Q2 2025 Waste Connections Inc Earnings Call
Good morning everyone and welcome to the Waste Connections Inc, Q2 2025 earnings call.
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Speaker Change: I'd now like to turn the floor over to Ron middlestead president and CEO sir. Please go ahead.
Speaker Change: Okay, thank you, operator, and good morning.
Speaker Change: I would like to welcome everyone to this conference. Call to discuss our second quarter results, and updated outlook for 2025, along with providing a framework for the back half of the year.
Speaker Change: I'm joined this morning by Marianne Whitney. Our CFO and several other members of our Senior Management
Speaker Change: As noted in our release. We once again, delivered results above the high-end of our outlook for the quarter.
Speaker Change: In spite of incremental headwinds, in Q2 from lower than expected contributions. From higher margin commodity related activities, and continued sluggishness in the economy, along with tariffs induced uncertainties
Speaker Change: Venue with a robust Pipeline and almost half the year. Still ahead of us.
Speaker Change: The strength of our financial profile and free cash. Flow generation keeps us, well positioned for additional Acquisitions while maintaining the flexibility for increased return of capital to shareholders including through opportunistic. Share repurchases, which are already underway.
Speaker Change: Moreover, in spite of incremental and growing, headwinds, our full year, 2025 Outlook remains within the ranges from February. Providing for approximately 6%, Revenue growth and 50 basis points of adjusted e, butt down margin expansion to 33%.
Speaker Change: We remain. Well, positioned for upside from contributions, from additional acquisitions.
Speaker Change: Improvements in commodity related activity and incremental Solid Waste volumes.
Speaker Change: Before we get into much more detail, let me turn the call over to Marianne for our forward-looking disclaimer and other housekeeping items.
Marianne Whitney: Thank you, Ron and good morning the discussion during today's call includes forward-looking statements made pursuant to the safe harbor. Provisions of the US private Securities. Litigation Reform, Act of 1995 including forward-looking information within the meaning of applicable Canadian Securities laws, actual results could differ materially from those made in such forward-looking statements due to various risks and uncertainties.
Marianne Whitney: Factors that could cause a actual results to differ are discussed both in the cautionary. Statement included in our July, 23rd, earnings release, and in greater detail in Waste Connections, filings for the US Securities and Exchange Commission and the Securities commission's, or similar regulatory authorities in Canada.
Marianne Whitney: You should not Place undue Reliance on forward-looking statements as there may be additional risks of which we are not presently aware or that we currently believe are immaterial which could have an adverse impact on our business. We make no commitment to revise or update any forward-looking statements in order to reflect the answer circumstances that may change after today's date on the call, we will discuss non-gaap measures such as adjusted, Eva adjusted. Net income attributable, to Waste Connections on both a dollar basis and per diluted share and adjusted free cash flow. Please refer to our earnings releases for a Reconciliation of such non-gaap measures to the most comparable. Gaap measures management uses certain non-gaap measures to evaluate and monitor the ongoing financial performance of our operations. Other companies May calculate these non-gaap measures differently.
Ron Middlestead: I will now turn the call back over to Ron.
Ron Middlestead: Okay, thank you Marianne.
Ron Middlestead: We're extremely pleased with our second quarter results, which reflect the enduring strength and consistency of solid waste regardless of the economic environment.
Ron Middlestead: Moreover, our operational execution was augmented by continued Improvement in employee, retention and safety to support pricing ahead of inflation and effectively manage costs.
Most notably, we overcame headwinds from incremental, weakness and commodities.
Ron Middlestead: Rents and cyclical volumes and still delivered margins of 32.7% consistent with our Q2 guidance.
Ron Middlestead: Remember this also includes 20 basis points year-over-year headwinds from our decision to close tikita, Canyon Landfill as of January 1st.
Ron Middlestead: During the quarter Revenue, growth of 7.1% was driven by 6.6% core Solid Waste pricing.
Ron Middlestead: Comfortably exceeding, our cost of inflation to drive 70 basis, points of underlying adjusted ibadan margin expansion in solid waste reported volume declines of 2.6% reflected the purposeful price volume trade-off and ongoing shedding of underperforming contracts that we have described in previous periods.
Ron Middlestead: Beyond that they reflect the trends. We've noted over the past several quarters that is underlying flat to negative volumes from continued, sluggishness and rolloff polls, and lower disposal volumes primarily from construction oriented activity.
Ron Middlestead: Both of which showed continued moderation during the quarter.
Ron Middlestead: Most importantly, we saw continued Improvement in operating Trends and the associated benefits in Q2 voluntary turnover. Once again, stepped down, sequentially marking our 11th consecutive quarter of improvement.
Ron Middlestead: On total turnover. Now below, 22% are voluntary, turnover of less than 11% is down. Almost 60% from mid 22. And has dropped below involuntary turnover, for the first time in recent years.
Ron Middlestead: And safety results which are highly correlated to turnover once again hit new historic lows, an incident rates were down, 15% year-over-year with momentum for continued Improvement. In fact, year-over-year monthly incidents were down over 20% in June, on a 5% increase in total employees, due, largely to Acquisitions, which typically, come on at higher safety related incident rates.
Ron Middlestead: Chamberlain q1, underlying margins expanded by 70 basis points about 2 times. The more normalized margin expansion we would expect from Price. Le organic Solid Waste growth.
Ron Middlestead: And this is, without the benefit of positive volumes, a reminder that when volumes do recover especially at landfills, they will be nicely creative.
Ron Middlestead: And given our high market share model and Broad footprint. We remain well, positioned to benefit from any pickup in activity, driven by construction or otherwise
Ron Middlestead: In the meantime, we are focusing on controlling what we can to delivering industry-leading margins and positioning ourselves for future growth.
Ron Middlestead: We continue to reinvest in the business through capex that existing operations and new acquisitions.
Ron Middlestead: Pursue new organic growth opportunities and Van and Advance our sustainability related projects.
Ron Middlestead: We're also focused on leveraging, technology to highlight additional avenues for outside margin expansion, using AI driven applications across multiple platforms, from customer retention and pricing to forecasting through data analytics. All of which we will be expanding during 26 and 27 as we look to further digitize,
Ron Middlestead: We continue to focus on customer experience and our operations. Targeting quality of Revenue on the top line and productivity and efficiency gains throughout our cost structure as we position ourselves for growth. Well beyond our current 10 billion dollar Revenue run rate
Ron Middlestead: To that end acquisition. Activity is continuing at an above average pace resulting in approximately 200 million in annualized revenues already closed today.
Ron Middlestead: Our balance sheet strength, along with a robust acquisition pipeline built on long-term relationships and a consistent disciplined approach to Market selection position us for additional activity.
Ron Middlestead: In fact including signed Louis, we expect to close another 100 to 200 million in Acquisitions later this year or by early 2026 with more to follow.
