it still is almost geographically.
It it aligns with geographies that are more open you know there's we are seeing the discretionary services, you know kind of coming back in line and and as I think many of the other at health care customers and different hospital groups that that also report on them on their progress you know I think they can see it too.
In terms of.
Whether it's you know the cancer screenings and and some of the other discretionary things hip replacements and some are back to pre pandemic levels and then others are still lagging and I think we are a general reflection of that.
Certainly is that you know the core of what we do so I think as I think a potential vaccine will will affect that I think you know geographies and economies opening back up to a greater degree well well continue to affect it but we we remain cautious and certainly you know pretty vigilant in continuing to manage our costs.
Based on what we're seeing per geography for demand.
And to me on the on the far left with the basically the same question on middle and secure information.
Just just curious how that's and that's and then through the quarter.
Where do you think we are with Oh, we kinda sensitive I was backing work that helps directly affecting your business.
Yeah, I think I think no I think that's a great question. There's a couple of things that we continue to monitor in order to take a look at the business first very pleased with the fact that we are seeing sequential improvement quarter on quarter. As you know, we we had good organic growth Q3 of of 2019.
You know, we just started to see organic growth saw it again in Q4 19 saw it again in Q1 of 2020, and then of course, you know the shutdown it kinda throttled, a throttle that opportunity, but right now we were monitoring things like.
Business and professional services, where are they in terms of you know opening back up and them being it at full force. We're looking at the World of education in Academia, you know where are they in terms of being back and that open and as as you know that's all over the board just from County to County, yet alone state to state we look at retail.
You know, where we have a you know a customer customer revenue base in retail so for us positive signs over the fact that we are seeing sequential improvements and then I think as evidenced by what we said in October you know that's a sequential improvement from where we finished in Q3.
So I think I think signs are looking it it isn't I think its directly commensurate with you know how how open we are in little I I always say the economy's opening a you know two steps forward and maybe in some places you still take one step backwards. So but overall then if you look on the flip side I think our team continues to do a terrific job.
Been managing the variable costs, that's associated with those stops and.
And I'm very proud of a proud of their efforts so for us.
I think it continues to improve and we're excited about where we're going.
Excellent Thanks, Andy take care I'll turn it over thanks guys.
Thank you next question is from Ryan Daniels of William Blair. Please go ahead.
Hey, guys next speak out in for Ryan. Thanks for taking my questions I guess going off the last line I appreciate kind of a year over year October Onest of October breakdown for growth in the RBC US and then I say de what's that kind of tracking from the close of Q3 like is that a.
A similar growth rate or a little.
Well, a little bit better kind of what's the number there.
So oh good morning. This is Janet so were not.
Not going to get into the intra quarter. There's a lot of you know turbulence in the markets right now I do think if you look at the quarter before and that month and you look how we've been trending for the first month as a corridor. It does show improvement and we're optimistic about that but there's still a lot of.
Turbulence in the market you know it and so we we are managing a very stable set of customers. If you see that we we've been able to achieve.
Maintaining a good portion of our revenue in this particular market.
And they also are continuing to be open for business largely but there are other businesses that depending on what happens internationally are here could change based upon on the economic conditions with pandemic dependent.
Okay do you think it should be kind of like similar to this quarter we saw.
Sequential growth with.
I'd, whereas RWC as well kind of lag a little bit a little bit more in line with kind of how it was nonperforming last quarter.
So I wouldn't look at that Buck for Maritime we are encouraged by the strength of our regulated medical waste business growth and that continued into October and we're encouraged by that.
Okay, So I'm, not saying I wouldn't say that our WCS is lagging in any way shape or form.
Got you. Thanks, and then disappears off I I know I asked this last quarter, but I guess, it's worth asking you guys have any contracts coming up with a with us ideas, there, but any pushback at all or or maybe any clients that have you know maybe you reassess their their need for kind of that service up but given time.
You know I think you know that's it that's a good question, but but I think what it what.
The our secure information destruction contracts just imagine Weve got certainly we do have some some larger customers and some national contracts, but it really is you know an awful lot of smaller local just engagements with with with with the small business small and medium sized business owners. So for us it is.
You know it is a give and take it is a constant discussion with them. We are staying very close to them as you know their conditions change, whether they're open or their clothes or even allowed to be open or close so.
So we see that that that's a that's become part of our everyday but in terms of are we seeing any major clients or any contracts or I can I can say no. You know we were we're not we don't see anything like that but we are continuing to manage you know just the the volatility potential that.
That's within that that that service line.
Awesome. Thanks I appreciate it.
Thanks, Nick.
Thank you. The next question is from Jeff Silber BMO. Please go ahead.
Thanks, So much you mentioned the October trends.
Kind of segmenting between North America, and international and even looking at what happened in this last quarter can you remind us where you are internationally I'm just curious why the trends are so different from North America.
Yeah. So so from an international perspective for the regulated I think that's what you're asking you know a strong position in the UK, Spain, Portugal, and then you know larger large operation in South Korea for the regulated metal.
Oh, and then also in Romania that being the you know the core and in Brazil. So you know those being the core spots for for service you know outside of the U.S.. So Oh also Canada, sorry, I I'm, just assuming North America, but I just sit outside the U.S.
So what we are seeing is you know strength everywhere as but yet it's it's it's different as countries open up a you'll see a surge and then they take a step backwards, there's the potential for the turbulence there as once you know certain areas close back up then you think about the discretionary.
Reis services that are that the you know drive some of the growth.
In the regulated waste side. So it really is a volatile global market at this moment, but but we're very encouraged by what we're seeing for October and then very excited about us being able to institute. The next quality of revenue initiative, which is the pipeline management piece you know for us.
