Q4 2021 GFL Environmental Inc Earnings Call
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Speaker 2: Welcome to the GFL Environmental fourth quarter earnings call. My name is Juan and I will be coordinating your call today. If you would like to ask a question during the presentation, you may do so by pressing star 1 on your telephone keypad or the flag icon if you have joined us online. I will now hand over to your host, Patrick Dobigy, founder and CEO of GFL Environmental. Please, Patrick, go ahead.
We're going to the DFL environmental fourth quarter earnings call. My name is Glenn and I will be coordinating your call. Today. If you would like to ask a question. During the presentation. You may do so by pricing that's part one on your telephone keypads or the black icon, if you're joining us online.
I will now hand over to your host Patrick <unk> founder and CEO of DFL. It might've mental please Patrick go ahead.
Speaker 3: Thank you and good morning. I would like to welcome everyone to today's call and thank you for joining us.
Thank you and good morning, I would like to welcome everyone to today's call and thank you for joining us.
Speaker 3: This morning, we will be reviewing our results for the fourth quarter and providing our guidance for 2022. I am joined this morning by Luke Pelosi, our CFO , who will take us through our forward-looking disclaimer before we get into the details.
This morning, we will be reviewing our results for the fourth quarter and providing our guidance for 2022.
I am joined this morning by <unk>, CFO , who will take us through our forward looking disclaimer before we get into the details.
Speaker 4: Thank you, Patrick. Good morning, everyone, and thank you for joining. We have filed our earnings press release, which includes important information. The press release is available on our website. We've prepared a presentation to accompany this call, but it's also available on our website.
Thank you Patrick good morning, everyone and thank you for joining we have filed our earnings press release, which includes important information. The press release is available on our website. We've prepared a presentation to accompany this call but it is also available on our website.
Speaker 4: During this call, we will be making some forward-looking statements within the meaning of applicable Canadian and U.S. securities laws, including statements regarding events or developments that we believe or anticipate may occur in the future. These forward-looking statements are subject to a number of risks and uncertainties, including those set out in our filings with the Canadian and U.S. securities regulators.
During this call we will be making some forward looking statements within the meaning of applicable Canadian and U S securities laws, including statements regarding events or developments that we believe or anticipate may occur in the future. These forward looking statements are subject to a number of risks and uncertainties, including those set out in our filings with the Canadian and U S Securities regulators.
Speaker 4: Any forward-looking statement is not a guarantee of future performance, and actual results may differ materially from those expressed or implied in the forward-looking statements. These forward-looking statements speak only as of today's date, and we do not assume any obligation to update these statements, whether as a result of new information, future events and developments, or otherwise.
Forward looking statement is not a guarantee of future performance and actual results may differ materially from those expressed or implied in the forward looking statements. These forward looking statements speak only as of today's date and we do not assume any obligation to update these statements whether as a result of new information future events or developments or otherwise. This call will include a discussion of certain.
Speaker 4: This call will include a discussion of certain non-IFRS measures. A reconciliation of these non-IFRS measures can be found in our filings with the Canadian and U.S. securities regulators.
Non <unk> measures a reconciliation of these non <unk> measures can be found in our filings with the Canadian and U S Securities regulators I will now turn the call back over to Patrick who will start on page three of the presentation.
Speaker 4: I will now turn the call back over to Patrick who will start off on page 3 of the presentation.
Speaker 3: As we look back and reflect on what we accomplished in 2021, I have to say I've never been prouder of the entire GFL family. While we had all hoped that COVID would be behind us with the vaccine rollout in Canada and the US, I think we can all agree it hasn't been as smooth as we would have liked, particularly here in Canada.
As we look back and reflect on what we accomplished in 2021 I have to say I've never been prouder of the entire GSL family, while we all hope that <unk> will be behind us with the vaccine rollout in Canada and the U S. I think we can all agree it hasnt been as smooth as we would have liked particularly here in Canada.
Speaker 3: add to that the labor shortages in some markets, building inflationary pressures, and overall supply chain disruptions, there's been a lot of challenges to deal with. And as a result, we have overcome
Add to that the labor shortages in some markets building inflationary pressures and overall supply chain disruptions, there's been a lot of challenges to deal with and as a result.
But we cannot we have overcome all of these challenges.
Speaker 3: The quality of our asset base and market selection continues to be the foundation of our growth. The strength of our brand supported our talent retention, and the dedication of our team allowed us to excel. GSL now stands with more than 18,000 employees, nine provinces, and 26 states in the U.S.
The quality of our asset base and market selection continues to be the foundation of our growth.
The strength of our brand supported our talent retention and the dedication of our team allowed us to excel.
GSO now stands at more than 18000 employees nine provinces in 2006 to eight in the U S.
Speaker 3: Every day we go out and we drive to win. I think it's safe to say that no one will outwork us and I believe that's what distinguishes us from others.
Every day, we go out and we drive to win I think it's safe to say that no. One will all work out and I believe that's what distinguishes us from others.
Speaker 3: Count on us not to take the easiest path, but to take the most accretive path.
<unk> been asked not to take the easier path, while the pick the most accretive path.
Speaker 3: The proof is in the headline results. Revenue for the year grew by over 30%.
The proof is in the headline results revenue for the year grew by over 30%.
Speaker 3: Our adjusted EBITDA grew closer to 40%. Adjusted free cash flow grew over 50%. And we have exceeded expectations for eight consecutive quarters as a public company.
Our adjusted EBITDA grew closer to 40% adjusted free cash flow grew over 50%.
And we have exceeded expectations for eight consecutive quarters as a public company.
Speaker 3: How are we able to consistently achieve these results? I believe that GFL is different. The collective equity ownership of our management team far exceeds that of any others in our industry and I believe that alignment drives a relentless focus on long-term value creation.
How are we able to consistently achieve these results I believe that <unk> is different.
Selective equity ownership of our management team far exceeds that of any others in our industry and I believe that alignment drives a relentless focus on long term value creation.
Speaker 3: We are laser-focused on the levers of our growth strategy that have guided us since our IPO, drive organic growth and margin expansion, rationalize our balance sheet to optimize our asset base, and reduce debt costs and execute on strategic accretive acquisitions.
We are laser focused on the levers of our growth strategy that have guided us since our IPO drive organic growth and margin expansion rationalize our balance sheet to optimize our asset base and reduced debt costs and execute our strategic accretive acquisitions.
Speaker 3: ESG continues to be a focus. It is core to our organic growth strategy. We released our updated sustainability report for 2020 in Q4, and we will be releasing our sustainability action plan with our ESG targets, goals, and objectives in our 2022 sustainability report later this year.
ESG continues to be a focus it is core to our organic growth strategy. We released our updated sustainability report for 2020 in Q4, and we will be releasing our sustainability action plan with our ESG targets goals and objectives in our 2022 sustainability report later this year.
Speaker 3: As we'll discuss later in more detail, later on the call, CAPEX in 2022 includes investments in our recycling business, in fleet conversion to CNG and in RNG projects at our landfills to support our sustainability action plan commitment.
As al will discuss later in more detail later on the call Capex in 'twenty. Two includes investments in our recycling business and fleet conversions in PNG and in R&D projects at our landfills to support our sustainability action plan commitments.
Speaker 3: In the face of the pandemic, we deployed $2.3 billion on 46 acquisitions.
In the face of the pandemic, we deployed $2 3 billion on 46 acquisitions.
Speaker 3: With our focus on rationalizing our balance sheet, we are also a seller of assets when it makes sense to ensure we are achieving the highest and best return from our asset base.
With our focus on rationalizing our balance sheet. We were also a seller of assets when it makes sense to ensure we are achieving the highest and best return from our asset base in.
Speaker 3: In 2021, we sold non-core assets in three separate divestitures, from which we realized approximately $260 million in proceeds.
In 2021, we sold noncore assets in three separate divestitures from what we realized approximately $260 million in proceeds, giving us additional capital to deploy into higher organic growth opportunities in our base business.
Speaker 3: Later in this call, we will discuss our plans for our infrastructure services business, which is more involved in the divestiture than we have done to date. But the underlying strategy is consistent, taking the path that we believe will drive the greatest value for our shareholders from our assets.
Later in this call we will discuss our plans for our infrastructure services business, which is more involved in the divestitures, we've done to date, but the underlying strategy is consistent.
Taking the path that we believe will drive the greatest value for our shareholders from our assets.
Speaker 3: As I mentioned, rationalizing our balance sheet also means focusing on our capital structure. So I'll touch briefly on our view of the impact of higher interest rates.
As I mentioned rationalizing our balance sheet also means focusing on our capital structure. So I'll touch briefly on our view of the impact of higher interest rates.
Speaker 3: I think you need to look at GSL differently than other industry players who are already investment grade. As our credit quality continues to improve with our increasing free cash flow, we still have lots of room to decrease our cost of capital.
I think if you just look at GSL differently than other industry players who are already investment grade.
As our credit quality continues to improve with our increasing free cash flow, we still have lots of room to decrease our cost of capital.
Speaker 3: We believe that the spread compression on rates, we can realize as a result of that improvement in our credit quality, will mitigate the risk of higher interest rates.
We believe that the spread compression on our rates, we can realize as a result of that improvement in our credit quality will mitigate the risk of higher interest rates.
Speaker 3: In pulling this all together, I believe that 2021 is another example of GFL executing on what we said we were going to do when we went public.
And pulling this altogether I believe that 2021 is another example of <unk> executing on what we said we were going to do when we went public.
Speaker 3: We buy when we see a creed of opportunities. We prune when we see opportunities to deploy our capital. And we invest when we see opportunities to add complementary lines to our business, like R&G, and doing all of that we create value for our shareholders.
We buy when we see accretive opportunities, we prune when we see opportunities to deploy our capital and we invest when we see opportunities to add complimentary line for a business like R&D and doing all of that we create value for our shareholders.
Speaker 3: I'll now pass the call over to Luke who will take us through the financial results and guidance.
I will now pass the call over to Luke who will take us through the financial results and guidance.
Speaker 4: Thanks, Patrick. I'll pick up on page 5 of the presentation. Revenue for the quarter increased over 25 percent compared to the prior year period, which was $125 million greater than the guidance we provided in November . While the outperformance was primarily driven by contributions from M&A, we also exceeded our targets for solid waste pricing and volume, which came in at 5.1 percent and 3.4 percent respectively.
Thanks, Patrick I'll pick up on page five of the presentation revenue for the quarter increased over 25% compared to the prior year period, which was $125 million greater than the guidance. We provided in November while the outperformance was primarily driven by contributions from M&A. We also exceeded our targets for solid waste pricing and volume which came in at five one.
<unk> percent and three 4% respectively.
Speaker 4: The price growth was 80 basis points better than Q3 and was supported by a pull forward of price increase plans in certain U.S. markets to respond to cost inflation.
Price growth was 80 basis points better than Q3 and was supported by a pull forward of price increase plans in certain U S markets to respond to cost inflation.
Speaker 4: Included in the volume growth is the impact of some opportunistic ancillary revenues we picked up in our Western Canadian operations. Commodity prices softened versus the peak we saw in Q3, so that was a modest drag on the quarter as compared to guidance.
Included in the volume growth has been back to some opportunistic ancillary revenues, we picked up in our western Canadian operations.
Entity prices softened versus the peak we saw in Q3, so that was a modest drag on the quarter as compared to guidance.
Speaker 4: Specifically on M&A, we saw meaningful volume in the tariff-tier liquid business continue straight through to December , a deviation from the typical seasonality profile. We also saw growth exceed expectations in certain of the new U.S. markets that came through the Q4 2020 acquisition.
Specifically on M&A, we saw meaningful volume in the tariff your liquid business continue straight through to December a deviation from a typical seasonality profile. We also saw growth exceed expectations in certain of the new U S markets that came through the Q4 2020 acquisitions it.
Speaker 4: It's not uncommon to have imperfect information on the contribution cadence of recent M&A, and as of late, COVID-related disruptions and then subsequent catch-ups have compounded some of this forecast uncertainty. Infrastructure and soil remediation continues to see delays in the start-up of new projects, but our pipeline of new opportunities remains robust, and our outlook for this segment, as we finally get the other side of COVID restrictions, is exceptionally positive.
It is not uncommon to have been perfect information on the contribution cadence of recent M&A and as of late Covid related disruptions and then subsequent catch ups are compounded some of this forecast uncertainty infra.
Infrastructure and soil remediation continued to see delays in the startup of new projects, but our pipeline of new opportunities remains robust and our outlook for this segment as we finally got the other side of Covid restrictions is exceptionally positive.
Speaker 4: On page 6 you'll see adjusted EBITDA for Q4 of $388.3 million at a margin of 25.2%. The decline in commodity prices, outperformance of the relatively lower margin M&A contributors, and the ancillary Western Canadian revenues all combined to partially offset the base number for margin that was largely in line with guidance.
On page six you'll see adjusted EBITDA for Q4 of $388 3 million and a margin of 25, 2%.
The decline in commodity prices outperformance of the relatively lower margin M&A contributors and the ancillary western Canadian revenues, all combined to partially offset the base number for margin that was largely in line with guidance.
