Good morning. Welcome. We're very excited to have everyone here today and be able to host in person. I'm gonna just do a quick intro and then bring Patrick up for some opening remarks. You know, I put on my suit today the first time in a while. Not a lot of people wearing suits, at least us today. In my breast pocket was this boarding pass, which is from March 4, 2020, which was the day that we did our IPO.
Just coincidentally, this is in the suit jacket. I highlight that because, as you can recall, March 4, 2020 was then the beginning of the end of all the sort of in-person get-togethers. As a result, we haven't had a chance to be able to host something like this and get together in person.
We're thrilled, you know, two years plus later to now be able to do it. During that time, we've been very busy, and part of today is gonna just, you know, update and showcase all the things that we've accomplished during that period. Despite all that we've done thus far, what's really exciting for us is, you know, looking forward.
You know, we strongly believe we have the most compelling story in the industry today, and we wanna sort of showcase that and all the opportunities, and perhaps more importantly, showcase the people that actually execute on that. I mean, a lot of you have sort of met with Patrick and I, but there's a whole host of sort of GFL folks here today, and we wanna be able to showcase the depth and breadth of that talent. We'll get in.
There'll be, you have the agenda, and we'll go through it. Just from a housekeeping perspective, there's a break midway through. We're gonna do all Q&A at the end, so we'll just go straight through. Please just accumulate your questions, and we can do those at the end.
There will be a grab-and-go lunch available, and all the GFL folks will be sticking around if you wanna, you know, hang out for a bit. There will be a sort of grab-and-go lunch available to take with you. I need to read a disclaimer before we begin, so bear with me, and then we'll get started.
During today's session, we'll be making certain forward-looking statements within the meaning of applicable Canadian and U.S. securities laws, including statements regarding events or developments that we believe or anticipate may occur in the future.
These forward-looking statements are subject to a number of risks and uncertainties, including those set out in our filings with the Canadian and U.S. securities regulators and in the presentation for today's meeting, which is available on our website. Any forward-looking statement is not a guarantee of future performance, and actual results may differ materially from those expressed or implied in the forward-looking statement.
These forward-looking statements speak only as of today's date, and we do not assume any obligation to update these statements, whether as a result of new information, future events and developments or otherwise. We will also discuss today certain non-IFRS measures. A reconciliation of non-IFRS measures can be found in our filings with the Canadian and U.S. securities regulators, as well as the presentation for today's meeting.
With that, I'm gonna now turn it over and welcome up to the stage the founder of GFL, our Chairman and CEO, Patrick Dovigi.
Good morning, everyone. Thanks for joining us today. I think from, you know, my perspective, this is obviously an important day for every one of us here. I think most of you got to know Luke and myself pretty well, obviously over the course of the last couple years.
We thought it was, you know, extremely important to get out in front of each and every one of you and really showcase, you know, what's really been built at GFL over the last 16 years. I think from most people's perspectives, they've really only got to see GFL over the last couple years, but this has been a real work in progress, really from sort of, you know, early in 2007 to sort of where we are today, and it's been really an exciting evolution.
Today is really about, you know, not about myself, not about Luke. It's really about showcasing the talent, showcasing the operating system, showing how special GFL, really actually is. When you think about that, you know, how do we actually get here?
You know, the company today, 18,000 employees, and you look at sort of today's presenters, real group of, you know, diverse group of individuals that have, you know, come together to build one of the, my perspective, one of the best management teams in the industry.
This team, you know, I always say it's actually harder to build, you know, a culture and a smart management team full of smart people than it actually is built from not-so-smart people, because not-so-smart people don't have a lot of great, diverse opinions, and trying to get them all to work to come with one common vision and one common set of goals is always difficult.
You know, I think we've done that today. I think we have the best management team in the industry by far, and I think you're gonna see that, throughout the presentation from each and every one of these guys and women about how we put this together, their previous roles within GFL, and sort of where it sort of sits today.
I'm really excited for them to be able to get in front of you and, you know, tell you a little bit about themselves and exactly what they do on sort of a day-to-day basis. If you think about when we did the IPO, you look at the IPO, we had some goals. You know, I'm a big believer in sort of three to five year time horizons.
You can have longer-term goals, but you know, we set out at the time of the IPO, the plan was to double the size of the business. We thought there was a clear path to take $1 billion of EBITDA to $2 billion of EBITDA, do that responsibly, exactly within the same model that we deployed over the previous, you know, 13-14 years under private equity ownership.
I think we're well on track to do that, you know, in a quicker time horizon than we'd articulated at the time of the IPO. We had a big plan to expand EBITDA margins by 200-250 basis points. We've already increased margins 180 basis points, and I think we're well on our way to getting to +30% margin within the next sort of 18 months.
If you look at, you know, obviously on strategic acquisitions, which is a big focal point of why we actually did the IPO, having the capital to be able to delever our balance sheet under private equity ownership, I think we've deployed responsibly $6.2 billion of capital in 2020 and 2021, even through COVID.
Now you look at what the opportunities are for 2022, it's actually rationalizing that book, which we've done a very good job of doing already. You know, we're very good purchasers, but we're also very good sellers, and we look at the markets where we think we can maximize our best return on our invested capital.
If you look at that today, now we have this platform we can continue densifying in 26 states, in nine provinces in Canada, you know, that's gonna provide us a huge opportunity sort of moving forward. Then we've, you know, one thing we committed to is delevering our balance sheet. Luke will talk a little bit about that over the next three years, how that looks.
You know, at the time of the IPO, we delevered to, you know, 4.75x from, you know, closer to 7.5. And obviously, we reduced our cost of capital significantly from 6.5% to 4.2%. We think there's further opportunity, which, Luke will talk about also, to continue decreasing that cost of capital over time. A little bit on the platform, sort of pre-IPO and post-IPO.
I won't spend too much time on this because there's a slide as we move forward. Basically, when we did the IPO, we were 11,000 employees, currently over 18,000 employees. You know, we had 5,000 trucks pre-IPO, 9,000+ trucks post-IPO, 450+ collection operations now, 210 collection operations pre-IPO.
Approximately $ 3.3 billion of revenue pre-IPO, and we look forward to today almost $6 billion of revenue and almost $ 1.7 billion of EBITDA at 28% EBITDA margins. We've made significant progress, and again, a lot of opportunities still to move forward. This slide, you know, is basically self-explanatory. It's just really talking about the CAGR in our business.
Obviously, from a revenue perspective, you know, growing the business at 34%+ CAGR. Adjusted EBITDA is growing at almost 43% and adjusted free cash flow at almost 35% between, you know, from the time of the IPO until today. Obviously, significantly higher than the industry peers, but from our perspective, again, this is something that's, you know, we've been doing for a long period of time.
Albeit only a couple years in the public market, we've been doing it for a long time, you know, growing at these sort of rates for a long time, under private equity ownership. I think this is, from my perspective, the most exciting slide, you know, in the entire deck. I think when you look at this, I think what people need to understand is that this platform has been built over 16 years.
When you look at this platform, you know, the most complicated thing of building these businesses is obviously from an operational side, operational systems, both from the SG&A side, and just culturally making all of these operations work both in Canada and the U.S.
I think when you look at building our footprints, when you're building these businesses, building these businesses is, you know, it's not easy. I think we have one very simple operating philosophy, which was centralize everything the customer doesn't see. That allowed us to be able to drive this growth and drive it, to have this be a sustainable growth model.
Putting everything on one accounting system, one operating system for all of our different lines of business, having one KPI reporting program that does all of our financial reporting, et cetera, was near and dear to our heart from basically 2006 and 2007 when we started.
You know, we had private equity partners who were supportive of having 25% of our costs as, on, attributed to the SG&A line when we were starting because we knew that's what the financial investment that was required to be able to do this. I mean, I think not being able to measure and monitor what you acquired is very important. We always knew that was gonna be important.
When you look at this platform today, you basically have, you know, again, nine provinces in Canada and 26 states in the U.S. that have been GFL-ized. When I say GFL-ized, you have management teams that already know what's going on in those existing markets. They know how to use our operating systems. They're on our procurement program. They're on our pricing program. Culturally, they work.
The people are, you know, bleed green, and that takes a lot of time and effort, and that's where the lion's share of the risk comes in, particularly on the M&A front. Now when we look at M&A, anything we do on the M&A side is going into an existing GFL market. The risk of, you know, a cultural issue with people, with employees, et cetera, has been significantly diminished by the fact that this platform has now been built.
When you look at the platform, the platform is far from mature. There's a significant amount of opportunity, again, around procurement, pricing, continued further SG&A rationalization. You know, as you scale up these businesses and they get as large as they are, you know, it just over time, with time, you just get better and better and better.
That's why you're gonna continue seeing margin expansion, you know, above what probably the normal peer average is. You know, one big opportunity we have is on pricing. Pricing from our perspective, rationalizing the book of business, getting our surcharges level-setted through this entire customer base. Just significant opportunity that we still have that, you know, we're in the early days of that opportunity.
I think when you look now, you know, I think from our perspective, the biggest and best use of our capital is gonna be spent on trucking acquisition to leverage the post-collection operations that we now own. Again, 160 transfer stations, 90+ landfills, 35+ material recovery facilities, 20 organics facilities, 140 liquid waste facilities, 13 soil remediation facilities. When you look at those are all fixed cost-based facilities.
The more volume we can drive through those facilities, which we're gonna do. You know, and leveraging those, you know, I would say the more on the collection side assets that we don't really need a lot of post-collection assets anymore. That's just gonna further increase the profitability of the business, and you're gonna get that nice hockey stick effect that takes place in those markets.
When you look at the multi-pronged, you know, growth strategies to create long-term shareholder value, obviously driving organic growth is at the top of the page. As I just said, expanding adjusted EBITDA margins, leveraging this platform that we have, driving further opportunity, both on the procurement side, et cetera, is gonna help us with that. Obviously, reducing our cost of debt, which we've done very well.
I mean, I think if you look at our debt investors today on the institutional side, you know, we've always punched above our weight in terms of, you know, where we've been rated to where we actually price our debt. We think that further continues. We've built an exceptional reputation with those group of investors. We have the highest quality group of investors.
I think if anybody we have a list that people would envy, and they've been always very supportive of us. We think over time, as we continue to focus on rating increases, et cetera, that's gonna continue coming down. Obviously, reinvesting our excess free cash flow into our M&A strategy, which has always been sort of front and center for us. M&A is something we do extremely well. When you look at how this team's
You know, this is a management team that has really a lot of our wealth has come from executing M&A and executing it well. We've done it under private equity ownership for a long period of time. We had a management incentive plan under private equity ownership that we've recapped 3x to 4x , so this team actually understands how to create value, and they have done that, and we'll continue to do that.
Obviously maximizing value from sustainability initiatives. Obviously, recycling and RNG, so renewable natural gas. You know, the recycling business has really taken off and we see another leg up in the industry for that. We think you couple all those together, you know, this is obviously gonna be a very exciting opportunity and an exciting time for the company.
You know, I've stated this publicly multiple times, and, you know, I'm not sure whether people believe me or not, but I think, you know, it's pretty clear to us that we had a clear path to get to $1 billion of, you know, run-rate free cash flow by 2024.
Look at that. I mean, look where we sort of sit today and what we've been able to accomplish, you know, starting at the time of the IPO of 2020 with $360 million of free cash flow, growing that to somewhere between $685 million and $730 million of free cash flow for 2022. Then you look at how the building blocks start to actually, you know, get to 2024, and how we get to that $1 billion of free cash flow.
I think for most of you know, every number we've put out to the street since we've been public and to our investors, we've obviously beat every expectation. You know, while this is on the page, it's our expectations that we're gonna do better than this. We think as a base, this is a good base to start at.
You know, Luke will talk, you know, to the different models, et cetera, as we move forward about how we think about free cash flow generation and how we what we think about doing with that free cash flow coupled together with delevering, et cetera. You don't really have to believe very much for us to actually get there when you look at this model.
From an organic growth perspective, obviously growing free cash flow to $ 110 million to $150 million. You look at the potential incremental acquisitions, which I think, you know, I think we've demonstrated that we do successfully now and have executed on over a long period of time, you know, taking some very modest assumptions over that.
You look at what we've modeled for RNG. RNG coming in starting, you know, in spring, summer of 2023, and then coming online throughout 2023 and 2024. You know, we have, you know, modeled very conservatively $ 105 million to $125 million a year of annual free cash flow.
You know, that gets you to somewhere between a launch point of $990 million and $1.1 billion going into 2024. With that, you know, I think it's pretty clear that that's where we're gonna get to. Those are our goals, that's our targets, and we have every expectation that we'll actually beat that number. You know, we just wanted to give you the building blocks to show a pretty conservative estimate of where we would get to.
You know, a little bit on the management team. I think, you know, from our perspective, pretty simple. We think like owners, and we spend your capital like we're owners, because we are owners. At the end of the day, this management team owns close to $1 billion of equity in this company.
I don't think you can say that for many of the other industry comps. I spend it like it's my own because it is my own, and I spend it like it's yours because it's my own also. I think from our perspective, you know, there's not a team that's more motivated or more incentivized to continue doing great things. Like I said, we've been doing this for over 16 years now.
We've done it very successfully. I think if you went back 16 years ago and you asked someone if there could be another, you know, $2 billion EBITDA business in the waste industry, they all probably would've laughed at you, including all of our peers. Most of them did laugh at us for the first five years.
I think at the end of the day, we were able to be successful. We've been able to recruit the best talent in the industry, you know, both from an operational side but also an entrepreneurial side. You know, this isn't a management team that's full of robots just doing what I tell them to do. This is a management team that has great ideas that have had, you know, and taken a big hand in building this company.
You know, we've sat here, and it's really built from the bottom up, not from the top down. You know, I had a vision. This team's executed on the vision and continues to execute on the vision every day. You know, I think where we've been very successful is, you know, I think we think big, but we act small.
That's a big thing culturally, for this company to be able to do. Because, you know, as a company gets bigger, you can see how you can sort of lose your way with that.
But I think putting in place the safeguards and the operational systems that we have to measure and monitor what we've been able to acquire, you know, has allowed local decision-making and allowed the players in the field to make local decisions.
You know, I think that's hugely important because you never wanna take that power away from the field and from their local regions to make the decisions that they need to make, too.
We're there to support, you know, create obviously from a macro perspective within the existing company and how we allocate capital, you know, that happens at one place. It's communicated on a, you know, basically on a monthly basis, but, you know, we're always sitting, we're always looking to, you know, make the.
We're very nimble. This management team is very nimble, and I think that's what would make us sort of very special. Lastly, you know, before I turn it over to Greg, I think when you look at, you know, this is, this is a proven business model. I mean, yes, it's only been two years public, and yes, we have to continue proving ourselves, but at the end of the day, we've been doing this for 16 years.
You can ask every private equity investor that's been invested in this business, no one's left with less than 3x their money. They were always our best friend until they made three times their money, and then they took the check and left. You know, it was. They've all been great partners and played a significant role over the years in making this business what it was.
You know, as I said earlier, we have industry-leading growth rates across every one of our key financial metrics. I think, you know, we've executed on the key strategic initiatives since the IPO. Basically, what this says, you know, we did exactly what we said we were gonna do, and I think we probably did a little bit more. You know, multipronged growth strategy to create long-term shareholder value.
Again, we're in the early innings of a long baseball game here. You know, by far, we're not mature. There's a lot of work for us still to do. There's a lot of opportunity. There's still a lot of value to create, so, you know, we think we have a significant amount of opportunity here over the next sort of five years.
As I said, we're on track to create, you know, generate over $ 1 billion of adjusted free cash flow in the near term. Again, I think when you see that's a pretty modest projections, and I think each and every one of you in this room would expect us to do better, and we believe we'll do better.
Then again, like I said, we have a committed entrepreneurial management team with significant equity stakes, and I think you put that all together, that's a recipe for success. You know, I'm extremely excited and fully committed and invested, and, you know, I think from our perspective, you're gonna see pretty soon here how excited the management team is about the opportunity and all the great things that they've done.
With that, I will turn it over to Greg, and thank you very much. Much appreciated, and it's good to be in front of everybody in person again.
Morning. Excuse my throat, but got a couple folks here that wanna join us on stage here this morning. Matt. He'll introduce himself later. This is Matthew McAra. He's Area Vice President for Western Canada. Ben Habets, Area Vice President for Eastern United States. We've got Steve Miranda, Vice President for Recycling North America, and Billy Soffera, Senior Vice President of Operations for North America.
I'm Greg Yorston. They asked for just a quick bio of myself. I've been with GFL for the last four years. Before that, I was with Waste Industries for five, where I was the president and COO of Waste Industries. Prior to that, I was with Waste Management for over 20 years, where I was an Area Vice President, similar to these two gentlemen, for about 12 years.
My last two years with Waste Management, I was Operations Vice President for North America with Waste Management for that. Today, one of the detail Patrick were talking about, thank you. Been COVID tested twice coming here. I'm convinced this is allergies, so forgive me. Thank you. Some of the detail Patrick was talking about is what I'll focus on today.
We'll talk about pricing. We're gonna talk about margins. We're gonna talk about density. We're gonna talk about ESG, and we're gonna talk about safety. I'll focus mostly on the details that Patrick was talking about surrounding pricing tools, KPIs, you know, how we expand EBITDA margins and safety. Others will talk to ESG and density a little bit more.
What I'd like to start with is the map, the structure, because I think this is important. It goes to supporting all of our process. The structure goes to supporting our processes, the strategies, and really helps with execution. If you look at the map, we're cut into seven distinct areas. There's two in Canada, Eastern Canada, which goes all the way to Western Ontario.
Matthew will talk about that later, as to Western Canada. Eastern Canada, Dave Richmond, he's here with us today. We've got five areas in the United States. We've got Lou in the background that's got Michigan, Indiana. We've got Mike Stege, who's got Wisconsin, Illinois.
Those are two of our smaller areas at this point, but they're in development, and they kind of fit into our strategy as well because the areas do range from about CAD 600 million to CAD 1.3 billion. We've got Ben Habets, who will speak to you today. He's got the largest area in the United States, which is Eastern Canada.
You can see him in that, the gray shaded piece. We've got the Florida market, which is led by Rodney, which is in the back there, so you can point out so they can meet you at lunch as well. We'll talk to Rodney. We've got Tony that's running the Texas, Arkansas, Missouri, Kansas markets, and it's encompassed to the left there. The areas are structured in that inside of each area, they have two regions to four regions.
Like Ben will have four, someone like Tony's, or someone like Lou's will have two. They have regions, they have regional vice presidents, they have general managers that report all the way through. What this does do is it gives us kind of line of sight right down to the customer.
That's what we're after, is getting the people that are making the decisions in the customer's, you know, in the customer's community and in the customer's care. The AVP also has a business partner that's assigned to them, which is for financial planning and analysis. It helps with budgeting, helps with forecasts, and so forth. We don't have a corporate function that's accounting in the field.
Everything, as Patrick said, that doesn't face the customer is in the back office, but our AVPs and RVPs have planning analysis support because a lot of what we do is very strategic to help set up our regional vice presidents, our general managers execute inside of this structure of budgeting and forecasting is done by our general managers.