Ron Middlestead: of course, contributions from any additional deals closing in 2025 would be additive to the Outlook, we've provided
Ron Middlestead: and finally, as noted, we've been in the market buying back shares,
Ron Middlestead: as we've consist consistently maintained, we take an opportunity to approach to share repurchases and look to capitalize when we see, compelling dislocations across the market, or within our sector,
Ron Middlestead: Today we bought back 1.3 million shares or about half a percentage point of shares outstanding, pursuant to our normal course, issue, or bid, which we renew annually in August providing for annual repurchases of up to 5% of shares outstanding.
Ron Middlestead: And speaking of which in June, we announced an additional listing and became a founding member of NYSC Texas. A recognition of our corporate presence here in the Woodlands along, with our operations across the state.
Ron Middlestead: We have enjoyed tremendous growth as a company. Since relocating, our headquarters from California to Texas, 13 years ago, and appreciate the business support of environments, Texas provides we recognize the importance of strong community and appreciate the collaborative can do spirit. That Texas, is famous for
Ron Middlestead: Shifting next to an update on a remediation efforts at chikita, Canyon Landfill in Southern California.
Ron Middlestead: We continue to make progress managing the elevated temperature landfill or ETF event.
At this time, there is no change to expectations regarding the cash flow or other impacts at the site.
The most encouraging progress. However is on the administrative front with the US EPA, taking a more active leadership role in regulatory oversight of the facility.
Ron Middlestead: To that end.
Ron Middlestead: Our team has been engaged in ongoing discussions with region 9 of the US EPA.
Ron Middlestead: In an effort to further streamline ongoing regulatory oversight and approvals at the facility and in line with President Trump's and administrators zeldins stated goals of focusing efforts on powering the Great American comeback.
Ron Middlestead: Toa's requested region, 9's, further assistance, in minimizing Regulatory and decision and inaction by taking a more active role at the site to be very clear. This is good news and something we requested and will drive continued improvements in the management of the reaction and any impacts to the local communities.
Ron Middlestead: We expect the results will be more, be a more effective and efficient and ultimately less costly process.
And what that implies for the back, half of the year, I will then wrap up before heading into Q&A.
Ron Middlestead: Thank you, Ron.
Ron Middlestead: In the second quarter revenue of 2.407 billion, exceeded the high end of our Outlook and was up 159 million or 7.1%. Year-over-year Acquisitions completed since a year ago, period contributed about 113 million dollars, net of Devastators.
Ron Middlestead: core pricing of 6.6% was as expected in Q2 and reflected the typical Cadence of seasonality for the full year core pricing of over 6% is now effectively complete or contractually provided for
Ron Middlestead: volume down 2.6%. Reflect the following year-over-year results in Q2 on a same store basis.
Ron Middlestead: Roll off Revenue was down about 1% on pulse down, 3% and rates per pull up 2%.
looking at Regional variances, polls range from down high single digits in our southern region to up mid single digits, in our western region with most regions down slightly
Ron Middlestead: Activity levels during the quarter, which would typically reflect a seasonal ramp of as much as 5% showed only about a 1% sequential Improvement between April and June.
Ron Middlestead: We would note that constantly changing tariff schedules during this period, which we believe contributed to uncertainty for customers.
Ron Middlestead: Lethal Revenue was up about 4% on tons up 1.5%.
Ron Middlestead: Looking by waist height MSW towns were up, 3%. Special waste was up 7% and CND. Towns were down 9% slightly below, recent quarters and indicative of limited construction activity.
Ron Middlestead: Values for recycle, Commodities are already down. Year-over-year coming into the quarter declined, another 10 to 15% during Q2,
Ron Middlestead: Renewable, energy. Credits are rims. Also stepped down by about 15% during Q2.
Ron Middlestead: And our US EPA waste activity, which is highly correlated to crude prices and related. Drilling activity was down about 10% year-over-year. Most notably in June as crude volatility was magnified by ever-changing policies.
Ron Middlestead: In volume and three Q similar to <unk>, but then maybe for Q just gets back to sort of more normal shedding and I know Chiquita is also sort of a factor in here. So like maybe there's still a little bit below normal volume in four Q and then maybe maybe the normal.
Ron Middlestead: Starts in one queue of 26 like just wanted to understand the dynamics of how you think about the volume. Thanks.
Ron Middlestead: Sure. So as you know we think in terms of we have the shedding of course, with Takeda, which we kind of buckets separately.
Ron Middlestead: And that does anniversary at the end of the year, but we've started diverting tons in Q4. So the impact is smaller in Q4, but when I think about the ongoing impacts youre right. Some of the shedding does anniversary I think the way to think about it is the most negative quarter would therefore be Q3, because you had that combined impact.
Speaker Change: Are those ongoing impact plus what we talked about that lower seasonal ramp.
Speaker Change: Impacting the the revenue growth Q3 versus Q2, so most negative in Q3 getting back to more like Q2, and Q4 and yes, I agree with your expectation that some of those pieces anniversary as we look ahead to 'twenty six yeah, Tony the one specific <unk>.
Speaker Change: Contract, we did call out last year.
Speaker Change: Former progressive contract am.
Speaker Change: Actually in North, Texas. It does anniversary on October one as you as you pointed out.
Speaker Change: Great and I guess, maybe just longer term when you think about volumes right like I guess you meant you made the comment that when volumes do recover like that will be accretive do you expect like that volumes recover and in.
Speaker Change: <unk> 26, or like when when does that happen or you know because of all the M&A like maybe it's even pushed out further than that just wanted to sort of get a longer term picture.
Speaker Change: Yeah, well I think you've got to break apart the components Tony of the negative volume and a and again I'm I'm just rounding here you know we've said there's been about a hunt if you take a negative two and a half I'm rounding for the quarter. It was a little more than that.
Speaker Change: <unk> got about a 100 point price volume tradeoff that's been conscious.
Speaker Change: So depending on how the economy is and how hard we want to push that and were inflationary indexes are.
Speaker Change: That can that can get better.
Speaker Change: You have about 100 points from purposeful shedding, we just outlined that a lot of that will get better specifically chiquita and a large contract we did not renew purposely in north Texas. However, we have done a lot of M&A in 'twenty four and continue into 'twenty five so some of that.
Speaker Change: We'll continue obviously and then right now I'd say you got about 50 60 basis points of just underlying economic activity that is soft, particularly in construction linked activities.
Speaker Change: Activities, so it affects roll off and it affects C&D, which you saw down 9% in the quarter.
Speaker Change: So that is it's tough to say we would we would hope now that you know that the bill has been passed in Congress that maybe.
Speaker Change: Maybe as is interest rates potentially decrease some over the second half of the year into next year. These are somewhat fuel for.
