Q4 2023 Waste Connections Inc Earnings Call

Operator: All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. To ask a question, you may press star and then one on your touch-tone telephone. To withdraw your question, you may press star and... Please also note today's event is being recorded. At this time, I'd like to turn the floor over to Ron Middlestad, president and CEO. Sir, please go ahead.

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At this time I'd like to turn the floor over to Ron Mittelstaedt.

Ron Mittelstaedt: <unk> and CEO Sir Please go ahead.

Ron Mittelstaedt: Okay. Thank you operator, and good morning, I would like to welcome everyone to this conference call to discuss fourth quarter results and our outlook for both the first quarter and full year 2024.

Ron Middlestad: Thank you, Operator, and good morning. I would like to welcome everyone to this conference call to discuss fourth-quarter results and our outlook for both the first quarter and full year 2024. I'm joined this morning by Mary Ann Whitney, our CFO, and several other members of senior management, driven by solid execution and continued improvement in operating trends. Solid Waste Organic Growth, led by 8.7% core pricing, was bolstered by improvements in commodity-driven revenues during the quarter, providing momentum for 2024. Looking at our differentiated results during the full year 2023, we delivered 70 basis points of adjusted EBITDA margin expansion after overcoming 60 basis points of headwinds from recovered commodity values to report an industry-leading margin of 31.5%. Double-digit growth in both revenue and adjusted EBITDA from price-led organic solid waste growth and outside acquisition contracts, along with disciplined execution and focus on the quality of revenue, drove adjusted free cash flow of $1.224 billion, or 15.3% of revenue, in line with our outlook.

Ron Mittelstaedt: I'm joined this morning by Mary Anne Whitney, our CFO and several other members of senior management.

Ron Mittelstaedt: As noted in our earnings release, adjusted EBITDA margin expansion of 200 basis points in Q4 capped off a remarkable year for waste connections driven by solid execution and continued improvement in operating trends solid waste organic growth led by eight 7% core pricing was bolstered by improvements in <unk>.

Ron Mittelstaedt: <unk> driven revenues during the quarter, providing momentum for 2024.

Ron Mittelstaedt: Acquisition activity also accelerated into year end as we announced the acquisition of the U S $225 million revenue E&P waste disposal oriented assets of secure energy in Western Canada.

Ron Mittelstaedt: Which has closed as of February one, bringing expected 2020 for revenue contribution from acquisitions to approximately $325 million with incremental dialogue ongoing.

Ron Mittelstaedt: Looking at our differentiated results during the full year 2023, we delivered 70 basis points adjusted EBITDA margin expansion after overcoming 60 basis points and headwinds from recovered commodity values to report an industry leading margin of 31, 5%.

Ron Mittelstaedt: Double digit growth in both revenue and adjusted EBITDA from price led organic solid waste growth and outside acquisition contribution along with disciplined execution and focus on the quality of revenue drove adjusted free cash flow of one to two 4 billion or 15, 3% of revenue in line with our outlook.

Ron Middlestad: Both employee turnover and safety incident rates exited 2023 at multi-year lows, setting up 2024 for continued improvement in trends, along with the opportunity for outsized margin expansion. We make no commitment to revise or update any forward-looking statements in order to reflect events or circumstances that may change after today's date. Please refer to our earnings releases for a reconciliation of such non-GAAP measures to the most comparable GAAP. Management uses certain non-GAAP measures to evaluate and monitor the ongoing financial performance of our operations. Other companies may calculate these non-GAAP measures differently. I will now turn the call back over to Ron. Thank you, Marianne.

Ron Mittelstaedt: Both employee turnover and safety incident rates exited 2023 at multi year lows setting up 2024 for continued improvement in trends along with the opportunity for outsized margin expansion.

Ron Mittelstaedt: Before we get into much more detail, let me turn the call over to Maryann for a forward looking disclaimer and other housekeeping items.

Maryann: You Ron and good morning, the discussing during today's call includes forward looking statements made pursuant to the safe Harbor provisions of the US Private Securities Litigation Reform Act of 1095, including forward looking information within the meaning of applicable Canadian Securities laws.

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

Maryann: Factors that could cause actual results to differ are discussed both in the cautionary statement included in our February 13th earnings release and in greater detail in waste connections filings with the U S Securities and Exchange Commission and the securities commissions or similar regulatory authorities in Canada, you should not place undue reliance on forward looking statements as there may be additional rest of which we are.

Maryann: Presently aware or that we currently believe are immaterial, which could have an adverse impact on our business we.

Ron Middlestad: What didn't change, however, was the dedication and accountability of our local team, who consistently demonstrated their commitment to the customers and communities we have the privilege of serving. Similarly, we renewed our commitment to a decentralized operating philosophy and servant leadership culture, both of which have served to differentiate waste connections and drive industry-leading results. As we have indicated, we are extremely pleased with our strong operating and financial performance throughout 2023, most notably driven by momentum in the second half of the year, when adjusted EBITDA margins expanded to an average of 32.4%, with Q4 margin expansion of 200 basis points year-over-year. Most importantly, we also achieved a reduction of over 7% in safety incident rates, with over 60% of our operating locations showing improvement or zero safety-related incidents during the

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

Maryann: On the call, we will discuss non-GAAP measures such as adjusted EBITDA adjusted net income attributable to waste connections on both a dollar basis and per diluted share and adjusted free cash flow.

Maryann: Please refer to our earnings releases for a reconciliation of such non-GAAP measures to the most comparable GAAP measures man.

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

I'll now turn the call back over to Ron.

Ron Mittelstaedt: Thank you Marianne.

Ron Mittelstaedt: <unk> 23 was a remarkable way among remarkable year excuse me in many ways and we recognize that there were some unanticipated changes what didn't change however was the dedication and accountability of our local teams.

Ron Mittelstaedt: Consistently demonstrated their commitment to the customers and communities we have the privilege to serve similarly, we renewed our commitment to a decentralized operating philosophy and servant leadership culture, both of which have served to differentiate waste connections and drive industry leading results.

Ron Mittelstaedt: As we have indicated we are extremely pleased with our strong operating and financial performance throughout 2023, most notably driven by momentum in the second half of the year when adjusted EBITDA margins expanded to an average of 32, 4% with Q4 margin expansion of 200 basis points year over year.

Ron Mittelstaedt: During 2023 employee retention improved by over 20% with a reduction in open positions of over 40% most.

Ron Mittelstaedt: Most importantly, we also achieved a reduction of over 7% and safety incident rates with over 60% of our operating locations showing improvement or zero safety related incidents during the year.

Mary Ann Whitney: Virtually all of this improvement occurred in Q3 and Q4, providing momentum into 2024. We delivered core pricing of 9.5% and expanded margins by 70 basis points to a report-adjusted EBITDA margin of 31.5% for the full year 2023. Excluding 60 basis points of margin drag from lower commodity values, underlying margins expanded by 130 basis points during the year.

Ron Mittelstaedt: Virtually all of this improvement occurred in Q3, and Q4, providing momentum into 2024.

Ron Mittelstaedt: We delivered core pricing of nine 5% and expanded margins by 70 basis points to report adjusted EBITDA margin of 31, 5% for the full year of 2023.

Ron Mittelstaedt: Excluding 60 basis points margin drag from lower commodity values underlying margins expanded by 130 basis points during the year.

Mary Ann Whitney: Reflecting our focus on revenue quality as well as the impact of abating cost pressures and the improving trends in retention and safety, all of which contributed to the accelerating margin expansion in the second half of 2023. Looking ahead, 2024 is set up for continued outsized margin expansion from reduced turnover and the unrealized cost benefits of improving risk along with moderating cost inflation. We delivered adjusted free cash flow of $1.224 billion in 2023, converting over 48% of adjusted EBITDA to adjusted free cash flow, in line with the increased outlook we provided in August and more than overcoming unanticipated site-specific closure-related impacts at our Chiquita Canyon landfill in Southern California. Regarding the Elevated Temperature Landfill Event, or ETLF, at Chiquita Canyon that we described on our last earnings call in October, we are encouraged by our ongoing progress.

Ron Mittelstaedt: Reflecting our focus on revenue quality as well as the impact of abating cost pressures and the improving trends in retention and safety all of which contributed to the accelerating margin expansion in the second half of 2023 looks.

Ron Mittelstaedt: Looking ahead 2024 is set up for continued outsized margin expansion from reduced turnover and the unrealized cost benefits of improving risk along with moderating cost inflation.

Ron Mittelstaedt: We delivered adjusted free cash flow of one to two 4 billion in 2003 converting over 48% of adjusted EBITDA to adjusted free cash flow in line with the increased outlook we provided in August.

Ron Mittelstaedt: And more than overcoming unanticipated site specific closure related impacts at our Chiquita Canyon landfill in southern California.

Ron Mittelstaedt: Regarding the elevated temperature landfill event or <unk> at Chiquita Canyon that we have described on our last earnings call. In October we are encouraged by our ongoing progress we continue to work with the community and other stakeholders as we manage the ongoing impacts from the underground reaction occurring in a closed portion.

Mary Ann Whitney: We continue to work with the community and other stakeholders as we manage the ongoing impacts from the underground reaction occurring in a closed portion of our landfill, including the associated leachate generation. As indicated in the additional disclosure we provided in November, we reported an increase of approximately $160 million to our landfill closure and post-closure liabilities in Q4 to address and mitigate the ETLF impacts, which are site-specific and non-recurring in nature. During 2023, we incurred approximately $21 million in related costs, slightly below our estimates due to the timing of outlay.

Ron Mittelstaedt: Of our landfill.

Ron Mittelstaedt: Including the associated leachate generation as.

Ron Mittelstaedt: As indicated would be the case in the additional disclosure we provided in November we recorded an increase of approximately $160 million to our landfill closure and post closure liabilities in Q4 to address and mitigate the ETF impacts which are site specific and nonrecurring in nature.

Ron Mittelstaedt: During 2023, we incurred approximately $21 million in related class slightly below our estimates due to the timing of outlays.

Ron Mittelstaedt: Just on current engineering estimates and the projected timeline with the expectation for leachate generation rates to peak later this year. The outlays for 2024 are expected to be approximately $75 million, which is included in our outlook for adjusted free cash flow as Maryann will more fully described.

Ron Middlestad: Looking next at acquisitions. In 2023, we closed over $215 million in annualized revenue from 13 acquisitions, with activity across our footprint of franchises and competitive markets, including integrated markets, new market entries, and a number of tuck-ins to existing operations. Additionally, on February 1st, we closed the previously announced acquisition of Secure Energy's E&P waste disposal-oriented asset divestitures in Western Canada.

Ron Mittelstaedt: Looking next at acquisitions in 2023, we closed over $215 million in annualized revenue from 13 acquisitions with activity across our footprint of franchises and competitive markets, including integrated markets, new market entries and a number of tuck ins to existing opera.

Ron Mittelstaedt: <unk> <unk>.

Ron Mittelstaedt: Additionally on February one we closed the previously announced acquisition of secured energies E&P waste disposal oriented asset divestitures and Western Canada together.

Ron Middlestad: Together with the rollover contribution from deals completed during 23, this already sets up an expected 2024 acquisition contribution of over $325 million, with a robust pipeline of solid waste opportunities coming in the ensuing quarters. On top of that, 2024 is set up for an outsized M&A year in our core solid waste business. Stay tuned for the next few quarters.

Ron Mittelstaedt: Together with the rollover contribution from deals completed during 'twenty. Three this already sets up expected 2020 for acquisition contribution of over $325 million with a robust pipeline of solid waste opportunities coming in ensuing quarters on top of secure 2024 is set up for an outsized M&A year in our core.

Ron Mittelstaedt: Our solid waste business stay tuned for the next few quarters.

Ron Mittelstaedt: Additionally, we are encouraged by recent movement in the franchise process in New York City.

Ron Mittelstaedt: While we have been awarded the right to compete in 12 commercial zone, plus citywide Compactor service. We look forward to seeing continued progress this year beginning with a pilot project slated for Q4 as we've noted recent acquisition activity in the northeast, including rail access to our <unk> landfill in Alabama has created.

Mary Ann Whitney: We look forward to seeing continued progress this year, beginning with a pilot project slated for Q4. As we've noted, recent acquisition activity in the Northeast, including rail access to our Arrowhead landfill in Alabama, has created greater optionality for disposal in many markets and expanded the potentially addressable market for acquisitions for us. That said, there is no change to our disciplined approach to acquisitions, our focus on market selection, the risk profiles we accept, and the valuations we determine to be appropriate. Ending 2023 with leverage of approximately 2.6 times debt-to-EBITDA and liquidity of over $1.5 billion, our balance sheet strength and free cash flow profile provide flexibility for continuing elevated levels of investments in our organic solid waste growth story, along with renewable energy projects and solid waste acquisitions, To that end, during 2023, we increased our quarterly per share dividend by 11.8% to return over $270 million to shareholders through dividends. And we invested approximately $1.7 billion in capital expenditures and acquisitions to reinvest in our business and position ourselves for future growth. Thank you, Ron.

Ron Mittelstaedt: Greater optionality for disposal in many markets and expanded the potentially addressable market for acquisitions for us.

That said there is no change to our disciplined approach to acquisitions, our focus on market selection the risk profiles, we accept and the valuations we determined to be appropriate.

