Q2 2024 GFL Environmental Inc Earnings Call

and our margins.

Patrick Dovigi: that confirmed the ongoing operational excellence of the business that we have built. Consistent with our previous guidance, we deployed 89 million into incremental growth investments, primarily related to recycling and RNG infrastructure that we expect will generate significant ROIC for years to come. We remain on track to deploy a total of 250 to 300 million into those investments during 2024, as previously guided.

Luke will walk through more of the details for the quarter that confirm the ongoing operational excellence of the business that we have built.

Patrick Dovigi: Consistent with our previous guidance, we deployed $89 million into incremental growth investments primarily related to recycling and R&G infrastructure that we expect will generate significant ROIC for years to come. We remain on track to deploy a total of $250 to $300 million into those investments during 2024, as previously guided. In the quarter, we also accelerated our exit from a portfolio of residential collection contracts in Michigan that no longer met our return threshold.

Patrick Dovigi: In the quarter, we also accelerated our exit from a portfolio of residential collection contracts in Michigan that no longer met our return thresholds. The sale of this book of business occurred at the end of the second quarter and will be accreted to our margins in the second half. We've seen continued success with the development of our book of business related to EPR in the Canadian markets. New contract awards in Ontario and Quebec have added to the 80 to 100 million of incremental adjusts that we previously identified related to EPR. We now expect to generate approximately 130 million of incremental adjusts that we put up from the contracts awarded to us today.

Patrick Dovigi: The sale of this book of business occurred at the end of the second quarter and will be accretive to our margins in the second half. We've seen continued success with the development of our book of business related to EPR in the Canadian market.

Patrick Dovigi: To reiterate what I said last quarter, the contribution from these contracts is expected to start late in 2024, slowly ramp through 2025, and achieve our expected full contribution in fiscal 2026. The contribution of this work is expected to be highly accretive to the margin profile of our Canadian solid waste segment and to our consolidated margin. On R&G, we continue to expect that two or three more facilities will come online by the end of the year, and we remain confident that we will realize $175 million of adjusted EBITDA previously disclosed once our portfolio of landfill gas-to-energy facilities is fully operational in the coming years. We remain absolutely committed to our cap for the AGRA 2024 growth investments of $900 million and the net leverage target that we set out late last year.

Patrick Dovigi: To reiterate what I said last quarter, the contribution from these contracts is expected to start late in 2024, slowly ramped through 2025, and achieved our expected full contribution in fiscal 2026. The contribution of this work is expected to be highly accreted to the margin profile of our Canadian Solid Waste segment and to our consolidated margins. We also remain optimistic about opportunities for further upside as EPR programs are rolled out in Quebec, Western Canada, and the Maritimes. On RNG, we continue to expect that two or three more facilities will come online by the end of the year, and we remain confident that we will realize 175 million of adjusting, but our previously disclosed once our portfolio of landfill gas energy facilities is fully operational in the coming years.

Luke: We also remain optimistic about opportunities for further upside as EPR programs are rolled out in Quebec, Western Canada, and the Maritimes.

Speaker Change: On R&G, we continue to expect that two or three more facilities will come online by the end of the year, and we remain confident that we will realize $175 million of adjusted EBITDA previously disclosed once our portfolio of landfill gas energy facilities is fully operational in the coming years.

Patrick Dovigi: In the first half of the year, we deploy approximately 500 million M&A, all of which was completed when we provided our first quarter results in May. We remain absolutely committed to our cap for the Agra 2024 growth investment of 900 million and the net leverage target that we set out late last year. While we continue to have a robust pipeline of attractive M&A opportunities in our markets, at this stage there will be likely only small transactions in the second half, with the majority of current pipeline to be executed in 2025 and beyond.

Patrick Dovigi: The quality of our first half results, with the continued strength of our business model, supports an increase in our guidance for the second time this year. We are increasing adjusted EBITDA to 2.24 to 2.25 billion, and adjusted EBITDA margin to 28.4%. A 70 basis point increase over our original guidance, and a 170 basis point increase over the prior year. Local walks through the guidance in more detail, but to be able to raise the guide to consecutive quarters, and to have line of sight to 170 basis points of annual margin expansion, certainly has a feeling very optimistic about the effectiveness of our valuation strategies.

Patrick Dovigi: The quality of our first half results and the continued strength of our business model support an increase in our guidance for the second time this year. We are increasing adjusted EBITDA to between 2.24 and 2.25 billion and adjusted EBITDA margin to 28.4%, a 70 basis point increase over our original guidance and 170 basis points increase over the prior year. Revenue for the quarter of $2.06 billion was 11.1% higher than the prior year, excluding the impact of the solid waste divestiture.

Speaker Change: We are increasing adjusted EBITDA to 2.24 to 2.25 billion and adjusted EBITDA margin to 28.4 percent. A 70 basis point increase over our original guidance and a 170 basis point increase over the prior year.

Speaker Change: Luke will walk through the guidance in more detail, but to be able to raise the guide two consecutive quarters and to have line of sight to 170 basis points of annual margin expansion certainly has us feeling very optimistic about the effectiveness of our value creation strategies. I will now turn it over to Luke.

Luke Pelosi: I will now turn it over to Luke. Thanks, Patrick. Revenue for the quarter of 2.06 billion was 11.1% higher than the prior year, excluding the impact of the solid waste divestagers. Solid waste pricing of 6.5% and minus 1.7% volume were both ahead of plan, and the continued strength of recycled commodity prices also contributed to the year-over-year increase. Our environmental services segment price-led growth strategy advanced and was further supported by increased soil volumes and used motor oil prices. Large-scale event-driven response work around major spills and fires, the timing of which can be more variable, was lower compared to the prior year.

Patrick Dovigi: Solid Waste Pricing of 6.5% and minus 1.7% volume were both ahead of plan, and the continued strength in recycled commodity prices also contributed to the year-over-year increase. Our environmental services segment price-led growth strategy advanced and was further supported by increased soil volumes and used motor oil prices. Large-scale, event-driven response work around major spills and fires, the timing of which can be more variable, was lower compared to the prior year.

Luke: Large-scale, event-driven response work around major spills and fires, the timing of which can be more variable, was lower compared to the prior year.

Luke Pelosi: Adjusted EBITDA margins were 28.7% for the quarter, 90 basis points ahead of the prior year, and 20 basis points ahead of our guidance. Underlying solid waste margin expansion of 100 basis points reflected the positive impact of price-cost spread, higher commodity prices, plus M&A that came in the creative EBITDA margins. Offset by the dilutive margin impact of the increased cost of risk, as well as the absence of one-time benefits related to the prior year divestitures and insurance proceeds received in Q223. Consistent with the first quarter, elevated price-cost spread, the positive margin impact of our deliberate volume strategies, R&G, and favorable commodity price contribution, as well as incremental operating leverage, are all contributing to margin expansion ahead of expectations.

Patrick Dovigi: Adjusted EBITDA margins were 28.7% for the quarter, 90 basis points ahead of the prior year and 20 basis points ahead of our guidance. The underlying solid waste margin expansion of 100 basis points reflected the positive impact of price-cost spread, higher commodity prices, plus M&A that came in at accretive EBITDA margins, offset by the dilutive margin impact of the increased cost of risk, as well as the absence of one-time benefits related to the prior divestitures and insurance proceeds received in Q2 2023.

Luke: Underlying solid waste margin expansion of 100 basis points reflected the positive impact of price cost spread, higher commodity prices, plus M&A that came in and accreted EBITDA margins.

Patrick Dovigi: Consistent with the first quarter, elevated price-cost spread, the positive margin impact of our deliberate volume strategies, R&D, and favorable commodity price contribution, as well as incremental operating leverage, are all contributing to margin expansion ahead of expectations. Environmental services adjusted EBITDA margins were 29.6%, in line with expectations and inclusive of nearly 100 basis points of cost of risk headwind, indicative of the success of our price-led growth strategy. Adjusted pre-cash flow was $185 million in the quarter, $177 million greater than the prior year period, and approximately $20 million better than guidance.

Luke: Consistent with the first quarter, elevated price-cost spread, the positive margin impact of our deliberate volume strategies, R&G, and favorable commodity price contribution, as well as incremental operating leverage, are all contributing to margin expansion ahead of expectations.

Luke Pelosi: Environmental services adjusted EBITDA margins were 29.6%, in line with expectations that inclusive of nearly 100 basis points cost of risk headwind, indicative of the success of our price-led growth strategy. Adjusted pre-cashlaw was $185 million in the quarter, 177 million greater than the prior year period, and approximately $20 million better than guidance. The contributions to the outperformance came from CAPEX, working capital, and other operating items, which are all expected to be timing differences that will normalize by the end of the year. Net leverage at the end of the quarter was 4.29, ahead of expectations and consistent with the quarterly cadence on which our year-end net leverage target was based.

Luke: Environmental services adjusted EBITDA margins were 29.6% in line with expectations and inclusive of nearly 100 basis point cost of risk headwind indicative of the success of our price led growth strategy.

Luke: Adjusted pre-cash flow was $185 million in the quarter, $177 million greater than the prior year period, and approximately $20 million better than guidance.

Patrick Dovigi: The contributions to the outperformance came from CapEx, working capital, and other operating items, which are all expected to be timing differences that will normalize by the end of the year. Net leverage at the end of the quarter was 4.29, ahead of expectations and consistent with the quarterly cadence on which our year-end net leverage target was based. During the quarter, we were successful in refinancing one of our 2025 bonds, with a new bond maturing in 2032.

Luke Pelosi: During the quarter, we were successful in refinancing one of our 2025 bonds with a new bond maturing in 2032. After the end of the quarter, we also successfully refinanced our Term Loan B in a transaction that both reduced the borrowing spread by 50 basis points and extended maturity to 2031. We have one additional bond that becomes recallable at power in the third quarter of this year. The debt markets remain highly constructive, and we expect to opportunistically refinance this bond when a market window presents itself. After we complete that expected refinancing, over 90% of our non-revolving long-term debt will have a maturity date of 2028 and beyond.

Luke: During the quarter, we were successful in refinancing one of our 2025 bonds with a new bond maturing in 2032.

Patrick Dovigi: After the end of the quarter, we also successfully refinanced our Term Loan B in a transaction that both reduced the borrowing spread by 50 basis points and extended its maturity to 2031. We have one additional bond that becomes callable at par in the third quarter of this year. The debt markets remain highly constructive, and we expect to opportunistically refinance this bond when a market window presents itself. After we complete that expected refinancing, over 90% of our non-revolving long-term debt will have a maturity date of 2028 and beyond.

Luke: After the end of the quarter, we also successfully refinanced our Term Loan B in a transaction that both reduced the borrowing spread by 50 basis points and extended its maturity to 2031.

Luke: We have one additional bond that becomes callable at par in the third quarter of this year.

Luke Pelosi: As Patrick said, the success of our first half results sets us up to increase guidance for the second time this year. Revenue is now expected to be approximately 7.9 to 7.925 billion, driven by solid waste pricing of 6.25 to 6.5% and solid waste volumes of negative 1.25%. Incremental revenue from in-year M&A is more than offset by the Q2 asset sale, which is now expected to reduce our original expectations for second half revenue by just over $110 million on a can of seasonality. Additionally, in light of the lower volume of large event-driven work in our ES segment in the first half of the year, we are taking a more conservative view for the back half of the year, and the newer guidance assumed this trend continues.

Patrick Dovigi: As Patrick said, the success of our first half results sets us up to increase guidance for the second time this year. Revenue is now expected to be approximately $7.9 to $7.925 billion, driven by solid waste pricing of 6.25 to 6.5% and solid waste volumes of minus 1.25%. Incremental revenue from in-year M&A is more than offset by the Q2 asset sale, which is now expected to reduce our original expectations for second half revenue by just over $110 million on account of seasonality.