Speaker Change: Construction activity at all levels, and then that we see a corresponding real time benefit from that but we're not obviously sitting here trying to predict that we've been in effectively a flat to negative.
Speaker Change: Take out government spending takeout federal government spending we've been in a flat to negative.
Speaker Change: GDP environment for approaching three years now.
Speaker Change: And so is his twenty-six kind of break that well I would hope so, but we don't know.
Speaker Change: Super Thank you.
Speaker Change: Our next question.
Speaker Change: And company. Please go ahead with your question.
Speaker Change: No.
Speaker Change: Yeah.
Speaker Change: No that was it possible for.
Speaker Change: Are you.
Speaker Change: Yes.
Speaker Change: Morning.
Speaker Change: Alright. Thank you yeah, we just didnt hear our name called so.
Speaker Change: Appreciate everyone taking the question.
Speaker Change: Marion just just maybe trying to bridge.
Speaker Change: From the.
Speaker Change: The 9.45.
Speaker Change: You saw in four Q.
Speaker Change: On the revenue side to how you see it now because you pointed out the mix has changed you got the 75 million higher M&A revenues.
Speaker Change: Maybe give us the other kind of moving pieces here, because I think that will.
Speaker Change: Help us and investors kind of understand.
Speaker Change: Some of the mix shift a little bit better I mean, how much more is the impact from commodities.
Speaker Change: And are you potentially kind of underlying volumes versus what you thought.
Speaker Change: Sure so.
Speaker Change: Do you have plans to $75 million incremental and acquisition contribution a little bit of a good guy from FX because it's in our view improved by about a point, which is about $20 million and then the offsets are primarily those commodity driven reductions where you've got recycled commodities down about 25 million rins down another $5 million and then we have about <unk>.
Speaker Change: A point less in terms of overall solid waste volume.
Speaker Change: And so those are the moving pieces that that effectively net that to neutral, but the really important part of that is the difference in the margin contributions from each of those and the fact that that what that really requires is that the underlying business improved by 30 basis points.
Speaker Change: Order to offset the fact that there was a little margin dilution sub 10 basis points sub 10 basis points from the incremental M&A, but it's primarily the 30 basis points incremental headwinds from those lower recycled commodities and random.
Speaker Change: And no I would add that you also have about another approximately $20 million to $25 million in E&P.
Speaker Change: Volumes lower in the second half.
Speaker Change: Based on current rig count in the U S versus Canada, not meaning not is not that's not happening in Canada. It is happening in the Permian and the Louisiana on an offshore yes. Thanks Ryan.
Speaker Change: $20 million to $25 million lower versus what you thought in February.
Speaker Change: Right at $50 million 25 in the second half.
Speaker Change: Okay, and then for again for our models I appreciate you, giving us sort of the margin expectations for three Q.
Speaker Change: You did also comment.
Speaker Change: Not much of a sort of a sequential ramp expected in kind of underlying macros. So.
Speaker Change: Just some rough guideposts on how to think about the revenue step up because typically it is a seasonally strong quarter, but you.
Speaker Change: Between the commodity stepped down and.
Speaker Change: Some of the other headwinds you mentioned, perhaps we don't see as big of a step up as usual.
Speaker Change: Yeah, that's the right way to think about it because that the typical seasonal ramp could be as much as 3% to 4% and so this should be muted and there would be that step down in commodities. So you could certainly work your way to more like one 5% in terms of that step up Q3 versus Q2.
Tyler: Thank you and just one last one I mean, Tyler I think.
Tyler: As always asked a great question earlier around capital allocation I, just want to follow up on the buybacks.
Tyler: Should we think about additional buyback activity in any way to dimension that over the back half of the year I understand that you're being opportunistic here, but.
Tyler: But kind of given where the stock is and your view on the multi year growth opportunity.
Tyler: Fair to think about additional buyback activity in in any way to dimension it.
Tyler: Yeah, we always think in terms of being opportunistic no on that yeah, yeah, rather than being programmatic and so.
Tyler: The way we approach it is that we have tremendous optionality given the magnitude of our free cash flow and where our leverage stats and we'll continue to evaluate all the alternatives for capital allocation, Yeah, and the only thing I would say add no is look you saw us in a very short period of time as we thought there was a.
Tyler: Disproportionate dislocation spend close to a quarter billion dollars.
Tyler: And so we remain positioned to do that in the same manner.
Speaker Change: Very helpful. Thank you.
Tyler: Okay.
Speaker Change: Our next question comes from Kevin Chiang from CIBC. Please go ahead with your question.
Tyler: Hi.
Speaker Change: For taking my question good morning, and congratulations Darryl echoing.
Speaker Change: What others have said already.
Speaker Change: Maybe just two quick ones for me.
Speaker Change: You're obviously, making great progress on your voluntary turnover and safety incident.
Speaker Change: Metrics and trends.
Speaker Change: If memory serves me correct I think that was 100 basis point margin opportunity.
Speaker Change: You've achieved about two thirds of that just given the trends you're seeing should we expect that additional one third or let's call. It 33 34 basis points does that fully materialize in 2026, just given the trends you're seeing through 25 here.
Speaker Change: Sure So you're right, Kevin we've talked a lot about as we describe it there was about 100 basis points of margin that we thought we'd get unlocked by these improving trends and then we actually revisit at that and said, it's probably a little north of that given that the magnitude of the headwinds we were still absorbing from those lagging improvements associated with risk management costs, and I think last quarter.
Speaker Change: We said, we're about halfway through the 100 basis points, we'd realized about 50 and the update is now we're north of that maybe 60 to 70 basis points in terms of good guys that were seeing you know its interesting we look across about 10 different cost items every quarter and I can't remember a time, where they'd all been green up until now meaning that that margin.
Speaker Change: You know the cost as a percentage of revenue was improving and so many of them are related to third party costs, whether it's sub contracting contract labor, whether it's overtime compared to straight time, all the benefits you know third party repairs et cetera, all the benefits that we thought over time should start to accrue to us so what we haven't seen.
Speaker Change: And yet as I said is that risk costs, while they're abating, meaning it's been less of a bad guy less of a headwind on.
Speaker Change: On a year over year basis, it hasn't become a tailwind so to answer your question Theres still more to come tough to say that we would get it all in 2006 because of the way that the risk cost lag, but we expect to continue to realize the benefits and the trends we've seen make us bullish about seeing more by the end of the year than we're seeing right now.
Speaker Change: That's super helpful.
Speaker Change: Maybe just a.
Speaker Change: My second question here, you know Ron you talked about the EPA, taking a more active role execute on and you think that's a you know a favorable outcome or development.
Speaker Change: If you can maybe just provide a little bit of detail in terms of how that benefits your remediation efforts and maybe some of the challenges you have.
Speaker Change: <unk> been facing I suspect dealing with multiple agencies and trying them.
