Q2 2021 GFL Environmental Inc Earnings Call
Revenue by nearly 40% on a constant currency basis.
Adjusted EBITDA margin expanded 60 basis points and adjusted free cash flow more than doubled.
Thanks for the tireless dedication and capabilities of our more than 15000 employees. We were once again able to demonstrate the power of our business model and our ability to execute on.
And our stated growth strategy.
In terms of organic growth the quality and pricing you saw in Q1 continue to accelerate into the second quarter, where we saw solid waste pricing ahead of plan and 4.1% and crude residential pricing the recovery of price.
<unk> and commercial volume and strong price retention combined to yield this outcome.
We remain encouraged with the path to see more than offsetting rising cost inflation. So the underlying pricing opportunities, we see and the business. Additionally, the inflationary environment should provide a boost to the pricing we see on CPI linked contracts a benefit that we will realize as we rollover into 2022.
Solid waste volume growth was well ahead of expectations at 6.3% the markets are quicker to ease COVID-19 related restriction saw the greatest volume recoveries, so that being said, our Canadian business, which is subject to continued and in some cases enhance COVID-19 restrictions through most of Q2 saw a 5.5% revenue increase.
From non more processing volumes and outcome that we think bodes well for future periods when existing restrictions are lifted.
We're hopeful that Canada gets to such a stage soon but at this point and the year. We think the benefits will be realized primarily in 2022.
Commodity values once again provided a tailwind although as we've disclosed our sensitivity to price.
<unk> continues to decrease.
And for gas and a strategic shift for the fixed price processing model. Nonetheless commodities will continue to provide a benefit if prices remain at current values for the remainder of the year and we've updated our full year outlook on that basis, our liquid waste business showed significant recovery during the quarter growing organically.
Fluctuate and 14% as the markets and which we operate began to recover consistent with our guidance. We saw significant operating leverage associated with the volume recovery, our rigorous focus on quality of revenue and cost management drove nearly a 500 basis points EBITDA margin expansion over the prior period and further our progress towards the longer term.
Nearly profile, we expect for this segment.
Recall that our infrastructure and saw the remediation business posted positive organic growth and the second quarter of 2020 and the nature of the activity in that segment was the last the taper off at the onset of a pandemic.
And what we're now seeing is a bit of last stop loss the restart.
Margin has the recovery and the segment is right and the broader business by a quarter or 2.
We remain confident that the lag of nearly timing and that will delay the pent up demand and additional stimulus from infrastructure spending will drive volume recovery that we expect will benefit and for the periods to come.
In addition to organic growth the second quarter also saw us advance several.
Further our value creation initiatives.
We successfully refinanced our highest coupon bond and realized nearly $17 million of annual cash.
Cash interest savings and doing so well.
We sold $60 million of non core low low contribution assets and have identified several high contribution opportunities and through which we intend to deploy the.
Several of them and.
And finally, we continue to actually keeping on our M&A strategy.
In addition to substantially further and the regulatory process on the share of your acquisition, we acquired a small tuck ins and a new landfill during the quarter.
And we expect to close a similar number of transactions in Q3 and remain high.
Really optimistic and our ability to deploy and outsized amount of capital into M&A strategy and the back half of the year, considering the depth and quality of our pipeline.
The strong first half results, coupled with our confidence and the back half of the year are leading us to increase our full year expectations from our business.
Well walk through the details.
But when you boil that down on a constant currency basis, we are increasing our guidance for revenue and EBITDA by 4% to 5%.
We are increasing our adjusted free cash flow guidance by nearly 10%.
But perhaps the most relevant of all we are now guiding to and ended the year with and adjusted run rate free cash flow number of $610 million or better, which we think.
And I can talk to exceed the multiyear guidance, we laid out just 6 months ago.
And now we are still relatively new named from any of you, but this marks our sixth quarter as a public company.
But what we've been doing we drilled this quarter for a long time and the private markets setting expectations for the business and meeting or exceeding them.
We set off.
So quarterly calls, but we've assembled the pieces of puzzle that form the foundation capable of consistently producing exceptional high quality growth.
We believe that this quarter and resolved again demonstrates our ability to execute on this growth strategy I will now pass the call over to Luke who will walk us through the details of the financial results and then I'll share some closing perspectives before we.
To wrap up.
Thanks, Patrick I'll pick up on page 4 and the presentation revenue increased over 32% compared to the prior year period. This was driven by outperformance from the 2020, M&A strong solid waste pricing and meaningful volume improvements both sequentially and compared to the prior period.
Can see the trend and volume growth over the past.
And followers and the chart and the bottom left of the page and I'll circle back to the short and minute net.
And that solid waste pricing was 4.1%, which was better than what we saw on the prior comparable period, ending Q1, and this year as anticipated the recovery by C&I volume coupled with inflationary backdrop has continued to provide incremental price support for the year and provides us the confidence to forecast.
We were able to deliver at the high end of our pricing targets for the year as a whole resetting and CPI linked contracts, which tend to lag actual CPI movements should also provide broad based support the pricing levels over the next several quarters.
Comparable to what we reported and Q1 elevated commodity prices and increased revenue 80 basis points as compared to the.
That's it period.
The 6.3% positive solid waste volume increase was 5.1% when excluding the Maersk processing contract in Canada that have now lapped in Q2, excluding these contracts U S volumes were 60 basis points better than Canadian volumes, which while a positive data point for the U S. We believe also speaks to the underline.
The prior and strength of our Canadian business, considering we achieved these results and most major Canadian market and continued to be with pandemic related restrictions on activities throughout the second quarter.
Although Q3 has seen additional easing of Covid related measures key Canadian market, such as Toronto, continuing to things activity restriction, which will temper the pace of the volume recovery.
And while they remain in place.
Although the laggard and become longer than we had originally anticipated the evidence coming from our southern U S markets is further reinforced our view that when the restrictions are eventually lifted we will see a meaningful acceleration in volumes on.
From this point I would remind everyone that the majority of the revenue we derived from the fastest to open U S markets.
Underlying those and the sunbelt and certain pockets and the Midwest is coming from our 2020 acquisitions and the outperformance of these businesses is there from being presented as incremental contribution from M&A as opposed to additional volume growth.
And also just wanted to remind folks about the cadence of our volume growth over the past few quarters. So if you circle.
The volume trend and trying to bundle the lab I think it's important to highlight that we're just getting back to slightly above 2019 levels. The volume growth is more a function of the easy comps as opposed to real incremental economic activity growth, which we think is there, but not yet fully showing through and the numbers I highlight this to help provide context for our expectations.