Luke: Revenue is now expected to be approximately $7.9 to $7.925 billion, driven by solid waste pricing of 6.25 to 6.5%, and solid waste volumes of negative 1.25%.

Luke: Incremental revenue from in-year M&A is more than offset by the Q2 asset sale, which is now expected to reduce our original expectations for second-half revenue by just over $110 million on account of seasonality.

Patrick Dovigi: Additionally, in light of the lower volume of large event-driven work in our ES segment in the first half of the year, we are taking a more conservative view for the back half of the year, and the new guidance assumes this trend continues. However, if large-scale event-driven work picks up in the back half, there should be upsides to the guide. The contribution from any additional M&A completed in the back half of the year will also provide upside to the guide.

Luke: Additionally, in light of the lower volume of large event-driven work in our ES segment in the first half of the year, we are taking a more conservative view for the back half of the year and the new guidance assumes this trend continues.

Luke Pelosi: If large scale event-driven work picks up in the back half, there should be upside to the guide. The contribution from any additional M&A completed in the back half of the year will also provide upside to the guide. Adjusted EBITDA guidance increases to 2.24 to 2.25 billion, a $30 million increase over our original guide. A result of the described changes in revenue together with ongoing expansion of adjusted EBITDA margin, which, as Patrick said, increases to 28.4%. Adjusted pre-cashable increases to 810 million, a 10 million increase driven by the incremental adjusted EBITDA and partially offset by $25 million of incremental interest costs, which are now expected to be $500 million for the year.

Luke: The contribution from any additional M&A completed in the back half of the year will also provide upside to the guide.

Patrick Dovigi: Adjusted EBITDA guidance increases to $2.24 to $2.25 billion, a $30 million increase over our original guide, a result of the described changes in revenue together with ongoing expansion of adjusted EBITDA margin, which, as Patrick said, has increased to 28.4%. Adjusted free cash flow increased to $810 million, a $10 million increase driven by the incremental adjusted EBITDA and partially offset by $25 million of incremental interest costs, which are now expected to be $500 million for the year.

Luke: Adjusted EBITDA guidance increases to $2.24 to $2.25 billion, a $30 million increase over our original guide, a result of the described changes in revenue together with ongoing expansion of adjusted EBITDA margin, which as Patrick said, has increases to 28.4%.

Luke: Adjusted free cash flow increases to $810 million, a $10 million increase driven by the incremental adjusted EBITDA and partially offset by $25 million of incremental interest costs, which are now expected to be $500 million for the year.

Patrick Dovigi: So in summary, revenue increases pro forma for the divestitures, adjusted EBITDA increases again, adjusted EBITDA margin expands an additional 70 basis points on top of the original 100 basis points guide, and adjusted free cash flow increases as well. As it relates to the third quarter, we expect consolidated revenue of approximately $2.055 to $2.06 billion, with a similar split between solid and ES revenues as we saw in the second quarter. Keep in mind that the Michigan residential contract sale results in a sequential revenue step down from the second quarter.

Luke Pelosi: So in summary, revenue increases pro forma for the investiture, adjusted EBITDA increases again, adjusted EBITDA margin expands an additional 70 basis points on top of the original 100 basis points guide, and adjusted pre-cashable increases as well. As it relates to the third quarter, we expect consolidated revenue of approximately 2.055 to 2.06 billion, with a similar split between solid and ES revenues as what we saw in the second quarter. Keep in mind that the Michigan residential contract sale results in its sequential revenue step down from the second quarter. In terms of margin, we expect consolidated adjusted EBITDA margin of 30.25%, over 200 basis points higher than the prior year and the first time in our history achieving a consolidated margin of over 30%.

Speaker Change: So in summary, revenue increases pro forma for the divestitures, adjusted EBITDA increases again, adjusted EBITDA margin expands an additional 70 basis points on top of the original 100 basis points guide, and adjusted free cash flow increases as well.

Patrick Dovigi: In terms of margin, we expect consolidated adjusted even a margin of 30.25 percent, over 200 basis points higher than the prior year and the first time in our history achieving a consolidated margin of over 30 percent. The guide then contemplates margin stepping down in the fourth quarter as per the typical seasonal cadence of the business. In terms of net leverage, we expect a reduction of approximately 15 basis points throughout the quarter to end the quarter at just above 4.1 times, and then a larger reduction in the fourth quarter to end the year within the previously stated range of 3.65 to 3.85. Adjusted net income is expected to be $125 million for the third quarter.

Luke Pelosi: The guide then contemplates margin step down in the fourth quarter as per the typical seasonal cadence of the business. Those revenue and margin expectations equate to approximately 625 million of adjusted EBITDA for the third quarter. Additionally, we expect 230 million dollars of net capital expenditures, 165 million of cash interest, and close to a nil impact from the recovery of working capital offsetting other operating items for a Q3 adjusted pre-cashable approximately 225 million. In terms of net leverage, we expect a reduction of approximately 15 basis points throughout the quarter to end the quarter at just above 4.1 times and then a larger reduction in the fourth quarter to end the year within the previously stated range of 3.65 to 3.85.

Speaker Change: Additionally, we expect $230 million of net capital expenditures, $165 million of cash interest, and close to a nil impact from the recovery of working capital offsetting other operating items, for a Q3 adjusted free cash flow of approximately $225 million.

Speaker Change: In terms of net leverage, we expect a reduction of approximately 15 basis points throughout the quarter to end the quarter at just above 4.1 times, and then a larger reduction in the fourth quarter to end the year within the previously stated range of 3.65 to 3.85.

Luke Pelosi: Adjusted net income is expected to be 125 million dollars for the third quarter.

Patrick Dovigi: I will now pass the call back over to Patrick, who will provide some closing comments before Q&A. We believe that the business today is significantly undervalued when you consider the quality of our assets. The capabilities and track record of our team, the near-term growth prospects, especially around EPR and RNG, and the deleveraging trajectory we're currently on. With the current disconnect in valuation, we are buyers of GFL, not sellers. Based on the non-core asset sales we completed last year, it makes teens multiple.

Patrick Dovigi: I will now pass the call back over to Patrick, who provides imposing comments before Q&A. Before we open it up for Q&A, although we don't generally comment on market speculation, I want to address some of the headlines that you have all seen lately. We believe that the business today is significantly undervalued when you consider the quality of our assets, the capabilities and track record of our team, the near-term growth prospects, especially around EPR and RNG, and the de-leveraging trajectory we currently own.

Speaker Change: Before we open it up for Q&A, although we don't generally comment on market speculation, I want to address some of the headlines that you have all seen lately.

Speaker Change: We believe that the business today is significantly undervalued when you consider the quality of our assets,

Speaker Change: The capabilities and track record of our team, the near-term growth prospects, especially around EPR and RNG, and the deleveraging trajectory we're currently on. In my view, the current valuation does not make sense. With the current disconnect in valuation, we are buyers of GFL, not sellers.

Patrick Dovigi: In my view, the current valuation does not make sense. With the current disconnect and valuation, we are buyers of GFL, not sellers. Based on the non-core asset sales we completed last year, it made teens multiples, and the recapitalization we completed in 2014 and 2018 has a private company at 13 to 14 times EBITDA. We have demonstrated that GFL's assets are worth more than was reflected in our current stock price, and since then, publicly traded waste multiples have continued to expand. So while selling the entire business is not on the table today, there could be merit in selling a portion of our business evaluations that are more in line with what we believe is fair value of the business.

Speaker Change: Based on the non-core asset sales we completed last year I'd make teens multiples.

Speaker Change: And the recapitalizations we completed in 2014 and 2018 as a private company at 13 to 14 times EBITDA, we have demonstrated that GFL's assets are worth more than was reflected in our current stock price.

Patrick Dovigi: And since then, publicly traded waste multiples have continued to expand. So while selling the entire business is not on the table today, there could be merit in selling a portion of our business at valuations that are more in line with what we believe is the fair value of the business. We have had significant inbound interest from both strategic and financial sponsors that support this valuation. From a valuation perspective, such a sale could serve the dual purpose of accelerating our deleveraging and, most importantly, allowing us the opportunity to buy back a significant amount of stock at an attractive valuation.

Speaker Change: And since then, publicly traded waste multiples have continued to expand.

Speaker Change: So, while selling the entire business is not on the table today, there could be merit in selling a portion of our business at valuations that are more in line with what we believe is fair value of the business.

Patrick Dovigi: A sale of high-quality assets such as our ES segment can easily attract mid-teens multiples. We have had significant inbound interest from both strategic and financial sponsors that support the valuation perspective. Such a sale could serve the dual purpose of accelerating or de-labourging, and most importantly, allowing us the opportunity to buy back a significant amount of stock at an interactive valuation. To make a decision around such a significant sale would require a full auction process to ensure we are maximizing shareholder value and achieving the best use of proceeds. We are absolutely exploring all of our options and have begun to implement the steps necessary to prepare for potential transactions.

Speaker Change: Such a sale could serve the dual purpose of accelerating our deleveraging, and most importantly, allowing us the opportunity to buy back a significant amount of stock at an attractive valuation.

Patrick Dovigi: Since we went public, I believe that we have clearly demonstrated that we are a dynamic, roll up our sleeves management team, that can and will implement the appropriate strategies to ensure that we are maximizing long-term value creation for all of our shareholders. We have no intention of deviating from that strategy with the opportunities we now have in front of us.

Patrick Dovigi: Since we went public, I believe that we have clearly demonstrated that we are a dynamic, roll-up-your-sleeves management team that can and will implement the appropriate strategies to ensure that we are maximizing long-term value creation for all of our shareholders. Thank you.

Speaker Change: Since we went public, I believe that we have clearly demonstrated that we are a dynamic, roll-up-our-sleeves management team that can and will implement the appropriate strategies to ensure that we are maximizing long-term value creation for all of our shareholders.

Operator: I will now turn the call over to the operator to open up the line for Q&A.

Operator: Thank you.

Patrick Dovigi: We will now begin the question and answer session. If you would like to ask a question, please do so now, change your mind and would like to remove that request, please press star followed by, And again, to ask a question, please press star, from, you know, investors, um, as well as strategic, you know, I think where we landed is that, you know, we need to run an auction to sell this. And we've been taking the steps over the last couple of months to prepare for that.

Operator: We will now begin the question and answer session. If you would like to ask a question, please press star followed by one on your telephone keys. If you change your mind and would like to move that request, please press star followed by two. And again, do ask a question. Please press star one. As a reminder, if you are using a speaker phone, please remember to pick up your handset before asking a question.

Speaker Change: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star followed by 1 on your telephone keypad.

Speaker Change: As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking a question.

Operator: Do report it briefly while questions are registered.

Sabahat Khan: We have the first question from SabbathCon with RBC. Great. Thanks and good morning.

Speaker Change: We have the first question from Sabahat Khan with RBC.

Patrick Dovigi: Maybe if we could just start with those closing comments. So I'm going to give you an opportunity to share a little bit more color on maybe the type of interest you've seen, the type of invest or the type of parties that are looking at it. Do you have a lower bound on the multiple-year-old to sell timelines? And just sort of your decision-making process. Anything, any additional color you can share on. Know what the market should expect over the next little while and how you'll make maybe arriving at that decision. Thank you. Yeah, I think Sabbath, from my perspective, you know, again, we spent 17 years building this business, right?

Sabah Khan: Great. Thanks and good morning. Maybe if we could just start with those closing comments. I just wanted to maybe give you an opportunity to maybe share a little bit more color on...

