GFL Environmental Q1 2026 Earnings Call Transcript

GFL Environmental (TSX:GFL) reported first-quarter financial results on Thursday. The transcript from the company's first-quarter earnings call has been provided below. This content is powered by Benzinga APIs. For comprehensive financial data and transcripts, visit https://www.benzinga.com/apis/. View the webcast at https://events.q4inc.com/attendee/115568932 Summary GFL Environmental Inc reported a strong first quarter, with adjusted EBITDA margins expanding by 180 basis points to 29.1%, the highest first-quarter margin in the company's history. The company completed eight acquisitions year-to-date, including Frontier Waste Solutions, and announced plans for the acquisition of Secure Waste Infrastructure, which is expected to enhance their footprint in Western Canada. GFL Environmental Inc increased its full-year 2026 guidance to reflect these acquisitions, projecting revenue between $7.32 and $7.34 billion and adjusted EBITDA of $2.23 billion. Operational efficiencies led to reduced SG&A cost intensity, and the company saw positive impacts from recent growth investments such as EPR. Management expressed confidence in maintaining leverage between 3 and 3.5 times and highlighted the potential for significant M&A activity and share buybacks. Full Transcript Lucy (Operator) Hello everyone and thank you for joining the GFL Environmental Inc first quarter 2026 earnings call. My name is Lucy and I'll be coordinating your call today. During the presentation you can register a question by pressing STAR followed by one on your telephone keypad. If you change your mind, please press STAR followed by two to remove yourself from the question queue. It is now my pleasure to hand over to Patrick Dovigi, Founder and CEO of GFL Environmental Inc to begin. Please go ahead. Patrick Dovigi Thank you and good morning. I would like to welcome everyone to today's call and thank you for joining us. This morning we will be reviewing our results for the first quarter. I am joined this morning by Luke Pelosi, our CFO who will take us through our forward looking disclaimer before we get into details. Luke Pelosi (Chief Financial Officer) Thank you Patrick. Good morning everyone and thank you for joining. We have filed our earnings press release which includes important information. The press release is available on our website. During this call we will be making some forward looking statements within the meaning of applicable Canadian and U.S. securities laws and including statements regarding events or developments that we believe or anticipate may occur in the future. These forward looking statements are subject to a number of risks and uncertainties including those set out in our filings with the Canadian and U.S. securities regulators. Any forward looking statement is not a guarantee of future performance and actual results may differ materially from those expressed or implied in the forward looking statements. These forward looking statements speak only as of today's date and we do not assume any obligation to update these statements whether as a result of new information, future events and developments or otherwise. This call will include a certain discussion of certain non IFRS measures. A reconciliation of these non IFRS measures can be found in our filings with the Canadian and U.S. securities regulators. I will now turn the call back over to Patrick. Patrick Dovigi Thank you Luke. Our financial results for the first quarter exceeded our expectations from top to bottom. Adjusted EBITDA margins expanded 180 basis points to 29.1%, the highest first quarter adjusted EBITDA margin in our history. We achieved this record setting result in the face of notable headwinds that arose after we provided our guidance as well as increased uncertainty of the broader macro environment. The strength of our start to the year once again demonstrates the quality of our asset base, the effectiveness of our growth strategies and the resiliency of our business model. Most importantly, it highlights the capabilities and commitment of our employees who make all of these achievements possible. Pricing was ahead of plan driven by strong customer retention and ongoing tailwinds from our recent growth investments including epr. We think that this early outperformance should carry forward through the rest of the year and represent upside to our original guide. We expect that our continued focus on realizing incremental pricing opportunities that are available within our portfolio will continue to support pricing at an appropriate spread above our internal cost of inflation volumes were better than expected considering the incremental headwinds from significant winter storms experienced in many of our markets later in the quarter. Excluding the impact of hurricane and one time transfer station volumes realized in the prior year, volumes were up 80 basis points. A special waste and EPR volumes more than offset the impacts of lower C and D related volumes and winter storms. We believe that the ongoing industry leading volume performance demonstrates the quality of our market selection and the effectiveness of returns focused capital deployment strategy. The impact of broader economic uncertainty continues to be a drag on C and D volumes compared to prior periods, but we remain well positioned to participate in the upside when these volumes inevitably return. On the cost side, we saw our fifth consecutive quarter of year over year reductions in both operational and SG and A cost intensity as a percentage of overall revenue. Greater operational efficiency, improving labor turnover, fleet optimization and procurement benefits are some of the initiatives that we highlighted at last year's Investor Day which all have contributed to these results. The benefit of these cost efficiencies and our top line outperformance are reflected in the over 200 basis points of underlying solid waste adjusted EBITDA margin expansion that we achieved in the quarter. We believe that our continued sequential exceedance of our already industry leading margin expansion guidance demonstrates that we are on path to realize our stated goal of low to mid 30s margins by 2028. On M& A activity, we've had an active start to the year as expected, we have completed eight acquisitions year to date including Frontier Waste Solutions which closed at the beginning of this month. Frontier is a leading vertically integrated solid waste business with operations across the Texas Triangle, one of the fastest growing regions in the United States. Frontiers assets are highly complementary to GFL Environmental Inc's existing assets in the region and will densify our Texas footprint and further strengthen our presence there. The region's favorable demographics when combined with the deep market and operational expertise that the Frontier management team brings to GFL Environmental Inc are expected to drive outsized growth for the coming years. The contribution from these eight acquisitions allows us to increase our guidance by nearly 5% and Luke will walk you through the details shortly. We still have a robust pipeline of actionable opportunities where we think we can deploy an incremental 3 to 500 million before year end. The contribution from any additional MA that we complete this year will be further upside to our guide. Additionally, earlier this month we announced the proposed acquisition of Secure Waste Infrastructure. Secure operates a network of permitted waste processing and disposal assets that will complement identify GFL Environmental Inc's existing geographic footprint in Western Canada, a market that has very strong structural tailwinds to support the combined businesses growth prospects over the near and long term. Combining Secure's hard to replicate infrastructure network with GFL's broader platform strengthens our ability to capture more waste streams across the value chain and to more fully participate in the significant growth investments that are expected in this region by both public and private sectors. I will now pass the call to Luke who will walk us through the guidance update and the quarter in more detail and then I'll share some closing comments before we open it up for Q and a. Luke Pelosi (Chief Financial Officer) Thanks Patrick Q1 revenues grew 8.5% before considering the translational headwinds from FX, largely on account of strong pricing and underlying volume, which more than offset greater than anticipated headwinds from adverse weather conditions in the quarter. Pricing was 7% for the quarter, which was approximately 25 basis points better than planned and attributable to higher retention rates and ongoing realization of the incremental pricing opportunities we articulated at investor day. Pricing was 8.5% in Canada and 6.3% in the U.S. the strength of the first quarter's pricing results provide a high degree of visibility on the path to meet or exceed the high end of our pricing guidance for the year. Q1 volumes were 120 basis points behind the prior year, but better than expected