Q4 2021 Waste Connections Inc Earnings Call

Please standby the conference will begin momentarily we thank you for your patience and I say you. Please remain on the line.

Speaker 1: Please stand by. The conference will begin momentarily. We thank you for your patience and ask that you please remain on the line.

Okay.

Speaker 2: B bunker

[music].

Okay.

Okay.

Speaker 1: Greetings and welcome to the Waste Connections fourth quarter 2021 earnings conference call.

Greetings and welcome to the waste connections fourth quarter 2021 earnings conference call.

During the presentation, all participants will be in a listen only mode.

Speaker 1: During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question and answer session.

Afterwards, we will conduct a question and answer session.

Speaker 1: At that time, if you have a question, please press the 1 followed by the 4 on your telephone.

At that time, if you have a question. Please press the one followed by the four on your telephone.

Speaker 1: If at any time during the conference you need to reach an operator, please press star zero.

At any time during the conference you need to reach an operator, Please press star zero.

As a reminder, this conference is being recorded Thursday February 17th 2022.

Speaker 1: As a reminder, this conference is being recorded Thursday, February 17, 2020.

I would now like to turn the conference over to Worthing, Jackman President and CEO . Please go ahead.

Speaker 1: I would now like to turn the conference over to Worthing Jackman, President and CEO . Please go ahead.

Thank you operator and good morning.

I'd like to welcome everyone to this conference call to discuss fourth quarter results and our outlook for both the first quarter and full year 2022.

Speaker 3: I'd like to welcome everyone to this conference call to discuss fourth quarter results. In our outlook for both the 1st quarter and full year 2022. I'm joined this morning by Mary and Whitney.

This morning by Mary Anne Whitney our CFO .

Speaker 3: As noted in our earnings release, 2021 ended on a high note, as strong solid waste organic growth and acquisition activity, along with continuing underlying margin expansion, drove Q4 financial results once again above expectations.

As noted in our earnings release 2021 ended on a high note.

Strong solid waste organic growth and acquisition activity, along with continuing underlying margin expansion drove Q4 financial results once again above expectations.

Speaker 3: Acquisition activity accelerated in the fourth quarter, resulting in approximately $400 million in acquired annualized revenues in 2021 and setting up acquisition contribution approaching 6% in 2022, including transactions completed year-to-date.

Acquisition activity accelerated in the fourth quarter, resulting in approximately $400 million in acquired annualized revenues in 2021, and setting up acquisition contribution approaching 6% in 2022, including transactions completed year to date.

Speaker 3: Along with solid waste price and growth of about 6.5%, this already positions us for double-digit percentage growth in revenue, adjusted EBITDA, and adjusted free cash flow in 2022.

Along with solid waste price and growth of about six 5%. This already positions us for double digit percentage growth in revenue adjusted EBITDA and adjusted free cash flow in 2022.

Speaker 3: Put simply, 2021 is a reflection of how an intentional culture of commitment and accountability to all stakeholders enabled us to excel in a challenging operating environment, overcome inflationary pressures and supply chain issues, execute our growth strategy, expand margins, support employee health and welfare, and position the company well for 2022 and beyond.

Put simply 2021 is a reflection of how an intentional culture of commitment and accountability to all stakeholders enabled us to excel in a challenging operating environment overcome inflationary pressures that supply chain issues execute our growth strategy expand margins support employee health and welfare and positioned the company.

Well for 2022 and beyond.

Speaker 3: Before we get into much more detail, let me turn the call over to Mary Ann for our forward-looking disclaimer and other housekeeping items.

Before we get into much more detail, let me turn the call over to Mary Anne for our forward looking disclaimer and other housekeeping items. Thank.

Speaker 4: Thank you, Worthing, and good morning. The discussion during today's call includes forward-looking statements made pursuant to the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, including forward-looking information within the meaning of applicable Canadian securities laws. Actual results could differ materially from those made in such forward-looking statements due to various risks and uncertainties.

Thank you Worthing and good morning, the discussion during today's call includes forward looking statements made pursuant to the safe Harbor provisions of the U S. Private Securities Litigation Reform Act of 1095, including forward looking information within the meaning of applicable Canadian Securities laws.

Actual results could differ materially from those made in such forward looking statements due to various risks and uncertainties.

Speaker 4: Factors that could cause actual results to differ are discussed both in the cautionary statement included in our February 16th earnings release and in greater detail in Waste Connections filings to the U.S. Securities and Exchange Commission and the Securities Commission's or similar regulatory authorities in Canada.

That could cause actual results to differ are discussed both in the cautionary statement included in our February 16th earnings release and in greater detail in waste connections filings with the U S Securities and Exchange Commission and the securities commissions or similar regulatory authorities in Canada.

Speaker 4: You should not place undue reliance on forward-looking statements, as there may be additional risks of which we are not presently aware or that we currently believe are immaterial, which could have an adverse impact on our business.

You should not place undue reliance on forward looking statements as there may be additional risks of which we are not presently aware or that we can.

Currently believe are immaterial, which could have an adverse impact on our business, we make no commitment to revise or update any forward looking statements in order to reflect events or circumstances that may change after today's date.

Speaker 4: We make no commitment to revise or update any forward-looking statements in order to reflect events or circumstances that may change after today's date.

Speaker 4: On the call, we will discuss non-GAAP measures such as adjusted EBITDA, adjusted net income attributable to waste connections on both a dollar basis and per diluted share, and adjusted free cash flow. Please refer to our earnings releases for a reconciliation of such non-GAAP measures to the most comparable GAAP measures.

On the call, we will discuss non-GAAP measures such as adjusted EBITDA adjusted net income attributable to waste connections on both a dollar basis and per diluted share and adjusted free cash flow. Please refer to our earnings release for a reconciliation of such non-GAAP measures to the most comparable GAAP measures.

Speaker 4: Management uses certain non-GAAP measures to evaluate and monitor the ongoing financial performance of our operations. Other companies may calculate these non-GAAP measures differently.

Management uses certain non-GAAP measures to evaluate and monitor the ongoing financial performance of our operations. Other companies may calculate these non-GAAP measures differently.

Speaker 4: I will now turn the call back over to you, Morning. Thank you, Marianne.

I will now turn the call back over to where they think.

Mary Anne.

Speaker 3: We're extremely pleased with our strong operating and financial performance in Q4 and throughout 2021 as we manage through the pandemic and related impacts with an intentional approach to strategy, culture, execution, and value creation.

We're extremely pleased with our strong operating and financial performance in Q4 and throughout 2021, as we manage through the pandemic and related impacts with an intentional approach to strategy culture execution and value creation.

Speaker 3: Our proactive approach to pricing through labor pressures, accelerating capital expenditures through supply chain constraints, and maintaining our focus on servicing our customers drove record performance in 2021 and positioned us for another outsized year of revenue, adjusted EBITDA, and adjusted free cash flow growth in 2022.

Our proactive approach to pricing through labor pressures accelerating capital expenditures through supply chain constraints and maintaining our focus on servicing our customers drove record performance in 2021 and positions us for another outsized year revenue adjusted EBITDA and adjusted free cash flow growth in 2022.

We often highlight the importance of culture in driving differentiated results.

Speaker 3: We often highlight the importance of culture in driving differentiated results, and our results are emblematic of that purposeful culture in action.

Our results are emblematic of the purposeful culture in action.

Speaker 3: Our culture guided our response from the onset of the pandemic as we focused on reducing employee concerns regarding health, welfare, and family obligations.

Our culture guided our response from the onset of the pandemic as we focused on reducing employee concerns regarding health welfare and family obligations.

Speaker 3: To date, that investment totals over $50 million, primarily focused on our frontline employees, including $10 million during the recent Omicron surge in January .

To date that investment totals over $50 million, primarily focused on our frontline employees.

<unk> $10 million during the recent omicron surge in January .

Speaker 3: when we reinstituted both paid leave for COVID-19 related absences and supplemental wages in recognition of frontline efforts to honor our service commitments during an extremely tough operating environment.

When <unk> when we reinstituted, both paid leave for COVID-19 related absences, and supplemental wages and recognition of frontline efforts.

And our service commitments during an extremely tough operating environment.

Speaker 3: That intentional focus on execution also drove continuous improvement in safety in 2021.

That intentional focus on execution also drove continuous improvement in safety in 2021.

Speaker 3: As we not only maintain the 12% gains we achieved in safety related incident rates during 2020, but drove continued improvement in spite of reopening activity. During 2021, over 55% of our operating locations either posted 0 safety related incidents or year over year improvement.

As we not only maintain the 12% gains we achieved in safety related incident rates during 2020, but drove continued improvement in spite of reopening activity.

During 2021 over 55% of our operating locations either posted zero safety related incidents or year over year improvements in our total recorded injury rate and cost of risk as a percentage of revenue remained well below industry averages.

Speaker 3: and our total recorded injury rate and cost of risk as a percentage of revenue remained well below industry average.

We also delivered 5% solid waste price in 2021 100 basis points above our initial outlook as we recognize and address the need for incremental price throughout the year to help offset inflationary pressures.

Speaker 3: We also delivered 5% solid waste price in 2021, 100 basis points above our initial outlook as we recognize and address the need for incremental price throughout the year to help offset inflationary pressure.

Speaker 3: Adjusted EBITDA margin expanded each quarter, excluding the impact of acquisitions, and it was up 70 basis points for the full year, even including the impact of acquisitions.

Adjusted EBITDA margin expanded each quarter, excluding the impact of acquisitions and it was up 70 basis points for the full year, even including the impact of acquisitions.

Moreover, we're already set up for pricing of about six 5% in 2022, and perhaps ultimately approaching 7%.

Speaker 3: Moreover, we're already set up for pricing of about 6.5% in 2022 and perhaps ultimately approaching 7% as we recognize the realities of continued elevated inflation rates, which informs our outlook for 2022.

As we recognize the realities of continued elevated inflation rates, which informs our outlook for 2022.

Speaker 3: In spite of inflationary pressures and a 25% year-over-year increase in CapEx in 2021, adjusted free cash flow increased 20% and exceeded $1 billion, with a conversion rate of over 52% of adjusted EBITDA.

In spite of inflationary pressures and a 25% year over year increase in Capex in 2021, adjusted free cash flow increased 20% and exceeded a $1 billion.

With a conversion rate of over 52% of adjusted EBITDA.

Speaker 3: We are positioned for similar strong conversion and continuing double-digit free cash flow growth again in 2022.

We are positioned for similar strong conversion and continuing double digit free cash flow growth again in 2022.

We continue to reinvest in and grow our business successfully accelerating fleet and equipment purchases in spite of macro supply chain issues.

Speaker 3: successfully accelerating fleet and equipment purchases in spite of macro supply chain issues. Looking ahead, our 2022 outlook includes CapEx up another 14 percent to $850 million, including $100 million for new landfill gas and resource recovery facilities.

Looking ahead, our 2022 outlook includes capex up another 14% to.

$850 million.

Including $100 million of new landfill gas resource recovery facilities.

Consistent with our priorities identified in our sustainability report. These investments include two greenfield recycling facilities in existing markets and renewable gas projects at two of our landfills all projected to be operational in late 2023.

Speaker 3: Consistent with the priorities identified in our sustainability report, these investments include two greenfield recycling facilities in existing markets and renewable gas projects at two of our landfills, all projected to be operational in late 2023.

At approximately $150 million in total capital outlays over two years. These are strategic investments with attractive paybacks, even at more normalized values for recovered resources.

