Earnings Call: Q2 2021

Jul 28, 2021

Good morning, and welcome to the GFL Environmental Second Quarter Earnings Conference Call. All participants will be in listen only mode. Please note this event is being recorded. I would now like to turn the conference over to Patrick DiVici, CEO and Founder. Please go ahead. Thank you, and good morning. I would like to welcome everyone to today's call, and thank you for joining us. This morning, we will be reviewing our results for the Q2 and providing our outlook for the remainder of the year. I am joined this morning by Luke Palosi, our CFO, who will take us through our Our earnings press release, which includes important information. The press release is available on our website. We have prepared a presentation to accompany this call that is also available on our website. During this call, we will be making some 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. 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 statements. 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. This call will include a discussion of certain non IFRS measures. A reconciliation of these non IFRS measures can be found in our filings with the Canadian U. S. Securities regulators. I will now turn the call back over to Patrick, who will start off on Page 3 of the presentation. Thank you, Luke. Our exceptional start to the year continued into the Q2, allowing us to once again exceed expectations. Specifically, we grew revenue by nearly 40% on a constant currency basis. Adjusted EBITDA margin expanded 60 basis points And adjusted free cash flow more than doubled. Thanks to the tireless dedication and capabilities of our more than 15,000 employees, We are once again able to demonstrate the power of our business model and our ability to execute on our stated growth strategy. In terms of organic growth, the quality of pricing we saw in Q1 continued to accelerate into the Q2, where we saw solid waste pricing ahead of plan at 4.1 Thanks. Improved residential pricing, the recovery of price attracting commercial volume and strong price retention combined to yield this outcome. We remain encouraged with the path to see more than offsetting rising cost inflation through the underlying pricing opportunities we see in the business. Additionally, the inflationary environment should provide a boost to the pricing we see on CPI linked contracts, That we will realize as we roll over into 2022. Solid waste volume growth Was well ahead of expectations at 6.3%. The markets that are quicker to ease COVID related restrictions saw the greatest volume recoveries. That being said, our Canadian business, which is subject to continued and in some cases enhanced COVID restrictions through most of Q2, saw a 5.5% revenue increase From non MERV processing volumes, an outcome that we think bodes well for future periods when existing restrictions are lifted. We're hopeful that Canada gets to such a stage soon, but at this point in the year, we think the benefits will be realized primarily in 2022. Commodity values once again provided a tailwind, although as we've disclosed, our sensitivity to price fluctuations continues to decrease As we progress on a strategic shift toward the fixed price processing model, non mirage commodities will continue to provide a benefit The prices remain at current values for the remainder of the year and we've updated our full year outlook on that basis. Our Liquor Waste business showed significant recovery during the quarter, Growing organically nearly 14% as the markets in which we operate began to recover. Consistent with our guidance, we saw significant Operating leverage associated with the volume recovery. Our rigorous focus on quality of revenue and cost management drove nearly a 500 basis points EBITDA margin expansion Over the prior period, it furthers our progress towards the longer term margin profile we expect for this segment. Recall that our infrastructure and soil remediation business posted positive organic growth in the Q2 of 2020 as the nature of the activity in that segment was the last taper off at the onset of the pandemic. And what we're now seeing is a bit of last stop, last restart. As the recovery of this segment is lagging the broader business by a quarter or 2, we remain confident that the lag is merely timing and that while Delayed, the pent up demand and additional stimulus from infrastructure spending will drive volume recovery that we expect will benefit us for the periods to come. In addition to organic growth, the 2nd quarter also saw us advance several of other value creation initiatives. We successfully refinanced I just put on bonds and realized nearly $17,000,000 of annualized cash interest savings in doing so. We sold $60,000,000 of non core low And we've identified several high contribution opportunities into which we intend to deploy the capital. And finally, we continued executing on our M and A strategy. In addition to substantially furthering the regulatory process on the Peravir Acquisition, we acquired 8 small tuck ins in a new landfill during the quarter. We expect to close a similar number of transactions In Q3, we remain highly optimistic in our ability to deploy an outsized amount of capital into M and A strategy in the back half of the year considering the depth And quality of our pipeline. The strong first half results coupled with our confidence in the back half of the year are leading us to increase our full year expectations for the business. Luke will walk through the details, but when you boil that down on a constant currency basis, we're increasing our guidance for revenue and EBITDA by 4% to 5%. We're increasing our adjusted free cash flow guidance by nearly 10%. But perhaps the most relevant of all, we are now guiding to the The year with an adjusted run rate free cash flow number of $610,000,000 or better, which we think sets us up to exceed the multi year guidance we laid out just 6 months ago. I know we're still relatively new name for many of you, but this marks our 6th quarter as a public company. But what we've been doing, We did this quarter for a long time in the private markets, setting expectations for the business and meeting or exceeding them. We said on following quarterly calls that we've assembled the pieces of the puzzle that form the foundation capable of consistently producing exceptional high quality growth. We believe that this quarter's results again demonstrates our ability to execute on this growth strategy. I'll now pass the call over to Luke, who will walk us through the details of financial results, and then I'll share Some closing perspectives before we wrap up. Thanks, Patrick. I'll pick up on Page 4 of the presentation. Revenue increased over 32% compared to the prior year period. This was driven by outperformance from the 2020 M and A, strong solid waste Pricing and meaningful volume improvements both sequentially and as compared to the prior period. You can see the trend in volume growth over the past quarters on the chart at the bottom left of the page. I'll circle back to the shark in a minute. Net solid waste pricing was 4.1%, which was better than what we saw in the prior comparable period ending Q1 of this year. As anticipated, the recovery of IC and I volumes coupled with the inflationary backdrop has continued to provide incremental price support for the year And provides us the confidence to forecast that we'll be able to deliver at the high end of our pricing targets for the year as a whole. Resetting of CPI linked contracts, Which tend to lag actual CPI movements should also provide broad based support to pricing levels over the next several quarters. Comparable to what we reported in Q1, Elevated commodity prices increased revenue 80 basis points as compared to the prior period. The 6.3% positive solid waste volume increase was 5.1% when excluding the Merck processing contracts in Canada that have now lapped in Q2. Excluding these contracts, U. S. Volumes were 60 basis points better than Canadian volumes, which while a positive data point for the U. S, we believe also speaks to the underlying strength of our Canadian business, Considering we achieved these results when most major Canadian markets continue to be faced with pandemic