It's something that we focus on as well. We look at it as a management tool inside of each of the regions. I guess lastly, about the structure. This inherently provides succession planning 'cause our general managers that become regional vice presidents, regional vice presidents become area vice presidents, and area vice presidents succeed to replace myself, Billy, and Mark Badger when we leave the company. Next page. Okay. Yeah.
In addition to the structure with the Area Vice Presidents, Regional Vice Presidents and so forth in the field, we've got a really talented group of folks that are in this room today as well, that support IT, procurement, landfills, and compliance, safety, HR, and M&A. Focused field group, strong corporate support group that's different inside of each area and each region, depending on what the strategy is for that local area. We have an absolute great team that provides those support across those fields.
Ultimately, what I like to say is that we execute centralized strategies in a decentralized environment, and this is what this structure is all built for. Safety is a good example of that. As each of our AVPs approach safety a little bit differently, but we have one common safety enterprise management system. We've got consensus on tools and technology.
We have one common safety protocol manual. Like I say, each of the Area Vice Presidents approach it a little bit differently because each region, each branch and each area is culturally different, and different things motivate people. We all agree on what success looks like in safety, and that's what we strive for. All right, this is a TRIR rate that you're looking at.
Total recordable injury rate. That's an industry standard. You can see the progression that we've made over a period of time. This is difficult with the acquisitions that we do because you bring in different cultures. I think we make the progress because we sit down quickly and agree what's acceptable, what's not acceptable, and what excellence looks like. It's just not negotiable. Safety is a table stakes for us. Go to forecasting.
This is a cornerstone of our management philosophy as well. The local managers forecast twice a month. It's vetted by the regional managers and area vice presidents, and we take a look at what we're doing twice a month, each month. We think about forecasting the close at the end of the month as something that is unrelated to us because close is an accounting function, it should just confirm what we forecast.
We're quite good at it. We're able to predict what's gonna happen. If we can predict what's gonna happen, then we can influence. That's the whole thought process we have around forecasting, is to try and influence the future if we can understand what's gonna happen. Right now with inflation, I think that's a good example.
We've done some great work trying to outguess what we think inflation is gonna do and made sure that we adjust our pricing programs to compensate for it. A tool that we use is called WISHES. WISHES is a tool that I had at Waste Industries I brought to GFL, and the GFL team's been working furiously trying to enhance this over a period of time.
It's a proactive tool that does retention, prospecting, but it's got a pricing tool inside of it as well. That tool is customized at the region level. All the local operating costs go into it, again, vetted back by the kind of chain that I described. You can do it on a tablet or a cell phone, but it produces an easy-to-quote tool for our sales rep to use that's foolproof.
They can't get outside of the box that we put them in with this tool. It sounds a little harsh, but salespeople have to be directed in certain functions, but gives them also an exclusion button that they can push, and it goes straight to the local manager who's got authority inside of, you know, certain windows where he can adjust the prices.
If a sales rep's trying to sell a fuel surcharge or environmental surcharge that's outside of our boundaries, it will flag very quickly in the system, and it re-requires exceptions and so forth. We get kind of a command and control over top of what our field people are doing in a very decentralized environment, 'cause we do encourage them to be creative, but if they get outside of the box and start to color, you get to watch what's happening with them.
Very effective in driving behaviors. This is just a quick snapshot, 'cause like I say, it really turns out to be a prevent control tool, but it gives me just a bevy, and it gives Ben, gives Matthew, gives the region managers, everybody, a bevy of tools to go look at. Like, if I look at the bell chart on the bottom, you can see that's what's been sold at.
This is an actual data point from a region that says 25%. That green was less than 25% margin the customer sold at. 25 to 40 and over 40. You're getting specific detail right down to the rep as to what's happening in the field. Then you go back, and you make sure that what they're doing fits with your strategy.
The tool's producing just fantastic information that we can see from afar, that people can execute just right at the face of the customer. That helps on a go-forward basis. Looking back, the way that our company's come together, we've accumulated a really under-leveraged customer base at this point in time because we're acquiring people that don't have surcharges on fuel or environmental or other.
We've got this big bucket that we started to work with in 2021. We had kinda matured to that point, we were able to start to work on it. Very complicated. A lot of different systems, a lot of different customers, a lot of different coding, but we worked through it in 2021. By the time we got to the end of the year, we were ready with the tools that we can group these customers into different buckets.
We're just really on the cusp right now of putting in surcharges to our existing customer base that were really hard to touch before. We're prepared for it. We've had a good first quarter. Second quarter's even better. We continue to move faster through the system now, and we think by the end of 2022, our eligible customer base will have been addressed at that point in time. KPIs.
Billy will talk more about KPIs. There's five specific. Just kinda wanna show you back the systems and how we think about things. Five specific KPIs we're looking at all the time. Gross profit margin, net revenue, operating cost per hour, labor cost per hour, repairs and maintenance. This is important because this is a real chart that we use consistently in our organization.
If you look at it, if I was to put my cursor on the left, on the purple one, you can see the margin for that branch is significantly high, 56.8% is the gross operating margin at that branch. It'll tell you what net revenue per hour is. Net revenue per hour is important because it doesn't matter if it picks up one can or 100 cans, it's just how much is that truck making in an hour.
You're watching your net revenue per hour, and we rank them, and these are quartiles. Great, both first quartiles, but if you look, their operating cost is in the third quartile. That's gonna ask a question of what's driving that. And if you look, you can see labor cost is in the third quartile. You can go back to that market.
Is it an expensive market or is there efficiencies to be gained? It's asking questions. You look at truck repairs and maintenance. It looks great. It's in the upper part, second quartile, but what's the age of the fleet? If it's a brand-new fleet, they're spending too much money. If it's a middle-aged fleet, it's about right. Our tools are asking questions, so people get to work independently, but we get to ask questions, and we get to see what the results of their thought processes are.
In summary, that's safety, table stakes. It's just non-negotiable. It is huge. It's important. It's in our hearts. Our operating model with centralized strategies in a decentralized environment. We use KPIs. The price and surcharge stuff is. Price and surcharge strategies are working exceptionally well at this point in time. We're complex, but we're there.
Ultimately, I've been here four years. It's been a great four years. It feels like it's been longer than that. We're making great progress, and we've got an amazing team that's gonna continue to do great things with what they have at this point in time. They're ready. With that, I'll give it to Billy.
Sure. I'm Billy Soffera. I've been with GFL now for a year actually. Previous to being with GFL, I've been in the environmental industry for 32+ years, with BFI, with Republic, with Advanced Disposal prior to GFL, and briefly in the transition period for the divestiture of Waste Management, I handled the transition for a year and a half between the three companies or a portion of it, with some of our folks here.
You're gonna hear a similar theme kind of permeating through all of our presentations. Greg started, Patrick mentioned it a number of times, and that's of a dynamic environment and very exciting. I want to mention first how tremendously excited I am to address this group. Just as excited to tell the story or a portion of the story of GFL.
I think we find it to be quite a compelling story. Excited that I'm probably gonna go a couple minutes over my time, so I'm ready. You okay with it? Well, that's the danger of giving me an open mic. They all know better than that, but they did it anyway. Greg just described a foundation that has very strong basics and that is firmly rooted in very sound fundamentals.
Greg also related how that plant platform has translated into a number of early successes. I will be talking about how GFL is leveraging that platform and the strong asset base to build and mature to help define this journey we're on, starting with an open mind for alternative routes and bolstered by that strong foundation of basics that Greg described.
If I can categorize that journey in terms of operational priorities, I would emphasize a few areas of immediate focus, building infrastructure and systems and capability by continuing to evaluate and optimize our asset network, building processes and internal performance expectations by broadening the KPI rigor, building culture and maturing within that culture with an emphasis on talent that is both dynamic and different, and that is comfortable working at a very brisk pace.
That's another thing you're gonna continue to hear as we go through. Internally, we say GFL years are like dog years, seven years for every normal year in GFL, as we're moving very quickly.
Then building competency in internal alternative fuel technologies and enhancing our commitment to sustainability initiatives, you're gonna hear a lot about later, by continuing our efforts with CNG fleet conversions and RNG, and building efficiency and enhancing safety efforts by investing in residential fleet automation. Perhaps the priority with which I have the most intimate connection is that of logistics, and technical applications and network efficiencies.
For over 2/3 of my 32 years in the environmental industry, I've had direct responsibility for routing efficiencies, routing technology evaluation, network optimization, mapping technology, data gathering, and utilization of all those strategies. I have a great deal of insight into the tools and the teams of the other competitors, our large major competitors.
I have, because of that experience kinda lends credence to the next statement I'm gonna make, which is that the logistics team we have assembled at GFL, sourced largely by Mr. Yorston and me, is the best in the industry and certainly the best and most capable with which I've had the privilege to work. It has been my observation that when you marry the best people with advanced technologies, it's a true recipe for success.
Utilizing GIS mapping and geospatial mapping capabilities, data conditioning, algorithmic routing solutions, our team is heavily involved in both pre and post-acquisition M&A activity. We utilize our tools to evaluate prospective markets, evaluate and optimize network opportunities, to rationalize assets, and to identify and execute efficiency opportunities. We decide what fits and we determine how to enhance the platform now and for the future.
We're currently evaluating and inventorying those tools that we have with an eye toward further enhancing our capabilities. The example you see here on the board is the network efficiency evaluation, which helps us determine optimal locations for assets and depots, as well as highlighting additional opportunities.
An example of other opportunities we would find in a layout such as this would be internalization of commodities. Such an evaluation also informs future growth opportunities. We also use logistics as an interactive management support tool for sales, recycling, liquid waste, and customer service. Interactive management that allows us the freedom to explore, but that is rooted in rigor. Now, neither logistics nor management decision-making is effective if the information at its core is not relevant, timely, or accurate.
We are building capability in each area of our operating disciplines, having established a gathering methodology and defining parameters so that our information meets common platform requirements. For maintenance, we have adopted the AssetWorks M5 product. We are about 85% deployed across the enterprise, and we'll be fully deployed within this year of 2022. M5 is already used to inform our purchasing direction for everything from trucks to truck bodies to parts.
The information we gather from M5 is also key in evaluating business opportunities such as municipal contracts and in reviewing our monthly cost containment efforts. M5 data and trend reporting further allows us to institute inventory control and take full advantage of our warranty recovery opportunities. For customer experience call center and inside sales efforts, we utilize a call management program enterprise-wide known as Five9.
We use metrics from Five9 such as call volume, hold times, abandonment rate, call quality to determine the effectiveness of our network and our service provisions. In addition, we are building a follow-up rigor right now that requires a set escalation process for issues and problems. Our network is about 92% deployed as we speak. We have also instituted in 2022 a regular cadence in interaction between field management and customer experience support managers.
This interaction in our approach can best be described as multi-channel. Multi-channel in that we have a hybrid model of web, media, traditional phones, soft phones, and social media with the goal of providing a superior customer experience. We continue to grow and improve in this area. Some areas of rigor are forced upon us.
A couple of pretty basic playbook items such as maximizing transfer station load weights and maximizing the efficiency of yellow iron use in our post-collection operations have taken on increased significance as fuel and transportation costs have exploded. Everyone, of course, is experiencing difficulties relative to these items, but we recognized this trend very, very early and adopted measures to counteract the trend.
We have a load-by-load evaluation from the transfer stations that is shared with field management weekly for review, and we have seen a significant improvement since the establishment of that discipline.
We, in turn, have hired an industry-recognized expert in yellow iron maintenance and program management. He immediately established several programs to increase our efficiency. One example is his idle time evaluation program, which benchmarks heavy iron 15% to 20% idle time and support vehicles at 40% idle time.
He has significantly reduced our fuel burn, which in turn has turned to dollars very quickly. In a terribly important effort, we recognize that employee retention is a stat that informs and affects all other relevant statistical categories. In conjunction with our HR partners, we're using advanced metrics and enhanced programs to both attract talent, to show pathways for talent growth, and to retain talent.
GFL has developed a model and process for that effort. Because the labor market in North America remains challenging, particularly for skilled vocational positions, GFL has and is responding on several levels. Programs are developing to look inwardly and enhance employee satisfaction. We're finding ways to leverage the reputation that has evolved around our culture, that reputation being getting the right people in the right places and allowing them to be impactful.
We also are looking to embrace the cultural enhancements we get from acquired companies, learning from them and weaving their culture into the tapestry of our developing culture. We place a premium on recognizing and keeping that talent that we have acquired. We also place an emphasis on giving talent the room and opportunity to develop instead of putting strictures in their place.
As the chart you see here describes, we are moving along the spectrum from fragmented and reactive, as you would expect in a rapidly growing company, to organized, focused, and employee-centric. The atmosphere is dynamic, fluid, exciting, inclusive, and opportunity-rich.
I cannot leave this slide without pointing to our senior management team, which is well represented by strong, competent, and effective women. Our diversity efforts are continued, focused, and structured as we go forward.
Part of our sustainability efforts are represented by our commitment to embracing alternative fuels in our fleet. As you would expect, the percent of our fleet that is currently alternative fuel-based is lower than our peers, as much as our fleet has been more recently acquired. As our fleet replacement strategies are informed by both ROI and by sustainability initiatives, we are taking an aggressive stance in our purchasing strategies.
We are less focused on comparing our percent of fleet that is made of CNG vehicles, and instead focus on the tremendous opportunity that is in front of us. We expect and envision that 50% to 70% of our near-term truck replacement purchases will be CNG. The obvious benefits you see here follow, but I would like to mention a couple.
First of all, the efficiency and maintenance advantages, and the advantages of overnight fueling that promote labor savings, and an ability to leverage our RNG projects, as Patrick mentioned, to reduce the cost to fuel our fleet.
Another significant fleet-based opportunity is represented by residential fleet automation. Specifically, conversion of manually operated systems, largely rear load trucks, to automated systems, which are typically automated side loaders, Curotto-Can systems or MASL trucks.
Once again, our acquisition activity has determined the makeup of the types of trucks that we currently have in our fleet. The opportunity is headlined by the fact that automated systems provide significant and measurable safety benefits, significant operational efficiencies and potentially attractive payback periods for capital outlay.
As an aside, we also have underway a number of rear load, front load commercial conversions, and these conversions provide similar benefits but at a generally higher return on investment rate. Much like CNG deployment, the automation evaluation is subject to very objective and rigorous return on investment review. Perhaps the most interesting and exciting effort in which GFL is involved is a very early adoption of BEVs or battery electric vehicles.
GFL is blessed with some very specific fleet and procurement expertise, some of which is in this room today, particularly in the area of fleet specification and an evaluation. That experience and expertise has allowed us to create and leverage strategic partnerships with multiple OEMs or original equipment manufacturers.
Leveraging that expertise, GFL has conducted extensive research, both here domestically and in Europe, where BEV technology has developed a little more quickly and is a little further along. We have chosen to adopt true BEV technology as opposed to hybrid models, which gives us up to a 30% battery life. We are also monitoring and are involved in other alternative fuel developments.
We were recently awarded the City of Gainesville, Florida contract, the largest single site deployment for BEVs in North America, which will ultimately include 30 to 40 of the trucks by 2025. We foresee benefits from both maintenance costs and skill levels necessary to man the maintenance shop. The success of this venture will certainly drive and inform our future efforts. I'd like to leave you with a final thought.
When we think and plan where we want to be as a future state at GFL, we start with alternative and differentiated and move from there. Thank you. I'd like to introduce Ben Habets.
Thank you, Bill. Morning, everyone. My name is Ben Habets, Area Vice President for the Eastern U.S. area. My background is from Waste Industries. I joined GFL in 2018 as a result of that acquisition. Previously, I served as the Senior Vice President of Operations for Waste Industries, and I've had about 17 years of experience, predominantly on the East Coast in the solid waste and recycling industry.
I'm very excited to be here this morning with you and share a little glimpse of the Eastern United States market area. We'll jump right in. As you can see on the map to your left, the area consists of the states of Pennsylvania, Maryland, Delaware, Virginia, North Carolina, South Carolina, and a small portion of Eastern Tennessee.
The revenue mix consists of about 30% commercial revenues, 19% industrial revenues, 36% residential, and about 15% post-collection. Material recycling facilities are relatively new in the last two years within our area, and they represent about 1.3% of our revenue base, an area of opportunity for the area. We divide the area into four regions.
Those are led by a regional vice president and a regional controller. These are really the local leadership teams that drive our operational efficiencies, drive our revenue growth at the specific business units that you see on the map, whether that be a transfer station, a landfill, material recycling facility, or hauling operation.
The main components of the area were really built on the acquisition of Waste Industries back in 2018, as well as County Waste in 2020. These two large acquisitions positioned us very well in some of the key growth markets in the Carolinas, Virginia, and Mid-Atlantic states.
I believe one of the core strengths of the area is really our strong management team that has been in place for a consistent number of years, and they bring a strong experience in a lot of our key functions. Those include forecasting, KPI monitoring, we have price and surcharge strategy implementation, just to name a few.
Really what the benefit of that is it creates training grounds so that, our newly onboarded management or acquired businesses have an area to learn our practices and procedures, so we can replicate those as we move forward. Our 2,900 employees, over 1,600 trucks are really what are leading our growth across the network of transfer stations, material recycling facilities, landfills, as you can see on that map.
We're fortunate to be in a lot of growing markets to help us. Looking at some of our strategies in the Eastern U.S., and our strong safety focus and culture is really what allowed us to drive a TRIR improvement of over 160 basis points over the previous three years.
Certainly we embrace our safety enterprise management system and obviously embracing key technologies like DriveCam that allow us to make positive change to driver behaviors out in the roadways. However, what I think is most important that we do is really having a strong focus and disciplined focus on key operating practices.
Just to name a few that are near and dear to my heart, our morning launch process, our safety lane process, and our driver check-in process. Typically, our employees are working on a truck or a piece of equipment for 9 to 11 hours a day, and that doesn't leave a lot of time for interaction with our management team.
We believe strongly that our management team needs to involve in those best management practices, make sure that each and every day they're taking advantage of those 30 minutes to be in front of our people so that we can make strong personal touches, and those personal touches really drive ownership and accountability.
Those are really the foundational pieces that drive a strong safety performance. Touching on our revenue and adjusted EBITDA. Since the initial public offering, the area has now driven strong revenue growth, as you can see in the slide. This has really been driven by a price over buying strategy, allowing us to expand our adjusted EBITDA margins by over 135 basis points.
Our pricing strategies are built really from a bottom-up budget process they do each and every year, and it's complemented with our monthly forecasting process that if we're doing it right, we should be able to have some predictability of what opportunities lie ahead as well as what headwinds lie ahead. Therefore, we are able to adjust our pricing strategies as an example, particularly in today's climate with, you know, rising inflation, higher fuel costs.
We're right now adjusting pricing strategies, working harder to get more further implementation of fuel surcharges. One of the big opportunities across the area is really our ability and I think future ability to densify our commercial and industrial product lines. One of the ways we can do that is some of the acquired businesses that we've had recently are more heavily weighted to residential revenues.
You know, however, that provides a new operational hub for us to go ahead and expand into industrial and commercial services out of those operating units. We also have really three teams that help us grow organically on board within the area. First and foremost, a robust team of account managers that are driving organic growth at the individual business units you see on the map.