Speaker 3: At approximately $150 million in total capital outlays over two years, these are strategic investments with attractive paybacks, even at more normalized values, for recovered resources.

Speaker 3: As we have consistently emphasized in our approach to ESG, these projects are an integral part of our business and are consistent with our focus on value creation.

As we have consistently emphasized in our approach to ESG. These projects are integral part of our business and are consistent with our focus on value creation.

Speaker 3: Looking specifically at the two renewable gas facilities that are landfills, these projects are part of a group of 15 to 20 projects in various stages of development and expected to be completed over the next 10 to 15 years.

Looking specifically at the two renewable gas facilities at our landfills. These.

These projects are part of a group of 15% to 20 projects in various stages of development and expect it to be completed over the next 10 to 15 years.

With third party partners involved in about two thirds of these opportunities and waste connections owning the remainder.

Speaker 3: with third-party partners involved in about two-thirds of these opportunities and Waste Connections owning the remainder.

Looking next at acquisitions following four years of above average activity 2021, once again stood out for the pace and magnitude of activity, which accelerated at year end is expected to drive another outsized year.

Speaker 3: Looking next at acquisitions, following four years of above-average activity, 2021 once again stood out for the pace and magnitude of activity, which accelerated at year-end as expected to drive another outsized year.

Speaker 3: We completed over 30 acquisitions, all in solid waste, and spread across our geographic footprint in both franchise and new competitive markets, and including a number of tuck-ins to existing operations.

We completed over 30 acquisitions all in solid waste.

And spread across our geographic footprint in both franchise that new competitive markets and including a number of tuck ins to existing operations.

Speaker 3: We continue to be selective about the markets we pursue, the risk profiles we accept, and the valuations we determine to be appropriate.

We continue to be selective about the markets, we pursue the risk profiles, we accept and the valuations that we determined to be appropriate.

Speaker 3: In total, we acquired approximately $400 million in annualized revenue in 2021, and we've closed another $100 million annualized revenue year-to-date, providing 2022 acquisition contribution of about $350 million in revenue, or about 6% from deals already completed.

In total we acquired approximately $400 million in annualized revenue in 2021, and we've closed another $100 million annualized revenue year to date.

Providing 2022 acquisition contribution of about $350 million in revenue or about 6% from deals already completed.

This strong start to the year, along with continued elevated acquisition dialogue.

Speaker 3: This strong start to the year, along with continued elevated acquisition dialogue, potentially sets up 2022 for another outsized year of activity.

Potentially sets up 2022 for another outsized year of activity.

In spite of acquisition outlays of over $1 billion in almost doubling our return of capital to shareholders in 2021.

Speaker 3: In spite of acquisition outlays of over $1 billion and almost doubling our return of capital to shareholders in 2021, our leverage remained essentially flat at about 2.4 times net debt to EBITDA.

Our leverage remained essentially flat at.

Two four times net debt to EBITDA.

We remain well positioned for continuing elevated levels of investment in our solid waste growth strategy, whether via organic growth.

Speaker 3: We remain well positioned for continuing elevated levels of investment in our solid waste growth strategy, whether via organic growth, new resource recovery projects, or solid waste acquisition.

Resource recovery projects or solid waste acquisitions.

Speaker 3: It's an all-of-the-above approach with differentiated returns, not one with tradeoffs, that drives continuing long-term double-digit free cash flow per share growth.

It's in all of the above approach with differentiated returns.

One of the tradeoffs that drives continuing long term double digit free cash flow per share growth.

2021 marked our 18th consecutive year of positive total shareholder returns and we returned $560 million to shareholders through dividends and opportunistic share repurchases, including.

Speaker 3: 2021 marked our 18th consecutive year of positive total shareholder returns, and we returned $560 million to shareholders through dividends and opportunistic share repurchases.

Speaker 3: including about $350 million of shares repurchased in early and late 2021. In addition, we've already repurchased another $425 million of shares in 2022.

Including about $350 million of shares million of shares repurchased in early and late 2021.

In addition, we've already repurchased another $425 million of shares in 2022.

Now I'd like to pass the call to Mary Anne to review more in depth the financial highlights of the fourth quarter and provide a detailed outlook for Q1 and our full year 2022.

Speaker 3: Now I'd like to pass the call to Mary Ann to review more in-depth the financial highlights of the fourth quarter and provide a detailed outlook for Q1 and our full year 2022. I will then wrap up before heading into Q&A.

I'll, then wrap up before heading into Q&A.

Thank you Worthing.

Speaker 4: Thank you, Worthing. In the fourth quarter, revenue was $1.624 billion, about $44 million above our outlook, and up $226 million, or 16% year over year. Acquisitions completed since the year-ago period contributed about $83 million of revenue in the quarter, or about $79 million net of divestiture.

In the fourth quarter revenue was $1 62, 4 billion about $44 million above our outlook and up $226 million or 16% year over year.

Acquisitions completed since the year ago period contributed about $83 million of revenue in the quarter or about $79 million net of divestitures.

Speaker 4: Total price in Q4 of 5.7%, including about 70 basis points in fuel and material surcharges, was our highest reported price in a decade, and ranged from about 2.6% in our mostly exclusive market western region, to between 5.8% and 7.2% in our competitive market.

Total price in Q4 of five 7%, including about 70 basis points from Q on material surcharges with our highest reported price in a decade and range from about two 6% and our mostly exclusive market western region to between five 8% and seven 2% in our competitive markets.

Speaker 4: Solid waste volumes of 1.2% exceeded our expectations with positive volumes in all U.S. regions.

Solid waste volumes of one 2% exceeded our expectation with positive volumes in all U S region.

Speaker 4: volumes were strongest in our central region, including Colorado and the Plains State, where mild winter weather through most of the quarter led to better-than-expected activity, and also in our western region, where landfill activity was strong up until late December's epic snowfall.

Volumes were strongest in our central region, including Colorado in the Plains States.

Mild winter weather through most of the quarter led to better than expected activity and also in our western region, where landfill activity was strong.

Till late December epic snowfall.

Speaker 4: Underlying volumes were also up in Canada, but down on a reported basis due to the expiration during the quarter of a poor-quality municipal contract inherited in our 2016 Progressive Waste Acquisition.

Underlying volumes were also up in Canada, but down on a reported basis due to the exploration during the quarter of a poor quality municipal contract inherited in our 2016 progressive waste acquisition.

Looking at year over year results in the fourth quarter on a same store basis commercial collection revenue was up 13%.

Speaker 4: Looking at year-over-year results in the fourth quarter on a same-store basis, commercial collection revenue was up 13 percent, roll-off revenue was up 11 percent, and pulls per day up 5 percent, with revenue per pull up 6 percent, and landfill counts were up 4 percent on increases of 3 to 5 percent in all waste types.

Roll off revenue was up 11% on posts per day up 5% with revenue per policy up 6% and landfill tons were up 4% on increases of 3% to 5% in all these types.

Speaker 4: Moving on to E&P Waste, as expected, revenue was essentially in line with the prior quarter at about $34 million, up $9 million year over year, and up about 45% from the lows we saw in mid-2020.

Moving on to E&P waste as expected revenue was essentially in line with the prior quarter at about $34 million up $9 million year over year and up about 45% from the lows we saw in mid 2020.

Speaker 4: We remain encouraged by increased rig counts and elevated crude pricing levels, which, if sustained, could lead to increased E&P waste activity over the course of 2022.

We remain encouraged by increased rig counts in elevated crude pricing levels, which if sustained could lead to increased E&P waste activity over the course of 2022.

Speaker 4: Looking at Q4 revenues from recovered commodities, that is, recycled commodities, landfill gas, and renewable energy credits, or RINs, excluding acquisitions in the aggregate, they were up about 90% year over year due to both higher RIN prices and higher recycled commodity revenues due to strong fiber value.

Looking at Q4 revenues from recovered commodities that is recycled commodities landfill gas and renewable energy credits are renewed.

Excluding acquisitions in the aggregate they were up about 90% year over year due to both higher RIN prices and higher recycled commodity revenue due to strong fiber values.

As for OCC or old corrugated containers averaged about one $185 per ton in Q4 decreasing during the quarter to end the year at about 170 with current values about $160 per ton.

Speaker 4: Prices for OCC, or old corrugated containers, averaged about $185 per ton in Q4, decreasing during the quarter to end the year at about $170, with current values about $160 per ton.

Speaker 4: Renewable energy credits, or RINs, averaged about $2.80 in Q4, including the impact of a hedge which rolled off at year end.

Renewable energy credits or Rins averaged about $2 80.

Q4, including the impact of the hedge which rolled off at year end.

Speaker 4: During Q4, spot rates were in the range of 325 to 350, where they have remained year to date.

During Q4 spot rates were in the range of $3 25 to $3 50, where they have remains a year to date.

Adjusted EBITDA for Q4 as reconciled in our earnings release was $495 million about $9 million above our outlook and 35% of revenue up 20 basis points year over year, excluding the margin dilutive impact of acquisitions.

Speaker 4: Adjusted EBITDA for Q4 is reconciled in our earnings release with $495 million, about $9 million above our outlook, and 30.5% of revenue. Up 20 basis points year over year, excluding the margin dilutive impact of acquisition.

Speaker 4: underlying solid waste margin expansion of about 40 basis points plus 90 basis points from recycled commodities, RIMS, and E&P net of fuel more than offset higher wages and COVID-19 related increased overtime and outside repairs as well as the return of certain discretionary and COVID-19 related support costs.

Underlying solid waste margin expansion of about 40 basis points, plus 90 basis points from recycled commodities and E&P net appeal more than offset higher wages and COVID-19 related increased overtime and outside repairs as well as the return of certain discretionary and COVID-19 related support costs.

Speaker 4: Capital expenditures of $744 million in 2021 were about $44 million above expectations as we continue to capitalize on opportunities to acquire fleet and equipment as we approach year-end.

Capital expenditures of $744 million in 2021, we're about $44 million above expectations as we continued to capitalize on opportunities to acquire fleet and equipment as we approached year end.

Speaker 4: In spite of cash out X up 25% on a year-over-year basis, we delivered full-year adjusted free cash flow up 20% year-over-year at $1.01 billion, or 16.4% of revenue, reflecting a conversion of 52.6% of adjusted EBITDA. Moreover, we entered 2022 well-positioned from a working capital standpoint, which once again provides a strong cushion.

In spite of cap ex up 25% on a year over year basis, we delivered full year adjusted free cash flow up 20% year over year at $1 1 billion or 16, 4% of revenue, reflecting a conversion of 52, 6% of adjusted EBITDA.

Moreover, we entered 2022 well positioned from a working capital standpoint, which once again provides a strong question.

I will now review our outlook for the first quarter and full year 2022, before I do we'd like to remind everyone. Once again that actual results may vary significantly based on risks and uncertainties outlined in our safe Harbor statements and filings we've made with the SEC and the securities commissions or similar regulatory authorities in Canada, we encourage investors.

Speaker 4: I will now review our outlook for the first quarter of the year 2022. Before I do, we'd like to remind everyone once again that actual results may vary significantly based on risks and uncertainties outlined in our Safe Harbor Statement and filings we've made with the SEC and the Securities Commission or similar regulatory authorities in Canada. We encourage investors to review these factors carefully.

To review these factors carefully.

Our outlook assumes no change in the current economic environment. It also excludes any impact from additional acquisitions that may close during the remainder of the year and expensing of transaction related items during the period.