Speaker Change: Maybe the type of interest you've seen, the type of investor or the type of party that are looking at it. You know, do you have like a lower bound on the multiple you're willing to sell, timelines?

Patrick Dovigi: So again, it's sort of near and dear to our heart. You know, it was a core force of the strategy historically. And again, as this sort of came to light over the last little while. And again, as I said, you know, from my perspective, there is a very sort of large valuation gap today. And it's not necessarily to the peers, but it's also just in general in terms of what, you know, I would say, you know, private investors are prepared to pay for these assets and the IRR that they can drive at each and every one of them.

Speaker Change: Again, we've spent 17 years building this business, right, so...

Speaker Change: And again, as this sort of came to light over the last little while, and again, as I said,

Speaker Change: you know, I would say, you know, private investors are prepared to pay for these assets and the IRR that they can drive out of each and every one of them. So, you know, where I sit today, obviously, you know, I think as we started engaging in this process,

Patrick Dovigi: So, you know, where I sit today, obviously, you know, I think as we started engaging in this process, you know, there were multiple different avenues available to us on the table, and it was sort of narrowed down very specifically. And I think, you know, to get alignment from the board and specific sort of large shareholders. You know, it was a process that we sort of had to go through. I think giving the amount of inbound interest that we've seen. from, you know, investors, as well as strategic, you know, I think where we landed is that, you know, we need to run an auction to sell this, and we've been taking a step over the last couple of months to prepare for that.

Speaker Change: You know, there was multiple different...

Speaker Change: And I think a lot of the avenues available to us on the table and it was sort of narrowed down very specifically and I think you know to get alignment from board and specific sort of large shareholders. You know, it was a process that we sort of had to go through.

Speaker Change: You know, I think where we landed is that, you know, we need to run an auction to sell this. And we've been taking the steps over the last couple of months to prepare for that. And I think what you'll see is a process launched, you know, after Labor Day sometime over the month of September .

Patrick Dovigi: Um, and I think what you'll see is a process launched, you know, after Labor Day sometime over the month of September, to determine what the actual, you know, true value of the business. I have no reason to believe that the business today isn't worth, you know, significantly higher than what GFL is sort of trading at today. I think if you look in the market, if you look at, you know, recent trades of Covanta, Sercom, if you look at Heritage Environmental that was, you know, recently sold to EQT, if you look at U.S. Ecology that was sold to Republic, the recent StairCycle trade with Waste Management, I mean, I think you can see that, you know, all of these traded, you know, in that range, and I think when you run a model, and you run a private equity model on this business.

Patrick Dovigi: And I think what you'll see is a process launched, you know, after Labor Day sometime over the month of September to determine what the actual, you know, true value of the businesses. I have no reason to believe that the business today isn't worth, you know, significantly higher than what GFL is sort of trading at today. I think if you look in the market, if you look at, you know, recent trades of Coventa Surcom, if you look at Heritage Environmental, that was, you know, recently sold to EQT. If you look at U.S. ecology, that was sold to Republic; the recent stair cycle trade was waste management.

Speaker Change: to determine what the actual, you know, true value of the business is.

Speaker Change: I have no reason to believe that the business today isn't worth investing in.

Speaker Change: you know, significantly higher than what GFL is sort of trading at today. I think if you look in the market, if you look at, you know, recent trades of Covanta, Surcombe, if you look at Heritage Environmental that was, you know, recently sold to EQT,

Speaker Change: If you look at U.S. ecology that was sold to the public, the recent stereo cycle trade with waste management, I mean, I think you can see that, you know, all of these traded...

Patrick Dovigi: I mean, I think you can see that, you know, all of these traded, you know, in that range. And I think when you run a model, and you run a private equity model on this business, I mean, I don't care what model you run, it's very sort of simple growth algorithm, right? You have, you have complying growth of sort of high single digits, bottom line, you know, that flows down to EBITDA, sort of just low double digits, put on sort of five, five and a half turns of leverage, model in a bit of M&A. I mean, in a base case, you get to a sort of a 15% IRR, and an upside case, you can underwrite 23 to 25%.

Speaker Change: in that range. And I think when you run a model and you run a private equity model on this business, I mean, I don't care what model you run, a very sort of simple growth algorithm, right? You have...

Patrick Dovigi: You have top line growth of sort of high single digits, and bottom line, you know, that flows down to EBITDA at sort of just low double digits. And, you know, you can take conservative views on what 25 and 26 are.

Speaker Change: You have top line growth of sort of high single digits, bottom line, you know, that flows down to EBITDA at sort of just low double digits.

Patrick Dovigi: And I mean, again, I go back to, you know, this is what GFL did in recap for a number of years. Go back to our 2014 recap, you know, HPS, when they recap that business, they are business they paid, you know, 14 times for that in 2014. And they left with an equity return of 3.6 times their money in four years. You look at BC Partners; they came in, played close to 14 times for the business in 2018. Look where their equity is marked today; they're at already three times their equity and massive sort of runway in front of us.

Speaker Change: You know, this is what GFL did and recaps for a number of years go back for a 2014 recap You know HPS when they recap that business they are business they paid

Speaker Change: You know 14 times for that in 2014 and they left with an equity return of 3.6 times their money in four years

Speaker Change: You look at BC Partners, they came in, played COSTA 14 times for the business in 2018.

Patrick Dovigi: So there's no reason to believe, you know, that again, a private equity investor wouldn't view this the same way. And with our discussions that we had with them, you know, we can definitely stand behind those models. But again, there was significantly more interest than I thought; the more parties. And I think that's the only way for sort of maximize value. But most importantly, if you look at Remain Co. And yeah, we can look at, you know, GFL trading around 12, 12 and a half times 2024. But the reality is, let's not look at 24; we need to look at 25 and 26.

Speaker Change: massive sort of runway in front of us. So there's no reason to believe.

Speaker Change: We can definitely stand behind those models, but again, there was significantly more interest than I thought from more parties, and I think that's the only way for sort of us to maximize value. But most importantly...

Speaker Change: If you look at Remainco, and yeah, we can look at GFL trading around 12, 12 and a half times 2024, but the reality is, let's not look at 24, we need to look at 25 and 26.

Patrick Dovigi: And you know, you can take conservative views on what 25 and 26 are. We've given you the breadcrumbs of what R and G and EPR are; you know, as you sort of rule out to 26, you know. And we have our existing shareholders. This is solely a trade; you know, for me, is the largest shareholder. If I can sell something in mid teens and buy back a significant amount of our stock. And I can end up owning 12 and a half or 15% more of the company at these values. And taking out a line share of the overhang that exists from some of our PE partners.

Speaker Change: And, you know, you can take conservative views on what 25 and 26 are, we've given you the breadcrumbs of what R&G and EPR are, you know, as you sort of roll out to 26, you know.

Patrick Dovigi: We've given you the breadcrumbs of what RNG and EPR are, you know, as you sort of roll out to 26, you know, and we have our existing shareholders, you know, leverage will be reduced. You'll have a war chest of capital to go out and do the things you want to do in your sort of core service offerings. And there will be no impediment to doing the things that we want to do in the markets we want to do while growing the solid waste business. So I think it's a win-win. It might be a question for Luke.

Speaker Change: and we have our existing shareholders.

Speaker Change: This is solely a trade, you know, for me as the largest shareholder, if I can sell something in mid-teens, and buy back a significant amount of our stock,

Patrick Dovigi: And not having to come back to the market and sort of buy death by a thousand cuts that I'm selling every six months. You know, that absolves all of that. So that's how I thought about it. You know, to get those shareholders on, on side to time. But I think, you know, we've made a decision as a board that that's what we're going to do. Those shareholders are on side with that process. And, you know, I think now, you know, there's no, there will be limited overhang left in the market. If you want to own GFL stock, you're not going to wait for secondary.

Speaker Change: and not having to come back to the market and sort of buy death by a thousand cuts of them selling every six months.

Patrick Dovigi: Because there isn't going to be one because we're going to own the stock, and we're going to own 50% more of it. And that's simply how I sort of thought about it. And then the secondary aspect of it is. You know, leverage will be reduced. You'll have a war chest of capital to go out and do the things you want to do, and you're sort of core service offerings. And there will be no impediment to doing the things that we want to do in the markets we want to do while growing the solid waste business.

Speaker Change: You know, leverage will be reduced, you'll have a war chest of capital to go out and do the things you want to do in your sort of core service offerings and there will be no impediment to doing the things that we want to do in the markets we want to do while growing the solid waste business. So I think it's a win-win.

Patrick Dovigi: So I think it's a win-win.

Speaker Change: Okay, I appreciate that color. Maybe just shifting over to the guidance.

Speaker Change: This might be a question for Luke. There's a few moving pieces in the update to the guidance. You know, I think you called out the environmental services. I think Solid Waste is doing a little bit better, some effects, benefits. If you can maybe just parse out the puts and the takes in the 24 guidance update, please.

Patrick Dovigi: I think solid waste doing a little bit better at some effects benefit.

Luke Pelosi: If you can maybe just parse out the puts and the takes and the 24 guidance update, please. Yeah, good morning, Sabah. You know, great question. It was the one thing that maybe contemplate we should provide a deck, but you know, we think once you hear the details, we sort of straightforward enough. Look at a high level, the EBITL line, starting 2215 guidance number. If I think about that, I think about the exogenous factors of effects and commodities; that's giving me a little bit greater than plus 30 to the good. And then you have this ER volume, right?

Luke Pelosi: There are a few moving pieces in the update to the guidance, and I think you called out the environmental services. [inaudible] Yeah, good morning, Sabah. You know, great question. It was the one thing that made me contemplate whether we should provide a deck. But you know, we think once you hear the details, it'll be sort of straightforward enough. Look at it from a high level, the EBITDA line, and the starting 2215 guidance number. If I think about that, and I think about exogenous factors of FX and commodities, that's giving me a little bit greater than plus 30 to the good.

Luke: Yeah, good morning Sabah. You know, great question. It was the one thing that made me contemplate we should provide a deck. But, you know, we think once you hear the details, it'll be sort of straightforward enough. Look, at a high level, the EBITDA line, a starting 2215 guidance number.

Luke Pelosi: And then you have this ER volume, right, the large-scale event-driven stuff; the new guide assumes about 100 million less of that. So the margin on that effectively offsets the benefit you're getting from FX and commodities.

Luke Pelosi: The large scale of enter from stuff, the new guide assumes about 100 million less of that. So the margin on that effectively offsets the benefit you're getting from effects and commodity. So then we think about M&A and right we did in the early in the year, we did those couple of deals and we have the positive contribution of that offset by the Michigan portfolio sale and the net of those two is roughly about $15 million to the good. So if you think about those as the broad based sort of external factors, it leaves you with about sort of 15 to 20 of, you know, just pure underlying guidance race and it's really coming out of, you know, as you said, solid waste and solid waste margin.

Speaker Change: And then you have this ER volume, right? The large-scale event-driven stuff, the new guide assumes about $100 million less of that. So the margin on that effectively offsets the benefit you're getting from FX in commodity.

Luke Pelosi: So then we think about M&A. And right early in the year, we did those couple of deals. And we have the positive contribution of that offset by the Michigan portfolio sale. And the net of those two is roughly about $15 million to the good.

Speaker Change: So then we think about M&A, and early in the year we did those couple of deals.

Speaker Change: And we have the positive contribution of that offset by the...

Speaker Change: Michigan Portfolio Sale, and the net of those two is roughly about $15 million to the good.

Luke Pelosi: Right. So if you think about those as the broad-based sort of external factors, it leaves you with about sort of 15 to 20 of, you know, just pure underlying guidance rates. And it's really coming out of, you know, as you said, solid waste and solid waste margin, as we're seeing the effectiveness of our strategies just come through, you know, even greater than anticipated. Thanks very much.

