Q1 2025 SECURE Waste Infrastructure Corp Earnings Call
Yeah.
Speaker Change: Good morning, ladies and gentlemen, and welcome to the secure waste infrastructure Corp, Q1, 'twenty 25 results conference call.
This time all lines are in listen only mode.
Speaker Change: During the presentation, we will conduct a question and answer session.
Speaker Change: If at any time during this call you require immediate assistance. Please press star zero for the operator.
Speaker Change: This call is being recorded on Friday may 2nd 2025.
Austin Protocol: I would now like to turn the conference over to Austin Protocol.
Speaker Change: Ed.
Thank you and good morning to everyone, who has left the rest of the call welcome to pick your conference call for the first quarter of 2025, joining me on the call today is Alan branch, our President and Chief Executive Officer, Chattanooga, Our Chief Financial Officer, and Corey Hi him, our Chief operating officer during the call today, we will make forward looking statements related to future performance.
Speaker Change: We will refer to certain financial measures and ratios that do not have any standardized meaning prescribed by GAAP and may not be comparable system wide financial metrics or ratios disclosed by other companies.
Speaker Change: Forward looking statements reflect the current views of secure with respect to future events and are based on certain key expectations and assumptions considered reasonable by secure this forward looking information about the future events and conditions by their very nature. They involve inherent assumptions risks and uncertainties and actual results could differ materially from those anticipated.
Speaker Change: Right.
Speaker Change: Please refer to our continuous disclosure documents available on SEDAR plant and they identify at risk factors like a whole set of care factors, which may cause actual results to differ materially from any forward looking statements and identify and define our non-GAAP measures.
Speaker Change: Today, We will review our financial and operational results for the three months ended March 31, 2025, I will now turn it all over to Alan.
Alan: Good morning, everyone and thank you for joining today's call. We are pleased to report a solid start to 2025, reflecting the consistency of our infrastructure infrastructure back business model.
Alan: Rep recessionary concerns and lower commodity prices, our operations continuing to generate high quality earnings and stable cash flow underpinned by a reoccurring waste volumes tied to production and industrial activity adjusted.
Alan: Adjusted EBITDA for the quarter was 121 million, representing a 33% EBITDA margin had stable performance on a pro forma basis after removing the $13 million of adjusted EBITDA for the facilities that we sold to waste connections on February one 2024.
Alan: Extreme cold weather in February temporarily soften some activity levels, but our base business and strategic investments continue to deliver on a per share basis. Adjusted EBITDA increased 24% from the first quarter of 2020 for pro forma reinforcing the value of our capital return strategy. This inquiry.
Alan: This is driven by an 18% reduction in our weighted average shares outstanding year over year, along with strong infrastructure utilization and contributions from recent growth projects and acquisitions.
Alan: In the first quarter of 2025, we continued our buyback strategy and reflecting our strong conviction and the intrinsic value of the business and our commitment to returning capital to shareholders. In total we repurchased five 3 million common shares for approximately 2% of our total outstanding shares for a total cost of 79 million.
Alan: In April we launched a 200 billion substantial issuer bid accelerating our share buybacks planned for 2025 together with our dividend. We are on track to return nearly $400 million to shareholders in the year, while continuing to invest in growth and maintain our financial strength.
Alan: This morning, we announced an increase to our 2025 organic growth capital program to a $125 million up from 85 billion supported by a 10 year commercial agreement with senior Montney producer key projects planned for 2025 include constructing two greenfield water disposal facilities with.
Alan: Integrated pipelines in the Montney region of Alberta to accommodate growing producer volumes. These new facilities are both backed by 10 year produced water contracts with large reputable counterparties one of the new facilities will be the op will be operational in the fourth quarter. While the second facility is scheduled to come online in the first quarter of 2026.
Alan: Yeah.
Alan: In March we completed phase three expansion of our Clearwater terminal, adding treating capabilities for chocked any margin volumes and increasing capacities to 75000 barrels per day.
Alan: This expansion as I mentioned came in into service this first quarter.
Alan: Reopening and upgrading and industrial waste facility in Alberta is industrial heartland expected to be operational in the third quarter.
Alan: Purchasing incremental railcars to bring secures fleet to approximately 200 cars, increasing the efficiency of our metal recycling logistics and distribution operations.
Alan: And finally ongoing optimization efforts across our network to increase volume throughput and drive same store sales adjusted EBITDA growth.
