Q1 2024 Waste Connections Inc Earnings Call

Yes.

Please also note today's event is being recorded.

Operator: To submit your questions, you may press star and two. Please also note today's event is being recorded. At this time, I'd like to turn the floor over to Ron Mittelstadt, President and CEO. Please go ahead.

At this time I would like to turn the floor over to Ron Mittelstaedt, President and CEO. Please go ahead.

Ronald J. Mittelstaedt: Okay, thank you, operator, and good morning. I would like to welcome everyone to this conference call to discuss our first quarter results and provide a detailed outlook for the second quarter. I'm joined this morning by Mary Ann Whitney, our CFO, and several other members of our senior management. We are extremely pleased with the strong start to the year, driving better than expected operating and financial results, which, along with recently completed acquisitions, positions us well for the remainder of 2024.

Ronald J. Mittelstaedt: Okay. Thank you operator and good morning.

Ronald J. Mittelstaedt: I would like to welcome everyone to this conference call to discuss our first quarter results and to provide a detailed outlook for the second quarter.

Ronald J. Mittelstaedt: I am joined this morning by Mary Anne Whitney, our CFO and several other members of our senior management.

Ronald J. Mittelstaedt: We are extremely pleased by the strong start to the year driving better than expected operating and financial results, which along with recently completed acquisitions positions us well for the remainder of 2024.

Ronald J. Mittelstaedt: Adjusted EBITDA margin expansion of 160 basis points to 31.4% in the seasonally weakest quarter of the year puts us on track to exceed our industry-leading full-year margin outlook of 32.7% as continuing improvements in employee retention and safety trends, along with rising commodity values, provide momentum for continued performance. Before we get into much more detail, let me turn the call over to Mary Ann for our forward-looking disclaimer as well as other housekeeping items. Thank you, Ron, and good morning.

Ronald J. Mittelstaedt: Adjusted EBITDA margin expansion of 160 basis points to 31, 4% in the seasonally weakest quarter of the year puts us on track to exceed our industry, leading full year margin outlook of 32, 7% as continuing improvements in employee retention and safety trends along with rising commodity values.

Ronald J. Mittelstaedt: Momentum for continued performance.

Ronald J. Mittelstaedt: Before we get into much more detail, let me turn the call over to Mary Anne for our forward looking disclaimer as well as other housekeeping items.

Mary Anne Whitney: You Ron and good morning.

Mary Anne Whitney: The discussion during today's call includes forward-looking statements made pursuant to the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, including forward-looking information within the meeting of applicable Canadian securities. However, actual results could differ materially from those made in such forward-looking statements due to various risks and uncertainties. Factors that could cause actual results to differ are discussed both in the cautionary statement included in our April 24th earnings release and in greater detail in Waste Connections' filings with the U.S. Securities and Exchange Commission and the Securities Commissions or similar regulatory authorities in Canada.

Mary Anne Whitney: The discussion during today's call includes forward looking statements made pursuant to the safe Harbor provisions of the US Private Securities Litigation Reform Act of 1095, including forward looking information within the meaning of applicable Canadian Securities laws actual results could differ materially from those made in such forward looking statements due to various risks and uncertainties.

Mary Anne Whitney: Factors that could cause actual results to differ are discussed both in the cautionary statement included in our April 24 earnings release and in greater detail in waste connections filings with the U S Securities and Exchange Commission and the securities commissions or similar regulatory authorities in Canada.

Mary Anne Whitney: We should not place undue reliance on forward-looking statements as there may be additional risks of which we are not presently aware or that we currently believe are immaterial, which could have an adverse impact on us. We make no commitment to revise or update any forward-looking statements in order to reflect events or circumstances that may change after today. On the call, we will discuss non-GAAP measures such as Adjusted EBITDA, Adjusted Net Income Attributable to Waste Connections on both the dollar basis and per Duluth Chairperson, and Adjusted Pre-Cash Flow.

Mary Anne Whitney: You should not place undue reliance on forward looking statements as there may be additional risks of which we are not presently aware or that we currently believe are immaterial, which could have an adverse impact on our business. We make no commitment to revise or update any forward looking statements in order to reflect events or circumstances that may change after today's date.

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

Mary Anne Whitney: Please refer to our earnings releases for a reconciliation of such non-GAAP measures to the most comparable GAAP. Management uses certain non-GAAP measures to evaluate and monitor the ongoing financial performance of our operations. However, other companies may calculate these non-GAAP measures differently.

Mary Anne Whitney: Please refer to our earnings releases for a reconciliation of such non-GAAP measures to the most comparable GAAP measures management uses certain non-GAAP measures to evaluate and monitor the ongoing financial performance of our operations. Other companies may calculate these non-GAAP measures differently.

Ronald J. Mittelstaedt: I will now turn the call back over to Marianne. As noted earlier, we're off to a great start in 2024 by any number of measures, beginning with our financial results. Already set up for industry-leading outsized margin expansion during the year, we delivered a top-to-bottom beat in the quarter with adjusted EBITDA margin 20 basis points above our outlook and momentum for continued outperformance from a number of drivers. And this was all achieved in spite of significant weather impacts in January and early March.

Mary Anne Whitney: I will now turn the call back over to Ron.

Ronald J. Mittelstaedt: Okay. Thank you maryann.

Ronald J. Mittelstaedt: As noted earlier, we are off to a great start in 2024 by any number of measures beginning with our financial results already setup for industry, leading outsize margin expansion during the year, we delivered a top to bottom beat in the quarter with adjusted EBITDA margin 20 basis points above our outlook and momentum for continued outperformance.

Ronald J. Mittelstaedt: From a number of drivers.

Ronald J. Mittelstaedt: This was all achieved in spite of significant weather impacts in January and early March.

Ronald J. Mittelstaedt: Along with better-than-expected financial results, we saw continued improvement in trends for employee retention and, most importantly, safety. In Q1, voluntary turnover once again stepped down sequentially, making the sixth consecutive quarter of improvement to levels which are now 30% below the peaks we saw in late 2012. Similarly, we saw continued improvement in safety, with incidence rates declining for the seventh consecutive month.

Ronald J. Mittelstaedt: Along with better than expected financial results. We saw continued improvement in trends for employee retention and most importantly safety.

Ronald J. Mittelstaedt: In Q1 voluntary turnover once again stepped down sequentially, making the sixth consecutive quarter of improvement to levels, which are now 30% below the peaks we saw in late 'twenty two.

Ronald J. Mittelstaedt: Similarly, we saw continued improvement in safety with incidence rates declining for the seventh consecutive month in fact during Q1, we achieved some of our best safety performance in years with monthly incentives down to three year lows in spite of outsized growth from acquisitions during that period, we believe these.

Ronald J. Mittelstaedt: In fact, during Q1, we achieved some of our best safety performance in years, with monthly incidence down to three-year lows in spite of outsized growth from acquisitions during that period. We believe these results reflect our commitment to a culture of accountability with empowered and engaged employees. To that end, we're excited about the steps we've taken to support employee growth and development with expanded training, including through our in-house Driver Academies, the second of which will open this summer, and our Diesel Technician School Partnership Offer.

Ronald J. Mittelstaedt: <unk> reflect our commitment to a culture of accountability with an empowered and engaged employees.

Ronald J. Mittelstaedt: To that end, we're excited about the steps we've taken to support employee growth and development with expanded training, including through our in house driver academies, the second of which will open this summer and our diesel technician school partnership offering.

Ronald J. Mittelstaedt: We expect that these internal efforts will augment the improving dynamics we've seen in employee recruiting, resulting from additional resources and targeted efforts. As noted previously, the progress in retention and safety we're seeing today positions us to unlock future benefits from improving costs in risk management along with continued and expected growing savings across several areas, including labor, maintenance, and third-party services, all of which we are seeing in the financials today. Moving back to our financial results, starting with organic solid waste growth. In the first quarter, we delivered solid waste core pricing of 7.8%.

Ronald J. Mittelstaedt: We expect that these internal efforts will augment the improving dynamics, we've seen in employee recruiting resulting from additional resources and targeted efforts as noted previously the progress in retention and safety, we're seeing today positions us to unlock future benefits from improving costs and risk management, along with continued and expected.

Ronald J. Mittelstaedt: Growing savings across several areas, including labor maintenance and third party services all of which we are seeing in the financials today.

Ronald J. Mittelstaedt: Moving back to our financial results, starting with organic solid waste growth.

Ronald J. Mittelstaedt: In the first quarter, we delivered solid waste core pricing of seven 8% and to be clear our core price is what we actually retained not what was implemented which in other models gets reduced by churn to calculate yield our price retention was in line with our expectations and <unk>.

Ronald J. Mittelstaedt: And to be clear, our core price is what we actually retained, not what was implemented, which in other models gets reduced by churn to calculate yield. Our price retention was in line with our expectations and continues to reflect the resilience of our market model. Similarly, reported volume growth of negative 3.8% was in line with our expectations following extreme weather events, primarily during January, which we believe impacted reported volumes by about 100 basis points beyond what we would consider typical levels of ongoing purposeful shedding.

Ronald J. Mittelstaedt: Continues to reflect the resilience of our market model.

Ronald J. Mittelstaedt: Similarly reported volume growth of negative three 8% was in line with our expectations. Following extreme weather events, primarily during January which we believe impacted reported volumes by about 100 basis points beyond what we would consider typical levels of ongoing purposeful shedding.

Ronald J. Mittelstaedt: Looking ahead to Q2, we would expect a sequential step-up in reported volumes of about 100 basis points, assuming a typical seasonal ramp-up in activity. And as a reminder about volume calculation... Our reported volumes are strictly solid waste volume changes, not RNG, E&P, recycled commodities, or acquisitions until after we've owned them for 12 months. Companies calculate volumes differently, and they may view them differently.

Ronald J. Mittelstaedt: Looking ahead to Q2, we would expect a sequential step up in reported volumes of about 100 basis points, assuming a typical seasonal ramp in activity.

Ronald J. Mittelstaedt: As a reminder, on volume calculations, our reported volumes are strictly solid waste volume changes not RMG E&P recycle commodities or acquisitions until after we've owned them for 12 months companies calculate volumes differently and they may view them differently.

Ronald J. Mittelstaedt: As discussed in previous quarters, our outsized growth over the past few years has created the opportunity for improving revenue quality and otherwise right-sizing newly acquired locations. Depending on the market, purposeful shedding and contract non-renewals may provide multi-year tailwinds for margin expansion, along with improvements in asset utilization and operating efficiency. We look forward to similar opportunities from acquisitions that fit our strategy and meet our financial criteria as we maintain our focus on long-term value creation. We continue to see high levels of seller interest and have a robust pipeline of solid waste opportunities across our regional footprint.

Ronald J. Mittelstaedt: As discussed in previous quarters, our outsized growth over the past few years has created the opportunity for improving revenue quality and otherwise right sizing newly acquired locations depending on the market purposeful shedding and contract Nonrenewals may provide multiyear tailwind for margin expansion.

Ronald J. Mittelstaedt: Along with improvements in asset utilization and operating efficiencies.

Ronald J. Mittelstaedt: We look forward to similar opportunities from acquisitions that fit our strategy and meet our financial criteria as we maintain our focus on long term value creation.

Ronald J. Mittelstaedt: We continue to see high levels of seller interest and have a robust pipeline of solid waste opportunities across our regional footprint.

Ronald J. Mittelstaedt: As noted, acquisition activity has already contributed to our strong start to the year with approximately $375 million in annualized revenue completed to date. In addition to the secure energy divestitures we acquired in February, we've completed acquisitions of over $150 million in annualized solid waste revenue, including a new market entry providing services to customers in Indiana and Southern Michigan. The strength of our financial position and free cash flow generation provide flexibility for continued acquisition outlays in 2024 for what could be one of our busiest years ever, along with continuing to increase our capital to share of hope. Beyond M&A, we continue to make progress on our development of multiple renewable gas, or RMG, facilities, three of which are scheduled to be operational this year.

Ronald J. Mittelstaedt: As noted acquisition activity has already contributed to our strong start to the year with approximately $375 million in annualized revenue completed today.

Ronald J. Mittelstaedt: In addition to the secure energy divestitures, we acquired in February we've completed acquisitions of over $150 million in annualized solid waste revenue, including a new market entry, providing services to customers in Indiana and southern Michigan.

