Welcome everyone to The Woodlands. We appreciate you taking the time to travel, many of you from a long distance, Canada, the Northeast, other areas. We appreciate it very much. We have about 50 investors and analysts in here this morning, and we are also joined by several on the webcast. We appreciate everybody's attention. Welcome to our second ever Investor and Analyst Day. We did this exactly 10 years ago on our 10-year anniversary, and we figured with another milestone at 20 years, we'd do it again. That will be today. In the back, I'm joined by many of our executive officers today. You'll notice them because they're wearing either a name tag or a Waste Connections shirt of some sort, as well as many of our regional staff or regional VPs.
In fact, five of our six regional VPs are here with us today, four of which will be presenting later today, and I'll be introducing them as they go. Please feel free to, at the breaks or at the lunch, grab any Waste Connections individual you see and any question you have of them, please feel free to ask throughout the day. All right. Let me, before I go into our agenda, tell you a little bit about where you are. You're obviously in The Woodlands. This hotel you're sitting in did not exist 18 months ago. It's been completed over the last year and a half. The whole area that you're sitting in really did not exist about four years ago, including all the buildings that you see as you walked in and came down.
We relocated to The Woodlands five and a half years ago from California, moved our corporate headquarters, and this was grass. Part of our negotiation was to build with The Woodlands, was to build the 258,000 square foot building where we are in, and to include a restaurant in the lobby of that building, which is where our lobby is, but was also to build a four-star hotel with 300 rooms or greater as part of that, and this was that hotel, and that was finally completed about a year ago. It's worked out very well for us. We sort of have a little campus here. We have our headquarters with a training facility in the bottom, and it's about a 100-yard walk or less connected to this hotel. We often bring guests into here or employees into here for training.
They're able to stay here and able to really walk and go anywhere they wish for the evenings. Today, the agenda. We're going to spend the first hour talking a little bit about what we believe about the business and why, what our strategy is and why, and talking about other things that we believe are critical to what we believe is a differentiated company. We're then going to give you a bit of a deeper dive into the Progressive Waste transaction and what we have done from a high-level view. We're going to dive into three specific geographic regions and have our regions talk about their perspectives on what they found throughout the transaction and from that, what they did, and now what those outcomes are exactly one year later.
We will have Q&A at the end of that session before we take our first break at around 10:00. We'll come back, and we're going to have a section on continuous improvement, giving you some deeper dives into some things that we believe are differentiators for Waste Connections and things that are top of mind in the industry right now to include leadership development, IT, technology, its application, some very specific things that we're doing in three different areas. We're going to have a discussion on quality of revenue and sales approach, and a Q&A for that session. We'll have our senior executive team up here for a 30 to 45-minute Q&A, a fireside chat, taking questions on anything we've talked about today or things that we didn't talk about that might be on your mind from the audience.
That is the agenda for today. These are in your book, I'm not going to read them to you, but just a list of our presenters today and a few that are not presenting, but that are here, again, are available for your questions at breaks or at the lunch or any time therein, and this is in your book. Our requisite safe harbor statement. Again, we would always encourage anybody, before making any investment decision, to read this, either in any of our filings or on our website. I'm going to start off by talking about what we believe are the keys to success to this business and the way we look at the business.
I want to preface this by saying that one of the things you're going to hear from us today is a word that I don't think is understood enough in this business, at least, and that word is intentional. Waste Connections has been very intentional for 20 years about a few things. One of them is we've been very intentional about what our strategy is about this business and why. I'm going to talk about that. By saying what we're intentional about, we're also saying what we're intentional about not doing. We've also been very intentional about culture, and we're going to give you a deeper dive into that today. As we will tell you, we believe everybody has a culture. Most are unintentional about it. It's an outcome of how they go about life day to day. That is very, very different than what we do.
We're going to talk about some of these keys to success today. I'm going to start off with, obviously, this is our 20th anniversary and why we're having our second Analyst and Investor Day. We are proud about that. We'll do a little bit of look back, only to give some perspective to those that haven't known us as long, but mostly, look forward and talk about current day. We have some analysts and investors, both, in here today who were here 20 years ago, believe it or not. As I look around, Michael Hoffman, Bill Fisher, they were here 20 years ago. If I go to 10 years ago, I can hit several others. Corey Greendale, sitting in the audience, was here 20 years ago.
Several of our largest investors that we're fortunate enough to have here today, although the analyst or the manager may have changed at those investment community funds, the same investors are still with us today. We're very proud of that. Real quickly, I'm not going to read these, you can read them for yourself. You can see where we started and where we are today. A dramatic change. If we were to go back 10 years ago, in 2007, the company was just approaching $1 billion, had about a $2.2 billion market cap, and $106 million of free cash flow. As we move to today, the company's nearly $4.5 billion, about a little over $16 billion, $16 billion-$17 billion market cap, and concurrent guidance about $725 million of free cash flow. If you go back to 2007, we were managing about 215 P&Ls.
That's what each of those operating locations represent. Today, it's about 621 P&Ls. A dramatic difference in the complexity of the company. Not up there, today, we serve over 7 million customers. If we go back to 2007, we serviced a little under 3 million. I think one thing that is important is, and sometimes gets lost, especially because many analysts and investors stop at EBITDA in their valuation, is if you take a look at two numbers right there. 2007, adjusted free cash flow, $106 million, equity market cap, $2.2 billion. That's about just under 21 times free cash flow was the value of the company. If you forward to today and you take the same two numbers, you get 21 times free cash flow.
Despite a valuation change in EBITDA, the reality is that the company's really been valued at about the same multiple of free cash flow for the last decade. Ultimately, why we believe it is the only arbiter that matters is free cash flow. Why EBITDA has expanded, because if you look at why the EBITDA multiple has expanded, if you look at 2007, the company's free cash flow was running about 10%-11% of revenue, $106 million on about $1 billion in revenue. Today, it runs 15%-17%. Free cash flow percent of revenue has changed dramatically over the last decade, thus you see an expansion of the EBITDA multiple that we trade at. That's really just the same free cash flow multiple. It's great when these work. All right. What do we believe about the business?
Let me define this, because there was some discussion about this at the WasteExpo, I know other companies take a different view of the business. I believe a lot of it comes down to a definition. We believe the solid waste business is fundamentally a commodity business. What do I mean by that? What I mean by that is that for most customers, and we have 7 million of them, the number one decision is price. There is a very small percentage of customers, your large industrial customers, your manufacturing customers, by the way, that represents 1%-2% of your customers, where service quality materially matters. For the vast majority of customers, what matters is price. That's why we define this as a commodity business. Something that trades predominantly on price is a commodity business.
I know, for example, Republic Services believes and articulated that they do not believe it is a commodity. I would argue that when you're the size of a Republic Services and when you change your price by more than 1% a year, you lose most of your business, that's a commodity. To me, something that can't improve price by more than 1% or so is a commodity. That's our definition. That's important because what we have tried to do in our model intentionally for 20 years is build a business where we minimize the price commoditization of the business. That is what we've attempted to do. We've done that by our focus on franchise and secondary markets. The reality is, if this wasn't a commodity, private companies wouldn't dictate pricing in local markets. They do. We seek to minimize that element in our model.
We've been very intentional about that. Based on that, we believe that in this business, success is first and foremost driven by market selection because it determines the sustainability and direction of return. Second, your asset and contractual positioning within each of the markets that you select. This creates a moat for pricing growth and customer retention. Third, execution at the local level. Put simply, we believe if you get 1 and 2 right, the 3rd matters a lot less. If you get 1 and 2 wrong, the 3rd doesn't matter at all. Okay? That is a fundamentally different belief because of the market strata that we are in than our large, urban-centric, competitive model company. They must rely on number 3 because they do not have 1 and 2. We believe ultimately in this business, the only thing that matters is free cash flow creation.
That is what drives value creation. That's been our focus for 20 years. We've expanded the free cash flow as a percentage of revenue over the last decade by almost 2x as a percentage of revenue, moving it from approximately 10% of revenue to, well, at times prior to the Progressive transaction, to 18%-20% of revenue. Still sitting today at about 16% of revenue. The next thing that we're very intentional about is we believe that the company that wins human capital business wins in this business on a market-by-market basis, ultimately. We believe that every business, whether you're in the waste industry or any other business, has 3 types of assets, financial, physical, and human. What we find is that most companies in most industries, ours included, spend all of their effort focused on financial and physical assets. Here's the truth.
Those are the easiest to do. Those are the easiest to do because you can purchase them. Those are initiatives, technology. Okay? The reason most companies focus on that is because they're more instantaneous. We believe the focus on human capital and winning that game is actually what differentiates our company and differentiates one in this industry or in most industries. The reality is the financial and the physical is a very commoditized business as well. With our balance sheet, we can win both of those at any time. We spend almost all our energy focused in the 3rd bucket, the human element bucket. We believe if you take and you focus your energy in that bucket and you win in that area, that you ultimately win this game. We believe that we point to our last 20 years as proof of that.
It is not coincidental that whether you choose margins, whether you choose turnover rate, whether you choose safety incidents, whether you choose pricing, whether you choose volume, choose whatever metric you would like to in any area, Waste Connections has been fortunate to lead this sector for 20 consecutive years in every metric. That is not a coincidence. That is intentional. That is an outcome of our strategy and our approach to the business. As we're going to spend time on today, ultimately, you'll hear a lot at Waste Connections. You won't hear us talk about initiatives. We don't talk about initiatives. We believe initiatives are what you do when you don't know what else to do. Okay? We talk about culture.
Ultimately, if you get the best people, if you incentivize and motivate and retain the best people, the best people figure out how to win locally day in and day out. One of the things that is a hallmark of Waste Connections, again, that we've been intentional about for 20 years, is the continuity and stability of our management team. Compare that to anyone else in the sector, they've probably been through two to four rotations in the same period. We believe that has an effect on things. As you'll hear presenters today, most presenters today have been with Waste Connections between 15 and 20 years. Our senior executive team, which includes 20 officers, has been together an average of 15 to 16 years. Several of us who are here today have been working together for over 25 years.
It's something we believe is very important, and we're very intentional about. Well, it's pretty sensitive. Eventually, I'll get this to work. We have a little saying, it's culture, it, in parentheses, matters. That's not IT. Our IT group would like to believe it's IT matters. We make sure it's not. IT does matter, but it matters. We use this as a little saying within our company. Most people just say, "Well, okay, that's cute. What is it?" We actually define it. Okay? It is sort of the three to four cultural underpinning pillars of how we do things and why.
It's the how and the why behind what we do that we try to establish as a common element for all our leaders and all our employees throughout the company to make it a intentional but really almost unconscious way of acting and thinking over time. What are those that define us? Well, really one we would really define is what we call golden rule thinking. Okay? It's really that simple. Gets back to something we all learned early on, treat others as we would hope to be treated. That's really the underpinning of this. It starts with our vision and values and purpose that underpins everything we do. Many of you have heard about servant leadership. You're going to hear a lot more about that today because that is a real underpinning of golden rule thinking.
We began the implementation of servant leadership as a leadership philosophy back into the company 12 years ago. This has been a 12-year journey. It is not a project. It is not an initiative. Those have beginnings and ends. This does not. This is a philosophy. It's a way of doing things. It's been a long journey. First two to three years, a very difficult one. It is something that is very foreign in an old line, industrial, male-centric, blue-collar business. That's what the waste industry is. Something that's very foreign to that, and took a tremendous amount of intentional effort for many years to get going. But about the three to four-year mark, we started getting a lot of traction, and the acceleration of that traction over the last six to eight years has been tremendous. You're going to hear about that today.
I believe, we believe, that it is the number one thing that helps drive our culture and ultimately much of our results. It is something that is very difficult to do. It is not something you can begin today and say, "We're going to be there in five years." We're very big in community involvement and giving back. We believe that ultimately our business is a local business at each market, and to be successful, we have to be woven as a thread through the fabric of each community that we operate in and be viewed as a partner with the community and the not-for-profits and those that are less fortunate in each of the communities we operate in. That is a fundamental value that we drive for. We also believe that relationships drive results. That relationships drive results. There's a huge focus for us.
You'll hear about it today. We're also very big on delivering our commitments. One thing that people have a hard time understanding from the outside is how in a decentralized operating structure do you get accountability and results? That is part of the secret sauce. That is part of the magic of, we believe, our Culture Matters and our leadership approach is that accountability to results in a decentralized operating environment. If I was to back up, I'm not going to because of this clicker. If I was to back up to the little handprint on the Culture Matters with a little handprint, like a greasy handprint. It's sort of what we call an indelible thumbprint. We use that as a symbolic reminder to our people, to our leaders, throughout branding within the company, that every day in your interaction with people, you're leaving an indelible thumbprint.
You're touching them whether you like it or not, in your interaction, in your communication, in your approach to how you handle things, good and bad. That thumbprint's indelible. We ask our people to think about how they want that thumbprint to be remembered a year, five years, 10 years out with each and every one of the employees that they have the opportunity to lead. That's what that is for. It's about trying to have our people be humble and show humility. The hallmark of servant leadership is the willingness to be accountable to those you have the opportunity to lead. I'll let you think about that for a second. Because most organizations, leadership is about people being accountable to those they report to. We have that, too. That's called management. That's called management. Management is about the execution, how things are executed. It is about order.
It is about the accomplishment of objectives, sometimes agreed, sometimes unagreed. Leadership is about how that gets done. In how it gets done, we ask our leaders to be accountable to those they have the opportunity to lead. Sort of inverts the traditional management pyramid is how we look at it. Also, one thing, if you've been around Waste Connections at all, this is one you probably think was number one. It's something we do believe very much in, and that is celebrating victories Celebrate and recognize. At a corporate level, at a district level, at a departmental level, we focus very heavily on striving to be a great place to work. We sort of want to embody a work hard, play harder attitude. People put so much of their lives into their careers, whether they're driving for us or they're one of our executive leaders.
They're spending 50 to 70 hours a week at work, more time than they do probably at home with their spouse. If they don't want to do that, there's a lot of options in the world for them today. We focus very heavily on trying to create a great place to work where they want to be, not have to be, and we believe that continuous celebration of small victories is very, very important. Lastly, one of the last tools of that is local decision-making. We operate in what we call a strong district manager, decentralized operating philosophy, which means that we push down the vast majority of our decisions on service delivery and employee interaction and execution to our local management team. Part of servant leadership is developing self-directed, empowered employees.
What you will find in this industry as a rule of thumb, and we were there and we are still there in some places because it's a continuous battle, is what we call firefighting leadership. Every day you get up, you go in, you figure out what fires to put out because there's too many to put out. All you do is hope to get through the day in 12 hours, get everybody in, hopefully somewhat safe, and go to the next day and get ready to firefight again. That is a painful way to run a local market or a company. It is the hallmark of this industry.
We have tried for over a decade now to move away from that model to a model where employees are much more self-empowered so that leadership can actually take proactive steps of continuing to move the company forward and get out of crisis management, get out of what we call firefighting management. We've done that through our decentralized model with servant leadership really being the guiding way to do that. We're going to put a lot more teeth on that for you today so you understand how we've done that. Ultimately, the key to a successful model, and particularly one that is decentralized, is accountability to objectives. Taking ownership at a local level. As you'll hear from us today, we do not believe in standardization. We believe in standards. Okay? Now, we have standardization in many things. Okay?
Financial, accounting, IT, things that are sort of transparent to the customer and the employee would be a good way to think about it. Aside from that, we believe in standards. Standards for risk, standards for productivity, standards for customer satisfaction, for sales, for return on invested capital, for virtually everything. We allow the market to determine how to achieve the standard, because it's very different business in Alaska than Houston, than Albany, N.Y., and Miami, Florida. Culture, weather, local politics, local politics, local politics, national politics, government regulation, all of these things have dramatic impacts on our business on a local level, more so than most people would understand. You cannot have a standardized approach to this business. We do not believe you can. Before I introduce our next speaker, I want to say this.
What we want you to think about today is what has made Waste Connections successful for 20 years, and has increased that lead between years 10 and 20. We really have kept the same strategy for 20 years. We've moved very heavily into the leadership and culture focus over the last 12 years, with even a greater focus over the last 8 to 10. We believe we've created a business model that is very different and at a size now that obviously is very different than we were 10 years ago. Our approach to the business, and the markets we choose, why we choose those markets, and the operating model that that produces is not something that anyone else can just pick up tomorrow.
Put simply, the 500 to 1,000 basis point lead in margins that we've had over most of the industry for a decade to 20 years, the 40% gap in pricing, the 40% better turnover, the 40% better risk, those are monumental gaps in a commodity business. This is not a gap that will be closed in 10 years or 15 years or 20 years. As we stand here at our third investor meeting at year 30, the gap will be as great or larger. Some people say, I've had investors and analysts say, "Well, so and so company is going to get to 30%. They're at 27 or 28 today in EBITDA." I said, "That's great." There's one way they get there, with 3% GDP and a 3% plus CPI, because that tide will lift their boat. If they get there, that means I'm at 36 to 37.
The gap doesn't change. That's what it takes for them to get something approaching 5% to 6% organic growth. In that environment, we'll have 7 to 9. We've been through that environment. It was called 2006 to 2008. We believe we've created a company that in good times or bad, and we've been through both. This will be, if we hold up this year, I hope we do, this will be our 14th consecutive year of positive stock price appreciation. We've done that through the worst contraction in the history of the U.S., other than the Great Depression, and through all those years, we were still positive. Whether in good times or bad, we believe we've built a resilient model. We've been intentional about it.
I hope what you're going to see from our teams today is the breadth and the depth of the team and the understanding of an approach to the business that is fundamentally different than anyone has had, or will have, because there's no way to adjust mid-course at where people are today, not with the footprints that exist. Our next speaker is Mr. Glenn Holt. Glenn is our Director of Leadership and Development at the corporate level. Glenn's been with us about 11+ years now. We recruited him back when we were headquartered in California in the Sacramento area. He has a tremendous pedigree in leadership training and development out of several sectors. Glenn is really the champion, I'm going to say, of our culture. He and his team drive every day to continue pounding on the message of culture and leadership development.
With that, Glenn, come on forward.
Thanks. Thanks, Ron, for the nice comment. Thank you all for taking some time out and coming down and letting us share our story with you today. I hope you have a good time, and I hope maybe you learned a couple of golden nuggets you can take back to the people that you work with over here. 2013, this was our annual report. Some of you may recognize it. Let's see who's the sharpest person this time of the morning in the room right now. Who can unscramble the letters that were on the cover of our 2013 annual report? Who's got it? Who's sharp?
Culture Matters.
Culture Matters. Oh my gosh. Do we have prizes?
Yes.
Okay, perhaps later. It's Culture Matters. Let me ask you guys are smart people. You see a lot of annual reports. How many companies put culture on the cover of their annual report? Come on, give me a number.
All Europeans do.
How many?
All Europeans do.
All Europeans do. Wow. What could we draw from that? We probably don't have time to go into that discussion today, but I suggest not many really put that on the cover of the report, but that's how important it is to us. It kind of begs the question, I guess, what do we mean by culture? What is culture? Anybody want to throw something out? What comes to mind when you hear culture? This is the participation part of the morning, by the way, just so you don't miss this opportunity. Who's got a working definition for culture? Anybody? It's easier than doing the scramble letters, wasn't it? Yeah. Okay. I'll help you out a little bit. At Waste Connections, we like to think culture is kind of the way we do things around here. It's how we do what we do, but it's very intentional.
It's not by accident. As Ron said, every group of people has a culture. You get more than two people hanging out together, they've got a culture in how they do what they do. In most cases, it just evolves. For the last 10 years, we've been very intentional in what we want the Waste Connections culture to be. We think that culture is going to help us get the results that we want to get. We call our culture servant leadership. As Ron mentioned, servant leadership is about taking care of other people. It's about being able to make good things happen for other people. That's what it's all about.
If we've got 16,000 employees that every day are trying to make good things happen for other people, whether it's their customers, their coworkers, their managers, the community, our shareholders, we think that's what drives the results is that. You may be asking yourself, since I mentioned we do this intentionally, how do you do that? How do you drive a culture that's coast to coast, multi-nations now, 16,000 employees, a couple of thousand managers? How do you be intentional about that? Well, let me share with you one thing that we do. Every new manager to the company, whether it's newly hired, newly promoted, or newly acquired through an acquisition, during their first 90 days, they attend a two-day training session at the region office that we call Servant Leadership Discovery.
