Q3 2022 GFL Environmental Inc Earnings Call

November 3, 2022

I would like to welcome everyone to the G. S. L. Environmental Inc. Results call for the third quarter of 2022, I will now turn the call over to Mr. Patrick J D. G. The CEO of G. S. L. Please go ahead Mr. D G.

Thank you and good morning, I would like to welcome everyone to today's call and thank you for joining US. This morning, we will be reviewing our results for the third quarter and updating our guidance for this year I am joined this morning by loopholes here, our CFO , who will take us through our forward looking disclaimer before we get into the details. Thank you Patrick and good morning, everyone. We filed our earnings press.

The release, which includes important information the press release is available on our website. We have prepared a presentation to accompany this call is also available on our website.

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 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.

This call will include a discussion of certain 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'll now turn the call back over to Patrick.

Thank you Luke the quality of our assets and capabilities of our team are once again highlighted in our third quarter results. The success of our pricing strategies and focus on cost efficiencies continue to drive double digit growth, even with the significant inflationary impacts that have persisted far longer than we originally anticipated.

Organic revenue growth was over 15% with double digit revenue growth in both our segments for the third quarter in a row.

Solid waste pricing salaries to over 10%, including fuel surcharges solid waste volume growth was over 2%, excluding nonrecurring Merck revenues excluding.

Surcharges pricing was eight 6% 130 basis points sequential increase over Q2, we have achieved this result without the full benefit of the significant price increases we expect to realize in our CPI linked revenue in the coming quarters.

Environmental services realized organic revenue growth of 37% with almost all of our individual market areas exceeding expectations.

The continued re engagement of our customer base that we saw in the first half of the year the impact of our pricing strategies and the price of used motor oil contributed to mid teens of this organic growth.

Significant volume in our emergency response line of business much of what we sub contracted a third party is more than offset what we believe the temporary delay in soil volumes from a few large projects primarily in our mid Atlantic soil business. Overall, we're thrilled with the success of our integration of the <unk> acquisition that we completed last August and our extremely optimistic.

The opportunities ahead in this segment.

We achieved nearly 20% growth quarter over quarter and adjusted EBITDA, We believe that achieving this level of performance in this environment demonstrates the effectiveness of our strategies persistent broad based cost pressures have continued to have significant impact, but our business has responded through the pricing and cost efficiencies to recover substantially all of them.

Those excess costs.

The extent of this cost recovery as well as the business mix impacted our adjusted EBITDA margins during the quarter Luke will walk you through the bridge for our solid waste margins, but a high level. The impacts were seen primarily come down to fuel prices and we're continuing to see record cost impacts. This quarter. We also saw significant increases in the pass through fuel costs from third party service.

Providers as we've said before we're in the early stages of our fuel cost recovery program. We have begun to see significant benefits. This year. As this program continues to mature we see very significant opportunity to drive more price from our existing book of business and corresponding improvements our EBIT margins over the near term.

Margins were also impacted by significant cost pressures from the impact of higher cost third party maintenance and increased truck rental costs from delays in spare parts of new truck deliveries. While these non fuel cost pressures haven't subsided. Yet we are beginning to see the signs of unit rate cost inflation is moderating and supply chain disruptions are starting to ease.

We expect the impact of our pricing and surcharge strategies together with moderating cost inflation will result in significant opportunities for outsized margin expansion through 2023 and beyond.

We completed another six acquisitions during the quarter, all smaller tuck ins that added density to our existing platform.

Year to date, we've acquired approximately $430 million in annualized revenue and continue to manage a robust and attractive M&A pipeline on.

On the ESG front, we will release, our 2021 sustainability report later this month. The report will include our full set of ESG related goals targets and commitments for the first time, including our commitment to increase our material recovery services through investments in our network of processing facilities for recyclables.

Our aero roadmap outside of Toronto, which is one of the most advanced material recovery facilities using the latest technologies was named the 2022 recycling facility of the year by the National waste and recycling Association last month.

On LNG five of our projects are in active development. These first five are amongst the largest R&D projects in our portfolio and are expected to come online starting in mid to late 2023 and produce a total of more than 6 million <unk> of RG <unk>.

We remain highly confident that when we see these projects begin to generate cash flow in 2023 and continue to ramp up through 2024 and beyond.

Another seven sites, representing approximately $7 million or <unk> or under negotiation and have started development and we are just received positive news that should allow for the development of our moves Creek landfill in Ontario, which will produce approximately $3 million <unk>.

We continue to evaluate development partners for the nine other sites that we've identified for development.

Now I'll pass the call back over to Luke to walk us through the Investor presentation, and then I will share some closing perspectives before we wrap up before questions.

Thanks, Patrick and.

In our Investor presentation, we have provided supplemental analysis to summarize the moving pieces in the quarter.

If you turn to page three of that presentation, but we have laid out our bridges between our implied Q3 guidance and our actual Q3 results revenue on the top of the page and adjusted EBITDA on the bottom.

While we hope the components are relatively self explanatory I would note the following.

Combining solid waste price and surcharges were nearly 30 basis points ahead of expectations in aggregate are comprised of a different mix is in certain instances. We saw between the first lean in on base price before optimizing our fuel surcharges.

The outsized contribution from environmental services sub contracted revenue was realized that dilutive margins and required investment in working capital, but had no capex requirements will ultimately be free cash flow accretive.

Commodity prices averaged $250 in the quarter versus our expectation of 325 and in addition to the pricing impact we realized some incremental costs in those select markets, where we rely on third party processors for recycling collection business.

Our large scale soil remediation project that we've been awarded was unexpectedly postponed until 2023 together with delays and other soil projects that we believe are supply chain related and temporary in nature.

Several of our third party service providers, mostly long haul transportation pass on significant price increases in order to recover their own internal fuel cost inflation, we saw a modest amount of such increases in Q2, but were faced with significant incremental increases in Q3.

During the summer we had fires at two of our <unk> in Canada, which resulted in near term operating inefficiencies and excess costs, while the disruption will cause temporary cost headwinds. These were two of our older facilities and these events will act as catalyst to build back better which will ultimately generate highly attractive returns.

Turning to page four we have presented a bridge for solid waste adjusted EBITDA margins year over year.

As can be seen fuel prices accounted for 175 basis points of margin impact net of any benefits from surcharges.

<unk> prices were 85 basis points of margin headwind, including 30 basis points from onetime Merck volumes that we knew would not recur and M&A was another 25 basis points.

Everything else was net positive, including overcoming the $5 million cost headwind from them or fires, which we believe is a testament to our business model when considering the incentive cost pressures.

Page five summarizes the sequential improvements we've made on our fuel cost recovery programs during the year.

This was one of the areas of self help that we identified as a priority at our Investor day, and we are very happy with our rate of progress. These improvements are despite our decision to focus on base price instead of surcharges for certain customers as I previously mentioned.

We believe these decisions are right for the long term, but have had the effect of delaying some of the anticipated ramp and fuel cost recovery.

We continue to see significant opportunity from surcharges and are focused on optimizing our practices in this area.

On page six we have laid out how we anticipate the balance of the year to play out on the strength of the third quarter top line results. We are raising our revenue guidance to approximately $6 6 billion.

This was largely the result of the Q3 outperformance and the impact of recasting Q4, today's FX rate of 136 versus the $1. Two eight that was used for the last guidance update we have assumed commodity prices of $150 for the remainder of the year.

We are affirming our previously provided adjusted EBIT and free cash flow guidance as the strength in outsized pricing volume and the impact of FX is expected to be offset by the impact of commodity prices the tumor fires and the indirect fuel pass throughs from our transportation and other third party service providers.

On the bottom half of page six we have flushed out adjusted free cash flow in a bit more depth as there are a few moving pieces.

The last row of the first column shows $318 million of adjusted free cash flow, we reported for the first nine months of the year. The reconciliation of which is provided in our filings.

Included in the $318 million is a $150 million investment in net working capital for the year to date period.

The seasonality profile of our business is such that we typically see an investment in working capital over the first nine months of the year and then a reversal by year end. This.

This year's working capital investment has been also impacted by the acceleration in revenue growth.

And to a lesser extent recent acquisitions.

We anticipate the year to date net working capital investment to reverse in Q4, providing a significant tailwind to Q4 adjusted free cash flow.

Also not shown on the pages that we now expect cash interest expense of approximately $410 million, that's about $10 million higher than the previously anticipated interest expense on account of the higher <unk>.

Rates and FX rates, we also expect net capex of approximately $600 million to $650 million or $750 million to $800 million when excluding the $150 million normalizing adjustment for the excess proceeds from the divestitures that we received in 2021, but deployed in the current year.

The topic of normalizing adjustments is one that we understand to be an area of focus for certain users of our financial reporting and.

So on page seven we presented a summary of the components of our adjusted EBITDA from 2018 through today.

As can be seen the.

The relative impact of adjustments has materially decreased over this period.

Acquisition transaction and integration costs of consistently remain between $60 million to $80 million. Despite the significant increase in adjusted EBITDA since we went public.

We anticipate continuing to incur incremental transaction integration costs as we deploy capital to M&A.

We continue to believe that adding these costs back is the best way to accurately depict the earnings potential of our existing business at any given point in time, and we will therefore continue to adjust these costs in the future. However, we expect that the relative weighting of these add backs will continue to decrease consistent with the trend since 2018.

Leverage is another area that we know is a focus for many.

Reported net leverage at September 30 was $5 one nine but the increase was largely the result of the translational impact of the rapid devaluation of the Canadian dollar against the U S. Dollar during the last two weeks of the quarter.

While this FX volatility had a significant impact on the Q3 balance sheet. It had minimal impact on our trailing earnings if.

If FX rates remain at current levels. The FX related increase in net leverage will largely reverse on a go forward basis as our U S. Dollar denominated EBITDA is translated to Canadian dollars at the higher FX rate.