Ronald J. Mittelstaedt: The strength of our financial position and free cash flow generation provide flexibility for continued acquisition outlays in 2024 for what could be one of our busiest years ever.

Ronald J. Mittelstaedt: Along with continuing to increase our capital to shareholders.

Ronald J. Mittelstaedt: Beyond M&A, we continue to make progress on our development of multiple renewable gas or RMG facilities.

Ronald J. Mittelstaedt: Three of which are scheduled to be operational this year.

Mary Anne Whitney: In spite of industry-wide delays related to equipment and utility installations, we continue to anticipate an incremental $200 million of annual EBITDA beginning in 2026 from the projects in development on a commensurate capital outlay. As noted previously, $150 million of CapEx will be deployed in 2024 and has been factored into our full year free cash flow outlook. Now I'd like to pass the call to Mary Ann to review the financial highlights of the first quarter and provide a detailed outlook for Q2.

Ronald J. Mittelstaedt: In spite of industry wide delays related to equipment and utility installations, we continue to anticipate an incremental $200 million of annual EBITDA beginning in 2026 from the projects in development on a commensurate capital outlay as.

Ronald J. Mittelstaedt: <unk> previously $150 million of that Capex will be deployed in 2024 and has been factored into our full year free cash flow outlook.

Ronald J. Mittelstaedt: Now I'd like to pass the call to Mary Anne to review more in depth the financial highlights of the first quarter and provide a detailed outlook for Q2 I will then wrap up before heading into Q&A.

Mary Anne Whitney: I will then wrap up before heading into Q&A. Thank you, Ron. In the first quarter, revenue of $2.073 billion was about $23 million above our outlook, due primarily to incremental acquisition contributions and higher recovered commodity value. Revenue on a reported basis was up $172 million, or 9.1%, year over year.

Mary Anne Whitney: Thank you Ron in the first quarter revenue of 273 billion was about $23 million above our outlook due primarily to incremental acquisition contributions and higher recovered commodity values.

Mary Anne Whitney: Revenue on a reported basis was up $172 million or nine 1% year over year.

Mary Anne Whitney: Acquisitions completed since the Eurovote period contributed about $81 million of revenue in the quarter, or about $78 million net of divestment. Solid waste organic growth was led by 7.8% of the core price, which ranged from over 5% in our mostly exclusive market Western region to up to 9% in our competitive market. The total price of 7.1% reflected a reduction of about 70 basis points in fuel and material surcharges, primarily related to lower fuel. We have high visibility for full year 2024 total price in the range of 6% to 7% with 75% of our core price either already in place or specified by contract, as is pretty typical for us by this point in the year.

Mary Anne Whitney: Acquisitions completed since the year ago period contributed about $81 million of revenue in the quarter or about $78 million net of divestitures.

Mary Anne Whitney: Solid waste organic growth was led by seven 8% core price, which range from over 5% and our mostly exclusive market western region to up to 9% in our competitive markets.

Mary Anne Whitney: Total price of seven 1% reflected a reduction of about 70 basis points and fuel and material surcharges, primarily related to lower fuel rates.

Mary Anne Whitney: We have high visibility for full year 2020 for total price in the range of 6% to 7% with 75% of our core price either already in place or specified by contract as it is pretty typical for us by this point in the year.

Mary Anne Whitney: Solid waste volume losses of 3.8% in Q1 include about 1% from January storm-related closures and other weather impacts that resulted in volume losses to varying degrees across all of our geographic regions beyond the ongoing purposeful shedding and price volume trade-offs.

Mary Anne Whitney: Celebrate volume losses of three 8% in Q1 include about 1% from January storm related closures and other weather impacts that resulted in volume losses to varying degrees across all of our geographic regions beyond the ongoing purposeful shedding and price volume trade off.

Mary Anne Whitney: Looking at year-over-year results in the first quarter on a same-store basis, daily roll-off polls were down 3%, driven by outside declines in our most weather-impacted markets in our Mid-South and Eastern, and Daily Landfill Tons were down 6% on Lower Special Waste Activity and C&D Tons, both of which were down about 15% while MSW Tons were flat in spite of the weather impacts. Looking at special waste and C&D, the year-over-year slowdown in Q1 was widespread but most notable in our central region and Canada, both of which benefited from outsized activity in prior years.

Mary Anne Whitney: Looking at year over year results in the first quarter on a same store basis daily roll off polls were down 3% driven by outside declines in our most weather impacted markets in our mid south and eastern regions.

Mary Anne Whitney: <unk> daily landfill tons were down 6% on lower special waste activity in CND tons.

Mary Anne Whitney: We're down about 15% while.

Mary Anne Whitney: MSW tons were flat in spite of the weather impacts noted.

Mary Anne Whitney: Looking at special waste and C&D the year over year slowdown in Q1 was widespread but most notable in our central region, and Canada, both of which benefited from outsized activity in prior year periods.

Mary Anne Whitney: We saw improving trends in both roll-off polls and MSW tons during the quarter, beginning with January activity down in the high single digits due to severe weather and ending with March about flat or up nominally on a year-over-year basis. And in our western regions, the best barometer of underlying activity, given the nature of franchises, reported volumes were positive in Q1, in spite of the weather impacts in January. Beyond solid waste, revenues played out slightly better than expected in Q1, with recycled commodities, landfill gas, and renewable energy credits, or RIMs, collectively up about 50% year-over-year, on recycled commodity values up around 15% from earlier this year. Prices for OCC, or Old Corrugated Containers, averaged about $130 per ton in Q1, and RIMS averaged about $3.10.

Mary Anne Whitney: We saw improving trends in both rollout pulls in MSW tons during the quarter beginning with January activity down high single digits due to severe weather and ending with March about flat or up nominally on a year over year basis.

Mary Anne Whitney: And in our Western region, the best barometer of underlying activity given the nature of franchises reported volumes were positive in Q1 in spite of the weather impact in January.

Mary Anne Whitney: Beyond solid waste revenues played out slightly better than expected in Q1 with recycled commodities landfill gas and renewable energy credits or Rins collectively up about 50% year over year on recycled commodity values up around 15% from earlier this year.

Mary Anne Whitney: Rice's for OCC or old corrugated containers averaged about $130 per ton in Q1 and.

Mary Anne Whitney: <unk> averaged about $3 10 accounts.

Mary Anne Whitney: Adjusted EBITDA for Q1 as reconciled in our earnings release was $650.7 million, up 14.8% year-over-year and about $10 million above our outlook. At 31.4% of revenue, our adjusted EBITDA margin was up 160 basis points year-over-year and 20 basis points above our outlook. These results include an estimated 40 basis points of margin drag related primarily to the extreme weather-related impacts noted. Therefore, on a normalized basis, margins were up 200 basis points year over year. Net interest expense in the quarter increased by $10.8 million over the prior year period to $76.4 million due to higher outstanding debt and increased interest rates as compared to the prior year period.

Mary Anne Whitney: Adjusted EBITDA for Q1 as reconciled in our earnings release was $650 7 million up 14, 8% year over year and about $10 million above our outlook at 31, 4% of revenue our adjusted EBITDA margin was up 160 basis points year over year and two.

Mary Anne Whitney: <unk> basis points above our outlook.

Mary Anne Whitney: These results include an estimated 40 basis point margin drag related primarily to the extreme weather related impacts noted therefore on a normalized basis margins were up 200 basis points year over year.

Mary Anne Whitney: Net interest expense in the quarter increased by $10 $8 million over the prior year period to $76 4 million due to higher outstanding debt and increased interest rates as compared to the prior year period.

Mary Anne Whitney: During Q1, we completed a public offering of $750 million of senior notes with proceeds directed to floating rate debt repayment, reducing borrowing costs by over 100 basis points. Our current weighted average cost of debt is approximately 4.15%, with an average tenor of over 10 years. We ended the quarter with debt outstanding of about $7.9 billion, about 19% of which was floating rate, liquidity of approximately $830 million, and our leverage ratio, as defined in our credit agreement, was about 2.8 times debt to EBITDA. Our effective tax rate for the first quarter was just under 21 percent.

Mary Anne Whitney: During Q1, we completed a public offering of $750 million of senior notes with proceeds directed to floating rate debt repayment, reducing borrowing costs by over 100 basis points. Our current weighted average cost of debt is approximately $4 one 5% with an average tenure of over 10 years.

Mary Anne Whitney: We ended the quarter with debt outstanding of about seven 9 billion up 19% of which was floating rate liquidity of approximately $830 million and our leverage ratio as defined in our credit agreement was about two eight times debt to EBITDA.

Mary Anne Whitney: Our effective tax rate for the first quarter was just under 21%. The Q1 rate as expected included a benefit to the provision related to excess tax benefits associated with equity based compensation.

Mary Anne Whitney: In addition, it reflected the impact of an investment tax credit associated with an R&D facility expected to begin service during the year, which has about a 70 basis point benefit to our effective tax rate for 2024.

Mary Anne Whitney: The Q1 rate, as expected, included a benefit to the provision related to excess tax benefits associated with equity-based compensation. In addition, it reflected the impact of an investment tax credit associated with an R&G facility expected to begin service during the year, which has about a 70 basis point benefit to our effective tax rate for 2025. And finally, a just-decree cash flow of approximately $325 million was in line with our expectations and our full-year outlook of $1.2 billion, as provided in February.

Mary Anne Whitney: And finally, adjusted free cash flow of approximately $325 million was in line with our expectations and our full year outlook of $1 2 billion provided in February.

Mary Anne Whitney: I will now review our outlook for the second quarter of 2020. Before I do, we'd like to remind everyone once again that actual results may vary significantly based on risks and uncertainties outlined in our Safe Harbor Statement and filings we've made with the SEC and the Securities Commission or similar regulatory authorities in Canada. We encourage investors to review these factors. Our outlook assumes no significant change in underlying economic trends.

Speaker Change: I will now review our outlook for the second quarter of 2024 before I do we'd like to remind everyone. Once again that actual results may vary significantly based on risks and uncertainties outlined in our safe Harbor statement and filings we've made with the SEC and the securities commissions or similar regulatory authorities in Canada we.

Mary Anne Whitney: We encourage investors to review these factors carefully.

Mary Anne Whitney: Our outlook assumes no significant change in underlying economic trends. It also excludes any impact from additional acquisitions that may close during the remainder of the year and expensing of transaction related items during the period.

Mary Anne Whitney: It also excludes any impact from additional acquisitions that may close during the remainder of the year and expensing of transaction-related items during the period. Revenue in Q2 is estimated to be in the range of $2.2 to $2.225 billion. This includes solid waste price plus volume growth of approximately four percent, from a total price of six and a half to seven percent, on a core price of seven to seven and a half percent, and volume down two and a half to three.

Mary Anne Whitney: Revenue in Q2 is estimated to be in the range of $2 two to two to two 5 billion.

Mary Anne Whitney: This includes solid waste price plus volume growth of approximately 4% from total price of $6, 5% to 7% on core price of 7% to seven 5% and volume down two 5% to 3%.

Mary Anne Whitney: Adjusted EBITDA margin in Q2 is estimated at approximately 32.5%, up 140 basis points year-over-year. Depreciation and amortization expense for the second quarter is estimated at approximately 12.8% of revenue, including amortization of intangibles of about $44 million, or $0.13 per diluted share, net of taxes. Interest expense and interest income is estimated at approximately $82 million for the second quarter.

Mary Anne Whitney: Adjusted EBITDA margin in Q2 is estimated at approximately 32, 5% up 140 basis points year over year.

Mary Anne Whitney: Depreciation and amortization expense for the second quarter is estimated at approximately 12, 8% of revenue, including amortization of intangibles of about $44 million or <unk> 13 per diluted share net of taxes.

Mary Anne Whitney: Interest expense net of interest income is estimated at approximately $82 million for the second quarter and finally, our effective tax rate in Q2 is estimated at about 23, 5% subject to some variability.

Ronald J. Mittelstaedt: And finally, our effective tax rate in Q2 is estimated at about 23.5%, subject to some volatility. And now, let me turn the call back over to Ram for some final remarks before Q&A. Thank you, Marianne.

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

Ronald J. Mittelstaedt: Thank you Marianne.