Alan: We also closed the acquisition of an Edmonton base metal recycling business on January 31st for $162 million, including certain working capital. This acquisition strengthen strengthens our processing capabilities at scale and supply diversification and improved logistics through our investment in railcars we have.
Alan: Also determined not to proceed with the previously announced 18 million acquisition in our metal recycling business unified final due diligence outcomes.
Alan: We are maintaining our 2025 full year adjusted EBITDA guidance range of 510 million to $540 million.
Our outlook reflects a more cautious stance in light of ongoing macro economic volatility, including uncertainties surrounding tariffs recessionary concerns and the recent decline in commodity prices now while these factors have contributed to a weaker economic outlook and increased uncertainty for our customers they potential impact they assessed.
Alan: Potential impacts on their businesses and we believe our guidance range had sufficient flexibility to accommodate these conditions along with the impact of our decision not to proceed with the 18 million acquisition in the metals recycling business.
Alan: Our long term fundamentals of our business remain intact consistent energy demand mandated liability reduction and steady industrial activity. Our infrastructure supports reoccurring waste streams and is built to perform across cycles.
Alan: We provide critical regulatory driven services through our infrastructure and helping our customers meet environmental obligations, while ensuring safe compliant ways tablet with a strong balance sheet and robust cash flows we remain well positioned to fund growth return capital and maintain a leverage ratio below our target.
Alan: <unk> up two to two five times debt to EBITDA.
Alan: I'll now turn the call over to Chad to walk through our Q1 financial results in more detail.
Chad: Thanks, Alan and good morning, everyone.
Chad: Our first quarter performance highlights the strength and stability of our core business.
Speaker Change: Sure metrics underscoring the positive impact of our strategic buybacks over the past year.
Chad: Financial highlights for the first quarter include net.
Speaker Change: Net revenue of $371 million up 3% year over year.
Speaker Change: Growth was driven by our metals recycling acquisition higher pricing at our waste processing facilities in landfills and increased volumes at our Clearwater facility. Following the phase two expansion, which came into service in the second quarter of 2024.
Speaker Change: Gains were partially offset by the Divesture of <unk> facilities on February 1st last year lower processing volumes. During this period of extreme cold in February.
Speaker Change: And reduced arbitrage arbitrage opportunities in our storage and trading business.
Speaker Change: Net income was $38 million or <unk> 16 per share prior.
Speaker Change: Prior year included a significant gain on the asset divestitures and as a result net income this quarter appears lower.
Speaker Change: Flex more typical operating performance.
Speaker Change: Adjusted EBITDA was $121 million up 2% year over year pro forma on a per share basis. Adjusted EBITDA of 52 was up 24% year over year pro forma reflecting the impact of a lower share count and buybacks.
Speaker Change: Our adjusted EBITDA margin was 33% of net revenue.
Speaker Change: Consistent with full year expectations post acquisition of the metals recycling business.
Speaker Change: Discretionary free cash flow was $67 million, reflecting a 55% conversion of adjusted EBITDA. This was driven by low sustaining capital minimal debt servicing and a favorable tax position. We continue to expect to spend $85 million of sustaining capital in 2025 $15 million associated with it.
Speaker Change: Retirement obligations and report $60 million to $65 million of current taxes.
Speaker Change: $29 million and growth capital is deployed in the quarter. This included the completion of the phase III expansion, Clearwater, which increases capacity in pads processing capabilities.
Speaker Change: We also advanced the upgrades on the industrial waste facility.
Construction on our previously announced monthly water disposal facility as well as added railcars for our metals recycling operations.
Speaker Change: We paid a quarterly dividend of <unk> 10 per share representing an attractive 3% yield we intend to maintain the <unk> 47 per share annualized dividend, which equates to approximately $92 million annualized based on our shares outstanding as of quarter end.
Speaker Change: As Alan noted, we repurchased over five 3 million shares for $79 million.
Speaker Change: Under the normal course issuer bid or in CIB in the quarter on April eight we launched a substantial issuer bid or <unk>.
Speaker Change: <unk> to repurchase up to $200 million of common shares.
Speaker Change: The offer is being conducted through a modified Dutch auction with a price range of $12 to $14 50 per share and an option for proportionate tender.
Speaker Change: The high end of the offer reflects a premium of approximately 10% on our closing share price yesterday.
Speaker Change: They offer remains open until may 14th.