related restrictions on activities throughout the Q2. Although Q3 has seen additional easing of COVID related measures, key Canadian markets such as Toronto continue to face activity restrictions, which will temper the pace of the volume recovery while they remain in place. Although the lag has become longer than we had originally anticipated, the Evidence coming from our Southern U. S. Markets has further reinforced our views that when the restrictions are eventually lifted, we will see a meaningful acceleration of volumes. On this point, I'd remind everyone that the majority of the revenue we derive from the fastest to open U. S. Markets, namely those in the Sun Belt and certain pockets of the Midwest, It's coming from our 2020 acquisitions and the outperformance of these businesses is therefore being presented as incremental contribution from M and A as opposed to additional volume growth. Also just want to remind folks about the cadence of our volume growth over the past few quarters. So if you circle back to the volume trend chart at the bottom of the left, I think it's important to highlight that we're just getting back to slightly above 2019 levels. The volume growth is more a function of the easy comps as opposed to real incremental Economic activity growth, which we think is there, but not yet fully showing through in the numbers. I highlight this to help provide context for expectations. We were only negative 8% for the low of Q2 last year and were actually positive by Q4 of last year. The lows that we're bouncing off are not nearly as low as what some of the others Experience. So as we talk about the guidance for the balance of the year, I just wanted to remind that context. Moving to liquid waste. This segment showed tremendous growth during the quarter as COVID related volume declines came back online. The volume recovery was more pronounced than our U. S. Business, although the Canadian business recovery was also impressive, particularly considering the continuation of the broad based pandemic restrictions. Similar to our comments on the recovery of solid waste volumes in Canada, We expect improving strength in the recovery of this segment as restrictions in Canada continue to ease. As Patrick mentioned, the negative volumes were in line with our expectations and largely attributable to the tough prior period comp. M and A contributed $288,000,000 of revenue during the quarter, about $16,000,000 of which was from new 2021 M and A, With the rollover from 2020 accounting for the balance, which was above our guidance despite the FX headwind from the predominantly U. S. Dollar denominated revenues of these assets, We continue to identify significant incremental growth opportunities within these asset packages and remain confident in the ability to outperform the original pro form a FX was negative 6.4% for the prior versus the prior period and about a $25,000,000 revenue headwind versus guidance. You'll recall that our FX impact is substantially all translational and that for every one point change in the FX rate, our annual revenues are impacted by approximately $4,000,000 On Page 5, you'll see segment results. Solid waste margins of 30.9% were 10 basis points ahead of the prior comparable period despite a 5 basis point headwind from recent M and A. Although the net effect of elevated commodity pricing was a margin tailwind, this was more than offset by the impact of Fuel prices and the strengthening of the Canadian dollar. Excluding these macro factors, we saw strong pricing, cost Management and focus on productivity and asset utilization drive 90 basis points of organic solid waste margin expansion, A result we think is quite impressive when considering rising labor and input cost inflation and the delayed recovery of such costs in much of our CPI linked revenue base. Liquid waste margins increased 480 basis points, substantially all of which was organic and demonstrative of the operating leverage in this segment. The ongoing volume recovery should provide support for better than mid-20s margins to continue through Q3 before the seasonal step down in Q4. Infrastructure and SOREL margins improved 6 40 basis points sequentially from Q1 despite the ongoing impact of decreased volumes and the change in mix. On Page 6, you can see adjusted cash flow from operating activities of nearly $160,000,000 This amount includes $63,000,000 of proceeds from our asset Dale, note that while inclusion of these proceeds seems lopsided for the current quarter, we intend to redeploy these dollars before the end of the year, and therefore, the timing difference will be offset by year's end. Excluding these proceeds, adjusted free cash flow was $97,000,000 More than double the prior year and ahead of our expectations on the strength of our operating results for the business and continued rigor around working capital management. We continue to expect the working capital investment in the first half of the year to be recovered in the second half of the year, save for any impacts from second half M and A. As previously discussed, we once again demonstrated our ability to reduce our weighted average cost of debt by Financing our 8.5% notes during the quarter. Re pricing that US360 million dollars 8.5% to 4.75 percent reduces annual interest costs by approximately $17,000,000 We continue to see opportunities for refinancing will execute as opportunities present themselves. We deployed approximately $200,000,000 into 15 acquisitions for the 1st 6 months of the year And almost another $100,000,000 into 5 additional tuck ins subsequent to quarter end. We think these acquisitions will contribute approximately $130,000,000 $140,000,000 Annual revenues and puts us well on our way to achieving the M and A targets we laid out at the beginning of the year, even before considering the impact of Teripure, which we are on track to close by the end of Q3. Quickly on Page 7, net leverage at quarter end further improved and we continue to have ample liquidity to Our growth goals while delevering our balance sheet. And as I just said, we continue to assess opportunities to reduce our overall cost of borrowing. On Page 9, we've laid out our updated guidance in the form of a revenue bridge. On the strength of the results in the first half of the year, increasing our guidance by $100,000,000 to $115,000,000 attributable to solid waste pricing and volume and assuming commodity prices remain at the current levels. Specifically, solid waste pricing goes to 4%, the high end of our previous range, and solid waste volume goes to the low 2s, Despite the lingering restrictions in Canada, commodities add an incremental $20,000,000 on top of the original guide And the outperformance of the 2020 M and A adds another $20,000,000 Conversely, with the delays in recommencement of activities, We're now expecting Soil and Infrastructure to be approximately $30,000,000 less than our original guide. Again, we think this is entirely timing and when the sector starts There will be meaningful volume gains. It's just that where we're sitting today, it would appear as if the majority of that benefit will be a 2022 event as opposed to 2021. We then have the expected contribution from 2021 M and A, which reflects our expectations for the businesses we've acquired to date And assumes TerraPure closes October 1, a date for which we now have a high degree of conviction. The $120,000,000 to $150,000,000 presented as contribution from net new M and A is net of the revenue divested as part of the asset sale we completed during this quarter. That takes you to revenue of approximately $5,300,000,000 which is presented on a constant currency basis to what we presented in our original guide. The last step on that page normalizes for FX, Reflecting the actual FX for the 1st 6 months of the year and assumption of a 1.25 FX rate for the second half of the year. From that revenue, we expect to generate EBIT of approximately 1.410, the high end of our margin range and adjusted cash flow $520,000,000 or $530,000,000 on a currency constant currency basis with our original guidance, reflecting a 10% increase over our original adjusted free cash So then lastly is Page 10, and we think this page is the most relevant. What we've done