We were only negative 8% from a low of Q2 last year and were actually positive by Q4 of last year. The low is that we're bouncing off are not nearly as low as what some of the others are experience. So as we talked about the guidance for the balance of the year I just wanted to remind that context.
Moving to liquid wave this segment showed tremendous growth during the quarter as COVID-19.
Related volume declines came back online.
The volume recovery was more pronounced and our U S business, although the Canadian business recovery was also impressive, particularly considering the continuation of the broad based pandemic restrictions.
And to our comments and recovery of solid waste volumes and Canada, we expect improving strength and the recovery of this segment is there.
And Canada continue to ease.
As Patrick mentioned, the negative infrastructure volumes were in line with our expectations and largely attributable to the tough prior period calm.
Mmk contributed approximately $288 million of revenue during the quarter about 16 million of which was from new 2021, M&A with the rollover from 2020 accounting for the balance which was above our guidance. Despite the FX headwind from the predominantly U S. Dollar denominated revenues of these assets.
We continued to identify significant incremental growth opportunities within these assets packages and remain confident and the ability to outperform the original pro forma expectations for these deals.
FX with negative 6.4% for the fire vs. The prior period and about $25 million revenue headwind vs guidance.
Recall that are FX impact is substantially all translational and net for everyone change and the FX right. Our annual revenues are impacted by approximately $24 million.
On page 5 you'll see segment results solid waste margins of 39% were 10 basis points ahead of the prior comparable period. Despite a 65 basis point headwind from recent M&A, although the net effect of elevated commodity pricing was the margin tailwind. This was more than offset by the impact of higher fuel prices and the strengthening of the Canadian dollar.
Excluding these macro factors, we saw strong pricing cost management and focus on productivity and assets utilization drive and 90 basis points of organic solid waste margin expansion. A result, we think is quite impressive when considering rising labor and input cost inflation and the delayed recovery as such costs and much of our CPI linked to revenue.
Bates.
Liquid waste margins increased 480 basis points substantially all of which was organic and demonstrated of the operating leverage and the segment. The ongoing volume recovery should provide support for better than mid twenties margins to continue through Q3 before the seasonal step down and queue for infrastructure and soil margins improved 640 basis points.
Q1, despite the ongoing impact of decreased volumes and the change and mix.
On page 6 you can see adjusted cash flow from operating activities and nearly 160 million.
This amount includes $63 million and proceeds from our assets sale.
Note that will inclusion of these proceeds seemed lopsided for the current quarter and tend to redeploy these dollars before the end of the year and therefore, the timing difference will be offset by years and excluding these proceeds adjusted free cash flow was $97 million more than doubled and prior year and ahead of our expectations from the strength of our operating results for the business and.
And you'd rigor around working capital management, and we continue to expect the working capital investment and the first half of the year to be recovered and the second half of the year safer and the impacts.
From the second half M&A.
As previously discussed we once again demonstrated our ability to reduce our weighted average cost of that Ah refunding financing are 8 and 5% notes during the quarter.
Repricing that U S dollars and $360 million from 8.5% to $4, 75% reduces annual interest costs by approximately $17 million, we continue to see opportunities for refinancing and will execute as opportunities present themselves.
We deployed approximately $200 million and to 15 acquisitions for the first 6 months of the year and almost another $100 million and to 5 additional tuck in subsequent to quarter and.
We think these acquisitions with contributed approximately $130.140 million and annual revenues and puts us well on our way to achieving the M&A targets. We later beginning of the year, even before considering the impact of Terror Pier, which we are on track to close by the end of the third quarter.
Quickly on page 7 net leverage a quarter and further improved and we continue to have ample liquidity support our growth goals, while delevering, our balance sheet and as I. Just said, we continue to assess opportunities to reduce the overall cost of borrowing.
On page 9 we've laid out our updated guidance and the form of a revenue bridge on the strength of the results and the first half of the year, we're increasing our guidance by 100 to 115 million attributable solid waste pricing and volume and assuming commodity prices remain and the current levels.
Specifically solid waste pricing goes to 4% the high end of our previous range and is always volume goes to the low twos, despite the lingering restrictions and Canada commodity that and incremental $20 million on top of the original guide and the outperformance of the 2020 and then as another $20 million can.
Virtually with the delays and Recommencement and activities were now expect and soil and infrastructure to be approximately $30 million less and our original guide again. We think this is entirely timing and and then the sector starts back up there will be meaningful volume gains interest that we're we're sitting today and would appear as if the majority of that benefit will be a 2022 and then as opposed to 2.
And 21.
We then have the expected contribution from 2021, M&A, which reflects our expectations for the businesses. We've required to date and assumes terror pure closes October 1st Ah date from which we now have a high degree of conviction.
$120 million to $150 million presented as contribution from net new M&A has netted the revenue divested as part of the assets day, we completed during this quarter.
That takes you to revenue of approximately 5.3 billion, which is presented on constant currency basis to what we presented our original guide the last step on that page normalizes for FX, reflecting the actual FX from the first 6 months of the year and assumption of a 125 FX right for the second half of the year.
From that revenue, we expect to generate EBIT of approximately.
1410, the high and have a margin range and adjusted cash flow of approximately $520 million or $530 million and the currency constant currency basis with our original guidance, reflecting a 10% increase over our original adjusted free cash flow guidance for the year.
So then lastly is page 10, and we think this pages and most relevant what we've done here is updated our expectations for 2021 exit run right. So if you start with the actual expected revenue and be realized and 2021. We then have the rolled over the M&A. We've already done so far and 2021 and this brings you to and exit run rate of $5 billion and 550 million.
So this is effectively what the run and I will look like if we don't do anything else for the remainder of the year.
At the beginning of the year related and incremental upside opportunities related to M&A refinancing and capital redeployment, excluding care appear with basically achieve half of our goals and these areas through the first 6 months.
Last step of $150 million represents the incremental expected contribution if we achieved the targets we laid out for and each of these areas by the end of the year and big do and exit run rate of 575 Oh.
From this revenue we expect to run rate adjusted EBITDA of 1545 and run rate adjusted free cash flow $610 million.
So while we're not currently updating our guidance for 2022 and 2023, we think this page should help set the stage. If you take the base business organic growth model of mid single digits at the top line mid to high single digits at adjusted EBITDA, and low double digits and adjusted free cash flow layer and some outside volume contributions that are expected.
And for 2022 from self funded tuck and M&A and continued refinancing we feel highly confident and our ability to exceed the multiyear growth targets, we laid out and just 6 months ago, we will formally provider of 2022 guidance on and subsequent call, but just wanted to provide the stepping stones as we know there have been a lot of moving pieces.
With that I will now turn the call back over to Patrick for some closing comments.