Speaker 4: Our outlook assumes no change in the current economic environment. It also excludes any impact from additional acquisitions that may close during the remainder of the year and expensing of transaction related items during the period.

Looking first at the full year 2022.

Revenue in 2022 is estimated at $6 $8 75 billion.

Speaker 4: Revenue in 2022 is estimated at $6.875 billion. For solid waste, we expect mostly price-led organic growth of 6.5% to 7%, plus about $350 million from acquisitions already completed. With E&P waste revenue and the values for recycled commodities and renewable fuels assumed about in line with current levels.

For solid waste, we expect mostly priced flat organic growth of six 5% to 7%.

About $350 million from acquisitions already completed.

With E&P waste revenue and the values for recycled commodities and renewable fuels assumed about in line with current levels.

Adjusted EBITDA in 2022 as reconciled in our earnings release is expected to be approximately $2 145 billion or 31, 2% of revenue.

Speaker 4: Adjusted EBITDA in 2022, as reconciled in our earnings release, is expected to be approximately $2.145 billion, or 31.2% of revenue.

Speaker 4: Excluding the 20 basis point margin dilutive impact of acquisitions already completed, and 15 basis points for January's COVID support costs, margins would be up about 35 basis points.

Excluding the 20 basis point margin dilutive impact of acquisitions already completed.

And 15 basis points for January corporate support costs.

<unk> would be up about 35 basis points.

Speaker 4: Any moderation in inflationary trends, increases in the values for recovered commodities or an E&P waste activity, or additional acquisitions closed during the year would provide upside to our initial 2022 outlook.

Any moderation in inflationary trends increases and the values for recovered commodities or in E&P waste activity or additional acquisitions closed during the year would provide upside to our initial 2022 outlets.

Speaker 4: Regarding tax rates, our effective tax rate for 2022 is expected to be approximately 22%, with some quarter-to-quarter variability.

Regarding tax rates, our effective tax rate for 2022 is expected to be approximately 22% with some quarter to quarter variability in.

Speaker 4: and cash taxes are expected at 50 to 60 percent of books.

And cash taxes are expected at 50% to 60%.

And finally, our share count is expected to be about $259 million on a fully diluted basis.

Speaker 4: And finally, our share count is expected to be about $259 million on a fully diluted basis, consistent with the share repurchases already completed year-to-date.

With the share repurchases already completed year to date.

Speaker 4: Adjusted free cash flow 2022 is reconciled in our earnings release is expected to be approximately 1.15 billion, or about 53.5% of adjusted EBITDA, and about 16.7% of revenue on CapEx totaling $850 million, including $100 million for new landfill gas and resource recovery facilities, as Worthing described.

Adjusted free cash flow in 2022 as reconciled in our earnings release is expected to be approximately 115 billion or about 53, 5% of adjusted EBITDA and about 16, 7% of revenue on capex totaling $850 million, including $100 million for new landfill gas and.

Resource recovery facilities as worthy described to.

Speaker 4: To be clear, 2022 adjusted free cash flow of $1.15 billion, projected up 13.9% year over year, includes the incremental $100 million in CapEx. Turning now to our...

To be clear 2022, adjusted free cash flow of $1, one 5 billion projected up 13, 9% year over year, including the incremental $100 million in Capex.

Turning now to our outlook for Q1 2022.

Speaker 4: Revenue for Q1 is estimated to be approximately $1.61 billion.

Revenue for Q1 is estimated to be approximately 161 billion.

Speaker 4: we expect price plus volume growth for solid waste of about 6.5 percent, primarily price.

We expect price plus volume growth for solid waste of about six 5% primarily price.

Speaker 4: The positive volume trends we saw in most of Q4 continued into January , but severe winter weather has since impacted many parts of the U.S.

The positive volume trends, we saw in most of Q4 continued into January but severe winter weather has impacted many parts of the U S.

Speaker 4: Reported volumes will also continue to be impacted by the expiration of the municipal contract in Canada noted earlier, as well as the end earlier this quarter of the remaining low-quality progressive waste municipal contract in our southern region.

Reported volumes will also continue to be impacted by the exploration of the municipal contracts in Canada noted earlier.

As well as the end earlier this quarter of the remaining low quality progressive waste municipal contracts in our southern region.

Speaker 4: We've mentioned looking forward to the end of these lingering poor quality contracts since completing the progressive waste acquisition in 2016.

You mentioned looking forward to the end of these lingering poor quality contracts since completing the progressive waste acquisition in 2016.

Speaker 4: In the aggregate, they account for revenues of about $50 million, or about 80 basis points of volume. We're happily redeploying assets from both of these expired contracts for better return.

In the aggregate they account for revenues of about $50 million or about 80 basis points of volume, we're happily redeploying assets from both of these expired contracts for better returns.

E&P waste revenue in recovered commodity values are expected to remain in line with current levels.

Speaker 4: E&P waste revenue and recovered commodity values are expected to remain in line with current levels.

Adjusted EBITDA in Q1 is estimated to be approximately $495 million or 37% of revenue down 30 basis points year over year.

Speaker 4: Adjusted EBITDA in Q1 is estimated to be approximately $495 million, or 30.7% of revenue, down 30 basis points year over year.

Excluding 30 basis points margin dilutive impact from acquisitions already completed and.

Speaker 4: Excluding 30 basis points margin diluted impact from acquisitions already completed, and 60 basis points impact from January's COVID support, margins would be up about 60 basis points in the quarter.

And 60 basis points impact from January Covid support margins would be up about 60 basis points in the quarter.

Depreciation and amortization for the first quarter is estimated to be about 13, 4% of revenue, including amortization of intangibles of about $37 million or <unk> 11 per diluted share net of tax.

Speaker 4: Depreciation and amortization for the first quarter is estimated to be about 13.4% of revenue, including amortization of intangibles of about $37 million, or $0.11 per diluted share net of tax.

Interest expense net of interest income is estimated at approximately $40 million.

Speaker 4: Interest expense net of interest income is estimated at approximately $40 million. And now, let me turn the call back over to Worthing for some final remarks before Q&A. Terrific. Thank you, Marianne.

And now let me turn the call back over to worthy for some final remarks before Q&A terrific. Thank you Marianne.

We define intentional to me in a sustained commitment to being deliberate and purposeful in everything we do to achieve desired predictable and differentiated results.

Speaker 3: We define intentional to mean a sustained commitment to being deliberate and purposeful in everything we do to achieve desired, predictable, and differentiated results.

The strength and consistency of our results reflect the durability of our market model and the benefits of an intentional culture focused on employees and value creation.

Speaker 3: The strength and consistency of our results reflect the durability of our market model and the benefits of an intentional culture focused on employees and value creation.

Speaker 3: Put simply, we have a playbook that has served us well, whether at revenues of $30 million or now approaching $7 billion, providing the visibility to deliver on our commitment.

Put simply we have a playbook that has served as well whether it revenues of $30 million are now approaching $7 billion, providing the visibility to deliver on our commitments.

We recognize that the offset onset of the pandemic, but the challenges of this period could create opportunities for differentiation in terms of culture strategy and value creation.

Speaker 3: We recognize at the onset of the pandemic that the challenges of this period could create opportunities for differentiation in terms of culture, strategy, and value creation.

Speaker 3: Looking back at the past two years, we couldn't be prouder of our teams and their accomplishments.

Looking back at the past two years, we couldnt be prouder of our teams and our accomplishments.

Driving outsized financial performance and operational excellence, while adhering to the values that have set waste connections apart.

Speaker 3: driving outsized financial performance and operational excellence while adhering to the values that have set Waste Connections apart since the company's inception.

The company's inception.

Speaker 3: As we enter our 25th anniversary year in 2022, we look forward to more opportunities to be back together, to celebrate the successes that have driven a track record of growth and value creation, and to further accelerate our speed of execution.

As we enter our 20 <unk> anniversary year in 2022, we look forward to more opportunities to be to be back together to celebrate the successes that have driven a track record of growth and value creation and to further accelerate our speed of execution.

Speaker 3: Moreover, we're looking ahead as we position ourselves for revenue of $10 billion and more.

Moreover, we're looking ahead as we position ourselves for revenue of $10 billion and more.

We appreciate your time today I'll now turn this call over to the operator to open up the lines for your questions operator.

Speaker 3: We appreciate your time today. I'll now turn this call over to the operator to open up the lines for your questions. Operator?

Thank you.

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Speaker 1: Our first question comes from the line of Walters Bracklin with RBC Capital Markets. Please proceed with your question. Thanks very much, Operator.

Our first question comes from the line of Walter <unk> with RBC capital markets. Please proceed with your question.

Thanks, very much operator, and good morning, everyone.

Good morning Walter.

Speaker 3: So my first question I guess is on capital deployment and certainly when large companies get a lot of cash, a lot of investors have some concerns about strategic drift and so on and when you look at your opportunity set going forward, whether it's RNG, whether it's acquisitions or other growth opportunities.

So my first question I guess is on capital deployment.

And certainly when large companies get a lot of cash a lot of investors have some.

Concerns about strategic drift and so on and when you look at your opportunity set.

Going forward, whether it's R&D, whether it's acquisitions or other growth opportunities.

Speaker 3: How do you prioritize and is there any risk that as you get bigger, you start to have less and less opportunities in your core markets and start to look at projects outside of solid waste, perhaps where they talk a little bit about where those priorities are and where you see that opportunity set, is that still far off in the future?

How do you prioritize and is there any risk that as you get bigger you start to have less and less opportunities in your core markets and start to look at projects that perhaps outside of outside of solid waste, perhaps where they talk a little bit about.

Where those priorities are and where you see that opportunity set or is that still far off from the difference.

Yes.

Speaker 3: Yeah, you know, as I tried to wrap up my comments today, our priorities remain, you know, to maintain the playbook that we know has driven our success, and that is.

Try to wrap up my comments today.

Our priorities remain the.

Maintaining the playbook that we know is driven our success and that is.

Speaker 3: You know, capitalizing on opportunities and in solid waste, you know, as you know, the, the opportunity baskets quite large. We look, we focus on a subset of the opportunity baskets, some 3.5 to 4Billion of revenue that fits our market model. That's a fraction of the total available or addressable market when it comes to to that.

Capitalizing on opportunities in solid waste.

As you know the the.

The opportunity basket is quite large.

Look we focus on a subset of the opportunity basket, some three $5 billion to $4 billion of revenue that fits our market model.

As a fraction of the total available our addressable market when it comes to that.

Speaker 3: I was pretty clear on in October with my thoughts on on moving away from solid waste to other quote environmental solutions or services type businesses. It's so I'll stand by those comments back in October . So it's not something we look at for regards to a drift.

I was pretty clear on in October with my thoughts on on moving away from solid waste to other quote environmental solutions.

<unk> solutions or services type businesses.

So I'll stand by those comments back in October So that's something we look at both regards to adrift.

When it comes to capital deployment I think our view has always been we have in all of the above approach as I've said also.

Speaker 3: When it comes to capital deployment, you know, I think our view has always been we have an all the above approach. As I said, also, it's not about tradeoffs.

It's not about tradeoffs.

Speaker 3: Look, when you think about acquisitions, sellers drive most of the timing and the transactions we do.

When you think about acquisitions sellers drive most of the timing of the transactions, we do whether it would be last year early on.

