Q1 2021 GFL Environmental Inc Earnings Call

[music].

[noise] good morning, operator, I don't think we can hear Ya.

Thank you I.

No you couldn't hear me I apologize good morning, and welcome to the G. S L environmental first quarter earnings call.

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After today's presentation, there will be an opportunity to ask questions.

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Please note this event is being recorded.

I would now like to turn the conference over to Patrick The V. G founder and C. E O of G. F. L. Please go ahead.

Thank you in the morning, I would like the welcome everyone to today's call and thank you for joining US. This morning, we will be reviewing a results for the first quarter I am joined this morning by the people Ozier CFO, who will take the through our forward looking disclaimer before we get into the details.

Thank you Patrick and good morning, everyone and thank you for joining please note that we have filed the earnings press release, which includes important information. The press releases available on our web site also we have prepared a presentation of the company in this call that is also available on our website.

During this call will be making some forward looking statements within the meaning of applicable Canadian and U S securities laws, including statements regarding events or developments that we believe or anticipate may occur in the future. These forward looking statements are subject to a number of risks and uncertainties, including those set out on the filings with the Canadian the newer securities regulators.

Any forward looking statement is not of guarantee of future performance an actual results may differ materially from those expressed or implied in the forward looking statements. These.

These forward looking statements speak only as of today's date, and we do not assume any obligation to update the statements whether as a result of new information future events and developments or otherwise. This call will include the discussion of certain non I F or S measures of reconciliation of these non I of rest measures can be found in our filings with the Canadian in the U S Securities regulators.

I will now turn the call back over the Patrick we'll start off on page three of the presentation.

We achieved his growth despite severe weather events in February and in certain markets. The continued or on the case of Canada enhanced lockdown measures.

For context, nearly 40 per cent of our revenues are derived from Canada, where many major cities continue to have the most stringent COVID-19 business closure regulations in North America.

Our Q1 results reinforce are optimistic view of of the position to benefit from the reopening activities in these markets, which we anticipate will langer other geographies by three to six months.

As expected commodity values were up versus the comparable period of modestly above our guidance.

Although our strategic shift towards the fixed price process. The model reduces the impact from commodity volatility the rapidly changing pricing dynamics during the quarter provided of benefit to both revenues and margins.

This is of tailwind we expect to continue although the impact in queue to will be muted on the tougher of year over year comparison.

Consistent with prior comments or liquid and infrastructure business have been most impacted by COVID-19 related volume declines. The Q1 results were in line with our plan notwithstanding debt. The substantial majority of our revenue of these segments is derived from the slowest to reopen markets in our platform.

Based on our current visibility we expect that is reopening activities continue the growth in these segments will be substantial and yield significant operating leverage.

The integration of the 2020 acquisitions continue to progress on plan and the acquired businesses exceeded our expectation for the first quarter.

We announced the acquisition of tear appeared on March and as we sit on that call. We believe this transaction represents of unique opportunity to acquire of highly complimentary set of free cash flow accretive assets at a compelling valuation.

The regulatory review is proceeding is expected and we anticipate closing of the second half of the year of.

Although the tear up your transaction alone will result in a succeeding hour M&A upside opportunities for the year by nearly two times. We also closed six small talk in acquisitions during the quarter and another for after the quarter and.

Our pipeline remains active and we are confident of our ability to deliver on our M&A guidance, even when excluding dare appear on.

I'll now pass the call over to Luke will walk us through the details of the financial results and then I'll share some closing perspectives before we wrap up and turn it over to the questions.

Okay. So picking up on page four of the presentation revenue increased over 27% compared to the prior year period, driven by M&A contribution strong solid waste pricing and continued volume of improvements overall organic revenue grew sequentially from Q4, despite ongoing COVID-19 related headwinds net.

Net pricing with the head of plan at 4%, which was the sequential increase from what we saw on queue for our price and continues to be impacted by suppressed iceni volumes and rollover of negative CPI from 2020, but we should see these headwinds he's as we opening continues and in light of the inflationary environment.

Commodity prices added an incremental 70 basis points of revenue growth tied to the portion of a merc business that is not on the fixed price processing model.

The overall positive solid waste volume increase of 4% that Patrick of 0.4% of Patrick mentioned is just over 1.1 per cent. When we're moving the impact of the leap day on the prior period and continues to be attributable to the numerous processing contracts in Canada, which will lap in early queue to.