Secondly, we work very closely with our centralized national accounts team to help them grow our corporate book of business with national accounts across the country. Finally, their extensive relationships with a lot of the waste brokers allow us to find opportunities to densify routes in various marketplaces.
Finally, we have a dedicated team of government account managers, and these are the folks that are on the ground each and every day helping us maintain and grow our municipal books of business so that we're constantly growing on that front as well. I think one of the big benefits across the area, and I'll get into it in a little bit more detail, but we're vertically integrated in a number of our marketplaces, and those tend to be growing marketplaces.
It allows us to use our network of transfer stations, material recycling facilities, landfills to internalize waste. That could be construction and demolition volume, municipal solid waste or recyclables. About 75% of the operating units in the Eastern United States are rather experienced in implementing and managing fee and surcharge policies.
A lot of this experience goes all the way back to 2010 when most of our area was Waste Industries, and this was, you know, a regular duty day in and day out. The opportunity for us is a lot of that acquired platform has not had these fees. The opportunities ahead of us is to implement those fees and surcharges, and we're well underway doing so.
I think the second opportunity on that front for us is we have a number of customers that are on a fixed percentage rate, and we're actively working to move them to our GFL standardized variable fee structure. We're doing that using what we call our customer visibility tools. That allows us to investigate, identify, and target specific accounts so that we can continue to expand that program.
Now going back to kind of our safety focus, about 40% of the Eastern United States operation is automated in the residential product line, and we continue to try to push further and further on that each and every year. If I had to say, every single one of our operating locations has some form of automated truck in it today.
Now we've taken it a step further, and we're actually looking route by route these days to be very specific on where we can automate future routes in the future. We also look very heavily at that as we come across new bidding opportunities. Always prefer to do automation if we can do so. Finally, in the Eastern United States, we operate about 11 business units with compressed natural gas vehicles. This has been a great opportunity for us.
A lot of experience. It makes up about 24% of the fleet in the Eastern United States. Most of these operations have their own fueling stations on site, and then a couple of them actually use third-party off-site fueling locations. We still have some nice opportunities at certain locations to expand our CNG usage.
Here's a quick look at a couple of our specific marketplaces, one being Richmond, Virginia, and the other being Raleigh, North Carolina. Both of these are vertically integrated markets for us. Richmond's a nascent marketplace. It's kind of an active build, buy, and build strategy that we have in place there, driven by also strong organic growth.
As you can see on the map with the blue plus signs, you know, a number of those are representing transfer stations in our network that allows us to internalize recycling and leverage our material recycling facility asset. That in turn allows us to drive new business, grow business, and densify our routes. Secondly, this will be a nice example of an area where we'll get the biggest bang for our buck in regards to the implementation of further fuel surcharges, fees, et cetera.
Next to the right is Raleigh, North Carolina. It's one of the top 10 growth markets in the United States, and obviously, therefore, with large population growth provides strong organic growth opportunities. Also, additional tuck-in opportunities as we move forward. Probably actually one of our more mature marketplaces in my area.
It's been there for an extended period of time, as is the market, the network of transfer stations and C&D landfills and MSW landfills. This network allows us to internalize a large amount of municipal solid waste and construction and demolition materials. In addition, not shown in the map, we're able to internalize to our regional landfill. It's about an hour and 15 minutes southeast of Raleigh on the map.
In addition, in this marketplace, our hauling operations collect a significant amount of tonnage for recycling, and it presents a nice opportunity potentially in the future where we can build our own material recycling facility and better service our customers. Most of those volumes come through our extensive network of residential subscription accounts and municipal subscription accounts in the residential product line.
Finally, our main opportunity to expand margin in the Raleigh, North Carolina marketplace is through pricing discipline with some potential upside from further automation and CNG conversions. In closing, I think the main point I'd like to make for the Eastern United States is we have a number of mature markets right next to nascent markets that have come through acquisition.
I think our leadership team that's on the ground has great experience in our key business practices, those being forecasting, KPI monitoring, hitting our operational best practices, and that's really a wonderful platform for us to build on and introduce those new managers from the newly acquired businesses that'll allow us to expand our best practices. With that, I'll conclude, and I'll turn it over to Matthew McAra from Western Canada.
Morning, everyone. My name's Matthew McAra. I'm the Area Vice President for Western Canada. Been in the industry for just over a decade now. Most of those years have been spent with GFL, and prior to that, I was in the financial services business. Excited to be here and excited to showcase the West. Seeing a look at the map, Greg alluded to it in his slide, but you know, geographically, Western Canada is a pretty significant area.
It stretches from Vancouver Island to Sudbury, Ontario. For all my U.S. friends here, that's a distance nearly the same as going from Seattle to Detroit. Covers five Canadian provinces. It takes me five hours to fly across the area, and I work in four different time zones.
When I started at GFL eight years ago, Western Canada was doing approximately $49 million in revenue and had just over 100 employees. You know, through that, through the last eight years, you know, acquisitive growth has been quite strong. We've completed over 30 transactions, ranging in size anywhere from $ 250,000 in acquired EBITDA to $ 16 million.
That puts us to where we're at today with over 2,300 employees, over 1,100 trucks, 25 landfills, 22 of which are operating contracts, 40 transfer stations, eight MRFs, and two organic facilities. In terms of the revenue mix, you know, we largely follow a traditional solid waste business with over 50% of our revenues coming from commercial and industrial.
We have 22% of our revenues coming from our MRF line of business. This is, you know, relatively higher than some of the areas. We have a large extended producer responsibility contract in British Columbia that I'll speak to. We have 19% residential and just shy of 4% in our landfill business. Area strategy and perspectives. First off, you know, the significant building out of our safety culture since the IPO.
The most important job I have is that I ensure that the over 2,300 employees in Western Canada come home safely every night. As you can imagine, you know, through our growth through acquisition strategy, you know, we have historically seen some elevated safety numbers, and it's taken steady focus and leadership to improve that.
With the leadership of the management team, we've made significant progress since the IPO in lowering the amount of injuries as measured by our over 75% reduction in our TRIR ranking. You can all agree that safety doesn't, you know, come by accident and requires, you know, consistency, leadership and structure.
So continuing to move the ball forward, we've recently introduced our Safe for Life P.A.U.S.E. initiative. This initiative is a simple, universal, structured approach to preemptive assessment of risk by employees before taking on a task. We're simply asking employees to take a few seconds, not minutes, a few seconds before taking on a task to fully understand and secure the risks associated with it. P.A.U.S.E. is an acronym.
P is for pause, A is for analyze, U is for understand, S is for secure, and E is to engage. Moving on to growth. Robust growth since the IPO. You know, like the broader story at GFL, it's been all about growth from the start, and the last two years post-IPO, this is no different. You know, driven to deliver both top line and bottom line growth, coupled with intense focus on margin expansion.
We've grown revenue by over 50% since the IPO, adjusted EBITDA by over 55%, and nearly 150 basis points in adjusted EBITDA margin expansion. The growth in revenue has been driven by both our M&A program as well as organic growth initiatives, most notably price.
Adjusted EBITDA and margins have been driven by the same, but we've also been, you know, very focused on improving our operating metrics, including labor efficiencies, fleet optimization, and realizing the synergies of all the transactions that we've completed.
In terms of how we move forward and our positioning for our growth strategies, I recently introduced an RVP management structure similar to what Greg has, Greg spoke of earlier. This unique combination of best-in-class assets to build around, coupled with the management team that we've put together, really makes the growth story for Western Canada quite compelling.
As I mentioned in the first slide, our landfill revenue is just shy of 4%, which on a relative basis to other areas within the company is low. You know, this is certainly an opportunity for us to pursue landfill targets, and we're doing so in nearly every one of my markets. Like Ben, we're also pursuing densification opportunities in all of the markets.
Although many of these transactions may be relatively small, they come with highly accretive EBITDA. Lastly, our pricing initiatives led by the introduction and standardization of fees and surcharges. Almost all the acquisitions that we've completed have been of the mom-and-pop type variety, and in many cases, fees and surcharges isn't a line item that shows up on invoices.
Quite often, actually, this is used to sort of compete against the larger companies. Implementing fees and surcharges on these businesses isn't as easy as flipping a switch. However, in the current inflationary environment, you know, this provides a unique opportunity to introduce those new fees and surcharges. From what we've seen so far, we're having very deep customer penetration rates and very little pushback.
Before moving on to the next slide, I'd like to touch on a couple unique business lines that are within Western Canada. Number one is our business within Extended Producer Responsibility, and number two is our Delta Organics facility. Extended Producer Responsibility or EPR, you know, Western Canada is a leader in the country.
This is led by the winning of the Recycle BC contract in British Columbia. This contract holds us responsible for pre-processing all curbside recycling province-wide, which represents just over 220,000 metric tons per year.
This goes beyond just a simple processing contract for managing materials province-wide across the province to the rigorous reporting requirements that ultimately track the tonnage of individual commodities collected at curbside through to the selling of that commodity to end markets.
It's certainly a complicated contract, but we've been able to build out our systems and processes and better position us to capitalize on the wave of EPR legislation that will be coming across the country and maybe in the United States as well.
Next up on the EPR front in Western Canada is Alberta, and we're working very closely with the Alberta government to help form the final piece of regulation. Our Delta Organics facility. You know, organics processing isn't unique, but our facility in the Metro Vancouver market is. This facility receives about 150,000 tons per year of kitchen, leaf, and yard waste.
The facility aerobically composts this material through a series of long aerated channels equipped with agitators for mixing. All the receiving and processing is done indoors, and the odorous air is captured and run through a state-of-the-art biofilter which eliminates odors.
Our final compost product is either spread on surrounding agriculture, where we grow and sell a turf product or mixed with sand, to create a topsoil product that is sold to landscapers throughout the Lower Mainland. A very good story from a sustainability perspective, and a very attractive facility to replicate throughout the company with its landfill-type margins, yet lower CapEx requirements in the long run.
Taking a look at a couple different markets within Western Canada, first of which is the Lower Mainland in Vancouver Island. If you look at the Lower Mainland of Vancouver Island, there are two distinctly different markets, but built with the same common approach. In each of the markets, we made platform acquisitions, Alpine Disposal on Vancouver Island, Smithrite, in the Lower Mainland.
From there, we completed numerous tuck-in transactions, began our work integrating and extracting value out of our densified platform, and also pursuing some residential co-contracts to anchor our presence. Our most notable recent win is the City of Surrey contract, which represents over 50 collection vehicles in the Metro Vancouver market and effectively creates a whole new business for us.
This strategy in both places has led to significant value creation. For example, on Vancouver Island, since that transaction was closed, we've seen EBITDA grow by 100% and nearly 500 basis points in margin expansion. We've certainly positioned ourselves as a market leader and have the opportunity to continue to build out our vertically integrated business model.
Lastly, I want to touch on people, as it relates to Vancouver and the Lower Mainland, and this is also, you know, sort of more broadly too. We often talk about great M&A opportunities in terms of the dollars and cents on a deal, but the immeasurable item is the talent that we acquire in many of these transactions. Not only drivers, supervisor, and management talent, but also entrepreneurial former owners who end up in senior management positions.
This is the case with our Alpine Disposal deal, where one of the former owners, Stu Young Jr., has recently been promoted into an RVP position with tremendous upside to take on greater roles in the future. Moving on to the Edmonton market. Edmonton is my hometown. This is a mature market.
We've got a large collection business, two transfer stations, a MRF, and a recently acquired C&D landfill. I would say that, you know, despite this market being mature, it's a perfect example of where we can still have highly accretive tuck-in opportunities as well as further landfill growth. Additionally, with our MRF asset, we are perfectly positioned to capitalize on the pending EPR legislation.
With the maturity of this business, we've been able to build out our C&D truck presence. We've got over 60 assets in place today, representing 40% of the fleet, and plans to increase this to over 60% in the coming years.
When we look at the Vancouver Island, Lower Mainland, and the Edmonton markets, you know, different in terms of their levels of maturation, but both offering compelling growth opportunities going forward.
In summary, you know, Western Canada is better positioned today more than ever to deliver on our growth strategies from our unique suite of assets and footprint to the best-in-class, people. I certainly look forward to the coming years, so thanks for your time. Up we go, Steve Miranda.
Morning, everyone. Steve Miranda, Vice President of Recycling. I've been involved in the recycling industry for over 20 years now, coming up through a family business. During that time, I've, you know, performed many duties from being a floor operator to selling and brokering newsprint rolls, to selling commodities, to starting MRFs, to managing MRFs.
Came to GFL in 2019 through the Canada Fibers acquisition, and you know, during my short time here, I couldn't be more excited to work with a group of dynamic and people that like to work at a fast pace, although responsible pace, which is what I was used to. Quickly talk about our recycling business. You could see we have 36 MRFs spread out across North America right now.
When I say MRFs, I'm talking about multi-material recycling facilities, not push and bale facilities, because we do have a multitude of those facilities as well, where we can utilize our collection routes, bring in straight commodities, bale and sell them to market. These facilities, you can see from our commodity mix, take in plastics, metals and fibers, sell them to market.
We take a very proactive approach in selling to market, and we often talk about it's our business within a business. We charge our fees, our processing fees, to bring in the material and to separate them out. Then on the backside, we have all these commodities, and what we really try and do is strategically is pay attention to what these end markets want.
We create nimble operations, and if we're paying attention to what the end markets want, we can really make sure we're maximizing our sales on the back end. If you look at our MRF footprint, it's not as vast as our collection and haulage footprint that you've seen earlier. What that does create is a tremendous amount of internalization opportunities, which we are constantly examining and researching.
Again, just lastly, our MRFs range from 10,000 tons processed per year to our largest site in Toronto, Canada, that processes over 400,000 tons per year on that site. We often talk about our recycling business having three strong pillars, the first pillar being business development. Take a very proactive approach in researching and developing strategy when opportunities come our way, whether that be through a residential contract or a commercial contract.
We take a disciplined approach, we price accordingly, and we look for opportunities for organic growth between multiple lines of business within that area. If we're able to come up with these anchor contracts, which is the ultimate goal, we can then take these anchor contracts, and we have the ability to bid on a lot of other smaller contracts, whether again, that be residential or commercial, and bring in at incremental cost, great opportunity to enhance our margins on that site.
We then talk about our MRF operations management as the second pillar. What we have to do is execute on that strategy. We came up with a strategy, we need to execute on it now. First, we've got to create a safe and great work environment for our employees.
Second, we have to create systems that are nimble enough and flexible enough to deal with market changes. We work in the recycling industry. We've all been around long enough to know that it's circular. It goes up, it goes down, it goes up, it goes down. By creating these systems that are nimble enough, we're able to deal with packaging changes and other market dynamics.
Also, by utilizing technology and, you know, staying on top of technology, we're able to decrease our labor costs, such as an optical sorting unit. We can decrease our labor costs, increase our recovery rates, but also very importantly, increase the quality of the commodities that we're recovering to maximize our revenue on the back end. Our last pillar is contract management. Very important piece.
Oftentimes we get involved in these longer-term contracts, whether they're two, three, 10-year contracts, could be with municipalities or commercial accounts. During that time period, lots of events can happen, lots of market dynamics, COVID for one. It's our job to stay on top of our contract to make sure not only are we maintaining our margin that we've strategized, that there's opportunities to enhance those margins, and we're proactively looking for those opportunities all the time.
Within our three pillars, we also talk about our five key strategic priorities, the first one being centralized commodity marketing. Again, we take a very proactive approach in marketing our commodities. We have a centralized team that's really acting as kind of central intelligence for our local commodity marketing team. We're utilizing quarterly reports and data to make sure that every region is maximizing on their opportunities.
For example, you don't want one region that has OCC or a cardboard sale price that's a lot higher than another region. We wanna make sure that region, if it's a little bit lower, can maximize on their sales by going up. It's a lot of data and intelligence used to maximize on those. We also look at leveraging our collection footprint. As I talked about, it's a great opportunity for internalization. Where we have strong collection footprint without a MRF, we can look into those opportunities as well.
You know, utilizing our existing customer base, again, we talked about cross-selling and really deepening our relationship with our customers, so we can truly be that one-stop shop solution for them. Fourth, operational tune-ups. Again, we're continuing to reinvest in our MRFs. The last thing anyone wants is a dead asset.
All too often, you hear about, "Oh, there's this MRF that's going down." No, we don't want that asset. We continue to invest in them. A little bit of investment can go a long way and can have very quick returns, but it also makes sure that we're able to stay on top of our margins to make sure that if, you know, the equipment starts to deteriorate, it's gonna be hard to maintain the quality of the product and the recovery of the product.
We continuously invest in it with great payback. Again, you heard Matthew talk about EPR as kind of our fifth strategic pillar. That could be other legislation, but for the purpose of this presentation, I'll talk about EPR. As Matthew mentioned, we operate a full extended producer responsibility program in British Columbia.
We're very comfortable with the complexities of such programs and legislation, to the point that we're able to offer some real operational experience and real operational advice to, if it's a government body, an association or whatnot, to make sure that when EPR enacts in Canada and possibly throughout the United States, we're starting to hear a lot about it in the United States, that it's in a great position and it can work.
Just wanna quickly bring up a case study. It's our Winnipeg MRF, and the reason I wanna bring up this case study is because it touches upon all of our pillars and strategic priorities. City of Winnipeg came out with an RFP in 2018 that we actively researched, and we responded in a very disciplined manner to making sure we had their margins in place.
We were successful in being awarded the bid, and it was a 10-year contract, and we built a brand-new facility. This facility started with one anchor contract. You hear me talk about an anchor contract. That anchor contract was the City of Winnipeg, 55,000 tons a year. We overbuilt the system. We designed it for flexibility, and we are ready for packaging changes and increased volume that could come through the facility.
Ultimately, the net result of that is, in two and a half years, we've now seen 20+ other municipalities come through that MRF with their volume, let alone, not to mention the commercial volume that we've been able to gain in the marketplace by having the strategic MRF there. We've been able to sell multiple services and become that one-stop shop in the area.
This MRF, actually, in 2020 by the National Waste & Recycling Association, was named the Recycling Facility of the Year. We also take a very active approach in selling the commodities there because, in fact, it is the municipality that owns the commodity, and they were, you know, they were very thrilled with our marketing plan and our approach to selling the commodities.
I think over the two and a half years, I think they'd be quite happy with our performance on selling these commodities. Again, this is a template that we can bring across different parts of Canada, different parts of the U.S. You know, there's quite a bit of opportunities out there right now. Lastly, just quickly on a, you know, kind of three year outlook, obviously, we have some plans to build some greenfield MRFs.
We have lots of plans for reinvestment in our existing MRFs, utilizing technology to help us drive down our labor costs and increase our recovery rates and the quality of the commodities we sell. We're actively researching right now several RFPs from residential contracts through municipalities.
If we're successful in those, then we'll be building more MRFs in two to three years from now, which again, will help increase the densification of our collection footprint. Of course, as you heard Ben talk about and Matthew talk about, we have an opportunity to internalize tons, which we'll actively and proactively engage in. Thank you. I'll pass the mic to Ed Glavina.
Thank you very much.