Speaker 3: whether it be last year early on and in, you know, people concerned about changing tax rates. That was a big impetus for a while as the year moved on and we got more clarity on that. Frankly, you know, owner exhaustion in trying to run a business in a pandemic world, in a labor-constrained environment, in an inflationary environment, et cetera, you know, it takes a different focus to succeed in this.

And people concerned about changing tax rates that was a big impetus for a while.

As the year moved on and we got more clarity on that.

Frankly.

Owner exhaustion and trying to run a business center.

In a pandemic.

A world in a labor constrained environment in an inflationary environment et cetera.

It takes it.

It takes a different focus to succeed in this.

Speaker 3: And so that seems to be driving a lot of the transactions that we're looking at right now. And so, again, sellers drive most of the opportunities and the timing around that. We're ready to take advantage of that and capitalize on that.

And so that seems to be driving a lot of a lot of the transactions that we're looking at right now.

So again sellers drive most of the opportunities and the timing around that.

We're ready to take advantage of that and capitalize on that again the resource recovery projects.

Speaker 3: Again, the resource recovery projects, you know, we look at it and these are years in development. The ones we're finally breaking ground on today have been years, you know, on the drawing board. And the timing of those really is nothing more than now the expansions that landfills might have been done or the permitting's in place.

We look at it and these are years in development.

The ones that were finally, breaking ground on a day have been years.

On the drawing board and the timing of those really is as nothing more than now the expansions at landfills might have been done.

Permitting is in place for the pipelines are now available et cetera. So there's a host of things that drive the timing.

Speaker 3: or the pipelines are now available, etc. So there's a host of things that drive the timing.

Speaker 3: That's why we look at it and say over the next 10 to 15 years, we can see a pipeline of projects.

Why we look at it and say over the next 10 to 15 years.

You can see a pipeline of projects.

Speaker 3: But as we look at it, it's not like we're going to own all of them, as we said before. You know, two-thirds, as we see it, already involve third parties in this planning and development. And frankly, in many cases, it's because the landfill rights are already under some contractual obligation that we're now talking to them about carrying up existing contracts and kind of redoing things for the benefit of both parties.

But as we look at it.

It's not like we're going to own all of them.

As we've said before two thirds as we see it already involve third parties.

And this planning development and frankly in many cases, it's because the landfill rights already under some contractual obligation that we're now talking to them about tearing up existing contracts and kind of redoing things for the benefit of both parties.

Speaker 3: And so we don't see a large amount of capital being deployed on the landfill gas side because, as I said, it's only a third of the projects or less that we will own.

And so we don't see a large amount of capital being deployed.

On the landfill gas side because thats.

As I said, it's only a third of the projects are less.

<unk> alone.

Speaker 3: And frankly, if you look back at these two projects and look at some press releases that have been out there the past two months, there are two other projects that we're doing a partnership with third parties that have been out there, two of our landfills. And so, theoretically, out of the four that we're doing right now, two are our own.

Frankly, if you look back at these two projects and looked at some press releases that have been out there. The past two months. There are two other projects that we're doing a partnership with third parties have been out there two of our landfills and so theoretically out of the four that we're doing right now to our own so not lower so thats not consuming so much capital that.

Speaker 3: So, in other words, that's not consuming so much capital that there's a tradeoff of that or something else. Acquisitions are always more creative than buying back our stock. Obviously, the market episodically provides opportunities to buy back our stock, but we clearly understand that deploying capital and acquisitions is accretive to value creation. And doing smaller transactions provide a lower risk profile and a lot better return per capital dollar deployed.

Trade off of that or something else acquisitions are always more accretive than buying back our stock obviously the market episodically provides opportunities to buyback our stock, but we clearly understand that deploying capital in acquisitions.

Accretive to value creation, and doing smaller transactions provide a lower risk profile in a lot better return per capital dollar deployed.

Speaker 3: than doing larger public-to-public type transactions.

<unk> been doing larger public to public type transactions.

Speaker 3: And so, what's made us successful, as I said, the last 25 years will continue to be our playbook going forward. And we talk about a pathway to $10 billion or more in revenue, and we'll execute the playbook to that.

And so what's made US successful as I said the last 25 years will continue to be our playbook going forward and we've talked about a pathway to $10 billion or more in revenue than we.

We will execute the playbook to that.

Speaker 3: That's fantastic and certainly a prioritization that's consistent with, I think, what investors are looking for. Now, second, my follow-up question here is really on if we look out a number of years, I guess, firstly, you did a billion dollars in acquisitions, that's certainly well above what you kind of trended in prior years.

That's fantastic and certainly a prioritization that's consistent with I think what investors are looking for it now.

Second my follow up question here is really on if we look out a number of years I guess firstly.

You did a $1 billion.

In acquisitions.

That's certainly well above what you you've kind of trended in prior years.

Speaker 3: How many more billion-dollar years are there, and when we're past that, whenever that might be, can you give us a peek into what your return-of-capital strategy will be once you get of a size that acquisitions simply won't be enough out there? How would you look at return-of-capital shareholders?

How many more year $1 billion of years are there and when we're past that whenever that might be can you give us a peek into what your return of capital strategy will be once you get of a size that acquisitions simply won't be able to there won't be enough out there how would you look at return of capital return.

Return of capital to shareholders.

Sure we've been consistent in saying this for probably a decade now as we continue to grow the business because it's not about chasing a growth rate.

Speaker 3: Sure. We've been consistent in saying this for probably a decade now as we continue to grow the business because, you know, it's not about chasing a growth rate.

We look at as a on a risk return basis.

Speaker 3: You know we look at is a on a risk return basis. You know the lowest risk path to a double digit free cash flow per share growth. And you know we have said as all along as we get bigger our expectations always been that.

The lowest risk path to a double digit free cash flow per share growth.

And we have said all along as we get bigger our expectation has always been that.

Speaker 3: Shrinking the denominator in the share count becomes a component of that pathway to double digit, not just increasing the numerator. It's just the fact that's happened over the past six, seven or more years. The top-line growth from acquisitions has driven a numerator growth that has allowed lower mid-teens free cash flow per share CAGR.

Shrinking the denominator in the share count, yes, it becomes a.

A component of that pathway to double digit not just increasing the numerator. It's just the fact, that's happened over the past six or seven or more years.

Topline growth from acquisitions has driven a numerator growth that has allowed lower mid teens free cash flow per share CAGR.

Speaker 3: I mean, our belief has always been that at some point in time, we transition to, you know, the organic side, providing, you know, 7, 8, 9 percent of that pathway to, to, to top line growth acquisitions, you know, topping that off by one or two percentage points.

Our belief has always been that at some point in time, we transition to <unk>.

The organic side, providing 789% of that pathway to topline.

Topline growth acquisitions.

Acquisitions topping.

Topping that off by one or two percentage points.

Speaker 3: and then a repurchase of 1% to 2% of our stock, providing another couple of points to that growth. So the pathway to get to the double-digit, sustained free cash over share growth can change over time. Frankly, it's organic growth continues to drive more of it over time.

And our repurchase of 1% to 2% of our stock providing another another couple of points to that growth. So the pathway to get to the double digit sustained free cash flow per share growth can change over time.

Thankfully it's.

So organic growth continues to drive more of it overtime.

Speaker 3: you know, it's a much lower capex deployment for that for that attainment. Makes a lot of sense.

It's a much lower capex deployment for that for that attainment.

Makes a lot of sense I appreciate the time as always congrats on a great quarter. Thanks for that.

Thank you. Our next question comes from the line of Hamzah <unk> with Jefferies. Please proceed with your question.

Speaker 1: Thank you. Our next question comes from the line of Hamza Mazari with Jeffries. Please proceed with your question.

Hey, good morning.

Speaker 5: Okay, good morning. My question is just around just operating leverage. I know you guided that to 20 bps, but maybe you could just talk about, you know, with price slurred organic growth of 7%, how does that sort of break out between open market and franchise? And then just what's your assumption on cost inflation in that guide of kind of 20 bps op leverage?

My question is just around <unk>.

Operating leverage I know you guided that.

20 bps, but maybe you could just talk about.

With price led organic growth of 7%, how does that sort of breakout between open market than franchise.

And then just what is your assumption on cost inflation.

That guide of 20 bps op leverage.

Sure I'll start and then hand, it off to Maryann. Good question Hamzah. So I know it's.

Speaker 3: I'll start and then hand it off to Marianne. Good question, Hamza. So I know it's atypical for folks to run models in an inflationary environment because it's new to many.

Atypical for folks to run models in an inflationary environment, because it's new to many.

Speaker 3: But if you think, as we look at it right here, assuming a 6% overall cost inflation.

But if you think as we look at it right here, assuming a 6% overall cost inflation.

Speaker 3: You know, it takes 4.5% of price just to overcome that on a dollar basis, right? And if that's all we did, that's about 80 basis points to loot them.

It takes four 5% of price just to overcome that on a dollar basis right.

All we did that's about 80 basis points dilutive.

Speaker 3: So the fact is, is that to drive, you know, 20 basis points on a reported basis of expansion X acquisitions.

<unk> is is that to drive.

20 basis points on a reported basis of expansion ex acquisitions, it's really a 100 basis point margin expansion.

Speaker 3: It's really a hundred basis point margin expansion, because you know, first thing we do is by going to six and a half or more is we're overcoming the 80 basis point dilution that just inflationary results in, and then some because we're driving at six and a half to 7% price.

First thing we do is by going to six five for more as we're overcoming the 80 basis point dilution that just inflationary.

Results in and then some because we are driving at six 5% to 7% price.

Speaker 3: And so it's the optics. I know why the optics you say, well, why is it just 20 and such a strong pricing environment? The fact is it's 100 basis point margin expansion over the impact of inflation to reported numbers.

The optics I know, while the optics, you say well why is it just 20 in such a strong price environment.

Fact is it's a 100 basis point margin expansion over the impact of inflation, the reported numbers and Marianne that breaks down.

Speaker 3: And, Marianne, that breaks down, hasn't it? Sure. Sure. So again, when you think about that 6.5%, maybe plus, on price, the way it breaks down in our exclusive markets, that's around 4%, and in the competitive markets, that's 6 to 8%. So, you know, 50 to 100 basis points higher on both sides in terms of what's driving the difference between 5% last year and, you know, 6.5% this year. And as Worthing said, we think of that as addressing the inflationary environment we're currently in.

So again, when you think about that six 5% and flat on price when it breaks down in our exclusive markets. That's around 4% and then the competitive markets that 6% to 8%. So 50 to 100 basis points higher on both sides in terms of what's driving the difference between 5% last year and.

Six 5% this year and where they said we think of that is addressing the inflationary environment. We're currently in.

Speaker 4: So, you know, exactly how you've defined that, whether you call that five and a half, six percent, that type of inflation, that's what we're seeing around us. And that's what we're addressing. As you'll recall, Hamza, back in October , we talked about thinking, you know, maybe five and a half, six percent. Then we said we were comfortable at the high end of the range. We've stepped that up to six and a half percent. And as Worthing mentioned in his remarks, maybe higher than that, maybe ultimately it's seven.

Exactly how you define that whether you call that five 5% that type of inflation, that's what we're seeing around us and thats. What we are addressing as youll recall hamzah back in October we talked about thinking of maybe 556%. Then we said we're comfortable at the high end of the range, we stepped that up to six 5%.

And as Worthing mentioned in his remarks may be higher than that maybe ultimately it's seven.

Speaker 4: because what we're doing is addressing the environment we're in.