To facilitate comparison on a like for like basis page eight sets out a simplified constant currency presentation of net leverage and illustrates our growth driven delevering capabilities. Despite significant unprecedented headwinds and the continued execution of our M&A strategy.

While we believe this year once again demonstrates the resiliency and financial strength of the business. We understand the current leverage levels or perceived is suboptimal and we remain committed to reducing leverage over the near term.

On page nine we have summarized our existing debt profile to provide additional context for consideration when thinking about leverage.

On the left of the page, we highlight that two thirds of our debt is fixed rate with over five years of average term remaining.

On the right. We highlight that we have no significant maturities for three or four years and that the majority of the amounts coming due in 'twenty, five and 26, our floating rate debt and therefore already largely priced to current market conditions.

Lastly, we highlight our expectation to receive material credit rating upgrades prior to the maturity of a significant amount of our debt based on enhancements to our credit quality. So while we remain 100% committed to deleveraging. We also are highly confident in the capacity of the business to support our current debt obligations.

If you look at page 10, we have laid out initial prospective on 2023, when we think about recent price and volume trends together with anticipated CPI resets, we do not see a path where organic price and volume growth is less than high single digits.

Add to this the nearly $200 million of M&A rollover already in hand, and the impact of current FX rates and we are expecting a minimum of 12% topline growth.

Even after accounting for the assumption that commodity prices stay at today's levels for all 23.

As Patrick said, we believe 23 will be a year of outsized margin expansion opportunity as the strength of recent pricing together with the rollout of our surcharge programs continue against a moderating level of cost inflation.

We anticipate at least 100 basis points of margin expansion inclusive of the headwind created by the decrease in commodity prices, yielding high teens growth in adjusted EBITDA in 2023.

Adjusted free cash flow will be contingent on our finalized capex plans, but even in the face of mid teens headwind from higher interest costs, which are expected to be approximately $490 million in 2023, we anticipate double digit adjusted free cash flow growth.

Consistent with past practice, our future outlook does not contemplate additional M&A any contribution from transactions that are completed will be incremental to what we've laid out currently.

On page 11, we have illustrated how the potential 2023 performance with impact our leverage profile. This is a carryforward of the slides we presented at our Investor day with the punch line being that the organic growth profile of the business is such that the business is expected to delever inclusive of any future M&A.

With that I will turn the call back over to Patrick.

Thanks, Luke we're obviously really excited about our initial thoughts on 2023 and as Luc said there are several paths to upside above and beyond what we laid out.

Look forward to providing a more definitive guide when we report our Q4 results in February .

And to circle back on leverage I think it's important to remember why and how we got to where we are today. We went public in March of 2020 with leverage in the low fours with a plan to double the size of the business from 1 billion of EBITDA to over 2 billion of EBITDA in five years.

As you heard in our 2023 outlook. We believe we have achieved that goal by early 2023, doubling the business in three years and yes, while leverage has modestly increase in the process. We have consistently said that our elevated leverage would be temporary and we would delever once the core building blocks were in place.

But the business is expected to delever inclusive of any future M&A.

With that I will turn the call back over to Patrick.

Thanks, Luke we're obviously really excited about our initial thoughts on 2023 and as Luc said there are several paths to upside above and beyond what we laid out we look forward to providing a more definitive guide when we report our Q4 results in February.

We're doing that just now despite all these headwinds we saw this year and we are committed to continue down this path our organic growth alone will get us there in a couple of years as much as we feel comfortable with the current balance sheet as I've often said we are shareholders first.

We fully understand the impact of maintaining leverage at the current levels and are absolutely committed to reducing leverage to a level more consistent with industry norms.

As you heard in our 2023 outlook. We believe we've achieved that goal by early 2023, doubling the business in three years and yes, while leverage has modestly increased and the process. We have consistently said that our elevated leverage would be temporary and we would delever once the core building blocks were in place.

I think I said this on every call, but as I watch our business perform quarter over quarter I've never been more optimistic about our future and the ability of team green to continue delivering I'll now turn the call over to the operator to open the line for Q&A.

Thank you.

I'd like to ask a question. Please press star followed by one on your telephone keypad.

Any reason you would like to remove a question. Please press star followed by Q again to ask a question for Star one.

As a reminder, if you are using a speaker phone. Please remember to pick up your handset before asking your question.

We fully understand the impact of maintaining leverage at the current levels and are absolutely committed to reducing leverage to a level more consistent with industry norms.

We will talk to you briefly ask questions for rich.

Our first question comes from the line of Michael Hoffman with Stifel. Your line is now open.

I think I say this on every call, but as I watch our business performed quarter over quarter I've never been more optimistic about our future and the ability to team green to continue delivering I will now turn the call over to the operator to open the line for Q&A.

Hey, good.

Good morning feels like afternoon. After five earnings calls in a row.

Luke can you help us with what is the dollar impact in 'twenty two.

Thank you.

I would like to ask a question. Please press star followed by one on your telephone keypad. If for any reason you would like to remove a question. Please press star followed by two.

Total fuel direct indirect that you cannot recover yet.

To show the power of this what you could recover.

Again to ask a question press Star one as a reminder, if you are using a speaker phone. Please remember to pick up your handset before asking your question.

On a dollar basis in 'twenty three.

As you keep making progress.

Yes, so Mike I think that's it.

We will talk to you briefly as questions are registered.

Great question, because that's really the focus of what we're seeing at the margin level do you think about fuel. This year, you probably have around $150 million increase driven by price and price alone, taking our volume growth and taking out the acquisitions.

Our first question comes from the line of Michael Hoffman with Stifel. Your line is now open.

Hey, good.

Good morning feels like afternoon. After five earnings calls in a row.

And you started the year recovering 30 of that by the end, where we're at today, we're closer to 75% on a run rate basis. So when you blend that all for the year, you are probably going to be recovering through the mechanism.

Sure.

Luke can you help us with what is the dollar impact in 'twenty two.

Of the total fuel direct indirect that you cannot recover yet.

To show the power of this what you could recover.

Surcharge mechanism.

40% of those dollars, let's say now when you go into next year and we continue to mature the program I think the industry is clearly demonstrated an ability to recover all of those dollars and perhaps some of the incremental.

On a dollar basis in 'twenty three.

As you keep making progress.

Yes, so Mike I think that's a great question, because that's really the focus of what we're seeing at the margin line. If you think about fuel. This year you probably have around 150 million dollar increase was driven by price and price alone, taking our volume growth and taking out the acquisitions.

Indirect dollars as well so that's why we're highlighting the magnitude of that opportunity.

And the margin accretive this that it will initially be upon first time recognition I understand that subsequent to the initial recognition and it can be margin impact moving up and down but the first time recognition. This is all accretive.

And you started the year recovering 30 of that.

By the end, where we're at today, we're closer to 75% on a run rate basis. So when you blend that all for the year, you're probably going to be recovering through the method the surcharge mechanism.

It's focused on the important for folks to understand how much runway we have in this area.

And just to be clear the 150.

40% of those dollars, let's say.

<unk> direct.

Now when you go into next year, and we continue to mature the program I think the industry is clearly demonstrated an ability to recover all of those dollars and perhaps some of the incremental.

The increase in.

What you have to spend to buy fuel net of adding new customers and M&A.

One is about 130 of the direct fuel increase Michael that our direct fuel costs, and then including 20 in there of this indirect that we've highlighted just in relation to the third party transport.

Indirect dollars as well so that's why we're highlighting the magnitude of that opportunity and the margin accretive. This that it will initially be upon first time recognition I understand that subsequent to the initial recognition there can be margin impact moving up and down but the first time recognition. This is all accretive and I think it.

Where we've had those fuel surcharges passed onto us.

Right.

Ultimately like you said the industry has shown its ability to recover all of its fuel cost incremental and Thats your goal and Thats the power of this.

Focused under important for folks to understand how much runway we have in this area.

$90 million of it is not being covered.

And just to be clear. The 150 is just your direct.

And.

Increase in.

That alone can you think you can cover that $90 million all else being equal in 2023.

What you have to spend to buy fuel net of adding new customers and M&A.

I think one of the guys would want me to tell you is by exiting 2023, we could be at that level.

Wanted to see about 130 of the direct fuel increase Michael that our direct fuel costs, and then including 20 in there of this indirect that we've highlighted just in relation to the third party transport.

But it will be a ramp throughout the year as we demonstrated the ramp during this year.

Okay.

Where we've had those fuel surcharges passed onto us.

Leverage is something everybody wants to talk about I have two questions on it on a constant currency basis full year leverage at the end of the year being less than it was in 2021.

Right.

Ultimately like you've said the industry has shown its ability to recover all of its fuel cost incremental and Thats your goal and Thats the power of this.

Sure.

Okay.

$90 million of it is not being covered.

So Michael when we said that you asked that same question on the Q2 call and at that time, we are looking at the plan for the balance of the year and not included with the commodity prices and not included was.

That alone can you. So you think you can cover that $90 million all else being equal in 2023.

I think what the guys will want me to tell you is by exiting 2023, we could be at that level.

<unk> of them are fires and the incremental fuel and so I think today when we look at these incremental headwinds that have arisen subsequent to that on a constant currency basis.

But it will be a ramp throughout the year as we've demonstrated the ramp during this year.

We'll be aiming to maintain leverage in those stated.

Okay.

Leverages something everybody wants to talk about I have two questions on it on a constant currency basis, where your leverage at the end of the year being less than it was in 2021.

Levels and I, just highlight that because I don't want to at this point say, it's going to be exactly 474 or something lower than last year because of the.

Okay.

Existence of the multitude of headwinds so I think we're going to be in that Zip code.

Okay.