here is updated our expectations for our 2021 exit run rate. So if you start with the actual expected revenue to be realized in 2021, we then have the rollover of the M and A we've already done so far in 2021, And this brings you to an exit run rate of $5,550,000,000 So this is effectively what the run rate will look like if we don't do anything else for the remainder of the year. At the beginning of the year, we laid out incremental upside opportunities related to M and A, refinancing and capital redeployment. Excluding Terrapure, We basically achieved half of our goals in these areas through the 1st 6 months. The last step of the $150,000,000 represents the incremental The contribution if we achieve the targets we laid out for in each of these areas by the end of the year and risk due to an exit run rate of 5.750. From this revenue, we expect a run rate adjusted EBITDA of $1,545,000,000 and run rate adjusted free cash flow of $610,000,000 So while we're not currently updating our guidance for 2022 and 2023, we think this page should help set the stage. If you take the base business organic growth model of mid single digits of the top line, mid to high single digits at adjusted EBITDA And low double digits and adjusted free cash flow, layer in some outsized volume contributions that are expected for 2022, Some self funded tuck in M and A and continued refinancing. We feel highly confident in our ability to exceed the multi year growth targets we laid out just 6 months ago. We will formally provide our 2022 guidance on a subsequent call, but just wanted to provide the stepping stones as we know there have been a lot of moving pieces. With that, I will now turn the call back over to Patrick for some closing comments. I would like to end our call today with an update on our sustainability initiatives. We are continuing to develop ESG goals and targets that we will disclose in next year's sustainability report. A focus of our report will be our initiatives aimed at reducing or avoiding GHG emissions. One key area is recyclables. Earlier this month, we announced the formation of the Resource Recovery Alliance. This initiative puts GFL at the forefront of the move to extend the producer responsibility, providing producers with the solutions they need to drive higher resource recovery rates. Another key focus is on renewable energy. We have set up GFR Renewables with our vehicles to unlock significant value in landfill gas energy projects At 18 of our MSW landfills that we have identified to date and to accelerate the conversion of our fleet to CNG. All of these trends we are seeing this quarter and the opportunities we see ahead of us have never been more optimistic about I will now turn the call over to the operator to open up the line for Q and A. We will now begin the question and answer Our first question comes from Hamzah Mazari from Jefferies. Please go ahead. Hey, good morning. Thank you. Could you maybe talk about directionally how investors should think about free cash Slow given the update and given the current update for 2022 and 2023. And then maybe just tie that back to The investment thesis from the time of the IPO as well. Yes. So I'll turn it over to Luke. But I mean high level, I mean, it's I guess the irony of this is last At this time, we were defending a short seller that said the business had no free cash flow and we were estimating $360,000,000 for 2020 as realized. I think when you look today, realizing somewhere between sort of 510 and 520 This year with probably some potential upside to that number. And then you roll that forward into a run rate number like Luke mentioned of the 610, There's very good probability that we continue growing this business at double digit Free cash flow growth from there. So I mean you're looking at somewhere between $675,000,000 $700,000,000 for 2022. And then When you think about 2023, you're going to be growing at double digits again from there. So I think fairly conservatively, You get free cash flow in 2023 to sort of the mid-eight 100s. And I think that exceeded what we had anticipated at Time of the IPO, but as the piece of the puzzle continues falling in place, this is really what the free cash flow is driving the business. Yes. I would just add, Hamzah, that the numbers Patrick is saying isn't sort of the official guidance for next year, but rather just We lay out the operating model on our exit run rate and that's the math that you get even before considering Some of this incremental self help opportunities we've identified within the base business, which could be quite sort of meaningful. So again, I think We're at a very unique inflection point where we're going to start leveraging some of the investment and the capital structure And you're just going to really see that conversion of what was, as a percentage of revenue, a mid- to high single digits really quickly start approaching the low than the mid teens. And then Converzer, similarly at the EBITDA line, you can take what was a sort of high mid to high 30s EBITDA conversion into free cash flow is going to go The low 40s and then the high. And I mean, I think we're just going to keep laying out the building blocks so that folks understand because I think We're talking about a free cash flow CAGR north of 20%. And I realize there's a lot of moving pieces and get there, but Now that's the story that we want folks to keep sort of focusing on because we believe that that's highly compelling. That's great. And then just the second question is just on GFL Renewables. Could you maybe talk about the strategy there? Are you separating that business out? Just any broad thoughts on long term strategy there? Yes. So I mean, particularly over the course of the last 6 months and particularly with the Increased value of the ring credits, we have Significant cubic feet of gas coming through our landfills. And when we've done a study on this really over the last 6 months and it Sort of bubbled up for a lot of other companies in the industry that I think are a little bit more mature than us. We have 18 landfills today that we have an opportunity to basically Make RNG, when you think about that, I just we sort of just gave high level numbers. What I'm talking about now would be all in addition to. Today, we have, like today's RIN pricing, about 100 and $75,000,000 of gas that could be sold at today's RIN pricing. Our perspective is that This cash could add $75,000,000 to $100,000,000 of free cash flow over the sort of next couple of years because what we would do is we would partner with There's 2 companies we're in dialogue with today to build out this infrastructure at our facilities. And it would be with a fairly minimal CapEx spend. I think the other thing we would do is we would hedge out That win value over 20 years and signed off take agreements with some others. Now that comes at a discount to where the wins are currently trading at today, But it takes out a lot of the volatility out of the RIN values. So when we look at that, I think that $175,000,000 is going to be some economic split with the developers, Plus then you got to discount it back a little bit because we would enter into a hedge or a presale contract for 20 years with an offtake provider. So at the end of that, we think there's probably $75,000,000 to $100,000,000 of free cash flow that comes back to us without not a lot of volatility. So It's a big opportunity. I'm also separating it out. There's been some recent transactions where There have been some renewable fuel plays and these businesses are trading at 40 to 50 times EBITDA. And I think from our perspective, yes, it will be a nice free cash flow generator, but hey, if it's a way to unlock value because Some of these other players that are in the business want to come in and pay us a big check to buy the rights of that fuel. There's 1,000,000,000 of dollars Sitting there under our nose potentially and we just wanted to have that in a separate vehicle. And then the other big benefit from an ESG story is with As we develop these plants, we'll be able to fuel 100% of our vehicles with gas that we capture in all landfills, which we think is a great Sorry, as well. So put all that together, we think this is a very large opportunity. And