Speaker Change: Further and CIB activity following the Saudi will be at the discretion of management and board.
Speaker Change: $13 6 million shares remain available for repurchase under the HIV, which expires on December 17 2025.
Speaker Change: As we enter the first quarter, we had $300 million in fixed debt and $255 million drawn on our $800 million revolver.
Speaker Change: Leaving us with significant liquidity to execute our capital plans are.
Speaker Change: Our total debt to EBITDA ratio was one six times or one three times excluding leases.
Speaker Change: Well below our long term target range of two to two and a half times.
Speaker Change: With that I'll pass over to Corey to discuss our Q1 operational highlights. Thanks.
Corey: Thanks, Jeff operationally our teams delivered solid results. Despite despite challenging conditions in February including extreme cold that impacted field activity and the waste management segment.
Corey: Our waste processing facilities, we safely process on average 99000 barrels per day of produced water and 40000 barrels per day of slurry and emulsion. We also recovered 289000 barrels of oil from waste streams reinforcing the value we create.
Corey: Landfill disposal volumes remained strong with 846000 tons safely contained across our network.
Corey: We acquired Edmondson base metals recycling business adds significant scale to our operations approximately doubling the scrap metal we expect to handle across our network. We now have 12 facilities across western Canada and are seeking to drive volumes from our secondary yard to the Edmonton help to increase utilization of the shredder, reducing processing costs and driving higher margins.
Integration of the acquired staff and infrastructure is going extremely well and we expect to achieve the full run rate of synergies from the acquisition in 2026.
Corey: Our specialty chemicals business continued to perform well with strong demand increasing market share and a favorable mix of higher margin products contributing to the segment's results.
Corey: And the energy infrastructure segment first quarter, Terminalling and pipeline volumes averaged 128000 barrels per day, an increase of 16% pro forma due primarily to the phase two expansion of the Clearwater terminal, which came into service in June 2024.
Corey: Secure continues to benefit from stable recurring production related volumes across our infrastructure network.
Corey: Actually 80% of our adjusted EBITDA is tied to ongoing production industrial activity, while the remaining 20% is linked to drilling and completions, while we may see some slowdown in capital spending as our customers approach the current environment with caution emphasizing discipline and operational efficiency production driven waste volumes are expected to remain steady highlighting.
Corey: The resilience of our business model.
Corey: To support long term growth, we increased our 2025 capital program by $40 million, bringing the total expected spend in 2000 $25 million to $125 million.
Corey: The increase reflects the second new Montney water infrastructure facility and pipeline connection.
Corey: By a 10 year commercial agreement signed during the quarter one of the new facilities will be operational in Q4 with a second new facility is scheduled to come online in early 2026.
Corey: We continue to optimize throughput increased efficiency increased efficiency and align capacity with long term demand across industrial energy and metals waste streams.
Corey: All 2025 growth projects are advancing safely and on schedule and we're seeing strong interest from our customers for additional capacity.
Corey: I'll now pass it back to Alan for closing remarks.
Corey: Corey and.
In summary, <unk> performance in the first quarter reflects our strength as a waste and energy infrastructure business, our capital allocation priorities continue to focus on stock buybacks.
Corey: Management and the board continue to maintain the shares of the company are undervalued and these repurchases under the NCI and now <unk> support that conviction.
Corey: We are also excited to increase our 2025 organic capital spend to $125 million were 73% are over $90 million of our capital spend is backed by long term contracts.
Corey: Organic growth opportunities and M&A are key elements of our strategy.
Corey: We were also pleased to close the Edmonton acquisition in the quarter as the Mega Center provides significant operational efficiencies to key to our hub and spoke strategy of driving volumes at a central location.
Corey: With our leverage ratio of one three times at quarter end. The corporation remains under Levered. Following the waste connection asset sale last year, and our continued strong cash flow generation.
Corey: This provides us significant flexibility to execute on our strategy scale the business for the future and create value for shareholders through buybacks dividends and disciplined investing.
Corey: We look forward to updating updating you on our progress throughout the year.
Corey: With that I'll turn it over to the operator for questions.
Corey: Okay.
Corey: Thank you.
Speaker Change: Ladies and gentlemen, we will now begin the question and answer session.
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Speaker Change: One moment. Please for your first question.
Speaker Change: Yeah.
Speaker Change: Your first question is from car Gupta from Scotiabank. Please go ahead.
Speaker Change: Thanks, operator, and good morning, everyone.