Ron Mittelstaedt: Ending 2023 with leverage of approximately two times to six times debt to EBITDA and liquidity of over $1 5 billion, our balance sheet strength and free cash flow profile provides flexibility for continuing elevated levels of investments in our organic solid waste growth story, along with renewable energy projects and solid.

Ron Mittelstaedt: Waste acquisitions, while also increasing our return of capital to shareholders.

Ron Mittelstaedt: To that end during 2023, we increased our quarterly per share dividend by 11, 8% to return over $270 million to shareholders through dividends and we invested approximately $1 7 billion in capital expenditures and acquisitions to reinvest in our business and position.

Ron Mittelstaedt: <unk> ourselves for future growth.

Ron Mittelstaedt: And now I'd like to pass the call to Mary Anne to review more in depth the financial highlights of the fourth quarter and provide a detailed outlook for Q1 and full year 2024, I will then wrap up before heading into Q&A.

Mary Ann Whitney: In the fourth quarter, revenue of $2.036 billion was up $166 million or 8.9% year over year, bringing full year 2023 revenues to $8.022 billion, in line with our expectations and up 11.2% year over year. Acquisitions completed since the year-ago period contributed about $53 million of revenue in Q4, or about $51 million net of development, bringing full year net acquisition contribution to $407 million. Core pricing in Q4 was 8.7% and ranged from about 7% in our mostly exclusive market Western region to between about eight and a half percent and over 10% in our competitive market. Fuel and material surcharges were negative 80 basis points in the quarter on lower fuel costs. Solid waste volumes in Q4 were down 2.3% and continue to reflect our shedding of poor quality revenues and the non-renewal of municipal contracts, as well as a purposeful trade-off between price and volume in some markets.

Mary Anne: Thank you Ron in the fourth quarter revenue of two point out $3 6 billion was up $166 million or eight 9% year over year, bringing full year 2023 revenues to eight <unk> two two.

$2 billion in line with our expectations and up 11, 2% year over year.

Mary Anne: Acquisitions completed since the year ago period contributed about $53 million of revenue in Q4 or about 51 million net of divestitures, bringing full year net acquisition contributions of $407 million.

Mary Anne: Core pricing in Q4 was eight 7% and range from about 7% and are mostly exclusive market western region to be to between about eight 5% and over 10% in our competitive markets fuel and material surcharges were negative ADP basis points in the quarter on lower fuel costs.

Mary Anne: Solid waste volumes in Q4 were down two 3% and continued to reflect our shedding of poor quality revenues and the nonrenewable, new municipal contracts as well as the purposeful tradeoff between price and volume in some markets.

Mary Ann Whitney: Additionally, in Q4, they reflect tough comparisons to the prior year's hurricane-related activity in Florida and in Texas and the diversion of waste from our Seabreeze landfill, where we imposed temporary operating limitations while completing certain repairs. Those diversion activities concluded at the end of January. Looking at year-over-year results in the fourth quarter on a same-store basis, roll-up pulls per day were about flat, and total landfill tons were down about 1%, with MSW flat, special waste up 2%, and C&D waste down 9%, due primarily to last year's hurricane-related volumes, as noted. However, adjusting for those impacts and sea breeze, total tons were up nominally, year-over-year Adjusted EBITDA for Q4 was reconciled, and our earnings release was up 16.4% year-over-year to $656 million, or 32.2% of revenue, and included an impact of about $5 million from the waste diversion and repairs at Seabreeze noted earlier.

Mary Anne: Additionally, in Q4, they reflect tough comparison to the prior year's hurricane related activity in Florida and in Texas, the diversion of waste from our Seabreeze landfill, where we encourage temporary operating limitations, while completing certain repairs. Those diversions concluded at the end of January.

Mary Anne: Looking at year over year results in the fourth quarter on a same store basis rollout pulls per day were about flat and total landfill tons were down about 1% with MSW flat special waste up 2% and CND waste down 9% due primarily to last year's Hurricane Keene related volumes as noted.

Mary Anne: Adjusting for those impacts and Seabreeze total tons were up nominally year over year.

Mary Anne: Adjusted EBITDA for Q4 as reconciled in our earnings release was up 16, 4% year over year to $656 million or 32, 2% of revenue and included an impact of about $5 million from the waste diversion and repairs that Seabreeze noted earlier.

Mary Anne: Excluding this 20 basis point impact our adjusted EBITDA margin was up 220 basis points year over year, primarily from underlying solid waste margin expansion.

Mary Ann Whitney: As Ron noted earlier, our Q4 results reflect an adjustment of approximately $160 million to increase our closure and post-closure liabilities for the expected outlays to address the ETLF impacts at Chiquita Canyon, projected primarily during 2023 to 2025. Therefore, while there was no impact to adjusted EBITDA, our 2023 adjusted free cash flow reflects outlays for site-specific operating capital outlays to address the ETLF impacts, totaling over $21 million. In spite of those incremental outlays, our adjusted free cash flow of $1.224 billion, or 15.3% of revenue, was in line with our expectations for the year and reflects a 48% conversion of adjusted EBITDA. Capital expenditures of $934 million reflect a similar amount of fleet purchases slipping to 24 as we saw in the prior year.

Mary Anne: As Ron noted earlier, our Q4 results reflect an adjustment of approximately $160 million to increase our closure and post closure liabilities for the expected outlays to address the EP Lf impact at Chiquita Canyon.

Mary Anne: Projected primarily during 2023 to 2020 time.

Mary Anne: Therefore, while there is no impact to adjusted EBITDA. Our 2023 adjusted free cash flow reflects outlays precise specific operating capital outlays to address the E. L F impacts totaling over $21 million in.

Mary Anne: In spite of those incremental outlays, our adjusted free cash flow of one to two 4 billion or 15, 3% of revenue was in line with our expectations for the year and reflects 48% conversion of adjusted EBITDA.

Mary Anne: Capital expenditures of $934 million reflect a similar amount of fleet purchases flipping to 'twenty four as we saw in the prior year.

Mary Ann Whitney: Additionally, they include about $40 million associated with renewable natural gas (RNG) facilities under development. As discussed on prior calls, our sustainability-related projects include about a dozen R&G facilities. Strategic Investments with a Variety of Ownership Structures

Mary Anne: Additionally, they included about $40 million associated with renewable natural gas or RMG facilities under development.

Mary Anne: As discussed on prior calls our sustainability related projects include about a dozen R&D facilities strategic investments with a variety of ownership structures aggregate capital outlays through 2025 of approximately $200 million are expected to generate an estimated $200 million of increment.

Mary Ann Whitney: Aggregate capital outlays through 2025 of approximately $200 million are expected to generate an estimated $200 million of incremental EBITDA by 2026, or about $1 of EBITDA per dollar of capital. The outlays for R&G projects step up in 2024 to approximately $150 million, which has been factored into our 2024 outlook, which I will now review, along with our outlook for Q1. Before I do, we'd like to remind everyone once again that actual results may vary significantly based on risks and uncertainties outlined in our Safe Harbor Statement and filings we've made with the SEC and the Securities Commissions or similar regulatory authorities in Canada. We encourage investors to review these factors carefully. Our outlook assumes no change in the current economic environment.

Mary Anne: It'll EBITDA by 2026 or about one dollar of EBITDA per dollar of Capex.

Mary Anne: The outlay is for R&D projects step up in 2024 to approximately $150 million, which has been factored into our 2024 outlook, which I will now review along with our outlook for Q1 2024.

Speaker Change: Before I do we'd like to remind everyone. Once again that actual results may vary significantly based on risks and uncertainties outlined in our safe Harbor statement and filings we've made with the SEC and the securities commissions or similar regulatory authorities in Canada, we encourage investors to review these factors carefully.

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

Mary Ann Whitney: It also excludes any impact from additional acquisitions that may close during the remainder of the year and expensing of transaction-related items during the period. Looking first at the full year 2020, revenue in 2024 is estimated to increase by over 9% to $8.75 billion. For solid waste, we expect price plus volume of approximately 4.5% to 5.5%, driven by pricing of 6% to 7% on core pricing of about 7%.

Speaker Change: Looking first at the full year 2020 for revenue in 2024 is estimated to increase by over 9% to $8 $75 billion for solid waste, we expect price plus volume of approximately four 5% to five 5% driven by pricing of 6% to seven.

Speaker Change: Percent on core pricing of about 7%.

Mary Ann Whitney: About $325 million of estimated revenue in 2024 is from acquisitions closed to date, and commodity-driven revenues reflect values in line with recent levels, plus a nominal contribution from R&G facilities expected to come online during 2025. Adjusted EBITDA in 2024, as reconciled in our earnings release, is expected to be approximately $2.86 billion, or an adjusted EBITDA margin of 32.7%, up 120 basis points year over year. Continued moderation in inflationary trends, additional acquisitions closed during the year, or increases in the values for recovered commodities or E&P waste activity would provide upside to our 2024 outlook. Depreciation and amortization expense in 2024 is estimated to be about 12.8% of revenue, including amortization of intangibles of about $172 million or 49 cents per diluted share net of tax. Interest expense in 2024 is estimated at approximately $280 million.

About $325 million of estimated revenue in 2024 is from acquisitions closed to date and commodity driven revenues reflect reflect values in line with recent levels plus nominal contribution from R&D facilities expected to come online during 2024.

Speaker Change: Adjusted EBITDA in 2024 as reconciled in our earnings release is expected at approximately $2 $86 billion.

Speaker Change: Our adjusted EBITDA margin of 32, 7% up 120 basis points year over year.

Speaker Change: Continued moderation in inflationary trends additional acquisitions closed during the year or increases in the values for recovered commodities are in E&P waste activity would provide upside to our 2020 per outlook.

Speaker Change: Depreciation and amortization expense in 2024 is estimated to be about 12, 8% of revenue, including amortization of intangibles of about $172 million or <unk> 49 per diluted share net of taxes.

Speaker Change: Interest expense in 2024 is estimated at approximately $280 million and our effective tax rate for 2024 is expected in the range of 23% to 23, 5% with some quarter to quarter variability.

Mary Ann Whitney: And our effective tax rate for 2024 is expected in the range of 23% to 23.5%, with some quarter-to-quarter variability. Adjusted free cash flow in 2024, as reconciled in our earnings release, is expected at approximately $1.2 billion on CapEx of approximately $1.15 billion, including base CapEx of $1 billion plus $150 million for R&G project development. Incremental tax credits for RNG are not factored into our outlook and would therefore be added.

Speaker Change: Adjusted free cash flow in 2024 as reconciled in our earnings release is expected at approximately $1 2 billion on Capex of approximately 115 billion, including base Capex of $1 billion.

Speaker Change: Plus $150 million for RMG project development.

Speaker Change: As Ron noted earlier, our adjusted free cash flow outlook also reflects $75 million per outlays associated with the Chiquita Canyon ETF.

Normalizing for the outlets for Takeda and the R&D facilities 2024, adjusted free cash flow of $1 $4 billion to $5 billion reflects conversion of EBITDA of approximately 50%.

Speaker Change: This level is consistent with longer term trends and in line with our expectations for underlying growth in 2025, when we anticipate outlays for both R&D facilities, and Chiquita closure will decline by $170 million.

Speaker Change: Incremental tax credits for RMG are not factored into our outlook and would therefore be additive. Similarly, any restoration of bonus depreciation benefits on a retroactive or prospective basis, including two attacks they'll currently under consideration would be additive to the outlook we have provided.

Mary Ann Whitney: Similarly, any restoration of bonus depreciation benefits on a retroactive or prospective basis, including through a tax bill currently under consideration, would be additive to the outlook we have provided. Revenue in Q1 is estimated to be approximately $2.05 billion, on expected solid waste price plus volume growth of 3.5%, driven by pricing of about 7%. Volume expectations reflect about 1% in incremental temporary volume losses associated with the widespread weather-driven closures during January across many markets, particularly in the West. Adjusted EBITDA in Q1 is estimated to be up 140 basis points year-over-year to 31.2% of revenue, or approximately $640 million. Depreciation and amortization expense for the first quarter is estimated to be about 12.8% of revenue, including amortization of intangibles of about $40 million, or about $0.11 per diluted share net of taxes.

Speaker Change: Turning now to our outlook for Q1 2024.

Speaker Change: Revenue in Q1 is estimated to be approximately $2 <unk> 5 billion unexpected solid waste price plus volume growth of three 5% driven by pricing of about 7%.

Speaker Change: Volume expectations reflect about 1% in incremental temporary volume losses associated with the widespread weather driven closures during January across many markets, particularly on the west coast.

Speaker Change: Adjusted EBITDA in Q1, Q1 is estimated to be up 140 basis points year over year to 31, 2% of revenue or approximately $640 million.

Speaker Change: Depreciation and amortization expense for the first quarter is estimated to be about 12, 8% of revenue, including amortization of intangibles of about $40 million or about <unk> 11 per diluted share net of taxes interim.

Interest expense in Q1 net of interest income is estimated at approximately $76 million and the tax rate for the first quarter is estimated at about 23%.

Ron Middlestad: And now, I will turn the call back over to Ron for some final remarks before Q&A. Thank you, Marianne. We are extremely pleased by our 2023 results and our positioning for outsized growth in 2024, with 120 basis points of adjusted EBITDA margin expansion expected as a minimum, along with upside from continued improvement in recovered commodity values or inflationary pressures, as well as any additional activity. We're well on our way to exceeding the near-term 34% EBITDA target we've discussed widely. We double down on human capital, getting back to the basics that are fundamental to implementing the differentiated strategy that has driven our exemplary track record of value creation for 26 years. We enter 2024 with continued momentum and are well-positioned for outsized growth, along with a renewed commitment to sustaining the model that has set us apart. At Waste Connections, we recognize the importance of both relationships and results.