During that time, that's when we introduce them to this intentional culture that they get to be a part of now. I thought it might be kind of fun, if you'll indulge me. Are you willing to have just a little bit of fun? I know it's stretching for some of you, but could we have just a little fun for a minute? I'd share with you one of the activities we do during Servant Leadership Discovery for our new managers. Inside the front pocket of your book is a little worksheet. This is all you need. What we do during the Servant Leadership Discovery, Naaman, if you can help me out there? We ask them to take a minute and think about where they used to work. Okay?
You can think about where you work now or where you used to work, whatever you like. What we do is we ask them to go through this list of things and decide, is it more like the left side or more like the right side? In other words, where you used to work, were the decisions more centralized, in other words, they all came from the home office, or were they more decentralized and allowed to be made at the other end? You can just put a check mark more towards the left or more towards the right with all that. Again, just for fun, you can skip through that. Don't worry. It's not going on your permanent record. Okay? Nobody's going to collect these or anything later. Just go through them, and we take a look at centralized and decentralized decision-making.
Does the company have standardization, as Ron just talked about, cookie cutter, everything's the same, or were there just standards, in other words, values that people could make decisions by? Was it about controlling people, or was it about empowering people? Was it about a results focus or more relationships focus? Was it about doing things right, following all the procedures, checking the boxes, or was it about doing the right thing? Was it about thinking and talking about it, or was it about doing something about it, getting her done? Was it about work hard or play hard? Maybe it's in the middle someplace. That's okay, too. Was it about looking forward or looking back? Was it about annual performance conversations for employees, or was it about daily performance conversations between managers and employees? Was it about safety compliance or safety behavior?
You should probably have a group of X's all over the pages if you're playing along with me. Some of you I know just got an important email you had to take care of, so you didn't have time to take care of this. I'm a trained professional. I understand all those games. Okay? You can't fool me. Okay? Here's the deal. If you've got somebody next to you, just take a peek over at the person sitting next to you and see if their X's look exactly like yours. Who's got it? Anybody got a couple? Yeah. Anybody the same? Are they the same or different, do you think? It's different. Okay? Because every culture is different. Thanks for playing along with me, too. You'll be richly rewarded later in the day. Okay? Every culture is a little bit different.
I've been with Waste Connections about 10 years now, this is the world according to Hank. Okay? If I had to do this on how I view Waste Connections right now, this would be how I see the X's here at Waste Connections in our culture. Let me connect the dots here. If I connected all those, and turn your head slightly to the right as you look at the screen, what do you see? What do you see? A W. The W is for winning. We think this is the winning culture. This is the winning culture. This is what it takes to get the results that we get and make them sustained results. A little later this morning, Ron's going to share with you some information about the Progressive acquisition, where we doubled in size a year ago.
In the first 90 days, every single one of the 1,000 managers at Progressive did this activity with us. You might be thinking, "Huh, I wonder what their graph looked like when they came on board." Should I share that with you? I'm asking your permission. Is it okay? Okay. You've got other things, I'll just move right along. Here's what the Progressive graph looked like. The exact opposite. It's the exact opposite. Picture you're in a room, and this is where you used to work, and you just got introduced to what it's going to be like with the new place you work. What might you be thinking? Anybody?
Oh, shit.
The "oh, shit" was where they used to work. I'll tell you, the response we got was, "Woohoo. It's about damn time." Okay? This is the kind of organization I want to work for. I think that that whole shift in understanding the culture they were going from to the culture they were going to really is what helped us make this transition much, much, much easier because people could see, I get to do things the way I'd like to do them. I'm going to be rewarded for and embraced in doing it. That's what the culture was really all about and how it changed and how we helped them understand what the culture was like in being able to make that transition. We mentioned that it's an intentional culture. When new managers come on board, they've got some responsibilities with that.
In other words, what's the manager's role in making sure the culture stays where it's going and doesn't go sideways and doesn't really change? Cultures will change if you're not intentional about them. Our message to all new managers is that they become, once they work at Waste Connections, the keeper of the culture, which basically means don't mess it up. It's very intentional. It took us time to get here, and their job is to keep doing things how we do them. Let me ask you all, based on what you've heard already and what you already know about Waste Connections, does culture matter?
Yes.
Yeah. We think it really does, and it takes a lot of work. It's hard, it's difficult, we really think culture is that key differentiator that's made things happen so much. Ron? Thanks for a few If it's okay, could I come back a little later this morning? Oh, goody. I can't wait. Thanks, Ron.
This early in the morning, we give you brief snippets of Hank. We do this at corporate, too, for training. We have him come in early, gets everybody awake, we have to bring him in later to reenergize. This morning, I wanted Hank to give you a glimpse into servant leadership because later today we're going to do three deeper dives into areas, one of them is going to be into servant leadership. Hank will be back to really put more fundamental meat on the bones for you. This morning's meant to just get you going on the concept. Next, I would like to introduce Shawn Mandel, our VP of Safety and Risk Management. Shawn is going to come up and give you a little bit of overview of how we view risk, what our approach is to risk, what some of the results have been.
Shawn has done an exceptional job with us. He came to us from one of the larger public companies where he had been for many years, I think it's valuable for you to hear his opinion of the approach there versus the approach we have here. Shawn has been with us for the last seven to eight years in this role, under his tutelage, the company has made great strides as I think you'll see today. With that, Shawn, come on up.
Great. Thank you, Ron. Appreciate it. Let's see if I can figure this clicker out. Well, good morning. Appreciate the opportunity to spend a few minutes and share with you what we consider our first operating value. I am privileged, as Ron had said, to be the Vice President of Safety and Risk. With that, just to give you a little background on myself, I have got 22 years in the industry. Started with a company known as BFI. Many of you probably remember that company. They were acquired by Allied Waste, then eventually Republic Services. Although I remained with the organization, the organization just changed names. I was fortunate enough, as he said, about seven years ago, to come over to what I consider the absolute best company in the industry. I would like to share with you our story from a risk and safety standpoint.
When I first got here, it was pretty clear that there were some things very special about Waste Connections. Hank and Ron have shared with you a little bit about that, a thing that we call servant leadership and the approach. It has really been the foundation of the success that we have been able to see. You see, for those of you that may not know, this waste industry, as an industry, has been in the top 10 most hazardous industries in America for well over a decade. According to the Bureau of Labor Statistics, we are currently fifth most hazardous industry in America. Why is this important to know? Because all the companies will say safety is our first priority, with the exception of one. We refer to it as our first value. You see, priorities can change according to the wind and direction and things of that nature.
Values remain consistent. They do not change. The Waste Connections' record of success in safety and risk mitigation, reducing that risk is built upon that foundation of servant leadership. Our role as leaders is to equip our people for success, to get our business and our people from here to there. That servant leadership, that unparalleled culture of safety, and the strict adherence to those operating values, it is a differentiator for us. I would like to share with you some of the successes that we have seen. As you know, there are certain things that are reported to governmental agencies with public companies, publicly traded companies. On the private side of the waste industry, we are accountable to report to the Bureau of Labor Statistics things like our total incident rates. To the DOT, our total accident rates and things of that nature.
This is just a snapshot from 2015 of where we were at that NAICS code of 5621. Well, I am sure all of you understand, but that is basically the waste industry. As an industry, it was around 6.4. In other words, if you had 100 employees, better than six of those employees would be involved in some type of recordable injury throughout the course of a year. In addition, during the years of 2013, 2014, and 2015, the private sector saw well over 200 employee fatalities. Think about that for a minute. Private sector only, over 200 fatalities during that time period. Anybody have any idea over that same period, how many employee fatalities Waste Connections may have had?
Zero.
Zero. Not one. Why? Because it's a value for us. We have onboard event recording technology. We have onboard tablets. We have processes for defensive driver training like Smith System and so forth. We have all those things. What's the difference? Our culture and the servant leader approach that we take. You see, we're made up of a lot of type A personality folks that like to win. How many of you enjoy winning, right? Take a look at Waste Connections' track record, and you'll see we enjoy winning. I don't care what the metric is, we like to win. There is no greater asset to our organization than our people. As Ron mentioned earlier, if we can win in that human piece, game over. That's what we've done through this servant leader approach and the culture of safety that we've been able to establish.
From a total recordable incident rate that I was referencing earlier, as you see, the industry has remained flat or actually slightly increased in that total recordable incident rate, while Waste Connections continues to improve. This is important to remember because when our folks come in to work this very arduous and sometimes hazardous job, they want to feel like they're protected. They're protected through a culture with us. Our job is to get our people and our business from here to there. We talked about the last 20 years and where that here to there was in 1997 and 2007. Our here to there in 2017 is to continue the track record that we've had for 20 years.
Is to continue to further that mindset, that skill set, that tool set throughout our nearly 16,000 employees, over 600 locations in 41 states and six provinces of Canada, is to continue to further that. You see, when I started in the industry 22 years ago, it was very much about compliance. If our lockout/tagout and hazard communication, our confined space programs and so forth, we've got all the records and documents, we're doing the training. We could hit everything but the lottery out there from a collision and injury standpoint. If those things were done and we could check the box, we were winning. What an abysmal thought and approach to take. Our success here is dictated by the success of our folks out there on the road every day.
Every day, each region reports out to the Regional Vice President and every other leader in the region, how many incidents they had that day. Now, an incident could be a rut in the lawn or a broken sprinkler head, maybe a mailbox, or it could be as serious as a life-changing injury. They report that out every day. When a report comes through that a region has gone with a zero for the day, there is a celebration. There are emails flying back and forth. You should see it. Way to rock it. We've had some regions, you'll be speaking with Jason Craft a little bit later, that have gone four, five, six days without a single incident, again, in the fifth most hazardous industry in America. Pretty exciting stuff we've got going on, it's a differentiator for us.
Waste Connections operating values, those serve as a constant guide to our leaders. There's a reason that they're in the order that they are. Safety is at the top. Why? Because without it, none of the others, integrity, creating a great place to work, customer service, being that premier, none of those other things can happen if our employees aren't able to go home the same way they came in. Our local leaders, our supervisors, ops managers, district managers, site managers, they understand and utilize those well-established values as a basis for their decisions every day. They're not checking a box. They're creating an environment and building relationships where folks can come home the same way that they went out. It's an important differentiator. As I said, I was previously the director of safety for Republic Services, and they had very similar programs and processes. What was missing?
The culture. The leaders understanding that they're here to make good things happen for other people. The most important other people that we're talking about are those people that they have the privilege to lead. Our senior leaders, like our divisional vice presidents and regional vice presidents, many of whom you'll be hearing from later this morning, their responsibility is to ensure that they support that they're furthering that. Finally, all of our leaders promote these values throughout our organization. We refer to them as values, and by definition, for us anyway, it's how we do what we do. It's what differentiates us from the others. Go and take a look if there's any other national players out there that can say they completed 4 consecutive years without a single employee fatality or preventable third-party fatality. I assure you there are none.
As a co-chair of the National Waste & Recycling Association Safety Committee, I guarantee you there are none. You see, these values, they differ from priorities. They don't change. They remain the same as they were 10 years ago, and they will be the same 10 years from now. There are some foundational and cornerstones that we've built upon. We have the best technology. We were the first national company to fully deploy event recording technologies in the form of DriveCam and ThirdEye Cam. We're one of the first to make it a mandatory requirement that all of our drivers go through Smith System Defensive Driver training. We developed internal defensive driver training that we refer to as the Target 4. We've got Target District programs and things of that nature. We're the first company to fully deploy internal e-communication safety boards at all of our locations.
We've got the technology. What's the difference? The culture side, that servant leadership. It's a differentiator for us. It will continue to be a differentiator for us. Our success is dependent upon it. Every one of our leaders understands that. Again, it's why we're able to sit here 20 years later with the success and track record that we've been able to. Appreciate your time this morning. We've got a lot more that we're going to share with you, but this is just kind of the Waste Connections incident rates over a decade plus. As you see, every year, we've continued to improve. Make no mistake, there was a reset with the merger and the legacy Progressive Waste company, but we're getting there again.
Give you an example of the successes we've seen already just in the first year post-merger, keep in mind that we actually communicated this in January and in February, there were some key leaders meeting together to ensure that the Progressive Waste leaders that would be coming on board understood our operating values and direction. These are the results that we saw. In November of 2015, Progressive Waste saw nearly 500 incidents in that one month. As a comparison, Waste Connections, for all of 2015, had 1,200 incidents. One month, Progressive Waste, 500 incidents. In April of 2016, after the communication and several meetings with their leadership, that number was dramatically reduced, almost cut in half to about 250. In April of 2017, we're trending just slightly above 100 incidents. What changed? The trucks didn't change. The people didn't change. The technology didn't change. The mindset changed.
The values changed. The culture is beginning to change. We're excited about the direction. We anticipate that we will be at 30% improvement by year-end. Think about that. One year post-merger, 40%-plus improvement in our incident rates. What is most valuable to our leaders, what we consider our greatest accomplishment is, that means people are going home to their families at the end of their workday. That means fewer life-changing events are occurring. There's this thing that is known as Heinrich's pyramid. Some of you may be familiar with it. There was a gentleman by the name of Herbert Heinrich, in the 1930s, he did several studies and came up with this math that says, for every life-changing event that occurs, there will be 29 less serious, but still minor incidents.
Of those 29, there will be 300 unsafe behaviors that occur throughout an organization for that one life-changing. We address the behavior. You see, Progressive Waste had event recording technology as well. They just used it differently. We coach and change behavior. That's our responsibility as leaders. We want to equip our folks for success. Whether it's a customer site that is far too hazardous and we need to make a change, or it's an employee that, for whatever reason, can't come over from a behavioral standpoint to do what we need them to do and we need to make a change there, we're willing to make that change because we understand that that's what our responsibility is as leaders. Again, I appreciate your opportunity to spend a little time with you. If you have any questions, I'll be around on the breaks and this afternoon for lunch.
Thanks very much.
Now we're going to jump to the next part of our presentation. I'd like to ask the eight participants to come forward. As they do, let me talk a little bit about this. We're going to give you an in-depth view of the Progressive transaction and how we attacked that transaction from a macro standpoint. I'm going to start with that, then we're going to dive into some specific geographies, all of the major geographies of the company, and have you hear from our leaders what exactly they found from that, what their approach was, and then what the results are as we sit here today. As we looked at the Progressive transaction, we really approached it with the same playbook we approach every transaction. It's just that we hadn't approached a $2 billion transaction in revenue before. First thing, objective was to infuse our culture.
That is a major undertaking. We're a year into it, a little over a year into it, and we've got a lot of work to do, but it's had a material impact. You'll hear about some of that. By the way, let me back up. We announced this transaction January 19th of 2016. We had our first meeting in Orlando, Florida, with all of the field-level leadership of Progressive in the third week of February. We had the leadership of the Progressive, and the controller leadership of Progressive here for two-day meetings in April and May, then our next one in five days after we closed June 6th of 2016. While we closed June 1, 2016, we began the work intensely four months earlier, so that the day we closed, everybody knew the game plan that we were going to approach going forward.
A lot of people said, "Well, we've made a lot of progress in a year," and we have, but we've really been active closer to 16 to 17 months as we sit here today, than a year. The first thing we had to do was we had to drive our culture into Progressive, to improve safety, improve employee retention, and accountability. Real quick numbers. Progressive's risk rate was three and a half times ours at Waste Connections. Their employee turnover was 43%-44% on a run rate basis. Local accountability to objectives like risk, like turnover, like pricing, I don't want to say were nonexistent, but they were very close. It was something that was not part of the Progressive culture. We had to change that immediately. We had to improve the quality of revenue. You'll hear later from several in a deep dive.
Progressive was a company focused on volume at almost any cost. They were of the belief that if we didn't have a customer, we couldn't price increase them, which is true, but then you also have to price increase them. That was just something that they did not consistently do. Productivity was an overarching objective. There were $millions of customers that we gave the field the okay to shed that were unsafe to serve. We went about a very directed approach to quality of revenue, being strategically consistent, customers that were safe to serve, and appropriately priced. As many of you know, in the prior year to the close, Progressive's reported price improvement was 0.6%. That platform is now on a run rate of 3%-3.5% improvement in price per year. A 500%-600% increase in price in one year.
We wanted to drive higher EBITDA and less revenue. To an extent, Progressive had a philosophy of being all things to all people in each of the markets they were in. That led to many markets where they had 0% to single-digit EBITDA and were comfortable with that. That is not something we are comfortable with whatsoever. In many markets, we had to stop doing certain business, stop servicing different types of customers, eliminate brokerage business, and in some cases, divest the business through outright sales or swaps with other companies. We were going to control the business and make the business footprint look like what we're used to doing. We were going to reduce the CapEx to EBITDA ratio. Progressive consistently ran approaching 14% of revenue in CapEx.
We have that footprint down to about 10%, a 40% reduction in CapEx on the revenue in less than a year. Ultimately, we were going to increase EBITDA to drive free cash flow conversion, and that would lead to shareholder value creation. We are tracking a solid 12-18 months ahead of where we thought we'd be. To be quite honest, we sit here today in Q2 at where we thought we would end 2018 and begin 2019. That's how we get to the approximately 18 months ahead. The reality is we underestimated the opportunity for improvement. We've seen that in that we have scaled back the amount of divestitures because we have fixed markets that we thought we would divest.
In less than a year, we have taken markets that were running 0% to 4% EBITDA, and we have brought them to 18% to 21% in a year. We don't need to divest that when we can make that type of an improvement. We underestimated the opportunity, and that is one of the reasons we are ahead. Many of you know those outcomes, but I will tell you. Revenue, we're going to shrink the business 10% to 15% on divestitures and intentional shedding. What does that mean? Progressive was about $1.95 billion in revenue at the time of close. By the time we're done with that footprint, it'll be about $1.75 billion to $1.8 billion. Shrinking it probably about $200 million, $150 million or so in divestitures and $50 million in intentional shedding.
With the price growth on the business this year, you get back to about $1.75 billion to about $1.8 billion. Our EBITDA, we're going to increase to 25%. When we closed, it was running $475 million to $480 million. We are now going to be pushing a run rate of $600 million. Do the math, $600 million on $1.8 billion is almost 33%. When we closed, the business was running 24% to 25%. Adjusted free cash flow, we have doubled it. They were running about $150 million, and we are now running approximately $300 million. Next up, I am going to ask three of our most impacted regions. In our company, just you know, we have four U.S. solid waste regions and one Canadian solid waste region, and then we have an E&P region. We have six regions in our company.
The Progressive transaction really impacted three of our regions very heavily, you're going to hear from them today. A fourth one of our regions, our central region, we picked up the Missouri assets there, of course, it had some impact, but minimal. With time, we've asked three of our regions to present today. First up is Rob Nielsen, our regional vice president from our southern region, he's going to talk about what he found. Rob and I have worked together for probably close to 25 years now. Rob's been with Waste Connections since virtually our founding. He was our first regional vice president of our eastern region. He then went out and ran our western region for many years. When we acquired R360, I asked him to come in and be the President of R360, he did that.
When we did this transaction, I asked him to head up what would be the largest region in the company, which was the southern region. He has been here doing that since before we closed last June. With that, Rob, welcome.
Great. Thank you. Good morning, everybody, thanks for giving me the opportunity to talk about the southern region. I'm going to talk about the state that Progressive Waste was in when we found it and the steps we took in righting the ship. I'll talk about the struggles we've had with the fleet, at the end, I'll talk about the fruits of our labor. Before we start, though, I'll give you a quick orientation on the region. Southern region is the largest region in the company if you measure it by employees and by revenue, a little over 4,300 employees, $1.13 billion in revenue. We have a lot of opportunity for growth in these Southeast states. It's comprised of about 85% legacy Progressive Waste districts. We have three overlapping markets, Monroe, Louisiana, Houston, Texas, and Lubbock, Texas. We manage about 110 income statements in eight states.
We're in Arkansas, Louisiana, Mississippi, Alabama, Florida, all of Texas except for El Paso. El Paso reports still in the central region. We have a little bit of business in southern Oklahoma that reports down into North Texas, we have Memphis and a little bit of Western Tennessee. This is the leadership of the southern region. 23 folks, 13 came out of Waste Connections, 10 came out of Progressive Waste. Average tenure on the right-hand column is about 18 and a half years in the industry and about nine years either with Progressive or with Waste Connections. I'm going to talk a little bit about the situational assessment we had. What did we find?