Speaker 4: While internal cost inflation continues to rise and now sits around four, we view this quarter as a continued demonstration of the capacity of our platform to respond with price levels that not only cover the cost escalation, but drive organic margin expansion as well.
While internal cost inflation continuing to rise announcements around four we view. This quarter is the continued demonstration of the capacity of our platform to respond with price levels that not only cover the cost escalation, but drive organic margin expansion as well.
Speaker 4: Looking at each of the segments, solid waste margins were 30% or better every quarter this year, a first for the company and a result that is all the more impressive when considering the inflationary backdrop under which it was achieved.
Looking at each of the segments solid waste margins were 30% or better every quarter. This year, a first for the company and the result of it is all the more impressive when considering the inflationary backdrop under which it was achieved.
Speaker 4: excluding the impact of M&A, macro headwinds, and certain one-time gross collection volumes, margins expanded organically 20 basis points quarter over quarter, driven by pricing and overall operating leverage. The margin drive from rising fuel prices was partially offset by benefits from commodity pricing. For the year as a whole, solid waste margins expanded 90 basis points, with organic margin expansion in both of our geographies.
<unk> the impact of M&A macro headwinds and certain onetime both collection volumes margins expanded organically 20 basis points quarter over quarter, driven by pricing and overall operating leverage the margin drag from rising fuel prices was partially offset by benefits from commodity pricing.
For the year as a whole solid waste margins expanded 90 basis points with organic margin expansion in both of our geographies.
Speaker 4: Liquid waste margins were 21.7% for the quarter and were impacted by the outsized and dilutive revenue contribution from Tarapir.
Liquid waste margins were 21, 7% for the quarter and were impacted by the outsized and diluted revenue contribution from tariff your.
Speaker 4: TerraPure margins are right in line with exceptions and we continue with expectations and we continue to see a path to bring the TerraPure liquid revenues up to and then above the average margin for the liquid segment.
Character margins are right in line with exceptions, and we can do with expectations and we continue to see a path to bring the therapy liquid revenues up too and then above the average margin for the liquid segment for the year as a whole liquids margins increased 80 basis points, overcoming 100 basis point headwind from M&A and demonstrating the operating leverage at <unk>.
Speaker 4: For the year as a whole, liquid margins increased 80 basis points, overcoming a 100 basis point headwind from M&A and demonstrating the operating leverage associated with post-COVID volume recoveries that we had forecasted.
As stated with post Covid volume recovery that we had forecasted.
Speaker 4: Infrastructure and soil margins improved over 400 basis points period over period as the soil volumes recovery continued and we're able to leverage the relatively fixed cost structure of the segment.
Infrastructure and soil margins improved over 400 basis points period over period as the soil volumes recovery continued and we were able to leverage the relatively fixed cost structure of this segment.
Speaker 4: While the first part of 2022 will be challenging on margins from a quarter-over-quarter comparison perspective, we are confident in our ability to continue to use our pricing levers as well as cost and asset-based optimization to drive sustained and ongoing margin expansion over the near and longer term.
While the first part of 2022 will be challenging on margins from a quarter over quarter comparison perspective, we are confident in our ability to continue to use our pricing levers as well as cost and asset base optimization to drive sustained and ongoing margin expansion over the near and longer term.
Speaker 4: On page 7, you can see adjusted cash flow from operating activities of $321 million, a 33% increase over the prior period. We completed another asset divestiture during the quarter, bringing total proceeds from asset disposals for the year to approximately $260 million. As previously discussed, we are redeploying these dollars into attractive, high-return growth initiatives within the base business.
On page seven you can see adjusted cash flow from operating activities of $321 million or 33% increase over the prior period, we completed another asset divestitures during the quarter, bringing total proceeds from asset disposals for the year to approximately $260 million as previously discussed we are redeploying these dollars into attractive.
High return growth initiatives within the base business.
Speaker 4: Because the success of our portfolio rationalization efforts outpaced our ability to redeploy the proceeds into the business, we have a timing difference between dollars received and dollars deployed. As such, for the annual Adjusted Free Cash Flow reconciliation, we have included an adjustment to exclude the excess proceeds realized from asset disposal with the intent of burdening the Adjusted Free Cash Flow number with a normalized level of CapEx.
Because of the success of our portfolio rationalization efforts outpaced our ability to redeploy the proceeds into the business. We have a timing difference between dollars received a $1 deployed.
As such for the annual adjusted free cash flow reconciliation. We've included an adjustment to exclude the excess proceeds realized from asset disposals with the intent to burdening. The adjusted free cash flow number with a normalized level of Capex. When we discuss our guidance for 2022 will provide additional color as to how we're thinking about the treatment of these excess proceeds.
Speaker 4: When we discuss our guidance for 2022, we'll provide additional colors to how we're thinking about the treatment of these excess proceeds.
Speaker 4: During the quarter, we normalized for an incremental $5.6 million of working capital related to REITs and M&A that we believe is better characterized as part of purchase price. We believe our cash collection toward the end of December were modestly impacted by disruptions from the rapid spread of Omicron over the holiday period, and also our working capital was negatively impacted by just under $10 million as a result of the required repayment of 2020 payroll taxes previously deferred under the CARES Act.
During the quarter, we normalized for an incremental $5 6 million of working capital related to recent M&A that we believe is better characterized as part of the purchase price. We believe our cash collection towards we ended December were modestly impacted by disruptions from the rapid spread of omnicom over the holiday period and also our working capital was negatively impacted by just under 10 million.
As a result of the required repayment of 2020 payroll taxes previously deferred under the cares Act.
Speaker 4: Despite this $10 to $20 million working capital headwind, we realized over $540 million of adjusted free cash flow for the year, a result ahead of our guidance and representing over 50% growth as compared to the prior year, an outcome that we believe continues to demonstrate the attractiveness of our ongoing free cash flow growth opportunities.
Despite this $10 million to $20 million working capital headwind, we realized over $540 million of adjusted free cash flow for the year. Our results ahead of our guidance and representing over 50% growth as compared to the prior year an outcome that we believe continues to demonstrate the attractiveness of our ongoing free cash flow growth opportunities.
Speaker 4: Turning to page 8, in terms of net leverage, we ended the year as anticipated at 4.75 times, in part due to the previously announced issuance of 300 million U.S. dollars per bird equity.
Turning to page eight in terms of net leverage we ended the year as anticipated a 475 times in part due to the previously announced issuance of $300 million preferred equity.
Speaker 4: we deployed approximately $1 billion into 17 acquisitions during the quarter. Now over $900 million of this was completed when we last spoke in November , so it's about $90 million deployed into nine tuck-ins as the net new number since we last spoke.
We deployed approximately $1 billion into 2017 acquisitions during the quarter now over $900 million of this was completed when we last spoke in November so is about $90 million deployed into the nine tuck ins as the net new number since we last spoke for all of the acquisitions completed during the year, we expect to generate annualized revenues of approximately <unk>.
Speaker 4: For all the acquisitions completed during the year, we expect to generate annualized revenues of approximately $785 million.
$785 million, we previously guided towards a rollover of approximately $450 million related to M&A, we still believe that to be inaccurate net number as the new $50 million of <unk>.
Speaker 4: We previously guided towards a rollover of approximately $450 million related to M&A. We still believe that to be an accurate net number, as the new $50 million of revenue acquired since our last guidance is largely offset by the timing differences related to terapure and the incremental negative rollover from incremental divestitures.
Revenue acquired since our last guidance is largely offset by the timing differences related <unk> and the incremental negative rollover from incremental divestitures.
Speaker 4: From a liquidity perspective, we start the year with nearly $200 million of cash on hand and an undrawn revolver, which we think is an ideal setup, providing maximum optionality as we evaluate growth opportunities for 2022.
From a liquidity perspective, we started the year with nearly $200 million of cash on hand, and an undrawn revolver, which we think is in the ideal setup, providing maximum optionality as we evaluate growth opportunities for 2022.
Speaker 3: Picking up on page 10, we wanted to highlight what we believe to be the final significant step in our near-term portfolio rationalization initiative.
Picking up on page 10, we wanted to highlight what we believe to be the final significant step in our near term portfolio rationalization initiatives.
Speaker 3: Our infrastructure and soil remediation segment is comprised of two divisions with two different margin profiles. A mid-team service component and a high-20 soil division. The soil division is a service line that the entire industry participates in, but the services division has a different investment profile relative to our core solid and liquid waste businesses.
Our infrastructure and swarm aviation segment is comprised of two divisions with two different margin profiles are mid teens service component and a high 20 <unk> Division.
So our vision is a service line that the entire industry participate Tim but the services division has a different investment profile relative to our core solid and liquid waste businesses.
Speaker 3: We believe that our services division leadership team is best in class and would thrive if given the opportunity to invest incremental growth capital into its business.
We believe that our services Division leadership team is best in class and will thrive as given the opportunity to invest incremental capital into its business.
Speaker 3: That investment has been tempered under the GSL as we've been focused on deploying capital into our solid and liquid wage business.
That investment has been tempered under the GSL as we've been focused on deploying capital into our solid and liquid waste businesses.
Speaker 3: On page 11, we outline our plan. We will bring together our services business with CoCo Paving to create a leading infrastructure services growth vehicle called Green Infrastructure Partners.
On page 11, we outline our plan.
We will bring together our services business with cocoa savings to create a leading infrastructure services growth vehicle called Green infrastructure partners.
Speaker 3: Cocoa is a leading vertically integrated civil infrastructure company with highly complementary assets and service offerings to our existing infrastructure business.
<unk> is a leading vertically integrated civil infrastructure company with highly complementary assets and service offerings to our existing infrastructure business.
Speaker 3: I will be the chairman of the new entity and oversee the new management team, which will be a mix of existing GFL and COCOA leaders. With 180 million of pro forma EBITDA and meaningful M&A pipeline, we see a highly attractive value creation opportunity by spinning off the infrastructure services business and allowing it to capitalize on the value creation that we believe will far exceed its value with the inside GFL.
I will be the chairman of the new entity and oversee the new management team, which will be a mix of existing GSL and cocoa leaders.
It was $180 million of pro forma EBITDA and meaningful M&A pipeline, we see a highly attractive value creation opportunity by spinning off the infrastructure services business and allowing us to capitalize on the value creation that we believe will far exceed its value within <unk>.
Speaker 3: The form of the transaction will see us sell the infrastructure business to green infrastructure partners for cash and equity interest in the new entity. When complete, we will no longer recognize the results of infrastructure services within GFL's financial statement. Instead, we will carry our investment in green infrastructure partners that we can monetize over time as value is created.
The form of the transaction, we will see us sell the infrastructure business, the green infrastructure partners for cash and equity interest in the new entity.
When complete we will no longer recognize the results of infrastructure services within GFS financial statements. Instead, we will carry our investment in green infrastructure partners that we can monetize overtime as value is created.
Speaker 3: While the timing of the infrastructure services divestiture is still a moving target, we intend to execute the plan in the interim.
While the timing of infrastructure services. The venture is still a moving target we intend to execute the plan in the near term.
Speaker 3: Page 12 illustrates the impact of the divestiture to GFL post-transaction. In summary, the weighted of solid waste in the portfolio increases, even our margins increase, and the retained soil and radiation division will be combined with our liquid waste segment and renamed environmental services, simplifying our overall segment reporting.
Page 12 illustrates the impact of the divestiture to <unk> post transaction in summary, the weighted of solid waste in the portfolio increases EBITDA margins increase and the retained so our mediation division will be combined with our liquids segment and renamed Environmental services simplifying our overall segment reporting.
Speaker 3: And finally, while I'm not listed on the page, we think there's an opportunity to take the cash component of the consideration we brought to the infrastructure business and redeploy it into near-term M&A opportunities to backfill the divested infrastructure services EBITDA.
And finally, while not listed on the page, we think Theres an opportunity to take the cash component of the consideration we got to the infrastructure business and redeploy into near term M&A opportunities to backfill the divested infrastructure services EBITDA.
Speaker 3: With the increase in the weighting of solid waste and the opportunity for near-term M&A, this reaffirms our conviction that there is still a lot of opportunity for growth within our solid waste business, both organically and through accretive acquisition.
With the increase in the leading a solid way and the opportunity for near term M&A. This reaffirms our conviction that there is still a lot of opportunity for growth within our solid waste business, both organically and through accretive acquisitions.
Speaker 3: I will now pass it back to Lou to talk about further while we're viewing our guidance.
I will now pass it back to Luke talk about further while reviewing our guidance.
Speaker 4: So, starting on page 15, we've laid out the details for the guide. We followed the same format as last year, so hopefully that makes it easy to follow. Page 15 reiterates the levers Patrick mentioned earlier that we intend to continue to pull and create equity value. We believe we have demonstrated capabilities in each of these areas since we went public. We think the opportunities set looking forward is even greater than what we've accomplished to date.
So starting on page 15, we've laid out the details for the guide we follow the same format as last year. So hopefully that makes it easy to follow page 15 reiterate the lever as Patrick mentioned earlier that we intend to continue to pull and create equity value. We believe we have demonstrated capabilities in each of these areas. Since we went public we think the opportunity set looking forward is even greater than what we've accomplished to date.
Speaker 4: Looking at page 16, we've laid out how we see it all coming together on the top line. Solid waste pricing at high 4s, a full 100 basis points better than the prior year in response to inflationary cost pressures. There could be upside to the pricing number depending on retention rates and actual CPI levels of the time that each of our various resets get calculated.