expectations even in the face of the impacts of outsized winter storms experienced in several of our markets. Lapping Hurricane and one time Transfer station volume in the prior year period were the primary drivers of the anticipated negative volume print for the quarter. Average commodity prices in the quarter were in line with plan, but we saw sequential increases over the last few months and market pricing is now $15 per ton higher than our initial 2026 outlook. This is the first time in a while where it feels like commodity prices may have bottomed while there was no meaningful impact to the quarter. If pricing remains at or above current levels, that will result in incremental upside for the year. Our current commodity price sensitivity is that every $10 change in the gross basket price yields a 6 million dollar change to annual revenue and adjusted EBITDA. Looking at operating costs, cost of sales before depreciation, amortization integration cost as a percentage of revenue decreased 90 basis points to 60.7% ongoing efficiency and labor costs, in part driven by continued improvement in voluntary turnover as well as reduced repair and maintenance cost intensity more than offset the impact of higher fuel and transportation costs. In terms of fuel, diesel costs in the quarter were up nearly 10% year over year and 40% up in March alone. The sudden inflection in diesel pricing created a $10 million cost headwind versus our guidance, only 1 million of which was recovered in the quarter. Due to the timing lag inherent in our fuel surcharges, which are often billed in advance based on the prior month's diesel pricing, we expect that by the end of the second quarter our surcharges should generate sufficient incremental revenue to offset the additional fuel expense tied to diesel prices. Although the cost recovery nature of the surcharge mechanism will be a headwind to margins, SGA cost intensity also significantly decreased as compared to the prior year, primarily driven by operating leverage of our corporate cost segment in line with expectations. As we had previously indicated, the temporary increase in the percentage of revenue represented by corporate costs resulting from the divestiture of the environmental services business is expected to reverse as we continue to grow revenues and leverage. This relatively fixed cost segment adjusted to EBITDA margins were 29.1%, representing 180 basis point improvement over the prior year, about 30 basis points better than planned, and a 300 basis point improvement over 2024, a definitive illustration of the success of our strategies. Adjusted EBITDA margins were up 340 basis points in our Canadian segment and up over 100 basis points in the U.S. excluding the impact of hurricane volumes, acquisitions and the winter storms. As mentioned earlier, fuel and commodity prices were a drag on margins in both segments, excluding the impact of these exogenous Factors underlying consolidated Q1 margins were up over 230 basis points from the prior year. Adjusted free cash flow for the quarter was approximately $20 million ahead of plan on account of EBITDA outperformance. Q1 cash flows were inclusive of the investment in working capital we typically make in the first half of the year. In January, we opportunistically issued a $1 billion of new bonds to provide flexibility to execute our growth strategy. The bond issuance was significantly oversubscribed and the interest rate offered represented one of the tightest spreads ever offered for our rating category, another testament to the conviction institutional lenders have in our corporate credit quality. The cash proceeds from this issuance were on hand at the end of the quarter and were partially used to fund Frontier and the other acquisitions that closed in April, we exited the quarter with net leverage of 3.6 times inclusive of the translational impact of the FX rate running up to 1.393 at quarter end. Using the average FX rate for the quarter, net leverage would have been 3.5 times exactly in line with our expectations. The second quarter acquisitions will temporarily increase leverage about 30 basis points and the business will then naturally delever back down to mid 3s by year end. As is typical for our industry, we will update our full year guidance for our base business when we release our second quarter results. However, with the strong start to this year, we see multiple avenues of upside to our current guide that gives us confidence in our ability to meet and potentially exceed the expectations for the year. Nevertheless, given how successful we have been in our M&A program in the first four months of the year, we are updating our full year guidance to reflect the expected in year contribution from the eight acquisitions completed year to date. Again, this update does not change our previous guidance for our base business. As a result of the new acquisitions, we now expect the following amounts for full year 2026 revenue of 7.32 to 7.34 billion, adjusted EBITDA of 2.23 billion, adjusted free cash flow of $850 million inclusive of cash interest of $445 million and net CapEx of $825 million. Specifically, as it relates to the second quarter of 2026, we expect consolidated revenue of approximately 1.89 to $1.9 billion at an adjusted EBITDA margin of 30.4% as previewed in Q1. The Q2 adjusted EBITDA margin is modestly behind the prior year on account of the impact of commodities, fuel price and m and a. Q2 adjusted free cash flow is expected to be approximately 225 million inclusive of 85 million in cash interest and 265 million in net capex. I will now pass the call back to Patrick who will provide some closing comments before Q and A. Patrick Dovigi Thanks Luke. I wanted to finish by talking a bit more about our proposed Secure Acquisition. This acquisition represents an opportunity to acquire best in class network of hard to replicate waste disposal assets in a region with highly compelling market characteristics at a fair value. We first started looking at secure business in 2023 when they were divesting a small set of assets coming out of a review by the Canadian Competition Bureau related to the Tervita Corp merger. While we saw a lot of opportunity in this asset package, we had limited balance sheet capacity at that time of the sale process and we were ultimately unsuccessful with our bid. Since that time we have observed the resilient financial performance of Secure through several years of macro related headwinds, including the rapid interest rate hikes of 2021 and 2022, the inflationary environment in 2022 and 2023 and then the tariff related of uncertainty of 25 and oil price volatility. Along the way, the financial performance has been exceptional, illustrating the consistent and durable cash flows that characterize high quality solid waste assets. Secure's business is unlike other E and P disposal businesses that operate in other regions of North America. First off, the permitting process in Canada is such that it is truly difficult to replicate these assets. New disposal assets of this quality simply do not come online. Secondly, over 80% of their business is tied to ongoing production rather than new drilling activity which generates stable, recurring highly predictable volumes of waste. The financial performance is largely insensitive to drill rig counts and drilling activities that drive volumes into E and B disposal assets in other regions across North America. And thirdly, the ownership of the disposal capacity in the region yields an attractive competitive dynamic. We believe the Western Canada region in which Secure operates is on the precipice of the largest investment cycle of the region's history. As the Canadian federal government looks to fast track nation building critical energy infrastructure projects, private sector capital is already flowing into the region. With new multi billion dollar investments being publicly announced with increasing regularity. We expect Western Canada will be the growth engine of Canada for the foreseeable future. The combination of Secure's post collection network with GFL's existing asset base strategically positions us to participate in this growth. Operational cost and revenue synergies are expected to be material and could represent an incremental 25 to 50 million of opportunity above the 25 million of largely SGA cost savings already identified. Secure's revenue in 2026 is expected to be 1.5 to 1.6 billion. Approximately half of this amount is derived from normal post collection activities with the other relating to tangential energy related services namely specialty chemicals and energy infrastructure. These other energy related revenues expected to represent less than 8% of our pro forma 2027 revenues and and will decrease further in time as we continue to grow in solid waste and grow is exactly what we plan to do. The enhanced scale and free cash flow generation of the pro forma combined business will allow us to materially increase our returns focused growth capital deployment without compromising our net leverage