Q1 2024 GFL Environmental Inc Earnings Call

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Glenn Albee: Good morning, ladies and gentlemen, and welcome to the GFL Envrirnmntl 2024 first quarter earnings call. My name is Glenn Albee, the operator for today's call. At this time, all participants will be in a listen-only mode. If you would like to ask a question during the presentation, you may do so by pressing star 1 on the telephone keypad. I will now hand you over to your host, Patrick Dovigi, founder and CEO of Gfl Envrirnmnt. Patrick, you may now begin.

Glen: Good morning, ladies and gentlemen, and welcome to the <unk> 2020 full first quarter earnings call. My name is Glen I'll be the operator for today's call. At this time, all participants will be in a listen only mode. If you'd like to ask a question. During the presentation. You may do so by pressing star one on tap.

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Glen: I will now hand, you over to your host Patrick Davinci, founder and CEO, Jeff L. Environmental Patrick you May now begin.

Patrick Dovigi: Thank you and good morning. I would like to welcome everyone to today's call and thank you for joining us. This morning, we will be reviewing our results for the quarter. I am joined this morning by Luke Pelosi, our CFO, who will take us through our forward-looking disclaimer before we get into details.

Patrick Dovigi: Thank you and good morning, I would like to welcome everyone to today's call and thank you for joining US. This morning, we will be reviewing our results for the quarter.

Glen: I am joined this morning by <unk>, our CFO, who will take us through our forward looking disclaimer before we get into details.

Luke Pelosi: Thank you, Patrick. Good morning, everyone, and thank you for joining us.

CFO: Thank you Patrick good morning, everyone and thank you for joining we have filed our earnings press release, which includes important information the press release as well as a presentation to accompany this call is available on our website during.

Luke Pelosi: We have filed our earnings press release, which includes important information. The press release, as well as a presentation to accompany this call, is available on our website. During this call, we will be making some forward-looking statements within the meaning of applicable Canadian and U.S. securities laws, including statements regarding events or developments that we believe or anticipate may occur in the future. These forward-looking statements are subject to a number of risks and uncertainties, including those set out in our filings with the Canadian and U.S. securities regulators.

Luke Pelosi: Any forward-looking statement is not a guarantee of future performance, and actual results may differ materially from those expressed or implied in the forward-looking statement. These forward-looking statements speak only as of today, and we do not assume any obligation to update these statements, whether as a result of new information, future events and developments, or otherwise. This call will include the discussion of certain non-IFRS measures. A reconciliation of these non-IFRS measures can be found in our filings with the Canadian and U.S. securities regulators. I will now turn the call back over to Patrick.

CFO: During this call, we'll be making some forward looking statements within the meaning of applicable Canadian and U S securities laws, including statements regarding events or developments that we believe or anticipate may occur in the future. These.

CFO: These forward looking statements are subject to a number of risks and uncertainties, including those set out in our filings with the Canadian and U S Securities regulators.

CFO: Any forward looking statement is not a guarantee of future performance and actual results may differ materially from those expressed or implied in the forward looking statements.

CFO: These forward looking statements speak only as of today's date and we do not assume any obligation to update these statements whether as a result of new instrument information future events and developments or otherwise.

CFO: This call will include a discussion of certain non <unk> measures. A reconciliation of these non <unk> measures can be found in our filings with the Canadian and U S Securities regulators I will now turn the call back over to Patrick.

Patrick Dovigi: Thank you, Luke. Once again, we started the year with the strength of our high-quality employees and asset-based driving performance ahead of expectations. This is our fifth year of being a public company, and I continue to be humbled by the capacity of more than our 20,000 employees to consistently deliver results ahead of our plans. On our last call...

Patrick: Thank you Luke once again, we started the year with the strength of our high quality employees and asset base driving performance ahead of expectations.

Patrick: This is our fifth year of being a public company and I continue to be humbled by the capacity of more than 20000 employees to consistently deliver results ahead of our plans.

Speaker Change: On our last call.

Patrick Dovigi: In what has become our usual practice, we provided our 2024 guidance with an industry-leading degree of transparency and the details of the moving pieces that we anticipated this year, including what we expected to be industry-leading organic margin expansion in our beef business. We also outline the specifics of our planned M&A and growth investment. Our first quarter results were better than we guided, and we fully expect this positive momentum to continue for the balance of the year. Luke will walk us through the details, but I wanted to first highlight a few key metrics.

Speaker Change: And what has become our usual practice, we provided our 2024 guidance with an industry, leading degree of transparency and the details of the moving pieces that we anticipated this year.

Speaker Change: What we expect it to be industry, leading organic margin expansion in our base business. We also outline the specifics of our planned M&A and growth investments. Our first quarter results are better than we guided and we fully expect this positive momentum.

Speaker Change: For the balance of the year.

Speaker Change: Luke will walk you through the details, but I wanted to first highlight a few key metrics first quarter pricing was seven 7% on a like for like basis.

Patrick Dovigi: First quarter pricing was 7.7% on a like for like basis. Our pricing strategies continue to outperform expectations, and we remain optimistic about our ability to realize incremental pricing opportunities as we replicate the pricing playbook that our public company peers have already successfully employed. With the strength of our first quarter pricing, we are highly confident that we will be able to meet or exceed our price guidance for the year. We expect the recent strength in commodity prices to continue to be on the upside versus our guidance. On the cost side, labor turnover is sequentially improving and is yielding efficiencies in onboarding costs, productivity, and the overall cost of risk.

Speaker Change: Our pricing strategies continue to outperform expectations and we remain optimistic about our ability to realize incremental pricing opportunities as we replicate the pricing playbook that our public company peers have already successfully employed.

Speaker Change: With the strength of our first quarter pricing, we are highly confident that we will be able to meet or exceed our price guidance for the year. We expect the recent strength in commodity prices that continue to be upside versus our guidance.

Speaker Change: On the cost side labor turnover sequentially, improving and is yielding efficiencies and onboarding cost productivity and the overall cost of risk R&R.

Patrick Dovigi: R&M costs are also improving as unit cost inflation moderates and fleet replacement rates improve. The result is the realization of an outsized price-cost spread that supports ongoing margin expansion. Volume growth in the quarter was negative 3%.

Speaker Change: R&M costs are also improving as a unit cost inflation moderates and fleet replacement rates improve.

Speaker Change: As a result of the realization of outsized price cost spread that supports ongoing margin expansion.

Speaker Change: Volume growth in the quarter was negative 3% this was significantly better than our expectations as the negative impact on volume of the unusually cold January weather in our southern markets was offset by the positive impact of milder weather in most of our northern markets in February and March.

Patrick Dovigi: This was significantly better than our expectations as the negative impact on volume of the unusually cold January weather in our southern markets was offset by the positive impact of milder weather in most of our northern markets in February and March. We expect some of this could be a pull-forward of second quarter volumes. However, we remain confident in our full-year volume expectations, including our guidance. We also remain confident in the effectiveness of our deliberate volume strategies.

Speaker Change: We expect some of this could be a pull forward of second quarter volumes. However, we remain confident in our full year volume expectations included in our guidance.

Speaker Change: We also remain confident in the effectiveness of our deliberate volume strategies as we have discussed our industry, leading growth has provided us outsize opportunities to improve asset utilization and drive margin expansion through the internal intentional shedding of lower quality revenues. We believe the benefits of these strategies are evident in our margin performance.

Patrick Dovigi: As we've discussed, our industry-leading growth has provided us with outsized opportunities to improve asset utilization and drive margin expansion through the intentional shedding of lower-quality revenues. We believe the benefits of these strategies are evident in our margin performance. As we highlighted on our year-end call, we are also actively deploying growth capital across a variety of initiatives that we expect will generate significant ROIC for years to come. In the first quarter, we deployed $62 million in incremental growth investment, primarily related to recycling and R&G infrastructure.

Speaker Change: As we highlighted on our year end call. We are also actively deploying growth capital across a variety of initiatives that we expect will generate significant ROI for years to come.

Speaker Change: In the first quarter, we deployed $62 million of the incremental growth investments primarily related to recycling and R&D infrastructure for the full year 2024, we remain on track to deploy $250 million to $300 million into these investments as we previously guided.

Patrick Dovigi: For the full year 2024, we remain on track to deploy $250 to $300 million into these investments as we previously guided. The EPR landscape in our Canadian markets continues to evolve, and we remain confident that we will see upside to 80 to 100 million of incremental adjustability as we previously identified associated with these initiatives. As we said earlier, the contribution from these contracts is expected to start late this year, ramp up through 2025, and achieve our expected full contribution in fiscal 2026.

Speaker Change: The EPR landscape in our Canadian market continues to evolve and we remain confident that we will see upside to the 80% to $100 million of incremental adjusted EBITDA. We previously identified associated with these initiatives.

Speaker Change: As we said earlier the contribution from these contracts.

Speaker Change: Expected to start late this year ramp up through 2025 and achieve our expected full contribution in fiscal 2026.

Patrick Dovigi: On RNG, our first facility at the Arbor Hills landfill is continuing to ramp up its operations, generating cash flow in line with our expectations. We have two or three more facilities that we expect to come online by the end of the year. We remain confident that we will realize the $175 million of adjusted EBITDA previously disclosed once our portfolio of landfill gas energy facilities is fully operational in the coming year. In addition to organic growth initiatives, we have deployed approximately $500 million in six acquisitions since the beginning of this year. All these acquisitions were in solid waste within our existing geography.

Speaker Change: On RMG, our first facility the Arbor Hills landfill is continuing to ramp up its operations generating cash flow in line with our expectations. We have two or three more facilities that we'll expect to come online by the end of the year. We remain confident that we will realize the $175 million of adjusted EBITDA previously disclosed once our portfolio of land.

Speaker Change: <unk> is fully operational in the coming years.

Speaker Change: In addition to organic growth initiatives, we have deployed approximately $500 million into six acquisitions since the beginning of this year. All of these acquisitions were in solid waste within our existing geographies the largest of the six acquisitions. We discussed on our last earnings call as a vertically integrated asset in central Florida, one of the fastest growing markets in the U S.

Luke Pelosi: The largest of the six acquisitions we discussed in our last earnings call is a vertically integrated asset in Central Florida, one of the fastest growing markets in the U.S. This asset is highly complementary to our existing network, and we expect that it will act as a driver for significant organic growth for us in this market for years to come. Like most acquisitions of this caliber, the M&A process commenced over six months before closing, and the consummation of this transaction was fully anticipated when we provided our capital allocation framework in November of last year.

Speaker Change: This asset is highly complementary to our existing network and we expect that it will act as a driver for significant organic growth for us in this market for years to come like most acquisitions of his caliber the M&A process commenced over six months before closing and the consummation of this transaction was fully anticipated when we provided our capital allocation framework.

Speaker Change: In November of last year, while we continue to maintain a robust acquisition pipeline, we remain absolutely committed to the guidance for our total 2020 for growth investments and net leverage that we set out at the beginning of the year.

Luke Pelosi: While we continue to maintain a robust acquisition pipeline, we remain absolutely committed to the guidance for our total 2024 growth investment and net leverage that we set out at the beginning of the year. As we have consistently demonstrated, the predictable recurring nature of the revenues and cash flows generated by our business allows us to forecast the full year's results with a high degree of accuracy. Within a given year, weather-driven timing differences between the first and second quarters can impact comparability on a year-over-year basis, and therefore, we typically have waited until the first half of the year to give updated guidance for the year.

Speaker Change: As we have consistently demonstrated the predictable recurring nature of the revenues or cash flows generated by our business allow us to forecast our full year results with a high degree of accuracy.

Speaker Change: Within a given year weather driven timing differences between the first and second quarters can impact comparability on a year over year basis, and therefore, we typically have waited until the first half of the year to give updated guidance for the year. While we believe there could be some revenue pulled forward from the second quarter because of weather related impacts based on the quality of the margin performance.

Luke Pelosi: While we believe there could be some revenue pulled forward from the second quarter because of weather-related impacts, based on the quality of the margin performance in the first quarter, we are increasing our guidance for 2024 Adjusted EBITDA to $2.23 billion. We will provide a more fulsome guidance update when we report our second quarter results. I'll now pass the call to Luke, who will walk us through the quarter in more detail, and then I'll share some closing comments before we open it up for viewing.

Speaker Change: In the first quarter, we are increasing our guidance for 2024 adjusted EBITDA to $2 3 billion, we will provide a more fulsome guidance update when we report our second quarter results I will now pass the call to Luc who will walk us through the quarter in more detail and then I'll share some closing comments before we open it up for Q&A.

Luke Pelosi: Thanks Patrick. Our accompanying investor presentation provides supplemental analysis to summarize performance in the quarter in a consistent format to what we've previously provided. Revenue for the quarter of $1.8 billion was 6.5% higher than the prior year, excluding the impact of the solid waste divestiture. Stronger-than-anticipated pricing and volume were the primary drivers of this result, which was $25 million ahead of internal expectations. While the January cold weather in our southern markets negatively impacted volumes, the above-average temperatures later in the quarter in many of our northern U.S. and Canadian markets partially offset the January impact.