Ronald J. Mittelstaedt: When I returned to the seat one year ago this week, I emphasized the importance of the decentralized operating model and culture of accountability that has served to drive differentiated results since our beginnings as a company. Reflecting on the progress that has been achieved over the past 12 months, I could not be prouder of our local team. Although we've added to the playbook and made some organizational changes, we've mostly reinforced our vision and values, and, as we say, are doubling down on human capital.

Ronald J. Mittelstaedt: When I returned to the seat one year ago. This week I emphasized the importance of the decentralized operating model and culture of accountability that is served to drive differentiation differentiated results since our beginnings as a company.

Ronald J. Mittelstaedt: <unk> on the progress that has been achieved over the past 12 months I could not be prouder of our local teams. Although we've added to the playbook and made some organizational changes, we've mostly reinforced our vision and values and as we say doubling down on human capital.

Ronald J. Mittelstaedt: And you've seen the results in our Most Important Operating Value, as we recorded in March the lowest number of safety incidents that we've seen for three years in spite of adding over 3,000 employees during that same period. So I want to conclude by thanking our 23,000 employees who put safety first every day and whose commitment to accountability is evident in not only what they say but what they do, as demonstrated by delivering such a strong start to 2024, with Solid Waste Pricing largely in place.

Ronald J. Mittelstaedt: And you've seen the results in our most important operating value as we reported in March the lowest number of safety incidents that we've seen for three years in spite of adding over 3000 employees during that same period.

Ronald J. Mittelstaedt: So I want to conclude by thanking our 23000 employees, who put safety first every day and his commitment to accountability is evident in not only what they say, but what they do as demonstrated by delivering such a strong start to 2024.

Ronald J. Mittelstaedt: With solid waste pricing largely in place improve.

Ronald J. Mittelstaedt: With improving operating trends, higher commodity values, and the benefit of what could be a record year of M&A, we are well positioned. That all said, we believe it's appropriate, as in previous years, to wait until our Q2 earnings release to consider updating our outlook for the full year. We appreciate your time today, and I will now turn this call over to the operator to open up the lines for your questions. Operator.

Ronald J. Mittelstaedt: Improving operating trends higher commodity values and the benefit of what could be a record year of M&A, we are well positioned.

Ronald J. Mittelstaedt: That all said, we believe it's appropriate as in prior years to wait until our Q2 earnings release to consider updating our outlook for the full year.

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

Speaker Change: Brighter.

Ronald J. Mittelstaedt: Ladies and gentlemen, we'll now begin the question and answer session. To ask a question, you may press star and one on a touch-tone telephone. If you are using a speakerphone, we do ask that you please pick up your handset prior to pressing the keys to ensure the best sound quality.

Speaker Change: Ladies and gentlemen, we will now begin the question and answer session to ask a question you May press star and one on a touchtone telephone.

Operator: If you are using a speaker phone we do ask you. Please pickup your handset prior to pressing the keys to ensure the best sound quality.

Operator: To withdraw your questions, you may press star and two. Time will pause momentarily to assemble the roster. And our first question today comes from Tyler Brown from Raymond James. Please go ahead with your question. Hey, good morning, everyone. Good morning, Tyler. Hey, Ron.

Operator: Withdraw your questions you May press star two.

Operator: We will pause momentarily to assemble the roster.

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

Tyler Brown: Hey, good morning, everyone.

Tyler Brown: Good morning, Tyler Hey, Brian Hey, obviously margins were up 160 basis point, I mean, a great start for the year, particularly given the drag from weather, but I was just hoping we could get a little bit more detail maybe on some of the puts and takes in the quarter because I do assume that maybe fuel recycling M&A will all slight tailwind, but just any.

Ronald J. Mittelstaedt: Hey, obviously, you know, margins up 160 basis points. I mean, a great start to the year, particularly given the drag from weather. But I was just hoping we could get a little bit more detail, maybe on some of the puts and takes in the quarter, because I do assume that maybe fuel, recycling, and M&A were all slight tailwinds, but just any additional color would be helpful. Sure, Tyler. So, the way we think about it, as we said in the remarks, think of it as 200 basis points, excluding those outsized impacts from weather, which resulted in lower volumes.

Speaker Change: Additional color would be helpful.

Speaker Change: Sure Tyler so the way, we think about it as we said in the remarks think of it as 200 basis points, excluding those outsized impacts from weather, which resulted in lower volumes. So when I think about those 200 basis points I'd split it into two large buckets, one being commodity driven recycling and <unk> combined.

Ronald J. Mittelstaedt: So, when I think about those 200 basis points, I split it into two large buckets, one being commodity driven, recycling and RIMS being combined, close to about 100 basis points, and the remainder, the rest of the business. So, that's really primarily underlying solid waste. You know, E&P was a good guy, and acquisitions are creative.

Speaker Change: Close to about 100 basis points and the remainder the rest of the business. So that's really primarily underlying solid waste you do E&P was a good guy acquisitions are accretive.

Ronald J. Mittelstaedt: And so, in the aggregate, that's another 100 basis points. And within there, you're seeing the benefits of that price cost spread and the improving trends on the operating side. For instance, when you look within wages, where we said we've been looking at same employee increases that last year went from 8% to about 6%, you're down under six, between five and a half percent and 6% in Q1. So, an example of where you're seeing that leverage from price costs and then similarly on some of those third-party costs as we bring down turnover and improve safety. Yeah, excellent. Okay. Yeah, a very core level.

Speaker Change: And so in the aggregate that's another 100 basis points and within there youre seeing the benefits of that price cost spread and the improving trends on the operating side.

Speaker Change: For instance, when you look within wages, where we had said we'd been looking at same employee increases that last year went from 8% to about 6% Youre down sub six between five 5% and 6% in Q1. So an example of where youre seeing that leverage from price cost and then similar.

Speaker Change: Early on some of those third party costs.

Speaker Change: We bring down turnover and improved safety.

Ronald J. Mittelstaedt: Good improvement. Hey, Ron, I'm sure there's going to be some additional questions about this, but maybe I'll just kind of kick off the discussion about it. But obviously, the US government EPA made some changes on the regulatory side on PFAS in the last couple weeks.

Speaker Change: Excellent Okay, Yeah, that's very core level, good improvement Hey, Ron I'm sure there's going to be some additional questions about this but maybe I'll just kind of kicking off the discussion about it but obviously the U S government EPA made some changes on the regulatory side on PFS in the last couple of weeks and I was just.

Ronald J. Mittelstaedt: And I was just, you know, hoping you could give us some high-level thoughts about that broadly, what it means for waste connections, but specifically, I was wondering what this may mean for landfill leachate costs in the near-to-intermediate term, and what are the prospects of recouping any additional costs, whether it be operating or capital costs. Well, first off, Tyler, let me say that I think what transpired with the legislation was effectively totally as expected, number one.

Ronald J. Mittelstaedt: Hoping you could give us some high level thoughts about that broadly what it means for waste connections, but specifically I was wondering to get your thoughts on what this may mean for landfill leachate costs just in the near to intermediate term and what are the prospects to recoup any additional costs, whether it be operating or capital costs.

Speaker Change: Sure.

Speaker Change: Well first off let me say that I think what transpired with the legislation was effectively totally as expected number. One this is not some surprise to us or to the greater industry by any means.

Ronald J. Mittelstaedt: This is not a surprise to us or to the greater industry by any means. Number two, I think, is to step back. Traditionally, and we can point to several examples of this, but traditionally, uniform new incremental federal regulation, such as this, is very good in both the short and long terms for a well-capitalized public company. It creates a level playing field, it creates a playing field where those with the access to capital and the infrastructure to take advantage of it are able to do so, and it creates a price opportunity that generally quite exceeds the cost to comply, both operating and capital-wise.

Speaker Change: Number two I think stepped back.

Speaker Change: Traditionally and we can point to several examples of this but traditionally uniforms, new incremental federal regulation such as this is very good.

Speaker Change: In both the short and long term for the well capitalized public companies.

Speaker Change: It has it creates a uniform playing field creates a playing field, where those with the access to capital and the infrastructure to <unk>.

Speaker Change: Take advantage of it are able to do so and it creates a price opportunity that generally quite exceeds the cost to comply both operating and capital wise. It also traditionally has created sort of an M&A catalyst.

Ronald J. Mittelstaedt: It also traditionally has created sort of a M&A catalyst. So, I don't think public companies are, in any way, concerned or fear this change in federal regulation. The other thing I would tell you is there's a lot of activity going on within the legislature and, particularly, of course, at the staff level where things get passed and then really the work begins of amending and modifying that regulation. And I think, from everything we're hearing, there will be changes to the regulation or, really, a codification of the regulation further that gives the intended purpose of the regulation, which was not so to be punitive to Landfills, a passive receiver, are taking this material as required by law and permit on behalf of the producers and the consumers of it.

Speaker Change: No.

Speaker Change: I don't think the public companies in any way.

Speaker Change: Our concern or fear this change in federal regulation. The other thing I would tell you is there's a lot of activity going on within the legislature and particularly of course at the staff level that things get passed and then really the work begins.

Speaker Change: Of amending and modifying that regulation and I think from everything we're hearing there will be changes to the regulation or really a codification of the regulation further that gives the the intended of.

Speaker Change: The intention of the regulation, which was not sort of be punitive to passive receivers such as landfills. Okay. Landfills are passive receiver. It's taking this material as required by law and permits on behalf of the producers and the consumers of it. This legislation is really targeted if there was a.

Ronald J. Mittelstaedt: This legislation is really targeted, if there's a word, at producers of the material, not passive receivers. So, I think you're going to see the language, the law, amended and changed to reflect more of that. As I said, and I think the EPA has been very clear that they said that it is not meant to create liability for those that are passive receivers.

Speaker Change: We're at producers of the of the materials not passive receivers, so I think youre going to see the language.

Speaker Change: But the law amended and changed to reflect more of that so.

Speaker Change: So as I said and I think the EPA has been very clear that they've said they've said that it is not meant to create liability for those that are passive receivers and thats what.

Ronald J. Mittelstaedt: And that's what, you know, our landfills are. So, a long-winded answer to you, Tyler, but, you know, the devil's ultimately in the details of how this gets implemented. We're still a ways from that.

Speaker Change: Our landfills are so a long winded answer to Tyler but.

Speaker Change: The Devil is ultimately in the details of how this gets implemented were still ways from that.

Ronald J. Mittelstaedt: Look, there are relatively low-cost capital opportunities for treatment such as foam fractionation and others for PFAS that we have already proactively done at several of our landfills over the last year and a half to two in anticipation of this. So, we have a good idea of what works and what may not. What I would tell you is it's not going to really move the needle, I don't think, for the industry on capital costs, and it will present an incremental pricing cost to price through it and recover it. At least, I can speak for us on that.

Speaker Change: Look there are there are relatively low cost.

Speaker Change: Capital.

Speaker Change: Opportunities for treatment, such as phone fractionation and others for P. Pause that we are doing already proactively at several of our landfills over the last year and a half to two in anticipation of this so we have a good idea of what works and what may not.

Speaker Change: And what I would tell you is it's not going to really move the needle I don't think for the industry.

Speaker Change: On the capital cost and it will present, an incremental pricing cost of price through it and recover it.

Speaker Change: At least I can speak for us on that.

Ronald J. Mittelstaedt: As far as the cost of leachate, again, if you go with a low-cost capital cost and do some on-site treatment, Tyler, it won't change the cost of leachate. Now, there are some POTWs that may not opt to take it or even treat it for just fear, but in most markets, there are options.

Speaker Change: As far as the cost of Leachate again, if you go with the capital. If you go with a low cost capital cost and do some onsite treatment Tyler.

Speaker Change: It won't change the cost of leachate now there are some <unk> that may opt to take it even even treated.

Speaker Change: Just.

Speaker Change: Fear and but in most markets. There are options if that does raise the cost of leachate again that will be a local pricing opportunity through that customer base, where there are less options. So I mean, it's a long winded answer, but I think thats, how we holistically think about this yeah no perfect extremely good color very much.

Ronald J. Mittelstaedt: If that does raise the cost of leachate, again, that will be a local pricing opportunity through that customer base where there are fewer options. So, I mean, it's a long-winded answer, but I think that's how we holistically think about, Yeah, no, perfect. Extremely good color.