Excluding merv processing volumes solve the weights volumes were negative three 2% as compared to negative three seven per cent in queue for a 50 basis points sequential improvement and over 110 basis point improvement after accounting for the leap day.

The volume story remains of regional specific non mirc volumes in Canada were negative five 2% of negative 2% of the U S. The acceleration of of the recovery throughout the quarter was evident in although negative for the quarter as a whole we saw on non murph volume turned positive in March in both regions.

As Patrick mentioned the negative infrastructure. It in liquid volumes were in line with our expectations and despite continued restrictions and many of the key markets and the segments of the indication throughout March and April or that the volumes are continuing to recover.

2020, M&A contributed of just over $270 million of revenue during the quarter $10 million above our guidance and achieved despite the challenging winter weather across much of the legacy WC a footprint.

Strengthen the underlying acquired based businesses, coupled with significant incremental growth opportunities identified post acquisition have driven outperformance from these asset packages since we acquired them.

<unk> was negative 3% versus the prior period, where about $2 million revenue headwind versus our guide the.

The recent strengthening of the Canadian dollar against the U S dollar will yield the bigger impact in queue too.

The recall that for every one change in the F X Ray R. Annual revenues are impacted by of of $24 million.

The six acquisitions in the quarter another quarter force since quarter end for a total of 10 deals year to date for which we deployed about $150 million. We think these acquisitions will contribute approximately $60 million in annual revenue $5 million of which was recognized in the first quarter.

Net leverage at quarter end was slightly better than Q4, and we continue to have ample liquidity to support our growth goals, while delevering our balance sheet.

Finally, we continue to assess opportunities to reduce our overall cost of the boring with that I'll turn the call back over to Patrick for some closing remarks.

At the end of 2020, we said that the puzzle pieces have been assembled to form an ideal foundation to drive exceptional high quality growth over the next several years the.

Complementary therapy business and recent tuck in acquisitions further solidify that foundation.

Coupled with the constructive macro backdrop across pricing volumes in commodities that has further improved since the beginning of the year, we anticipate a clear path to exceeding our guidance for the year towards the end of the second quarter, we expect the gain better visibility on the timing of the tariff of your acquisition and any potential divestitures and therefore anticipated being.

In a position to provide accurately revised and increased guidance when we report our Q2 results.

I will now turn the call back over to the operator to open the line for Q&A.

We will now begin our question and answer session.

Ask the question you May Press Star then one on your telephone keypad. If you are using a speakerphone. Please pick up your handset before pressing the keys.

To withdraw your question you May Press Star then two at.

At this time, we will pause momentarily to assemble roster.

The first question comes from Tyler Brown with Raymond James. Please go ahead.

Good morning, guys. Good morning, Good morning, Hey, Patrick So I hear you on the commentary about Canada lagging, but the organic growth was up 9% there in solid waste I think you said the non murph volumes were down five in Canada. So are those murph volumes, adding something like 10 points to that organic growth number in Canada.

Yes, Tyler the aid Fluke I mean, that's about right for the quarter you have to remember we had.

<unk> Q2 of 2020, we had some significant success expanding that Canada fibrous platform into both western Canada and into Quebec, and so we've been benefiting from the last couple of quarters from that sort of net new processing volume. So we've been parsing. It out just because as you said about 9% positive volume in the quarter.

We didn't want to overshadow the underlying trend of the sort of broader business.

And your math is correct you have Canada at just above 5% negative now it's an improvement sequentially over Q4.

But it does show was the net sort of positive number because of the strength of that Merck processing volume and as I said in the prepared remarks that will lap in Q2, and then I'll stop parts of sort of parsing that out because you will have now like for like.

Okay, perfect and then I appreciate the $2 nine volume in March but on a little unclear. If that includes the merck volumes or not but now that you've likely close to April.

Can you give us any color on kind of how April trended.

So what I would say that out of the 209 does not include the Merck So it's like for like.

So you can really see that that that non Merck that was negative 3% for the quarter, but March was actually positive two nine so seeing the trajectory there and look April is going to be even better.

The trend and as the Guy that suggested would be as you start lapping those COVID-19 quarters youre going to see the improvement we had our initial guide Ed said Q2 would be in the mid single digits positive I think everything we're seeing based on Q1 is there's probably an opportunity to do a little bit better than that.