Luc: Thanks, Patrick our accompanying Investor presentation provides supplemental analysis summarized performance in the quarter in a consistent format to what we've previously provided.

Luc: Revenue for the quarter of $1 8 billion was six 5% higher than the prior year, excluding the impact of the solid waste divestitures stronger than anticipated pricing and volume were the primary drivers of this result that was $25 million ahead of internal expectations.

Luc: While the January cold weather in our southern markets negatively impacted volumes.

Luc: Above average temperatures later in the quarter and many of our northern U S and Canadian markets, partially offset the January impacts.

Luke Pelosi: As Patrick said, the strength of our first quarter pricing activities is highly encouraging for the achievement or exceeding of our pricing expectations for the year, with over 80% of our full year pricing impact already locked in based on the contracted nature of our business. Page 3 shows the bridge for solid waste adjusted EBITDA margins compared to the first quarter of 2023. As anticipated, the change in commodity and fuel prices from the prior year served as a margin tailwind, whereas the net contribution of M&A and divestitures was a 20 basis point margin headwind compared to the first quarter of 2023.

Luc: As Patrick said, the strength of our first quarter pricing activities as highly encouraging for the achievement or exceedance of our pricing expectations for the year with over 80% of our full year pricing impact already locked in based on the contracted nature of our business.

Luc: Page three shows the bridge for solid waste adjusted EBITDA margins compared to the first quarter of 2023.

Luc: As anticipated the change in commodity and fuel prices from the prior year served as a margin tailwind, whereas the net contribution of M&A and divestitures was a 20 basis point margin headwind versus the first quarter of 2023.

Luke Pelosi: Underlying solid waste margins expanded by 100 basis points, 50 basis points better than planned, a result that would have been even greater without the weather-related impact. The flow-through benefits of the outsized price-cost spread, our intentional volume-shedding initiatives, R&G contribution, and incremental operating leverage coming from improving employee turnover and asset utilization are exceeding expectations and reinforce our optimism and our ability to exceed the industry-leading organic margin expansion we included in our base guide for this year. Page four highlights the performance of our environmental services segment in the quarter.

Luc: Underlying solid waste margins expanded by 100 basis points 50 basis points better than plan. A result that would have been even greater without the weather related impacts.

Luc: The flow through benefits of the outsized price cost spread our intentional volume shedding initiatives RMG contribution and incremental operating leverage coming from improving employee turnover and asset utilization are exceeding expectations and reinforce our optimism in our ability to exceed the industry leading organic.

Luc: <unk> margin expansion, we included in our base guide for this year.

Luc: Page four highlights the performance of our environmental services segment in the quarter.

Luke Pelosi: To contextualize this year's performance, it is important to recall the prior year comparable periods saw an unseasonably high level of activity, resulting in 25 percent organic revenue growth in that quarter. We had called out this outsized performance in our Q1 2023 reporting. Normalizing the prior period for this outperformance, we saw over 10% top-line revenue growth in this segment. However, unusually cold weather in the south in January, as well as the imposition of earlier spring road weight restrictions because of warmer weather in our northern markets that are typically implemented in the second quarter, negatively impacted volumes.

Luc: To contextualize this year's performance. It is important to recall the prior year comparable periods on unseasonably high level of activity, resulting in 25% organic revenue growth in that quarter, we had called out this outsized performance and our Q1 2023 reporting.

Luc: Normalizing the prior period for this outperformance we saw over 10% topline revenue growth in this segment.

Luc: Unusually cold weather in the south in January as well as the imposition of earlier spring road weight restrictions because of warmer weather in our northern markets that are typically implemented in the second quarter negatively impacted volumes.

Luke Pelosi: The impacts on our southern markets alone impacted margins by over a hundred basis points. The rollover impact of the fire we had at one of our facilities in Lake Q4 was a 20 basis point drag on ES margin. The timing of event-driven work and the sale of used motor oil also resulted in reduced revenue versus the prior year.

Luc: The impact on our southern markets alone impacted margins by over 100 basis points.

Luc: The rollover impact of the fire, we had at one of our facilities in late Q4 was a 20 basis point drag on Es margins.

Luc: The timing of event driven work and the sale of used motor oil also resulted in reduced revenue versus the prior year.

Luke Pelosi: The fact that we are exceeding our margin expectations in the face of these headwinds serves to highlight the quality of the underlying portfolio and our overall growth strategy for this segment. Adjusted pre-cash flow for the quarter was $49 million, an increase of nearly $100 million over the prior year period and ahead of our internal expectations. The outperformance of adjusted EBITDA, a lower seasonal investment in working capital, and capital expenditures that were $25 million less than the plan all contributed to the significant outperformance versus expectation.

Luc: Fact that we are exceeding our margin expectations in the face of these headwinds serves to highlight the quality of the underlying portfolio and our overall growth strategy for this segment.

Luc: Adjusted free cash flow for the quarter was $49 million.

Luc: An increase of nearly $100 million.

Luc: Over the prior year period, and ahead of our internal expectations.

Luc: The outperformance of adjusted EBITDA, a lower seasonal investment in working capital and capital expenditures that were $25 million less than the plan all contributed to the significant outperformance versus expectations.

Luke Pelosi: We expect the working capital and CapEx variances to be timing differences and remain confident in our full-year expectations for both of these line items. Page 5 summarizes reported net leverage, which was 4.3 times on March 31st, reflecting the impact of normal course seasonality and the change in FX rates from the start to the end of the quarter. During the quarter, we received a credit rating upgrade from S&P and remain on positive credit watch from both the rating agencies, reflecting the material improvement in our credit quality and the expectation for further improvement in the near term.

Luc: We expect the working capital and Capex variances to be timing differences and remain confident in our full year expectations for both of these line items.

Luc: Page five summarizes reported net leverage which was four three times on March 31, reflecting the impact of normal course seasonality and the change in FX rates from the start to the end of the quarter.

Luc: During the quarter, we received a credit rating upgrade from S&P and remain on positive credit rock watch from both the rating agencies, reflecting the material proven in our credit quality and the expectation for further improvement in the near term as we've previously said, we anticipate material credit rating upgrades prior to the maturity of most of our.

Luke Pelosi: As we've previously said, we anticipate material credit rating upgrades prior to the maturity of most of our existing debt, providing an opportunity for near-term lower borrowing costs and improved free cash flow conversion. As Patrick said, we remain absolutely committed to our previously stated leverage targets.

Luc: Existing debt, providing an opportunity for near term lower borrowing costs and improved free cash flow conversion.

Luc: As Patrick said, we remain absolutely committed to our previously stated leverage targets and with the strength of the first quarter performance. We are confident in our ability to achieve these targets exiting 2024 with net leverage between $3 65 and $3 85.

Luke Pelosi: And with the strength of the first quarter performance, we are confident in our ability to achieve these targets, exiting 2024 with net leverage between 3.65 and 3.85. In terms of guidance, with the strength of this year's start, we're feeling highly confident in our ability to exceed our previously communicated targets. As Patrick said, the strength of the first quarter's margin performance allows us the confidence to increase our adjusted EBITDA guidance to $2.23 billion.

Luc: In terms of guidance with the strength of this year's start we're feeling highly confident in our ability to exceed our previously communicated targets as Patrick said the strength of the first quarter's margin performance allows us the confidence to increase our adjusted EBITDA guidance to 223 billion. However, as Patrick noted and we've consistently said that can offer.

Luke Pelosi: However, as Patrick noted and we've consistently said, there can often be timing shifts between the first and second quarters, so we will maintain our normal course practice of waiting until July before we formally update our full set of guidance for the year. Specifically related to the second quarter, we note the following. Consolidated revenue is expected to be approximately $2.055 billion. Solid Waste revenues are expected to be $1.56 billion to $1.57 billion, driven by pricing just over 6% and volume that's anticipated to improve approximately 50 basis points sequentially from the first quarter, or approximately negative 2.5%.

Luc: The timing shifts between the first and second quarters. So we will maintain our normal course practice of waiting until July before we formally update our full set of guidance for the year.

Speaker Change: Specifically related to the second quarter. We note. The following consolidated revenue is expected to be approximately 2.0, $5 5 billion.

Speaker Change: Solid waste revenues are expected to be one $5 6 billion to $1 57 billion driven by pricing just over 6% and volume is anticipated to improve proximately 50 basis points sequentially from the first quarter or approximately negative two 5% for.

Luke Pelosi: For environmental services, we expect to realize between $475 and $500 million of revenue, representing another quarter of 10% growth over the prior year. The wider-than-typical revenue ranges within the segments are to account for the potential weather-driven pull-forward of revenue into the first quarter from Q2. In terms of margin, we expect consolidated adjusted EBITDA margins to accelerate over 300 basis points sequentially over the first quarter to just under 28.5%, or nearly 70 basis points over Q2 2023.

Speaker Change: For environmental services, we expect to realize between 475% and $500 million of revenue representing another quarter of 10% growth over the prior year.

Speaker Change: The wider than typical revenue rages that within the segments or to account for the potential weather driven pull forward of revenue into the first quarter from Q2.

Speaker Change: In terms of margin, we expect consolidated adjusted EBITDA margins to accelerate over 300 basis points sequentially over the first quarter to just under 28, 5% or nearly 70 basis points over Q2 2023 at.

Luke Pelosi: At the segment level, this assumes solid waste margins of 32.25% to 32.5%, ES margins of almost flat with the prior year, around 29.6%, and corporate margins of negative 3.2%. The Guide then contemplates further margin expansion in the third quarter before stepping down in the fourth quarter as per the typical cadence of the business. Putting that together yields between $585 and $590 million of adjusted EBITDA for the second quarter. Additionally, we expect $220 to $230 million of net capital expenditures, $105 million of cash interest, an investment in working capital between $65 and $75 million, and other operating items of approximately $25 million for a Q2 adjusted free cash flow of approximately $160 to $170 million.

Speaker Change: At the segment level. This assumes solid waste margins of 32, and a quarter to 32, 5% es margins of almost flat with the prior year round 29, 6% and corporate margins of negative three 2% the.

Speaker Change: The guidance contemplates further margin expansion in the third quarter before stepping down in the fourth quarter as per the typical cadence of the business.

Speaker Change: Putting that together yields between 585 and $590 million of adjusted EBITDA for the second quarter.

Speaker Change: Additionally, we expect $220 million to $230 million of net capital expenditures of $105 million of cash interest and investment in working capital between 65 and $75 million and other operating items of approximately $25 million for Q2, adjusted free cash flow of approximately 160 to one.

Speaker Change: Third $70 million.

Luke Pelosi: In terms of net leverage, we expect a modest step up in Q2 as a result of seasonality and completed M&A, and then to step down in Q3 and Q4. Adjusted net income is expected to be approximately $100 million for the second quarter. I will now pass the call back to Patrick, who will provide some closing comments before Q&A.

Speaker Change: In terms of net leverage we expect a modest step up in Q2 as a result of seasonality and completed M&A and then to Ratably stepped down in Q3 and Q4.

Speaker Change: Adjusted net income is expected to be approximately $100 million for the second quarter.

Speaker Change: I will now pass the call back to Patrick who will provide some closing comments before Q&A.

Patrick Dovigi: Thanks, Luke. The drive of our employees to make our business better every day is evident in what we have achieved this quarter and the opportunities we are creating for steadily improving performance in the near and longer term. I want to thank each and every one of them for their dedicated contribution to Team Green. As I've said on many of our calls, our focus has always been on delivering what we say we're going to do.

Patrick: Thanks, Luke the drive of our employees to make our business better every day as evident in what we have achieved this quarter and the opportunities we are creating for steadily improving performance in the near and longer term.

Patrick: Want to thank each and every one of them for their dedicated.

Patrick: Contribution to team Dream.

Patrick: As I've said on many of our calls our focus has always been on delivering what we say we're going to do this quarter is no exception our.

Patrick Dovigi: This quarter is no exception. Our results for the quarter continue to demonstrate the underlying quality of our asset base and the impact of the effective and consistent implementation of our key value creation strategies. At the same time, the discipline-targeted growth investments we are making today are setting us up to deliver strong organic growth for many years to come. We have provided comprehensive, easy-to-follow guidance for the year, and we started off 2024 delivering on exactly what we said we were going to do.

Patrick: Our results for the.

Patrick: Quarter continue to demonstrate the underlying quality of our asset base and the impact of the effective and consistent implementation of our key value creation strategies at the same time the disciplined targeted growth investments. We are making today are setting us up to deliver strong organic growth for many years to come.

Patrick: We have provided comprehensive easy to follow guidance for the year and we started off 2024 delivering on exactly what we said we were going to do we intend to continue to do more of the same in the coming quarters I will now turn the call over to the operator to open the line for Q&A.

Patrick Dovigi: We intend to continue to do more of the same in the coming quarters. I will now turn the call over to the operator to open the line for Q&A. Thank you. Ladies and gentlemen, if you'd like to ask a question, please press star followed by 1 on the telephone keypad. If you change your mind, please press...

Operator: Thank you. Ladies and gentlemen, if you'd like to ask a question, please press star followed by 1 on the headphone keypad now. If you change your mind, please press star followed by 2 to show the question. When preparing to ask your question, please ensure your phone is muted locally.