Mary Anne Whitney: Very much appreciate it. One quick housekeeping. Mary Ann, based on what we know today, what's the M&A benefit to revenue based on what we know as of right now? So, when I think about the incremental deal activity that was done, that would add $80 to $90 million for the full year on top of what we already had, which I think was $325 million. Excellent. Perfect. Thank you. And our next question comes from. Sabahat Khan from RBC Capital Markets.

Speaker Change: Got it one quick housekeeping.

Speaker Change: And what is the.

Speaker Change: Based on what we know today, what's the M&A benefits to 'twenty four revenue based on what we know as of right now.

Speaker Change: So when I think about the incremental deal activity. It was done that would add $80 million to $90 million for the full year on top of what we already had which I think was $3 25.

Speaker Change: Excellent perfect. Thank you.

Speaker Change: And our next question comes from <unk> Khan from RBC Capital markets. Please go ahead with your question.

Ronald J. Mittelstaedt: Please go ahead with your question. Great. Thanks very much.

Ronald J. Mittelstaedt: Just on the Q2 guidance that you provided around volume being down 2.5% to 3%, I was just hoping if you could maybe detail that out a little bit in terms of shedding versus some of the other factors. You know, so I would say, if anything, what I think you should read into that is it suggests more margin opportunity and really reflects sort of an increased amount of M&A over the certainly already start of this year and the second half of last year.

Khan: Great. Thanks, very much just on the Q2 guidance that you've provided around volume being down two 5% to 3% I was just hoping if you can maybe detail that out a little bit in terms of shedding versus some of the other factors. Please.

Khan: Yeah.

Khan: So I would say if anything what I think you should read into that as it suggests more margin opportunity.

Khan: And really reflects sort of an increased amount of M&A over the certainly already of the start of this year in the second half of last year.

Ronald J. Mittelstaedt: So, you know, I would tell you that that's probably about 50 basis points more of an increase, which is basically all of that based on the guidance. And, you know, what we would expect you to see is roughly a 50 to 75 basis point incremental continuous improvement throughout this year, 100 basis points just on weather, as we said, Q1 to Q2, and then continuing from Q2 to Q3, Q3 to Q4, stepping up another 50 to 75 basis points per quarter. Again, that can change a little bit due to incremental shedding, but that's really the delta.

Khan: So I.

Khan: I would tell you that that's probably about 50 basis points more of the increase which is basically all of that base.

Khan: Based on the guidance.

Khan: And what we would expect you to see is roughly a 50 to 75 basis point incremental continuous improvement throughout this year, a 100 basis points just on weather as we said Q1 to Q2, and then continuing Q2 to three three to four stepping up another.

Khan: 50 to 75 basis points per quarter.

Khan: Again that can change a little bit due to incremental shedding.

Khan: But.

Khan: So really the delta.

Mary Anne Whitney: Okay, great. And then maybe just continuing the margin discussion from the last question, I think, you know, we're looking at another, I think, 100 plus beeps of margin improvement in Q2. Seems like the Q1 margin improvement was split between kind of core business and, you know, recycling, RINs, etc. Maybe just walk us through kind of the confidence around that 120 beeps in Q2. Where is that coming from?

Speaker Change: Okay, Great and then maybe just continuing the margin discussion from the last question.

Speaker Change: We're looking at another I think 100, plus bps of margin improvement in Q2. It seems like the Q1 margin improvement was split between kind of core business and recycling rins et cetera.

Speaker Change: Maybe just walk us through kind of the confidence around that 120 bps in Q2, what is that coming from maybe the split there and how much of a tailwind from sort of commodities and Rins are you baking into that improvement into the next quarter.

Mary Anne Whitney: Maybe the split there and, you know, how much of a tailwind from sort of commodities and RINs are you baking into that improvement for the next quarter? So the way to think about it is that the greatest margin contribution from recycled commodities and RIMS would be in the first quarter; it would decrease over the course of the year, all other things being equal just because the comparisons get tougher, right, because you had commodities ramp last year.

Speaker Change: Sure. So the way to think about it is that the greatest margin contribution from recycled commodities and rins have been in the first quarter a decrease over the course of the year all other things being equal just because the comparisons get tougher right. Because you had commodities ramp last year and so if by way of example, you started with 100 and <unk>.

Mary Anne Whitney: And so if by way of example you started with a hundred in Q1, you could see that stepping down to 60 or 50 basis points in Q2, so that really tells you that the tailwinds are coming from the underlying business and that is growing. And as we said, you know, we're coming into the year, we had talked about that outsized opportunity between that price cost spread that I described we're already seeing in Q1 and we'd expect that to continue, and also the operating leverage we're getting from those improving dynamics around retention and turnover, where we've said that we'd see it in a number of different areas and as we've indicated we're starting to see that, whether it's the relationship between overtime and straight time, even if we have more heads in place, but seeing overall.., and the reduction or the slower growth in third-party costs providing some more margin expansion on things like outside repairs.

Speaker Change: One you can see that stepping down to 60 or 50 basis points. In Q2. So that really tells you that the tail winds are coming from the underlying business and that is growing and as we said.

Speaker Change: Coming into the year, we had talked about that outsized opportunity between that price cost spread that I described we're already seeing in Q1, and we'd expect that to continue and also the operating leverage we are getting from those improving dynamics around retention and turnover, where we said that we'd.

Speaker Change: We'd see it in a number of different areas and as we've indicated we're starting to see that whether it's the relationship between overtime and straight time, even if we have more heads in place, but seeing overall improvement and the reduction of the slower growth in third party costs, providing some more margin expansion on things like outside repairs. So those are the types.

Mary Anne Whitney: So those are the types of dynamics that would contribute to growing operating leverage as we move through the year. And that's what gives us the conviction for Q2 is that we're already seeing it in the numbers in our operating statistics. And we know that the dynamic is that the savings follow after you see quarter after quarter of improvement. And one other thing I would note, you didn't ask it, but just to get it even more granular, as you know, we closed the secure E&P transaction in the first quarter, and we noted that, you know, it is margin accretive for the full year.

Speaker Change: The dynamics that would contribute to growing operating leverage as we move through the year and that's what gives us the conviction for Q2 is that we're already seeing it in the numbers in our operating statistics and we know that the dynamic is that the savings follow after you see those quarter after quarter of.

Speaker Change: Improvement and one other thing I would note just you didn't ask it but just to get it even more granular.

Speaker Change: As you know we closed the secure E&P transaction in the first quarter.

Speaker Change: We noted that it is margin accretive for the full year I would note that.

Mary Anne Whitney: I would note that, unlike our solid waste business, Q2 is actually the lowest seasonal quarter for revenue, EBITDA, and margin in that business due to the thaw breakup period that goes on in Canada from April through mid-June. So unlike our solid waste business, where Q1 is the seasonally weakest quarter, in that business, Q2 is comfortably the seasonally weakest quarter.

Speaker Change: Different than our solid waste business Q2 is actually the lowest seasonal quarter for revenue EBITDA and margin in that business due to the Saab breakup period that goes on in Canada from April through mid June so unlike our solid waste business.

Speaker Change: For Q1 is the seasonally weakest quarter in that business Q2 is comfortably the seasonally weakest quarter. So the point being that is not what is driving margins in Q2. It is our underlying solid waste business.

Ronald J. Mittelstaedt: So the point is, that is not what is driving margins in Q2. It is our underlying solid waste business. That's super helpful.

Ronald J. Mittelstaedt: And maybe just a quick follow-up, Ron, around your answer in the earlier question about the new PFAS regulation potentially adding to the M&A opportunity set. Presumably, this is going to take a while to play out, but maybe from a philosophical perspective, you know, how big of an addition could that be to the M&A set in terms of, you know, how many more folks could come to market? And, you know, over what period of time do you think that plays out in terms of the benefit to the larger acquirer?

Speaker Change: That's super helpful and maybe just a quick follow up Ron around your answer in the earlier question about.

Speaker Change: The new <unk> regulation, potentially adding to the M&A opportunity set.

Ronald J. Mittelstaedt: Presumably this is going to take a while to play out, but maybe from a philosophical perspective, how big.

Ronald J. Mittelstaedt: In addition could that be to the M&A is in terms of how many more folks could come to market and over what period of time do you think that plays out in terms of the benefit too.

Ronald J. Mittelstaedt: The larger acquirers.

Ronald J. Mittelstaedt: Yeah, well, number one, I would tell you it is too early to understand and all that. I think it depends, ultimately, on what the regulation is and, you know, how private folks decide, excuse me, to comply with it.

Speaker Change: Yeah, well number one I would tell you it is too early to.

Speaker Change: Understanding and all that.

Speaker Change: I think it depends on ultimately what the regulation is.

Ronald J. Mittelstaedt: How private folks depend decide excuse me to comply with it.

Ronald J. Mittelstaedt: You know, obviously, it has the most effect on disposal-related assets directly. And, of course, there are far fewer of those today than there were in previous cycles of, you know, incremental federal regulatory change. But without question, it has traditionally been a macro driver. It does take time for that to happen, so it's not something that's going to be a 24- or maybe even an early 25 thing.

Ronald J. Mittelstaedt: You obviously it has the most effect on disposal related assets.

Ronald J. Mittelstaedt: Directly.

Ronald J. Mittelstaedt: And of course, there are far less of those today than there were in previous cycles of.

Ronald J. Mittelstaedt: Incremental federal regulation change, but without question. It has traditionally been a macro driver. It does take time for that to happen. So it's not something that's going to be a 24 or maybe even in early 'twenty five thing, but over time. It does it tends to drive M&A.

Ronald J. Mittelstaedt: But over time, it does tend to drive M&A. Thanks very much for the call. Our next question comes from Michael E. Hoffman from Steeple. Please go ahead with your question. Hi, good morning, and thanks for taking the questions.

Speaker Change: Okay. Thanks, very much for the color.

Speaker Change: Okay.

Ronald J. Mittelstaedt: Ron, how would you think about where open positions are compared to year over year? And then sort of second to that is, at the point you get fully loaded with your in-house training... how do you feel about how the proportion of your fill rate will be driven by the things you actually own and control in the training? So, Michael, historically, meaning for, you know, let's just call it, 15, 20 years through various cycles, we've always targeted running the company at about a 3.5 to 4% open head count at all times, given through some natural attrition and then, of course, involuntary turnover that we're being proactive on. At our worst time, as we came through into 22, and into 23, we actually peaked at approaching 7.5% open headcount.

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

Ronald J. Mittelstaedt: We have reduced that throughout 23 to present to where we are now down right to about 4 percent, maybe even 3.9 on a run rate basis. So we're really at where we have historically run. We have a few regions that are down in the 2.5 percent level, and we're very comfortable with that. So, you know, we've reduced open headcounts year over year to date by 46 percent. That is the number.

Michael Edward Hoffman: Hi, good morning, Thanks for taking the questions.

Ronald J. Mittelstaedt: We've reduced voluntary turnover by where it peaked. We are now down to about 15.7 percent as of April 1, with a target of getting to between 10 and 12 by year end and entering 25. So we're well more than halfway to our target from where we were 12 months ago. Now, to the second part of your question, I would say that our objective as we come through what we believe will be mid-25, so call it a year from this summer, our objective is to get to about a third or more of those that we hire coming through our in-house development and academy. That would be the target. Now, you know, there could be more beyond that. But that's our target one in three of getting to that.

Michael Edward Hoffman: Brian How would you think about where open positions are versus year over year, and then sort of second to that is.

Michael Edward Hoffman: That's the point you get fully loaded with your in house training.

Michael Edward Hoffman: How do you feel about how with a proportion of your your fill rate will be driven by the things you actually own and control and the training.

Michael Edward Hoffman: Okay.

Speaker Change: So Michael we have historically.

Michael Edward Hoffman: Meaning for lets just call. It 15 20 years through various cycles, we've always targeted running the company at about a $3, 5% to 4% open head count.

Michael Edward Hoffman: At all times given through some natural attrition of and then of course in voluntary turnover that we're being proactive on.

Speaker Change: At our worst time as we came through into 'twenty two into 'twenty three we actually peaked at approaching seven and 5% open headcount positions, we have reduced that throughout 'twenty three to present to where we are now down right to about 4%, maybe even three nine on a run.

Speaker Change: Basis, So we're really.

Speaker Change: Where we have historically run we have a few regions that are down in the two 5% level.