Looking at page 16, we've laid out I would see it all coming together on the top line solid waste pricing at high fours or 400 basis points better than the prior year in response to inflationary cost pressures there.
There could be upside to the pricing number number depending on retention rates and actual CPI levels at the time that each of our areas resets get calculated.
Speaker 4: fall wage volume at a point to a point and a half. We expect to anchor at the high end of this range with the opportunity to beat if Canada can once and for all move beyond the lingering lockdown disruption.
Waste volume at a point to a point and a half we expect the anchor at the high end of this range with the opportunity to be a candidate and once and for all move beyond the lingering in lockdown disruptions.
Speaker 4: Commodity prices are plus 0.25%, whereas non-recurring commodity volumes that we benefited from in 2021 are just over a half a point headwind. So the net commodity impact we expect to be about a 40 basis point drag. The commodity forecast assumes January's net basket price of approximately $170 Canadian per metric tonne, which was about $25 less than where the basket was when we provided our outlook in November , a decrease that has an impact of about $20 million to revenue EBITDA and pre-cash flow.
Commodity prices are plus two 5%, whereas nonrecurring commodity volumes that we benefited from in 2021 or just over half a point headwind. So a net commodity impact we expect to get about 40 basis point drag the commodity forecast assumes january's net basket price of approximately $170 Canadian per metric ton, which was about $25 less than where the bath.
It was when we provided our outlook in November a decrease as an impact of about $20 million the revenue EBITDA and free cash flow.
Speaker 4: Liquid and infrastructure expected to generate 5 to 6 percent top-line growth, largely on the expected volume recovery associated with the reopening. The net M&A rollover, including the approximate $40 million negative rollover from divestitures, is expected to be around $450 million. The guidance assumes an FX rate of 1.26 versus the 1.25 average in 2021.
Liquid and infrastructure expected to generate 5% to 6% top line growth largely unexpected volume recovery associated with the reopening the net M&A rollover, including approximately $40 million negative rollover from divestitures is expected to be around $450 million. The guidance assumes an FX rate of $1 two six versus the 125 average in 2021.
Speaker 4: That brings you just over $6.3 billion of revenue at the midpoint, or just over 15% growth, excluding the negative drag from divestitures.
That brings me just over $6 3 billion of revenue at the midpoint or just over 15% growth excluding the negative drag from divestitures in the last step of the bridge you can see that we have backed out the standalone guidance for the infrastructure services business that we plan to spin out as Patrick said the timing of the spin out is still a moving target, but we intend to execute the plan.
Speaker 4: In the last step of the bridge, you can see that we have backed out the stand-alone guidance for the infrastructure services business that we plan to spin out. As Patrick said, the timing of the spin-out is still a moving target, but we intend to execute the plan in the near term and will segregate the results from this division until the transaction is consummated. The last bar on the page, which excludes contribution from infrastructure services, shows 5.875 as the midpoint. And this is the number we would highlight as 2022's base revenue guide.
In the near term and we'll segregate the results from this division until the transaction is consummated.
Paul on the page, which excludes contribution from infrastructure services shows 575 is the midpoint and this is the number we would highlight the 'twenty twos 2020 twos base revenue guide.
Speaker 4: Turning to page 17, you'll see that revenue ranges listed on page 16 convert to $17.10 of adjusted EBITDA and $6.80 of adjusted pre-cash flow, including infrastructure.
Turning to page 17, Youll see that revenue range is listed on page 16 convert to <unk> 10 of adjusted EBITDA and $6 80 of adjusted free cash flow, including infrastructure as I mentioned previously the contribution to adjusted EBIT and free cash from commodity prices by $20 million less than we provided our preliminary outlook in November .
Speaker 4: As I mentioned previously, the contribution adjusted EBITDA and free cash from commodity prices by $20 million less than we provided our preliminary outlook in November .
Speaker 4: Those are the numbers for the business as a whole. We've also presented in the blue highlighted column the guidance excluding our infrastructure services. 1645 have adjusted EBIT and 640 have adjusted pre-cash at the midpoint. Again, these are the base numbers that we think you should be expecting for 2022 before considering the impact of any new M&A, which we'll touch on in a moment.
Those are the numbers for the business as a whole. We are also presented in the blue highlighted column the guidance, excluding our infrastructure services $16 45 of adjusted EBITDA and $6 40 of adjusted free cash at the midpoint again. These are the base numbers that we think you should be expecting for 2022 before considering the impact of any net new M&A, which we'll touch on in a moment.
Speaker 4: in terms of the walk from adjusted EBITDA to adjusted pre-cash against the 1645 of EBITDA.
In terms of the walk from adjusted EBITDA and adjusted free cash against the <unk> 45 of EBITDA.
Speaker 4: We're expecting net capex of around $615 million, cash interest expense of approximately $340 million, neutral working capital, and other net drags of approximately $50 million.
We're expecting net capex of around 615 million cash interest expense of approximately $340 million neutral working capital and other net drags of approximately $50 million.
Speaker 4: No incremental M&A, and all free cash flow is used for delevering, the result of which you can see at the bottom of the page with leverage ending at low fours.
No incremental M&A and all free cash flows used for Delevering. The result of which you can see at the bottom of the page with leverage ending in low fours.
Speaker 4: On page 18, we unpack our CapEx for both 2021 and 2022. In 21, we had normal course CapEx of about $540 million. Offsetting this amount was $260 million of proceeds we received from the divestitures. As anticipated, we were able to redeploy just over $110 million of these proceeds into growth initiatives within our business. The remaining $150 million proceeds that we did not reploy during 2021 are normalizing as excess proceeds and expect to invest these dollars in 2022.
On page 18, we unpack our Capex for both 2021 and 2022 and 'twenty. One we are normal course, capex about $540 million offsetting this amount was 260 million of proceeds we received from the divestitures and as anticipated we were able to redeploy or just over $110 million of these proceeds into growth initiatives within our business.
The remaining 150 million proceeds that we did not reply. During 2021 are normalizing as excess proceeds unexpected invest these dollars in 2022 looking at the 2022 bridge at the bottom Vijay team, we've identified approximately $150 million of incremental growth opportunities substantially all of which will be funded with excess proceeds from 2021.
Speaker 4: Looking at the 2022 bridge at the bottom of page 18, we've identified approximately $150 million of incremental growth opportunities, substantially all of which will be funded with the excess proceeds from 2021.
Speaker 4: These investments are centered around new and material upgrades to existing recycling facilities, continued investment in the infrastructure and asset bases of certain new markets, and R&G development. Again, all this investment is being funded by the proceeds from our Rationalization Program. So another way of thinking about these dollars is simply a timing difference between when the cash was received and when it will be spent. This bridge does not reflect any cash proceeds received for the sale of infrastructure division, as we intend to reinvest those dollars into M&A.
These investments are centered around new and material upgrades to existing recycling facilities continued investment in the infrastructure and asset bases of certain new markets and RMG development again all of this investment is being funded by the proceeds from our rationalization program. So another way of thinking about these dollars is simply a timing difference between when the cash was received and when it will be spent.
The bridge does not reflect any cash proceeds received from the sale of infrastructure division as we intend to reinvest those dollars into M&A.
Speaker 4: Consistent with past practice, our guidance does not include any impact from future M&A. As Patrick mentioned, our M&A pipeline is robust, and page 19 has summarized how we are thinking about the landscape.
Consistent with past practice, our guidance does not include any impact from future M&A as Patrick mentioned, our M&A pipeline is robust and page 19, and summarize how we are thinking about the landscape for us.
Speaker 4: There's one larger transaction within our footprint that could largely backfill the infrastructure services that we have carved out in our guidance.
One larger transaction within our footprint that could largely backfill the infrastructure services EBIT, we have carved out in our guidance. This opportunity will be immediately accretive and actionable in the first half of 'twenty. Two then on top of this larger opportunity. We anticipate continued execution of our regular tuck in M&A program, we highlight this opportunity $250 million to $300 million of increments.
Speaker 4: This opportunity will be immediately accretive and actionable in the first half of 2022.
Speaker 4: Then on top of this larger opportunity, we anticipate continued execution of our regular tucking M&A program. We highlight this opportunity as $250 to $300 million of incremental revenue across 25 to 30 transactions. The history has shown that there's upsides to this number. If you think about those as potential upside opportunities, page 20 shows that if executed, we could exit 22 with adjusted EBITDA of $1.8 billion and adjusted pre-cash flow of $730 million on a run rate basis.
Revenue across 25% to 30 transactions, but history has shown that there is upside to this number if you think about those as potential upside opportunities page 20 shows that if executed we could exit 'twenty two with adjusted EBITDA of $1 8 billion and adjusted free cash flow of $730 million on a run rate basis.
Speaker 3: Page 21 has an overview of RNG opportunities and while not highly relevant for our 2022 guidance we wanted to frame how this ties into how we're thinking about 2023.
Page 21 is an overview of our R&D opportunities and while not highly relevant for our 2022 guidance. We wanted to frame how this ties into how we're thinking about 2023.
Speaker 3: We are contemplating using the 50-50 joint venture structure arrangement with third parties for the development of the landfill sites where we think there are viable R&G projects. Using conservative assumptions, we think our portion of the aggregate incremental free cash flow from these sites could be $150 to $200 million per annum.
We are contemplating using a 50 50 joint venture structure arrangements with third parties from development of the landfill sites, where we think they are a valuable R&D projects using conservative assumptions, we think our portion of the agrements aggregate incremental free cash flow from these sites could be $150 million to $200 million per annum.
Speaker 3: We have finalized arrangements for the first four sites are in the process of finaling the next five sites and the expectation that our portion of adjusted pre-cash flow from these nine sites will be 105 to 125 million per year.
We have finalized arrangements for the first four site during the process of finally in the next five sites and the expectation that our portion of adjusted free cash flow from these on site will be $105 million to $125 million per year.
Speaker 3: Our portion of the expected capital outlay for these nine projects is $150 to $180 million, the majority of which will be spent in 2023.
Our portion of the expected capital outlay for these non project is $150 million to $180 million. The majority of which will be spent in 2023.
Speaker 3: We see RNG as a great add-on to our core business, but it will not distract us from our focus on continuing to invest in the fundamental organic and M&A levers to drive our continued growth that we highlighted earlier.
We see R&D as a great add on to our core business, but it will not distract us from our focus on continuing to invest in the fundamental organic and M&A levers to drive our continued growth that we highlighted earlier.
Speaker 3: On page 23, you will see we start with our potential 2022 run rate.
On page 23, you will see we start with our potential 2022 run rate.
Speaker 3: Add this conservative estimate of the RNG opportunity to normal course and to normal course organic and M&A assumptions in 2023 and we end with an adjusted free cash flow run rate in the mid-900s, setting a clear path to exceed $1 billion in 2024.
As a conservative estimate of the RMG opportunity to normal course, and the normal course organic and M&A assumptions for 2023, and we end with an adjusted free cash flow run rate in a big 900, setting a clear path to exceed one point.
$1 billion in 2024.
Speaker 3: As many of you have followed GFL through our history, we think you'll see that there is a consistent theme when we have these calls with you every quarter. As owners, our senior management team is fully aligned with our shareholders. Our 2021 results, again, reaffirm how that alignment drives this management team to achieve industry-leading results, even in the face of the most challenging times.
As many of you have followed GFS of our history. We think you will see that there is a consistent theme. When we have these calls with you every quarter as owners our senior management team is fully aligned with our shareholders. Our 2021 results again reaffirm how that alignment drive this management team to achieve industry, leading results even in the face of the most challenging times.
Speaker 3: I'm very proud of what we've achieved so far, and I've never been more optimistic about what GFL's future holds. I will now turn the call over to the operator to open the line for questions.
I am very proud of what we've achieved so far and I've never been more optimistic about what GFS future holds I will now turn the call over to the operator to open the line for questions.
Speaker 2: Thank you. As a reminder, if you would like to ask any question, please press star followed by one on your telephone. Keep us now on the slack icon. If you have joined us online.
Thank you as a reminder, if you would like to ask any question. Please press the star followed by one on your telephone keypad now what the <expletive> icon, you'll have Jerry nice online.
Speaker 2: When asking a question, make sure your phone is unmuted locally. The first question comes from Hamza Massiri from Jefferies. Please, Hamza, your line is now open.
When asking a question make sure youre falling suddenly it locally.
Next question comes from Hamzah <unk> from Jefferies. Please handset your line is now open.
Speaker 5: Good good morning. Thank you. You know my first question Maybe for Luke is is just on free cash flow. You know it looks like the sector You know organically grows free cash flow in general high single-digit. Maybe if you add M&A Maybe it's 10% or slightly higher. You know your your free cash flow profile and growth Appears Much higher than bears, and and you know we it looks like it's approaching a billion in the out year Maybe walk us through you know what you're doing differently. How sustainable is this? You know do you just feel like your markets have less competition. I know there's some mixed differences in Canada versus u.s. But just walk us through you know confidence level in that free cash flow profile And and and why your numbers are a lot higher than peers
Good morning, Thank you.
My first question.
Maybe for Luke is just strong free cash flow.