We're not going to come out and revise the guide as of today, but the indications that we're seeing are positive.

So I would say that and that's in the face of the continued.

Lockdowns in Canada so.

I mean, our expectation is.

When they.

They start opening up in more of a material way as we sort of come into the end of May is my guess from.

The announced lack of Lockdowns were supposed to come off round may 20th I mean, I think youre going to start to seeing.

<unk> volume increases from a lot of the businesses that we service.

Okay, Perfect and then my last one here.

I think you guys mentioned six small tuck ins, maybe four completed post the quarter.

The likely small, though that they don't look to be terribly small, but just any color on where those where are those around newly acquired assets or are those more around existing assets.

So.

Mixed bag.

When you look at it.

I think the lion's share of what we did was basically in solid waste.

But between sort of Missouri, Colorado, Alabama.

Go back.

On Ontario couple of in Western Canada.

One in Virginia.

And another one in North Carolina, So it's sort of a mixed bag all within the existing footprint of our operations today.

But definitely leveraging the <unk> assets.

Correct, Yes, yes, okay, alright, thank you guys.

Thanks Tyler.

The next question comes from the handful of Missouri with Jefferies. Please go ahead.

Great. Good morning, Thank you.

Just.

You had mentioned you know pieces of the puzzle are now in place for sustainable long term growth.

Could you maybe just talk about.

The upside to synergies of how those ramp through 2021.

And sort of worked.

We can expect sort of next year or just sort of the cadence of the synergy upside really.

Yes, so I think I mean, hamzah I think what youre seeing is.

I think from an integration perspective, particularly in the of the larger too I mean, we basically got through those on plan and unscathed without any pain.

They did get exactly what they were supposed to do on they're performing.

Truthfully at or above plan, which is great.

Particularly on the Wm Avs divestitures as a carve out there's always a bit of risk when you carve something out to make sure youre actually.

You bought when you are getting so.

I think from that perspective, those have gone well I think the integration has gone well I think.

Getting back to the base business and some of the value creation opportunity that we saw pre COVID-19 I think those have sort of bubbled up from the surface again really largely leveraging the platform.

Around procurement and obviously with pricing as we've gone back to sort of harmonize some of those books that sort of been brought back up to the surface now. So I think there's still opportunity as Luke said to continue driving solid price.

Not all price is created equally as we all know right I think it would get in the day.

Driving price of making sure it's fixed in order to get that incremental margin expansion is where we're focused.

So I think youre seeing that come through.

And then you sort of couple of that together with.

A very sort of deep and robust pipeline of opportunities and a bunch of the markets, where we recently acquired to drive incremental margin and profitability off the backs of a bunch of those.

Fixed costs facilities, such as transfer stations recycling facilities in landfills.

We're just going to continue driving buying businesses that we can continue tucking into those operations to drive incremental profitability of the so couple of that altogether again, I keep coming back to US I think we are in the early innings here and I think we're going to continue doing that and I think youre just kind of continued to see further expansion and then.

Put that together with.

I mean today were sitting in Canada Im sitting in Lockdown again.

I think this government is.

<unk> taken.

On a different approach of sort of managing the lockdowns I think but I've given the day it comes down to a failure to get vaccines and the failure of our health care system to be able to let me handle the minimum amount of people going into hospitals.

Under our socialistic type of healthcare system.

At the end of the day that is reversing and theyre, taking the steps that they need to and obviously vaccine just started flowing now in hospitalizations continue to decrease.

As we reopen there's going to be substantial upside from the liquid in the infrastructure business, obviously as things continue to reopen.

Scott.

Got it.

Just.

As you know there was a small secondary.

Recently, maybe you could just comment on your intentions.

Sort of what you view as the intrinsic value of the stock just any thoughts as to how youre thinking about the hard I know you have a lot of equity in the business.

Yeah. So.

I mean, I think I've mentioned this on calls before people have asked.

Obviously, we have of private equity sponsor that was in and I think from our perspective.

Very rare I would say from a private equity sponsor did not sell anything in the first.

12 months post going public we have said that they would probably sell something in the 30% of.

At the end of the day.

All of US as a group believes that the stock continues to be undervalued and this can potential upside and we've only been of public company for a year, but I think we're starting to demonstrate and continue to demonstrate our ability to execute on our plan and I think the view is from everybody that as long as we continue doing that we're going to get continue to be.