Speaker Change: Thank you, ladies and gentlemen, if you'd like to ask a question. Please press star one.

Speaker Change: Yeah.

Speaker Change: You changed your mind, Keith pressed on flu.

Speaker Change: Okay two questions.

Speaker Change: We're preparing to ask your question. Please ensure your mute locally.

Stephanie Lynn Benjamin Moore: Our first question comes from Stephanie Moore from Jeffries. Stephanie, your line is now open. Hi, good morning. Thank you. Good morning. Um, you know, to start, could you give us an update on this EPR?

Speaker Change: With southwest question, Stephanie <unk> from Jefferies Stephanie.

Speaker Change: <unk>.

Stephanie: Hi, good morning, Thank you.

Stephanie: Good morning.

Speaker Change: You don't want to start.

Stephanie: Update on EPR.

Stephanie: Patrick you mentioned upside to the $80 million to $100 million of EBITDA, where are you seeing the additional opportunity.

Speaker Change: Timing thanks.

Patrick Dovigi: Yeah, so I think, you know, as we discussed, the 80 to 100 million of incremental EBITDA is, you know, in the bag today, signed, contracted, etc. As we said, there were, you know, there were a few large, particularly hauling and transfer contracts that were out for bid sort of late last year. We have been notified that we have been selected as a proverb vendor for, you know, the entire city of Toronto on the recycling side.

Patrick: Yes, so I think.

Patrick: As we discussed the $80 million to $100 million of incremental EBITDA is in the bag today signed contract and et cetera.

Speaker Change: As we said there was there.

Speaker Change: There is a few large.

Speaker Change: Particularly hauling and transfer contracts that were all for bids or late last year. We have been notified that we have been selected as a preferred vendor.

Speaker Change: For the entire city and Toronto on the recycling side, it's not Don as of yet but.

Patrick Dovigi: It's not done as of yet, but, you know, we are in contract negotiations to finalize that and hope to have a very good update for you on our 2-2 call. As well, there are a multitude of other residential contracts.

Speaker Change: We are in contract negotiations to finalize that and hope to have a very good update for you on our Q2 call.

Speaker Change: As well there is a multitude of other sort of residential contracts.

Speaker Change: Mostly the ones. We're focused on is why don't we actually already currently do we.

Speaker Change: We expect that those will be awarded over the next sort of three to four months. So again.

Speaker Change: Pretty good opportunity and upside from those and as we look at the other provinces.

Patrick Dovigi: Mostly, the ones we're focused on are ones that we actually already have, and we expect that those will be awarded over the next sort of three to four months. So again, pretty good opportunity and upside from those, and as we look at the other provinces, you know, Quebec and the Maritimes continue to release incremental bids, and legislation continues to go through in Western Canada. But I think, you know, on the 2-2 call, we'll give you a sort of very good update on where we stand with EPR.

Speaker Change: Quebec, and the Maritimes continued to release incremental beds in.

Speaker Change: Legislation continues to go through in Western Canada, but I think on the Q2 call. We'll give you sort of very good update on where we stand with EPR, but.

Patrick Dovigi: But, you know, very good news on our side that we were notified of being the preferred vendor for contract negotiations for the entire city of Toronto. Got it. And that's helpful. And this is a follow-up.

Speaker Change: Very good news on our side that.

Speaker Change: Notified of being the preferred vendor for contract negotiations for the entire city Toronto.

Speaker Change: Got it that's helpful.

Speaker Change: Maybe Luke.

Speaker Change: Cash flow was much better than expected for the quarter and it looks like you are seeing some improvements in working capital management, where are you in that process and kind of what are your expectations for working capital cadence for the remainder of the year.

Luke Pelosi: Yeah, thanks, Stephanie. It's a great question and certainly an area where we do see continued opportunity. I mean, for context, you got to remember working capital. With the levels of M&A we've done historically, sometimes you can have impacts of that that, you know, manifest in the working capital line and therefore harder to sort of smooth that out over the four quarters. As we now have the stability of the base business, it allows for more sort of regular cadence.

Luke: Yes, Thanks, Stephanie it's a great question and certainly an area, where we do see continued opportunity for context, you got to remember I mean, working capital with the levels of M&A, we've done historically.

Luke: Sometimes you've got impacts of that that manifests in the working capital line, and therefore harder to sort of smooth that out over the four quarters. As we now have the stability of the base business. It allows for a more sort of regular cadence so with the seasonality profile of our business primarily in the northern markets, we're going to continue to see investments in the first.

Luke Pelosi: So with the seasonality profile of our business, primarily the northern markets, we're going to continue to see investments in the first half that then reverse in the second half. However, as you can see in this quarter, the magnitude of the swing is becoming more and more muted. So it's going to allow for much more predictable and stable pre-cash flow generation on sort of a quarter over quarter basis, and you're seeing that in this quarter's results. So we do think this year's cadence will be similar. In Q2, we'll see another investment, albeit at a lower level than historically. And then the reversals that we've customarily realized in Q3 and Q4 are expected.

Luke: Have they been reversed in the second half. However, as you can see in this quarter the magnitude of the swing is becoming more and more muted. So it is going to allow for much more predictable and stable free cash flow generation and sort of quarter over quarter basis.

Luke: And youre seeing that in this quarter's results. So we do think this year's cadence will be similar Q2, we'll see another investment, albeit at a lower level than historically and then the reversals that we customarily realized in Q3 and Q4 are expected as well.

Luke: Well.

Speaker Change: Great. Thanks, so much.

Speaker Change: Yes.

Speaker Change: Thank you.

Calvin Chow: Our next question comes from Calvin Chow from CIBC Wood Gundy. Calvin, your line is now open.

Speaker Change: With our next question comes from the Kelvin Chu CIBC Wood Gundy Kelvin Your line is now open.

Patrick Dovigi: So it looks like you spent just over $111 million in Q1, which doesn't look like it includes the Angelo acquisition, which I think on the last call you suggested a sizable acquisition would be about half the expected spend this year. So it looks like about two-thirds, if my math is correct, about two-thirds of the way through the $600 to $650 million of M&A spend this year. Just wondering, one, is my math correct, and then two, just the visibility on spending the rest of that capital. Is that something we should expect in the second quarter here, or does that kind of smooth out through the rest of the year, just given how active you've been through the first four months of this year?

Kevin Chiang: Thanks for taking my questions.

Kevin Chiang: Maybe just on the M&A spend this year I just want to make sure.

Kevin Chiang: I have this correctly so it looks like you've spent just.

Kevin Chiang: Just over $111 million in.

Kevin Chiang: In Q1, which doesn't look like it includes Angelo acquisition, which I think on the last call you suggested.

Kevin Chiang: Sizable acquisition would it be about hospital.

Luke: It's been this year so it looks like about two thirds. If my math is correct about two thirds of the way through.

Luke: 606 under the $50 million.

Luke: M&A spend this year just wondering.

Luke: Is my math correct and then two just the visibility on spending the rest.

Luke: Of that capital.

Luke: Is that something we should expect.

Luke: In the second quarter here or does that kind of smoothed out through the rest of the year just given how activity.

Luke: The first four months of this year.

Luke Pelosi: Yeah, so I think we've spent year-to-date about $500 million. So, at least, you know, somewhere between $100 and $150 spent for the sort of rest of the year. I know, I think you'll see some of that trickle in later in Q2 and spread out through Q3 and early Q4. But, you know, I wouldn't expect it all to sort of be spent by the end of Q2. It's going to trickle down into the next couple of quarters. Yeah, and Kevin...

Speaker Change: Yes, so I think we spend year to date about $500 million. So that leaves seven between 100 150 spend for the sort of rest of the year.

Speaker Change: Think youll see some of that trickle in in later Q2 and spread out through Q3 and early Q4.

Speaker Change: But I wouldn't expect it all to sort of be spent by the end of Q2, but it's going to trickle into the next couple of quarters, Yes, and Kevin in terms of the financial statements you have it right Q1 soft for acquisitions close, but Angelo is the largest in another we're closed actually at the beginning of April so it's in that year to date number that Patrick said, but within the quarter of <unk>.

Kevin: Yeah, and Kevin, in terms of the financial statements, you have it right. Q1 saw four acquisitions closed, but Angelo's, the largest, and another were closed actually at the beginning of April. So it's in that year-to-date number that Patrick said, but within the quarter proper, you had the lower spend on just those four smaller acquisitions.

Kevin Chiang: Or you had the lower spend on just those four smaller acquisitions.

Kevin: That's that's helpful and maybe just a second one for me, and I appreciate you providing a more fulsome update on the full year guide when you report Q2, and you talked about some of the you know wanting to see some of the impact, maybe on volumes, shifting between Q1 and Q2. If I look at it simplistically, you assume the level of seasonality in Q1 as in your previous guidance.

Speaker Change: That's helpful.

Speaker Change: And maybe just.

Speaker Change: Second one for me and I. Appreciate you will provide a more fulsome update on the full year guide.

Speaker Change: When you report Q2.

Speaker Change: Talked about some above one can see some of the impact maybe on volumes shifted between Q1 and the second quarter here, but if I look at it.

Speaker Change: Particularly silver.

Speaker Change: Similar level of seasonality in Q1.

Speaker Change: Previous guidance.

Kevin: If I apply that seasonality to what you actually printed in Q1, plus adding in some of this M&A, which you haven't included in your guidance, plus maybe a more favorable commodity price environment than you had assumed, because you're pretty conservative, it feels like it's a pretty sizable increase versus where you're sitting now.

Speaker Change: If I apply that.

Speaker Change: Seasonality to what Josh principally in Q1.

Speaker Change: Plus we are adding in some of this M&A.

Speaker Change: Which you haven't included in our guidance.

Speaker Change: For a more favorable commodity price environment.

Speaker Change: We had assumed because we're pretty conservative.

Speaker Change: And so I think it's a pretty sizable increase versus what you're seeing now.

Patrick Dovigi: I'm sure you will confirm this, but, you know, north of 2.3 billion of these, it doesn't feel out of the realm of possibility when I look at the put-same-takes. Maybe, broad strokes, if there's anything you'd comment on that in terms of maybe when that might be wrong. Well, you know, we might be right.

Speaker Change: I'm sure you will confirm this but.

Speaker Change: North of $2 3 billion of EBITDA doesn't flow out of the realm of possibility when I look at the puts and takes will be broad strokes of anything you can comment on that in terms of maybe.

Speaker Change: The law.

Speaker Change: Well what.

Speaker Change: Where we might be right.

Patrick Dovigi: Without giving you sort of formally updated guidance, you're heading in the right direction, I would say. But, you know, we're going to come out at the end of Q2, and we'll give updated guidance for the full year, including sort of the contribution from M&A and any other things that sort of pop up along the way, particularly, you know, as we get through the first half of the year and get a real trajectory of sort of volumes and where pricing is going to lie.

Speaker Change: Well.

Speaker Change: Giving certainly formally updated guidance youre heading in the.

Speaker Change: Right direction, I would say, but.

Speaker Change: We're going to come out at the end of Q2, and we will give updated guidance for the full year, including sort of the contribution from M&A and any other things to sort of pop up along the way, particularly as we get through the first half of the year and get a real trajectory of sort of volumes and where pricing is going to lie, but yes I.

Kevin: But... I think, Kevin, you're on the right path. I appreciate you.

Speaker Change: I think Kevin you.

Kevin Chiang: Youre on the right path.

Operator: I appreciate you taking the time to answer that question. Good results there. Thank you very much.

Kevin Chiang: I appreciate you.

Kevin Chiang: Taking the time to answer that question.

Speaker Change: Good results. So thank you very much.

Kevin Chiang: Thanks, Kevin.

Speaker Change: Thank you.

Sabahat Khan: Our next question comes from Sabahat Khan from RBC Capital. Your line is now open.

Speaker Change: We found next question.

RBC capital: RBC capital your line is now open.

Patrick Dovigi: Great, thanks, and good morning. You know, I think you noted in the prepared remarks that labor turnover is trending lower, and some of the other costs are trending lower. Improving EBITDA margins seem to be a bit of a trend, as we've seen this reporting cycle. If you can maybe give a bit more detail on, you know, how much the labor turnover has improved, how you expect that to trend through maybe the rest of the year, and maybe a bit more color on the repair and maintenance costs, et cetera, as well. Thanks.

RBC capital: Great Thanks, and good morning.

RBC capital: I think you noted in the in the prepared remarks that labor turnover is trending lower than some of the other cost trending Laura.

RBC capital: Improving EBITDA margins seem to be a bit of a trend. We've seen this reporting cycle. If you can maybe give a bit more detail on.

RBC capital: How much of the labor turnover has improved how you expect that to trend of trying to the maybe the rest of the year and maybe a bit more color on the repair and maintenance costs et cetera, as well. Thanks.

Luke Pelosi: Yeah, so I'll give it to Luke on a couple of others, but on the labor front. You know, basically, like we said, at the peak of COVID, the jobs market was really tight. You know, labor voluntary turnover, particularly in the residential book of business, was trending sort of closer to 30%. That dropped to sort of the mid 20s last year and has trended to the low 20s this year.