So Michael when we said that you asked that same question on the Q2 call and at that time, we were looking at the plan for the balance of the year and not included with the commodity prices and not included was.

There is a path, but with the incremental headwinds.

Jim.

Sure.

I think it will remain to be seen exactly where it ends on the year.

Some of them are fires and the incremental fuel and so I think today when we look at these incremental headwinds that have arisen subsequent to that on a constant currency basis.

Okay Fair enough and then to your comment about the credit rating.

Opportunity.

And the refinancings are <unk> 25, which means you need to have the balance sheet that place by 'twenty forward against the credit rating adjustments because they kind of do that once or twice a year. So are you looking to be investment grade or just one move shift on the two that you have.

We'll be aiming to maintain leverage in those stated.

Levels and I, just highlight that because I don't want to at this point say, it's going to be exactly 474 or something lower than last year because of the.

I'm just trying to understand your expert.

Thanks.

Existence of the multitude of headwinds so I think we're going to be in that Zip code.

I think I can comment there and that bubble on the page over the later stuff the 27% and 28th the maturities for 25 and 26 at substantially all floating rate debt today and what we're trying to highlight is the refinancing of those.

There is a path, but with the incremental headwinds since last time.

I think it will remain to be seen exactly where it ends on the year.

Okay Fair enough and then to your comment about the credit rating.

Currently carrying them at largely market rates and the expectation is you would refinance those at something comparable that comment was really more in respect of the portion of the debt stack that had both longer tails. In the 27 28 29 range that is the point at which we think we would have material credit rating upgrades.

Opportunity.

And the refinancings are <unk> 25, which means you need to have the balance sheet that place by 'twenty four to get the credit rating adjustments because they kind of do that once or twice a year. So are you looking to be investment grade or Jess.

One move shift on the two that you have.

Okay that helps.

I'm just trying to understand your expert.

Very much.

Thanks.

Thank you Michael.

I think that comment there and that bubble on the page over the later stuff the 27% and 28th the maturities for 25 and 26 at substantially all floating rate debt today and what we're trying to highlight is the refinancing of those.

Thank you Mr Hosein.

Our next question comes from the line of Walter <unk> with RBC. Your line is now open.

Thank you very much operator, good morning, everyone.

So I was wondering Luke you gave us some.

Currently carrying them at largely market rates and the expectation is you would refinance those at something comparable the comment was really more in respect of the portion of the debt stack that has those longer tails into 27 28 29 range that is the point at which we think we would have material credit rating upgrades.

Merging indication for improvement for next year.

Can you repeat the number that you mentioned, but.

When you do could you unpack it based on the headwind and tailwind.

Particularly what would be the headwind from OCC.

Based on current prices.

Okay that helps.

What youre, assuming as acquisition headwinds on a normal based on what Youre looking at for next year and then obviously netted off with what you would typically look for in terms of annual margin improvement from some efficiency gains to get to the net number that you mentioned.

Thank you very much.

Thank you Michael.

Thank you Mr Hosein.

Our next question comes from the line of Walter <unk> with RBC. Your line is now open.

Thank you very much operator, good morning, everyone.

Yes, Thanks Walter.

So I was wondering Luke you gave us some.

We would assume no further M&A into next year right. So our guide is always just reflective of what we own today. So anything we do incremental to that today's businesses that we all will be additive from a margin perspective, you saw even in this quarter the ability of the M&A that we're doing to dilute or impact the margins are becoming less and less so we think.

Merging indication for improvement for next year.

Can you repeat the number that you mentioned, but.

When you do could you unpack it based on the headwind and tailwind.

Particularly what would be the headwind from OCC.

Just on current prices.

Any impact from what we have or what we will do will probably be de minimis. So what youre really left with is the biggest headwind that we're seeing today is obviously with the recycling pricing. We're assuming next year stays at this year's levels by $150 for a basket of goods.

Net number that you mentioned.

Canadian per metric ton, so if you're comparing to our peers a little bit different there.

Yes, Thanks Walter.

To start we would assume no further M&A into next year right. So our guide is always just reflective of what we own today. So anything we do incremental to that today's businesses that we own would be additive from a margin perspective, you saw even in this quarter the ability of the M&A that we're doing to dilute or impact the margins is becoming less and less so.

That's about a $50 million headwind going into next year, Alright, Thats topline and as you know all flows to the bottom. So it's real but I think beyond the major offset to that is really the power of the pricing that we're realizing and we think is going to continue to accelerate into Q4 and then into next year is finally, the CPI related revenue start getting.

We think any impact from what we have or what we will do will probably be de minimis. So what youre really left with is the biggest headwind that we're seeing today is obviously with the recycling pricing. We're assuming next year stays at this year's levels the $150 for a basket of goods.

The proper catch up price increases that we have been going with all of this year.

If you do the math of lining that up against what we expect to be a moderating cost inflation I think youll see that if normal course organic margin expansion. In this business is 20 to 40 bps or something to that is that we expect to be able to do multiples of that so I think when you put that together.

Canadian per metric ton, so if youre comparing to our peers a little bit different there.

That's about a $50 million headwind going into next year, Alright, Thats top line and as you know all flows to the bottom. So it's real but I think beyond the major offset to that is really the power of the pricing that we're realizing and we think is going to continue to accelerate into Q4 and then into next year is finally, the CPI related revenue start getting.

<unk>.

There is a path to.

Get to that what we said in the press release of the 100 basis points of margin expansion. The other point you need to remember as we anticipate in the LNG coming online next year, which although the commodity as a.

The proper catch up.

Significant decremental flow through there is a similar reverse on the R&D.

Price increases that we have been going with all of this year.

That's net new for US right. So that's going to be quite margin accretive and we're excited about that coming into the fold.

And then if you do the math of lining that up against what we expect to be a moderating cost inflation I think youll see that if normal course organic margin expansion. In this business is 20 to 40 bps or something to that is that we expect to be able to do multiples of that so I think when you put that together.

I just wanted to confirm on the pricing you had mentioned that it's coming through and that's going to be a big offset or a good way to overcome some of those headwinds.

I guess.

Based on what we're hearing from others fourth quarter. It looks like it's going to remain at an elevated level similar to third.

Sure.

There is a path to.

And then if I if I understand you correctly look youre pointing to high single digit for next year, but perhaps you can correct me, if I'm wrong coming coming off a high year over year in Q1, and then and then kind of tapering down.

Get to that what we said in the press release about 100 basis points of margin expansion. The other point you need to remember is we anticipating the R&D coming online next year, which although the commodity has a.

Significant decremental flow through there is a similar reverse on the R&D.

To some level at the end of next year.

What would you say is the long term.

That's net new for US right. So that's going to be quite margin accretive and we're excited about that coming into the fold.

You spoke about the industry long term.

I just wanted to confirm on the pricing you mentioned that it's coming through and Thats going to be a big offset or a good way to overcome some of those headwinds.

The pricing growth basis eggs.

Existing 2023, and then going out on long term basis, how would you characterize your view on pricing.

I guess im.

Based on what we're hearing from others fourth quarter. It looks like it's going to remain at an elevated level similar to third and then if I. If I understand you correctly look youre pointing to high single digit for next year, but perhaps you can correct me, if I'm wrong coming coming off a high year over year in Q1, and then and then kind of tapering.

I think it's important to step back and know that our pricing is in response to the environment in which we're operating in I mean, the cost inflation. There is real and then when we talk about sort of operating costs, but layer and interest rates talk about what's happening at capex et cetera.

Inflation is real and I think you need to be I think our peer who reported earlier said something similar that you need to be in high single digits, if not sort of low double digits in this environment and if this environment persists, then thats, where youre going to continue to see as FIFA is I think thats. The math you need to earn the appropriate return on the capital that we're investing into this busy.

Down.

Some level at the end of next year.

What would you say is the long term.

You spoke about the industry long term.

On a pricing growth basis.

Exiting 2023, and then going out on long term basis, how would you characterize your view.

<unk>, obviously inflation materially moderates and folks going back down and then you have an ability to sort of take your foot off the gas on the pricing lever, but we're going to be responsive.

On pricing.

I think it's important to step back and know that our pricing is in response to the environment in which we're operating in I mean, the cost inflation. There is real and then we talked about the sort of operating costs, but layer and interest rates talk about what's happening at capex et cetera. The cost inflation is real and I think you need.

To what we're seeing and I think you need to be at these levels.

In this environment I think the reality is the unit cost inflation should start to moderate on the basis that I think all of the call. It one time catch ups that happen that it could be wrong, but I don't think you have another equal leg up from here as we go into next year. So the pricing is going to be pretty.

To be I think our peer who reported earlier said something similar that you need to be in high single digits, if not sort of low double digits in this environment and if this environment persists, then thats, where youre going to continue to see as deep and as I think thats. The math you need to earn the appropriate return on the capital that we're investing into this business obviously of inflation.

Baked by the end of Q1, if you think about the strength with which we're exiting this year and you should now be lining that up with an easing.

<unk>.

Material.

Moderator and so it's going back down and then you have an ability to sort of take your foot off the gas on the pricing lever, but we're going to be responsive.

Unit cost inflation, where does the industry ultimately go.

Again, I think it was constantly going to be responding to the cost of providing the services that we do and allowing us to generate an earnings sort of appropriate return.

So what we're seeing and I think you need to be.

At these levels.

In this environment I think the reality is the unit cost inflation should start to moderate on the basis that I think all of the call. It one time catch ups have happened it could be wrong, but I don't think you have another equal leg up from here as we go into next year. So the pricing is going to be pretty.

So it's hard to say, but I think the continued consolidation and the continued focus and discipline around pricing, obviously are constructive and ensuring that.

We as a company are able to earn those those returns.

I appreciate it thanks for the time.

Baked by the end of Q1, if you think about the strength with which we're exiting this year.

Thanks Walter.