<unk> by the public markets and as we continue driving that agenda forward, we will get the multiple expansion that sort of we all deserve coupled together with the growth opportunities that we've articulated.

From my perspective items sell any stock.

Can I add.

Probably $800 million of equity sitting on the company today.

There will be.

I am considering my own personal tax perspective.

There is a potential of capital gains changes coming in there is potentially some re org that would require me to.

Paying probably somewhere in the neighborhood of of $50 million to $60 million tax bill to the benefit of myself for the years to come.

So I mean that is my only need for capital today. If in fact, we actually go ahead with the restructuring but.

I think where we sit today there is material upside given what we have.

What we are planning for the company.

Gotcha.

Last question and I'll turn it over is just clarification.

I guess, maybe if you could just comment on the liquid margins.

It seems like there were more positive of an unexpected and then in Canada.

What was March volume in Canada, I know you referenced two 9% positive I guess, that's the overall volume. Thank you.

Yes, Hamzah, it's Luke on terms of liquid if.

If you look at that sort of the 10 basis point overall expansion for the segment. What you really had in there was some strong organic margin expansion offset by the contribution of M&A, which came in at as sort of Decretive margin now really when you think about an 8% organic top line growth and the fact that theres still expanding margin organically really speaks.

Two the strength of the cost containment measures and productivity that's been put in place on that segment and now some of those costs will obviously come back as the volume does but we're really encouraged by that result in sea of real path the incremental operating leverage torque as the volume does come back on the on the basis of the of the Q1 experience.

In terms of Canada. The two nine that I referenced that was talking to solid waste. So were solid ways was negative $3 two for the quarter as a whole it was positive $2 nine looking at the liquid waste business like for like that 8% negative for the quarter was actually positive 2% in March so again.

Very encouraging trend line that you're seeing through that segment as well as the pace of reopening activity continues.

Great. Thank you.

Thanks, Tom Thanks, all of them.

The next question comes from Walter Sparc line with RBC capital markets. Please go ahead. Thanks.

Thanks, very much operator, good morning, everyone.

Good morning Walter.

I would like to ask on the free cash flow you had a very good first quarter number here on free cash flow most of that.

Seasonally most of the.

Expectations were that it would actually be of usage and you came in.

With the strong positive just curious because.

Net working capital can move around.

The quarter was the quarter performance here in your view kind of clean sustainable and we build on it from there or is there any timing influences that move maybe some of the net working capital expenditure into into a later quarter here on the year.

Yeah, Walter So what I would say is the result for the quarter was slightly ahead of our own internal expectations on the strength of some great sort of collection volumes.

The historical seasonal cadence when we were more predominantly focused in Canada, where you have larger swings is tempering and moderating as we've said and youre going to see.

Smaller swings in each quarter now with that.

Each one is going to continue to be of net use and then <unk> is the sort of the net recovery.

And so.

If you think of it for the year as a whole we continue to expect even in the face of the <unk>.

Modest incremental investment we had to make on the Wm Avs acquisition that rolled over from from Q4 into Q1, but still end the year sort of slightly positive. There as we've said we think we continue to have overall opportunities to improve working capital, but in light of the sort of uncertain dynamic in 2021 some of them.

The opportunities that likely materialize in 2022, I think it's fair to think that Q2 will look similar to Q1 and then those two quarters will reverse in Q3, and Q4, providing sources of net working capital and ending the year sort of slightly positive. The other piece on the free cash flow as we articulated in the opening remarks.

Just the interest cadence for this year. So you can see if you use $300 million as expected cash interest.

The only $40 million in Q1, that's going to ramp up to about $75 million in Q2 up to $100 million in Q3, and then the balance in Q4 and Thats just a function of some of the refinancing that happened in 2020 and the initial interest payments by the time you get out to 2022, you'll have a much more.

Approximately linear cadence across the quarters, except for the impact of any incremental financing we do from here on out.

And just my second question.

Related aspect.

Your guidance you mentioned what on refinancings.

Are you in a position that.

Perhaps youll have the ability into those refinancings in the coming quarter or is that something that goes out on the back half of the year and in your initial I think.

Can you repeat your expecting closing date on Terra purion, how that might have changed.

Yes, so I think when you.

The move said when we talked about giving updated guidance on the Q2 call I mean, I think there is.

At the same old pillars that again, we continue to focus on and refinancing is one of those will continue to be opportunistic.