Speaker Change: Alright, so if you think about those as the broad-based sort of external factors, it leaves you with about sort of 15 to 20.

Luke Pelosi: As we're seeing the effectiveness of our strategies just come through, you know, even greater than anticipated. Great. Thanks very much.

Stephanie Lynn Benjamin Moore: I'll pass it on. Thank you. Your next question comes from Stephanie Moore with Jeffreys. Hi, good morning.

Luke Pelosi: I'll pass it on.

Speaker Change: Great. Thanks very much. I'll pass it on.

Stephanie Moore: Thank you. Your next question comes from Stephanie Moore with Jeffrey.

Stephanie Moore: You may proceed. Hi, good morning. Thank you.

Luke Pelosi: Maybe first has more on the 2024 guidance. Good morning. Maybe first starting on the 2024 guidance. Your updated guidance has margins expanding 170 basis points 0 over year. This appears to me the highest margin expansion amongst your peers for the year. Can you comment on what's driving this? How much do you attribute to just the quality of your asset base for self-help initiative? And then can you update us just on what innings you are on on your self-help initiative? Thanks.

Mindy B. Gilbert: Thank you. Mindy's first question on the 2024 guidance. Good morning.

Stephanie Lynn Benjamin Moore: Mindy's first starting on the 2024 guidance. Your updated guidance has margins expanding 170 basis points year over year. This appears to me to be the highest margin expansion amongst your peers for the year. Can you comment on what's driving this? How much do you attribute to just the quality of your asset base for self-help initiatives? And then can you update us on what innings you are in with yourself? Yeah, good morning, Stephanie. It's Luke.

Luke Pelosi: Yeah, good morning. Stephanie is Luke. You know, we're certainly, you know, impressed with the headline number of 170 as well, but, you know, I think the starting point is exactly what you said. It's the quality of the assets and the market selection in which we've gone on. We've always said that, you know, we have, I think, a best-in-class asset portfolio in the right markets. And that's what's allowing us to now sort of execute on our strategies. And so you think about the price cost spread that we talked about at the beginning of the year and the ability of that to sort of come in, you know, better than anticipated.

Luke Pelosi: We're certainly impressed with the headline number of 170 as well. But I think the starting point is exactly what you said. It's the quality of the assets and the market selection in which we've gone on. We've always said that we have, I think, a best-in-class asset portfolio in the right markets. And that's what's allowing us to now sort of execute on our strategies. And so you think about the price-cost spread that we talked about at the beginning of the year and the ability of that to sort of come in better than anticipated.

Speaker Change: Yeah, good morning, Stephanie. It's Luke. Um, you know, we're certainly, you know, impressed with the headline number of 170 as well, but, you know, I think the starting point is exactly what you said.

Speaker Change: And so you think about the price-cost spread that we talked about at the beginning of the year and the ability of that to sort of come in, you know, better than anticipated.

Luke Pelosi: You think about the synergy realization of all the pieces that we've put together historically and starting to get the benefit of that. You think about the self-help levers that we're sort of pulling on, and all of these are sort of coming to, you know, fruition, and you're seeing the benefit come through in the margins. And so it's not any just specific one thing. Yes, commodities give a little bit of an incremental impact and, you know, certainly our intentional shedding and those deliberate volume strategies are helping, and the Michigan sale is sort of accelerates that even more.

Luke Pelosi: You think about the synergy realization of all the pieces that we've put together historically and are starting to get the benefit of that. You think about the self-help levers that we're sort of pulling on. And all of these are sort of coming to fruition, and you're seeing the benefits come through in the margins. And so it's not just one specific thing.

Luke Pelosi: But for actual quantify, you think the base guide of 100 basis points, if you recall, that was effectively all organic, right? Because the M&A was actually a net drag going into the year. So now with that, we have new M&A this year and improved commodity pricing. That's adding roughly 35 basis points of incremental. So the 70 basis point raised half is coming from those two pieces. And then another half is just the ongoing success of our strategies, both on the volume and just the underlying margin. And so, you know, I think it's a great testament to all of the things we've been saying for the past couple of years as we bring these pieces together and what the opportunities in front of us.

Luke Pelosi: Yes, commodities give a little bit of an incremental impact. And certainly, our intentional shedding and those deliberate volume strategies are helping. And the Michigan sale sort of accelerates that even more. But for actual quantification, you think the base guide of 100 basis points, if you recall, that was effectively all organic, right?

Speaker Change: to for actual quantify you think the base guide of a hundred basis points if you recall that was effectively all organic

Luke Pelosi: Because the M&A was actually a net drag going into the year. Now, with that, we have new M&A this year and improved commodity pricing. That's adding roughly 35 basis points of incremental.

Speaker Change: because the M&A was actually a neck drag going into the year.

Luke Pelosi: So the 70 basis point raise, half is coming from those two pieces, and then the other half is just the ongoing success of our strategies, both on volume and just the underlying margin. And so I think it's a great testament to all of the things we've been saying for the past couple of years as we bring these pieces together and what the opportunity is in front of us. And the most exciting part is that we really think this is just getting started. Great. Thanks, Luke.

Speaker Change: And so, you know, I think it's a great testament to all of the things we've been saying for the past couple years as we bring these pieces together and what the opportunities in front of us. And the most exciting part is, you know, we really think this is just getting started.

Luke Pelosi: And the most exciting part is, you know, we really think this is just getting started. Great. Thanks. I appreciate it.

Patrick Dovigi: Appreciate it. Patrick, you noted in the release and in your prepared remarks today that you believe the sale of certain other high-quality assets would be on the table. You obviously called out environmental services. But given the way it's worded, could we assume that there are other assets that could also possibly be for sale? No, no. Thank you all, thanks guys. Thank you.

Patrick Dovigi: Patrick, you noted in the release and in your prepared remarks today that you believe the sale of certain other high-quality assets would be on the table. You obviously called out environmental services, but you have been the way it's worded. Could we assume that there are other assets that could also possibly be for sale? No, thanks.

Patrick: Patrick, you noted in the release and in your prepared remarks today that you believed a sale of certain other high-quality assets would be on the table. You obviously called out environmental services, but given the way it's worded, could we assume that there are other assets that could also possibly be for sale? No.

Patrick Dovigi: No.

Speaker Change: No.

Stephanie Moore: Thank you. Thank you, Stephanie.

Speaker Change: Thank you.

Kevin Chiang: We now have Kevin Chiang with CIBC. We're going to. Hey, good morning, everyone.

Kevin Chiang: Thank you Stephanie. We now have Kevin Chiang with CIBC, Wodgundy.

Kevin Chiang: Maybe just looking at your solid waste performance, I guess I've noticed a bit of a divergence, I won't say divergence, it's more the Canadian solid waste organic growth has been tracking at a decent positive spread versus the U.S. organic growth. I'm just wondering if there's anything to call out there that you're seeing in Canada versus the U.S. I'm not sure if it's just the timing of how some of the M&A comes through and it rolls through after year one or if there's something specifically happening in the Canadian landscape versus the U.S. landscape. Yeah, good morning, Kevin.

Kevin Chiang: Maybe just looking at a solid waste performance. I guess I've noticed a bit of a diverge. Just almost a diverge. It's, it's, it's not. It's more the Canadian solid waste organic growth has been tracking at a decent positive spread versus the US organic growth. I'm just wondering if there's anything hollow out there that you're seeing in Canada versus the US. I'm not sure it's just the time. It will have some of the M&A come through, and it rolls through after year one, or if there's something specifically happening in the Canadian landscape versus the US landscape.

Kevin Chiang: Hey, good morning everyone. Maybe just looking at your solid waste performance, I guess I've noticed a bit of a divergence, I won't say divergence, it's more the Canadian solid waste organic growth has been tracking at a decent positive spread versus...

Speaker Change: I'm just wondering if there's anything you'd call out there that you're seeing in Canada versus the U.S. I'm not sure if it's just the timing of how some of the M&A comes through and it rolls through after year one, or if there's something specifically happening in the Canadian landscape versus the U.S. landscape.

Luke Pelosi: Yeah. Good morning, Kevin. It's a great question. If you think about solid waste organic growth being price and volume or call or Canadian business was sort of behind the fall on pricing, if you will. You know, when we really sort of embarked on price discovery, call it sort of five, six years ago. And so I think that upside that we've always articulated as to catching up with industry norms in terms of pricing. A lot of that existed in the Canadian book, and you're seeing that sort of come through. I think additionally we're starting to see some of the benefits of these investments we've made into recycling EPR and other initiatives in the Canadian landscape, which are helping support, you know, sort of overall volumes there.

Luke Pelosi: It's a great question. If you think about, you know, solid waste organic growth being price and volume, recall our Canadian business was sort of behind the eight ball on pricing, if you will, when we really sort of embarked on price discovery, call it sort of five, six years ago. And so I think that upside that we've always articulated as catching up with industry norms in terms of pricing, a lot of that existed in the Canadian book, and you're seeing that sort of come through.

Speaker Change: Yeah, good morning, Kevin. It's a great question. If you think about, you know, solid waste organic growth being price and volume, recall our Canadian business was sort of behind the eight ball on pricing, if you will, you know, when we really sort of embarked on price discovery, call it sort of five, six years ago. And so I think that upside that we've always articulated as the catching up with industry norms in terms of pricing, a lot of that existed in the Canadian book and you're seeing that sort of come through.

Luke Pelosi: I think additionally, we're starting to see some of the benefits of these investments we've made into recycling, EPR, and other initiatives in the Canadian landscape, which are helping support, you know, sort of overall volumes there. And then the flipside set is while the US pricing discipline has been more sort of mature, certainly has more runway there, it wasn't as much of a ramp as we saw in Canada. Some of our intentional shedding has been more focused on the US market, where we've done, you know, larger quantities of M&A and therefore inherited larger volumes of books of business that no longer meet our return threshold. So I think it's a combination of those two things.

Kevin Chiang: I think additionally, we're starting to see some of the benefits of these investments we've made into recycling, EPR, and other initiatives in the Canadian landscape, which are helping support, you know, sort of overall volumes there. And then the offside set is, well, the U.S.

Luke Pelosi: And then the offside set is while the US pricing discipline has been more sort of more mature, certainly have more runway there, but it wasn't as much steep of a ramp as we saw in Canada. Some of our intentional shedding has been more focused in the US market where we've done, you know, larger quantity of M&A and therefore inherited larger volumes of books of business than no longer meeting our return threshold. So I think it's a combination of those two things. Certainly, we're seeing very robust organic growth across both the segments, but you're absolutely right when you sort of pick it apart; you do see a bit of that sort of divergence. But as we go forward, you know, we're feeling highly confident in your organic growth prospects on both price and volume in both of those segments.

Kevin Chiang: Pricing discipline has been sort of more mature, certainly have more runway there, but it wasn't as much steep of a ramp as we saw in Canada.

Kevin Chiang: Some of our intentional shedding has been more focused in the U.S. market where we've done larger quantity of M&A and therefore inherited larger volumes of books of business and no longer meeting our return thresholds. So I think it's a combination of those two things. Certainly we're seeing very robust organic growth across both the segments, but you're absolutely right when you sort of pick it apart, you do see a bit of that sort of divergence. But as we go forward, we're feeling highly confident in the organic growth prospects on both price and volume in both of those segments.

Luke Pelosi: Certainly, we're seeing very robust organic growth across both segments. But you're absolutely right, when you sort of pick it apart, you do see a bit of that sort of divergence. But as we go forward, you know, we're feeling highly confident in the organic growth prospects for both price and volume in both of those segments.