Thank you Mr Backman.

You should now be lining that up with ease.

Our next question comes from the line of Jerry Revich with Goldman Sachs. Your line is now open.

Easing.

Unit cost inflation, where does the industry ultimately go.

I think it was constantly going to be responding to the cost of providing the services that we do and allowing us to generate an earnings sort of appropriate return.

Hi, Good morning. This is Adam <unk> on for Jerry Revich today, Thanks for taking my question.

Had another.

A question on how you're thinking about pricing in 2023, just conceptually do you feel like with the headwinds in recycling, we now need to push pricing, even more on the collection and disposal side.

So it's hard to say, but I think the continued consolidation and the continued focus and discipline around pricing, obviously are constructive and ensuring that we as a company we're able to earn those those returns.

Well look I think as we try to articulate it to $50 million to $60 million of headwind that sort of a 100% flow through margins from recycling is a real number and so youre going to need a lever to pull to offset that I think what it also needs to be understood is that we are and continue to.

I appreciate it thanks for the time.

Thanks Walter.

Thank you Mr Backman.

Our next question comes from the line of Jerry Revich with Goldman Sachs. Your line is now open.

Hi, Good morning. This is Adam <unk> on for Jerry Revich today, Thanks for taking my question.

Actively engaged in the renegotiation of the sort of contract that generate a lot of that material you've heard the industry talking about it and moving those away from commodity price driven returns to more fixed processing fee models and we've been actively engaged in those discussions even before the recent sort of crash.

Had another.

A question on how you're thinking about pricing in 2023, just conceptually do you feel like with the headwinds from recycling, we now need to push pricing, even more on the collection and disposal side.

And the OCC pricing and we anticipate fruitful benefits coming out of those.

Well look I think as we try to articulate it to $50 million to $60 million of headwind that sort of a 100% flow through margins from recycling is a real number.

Sitting here in Toronto, it's one of the areas, where the whole dynamic on sort of recycling is going to be changing so Adam short answer is yes, I think youll look at other levers to pull to offset that headwind, but even within that line of business I think youll see incremental dollars coming from the continued sort of.

So, yes, youre going to need to lever to sort of pull to offset that I think what also needs to be understood is that we are and continue to be actively engaged in the renegotiation of those contracts that generate a lot of that material you've heard the industry talking about it and moving those away from commodity prices.

<unk> and restructuring of those contracts.

The new model of the fee for service approach.

Driven returns to more fixed processing fee models and we've been actively engaged in those discussions even before the recent sort of crash in the OCC pricing and we anticipate fruitful benefits coming out of those some of them are sitting here in Toronto, It's one of the areas where the whole dynamic on sort of recycling is going.

Got it that's helpful and then really impressive organic growth in environmental services.

It looks like a lot of that may be coming from higher selling prices.

Can you help us think about how you are.

Thinking about the sustainability of revenues in this business as we enter 2023.

Be changing so Adam short answer is yes, I think youll look at other levers to pull to offset that headwind, but even within that line of business I think youll see incremental dollars coming from the continued sort of renegotiation and restructuring of those contracts to.

Yeah, Adam I think that's a bit of a misnomer I think it's important to understand that the business has grown through tariffs here inorganically, where they used motor oil side of it sort of has remained relatively static you think about used motor oil in a given quarter.

We're probably selling 50 to 60 million liters of used motor oil and were probably up in Q3.

The new model of the fee for service.

<unk>.

Got it that's helpful and then really impressive organic growth in environmental services.

Nine or 10 per liter.

So it's $6 million incremental revenue sort of coming out of that.

Looks like a lot of that may be coming from higher <unk> selling prices. So I'm. Just can you help us think about how you are.

The real growth in the real success of that was as we had anticipated and our thesis of bringing the two businesses together was creating.

Thinking about the sustainability of revenues in this business as we enter 2023.

One stop shop for environmental services needs that large.

Yeah, Adam I think that's a bit of a misnomer I think it's important to understand that the business has grown through tariff year, Inorganically, where the used motor oil side of it sort of has remained relatively static you think about used motor oil in a given quarter.

Customers could reach out to and all of the various markets.

That's really where we're seeing tremendous success.

It comes in a whole swath of industrial services, but this quarter one of the stars was just being in an emergency response, there was a large spill in the southern U S and called upon us as one of many subs and within a couple of days, we were appointed as the sort of mean.

Selling 50 to 60 million liters of used motor oil and were probably up in Q3.

910 per liter.

So the $6 million incremental revenue sort of coming out of that the real growth in the real success of that was as we had anticipated and our thesis of bringing the two businesses together was creating a one stop shop for environmental services needs that large.

Provider on that site and that being sort of $30 million plus of revenue.

And I think it's a testament to the quality of the service that we're providing and now the recognition of the capabilities of the GFS name you got to remember we're also still benefiting from the reopening effect in that environmental services lagged in 2021. So we are getting some of that benefit.

Customers could reach out to and all of the various markets and that's really where we're seeing tremendous success.

As well, but really this is broad based strength across our densify and expanded platform.

It comes in a whole swath of industrial services, but this quarter one of the stars was assuming an emergency response, there was a large spill in the southern U S and called upon us as one of many subs and within a couple of days, we were appointed as the sort of mean.

Amongst all of our service offerings in used motor oil and that sort of external commodity based.

<unk> is actually a de minimus contributor to what we are achieving.

Provider on that site and that being sort of $30 million plus of revenue.

Great. Thanks, so much.

Thanks, Adam.

Thank you Mr Lynch.

Our next question comes from the line of Tim James with TD Securities.

Your line is now open.

Mr. James Your line is now open.

As well, but really this is broad based strength across our densify and expanded platform.

Thank you.

Good morning, everyone.

Amongst all of our service offerings in used motor oil and that sort of external commodity base.

I'm just wondering if you could maybe talk about how you manage the pricing versus the surcharges. You mentioned earlier on that you were able to kind of lean into base pricing more in the third quarter. How do you think about the trade off between the two.

Component is actually a de minimus contributor to what we are achieving.

Great. Thanks, so much.

Thanks, Adam.

Is there one.

Thank you Mr <unk>.

Yes, Tim I think you always want to get your base pricing right on the notion that surcharges will sort of fluctuate in response to the.

Our next question comes from the line of Tim James with TD Securities. Your line is now open.

Macro energy cost environment, but your base price should be appropriate to cover your cost and generate the return that you need.

Mr. James Your line is now open.

Alright, thank you.

Good morning, everyone.

We've said for years of how we have an opportunity in our existing customer portfolio to sort of right size the pricing of many of the sort of.

Customers that have come through acquisition and we're doing exactly that.

Someone made a comment that we should just flip the switch and do all the surcharges. The reality is it's not that easy and requires some mining of the contracts and as we're doing that in certain instances. We are realizing that that specific customer is not where the pricing needs to be and we're focusing on that price increase one because again the base price will stick.

Is there more.

Yes, Tim I think you always want to get your base pricing right on the notion that surcharges will sort of fluctuate in response to the.

Macro energy cost environment, but your base price should be appropriate to cover your cost and generate the return that you need.

We need that to be an appropriate level for the service that we're providing so.

And in Q3 have resulted in a little bit less acceleration of our surcharge program that we had initially anticipated, but the trade off as we got more in base than we'd previously wanted and we will take that outcome. All day long, but I think that base is what's going to drive the durability of the pricing where the <unk>.

We've said for years of how we have an opportunity in our existing customer portfolio to sort of rightsize the pricing of many of the sort of.

Customers that have come through acquisition and we're doing exactly that.

Someone made a comment that you just flip the switch and do all the surcharges. The reality is it's not that easy and requires some mining of the contracts and as we're doing that in certain instances. We are realizing that that specific customer is not where the pricing needs to be and we're focusing on that price increase first because again the base price will stick.

Our charge is more just a mechanism to respond to a changing sort of volatile component of overall service offering.

Okay. That's very helpful. My second question I, just wanted to return to an earlier topic about environmental services.

We need that to be an appropriate level for the service that we're providing so.

Very strong performance there you talked about it a little bit is it possible to dig into more.

In Q3 have resulted in a little bit less acceleration of our surcharge program that we had initially anticipated, but the tradeoff is we got more in base than we'd previously wanted and we will take that outcome all day long because I think that base.

How much of that is.

And may be backing out the <unk>.

It's still that you referred to but how much of the growth in string.

As overall market versus.

And sort of GSL specific opportunities and maybe taking market share because of the platform that you've assembled there in any.

Is what's going to drive the durability of the pricing where the surcharges more just a mechanism to respond to a changing sort of volatile component of overall service offering.

Comment specifically on here tear appears fitting into that.

Okay. That's very helpful. My second question I, just wanted to return to an earlier topic about environmental services and <unk>.

Yes, I think when you look.

Look at the business I mean that thesis is playing out exactly the way we thought it would.

<unk> strong performance there you've talked about it a little bit is it possible to dig into more.

Remember, we bought that business in the middle of Covid a lot of that business is obviously lever to Canada, Canada was in rolling shutdowns for effectively a couple of years. So when we looked at buying that business, we bought it off an LTM number.

Much of that is.

And may be backing out the kind of skills that you referred to but how much of the growth and strength.

That add significant sort of COVID-19 impact so I think.

Overall market versus.

Now, let's come back home goods over that business, obviously with the size scale platform market positions. We have in Canada has led to this outsized organic growth. When you look at continued opportunities. We think those opportunities are going to persist into 2023 and beyond and we still think Huntington <unk>.

Sort of GSL specific opportunities and maybe taking market share because of the platform that you've assembled there in any.

No comment specifically on here in house here appears fitting into that.

Yes.

I think when you look at the business I mean that thesis is playing out exactly the way we thought it would.

The expectations, we had on that acquisition.

Is it basically.