Speaker Change: And.

Speaker Change: And we're very comfortable with that so we've reduced open head counts year over a year to date by 46%.

Speaker Change: That is the number we've reduced voluntary turnover by.

Speaker Change: Where it peaked.

Speaker Change: We are now down to about 15, 7% as of April one.

Speaker Change: With a target of getting to between 10 and 12 by at year end and entering 25, so we're well more than halfway to our target from where we were 12 months ago.

Speaker Change:

Speaker Change: And now to the second part of your question I would say that our objective as we come through what we believe will be mid 'twenty five so quality year from this summer our objective is to get to sort of a third or more of those that we hire coming through.

Speaker Change: Our in house, what I'll call, our in house development, and and academies that that would be the target.

Speaker Change: Could be more beyond that but that's our target one in three of getting to that.

Speaker Change: Okay, that's terrific and then.

Ronald J. Mittelstaedt: Okay, that's terrific. And then... Everybody's going to wring their hands about PFAS for a while until this all plays itself out. But putting it in perspective, leachate costs are 1 to 2 percent of revenues, and then it's not 5 to 6. No, it's actually even lower, Michael. One is a fair average; it's actually just below.

Speaker Change: Everybody is going to wring their hands about <unk> for a while until this all plays itself out, but putting it in perspective, we take cost or 1% to 2% of revenues.

Speaker Change: Five to 10.

Speaker Change: No. The fact that it's actually even lower Michael.

Speaker Change: One is a fair average it actually just below okay and the the treatment technologies that you mentioned I mean were 15 to 20 billion gallons a year earlier.

Ronald J. Mittelstaedt: Okay, and the treatment technologies that you mentioned, I mean, we're 15 to 20 billion gallons of leachate per year, you know, as an industry, it's 5 to 20 cents a gallon, the range, but the treatment technologies are inside that. So it's not like you're quadrupling or whatever if you had to add those technologies to pre-treat and take the PFAS out before. Michael, as you know, there's great variability in the size of landfills and the amount of leachate based on how old they are and how much waste mass is in place, and, of course, what the weather conditions are in that geography, but you're talking about $1 to $4 million for the capital cost to treat most landfills in the U.S., and that will then lower the leachate cost to what it is today.

Speaker Change: Industry, it's five to 20 cents a gallon.

Speaker Change: Is the range, but the treatment technologies are inside that range. So it's not like you're quadrupling or whatever if you had to add those technologies to pretreat take the paper side before.

Speaker Change: No I mean, Michael I mean, as you know there is great variability in the size of landfills in the amount of leachate based on how old they are and how much waste masses in place and of course, what the weather conditions are in that geography.

Speaker Change: Youre talking about $1 million to $4 million for the capital cost to do treatment of most landfills in the U S.

Speaker Change: And that will then lower the leachate cost to what it is to that.

Ronald J. Mittelstaedt: Got it. Okay. And then, my understanding is that the Senate had a meeting about a month ago that proactively, the Environmental Public Works Committee proactively sought to discuss what that intervention language should look like with a real objective of trying to get something passed in 2024. Are you hearing anything different than that?

Speaker Change: Got it Okay and then my understanding in the Senate had a meeting about a month ago.

Speaker Change: That proactively.

Speaker Change: Environmental Public works Committee.

Speaker Change: Proactively sought to discuss what that intervention language should look like with a real objective of trying to get something passed in 2024.

Speaker Change: Are you hearing anything different from that.

Ronald J. Mittelstaedt: You know, I have heard the same thing through the Industry Association Council and lobbyists, but I do not have any better information than that, Michael. Okay. Great. Thank you. Thank you.

Speaker Change: Yeah.

Speaker Change: I have heard the same thing through industry Association Council and lobbyists.

Speaker Change: I do not have any better information than that Michael Okay, great. Thank you.

Speaker Change: Okay.

Ronald J. Mittelstaedt: Our next question comes from Kevin Chiang from CIBC; please go ahead with your question. Thanks for taking my question, and congratulations on a good quarter here and start to the year. Maybe if I could just start with the marginal performance. If I look at your full-year guide, which I know you haven't updated at this point in time, full-year 120 basis points, and if I think back to how we thought that would play out through the year, maybe a little bit of outperformance in H1, maybe a little bit below the 120 in H2, but broadly speaking, pretty even throughout. Just given the outperformance in H1, should we think about outperformance carrying through to H2?

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

Mary Anne Whitney: I know you're not officially updating your guide, but anything you can push back on that kind of simple math just given in the H1 performance so far? Sure, so just to reiterate or underscore what you've talked about in terms of what expectations we laid out for the year. You're right.

Kevin Chiang: Thanks for taking my question and congrats on a good quarter here and start to the year.

Kevin Chiang: Maybe if I could just.

Kevin Chiang: Start with the margin outperformance if I look at your full year guide, which I know you have an updated.

Speaker Change: At this point in time.

Kevin Chiang: Full year 120 basis points.

Kevin Chiang: If I think back to how we thought that would play to play through the year, maybe a little bit of outperformance in each one maybe a little bit below the 122, but broadly speaking pretty even throughout.

Kevin Chiang: Given the outperformance in each one should we think about Oklahoma clearing through H, two I know you're not officially updating your guide but any.

Kevin Chiang: Anything.

Kevin Chiang: If anything you pushed back on that kind of simple math just given.

Kevin Chiang: One performance.

Speaker Change: So far.

Mary Anne Whitney: We said that it was pretty evenly distributed was our expectation for that 120 basis points margin expansion. We also said, as I mentioned earlier, that the contribution from recycled commodities and RINs would be greatest, greater in the first half and the beta over the course of the year. So, I'd just be mindful of the fact that, as we've noted, some of the benefit in Q1 was from commodities. And so the expectation would have to be that if you're marking the market here, then you'd continue to have that benefit.

Speaker Change: Sure. So so just check.

Speaker Change: Just reiterate or underscore what you've talked about in terms of what expectations. We laid out for the year, you're right. We said that it was pretty evenly distributed was our expectation for that 120 basis points margin expansion. We also said as I mentioned earlier that the contribution from recycled commodities and rents would be greatest greater in the first half in the beta.

Speaker Change: For the course of the year so.

Speaker Change: Just be mindful of the fact that as as we've noted some of the benefit in Q1 was from commodities and so the expectation would have to be that if you're marking to market. Here. Then you would continue to have that benefit. The other thing to keep in mind is some of our outsized performance on the topline with M&A and so as we continue to do M&A.

Mary Anne Whitney: The other thing to keep in mind is some of our outside performance on the top line with M&A. And so, as we continue to do M&A, which is typically a little diluted if it's the typical collection company, you'd want to factor that into your expectations, which is why, as we think about it, updating in July, or considering taking a look at that in July, as we always do, feels appropriate given all those dynamics. Okay, that's helpful.

Speaker Change: <unk> is typically a little dilutive.

Speaker Change: The typical collection company, we'd want you'd want to factor that into your expectations, which is why as we think about it updating in July is there considering taking a look at that in July as we always do.

Speaker Change: As appropriate given all those dynamics.

Ronald J. Mittelstaedt: And maybe just my second question, and maybe it's a bigger, bigger picture question about some of the in-house development you're doing. And you talked about a target of one-third, and I'm not sure if you have enough granularity on this, but I'd be interested in knowing, you know, I suspect you're pulling in a lot of people, or people move back and forth between. Do you think it ends up being pretty steady through a freight cycle just because you offer a different work-life balance, or do you think it becomes more challenging if the Yeah, well, so let's take a step back, Kevin.

Speaker Change: Okay. That's helpful.

Speaker Change: And maybe just my second question.

Speaker Change: Maybe it's a bigger business.

Speaker Change: Bigger picture question on some of the in House development Youre doing as we've talked about a target.

Speaker Change: Of one third and I'm not sure if you have enough granularity on this but I'd be interested in knowing.

Speaker Change: Spectra pulling a lot of people are people move back and forth between.

Speaker Change: Was it working for the broader transportation sector. So.

Speaker Change: Truck drivers.

Speaker Change: And its workers.

Speaker Change: And that fueled versus not.

Speaker Change: Those that might enter the waste sector.

Speaker Change: We were in the midst of a very long recession here, so I suspect that's a tailwind.

Speaker Change: For people that are looking to.

Speaker Change: To join your firm I guess as you think about the great recession eventually exit them.

Speaker Change: How much volatility do you think that.

Speaker Change: Two.

Speaker Change: I guess its in house development do you think it ends.

Speaker Change: It ended up being pretty steady pure freight cycle, just because of all of our different work life balance or do you think it becomes more challenging.

Speaker Change: Afraid economy starts starts.

Speaker Change: Starts to really move up here.

Speaker Change: Competition for long haul trucking becomes a.

Speaker Change: A little bit more favorable than it is today.

Ronald J. Mittelstaedt: I'll answer it in a little bit of a different way, but I think it will get to what you're asking. So traditionally, for us, and I would say most of the industry, our largest two employee bases are, of course, CDL drivers and diesel technicians or mechanics. When we have had, as a company and an industry, an opening for that, we have sought to pursue somebody who is a CDL driver or somebody who is a certified diesel technician, which means that we either have to find them unemployed, or we have to steal them from another employer, usually by offering better compensation and or structure for them.

Speaker Change: Yeah, well, so let's take a step back Kevin I'll answer it in a little bit different way, but I think it will get to what you're asking.

Speaker Change: Okay.

Speaker Change: So traditionally for us and I would say most of the industry remember our largest too.

Speaker Change: Employee bases are of course, CDL drivers and diesel technician or mechanics.

Speaker Change: When we have had as a company and an industry and opening for that we have sought to pursue somebody who is a CDL driver or somebody who is a certified diesel technician.

Speaker Change: Which means that we either have to find them unemployed or we have to find we have to steal them from another employer, usually by a better compensation pandore.

Speaker Change: <unk> for that.

Ronald J. Mittelstaedt: Um, you know, that in a tight economy is a vicious cycle. What we are doing by opening these academies that we are doing is we are actually pursuing a different type of employee. This is an employee who we are upskilling quite dramatically from where they are. So we are not bringing in somebody who has a CDL into our CDL driving academies. We are not bringing someone in to our diesel technician partnership school for somebody that has a maintenance background.

Speaker Change: That in a tight economy is a vicious cycle.

Speaker Change: What we are doing by opening these academies that we are doing is we are actually pursuing a different type of employee.

Speaker Change: This is an employee who we are up skilling quite dramatically from where they are so we are not bringing in somebody who has a CDL into our CEO driving academies, we are not bringing someone in to our diesel technician partnership school for somebody that has a maintenance.

Ronald J. Mittelstaedt: So this is a longer approach. It is a dynamic, positive change to the impact of that type of employee. It is often an employee who has been with us for a period of time, so we know their character and we are making an investment in them.

Speaker Change: Ground.

Speaker Change: So this is a longer approach it is a dynamic positive change to the impact of that type of employee.

Speaker Change: It is often an employee who has been with us for a period of time, So we know their character.

Speaker Change: We are making an investment.

Ronald J. Mittelstaedt: We're also doing it from people on the outside. So an example would be, you know, instead of hiring somebody with a CDL and taking them from another waste company or a trucking company, we're hiring someone who's been with Home Depot for two years as a forklift operator who has a great track record and safety culture, but it's another $10 an hour opportunity if we can get them their CDL, and it totally changes their life and, I would say, their commitment to us So, That's why it won't be 100% of my response to Michael Hoffman, but I think it will ultimately be a third.

Speaker Change: We're also doing it from people on the on the outside so an example would be.

Speaker Change: Instead of hiring somebody with a CDL and taking them from another waste company or a trucking company. We're hiring someone who has been with home depot for two years as a forklift operator.

Speaker Change: That has a great track record in safety culture.

Speaker Change: But it's another $10 an hour opportunity if we can get them their CDL and it totally changes there their life and I would say our the commitment to us so.

Speaker Change: That's why it won't be 100% to my response to Michael Hoffman, but I think it will ultimately be a third.

Ronald J. Mittelstaedt: So I'm less concerned as we go into a tight economy, if and when we do, which of course we will, with us having this approach to help buffer that. It's another reason we're actually doing it. That's great, Calder. Thank you very much.