commitment. While this breadth and depth of M and A of Our M and A pipeline suggest that most of this capital will be invested in the future. Solid waste acquisitions as well as high return on invested capital, organic opportunities. The enhanced scale will accelerate the opportunity for share buybacks to become a more frequent and sustainable component of our capital allocation strategy going forward. I will now turn the call over to the operator to open up the line for Q and A. Operator Thank you. To ask a question, please press Star followed by one on your telephone keypad. Now if you change your mind, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally. And we kindly ask all participants to limit their questions to one main and one follow up. The first question today comes from Sabahat Khan of RBC Capital Markets. Your line is now open. Please go ahead. Sabahat Khan (Equity Analyst) Great. Thanks and good morning. Maybe just a question for us to start off on the pending transaction. I think there's a vote coming up later in May and one investor came out somewhat opposed to the transaction in some form. Patrick Dovigi From your vantage point, can you just maybe share thoughts on sort of getting the transaction completion and your confidence in getting the vote? Thanks very much. Thanks. Yeah, as you said, there was, you know, there has been one investor that has publicly expressed their desire to, to not vote for the transaction. I think, you know, I don't personally know Abrams Capital, but for everything we've learned and know they're, you know, highly respected, high-performing sort of money manager. But you know, I think the one thing we agree with Abrams Capital on is, is the quality of the asset that we're buying and their passion for owning this asset, given the amount of work that they've done over a long period of time studying and understanding the asset. Obviously we don't agree on the fact that we believe there's more value to create as one versus two. But you know, that being said, I've never met them, never had a conversation with them, reached out to them recently and plan to have a fruitful discussion with them next week. And, you know, we'll see where that goes. That being said, that's one investor out of a multitude of many. You know, when you look at the transaction, you know, you have a very experienced management team that has been at both of these assets being secure in GFL for over 20 years. And you have a board here that again, highly sophisticated, has been alongside both of us building the business for a long period of time. And most importantly, you know, put their money where their mouth is. You know, around this board table, there's about 6 billion of invested capital in the combined entities. Right. So, you know, they all believe in the strategy, they believe in the combination of these two businesses. And you know, over the last week we've had 60 to 70 investor calls with both GFL investors as well as a number of secure holders. And you know, the, the, it's been very positive. So you know, from our perspective, you know, we believe this transaction is going to, is going to go over the line. Obviously shareholders can vote however they want to, but I think once particularly GFL investors got comfortable with the strategy, got comfortable with the assets, we underestimated and probably underappreciated the lack of knowledge of some of our investors in terms of what the profile this asset was, where it was, what the opportunities were coming in Western Canada on the backdrops of a lot of the Canadian infrastructure and government investment. I think we're very well positioned to sort of move, move this across the line. Again, we're going to continue speaking to both investors over the course of the next few weeks. But you know, I keep reiterating the fact when you look at these businesses on a combined basis, you know, when you look at next year, you know, yeah, you're approximately going to have nine and a half billion of combined revenue, call it 3.2 ish billion of EBITDA, you know, 1.3 to 1.4 billion of free cash flow next year. I mean, if you look where the business is trading today, on a combined basis, we're probably trading at 17 to 18 times 20, 27 free cash flow, probably 10 to 10 and a half times EBITDA when historically we've traded at 25 to 30 times free cash flow. And multiple veto has been somewhere between 13 and 16 times. Right. So from our perspective, this will catch up. Yes, little bump in the road, but there's significant upside to the combined business. So, you know, for all those reasons, we believe that, you know, this is the right thing to do. Sabahat Khan (Equity Analyst) Great, thanks. And then just on my follow up, maybe on the, the guidance outlook and maybe more for Luke and I appreciate the color that you shared on the guidance. I guess as you think about the base business, can you help us just maybe think about the puts and takes at least on the organic business outside of the completed M and A that Luke Pelosi (Chief Financial Officer) you've baked in, you know, rins and commodity prices at least directionally are stabilizing. Maybe just talk us through the, the opportunity in the back half. Is there potential for upside to the numbers you've shared for 26? Thanks and I'll pass line. Yeah, thanks Abba great question. I mean as we said in the prepared remarks, we'll wait till Q2 before we provide. But if you think about directionally, obviously the strength of our pricing to start the year coming in 25, 30 basis points better than expected should flow through to the balance. So if you think about the original guide of being a mid fives or 5.5% price, I think you'd see a path where you're 25basis points better than that. And that should yield, if you're looking in dollars, that's 15 to 30 million incremental dollars coming out of that. Now the offset is volume and this is really why we need to wait to Q2 to see because as much as we outperformed in Q1, it's difficult to see between winter weather and some special waste tailwinds that we had as to what's actually going to transpire in the underlying core volumes. C&D continues to drag and the outlook for the year I don't think has been improved by virtue of the incremental uncertainty that has arisen on a geopolitical basis since we started. And so if you think about from an interest rate perspective, from an oil price perspective, the expectations for incremental C and D activity to ramp I think still has a high degree of uncertainty. So that's really, I think the unknown piece on volume, I mean the guide was 25 to 50basis points, right? That's representing 15 to 30 million dollars of incremental revenue. I think that's the part we want to wait and see. Now obviously some of the exogenous factors being commodities, fuel surcharge and FX all have opportunities to be meaningful Upside above and beyond the guide. Obviously with the commodity price recovery there could be a tailwind in there. And provided the sort of sensitivity, we'll see where fiber prices go. Certainly on the fuel surcharge piece, if today's diesel prices persist through the balance of the year, there's another, call it 50 to 75 million dollars of incremental revenue that would come online to offset that incremental diesel cost. And then FX for call, I mean FX was a 210 basis point headwind against us. The Canadian dollar has been bouncing around quite significantly, but that $135 million headwind, you could see some improvement to that number depending on where it hopefully shakes out. So we'll wait to Q2, but certainly very optimistic based on the strength of Q1 and we see multiple avenues to upside. Great, thanks very much. Operator Thank you. The next question comes from Patrick T. Brown of Raymond James. Your line is now open. Please go ahead. Tyler Hey, morning, guys. It's Tyler. You there? Operator Morning. Yeah, good morning. Tyler Hey, hey, hey, hey, Luke. I appreciate all the color a little bit on, on the guidance, but I just want to make sure I've got it clear. So I know that you guys have put a lot of work into fuel surcharges. That's been a big push over the last couple of years. But I just want to be clear, based on where you are today, you feel that fuel is basically just a margin dilutive issue. It's not really an EBITDA dollar drag over the course of a year. Would that be right? And then second, can you just talk about the momentum on price? Was that just. What was the delta there? Was that better pricing that you went out with on the street, better retention? A little bit of both. Just a little bit of color there would be helpful. Yeah, great question, Tyler. In terms of fuel, absolutely. The surcharge mechanisms and the efficiency we have in place, while you can have a temporary delay or lag like what we saw in March, the expectation is by the time you get into Q2, those surcharge mechanisms will recover the incremental dollars. So net, net no impact to EBITDA and just really that sort of margin dilution. Now, obviously if diesel runs up another significant leg higher from