I would like to and a call today and with an update on our sustainability initiatives. We are continuing to develop any yeah. She gold and target total will disclose and next year and sustainability report.
And focus of our political will be our initiatives aimed at reducing avoiding GHT initiatives.
1 key area is your recyclables earlier this month, and we announced the formation of the resort should probably alliance and.
And this initiative force GFR at the forefront and the move to extend their produce responsibility, providing producers and what the solution and they need to drive higher resource recovery rates.
Another key focus on renewable energy, we have setup GFR renewables as our vehicles to unlock significant value in landfill gas to energy projects had 18 of our average probably landfills and while we have identified to date and to accelerate the conversion of all <unk>.
All and all of these trends and we are seeing this quarter and the opportunities. We see ahead of us I've never been more optimistic about the future of G. F L.
Now turn the call over to you off later to open up the line for Q&A.
We will now begin the question and answer session.
I ask a question you may textiles, and 1 and you catch 10 songs if you and you can speak and please pick up your headset is my passion and the keys to withdraw your question please textiles and.
And Kim at this time, it will pass non Kelly chest and the last day.
First question comes from.
And some Jeffrey please go ahead.
Good morning. Thank you could you maybe talk about direct secondly, how investors should pick up our free cash flow given the update and given the car and update for 2022 and 23 and then maybe just sky backpack through the index.
And what pieces from the time of the IPO as well.
Yeah.
And then I'll I'll turn and all that look like and their high level and each each.
Yes, the irony of this and last year at this time, we were defending and have a shortfall and looked at the bank and it had no.
Free cash flow and we were estimating 360 million for 2020th legalized and.
I think when you look today.
Oh, well you know realizing some arbitrary and certified 10 and 520 this year will probably should potential upside to that number and then you will watch forward and day.
And run right number like we've mentioned of the shakes tatty.
And all those.
Very good probability that we continue growing and was being attacked.
Double digit free cash will go from there and so I mean, you're looking at somewhere between.
675, and 700 for 2022 and then.
When you think about 2023, and you are going to be growing a double digit kick and from there. So I think.
Fairly conservatively and get you get free cash flow and <unk> 2023 day sort of the immediate hundreds and I think that.
She did you know what we had anticipated at the time of the I P O but.
The piece of the problem and continue following and tell your ticket you really what you want to.
Free casuals, what's driving the big guys.
Yeah, I would just add.
That the numbers, Patrick saying, it and sort of the official guidance for next year, but rather just the layout the operating model on our on our exit and run right and that's the math and that you get even before considering some of this incremental self help opportunities we've identified within the base business, which can be quite sort of meaningful.
So again I think we're at a very unique inflection point, where I'm gonna start leveraging some of the investment and the capital structure and you're just going to really see that conversion of what was as a percentage of revenue a mid to high single digits really quickly started approaching the lower than the mid teens and then.
Converge there similarly at the EBIT and line you can take what was a sort of high mid to high thirties free got EBIT conversion and the free cash flow is going to go to low forties, and then to high and I mean I think.
We're just going to keep laying out the building blocks of the folks understand because I think we're talking about a free cash flow CAGR and.
North of 20% and realize those and there's a lot of moving pieces and get there, but that's the story that we want folks to keep sort of focusing on and.
Because we believe that that's highly compelling.
That's.
That's great and then just the second question is just on and she I've traveled renewables could you and maybe talk about the strategy. There are you separating doctors just any brock talks from long.
Long term strategy there.
Yeah, So I mean.
Particularly over the course of the last 6 months and particularly what's the increase the value of the late and credits.
And you know what.
We have significant cubic feet of gas coming from our landfills and and.
Hello, and we've done a study on that's really over the last 6 months and sort of bubbled up for a lot of other companies and the industry and I think a little bit more mature than us and we had 18 landfills today that we have an opportunity.
And could basically make orangey.
When you think about that.
I just you know, we started and skate high level numbers, but I'm talking about now would be all in addition to.
Today, we have like 2 days when teaching about $175 million of gas and.
It could be sold today's rain pricing.
You know our perspective that cash.
Cash cash $75 million to $100 million, a free cash flow.
And you can sort of next couple of years, because well we were being cause we partner with some.
There's 2 companies who are in dialogue with today to build up its infrastructure and facilities.
Maybe it would be with a fairly minimal capex and I think the other thing we were doing.
And he was.
The.
Darwin value over 20 years.
And shine off take agreements and some others now that comes out and Ah.
Discount to where they are and you are currently trading at today, but it takes out a lot of volatility and out of there.
And values. So when we look at day, I think 175, and you're going to be some economic split with developers plus and you have a discounted back a little bit because we would enter and game.
Or a presale contracts for 20 years and off peak provider. So at the end of that we think there's probably $75 million to $100 million a free casual that comes back to us without not a lot of volatility. So it's a big opportunity and I'm also separating it out.
And you know there's been some recent transaction you out and you can sell and renewable fuel plaids and.
These business and they were trading at.
40 to 50 times EBITDA and.
And.
And from our perspective.
Yeah, it'll be a nice free casual generally, but hey, if it's only unlocked value because some of these other players that are in the business want to come in and payments and big checks to keep the bite of light that fuel.
<unk>, there's billions of dollars C and they're under our nose detaching and we just wanted to have that and the separate vehicle.
And then the other big benefit from and ESG story H.
And he developed these plants will be able to fuel 100 per cent of our vehicles will cash and we capture and all landfills, which we think is there is a great story as well and so.
Put all that together, we can gives me a very large opportunity.
And all added in order to tie and that will just fade out.
Sorry, just last question and like turn it over I I know you talked about and many of this year, but any thoughts us for the longer term pipeline you know specifically out of the private company revenue that's all.
You know everybody has their own estimates what that number is and your ex in Canada, but.
You have a sense of what percent of private company revenue Fitzgerald book of business today and.
And you know you can answer it however, you want and.
And and the U S a and Canada.
<unk>.
Yeah I mean.
From our perspective, we.
Chip today.
Yeah, I'm in a market and he was extremely active and you know I think.
We're fortunate and a few markets, where we become the acquirer of choice because some of those competitors.
Family businesses that fit.
We're watching sort of our culture and.
And can also affect from a perspective that give them and you'd be the length of the Doj processes that people have been going through.
And they tried to get deals approved.
I would like to some delays and and you know we were part of a media Wm transaction and you know what public sponsor a genius.
With the recent acquisitions and I think there's from style or is that a concern of our workshop it'll gains are going and and that's permission and getting well because some of the market.
We don't think we have a very difficult time getting to Doj and that's made us and acquire a choice for some of those businesses, but I think it will be and I will try dear, but I mean, when we look at our pipeline today.