Speaker Change: Yes, so I'll give it a look on a couple of others, but on the labor front.

Speaker Change: Basically as we said in sort of the peak of Covid.

Speaker Change: <unk> market was really tight.

Speaker Change: Labour voluntary turnover, particularly in the residential book of business was trending sort of closer to 30% that dropped to sort of mid twenties last year and has trended to low twenty's this year.

Luke Pelosi: You know, pre-COVID, we were in the high teens range. So, you know, we're getting significantly closer, still some room to go, but, you know, it's certainly heading in the right direction, and, you know, you're seeing that flow through the P&L, and you're definitely seeing that on the margin. Yeah, and then.

Speaker Change: Pre COVID-19, we were in the high teens range.

Speaker Change: Getting significantly closer still some room to go but it's certainly heading in the right direction and youre seeing that flow through the P&L and you're definitely seeing that on the margin front, yes, and then Saba Luc speaking on R&M I think it's a similar story in trend line that things are moving in the right direction.

Luke Pelosi: Yeah, and then Sabah. It's Luke speaking on R&M. I think it's a similar story and trend line that things are moving in the right direction. I mean, if you look for the quarter, R&M was about 10.3% of revenue. Now that was flat with Q4, but it was achieved on the seasonally lower Q1 revenues, right? So if you think of how that then rolls forward with the revenue upticks and the improved efficiency in R&M, we see a path to that going back into the sort of single digits as you get into the middle of the year and, you know, probably ending the year in the mid to higher nines level.

Saba Luc: I mean, if you look for the quarter R&M was about 10, 3% of revenue now that was flat with Q4, but being achieved on the seasonally lower Q1 revenues right and so if you think of how that then rolls forward with the revenue upticks in the improved efficiency in R&M, we see a path to that going back into the sort of single digit and as you get into the middle of the year end.

Speaker Change: Probably ending the year.

Luke Pelosi: So I think there's still some conservatism in that number, and the improvements that we're seeing, you know, across the business should drive incremental opportunity there. So we're feeling really good with how that trend line is moving.

Speaker Change: In the mid to higher <unk> levels. So I think there's still some conservatism in that.

Speaker Change: Number and the improvements that we're seeing across the business should drive incremental opportunity. There. So we're feeling we're feeling really good with how that trend line is moving.

Patrick Dovigi: Okay, great. And then maybe I can tease out Patrick's comments around that Toronto recycling contract. I know you said you're still in contract negotiations, but any big picture parameters around kind of the scale, directional margins for this business versus a base business under the PR regime, just anything you can share, even at a high level, to give us perspective on what this could mean or what it could look like. Thanks.

Speaker Change: Okay, Great and then maybe if I can tease out on Patrick's comments around that Toronto recycling contract I know you said, you're still in contract negotiations, but any big picture parameters around kind of the scale directional margins for this business versus the base business under the <unk> regime.

Speaker Change: Anything you can share even at a high level to give us perspective on what this could mean or what it could look like.

Patrick Dovigi: Yeah, I mean, you know, it'll be, it'll be, you remember, keep in mind, we do 60% of the work already today. 40% of the work is being done by others, mostly city workers. You know, the contract value will be in excess of 50 million a year. I think that's sort of margin, accretive to what our blended margin is today for solid waste.

Speaker Change: Yes.

Speaker Change: It'll be it'll be around keep in mind, we do 60% of the work already today.

Speaker Change: 40% of the work is being done by by others.

Speaker Change: Mostly city workers.

Speaker Change: The contract value will be in excess of $50 million a year.

Speaker Change: <unk>.

Speaker Change: I think thats sort of margins.

Speaker Change: Accretive to what our blended margin is today for solidly.

Patrick Dovigi: That's $50 million to EBITDA.

Speaker Change: That's $50 million to EBITDA.

Patrick Dovigi: I don't know, 50 million in revenue. In excess of $50 million.

Speaker Change: There are $50 million of revenue.

Speaker Change: In excess of $50 million of revenue.

Patrick Dovigi: It's a 10-year contract, so it's going to be over half a billion dollars a year, or half a billion dollars in aggregate over 10 years. Thank you.

Speaker Change: Okay.

Speaker Change: Great. Thanks, very much what Shane Oliver it's a 10.

Speaker Change: 10 year contract so.

Speaker Change: It's going to be over half a billion dollars a year.

Speaker Change: There are half a billion dollars in aggregate.

Over 10 year. Thank you.

Speaker Change: Thank you.

Jerry David Revich: Our next question comes from Jerry Revich from Goldman Sachs. Jerry, your line is now open.

Speaker Change: We have our next question can be rampage Goldman Sachs. Jamie Your line is now open.

Operator: Yes, hi. Good morning, everyone.

Jamie: Yes, hi, good morning, everyone.

Jerry David Revich: I'm wondering if you could just talk about the acquisitions that you've completed year to date since they are all within your footprint can you just give us a flavor for it for the extensive route consolidation opportunities how many more stops per truck.

Jamie: Expect post integration, just just give us a feel for how accretive these opportunities are.

Speaker Change: The existing rotation in your markets, if you don't mind.

Patrick Dovigi: I'm wondering if you could just talk about the acquisitions that you've completed year-to-date, since they're all within your footprint. Can you just give us a flavor for the extent of the route consolidation opportunities? You know, how many more stops per truck do you expect post-integration? Just give us a feel for how accretive these opportunities are versus the existing route space in your markets, if you don't mind

Jerry David Revich: Yeah. Thanks, Jerry.

Speaker Change: <unk>.

Jerry David Revich: Key component of our whole sort of M&A strategy as you're doing these densify tuck ins getting the efficiency that you're speaking to unfortunately, the small population.

Luke Pelosi: Yeah, thanks, Jerry. It's, you know, a key component of our whole sort of M&A strategy as you're doing these densifying tokens, getting the efficiency that you're speaking to, unfortunately, the small population of, you know, there's six transactions, one larger one, Angelo's, you got five little small tokens, you know, it's going to be widely varied by market and by region what that opportunity But you're thinking about it the exact right way, that from buying a business today that's operating eight or nine trucks in a market where we operate significantly more than that, there's probably an opportunity to park one, two, or three trucks depending on the sort of density.

Luke Pelosi: Fixed transactions one larger one Angela you got five little small tuck in it's going to be widely varied by market and by region, what that opportunity sort of looks like but you're thinking about it the exact right way that from buying a business today, that's operating eight or nine trucks in a market, where we are operating significantly more than that.

Luke Pelosi: There's probably an opportunity to park 123 trucks, depending on the sort of density. So what we've historically said is on the smaller acquisitions that may be on the base of it. If you are paying somewhere between sort of six to eight times for a small one on a pre synergy basis post the synergies you might be able to take anywhere from two to three turns of <unk>.

Luke Pelosi: So what we've historically said is on these smaller acquisitions that may be on the face of it, if you're paying somewhere between sort of six to eight times for a small one on a pre-synergy basis, post the synergies, you might be able to take anywhere from two to three turns of cost out of that business by virtue of those cost savings from the route consolidation, facility consolidation, headcount consolidation, etc. So it does vary for these specific deals. I'd say they're no different than typical. So you're probably going to be in that range. But that's how we typically think about the M&A on the token nature.

Luke Pelosi: <unk> out of that business by virtue of those cost savings from the route consolidation facility consolidation headcount consolidation et cetera. So it does vary for these specific deals I'd say, they're no different than typical so.

Luke Pelosi: Are we going to be in that range, but that's how we typically think about the M&A on the tuck in nature.

Patrick Dovigi: And in terms of the additional acquisitions that you have in the pipeline for the balance of the year, it sounds like it's the same opportunity. We're going to have an outsized benefit from consolidations. It's all going to be within the existing footprint. So the M&A pipeline, it sounds like, is going to come with higher synergies. And, you know, obviously, in the past, it's been a combination of these types of acquisitions and building out the footprint. Correct me if I'm wrong, but it sounds like we're going to see outsized synergy opportunities with the pipeline that you have planned.

Speaker Change: And in terms of the additional acquisitions that you have in the pipeline for the balance of the year. It sounds like it's the same opportunities where we're going to have an outsized benefit from consol.

Patrick Dovigi: Consolidations, which is all going to be within the existing footprint.

Patrick Dovigi: M&A pipeline it sounds like it's going to come with higher <unk>.

Patrick Dovigi: Synergies.

Patrick Dovigi: Obviously in the past it's been a combination of these type of acquisitions.

Patrick Dovigi: Building out the footprint.

Patrick Dovigi: Correct me, if I'm wrong, but it sounds like you were going to see outside synergy opportunities with the pipeline that you plan.

Luke Pelosi: Yeah, and they're all in the existing footprint. Again, going back to opportunities, like Luke said, to consolidate sort of SG&A costs, consolidate, you know, hauling facilities, move those trucks onto our existing routes, and, you know, really focus around markets where we have underutilized post-collection assets, whether that's recycling facilities, transfer stations, landfills, to drive incremental volumes for those facilities that we're not getting, which is going to just, you know, yield exceptional ROI And Jerry, just in terms of the

Speaker Change: Yes, they are all in the existing footprint again going back to opportunities like Luke said, the consolidated sort of SG&A costs consolidate hauling facilities move those trucks onto our existing roads and really focused around markets, where we have underutilized post collection assets, whether that's recycling facilities.

Luke Pelosi: <unk> landfills to drive incremental volumes for those facilities that were not getting which is going to.

Luke Pelosi: Yield exceptional sort of ROIC on those investments that we're making and Jerry just in terms of the specific modeling, we typically think and see that you're initially these businesses are getting incorporated at margin decrease of levels by just the normal course sort of pre synergies and then it's with over those first sort of six to nine to 12 months.

Luke Pelosi: And Jerry, just in terms of the specific modeling, we typically think and see that initially, these businesses are getting incorporated at margin decretive levels, right, just the normal course sort of pre-synergies. And then it's over those first sort of six, nine to 12 months, depending on the market and the business, where you then take them up to the accretive margins for the reasons you articulated.

Luke Pelosi: Depending on the on the market and the business, where you then take them up to the accretive margins for the reasons you articulated.

Patrick Dovigi: Hey, can I ask you on a separate topic? You know, landfill gas heading into the election. I'm wondering, are you folks thinking about locking in any of the gas that you have coming online on long-term contracts? Or are you happy to bring it online with the written market structures? Any updated thoughts on what the voluntary market looks like as well, if you wouldn't mind?

Speaker Change: Hey can I ask you on a separate topic.

Luke Pelosi: Landfill gas.

Luke Pelosi: Heading into the election I'm wondering as you folks think.

Patrick Dovigi: About locking in any of the gas that you have coming online on long term contracts or.

Patrick Dovigi: Are you happy to.

Patrick Dovigi: Bringing online.

Patrick Dovigi: With the wind market structures any updated thoughts on.

Patrick Dovigi: What the voluntary market looks like as well.

Patrick Dovigi: Online.

Patrick Dovigi: Yeah, I mean, things keep continuing to trend in the right direction, you know, from our perspective, we're still selling into the transportation market today, particularly our partners at BP and Opal continue to see that as the best way to maximize value today, although we are seeing voluntary market prices continue to trend up to the point now where they're exceeding the mid-20s per MBTU and heading closer to $30 per MBTU. So I think you will see when some of our facilities come online; we're going to start looking to enter into those, you know, longer-term contracts for a portion of the gas.

Patrick Dovigi: Yes.

Speaker Change: Thanks Keith.

Patrick Dovigi: Continuing to trend in the right direction.

Patrick Dovigi: From our perspective, we're still selling into the transportation market today, particularly our partners at BP and Opal continuing to see that the best way to maximize value today although.

Patrick Dovigi: We are seeing the voluntary market prices continue to trend up to the point now where theyre exceeding mid Twenty's brand <unk> and heading closer to $30 per <unk>. So I think you won't see that some of our facilities come online we're going to start looking to enter into those.

Patrick Dovigi: Longer term contracts for a portion of the gas.

Jerry David Revich: I appreciate the update. Thank you.

Speaker Change: Okay I appreciate that thank you.

Speaker Change: Thanks Jerry.

Speaker Change: Thank you.

Michael Edward Hoffman: Our next question comes from Michael Hoffman from Staples. Michael, your line is now open.

Jerry David Revich: And our next question comes from Mike.

Speaker Change: <unk> stable Michael Nice now open.

Operator: Thank you very much. Good morning, Patrick.

Michael Edward Hoffman: Thank you very much.

Patrick Dovigi: Good morning, Patrick, and Luke. Just so maybe we can prevent everybody from getting their numbers too high. If you spent $500 million, you probably bought between $160 and $170 million of revenues at 25% margins. You've got to layer it in for, you know, eight or nine months, and then you walk it up into 2025. But that's the ramp-up, just so we don't get ahead of ourselves.

Michael Edward Hoffman: Patrick Luke.

Michael Edward Hoffman: So morning would be weak for everybody.

Michael Edward Hoffman: Your numbers too high.

Patrick Dovigi: Did you spent $500 million you'd probably bought between $160 million to $170 million of revenues at 25% margins you got a layered in for.