We bought that business in the middle of Covid, a lot of that business is obviously lever to Canada, Canada was in rolling shutdowns for effectively a couple of years. So when we looked at buying that business, we bought it off an LTM number.

Far outweighed sort of what our expectations were initially and I think there is still a significant amount of continued opportunity that we're going to have I mean, we underwrote almost 20 million of synergies we're through almost 25 of those today and we think there's significantly more to come and there is still a large pricing opportunity in that business. So we think pricing and volume.

Significant sort of Covid impact so I think now let's come back home goods over that business, obviously with the size scale platform market positions. We have in Canada has led to this outsized organic growth. When you look at continued opportunities. We think those opportunities are going to persist into 2023 and beyond.

To be very strong if you look at that business compared to the industry today that business is running at.

Mid twenties, 26% margins, we articulated that we think there's a path to get that business.

20% to 30% margin similar to our solid waste business and that thesis Hasnt changed so that opportunity continues to be there and I think just with our market position, particularly in Canada, it's going to get us there.

And we still think Huntington.

Synergy expectations, we had on that acquisition.

They basically.

Far away and sort of what our expectations were initially and I think there is still a significant amount of continued opportunity that we're going to have I mean, we underwrote almost 20 million of synergies we're through almost 25 of those today.

Great. Thank you very much Patrick.

Thank you Mr. James Our next question comes from the line of Stephanie more with Jefferies. Your line is now open.

And we think there's significantly more to come and there's still a large pricing opportunity in that business. So we think pricing and volume are going to be very strong. If you look at that business compared to the industry today that business is running at.

Hi, good morning.

Good morning.

Good morning, I appreciate the incremental color on just the margin expectations as you'd like to 2023 could you maybe talk about how some of your effort and investments whether it's around route optimization lead automation and lean enhancements and any other more.

Mid twenties, 26% margins, we articulated that we think there's a path to get that business to high 20% to 30% margin similar to our solid waste business and that thesis hasn't changed so that that opportunity continues to be there and I think just with our market position, particularly in Canada, it's going to get us there.

Company specific actions and how those fit into your margin expectations for 'twenty. Thanks, Gary.

Great. Thank you very much Patrick.

Yes, Kevin this is <unk>.

Thank you Mr. James.

Speaking I'd say the guide that we've sort of given is really just.

Our next question comes from the line of Stephanie more with Jefferies. Your line is now open.

Relying on this singular lever of the fuel surcharge initiative.

Hi, good morning.

As being one of those core self help items, we've identified the fleet optimization as you said from alternative fuel conversion from automation route optimization. That's obviously all ongoing in response to inflationary environment and just.

Good morning.

Good morning, I appreciate that incremental color on just the margin expectations as we would like to 2023 could you maybe talk about how some of your effort and investments whether it's around.

Route optimization lead automation and lean enhancements and any other more company.

Our desire to optimize the business that we have but I would think of that as being all incremental upside to what we're talking about today I mean, we will come out with a specific guide when we talk in February , but I think where we're sitting today, we have high degree of conviction that we're going to achieve what we've laid out just simply with the.

Company specific actions and how those fit into your margin expectations for 'twenty. Thanks, Larry.

Yes definitely this is Luc speaking I'd say the guide that we've sort of given is really just.

Relying on the singular lever of the fuel surcharge initiative.

Although rhythm of our pricing versus our costs and giving consideration to the sort of externalities of commodity and FX. So I think those opportunity sets that we articulated at Investor day and continue to focus on remain there will be additive and incremental to what we're talking about and we'll be sort of realize.

As being one of those core self help items, we've identified the fleet optimization as you said from alternative fuel conversion from automation route optimization, that's obviously, all ongoing and response to the inflationary environment and just.

Through 2023 in the years that follow.

Our desire to optimize the business that we have but I would think of that as being all incremental upside to what we're talking about today I mean, we will come out with a specific guide when we talk in February, but I think where we're sitting today, we have high degree of conviction that we're going to achieve what we've laid out just simply with the.

Great. Thank you and then maybe you can just touch a little bit on just the M&A environment, what you're seeing any change in activity or willingness from the sellers our competitiveness.

The buyer side as well.

Thanks.

Algorithm of our pricing versus our costs and giving consideration to the sort of externalities of commodity and FX. So I think those opportunity sets that we articulated at Investor day and continue to focus on remain there will be additive and incremental to what we're talking about and we'll be sort of realize.

Okay.

The market really hasn't reacted I mean typically the arena. We're playing is in smaller acquisitions or valuations really haven't moved theres still in sort of the same stated ranges of sort of 5% to seven times on a little stuff.

The bigger stuff, where you might see a little bit of movement, but we haven't seen much I mean, the pipeline continues to be very robust.

2023 in the years that follow.

If anything it sort of worked in the opposite where we've had.

Great. Thank you and then maybe you can just touch a little bit on just the M&A environment. What you are seeing any change in activity or willingness from the sellers our competitiveness on.

We talk about sort of the leverage issue, sometimes I think people think we're just sitting around here not thinking about anything but media is the largest shareholder of this.

On the buyer side as well.

Business, we're always thinking about ways of creating value in putting our shareholder hat on first and we've had.

No.

Obviously.

The market really hasn't reacted I mean typically the arena. We're playing is in smaller acquisitions or valuations really haven't moved theyre still in sort of the same stated range of 5% to seven times on a little stuff.

People have approached us about buying certain assets that we have.

Yes.

Contemplate, we're not going to make any rash decisions, but there's.

Paul at almost $150 million to $200 million of EBITDA that could be.

The bigger stuff, where you might see a little bit of movement, but we haven't seen much I mean, the pipeline continues to be very robust.

Sold that.

Mid teens type multiples, so we could easily generate two $5 billion to $3 billion of Av.

If anything it's sort of worked and the opposite when we've had.

Cash if we wanted to sell off some of these little assets throughout the existing business at very high multiples.

We talk about sort of the leverage issue, sometimes I think people think we're just sitting around youre not thinking about anything but media is the largest sort of shareholder of this business.

So if anything it's been the opposite we've had people approaching us to pay significantly higher multiples.

We're always thinking about ways of creating value in putting our shareholder hat on first and we've had.

We're currently trading at for our existing business. So.

People have approached us about buying certain assets that we have.

Not a lot has really changed on that front, but.

We will see what happens as we continue moving on and continue.

Yes.

Always contemplate we're not going to make any rash decisions, but there's.

We continue to take an approach that we've taken so far.

Call. It almost 150 to 200 million of EBITDA that could be.

Great and then just I guess, a follow up to that comment as you guys evaluate whether you said.

Sold.

Mid teens type multiples, so we could easily generate two $5 billion to $3 billion.

Some of those assets, what kind of kept you to retain those.

Where you stand today.

Cash if we wanted to sell off some of these little assets throughout the existing business at very high multiples.

I think from our perspective, it's always something.

Way and it goes into when you're building your plan your strategic outlook My perspective is.

So if anything it's been the opposite we've had people approaching us to pay significantly higher multiples.

We can't control the stock price, but what I can control is building a great business and you build a great business youre going to get paid for it right you may not get paid for it this month or this quarter.

And we're currently trading at for our existing business. So.

Not a lot has really changed on that front, but.

We'll see what happens as we continue moving on and continue.

Last year Levered growth was great. This year Levered growth is not right. So we can't really make.

Continue to taken the approach that we've taken so far.

Great and then just I guess, a follow up to that comment as you guys evaluate whether you said.

We can't make decisions based on what our computer wants to tell us for the day because the algorithms are saying. This is we should do or you Shouldnt do my perspective is just continue building a great business that being said.

Some of those assets, what kind of kept you to retain those.

Where you stand today.

We have assets and we have a business thats worth significantly more than its value today. That's the reality you can't buy these businesses for 10 times today, you couldn't buy our business, we couldn't buy high quality business for 10 times and we have assets that are worth significantly less so yes, if you want to stay a public company.

Yes, I think from our perspective, it's always something.

And it goes into when you're building your plan your strategic outlook My perspective is.

It's interesting we came under private equity World where.

We'd be under Levered in private equity in the public markets people think leverages too high because the industry comps.

Last year Levered growth was great. This year levered growth if not right. So we can't really make.

Use significantly lower levels. So we can always have a philosophical discussion about leverage but.

The reality is people want to see leverage lower.

And then you have a decision to make if you want to stay a public company you go private or do you stay public if you want to stay public you can look at selling some of these assets at 15 plus times.

We have assets and we have a business that's worth significantly more than its value today. That's the reality you can't buy these businesses for 10 times today, you couldn't buy our business, we couldnt buy high quality business for 10 times and we have assets that are worth significantly less so yes, if you want to stay a public company.

And I'll just use round numbers. If you sold 200 million of EBITDA that people, who have expressed interest on any generate $3 billion of cash and you repaid some of your most expensive debt.

It's interesting we came under private equity World where.

I'd say that average cost of debt today, and our most expensive debt in our cap structure sort of six 5% to 7%.

We'd be under Levered in private equity in the public markets people think leverages too high because the industry comps.

You basically get rid of $200 million of EBITDA, we'd also get rid of $200 million of interest costs right not just sort of a flow through so.

Use significantly lower levels. So we can always have a philosophical discussion about leverage but.

The reality is people want to see leverage lower.

And then you move to investment grade really quickly.

Obviously, you seem to be levered in the low threes.

Significantly change the credit profile of the business, which then will yield a pretty good result on financings I mean, if you look at our term loan today, our terminal in todays price that sulfur plus 300.

And just use round numbers. If you sold 200 billion of EBITDA that people, who have expressed interest on any generate $3 billion of cash and you repaid some of your most expensive debt.

If you look at waste connections that are investment grade. They just issued a new terminal in last week at a range of plus 75 to 125 right. So it was 225 to 250 basis points of.