Speaker Change: Deal with the E tail off issue Chiquita.
Speaker Change: Sure well.
Speaker Change: We have been dealing with approximately 12 to 13 state and local agencies.
Speaker Change: California.
Speaker Change: Each of those.
Speaker Change: Have their own staff's each of those have their own elected.
Speaker Change: Boards.
Speaker Change: And each of those have their own objectives. There is literally no coordination amongst those agencies at any level.
Speaker Change: And the objectives from them.
Speaker Change: Are often that cross currents with the other agencies.
Speaker Change: So trying to navigate for anyone.
Speaker Change: That.
Speaker Change: Morass as is extremely difficult and complex.
Speaker Change: And slow at best.
Speaker Change: You are talking about agencies, who would politically and through the media like to describe things as a crisis, but have difficulty responding to an email and in under a 90 day period.
Speaker Change: I think that indicates to you what real crisis. They think it is.
Speaker Change: So we were really sort of need an adult in the room and and that's what the EPA will bring.
Speaker Change: Uh huh.
Speaker Change: They have one of the reasons. We wanted their involvement is E tail off is not a new phenomenon in the waste industry by any means.
Speaker Change: And the EPA has quite an advanced depth of knowledge on best practices to mitigate remediate and move forward and the E tail off relative to any other government agency out there and so it was something that we look forward to and request.
Speaker Change: We believe that it will as we said streamline the process and.
Speaker Change: Help determine the prioritization of issues.
Speaker Change: And and allow us to make even faster progress that quite honestly.
Speaker Change: Just yeah.
Speaker Change: I don't think I have to explain the California bureaucracy, just disallowed to be very honest I mean, you know.
Speaker Change: Take no look further than the 4000 homes burned down in Pacific Palisades.
Speaker Change: And 95% of those that have applied for a rebuilding permit are nowhere.
Speaker Change: And that's a that's a housing situation so imagine their response to our landfill type prices.
Speaker Change: So yeah. This is is this is something we have a we have been seeking.
Speaker Change: Seeking for quite some time.
Speaker Change: You know the California politicians and.
Speaker Change: Tremendous media.
Speaker Change: Out there will we'll probably spend that as a negative.
Speaker Change: To bolster their political position, but it is in all we can tell you we are strongly encouraged by it.
Speaker Change: That's great color on thank you and that's it for me. Thank you very much.
Speaker Change: Our next question comes from Trevor Romeo from William Blair. Please go ahead with your question.
Trevor Romeo: Hey, good morning, Thanks, so much for taking the questions.
Trevor Romeo: I wanted to hit on price versus solid waste, so still kind of call. It upper sixes range to start the first half.
Trevor Romeo: Anything from a regional or line of business perspective that you'd call out as you know kind of stronger than you expected and then any thoughts on the trajectory of the cadence for the second half it seems like maybe you're trading above 6% for the full year, even if you do see some deceleration, but maybe any specific thoughts on that would be great.
Trevor Romeo: Sure.
Trevor Romeo: Trevor.
Trevor Romeo: As we said coming into the year, we got it to about 6% price and then following our Q1 results. We talked about the fact that price retention has been a little better than we had anticipated and therefore pricing in Q1 at six nine was a little bit higher we've now since said that pricing effectively done for the year and maintain.
Trevor Romeo: That will be above 6%, so really nothing to point out of course, we have our CPI linked markets and then we've got our competitive markets, but yes.
Trevor Romeo: As I said, where we're trending to better than we originally anticipated we attributed that at least a portion of it to better pricing retention and the fact that all of those those trends in employee retention and open positions had all improved so well that we're not surprised that retention was a little better than it has been expected.
Trevor Romeo: As we move through the year.
Trevor Romeo: In general that the cadence of our pricing and really the math around what the denominator is that we're measuring the dollar amount of price increases on by math, you know by definition that does step down sequentially through the course of the year and that's why he started six nine we did six six youre right. It implies that it steps down a little bit between.
Trevor Romeo: If you are modeling it and you put it somewhere between the six six and the six over the course of the rest of the year, that's probably the right way to think about it.
Speaker Change: Okay. Thanks, Brian.
Speaker Change: And then for my follow up just wanted to touch on I think you mentioned with the bonus depreciation comments, maybe some opportunistic fleet or equipment purchases to get ahead of.
Speaker Change: Yeah, maybe its potential changes with the tariffs could you maybe just give a little bit more color or detail on your latest thoughts maybe on what your suppliers are telling you what the potential impact could be with the latest deals in guidance in place.
Speaker Change: Yes.
Speaker Change: Well as you know first off that's dynamic and could change by the end of this call, but the reality.
Speaker Change: Audi is is that right now.
Speaker Change: Our suppliers, particularly on the truck and and.
Speaker Change: Truck body and chassis side, which is obviously the largest part of our capital.
Speaker Change: They are expecting about a two to a 3% price increase related to the tariffs for 'twenty six.
Speaker Change: In an overall increase of four to five so meaning just a little bit more in addition to the tariff so 4% to 5% total increase in fleet cost is what they're telling us with about half of that not quite half being the tariff impact as they know it today.
Speaker Change: Hey.
Speaker Change: So that is not by any means I think we said last quarter, we would expect it to be relatively de minimis in 'twenty five that is the case.
Speaker Change: But you know knowing the uncertainty that still exists or potentially exists with things not yet being finalized in many places.
Maryann Whitney: We have looked to accelerates some fleet as Maryann mentioned.
Maryann Whitney: Which that will offset some of that bonus depreciation that we otherwise would have seen in the free cash flow line in order to sort of hedge and blend down our 'twenty five 'twenty six overall cost to something hopefully below that 4% to 5% we would have otherwise expect.
Maryann Whitney: From the manufacturers so you know a.
Maryann Whitney: A number we're very we're very comfortable with and you have to remember there was also somewhat of a there were delays in fleet in 'twenty three and 'twenty for.
Maryann Whitney: That happened and so Theres still you know not a catch up but there was a little bit of a backlog that we were still taking delivery of and twenty-five too. So it's a combination of those things.
Maryann Whitney: Okay. That's all very helpful. I appreciate it.
Speaker Change: Our next question comes from <unk> Khan from RBC Capital markets. Please go ahead with your question.
Khan: Great. Thanks, and good morning, just wanted to revisit the discussion earlier around some of the components are on volume I think before some of the Takeda volume drag I think we're talking about the progress also the historical sort of volume shedding largely getting to the tail end can you just help us think through as we get into 'twenty, six and beyond now putting the GDP or that can.
Khan: <unk> decided how sort of the leftover shedding volumes going to look like in the next couple of years from your vantage point. Thanks.
Khan: Well, it's obviously a little bit hard to say.