It looks like the sector.
Organically gross free cash flow in general high single digits, maybe if you aren't M&A, maybe it's 10% or so.
Likely higher.
Your free cash flow profile and growth.
Appears much higher than peers.
It looks like it's approaching a 1 billion in the out year, maybe walk us through.
What youre doing differently, how sustainable is this.
Do you just feel like your markets have less competition I know there is some mix differences in Canada versus U S.
But just walk us through confidence level in that free cash flow profile.
And why your numbers are a lot higher than peers.
Speaker 4: Yeah, thanks, Hansa. Good morning. I mean, I think it's a great question. It's one that we sort of sit around and think about a lot when we look at where the sort of stock price is and try and correlate the sort of two of them. I mean, I think you're right. The normal model in this industry is you have mid-single-digit top line with a little bit of margin expansion, and at the bottom line, it equates to sort of, you know, high single-digit pre-cash flow. I think when you look at our business, because of the sort of market selection, quality of the asset base, and all the opportunity we have in the middle,
Yes, Thanks, Hans and good morning.
I think it's a great question is one that we sort of sit around and think about a lot. When we look at where the stock prices and try and correlate the sort of two of them. I mean, I think you are right. The normal model in this industry as you have mid single digit top line with a little bit of margin expansion and at the bottom line a quake.
High single digit free cash flow I think when you look at our business.
Market selection and quality of the asset base and all the opportunity we have in the middle we see an opportunity before considering the capital structure to beat that through the margin expansion. So even at sort of 5% top line growth I think we can eke out a little bit of incremental margin year over year, which is going to help drive a bigger number at the free cash flow line and when you couple that with.
Speaker 4: we see an opportunity before considering the capital structure to beat that through the margin expansion. So even at a sort of 5% top line growth, I think, we can eke out a little bit of incremental margin year over year, which is going to help drive a bigger number at the free cash flow line. Then when you couple that with what I think is a unique opportunity solely for GFL, which is the delevering profile. If you think today about that interest cost, as we're able to leverage that interest cost line going forward as we've reached the inflection point of self-funding our growth, there's a meaningful accretion at the free cash flow line that comes from that. And I think you put those factors together, you can take what a normal course grower is at sort of eight or nine, and organically, you can see that at low to mid sort of teens as a result of what I think is that unique advantage for GFL tied to the markets and the cap structure. Then on top of that, when you look at what we've been able to achieve and look to continue to achieve in these sort of organic redeployments, I think you have another sort of five to seven basis points easily sustainable for the next few years on that piece. And that's now all of a sudden brought free cash flow growth up to a sort of high teen, low 20% number. Then you layer on M&A on top of that, and you look at the numbers, last year was 50%, next year is 30% that this conservative guide we're giving, the year above is another 30%. I think there's a real unique opportunity that's compounded by not just the outside M&A and other, but just an organic opportunity that's unique to the industry. I think in time, as I've heard people say, the results are noisy, but as that noise subsides, I think you'll clearly be able to see this organic growth rate of the free cash flow far in excess of peers, and then complemented, if you will, by all this other value-added items we've been looking at.
What I think is a unique opportunity solely for GSL, which is the delevering profile I think we think today, but that interest costs as we are able to leverage that interest cost line going forward as we've reached the inflection point of self funding.
Our growth there is a meaningful accretion at the free cash flow that comes from that and I think you put those factors together you can take what are normal course grower or is it sort of eight or nine and organically you can see that at low to mid teens. As a result of what I think is a unique advantage for GSL tied to the markets and the cap structure that on top of that when you look at.
What we've been able to achieve and look to continue to achieve in.
These sort of organic redeployment. So I think you have another sort of five to seven basis points easily are sustainable over the next few years on that piece right and Thats about where all of a sudden brought free cash flow growth up to a sort of high teens low 20% number and then you layer on M&A on top of that I mean, you look at the numbers was jumping at least 50% extra 30% that this conservative guidance.
Again, the year above is another 30% I think there is a real unique opportunity that's compounded by not just the outsized M&A and other but just on the organic opportunity that's unique to the industry.
I think in time.
And I've heard people say the results are noisy, but as that noise of size I think that clearly would be able to see this organic growth rate at the free cash flow far in excess of peers and then complemented if you will by all this other value added items, we've been looking at.
Speaker 5: Got it. You know, the other question would just be on the infrastructure announcement. You know, it's pretty clear. But could you just talk about...
Got it.
The other question would just be on the infrastructure.
Smart.
It's pretty clear.
Could you just talk about.
Speaker 5: You know what what kind of proceeds do you expect. Is it too early. You know is is what does your equity pickup look like in terms of you know percentage ownership you want to keep. I know Patrick you're going to be chairman of that business.
Yes.
What kind of proceeds do you expect is it too early.
Is is what does your equity pick up look like in terms of percentage ownership you wanted to keep.
Patrick you are going to be chairman of that business.
Speaker 5: you know is is that distracting that you know is that business going to grow to be much larger is is bc partners going to be involved in that just you know any more detail around uh you know the uh the execution of that
Is that distracting.
That business is going to grow to be much larger.
BC partners is going to be involved in that just any more detail around.
Sure.
The execution of that.
Speaker 3: Sure. So, I mean, for some people that don't know the story, I mean, we organically built that business starting really in late 2009, early 2010.
Sure.
I mean, some people I don't know the story I mean, we organically built that business starting really in late 2009 early 2010 and have grown that business really over an eight year period between 2010 and call. It 2018. Thank.
Speaker 3: And I've grown that business really over, you know, an eight-year period between 2010 and call it 2018, free us thinking about starting to go public and, you know, what that would look like in the public realm. And, you know, grew that from zero to, you know, revenue today in excess of $500 million, you know, on the combined sort of infrastructure business.
Thinking about starting to go public and what that would look like.
In the public realm.
From zero revenue.
Revenue today in excess of $500 million on the combined sort of infrastructure business.
Speaker 3: It's always been my view that there's a significant opportunity to create a GFL 2.0 in the infrastructure services business. You know, when we were a private company, we were doing that ourselves.
It's always been my view that there is a significant opportunity to create GSL too.
Infrastructure services business.
When we were a private company, we were doing that ourselves.
Speaker 3: And it was less relevant to how we sort of looked and felt compared to the industry peers.
Tom.
And it would seem with less relevant to how we sort of looked and felt compared to industry peers.
I think he had a best in class management team in that business line.
Beyond Hungary, very successful Guy's industry leaders in Canada.
And we just saw this opportunity I think the easiest path would be just we can just sell it but I think from my perspective, while we sell something where we know there is a significant amount of value to be created for.
For us as shareholders that team reports to me today already so it's about getting more reports.
Speaker 3: They have lots of great ideas and COCO being one of the great ideas we've had over the last couple of years, being an industry leader in Canada, one of the most successful, best family-run businesses in Canada.
We have lots of great ideas in cocoa being one of the great ideas, we've had over the last couple of years being.
An industry leader in Canada, one of the most successful best family run businesses in Canada, right down the middle of the fairway of what GFS likes to do.
Speaker 3: right down the middle of the fairway of what GFL likes to do and you know it worked and you know that got the brain sort of thinking on my side about what we do and this created the opportunity to sort of spin that out. I think when you look at what makes sense for us
And our work.
<unk> got the blame sort of thinking on my side of it what we do and this created the opportunity to start to spin that out I think when you look at what makes sense for us.
Speaker 3: Um, you know, the thought process is, as we said, spin it out, keep it leverage neutral. So, you know, get back, you know, what I would call the round numbers, a quarter of a billion dollars of proceeds.
Yeah.
The thought process things like we said spin it out keep it leverage neutral so I will get back.
The approach for round numbers, a quarter over $1 billion of approaches and then get left with just under 50% equity stake in the new entity and we're going to go and build it and I think overtime as we build it.
Speaker 3: and then get left with just under a 50% equity stake in the new entity. And we're going to go and build it. And I think over time as we build it, you know, we're going to create significant value for our shareholders. And, you know, starting with a, you know, full form even of just call it roughly 180 million. I don't see any reason why we can't take 180 to a billion over sort of five, six years. There's a significant amount of opportunity, significantly under service.
We're going to create significant value for our shareholders and starting with our pro forma EBITDA just call. It roughly $180 million I don't see any reason why we can take the $180 billion to $1 billion over sort of five six years is a significant amount of opportunity significantly under service.
Speaker 3: and highly fragmented and when you start with a business the quality of ours you know if you look at industry comps this combined entity you'll have you know margins that are 400 to 600 basis points higher than the industry norm because of the quality of the two businesses.
We remain highly fragmented and when you start with the business the quality of ours.
Look at industry comps. This combined entity will have margins that are four to 600 basis points higher than the industry norm because of the quality of the two businesses. So it's very unique opportunity it will be a great opportunity for our investors to participate in that followed the GSL story.
Speaker 3: So, it's a very unique opportunity. It'll be a great opportunity for our investors to participate in that have followed the GFL story. And, you know, for GFL shareholders that have been a part of it that are going to contribute out of the gate, it's a great opportunity as well. So, I think it's a win-win for everybody and I think we'll just create a lot more value than we probably could have if we just would have sold it off.
And for <unk> shareholders that have been a part of it that are going to contribute <unk> to date, it's a great opportunity as well. So I think it's a win win for everybody and I think it will just create a lot more volume probably cut of it we've just would've sold it off.
Speaker 5: And then just last question. I'll turn it over. You know you have a lot going on. You have these free cash flow numbers in a lot of detail after 2023. And you know people can probably project beyond that. You've been public for two years Patrick. Stocks been you know volatile. It's been a good stock last year. Obviously the market does what it does. But but but maybe talk about you know your role at GFL. You know do you plan to see this see this whole thing through. Do you plan on being here over a decade. How are you thinking about you know your role. You know given obviously you have a lot of network tied into this. But also you've created a ton of value in the private market for yourself and others over you know.
And then just last question I'll turn it over.
You have.
A lot going on you have these free cash flow numbers and a lot of detail our 2023 and people can probably project beyond that.
<unk> been public for two years.
Greg stock spend.
Volatile.
It's been a good stock last year.
Obviously the market does what it does but maybe talk about.
Your role our GFS.
Do you plan to see this.
See this whole thing through do you plan on being here over a decade, how are you thinking about.
Overall.
Given obviously you have a lot of network tied into this but also you've created a ton of value.
In the private market for yourself and others over.
Speaker 5: the last decade plus.
The last decade plus.
Speaker 3: Yeah, I mean, a lot is sort of unpacked there, but I think for where we sit today...
Yeah.
Lots of sort of unpack, there, but I think.
So where we sit today.
I think.
Speaker 3: You know, we get a lot of, I can't control the stock price, right? Like there's certain things I control. All I can control is allocating capital, making the right decisions for the business that I think are going to create value over the long term.
Yes, we get a lot of I can't control the stock price very like certainties that control all I can control is allocated capital, making the right decisions for the business, but I think youre going to create value over the long term, that's what I've done here for 16 years, and I don't think thats going to change anytime soon.
Speaker 3: That's what I've done here for sort of 16 years. And I don't think that's going to change anytime soon. You know I think as we continue getting respect from you know the industry as this thing continues to season I'm not going to be happy until I see this stock go from you know wherever it's 30 to 33 U.S. to 100 U.S. and I think.
I think as we continue getting respect from the industry. As this thing continues to season I'm not going to be happy until I see the stock go from wherever it's 32% 33 U S 100 U S and I think that's at the tip of our fingers.
Speaker 3: That's at the tip of our fingers. I think, you know, I think.
I think I think.
Speaker 3: you know, it's always been sort of the under promise and over deliver approach. I think you see that. I think we've, you know, investors have asked us what the pieces of the puzzle look like. And I think that's why we came out and gave you the pieces of puzzle. I don't think there's a more attractive story in the industry today. We're in an amazing industry with amazing peers that have been successful over a long period of time.
There's always been some of the under promise and over deliver approach I think you see that I think we.
Investors have asked us what the pieces of the puzzle look like and I think Thats why we came out and gave you the pieces of puzzle I don't think there is a more attractive story in the industry. Today, we are in an amazing industry with amazing peers that have been successful over a long period of time and there's no better industry that want to be in today than this one and I think there is a significant amount of value.
Speaker 3: There's no better industry that I'd want to be in today than this one. And I think there's a significant amount of value that can be created here over the next little while. And at the end of the day, I'm here because I want to win. I don't need to be here for a paycheck and
That can be created here over the next little while again.
I'm here, because I want to win I don't need to be here for a paycheck.
Speaker 3: I have enough money. But like anything, I'm here to make money and make more money. And I'm going to make more money for everybody that's on this call. So we're going to take the 33 and we're going to get to 100. And we're not going to stop until we get there. When we get to 100, then we'll realign our goals. But that's where I sort of feel the opportunities here and where we're going to go.
I have enough money, but like anybody have yet to make money and make more money and I'm going to make more money for everybody Thats on this call. So we're going to take the 33 and we're going to get to 100, and we're not going to stop until we get there. When we got to 100, then when we align our goals, but that's where I sort of feel the opportunities here and where we're going to go.
Speaker 5: got it and you're still a young guy so you have a lot of time thank you
Okay got it and you are still a young guy. So you have a lot of time. Thank you.