On the refinancing so it is our expectation that that will get done.

At some point here in the future.

The M&A pieces again like the last call. We had at the end of the year. We had 13 under LOI. We closed 10 of those 13. The pipeline continues to build and I still think we are well positioned to do 30 of 35 like we've always said, we would do so well positioned on that obviously on the.

We will get more visibility over the next few months on the further re openings in Canada.

And then we will have very good clarity on the tariff on acquisition, but I don't think anything has changed from a timing perspective, I think it's <unk>.

Sometime between August and October that we'll be able to actually.

On execute on the closing of that so.

All of those I think provide pretty good tailwind in terms of how we're thinking about.

The future, but we will we will kick the can down the road a little bit in terms of.

Providing that guidance, but I think those are all of the pillars that we're focused on today to drive sort of incremental value here, yes, so what I'd say is like.

We don't intend on getting of the habit of updating guidance sort of every quarter.

The intention was the new Q2 and in light of all of those factors that Patrick spoke about the sort of external upside opportunities whether it be tariff your regular way M&A.

The.

The refinancing.

Et cetera, Q2 was going to be the natural timing to do that anyway in light of ex will have the visibility, but likely by then and that's part of the basis for the pausing until until we wanted to update.

The rental revenue that we've acquired thus far this year and again going back to the sort of formal guy by the time, we get the queue to we posed a few more we have visibility on therapy or I'll update the full in the are expected contribution from all net new M&A at that time.

Patrick maybe on the second of on the second question I mean I think.

Our focus has not been on anything larger I mean, we've been focused on the singles and doubles that are going to tuck in of the existing footprint in Canada and in the U S.

At this point with the platform we have.

That's where we're sort of laser focus because we think that's going to create the most equity value for us today and drive the highest sort of operational margin improvement within the existing business the leverage that platform. So I mean, it's a lot of what we've done in the past sort of $1 million to $10 million EBIT of businesses. So I think.

A little bit more work to get those done but at the end of the day I think given the pieces of the larger piece of the puzzle. We already have in place will continue just hitting the singles and doubles that are going to tuck in and integrate very nicely into the existing business.

Okay, obviously, obviously with.

We had an influx of calls recently where people were talking to.

Since bidens comments of.

Couple of weeks ago now on the increase in the capital gains rates, but I think that will drive people's behavior here over the next.

Six to eight months is my guess, so we're going to we're going to have the cherry pick the ones that on the most accretive to US again, our hands are sort of tied in terms of how much. We can do we're capable to do a lot of in the factory continues to run year, but.

Given what we're seeing today and how deep the pipeline is it's really going to be up to us the cherry pick the ones that are gonna be of the most of the value to us today.

Got it.

And on the liquid and the with restructure the volume is it really is it really just boils down to the.

Function of just reopening does that simple.

I think of that simple I mean, you look at.

I mean, just liquid in terms of what's essential and not essential and what people are doing.

Of our other public company peers in terms of the margins and organic number that they had put up so I think it's a testament to the business from the resiliency of it.

But it's.

It's very levered to the reopening here in Canada.

Thanks for that.

The thing maybe I'll ask one more question just on margin.

I'm thinking of solid waste, obviously very strong quarter.

A lot's happening against there's been M&A.

You spoke about procurement and pricing strategies.

Get the synergies coming in.

Against her.

The maybe ballpark in your opinion sort of what the upside opportunity is from here.

Of basis points over time.

Rough round numbers.

<unk>.

Yes look markets look I'd say, it's consistent with what we've been preaching the all the time that we think we can take over the short term this business of 28% blended plus margin for the consolidated business. The way you get there is bringing solid from what was of 30 upwards towards 32, you take liquid.

From low twenty's up to that mid to higher <unk> and you think soil from the high teens to the low Twenty's I mean, if you just bring soil and liquid back to where they historically were if you look for the quarter of the <unk>.

Margin, just bringing soil and liquid back to the historical margin profile would add another 100 basis points of consolidated margin. If you start leveraging that corporate bucket, which today includes all of the investment that we the made for becoming a public company as well as building out our shared services for our U S expansion, which is largely one time sort of fixed investment youll start leveraging that.

There's more margin that comes out of there and then if you take soil solid.

Every expansion point or basis point Youre doing there really impacts of the consolidated number so seeing that passed the 28% blended margins as we've talked about.