Kevin Chiang: No, that makes a ton of sense, and I appreciate the color there.

Kevin Chiang: I'm sure there'll be, you know, a ton of questions through this call on, you know, potentially divesting of ESM. Maybe I'll just ask one on, you know, it is a portfolio of assets you have within ESM. I guess when you think of potentially divesting of this, do you think of divesting all of it or none of it, or is divesting parts of it also part of the tip part part of the I guess the review you're going through today. No, beyond block. Okay, it would be, it would be, it would just be, you know, you would be selling the entire, I mean, the one piece that's in there is the sole remediation piece.

Luke Pelosi: I'm sure there will be a ton of questions during this call on potentially divesting of ES. Maybe I'll just ask one on, you know, it is a portfolio of assets you have within ES. I guess when you think of potentially divesting of this, do you think of divesting all of it or none of it, or is divesting parts of it also part of the, I guess, the review you're going through today? Thank you.

Speaker Change: Do you think of divesting all of it, or none of it, or is divesting parts of it also part of the review you're going through today?

Speaker Change: I'll be on block.

Speaker Change: For ES, it would be, it would just be, you know, you would be selling the entire...

Patrick Dovigi: So I would say that the one piece that could potentially not go with it, we wanted to keep that just given the exposure to the GTA and sort of GIP but everything, you know, it's a small piece of environmental services, but for the most part, it would be on block both Canada and the U.S. Obviously, as you know, almost 80% of the revenue for me has come from Canada, 20% from the U.S. So, yeah, that makes sense. That makes sense.

Speaker Change: So that I would say that's the one piece that could potentially.

Speaker Change: Not go with it. We wanted to keep that just given the exposure to the GTA and sort of GIP, but everything, you know, it's a small piece of environmental services, but for the most part.

Speaker Change: It would be on block both Canada and the U.S. Obviously, as you know, almost 80% of the revenue from U.S. comes out of Canada, 20% out of the U.S.

Kevin Chiang: That's it for me. Thank you for taking my questions. Thank you.

Speaker Change: Yeah. Yeah. That makes sense. That makes sense. That's it for me. Thank you for taking my questions.

Devin Dodge: We now have Devin Dodge with BMI of CO2 market. Alright, thank you for taking my questions here. I just wanted to come back to the 2024 margin guidance. Look, the face of increased really steps up in the second half compared to the first half. I know the sale of the operation, Michigan is part of it, but can you help us, you know, better understand that sequential improvement.

Speaker Change: Thank you.

Luke Pelosi: Thanks for taking the questions here. I just wanted to come back to the 2024 margin guidance. Look, the pace of increase really picks up in the second half. Can you speak to some of the drivers behind that?

Luke Pelosi: Yeah, Devin, it's Luke speaking, and again, I think it sort of goes back to my sort of prior comments, the Stephanie of the overarching margin, and it's sort of all of these things coming together, right? So you continue to have price cost spread, you know, similar to what we've seen all throughout the year. You know, the cost of risk had win. That's been a big drag all year. It's moderating, and you get to the second half, and the benefits of intentional shedding and other deliberate volume strategies are improving as we sort of go forward, and you're going to have, you know, the M&A contribution as well.

Luke Pelosi: So it's not any sort of one thing. I mean, the guy does contemplate solid waste margins, you know, expanding. I think it's roughly 200 basis points over the prior year for terms of Q3. And if you break that apart, you know, the Michigan sale would give you a sort of 80 to 90 basis points of that, and commodities give you sort of 70 basis points of that. Cost of risk is going to be again not as impactful as the first half. I call that another 30 to 40 basis point headwind against you. So it's still sort of when you take the puts and takes speaking to this underlying 100 basis points of solid waste margin expansion, which is we've been consistently seeing.

Luke Pelosi: And again, I think it's a function of all of those pieces we said, starting with the market selection and the assets, getting the synergy realization as these businesses are really sort of starting to gel, improved asset utilization, and all of the like. And so I think it's all of those pieces, and, you know, obviously culminating a 30% consolidated margin for Q3. So the first time in our history printing that is something that we're pretty excited about.

Devin Dodge: OK, OK, thanks for that. And then another question: you know, we get applicationally corporate costs. You know, we've seen this trip higher as a percentage sales. No, over the last two or three years. Can you speak to some of the drivers behind that?

Luke Pelosi: And if you have a line of sight into when you could be in a position to start, you know, leveraging those corporate costs and adding to the margin expansion of the underlying. Yeah, Dev, it's another great question, something we sort of look at a lot. If you look over the last three years, I mean, at a high level, you'd buy, you know, half of that is salaries, which sort of accretes at, you know, the normal core sort of wage inflation.

Luke Pelosi: And if you have line of sight into when you could be in a position to start leveraging those corporate costs and add to the margin expansion or the underlying doesn't seem? Yeah, Dev, it's another great question. It's something we sort of look at a lot at. If you look at the last three years, I mean, at a high level, you bite, you know, half of that is salaries, which sort of accretes up that, you know, normal course sort of wage inflation. Now, you know, from going to putting a public company and doubling our size, we did increase some of the sort of support, particularly around ESG and some of these other sort of departments that weren't sort of full pledge.

Luke Pelosi: Now, you know, from going to being a public company and doubling our size, we did increase some of the sort of support, particularly around ESG and some of these other sort of departments that weren't sort of full fledged. So you did have an investment in resources there. Another significant component of the non-salary is IT costs.

Luke Pelosi: So you did have an investment and resource there. Another significant component of the nonsense is IT cost. And as we articulated about sort of two years ago, massive investment to move a lot of our infrastructure into the cloud and just sort of prepare for ongoing scalability. Now, some of that IT shows up in CapEx, obviously, but a large portion of it just sort of sits in that sort of corporate bucket. I think the third item to consider is there's actually been, between the investors of last year and now, Michigan again. Some, you know, chunkier amounts of revenue dispositions, which obviously, you know, is for going some of the leverage that you're getting on that number.

Luke Pelosi: And as we articulated about sort of two years ago, massive investment to move a lot of our infrastructure into the cloud and just sort of prepare for ongoing scalability. Now, some of that IT shows up in CapEx, obviously, but a large portion of it just sort of sits in that sort of corporate bucket. I think the third item to consider is that between the divestitures of last year and now Michigan, there have actually been some, you know, chunkier amounts of revenue dispositions, which obviously, you know, is foregoing some of the leverage that you're getting on that number.

Speaker Change: Again component of non it course, and as we articulated but sort of two years ago, a massive investment to move a lot of our infrastructure into the cloud and just sort of prepare for ongoing scalability now some of that shows up in Capex, obviously, but a large portion of it just sort of sits in that sort of corporate bucket I think the third day.

Speaker Change: To consider is there is actually been between the divestitures of last year and now Michigan again, some chunkier amounts of revenue dispositions, which obviously is foregoing some of the leverage that you are getting on that number but when you think about it today I think the resource investments have been made I think the it spend is there and I think what you are.

Luke Pelosi: But when you think about it today, I think the resource investments have been made. I think the IT spend is there. And I think what you now are going to have is leveraging that as you go forward and grow a revenue base off of a, you know, corporate cost number that should sort of grow more just than a normal course cost inflation. And so, you know, you're going to have a lot of money.

Luke Pelosi: But when you think about it today, I think the resource investments have been made. I think the IT spend is there. And I think what you now are going to have is leveraging that as you go forward and growing a revenue base off of a, you know, corporate cost number that should sort of grow more just at a sort of normal course cost of inflation. Thank you, Devin.

Speaker Change: Now we're going to have is leveraging that as you go forward and grow our revenue base off of a corporate cost number that should sort of grow more just at a sort of normal course cost of inflation.

Devin Dodge: Okay, thanks for that. I'll turn it over.

Speaker Change: Okay. Thanks for that I'll turn it over.

Jury Ravich: Thank you, Devin. We now have Jury Ravich with Goldman Sachs. You may proceed, jury. Yes, hi. Good morning, everyone. I want to ask, you know, your margins in the second quarter were called at a point and a half ahead of normal seasonality. Really strong performance. And, you know, the guidance for the third quarter is for another outside margin move of a point versus normal seasonality. Can you just talk about what level of sequential price increase you are folks implementing to deliver that level of performance? And, you know, what are the sequential trends in unique costs that you're seeing that drove the beat in 2QN and again out performance.

Jerry David Revich: We now have Jerry Revich with Goldman Sachs, who drove the beat in 2Q and again outperformed in 3Q. Yeah, thanks for the question, Jerry. This is a year that's returning to a sort of normal cadence of pricing action. What I mean by that is the vast majority of pricing action has actually occurred already. And so as a result, we're seeing a normal course step down. You know, we started the year sort of high this quarter at six and a half percent, and you're going to be at a high fives number in Q3, and then stepping down a little bit further in sort of Q4.

Luke Pelosi: Thank you. Yeah, thanks for the question, Jury.

Luke Pelosi: Paul, this is a year that's returning back to us with a normal cadence of pricing action. What I mean by that is the vast majority of pricing actually have actually occurred already. And so, as a result, we're seeing a normal course step down. You know, we started the year sort of high this quarter at 6.5%, and you're going to be at a high buys number in Q3, and then stepping down a little bit further in sort of Q4. So, why I give that color in cadence is because that margin is not being achieved by us going out and, you know, implementing a whole host of incremental pricing increases.

Jerry David Revich: So why I give that color and cadence is because that margin is not being achieved by us going out and, you know, implementing a whole host of incremental price increases. It's simply all of the things that we have said coming together. So yes, you're getting price cost spread because although Q3 will be high fives, you're going to be against moderating cost inflation, still probably getting somewhere of 100, 150 basis points of spread.

Luke Pelosi: It's simply all of the things that we have said coming together. So, yes, you're getting price cost spread because although Q3 will be high fives, you're going to be against a moderating cost inflation, still probably getting somewhere of 100 to 150 basis points of spread. So, on top of that, but that moderating cost inflation is also accelerating. If you look at, you know, labor rates, last Q2, you know, labor rates, you know, year-over-year would have been up sort of a mid-to-high single-digit number. Versus now, it's sort of sub-five percent, and that's sort of continuing to trend in the right direction.

Luke Pelosi: So on top of that, but that moderating cost inflation is also accelerating. If you look at, you know, labor rates last Q2, labor rates would have been up sort of a mid to high single-digit number versus now it's sort of sub-5%. And that's sort of continuing to trend in the right direction. I mean, R&M is obviously, you know, another sort of key cost that's been falling.

Luke Pelosi: I mean, R&M is obviously, you know, another sort of key cost that's been dry. I mean, if you look at R&M as percentage revenue, I think we're sort of at, you know, 10 plus in Q1. Well, I'll be on the lower seasonally revenue, but then that's stepped down to a high ninth number in Q2. It's going to step down to a sort of a low to mid-nines as a percentage revenue in Q3. And so, you're going to be getting the sort of torque coming out of that as well. I mean, the commodity prices and the rank in the first half of the year are certainly helping the Q3 margins as is, you know, the incremental impact from the exiting the Michigan portfolio, which, as it said, but sort of, you know, 80-90 bits can help you in the quarter.

Luke Pelosi: I mean, if you look at R&M as a percentage of revenue, I think we were sort of at, you know, 10 plus in Q1. Well, I'll be in the lower seasonal revenue, but then that step down to a high nine number in Q2, and it's going to step down to sort of a low to mid nine as a percentage of revenue in Q3. And so you're going to be getting this sort of torque coming out of that as well.