all added is the time that Luke just laid out. Got it. Just last question, I'll turn it over. I know you talked about M and A this year, Bart, any thoughts as to the longer term pipeline, specifically, out of the private company revenue that's out Everybody has their own estimates what that number is in U. S. And Canada, but do you have a sense of what percent of Private company revenue fits your book of business today. You can answer it however you want in the U. S. Or Canada. Thank you. Yes. I mean, from our perspective, where we sit today, the M and A market is Extremely active and I think we're fortunate in the few markets where we've become the acquirer of choice because some of those competitors Our family businesses fit very well with us in sort of our culture, but they also fit from a perspective that Given the length of the DOJ processes that people have been going through, as they try to get deals approved, I've led to some delays. And we were part of that on MediaWM transaction and now Republic's gone through a few With the recent acquisitions, and I think there's some sellers that are concerned about where capital gains are going and that's Commission is very well because there's some of the markets where we don't think we have a very difficult time getting through DOJ and that's made us an acquirer of choice for some of those businesses. But I think it will be an outsized year. But I mean, when we look at our pipeline today, over the next sort of Rolled to 16 months, I mean, from our perspective, there's easily another $500,000,000 to $1,000,000,000 of revenue that we can get our hands on relatively seamlessly over that period. Great. Thank you so much. Our next question comes from Michael Hoffman at Stifel. Please go ahead. Hi. Thank you very much. This is a little bit in the weeds, Luke, but what's the quarterly contribution of TeraPure for the 4th quarter so we get Progression right? Yes. So Michael, what we've modeled in as of now is about $80,000,000 to $90,000,000 of revenue. And the reason that's going to be arguably a larger range than normal is on the basis that with the reopening in Canada, I think we're going to see a bit of a shift in Seasonality pattern that one would expect with delays. So there's a bit of a moving target there. But it's around that $80,000,000 to $90,000,000 at the top As a whole, just again, because the difficult sort of seasonality pattern in Canada. So it's in the low 20s as opposed to that high 20s that we expect for the full 12 months Okay. That helps a lot. Thank you. And then when you think about your comment on Canada and the sort of progressive reopening, But you also have a seasonal issue. Again, how do we think about being back Even 2019 levels, what's your sort of sense about the timing of that relative to Canada? Yes. I mean, I think we're vaccination rates are bad. I mean, I think the full reopening plan is planned for All phase in through September November and when I say that, it's really sporting events. It's The office building, the schools, etcetera, which have been shut for a long period of time. And I think if you see you have all the guidance that you once put out across Canada. It's now okay. We got to live with the virus and they're going to phase that in between September, November. I mean, We're getting pretty close to 2019 levels today, as Luc mentioned earlier in the call. So I think we turn positive Start by the end of the year and then certainly going into 2022, we'll be back to pre pandemic levels. Okay. That helps too. And then on the renewables business, and then rents are a little over $3 right now, long term average is sort of 1 point 5 2, is the intention to sort of hedge down into that long term average and that's the point you're not introducing another point of volatility in the model? Yes. That's my perspective. And particularly, we'll look to lock in, call it, 65% on that, so we don't get volatility on 65% of the rain. And then the other way, We've got a natural hedge internally because we would take a storm of that fuel to fuel our trucks. So we'd be virtually 100% covered. Okay. That helps on that. And then on the EPR program, can you talk a little bit So any unique issue relative to the United States, we do it at a state level like that. It ever happens at a federal level. So what is a particular strength To GFL, given this national rollout, the stewardship programs, buying in the nonprofit, What do all those combined to create as a natural within your natural strengths a competitive advantage? Yes. So if you look at today, British Columbia was the 1st province to enact it. We currently manage that program for producers and for the I know we have a lot of experience, firstly. And I just think and this is dealing with municipal curbside volumes. So we're not talking about the IC and I sector here. And today, the producers pay 50% of the cost of the recycling of those materials. That is moving to 100% And they are responsible for the actual collection processing and the municipalities actually have to opt out. So I think the value we bring is I think our asset base, given the amount collection contracts we already have in Ontario, layering on together the processing facilities we already have and then coupled together with the experience we have in BC And then buying the CSSA, which actually has the regulatory reporting and compliance tool. So we put that all together, I think it's a very compelling offer for producers. And at the end of the day, our tail is moving away from a single model to a multiple Paul, now I'm going to have to work together. So we think us working together will give us the right seat at the table to structure all these contracts properly And utilizing our assets to the best of our abilities. Okay. And then within the context of the free cash flow outlook, All of the numbers you're giving are still sort of around the high-30s cash conversion of your EBITDA. So what's the prospect of moving the conversion ratio As well, not just the overall growth of it, but moving the conversion ratio back up into a mid-40s or better level. Yes, Michael, I think naturally, the conversion Improvement driven by the margin improvement that we're talking about is going to fall through. But I think where you're going to get the most torque and something we've spoken about before It's by leveraging that interest line, right? So if you think about the sort of $300,000,000 ish interest line that's Currently in my free cash flow walk, pivoting into next year, I mean, we really turned into the self funding model And you start leveraging that line. And I think it's through that, that if that represents sort of mid single digits of our Revenue today, as you grow thereafter, you're going to really see that sort of number getting leverage off of that. So as we said before, the plan was From 2020 IPO year to 2025, we thought we could take at a percentage of revenue up from high single digits to sort of mid teens. And if you roll that into the EBITDA conversion ratio, it's taking from that mid-30s to high-40s. So we think that we're demonstrating that and you're going to continue to see that. But the capital structure component of it, I think, is a unique Opportunity for us where we're at in our path that's going to provide extra torque at that conversion ratio. Okay. And to put that in context, the peers are 2% to 3% of revenues as their interest expense, you're higher than that. And this is an absolute dollar reduction in it or an Accelerated growth of the revs and therefore the compounding through the process. Well, the latter in the near term And then the former in the longer term, right? As you get beyond sort of 2023 and you start having In excess free cash flow, then that's when I think you actually start reducing the quantum of the dollars. But in the nearer term, we have this leveraging The fixed amount of dollars. Okay, thanks. That's great. Thank you for taking the question. Our next question comes from Walter Spracken from RBC Capital Markets. Please go ahead. Thanks very much. Good morning, everyone. Let's come back to the landfill to gas conversion. Patrick, you mentioned that you're at opportunity right now of $175,000,000 Ability to grow significantly beyond that. Can