You know over the net sort of 12.16 months I mean from from our perspective, there's really easily and now.
You know.
500 to a billion revenue that we can get our hands on you know.
Relatively seamlessly over and over that period.
And.
Great. Thank you so much.
Our next question comes from Michael Hoffman It please.
Please go ahead.
Thank you very much just a little bit and Ah, but Ah what's the quarterly contribution of tear up here for the fourth quarter. So we get that progression right.
Yeah, and some some Michael Moore.
Modeled and as of now is about 80% to $90 million of revenue and the reason that blame the arguably and larger range than normal is on the basis that with the reopening and Canada I think we're going to see a bit of a shift and the typical seasonality pattern that wanted to expect the delays. So there's a bit of a moving target there but it's.
Around that $80 million to $90 million at the top line is what we've included and keep in mind is at a lower margin than the blended what we underwrote the business as a whole just again, because the typical sort of seasonality pattern and Canada. So it's and the low twenties as opposed to that high funny that we expect from full 12 months and character.
That helps a lot. Thank you and then when you think about your comment on Canada, and it's sort of progressive reopening.
But you also have a seasonal issue.
Okay, and how do we think about being back to even 20th 19 levels and what's your sort of sense about the timing of that.
Relative to Kat.
Yeah, and then I think well.
Vaccination rates and and I think for reopening plan is plan for.
Stage and food September and November and you wanted to say that it really sporting events.
[noise] office ball games at school, and you should et cetera will change that and shop for a long period of time and and give you see you have all the guy and a table and protocols candidates now, Okay and you got to live with the virus.
They're gonna faint and retreat dependent November I mean.
We're getting pretty close to 2019 levels today is Luke mentioned earlier and the call. So I think we turn positive female and start by the end of the year and then suddenly going into 2022 will be back.
And to Prepandemic levels.
Okay and that helps too and then on the renewables business and then rent or at a little over $3 right now long term average and sort of a Buck 52 is the intention just sort of hedge down into that long term average and that's the that's the point you're not introducing another point of volatility and the model.
Yeah, I got from my perspective and.
Particularly if we want to lock in Pollock 60.
65% from that so we don't get volatility and 65% of the line and then the.
The other way and when would you go below who would have and.
Natural hedging total only because you can take and Florida that fuel to fuel our trucks and.
So we'd be Georgia, only 100% covered.
Okay.
Helps on that and then on the APR programs.
Can you talk a little bit.
And a unique issue relative to the United States, we do it at the state level I doubt it ever happens at a federal level. So what is the particular strength to G. F. L. Given this national rollout stewardship programs.
Buying and the the nonprofit what what what are all those combined to create as a natural within your natural strength.
Competitive advantage.
Yeah, and so if you look at it today, British Columbia with the first province to enacted.
And we currently manage that program for producers and for the province, and and you have a lot of experienced firstly.
And I, just think and Mr dealing with municipal curbside volume. So we're not talking about the ice tea and I checked out here.
And today and the producers take 50% of the cost for recycling and those materials that is moving to 100% and they are responsible for the actual collapsing podcasting and and municipalities actually has to opt out.
So I think people all day.
You know I think or act and beige given the amount of collection and contracts, we already have in Ontario.
And on together the processing facility here already.
And and comfortable together with the experienced and you have and B C. And then buying these you have to tell you, which actually has the day.
The regulatory reporting and compliance tool and can you put that altogether.
Very compelling offshore refers for producers and.
Given the day I tell him.
Moving away from a single model to a multiple pro model and all that.
We're gonna have to work together so.
You think that's working together and we will give us the rights moving at the tables and restructure all these contracts properly and utilizing our assets.
To the best of our abilities.
Okay.
And then within the context and the free cash flow outlook.
All of the numbers are giving her still sort of around the high thirties cash conversion of your EBITDA.
So what's the prospect of moving the conversion ratio as well not just the overall growth of it but I'm moving the conversion rates are back up into them.
Forties or better level.
Yeah, Michael I think naturally the.
The conversion improvement driven by the margin improvement that we're talking about has been and fall through but I think we're going to get the most work and and suddenly we've spoken about before is by leveraging that interest line right. So if you think about this sort of 300 million ish interest line. That's currently and my free cash flow walk pivoting and the next day.
Here I mean, we really they turned into the self funding model and you start leveraging that line and I think it's through that that it that that represents sort of mid single digits of our of our revenue today.
As you grow thereafter, you're going to really see that sort of number getting leverage off of that so as you said before the plan was from 2020 IPO year 2025, we thought we can take and a percentage of revenue up from high single digits, the sort of mid teens and as you roll that into the EBIT.
Conversion ratio and taking them.
Mid thirties, the high forties so.
And we think that we're demonstrating that and you're going to continue and see that but.
The capital structure component of it I think is a unique opportunity for us where we're at and are.
That's going to provide extra torque at that that conversion ratio, okay, and and to put that in context appears or 2% to 3% of revenues and is there is there interest expense you are higher than that and this is an absolute dollar reduction and it or and accelerated growth as a reds and therefore, the compound and for profit.
Well the ladder and the near term and then the former and the longer term right. As you as you get beyond what of 2023, and you start having and excess free cash flow and and that's what I think actually start reducing the quantum of dollars, but in the near term. We have this leveraging the fixed cost the fixed amount and.
Okay. That's.
That's great. Thank you for taking my question.
[noise] from Walmart and from.
B C capital markets. Please go ahead and.
And thanks, very much morning and lunch.
And then come back to the landfill the cash conversion Patrick.
Mentioned that you are at 1.
And right now of $170.975 million, but the ability to grow significantly beyond that can can you give us a little bit of what it would take to grow and what level. It could get up too and I think he said a modest capex spending a little bit more.
Elaboration on on on the capital required to get up to a higher run right on your land total gas conversion.
Yeah, So I tell me and what kind of today, there's what I shattered and laughter.
$175 million today in today's and pricing.
Give or take so it's probably some awesome few conservative on that day.
And she names as you know we were.
Perspective, and today, and what kind of joint develop them and they're all talking to develop them on our own and I think our time to realize those dollars. It should be quicker day with someone that knows how so we're going to give up some of the economics without feel if somebody else and a revenue sharing arrangement.
But if you can walk today today, you can sort of you know.
And some of these forward gas contracts and effectively hijacked the win.
Someone with you and $1.80 and $2. So you don't take a third of that off and turn around and you should.
Thank you how you get from somewhere between 75, and 100 million I think the total capex spend to do that.
Oh, a portion of it will be 125, 2 and 150 can use.
From number.
The interesting part of it and she had 2 entities vs hedgie, while we're contemplating doing.