I'd say that average cost of debt today, and our most expensive debt in our cap structure sort of six 5% to 7%.

Sure.

Of upside that you can sort of see on that so these are all things we're thinking about we're certainly not sitting here thinking about nothing.

You basically get rid of $200 million of EBITDA, we'd also get rid of $200 million of interest costs right not just sort of a flow through so.

We're sitting here thinking about building a great business, but we're also sitting here thinking about how we can make the business better and how we can drive higher free cash flow margins et cetera. So all of those are all things are on the table at the moment and we'll watch were not going to make a rash decision based on what the fed says from from week to week, but we know our business is exceptional and we know what is.

And then you move to investment grade really quickly.

Obviously, you seem to be levered in the low threes.

Significantly changed the credit profile of the business, which then will yield a pretty good result on financings I mean, if you look at our term loan today, our terminal in todays price that sulfur plus 300.

There are a lot more than its valued at today.

If you look at waste connections that are investment grade. They just issued a new terminal in last week at a range of plus 75 to 125 right. So it was 225 to 250 basis points of.

Great. Thank you so much.

Thank you Miss more.

Yes.

Next question comes from the line of Rupert <unk> with.

Of upsides that you can sort of see on that so these are all things we're thinking about we're certainly not sitting here thinking about nothing.

National Bank. Your line is now open.

Good morning, So Luca filling here for Rupert today.

At what level of interest rates is the tradeoff between pursuing M&A versus deleveraging your balance sheet starts favoring more of the site of deleveraging.

I think it's important to understand that all of our deleveraging anticipated is really through growth in EBITDA more so than the debt repayment right.

Worth a lot more than its valued at today.

Great. Thank you so much.

Not entering into a mode in the next couple of years, where we're anticipating material debt repayments. It's rather the deleveraging is coming from sort of growth. We are put out on the page, where we show the impact of M&A and deploying X million dollars.

Thank you Miss more or.

Next question comes from the line of Rupert <unk> with.

National Bank. Your line is now open.

Good morning, So Luca filling here for Rupert today.

Reasonable valuations and more and more of that tuck in M&A is a de minimis impact to your overall.

And what level of interest rates is the tradeoff between pursuing M&A versus deleveraging your balance sheet starts favoring more of the site of deleveraging.

So a deleveraging path. So if you took that $400 million that we're contemplating in that slide and put that to sort of deleveraging you could take another sort of 20 bps that much quicker, but I think in the long run youll continue to see that deleveraging coming from.

Yes.

I think it's important understand that all of our deleveraging anticipated is really through growth in EBITDA more so than the debt repayment right where we're at.

Not entering into a mode in the next couple of years, where we're anticipating material debt repayments. It's rather the deleveraging is coming from sort of growth, where we'd put out on the page, where we show the impact of M&A and deploying X million dollars.

Growth in EBITDA as opposed to actually interest rate outlook.

If rates went up into double digits would that be a different conversation, perhaps but I think when you think about the vast majority of our debt being fixed.

Our floating rate debt today priced in for yesterday's decision going to be in high Sevens at this level I don't think it changes our M&A strategy.

Reasonable valuations and more and more of that tuck in M&A is a de minimis impact to your overall.

If we go materially higher from here.

So at deleveraging path.

<unk> do you to have a different perspective, but we don't anticipate that.

If you took that $400 million that we are contemplating in that slide and put that to sort of deleveraging you could take another sort of 20 bps that much quicker, but I think in the long run youll continue to see that deleveraging coming from.

And the modeling that we're doing.

Alright, Thank you very much.

Coming back to the environmental services. So you mentioned earlier that.

The recovering candidly too good portion of it.

Growth in EBITDA as opposed to actually interest rate outlook.

Where do you see industrial collection and processing activity levels versus where they were pre COVID-19 or more like in a normalized state.

If rates went up into double digits would that be a different conversation, perhaps but I think when you think about the vast majority of our debt being fixed.

Yes.

Yes, I think the reality is there anyone who has anything to do with the energy sector. Today is actually amping up a lot of their sort of work because they want to make sure that they are up and running and continuous basis as much as possible. So we're seeing in western Canada and some other stuff in the U S.

The floating rate debt today priced in for yesterday's decision going to be in high Sevens at this level I don't think it changes our M&A strategy.

If we go materially higher from here, perhaps you'd have a different perspective, but we don't anticipate that.

And the modeling that we're doing.

Where is.

Alright, Thank you very much.

Just broad based tie in to that economy or that market. We don't service directly oilfield customers, but if you think about western Canada pockets of Atlantic, Canada, just have that broad based exposure youre seeing a lot of activity. So we think obviously in Canada sort of strong energy environment is good for the sort of market is.

And coming back to the environmental services. So you mentioned earlier that.

The recovering candidly too good portion of it.

Where do you see industrial collection and processing activity levels versus where they were pre COVID-19 or more like in a normalized state.

Yes.

And we are well positioned to benefit from that.

Alright, Thank you very much I'll leave it there.

Yes.

Thank you Mr <unk>.

Our next question is a follow up from the line of Michael Hoffman with Stifel. Your line is now open.

Yeah.

So.

An interesting thread on leverage and the idea of maybe divesting through asset sales.

I mean, one of the issues you have is your debt your interest costs of 6% of your revenues and your peers are in the twos. So.

If you're not going to do it through asset sales do you do it through equity does DCP, let you raise equity and you would get there faster because clearly that's the hangover on your multiple.

A hole and we are well positioned to benefit from that.

Alright, Thank you very much I'll leave it there.

It's your leverage down passenger multiple Rosa.

Okay.

Thank you Mr mirrors.

I think.

And then what I said, we contemplate all of these different things I think the reality is.

Our next question is a follow up from the line of Michael Hoffman with Stifel. Your line is now open.

Pete.

So.

The short answer is you get there any way you can do you want to wait to get their two or two and a half years or do you want to expedite that right and I think some of that into some of the consideration you have to factor in what the fed you're doing and where rates are going et cetera, and you look at sort of debt maturities. The reality is we don't really have any real material maturities for another sort of five plus years.

An interesting thread on leverage and the idea of maybe divesting through asset sales.

I mean, one of the issues you have is your debt.

Interest costs of 6% of your revenues and your peers are in the twos.

If you're not going to do it through asset sales do you do it through equity does BCP, let you raise equity and you would get there faster because clearly that's the hangover on your multiple.

Loans have a term loan which is floating today anyway.

So.

There is no concern for me is the largest shareholders putting my equity had on an island. So you get there too and two and a half years do you want to expedite that if you wanted to expedite that what I sell equity at these levels absolutely not I mean, there is.

It's your leverage down passenger multiple goes up.

I think.

I mean, what I said.

Contemplate all of these different things I think the reality is.

Under no circumstance, what I sell equity at these levels why would I say on equities at these levels. If I can sell some assets that I have for 15 or 16 times to expedite that.

Pete.

The short answer is you get there any way you can do you want to wait to get their two or two and a half years or do you want to expedite that right and I think some of that into some of the consideration you have to factor in what the <unk> and where rates are going et cetera, and you look at sort of debt maturities. The reality is we don't really have any real material maturities for another sort of five plus years the terminal.

Because thats sort of a truly reflect the value of the business today right. So that's what you would do.

People have expressed interest like I said in a couple of hundred million dollars of EBITDA that we have.

Sure.

You got rid of a couple hundred million of EBITDA. We can also get rid of a couple of hundred million dollars of interest cost so not the worst don't come in and get you delever into the low threes.

The term loan which is floating today anyways.

<unk>.

There is no concern for me as the largest shareholder is all putting my equity had on an island. So you get there in two two and a half years do you want to expedite that if you want to expedite that.

And you get move to investment grade sort of relatively quickly.

I sell equity at these levels absolutely not I mean, there is under no circumstance, what I sell equity at these levels why would I sell equity at these levels. If I can sell some assets that I have for 15 or 16 times to expedite that.

So thats the path.

Is that the best path I don't know if that answer today, but it's certainly an option that is on the table today.

And I think for any investors I had a question about returns on invested capital I think that would clearly.

Because that sort of a truly reflect the value of the business today right. So that's what you would do.

<unk>.

Quash that thesis of what returns on invested capital because there would be there'll be material upside to come from some of those but it's all things we have on the table.

People, who have expressed interest like I said in a couple of hundred million dollars of EBITDA that we have yes sure.

Issuing equity at 10 times 2023, just doesn't seem like a very smart are good use of capital, but selling some assets in the mid teens could be so.

Instead of you.

Got rid of a couple hundred million of EBITDA, we'd also get rid of a couple of hundred million dollars of interest cost. So.

Not the worst on coming to get you delever into the low threes and.

If we decide that that's a path that we want to go down but all options are on the table at this point, but we'll watch to see what happens with the rate increases in the fed sort of over the next couple of months and then we'll sort of make a decision on that.

And you get move to investment grade sort of relatively quickly.

So that's the path.

Just the best path I don't know if that answer today, but it's certainly an option that is on the table today.

Okay. Thank you.

And I think for any investors I had a question about returns on invested capital I think that would clearly.

Thank you Mr. <unk>. Our next question comes from the line of Chris Murray with <unk> capital markets. Your line is now open.

<unk>.

Quash that thesis of what returns on invested capital because there would be there'll be material upside to come from some of those but it's all the things we have on the table.

Yes, thanks folks so just maybe taking a different tact.

Issuing equity at 10 times 2023, just doesn't seem like a very smart are good use of capital, but selling some assets in the mid teens could be so.

About margins next year, you did mention the fact that Youre looking for about 100 basis points.

Year over year, but look you kind of alluded to the fact that you might have some of the impacts from our LNG can you just talk about your best guess at this point about when the R&D projects might start working their way into the.