you give us a little bit of sense of what it would take to grow, what level it could get up to? And I think you said a modest CapEx spend, a little bit more elaboration on I'll spend a little bit more elaboration on the capital required to get up to a higher run rate on your landfill to gas conversion. Yes. So I think when you look at it today, there's what I said is there's roughly $175,000,000 today at today's win pricing. Give or take, there's probably some more, so I'm being conservative on that. The question is, we would Our perspective is today we're going to joint develop them. We're not going to develop them on our own. I think our time to realize those dollars would just be quicker dealing with Someone that knows how. So we're going to give up some of the economics of that fuel to somebody else on a revenue sharing arrangement. But if you look today, today you can sort of lock in some of these forward gas contracts and effectively hedge out the Somewhat between $1.80 $2 so you don't take a third of that off. And then the revenue share, I think, you get to somewhere between $75,000,000 $100,000,000 I think the total CapEx spend to do that, a portion of it would be $125,000,000 to $150,000,000 is a rough number. The interesting part is if you enter into these hedges that we're contemplating doing We will be signing these offtake agreements with an investment grade utility. We could get investment grade bonds to basically finance 100% of the build out if we did 60%, 65% of the offtake with them. So From an equity perspective, it is very minimal and obviously from an IRR perspective, it's 40 plus. I mean, I don't think there's a better use Capital anywhere today. So that is what's going and that's why I sort of use the number of 75 to 100 over the next sort of 2 to 2.5 years. That's great. And dovetailing that into non core operations, you made a divestiture just Recently, are there other divestitures that you could then deploy into some of your core areas You could frame out how much of non core are you currently looking at or could possibly look at? And would landfill to gas conversion be if it gets big enough? And would you look at that as something to spin out And redeploy into some of your core, is that or is that something you want to kind of keep in house? From my perspective, I'm a shareholder first. My priority here is to make money. I'm a single largest shareholder. We kept it separate for that reason. I mean these renewable plays, like I said, there's been a recent one that's just come out $40,000,000 of EBITDA Gone public at a $2,000,000,000 value. There's one recently in Canada that I think it had $7,000,000,000 or $8,000,000,000 of EBITDA and it's trading at $1,000,000,000 value. We're going to have 75 to 100 sitting in here. And I think If someone wants to pay us multiple 1,000,000,000 of dollars, I mean, we're happy to take that money and I think we'd make a lot of people happy with the deleveraging story, maybe Some form of dividend or distribution, but that's all we do. So I don't know why we just keep it. I mean, we think these businesses are trading at 25 times to 30 times free cash flow. So you have potentially could create $3,000,000,000 plus of value over the next little while. So one way or another, We think it's going to create significant value, whether that's kept internally or whether longer term. We sell the rights to that gas to Someone that's got a crazy multiple in the public markets. And Walter, the gas Component aside, just the broader redeployment of capital or non core, at the beginning of the year, we said there was $50,000,000 to $100,000,000 potential sort of asset sales to complete, what we did in Q2 was about $50,000,000 that we sold. What we've put in the Incremental upside opportunities in terms of the guide. It's just that remaining $50,000,000 So saying that we still think there's In this year, dollars 100,000,000 in the non core that we're going to sort of execute on and take those dollars to sort of redeploy into other higher growth and return initiatives. Okay. Appreciate it. Yes, I think that's a conservative number as well. So You'll probably see us do a little bit more than what we put in the guide on that front. Yes, it sounds like a good optionality for sure. Appreciate the time as always guys. Thanks. Thanks, Walter. Thanks, Walter. Our next question comes from Kevin Chiang from CIBC. Please go ahead. Good morning. Thanks for taking my question. I know you're not sufficiently adjusting your 2022 2023 targets, but if my math is correct, I think you're applying something with a low 20% 27% EBITDA margin out in 2023, but just given the 2021 update, which kind of gets you Almost a 27% already. Just wondering how you think of the cadence of EBITDA margin expansion over the coming years here? Do you see a higher Upside relative to maybe what you saw 6 to 7 months ago when you put out that outlook initially? Yes. I think from our perspective, we're taking the under promise and overdeliver approach. I think what we talked about at the time of the IPO, I think we're probably a year ahead of plan on terms of margin expansion. But certainly, our plan is to continue expanding margins and as we move somewhere between 28% 29% As we move out into sort of 2023, feel free to type in. Yes, Kevin, what I'd The quantum of the margin expansion period over period last year was sort of unique. Coming to this year, the idea was to take it up to high 26s, 26.7%, 26.8%, I think was the guide. I think you're right. There could be a path to doing a little bit better than that, which is then setting you up next year. I think what you'll see in the guide when we talk for 2022 Is we're able to battle these cost inflation this year without having the benefit of The CPI resets, right, because again, that's really going to be a 2022 benefit. So we're eating it for the 1st 2 or 3 quarters of this year before we get the benefit. That's going to likely probably add even more. So I think you're right in thinking about the original target has probably now been accelerated. The exact timing and new sort of goalpost, you have to sort of stay tuned, but I think you're thinking about it in the right context. Okay. That's helpful. And then as you sit here today, you're obviously punching above your head of schedule, as you mentioned, Patrick and Luke, can you just give an update on when you think cash taxes start flowing into you? And And then with this accelerated free cash flow generation, does that change your priorities? Do you push more of that into M and A? Does deleveraging become More of a priority with this excess free cash flow here, just wondering how you think about that. I'll touch on the cash taxes quickly, then Patrick speak to excess cash flow considerations. On the cash taxes, It's largely the growth in the U. S. Business is what's going to drive the Cash tax payments starting and as of now that's sort of a little bit in 2024 and then you get into more of a full payer in 2025 and then a real full payer in 20 But that's absent continued strategies to sort of mitigate that, which we're constantly evaluating. And certainly, the incremental deployment of capital to M and A helps with that. So Kevin, to your point, I think, yes, On the base plan, the outperformance is accelerating that. However, the counter is excess Outperformance in M and A deployment, which I think kind of provides a bit of a sort of buffer. So we continue to evaluate, I think, holding the 2025 as the year still sort of holds true, but know that we are actively engaged and continue to be as strategic there as possible. In terms of what we do with the excess free cash flow, Patrick, I'm not sure you have sort of commentary around that. Yes. I mean, I think from our perspective, like we've always said, we're going to continue deploying capital into smart accretive M and A. We think Where we are in our growth cycle, that's going to continue to be prevalent. The free cash flow really starts building between 2022 2023. I think You're going to move to what? You're also going to move to sort of a dividend policy when the TEUs Come off and you're going to put it sort of back to a nominal dividend as some of those PU interest payments go away. And then sort of