Because what we're doing is addressing the environment we're in.

Speaker 4: And we think that's the right way to be proactive from a pricing standpoint.

And we think thats, the right way to be proactive.

From a pricing standpoint.

Speaker 3: And the importance, again, the importance of understanding the need to get the 80 basis points back and then some on the margin side is inflation is not just in the P&L. Inflation is on capital as well, right, in the CapEx. And we're seeing increases, as you might imagine, on fleet construction and other outlays. So you now don't have to cover it through what's impacting your P&L, but it's what's impacting your CapEx as well, because that's how we maintain the very high conversion rate of EBITDA for free cash flow.

And importance again, the importance of understanding the need to get the 80 basis points back and then some on the margin side is inflation is not just in the P&L inflations on capital as well right in the Capex and we are seeing increases as you might imagine on fleet construction. Another another outlays. So you don't have to cover it through what's been impacting.

Your P&L.

What's impacting your capex as well because that's how we maintain the very high conversion rate of EBITDA to free cash flow.

Very very helpful.

Speaker 5: Very very helpful. My my second question, and I'll turn it over is just At at what point does your leverage get too low? Where I guess your leverage is 2.4 times net You know it feels like The acquisition environment, you know as you pointed out could be as good as 2021 You know that's going to add a lot more EBITDA

My second question and I'll turn it over is just.

At what point does your leverage got too low.

Where I guess your Leverages two four times Matt.

It feels like.

The acquisition environment as you pointed out could be as good as 2021.

That's going to add a lot more EBITDA.

Speaker 5: If you're sitting below two times, you know, I'm not saying you're going to sit below two next year, but at some point, if you're below two.

If you are sitting below two times.

I'm, not saying you're going to start below two next year, but at some point if youre below two.

Speaker 5: Do you do a special dividend? Do you just buy back more stock? At what point does, you know, do you just say that the balance sheet is too under-levered?

You do a special dividend do you just buy back more stock.

At what point does it does.

Or do you just said that the balance sheet is too under Levered.

Speaker 3: Well, I think if you look at the good question, if you look at the outlays this year, if this year looks like last year, you know, we'll exit the year closer to three times level, right? Because between the billion dollar outlay and acquisitions, if that occurs.

Well I think if you look at the your question. If you look at the outlays this year.

This year it looks like last year.

Exit the year closer to three times Levered right because between the $1 billion outlay in acquisitions if that occurs.

Speaker 3: The outlay you've already seen on share repurchases of 425 and we're just early in the year, right?

<unk> already seen on share repurchases of $4 25, and we're just early in the year right.

Speaker 3: And so we expect to exit the year closer to three. That gives us all the flexibility again looking forward to continue the growth model and return to capital. It's hard to imagine that we would ever get below two times given the way we're running the.

And so we expect to exit the year closer to three.

That gives us all the flexibility again looking forward to continue the growth model in return of capital.

It's hard to imagine that we would ever get below two times.

Given the way we're running the business right. It's a worthy as earlier comments about capital deployment again, we've tried to be consistent to remind people that look back to pre progressive we were buying back 3% to 4% of shares. So there is certainly optionality to increase the capital and the return of capital to shareholders in that environment.

Speaker 4: Right. And toward these earlier comments about capital deployment, you know, again, we've tried to be consistent to remind people that look back to pre-progressive. We were buying back three to four percent of shares. And so there's certainly optionality to increase the capital, the return of capital to shareholders in that environment. Got it.

<unk>.

Got it thank you so much.

Okay.

Speaker 1: Thank you. Our next question comes from the line of Tyler Brown with Raymond James. Please proceed with your question.

Thank you. Our next question comes from the line of Tyler Brown with Raymond James. Please proceed with your question.

Hey, good morning.

Good morning.

Speaker 6: Morning. Hey, Marianne, just real quick. Do you specifically have what EMP and fuel, the impact there on margins? It sounded like there was a lot in that 90 basis points of commodity and other stuff in there that you talked about.

Hey, Marianne just real quick do you specifically have what E&P and fuel the impact there on margins. It sounded like there was a lot in that.

90 basis points of commodity and other stuff in there that you talked about.

So looking looking ahead, it's a nominal tailwind.

Speaker 4: So, looking ahead, it's a nominal tailwind, you know, if you think about where we are this year versus where we averaged last year, kind of the tailwinds from recycling, RIMS and E&P, net of fuel, you know, maybe that's 20 basis points of tailwind net as we move ahead. So, small nominal benefit in 2022. Yes, Al, we

If you think about where we are this year versus where we averaged last year kind of that the <unk>.

<unk> from recycling Rems in E&P net of fuel, maybe that 20 basis points of tailwind.

As we move as we move ahead, so small nominal benefit.

Yes Hello.

Speaker 3: We de-risked fuel somewhat more late last year when you saw that massive dislocation and crude for that brief period of time in December .

We derisked fuel somewhat.

More of late last year, when you saw that.

This location in crude for that brief period of time than in December .

Okay. Okay. That's helpful. And then I appreciate the Q1 guidance very helpful and maybe more than you you kind of already addressed this but.

Speaker 6: Okay. Okay. That's helpful. And then I appreciate the Q1 guidance. Very helpful. And maybe, Worthing, you kind of already addressed this, but how should we think about the cadence of margins through the year? I mean, it sounded like you guys might be a little bit more consistent versus more back-end loaded.

How should we think about the cadence of margins through the year I mean, it sounded like you guys might be a little bit more consistent versus more backend loaded.

That's right I think thats, a great observation and yes, we recognize that there is some there is certainly some puts and takes but as we think about that.

Speaker 4: That's right, I think that's a that's a great observation and and we recognize that there are some there's certainly some puts and takes. But as we think about, you know, the guiding the full year up 20 basis points X acquisitions, and then telling you, well, look, if it's up, it's up 30 basis points, you know, in Q1, that that tells you that it's going to be pretty similar as we move through the year, it's really not a bet.

Guiding the full year up 20 basis points ex acquisition, and then telling you will look at that.

About 30 basis points.

In Q1 that tells you that it's going to be pretty similar as we move through the year, it's really not a debt on something changing in the back half of the year. We acknowledge that there is a little more benefit from recycling rins et cetera earlier in the year, but we're talking about COVID-19 costs, So I'd say that.

Speaker 4: on something changing in the back half of the year. We acknowledge that there's a little more benefit from recycling rins, etc. earlier in the year, but we told you about COVID costs, so I'd say that there's sort of puts and takes.

Puts and takes that then dissipate as you move through the year, there's less of that noise.

Speaker 4: that then dissipate as you move through the year. There's less of that noise and the year-over-year margin activity, therefore, becomes far more consistent as you move through the year quarter by quarter. Yeah, I think it's consistent in 22 because it was consistent in 21.

Yes.

The year over year margin activity, therefore becomes far more consistent as you move through the year quarter by quarter I think it's consistent in 'twenty two because it was consistent in 'twenty one.

Yeah.

Speaker 6: Okay, right. So there's not an assumption that things, you know, inflation gets significantly easier in the back half in the guidance. Right. And nor is there, you know, entering the year with a big year over year decline that makes that, you know, back end assumption, you know, a taller mountain.

Okay, Alright, so there's not an assumption that things.

Inflation gets significantly easier in the back half and the guidance.

Nor is there entering the year with the big year over year decline that makes that backend assumption.

Taller mountain.

Speaker 6: Okay. Okay. And then on the, excuse me, on the sustainability link CapEx, I realized that there's a good pipeline of R&G projects, but can you talk about the two MRFs? I guess, is there a tail opportunity there, or were these just kind of advantageous opportunities to internalize some third-party commodity volumes? Just any thoughts there?

Okay, Okay, and then on the excuse me on the sustainability linked Capex I realize that Theres a good pipeline of R&D projects, but can you talk about the two merck's.

I guess is there a tail opportunity there or were these just kind of advantageous opportunities to internalize. Some third party commodity volumes just any thoughts there.

Speaker 4: Yeah, that's that's the way to think about it, Tyler, you know, as we've described in our sustainability objectives that we'd increase our recycling capacity. We've talked about the fact that that there would be these greenfield opportunities. So these are 2 markets where we already have the recycle recyclables. We're collecting them and we were utilizing a 3rd party facility. So, what this does for us, of course, is it internalizes those Tom, the risk, the processing, the aspect of it, and it also provides an opportunity to put the new technology into a new facility. Use of robotics, more optical, sort of left a lot less reliance on labor. So, really a win win in terms of the timing and the opportunity there. Those are somewhat unique opportunities. We'll certainly look for others, but that's the way to think about that opportunity set.

Yes, that's the way to think about it Tyler.

Described in our sustainability objectives that we've increased our recycling capacity, we've talked about the fact that there would be these greenfields opportunities. So these are two markets, where we already have the recyclable recyclables were collecting them or we were utilizing a third party facility. So what this does for US of course is it internalizes those.

Tom It de risks the processing fee aspect of it and it also provides an opportunity to put the new technology into a new facility to use of robotics more optical Florida has left for a lot less reliance on labor. So.

Really a win win in terms of the timing and the opportunity there those are.

Unique opportunities, we'll certainly look for others, but that's the way to think about that.

Yes.

Speaker 3: Okay, great. All right. Once we do those projects, we're mostly optimized throughout our footprint with regard to recycling facilities. Okay, okay. That's very helpful. Okay.

Okay, Great Alright got put on what we do those projects were mostly optimized throughout our footprint with regard to recycling facilities.

Okay. Okay. That's very helpful. Okay. Thanks ill pass it on thanks.

Thank you. Our next question comes from the line of Jerry Revich with Goldman Sachs. Please proceed with your question.

Speaker 1: Thank you. Our next question comes from the line of Jerry Ravitch with Goldman Sachs. Please proceed with your question.

Yes, hi, good morning, everyone.

Good morning.

Speaker 7: Marion, can we just talk about the first quarter guidance a bit more, so you folks are going to get good core price contribution, you know, probably.

Maryann can we just talk about the first quarter guidance.

A bit more so you folks are going to get good core price contribution probably closer to seven points in the first quarter and so I just want to make sure I understand the volume comments that you made because it looks like maybe the volume contemplates.

Speaker 7: Those are the seven points in the first quarter, and so I just want to make sure I understand that the volume comments that you made, because it looks like maybe the volume contemplates flat down organic volume. Is that the impact of the winter weather that you referred to? Can you just expand on that? Or is there.

That ticked down.

Organic volume.

Is that the impact of the winter weather you referred to can you just expand on that or is there just.

Speaker 7: enough moving pieces in the guide to give us room to execute in this environment.

Enough moving pieces in the guide to give us room to execute in this environment.

Speaker 4: Sure. We'll start safe. First off, you know, we sort of like to guide to what we know and leave upside for things outside of our control. And we put volume in that in that category, particularly during the.

Sure well I would say first off we sort of like to guide to what we know and leave upside for things outside of our control and we put volume in that in that categories, particularly during the winter.

Speaker 4: So, with that observation, I then call out the fact that we have baked in these contracts that went away. And so, if you think about our full year guide.

With that observation and then you call out the fact that we have baked in.

Contracts that went away and so if you think about our full year guidance and maybe whether it's half a point of volume add to that the 80 basis points for these contract that went away and you are in what we would characterize as a more normalized call. It one 5% type of volume environment and I'd say the first quarter is the same way.