Khan: Cause that to an extent depends on the pace of M&A and you know as I have said as we have said look.
Khan: You should want us to have a little bit of I R. Shedding number because it means that the implied pace of M&A is higher right. We've said that when we do private company M&A on the solid waste side somewhere around 10, maybe up to 15% to 20% of that revenue over the first one to three years.
Khan: Post M&A, we will look to either rebid and at a price, we make money or or walk away.
Khan: And that is what that shedding is so you know I would tell you. It has been larger to your exact point because of legacy progressive contracts, which we do believe we are effectively at the end of as of.
Khan: October 24, the one we mentioned earlier in this call that will anniversary this year and so that will you know.
Khan: That has been the largest piece to answer the question. So I would tell you I would expect it to come down some 30% to 50% on a go forward basis.
Khan: Because that was the largest piece that's still probably leaves it in that 50 to 75 basis points on a normalized basis, if we're doing quite a bit of M&A.
Speaker Change: Got it and then just following up on the E&P side of the business a little bit as you think about the sort of the volume trends and things like that they're sort of maybe just talk us through sort of the flexibility on the cost structure. There obviously just.
Speaker Change: Small blip here this year, but just over the long run how do you think about the cost structure. There how much of that is variable and just the ability to sort of tweak that and over more of a multiyear basis not just in reaction to the the short term blip when might finish to this year just wanted to understand sort of how you think about that business. Thanks.
Speaker Change: We think of it as a very high fixed cost business. The reality is is that that is a.
Speaker Change: A relatively high fixed asset business.
Speaker Change: Low variable business.
Speaker Change: And it is a volume throughput business.
Speaker Change: And in the U S. Certainly as it is drilling link.
Speaker Change: Hi.
Speaker Change: Much less so in Canada, where it is 85 plus percent production linked so you.
Speaker Change: You know I wouldn't it would be misleading to tell you or anyone that in that 6% of our total revenue, which is E&P that we are expecting margin expansion to come from cost reduction in A&P that that would be misleading.
Speaker Change: But as that volume improves well.
Speaker Change: Whether it's because of crude price in drilling activity or increased production in Canada, you've obviously, you see the margin contribution in that business.
Speaker Change: So that's how we do think about the cost in the E&P business and just to be to be clear. When we think about that business as I mentioned earlier, that's part of the rationale for Derisking the business more broadly because only about half of that six or six 5% is <unk>.
Speaker Change: Drilling oriented it's the U S piece of the business and as we mentioned the Canadian business is holding up fine and in fact was up.
Speaker Change: Year over it really it really in line with our expectations, we haven't seen an impact there.
Speaker Change: Great. Thanks very much.
Speaker Change: Our next question comes from Brian Maguire from Citi. Please go ahead with your question.
Brian Maguire: Good morning, Thank you for taking the question maybe.
Brian Maguire: Maybe just on the volume headwinds that are impacting your 25 guidance is it accurate to say that sort of really concentrated in three Q event, just kind of focused on construction activity.
Brian Maguire: Or did you start to see slowdown in <unk>.
Brian Maguire: And would you say there is any sort of meaningful difference between the activity in the U S and Canada, where it's just kind of the same everywhere.
Brian Maguire: Well to give you some context, if you look at CND tons, so that piece of our business year over year Q2 was the seventh quarter in a row for those being down year over year and its average between 7% and 8% Q1 to Q2 Q1 was down six.
Brian Maguire: Percent Q2 was down eight 5%. So there is some incremental weakness, but the point is even though the comps are easy.
Brian Maguire: Not seeing increases year over year. So we did see what we what we called out as being a little different in in Q2 were for that activity and also for our roll off activity, which again if I just look at pulse down. This was the sixth quarter in a row, where polls were down and those have been down on the order of.
Brian Maguire: Kind of an average of about 3% year over year in each of those quarters. So we wouldn't say this is a new trend, but what we saw during the quarter with some continued moderation as we would say some incremental weakness, meaning June was tougher than April was and we called out. The fact that ordinarily between April and June you would see more of a seasonal.
Brian Maguire: <unk>.
Brian Maguire: The fact that that was missing is what informed our expectations for the back half of the year, specifically Q3, which is typically your seasonally strongest quarter and these are the pieces of the business, where you see it because theyre more construction driven.
Brian Maguire: Got it got it thank you.
Speaker Change: And just a follow up would you say there is any sort of difference between activity and in between U S and Canada, just kind of the same everywhere and then just as a follow up I'm just kind of for modeling purposes are you able to share sort.
Speaker Change: The recycled commodity price assumption that you started the year with and then what you're kind of assuming now for the back half given the recent decline.
Speaker Change: Yes.
Brian Maguire: Take the second part of that first Brian we assumed when we started in February we assumed a basket of about 105 to $1 10 on OCC excuse me, which is the largest piece of our basket and were now seeing that more in that 85 to 90.
Speaker Change: Closer to 90 as I look down.
Speaker Change: In sort of the second half in real in real time right now.
Speaker Change: And shifting to your question about differences across Canada or other regions.
Speaker Change: I'd say, if I looked across again these more cyclically exposed pieces that in markets that are holding up a little better on a relative basis do include Canada actually being a little better and our west coast markets and the softness that the greatest weakness we saw in our southern region, which includes like Florida.
Speaker Change: Texas, Louisiana, and then also our eastern region, which includes the northeast and then some of the southeastern markets.
Speaker Change: Got it thanks, a lot for that detail I will turn it over.
Speaker Change: Our next question comes from Jerry Revich from Goldman Sachs. Please go ahead with your question.
Speaker Change: Hi, Good morning. This is Adam on for Gary Today, I think the 2025 margin guidance implies over 100 basis points underlying margin expansion compared to 70 basis points in the first half of the year.
Speaker Change: What are some of the moving pieces driving that accelerating underlying margin expansion in the balance of the year is that the improvements in voluntary turnover I mean any color there.
Speaker Change: Yes.
Speaker Change: For pointing that out.
Speaker Change: Yes, we are bullish based on the trends, we've seen and as I described all of those indicators trending positive for us as we move through Q2.
Speaker Change: That we see acceleration there and see that increased margin expansion and then of course, then more broadly you see you'll see a bigger increase in Q4, because the comps in other areas get easier.
Speaker Change: And so that headwinds abate, but looking sequentially, we would expect margin to continue to improve as we move through the year, primarily because of those improving trends.
Speaker Change: Great and then you closed on the 75 million of annualized revenues incremental in the quarter and then expect potential to close on the 100 million to 200 million later.
Speaker Change: This early next year can you just comment on the mix and margin profile of these acquisitions and.
Speaker Change: How we should think about the incremental in your EBITDA associated with the.
Speaker Change: 75 million in incremental revenues acquired in <unk>.