Speaker Change: I am less concerned as we go into a tight economy.

Speaker Change: If and when we do which of course, we will.

Speaker Change: With us having this approach to help buffer that it's another reason, we're actually doing it.

Speaker Change: That's great color. Thank you very much.

Ronald J. Mittelstaedt: Our next question comes from Noah Kaye from Oppenheimer. Please go ahead with your question. Oh, thanks. Hey, Ron, we talked last quarter about, you know, the $5 billion or so now fitting the market model for M&A, you know, the internalization opportunities around the North. I guess just given your comments around this year potentially being one of the busiest ever and in recognition of what you've done already, just wondering if we could get some more color either around the regional mix that you see those opportunities in and what kind of profile of the types of acquisitions you're looking at.

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

Noah Duke Kaye: Thanks, Ron.

Noah Duke Kaye: <unk> talked last quarter about a $5 billion or so now fitting the market model for M&A and internalization opportunities around the northeast and I guess, just given your comments around this year potentially being one of the busiest ever.

Noah Duke Kaye: Recognition of what you've done already just wondering if we get some more color either around the regional mix that you see those opportunities in.

Noah Duke Kaye: And what are the kind of the profile of the types of acquisitions, you're looking at.

Ronald J. Mittelstaedt: Sure. Well, I would say, first off, Noah, that there are opportunities in all of our solid waste regions. We have five regions in the U.S. and one in Canada, as you know, and we have active LOIs signed and discussions going on in all of those regions. They are all what I would consider our traditional solid waste companies, collection companies, integrated companies, companies with transfer stations, etc.

Speaker Change: Sure well I would say first off no.

Speaker Change: There is we've got opportunities in all of our <unk>.

Speaker Change: Solid waste regions, we have five regions in the U S and one in Canada as you know and we have active.

Speaker Change: LOI signed an discussions going and all of those regions. They are all what I would consider our traditional solid waste.

Speaker Change: Company's collection companies.

Speaker Change: Integrated companies companies with transfer stations et cetera.

Speaker Change: So.

Speaker Change: I am not necessarily.

Ronald J. Mittelstaedt: So, you know, I'm not necessarily saying there's an incremental weighting to some geography or the other. It's probably a little bit more in our competitive footprint right now. Of course, our competitive footprint is a little larger. Franchise transactions and the exclusive models take a little longer, although we have several signed as well.

Speaker Change: Saying, there's an incremental waiting to some geography or the other it's probably a little bit more in our competitive footprint right now of course, our competitive footprint is a little larger.

Speaker Change: Franchise transactions and the exclusive models take a little longer although we have several signed as well.

Ronald J. Mittelstaedt: So, it's pretty balanced, which is what gives us the confidence to say that, you know, we have an opportunity for perhaps a record year, other than, you know, the year we did the public merger. So, and this, you know, this is, as I said, all core, key solid waste business. Certainly, we're focused on improving our utilization of our Arrowhead asset and increasing tonnage through that asset that we acquired in August of 2023. And there are definitely transactions that will boost that. So, you know, but those can come from sort of the mid-south all the way up through the eastern seaboard.

Speaker Change: So it's pretty balanced which is what gives us the confidence to say that.

Speaker Change: Have an opportunity, perhaps a record year other than the year, we did a public merger.

Speaker Change: So.

Speaker Change: And this is as I said, all core key solid waste business, certainly we're focused on improving our utilization of our arrowhead asset.

Speaker Change: And incremental tonnage through that asset that we acquired in August of 'twenty, three and there are definitely transactions that that will boost that.

Speaker Change: So that but but those can come from sort of the mid south all the way up through the eastern seaboard. So.

Ronald J. Mittelstaedt: So, you know, we have a busy plate, a lot going on. And I think over the next couple of quarters, hopefully, some of that will become clearer for everyone. Thanks Ron, and you know I was just reflecting on your comments to start the call about, you know, where you in the business sit a year later since you're coming back. And I guess the question is, you know... Too certain to declare victory, but you've made a lot of progress already on things like employee retention and turnover reduction.

Speaker Change: Yeah.

Speaker Change: We have a busy plate a lot going on and I think over the next couple of quarters hopefully.

Speaker Change: Some of that will will become clear for everyone.

Speaker Change: Thanks, Ron.

Speaker Change: I was just reflecting on on your comments to start the call about.

Speaker Change: Where you are in the business set.

Speaker Change: A year later.

Speaker Change: Since you are coming back.

Speaker Change: And I guess the question is.

Speaker Change: Too soon to declare victory, but you've made a lot of progress already.

Speaker Change: Things like employee retention and turnover reduction.

Ronald J. Mittelstaedt: Where are your incremental focus areas at this point for operational improvement within the business? Well, first off, thank you. I would say all our teams, our local teams, and our regions have made improvements. We just get to talk about them.

Speaker Change: Where are your incremental focus areas at this point for operational improvements within the business.

Speaker Change: Okay.

Speaker Change: Well first of all thank you.

Speaker Change: I would say all of our team our local teams in our regions have made the improvements.

Speaker Change: We just get to talk about them.

Ronald J. Mittelstaedt: You know, look, we're going to continue doing that. You know, when I first got back, I said, I think on this call one year ago this week, if you're going to follow one thing, follow turnover because it drives everything. You know, it drives incremental improvement in cost, it drives safety, it drives customer satisfaction, it drives our ability to pursue incremental volumes of all types that we otherwise might not be able to if headcount is too open, so it will help us get better across the board.

Speaker Change: But.

Speaker Change: Look we're going to continue doing that first got back I said I think on this call one year ago. This week.

Speaker Change: If youre going to follow one thing fall followed turnover because it drives everything.

Speaker Change: It drives incremental improvement in.

Speaker Change: Cost it drives safety it drives customer satisfaction it drives our ability to pursue incremental volumes of all types that we otherwise might not be able to <unk> head count as to open. So so it will help us get better across the board.

Ronald J. Mittelstaedt: So that's going to continue to be a huge focus and continue to maintain and drive down, particularly voluntary turnover. So that's a focus, we have a huge focus on risk, as you know, we've always had a huge focus on price, and that's not going to change. And as we continue to get, you know, I'll call it, healthier in how we're performing, both operating wise and financially, then we've got the ability to step on the pedal on growth, both organically and inorganically. And I would tell you that, you know, a year ago, we really couldn't afford to do that. Because we were just trying to get through the quarters with the amount of open positions, etc.

Speaker Change: So that's going to continue to be a huge focus.

Speaker Change: And continuing to maintain.

Speaker Change: And drive down, particularly voluntary turnover.

Speaker Change: So that's the focus we have a huge focus on risk as you know we've always had a huge focus on price that's not going to change and.

Speaker Change: And as we continue to get.

Speaker Change: Call it healthier in how we're performing.

Speaker Change: Both operating wise and financially than we've got the ability to step on the pedal on growth.

Speaker Change: Both organically and Inorganically and I would tell you that a year ago, we really couldn't afford to do that.

Speaker Change: Because we were just trying to get through the quarters with the amount of open positions.

Speaker Change: Et cetera, and that just puts a strain on the entire organization at every level. So.

Ronald J. Mittelstaedt: And that just puts strain on the entire organization at every level. So the focus isn't going to change, other than I think you'll continue to see us have more opportunities for growth. You know, we've got, you know, we don't talk about it; that's not our style. We've got all kinds of different things we're working on, utilization of AI in a number of different areas, but we don't come out and put benchmarks on that; we'll let the margin talk about that when we complete them. So, you know, certainly we have room for technological improvement in our operating platform over the next several years. Appreciate that, Collette.

Speaker Change: So the focus isn't going to change other than I think youll continue to see us have more opportunity for growth.

Speaker Change: We've got we don't talk about it that's not our style they've got all kinds of different.

Speaker Change: Things were working on utilization of AI.

Speaker Change: In a number of different areas, but we don't come out put benchmarks to that.

Speaker Change: We'll let the margin talk about that when we when we complete them. So.

Speaker Change: Certainly we have room for technology improvement in our operating platform over the next several years.

Speaker Change: I appreciate that color. Thank you.

Ronald J. Mittelstaedt: Thank you. Our next question comes from Bryan Burgmeier from Citi. Please go ahead with your question. Good morning.

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

Ronald J. Mittelstaedt: Thank you for taking the question. Ron, I know it's only been, you know, three months since you closed the secure acquisition. But, you know, I think in the last call you mentioned the company is running about 22 of the 29 acquired facilities and some of them, you know, maybe will come back online this year. Is there any update on that?

Brian: Good morning, Thank you for taking the question.

Brian: Ron I know, it's only been three months since you've closed the secure acquisition, but I think in the last call. You mentioned the company is running about 22 to 29 acquired facilities and some of them maybe come back on line this year.

Ronald J. Mittelstaedt: I guess I'm just curious what exactly is being assumed in guidance now. And if it's too soon to say, I totally understand. You know, maybe that's a better item for July or October.

Speaker Change: Is there any update there I guess I'm just curious what exactly is being assumed in guidance now and if it's too soon to say I totally understand maybe thats a better rate for July or October.

Ronald J. Mittelstaedt: Yeah, Okay, well thanks, Brian.

Ronald J. Mittelstaedt: So number one the guidance does not assume any incremental opening of those seven shut.

Speaker Change: Shuttered facilities.

Ronald J. Mittelstaedt: Yeah, okay. Well, thanks, Brian. Number one, the guidance does not assume any incremental opening of those seven shuttered facilities.

Speaker Change: I believe that prior to year end, we will open up to two of those I think we'll understand that better come July but I think we will open potentially two of the seven that are shuttered right now before year end or maybe right at year end. So.

Ronald J. Mittelstaedt: I believe that prior to year-end, we will open up to two of those. I think we'll understand that better come July, but I think we will open potentially two of the seven that are shuttered right now before year-end or maybe right at year-end. So, you know, maybe not contributing anything to 24, but certainly some rollover into 25.

Speaker Change: Maybe not contributing anything to 'twenty four but certainly some rollover into 25 and then we will evaluate continue to evaluate the other five of the seven.

Ronald J. Mittelstaedt: And then we will, you know, evaluate, continue to evaluate the other five of the seven, and you'll see various openings occur throughout 25 and into 26. I ultimately believe that we will probably open six of the seven, those incremental ones that we acquire. Got it, got it.

Speaker Change: And you'll see various openings occur throughout 'twenty, five and into 26 I. Ultimately believe that we will probably open six of the seven that are incremental ones that we acquired.

Mary Anne Whitney: Thanks for that detail. And, you know, last question for me, maybe just for Mary Ann, and apologies if I missed this. Can you remind us what your guidance is assuming right now for recycled commodity prices and RIN prices, and then where Waste Connections stands with those items in one queue? Thank you. I'll turn it over to Mary.

Speaker Change: Got it got it thanks for that detail and last question for me, maybe just for Maryann and apologies if I missed this could you remind us what your guidance is assuming right now for recycled commodity prices and RIN prices than where waste connections stood with.

Speaker Change: With those items in <unk>. Thank you I'll turn it over.

Mary Anne Whitney: Sure, so for 1Q, OCC was $130 a ton, and RIMS averaged $3.10. You did see OCC tick up a little higher over the course of the quarter, and it ended closer to $140, so we always mark to market, so basically, the assumption is they're around current levels. That's what is included in the guidance. And our next question comes from Toni Kaplan from Morgan Stanley. Please go ahead with your question. Hi guys, this is Hilary Lee on behalf of Toni.

Maryann: Sure separate <unk> OCC was $130 a ton of Rins averaged $3.10 you did see OCC tick up a little higher over the course of the quarter and it ended closer to 140. So we're not in we always mark to market base.

Speaker Change: Basically the assumption is there around current level Thats. What is included in the guidance for Q2.

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

Toni Michele Kaplan: Hi, guys. This is hilary on for Tony.

Hilary Lee: You know, great quarter. Congratulations. Was just wanting to talk about margin a little bit, kind of going back to Kevin's question. It looks like, you know, with the rest of the year potentially being evenly distributed, it could possibly reach 34% by the back half of the year. So just wondering what would need to happen for you guys to get to that threshold or, you know, what could hold you back.

Hilary: Great quarter congrats.

Hilary: Just wanted to talk about margin a little bit kind of going back to Kevin's question. It looks like you know what.