Good morning. Pleasure to be here with all of you. My name is Ed Glavina. I am the Area Vice President for Environmental Services for GFL. I've been in the industry for over 15 years, originally with Safety-Kleen, Clean Harbors, but with GFL for the last six years, and it is, it's been a phenomenal ride. It's amazing what this organization can do.
It's amazing how we continue to grow, and it's I couldn't be prouder or happier to be part of an organization that GFL and Patrick has put together. Talk a little bit about the environmental business and kind of what our priorities are over the next little while. You know, up on the screen, you see the next, you know, kind of our five biggest priorities.
I'll kind of tie in the number one and number four together. You know, we have facilities in the environmental business where we perform a wide variety of services, you know, from collection to bulking to processing to final disposal, water treatment, sludge pits, you know, et cetera, et cetera. Then we have other facilities that are as simple as just simple collection facilities.
When we look at our environmental business across the organization, we understand where the greatest margins are. We understand which facilities and in which markets those facilities generate those greatest margins. You know, our strategy for this year is to align all of that and make sure that we are growing those additional lines of business and those additional services into those facilities where we don't have them.
You know, owning more of that supply chain and kind of adding those lines of business into those facilities. That's been one of the reasons why we've been able to kind of drive margin expansion, and it's one of the things that, you know, we anticipate is gonna continue to help us drive margin expansion here in the near future.
One of our other strategies is to grow in the U.S. market. When we look at Canada, you know, last year, we acquired Terrapure, which in essence was probably our largest competitor in the Canadian market. I think we've had tremendous success with that acquisition. We've had great synergies.
We've integrated probably faster and better than we even anticipated we were going to. We've really seen the results in how it impacts our numbers in Canada. We need to do some of that or more of that in the U.S. market, so that's kind of one of our focuses for the near future as well, the coming year or so.
The last thing to talk about, and it probably should be the first thing actually, is health and safety. You know, everyone's talked about health and safety, but we really have you know, in the Environmental Services division, we have a TRIR of below 0.6.
For those of you who understand those safety metrics, it is an industry-leading metric for the environmental services segment. We really are focused on safety, and we have a culture, and, you know, I'd like to say it's me, but we really have a great team of people throughout our organization that really promotes the safety culture.
When we do the acquisition, we make sure that you know, the people that we onboard understand how we look at safety and how we focus on it. It's really, you know, it's really been a great story for us. It's, you know, over the years, we've continued to even trend down on that really great number.
It's, you know, I couldn't be prouder of what the team's doing on the safety side. Kind of a snapshot of the environmental services business across North America. I mean, you guys can see the screen, you can see how we're broken up.
A key point to take away from this slide is that, you know, probably 80% of our revenue is in Canada. 20% is probably in the U.S., roughly. You know, we can see that we are, you know, kind of focused on the Canadian market. We need to kind of bring some of that success and growth to the U.S. market. One thing with the.
You know, one of the benefits of that Canadian market is when you look at how we are spread out across, you know, really coast to coast from Vancouver Island to Newfoundland, you know, we are really everywhere. It really gives us some influence and power over some national accounts. You know, I'm not gonna use any names here, but I'll just give you a quick example.
If you think of a chemical manufacturer, and they're manufacturing chemicals, they have a plant, they need that plant, you know, waste taken out of that plant, specialized cleaning, all of that stuff happening with that chemical plant, we do that, and I'll talk a little bit more about that in a couple of the other slides. Then they are hauling those chemicals across the country.
Now, you know, 99% of the time, nothing ever happens, but if there is a situation and they have a spill or they need to do something, you know, there's an issue. They know that we've got coverage across the entire country to look after them. Helps us to add value to that customer and really helps us to make that customer stickier.
So that's, you know, we continue to do that across the organization. You know, what do we do with some of the waste? So in the Environmental Services business, we really get some kind of unique waste streams. You know, what are some of the solutions that we have and how do we treat and what do we do with some of those things?
If you think of when you get the oil changed in your car, you know, we will take that oil, we will re-refine it, we'll make an industrial fuel out of it, we'll make a new base oil out of it. When you get the antifreeze changed in your car or when an industrial plant has glycols and antifreeze in their process that they use as they're running their plants, we take those materials, we'll distill them, we'll make a new product that we can sell right back to those customers again.
You think about paint. You know, if you have old paint, you know, you take old paint cans away. We'll take that paint, we'll mix it up, we'll create paint that can be resold back into the marketplace. Wastewater.
We take literally millions of gallons of wastewater in every year, treat it, and put it back into the environment. You know, we take a lot of this kind of, you know, soil with contaminated soil, treating it, putting it back. You think about kind of the circular resource recovery aspect of what we do, and there's a lot of the material that we take that we are able to.
Some of this is kind of nasty stuff that we're able to take and bring back into, you know, back into reuse or for resale, and that's, you know, across our organization. Again, it's kind of a pretty impressive when you think about all the different things that we can do and how we can treat them.
When I think about comparing the environmental services business to Greg's solid waste business, you think of solid waste as highly recurring revenue. You think of your waste, you know, your own trash being collected on a weekly basis from your home.
You think, if you have a business, you get the bin dumped. You know, it's that constantly kind of recurring revenue. On the environmental services side, you know, we're servicing customers that are generating unique waste, but on a longer frequency.
Instead of going to, you know, your home on a weekly basis or going to dump that bin once a month, we are going to that chemical plant that I talked about on a, you know, maybe every six weeks or every eight weeks and picking up, you know, 10 or 20 drums and bringing that waste back to our plant where we are bulking it, treating it, you know, whatever the, depending on what the material is, we're doing whatever we need to do to treat that material.
As we service that customer and we're taking all those kind of waste streams, those plants all typically do shutdowns where, you know, sometimes it's every six months, sometimes it's annually, where they will do an intense cleanup, where they clean the inside of the tanks, they will power wash, you know, they will do all kinds of heavy maintenance.
By having that relationship on the waste and collection side, we transfer that into the industrial services side, where we're able to provide all those additional services. Again, making that customer stickier so that we are able to do all kinds of things for our customers. When you look at the
You know, I'm not gonna go through all the list of the stuff on the screen, but when you look at all of the different wastes that we collect, we really do everything except for medical waste. We don't do biological or pathological, and we don't do radioactive.
Other than that, we will take virtually any waste from a customer and all kinds of unique waste streams and process them. We'll collect, we'll transport by any means necessary. You know, so we'll bulk and rail. We'll use, you know, tanker trucks, box trucks. We have our own fleet.
We'll use some third-party stuff. You know, we process at our facilities, we'll use third-party processors, and then of course, at the end, we'll have final disposal or reuse depending upon what's needed or what the customer is looking for. On the screen now, this is how we kind of think about the environmental services business, and this is how we kind of talk about the business internally.
I really think of it as five segments. We've got you know, vac trucks. Vac trucks are a segment on their own, but a lot of what they do also supports the industrial services and also supports the waste and processing.
The vac trucks can vary from hydro vacs, which are doing daylighting, to wet vacs, which vacuum up wet materials and sludges, to dry vacs, which are vacuuming dry materials, to combo units, where they have power washers as well as a vac truck, I mean, to flushing units, where we use to flush lines. I mean, the array of vac trucks is really quite wide and quite specialized.
You know, we have a massive fleet with highly skilled, highly technical people that are able to manage those trucks and perform the services that are required by customers, including in industrial services. The industrial services segment includes things like tank cleaning, you know, a confined space entry. We send guys inside tanks to clean them out.
It includes robotics, so we'll also send robots inside tanks to clean them out. It includes chemical cleaning, so if there's certain contaminants inside a plant or a facility, we need to clean out their lines. You know, we have chemical cleaning that's able to do that. We have dredging and dewatering services. So if you have a mine with a tailings pond, or if you have a municipal sludge pit, you know, we have dredges that will go out.
They'll scrape off the bottom of the bottom of that pond, clean out all the water, put the liquid back into the pond and put the contaminants or soil, whatever happens to be on the side. Depending upon what the customer wants to do, we'll treat that material, we'll take it away.
Industrial services has, you know, really a wide array of services. When you think, well, you know, who needs this kind of stuff? You know, we are servicing car manufacturers, we are servicing, you know, food plants, we are servicing, you know, anything to do with energy.
As long as we continue to drive, eat, and use energy, all these services are, you know, continually required and growing. It's, you know, been a really strong segment for us. We have waste and waste processing. Back to that example, that's where we're picking up drums of waste.
Sometimes we're picking up bulk waste in a vac truck, bringing it back to a facility, processing it, cleaning it, you know, sometimes treating it, reselling it, depends on what the material is, and it's a large segment for us as well, too. All of those services are kind of interconnected. Then we have oil and oil processing.
Again, simple example, you change the oil in your car, we come collect the oil. We'll bulk it up. We'll send it to a refinery. We'll make new oil out of it. We will create fuels out of it, any of that kind of stuff. That's been a pretty successful segment for us as well, too.
Of course, soil remediation, which is just, you know, when we're taking contaminated soil, treating it, and you know, putting it back into the environment as needed. From a growth perspective, I mean, it's you know. The growth in our segment continues to grow in the environmental businesses in GFL, you know, extremely well.
You know, you look at the margins and there's a dip due to you know, being primarily Canadian-based business and having the COVID impact in Canada far greater than you know, the U.S. we had more of a COVID dip in the numbers, and you can see it there.
If you look at the margins in the environmental services business and you compare us to our peers, we really are industry-leading in our margins compared to the peers in the environmental services business. People that are doing what we do, we are, again, you know, I think doing a tremendous job and it all ties to. You know, everyone here has mentioned it already, so I, you know, stealing my thunder to a certain degree.
Not only do we have a phenomenal, you know, corporate team, but we really have I have a phenomenal team underneath me that really allows us to to achieve these kind of results, allows us to integrate these businesses, allows us to synergize, and allows us to really continue the growth path that we're on. It's, you know.
I'm constantly amazed at the quality of people that we have inside our organization. It really is phenomenal. 2022 is looking to be a solid year. I'm excited for what the future holds. I managed to blast through it within my 15 minutes, so I'm pretty proud of myself and I'll turn it over to Joy and Jen.
Good morning, everyone. We thought we'd bring some women into the room, a little bit of femininity. It's appropriate because this is our topic or part of our topic today. I'm Joy Grahek. I'm the EVP of Strategic Initiatives.
Together with Jen Ahluwalia, we lead the development of GFL's strategy related to ESG and sustainability, as well as the communication of that strategy to internal and external stakeholders. We have spoken to some of you in the past about our ESG program.
I joined GFL in 2011, was the original lawyer here, the only one for several years, and moved into my current role when Mindy Gilbert, our chief legal officer, joined in 2018. Prior to joining GFL, I was in private practice and worked for a couple of public environmental services companies.
As Joy said, I'm Jennifer Ahluwalia, and I've been with GFL just coming up on four years this summer. I'm our Vice President of Environmental Responsibility and Sustainability. I think I win the prize for the longest title in the company. Prior to joining GFL, I spent 20 years in environmental and engineering consulting.
I led various practices through the years, primarily focused on air quality, climate change, and then the latter years, waste management, which is where I ran into GFL. Then also in the latter years in my consulting career, I was responsible for the business development aspects of the firm that I worked for.
Jen and I are gonna be sharing discussion about ESG and sustainability programs at GFL. While sustainability is core to our business, it's been part of our business from the beginning. ESG is fairly new to us. We published our first sustainability report in 2019.
This year, in 2021, we published our 2020 update report. Then this year is gonna be a big year in which we're gonna be in Q4 releasing our report, which will detail all of our full targets, objectives, and goals for our sustainability program, which we call our Sustainability Action Plan.
I think that it's, you know, one thing that I think we're really proud of in terms of ESG at GFL is that you'll notice that all of the operational folks talked about ESG. We work very closely with the operational folks to make sure that I think what happens with a lot of companies is that ESG is over here and operations is over here, and never the two shall meet.
We have worked very hard with the operational folks to make sure that this is integrated into the company and that we're all talking about ESG and what we can do to make it better, and that we're implementing programs that the operations understand and embrace. We think that's key to our success. The first slide. Okay. People know that I'm not good at technology.
I'm not gonna walk through all the words on the page, but instead I'm gonna highlight some of the social and governance parts of our ESG program that are described here on the page. Each of Greg, Billy, Ben, Matt, and Ed, they all talked about our Safe for Life, health and safety program, and that reflects the commitment of our operations to drive continuous improvement in our health and safety programs and our path to achieving a best-in-industry TRIR.
Our 2020 sustainability update report reflects some of the various certifications and awards that our program has received, and we direct you to those reports if you're interested in learning more about that. Our Women in Waste program.
Women in Waste started organically in 2017, 2018, with some of our managers in the field, as they saw the benefits of having more women at all levels within GFL and were looking for ways to encourage more women to join our organization and to live out their careers with GFL. This led to a series of online profiles of women drivers, operators, and managers that allow women to see themselves in the organization.
We think that's very important, that in order to be able to attract and retain women, that they can see themselves in the roles, within our organization. I think that goes all the way up to, you know, Mindy and I being two of the named executive officers within GFL. We're 40%.
I think that's unique for a lot of companies that there's that many women at the most senior levels. There's a lot of us who are women within the organization who, you know, it's not as informal, but we mentor a lot of other women within the organization. Through Women in Waste, we also discovered, to our surprise, that our uniform suppliers have never been asked to produce a broad range of health and safety gear for women that was specifically geared for women's bodies.
Our experience tells us that one of the biggest barriers for women is that there's sort of these type of subtle messages that you're not welcome, right? When you show up and they hand you a man-sized uniform and say, "Here you go." Oh, okay. Do I belong here? Maybe not, right?
In doing this simple. It wasn't so simple. I'm looking at Josh here, who's our VP of Procurement. You know, it was actually, as we said, surprising that the suppliers were like, "Nobody's ever asked us to do this." By this simple change of having safety equipment that actually fits our female drivers, and operators means that they can feel welcome at GFL.
As I described on this slide, our Women in Waste program is now part of our broader diversity, equity, and inclusion and belonging program. We're again trying to use the same playbook as we used in Women in Waste. We wanna make sure that it's organic, that it comes from.
This is what we find at GFL, that things work better when they come from internal to the organization. People embrace it, the operators embrace it at all levels. People embrace it and understand how it benefits their business. That's what the messaging is, and that's why we think that we can make it better. We also wanna bring some of the type of discipline and focus that we bring to financial performance.
We find that if we focus on something, and we've seen that in the discipline that everyone was speaking on in the operational level, when you're focused on something and you make sure that that is part of your every day, when you come to work in the morning, you think, "Okay, how am I gonna make sure that I, you know, I have better optimization of my routes?"
What we're trying to encourage throughout the organization is when you're thinking about all your hiring and all your promotion, that the diversity, equity, and inclusion is part of the thinking process in deciding how you're gonna make this better, how you're gonna make your operation better. Those are big goals, but we think we have a, you know, we think we have a strong program, and it will be able to accomplish that.
Finally, I wanna highlight our Environmental Innovation Program. You see the SEAL Award symbol up there. We're very proud that we launched our Environmental Innovation Program in 2019, and in 2020 we received the SEAL Award, which stands for Sustainability, Environmental Achievement, and Leadership. Our Environmental Innovation Program includes both our Greenlight Innovation Workshop and our Sustainability Value Initiatives.
Jen's gonna talk about Sustainability Value Initiatives, which we call SVIs. Quickly, SVIs identify and track solutions and innovations generated from within the business, again, organically within the business that align with our Green for Life vision, ensure we have a continuous pipeline of new innovations, and the Greenlight Workshop is where our employees can shine a light on their ideas to make our business better.
We believe that these activities are a great source of new innovation in the business and are also a critical part of our overall employee engagement. I'm gonna kind of hand it over to Jen now, and she's gonna talk about.
Sure. Okay. I'm gonna take, probably just a few minutes, looking at the clock here, to just, you know, take you through looking at our business in a slightly different way. You've heard from a lot of our colleagues about the different services and products that we provide. You know, just kinda taking a step back, we are, you know, in the environmental solutions business.
We provide safe and reliable environmental services to our customers. Some of those are the more traditional waste management solutions, like collection, hauling, transfer, disposal at landfill, et cetera. But some of them are also what we call sustainable environmental solutions. The importance of those is that these are the ones that really help our customers achieve their own sustainability goals.
When you kinda take a step back from that more broadly helps us move towards, and I think Steven mentioned this in his presentation, a more circular economy and then also a low carbon economy, which is, again, some major sustainability priorities that are out there right now. We think this is a really special and kinda unique part of our business and really our industry as a whole.
We think it really helps us set apart our overall sustainability strategy from many other companies that are out there. What do we mean by you know, helping our customers achieve their sustainability goals? On the right-hand.
Sorry, the left-hand side for you guys of the slide here, you know, we've highlighted this is from our 2020 year, you know, how many or how much of our services were directed towards helping our customers achieve those goals. Some of those goals are things like, you know, they may have set targets around recycling the amount of products or maybe packaging that they produce or put out into the market.
Maybe, I think Ed mentioned this, recycling the amount of water that they use so that they're able to return it back to the natural environment in a clean state. Some of it may be in the packaging or products that they produce incorporating a recycled content.
You know, the kind of fourth big bucket that we like to talk about and quantify every year is, you know, some of our customers are setting goals around reducing their overall carbon footprint, and in particular, their indirect emissions or what we call our Scope 3 emissions. You know, when we report these, we call them our avoided emissions.
If you look at that pie graph there on the left-hand side, you can see a major portion of what we help our customers avoid as far as greenhouse gas emissions are concerned comes from our recycling activities, which is quite significant.
You know, just to kinda underscore the importance of what we do, you know, we were really pleased earlier this year to actually be recognized by Corporate Knights and As You Sow as on their Clean 200 list. What this meant was, of about 8,500 publicly traded companies, we were, you know, within the top 200 that were, you know, really seen as leaders in providing clean energy and low carbon solutions.
Our efforts go beyond just helping our customers with their greenhouse gas emissions. You know, we're really focused on also doing things to reduce our own emissions within our own operations. Billy talked a little bit about this.
You know, if you look at the pie graph up on the right-hand side there, you know, you can really see two major contributors to our overall emissions are, number one, our landfills, but number two, our fleet.
What Billy had mentioned was, you know, our efforts towards fleet conversion to compressed natural gas, the incorporation of some BEV or battery electric vehicles into our fleet, which all reduce or result in a reduction in our emissions. But in addition to that, also the automation that he talked about.
Lower fuel costs also means lower emissions, right? Good news story for us. From a landfill perspective, we haven't touched a lot on that, so I'll probably, I'm just gonna go into a little bit more detail.
Basically, in particular for municipal solid waste landfills, you know, within the waste that goes in those landfills, there's a portion of that that is food waste or degradable organic carbon. When we put that in the landfill, over time, it'll decompose, and it produces methane, and methane is a greenhouse gas. If we capture that methane, and then we turn it into electricity, heat, steam, or, as you've seen from a lot of our plants, renewable natural gas, this is considered a renewable or a clean energy source, which again, is just a great story for us.
With our focus on, you know, trying to capture a lot more gas across our portfolio of landfills and converting that into renewable natural gas, we also end up reducing the amount of emissions for landfill gas or methane that ends up being just emitted from those landfills, which ultimately lowers our overall footprint.