Yes.
Yeah.
And both of them all hold hands with my wife.
We're going to keep working until we get there.
Thanks.
Thank you.
Speaker 2: Thank you. Our next question comes from Michael Hoffman from Stifel. Please, Michael, your line is now open.
Thank you. Our next question comes from Michael Hoffman from Stifel. Please Mike Your line is now open.
Speaker 4: Hi, thank you very much. So we I'm going to tackle green infrastructure for a second. Just so you you're putting in your fifty five million you're getting half of the value you put it in for cash and then the equity interest. Beth help me if I've got these numbers right. You then got one hundred eighty million starting number. Throw it. Call it 4 or 5 percent organically. Add 20 million to be the top for M&A.
Hi, Thank you very much.
I'm going to tackle drain infrastructure for a second just so.
If you are putting in your $55 million or getting half the value of you put it in for cash and then the equity interest.
If I got these numbers right. You then got a 180 million starting number EBITDA grow at call.
Call it 45% organically at 20 million of EBITDA from M&A.
Speaker 4: That's a 210 number. Take it public, the peers are 10 to 12. That's a $2.1 billion enterprise value. I don't know, you can elaborate four and a half times, take out 900 million, that's sort of 1.16.
That's a $2 10 number taken public appears a 10 to 12 two.
$2 $1 billion enterprise I don't know you can lever at four five times take out $900 million, that's sort of 1.16.
Speaker 4: 45% of that is $520 million. That's your value plus the cash. Is that the right way everybody should think about that?
45% of that $520 million, that's your value plus the.
The cash is that.
Alright ways, everybody should think about that.
Speaker 4: Yeah, yeah, Mike, I think that math is very good. I mean, I think there's probably more of an opportunity. It all depends on when you would actually want to take the thing public. But yeah, and if you do that, you're getting close to sort of 2x on your equity. And so while it may look on the face of it today that maybe, you know, the 55 isn't getting maximum value, following that logic you just described, we think you're going to end up monetizing that at some significant premium to what you would otherwise get for today. And that's the exact rationale. And if things go well, it could be multiple higher than what you just said.
Yes, yes.
The math is very good I mean, I think there's probably more of an opportunity. It all depends on when you would actually want to take the same public and if you do that you are getting close to sort of <unk> on your equity and so while it may look on the face of it today that may be.
The 55 isn't getting maximum value following that logic. You. Just described we think you're going to end up monetizing that at sub.
A significant premium to what you would otherwise get for it today and that's the exact rationale and if things go well it could be multiples higher than what you just said.
Speaker 4: Right, and I'm using all the low end of things. I'm not trying to overstate it. Take a conservative view. That's how you create the incremental value for the shareholders. It's not the, you're sure you could sell 55 at 12 times or something. This is creating, in a relatively short window of time, how to calculate what...
Right.
Using all the low end of things I'm not trying to overstate stated take a conservative view, that's how you create the incremental value for the shareholders. It's not sure you could sell 55 at 12 times or something.
Creating in a relatively short window of time.
All of them.
Calculate what the path to the upside there.
Correct.
Speaker 6: OK, good. All right, 2022.
Okay.
Alright.
2022.
Speaker 6: Um, yeah, part of being a young company and in the development mode and all the growth. I get the adjustments. That's the
Part of being a young company and in the development mode in all of the growth.
I get the adjustments.
Absent noise people talk about.
Speaker 6: It's 30% of your adjusted pre-cash flow at the midpoint, our adjustment. How do you get that number so...
It's 30% of your adjusted free cash flow at the midpoint our adjustment.
I think that that number sub 10.
When.
Yeah.
I hear people's either adjustments I mean to level set I mean really what we're adding back never mind blowing up the cap structure in past years with the IPO really where we're adding back is sort of $25 million a year at this pace of rebranding where we're painting everything bright green and you can see that as you travel all over the country.
Speaker 4: I mean, really what we're adding back, never mind blowing up the cap structure in past years with the IPO, really what we're adding back is, you know, $25 million a year at this pace of rebranding, where we're painting everything bright green, and you can see that as you travel all over the country. And, you know, that's a strategic decision that we do with this M&A, and, you know, you can debate that. But we say, look, that is unique as we're in growth mode, and there's that $20 million. And you have $60 million a year, roughly, of transaction costs. I mean, you look at the last four years.
The strategic decision that we deal with is M&A and you can debate that but we say about that is unique as we are in a growth mode and that is that $20 million spend you had $60 million a year roughly a transaction cost I mean, you look at the last four years.
Speaker 4: We've done over 125 deals and deployed over $11 billion.
We've done over 125 deals and deployed over $11 billion and across all of that but 60 million Bucks a year and transaction costs of $240 million in aggregate over four years and transaction cost to deploy 11, $11 2 billion, let's say, 2% so.
Speaker 4: And across all of that, about $60 million a year in transaction costs. So $240 million in aggregate over four years in transaction costs that deploy $11.2 billion. I mean, that's, I think, 2%.
Speaker 4: So, you know, what I've said to folks is if we're deploying capital at these levels, there's going to be transaction costs associated with that. I mean, we don't pay bankers. We don't put these lawyer fees and et cetera, sort of add up, and that's what it is. I'd say if you look at the last three years, I think that number has been like $60 million every year. And the free cash flows went from a negative to $300 to $500 on its way to $9.
That said to bolster that we're deploying capital at these levels. There is going to be transaction costs associated with that I mean, we don't pay bankers.
The lawyer fees and et cetera sort of add up.
What it is I would say if you look at the last three years I think.
That number has been like $60 million every year and the free cash flow was went from a negative 300 to 500 unacquainted nine so.
Speaker 4: you know I think the relative quantum of that number is naturally going to decrease through the growth of the free cash and obviously if we're not growing
I think the relative quantum of that number is naturally going to decrease through the growth of the free cash and obviously, if we're not growing free cash at 50% of years.
Speaker 4: free cash at 50% a year you know augmented with the M&A that number is going to come down but if we're deploying this year 2.3 billion dollars across 46 transactions I think 50 to 60 million dollars is you know a fair number of where that's going to shake out so I mean that's the way I think about that I do think though your comment about the percentage that's naturally just coming down in meaningful steps as the base number is growing.
Is that the M&A that number is going to come down, but if we are deploying this.
This year $2 3 billion across 46 transactions, I think $50 million to $60 million.
A fair number of where that's going to shake out so that's the way I think.
Think about that I do think though your comment about the percentage that's naturally coming down a meaningful steps as the base number is growing.
Speaker 6: Great. I think that helps clarify how to think about how dissonant that noise really is. You introduced the idea that we ought to think about margins, first half, second half. Do you want to walk us through the cadence so everybody gets that right?
Great I think that helps clarify what how to think about how dissonant that noise really as you introduce the idea that we ought to think about margins first half second half do you want to walk us through the cadence so everybody again.
Speaker 6: Street numbers don't end up with a, you can drive a truck through it rain. Yeah, so.
Right.
The street numbers don't end up with them.
Right right.
Yeah. So.
Speaker 4: So starting point, we've included in the deck like a full formula for next for a recasting 2021 if you backed out infrastructure. So just so we can have a sort of right level set comparison. If you think we're not going to give the quarterly guidance, I mean, Q1
So starting point we've included in the deck like a pro forma for next for a recasting 2021, if you back that infrastructure. So just so we can have the right level set comparison, if you think we are.
Not going to give the quarterly guidance that in Q1.
Speaker 4: Look, historically it's sort of 22 to 23% of annual revenue in a normal seasonality case. Now, as I said, seasonality is sort of getting a little bit wonky, you know, in Canada with
Historically, it's about a 22% to 23% of annual revenue and the normal seasonality cadence now as I said seasonality is sort of getting a little bit wonky in Canada.
Speaker 4: with the COVID start and stop, but you know, if you take 22 and a half.
With the Colgate starts and stops, but if you take 22, 529% at the midpoint of the revenue range.
Speaker 4: 22.9% times the midpoint of the revenue range, that's $5.9 billion. I think that's a good sort of revenue number for Q1.
$5 9 billion as a good sort of revenue number for Q1.
Speaker 4: I think, you know, typically Q1 is the sort of lowest margin quarter here, the tune of 150, 200 basis points.
Typically Q1 is the sort of lowest margin quarter are to the tune of 150 to 200 basis points, David thinking about high 20 Sevens as the blended number for next year.
Speaker 4: So if you're thinking about high 27s as the blended number for next year, you'd see Q1 is sort of, call it high 25s, I really think if you unpack that, you have, solid will be a tough comp last year, if you look at last year Q1, solid US was its highest margin of the year, which is very atypical for Q1, so normalizing for that, solid's going to have a tough comp, liquid, you know the new liquid will have some expansion, and you can bank on the corporate cost bucket being about sort of 3%. So that's how I'd see Q1 shaking out, then Q2, Q3 and Q4 I think will follow that sort of typical seasonality cadence, you'll peak margins in Q3, you know, and rounding out the year, ending at that sort of high 27s, low 28s as per the guide.
Youll see Q1 and sort of.
Call. It high 20, fives I really think if you unpack that you have solid will be a tough comp last year. If you look at last year Q1.
Solid U S was its highest margin of the year, which is very atypical for Q1. So normalizing for that salt is going to have a tough comp liquid and illiquid will have some expansion.
You can bank on the corporate cost bucket being about sort of 3%. So that's how I would see Q.
Q1 shaking out in Q2, Q3, and Q4 I think we'll follow that sort of typical seasonality cadence you'll peak margins in Q3.
And rounding out the year.
Ending at that sort of high 27 28 for the guide.
Speaker 6: Okay. Um, and then Patrick, I don't think you're going anywhere. You have, I think you have four kids under the age of 10. So, you know, you're going to go to work every day. But more importantly, talk about your bench strength.
Okay.
And then Patrick.
I don't think Youre going anywhere you have.
For kids under the age of 10, so youre going to go to work every day right.
Talk about your bench strength.
Speaker 3: Um, I mean, listen, I mean, yeah, we're gonna do an investor day and yeah, instead of obviously being public, you know.
Alright.
Hi.
Yes.
We're going to do an investor day.
Yes.
Obviously being public.
Speaker 3: a week before COVID hit in March of 2020, we haven't really had the opportunity to sort of showcase.
A week before Covid hit in March of 2020, we haven't really had the opportunity to sort of showcase.
Speaker 3: Showcase the team, and you know, where I sit today, from my perspective, I don't know the other teams, but what this team's been able to accomplish, at the end of the day, I'm here, I'm a cheerleader, right? I'm cheering on.
Okay the team.
And you know where I sit today.
From my perspective, I don't know the other haynesville.
Haynesville what this team has been able to accomplish at the end of the day I'm here I'm, a cheerleader right I'm cheering on.
Speaker 3: you know, starting with sort of Greg Yorston through the sort of, you know, Luke and his team to the HR team to the integration team, the BD team, you know, general counsel. As we go through the whole list, from my perspective, where I sit, there's a handpicked team, best in class management team that have delivered exceptional results quarter after quarter for a long period of time.
Starting with sort of Greg your sin through to sort of look and his team to the HR teams and the integration team the BD team.
General Counsel as we go through the whole list from my perspective, <unk> is the <unk> best in class management team that has delivered exceptional results quarter after quarter for a long period of time.
Speaker 3: When we look at that, you know, I think that is a big thing when you look at the, you know, solid waste, which is a lion's share of our business, if you look at the results.
And when we look at that I think that is a big thing when you look at the solid waste, which is the lion's share of our business. If you look at the results that this team has been able to pump and execute on and the amount of M&A in the face of all these inflationary pressures and all the other things I think it's exceptional.
Speaker 3: that this team has been able to put and execute on and the amount of M&A in the face of all these inflationary pressures and all the other things. I think it's exceptional and you know I look forward to showcasing that team when we do our investor day in May. You know we haven't picked a date exactly yet because we're just waiting to see what happens with COVID but I think
And I look forward to showcasing that team when we do our Investor day in May we haven't exactly yet because we're just waiting to see what happened with Colgate, but I think.
Speaker 3: when that onion gets peeled back and people get to look under the hood, you know, if Patrick gets hit by a bus tomorrow, I think it's going to be pretty clear that GFL is going to be just fine. So, you know, I think we have all of the relevant pieces of that management team in place.
When that gets pulled back and people get to look under the Hood.
And Patrick hit by a bus tomorrow, I think it's going to be pretty clear that <unk> was going to be just fine. So I think we have all of the relevant pieces of that management team in place.
Speaker 3: um and you're just doing and executing and continue to great do great things and it's really amazing to watch because you know from from you know starting on a scale being on a scale to sort of sitting where i am today and then being able to watch you know these guys execute the playbook it's it's pretty amazing and you know it's i take my hat off to them because you know what there's guys that are doing a better job than i did when i was in the seat and you know
And Youre, just doing executing and continue to do great things and it's really amazing to watch because you know from from.
Starting on a scale of being on a scale of a sort of sitting where I am today, and then being able to watch these guys execute the playbook, it's pretty amazing.
I take my hat off to them because what you guys are doing better job than I did when I was in the seat.