Always take agreements.
And we will be shot and he's off take agreements with and investment grade utility and.
And we could get investment day bombs to basically finance 100 per cent and if you did 60, 65% of the I'll stick with them.
From and equity perspective, very minimal and navigate from and Iowa perspective, it's.
40, plus shipping and altogether, you should cancel anywhere today and.
And so that has got into what's going on and that's why I try to use the number of 75 to 100 over the next day to get you and interferes.
That's great and duck turn that into.
Non core operations you you you made a divestiture just recently.
Are there other divestitures that you could and deploy into some of your core areas and.
Frame out how much of non core B are you currently looking at our could possibly look at it and and and would Landfilled and cash conversion B. If it gets big enough and would you look at that as something to spin out.
And redeploy into some of your course, that's the or is that something you want to kind of keep and half.
From my perspective, I'm, a shareholder first my priority here to make mommy I am a single largest shareholder.
We kept a shepherd for that reason I mean, these renewable plain and like I said the youngest.
Reaching a wall and that's just hanging out from I was 40 made and ebay and that's gone public and a 2 day dollar volume, there's 1 recently and Canada and I think they have 7 or 8 billion of EBITDA and it's trading at a billion dollar value.
You know, we're going to and.
75 to 100 sitting in the area and you know I think.
If someone wants to pay I've seen all multiple billions of dollars you mean, and we're happy to take that money and I think we would make a lot of people are happy with what's your story and maybe some form I'm getting into and their their distribution, but that's all Walter and what are we.
Just keep it and you know, let me think he's going to do the training and 25 to 30 times free cash flow and you're all potential you could 23.
3 calls between the value.
With an extra long, so 1 way or another.
And you think it's gonna create significant value, whether they've kept internally or whether he no longer term.
All the lights Covid cause I did that gas too.
Someone that's.
Got a crazy multiple and their money and and the public markets.
And what are the the gas component and aside and just the broader redeployment of capital or non core at the beginning of the year. We said there was $50 million to $100 million a potential sort of assets sales to complete what we did and Q2.
$50 million U S that we sold what we've put in the incremental upside opportunities in terms of the guide is just that remaining 50, so saying that we still think theirs and this year $100 million and the non core that we're going to execute on and and take those dollars. This way to redeploy and the other higher growth and return and.
<unk>.
Virginia.
That's.
Yeah, and and she had conservative number as well so.
Probably see and do a little bit more than than what we put and the guide on that front and.
And it sounds like a good option I would like for sure I appreciate your time.
Thankful and thanks, mostly.
I guess the question comes from Kevin Chang from.
And just go ahead.
And thanks for taking my question.
And they are not officially adjusting of 2022 O 2023 targets.
And with my math is correct I think you are applying something with a low 2027% EBITDA margin out and 2023.
And the 2021 off day, which kind of gets it.
It's a 24% of all day or just just wondering how do you think of the cadence that's EBITDA margin expansion.
Over the coming years here.
Do you see a higher.
Upside relative deliberately fall.
6 months ago, and you put put up outlook initially.
Yeah, I think from our perspective, you know, we're taking the under under promise and.
Along with the Liberal approach and you know.
And I think when we talked about it at the time and the IP and I think we're probably a year ahead of plan on terms and margin expansion.
But.
Suddenly you know her and a plan is to continue expanding margins and and we will get move somewhere between 28 and 29% from.
And he knew log and sort of 2023.
And you can feel free to typing.
Kevin what I'd say is like the quantum of the margin expansion period over a period last year, we sort of unique.
Coming into this year the idea was to take it up to high 20 sixes.
And $26.7 and tried to explain and I think that the guy and I think you're right that could be a path and doing a little bit better than that which is and setting up next year.
I think what you'll see and the guide and we talk for 2022 is we're able to battle. These cost inflation this year without having the benefit of this the CPI recess right because again and that's really going to be a 2022 benefit. So we're eating it for the first 2 or 3 quarters of this year before we get the benefit that's going to likely.
Probably add even more so.
You are right and thinking about the original target is probably know a and accelerated.
The exact timing and new sort of goal post office, what it tastes stay tuned, but I think you're thinking about it and the right and the right context.
Okay.
Helpful and such.
As we sit here today.
Punching above our heads.
Schedule and as I mentioned, Patrick and can you just kind of update and when you think cash.
Cash taxes start flowing and to you and then and what what.
And what with accelerated free cash flow generation does that change your priorities.
And you pushed more of that and to emanate all day.
Leveraging become more of a priority with.
This excess free cash flow here, just just wanted to know how you think about the net.
I'll touch on the cash taxes quickly the Patrick speak to excess cash flow.
Considerations on the gas taxes and.
It's largely the growth and the us businesses, what's going to drive the.
The cash tax payments, starting and as of now and that sort of a little bit and 2024, and then you get into more of a full payer and 2025 and and a real full pair and 2026.
And that's absent continued strategies to mitigate that which were constantly evaluating and certainly the incremental deployment and capital to M&A helps with that so Ah Kevin's Your point I think yes on the base plan the.
Outperformance is accelerating that however accounts there is access outperformance and M&A deployment, which I think kind of provides a bit of a sort of buffer. So.
We continue to evaluate I think the holding the 2025 is the year still sort of holds true but know that we are actively engaged and continue to be as strategic there as possible and terms of what we do with the excess free cash flow Patrick and ensure you have sort of commentary around that.
Yeah, and I think from our perspective and like like we've always said.
And we're going to continue deploying capital income smart accreted M&A and we think while we are and are grown cycle and that's gonna continue to be you know.
Evelyn.
And the free cash or really starts building between 2083, and 2023, and I think and how you're gonna move to work and would you also gonna move to and sort of a dividend policy.
Let me when the <unk> come off and you know, we're gonna play and it's sort of.
Back to a normal day to them and some of those interest payments go away and then turn around and Cuddled together and what's I'd share buybacks at some point, but you know.
And I think.
A lot of M&A and a lot of great M&A that can still be done.
Significantly lower values and world trade and you had today, so I mean.
And not the mindset today to buy back our own stock and should never give me higher values and I could buy from high quality and I think privately day for any overtime that just gonna create a lot of valuable also and you've been doing this for 14 years and like I said, all I wanted to and it's taken.
Take my and.
And her day.
The ability and have equity and my option, but I have and continue just driving the value of those forward I mean, if you look at the the reach and I'll get plan that the annual signed up for I mean.
No 1 and getting anything until we know overstock clears 250, and then he has to receive $50 U S. So yeah that is our conviction around you know what we believe you you'll be equity value of each business is going which is you know almost 2 actuaries today. So we are.