coupled together with share buybacks at some point. But I think there is a lot of M and A and a lot of great M and A that Can still be done, significantly more value than we're trading at today. So I mean, I'm not of the mindset today to buy back our own stock at I mean, I could buy some high quality assets privately today for me. Over time, that's what's going to create a lot of value for us. I mean, we've been doing this for 14 years. Like I said, all I want to do is take my $800,000,000 to $1,000,000,000 to $1,000,000,000 of equity in my option that I have And continue just driving the value of those forward. I mean, if you look at the recent out of plan that the NEO signed up for, I mean, No one is getting anything until the stock clears through $50 and then clears through $60 So that is our conviction around what we believe the equity value of this business is going, which is Almost 2x where it is today. So we are very sort of comfortable in the plan that we've laid out. And I think from our perspective, just giving each and every one of your building blocks about how we're going to get there. I think it's been 6 quarters of us Participating exactly what we were going to do even at the time of the IPO living through COVID and where we are today. We'll just continue delivering and executing on that plan and Eventually, we're going to fill up the bus with investors and that will start driving things forward and getting this trading where we all believe it will be. I appreciate taking my questions. Thank you very much. Thanks, Kevin. Our next question comes from Mark Neville from Scotia Please go ahead. Good morning, guys. Good morning, Mark. Maybe first for Patrick, Maybe just going back to the renewable opportunity, can you maybe just walk us through sort of timelines and sort of milestones to watch for in terms of signing up Yes. So we're well along the line. And I think the first engagement Engagements will be signed sort of in the next 4 weeks. And then you're basically between sort of 15 16 months out To build some of them. Some of the facilities are already built, they just need to be modified because they've been used for cogen and power. So I think pretty conceivably, we could start Seeing the realization of some of the dollars going into early 2022, but then seeing the real dollars as we get into later 2022 and Thanks. Maybe Luke, just a point of Clarification on the CapEx. It sounds like gross and net for the year will sort of net out to the same number if you can sort of spend all that money, but maybe just give us Maybe just help on the guide for the CapEx spend for the year? Thanks guys. Yes, Mark. So you're right. It's the Proceeds from disposal are going to offset any incremental spend. So if you think about the original guide, it was sort of a 5.10 number with the M and A, there's another So maybe think about it as a net $525,000,000 To the extent we can redeploy the capital this year, we'll be sort of doing so, but we're going to Average out to a net number of $525,000,000 meaning we won't we'll only spend proceeds to push investment above and beyond that. So while the gross number could be north of that towards sort of say 600, we'll make sure to manage that net number of the 525, and it's Depended on how quickly we could deploy some of this capital into a whole host of growth opportunities we've identified in the existing base Business and net new things like Relentro Gas to Patrick Starcana. Got it. Thanks for taking my questions. Our next question comes from Jerry Revich from Goldman Sachs. Please go ahead. Hi, this is Adam on for Jerry today. In addition to landfill gas, you folks have a broad set of ESG So just wondering if you could help me think about the annual CapEx associated with green initiatives. And is it possible to break that out Between landfill gas, recycling and any other key initiatives? Yes. So we don't separately break out a bunch of our ESG type initiatives. I mean that all gets sort of modeled in our maintenance and growth CapEx for the year that sort of sits at around 10%. But I think realistically where we're sort of Sitting today, we're deploying anywhere on a given year roughly $50,000,000 on recycling type initiatives. A year ago, it was closer to 100 just because we had a large organics build out and a large recycling facility. But I think 50 today It's probably a realistic number that we're using as we've developed those over the last number of years. On the landfill gas, like I said, I think our spend is going to be somewhere between $125,000,000 $150,000,000 to capture that over the next 24 months, but given these creative way to finance it with these investment grade type bonds, with these offtake agreements, from an equity perspective, it should eat up any From an IRR perspective, I don't think we'll find something that can produce any IRRs that are much sort of higher than that internal opportunity. Okay, great. That's really helpful. And then other solid waste peers have talked about gradually shifting their index price contracts to water, sewer, trash away from traditional CPI, I was wondering if you could provide any color into the makeup of your index contracts and if you see that evolving from current levels? Yes, Adam, it's Luke. Yes. What I would say is we welcome the shift, but are very early days in our personal sort of participation in that. So if you look today, we have roughly $800,000,000 most of which is in residential, but you also have some in MRF processing, landfill and That's tied to a CPI type index. Very little de minimis of it is tied to one of the, what I'll Better indices like sewer, water, main or utility or some of the others that the majors in the industry have been converting to. We are supportive of the change and think it does better reflect the cost structure Of these businesses, but we just see that as opportunity today because we are still sort of pegged to the old way, if you will, sort of CPI. But That being said, we think even the CPI linked contracts are going to provide a very nice pickup for the next, Call it 4 to 6 quarters as those things sort of reset. I mean, I think the print in June in the U. S. Was north of 5, in Canada sort of mid-3s. And I think as we now get the resets, a lot of which happened in the back half of the year, we're going to enjoy that benefit going. But I think longer term, Pivoting and migrating our portfolio of index linked revenue to these higher indexes is just And even larger opportunity that's out there for us. Great. Thank you very much. Our next question comes from Tim James from TD Securities. Please go ahead. Thank you very much. Good morning. I just want to go back on the question, Patrick, here on your comments regarding Kind of the change in revenue guidance and where some of that originated from it. Was I correct in understanding that the solid waste impact John, guidance is primarily originating from acquired businesses and the assets in the Sun Belt in particular? No, no. Yes. What we tried to break out there was The pieces of the outperformance, I mean, what we're saying in the base guide, we're taking up price. Before we said price was sort of going to be 3.5 and take that up to the high end of the range. We're taking up volume before we said volume would be like Sub-one, now taking that up to sort of low-2s. And then the other piece of volume is in the M and A bucket, the rollover, but now saying The volume experience we have in that rollover M and A is greater than thought. So that's coming up again by another sort of point to 2 points. So I think it's broad based Across all of the buckets, as opposed to saying the new M and A. The new M and A was that separate bucket if you look at the bridge. So I think all of the revenue drivers are sort of coming up. So commodities was the last one I didn't mention. And in the quantum that I just articulated. Okay. That's helpful. Thank you. And then, I'm wondering if you could just talk a bit about what you're hearing from your construction project customers, in particular, in terms Of getting back online, are there any notable and remaining impediments to returning to normal levels of activity in the back Half of the year, again, notwithstanding, I guess, any retrenchment in reopenings