It is becoming clearer and clearer and our ability to get there the.

Path to get there is probably shortened from what originally was and we're not going to stop there we're going to keep going as Patrick said, I think densify and increasing asset utilization across the sort of footprint that we have today is going to be highly margin accretive and we see meaningful opportunities to do that both organically and inorganically and I think.

The proof will be in the continued expansion I mean, if you think about the LTM margin.

I mean, if you just go back to Q2 of last year LTM margins of the consolidated business was 24 five per cent.

The Q3 of 2020 that had gone out the sort of low 20 fives. We ended the year at sort of higher 25, LTM margins. So all of the business today of 26, 1%.

It's very you can clearly see the strategies are working and we continue to sort of keep pushing it forward from here through all of those levers that we continue to discuss.

Alright Thats helpful. Thanks for taking the questions guys appreciate it.

Thanks Mark.

The next question comes from Brian Butler with Stifel.

Please go ahead.

Good morning, Thanks for taking my questions.

Good morning, Brian.

Just you touched on this a little bit, but I was hoping to maybe put a little finer point when you look at the segments.

And you look at.

What business was disrupted in what's kind of recovery could you give a little colored by those segments, just kind of what what.

What's still I guess remaining out there like how much was disrupted and how much has come back and then as it comes back.

At pent up demand potentially kind of drive further strength beyond just the simple recovery.

Yes.

Broad question, but I mean.

I think you've seen from all of you.

I'll start with solid waste I mean, the U S continues to recover at a very good pace I mean, when you look at from a volume perspective apples to apples sort of negative sort of 1%. So I think that business is coming back and as further re openings happening in particular on office buildings Entertainment schools et cetera.

Even restaurants to of certain extent I was just going to drive incremental volume. So I think that as well on the path and there continues to be upside in the U S, which will continue to drive great results I mean solid waste in Canada again.

Major centers or lockdown secondary markets, a little bit less affected but again as Luc said volume sort of down negative 5% continues to be material.

On our view of material upside, which again when you think about the incrementals that come back on that volume loss of would be similar to what you saw on the U S.

And then on the liquid and the infrastructure side like we talked about hardest hit.

Leverage of the reopening I think youll see material margin expansion out of both of those that will be the sort of pre COVID-19 levels, which were substantially higher than where they sit today.

Once again, we will sort of put it in a blender is going to come up with significant opportunity for us to even turbocharge the numbers that youre seeing today. So I think that's what excites us today, the putting out. These these results today in the face of almost 40% of our revenue coming out of Canada.

That's levered to the reopening that hasnt happened yet.

I think of our best days are in front of us.

Plus.

Liquid it can be in that sort of high <unk>. So call. It 27, 28 and soil is going to comp those low 20 years of sort of 23 ish. If you apply those same capital intensities of that level and Youre seeing everything is sort of blending two of comparable with the 20% simplified sort of free cash flow profile. So.

I mean EBITDA, we have said before EBITDA is nice, but it's not the <unk> because of the meaningfully lower capital intensity of those businesses. We think there's a clear path that each of the segments can be a good and meaningful contributor to what we believe in time can become a leading free cash.

<unk> profile for the business as a whole.

Perfect. That's very helpful and one last one if I could send the then.

Just kind of can you touch on on maybe the ESC zone and then.

Maybe talk about what we could see maybe an update post obviously your first on yes are in thoughts on on those targets.

Yes, Brian what I'd say is we came out with our first report and I think we had a lot of great sort of color on a lot of the areas in which we've strived and continue to sort of focus our attention as it relates the ESG type matters. We have the team actively working now on really quantifying what the.

Sort of observable and quantifiable goals are going to be in.

We intend to come out with our best foot forward, I think where youre going to see us put out some goals that are industry leading.

And I think it's consistent with who we are and what we are I mean GFS.

Many of the ESG type initiatives have been embedded in our culture from the beginning and we're proud of that going to highlight that and we're going to.

Put our money were about the so to speak in the I think youre going to see some some pretty aggressive and impressive sort of lines in the sand being sort of drawn so we're working on on extra part and we'll be including some of those quantifiable goals.

Believe that schedule of the sort of come out.

In the next couple of quarters I think it's on.

The timing for that.

Great. Thank you very much.

Sure.

Thanks, Brian.

The next question is from Jerry Revich.

With Goldman Sachs. Please go ahead.