We're very lucky in that we were able to go out into these operations and spend two to three months listening and learning for all the legacy Progressive Waste operations before the merger closed. We found a culture that was very, very different than ours. It was top-down driven, had decision-making done at the corporate office, and it was slow, really slow, long, protracted decisions on very simple things. This led to a complete lack of trust within the field. We found that customer service trumped safety. No matter what, service the customer. We just recently, as of last week, found a customer in Florida where our driver, to service that customer, had to pull his truck back into an enclosure and climb out of a window to service that customer. Completely unacceptable. We quit the customer.
We told the customer they had to change their enclosure, or we weren't going to service the customer. They chose not to change the enclosure, so we quit the customer. We let someone else take that risk. I'm 53 years old. I don't want to be climbing out of a truck, I'm not sure about anybody else in here, out of the truck window every day. We found there was a high focus on statistics and on metrics, most of which, when we quizzed the field, no one knew what was done with these statistics. They had basic numbers they kept that were very important, hauls per day, landfill tons, recycling tons, employee hours of service, but they captured many other statistics, and it consumed their day. No one could tell us what they did with these numbers. They just knew they went to Toronto somewhere.
We found the districts and the regions specifically spent an enormous amount of time doing backwards looking. Quarterly Operating Reviews, Monthly Operating Reviews, very little time looking forward. We found poor capital deployment. We found locations that desperately needed trucks. They didn't get sufficient replacement trucks. Even trucks for growth that were justified by price or by additional customer count, they were starved of these trucks. We found hauling company managers who had absolutely no input into the type of truck that they were given to run their operations. We found a complete lack of discipline on RFPs and on bids.
I actually had one area manager, this is a true story, had one area manager try to convince myself and Rick Wojahn that we needed to buy an asset in order to get their trucks because their fleet was so much better than the fleet he had, so he could rob those trucks and take them and put them into other operations. He was completely willing to overpay for that deal just to get those trucks because he was so starved from capital. We also learned that former executives thought that CapEx could be a solution for safety. I'll submit to you, the opposite is true. The right truck for the right service is the safer thing to do. It's not the truck, it's the driver. We found that revenue and top-line growth was a priority. Managers were not required to look at margins.
They weren't required to look at contract terms. They were required to get the revenue with the mantra being, you can't price increase or rate adjust a customer you don't have. We found training was done, it wasn't done in a meaningful manner. They had driver trainers, certified driver trainers. They had a driver trainer academy. They flew people into a central location or drove them into a central location to train them before they started service with us. Sounds good. The problem is they hand that driver off to someone else, they never talk to that driver again. They don't know what that driver's taught, they don't know what the proficiency was of that driver. This all led to high turnover and to low morale. What do we do?
Our immediate plan was to immerse as many people, as many leaders, as many employees into the culture as possible. As Glenn Holt talked about, we immersed the leaders in Servant Leadership Discovery. In our region alone, between June 1 and September 30th, we trained 800 leaders in Servant Leadership Discovery. We followed it up with Culture Matters, with SLD for all, with SL-1, with Civil Treatment training. Concurred with this, we set the structure into the strong district manager, decentralized structure that Ron talked about. We have a region, below the regions, we have divisions, below divisions, we have districts. The district manager makes the decisions. The rest of us support that person, support those individuals. Safety was and is our number one value and effort, safety improvement became a byproduct of the changing of the culture. We focused on margin improvement.
We quit brokers, we quit low-margin accounts, we renewed municipal contracts on our terms, we let the competition have that customer. We recognized and implemented synergies. We reduced our headcount by 400 people in my region alone. Sorry. We began planning the implementing capital deployments for landfills in the fleet. We moved trucks out of operations that didn't want that type of truck. We replaced it with the proper equipment. We traded yellow iron between sites, between landfills, between transportation, between recycling plants, we listened to the managers who needed equipment. We asked them what they needed, oftentimes, Darrell Chambliss, our COO, and I, on the spot, ordered the trucks. No lengthy decision-making. We repainted every single truck in the entire fleet in the first 12 months. Imagine what that did for morale.
We hired a half a dozen region engineers and environmental compliance managers to support the field with engineering, construction, and compliance. We put processes in place to make sure the field was compliant with all federal, state, local statutes, and permits. We sold off assets when it made sense. Last Friday, we did a small little deal between Jason Craft and our region with Advanced Disposal. Lee County, Florida, we traded in my region to Advanced Disposal, they gave Jason Craft and his region the stranded assets in the Carolinas. It made sense for both of us. It was high capital, low margin, no internalization in our region. No reason to continue running that asset. With the fleet, we inherited a bunch of markets that Progressive Waste Solutions decided to go all in on compressed natural gas, Dallas, McKinney, Fort Worth, Tampa, Florida, parts of Louisiana.
There was no direct monetary return to do this. There were no contract extensions. There were no customer requirements to do this. Progressive Waste made the decision to do this purely based upon the savings they believed they could get out of commodity. This had a ripple-down effect through the entire region. You had fleets that got 100% new trucks across the board. They loved it. And we had other fleets, high-performing districts, that were starved of additional capital. This hurt safety, it hurt morale, and it really hurt turnover. Drivers will not last long on old trucks that they're not happy to drive in, and they don't feel are safe. The culture of the fleet management, fleet maintenance team was to rent trucks anytime you needed it. In 30 years prior to this last year, I had never rented a truck in my entire career.
When we took over this region, we found out we had 55 trucks on rent at $7,000 a month. We found deferred repairs. We found elongated service intervals. We found leaders were tasked with reducing their costs to manage the fleet, but they weren't given new capital. Old trucks, it's a fact, they cost more to maintain. What did we do? We continued to tell everyone our priority and our number one value is safety. We installed a maintenance database called RTA to track all maintenance that we tracked. Tasked all the maintenance staff with fixing anything that was unsafe, no matter how small. We moved trucks to the proper applications. We implemented preventative maintenance programs to be proactive, and the results over time was an improved fleet with better reliability and more uptime. We eliminated truck rentals by purchasing the trucks.
We also quit customers, and that reduced the demand on some of those trucks, and we purchased new equipment. Our goal, and we accomplished this, was to reduce repairs and maintenance as a percentage of revenue and to make our truck costs more predictable. Our results, we reduced our incidents by 45%. We decreased our turnover by 40%. We increased our quality revenue by 300 basis points, and most importantly, and the proudest, we increased our margins in our region by 750 basis points in 12 months. It's been a tough 12 months, but the results have proven the effort was worth it. Thank you.
Thanks, Rob. Great job. Next up, Jason Craft, our Regional Vice President of our Eastern region. Jason has been, like Rob, with us for quite a period of time. We've had him in multiple roles throughout the Western U.S., corporate, and now the Eastern region. Has done an exceptional job, I think, as you will see from the numbers. This is a region that was our smallest region prior to the merger and today has become, really from a revenue standpoint, equal to our second largest region, our Western region, just behind the Southern region. With that, Jason, come on up.
Thank you, Ron, and thanks for the comments. On behalf of the entire Eastern Region team, I'm pleased to share with you a little bit about our region and a little bit about our experience as we go through the progressive integration here. A quick overview of the region. Just as Ron alluded to, we're tracking right at $1.1 billion, when you add in the Groot acquisition that occurred earlier this year. We're in 11 states, just over 80 facilities, and call it 3,100, 3,200 employees. Our largest concentration by revenue is now really in Illinois, upstate New York, and Tennessee, and Kentucky in particular. Here's a look at our region leadership team. Our region's broken into six divisions led by division VPs and division controllers. Within that, you'll see we've got three key members of the New Waste Connections members of the former Progressive group.
In particular, our DVP in the Northeast, as well as our sales manager and our assistant region controller in Knoxville, ranging anywhere from 2 to 34 years of experience on the team. Our situational assessment leading into the region. Our region today is about 65% legacy Waste Connections, if you will, 35% legacy Progressive, or what we now call as New Waste Connection sites. We were running just north of 35% EBITDA margin. We were doing about 77 incidents a quarter. For right at about 2,100 employees, we had about an incident every single day. We were clipping along right at about 4.5% organic growth, really price-led organic growth. About three-quarters of that was price. The balance, obviously, volume.
To the contrary or in comparison, our legacy Progressive or our New Waste Connection sites, as I'll refer to them from this point on, their margin was about 1,300 basis points below ours, so they're running low 20s. As you heard Ron talk about earlier, their incident frequency was about three and a half times our frequency. This is the thing that concerned me the most as we moved into the integration, was how do we make an impact as quickly as we can to let them know how we define success and what the expectation of leadership was, or my expectation, in particular, we're going to make it a safer place to work today for tomorrow and make an impact there. They were actually a full point ahead of us on organic growth, but it was all volume.
It was about 67%, 68% volume, the balance being price. In terms of integration of the team, leading up to the integration, we got an opportunity to go out and do site visits, to due diligence. As we interacted with the group, what we found largely was they were good people, really stuck in a procedural-based management system, had low autonomy, were very reactive in how they managed the business. There was a lack of vision, certainly unclear direction. You saw some short-term decision-making, some decisions today that certainly would impact the business longer term, and I'll share some of those with you in a little bit. Saw low leadership accountability for safety. Again, from my vantage point, actions always support your values. I'll give you an example. We're out at a district, and we're walking around, and we're talking to the general manager.
We're looking at the trucks, and we're talking about the service area. Started asking him about his incident rate or his incident frequency, he started telling us, "Oh, yeah, safety's important." We walk into the driver break room, there's a four-by-eight whiteboard, and it's got all statistics, every statistic you could ever be known to man from the garbage business. In about the top corner, taking up about 2% of the whiteboard, is their incident frequency. I asked him, I said, "What kind of message you think you're really sending when the guys come in and you say, 'Hey, we're all about safety,' but 98% of your eight-foot whiteboard's all about each statistic that you're running in day in and day out?" You saw a siloed management structure, in particular, maintenance and sales. This is where we saw this the largest.
Again, conversations early on with the group, as we talked about their market plan and their sales plan and what the condition of their fleet was, we got a lot of answers about, "Well, that's not mine. That goes to division, or that goes to region." We quickly, as you'll see in the integration, went to our strong DM philosophy and removed those silos and said, "Hey, if you're going to be the general manager, you're accountable for everything that happens on site." Certainly, the strength of Progressive was sales, without question. Their goal was to drive revenue, grow revenue at all costs. Again, can't have a customer you can't PI, most importantly, just grow revenue. We saw sites out there that had zero EBITDA margin.
When we asked the question about, "Hey, why are you at zero?" "Well, that's what they've asked me to do." In our world, zero EBITDA margin doesn't work. We don't live on zero EBITDA margin. Whether it's integrated or not, you're running trucks, you're deploying people, you've got capital. We don't do zero. Those same assets today are no longer doing zero. Wasn't overnight, I'll tell you, it's capable if you empower the DM and tell them exactly what you want from them. Rob talked about fleet deployment in a vacuum. I'll give you a great example.
We're in a site in Pennsylvania, they had two brand-new trucks, and I said, "Oh, you guys got new trucks?" They said, "Yeah." I said, "What are you doing with those?" They said, "Well, we're trying to figure out if we're going to put them on route." I go, "What do you mean, figure out?" "Well, it was kind of the wrong truck." "Okay." I'm like, "Well, are you going to cut any route hours?" "No." I go, "Do me a favor. Don't put those trucks on route." Those trucks were deployed by June 1st in a location where we actually deployed them in the right mechanism. They didn't get two new trucks out of the deal, but they certainly understood that you can't just deploy a truck and not get some sort of return on it.
As we walk through the integration, our balance for the Eastern region, again, now two-thirds or one-third was certainly going forward as one team. What we meant by that, or what I meant by that, was ensuring that the team from Progressive understood our expectations in the playbook early on, how we define success, what was important to us, why we do the things that we do. You heard Hank talk about our culture earlier. The other caveat to that, and this was incredibly important to me, was that our legacy Waste Connections didn't see a disconnect as we started to integrate effectively double the size of the company. In our case, add 40% to the region. It was important that their culture remain the same, because as that starts to change, that's cultural change for our group. Sorry, guys, we're a little delayed here. All right.
I talked about going out and introducing the Waste Connections playbook. Our strategy was a little bit different. We were afforded a little bit better of a strategic position, if you will, from an integration standpoint. Our goal was to go out to each site as fast as we can, beginning May 31st at midnight. I'm literally standing on the sidewalk in the Bronx talking to people in New York City about welcoming them to the team, what was important to us, and how we define success. We did that as quickly as we could and hit each one of the locations that we could really in about 10 days. We were moving. It was a little bit of planes, trains, and automobiles.
It was important to us and it was important for me to meet as many people as we could early on and let them know who we were and what we were about. We set the expectation early about servant leadership. From our vantage point, it's the only way we lead people. To build that relationship with every employee and find out what you can do to help them be successful. Certainly, immediately turned over empowerment to the team, defined the guidelines or the ground rules, if you will, for how our playbook works. After that, we got out of their way and let them run the business. You'll see here on our slide, we've done some very good things, and I'm very proud of what the team has done in many of our markets. We work to make it a great place to work.
Again, you heard Ron talk earlier about work hard, play harder. From our vantage point, whether it was lunches on site or dinners late at night, we just talked to them about our story, our Waste Connections story, and about how much work it takes to be in this industry or this business. At the same time, let's have a little bit of fun doing it, because we're certainly asking a lot of everybody that's on our team. I talked about the integration earlier, the immediate expectation of one team. I wanted to make sure early on that we didn't have two cultures going in the Eastern region. It was our Waste Connections culture from the onset. We eradicated the former Progressive.
The new Waste Connections members is how we referred to them. The expectation was the same from the legacy to the new Waste Connections members. We set up mentors at the DM level. We provided as much support as we could and told them what was expected of them and started driving accountability. We talked about financial discipline and expectations early on. From our vantage point, we told them that price always mattered more than volume. It trumps volume in every case, that EBITDA matters. We talked about the 0% group. We established margin targets in many of our markets.
There's a conversation that dates back to March of earlier this year. There's a group in New York City talking about the New York City business in particular. The margin that they were running at that time, and whether or not they could get it to a double-digit EBITDA margin. They absolutely, resoundingly said, "Yes, we can do that. Here's how you do it." Now fast-forward the clock, call it 13 months on paper, it's over 2,000 basis points improvement in New York City alone. We're putting our CapEx to diet. We've made them rebudget everything that they had for the balance of the year and said, "Hey, listen, we look at capital a little bit different than the way that you do." Focused on voluntary turnover reduction.
In particular, again, going back to servant leadership and building relationships, letting people know you care about them, let them know that you're important, that they have an opportunity to interact with you on a daily basis, that you want them to be there is important. I'll tell you a little bit about where we've got to in turnover reduction here in a minute. One of my more favorite here is we eliminated the monthly operating review and the quarterly operating reviews, MORs or QORs, as they referred to them. We heard many stories about hours of preparation of MORs and QORs. Then going to a specific site, presenting what happened over the last month, then looking at an action plan. That's not the way we lead. We certainly keep score, right?
We need to know exactly what the result is. We spend an incredible amount of time talking about what's going to happen, as importantly, from a leadership perspective, what you're going to do about it. I actually went so far as to impose fines on people that said MOR, QOR. We gave a nice contribution to the East Tennessee Children's Hospital on behalf of our new members of Waste Connections. Let me give you a quick example of situational awareness and where we got to on a specific site. Most of you probably are familiar with Seneca Meadows Landfill. It's New York State's largest landfill. It's in the Eastern Region. As we started looking at Seneca, it had a host of issues, specifically operational issues, odor in particular, that led to some deteriorating host community relationships.
The team locally had a lack of leadership and vision. They really got jammed up in an analyze and plan mode without a lot of action. We very quickly identified an action plan to get this site going in the right direction, I'll tell you, we actually deployed one of our very best district managers from Legacy Waste Connections, a guy, engineering background, has run multiple sites in really all across the country. He was deployed into Seneca Meadows in March, long before the actual merger closed, to take over the site. Hold on. Damian, can you just hit that? Thank you. He specifically looked at leachate, he looked at gas collection, he looked at equipment, and he looked at what we were taking as a landfill, what the stream was, and what the pricing was.
I will tell you that he made improvements very quickly based upon just really how we were operating the business. Some short-term decisions about things like intermediate cover and how much water was being held in the cell and what we were charging specific customers really made a large impact very quickly. As importantly, he immediately, with the help of several members of our executive team that are in here today, went and met with the host community and said, "Hey, guys, here's where we're at, but more importantly, here's where we're going," which made a significant improvement with the host community early on of just acknowledging, "Hey, we're not as good as we should be, but here's where we're going." Let me tell you about where we ended up in the Eastern region. Fast-forward the clock.
We've got, I think, an exceptional number of additions to the Eastern region team. We believe we've established culture and vision. We've invigorated and fulfilled a number of the employees or the team members that have joined us. Why do I say that? Let me tell you about what they've done since they've come aboard. Safety, we reduced our incidents by over half, right at 55%. We've improved turnover by 30%. More importantly, we've decreased voluntary turnover by over 50%. Quality of revenue on price, we've went up over 300 basis points. We've taken EBITDA margin up a full 950 basis points and counting from this point going forward. We've really taken our internalization, which is one of the key strategic moves in this industry, as many of you are well aware. We've increased that by over 1,000 basis points in the region alone.
Appreciate your time today. Thank you very much.
Great job. Thank you, Jason. Next up, I'm going to ask Dan Pio, who is our President of Canada, to come up. Before I do that, in Canada, we also have a Regional Vice President, just like you've had Rob and Jason present. Marc Fox at the end of the table is our Regional Vice President for Canada. Because Canada is an entire nation, runs the geography of the entire U.S., we run Canada business a little differently, in part because part of it is French-speaking, as well as English-speaking. We have legal and treasury and portions of IT, where we do those functions in the U.S. at our corporate headquarters, and support our regions. We have those self-contained in Canada. Because of that, we also have a President of Canada, and that is Dan Pio.
We were structured just a little different, and I wanted to explain why Dan was presenting rather than Marc, who runs the region on a day-to-day basis, for Dan and for us. Dan, come on up.
Thanks, Shawn. Good morning, everyone. It's great to be here. I'm blessed to have spent the last 30 years in this industry, and I can tell you, without a doubt, no period has been more rewarding than the last 18 months with Waste Connections. What stands out about our region is the sheer breadth and diversity of our business across a very large country. I think many of you know that about 75% of the population in Canada resides about 100 miles north of the U.S. border. We operate in many of those locations, about 3,000 miles from Victoria through to Montreal. We cover four time zones, and our 84 locations house about 3,000 employees, and we generate just over CAD 900 million on an annual basis in revenue. To dispel the myth, we operate very similar services to the services that are provided to our U.S. customers.
Collection, it's transfer, it's recycling, it's landfills, all the same. I think the one thing that differentiates our business in Canada from our competitors is we have a strong presence in every market we operate in. We've got assets that are very difficult to replicate, long-term assets, and that gives us a competitive edge. Where were we about a year or so ago? Go back one. Past the slide. Just as an overview of our leadership team, you'll see here there's quite a bit of tenure. Average tenure is about 17 years. The neat thing is we've actually integrated some Waste Connections folks. You'll recall Waste Connections did not have a presence in Canada at all. Pre-merger, we were able to integrate five Waste Connections employees. Some of them are expats who came back to Canada to work for our team.
They've been invaluable members and contributors to our success so far. A very good blend of industry experience, as you can see, but also some new faces, some new blood, some fresh ideas have been added to our team, and that's been very beneficial as we look to our continuous improvement mindset. They keep us long-timers honest and help us look at things in a different way at times. Very fortunate to have this team there. They're reason why we've been successful. Pre-merger, we were a company that was really managing quarter to quarter. A lot of the decisions we were making were really focused on short-term improvements and not long-term value. We had a top-down management approach to our company. Very few decisions were left to our local leaders.
If you heard Ron and many others talk about it, this is a local business at the end of the day. Decisions have to be made locally. Unfortunately, our leadership at the time did not allow it to happen. That was one of the things we changed immediately, and I tell you, our folks really embraced that change. At the company, safety was not a value. It was more a program. We had policies and more policies. What we didn't do was take it from the head. I think everyone conceptually understands what safety is all about, but we didn't take it from the head to the heart. I think that's one of the things we've been able to do over the last 12 months has caused that to happen, and we've seen tremendous improvement as a result.