Luke Pelosi: I mean, the commodity prices and the ramp in the first half of the year are certainly helping the Q3 margins, as is, you know, the incremental impact from exiting the Michigan portfolio, which, as I said, but sort of, you know, 80, 90 bits is going to help you in the quarter. But it's not any of these one things, Jerry; it's all of the things coming together.

Luke Pelosi: But it's not any of these one-things, Jerry. It's all of the things coming together. And as I said, you know, yield the 30 percent margin for the first time in our history.

Speaker Change: As Gerry it's all of the things coming together and as I said going to yield a 30% margin for the first time in our history.

Luke Pelosi: And as I said, it's going to, you know, yield a 30% margin for the first time in our history. And, you know, we think there's a lot more room to run as we go forward to 25 and 26 and beyond as you really start getting the benefit of EPR, RNG, and all this margin of creative pieces that we've been talking about for the last couple of years. You certainly don't have that perspective that that Chevron decision will affect anything.

Luke Pelosi: And, you know, we think there's a lot more room to run as we go forward to 25 and 26 and beyond as you really start getting the benefit of EPR, R&G, and all of this margin of creative pieces that we've been talking about for the last couple of years. Super, appreciate the color.

Gerry: There's a lot more room to run as we go forward to 2005, and 26 and beyond as you really start getting the benefit of EPR RMG and all of its margin accretive pieces that we've been talking about for the last couple of years.

Speaker Change: Super I appreciate the color.

Luke Pelosi: And, you know, on the R&G point, Luke, can you folks just weigh in on your updated views on the attractiveness of voluntary markets versus D3-RIN markets? Do you view the Chevron ruling as any uncertainty for the D3-RIN market? You just weigh in with your updated thoughts on spot versus potentially locking in those volumes. Yeah, man, again, you know, nothing has moved in, you know, all the smarter people that are not definitely on the rims haven't, you know, certainly don't have that perspective that that Chevron decision will affect anything, but, you know, from our perspective, again, market continues to be very stable, you know, being able to push as much as we can sort of in the transportation market, given sort of win pricing, voluntary market continues to creep up.

Luke: RMG point, Luke can you folks just weigh in on your updated views on.

Speaker Change: The attractiveness of voluntary markets versus <unk> markets do you.

Speaker Change: View, the Chevron ruling is any uncertainty for the DS three <unk>.

Speaker Change: Mid market you just weigh in with your updated thoughts on spot.

Speaker Change: Spot versus potentially locking in those volumes longer term.

Speaker Change: Yes.

Speaker Change: Again, nothing is moving all the smarter people than not definitely on the Rins havent.

Luke Pelosi: But, you know, from our perspective, again, the market continues to be very stable, you know, being able to push as much as we can sort of in the transportation market, given sort of wind pricing. The voluntary market continues to creep up. So, you know, I think as more volume continues to come online, I think, you know, there's going to be the opportunity to move some of that definitely into the voluntary market. And I think our strategy, our long-term strategy, really hasn't changed.

Luke Pelosi: So, you know, I think as more volume continues to come online, I think, you know, there's going to be the opportunity to move some of that, I definitely into the, into the voluntary market, and I think our strategy, long term strategy, really hasn't changed, so I think we're, you know, again, just highly focused on keeping that balance. Again, longer term, we want to be; we still have the view that we want to be 60% into the sort of, into the voluntary market and then play the spot market on the other sort of balance of 40.

Luke Pelosi: So I think we're, you know, again, just highly focused on keeping that balance. Again, longer term, we want to be, we still have the view that we want to be 60% into the sort of voluntary market and then play the spot market on the other sort of balance of 40. And, you know, last question on ES: you have expanded margins significantly from when you acquired those businesses. Can you just talk about what the tax position and the tax basis look like for those assets if you do move towards a sale? Anything we should keep an eye on US versus Canada?

Luke Pelosi: Super.

Luke Pelosi: And, you know, last question on ES, you folks have expanded the market significantly from when you folks acquired those businesses. Can you just talk about what the tax position and the tax basis looks like for those assets, if you move towards a sale, anything we should keep it going, US versus Canadian position? Yeah, so you think about the business. I mean, we did a couple of things. I mean, as people know, the Canadian government changed the capital gains rates earlier this year, so we were able to do a reorganization within the existing business to preserve the old capital gains rate in that business unit.

Luke Pelosi: Yeah, so you think about the business. I mean, we did a couple things. As people know, the Canadian government changed the capital gains rate earlier this year. So we were able to do a reorganization within the existing business to preserve the old capital gains rate in that business unit. So again, you know, we had the ES business as its own entity. I mean, if you look at it, the irony of this and the funny thing about it is, you know, we look at ES, which I sort of mentioned to the board yesterday. In 2010, we got offered 100 million for our ES business.

Luke Pelosi: So again, you know, we had that; we had the ES business in its own entity. I mean, if you look, I mean, the irony of this, the funny thing about it is, you know, we look at ES, which sort of mentioned to the board yesterday. You know, you look at that business, 2010, we got offered 100 million for our ES business; 2018, we got offered 800 million for our ES business. And, you know, I think you've seen some of the numbers that are out there, you know, today. And again, we've done, we've done, you know, the management team has done an amazing job.

Speaker Change: We had that we had the es business in its own entity I mean, if you look I mean, the irony of this and the funny thing about it is when you look at Es.

Speaker Change: So I mentioned to the board yesterday as you look at that business 2010, We got offered 100 million for our U S. Business 2018, we got offered 800 million for our U S business and I think you've seen some of the numbers that are out there.

Luke Pelosi: In 2018, we got offered $800 million for our EF business, and you know, I think you've seen some of the numbers that are out there today. And again, the management team there has done an amazing job. I mean, they printed north of 29% margins in Q2. I mean, you know, it's an amazing business, an amazing margin profile with a lot of sort of runway sort of sitting in front of it. That being said, you know, it would be basically fully taxable in the U.S. for the 20% piece. We do have a significant number of these sort of..., https://www.youtube.com.uk Subs by www.zeoranger.co.uk, Great

Speaker Change: Today.

Speaker Change: And again, we've done we're going to.

Speaker Change: Management team has done an amazing job I mean, they printed north of 29% margins.

Luke Pelosi: I mean, they printed north of 29% margins in Q2. I mean, you know, it's an amazing business, an amazing margin profile with a lot of sort of runway sort of sitting in front of it. That being said, you know, it would be basically fully taxable in the US for the 20% piece. We do have a significant number of sort of losses that we could use in Canada. So I mean, I think, you know, depending obviously on the purchase price, but you could think about a tax bill, sort of in the five to 600 million dollar range.

Speaker Change: In Q2 I mean.

Speaker Change: It's an amazing business, an amazing margin profile with a lot of sort of runway sort of sitting in front of it.

Speaker Change: That being said it would be basically fully taxable in the U S for the 20% piece, we do have a significant.

Speaker Change: Number of sort of.

Speaker Change: Losses that we could use in Canada, So I mean I think.

Speaker Change: Depending obviously on the purchase price but.

Speaker Change: You could think about a tax bill sort of in the $5 million to $600 million range.

Luke Pelosi: Thank you.

Luke Pelosi: Thank you, Jerry.

James Schumm: We now have Jane. We have TD Cowan. Good morning, guys. Nice quarter. Most of my questions have been answered. Maybe just one for me. I know it's way too early for 2025 guidance, but just at a high level with, you know, with the price. The base cost spread opportunity, plus some RNG and EPR contributions. Could we see another 100 basis points, plus improvement to EBITDA margins next year? And then just, you know, thinking longer term about the volumes, what they could do next year. Could those be flat to marginally up next year, or do you still have a lot of shedding ahead of you?

Luke Pelosi: Hey, James, it's Luke speaking. I mean, I think where we sit today, I'd say it's a definitive yes that we are expecting next year to be another hundred plus. You know, we'll obviously unveil a full guide as we go for it, but I think you're absolutely thinking about that correctly, and if you do the map, you actually don't need to believe a lot to get to a number like that. In terms of the deliberate volume strategy, like, as we said previously early this year, this portfolio of residential contracts, the mission was like the last big chunk.

Luke Pelosi: I mean, there's always going to be pieces, and as you do M&A, there's stuff around the edges, but I think, you know, the lion's share of the strategy that was actually moving volume and overshadowing actually underlying positive volume is largely sort of behind us. So I think, you know, we'll hold until the end of the year or early next before we give a final view on volumes for 2025, but you know, certainly think, you know, we're not going to be printing in the minus 3% that we did the beginning half of this year, and it's certainly something sort of closer to flat with the path to being up.

Speaker Change: Next before we give a final view on volumes for 2025, but certainly think we're not going to be printing in the minus 3% that we did the beginning half of this year and it's certainly something sort of closer to flat with a path to being up.

James Schumm: Great.

Luke Pelosi: Thanks, Luke. I'll turn it back on. We now have Brian Butler with us... Good morning.

Speaker Change: Great. Thanks, Luc I'll turn it back.

James Schumm: Thanks, Luke. I'll turn it back. Thanks, James. Thank you, James, and thank you, Luke.

James: Thanks James.

Speaker Change: Thank you Jamie and thank you ladies we now have Brian Butler with Stifel.

Brian Butler: We now have Brian Butler with People. I do want any thanks for taking my question. First one, just on the, yes, timeline, I guess, he talked about after Labor Day kind of starting the auction process. I guess, what's your thoughts on in maybe appetite on how long that process runs? I mean, does that go through the end of 2024, maybe in the 25, or is there an expectation to try to do that sooner rather than later? I mean, from all perspectives, we want to get it done as soon as we possibly could. You know, again, just, it'll be a question of how fast we can move.

Brian Butler: Hi, good morning, Thanks for taking my question.

Brian Joseph Butler: Thanks for taking my question. First one on it, just on the timeline, I guess you talked about after Labor Day kind of starting the auction process. I guess what? What's your thoughts on and maybe appetite for how long that process runs? I mean, does that go through the end of 2024? Maybe in the 25?

Speaker Change: First.

Brian Butler: First one just on EPS timeline, I guess, you talked about after labor day kind of starting the auction process I guess what.

Patrick Dovigi: Or is there an expectation to try to do that sooner rather than later? For most of us that know us, I generally don't think we waste a lot of time. And I think the beauty of this business is that this is not a 100-person auction. This is, you know, I would say 8 to 10 sophisticated buyers that have played in this space over and over again. So there's not a typical learning curve about assets, markets, etc. So, listen, from our perspective, I think it'll move very quickly. But again, you know; you never know, I think.

Speaker Change: What's your thoughts on and maybe appetite how long that process runs I mean does that go through the end of 2024, maybe in the 25 or is there an expectation that tried to do that sooner rather than later.

Speaker Change: I mean from our perspective, we want to get it done.

Speaker Change: We possibly could.

Speaker Change: Again, it will be a question of how fast we can move I think for.

Patrick Dovigi: I think for most of us that know us, I generally don't think we wait a lot of time. And I think the beauty of this business is, this is not a 100-person auction. This is, you know, I would say 8 to 10 sophisticated buyers that have played in the space over and over again. So there's not a typical learning curve about assets, markets, et cetera. So I listen, from our perspective, I think it'll move very quick. But again, you know, you never know. I think the biggest thing for us is, again, just, you know, getting the cargo financials done, particularly if it's a financial sponsor buyer.

Patrick Dovigi: The biggest thing for us is again, just, you know, getting the cargo financials done, particularly if it's a financial sponsor buyer. Obviously, we've been a public company, and we reported the segment independently, but, you know, for someone to get financing, a part of what we have to do is get cargo financials. So that's in the process.

Patrick Dovigi: Obviously, we've been a public company. We reported the segment independently, but you know, for someone to get financing, you know, a part of what we have to do is get cargo financial.