Nearly and you sort of comfortable and the plan and we laid out and if you don't see from our perspective G. C D. Each and every 1 of your building blocks and and how are we going to get there I think it's been 6 quarters of us.
Exactly what we were gonna do and even at the time of the Ico wading through Colgate and where we are today you know, we'll just continue delivering and extra getting on that plan and.
And eventually we're going to fill up the boss with investors and you know and then it'll start driving going forward and getting this trading where we all believe and will be.
I appreciate you taking my question. Thank you very much.
7.
Our next question comes from Martin That's Awesome Scotiabank. Please go ahead.
And then you're wondering guys.
And that any.
Money and your sister or Footpaths, and maybe just going back and the renewable opportunity.
Yeah, and he just walk us through for the timeline sort of milestones and the last 4 times a day.
Developers are partners and just help us with that.
Yeah. So we're well along the line and I think the first and gave and change me can be shy and sort of in the next 4 weeks.
And then you know you're basically getting.
And sort of 15 and 16 months out the day.
And I'm just 1 of them to show you already built you just need to be modified because they've been used for co Gen and power and so I think free you know conceivably we could start seeing the legalization and some of the dollar's going into early 2020 team but.
And seen the real dollars as we get into later 2022 and starting in 2020.328.
2024.
Thanks.
And maybe we just the.
Clarification and the Capex.
And it sounds like gross and net for the year will sort of meadow to the same number if you can sort of spend all that money but.
And maybe just give us they they've just help and the guy through the Capex done for the year.
Yeah, so the you're right.
The proceeds from disposals are going to offset any incremental spend so if you think about the original guy and it was sort of a fight and number with the M&A. There's another sort of tend to maybe think of it as a net 525 to the extent we can redeploy the capital this year will be sort of doing so, but we're going to average out to a net number of <unk>.
25, and even months will only spend proceeds.
To bush investment above and beyond that and so the while the gross number could be north of that towards and so it's a 600 well we'll make sure the managed to that and net number of the 525 and it depended on how quickly we can deploy some of those capital and do a whole host of growth opportunities we've identified and.
And the existing base business and net new things like from the landfill gas and Patrick document.
Thanks for taking my question.
And next time.
Question comes from carrying and events and Goldman.
And please go ahead.
Hi, This is Adam on for Jerry Today. In addition to landfill gas you folks have a broad set of ESG opportunity. So just wondering if you could help me think about the annual capex associated with green initiatives and is it possible to break that out between landfill gas recycling and any other key initiatives.
Yeah.
We don't separately break out a bunch of art and yeah. She type initiatives that I'll get sort of modeled and Ah.
Thank you me and grow Capex for the year and that sort of kicking around 10%, but I think realistically. We're we're sort of sitting today and she will deploy anywhere around a gift given year roughly $50 million on recycling type initiatives.
A year ago was closer to real hungry, just because we had a large organic spelled out and a large recycling, but you need better than 50 today and it was probably a realistic number that we're using from.
And.
Cause all of those over the last number of years when the landfill gas and like all you can always said I think I've spent and they're gonna be somewhere between 125 and 150 to capturing I'd over the next.
24 months, but given these creative way to finance and what these.
And that's.
Frankly type bonds with these off each agreements and now from Iraq.
And your perspective it keeps you know your opinion from and IRR perspective, you know I don't think it will find something that companies.
And that are much sort of higher than that eternal opportunity.
Okay, Great and that's really helpful and and other solid waste peers have talked about gradually shifting their index price contracts to water and sewer trash away from traditional CPI and just 1.
If you could provide any color and to the make up of your index contracts and if you see that evolving from current levels.
Yeah, Adam and flu.
Yeah, what I would say is we welcome the shift but are very early days and our personal sort of participation and that so if you look today, we have roughly.
$800 million, most of which is and residential and you also have some and and Merck processing landfill and transfer that's tied to a CPI type index.
Very little day minimum.
I did 1 of the what I'll call better and disease like sewer water mean or utility or some of the others that the majors and the industry have been.
And converting too.
We are so.
Supportive of the change and think it does and better reflect the cost structure of the businesses, but we just see that as opportunity today, because we are still sort of pegged to the the old way, if you will of sort of CPI, but.
And that being said, we think even the CPI linked contracts are going to provide a very nice pick up from the next call at 46 quarters as those things sort of reset and I think the print and June and the U S was north of 5 and Canada sort of.
Mid threes and I think as we now get the reset a lot of what's happened in the back half of the year, we're going to enjoy that benefit billing.
The line, but I think longer term pivoting and migrating our portfolio of.
Index linked revenue to these higher index is is just an even larger opportunity and.
That that out there for us.
Great. Thank you very much.
And.
Our next question comes from 10 games and.
Securities. Please go ahead.
Okay. Thank you very much good morning.
I just want to go back on the question Patrick on your comments regarding and.
The change and revenue guidance and where some of that originated from that was that correct and understanding.
And the solid waste impact on guidance is primarily originating from from acquired businesses and and the assets and some built in particular.
No no no and a little May day.
Yeah, what we what we tried to break out there was the.
The pieces of the outperformance and and what we're saying and the base guide, we're taking up price before we said price was sort of going to be 3 and a half and and take that after the high end of the range. We're taking up volume before we said volume would be like self 1 now taking that episode of low twos and then the other.
Piece of volume is and the end and a bucket the rollover, but now saying the volume experienced and we have and that rollover M&A is greater than than thought so that's coming up again, but I know that sort of points and 2 points. So I think it is broad based across all of the buckets.
As opposed to saying the the new M&A the new M&A was that separate bucket. If you looked at the bridge.
So I think all of the revenue drivers are sort of coming up side commodities with the last 1 I didn't mention.
And and.
And the and the quantum net just such a good.
Okay. That's helpful. Thank you.
And then get and where you could you just talk a bit about what you're hearing from you.
Your construction project customers in particular in terms of of getting back on line or are there any notable and remaining impediments to returning to normal levels of activity and in the back half of the year again, notwithstanding I guess and.
And he retrenchment and Reopenings.
And.
And maybe and particularly the lower volume soil and mediation customers and a bit of and update there and you know that's continued to be slow here and in the second quarter.
Yeah, and so I think it's coming and I think everyone is highly encouraged final restrictions came on and and this is really Ontario business for Austin and it's not working.
And significantly GTA and I think most of those restrictions came off at the end of June and beginning of July people are now ramping back up too.
But they do take a few months to get these sites ramped up since Kevin and then.
Shanghai, So I'll I'll try and she doesn't work I think that looks at her and you will get the bulk of inches from.
And he will watch that and we're gonna get us for 2022, and I looked at the amount of contracts that you paid and the guys don't talk to you about going and Orange.