You've heard others talk about the volume strategy we were on. We really developed a sales force that was geared towards hunting new business, gain volume. The theory was that that would drive productivity, and that would really serve the same purpose as price. That proved to not be accurate. That volume mindset created a culture that lacked a safety focus, and that was obviously something that we could not sustain. Our leaders were really out of touch with what the drivers of true performance in a business were. We spent far too much time looking back. You've heard about MORs and QORs and not enough time looking forward and how we're going to change that environment. Our integration, with respect to integration with Waste Connections, our first priority was really communication. We started that communication early on. That communication took many forms.
We'd held a lot of town halls to get people up to speed on what was happening, how the merger would affect their daily lives. That was very well received, and it's something we continue to this day, quite honestly. You heard others talk about the training we put people through. We did a lot of, what I call vocational-type training. Training people how to be better mechanics, how to be better drivers. What we didn't do is invest in leadership training, and that is some of the hardest training that anybody will take on. As Ron pointed out, a competitive advantage that will take a decade or more for others to catch up, even if they wanted to start today. We made a significant investment in that.
In the first 90 days following the merger, we trained about 400 people in what we called Culture Matters. We followed up within the last three months on what we call Servant Leadership Discovery. Another 400 people going through that very training provides a foundation for how we want to operate the company. Part of the feedback we got through those sessions, you may recall, some of us may recall, we were going to stay branded as Progressive in Canada. We'd gone through a rebranding in the last couple of years. Some of the feedback we got through some of those sessions was, we want to be part of the Waste Connections. Earlier this year, we announced a rebranding of the company to Waste Connections of Canada and couldn't be prouder.
You'll start to see, for those of you who travel to Canada, our trucks, our containers, our facilities, taking on that rebranded image. Early on, we invested in recruiters. We did not have recruiters at all. All our recruiting was done locally. What that's allowed us to do is really improve the quality of the hire, allow us to have standards around how we onboard folks, how we train them, and more importantly, how we provide ongoing coaching to those employees, which we didn't have previously. That's allowed us really to set expectations. We had some very clear expectations this year. You see two of them there in terms of reducing turnover and improving pricing. We have five sets of goals for 2017 for our region, and we've been delivering on all five of those areas.
I think the best example for us is our transformation in the area of safety. It really starts with, in my opinion, safety starts with what I call visible leadership. Visible leadership means being there with our employees each and every day. It means being at, what we call tailgate meetings. Many of our drivers start the day really early, before many of us get out of bed. They're out on the road at 2:00, 3:00 in the morning. Being visible and being a leader in front of them during those tailgates is incredibly important. We embarked upon a very long journey in doing that. We continue to do that.
I mentioned the town halls we held with employees, many face-to-face meetings, conference calls, newsletters, everything we do to continue to enforce the fact that our number one value is safety. That's how we need to focus our company. We lead every decision, whether it's going after a new bid, a renewal of a bid, with a discussion around safety. Can we perform the work safely? We focused on risky behaviors. To me, you heard some talk about IR rates and incident rates. That's an outcome. It's kind of like an EBITDA multiple in the M&A game. That's an outcome. What we focus on is the behaviors that lead to those incidents and addressing those behaviors head-on. We instituted early on what we call Target 4 calls. As a company, we review very serious Target 4 incidents.
These are the most risky type of maneuvers that we see our drivers perform. We've done them for all Target 4 calls. I get on a call, no matter whether the reversal of a truck was into a pole or into a building, I'm on that call reviewing that call with Marc and discussing the root causes and what we're going to do to get better. We instituted recognition programs. Those recognition programs are varied, from truck rodeos that we hold all across the country. That's really led to some outstanding performance. In the month of April, we had 5 days where we had 0 incidents, no injuries, no accidents anywhere across the whole country. Proactively sourcing people, as I mentioned earlier, on the turnover side, there is a direct link between turnover and safety.
If you hire the right person, if you bring them on board the right way, and you continue to provide mentoring to that employee, you're going to end up with a better safety result. The results after 1 year are quite impressive and, quite honestly, very rewarding for not only me, but for our team, for Marc and our team. Our incidents, as you can see there in April, year-over-year, down a staggering 70%. It's really a testament to how we've embraced the values of Waste Connections. It means we are keeping not only our people safe, but keeping the communities that we serve safe each and every day. Turnover, I think, is a big driver of that improvement in safety. Again, focusing on hiring based on a set of values. When we go through interviews, we actually hire to the characteristics of our values.
That's been a big change for us. It's no longer acceptable to be a warm body to be in 1 of our trucks. You've got to embody our values each and every day. We've improved the penetration of PIs. Make sure that all our customers feel and carry the weight of our cost increases. We've been able to do that quite successfully, and we've been focused on shedding some unprofitable business. You heard folks talk about 0 EBITDA business. Canada was no different. We had some of that. We focused on that and improved that. We also spent quite a bit of time investing in RTA. RTA is a fleet management system. Progressive was lacking in this area. We didn't have any consistent standard across any of our regions, quite honestly. RTA has allowed us to have visibility to our fleet. We pride ourselves on our preventative maintenance program.
We think ultimately that's what results in higher uptime and better reliability with our trucks. The tool gives us that visibility. It gives us visibility to spend and forecast spend. To wrap up, we're pleased with what we've been able to achieve so far, and we are excited, and I'm quite encouraged about our future. Thank you.
Before we go to Q&A, which we're going to do in just a second here, I want to point one thing out. Many of you know that Canada was, and is, the crown jewel within Progressive. It was the original BFI Canada. One thing we were told early on is you will not change risk in Canada. It is fundamentally different, Ron. We heard it over and over and over. It's 50% unionized. That is the nature of the business in Canada. One year later, incidents are down by 70%. In some way, we couldn't do it. That is, the only thing that changed, is the approach to how we deal with our people. I know that is really hard to understand and put in a model, it is the fundamental driver.
To drive 200 margin points in what was already the crown jewel of the company in a year is a tremendous testament to Dan and Marc and their team. With this, while Woody and Mary Anne come forward with the microphones to take your questions so that the people that are webcast can hear you as well as in here. Obviously, you've met Rob, you've met Jason, you've met Dan, you've heard me introduce Marc. Let me introduce the other people that are up here. Some of them you will hear later in today's session. This is Chris Thomas. Chris Thomas is a longtime Waste Connections leader who we immediately deployed from the West Coast to Florida upon the closing of the transaction. Chris has made an enormous impact in the greater Orlando marketplace for us.
He is now going to actually be moving to Texas, where we have promoted him to a Divisional Vice President within the last two weeks, he'll be running a very large part of Texas for us now. Damian Ribar was a legacy, we don't use that word, Progressive leader who was an area manager in Atlantic area of Florida. He is the Divisional Vice President for us for all of the Atlantic Coast of our Florida operations. Adam Gooderham is our District Manager up here in the Houston market. You're going to hear specifically from Adam in a deep dive a little later today about pricing and sales. Adam is a longtime Waste Connections guy. Next, Dean DiValerio. Dean is our Assistant Regional Vice President of our Southern Region for Rob, a longtime leader in this industry through BFI, Republic, and then Progressive.
We asked Dean to come over with the transaction and be an understudy at one of our regions to Rob, our largest region, a region that was 85% Progressive, we wanted somebody that really understood what had worked there and what hadn't and why. Dean's been a critical link to what we've been able to achieve in the Southern Region. I've introduced Marc Fox as our Regional Vice President. Ask those people to be a part of this panel. We'll take your questions now on hopefully the things we've talked about to this point this morning, I'll direct that to the appropriate leader here on the panel. Later today in the fireside, our executive team will take any and all of your questions.
This morning, especially since we're webcasting, we'd like to try and take questions relating to something we've talked about thus this morning. Chris, go ahead.
Okay, thanks. Chris Merage, Multicore Capital. Maybe a question for each of the regional leaders. One of the things that was always interesting about Progressive was, frankly, for a lot of us in the investment community, the forecasting, the accuracy was always top. Can you talk a little bit about, and some of you touched on some of the cultural issues, how the difficulty was in transitioning and the level you have and the confidence in what you're generating now on a regular basis?
Dave, why don't you start, then jump to Rob?
You're talking about specifically the projections?
Yeah. The question I think was Progressive had some struggles with it. You're a region that now has a lot of former Progressive leaders. Rob has even more. How has that adjustment been?
I would tell you it's actually went better than what we thought. Again, we were very intentional and purposeful about our actions. We actually sat down as a region team with the district level managers and division level managers and controllers early on, and really became an active participant in that discussion and that participation, that here's the level of detail that we expect and why. I think, from our vantage point, went much better than what we thought. They were very receptive to it. Again, I talked about it early on in my session. For me, that's specifically when I get into the details on a monthly basis. I walk them through the why that is, and specifically because we can make an impact on it. Once we've closed, it is what it is.
Much better than what we thought, but we identified that early on as an opportunity where we could help set the expectation and coach and mentor, and did that.
Before Rob does, let me jump to Chris Thomas, our District Manager of our Orlando market. We moved Chris from the West Coast right at the close to take over Orlando. Orlando's in a fantastic market for us today and was for Progressive. Let me give you a couple statistics. When Chris took over Orlando in the preceding year, Orlando had almost 200 accidents and injuries in the year. Today, on a run rate basis, Orlando is down to likely having in the teens for incidents in a year. It has been reduced by about 85%-90% in the incident. That's just one area. I think Chris could talk to you because he took over a district that the entire leadership team was Progressive, legacy Progressive. Talk to where forecasting was and where it is today.
It was an interesting process. I spent a lot more time talking about what happened the previous month than actually what was going to happen. Matter of fact, there was seemingly no good process to track that. We really put in the first month, I sat down, and it was a little interesting because I had controllers that were former Progressive folks. We sat down with them and showed them step by step how to build trackers to track some certain key things that are going to drive the forecast. First couple of months were a little rocky. Once we got it into place, we're hitting revenue within a half a percent, and down in that 1% on EBITDA. It really took 90 to maybe a little over 90 days, and we were able to kind of get that nailed down.
Ours was kind of a small microcosm of all of Progressive, I imagine it was pretty similar across the region from what you guys saw.
Rob.
It may sound simple, what we did is we took away gamesmanship. In the old days, a projection would come in nine, 10 days into the working month, and the field would keep a little bit back because they knew we were going to come back and beat them up. This process was flawed. What we did as a region is we made them own it. We said, "You're going to give us your best projection, we're not going to change it." Now we're going to challenge them on it. We're going to look at it. We have a very short period of time to go through these, especially when in our region, we have 110 income statements. We don't make significant changes. Then we incentivize them to be accurate.
There's advantages to them if they can be accurate on revenue and on EBITDA. We've typically been within that 1% range in accuracy.
Yep.
It's Andrew Visciglia, Credit Suisse. Can you guys talk a little bit about, and a lot of the discussion this morning obviously is your differentiation, your culture. One thing you guys pointed out, rising tides lifts all boats. Would you not say your competition is probably more rational than it might have ever been in the last 10 years, and that's helping you guys too? Could you just talk a little bit about what you're seeing competitively? It seems like obviously there's that gap that you pointed out regardless of what your competitors are doing. It'd be hard for them to catch up. Do you think you're benefiting a little bit from generally better competition that's a little bit more rational than it's ever been?
Sure. I'm going to let these guys answer directly in a second. Let me say this. Number one, the basic answer to your question is absolutely a rising tide lifts all boats. Since we're in the ocean, we get lifted too. As things get better for the group, we get a benefit from that. That is unequivocally, that is accurate. However. Do not mistake improved rationality for rising tides. As soon as tides go back out, you'll find rationality goes away. We've been through these cycles, and all you have to do is go look back at what happened from 2009 to 2014. Our largest peer had negative price and volume. Do not mistake rationality for rising tides. Now, let's look at it on a local basis. Adam, who runs our Houston market, highly competitive market.
How would you define how things are in the competitive environment today relative to pick two to five years ago?
Yeah. I was here in 2009 coming off the recession, and there's a definite difference in how the two main competitors perceive us today than they did then. Back then, they were more aggressive with pricing than the independent players would be. Now you see them being a little bit more disciplined, and we're seeing that more so today than we did three or four years ago.
Damian, who runs our Eastern Florida, Atlantic Sea area of Florida.
Yeah, similar. What we're seeing is definitely competitors are jumping on that volume bandwagon. We do see that out there. We see, as alluded to in a number of the presentations, certain bids where we've had in the past that were low margin. We'll come back and say, "Look, if we're going to do this on a long-term basis, we want it for a return, not for practice." In some cases, we haven't been successful in some of those, but those that were, left a tremendous amount of money on the table relative to what they were going after these contracts for. We're fine with that because we're not going to just buy the trucks to wear them out in six or seven years. We have seen people do that.
We're going to stick with the fundamentals of the price and making sure that we're doing the work that we want to do, and that's safe to do, and it's the right work for our company to do.
Another question over here. Hamza?
Yeah.
Thank you.
Hamza from Macquarie. One of the things I think the market appreciates what you've done with the BIN assets, but maybe just give us a flavor of where do we go from here? Where is the low-hanging fruit now? Safety seems like it's come down a lot, incidents. Where do we go from here? Secondly, maybe for Dan, the Canadian market's very unique. You guys have a gas plant that is helping margins. Is there anything unique that you can do in Canada that you can't do in the U.S. going forward that can help the business? Thanks.
Hamza, let me take the first part of that, and I'll give it to a couple of the guys and have Dan come back on Canada, Dan or Marc. Obviously, the largest impact to the prior Progressive footprint has occurred. We moved EBITDA from 480 to approaching 600. You don't move it from 600 to 720. Maybe you do over time, but you don't do it in this time of a period. We believe there are still multiple years of improvement, meaning 2018 and 2019, on the legacy Progressive footprint for us. There are improvements still through turnover, which will drive risk. There's continued multi-year improvements to price that we will drive. There are continued divestiture or rationalization opportunities as we make a determination on assets, can we get them to the position we think? It is a continuous process from here in 2018 and 2019.
You're going to see that happen, I think you'll continue to see that. It will not be to the magnitude, obviously. I'm going to let Jason, why don't you take-- you've had almost 1,000 basis points, and you're not going to have that going forward, but what do you expect over 2018 and 2019 in that footprint?
Well, Ron, I think you nailed it. Specifically what I want to see is sustained improvement in turnover, which obviously helps risk for us. There's some pricing. We did what we were able to do early on, based upon contract windows, et cetera, there's still improvement there to be seen. I think in a few markets, we still are defining who we want to be long term. We went back, somebody said earlier, maybe it was Ron, in many cases, we were all things to everybody in that market, and we've repositioned a few to say, "Hey, we're going to be slightly different as we grow up, and long term, here's what the vision looks like.
Marc, you want to take the question? Hamza had a specific question on Canada.
Sure. I think the question was, what can we do to enhance our margins in Canada? You referenced a gas plant, one answer is we could build another one. We have another point is we have done some permitting changes in activities at our landfills for things that are ancillary to the landfill. I'm thinking, for example, at our soils landfill, we started a soil recycling activity, which has allowed us to increase our throughput. We have another landfill where we have received permission from the ministry to exempt certain materials going to our landfill. We started some organics processing at a landfill. The third part to my answer would be, at the onset, Ron challenged us in improving the collection margins.
We have a number of locations that have attractive margins, when you dig deep into those locations, there are activities within those locations that could be doing better.
One other thing I want to say, Hamza, is that We've spent the last year and a half really driving towards improving the footprint of the business we acquired, making some very large changes. The thing you haven't yet seen, I believe you will see at the latter part of 2017 and into 2018 and 2019, is a whole other engine that is not presenting to you today, which is our M&A group. That M&A group has a footprint to work in, drive our model that it has not had for 20 years.
You're going to see that engine come out of first gear and go into second and third over the next year to three years, expand upon these new assets in both the U.S. and Canada that we have, further drive free cash flow creation through tuck-in acquisitions, additional transfer stations to internalize business that isn't today, new landfills to internalize business that's not today. That's, I think, what the next leg is for the business over the next two to three years, is that engine, which we've been really working heavily on. That engine takes time, there are other drivers we'll talk about later today that do that. We apologize because we are webcast and we publish a very specific time we would stay to.
We've asked you to sit quietly for two hours and drink coffee, which we know is a good thing to do. We're going to take a 15-minute break right now, come back right at 10:15. We promise you at the end section, we will not have a, "We'll cut off our questions." We'll take any and all questions you have and try to answer those thoroughly. Thank you.
Two, three. One, two, three. One, two, three. Again?
Yes.
One, two, three. One, two, three. One, two, three.
Okay. Can I get you maybe the button, the next button up?
That works.
One, two. One, two, three. One. Okay.
That's the plate. Collect a buck from each of them. They say, "We're getting some revenue out of it.
One. Hello? Hello? There you go. Okay.
Thanks.
Yeah, I think it was. That's good. Thank you. Okay, if we could get everybody to take a seat. Thank you. We know 15 minutes goes really quick after two hours of sitting. Thank you for getting back in. Because we are a webcast and we have many people on the webcast, we're trying to stay on track. All right. We are now going to go into the section in your slide deck that is entitled, Driving Continuous Improvement. We're going to give you sort of three deeper dives into some areas. I'd now like to bring back up Glenn Holt, who you met earlier today, our Director of Leadership and Development. [Hank] will be joined up here by Adam Matthews.
Adam, who is currently our Divisional Vice President in Texas, is actually going to be very shortly moving into Hank's role at the corporate level as Hank sort of transits. Hank, we didn't tell you this? As Hank has decided to move into more of a leisure life on a part-time role over the next several years, backing down a little bit of what he's been doing on the travel side for us for over a decade. He is going to continue working with us, but he will now be working with Adam, who will be taking over our leadership development and training at the corporate level. Adam will be backfilled by who I mentioned earlier today, Chris Thomas, who will be Divisional Vice President in Texas. We've asked both Hank and Adam to join us today for the next section. Come on up, guys.
All right. Awesome.
Adam, they need some expendable supplies before we come on board here. Because this tape is definite this room, I tell you, they are so tuned in. They're paying attention. I bought the tape. I know, it was great, wasn't it?
I know. I bought them myself. I know how it happened.
But I'm so glad they let us come back and chat. All right. Hey, congratulations on [inaudible] the new role. I didn't realize. We talked about that.
Yeah, I know. It's a little awkward, but Hope the retirement gig goes good.
Yeah, I hope so too. Good luck to you with all this stuff. You know what it makes me think, maybe we should have a little pop quiz. Are you up for that?
I'm ready for that.
Okay. Just talk amongst yourselves. We've got to work this out. Since you're taking over this gig here. Oh the first pop quiz is Culture Matters. Would you say true or false? True. True? The it is IT. IT. Perfect. I think we're tracking good, because without technology, the clickers wouldn't work. I know. We upgraded the clicker. Okay? You're supposed to say nice. Nice. Yeah, there it is. There it is. Hey, one more quick pop quiz question. Okay. Just to see if you're worthy. Oh Can you handle it? Ron, you didn't tell me about this. Okay, I know. This is how we do. We make it up as we go along sometimes here. For Culture Matters, we call that servant leadership. For those along who were paying attention earlier today, this is the pop quiz portion of our morning.
We have a definition of servant leadership, and it's to make good things happen for other people. Is that what you were going to say, Adam? I was. It's awesome. It's awesome. I love that. I love that. So far, so good 100% on the pop quiz, Adam. I think he's going to work out just fine. I want to take just a few more minutes and pull back the curtain a little bit. Since we've been talking about our culture is how we do what we do, I thought we would just share with you a little bit of a high overview of how do we develop these managers that oftentimes come from cultures that are exactly the opposite of us. How do we help them do what we need to do very quickly here? Would that be of interest to you?
If not, we're done early, and you can start asking all those financial questions. Let me share with you kind of quickly how it is. Here's the secret, if I had to boil it down. It's about taking the typical org chart, where the manager's at the top, they control all the people underneath them, and it's turning that upside down. Instead of controlling people, now the manager's at the bottom of the pyramid, and they have to empower all the people that they're fortunate enough to lead. Do you think that's hard or easy? It's hard. Hard or way hard? It's way hard. It's way hard, because now when you're at the bottom of the org chart, to get the results that you want, you have to train and develop all those people up there.
You have to set crystal clear expectations, then you've got to make sure that they know the boundaries, that they can make those decisions within. Then the hardest part at all for a lot of managers is you got to get out of the way and let people do what you hired them to do. That's what empowerment is. That's what we've done in our organization, our culture, is we've gone from controlling people to empowering people and letting them closest to the situation make the best decisions. Okay? Again, we've been on a 10-year journey of that. Anybody else that wants to do it, I can show them this slide and tell them that's what you need to do.