Speaker Change: When you're selling on the guidance side of things you are sounding caution on macro and commodity prices yet the guidance is still the same without any incremental laminate that you announced today are all contributions from the new contract that you just disclosed so just wondering like are there any areas.
Speaker Change: And your business, where things sort of stronger than you expected back in December and that's offsetting any of the market weakness you might be baking into guidance.
Speaker Change: Good morning, Collyn arc, yes. Thanks for your question, Yeah, I think when we look at our guidance range. We look at it and say there is room on on the range based on what we're seeing today I mean, obviously, there's been lots of uncertainty in the first quarter with with tariffs and the tariffs impacting overall global.
Speaker Change: What markets do we head into a recession, so not saying that those don't factor in but I think when we look at our guidance and we look at what we're seeing into Q2, I mean activity still remains relatively robust.
Speaker Change: Customers are generally looking at the the.
Speaker Change: The impact that theyre going to have to their own business on what their operating cash flows with the biggest one being the price of Debbie Ti coming off $10. How does that impact your cash flows do they make any adjustments or quoted me, but so.
Speaker Change: So far through our conversations I think there's a cautious approach from our from our customers, but they don't seem to be moving in a direction that we think would result in significantly lower activity at this time.
Speaker Change: So we're going to maintain and you know each quarter, we will update if the range is still appropriate I mean, obviously it comes off a little bit with us not going ahead with the acquisition on the metal recycling business I mean that that will slow down a little bit on our numbers, but so far we're confident that the <unk>.
Speaker Change: Activity levels are strong enough to continue on this guidance range through through 2025.
Speaker Change: Okay that makes sense and just just to be clear when you talk about the customers who are kind of saying, they're also looking to significantly reduce activity.
Speaker Change: Is that because you are more skewed to production and like drilling guys would be impacted somewhat incrementally.
Speaker Change: That's correct, yes, that's correct I think when we look at the amount that we're exposed to drilling and completion, that's relatively small call it in that 20% range yet.
Speaker Change: Small adjustments, we're talking very small percentages in terms of volumes that are coming into our facilities. So when I look at production and production being maintained and stable, that's where I get a lot of confidence on the stability of the cash flow. So that's correct.
Speaker Change: Okay, that's great and if I can follow up on on the new contract you got so congrats on that it seems like a big baked into your contracts.
Speaker Change: Any sense on how much.
Speaker Change: Return on capital you expect from this Oh 10 year timeframe and is there room to expand beyond the anchor customer you out.
Speaker Change: Yes, when we look at any of our business development opportunities. Our goal is to ultimately target at 20% after tax IRR. When we look at these specific projects part of the project is guaranteed and backed by our customer.
Speaker Change: Call it in that 75% range and we are typically targeting IRR is that or in that call. It 15, 16 percentage points, where we're getting additional IRR points would be area dedications from that customer as well as third party volumes that we can take to make sure we get the utilization of that.
Speaker Change: That facility wrapped up so there's this level of confidence that you can go and execute on the project knowing that you've got a base level of guaranteed returns, but you also have upside to hit our targeted thresholds and we're just seeing a lot of water volumes in the montney. The water cuts are high and they're continuing to grow and I think our customers recognize we had.
Speaker Change: So much expertise in water management, and specifically the chemistries involved in filtration and mechanically separating out some some potential solids and then ultimately disposing of it and so they are leveraging off that expertise and Zane will outsource outsourced to sit here and I do think this is the second now kind of Montney water disposal project.
Speaker Change: That where we're executing in 2025 and these projects have further opportunities to expand because I think as these customers of ours continue to expand their activity in these areas, they're going to need more water off taken once you have that base level of infrastructure.
Speaker Change: You're really just bolting on what I would call brownfield expansions, where the returns look better and thats the whole point of utilizing existing infrastructure, adding to that infrastructure and making me the waste aspect of what producers deal with every day, we handle that for them on their behalf.
Speaker Change: Okay, that's great to hear that thank you so much for the time.
Speaker Change: Thanks Connor.
Speaker Change: Okay.
Speaker Change: The next question is from Patrick Kenny from National Bank Financial. Please go ahead.
Patrick Kenny: Thank you good morning.
Patrick Kenny: Yes, just on the Upsized growth Capex budget, just wanted to check in to see if youre still pursuing other commercial opportunities from here that if successful Mike.
Patrick Kenny: It might push the growth budget for the year, even higher or.