To be able to even get greater visibility into the forecasting and into the revenue streams. It into what's happening I you know across the customer base is so where were you know a lot of lot of things for us are going to help us get better certainly to continue to manage through the volatility.
Okay. That's helpful and I appreciate you, giving us your long term outlook I'm just curious when you think you'll be comfortable enough providing near term guidance. For example, do you expect to provide 2021 guidance. When you report your fourth quarter numbers.
Thank you for the question I'm not reach a decision on that yet I think it really depends on the the economic turbulence and uncertainties in the market and on whether we introduce annual guidance again.
Okay I appreciate that thank you.
Thank you next question is from Gary Bisbee of Bank of America. Please go ahead.
Hey, this is Jay Hanna on for Gary today.
Just sort of going back to that margin discussion from earlier.
This quarter, you could better operational efficiencies and cost reductions.
So just more on that cost reduction side, how do you see that trending going forward as sales sort of start to improve from.
From here.
So one of the things we're excited about is our ability to manage our variable cost in this in this timeframe and through all the activities, we've done to the engineering and operations team and the commercial team too.
To to get more efficient than what we do every day is driving cost reductions as we mentioned, there's about $3 million to $5 million of sustainable what we believe are sustainable cost efficiencies that are in the quarter and we saw those last quarter were seeing those this quarter and we believe those are sustainable and as I.
I mentioned the other structural change in the business is the divestiture of low margin business, which is contributing to an improved operating leverage performance.
And then Jay if I can just say one thing I think you bring up a great point for us, but but to me. It's it's your what Shannon is talking about is we really are in and evolution of our cultural mindset across all things, we do and cost management is one of those it is it is a team of folks right now that are it.
Effecting change and that change that they're accepting is where we're having greater visibility and accountability to see what everybody's doing a and then in in in the reaction to that accountability, we're becoming more disciplined and I think that really is the cultural change in mindset that were.
Seeing move in the right direction. So that we are holding on to cost reductions. We are looking to continually improve a and I think those are all the things that that we were looking to achieve once we implemented the ERP because we'd have greater visibility in and you know for us to be in a position where we are right now I'm quite frankly, you know.
As helped by you know that the the pandemic and having to operate differently.
I think I think that's where we're seeing the great results of that across the board from safety to all the quality of of all the all the key priorities that we have as we move forward.
Okay, and then on that that long term breakout you gave would you be willing to comment on sort of the break out between your expectations for organic growth longer term and between shredding and the regulated waste business.
So at this point I would I would say is that we are headed about both of our core businesses and they both contribute to that growth projection.
Okay. Thank you.
Thanks Jay.
Got it for your question. Please press Star then one.
Next question is from Alexander Leach Rehnberg capital markets. Please go ahead.
Hi, guys. Thanks for taking my question, what's the environment, it's been like for new customer additions, particularly in all the other piece, yes in light of all the well these quality of revenue initiatives that you've implemented.
Yeah. That's it you know I I really appreciate that question, Alex because that that really gets gets really to the heart of us trying to.
Figure out how to grow so so for US I think we are seeing strength and a good bit of this pipeline management that we're putting in will also afford us the opportunity to see into you know actual sales and engagement by resource right down to the sales rep level, but but I think what's been.
[noise] evidence or at least what we're seeing is we are seeing encouraging organic growth as as we improve in in shred quarter over quarter, and then and I feel very positive about about our ability to continue to grow you know across across all of our business unit.
Because we are seeing encouraging signs whether its regulated year over year or you know demonstrated with a quarter over quarter improvement in in in shred. So a lot of these initiatives really are going after you know it.
Broadening the every sales person patch of land that they're responsible for and and I think I think we're early days in that in that effort, but I'm sure more to come.
Okay, Great and then.
Looking at Capex.
Well, we have a moment of more normalized level of of a capital expenditure. This I know that you guys mentioned, a pretty pathetic levels a full capex from 2021 of your remarks, but its again some more elevated capex as a result of the ERP implementation well sort of.
Well, it's about Plato.
So thanks for joining our call today by the way. This is Janet so capex is actually lower this year than what we would normally expect and as I mentioned in my script, we anticipate next year to getting to what I call pre pandemic levels of capital spending and we also will have capital spend on deploying the ERP, which we deferred out of this year due to the pad that.
But the trajectory of capital is also an operational story so.
In the business there was no central capital management process or budgeting process and that was instituted in first quarter of this year, which resulted in a pause in some a lot of the projects whether they be maintenance or discretionary just to assess them make sure. We were doing them in the most cost effective and efficient manner and at thought it through everything and to work.
Getting ready to launch those and then the pandemic sudden so we have maintained our maintenance capital and some discretionary but that those two quarters, just sort of suppressed what would be normal spending we're ramping up our capital spending we're not intending not to invest in the business or we are doing so and I think we will see some sustainable savings based on the Sun.
For life process, but we also want to make sure we bring our all our facilities and our fleet into where they need to be in terms of the investments. So we don't see this level of lower capital spend continuing we anticipate to bring it back to normal levels next year.
Okay, Great I suppose.
This concludes Alexander.
Oh excuse me. This concludes our question answer session knowledge, but.
Conference back over to Ms., Cindy Miller for closing remarks.
Thank you Nick and so we just like to close that by telling everyone. Thanks for listening to the call 'em. We appreciate your continued interest in Terra cycle and your shared excitement for our future. So thanks much everybody.
Conference is now concluded. Thank you for attending today's presentation you may now disconnect.