It's just hard to do, that's why I think so many companies don't actually create this kind of a culture, because it's hard to do. Hard to do. Here's how we do it. We believe every manager needs to have three things. They need to have a mindset, a skillset, and a tool set to operate within this culture. Three things. That if they can get those three things, they'll be successful and what we call be a servant leader. The mindset is that as a manager, my job is to focus on results and relationships. Most companies' managers focus on which of those two? The results. It's all about, did you get the numbers? Did you meet the budget? Did you exceed this? They're equal there. There's a big and in the middle. You got to do both. You got to get results. That doesn't change.
Like with the Progressive managers, we had to teach them, how do you build relationships with your people? Because it's a people sport. That's the difference. They got to have that in their head. They got to understand that, oh, that's what I need to do, results and relationships. That's the mindset. We have to give them the skillset. The skillset is how do you have conversations with people? I know. Don't be offended, there's a lot of managers that don't know how to have real conversations, straight up, honest, candid, caring conversations with people. We've actually had to teach managers how to do that. That's the skill, is having conversations. The tool set to back all that up is structure, support, and accountability, that comes from every level within the organization. That there is a structure to have these conversations.
There's a time to have this kind of a conversation, a time to have that kind. There's plenty of support. If I'm not sure how to have a specific conversation with Skippy, I can get some support. I know there's somebody there who can help me help Skippy be more successful. Then there's accountability. Someone's going to be checking, how'd that conversation with Skippy go? Was Skippy able to change his behavior and do things better? That's what we do in its simplest form, is help people get that mindset, skillset, and tool set. The success is they become a servant leader, now they've left their indelible thumbprint on Skippy. Skippy's the one that pays that forward to somebody else, where now he can have a conversation with somebody, that's what makes our culture self-sustaining. It's not about me.
I feel really comfortable with me going into a part-time retirement mode, that our culture will keep this going because we've got enough people passing on the thumbprints as we go along. Head nod if that kind of makes sense. Perfect. Perfect. Here's how it plays out. The question you should be asking yourself, how do they get the mindset, skillset, and tool set? We have three ways that we help every single manager in our company get the mindset, skillset, and tool set. The first one is on-the-job coaching from their boss. Their direct boss is responsible for developing leaders.
My job is to help them be able to do that, but I'm not responsible for teaching 2,000 managers how to be great leaders in Waste Connections. Each manager, that's their job. Most important part of their job is develop their people. It's through on-the-job coaching. The second way is we do offer weekly webinars. All those high achievers that want to multitask over lunch at their desk, we can give them the mindset, skill set, and tool set in a very short manner, right at their desk. They're very practical, that at the end of the webinar, they'll be able to go out and do something right now that's different and better than what they did before.
Finally, probably the most impactful, is we have classroom sessions where we bring managers together, which we call learning labs, to help them get this mindset, skill set, and tool set. If I could real quick, I'll give you just a quick overview of what these three methods kind of work. The first one is on-the-job coaching, what that is, that's where these conversations play out. Every one of our managers are able to have the three most important conversations. Sometimes they call them something different, but essentially they're all the same. The first one is what we call a DOT conversation. A DOT just stands for "do one thing." Here's the basic premise. If I sit down and give Skippy 27 measurable objectives to have completed by the end of the year, guess how many things he's going to focus on? Zero. Okay?
Nobody can handle 27 measurable objectives at one time and stay focused on them. What Skippy can focus in on is one thing at a time, particularly if it's a short time frame. The conversation with Skippy is, "Hey, Skippy, what's the one most important thing you can do this week that would have the greatest positive impact on your safety? Great. Just do that this week." Or, "What's the most important thing you could do to have the greatest positive impact on reducing our truck variable expense this month? Great. Do that this week." We have 16,000 people all doing one thing a week. Think it'll make a difference? Yeah, we think it does. It's about having that short conversation about what's your one thing you're doing this week that's going to make things better. It definitely impacts results.
The second conversation is about relationships. We call it a take ten check-in. Every employee gets one-on-one time with their boss about once a month, sometimes a little more frequently, sometimes a little less, for just 10 minutes. It's the employee's agenda. We talk about whatever the employee wants to talk about. Sometimes it's personal stuff, sometimes it's work stuff, whatever it is. Everybody gets one-on-one time. That's where we build these relationships. It's intentional. Everybody gets one-on-one time. Finally, the third conversation is what we call a safe three-minute conversation. Only takes about 3 minutes. Okay. What we use it for is twofold. One, it's a way of recognizing and celebrating people.
If Adam's walking through his division or his district, he sees somebody doing something good, we like to say, "If we see it, say it." Stop and let them know how much we appreciate what they do, and we tell them why what they're doing makes a difference. We reinforce the behavior. The safe three-minute conversation is also if Adam sees somebody who's signed a little bit off track, this is the conversation that says, "Good news, I'm here to help you get back on track so you can be as successful as you can be. Let me give you some feedback that's going to allow you to get back on track." All that happens within 3 minutes. Nobody gets written up. Nobody gets ripped a new one.
It's all about, "I'm talking to you because I care about you and I want you to be successful." That's what we do. All of your managers have been through Servant Leadership Discovery, where we really teach them about these safe conversations. Do you have a story maybe you could share of how being able to have these conversations has impacted your folks?
I do. Thank you, Hank. Before Progressive was acquired last year, we really had no formal training in the area of performance feedback to our people, either good or bad. We went through the Servant Leadership Discovery. We were introduced to safe conversations, and it was a totally foreign concept. It was new to us. Candidly, we were a little skeptical of this. We practiced the safe conversations on each other, these three-minute conversations which are intended to recognize and reinforce those good behaviors, but also to redirect or change certain behaviors, particularly unsafe ones from the organization. We practiced those. I will tell you that one of our guys who really took this to heart was Chris Carr. Chris is our district manager of the San Antonio district. He's a good manager.
He's been with us a number of years, but he'd been struggling in some areas of performance in some key areas. His incident rate, the 12-month IR rate that Shawn Mandel talked about earlier is a key indicator of our safety performance, was over 40, was unacceptable. His turnover rate was over 40%. It was a combination of both voluntary, involuntary turnover, a high turnover rate. He had some equipment failures at his district, which had contributed to some service issues, which had impacted the organization and frustrated really everyone at the district. Well, Chris took this to heart. He practiced these three-minute conversations with his people, became very fluent, and really made an impact in the organization, really changing both results and relationships there. A year later, his IR rate now is below 10, which is a vast improvement over where he was a year ago.
As a matter of fact, he is second only to Chris Thomas' Orlando district of most improved for a Target District in the company in that year. His turnover rate is less than half of what it was a year ago, and the customer service efforts there have been vastly improved and really were a reason among contributing to the renewal and extension of two key municipal contracts in that market, both with price increases. Really, Chris has done an outstanding job to make an effort in those areas, impacting results and relationships. Now, today, I would regard Chris' team as one of the closest-knit groups that I have in the division. Truly, they've become a stronger team, and it just demonstrates again how these safe three-minute conversations can make an impact.
Nice. Chris, he's a long-term industry veteran, been successful in some way, but he's an even better manager now because he can have the right kind of conversation with his folks and still get results.
Absolutely.
Results and relationships.
Yeah.
-is exactly how it plays out. The second way we try to help people get this mindset, skill set, and tool set is via weekly webinars. We offer at least one webinar every week. We have over 50 topics that we have, all of them related to leadership. We don't teach how to route. We don't teach all the technical, vocational stuff. This is all about leaders. How do I be a better leader when I go back? They're everything from how do you stop boring meetings that suck, that piss off your people, to how do you interview and hire aces instead of pulling a joker out of the deck? They're all hard-hitting. They'll get the mindset.
They'll leave with a specific skill and usually some kind of tool, a job aid, something, so they can go back right after the webinar and do something differently that allows them to be more successful. We also offer a series of six webinars that help employees move into that supervisory role. Very difficult transition. We call it going from bud to boss. We give them the basic skills that fit into our culture to do that. Again, a variety of that. For all the high-achieving managers that want just a little bit more, they can sign on. It's opt-in. Nobody ever gets sent to a webinar or sent to a training. Everything we do is opt-in. They choose it if they want it. That's another way that we get them to be successful.
Finally, the Servant Leadership Learning Labs is what we do, where we bring people together. It's expensive for us to bring 25, 30 managers together here at corporate at a given time, but we think it's one of the most positive things we do. Right now, I've got 25 managers in our Servant Leadership Development Center waiting for me to get back over to them right now. What we do is we bring managers from all across the country, all the disciplines together for three days. They get a chance to interact with their peers, problem solve, learn new skills together. The way they get there is by invitation only. As I said, no one gets sent to training. We invite people to training. When we invite them, they get to choose to opt in or opt out. Okay?
Practically, there's only two answers we get when you get invited to one of our Servant Leadership Learning Labs. Managers either say, "Yes," or they say, "Hell yes." One of the two. Not everybody gets invited. It's not an entitlement program. We basically take the very best managers we've got, and those are the ones we choose to invest just a little bit more in. There's a little bit of prestige of being invited to attend the Servant Leadership Learning Lab sessions. In each of the sessions, there's pre-reading. The pre-reading for our very first session, Servant Leadership Discovery, is the book called "The Secret," because we want them to know the secret right at the beginning of it. We have them do the pre-reading where they really learn what they need to learn.
That way, once they show up, we get to just practice it. We kind of flip the learning. They don't show up and they're as empty vessels to learn, but they do the learning before they even get there. Every one of the Servant Leadership Learning Lab sessions, there's also some kind of an assessment process, whether it's just a self-assessment or a 360 assessment, so they get feedback on how well they're already doing with whatever that skill set and tool set is that they're going to get to help them realize what they need to change and what they need to do better with that. The highlight of all of the Learning Lab sessions is what we call the project. In every one of them, there's a different project. The project is basically, it's kind of a Harvard case study kind of a project.
It's real-life stuff that has happened at Waste Connections that we put together into a case study. We put them together in teams, they basically have to come up with their solution for whatever the project is. There's no right answer. They get to interpret the information and decide what would they do as a leader to deal with that. All of these case studies are leadership kinds of issues. The following morning, they actually have to present their solution to our senior leadership team. Our senior leadership team gets to know them, we talk about it collectively as a group afterward. Again, by far, this is the highlight of every one of our Leadership Learning Lab sessions is that. Also, all of our senior leadership teams present and teach.
We kind of believe in leaders as teachers here, they all share that. Again, all of this I think is very unique. A lot of companies have a week-long leadership academy, some new manager goes through, checks the box they've been, then that's all they do. Well, at Waste Connections, the learning never ends. We currently have a curriculum of nine of these Servant Leadership Labs. The managers that get invited maybe attend one per year. We've got managers that sometimes have been here seven, eight, nine, 10 years that are coming back to learn one more thing. The basic premise we do this is to answer the question of when do you know it all? When do you know it all?
Never.
No. Do you all know people who think they know it all?
Yeah.
They're doomed. The minute you think you know it all, you absolutely do. Malcolm Forbes says, "The dumbest people I know are those that know it all." We invest in managers every single year. Even though they've been successful and been here for 10 years or more, they get to keep coming back, and we add one more layer on to how to be an even better Servant Leader with all of this. Adam, most of your managers in Texas have been through our first-level Servant Leadership Discovery. A bunch of them have been through Servant Leadership 1. What difference have you seen from them once they attend the Learning Lab?
Significant. I want to point out, too, is that training is not unique to the other major players in the industry. They have very elaborate training efforts. They're typically targeted towards functional objectives. I can tell you that after 30 years in the industry, both with work at Waste Management, BFI, they're very targeted training efforts, maybe around route optimization or around customer service initiatives. I know it because I led one of those, so I know that typically these initiatives are very focused. What Hank describes around leadership is unique because the whole strategy around leadership and around servant leadership is very unique to Waste Connections. I can tell you that from the standpoint of its impact, it's made a notable impact to our group in our division. One individual that I think is really noteworthy is that of Tom Evenhouse.
Now, Tom is our district manager in the Austin district. Tom is a seasoned professional. He's been in the industry for over 30 years. He is really kind of old school. He's got a very direct communication style, very efficient. Heck, some might even call him a boss hole. He's very focused. I tell you that after SLD and SL1, his personality truly changed. Today he's far more approachable. He's more engaging. He's frankly happier. It's made a difference in the organization. You can see it. You can feel it when you walk now through the district in Austin, it's a whole different atmosphere. When you walk through there, you'll see people, groups collaborating together. You walk through the driver room at the end of the day, you'll see guys who are punched out. They're still hanging out. Why?
It's a greater place to be, and that just has made a big impact on the organization. I can tell you Tom is one of the first guys in Austin, along with Adam in Houston, who rolled out SLD for all. Rob mentioned that earlier, but SLD for all is kind of a condensed version of the SLD training class, and we designed that in collaboration with Hank's team, and it's designed to bring the same principles to everyone. It's not just engineered for leaders, for supervisors and managers, because the principles of the teaching is that everyone is a servant leader. We want to share that with the organization. Adam and Tom are among the first to introduce that at the division.
Tom also is one of the first guys to hang our operating core values in the form of Progressive Office there in Austin. Hung them in the foyer, also in the training center. He made sure everyone in the organization understood those core values, understood that our decisions as managers and leaders were based upon them, understood that we have a decision tree based upon them. Today it's made a big impact. I would say that following the SLD, SL-1, Tom's become that servant leader, and it just goes to show you that after years of doing things a certain way, that you can change and can make great things happen for your people.
Wow. That's a great story. Not only did we help Tom become a better manager and a leader, but is it fair to say we made Tom a better Tom?
No doubt.
That's pretty powerful stuff, Matt, and that they're happening in a lot of organizations. I hope you realize that. Here's what we found over the years, is we can't make Tom be a servant leader. What we found is servant leadership is a choice. You have to choose to want to be a servant leader. There is an alternative path you can take. That's a choice. Okay? We think servant leadership is the way to go. If you got the mindset, skillset, and tool set, you can be a great servant leader. Here's the deal, you can choose that you want to be a servant leader, but you don't get to pick whether you are a servant leader. That happens every night at the dinner table by every one of your employees.
When Skippy comes home from work and Mrs. Skippy says, "Hey honey, how was your day today?" Skippy says, "You know what that boss hole Hank did today? He's making me work this weekend. I'm missing our kid's birthday party." That's when Skippy decides whether his boss is a servant leader or not. That's quite different than if Skippy's able to say, "You know what Hank did today? He remembered our son was pitching the final high school baseball game this Friday, and he told me to leave at noon so I can go home and shower, and we can go see him pitch. That Hank, he's an okay guy." That's the difference. Where do you think discretionary effort comes from? The first example or the second example? That's the value of the culture.
That's what servant leadership is all about, is having the relationships that help us get the result, and we do that very intentionally. We kind of believe, as Adam said, every one of our 16,000 employees can be a servant leader. The reason for that is everyone can serve. Every one of you can serve other people. It's all about approaching life all day long with we're here to make good things happen for other people. If you look for every opportunity to do that, you think it gets good results? We think it does. Thanks for your time today. Adam-
Hey, man.
Glad to have you here, man.
Thank you.
It's all good.
Think about where you work. For many, we know that your business probably is not that different from most of the waste industry or many industrial companies. If you look back, and then we know we've made this point a few times today, we didn't change fleets. We didn't change frontline people. We didn't route differently. We changed approach, changed the leadership approach, communication approach. We made it result-focused-- excuse me, relationship-focused and result outcome, not results-focused. Relationship-focused and results are an outcome.
That's something that we believe very strongly in, and it's worked very well for us. We will tell you it is very foreign to this business and foreign to many businesses, because it takes tremendous time to implement into the organization and become the way the organization sort of unconsciously acts day in and day out. It's something you must be intentional about for a long time before it becomes sort of an unconscious act of how you do things. There's no way to take servant leadership and what we call golden rule thinking, as we talked about in our opening today, and explain it in a half hour to 40 minutes in any kind of forum, because it is woven through the thread of everything we do in our company, in every department, in every approach.
We wanted to give you just sort of a snippet of how we do it and some of the impact it's made. Next, I would like to introduce Eric Hansen, our Vice President and CIO, and Keith Gordon, our VP of Information Systems. They're going to come forward now, and very shortly, joining them up here will be Colin Wittmer, our VP of Sales. We've asked them to give you more of an in-depth view of some things we're doing in our information system and our technology approach to the business, with three specific things in different areas, to give you, again, some snippets of things that we're doing and how we think about the utilization of technology today and on a go-forward basis. Eric, Keith, come on up.
Good morning, everyone. It is nice to be here, very difficult to follow Hank, Adam, and Skippy with a presentation. We're going to go ahead and tell you a little bit about the Information Systems Department. I'm Eric Hansen. That's Keith Gordon. As we get started, I got to go back just a few years because I've been here a long time, 19 years. I'm looking in the back of the room at Eric Merrill. About 19 years ago this month, we started probably the biggest computer project in this company's history at the time. It was a very short tenure at that time, we had to convert Vancouver, Washington, to Route Manager. We did that on one server, which really was our first data center. One server. My cell phone back there, my smartphone, has more capacity in it than that one server did.
We now have about 1,000 servers, along the way, between one server and 1,000 servers, we did a couple key things. One, we learned how to work together. That was operations and IT working as a team. We decided right then and there that's how it was going to go. Two, on the technology side, was we adopted Citrix, that allowed us a number of things. Most importantly, it allowed us that when we acquired a company, we could get that new company on our systems right away, just in a matter of minutes. Then just a few years ago, when we moved to Texas, we had a big change in our technology, that's when we adopted the VCE converged infrastructure here in Houston, we did that at the same time we made the move. A big deal for us.
Allowed us to grow quickly, rapidly, which we absolutely needed because you saw what happened to us once we got here. We just didn't sit still. Today, we're going to talk about three major topics and to tell you a little bit more about the team that run those projects with Keith Gordon.
Thanks, Eric. Again, I'm Keith Gordon. I've been with the company for seven years, so I'm one of the guys dragging down that tenure that Ron talked about a little bit. I do have 25 years of experience. I spent about 14 years in the cable and satellite IT, so I've seen them evolve. I've seen bigger companies. I had the pleasure to work in a startup company and get the sense of energy there. I spent a number of years in the military, ending as an instructor at West Point. I've never seen is a CIO with 19 years of experience. Never. All right. In the technology world, CIO stands for career is over, right. This is a real testament and speaks volumes to what he put in place. I mean that. That's really what we call it. All right.
I think we make a great partnership, Eric and I, and sort of the yin-yang. I'd like to talk a little bit about the team that we have. There's five major departments. We have a HR and financial applications team. They basically do the development and support of all the corporate applications, anything that really isn't operationally developed. We've got an operational application team. We're going to take a look at a couple of their applications today. Any application that's around service delivery, they're the ones that are responsible for delivering and supporting those. Our biggest organization is our customer service organization. We've got some field techs that we strategically place across North America, provide hands-on support. We got two small call centers that provide help desk support. We also have a data center team that provides all. Eric talked about our data centers today.
We have three data centers. Every aspect of the physical and the virtual servers, they're responsible for that. We're taking it down to two, so they're collapsing one of the data centers there, and they're also responsible for our on-cloud disaster recovery. The final one is our network team, and we've got our director over there. I'll introduce Blake Chambliss. He runs the network as well as the telecommunications and some of the facilities and procurement. I want to take just one little side detour here, though, and talk about the interview process that we use that kind of bring together my experience with the startups. We do interviews, Eric and I, no matter if it's a help desk tech or if it's a manager. We both interview them, and often, Steve Valk will come in as the president, Ron will come by.
When you're doing an interview and a CEO or the president comes by, it actually blows the mind of the candidates. They're like, "Your president or your CEO actually takes the time to come down and meet us." I said, "Yeah, it's a different kind of a company, right." We've been around for 19 years, we've got all that experience, but in all the right ways, it feels like a startup company. You got people who share the same values, they're passionate about what they do, you're empowered, there's no bureaucracy here, and that really goes a long way when we're going through the interviews process.
Good stuff, [Keith]. All right. Guys, what our role is, we work directly with the business units, finance team, sales team, operations team. Their ideas, their concepts, their needs, that's what drives our decisions, okay? Everything we do is with intent. We try to align ourselves with our business unit, and in the end, that's the partnership we create.