Yes, hi, good morning, and.

Congratulations on the strong results here.

I'm wondering if you could talk about the <unk>.

<unk> expansion over the course of the quarter.

Nearly 200 basis points of <unk>.

<unk> without the benefit of volume, but obviously March looked a lot better than February can you just talk about with the benefit of volumes how much margin expansion you folks saw in March.

Any.

Any way you can talk about how much of the leverage improves once you get a little bit of volumes in the system.

That'd be helpful.

Yes, Jerry so what I'd say is I mean January February and March on getting in the spring our business as a whole has significant degrees of seasonality that drive margin impacts and so it's difficult to just pie the expansion and contraction just to the volume of alone, but look what we said was coming into 2020.

One with our original guide we thought we could continue our successful operating leverage to drive an incremental 80 to 90 basis points of margin expansion.

Out with incremental or accelerated volume recovery I think theres high torque high incrementals on that extra volume and youre going to see outsized benefit to that and so when we come back in Q2 will better articulate the upside to that original sort of guide we think we can.

C at the margin line, because it's real if you think about the volume that's missing in the post collection.

In the.

Commercial collection, and our broader liquid and soil businesses I mean, it's very high incrementals on that because of the relatively sort of fixed cost nature of those operations.

Youll get hydro our guests the costs are coming back I mean today the.

Cost takeout that has happened today I think the goal is to have some of that disciplined stick. Obviously some of it is going to come back on some of it we want to come back I mean travel entertainment I think as a part of the business maybe it won't come back in the same extent to which it was before but our SG&A is benefiting from that today, we will give some of that back.

But I think it will be net net positive. So what I would say is the original guide anticipated sort of the 80 to 90 basis points of expansion.

And to the extent there is volume recovery in excess of what we had planned there's probably some upside available on that number and the quantum of that will come back to you. When we speak in Q2 and see where we think the full year will shake out.

Okay.

And then can you talk about the.

Margin expansion that Youre seeing on 2019 vintage acquisition so.

The.

The leases my perception of boats.

When you folks should be hitting your sweet spot in terms of the pricing initiatives on the cost out. So I'm wondering if you could comment on whether the pricing.

On margin improvement that Youre seeing on.

Those assets are.

<unk> at or above the company total in the quarter.

Yes, what I would say for 2019 vintage acquisitions, we actually had the benefit of the 2020 and low to accelerate a lot of the activities that would give rise to achieving the expected pro forma for all of those businesses right. If you think about the integration activities that could span.

The between six to 12 months and doing everything with the quiet periods of 2020, we reported a unique opportunity to I think accelerate a lot of that so I would say by and large I mean, a lot of those businesses are tuck ins that go into a market and by the time you get two years out and you've done incremental tuck ins the ability to track that one.

<unk> is somewhat lost but the market as a whole are exceeding our expectations across the board and so I think we're really seeing the benefit of all of the great work that was done in 2020 to position us to outperform now on the reopening.

And so I would say by and large there's not an acquisition or a specific market in our portfolio that is not sort of running at a better volume adjusted number than it was sort of in 2019, and we're really happy with that success.

Okay.

Lastly, landfill gas to the pipeline economics look pretty attractive on.

On paper I'm wondering if you could just talk about what opportunities you folks have to essentially monetize the.

Outlook for RIN prices.

How many additional plants could we be looking at across your network.

Over the next three to five years.

Yes.

Currently we have three to four opportunities.

To develop some new.

Plans from sort of the ground up in which were currently.

In discussions on exploring and then the big opportunity for us.

We've said we've entered into a bunch of different royalty agreements et cetera in the.

The past out of a bunch of a bunch of the legacy landfills and as those agreements come up for exploration.

The over the next three to five years theres going to be an opportunity to renegotiate.

Those agreements or develop.

New more state of the art type of collection systems to be able to drive incremental value of them. So.

There is upside I think like we said we are collecting the gas on most of our facilities today with the exception of those three of four projects that I just mentioned.

And that will play out sort of over the next three years, most likely and the repricing will take place over the next three to five years of those contracts come up the exploration but.

Theres meaningful material dollars.

Ren.

Credits continuing royalty agreements continue to stay where they are today.

We believe there is material upside probably in the tune of $25 million to $30 million over the next.

Three to five years.

Okay terrific I appreciate the discussion thanks.

Thanks Darren.