Speaker Change: And now let me turn the call back over to Ron for some final remarks before Q&A.

Ron Mittelstaedt: Thank you Marianne.

Ron Mittelstaedt: We're extremely pleased by our 2023 results and our positioning for outsized growth in 2024.

Ron Mittelstaedt: With 120 basis points of adjusted EBITA margin expansion expected as a minimum.

Ron Mittelstaedt: Along with upside from continued improvement in recovered commodity values or inflationary pressures as well as any additional activity, we're well on our way towards exceeding the near term, 34% EBITDA target we've discussed widely.

2023 was a year of renewal for west connections with a return to our leadership roots to reinforce our decentralized operating model supported by a servant leadership driven culture with.

Ron Mittelstaedt: We doubled down on human capital getting back to the basics that are fundamental to implementing the differentiated strategy that has driven our exemplary track record of value creation for 26 years.

Ron Mittelstaedt: We enter 2024 with continued continued momentum and well positioned for outsized growth along with a renewed commitment to sustaining the model that has set us apart.

Ron Mittelstaedt: At waste connections, we recognize the importance of both relationships and results more.

Operator: Moreover, we believe that not only are they both achievable, but they are necessarily interrelated. We're proud of our results and applaud the local teams who embody the enduring operating values of the company. I want to conclude by thanking our 23,000 employees who work tirelessly to make us better every day. In addition, I'd like to officially welcome the approximately 300 employees who are now part of our R360 Canada team who were previously with Secure Energy. We also appreciate your time today, and I will now turn this call over to the operator to open up the lines for your questions. Operator. To withdraw your questions, you may press star and two.

Ron Mittelstaedt: Over we believe that not only are they both achievable, but they are necessarily interrelated.

Ron Mittelstaedt: We're proud of our results and applaud the local teams who embody the enduring operating values of the company.

Ron Mittelstaedt: I want to conclude by thanking our 23000 employees, who worked tirelessly to make us better every day and.

Ron Mittelstaedt: In addition, I'd like to officially welcome the approximately 300 employees, who are now part of our our 360, Canada team, who previously were worth secure energy.

Speaker Change: We also appreciate your time today and I will now turn this call over to the operator to open up the lines for your questions operator.

Operator: Ladies and gentlemen at this time, we'll begin the question and answer session. Once again to ask a question you May Press Star and then one using a touchtone telephone you are using a speaker phone. We do ask that you. Please pickup your handset prior to pressing the keys to ensure the best sound quality.

Tyler Brown: Again, that is a star and then one to join the question. Our first question today comes from Tyler Brown from Raymond James. Please go ahead with your question. Hey, good morning.

To withdraw your questions you May press star two.

Operator: Again that is star and then one to join the question queue.

Operator: We will pause momentarily to assemble the roster.

Mary Ann Whitney: Good morning, Tyler. Hey, Ron. Hey, Marianne. Actually, thank you for all the detail. But, you know, margins here, both in Q4 and in the outlook, are quite strong. I was just hoping if you could maybe walk us through the 200 basis point improvement for Q4, maybe walk through the expected improvement for 2024 as well. Just kind of what some of those key pieces are. Sure, happy to do so.

Operator: Our first question today comes from Tyler Brown from Raymond James. Please go ahead with your question.

Tyler Brown: Hey, good morning.

Tyler Brown: Good morning, Tyler.

Tyler Brown: Hum 8 million absolutely. Thank you for all the detail.

Tyler Brown: Margins here, both in Q4 outlook all quite strong I was just hoping if you could maybe walk us through the 200 basis point improvement from Q4, maybe walk through.

Tyler Brown: The.

Tyler Brown: Improvement for 2024, as well as what kind of what some of those key pieces on.

Sure happy to do so so as I said in the prepared remarks, Q4 was primarily the underlying solid waste business. The way to think about it is about 75% of the improvement was there and the balance in hierarchy would be recycled commodities and then rinse and then a nominal contribution from E&P with a small offset from M&A.

Tyler Brown: So that the Q4.

Tyler Brown: And then looking at at the full year as we said there were there are three factors that would drive the opportunity for outsized margin expansion. The first one being the underlying business and the opportunity for outsized price cost spread and improving retention and so about half of the 120 basis point margin expansion would be driven by the underlying business and then the two.

Mary Ann Whitney: So, as I said in the prepared remarks, Q4 was primarily the underlying solid waste business. The way to think about it is that about 75% of the improvement was there. And the balance in the hierarchy would be recycled commodities and then RINs and then a nominal contribution from E&P with a small offset from M&A. Okay.

Tyler Brown: Other pieces would be the accretive benefit of acquisitions with the addition of secure so if you think 30 to 40 basis points, including secure and the other acquisitions, which have that mildly dilutive impact and then the balance being the tailwind from recycled commodities and rents which would be the smallest piece, but on the order of say 20 to 30 basis.

Ron Middlestad: And then, Ron, I appreciate the update on turnover and safety. So, in that core improvement in 24, are you assuming... If that turnover in safety renumerates to margins, it sounds like yes, because I think you said last quarter it takes. Yeah, so we've got to separate them a little bit, Tyler.

Tyler Brown: Points.

Speaker Change: Okay, and then Ron I appreciate the update on turnover on safety.

In that core improvement in 24 are you assuming that that turnover in safety <unk> margins at some point, yes, I think you said.

Last quarter. It takes a few months for that to kind of show up on the margins I just want to be clear if that is in the expectation now.

Speaker Change: Yes so.

We've got a separate them a little bit Tyler so I would say that.

Ron Middlestad: So I would say that certainly turnover at this point is impacting our cost structure, and we're starting to see it favorably impacting our cost structure. And we're starting to see some of the costs come out of the 100 basis points we've talked about in areas of labor, variable, other operating, etc. There is a lag effect on seeing the cost benefit from the risk reductions, so that actually is not factored into 24.

Speaker Change: Certainly turnover at this point is impacting our cost structure and we're starting to see.

Speaker Change: Favorably impacting our cost structure and we're starting to see some of the costs come out of the 100 basis points, we've talked about in areas of labor variable other operating et cetera.

Speaker Change: There is a lag effect on seeing the cost benefit from the risk reductions. So that actually is not factor into 24. So as we continue to have risk reductions, we will get that benefit.

Mary Ann Whitney: So as we continue to have risk reductions, we will get that benefit as we come through 24 into 25. But that is not in the 24 guidance. So this margin improvement is without seeing the benefit of that risk in the actuarial tables at this point. Okay, that is very helpful.

Speaker Change: As we come through 'twenty four 'twenty five but that is not in the 24 guidance. So this margin improvement is without seeing the benefit of that risk in.

Speaker Change: And the actuarial tables at this point.

Speaker Change: Okay that is very helpful. And then I know that there is a lot moving around in free cash flow that is very clear.

Mary Ann Whitney: And then I know that there is a lot moving around in free cash flow. That is very clear. Did Marianne say that in 23 you spent $40 million on RNG, so if I add that to the $150, that would imply that maybe your RNG spend next year will drop to something like $10 million, and then maybe to $0 in 26? That's right.

Speaker Change: In 2003, you spent $40 million on Orange, So if I add that to the one.

Speaker Change: That would imply that maybe your R&D spend next year will drop to something like $10 million and then maybe to zero in 2000 kits.

Speaker Change: That's right, yes, and Thats the point I made the $170 million reduction between the two pieces, which are key to step down and the R&D steps down.

Mary Ann Whitney: Yes. And that's the point I made the $170 million dollar reduction between the two pieces where Chiquita steps down, and R&G steps down. Okay, and then my last one here, so it sounds like there's a nominal EBITDA contribution from RNG in 24, but how will that schedule look in 25 and 26? And then, Ron, sorry, just to be clear, when you talk about 34, does that, 34% margins, does that include any benefit from RNG? Yes, thank you for the answer to the double question. Thank you guys. Our next question comes from Toni Kaplan from Morgan Stanley. Please go ahead with your question. Thanks so much.

Speaker Change: And then my last one here so it sounds like there's a nominal EBITDA contribution from LNG in 'twenty one.

Speaker Change: But how will that schedule will look in 2005 and 2006 and then Ron just to be clear. When you talk about 34 does that 34% margins does that include any benefit from LNG.

Ron Mittelstaedt: Okay. So let's tackle the first part of your question first.

Ron Mittelstaedt: Let's start with 26, we said that for full year 2006, we would achieve $200 million of EBITDA on $200 million of Capex investment for R&D.

Ron Mittelstaedt: A very nominal amount of that contribution as you as you've noted we only outlaid $40 million in 'twenty, three and R&D. So a nominal amount of that will contribute in 'twenty four user number of $15 million to $20 million.

Ron Mittelstaedt: Of EBITDA for 24 that will obviously with the Capex spend in 'twenty four that will wrap some in 'twenty five and you'll start to see some more contribution.

Ron Mittelstaedt: But the bulk of that doesn't come online till the end of the third quarter or so in 'twenty five that's why the largest amount is.

Toni Kaplan: Pricing this quarter will continue to be strong, and you'll lock in most of it by April, and you'll have cost inflation moderating. So as we look at margins through the year, should we look at them more as sort of better? Well, I guess.

While the full amount as in 2006, we also are going to be somewhat cautious in guiding RMG as you are seeing across the board.

Ron Mittelstaedt: Half the.

Ron Mittelstaedt: Build headroom in these projects these local utilities.

Ron Middlestad: 1H is probably also helped by the safety and turnover benefits that you've been seeing, but like basically, you'll also see inflation coming down through the end of the year. So I guess in terms of just the trajectory of margins, you know, what are your thoughts on that? Sure, so the way to think about it, Toni, is pretty similar margin expansion over the course of the year. You know, we've already given you Q1 at 140 basis points, we gave you 120 for the full year, but if you modeled in, you know, somewhere around 120 for each quarter, a little less obviously in one quarter since we've given you a little more in one, it's the right way to think about it, For instance, the tail from commodities is greater early than it will be later, but the ability to realize some of those savings and benefits from turnover, for instance, might be further backloaded, and so that's why I think about it as consistent margin expansion over the course of the year.

Ron Mittelstaedt: Our extremely backed up there are still supply chain issues for things like transformers generators et cetera that they need and they give us a commitment of ax and four to six months later, we're still talking about a hook up so you have to build a little headroom in there. So that's why.

Ron Mittelstaedt: I feel comfortable telling you full contribution by 'twenty six.

Ron Mittelstaedt: And with some.

Ron Mittelstaedt: More amount coming in 2005, then of course, the $20 million or so in 'twenty four or so.

Ron Mittelstaedt: That's a long way around the bend to say very little to no RMG contribution in that 34%.

Ron Mittelstaedt: Why we've said there are multiple ways to get there and none of them had R&D and it.

Speaker Change: Yes. Thank you.

Speaker Change: So on the double question look you guys.

Speaker Change: Our next question comes from Toni Kaplan from Morgan Stanley. Please go ahead with your question.

Toni Kaplan: Thanks, so much.

Toni Kaplan: Pricing this quarter continued to be strong and lock in most of it by April and you'll have cost inflation moderating. So as we look at margins through the year should we look at it more as.

Speaker Change: Sort of.

Toni Kaplan: Better well I guess.

Toni Kaplan: One H is probably also helped by the safety and turnover of benefits that you've been seeing but like basically.

Toni Kaplan: You'll also see that inflation coming down through the end of the year. So I guess in terms of just trajectory of margins you know what what are your thoughts on that.

Mary Ann Whitney: And then, I guess when you think about the labor turnover initiatives that you've been doing, and, you know, you mentioned turnover at multi-year lows. You know, when you think about the rate continuing, are you benefiting from market conditions, or are you the initiatives that you were putting in place last year, or a combination of the two, and just trying to get at the sustainability of the labor turnover level? Yeah, sure, Tony.

Speaker Change: Sure. So so the way to think about it Tony is pretty similar margin expansion over the course of the year. We've already given you Q1 at 140 basis points. We gave you $1 20 for the full year, but if you model then somewhere around 120 for each quarter, a little less obviously in one quarter since we've given you a little more than one.

Speaker Change: It's the right way to think about it because just to the point you raised you have a couple of different factors driving it some of which will lag and some of which will get in the first half of the year for instance that the tail from commodities is greater early then it will be later, but the ability to realize some of those savings and benefits from turnover for instance might be.

Ron Middlestad: Well, so let's start with a little bit of a cadence. So coming out of 22, we experienced total turnover of, you know, in the low 30s, which was, you know, a high for us forever. As we came through Q2 of 23, that number dropped to about 30%. And as we came through the end of the year, that number dropped to about 27%. These are total turnover numbers, and the voluntary turnover number has been reduced to about 17%.

Speaker Change: Further back loaded and so that's why I would think about it as consistent margin expansion over the course of the year.

Speaker Change: Perfect and then I guess when you think about the labor turnover initiatives that you've been doing and you know you mentioned that turnover at multiyear lows.

Speaker Change: You know when you think about the rate continuing are you benefiting from market conditions or is it the initiatives that you were putting in place last year or a combination of the two and just trying to get at sustainability of the label or labor turnover level. Thanks.