And he was August given and as far out and sort of earlier and next year I mean.
And some significant projects and I mean.
Tens of billions of dollars at the provincial government has.
Canvassing now and looking for work to be done so I'll watch can they come I just think.
Like we said it to the slogans to wind down and it's so slow as to sort of pick back up.
We know and visibility and and what's gonna be better and I think 2023 news is gonna be.
Very big ear fluids.
Yeah.
Okay. That's great, thanks, very much and congratulations and and get court.
Thank you. Thank you.
Our next test.
Miller Brown from rain and please.
Please go ahead.
And hey, good morning, guys Morningside and.
I got a call waiting right whenever I turn it over but he.
Calls been long here, but we've gone on slide 9 and I really appreciate it and I want to make sure that I have it so.
Incremental 110 to 115 and solid waste only 20 of that is from commodities and the rest is just kind of core.
Delta.
Yeah, that's right. So if you think about what we said at the beginning of the year year over year. The original guide provided plus 10 and commodity based on what we've seen throughout this year and now the expectation for the balance of the year, saying there would be another sort of plus 20 on commodity and again, while that's muted compared to what others may be sort of thing and you Gotta remember that.
For every every dollar the commodity goes up I guess sort of 40 cents of it back to the guy and so.
I am getting less of an impact and so there's $20 million macro commodity the rest is really outperformance on price and volume.
Okay and on the price and volume I'm, assuming that's largely a positive delta and the U S and I mean, it sounds like you have pretty reserved comments on Canada.
I mean I.
I just continued to average their comments on Canada, but the opening guidance is also reserved on Canada. So it is positive and both particularly on this sort of pricing moving both of those up and getting.
A higher number then and the original Guy, but yes, it's the U S business for which we are more have a better line of sight, because again, our Canadian government seems to be a little bit more uncertainty in terms of timing.
Yeah, Okay, and then so on the free cash and I just want to make sure I've got this because I'm a little confused so you booked and 50 million of assets sales and the quarter that is in your guide correct.
But $50 million is really just going to be and off separate incremental capital growth capital and we will redeploy so I have it in there today because by the time, they get the year and I'm, probably going to have redeployed those dollars and I wanted to get to that and net normalized.
Capex a 525, so by the end of the year. If I've spent 585, I've only done and spend that extra 60 by virtue of having those proceeds so it kind of creates a walking is for this quarter individually adopted out for this quarter, but no by the time and get the year and deployed it and therefore, its inclusion normalizes capex to that right 525.
Okay. That's that's helpful. So it's and normalizing non capex. So then if we just do that simple EBITDA free cash walk.
I'm assuming it's.
Against something like 1.4 of EBITDA, you've got 300 million or so of cash.
Capex of qualify fit you, a little bit more and and closer Postpose your and that's pretty much the walk.
Yeah, that's right working capital B sort of net neutral and you've got the cash interest and that 300, and you've got the capex and 5 and a quarter Pomiculture post closure and that sort of 55 range and the 8 to 10 for cash taxes, and you do that walk and you should get to the sort of 5 and 5 twang.
Okay and is I've come the balance sheet is it safe to assume that about half of the refis have been done and.
The other tranches will just he'll come as the called premium vs.
I'd say about.
2 thirds of the 2021 opportunity has been done and we anticipate being able to execute and the full opportunity and then the balance of the balance sheet becomes 2022.2023 opportunities.
Okay, Okay, all right and I appreciate it thanks.
Thanks.
Okay.
Our next question comes from.
And from National Bank.
Good morning, and thanks for taking my question.
Monitoring.
Back to to J F L renewables again.
You've got a very well developed organics business and I'm wondering are you are you looking at any opportunities for conversion of organics too Orangey with Andy systems, and if you can get some kind of on what the economics and that might.
[noise], Yeah I mean.
I'm not sure.
From the piano Digest your fund, particularly in North America, just because like.
And the consistency of the stream and I need to go and she goes digesters connect and run them. The most.
Economical and that's what.
And you'd sort of changing the other path for now and I mean, you know and and I mean, we all know and we sticking all day and extend from time to time and and.
Particularly Ontario, and and can only gets worse did you go into parts of the U S. So we're gonna stick with that and that we're not gonna work.
We're not we don't and what not into the thing and going into being able to digest what gives us anytime soon.
Alright, great, Thanks, and and on the last call you highlighted some royalty agreements on line. So.
Gas operation and set her up for negotiation and the next 3 to 5 years, how does that play and to the strategy do you do you buy those out or or do you need to.
Fire.
And.
And that's part of also share and some of the electrical contracting and what you. Just go all sort of you I wonder why and and telegraphed and and that number and.
You know, we think that'll happen relatively quickly as those aren't really money and itchy.
Opportunities for we actually utility so a lot of and we're happy to get out of them.
What do you mean city furniture.
Oh, Great and then just finally and can you give us some thoughts on the timing of investment that's going to be needed to convert to see and G vehicles.
And that'll photos and more and more cause for sure I mean, what word and looking at doing and sort of just rebalancing athletes moving diesel trucks and came markets where from existing area of the total have C. N G and then.
And he spent a maintenance capex deploying those and.
Areas, where just C. G makes more sense so and.
And I don't think you'll see and hear outsized capex complement interest better and it'll be a rebalancing and shifting of all those dollars gets bent.
Okay, well I'll leave it there and thank you very much.
Can I interest.
Okay, and if you have a question. Please press starts and 1 our next.
And at H E W and capital.
Hey, Patrick congratulations on a on a great quarter.
I think my question is more qualitative and nature. If you kind of look back you guys went public and early 2020.
At the depths of Covid I think.
And the challenge is taken the asset to market.
And look you guys that day to Covid extremely well.
And on exactly what you said with you got the 2 platforms.
Divesting assets Leverages coming down the refinance story is happening I mean, I would say that for the last year and a half you basically delivered on everything you. You said you would do and you know exceeded all kind of numerical expectations.
That being said.
You know the rest of the industry trade that at a substantially higher multiple and arguably you know has.
You know what.
I would argue and your unit economics on and incremental basis and from.
And all I see and all the rest and so you know you as an insider and the largest shareholder unlike the rest of your peer group.
Are faced with the cover.
Question or or kind of something to ask yourself, which is you know.
The public markets are resisting the way you deploy capital and even though it is far superior to your peer group and you traded and at a at a significant discount to your peer group I mean at what point people all day lepers to kind of tease out and about you know, obviously, you're concentrating shareholder base could make it easy and that's tapped the capital market to get and interest rates.
Obviously very very low.
This company get re L. P O could you do a sale leaseback on your real estate and that.