This is just a handful of some of the projects we're working on. In every area, we've got dozens of different initiatives. If you look at this, aside from maybe the data center and the network where we're setting up the infrastructure or looking at cybersecurity or other security, we really are driven by the business. If you look at what Hank was talking about servant leadership, we actually, all the IT folks, Eric and I have a program that we've rolled out about servant leadership, and we use that principle in how we look at the districts that we support. We're on the bottom of that. A lot of IT organizations, you'll see push-down initiatives based on what the IT agenda is. That's not what we do. We champion what the district's mission is, and it's our job to make them successful.
We're going to take a look at three areas where we've built in-house solutions to do just that. It's about driving either safety, it's about revenue generation, it's about efficiency and cutting costs, or it's about customer satisfaction and retention.
Okay, our first one is the truck tablet. A lot of technology has been put into trucks these days. A few years ago, we started looking into creating our own truck tablet application. Truck tablets have been around for a long time. We've always found they're kind of big and bulky and expensive, and the software that was on them required us to shape our business towards the software rather than shaping the software towards our business. We experimented with them. We tried them in a few districts, never had a lot of great success. Our in-house development team wanted to take a crack at it.
I let them go to work on it a little bit, we found a couple of test tablets, we took this idea to Darrell Chambliss in the back row there, we said, "Darrell, what do you think of this? We think we can build a tool specifically for Waste Connections, how we do business in our districts. Put this tablet in our trucks." He looked at it and he said, "Do it." The famous words of our CEO and our COO are always, "Do it." Love hearing those words. He said, "You got to do 4 things. You got to make it safe, you got to increase productivity and customer service, you got to lower cost." Those 4 things were on our minds when we started building this tablet project. Our guys went to work on it again.
We talked to district managers, we talked to guys in the field, operations supervisors. We took our own interpretation of the thing, and we put it all together, and we created a pilot project. We rolled it out, and we thought we had a pretty good product. We'd come in at a lot less cost, about $1,000 a tablet. Product was looking good. We own the licensing, so that didn't cost us any money. We gave it to the drivers in a pilot project, and they didn't like it at all. Didn't like it, hated it. All right, where did we go wrong? We went back to the drivers, and to figure out where we went wrong, we took the developers, and we put them in the truck with the drivers for 2 weeks.
They got up at 2:00 A.M., 3:00 A.M., they went around with these guys till they figured it out. By the time we got done, we ended up with this right here. I'm going to take you through this program. This is actually our truck tablet tool. Just in case any of you want to switch careers in the future and become a driver, you'll know how to work our truck tablet. Anybody at all? All right. Safety was first, right? First thing we did, and the absolute first thing we did, was make sure that this tablet cannot be interacted with while the vehicle's moving. You can see the address, but there's no touching, no messing with it, can't do it. Took it to Shawn, we got Shawn's blessing. Shawn can shut this thing down anytime or make changes to it.
That was number 1. Number 2 was to increase productivity. On here are all the key areas we need to capture from a tech productivity standpoint. Let me go back and just tell you what we're trying to replace here, by the way, in case you guys don't know this. You're all involved in part of this. Every week, you take your trash can out and put it on the street, don't you? Some of you probably take it down to the condo and shove it down a chute, but some of you take that trash can out and put it on the street. This route sheet in the old days looked just like this. We would print these off every night. Driver would pick it up, got his pencil, he'd go start running the route.
As he runs the route, he goes to your house, he marks down whether he serviced this or he didn't service it or was not out or there was an extra, things of that nature. Also captures how much fuel he used, how long he was out there, those types of things. This is what we're replacing, paper and pencil. Now, it seems pretty prehistoric from where we're sitting. We have smartphones, computers, tablets, and things of that nature. To a driver, this is pretty easy. The only way I make friends in this business is if I make someone's job easier. That's where we went with this tablet. We look at this tablet now. You can see up in the left-hand corner, "Who am I?" Driver basically logs in. He picks a route.
He starts telling us when he's leaving the yard, and he begins the route. In the end of the day, he comes back to this, puts in how many miles, how many gallons, and those types of things in terms of fuel. Along the way, we tell him where to go and what to do when he gets there. Left-hand side are all of the addresses coming up. In the middle is the current stop. He tells us now if we service the account, if it's not out, if it's not serviced, he takes a photo. Is there extras? All these things, rather than being put down on this piece of paper and handed to a person in the office at the end of the day to be hand-keyed in, are now traveling real time back to our systems, updating our databases.
No one has to key them in at the end of the day. We started rolling this out, like I said, in that pilot project, the guys weren't real enthused about it initially. Once we made our adjustments, once we got to this point here, this was like the rediscovery of the iPhone for us. Okay? We can't roll them out fast enough. We've got 2,800 rolled out in the U.S. in, I think, 18 months. Another 1,800 in Canada, and that's in a lot less time. The drivers are eating this up. It was a good cooperative effort, a good collaborative effort between information systems and the operations group. To tell you about our next project, Steve.
Thank you. The next one is our next generation customer management, billing, and routing tool. We co-developed this with our vendor who's provided our solution for the last 19 years, the idea was to make it state-of-the-art. It's using responsive design, web technology, but also to streamline some of those business processes so we could drive some efficiencies. This screen that you're looking at right now, this is our onboarding or our new user screen. Traditionally, it takes 56 different steps and five minutes for a CSR to go through this process. We streamlined it. You go in there, you select the billing company, start entering in the customer name and typing in their address. We use Google APIs to do auto-complete on the address. Comes back with a USPS certified address. We got it down to nine steps, about 30 seconds.
The data's cleaner, right? The customer experience is better because the customer's not on the phone for five minutes going through this process. It's a lot more efficient for us as a business. This is what it looks like after we auto-populate a lot of these fields that the CSRs were actually manually putting in during that process. The beauty of this project really is that we were able to leverage the expertise and the resources of our vendor, right? We were able to bring our staff up at a manageable pace. We now own that code line, so we're able to go in here and make changes that are specific to our company. We don't have to be on a roadmap, a product roadmap, for a vendor.
We actually go out there and make our own changes as the field says, "Hey, it needs to do this." This is a good example of something that we've really taken in-house. Obviously the licensing, we can't beat the price there.
All right. For our next project, we're going to bring up Colin Wittmer. This is a really exciting project. It's called Web-to-Lead. It's a partnership now between Information Systems and the sales team.
Good.
Bottom line, guys, short story on this one is we take customer information that we gather on the internet from just about any device, cultivate it, and turn it into a customer. Colin?
Okay. Thanks, Eric. I'm not talking really about lead generation here. Everybody in our space does that in different levels of success. Whether you're doing some kind of AdWords search and putting money into that or doing organic search, that's a discussion in and of itself. I'm talking more about our partnership with IT to grab these leads once they're on our webpage, be able to move the customer quickly through our webpage, and then be able to get back into the hands of our sales rep. Just give a little background of what this has done for us, because all of this is done in-house. That's what makes it rapid for us to get this change. Like everything, things are moving a lot faster today, and especially on the sales side. We see enhancements happening to lead sources all the time.
We have to react to them rather quickly. In the case of this is all the leads that come through the web for Waste Connections already our number 1 sales rep in the company, and they have been for a number of months. The growth on that's exponential. We've seen more and more leads that are coming through the web, and they're all hot leads, so we're able to convert them rather quickly. The real interesting piece of that, and the most important piece of that, is the average size of these leads is around $200 per month. What that means is those are the individual proprietor-type businesses, one-off businesses that are very receptive to the things that we like around value on revenue. They're willing to sign the contract that we present to them, which is usually an evergreen contract.
They're very receptive to the price that we come in on the door. Most importantly, they put no restrictions around what we can do on price increases. An extremely important lead source to us because that's really what we call our sweet spot customer. What we went to IT with on this was looking at that group of customers and studying what they really wanted was the ease to move through our system once they're on our webpage very quickly.
They've enhanced this tool for whatever tool the customer or the prospect is using, whether that's a handheld device, an iPad, a laptop, a desktop, it configures automatically for them. That may sound easy, but remember that even though we're showing you a Waste Connections website on the screen here, we have multiple websites. If you go to El Paso, that's a Waste Connections company, but they go under a strong brand name that is El Paso Disposal that has been there for many years. We have websites that are also local to those strong brands. Any changes that we make on this, when we say we make them rapidly, they have to do them on multiple different websites. Within this, they made the steps extremely easy for the customer.
That can change with us from month to month as we find things out on our other web pages. We have to be very quick on how we change that. We move through there very quickly. The final thing that they did was they made the connection from once the customer pushed that button that they want us to give them a price, to instantaneously put that in the hands of our reps in the field. All of our sales tools are built on a strong platform, a Salesforce.com cloud-based platform. They are able to work with that platform and rapidly make these changes that we need as these lead sources change. This is the number one feedback piece that we get from our field sales rep saying, "Put more effort into this.
Give us more of these leads because they're warm and things that we can close quickly." IT is able to, because it's in-house, rapidly make those changes that we need on this and other programs that we're going to be talking about in a minute.
All right. Thank you.
Ron?
Thank you. Before we go into our next part, which Colin's actually going to stay up here for, I think the thing we want you to take away, and again, we're just trying to give you snapshots or snippets of various areas, give you a little bit of a view of how we view the world, is with IT, particularly two things. One, we use IT sort of driven by the field in how and what they need to improve the business, whether it is in safety, productivity, revenue enhancement, or customer experience. What we don't do is acquire enterprise-level, consultant-driven platforms and force them onto the organization with the belief that the consultant that has sold it to us, that it will drive millions of dollars of improvement. What it usually drives is a software write-off. That's our experience. It's why we do not do it.
Like most things we do at Waste Connections, we believe internally customized solutions are a far better approach to the business. This is not a cookie-cutter business on a local basis. Next up, I've asked Colin Wittmer, our VP of sales, David Hall, our Senior VP of sales and marketing, and then Adam Gooderham, our District Manager of our Houston marketplace, to come up and give you more of a deep dive of quality of revenue and how we are using both technology and our sales approach in a post Progressive Waste Connections merger. How that looks on a macro basis, and then what it looks like on a local basis, on an implemented basis. Colin, why don't you start?
David.
Sorry, Dave.
Up here.
Okay. I'm David Hall. I've been with the company 19 years, been in the business 30 years. Waste Connections has always focused on quality of revenue. That's always been our play from day one. As what we heard a little bit earlier, Progressive was growth for growth's sake. The challenge we had is we've got to change behavior, and we've got to bring in systems to support changing behavior to have a more quality of revenue going forward. That's really what we're going to talk about today, is a system that will push that increased growth, but provide discipline in pricing. Two of the cornerstones of the company, as you've heard several times today, servant leadership and decentralization. Those two cornerstones are what we use in the sales organization to establish our structure and our management philosophy. The reality is this.
I started in this business 30 years ago. It's a local business. Today, it's a local business, and in the future, it will always be a local business. What you've got to do is match your sales organization, your management organization, to the customers. They're local. As you can see, the sales rep reports directly to their sales manager, who reports directly to the district manager. They run the marketing sales for that organization. You cannot manage 600 different locations, all of which have different strategies that you've got to put in place. You can't do it from three states away, and you certainly can't do it in a centralized style of environment. We do have dotted line reporting, and that's where you see regional sales managers. We have four of those in the U.S. to include Canada.
Their job is really there to support them in
Thinking about those strategies, how do we implement those? What can we do in terms of capturing sales data? There, an accountability, regional accountability, and then in concert with the corporate level, our job is to bring tools to the sales organization that makes them more efficient and more successful. When we had the merger, any merger that you have, you're going to have duplicative systems. We did too from a software standpoint, particularly in the area of CRM and sales software systems. Quite frankly, both systems had very strong tools in terms of supporting sales organizations. That was a challenge for us. What do we do? Fortunately, what we discovered is we have two highly complementary systems.
What I mean by that is Progressive, as we saw, really was on the growth side, really pushed on getting prospects, and we were at the other end of the sales cycle from the standpoint that we looked at quality of revenue, how do I improve the profitability of a current customer, and customer retention. We spent 10 months really combining the two, and we just started deploying here over the last few months. Through about January, we should be through. What is different, and the first time in 30 years that I've seen it in the business, is we are fully automated in the sales cycle. What do I mean by that? When you enter that prospect, we're going to take that information all the way through to eventual input into the operations system.
The sales rep sits with an iPad in front of the customer, gets their service data, inputs that. The system's going to give them a pricing level that they go after. Customer says, "I'd like to see a proposal." They push a button, automatically generated. Customer says, "I like what I see. Can you get me a contract?" Automatically generated with the terms and conditions they just spoke about on the proposal. Customer signs it, either on the iPad or they send it in via email, automatically input it into a queue, a management queue for approval. We're going to take a look at that. Then after that, we have a customer service person who just validates the information. They don't have to do anything.
Once again, once we entered the data here, it's going straight through, goes into the system then to have it deployed from a container standpoint and a routing standpoint, completely automated. Now we're going to have Colin go over one of the aspects we really liked about the Progressive system, and that is the ability to forecast.
Okay, good. Thanks, David. Sales, this is a little bit of an overused term, but sales is part art, part science. The art piece, we're heavily focused on, that's the training of our people so that they can negotiate, that they can work sales through a pipeline, and that they're able to close. So art is one side of it. That's the components in the person themself. The other side, the science piece, is what we're talking about today. The science really is the math part of it. Working leads through a system, if you have consistent steps, it really turns into math at that point. You can apply ratios to different steps in a pipeline and get extremely predictable about what your future sales are going to be. One of the first conversations I had with Ron, I come from the Progressive side.
Well, it wasn't the first conversation. The first conversation was revenue quality and price increase. The second conversation we had was with looking forward. Ron said it's important what happened to analyze that and look at it, but it pales in comparison to your ability to look forward. Looking forward, I can make changes and adjustments to make sure that my month is coming through or my months in the future. Let me explain what we're looking at here quickly so you can understand really quickly what I'm going through. This is a snapshot of a live pipeline. I bring up that live pipeline piece because I think it was Rob Nielsen said when he first started meeting with Progressive sites, he didn't want them putting a lot of time into making reports.
Our sales tool is a live tool that as sales reps are filling their data on an hourly basis, this tool updates. You are looking at a corporate version of the tool, but the same pipeline as this exists for the regions and more importantly, for the districts and the sales reps. If we were looking at it live right now, you would see it moving every few minutes. It moves about $8,000-$12,000 a day. Let me explain those numbers too so you can understand this. When you look at certain numbers on here, they represent the first month revenue of a deal that we sell. If you are looking at this number on the bottom here that says $509,000, that is the amount of closed business for that particular month, first month revenue.
We keep a contract or a customer in the company on average 10 years, about 120 months. Any number that you are looking at here, they are not quite as small as they look there. They are 120 times that. For that month and every month, our goal is around $60 million of lifetime value of the contracts that they bring on, just to kind of level set you on what you are looking at here. I want to explain what is on here so you can follow me. This snapshot that I took, I did it purposely on May 31st, the top three bars across the top represent the month of May. The bottom three widgets, if you will, represent the month of June. On May 31st, I am looking at what I have coming in June and what happened in May.
The first bar graph represents the corporate goal, and in that case, it is just below $460,000 on first month revenue. Again, that would multiply out by 120 times. Above it, the blue bar represents where we came in the month of May. It is about $509,000 on that goal of $460,000. The middle widget represents what percentage that is, 111%. On the far right is the pipeline stages. Very importantly on the pipeline stages, this goes back to standardization and standards. We have standard terminology for each of those pipeline stages. That is what gives us the ability to really project cleanly. Looking at these, you can see on May 31st, when I took this shot, that for the month of May, the corporation was in good shape, 111% on that month. We were happy with that month. I do not put it up there for that reason.
I put it up there just to explain that that was not a surprise to me. I knew we were going to come in around 110% for the month of May, sometime mid-April, because I saw the pipeline for May building out back in April. Very similar to how I saw this June pipeline building out already mid-May. I can see when I look at this, where June is going to end up on May 31st, and it is executing out exactly like I see it here. I will explain to you what I see here.
For our corporation, we found over the last several years of doing this that if we enter the month in that middle widget at just below, right around 50% on pre-sold business, that's what that represents, that we're in good shape if the other portions of our pipeline are built up, that we're going to make our goal. We're looking at getting 50% around this closed number. When I talk about ratios in this pipeline, we're tracking specifically on ratios against these three buckets right here. Closed won has a firm definition. That means there's a contract with a signature sitting on a district manager like Adam's or a sales manager's desk in our districts across Canada and U.S. We know 100% of this $264,000 on May 31st is already done for June. Verbal, again, is a firm definition.
It means that someone has verbally committed to us, and they're just going through the steps of getting the contract done. We know from our history that 85% of that comes through. Proposal, again, another definition that's the same in Anchorage as it is in Miami. A price has been presented, whether verbally or on a proposal to a customer, and they're actively working on that deal. 20% of this comes through by the end of the month. When you add up those ratios that I just gave you, we come out on this month at about 94%. When I took this shot, the month isn't done. There's still some stuff that are going to flow down into here, which did happen for the rest of May 31st. Going into this month, I was very comfortable. I was more than very comfortable.
I knew where I was going to end the month of June. That's me at the corporate level. We also have those exact same pipelines at every single one of our districts. Adam's here today, so I put his pipeline up. It's the same rationale. Adam, in the month of May, I took this screenshot again at the end of May, knew that he was 113% sometime mid-April. Adam, with his sales manager, walked through his pipeline build. He's predicting out where his May is going to end up long before that happens. That wasn't a surprise to him. More importantly for him, in the month of May, he was already looking at this build. If you go back to what I said, we're looking at about 50% to start the month of close won business. He was already at 61%.
If you add up the ratios that I apply again to the closed won and the verbal and the proposal stage, Adam was projecting out to be for the month at about 115-ish percent. He's tracking right now, when we look at his pipelines today, to be exactly there. That's the important piece, because he was looking at this in mid-May already, and he can make adjustments either way. If he sees he's short, he knows he's short a piece of this funnel because his pipelines, again, are nothing more than a build-up of all of his individual reps. Now, we took the names off, but these are Houston reps. Adam can dig into this, into this month, the prior month, the months to come. I showed you pipelines for May and June.
We have the exact same pipelines for August, September, October, going all through the year and into 2018. We have business pre-sold in every single month in 2017 and many months in 2018. This data at the rep level gives Adam and his sales manager the ability to work with the reps that need to be worked with and make adjustments so that he is getting very predictable on his sales results for every month. He is looking forward six weeks at all time with a predictable pipeline. If you have this working well, which we do here, and really had it working well at Progressive. The issue is, a lot of people have alluded to it becomes a bit of a faucet because it works well for you, and you can open or close that faucet.
The opening of the faucet is you start to accept lower rates, let's put it that way, and you can open the faucet and bring more revenue on. That was one of the first discussions also that Ron had with me when we came together. As we built this tool and refined it, we wanted to put in a lot more safeguards for Adam and the district managers to make sure the quality of revenue in all these pipelines was exactly what they wanted from a pricing standpoint, from a contract term standpoint, and ability to do price increases. David's going to talk further about that.
When we talk about differentiation, this system doesn't exist anywhere else. The ability to forecast. This differentiates us in terms of anybody else in the space. As I said, quite frankly, this came from Progressive, and it was one of the aspects that we really liked, and we knew that we had to keep that. This is where the rubber hits the road when we talk about quality of revenue. Within the system, this is what the sales rep is going to see when they're in front of that customer, and they just found out, in this case, they've got a six-yard container. They put the service data in there, the system down where you see the green bar, the system is going to generate an A, a B, and a C price, and the difference in those are just different returns at those levels.
We want to, of course, try and achieve the A level. The system gets pricing changed on a quarterly basis. We make sure that we're up to date with our expenses. We have a price increase at the landfill. If fuel goes up, we look at it on a quarterly basis. It automatically uploads different pricing. In this case, in the circles, you can see the sales rep did a great job, and they've got A, and we color code everything very quickly. As you're going to see, to me, the most powerful part of this system is this slide right here. This is what the manager takes a look at. When that customer signs the deal, they have an approval board, which they take a look at. This just magnifies one single account. They may have 50 that they take a look at.