and maybe in particular, the lower Volume, soil remediation customers, a bit of an update there. I know that's continued to be slow here in the second quarter. Yes. So I think it's coming. I think everyone is highly encouraged. Final restrictions came on. I mean, this is really an Ontario business for us. I mean, it's derogatory, significantly GTA. And I think As most of those restrictions came off at the end of June beginning of July, people are now ramping back up to but they do take a few months to get these sites ramped up, Just given they've been so that's why I said, Luc, I think what Luc said earlier was that the bulk of this is the real upside we're going to get is for 2022. When I look at the amount Contracts we bid and the guys are talking about Boeing as early as August and as far as sort of earlier next year. I mean, There are some significant projects and I mean tens of 1,000,000,000 of dollars that the provincial government has is Canvassing now and looking for work to be done. So all of that's going to come. I just think, like we said, it was the slowest to wind down and it's the slowest to sort of pick back up. We now have visibility on what's going to be done, and I think 2022 is going to be a very, very big year for us. Okay, that's great. Thanks very much and congratulations on a good quarter. Thank you. Thank you. Our next question comes from Tyler Brown from Raymond James. Please go ahead. Hey, good morning guys. Good morning, Tyler. Hey, sorry. I got a call waiting right whenever I turned over. But hey, I know the call has been long here. But Luke, on Slide 9, I really appreciate it, but I want to make sure that I have it. So of the incremental 110 to 100 and In solid waste, only 20 of that is from commodities and the rest is just kind of core delta? Yes, that's right. So, Tara, if you think about what we said at the beginning of the year, year over year, the original guide provided plus 10 at commodity. Based on what we've seen throughout this year and now the expectation for the balance of the year, saying there will be another sort of plus 20 On commodity. And again, while that's muted compared to what others may be sort of saying, you got to remember that for every dollar the commodity goes up, I give sort of $0.40 of it back So the guidance, so I'm getting less of an impact as I move. So the $20,000,000 macro commodity, the rest is really outperformance on price and volume. Okay. And on the price and volume, I'm assuming that's largely a positive delta in the U. S. I mean, it sounds like you have pretty reserved comments on Canada. I mean, it's I continue to have reserve comments on Canada, but the opening guidance was also reserved on Canada. So it is positive in both, Particularly on the sort of pricing, moving both of those up to getting to a higher number than in the original guide. But yes, it's the U. S. Business for which we are More have a better line of sight because again, our Canadian government seems to be a little bit more uncertainty in terms of timing. Yes. Okay. And then so on the free cash, and I just want to make sure I've got this because I'm a little confused. So you booked the $50,000,000 Of asset sales in the quarter, that is in your guide, correct? The $50,000,000 is really just going to be an offset for incremental capital, growth capital, we will redeploy. So I have it in there today because by the time I get to year end, I'm probably going to have redeployed those dollars, and I want to get to that net normalized CapEx of 525. So by the end of the year, if I spend $5.85 I've only done spend that extra $60 by virtue of having those proceeds. So it kind of creates a wonkiness for this quarter individually. I'd back it out for this quarter. But know by the time I get to year end, I'll have deployed it. And therefore, its inclusion normalizes CapEx, is that right, $525,000,000 level. Okay, that's helpful. So it's a normalizing on CapEx. So then if we just do the simple EBITDA to free cash walk, I'm assuming it's again something like 1.4 of EBITDA, you got $300,000,000 or so of cash, It's your CapEx of $500,000,000 a little bit more and then closure post closure and that's pretty much the walk? Yes, that's right. Working We'll be sort of net neutral. You got the cash interest in that $300,000,000 You got the CapEx at $5,000,000 in a quarter, closure, post closure in that sort of $55,000,000 range And the 8 to 10 for cash taxes, and you do that walk, you should get to the sort of that 5.10, 5.20 range. Okay. And then just asking on the balance sheet, is it safe to assume that about half of the refis have been done and the other tranches will just They'll come as the call premium Opportunity has been done and we anticipate being able to execute on the full opportunity and then the balance of the balance sheet becomes 2022, 2023 opportunities. Right. Okay. Okay. All right, guys. Appreciate it. Thanks, Tyler. Thanks, Tyler. Our next question comes from Rupert Back to GFL Renewables again. You've got a very well developed organics business. I'm wondering, are you looking at any opportunities for conversion of organics to RNG with AD Systems? And if you can give us a follow-up on what the economics of that might be? Yes. I mean, I'm not as bullish on the anaerobic digester front, particularly in North America, just because the consistency of the Train that needs to go through those digesters to run them the most economical. And that's why we've sort of chosen the other path for now. I mean, We all know when we stick to our organic spend from time to time in particularly Ontario, and it only gets worse as you go into parts of the U. S. So we're going to stick with that. So no, we're not going to we're not anticipating going into being a robotic business anytime soon. All right, great. Thanks. And on the last call, you highlighted some royalty agreements on landfill gas operations that are up for negotiation in the next 3 to 5 years. How does that play into the strategy? Do you buy those out or do you need to have them to expire? That's part of it for sure on some of the electrical contracts and which is all sort of well underway and telegraphed in that number. And We think that will happen relatively quickly. Those aren't really money making opportunities for the actual utilities. So a lot of them are happy to get out of them Thank you. Let me move through this venture. Great. And then just finally, can you give us some thoughts on the timing of investment that's It can be needed to convert to CNG vehicles? I'm going to follow the normal course For sure. I mean, what we're looking at doing is sort of just rebalancing our fleets, moving diesel trucks into markets where from existing areas that don't have CNG and then Well, we spent our maintenance CapEx for deploying those into areas where just CNG makes more sense. So I don't think you'll see any outsized CapEx complement. It'll just be it. It'll be a rebalancing and shifting of where those dollars get spent. Great. I'll leave it there. Thank you very much. Thanks, Our next question comes from Adam Wyden at ADW Capital. Please Patrick, congratulations on a great quarter. I think my question is more qualitative than nature. If you kind of look back, you guys went public in early 2020 At the depths of COVID, I think you would obviously have some challenges taking the asset to market. And look, you guys navigated COVID extremely well. You've executed on exactly what you said you would do. You've got the 2 platforms. You're divesting assets, leverage is coming down, the refinance story is happening. I mean, I would say that for the last You basically delivered on everything that you said you would do and exceeded all kind of numerical expectations. That being said, the rest of the industry trades at a substantially higher multiple and arguably Has what I would argue interior unit economics on incremental basis and from an ROIC and all the rest. So you as an insider and the largest shareholder, unlike the rest of your peer group, are faced with a Kind of a question or kind of something to ask yourself, which is the public markets are resisting the way you deploy capital, even though it is far superior to your peer group and you trade it at a significant discount