Patrick Kenny: Are you looking to take a bit of a pause now on adding more organic growth projects until say next year or at least until things settle out on the macro front.
Patrick Kenny: Good morning, Patrick.
Patrick Kenny: We're at $1 25, which is above what we typically have done it.
Patrick Kenny: Look at last year, but this type of a range of $100 million to $125 million when I look at our engineering and construction team and our business development team and being able to execute on that project on these type of projects, we definitely have the team and the capabilities to do it right now a lot of our focus in our hopper for 2026%.
Patrick Kenny: 27 is where we're driving a lot more of our thoughts around where does that organic capital look like for 2026, I would say right now if I were to look at the various area. So we've got we completed that treater expansion admit to see so that's complete these two facilities will be ongoing construction in Q3.
Patrick Kenny: In Q4, we got our Red water facility, which is a class one eight hazardous facility, where we can take hazardous waste that facility will be under construction as well, we're pretty excited about that it just it really allows an opportunity for us to go after some of the specialty waste in markets, where we're seeing the volume to exit the <unk>.
Patrick Kenny: And so we think we have a pretty strategic asset.
Patrick Kenny: Asset to get back quickly and we have conviction in completing these capital programs, because we understand the market or were contract back so that.
Patrick Kenny: The uncertainty that we are.
Patrick Kenny: We're all facing from businesses right now.
Patrick Kenny: Is supported by the fact that we've got these longer term arrangements with great Counterparties. So.
Patrick Kenny: To answer your question I don't foresee any in the rest of the year that we're going to increase this organic capital program. We're already thinking about 2026, but what we do have right now, we're willing and able to execute on and.
Patrick Kenny: We continue to add to our hopper of opportunities, which is great because we want to handle more and more waste from our customers.
Patrick Kenny: Okay. That's helpful. And then I guess on the buybacks you know assuming theres full take up of the S. A b.
Patrick Kenny: It sounds like.
Patrick Kenny: Might take a bit of a pause on the NCI be afterwards.
Patrick Kenny: Is that more a function of just wanting to maintain a bit more liquidity cushion on the balance sheet in this environment or is there some other technicality that might be.
Patrick Kenny: Holding you back from fully executing the NCI be for the remainder of the year.
Patrick Kenny: Hey, good morning, Patrick It's Scott.
Patrick Kenny: We're not sure we'll take a pause I think we'll see.
Patrick Kenny: How much uptick we get on this S. IV, obviously, we still got quite a bit of room under the inside.
Patrick Kenny: Ultimately it will depend on on where we're trading and what we think are.
Patrick Kenny: EBIT was going to be and where.
Patrick Kenny: Where the valuation is and whether we think there is.
Patrick Kenny:
Patrick Kenny: It's a good move for shareholders to be allocating that capital to buy back shares. So I would say it'll be.
Patrick Kenny: A little bit of a wait and see but we still got lots of capacity on our balance sheet to continue to buy back shares so.
Patrick Kenny:
Patrick Kenny: I I anticipate at these current levels that we would continue to support.
Patrick Kenny: Yes, I'd be thrilled to remainder of the year.
Patrick Kenny: Okay great.
Patrick Kenny: Just one for me if I could just the decision not to proceed with the B C metals recycling a tuck in there.
Patrick Kenny: Was that just a function of you know.
Patrick Kenny: Getting in under the Hood and seeing the quality of the inventory or.
Patrick Kenny: Was it something with the operations.
Patrick Kenny: And I guess, how does this maybe.
Patrick Kenny: Change your due diligence process and the way you might be thinking about pursuing other tuck in opportunities in this space going forward.
Patrick Kenny: Yeah, I think when we look at acquisitions, we go through a number of things in terms of we want to make sure that we're doing our own due diligence on whats happening in terms of volumes that come into the facility how their process, where theyre sold reviewing our our own economics.
Patrick Kenny: Associated with how the business is operating and we look at it whether this environmental liabilities. We look at the people you look at the equipment and all of these have to meet our expectations and you're right. As you do do do do do due diligence and work through these areas.
Patrick Kenny: You uncover some things into unfortunately that those that those points in time you have to have a question of okay. Do we wanted to adjust our model that we want to adjust our returns and have those Frank conversations with sellers and if you can't beat on where you agree we're happy to walk away I mean, we're not we don't need to do these deals we do deals that we do.