Speaker 3: if it wasn't for them and me sort of handing over the reins we wouldn't sort of be where we are so uh you know i'm thankful to all of them for actually making that
If it wasn't for them in these sort of hanging over the reins he wouldn't sort of be where we are.
I am thankful to all of them for actually making that happen.
Speaker 3: But I look forward to showcasing that entire team in May when we do that investor day.
I look forward to showcasing an entire team in may when we do that Investor day.
Okay. Thank you.
Thanks, Brian .
Speaker 2: Thank you. Our next question comes from Tyler Brown from Raymond James. Please, Tyler, your line is now open.
Thank you. Our next question comes from tightened up Brian from Raymond James Please Tyler Your line is now open.
Hey, good morning, guys.
Speaker 4: You guys hear me? Oh, hey, sorry. Hey, um, obviously pricing was really, yeah, it's really solid. You know, it sounds like you pulled forward some PIs into Q4, but given the pull forward and the fact that CPI will layer in over the course of the year, just how does pricing look as the year plays out? Does it start high and fade or should it be pretty consistent as the year plays out?
Hey, Paul.
Guys hear me, Okay sorry.
Obviously pricing was really it's really solid it sounds like you pulled forward some <unk> into.
In Q4, but given the pull forward in the fact that CPI will layer in over the course of the year just how does pricing look as the year plays out does it start high and fade or should it be pretty consistent as the year plays out.
Speaker 4: Yeah, so I still think we're we're anticipating the start high and then walk down but with less fade than a sort of normal year. I mean, Q1 and January particularly, we have about
So I still think we're anticipating the start high and then walk down but with less space than it sort of a normal year I mean Q1 in January , particularly we have about 40% approximately of our CPI resets are hitting then.
Speaker 4: 40% approximately of our CPI resets are hitting then and then just a bunch of open market stuff is focused at that time as well. So Q1 will definitely be the biggest number.
And then just a bunch of all open market stuff is focused at that time as well. So Q1 will definitely be the biggest number.
Speaker 4: know, we've guided sort of the high fours. I think there's maybe opportunity to beat and I think Q1 will tell that tale.
We've guided to sort of the high fours I think there's maybe opportunity to beat and I think Q1 will tell that tail. So if you can see Q1 and it will be dependent on how the CPI resets actually hit and what the Retentions are like but if you see Q1 at a high fives I think thats going to set the stage for our beat for the year.
Speaker 4: So if you can see Q1, and it'll be depending on how the CPI resets actually hit and what the retentions are like, but if you see Q1 at a high five, you know, I think that's going to set the stage for, you know, a beat for the year.
Speaker 4: um but you know we'll we'll see how that actually shakes out but i think you'll have q1 is the majority step down in q2 and then consistently q3 and q4 albeit perhaps not as
But we'll see how that actually shakes out, but I think Q.
Q1 is the majority of the step down in Q2.
And then consistently in Q3 and Q4, albeit perhaps not as big of a step downs as you would've seen in the sort of pre COVID-19 environment. Because we will have good support from large CPI that hit in Q3, primarily in our U S book of business.
Speaker 4: big of a step down as you would have seen in the sort of pre-COVID environment because we will have good support from large CPIs that hit in Q3 primarily in our U.S. public business.
Speaker 4: Right. Okay. That's helpful. And then just real quick on RNG. So to be clear, you know, despite the JV structure, that RNG CapEx will flow through the actual CapEx line. Is that right?
Right. Okay. That's helpful. And then just real quick on R&D, so to be clear. Despite the JV structure that R&D capex will flow through the actual Capex line is that is that right.
Speaker 4: So as the structures aren't all finalized that's still sort of in flux but you know either way we'll parse it out so you actually see the sort of apples to apples if to the extent it manifests itself on certain transactions as investment in JV we'll be sure to sort of ring fence and isolate so people can actually see the real underlying economics.
So.
The structures arent all finalized all of that still in flux, but either way, we will parse it out so you actually see the sort of apples to apples if it <unk>.
Tentage manifest itself on certain transactions as investment in JV, we'll be sure to sort of ring fence and isolate so people can actually see the real underlying economics.
Speaker 4: Okay, and then kind of in the same along the same thinking here, but how in 23 will you account for the unconsolidated share?
Okay, and then kind of in the same along the same.
Thinking here how in 'twenty three.
You account for the unconsolidated share.
Speaker 4: the EBITDA from those plans. Will there just simply be an add back to EBITDA or how will you show that financially. I know it's probably still in flux but just any thoughts there.
The EBITDA from those plants, while theyre, just simply be an add back to EBITDA, how will you show that.
Financially I know, it's probably still in flux, but just any thoughts there.
Speaker 4: Yeah, I mean, again, inflection because all those agreements aren't sort of done. But I mean, if you look in practice, I mean, you know, you end up picking up your proportionate share of the sort of results of the JV. And, you know, if you look at those guys who in practice are already doing this, they exclude that and they add back, you know, their share of the EBITDA.
Yes, I mean again inflection because all those agreements on sort of done but I mean, if you look in practice you end up picking up your proportionate share of those sort of results of the JV and if you look at those guys who in fact is already doing this they exclude that and then add back their share of the EBITDA right. So.
Speaker 4: Right. So there's, you know, other if you look at other RNG players, I mean, Darling, just as an example, is one I was looking at that has a bunch of these, you know, as what the precedent might look like. But, yeah, I think there's something about backing out the normal course accounting and then just layering in your share of the EBITDA is probably how that ends up shaking out.
There is.
If you look at other RMG players I mean Darling just as an example is when I was looking at that has a bunch of these.
What the precedent might look like but yes, I think there is something about backing out the normal course accounting and then just layering in your share of the EBITDA is probably how that ends up shaking out.
Speaker 4: Okay. Okay. That's helpful. It's my last one. And I appreciate the proformas in the appendix. But when you layer in TerraPure just for modeling purposes, will that new environmental services line be about a billion dollars in revenue? Is that kind of a good placeholder?
Okay. Okay. That's helpful. Just my last one and I appreciate the pro forma is in the appendix, but when you layer in Terra pure just for modeling purposes will that new environmental services line.
$1 billion in revenue is that kind of a good placeholder.
Speaker 4: Yeah, that's a perfect place. I think about 2022 is a billion dollars in environmental services and 4.9 of solid, you know, on the base of the base guy. Okay. Okay, perfect. All right.
Yes.
That's a perfect place that I think about 2022 is a $1 billion of environmental services and $4 nine of solid on the base the base guidance Okay.
Okay perfect Alright, I appreciate the time thanks, guys.
Thank you.
Speaker 2: Thank you. Our next question comes from Walter Sprachlin from RBC Capital Markets. Please, Walter, your line is now open.
Thank you. Our next question comes from Walter sparkling from RBC capital markets. Please.
And is now open.
Speaker 6: Thanks very much. Good morning, everyone. So I want to come back on the renewable energy approach and Patrick, your strategy on how to tap that resource that you have. And we've seen your competitors take or discuss and reveal some other ways to do it, more of a go it alone, invest it all, you know, invest and own the entire thing, but then subject
Okay. Thanks, very much good morning, everyone. So I wanted to come back on the renewable energy approach and Patrick your strategy on how to tap that resource that you have.
We've seen your competitors take or discuss.
Reveal some some other ways to do it more of a go it alone invest at all.
Invest.
And on the entire thing, but then subject.
Speaker 6: a little bit to some of the volatility that would come with that higher level of investment. You're going to partner.
Bit too some of the volatility that would come with that higher level of investment you're going to partner.
Speaker 6: approach. I'm hearing positive feedback on that relative to the other approach. Perhaps talk a little bit more about what led to your decision and how would you characterize
Approach.
I'm hearing positive feedback on that relative to the other approach, perhaps talk a little bit more about what led to your decision and how would you how would you characterize.
Speaker 6: the GOAT alone, which being much more upside, but perhaps with some more volatility.
The go it alone, which being much more upside, but perhaps with some more volatility.
Yeah I mean.
Speaker 3: The way I mean, initially, when we started talking about this, I think.
The way I mean.
Initially when we started talking about yes, so I think.
Speaker 3: If you went back, if you sort of rolled back the clock, uh, eight months, eight months ago, I would say.
If you went back could you sort of rolled back to Claude.
Eight months eight months ago, I would say.
Speaker 3: We knew very little about how to actually.
Very little about patent actually.
Speaker 3: Harvest dollars from this R&G. I think some of those other companies that have been going at it alone have significantly more internal resources.
Harvest stall or from this R&D I think some of those other companies that have been going at it alone.
Are you, having any more internal resources.
Speaker 3: um that have been looking at this for a while so i think that was one thing yes we could go and figure it out i'm not looking at this as a core pillar of you know well at the end of the day we're
But I've been looking at this for a while so I think that was one thing yes, we could go and figure it out and not looking at this as a core pillar of <unk>.
At the end of the day, we're one environmental services company R&D is something we sort of found.
Speaker 3: we're an environmental services company, R&G is something we sort of found that was not going to be sort of, you know, a new business line where we were going to stop doing exactly what we've been doing for the last 15 years. It was like how do we realize dollars as quickly as we can with experts that know how to do this, that can get a shovel in the ground as quickly as possible, that have inventory, you know, inventory to build out the parts that they need to build out one of these facilities as quickly as possible, have the engineers on site that can get it permitted, and most importantly find, you know, the best back end to be able to maximize profitability on the sale of the actual R&G.
That was not going to be sort of a new.
New business line, where we were going to stop doing exactly what we've been doing for the last 15 years. So how do we realized dollars as quickly as we can with experts that know how to do this that can get a shovel in the ground as quickly as possible.
Inventory.
Inventory to build out the parts that they need to build out one of these facilities as quickly as possible have the engineers onsite and get it permitted and most importantly find the best back end to be able to maximize profitability on the sale of the actual LNG overall things, we didn't know anything about six to eight months ago.
Speaker 3: Those were all things we didn't know anything about six, eight months ago.
Coupled together with <unk>.
Speaker 3: A lot of our sites had, you know, they already had gas rights that were given away, we had loyalty agreements.
A lot of our sites pad.
They already had gas rates that were given away we had royalty agreements.
Speaker 3: uh you know which require our consent to switch those from you know the typical
Which require our consent to switch those from the typical.
Speaker 3: you know, electric or flaring model to, you know, RNG. So that opened the door to have a discussion about, hey...
Trick or flaring model to R&D, so that open the door to have a discussion about hey, R&D certainly makes more sense and these old sort of electrical subsidized agreements, let's go R&D, but let's split them 50, 50, and it makes sense I think it's fair.
Speaker 3: it'll get us to the market as quickly as possible with experts that do this every day, or someone we didn't have any, in a division that we don't have expertise in. And, you know, it's hugely profitable. So I think you sort of couple that together. I think we learned a lot. I think if we had to go at it on our own today, we probably could on some of these sites. But at the end of the day, it's just something we're not sort of set up to do. And let's just let the expert do it because they're gonna do it better than we're gonna do it. It was just my perspective.
I think it will get us to the market as quickly as possible with experts that do this every day, we're somewhat we didn't have any.
No we don't have expertise in and yes, it's usually profitable. So I think there's been a couple that together I think we learned a lot I think if we have to go out on our own today, we'd probably cut on some of these sites, but at the end of the day. It's just something we're not sort of set out to do and let's just let's let the expert to it because theyre going to do it.
Speaker 3: But at the end of the day, it's just something we're not sort of set up to do. And let's just let the effort do it because they're going to do it better than we're going to do it. It was just my...
Better than oriented.
My perspective.
Speaker 6: Yeah, that makes a ton of sense. Okay, switching gears here to pricing, service, and churn.
Yes that makes a ton of sense.
Okay switching gears here to pricing service and churn.
Speaker 6: you know clearly you're driving prices your as are your competitors when a customer gets a big price increase they may have to take it but i think their lens gets a little more focused on
Clearly youre driving price as is.
Are your competitors.
When a customer gets a big price increase they may have to take it but I think theyre lens gets a little more focused on.
Speaker 6: on getting the right service with the higher price, all things considered. Are you seeing either, you know, any...
Getting getting the right service with the higher price all things considered are you seeing either any any.
Any.
Speaker 6: Are you getting worried at all about any trends in churn within your own organization or and or are you looking at any opportunities for churn in other of your competitors that could see you grow market share as a result of this kind of Very extreme pricing dynamic. We're seeing emerge continuing into this year
Are you getting worried at all about any trends in churn within your own organization or <unk> or are you looking at any opportunities for churn in other of your competitors that could see you grow market share as a result of this kind of.
Very extreme pricing dynamic, we're seeing emerge continuing into this year.
Speaker 3: Yeah, for me, it's an interesting time in the market, right? Because even for us as, you know, companies, we're all having to be very selective about new business and ensuring that we're getting paid the appropriate
Yeah.
For me, it's an interesting time in the market right because even for us.
Companies.
I'll have it can be very selective about new business and ensuring that we're getting paid the appropriate price to collect new business just for the simple fact that.
Speaker 3: twice to collect new business just for the simple fact that
Speaker 3: You know, it's a challenging labor market. It's challenging to get new equipment. Everything, you know, has been slower. I think we've all navigated the situation as an industry very well. And I think the market is we've all, as competitors, been very disciplined to ensure that we continue getting, you know, price.