Another priority for us in terms of reducing our greenhouse gas emissions is really around advancing the science in estimating what those emissions are that come off the surface of the landfill. We have a really good handle on, like, measuring and quantifying how much we capture because that's metered. As I said before, all the, you know, degradable organic carbon that goes into the landfill will degrade.
You know, the kinda difference between what's captured and then what's generated is, you know, released as fugitive from the surface of the landfill. Right now, we've been relying on models to estimate what those values are. They're all U.S. EPA-approved or developed models and so on. You know, there's an accepted or inherent weakness in those models, and they don't do a great job of really quantifying what those are.
There's some new technologies that are out there right now, and together, you know, with our industry peers and through our industry associations, we're working on advancing that science so that we can be able to more reliably estimate what that fugitive contribution is and then ultimately use that information to help optimize how much we're gonna capture and then, you know, increase the amount of renewable natural gas that we can capture, and produce.
The last kind of priority from a greenhouse gas reduction perspective that we have or we're focusing on is more for the longer term. You know, really the major lever that we have to reduce greenhouse gas emissions from our landfills comes from taking that food waste out of the landfill.
Now, in order to do that in a viable or cost-effective way, you know, solutions have a little bit further to go to be developed. You know, what we're continuing to do because, you know, as Matthew described, this does make sense for us in some jurisdictions, we're gonna continue to invest in, like, regional solutions for recycling organics outside of landfill.
This would be composting, or this could be anaerobic digestion. Okay, my favorite slide. Okay, so Joy's already mentioned that we'll be announcing our full Sustainability Action Plan later this year, and this will include targets, objectives, and commitments. A key part of successfully implementing this plan is for us to remain focused, this is the word everybody seems to use at GFL, on continuously delivering sustainable environmental solutions.
You've seen throughout everybody's presentation so far that advancing sustainability initiatives, and in particular, those that help our customers achieve their goals, is inherent in what we do.
In order to ensure that we remain focused on moving the needle year over year in achieving those targets, and there'll be a broad set of targets that we'll be setting, we recognize that we need to have kind of a basket of initiatives that we're continuing to monitor that not only kind of address each of the different types of sustainability goals that we're trying to achieve, but also help us address meeting those goals on, like, a longer time horizon.
Most sustainability goals and targets, and action plans really address a much longer timeframe than most business strategies. It's kind of a 10-year plus.
As a result of that, you know, what we've got, or what we're focused on maintaining are, you know, those solutions that are gonna help us today, you know, move the needle year over year, in terms of achieving our goals, but also those that may only be, you know, viable in certain contexts or geographies, but you know, later down the road will probably be implemented more broadly in order to achieve sustainability goals.
This last piece, my favorite, is our incubator, which is really these initiatives or research or pilots that we need to be participating in as an industry and as an industry leader in sustainability, in order to make sure that, you know, we're able to achieve our targets in the longer term.
All this is what we call our Sustainability Value Initiative, which Joy had talked about earlier, is you know, one part of our Environmental Innovation Program. Every year, we review our SVIs, our Sustainability Value Initiative, as a part of our budgeting process.
Again, you know, we think this is key to making sure that we've got a you know, solid pipeline of sustainable environmental solutions to not only help our customers achieve their goals, but also for us to achieve our own. I'm gonna turn things over or back over to Joy.
Briefly, I think many of you will have seen this slide before. It was from the investor deck in February, but RNG has a number of benefits. From an ESG perspective, as we talked about, you know, RNG, because of the economics of RNG, it encourages greater capture of landfill gas, which you can then monetize, and, you know, it's a source of fuel for our CNG fleet.
I think Patrick and Luke previously talked about the fact that we're looking at fueling about 10% of our own fleet with our RNG. You know, the big story about RNG is from the financial perspective, right? It has significant financial benefits. To date, we've identified 18 MSW landfills we believe are viable for RNG projects.
As shown in the pie chart, four of these are currently signed up. We have another, as we said previously, we had five under negotiation. We've now got eight into that bucket of under negotiation or under development, and we have six, at least another six that are still under development or sorry, under evaluation. I mean, this is an iterative process that we're going through.
We're looking at all of our landfills and assessing what the opportunities are that are there. We're looking at, you know, existing contractual relations, relationships to see what we can do around those to change them, to make sure that we're getting a better piece of the puzzle.
The end result is that we expect that this is in the bridge that Patrick produced earlier, about $ 105 million to $ 125 million a year of free cash flow generated by RNG. So that is a very brief summary of our ESG initiative. To now introduce Mike May, our Chief Information Officer.
Good morning. I'm Mike May. I'm the new CIO at GFL, Chief Information Officer, not Chief Investment Officer, as they're sometimes confused. New to GFL, but not new to the industry. I spent close to five years at BFI Canada, Progressive Waste, building some of their innovative customer sales and operation systems, which became crown jewels at Waste Connections when they acquired Progressive Waste.
Spent decades in Chief Information Officer roles in a variety of industries, as well as Chief Technology Officer in software companies, also building innovative cloud-based solutions. Finally, I'm also a CPA, so I try to bring accounting sense to the use of technology in business to drive value. Not sure which button. There we go. I'm gonna focus on a couple of points.
You've heard from the previous presenters how they use technology and information to run the business, and we truly have good legacy systems that provide quality information to the operators. Where do we go from there? How do we improve? The answer is, these systems are legacy applications. They're built in traditional server farms. They run in data centers.
With our scale, it's been a real struggle with growth, keeping the technology aligned with the rate of growth of the business. Our strategy is to move the technology into the cloud. We'll have a hybrid cloud model, which gives us scalability. It turns operating costs from capital to variable. It also allows us to refactor the applications to truly take advantage of the cloud.
You don't really get cloud benefits from doing a lift and shift from a data center into the cloud. You get it by re-architecting the applications, and that's what we're doing with the tech stack. The other element then is data analytics. Today, the data is largely transaction-oriented. Transaction has a short life cycle. We deliver service, we invoice, we get paid, it goes into the history files, it goes into the archive files.
It doesn't really tell us a lot about what's happening in the field in operations. Part of our model going forward then is focusing on metadata. Metadata is the data about the transaction data. Without getting into too much detail, we do things like our vehicles generate 80 columns of data from the engine computers and from the body computers.
By analyzing that data, we can tell exactly what's happening in the vehicle when they enter a service location, when they do their lifts, how many lifts. We can see, did they have to bang the cans because there were wet waste in that container. What we do is we start building a graph of history for each one of those locations, and when there's a deviation, it sets off an alarm, an event, that we can then follow up. Some of those events are things like the containers are overflowed.
That's a signal to sales. Hey, maybe this customer has changed their patterns, and we have an opportunity to either sell larger containers, sell in increased frequency. This metadata and the information that comes from that metadata helps us run the business better as well as deliver better service to the customers.
One of my favorite learnings in the waste industry is that every day starts out good and then goes downhill from there. Weather, traffic, odd service conditions at a location. The biggest risk comes when we can't finish the day and customers are left with overflowing bins. So what this metadata and the analytics, the real-time analytics do is we create a thing called a goodness engine that tells us, "Hey, the day is going great on each individual trucks." You saw there's 9,000 of them.
When the day doesn't go good, we send a signal, and that allows the operators to say, "Hey, do we wanna divert some trucks to finish the routes?" They have a strategy for delivering better service. This is really, you know, waste collection is not a strategic activity at our customer site.
They only know about it when something goes wrong. When we talk about customer service improvements, it's prevent those events that make them unhappy. Technology does all of that, but it does require the compute power and the tools that we get from the cloud. Part of the process then is as we bring these new tools and methods to the business, is helping them capitalize on it.
In the IT group, we have created a role that is filled by an engineer who has several years of experience in our company, which is called VP of Process or Performance Improvements. Instead of just building technology, we are partnering with the business to take advantage of these new tools that we'll build in the cloud.
Just in summary, we have a number of priorities. This is, you know, new, net new. I've talked about the digital innovation. Greg talked about WISHES. I'll use that as an example, as being a great driver of pricing, and managing sales and the business. But you also noticed he mentioned that we're working hard to make it better.
Today, because the team is using legacy development methods, it takes too long to build new features. I come from VC-funded software, where you have to build features fast and deliver fast. We're bringing that agile development methodology to our systems so that we can respond faster to the business. In addition, the business will drive what we build.
This is not just a bunch of technologists deciding, "Hey, let's build some new features." Our product roadmap will align with the business priorities of the organization. Part of that is, you know, we talked about various growth, the systems that we had built at previous companies were leaders in both volume and density growth.
This does have a direct impact on EBIT as well. I've talked about the enterprise architecture. Really, it's consolidate, simplify the stack. In the analytics, a whole new set of tools that we're bringing about that follow best practice. There's some math models, statistical, as well as artificial intelligence, machine learning, that discover important information in the data. It's all event-driven.
Instead of waiting for somebody to read a report when one of these events occur, we notify the interested party, the subscribers to that information that, "Hey, something's happened that you need to be aware of." Acquisitions. We have a general strategy, which is acquire, integrate, and optimize. Really, as we build out these new generations of systems, it just helps build synergy from those acquisitions.
Table stakes is cybersecurity. Today, our cybersecurity is managed by a very capable but very expensive third party. I still worry about cybersecurity. We've hired an internal chief information security officer, who will still be working with third parties, but we will be optimizing how that third-party security is executed so that we can basically optimize our total operating costs.
Those are the high level points. Move to the cloud, move to a new architecture, a lot more data that provides better value to the business. With that, I think I get to announce the next is to break.
It starts promptly at 10:30 A.M. Is everyone in? Yeah. Craig? Everyone's in? Don't worry about Patrick. Okay, we continue on. You heard this morning a lot of talk about organically opportunities that we have in our business and, you know, meeting and hearing from the folks that are gonna execute on those opportunities.
You know, that alone, we think with the opportunities set in front of us, we have the most compelling growth story in the industry with the organic piece alone. As you may have noticed, M&A is another lever that, you know, we utilize to drive incremental growth. You know, I think it's worthwhile to note at the beginning of this, the M&A team was Patrick. He would leverage and use resources within the company, but Patrick was the M&A team.
And then, almost a decade ago, I joined as the director of M&A. And then there were two. And you know, we went forward from there and started building up the team and then getting to where we are today. I'm about to bring on Craig and Julie, who collectively, you know, lead our M&A, both pre-acquisition integration efforts. they're gonna tell you about the team, you know, and the resources that we have today.
I want you to think about it in the context that it originally was Patrick, and then you fast-forward and look, you know, many of you have heard us say of how the opportunity set going forward has never been better, and a large part of it is because of these two individuals, the teams that they have, the processes that we have, and we've never been more excited about what that looks like on a go-forward basis. I'll hand it over to Craig and Julie to talk you guys through that.
Well, good morning, everybody. It's a pleasure to be here to speak about acquisitions, M&A, the M&A platform. As Luke introduced, my name is Craig Orenstein. I joined GFL four years ago to run the M&A efforts. Prior to that, I was in the private equity space in Toronto for 11 years, and prior to that, with CIBC for five.
You know, interesting enough, I met Patrick in 2007. My first meeting at Generation Capital Partners, which was the private equity group, was also the first meeting with Patrick. He had a vision of growing a solid waste business in the Greater Toronto Area. We happened to be the first equity dollars into GFL.
My relationship sort of started with GFL back in June 2007 and then have been around the story really ever since, and finally joined four years ago. Happy to be here and happy to have a partner like Julie who helps to ensure the execution of the M&A strategy is on point and successful.
Yeah. I'm Julie Boudreau, I'm VP, Integrations at GFL. I've been at GFL since 2014, and I actually joined as treasurer at GFL. Over the years, I was here for largely a lot of the growth in M&A. In treasury, I had AR, AP, the back office reporting to me. I was heavily involved right from the get-go into how we brought in these acquisitions into our systems and processes.
A couple years ago, I approached Luke and Patrick and pitched the idea of a VP Integration role because I thought that, you know, I spent a lot of my time doing integrations and thought that there was a lot of enough work to warrant this role. Lo and behold, they put me in the role, and it's been great fun ever since.
As you've all heard today, there's been a lot of activity over the years. We've completed over 200 acquisitions since the inception of GFL. We essentially have a proven acquisition track record as an acquirer of choice with significant momentum.
Even today, I picked up another NDA and teaser from one of the folks attending this investor meeting. It continues on a daily basis. We now have an established M&A platform. We have a well-defined execution and integration playbook, which we'll speak to today. We have a demonstrated ability to source, execute, and integrate accretive transactions of varying sizes, complexity, and geographies.
At any one time, the corporate development group will be managing acquisitions ranging in size from a purchase price of $250,000 perhaps for 300 residential subscription customers to a, you know, footprint acquisition that may span many states In the U.S. or expand our footprint throughout Canada, and that may have an enterprise value well north of $100 million.
At any one time, there's complexity to the size of the deals, the quality of the information that we're working through, and thinking through the geographies and the natural expansion of the business.
Before we get into the drivers of consolidation, the chart at the bottom or the illustrative is an attempt to sort of give you a sense of the size of the North American solid waste market. We estimate that to be approximately $80 billion of revenue, of which approximately 49% is serviced by the large public companies, GFL representing about 5% market share of that group.
Clearly, there's a lot of revenue performed by independents, by mom and pops, and that sort of spreads throughout Canada and the U.S. The opportunity for continued consolidation is vast. The markets are highly fragmented, and industry consolidation continues. You know, there's, as we've heard throughout, a number of small or plenty of small mom and pops.
Some of them lack infrastructure capabilities. Some of them lack the drive to continue to compete. We're in a very tough environment right now. We've been through COVID. We're now facing inflationary pressures that are putting a stress on labor, are putting a stress on capital. Continued growth of these small entrepreneurial mom-and-pop shops is a challenging endeavor.
As we speak to drivers of consolidation, that's one of the key factors. You know, it's a hard time to be a small waste company. Capital for new trucks is increasing. Being able to complete repairs and maintenance on a timely manner is challenging.
These are all challenges that, you know, a single owner may take on that GFL can better approach and deal with with the management team that you've heard from today. We also find there's a lot of companies that lack succession plans.
They lack an exit strategy, and so GFL essentially becomes part of that exit strategy. That helps to drive activity. Turning to this next slide, the bar chart essentially gives you a track record of the number of acquisitions completed throughout the time of GFL.
Most recently, we completed 45 acquisitions in 2021, and as we spoke about technology, obviously the investment in technology helps to provide a strong foundation for us to sort of achieve the velocity that we are focused on today. Historically, the acquisitions have been completed with an acquisition price ranging around 7x.
That obviously excludes some of the premium prices paid for platform acquisitions. There's a continuing opportunity to complete 30 to 40 acquisitions each year. I think of this as low risk M&A compared to some of our formative years. If you think about the transactions today, 30 to 40 acquisitions spread out across 30 to 40 markets is not really a burden on the management team because the platform is.
The pipeline is dispersed among those regions. If you look back to 2012, 2013, 2014, completing four, five, six acquisitions in those time periods within two or three markets was a much more challenging endeavor. When you think about some of the businesses that we've acquired, we also bring on owners, leaders of those organizations.
You know, in our early days, we were sort of beholden to the early entrepreneur being onboarded onto or with GFL. Today, we have a structure, we have a culture that's developed.
We have folks within the organization who were entrepreneurs, who have now joined into leadership roles, who are running local branches, who are running parts of our business, who can speak to the culture of GFL and do so in a way that
I think reduces the risk on execution today. We've talked about being an acquirer of choice. You know, obviously that it starts with relationships with the sellers. You know, some of our best folks who source deals are those who are running businesses in the local markets.
They know who the competitors are, they know who runs the business, and they understand the GFL platform such that, if there's an opportunity for densification, you know, they're able to sort of highlight who those targets are and start to develop that relationship. Sometimes those relationships form very quickly.
Other times, we're fostering relationships with potential sellers, you know, over 12, 16, 18, 24 months. As an acquirer, we have a strong track record of delivering our proposed transaction terms of delivering a transaction on a timeline that we set out at the start of the process. This creates a reputation for GFL, and that's an important one for us to preserve.
As we get into later slides, you'll see how important it is for us to do due diligence prior to the letter of intent so that we can put our best foot forward, shake hands on the terms of a transaction, and our reputation will speak to the confidence of being able to execute in that way.
We also have a reputation for being a good environmental steward, the way in which we treat employees onboarded onto GFL, our commitment to management, our safety commitments and execution of day-to-day service. For those entrepreneurs, founders of businesses who wanna see their own business thrive by being within GFL, they have a fair amount of confidence that we can execute in a positive way.
The comments around the acquisition focus, obviously you've heard a lot about that today. We're focused on secondary markets, tuck-ins. There will always be those opportunities that we may not foresee today, but allow for an expansion of our footprint. You know, there's meaningful densification opportunities now, given the size of our business.
The ability to acquire a hauling company, which then feeds our transfer stations, which then feeds our processing facilities and our landfills, builds out our and reinforces our current infrastructure. Those are all opportunities that help to support the M&A efforts.
This next page is quite important and Julie will chime in as well. I think what we tried to do here is to illustrate the team that executes on the M&A and integration strategy and efforts within the organization.
Obviously, quite a bit different than the early years when this was a page, and it would have Patrick, or it was a page, and it would have Luke and a few others. There's been significant investment to build out the corporate development team, to build out the integration team.
We have several folks within the field who help to source deals that are stewards of our business. We have within the corporate development team, we're approaching 10 professionals, all but one are CPAs. Several, if not almost all, have transaction services experience. You know, almost table stakes for the role is a strong financial acumen. From that, we're then able to leverage the experience and the expertise within the organization.
The chart on the left simply shows all the various functional areas of the business that we would collaborate with as we work through a due diligence process, as we work to define strategy, to check our strategy, and to make sure that we're, you know, thinking about acquisitions and opportunities in the right way.
Yeah. In terms of my team, we've added a lot of bench strength over the last couple of years. We have what we refer to as M&A portfolio managers. That's a combination of what we call integration controllers, who bring the finance and business aspect to the integration. We have integration managers that help with the structuring of the deal and the rollout of the integration.
We have support underneath them as well, in the form of analysts and coordinators, to help them walk through the acquisition. We also, on top of that, get to leverage off of a fantastic IT integration team that's been with us for many, many years, and we have dedicated HR integration support, and we have dedicated environmental integration support.
Again, over the last few years, we've had the benefit of really increasing our bench strength on the integration side. Should mention also we have a PMO that also assists in the integration. Fantastic team that's able to walk through the acquisition.
I'll touch on this next slide briefly. The slide that follows, Julie will speak to the involvement of integration planning. I think what's important here and perhaps what is important to emphasize, and as we spoke about reputation of GFL, is when we make initial contact with a potential seller. That initial contact and then the period up until the point of offering a letter of intent, there's a fair amount of work and diligence that we perform during that period.
It's incredibly important for us to ensure that when we, you know, shake hands with a potential seller on a purchase price, that we think it's fair and we think we can execute on our promise. There'll be a confidentiality agreement that's entered into. There's a fair amount of information we request.