here, you could have an incremental lag. But assuming that we'll find some sort of stability in that the surcharge mechanism should recover all of our incremental costs in terms of the base pricing. Look, as we've said, we have incremental opportunities within our portfolio by virtue of just being a little bit behind the industry and where they're at in terms of price optimization. And we continue to pull on that lever and we have success with it. I think what we've also seen is just a very high level of retention. Right. Luke Pelosi (Chief Financial Officer) So the base plan assumes you put out pricing of X and you have to give back a component of it. Our retention levels have been higher than anticipated, which has allowed for us to print that higher level of price. So do think, if you recall the original guide we started at mid sixes or better, was then going to step down ratably through the year. That cadence is expected to remain the same. And so if you think about Q2, that should step down now to sort of the high fives and continue to step down thereafter. But if all other things being equal, we should be able to end the year 20 to 30 basis points higher on overall price than was originally anticipated due to the strength of the Q1 start. Okay, excellent. And this is a bigger picture question, so I want to kind of come back to this prospect of getting to investment grade. I think one of the things about the secure deal is that it will substantially improve the cash generating profile of the business. So I'm just kind of curious how quickly you think the rating agencies would factor that in and then how quickly. Just don't know mechanically how it would work. But how quickly would you be able to actually refinance the balance sheet? And you just talked about a really tight spread on your bond issuance, the billion dollars this year. So how much of a coupon differential would there be? Big picture, sorry, I know there's a lot there, but just broadly on the. On the investment grade opportunity to cash flow. Thank you. Yeah, it's a great question, Tyler. Something we focus a lot on. And I think our offering in the bond market demonstrates our borrowing rate today is already closer to investment grade than our, you know, actual rating represents. So pro forma for secure. You're absolutely right. A bigger business, better free cash flow generation, you know, larger scale is all highly sort of credit positive. You know, the rating agencies as you know, are a little bit more backward looking than we are. And so it would take some time for the pro forma combined business to perform and the sort of run rate adjustments to roll off. Before I think you were at a place where you started getting those credit rating upgrades. To your point on refinancing the balance sheet, you know, as we have alluded to, our borrowing rate today on an after tax basis is just modestly higher than what we would be borrowing at on an investment grade level. So we've continued to highlight that we view this less as a cost of debt capital. While there is benefit, that's not really the idea. I think it's more the cost of equity capital that one can achieve by having the perception of higher quality by virtue of the investment grade rating. So if you look at our spread, I mean we're borrowing at 140 basis points over the underlying treasury and an investment grade peer would be doing it at 70 to 80 basis points. So you have a 60 to 70 basis point spread on a pre tax basis. I think that probably represents what the interest efficiency opportunity is. However, as we've said, we continue to really believe this is more about cost of equity capital than about cost of debt capital. Yeah, perfect. Thank you. Thank you guys. Operator Thank you. The next question comes from Kevin Chang of cibc Widgundy Your line is now open. Please go ahead. Kevin Chang (Equity Analyst) Hi, good morning. Maybe just one clarification question. Just on the frontier deal you noted it improves your density in Texas and you're tied to these high growth markets in the Texas triangle. Did you mention you saw internalization benefits or was that something I might have missed in the prepared remarks? Patrick Dovigi No, we have internalization benefits in the. Obviously we have landfill capacity in Houston, which we've been to. So there's a bunch of internalization opportunities around that, those disposal assets. Luke Pelosi (Chief Financial Officer) Okay. Okay, cool. Yeah, I thought that would be the case. Maybe just a more conceptual question. And Luke, you alluded to this in your prior answer. I realize you make strategic decisions with the long term view in mind versus just the near term gyrations in your share price. But if we look back the last 18 months, you saw your cost of equity improve as you went through this deleveraging process and clearly the market has penalized your equity a little bit here, just as you've seen elevated M&A to start this year. I'm just wondering, when you look back, does that reframe how you think about the pace of future M&A? Just, just given how, you know, this one specific issue can kind of swing your cost of equity quite quite violently in a short period of time. I mean, I'm looking at Patrick, but I'll respond. Kevin. Look, it's obviously something we think about and I think, you know, truthfully, it's probably one of the flaws of the public equity markets that it forces you to maybe be a little bit more short termism in your thinking than long term thoughts that we believe are actually the foundation for equity value creation. Obviously coming out of 23 and 24, we reevaluated our capital allocation strategy and came to the view that operating in a sort of three to three and a half turn leverage level is ultimately what's going to yield the best path for ideal cost of equity. And that's what we're sticking to and maintaining. I think while we may continue to see hopefully temporary dislocations in the current share price over the long term, we are large believers in driving incremental free cash flow per share generation at rates above and beyond the industry by virtue of our return focused capital deployment strategy, that is going to pay you the path to long term equity value creation and short term sort of share swings, as you said, may come and go and obviously not something that we aspire to, but very much attempt to not allow that to cloud the vision that Patrick started with nearly 20 years ago. And has been highly, highly successful at creating material equity value. Patrick Dovigi Kevin, the industry, for whatever reason, I think, sold off, you know, was out of favor for, you know, the, let's say, Q4 of last year and definitely into Q1 of this year. And, you know, stock had sold off before we announced any sort of M&A and then actually recovered a bit with some of the actual M&A. So, I mean, listen, we don't know what makes a stock go up or down. I think over time, you know, the capital allocation decisions we've made have made investors a significant amount of money over a long period of time and compounded their rates above and beyond sort of each and every one of their expectations. So we're going to keep making smart financial decisions. Like I said, you have a board on the GFL side that probably today owns around 5/plus billion dollars of equity and you have, you know, a secure board that owns, you know, between TPG and Solus, another billion dollars of equity. It's over $6 billion of equity. So, you know, I think we are making prudent financial decisions and we have our money where our mouths are. And, you know, we're going to keep doing the things that we think will yield the best result for us as shareholders, you know, might not be listen, we had it. We knew that the stair price could maybe suffer, you know, 4 or 5% at the time of when we did the secure deal, but it overcover and, you know, you could keep printing quarters like we printed keep printing quarters like secure printed this this quarter, as you saw this morning. You know, I think each and every one of our investors are going to be very thankful, you know, that of what we're doing and what we continue to do to drive exceptional results and exceptional performance. So we're just going to keep doing the things that we know what to do, albeit with, you know, what we've heard over and over and time and time again, maintain leverage between three and three and a half because that is going to yield the best result for the equity account. And we're going to keep doing that. We're going to live within that. So you'll continue to see that from us. Kevin Chang (Equity Analyst) I appreciate the response there. Yeah, congrats on a solid start to the year here. Thank you very much. Thanks, Kevin. Operator Thank you. The next question comes from Stephanie Moore of Jefferies. Your line is now open. Please go ahead. Great. Good morning. Thanks, everybody. I wanted to touch on Unsecure again, you know, maybe just talk a little bit about, I think a lot of the Questions that we get and maybe helpful to get a little bit of color would just be