Obviously industrial real estate is very very low multiples I mean.
Way, we see you're trading at like almost 10 plus percent yield out here and a half and your real estate screening at 3 appears are trading at 3.
How do you think about you know kind of you know from from and owners perspective from and IRR perspective.
Types of libraries, you can pull and and and at what point do you say look this is this.
This is a waste of my time.
This is enough, we're not creating value fast from and equity perspective relative to the business performance.
And so there's a lot and I guess.
A lot of statements and the lecturing.
I think I'll take a stab and I think I think from our perspective.
I think.
And as a private company would never really got to focus on the mark of the equity bright and them to mark and the equity and whoever was in the walls and if.
And he be equity can total fun your plan and I think at this point that plan is largely self funded so dull.
And that being said, we didn't think there's very.
A very compelling opportunity.
And this name and Ah.
Relatively inexpensive causing.
Correlation to some of the other peers.
I think we've been at it for 6 quarters publicly policy and law longer time privately and you're all right now I do and the largest single shareholder and at the end of the day I'm Gonna keep being great store, the capital and when I get home last 14 years and you start with this company with.
$250000 and.
Posted up significantly over that period, and I think 1 way or another of the value will be unlocked.
Some point and.
Why don't I try with 1 another another M&A transaction and whether that you know and just continue executing on what we do best.
Unlock the volume overtime, and you know and we will.
Giving everybody the roadmap.
Oh and when she was already and like you said, you and walk out with a couple of years. He all day.
And I don't really want to focus on the corner I mean, you can't board, great businesses quarter to quarter, you've got to take.
3 to 4 year view.
Where are you going to do from a plant perspective, and a business perspective, and that's exactly what we're doing and.
And like I said, a year ago defending that the biggest had didn't have any cash flow and the equity worldview and all and I think we just put our head.
Down and really small and continue doing now and have grown cash flow and a 40% CAGR and.
And and we're saying warning and can continue growing free cash what a 15, 20% CAGR here for the next.
Free patchy or something.
And when you've given me are you know there is I have no interest and saying it other than saying, okay wait and see I mean, what's what's gonna happen and if you are.
And today I want somebody who don't Wanna off and they don't want me today, but I mean, all these little gifts from exactly what we're gonna do and and I think we have a history of beating expectations and that's my focus and like I said, 1 way or another and and they'll get you know what the removal and slide here and we found him and almost potential gas opportunity that could yield teal and significant amount of free cash flow and we are and what.
And are you from out of toilet, that's keeping the cash flow and trading at 225 to 30 country cash with all we tried out today.
Being locked up all you with someone else that's trading at 40 to 50 tax free cash flow and so.
We'll do that and we'll just keep doing the things that we think add value to all and equity.
Okay.
That's very helpful.
Last question so so.
Think about the Tfl historical strategy, you guys approached the waste management consolidation.
Somewhat differently than your peers, albeit better you by a very well run platform.
And and local and.
No you don't buy their trucks or do you sell their trucks you keep their trucks.
You do consolidation and you know it might be helpful for me and and perhaps others on the call to kind of.
Walk folks through you know.
Prototypical tucking transaction to your hub and spoke so $5.5 million.
And put it in your system.
Multiple and that is because at least from our understanding and and in fact, they might be helpful for others, but.
And when you buy a platform you'd find the structure, but when brightens things and plug them into your roots. There there are substantial capex savings and substantial TNA state and so I mean, it might be helpful for me and and others to kind of city and we'll pay for everybody.
5 or 6 times EBITDA, it's a really should think about them as a multiple of cash flow and bit. So it might be helpful. Just to kind of lay out how that works because it feels like that's where this business is dull and gotten those 2 big.
Platform and so the vast majority of your time zone.
Bedroom and kind of emblematic transaction.
Yeah cause I would say, it's no different and Canada and look at the margin and throw a viable tapping and Canada, Canada was a little twenties margin business today and high twenties margin day minutes from now that have and as we built out the platform across Canada, and you build up to the platform you'd get all we asked G&A requirements, the operating facilities and yeah.
Teams and he gets the market and the flow different and we're doing now and you actually and many much and what we do and you know I'd say, we have a lot of the great piece of your total puzzle already in place.
Haven't and amazing and fixed facility and fish.
Cost and he said now and when you're quality smaller collection only business days. So we can talk into our existing geography and utilize that fixed cost base and utilize both post collection operations and I'll transfer stations recycling facilities and landfills.
Become Holly and creaking.
And and when you can put them on those those routes on the back of your joking around and so obviously, you're eliminating a significant amount of capex and.
And you're just increasing revenue on your existing book of business, that's drive higher margins and drive high and free cash flow margins and and that's what we've been doing for 14 years, and that's why our margins and brown from high teens to.
<unk> <unk> 20, and she approaching 30 right and.
And from the solid waste business and excess of 30 so.
And that can be and will continue and you won't deviate from that strategy.
You know and we.
Why not Allentown interest you know the lion and even move strategy and the number of opportunities. We've acquired this year 20 blocks if you want.
The relative each line again tiny and.
And you know we.
Think over time bold July the most valued directly.
Sure and and and how do you think about Capex as a percentage of sales from where we are now and where do you think it could be and 5 years. I mean, if you continue to execute on this I mean do you I mean, you're Catholic church elders come down a lot and it could be and 5 years.
Yeah. I mean, we were early days were 15% and you know look today and it's.
And 10 minutes to 11 Zip code.
There goes would you keep going from there I think.
Cause they couldn't get the 9 to 10 sure I need just depends where we are and the grown cycle and how we want to think about our basements force Rogers and thanks Yeah.
Right and say now when you look back and Tigers and looks a prospectus capex and we haven't had to make those investments has come down and the person.
Senator deal railroading.
Yeah, I mean look I'll leave you with it that that to me is the most exciting part of this story.
That you know, obviously, you're thinking about it as a business owner and you've got to buy these good platforms and that's why you historical and placed firm multiples for these big platforms, but I mean, what you do is you get this great Foundation and you bring and these little guys and you don't duplicate the trucks and you get share procurement and made it feels like you think about where we are in the cycle with these 2 platforms.
And the these deals that you are buying and 4 or 5.6 times EBITDA multiple of EBIT is considerably lower so.
And that that's the most exciting part of the story. So I look forward to seeing and and thank you again for all the hard work and a great quarter.
Alright, and thank you so much.
This concludes the question and answer session I.
And I'd like to kind of conference back every day Patrick.
He for closing remarks.
Thank you, everyone and and we look forward to speaking to report a Q T results. Thank you.
This conference has now concluded. Thank you for attending present cash you may now disconnect.