Speaker Change: Sure, let's take the first part of that first if we could so that the $100 million to $200 million that we have I am very confident in our closing.
Speaker Change: The components of that in Q3 and Q4.
Speaker Change: Is all traditional solid waste are theirs.
Speaker Change: There is no E&P in that or anything else.
Speaker Change: It is a mix of transactions through several of our geographies, so relatively well dispersed franchises in there on the West Coast, you have competitive markets in the south and Midwest and the east.
Speaker Change: And typically the margin profile of that comes on.
Speaker Change: Minimally dilutive to our corporate average obviously, we typically tell people to think of that as about 25% as a guideline as an EBITDA margin you've got a few that are will be higher you have some that based on perhaps if they are on the eastern seaboard with very high.
Speaker Change: Tip fees. They are just structurally a little lower on a margin basis, and we have a mix of all of those in there.
Speaker Change: So I think that was the first part of your question at least.
Speaker Change: I think the second part was the incremental <unk>.
Speaker Change: 75 million that has been closed since we reported Q1.
Speaker Change: And what we would tell you is we again same commentary on margin.
Speaker Change: We had.
Speaker Change: A smaller.
Speaker Change: Although very nice E&P acquisition in Canada that.
Speaker Change: That we did in that 75, so that was a little accretive to margins.
Speaker Change: But it was the smallest component of the 75, so again I would tell you if you use 25% to 30% for that basket.
Speaker Change: Cause of that E&P acquisition that would be a fair assumption on that 75.
Speaker Change: Now if you if you assume some dilution on the order of 10 to 15 basis points from incremental M&A, given our size and the relative contribution that's probably the right way to think about it.
Speaker Change: Great. Thanks, so much.
Speaker Change: Our next question comes from Chris Murray from H E B.
Speaker Change: Please go ahead with your question.
Chris Murray: Thanks folks good morning.
Speaker Change: Maybe I don't know who wants to take this one but we will put a lot of interest from our volumes.
Chris Murray: But one of the things that at least we've been seen as a bit of a.
Chris Murray: Split between kind of the.
Chris Murray: Construction manufacturing World of services, just wondering if you have any thoughts so what youre seeing from some of the end markets, if you're seeing kind of some of the volume decline in the services like I'm thinking like restaurants different things that we're seeing just on consumer behavior.
Chris Murray: Versus what you've been calling out for like CND and manufacturing.
Chris Murray: Yeah, you know Chris we.
Chris Murray: Actually it's actually inverse of that question from what we're seeing we are we are.
Chris Murray: Fairly nicely positive commercial yardage.
Chris Murray: Cross our system and commercial yardage growth commercial customer growth on a net basis.
Chris Murray: And fairly nice revenue growth on the commercial side.
Chris Murray: So we're not seeing it there it is the larger mass.
Chris Murray: Manufacturing industry.
Chris Murray: And C and more cyclical construction activity, both commercially and residential Lee that the slowing is happening in <unk>.
Chris Murray: You know, we Mark that we noted that special waste.
Chris Murray: Which is.
Chris Murray: You know can be cyclical was up in the quarter.
Chris Murray: But again, they don't get left that mislead you that can be one or two big jobs that skew things we are seeing states.
Chris Murray: That are trying to get budgets paths that are put holds on projects that had been that had been going so some of that's just a temporary thing, but it's more related to larger projects stalling or not getting released then it is the what I'd call mains.
Chris Murray: Street America commercial business.
Chris Murray: So I guess the reason I ask the question is if I think about kind of a volume recovery. It feels like we're kind of in a period of we get by the uncertainty the whole bit but the underlying majority of the economy still feels like it's doing okay is that the right way.
Chris Murray: To approach it or how you guys are seeing how this happened so that the volume recovery could happen maybe faster than we expect.
Yeah I mean.
Chris Murray: Again, we are we have said for quite some time now is as we pointed out on a few of the comments on the call.
Chris Murray: You know it has just been flat sort of up 1% down 1% for 10 to 11 consecutive quarters.
Chris Murray: With really the economy sort of a neutral that and that continues to be weak.
Chris Murray: We aren't saying theres any difference than that maybe its down one and a half instead of one.
Chris Murray: But that can also be.
Chris Murray: We've had pretty significant weather in the south as an example, we pointed out the south was weaker in an area I would tell you which has been very strong.
Chris Murray: So.
Chris Murray: You know, where we just were hesitant to make a call on what you look we have never guided.
Chris Murray: We have never guided saying well our guidance assumes a dramatic recovery in the economy.
Chris Murray: That we don't do that well, we're sort of telling you what we're seeing in real time and assuming it marches forward and that if it improves that's all upside.
Chris Murray: And so I think we're cautious after 11 quarters of flatline.
Chris Murray: Okay sounds good.
Chris Murray: Maybe one more question if you don't mind.
Chris Murray: As I listened to the call I listen to some of the things you talked about.
Chris Murray: In terms of turnover in terms of technology.
Chris Murray: No, we really haven't talked all about R&D development.
Chris Murray: And things like that.
Chris Murray: But when you go back a few calls and we've been talking about outsized margin expansion as we went into 'twenty six 'twenty seven.
Chris Murray: Given where you're sitting and I appreciate volumes, maybe going to hurt, but I think as you pointed out.
Chris Murray: Second half margin expansion is already kind of aiming at a 100 basis points, which probably carry us into the early part of 2006, how should we be thinking about.
Chris Murray: That margin cadence as we go into sort of the later years as you get some of the benefit of some of the investments you've made over the last little while in some of the new initiatives that you are.
Chris Murray: That you are implementing.
Chris Murray: Well, we certainly think about setting ourselves to have a tailwind that would be incremental to the typical 20 to 40 basis points of price led organic growth.
Chris Murray: When you look at this year delivering 50 basis points in spite of the fact that there are incremental headwinds.
Chris Murray: From commodities and so we talked about that opportunity for just when that normalizes for another in this case 50 basis points from commodities alone. So look where that that is certainly the thought behind making the investments, we're making now Chris and we do look forward to in subsequent periods continuing to.
Chris Murray: Realize those benefits.
Chris Murray: And so we're certainly bullish about being north of that 20 to 40 basis points.
Chris Murray: Okay I'll leave it there thanks Brooks.
Chris Murray: Thank you.
Speaker Change: Our next question comes from <unk> Gupta from Scotiabank. Please go ahead with your question.
Speaker Change: Thanks, operator, good morning, everyone.
Speaker Change: Maybe on the price cost front it.
Speaker Change: It seems like you guys are still hitting as an industry, maybe near the high end of the typical ranges so maybe about.
Speaker Change: Visit the six 5% pricing and whatnot.
Speaker Change: Heading into 'twenty six like exiting 'twenty five.
Speaker Change: Do you feel like that the price cost spread.