Speaker 4: at, you know, maybe it's half a point of volume, add to that the 80 basis points for these contracts that went away, and you're in what we would characterize as a more normalized, call it 1.5% type of volume environment. And I'd say the first quarter is the same way, with that caveat around winter weather, and just, you know, arguably, rather waiting to see until that comes.

With that caveat around winter weather and just arguably rather waiting to see until that com now what I would say is if I look at trends in January it is encouraging to see the same kind of positive set of low single digit type of numbers coming out of our landfills and our roll off polls.

Speaker 4: Now, what I would say is if I look at trends in January , it is encouraging to see that the same kind of positive, you know, sort of low single digit type of numbers coming out of our landfills and our roll off polls, which are, you know, those are good real time indicators of what we're seeing out there and could be indicative of the kind of volumes we'll be seeing.

Yes, Theres a good real time indicators of what we're seeing out there and could be indicative of the kinds of volumes over the fourth.

Okay terrific and then.

Speaker 7: Terrific. And then, in terms of the recycling opportunities for you folks, can you just remind us of what proportion of your collections business is recycling today, and of that, what proportion do you dispose to third-party facilities? Are you folks optimistic on acquisition opportunities in areas that don't require greenfields?

In terms of the recycling opportunities for you folks can you just remind us what proportion of your collections businesses recycling today and of that what proportion do dispose to third party facilities are you folks optimistic on acquisition opportunities.

Or is that don't require greenfields as you alluded to.

Speaker 7: is there an opportunity for accelerated M&A in parts of the footprint where you dispose

Is there an opportunity for accelerated <unk>.

In parts of the footprint.

You disposed to third parties.

Speaker 3: Yeah, I mean, again, as I said earlier, these last two facilities optimize our recycling position and our current footprint. You know, the majority of our of our tons in our facilities come off our trucks. And so to Marianne's point about reducing our reliance or risk exposure to 3rd parties. You know, this, this buttons that up, obviously acquisitions that bring us into new markets, great new opportunities.

Again as I said earlier these lab.

Last three facilities optimize our recycling position in our current footprint.

But the majority.

80 of our of our tons in our facilities come off our trucks, so to Mary Anne's point about reducing our reliance or risk exposure to third parties.

This buttons that up obviously acquisitions that bring us into new markets create new opportunities.

Speaker 3: You know, you've seen the transaction we did in Massachusetts last year. That is more of a resource recovery market, but those acquisitions are coming with their own resource recovery facilities. Obviously, as we do more tuck-ins in those markets, we'll be able to bring more volumes into those facilities, except we're not already getting those.

You've seen transaction, we did in Massachusetts last year that is a more of a resource recovery market, but those those acquisitions are coming with their own resource recovery facilities.

As we do more tuck into those facilities and those markets will be able to bring more volumes into those facilities that were not already getting those.

Speaker 3: But once you've got your footprint down, after that, it's minor investments with regards to robotics and additional sorters to, again, reduce our reliance on labor as well as increase the quality of the output and, therefore, the price of the commodities.

But once you've got your footprint down after that.

Its minor investments with regards to robotics and additional sorters too so again reduce our reliance on labor as well as increase the quality of the output and therefore, the price of the commodities.

Got it thanks.

Thank you. Our next question comes from the line of Kevin Chiang with CIBC. Please proceed with your question.

Speaker 1: Thank you. Our next question comes from the line of Kevin Chang with CIBC.

Alright, good morning, and thanks for taking my question.

Speaker 8: Hi, good morning and thanks for taking my question. I just want to clarify something you mentioned in your prepared remarks. I think you said you're

I just want to clarify something you mentioned in your prepared remarks, I think you said you are.

Speaker 8: your, a lot of your safety metrics and I think you said your cost of risk was at a lower year-over-year or trending lower. And I guess when I think of an environment where labor has been tight, so you have more new employees, you've also made a lot of acquisitions and typically.

Your largest safety metrics.

I think you said your cost of risk.

Was that the lower year over year or trending lower.

And I guess, when I think of an environment, where labor has been tight. So you have more more new employees to meet a lot of acquisitions that typically.

Speaker 8: Safety is one of the places you find synergies. I'm just wondering maybe what's driving, you know, this better safety performance maybe relative to those, I guess, perceived headwinds, at least on my part.

Safety is one of the places viewpoint synergies just wondering.

Maybe what's driving.

This better safety performance.

Maybe relative to those.

Please proceed headwinds on my part.

Well again, I think that's a longer story I mean, it's we've always talked about our behavioral based approach to safety, where every person's accountable I mean this is not a safety department's responsibility in this company.

Speaker 3: Well, again, I think that's a that's a longer story. I mean, it's we've always talked about our behavioral based approach to safety, where every person is accountable. I mean, this is not a safety department's responsibility in this company.

Speaker 3: And so we reinforce those behaviors, we coach behaviors, and we hold ourselves accountable for continuous improvement. But simply, you're right when you point out that acquisitions do typically come along at higher incident rates.

And so we reinforced those behaviors we coach behaviors.

And we hold ourselves accountable for continuous improvement, but simply.

You are right when you pointed out that acquisitions do typically come come along at that higher incident rates.

Speaker 3: That's opportunity. It's opportunities not just financially but most importantly for the for the health and health of our employees and the safety within the communities. I mean that's a paramount importance.

Opportunity what's opportunities.

Just financially, but most importantly for the health and health of our employees and the safety within our communities I mean, thats a paramount importance.

Speaker 3: It's not uncommon for acquisitions to come to us with incident rates at four to eight times our average.

Not uncommon for acquisitions to come to us with incident rates at four to eight times our average.

And when.

Speaker 3: And when we see that, we look at our most improved performers year over year, and this past year, our most improved performer was a recent acquisition in the prior year, and they were down, what, some 65% or 70% in incident rates in year one. So it's possible. It's just it's about culture. It's about relationships. It's about accountability, and it's about owning it.

When we see that we look at our most improved performers year over year and this past year. Most improved performer was a recent acquisition in the prior year and they were down what some 65% or 70% in incident rates in year one so.

It's possible.

Just it's about culture, it's about relationships, it's about accountability and it's.

That's about owning it.

Speaker 8: That's helpful. Just for my second question, maybe going back to something Walter had asked, I think you've talked about this pipeline of...

That's helpful.

My second question.

Maybe going back to some point Walter.

I think you've talked about.

While this pipeline up.

Speaker 8: of opportunities or subset of opportunities, a kind of $3.5 to $4 billion. And I think that's been pretty consistent for a number of years now. But it does feel like the underlying solid waste industry has gotten more rational. I think the industry seems to be

Of opportunities or subset of opportunities.

Three $5 billion to $4 billion, I think thats been pretty consistent for a number of years now, but it does feel like.

So the underlying solid waste industry.

<unk> got more rationally.

The street seems to be.

Speaker 8: stronger. Just wondering, does that not play a role in what goes into that pipeline? Are there markets that five years ago weren't attractive because of the way the overall solid waste market was positioned versus here in 2022?

Stronger just wondering does that all play a role in what.

It goes into our pipeline with other markets that five years ago weren't attractive because of the way the overall solid waste market position versus peers.

It was here in 2022.

Speaker 3: Well, you know, it's not that they weren't attractive. It's that the proper way to answer it wasn't available at the time. And so, you know, as we move through, like you've seen us do in many new markets these past several years.

Well.

It's not that they werent attractive is that the proper way to enter it wasn't available at the time.

And so as we move through like you've seen us do in many new markets. These past several years.

Speaker 3: those new market entries are the beachhead for us to continue our model, right? And so it's, you know, just because we're not in a market today doesn't mean we may not be in a market in the future. We're just waiting for that right entry point to be available. And so that's why the addressable market really hasn't changed too much because while we're very active and

Those new market entries or the beachhead for us to continue our model right.

And so it's just because we're not in a market today. It doesn't mean, we may not be in a market in the future.

We're just waiting for that right entry point to be available and so that's why the addressable market really hasnt changed too much because while we are very active in.

Speaker 3: in what we're executing on, we're actually replacing what we're closing with the opportunities that we now have in those new markets.

And what we're executing on we're actually replacing what were closing with the opportunities that we now have in those new markets.

Okay.

Speaker 8: That makes a lot of sense. Congrats on a good quarter. Thank you very much.

That makes lot of sense, but congrats on a good quarter. Thank you very much.

Thank you. Our next question comes from the line of Sean Eastman with Keybanc capital markets. Please proceed with your question.

Speaker 1: Thank you. Our next question comes from the line of Sean Eastman with KeyBank Capital Markets. Please proceed with your question.

Hi, guys nice strong finish to the year.

Speaker 9: Hi, guys. Nice, strong finish to the year. I just wanted to come back to the CapEx.

I just wanted to come back to the Capex.

Speaker 9: So it's helpful to call out exactly what's in there for the sustainability investments. If you pull that out, underlying 11% as a percent of revenue.

So it's helpful to call out exactly what's in there for the sustainability investments if you pull that out underlying 11% as a percent of revenue.

Speaker 9: How do we think about the go forward? We've got a big pipeline of sustainability links, investment opportunities. Does that $100 million ramp into next year? And then is that 11% underlying the right way to think about the next couple of years as well? Just some color on the trajectory of those two pieces would be great.

How do we think about the go forward, we've got a big pipeline of.

Sustainability linked investment opportunities does that $100 million ramp into next year.

And then is that 11% underlying sort of the right way to think about the next couple of years as well as some some.

Some color on the on the trajectory of those two pieces would be great.

Sure. So first with respect to your question about the pipeline of projects the way to think about it is for those four discrete projects that we called out that are unique and where I think that those are two unique recycling facilities and two of the few R&D facilities that we plan to own are included there so for next year.

Speaker 4: So first of all, with respect to your question about the pipeline of projects, the way to think about it is for those four discrete projects that we called out that are unique, as Worthing said, those are two unique recycling facilities, and two of the few RNG facilities that we plan to own are included there. So, for next year, in addition to the hundred we're spending this year, there'd be another about fifty, we'd finish those four projects.

In addition to the 100, we're spending this year there'll be another about 50 would finish the four projects.

Speaker 4: Beyond that, we're not talking about layering in more as you look ahead. So that's one aspect of the answer. The second would be with respect to what is arguably in some outsized capex. We thought that was prudent in twenty one to make sure that we were positioning ourselves given supply chain constraints.

And that we're not talking about layering in more as you look ahead. So thats one aspect of the answer the second would be with respect to what is arguably some outsized capex. We thought that was prudent in 'twenty one to make sure that we are positioning ourselves given supply chain constraints and any concerns about deliveries to make.

Speaker 4: and any concerns about deliveries to make sure we were positioned to get it. And we talked about that all last year. And coming into this year, we felt the same way. And so we've positioned ourselves again. And those are the numbers we've communicated. As we look further down the road, you know, we would say, think more about a more normalized cap back to the percentage of revenue back at that 10.5% type of range that you've historically seen us in.

Sure we were positioned to get it and we talked about that all last year and coming into this year. We felt the same way and so we've positioned ourselves again and those are the numbers. We've communicated as we look further down the road we will.

I'd say think more about a more normalized capex as a percentage of revenue back at that 10, 5% type of range that you've historically seen up then.

Okay very helpful.

And then I wanted to ask about the E&ps.

Speaker 9: And then I wanted to ask about the EMP upside optionality, you know, it's hard to ignore the leading indicators, which are looking very encouraging, you know, probably prudent to leave that as upside, but...

Optionality.