Patrick Dovigi: Eight or nine months.

Patrick Dovigi: And then you walk them up into 2025, but that's the work stoppages.

Patrick Dovigi: Don't get ahead of ourselves.

Luke Pelosi: Well, before we start, Michael, I want to first say thank you to you because I know this is going to be, you know, your last call with us. And I think you've done this industry a great service for a long number of years, and you've certainly been a very big help to watch as a company, particularly as we have navigated going public over the last, you know, a number of years.

Speaker Change: Well before we start Michael I wanted to first I want to say thank you to you because I know all of this is going to be your last call with us and I think you've got in this industry.

Luke Pelosi: A great service for a long number of years and you've certainly been.

Luke Pelosi: Very big Health to watch the company, particularly as we navigated going public over block.

Luke Pelosi: So I wanted to say thank you, not only from GFL but from the rest of the industry for, you know, everything you've done for the industry. Because, you know, you've been a very big champion of the industry for, you know, each and every one of us as companies. And I think we owe you a big thank you for all you've done for the industry over the last number of years. And with that, it turns over, and we can walk you through it. Mike, I'm going to walk you through it.

Luke Pelosi: Yes.

Luke Pelosi: A number of years. So I wanted to say, thank you not only from <unk>, but for the rest of the industry for everything you've done for the industry because.

Luke Pelosi: <unk> been a very big champion of the industry.

Mike: Each and every one of us those companies and I think we'd all a big thank you for all you've done for the industry over the last number of years.

Mike: And with that I'll turn it over to move it can walk you through.

Luke Pelosi: Michael, I echo everything that Patrick just said. So thank you and wishing you all the best of luck in your future endeavors, but I look forward to catching up next week as well.

Speaker Change: Michael I Echo everything that Patrick just said so thank you and wishing you all the best of luck in your future endeavors, but look forward to catching up next week as well on the specific M&A, what I would say Michael is while the math you suggested would be normal in a typical <unk> year. This year with Angelos, it's a little bit skewed because a disproportion amount of dollars go into one.

Michael Edward Hoffman: On the specific M&A, what I'd say, Michael, while the math you suggested would be normal in a typical GFL year, this year with Angelos, it's a little bit sort of skewed because of the disproportionate amount of dollars going to one large vertically integrated asset. So what we said is that for the 500, we actually got $100 million in revenue. Now, the margin profile, because so much of it is coming out of a large vertically integrated company, is much greater than typical.

Michael Edward Hoffman: Large vertically integrated asset so what we said is for the 500, we actually got $100 million.

Michael Edward Hoffman: Of revenue now the margin profile because so much of it is coming out of a large vertically integrated is much greater than typical and so that's closer to a 40% number.

Michael Edward Hoffman: And so that's closer to a 40% number. And with that, though, the basis of what the math you're doing is absolutely right. So if you bought, call it, $40 million of EBITDA, and you got that sort of three-quarters of the way through the year, the contribution for the year would be in that sort of $30 kind of range.

Michael Edward Hoffman: And with that though.

Michael Edward Hoffman: Basis of what the math, you're doing is absolutely right. So if you bought call it $40 million of EBITDA and you've got that sort of three quarters of the way through the year. The contribution in the year would be in that sort of 30 kind of range.

Patrick Dovigi: And that is the building block as it relates to M&A. And then, incremental M&A will have an incremental contribution. And then the other points Kevin was highlighting, commodity and other tailwinds are real, but as we all know, there will be headwinds. So we can't only count the good guys. But you're absolutely right. It's more of 2025 that you'll get the full year benefit of all of that M&A spend plus.

Michael Edward Hoffman: And that is the building block as it relates to M&A and then incremental M&A, we'll have incremental contribution and then other points, Kevin was highlighting a commodity and other <unk> are real but as we all know there will be headwinds. So we can only count the good guys, but youre absolutely right. It's more of a 2025.

Patrick Dovigi: That youll get the full year benefit of all of that M&A spend plus the synergies.

Michael Edward Hoffman: Okay, so Juan, thank you very much for those kind comments. It was unexpected and very kind of you. Thank you.

Speaker Change: Okay. So.

Speaker Change: One thank you very much for those comments.

Patrick Dovigi: An unexpected and Greg kind of you. Thank.

Speaker Change: Thank you.

Luke Pelosi: The following up, working capital, we should still presume it's a good use because you're still growing the company. It's just going to be less of a use than it has been because you're getting better at managing it. Is that the right way to think?

Speaker Change: Following up working capital, we should still presume it to use because you're still growing the company is just going to be a less of a use than it has been getting better managing is that the right way to think.

Patrick Dovigi: I think that's right. But you've got to remember, Michael, like the volumetric shedding that's been done of some of what we call bad revenue. Sometimes bad revenue is coming from bad customers. Right, and so around the edges, that helps. And then just the broader improvement; it's been hard to optimize the ship as you were growing at the rate at which we were. And as we now have stability, we're able to pull the levers that our peers have already done to optimize in those areas.

Juan: I think thats right <unk> got to remember valued alike.

Luke Pelosi: Volume metric shedding that's been done in some what we call bad revenue, sometimes bad revenues coming from bad customers right and so around the edges that helps and then just the broader improvement it's been hard to optimize the shift as you were growing at the rate at which we were and as we now have stability, we're able to pull the levers that are peers of ours.

Patrick Dovigi: <unk> done to optimize in those areas and so we still think there is opportunity for instance, within our DSO.

Patrick Dovigi: And so we still think there is opportunity, for instance, within our DSO. And we will continue to drive after that, which will see a recovery of that investment, and will help offset what the normal course of growth would be associated with organic growth. But you're thinking about it exactly right.

Patrick Dovigi: And we will continue to drive after that which will see a recovery of that investment and will help offset what the normal course growth would be associated with organic growth, but you're thinking about it exactly right.

Patrick Dovigi: Okay, and then to that end, you have had a lot of self-help opportunities just because where you are in your life cycle, whether it's automation and residential or C&G on the trucks or digital on the cab. Can we talk about what innings you are in that and how that kind of reflects back to your comments you made about your working cab?

Speaker Change: Okay, and then to that end you have had.

Patrick Dovigi: Sort of self help opportunities just because where you are in their lifecycle.

Patrick Dovigi: Whether it's automation in residential or <unk> on the trucks are digital and the cat can we talk about what inning you are in that and how that reflects back to you.

Patrick Dovigi: Comments, you made about your working capital.

Operator: Yeah, I think, you know, where we're sitting today, we do have a lot of self-help opportunities. I mean, for 2024, again, rolling out 3,500 tablets into our commercial trucks, being able to capture all sorts of incremental charges from blocked bins to overweight bins is, you know, a big thing that we're focused on. I think that's the biggest piece of the sort of low-hanging fruit.

Patrick Dovigi: Yes, I think where we're sort of sitting today, we do have a lot of self help opportunities I mean, <unk> for 2024 again rolling out 3500 tablets into our commercial trucks being able to capture all sort of incremental charges from blocked been overweight vantage is a big thing that we're focused on I think that's the.

Operator: Biggest piece of the sort of low hanging fruit.

Operator: And we're in process of doing that again continued fleet conversion to <unk> I would say is going to be the next biggest wave over the next couple of years, particularly on the backs of a bunch of the EPR contracts that were sort of looking.

Luke Pelosi: And, you know, we're in the process of doing that. Again, continued fleet conversion to CNG is going to be the, you know, next biggest wave over the next couple of years. Particularly on the backs of a bunch of the EPR contracts that we're sort of looking at, to execute on, and the lion's share of those trucks will be converted over to CNG. You know, I think we were sort of a weak team previously.

Operator: To execute on and the lion's share of those trucks will be converted over to CMG.

Luke Pelosi: I think we were sort of low teens previously now if you look at the fleet sort of high teens on <unk>. As we said we have our goal stated goal of getting back to sort of 45% to 50% of the overall.

Luke Pelosi: Now, if you look at the fleet, sort of high teams on CNG, and, you know, as we said, we have a goal, stated goal of getting that to sort of 45 to 50% of the overall fleet. And then again, as we said on a previous call, we are, you know, we still have about $150 million of revenue that's in sort of low-margin residential contracts for the most part. And, you know, as we said, we're looking to, you know, exit some of that revenue or sell it to a, you know, local competitor or local market that we'll do better for. And I think all of those together will help sort of with the capital allocation program, will help with the margin profile, and just continue to put us on the right trajectory to continue moving forward.

Luke Pelosi: Fleet and then again as we said on our previous call.

Luke Pelosi: Yes.

Luke Pelosi: We still have about $150 million of revenue that's in sort of low margin residential contracts for the most part and.

Luke Pelosi: As we said we're looking to exit.

Luke Pelosi: Some of that revenue or you sell it to a local competitor in a local market that.

Luke Pelosi: We will do better horn I think all of those together.

Luke Pelosi: Sort of what the capital allocation program will happen with the margin profile helped with the margin profile.

Luke Pelosi: And just continuous putting us on the right trajectory to continue moving forward.

Patrick Dovigi: Okay, last one for me is, and I applaud that you're giving a level of detail in the 90-day view, but I back up and go, that means you have a much greater confidence and ability to see where the model's going. What can you attribute over the last year or two that has given you, one, the confidence to do it, as you've turned this... consolidation story into an ongoing operating company. What do you, what would you point to specifically that gives you that confidence to be able to do that 90-day view?

Speaker Change: Okay last one for me is and I applaud that youre, giving the level of detail on the 90 day view.

Patrick Dovigi: Backup and go that means you are having a much greater confidence in the ability to see where the model's going.

Patrick Dovigi: What can you attribute.

Patrick Dovigi: Over the last year or two that is giving you the confidence to do it.

Patrick Dovigi: Okay.

Patrick Dovigi: Turn this.

Patrick Dovigi: The consolidation story.

Patrick Dovigi: Ongoing operating company, what do you what would you point to specifically that gives you that confidence to be able to do that 90 day deal.

Patrick Dovigi: Well I think if you.

Patrick Dovigi: If you look at the business and how it's come together, right, like, there wasn't a year for the first sort of 14 or 15 years of our founding that we weren't growing at north of a sort of 30 to 40% CAGR. Obviously, with the higher rates for longer narratives, Leverage, particularly in the public markets, became sort of a myopic focus of ours.

Patrick Dovigi: You look at the business and how it comes together right.

Patrick Dovigi: There hasnt been there wasn't a year for the first sort of 14 or 15 years of our filing that we werent growing at north of a sort of 30% to 40% CAGR, obviously with the higher rates for longer narrative.

Patrick Dovigi: Leverage, particularly in the public markets became sort of a myopic myopic focus of ours and again.

Patrick Dovigi: The committed goal of sustainable moving leverage into the sort of mid threes again, that's allowed us to take our foot off the M&A gas paddle and I think if you look historically at what the business is Don I mean.

Patrick Dovigi: And again, with the committed goal of us and the stated goal of moving leverage into the sort of mid-3s, that's allowed us to take our foot off the M&A gas pedal. And I think if you look historically at what the business has done, I mean, we've been pretty sort of muted on the M&A front for the last sort of year and a half, and I think you get a true picture of what the operating power is of this business because there hasn't been a huge amount of M&A. So the story has been pretty easy to follow.

Patrick Dovigi: We've been pretty sort of muted on the M&A front for the last sort of year and a half and I think you get the true picture of what the operating power ends of this business because there hasnt been a huge amount of M&A. So the story has been pretty easy to follow our operators are sort of just managing their existing book of businesses without M&A. So on the confidence.

Patrick Dovigi: Our operators are sort of just managing their existing books of businesses without M&A. So the confidence we have in the forecasting, et cetera, you know, is what you're seeing today and I think you're going to continue to see in the future. And even as we sort of get that leverage to the level where, you know, the lion's share of investors want it, particularly in an interest rate environment like we're in today, I think the business is just now of such size and scale that M&A is really just a modest contribution and just, you know, a real part of sort of the growth algorithm. But it's not going to be the part of the growth algorithm that's front and Okay, thank you.

Patrick Dovigi: We have in the forecasting et cetera.

Patrick Dovigi: Is what youre seeing today, and I think youre going to continue to see for the future and even as we sort of get that leverage the level, where the lion's share of investors why in particular in an interest rate environment like we're in today.

Patrick Dovigi: I think the business is just now of a size and scale that M&A is really just a modest contribution and just.

Patrick Dovigi: A real part of sort of the growth algorithm, but it's not going to be the part of the growth algorithm, that's front and center.

Patrick Dovigi: Okay, thank you very much, and thank you again for the kind words, and I'll see you Sunday.

Speaker Change: Okay. Thank you very much and thank you again kind words and I'll see you Sunday.

Speaker Change: Thanks, Michael.

Speaker Change: Thank you Michael.

Operator: Our next question comes from Patrick Tyler Brown from Raymond James. Patrick, your line is now open.

Patrick Dovigi: And our next question comes from Patrick kind of Brown with Raymond James.

Speaker Change: Your line is now open.

Patrick Dovigi: Yes, a very formal introduction. Good morning, guys.

Speaker Change: Yes, very formal introduction good morning, guys.