What we had to do is make it quick. The old days, you had 75 deals that were on sheets of paper. You've got to go through those. Now, that same thing takes one second to quickly take a look at the three criteria that you need to decide whether this is a good sale or not, and they are, A, the price. In this case, they had a score of A, it's green. If they do B pricing, we put that at orange, and if it's a C price, it's red, so it stands out. Now, as you can see under the terms and conditions, this is a 36-month agreement with 36-month renewal. Looks pretty good, but it's orange. The reason why it's orange is in this particular district, it's a market that can handle five-year agreements. What we call this is a coaching opportunity.
The manager's going to go to the person and go, "Why is this only 36 months? We usually get five-year agreements." Finally, we want to know whether it has any restrictions on it, meaning pricing restrictions. You can't increase the price more than 3% over the next two years. We don't see very much of that, and we very much avoid that. In many cases, this may be where I'm saving a customer. They want to stay with us, but they don't want us to price increase them greater than 3%-5% down the road. What you've got to match here with these, the perfect situation is green, green. That means the sales rep's commission plan, you've got to change that behavior, as we talked about, from growth for growth's sake to quality of revenue.
Your commission plan has to reward them for selling at a higher price. Our plans follow exactly that. We want to make sure we reward them for getting what we hope is, A, a five-year agreement and no restrictions. That's new business. We need to take a look at current business that we have, and this analysis does that. It looks at the current customer. When we have an increase in service or a decrease in service, that is the one opportunity in this business where you have the ability, besides a price increase, to really move the profitability of the account. Once again, we direct them. We give them percentages over to improve the profitability. In this case, the customer is at $3.13 a yard.
The sales rep moved it to $3.44 a yard when they changed their service from twice a week to three times a week. We just improved the profitability of that particular customer. Once again, it's color-coded green. We see that we moved it by 10%. These systems are all great. We changed these behaviors, we hope. What Adam is going to be talking about is at the field level, do the systems work? Do we see any change in terms of the financials of the district? Adam's going to address that.
Thanks, David. We're going to conclude our presentation today on quality of revenue by talking about the Houston experience. Our continued focus really on quality of revenue and our disciplined approach to growth and price. As David had mentioned, we use something internally called our Pricing Model, which is updated quarterly, that takes into account our individual district's cost structure, and this takes place at most of our competitive markets throughout the country, and I'm assuming now Canada. Those Pricing Models are a matrix that takes the size of the container and the frequency of the pickups and puts it into buckets A, B, and C based on a specific internal rate of return.
Like David mentioned in the previous slide, our sales reps and our compensation plans are aligned with that so that our reps are paid a heavier or a greater weighted percentage on an A rate versus a C rate. In this new system, Aries, we're able to now see that in a way that we've never been able to see it before. As David mentioned, as far as maybe four or five years ago, we were looking at everything in physical contract. Now everything's digital, and you can see a snapshot of everything at any given point in the month, which makes my job and makes our job at the sales manager level much easier to identify opportunities for improvement. In Houston, we have adopted the Specialized Sales Roles. It works for us here in the Houston market.
What the Specialized Sales Roles are basically, we've split our team into two groups. One set of reps are solely focused on growth and looking for new opportunities. The other half are focused on account management and customer relationships. Where we've seen a huge benefit in this structure has been after our annual large price increases. Historically, when we've had that model before, our growth reps or our reps would lose momentum because they were inundated with calls and customer inquiries, and also competitive pressures seemed to creep up during that timeframe. Now those reps, those growth reps, don't lose any momentum. They are continually going after business. In fact, this year, after we've adopted this structure, we've actually had some of our best sales months following our rate adjustment. We've really enjoyed that and have seen the benefit of that.
As David and Colin both mentioned in the presentation, the visibility in our system, our new Aries system, is fantastic. With visibility comes, of course, accountability. It allows us to identify opportunities for praise and also identify opportunities for improvement. The big benefit to this system is the forecasting benefit. Not just on revenue. That's pretty easy to see on the other dashboard that you were able to look at, but more so on the capital side and the container count, the truck capacity on routes, and the ability to make sure our staffing levels are appropriate.
If we're selling, like in the example that if you go back to the other slide, we had already sold in the first part of May, I believe $12,000 worth of gross sales for June, which allowed me and our team to understand that we've probably already sold a certain number of yards that are associated with that. We had to make sure, knowing that early in the month, that our routes were able to accommodate that growth and that we had the proper resources to absorb that and get our customers taken care of. Also a big benefit is the market intelligence gathering. Every appointment, every prospect has a value associated with it. It also shows where we're at in the process.
If a rep leaves the company, is out on vacation or extended leave of absence, we do not lose any momentum with the sales process. Due to our improved focus on quality of revenue and our disciplined approach, in addition to other integration benefits, our district and market area has improved nearly 700 basis points here in the Houston area.
Okay. Thank you, Adam and Colin and David. While our team brings forward some chairs before Worthing and Steven Bouck and Darrell Chambliss and I open this up to what we call our fireside chat, just to put a couple of little things in perspective for you. While you sit there and you're not as familiar with our business, you just heard Adam talk about $20,000 in a monthly new sales in a market like a Houston. Let's put that in perspective around as to why this tool and these things are so important. Well, $20,000 a month sitting in your seat sounds very nominal. Our average price per yard in the Houston market is just north of $3 a yard. Divide $3 a yard into $20,000 a month, you'd get about 6,000 yards.
Our average container size in Houston is a little over five and a half yards per container. Do the math. It's 1,100 containers a month that he has to plan for going out. That's the math. Now do that across the system. Adam's one market of over 250 market areas. That's why this is so critical. The forecasting element is, do we spend CapEx for 1,100 containers a market per month? No. Why? Because in the competitive piece of this business, you probably have 600 to 900 coming back in. Okay? That's how this business works. He's planning on 1,700 to 1,900 container moves a month just to handle that $20,000 in new business. I just wanted to give you some perspective on how that intricacy of this business actually works. With that, you obviously know Darrell, Worthing, and Steven.
We now wanted to go to what we're calling a fireside chat, which is nothing more than really opening this up to your questions about anything we've talked about today or anything we haven't talked about today. One of the four of us will attempt to answer your question. If we think one of our leaders that's sitting in the back with us today is more appropriate, we'll ask them to come up and answer it. Go ahead.
I think I have the microphone first. Thanks for doing this, Ronald. I got a few questions, if I may. In a decentralized model, who owns what at corporate, and what are you doing from an ongoing sort of investment in training? I guess where I'm coming at that is in 2007, 2008, 2009, did training get cut when things got bad? Then who owns what at corporate versus who owns what at the district in a decentralized model? Just to be clear about accountability.
Sure.
That's the first one.
Number one, we did not cut any training in 2007, 2008, or 2009. It has accelerated every year since 2004. Increased spend, not only aggregate dollar spend, but as a percentage of revenue spend. That's number one. Number two, really the way to think about the decentralized model is, look, our district managers and their teams, locally, operations manager, maintenance manager, customer service manager, a controller, sales manager, government affairs manager, I'm using that. They own really all of the day-to-day decisions that affect service delivery, and employee interaction. They make hiring and firing decisions, they make wage compensation decisions, they make customer pricing decisions, they make customer satisfaction and delivery decisions, they make capital allocation decisions.
They do all that day to day, but they do it in the framework of the standard that the corporate executive group and the region staff give them the boundaries upon. Those are what I'm going to call the standards. The standards for returns, the standards for price, the standards for return on capital, for safety, et cetera. It is really and truly a collaborative effort between corporate, region, and the district, and the base.
You have about 10% of the business is urban, and you've defined this structural difference in your model versus the competitors. How would you compare that 10% of the business versus the competition in performance? What are the distinguishing features of this servant leadership model that make you stand out in that cutthroat competitive environment?
Number one, because we have less of it as a percentage, we can probably focus a greater amount of energy necessarily because 43, 44% of our business doesn't take nearly as much management energy because it is franchised or exclusive in some form. We're able to focus a little bit more on that percentage that's not. If I compare Houston, which is obviously more urban, or New York City, as we talked about today, Miami, as an example. Our margins in those markets on a collection-only basis are, I would argue, probably 30%-70% higher than most of the urban-centric peers' margins in similar market areas. To give you an example, we're running at approximately a 20% collection margin in Houston. We're running approximately or approaching that in New York City. If you look at, and again, look at the business holistically. I'm rounding.
A third of what we do is disposal. A third of the industry, whether it's us, Waste Management, Republic, doesn't matter. About a third is transfer and disposal. That business runs around 50%-60% EBITDA margin. That means two-thirds of the business, and if you want to call that collection, some of it's recycling, some of it's other things, but about two-thirds of the business is collection? If you take a look at what is different between us and our peer group, it's that our margins on collection are substantially higher because our disposal margins are the same. The way we get 500-1,000 basis point difference of aggregate EBITDA margin is we make more money in collection. Period. Simple.
We do that because we've taken the price discovery element out of the franchise piece and the secondary market piece, then in our urban piece, we've been able to focus a little more concertedly on it because it's such a small piece of what we do.
Okay, last one from me. Culture is hard work. You said it, but it is hard work. I think of, they had a real job once they worked at GE. They spent 40 years investing in culture, then spent the last 16 killing it. As they went from training people, investing in training. What do you do to see the slippage so you can stop the slippage? Because there's always slippage.
Yeah.
What are the tools, the lines? Catch it quickly so that there isn't this slide back, because it tended to happen. It took 16 years for him to kill it, but he did it. It took him 16 years.
Well, I think number one, Mike, and you've heard us repeatedly say today, there's some statistics we focus on very heavily, and we're not a huge statistics-focused company. One is employee turnover and two is risk.
The reason we do is those are inexplicably linked, number one. Number two, they are an indicator of leadership success or failure. Employees leave, particularly on a voluntary basis, due to lack of engagement. Culture is what we believe keeps people engaged. We focus very heavily. I look daily at turnover, weekly and monthly can tell you all the jobs by region that are open, where we're running, and what that percentage is, and pretty much project the wording on a forward basis what this is going to look like in the next two to three months based on turnover. If we were to look at Progressive, again, at the beginning, they were 43%-44% turnover compared to Waste Connections legacy 18%. Of our 18% legacy, half was involuntary. We made the proactive decision to terminate employees. At Progressive, 95% of turnover was voluntary.
People walking out the door. That's a repudiation of what's going on. We look at not only what is turnover, but what's voluntary versus involuntary. To me, that is the most important thing of what is going on within the culture of the company, and what our leadership is moving forward and backward.
A couple of other things to add. One is we do an annual survey of all of our employees, asking them basically to grade their manager, how are they doing? We look at those surveys and the feedback that we get from every employee, and that tells us where we are from a culture perspective within that organization. The other piece of it is Darrell, myself, and the RVPs, Ron, we all spend a lot of time traveling in the field and talking to the people themselves. They're the ones who really give you the feedback. They're the ones that you get the sense of what is going on within the organization.
To that, Steve, what Steve's referring to is an annual servant leadership survey that's sent to every employee. They can fill it out either as hard form or online. It is like a Gallup survey, but we do it internally, in 10 measurable areas of servant leadership of their manager. To give you a perspective, this year, we had an 82% response rate of 16,000 employees on that survey of their managers. We grade every leader against their prior year's score in the eyes of their employees. It is a quarter of their incentive compensation is their servant leadership score in the eyes of their employees. We know by district, by manager, we have an eight-year running chart of what's going on in 10 measurable areas in the eyes of the employees at every location.
That's one of the ways we view, is it going forward or backward, and where and why.
If you look at it further from a finance standpoint, you hear a lot of people talk about forecasting. If you're in my seat, how do I gauge the ability for the field to hit those commitments? Because those are just commitments. What I know is if turnover is trending in the right direction, and if safety is trending in the right direction, that reflects on the local leadership. The odds of that local leader satisfying or exceeding their commitment on a forecasting basis goes up dramatically if safety and turnover are trending in the right direction. The early indicators, if those are trending in the wrong direction, will be problems in the financials in the future. Even in my seat, say, we're looking at these statistics, they mean something different to everyone.
From my standpoint, it's a comfort level ability to meet the commitment on the forecast.
Bill, illustrative, when your turnover is 10% and you're running a district of 100 employees, so you're replacing 10 employees a year, I'm using that, your ability to drive proactively what's going on in the market and forecast is exponentially higher than if your turnover is 45% in that same size district. You are in a firefighting mode day in and day out. Your forecast is going to suffer because you are reactive only.
Thank you.
Thank you. Derek Schilling at RBC. You've had a pretty significant improvement in your free cash flow as a percent of revenue over the past decade. You're now sitting just north of 15% free cash flow as a percent of revenue. Is there a ceiling to that, or can you further improve that as you go forward? At the same time, as the company matures and it's a larger company, how do you manage cost inflation, whether it be wages or capital costs?
On the outside, on the percentage of revenue, you have to remember the challenge is not to expand it as a percentage of revenue from here, but to keep on achieving that percentage on an ever-increasing top line. Right? If you look at the balance of the space, most companies in the space, if they can do 9% or 10% of revenue is free cash flow, and this is on many billions of revenue, that's the best they can do. The fact that as you saw us take the company from $1 billion in sales 10 years ago, doing 10%, to now $4.5 billion doing 16%, the fact that we're able even to double the company in the past year and maintain that percentage, that's where the challenge is.
We see the ability going forward to maintain that conversion of EBITDA to free cash flow, again, at around that 50% range, and maintain that 16% ± percentage of revenue, again, doing it on an ever-increasing top line as we grow the business.
That is probably the least understood issue in this room. Actually, within our industry, we've been pounding on it now for four to five years publicly. We actually are finally hearing other companies say, "Oh, that's our problem." When you do M&A, you either get a step up in your invested purchase price or you don't. Waste Connections has been extremely deliberate about getting step up 95%+ of the time when we invest capital in buying a company. What does that mean? If you're buying a company for $10 and it has $2 of tax basis in its stock, your options are to take the $2 of basis, pay $10 for it, and not get to deduct $8 of purchase price forever. Pay $10, get a step-up, and get $10 of deductibility in your purchase price. Okay? It's a material difference.
Many companies in our space, if you look at why their cash tax rate is higher than their GAAP tax rate, it's because they did deals for decades with no step-up. They can't fix it. That's why if they have a 39% GAAP tax rate and their outflow is more than 39% of GAAP taxes, it's because they have a permanent disconnect between GAAP and cash. Waste Connections has a lower cash tax rate than GAAP. Why? Because we've battled for 20 years in deals to get a step-up. It is the least understood thing in our business about M&A. It can be a two to three turn of EBITDA difference in a purchase transaction. If somebody thinks they're paying 6x, I'm using that, 8x EBITDA, and they didn't get a step-up, they just paid 10x-11x.
They wake up five years later and say, "We don't understand why our cash tax rate is 47%." Can't fix it.
Okay.
These are some of the permanent differences, permanent differentiators that we've talked about this morning, that there's not a way to close that gap.
On the cost inflation side, what we're seeing right now really hasn't changed too much. Wage inflation's up probably about 50 basis points this year, higher than what it was last year. Again, if last year was 2.2.3, and now it's running about 2.7, 2.8. If wages are about 20% of revenue, that's a 10 basis point push on the cost side. If you step back and look at it on the macro, really the first 1% of price increase is needed to overcome wage and benefit inflation. Second 1% of price increase really covers inflation on the balance of your cost items. At a minimum, in this industry, in this environment, you've got to show up at 2% price just to stay even on EBITDA dollars. Obviously, that's margin dilutive, because you're doing more revenue to stay neutral on the dollar impact.
Pricing has to exceed 2% to drive margin inflation. Obviously, you would hope that the volume growth that's come reserved, sustaining right now is margin accretive. Obviously, in our model, with over 40% of the revenue in exclusive markets, new volume growth comes on as a much higher contribution because of the guaranteed price. It's quality of price. You heard David and Colin talk about on volume growth with regard to competitive markets, volume growth in our system also comes margin accretive on an aggregate basis. It's a tougher climate, but again, you've got to deliver step in at least 2% to start the margin discussion above and beyond that.
Yeah. I'm not saying anything that anyone doesn't know. Look, to drive free cash flow growth, great creation, percentage of revenue higher from here, we have to do four things. We have to improve margins, EBITDA margins. Okay? We have to do that. We have to control CapEx as a percentage of revenue to tighter and lower than it's been. Certainly, as we've told you on the Progressive transaction, we're 40% lower than they were running. If we drive EBITDA, maintain CapEx control, that's going to drive EBIT. That's going to drive greater free cash flow creation. We have to deploy capital at a higher return rate than our average cost of capital.
We have to get step-up in transactions when we're deploying large amounts of capital to not fool ourselves on the efficiency of that capital over a 10-year model when we're making very prospective decisions. Those are the things we have to do to move that, continually move free cash flow as a percentage of revenue up.
Okay.
Chuck there, then Joe.
Okay.
To try to generate. Just one question from me, I think earlier on, you've spoken about how there's a cultural advantage you have. This is why you seem to be able to maintain this outgrowth to your peers. I think it's something that you should have said. At the same time, overall on purity, you dramatically changed the culture with a Progressive Waste Solutions. When I think about your leadership retention, what are you doing to prevent others from poaching the talent you've cultivated internally here and effectively allowing your peers, especially post that, it has been kind of hard to do what you've done. Successfully for 20 years here.
Sure. Well, number 1, let me correct one thing. We think the differentiation is really 2 things. We think it's a model differentiation where we have focused on a different strata of the business, focusing on exclusive revenue, which is 43%, 44% of what we do today, and predominantly secondary suburban markets where we are usually the only 1 or 2 players. That's a very different model for 85%-90% of our revenue than the urban center. We think that's the number 1 differentiator. That yields a business that is less price prone to churn. A variety of other things. That builds in built-in model differences in financial performance. We augment that with what we believe is a different cultural approach. Then that drives things like risk, like turnover, like management retention, that we think is additive to the model difference.
I think that's how we think of the business. Now to that next part of your question, look, no offense, it's a lot harder for someone to take our people today- Than it was 10 years ago. Okay? Why do I say that? We use a lot of equity incentives for our people at all levels. Our district managers, our district sales managers, our division vice presidents, our region vice presidents, they make on a salary basis probably 80%-90% of their public company peer group, but they make on an equity participation basis 150%-300% of their public company peer group. Then when that equity goes up by 2,500% over the last 15 years, they swap their peer group if we perform. That, we'd like to think they all stay here just because we're good people.
They've also stayed here because they've done very well. All of them have had their doors knocked on, their emails tapped, emailed into, called, and they could go anywhere they wanted if they wished today. I would tell you that I think that's a challenge. It's our job to make that a challenge for our competitors to do. I view that as a personal challenge. I think I know all these guys, and I know our RVPs and our executives in the back too. It's why it hasn't happened. I'm not going to say it won't, although it can, but it hasn't, and we're going to do everything we can to prevent that.
Sure.
You guys were very up front beginning today that this is a commodity business. I can't think of many, if any other commodity business where price is up low single digits year in, year out. In the non-franchise part of the business, how do you think about that elasticity curve? Obviously, waste management is a required service for your customers, but how do you think about pricing year in, year out, where there's either extra competition or customers starting to push back?
We believe that the reason price has been low single digits year in, year out in our model, and again, I think if you look at the sector, we're unique in that because it's been negative for many years in many of the others, points to the model differentiation, where in 43%-44% of the business today, we're going to get that CPI, whatever that is. That might only be 2.5%, but we're going to get it. In that other 56%-57% of the business that's not, in the vast majority of it, we are in a more of a suburban or rural market.
We often own the only landfill, we can drive price without as much fear of retribution, because if we do lose that customer, the competitor is still going to likely bring it into our landfill at a differential price. That now allows us for that 10%-12% that's urban to be more surgical. Those are the three ways we think about how the model is different than where you have 50%-70% sitting in urban centric America with multiple landfills and hundreds of competitors. It's different model. That's not what the model we want to be in. In this business, in the competitive piece of this business, when you go to price increase the customer, customers are upset whether you increase them 2% or 8%. The same customers are going to call, whether it's 2% or 8%.
What we find is go for 8%. Okay? You're going to get the same number of calls, and for those that don't call, you're going to do a little better on. That's an oversimplification, obviously. We're not the right choice for all customers. Okay? We're okay with that. There is a good portion of customer base by market that the private companies who can live on lower margins, they're not public, they don't have the expectation of their shareholder. They're the shareholder, and if 5% to 10% even drops, they're making a good living and they're happy, and that's financeable. There's a customer base for that. Okay? That's not who should always be our customer. In that case, we want to own the landfill or the transfer station and be the customer to that private space.