Hilary: The rest of the year potentially being evenly distributed could possibly reached 34% by the back half of the year. So just wondering.

Hilary: Need to happen for you guys to get to a threshold or what could hold you back.

Hilary Lee: Well, you know, first of all, I'd say in the guidance we gave for the full year, we acknowledged that in Q3, the seasonally strongest quarter, we would be approaching those levels. Because if you just put 120 basis points on top of each of the four quarters, I think that would bring you up to 33.7, right?

Hilary: Well.

Speaker Change: First of all I would say in the guidance we gave for the full year. We acknowledged that in Q3 is the seasonally strongest quarter, we would be approaching those levels. Because if you just put 120 basis points on top of each of the four quarters I think that brought you up to.

Hilary: 33, <unk> right so.

Speaker Change: Yes, basically we said without performed as I noted some of that is commodities. Some of it is the underlying business and some as acquisition contribution and so those three variables I would say it will dictate the extent to which we get to that level or somewhere around there, but I don't disagree with your setup.

Mary Anne Whitney: So, you know, basically, we said we'd outperformed. As I noted, some of that is commodities, some of it is the underlying business, and some is acquisition contribution. And so those three variables, I would say, will dictate the extent to which we get to that level or somewhere around there. But I don't disagree with your setup.

Hilary Lee: And if, again, things play out in subsequent quarters, the way they did in Q1, meaning the outperformance we saw from all of those various drivers, that certainly is striking. Got it. Thank you. And, you know, because the 34% is, you know, well within sight, I guess, do you guys have another target in mind or, you know, anything that you guys are kind of reaching towards after that? I know it might be a little early to comment on that, though.

Speaker Change: If things play out in subsequent quarters the way they did in Q1, meaning the outperformance we saw from all of those various drivers that certainly is in striking distance.

Speaker Change: Got it thank you.

Speaker Change: Because the 34% is well within sight.

Speaker Change: Do you guys have another target in mind or anything that you guys are kind of reaching towards after that I know it might be a little early to comment on that though.

Mary Anne Whitney: Well, we never meant for 34% to be a limiting factor. It was just more of a conversational tone because we've certainly been there before. But as you may recall, or some folks on the call may recall, we said that before we had closed the Secure transaction, and we said that Secure would be 50 basis points accretive to overall margins. And so I think that tells you we already have our sights set well north of 34%.

Speaker Change: Well, we never met for 34% to be a limiting factor. It's just a much more conversational because we've certainly been there before but.

Speaker Change: As you May recall, there are some folks on the call may recall, we said that before we had closed the secure transaction and we said that secure would be 50 basis points accretive to overall margins and so I think that tells you we already have our sights set well north of 34% and I would also say Hillary that.

Mary Anne Whitney: And I would also say, Hilary, that, you know, remember, that does not include $200 million of EBITDA from proposed and planned R&G facility openings in 26, our contribution that we've said. So it also did not include that.

Speaker Change: Remember that does not include $200 million of EBITDA from proposed and planned RMG facility openings in 2006, our contribution that we've said.

Speaker Change: So.

Speaker Change: It also did not include that.

Ronald J. Mittelstaedt: Great, thanks. And just lastly, I just want to know if you guys have an update regarding the New York City franchise process, you know, anything going on there, any updates? You know, no real updates, I mean, everything's moving incrementally forward, positive. Starting September 4th, whatever the day is right after Labor Day, that Tuesday is the first operating day of the beta pilot for several of the zones that the city is going to run for 90 days, basically till almost year end.

Speaker Change: Great. Thanks, and just lastly, I just wanted to know if you guys have an update regarding the New York City franchise process.

Speaker Change: Anything going on there or any updates.

Speaker Change: No no real updates.

Speaker Change: Everything is moving incrementally forward positive.

Speaker Change: We start September.

Speaker Change: Fourth of whatever the day is right after labor day that Tuesday is the first operating day of.

Speaker Change: The beta pilot for several of the zones that the city is going to run for 90 days basically until almost a year end.

Hilary Lee: I would tell you the other update is the city asked us a while back to demo some electric vehicles, and we have taken delivery of some of those in the month of April and have begun operating those for the city to see how that works performance-wise in all areas. So, I mean, these are just little anecdotal updates, but those are really the updates right now. Great, thank you. And, you know, if we could get invited to the New York demo, that'd be great. But thanks again.

Speaker Change: I would tell you. The other update is the city asked us a while back to to demo some electric vehicles and we have taken delivery of some of those in the month of April.

Speaker Change: And have begun operating those.

Speaker Change: For the city to see how that works performance wise.

Speaker Change: In all areas.

Speaker Change: I mean, these are those and a little anecdotal updates, but those are really the updates right now.

Speaker Change: Oh, great. Thank you and if we could given by the New York demo that'd be great.

Speaker Change: Thanks again, great quarter.

Speaker Change: Thank you.

Operator: Great quarter. Thank you. Our next question comes from Jerry Revich from Goldman Sachs. Please go ahead with your question. Hi, this is Adam one for Jerry today.

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

Adam Samuel Bubes: Thanks for taking my question. Um, really strong M&A activity to date. I was just hoping to better understand the makeup of solid waste acquisitions here today. So I think you're referencing, the acquisitions included a new market entry in Indiana and Michigan. Was that one deal or multiple deals, and how large of a $150 million did that represent? Just trying to understand the makeup a little bit better.

Speaker Change: Hi, This is Adam on for Gary today, Thanks for taking my questions.

Adam: Really strong M&A activity to date was just hoping to better understand the makeup of solid waste acquisitions year to date. So I think you referenced.

Adam: The acquisitions included a new market entry in Indiana, Michigan without one deal or multiple deals how large.

Adam: The 150 million does that represent just trying to understand the make up a little bit better. Thank you.

Ronald J. Mittelstaedt: Thank you. Sure. Yeah, Adam.

Adam: Sure.

Adam: Yeah.

Adam: Adam.

Adam: So the transaction, we acquired was a company out of Elkhart, Indiana.

Ronald J. Mittelstaedt: So the transaction we acquired was a company out of Elkhart, Indiana, which is in North Indiana, approaching the southern Michigan border, named WasteAway, a phenomenal nearing third-term, third-generation company, really very, very well known in our industry, a phenomenal family ownership that was retiring, had an incredible management team in place that we have taken with us, and that represented more than half of the total revenue of that incremental 150 that we reported. A large acquisition by any stretch, certainly on our platform, about 300 employees out of three locations, and I would tell you that, and we closed that, you know, obviously in the quarter. I would tell you that we are already in the process of closing our first acquisition in that area as well in the middle of Q2. Great; I appreciate the color.

Adam: Which is in northern Indiana approaching the southern Michigan border named waste away.

Adam: Phenomenal.

Adam: Nearing third term third generation company.

Adam: Really very very well known in our industry.

Adam: Phenomenal family ownership.

Adam: That was retiring.

Adam: Had an incredible management team in place.

Adam: That we have.

Adam: Taken with us.

Adam: And that represented.

Adam: More than half of the total revenue.

Adam: That incremental 150 that we reported a large acquisition.

Adam: By any stretch it certainly in our platform.

Adam: Uh huh.

Adam: 300 employees out of three locations.

Adam: And I would tell you that and we are closed to that obviously in the quarter I would tell you that we are already in the process of closing our first acquisition in that area as well in the middle of Q2.

Ronald J. Mittelstaedt: And then you folks have achieved a really strong improvement in employee retention and turnover over the last four quarters or so. Can you just update us on where we are in seeing the benefits of lower turnover flow through the cost structure given there's a lag there? Sure. So, you know, what we've talked about is that there's an incremental 100 basis points associated with improvement in several different line items.

Speaker Change: Great I appreciate the color and then you folks have achieved a really strong improvement in employee retention and turnover for the last four quarters or so can you just update us on where we are and seeing the benefits of lower turnover flow through the cost structure, given there's a lag there.

Speaker Change: Sure. So what we've talked about is that there is an incremental 100 basis points associated with improvement in several different line items and as I mentioned earlier, we're starting to see those for instance in over time and at some of our third party costs like sub contracting business.

Mary Anne Whitney: And as I mentioned earlier, we're starting to see those, for instance, in overtime and some of our third-party costs, like subcontracting business. And so if I were to think about it in terms of that 100 in the aggregate, I'd say we're down about 10 to 20 basis points of the improvement we've started to see. Of course, we know that there are pieces of it that will lag even longer, most notably the cost of risk, which is, as we've described it, you can bring down your incidents in the current period, but you're still paying for incidents in prior periods. And so we're not surprised, but that certainly continues to be a headwind rather than a tailwind, and we anticipate that that takes multiple periods to start being recognized. Great, thanks so much.

Speaker Change: And so if I if I were to think about it in terms of that 100 and the aggregate I'd say, we're down at that maybe in the 10 to 20 basis points of the improvement is what we've started to see of course, we know that there are pieces of it that will lag even longer most notably the cost of risk which is as we've described it.

Speaker Change: You can bring down your incidents in the current period, but you are still paying for incidents in prior periods and so we're not surprised but that certainly continues to be a headwind rather than a tailwind and anticipate that that takes multiple periods to start being recognized.

Speaker Change: Great. Thanks, so much.

Speaker Change: Thank you.

Mary Anne Whitney: Thank you. Our next question comes from Tony Bancroft from... Ganco Investors. Please go ahead with your question, thank you. Congratulations, Ron and team, on a great quarter.

Speaker Change: Our next question comes from Tony Bancroft from.

Tony Bancroft: Kimco investors. Please go ahead with your question.

Ronald J. Mittelstaedt: Maybe as to more of a long-term question, you know, you made the large acquisition with Secure Energy. I know that you look more into traditional solid waste is sort of your focus, but any other opportunities there or maybe even longer term, you know, there's these large regionals that they've always talked about. Is there ever going to be an opportunity to do something more transformational there, or how do, or maybe even not on the municipal side, have you seen anything incremental with maybe a higher cost for towns and municipalities to transfer those to private operators?

Tony Bancroft: Thanks, so much congratulations Ron and team on the great quarter, maybe as to more of a long term.

Tony Bancroft: Question.

Tony Bancroft: <unk>.

Tony Bancroft: The large acquisition with a secure energy.

Speaker Change: Know that you look forward the traditional solid waste.

Tony Bancroft: Where you're focused but any other opportunities there or maybe even longer term.

Tony Bancroft: These large regionals that they've always talked about.

Tony Bancroft: Is there ever going to be opportunity to do something more transformational there or how do or maybe even not in municipal side have you seen anything incremental whereas it may be higher cost too.

Speaker Change: You too.

Tony Bancroft: Towns and municipalities.

Speaker Change: Transfer those to two private operators thanks Ron.

Ronald J. Mittelstaedt: Well, so let's break that apart a little bit. So on the secure side, you know, as you know, we have been in the E&P business strongly since 2012 in the U.S., mostly on the drilling side. The beauty of the secure transaction was that it was about the exact same size as what we had in the U.S., but it was completely inverse.

Tony Bancroft: Well.

Speaker Change: So, let's break that apart a little bit.

Tony Bancroft: So on the secure side.

Tony Bancroft: As you know we had been in the E&P business strongly since 2012 in the U S mostly on the drilling side.

Tony Bancroft: The beauty of the secure transaction. It was about the exact same size as what we had in the U S. But it was completely inverse it was 85% production.

Ronald J. Mittelstaedt: It was 85% production. And so, we like that balance, and we like the size that the combination of those is. And as we continue to grow our core solid waste business, that will become a smaller percentage just naturally in the company. However, having said that, you know, we have some incremental opportunities, we believe, in that space. They're smaller, but they're nice, and they're additive, and we'll continue to pursue those as we have over the last many years in the U.S. Now we have the Canadian market to look at for this space as well.

Tony Bancroft: And so we like that balance and we like the size that the combination of those are and as we continue to grow our core solid waste that will become a smaller percentage just naturally in the company. However, having said that we have some incremental opportunities we believe in that.

Tony Bancroft: There are smaller.

Tony Bancroft: They're nice and they're additive and and we will continue to pursue those.

Tony Bancroft: We have over the last many years in the U S.

Tony Bancroft: Now we have the Canadian market to look at for the space as well as far as anything transformational Tony I mean look I guess you would you never say never because then you regret it if you do something but.