Ron Middlestad: I would tell you that, you know, up through probably mid-year, most of the help was the labor market improvement. And sort of, you know, the second half of the year, particularly the end of the third quarter and the fourth quarter, the programs and changes we've made were the incremental part. So, you know, I would call it sort of 50-50.

Speaker Change: Yes, sure Tony So let.

Tony: Let's start with a little bit of a cadence so coming out of 'twenty. Two we experienced total turnover of in the low thirties, which was a high for us forever.

Ron Middlestad: Now, as we go through 24, and we plan to drive this number from, you know, 27% down to, say, 22% or below as we sit here a year from now, that will be 100% driven by what we are doing. And so, you know, we've made significant changes in how we recruit. We've made significant changes in how we onboard new employees. We've made significant changes in, you know, sort of the first-year experience of an employee, and supervisor development. There's a whole litany of changes that we have made to improve voluntary turnover. We are always going to want to have about 10% to 12% involuntary turnover. That means we are being proactive with people who might not be the best fit, particularly with regard to safety.

Tony: We came through into Q2 of 'twenty three that number dropped to about 30%.

Tony: And as we came through the end of the year that number dropped to about 27%. These are total turnover numbers and the voluntary turnover number reduced to about 17% I would tell you that the.

Tony: Up through probably mid year most of the help was the labor market improvement and sort of the second half of the year, particularly the end of the third quarter and the fourth quarter.

The programs and changes we've made are worthy incremental part so I would call it sort of 50 50.

Tony: Now as we go through 'twenty, four and we plan to drive this number from 27% down to say, 22% or below as we sit here from a year from now that will be 100% driven by what we are doing.

Ron Middlestad: So, you know, to get to that 20, 22% number over the next year or so, it's telling you that voluntary turnover will get down to 10 to 12%. And we feel very confident in achieving that number. We've been there before, but definitely, you know, we still have some work to do. Super. Thanks so much.

And so.

Tony: We've made significant changes in how we recruit we've made significant changes in how we onboard we've made significant changes in <unk>.

Tony: Sort of the first year experience of an employee.

Toni Kaplan: Congratulations on the quarter. Thank you. Our next question comes from Jerry Revich from Goldman Sachs. Please go ahead with your question. Hi, this is Adam speaking for Jerry today.

Tony: Supervisor development, there's a whole litany of changes that we have made to improve voluntary turnover. We are always going to want to have about 10% to 12% in voluntary turnover that means we are being proactive.

Jerry Revich: Thanks for taking my question. I believe Q1 margin guidance of 31.2% translates to margins down 100 basis points sequentially. However, if we just look at normal seasonality based on recent historical averages, it's usually around nine basis points sequentially, Q1 versus 4Q.

Tony: On.

Tony: People, who might not be the best fit, particularly with regard to safety. So.

Tony: No.

Tony: To get to that 2022% number over the next year or so it's telling you that voluntary turnover will get down to 10% to 12% and we feel very confident in achieving that number we've been there before.

Mary Ann Whitney: Can you just help us understand the puts and takes versus normal seasonality in Q1? I know weather was one item. Yeah, I'd say that's where I would start. You know, there are always idiosyncratic factors that drive the comparability across quarters. And also, just keep in mind, this is guidance as opposed to what we've reported. And so it's always a little more difficult to get granular to tell you what the specific drivers are.

Tony: But definitely we still have some work to do.

Super Thanks: Super Thanks, so much congrats on the corner.

Speaker Change: Thank you.

Our next question comes from Jerry Revich from Goldman Sachs. Please go ahead with your question.

Speaker Change: Hi, This is Adam on for Jerry today. Thanks for taking my question I believe Q1 margin guidance of 31, 2% translates to margins down.

Adam: 100 basis points sequentially. If we just look at normal seasonality baked off recent historical averages, it's usually around nine basis points sequentially Q1 versus <unk> can you just help us understand the.

Ron Middlestad: But weather is a factor, as we said, it's contributing to outsize negative volumes in the quarter. And so I would start there. And just that's one consideration that would drive that. Okay, great. And I was just wondering if we could dive in a little further into the M&A pipeline from here, you know, how active is the opportunity set in the Northeast, specifically, and what's a good way to think about potential allocation to M&A. Please comment on anything that's not done or completed or provide any specifics on what's in our pipeline. And we don't have an allocation for M&A.

Adam: Puts and takes versus normal seasonality in Q1, I know weather was one item mentioned.

Speaker Change: Yes, I'd say, that's where I would start there always idiosyncratic factors that drive that comparability across quarters and also just keep in mind. This is guidance as opposed to what we reported and so it's always a little more difficult to get granular to tell you. What the specific drivers are but weather is a factor as we said it.

Speaker Change: Contributing to outsize negative volumes in the quarter and so I would start there and just that that's one consideration.

Speaker Change: That would drive that difference.

Speaker Change: Okay, Great and I was just wondering if we could dive in a little further and to be M&A pipeline from here.

Ron Middlestad: We sort of have an unlimited, you know, finance capacity for M&A that meets our strategic and our financial guidelines. You know, a historically strong year is $150 to $200 million of acquired revenue. We've already done secure, and that's $225.

Speaker Change: All active if the opportunity set in the northeast, specifically and whats a good way to think about potential.

Speaker Change: Potential allocation of M&A this year.

Speaker Change: Well.

Speaker Change: Adam we never.

Speaker Change: A comment on anything that's not done or completed or provide any specifics on what's in our pipeline and we don't have an allocation to M&A.

Ron Middlestad: And in my comments, I said on top of that, you can assume an outsized year on top of that. So it sort of implies that, you know, we would do comfortably, you know, $150 to $200 million in acquired revenue, minimally on top of secure. So, you know, I think you can figure out from there what in your mind what an allocation would be based on historical, you know, valuations, etc. Our next question comes from Noah Kaye from Oppenheimer. Please go ahead with your question. Hey, thanks. Iran, the New York commercial zoning strikes home for me literally since I'm in the first pilot zone.

Speaker Change: We sort of have an unlimited.

Speaker Change: Finance capacity for M&A that meets our strategic and our financial guidelines.

Speaker Change: You know our historical strong year is $150 million to $200 million of acquired revenue we've already done secure and that's 225 and in my comments I said on top of that you can.

Speaker Change: Assume.

Speaker Change: An outsized year on top of that so it sort of implies that we would do comfortably a $150 million to $200 million in acquired revenue minimally on top of secure.

Speaker Change: So I.

Ron Middlestad: Um, so, you know, as you move through that, I think you commented during prepared remarks that, plus, uh, the rail acquisitions, seem to be expanding your addressable market opportunity in and around the Northeast. I wonder if you could just expand on that a little bit and take us through in more detail how both of those moving pieces increase your addressable opportunity. Well, what the New York City franchise opportunity provides is a number of things. I mean, number one, it provides certainty and sustainability and projectability of the business model in and around New York City, which has had sort of an uncertain competitive footprint for decades.

Speaker Change: I think you can figure out from there what are in your mind, what an allocation would be based on historical valuations et cetera.

Speaker Change: Great. Thanks, so much.

Our next question comes from Noah Kaye from Oppenheimer. Please go ahead with your question.

Noah Kaye: Hey, thanks.

Noah Kaye: New York.

Noah Kaye: Commercial zoning strikes home for me literally since I'm in the first pilot zone.

Noah Kaye: So as you move through that I think you commented during your prepared remarks that plus.

Speaker Change: The rail acquisition.

Speaker Change: It seems to be expanding your addressable market opportunity in and around the northeast I'm wondering if you could just expand on that a little bit and take us through in more detail.

Speaker Change: How both of those moving pieces increase your addressable opportunities.

Speaker Change: Well.

Speaker Change: The New York City franchise opportunity provides is a number of things I mean.

Speaker Change: Number one it provides certainty and sustainability and project ability of the business model in in and around New York City, which has had sort of an uncertain.

Ron Middlestad: So it really changes the operating and financial metrics of that market for us, where we have been more quiet, waiting to see if this platform came through and waiting to see whether we were successful in it and achieving it. So now that there's clarity, I think it creates growth opportunities both organically and acquisition-wise in and around the market area. Number one.

Speaker Change: <unk> footprint for decades, so it really changes the the the operating and financial metrics of that market for us where we have been more quiet.

Ron Middlestad: Two, the disposal capacity in the Northeast is constrained, as everyone knows. We have some great disposal assets in New York and up and along the eastern seaboard, but we are effectively at capacity in many of those assets. So we were shipping waste to third-party locations, and we were not able to take incremental volumes into our sites.

Speaker Change: Waiting for to see if this platform came through and waiting to see whether we were successful in it and achieving it. So now that there is clarity I think it produces growth opportunities, both organically and acquisition wise in and around the market area.

Speaker Change: Number one to the disposal capacity is in the northeast as constrained as everyone knows we have some great assets disposal assets in New York and up and along the eastern Seaboard, but we are effectively at capacity in many of those assets.

Ron Middlestad: What the Arrowhead acquisition did for us is it allowed us to internalize volumes that were going to third parties. It also allowed us to pull volumes out of our northeastern facilities and attract and contract with new volumes at better prices in the Northeast for us. So it did that.

Speaker Change: So we were shipping waste to third party locations and we were not able to take incremental volumes into our sites what the what the Arrowhead acquisition did for US is it allowed us to internalize volumes that we're going to third parties. It also allowed us to pull volumes out of our northeastern facilities.

Ron Middlestad: It also opened up M&A opportunities along the Eastern Seaboard that we otherwise would not have looked at. We are not prone to go in, particularly to a more urbanized market, and acquire something that is non-integratable. That's not part of our model. So this allowed us to achieve that. So it's done a number of things for us currently and in the future. Great color.

Speaker Change: <unk> and attract and contract with new volumes.

Speaker Change: At better pricing in the northeast for us. So it did that it also opened up M&A opportunities along the eastern seaboard that we otherwise would not have looked at where we are not prone to to go in particularly to a more urbanized market and acquire something that.

Noah Kaye: And then on RNG, Marianne, you said the guide does not include any benefit from the ITC tax credit, you know, in 24. That is just pure optionality. If Treasury were to finalize guidance in a way that is consistent with the law, meaning allowing companies to claim the credit on what is essentially the major pieces of equipment, what could that possibly do in terms of incremental cash tax benefits to the company? Is that something you can size and feel comfortable sharing?

Speaker Change: Non integrator Bull.

Speaker Change: That's not part of our model. So this allowed us to achieve that so it's done a number of things for us currently and forward looking.

Speaker Change: Great color.

Speaker Change: And then on our LNG Marianne you said.

Speaker Change: The guide does not include any benefit from ITC tax credits.

Speaker Change: In 2000 and for that is just pure optionality.

Mary Ann Whitney: Sure. Well, given the fact, Noah, that, as you know, only a small percentage of our projects are loans we will lend outright in 24, it's pretty nominal. It's about $10 million in incremental benefit that we'd expect, and on the full portfolio once it's built out. Yeah, that whole portfolio. I'm not in a position to give that yet, just looking at what's qualifying equipment and what the actual outlays are for the project. All right, well, we'll stay tuned for that. Thank you very much.

Speaker Change: If treasury were to finalize guidance in a way that is consistent with the law, meaning allowing companies to claim the.

Speaker Change: The credit on what is essentially the major pieces of equipment.

Speaker Change: What could that possibly do in terms of incremental cash tax benefits for the company, that's something you've sized and feel comfortable sharing.

Speaker Change: Sure well given the fact that as you know only a small percentage of our projects are well, we will own outright in.

Speaker Change: In 24, it's pretty nominal it's about $10 million in incremental benefit that we'd expect.

Noah Kaye: Yep. Our next question comes from Kevin Chang from CIBC; please go ahead with your question. Hi, thanks for taking my question. Maybe just on the, well, congratulations on closing on the Secure deal. I know this came out through a competition bureau tribunal, and my understanding is that Secure wasn't necessarily running these Tervida assets to their full capabilities.

Speaker Change: And on the whole portfolio.

Speaker Change: Once it's built out.

Speaker Change: Yes.

Speaker Change: Hopefully folio I am not in a position to give that yet just looking at what's qualifying equipment and what the actual outlays are for the projects were alone.

Speaker Change: Alright, well, we'll stay tuned for that thank you very much.

Speaker Change: Sure.

Speaker Change: Our next question comes from Kevin Chiang from CIBC. Please go ahead with your question.

Kevin Chiang: Hi, Thanks for taking my question, maybe just on the <unk>.

Kevin Chiang: Well congratulations on closing on the secure secured deal.

Kevin Chiang: I know this came out through a competition Bureau tribunal and my understanding is that secure wasn't nest.

Ron Middlestad: Just wondering how that might change under your ownership and the revenue guide you provided related to that acquisition. Is that the run rate Secure was achieving, so any upside you'd see, or is that the revenue you think you can achieve as you own these assets? Okay, a couple pieces here, Kevin. So first off, there were 29 assets required to be divested by the tribunal, of which 22 were operating at the time of closure. And I would say they were operating at full throttle. Secure is a very good operator.

Kevin Chiang: Necessarily running these <unk> assets to their full capabilities, just just wondering how that might change under your ownership.

Kevin Chiang: On the revenue guide the revenue guide you provided related to that acquisition does that is that the.