about the commodity exposure under the, under the assets. You know, how do you think about how the exposure has changed over time and at the same time the position that GFL can make us the new owner here and really kind of addressing the quality of the assets and you know, really looking at GFL's legacy services and how they can enhance the business under, under GFL's umbrella. Thank you. Stephanie Moore (Equity Analyst) Yeah, good morning Stephanie, it's Luke. Great question on the commodity price exposure we've highlighted in the call and certainly I believe on Secure's call today they're doing the same. It's really limited in the short term on the basis that they derive a very small amount of revenue from the sale of oil and oil related products in the short term. That's what gives rise to the commodity price exposure. If you think about Secure's guidance for the year 525 to 550 million dollars of EBITD in light of WTI running as much as it has, I think they're now suggesting that they're at the high end of their guidance. Right, so meaning a relatively de minimis in year impact where the exposure could be more significant is at a elevated level of wti. Over the longer term, does that drive multi year changes in production volumes in the area in which they operate, ultimately generating higher volumes of waste? And conversely, the same is true if you entered a period of prolonged suppressed WCI pricing, say something below $45, that could see a reduction in the production activities that give rise to the steady state volumes that Secure processes. But again, unlike some of the other basins or areas of energy exploration, that is the volumes are very much tied to rig counts and those rig counts can be much more volatilely tied to WTI swings. The production focused nature of Secure's waste streams that it processes does not yield any of that sort of short term volatility, thereby creating a much more sort of stable and cash flow characteristic very much alike to what GFL has today in terms of the overlap in that region. If you really think about it, at the highest level, Secure operates a best in class network of post collection assets and GFL in the area is very focused on collection. And so if you think about just the market as it exists today, there will be overlap opportunities whereby GFL currently collects wastes and brings them to a disposal site that is not secure, that could ultimately be internalized. And the opposite is true whereby Secure uses or benefits from collection collectors that bring the waste to their facilities that are not GFL and that could be internalized. So just with the existing footprint today, I think there's those sort of internalization opportunities. Obviously, when we look at the expected capital investment into this region over the near medium and short term, which is looking to be in tens and tens of billions of dollars, as more energy production comes online and more transmission and pipelines to get that energy to the west coast and other markets is developed, we think there'll be a massive opportunity for incremental participation in both the collection activities that GFL does today and the post collection activities that secure does today. So we're feeling very optimistic for just the base business status quo. But when you layer in the potential growth opportunities in this region, we think there could be meaningful upside. And that's where I think, to Patrick's point, the combined boards and shareholders believe the business is much more valuable on a combined basis than it was standalone. Luke Pelosi (Chief Financial Officer) And the regulatory environment in Canada, for these assets, you just, they're irreplaceable. So to try and get a landfill permanent, get a deep well permitted, you just, you can't do it. Their metal recycling facility permits the rail that goes into those facilities, you know, and again, the network of storage and pipeline facilities that they own, you just, these are impossible to replicate assets which, you know, yields the margin profile that these assets come with and the returns on invested capital that come with them. So I think the transaction works perfectly because it's highly complementary to both businesses. I think from an M and A perspective, there's limited opportunities on the secure side and they would have to diversify outside of their core today into more lines of business that we're in that would come in at significantly lower margins because we've been densifying and rationalizing the businesses around them for almost 16 years. Again, you know, strategically makes total sense financially. Makes total sense in a, you know, as I always say, market where we want to be and market selection. We want to be in a market that, you know, we're going to be sort of sharing a big part of it with lace connections and, you know, those. That's a market profile that we like. So, you know, we'll continue sort of driving through. And again, like I said, I think we as shareholders will all be rewarded handsomely on both sides of the transaction. Both Secure shareholders and GFL shareholders over time. Patrick Dovigi Appreciate the color. Just one quick follow up on. On MA in general, and I think you touched on this, but I think it's worth emphasizing. So maybe just talk a Little bit about, you know, let's just say this deal does close. What is the enhanced flexibility for doing additional M and A on A, on A based on a combined basis. So I think that's an important aspect here that's not being considered. Thanks. Yeah, I mean, great question. I mean, if you look at it today, we said we could effectively deploy, you know, somewhere between 800 and a billion dollars on incremental mast still deleveraging sort of 10 to 20 basis points. Right. And so that's sort of the sweet spot in which we, you know, have been sort of modeling where we're sort of moving now. When you put the two businesses together, you're basically going to be able to deploy, you know, somewhere between 1.8 and $2 billion a year. So we can materially ramp up the solid waste M&A spend because our pipeline is very deep. I mean, as you've seen this year, we have a significant amount of opportunities that we can continue deploying capital. And then on the secure side, when they were thinking about diversifying into sort of incremental M&A, we don't need to spend those dollars anymore on that incremental M&A. We can just spend the capital on their internal sort of, you know, on their organic high returns on invested capital projects that you see in the spend on the year, which has been a 50 to $100 million a year spend. So you put those together that will then keep the solid waste business growing, continue densifying the markets where we're operating in the US and we have an incremental call, 800 to $1 billion a year that we can continue spending with the free cash flow generation off of the combined businesses, which is highly compelling. If the share price continues to remain this large, you're going to take that and you have ultimate flexibility to buy back a significant amount of stock at these levels. And obviously stock share buybacks when the stock's trading at these kind of levels is highly compelling. So we have ultimate flexibility with the capital structure to basically do whatever we want. And you know, I think again, that is a tangential benefit of the transaction. Operator Thank you. Thank you. The next question comes from Jim Shum of TD Securities. Your line is now open. Please go ahead. Jim Shum (Equity Analyst) Hey, thanks and good morning. Just wanted to get your thoughts on landfills and logistics. Your competitor noted that rail may play an increasing role in disposal and another competitor believes that available landfill disposal capacity will gravitate towards the central US So just curious how you see things playing out and how is GFL Positioned for any shifts in the landscape. Patrick Dovigi Yeah, I mean, I think that's more of a geographic discussion than anything else. You know, I think if you're thinking about the Northeast particularly, that's where a lot of, you know, waste by rail volumes are happening. I think, you know, from our perspective, in the regions that we're operating, keep in mind, we're 75% secondary, you know, 25% primary. The big primary markets where we're operating in, again, sort of, you know, if you think about Houston, Atlanta, Detroit, those are our big, you know, primary markets in the US There's a lot of disposal capacity in those markets. So that's not a major issue for us. And in the secondary markets, we're operating, you know, our landfills have significant capacity for the next number of years. We're not where we're not going to have to worry about waste by rail. As you know, we don't operate very much in the Northeast, so the waste by rail thesis for us is less relevant because we just don't have, you know, operations in those geographic regions. Jim Shum (Equity Analyst) Right, okay. And then could you just, could you just give us an update on the, on the EPR and just maybe on the