Operator: Good morning, Patrick. Tyler, your name.

Speaker Change: Good morning, Patrick Tyler can you hear me.

Patrick Dovigi: So, I think you guys have a debt tower that's coming up next year. I know your credit quality is improving, but just based on where you are today, do you think that refinancing that $25 million tower is going to prove a cash interest headwind next year?

Patrick Dovigi: Okay.

Patrick Dovigi: Yes.

Speaker Change: I think you guys have tower, that's coming up next year.

Patrick Dovigi: Your credit quality is improving but just based on where you are today do you think that refinancing that 25 towers can improve our cash interest headwind next year.

Luke Pelosi: Yeah, so Tyler, you're right, there's about $1.2 billion across two bonds that come up next summer. They currently carry a blended coupon of about sort of four and a quarter, 4.3%. And if you're redoing that today, you're probably more in the mid to high sixes, is what you're seeing.

Patrick Dovigi: Yes. So Tyler you are right there is about $1 $2 billion across two bonds.

Luke Pelosi: That come up next summer. They currently carry a blended coupon of both sort of four and a quarter to four 3%.

Luke Pelosi: We are redoing that today, you are probably more in the mid to high sixes is what you're seeing so theres certainly an incremental headline cash interest cost on that however, where we are and opportunities from some structuring perspectives. The existing bonds that you would be refinancing are domiciled in Canada, whereas you'd be issuing the new ones out.

Luke Pelosi: So there's certainly an incremental headline cash interest cost on that. However, where we have an opportunity from some structuring perspectives, the existing bonds that you would be refinancing or domiciled in Canada, whereas you'd be issuing the new ones out of a US entity, thereby providing a meaningful cash tax shield, right, because we're becoming a bigger cash taxpayer in the US. And so net net, in the free cash flow line, the cash tax savings would largely offset the interest costs. And so you'd have a reclass or gross up on the actual line items, but net net, your free cash number would be a pretty de minimis impact.

Luke Pelosi: The U S entity, thereby providing meaningful.

Luke Pelosi: Cash tax shields, alright, because we are becoming a bigger cash taxpayer in the U S and so net net in the free cash flow line. The cash tax savings would largely offset the interest cost and so you have to have a re class or gross up on the actual line items, but net net you're free cash number it would be a pretty de minimis impact.

Patrick Dovigi: Okay, excellent. That's very, very helpful.

Speaker Change: Okay excellent that's very very helpful. And then Patrick can we can we get some high level thoughts on IP.

Patrick Dovigi: Maybe one down from about the end year financials, just how it was tracking in terms of EBITDA leverage and just any thoughts about monetization.

Patrick Dovigi: Yes.

Patrick Dovigi: As we stated.

Patrick Dovigi: Last year again that business experienced headwinds.

Patrick Dovigi: Just from the run up in sort of the inflationary environment as we are coming on the back side of that.

Patrick Dovigi: Largely through this year, we'll be through.

Patrick Dovigi: And we will be getting sort of back to where we anticipated that business would be but.

Patrick Dovigi: And then Patrick, can we, can we get some high-level thoughts on GIP? Can you maybe run down some of the end-year financials, just how it was tracking in terms of EBITDA and leverage? And just any thoughts about monetization there?

Patrick Dovigi: I would say this year low two hundreds from an EBIT level without M&A.

Patrick Dovigi: Yeah, I mean, as we stated, you know, last year, again, that business experienced headwinds just from, you know, the run-up and sort of the inflationary environment. As we're coming on the backside of that, you know, which, you know, largely through this year will be through.

Patrick Dovigi: That business again today is sort of running 12, 5% to 13% margins, we expect it to go to sort of 15.

Patrick Dovigi: And we'll be getting sort of back to where we anticipated that business would be. But, you know, I would say this year in the low 200s from an EBITDA level without M&A. You know, that business, again, today is sort of running, you know, 12.5 to 13% margins. We expect it to go to sort of 15 over the coming, you know, over the course of the next year. You know, leverage sort of in the mid fives as a private company. But again, you know, we have a couple interesting sort of M&A opportunities that will get done in that business as well. But again, nothing has changed from what I believe the thesis to be.

Patrick Dovigi: Over the coming over the course of the next year.

Patrick Dovigi: Leverage sort of in the mid fives as a private company, but again.

Patrick Dovigi: We have a couple of interesting sort of M&A opportunities that will get done in that business as well.

Patrick Dovigi: But again nothing has changed from what my believe that thesis to be we'll grow that business.

Patrick Dovigi: We'll grow that business, and I would assume there will be sort of a billion dollars of equity value that'll come out of that. As we can, we'll just look at market opportunities. As you know, there's been a real run-up in valuations in that sector, particularly with CRH sort of listing now in the U.S., coupled together with Lafarge separating their European and their North American business. You know, other comps like Road, all of those have had pretty good runs over the last little while.

Patrick Dovigi: Expected sort of $1 billion of equity value that will come out of that.

Patrick Dovigi: <unk>.

Patrick Dovigi: Would assume as we can we'll just look at market opportunities as you know.

Patrick Dovigi: Theres been a real run up in valuations in that sector, particularly with.

Patrick Dovigi: <unk>.

Patrick Dovigi: CRA sort of listing now in the U S. Coupled together with lafarge separating their European and our North American business either.

Patrick Dovigi: Either comps like road all of those have had a pretty good runs over the last little while.

Patrick Dovigi: So, you know, I think the thesis is only getting better. Time has been our friend and will continue to be our friend, but we want to optimize the value of that. But, you know, I think that's a late 25, 26 type of event where we look at that. And again, I'm not wed to any sort of exit in that. From our perspective, you know, it's really a triple-track process, whether it's an IPO, whether that's a financial sponsor, given the perfect size of that for financial sponsors today, or whether that's strategic. But I think there's a lot of opportunity for exits in that. We want to get it to the right number and get the equity value where we want it.

Patrick Dovigi: So.

Patrick Dovigi: I think the thesis is only getting better and.

Patrick Dovigi: Time has been our friend and we will continue to be our friend, but we want to optimize the value of that but I think thats a late 'twenty five 'twenty six type event, where we look at that and again I'm not wed to any sort of exited on that I mean from our perspective.

Patrick Dovigi: So it's really a triple track process, whether it's an IPO, whether that's a financial sponsor just given the perfect size of that for financial sponsors today.

Patrick Dovigi: Or whether that strategic but I think there is a lot of opportunity for.

Patrick Dovigi: For exits and that we just we want to get it to the right number in and get the equity value, where we want it.

Patrick Dovigi: Perfect. And then my last one here. So there's been a lot of movement on PFAS in the U.S., but I'm just curious. Has there been any, has anything happened in Canada similar?

Speaker Change: Perfect and then my last one here so there's been a lot of movement on <unk> in the U S. But I'm just curious has there been any.

Patrick Dovigi: Anything happened in Canada similar.

Speaker Change: I, just don't really know and I'm just curious how you view <unk>, yes.

Patrick Dovigi: Is that something that.

Patrick Dovigi: I just don't really know, and I'm just curious how you view PFAS through your E.S. lens. Is that something that, you know, is within or outside of the scope of your ES business? And could that be an opportunity longer term?

Patrick Dovigi: Is within or outside of the scope of your es business and could that be an opportunity longer term. Thanks guys.

Patrick Dovigi: Lots of I would say lots of chatter as the chatter picks up in the U S but nothing.

Speaker Change: Specific in Canada at the moment, obviously the legislation that is being proposed was actually.

Patrick Dovigi: I think in line with.

Patrick Dovigi: What we.

Patrick Dovigi: We believe there is going to happen I think there's still some more room to go but at the end of the day landfills, our Napa generator of Vista.

Patrick Dovigi: Solution to the problem more passive receivers as material so.

Patrick Dovigi: I think that's going to continue to play out.

Patrick Dovigi: In our EES business, yes, it's a big part of what we're looking at is different technologies.

Patrick Dovigi: As we know everybody who thinks they have the solution to be fast, but at the end of the day.

Patrick Dovigi: <unk> solution is going to work and how economically is it going to work in and et cetera. So we.

Patrick Dovigi: We are in discussions with a multitude of.

Patrick Dovigi: Companies that I think we're either in sort of looking to acquire or partner with.

Patrick Dovigi: To create a sort of a solution to the <unk> issue that we're going to be have to everyone's going to be having to dealing with in the near future, but fundamentally Tyler I mean, our perspective would be in the long run P. Pause will be a tailwind for price and volume for our business and so the exact sort of form in which that shakes out remains to be seen but we are.

Patrick Dovigi: <unk> optimistic that this is ultimately going to be an opportunity for us across both our solid and liquid waste segments on a price and volume perspective.

Patrick Dovigi: Thanks, guys.

Speaker Change: Okay, Alright, thanks, guys.

Speaker Change: Thanks Tyler.

Speaker Change: Thank you.

Patrick Dovigi: With our next question is coming from.

Patrick Dovigi: Michael <unk> from Scotiabank. Your line is now open.

Luke Pelosi: Lots of chatter, I would say lots of chatter as the chatter picks up in the US, but nothing specific in Canada at the moment. Obviously, the legislation that is being proposed was actually, you know, I think, in line with, you know, what we believed was going to happen. I think there's still some more room to go. But at the end of the day, landfills are not the generator of this. They're a solution to the problem. We're passive receivers of this material.

Speaker Change: Hey, good morning, guys I wanted to get back to the guidance.

Patrick Dovigi: So I think that's going to continue to play out in our ES business. Yes, a big part of what we're looking at is different technologies. As we know, everybody thinks they have the solution to PFAS. But at the end of the day, what solution is going to work, and how economically is it going to work, etc. We are in discussions with a multitude of companies that I think we're either looking to acquire or partner with to create a sort of solution to the PFAS issue that, you know, we're going to be having to deal with in the near future.

Patrick Dovigi: Correct me, if I'm wrong, but I believe the initial expectation was.

Patrick Dovigi: That margin expansion would increase as the year progressed. So can you comment on whether that margin cadence still stands obviously outside the.

Patrick Dovigi: Comments regarding the pull forward.

Luke Pelosi: Fundamentally, Tyler, I mean, our perspective would be that in the long run, PFAS will be a tailwind for price and volume for our business. And so the exact sort of form in which that shakes out remains to be seen, but we're feeling optimistic that this is ultimately going to be an opportunity for us across both our solid and liquid waste segments on a price and volume perspective.

Speaker Change: Yes, I think thats, absolutely right Michael It is a first half second half story I mean within each one as we're articulating the outperformance in Q1 may sort of eat into what was otherwise expansion expected in Q2, but absolutely I mean, if you look at the sort of cadence that's being expected in the original.

Luke Pelosi: I don't think that has changed and with the strength of Q1 performance. We think maybe that gets a little bit better and so we set out this year with a guide that from our perspective, I think had industry, leading organic growth as the impact from M&A was muted and so therefore, all organic and where we're sitting today if youre reading the tea leaves I think we're teeing up.

Patrick Dovigi: All right. Thanks, guys.

Michael Doumet: Our next questions come from Michael Dolmed from Scotia Bank. Michael, your line is now open.

Luke Pelosi: Hey, good morning, guys. I wanted to get back to the guidance. Correct me if I'm wrong, but I believe the initial expectation was that margin expansion would increase as the year progressed. So can you comment on whether that margin cadence still stands, obviously outside the comments regarding the pull forward?

Michael Doumet: Yeah, I think that's absolutely right, Michael. It's a first half, second half story. I mean, within H1, as we're articulating, the outperformance in Q1 may sort of eat into what was otherwise the expansion expected in Q2. But absolutely, I mean, if you look at the sort of cadence that's being expected in the original guide, I don't think that has changed. And with the strength of Q1 performance, we think maybe that will get a little bit better.

Michael Doumet: Going to be better than initially anticipated exactly how much remains to be seen and we look forward to updating you on that in July but that cadence everything is looking as expected just perhaps a little bit better.

Michael Doumet: And so, you know, we set out this year with a guide that, from our perspective, I think had industry-leading organic growth, as the impact of M&A was muted and was therefore all organic. And where we're sitting today, you know, if you're reading the tea leaves, I think we're teeing up for better than initially anticipated. Exactly how much remains to be seen, and we look forward to updating you on that in July. But that cadence, everything is looking as expected, just perhaps a little bit better.

Luke Pelosi: makes sense. And then you talked about the sustainability of the strong start to price in a year. You know, how are unit costs tracking versus your initial expectation?

Speaker Change: Makes sense and then you talked about the sustainability of the strong start to price in a year.

Michael Doumet: <unk> unit costs.

Luke Pelosi: Tracking versus your initial expectation.

Luke Pelosi: I'd say they're right in line. I mean, when we look at labor, I mean, labor is still, you know, a 5% plus number, and you're putting all together, you got cost inflation in the sort of mid to high fives. But it's stepping down as you're comping the tougher quarters, and as all of the other disruption, whether it be fleet replacement, etc., is getting better. So we're feeling, you know, that price/cost spread that we articulated earlier in the year that could be upwards of 150 basis points. You know, we feel good about that.