Kevin Chiang: The run rate secure was was achieving so any upside you would see or is that the revenue. You think you can achieve as you on these assets.

Kevin Chiang: Okay.

Speaker Change: A couple of pieces there Kevin So first off there were 29.

Speaker Change: Assets are required to be divested by the tribunal of which 22 were operating at the time of close and I would say they were operating at full throttle secured is a very good operator.

Ron Middlestad: And they had optimized the facility. So the 22 were running of the 29. And the guidance we have provided for 24 and Secure includes those 22 facilities. There are seven incremental facilities that we will be reopening over a period of time, you know, perhaps some of those in 24, but certainly into 25. We're looking at that right now. That is not in what we have guided.

Speaker Change: And they they had optimized.

Speaker Change: The facilities so the 22.

Speaker Change: We're running of the 29 and the guidance we have provided for 'twenty foreign secure includes those 22 facilities. There are seven incremental facilities that we will be reopening over a period of time.

Speaker Change: Perhaps some of those in 'twenty, four but certainly into 'twenty five where we're looking at that right now that is not in what we have got it okay and we would we would not make those assumptions that that would be anything material in 'twenty four but it certainly could be incremental to 'twenty five and beyond.

Ron Middlestad: Okay. And we would not make those assumptions that that would be, you know, anything material in 24. But it certainly could be incremental to 25 and beyond. So, you know, so that's how I think you should think of what is in the guidance and what is available beyond that. That's helpful.

Speaker Change: So.

Speaker Change: So that's how I think you should think of what what is in the guidance and what is available beyond that.

Speaker Change: That's helpful.

Ron Middlestad: And then just maybe on to, again, congratulations again on winning the zones in New York. Obviously, there are a number of bidders that, you know, came up short here. Just wondering, does that create an M&A opportunity for you to maybe pick up assets in that market from, you know, haulers that might look at New York differently because they won fewer zones or maybe didn't win any zones after the bidding process? Well, I would say, you know, Kevin, generally, the answer is yes to everything you said. But, you know, it is a complex situation. So remember that while this is a franchise area, there are three non-exclusive franchisees awarded to each zone. You certainly can acquire, potentially acquire someone within zones you have or other zones. But first, you must get the city and the BIC, the Business Council's, approval for such.

Speaker Change: And then just maybe on <unk>.

Speaker Change: <unk>, congratulations again on winning new zones, and New York.

Speaker Change: Obviously, there are a number of bidders that.

Speaker Change: That.

Speaker Change: But.

Speaker Change: Came up short here just wondering does that does that create an M&A opportunity for you to.

Speaker Change: Can maybe pick up assets in that market from from.

Speaker Change: Haulers that.

Speaker Change: They might look at New York differently, because the one fewer zones or maybe didn't win any zones. After the bidding process.

Speaker Change: Well I would say.

Speaker Change: Kevin generally the answer is yes.

Speaker Change: To everything you said, but it is a complex situation. So remember that while this is a franchise area. There are three nonexclusive franchisees awarded to each zone.

You certainly can acquire.

Speaker Change: Potentially acquire someone within zones, you have or other zones, but first you must get the city and the Bic the business Council approval of such and they have to determine what their comfort is on reducing competitors in a zone.

Ron Middlestad: And they have to determine what their comfort level is with reducing competitors in a zone. And then they could add a third competitor back if it was an overlapping zone. So, you know, there are a number of complexities. There are also caps on how many zones one can own right now. So they have to decide their comfort level if someone goes beyond that cap, or do they then have to divest another zone or trade it? So it's a complex situation. But generally, I would say it improves our flexibility and M&A opportunities in the city. Perfect. That's all my questions.

And then that could add a third competitor back if it was an overlapping zone.

Speaker Change: And so there are a number of complexities. There are also caps on how many zones one Ken Oh.

Speaker Change: Right now so they have to decide their comfort level, if someone goes beyond that cap or do they then have to divest in other zone or trade. It. So it's a complex.

Speaker Change: Situation, but generally I would say it improves our optionality and M&A opportunities in the city.

Speaker Change: Perfect. That's all my questions Congrats on a strong into the year there.

Bryan Burgmeier: Congratulations on a strong end to the year there. Our next question comes from Bryan Burgmeier from Citi. Please go ahead with your question.

Speaker Change: Thank you very much.

Speaker Change: Our next question comes from Brian Birchmeier from Citi. Please go ahead with your question.

Mary Ann Whitney: Maybe the exit rate for 23 being, you know, five, five and a half percent, wondering, are those still good numbers? Is there any view on what that wage growth could look like in 24? I'm just trying to be cognizant of kind of ongoing inflation, some changes in your portfolio, you know, versus that strong margin expansion that you did see in Sure. So with respect to wage growth, you're right. We talked about in 2023 the moderation from a starting point of about 8% coming into the year to an exit of about 6%, which is what we saw in Q4, I think to one of your questions, that it did get to that level. So as we think about continued moderation and the non-repeating of outsized increases or last year's level of increases, we would think about further moderation.

Bryan Burgmeier: Good morning, Thank you for taking the question.

Bryan Burgmeier: I think on the last call you talked about wage growth kind of moderating to maybe 665%.

Bryan Burgmeier: Maybe the exit rate for 'twenty, three being 555% I'm just wondering are those still good numbers.

Speaker Change: Is there any view on what that.

Bryan Burgmeier: Wage growth could look like in 'twenty four.

Bryan Burgmeier: Trying to be cognizant of kind of ongoing inflation. Some changes in your portfolio versus the strong margin expansion that you did see in Q.

Speaker Change: Sure so with respect to wage growth you're right. We've talked about in 2023 of the moderation from a starting point of about 8% coming into the year to the exit of about 6%, which is what we sign in Q4 I think to one of your questions.

Bryan Burgmeier: But it did get to that level. So as we think about continued moderation in the non repeating of outsized increases or last year's level of increases we would think about further moderation and as we talk about underlying solid waste margin expansion one of the drivers being cost moderation as we move through the year. So.

Mary Ann Whitney: And as we talk about underlying solid waste margin expansion, one of the drivers is cost moderation as we move through the year. So you know, I think about it, you know, we saw 8 to 6 in 2023, you know, 6, maybe the rate of slowing down will slow down. And so maybe it's 6 to 5 or sub 5 as we move through the year. That's probably a realistic way to think about some of those cost pressures moderating, specifically wage. Can you just help size maybe the revenue impact from M&A and 1Q? I know the E&P deal closed mid-quarter, but I'm not sure if there's some seasonality to be mindful of.

Bryan Burgmeier: I think about it we saw 8% to six in 2023.

Bryan Burgmeier: Six maybe the rate of slowing down flows and so maybe it's six to five or sub 5% as we move through the year, that's probably a realistic way to think about some of those cost pressures moderating specifically wages.

Speaker Change: Got it got it thanks for that detail and.

Speaker Change: Can you just help size, maybe the revenue impact from M&A and <unk> I know the E&P deal closed mid quarter I'm not sure. If there's some seasonality to be mindful of and then just.

Mary Ann Whitney: And then just a smaller item, as you talked about Arrowhead. Do you think that kind of flips to a slight positive in 24, especially with this new New York City? Sure. So, with respect to the contribution from acquisitions in Q1 and how to think about that, about $65 million in Q1. And you should think about some seasonality as we head into Q2, even for the E&P business. So it's a little different from the underlying business, what drives the timing there. But so, I would have overall acquisitions ramping up a little bit as we move through the year and then dropping down toward the end of the year, just as we anniversary some coming online. But 65 for Q1 is a good way to think about it.

Speaker Change: The smaller item as you've talked about arrowhead, maybe being slightly dilutive to margins at the beginning.

Speaker Change: Do you think that kind of flips to a slight positive in 'twenty four, especially with this new New York City business.

Speaker Change: Sure so with respect to the contribution from acquisitions in Q1, and how to think about that about $65 million in Q1, and you should think about some seasonality as we head into Q2. We then for the E&P business. So it's a little different from the underlying business what drives the timing there but.

Speaker Change: So I would have overall acquisitions ramping a little bit as we move through the year and then dropping down toward the end of the year just as we anniversary some coming online, but 65 for Q1 is a good way to think about it.

Mary Ann Whitney: And with regard to Arrowhead, I would tell you that as we move throughout 24, you are correct that initially, because of the rail component of transportation in the model, Arrowhead was nominally dilutive to margins. It will be accretive to margins by mid-year as volumes continue to ramp up there. And as a disproportionate amount of those volumes are our internal volumes, so you have an elimination, an intercompany elimination, which raises the margin profile of the asset relative to volumes coming from third parties, which dilutes the margin profile of the assets. So there's semantics there that are important on the margin. Got it. Thanks a lot.

Speaker Change: With regard to Arrowhead.

Speaker Change: I would tell you that as we move throughout 'twenty for you.

Speaker Change: You are correct that initially because of the rail component of transportation in the model.

Speaker Change: Arrowhead was nominally dilutive to margins it will be a creative to margins by mid year as volumes continue to ramp there and as a disproportionate amount of those volumes are our internal volumes. So you have a you have an elimination.

Speaker Change: Intercompany elimination, which raises the margin profile of the asset relative to volumes coming third party, which dilutes the margin profile of the assets. So if there.

Speaker Change: There's semantics there that are important on the margin.

John Mazzoni: I'll turn it over to you. Good luck in the quarter. Thank you. Our next question comes from John Mazzoni from Wells Fargo. Please go ahead with your question. Good morning.

Speaker Change: Got it thanks, a lot I'll turn it over good luck in the quarter.

Speaker Change: Thank you.

Speaker Change: Our next question comes from John <unk> from Wells Fargo. Please go ahead with your question.

John: Good morning, Congratulations on the strong results maybe asked.

Ron Middlestad: Congratulations on the strong results may be asked in a very different way. Of course, maybe ask in a different way: can you talk about the competitive backdrop with your peers focusing more on sustainability projects and more about kind of what changes you're expecting in terms of kind of markets exiting 24 and what you..., or Gazine 23, excuse me, into 24. And has there been any uptake from sponsors?

Speaker Change: Wei.

John: Of course, maybe asked a different way could you talk to the competitive backdrop with your peers focusing more on sustainability projects and more about kind of what changes you're expecting in terms of kind of markets exiting 'twenty, four and what you've seen or exiting 'twenty three excuse me in the 'twenty four and has there been.

John: Any uptake from kind of sponsors I think private equity dry powder is kind of in the trillion Mark now some kind of like I say four trillion, but how do we balance kind of the competitive backdrop as well as framed up within the M&A commentary. Thanks.

Ron Middlestad: I think private equity dry powder is kind of in the trillion mark now, some kind of like, say, 4 trillion. But how do we balance the competitive backdrop as well as frame that within the M&A commentary? Okay, Don, thanks. I think that's a complex question and that you asked there in several parts. I'll try our best to answer it. So, first off, look, sustainability is core to what we do and, quite honestly, has always been. You know, we have taken what I would consider a balanced approach, a moderated approach to R&G as a specific to sustainability. And as you've seen, we've said we'll do, you know, $200 million in EBITDA for $200 million in investment. And that's for our initial 12 projects that we'll bring online fully by 26. We have projects beyond that, okay? Number one, that we have not yet talked about and nor do we plan to for some period of time. We are not betting the entirety of our future on sustainability, okay?

Speaker Change: Okay John Thanks.

John: I think that's a complex question that you asked there was several parts I'll try our best to answer it so first off look.

John: Sustainability is core to what we do and quite honestly always has been.

Speaker Change: We have taken what I would consider a balanced approach.

Speaker Change: A moderated approach to RMG as a specific and sustainability.

Speaker Change: And as you've seen we've said we'll do.

Speaker Change: $200 million in EBITDA for $200 million in investment and Thats for our initial 12 projects that will bring online fully by 'twenty six we have projects beyond that okay number one that we have not yet talked about.

Speaker Change: And nor do we plan to for some period of time.

Speaker Change: We are not betting the entirety of our future on sustainability. Okay. It is one aspect of our strategy and our and our growth strategy. We have ample to do in the core solid waste business from an organic and an M&A standpoint.

Ron Middlestad: It is one aspect of our strategy and our growth strategy. We have plenty to do in the core solid waste business from an organic and an M&A standpoint, and you're going to continue to see that happen throughout 24 and 25 and beyond.

Speaker Change: We're going to continue to see that happen throughout 'twenty, four 'twenty five and beyond.

Ron Middlestad: You know, others, for various reasons, have different amounts focused on sustainability, some of that size and an inability to do as much M&A under the current HSR requirements. So there's a great window of opportunity for us in that way, and those are excellent strategies for their companies as well. We are in a little bit different niche. As far as private equity is concerned, you know, look, private equity has always been active in this space. You know, yeah, maybe a little more so right now just because there are more dollars in private equity than there are deals to do. So that yields more involvement. But. To be very honest, we do not butt heads that often with private equity in our M&A platform. Most private equity is focused on urban America because they are able to consolidate large amounts of revenue in short periods of time and flip it, which fits their model.

Speaker Change: Hum.

Speaker Change: Others, others because of various reasons.

Speaker Change: Have differential amounts focus on sustainability some of that size and an inability to do as much M&A in the current.

Speaker Change: HSR requirements, so theres, a great window of opportunity for us in that way.

Speaker Change: And those are excellent strategies for their companies as well.

Speaker Change: We are in a little bit different niche profile.

Speaker Change: As far as private equity.