The next question comes from Luca <unk> with National Bank. Please go ahead.

Good morning.

Good morning.

So my question.

With regards to so earlier you mentioned between the 8% long term margin goal and you said it could be coming earlier than you expected. When you think of the new fine line for the company to reach that margin profile.

Yes, it's of Luca.

As of suggested we're going to come in Q2 with some more as one of the definitive views on a revised so of the outlook and guidance.

As I said the original plan for the current year was taking where we ended 2020 and adding sort of 80% 90 basis points, where we sit today. We think we can do better than that the exact sort of quantum of that will sort of update the group with whom we speak in Q2, and then thereafter, you can layer on the incremental outlook.

We provided for 2022 and 2023, so again not going to provide the updates today, but we think the path has been shortened and likely the goalpost has been sort of raised in the there's probably a net new number that we can be striving to achieve but we'll come back in Q2 and.

The people of the outlook for 2021 as well as then you can layer on thereafter.

Good. Thank you for the color on debt and one more in terms of.

The M&A picture. So do you foresee increased competition as the opening.

And do you think youll have to pay more for M&A in the future.

So we think we will have to pay more like from a valuation perspective.

Exactly like do you expect to pay higher multiples for your valuation.

Like what are your goals.

Are you willing to reconfigure inquiries in terms of regardless of the price or the streak of more to treat valuation M&A.

I mean, the Andrew the.

The interesting.

We all talk about multiples et cetera, but at the end of the day.

75% of these businesses that we're buying the sellers don't even know what EBITDA or what a multiple of these I mean, it's.

Generally when Jimmy and Bobby one for their business.

The heated and a true up to us the sort of back into the math.

I think valuations of materially changed on the small opportunities larger scale opportunities like we talked about continuing to stay on it sort of 10 to 12 times, but that's not where we're focused our focus is as sort of being in the sort of four to seven times range.

And we continue to see a significant amount of opportunity in that range. Hence the reason we did.

10, we have closed almost six acquisitions in Q1, another for post Q1 leverage really hasn't moved and that's just the testament to the to the fact that we continue finding opportunities.

Sort of.

Mark.

Leverage accretive multiple so I think.

I don't see a material change on that today I mean, I think what Youll see is you may see some guys speeding up to try and get a deal closed by December 31, because they are afraid of the capital gains change in 2022.

And my guess is we'll probably see that in Canada, because Canada at some point.

Over the next little while it's going to have to do something in order to pay for this one five trillion dollars of given the weight of people.

During the pandemic so.

I think it's going to be a very robust and strong M&A market for the the next few years to come here.

Good thank you.

Thanks.

Again, if you have a question. Please press Star then one.

And we have a question.

From Devin Dodge from BMO capital.

Go ahead.

Alright. Thanks, Good morning, guys. Good morning, good morning Devin.

Maybe it's been a long call here and maybe just one from me on the on labor.

The hearing some companies are starting to have some challenges hiring I'm just wondering what youre seeing across your markets and maybe what programs you have in place or are considering to help maybe navigate on potentially tight labor market.

Yes.

I mean, the tightest labor market. We saw was really in 2018. So I don't think were seeing anything any anything today anywhere near those levels I would say Canada has been.

Fairly stable and good obviously in all of the.

Unemployment levels are higher in Canada on.

Truthfully most people in Canada don't move on are happy with where they're working so turnover on Canada has been <unk> been very low and stable. There are some specific markets in the U S.

Where it has tightened up nothing to the point of anything that worries us today.

So I think we're okay, but again the day and a lot of the sunbelt markets.

We've just recently acquired I mean, there is there is a bit of of lag and I think as <unk>.

Further stimulus dollars continue to come out.

It's it's tightened up the labor market, but I think as that sort of runs its course by the summer I think youll see that loosen back up again.

But we're nowhere near the level that we saw on 2018 I think we're on the hospitality industry I think <unk> been sort of harder hit trying to get people back of work.

Just from an hourly wage perspective, typically a lot lower than what our employees make so we're not as affected but I think we're still sitting in a pretty good position today.

Okay. Good color I'll turn it over thank you.

Thanks, Tom.

This concludes our question and the answer session I would like to turn the conference back over to Patrick <unk> for any closing remarks. Thank.

Thank you everyone for joining us and we look forward to.

Speaking of everyone. After the Q2 results.

The good day.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Yeah.