Patrick Dovigi: That's in process, but you know, other than that, I don't see, you know, my goal would be, you know, clearly to get it done versus, you know, when we report, you know, Q4 at the latest. But hopefully, you know, we get, we're able to come up with the path one way or another within calendar year 2024. Okay. And then many on the M&A spend for the back half, and then maybe thinking about the pipeline going into 25. You know, obviously it's moderating in the back half of 24 to be at the leverage target. But when you think about the opportunities still in front of you in your pipeline, you know, how should we think about 2025, M&A, and then maybe, you know, if the sale of ES happened, should that be, you know, much, much larger? Just trying to think about what where that could go.

Patrick Dovigi: But, you know, other than that, I don't see it. You know, my goal would be, you know, clearly to get it done versus, you know, when we report, you know, Q4 at the latest, but hopefully, you know, we get, we're able to come up with a path one way or another within calendar year 2024. Okay, and then maybe on the M&A spend for the back half, and then maybe thinking about the pipeline going into 2025.

Patrick Dovigi: You know, obviously, it's moderating in the back half of 2024 to be at the leverage target. But when you think about the opportunities still in front of you in your pipeline, you know, what should we think about 2025 M&A? And then maybe, you know, if the sale of ES happens, could that be, you know, much, much larger, just trying to think about where that could go? Yeah, so I mean, again... balancing between M&A spends and sort of the organic growth cap expense.

Luke Pelosi: Yeah, so I mean, again, the backdrop is, again, you know, we've committed to keeping leverage in the three. I think, you know, the goal is to get sort of leverage absent sort of a sale with to get leverage down in the mid three for 25. So I guess, you know, that would drive, you know, that would drive the M&A spend. I think when you look at that for next year, you could, this year, if we spent 600 to 650 million M&A, given sort of some of the most recent EPR win that we had, and again, having the hybrid, you know, balancing between M&A spend and sort of on the organic growth cap expense, you know, I think next year, we could step it up for sure, you know, from 650, probably closer to something, you know, somewhere between 850 and a billion.

Patrick Dovigi: You know, I think next year we could step it up for sure. You know, from 650 probably closer to something, you know, somewhere between 850 and a billion. Obviously, if we, if we, obviously, if we did something with the E.S.

Luke Pelosi: Obviously, if we, if we obviously, if we did something with the ES business, I mean, that would give you ultimate flexibility to do whatever you want. You know, I think you could certainly spend more leverage; wouldn't really move, you know, coupled together sort of with the share buybacks. I mean, I think you'd have a lot of flexibility to, you know, even take that M&A spend higher.

Luke Pelosi: And Brian, it's Luke speaking in reference to 850 to a billion that you could potentially be looking at, you know, in a non-ES divest citrus or scenario, just one of, everyone to recall, you know, with this size, you know, roughly every $500 million you deploy in M&A has an impact leverage of about 10 basis points around numbers. So if you think about the organic the leveraging model, if you're ending this year in that sort of 365 to 385 range, you know, organically, you would be levered to something well below three and a half. And, you know, even at spending that billion dollars of a level of M&A, still very sort of comfortably, you know, arriving at the end of 2025 and that sort of mid-trees range.

Luke Pelosi: business, leverage wouldn't really move, you know, coupled together sort of with the share buybacks. I mean, I think you'd have a lot of flexibility to, you know, even take that M&A spend higher. And Brian, it's Luke speaking in reference to $850 to a billion that you could potentially be looking at, you know, in a non-ES divestiture sort of scenario. I just want everyone to recall that with this size, roughly every $500 million you deploy in M&A has an impact on leverage of about 10 basis points, round numbers.

Luke Pelosi: So if you think about the organic, the leveraging model, if you're ending this year in that sort of 365 to 385 range, you know, organically, you would be levered to something well below three and a half. And, you know, even at spending that billion dollars of a level of M&A, still very sort of comfortably, you know, arriving at the end of 2025 in that sort of mid-threes range Yes, I mean, you know, it's obviously market specific. But by and large, yes, we continue to see them all pay. Great, thanks for taking the question. Hi, good morning, everyone.

Luke Pelosi: Okay, that's great color.

Brian Butler: And if I could look one last one in there, cutting through kind of maybe on the surface, you know, or maybe, sorry, not surface, but the shedding of volume. If you look at the service intervals on the commercial business, are you still seeing, you know, upgrades kind of outpacing downgrades in that piece of the business? Yes, I mean, yeah, it's obviously market-specific, but by and large, yes, we continue to see them all pacing the client. So, in markets very healthy, so, you know, we haven't seen anything sort of material. Obviously, special waste volumes continue sort of just chug sideways. It's given, you know, where the interest rates are sort of sitting, but I think other than that, it's been very good.

Speaker Change: Sideways just given.

Speaker Change: The interest rates are sort of sitting in but I think other than that.

Speaker Change: It's been very good.

Brian Butler: Great, thanks for taking the question.

Speaker Change: Great. Thanks for taking my questions.

Rupert Merer: Thank you, Brian. We now have Rupert Sarah with National Bank of Canada. Hi, good morning everyone. Thanks for taking the question. I'd like to start by following up on that last question.

Speaker Change: Thank you, Brian we now have for that.

Speaker Change: With National Bank of Canada.

Luke Pelosi: Thanks for taking the question. You're going to move between 275 and sort of three and a quarter, you know, for a period of time, but ultimately, sort of target leverage would sit around three post the transaction. Great, and then looking at M&A potential with any remaining proceeds, how do you see the relative price of assets in your pipeline today versus the price of your stock? A couple of things here. I mean, from my perspective, to get an asset of this quality at this level, to be, you know, again, going back to Luke's comments earlier, we talked about 25 and 26, the business is trading at sort of 12, 12 and a half times today. And you run that out to 26.

Speaker Change: Hi, good morning, everyone. Thanks for taking the question.

Speaker Change: Like to start by following up on that last question, if youre looking to deploy capital from the sale of the Es business. What's your view on the optimal level of debt for the remaining company is it still the same is it mid threes or if you have the option could that go lower.

Patrick Dovigi: If you're looking to deploy capital from the sale of the Yes business, what's your view on the optimal level of debt, the remaining companies? Is it still the same? Is it mid-freeze, or... If you have the option, could that go lower? I think, you know, when we ran our models internally, you know, with the sale, I think you would basically, I mean, I think comfortably you'd move it to three, and that's to get the IG to make sure you're definitively square in the view of getting that sort of investment grade rating. I mean, if you're going to be that close, you might as well move to three and definitively get the IG rating. There's no reason the sort of teeter thought I'm trying to be cute with that number, so I think you would move that target level to you.

Speaker Change: Okay.

Speaker Change: And then when we ran our models internally.

Speaker Change: With the sale I think.

Speaker Change: You are basically I mean, I think comfortably move into three and that to get to IAG.

Speaker Change: To make sure you are definitively square in the view of getting that sort of investment grade rating I mean, if youre going to be that closed you might as well move to three and definitively get the IAG rating Theres No reason to start a teeter totter I'm trying to be cute with that number. So I think you would move that target leverage here.

Patrick Dovigi: You're going to move between two, seven, five, and sort of three in a quarter, you know, for a period of time, but ultimately, sort of target levels would sit around three, post the transaction.

Patrick Dovigi: Okay, great, and then looking at M&A potential with any remaining proceeds, how do you see the relative price of assets in your pipeline today versus the price of your stock if you're looking at buybacks and the pipeline have any platform acquisition opportunities, or you think they're still plenty to do in tuck-ins? So, a couple of things in there. I mean, I think, again, from my perspective, to get an asset of this quality at this level, to be, you know, again, going back to loose comments earlier, we talked about 25 and 26. The business is trading at sort of 12, 12 and a half times today, and you run that out to 26 and you start in 12 to 14 months from now, you're trading off of a 20, 26 number.

Patrick Dovigi: And you know, starting in 12 to 14 months from now, you're trading off of the 2026 number. This business is, you know, with EPR and RNG, trading somewhere around probably 10 times 2026, depending sort of how you model it. I mean, I don't think there's a higher, better use of capital than to buy back some of our own stock at that level. That being said, you know, that would be one use of capital.

Patrick Dovigi: This business is, you know, with EPR and RNG, is trading somewhere around probably 10 times, 20, 26, depending sort of how you model this. I mean, I don't think there's a higher, better use of capital than to buy back sort of overall stock at that level. That being said, you know, that would be one; so would be one use of capital. There is a significant amount of M&A in the markets where we already operate. I mean, again, we have a very large footprint: 10 provinces in Canada, 24, 25 states in the US, some high growth markets with a lot of opportunity.

Patrick Dovigi: There is a significant amount of M&A in the markets where we already operate. I mean, again, we have a very large footprint, 10 provinces in Canada, 24, 25 states in the US, some high-growth markets with a lot of opportunity. So again, we feel very comfortable that we can deploy that capital. And again, from a valuation perspective, it's hit and miss. I mean...

Speaker Change: 10 provinces in Canada, 24, 25 states in the U S.

Speaker Change: Some high growth markets with a lot with a lot of opportunity. So again, we feel very comfortable that we can deploy that capital and again from a valuation perspective.

Patrick Dovigi: So again, we feel very comfortable that we can deploy that capital. And again, from a valuation perspective, again, it's hit and miss. I mean, there's some assets, you know, that are more expensive than others, but by and large, valuations from our perspective, maybe they've ticked out a little bit. Because of the higher interest rates, but, you know, I would say that, again, from the competition for some of them, you know, medium-sized assets, you know, you have a little bit on the private equity side that can be with you. And at the leverage for the edge markets have come back, even though rates are a little bit higher, you know, it continues. You can, again, similar to the math I get earlier in the call, you know, you can make the IRR's work if you believe in the sort of growth trajectory and the stability of the business.

Speaker Change: Again, it's hit and Miss I mean.

Speaker Change: There are some assets that.

Speaker Change: Are more expensive than others.

Speaker Change: But by and large valuations from our perspective, maybe they ticked down a little bit.

Speaker Change: Because of the higher interest rates, but.

Patrick Dovigi: I would say that, again, in the competition for some of the, you know, medium-sized assets, you have a little bit on the private equity side that competes with you. And as the leveraged finance markets have come back, even though rates are a little bit higher, this continues. You can, again, similar to the math I did earlier in the call, you can make the IRRs work if you believe in the sort of growth trajectory and the stability of the business. So, you know, I think nothing has really changed on the tuck-in side. And again, there is a significant amount of M&A and white space within the existing footprint that we have. Thanks for coming.

Speaker Change: I would say that again from the competition for some of them medium sized assets you have a little bit on the private equity side that compete with you and as the leveraged finance markets have come back even though rates are a little bit higher it.

Speaker Change: Continued.

Speaker Change: Again, similar to the math I get earlier on the call you can make the IRR is work.

Speaker Change: If you believe in the sort of growth trajectory the stability of the business. So.

Patrick Dovigi: So, you know, I think nothing has really changed from the top to the inside. And again, there's a significant amount of M&A and white space within the existing footprint that we have. Great, thanks for coming along.

Speaker Change: I think nothing has really changed from the tuck in side and again, there is a significant amount of M&A in white space within the existing footprint that we have.

Speaker Change: Great. Thanks for the color I'll leave it there.

Patrick Dovigi: We'll leave it there. Thank you.

Speaker Change: Thank you.

Tobey Sommer: Your next question comes from Toby, someone weird. Thanks. How has employee attrition, training, and safety expense trended year-to-date? Is there room for improvement from here? Is there a difference in trends if you look at the business geographically between Canada and the US? So I think there's a difference between secondary and open market. You know, second secondary markets, again, employee turnover, obviously, significantly lower than the urban markets, which has been good. I think if you look at trailing 12 months as a business of a whole, you know, like I said last year, we were sort of, we were trending sort of mid-twenties.