Speaker Change: Can potentially come down on normalized two what's sort of the normal levels.
Speaker Change: It's still kind of like a far fetched idea and if at all the spread.
Speaker Change: Narrows or stay the same would it be more driven by the price of other cost.
Speaker Change: Yes.
Speaker Change: Well I think I think it would be driven by.
Speaker Change: To answer the question I mean look if you go back 15 years.
Speaker Change: So all different types of economic cycles that have happened in that we've averaged about 150 basis points spread of our price too.
Speaker Change: At least the CPI, if you want to use that as a proxy for cost some years costs have been a little higher than CPI, some maybe right at but that's a fair proxy.
Speaker Change: So as the CPI continues to step down.
Speaker Change: Which it has been and is projected to continue to do so or maybe flatten out in the two and a half to three level coming down from 9% 24 months 24 months to 30 months ago.
Speaker Change: You will see the aggregate price or reported price come down.
Speaker Change: Accordingly, as you have been but I think you will see that spread continue.
Speaker Change: Because that's what we target as a company and and have for long periods now I think the higher the CPI that does help a little bit on the margin to increase that spread a bit.
Speaker Change: That you have so, but I think thats pretty de minimis to be honest.
Speaker Change: We are seeing our costs our.
Speaker Change: Aggregate lease fall.
Speaker Change: In total.
Speaker Change: Each quarter for the last you know year.
Speaker Change: Year and a half we saw it step down again in aggregate, we saw our labor costs go to the sort of four to four three level and our total costs come in about three four to three five so still a little bit above the CPI, but coming down. So if you use that as a proxy.
Speaker Change: See you know a 150 to 200 basis points on top of that would get you sort of five five and a half type percent price to get you. The same performance at six and a half had been getting in 2025.
Speaker Change: That's great color Bryan Thanks, Tim just to follow up.
Speaker Change: Just kind of like understanding you said.
Speaker Change: Having the EPA has their own the room should help obviously.
Speaker Change: Do you see an opportunity to reduce your cost obligation for the next several years with the EPA involved here or.
Speaker Change: <unk> pretty much forgiven.
Speaker Change: Well look I think what we said is that we don't have any changes to the cost assumptions and the cash outflow assumptions and closure assumptions that we have I have provided we.
Speaker Change: We do a multiyear model one that there are quarters that are higher there are quarters that are lower but none of the assumptions.
Speaker Change: In materially change, we just believe that look a lot of these costs are legal and consulting and a lot of that is driven by regulatory framework in California. So if that alone has streamlined through the EPA.
Speaker Change: That'll get better right, there irregardless of remediation cost.
Speaker Change: So.
Speaker Change: Look I would tell you we're cautiously optimistic on on doing better.
Speaker Change: But we're going to fulfill whatever our regulatory legal.
Speaker Change: Requirements are to whatever agency is over us.
Speaker Change: And and and we have been doing that and we'll continue to do that so it's a little bit hard to predict but I would tell you we feel incrementally better.
Speaker Change: Okay.
Speaker Change: Glad to hear it thanks, so much.
Speaker Change: Our next question comes from Michael Dummett from National Bank. Please go ahead with your question.
Michael Dummett: Hey, good morning, guys.
Michael Dummett: So obviously nice job on the employee retention improvement I wonder if you'd characterize that improvement is largely complete obviously understanding the impact to margins is lagged.
Michael Dummett: And if that's the case what are your thoughts on some of the other call. It buckets of potential efficiencies that you can drive incremental and price cost spread going forward I think such as the AI initiatives you mentioned at the conference call.
Michael Dummett: Well.
Michael Dummett: Thank you for your comments there I appreciate it well first I'd tell you that when you when you talk about the turnover and the employee piece. It's never done obviously, you do get to a point of diminishing returns, but our objective is to drive total turnover below 20% by year end and into 26 in total voluntary to well under.
Michael Dummett: 10% as we go into 'twenty six so we're not done but we're getting close.
Michael Dummett: Look I would tell you that the opportunities that we see.
Michael Dummett:
Michael Dummett: That are the largest impact going forward.
Michael Dummett: Or are the use of technology, and specifically AI and and I Wouldnt say that its necessarily the ability to increase the price cost spread I think it's the ability to maintain the price cost spread and reduce churn and therefore impacts to report.
Michael Dummett: At volumes that is the opportunity and that is we believe can be fairly significant.
Michael Dummett: Based on the pilots that we've been doing for the last several quarters.
Michael Dummett: And so that will start to play out fully in 26, as we will be fully using it by the fourth quarter of this year.
Michael Dummett: So those are the projects like that projects like you know.
Michael Dummett: <unk> real time.
Michael Dummett: Routing.
Michael Dummett: Which think of it as sort of ways for garbage trucks.
Michael Dummett: Which we really don't have the ability to do in our system today and the matter that we want.
Michael Dummett: To avoid traffic to avoid construction to reroute dynamically.
Michael Dummett: To affect productivity and incremental new stops so those are the type things.
Michael Dummett: Complete digitization of our maintenance program and systems, which I think will allows for greater inventory control greater project ability in preventative maintenance and scheduled maintenance.
Michael Dummett: And and are flexing of course with.
Michael Dummett: With project ability. These are all things we are rolling out in real time over 26% 27 that I think are more.
Michael Dummett: May not Inc. May not individually be the margin drivers 100 basis points that turnover reduction has but combined they're significant.
Michael Dummett: Really interesting comments on the on the price optimization.
Michael Dummett: Ron just to follow up on that does that in your opinion could that change the calculus for the typical price cost spread that you guys have historically had.
Michael Dummett: Again, I would want to say if we could maintain the typical price spread we have had.
Michael Dummett: And we could reduce by 20% to 40% the churn impact of that meaning you have to sell 20% to 50% less customers to stay neutral uptick.
Michael Dummett: I'll take that all day long.
Michael Dummett: Got it thanks for the comments.
Speaker Change: Our next question comes from Stephanie <unk> from Jefferies. Please go ahead with your question.
Stephanie: Hi, Good morning, just one question for me.
Stephanie: In this current and it does appear that this current administration.
Stephanie: Could potentially be a little bit more lenient in terms of large M&A than at least the prior administration.
Stephanie: Wanted to maybe ask a higher level of thought and that's the current.
Stephanie: Okay.
Stephanie: <unk> chop would make you a bit more amenable to doing maybe a larger deals or anything that might be outside of kind of the core average deals that you look at it on an annual basis.
Stephanie: Thank you.
Speaker Change: Yeah no. Thank you Stephanie for the question look the first thing I would tell you is that.
Speaker Change: In the course of 28 years, we have never been through a second request with the department of Justice or the antitrust Division.
Speaker Change: And.
Speaker Change: I think that's indicative of our market model number one.
Speaker Change: Yeah.