Hard to ignore the leading indicators, which are looking very encouraging.

Probably prudent to leave that as upside but.

Speaker 9: Is there any other reason other than just prudent conservatism to think that EMP won't have some potentially meaningful uplift over the course of 2022?

Is there any other reason other than just.

Prudent conservatism.

To.

Think that E&P won't have some potentially a meaningful uplift over the course of 2022.

Speaker 4: Sure, and we don't disagree, Sean, that there's certainly the fundamentals would suggest that there's an opportunity there. And what we typically would say is, look, let's get into the spring because that's when we have better visibility because that's when the drillers.

Sure and we don't disagree Sean that Theres certainly the fundamentals would suggest that there is an opportunity there.

And what we typically say is let's get into the spring because thats when we have better visibility because that's when the drillers have better visibility and are communicating that to us the one.

Speaker 4: have better visibility and are communicating that to us. The one additional element, I would say, is that the realities of labor constraints are impacting the drillers as well. And so even though you see rigged movement, it doesn't mean that the waste is being generated as quickly as it might otherwise be, because people may not be moving as quickly.

Additional element I would say is that the realities of labor constraints are impacting.

Drillers as well and so even though you see rig movement. It doesn't mean that the waste is being is generated as quickly as it might otherwise be because people may not be moving as quickly and so that would be a limiting factor in the near term, but we agree with your characterization of the opportunity as we move through 2002 and as Youll recall, we typically guy.

Speaker 4: And so that would be a limiting factor in the near term, but we agree with your characterization of the opportunity as we move through 22. And as you all recall, we typically guide to what we see. And so that's why the guidance is what it is, but of course we acknowledge there should be an opportunity as we move through the year.

To what we see and so that's why the guidance is what it is but of course, we acknowledge there shouldn't be an opportunity as we move through the year.

Understood Thanks very much.

Okay.

Thank you as a reminder to register for a question. Please press the one followed by the four on your telephone.

Speaker 1: Thank you. As a reminder, to register for a question, please press the 1 followed by the 4 on your telephone.

Speaker 1: Our next question comes from the line of Noah K. with Oppenheimer. Please proceed with your question.

Our next question comes from the line of Noah Kaye with Oppenheimer. Please proceed with your question.

Speaker 10: Good morning. Thanks for taking the questions. My first one is about investments at the landfill and specifically around leachate management. You know, it seems like we're circling a date for PFAS regulations to potentially come down the pike in, you know, maybe mid next year.

Good morning, Thanks for taking the questions.

My first one is about investments at the landfill and specifically around leachate management.

It seems like we're circling a date for key fast regulations potentially coming down the pike.

In maybe mid next year.

Speaker 10: And even when that happens, it just seems like it's going to take a huge toll on private and public, you know, water treatment infrastructure, wastewater treatment infrastructure. So, you know, to what extent are you addressing that proactively with some of your investments? Do you think the industry is ready to handle the incremental expenses of leachate disposal? And what might the implications be for landfill prices?

And if and when that happens it just seems like it's going to take a huge toll on private and public.

Water treatment infrastructure wastewater treatment infrastructure.

So to what extent are you addressing that proactively with some of your investments do you think the industry is ready to handle the incremental expenses I believe <unk> disposal.

And what might be implications be for landfill pricing.

Speaker 3: Yeah, well, I can just say I know what we're doing because we've been focusing on de-risking, you know, our exposure to third-party treatment providers for many years now, plus making R&D investments into how to address PFAS, RH2S emissions at landfills.

Yes, I can just say that what we're doing because we've been focusing on de risking.

Our exposure to third party treatment providers.

For many years now.

Plus making R&D investments.

Two.

How to address PFS <unk> emissions at landfills and so it's.

Speaker 3: You know, we like the position we're in right now. Clearly, we're investing.

We like the position we're in right now clearly we are investing whether it be in thermal treatment or whether it be in leachate.

Speaker 3: whether it be in thermal treatment or whether it be in in leachate wastewater treatment on site.

Water treatment on site.

Speaker 3: And those efforts continue. We monitor our progress in what percent we're handling on site versus third parties.

And those efforts continue we monitor our progress and and what percent were handling on site versus third parties.

Speaker 3: Look, you've got to remember that landfills are the regulated capsule to contain PFAS. And so, you know, this is an opportunity for us in how we treat this less of a risk. But you're right to point out that in the wastewater treatment plants, that's where there's a much bigger focus, and it is a bigger, more complicated issue for utilities.

Look you've got to remember that the landfills or the regulated capsule to two two containment DFAST.

And so.

This is opportunity for us in how we treat this.

Less of a risk, but you're right to point out that the wastewater treatment plants.

Where there is a much bigger focus in it.

It is a bigger more complicated issue for utilities.

Speaker 10: Okay, thanks. And the second one is just around the subjects of labor and automation, you know, clearly, you know, this is a people first business, you can tend to invest, you know, in your frontline employees.

Okay. Thanks.

Second one is just around.

The subjects of labor and automation.

Clearly this is a people first business you continue to invest.

And your frontline employees.

Obviously, some industry players have been talking about automation.

Speaker 10: Obviously, some industry players have been talking about automation as a lever to really optimize operations and potentially even drive natural attrition in the labor force. I just love your perspective on that. To what extent do you see automation as a further tool for optimizing your labor costs?

As a lever to really optimize operations.

And potentially even drive natural attrition.

And the Labor force.

Just love your perspective on that to what extent do you see.

Automation has.

Further tool for for optimizing your labor costs, where you're investing and how would you frame. It from the way we spend waste connections is approaching it.

Speaker 10: Where are you investing and how would you frame it from the way Waste Connections is approaching it?

Sure.

Look it's just call running a good business.

Speaker 3: Look, it's just called running a good business. You know, we don't talk about.

We don't talk about.

Speaker 3: what might happen and therefore have you have expectations and kind of, you know, look to the future for something that may or may not be delivered upon. Look, our view is, as you know, we've already been proactive on robotics to reduce the labor headcounts at recycling facilities. Those investments will continue. You got to remember, as good things happen, you know, other, there's always pushes, puts and takes, right, in every P&L and market by market.

What might happen and therefore have you have expectations and kind of look to the future for something that may or may not be delivered upon.

Look our view is as you know we've already been proactive on robotics to reduce labor head counts.

Our recycling facilities those investments will continue.

You got to remember is good things happen.

There's always pushes puts and takes right and every P&L in that market by market.

Speaker 3: And so I don't view this as a layer cake-a-bowl, taking thousands of employees out and representing ourselves in a whole different view. The reality is that you chip away and you run a better operation. You try to reduce your reliance on labor in a tough environment.

And so I don't view this as a later capable taking thousands of employees out.

And representing ourselves in a whole different view the reality is as you view you chip away.

You run a better operation.

You try to reduce your reliance on labor in a tough environment.

Speaker 3: But, you know, I wouldn't hang out hope for something that, you know, may sound good, but, you know, may be more difficult to deliver upon.

<unk>.

I wouldn't hang out hope for something that.

It may sound good but.

And it may be more difficult to deliver upon.

Okay. Thanks, very much as always.

Okay.

Thank you. Our next question comes from the line of Michael Hoffman with Stifel. Please proceed with your question Hey.

Speaker 1: Thank you. Our next question comes from the line of Michael Hoffman with FIFO. Please proceed with your question. Hey gang, congratulations on 25 years. It's been a pretty cool run.

Hey gang congratulations on 25 years.

It's been pretty cool run.

I've got a bunch of questions that are about the model.

Speaker 9: I've got a bunch of questions that are about the model, not in any particular order. Rising rates in the business model, and it's not about is your interest expense going up or down. What do you think about rising rates as operating a garbage company and some of the issues that you're seeing?

This particular order rising rates and the business model and it's not about is your interest expense going up or down what do you think about rising rates is operating a garbage company and some of the issues.

<unk>.

The consequences of rates going up.

So I would say from our perspective since the majority of our debt is fixed.

Speaker 4: So I'd say from our perspective, since the majority of our debt is fixed.

Speaker 4: And our weighted average interest expense is around 3 percent, even with a modest increase. But I don't think it moves the needle. And I think what you should expect is to the extent we take on more debt, we'd look for opportunities to fix more, because we can still consider this an attractive environment in spite of the fact that rates are up.

And our average weighted average interest expenses around 3%, even with a modest increase but I don't think it moves the needle and I think what you should expect that to the extent, we take on more debt would look for opportunities to fix more because we can still consider it as an attractive environment. In spite of the fact that rates are up.

Sure.

Speaker 4: You know, perhaps for other people who've relied on the low cost of debt to be more aggressive with respect to acquisitions or other decisions they've made, I think it would have a bigger impact. But again, that's not us.

Perhaps for other people, who have relied on the low cost of debt to be more aggressive with respect to acquisitions, rather decisions. They've made I think it would have a bigger impact, but again, that's not us but away from interest expense as you say Michael.

If the view is.

Speaker 3: If the view is to increase interest rates, to kind of dislocate this economy and potentially have a recession on the horizon.

To increase interest rates to dislocate. This this economy.

And potentially have a recession on the horizon.

Speaker 3: This industry does very well in a recession. I mean, as we all know, it's a very resilient industry. In fact, the recession, if it dislocates the labor force and puts increases our available pool of labor, makes us an easier business to operate. And you look back over time, we performed quite well in recessions. What would be the early 2000s, late 2000s, et cetera.

This industry does very well in a recession I mean as we all know it's a very resilient.

Industry and <unk>.

The recession, if it dislocates the labor force.

And puts.

<unk> are available pool of labor makes us an easier business to operate.

Can you look back over time, we performed quite well in recessions, whether it be the early two thousand's late two thousands et cetera.

Speaker 3: Um, you know, it's a, it's an industry that does well and for us, it's a market model that, that, you know, allows for that continued different.

It's an industry that does well and for us it's a market model that.

Allows for that continued differentiation.

Speaker 9: Perfect. And then, Marianne, I was writing numbers down so fast you may have set it and I missed it. Did you give an interest expense for the full year? You gave it for the first quarter. But did you give interest expense for 22?

Perfect and then Marianne I was writing numbers down. So fast you may have said it and I missed it did you give an interest expense for the full year you gave it for the first quarter, but did you give interest expense for the first for 'twenty two.

About $1 60.

Okay, I missed that and then I appreciate.

Speaker 9: I missed that. And then I appreciate, and you've been very clear, you're going to walk away from bad business and therefore don't freak out of volumes are negative or zero. Can you give us the cadence of when I'm seeing that? Because I think it feels like I'm probably negative in the first half and positive in the second half. And the second half reflects what's actually happening in the market on a go forward basis.

And you've been very clear he's going to walk away from bad business, and therefore don't freak out of volumes or a negative or zero can you give us the cadence of when I'm, saying that because I think it feels like I'm, probably negative in the first half and positive in the second half in the second half reflects what's actually happening in the market.

Go forward basis.

Speaker 4: You're talking about with respect to the two contracts that went away, one went in Q4 and one in Q1. So it's pretty steady, a little bit lower in 1 and 4, higher in 2 and 3, 80 basis points across the four quarters. Okay.

So youre talking about with respect to the two contracts that we.

One one in Q4 and one in Q1, so it's pretty steady a little bit lower and one in four higher in two and 380 basis points.

Across the four quarters.

Okay, so being.

Speaker 9: Negative and one and negative to flatten two and then slightly positive to more positive is sort of the way to think about it

Negative and one in <unk>.