We don't always get what we request. We don't always understand necessarily the format of the data that we receive, but we work through it. Sometimes that period can be as quick as two weeks. There are bankers in the room.
That's part of the process, I suppose. Oftentimes it's quite a bit longer where we spend really getting to understand the business, the opportunity, the market, if it's a new market for us, quality of revenue and earnings, infrastructure, operating efficiency and cash conversion as well.
A fair amount of work is completed before the letter of intent is issued. Then as you follow through the timeline here, you know at different times we may engage external advisors depending on the size of the transaction depending on the asset mix.
If there are landfills involved, oftentimes we'll include external engineers to help with our environmental diligence. We often employ tax professionals to help us with tax diligence on share transactions both in the U.S. and Canada. On a deal-by-deal basis, we may engage different professionals. Obviously, as we work through the timeline, legal, financial, reputational risk is all thought through in diligence.
Important to note, there's a little bubble in the middle called pre-integration planning. I think Julie and I begin working almost immediately after a letter of intent is signed, and we're talking through the acquisition. We're having weekly calls, and we're thinking through what information is required, what do we need to get from the business to understand how to most efficiently and most effectively integrate the business on closing.
Because it is one thing to close on a transaction, to negotiate the terms, all those sorts of things, but obviously, execution is of the utmost importance. You've heard from a lot of the operators today, you know, we probably speak far too often, but that's a good thing. We're talking about the business, we're talking about integration and how we can be successful with these acquisition targets.
All right. I'm gonna walk you through the rest of the M&A process, which is really the integration. What does my team do? We look after the integration activities pre and post-closing. We devise the integration strategy planning with our ops partners 'cause it needs to make sense for them and what they envision for the business. We build the transition plans.
We work on structuring transition services agreements where they're called for for the acquisition. Let's say we're buying a company, splitting it from another company. We need to put agreements in place. How do we do all of this? How do we cycle through so many of these integrations? Well, it's two key pieces. It's discipline, and then it's communication.
Over and above that, you know, I have the four key points at the top of this slide here, which is planning, having dedicated integration resources, having a well-defined, repeatable process, and having standard onboarding materials and training programs, which we all have. How does it start? As Craig mentioned, his team and I work very closely together. We always have our finger on the pulse of what's upcoming in the next three months.
We participate in the due diligence sessions, so right away, we understand the complexity of what's closing, the number of sites, the number of employees, the systems that are coming on, so we can understand how difficult or how easy it's gonna be to integrate into our systems straight from the get-go.
From that, we're actually taking that and starting to build our plan well before closing. We're not waiting until we're closing to build a plan. We start executing the plan on closing. In terms of integration timing, how do we approach timing? We're looking at integrating all acquisitions between zero and 90 days. Small asset purchases we'll do a lot faster. We need to bring in into our systems.
Typically, we don't get the seller's systems on asset purchases. For midsize to larger companies, the sweet spot is 60 to 90 days. That gives us enough time to do the in-depth discoveries, to do the data conversion, to do the change management, to do the training, and then to do the go live. Obviously, we talked about it in the prior slide, dedicated integration support.
I hire in my team folks that are very well-rounded. They've got the business knowledge. They understand our processes. They understand our systems, finance, accounting, HR, IT. They can speak to the whole of it. They make the perfect professional to walk the acquisition through the integration process. What does that mean for synergies zero to 90 days?
That means that as soon as we're tucking in these acquisitions into our system, we're benefiting from our centralized back office structure, so we're gaining margin from that. We're actually doing route optimization prior to the data coming into our system. As soon as the customer site service is coming into our system, the routes are already efficient and optimized, so we're getting margin from that.
Obviously we're getting density, which we've talked about prior, and then we very quickly can start implementing our price increase programs, raising the customer prices to GFL levels. In a nutshell, that's part of the process.
On the next slide, I just wanted to call out again a big piece of our role because we do these quickly and why we have these dedicated resources is to help walk the acquisition through the transition, which can be arduous depending on who we're taking in, arduous for the acquisition.
We're there. We can answer all questions. We can connect them with the various verticals where they need information. We're the one-stop shop for them for questions, which we found a great benefit into easing the acquisitions into our systems and processes.
My last slide, there's two key points I wanna cover here. I talked about having a defined, repeatable process that helps us cycle through the velocity of these integrations. When I stepped into this a couple years ago, we were already good at M&A integration, okay? We had already been doing it very well, but we hadn't necessarily all been marching at the same beat of the drum.
One of my goals stepping into this was to make sure let's align everybody, make sure everybody walks through the process in the same cadence. We put together this. This is a very high-level process here, just so you can see. But it's a simple process, easy to understand.
It lays out when people need to communicate with one another, what materials we need to develop, when we need to build the plan, which is our 1,000-line Boilerplate plan, which we tweak and tune for every acquisition. Walking through this gives us the fail-safe so that we repeat the same recipe for every acquisition, obviously tweaking and tuning for the acquisition. Largely, the process stays the same.
Finally, I wanna call out our onboarding materials and our training programs. Over the last couple years, we've developed fantastic onboarding materials. We're bringing these people into GFL. We need to teach them how GFL works. We've got the standardized onboarding materials. We're not reinventing the wheel. We're repeating that. We've got fantastic training.
I'm gonna call them training programs, not training materials, because really, we're teaching the system, but we're teaching the process around the system, which is very, very important. What we do, which is key when we go live on the system, we pull various GFL'ers from operations, from my team, from IT. We place them at the sites where we're going live, so they have that on-site go-live support.
Again, very, very key that people have that safety net when they go live on the system, which again eases that transition into our systems and processes. Yeah, in a nutshell, that's our integration process.
This last slide, you've heard us talk about the rigor and cadence of what we do, the repetitive nature of what we do, albeit tailored to each opportunity. We also do a fair amount of look-back with the acquisitions to understand how we're performing against our expectations.
I think we've been very good at this point in preparing a pro forma with our management folks, our operating folks, to understand and set the expectations of how the business is expected to perform. That look-back allows us to measure that, to learn from observations, to learn from process, and fine-tune the way in which we approach the next acquisition.
What we have here is an illustrative example of applying $500 million of capital at work. The assumed purchase price multiple at the front end is 7x to 8x, equating to a range of EBITDA of $60 million to $70 million of acquired adjusted EBITDA. The quantum of cost savings has never been as great as it is today.
On the right-hand side, there's a list of cost synergy levers, and with each one, there's a high degree of confidence and a high degree of predictability in the diligence stage that we're able to then underwrite as part of the acquisition. Those include route optimization, SG&A rationalization, implementation of GFL's National Procurement Programs. In one very recent example, we recently acquired Sprint down in the Houston market.
There was a very large CapEx purchase of bins that we held off essentially on processing prior to closing. As soon as we closed the deal, we went to our own suppliers, and we were able to save 7% within a week before placing that order, and that was a multimillion-dollar order.
Real dollars generated thanks to Josh and his team based on the relationships that we have with our suppliers and leveraging those relationships. Insurance program savings, disposal internalization, and others. Facility consolidation is another lever that obviously is very predictable, and we're able to underwrite at the front end.
As you think through all of those cost synergies, you typically see 1.5x to 2.5x incremental value, increasing the EBITDA, in this example, by $15 million to $30 million, for a post-synergy sort of buy-in multiple of 5x to 6x. That then excludes the revenue synergies, and I think what we've heard is the continuing opportunity around pricing.
Many of the customers that are acquired through these acquisitions do not have any sort of fuel surcharges, environmental surcharges, or other sort of dynamics that we can introduce. We do so in a thoughtful manner to ensure that we don't disrupt the business that we've acquired. We sort of preserve the value and increase the value.
Those opportunities are there, and that would be incremental to the example here. We're obviously excited about what we do. We're busy. There's lots to do. We have a great team of support that we collaborate with at GFL to ensure success. Luke, I think you're up next.
Okay, the home stretch here, financial outlook. I don't think you guys wanna spend much time listening to me, so I'm gonna be very quick and brief, and then we'll open it up to Q&A for the group. Can you figure this out? There we go. Financial priorities. You've heard us speak to this ad nauseam.
I'm not gonna get into the same items that we keep sort of, you know, speaking to on each of the calls. I think when you look at how we've executed on those, from the time of the IPO and beyond, you know, I think the growth rates speak for themselves, across nearly every sort of metric that I think folks pay attention to.
You know, while the history has been impressive, I'm sure many are more curious on what the future has in store, and I think that was a big part of today. Because what we wanted to do was highlight, you know, the growth opportunities that exist within GFL. The organic ones unto themselves, I think are sufficient for us to be the clear leader of growth in this industry across every metric that folks pay attention to.
Right? If you look at the historical growth algorithm for, you know, the peer group, it's sort of a mid-single digit top line with sort of mid to high single digit EBITDA and, you know, a high single digit sort of free cash flow line. That's the historical sort of growth of what the industry has done.
If you look at these incremental opportunities that are available to GFL on the organic side, and add those to the industry norm, we see a clear path organically being the superior grower across each of these metrics. Again, I think what's important to highlight is these levers that we're talking about are tried, tested, and true in this industry.
We are not going out and reinventing the wheel and trying to find new avenues or unique ways to grow. We just wanna execute the playbook that has been done by many of our peers highly successfully. I think what part of today was showcasing a lot of the individuals that we have on the team are the same ones that have done that so successfully at some of our peers.
When you think about any one of these individual levers, so the pricing, you know, starting at the top, I mean, surcharges in and of themselves, if we could get to what best in class represents, it's probably 100 to 150 basis points of incremental margin. Just the straight math of putting that on. Go down to some of the areas that Billy and others are talking about on the fleet optimization. CNG.
CNG is a real opportunity that's been demonstrated the effectiveness of it. If we took CNG to the goal that, you know, we had articulated, that in and of itself is probably another 100 basis points of margin. ASL is similar. Taking ASL and converting another 1,000 residential units to ASL, that's another 100 basis points of margin. You know, take these amounts and put them together.
You know, we can debate whether we'll get the full way there and the timing it will take, but there's no debate to the effectiveness of these strategies. We're just earlier stages in harvesting these opportunities, these opportunities that have proven to be effective. I think when you put that together, there's just a clear path at the EBITDA margin level that we're gonna be able to be the superior grower within the industry.
I mean, RNG is, I think, the last item on there, and obviously, the impacts of that can be very meaningful. While the industry is talking about it today, I think it's important to understand a lot of our peers already benefit from, you know, a certain degree of RNG, some of it quite material. The margin profile of that is very meaningful.
I mean, the RNG opportunity that we're talking about here, if you layered that onto our business today, that's almost 200 basis points of incremental margin. So I mean, these are real meaningful levers that are gonna drive operational improvement organically that, you know, I don't think it's debatable about the ability for these to move the needle in that way.
Just, you know, the timing, which is gonna take us to get there. You've heard from Greg and the team and Ed, we are actively pursuing these. You know, when you bring it to the free cash flow line, you take all of that all flows to free cash flow, and then we have this leverage component.
Now, I know the leverage word is often used with a negative connotation, but the torque it provides at free cash flow for growth is sort of not debatable. That, again, is a unique attribute to the GFL story because of where we're at in our de-leveraging profile. We're gonna delever. I'm gonna have a whole bunch of slides I'm gonna show you in a moment showing the power of this, but we're gonna de-lever.
That process of doing so is gonna yield significant sort of growth going from the debt side to the equity side, and it's gonna create a free cash flow CAGR that just, you know, is unique to GFL and GFL alone because of that leverage profile.
If you take that all together, I mean, organically, we think this is the most compelling story in the industry, and I don't think you need to believe a lot to see that. I mean, do your own models. No matter where you end up, you're probably gonna be arriving at the same sort of conclusion.
When you take M&A, and you heard from Craig and you heard from Julie about the capabilities that we have, and I think we've demonstrated that, but we also have this sort of law of the numbers and the sizing sort of working for us. I mean, if we deploy $500 million to $1 billion a year in capital and then the EBITDA you acquire from that, you know, it's a meaningful contributor when you think about sort of CAGR.
I have that sort of second to last column on the page showing that effectively, you know, M&A can then double up where those organic growth rates. When you put that together, you know, you can see the bottom right corner of the page, which is saying organic plus M&A, you know, there's a clear path there, okay, over the next sort of three to five years of the mid-20%.
You know, we have a high degree of conviction in our ability to go out and execute on that. Again, I think the levers that need to be pulled in order to achieve those goals are, I want to say, tried, tested, and true.
You know, if you think about how that translates to the current year, you know, the guidance. We updated our guidance when we reported Q1 to reflect the successfulness of our M&A in the first sort of four months of the year. We anticipate being able to revisit our guidance when we report in Q2 with a normal course cadence to observe the seasonalities in the year.
We'll get back to you on that point. We're just sort of repeating what we updated at Q1 today. You know, there's been a lot of talk in the word focus today. You heard from Mark coming in about how we're focused on all these operational improvements levers and focused on sustainability initiatives and focused on our people, focused on safety.
I think the bottom of this screen shows net leverage is an area of focus for sort of many outside of our organization. I just want to spend a minute sort of, you know, speaking to that. Because, you know, if you look at the trajectory that we've done since the IPO, you know, took leverage from sort of mid to high seven, you know, down to the sort of, you know, 4.75 last year.
If we didn't do anything for the balance of the year, we'd end the year sort of mid 4s. Now, I realize that, you know, it makes us an outlier in the industry. It's a higher level of leverage than others sort of have in the industry.
You know, I think the leverage and the pace of delevering is tied to the growth that we've been sort of executing on. I think what's important today is, one, I'll spend a minute just to understand what our debt stack looks like when you think about this level of leverage, what that actually means in terms of the instruments we have in our debt stack.
Then second, the trade-off of the leverage versus the growth that that can afford you. You know, what I would argue is just a slightly slower pace of delevering. Still delevering and still arriving at the same position, but on a slightly lower pace and trade-off for superior growth profile. So if you look at the debt stack today, this is where we sit. Round number is $8 billion of debt.
You have about 73% of it that's fixed and 25% of it that floats. If you look on the right-hand side, the maturity profile, I think it's important to highlight, there's really no material debt obligation till 2025. In 2025, you can see the stack of about $3 billion that comes due. More than half of that is our term loan, and then we have two secured notes.
If we were to go today, now I haven't checked the market today, but directionally today, you could probably refinance that whole stack, push it out to a 2030 and beyond maturity at very comparable rates to what we're paying today. Included in you know one of those secured notes is a piece of debt that's sort of 6%. The term loan is floating.
It, you know, is already sort of very close to market. We could take that and push that out, call it 20, you know, 30. As a result, we have no meaningful maturities whatsoever till 2026. What happens in 2026? Well, half of that number is just our regular revolving credit facility. We've got $1 billion in the white box, which, you know, we have a very supportive group of sort of banks that's supportive.
Just want to highlight from a sort of maturity waterfall perspective, there's a lot of runway on this existing capital structure before you start getting into the need for sort of refinancing that can particularly impact, you know, the rates at which you're doing so.
When you think about that runway, I think it's also important to understand our credit profile and what's gonna happen to that over that period of time. We are still a non-investment grade credit, right? The leverage profile and coming out and the pace of delevering has us still on a sort of single B credit. There's a path to investment grade.
Again, we can debate when that's going to happen, but it's going to happen. The deleveraging profile of the business and the cash flow is still above. We're gonna become an investment grade credit. At that point, we're gonna likely enjoy a much better borrowing rate than we do today. Despite a rising rate environment, we're gonna have this natural mitigant as we eventually get to investment grade to have, you know, improved spreads on our borrowing costs.
I highlight that because it's probably gonna coincide nicely with the timetable to which some of the debt stack becomes, you know, due. You know, I know there's concern with a leverage level that's higher than, say, the industry group, and what does that mean when you look in the rising rate environment. We really just wanted to articulate the quantum of runway we have here before some of these notes became sort of required to be refinanced.
With that piece, if you think about the debt stack that we have, we'll end this year, if we don't do any further M&A, roughly 4.5 turns of leverage. What this page is illustrating is just an illustrative example of the delevering capabilities of the business today using just sort of what I would call normal course growth assumptions, right?
5% top-line growth, 10% to 11% capital intensity. Just everything sort of what I'd call more middle of the fairway. Now, it does have margin expansion of 40 basis points per year. In light of all the self-help levers we've been talking about, we think that's a goal that we could exceed on. For illustrative purposes, in the model, we included 40 basis points a year for margin expansion.
This assumes no M&A, and so you can see what you're effectively doing is all the free cash flow generated by the business you're using to sort of delever, and you can see the power of that free cash flow. You know, roll this forward, you go from 4.5 to 2.5 by the time you exit 2025.
Now, I think in reality, you probably wouldn't be operating the business two and a half turns of leverage, and you would've started a share buyback program or some other capital sort of reallocation prior to that. You probably end up living in a sort of, you know, high twos, three leverage, where, you know, a bunch of our peers do.
This is just illustrating the power of the deleveraging of the model. This is not going to be the scenario that's gonna play out. I wanna be very clear. We are not going to do this scenario because we will do M&A.
I wanted to show the power of the organic model and how capable it is of deleveraging, because it is our extreme conviction in the accuracy of this that leads us to the conclusion that deploying incremental capital M&A along the way is a better sort of decision because it's gonna eventually yield the same outcome, but we're gonna be that much better and stronger when we get there. That's what we go to illustrate in the next slide.
This is what I call scenario two. In here we're saying, okay, take the exact same base case scenario assumption that I just showed you, but assume you deploy $ 500 million per year of that free cash flow into M&A. Again, what I'll call our normal course assumptions. I think we're assuming we pay 7.5x for the M&A.
You bring in 90% to 25% margins, so it's initially sort of margin dilutive and execute that. If you look at this scenario, you roll forward, the business still delevers. You still end up at a sort of two number by 2025. It's 40 basis points higher than it was before, but you've created that much more value along the way by executing on the M&A program and continue to densify and sort of build the business and build, more importantly, that free cash flow per share.
You can see the CAGR in here goes up to sort of a low 20s versus what was a mid-teens before. We take it one step further. We say, okay, let's take a scenario where we deploy $1 billion a year in M&A, so 2x the prior scenario.
Once again, all other assumptions being equal, and you roll this forward, you get to 2025, and you end up with this leverage that's sort of almost 3x. I think, you know, a sweet spot where folks would like to see the business eventually be. Again, this case is deploying $1 billion a year. If you roll this forward one more year, this number would have 2x leverage as well.
Why I highlight this is because these two scenarios, what are we trading off? They're both the base case of no M&A or this case of $1 billion a year. Both cases are ending up, I think, at what's the ideal, you know, by industry sort of definition, leverage profile. You're getting there.
In this scenario, I have $500 million more EBITDA than I do in the first one. We've arrived at the same conclusion. The pace of the delevering was a little bit slower, but we arrive at the same outcome. You know, I was having a conversation earlier, you know, with I think one of the smartest, you know, people in this sort of room and talked about the duration that exists today of people's sort of attention span.
We hear a lot like, "Delever fast, and you'll get to the place where you wanna be." I mean, you heard Patrick speak about the long-term vision of this business. You know, we are long-term. The management group here is long-term shareholders, as I know sort of many of you are or will be.