Speaker Change: There is nothing that we are looking at that or have been looking at that we have shied away because of fears of.
Speaker Change: Justice Department clearance.
Speaker Change: <unk> et cetera, so I wouldn't want to say that I believe for us that are more lenient.
Speaker Change: Justice process.
Speaker Change: Is an accelerant to M&A.
Speaker Change: Because it hasnt been an inhibition to M&A now.
Speaker Change: I'll say that I think in general.
Speaker Change: That probably broadens.
Speaker Change: The scope of things in some markets for us.
Speaker Change: You have to remember that.
Speaker Change: <unk>.
Speaker Change: The filing requirement is about $125 million of purchase price not revenue to remember in our sector that could be 40 million of rabbit, okay, depending on profitability of the deal.
Speaker Change: So you.
You know that that's what you got to remember as far as where does this HSR requirement apply to that is how low it that's what it goes down to but.
Speaker Change: I would not tell you that it has been an inhibition for us.
Speaker Change: But it certainly we welcome the more.
Speaker Change: <unk> regulatory environment I would say.
Speaker Change: Great. Thank you.
Speaker Change: Our next question comes from James Schumm from TD Cowen. Please go ahead with your question.
James Schumm: Hey, good morning. Thanks.
James Schumm: With respect to free cash flow you mentioned, you're on track to hit your Chiquita Canyon spending guidance, but can you update on your best estimate for next year spending on Chiquita was that was that $50 million where was that the was that the last update and can the E. P. A give you some relief on.
James Schumm: Leachate disposal or does that have to come from the state and maybe just give us a sense of the 100 to 150 that you spend this year give us a sense like how much is leachate or.
James Schumm: If you could bucket some of the costs that would be super helpful.
James Schumm: Sure well what I would tell you is I think it's too early to make any changes up or down to our 'twenty six 'twenty seven estimates because it is a dynamic situation and we are looking at this potential sort of lead.
James Schumm: Coordination.
James Schumm: Change, okay, and so it would be it would be speculative I think to do that to.
James Schumm: To the part of your question regarding how much is leachate.
James Schumm: That's about 70% of the cost okay, the cost of treatment and disposal and transportation.
James Schumm: So obviously any are any impacts that we can make operationally or outlet wise.
James Schumm: Or transit was help help that.
James Schumm: We have made some changes that have recently reduced that.
James Schumm: In real time that we will begin seeing throughout this third quarter as a somewhat of a step change for us and they were contemplated.
James Schumm: And yes, and they were contemplated that then that is not a result of anything new that's result of ongoing efforts. So.
James Schumm:
James Schumm: Know that that is what we can what we can tell you about that James.
James Schumm: And then Ron just I mean, as you look for different options to.
Speaker Change: Sort of ameliorate those costs like will you be appealing to the EPA or would that still have to go through the state.
James Schumm: In terms of getting some.
Speaker Change: Hey.
Speaker Change: It is the.
Speaker Change: The answer depends on what that cost is same I mean, the E. P. A is not going to come in and direct to do direct the state to do things that are against state laws or regulations or.
Speaker Change: Objectives that is not what they are intended to do okay.
Speaker Change: So.
Speaker Change: Where we will still have to and still are in compliance with all of those things.
Speaker Change: But there are there are things that reside under the Epa's.
Speaker Change: Per view that I would say, it's not clear.
Speaker Change: Whether it is a federal state or local issue on some decisions and in those areas I think the clarity.
Speaker Change: The EPA can be helpful to us so.
Speaker Change: Stay tuned for how that plays itself out.
Speaker Change: Okay very good and then just lastly for recycling what does your overall book of business look like right. Now is it majority fee for service or are you assuming the full commodity price risk. What is what is the book look like currently.
Speaker Change: Yes, most of the recycling, we do as part of a broader service provision and so.
Speaker Change: We have the exposure, which is why we communicate what the sensitivity is on the total recycling basket and you see that moved through our numbers every quarter.
Speaker Change: Okay. Thank you.
Speaker Change: Our next question comes from Tobey Sommer from Truest. Please go ahead with your question.
Speaker Change: Kyle it's Henry on for Tobey here. Thanks for squeezing me in I just have a quick one on M&A.
Speaker Change: Touched on this briefly before but what's the typical timeline that we should look at for tuck ins to reach kind of company average margins and then how does that average timeline changed here as you've stepped up.
Speaker Change: Acquisitions.
Speaker Change: Yeah, Yeah. So so.
Speaker Change: I would tell you everybody's definition of a tuck ins a little different so a little bit about you know.
Speaker Change: Commentary, there, but typically a tuck in we're gonna be able to bring up the company margin average within a 12 to 18 month period, it's a relatively quick timeframe because you are.
Speaker Change: You're shutting down a facility that exists you're consolidating routes youre doing things that happen in relatively quick order.
Speaker Change: Now again, that's that was tend to be a very small transactions, where you're just densify a market area. When you're talking about something that is a more of a stand alone and that could be something 20 $30 million in revenue and youre going to build out around that that's a longer timeframe right.
Speaker Change: Talking a.
Speaker Change: It probably more of like a three to four year time period to move that closer to your comp to the company average they will remember if we're buying a company that's a 'twenty three 'twenty, 4% EBITDA margin.
Speaker Change: That's a thousand basis points below our margin.
Speaker Change: So even if you're moving at 200 basis points, a year, you're mathematically four and a half to five years.
Speaker Change: So so it somewhat depends.
Speaker Change: On a Henry on the your definition of what a tuck in is.
Speaker Change: And our last question comes from Tami Zakaria from Jpmorgan. Please go ahead with your question.
Tami Zakaria: Hi, good morning. Thank you so much for fitting me in I just had one quick clarification question about the opportunistic buyback.
Tami Zakaria: If the hundreds to 200 million M&A in the pipeline closes this year could we still expect some opportunistic repo or will it be sort of an either or.
Tami Zakaria: Tom.
Tami Zakaria: We view ourselves as having the optionality that continue to do all aspects of capital allocation. So no we don't see it as either or.
Tami Zakaria: Got it perfect. Thank you.
Tami Zakaria: Ladies and gentlemen, with that we will be concluding today's question and answer session I'd like to turn the floor back over to Ron Mittelstaedt for any closing remarks.
Tami Zakaria: If there are no further questions on behalf of our entire management team. We appreciate your listening to and interest in the call today.
Speaker Change: Marianne and Joe boxer available today to answer any direct questions that we did not cover that we're allowed to answer under regulation FD Reg G and applicable securities laws in Canada.
Speaker Change: Thank you again, we look forward to connecting with you at upcoming Investor conferences or on our next earnings call.
Speaker Change: Ladies and gentlemen, with that we'll conclude today's conference call and presentation. We do thank you for joining you may now disconnect your lines.