Speaker Change: I'd say theyre right in line I mean, when we look at labor I mean labor is still 5% plus number and you're putting it all together you've got cost inflation in this sort of mid to high fives.

Luke Pelosi: But it is stepping down as you're as you're comping, the tougher quarters and as all of the other disruption whether it be fleet replacement et cetera is getting better. So we're feeling that price cost spread that we articulated in the year that could be upwards of 150 basis points. We're feeling good on that look I don't think this is going to be a year with the way.

Michael Doumet: Look, I don't think this is going to be a year where cost inflation is moderating so that we're going to have to go back to the pricing lever as frequently as we've done maybe in the past 24 months and therefore yield a materially different pricing outcome. I think, you know, the cost unit cost inflation appears to be moving as anticipated, and therefore the pricing guidance will be as anticipated. And then you got to remember, I mean, I said in the prepared remarks, that 80% plus of this year's pricing activity is already done. Right.

Luke Pelosi: Cost inflation is moderating that we're going to have to go back to the pricing lever as frequently as we have done maybe in the past 24 months, and therefore yield a materially different pricing outcome.

Michael Doumet: I think the cost unit cost inflation appears to be moving as anticipated and therefore, our pricing guidance as anticipated and then you got to remember I mean, we said in the prepared remarks like 80% plus of this year's pricing activity is already done right and that just a function of the rollover from prior year and the weighted average of Q1 pricing activity being the.

Luke Pelosi: And that's just a function of, you know, the rollover from the prior year and the weighted average of Q1 pricing activity being the lion's share for the year. So we're feeling really good about the spread, which is ultimately what we're trying to manage. As we've demonstrated before, if the unit cost changes for expectations, we'll revisit the pricing initiatives. But right now, we're feeling really good about how those trends are playing out.

Luke Pelosi: The lion's share for the year. So we're feeling really good on the spread which is ultimately what we're trying to manage as we've demonstrated before if the cost unit cost changes or.

Luke Pelosi: Expectations, we'll revisit the pricing initiatives, but right now we're feeling really good on how those trends are playing out.

Michael Doumet: Perfect. Thanks, Luke.

Speaker Change: Perfect. Thanks, Luca and then maybe just to sneak one in just on working capital management.

Luke Pelosi: And then maybe just to sneak one in, just on the work in capital management. No, I think I understand the improvement there. It doesn't sound so much structural in the sense that you're getting less working capital, more that you're smoothing things out from a seasonal perspective, but, You know, as we look to kind of future years, well, that's smoothing out, that doesn't go away, it might actually even get better. Yeah, I think that's right. I mean, if you look at the ex-

Luke Pelosi: I think I understand the improvement there.

Michael Doumet: It sounds so much structural that youre getting less working cap more of that smoothing things out from a seasonal perspective, but.

Luke Pelosi: As we look to future years as well.

Luke Pelosi: Smoothing out that doesn't go away it might actually even get better.

Luke Pelosi: Yeah, I think that's right. I mean, if you look at the extent of the swings that we've historically had, like, I think, last year, the H1 investment was just under $200 million. And then you recover all of that in H2, right? And that's just with the seasonal profile and ramp of revenues. This year, the way we're tying it up now is that the H1 investment is going to be, you know, just over $100 million, right? So I think 120 is what we sort of alluded to in the guide there.

Speaker Change: Yes, I think Thats right I mean, if you look at the extent of the swings that we've historically had like I think last year that each one investment was just under $200 million.

Luke Pelosi: And then you recover all of that in <unk>, right and that just with the seasonal profile and ramp up the revenues. This year the way we're teeing it up now is that the <unk>.

Luke Pelosi: <unk> investment is going to be just over $100 million right. So I think the 120 is where we sort of alluded to in the guide there so material improvement over over last year again for the year as a whole you still netting out to roughly the same place, but just tempering the.

Luke Pelosi: So, you know, material improvement over last year, again, for the year as a whole, you're still netting out to roughly the same place, but just tempering the volatility, if you will, of the investments. Part of it is the changing business mix; more and more business in the southeastern US, where they have a different seasonality profile, is certainly sort of helpful. And then part of it is just continuing to sort of optimize our processes and the information coming out of our systems to manage this appropriately. So we continue to see it as an opportunity. I think it will always be an H1 investment and an H2 recovery, although the quantum of changes from quarter to quarter will be more muted than historic.

Luke Pelosi: Volatility if you will of the investment part of it is by the changing business mix more and more business in the southeastern U S where they have a different seasonality profile is certainly sort of helpful. And then part of it is just continuing to sort of optimize our processes in the information coming of our systems to manage this appropriately. So we continue to see it as an opportunity I think.

Luke Pelosi: We'll always be in each one investment each to recovery, although the quantum of changes from quarter to quarter will temper and be more muted than historically.

Speaker Change: Perfect. Thank you very much.

Tobey O'Brien Sommer: Our next question is from Tobey Sommer from Tours. Tobey, your line is now open.

Speaker Change: Thank you.

Luke Pelosi: Our next question is from police the choice to Lee Your line is now open.

Luke Pelosi: Thanks. How does the 80% of pricing activity for the year already being done compared to last year at this time, and the historic experiences kind of want to dimensionalize that?

Tobey O'Brien Sommer: Thanks.

Tobey O'Brien Sommer: How does the 80% of pricing activity for the year already being done compare to.

Tobey O'Brien Sommer: Last year at this time in the historic experience this kind of one of them.

Tobey O'Brien Sommer: Dimensionalize that comment.

Tobey O'Brien Sommer: Yeah, so Toby, it's Luke speaking. I think the last couple of years have been unique in terms of pricing because they've deviated from the historical norm that the majority of your pricing activity happened in the first quarter. And that was really in response to the cost inflation we saw in 22 and 23 that had you pulling on the price lever more frequently throughout the year than you customarily do. So as a result, what happened was 22 and 23's price cadence was very off. Now, by the second half of 23, we started to approach normal more.

Luke Pelosi: Yes, so tobey its Luc speaking I think the last couple of years have been unique from pricing because they have deviated from the historical norm that majority of your pricing activity happened in the first quarter and that was really in response to the cost inflation, we saw in 'twenty, two and 'twenty three.

Tobey O'Brien Sommer: That had you pulling on the price lever more frequently throughout the year, then you'd customarily do so as a result, what happened was 20 twos and 20 threes price cadence was very off now by the second half of 'twenty three we start to do more approach normal and so 24 is set up and what I would call a more typical year and was.

Luke Pelosi: And so 24 is set up in what I'd call a more typical year. And what is a more typical year? You roughly have anywhere from 25 to 35% of your in-year pricing rolling forward from last year's pricing activities. So you think about Q2, Q3, Q4 pricing actions in 2023, and they roll over into 2024. That accounts for roughly 25 to 35% of this year's price. Q1 activities are roughly sort of 50, 55% of your overall sort of pricing activity for the year.

Luke Pelosi: A more typical year, you roughly have anywhere from 25% to 35% of your in your pricing rolling forward from last year's pricing activities. So you think about Q2 Q3 Q4 pricing actions in 2023 rollover into 2024 that accounts for roughly 25% to 35% of this year's price Q1 activities is.

Luke Pelosi: Roughly sort of 50, 55% of your overall sort of pricing activity for the year and then that regularly steps down from Q2 Q3 for Q2 was like 10% Q3 is like 5% in Q4 is de Minimis.

Luke Pelosi: And then that rate steps down at least from Q2, Q3, and Q4. Q2 is like 10%, Q3 is like 5%, and Q4 is diminishing. And so I'd say the last couple years have been atypical. This year is returning to a more typical cadence, and I think 2025 should be very typical. But again, it's one of the very attractive attributes of our business that allows us this early in the year to already have confidence in the contribution from that aspect of our top line revenue growth.

Luke Pelosi: And so I'd say its the last couple of years that have been atypical. This year is returning to a more typical cadence that I think 2025 should be very typical but again, it's one of the very attractive attributes of our business that allows us. This early in the year to already have the confidence in the contribution.

Luke Pelosi: From that aspect of our topline revenue growth.

Tobey O'Brien Sommer: Thank you. In environmental services, I'm curious about the outlook for growth over the balance of the year. You talked about about 10% on an adjusted basis. Is that a good trend line? And are there any other adjustments that you could remind us of, or do you need to call anything out?

Speaker Change: Thank you.

Speaker Change: In environmental services I'm curious about the outlook for growth over the balance of the year.

Tobey O'Brien Sommer: You talked about about 10% on an adjusted basis is that a good trend line and are there any other adjustments that you could remind us if you need to call anything out.

Luke Pelosi: No, so the adjustments really, if you recall in the Q1 presentation, I mean, it was a perfect storm of opportunity in Q1 of last year, and everything just came together, and the business exceeded top line, even our internal by about $40 million. So we normalized for that.

Speaker Change: No. So the adjustment is really if you recall on the Q1 presentation I mean it was.

Tobey O'Brien Sommer: A perfect storm of opportunity in Q1 of last year and everything just came together in the business exceeded topline, even our internal by about $40 million. So we normalized for that if you think about the guide for this year Es growth is supposed to be sort of mid single digits organically. The Q1 and Q2 normalized growth is inclusive of M&A.

Tobey O'Brien Sommer: If you think about the guide for this year, ES growth is supposed to be sort of mid single digits organically. The Q1 and Q2 normalized growth is inclusive of M&A. But really, if you think about XM&A for the year, we're anticipating this mid single-digit top line growth. This is really a price-led growth strategy that's probably offsetting some shedding of lower quality volume. You know, I think that will pick up in Q2 and Q3.

Tobey O'Brien Sommer: So really if you think about ex M&A for the year. We're anticipating this mid single digit top line growth. This is really a price led growth strategy thats, probably offsetting some shedding of lower quality volume.

Tobey O'Brien Sommer: I think that will pick up in Q2, and Q3 and for the year as a whole we're feeling good at that mid single digit number, but what's exciting us. The most is the effect.

Tobey O'Brien Sommer: And for the year as a whole, we're feeling good at that mid single-digit number. But you know, what's exciting us the most is the effectiveness of our top line growth strategy, as measured by the sort of margin expansion, right? And if we look at the Q1 result, despite some of the headwinds, to see the margin coming in, you know, 70 basis points better than planned, you know, that I think is a testament to the effectiveness of this chasing quality over quantity on the top line.

Tobey O'Brien Sommer: Our topline growth strategy as measured by the sort of margin expansion right and if we look at the Q1 result, despite some of the headwinds to see the margin coming in 70 basis points better than plan.

Tobey O'Brien Sommer: I think it's a testament to the effectiveness of this chasing quality over quantity on the topline and that's going to be something we sort of continue to do our.

Tobey O'Brien Sommer: And that's going to be something we sort of continue to do. I mean, our business, unlike some of our peers, one of the benefits of the RDS business is that you're sort of 80% plus of it's this recurring maintenance sort of type nature. And you know, there is a small component that is, you know, more event-driven, but it's the quality of that sort of underlying recurring business that allows us to sort of drive that margin. So, I think for the year, that mid-single digit holds, and we're encouraged by the margin expansion that we saw in Q1.

Tobey O'Brien Sommer: Our business. Unlike some of our peers one of the benefits of Rds business, you had sort of 80% plus of it is recurring maintenance sort of tight nature and there is a small component that is in a more events weather driven but it's the quality of that sort of underlying recurring business that allows us to sort of drive that margin expansion. So I think for.

Tobey O'Brien Sommer: The year.

Tobey O'Brien Sommer: That mid single digit holds.

Tobey O'Brien Sommer: We're encouraged by the margin expansion that we've seen in Q1.

Luke Pelosi: Great. Last one for me.

Tobey O'Brien Sommer: Great.

Tobey O'Brien Sommer: Last one for me you mentioned.

Tobey O'Brien Sommer: Negative weather impact to begin with the quarter clearly it was very cold lots of places we went a little bit unseasonably warm, Turkey, and if you net that out.

Tobey O'Brien Sommer: You mentioned the negative weather impact at the beginning of the quarter. Clearly, it was very cold in lots of places and then a little bit unseasonably warm throughout the year. And if you net that out, what sort of impact did weather have on the quarter? I mean,

Tobey O'Brien Sommer: What sort of impacted weather have on the quarter.

Luke Pelosi: I mean, it's hard to say to just measure that just the bad guys, but I think on your sort of volume and solid waste, you know, it was probably pretty close to offset by virtue of the pull forward of the, you know, warmer weather. I think about Ontario and Quebec and Michigan, where solid waste benefited. I mean, it was really the ES business that felt it on both sides because the warm weather in a lot of Michigan and other areas where they introduced the half load season earlier. The nature of that business is that large full size tankers just won't run in that sort of road conditions.

Tobey O'Brien Sommer: I mean, it's hard to say to just measure that just the bad guys I think on your sort of volume and solid waste.

Luke Pelosi: Probably pretty close to offsets by virtue of the pull forward of the <unk>.

Luke Pelosi: Warmer weather and you think about it in Ontario, and Quebec in Michigan solid waste benefited I mean, it was really the es business that felt it on both sides because of the warm weather and a lot of our Michigan and another areas, where they introduced half load season earlier the nature of that business is large full size tankers just won't run in that sort of road conditions. So I think.