Speaker Change: Private equity has always been active in this space.

Speaker Change: Yes, maybe a little more so right now.

Speaker Change: Just because there's more dollars.

Speaker Change: In private equity than there are deals to do so that that yields more involvement but to.

Speaker Change: To be very honest, we do not butt heads that often with private equity in our M&A platform.

Speaker Change: Most private equity is focused on urban America, because they are able to consolidate large amounts of revenue in short periods of time and flip it which fits their model.

Ron Middlestad: We're only 15% urban, so 85% of the time we're in suburban and rural America. That's not a market strategy that, with $2 to $5 million of deals at a time, you can consolidate a lot of revenue. So we're not too negatively impacted by private equity. Ultimately, we also have the opportunity as private equity exits theirs to take a look at those platforms. Arrowhead was such a platform, and we were successful there.

Speaker Change: We're only 15% urban so 85% of the time, we're in suburban and Rural America, that's not a market strategy that $2 million to $5 million of deals at a time you can consolidate a lot of revenue. So we're not too negatively impacted by private equity ultimately we.

Speaker Change: Also have the opportunity as private equity exits theirs to take a look at those platforms.

Speaker Change: Arrowhead was such a platform.

Speaker Change: And we were successful there so you know we.

Ron Middlestad: So, you know, we are not using or seeing private equity as an excuse for not being able to get deals done, okay? We've always competed against them, and we'll continue to be successful doing so. They'll get their share, but we'll get ours and then some.

Speaker Change: We are not using or seeing private equity as an excuse for not being able to get deals done okay.

Speaker Change: <unk> always competed against them and we will continue to be successful doing so they will get their share, but we'll get ours and then some so I I I believe that's what you were hinting at but but if I if I didn't address the core of your question, maybe you could clarify it for me.

John Mazzoni: So I believe that's what you were hinting at, but if I didn't address the core of your question, maybe you could clarify it for me. That's exactly what we were looking for. Great caller.

Speaker Change: Well that's exactly what we were looking for great color. Thank you and maybe a quick segue into kind of the 34% EBITA margin target. It seems like you could come to that sooner than expected could you just help us kind of frame what the puts and takes are there and anything we should be cognizant of as we model 'twenty four.

Mary Ann Whitney: Thank you. And maybe a quick segue into kind of the 34% EBITDA margin target. It seems like you could come to that sooner than expected. Could you just help us kind of frame what the puts and takes are there and anything we should be cognizant of as we model 24 and look to kind of the back half of the year and the exit rate? I'll take just a comment on that, John, and then I'll have Marianne provide more details. Look, if you look at our Q3, which, granted, is the best seasonal quarter of the year, we reported a 32.5% EBITDA margin, and we swallowed almost 50 basis points of headwinds that we didn't expect. But just take the 32.5% that we did. You heard Marianne say it was relatively balanced on the 120 basis points of margin improvement. Let's just say that it's 120 for Q3.

Speaker Change: And looking to kind of the back half of the year and the exit rate.

Speaker Change: I'll take just a comment on that John and then I'll have Marianne provide more detailed look if you know if you look at our Q3, which granted is the best seasonal quarter of the year, We reported 32, 5% EBITDA margin and we swallow.

Speaker Change: <unk> almost 50 basis points of headwinds that we didn't expect but just take the 32 five that we did you heard Marianne say relatively balanced on the 120 basis points of margin improvement, let's just say that it's 124 Q3 will now you're at 30.

Ron Middlestad: Well, you know, now you're at 33.7% or above in Q3 of 24%. So that's what gives us confidence in achieving 34% in some of our quarters throughout 24 as we ramp into 25. It's the math on where we are. So with that, I'll let Marianne comment. Sure, I guess the other point, just the math behind it, if you look at the fact that we're guiding to 120 basis points of margin expansion in 24, it says we're halfway there since we just delivered 31.5. And so there are various ways to get there, and Ron ran through the opportunities.

Speaker Change: Three seven or above in Q3 of 24, so that's what gives us confidence in achieving.

Speaker Change: Achieving 34% in some of our quarters throughout 'twenty four as we ramp into 'twenty five.

Speaker Change: It's the math on where we are.

Speaker Change: So with that I'll, let maryann comment sure I guess the other the other point just the math behind it. If you look at the fact that we're guiding to 120 basis point margin expansion in 'twenty four it says we're halfway there since we just delivered 31 five and so there are various ways to get there and ran ran through the.

Mary Ann Whitney: But if you just look at 24 as an example, and the outsized margin expansion in the underlying business, it gives you a sense of what's possible. And so then the question just becomes, not so much, is it 34? It was never meant to be an endpoint.

Maryann: <unk>, but if you just look at 'twenty four as an example, and the outsized margin expansion in the underlying business. It gives you a sense of what's possible and so then the question just becomes not so much is at 34. It was never meant to be an endpoint that was just illustrative of the ability to get back to prior peak margins and.

Mary Ann Whitney: It was just illustrative of the ability to get back to prior peak margins, and we feel now well-positioned to do even better than that. Thank you. Congratulations again on the strong results.

Speaker Change: We are now well positioned to do even north of that.

Speaker Change: Alright. Thank you congratulations again on the strong results.

Michael E. Hoffman: Thank you very much, Sean. Our next question comes from Michael Hoffman from Stiefel. Please go ahead with your question. Hey, happy Valentine's Day, everybody.

Speaker Change: Thank you very much John.

Speaker Change: Our next question comes from Michael Hoffman from Stifel. Please go ahead with your question.

Michael E. Hoffman: Happy Valentine's day everybody.

Michael E. Hoffman: Thank you, Mike we were going to start that way, but thank you I thought you would but okay anyway. So can we get back to operation for a minute and talk about fleet.

Michael E. Hoffman: Thanks, Michael. We were going to start that way, but thank you. I thought you would, but okay.

Speaker Change: Am I correct you'd like to buy.

Ron Middlestad: Anyway, so can we get back to operations for a minute and talk about sleep? Yeah. So, you know, first off, Michael, I think your first comment about percentages is accurate. Look, I'm in a round.

Michael E. Hoffman: 10% of your direct fleet Youre routed trucks, we've been below that what do you think is the outcome in 'twenty four.

Michael E. Hoffman: And correspondingly how that sort of works its way through repair and maintenance cost.

Speaker Change: Yes, So first of all Michael I think your first comment is about.

Speaker Change: About percentages is accurate look we've I've been around we've gotten approximately if you look at 'twenty, two and 'twenty three.

Ron Middlestad: We've gotten approximately, if you look at 22 and 23, around 90%, maybe a hair below our fleet in one way or another delivered. So we're running about one in 10 short, okay? We are being told that that number should compress a little bit in 24, but there will still be some fleet push from 24 into 25. We're being told that that should be closer to, you know, 5 to 8% rather than maybe 10%. So you will see improvement.

Speaker Change: Around 90%, maybe a hair below of our fleet in one way or another deliver so we're running about one in 10 short okay.

Speaker Change: Or being told that that number should compress a little bit in 'twenty four but the there.

Speaker Change: We will still be some.

Speaker Change: Felipe push from 24% to 25, we're being told that that should be closer to 5% to 8% that maybe 10%. So you see improvement and then we're being told that it normalizes in 25 or so.

Ron Middlestad: And then we're being told that it normalizes in 25. So, you know, we believe by 25, we'll be back on track with the normal fleet replacement. As far as, you know, the maintenance side, look, the good news is it's in the numbers and it's in the guidance, and it's not one of the key drivers to delivering 34%. You know, quite honestly, you don't want an accelerated fleet at a time when your turnover is highest and you're doing the most damage to new equipment.

Speaker Change: We believe by.

Speaker Change: By 'twenty five we'll be back on track with norm with the normal fleet.

Speaker Change: Fleet replacement as far as the maintenance side.

Speaker Change: Look the good news is it's in the numbers and it's in the guidance and it's it's not one of the key drivers to delivering 34%.

Speaker Change: No.

Speaker Change: Quite honestly you don't want accelerated fleet at a time when your turnover is highest and you're doing the most damage to new equipment. So we wanted to bring turnover down.

Ron Middlestad: So we wanted to bring turnover down quite dramatically before we focused on any, you know, sort of movement upwards in fleet replacement because it's just not going to show up in the maintenance when you've got so many new employees. So it actually has been somewhat of a blessing, to be honest, and we feel good about the timing of how the fleet will, allocation will improve as we go through 24 into 25. Okay, switching gears to Arrowhead.

Speaker Change: Quite dramatically before we focused on any sort of movement upwards and fleet replacement.

Speaker Change: Because it's just not going to show up in the maintenance when you've got so many new employees. So.

Speaker Change: It actually has been somewhat of a blessing to be honest.

Speaker Change: And we feel good about that.

Speaker Change: The timing of how the fleet will allocation will improve as we go through 'twenty four 'twenty five.

Speaker Change: Okay switching gears to arrow had.

Ron Middlestad: It has a pretty big tons per day capacity. Where are we in maximizing that utilization? You alluded in your comments that you've been redirecting your own volume.

Speaker Change: It has a pretty big tons per day capacity, where are we in maximizing that utilization you alluded in your comments you've been redirecting your own volume.

Ron Middlestad: So what's the trend? Well, what I would tell you, Michael, is that, you know, as you know, maybe not everyone does. Arrowhead has a 15,000 ton per day permit.

Speaker Change: Whats the trend look like.

Speaker Change: Well, what I would tell you Michael.

Speaker Change: And so.

Speaker Change: As you know maybe not everyone does.

Speaker Change: Arrowhead has a 15000 ton per day.

Speaker Change: Permit.

Ron Middlestad: When we acquired Arrowhead, it was handling, you know, just under or around 3,000 tons a day. We have improved that by 35% or more already. I believe we will exit 24 at a doubling where it was originally. And I think, longer term, it's 25 into 26.

Speaker Change: When we acquired Arrowhead it was handling just under or around 3000 tonnes. A day, we have improved that by 35% or more already I believe we will exit 'twenty four at doubling where it was.

Speaker Change: Was originally.

Speaker Change: And I think longer term longer term is 25% to 26. These things take some time I think youll see us approaching triple what we originally acquired of that.

Ron Middlestad: These things take some time. I think you'll see us approaching triple what we originally acquired it for. Okay, and then... As you think about the secure business, you know, you're dependent on production. And if I remember correctly, even in COVID, Canadian production didn't go down that low, given all the disruption. So what's the sensitivity to shut-ins?

Speaker Change: Okay and then.

Speaker Change: As you think about the secure business.

Speaker Change: You're dependent on production.

Speaker Change: And if I remember correctly, even in Covid. The Canadian production didn't go down that low given all the disruption so what's the sensitivity to shut ins how help everybody get comfortable that this is really stable.

Ron Middlestad: Help everybody get comfortable that this is really, Yeah, so as you said, Michael, the Canadian E&P market is very different than the U.S. Again, just to reiterate, the U.S. is our R360 business is about 80% drilling-oriented, so it's highly sensitive to rig count and crude price. The Canadian market is really inverted because they do not do a lot of fracking. So their market is 80 to 85% production-oriented. We look back over a five-year period during due diligence on the assets we would be acquiring, and western Canadian crude moved from a high of about $80 a barrel to around $32.

Speaker Change: Yeah. So as you said, Michael I mean, the Canadian E&P market is very different than the U S. Again, just to reiterate the U S. Our <unk> hundred 60 business is about 80% drilling oriented. So it is highly sensitive to rig count and crude price the Canadian market has really.

Speaker Change: Inverted.

Speaker Change: Because they do not do a lot of fracking.

Speaker Change: So their market is 80% to 85% production oriented we look back over a five year period during diligence at the assets, we would be acquiring and crude move a western Canadian crude move from a high of about $80 a barrel to around 30.

Ron Middlestad: So that's a pretty significant swing, and revenue changed 8% peak to trough, and EBITDA changed 12% peak to trough. So, um... I think that that shows the significant difference between a production-oriented model and a drilling-oriented model. And that's quite honestly, one of the things we loved about the assets is that they de-risked our combined portfolio and brought it more to a 50-50 balance. And then, specifically, Canada, which has a nice business, is rolling out an EPR program. Were you one of the beneficiaries of their contract award?

Speaker Change: Oh shoot.

Speaker Change: So that's a pretty significant swing and revenue changed 8% peak to trough and EBITDA change, 12% peak to trough.

Speaker Change: So.

Speaker Change: I think that shows the significant difference between our production oriented model and a drilling oriented model and and that's quite honestly one of the things we loved about the assets is it de risks our combined portfolio.

Speaker Change: And brought it more to a 50 50 balance.

Speaker Change: Got it and then Canada specific, Ontario, which you have a nice businesses rolling out an EPR program, where you're one of the beneficiaries of their contract award.

Speaker Change: No and we were.

Ron Middlestad: No, and we were, you know, that was, you know, quite intentional, to be honest with you. So first off, let us say this. We think the EPR opportunities in Canada are nice opportunities, okay? They are nice opportunities for providers whose business is predominantly a residential platform. We have purposely tacked away from since acquiring Progressive and have shed most of the residential business in Canada purposely, and we are much more of a commercial and disposal platform company in Canada. And that's reflective.

Speaker Change: That was quite intentional to be honest with you. So first off let's say this we think the EPR opportunities in Canada are nice opportunities okay.

Speaker Change: They are nice opportunities for peak for providers, whose business is predominantly a residential platform.