to your peer group, I mean, at what point do you pull other levers to kind of tease out the value? Obviously, your concentrated shareholder base could make it easy to tap the capital Markets, again, interest rates are obviously very, very low. Could this company get re LBO ed? Could you do A sale leaseback on your real estate, that obviously industrial real estate is at very, very low multiples. I The way we see it, you're trading at like almost a 10 plus percent yield out a year and a half. And your From an IRR perspective, the types of levers you can pull in it and at what point you say, look, this is a waste of my time, this is enough. We're not creating value fast enough from an equity perspective relative to the business performance. There's a lot of statements in the lecturing. So I mean, I think I'll take a stab at it. I mean, I think from our perspective, I think as a private company, we never really want to focus on the mark The equity, right? And the mark on the equity is really, really well with it if you need the equity to sort of fund your plan. And I think at this point, that plan is largely self funded, so we don't. That being said, we do think there's a very compelling opportunity to own this name at a relatively Inexpensive cost in correlation to some of the other peers. But I think we've been at it for 6 quarters publicly, obviously a longer time privately. And you are right. I do. I am the largest single shareholder. And at the end of the day, I'm going to keep Being the great steward of capital that I've been over the last 14 years and we started this company with $250,000 and Both it up significantly over that period. And I think one way or another, the value will be unlocked at some point. And Whether that's private, whether that's another M and A transaction, whether that is just continue executing on what we do best, We'll unlock the value over time and we're giving everybody the roadmap and we'll see the value. And like you said, you look out a couple of years. Everybody loves to focus on the quarter. I mean, you can't build great businesses quarter to quarter. You got to take a 3 year to 4 year view I'll let you're going to do from a plan perspective and a business perspective, and that's exactly what we're doing. And like I said, a year ago, we were defending that the business had didn't have any cash flow And the equity was worth 0. And I think we just put our head down, didn't really respond, continue doing that and have grown cash flow at a 40% CAGR And we're saying we're going to continue growing free cash flow to 15% to 20% CAGR here for the next 3 plus years. So I mean, We've given you there's I have no interest in saying it other than saying, okay, it's Blade and C. I mean, watch what's going to happen. And if you want Today, we don't want to own it today, don't own it today. But I mean, this is exactly what we're going to do. And I think we have a history of beating expectations. And that's my focus. And Like I said, one way or another, and we'll get to them with the removal side here. We found this potential gas opportunity that could yield a significant amount of free cash flow. And we will unlock the value from that, whether that's keeping the cash flow and trading at the $0.25 to $0.30 free cash flow that we trade at today Or you unlock the value of someone else that's trading at 30 to 50 times free cash flow. So We will do that, and we'll just keep doing the things that we think add value to our own equity. Okay. That's very helpful. Last question. So if you think about the GFL historical strategy, you guys have approached the Waste Management Consolidation somewhat differently than your peers, albeit better. You buy a very well run platform And local, listen, you don't buy their trucks or you sell their trucks, you keep their trucks, You do consolidation. It might be helpful for me and perhaps others on the call to kind of walk folks through You know, what a typical tuck in transaction to your hub and spoke, so you buy $5,000,000 of EBITDA And put it into your system, what multiple of EBIT is because at least from our understanding and I think it might be helpful for others is that When you buy a platform, you're buying a structure, but when you buy these things and you plug them into your roots, there are substantial CapEx Savings and substantial G and A savings. So I mean it might be helpful for me and others to kind of say, okay, when we buy things at 5x or 6x EBITDA, It's you really should think about them as a multiple of cash flow or EBIT. So it might be helpful just to kind of lay out how that works because it feels like that's where this business is going. You've gotten Those 2 big platforms. So the vast majority of your time going forward, should we expect those kind of emblematic transaction? Yes. I would say it's no different in Canada. Look at the margin profile of what's happening in Canada. Canada was a low 20s margin business. Today is Hi, 2020's margin business and how that happened is we built out the platform across Canada. When you build out the platform, you get All the SG and A requirements, the operating facilities and the teams in the EBITDA markets and it's no different than we're doing now in the U. S. And when you Look at what we do, as you know, I'd say we have a lot of the great pieces of the puzzle already in place. We have an amazing fixed So we're in fixed cost base and now when we acquire these smaller collection only businesses, so we can tuck into our existing geographies and utilize that fixed And utilize those post collection operations like transfer stations, recycling facilities and landfills, those become highly accretive. And when you can put them on those Those routes on the back of your existing routes, obviously, you're eliminating a significant amount of CapEx and you're just increasing revenue on your existing book of business, which drives higher margins and drives Higher free cash flow margins. And that's what we've been doing for 14 years. And that's why our margins have gone from high teens to Moving to high 20s, it's approaching 30, right? And then for the solid waste business, in excess of 30. While that team will continue, we won't deviate from that strategy. We're not elephant hunters. The lion, as Luke said, the number of opportunities we've acquired this year, 20 plus. If you look at the relative size of those, again, tiny. And we think over time those will add the most value to our equity. Sure. And how do you think about CapEx as a percentage of sales from where we are now, like where do you think it could be in 5 years? I mean, if you continue to execute on this, I mean, you I mean, your CapEx for certain sales has come down a lot. I mean, what do you think it could be in 5 years? Yes. I mean, we were early days, we were 15%. And look, today, it's in the 10 ish to 11 zip code. Where it goes as you keep going from there, I Could it get to 9% to 10% sure. I mean it just depends where we are in the growth cycle and how we want to think about our business 4 or 5 years out. But Yes. You're right in saying that when you look back in time, if you look at the prospectus, CapEx, as we haven't had to make those investments, has come down as a percentage of the overall revenue. Yes, I mean, look, I'll leave you with this. That to me is the most exciting part of this story that obviously you're thinking about it as a business owner and you've got to buy these good platforms That's why you've historically played for our multiples for these big platforms. But I mean, what you do is you get this great foundation and you bring in these little guys and you don't duplicate the You get shared procurement. I mean, it feels like you think about where we are in the cycle with these two platforms, these deals that you're buying at 4, 5, 6 times EBITDA, the multiple of EBITDA is considerably lower. So to us, that's the most exciting part of the story. So I This concludes the question and answer session. I would now like to turn the conference back over to Patrick Davichi for closing remarks. Thank you, everyone, and we look forward to speaking to you when we report our Q3 results. Thank you. This conference has now concluded. Thank you for attending today's presentation. You may now