sustainability growth CapEx? Is that like 100 million next year? Sort of ballpark, the right way to think about it? Patrick Dovigi Yeah. So on epr, you know, with the exception of some of the stuff in Western Canada, the Lion's share of EPR, you know, continues to come online throughout 2026. Obviously, the growth CAPEX spend associated with those has been coming down significantly. Yeah. To the tune of, you know, 100 to 125 million. As we sort of go into next year, there will be some modest CAPEX spends around Alberta as those collection contracts and processing contracts continue to come online throughout now and the end of 2027. But, you know, that program is materially winding down now and those contracts are live, and the largest collection contracts came on are coming on through the sort of first half of 2026. So we're largely through the lion's share of the major CAPEX spend around those initiatives. Okay. Jim Shum (Equity Analyst) And then, forgive me, but was there, were there still some opportunities in the Maritimes or did that, did that already come to pass? Patrick Dovigi There's still some collection opportunities in the Maritimes, but the processing ones have been. Have been. Let's already. Jim Shum (Equity Analyst) All right, great. Thanks a lot. Appreciate it. Thank you. Operator Thank you. The next question is from Brian Bergmeier of Citi. Your line is now open. Please go ahead. Brian Bergmeier (Equity Analyst) Hey, good morning. Thanks for taking the Question, Luke, I was wondering if you could maybe just call out some of the bigger items for the 2Q margin bridge to kind of get to that 30.4%. You know, I think we've talked about kind of the timing of EPR from last year and then maybe some fuel headwinds and then you've got the M and A integration now. So just if you can provide color on some of the big items, that would that be helpful? Brian, great question. If you look at sequential going from Q1 to Q2, you know, contemplating at that 30.4% level an 80 basis point increase. Now I think in order to frame the year over year, you have to look at last year. Last year Q1 to Q2 increased sequentially 280 basis points, which was sort of outsized and atypical. If you go back to 24, the sequential increase from Q1 to Q2 is 170bps. And I think that's more sort of the normal course cadence. So really as we go into this Q2, you have fuel, commodity and MA. I mean fuel of today's pricing is going to be a sort of 40, 45bps headwind and you're going to have commodities if it stays where it is today, sort of 20, 25 bips. And then you got MA with what we've done so far is 40, 45 bips. And so when you add that all together, you got this sort of 110, 120 basis point headwind going against you. And so if you were to normalize for that, this 80 basis point sequential increase from Q1 to Q2 is closer to sort of 200, which is sort of more in line with that normal course cadence. The other thing, I mean, Q2 of last year we also had a benefit of 40, 50bps as it just related to certain accruals and WSI rebates that we generated in Canada. And so again it was about a 45bp benefit for the prior year. That's not repeating. So it's a combination of all those pieces. We knew about this going into the year with the cadence and notwithstanding the headline number slightly behind on a year over year basis. I think when you look at the underlying. We continue to generate the margin expansion by pulling on all the levers we've been talking about. Got it. That's really helpful. I'll turn it over. Operator Thank you. The next question comes from Trevor Romeo of William Blair. Your line is now open. Please go ahead. Trevor Romeo (Equity Analyst) Morning guys. Thank you for taking the Questions? I wanted to follow up a little bit on the Frontier and then the Texas market. Maybe appreciate the comments on internalization opportunities, but just thinking about Texas being a good population growth market, sort of from a growth perspective. How are you thinking about that for potential future deals now that you have a bigger footprint across the space? And then I know Frontier had done several acquisitions of their own over the years. So just what are your thoughts on how they've integrated all those deals and where they are from an efficiency standpoint? Patrick Dovigi Yeah, great question. They're running a very well oiled machine. If you think about Frontier today. Historically we were generally around the Houston area. This has obviously opened up sort of Dallas, San Antonio and Houston for us. Now. I think if you look at our plan, we have a plan to sort of, you know, double the revenue of the Texas market sort of over the next, over the next five years. So we feel pretty comfortable in that operating model. It's a model shared by ourselves and the Frontier team that has come along with the business. But you know, the plan is to double the size of the revenue in Texas over the next five years. Luke Pelosi (Chief Financial Officer) And I'd say on that, just to add, I mean, while M and A is obviously part of our playbook, you know, the nice things about entrepreneurial and growing business like Frontier is there's meaningful opportunities for organic M and A deployment as well. One of the opportunities that was in flight when we closed the transaction is adding a new sort of C and D recycling facility at the front end of their C and D landfill. And that'll be a benefit to the whole region. So that's in flight, you know, have some incremental growth spend. You know, it doesn't manifest as purchase price because you know, the payment for that is happening under our watch. But you know, when that's up and running by the, towards the end of the year, there will be incremental benefit that we'll see coming through in the results that goes to the point of this sort of outsized growth expectations. So not only just M and A, but some high return organic growth opportunities are available to us in that market as well. That's great. Thank you both. And then quick follow up on volumes. Did you specifically call out any headwind from weather in the quarter? And then just if you have any thoughts on kind of, if you take out the hurricane top comp. What was underlying volume activity kind of across your regional areas if there were any differences? Yeah, look, weather we operate in Canada, we operate, you know, in northern climates. We try not to call out weather on it. But I think, you know, this first quarter was exceptional and certainly, you know, beyond what we had sort of anticipated. So when you look at the volume, we anticipate there's about $11 million headwind as it related to the sort of weather. And again, it wasn't just in Canada, but you had weather in the Carolinas and other sort of markets that aren't typically. So if you look at actual dollars, volume was negative $18.5 million. So prior year we had this one time transfer station volume of 10 million bucks that benefited Q1 and we also had hurricane related volumes of $21 million last year. So if you just normalize for those two things, you actually had positive $12.5 million of underlying volume. Now as I said, weather was about $11 million headwinds, but you also had EPR which this growth capital spend was about a $10 million tailwind. So those sort of largely offset. So you're really left with this $12.5 million on a sort of net, net underlying volume that's roughly 80 basis point improvement. Now if you look at the pieces in there, I mean we had a great performance in special waste in the quarter, which as you know, can be sort of lumpy and a little bit challenging to extrapolate trends from. So while special waste has been good for the past four quarters, C and D volumes have been negative for those past three or four quarters. C& D was at the landfill was negative 7.5% in Q1. Now typically the special waste is a precursor to subsequent C and D volume growth. And I think at the beginning of the year we thought that that was going to be an opportunity. Back to the prior comments. I mean, with today's macro uncertainty, I think there is a bit of a wait and see. And so with that we'll let Q2 play out and see if there is sequential improvements. We're seeing it in the roll off. I mean our roll off polls in Q1 were organically down about 1%. Those have flipped to positive in April, which is an encouraging sign. But again, we'll wait until the balance of Q2 before we recast what we think that means for a full year basis. All right guys, thanks a lot. Operator Thank you. The next question comes from Jerry Revitch of Wells Fargo. Your line is now open. Please go ahead. Jake Kooyman Hi, this is Jake Kooyman on for Jerry. Thank you for taking the questions. So on the secure Synergy build, you've laid out roughly 25 million of low hanging operational cost synergies and a path to 50 to 75 million over 18 to 24 months once the broader operational components are factored in. So I was just hoping you could walk us through what gets you from the 25 million to the higher end of that range. Yeah, great question, thanks. So as you said, the 25 million really