Speaker Change: Your next question comes from the cave.

Speaker Change: Sure.

Speaker Change: You May proceed.

Luke Pelosi: Thanks. How has employee attrition training and safety expense trended year to date? Is there room for improvement from here? And is there a difference in trends if you look at business geographically between Canada and the US? [inaudible] We were trending sort of in the mid 20s. Today, we're just above 20. And we think, you know, that, again, goes back to sort of where we were pre-COVID, sort of in the high teens. So, mid to high teens is what the goal is.

Speaker Change: Thanks.

Luke Pelosi: And we are definitely, on a trailing 12 month basis, trending down. I mean, turnover is down sort of four, four and a half percent over the last 12 months. So we are definitely heading in the right direction. And the opportunity is still great to continue moving again, down sort of mid to high teens. Yeah, so I think if you look at it, I mean, the model that, had a solid weight need, right?

Patrick Dovigi: Today we're just above 20, and we think, you know, that again goes back to sort of where we were pre-COVID, sort of in the high teens. So mid-to-high teens is what the goal is, and we are definitely on a trailing 12 month basis trending down. I mean, it turnovers down over sort of 4, 4, and a half percent over the last 12 months. So we are definitely heading in the right direction.

Patrick Dovigi: And the opportunity is still great to continue moving again down sort of mid-to-high. I mean, could you discuss any cross-selling or historical benefits that we should have in mind between solid waste and ES that you've generated with those businesses together that might not be a feature of the rominka? Yeah, so I think if you look at it, I mean, the model that you had a solid waste need, right? Not in the sort of reverse. So yes, there was cross-selling opportunities, but the way it's structured today is you basically have a solid waste salesman and you have a liquid waste environmental services salesman.

Luke Pelosi: Not in the sort of reverse. So, Yes, there were cross-selling opportunities, but the way it's structured today is you basically have a solid waste salesman, and you have a liquid waste, and environmental services salesman, right? Or saleswoman.

Patrick Dovigi: Right? So our saleswoman. And I think when you look at that, we basically incorporate effectively a body body system. So in every region, each of the sales people on the respective side of the business has a body body that can cross-sell between the two lines. In a transaction, I think that is valuable to both companies and my, you know, inclination today in sort of discussions with certain prospective buyers, that would sort of stay in place. I don't, we don't think that that would change in any material way because it's a benefit to sort of both companies.

Luke Pelosi: In every region, each of the salespeople on the respective sides of the business has a buddy-buddy that can cross sell between the two lines. In a transaction, I think that is valuable to both companies. In my, you know, inclination today in sort of discussions with certain prospective buyers, that would sort of stay in place. I don't, we don't think that that would change in any material way because it's a benefit to sort of both companies. Today, they're still getting two separate invoices, regardless, one for each service.

Patrick Dovigi: Today, they're getting two separate invoices regardless, one for each service. So again, that wouldn't be something we have to decouple. So, you know, from our perspective, I think that would be ongoing, and it's beneficial to both of us.

Luke Pelosi: So again, that wouldn't be something we have to decouple. So, you know, from our perspective, I think that would be ongoing, and it's beneficial to both of us. As a reminder, it is staffed; if I wanted to ask any more questions, can we now... Yeah, thanks, folks. Good morning.

Patrick Dovigi: Thank you. I appreciate that. Thank you, David.

Operator: As a reminder, it is staffed if I wanted to ask any more questions.

Operator: And we now have Chris Murray from ATB Capital Markets. Yeah, thanks so much. Good morning. Maybe turning around to call a cold, the more boring, blocking, tackling, and stuff. Talk to you in previous calls about some of the margins. and Hansmiths and Improvements. And we've touched a little bit on labor and turnover management. But I'm just wondering, you know, how you're making progress on, you know, kind of core waste margins. And some of the initiatives, I think we talked a little bit about, you know, rolling out things like tablets and the trucks, some of the other, you know, pricing initiatives.

Luke Pelosi: Um, you know, we talked in previous calls about some of the margin, but by and large, it's very, it will be one of the simpler things we've done in our history. So again, nothing that would be an impediment to making it happen. Chris, the divestitures we did last year were more sort of inextricably linked with the business than ES would be. So, you know, just as a point of reference, this would be a cleaner sort of extraction than that.

Christopher Murray: Just wondering if there's any color on, you know, kind of a walk into higher margins is to go through the next three quarters. Yeah, it's a great question. You know, something that as we look at the margin profile, what we're being able to deliver in the expansion year over year, you know, it's very evident that these strategies we've been talking to are being sort of highly successful. And, you know, again, Chris, I think it's all of the above coming through in the beginning stages of what those ultimate run rates could be. I mean, you mentioned the tablets and the trucks.

Speaker Change: We have evidence that the strategies, we've been talking to are being sort of a highly successful and again, Chris I think it's all of the above coming through in the beginning stages of what those ultimate run rates could be.

Speaker Change: You mentioned the tablets and the trucks I mean that is a.

Luke Pelosi: I mean, that is a new initiative for this year that's in the nace and stages. And yes, there's a little bit of modest contribution, but nothing compared to once that's fully ramped with the implementation completed, you know, towards, you know, end of Q4 into Q1 of next year. And so that's going to be another lever that's going to be sort of additive. You know, we talked about the RNG, and this year we have a very modest amount of it, but as the, you know, full portfolio comes online, you think about the margin of creative nature of that is.

Chris: A new initiative for this year, that's in the nascent stages and yes, there is a little bit of modest contribution, but nothing compared to once that's fully ramped with the implementation completed.

Luke Pelosi: Towards the end of Q4 into Q1 of next year. So that's going to be another lever that's going to be sort of additive we talked about the R&D and this year, we have a very modest amount of it but as the full portfolio comes online you think about the margin accretive nature of that is EPR.

Luke Pelosi: You know, EPR, you heard that you're talking about we now sort of roughly $130 million of EPR contracts in hand. You're going to have, I think we said $5 to $10 million of contribution in this year, but then that ramps up through 25 and 26 and call, you know, that's all a creative margins, which unto itself is going to take our Canadian solid waste margin, you know, up to low 30s and, you know, be creative to both the consolidated solid margins and the consolidated business as a whole, you know, continuing. You know, with the benefits and the rollover of now this exiting of the Michigan portfolio contracts will be rollover effect into next year and you have really all of these pieces coming together.

Luke Pelosi: Patrick is talking about we now sort of roughly $130 million of EPR contracts in hand, youre going to have I think we said $5 million to $10 million of contribution in this year, but then that ramps up to $25 26 and call. That's all accretive margins, which unto itself is going to take our Canadian solid waste margin.

Speaker Change: After low thirties and be accretive to both the consolidated <unk>.

Speaker Change: Solid margins in the consolidated business as a whole.

Speaker Change: Continuing with the benefits and the rollover of now this exiting of the Michigan portfolio contracts will be rollover effect into next year and really all of these pieces coming together I mean, as we start time of the next layer down of CMG conversion improved asset utilization from routing technologies. This is the sort of next leg up that we.

Luke Pelosi: I mean, as we start time with the next layer down of, you know, CNG conversion improved out that utilization from routing technologies. This is the sort of next leg up, you know, that we anticipate being on the scene. Chris, what I'd say is, you know, we're actively engaged over on this side, you know, looking and figuring out how to prioritize all of these, you know, value add levers. In front of us, and we hope to do as an investor day later this year, you know, T this all up and, you know, articulate, you know, what the next couple of years could look like because you heard it from Patrick.

Speaker Change: Being able to see Chris what I'd say is we're at.

Speaker Change: Actively engaged over on this side looking in figuring out how to prioritize all of these value add levers in front of us and we hope to do as an Investor day later this year.

Speaker Change: This all up and articulate what the next couple of years could look like because you heard it from Patrick I mean, theres a lot of focus on 2024, but from our perspective, I think we're sort of missing the forest for the trees. When you think about what this looks like and sort of <unk> 26, and beyond and so we do look forward at our Investor day at the end of the year sort of a piece out and quantify what all of those buckets could be.

Luke Pelosi: I mean, there's a lot of focus on 2024, but from our perspective, I think we're sort of missing the forest for the trees when you think about what this looks like in sort of 26 and beyond.

Luke Pelosi: And so we do look forward at our investor day at the end of the year, sort of to piece out and quantify what all those buckets could be. Okay, great.

Luke Pelosi: Along those lines, though, the other question, just in terms of being able to receive things like new vehicles, technology, things like that. I know there's been some supply chain issues, and, but you know, it seems like a lot of stuff is starting to feel better. How are you finding, you know, kind of things like truck supply, things like that in terms of your ability to get kind of newer trucks into the system. And I hope your voice and maintenance costs, things like that. Yeah, so we were shooting it around 70% of what we wanted to go back sort of a year and a half, two years ago.

Luke Pelosi: I think that's trended sort of like 85 to 90. And I think we could be 100% of where we want to be, you know, absent. Again, some of these big new EPR contracts that we've had to reallocate, you know, units coming up the floor to these because of the contract start base of those. But I think, yes, the long jam has definitely subsided, and we're moving to a point now where we can get exactly. And then one quick one, just to clean up.

Patrick Dovigi: Just in terms of the business, is there any back-office systems or anything? I know, Patrick, you talked about sort of the sales front-end, but is there any back-office or common areas that you'd have to split up or anything that would make a kind of a sale complicated from an operational perspective? Not really. Obviously, there's a little bit of infreasury and there's definitely a little bit in HR or the two big short-of-overlapse, but by and large, you know, it's very, so we're one of the simpler things we've done in our history. So again, nothing that would be an impediment to making it happen.

Speaker Change: Common areas that you'd have to split up or anything that would make a kind of a sales complicated from an operational perspective.

Speaker Change: Not really.

Speaker Change: Obviously, there's a little bit of it in treasury and there's definitely a little bit in HR are the two big sort of overlaps but.

Speaker Change: By and large.

Speaker Change: So if you want a simpler things we've done.

Speaker Change: In our history result, again, not nothing that would be an impediment to making it happen.

Patrick Dovigi: Of course, the debatitors we did last year were more sort of inextricably linked with the business than Yes would be. So, you know, just as a point of reference, this would be a cleaner sort of extraction than that was.

Speaker Change: Chris the divestitures, we did last year were more sort of inextricably linked with the business and yes would be so just as a point of reference this would be a cleaner sort or extraction and that was.

Patrick Dovigi: Okay, folks, I'll leave it there.

Luke Pelosi: Okay, folks, I'll leave it there. Thank you. Thank you. Thank you, Chris. I would now like to hand it back. Thank you all for joining us for the GFL second quarter.

Speaker Change: Alright, Okay folks I'll leave it there thank you.

Speaker Change: Thank you.

Patrick Dovigi: Thank you, Chris.

Speaker Change: Thank you Craig I would now like to hand, it back to Pat.

Patrick Dovigi: I would now like to hand it back to Patrick for some final remarks. Thank you, everyone, for joining us this morning, and we look forward to speaking to you after Q3. Thank you very much.

Speaker Change: Patrick for some final remarks.

Patrick: Thank you everyone for joining us this morning, and we look forward to.

Patrick: Speaking to you after Q3, thank you very much.

Operator: Thank you all for joining the GFL 2nd quarter, 2024 earnings call.

Speaker Change: Thank you all for joining the <unk> second quarter 2024 earnings call. Please enjoy the rest of your day and you may now disconnect.

Operator: Please enjoy the rest of your day, and you may now disconnect from the goal.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: With.

Speaker Change: With regard.