If we decide that that's a path that we want to go down but all options are on the table at this point, but we will watch to see what happens with the rate increases in the fed sort of over the next couple of months and then we'll sort of make a decision on that.

Into the program.

And what the possible magnitude of some of those contributions look like over 'twenty through 'twenty four.

Thank you.

Thank you Mr. <unk>. Our next question comes from the line of Chris Murray with <unk> capital markets. Your line is now open.

So what we've said is by mid next year, we expect the first one to sort of be up and running.

From a contributing basis I think the first couple of months Theres, a ramp and so you put and then the second one would be up and running.

Yes, thanks folks.

Maybe taking a different tact thinking.

Thinking about margins next year, you did mention the fact that youre looking for about 100 basis points.

Q3, Q4 of next year.

Year over year, but look you kind of alluded to the fact that you might have some of the impact from our LNG can you just talk about your best guess at this point about when the R&D projects might start working their way into the.

And potentially another couple in Q4, so we've always articulated I think the in year contribution for next year is a small dollars, maybe there's sort of $20 million to $40 million of contribution in year next year, depending on that ramp, but it's what you can be having as I sort of launch off point for 2024.

Into the program.

And what the possible magnitude of some of those contributions look like over 'twenty three 'twenty four.

Which is what we've articulated as being that sort of first five five projects in that first bucket.

So what we've said is by mid next year, we expect the first one to sort of be up and running.

As being the price that we think to be entering 2020 forward right, which is roughly close to $100 million.

Contributing basis I think the first couple of months Theres, a ramp and so you put and then the second one would be up and running.

In your contribution, though again, we will have better visibility when we give the official guide in early next year, but it's going to be in the order of magnitude as I just described.

Three Q4 of next year.

Okay.

And I know, there's been lots of questions about the puts and takes around the balance sheet, but I'll go back to Investor Day, and I think you laid out a case for.

About the balance between the pace of deleveraging versus free cash flow growth.

Which is what we've articulated as being that sort of first five five projects in that first bucket.

But just really a question when we look at your acquisition sort of in the quarter.

Again, I think when we talked about optimizing the footprint.

As being the price that we think to be entering 2020 forward right, which is roughly close to $100 million.

Awesome Tuck ins here, so I guess a couple of questions about this one.

It's just really how we should be thinking about.

The in year contribution, though again, we will have better visibility when we give the official guide in early next year, but it's going to be in the order of magnitude as I just described.

Acquisitions on a go forward basis, which is really around optimizing the footprint and over time, you should be able to drive margins that way.

And so we shouldnt be expecting larger larger levels and then they get back to that.

Okay.

And I know, there's been lots of questions about the puts and takes around the balance sheet, but I'll go back to Investor Day, and I think you laid out a case for.

Think about what you've done so far.

Can you get away with us with that.

The lower end of maybe those different scenarios you described.

About the balance between the pace of deleveraging versus free cash flow growth.

And still kind of maybe accelerate.

Just really a question when we look at your acquisition sort of in the quarter.

Accelerate that deleveraging if you so chose to.

Again, I think really talked about optimizing the footprint.

Yes.

Awesome Tuck ins here, so I guess a couple of questions about this one.

There's a lot in there Chris I think it's important to go back our strategy has always been to buy a platform or buy platforms and use that as the base for both organic and inorganic growth to drive margin expansion and if you look at the 200 plus acquisitions, we've done exactly what there's been there has been 15% to 20 larger businesses three of those came since we've gone.

It was just really how we should be thinking about.

Acquisitions on a go forward basis, which is really around optimizing the footprint and over time, you should be able to drive margins that way.

And so we shouldnt be expecting larger larger levels, and then again back to that.

Public when reality and that's where the.

Think about what you've done so far.

Can you get away with us with perhaps the lower end of maybe those different scenarios you described.

Modestly elevated leverage levels are as a result, we saw these pieces to put together to create what we believe to be now an industry leading.

And still kind of maybe accelerate.

Growth platform in North America.

Accelerate that deleveraging if you so chose to.

And the model and the expectation always was now focusing on densify tuck in acquisitions is thats whats going to drive the highest.

Yes.

There's a lot in there Chris I think it's important to go back our strategy has always been to buy a platform by platform and use that as the base for both organic and inorganic growth to drive margin expansion and if you look at the 200 plus acquisitions, we've done exactly what there's been there has been 15% to 20 larger businesses three of those came since we've gone.

Our return on equity and return on invested capital interest that's what we do.

It's been our Mo since the beginning and that is I think where we have a differentiated sort of ability to grow and do that in the markets where we are.

Another peer that also does it sort of very well, but you know there's a lot of markets, where we do not overlap with one another and it provides us a bunch of white space for us both to execute on that strategy. So I mean your comment about the level of M&A in a given year look it's always difficult to forecast exactly where that's going to be because.

Public when reality and that's where the.

Modestly elevated leverage levels. Our results. We saw these pieces to put together to create what we believe to be now an industry leading.

Growth platform in North America.

And the model and the expectation always was now focusing on densify and tuck in acquisitions as that's what's going to drive the highest return on equity and return on invested capital and truthfully. That's what we do I mean, that's been our ammo since the beginning and that is I think where we have a differentiated.

Opportunities arise and if it makes sense, we want to be able to capitalize on it do we have anything in our pipeline today that is multibillion dollar acquisitions no. It is the vast majority of everything is focus will be densify tuck ins, but we always just save or a caveat that we don't know what tomorrow holds and if one of these leading business.

Our ability to grow and do that in the markets, where we are.

<unk> was the sort of come for sale and it made sense for our model and footprint and we'd want to sort of look at it but I think suffice to say the commitment to deleveraging is there you've heard it from Patrick.

Another peer that also does this sort of very well, but there's a lot of markets, where we do not overlap with one another and it provides us a bunch of white space for us both to execute on that strategy. So I mean your comment about the level of M&A in a given year look it's always difficult to forecast exactly where that's going to be because.

Whether you do it organically inclusive of M&A or you accelerate that through potential sort of raising and proceeds as Patrick described remains to be seen but I think the ability or the likelihood that our M&A of what we're requiring materially impacts our deleveraging.

As unlikely so I think there will be some it does temper it but not to a material degree.

Okay. That's helpful. Thank you.

<unk> was the sort of come for sale and it made sense for our model and footprint that we'd want to sort of look at it but I think suffice to say the.

Thank you Mr. Murray.

Our next question comes from the line of Stephanie Yee with Jpmorgan Chase. Your line is now open.

The commitment to deleveraging is there you've heard it from Patrick.

Whether you do it organically inclusive of M&A or you accelerate that through potential sort of raising of proceeds as Patrick described remains to be seen but I think the ability or the likelihood that our M&A of what we're acquiring materially impacts our deleveraging.

Hi, good morning.

To ask about.

Free cash flow for 2023, I know there is a caveat about it.

Capex needs of the business.

If you can elaborate on what you are considering.

Thank you and just stay higher than your trucks or perhaps the retail <unk> SME Marsh Jess.

As unlikely so I think there will be some it does temper it but not to a material degree.

Just directionally would you expect capex to be about the same level as 2000 teu or apps what are some of that.

Okay.

Thank you.

Alright that consideration.

Thank you Mr. Murray.

Yes.

Our next question comes from the line of Stephanie Yee with Jpmorgan Chase. Your line is now open.

Truck spend.

Normal course, the rebuilding of the Mercer insurance proceeds so it's something that it's really as we continue to develop some particularly some of our net newer markets. We're just seeing more and more opportunities for investment and foundational.

Hi, Good morning, I wanted to ask about.

Free cash flow for 2023, I know there is a caveat about a penny on the capex needs of the business.

Capex that could then serve for years.

Wonder if you can elaborate on what you are considering.

Should growth thereafter, I mean, merck's, so we look across our footprint and the continuing sort of evolving dynamic of recycling in different markets and there's a significant opportunity to build recycling facilities and many of our markets that are currently underserved by capacity.

Thank you anticipate higher plenty on trucks or perhaps the rebuilding of some accounts Marsh Jess.

Yes, Directionally would you expect capex to be about the same level.

Level at 20 tier or apps, what are some of that alright.

Alright, the consideration.

And that's something is very interesting to us, particularly as you move to the better. So at a service based model that allows you to underwrite very attractive returns in that business. So looking at items like that.

Yes.

Truck spend.

Normal course, the rebuilding of the Mercer insurance proceeds so it's something that it's really as we continue to develop some particularly in some of our net newer markets. We're just seeing more and more opportunities for investment and foundational.

<unk> there may be some opportunities for us to augment the current partnership dynamics on certain of the sites and maybe take on something where we have a larger capital component of it and spend more dollars, but then generate more returns so I would ring fenced the opportunities above and beyond.

Capex that could then serve for years.

Growth thereafter, I mean, merck's, so we look across our footprint and the continuing sort of evolving dynamic of recycling in different markets and there's a significant opportunity to build recycling facilities in many of our markets that are currently underserved by capacity.

<unk> growth oriented projects with this would've ESG type slant.

That we see a whole host of obviously, we're mindful of this conversation that we're having about leverage at the same time and sort of taking that in consideration.

But that's what we're contemplating we will have a better view on when we report in.

In February because it really I mean, if you think about the normal course maintenance capex for this business with normal course growth business with a tenant and a half 11% number right Thats, where even the question is do we make the decision to deploy incremental dollars into some of the growth opportunities above and beyond that.

Okay.

Very helpful color.

And then just on the remedial.

<unk> growth oriented projects with this would've ESG type slant.

Okay.

Some of the delays in the projects being pushed out to 'twenty three do you see that as a customer being more cautious in this economic environment I guess in your outlook are you assuming that those projects would start up next year or you haven't baked that in.

That we see a whole host of obviously, we're mindful of this conversation that we're having about leverage at the same time and sort of taking that in consideration.