Speaker Change: We have purposely tapped away from since acquiring progressive and have shed most of the residential business in Canada purposely and we are much more of a commercial and disposal platform company in Canada.

Speaker Change: And that's reflective you can see our segment margins in our filings and that is reflective of what we've done if you look at that relative to our peers are our margins are almost double.

Ron Middlestad: You can see our segment margins in our filings, and that is reflective of what we've done. If you look at that relative to our peers, our margins are almost double. So we're not looking to move heavily into the residential muni contract business in Canada. That business tends to be a five-year type business. Those are very short-term contracts. And if you have assets, particularly MRF assets that are underutilized, and you're able to add a relatively nominal amount of capital, those investments make a lot of sense. That's not our asset platform in Canada.

Speaker Change: So we're not.

Speaker Change: We're not looking to move heavily into the residential muni contract business in Canada that business tends to be a five year type business. Those are very short term contracts and if you have assets.

Speaker Change: You know, particularly murph assets.

Speaker Change: That are.

Speaker Change: Underutilized and you're able to add a relatively nominal amount of capital those investments makes a lot of sense.

Speaker Change: That's not our asset platform in Canada. So.

Ron Middlestad: So it really is – I think it's a great opportunity, but it's not an opportunity that we're really pursuing because of asset mix. Got it. Last one for me.

Speaker Change: It really I think it's a great opportunity, but it's not an opportunity that we're really pursuing because of asset mix.

Speaker Change: Got it last one for me.

Speaker Change: So R&D comes with some incremental volatility potentially because of the credit what are what is your strategy around diffusing that risk.

Michael E. Hoffman: So RNG comes with some incremental volatility, potentially because of the credit. What is your strategy around defusing that risk? Terrific. Thanks for taking the question. Thank you, Michael.

Speaker Change: Well sure Michael as you know and for anyone who doesn't know that's just fundamental to the way we approached our LNG, but the portfolio approach and the variety of ownership structures and the fact that we will own outright about a third of the projects that we ultimately participate in so right. There that that's one element of <unk>.

Speaker Change: Risk and the other is is hedging rents and we opportunistically put those hedges in place we've done it in the past so well that's how we think about it fundamentally and that's the way to deal with it.

Derek Spronck: Our next question comes from Walter Spracklin from RBC Capital Markets. Please go ahead with your question. Yeah, thanks very much. Good morning, everyone.

Speaker Change: Terrific. Thanks for taking the questions.

Speaker Change: Thank you Michael.

Speaker Change: Our next question comes from Walter Spracklen from RBC Capital markets. Please go ahead with your question, yes, Thanks very much good morning, everyone.

Ron Middlestad: I just wanted two, hopefully quick ones here. First, on the rail Side, the waste rail side, Ron, you alluded to it a number of times on this call and especially when you did the deal. How much can you scale that up, do you think, if the economics look, appear to be quite attractive on this? To what extent, if fully utilized in every way, do you think you could scale this up, or is this more of a surgical, tactical type of option for you that won't really move the dial on your total numbers but is nice on an incremental basis? So, I've got to dissect it a little bit, Walter. First off, as I mentioned earlier, that landfill has the capacity to take 15,000 tons a day. When we acquired it, it was taking 3,000.

Derek Spronck: I just wanted to two hopefully quick ones here first on the on the rail side the waste real side, Ron you alluded to a number of times here on the call and especially when you did the deal.

Derek Spronck: How much can you scale that up do you think if you were to.

Derek Spronck: The economics look.

Derek Spronck: Appear to be quite attractive on this.

Derek Spronck: To what extent if fully utilized in every way do you think you could you could scale. This up or is this more surgical tactical type of type of option for you that won't really move the dial in your total numbers, but.

Derek Spronck: But are nice.

Derek Spronck: On an incremental basis.

Speaker Change: So I've got to dissect it a little bit Walter So first off.

Speaker Change: As I mentioned earlier.

Derek Spronck: That landfill has the capacity to take 15000 tons a day when we acquired it was taking 3000. So you know that it was quote 20% utilized if you will right and I mentioned that I thought by the time, we exit 'twenty four we'll double that so that it would be 40% utilized and that as we come through 'twenty five.

Ron Middlestad: So, you know, it was, quote, 20% utilized, if you will, right? And I mentioned that I thought by the time we exit 24, we'll double that so that it would be 40% utilized, and that as we come through 25 and then 26, we think we can get that up to 3x where we were. So, in that scenario, 60% is utilized. There really is no rail constraint on utilization. It's just incremental cars and loading and track.

Derek Spronck: 526, we think we can get that up to three X, where we were so in that scenario, 60% utilized.

Derek Spronck: There really is no rail constraint on utilization.

Derek Spronck: Incremental.

Derek Spronck: Bars and loading.

Derek Spronck: And track so that is not the scale the scalability issue.

Ron Middlestad: So, that is not the scale, you know, a scalability issue. So, you know, look at the size of our corpus. Is this going to be, you know, something that moves the needle 100 basis points on its own? No.

Derek Spronck: So look in the size of our corpus.

Derek Spronck: Is this going to be something that moves the needle 100 basis points on its Oh, no and we've never said that but here is how it moves the needle it moves the needle on what our growth can be M&A wise.

Ron Middlestad: And we've never said that. But here is how it moves the needle. It moves the needle on what our growth can be M&A-wise because of the market areas that we can now integrate that we never looked at before. So in that way, I do consider it a needle mover. You know, could it add a point or more to M&A growth per year for a while? I think it could.

Derek Spronck: Because of the market areas that we can now integrate that we never looked at before so in that way I do consider it a needle mover quoted add a point or more in.

Derek Spronck: M&A growth per year for a while I think it could and I think the compounding of that is something.

Ron Middlestad: And I think the compounding of that is something. So that's where I'd say, and that's one of the reasons I gave commentary, you know, that we're fairly bullish on the M&A environment for 24 as we sit here, you know, 45 days into the year. So, you know, hopefully that that gives you some color on our thoughts on that opportunity. Yeah, that's a great color, Ron.

Derek Spronck: So that that's where I'd say and that's one of the reasons I gave commentary that we're fairly bullish on the M&A environment for 'twenty four as we sit here 45 days into the year.

Derek Spronck: So hopefully that gives you some color on.

Derek Spronck: Our thoughts on that opportunity.

Speaker Change: That's great color Ron I appreciate that and my second question here is on volume I know I've heard some inbounds on the negative volume that you've had through the.

Derek Spronck: I appreciate that. And my second question here is about volume. I know I've had some inbounds on the negative volume that you've had through the course of 2023 and the negative volume you're now projecting for 2024. And some are comparing that to your peers, which are in positive territory. Two aspects, I know Mary and I have talked about this before, but just wanted to flag it. You know, there's not really an apples to oranges comparison.

Speaker Change: 2023, and the negative volume and now projecting for 2024.

Speaker Change: And some are comparing that to two your peers, which are the positive territory two aspects I don't.

Speaker Change: We've talked about this before but just wanted to flag it.

Speaker Change: There's not really an apples to oranges, there isn't apples to or just compare there I think and perhaps you could elaborate on that and then second is on how much of the volume is really purposeful shedding that you completed in 2023, that's just carrying forward to 2024, but as opposed to a projection for a <unk>.

Mary Ann Whitney: There is an apples to oranges comparison there, I think, and perhaps you can elaborate on that. And then, second, on how much of the volume is really purposeful shedding that you completed in 2023 that's just carrying forward to 2024, as opposed to a projection for a persistent negative volume outlook for your company. Sure. I'm happy to address those questions.

Speaker Change: <unk> negative volume outlook for your company.

Speaker Change: Sure.

Speaker Change: Sure So happy to address those questions. So first of all to your point I do think that we different companies communicate both price and volume differently than ours is strictly solid waste volumes without the benefit of incremental R&D or recycling facilities coming online, which would be additive I believe.

Mary Ann Whitney: So, first of all, to your point, I do think that we, different companies, communicate both price and volume differently. And ours is strictly solid waste volumes without the benefit of incremental RNG or recycling facilities coming online, which would be additive, I believe, to other people's volume calculations. So just with that as a starting point. And then, of course, what also goes along with it is how we communicate price. And when some people talk about the core price, it's not what they ultimately report, but it's what they put on the street.

Speaker Change: Other peoples volume calculations, so just with that as a starting point and then of course, but also goes along with that is how we communicate price and when some people talk about core price, it's not what they ultimately report, but it's what they put out in the street. When we give you price those are the numbers. We expect to report that's how we got and that's what we talk about with respect to price.

Mary Ann Whitney: When we give you price, those are the numbers we expect to report. That's how we guide, and that's what we talk about with respect to price. Necessarily, or understandably, that means that the way we talk about price one way, it's going to drive how we talk about volume. And so again, the calculations are probably a little different. But here's what we do know.

Speaker Change: So.

Derek Spronck: Necessarily are understandably it means that the way we were talking about price one way, it's going to drive how we talk about volume and so again the calculations are probably a little different but here's what we do know we know that as we exited 2023, we had purposeful shedding. So if we're at a run rate of negative two 5% volume.

Mary Ann Whitney: We know that, you know, as we exited 2023, we had purposeful shedding. So if we were at a run rate of negative 2.5% volume, we said about a point of that was purposeful shedding from contracts that we walked away from or rebid in such a way that we knew we wouldn't ultimately hold on to them. And that was okay because they were poor quality revenue contracts.

Derek Spronck: We set about a point of that is purposeful shedding from contracts that we locked away from or rebid in such a way that we knew we wouldn't ultimately hold onto it and that was okay.

Derek Spronck: Because they were poor quality revenue contracts or customers. Additionally.

Mary Ann Whitney: Additionally, we've acknowledged that in our pricing strategy, we acknowledge that there's a price/volume trade-off, which we think is an acceptable trade-off, and we encourage people to look at where margins go when you make that trade-off. And so if you look at our exit rate of about a point for each of those two things, and then I'd say quarter-specific drivers like difficult comparisons or weather would be additive to that. So then that's why, as we said in Q1, coming in, the exit rate was around 2.5%, and we know that we had not only tough comparisons in Q1 with last year because of hurricane-related disposal, but we also had the weather we've already had. That's great commentary. Thank you. And Walter, I would add, you know, again, we talked about this on the last call, but number one, the purposeful shedding by us in our model is not new. We have done this for decades. Okay. You know, others who are not really very active at this point in M&A don't have that in their model to do. Okay. So that is a difference.

Derek Spronck: We've acknowledged that in our pricing strategy, we acknowledge that there is a price volume trade off which we think is an acceptable trade off and we encourage people to look at where margins go when you make that trade off and so if you. If you look at our exit rate of about one point for each of those two things and then I'd say quarter specific drivers.

Derek Spronck: Like difficult comparisons or whether would be additive to that so then that's why as we said in Q1 coming in the exit rate was around two 5% and we know that we had not only tough comparisons in Q1 last year because of hurricane related disposal, but we also have the weather we've already seen.

Derek Spronck: So that's how we think about coming into the year most negative in Q1 for that reason and that improving over the course of the year as we anniversary some of those purposeful losses.

Speaker Change: That's great color.

Speaker Change: And Walter I would add.

Derek Spronck: Again, we've talked about this on the last call, but so number one the purposeful shedding by us in our model is not new we have done this for decades.

Speaker Change: Hey.

Derek Spronck: And others, who are not really very active at this point and M&A don't have that in their model to do okay. So so that that is a difference when we are acquiring user number to $300 million a year of <unk>.

Ron Middlestad: You know, when we are acquiring, we use a number, two, three hundred million dollars a year of revenue, year in, year out, year in, year out, some years double that, all at 22. We've said there's maybe 15 to 20 percent of private company revenue that when you acquire it, you know you're going to either price it to improve it or lose it. So the difference is why that shows up now is that the underlying economy is effectively dead flat. So they said it was zero, that's what if it's zero organic volume growth at zero to one and you do shedding, you're negative.

Derek Spronck: Revenue year in year out year in year out some years double that all of 'twenty two.

Derek Spronck: We've said Theres, maybe 15% to 20% of private company revenue that when you acquire it you know you're going to either price it to improve it or lose it. So the difference of why that shows up now is that the underlying economy.

Derek Spronck: Is effectively dead flat.

Derek Spronck: And you heard our largest competitor in the nation, who would be the greatest proxy for the economy on volume say, it's zero to 1%, Oh, and that's with RMG, making up the 1%.

Derek Spronck: So as I said it was zero.

Derek Spronck: That's what was so if it's zero organic volume growth.

Derek Spronck: Zero to one and you do shedding your negative it's just that simple.

Derek Spronck: It's just that simple. That makes total sense. I appreciate the time. Our next question comes from James Shum from TD Cowan. Please go ahead with your question. Hey, good morning.

Speaker Change: That makes total sense I appreciate the time.

Speaker Change: Our next question comes from James Schumm from TD Cowen. Please go ahead with your question.

James Schumm: Hey, good morning.

James Shum: Just a high-level question, and you touched on it a little bit, but historically, you haven't had a lot of exposure to recycling, you know, maybe relative to your peers. But I'm wondering if that will change in the near future, given recent advancements in technology or perhaps EPR legislation. And again, I mean, you touched on it in Canada, but maybe, you know, talk about the U.S. if you

James Schumm: Just high level question and you touched on a little bit, but historically you haven't had a lot of exposure to recycling.