The flattened too and then slightly positive more positive as sort of the way to think about it.

Speaker 3: Or it could be positive in one and would have been more positive without the losses. Okay. So no, like we think of this environment right now as kind of an underlying, you know, 1% plus environment. And so then you factor out that 80 basis points and it gives you a sense of what might be reported. Obviously, you know, if we do better than 1%, that layers on top of that.

Or it could be positive and one would have been more positive without the losses.

Yes.

So no look we think of this environment right now is kind of an underlying.

1% plus environment and so when you factor out that 80 basis points and it gives you a sense of.

What might be reported obviously, if we can.

Better than 1% that layers on top of that.

Got it and then.

Speaker 9: Got it. And then you've shared your internal cost of inflation.

You've shared your internal cost of inflation, which.

Speaker 9: Which is predominantly a wage issue in addition to the capital issue. Where are you on open positions and sort of the trend in actually being on a filled position?

Which is predominantly a wage issue.

Addition to the capital issue where are you on open positions.

And sort of the trend and actually being able to fill positions.

No I would say, it's just a wage and.

Speaker 3: No, I wouldn't say it's just a wage and capex issue.

And Capex issue.

First off I would say the wages, we were very proactive last year going all way back to the first half of last year. When we started taking those up.

Speaker 3: First off, I'd say the wages were very proactive last year, going all the way back to the first half of last year when we started ticking those up. Notably, just in anticipation of what was going to come the remainder of the year. And so we do start the anniversary of some of those as we work through the first half of this year.

Notably just.

In anticipation of what was going to come the remainder of the year and so we do start to anniversary some of those as we worked through the first half of this year.

Speaker 3: But there are all sorts of pressures out there, whether it be pressures around repair and maintenance, pressures around third-party trucking availability, because they have the same wage and labor availability issues.

But there are all sorts of pressures out there whether it be pressures around repair and maintenance pressure pressures around third party trucking availability.

Because they have the same wage excuse me the same wage and labor availability issues.

Speaker 3: that we all do, yet the waste still has to move from the T stations to the landfills, right? And so, no, there are many line items that pop and, you know, our belief right now is, you know, the underlying is at least 6%. And as we move through the year, as Marianne said, if we think that pressure for the full year is going to be higher than that, you'll see a step up. As I alluded to, maybe pricing approaches 7% because of that.

But we all do.

You have to wait still has to move from the T station stood landfills right.

So there are many line items that pop in.

And our belief right now is the underlying is at least 6%.

And as we move through the year as Maryann said, if we think that pressure for the full year to be higher than that youll see a step up as I alluded to maybe pricing approach of 7% because of that.

Speaker 9: Okay, and then open positions, are you finding that?

Okay, and then open positions have you are you finding that.

You are being able to find people know a little bit easier that you had the worst of it was sort of an early <unk> and it has gotten a little bit better or is it still at the same high level of global positions.

Speaker 9: You're being able to find people now a little bit easier that you had the worst of it was sort of an early 3Q and it's gotten a little bit better or is it still at the same high level of open position?

Speaker 3: Yeah, I mean, we were still running, you know, at that 5% or so of open positions. And, you know, when you spread across so many operating locations, you know, running in that 4 to 5% is not unexpected. You know, I'd say we were stressed, obviously, in many locations with Omicron as, you know, at some point to the time, over 1,000 employees, you know, were affected or impacted by that in some ways, and those that were able to show up.

Yes.

We're still running at 5% or so.

And physicians.

When you spread across so many operating locations.

Running in that 4% to 5% is not unexpected I.

I'd say, we were stressed obviously in many locations with omicron as some points of time over a thousand employees.

Were affected or impacted by about some ways and those that were able to show up.

Speaker 3: You know, there was extra pressure to get the work done, which is why we we did we did a month of January . I think the telling telling sign really is going to be is how do you get through the spring? Because obviously. You know, the spring and is where you start getting the pressures. And so it's a.

<unk>.

There was extra pressure to get the work done which is why we built within the month of January .

They are telling telling side really it's going to be is how do you get through the spring because obviously the <unk>.

Spring is what.

You start getting the pressures.

And so it's.

Speaker 3: You know, right now, we'd like where we stand, but obviously, we'd love to...

Right now, we like where we stand but.

But obviously, we'd love to.

Speaker 3: to make some inroads in that and put some more seats in there.

Does it make some inroads in that and put some more seats on the <unk>.

Speaker 9: in the trucks. Okay. And then this is down in the weeds a bit, but there's a change in political party in Seneca area where your landfill is and you're trying to get a host fee, a community host fee agreement. Do you change your handicapping on that now, given what happened in November ?

Trucks, Okay, and then this is down in the weeds a bit but there is a.

Change in political party in Seneca area, where Youre landfill is and you're trying to get a host fee for.

Community OSV agreement.

Have you changed your handicapping on that now given what happened in November .

So we don't control the outcome.

Speaker 3: Look, we don't control the outcome, and so we'll just let time play out and determine where that heads.

And so we'll just let time play out in terms of where that where that heads.

Okay, and then last did I hear you correctly. So you spent 425 million on a share buyback in January and so that's like three and a quarter million shares.

Speaker 9: uh... okay and then left that i hear you correctly please spent four twenty five million on a share buyback in January and so that's like three-and-a-quarter million shares

That's right and that's why we gave you a share count of what $2 59 for the full year as we sit today desktop point already bought back.

Speaker 3: That's right, and that's why we gave you a share count of, what, $259 for the full year. That's right. Yes. So a point. I already brought back a point. Okay. All right. That's terrific to hear. Thank you very much.

Okay Alright.

Terrific to hear thank you very much.

Yes.

Thank you.

Speaker 1: Thank you. Our last question comes from the line of Chris Murray with ATB Capital Markets. Please proceed with your question.

Our last question comes from the line of Chris Murray with ATB Capital markets. Please proceed with your question yes.

Speaker 8: Yeah, thanks folks. Just a quick question going back to the inflation question, so if we were to think about the fact that maybe there's a chance that we could see some moderation on some of the inflation pressures as we go into the second half of the year, can you just you know again back to the understanding the mechanics of inflation, is it fair to think that all the pricing that you'll have been putting in and the stuff you've got in

Yes. Thanks folks just a quick question is going back to the inflation.

<unk>.

So if we were to think about the fact that.

Maybe there's a chance that we could see some moderation on some of the inflation pressures as we go into the second half of the year.

Can you just again back to the understanding the mechanics of inflation.

Is it fair to think that all the pricing that youll have been putting in and the stuff you've got in.

In your captive markets like that.

Speaker 8: in your captive markets, that's going to be sticky. Those increases will be on an annualized basis. So that really leads to your comment about perhaps some margin improvement on the back half if inflation moderates.

That's going to be sticky that those increases will be on an annualized basis. So that really leads to your comment about perhaps some margin improvement on the back half if inflation moderates.

Speaker 3: Right. I mean, what we're saying, moderation is upside, not what it takes to produce a wishful second half recovery.

Alright.

We're seeing moderation as upside not what it takes to produce.

The wishful second half recovery.

Speaker 4: That's right. And just to your point, we put in the majority of our price increases early in the year, to the extent their CPI length, that's where there's the lag. So those are known numbers for 22. To the extent that were to happen, it could have an impact on 23 for those, you know, because where we sit now, it only gets better in 23 because of the inflationary pressures we've seen in terms of price.

That's right and just Chris to your point, we put in the majority of our price increases early in the year.

The CPI linked.

The lag, but those are known numbers for 'twenty two to the extent that were to happen.

Impact on 'twenty three.

Because where we sit now it only gets better in 'twenty three because of the inflationary pressures we've seen in terms of pricing.

Alright, that's fair I, just wanted to make sure that there wasn't something that reverses back in.

Speaker 8: All right, no, that's fair. I just wanted to make sure that there wasn't something that reverses back out on you.

Speaker 8: My last question is around the base dividend. You made the comment a few times that the idea was, as you were growing, the dividend would probably outgrow the pace of your cash flow generation. But in the last couple of years now, we've seen

And then my last question very quickly is just around the base dividend worthy and you made the comment a few times that.

The idea was as you were growing.

The dividend would probably outgrow.

The pace of your cash flow generation, but in the last couple of years now we've seen cash loan we look through 'twenty. Two guide certainly this year it looks like it's going to be pretty strong as well. So now you are kind of outstripping the growth in the base dividend.

Speaker 8: cash loan, and we look at your 22 guide, certainly this year it looks like it's going to be pretty strong as well. So now you're kind of outstripping the growth in the base dividend, appreciating that you're also supplementing that with some share buybacks.

I appreciate it and Youre also supplementing that with some share buybacks, but how do we think about that base dividend in terms of growth.

Speaker 8: You know, how do we think about that base dividend in terms of growth? You know, I think, you know, Hans asked a question about a special but

I think you know.

<unk> asked a question about a special but just going back to the base dividend and where you see that longer term and do you start trying to grow that at above cash flow.

Speaker 8: You know, just going back to the base dividend and where you see that longer term and you start, you know, trying to grow that at above cash flow.

In the future.

Speaker 4: So a couple of observations, Chris, first of all, it has been about a 15% CAGR since we initiated the dividend 11 years ago. So we have consistently raised it double digits. And we do anticipate that when the outsized acquisition slows down as a percentage of our total free cash flow, that will grow from the 20 to 22% where it is now. We could see that growing to more like 30% of free cash flow. The other observation would be in a year like this, the 21, we actually doubled the return of capital shareholder from the prior year between our share repurchases and the continued growth in the dividend. And coming into this year, having already done share repurchases and being well positioned for continued growth in the dividend, you should expect something comparable.

A couple of observations Chris first of all it has been about a 15% CAGR since we initiated the dividend 11 years ago. So we have consistently raised at double digits and we do anticipate that when the outsized acquisition closed down as a percentage of our total free cash flow that will grow from that 20%.

22%, where it is now we could see that growing to more like 30% of free cash flow.

Our observation would be in a year like this a 'twenty one we actually doubled the return of capital to shareholders from the prior year between our share repurchases and the continued growth in the dividend and coming into this year, having already done share repurchases and being well positioned for continued growth in the dividend you should expect something comparable.

Alright, that's fair thanks for your thanks for your time.

Speaker 8: That's fair. Thanks for your time.

Sure sure.

Yeah.

Speaker 1: Thank you. Mr. Jackman, there are no further questions at this time. I will now turn the call back to you. Please continue with your presentation or closing remarks.

Thank you Mr. Jackman there are no further questions at this time I will now turn the call back to you. Please continue with your presentation or closing remarks.

Well if there are no further questions on behalf of our entire management team. We appreciate your listening to and interest in the call today.

Speaker 3: Well, if there are no further questions, on behalf of our entire management team, we appreciate your listening to and interest in the call today. Mary Ann and Joe Box are available today to answer any direct questions that we did not cover that we were allowed to answer under Reg FD, Reg G, and applicable securities laws in Canada.

And Joe box available today to answer any direct questions that we did not cover that we're allowed to answer under Reg FD Reg G and applicable securities laws in Canada.

Speaker 3: Thank you again, and we look forward to seeing you at upcoming investor conferences or on our next earnings call.

Thank you again, and we look forward to seeing you at upcoming investor conferences or on our next earnings call.

Thank you that does conclude the conference call for today, we thank you for your participation and ask that you. Please disconnect your lines.

Speaker 1: Thank you. That does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.

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