It's a challenging labor market, it's challenging to get new equipment everything has been slower I think we've all navigated the situation as an industry very well and I think the market is we've all as competitors in their discipline to ensure that we continue getting.
Speaker 3: to at least cover our, you know, these internal costs of inflation, because I don't think anyone's seen, you know, myself today, inflation, you know, high since it's been since 82.
Price to at least.
Cover our internal cost inflation, I don't think anyone <unk> inflation.
Inflation highest since has been sent to ADT.
Speaker 3: I think there's very few industries like ours that have been able to sort of pass that on like we have.
I think theres very few industries like ours that have been able to surpass that all make behalf.
Speaker 3: So I don't think the focus, the focus of ours is not trying to go out and grab as much market share as we can based on some of the PIs that are going through the market. I think our customer base knows that the price is needed for us to be able to remain competitive and provide that service.
So I don't like to focus the focus of ours is not trying to go out and drive as much market share as we can based on some of the pis that are going through in the market I think our customer base knows that the price is needed for us to be able to.
We remain competitive and provide that service.
And they want to make sure that it's picked up on time and I think it would be in the luxury of our businesses, but the lion's share of our account for between two and $500 a month right. So even if they are getting high single digit price increase I mean, it's not a material amount for them I think we have other bigger fish to fry than the normal.
Speaker 3: on time and you know I think if you have a luxury of our businesses you know but the lion's share of our accounts are between two and five hundred dollars a month right so you know even if they're getting a you know high single biggest price increase I mean it's not a material amount for them I think they have other bigger fish to fry.
Speaker 3: than they normally would. So I'm not seeing any, I think the market is understanding of it, clearly the headlines every day in the papers around inflation and driver shortages and fuel and insurance.
So I'm not seeing any I think the market is understanding of it.
The headlines every day in the papers around inflation and driver shortages and fuel insurance and R&M and supply chain shortage backlog all of those sort of coupled together.
Speaker 3: and R&M and supply chain shortage, you know, backlogs, all of those sort of coupled together have remained intact. I think all of us in the industry is
It remains intact, all I think all of us in the industry as well.
Speaker 3: you know, pretty loyal sort of customer base today. And it's not people aren't driving to go out and win new market share just at any cost, because it just doesn't make sense today, just given what's sort of happening in the industry. But I think that's where it sort of sits today, but nothing that worries me in any really rich way today. Perfect. Okay.
Pretty loyal customer base today, and it's not people aren't driving to go out and win new market share at any cost because it just doesn't make sense today, just given what's sort of happening in the industry, but I think thats, where it sort of sits there, but nothing that worries me in any which way today.
Perfect. Okay as always I appreciate the time Patrick.
Thanks Walter.
Speaker 2: Thank you. Our next question comes from Kevin Chang from CIBC. Please, Kevin, your line is now open.
Thank you. Our next question comes from Kevin Chiang from CIBC. Please Kevin Your line is now open.
Speaker 4: Thanks for taking my question. If I could just clarify, I think Luke in your prepared remarks, you talked about when you get the bridge for 2022 and you highlighted the...
Thanks for taking my question.
Just to clarify I think Luke in your prepared remarks, you talked about when you get the bridge for 2022 and you highlighted.
Speaker 4: the upside to solid rate volume, but you made a comment on basically Canada and maybe there's upside if we see more of a reopening. Just wondering what are you building in for recovery within
The upside to.
Solid waste volume, but you made a comment on basically Canada.
Maybe there's upside to us if we see more of a reopening just just wondering what are you building in for Ricky.
Coverage within.
Speaker 4: within your solid ways. Is it what we're seeing today in Canada, which is obviously a pretty challenge, or do you see we kind of get back to some level of normalcy through the year?
Within your solid waste is it what we're seeing today in Canada, which is which is obviously pretty pretty challenging.
<unk>.
Kind of get back to some level of normalcy through the year.
Speaker 4: Yeah, Kevin, it's a good question. To be honest, we're sort of getting tired of trying to pin in the tail the donkey in Canada. So it's really, look, I think, you know, you're sitting here in Toronto with me today. We seem to be in the right direction. It's assumed that we continue this.
Yes, Kevin it's a good question to be honest, we're sort of getting tired of trying to pay your pin the tail on the donkey in Canada. So it's really.
I think you are sitting here in Toronto with me today, we seem to be in the right direction. It's assuming we continue this we get back another two weeks led to have full restaurants et cetera, and we continue on this progress if we all.
Speaker 4: we get back in another two weeks he lets us have full restaurants etc and we continue on this progress if we all you know sort of get completely locked down again obviously that would be a head wind and if we by this summer we can actually be fully enjoying life again that could be a tailwind
Sort of get completely locked down again, obviously that would be a headwind and if we buy this summer we can actually be fully enjoying life again that could be a tailwind. So I think it's sort of middle of the fairway right now I do think there's upside to the number because I'm very hopeful we don't go backwards from here, but.
Speaker 4: So I think it's sort of middle of the fairway right now. I do think there's upsides to the number because I'm very hopeful we don't go backwards from here. But we've tried to guess for the last two years and been wrong, so sort of just taking a conservative approach this time.
We've tried to guests for the last two years <unk> been wrong, so sort of just taking the conservative approach. This time.
Speaker 4: Yeah, I hear you. I've stopped wearing suits and I'm only wearing track pants because I've been stuck at home as well. Just on your, when I look at your 2023 run rate, you know, you're implying about a 49 percent.
Yes, I hear you are suffering seats in some other way to track tenants.
At home as well.
Sure.
Just on your fleet.
When you're looking at 2023 run rate youre, implying about a 49%.
Speaker 4: pre-cash flow conversion. If I go back to the presentation you had this time last year and you talked about what 2023 could look like. You know I think it was about mid 40s. Just wondering as we kind of look up maybe past 2023.
Free cash flow conversion, if I, if I go back to the presentation you had.
This time last year, and you talked about what 2020 could look like.
I think it was about mid forties.
I'm just wondering as we kind of look out maybe 2023.
Speaker 4: Do you see yourself being a north of 50 percent free cash flow converting company? And I guess I ask that because it does seem like you have, you know, incremental free cash flow opportunities from R&G, which I suspect convert at a higher rate here. Any color that would be helpful.
Do you see yourself being a north of 50%.
Cash flow converting company and I guess I ask that because it does seem like you have.
Incremental free cash flow opportunities from R&D, which is it's been convert at a higher higher ratio.
Any color there would be helpful.
Speaker 4: Yeah it's okay but I think there's a little that page you're looking at there's some footnotes that I think are relevant because really the RNG for simplicity on that page has just been layered into the pre-cash number. You can see the table on the page before that tees that up and the footnotes but you're dividing the pre-cash and the EBITDA but it's not apple to apple. So when you do that it would be more along that line of mid-40s but to your point you know we don't think that's the ceiling. You know as you go forward from here you've heard Patrick say I mean we think this can you know go above mid-40s and yeah we're going to break through the 50% level and keep going from there. You know I think when you look fundamentally at the opportunity set that lies in front of us and where the industry as a whole is going to echo Patrick's comments you know I don't think there's a there's a ceiling there and the asset base we have in the opportunity we see a path to you know continuing you know that march to a point where we think we can be industry leading.
Yes, so Kevin I think that's a little of that page you are looking at there. Some footnotes that I think are relevant because really the RMG for simplicity on that page is just been layered into the free cash number you can see the table on the page before that tee that up in the footnotes that youre dividing the free cash in the EBIT, but it is not apples to apples. So when you do that it would be more along that line.
And mid Forty's, but to your point, we don't think that's the ceiling as you go forward from here you've heard Patrick said, we think this can go.
Go above mid Forty's, and yet we're going to break through the 50% level and keep going from there I think when you look fundamentally at the opportunity set that lies in front of us and where the industry as a whole is going to echo Patrick's comments I don't think there is there is a ceiling there and the asset base, we have and the opportunity we see a path to continuing that March.
To a point, where we think we can be industry leading.
Speaker 4: Excellent. You know, I'll leave it there. Thank you very much for the clarification.
Excellent I'll leave it there. Thank you very much for the clarification.
Thank you.
Speaker 2: Thank you. Our next question comes from Mark Neville from Scotiabank. Please, Mark, your line is now open.
Thank you. Our next question comes from Monica <unk> from Scotia Bank. Please Mark your line is now open.
Hey, good morning, guys.
Speaker 6: appreciate all the talk. Maybe just on the remaining environmental service business. Is that something that you would consider sort of core long term. Is it saleable or would you sort of anticipate participating in that consolidating market as well.
<unk> morning, Mark.
Maybe just on the.
The remaining environmental service business.
I mean is that something that you would consider sort of a core long term saleable or would you sort of anticipate participating in that.
Consolidating that market as well.
Speaker 3: I think, you know, as long as we can keep creating value, I mean, obviously, if...
Hi.
As long as we keep creating value I mean, obviously, we will.
Speaker 3: we'll have this equity interest and you know I think the plan is to take that entity public and let people participate it in from the beginning and we'll keep it and you know again we have there's a very good plan behind that to significantly grow the equity value that business to the post IPO but you know I think we have the ability to monetize that over time and we'll do that once you know we create significant value.
Have this equity interest I think the plan is to take that entity public and let people participated in from the beginning and we will keep at it again.
There is a very good plan behind that to significantly grow the equity value of that business sort of post IPO.
I think we have the ability to monetize that over time.
And we will do that once we create significant value.
Speaker 3: Are you, sorry you're talking about, you're talking about, you're definitely talking about nicotine.
Sorry, you were talking about sort of how youre thinking about the infrastructure you're talking about.
Speaker 3: The liquid, the stub, that'll be left, the liquid and the soil. Oh, sorry, my fault, I misunderstood that. Oh, the liquid business is...
The liquid stuff that'll be less liquid in the soil.
Great.
Michael I misunderstood that.
The electric businesses.
Speaker 3: It's great. I mean, like I said, I'm a shareholder first, someone to pay a big number for. I think, you know, looking at what Republic paid on the face of it for U.S. ecology, I think, you know, U.S. ecology was a, you know, high-key business. You have our business that sits at high, you know, mid-20s margins, going to go to high-20s margins. You know, great.
It is great I mean, like I said I am a shareholder first somewhat to pay a big number four and I think looking at where Republic paint on the face of it for U S. Oncology I think you want to call. It high teens business our business at high mid Twenty's margins going to go to high Twenty's margins.
Speaker 3: similar, comparable sort of asset base. You know, they've paid sort of over 14 times for that. So I think from our perspective, you know, we think we have a similar business. Could be better in some ways, maybe not in other ways, but at least it sort of sets the benchmark of what sort of, you know, what value.
Great similar comparable sort of asset base.
Over 14 times for that.
From our perspective, we think we have.
Similar business could be better in some ways, maybe not novel ways, but at least it certainly sets the benchmark of what sort of value.
Speaker 3: That's where sort of in the base case, but I think we're going to keep it. I think it's a great business
That's where we're sort of in the base case, but I think we're going to keep it I think it's a great business.
Speaker 3: you know, very comparable free cash flow margins to our existing business.
Very.
<unk> free cash flow margins to our existing business.
Speaker 3: There's no reason not to keep it, largely focused on the Canadian market today. So I think we're of the opinion we're going to keep it. It's a great business. Why not? And we'll keep growing it with an exceptional management team with industry leading margins as well in that business. So no thoughts to get out of that anytime soon.
There is no reason not to keep it.
It's largely sort of focus in the Canadian market today, So I think we're.
We are of the opinion, we're going to keep it it's a great business why not and we will keep growing it with an exceptional management team.
With industry, leading margins as well in that business. So no more more thoughts to get out of that anytime soon.
Speaker 4: Just on renewables, you gave some numbers, I think for your capital investment, to get to the $150,000-$200,000, roughly what's your investment required, or should we just kind of look at it linearly?
Okay.
Just wondering renewables.
You gave some numbers I think for the.
Your capital, but it's.
Capital investment to get to the $1 5200.
Roughly what's sort of your investment required from just kind of looking at linear Leafs.
Speaker 3: It's a little bit of a moving target because we're negotiating. You know, I think some of the benefits of what we're working on today is the future capital commitments will be significantly less than the original deals, and that's how some of the developers are differentiating themselves. So I think, you know, I think
Yes.
We are a moving target because we're negotiating.
I think some of the benefits of what we're working on today with future capital commitments will be significantly less than the original deals.
And that's all some of the developers are differentiating themselves.
So I think I think we.
Speaker 3: there'll be minimal capital required from us for the future project that you see. So I don't think there'll be much more required given what we're negotiating with today.
There will be minimal capital required from our from us for the future projects that you see so I don't think there'll be much more required.
Given what we're negotiating with today.
Speaker 4: And maybe just one final point of clarification, when you report Q1, even if the infrastructure hasn't closed yet, the plan would be to report with that excluded, is that correct?
Okay.
And maybe just one final point of clarification when you report Q1.
The infrastructure hasn't closed yet, but the plan would be to report.
That excluded is that correct.
Speaker 4: Yeah Mark, that's correct. Whether it's officially done in the financial statements proper or I need to sort of pro forma do it in the report, it's still sort of TBD. But either way, we will get you a clean sort of segment presentation, X infrastructure. Right.