But that's what we're contemplating we will have a better view on when we report in.

In February because it really I mean, if you think about the normal course maintenance capex for this business with normal course growth business with a tenant and a half 11% number right Thats, where <unk> been the question is do we make the decision to deploy incremental dollars into some of the growth opportunities above and beyond that.

I mean, the vast majority of that is a singular site that they've built half of and I think everyone fully expect them to continue with the other half.

A large fortune 500 company in the mid Atlantic area building, a second headquarters so we see that as continuing but I think the broader based comment is probably fair in that.

Okay.

Very helpful color.

And then just on the remediation.

With some of the delays in the projects being pushed out to 'twenty three do you see that as a customer being more cautious in this economic environment I guess in your outlook are you assuming that just project start up next year or you haven't baked that in.

If we're entering into sort of a period of unknown that will there be a potential sort of softening in some of that and thats possible I think it's important to understand the actual dollars from that line of business is relatively big particularly with the growth of our industrial business is becoming smaller and smaller we highlighted it in the quarter as it was baked into our guy.

I mean, the vast majority of that is a singular site that they've built half of and I think everyone fully expect them to continue with the other half.

<unk> and because of margin flow through is so meaningful it moved the needle in that regard, which is really the basis of the callout, but reality that business, particularly in the U S side is becoming a smaller and smaller contributor. So I think we have a base level of that business is tied to maintenance type activities and we don't see that sort of going away to the extent there.

A large fortune 500 company in that mid Atlantic area building. The second headquarters. So we see that as continuing but I think the broader based comment is probably fair in that.

There is a downturn greater than what we're currently seeing is there potentially some exposure in that business sure, but I think the broader based strength of our other offerings are more going to offset and what as we look into 2023% of contribution but would potentially be lost.

We're entering into sort of a period of unknown that will there be a potential sort of softening in some of that and thats possible I think it's important to understand the actual dollars from that line of business is relatively big particularly with the growth of our industrial business is becoming smaller and smaller we highlighted it in the quarter as it was baked into our guide.

Okay. That's helpful perspective, thank you.

<unk> and because of margin flow through is so meaningful it moves the needle in that regard, which is really the basis of the colo, but reality that business, particularly in the U S side is becoming a smaller and smaller contributor. So I think we have a base level.

Yes.

Thanks.

Thank you Mitch.

Next question is from the line of Mark Neville with Scotiabank. Your line is now open.

Hey, good morning, guys. Thanks for squeezing me in.

That business is tied to maintenance type activities, and we don't see that sort of going away to the extent there is a downturn greater than what we're currently seeing is there potentially some exposure in that business sure, but I think the broader based strength of our.

So I just wanted to follow up on the asset.

The disposition.

Conversation.

I mean, you talked about potentially selling $200 million of EBITDA $3 billion.

Other offerings are more going to offset and what as we look into 2023, the contribution but would potentially be lost.

Free cash flow neutral basis.

I mean that sounds great to me I'm just.

We're debating this.

Okay. That's helpful perspective, thank you.

What would be the reasons not to do something like that.

Yes.

Keep those assets.

Thanks.

Thank you Mitch.

Next question is from the line of Mark Neville with Scotiabank. Your line is now open.

The assets that you've assembled that are clear.

Clearly high quality assets like the rest of our business.

Hey, good morning, guys. Thanks for squeezing me in.

Sure.

The reality is is what's your what's your view are you a long term holder Youre short term will get if youre concerned about short term.

So I just wanted to follow up on the.

The disposition conversation.

<unk> price sure, but the reality is our business plan and get to that leverage level.

I mean, you talked about potentially selling $200 million of EBITDA was $3 billion.

Two to two and a half years anyway. So.

Free cash flow neutral basis.

That would be the that's the trade off right obviously.

I mean that sounds great to me I'm just.

Obviously, if it looks like long set of rates ran up higher.

If we're debating this.

What would be the reasons not to do something like that.

Discussion changes right.

These are real things that we've put on the table, we're not just sitting around here just hoping for the best and hoping for Mr. Paolo Husseini is not raising rates anymore. That's not what we're thinking we're obviously of every sort of option on the table.

Keep those assets.

Paul.

So you've assembled better.

Clearly high quality assets like the rest of our business.

A real option.

Sure.

That's one of the real options, there's other options, but that's one of the real options.

The reality is is what's your what's your view are you a long term holder Youre short term will get if youre concerned about short term stock price sure, but the reality is our business plan and get to that leverage level.

When you say whole should you raise equity to delever a bit no I will not sell equity at these levels. They sell some assets before I do that at very high multiples.

People of <unk>.

Two to two and a half years anyway. So.

Express interest in over the last sort of three to four months.

That would be the that's the trade off obviously.

So that's that's really just the debate you wait two to five years.

Obviously, if it looked like long set of rates ran up higher.

Again, like we said we can't control the stock price, we can only control building a great business, but.

Discussion changes right.

These are real things that we've put on the table, we're not just sitting around here just hoping for the best and hoping for Mr. Paolo will say its not raising rates anymore. That's not we're thinking we're obviously of every sort of option on the table, that's a real option.

Or do you expedite that and then use that extra firepower to go double down in the markets that you keep.

Those are just those are the.

The debates that we have sort of internally, yes, Mark I think as Patrick said, if you own this business yourself and your long term private owner you Wouldnt sell high quality assets, because you have such conviction and the ability to delever, regardless now putting on a different hat the shareholder hat in the public equity market that may drive a different.

That's one of the real options, there's other options, but that's one of the real options.

When you say whole should you raise equity to delever a bit no I would not sell equity at these levels. They sell some assets before I do that at very high multiples.

People of <unk>.

Express interest in over the last sort of three to four months.

Decision.

So that's that's really just the debate you wait two to five years.

Yes, no I appreciate that.

I would ask the question.

Again, like we said we can't control the stock price, we can only control building a great business, but.

Mark when you look at it but.

Or do you expedite that and then use that extra firepower to go double down on the markets that you keep.

Yes, just a quick one.

So it's certainly crystallizes the value of what you think I mean from our perspective at Crystal Youre, not giving you wouldn't be giving up very much.

Those are just those are the.

You would crystallize the value of what <unk>.

<unk>.

Work in sort of a base case and if the real Mark is solely just leverage.

And then that resolves all of those issues and there's sort of nothing left.

And you move the hygiene you can refinance the rest of your balance sheet at IAG type rates like everybody else and you have expedited that you did it in a few months versus a few years right. So things we're thinking about all of these things it's not something we've made a decision on today, but we're thinking about all of them and we'll continue to think about them.

Decision.

Yes, no I appreciate that.

I would ask the question.

Alright.

If you look at it but.

Yes, just a quick when you look at it.

So it's certainly crystallizes the value of what you think I mean from our perspective at Crystal Youre, not giving you wouldn't be giving up very much.

People as we sort of move forward in our decisions and thought process.

Yes.

You would crystallize the value of what <unk>.

Appreciate the.

The difference between short term Walter so understand all that so I appreciate that.

<unk>.

Work in sort of a base case and if the real Mark is solely just leverage.

Maybe just a last question just on interest expense I think I.

I think if I can.

Then.

Do the math, it's sort of a 115 million for Q4 cash interests.

That resolves all of those issues and there's sort of nothing locked.

And you move the hygiene you can refinance the rest of your balance sheet at IAG type rates like everybody else and you have expedited now you did it in a few months versus a few years right. So as we're thinking about all these things.

<unk> for 16.

And then I think look you said 490, so youre building something and through higher rates is that sort of roughly how what the neighborhood interest next year.

Yes, the cash interest because of the way we lock in enrolled three months youre not necessarily Q4, you're absolutely right. It's in that 115 ZIP code, but you're not actually feeling the full brunt of all the recent rate increases. So if you take that into next year at the current prevailing rates for next year, you have an annualized $490 million expense, it's just more a function.

Not something we've made a decision on today, but we're thinking about all of them and we'll continue to think about them.

Update people as we sort of move forward in our decisions and thought process.

Yes.

I appreciate the.

The difference between short term long term, so I understand all that so I appreciate that.

The delay in which our cash payments are based on the prevailing rates from a few months prior.

Maybe just a last question just on interest expense I think.

I think.

If I do the math, it's sort of $115 million for Q forecast stress.

Understood. Thanks again, guys appreciate it.

<unk> is that it gets to the $4 60.

Thanks, Mark Thank you.

And then I think Luke you said 490, so youre building something and through higher rates is that sort of roughly what the neighborhood.

Thank you.

There are currently no additional questions waiting at this time, so I'll pass the conference over to Patrick <unk> for closing remarks.

Interest next year.

Yes, the cash interest because of the way we lock in enrolled three months.

Thank you Rami rozen much appreciated for joining us. This morning, we look forward to speaking to you in February when we report our year end results and our guidance for 2023. Thank you.

This early Q4, you're absolutely right. It's in that 115, ZIP code, but you're not actually feeling the full brunt of all the recent rate increases. So if you take that into next year at the current prevailing rates for next year, you have an annualized $490 million expense. It's just more a function of the delay in which our cash payments are based on the <unk>.

That concludes the GSL Environmental Inc. Results call for the third quarter of 2022. Thank you for your participation you may now disconnect your line.

Ailing rates a few months prior.

Understood. Thanks again, guys appreciate it.

Thanks, Mark Thank you.

Thank you.

There are currently no additional questions waiting at this time, so I'll pass the conference over to Patrick <unk> for closing remarks.

Thank you everyone. Much appreciate you for joining us. This morning, we look forward to speaking to you in February when we report our year end results and our guidance for 2023. Thank you.

That concludes the GSL Environmental Inc. Results call for the third quarter of 2022. Thank you for your participation you may now disconnect your line.

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