Luke Pelosi: So I think, you know, you probably saw 100 basis points plus of margin impact. I think I said that in prepared remarks on the weather on sort of ES solid, you know, I think it's probably a wash. We had anticipated January to be negative four and a half, and we ended up at, you know, that negative 3% number, which I think you're largely sort of offset by the benefit of the warmer weather and the end of the quarter.

Luke Pelosi: You probably saw a 100 basis points plus a margin impact I think I said in prepared remarks from the weather on sort of Es solid.

Luke Pelosi: It's probably a wash we had anticipated with the January to be negative four five and we ended up at.

Luke Pelosi: That negative, 3% number, which I think you're largely sort of offset by the by the benefit of the warmer weather in the end of the quarter.

Speaker Change: Thank you very much.

Luke Pelosi: Thanks.

Speaker Change: Thank you.

Christopher Allan Murray: Our next question comes from Chris Murray from ATB Capital Markets. Chris, your line is now open. Yeah, thanks, guys. Good morning.

Speaker Change: Next question, please from array of ATB capital buckets.

Speaker Change: Your line is now.

Patrick Dovigi: Luke, you know, it was interesting looking at the chart. And one of the things you did pull out and didn't talk about a little bit was some of the surcharge pricing and getting that into the system. And then you've also sort of talked about some of the system things you've been doing, maybe putting, I think you said you were going to put some tablets in the trucks to let them capture maybe some better, some better pricing opportunities. Can you just talk a little bit about what's left to do? structurally and kind of catching up with your pricing to what you think your peers have been doing over the years?

Christopher Allan Murray: Yeah.

Christopher Allan Murray: Yeah. Thanks, guys good morning.

Christopher Allan Murray: Look it's.

Christopher Allan Murray: Interesting looking at the Upper chart loyalty things you did pull out and didn't talk about a little bit was.

Patrick Dovigi: Some of the surcharge pricing and getting the animal system and then you've also sort of talked about.

Patrick Dovigi: Some of the system things <unk> been doing and maybe putting I think you said youre going to put some tablets in the in the trucks.

Patrick Dovigi: Got it captured.

Patrick Dovigi: Capture maybe some better.

Patrick Dovigi: Better pricing opportunities can you just talk a little bit about what's left to do.

Patrick Dovigi: Structurally and kind of catching up to pricing.

Patrick Dovigi: Two what you think your peers have been doing over the years.

Christopher Allan Murray: Yeah, it's Patrick speaking. I think, again, structurally... If you look at the, if you look at the margins sort of independently, the two sort of LOBs, I mean, if you look at, let's, you know, if you look at environmental services, you know, that business sort of on a like for like basis is sort of running at three to four basis points higher than the rest of the sector after sort of SG&A allocation.

Patrick Dovigi: Yes.

Patrick Dovigi: Atrix speaking I think again structurally.

Patrick Dovigi: If you look at the end if you look at the margin sort of independently.

Christopher Allan Murray: Two sort of <unk> I mean, if you look at if you look at environmental services.

Christopher Allan Murray: So, you know, I think we still have a lot to do. I think we're still getting fuel surcharges, environmental surcharges. There's a bunch of other charges that we think we can implement in that business to push that business on a like for like basis to that sort of high 20s. You know, our solid waste business today, again, post sort of SG&A allocations, running in the high 20s today. If you look at the implementation of the repricing of sort of EPR contracts.

Christopher Allan Murray: That that business sort of on a like for like basis is sort of running at three to 400 basis points higher than the rest of the sector on them after short of SG&A allocation. So.

Christopher Allan Murray: I think we still have a lot to do I think they are still fuel surcharges environmental surcharges Theres a bunch of other charges that we think we can implement on that business to push that business on a like for like basis to that sort of high twenties, our solid waste business today again.

Christopher Allan Murray: Paul sort of SG&A allocation sort of running in the high Twenty's today, if you look at the implementation of the repricing and sort of the EPR contracts.

Christopher Allan Murray: Pauline municipal hauling contracts that continue to come over, plus the implementation of fuel surcharges, environmental surcharges, the level set that we've been through over the last couple of years. That's what's allowed that sort of outside margin expansion coupled together now with, again, the implementation of the tablets in our trucks to allow us to capture charges that we're able to charge contractually that we may be sort of missing today. And I said, you know, the role of those 3,500 tablets is going to be very meaningful.

Christopher Allan Murray: Paul municipal hauling contracts that continue to come over plus the implementation of the fuel surcharges environmental surcharges to level set that we've been through over the last couple of years Thats whats allowed that sort of outsize margin expansion, coupled together now with again the implementation of the tablets in our trucks again to allow us to capture charges that.

Christopher Allan Murray: We're able to charge contractually that we may be sort of missing today, and I said that the rollout of those 3500 tablets is going to be very meaningful.

Christopher Allan Murray: And again, sort of catch up on that. So I think when you sort of put that all together, plus EPR, plus, you know, RNG in the solid waste book of business, which we have very little of today, that is going to push us, you know, I would say, closer to industry leading margins in solid waste. You have a real sort of turning point on margins and the free cash flow profile of the entire business of free cash flow conversion as we sort of move there. Okay, that's helpful. I'll leave it be.

Christopher Allan Murray: And again sort of catch up on that so I think when you sort of put that altogether.

Christopher Allan Murray: EPR plus RMG in this always book of business, which we have very little of today.

Christopher Allan Murray: That is going to push us.

Christopher Allan Murray: I would say closer to our industry, leading margins in solid waste. So all of that together, we think over the next two to three years all of that happens and I would say by 2026 you have.

Christopher Allan Murray: Do you have a real sort of turning point, turning point on sort of on margins and the free cash flow profile of the entire business and free cash flow conversion as we sort of move there.

Speaker Change: Okay. That's helpful I'll leave it there thanks guys.

Speaker Change: Thank you.

Speaker Change: Thank you.

James Strong: We have our last question for today from James Strong from TVCovid. James, your line is now open.

James: With our last question for today, James So PD.

Christopher Allan Murray: TD cohort James Your line is now okay.

Patrick Dovigi: Hey guys, good morning, nice quarter. Patrick, maybe just to follow up on that last point. So by 26, do you think that your margin free cash flow profile will sort of equal your larger peers? Do you think you can fully catch up?

James Strong: Hey, guys good morning nice quarter.

James Strong: Patrick maybe just just a follow up on that last point. So by 'twenty. Six do you think that your margin free cash flow profile will sort of equal your larger peers. Do you think you can fully catch up.

Patrick Dovigi: Yeah.

Patrick Dovigi: I think the free cash flow conversion will still continue to lag a little bit, but that's just solely from the capital structure perspective. I think from a margin perspective, you're definitely going to be there, and I think you still have a little bit of a lag just in terms of the way our R&G portfolio is structured, right? Because you're going to get even a contribution from the R&G portfolio, but the first dollars out of the R&G project actually go to repay a portion of the debt.

Patrick Dovigi: I think the free cash flow conversion I will still continue to lag, but thats a solely from a capital structure perspective, I think from a margin perspective, we're definitely going to be there and I think you still have a little bit of a lag just in terms of the way to our RMG portfolio restructured right, because you're going to get to even a contribution from the R&D portfolio.

Patrick Dovigi: So, but the $1st the $1st out of the R&D projects.

Patrick Dovigi: Go to repay a portion of the debt that's the way they're structured financial.

Patrick Dovigi: That's the way they're sort of structured today. So you're going to have a year, a year and a half basically payback on those, and then you get the ramp of the free cash flow from that. But from a margin perspective, again, you look at EPR, you look at R&G, you look at all the self-help opportunities internally, I think headline margin numbers certainly are going to be there. Free cash flow conversion, and we'll get there; it just might be sort of a year, a year and a half behind.

Patrick Dovigi: Going to have a year, a year and a half basically payback on those.

Patrick Dovigi: And then you get the ramp of the free cash flow and not but from a margin perspective again. If you look at <unk> you look at R&D you look at all the self help opportunities internally I think headline margin numbers certainly are going to be there free cash flow conversion.

Patrick Dovigi: We will get there just might be sort of a year to year and a half.

Patrick Dovigi: Behind.

Speaker Change: Alright, alright, great. Thanks for that and then just on the.

Patrick Dovigi: On the M&A front as you noted your.

Speaker Change: Around $500 million Emma.

Patrick Dovigi: M&A so.

Patrick Dovigi: Tracking ahead, there for the year, how do you think about that strategically going forward for the rest of the year.

James Strong: to think about that strategically going forward for the rest of the year. Do you continue to bid on tuck-in work? I'm just trying to think about how you strategically handle, as you get closer to your target, 600 to 650, do you put in some low bids, and if you win them and exceed your guidance, so be it, because it's a great opportunity, or is that 600 to 650 a hard cap that you're definitely not gonna surpass?

Patrick Dovigi: To you.

James Strong: Do you continue to bid on tuck in work do you put more low ball bids out there and I'm just trying to think about how you strategically handle as you get closer to your.

James Strong: Your target 600 to 650 <unk>.

James Strong: <unk> put in some low bids and.

James Strong: If you win them and exceed your guidance so be it because it's a great opportunity or is that 600 to $6 50, a hard cap that you're definitely not going to surpass.

Patrick Dovigi: The 600 to 650 is definitely a hard cap. We've committed to that in the capital allocation framework. That's what drives the That's what drives where we're going to end up on a leverage level. So all of that, you know, is what we are going to do. Again, the full pipeline, we have very good, acquisitions just don't happen in a week, right? So we have very good visibility on where the pipeline sits, what we're going to close over the next couple of quarters, and then, you know, we're getting to a point in the year where, again, acquisitions, like I said, don't happen in a week. You know, generally take six to eight months between, you know, negotiations with sellers, and implementation, and sometimes they take years.

Speaker Change: The 600 to 650 is definitely a hard cap, we've committed to that and the capital allocation framework, that's what drives the Bachelor.

Patrick Dovigi: That's what drives where we're going to end up on a leveraged level. So all of that.

Patrick Dovigi: Is what we are going to do again the full we have very good acquisitions, just don't happen in a week right. So we have very good visibility on where the pipeline sits what we're going to close over the next couple of quarters and then.

Patrick Dovigi: We're getting to a point in the year, where again acquisitions, you said don't happen in a week generally take six to eight months between negotiations with sellers implementation, sometimes take years.

Patrick Dovigi: But we feel very comfortable with that number. Obviously, there'll be rollover. We're getting to the point where, you know, we're getting to the point now where we can start pushing stuff until 2025. But for 2024, we're definitely committed to the framework. We're definitely committed to the leverage levels. And I think as that rolls into 2025, you know, I think we got a question from. Someone, you know, over the course of the night, you know, are you just going to honor this for 2024 and then drive leverage back up in 2025 with an influx of deals?

Patrick Dovigi: But we feel very comfortable in that number obviously there'll be rollover, we're getting to the point, where we're getting now where we can start pushing stuff until 2025, but for 2024, we're definitely committed to the framework, we're definitely continuing to the committed to the leverage levels and I think as that rolls into 25, I think we got we got a question from summer.

Patrick Dovigi: And the answer to that is no. I think if you look at the free cash flow generation, the organic margin expansion, the organic growth in the base business, how much capacity that gives us for M&A while still driving down leverage, I mean, that puts us squarely short of the sub-mid threes next year. So, you know, that's the model we're working towards. So no, I feel very comfortable with what we put out. And, you know, we are going to stick to that hard cap. Okay, great. Thanks for the answers, guys. I appreciate it.

Patrick Dovigi: Over the course of the night.

Patrick Dovigi: Or are you just going to honor. This for 2024, and then drive leverage back up in 2025 with an influx of deals and the answer to that is no. I think if you look at the free cash flow generation the organic margin expansion in the organic growth in the base business, how much capacity that gives us for M&A, while that while still driving down leverage.

Patrick Dovigi: That puts us squarely sort of sub mid threes next year for 2025. So that's the model we're working towards.

Patrick Dovigi: So no I feel very comfortable with what we put out and we're going to stick to that hard cap.

Patrick Dovigi: Okay, great. Thanks for the answers guys I appreciate it.

Speaker Change: Okay. Thank.

Speaker Change: Thank you.

Speaker Change: Thank you.

Patrick Dovigi: Okay.

Operator: We have no further questions on the line. I will now hand you back to the management team for closing remarks.

Speaker Change: We have no further questions for the line.

Speaker Change: To the management team for closing remarks.

Patrick Dovigi: Thank you, everyone. Much appreciated. We look forward to speaking to everyone after our Q2 results in July. Thank you very much.

Patrick Dovigi: Yeah.

Speaker Change: Thank you everyone.

Speaker Change: Much appreciated and we look forward to speaking to everyone. After our Q2 results in July Thank you very much.

Operator: Thank you. Ladies and gentlemen, this concludes today's call. Thank you for joining us. You may now disconnect your lines.

Speaker Change: Thank you.

Speaker Change: Ladies and gentlemen. This concludes today's call. Thank you for joining you may now disconnect your lines.

Operator: Yeah.

Operator: Okay.