Patrick Kenny: <unk> are going to be accretive to our operations accretive to overall shareholder value. So we're happy to walk away. If it doesn't meet our expectations I would say every business deal is different we have over 100 billion of other metal recycling opportunities and the offer that from an M&A perspective, I think having our strategic comp here in Edmonton.
Patrick Kenny: They make a lot of SaaS, when we think about transportation and operational synergies with running the shredder and its tapping more scale. So we want to continue to vet through those I don't think we're in any rush, we're right in the midst of integrating that general acquisition.
Speaker Change: Cory noted.
Speaker Change: Going very very well, but we want to make sure everything is running very very smooth as we continue to bolt on other M&A opportunities here throughout the year oriented to 2026, but.
Speaker Change: As I said, yes, you get through deals and sometimes they don't work out and we're happy to exit that and continue on.
Speaker Change: Okay.
Speaker Change: Okay, that's great.
Speaker Change: I'll leave it there I appreciate all the comments.
Speaker Change: Okay.
Bob: Thanks, Bob.
Speaker Change: Your next question is from Arthur <unk> from RBC capital markets. Please go ahead.
Arthur: Hey, good morning.
Arthur <unk>: Just wanted to follow up on the earlier question around tariffs, but focusing on the metals recycling business.
Arthur: Are you seeing any meaningful impact on demand or places so far across your U S and Canadian customers.
Corey: Hey, good morning, Arthur it's Corey certainly around tariffs.
Arthur: The seesaw approach with President Trump.
Arthur: We've got a lot of clarity around tariffs with respect to our our business today and under the Canadian U S. Free trade agreement, there's no tariffs impacting.
Arthur: Our revenue line items today around our metals recycling business.
Arthur: It's not really any different than what <unk> has commented about we're continually talking with our our downstream buyers.
Arthur: There will be some uncertainty as we move through.
Arthur: The China and U S bite and.
Arthur: Most of our downstream markets or in Canada.
Arthur: Not seeing a major impact yet, but we will continue to to engage and monitor the situation.
Arthur: That's helpful.
Arthur: And then just on the new Montney project.
Arthur: Specifically the one that's coming online in Q4 here.
Arthur: You expect any meaningful contribution in 2025 or is that going to be kind of coming online and closer to the end of the quarter.
Arthur: Yes, Youll see youll see more impact from that into Q1 2026.
Arthur: Okay, and then I guess just sticking on that too I think you mentioned the contracts.
Arthur: Or more area of dedication.
Arthur: So I'm just wondering if you could maybe detail that out a little bit you know.
Arthur: Weather and.
Arthur: And maybe help us with whether there's more kind of take or pay elements to those contracts as well.
Arthur: Oh, I'm, sorry, it's Alan Yeah.
Arthur: I know that the contract terms.
Arthur: On the area dedication would be above the 75% that is that is committed into these facilities. So we look to lock down at least.
Arthur: A few IRR points above our cost of capital and when we think about area dedication it would really be taking on some level of risk when we're talking about 20%. After tax IRR you have to have risk associated with those returns then we always look at risks and returns on an adjusted basis and how much risk, we're taking and what we're really.
Arthur: To accept so when we talk about an area of dedication area dedication easier future going in the future you're going to develop the acreage and continue to produce more volume switch.
Arthur: If youre thinking about commitments no one wants to overcommit until they actually start getting into it but the probability of them going ahead and developing the acreage with all the infrastructure that they have and how we support that on the weak side you get a high level of confidence that the area dedications volumes are going to come to fruition and then on top of that.
Arthur: This area is so busy right now a lot of the volumes are migrating to three hours on a truck right and so you got more conviction that if you had a transportation differential that is closer.
Arthur: Producer or your customer can deliver without having a chocolate two hours away that obviously pacing plays into your utilization and your economics and time value money is really important in driving this kind of 90% to 95% utilization at these facilities. So so part of it I'd say, 25% is more on your adjusted.
Arthur: A return based on risk in what we share with our customers and to be able to grow grass board in that part of it is we have to have some level of conviction that there's a guaranteed base on our own cost of capital.
Arthur: Alright, Thats perfect. Thank you.
Arthur: And then I.
Arthur: I guess just one last question for me just wanted to follow up on the metals recycling acquisition.
Arthur: I think where you touched on a little bit, but I'm just wondering how integration is going so far and if theres anything thats kind of surprised you I know, it's still early days, but.