Ronald J. Mittelstaedt: As far as anything transformational, Toni, I mean, look, I guess you would never say never, because then you'll regret it if you do something, but, you know, it's as close to never as I think I can come in saying, you know, look, we are a core solid waste company. You know, that's what we are, and that's what we want to be.

Tony Bancroft: It's as close to never as I as I think I can come in saying.

Speaker Change: Look we are we are a core solid waste company. So that's what we are and that's what we want to be that's our competency and we've got a lot of runway in that space.

Ronald J. Mittelstaedt: That's our competence, and we've got a lot of runway in that space. We know it well, and I think we know how to perform fairly well in it.

Speaker Change: No well.

Speaker Change: And I think we know how to perform fairly well in it.

Ronald J. Mittelstaedt: And that's going to be what we do for the indefinite and sustainable future. We'll look at things, and certainly if regulation or something drives, you know, local governments to look to exit certain things, and those are good assets, absolutely we'll entertain that. This is a business, as I said, we know well, but we're not looking to pivot into something differential due to a lack of opportunity in our core business. It would only be because we thought it had similar characteristics in terms of financial performance and defensibility and growth opportunity.

Speaker Change: And that's going to be what we do for the indefinite and sustaining future.

Speaker Change: We will look at things.

Speaker Change: And certainly if regulation or something drives local governments to look to exit certain things and those are good assets absolutely. We'll entertain that this is a business as I said, we know well, but we're not looking to pivot into something differential do.

Speaker Change: Due to lack of opportunity in our core business.

Speaker Change: It would only be because we thought it had similar characteristics.

Speaker Change: In terms of financial performance and defensibility.

Speaker Change: And a growth opportunity and in fact, if we saw that we'd take a hard look at it.

Ronald J. Mittelstaedt: And if we saw that, you know, we'd take a hard look at it. Perfect. Great answer. Thank you. Our next question comes from Tobey Sommer from Truist Securities. Please go ahead with your question. Yeah, hey, good morning. This is Jack Wilson on behalf of Tobey.

Speaker Change: Perfect Great answer thank you.

Speaker Change: Our next question comes from Tobey Sommer from <unk> Securities. Please go ahead with your question.

Tobey O'Brien Sommer: Yeah, Hey, good morning uses Jack Wilson on for Tobey can we maybe dig into those weather headwinds youre seeing and sort of what distinguished those from normal seasonal weather patterns.

Jack Wilson: Can we maybe dig into those weather headwinds you were seeing and sort of what distinguished those from normal seasonal weather patterns? Sure. I'll start.

Tobey O'Brien Sommer: Sure.

Ronald J. Mittelstaedt: So, you know, look, weather's nothing new. It happens every year, whether we like it or not. It occurs most harshly in the first quarter, of course, here in North America. But we had, in January, in both the West Coast and parts of what we call the Mid-South and the Southeast, very extreme weather and, in particular, very high, very low, frigid temperatures that shut down our ability to run. We had markets that we could not operate in for one to two weeks at all.

Speaker Change: I'll start and I'll let.

Tobey O'Brien Sommer: So.

Tobey O'Brien Sommer: Look whether it's nothing new it occurs every year, whether we like it or not it occurs most harshly in the first quarter of course here in North America.

Tobey O'Brien Sommer: But we had in January in both the West coast and parts of the what we call the mid south and the South East.

Tobey O'Brien Sommer: A very extreme weather and particularly very high.

Tobey O'Brien Sommer: Very low frigid temperatures that shut down our ability to run we had markets that we could not operate in for one to two weeks at all.

Ronald J. Mittelstaedt: Facilities completely shuttered, employees home, and nobody could run because the Department of Transportation within those states and areas, such as Oregon, a great example, disallowed transportation that was not deemed, you know, something safety, fire, or police or other. That is abnormal, okay? We can handle cold weather, we can handle snow, but when we're told by authorities that we're not to be on the road, that's not something we can violate

Tobey O'Brien Sommer: Facilities completely shuttered.

Tobey O'Brien Sommer: Employees home.

Tobey O'Brien Sommer: And nobody.

Tobey O'Brien Sommer: Could one because of the department of transportation within those.

Tobey O'Brien Sommer: States in areas such as Oregon is a great example.

Tobey O'Brien Sommer: Disallowed transportation that was not deemed.

Tobey O'Brien Sommer: Something safety fire or police or other.

Tobey O'Brien Sommer: That is abnormal okay.

Tobey O'Brien Sommer: We can handle cold weather, we can handle snow, but when we're told by authorities that were not to be on the road, that's not something we violate.

Jack Wilson: Alaska, we're, you know, the largest player in Alaska, and if you would think anywhere's used to significant weather, it's Alaska. And we had over 60 inches of snow in a five-day period in Alaska that shut down Alaska for 12 days that we could not run. So, those are examples of what we're referring to, that the weather was prohibitive in that it just closed geographic areas.

Tobey O'Brien Sommer: You know Alaska, we're the largest player in Alaska and if you would think anywhere is used to.

Tobey O'Brien Sommer: Significant whether it's Alaska.

Tobey O'Brien Sommer: And we had over 60 inches of snowfall and a five day period, and Alaska shut down Alaska for 12 days that we could not run. So those are examples of what we're referring to.

Tobey O'Brien Sommer: That the weather was prohibitive in that it just closed geographic areas.

Ronald J. Mittelstaedt: Okay, thank you for that color there. And then just one quick follow-up. If you do achieve that one third of sort of in-house upscaled role fills, is it possible to quantify sort of the margin impact that might have? No. You know, I would say no.

Speaker Change: Okay. Thank you for that color there and then just one quick follow up.

Speaker Change: If you do achieve that one third of sort of in house upscale role Phil is it possible to quantify sort of the margin impact that might have.

Ronald J. Mittelstaedt: The answer is I don't think it is. What I would say is it's part of how we believe there are, you know, 100 basis points plus, as we've said, in incremental margin improvement from these employee initiatives. And then I think there's just things that are too difficult to quantify in your consistency of service quality, your ability to price and retain more price, your ability to pursue event jobs because you're fully staffed that you can't pursue right now. There's just a lot of those kinds of things.

Speaker Change: No.

Speaker Change: I would say the.

Speaker Change: The answer is I don't think it is what I, what I would say is it's part of how we believe there is a 100 basis points plus as we've said an incremental margin improvement from these.

Speaker Change: Employee initiatives.

Speaker Change: And then I think Theres, just things that are too difficult to quantify.

Speaker Change: Your consistency of your service quality your ability to price and retain more price your ability to pursue event jobs, because they're fully staff that right now you can't pursue theres just a lot of it.

Ronald J. Mittelstaedt: And just the ability to have a stronger overall company because of, you know, a balance in everybody's life. So, you know, what that exact margin impact is, we would only be guessing right now. Thank you very much. And our final question today comes from James Schumm from TD Cowan. Please go ahead with your question. Hey, guys, good morning.

Speaker Change: Those kinds of things.

Speaker Change: And just the ability to have a stronger overall company because of our balanced and everybody's lives. So.

Speaker Change: What that exact margin impact as I, we would only be guessing right now.

Speaker Change: Thank you very much.

Speaker Change: And our final question today comes from James Schumm from TD Cowen. Please go ahead with your question.

James Joseph Schumm: Nice quarter. Nice quarter. Could you give an update on the Chiquita Canyon landfill? How are expenses tracking relative to your expectations?

James Joseph Schumm: Hey, guys good morning.

James Joseph Schumm: Good morning, nice quarter nice quarter.

James Joseph Schumm: Could you give an update on the Chiquita Canyon landfill.

James Joseph Schumm: However expenses tracking relative to your expectations.

James Joseph Schumm: Do you expect to have the revised cost estimates higher perhaps due to relocation or other ancillary charges.

Ronald J. Mittelstaedt: And do you expect to have to revise cost estimates higher, perhaps due to relocation or other ancillary charges? Yeah. So, I would tell you that Chiquita is tracking about where we would think at this point. It may be a little ahead, but that's actually a good thing in a way because it means we're perhaps making more headway a little faster than we had planned. We don't believe right now that what we've presented and accrued in terms of the $160 million is going to change or change significantly.

Speaker Change: Yeah. So.

Speaker Change: So I would tell you that chiquita is tracking about.

Speaker Change: Where we would think at this point it may be a little ahead, but that's actually a good thing in a way because it means were perhaps making more headway a little faster than we had planned.

Speaker Change: We do believe right now that there that are.

Speaker Change: That what we've.

Speaker Change: Presented an accrued in terms of the $160 million.

Ronald J. Mittelstaedt: What we do, just so you're aware, and this is not something new; we've done it every year for 26 years, is once a year we review our closure and post-closure accruals based on engineering estimates. As we have told you, this is a closure cost for our Chiquita landfill because it's in a closed section of the landfill. So, we will review that cost once a year, and if there are changes to it, we will make them. If they're material, we'll communicate them. We don't expect they would be material.

Speaker Change: Is.

Speaker Change: Is it going to change or change significantly what we do just so youre aware and this is not something new we've done it every year for 26 years is.

Speaker Change: Once a year, we review our closure and post closure accruals based on engineering estimates and as we have told you. This is a closure costs to our scale landfill because it's in a closed section of the landfill. So we will review that cost once a year and if there are changes to it we will we will.

Speaker Change: Make them if theyre material, we will communicate them, we don't expect they would be material. So.

James Joseph Schumm: And that is not anything different than we do at every one of our landfills and have for 26 years. But it's a larger, more public issue that is more well-known because of everything surrounding Southern California and this type of event. But Chiquita is tracking about where we thought it would be at this point in time. Okay, great. Thanks, Ron. And I recognize that we're only a few weeks into April but wanted to know how Q2 is tracking relative to normal seasonal expectations thus far. Is there any color you can provide there?

Speaker Change: So and that is not anything different than we do at every one of our landfills and have for 26 years. So it's just it's a larger more public.

Speaker Change: Issue that is more well known because of everything surrounding southern California and in this type of an event but.

Speaker Change: Takeda is tracking about where we are.

Speaker Change: I thought it would be at this point in time.

Speaker Change: Okay, great. Thanks, Ron and I recognize that we're only a few weeks into April but wanted to know how Q2 is tracking relative to normal seasonal expectations. Thus far is there any color you can provide there.

Ronald J. Mittelstaedt: As we said, the way we've got it serves that sort of normal seasonal ramp, and probably too early to say, but nothing to suggest it's outside of anything extraordinary. It certainly hasn't been weather or anything else that would cause us to change our thinking on the quarter, but we'll look forward to letting you see how the quarter plays out. Okay, great. Thanks a lot, guys. And ladies and gentlemen, with that, we'll conclude today's question and answer session.

Speaker Change: As we said the way, we guided a surge that sort of normal seasonal ramp and probably too early to say, but nothing to suggest it's outside of anything extraordinary certainly havent been weather or anything else that would cause us to change our thinking on in a quarter, but we will look forward to letting you see how the quarter plays.

Speaker Change: That.

Speaker Change: Okay, great. Thanks, a lot guys.

Speaker Change: And ladies and gentlemen, with that we'll conclude today's question and answer session.

Ronald J. Mittelstaedt: I'd like to now turn the floor back over to Ron Mittelstaedt for any closing remarks. Okay, well, if there are no further questions, on behalf of our entire management team, we appreciate your listening and interest in the call today. Mary Ann and Joe Box are available today to answer any direct questions that we did not cover that we are allowed to answer under Regulation FD, Regulation G, and applicable securities laws in Canada.

Speaker Change: I'd like to now turn the floor back over to Ron Mittelstaedt for any closing remarks.

Ronald J. Mittelstaedt: Thank you again. We look forward to connecting with you at Waste Expo, upcoming investment conferences, or on our next earnings call. And ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We thank you for joining us. You may now disconnect your line.

Ronald J. Mittelstaedt: Okay, well if there are no further questions on behalf of our entire management team. We appreciate your listening to and interest in the call today.

Ronald J. Mittelstaedt: Maryann and Joe boxer available today to answer any direct questions that we did not cover that we're allowed to answer under regulation FD regulation G and applicable securities laws in Canada. Thank you.

Speaker Change: Again, we look forward to connecting with you at waste Expo upcoming investor conferences or on our next earnings call.

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