Yes, Mark that's correct, whether it's officially done in the financial statements proper or I need to sort of pro forma do it in the report is still sort of TBD, but either way, we will get you a clean sort of segment presentation ex infrastructure.
Yes.
Alright, alright, Thanks, Dennis machine.
Thanks, Brian .
Speaker 2: Thank you. Our next question comes from Jerry Robich from Goldman Sachs. Jerry your line is now open.
Thank you. Our next question comes from Gary Rebates from Goldman Sachs. Thanks, Jerry Your line is now open.
Speaker 3: Yeah, thanks. Good morning. Patrick Luke, on the 7.5 million MMBTU of landfill gas projects, I'm wondering if you could talk about what proportion of that you expect to use as you build out your C&G vehicle fleet versus other WIN3 eligible applications and what proportion you expect to go to industrial non-WIN3 applications based on the offtake plan.
Yeah. Thanks, good morning.
Patrick Luke.
Suddenly.
And Btu of landfill gas projects I'm wondering if you could talk about what proportion of that.
You expect to use as you build out your <unk> vehicle fleet versus other three eligible applications.
And what proportion do you expect to go to industrial non win three applications based on the.
The offtake plans.
Speaker 3: Yeah so we need we need about 10 percent of that volume you know and that'll slightly grow that we're gonna have to put in the you know into our own vehicles and sort of transportation market and then if you're left with 90
Yes, so we need we need about 10% of that volume and that will slightly grow that we're going to put into the into our own vehicles and that sort of transportation market and then you showed a lack of 90.
Speaker 3: So we're in process and have negotiated some long-term arrangements, but I think what you'll see is most likely, 50% of that, the remaining balance going into the sort of industrial commercial long-term agreement path, and then the other 40 will continue into the transportation sort of market.
<unk>.
So we're in process.
<unk> negotiated some long term arrangements, but I think I think what youll see is most likely.
50% of that the remaining balance going into the sort of industrial commercial long term agreement.
Pass and then the other 40 will continue into the transportation sort of Widmer market.
Speaker 3: Got it. And Patrick, when we last spoke about the topic, you had mentioned that industrial market prices in the 20s, is that where it's shaking out? Any update as you've spent more time with that?
And Patrick when we last spoke about the topic you had mentioned that industrial market prices in the twenties.
Is that where it's shaking out.
As you've spent more time with that.
So.
Speaker 3: It's still there. Obviously, as the rim pricing's moved up, the pricing's moved up a bit.
Still there obviously is the RIN pricing has moved up the pricing has moved up a bit.
Speaker 3: But what we're seeing now is the ability to
But what we're seeing now is the ability to actually share in the upside for example of RIN pricing went from.
Speaker 3: actually share in the upside if you know for example if written pricing went from you know it's called $3.20 to $3.40 to $4.00 or $5.00 whatever that wherever it may go.
It's called $3 in 2010 to 2040 <unk> in the range of four five whatever wherever it may go.
Speaker 3: these new agreements are now you have a sharing agreement that's sort of correlated to wind pricing so if they go up higher than the long-term supply agreement has to pay more and they have to pay a portion back so you're getting a little bit more lucrative than we originally anticipated back you know three four months ago.
These new agreements are now you have a <unk>.
Sharon agreement that sort of correlated to when prices go up higher than the long term supply agreement has to pay more on naphtha.
The Fayetteville answer back.
Even getting a little bit more lucrative.
We originally anticipated back.
Three four months ago.
Speaker 3: Terrific. And then, you know, in terms of the plan to roll up the infrastructure and asphalt industry, you know, not a lot of assets out there that can post.
Terrific and then in terms of the plan to rollout.
Restructure and.
Asphalt industry not a lot of it.
Assets out there that can post mid.
Speaker 3: mid-teens, EBITDA margins. Can you just expand on what the M&A pipeline looks like for that part of the portfolio? You know, how much heavy lifting will you folks need to do to get, you know, acquired businesses to the margin profile that your business and certainly COCO is running at?
Mid teens.
EBITDA margins.
You just expand on what the M&A pipeline looks like for that part of the portfolio.
How much heavy lifting will you folks.
Yes.
<unk> businesses.
The profile of that business.
Certainly cocoa is running at.
Speaker 3: Yeah, so I think it comes down to exactly what we did on the solid waste and liquid waste business, right? It's, you know, how are our assets performing sort of where they are? And I think at the end of the day, you know, it comes down to market selection and finding the right markets in the right places to go. And I think the beauty of us operating in nine provinces in Canada and 26 states in the U.S.
Yes.
It comes down to exactly what we did on the solid waste and liquid waste business related.
How are how our assets performing sort of where we are and I think at the end of the day.
It comes down to market selection and finding the right marketing right places to go and I think the beauty of US operating in nine provinces in Canada in 2016 in the U S. We generally know what markets to be in and I think you'll see us focus on markets that have better margin profile than others right so with that backdrop.
Speaker 3: we generally know what markets to be in and I think you'll see us focus on markets that have better margin profiles than others.
Speaker 3: With that backdrop I think it'll be the exact same playbook that we that you've seen the sort of GFL and the margin profile GFL and it's liquid waste business and solid waste business so I think you'll continue to see that and I think you'll continue to see us be very selectful about the markets we go into with that business and the quality of businesses that we acquire under that profile so we'll continue to be you know our perspective industry leading business and it should go pretty well.
I think it will be the exact same playbook that we that you've seen with sort of the GFS margin profile Tfl and its liquidity things installed based business and I think deal.
We continue to see that and I think youll continue to CSB very select for local markets. We go into it that business and the quality of businesses that we acquire under that profile. So we will continue to be our perspective.
Leading business.
And it should go pretty well.
Speaker 3: Great. And lastly, you know, nice to see the pricing pulled forward on the solid way side. You know, I'm wondering, as you look at the absences from Omicron in the first quarter, you know, any new actions that you folks have implemented given, you know, higher overtime and other costs, Luke, you alluded to it, and potential for pricing to be higher than what you're guided to. I'm wondering, how did that look through Jan and Feb as you folks have dealt with those constraints?
Okay, Great and lastly, nice to see the pricing pull forward on the solid waste side I'm wondering as you look at the absence of spring.
In the first quarter.
You actions that you folks have implemented given higher overtime and other other causes.
<unk> potential for pricing to be higher than what you guided to I am wondering how does that look through Shannon.
As you folks have dealt with.
Those constraints.
Speaker 4: Yeah, look, obviously, the beginning of Jan, the sort of labor constraints, I think, on Macron, unfortunately, had a very sort of short fuse, and, you know, a lot of that sort of got behind us quite quickly. You know, I think...
Yes look obviously, the beginning of Jan or labor constraints I think on the call. Unfortunately had a very sort of short fuse in a lot of that sort of got behind us quite quickly.
Speaker 4: Look, the pricing in Q1 is coming in sort of strong, as I said, at some of our strongest sort of levels. And if this is where it keeps up throughout the quarter, you know, I think there's an opportunity to beat, you know, the high end of that guide that we had provided. Look, I think it's important to understand, the low end of the guide at $4.5, that's enough to cover the cost of inflation.
I think that's good.
Pricing in Q1 is coming in sort of a strong as I said there are some of our strongest order levels and if this keeps up throughout the quarter.
There is opportunity to beat the high end of that guide that we've provided I think it's important to understand the low end of the guide at four five that's the number that's enough to cover the cost of inflation. So even at the low end of the guide we're sort of we're good.
Speaker 4: So even at the low end of the guide, we're sort of, you know, we're good.
Speaker 4: I think the opportunity is to beat, you know, ever achieve the high end or beat the guide. And as I said, you know, in one of the earlier comments, I think Q1 will sort of tell the tale. First, you know, January , February is looking promising in terms of sort of retention, but we'll see by the time we get to the end of the quarter, again, if that's sort of a high five number, you know, or a six.
Thank the opportunity is to be achieved the high end or beat the guide and as I said one of the earlier comments I think Q1 will sort of tell the tale first January and February is looking promising in terms of sort of retention, but we will see by the time, we get to the end of the quarter again, if thats sort of a high five number.
Speaker 4: I think that sort of sets us up for the opportunity to sort of beat the guy through the air. But I just I think people should rest assured that even the low end of the guide, you know, more than covers the current cost of inflation we're seeing.
Six I think thats, so it sets us up for the opportunity to sort of beat the guidance of the year, but I would just I think people shouldn't should rest assure that even the low end of the guide more than covers the current cost inflation, we're seeing.
Terrific I appreciate the discussion thanks.
Thanks.
Speaker 2: Thank you. Our next question comes from Rupert Merer from National Bank. Please, Rupert, your line is now open.
Thank you. Our next question comes from <unk> Mehta from National Bank. Please <unk>. Your line is now open.
Speaker 7: Thank you. Good morning, guys. Patrick, on GIP, you mentioned $250 million cash GFL should receive from divestment of the infrastructure assets, and you gave us a rough estimate for the ownership stake in GIP. Can you tell us what's left to do to finalize the economics on the deal when you might have that final plan?
Thank you good morning, guys Patrick on Gi P. You mentioned $250 million cash Tfl should receive from divestment of infrastructure assets and you gave us a rough estimate for the ownership stake in CIP can you tell us what's left to do to finalize the economics on the deal.
When you might have that final plan.
Speaker 3: Yeah, I mean, it's going to come together sort of over the next, you know, five to six weeks. You know, we're just looking at a bunch of sort of old structures, etc. You know, leading up to sort of, you know, getting that entity public in September . So that's all pretty fluid now, but that's generally the parameters of what you'll see.
Yes.
Come together sort of over the next five.
Five to six weeks.
We're just looking at a bunch of sort of structure of et cetera.
Leading up to shortly.
Getting that entity public in September so thats, all pretty fluid now.
That's generally the parameters of what.
What youll see.
Speaker 7: Okay, we do expect to be minority interest and have a joint venture accounting kind of along the lines of what you explained on R&G.
Okay.
To be minority interest in <unk>.
Venture accounting kind of along the lines of what you explained on R&D et cetera.
Speaker 4: I regret the equity accounting, it won't be a joint control is an unlikely outcome as Patrick said it's still fluid but it's probably non-controlling interest just to have regular way equity accounting as opposed to actually joint venture accounting.
The equity accounting it won't be.
Joining control is an unlikely outcome as Patrick said, it's still fluid, but it's probably noncontrolling interest just regular way equity accounting as opposed to actually joint venture accounting.
Speaker 7: Okay, great. And then you mentioned your asset rationalizations largely done. Are there any assets out there, any regions you might consider non-core? Do you anticipate seeing any other asset sales in 2022?
Okay, Great and then.
You mentioned your asset rationalizations, largely done or are there any assets out there or any changes you might consider non core.
I anticipate seeing any other asset sales in 2022.
Speaker 3: Yeah, there's a few things left to do, which, you know, we'll expect to get done, you know, Q1 and early Q2, sort of well underway, you know, anticipate proceeds probably in the sort of 50 to 60 million dollar range.
Yes.
A few things left to do.
Which we'll expect to get done.
Q1 early Q2.
Sort of well underway.
No.
Anticipate proceeds probably in <unk>.
Sort of $50 million to $60 million range.
Speaker 7: Given those were quick, if I could lob one more quick one at you, the R&G projects, the first four, what's the timing on those? I know we're looking at them in 2023. Are you thinking early 2023, mid, late? How should we think about the cadence? I think for simplicity modeling purposes, if you basically get 50% of those revenues in 2023, the reality is we probably...
Great given those real quick if I could loved one more quick one at you the R&D projects first before.
Whats the timing on those I know, we're looking at them in 2020 threes, you're thinking early 2023 mid late how should we think about the cadence and then.
Simplicity modeling purposes are you basically get 50% of those revenues in 2023 and the reality is we probably.
Speaker 3: we're going to shovel ready and starting construction on some of them in March. So, you know, typical construction time on those is like 12 to 12 and a half months. So, I think, you know, late Q1 or early Q2, we should be online, particularly with the largest one, which is a landfill in Michigan that's like a 10,000 SCFM site. So, we hope to have that up and running, you know, sort of April-ish next year.
We'll go on and we're going to shovel ready and starting construction on some of them in in March. So typical construction final knows of what 12 to 12 and a half months.
And so I think late Q1 early Q2, we should be online.
Particularly with the largest one which is a landfill in Michigan, that's like a 10000 CFM site.
So we hope to have that up and running.
Sort of April ish next year.
Okay excellent. Thank you very much.
Yes.
Thanks.
Speaker 2: Thank you. We currently have no further questions. I will hand over back Patrick to BG for any final remarks.
We currently have no further questions I will hand back Patrick <unk> for any final remarks.
Speaker 3: Thank you so much everyone for joining the call and again appreciate your continued support and all is always available today to jump on the phone if there's any further questions. Thanks so much.
Thank you so much everyone for joining the call and again appreciate your continued support and.
As always available today.
Trump on the phone if there is any further questions everyone. Thanks, so much.
Speaker 2: This concludes today's call. Thank you so much for joining. You may now disconnect your lines.
This concludes today's call. Thank you so much for joining you may now disconnect your lines.
Yes.
Okay.