James Schumm: Maybe relevant relative to your peers, but I'm wondering if that will change in the near future given recent advancements in technology are perhaps EPR legislation.

James Schumm: And again I mean, you touched on in Canada, but maybe talk.

Derek Spronck: Talk about the U S. If you could.

Derek Spronck: Yeah, well number one I think.

Ron Middlestad: Yeah, well, number one, I think part of it has been a model difference, James. As I mentioned, we have, you know, substantially less urban exposure than some of our larger peers in our model, and a lot of recycling in the U. S. has occurred in the coastal areas, which tend to be more urbanized. Okay. So we just have a little bit less exposure to it. There is no question that technology will aid and is making recycling a better business model every day, every year, and can produce some very acceptable returns with the right market and the right technology.

Derek Spronck: Part of it has been a model difference James as I mentioned, we have.

Derek Spronck: Substantially less urban exposure than some of our larger peers in our model and a lot of recycling in the U S has occurred in the coastal areas, which tend to be more urbanized. Okay.

Derek Spronck: So we just have a little bit less exposure to it.

Derek Spronck: There is no question that technology will aid and is making recycling a better business model every day every year.

Derek Spronck: And and and can produce some very acceptable returns with the with the right market and the right technology. So yes, you will see recycling over time grow as a percentage. There is also push for diversion legislation and recycling in many stay.

Mary Ann Whitney: So, yes, you will see recycling over time grow as a percentage. There is also a push for diversion legislation and recycling in many states that, up to this point, had not been as much of a push. So, it will ultimately continue to develop, and we're good with that. That extends the life of our landfills, which are a non-replicable asset. It limits the timing on capital for landfills for expansion. So, it's a process. It's an evolutionary process that we feel very, very comfortable with overall.

Derek Spronck: <unk> that up to this point there had not been as much of a push so it will ultimately continue to develop.

Derek Spronck: And we're good with that.

Derek Spronck: You know that that extends the life of our landfills, which are you know a non replicable asset.

Derek Spronck: It limits the timing on capital four landfills for expansion.

Derek Spronck: And so.

Derek Spronck: It's a it's a process it's evolutionary that we feel very very comfortable with overall and I would just add to that James that of course, increasing the recycling boats. We process ourselves is one of our sustainability objectives and we have been seeing growth every year and we built two new facilities and you added.

Mary Ann Whitney: And I would just add to that, James, that, of course, increasing the recyclables we process ourselves is one of our sustainability objectives, and we have been seeing growth every year. And we've built two new facilities, and you have added the latest technology and have 50 robotics units in operation at our facilities and continue to make investments, to Ron's point, to make it an even better business and to de-risk it for ourselves. Because it's a service we provide, but not in all cases do we use our own recycling facilities.

Derek Spronck: The latest technology and have 50 robotics units in operation at our facilities and continue to make investments to Ron's point to make it an even better business and to derisk. It for ourselves because it's a service we provide but not in all cases do we use our own recycling facilities and so we've been advancing in improving that.

Mary Ann Whitney: And so, we've been advancing and improving that. Okay, great, thanks. And then I'm just wondering if landfill costs will rise at your other 100 plus landfills in 2024 to prevent another ETLF? Like, is there a change in strategy in the wake of events at the Chiquita landfill? Or, you know, should we not expect, Well, number one, I don't think you should expect an incremental or step change increase in costs for our landfills because of what happened at Chiquita. What happened at Chiquita is, you know, as we've said, ETLFs are very, very rare. They are a natural organic reaction that occurs under, you know, very unique circumstances.

Derek Spronck: Yeah.

Speaker Change: Okay, great Thanks and.

Speaker Change: And then I'm just wondering if landfill costs will rise that your other 100, plus landfills in 2024 to prevent another E. L F.

Speaker Change: Is there a change in strategy in the week of events at the Chiquita landfill or should we not expect much change here.

Speaker Change: Well number one.

Speaker Change: I don't think you should expect an incremental or step change increase in costs on our landfills.

Speaker Change: Because of what's happened at Chiquita.

Speaker Change: Happen to Chiquita is.

Speaker Change: As we've said <unk> are very very rare.

Speaker Change: There are natural they are a natural organic reaction that occurs under very unique circumstances.

Ron Middlestad: You know, can they happen elsewhere? They certainly can. But, you know, what I think is more important is what we are doing post-Chiquita that we've learned that would help to minimize the impact earlier on if one were to occur. And so we have made some engineering protocol changes to some more centralized landfill well temperature monitoring on a more frequent basis. We have decided that if we experience that, we will drill wells to alleviate the temperature earlier.

Speaker Change: Can they happen elsewhere, they certainly can.

Speaker Change: But what I think is more important is what are we doing post takeda that we've learned that would help to minimize the impact earlier on.

Speaker Change: Relative.

Speaker Change: If one were to occur and so we have made some engineering protocol changes of some more centralized.

Speaker Change: Landfill well temperature monitoring on a more frequent basis.

Speaker Change: We have decided.

Speaker Change: As that if if we experience that that we will.

Speaker Change: We will drill wells to alleviate temperature earlier.

Ron Middlestad: And then, you know, as a company over five years ago, we stopped taking much of the material that we believe can cause ETLFs, which tend to be, you know, some sort of aluminum production material or untreated auto shredder fluff. So, you know, there are things we are doing, but they are not things that you should see, you know, rippling through the P&L. Okay, great. Thanks for the answers, guys. I appreciate it. Our next question comes from Stephanie Moore from Jeffries. Please go ahead with your question. Hi, good morning.

Speaker Change: And then.

Speaker Change: As a company over five years ago, we stopped taking.

Speaker Change: Much of the material that we believe.

Speaker Change: Can cause <unk>, which tend to be.

Speaker Change: You know some sort of aluminum production material or untreated auto shredder fluff so.

Speaker Change: So yes, there are things we are doing but they are not things that you should see rippling through the P&L.

Speaker Change: Okay, great. Thanks, Thanks for the answers guys I appreciate it.

Speaker Change: Thank you.

Speaker Change: Our next question comes from Stephanie more from Jefferies. Please go ahead with your question.

Stephanie Yee: Hi, good morning, Thank you.

Stephanie Yee: I wanted to touch back on some of the pricing color. You know, I think outside of your index contracts, maybe if you could touch a little bit on how your conversations have been going with customers on pricing and maybe how this is compared to any prior years, that would be helpful. Thank you.

Stephanie: Thank you Stephanie.

Stephanie Yee: And then I wanted to touch back on.

Stephanie: The pricing color I think outside outside of your index contracts.

Stephanie Yee: Types, a little bit on how your conversations have been going with customers on pricing and maybe how that compared to any prior year.

Speaker Change: Thank you.

Mary Ann Whitney: Sure. I'd say that things are playing out really pretty much as we'd expected. And, you know, coming into the year, we knew that we were coming off of two years of outsized price increases, and we were looking forward to not meeting that same level of pricing. Right, you know, doing 9.5% in each of the last two years implied that in our competitive markets, those increases were well north of that. And we talked about that 11%, 13%, 14%. So it's a relief to be down in the 7, 8.5 type of range on price increases. I'd say that in terms of those conversations, retention is pretty similar to historic levels. You come in kind of expecting that 85% type of level.

Stephanie Yee: Sure I'd say that things are playing out really pretty much as we had expected coming into the year. We knew that we were coming off of two years of outsized price increases and we were looking forward to not meeting that same level of pricing right doing nine 5% in each of the last two years implied that.

Stephanie Yee: In our competitive markets those increases were well north of that and we talked about that 11 13, 14%. So it's a relief to be down and more of the seven eight and a half type of type of range on price increases I would say that in terms of those conversations retention is pretty similar to historic.

Stephanie Yee: Level, you come in kind of expecting that 85% type of level.

Ron Middlestad: We've had periods when there was hyperinflation where it was stickier than that, and I'd say we've reverted back to more normalized levels. And that's the way those conversations are going on. Great, that's helpful. And then maybe just to follow up on some prior questions on the Arrowhead deal, you know, as you think about future M&A, do you see similar opportunities, maybe similar to Arrowhead, on the horizon, those that provide, you know, greater rail access or transfer for customers outside of your traditional core market? Well, you know, I would tell you, Stephanie, that Arrowhead was a unique asset. And, you know, we are not currently looking at anything that is analogous to it.

Stephanie Moore: We've had periods when there is hyper inflation risks it was stickier than that and I'd say, we've reverted back to more normalized levels and that's the way those conversations are playing out.

Speaker Change: Great No. That's helpful. And then maybe just the follow up on some prior questions and the Arrowhead deal as you think about future M&A do you see similar opportunities maybe some other arrowhead on the horizon that provide greater rail access our transfer footprint outside of your traditional.

Speaker Change: Core market.

Speaker Change: Well.

Speaker Change: I would tell you Stephanie that arrowhead was unique a unique asset.

Stephanie Moore: And we are not currently looking at anything that is analogous to it.

Ron Middlestad: But I will also say that, you know, look, as landfill prices continue to move upwards over time, and airspace in markets contract. It is a natural consequence that more waste will move by rail over time, and in geographies, perhaps, that it doesn't today. So I do believe that there will be opportunities for incremental arrowhead-type acquisitions, but I don't feel that that is imminent, but it will occur over time. Okay. Thank you guys so much, and our next question comes from Tobey Sommer from Truist Securities. Please go ahead with your question. Yeah, hey, good morning. This is Jack Wilson on for Toby.

Stephanie Moore: But I will also say that you know look as as.

Stephanie Moore: Landfill prices continue to move upwards over time and aerospace in markets contract.

Stephanie Moore: It is a natural modality that wasteful more wasteful move by rail over time.

Stephanie Moore: And in geographies, perhaps that it doesn't today.

Stephanie: So I do believe that there will be opportunities for incremental.

Stephanie: Arrowhead type.

Stephanie: Acquisitions, but I don't feel that that is imminent, but it but it will occur over time.

Speaker Change: Okay got it. Thank you guys so much.

Speaker Change: Yes.

Stephanie: And our next question comes from Tobey Sommer from true of Securities. Please go ahead with your question.

Stephanie: Yeah, Hey, good morning. This is Jack Wilson on for Tobey.

Jack Wilson: So specifically in 2024, is there going to be any sort of quarters that are especially heavy with capital expenditures, or given the Chiquita and RNG spend? No, there's nothing that stands out as being unique in any quarter, but just a reminder that free cash flow generation in any year can be lumpy for a variety of reasons, you know, outside of CapEx, for instance, interest and taxes. So I wouldn't get too hung up on activity in one individual. Okay, thank you for that color there. And then sort of just in regards to the new winds in New York and sort of the intentional shedding, does that change your thinking around market exposure at all or sort of how you're weighting sort of franchise, secondary, and urban?

Jack Wilson: Is it between 2024 is there going to be any sort of quarters that are especially heavy with capital expenditures, where given the chiquita and R&D spend.

Jack Wilson: No. There is nothing that stands out as being unique in any quarter, but you know just a reminder, that free cash flow generation and any any core.

Stephanie: Quarters can be lumpy for a variety of reasons outside of Capex for instance, interest and taxes. So.

Stephanie: I wouldn't get too hung up on activity in any one individual quarter.

Speaker Change: Okay. Thank you for that color there.

Speaker Change: And then sort of just in regards to the new wins in New York and sort of the intentional shedding does.

Speaker Change: Does that change sort of your thinking around market exposure at all or sort of how you're waiting sort of franchise secondary and urban.

Jack Wilson: No, I mean, we're opportunistic in terms of acquisition opportunities. You know, as we always say, sellers drive the timing of deals. But, you know, as Ron said in his remarks, our strategy hasn't changed. You know, we know the types of markets we're interested in. And a lot of these deals are the outcome of, you know, quarters or even years of dialogue. And so there's no change in thinking about that at all.

Speaker Change: No I mean, we're opportunistic in terms of acquisition opportunities as we always say sellers drive the timing of deal.

Speaker Change: But.

Speaker Change: As Ron said in his remarks, our strategy Hasnt changed we know the types of markets. We're interested in and a lot of these deals are the outcome.

Speaker Change: Quarters, or even years of dialogue and so theres no change in thinking about that at all.

Mary Ann Whitney: Thanks for the time. And ladies and gentlemen, with that being our final question today, I'd like to turn the floor back over to management for any closing remarks. Okay, well, if there are no further questions, on behalf of our entire management team, we appreciate your listening to and interest in our call today. Marianne and Joe Box are available today to answer any direct questions that we did not cover that we are allowed to answer under Regulation FD, Reg G, and applicable securities laws in Canada. Thank you again. We look forward to seeing you at upcoming investor conferences or on our next earnings call. Ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We thank you for joining us. You may now disconnect your line.

Speaker Change: Perfect. Thanks for the time.

Speaker Change: Thank you.

Speaker Change: Yeah.

Speaker Change: And ladies and gentlemen, with that being our final question today I'd like to turn the floor back over to management for any closing remarks.

Speaker Change: Okay, well if there are no further questions on behalf of our entire management team. We appreciate your listening to and interest in our call today, Maryanne and Joe boxer available today to answer any direct questions that we did not cover that we're allowed to answer under regulation FD Reg G and applicable securities laws.

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

Speaker Change: Ladies and gentlemen, with that we'll conclude today's conference call and presentation. We thank you for joining you may now disconnect your lines.