I think for the long term, based on our, you know, the strength of our belief in the delevering capabilities of the business, ending 2025 with an incremental $500 million of EBITDA or $250 to $300 million of free cash, I think is a better outcome over the longer term. I'm not saying we're gonna do exactly $500 million a year or we're gonna deploy a $1 billion a year.
I can't tell you exactly what it's gonna be. What I'll tell you is what we advised at the beginning of the year. It's probably gonna be a number a little bit higher than that, if you guys have been sort of following along for the past couple of years.
You know, despite the ebbs and flows of the economy, what we're really just trying to highlight is the power of the model. We've reached the inflection point. The free cash flow is so robust that the deleveraging capabilities are basically unstoppable at this point with any sort of reasonable levels of M&A, and you're going to arrive at the leverage profile, you know, I think that's desired by the group.
You know, in the press release we put out, we talked about these three scenarios, really not saying this is the guidance per se, but wanted to kind of identify the art of the possible, right? We think the base case includes assumptions that we can exceed on, and then the M&A will be, you know, somewhere in this zip code.
Just wanted to put it all together on paper to see the power and to see, you know, of our conviction that we're gonna end up, you know, directionally in this sort of area. The last page is just talking about that capital allocation. I mean, first and foremost are these internal growth opportunities. I think the returns and the ROI, you know, as they've always been and continue to fund the growth opportunities, both regular way maintenance but incremental growth, is always a priority and will continue to be.
The M&A, you know, Craig and Julie articulated why we've never been more excited or seen more torque from the incremental accretiveness that that M&A can provide, so that will continue to be a sort of key place where we're deploying capital.
The last three will be balanced as we mature in the free cash flow profile. I mean, you saw we issued a normal course issuer bid that sets us up for the ability to sort of buy back our shares. You know, we said we'll do so opportunistically only. If we believe there's a lot of value to create outside of buying back our shares and don't intend or hope to see such dislocation from a value perspective that we need to do that today, so we wanna set that up.
Because as we roll this forward, you can see the free cash flow numbers are climbing. There will become a time when that becomes part of the sort of capital allocation playbook. We just hope that's, you know, the stock price doesn't sort of necessitate that happening sooner rather than later.
This is what we're gonna continue doing, and I think, you know, executing and demonstrating the capital allocation discipline to continue to drive sort of free cash flow per share, as Patrick started doing, you know, 14 years ago, and this team continues to do so up until today. That's the formal presentation. I think Patrick's gonna come up for some closing remarks before we move into Q&A.
Is that the Q&A? I think it's been. I'm happy everyone got to get a good glimpse into, you know, the GFL story today and the people behind the story. Obviously, I wanna thank everyone for coming. You know, I think it's been a long time coming since the IPO. We're really looking forward to the next sort of five years here.
You know, hopefully, the lion's share of the people in here can share in that. You know, it's just an exciting time to be here. Now we'll sort of open it up for Q&A. If anybody has any questions, you know, the entire management team is available to answer questions. Feel free to ask questions of anybody. Not only you guys already see me enough, but happy to answer anything.
Hey, Patrick, it's Hamza from Jefferies. I guess this is for you, but also the, you know, management team, Greg, et cetera. You talked a lot about M&A. You talked a lot about the self-help in the portfolio, fuel surcharges, automation, et cetera. How do you balance the M&A with sort of taking a pause and saying, "We did all this M&A, we grew from $ 1.8 billion to $6 billion.
Let's take a pause, and let's optimize the base and, you know, do the fuel surcharges, do all of that, and take a pause on M&A." Or can you do both simultaneously? And does that really push out the timelines in terms of optimizing the base? Just any thoughts on how you're balancing that today?
Yeah, I think it was really identification of the opportunities first, which I now think we have. I think those are separate processes. I think being smarter about how you identify those opportunities when you're doing M&A and realizing what needs to be fixed right away allows that to happen faster with a separate team.
Unfortunately, on the M&A front, you don't really get to pick a lot of the time when, you know, Vic and Betty decide they wanna sell. I can't tell Vic and Betty to wait two years while we optimize our, you know, fuel surcharges, et cetera. I think, yeah, we're gonna obviously be selective and pick the most accretive opportunities that work.
I think from what we see is that's a separate process now that's running in tandem with the M&A process, working very well together. I think that's been very sort of refined significantly over the last number of years.
It's less impactful than it was, and therefore the disruptiveness. I mean, Craig spoke about this. Doing 30, 40 deals, but having 30, 40 markets to do it though, you know, you have the capability to continue to push forward all these great sort of strategic initiatives that Greg and team are doing because the relative contribution of M&A isn't, you know, upsetting the apple cart, if you want.
I think people underestimate the differential between where we are today versus historically and how much, you know, the business can absorb that M&A today without, you know, thinking about the trucks you're buying.
If we're gonna move, you know, from a CNG perspective, from 1,000 trucks to 4,000 trucks, that's a big beast. The M&A is adding, you know, small single-digit incremental percentages there, but it's not upsetting the entire program. I think it's an important distinction.
Hi, Jerry Revich, Goldman Sachs. I'm wondering, can we just dig in on the green CapEx part of the discussion? You know, nine facilities, seven and a half , and then BTU. Can we talk about how much, you know, carbon reduction you folks are delivering versus conventional gas, based on the EPA models that you folks spoke about?
You know, separately, since the model for $105 million to $125 million was laid out. You know, we've seen a doubling in Henry Hub prices, 20% increase in WINT prices, and, you know, we're talking about potential for your RNG fleet to absorb, I don't know, 2/3 Of the gas that you're delivering.
It feels like you're closer to $200 million incremental earnings run rate versus what you folks outlined. I'm wondering, are there any cost increases that are holding you back? If you wouldn't mind commenting on that.
I think I'll address the financial questions while you're sorting through. We do think the RNG opportunity, when we get to the finish line, could be $175 million to $200 million. You know, we've been very conservative. You know, it's a business we don't know that well. We're relying on third parties, but I think every day that goes by, we get significantly smarter on it.
I think we've partnered with the smartest people in the industry. But we do think it has the opportunity to be significantly more than the $105 million to $115 million. We do think directionally you're correct in the $175 million to $200 million. I think the equity contribution from us is gonna have to be significantly less.
We're in the middle of some creative financing structures, you know, that'll basically require only sort of 25% to 30% equity. I think the ROIC would be really high on what we're gonna do, and I think we're gonna achieve that over the next little while. As for your specific questions on that, I'll turn to Jen because she's significantly smarter than me on that. I don't know if you guys wanna take it offline, and you guys can sort of walk through it in detail.
Sure.
Do you wanna come up, or you wanna
Oh, you wanna do it right now?
Sure. Whatever you want.
I mean, in terms of how much greenhouse gas reductions we'd see with the implementation of our RNG projects, we're like looking at trying to identify what that amount would be right now. You know, when we announce our goals later this year, like that degree will be reflected in that, is the best I can say right now.
We do expect to see reductions in our overall footprint as a result of the RNG. It's just like what that level is will be communicated to our goals. You mean in terms of how much additional RNG we would produce and provide to them? Yes. That's, I don't have that number off the top of my head, but yes, we do have a good sense of what that would be.
Whoever's gonna be the receiver of the gas at the end for sure. I mean, that's the, you know, the Google, the Amazons of the world that are buying these to, you know, to reduce their own carbon footprints by significant capacity. That's what the benefit is, and that's why they're paying significantly more dollars. I mean, the other thing on your point, yes, RIN pricing has moved up significantly.
The voluntary market, like we're talking about in terms of doing long-term deals, has also changed significantly, even over the course of the last eight, nine months. You know, it's still our internal expectation that we will enter into long-term supply agreements for 65%-ish of the gas.
I mean, I think people buy this industry because they like the stability of the free cash flow, et cetera. I don't think Luke or I wanna spend our time on a quarterly call, you know, talking about why free cash flow was X, Y, or Z. We wanna make sure that we just get that consistent flow.
The numbers are still highly compelling, and we'll enter into long-term contracts, and then we'll play the spot market a little bit. Then obviously, as Joy said, we're gonna fuel our own trucks with our own RNG, which then creates that full circular economy.
Patrick, it's Tyler Brown at Raymond James. I've got a couple questions. Just first a clarification. So on the slides, you noted that 50% coverage of fuel surcharge. I think you just talked about 40% maybe 30 days ago. So I'm curious if that's apples to apples or if it's you really have seen a 10-point improvement already.
No, Tyler, what that slide was attempting to illustrate, you know, of the potential customer base, 50% of them are participating in it. You saw the two bars at 25% are at the right place, and 75% of them are not. If you blend that all together, that's why we're saying we're kind of getting 40 cents on the dollar, we should be.
Now, like for like, with the day we told you, Greg and team and Mark have been actively, so today we would be better than that, but you're gonna have to wait till Q2 to hear how much better.
Okay. I actually have some questions. First, can you just talk about WISHES a little bit more?
Okay.
I think you had talked it going from a 20% to 70% business unit coverage. Can you talk about what a business unit typically sees when it goes onto WISHES? Can you talk about getting to 100%? Can you talk about an implementation of a similar type of tool in environmental services?
Okay. Excellent. What the branch will see at the initiation of the WISHES tool when you introduce it, you bring the tablet in, you do the training, you do the cost management training and so forth for the local management. They basically load the tool, and they give it to the sales reps.
The sales reps love it because it instantly simplifies their process, and they have parameters that they'll work inside of. The sales reps love it. It works great. They can electronically send a contract. Everybody's really happy with it. What it does do, and this is the piece I'm interested in, it gives me data on the back end.
Then kind of the thought process changes at that point because then you can now actually see what's happening at that branch, who's charging fees, who's waiving fees, who's giving stick fees, who's selling just consistently at lower margins. We'll have sales reps that'll sell at higher margins consistently, other sales reps that find the path of least resistance. It initially provides ease of doing business.
It gives great data that changes the behavior, and you're back to your sales rep, and you're changing the behavior of the sales rep. The 20% to 70% is the trucks and tower environment that we have. We're just working through the process, and Mike talked about he's, like, supercharging the program at this point in time to get into the system. We've got the training set up.
It's just having the tool available and out to the field as it move along into the field environments. Having talked with Ed a ton about how he could adapt this to his specific environment, he has so many different variables, I'm not certain it would match up because our sales process is really simple.
If you just said, "Now, there's a price sheet," you know, years ago, we used to do kinda the front piece of Wishes on a piece of paper. You could give a sales rep and say, "Here's your parameters." The costing mechanism inside of Wishes that's so dynamic is what really makes it powerful. Then it's the reporting on the backside that really, really drives it home and changes behaviors and changes margins.
It's Scott Levine at Bloomberg Intelligence. I guess this is a question for Luke. You just gave us three scenarios, all of which really have you getting down to a leverage level in the neighborhood of 3x by 2025. Is the punchline here that irrespective of your M&A strategy, you're coming off two years where you did nearly $6 billion worth of spend, right?
Is the point here that you expect to and plan to get to that leverage level over time? Secondly, does the fact that we're looking at a rising rate environment and potentially a recessionary environment as well cause you to maybe emphasize delivering a little bit more than you other wise would have?
Yeah. On the rising rate environment comment, you know, showed the debt stack, showed 25% of the book being subject to variable rates and the balance sort of, you know, fixed rates with relatively long-dated paper. If you think today, where do how much more rates come from here? I mean, I don't know, about 50 basis points, 100 basis points are there.
If you look at the incremental cash interest cost coming off of that, you know, I think in the grand scheme of that free cash flow profile, another sort of 50 basis points on $2 billion of debt doesn't materially move the sort of number. I think that outcome happens irregardless of the sort of rising rate environment in that next sort of, you know, 2 to 4-year window.
Obviously, if we're going to 10% tenure by that time, it would be a sort of different discussion. You know, where the trajectory is today, I think this incorporates the impacts of the potential sort of rising rate environment from that piece.
I think the conviction in the deleveraging profile suggests that we don't need to pause the M&A opportunity solely for that purpose. We see attractive, accretive opportunities. We think it makes the most sense to deploy capital into them because of the protection on the debt stack, coupled with, you know, our belief in the free cash flow profile of the business.
You know, your first component of the question, I think the answer is yes. This business is gonna delever. It's going to approach three. The pace at which it happens will largely be predicated on the quantum of M&A opportunity we see along the way.
What we're attempting to illustrate is regardless of what that quantum looks like, if it's a $500 million deployment year or a $1 billion deployment year, we're largely still getting to the same place in the same period of time.
Interestingly enough, I mean, if you look back to pre-2020, pre-IPO, we were levered at 7.5x , and our average cost of capital was 6.2%. Levered at 4.5x today with a business two times its size, our average cost of capital is 4.2%.
I mean, you can look at the bookends of what, you know, probably the worst-case scenario was back in sort of 2018, 2019, when we were a private company with 7.5 turns of leverage. Our cost of capital was still only 6.2%. I mean, I think we feel pretty comfortable. Investors like the space. Obviously, we felt comfortable with the cash flows then. We never stopped this from going then.
I think just where we are today and the delevering event we had, now the free cash flow profile of the business is just too powerful to stop the delevering. I think when you look at the, we spent $ 6 billion, but if you actually break apart how that $6 billion was spent, almost $4 billion of it was spent basically on four transactions, right?
$2 billion of it was, you know, just the routine steady Eddie stuff that we do every day. I think, you know, what we see in the, you know, the future here is really just around, again, the moms and pops, generally $ 1 million to $30 million of enterprise value, that are just gonna tuck in, and it'll be, you know.
That's why, you know, we've modeled sort of 7.5x purchase price. I think when you sort of layer all that in, there's not much that could happen on the leverage run.
Yeah. It's Walter Spracklin, RBC Capital Markets. Patrick, you described slide nine as your favorite slide. There was the map with a lot of your density and your concentration in the areas in which you operate.
A lot of white space was still in that area, and I think you touched on the answer to the question, but where do you really focus your M&A if you look at the $40 billion addressable non-GFL owned revenue stream? Are there any large ones that you wanna go into that are in that white space right now, that you're not there right now and you could see yourself getting into?
Is this more your the next few years is really gonna be focused on densification and building out some tuck-ins within the regions that you operate?
Yeah. You can never time opportunities, you know, when they, when they come, when families decide for whatever reason they wanna, you know, it's time to sell and exit. I would say if I look today, there's nothing of any material size and scale that we think we're gonna step outside the footprint into a new geography. There are those opportunities.
There are those families we've had conversations with. When that time comes, I don't know. The lion's share of our time and dollars is gonna get spent on the existing markets where we can leverage our sort of post-collection operations really with collection-only business to drive incremental volume through those six cross bay facilities like I said earlier.
I think that's gonna be the highest and best use of our capital, and we're gonna get the highest returns on invested capital by investing those dollars, rationalizing those books of business, and continue tucking in existing businesses into those markets where we have opportunity to further add incremental volume to those facilities.
Just Kevin here from CIBC. Maybe for Mike, you talked about this technology stack you're building. It seems like a lot of the initiatives are to improve internal efficiency. Are you evaluating an opportunity to track carbon emissions for your customers using this technology stack?
There seems to be a greater regulatory push for customers to track their own Scope 3 emissions. Is that something you can lay out with you know some of the ESG strategy that Matt presented earlier today?
Focus has been on the operational side. As Jennifer and her team build out that plan, we will incorporate those requirements into the IT plan.
Hi. Rupinder from National Bank.
Hi.
If we are moving into a recession, how are you thinking about some of the puts and takes from that kind of environment from an M&A perspective? Could we see an acceleration or a slowdown? Just, walk us through your thoughts.
Yeah. I mean, I think the industry's proven that it's pretty resilient through recessions. Obviously, you look at the volume side and special waste and C&D side, and I think what we've historically tells us that, you know, volumes have been off sort of in the 2% to 3% range, so, you know, not a significant number. This industry's become more about a pricing model versus a volume story.
So I don't think it would change much from our perspective. Obviously, the cost of debt would get cheaper if we went into a recession, so I mean, that's the trade-off. Maybe valuations get a little bit less expensive, but I don't think so. I think by and large, you know, where we sit today wouldn't really change much of our behavior.
I mean, I think we lived through. I know it was a short downturn, but we've lived through a prolonged downturn in Canada for almost a year and a half to two years now, where we've gone through this COVID wave. You know, I think if you look at what happened to the margin profile et cetera of the business. Nothing really happened, and it's provided some great M&A opportunities. I don't think it would change our behavior materially even if we were about to go into a recession.
You wouldn't change your behavior. Any chance it'd change the pace of M&A?
I don't think so. I mean, I think generally what we see is sellers on the other side of the recession decide to exit. A lot of them generally don't sell going into the recession. They wanna get through it, then they say, "I never wanna live through this again."
Similar to what we're seeing in COVID and all this inflationary stuff, as they're getting on the other side of it, I think you're seeing an influx of sellers say, "You know what? I don't wanna deal with this anymore. I stabilized my business. I got through it, but now is the time to exit." I think you'd see the pace. I don't think it'd be inconsistent with what you've seen to date.
Thanks. Chris Murray from ATB Capital Markets. Maybe a question for Greg and Craig. Just thinking about your historical M&A, it's really been called central office, top-down driven. As we think about, you know, call it 30 to 40 acquisitions, how do you balance the impact in the areas versus sort of a central identification of M&A?
It goes back to the structure that I opened up with being in distinct areas with regional vice presidents. The regional vice presidents aren't active in soliciting the acquisitions, but the area vice presidents are, and so there's early identification. The area vice president's working with Craig and working with Julie and their team, and they're thinking strategically in advance 'cause they don't happen, like, immediately, so they know well in advance of what's coming.
They think about budget season. They think about parallel acquisitions they're going through. It's really, if you think of Ben , Matthew, Robbie as a team, acquisitions is a significant part of their strategies and how they think in a 12-month window, so they're constantly blending this into their organization. It doesn't just necessarily get delivered to them.
What they've done underneath as well, like with our RVP structure, they're used to engaging with Julie's group very quickly as well, and that's at that point after it's public, and we can talk about it. Those two can manage that very quickly, and then it blends in. A lot of foresight, and then it's got a well-oiled team that works together to execute. Yeah, they do really quite well.
Chris, I think one of the things that Patrick, you have heard him say, you know, is that he never wanted and we still don't want that corporate did a deal and here you go GFL. This is your deal. Go and have it. I mean, it's been the polar opposite of that.
I mean, as Greg said, you know, a bunch of the sort of technical integration components, et cetera, Julie and her team and other, but the field is always sort of involved from an origination perspective, the initial tire kicking diligence. No one's gonna know about a business better in Michigan than Lou. So, hey, Lou, this, you like it, you don't like it's good, it's bad, it's ugly. Then when it's getting close, Lou is gonna sign off on what that opportunity looks like.
Okay, we're gonna take out these trucks, we're gonna park this, we're gonna do this. Lou is signing off on that, and Lou is then accountable. While they're not involved through some of the sort of technical negotiation and/or diligence and integration planning, certainly they're gonna own that acquisition and be part of it. Today, one of our greatest sources of origination is the guys in the field. I mean, they know their markets, they know what's good, and that's, you know, provides, you know, a lot of benefit for us.