SGA related costs, you know, public company and other type of corporate costs, where we think there's efficiency, you move into the next leg, which I'd call operational cost. When we alluded to this in the prior comments, you start thinking about internalization opportunities whereby today Secure is subcontracting a collection activity to a third party. They're basically to internalize that collection activity. And then additionally, if you look at the inverse where GFL is disposing of waste at a third party, the ability to internalize that and so on, the sort of cost internalization, I think that'd sort of be the next bucket and then the third bucket being sort of what we'll call revenue opportunities. If you look today, GFL services many customers in the services that GFL provides, that customer also has a need for a service that Secure could provide but isn't today. And that could represent an incremental revenue opportunity that we could capture on the pro forma combined business. And the same is true in the inverse where Secure may be taking the waste of a customer, but other services that GFL is capable of providing are being provided by a third party. And so again, we think that incremental wallet share capture is a real opportunity that the pro forma combined business could go out and get. So while the first bucket, the 25 that we underwrote is really that sort of SG&A, that other incremental 25 to 50 is really equally across those two operational cost and revenue synergy categories. And then obviously if there's growth above and beyond in this market, as is anticipated by many by virtue of the capital investment plan that's coming out of both public and private sectors, there could be meaningful growth opportunities above and beyond that. Great, thank you. Really appreciate the color. And then my second question would be on the Q4 call, you sized RNG in the roughly 125 to $150 million range. I was just hoping you could give us an update on where you sit today on RNG run rate contribution and how much of the 2026 step up in the bridge is RNG versus EPR. Thank you. Yeah, so that's right. I mean the original plan for RNG was 175. We talked that down saying to about 125 in light of deeper dives at each of the facilities, what's feasible in terms of actual facility development as well as the opportunity at each of those facilities? So 125 is the expected target. You're doing roughly $50 million today out of the five facilities that you're generating benefit from. That's roughly flat with last year. If you recall this year's guide, there was no meaningful incremental step up in RNG related contribution as you had an incremental amount of volume from the maturity of facilities offset by the slightly lower RIN prices. You know, today's 240 versus the higher level that you realize on a blended average in 2020 going forward, 2027 is supposed to see an incremental four facilities come online which takes you sort of upwards to that sort of, you know, close to 85 to $100 million mark. And then in 28 you have the other remaining sort of four facilities that come online to take you the balance of the way there. So meaningful minimal incremental contribution in 26 to the guide. But we remain, you know, clearly focused on that path of sort of getting to that 125 target as a whole. Great, thank you. Really, Luke Pelosi (Chief Financial Officer) thank you. The next question comes from Adam Bubs of Goldman Sachs. Your line is now open. Please go ahead. Jake Kooyman Hi, good morning. Can you just update US on the 2026 EBITDA outlook for GIP and environmental services respectively and any changes in net leverage on those assets since the last mark to market? Patrick Dovigi No, nothing material. I mean I think es this year of sort of exiting year run rate of, you know, probably 600 to 625 million. You know, there's been some incremental M and A, no change in sort of net leverage, sort of five and a half to six on the GIP business today. You know, recently just signed another transaction pro forma ebitda, probably exiting the year of, you know, in the neighborhood of 350 to 375. And net leverage in that business been sitting around four and a half to five. So you know, so again going back to the point of, you know, it doesn't show up on the Bloomberg screen, but there's material equity. Again, keep in mind, we own just under 40% of ES and roughly a quarter of GIP. And our equity value creation initiatives in those businesses continue to sort of continue to prove out. So you know, they're going well, they're doing exactly what they were supposed to do and what earth they're set out to do. And you know, at some point over the next few years we'll, we'll definitely monetize our stakes in those two businesses. Luke Pelosi (Chief Financial Officer) And Adam, just as a follow up in terms of disclosure on I know we've talked before about regular cadence of disclosure. As Patrick alluded to the values vis a vis when we just marked the equity in 2025 have not changed sort of materially. So you have that sort of 1.7, $1.8 billion value on the ES investment and then the billion dollars that was just marked on GIP, those are still relatively fresh. As we get towards the end of this year, we will look at incorporating ongoing disclosure so people have the ability to keep tabs on that incremental store value. As Patrick said, we think sometimes is sight of which is lost. Got it. Super helpful. And then can you just talk about how are you thinking about magnitude of transaction and integration costs over the next 12 months as you digest a higher level of M and A? Just trying to think through, you know, what that bridge between adjusted and free cash flow, actual free cash flow, might look like to consider how much capital on hand you might end the year with. Thanks. Patrick Dovigi Then what I'd say is, you know, that'll be somewhat binary depending on whether the Secure transaction is happening or is it not. So as Patrick said, there's a vote at the end of May which will have certainty and while we're feeling good, we'll have that in hand before we sort of update that for the year. So if you think X Secure normal course you'll have the same level of acquisition integration costs that you've had the last couple years, that number doesn't sort of move around all that much. If Secure gets layered on, you could have something greater. Although I would highlight, as we have said many times, it's often much easier to integrate large organized businesses than it is a bunch of sort of small ones. I mean the team at Secure is fantastic and when you think about their capabilities and skill sets across it, hr, legal and areas where we need integration, you know, being able to leverage the existing folks is really going to minimize the need for incremental sort of third party cost. However, we'll wait until Q2 and you know, by then we'll have more visibility and provide you a sort of number for the guidance that was provided today on the 7.32, 7.34 billion of revenue. I'd assume commensurate level of integration costs as you've seen in the past couple years. Great, thanks. So Much. Operator Thank you. The next question comes from Chris Murray of ATB Capital Markets. Your line is now open. Please go ahead. Chris Murray (Equity Analyst) Yeah, thanks, folks, Good morning. Maybe turning back to secure just for a second and thinking about kind of again, the synergies and where you drive this from. Can you maybe lay out the impact that this may also have on the ES business versus maybe the solid waste business and where you think you could leverage some of these assets? I know historically, you know, you had been involved in some of the transactions even back to the Teravita days, but any, any other thoughts you have on. On kind of the mix of business that you see kind of evolving over time would be great. Patrick Dovigi Yeah. Not material impact on the ES business, although there should be some disposal synergies from the ES business that would benefit, you know, the secure GFL combination. Right. So I think there's some incremental waste streams that we could probably internalize into those landfills sort of over time and into the deep well. So. But no material changes to sort of either business that sort of come with that. Okay. Chris Murray (Equity Analyst) And then last one, just to follow up on just the pricing comment. You had mentioned that part of the reason for the stronger pricing was on lower CHURN as well as epr. So just the question very quickly, is there something different you're doing on your approach to CHURN that's actually driving that, or is it just kind of a factor of. Of kind of, you know, the mix of business or how it's coming in and how is EPR playing into that? You know, any additional color would be helpful. Yeah, I mean, two distinct questions in there. EPR is just a function that we have deployed this growth capital and we're strategic at getting in front of this wave of change in Canada and have sort of benefited from returns on our capital invested, and some of that's materializing in