That's why this business is so different by market area, and you can't take a standardized approach to it in our belief.
Sure.
Obviously, you guys have spent a lot of time on revenue quality. Can you please talk about how your view of revenue quality has evolved over the last several years? I guess we could probably use New York City as a good example. 18% EBITDA margin, up 2,000 basis points. I'm guessing three years ago, you would have laughed at the comment that New York City would be a good market. How has the model changed?
Laughed at it a year and a half ago.
By the way, it's also internalized.
Yes.
Yeah. Again, I think to a question asked earlier today or comment made earlier today, rising tides do help all boats. New York City is a very unique market, and there's a whole host of reasons that we're doing better, and we want to be there, and we think there's a very bright future there for us. On the price side, what we found when we went and spent time with the management is that they were told, "Don't lose customers, and obtain X amount of growth per month." That brought in revenue at a certain level. When we went there, we said, "Shrink the business, get rid of stuff that you're charging $1 that costs you $2.50 to handle." Stop doing unsafe things, and don't try to be all things to all people.
Don't try to subsidize collection with recycling.
Don't try to subsidize collection with recycling.
Yeah.
Okay? That was a fundamental shift in what they had looked at in the whole market. In fairness, they actually said, "Here's what we need to do to make money." We said, "Yeah, go do all those things." Those are all things we're okay with. We're fine going backwards in revenue and not doing this for profit. We gave them benchmarks that if they could hit and demonstrate what they said, that that would be a market we would take from, does this make sense to be in and look at swapping, or does this make real long-term sense? That they have that control in their destiny. I'll tell you, they executed ahead of schedule.
I guess maybe in that same vein, then, I'm curious if you could clarify your comments from earlier. I mean, you said that the M&A engine could be turned on over the next 1-3 years. I guess that would argue it's already on. I mean, you've obviously done a lot of deals over the last eight years. Are you seeing the market open up in terms of where you're willing to go? Or are you just more focused on operations and fixing Progressive over the last year, and now you can get into some of these markets and do some adjacent deals?
Yeah. I think it's a combination of things, Joe. Number 1, it takes time to go into new market areas, evaluate who the prospects are, and how they may fit into your assets or become new assets, and then develop relationships and see if there is an interest in doing something. That is a protracted process. That's why while we've been at it for a year and a half on the Progressive assets, you're going to just start seeing some stuff going. If you've heard us for any time on Waste Connections, we will tell you that the deals that we close in any given year, we've probably talked to for 5-10 or more years and made 3-7 offers till we finally get it done. That engine takes longer.
The second thing is, I believe, this has nothing to do with Progressive, that we are on the verge, and I don't just mean our sector. We are on the verge of an M&A bonanza in this country if tax reform happens. You have no idea how many private companies have sat on the sidelines for the last eight years. Can you figure out why? Because of an economic decline for a while, then dramatic tax rate changes at state and federal levels, and then increased regulatory activity that increased costs for them, then depressed their financial performance. They have lined up waiting for a tax law change. They view that there's a window. If it happens, there's a window of maybe three years to get through before potentially a regime change and a reversal of that tax law change. I think you're going to see dramatic change.
There's also a change in taxes or a reduction in taxes dramatically has an effect on this lack of step-up issue that affects transactions. You get a dual multiplier for why it would occur.
John?
Hey, thank you for taking my question. Ron, just on the M&A idea, you guys have done such a tremendous job with Progressive and pretty much every asset you've purchased. Could you give us a sense of what the pipeline looks like, big picture? What I mean by that is when I think out 10, 15 years, how many revenue dollars could we be putting Connections margins on when I think about what that might look like?
Well, I mean, look, the private company basket of M&A opportunities, when we were in the former Waste Connections footprint, we talked about a $2 billion-$2.5 billion private company basket of opportunities. Now we can tell you that that number is closer to about $4 billion as we look at our market areas today, okay? That's private companies. That's not regional companies or any of the public companies or anything of that nature. If you look at our model of acquiring 3%-4% external growth a year on $4.5 billion, that would tell you we're acquiring $150 million-ish a year. Well, that basket of $4 billion is growing at the same 3%-4%. We're effectively just about only buying growth rate. You can go out, not forever, but quite some time.
There's going to be years we do a lot more than that 3% or 4%. I would tell you that if you just look at us and you say that we deliver organically, I'm going to round, in this environment, in this GDP and CPI environment, for 2.5%-3% price. If the environment's better, it'll be better than that. 1.5%-2% volume. If GDP's better, it'll be better than that. That tells you 4%-6% organic growth. Layer on 3%-4% external growth. Well, that takes you within five years, the company is well north of $6.5 billion-$7 billion in revenue. You can just extrapolate from there. I mean, we're not in the business of making five, 10-year projections, but that is the model. That is the math.
Got it. If I could ask one more on Progressive. There's a little bit of housekeeping in here, but also bigger picture. On housekeeping, I feel like you've been very clear that the volume numbers are going to start looking very different around the corner as we mix in the negative volume growth in Progressive. If maybe you could just sort of clarify that and elaborate that. Just as a kind of bigger picture associated question is, at what point do we see the kind of more typical Connection algorithms kick in into Progressive and those numbers normalize where we're seeing positive volume growth or normal price?
Sure. If you look at the near term, again, we've been very clear on Progressive's impact to reported volume. Progressive organic growth numbers started coming into our reported numbers beginning June 1st, so we're just the first month into it. There won't be as much impact in the reported numbers in Q2 on volume because it's just one month out of the three. The U.S. economy for us, and the regions we operate in, is running at the upper end of a 1%-2% range. We've been reporting numbers 2% plus or minus on volume growth for some time. If you pull Progressive in for one month, you'll have basically one month impact of a negative 1% impact from what we're shedding. That's about a 30 basis point impact to reported volume growth in the U.S.
If you think about it in Canada, it's different. By the way, that will accelerate because in the second half of the year, you have the full 1% impact, because you have three out of three months in each quarter. In Canada right now, you've got the purposeful shedding is running 2%-2.5% as impact on volume. You've got some other things that we're doing around a price focus in Canada that's driving north of 4% on price and some price volume trade off in the near term. Basically in the near term, you're seeing us kind of fix and right size the Canadian business where price is still outstripping volume losses. Most of the volume growth you're seeing on a reported basis, still in the U.S. marketplace, given the broader mix of Waste Connections underlying.
Yeah, I think, Phil, if you take that, the second part of your question is that as it comes in, Progressive meaning into the organic growth calculation of price and volume at the anniversary date, as Worthing said, you really got to go a full year until you've anniversaried the effect of that before you really get into what, to your comment, what I call a normalized Waste Connection algorithm from a reported price and volume. What you'll see is some compression of price in places consciously in 2018 by Waste Connections, where we'll now let volume come back up.
You mix that with our traditional footprint, you're going to get something, I would say, next year, in the second half of the year, that looks more like that, I'm going to round, depending on the environment, 3% prices and getting back to that 1.5% reported volume on a run rate basis. If the economy improves, maybe a little north of that as we exit 2018. Really by the second half of 2018. Again, if you look at it now, that's occurring now, but it's being masked by that we're consciously shedding business, and we're consciously shedding unprofitable and unsafe business. Our sales force, Colin Wittmer, is still plowing along and driving positive volume on the underlying nature of that. We're just outstripping what we're shedding.
Where we have the opposite impact on price, where our reported price is going to be going higher. Legacy Waste Connections, to use that phrase again, was running 2.5%-2.7% with Progressive coming into the mix. You're seeing pricing in the U.S. pull up to the upper end of that 2.5%-3%. You had already talked about Canada right now pricing around 4%.
Yes.
You mentioned kind of next leg of Progressive is M&A engine. I'm just curious that three years down the road, could we be seeing that exclusive revenue and contract percent of your business, do you expect that to trend lower with maybe more comfortable and confident in your culture and your approach in some of these more urban areas? A last question would just be on the E&P business, obviously there's a lot of volatility with oil and things of that nature. Just curious if any updates you're seeing there. Is that part of your business part of the discussions, the M&A pipeline? Does that M&A piece move forward?
Let's take each of those three. Number one, I do not think you will see the percentage of exclusive contract business decrease as a percentage of revenue as we go forward. I'm not saying it won't move a point or two, but it's going to effectively be in that 40%-45% level. Because the reality is, in the footprint of opportunity, 35%-40% sit in exclusive contract or franchise market areas of that $4 billion I identified. That percentage, that geography, has also been the slowest over the last five years in M&A because of tax rate issues. I actually think you could see some disproportionate opportunities there as a percentage. No, I don't expect it to change. Secondly, I do not want to mislead anyone if I said this.
We are not more comfortable in the urban-centric footprint, you will see that continue to decline as a percentage of revenue as the company moves forward. That is not our model. Okay. We will not be out doing urban-centric M&A. We have made some very nice progress in markets we inherited and decided to stay in because of niche opportunities. You're not going to see us out doing M&A in urban-centric America where we're not already today. It will continue to drop. The revenue mix will look more and more like legacy Waste Connections as the company moves forward year after year after year. Okay. Because of dilution of that. A third thing is our E&P business. I'll give you a very distinct answer to that. You tell me the price of oil, and I'll tell you how it'll do.
Look, six weeks ago, oil was $53-$54 and was going to break through to 55-60, everybody felt great. Today it's 44. I think people still feel a lot better at 44 than they did at 38-40 a year ago because those producers have lowered their cost structures dramatically. Our E&P business is doing very well. We report it each quarter, we will again, but we are ahead of where we thought we would be in the second quarter. We're clearly ahead of where we thought we'd be in 2017. That business is going to be a $150 million-$200 million business for us this year, and it's going to be back to not the margins it was in 2014, but not far from them on a run-rate basis.
That is the engine of the size company we are today, is now 3%-4% of our revenue and 4%-5% of our EBITDA, not 10%-15% of each. We do not need M&A to drive our E&P business. We have the assets. We are in the disposal of solids, which is what we do. We are the 800-pound gorilla. No one's close. We don't need anyone else's assets to improve our performance there. We need the price of crude to change. With that, we will have the performance.
Okay.
Yeah. Just a two-part question. Ron, you alluded to this earlier, the margin gap between peers. How much of that is execution versus structural? Second question for William, how come you're not raising guidance today? Should we be reading anything into that? Most companies raise guidance, or most waste companies, based on seasonality of volumes. You're reiterating guidance that you appointed. Should we be reading anything into that?
Yeah. I'll take the second one first. You're right. We typically reassess guidance when we announce Q2, and you're right. You got to sit around and wait another month. We'll stay on schedule, and when we report Q2 and have our earnings call, we'll guide for Q3, and we'll also take a hard look at the full year as well. No change in our timing on that. Read nothing into it.
I want to take the first one.
How much of it do you attribute-
Oh, I'm sorry. I apologize. Yeah. Look, we would tell you that 75% of that gap is structural due to market selection and asset positioning within the market, or what I call the model. Okay? Then I think 25% of that is execution, culture, things we try to do different and impact in the areas we've talked about today. Now, as we have more urban-centered business because of the transaction we did, I would tell you then in those areas, the performance is a lot more than the 25% delta execution. Of course, because it's such a small percentage, we can pour a lot more of our energy in it than anyone can on a relative basis because it's such a small percentage of what we do. That's another reason it's more.
Troy?
I think the conventional wisdom for why that progressed is that the weaknesses were in the Northeast and the South, where you had some of the fleet issues. Are those the areas where you have seen and still see the greatest margin opportunity potentially? And wondering if the deal as well, I'd ask you if there are any things about the operations you acquired that surprised you that are positive there.
Well, number 1, yes. I mean, the greatest areas of opportunity when we closed the deal were the Northeast and the South. We showed you today we've made the greatest progress in the Northeast on a margin basis, and substantial but not quite as much yet in the South. The South is much bigger, so it's harder to do. I would say on a go-forward basis that we have incrementally more opportunity in the Southern Region to make improvements, then the North, and then Canada, in that order. We also had a large piece of business precipitated in our Central Region, which we didn't Phil Rivard is our VP sitting here today. Central, in Missouri, in and around the St. Louis area and south of St. Louis. That has actually had arguably maybe the largest margin business came in that area of the country for us.
Yeah. Can I just touch on a couple of things? You mentioned fleet, and certainly within our Southern Region, fleet has been a big issue for us. We've been resolving those issues. Darrell and Gregory Thibodeaux have been working through those issues. Those fleet issues are improving. It's getting the right vehicle, as you heard today, into the right application. We've got those things continuing. There are also poor contracts, some of which we have to let them run out, at which point in time we will either renew them at a price where we make money or we will lose them, which is fine. In addition, we have the divestitures.
All of those are part of taking the margins that we have, I'm particularly focusing here in my remarks on the Southern Region, improving the margins in the Southern Region to what would be more acceptable margins and the way we do business within Waste Connections.
Above all that, we still have the rollover contribution of safety improvements, right? We talked about the reduction in frequency right now. We're seeing that benefit on the cash side. In the P&L, there's only about $18 million-$20 million of savings this year. There's another $8 million-$10 million of rollover that will come most likely next year, maybe some of it drifts into 2019 a little bit. That's above and beyond the quality of revenue, the pricing improvements we're talking about, and the fine-tuning around maintenance fleet, et cetera. There's still tailwinds with regards to the transaction that are above and beyond what someone else refers as our normal algorithm on that side.
In what quarter are you in on the fleet?
I'm sorry?
What inning are you in on the fleet?
What do you think, Darrell?
What innings are you in on the fleet?
I'd say we're probably in the sixth.
Again, you're seeing a lot of the flow-through already. The things that we talked about driving Q1 of this year, both pricing and volume environment, both the integration benefits, higher recycling prices, better E&P, et cetera, all that's influenced second quarter as well. It's all the trends we've been talking about first part of the year that continue well into Q2 and continue to sit here today. It's just been an overall favorable environment, and obviously the integration benefits are the one driver of that.
I think the second part of your question, Scott, you asked was what was favorable, what was unfavorable relative to our expectations? I'll take a little bit from Michael's comment. While I agree with Darrell, we're in the sixth inning on the fleet. Reality is, for example, our Southern Region, we need to spend more money in fleet than we're spending today. There's no question. How are we going to do that with you not seeing it is we're going to do that by improving quality of revenue. If I outstrip the revenue, I can jack those R&M subsets. The fleet in the Southern Region was in far worse condition than we could have imagined for the magnitude of CapEx put in by Progressive in the prior four years. As Rob noted in his commentary, it was put in in very concentrated doses in specific markets.
Because they were already at such a high % of revenue, they couldn't do anything else and communicate to you why, they did nothing. When you do nothing, when you don't have ongoing preventative maintenance, you have breakdown maintenance. When you do have breakdown maintenance, you put new fleet in and you don't maintain it, you take an asset that should last 10-12 years, and you turn it into 4-6. That was worse than we anticipated. That was far worse than we anticipated. We are getting our arms around that fast, but that takes several years to do. We need to spend more money in that area. Progressive also, relative to Waste Connections in parts of the country, ran the business with far fewer frontline supervisors than we do in certain areas.
It depends on the nature of the business, franchised or competitive, the geography, and how far rural versus non-rural it is, et cetera. In some parts of the country, we need to put a lot more supervision in and decrease the frontline headcount for supervisors. In other parts of the country, we need to thin it out. That was a surprise to us. For a company that was so regimented in command and control, it was so disparate and didn't make sense. Okay. Still, in some places, doesn't make sense to us.
I know in this forum, we've got time for two more questions, and then we'll all be hanging around here during lunch. Feel free to mix and mingle, ask additional questions. I see a microphone with Corey.
Yeah.
I think Andrew and Gary. We'll take the final three questions.
Thanks for sticking around into lunch. Two quick ones, both M&A related. A short-term question, as you pointed out, Ron, tax reform would be a boon. Given what's happening or not in D.C., do you have kind of a pretty opposite effect now? Are you seeing sellers say, "Hang on, we're just going to wait and see what plays out? Until we hear what plays out, we're not doing anything?
Absolutely. You're going to see it. There's two types of things. Traditionally and today, remember, we had said there's things that drive our M&A pipeline. Whether it's death, disability, disease, divorce, what we call life events. Those life events are still occurring. Irrespective of tax reform, those life events occur, and people need to move forward in deals, and they are. There's a whole other set of deals that
The life event hasn't happened, but I want to plan my estate. I'm not going to do that until I know what's going to happen this year. Was it going to be something tax reform happened before the August recess and is effective back to January 1 or after the August recess and is in effect until next year? Why am I going to do something to my business? We're seeing a lot of people just say, "Let me get ready to the start line, tell me what business is worth. Let's talk about structure and let's hurry up and wait for DT.
Other question, a longer-term one. How important is or not is culture of the target when you look at M&A? Is your belief that almost anyone can learn your culture if you're going to buy a company? Or is culture the target because you can pay less and make more improvements? It definitely influences your thinking on either retaining or replacing management of the target.
It absolutely plays into it. It plays into valuations very much. There are companies that, for example, [Groot] is a great example. That is a company with a tremendous culture, long-term tenure, very entrepreneurial management, a fourth generation, 104-year-old company that had a very, very cohesive culture. In a lot of ways, very similar to Waste Connections. Not quite as strong on safety, not quite as strong on price, not quite as much proactive on R&M, but tremendous capital replacement policy, quality of assets, market positioning, contract strength, things that were very critical. In that, we're able to take existing management, in this case, fourth generation, John Routh and Ryan Brandsma. Those are gentlemen who are in their mid-30s who have adapted our culture exceedingly well and have made step changes already in that business.
We felt that would happen in our analysis of it, we factored it into it. Other times, we look at companies, and we like the market positioning and assets, but there's no way the existing management's going to function in our culture. In that case, we can sort of negotiate the excise of a management prior to close and identify usually two or three key players from our organization that we can insert, and we can effect that pretty quickly. Particularly if the culture was sort of a top-down, repressive culture. The reality is most people don't like to work in that environment. We're able to effect that a little quicker.
Gary?
The service portion of the company is that something you do a lot with all of them?
We have.
You have?
Yes. What you saw today is being done in every market in the U.S. and Canada now.
Thanks. Just one last one on your capital allocation looking forward in the next five years. Do you think it's time to reassess, given you're a much bigger company now, bigger, broader investor base, potentially could be in the TSX 60. Will you take a look at that in terms of your dividend, maybe bump that up? Just how are you thinking about that in the next few years?
Well, the good news is we already are on the TSX 60.
Okay.
That happened last week. Look, we're very methodical to look at the dividend and growing it double digits every October. With the free cash flow per share CAGR that's been growing at 14% over the last five years, it's really not encroaching on the aggregate percentage of free cash flow. But look, we like the flexibility given the growth runway we have, and Ron's talked about that, especially as you look at the next potential M&A environment. That the flexibility we have of not having the dividend be 60% or 80% of cash flow, that flexibility to grow the business through acquisitions is a unique advantage that we have. If M&A slows down for any reason, we can redirect the cash flow to share buyback.
We're sitting right now on over $400 million of cash in the U.S. on the balance sheet, waiting for the timing of the acquisitions to get knocked down. Our approach to capital allocation won't change. Again, you'll see a steady increase in the dividend. You won't see the dividend, though, given the growth of cash flow limit our flexibility and ability, again, to fund all the growth opportunities we have is unique for us.
Well, I think we've run over by 20 minutes what we promised you we'd do today. We apologize for that, but we wanted to be able to take all of your questions. For everybody here in the room, and those that may still be left online or on the webcast, we appreciate you taking the time out to make the sacrifice to be here today, to be part of the investor day and hear our team. We're proud of our team. We're proud of the 20 years that we've had. For those that have owned us or watched us for any period of time, you shouldn't anticipate a change. We've been executing effectively the same game plan for quite some time. We'll tweak it here and there as the dynamics of the business change and technology and other things change. Those are going to be tweaks around the edges.
They're not going to be material changes to the focus of how we pursue the business. We're always accessible. Certainly Worthy and Mary Anne Whitney are available at all times, and Steven Bouck and I, and our other senior team as ever you need it. Thank you. We do have, for those here, we do have lunch available now. The four of us and our senior members that are here today will be at the lunch. Feel free to approach anyone and ask any questions you didn't get answered or didn't have a chance to ask today. We thank you, and we'll obviously be talking to you on our July call and seeing you at conferences and meetings as we go forward, and then in this kind of setting 10 years from now.