Actually, it's loaded into their budgets immediately. You could purchase something in March, it'll take us about a month, but we will have the approved pro forma that, in this example, Lou has signed off on with the synergies, with the assigned CapEx, with the repair CapEx and so forth.
Inside of a month, it's loaded into his budget, which is he's accountable for and compensated for at the end of the year, which will drive down into his line management all the way through. Very quickly, they get ownership of it. They know that when they sign off on that LOI.
Hi. Jerry Revich again. I'm wondering if you could talk about for the larger deals that you've done recently, Terrapure, the divestiture package, what level of synergy have you folks delivered already on that value capture framework that you laid out for smaller deals? Can you just talk about, in specifics on those larger deals? And separately, when looking at the pipeline today, what proportion of the pipeline is outbound sourced opportunities versus, something that involves a process?
You're specifically asking about Terrapure. What was the other one?
The Waste Management Divestiture Package.
Well Terrapure, I mean Terrapure, I don't want to take a dig at you, but Terrapure was a home run, and we knew. We've looked at that business off and on for eight years. They had a part of that business that we didn't like, which is the battery recycling business, and we fought for years with them. Not that it's not a good business, we just didn't know anything about it. It was more on the smelter side.
There was a lot of volatility in metals, and we just, you know. I'm sure it's a home run for them today with the way the commodity pricing's gone, but it just wasn't a business unit we wanted to be in.
Obviously with COVID and then the lithium recycling technology, we knew the private equity partners that own that business, and we were able to negotiate something 'cause a lot of our U.S. private equity peers actually couldn't get into the country to actually diligence the asset, and they needed to be out of it in a short period of time.
It created a very narrow sort of window of opportunity to go in, and we sort of locked that up outside of a process. I mean, you know, we communicated to the street it was probably $1 05 million to $ 110 million of EBITDA. I think when you look today, it's gonna be. When you look through the. Again, I don't wanna. These guys like to sandbag 'cause we're a public company now. We're in private equity.
We'd always have to have 10% to 12% organic growth, but when we're a public company, generally try to underpromise and overdeliver. I think we're significantly through the original synergy plan, which is incremental $10 million to $15 million. We're well onto sort of phase two of that and expect probably another $10 million to $15 million out of the business over the course of this year.
The Waste Management ADS divestitures, the only person in this room that actually knows what we were getting, including us at a certain time, was Billy. I think when you look at those assets we got, we were very fortunate. I think we were in the right place at the right time there.
You know, I think from Waste Management's perspective, you know, they had a tough time with the DOJ. DOJ gave them a hard time getting through that process. We were the benefactors of that when we sort of looked at what we got through today.
Again, we've communicated to the street that it was probably in the tune of sort of $85 million to $90 million of EBITDA. I think when you look through Wisconsin and some. We've divested of a bunch of that stuff, as you know, in markets where we just, you know, we didn't see a real path to.
Not that they weren't good markets, but we've divested of some landfills and some things that were of higher and better use to some local players, that we're sort of negative free cash flow generators, that we got significant capital from those. We've significantly outperformed our original pro forma for that. I think that business is. If you try and break apart the pieces that are left, we're basically.
I think net effect is we basically today probably sitting at about $ 115 million to $120 million of EBITDA. If you net off the assets we sold, we basically. The purchase price is probably closer to $ 700 million today with the assets we sold as part of that.
We basically got $150 million of EBITDA for roughly about $700 million of purchase price when you net off the asset sales.
Jerry, it goes back to some of the comments that Craig was making on this slide here, you know, when we talk about the cost synergy levers that we're looking to sort of realize on M&A. The process and our expertise in this area in quantifying this has never been greater. I mean, you just think about the rigor that they go in.
If you look at any one of these things, you know, in terms of the cost synergy levers, the rigor with which goes into estimating this, the sign-off from Lou that he's gonna deliver this, and then going out and executing, again, with all of the infrastructure and processes today, the accuracy of synergy capture has never been better.
The more exciting part is the quantum, that size of that pie has never been bigger, and the speed with which we can get it has never been better. In terms of you're thinking, oh, how well have you done on actually achieving what you laid out, I mean, across the board now, if there's a unique COVID event or something, obviously.
Across the board now, the accuracy with which guys are able to predict what we're gonna be able to sort of get out has never been better, and that's why you hear us say we've never been more excited about the opportunity set as we go forward.
Hi, this is Brian Butler from Stifel. I just wanted to touch on the pricing opportunities you have. You kinda have two, where you have the underpriced group of customers that need to be priced higher as well as then the surcharge opportunity. Maybe you can just give a little color on what stage you are in each one of those and what timeline those kinda play out.
Yeah. There was $25 million to $30 million of, you know, I would say mis-priced customers in the Canadian book of business that we had identified as part of the original process pre-COVID. I think when we looked through and took the waste industry's pricing optimization tool and we went through our existing book of business.
Just to give a little bit of color on that, effectively what we did, for all the benefits of centralization, we would take in that customer from Vic and Betty's business in Edson and Whitecourt, Alberta. We would take that customer in right away and dump them into our database.
I think the mistake we made when we brought that database is we lost the historical data of, number one, when they got their last price increase, and what were their surcharges and what were their environmental charges based, if they even had them.
We were missing those three steps. We brought them in, when we missed those three steps, when we were price increasing that market, if we were putting through, like, I don't know, 6% price increase or 7% price increase on the industrial commercial book of business, it was off maybe a customer that hadn't been price increased in six years, so he's under market.
We went through the Canadian book of business and found in the Canadian industrial commercial book of business almost $ 25 million to $ 30 million. That got paused.
Obviously with COVID, we wanted our customers to be a going concern, obviously, and, you know, we worked with them given how hard they were hit. That will, you know, start picking up pace now as we exit COVID. You know, we're seeing a, you know, obviously material uptick in what's going on in the Canadian book of business as, you know, particularly in the last four to six weeks.
We've said this 6x now, so we hope this is the last round of COVID shutdowns in Canada, but I think by and large, we've turned the corner. The surcharge opportunity that Lou just talked about, you know, there's 100 basis points of surcharge opportunity within that within our existing book of business.
I think it will take some time for us to go and get it all, but I think over the course of the next 12 to 18 months, I'm not gonna say we're gonna be 100% of the way there, but we should get a material amount over the way there.
The fuel surcharge, I mean, just to be, I think what, when Patrick's saying 100 basis points, I know he said 100, but that's to get to the point where you're recovering your energy costs.
Yep.
Right? You know, if we have $300 million to $400 million of energy costs today, I give a wide range 'cause I don't know what diesel's gonna do for the back half of the year. If you have costs like that, you wanna recover, you know, 100% of that. As we said, we're probably getting 40 cents on the dollar of that today. Just getting to recovering all of it represents a massive opportunity.
If you look at what best in class does, is you get to the point where you recover all of it, and then at the same time migrate away from diesel onto alternative fuels, and then all of a sudden you're at a point where you're recovering 150% of your energy costs. I mean, those are directionally real world examples.
You know, the opportunity here. I've heard the comment that, oh, fuel surcharges eventually just can become margin accretive because as it's going up, you're just passing on dollar for dollar. Well, the initial recognition of fuel surcharges is highly margin accretive. It's like incremental price. This is, again, I go back to the comments.
This isn't like we're reinventing, we're just doing what everyone else has already done and, you know, gonna accrue material benefit because we're just yet to sort of do it. Environmental surcharge, another one, I mean, we're an environmental services company. You know, Jen and Joy and us, we have a lot of costs associated with that. We need to sort of recover that. To see an environmental surcharge of 20% on a bill today, I think is very sort of normal in the industry.
20% of your commercial book of business. I mean, Greg and Mark and team are actively pursuing that, but we're the beginning of that. You just do the math as to what that could reflect. It's meaningful dollars. Now today, some of it's gonna go to overcome cost inflation and overcome $5 gallon diesel. Eventually, as those subside, these will be new levers of sort of price effectively that, you know, I think will be meaningful contributors to margin as we go forward.
I think that's a really good point to remember. We're doing this, as I was just saying, in a fortuitous time because fuel, you know, $5 diesel at this point in time. It's on TV. People are accepting. People understand that trucking expenses have gone up. People that don't have a fuel surcharge have never been more receptive of fuel surcharge right now. People that have a fixed fuel surcharge, they understand that right now.
Our competitors have the environmental surcharge and the fuel surcharges fully maxed out. When we implement ours, we're just catching up to them. We're not surpassing anybody at this point in time. We've got a customer base that's wildly conditioned to accept fuel surcharges at this point. As Luke said, it will settle, but we'll have been finished.
When we'll be on that path, if they're just near alone, short term, this is gonna do some offsetting for us, but long term, this is gonna have amazing power. We're gonna get a lot done because of the tumultuous time we're in right now with fuel.
Thanks. Luke at National Bank. Patrick, you said in the past that RNG from AD systems was not on your radar screen. Is that evolving at all? Could it be a next generation of RNG once you get your landfill gas developed?
I mean, for our waste streams, AD is not the preferred path today. I mean, we've seen that tried time and time again. You know, we are in discussions with some of the farming industry. It's interesting, a bunch of farmers are looking at ways of sort of, particularly in Canada, looking at sort of grouping up together to build, you know, like one central anaerobic digester to deal with all of their farm waste in certain geographic pockets, which could be an opportunity.
No anaerobic digestion to deal with any of our own sort of waste streams at this point. The consistency of the stream is. It's not consistent enough to get good quality gas without mucking up the entire system.
The cost, it's so cost prohibitive today that it just doesn't make a lot of sense unless you have a municipality prepared to subsidize it.
Yeah, a question about the environmental services business. I don't recall. I know you talked about the margins, which are really impressive for that business. I don't recall if you guys do any disposal yourselves or treatment or to what extent.
You know, if not, or even if it is, you know, is adding that and integrating that business vertically part of the strategy here, potentially, including the expansion you were talking about into the U.S.? Just looking for a little bit more color into what your plans for that business are.
Yeah, I mean, think about that business as the exact same as our solid waste business. We're fully vertically integrated. We process all of our own waters at our wastewater treatment plant. That's really the moat, and that's what drives the margin profile of that business. When you look at it, think about it, you know, solid waste truck would go out, pick up a route, either bring that waste back to a transfer station or directly to a landfill or a recycling facility.
Our trucks go out, and third-party trucks go out, come bring them back to a wastewater treatment plant, whether we treat those waters and discharge them or solidify it into a sludge. If we solidify it into a sludge, there's certain landfills, generally, we'll internalize them into our own landfills.
There's an odd market where we don't internalize them all, or if it's a hazardous waste, we'll have to go to a Clean Harbors or something, but we generally don't deal in much hazardous waste as part of that business. Generally, we're controlling all of our own destiny, and that's what generally is the moat in that line of business.
Could you see getting into the hazardous waste side of it at any point, or not really?
I don't think so. I think from our perspective, you know, we like the non-cyclical. I mean, listen, we were levered at 7.5x. We couldn't afford to be in cyclical businesses. If you look at the business units that we picked as part of that was basically in all non-cyclical parts of the business. The hazardous waste part has, you know, significantly more ups and downs.
We like the more industrial commercial side, Steady Eddie in the large markets, just go out, milk runs, come back and offload your material. I think you'll see us continue to play there. I don't think you'll see us jumping into the hazardous space in any material way.
When you look at the solid waste operations in the margin or the leverage opportunity, can you give color which ones maybe have the most opportunity for improvement there?
Sorry, what?
Across the solid waste, kind of the different regions.
I think at this point, you know, the regions are getting more mature, and I think from our perspective, you know, there's some opportunities in some of the newly acquired businesses, you know, that's sort of in the Midwest. Obviously in the Southeast and in Western Canada, as we continue rationalizing those books will provide those three regions, I think is the most opportunity for margin expansion for sure.
But then just the overall general book of business, I think, you know, I think if you look at this industry historically from a pricing perspective, you know, this was a 2% to 2.5% pricing model. Then it was 2.5% to 3%, 3% to 3.5%, 3.5% to 4%, 4% to 4.5%.
I think the industry has continued to consolidate and gotten more rational in becoming a low pricing. I think the real opportunity is gonna be when we get out of this inflationary environment. At some point, it will happen. We're already seeing it now, things starting to level off. Our perspective is that pricing is gonna materially change from here.
So that's gonna provide another leg up on the margin side for the industry. You know, once the customers get a, you know, a client pays on $ 200 dollar bill, whether they get a 4% price increase on $ 200 dollars or whether they get a 6% price increase on $ 200 dollars a month, it doesn't really change much. So I think there's a new pricing model here, and that new pricing model is here to stay.
Tyler Brown, Raymond James. Luke, quick question, clarification. I think your solid waste business is circa $ 4.4 billion or so in revenue. Is that pretty close?
Those are the 2021 numbers of the M&A roll 40. If you think about this year's guide, $6 billion is $5 billion solid, $1 billion environmental.
Okay. Billion or $5 billion solid. What is roughly the CPI mix, if you could update us on that?
Like $ 1.2 billion, that is what we would call CPI linked.
Okay. A little over 20%. Okay.
Yeah.
On the bridges, on the three scenarios, just to be clear here, there's only 40 basis points of margin baked in. Is that right?
In that base case scenario, there's 40 basis points of margin, annual margin expansion. You started roughly 28% for this year, which we'll confirm in Q2, and then you go 28.4%, you go 28.8%, you go to 29.3%. The M&A cases, by the math, it dilutes it, right? Because we bring the M&A at 25%. Those M&A cases are effectively something less than that. That's baking in, yes, an annual 40 basis points.
40 basis points core. When we think about the buckets, fuel surcharge, environmental fees, CNG, side loaders, et cetera, is that kind of that would be all incremental to that 40 in all of these base case scenarios?
Yeah. You think about the pricing model in this industry. If you're gonna price at 5%, your internal cost inflation of 3.5 or 4 at a 30% margin business, that should drive 35 basis points of margin or the math in and around there. One would argue that absent meaningful churn, the organic pricing algorithm gives you a 30 to 40 basis points, which is what we're showing there.
All of this self-help would be additive, which is why I'm saying I think our opportunity to grow margins, multiples of that is real. I was just trying to illustrate that, not as the guide. I don't want anyone here to think that the guide is 40 basis points margin. I'm just trying to highlight, even with only 40 basis points of margin, this is the delevering capability. And, I...
There was a question about recession downscale. Take that same model and run it in a recession case. Do you know what happens? It still delevers. It's just like that inflection point is so real that we're trying to just highlight, take a very pedestrian set of assumptions, and you see the value. Layer in what we think we can do, it's gonna be something, you know, significantly better than that.
Okay. Got one more question.
Thanks. Yeah, one last one on recycling. Can you talk about the opportunity in your markets for rising recycling rates or for greater participation for you folks via M&A or Greenfield? Can you just quantify that opportunity, if you don't mind?
Yeah, I think, you know, recycling is a moving target, but I think, you know, I think when you're an industry leading like we have and sort of been on the forefront of EPR, we think that's a big opportunity in Canada. Obviously, extended producer responsibility is gonna drive significantly higher recycling rates, particularly when, municipalities don't have to pay for it anymore.
So I think where that's moving to is the producers are gonna be fully responsible for collecting and recovering those with actual strict regulation behind it that they have to collect and recycle that. So that's gonna drive
In our view, I mean, if you look at British Columbia as a model, for example, pre-EPR, you know, recycled commodities were about 170,000 tons. Post-EPR, you know, 225,000 to 230,000 tons a year, now. You know, significant increase in volume, so between about, you know, over 20%. We think that is gonna happen in a lot of the markets.
I mean, we're set up very well in Canada to be the sort of processor of choice, particularly for producers, given that there's regulations coming in between 2023 and 2025. We're already in discussions with them today to finalize that. We'll see obviously significant volumes.
Building a large MRF in the Michigan market where we control a significant amount of tons on our own back. If you looked historically through, you know, Ben's book of business in the Southeast, we generally dealt with third-party providers pre, you know, I would say China closing the doors in 2018 and entrance to long-term agreements with the likes of Sonoco, et cetera.
As those agreements roll off, we are looking to build our own facilities in those markets. Midwest is a market where we got, you know, whether it be ADS and WM divestiture, gonna build a large scale MRF there. We have significant tons on our own back. I think you'll see significant volume increases, not necessarily on the collection side. I mean, Canada, you'll see definitely on the collection side and the processing side because of EPR legislation.
In the U.S., we're just gonna be very selective about. We've identified three or four markets today where we can build, you know, super-sized MRFs. You know, to process like 150,000 to 250,000 tons.
Markets where we have very little risk because we already control those tons on our own back. I don't have to go out and bid for those tons. Those are markets where we're already giving those tons to third parties, and we're gonna internalize those tons into our own facilities now under the new models that exist.
Which is, you know, before we pre-2018, we didn't love the business as much because there was a significant amount of risk you had to take on the commodity. Now that you've gone through a processing charge and a revenue share in the commodity, it makes all the sense in the world, and your returns on invested capital are fixed and generally on the upside to those models. Now we're developing those facilities in around the big markets where we pull a lot of volume.
With that, we're out of time. Oh, one more. Sorry. No, no, go ahead.
Thanks. Chris Murray from ATB. Just a quick question on CapEx and just thinking about some of your, you know, you talked about the self-help ideas. Historically, I think you've mentioned 9.5% cap of revenue as CapEx now 10% to 11%. Are there any opportunities for you to accelerate some of these investments?
You know, it sounds like, you know, things like side loaders, some of the RNG projects have pretty high returns on invested capital, maybe even above some of your M&A. Is there any way to accelerate that, or is there something in the system that prevents you from being able to implement that?
I think acceleration is certainly one of the capital allocation levers that we sort of constantly look at. I think today, thinking about incremental truck buys is probably difficult. I'm sure Josh would, you know, be upset if we went to try and commit to buying another sort of couple thousand trucks in today's environment.
Certainly, as you go through the next couple of years, I mean, talking about the normal course replacement plan of 50% to 70% of our fleet being, you know, net new CNG. When you get out into this 2024, 2025, you know, there's real opportunity, assuming supply chains have sort of normalized by then, you can make the decision, "Hey, let's accelerate that with this X thousand, you know, incremental truck buy over sort of three year period," and you just accelerate the rate at which you realize the benefit.
Certainly, I think because a lot of that is truck-centered today is probably problematic to meaningfully move your truck buys. I think it's gonna hopefully timing coincide quite nicely that by the time we're ready from a leverage-deleveraging profile to perhaps make some outsized investment, that should hopefully correlate to also normalization of the supply chain to be able to execute on some of that. Because as you said, I mean, the payback is extremely compelling. You know.
If I could add to that's accelerating the pace of the capital spend, but accelerating within our regular capital spend now the pace of those opportunities. That's part of our ROI process. We're very opportunistic when it comes to municipalities. We're only bidding generally those type of scenarios with automation.
Within our current structure now, market-based, we'll look to see, and we're already doing those three-to-two transitions from rear load to front load, and actually going through and looking within our current spend, what we can accelerate now. It becomes a little bit of a competition with our structure to say everyone that can come up with more automation opportunities is more likely to get a distribution of capital.
Sounds good. Well, thank you everyone for attending. Much appreciated, and look forward to speaking to all of you after the next quarter. Thank you so much.