price and some materializing in volume. As we've said, if it was a contract that we were doing before or volume that we were processing before and now we're still doing the same. But under an EPR contract, that change has been sort of reflected in price, whereas if it was net new volume or activity, that change was in volume. So the EPR price component is a function of that return on the capital invested in terms of the base business and sort of churn and retention. Look, I mean, churn and retention really comes down to customer service. Provide exceptional service in the market, and that's going to go a long way towards your retention. I think it's also becoming more strategic in your pricing initiatives. I mean, I'm sure this is a theme throughout the industry as a whole. But as you have better tools, whether that's AI enabled or or not, just better data analytics allows for more appropriate or targeted or relevant sort of pricing. And you know, when it's more appropriate and targeted pricing, you tend to get sort of better stick rate than not. So I think it's just the continuous improvement. You know, the other piece of it is obviously the incremental portfolio optimization that we've spoken about. And we continue to find the opportunities to realize what we had articulated as a 40 to 80 million dollars benefit at our investor day. And you know, we keep sort of chipping away at that, but it's all those pieces together and I think that's what gives us a great deal of comfort that the industry's pricing dynamic, that the discipline around ensuring this sort of price above our costs to generate sufficient return is very healthy and remains disciplined. And you know, we see that not changing, you know, for our long term outlook. Okay, that's helpful. Thanks folks. Operator Thank you. The next question comes from Toby Sommer of Truist Securities. Your line is now open. Please go ahead. Henry Hi guys, thanks for coming in. It's Henry on for Toby here. Just to start on kind of your expectations for inflation for the rest of the year and you know, some of the potential upside to the guidance there with the global situation and just kind of the mix of contracts that you have that are CPI linked and the lag we could expect once those adjustments flow through. Thank you. Yeah, great question. I think it's important to understand the nature of our cpi. Resets are often such that they're looking back at a reference period sometime before for the contract price renewal. So if you think about January 1st price increases that you received, those were probably based on inflation reads somewhere three, six or nine months before that. With that 2026 pricing is largely baked and isn't going to change materially. As you think about that largely residential book of business that has CPI linked, it would really represent an opportunity for your 2027 pricing. Now with that, as we and the industry have demonstrated historically, if cost inflation runs significantly higher than expectations in year, we will go to our open market pricing in order to recover those incremental costs. Now, where we're at today, we have yet to sort of see that because I think the cost inflation is really a function of the energy costs and we're able to recover that separately. But I think if you look back at 22 through 24 and how the industry responded to cost inflation. There's a great data point to show the willingness, ability and sort of real time nature in which incremental unexpected cost inflation can be passed on. The broader sort of CPI printing at a higher level though, would really be a benefit for 27 and beyond. Understood, thank you. Luke Pelosi (Chief Financial Officer) Thank you for that. Henry And then just a quick on the kind of potential timeline for secure deal from the regulatory side, you know, are there any major milestones that you would call it that we should be looking for, you know, as that process moves along? Thank you. Patrick Dovigi No, I mean, I think again we put in a significant amount of work, obviously pre announcement and post signing. You know, from our perspective, there are no real material issues, you know, and hopefully the bureau, again, just because they've gone through this process in depth a couple years ago, they understand the market really well. And our expectation is that our hope is that we'll get through relatively quickly. But you know, I think you can expect somewhere between, somewhere between three and five months is probably a reasonable time frame to get, get through that which would have, you know, us hopefully closing the transaction on, you know, going into sort of Q4, so around, you know, summer in September, October, closing the transaction. So we'd have that tucked in for a quarter of ownership of that asset for this year. Henry Appreciate the caller, guys. Thank you. Operator Thank you. The final question today comes from Shlomo Rosenbaum of Stifel. Your line is now open. Please go ahead. Shlomo Rosenbaum (Equity Analyst) Hi, thank you very much for squeezing me in over here. Patrick, maybe you could just give us a little color on the differences in the regions in the performance. Looks like Canada grew organically, 7.2% US 3.4. You're getting more margin expansion in Canada. Even you look at the underlying in the US And I'm just trying to understand is there operational something that's very different going on? Does it have to do somewhat with EPR coming on? Maybe you could break that down and then I just have kind of a housekeeping question for Luke. Patrick Dovigi Sure. I mean the most of the margin increase in Canada again is coming from again. Remember we, on January 1, 2026, we took over a significant amount of recycling contracts. A lot of those things were extended. You know, they were priced between 2009 and 2013. That just kept continuing to get extended and we were getting CPI on those. And then as we took over the recycling as part of epr, we reset them to current market rates. Right. So that led to some of the margin expansion or the big difference in the margin expansion between Canada and the US over that period. So nothing. There's no anomalies that have come out of Canada or the US over that period. It's largely just again, the repricing a bunch of those recycling collection contracts that represented a significant amount of revenue. Luke Pelosi (Chief Financial Officer) And Shlomo, I would just add when you think about that margin that you described, on the face of it, underlying the US Was significantly more impacted by some of what I'd call exogenous factors than Canada was. If you think about the US quarter year over year margin commodities was a 40 basis point headwind. Fuel was 40 basis point. The hurricane from last year that you're lapping and the winter impact was 40 basis points point and yet sort of 75, 80 basis point from M&A that was in the US and so if you factor that and you actually have nearly a 200 basis point underlying margin expansion in the U.S. now, Canada is still higher by virtue of the EPR benefits that Patrick sort of alluded to. But you got to remember, our Canadian business is coming from what was a high 20s margin business now approaching the low to mid-30s, where our US business has very squarely been sort of, you know, low to mid-30s. Some of the pricing opportunities that we've talked about were also disproportionately available in Canada than in the US So I think it's all of those things that need to be taken into account. I'd suggest both of our geographic regions from our perspective are performing exceptionally well. And it's really more those exogenous factors making the headline margin expansion look different in the different geographies. Okay, great. That's great. Color. And then, Luke, maybe you could just provide color. What? Exactly. This is a housekeeping item. What is the change in value on a call option? What does that do to. So as you know, we have a call option to buy back the ES business in four years time. As with any option, a significant component of the value is the time. And naturally, all other things being equal, that time decay is going to erode the value of the options. Now to the comment we were having before with Adam. We will update the equity value calculations for that asset on a periodic basis, which would offset the time decay component of the call option. But all other things being equal, you'll just see that natural $10 million a quarter amortization of the value as a function of the reduced amount of duration left in the option. Okay, that's great. Color. So on an annual basis you should expect to see something like that absent a change in the equity value. Correct. Thank you. Operator Thank you. We have no further questions at this time, so I'd like to hand back to Patrick for closing remarks. Patrick Dovigi Thank you, everyone, and we'll look forward to speaking to you about our Q2 results. Thank you. Have a good day. Operator This concludes today's call. Thank you all for joining. You may now disconnect your line. Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.