Arthur: Are things generally going along according to plan or is there anything that I.
Arthur: I guess, yeah surprising so far thank you.
Arthur: In a nutshell, it's going fantastic we've had the keys to the car here for about three months now.
Arthur: Yes.
Arthur: When you do a large acquisition like this we put a lot of time and energy internally on integration and whether that's operational procedures that people our customers et cetera. So it's.
Arthur: Going fantastic.
Arthur: Spent a lot of time dealing with the staff and as most of you know.
Arthur: None of these businesses work without people and the people at that.
Arthur: That we've acquired have been fantastic and things are going great.
Speaker Change: Ladies and gentlemen, as a reminder, should you have any questions. Please press the star key followed by the number one.
Speaker Change: I am showing we do have one more question from <unk> Gupta from Scotiabank. Please go ahead.
Speaker Change: Thanks, Tessa. So are you just getting back on a quick follow up for pricing.
Speaker Change: In these kind of environments.
Speaker Change: Did you expect.
Speaker Change: Pricing I know you took some pricing increases in the last few years, but did you expect pricing as we head into 'twenty six two soft and down a bit as commodity prices are being volatile and obviously you know the macro is it's not clear at this point or do you see like the the infrastructure that you have.
Speaker Change: It provides value.
Speaker Change: Do you have customers that you can still push some pricing increases regardless of the environment.
Speaker Change: Thanks Scott.
Speaker Change: I think when you look at the overall environment today, what tariffs do as they raise the cost of everything Darrin there are sales tax so your cost of.
Speaker Change: Your cost of goods or services are going to go up because of these tariffs that are going to be in place.
Speaker Change: In Canada.
Speaker Change: United States and so we're going to have inflationary effects and we've seen that continuation for 2024 and to 2025 as part of our cost structure and we're looking at it in terms of how is it impacting our business, whether it's chemical cost power cost labor cost and looking at the impact to the margin in our customer.
Speaker Change: See the same thing so we want to make sure that.
Speaker Change: We're managing those inflationary costs through price increases and a bit of that is dialog with our customers. We just raise prices here in the start of 2025 so.
Speaker Change: Obviously, I don't want a lot more things to play out through the remainder of 2025 and see what that the recessionary backdrop backdrop looks like and what the economic outlook looks like but we will re enter into those discussions and I think there are some areas where there is a justification for pricing increases is probably some areas where.
Speaker Change: We got to be a bit more thoughtful on how we want to approach it but I think we can have that open dialogue with our customers. Because these are these are these are impacts that we're seeing to our business to their business and we have those conversations. So the answer is yes.
Speaker Change: Potentially yes.
Speaker Change: Right that makes sense.
Speaker Change: Thank you Shirley.
Speaker Change: The inflationary effects that you might be seeing with tariffs.
Speaker Change: To what magnitude are these incremental over and above the base inflation that you guys are we talking about a few percentage points or do you feel like you know mid to high single impacts.
Speaker Change: Right now, we're seeing pretty low.
Speaker Change: Pretty low I'd say it in the one to two points as you described but that could change right I mean, I've never seen so many changes in flip flops on tariffs in two months and.
Speaker Change: That uncertainty and what it looks like going forward could could impact it but your 1% to 2% comment is fair.
Speaker Change: I'm not seeing that.
Speaker Change: The higher single digits for sure.
Speaker Change: Okay. That's great I appreciate the time again, thank you.
Speaker Change: Thank you.
Speaker Change: Yes.
Speaker Change: Ladies and gentlemen, once again as a reminder, should you have any questions. Please press to Starkey followed by the number one.
Speaker Change: We will pause for further questions.
Speaker Change: There are no further questions at this time I will now turn the call over to Alan Graf for closing remarks.
Speaker Change: Well, thanks, everyone for being on the conference call today are taped broadcast of the call will be available on secures website.
Speaker Change: Thank you all to attend today's annual and special meeting of shareholders. At this meeting among other things shareholders have the opportunity to vote on our board of directors, our incentive plan and secures approach to executive compensation.
Speaker Change: Meeting will be conducted via live audio conference call and the details on how the dial and can be found on our website. Finally, we look forward to providing you with updates on secure second quarter results on July 29. Thank you.
Speaker Change: Okay.
Speaker Change: Ladies and gentlemen, this concludes your conference call for today.
Speaker Change: Thank you for participating and ask that you. Please disconnect your lines.